UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒ | |
Filed by a Party other than the Registrant ☐ | |
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| Preliminary Proxy Statement | |
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| Definitive Proxy Statement | |
| Definitive Additional Materials | |
| Soliciting Material under §240.14a-12 | |
| Cantel Medical Corp. | ||
| (Name of Registrant as Specified In Its Charter) | ||
| (Name of Person(s) Filing Proxy Statement, if | ||
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Cantel Medical Corp.
150 Clove Road
Little Falls, NJ 07424
150 Clove Road
Little Falls, NJ 07424
NOTICE OF 20172018 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On January 3,December 19, 2018
The Annual Meeting of Stockholders of Cantel Medical Corp. will be held on Wednesday, January 3,December 19, 2018 at 9:30 a.m., Eastern Standard Time, at Loews Regency New York Hotel, 540 Park Avenue, New York, New York. We are holding the Annual Meeting to:
| 1. | Elect as directors the ten (10) nominees named in the attached Proxy Statement (Proposal 1); |
| 2. | Conduct an advisory vote on the compensation of the Company’s Named Executive Officers (Proposal 2); |
| 3. |
Ratify the selection of Deloitte & Touche LLP as |
Transact such other business as may properly be brought before the meeting. |
The record date for the Annual Meeting is November 13, 2017.October 31, 2018. Only our stockholders of record at the close of business on that date may vote at the meeting, or any adjournment of the meeting. A copy of our Annual Report to Stockholders for the fiscal year ended July 31, 20172018 is being mailed with this Proxy Statement.
You are invited to attend the Annual Meeting. Your vote is very important. Whether or not you plan to attend the meeting, we hope that you will read the proxy statement and vote your proxy by telephone, via the Internet or by requesting a printed copy of the proxy materials and completing, signing, and returning the proxy card enclosed therein in order that your vote can be recorded.
| By the order of the Board of Directors | |
 | |
| Eric W. Nodiff | |
| Corporate Secretary |
Little Falls, New Jersey
November 28, 201715, 2018
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting
to Be Held onJanuary 3,December 19, 2018.
to Be Held on
This Proxy Statement and the Company'sCompany’s Annual Report are all available free of charge at www.proxyvote.comwww.proxyvote.com.
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Cantel Medical Corp.
150 Clove Road
Little Falls, NJ 07424
150 Clove Road
Little Falls, NJ 07424
PROXY STATEMENT
Cantel Medical Corp.
150 Clove Road
Little Falls, NJ 07424
Information about the Annual Meeting
Q: Why did you send me this Proxy Statement?
A: We sent you this Proxy Statement and the enclosed proxy card because the Board is soliciting your proxy to vote at our 20172018 Annual Meeting of Stockholders (the(the meeting) to be held on Wednesday, January 3,December 19, 2018, or any adjournments of the meeting. This Proxy Statement summarizes information that is intended to assist you in making an informed vote on the proposals described in this Proxy Statement.
Q: Who can vote at the meeting?
A: Only stockholders of record as of the close of business on November 13, 2017October 31, 2018 are entitled to vote at the meeting. On that date, there were 41,805,83741,721,316 shares of our common stock (each, a share) outstanding and entitled to vote.
Q: How many shares must be present to conduct the meeting?
A: We must have a “quorum” present in person or by proxy to hold the meeting. A quorum is a majority of the outstanding shares entitled to vote. Abstentions and broker non-votes (defined below) will be counted for the purpose of determining the existence of a quorum.
Q: What matters are to be voted upon at the meeting?
A: FiveThree proposals are scheduled for a vote:
| ● | Election as directors of the ten nominees named in this Proxy Statement, to serve until the first Annual Meeting of Stockholders following the fiscal year ending July 31, 2019 (fiscal year 2019); |
| ● | Approval, on an advisory basis, of the compensation of the Company’s Named Executive Officers; and |
| ● | Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019. |
As of the date of this Proxy Statement, these fivethree proposals are the only matters that our Board intends to present at the meeting. Our Board does not know of any other business to be presented at the meeting. If other business is properly brought before the meeting, the persons named on the enclosed proxy card will vote on these other matters in their discretion.
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Q: How does the Board recommend that I vote?
A: The Board recommends that you vote:
| ● | FOR the election of each of the nominees for director named in this Proxy Statement; |
| ● | FOR the proposal to approve (on an advisory basis) the compensation of the Company’s Named Executive Officers; and |
| ● | FOR the proposal to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019. |
Q: How do I vote before the meeting?meeting?
A: You may vote your shares by mail by filling in, signing and returning the enclosed proxy card. For your convenience, you may also vote your shares by telephone and Internet by following the instructions on the enclosed proxy card. If you vote by telephone or via the Internet, you do not need to return your proxy card.
With respect to the election of directors, you may vote “FOR” or “AGAINST” or abstain from voting with respect to each nominee. For the advisory vote on the frequency of future advisory votes on the compensation of the Company’s Named Executive Officers, you may voteSimilarly, for every “3 Years”, “2 Years”, “1 Year” or abstain from voting. For the approval of all other matters, you may vote “FOR” or “AGAINST” or abstain from voting.
Q: May I vote at the meeting?meeting?
A: Yes, you may vote your shares at the meeting if you attend in person. Even if you plan to attend the meeting in person,, we recommend that you also submit your proxy or voting instructions as described above so that your vote will be counted if you later decide not to attend the meeting in person.person. For information on how to obtain directions to the meeting, please contact us at (973) 890-7220.
Q: How do I vote if my broker holds my shares in “street name”?
A: If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker. For directions on how to vote shares held beneficially in street name, please refer to the voting instruction card provided by your broker.
Q: What should I do if I receive more than one set of proxy materials?
A: You may receive more than one set of these proxy materials, including multiple copies of this Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive to ensure that all your shares are voted.
Q: How many votes do I have?
A: Each share that you own as of the close of business on November 13, 2017October 31, 2018 entitles you to one vote on each matter voted upon at the meeting. As of the close of business on November 13, 2017,October 31, 2018, there were 41,805,837 41,721,316 shares outstanding.
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Q: May I change my vote?
A: Yes, you may change your vote or revoke your proxy at any time before the vote at the meeting. You may change your vote prior to the meeting by executing a valid proxy bearing a later date and delivering it to us prior to the meeting at Cantel Medical Corp., 150 Clove Road, Little Falls, New Jersey 07424, Attn: Secretary. You may withdraw your vote at the meeting and vote in person by giving written notice to our Secretary. You may also revoke your vote without voting by sending written notice of revocation to our Secretary at the above address.
Q: How are my shares voted if I submit a proxy but do not specify how I want to vote?
A: If you submit a properly executed proxy card, the persons named in the proxy card (or, if applicable, their substitutes) will vote your shares as you instruct. If you sign your proxy card and return it without indicating how you would like to vote your shares, your shares will be voted as the Board recommends, which is:
| ● | FOR the election of each of the nominees for director named in this Proxy Statement; |
| ● | FOR the proposal to approve (on an advisory basis) the compensation of the Company’s Named Executive Officers; and |
| ● | FOR the proposal to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019. |
Q: What is a broker non-vote?
A: If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (NYSE). If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under NYSE rules to vote your shares on the proposal to ratify the selection of Deloitte & Touche LLP even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the election of directors or the advisory votesvote on executive compensation and frequency of future advisory votes on executive compensation or the approval of an amendment to the Company’s By-Laws without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters.
Your vote is important and we strongly encourage you to vote your shares by following the instructions provided on the voting instruction card.card. Please return your proxy card to your broker,, bank or other nominee and contact the person responsible for your account to ensure that a proxy card is voted on your behalf.behalf.
Q: What vote is required to elect directors?
A: Under our By-laws and our Corporate Governance Guidelines, nominees for director must be elected by a majority of the votes cast in uncontested elections, such as the election of directors at the meeting. This means that the number of votes cast “for”“FOR” a director nominee must exceed the number of votes cast “against”“AGAINST” that nominee. Abstentions and broker non-votes are not counted as votes “for”“FOR” or “against”“AGAINST” a director nominee and therefore have no impact on the outcome of director elections. Any nominee who does not receive a majority of votes cast “for”“FOR” his or her election would be required to tender his or her resignation promptly following the failure to receive the required vote. Our Board’s Nominating and Governance Committee (Nominating Committee) would then be required to make a recommendation to the Board as to whether the Board should accept the resignation, and the Board would be required to decide whether to accept the resignation and to publicly disclose its decision. In a contested election, the required vote would be a plurality of votes cast.
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Q: What happens in an uncontested election if an incumbent director does not receive enough votes to be elected?
A: Pursuant to our Corporate Governance Guidelines, each director who fails to receive the required number of votes cast for his or her re-election is required to tender his or her resignation to the Board. Such resignation is subject to acceptance by the Board. In order to ensure that the Company always has a fully functioning Board, if an incumbent director fails to receive the required number of votes cast, he or she continues as a director. The Nominating Committee will act on an expedited basis to determine whether to accept or reject the director’s resignation and will submit such recommendation to the Board for prompt consideration. The Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation. The Board will make its decision public as soon as practicable following the meeting.
Q: What vote is required to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers?
A: This matter is being submitted to enable stockholders to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers. Since it is an advisory vote, the provisions of our By-laws regarding the vote required to “approve” a proposal are not applicable to this matter. In order to be approved on an advisory basis, this proposal must receive the “FOR” vote of a majority of the votes cast by stockholders present in person or by proxy and entitled to vote on the matter. Abstentions will not be counted as votes cast and, therefore, have no effect on the proposal. Broker non-votes will have no effect on this proposal as brokers are not entitled to vote on such proposalsproposal in the absence of voting instructions from the beneficial owner.
Q: What vote is required to ratify the selection of Deloitte & Touche LLP as Cantel’s independent registered public accounting firm for fiscal year 2018?2019?
A: For approval of this proposal, the proposal must receive the "FOR"“FOR” vote of a majority of the votes cast by stockholders present in person or by proxy and entitled to vote on the matter. Because this proposal is considered a discretionary item for which a broker will have discretionary voting power if you do not give instructions with respect to this proposal, there will be no broker non-votes with respect to this proposal. Abstentions will not be counted as votes cast and, therefore, have no effect on the proposal.
Q: Who will count the votes?
A: Votes will be counted by an independent inspector of election appointed by the Company.
Q: Who pays for the solicitation of proxies?
A: We will pay for the entire cost of soliciting proxies. We will also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners. In addition, our directors and employees may solicit proxies in person, by telephone, via the Internet, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies.
Q: How can I find out the results of the voting at the meeting?
A: We will announce preliminary results at the meeting. We will report final results in a filing with the U.S. Securities and Exchange Commission (SEC) on a Current Report on Form 8-K within four business days after the meetingmeeting.
Q: What is “householding” and how does it work?
A:The SEC’s “householding” rules permit us to deliver only one set of proxy materials to stockholders who share an address unless otherwise requested. This procedure reduces printing and mailing costs. If you share an address with another stockholder and have received only one set of proxy materials, you may request a separate copy of these materials at no cost to you by writing to Cantel Medical Corp., 150 Clove Road, Little Falls, New Jersey 07424, Attn: Secretary, or by calling us at (973) 890-7220. Alternatively, if you are currently receiving multiple copies of the proxy materials at the same address and wish to receive a single copy in the future, you may contact us by calling or writing to us at the telephone number or address given above.
If you are a beneficial owner (i.e., your shares are held in the name of a bank, broker or other holder of record), the bank, broker or other holder of record may deliver only one copy of the notices of stockholder meetings and related proxy statements to stockholders who have the same address unless the bank, broker or other holder of record has received contrary instructions from one or more of the stockholders. If you wish to receive a separate copy of the notices of stockholder meetings and proxy statements, now or in the future, you may contact us at the address or telephone number above and we will promptly deliver a separate copy. Beneficial owners sharing an address, who are currently receiving multiple copies of the notice of stockholders meetings and proxy statements and wish to receive a single copy in the future, should contact their bank, broker or other holder of record to request that only a single copy be delivered to all stockholders at the shared address in the future.
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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Director and Officer Owners
The table below shows the number of shares of our common stock beneficially owned as of the close of business on November 13, 2017October 31, 2018 by each of our current directors and nominees for director, and each Named Executive Officer listed in the 20172018 Summary Compensation Table below, as well as the number of shares beneficially owned by all of our directors and current executive officers as a group. The table and footnotes also include information about stock options held by directors and executive officers under the Company’s 2006 Equity Incentive Plan (2006 Plan) and 2016 Equity Incentive Plan (2016 Equity Plan).
