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| ☐ | Definitive |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 |
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| Fee computed on table required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11. | |||
Sotera Health 2022 Proxy Statement and Notice of Annual Meeting of Stockholders
United by Our Mission, Driven by Our Values Sotera Health Company (Nasdaq: SHC) is a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. The name Sotera Health was inspired by Soteria, the Greek goddess of safety, and reflects the Company’s unwavering commitment to its mission, Safeguarding Global Health®. 3,000+ employees Our Best-In-Class Businesses Sterigenics® Provider of mission-critical and government-mandated sterilization services ~5,500 customers in 50+ countries Nordion® Global leader in supply of Cobalt-60, the key input for gamma sterilization 50 sterilization facilities Nelson Labs® Provider of mission-critical medical device and pharmaceutical lab testing and advisory services 15 lab and advisory service locations 800+ laboratory tests Our Values Safety People Customer Focus Integrity Excellence
Safeguarding Global Health® Sotera Health - we are over 3,000 employees united each and every day by our mission, Safeguarding Global Health. The integrity, safety and excellence of our sterilization and lab testing services are at the heart of countless healthcare experiences and touch the lives of millions across the globe. You’ll find us at the start of something new. We help to protect the most vulnerable among us since their first breath. We sterilize and test: Feeding tubes and bags Breathing apparatuses and masks You’ll find us where people overcome obstacles and run another mile. We sterilize and test: Orthopedic implants for knees, hips, shoulders Cardiovascular implants, such as pacemakers and stents We are found where testing is done and discoveries are made. We sterilize and test: Syringes, needles and alcohol wipes Vials and stoppers that contain vaccines, including for COVID-19 Personal Protective Equipment, such as masks and gloves We bolster trust and confidence - from providing radiation to attack brain and breast cancer to sterilizing and testing products used to deliver cancer-fighting drugs. Radiation to treat brain and breast cancer Drug administration and infusion sets Sterile bandages and alcohol prep pads Many things on you, in you and around you in a healthcare setting have been sterilized and/or tested by Sotera Health – to ensure that healthcare is consistently and reliably safe every day.
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In looking back, it was another year of growth for Sotera Health and I am proud of what we accomplished. In 2021, we completed our first full year as a public company. Although the past year was certainly one of the most challenging years in our Company’s history, the decades of hard work by our entire global team is reflected in our Company’s achievements, which include:
Being a global leader in providing mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry;
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Growing our Company organically by investing in facility expansions and enhancements aligned with customer growth opportunities;
Strategically deploying capital for bolt-on acquisitions to grow inorganically;
Launching our Environmental, Social and Governance (“ESG”) strategy with oversight and engagement by our Board; and
Demonstrating revenue growth every year since 2005.
In the past year, I have appreciated the opportunity to meet and speak with so many of our stockholders. Thank you for taking the time to allow us to share more information with you about Sotera Health. Our Company, with Board oversight, is committed to our ESG efforts. As an organization, we will disclose our ESG progress now and in the future, as evidenced in this Proxy Statement. Later in 2022, you can expect to see Sotera Health’s first ESG report.
In summary, on behalf of the Board and our Executive Team, we are deeply grateful to our employees, our customers, and our partners for your ongoing support in 2021. To our investors, we thank you for your continued belief and investment in Sotera Health. We invite you to share your perspectives with us throughout the year and we will strive to live up to, and exceed, your expectations.
Michael B. Petras, Jr.
Chairman of the Board
and Chief Executive Officer
| 9100 South Hills Blvd, Suite 300 Broadview Heights, Ohio 44147 |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
Time and Date |
Place |
Record Date | ||
Thursday, May 9:00 a.m., Eastern Daylight Time | Virtual The
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Items of Business
| ∎ | To elect |
| ∎ | To approve, on an advisory basis, the |
| ∎ | To ratify the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, |
| ∎ | To approve an amendment to our amended and restated certificate of incorporation allowing officer exculpation consistent with Delaware law. |
| ∎ | To transact any other business that may properly come before the Annual Meeting or any adjournment or postponement thereof. |
Our Board recommends you vote (1) FOR the election of the threefour nominees for directors named in this Proxy Statement, (2) for a say-on-pay vote every ONE YEAR, and FOR the compensation of named executive officers, (3) FOR the ratification of our independent auditors.auditors, and (4) FOR the approval of an amendment to our amended and restated certificate of incorporation allowing for officer exculpation consistent with Delaware law.
Your vote is important to us. You may vote via the Internet or by telephone, or if you requested to receive printed proxy materials, bysigning, dating and returning your proxy card. If you are voting via the Internet or by telephone, your vote must be received by 11:59 p.m., Eastern Daylight Time, on Wednesday, May 25, 2022.22, 2024. For specific voting instructions, please refer to the information provided in this Proxy Statement, together with your proxy card or the voting instructions you receive by e-mail or that are provided via the Internet.
If you received only a Notice of Internet Availability of Proxy Materials on how to access the proxy materials via the(“Notice of Internet a proxy card was not sent toAvailability”) but you and you may vote only via the Internet, unless you have requestedwant a paper copy of the proxy materials in which case, you may alsoto vote by telephone or by signing, dating and returning your proxy card. Shares of Sotera Health common stock cannot be voted by marking, writing on and returningmail, the Notice of Internet Availability of Proxy Materials. Any Notices of Internet Availability of Proxy Materials that are returned will not be counted as votes. Instructions for requestingincludes instructions on how to request a paper copy of the proxy materials are set forth onmaterials.
Whether or not you plan to attend the NoticeAnnual Meeting online, we encourage you to promptly vote and submit your proxy via the Internet, by telephone or mail in advance of Internet Availability of Proxy Materials.the meeting.
By order of the Board of Directors,
Terrence G. Hammons, Jr.Alexander Dimitrief
Secretary
April 14, 2022[●], 2024
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on May 26, 2022. 23, 2024.Our Proxy Statement and Annual Report to StockholdersShareholders are being made available on or about April 14, 2022[●], 2024 at www.proxyvote.com. We are providing access to our proxy materials over the Internet under the rules adopted by the Securities and Exchange Commission (“SEC”).
| LETTER FROM THE CHAIRMAN OF THE BOARD | |||||||
| NOTICE OF ANNUAL MEETING OF | |||||||
| PROXY STATEMENT SUMMARY | 1 | ||||||
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| BOARD COMPOSITION, NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS | |||||||
| PROPOSAL 1: ELECTION OF DIRECTORS | |||||||
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| NON-EMPLOYEE DIRECTOR COMPENSATION | |||||||
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| PROPOSAL 2: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION | |||||||
| COMPENSATION DISCUSSION AND ANALYSIS | 27 | ||||||
Executive Transitions in 2023 | |||||||
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| COMPENSATION TABLES | |||||||
| POTENTIAL TERMINATION PAYMENTS | |||||||
| EQUITY COMPENSATION PLAN INFORMATION | |||||||
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| CEO PAY RATIO | 62 | ||||||
| PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |||||||
| AUDIT COMMITTEE REPORT | |||||||
| PROPOSAL 4: APPROVAL OF AN OFFICER EXCULPATION AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION | 66 | ||||||
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Proxy Statement Summary
Annual Meeting of StockholdersShareholders
Your proxy is being solicited on behalf of the board of directors (“Board”) of Sotera Health Company (“Sotera Health”,Health,” the “Company”, “we”,“Company,” “we,” “us” or “our”) to vote at the 20222024 Annual Meeting of StockholdersShareholders (“Annual Meeting”). We are making this Proxy Statement available to stockholdersshareholders beginning on April 14, 2022.[●], 2024. This summary represents only selected information. We encourage you to read the entire Proxy Statement before voting.
Annual Meeting of StockholdersShareholders
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Proposals and Board Recommendations
Proposal | Description | Board Voting Recommendation | ||
1. Election of directors | Election of
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3. Ratification of appointment of independent auditors | Ratification of the appointment of Ernst & Young LLP as our independent auditors for
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4. Approval of an officer exculpation amendment to our amended and restated certificate of incorporation | Vote to approve an amendment to our amended and restated certificate of incorporation to adopt provisions allowing officer exculpation consistent with Delaware law | FOR | ||
Information on Director Nominees
Information about the three nominees for Class II directors, as of April 1, 2022, is included below. Our Nominating and Corporate Governance Committee reviewed the individual director attributes and contributions of each of the nominees
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Proxy Statement Summary
Information on Director Nominees
(withoutInformation on Director Nominees
Information as of March 28, 2024 about the four nominees for Class I directors is set forth below. The Nominating and Corporate Governance (NCG) Committee reviewed the attributes and contributions of each of the nominees (without Dr. Wheadon’s involvement in the review orand discussion of his or her own attributes or contributions), and the Board recommends that stockholdersshareholders vote FOR the election of each of these nominees.
Name and Occupation | Age | Director Since (1) | Independent | Committees | ||||
Ruoxi Chen | 38 | 2020 | ✓ | Nominating & Corporate Governance | ||||
David A. Donnini | 56 | 2015 | ✓ | Nominating & Corporate Governance | ||||
Ann R. Klee | 60 | 2020 | ✓ | Nominating & Corporate Governance (Chair); Audit Committee | ||||
Name and Occupation | Age | Director Since (1) | Independent | Committees | ||||
Constantine S. Mihas | 57 | 2015 | ✓ | Leadership Development and Compensation (LDC) Committee | ||||
James C. Neary | 59 | 2015 | ✓ | LDC Committee (Chair) | ||||
Michael B. Petras, Jr. | 56 | 2016 |
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David E. Wheadon, M.D. | 66 | 2021 | ✓ | Audit Committee; NCG Committee | ||||
Year in which director began service as a Company director or a member of Topco Parent’s (as defined below) board of managers. |
Virtual Annual Meeting
TheOur Annual Meeting will be held exclusively online in a virtual format through a live audio webcast. You are entitled to participate in the Annual Meeting if you were a stockholdershareholder as of the close of business on April 1, 2022,March 28, 2024, the record date, or hold a valid proxy for the meeting.
To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/SHC2022SHC2024, you must enter the 16-digit control number found next to the label “Control Number” on your Notice of Internet Availability, proxy card, or the voting instructions you receive by email. StockholdersShareholders may vote their shares electronically during the Annual Meeting through the virtual meeting platform; for more information on how to vote your shares, please see “Questions and Answers About the Proxy Statement and Our 20222024 Annual Meeting of Stockholders”Shareholders” on the following page.page 75.
We are committed to ensuring that stockholdersshareholders who attend theour virtual Annual Meeting will beare afforded the same rights and opportunities to participate as they wouldshareholders receive at an in-person meeting. Stockholders meetings. Shareholders will be able to submit questions to Sotera Health’s management and directors online during the Annual Meeting usingthrough the virtual meeting platform and we will answer as many properly submitted questions as possible.
The Annual Meeting webcast will begin promptly at 9:00 a.m., Eastern Daylight Time, on May 26, 2022.23, 2024. Online access and check-in will begin approximately 15 minutes prior to the 9:00 a.m. start time. We encourage you to access the meeting prior to the start time to allow ample time for check-in procedures. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call 844-986-0822 (US) or 303-562-9302 (International). If there are any technical issues in convening or hosting the meeting, we plan to promptly post information to our investor relations website, https://investors.soterahealth.com/, including information on when the meeting will be reconvened.
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Questions and Answers About the Proxy Statement and Our 2022 Annual Meeting of StockholdersShareholder Engagement – 2023
QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND OUR 2022 ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDER ENGAGEMENT – 2023
Shareholder feedback is a valuable input that we incorporate into Board, committee and management discussions. Our executive ESG Committee, which reports to our Chief Executive Officer (“CEO”) and provides regular reports to the NCG Committee, seeks opportunities to connect with our investors to discuss current and ongoing corporate responsibility trends and hear their views about governance policies and practices. In 2023, we reached out to institutional shareholders representing over 60% of shares not held by affiliates to solicit their feedback and to address shareholder questions. An external consultant also provides input on these discussions. Members of our executive ESG Committee participated in most of these meetings with institutional investors and the Chairs of the NCG and LDC Committees separately attended two of these meetings. These governance engagements are in addition to the discussions that our senior leadership and investor relations teams regularly have with institutional and other shareholders regarding governance and numerous other issues, which includes quarterly outreach to our largest shareholders after we release our earnings reports.
| Scope of Outreach | Who We Met With | |||||
60% | We reached out to shareholders1 representing over 60% of outstanding shares not held by affiliates on ESG topics | 48% | We met with shareholders1 representing approximately 48% of outstanding shares not held by affiliates on ESG topics | |||
The following table highlights key themes that shareholders raised about governance matters during our engagement and how management and the Board address these issues. Shareholder feedback is shared with the NCG Committee and the Board.
| What We Heard |
| What We Do |
| Some investors disfavor our classified board and the supermajority voting standards for charter amendments after our Sponsors own less than a majority of shares | NCG Committee regularly reviews board and voting governance structures, including board classification and voting standards, to confirm that a classified board and supermajority voting standards remain appropriate | |
| Ensure Board and Committees are independent | All our directors (with the single exception of our CEO) and all the members of all Board Committees are independent under Nasdaq standards | |
| Enhance diversity of Board | Following the addition of Karen Flynn to our Board in November 2023, four of our 11 directors are diverse under Nasdaq’s standards | |
| Oversight and disclosure related to EO risks and litigation | Robust and transparent disclosure in our investor communications of EO risks and developments; website dedicated to EO education and updates; regular investor updates on EO developments; and comprehensive Board oversight of EO risks and litigation | |
| Appropriate governance oversight of business risks | Board annually reviews our strategic plans; Audit Committee annually reviews our enterprise risk management programs, including cybersecurity risks; established a new risk committee comprising a cross-section of senior executives | |
| Enhance executive compensation disclosures | Expanded disclosures on compensation topics in our proxy statements | |
The |
These proxy materials are being provided on or about April 14, 2022 to all stockholders of record of Sotera Health as of April 1, 2022.
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If you requested to receive printed proxy materials, these materials also include an accompanying proxy card. If you received more than one proxy card, this generally means your shares are registered differently or are in more than one account. Please provide voting instructions for each proxy card or, if you vote via the Internet or by telephone, vote once for each proxy card you receive to ensure that all of your shares are voted.
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At the time this Proxy Statement was mailed, we were not aware of any other matters to be presented at the Annual Meeting other than those set forth in this Proxy Statement and in the notice accompanying this Proxy Statement.
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Questions and Answers About the Proxy Statement and Our 2022 Annual Meeting of Stockholders
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Stockholders of Record. If your shares of Sotera Health common stock are registered directly in your name with Sotera Health’s transfer agent, Computershare, youare considered the stockholder of record with respect to those shares, and these proxy materials are being sent directly to you. As a stockholder of record, you have the right to grant your voting proxy directly to Sotera Health or to vote electronically at the Annual Meeting. If you requested printed proxy materials, we have enclosed an accompanying proxy card for you to use. You may also submit voting instructions via the Internet or by telephone by following the instructions on the accompanying proxy card, as described below under “How can I vote my shares?”
Beneficial Owners. If your shares of Sotera Health common stock are held in a brokerage account or by a broker, bank, or other nominee, you are considered thebeneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered the stockholder of record with respect to those shares. As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. However, because you are not the stockholder of record, you may not vote these shares electronically at the Annual Meeting, unless you follow the instructions from your broker, bank or other nominee. Your broker, bank, or other nominee has included a voting instruction form for you to use to direct them how to vote your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them.
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Voting over the Internet. To vote over the Internet, please follow either the instructions included on your proxy card or the votinginstructions you receive by e-mail or that are being provided via the Internet. You will be asked to provide the 16-digit control number on your Notice of Internet Availability or Voting Instruction Form. If you vote over the Internet, you do not need to complete and mail a proxy card.
Voting by Telephone. To vote by telephone, dial 1-800-690-6903 and follow the recorded instructions. You will be asked to providethe 16-digit control number on your Notice of Internet Availability or Voting Instruction Form. If you vote by telephone, you do not need to complete and mail a proxy card.
Voting by Mail. If you have requested printed proxy materials, you may vote by mail by signing the proxy card and returning it in theprepaid and addressed envelope enclosed with the proxy materials. By signing and returning the proxy card, you are authorizing the individuals named on the proxy card to vote your shares at the Annual Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Annual
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Questions and Answers About the Proxy Statement and Our 2022 Annual Meeting of StockholdersShareholder Engagement – 2023
Meeting so that your shares of Sotera Health common stock will be voted if you are unable to attend the Annual Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Your printed proxy materials may also indicate methods whereby you may vote by telephone or over the Internet instead of signing, dating and returning the proxy card by mail.
Voting Electronically at the Meeting. If you attend the virtual Annual Meeting and plan to vote electronically at the Annual Meeting,you can vote by following the instructions provided when you log in to the online virtual Annual Meeting platform. If you are a stockholder of record, you have the right to vote electronically at the Annual Meeting. If you are the beneficial owner of shares held in street name, you may also vote electronically at the Annual Meeting if you follow the instructions from your broker, bank or other nominee to vote those shares.
| What We Heard |
| What We Do |
| Transition our compensation programs toward more performance-based metrics | Please see the Compensation Discussion and Analysis, beginning on page 27, for a discussion of how we are responding to shareholder feedback on our compensation programs. | |
| Enhance disclosures around governance structures that we believe best meet our governance needs (e.g., combining the roles of Chairman and CEO, whether to appoint a lead independent director, supermajority voting requirements for charter amendments) | Expanded disclosures on governance topics in our proxy statements | |
| Disclosure of more information around ESG goals and metrics | Published our second Corporate Responsibility Report in 2023; enhancing our metrics with ongoing refinements around goals and metrics planned for future | |
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Sign and return a later-dated proxy card, or enter a new vote over the Internet or by telephone; or
Provide written notice of the revocation to Sotera Health’s Corporate Secretary at: Sotera Health Company, Attention: Terrence G. Hammons, Jr., Secretary, 9100 South Hills Blvd, Suite 300, Broadview Heights, Ohio 44147, before the proxies vote your shares at the Annual Meeting; or
Attend the virtual Annual Meeting and vote electronically at the meeting.
If you are a beneficial stockholder, you may revoke your proxy or change your vote only by following the separate instructions provided by your broker, trust, bank or other nominee.
Only the latest validly-executed proxy that you submit will be counted.
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Abstentions and broker non-votes are counted as present for the purpose of determining a quorum.
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Proposal 2: Advisory Vote on the Frequency of Future Advisory Votes on Named Executive Officer Compensation. You may vote to have such advisory votes every “1 YEAR,” “2 YEARS,” “3 YEARS,” or you may “ABSTAIN”. The frequency that receives the most votes will be considered the advisory vote of our stockholders. If you elect to abstain from this proposal, the abstention will not have any effect on the advisory vote.
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Questions and Answers About the Proxy Statement and Our 2022 Annual Meeting of Stockholders
Proposal 3: Ratification of Ernst & Young LLP. You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to the ratification ofErnst & Young LLP as our independent registered public accounting firm for fiscal year 2022. If you elect to abstain from this proposal, the abstention will have the same effect as an “AGAINST” vote with respect to such proposal. The affirmative vote of the holders of not less than a majority of the outstanding common stock entitled to vote and present, in person or by proxy, at the meeting is required.
If you are a stockholder of record and you sign and return your proxy card without giving specific voting instructions, your shares will be voted on the proposals as recommended by our Board and in accordance with the discretion of the persons named on the proxy card with respect to any other matters that may properly come before the Annual Meeting.
If your shares are held in street name and you do not instruct your broker on a timely basis on how to vote your shares, your brokerage firm, in its discretion, may either leave your shares unvoted or vote your shares on routine matters. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm is a routine matter. Without your voting instructions, your brokerage firm cannot vote your shares on Proposal 1 or Proposal 2. These unvoted shares, called “broker non-votes,” refer to shares held by brokers who have not received voting instructions from their clients and who do not have discretionary authority to vote on non-routine matters. Broker non-votes are not considered entitled to vote on non-routine proposals. Broker non-votes will not have an effect on the outcome of the election of any director nominee or on the frequency of future advisory votes on named executive officer compensation.
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This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
Questions and Answers About the Proxy Statement and Our 2022 Annual Meeting of Stockholders
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If you share an address with another stockholder and received only one set of proxy materials and would like to request a separate paper copy of these materials, please contact the Broadridge Householding Department by phone at 1-866-540-7095 or by mail to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717.
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Our Corporate Responsibility
At Sotera Health, our mission is Safeguarding Global Health®. Across our businesses, we provide mission-critical, end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. Our purpose ultimately is greater than our products and services — our integrity, the safety and excellence of our people, and our customer focus are at the heart of countless healthcare experiences that touch the lives of millions across the globe.
Our products and services serve broad human health and well-being needs. Whether providing critical inputs for vaccine production, preventing infection across a broad range of medical and pharmaceutical products, verifying the legitimacy of a product’s testing, or providing a variety of other services, we strive every day to live our commitment to United Nations Sustainable Development Goal #3, which is to ensure healthy lives and promote well-being for people around the world. That’s why our ESG strategy is integral to our mission.
Throughout this Proxy Statement, we are proud to report on our ESG activities and initiatives to our stockholders. Whether it is through our actions to advance an inclusive culture where all employees can thrive or our industry-leading approach to environmental, health and safety (“EHS”) initiatives, our recent progress is only the beginning of a multi-year strategy to coordinate, drive and communicate more broadly about our ESG activities. Disclosures regarding many of our governance practices and initiatives appear elsewhere in this Proxy Statement. Below are some highlights of our overall ESG strategy, including information about our progress on our corporate responsibility initiatives since the beginning of 2021.
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Our Corporate Responsibility
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Board Composition, Nominations Process and Director Qualifications
Board Composition
BOARD COMPOSITION, NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS
On November 24, 2020, we completedOur Board of Directors represents the interests of our initial public offering (“IPO”). Pursuant to the termsshareholders and oversees our business and affairs. Our Board currently consists of eleven members, six of whom were members of the corporate reorganization that was completed in connection withboard of managers (“Board of Managers”) of our IPO, our predecessor company, Sotera Health Topco Parent, L.P. (“Topco Parent”),. In connection with our initial public offering (“IPO”) in November 2020, Topco Parent distributed shares of Sotera Health common stock to its partners, including investment funds and entities affiliated with Warburg Pincus LLC (“Warburg Pincus”) and GTCR, LLC (“GTCR” and, together with Warburg Pincus, the “Sponsors”), in accordance with the limited partnership agreement of Topco Parent.
Our business and affairs are managed under the direction of the Board. Our Board currently consists of ten members, seven of whom were members of Topco Parent’s board of managers (“Board of Managers”) and elected to. The Company, our current Board in connection with our IPO. Each of the ten current members were elected to our Board in compliance with the provisions of the stockholders’ agreement (“Stockholders’ Agreement”), entered into in connection with our IPO among our CompanySponsors and certain holders of our common stock.stock also entered into a stockholders agreement (the “Stockholders Agreement”) pursuant to which our Sponsors are entitled to designate certain numbers of our directors, who are reviewed by the NCG Committee, until such time as the Sponsors’ holdings of our common stock is reduced below particular thresholds. Six of our teneleven directors were designated by our Sponsors. In particular, Warburg Pincus designated Mr. Chen, Ms. GevedaMr. Knauss and Mr. Neary and mayis currently entitled to designate up to twoone additional directors,director for election to our Board, andBoard. GTCR designated Messrs.Mr. Cunningham, Mr. Donnini and Mihas for election to our Board.Mr. Mihas.