| Beneficial Owners | Number of Shares(1) | Options Currently Exercisable or Exercisable Within 60 Days | Total Beneficial Ownership(2) | Percent of Class |
| Alan R. Batkin | 54,225 | — | 54,225 | * |
| Ann E. Berman | 6,299 | — | 6,299 | * |
| Peter G. Clifford | 11,006 | — | 11,006 | * |
Charles M. Diker(3) | 4,170,849 | 40,000 | 4,210,849 | 10.1% |
Mark N. Diker(4) | 423,398 | — | 423,398 | 1.0% |
| Anthony B. Evnin | 6,272 | — | 6,272 | * |
| Laura L. Forese | 4,210 | — | 4,210 | * |
| George L. Fotiades | 94,320 | — | 94,320 | * |
| Jorgen B. Hansen | 38,891 | — | 38,891 | * |
| Ronnie Myers | 1,797 | — | 1,797 | * |
| Eric W. Nodiff | 31,162 | — | 31,162 | * |
| Peter J. Pronovost | 20,322 | — | 20,322 | * |
| Seth M. Yellin | 20,246 | — | 20,246 | * |
All Directors, Nominees for Director, and Executive Officers as a group (16 persons)(5) | 4,842,404 | 40,000 | 4,882,404 | 11.7% |
Beneficial Owners | Number of Shares(1) | Options Currently Exercisable or Exercisable Within 60 Days | Total Beneficial Ownership(2) | Percent of Class |
| Alan R. Batkin | 71,225 | — | 71,225 | * |
| Ann E. Berman | 5,424 | — | 5,424 | * |
| Peter G. Clifford | 16,226 | — | 16,226 | * |
| Lawrence Conway | 2,663 | — | 2,663 | * |
Charles M. Diker(3) | 4,270,086 | 65,000 | 4,335,086 | 10.4% |
Mark N. Diker(4) | 476,801 | — | 476,801 | 1.1% |
| Anthony B. Evnin | 6,272 | — | 6,272 | * |
| Laura L. Forese | 4,210 | — | 4,210 | * |
| George L. Fotiades | 100,066 | — | 100,066 | * |
| Jorgen B. Hansen | 40,161 | — | 40,161 | * |
| Ronnie Myers | 2,258 | — | 2,258 | * |
Eric W. Nodiff(5) | 39,796 | — | 39,796 | * |
| Peter J. Pronovost | 19,610 | — | 19,610 | * |
| Seth M. Yellin | 21,976 | — | 21,976 | * |
All Directors, Nominees for Director, and Executive Officers as a group (15 persons)(6) | 5,033,380 | 65,000 | 5,098,380 | 12.3% |
| * | Represents beneficial ownership of less than one percent (1%). |
| (1) | Includes unvested restricted stock awards (RSAs) for which the named person has voting rights. Excludes unvested restricted stock units (RSUs) for which the named person does not |
| (2) | Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from |
| (3) | Includes an aggregate of |
| (4) | Includes an aggregate of |
| (5) |
Includes those shares set forth in footnotes (3) |
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Beneficial Owners
Based on filings made under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (Exchange Act), as of November 13, 2017,October 31, 2018, the only persons known by us to be the beneficial owner of more than 5% of our common stock was as follows:
| Name | Address | Number of Shares | Percent of Class | |
| BlackRock, Inc. | 55 East 52nd Street New York, NY 10055 | |||
| Brown Capital Management, LLC | 1201 N. Calvert Street Baltimore, MD 21202 | 3,580,500(2) | 8.6% | |
| Charles M. Diker | 150 Clove Road Little Falls, NJ 07424 | |||
| The Vanguard Group | 100 Vanguard Blvd. Malvern, PA 19355 | |||
| (1) | This information is based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January |
| (2) | This information is based solely on a Schedule 13G/A filed by Brown Capital Management, LLC with the SEC on February |
| (3) | See |
| (4) | This information is based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February |
Section 16(a) Beneficial Ownership Reporting Compliance
Federal securities laws require our executive officers and directors and persons owning more than 10% of our common stock to file certain reports on ownership and changes in ownership with the SEC. Based on a review of our records and other information, we believe that during the fiscal year ended July 31, 20172018 (fiscal year 2017)2018), our executive officersand directors and allpersons holding more than 10% of our common stock timely filed all suchSection 16(a) reports except as described herein. On June 9,July 31, 2017, Brian Capone875 restricted shares were granted to Ann E. Berman who was appointed Chief Accounting Officerrequired to file a Form 4 to report such acquisition within two business days of the grant. The Form 4 was filed on August 1, 2017, but incorrectly reported the transaction and an amendment to such Form 4 was filed on November 13, 2018. On October 10, 2017, Seth M. Yellin had 1,252 shares withheld by the Company andto fulfill income tax obligations on the vesting of a RSA for which a Form 3 that4 was required to be filed by June 19, 2017, tenwithin two business days followingof the appointment,withholding. The Form 4 was filed on June 20,October 13, 2017. On September 30, 2016, Ann E. BermanOctober 18, 2017, Charles M. Diker had 613 shares withheld by the Company to fulfill income tax obligations on the vesting of a RSA for which a Form 4 was required to be filed within two business days of the withholding. The Form 4 was filed on November 3, 2017. On March 23, 2018, Peter G. Clifford had 804 shares withheld by the Company to fulfill income tax obligations on the vesting of a RSA for which a Form 4 was required to be filed within two business days of the withholding. The Form 4 was filed on March 28, 2018. On April 10, 2018, Ronnie Myers sold 1,453200 shares of common stock in an open market transaction and was required to file a Form 4 to report such disposition by October 4, 2016,within two business days followingof the sale. The Form 4 was filed on October 5, 2016.April 30, 2018. On July 31, 2018, 712 restricted shares were granted to Anthony B. Evnin who was required to file a Form 4 to report such acquisition within two business days of the grant. The Form 4 was filed on August 10, 2018.
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PROPOSAL 1
ELECTION OF DIRECTORS
Our entire Board is elected each year at the Annual Meeting of Stockholders. The Board is currently comprised of ten members. All of the nominees listed below are incumbent directors. The nomination of each nominee to serve for a one-year term was recommended by our Nominating Committee and approved by the Board. The ten nominees include seven independent directors as defined in the NYSE rules and regulations.
A majority of the votes cast is required for the election of directors in an uncontested election (which is the case for the election of directors at the meeting). A majority of the votes cast means that the number of votes cast “for”“FOR” a director nominee must exceed the number of votes cast “against”“AGAINST” that nominee. Our Corporate Governance Guidelines contain detailed procedures to be followed in the event that one or more directors do not receive a majority of the votes cast. Each nominee elected as a director will continue in office until his or her successor has been elected or appointed and qualified, or until his or her earlier death, resignation or retirement. Each person nominated has agreed to serve if elected.
The persons named as proxies intend to vote the proxies “FOR” the election of each of the nominees unless you indicate on the proxy card that your vote should be against or abstain from voting with respect to any of the nominees. If for some reason any director nominee is unable to serve, the persons named as proxies may vote for a substitute nominee recommended by the Board, and unless you indicate otherwise on the proxy card, theproxies will be voted in favor of the remaining nominees.
Director Nominees at a Glance
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The following persons have been nominated as directors:
Name and Principal Occupation or Position | Age | Has Been a Director Since | ||
Alan R. Batkin  Chairman and Chief Executive Officer (CEO) of Converse Associates, Inc., a strategic advisory firm, since January 2013. From February 2007 until December 2012, Mr. Batkin served as Vice Chairman of Eton Park Capital Management, L.P., an investment firm. For more than five years prior thereto, Mr. Batkin served as Vice Chairman of Kissinger Associates, Inc., a geopolitical consulting firm that advises multi-national companies. He is also a director of Omnicom Group, Inc. (NYSE), a global marketing and corporate communications company, and Pattern Energy Group, Inc. (Nasdaq), an independent power company. We believe that Mr. Batkin’s specific banking, consulting and directorial experience described above qualifies him for service on the Board. | 74 | 2004 |
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Name and Principal Occupation or Position | Age | Has Been a Director Since | ||
Anthony B. Evnin  Partner, Venrock, a venture capital firm, since 1975. Mr. Evnin currently serves on the Board of Directors of AVEO Pharmaceuticals, Inc. (Nasdaq), Constellation Pharmaceuticals, Inc. (Nasdaq), and Infinity Pharmaceuticals, Inc. (Nasdaq) as well as on the Board of two private companies. He was formerly a Director of over 35 companies, both public and private, in the life sciences area, including Juno Therapeutics, Inc. (Nasdaq). He is a Member of the Boards of Overseers and Managers of Memorial Sloan Kettering Cancer Center, a Trustee of The Jackson Laboratory, a Director of the New York Genome Center, a Member of the Board of Directors of the Albert and Mary Lasker Foundation, a Trustee Emeritus of Princeton University, and a Trustee Emeritus of The Rockefeller University. We believe that Mr. Evnin’s long time experience in the healthcare and life sciences area qualifies him to serve on the Board. | 77 | 2017 | ||
Laura L. Forese  Executive Vice President and Chief Operating Officer (COO) of NewYork-Presbyterian, a comprehensive academic health care delivery system in collaboration with two renowned medical schools, Weill Cornell Medicine and Columbia University College of Physicians & Surgeons. NewYork-Presbyterian includes academic medical centers, regional hospitals, employed and affiliated physician practices and ambulatory and post-acute facilities. Dr. Forese is responsible for all enterprise operations, risk management, and strategy and execution of acquisitions and partnerships. She is also chairwoman of the board of directors of NIH Clinical Center, the nation’s premier hospital devoted to clinical research. Dr. Forese was President of NYP Healthcare System (now subsumed into NewYork-Presbyterian) from 2013 to 2015 and Group SVP and COO NYP/Weill Cornell from 2011 to 2015. We believe that Dr. Forese’s experience as a hospital executive, faculty member and practicing physician in one of the largest health care enterprises in the United States, as well as her depth of experience in risk management, qualifies her to serve on the Board. | 57 | 2015 | ||
George L. Fotiades  Operating Partner at Five Arrows Capital Partners (Rothschild Merchant Banking), since April 2017. From April 2007 through April 2017, Mr. Fotiades was a Partner, Healthcare investments at Diamond Castle Holdings, LLC, a private equity firm. For more than five years prior thereto, he served as President and COO of Cardinal Health, Inc., a leading provider of healthcare products and services. Prior to that position, he served as President and CEO of Cardinal Health, Inc.’s Pharmaceutical Technologies and Services segment, as well as in a variety of executive roles, including president of Warner-Lambert’s consumer healthcare business and senior positions at Bristol-Myers Squibb, Wyeth and Procter & Gamble. Mr. Fotiades is also a director of Prologis, Inc. (NYSE), a leading owner, operator and developer of industrial real estate, and Chairman of the Board of AptarGroup Inc. (NYSE), a leader in the global dispensing systems industry. He has served as Vice Chairman of the Board of Cantel and a non-executive member of the Office of the Chairman since April 2008. We believe that Mr. Fotiades’ extensive experience in executive management of global operations, strategic planning, and sales and marketing, particularly in the healthcare industry, qualifies him to serve on the Board. | 65 | 2008 |
Name and Principal Occupation or Position Ann E. Berman From October 1994 through June 2009, Ms. Berman served in various financial capacities at Harvard University, most recently (commencing April 2006) as senior advisor to the president of Harvard University and prior thereto as Vice President of Finance and Chief Financial Officer (CFO). Ms. Berman is a certified public accountant (CPA), and is also a director of Loews Corporation (NYSE), a holding company whose subsidiaries include a commercial property-casualty insurer; an offshore drilling company; a natural gas transportation and storage company; and a luxury lodging company; and Eaton Vance Corporation, an investment manager. We believe that Ms. Berman’s accounting and financial management expertise and service as an audit committee member and chair of other public companies qualify her for service on the Board. | Age 65 | Has Been a Director Since 2011 |
Charles M. Diker Chairman of the Board since 1986 and a member of the Office of the Chairman since April 2008. Mr. Diker was responsible for the Company’s transitioning into infection prevention. He has also served as Chairman and co-founder of Diker Management LLC, a registered investment advisor, for over ten years. He is also a director of Loews Corporation (NYSE), a holding company whose subsidiaries include a commercial property-casualty insurer; an offshore drilling company; a natural gas transportation and storage company; and a luxury lodging company. We believe that Mr. Diker’s thirty-two years of service as Chairman and a director of Cantel, knowledge of the Company’s business and his strong strategic vision for the Company qualify him to serve on the Board. | 82 | 1985 |
Mark N. Diker CEO and co-founder of Diker Management LLC, a registered investment adviser, for more than the past five years. We believe that Mr. Diker’s experience in investment-related matters and ability to assist in the analysis of acquisition targets qualify him to serve on the Board. | 51 | 2007 |
Anthony B. Evnin Partner, Venrock, a venture capital firm, since 1975. Mr. Evnin currently serves on the Board of Directors of Juno Therapeutics, Inc. (NASDAQ), AVEO Pharmaceuticals, Inc. (NASDAQ), and Infinity Pharmaceuticals, Inc. (NASDAQ) as well as on the Board of two private companies. He was formerly a Director of over 35 companies, both public and private, in the life sciences area. He is a Member of the Boards of Overseers and Managers of Memorial Sloan-Kettering Cancer Center, a Trustee of The Jackson Laboratory, a Director of the New York Genome Center, a Member of the Board of Directors of the Albert and Mary Lasker Foundation, a Trustee Emeritus of Princeton University, and a Trustee Emeritus of The Rockefeller University. We believe that Mr. Evnin’s long time experience in the healthcare and life sciences area qualifies him to serve on the Board. | 76 | 2017 |
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Name and Principal Occupation or Position | Age | Has Been a Director Since | ||
Jorgen B. Hansen  CEO and member of the Office of the Chairman of the Company since August 2016. Mr. Hansen has also served as President of the Company since November 2014. Prior thereto, from November 2012 to July 2016, he served as COO of the Company, and from November 2012 to November 2014, he served as Executive Vice President of the Company. He also served as President and CEO of Medivators Inc., a subsidiary of the Company from November 2012 to July 2015. Prior to joining the Company, Mr. Hansen had global leadership positions with increasing responsibility within the healthcare and medical devices industry for over fifteen years. Most recently, he was Senior Vice President, Global Marketing, Business Development, Science and Innovation for ConvaTec Corp. We believe that Mr. Hansen’s detailed knowledge of the Company’s business and operations, his current service as President and CEO of the Company, his past service as COO of the Company and CEO of Medivators Inc., and his experience in international healthcare-related markets qualify him to serve on the Board. | 51 | 2016 | ||
Ronnie Myers  Dean of the Touro College of Dental Medicine at New York Medical College since July 2017, previously having served as Senior Associate Dean for Academic and Administrative Affairs since June 2016. From January 2011 to June 2012 and then again from August 2013 to May 2016, Dr. Myers served as Vice Dean for Administration of Columbia University College of Dental Medicine. He served as Interim Dean of Columbia University College of Dental Medicine from July 2012 to July 2013 and Associate Dean for Clinical Affairs from 1997-2010. Dr. Myers maintained a private practice in general dentistry for 36 years and currently delivers lectures on the topic of infection prevention in the field of dentistry. We believe that Dr. Myers’ experience in dentistry and infection prevention, coupled with his practical experience, qualify him to serve on the Board. | 66 | 2016 | ||
Peter J. Pronovost  Chief Clinical Transformation Officer, University Hospitals since October 2018. Prior to that, beginning in January 2018, Dr. Pronovost served UnitedHealth Group Incorporated as its Senior Vice President for Clinical Strategy and then as its Chief Medical Officer. Previously, Dr. Pronovost was professor of anesthesiology and critical care medicine, surgery, nursing, health policy and management, engineering, and business at the Johns Hopkins University School of Medicine, where he had served since July 2011. He is a practicing critical care physician who is dedicated to finding ways to make hospitals and healthcare safer for patients. In June 2011, he was named director of the new Armstrong Institute for Patient Safety and Quality at Johns Hopkins, as well as Johns Hopkins Medicine’s senior vice president for patient safety and quality. Dr. Pronovost is also a member of the Institute of Medicine-National Academy of Science. In 2008 he was named one of Time magazine’s 100 most influential people in the world for his work in improving healthcare safety. He is a lecturer and author in the fields of patient safety and healthcare management. Additionally, Dr. Pronovost is a researcher centered on improving the quality of care. Previously, from January 2010 to June 2015, Dr. Pronovost served as a director of the Company. We believe that Dr. Pronovost’s position as a world renowned leader of patient safety and quality qualifies him to serve on the Board. | 53 | 2017 |