In accordance with the terms of our amended and restated certificate of incorporation, effective as of the 2021 Annual Meeting of Stockholders, the Board determined to increase the size of the Board from nine to ten members, and increase the number of directors in Class I from three to four. Upon his election at the 2021 Annual Meeting of Stockholders, Dr. Wheadon joined our Board in Class I, with a term expiring at the Annual Meeting of Stockholders in 2024.
Each of the threeThe four current members of Class III will stand for election at theour Annual Meeting. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. The following table provides summary information, as of April 1, 2022,March 28, 2024, about each director, including the threefour nominees for election at theour Annual Meeting.Meeting and our other directors. Additional information about each directors’director’s background and experience can be found in the sections “Board Skills, Experience and Skills”,Attributes,” “Board Diversity” and “Proposal 1 — Election of Directors”.Directors.”
Members of the Board and Committees | ||||||||||||||||||||||||||||
Members of the Board and Standing Committees | Members of the Board and Standing Committees | |||||||||||||||||||||||||||
Name | Age | Class and Year in Term Will Expire | Director Since (1) | Independent | Audit Committee | Leadership Development & Compensation Committee | Nominating & Corporate Governance Committee | Age | Class and Year in Term Will Expire | Director Since (1) | Independent | Audit Committee | Leadership Development & Compensation Committee | Nominating & Corporate Governance Committee | ||||||||||||||
Nominees for Election | ||||||||||||||||||||||||||||
Nominees for Election | ||||||||||||||||||||||||||||
Constantine S. Mihas | ||||||||||||||||||||||||||||
Constantine S. Mihas | 57 | Class I — 2024 | 2015 | Yes | ✓ | |||||||||||||||||||||||
James C. Neary | ||||||||||||||||||||||||||||
James C. Neary | 59 | Class I — 2024 | 2015 | Yes | C | |||||||||||||||||||||||
Michael B. Petras, Jr. Chair and CEO | ||||||||||||||||||||||||||||
Michael B. Petras, Jr. Chair and CEO | 56
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David E. Wheadon | ||||||||||||||||||||||||||||
David E. Wheadon | 66 | Class I — 2024 | 2021 | Yes | ✓ | ✓ | ||||||||||||||||||||||
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Ruoxi Chen | ||||||||||||||||||||||||||||
Ruoxi Chen | 38 | Class II — 2022 | 2020 | Yes | ✓ | 40 | Class II — 2025 | 2020 | Yes | ✓ | ||||||||||||||||||
David A. Donnini | 56 | Class II — 2022 | 2015 | Yes | ✓ | |||||||||||||||||||||||
David A. Donnini | 58 | Class II — 2025 | 2015 | Yes | ✓ | |||||||||||||||||||||||
Ann R. Klee | 60 | Class II — 2022 | 2020 | Yes | ✓ | C | ||||||||||||||||||||||
Ann R. Klee | 62 | Class II — 2025 | 2020 | Yes | ✓ | C | ||||||||||||||||||||||
Continuing Directors | ||||||||||||||||||||||||||||
Karen A. Flynn | ||||||||||||||||||||||||||||
Karen A. Flynn | 61 | Class II — 2025 | 2023 | Yes | ✓ | |||||||||||||||||||||||
Sean L. Cunningham | 46 | Class III — 2023 | 2015 | Yes | ✓ | |||||||||||||||||||||||
Sean L. Cunningham | 48 | Class III — 2026 | 2015 | Yes | ✓ | |||||||||||||||||||||||
Stephanie M. Geveda(2) | 42 | Class III — 2023 | 2015 | Yes | ||||||||||||||||||||||||
Robert B. Knauss | ||||||||||||||||||||||||||||
Robert B. Knauss | 70 | Class III — 2026 | 2022 | Yes | ||||||||||||||||||||||||
Vincent K. Petrella | 61 | Class III — 2023 | 2020 | Yes | C | |||||||||||||||||||||||
Constantine S. Mihas | 55 | Class I — 2024 | 2015 | Yes | ✓ | |||||||||||||||||||||||
James C. Neary | 57 | Class I — 2024 | 2015 | Yes | C | |||||||||||||||||||||||
Michael B. Petras, Jr. Chairman and CEO | 54
| Class I — 2024
| 2016
| No
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David E. Wheadon | 64 | Class I — 2024 | 2021 | Yes | ✓ | ✓ | ||||||||||||||||||||||
Vincent K. Petrella | 63 | Class III — 2026 | 2020 | Yes | C | |||||||||||||||||||||||
| ✓ Member | |
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| 2024 Notice and Proxy Statement |
Board Composition, Nominations Process and Director Qualifications
Board Skills, Experience and Attributes
Board Skills, Experience and Attributes
Our Board is comprised ofcomprises a group of individuals with diverse skills, experience and attributes, which provides us with a wide range of perspectives and judgment necessary to guide our strategies, monitor their execution and advance the interests of our stockholders.shareholders. As described in further detail in “Director Nominee Criteria and Process”,Process,” our GovernanceNCG Committee regularly evaluates the composition of our Board. The table below summarizes several of the key characteristics of each of our directors relevant to their Board service. The table is intended as a high-level summary and not an exhaustive list of each director’s skills or contributions to our Board.
Name | Healthcare/ MedTech | Finance | International | Legal/ Regulatory | Technology & Science | Corporate Responsibility | C-Suite/ Operations | Cybersecurity | ERM | Strategy | Service on Other Public Company Boards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Ann R. Klee | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Robert B. Knauss | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Constantine S. Mihas | | | | | | | | | | | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James C. Neary | | | | | | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael B. Petras, Jr. | | | | | | | | | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vincent K. Petrella | | | | | | | | | | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David E. Wheadon | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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As further described in “Director Nominee Criteria and Process”,Process,” all directors and director nominees must demonstrate integrity, strength of character and judgment, and have extensive business experience, specific areas of expertise and the ability to devote adequate time and effort to Board responsibilities. Additional information regarding the skills, experience and attributes of each of the threefour nominees for election as a director at the Annual Meeting, and for each of the continuing members of our Board, is included in directors’ individual biographies on the following pages.
| 7 | |
Board Composition, Nominations Process and Director Qualifications
Board Diversity
Our Board composition reflects our commitment to diversity. Currently, ofOf the teneleven current directors on our Board, two have self-identified as women, one has self-identified as Asian, one has self-identified as African American or Black, one has self-identified as a member of the LGBTQ+ community, and our directors range in age from 3840 to 64.70. We value diversity and are committed to achieving a mix of Board members that representrepresents a diversity of skills, experience and backgrounds, including with respect to age, gender identity, sexual orientation, race, ethnicity, education, cultural background and ethnicity.professional experience. In furtherance of this commitment, in 2022, the Board adopted amendments to the charter of the NCG Committee and the Corporate Governance Guidelines to include an explicit commitment to include candidates with the aforementioned diversity characteristics on slates of potential nominees to fill new positions on the Board.
The EO Litigation Committee and Nordion Pricing Committee |
| 2024 Notice and Proxy Statement |
Board Composition, Nominations Process and Director Qualifications
Board Diversity
The following Board Diversity Matrix presents our Board diversity statistics in accordance with Nasdaq Listing Rule 5606, as self-disclosed by our directors. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f).
| Board Diversity Matrix as of April 14, 2022 | ||||||||||||||||||||
Total Number of Directors 10 | ||||||||||||||||||||
| Board Diversity Matrix as of April 2024 | Board Diversity Matrix as of April 2024 | |||||||||||||||||||
Total Number of Directors 11 | ||||||||||||||||||||
| Female | Male | Non-Binary | Did Not Disclose Gender | Female | Male | |||||||||||||||
Part I: Gender Identity | Part I: Gender Identity |
| Part I: Gender Identity |
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Directors | 2 | 8 | — | — | 2 | 9 | ||||||||||||||
Part II: Demographic Background | Part II: Demographic Background |
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African American or Black | — | 1 | — | — | — | 1 | ||||||||||||||
Alaskan Native or Native American | — | — | — | — | — | — | ||||||||||||||
Asian | — | 1 | — | — | — | 1 | ||||||||||||||
Hispanic or Latinx | — | — | — | — | — | — | ||||||||||||||
Native Hawaiian or Pacific Islander | — | — | — | — | — | — | ||||||||||||||
White | 2 | 6 | — | — | 2 | 7 | ||||||||||||||
Two or More Races or Ethnicities | — | — | — | — | — | — | ||||||||||||||
LGBTQ+ | 1 | 1 | ||||||||||||||||||
Did Not Disclose Demographic Background | 0 | — | ||||||||||||||||||
Director Nominee Criteria and Process
The GovernanceNCG Committee is responsible for identifying and screening candidates, for developing and recommending candidates to the Board, for evaluating candidates recommended or nominated by stockholders,shareholders (including nominees designated by our Sponsors), for recommending to the Board all nominees for election to the Board at the annual meeting of stockholders,shareholders, and for recommending any other action with respect to candidates nominated by stockholders.shareholders. The GovernanceNCG Committee’s recommendations must be consistent with our organizational documents and applicable law, as well as the Company’s obligations under our Stockholders’Stockholders Agreement. See “Corporate Governance — Structure“Board Composition” and Role of the Board of Directors — Certain“Certain Sponsor Rights”. on pages 6 and 17, respectively. In evaluating candidates, the Board seeks individuals of high integrity and good judgment who have a record of accomplishment in their chosen fields, and who display the independence of mind and strength of character to effectively represent the best interests of all stockholdersshareholders and provide practical insights and diverse perspectives. AsIn addition, as described above in “Board Diversity”,Diversity,” the Board values diversityNCG Committee’s charter and seeksour Corporate Governance Guidelines include an explicit commitment to achieve a mixinclude diverse candidates on slates of Board members that represent a diversity of skills, experience and background, including with respectpotential nominees to age, gender identity, sexual orientation, race and ethnicity.fill new positions on the Board.
Our GovernanceNCG Committee reviews with our Board, on an annual basis, the independence, skills, experience and background of Board members, and the experience, skills and background of the Board as a whole, in determining whether to recommend incumbent directors for re-election.reelection. In identifying potential new candidates for Board membership, the GovernanceNCG Committee considers recommendations from directors, stockholders,shareholders, management, and from time to time it will engage executive search firms to assist in the identification of qualified candidates.
| 9 | |
Board Composition, Nominations Process and Director Qualifications
Director Nominee Criteria and Process
Once potential director candidates are identified, the GovernanceNCG Committee begins an extensive evaluation process. The evaluation and selection of qualified directors is a complex process that involves the consideration of many factors, including the needs of our Board at that time. In addition to those qualifications necessary to meet the requirements of our organizational documents, applicable U.S. legal, regulatory and Nasdaq listing requirements, as well asand the Company’s obligations under our Stockholders’Stockholders Agreement, among other things, the GovernanceNCG Committee and Board consider the following with respect to each potential director nominee:
• Integrity | • Ability to devote adequate time and effort to Board responsibilities | |
• Strength of character and judgment | • Participation on other | |
• Business experience | • | |
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• Principles of diversity (including diversity of gender, race, ethnicity, sexual orientation, age, education, cultural background and professional experience)
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Board Composition, Nominations Process and Director Qualifications
StockholderShareholder Nominations for Directors
Stockholder Nominations for Directors
The GovernanceNCG Committee will consider potential director candidates recommended by stockholdersshareholders in accordance with the procedures set forth in our corporate governance guidelines,Corporate Governance Guidelines, organizational documents, our Stockholders’Stockholders Agreement and applicable law. As part of this responsibility, the GovernanceNCG Committee is responsible for conducting,conducts, subject to applicable law, any and all inquiries into the background and qualifications of any candidate for the Board. The GovernanceNCG Committee also oversees the nomination of director candidates by stockholdersshareholders in accordance with our organizational documents, our Stockholders’Stockholders Agreement and applicable law.
Our amended and restated bylaws provide advance notice procedures for stockholdersshareholders seeking to nominate candidates for election as directors at our annual meeting of stockholders, other than nominations made by or at the direction of the Board or pursuant to our Stockholders’ Agreement.shareholders. Any stockholdershareholder nomination must comply with the requirements set forth in our amended and restated bylaws and should be sent in writing to our Secretary at Sotera Health Company, 9100 South Hills Blvd, Suite 300, Broadview Heights, Ohio 44147. To be considered timely, notice,the Secretary must receive a stockholder’sshareholder’s notice must be received by the Secretary not earlier than the opening of business 120 days before, and not later than the close of business 90 days before, the first anniversary of the date of the preceding year’s annual meeting of stockholders.shareholders. If no annual meeting was held in the previous year, or if the date of the applicable annual meeting has been changed by more than 30 days from the date of the previous year’s annual meeting, then the Secretary must receive a stockholder’sshareholder’s notice, in order to be considered timely, must be received by the Secretary not earlier than the opening of business 120 days before the date of such annual meeting, and not later than the close of business on the later of (i) 90 days prior to the date of such annual meeting; and (ii) the 10th day following the day on which public announcement of the date of such annual meeting was first made. No such nominations were made for the Board’s consideration this year.
| 2024 Notice and Proxy Statement |
Proposal 1: Election of Directors
Nominees for Election as Class III Directors
PROPOSAL 1: ELECTION OF DIRECTORS
Our Board is currently comprised of tencomprises eleven directors, divided into three classes, each of whose members serve for staggered three-year terms. Each class consists, as nearly as possible, of one-third of the total number of directors.
The members of the classes are divided as follows:
the Class II directors are Mr. Chen, Mr. Donnini and Ms. Klee, and their term will expire at the Annual Meeting;
| • | The Class I directors are Mr. Mihas, Mr. Neary, Mr. Petras and Dr. Wheadon, and their terms will expire at the Annual Meeting; |
the Class III directors are Mr. Cunningham, Ms. Geveda and Mr. Petrella, and their term expires at the Annual Meeting of Stockholders in 2023; and
| • | The Class II directors are Mr. Chen, Mr. Donnini, Ms. Flynn and Ms. Klee, and their terms will expire at the Annual Meeting of Shareholders in 2025; and |
the Class I directors are Mr. Mihas, Mr. Neary, Mr. Petras and Dr. Wheadon and their term expires at the Annual Meeting of Stockholders in 2024.
| • | The Class III directors are Mr. Cunningham, Mr. Petrella and Mr. Knauss, and their terms will expire at the Annual Meeting of Shareholders in 2026. |
Upon the expiration of the termterms of a class of directors, directors in that class will be eligible to be elected for a new three-year termterms at the annual meeting of stockholdersshareholders in the year in which their term expires. In accordance with our corporate governance guidelines, asCorporate Governance Guidelines, when the election of directors at the Annual Meeting is uncontested, a director nominee must receive more votes cast “FOR” than “AGAINST” her or his or her election in order to be elected.
Our amended and restated certificate of incorporation does not provide for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of common stock (i.e., our Sponsors) can elect all of the directors standing for election and the holders of the remaining shares are not able to elect any directors, subject to their rights under our Stockholders’ Agreement.directors.
Nominees for Election as Class III Directors
At the Annual Meeting, the stockholdersshareholders will vote to elect the threefour Class III director nominees to serve until the 20252027 Annual Meeting of StockholdersShareholders and until their successors are duly elected and qualified. On the recommendation of the GovernanceNCG Committee, our Board has unanimously nominated Ruoxi Chen,Constantine S. Mihas, James C. Neary, Michael B. Petras, Jr., and David A. Donnini, and Ann R. KleeE. Wheadon, M.D. for election to our Board. If any of the director nominees becomes unable or for good cause, unwilling to serve, proxies may be voted for the election of such other personanother candidate as shall be designated by our Board or the Board may decrease the size of the Board.
The following brief biographical descriptions ofinformation regarding each director includes the primary individual experience, qualifications, attributes and skills and a brief statement of those aspects of our directors’ backgrounds that led us to conclude that each director should continue to serve as a member of our Board.
Age: Director |
Biographical Information: | ||
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Proposal 1: Election of Directors
Nominees for Election as Class II Directors
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Proposal 1: Election of Directors
Directors Continuing in Office
Directors Continuing in Office
Seven directors are serving for terms that end after the Annual Meeting, at the 2023 or 2024 annual meetings of stockholders. The following brief biographical descriptions include certain information regarding our directors’ individual experience, qualifications, attributes and skills, and a brief statement of those aspects of our directors’ backgrounds that led us to conclude that they should serve as directors.
Class III Directors (Term Expires at 2023 Annual Meeting)
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Proposal 1: Election of Directors
Directors Continuing in Office
Class I Directors (Term Expires at 2024 Annual Meeting)
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Qualifications: | |
| 11 | |
Proposal 1: Election of Directors
Nominees for Election as Class I Directors
James Age: Director |
Biographical Information:James C. Neary has served as a member of our Board sinceOctober 2020 and was a member of Topco Parent’s Board of Managers from 2015 through November 2020. Mr. Neary joined Warburg Pincus in 2000 and is now a managing director and Mr. Neary serves on the board of directors of WEX Inc. (NYSE:WEX) and several private companies. He
Qualifications: | |
Michael Age: Chairman |
Biographical Information:Michael B. Petras, Jr. has served as our Chief Executive Officer since June 2016and as the Chairman of our Board since October 2020. He also served as the Chairman of Topco Parent’s Board of Managers from January 2019 through November 2020 and as a member of Topco Parent’s Board of Managers from June 2016 through November 2020. Prior to joining Sotera Health, Mr. Petras served as chief executive officer of Post-Acute Solutions at Cardinal Health, Inc., a multinational healthcare services company, from 2015 to 2016 and chief executive officer of Cardinal Health Mr. Petras was named to the board of directors of the Cleveland Clinic in 2016 and elected vice chair of the board in 2020. Mr. Petras holds a B.S.B.A. in finance from John Carroll University and an M.B.A. in marketing from Case Western Reserve University.
Qualifications: | |
| 2024 Notice and Proxy Statement |
Proposal 1: Election of Directors
Nominees for Election as Class I Directors Continuing in Office
David Age: Director |
Biographical Information:David E. Wheadon, M.D. has served as a member of our Board since May 2021. Dr. Wheadon served as senior vice president of global regulatoryaffairs, patient safety, and quality assurance at AstraZeneca Plc from December 2014 to July 2019. Prior to that, he was executive vice president, research and advocacy at Juvenile Diabetes Research Foundation International Inc., from May 2013 to December 2014, and senior vice president, scientific and regulatory affairs at Pharmaceutical Research and Manufacturers of America (PhRMA) Dr. Wheadon serves on the board of directors of Vaxart, Inc. (NASDAQ:VXRT) and served on the boards of Karuna Therapeutics, Inc. (NASDAQ:KRTX) from December 2020 to March 2024, ChemoCentryx, Inc. (NASDAQ:CCXI) from May 2022 to October 2022 and
Qualifications:Dr. Wheadon was selected to serve on our Board because of his extensive experience in the biopharmaceutical industry and for his expertise in global health policy and regulatory affairs, product quality and patient safety. | ||
| The Board recommends a vote “FOR” the election of each of the director nominees set forth above to serve until the 2027 Annual Meeting of Shareholders. |
| 13 | |
Proposal 1: Election of Directors
Directors Continuing in Office
Directors Continuing in Office
Seven directors are serving for terms that will continue after the Annual Meeting until the 2025 or 2026 Annual Meetings of Shareholders. The following brief biographical descriptions provide information regarding these directors’ individual experience, qualifications, attributes and skills and a brief statement of those aspects of our directors’ backgrounds that led us to conclude that they should serve as directors.