Name and Principal Occupation or Position Laura L. Forese Executive Vice President and Chief Operating Officer (COO) of NewYork-Presbyterian, a comprehensive academic health care delivery system in collaboration with two renowned medical schools, Weill Cornell Medicine and Columbia University College of Physicians & Surgeons. NewYork-Presbyterian includes academic medical centers, regional hospitals, employed and affiliated physician practices and ambulatory and post-acute facilities. Dr. Forese is responsible for all enterprise operations as well as strategy and execution of acquisitions and partnerships. She is also chairwoman of the board of directors of NIH Clinical Center, the nation’s premier hospital devoted to clinical research. Dr. Forese was President of NYP Healthcare System (now subsumed into NewYork-Presbyterian) from 2013 to 2015 and Group SVP and COO NYP/Weill Cornell from 2011 to 2015. We believe that Dr. Forese’s experience as a hospital executive, faculty member and practicing physician in one of the largest health care enterprises in the United States qualifies her to serve on the Board. | Age 56 | Has Been a Director Since 2015 |
George L. Fotiades Operating Partner at Five Arrows Capital Partners (Rothschild Merchant Banking), since April 2017. From April 2007 through April 2017, Mr. Fotiades was a Partner, Healthcare investments at Diamond Castle Holdings, LLC, a private equity firm. For more than five years prior thereto, he served as President and COO of Cardinal Health, Inc., a leading provider of healthcare products and services. Mr. Fotiades is also a director of Prologis, Inc. (NYSE), a leading owner, operator and developer of industrial real estate, and AptarGroup Inc. (NYSE), a leader in the global dispensing systems industry. He has served as Vice Chairman of the Board of Cantel and a non-executive member of the Office of the Chairman since April 2008. We believe that Mr. Fotiades’ extensive experience in executive management of global operations, strategic planning, and sales and marketing, particularly in the healthcare industry, qualifies him to serve on the Board. | 64 | 2008 |
Jorgen B. Hansen CEO and member of the Office of the Chairman of the Company since August 2016. Mr. Hansen has also served as President of the Company since November 2014. Prior thereto, from November 2012 to July 2016, he served as COO of the Company, and from November 2012 to November 2014, he served as Executive Vice President of the Company. He also served as President and CEO of Medivators Inc., a subsidiary of the Company from November 2012 to July 2015. Prior to joining the Company, Mr. Hansen had global leadership positions with increasing responsibility within the healthcare and medical devices industry for over fifteen years. Most recently, he was Senior Vice President, Global Marketing, Business Development, Science and Innovation for ConvaTec Corp. We believe that Mr. Hansen’s detailed knowledge of the Company’s business and operations, his current service as President and CEO of the Company, his past service as COO of the Company and CEO of Medivators Inc., and his experience in international healthcare-related markets qualify him to serve on the Board. | 50 | 2016 |
Name and Principal Occupation or Position Ronnie Myers Dean of the Touro College of Dental Medicine at New York Medical College since July 2017, previously having served as Senior Associate Dean for Academic and Administrative Affairs since June 2016. From January 2011 to June 2012 and then again from August 2013 to May 2016, Dr. Myers served as Vice Dean for Administration of Columbia University College of Dental Medicine. He served as Interim Dean of Columbia University College of Dental Medicine from July 2012 to July 2013. Dr. Myers maintained a private practice in general dentistry for 36 years and currently delivers lectures on the topic of infection prevention in the field of dentistry. We believe that Dr. Myers’ experience in dentistry and infection prevention, coupled with his practical experience, qualify him to serve on the Board. | Age 65 | Has Been a Director Since 2016 |
Peter J. Pronovost Professor of anesthesiology and critical care medicine, surgery, nursing, health policy and management, engineering, and business at the Johns Hopkins University School of Medicine. He is a practicing critical care physician who is dedicated to finding ways to make hospitals and healthcare safer for patients. In June 2011, he was named director of the new Armstrong Institute for Patient Safety and Quality at Johns Hopkins, as well as Johns Hopkins Medicine’s senior vice president for patient safety and quality. Dr. Pronovost is also a member of the Institute of Medicine-National Academy of Science. In 2008 he was named one of Time magazine’s 100 most influential people in the world for his work in improving healthcare safety. He is a lecturer and author in the fields of patient safety and healthcare management. Additionally, Dr. Pronovost is a researcher centered on improving the quality of care. Previously, from January 2010 to June 2015, Dr. Pronovost served as a director of the Company. We believe that Dr. Pronovost’s position as a world renowned leader of patient safety and quality qualifies him to serve on the Board. | 52 | 2017 |
The Board recommends that you vote “FOR” the election of each of the ten nominees.
CORPORATE GOVERNANCE
We seek to follow best practices in corporate governance in a manner that is in the best interests of our business and our stockholders. We are in compliance with the corporate governance requirements imposed by the Sarbanes-Oxley Act, the SEC and the NYSE and will continue to review our policies and practices to meet ongoing developments in this area.
Code of Business Conduct and Ethics; Executive Compensation Clawback Policy
All of our directors and employees, including our CEO, CFO, all other senior financial officers and all other executive officers, are required to comply with our Code of Business Conduct and Ethics. You can access our Code of Business Conduct and Ethics by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com. The Code of Business Conduct and Ethics is also available without charge in print to any requesting stockholder. We post amendments to, and waivers of, our Code of Business Conduct and Ethics, as applicable, on our website.
We have an Executive Compensation Clawback Policy under which a designated officer of the Company, if found to have engaged in misconduct causing a restatement of financial statements, could have a portion of his or her compensation recovered by the Company to the extent of the benefit received by such officer based on the financial statements that were restated. You can access our Executive Compensation Clawback Policy by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com.
Corporate Governance Guidelines
Our Corporate Governance Guidelines reflect the principles by which we operate. From time to time, the Nominating Committee and the Board review and revise our Corporate Governance Guidelines in response to regulatory requirements and evolving best practices. You can access our Corporate Governance Guidelines by clicking on the “Corporate Governance” link
in the “Investor Relations” section of our website at www.cantelmedical.com. The Corporate Governance Guidelines are also available without charge in print to any requesting stockholder.
Certain Relationships and Related Person Transactions
Our Corporate Governance Guidelines address, among other things, the consideration and approval of any related person transactions. Under these Governance Guidelines, any related person transaction that would require disclosure by us under Item 404(a) of Regulation S-K of the rules and regulations of the SEC, including those with respect to a director, a nominee for director or an executive officer, must be reviewed and approved or ratified by the Nominating Committee, excluding any director(s) interested in such transaction. Any such related person transactions will only be approved or ratified if the Nominating Committee determines that such transaction will not impair the involved person(s)’ service to, and exercise of judgment on behalf of, the Company, or otherwise create a conflict of interest that would be detrimental to the Company.
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Mark N. Diker, our Chairman’s son, has served as a director of Cantel since October 18, 2007. Because of such family relationship, he is not treated as an independent director. During fiscal year 2017,2018, as with our other non-employee directors, Mr. Mark Diker’s totalDiker received compensation was approximately $45,000 of $50,000 and he waswas awarded 712 RSUs un 875 RSAs underder the 2016 Equity Plan in connection with his directorship at Cantel.
Other than compensation paid to our executive officers and directors and disclosed in this Proxy Statement or otherwise approved by our Compensation Committee or Board, we did not engage in any related person transactions in fiscal year 2017.2018.
BOARD MATTERS; COMMITTEES
Board Meetings and Attendance of Directors
The Board held fivesix meetings, four regular meetings and onetwo special meeting,meetings, during fiscal year 2017.2018. During fiscal year 2017,2018, each of the directors attended 75% or more of the combinedtotal meetings of the Board and the respective committees on which he or she served. Directors are required to make every reasonable effort to attend the Annual Meeting of Stockholders. Eight ofAll ten nine individuals then serving as members of the Board attended our last Annual Meeting of Stockholders.
Director Independence
In determining independence pursuant to NYSE standards, each year the Board affirmatively determines whether directors have a direct or indirect material relationship with the Company that may interfere with their ability to exercise their independence from the Company. When assessing the materiality of a director’s relationship with the Company, the Board considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. The Board has affirmatively determined that the following seven directors have no material relationship with us and are independent within the meaning of Rule 10A-3 of the Exchange Act and within the NYSE definition of "independence": Alan R. Batkin, Ann E. Berman, Anthony B. Evnin, Laura L. Forese, George L. Fotiades, Ronnie Myers and Peter J. Pronovost. Our Board has also concluded that none of these directors possessed the objective relationships set forth in the NYSE listing standards that prevent independence. None of our independent directors has any relationship with the Company other than his or her service as a director and on committees of the Board. Independent directors receive no compensation from us for service on the Board or the Committees other than directors’ fees and equity grants under our 2016 Equity Plan.
Executive Sessions; Presiding Director
As required by the NYSE listing standards, our non-management directors meet in executive sessions at which only non-management directors are present. Such meetings are held following every regular meeting of the board of directors. Meetings of non-management directors are generally followed by meetings of the independent directors. Mr. Batkin serves as the presiding independent director (Presiding Director) and is the chairperson for all non-management and independent director meetings. He has been selected by our non-management directors to serve in such position each year since December 2004. In addition, Mr. Fotiades, in his capacity as Vice Chairman of the Board, performs certain responsibilities sometimes attributable to a presiding or lead director, particularly with respect to helping build and maintain a productive relationship between the Chairman and the CEO, as well as the Board and the CEO.
Communications with Directors; Hotline
You may contact the entire Board, any Committee, the Presiding Director or any other non-management directors as a group or any individual director by visiting www.cantelmedical.alertline.com, or by calling our toll-free Hotline at 1-800-826-6762 (for calls originated within the United States or Canada). For calls originated outside the United States and Canada,within France, the toll-free Hotline number is 1-800-714-4152; please0800-900240. For calls originated within Germany, the toll-free Hotline number is 0800-182-3246. For calls originated outside the United States, Canada, France and Germany, the toll-free Hotline number is 1-800-714-4152. Please visit our website identified below or the AT&T website http://www.business.att.com/bt/access.jsp for international access codes required for calls originated outside the United States and Canada. An outside vendor collects all reports or complaints and delivers them to our General Counsel, and Chief Compliance Officer, who, in appropriate cases, forwards them to the Audit Committee and/or the appropriate director or group of directors or member of management. You are also welcome to communicate directly with the Board at the meeting. Additional information regarding the Hotline can be found by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com.
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Committees
The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating Committee. All members of the Audit Committee, the Compensation Committee, and the Nominating Committee are independent directors within the definition in the NYSE listing standards and Rule 10A-3 of the Exchange Act. Each of the Committees has the authority to retain independent advisors and consultants, with all fees and expenses to be paid by us. The Board-approved charters of each of the Committees can be found by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com or (free of charge) by sending a written request to Cantel Medical Corp., 150 Clove Road, Little Falls, NJ 07424, Attn: Secretary.
Audit Committee. The Audit Committee is composed of Ms. Berman (Chair) and Messrs. Batkin and Fotiades. All of the Audit Committee members are financially literate, and at least one member has accounting and financial management expertise. The Board has determined that Ms. Berman qualifies as an “audit committee financial expert” for purposes of the federal securities laws. Ms. Berman developed such qualifications through her skills as a CPA and her service as a Vice President of Finance and CFO of Harvard University.
The Audit Committee performs the following functions: (1) assisting the Board in fulfilling its oversight responsibilities with respect to (a) the integrity of our financial statements, (b) our compliance with legal and regulatory requirements, (c) the independent registered public accounting firm’s qualifications and independence, and (d) the performance of our internal audit function and independent registered public accounting firm and (2) preparing a report in accordance with the rules of the SEC to be included in our annual proxy statement.
Additionally, the Audit Committee supervises our enterprise risk management committee, which monitors and escalates enterprise level issues, including cybersecurity matters, to the appropriate management levels within our organization and to members of our Board of Directors as appropriate. The Audit Committee receives regular reports from both the enterprise risk management committee and the internal auditor. Matters determined by the enterprise risk management committee to present potential material impacts to our financial results, operations or reputation are immediately reported by management to the chair of our Audit Committee.
The Audit Committee held eightfive meetings during fiscal year 2017,2018, of which four were meetings held prior to the filing of our Quarterly Reports on Form 10-Q or Annual Report on Form 10-K for the primary purpose of reviewing such reports and the quarterly financial closing process.
Compensation Committee. The Compensation Committee is composed of Mr. Batkin (Chair) and Drs. Myers and Forese. If Dr. Pronovost is elected at the meeting he will be appointed to the Compensation Committee in place of Dr. Myers. The Compensation Committee performs the following functions: (1) discharging the Board'sBoard’s responsibilities relating to compensation of our executive officers; (2) producing an annual report on executive compensation for inclusion in our proxy statement in accordance with applicable rules and regulations; and (3) administering our equity incentive plans in accordance with the terms of such plans. The Compensation Committee held fourfive meetings during fiscal year 2017.2018. In discharging its responsibilities, the Compensation Committee, among other things, evaluates the CEO’s performance and determines and approves the CEO’s compensation level based on such evaluation. The Compensation Committee also determines and approves the compensation of other executive officers. The CEO makes recommendations to the Compensation Committee regarding the amount and form of his compensation and the compensation of our other executive officers.
As described further in “Compensation Discussion and Analysis” below, the Compensation Committee retained Frederic W. Cook & Co., Inc. (FW Cook), an independent compensation consultant to provide advice with respect to executive compensation for fiscal years 2017 andyear 2018. FW Cook’s primary responsibility was to review our existing annual and long-term incentive plan designs and provide advice to the Compensation Committee on refinements and modifications to the plansresponsibilities in preparation for fiscal year 2017.2018 included identifying our peer group companies, benchmarking the compensation of our CEO and other executive officers, incentive design and facilitating the compensation risk assessment.
Compensation Committee Interlocks and Insider Participation. None of the directors who served on the Compensation Committee during fiscal year 20172018 is or has been an officer or employee of the Company or had any relationship that is required to be disclosed as a transaction with a related person. During fiscal year 2017,2018, none of our executive officers served as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board or our Compensation Committee.
Nominating Committee. The Nominating Committee is composed of Mr. Fotiades (Chairman), Mr. Evnin and Drs. Forese and Myers.Dr. Pronovost. The Nominating Committee performs the following functions: (1) identifying individuals qualified to become Board members, consistent with criteria approved by the Board and recommending that the Board select the director nominees for the next Annual Meeting of Stockholders; (2) developing and recommending to the Board the Corporate Governance Guidelines; (3) overseeing evaluation of the Board and management and (4) reviewing and assessing the compensation paid to members of the Board and its committees. The Nominating Committee held threetwo meetings during fiscal year 2017.2018.
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Board Leadership Structure
The CEO and Chairman roles at Cantel are separated between Jorgen B. Hansen (who assumed the CEO role on August 1, 2016) and Charles M. Diker, respectively, in recognition of their differing responsibilities. The CEO is responsible for leading the organization’s day-to-day performance, executing the Company’s strategies and ensuring the success of our acquisition program. The Chairman is responsible for advising the CEO, collaborating on acquisitions, and presiding over meetings of the Board. In addition, the Chairman and the CEO have principal responsibility for setting the strategic direction of the Company. Although we do not have a formal policy regarding whether the offices of Chairman and CEO should be separate, our Board believes that the existing leadership structure, with the separation of the Chairman of the Board and CEO roles, enhances the accountability of the CEO to the Board and strengthens the Board’s independence from management. In addition, the Board believes that having a separate Chairman creates an environment that is more conducive to the objective evaluation and oversight of management’s performance, increasing management accountability, and improving the ability of the Board to monitor whether management’s actions are in the best interests of the Company and our stockholders.
Board Role in Risk Oversight
The Board, through its Audit Committee, is responsible for oversight of the Company’s management of enterprise risks.risks, including cybersecurity. Cantel’s senior management is responsible for the Company’s risk management process and the day-to-day supervision and mitigation of enterprise risks. risks, as well running its enterprise risk management committee, which is supervised by the Audit Committee. Additional details are set forth above under "Audit Committee."
Management of the Company advises the Audit Committee and Board on areas of material Company risk, including strategic, operational, financial, legal and regulatory risks. We do not believe our Board’s oversight of risk influences our leadership structure, though we believe our leadership structure helps mitigate risk by separating oversight of our day-to-day business from the oversight of our Board.
Selection of Nominees for Election to the Board
The Nominating Committee has established a process for identifying and evaluating nominees for director. Although the Nominating Committee will consider nominees recommended by stockholders, the Nominating Committee believes that the process it utilizes to identify and evaluate nominees for director is designed to produce nominees that possess the educational, professional, business and personal attributes that are best suited to further our purposes. Any interested person may recommend a nominee by submitting the nomination, together with appropriate biographical information, to the Nominating Committee, c/o Cantel Medical Corp., 150 Clove Road, Little Falls, NJ 07424, Attn: Secretary. All recommended candidates will be considered using the criteria set forth in our Corporate Governance Guidelines.
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The Nominating Committee will consider, among other things, the following factors to evaluate recommended nominees: the Board'sBoard’s current composition, including expertise, diversity, balance of management and non-management directors, independence and other qualifications required or recommended by applicable laws, rules and regulations (including NYSE requirements) and company policies or procedures. Although the Board considers diversity as a factor to be considered in identifying and evaluating nominees, it does not have any formal policy with respect to diversity. The Nominating Committee will also consider the general qualifications of potential nominees, including, but not limited to personal integrity; concern for Cantel’s success and welfare; experience at strategy/policy setting level; high-level leadership experience in business or administrative activity; breadth of knowledge about issues affecting Cantel; an ability to work effectively with others; sufficient time to devote to the Company; and freedom from conflicts of interests.
EXECUTIVE OFFICERS OF CANTEL
| Name | Age | Position |
| Charles M. Diker | Chairman of the Board and member of Office of the Chairman | |
| Jorgen B. Hansen | President, CEO and member of Office of the Chairman | |
| Peter G. Clifford | Executive Vice President, CFO and member of Office of the Chairman | |
| Eric W. Nodiff | Executive Vice President, General Counsel, Secretary and member of Office of the Chairman | |
| Seth M. Yellin | Executive Vice President, Strategy and Corporate Development and member of Office of the Chairman | |
| Dottie | Senior Vice President and Chief Human Resources Officer | |
| Lawrence Conway | Senior Vice President - Business Systems and Procurement | |
| Brian Capone | 43 | Senior Vice President - Corporate Controller and Chief Accounting Officer |
Set forth below is certain biographical information concerning our current executive officers who are not also directors:
Mr. Clifford has served as Executive Vice President and CFO of the Company since March 2015. Prior to joining the Company, Mr. Clifford served in various financial positions with increasing responsibility for over twenty years. For more than five years prior to joining the Company, he was Group Vice President of Operations Finance and Information Technology for IDEX Corporation.
Mr. Nodiff has served as Executive Vice President and General Counsel since November 2014. Prior thereto, from January 2005 through November 2014, he served as Senior Vice President and General Counsel. He has also served as Secretary since January 2009.
Mr. Yellin has served as Executive Vice President, Strategy and Corporate Development of the Company since September 2016. Prior thereto, from March 2013 to September 2016, he served as Senior Vice President – Corporate Development, and from April 2012 through March 2013, he served as Vice President – Corporate Development. From January 2011 through January 2012, Mr. Yellin was an analyst in the Medical Devices & Life Science Tools segment of Citadel Asset Management.
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Ms. Donnelly-BrienzaDonnelly has served as Senior Vice President and Chief Human Resources Officer of the Company since January 2017. Prior to joining the Company, she served as the Head of Organizational Performance at Bristol-Myers Squibb from October 2014 until January 2017. From April 2012 to October 2014, Ms. Donnelly-BrienzaDonnelly served in various positions at Merck including Head of Global Talent Management and Chief Diversity Officer. Earlier in her career, Ms. Donnelly-BrienzaDonnelly had almost 20 years at Johnson and Johnson in a variety of executive roles including Worldwide Vice President Human Resources at Ethicon, Inc.
Mr. Conway was appointed Senior Vice President - Business Systems and Procurement of the Company in November 2017, having served as Vice President - Business Systems and Procurement since September 2013 and as an independent consultant of the Company since May 2013. For more than 10 years prior to joining, Mr. Conway served in various management positions at Convatec, most recently as Vice President and General Manager Ostomy Care.
Mr. Capone was appointed Senior Vice President, Corporate Controller and Chief Accounting Officer in October 2018, having previously served as Vice President, Chief Accounting Officer and Vice President, Corporate Controller for the Company since April 2017. Prior to joining the Company, Mr. Capone served as the Assistant Corporate Controller for Stryker Corporation from October 2014 to April 2017, and Director, External Financial Reporting and Technical Accounting for Quest Diagnostics Incorporated from March 2012 to October 2014. Prior to those roles, Mr. Capone served in various financial reporting roles at Genzyme Corporation and CVS Health Corporation.
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
This Compensation Discussion and Analysis (CD&A) describes our executive compensation philosophy and program, the compensation decisions made under this program and the specific factors we considered in making those decisions. This CD&A focuses on the compensation of our “Named Executive Officers” (NEOs) for fiscal year 2017,2018, who were:
| ● | Charles M. Diker - Chairman of the Board |
| ● | Jorgen B. Hansen - President and CEO |
| ● | Peter G. Clifford - Executive Vice President and CFO |
| ● | Eric W. Nodiff - Executive Vice President, General Counsel and Secretary |
| ● | Seth M. Yellin - Executive Vice President, Strategy and Corporate Development |
All of the NEOs served as members of the Office of the Chairman through July 31, 2017.2018.
| Ø | Fiscal Year |
Fiscal year 20172018 was a very successful year for the Company as we significantly improved everycontinued to improve key financial performance metric.metrics. We delivered record top and bottom line performance and improved cash flows, while investing strategically in the business and closing threetwo acquisitions. Performance highlights included the following:
| ● | Net sales increased by 13.2% to a record $871.9 million from $770.2 |
| ● | Net income under generally accepted accounting principles (GAAP) increased by 27.5% to $91.0 million from $71.4 |
| ● | Diluted EPS increased by 27.6% to $2.18 from $1.71. |
| ● | Non-GAAP diluted EPS increased by 20.6% to $2.51 from $2.08. |
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| Ø | Executive Compensation Program Best Practices |
Our Compensation Committee believes that a strong foundation for our compensation program is necessary to execute our executive compensation philosophy effectively. The following best practices serve as the foundation for our executive compensation program.
| Ø | How Pay Was Tied to the Company’s Performance in Fiscal Year 2018 |
| Ø | Compensation Philosophy and Objectives |
The approach to our compensation is designed to accomplish the following objectives:
| ● | Pay-for-Performance. To reward performance that drives the achievement of the Company’s short- and long-term goals and, ultimately, stockholder value. |
| ● | Align Management and Stockholder Interests. To align the interests of our executive officers with our stockholders by using long-term, equity-based incentives, maintaining stock ownership and retention guidelines that encourage a culture of ownership, and rewarding executive officers for sustained and superior Company performance as measured by operating results and relative total stockholder return (TSR). |
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| ● | Attract, Retain, and Motivate Talented Executives. To compete and provide incentives for talented, high-performing executives. |
| ● | Address Risk-Management Considerations. To motivate our executives to pursue objectives that create long-term stockholder value and discourage behavior that could lead to unnecessary or excessive risk-taking inconsistent with our strategic and financial objectives, by providing a certain amount of fixed pay and balancing our executives’ at-risk pay between short-term (one-year) and long-term (three-year) performance horizons, using a variety of financial and other performance metrics. |
| ● | Support Financial Efficiency. To help ensure that payouts under our cash-based and equity-based incentive awards are appropriately supported by performance and to allow the Compensation Committee to design these awards in a way that is intended to |
What the Company’s Compensation Program is Designed to Reward
The Company’s business plan emphasizes growth through the expansion of existing operations (i.e., organic growth), the addition of new businesses and products through acquisitions, and product development. This strategy is advanced by identifying and acquiring businesses; effectively integrating acquired operations, personnel, products and technologies into the organization; retaining and motivating key personnel throughout the Company; attracting and retaining customers; and encouraging new product development. In addition, the Company relies on its executives to sustain and efficiently manage current businesses while adapting and growing its business segments in response to the ever-changing competitive landscape, and, in general, to maximize stockholder value. The compensation program is designed to reward the NEOs for successfully managing these tasks, increasing earnings of the Company, and creating stockholder value.
The abilities and performance of the Company’s executives are critical to the Company’s long-term success, and the objectives of the compensation program are designed to complement each other by balancing the Company’s interest in achieving both its short-term and long-term goals. Base salary and incentive-based cash bonuses are paid to reward performance and the achievement of short-term objectives and equity awards are used to align the executives’ interests with the long-term success of the Company and to attract and retain executives.
Responsibilities in Setting Executive Compensation
The Compensation Committee has responsibility for determining executive compensation. The Compensation Committee is made up entirely of independent directors as defined by our Governance Guidelines and NYSE listing standards. It regularly reviews the design and implementation of our executive compensation program and reports on its discussions and actions to the Board. In particular, the Compensation Committee (i) oversees our executive compensation program, (ii) approves the performance goals for our NEOs, evaluates results against those targets each year, and determines and approves the compensation of our CEO and our other NEOs, as well as any other executive officers of the Company and division and regional presidents, and (iii) makes recommendations to the Board with respect to the structure of overall incentive and equity-based plans. The Compensation Committee makes its determinations regarding executive compensation after consulting with the Chairman, andthe Vice Chairman, the CEO and if retained, the Compensation Committee’s independent compensation consultant (as further described below). Its decisions are based on a variety of factors, including the Company’s performance, individual executives’ performance, and input and recommendations from the Chairman and the CEO. Individual performance is evaluated primarily based on the consolidated performance of the Company, and, in the case of division and regional presidents, on the business or operations for which the executive is responsible, the individual’s skill set relative to industry peers, overall experience and time in the position, the critical nature of the individual’s role, difficulty of replacement, expected future contributions, readiness for promotion to a higher level, and role relative to that of other executive officers, and, in the case of externally recruited NEOs, compensation earned with a prior employer.officers. NEOs do not have a role in the determination of their own compensation, but the Chairman of the Board and the CEO do discuss their compensation with the Compensation Committee. Following the Compensation Committee’s determination of the Chairman’s annual equity award and other compensation, the Board is requested to consider and ratify such compensation. The Compensation Committee currently consists of Mr. Batkin (Chairman) and Drs. Forese and Myers.
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Role of Compensation Data and Independent Consulting Firm
The Compensation Committee retained FW Cook as an independent compensation consultant to provide advice with respect to executive compensation for fiscal year 2017.2018. With respect to the compensation of our CEO and other senior executives in fiscal year 2017, in order to obtain a general understanding of current trends in compensation practices and ranges of amounts being awarded by other public companies to their executive officers,2018, FW Cook provided the Compensation Committee with a list of peer group companies to the Company that are public companies engaged in our industry, in related industries, or that possess size or other characteristics which are similar to ours, as well as compensation data of the peer group companies. While the consulting firm provided the peer groupcompanies, and suchsurvey data it did not otherwise provide advice to the Compensation Committee regarding compensation decisions. Prior to FW Cook providing the recommended peer group list and compensation data, thebenchmarking information.