Class II Directors (Terms Expire at 2025 Annual Meeting)
Ruoxi Chen Age: 40 Director | Biographical Information: Ruoxi Chen has served as a member of our Board since November 2020. Mr. Chen joined Warburg Pincus in 2011 and is now a managing director focusing on investments in the healthcare sector. Prior to joining Warburg Pincus, Mr. Chen worked at the Carlyle Group in the U.S. Buyout Fund and in investment banking at Citigroup. He is currently a board member of several private healthcare companies. He served on the board of directors of Silk Road Medical Inc. (NASDAQ:SILK) from April 2019 to December 2020. He earned a B.S. magna cum laude in economics and computer science at Duke University and an M.B.A. at Harvard Business School. Qualifications: Mr. Chen was selected to serve on our Board because of his extensive knowledge of strategy and business development in the healthcare sector, his wide-ranging experience as a director and deep familiarity with our Company. | |
David Donnini Age: 58 Director | Biographical Information: David A. Donnini has served as a member of our Board since October 2020 and was a member of Topco Parent’s Board of Managers from 2015 through November 2020. Mr. Donnini joined GTCR in 1991 and is currently a managing director of the firm. Prior to joining GTCR, he worked as an associate consultant at Bain & Company. He leads GTCR’s business services efforts. Mr. Donnini serves on the board of directors of Vivid Seats Inc. (NASDAQ:SEAT) and several private companies. He holds a B.A. in economics, summa cum laude, from Yale University and an M.B.A. from Stanford University, where he was an Arjay Miller Scholar and Robichek Finance Award winner. Qualifications: Mr. Donnini was selected to serve on our Board because of his significant financial and investment experience, wide-ranging experience as a director and deep familiarity with our Company. |
| 2024 Notice and Proxy Statement |
Proposal 1: Election of Directors
Directors Continuing in Office
Karen Flynn Age: 61 Director | Biographical Information: Karen A. Flynn has served as a member of our board since November 2023. Ms. Flynn retired in October 2023 from her position as President, Biomodalities of Catalent Pharma Solutions, a position she held since April 2023. Prior to this, she was Senior Vice President and Chief Commercial Officer at Catalent until September 2022. She joined Catalent as President, Biologics and Chief Commercial Officer in 2020. Before Catalent, Ms. Flynn was Senior Vice President and Chief Commercial Officer for West Pharmaceutical Services, Inc. from 2016 to 2019, and served as its President of Pharmaceutical Packaging Systems from 2014. Ms. Flynn serves on the board of Quanterix Corporation (NASDAQ:QTRX) and a privately held company. She previously served on the boards of Recro Pharmaceuticals (NASDAQ:SCTL) from September 2015 to January 2020 and Catalent (NYSE:CTLT) from September 2022 to January 2024. She serves on the Board of the Franklin Institute and previously served on the Chester County Economic Development Council and the Advisory Board of the Downingtown STEM Academy. Ms. Flynn holds a Master of Science in Business Administration from Boston University and a Master of Science in Engineering from the University of Pennsylvania. She received her Bachelor of Science in Pre-Professional Studies from the University of Notre Dame. Qualifications: Ms. Flynn was selected to serve on our Board because of her extensive experience in commercial strategy, strategic planning, innovation, quality management and the healthcare industry. | |
Ann Klee Age: 62 Director | Biographical Information: Ann R. Klee has served as a member of our Board since October 2020 and was a member of Topco Parent’s Board of Managers from May 2020 through November 2020. Ms. Klee served as the executive vice president, Business Development & External Affairs at Suffolk Construction, a vertically integrated construction company, from February 2020 until March 2021. Prior to that, she was the vice president, Environment Health & Safety (EHS) at GE, a multinational conglomerate, from February 2008 to September 2019, and the vice president, Boston Development & Operations at GE from January 2016 to September 2019. At GE, she was also the president of the GE Foundation from August 2015 to September 2019, where she oversaw the company’s $140 million in annual charitable contributions. She was a partner at Crowell & Moring in Washington, D.C. from 2006 to 2007, where she served as co-chair of the firm’s Environment and Natural Resources Group. Prior to Crowell & Moring, she served as general counsel to the US EPA, as counselor and special assistant to the Secretary of the U.S. Department of the Interior and as chief counsel to the U.S. Senate’s Environment and Public Works Committee. Ms. Klee is a director at Wabtec Corporation (NYSE:WAB), where she chairs the compensation and management development committee and the EHS subcommittee of the nominating and corporate governance committee, and at a privately held company. She holds a B.A. with High Honors in classics from Swarthmore College and a J.D. from the University of Pennsylvania Carey Law School. Qualifications: Ms. Klee was selected to serve on our Board because of her extensive experience as an environmental lawyer in managing complex litigation and for her expertise in regulation, government affairs, public policy, EHS and corporate responsibility and ESG matters. |
| 15 | |
Proposal 1: Election of Directors
Directors Continuing in Office
Class III Directors (Terms Expire at 2026 Annual Meeting)
Sean Cunningham Age: 48 Director | Biographical Information: Sean L. Cunningham has served as a member of our Board sinceOctober 2020 and was a member of Topco Parent’s Board of Managers from 2015 to November 2020. Mr. Cunningham joined GTCR in 2001 and is currently a managing director of the firm and the leader of its Healthcare group. Prior to joining GTCR, he worked as a consultant with Boston Consulting Group. Mr. Cunningham is a director of Maravai LifeSciences (NASDAQ:MRVI) and several private companies. He holds A.B. and B.E. degrees in engineering sciences from Dartmouth College and an M.B.A. from the Wharton School at the University of Pennsylvania. Qualifications: Mr. Cunningham was selected to serve on our Board because of his wide range of experienceoverseeing and assessing the performance of companies in our industry, decades-long investment practice and extensive knowledge of strategy and business development. | |
Robert Knauss Age: 70 Director | Biographical Information: Robert B. Knauss has served as a member of our Board sinceOctober 2022. Mr. Knauss is a managing director at Warburg Pincus. Mr. Knauss joined Warburg Pincus in 2013 and served as its general counsel from 2013 until 2020. He currently advises on legal, policy, regulatory and compliance matters at Warburg Pincus. Prior to joining Warburg Pincus, Mr. Knauss was a partner at Munger, Tolles & Olson LLP in Los Angeles, where he focused primarily on mergers and acquisitions, corporate finance and securities and private equity. Before joining Munger, Tolles & Olson in 1981, he served as a law clerk for Justice William H. Rehnquist of the Supreme Court of the United States and the Honorable Walter R. Mansfield of the United States Court of Appeals for the Second Circuit. Mr. Knauss received an A.B. from Harvard University and a J.D. from the University of Michigan Law School. Qualifications: Mr. Knauss was selected to serve on our Board because of his significant experience overseeing legal, regulatory and compliance matters, his knowledge of overseas markets, and his expertise with respect to corporate responsibility, cybersecurity, and enterprise risk management. | |
Vincent Petrella Age: 63 Director | Biographical Information: Vincent K. Petrella has served as a member of our Board since November 2020. Mr. Petrella served as the executive vice president, chief financial officer and treasurer at Lincoln Electric Holdings, Inc. (NASDAQ:LECO), a welding, cutting and brazing products manufacturer, from 2004 until April 2020. Prior to that role, he served as vice president, corporate controller from 1997 to 2003 and as internal audit manager from 1995 to 1997. Before Lincoln Electric, Mr. Petrella was an auditor at PricewaterhouseCoopers. He serves on the boards of Applied Industrial Technologies, Inc. (NYSE:AIT) and Gorman-Rupp Company (NYSE:GRC). Mr. Petrella holds a B.A. in business administration (accounting) from Baldwin Wallace University and is a Certified Public Accountant in Ohio (inactive). Qualifications: Mr. Petrella was selected to serve on our Board because of his significant global finance, accounting and international business development experience, his expertise with respect to audit committees and his wide-ranging experience as a director. |
| 2024 Notice and Proxy Statement | 16 |
Corporate Governance
Structure and Role of the Board of Directors
Structure and Role of the Board
Our Stockholders’ Agreement provides that investment funds and entities affiliated with Warburg Pincus are entitled to designate up to:
five directors for election to our Board for so long as certain investment funds and entities affiliated with Warburg Pincus hold 80% or more of the shares of our common stock that they held immediately following our IPO;
four directors for election to our Board for so long as certain investment funds and entities affiliated with Warburg Pincus hold 60% or more of the shares of our common stock that they held immediately following our IPO;
three directors for election to our Board for so long as certain investment funds and entities affiliated with Warburg Pincus hold 40% or more of the shares of our common stock that they held immediately following our IPO;
two directors for election to our Board for so long as certain investment funds and entities affiliated with Warburg Pincus hold 20% or more of the shares of our common stock that they held immediately following our IPO; and
one director for election to our Board for so long as certain investment funds and entities affiliated with Warburg Pincus hold 6 2/3% or more of the shares of our common stock that they held immediately following our IPO.
In addition, our Stockholders’ Agreement provides that investment funds and entities affiliated with GTCR are entitled to designate up to:
three directors for election to our Board for so long as certain investment funds and entities affiliated with GTCR hold 70% or more of the shares of our common stock that they held immediately following our IPO;
two directors for election to our Board for so long as certain investment funds and entities affiliated with GTCR hold 40% or more of the shares of our common stock that they held immediately following our IPO; and
one director for election to our Board for so long as certain investment funds and entities affiliated with GTCR hold 10% or more of the shares of our common stock that they held immediately following our IPO.
Our amended and restated certificate of incorporation provides that the authorized number of directors may be changed only by our Board, subject to the rights of any holders of any series of our preferred stock; provided that, without the consent of Warburg Pincus or GTCR, the authorized number of directors may not exceed eleven as long as investment funds and entities affiliated with either Warburg Pincus or GTCR are entitled to designate at least one director. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our Board may have the effect of delaying or preventing changes in our control or management.
Subject to any restrictions under applicable law or the Nasdaq rules, our Stockholders’ Agreement provides that each of Warburg Pincus and GTCR is entitled to representation on each Board committee proportionate to the number of directors they are entitled to designate on our Board. In addition, Warburg Pincus is entitled to appoint the chairperson of our Leadership Development and Compensation Committee for so long as Warburg Pincus has the right to designate at least one director for election to our Board. See “Stockholders’ Agreement” on page 63 for additional information about our Stockholders’ Agreement.
Our amended and restated certificate of incorporation provides that our directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in an annual election of directors; provided that for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR, collectively, hold at least a majority of our outstanding capital stock, a director designated by investment funds and entities affiliated with either Warburg Pincus or GTCR, respectively, may be removed with or without cause by the affirmative vote of the holders of a majority of our outstanding capital stock and with the consent of Warburg Pincus or GTCR, respectively.
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Corporate Governance
Director Independence
Our Board, together with the Governance Committee and the Company’s legal counsel, conducts an annual review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board has determined that each of our directors and director nominees, with the exception of Mr. Petras, do not have relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors and director nominees is “independent” as that term is defined under the listing standards of the Nasdaq. In making these determinations, the Board considered the current and prior relationships that each director and director nominee has with our Company and all other facts and circumstances the Board deemed relevant in determining their independence, including each director and director nominee’s beneficial ownership of our capital stock, and transactions involving them and the Company, if any, further described in the section titled “Certain Relationships and Related Party Transactions”.
The Sponsors beneficially own shares representing a majority of the outstanding shares of our common stock. As a result, we may be considered a “controlled company” within the meaning of the Nasdaq rules. Under the Nasdaq rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance standards, including:
the requirement that a majority of the Board consist of independent directors;
the requirement that our director nominations be made, or recommended to the full board of directors, by our independent directors or by a nominations committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
These requirements would not apply to us as long as we remain a “controlled company.” Although we may qualify as a “controlled company,” we do not currently rely on this exemption and fully comply with all corporate governance requirements under the Nasdaq corporate governance standards.
Board Structure and Leadership
In accordance with our amended and restated certificate of incorporation, and as permitted by the Delaware General Corporation Law of the State of Delaware (“DGCL”), permits, our Board is divided into three classes. Our classified Boardclasses, a structure that has been in place since our IPO. While the Board believes its currentthis structure continues to be in the best interests of the Company and our stockholdersshareholders at this time, the GovernanceNCG Committee annually considers the Board’s classified structure and will make recommendations to the Board with respect thereto as the GovernanceNCG Committee deems appropriate.
Our corporate governance guidelinesCorporate Governance Guidelines provide that the chairChair of our Board (the “Chair” or “Chairman”) is a member of the Board and may or may not be an officer or employee of the Company. It is presently the Company’s policy of the Company that the positions of the Chair and the Chief Executive Officer (“CEO”)CEO be held by the same person except in unusual circumstances. The principal duty of the Chair is to lead and oversee the Board. Mr. Petras has served as our CEO since June 2016. He wasserved as chairman of the Board of Managers of Topco Parent from January 2019 through November 2020 and has been Chairman of the Board since October 2020. The Board believes that combining the Chair and CEO roles is currently the most effective leadership structure because of Mr. Petras’sPetras’ extensive knowledge of and experience ofin the Company’s operations, his knowledge of the industries we serve and his collaborative working and leadership style.
If the ChairmanChair is also the CEO, the independent directors may, but are not required to, select from themselves a lead director. We do not currently have a lead director. The Board believes that its function to monitor the performance of senior management is fulfilled by the presence of independent directors of stature who have substantive knowledge of the Company’s business. Pursuant to our corporate governance guidelines,Corporate Governance Guidelines, our independent directors are required to meet at least two times per year without management present. As described in “Executive Sessions,” in 2021, the independent
Corporate Governance
Board Role in Risk Oversight
directors met in executive session four times without the ChairmanChair and CEO or any other membermembers of management present. GivenIn view of our independent directors’ open and active communications, at this time the Board believes its current leadership structure is appropriate.
Our GovernanceThe NCG Committee annually considers the Board’s leadership structure, including the combined Chair and CEO roles and the appointment ofwhether to appoint a lead director, and will makemakes recommendations to the Board with respect thereto as the GovernanceNCG Committee deems appropriate.
Our Stockholders Agreement provides that Warburg Pincus is entitled to designate up to:
| • | five directors for election to our Board for so long as Warburg Pincus holds 80% or more of the shares of our common stock that Warburg Pincus immediately following our IPO; |
| • | four directors for election to our Board for so long as Warburg Pincus holds 60% or more of the shares of our common stock that Warburg Pincus held immediately following our IPO; |
| • | three directors for election to our Board for so long as Warburg Pincus holds 40% or more of the shares of our common stock that Warburg Pincus held immediately following our IPO; |
| • | two directors for election to our Board for so long as Warburg Pincus holds 20% or more of the shares of our common stock that Warburg Pincus held immediately following our IPO; and |
| • | one director for election to our Board for so long as Warburg Pincus holds 6 2/3 % or more of the shares of our common stock that Warburg Pincus held immediately following our IPO. |
At present, Warburg Pincus holds 74.69% of the shares of our common stock that Warburg Pincus held immediately following our IPO.
Our Stockholders Agreement also provides that GTCR is entitled to designate up to:
| • | three directors for election to our Board for so long as GTCR holds 70% or more of the shares of our common stock that GTCR held immediately following our IPO; |
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Corporate Governance
Certain Sponsor Rights
| • | two directors for election to our Board for so long as GTCR holds 40% or more of the shares of our common stock that GTCR held immediately following our IPO; and |
| • | one director for election to our Board for so long as GTCR holds 10% or more of the shares of our common stock that GTCR held immediately following our IPO. |
At present, GTCR holds 74.69% of the shares of our common stock that GTCR held immediately following our IPO.
Our amended and restated certificate of incorporation provides that only our Board may change the authorized number of directors, subject to the rights of any holders of any series of our preferred stock, provided that, without the consent of Warburg Pincus or GTCR, the authorized number of directors may not exceed eleven as long either Warburg Pincus or GTCR is entitled to designate at least one director. Any additional directorships resulting from an increase in the number of directors are to be distributed among the three classes of directors so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our Board may have the effect of delaying or preventing changes in our control or management.
Subject to restrictions under applicable law or the Nasdaq listing rules, our Stockholders Agreement also provides that Warburg Pincus and GTCR are each entitled to representation on each Board committee proportionate to the number of directors they are entitled to designate on our Board. Consistent with Nasdaq’s heightened independence standards for audit committees, however, no Sponsor-designated director sits on our Audit Committee. In addition, Warburg Pincus is entitled to appoint the Chair of our Leadership Development and Compensation Committee (the “LDC Committee”) for so long as Warburg Pincus has the right to designate at least one director for election to our Board. See “Stockholders Agreement” on page 71 for additional information about our Stockholders Agreement.
Our amended and restated certificate of incorporation provides that our directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the votes that all our shareholders would be entitled to cast in an annual election of directors, provided that for so long as either Warburg Pincus or GTCR collectively hold at least a majority of our outstanding capital stock, a director designated by Warburg Pincus or GTCR may be removed with or without cause only by the affirmative vote of the holders of a majority of our outstanding capital stock and with the consent of Warburg Pincus or GTCR, respectively.
In late February 2024, the Delaware Court of Chancery issued a decision that invalidated certain provisions of a stockholder agreement between another company and the controlling stockholder of that company on the grounds that that those provisions violated Section 141(a) of the DGCL. While the stockholder agreement at issue contains some similarities to our Stockholders Agreement, our overall governance arrangements also differ in significant respects from those at issue in the Chancery Court’s decision. The decision remains subject to appeal to the Delaware Supreme Court, and we will continue to monitor how Delaware law in this area evolves.
Director Independence
Our Board, together with the NCG Committee and the Company’s legal counsel, conducts an annual review of the independence of each director. Based on information the directors provided concerning their backgrounds, employment and affiliations, including family relationships, our Board has determined that none of our directors and director nominees has any relationships that would interfere with her or his exercise of independent judgment in carrying out the responsibilities of a director and that, with the exception of Mr. Petras, all the directors and director nominees are “independent” under the listing standards of the Nasdaq stock exchange. In making these determinations, the Board considered the current and prior relationships that each director and director nominee has with our Company and all other facts and circumstances the Board deemed relevant in determining their independence, including their beneficial ownership of our capital stock and any transactions between them and the Company, as further described in the section titled “Certain Relationships and Related Party Transactions.”
The Sponsors beneficially own shares representing a majority of the outstanding shares of our common stock. As a result, we are considered a “controlled company” under the Nasdaq rules and therefore may elect not to comply with certain Nasdaq corporate governance standards, including the requirements that
| • | a majority of the Board consist of independent directors; |
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Corporate Governance
Director Independence
| • | our director nominations be made, or recommended to the full board of directors, by our independent directors or by a nominations committee comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; |
| • | we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and |
| • | an annual performance evaluation be conducted of the nominations and compensation committees. |
Although we qualify as a “controlled company,” we do not currently rely on the exemptions for controlled companies and intend to continue to comply with all corporate governance requirements under the Nasdaq corporate governance standards for non-controlled companies.
Board Role in Risk Oversight
Our Board is responsible for overseeing senior management’s risk management responsibilities,of enterprise risks, including assessing senior management’s processes for identifying and managingmitigating enterprise risks. This oversight is carried out at the level of the full Board and through its fourfive committees.
An important element of the Board’s oversight involves regular interaction with senior management. The Board receives regular reports throughout the year from senior management, including from senior managementleaders in each of our three business units, to ensure itthe Board is well informed of risk exposures related to our strategy and operations, including regarding environmental, health and safety, sustainability, quality, legal, financial and reporting, reputational and human capital management risks. In addition, the Board has tasked each of its committees with the following risk-related responsibilities, described in more detail in the section entitled “Committees of the Board of Directors”:Directors.”
Primary Areas of Risk Oversight
Audit Committee |
• Receives regular briefings from the internal audit function regarding our systems of internal control and reviews and discusses the capacity and performance of the internal audit function.
• Regularly reviews with management our major financial risk and enterprise exposures, including cybersecurity
• Regularly reviews significant regulatory and litigation matters.
• Reviews any significant concerns our stakeholders raise, including reports received through our Global Ethics Line.
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Leadership Development and Compensation Committee |
• Oversees the compensation program for our senior executive team and evaluates any major compensation-related risk exposure.
• Reviews senior executive succession plans.
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Nominating and Corporate Governance Committee |
• Assesses risks related to our corporate governance practices and the independence of directors.
• Oversees our
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EO Litigation Committee
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• Receives regular briefings regarding ongoing litigation related to EO. • Oversees our strategy related to EO litigation. | |
Nordion Pricing Committee | • Reviews and approves Nordion customer contracts to ensure confidentiality and appropriate risk
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Corporate Governance
Committees of the Board of Directors
Board Meetings and Attendance
All directors are expected to attend all or substantially all meetings of the Board, andall meetings of the committees of the Board on which they serve as well asand our annual meeting of stockholders.shareholders. The Board met sevensix times in 20212023 and each director attended at least 75% of the aggregate number of meetings of the Board and the committees on which he or she served during the period in which he or she was a director or committee member. In addition, allmember, with the average attendance at meetings of the Board and its standing committees exceeding 98 percent. All directors attended the 20212023 Annual Meeting of Stockholders.Shareholders.
Executive Sessions
Executive sessions are typically scheduled with the Chairman at the beginning of each regular Board meeting and among only the directors immediately after each regular Board meeting. Throughout 2021,2023, directors met in regular executive session seven times,sessions, both with the Chairman and the independent directors met in executive session four times without the Chairman or any other member of management.management present. The Audit, NCG and LDC Committees also all met in executive sessions without members of management present. The Audit Committee also held regularly scheduled private sessions with our Chief Financial Officer, internal audit leadership and external auditors. The LDC Committee held regularly scheduled private sessions with our Chief Human Resources Officer and Exequity, LLP (“Exequity”), an independent compensation consultant that reports directly to the LDC Committee.
Committees of the Board of Directors
We have an Audit Committee, a Leadership Development and Compensation Committee, (“LD&C Committee”), a Nominating and Governance Committee, an EO Litigation Committee and a Nordion Pricing Committee. The composition and responsibilities of each of the committees of our Board are described below. The GovernanceNCG Committee is responsible for reviewing committee membership and making recommendations to the Board regarding committee composition, consistent with the Company’s organizational documents, our Stockholders’Stockholders Agreement and applicable law. Members serve on these committees until their resignation or until otherwise determined by our Board.Board determines otherwise. Our Board may change the membership of committees or establish other committees as it deems necessary or appropriate from time to time. Most recently, in October 2022, at the recommendation of the NCG Committee, the Board formed the EO Litigation Committee.
Audit Committee
The Audit Committee’s main purpose ispurposes are to oversee our accounting and financial reporting processes, our relationship with our independent auditors, our compliance with legal and regulatory requirements and our policies and procedures with respect to risk assessment and risk management.
In carrying out this purpose,these purposes, the Audit Committee:
oversees the design, implementation, adequacy and effectiveness of our disclosure controls and procedures, system of internal controls over financial accounting, internal audit function and the preparation and audit of our consolidated financial statements;
| • | oversees the design, implementation, adequacy and effectiveness of our disclosure controls and procedures, system of internal controls over financial accounting, internal audit function and the preparation and audit of our consolidated financial statements; |
appoints our independent registered public accounting firm annually, reviews the annual audit plan, approves audit and pre-approves any non-audit related services provided to us, evaluates independent auditor qualifications and performance and ensures their independence;
| • | appoints our independent registered public accounting firm annually, reviews the annual audit plan, approves audit and pre-approves any non-audit related services provided to us, evaluates independent auditor qualifications and performance and ensures their independence; |
oversees procedures for the receipt, retention and treatment of complaints about accounting, internal accounting controls or audit matters, and for the confidential and anonymous submission of complaints by employees concerning such matters;
| • | oversees procedures for the receipt, retention and treatment of complaints about accounting, internal accounting controls or audit matters, and for the confidential and anonymous submission of complaints concerning such matters; |
reviews and approves, or ratifies, in accordance with our policies, all related party transactions as defined by applicable rules and regulations;
| • | reviews and approves, or ratifies, in accordance with our policies, all related-party transactions as defined by applicable rules and regulations; |
oversees legal and regulatory matters and reviews and approves the adequacy and effectiveness of our compliance policies and procedures, including the global code of conduct;
| • | oversees legal and regulatory matters and reviews and approves the adequacy and effectiveness of our compliance policies and procedures, including the Company’s Global Code of Conduct; |
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approves the annual internal audit plan and budget, reviews with internal audit the resultsCorporate Governance
Committees of the audit work at least annually and more frequently as provided in the policy for reporting financial accounting and auditing concerns, as approved by the Committee, and at least annually reviews the performanceBoard of the internal audit team; andDirectors
| • | approves the annual internal audit plan and budget, reviews with internal audit the results of the audit work at least annually and more frequently as provided in the policy for reporting financial accounting and auditing concerns, and at least annually reviews the performance of the internal audit team; and |
oversees Company policies and practices with respect to financial risk assessment and risk management.
| • | oversees Company policies and practices with respect to financial risk assessment and enterprise risk management, including cybersecurity and data security risks. |
The Audit Committee met five times in 2021.2023. The current members of the Committee are Mr. Petrella (chair), Ms. Klee and Dr. Wheadon. Dr. Wheadon joinedFlynn (who was appointed to the Audit Committee in May 2021.February 2024), Ms. Klee and Dr. Wheadon. Each member of the Committee is “independent,”“independent” as
Corporate Governance
Committees of the Board of Directors
defined under the Nasdaq rules and Rule 10A-3 of the Exchange Act. Our Board has determined that each director appointed tomember of the Audit Committee is financially literate and the Board has determined that Mr. Petrella is a financial expert. Ms. Geveda served on the Audit Committee until her resignation from the Committee on November 1, 2021, to ensure the Company’s ongoing compliance with applicable independence standards for Audit Committee membership. Our Board had previously determined that Ms. Geveda did not satisfy applicable Audit Committee independence standards because of the equity ownership in our Company held by investment funds and entities affiliated with Warburg Pincus, of which Ms. Geveda is a managing director, but determined that Ms. Geveda was permitted to remain on the Audit Committee for a period of up to one year after our IPO in accordance with the phase-in period under the Nasdaq rules.
Our Audit Committee operates under a written charter, which is available on our Investor Relations website at https://investors.soterahealth.com/.
Leadership Development and Compensation Committee
In December 2021, the LD&C Committee recommended and the Board approved amendments to both the charterThe main purposes of the LD&CLDC Committee and the corporate governance guidelines to change the name of the Compensation Committee to the “Leadership Development and Compensation Committee” to better reflect the functions of the Committee. The purpose of the LD&C Committee isare to oversee the compensation of our directors and employees, including our CEO and other executive officers, and to oversee management development and succession planning and related matters.