The Compensation Committee used the peer group data principally to obtain a general understanding of median base salary, bonus and severance levels paid to chief executive officers in the healthcare industry and to determine where compensation levels of the Company’s CEO and other executives fell relative to median compensation levels of comparable industry executives. The data showed that the combined base salaries and short-term cash incentives were mixed relative to the medians in the comparative group. However,group, but that the CEO and CFO salaries, and the CFO cash incentive, were substantially below the medians. During the course of the year, the Compensation Committee did not utilize theutilized this and additional benchmarking data for benchmarking to specific market percentiles or modify anyassess salaries, incentives orand benefits of the CEO based onand other executives. That survey led to revisions to the data in the survey.base salary for our CEO and adjustments to salary and cash bonuses for some of our executives as set forth below.
FW Cook’s primary responsibility with respect toresponsibilities in fiscal year 2017 was to review2018 included identifying our peer group companies, benchmarking the compensation of our CEO and other executive officers, existing annual and long-term incentive plan designs, facilitating the compensation risk assessment and provideproviding advice to the Compensation Committee on refinements and modifications to the plans in preparation for fiscal year 2017, as well as advise the Compensation Committee generally on2018. FW Cook presented peer based data and market trends inon the competitiveness of the Company’s executive compensation program, incentive plan design, risk and reward structure of executive compensation plans. For fiscal year 2018,plans, and compensation benchmarking for the CEO and other executives. FW Cook also assisted inadvised the evaluationCompensation Committee on executive perquisites and implementation of changes to the Company’s long term incentive plans and programs thereunder, including a change in fiscal year 2018 from granting RSAs to RSUs.severance plans.
The Compensation Committee has assessed the independence of FW Cook pursuant to the NYSE listing standards and SEC rules and is not aware of any conflict of interest that would prevent FW Cook from providing independent advice to the Committee concerning executive compensation matters.
Elements of the Compensation Program; Why the Compensation Committee Chose Each Element and How Each Relates to the Company’s Objectives
The two principal elements comprising executive compensation are cash and equity awards. The cash element is divided into base salary and annual cash incentives. The equity element historically consisted of RSAs (subject to a risk of forfeiture) and, to a limited extent, stock options, under the Company’s 2006 Plan or 2016 Equity Plan. These elements complemented each other and gave the Compensation Committee flexibility to create compensation packages that provided short and long-term incentives in line with the Company’s approach to compensation. Such approach was designed to provide the executive sufficient cash to be competitive with other employment opportunities, while at the same time providing the executive with an incentive to build stockholder value by aligning the executive’s interests with those of our stockholders.
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Prior to the fiscal year ended July 31, 2016 (fiscal year 2016), cash awards and equity awards were granted each October following the end of the fiscal year based on targets established at the beginning of the fiscal year (as described below). However, the Compensation Committee decided that commencing with fiscal year 2017, equity awards would be granted at the beginning of the fiscal year and would include (for the first time) performance-based equity grants, as described below, in addition to strictly time-based equity grants. Therefore, the equity grants made to executives at the beginning of fiscal year 20172018 (in October 2016)2017) were attributable to fiscal year 2017. The equity grants were in the form of time-based2018, and performance-based RSAs, described below. Commencing in fiscal year 2018, equity grants were in the form of time-based and performance-based RSUs.
Cash
Base salary is the primary fixed element of the Company’s compensation program and is used to attract and retain, as well as motivate and reward, executive officers. In determining the base salary of NEOs, the Compensation Committee considers the experience, skills, knowledge and responsibilities required of the executive officer in his or her role, specifically, the functional role of the position, the level of the individual'sindividual’s responsibility and the ability to replace the individual, and if applicable, the base salary of the individual at his prior employment.
individual.
Short-term incentive compensation is an opportunity for executives to receive cash bonuses based on the Company’s (or its divisions’) annual financial performance. The short-term incentive compensation is intended to reward performance for the most recently completed fiscal year when financial objectives are achieved and motivate and retain qualified individuals who have the opportunity to influence future results, advance business objectives, and enhance stockholder value. Likewise, this element of compensation is designed to provide a reduced award or no award when financial objectives are not achieved. Target amounts for the annual bonus opportunity are historically established within 75 days after the commencement of the fiscal year and are based on achievement of a financial metric, which in fiscal year 20172018 was non-GAAP EPS. The exact annual metric and targets are determined and approved by the Compensation Committee each year. For fiscal year 2017,2018, to ensure deductibility of executive compensation in excess of one million dollars$1,000,000 under Section 162(m), the Compensation Committee approved a compensation program with established award targets and performance targets.
For fiscal year 2017,2018, the Compensation Committee also established a target level, as a percentage of base salary, for each member of senior management (exclusive of Mr. C. Diker) for purposes of determining cash bonuses. Mr. C. Diker is excluded because the Compensation Committee determines his annual bonus on a discretionary basis. Achievement of the target levels was based on attainment of the Company’s fiscal year 20172018 targeted diluted non-GAAP EPS and, in the case of division and regional Presidents, budgeted operating income for the applicable division, subject to achieving a minimum gross margin requirement.net income target. Additional factors included in the process of determining senior management target levels, as well as discretionary additional bonuses, were business performance, scope of responsibilities and accountability, competitive and other industry compensation data, special circumstances and expertise, individual performance, comparison with compensation of our other senior managers and recommendations of the CEO. Following the passage of The Tax Cuts and Jobs Act of 2017 (Tax Reform) in December 2017, and after considering its impact on the Company and the resulting modification of the fiscal year 2018 budget, the Compensation Committee elected for fiscal year 2018 to adjust the non-GAAP EPS performance target for purposes of establishing the annual bonus payments. Therefore, while the non-GAAP EPS performance target established for the executive officers was exceeded by the Company, the bonus awards were negatively adjusted based on this revised target.
Equity
The primary purpose of equity grants is to contribute to the motivation of key employees in accomplishing the Company’s long-term strategic, operational and financial objectives as well as stockholder value goals. Equity awards (which may consist of RSAs, RSUs, stock options, stock appreciation rights or performance awards) are granted to NEOs under our 2016 Equity Plan in order to give them an ownership interest in the Company, thereby aligning their interests with those of the stockholders and providing a long-term incentive. RSAs and RSUs consist of awards of the Company’s common stock subject to specified vesting restrictions or conditions including, among other things, continued employment with the Company. Stock options and stock appreciation rights (rights to receive a payment equal to the increase in fair market value of the Company’s common stock since the grant date thereof) are equity awards whose value depends on an increase in the Company’s common stock price. For more than the past five years, the Compensation Committee has awarded only RSAs and RSUs and no stock options to management, other than Mr. C. Diker who, prior to fiscal year 2016, received stock options. Grants of RSAs and RSUs have intrinsic value regardless of price appreciation, and may create a stronger alignment of interests between management and other stockholders. In addition, the Compensation Committee believes that due to their intrinsic value, RSAs and RSUs may have a stronger retentive effect on management than stock options.
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During fiscal year 20172018 (in October 2016)2017), RSAsRSUs were granted to senior management under the Company’s 2016 Equity Plan. Half of the awards were time-based and half were performance-based RSAs, except that all of the equity awards to Mr. C. Diker were time-based RSAs. The awards to Mr. C. Diker were approved by the Compensation Committee and ratified by the Board. During fiscal year 2018 (in October 2017), the Compensation Committee decided that the composition of equity awards to Mr. C. Diker should be the same as senior management. As such, like senior management, Mr. C. Diker was granted half time-based awards and half performance-based RSUs.
The Compensation Committee has typically imposed time-based vesting conditions on stock options and RSAsRSUs because it believes that time-based vesting encourages recipients of awards to remain employed by the Company and continue to provide services to us, and also encourages recipients to build stockholder value over a long period of time. As with other issued shares of our common stock, recipients of RSAs (but not stock options) under our 2016 Equity Plan are entitled to receive dividends we pay on our common stock.
For fiscal year 2018, during which we awarded time-based and performance based RSUs for the first time, recipients of time-based and performance-based RSUs will receiveaccrue cash dividend equivalents in cash equal in amount to the cash dividends that would have been paid to the recipient had he or she owned one share for each yet-unpaid RSU as of such payment date. However, recipients of performance-based RSUs will not be paid dividend equivalents unless and until their units vest based on performance criteria.
vest. Until such time, dividend equivalents will accrue and be subject to the same vesting and forfeiture restrictions and achievements of the performance goal as the RSUs to which they are attributable.
Risk in Our NEO Compensation Program
The Compensation Committee, in consultation with FW Cook, has evaluatedconsidered the risks that may exist in the Company’s compensation programsplans and the factors that mitigate against the plans creating material risks to assess whether such programs would facilitate or encourage excessive risk-taking bythe Company and believes that risks arising from our compensation policies and practices for our employees andare not likely to have a material adverse effect on the Company. The Compensation Committee further concluded that the mix and design of the short-term and long-term elements of executive compensation provides appropriate incentives to executives while mitigating excessive risk-taking.
The provisions within our overall executive compensation program that mitigate against risk-taking include:
An appropriate balance between annual cash compensation and equity compensation that is earned over a period of three years;
Caps on the payouts under incentive plans, which protect against executives taking short-term actions to maximize bonuses that are not supportive of long-term objectives;
Including a minimum gross margin requirement on long-term compensation awards having sales targets, thereby discouraging revenue generation at the expense of profitability;
Clawback provisions applicable to current and former executives that enable the recapture of previously paid compensation under certain circumstances, which serve as a deterrent to inappropriate risk-taking activities; and
Stock ownership guidelines that require executive officers to accumulate minimum levels of equity ownership in the Company, which align executives’ short- and long-term interests with those of the Company’s stockholders.
We believe the base salary levels of our executives mitigate excessive risk-taking behavior by providing reasonable predictability in the level of income earned by each executive and alleviating pressure on executives to focus exclusively on stock price performance to the detriment of other important business metrics. The performance measures used for both short-term and long-term incentives are intended to be challenging yet attainable, so that it is more likely than not that the executives will earn all or a substantial portion of their target bonus annually and long-term incentives over time. The Compensation Committee believes that extraordinary performance warrants a higher payout on both short-term and long-term performance-based awards but with a cap of 200% of targeted cash bonus or equity compensation, as the case may be, which further mitigates the likelihood that our executives will take excessive risks.
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For fiscal year 2017,2018, we used non-GAAP EPS as the relevant metric for short-term incentive compensation. Long-term incentives for fiscal year 20172018 consisted of time-based RSAsRSUs vesting over 3 years, performance-related RSAsRSUs based on achieving a budgeted fiscal year 20172018 sales target (with a minimum gross margin requirement and a 2-year3-year service-based vesting tail)vesting) and performance-related RSAsRSUs based on a 3-year relative TSR performance criterion. Therefore, executives always have a significant amount of value at stake through unvested awards that could decrease significantly in value if our business is not managed for the long term. The Compensation Committee further retains discretion to reduce or not pay awards under these plans due to a NEO’s misconduct or poor performance.
How the Compensation Committee Chose Amounts and Formulas for Each Element
Base Salary. Currently the Compensation Committee approves the base salaries of all NEOs; however, the base salary of Mr. Diker, who provides services to the Company on a part time basis, is also subject to approval by the Compensation Committee as well as the Board. Annual base salary increases for executives were made effective as of executives typically occur on February 1 of each yearDecember 11, 2017 with additional increases occurring on a case-by-case base to recognize promotions, for market-based adjustments, and the like. The base salary history of NEOs during fiscal year 2017, as well as the current base salaries of the NEOs2018 are as follows:
| NEO | Starting FY2018 Base Salary 8/1/17 | Base Salary 12/11/17 | Final Base Salary 7/31/18 | % Increase |
| Mr. Diker | $382,454 | $393,928 | $393,928 | 3% |
| Mr. Hansen | $700,000 | $721,000 | $825,000 | 18% |
| Mr. Clifford | $390,967 | $402,695 | $475,000 | 21% |
| Mr. Nodiff | $392,533 | $404,309 | $404,309 | 3% |
| Mr. Yellin | $361,767 | $372,620 | $372,620 | 3% |
| NEO | Starting FY2017 Base Salary 8/1/16 | Base Salary 2/1/17 | % Increase |
| Mr. Diker | $371,315 | $382,454 | 3% |
| Mr. Hansen | $600,000 | $600,000 | 0% |
| Mr. Clifford | $379,579 | $390,967 | 3% |
| Mr. Nodiff | $381,100 | $392,533 | 3% |
| Mr. Yellin | $351,230 | $361,767 | 3% |
All of the base salaries of NEOs were increased by 3% except for the salarysalaries of Mr. Hansen.Messrs. Hansen and Clifford. Mr. Hansen’s compensation for fiscal year 2017 and fiscal year 2018 was originally negotiated and established in 2016 in connection with his promotion to CEO. Such
compensation included a base salary of $600,000increase to $700,000 commencing August 1, 20162017. In March and an increaseJune of 2018, based on peer group compensation data presented by FW Cook indicating that Messrs. Hansen and Clifford’s compensation was substantially below the market median, and in view of their strong performance, the Compensation Committee approved changes to $700,000 (17%) commencing Augustcompensation for Messrs. Hansen and Clifford, respectively. Mr. Hansen’s base salary was raised to $825,000, effective April 1, 2017.2018. Mr. Clifford’s base salary was raised to $475,000, effective July 1, 2018.
Cash Bonuses. During the first quarter of fiscal year 2017,2018, the Compensation Committee chose non-GAAP diluted EPS as the performance metric for the target bonus payable to NEOs for such fiscal year, to maintain a focus on increasing stockholder value and driving superior financial performance. The Compensation Committee believes diluted EPS is a key metric in measuring the Company’s success and provides certainty and comparability since it is calculated in accordance with GAAP and audited each year. However, it also recognizes that non-GAAP diluted EPS (as derived from GAAP diluted EPS but calculated by the Company) is a meaningful metric in making comparisons to our historical operating results and analyzing the underlying performance of our results of operations. We define non-GAAP diluted EPS as diluted EPS adjusted to exclude amortization of purchased intangible assets, acquisition related items, business optimization and restructuring charges, certain significant and discrete tax matters, and other significant items management deems irregular or non-operating in nature. For purposes of determining fiscal year 20172018 cash incentive awards, we calculated non-GAAP EPS by adjusting diluted GAAP EPS to exclude items such as (i) amortization expense of purchased intangible assets, (ii) acquisition relatedacquisition-related items, (iii) costs associated with the retirement of our CEO and (iv) other business optimization and restructuring-related charges.charges, and (iv) certain significant and discrete tax matters. Specifically, at the beginning of fiscal year 2017,2018, the Compensation Committee established a non-GAAP diluted EPS performance target for fiscal year 20172018 of $1.96.$2.33. This represented a $0.21$0.25 increase (12%) over our non-GAAP diluted EPS of $1.75$2.08 for fiscal year 2016.2017.
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Regardless of the non-GAAP diluted EPS achieved, bonus payouts for fiscal year 20172018 were subject to the Company achieving a net income target of $60,000,000,$98,000,000, which target was exceeded.met. If this target had not been achieved, no bonuses would have been payable.
For fiscal year 20172018 the target incentive awards, established as a percentage of base salary of the NEO at the time of the award (and as a fixed dollar amount in the case of Mr. Diker), were set by the Compensation Committee as follows:set forth below. In conjunction with the executive compensation peer group review conducted by FW Cook in June 2018, the Compensation Committee increased Mr. Clifford’s original target incentive award set in the first quarter of 2018 at 55% to 70%, to be effective for all of fiscal year 2018.
| NEO | Target Incentive Award |
| Mr. Diker | $150,000 |
| Mr. Hansen | 100% |
| Mr. Clifford | |
| Mr. Nodiff | 55% |
| Mr. Yellin | 55% |
In fiscal year 2017,2018, the Company’s actual diluted non-GAAP EPS of $2.08$2.51 exceeded by $0.12$0.18 the performance target of $1.96.$2.33. However, the Compensation Committee negatively adjusted the actual bonus awards based on the favorable impacts of Tax Reform to the Company. Therefore, as described below, each NEO (other than Mr. Diker) received an amount in excessequal to 100% of his fullthe target incentive award.award rather than the otherwise higher percentages that would have been awarded. The amount of Mr. Diker’s award was determined at the discretion of the Compensation Committee. The primary factor considered byCommittee, based on the Compensation Committee in determining such amount was the amount by which ourCompany’s actual diluted non-GAAP EPS, exceeded our performance against target, sales and earnings growth, acquisition closings and other factors deemed relevant by the Compensation Committee.
Bonus payouts were based on the Company’s achievement of Non-GAAP EPS as follows:
| Non-GAAP EPS Achieved | % of Bonus Target to be Awarded |
| < | 0% of Bonus Target |
| ≥ | 50% to 99% of Bonus Target, ratably |
| = | 100% of Bonus Target |
| > | 100% to 199% of Bonus Target, ratably |
| ≥ | 200% of Bonus Target |
All bonuses are subject to final approval by the Compensation Committee, and may be adjusted from the table amounts in the discretion of the Compensation Committee so long as the final payout does not exceed the maximum opportunity made available by the achievement of the net income target.
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Based on the above scale and considerations, the actual non-GAAP EPSfunding for NEOs and other executives was equal to 100% of $2.08 achievedthe target incentive award. In the cases of Messrs. Hansen and Clifford, in recognition of the peer data from FW Cook indicating that their compensation was substantially below market median and their strong performance, the Compensation Committee determined to utilize their final base salaries for fiscal year 2017, NEOs (other than2018 as the basis for the award, as well as in the case of Mr. Diker) were paid 160%Clifford, his revised target award percentage (70% versus 55%) discussed above. In both cases, the Compensation Committee applied the same formulaic approach as with the other executives. In addition, the Compensation Committee awarded an additional bonus of $17,429 to Mr. Yellin based on his exceptional personal contribution to the Bonus Target as follows:Company’s acquisition strategy and execution.
| NEO | Target Bonus | Awarded Bonus per Plan | Additional Bonus | Total Bonus |
| Mr. Diker | NA | $150,000 | $0 | $150,000 |
| Mr. Hansen | $721,000 | $721,000 | $104,000 (1) | $825,000 |
| Mr. Clifford | $221,483 | $221,483 | $111,017 (2) | $332,500 |
| Mr. Nodiff | $222,370 | $222,370 | $0 | $222,370 |
| Mr. Yellin | $204,941 | $204,941 | $17,429 (3) | $222,370 |
| NEO | Target Bonus | Actual Bonus |
| Mr. Diker | NA | $150,000 |
| Mr. Hansen | $700,000 | $1,120,000 |
| Mr. Clifford | $215,031 | $344,051 |
| Mr. Nodiff | $215,893 | $345,429 |
| Mr. Yellin | $198,972 | $318,355 |
| (1) | Mr. Hansen’s award was calculated to match the equivalent of the full target incentive award at his adjusted base salary ($825,000). |
| (2) | Mr. Clifford’s award was calculated to match the equivalent of the full target incentive award of his re-set target bonus (70%) of his adjusted base salary ($475,000). |
| (3) | Mr. Yellin’s award was increased in recognition of his exceptional personal contribution to the Company’s acquisition strategy and execution. |
Equity Awards. For fiscal year 2017,2018, the Compensation Committee terminatedcontinued its practice of granting equity awards following, and based upon the financial performance of, the recently completed fiscal year. Rather, it decided that going forward, long-term equity awards would be granted at the beginning of the fiscal year with a portion50% of such awards to key executives being performance-related, certain of which would be based on defined metrics for the current fiscal year.performance-related. With the advice of FW Cook, the Compensation Committee agreed that for fiscal year 20172018 executive compensation, (other than for Mr. Diker), 50% of the equity awards would consist of time-based RSAsRSUs vesting over 3 years, 25% of the equity awards would be performance-related RSAsRSUs based on achieving a budgeted fiscal year 20172018 sales target (with a minimum gross margin requirement and a 2-year3-year service-based vesting tail)vesting) and 25% of the equity awards would be performance-related RSAsRSUs based on a 3-year relative TSR performance criterion. The additioninclusion of the performance-vesting RSAsRSUs into our long-term incentive program wasis designed to (i) increasecontinue the performance orientation of our program, (ii) change theavoid a focus fromon a singular measure of performance (i.e., non-GAAP EPS, which is used in determining annual bonus awards), to multi-performance oriented measures, and (iii) provide additional upside (or downside exposure) to executives in the event high levels of performance (or low levels of performance) are achieved (without increasing target levels of compensation).
Based on the foregoing, in October 2016,2017, the Compensation Committee established the following payment percentages or amounts for the current NEOs and awarded the equity grants indicated for fiscal year 2017:2018:
| NEO | Target Incentive Award | Total Value of Award | Equity Value Time-based RSUs (50%) | Time-based RSUs | Equity Value Sales-based RSUs (25%) | Sales-based RSUs (# Shares) | Equity Value TSR-based RSUs (25%) | TSR-based RSUs (# Shares) |
| Charles Diker | NA | $246,651 | $125,398 | 1,300 | $58,551 | 607 | $62,702 | 520 |
| Jorgen Hansen | $1,500,000 | $1,475,419 | $750,459 | 7,780 | $349,957 | 3,628 | $375,004 | 3,110 |
| Peter Clifford | 100% of Base Salary | $385,434 | $195,814 | 2,030 | $91,348 | 947 | $98,273 | 815 |
| Eric Nodiff | 100% of Base Salary | $386,399 | $196,296 | 2,035 | $91,830 | 952 | $98,273 | 815 |
| Seth Yellin | 100% of Base Salary | $356,978 | $181,345 | 1,880 | $84,595 | 877 | $91,038 | 755 |
| NEO | Target Incentive Award | Total Value of Award | Equity Value Time-based RSAs (50%) | Time-based RSAs | Equity Value Sales-based RSAs (25%) | Sales-based RSAs (# Shares) | Equity Value TSR-based RSAs (25%) | TSR-based RSAs (# Shares) |
| Charles Diker | NA | $250,000 | NA | NA | NA | NA | NA | NA |
| Jorgen Hansen | $1,000,000 | $1,000,000 | $500,000 | 6,360 | $250,000 | 3,180 | $250,000 | 2,435 |
| Peter Clifford | 100% of Base Salary | $379,579 | $189,790 | 2,415 | $94,895 | 1,210 | $94,895 | 925 |
| Eric Nodiff | 100% of Base Salary | $381,100 | $190,550 | 2,425 | $95,275 | 1,215 | $95,275 | 930 |
| Seth Yellin | 100% of Base Salary | $351,230 | $175,615 | 2,235 | $87,808 | 1,120 | $87,808 | 855 |
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The fiscal year 20172018 sales-based RSAsRSUs were subject to adjustment based on the achievement of a sales target of $765$873 million for fiscal year 20172018 and achievement of a minimum gross margin requirement of 46.7%47.5% as follows:
Level of Achievement of Company’s Sales Target for Company’s Fiscal Year Ended July 31, | Percentage of Shares Eligible for Vesting |
| Less than 95% of Sales Target or failure to achieve minimum gross margin requirement | 0 Shares |
| At least 95%, but less than 100%, of Sales Target | Between 50% and 99%, ratably, of Shares |
| 100% of Sales Target | 100% of Shares |
| More than 100%, but less than 105%, of Sales Target | Between 100% and 199%, ratably, of Shares |
| 105% or more of Sales Target | 200% of Shares |
Our actual sales in fiscal year 20172018 were $770.2$871.9 million, which resulted in the issuancea downward performance adjustment of additional RSAsRSUs to NEOs as follows:
| Name | Sales-Based RSUs (Issued 10/10/17) | Performance Adjustment (10/10/17) | Total Sales-Based RSUs |
| Jorgen Hansen | 3,890 | (262) | 3,628 |
| Peter Clifford | 1,015 | (68) | 947 |
| Eric Nodiff | 1,020 | (68) | 952 |
| Seth Yellin | 940 | (63) | 877 |
| Name | Sales-Based RSAs (Issued 10/10/16) | Additional RSAs (Issued 10/10/17) | Total Sales-Based RSAs |
| Jorgen Hansen | 3,180 | 636 | 3,816 |
| Peter Clifford | 1,210 | 242 | 1,452 |
| Eric Nodiff | 1,215 | 243 | 1,458 |
| Seth Yellin | 1,120 | 224 | 1,344 |
Post-Retirement and Other Benefits
Each of the NEOs other than Mr. Diker is party to a severance agreement with the Company that contains certain post-termination benefits.
The Compensation Committee believes that post-termination benefits are an important aspect of an executive compensation program because they allow the Company to better recruit and retain executive officers by offering competitive compensation packages. Such benefits also allow the executive officers to focus on performance of their duties and eliminate distractions related to job security concerns. The severance agreements also provide benefits in the event of a change in control of the Company to further align the interests of the executive with those of the stockholders. These arrangements are primarily intended to maintain the executive’s motivation to consummate the sale of the Company in circumstances where such event will maximize stockholder value, notwithstanding that such transaction may result in the executive’s loss of continued employment with the Company. We believe a “double trigger” requiring actual termination following a change of control rather than simply awarding amounts in the event of a change of control best aligns the NEOs’ interests by encouraging them to continue to perform their duties adequately rather than simply receiving an award for completing a transaction. Upon a change in control of the Company, although an executive may be subject to certain excise taxes pursuant to Section 280G of the Code, we have not agreed to reimburse any executive for any such taxes.
We believe that these severance benefits are reasonable and appropriate for our NEOs in light of the anticipated time it takes high-level executives to secure new positions with responsibilities and compensation that are commensurate with their experience. We do not include “gross-up” provisions in the severance agreements. A more detailed description of our severance agreements may be found below under the heading “Post Termination“Post-Termination Benefits and Change in Control.”
Severance benefits also include the vesting of 100% of the executives’ unvested stock options, unvested time-based RSUs and unvested RSAs, and other similar rights in certain circumstances. We believe that the equity awards granted to our executive officers have been reasonable in amount and that, in the event of a change in control and certain other terminations, it is appropriate that our executive officers receive the full benefit under their equity compensation awards of the increase in Cantel’s value attributable to the performance of the current management team.
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The severance agreements for Messrs. Hansen, Clifford, Nodiff and Yellin provide equal benefits for each individual, other than with respect to cash severance payable in the event of a termination in a non-change of control situation (i.e., a termination without cause). In such event, Mr. Hansen is entitled to two times the sum of his base salary and target bonus at the time of termination and Messrs. Clifford, Nodiff and Yellin are entitled to 12 months’ base salary. We believe that a higher severance formula for our CEO is justified and needed in order to attract the individual we believe is best suited for the office. Our CEO is
the individual the public and our stockholders most closely identify as the face of the Company. He has the greatest individual impact on our success, and he faces the greatest personal risks when the company takes risks. Finally, we believe that any NEO (other than Mr. Diker) who has 15 years of employment with the Company should be entitled to additional compensation in the event of a termination of his employment in a non‑change in control situation in recognition of his long service to the Company. Therefore, upon executives (other than the CEO) reaching 15 years’ employment, the severance payment of 12 months’ base salary described above is increased to 18 months’ base salary.
In addition to the above benefits, we provide NEOs (other than Mr. Diker): (1) term life insurance equal to one years’ base salary, (2) a car allowance equal to $750 a month plus related expenses, (3) an executive physical, once every three years (up to $3,500, subject to a gross-up to make this benefit tax neutral), (4) a $7,000 allowance for disability insurance or long term care insurance and (5) a 401(k) plan match. Messrs. Hansen and Nodiff are also provided allowances for the use of outside car services, particularly for transportation to and from the Company’s New Jersey headquarters. We believe these perquisites and benefits are appropriate as part of a competitive benefits package. Mr. Diker is provided a 401(k) plan match and a fixed monthly amount for office expenses.
Say-on-Pay Vote Response
In evaluating our compensation process for fiscal year 2017,2018, our Compensation Committee generally considered the results of the advisory vote of our stockholders on the compensation of the executive officers named in our last proxy statement related to our prior annual meeting of stockholders. Our Compensation Committee noted that approximately 97%98% of votes cast approved of the compensation of those executive officers as described in our last proxy statement. Our Compensation Committee considered these voting results as supportive of the Compensation Committee'sCommittee’s general executive compensation practices.