In carrying out this purpose,these duties, the LD&CLDC Committee:
reviews and approves our corporate goals relevant to compensation and evaluates the performance of our CEO and other executive officers against those goals;
| • | reviews and approves our corporate goals relevant to compensation and evaluates the performance of our CEO and other executive officers against those goals and the Company’s values; |
determines the compensation of our CEO and other executive officers based on their evaluations;
| • | determines the compensation of our CEO and other executive officers based on their evaluations, competitive market data pertaining to compensation at comparable companies and other relevant factors; |
administers and executes discretionary authority over the issuance of equity awards under our equity incentive plan;
| • | administers and executes discretionary authority over the issuance of equity awards under our equity incentive plan; |
evaluates any applicable post-service arrangements for our CEO and other executive officers;
| • | evaluates any applicable post-service arrangements for our CEO and other executive officers; |
reviews on a periodic basis the operation and structure of our compensation program, considering our business strategy, the results of any most recent Say-on-Pay vote and relative competitiveness against the market;
| • | administers the clawback policy the Company adopted in 2023; |
advises the Board with respect to our Board or committee compensation;
| • | ensures our executive team and non-employee directors are complying with our stock ownership guidelines; |
produces the Compensation Committee Report on executive officer compensation and reviews and discusses with management the “Compensation Discussion and Analysis” section proposed for inclusion in our SEC filings; and
| • | reviews on a periodic basis the operation and structure of our compensation program, considering our business strategy, the results of any most recent Say-on-Pay vote and relative competitiveness against the market; |
| • | advises the Board with respect to our Board and Committee compensation; |
oversees short-term and long-term management succession planning and leadership assessment and development.
| • | produces the Compensation Committee Report on executive officer compensation and reviews and discusses with management the “Compensation Discussion and Analysis” section proposed for inclusion in our SEC filings; and |
| • | oversees short-term and long-term management succession planning and leadership assessment and development. |
The LD&CLDC Committee met five times in 2021.2023. The members of the LD&CLDC Committee are Mr. Neary (chair) and Mr. Mihas. Each of Mr. Neary and Mr. MihasBoth are “independent,”“independent” as defined under the Nasdaq rules. Because we may be considered a “controlled company” under the Nasdaq rules, our LD&C Committee may not be required to be fully independent, although if such rules change in the future or we no longer meet the definition of a controlled company under the current rules and the LD&C Committee was not then fully independent, we would be required to adjust the composition of the LD&C Committee as and if necessary in order to comply with such rules.
Our LD&CLDC Committee operates under a written charter, which is available on our Investor Relations website at https://investors.soterahealth.com/.
Nominating and Corporate Governance Committee
The GovernanceNCG Committee’s main purpose ispurposes are to identify and evaluate individuals qualified to become Board members consistent with criteria approved by the Board approved, to recommend for the Board’s approval the slate of nominees for proposal to be proposed to stockholdersshareholders for election to the Board, to develop and recommend to the Board for approval a set of corporate governance guidelines,Corporate Governance Guidelines, to lead the annual review of the performance of the Board and each of its standing committees,
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Corporate Governance
Committees of the Board of Directors
and to oversee our program related to corporate responsibility and sustainability, including ESG initiatives.
In carrying out these purposes, the NCG Committee:
| • | evaluates the composition, size, organization, performance and governance of the Board and each of its committees, and makes recommendations to the Board about the appointment of directors to committees of the Board; |
| • | monitors developments and oversees our practices and policies related to corporate responsibility and sustainability, including environmental (e.g., climate change), social, and corporate governance issues; |
Corporate Governance
Corporate Governance Policies and Practices
In carrying out this purpose, the Governance Committee:
| • | develops policies and criteria for considering director nominees for election to the Board; |
evaluates the composition, size, organization, performance and governance of the Board and each of its committees, and makes recommendations to the Board about the appointment of directors to committees of the Board;
| • | engages in regular succession planning for the Board and its committees; |
monitors developments and oversees our practices and policies related to corporate responsibility and sustainability, including environmental (e.g., climate change), social, and corporate governance issues;
| • | oversees and conducts director independence determinations; and |
develops policies and criteria for considering director nominees for election to the Board, including as appropriate to conduct director independence determinations; and
ensures compliance with the corporate governance guidelines and reviews and recommends any changes to the Board on an annual basis.
| • | ensures compliance with the Corporate Governance Guidelines and reviews and recommends any changes to the Board on an annual basis. |
The GovernanceNCG Committee met four times in 2021.2023. The members of the GovernanceNCG Committee are Ms. Klee (chair), Mr. Chen, Mr. Cunningham, Mr. Donnini and Dr. Wheadon. Dr. Wheadon joinedEach member of the Governance Committee in May 2021. Each of Ms. Klee, Mr. Chen, Mr. Cunningham, Mr. Donnini and Dr. Wheadon are “independent,”is “independent” as defined under the Nasdaq rules. Because we may be considered a “controlled company” under the Nasdaq rules, our Governance Committee may not be required to be fully independent, although if such rules change in the future or we no longer meet the definition of a controlled company under the current rules and the Committee was not then fully independent, we would be required to adjust the composition of the Governance Committee as and if necessary in order to comply with such rules.
Our GovernanceNCG Committee operates under a written charter, which is available on our Investor Relations website at https://investors.soterahealth.com/.
EO Litigation Committee
The EO Litigation Committee was formed in October 2022 to oversee the Company’s management of litigation involving EO. The Committee monitors litigation developments, oversees our overall litigation strategy and reports to and makes recommendations to the Board as may be warranted. The EO Litigation Committee met 18 times in 2023. The members of the EO Litigation Committee are Mr. Cunningham, Ms. Klee, Mr. Knauss and Mr. Petrella.
Nordion Pricing Committee
The Nordion Pricing Committee is responsible for overseeingoversees matters related to Nordion’s pricing that require review ofimplicate sensitive or confidential customer information. The main purpose of this Committee is to prevent confidential information relating to Nordion’s customers from being shared with individuals who are involved in the day-to-day operations of Sterigenics. The Nordion Pricing Committee met three times in 2023. The members of the Nordion Pricing Committee are Mr. Chen, Mr. Cunningham, Ms. Geveda, and Mr. Petrella. Mr. Petrella joinedFlynn (who was appointed to the Nordion Pricing Committee in May 2021.February 2024) and Mr. Petrella.
Corporate Governance Policies and Practices
Corporate Governance Guidelines
In November 2020, the Board adopted corporate governance guidelines that we believe reflect the Board’s commitment to sound governance policies and practices. The GovernanceNCG Committee is responsible for reviewing the corporate governance guidelinesour Corporate Governance Guidelines annually and recommending amendments to the Board as itthe NCG Committee deems necessary or appropriate for the Board to discharge its responsibilities more effectively. In December 2021, on the recommendation of both the Governance Committee and the LD&C Committee,2023, the Board approved amendments to the corporate governance guidelinesCorporate Governance Guidelines to changereduce the namenumber of other public company boards on which the CEO may serve from two to one, to limit other directors to serving on the boards of no more than three other public companies and to reinforce the Company’s commitment to majority voting by requiring any director in an uncontested election who does not receive a majority of the Compensation Committeevotes cast to tender her or his resignation to the “Leadership DevelopmentBoard (which is then to consider the offer based on the relevant facts and Compensation Committee” to better reflect the Compensation Committee’s functions. You can find thecircumstances).
The full text of our corporate governance guidelinesCorporate Governance Guidelines is accessible on our investor relations website at https://investors.soterahealth.com/.
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Corporate Governance
Board and Committee Self-Evaluations
Board and Committee Self-Evaluations
The Board and each standing committee conduct annual self-evaluations. Consistent with its charter, the GovernanceNCG Committee led the Board evaluationself-evaluation process and oversaw the annual evaluation of the performance of each standing committeecommittee. The Chair of the Board. The chair of the GovernanceNCG Committee reports to the Board conclusions about the effectiveness and performance of the Board and may makemakes recommendations to the Chair and/or the Board regarding proposed changes considered appropriate for the Board’s consideration.
Corporate Governance
Communications with the Board
Code of Business Conduct and Ethics
Our Board has adopted procedures and policies to comply with the Sarbanes-Oxley Act of 2002 and the rules adopted by the SEC and the Nasdaq, including a global code of conduct applicable to all employees, including our CEO, Chief Financial Officer (“CFO”) and other executive and senior financial officers and all persons performing similar functions. Our global code of conduct is available on our website. We intend to disclose any amendments to the code, or any waivers of its requirements, on our website to the extent required by the applicable U.S. federal securities laws and the corporate governance rules of the Nasdaq.
Integrity is one of our core values. We expect the highest standards of integrity from our employees when dealing with customers, suppliers, regulators and each other. If employees do not feel comfortable or are otherwise unable to raise with their manager questions or concerns regarding ethics, compliance with laws, regulations or policies or workplace culture, employees are expected and encouraged to promptly report those questions or concerns on our Global Ethics Line. Our Global Ethics Line, which is available 24-hours24 hours a day, 7-days7 days a week to every employee worldwide. Live telephonic assistance is available via a tollfree number with operators available in multiple languages. Reports may also be made via electronic submission through our Global Ethics Line web portal. All reporters have the option of remaining anonymous to the extent permitted by local laws and regulations.
Calls to our Global Ethics Line are received by a third-party vendor that promptly reports the issueissue(s) to our internal investigations team. Pursuant to our whistleblower policy, general reports received via our Global Ethics Line are transmitted to an internal review team from the legal department, Human Resources or human resources, as appropriate. Certain reports, including those relatedinternal audit. Reports relating to potential fraud or errorerrors in the preparation or reporting of the Company’s financial condition are referred to an internal review team composed of at least the General Counsel, CFO and oneanother member of the Company’s disclosure committee. Any reports raising a potentially material issue will beare promptly sent toshared with the chairChair of the Audit Committee for review.Committee. Our General Counsel also reports to the Audit Committee at least quarterly regarding any other significant issues raised through the Global Ethics Line.
Our whistleblower policy prohibits retaliation against anyone who in good faith raises a question or concern or assists in the subsequent investigation of a question or concern.
Any interested parties wishing to communicate with, or otherwise make his or hertheir concerns known directly to the Board, a Board committee, or to individual directors regarding matters related to the duties and responsibilities of the Board may do so by addressing such communications or concerns to board@soterahealth.com. The Secretary reviews all communications sent to the Board. Inquiries that relateBoard and relays inquiries relating to the functions of the Board or a Board committee will be relayed to the Board, Boarda board committee or to individual directors as may be appropriate. The Secretary will not relay to the Board or its members inquiries unrelated to the duties and responsibilities of the Board or its committees, including complaints, solicitations, advertisements, resumes or other employment inquiries, service or product inquiries, or materials that are threatening or illegal.
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Non-Employee Director Compensation
2021 2023 Non-Employee Director Compensation Table
NON-EMPLOYEE DIRECTOR COMPENSATION
2021 2023 Non-Employee Director Compensation Table
The following table sets forth information regarding the compensation earned by or paid to each person who served as a non-employee director of our Board during 2021.2023. We reimburse directors for reasonable out-of-pocket expenses incurred in connection with their service to the Board and covered such expenses in 2021.2023. Mr. Petras, our Chairman and CEO, receives no compensation for his service as a director and is not included in this table. The compensation received by Mr. Petras received as an employeeCEO is presented in the Summary Compensation Table.
Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Total | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Total | ||||||
Ruoxi Chen | ||||||||||||
Ruoxi Chen | $77,500 | $224,996 | $302,496 | |||||||||
Sean L. Cunningham | ||||||||||||
Sean L. Cunningham | 77,500 | 224,996 | 302,496 | |||||||||
David A. Donnini | ||||||||||||
David A. Donnini | 77,500 | 224,996 | 302,496 | |||||||||
Karen A. Flynn | ||||||||||||
Karen A. Flynn | 9,986 | — | 9,986 | |||||||||
Ann R. Klee | ||||||||||||
Ann R. Klee | 97,500 | 224,996 | 322,496 | |||||||||
Robert B. Knauss | ||||||||||||
Robert B. Knauss | 75,000 | 224,996 | 299,996 | |||||||||
Constantine S. Mihas | ||||||||||||
Constantine S. Mihas | 80,000 | 224,996 | 304,996 | |||||||||
James C. Neary | ||||||||||||
James C. Neary | $ 95,000 | $225,000 | $320,000 | 95,000 | 224,996 | 319,996 | ||||||
Stephanie M. Geveda | 81,250 | 225,000 | 306,250 | |||||||||
David A. Donnini | 77,500 | 225,000 | 302,500 | |||||||||
Constantine S. Mihas | 80,000 | 225,000 | 305,000 | |||||||||
Sean L. Cunningham | 77,500 | 225,000 | 302,500 | |||||||||
Ann R. Klee | 97,500 | 225,000 | 322,500 | |||||||||
Vincent K. Petrella | ||||||||||||
Vincent K. Petrella | 100,000 | 225,000 | 325,000 | 100,000 | 224,996 | 324,996 | ||||||
Ruoxi Chen | 77,500 | 225,000 | 302,500 | |||||||||
David E. Wheadon | 50,673 | 225,000 | 275,673 | |||||||||
David E. Wheadon | 85,000 | 224,996 | 309,996 | |||||||||
Reflects cash retainer payments paid for service on our Board or any committee of our Board in |
Amounts in this column reflect the aggregate grant date fair value of share-based compensation awarded during the year. |
Non-Employee Director Compensation Policy
Our Board adopted a compensation policy for non-employee directors whichthat became effective in connection with our IPO. Pursuant to this policy, non-employee directors receive the compensation described below. Our non-employee director compensation policy may be amended by our Board from time to time.
Cash Compensation
Each non-employee director is entitled to receive an annual cash retainer of $75,000 as remuneration for service to the Company, with an additional $7,500 for service on the Audit Committee (or, in the case of the chair of suchthe Committee, $25,000), an additional $5,000 for service on the LD&CLDC Committee (or, in the case of the chair of suchthe Committee, $20,000), and an additional $2,500 for service on the GovernanceNCG Committee (or, in the case of the chair of suchthe Committee, $15,000), and an additional $35,000 for service as the lead independent director (to the extent this position exists). There is no additional compensation for service on the EO Litigation or Nordion Pricing Committee.Committees. The annual cash retainer is paid on a quarterly basis, pro-rated for any non-employee director whose service (or whose service in any of the additional capacities described above) begins or ends duringamid a calendar year.
Non-Employee Director Compensation
Non-Employee Director Compensation Policy
Equity Compensation
Each non-employee director is entitled to receive an annual grant of restricted stock units (“RSUs”) under the Sotera Health Company 2020 Omnibus Incentive Plan with a grant date fairtarget value of $225,000. SuchThe RSUs are time-based and will vest in full on the earlier of (i) the first anniversary of the date of grant, orand (ii) the date immediately prior to the Company’s next regular annual meeting of stockholders,shareholders, in each case, subject to the director’s continued service through such date. Subsequent annualAnnual grants of RSUs will beare generally made on the day immediately after our regular annual meeting of stockholdersshareholders to non-employee directors who are serving on our Board on such date.
Expenses
We reimburse our non-employee directors for all reasonable out-of-pocket expenses incurred in connection with his or hertheir service on our Board, including attendance at meetings of the Board, the Boardboard of directors of any of our subsidiaries and any committees thereof, in accordance with the terms of our amended and restated bylaws and our expense reimbursement policy, as in effect from time to time.
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Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation
PROPOSAL 2: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with Section 14A of the Securities Exchange Act of 1934, we are asking shareholders to approve, on an advisory basis, the compensation of our Named Executive Officers as reported in this Proxy Statement. While this vote (commonly referred to as a “say-on-pay” vote) is non-binding, we and our Board of Directors value the opinions of our shareholders and will consider the outcome of this vote when making future compensation decisions.
We encourage shareholders to review the Compensation Discussion and Analysis, beginning on page 27, as well as the Summary Compensation Table and other related tables, notes and narrative. For the reasons detailed in the Compensation Discussion and Analysis, our executive compensation program aligns the interests of our executive officers and our shareholders by linking a significant portion of our executives’ compensation to Sotera Health’s performance and providing a competitive level of compensation designed to recruit, retain and motivate executives who are critical to Sotera Health’s long-term success.
We are asking our shareholders to approve, on an advisory, non-binding basis, the following resolution:
Resolved, that the shareholders of Sotera Health Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table, the other compensation tables and related notes and narrative in this Proxy Statement for the 2024 Annual Meeting of Shareholders.
At the 2022 Annual Meeting of Shareholders, the shareholders approved the Board’s proposal to seek advisory approvals of the compensation of our Named Executive Officers on an annual basis. Accordingly, the next advisory approval of executive compensation will occur at the 2025 Annual Meeting of Shareholders.
| The Board recommends a vote “FOR” approval, on an advisory, non-binding basis, of the compensation of our Named Executive Officers. |
| 2024 Notice and Proxy Statement | 26 |
Compensation Discussion and Analysis
Overview
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the Company’s executive compensation program and provides an overview of our executive compensation-related policies, practices and decisions for 2021.2023. Our “Named Executive Officers”Officers,” or “NEOs,” as of December 31, 2021,2023, are listed below:
Michael B. Petras, Jr. | Chairman and | |
| Chief Financial Officer | |
Michael P. Rutz | President of Sterigenics | |
| Senior Vice President (“SVP”), General Counsel and Secretary | |
| Former | |
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On November 1, 2021,June 26, 2023, the Company hired Jonathan Lyons as our Chief Financial Officer. Mr. Hammons as Senior Vice President, General CounselLyons was selected by the Board based on his extensive expertise in leading multiple finance disciplines in complex and Secretary. Mr. Klaben, who had held the roleglobal businesses across healthcare and industrial sectors. His wide variety of Senior Vice President, General Counselleadership roles and Secretary, had previously informed the Companyhis deep knowledge of his desire to reduce his working commitmentscorporate finance and capital markets will be an asset to the Company and the Company wished to accommodate Mr. Klaben’s request yet retain his valuable services. Accordingly, effective upon the hiring of Mr. Hammons, Mr. Klaben stepped down as Senior Vice President, General Counsel and Secretary and remains with the Company as Deputy General Counsel.Sotera Health team. In connection with the commencement of his employment, the CompanyMr. Lyons entered into an offer letter and restrictive covenants agreement with the Company. Effective upon the hiring of Mr. Hammons.Lyons, Mr. Biehl, who was serving as our Interim CFO, stepped down as Interim CFO and, following a brief transition period, left the organization on August 4, 2023. Mr. Biehl did not receive any severance upon his departure.
2023 Executive Compensation Highlights
Our executive compensation program is designed to align the interests of our executives with the interests of our shareholders and is guided by three core principles:
| • | We pay for performance. The majority of our executives’ compensation is contingent, rather than fixed, and subject to variability commensurate with Company and individual performance. We set challenging financial and operational performance goals designed to build sustainable long-term shareholder value, while embedding into individual performance goals objectives that advance the Company’s values. |
| • | We reward the achievement of annual short-term and long-term business performance goals. Executives receive short-term and long-term incentive awards, the values of which are dependent on Company performance. Annual variable cash compensation is based on the achievement of predetermined performance goals, which motivates executives to achieve key objectives that support the achievement of the Company’s long-term strategic goals. Long-term equity compensation aligns executive and shareholder interests by linking executive compensation to long-term value creation and stock price performance. |
| • | We provide competitive compensation to attract, retain and motivate top talent. Our compensation programs are market competitive and enable us to attract, retain, and motivate highly talented individuals. We reward over-achievement and our highest performing executives can expect differentiated rewards, contributing to retention and engagement. |
The following summarizes the LDC Committee’s key actions with respect to our 2023 executive compensation program and demonstrates the program’s focus on the three principles described above.
2023 Annual Incentive Plan (AIP) Payouts. The Company’s 2023 performance produced payouts under our Annual Incentive Plan (“AIP”) at 85% of target for overall Company performance and at 91% of target for Sterigenics performance.
| 27 | |
Compensation Discussion and Analysis
2023 Executive Compensation Highlights
Executive payouts are based on the achievement of the financial performance goals and individual performance, including the extent to which the executive demonstrates our core values. See “Annual Incentive Plan (AIP)” on page 35 for more information.
Annual Long-Term Equity Incentive Awards. In March 2023, we granted awards under our annual equity award cycle. Except for Mr. Dimitrief, who received equity grants when he became our General Counsel in November 2022, and Mr. Biehl, due to the interim nature of his appointment, each NEO we employed as of March 2023 received a long-term equity incentive award comprised of stock options and time-based RSUs. Consistent with our compensation philosophy, we use equity incentive compensation to incentivize long-term value creation and align our executives’ interests with those of our shareholders. The LDC Committee also uses equity incentive compensation to attract and retain talent.
New Compensation Arrangements. Pursuant to the terms of his offer letter, Mr. Lyons receives an annual base salary of $475,000 and his target annual bonus opportunity under the Company’s AIP is equal to 70% of his annual base salary. Mr. Lyons’ annual long-term equity incentive award target grant date fair value is $1,200,000, which for 2023 was prorated to his start date and comprised of RSUs and stock options, each with a target grant date fair value of $300,000. To replace compensationcompensate Mr. HammonsLyons for the value of cash and equity incentive awards forfeited with his former employer, the LD&C Committee approved a cash sign-on award and recommended, and the Board approved, an equity award. Mr. Hammonshe received a one-time lump sum cash payment equal to $500,000award of $200,000, payable on the first payroll date in February 2022. He also receivedJuly 2023, and an equity replacement award of RSUs with a target grant date fair value of $1,000,000. All equity awards vest in November 2021, consisting of time-based RSUs and options, each scheduled to vest ratablyequal installments over a four-year term beginningthree-year period from date of grant. For additional details on Mr. Lyons’ compensation and employment arrangements, see “Compensation Elements for 2023” on page 34 and “Employment Agreements” on page 47.
2023 Say-On-Pay Engagement and Response
We regularly engage in shareholder outreach and, prior to 2023, discussions with shareholders regarding our executive pay program had generally reflected stockholders’ overall satisfaction with the program. Based on this positive feedback, we maintained the same basic approach to executive compensation program design and pay positioning in the years following our IPO, including the design and positioning of our pay program in 2023.
Shortly before our 2023 Annual Meeting of Shareholders, Glass Lewis recommended that shareholders vote for our say-on-pay proposal. In contrast, Institutional Shareholder Services (“ISS”) recommended that shareholders vote against our say-on-pay proposal on the first anniversarygrounds that the long-term incentive grants to our NEOs and one-time incentive grants to certain of our NEOs were entirely time-vesting. Our 2023 say-on-pay proposal was supported by 85.7% of shares voted. We believe that our ability to obtain 85.7% stockholder support despite ISS’s negative recommendation indicates that a significant majority of our stockholders supports our overall executive compensation program.