Tax Deductibility of Compensation
Section 162(m) limitsof the Code previously generally disallowed a federal income tax deduction ato public company is permittedcompanies for compensation paid to the chief executive officer and to the four most highly compensated executive officers other than the chief executive officer. Generally, amounts paid in excess of $1,000,000 paid in any year to a coveredthe principal executive cannot be deducted,officer (in our case, the CEO) and certain other executive officers, unless the compensation is paid pursuant to a plan whichthat is performance related, non-discretionary and has been approved by stockholders. In its deliberations the Compensation Committee considers ways to maximize deductibility of executive compensation.
There can be no assurance that any compensation awarded will be fully deductible under all circumstances. Also, with the goal of providing a compensation program that enhances stockholder value, the Compensation Committee reserves flexibility to approve compensation arrangements that are not fully tax deductible by the Company.Company, such as certain of those bonuses noted above, which are not expected to meet the Section 162(m) requirements.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the “Compensation Discussion and Analysis” section of this Proxy Statement and discussed such section with certain members of management. Based on its review and discussions and its ongoing involvement with executive compensation matters, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” section of this Proxy Statement be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the year ended July 31, 2017.
| Compensation Committee: | |
| Alan R. Batkin (Chair) | |
| Laura L. Forese | |
| Ronnie Myers |
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EXECUTIVE COMPENSATION
Fiscal Year 20172018 Summary Compensation Table
The following table sets forth compensation for our CEO, CFO and three other most highly compensated executive officers (our NEOs) during fiscal year 2017.2018.
| SUMMARY COMPENSATION TABLE | |||||||||
| Name and Principal Position | Year | Salary | Bonus | Option Awards(1) | Stock Awards(1) | Non-Equity Incentive Plan Compensation | All Other Compensation | Total | |
| Charles M. Diker | 2018 | $393,928 | — | — | $246,651 | $150,000 | $65,963 | (2) | $856,542 |
| Chairman of the Board | 2017 | $376,885 | — | — | $250,091 | $150,000 | $45,981 | $822,957 | |
| 2016 | $365,908 | — | $397,380 | $0 | $150,000 | $44,136 | $957,424 | ||
| Jorgen B. Hansen | 2018 | $750,539 | $104,000 | — | $1,475,419 | $721,000 | $67,661 | (3) | $3,118,619 |
| President and Chief | 2017 | $600,000 | — | — | $1,104,485 | $1,120,000 | $83,045 | $2,907,530 | |
| Executive Officer | 2016 | $504,337 | — | — | $504,610 | $780,000 | $33,058 | $1,822,005 | |
| Peter G. Clifford | 2018 | $408,258 | $111,017 | — | $385,434 | $221,483 | $21,437 | (4) | $1,147,629 |
| Executive Vice President, | 2017 | $385,273 | — | — | $419,676 | $344,051 | $21,444 | $1,170,444 | |
| Chief Financial Officer | 2016 | $374,790 | — | — | $370,120 | $271,399 | $23,611 | $1,039,920 | |
| Eric W. Nodiff Executive | 2018 | $400,233 | — | — | $386,399 | $222,370 | $42,721 | (5) | $1,051,723 |
| Vice President, General | 2017 | $386,817 | — | — | $421,559 | $345,429 | $71,293 | $1,225,098 | |
| Counsel, and Secretary | 2016 | $375,550 | — | — | $370,120 | $272,486 | $32,134 | $1,050,290 | |
| Seth M. Yellin Executive | 2018 | $368,863 | $17,429 | — | $356,978 | $204,941 | $18,078 | (6) | $966,289 |
| Vice President Corporate Strategy and Development | 2017 | $356,499 | — | — | $388,282 | $318,355 | $20,351 | $1,083,487 | |
| SUMMARY COMPENSATION TABLE | |||||||||
| Name and Principal Position | Year | Salary | Bonus | Option Awards(1) | Stock Awards(1) | Non-Equity Incentive Plan Compensation | All Other Compensation | Total | |
| Charles M. Diker Chairman of the Board | 2017 | $376,885 | — | — | $250,091 | $150,000 | $45,981 | (2) | $822,957 |
| 2016 | $365,908 | — | $397,380 | — | $150,000 | $44,136 | $957,424 | ||
| 2015 | $355,250 | — | $288,500 | — | $150,000 | $44,096 | $837,846 | ||
| Jorgen B. Hansen President and Chief Executive Officer | 2017 | $600,000 | — | — | $1,104,485 | $1,120,000 | $83,045 | (3) | $2,907,530 |
| 2016 | $504,337 | — | — | $504,610 | $780,000 | $33,058 | $1,822,005 | ||
| 2015 | $453,529 | — | — | $448,658 | $447,207 | $20,392 | $1,369,786 | ||
| Peter G. Clifford Executive Vice President, Chief Financial Officer | 2017 | $385,273 | — | — | $419,676 | $344,051 | $21,444 | (5) | $1,170,444 |
| 2016 | $374,790 | — | — | $370,120 | $271,399 | $23,611 | $1,039,920 | ||
| 2015 | $128,077 | — | — | $336,162 | $132,275 | $155,187 | (6) | $751,701 | |
| Eric W. Nodiff Executive Vice President, General Counsel, and Secretary | 2017 | $386,817 | — | — | $421,559 | $345,429 | $71,293 | (4) | $1,225,098 |
| 2016 | $375,550 | — | — | $370,120 | $272,486 | $32,134 | $1,050,290 | ||
| 2015 | $361,875 | — | — | $957,667 | $264,550 | $29,462 | $1,613,554 | ||
| Seth M. Yellin Executive Vice President Corporate Strategy and Development | 2017 | $356,499 | — | — | $388,282 | $318,355 | $20,351 | (7) | $1,083,487 |
| (1) | Represents the aggregate grant date fair value (pre-tax) computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718. For a discussion of valuation assumptions, see Note |
| (2) | This amount includes the following amounts paid or accrued by us for the benefit of Mr. Diker: (i) |
| (3) | This amount includes the following amounts paid or accrued by us for the benefit of Mr. Hansen: (i) |
| (4) | This amount includes the following amounts paid or accrued by us for the benefit of Mr. Clifford: (i) $12,489 in vehicle fringe benefits, and (ii) $8,947 in contributions under a 401(k) plan. |
| (5) | This amount includes the following amounts paid or accrued by us for the benefit of Mr. Nodiff: (i) |
| (6) |
This amount includes the following amounts paid or accrued by us for the benefit of Mr. Yellin: (i) |
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Grants of Plan-Based Awards Table
The following table sets forth certain additional information regarding grants of plan-based awards to our NEOs for fiscal year 2017:2018:
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Equity Grant Date | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value (Pre-tax) of Stock and Option Awards | |||
| Name | Threshold | Target | Maximum | |||||
| Charles M. Diker | NA(2) | NA(2) | NA(2) | 10/10/17 | 2,427(3) | — | — | $225,007 |
Jorgen B. Hansen(4) | $360,500 | $721,000 | $1,442,000 | 10/10/17 | 14,518(3) | — | — | $1,346,427 |
| Eric W. Nodiff | $111,185 | $222,370 | $444,740 | 10/10/17 | 3,802(3) | — | — | $352,576 |
Peter G. Clifford(5) | $110,742 | $221,483 | $442,966 | 10/10/17 | 3,792(3) | — | — | $351,649 |
| Seth M. Yellin | $102,471 | $204,941 | $409,882 | 10/10/17 | 3,512(3) | — | — | $325,690 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value (Pre-tax) of Stock and Option Awards | |||
| Name | Threshold | Target | Maximum | |||||
| Charles M. Diker | NA(2) | NA(2) | NA(2) | 10/18/16 | 3,295(4) | — | — | $250,091 |
Jorgen B. Hansen(3) | $350,000 | $700,000 | $1,400,000 | 10/10/16 | 12,611(4) | — | — | $1,104,485 |
| Eric W. Nodiff | $107,947 | $215,893 | $431,786 | 10/10/16 | 4,813(4) | — | — | $421,559 |
| Peter G. Clifford | $107,516 | $215,032 | $430,064 | 10/10/16 | 4,792(4) | — | — | $419,676 |
| Seth M. Yellin | $99,486 | $198,972 | $397,944 | 10/10/16 | 4,434(4) | — | — | $388,282 |
| (1) | All non-equity incentive plans referenced in the table provide that no bonus is payable if the minimum level of performance required by the plan is not achieved by the NEO. |
| (2) | Although Mr. Diker does not participate in the Company’s primary non-equity incentive plan, the Compensation Committee made Mr. Diker eligible to receive a target bonus of $150,000 (with a “Threshold” payout of $75,000), which target bonus was awarded to Mr. Diker for fiscal year |
| (3) |
Each |
| (4) | Mr. Hansen’s raise to $825,000 annual salary was effective April 1, 2018. |
| (5) | Mr. Clifford’s raise to $475,000 annual salary was effective July 1, 2018. |
Narrative Addendum to the Summary Compensation Table and Grants of Plan-Based Awards Table
Cash Bonus Awards
Our NEOs (other than Mr. Diker) are eligible to receive cash bonus awards based on the Company’s achievement of performance targets for each fiscal year ending July 31st (each year being referred to as a Plan Year). Mr. Diker receives a fixed cash bonus award approved at the discretion of the Compensation Committee.
The Compensation Committee establishes annual performance targets (the Performance Targets) at the beginning of each fiscal year. Awards are based on the Company’s achievement of the Performance Targets, which have historically been based on the attainment of specified levels of diluted EPS or non-GAAP EPS of the Company and, with respect to division and regional presidents, specified performance criteria of the division or region for or within which the participant is primarily employed. For fiscal year 2017,2018, the Compensation Committee established a Performance Target of diluted non-GAAP EPS of $1.96,$2.33, which was $0.21$0.25 (12%) higher than the Company’s fiscal year 20162017 non-GAAP EPS of $1.75.$2.08. In fiscal year 2017,2018, the Company achievedCompany’s actual diluted non-GAAP EPS of $2.08, thereby exceeding$2.51 exceeded by $0.18 the Performance Target by $0.12.performance target of $2.33. However, the Compensation Committee negatively adjusted the actual bonus awards based on the favorable impacts of Tax Reform to the Company. Therefore, each NEO (other than Mr. Diker) received an amount equal to 100% of the target incentive award rather than the otherwise higher percentages that would have been awarded.
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For fiscal year 20172018 the target incentive awards, expressedestablished as a percentage of base salary of the NEO at the time of the award (and as a fixed dollar amount in the case of Mr. Diker), were set by the Compensation Committee as set forth below. In conjunction with the executive compensation peer group review conducted by FW Cook in June 2018, Mr. Clifford’s original target incentive award set in the first quarter of 2018 at the beginning55% was raised to 70%, to be effective for all of fiscal year 2017 as follows:2018.
| NEO | Target Incentive Award |
| Mr. Diker | NA |
| Mr. Hansen | 100% |
| Mr. Clifford | |
| Mr. Nodiff | 55% |
| Mr. Yellin | 55% |
The target incentive award payable to each participant for 100% achievement of the Performance Target (the Bonus Target) is calculated by multiplying the participant’s anticipated base salary atfor the end of the relevant Plan Year by a designated percentage established by the Compensation Committee for such participant for such Plan Year (generally pro-rated if a NEO was employed for a partial year). If more or less than 100% of the Performance Target is achieved, the Compensation Committee
has the discretion to increaseadjust the Bonus Target, (not toso long as the final payout does not exceed 200%the maximum opportunity (200%) of the Bonus Target) or decrease the Bonus Target (not to be less than 50% of the Bonus Target, provided that a minimum threshold performance level has been achieved); provided, however, that the Compensation Committee in its discretion may establish minimum Performance Targets that must be achieved in order for any incentive award to be paid.Target. The Compensation Committee will determine the degree to which any applicable Performance Target has been achieved and any incentive award paid. At the sole discretion of the Compensation Committee, a participant may not receive an award, or the amount of an award may be decreased, due to substantiated poor individual performance or misconduct and may be declared ineligible to receive all or part of an applicable target incentive award. The Compensation Committee adopted a methodology for bonus payments in fiscal year 2017 under which the Compensation Committee no longer has broad discretion with respect to over-achievement or under-achievement of Performance Targets. Rather, increases and decreases in the bonus target will be strictly formulaic and committee discretion will be reserved for extreme circumstances.
The actual cash bonus awards for our NEOs for fiscal year 20172018 are shown in the tables and discussed in Compensation Discussion and Analysis above.
Long-Term Equity Awards
NEOs (other than Mr. Diker) are eligible to receive annual equity awards for each fiscal year. Mr. Diker receives equity awards at the discretion of the Compensation Committee. All equity awards subsequent to January 2016 were granted under the Company’s 2016 Equity Plan and no further options or awards will be granted under the 2006 Plan. The 2006 Plan and the 2016 Equity Plan, both of which were approved by the Company’s stockholders, are described below.
Commencing with fiscal year 2017, the Compensation Committee agreed that long-term equity awards would be granted at the beginning of the fiscal year with a portion of such awards performance-related, certain of which would be based on defined metrics for the current fiscal year. As such, commencing October 2016, equity awards granted in October were deemed to relate to the fiscal year in which they are granted. Thus, the equity grants to NEOs awarded in October 20162017 are deemed to relate to fiscal year 2017.2018. Further, whereas all equity grants to NEOs prior to October 2016 had time-based vesting, one-half of the equity awards granted to NEOs in October 20162017 are time-based RSAsRSUs and one-half are performance (and time) based RSAs.RSUs. The performance-based equity awards are tied to achievement of fiscal year 20172018 budgeted sales (subject to a minimum gross margin requirement) and relative TSR performance. The actual awards for our NEOs granted in fiscal year 20172018 are shown in the tables and discussed in Compensation Discussion and Analysis above.
2016 Equity Incentive Plan
The 2016 Equity Plan provides for the granting of stock options, stock appreciation rights (SARs), RSAs, RSUs, cash awards, and performance-based awards to our employees, independent contractors and consultants. It also provides the flexibility to grant equity-based awards to our non-employee Directors. The 2016 Equity Plan does not permit the granting of discounted options or discounted stock appreciation rights.