Despite this strong overall shareholder support, we remained disappointed by ISS’s position and, as part of our shareholder engagement program, endeavored to better understand potential concerns with our executive pay program and ways that our shareholders believed we could improve the program. The LDC Committee and Board similarly viewed ISS’s input as an opportunity to reexamine our executive compensation program and to engage in continuing conversations with our stockholders and other stakeholders on executive compensation. As detailed at pages 4-5, we met with 12 of our largest shareholders representing 48% of our total outstanding shares held by non-affiliates to engage on governance topics, including our executive pay program. After careful consideration of shareholder input following the 2023 say-on-pay vote, the LDC Committee approved prospective compensation design modifications and is considering several additional program changes to address the feedback that we have received from our shareholders. The table below sets forth an overview of the datefeedback we heard on our executive compensation program during shareholder engagement sessions following the 2023 say-on-pay vote and the actions we have taken and are considering taking in response.
| 2024 Notice and Proxy Statement | 28 |
Compensation Discussion and Analysis
2023 Say-On-Pay Engagement and Response
What We Heard | Actions Taken and Considered in Response | |
Limit special LTI grants outside the regular annual awards | We issue special grants only in extraordinary circumstances. The 2022 special awards were deemed critical in the context of significantly reduced retentive value offered by outstanding LTIs and we presently have no plans to issue additional supplemental LTI awards outside the annual LTI award cycle. | |
Desire for significant portion of LTI awards to be contingent on the achievement of performance goals | We continue to believe that stock options and RSUs are inherently performance-based and represent the soundest approach to incentive payments for a company at our stage of development as a publicly traded company. Our approach to NEO annual LTI grants in 2023 reflected this conviction that awards tied directly to stock price movements represent the most direct link between executive pay and shareholder value creation. But in view of the input we have received from our shareholders, we are actively considering whether to incorporate financial and other performance goals in future LTI grants. | |
Potential incorporation of relative TSR metric in our LTI awards | We are considering whether to incorporate relative TSR as either a standalone performance metric or as a modifier to other metrics under our LTI awards. | |
Performance measurement and vesting periods for LTI awards should be three years or longer | All LTI grants to our NEOs in 2023 had a vesting period of three years or more and our intention is that, except under special circumstances, all future annual LTI awards to our NEOs will continue to have vesting periods of at least three years. In addition, to the extent that we incorporate performance metrics in our LTI awards, our plan is to adopt performance goals that would cover at least a three-year period. | |
Desire for more comprehensive and clear disclosure of our incentive pay programs | We have expanded the disclosure of our executive pay arrangements in this proxy statement and intend to continue to provide clear and comprehensive disclosures in future proxy statements. |
2023 Business Performance Highlights
2023 was another good year for the Company. On a consolidated basis, we grew revenue by 4.5%. Sterigenics, our largest reporting segment, delivered 6.5% revenue growth, completed four capacity expansion projects and made significant progress on numerous EO emissions control enhancements across its United States facilities. These enhancements are industry-leading and underscore our overarching commitment to ensure safe, best-in-class, operations for our employees, customers and the communities in which we operate. Our Nordion segment continued to navigate unprecedented geopolitical uncertainty and adeptly managed third-party Cobalt-60 harvest supply schedules to deliver 4.4% revenue growth from the prior year. Finally, Nelson Labs achieved significant growth via its technical consulting team during the year. Following its 2021 acquisition, RCA continues to deliver strong revenue growth as it provides customers with world-class regulatory consulting for FDA and global regulatory submissions.
2023 Target Total Direct Compensation
Our NEOs’ 2023 target total compensation was consistent with our pay for performance philosophy and focused on variable compensation that was aligned with the Company’s overall performance and the Company’s stock performance. The chart below shows that 89% of grant.
Commensuratethe CEO’s 2023 compensation was performance-based with Mr. Klaben’s new role, effective November 1, 2021,a significant portion (76%) tied to the Company and Mr. Klaben entered into an offer letter and restrictive covenants agreement that terminated Mr. Klaben’s then-current employment agreementfuture performance of the Company. For our other NEOs, 75% of their 2023 target total compensation was performance-based, with a significant portion (60%) tied to the future performance of the Company. The LD&C Committee approved both a reduction in Mr. Klaben’s base salary and targetvariable elements of our 2023 compensation program included (i) our Annual Incentive Plan, which is our annual cash incentive bonus. For additional detail on Messrs. Hammonsaward program, and Klaben’s employment arrangements, please see “Employment Agreements”, beginning on page 46.(ii) Long-Term Equity Incentive Program, which in 2023 was comprised of stock options and RSUs.
| 29 | |
Compensation Discussion and Analysis
2023 Say-On-Pay Engagement and Response
CEO Target Total Compensation Mix
Non-CEO NEOs Average Total Compensation Mix(1)
| (1) | Includes the NEOs (other than the CEO and Mr. Biehl) employed by the Company as of December 31, 2023. This graph does not include Mr. Biehl due to the interim nature of his appointment. This graph also does not include the target value of the one-time replacement equity award and cash award provided to Mr. Lyons upon his hire as CFO in 2023. |
Compensation Philosophy and Program
Our executive compensation program is guided by three principles: (i) paypaying for performance; (ii) drivedriving achievement of the Company’s short-annual and long-term business performance goals; and (iii) paypaying competitively to attract, retain and retainmotivate top talent. These principles guide our program’s design, pay levels, and approach to total rewards. Our executive compensation program is comprised ofcomprises three elements: base salary, short-term annual cash incentive compensation and long-term equity incentive compensation. Our NEOs are eligible to participate in the standard health and welfare benefit plans offered to our other employees; a non-qualified deferred compensation plan for which the Company has not to-date provided matching, further described on page 38;40; and, upon certain qualifying terminations of employment, severance payments (as described beginning on page 48.50).
| 30 |
Compensation Discussion and Analysis
Compensation Philosophy and Program
We endeavor to incorporate best practices and good corporate governance policies and procedures throughout our executive compensation program. A representative sample of theseThese compensation practices and governance policies include:
| What We Do | What We Do Not Do | ||||
✓ | Require executives and directors to meet stock ownership levels | × |
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✓ | Directly align executives’ incentive opportunities with the creation of shareholder value by tying a majority of executive compensation to stock value | × |
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✓ | Double-trigger change in control equity vesting provisions | × |
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✓ | Conduct annual | × | No hedging or pledging of Company stock | |||
✓ | Engage an independent compensation consultant to the LDC Committee | × | No tax gross-ups (other than customary reimbursement of relocation expenses) | |||
✓ |
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| No repricing of stock options | ||||
First Compensation Principle: PayPaying for Performance
Executive compensation, including merit increases and annual incentive payouts, are influencedis determined primarily by both Company performance and individual performance. An individual’s annual performance can positively or negatively impact that individual’s merit base pay increase. For example,Earned values under our highest performing employees can expect differentiated rewards, contributingAIP are directly tied to engagementCompany-wide and retention.business unit success. Demonstrating the link between pay and performance, while we delivered both revenue and EBITDA growth in 2023, we fell short of our target, which resulted in an AIP payout at 85% of target for overall Company performance. Equity incentive compensation further aligns NEOs’ compensation with long-term Company performance. Stock options are valuable only to the extent the stock price increases from the grant date, and the performance of our stock drives, by definition, the value of RSUs is variable, dependent on the value of our stock at the time of vesting.and restricted stock.
Second Compensation Principle: DriveDriving Achievement of Short- and Long-Term Business Performance Goals
We believe it is important to reward achievement of short-annual and long-term business goals and we structure our performance-based compensation accordingly. We maintain an Annual Incentive Plan, (“AIP”), pursuant to which the LD&CLDC Committee sets performance targets to motivate NEOs to achieve our short-term financial and operational objectives, and ensureensuring accountability for progress towards longer-term strategic goals. Under our AIP, NEOs receive annual cash incentive opportunities tied to the achievement of both target annual EBITDA performance metrics set for the Company (and, in Mr. Rutz’s case, set for the Sterigenics business and the Company) and individual performance factors, which include individual performance against Company values, which are fundamentalfoundational to our ESGCompany’s culture, including our corporate responsibility initiatives. See “Annual Incentive Plan”Plan (AIP)” on page 35 for additional detail about our annual performance assessment process.
While we believe incentivizing the achievement of short-termannual business goals is critical, we strive to maintain a competitive total direct compensation opportunity for our NEOs.reward an appropriate balance of annual and long-term financial and strategic business results. Our pay mix is designed to deliver muchover 50% of the NEOs’ target total compensation in the form of equity awards linked to the value of our stock. We use equity awards to incentivize and reward long-term value creation and align our executives’ interests with those of our stockholders.shareholders. In conjunctionconnection with our IPO in November 2020, ourthe NEOs with the Company at that time (Mr. Petras and Mr. Rutz) received long-term equity incentive awards consisting of time-based RSUs and stock option awards each ofand time-based RSUs, which vest over a four-year term beginning on the first anniversary of the grant date of grant. These awards were intended to serve as an immediate link to stockholders’ interest in long-term value creation and to deliver competitive long-term compensation values covering the award cycles for 2020 and 2021. As such, no(the “IPO Equity Awards”). No additional long-term equity awards were granted in 2021 to recipients of the November 2020 awards.IPO Equity Awards. In 2022, we commenced an annual equity award cycle and each
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Compensation Discussion and Analysis
Compensation Philosophy and Program
NEO we employed in March 2022 received a long-term equity incentive award comprising stock option awards and time-based RSUs. We continued with our annual equity award cycle in 2023, making a long-term equity incentive award grant comprised of stock option awards and time-based RSUs to each NEO we employed in March 2023 (except for Mr. Dimitrief and Mr. Biehl) and a prorated long-term equity incentive award grant to Mr. Lyons following the commencement of his employment. Our policies and practices regarding RSUstock option and stock optionRSU grants, including the timing of grants and the determination of the exercise price, are further described beginning on page 40.
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Compensation Discussion37. The stock ownership guidelines we adopted to further align the interests of our senior executive team, executive officers and Analysis
Compensation Philosophy and Program
directors with those of our shareholders are further described on page 41.
Third Compensation Principle: PayPaying Competitively to Attract and Retain Top Talent
Our compensation program is designed to attract, retain and motivate high-performing executives critical to the Company’s short- and long-term success. As described in more detail below, we seek to ensure the overall level of total compensation for our executive officers is reasonable in relation to, and competitive with, the compensation paid by similarly situated peer leaders in our industry pay, subject to variation for individual factors such as experience, performance, duties, scope of responsibility, prior contributions and future potential contributions to our business. With the assistance of theour independent compensation consultant, the LD&CLDC Committee monitors market trends, including the prevalence of compensation delivery mechanisms, and will adjustadjusts the design and operation of our executive compensation program periodically as itthe LDC Committee deems necessary and appropriate, including to achieve our executive retention objectives. We believe our current compensation program, in particular our equity incentive program, provides high retentive value for the members of our leadership team who are critical to the Company’s success. From time to time, we have included cash bonuses and one-time equity awards in the total compensation of our executives to attract and retain talent, as further discussed herein and in previously filed Proxy Statements.
The Role of the LD&CLDC Committee
Among its other responsibilities, the LD&CThe LDC Committee establishes our compensation philosophy described above, and annually reviews and approves our executive compensation program. The Committee reviews and approves each NEO’s base salary, target short-term cash incentive award,and earned annual cash incentive award,awards and recommends to the full Board for approval the type and target value of each NEO’s long-term equity incentive award. The Board (without the CEO’s participation) also reviews and approves each element of our CEO’s compensation.
The LD&CLDC Committee has the authorityis authorized to retain independent advisors to assist the LDC Committee in the carrying out of its responsibilities and, in 20202021, 2022, and 2021,2023, the Committee retained Exequity LLP (“Exequity”) as its independent compensation consultant to review and provide input on our executive compensation program. At least annually, the Committee reviews with Exequity the executive compensation program, including incentive compensation plans and arrangements, to: (i) ensure the elements of our compensation program are based on appropriate measures, goals and targets for our industry and our business objectives; (ii) ensure our program is achieving its intended purpose of incentivizing achievement of short- andshort-and long-term business goals, as well as attractionattracting and retention ofretaining executive talent; and (iii) determine whether any changes to our compensation program are advisable.
The Role of our CEO and Management
The LD&CLDC Committee works with members of management, including our CEO and Chief Human Resources Officer (“CHRO”), to determine the compensation of our NEOs and other executives. Management further works with the Committee annually to recommend the structure of our AIP, to develop AIP performance metrics, including threshold, target and maximum performance levels, and to evaluate actual Company performance against selected measures.
Additionally, the CEO makes recommendations to the Committee regarding the compensation of ourthe other NEOs (other than himself) and other executives. At the beginning of each year, our CEO reviews our NEOs’ and other executives’ prior year’s performance and makes recommendations to the LD&CLDC Committee for each element of such executives’ compensation (other than his own),
| 2024 Notice and Proxy Statement | 32 |
Compensation Discussion and Analysis
Compensation-Setting Process
including any salary adjustments, adjustments to AIP target as a percentage of salary for the current year, actual AIP payout for the previous year, and target grant date value of long-term equity awards. The CEO’s compensation recommendations are based on his performance evaluation of each executive, the Company’s performance in the preceding year, and data provided by the LD&CLDC Committee’s compensation consultant concerning compensation practices among the Company’s compensation peer group. The LD&CLDC Committee considers the CEO’s recommendations when making executive compensation decisions, but the LD&CLDC Committee (and the Board, with respect to equity awards and CEO compensation) retains full discretion to set all compensation for our NEOs. For further discussion of the annual performance management process, see “Compensation Elements for 20212023 — Annual Incentive Plan”Plan (AIP).
Compensation Discussion and Analysis
Compensation-Setting Process
”
The Role of the Compensation Consultant
The LD&CLDC Committee has engaged Exequity as its independent compensation consultant. Although Exequity may periodically meetmeets with the CEO and CHRO to gather information about, orand provide advice regarding,about management proposals to the LD&C Committee, Exequity reports directly to the LD&CLDC Committee rather thanand not to management. Pursuant to its charter, the LD&CLDC Committee makes all determinations regarding the terms of the Company’s engagement with Exequity, including the services Exequity provides to the Company and the fees paid for those services. The Committee mayretains the prerogative to replace its compensation consultant or hire additional advisors at any time. At the invitation of the LD&CLDC Committee, representatives of Exequity attend meetings of the LD&CLDC Committee. The Committee also communicates with Exequity outside of meetings as needed.
The nature and scope of services that Exequity provided by Exequity in 2020, including for NEO’s IPO-related compensation adjustments,2023 included the following:
Advice and assistance developing a relevant compensation peer group;
| • | Advice and assistance developing a relevant compensation peer group; |
Advice and assistance regarding compensation best practices and market trends for executives and directors;
| • | Advice and assistance regarding compensation best practices and market trends for executives and directors, including new hire executive compensation packages and retention incentive programs; |
Analysis of appropriate levels of total overall compensation and each element of compensation for our NEOs and directors;
| • | Analysis of appropriate levels and design of total overall compensation and each element of compensation for our NEOs and directors; |
Consultation on technical matters such as the taxation of executive pay arrangements, as well as assistance with disclosure of executive pay arrangements;
| • | Consultation on technical matters such as the taxation of executive pay arrangements and assistance with disclosure of executive pay arrangements; |
Annual assessment of potential risks associated with compensation programs; and
| • | Annual assessment of potential risks associated with compensation programs; and |
Advice and assistance developing various Company policies.
Except for establishing new AIP targets, the nature and scope of services provided by Exequity in 2021 was unchanged from 2020.
| • | Advice and assistance developing various Company policies or programs. |
Competitive Positioning
Consistent with our goal of providing competitive compensation to attract and retain executives, the LD&CLDC Committee reviews market data on executive compensation levels and practices drawn from a group of peer companies similar to the Company in industry focus, revenue and market capitalization. While the Committee does not specifically target any particular percentile for any element of an NEO’s compensation, it does consider as a reference point the market median for each element of an NEO’s compensation.
The LDC Committee assessed our 2022 compensation peer group used in 2020 for 20212023 compensation decisions, based on a review by Exequity, and no changes were made at that time. The 2022 peer group consisted of the following companies:
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In consultation with the LD&C Committee, Exequity recommended the above compensation peer group, which was approved by the LD&C Committee. The peer group is comprised of companies that we identified as serving as competitors with the Company for executive talent, business competitors, and those companies referenced in the executive pay benchmarking processes disclosed by such talent and business competitors in their own executive pay benchmarking processes.competitors. In identifying candidates for the peer group, in consultation with Exequity, the LD&CLDC Committee reviewed companies that generally operated within the following industry segments: Health Care Equipment, Life Sciences Tools and Services, Health Care Supplies, Biotechnology and Pharmaceuticals, and Health Care Technology.
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Compensation Discussion and Analysis
Compensation-Setting Process
When assessing potential peers with the aforementionedthese characteristics, the LD&CLDC Committee further considered the relative sizes of those peer candidates in relation to the Company. The LD&CLDC Committee generally sought to include peer candidates with annual revenues of 0.5x – 4.0x–4.0x the Company’s revenues and a total enterprise value of 0.2x – 3x the Company’s anticipated total enterprise value at the time of the IPO.value. The LD&CLDC Committee also reviewed peer candidates’ EBITDA relative to the Company’s as an indicator of each company’s scale and performance.
2021
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Compensation Discussion and Analysis
Compensation-Setting Process
The compensation peer group used for 2023 compensation decisions consisted of the following companies:
| Abiomed, Inc. | Haemonetics Corporation | Repligen Corporation | ||
| Avanos Medical, Inc. | Hologic, Inc. | ResMed Inc. | ||
| Bio-Techne Corporation | Integra LifeSciences Holdings Corporation | STERIS plc | ||
| Catalent, Inc. | Masimo Corporation | Tandem Diabetes Care, Inc. | ||
| Charles River Laboratories International, Inc. | Medpace Holdings, Inc. | Teleflex Incorporated | ||
| CONMED Corporation | Merit Medical Systems, Inc. | Waters Corporation | ||
| The Cooper Companies, Inc. | QuidelOrtho Corporation | West Pharmaceutical Services, Inc. | ||
Changes to the Peer Group for 2024 Compensation Decisions
In connection with our IPO in November 2020,2023, the LD&CLDC Committee reassessed the peer group for 2024 compensation decisions and approved several changes. Abiomed, Inc. was removed due to its acquisition and Catalent, Inc. and Charles River Laboratories International, Inc. were removed due to their size relative to the Company. In considering potential additions for the 2024 peer group, the LDC Committee reviewed companies within the aforementioned industry segments with Exequity targetannual revenues and total 2021 compensation levels for each then-current NEO, our short-enterprise value of between 0.4x and long-term incentive compensation programs2.5x of the Company’s annual revenues and the types of compensation offered. In addition to input from the compensation consultant, thetotal enterprise value. The LDC Committee considered the CEO’s recommendations with respect to each NEO’s compensation (other than the CEO). In connection with our IPO, and in lieu of a separate formal 2021 compensation review and equity award grant cycle, on November 20, 2020, each of Messrs. Petras, Leffler and Klaben received a base salary increase, an increase in his target annual bonus, and each of Messrs. Petras, Leffler, Rutz and Klaben received an equity award in the form of RSUs and options with grant date fair values based on our IPO price. In March 2021, the LD&C Committeealso reviewed and approved target annual performance metrics for the Company and its business units under our AIP, but otherwise made no changespeer candidates’ EBITDA relative to the NEO compensation approved in November 2020.Company’s as an indicator of each company’s scale and performance. Based on this analysis, Maravai LifeSciences Holdings, Inc. was added to the peer group.
2023 Compensation Decisions
The factors described in the table below informed the Committee’s decisions with respect to the pay actions it took in November 2020 and 2021.setting 2023 executive compensation as further described below. Specifically, in determining our non-CEO NEOs’ 20212023 total target compensation, and recommending to the Board the CEO’s total target compensation and NEOs’ long-term equity incentive compensation, the Committee considered:
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• Experience, knowledge, skills, qualifications, tenure in position, and expected future contributions of the individual, including with respect to EO litigation | • Relative scope of each NEO’s responsibilities • Recommendations of our CEO (except with respect to his own compensation) • Historical compensation • Internal pay equity | |
• The need to attract and retain executives |
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The LD&CLDC Committee did not assign a particular weighting to any of these factors. Rather, the Committee considered this information in light of their experience and knowledge of the Company, the competitive market in which the Company operates, their knowledge of each NEO and business judgment. Please see “Employment Agreements”, beginning on page 46, for details regarding the compensation approved for Mr. Hammons in November 2021.
Compensation Elements for 20212023
Base Salary
To maintain competitiveness and internal pay equity, we provide each NEO with a base salary for the services the executive performs for us.salary. This compensation component constitutes a stable element of compensation while other compensation elements are variable. As described above, when setting base salaries, the LD&CLDC Committee considers a multitude of factors, including market practice, individual performance, Company performance, any change in the executive’s position within our business, the scope of his or her responsibilities and any changes thereto. Base salaries may also be increased as provided under the terms of an NEO’s employment agreement, as applicable.
In November 2020, in connection with our IPO, each of Messrs. Petras, Leffler and Klaben entered into amended and restated employment agreements with the Company and, based on the factors described above in “2021 Compensation Decisions”, the LD&C Committee approved base salary increases for Messrs. Petras, Leffler and Klaben at the levels shown
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Compensation Discussion and Analysis
Compensation Elements for 20212023
below. BasedBase salary increases are not guaranteed or automatic. In March 2023, based on consideration of the factors described above in “2023 Compensation Decisions,” the LDC Committee approved a base salary increase for Mr. Rutz, effective April 3, 2023. After reviewing competitive market data provided by Exequity and becausein consideration of his individual performance, Mr. Rutz’s salary rate had been established at a competitive level when he joined Company in May 2020, Mr. Rutz’s salary remained unchangedwas increased to $470,000 from 2020 to 2021. Mr. Hammons’s$450,000.
The Committee approved the base salary was approved by the Committeefor Mr. Lyons in October 2021June 2023, in connection with Mr. Hammonshis joining the Company on November 1, 2021 as Senior Vice President, General CounselCFO. The base salaries of our NEOs for 2022 (as applicable) and Secretary.2023 were as follows:
Base Salary (Annualized Rate) (1) | |||||||||||||||||
Named Executive Officer | 2021 Annual Base Salary (1) | 2022 | 2023 | % Change | |||||||||||||
Michael B. Petras, Jr. | $ | 1,000,000 | |||||||||||||||
Michael B. Petras, Jr. | |||||||||||||||||
Michael B. Petras, Jr. | |||||||||||||||||
Michael B. Petras, Jr. | $ | 1,050,000 | $ | 1,050,000 | — | ||||||||||||
Scott J. Leffler | 450,000 | ||||||||||||||||
Jonathan M. Lyons | |||||||||||||||||
Jonathan M. Lyons | |||||||||||||||||
Jonathan M. Lyons | |||||||||||||||||
Jonathan M. Lyons | — | 475,000 | — | ||||||||||||||
Michael P. Rutz | 430,000 | ||||||||||||||||
Michael P. Rutz | |||||||||||||||||
Michael P. Rutz | |||||||||||||||||
Michael P. Rutz | 450,000 | 470,000 | 4 | % | |||||||||||||
Terrence G. Hammons, Jr. | 425,000 | ||||||||||||||||
Alexander Dimitrief | |||||||||||||||||
Alexander Dimitrief | |||||||||||||||||
Alexander Dimitrief | |||||||||||||||||
Alexander Dimitrief | 600,000 | 600,000 | — | ||||||||||||||
Matthew J. Klaben(2) | 425,000 | ||||||||||||||||
Michael F. Biehl | |||||||||||||||||
Michael F. Biehl | |||||||||||||||||
Michael F. Biehl | |||||||||||||||||
Michael F. Biehl | 900,000 | 900,000 | — | ||||||||||||||
Please refer to the Summary Compensation Table for actual base salary amounts earned by our NEOs in |
|
Annual Incentive Plan (AIP)
Our AIP is designed to reward high performance, ensure employees are aligned with our mission, values and priorities and provide market competitive rewards. Our executive officers (including our NEOs)NEOs, other than Mr. Biehl) are eligible to participate in our AIP. The LD&CLDC Committee administers the AIP with respect to our NEOs by approving annual performance metrics, including threshold, target and maximum performance levels, establishing performance targets as a percentage of base salary for each NEO, and evaluating actual Company performance against selected measures.
The annual cash incentive opportunities set for our NEOs under our 20212023 Annual Incentive Plan were tied to (i) the Company’s achievement of financial performance goals (and Sterigenics’ financial performance goals, in Mr. Rutz’s case, achievement of both Company and Sterigenics financial performance goals)case) approved by the LD&CLDC Committee at the beginning of the applicable performance period, and (ii) individual performance. There is no AIP payout if the Company (and Sterigenics,does not (or, in the case of Mr. Rutz)Rutz, the Company and Sterigenics do notnot) achieve threshold performance for the financial performance metric.
The target financial metrics for the Company and the Sterigenics business for our 20212023 AIP are included in the below table. Our 20212023 AIP financial performance metric for the Company (“Company AIP Metric”) was based on our non-GAAP financial measure, Adjusted EBITDA. The 20212023 Company AIP Metric was calculated in a manner consistent with the calculation of Adjusted EBITDA as reported in the Company’s Form 10-K for the year ended December 31, 2021,2023, subject to adjustments as deemed appropriate by the LD&CLDC Committee. Our 20212023 AIP financial performance metric for Sterigenics (“Sterigenics AIP Metric”) was based on Sterigenics Segment Income. The 20212023 Sterigenics AIP Metric was calculated in a manner consistent with the calculation of Sterigenics Segment Income as reported in the Company’s Form 10-K for the year ended December 31, 2021, similarly subject to adjustments as deemed appropriate by the LD&C Committee.2023. AIP performance between threshold, target and maximum goals is determined based on linear interpolation.
2021 Financial Performance Goal (dollars in millions) | Performance as Percentage of Target | AIP Performance (as % of Target Opportunity) | ||
Company AIP Metric | ||||
Threshold $451.6 | 90% | 70% | ||
Target $501.7 | 100% | 100% | ||
Maximum $562.0 | 112% | Up to a maximum of 200% | ||
Sterigenics AIP Metric | ||||
Threshold $304.1 | 90% | 70% | ||
Target $337.9 | 100% | 100% | ||
Maximum $378.5 | 112% | Up to a maximum of 200% | ||
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Compensation Discussion and Analysis
Compensation Elements for 20212023
Target levels of performance were based on the Company’s beginning-of-year business plan, and were consistent with external guidance. The totaltargets were deemed by the LDC Committee to be challenging but attainable with excellent performance. The ranges of performance from threshold to target were developed as a function of the variability of Company-wide and Sterigenics Adjusted EBITDA, and are generally consistent with ranges employed by companies in our industry and in the general market with respect to EBITDA goals.
2023 Financial Performance Goal (dollars in millions) | Performance as Percentage of Target | AIP Earned Value (as % of Target Opportunity) | ||
Company AIP Metric | ||||
Below Threshold: Adjusted EBITDA < $502.4M | <90% | 0% | ||
Threshold: Adjusted EBITDA of $502.4M | 90% | 70% | ||
Target: Adjusted EBITDA of $558.6M | 100% | 100% | ||
Maximum: Adjusted EBITDA of $625.6M or more | 112% | Up to a maximum of 200% | ||
Sterigenics AIP Metric | ||||
Below Threshold: Adjusted EBITDA of < $366.8M | <90% | 0% | ||
Threshold: Adjusted EBITDA of $366.8M | 90% | 70% | ||
Target: Adjusted EBITDA of $407.8M | 100% | 100% | ||
Maximum: Adjusted EBITDA of $456.7M or more | 112% | Up to a maximum of 200% | ||
The 2023 target bonus percentagesopportunities for Messrs.Mr. Petras, Leffler,Mr. Lyons, Mr. Rutz and HammonsMr. Dimitrief were, respectively, 125%, 70%, 60%, and 50%, respectively, of their base salaries for 2021. While serving as Vice President, General Counsel and Secretary, Mr. Klaben’s target bonus percentage was 50%, which was reduced to 30% following his role change to Deputy General Counsel.salaries. Individual bonus payouts for Messrs.Mr. Petras, Leffler, HammonsMr. Lyons and Klaben areMr. Dimitrief were determined by taking into account both Company performance (80% of award) and individual performance (20% of award). Mr. Rutz’s bonus iswas determined by taking into account the performance of both the Company and Sterigenics (80% of award, with Sterigenics performance having a 75% weighting and Company performance a 25% weighting), and his individual performance (20% of award).
In determining annual incentive payouts payable for the achievement of financial performance goals, following the close of the fiscal year, the LD&CLDC Committee considered actual Company and Sterigenics performance against the financial performance metrics set forth in the table above. The LD&CLDC Committee then adjustedassessed the Company AIP Metric to account for any extraordinary, unusual, or non-recurring events during the performance period, including new public company related costs.and no such adjustments were made. The LD&CLDC Committee also assessed and then adjusted the Sterigenics AIP Metric to account for any extraordinary, unusual, or non-recurring events during the performance period, including the removal of corporate costs allocated to the Sterigenics segment. The results for our 20212023 Company AIP Metric and Sterigenics AIP Metric were $484.6$528.0 million and $333.9$391.7 million, respectively. The 20212023 financial performance goals set forth under our Annual Incentive Plan for overall Company performance and for Sterigenics performance were achieved at 91.0%85% of target and 97.0%91% of target, respectively.
The following table details the Company’s and Sterigenics’ Adjusted EBITDA performance in relation to the pre-established goals, as well as the related payout factors resulting from 2023 performance:
| Business | Business Weighting | Threshold Adjusted EBITDA: (90%) (1) | Target Adjusted EBITDA: (100%) (1) | Maximum Adjusted EBITDA: (112%) (1) | Actual Performance (1) | Actual Performance as % of Target Adjusted EBITDA | AIP Earned Value as % of | |||||||
Mr. Petras, Mr. Lyons and Mr. Dimitrief | ||||||||||||||
Company Performance | 100% | $502.4 | $558.6 | $625.6 | $528.0 | 94.5% | 85.0% | |||||||
Mr. Rutz | ||||||||||||||
Sterigenics Performance | 75% | $366.8 | $407.8 | $456.7 | $391.7 | 96.1% | 91.0% | |||||||
Company Performance | 25% | $502.4 | $558.6 | $625.6 | $528.0 | 94.5% | 85.0% | |||||||
| (1) | Dollars in millions. |
When determining the amount payable to NEOs for the achievement of individual goals, the LD&CLDC Committee considers the recommendation of the CEO with regard toregarding the other NEOs’ individual performance. All NEOs participate in the Company’s
| 2024 Notice and Proxy Statement | 36 |
Compensation Discussion and Analysis
Compensation Elements for 2023
annual performance management process. At the beginning of the year, in consultation with the CEO, each executive sets individual and business unit or functional goals as part of performance planning. At the end of the year, performance is assessed based both on the executive’s achievement of his or her set goals and the extent to which that executive demonstrated throughout the year the Company’s core values of safety, customer focus, people, integrity and excellence. The assessment of executive performance against the Company’s values, which are fundamental to our ESGCompany’s culture, and to our corporate responsibility initiatives, is a key component of each individual’s annual performance evaluation. The Committee believes the fact that all employees that participate in our AIP are annually evaluated for the extent to which their work embodies our values is a key part of mitigating our overall compensation risk.
Mr. Petras evaluated the performanceperformances of Messrs. Leffler,Mr. Lyons, Mr. Rutz Hammons and KlabenMr. Dimitrief and made a recommendation to the LD&CLDC Committee regarding the level of individual performance each executive achieved relative to his set goals and the embodiment of our values. The Board evaluated Mr. Petras’ performance and considered the CEO’s recommendation regarding the individual achievement levels of the other NEOs. Based on performance related to their 20212023 goals, Mr. LefflerDimitrief received 110% of his individual performance target as a result of his exceptional leadership of our legal and government affairs teams. Mr. Petras also received 110% of his individual performance target, and Messrs. Petras,Mr. Rutz Hammons and Klaben received 100% of theirhis individual performance targets.target. Mr. Lyons received 100% of his individual performance target prorated to his start date in 2023. The following table provides further detail about the 20212023 annual bonus opportunity and payout under our AIP for each NEO:
| Annual Incentive Threshold (1) | Annual Incentive Target | Actual 2021 AIP Bonus Payout | ||||||||||||||||||||||||||||
| % of Base Salary | Amount ($) | % of Base Salary | Amount ($) | % of Base Salary | Amount ($) | |||||||||||||||||||||||||
Michael B. Petras, Jr. | 87.5 | % | $ | 875,000 | 125 | % | $ | 1,250,000 | 114 | % | $ | 1,137,500 | ||||||||||||||||||
Scott J. Leffler | 49 | % | 220,500 | 70 | % | 315,000 | 65 | % | 292,383 | |||||||||||||||||||||
Michael P. Rutz | 42 | % | 180,600 | 60 | % | 258,000 | 57 | % | 246,390 | |||||||||||||||||||||
Terrence G. Hammons, Jr. | 35 | % | 148,750 | 50 | % | 212,500 | 7 | % | 29,750 | (2) | ||||||||||||||||||||
Matthew J. Klaben(3) | 35 | % | 148,750 | 50 | % | 212,500 | 49 | % | 176,225 | |||||||||||||||||||||
| Annual Incentive Threshold (1) | Annual Incentive Target | Actual 2023 AIP Bonus Payout | ||||||||||||||||
% of Base Salary | Amount ($) | % of Base Salary | Amount ($) | % of Base Salary | Amount ($) | |||||||||||||
Michael B. Petras, Jr. | 85% | $ | 891,188 | 125% | $ | 1,312,500 | 108% | $ | 1,137,938 | |||||||||
Jonathan M. Lyons(2) | 48% | 112,884 | 70% | 166,250 | 60% | 141,312 | ||||||||||||
Michael P. Rutz(3) | 41% | 189,284 | 60% | 278,769 | 54% | 249,498 | ||||||||||||
Alexander Dimitrief | 34% | 203,700 | 50% | 300,000 | 43% | 260,100 | ||||||||||||
No payout is made for performance below threshold levels. |
Amounts shown for Mr. |
Amounts shown |
Compensation Discussion and Analysis
Compensation Elements for 2021
Long-Term Equity Incentive Compensation
Consistent with our compensation philosophy, we use equity incentive compensation to incentivize long-term value creation and align our executives’ interests with those of our stockholders.shareholders. The LD&CLDC Committee also uses equity incentive compensation to attract and retain talent. In 2023, we granted the following types of equity awards to our named executive officers:
| • | Annual long-term equity incentive awards. Our annual long-term equity incentive awards (the “2023 Annual Equity Awards”) are a component of our annual executive compensation package, designed to incentivize long-term value creation and align executives’ interests with those of our shareholders. |
| • | Replacement equity award. Mr. Lyons was granted an equity award in connection with the commencement of his employment and appointment as Chief Financial Officer, with the value and design of the equity award determined as a function of the appropriate replacement of outstanding incentives Mr. Lyons forfeited upon terminating employment with his previous employer. |
2023 Annual Equity Awards. As described above, in “2021“2023 Compensation Decisions”,Decisions,” in November 2020, in connection with our IPO,March 2023, the LD&CLDC Committee withrecommended long-term equity incentive awards to each NEO we employed as of March 2023 (except for Mr. Dimitrief and Mr. Biehl) considering, among other things, the assistance of Exequity, conducted a review of our executive compensation programexecutive’s 2022 performance and evaluated market data from our compensationcontributions to the Company’s key short- and long-term strategic goals, the executive’s experience, skills and expected future contributions, and peer group with respect to each element of the then-current NEOs’ compensation. In establishing the amount and terms of the equity awards granted to Messrs. Petras, Leffler, Rutz and Klaben on November 20, 2020, in connection with the IPOdata (the “IPO“March 2023 Annual Equity Awards”), the Committee generally considered the factors described above in “2021 Compensation Decisions” and particularly:
the increased scope of responsibility required by each then-current NEO as a result of our IPO;
retention objectives, including the overall retentive value of NEOs’ existing unvested equity awards (on a stand-alone basis and relative to data regarding peer group company executives);
typical practices relating to the long-term incentive awards granted by companies undergoing an IPO, both in terms of level of grants and grant vehicles;
a desire to further align executives’ interests with stockholders’ in the achievement of a high-level of long-term performance and value, while discouraging the undertaking of undue short-term risks; and,
the extraordinary efforts of such executives in connection with the execution of our IPO.
As a result, the. The Board, upon the recommendation of the LD&CLDC Committee approved the IPOMarch 2023 Annual Equity Awards for the non-CEO NEOs and, without the involvement of the CEO, approved the CEO’s IPOMarch 2023 Annual Equity Award, in each case in lieu of a formal 2021 equity award grant cycle. Award.
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Compensation Discussion and Analysis
Compensation Elements for 2023
The target long-term incentive mix for the IPOMarch 2023 Annual Equity Awards and the sign-on equity award granted to Mr. Hammons was 60%50% stock options and 40%50% RSUs. In October 2021,As explained above, the LDC Committee continues to believe that a combination of stock options and RSUs tightly aligns executives’ incentive opportunities with the creation of shareholder value. Stock options provide value only to the extent that stock price rises, and RSUs help bolster the retention attributes of the program, which are critical in Sotera Health’s continued environment of challenging and variable operating conditions. Also as noted above, the LDC Committee takes the input of shareholders seriously, and consistent with feedback provided by shareholders following the 2023 say-on-pay vote, is considering the mix of our LTI vehicles and the possibility of incorporating performance metrics in future LTI awards. This consideration includes an assessment of the possibility of adding a range of potential financial objectives and relative TSR.
Upon the commencement of his service in June 2023, Mr. Lyons became eligible to participate in the long-term equity incentive program with a target long-term incentive mix of 50% stock options and 50% RSUs, consistent with our overarching pay philosophy and the awards of other top executives. His 2023 Annual Equity Award target value was prorated from the start of his service on June 26, 2023. Beginning in 2024, Mr. Lyons will participate in our annual long-term equity award grant cycle on the same schedule as the other NEOs.
The table below indicates the target value of the executive’s 2023 Annual Equity Award.
Named Executive Officer | 2023 Annual Equity Award Target Value |
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2023 Annual Equity Awards |
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Michael B. Petras, Jr. | $ | 7,500,000 |
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Michael P. Rutz | 1,000,000 |
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Jonathan M. Lyons | 600,000 | (1) |
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| (1) | Amount shown for Mr. Lyons is prorated from the start of his service on June 26, 2023. |
Replacement Equity Award. On August 7, 2023, in connection with Mr. Hammonshis joining the Company the LD&C Committee recommended and the Board approvedappointment as Chief Financial Officer, Mr. Lyons was granted an equity award for Mr. Hammons.of RSUs with a grant date fair value of $1,000,000 that replaced foregone long-term incentives from his prior employer. The award will vest in substantially equal yearly installments on each of the first three anniversaries of the date of grant, subject to his continued employment in good standing with the Company through each applicable vesting date.
The following sections further describe the equity incentive compensation including the IPO Equity Awards, awarded to our NEOs under the Sotera Health Company 2020 Omnibus Incentive Plan (“2020 Incentive Plan”) in 20202023.
Calculation of Equity Awards
When granting equity awards, we use formulas to calculate the number of RSUs and 2021.stock options to be granted to our employees based on the target value of the award. When granting RSUs, we determine the number of shares of stock to be granted by dividing the target award value by the closing sales price on the date of grant as quoted on the Nasdaq stock exchange (the “Fair Market Value”). When granting stock options, we divide the target value by the product of a specified multiplier and the Fair Market Value of our common stock. The specified multiplier is calculated as the product of the fair value of the option award as computed using the Black-Scholes Option Pricing Model prior to the grant date and the Fair Market Value of our common stock.
Stock Options
The IPO Equity Awards included options to purchase shares of our common stock. The Committee believedbelieves stock option awards wereare an appropriate long-term incentive vehicle both because they offeredoffer an immediate link between shareholder value creation and executive rewards, upon the IPO, and because share price needs to rise for the option awards aligned with typical practices among companies engaged in an IPO. On November 20, 2020, we awardedholder to receive any value from the following numberaward. As such, options directly tie executives’ realizable pay opportunities to the creation of nonqualifiedshareholder value.
| 2024 Notice and Proxy Statement | 38 |
Compensation Discussion and Analysis
Compensation Elements for 2023
The 2023 Annual Equity Awards were comprised of approximately 50% stock options to purchase shares of our then-current NEOs at an exercise pricecommon stock. The table below shows the number of $23.00 per share: (i)stock options granted to Mr. Petras 1,118,012, (ii) Mr. Leffler, 223,602, (iii)and Mr. Rutz 111,801on March 6, 2023 and (iv)to Mr. Klaben, 134,161. Upon joining the Company,Lyons on November 11, 2021, Mr. Hammons received an award of 37,676 nonqualified stockAugust 7, 2023. The options at an exercise price of $22.75 per share, consistent with the terms of his offer letter. See “Employment Agreements”, beginning on page 46, for more information about Mr. Hammons’s offer letter.
The stock option awards granted as 2023 Annual Equity Awards vest in 2020 and 2021 haveequal annual installments over a four-yearthree-year vesting period, an exercise price equal to the closing share price on the date of grant, and a contractual term of 10 years.period. Continued service of the executive during the vesting period is generally required. The option awards have a contractual term of 10 years.
Named Executive Officer | Exercise Price | Options (#) | ||||||
2023 Annual Equity Awards (Stock Options) |
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Michael B. Petras, Jr. | $17.59 | 404,094 | ||||||
Michael P. Rutz | $17.59 | 53,879 | ||||||
Jonathan M. Lyons | $16.89 | 33,640 | (1) | |||||
| (1) | Amount shown for Mr. Lyons is prorated from the start of his service on June 26, 2023. |
The exercise price of each option award granted in 2023 is the closing share price of our common stock on the date the stock options were granted. Please refer to “Potential Payments Upon Termination or Change in Control” on page 4850 for more information regarding the post-employment treatment of each NEO’s unvested equityoption awards.
For a description of grant date fair values related to stock options granted to our NEOs in 2020 and 2021,2023, and related valuation assumptions, see note 4 to the 2021 Summary Compensation Table. The exercise price of each award is the closing share price of our common stock on the date the options were granted.
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Compensation Discussion and Analysis
Compensation Elements for 2021
Restricted Stock Units
The IPO Equity Awards also included RSUs. In addition to enhancingRSUs enhance the linkage between shareholder value creation and executive rewards and the value of an RSU is directly tied to our stock price. In addition, RSUs are an effectivea powerful retention tool afterincentive vehicle and are therefore especially critical to a significant corporate eventcompany like an IPO.Sotera that faces unique operating challenges and volatility. Each RSU represents the right to receive one share of our common stock. On November 20, 2020, we awarded
The 2023 Annual Equity Awards were comprised of approximately 50% RSUs. The table below shows the following number of RSUs granted to our then-current NEOs: (i) Mr. Petras 260,869, (ii) Mr. Leffler, 52,173, (iii)and Mr. Rutz 26,086on March 6, 2023 and (iv)to Mr. Klaben, 31,304. Upon joining the Company,Lyons on November 11, 2021, Mr. Hammons received an award of 8,791 RSUs.
August 7, 2023. The RSU awardsRSUs granted in 2020 and 2021as 2023 Annual Equity Awards vest in equal annual installments over a four-yearthree-year period beginning on the first anniversary of the date of grant. Continued service of the executive during the vesting period is generally required.
Named Executive Officer | RSU (#) | |||
2023 Annual Equity Awards (RSUs) | ||||
Michael B. Petras, Jr. | 213,189 | |||
Michael P. Rutz | 28,425 | |||
Jonathan M. Lyons | 17,761 | (1) | ||
| (1) | Amount shown for Mr. Lyons is prorated from the start of his service on June 26, 2023. |
Mr. Lyons’ replacement equity award granted in August 2023 was comprised of 100% RSUs. The LDC Committee chose to deliver this replacement value 100% in the form of RSUs due to the inability to directly replace the pay-for-performance attributes of Mr. Lyon’s forfeited awards from his previous employer, and to maximize the retentive power of the award. The table below shows the number of replacement RSUs granted to Mr. Lyons in August, 2023. Mr. Lyons’ replacement RSUs vest in equal annual installments over a three-year period beginning on the first anniversary of the date of grant. Continued service of the executive during the vesting period is generally required.
Named Executive Officer | RSU (#) | |||
Replacement Equity Award | ||||
Jonathan M. Lyons | 59,206 | |||
Please refer to “Potential Payments Upon Termination or Change in Control” on page 4850 for more information regarding the post-employment treatment of each NEO’s unvested equity awards.
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Compensation Discussion and Analysis
Compensation Elements for 2023
Retirement Plans
In order toTo offer competitive total rewards that align with practices among our talent competitors, we maintain a tax-qualified 401(k) savings plan (the “401(k) Plan”), in which all U.S. employees, including our Named Executive Officers,NEOs, are eligible to participate. The 401(k) Plan allows participants to contribute up to 100% of their pay on a pre-tax basis (or on a post-tax basis, with respect to elective Roth deferrals) into individual retirement accounts, subject to the maximum annual limits set by the Internal Revenue Service. We have historically made annual contributions to employee 401(k) accounts of up to 4.5% of an employee’s contributions to the 401(k) Plan. In 2021,2023, we contributed up to $13,050$14,850 per employee. Participants are immediately fully vested in both their own contributions and our contributions to the 401(k) Plan.
Additionally, we maintain a non-qualified deferred compensation plan (the “Supplemental Retirement Benefit Plan”) under which a select group of management and highly compensated employees, including all of our NEOs, are permitted to supplement contributions made under the 401(k) Plan by deferring up to 50% of their bonus or salary. Although permitted by the Supplemental Retirement Plan, we have not previously provided matching employer contributions under this plan. Participants in the Supplemental Retirement Benefit Plan are permitted to elect to invest their accounts in the same investment options as are available under the 401(k) Plan. Distributions from the Supplemental Retirement Benefit Plan will be made on the earlier of (i) the Participant’s termination of employment with us, or (ii) a specified date at least two years from the time of deferral selected by the Participant at the time of deferral.
Contributions to our Supplemental Retirement Benefit Plan are described beginning on page 4546 in the Non-Qualified Deferred Compensation Table. Of our NEOs, only Mr. Rutz participates in the Supplemental Retirement Benefit Plan.
Other Benefits and Perquisites
Our NEOs are eligible to participate in the same employee benefits generally available to all full-time employees on the same basis as these benefits are generally made available to all other Company employees. The LD&CLDC Committee believes these limited benefits and perquisites are competitive with similar arrangements among our talent competitors, and thereby help support the recruitment and retention of critical executive talent. These benefits include medical and dental insurance, life insurance, and short- and long-term disability insurance. In 2021,2023, the Company provided a paid executive physical examinationexaminations for Mr. Petras and paid the cost of Hart-Scott-Rodino Act filing fees on behalf of Mr. Petras.Rutz. Please see page 4143 and note 6 to “All Other Compensation” in the Summary Compensation Table for details regarding the value of these perquisites.
Compensation Discussion and Analysis
Other Compensation Policies and Practices
Other Compensation Policies and Practices
Employment Arrangements
Although our NEOs are employed “at-will” and their employment can be terminated at any time for any reason with or without cause, the Company is party to employment agreements with Messrs.Mr. Petras Leffler and Mr. Rutz, and offer letters and restrictive covenants agreements with Messrs. HammonsMr. Biehl, Mr. Dimitrief and Klaben. Each of theMr. Lyons. The employment agreements with Mr. Petras and Mr. Rutz and the offer letters in effectletter with our NEOsMr. Lyons contain severance provisions, and the employment agreementsagreement with Messrs.Mr. Petras and Leffler containcontains “double-trigger” change in control provisions for the vesting of any portion of such executives’Mr. Petras’ unvested IPO Equity Award and in the case of Mr. Petras, any future equity awards in the event such executiveMr. Petras is terminated without cause or resigns for good reason within one (1)1 year following a change in control. The LD&CLDC Committee believes severance provisions assist us in attracting and retaining executive talent and that change in control provisions are appropriate to help ensure continuity of management during a potential change in control.
Additional detail regarding each NEO’s employment arrangementarrangements is provided in the sections “Employment Agreements” on page 46,47, and “Potential Payments Upon Termination or Change in Control” on page 48.50.
Policy Regarding Prohibition on Hedging and Pledging
We have adopted an Insider Trading Policy which provides that insiders, including executive officers and members of our Board, all employees at the Company’s global headquarters at 9100 South Hills Blvd, Suite 300, Broadview Heights, Ohio
| 2024 Notice and Proxy Statement | 40 |
Compensation Discussion and Analysis
Other Compensation Policies and Practices
and others reasonably expected to have access to material non-public information, are prohibited from the following: entering into hedging or monetization transactions with respect to our securities, including zero-cost collars, equity swaps, exchange funds and forward sale contracts; holding our securities in a margin account; pledging our securities as collateral for a loan, unless approved in advance; short selling our securities; and engaging in any transaction in publicly traded options in our securities, including puts or calls or other derivative securities.
Stock Ownership Guidelines
In an effort toTo further align the interests of our senior executive team, executive officers and directors with those of our stockholders,shareholders, in March 2021, the LD&CLDC Committee adopted stock ownership guidelines. Within five years of becoming subject to the guidelines, our senior executive team is expected to hold Company stock valued at the following multiple of their annual base salary: five-times annual base salary for our CEO and two-times annual base salary for each of our other NEOs and other members of the senior executive team. Our non-employee directors are expected to hold Company stock valued at five-times their annual cash retainer within five years of becoming subject to the guidelines. WeConsistent with typical practices, we count shares underlying RSUs and shares of unvested restricted stock which are subject to time-based vesting requirements as owned shares for purposes of these guidelines but do not count shares underlying stock options or shares of unvested restricted stock which are subject to performance-based vesting requirements as owned shares. The LD&C Committee will monitormonitors compliance with these guidelines on an annual basis.
Each of Messrs.Mr. Petras, Leffler,Mr. Dimitrief, Mr. Rutz, and Klaben andMr. Chen, Mr. Cunningham, Mr. Donnini, Mr. Mihas, Mr. Neary, Ms. Klee, were in complianceMr. Knauss and Mr. Petrella complied with our stock ownership guidelines as of April 1, 2022,March 31, 2023, and Mr. HammonsLyons and ourDr. Wheadon complied as of August 7, 2023. Our other non-employee directors are on track to meet the ownership guidelines within the time required. Mr. Biehl was not expected to comply with the guidelines due to the interim nature of his appointment.
Clawback Policy
In September 2023, the LDC Committee approved a new Policy for the Recovery of Erroneously Awarded Compensation (the “Clawback Policy”) to comply with the final clawback rules adopted by the SEC under Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended, and the associated listing standards of the Nasdaq. Effective October 2, 2023, the Company is required to claw back erroneously awarded incentive-based compensation from current and former executive officers of the Company (“Covered Officers”) if the Company is required to prepare an accounting restatement. The recovery of such compensation under the Clawback Policy applies regardless of whether a Covered Officer engaged in misconduct or otherwise caused or contributed to the requirement of an accounting restatement. The LDC and Audit Committees will oversee the administration of the Clawback Policy. The foregoing summary of the Clawback Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Clawback Policy, which may be found at Exhibit 97 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Compensation Risk Considerations
In consultation with Exequity, the LD&CLDC Committee has reviewed our compensation program to assess whether it encourages excessive risk taking.presents risks that are reasonably likely to have a material adverse effect on the Company. In particular, the Committee has reviewed and considered our compensation policies and practices, including our mix of short- versus long-term incentives; cash- versus stock-based awards; stock ownership guidelines; assessment of individual performance against Company values; and the independent Board oversight of our
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Compensation Discussion and Analysis
Other Compensation Policies and Practices
compensation program. Based on this review, the Committee agreed with Exequity’s assessment that any risks arising from ourthe compensation program does not present risks that are not reasonably likely to have a material adverse effect on the Company. Our LD&CLDC Committee conducts this assessment annually.
Policies and Practices Regarding Equity Awards
The Company does not grant equity awards when in possession of material non-public information. Generally, our broad-based equity awards will be granted at approximately the same time each year following our release of full-year financial results. When equity grants are approved outside of our regular annual cycle for(for example, in connection with a new hire, or a promotion or retention incentive,incentive), grants are made following the release of our next quarterly financial results. Stock options are granted only with an exercise price equal to the closing price of the Company’s stock on the date of grant.
| 41 | |
Compensation Discussion and Analysis
Other Compensation Policies and Practices
Deductibility of Compensation
Prior to the effectiveness of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), Section 162(m) of the Internal Revenue Code (“Section 162(m)”) imposed an annual deduction limit of $1 million on the amount of compensation paid to both the chief executive officer and certain other named executive officers. The deduction limit did not apply to performance-based compensation satisfying the requirements of Section 162(m). Effective in fiscal year 2018, the Tax Act eliminated the Section 162(m) provisions exempting performance-based compensation from the $1 million deduction limit for compensation granted or materially modified after November 2, 2017. While the LD&CLDC Committee will take into account the tax and accounting implications (including with respect to the expected lack of deductibility under the revised Section 162(m)) when making compensation decisions, it reserves the right to make compensation decisions based on other factors if the LD&CLDC Committee determines it is in its best interests to do so.so and as a result, some of the compensation paid to our NEOs may not be deductible.
Accounting for Stock-Based Compensation
We account for stock-based payments, including payments under the our 2020 Incentive Plan, in accordance with FASB ASC Topic 718, “Stock Compensation.”
Compensation Committee Interlocks and Insider Participation
None of the members of our LD&CLDC Committee is or has been an officer or employee of our Company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board or LD&CLDC Committee.
The Leadership Development and Compensation Committee of the Board has reviewed and discussed with management the Company’s Compensation Discussion and Analysis. Based on this review and discussion, the Leadership Development and Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2023.
Respectfully submitted,
The Leadership Development and Compensation Committee
James C. Neary, Chair
Constantine S. Mihas
Compensation Tables
Summary Compensation Table
The following table presents summary information regarding the total compensation that was awarded to, earned by or paid to our Named Executive Officers during the years ended December 31, 2019,2021, December 31, 20202022 and December 31, 2021:2023:
Name and Principal Position | Year | Salary (1) | Bonus (2) | Stock Awards (3) | Option Awards (4) | Non-Equity Incentive Plan Compensation (5) | All Other Compensation (6) | Total | ||||||||||||||||||||||||||||||||
Michael B. Petras, Jr. Chairman and Chief Executive Officer | 2021 | $ | 1,000,000 | — | — | — | $ | 1,137,500 | $ | 60,074 | $ | 2,197,574 | ||||||||||||||||||||||||||||
| 2020 | 727,692 | $ | 700,000 | $ | 6,000,000 | $ | 9,000,000 | 738,957 | 37,609 | 17,204,248 | ||||||||||||||||||||||||||||||
| 2019 | 700,000 | 1,000,000 | — | — | 759,500 | 12,600 | 2,472,100 | |||||||||||||||||||||||||||||||||
Scott J. Leffler Chief Financial Officer and Treasurer | 2021 | $ | 450,000 | — | — | — | $ | 292,383 | $ | 13,050 | $ | 755,433 | ||||||||||||||||||||||||||||
| 2020 | 369,805 | $ | 225,000 | $ | 1,200,000 | $ | 1,800,000 | 222,113 | 24,913 | 3,841,831 | ||||||||||||||||||||||||||||||
| 2019 | 352,135 | 1,650,000 | — | — | 229,240 | 12,600 | 2,243,975 | |||||||||||||||||||||||||||||||||
Michael P. Rutz President of Sterigenics | 2021 | $ | 430,000 | — | — | — | $ | 246,390 | $ | 13,050 | $ | 689,440 | ||||||||||||||||||||||||||||
| 2020 | 269,577 | $ | 50,000 | $ | 4,800,000 | 900,000 | 153,133 | 10,623 | 6,183,333 | |||||||||||||||||||||||||||||||
Terrence G. Hammons, Jr. SVP, General Counsel and Secretary | 2021 | $ | 65,385 | — | $ | 200,000 | $ | 300,000 | $ | 29,750 | $ | 490 | $ | 595,625 | ||||||||||||||||||||||||||
Matthew J. Klaben(7) Former SVP, General Counsel and Secretary | 2021 | $ | 405,769 | — | — | — | $ | 176,225 | $ | 13,050 | $ | 595,044 | ||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary (1) | Bonus (2) | Stock Awards (3) | Option Awards (4) | Non-Equity Incentive Plan Compensation (5) | All Other Compensation (6) | Total | ||||||||||||||||||||||||||||||||
Michael B. Petras, Jr. Chairman and CEO | 2023 | $ | 1,050,000 | — | $ | 3,749,995 | $ | 3,745,697 | $ | 1,137,938 | $ | 17,375 | $ | 9,701,005 | ||||||||||||||||||||||||||
| 2022 | 1,038,462 | — | 3,749,997 | 10,712,705 | 1,142,308 | 16,386 | 16,659,858 | |||||||||||||||||||||||||||||||||
| 2021 | 1,000,000 | — | — | — | 1,137,500 | 60,074 | 2,197,574 | |||||||||||||||||||||||||||||||||
Jonathan Lyons SVP, CFO | 2023 | $ | 237,500 | $ | 200,000 | $ | 1,299,973 | $ | 298,791 | $ | 141,312 | — | $ | 2,177,576 | ||||||||||||||||||||||||||
Michael P. Rutz President of Sterigenics | 2023 | $ | 464,615 | $ | 300,000 | $ | 499,996 | $ | 499,424 | $ | 249,498 | $ | 16,706 | $ | 2,030,239 | |||||||||||||||||||||||||
| 2022 | 445,385 | — | 499,989 | 497,220 | 253,201 | 17,146 | 1,712,941 | |||||||||||||||||||||||||||||||||
| 2021 | 430,000 | — | — | — | 246,390 | 13,050 | 689,440 | |||||||||||||||||||||||||||||||||
Alexander Dimitrief SVP, General Counsel and Secretary | 2023 | $ | 600,000 | — | — | — | $ | 260,100 | $ | 2,077 | $ | 862,177 | ||||||||||||||||||||||||||||
| 2022 | 90,000 | $ | 1,500,000 | $ | 1,499,995 | $ | 1,991,351 | 39,600 | 1,038 | 5,121,984 | ||||||||||||||||||||||||||||||
Michael F. Biehl Former Interim CFO | 2023 | $ | 553,846 | — | — | — | — | — | $ | 553,846 | ||||||||||||||||||||||||||||||
| 2022 | 415,385 | — | — | — | — | — | 415,385 | |||||||||||||||||||||||||||||||||
Amounts reported in this column represent annual base salary paid to our NEOs |
Amounts reported in this column represent bonuses paid to our NEOs |
Amounts in this column reflect the aggregate grant date fair value of share-based compensation awarded during the |
Amounts in this column reflect the aggregate grant date fair value of stock options awarded during the |
Amounts in this column reflect the value of annual cash incentive awards earned by each NEO under our Annual Incentive Plan in |
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Compensation Tables
Summary Compensation Table
| 6. | Amounts for fiscal year |
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The following table sets forth information regarding plan-based awards granted to each of our NEOs during the fiscal year ended December 31, 2021.2023. Each RSU and stock option award was granted under our 2020 Incentive Plan. Mr. Biehl was not granted any plan-based awards in 2023.
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Estimated future payouts under | All other (#) | All other (#) | Exercise ($/Sh) | Grant date fair value of stock and option awards |
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Estimated future payouts under | All other (#) | All other (#) | Exercise ($/Sh) | Grant date fair value of stock and option awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Name of Plan | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Name of Plan | Grant Date | Threshold ($) | Target ($) | Maximum ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael B. Petras, Jr. | Annual Incentive Plan | 3/4/2021 | $ | 875,000 | $ | 1,250,000 | $ | 2,500,000 |
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| Annual Incentive Plan | 3/6/2023 | $ | 891,188 | 1,312,500 | 2,703,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Scott J. Leffler | Annual Incentive Plan | 3/4/2021 | 220,500 | 315,000 | 630,000 |
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Michael B. Petras, Jr. | 2020 Incentive Plan | 3/6/2023 | 213,189 | (2) | $ | 3,749,995 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 Incentive Plan | 3/6/2023 | 404,094 | (3) | $ | 17.59 | $ | 3,745,697 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan | 8/7/2023 | $ | 112,884 | 166,250 | 342,475 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan Lyons | 2020 Incentive Plan | 8/7/2023 | 17,761 | (4) | $ | 299,983 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 Incentive Plan | 8/7/2023 | 59,206 | (6) | $ | 999,989 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 Incentive Plan | 8/7/2023 | 33,640 | (5) | $ | 16.89 | $ | 298,791 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan | 3/6/2023 | $ | 203,700 | 300,000 | 618,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael P. Rutz | Annual Incentive Plan | 3/4/2021 | 180,600 | 258,000 | 516,000 |
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Michael P. Rutz | Michael P. Rutz | Annual Incentive Plan | 3/6/2023 | $ | 189,284 | 278,769 | 574,265 |
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| 2020 Incentive Plan | 3/6/2023 |
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| 28,425 | (2) |
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| $ | 499,996 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 Incentive Plan | 3/6/2023 |
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| 53,879 | (3) | $ | 17.59 | $ | 499,424 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terrence G. Hammons, Jr. | Annual Incentive Plan | 3/4/2021 | 45,769 | 32,692 | 130,769 |
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| 2020 Incentive Plan | 11/11/2021 |
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| 8,791 | (2) |
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| 2020 Incentive Plan | 11/11/2021 |
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| 37,676 | (3) | $ | 22.75 | $ | 300,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew J. Klaben | Annual Incentive Plan | 3/4/2021 | 135,558 | 193,654 | 387,307 |
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Represents the threshold, target and maximum values for payments under the Company’s Annual Incentive Plan with respect to service in |
These RSUs vest in three substantially equal annual installments, with the first installment vesting on March 2, 2024, subject to the NEO’s continued employment through each applicable vesting date. |
| (3) | These stock options vest in three substantially equal annual installments, with the first installment vesting on March 2, 2024, subject to the NEO’s continued employment through each applicable vesting date. |
| (4) | These RSUs vest in three substantially equal annual installments, with the first installment vesting on August 5, 2024, subject to Mr. Lyons’ continued employment through each applicable vesting date. |
| (5) | These stock options vest in three substantially equal annual installments, with the first installment vesting on August 5, 2024, subject to Mr. Lyons’ continued employment through each applicable vesting date. |
| (6) | These RSUs were granted |
| 2024 Notice and Proxy Statement | 44 |
Compensation Tables
Outstanding Equity Awards at 2023 Year-End
Outstanding Equity Awards at 2023 Year-End
The following table sets forth information regarding outstanding equity awards held as of December 31, 2023 by each of our NEOs. Except for shares of unvested restricted common stock held by Mr. Rutz, each of these awards were granted under the 2020 Incentive Plan. Mr. Biehl was not granted any equity incentive awards in 2022 or 2023 and therefore had no equity awards outstanding on December 31, 2023.
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| Option Awards |
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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 | ||||||||||||||||||
Michael B. Petras, Jr. | 838,509(1) | 279,503(1) | $ | 23.00 | 11/20/2030 |
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| 159,644(2) | 319,288(2) | $ | 20.03 | 3/2/2032 |
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| 632,507(3) | 1,475,849(3) | $ | 6.37 | 11/7/2032 |
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| — | 404,094(4) | $ | 17.59 | 3/6/2033 |
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| 65,217(5) | $ | 1,098,906 | ||||||||||
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| 124,813(6) | $ | 2,103,099 | ||||||||||
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| 213,189(7) | $ | 3,592,235 | ||||||||||
Jonathan Lyons | — | 33,640(8) | $ | 16.89 | 8/7/2033 |
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| 17,761(9) | $ | 299,273 | ||||||||||
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| 59,206(10) | $ | 997,621 | ||||||||||
Alexander Dimitrief | 301,193(11) | 301,194(11) | $ | 6.37 | 11/7/2032 |
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| 117,739(12) | $ | 1,983,902 | ||||||||||
Michael P. Rutz | 83,851(1) | 27,950(1) | $ | 23.00 | 11/20/2030 |
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| 21,285(2) | 42,572(2) | $ | 20.03 | 3/2/2032 |
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| — | 53,879(4) | $ | 17.59 | 3/6/2033 |
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| 6,521(5) | $ | 109,879 | ||||||||||
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| 16,642(6) | $ | 280,418 | ||||||||||
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| 28,425(7) | $ | 478,961 | ||||||||||
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| 157,930(13) | $ | 2,661,121 | |||||||||
| (1) | These stock options were granted in connection with |
| (2) | These stock options vest in substantially equal yearly installments |
These stock options were granted |
| (4) | These stock options vest in three substantially equal installments on March 2, 2024, March 2, 2025, and March 2, 2026, subject to continued employment through each applicable vesting date. |
| (5) | These RSUs were granted in connection with |
| (6) | These RSUs vest in substantially equal yearly installments |
| (7) | These RSUs vest in three substantially equal installments on March 2, 2024, March 2, 2025, and March 2, 2026, subject to continued employment through each applicable vesting date. |
| (8) | These stock options vest in three substantially equal installments on August 5, 2024, August 5, 2025 and August 5, 2026, subject to continued employment through each applicable vesting date. |
| 45 | |
Compensation Tables
Outstanding Equity Awards at 2021 2023 Year-End
Outstanding Equity Awards at 2021 Year-End
The following table sets forth information regarding outstanding equity awards held as of December 31, 2021 by each of our NEOs.
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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 | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (8) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (9) | ||||||||||||||||||||||||||||||||
Michael B. Petras, Jr. | 279,503 | (1) | 838,509 | (1) | $ | 23.00 | 11/20/2030 |
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| 195,652 | (2) | $ | 4,607,605 |
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Scott J. Leffler | 55,901 | (1) | 167,701 | (1) | $ | 23.00 | 11/20/2030 |
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| 39,130 | (2) | $ | 921,512 |
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| 25,523 | (3) | $ | 601,067 |
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| 168,769 | $ | 3,974,510 | ||||||||||||||||||||
Michael P. Rutz | 27,950 | (1) | 83,851 | (1) | $ | 23.00 | 11/20/2030 |
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| 19,564 | (2) | $ | 460,732 |
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| 389,432 | (4) | $ | 9,171,124 |
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Terrence G. Hammons, Jr. | — | 37,676 | (5) | $ | 22.75 | 11/11/2031 |
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| 8,791 | (6) | $ | 207,028 |
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Matthew J. Klaben | 33,540 | (1) | 100,621 | (1) | $ | 23.00 | 11/20/2030 |
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| 23,478 | (2) | $ | 552,907 |
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| 93,760 | $ | 2,208,048 | ||||||||||||||||||||
These |
These RSUs were granted |
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This restricted stock was granted in connection with the commencement of Mr. Dimitrief’s employment. The remaining unvested potion of this award will vest on October 31, 2024, subject to continued employment through such vesting date. |
| (13) | Represents shares of unvested restricted common stock distributed to Mr. Rutz in respect of the limited partnership interest in Topco Parent that Mr. Rutz was granted in connection with the commencement of his employment. These shares of unvested restricted stock were distributed in respect of Mr. Rutz’s limited partnership interest held in Topco Parent and continue to vest according to the same vesting schedule applicable to the limited partnership interest. As a result, |
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Represents the fair market value of shares unvested as of December 31, |
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Compensation Tables
Outstanding Equity Awards at 2021 Year-End
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Compensation Tables
Option Exercises and Stock Vested
Option Exercises and Stock Vested
The following table sets forth information regarding stock vested in the fiscal year ended December 31, 2021 by2023 for each of our NEOs. None of our NEOs exercised stock option awards in the fiscal year ended December 31, 2021.2023 and neither Mr. Biehl nor Mr. Lyons acquired any shares of stock in the fiscal year ended December 31, 2023.
| Stock Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | ||||||||||||||
Name | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | ||||||||||||||
Michael B. Petras, Jr. | 65,217 | $ | 1,469,991 | |||||||||||||
Scott J. Leffler | 114,304 | 2,806,475 | ||||||||||||||
Michael B. Petras, Jr. | 127,623 | $ | 1,994,961 | |||||||||||||
Michael P. Rutz | 195,847 | 4,417,149 | ||||||||||||||
Michael P. Rutz | 130,594 | 2,074,130 | ||||||||||||||
Terrence G. Hammons, Jr. | — | — | ||||||||||||||
Matthew J. Klaben | 56,839 | 1,410,973 | ||||||||||||||
Alexander Dimitrief | ||||||||||||||||
Alexander Dimitrief | 117,739 | 1,490,576 | ||||||||||||||
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Consists of the value realized upon the vesting of RSUs and restricted stock, in each case, calculated by multiplying the number of shares vested by the share price on each applicable vesting date. |
Non-Qualified Deferred Compensation
The following table sets forth information regarding contributions to our Supplemental Retirement Benefit Plan in the fiscal year ended December 31, 20212023 by each of our NEOs. As of the date hereof, the only NEO who has participated in our Supplemental Retirement Benefit Plan is Mr. Rutz. We have not previously provided matching employer contributions under the Supplemental Retirement Plan, although we are permitted to do so by its terms. See “Retirement Plans” for more information on the Supplemental Retirement Plan. We do not offer any other nonqualified retirement plans or pension benefits.
Name | Executive Contributions ($) (1) | Registrant contributions in last FY ($) (2) | Aggregate earnings in last FY ($) (3) | Aggregate distributions ($) | Aggregate balance at last FYE ($) (4) | Executive Contributions ($) (1) | Registrant contributions in last FY ($) (2) | Aggregate earnings in last FY ($) (3) | Aggregate distributions ($) | Aggregate balance at last FYE ($) (4) | ||||||||||
Michael P. Rutz | $116,627 | — | $18,445 | — | $135,072 | |||||||||||||||
Michael P. Rutz | $19,332 | — | $49,907 | — | $243,467 | |||||||||||||||
Amounts in this column are also reported |
Amounts in this column represent Company contributions to the Supplemental Retirement Benefit Plan. There have been no such contributions to date, so no such contributions are included in the Summary Compensation Table. |
Amounts reported in this column reflect earnings in investment options that are consistent with those offered under the qualified 401(k) Plan. These amounts are not included in the Summary Compensation Table because the earnings are not “above-market” or preferential. |
|
| 2024 Notice and Proxy Statement |
POTENTIAL TERMINATION PAYMENTSPotential Termination Payments
Employment Agreements
POTENTIAL TERMINATION PAYMENTS
The Company is party to employment agreements with Messrs.Mr. Petras Leffler and Mr. Rutz and offer letters and restrictive covenants agreements with Messrs. HammonsMr. Biehl, Mr. Dimitrief and Klaben.Mr. Lyons. Although all of our executives are employed “at-will” and their employment can be terminated at any time for any reason with or without cause, each of the employment agreements orwith Mr. Petras and Mr. Rutz and the offer lettersletter in effect with our NEOsMr. Lyons contain severance provisions. In this section, we describe the compensation agreements in effect with each NEO and describe and quantify the compensation that may be payable to each NEO under such existing compensation arrangement or plan.
Employment Agreement with Mr. Michael B. Petras, Jr.
Mr. Petras entered into an employment agreement with our subsidiary, Sotera Health LLC, dated May 25, 2016 (the “CEO Employment Agreement”), pursuant to which he served as CEO and as a member of Topco Parent’s Board of Managers. Under the terms of the CEO Employment Agreement, Mr. Petras’s initial annual base salary in connection with his appointment as CEO was set at $700,000, less applicable withholding taxes. See the Summary Compensation Table for information on Mr. Petras’s base salary paid in 2019, 2020 and 2021. Under the CEO Employment Agreement, Mr. Petras was also eligible to receive an annual bonus based on his attainment of one or more pre-established performance criteria established by Topco Parent’s Board of Managers, with his annual target bonus opportunity equal to 100% of his then-current annual base salary.
In connection with the IPO, Sotera Health LLC assigned its rights and obligations under the CEO Employment Agreement to our Company, and we entered into an amended and restated employment agreement with Mr. Petras which replaced his existing employment agreement effective as of the closing of the IPO (the “Amended and Restated CEO Employment Agreement”). Under the terms of the Amended and Restated CEO Employment Agreement, Mr. Petras serves as our CEO and Executive Chairman of our Board. Mr. Petras’sPetras’ initial annual base salary was set at $1,000,000 as of November 2020, less applicable withholding taxes.and as of March 2022, Mr. Petras’ annual base salary was set at $1,050,000. See the Summary Compensation Table for information on Mr. Petras’ base salary paid in 2021, 2022, and 2023. Mr. Petras is eligible to receive an annual bonus based on the attainment of certain pre-established performance criteria established by our Board, with his annual target bonus opportunity equal to 125% of his then-current annual base salary.
Under the Amended and Restated CEO Employment Agreement, Mr. Petras is eligible to receive certain payments and benefits in the event of a termination of his employment by us without “cause” or due to his death or disability or a termination of employment by him for “good reason” (as each of these terms are defined in the Amended and Restated CEO Employment Agreement), which are described in detail under “Potential Payments Upon Termination or Change in Control” below.
Employment Agreement with Mr. Scott J. Leffler
Mr. Leffler entered into an employment agreement with our subsidiary, Sotera Health LLC, dated April 3, 2017 (the “CFO Employment Agreement”), pursuant to which he served as CFO. Under the terms of the CFO Employment Agreement, Mr. Leffler’s initial annual base salary in connection with his appointment as CFO was set at $340,000, less applicable withholding taxes. See the Summary Compensation Table for information on Mr. Leffler’s base salary paid in 2019, 2020 and 2021. Under the CFO Employment Agreement, Mr. Leffler was also eligible to receive an annual bonus based on his attainment of one or more pre-established performance criteria established by Topco Parent’s Board of Managers, with his annual target bonus opportunity equal to 60% of his then-current annual base salary.
In connection with the IPO, Sotera Health LLC, assigned its rights and obligations under the CFO Employment Agreement to our Company and we entered into an amended and restated employment agreement with Mr. Leffler which replaced his existing employment agreement effective as of the closing of the IPO (the “Amended and Restated CFO Employment Agreement”). Under the terms of the Amended and Restated CFO Employment Agreement, Mr. Leffler serves as our CFO. Mr. Leffler’s initial annual base salary was set at $450,000 as of November 2020, less applicable withholding taxes. Mr. Leffler is also eligible to receive an annual bonus based on the attainment of certain pre-established performance criteria established by our Board, with his annual target bonus opportunity equal to 70% of his then-current annual base salary.
Under the Amended and Restated CFOCEO Employment Agreement, Mr. LefflerPetras is eligiblesubject to receive certain paymentsan indefinite confidentiality clause and benefits innon-disparagement clause, as well as non-competition and non-solicitation clauses which shall be effective during the eventterm of aemployment and for 24 months following termination of his employment by us without “cause” or a termination of employment by him for
POTENTIAL TERMINATION PAYMENTS
Employment Agreements
“good reason” (as each of these terms is defined in the CFO Employment Agreement), which are described in detail under “Potential Payments Upon Termination or Change in Control” below.
Retention Agreement with Mr. Scott J. Leffler
Mr. Leffler entered into a bonus agreement with our subsidiary, Sotera Health LLC, dated as of November 18, 2019 (the “CFO Bonus Agreement”). Pursuant to the CFO Bonus Agreement, on the first ordinary payroll date following November 18, 2019, Mr. Leffler received a cash retention bonus of $1,500,000 (less applicable tax withholdings) in consideration for his agreement to continue active employment with Sotera Health LLC through November 18, 2021 (the “Retention Date”). If prior to the Retention Date, Mr. Leffler terminated his employment without “good reason” (as described below in “Potential Payments Upon Termination or Change in Control”, but excluding a termination due to Mr. Leffler’s death or disability), Mr. Leffler was obligated to repay, on a pre-tax basis, the full amount of the retention bonus. In connection with the IPO, Sotera Health LLC assigned its rights and obligations under the CFO Bonus Agreement to our Company and we entered into an amended and restated bonus agreement with Mr. Leffler which reflects such assignment.employment.
Employment Agreement with Mr. Michael P. Rutz
Mr. Rutz entered into an employment agreement with our subsidiary, Sotera Health LLC, dated May 21, 2020 (the “Rutz Employment Agreement”), pursuant to which he serves as President, Sterigenics. Under the terms of the Rutz Employment Agreement, Mr. Rutz’s initial annual base salary in connection with his appointment as President, Sterigenics was set at $430,000, less applicable withholding taxes.and as of March 2023, Mr. Rutz’s annual base salary was set at $470,000. See the Summary Compensation Table for information on Mr. Rutz’s base salary paid in 20202021, 2022, and 2021.2023. Under the Rutz Employment Agreement, Mr. Rutz is also eligible to receive an annual bonus based on his attainment of one or more pre-established performance criteria, with his annual target bonus opportunity equal to 60% of his then-current annual base salary.
In connection with the commencement of Mr. Rutz’s employment, he received a one-time lump sum cash payment equal to $50,000 (the “Sign-on“Rutz Bonus”), which was paid on the first ordinary payroll date following May 21, 2020. If Mr. Rutz’s employment with the Company ishad been terminated by Mr. Rutz without “good reason” (as described below in “Potential Payments Upon Termination or Change in Control”,Control,” but excluding a termination due to Mr. Rutz’s death or disability), or by the Company for “cause,” in each case prior to the second anniversary of the commencement of Mr. Rutz’s employment, he iswould have been obligated to repay, on a pre-tax basis, a pro-rata portion of the Sign-onRutz Bonus.
In addition, under the terms of the Rutz Employment Agreement, Mr. Rutz is entitled to receive a one-time lump sum cash payment equal to $1,500,000, less applicable tax withholdings, upon a change of control, contingent upon his continued employment through the consummation of a change of control.
| 47 | |
Potential Termination Payments
Employment Agreements
Under the Rutz Employment Agreement, Mr. Rutz is eligible to receive certain payments and benefits in the event of a termination of his employment by us without “cause” or a termination of employment by him for “good reason” (as each of these terms are defined in the Rutz Employment Agreement), which are described in detail under “Potential Payments Upon Termination or Change in Control” below.
Under the Rutz Employment Agreement, Mr. Rutz is subject to an indefinite confidentiality clause and non-disparagement clause, as well as non-competition and non-solicitation clauses which shall be effective during the term of employment and for 12 months following termination of employment.
Incentive Agreement with Mr. Michael P. Rutz
Mr. Rutz entered into a Cash Incentive Bonus Agreement with us, dated as of November 7, 2022 (the “Grant Date”), pursuant to which Mr. Rutz is eligible for a cash bonus of $1,000,000 in consideration for his active employment with us through certain vesting dates. Pursuant to the Cash Incentive Bonus Agreement, the Incentive Bonus vests in four installments as follows: (i) 10% vested 6 months from the Grant Date; (ii) 20% vested 12 months from the Grant Date; (iii) 30% will vest 18 months from the Grant Date; and (iv) 40% will vest 24 months from the Grant Date, subject in each case to Mr. Rutz’s continued employment in good standing with the Company through each applicable vesting date. If Mr. Rutz’s employment with the Company and its subsidiaries terminates for any reason prior to any applicable vesting date, any unvested portion of the incentive bonus will be forfeited in its entirety.
Offer Letter and Restrictive Covenants Agreement with Mr. Terrence G. Hammons, Jr.Michael F. Biehl
Mr. HammonsBiehl was a party to an offer letter with us dated July 18, 2022 (the “Biehl Offer Letter”), pursuant to which he served as Interim Chief Financial Officer. Under the terms of the Biehl Offer Letter, Mr. Biehl’s initial base salary in connection with his appointment as Interim Chief Financial Officer was set at $75,000 per month. See the Summary Compensation Table for information on Mr. Biehl’s base salary paid in 2022 and 2023. Under the Biehl Offer Letter, Mr. Biehl was not eligible to participate in the Annual Incentive Plan or the 2020 Incentive Plan. The Biehl Offer Letter does not provide for any severance payments in the event of a termination of his employment by Mr. Biehl or us, with or without cause or advance notice.
In connection with the commencement of his employment and in consideration of the terms of the Biehl Offer Letter, Mr. Biehl also entered into a restrictive covenants agreement dated July 20, 2022 (the “Biehl RCA”). Per the terms of the Biehl RCA, Mr. Biehl is subject to an indefinite confidentiality clause and non-disparagement clause, as well as non-competition and non-solicitation clauses which shall be effective during the term of employment and for 12 months following termination of employment.
Mr. Biehl departed the Company effective August 4, 2023 and did not receive any separation payments in connection with his departure.
Offer Letter and Restrictive Covenants Agreement with Mr. Alexander Dimitrief
Mr. Dimitrief is a party to an offer letter with us dated August 18, 2021October 28, 2022 (the “Hammons“Dimitrief Offer Letter”), pursuant to which he serves as Senior Vice President and General Counsel. Mr. Dimitrief’s employment with the Company commenced on November 1, 2022. Under the terms of the HammonsDimitrief Offer Letter, Mr. Hammons’sDimitrief’s initial annual base salary in connection with his appointment as Senior Vice President and General Counsel was set at $425,000, less applicable withholding taxes.$600,000. See the Summary Compensation Table for information on Mr. Hammons’sDimitrief’s base salary paid in 2021.2022 and 2023. Under the HammonsDimitrief Offer Letter, Mr. HammonsDimitrief is also eligible to participate in the Annual Incentive Plan, with his annual target incentive opportunity equal to 50% of his then-current annual base salary. His 2022 award was prorated based on his hire date.
In 2021,connection with the commencement of Mr. HammonsDimitrief’s employment, he received an equity awarda grant of stock options and restricted stock, in each case with a targeted grant date fair value of $500,000,$1,500,000 and in 2022 is eligible for an equity award with a grant date fair value of $750,000,which will vest, in each case, contingent upon the approval of the LD&C Committeein two equal installments on October 31, 2023 and October 31, 2024, subject to the terms and conditions of the 2020 Incentive Plan, as well as any applicable grant notices and agreements.
In
| 2024 Notice and Proxy Statement | 48 |
Potential Termination Payments
Employment Agreements
Also in connection with the commencement of Mr. Hammons’sDimitrief’s employment, he received a one-time lump sum cash payment equal to $500,000$1,500,000 (the “Hammons Sign-on“Dimitrief Bonus”), which was paid on the first ordinary payroll date in FebruaryNovember 2022. If
|
POTENTIAL TERMINATION PAYMENTS
Employment Agreements
Mr. Hammons’sDimitrief’s employment with the Company is terminated by Mr. HammonsDimitrief for any reason other than due to death or disability, or by the Company for “cause,” in each case prior to the second anniversary of the commencement of Mr. Hammons’sDimitrief’s employment, he iswill be obligated to repay, on a pre-tax basis, a pro-rata portion of the Hammons Sign-onDimitrief Bonus. The Dimitrief Offer Letter does not provide for any severance payments in the event of a termination of his employment by Mr. Dimitrief or us, with or without cause or advance notice.
In connection with the commencement of his employment and in consideration of the terms of the Dimitrief Offer Letter, Mr. Dimitrief also entered into a restrictive covenants agreement dated November 1, 2022 (the “Dimitrief RCA”). Per the terms of the Dimitrief RCA, Mr. Dimitrief is subject to an indefinite confidentiality clause and non-disparagement clause, as well as non-competition and non-solicitation clauses which shall be effective during the term of employment and for 12 months following termination of employment.
Offer Letter and Restrictive Covenants Agreement with Mr. Jonathan Lyons
Mr. Lyons is a party to an offer letter with us dated May 31, 2023, as amended and restated February 26, 2024 (the “Lyons Offer Letter”), pursuant to which he serves as Senior Vice President and Chief Financial Officer. Mr. Lyons’ employment with the Company commenced on June 26, 2023. Under the terms of the Lyons Offer Letter, Mr. Lyons’ initial annual base salary in connection with his appointment as Senior Vice President and Chief Financial Officer was set at $475,000. See the Summary Compensation Table for information on Mr. Lyons’ base salary paid in 2023. Under the Lyons Offer Letter, Mr. Lyons is eligible to participate in the Annual Incentive Plan, with his annual target incentive opportunity equal to 70% of his then-current annual base salary and his 2023 award was prorated based on his hire date. Under the Lyons Offer Letter, Mr. Lyons is also eligible to participate in the Long-Term Incentive Plan, with his annual target grant date fair value of $1,200,000, which will be comprised of stock options and restricted stock units and was prorated 50% for 2023.
In August 2023, Mr. Lyons also received an equity replacement award comprised of restricted stock units, with a targeted grant date fair value of $1,000,000. These restricted stock units will vest in three substantially equal installments on August 5, 2024, August 5, 2025 and August 5, 2026, subject to the terms and conditions of the 2020 Incentive Plan, as well as any applicable grant notices and agreements. In addition, to replace the forgone value of Mr. Lyons’ annual cash incentive award from his prior employer, he received a one-time lump sum cash payment equal to $200,000 (the “Lyons Bonus”), which was paid within the first payroll cycle after June 26, 2023. The Lyons Offer Letter also provides for Mr. Lyons to receive a one-time lump sum cash payment of $100,000 to defray costs associated with commuting to Cleveland, Ohio (the “Lyons Commuting Bonus”), to be paid in the final payroll cycle of April 2024. If Mr. Lyons’ employment with the Company is terminated by Mr. Lyons for any reason other than due to death or disability, or by the Company for “cause” (as defined in the Lyons Offer Letter) in each case prior to the second anniversary of the commencement of Mr. Lyons’ employment, he will be obligated to repay, on a pre-tax basis, a pro-rata portion of the Lyons Bonus and a pro-rata portion of the Lyons Commuting Bonus.
Under the HammonsLyons Offer Letter, Mr. HammonsLyons is eligible to receive certain payments and benefits in the event of a termination of his employment by us without “cause” (as defined in the Hammons Offer Letter),“cause,” which are described in detail under “Potential Payments Upon Termination or Change in Control” below.
In connection with the commencement of his employment and in consideration of the terms of the HammonsLyons Offer Letter, Mr. HammonsLyons also entered into a restrictive covenants agreement dated November 1, 2021June 26, 2023 (the “Hammons“Lyons RCA”). Per the terms of the HammonsLyons RCA, Mr. HammonsLyons is subject to an indefinite confidentiality clause and non-disparagement clause, as well as non-competition and non-solicitation clauses which shall be effective during the term of employment and for 12 months following termination of employment.
Offer Letter and Restrictive Covenants Agreement with Mr. Matthew J. Klaben
Mr. Klaben entered into an employment agreement with our subsidiary, Sotera Health LLC, dated December 12, 2016, pursuant to which he served as our Senior Vice President and General Counsel (the “Klaben Employment Agreement”). Under the terms of the Klaben Employment Agreement, Mr. Klaben’s initial annual base salary in connection with his appointment as Senior Vice President and General Counsel was set at $345,000, less applicable withholding taxes. See the Summary Compensation Table for information on Mr. Klaben’s base salary paid in 2021. Under the Klaben Employment Agreement, Mr. Klaben was also eligible to receive an annual bonus based on his attainment of one or more pre-established performance criteria established by Topco Parent’s Board of Managers, with his annual target bonus opportunity equal to 40% of his then-current annual base salary.
In connection with the IPO, Sotera Health LLC, assigned its rights and obligations under the Klaben Employment Agreement to our Company and we entered into an amended and restated employment agreement with Mr. Klaben which replaced his existing employment agreement effective as of the closing of the IPO (the “Amended and Restated Klaben Employment Agreement”). Under the terms of the Amended and Restated Klaben Employment Agreement, Mr. Klaben served as our Senior Vice President and General Counsel. Mr. Klaben’s initial annual base salary was set at $425,000 as of November 2020, less applicable withholding taxes. Mr. Klaben was also eligible to receive an annual bonus based on the attainment of certain pre-established performance criteria established by our Board of directors, with his annual target bonus opportunity equal to 50% of his then-current annual base salary.
| 49 | |
Potential Termination Payments
In connection with his transition to the role of Deputy General Counsel, Mr. Klaben entered into an offer letter with the Company (the “Klaben Offer Letter”), which sets out the terms of his role as Deputy General Counsel, effective November 1, 2021, and supersedes the Amended and Restated Klaben Employment Agreement. Under the terms of the Klaben Offer Letter, Mr. Klaben’s initial annual base salary in connection with his appointment as Deputy General Counsel was set at $300,000, less applicable withholding taxes. Under the Klaben Offer Letter, Mr. Klaben is also eligible to participate in the Annual Incentive Plan, with his annual target incentive opportunity equal to 30% of his then-current annual base salary, and in 2022, Mr. Klaben is eligible for an equity award with a grant date fair value of $350,000, contingent upon the approval of the LD&C Committee and the terms and conditions of the 2020 Incentive Plan, as well as any applicable grant notices and agreements.
In consideration of the terms of the Klaben Offer Letter, Mr. Klaben also entered into a restrictive covenants agreement dated November 1, 2021 (the “Klaben RCA”). Per the terms of the Klaben RCA, Mr. Klaben is subject to an indefinite confidentiality clause and non-disparagement clause, as well as non-competition and non-solicitation clauses which shall be effective during the term of employment and for 12 months following termination of employment.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
Potential Payments as Provided in Employment Agreements and Offer Letters
In addition to the treatment described below in “Treatment of NEO Equity Awards Upon Termination or Change in Control,” our NEOs are entitled to the following payments on certain terminations or a change in control of the Company pursuant to the terms of their respective employment agreements or offer letters.
Potential Payments to Mr. Michael B. Petras, Jr.
InUnder the Amended and Restated CEO Employment Agreement, in the event of a termination of employment by us without “cause” or by him for “good reason” (each as defined in the Amended and Restated CEO Employment Agreement), Mr. Petras, upon execution of a general release of claims in our
POTENTIAL TERMINATION PAYMENTS
Potential Payments Upon Termination or Change in Control
favor and subject to continued compliance with the terms of such release and the restrictive covenants set forth in the Amended and Restated CEO Employment Agreement, will be eligible to receive:
An amount equal to two-times (2x) his then-current annual base salary (determined before any reduction that gave rise to executive’s right to terminate employment for “good reason”) payable in a lump sum within 60 days following his termination date,
| • | An amount equal to two-times (2x) his then-current annual base salary (determined before any reduction that gave rise to executive’s right to terminate employment for “good reason”) payable in a lump sum within 60 days following his termination date, |
If Mr. Petras elects COBRA, monthly reimbursement of the COBRA premiums incurred by Mr. Petras in an amount equal to the employer portion of the health insurance coverage provided to active employees for up to 12 months, provided that this benefit will cease if Mr. Petras becomes reemployed with another employer prior to the expiration of the 12 month period, and
| • | If Mr. Petras elects COBRA, monthly reimbursement of the COBRA premiums incurred by Mr. Petras in an amount equal to the employer portion of the health insurance coverage provided to active employees for up to 12 months, provided that this benefit will cease if Mr. Petras becomes reemployed with another employer prior to the expiration of the 12 month period, and |
2 years of additional time-based vesting credit with respect to all then outstanding and unvested equity awards.
| • | 2 years of additional time-based vesting credit with respect to all then outstanding and unvested equity awards. |
Under the Amended and Restated CEO Employment Agreement, “cause” generally means Mr. Petras’sPetras’ (i) disclosure of confidential information or trade secrets of the Company, the Sponsors or any of their affiliates or any of their respective customers or suppliers, which use or disclosure causes or is demonstrably likely to cause a material injury to any of these parties, (ii) conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States, Canada or any jurisdiction in which Mr. Petras resides, (iii) fraud, willful misconduct or gross neglect in the performance of his material duties or engagement in any other willful misconduct or willful engagement in any act or omission involving dishonesty, unethical business conduct or moral turpitude which has caused a material injury to the Company, the Sponsors or any of their affiliates or any of their respective customers or suppliers, (v)(iv) intentional failure to perform assigned duties subject to a 30 day cure period, or (vi)(v) breach of his non-competition covenant or any material breach of any other restrictive covenants to which Mr. Petras may be subject.
Under the Amended and Restated CEO Employment Agreement, “good reason” generally means (i) any material reduction in Mr. Petras’sPetras’ title, status or authority, including, following the completion of the IPO, the failure to elect Mr. Petras to serve as the Executive Chairman of the Board of directors, (ii) any material reduction of Mr. Petras’sPetras’ responsibilities, annual base salary or annual bonus opportunity, other compensation or the aggregate value of Mr. Petras’sPetras’ benefits, (iii) the failure to grant certain IPO Equity Awards to Mr. Petras, or (iv) the failure to provide for certain time-based vesting protections in connection with any future equity awards granted to Mr. Petras.
Potential Payments to Mr. Scott J. LefflerMichael F. Biehl
InThe Biehl Offer Letter does not provide for any severance payments in the event of a termination of his employment by Mr. Biehl or us, with or without “cause”cause or by himadvance notice and Mr. Biehl did not receive equity incentive compensation for “good reason” (in each case as defined2022 or 2023. Mr. Biehl did not receive any separation payments in the Amended and Restated CFO Employment