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The selection of participants in the 2016 Equity Plan and the level of participation of each participant are subject to approval by the Compensation Committee (the Board will make these determinations as to non-employee directors). The Compensation Committee has the authority to interpret the 2016 Equity Plan, to establish and revise rules and regulations relating to the 2016 Equity Plan and to make any other determinations that it believes necessary or advisable for the administration of the 2016 Equity Plan. Subject to the limitations set forth in the 2016 Equity Plan, the Compensation Committee may delegate to our CEO or other executive officers such duties and powers as the Compensation Committee may deem advisable with respect to the designation of employees to be recipients of 2016 Equity Plan awards and the nature and size of such awards, except that no delegation may be made in the case of awards to executive officers or directors or awards intended to be qualified under Section 162(m).
The maximum number of shares with respect to which stock options and stock awards may be granted under the 2016 Equity Plan is 1,200,000 shares. Subject to adjustment by the Compensation Committee, the maximum number of shares with respect to which a participant may be granted in options or SARs under the 2016 Equity Plan in a calendar year is 150,000, the maximum number of shares with respect to which a participant may be granted awards intended to be “qualified performance-based compensation” under Section 162(m) is 150,000 and the maximum amount that may be paid a participant under awards intended to be “qualified performance-based compensation” under Section 162(m) and settled in cash or other property is $10,000,000. In multi-year performance periods, the number of shares of common stock granted or the amount of cash or other property deemed paid with respect to any one calendar year, is the total amount of the award divided by the number of calendar years in the performance period, which may be multiplied up to two times with respect to awards granted to a participant in the year his or her service commences with the Company. Subject to certain exceptions described in the 2016 Equity Plan, the
maximum number of shares subject to awards to any non-employee director during any calendar year, together with any cash fees paid to such non-employee director, may not exceed $275,000.
Unless otherwise provided by the Compensation Committee, in the event of termination of a participant’s service as an employee, independent contractor, consultant, non-employee director or other non-employee relationship for any reason other than the participant’s death or disability, stock options and SARs (to the extent exercisable) will remain exercisable for a period of three months from the date of such termination or until the expiration of the stated term of such options or SARs, whichever period is shorter (except that in the case of termination of employment for cause, such options and SARs will immediately expire). Unless otherwise provided by the Compensation Committee, upon a participant’s death, options and SARs granted to such participant will remain exercisable (to the extent exercisable) for a period of one year from date of termination or until the expiration of the stated term of such options or SARs, whichever period is shorter.
In addition, whenthis year the Board approved a non-material amendment to the 2016 Equity Plan to change the definition of Retirement therein. Under the terms of the amendment, a participant who has servedis qualified for “Retirement” provided that the Company for at least ten years andindividual is at least 6560 years of age and has provided at least 5 years of employment or who hasservice to the Company. Prior to the amendment, to meet the definition of Retirement, a participant had to be at least 60 years of age and have served the Company for at least 15 years, and isor be at least 6065 years of age terminates his or her serviceand have served the Company for at least 10 years. The Board made this determination after consultation with FW Cook, who proposed the Company,modification in order to bring the long-term incentive program within the range of market and industry standards. As before, upon Retirement, all options and SARs granted under the 2016 Equity Plan that are held by such participant will, upon such termination,Retirement, become immediately exercisable in full and remain exercisable through the original term of the award, and the restrictions on all RSAs will immediately lapse such that the underlying sharesand RSUs will become fully vested.vested and not be subject to forfeiture.
Subject to the terms of an award agreement and except as otherwise determined by the Compensation Committee at the time of the grant of an award or thereafter, upon termination of service as an employee (or other recipient) during the applicable employment period (or other applicable period) or upon failure to satisfy a performance goal, RSAs and RSUs that are at that time subject to restrictions will be forfeited. Subject to the terms of the 2016 Equity Plan, and except as provided in the previous sentence, RSAs and RSUs awarded to any participant under the 2016 Equity Plan will vest (i.e., the risk of forfeiture with respect to such shares will lapse) ratably on the first, second and third anniversaries of the date of grant, unless otherwise specified by the Compensation Committee, in its sole discretion, in the RSA or RSU agreement. Notwithstanding the foregoing, the Compensation Committee may in its discretion accelerate vesting of an RSA or RSU as to all or a portion of the shares underlying the award.
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The 2016 Equity Plan does not permit the repricing of options or the exchange of underwater options for cash or other awards without stockholder approval.
Provisions have been included to meet the requirements for deductibility of executive compensation under Section 162(m) with respect to options and other awards by qualifying payments under the 2016 Equity Plan as performance-based compensation.compensation, some of which may remain deductible under transition relief available under Section 162(m), as amended by Tax Reform. (The performance-based compensation exception has generally been eliminated effective for taxable years beginning after December 31, 2017.) In addition, provisions have been included to comply with the requirements of Section 409A of the Code to the extent applicable to options and other awards granted under the 2016 Equity Plan.
2006 Equity Incentive Plan
The 2006 Plan, which was terminated (as to the ability to award new grants), providesprovided for the granting of stock options, RSAs, stock appreciation rights (SARs) and performance awards to our employees, including our executive officers. Non-employee directors also participated in the 2006 Plan. The 2006 Plan did not permit the granting of discounted options or discounted SARs. The selection of employee participants in the 2006 Plan and the level of participation of each participant are determined by the Compensation Committee (the Board makes determinations relating to awards to directors). The 2006 Plan limits the number of shares that mayNo new grants will be granted to a participantmade under the 2006 Plan during any calendar year. Subject to the limitations set forth in the 2006 Plan, the Compensation Committee may delegate to our CEO or other executive officers such duties and powers as the Compensation Committee may deem advisable with respect to the designation of employees to be recipients of 2006 Plan awards and the nature and size of such awards.Plan.
Unless otherwise provided by the Compensation Committee, in the event of the termination of a participant’s service as an employee or non-employee director for any reason other than the participant’s Retirement (as defined in the 2006 Plan), death or disability, stock options and SARs (to the extent exercisable) will remain exercisable for a period of 90 days from such date or until the expiration of the stated term of such stock options or SARs, whichever period is shorter (except that in the case of a termination of employment for cause, such stock options and SARs will immediately expire). Unless otherwise provided by the Compensation Committee, upon the termination of a participant’s employment due to death or disability, stock options and SARs granted to such participant will remain exercisable (to the extent vested) for a period of one year from such date or until the expiration of the stated term of such stock options or SARs, whichever period is shorter. In addition, when an employee or non-employee director who has at least ten years of service with the Company and is at least 65 years of age (or at least 60 years of age with at least fifteen years of service) terminates his or her service as an employee or director (i.e., Retires), all
stock options and SARs granted to such employee or director under the 2006 Plan will, upon such termination, become immediately exercisable in full and remain exercisable through the original term of the award.
The 2006 Plan provides that unvested stock options and SARs will immediately vest if the recipient’s employment or service with the Company is terminated as a result of the recipient’s death or Retirement, or is terminated without cause during the 12-month period following a change in control. The 2006 Plan similarly provides for the acceleration of vesting of the next tranche of stock options and SARs in the event of a termination of employment or service as a result of disability. The 2006 Plan also provides for the acceleration of vesting of a stock option or SAR if such accelerated vesting is provided under any benefit plan of the Company to which the recipient is subject. In addition, under the 2006 Plan, the Compensation Committee may in its discretion “cash out” any award, whether vested or unvested, upon a change in control by paying the recipient the amount by which the Change in Control Price (as defined in the 2006 Plan) exceeds the exercise or grant price per share under the stock option or SAR award multiplied by the number of shares granted under the stock option or SAR award. The 2006 Plan does not permit the repricing of options or the exchange of underwater options for cash or other awards without stockholder approval.
Except to the extent that the Compensation Committee specifies a longer vesting schedule in the award agreement, RSAs given to non-employee directors (and to employee directors in their capacities as directors) will vest on the first anniversary of the grant date. Except as otherwise provided in the award agreement, RSAs given to employees will vest ratably on the first, second and third anniversaries of the grant date. The 2006 Plan provides that if the recipient’s service with the Company as a director or employee terminates as a result of the recipient’s death, any RSA awarded under the 2006 Plan will automatically vest, and if such service terminates as a result of disability, the next tranche of shares will automatically vest. The 2006 Plan also provides for the acceleration of vesting of an RSA if such accelerated vesting is provided under any benefit plan of the Company to which the recipient is subject. In addition, the 2006 Plan gives the Compensation Committee the authority, in its discretion, to accelerate the vesting of any RSA and, in connection with a change in control, to “cash out” any unvested RSA.
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Executive Stock Ownership Guidelines
To maintain alignment of the interests of the Company’s non-employee directors, Chairman of the Board, President and CEO, Executive Vice Presidents, COO, if any, CFO, Senior Vice Presidents and any other officer designated by the Board of Directors, which includes all of the NEOs, such individuals are expected to build and maintain a significant level of direct stock ownership. Ownership levels can be achieved over time in a variety of ways, such as by retaining stock received upon the vesting of stock awards or by purchasing stock in the open market. At a minimum, the applicable officers and directors are expected to establish and maintain direct ownership of Common Stock having a value, based on the average stock price over the ten trading day period prior to the measurement date as follows:
Chairman of the Board – three times annual base salary;
President and CEO – three times annual base salary;
COO (if any) – two times annual base salary;
All other executive officers who are Participants – one and a half times annual base salary; and
All non-employee directors – three times annual retainer.
Shares that count toward meeting the stock ownership guidelines include the following:
Shares owned by the individual or his or her immediate family members residing in the same household;
Shares held in trusts or other entities established for the benefit of the individual and/or his or her immediate family members;
Shares purchased on the open market;
Shares held in qualified plans (e.g., 401(k) plans);
Time-based RSAs and RSUs (whether vested or unvested) granted by the Company to, and held by, the individual.individual;
Shares underlying vested (but not unvested) stock options granted by the Company to, and held by, the individual.
Performance-based RSAs and RSUs are not included in the count of shares unless and until the relevant performance criteria is determined.
As of the date of this proxy statement, all of our NEOs have met the requiredexpected ownership levels.
Securities Trading Policy; Prohibition on Short Sales
and Hedging; Pledging
To ensure alignment of the interests of our stockholders and executive officers, including our NEOs, as well as compliance with applicable securities laws, the Company’s Securities Trading Policy prohibits directors, NEOs and other identified officers and employees from engaging in transactions involving the Company’s stock based on material non-public information or during established trading blackout periods (except for the exercise of options or for transactions in accordance with previously established trading plan that meets SEC requirements).
The policy also prohibits short sales of the Company’s stock.stock and trading in options (puts and calls) or other hedging instruments related to the Company’s stock, and discourages using the Company’s stock as collateral (pledging) for loans or in margin accounts.
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Clawback Policy
We have an Executive Compensation Clawback Policy under which a designated officer of the Company, which includes all NEOs, if found to have engaged in misconduct causing a restatement of financial statements, could have a portion of his or her cash and equity compensation (such as cash bonuses and performance-based equity awards) recovered by the Company to the extent of the benefit received by such officer based on the financial statementstatements that were restated. You can access our Executive Compensation Clawback Policy by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com.
Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information regarding unexercised options and unvested RSAs and RSUs held by each of our NEOs as of July 31, 2017. No RSUs were outstanding as of that date.2018.
| Option Awards | Stock Awards | |||||||||
| Name | Number of Securities Underlying Unexercised Options (Exercisable) | Number of Securities Underlying Unexercised Options (Unexercisable) | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(1) | ||||
| Charles M. Diker | 30,000 | — | (2) | $31.81 | 10/09/18 | |||||
| 25,000 | — | (3) | $36.70 | 10/09/19 | ||||||
| 10,000 | 5,000 | (4) | $55.36 | 10/11/20 | ||||||
| 2,196 | (5) | $203,591 | ||||||||
| 2,427 | (6) | $225,007 | ||||||||
| Jorgen B. Hansen | 3,101 | (7) | $287,494 | |||||||
| 9,219 | (8) | $854,693 | ||||||||
| 14,518 | (6) | $1,345,964 | ||||||||
| Peter G. Clifford | 2,275 | (7) | $210,915 | |||||||
| 3,503 | (8) | $324,763 | ||||||||
| 3,792 | (6) | $351,556 | ||||||||
| Eric W. Nodiff | 2,275 | (7) | $210,915 | |||||||
| 3,518 | (8) | $326,154 | ||||||||
| 3,802 | (6) | $352,483 | ||||||||
| Seth M. Yellin | 1,496 | (7) | $138,694 | |||||||
| 3,241 | (8) | $300,473 | ||||||||
| 410 | (9) | $38,011 | ||||||||
| 3,512 | (6) | $325,598 | ||||||||
| Option Awards | Stock Awards | |||||||||
| Name | Number of Securities Underlying Unexercised Options (Exercisable) | Number of Securities Underlying Unexercised Options (Unexercisable) | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(1) | ||||
| Charles M. Diker | 52,000 | — | (2) | $17.04 | 10/14/17 | |||||
| 30,000 | — | (3) | $31.81 | 10/09/18 | ||||||
| 16,667 | 8,333 | (4) | $36.70 | 10/09/19 | ||||||
| 5,000 | 10,000 | (5) | $55.36 | 10/11/20 | ||||||
| Jorgen B. Hansen | 4,075 | (6) | $302,365 | |||||||
| 6,203 | (7) | $460,263 | ||||||||
| 12,611 | (8) | $935,736 | ||||||||
| Peter G. Clifford | 2,333 | (10) | $173,109 | |||||||
| 4,550 | (7) | $337,610 | ||||||||
| 4,792 | (8) | $355,566 | ||||||||
| Eric W. Nodiff | 2,765 | (6) | $205,163 | |||||||
| 4,666 | (9) | $346,217 | ||||||||
| 4,550 | (7) | $337,610 | ||||||||
| 4,813 | (8) | $357,125 | ||||||||
| Seth M. Yellin | 2,185 | (6) | $162,127 | |||||||
| 2,993 | (7) | $222,081 | ||||||||
| 820 | (11) | $60,844 | ||||||||
| 4,434 | (8) | $329,003 | ||||||||
| (1) | The market value of shares of stock that have not vested was determined using the closing market price per share of our common stock on July 31, |
| (2) |
The option was granted on October 10, 2013 and has a five year term. The option vests and is exercisable as to one-third of the shares underlying the option on each of the first three anniversaries of the grant date. |
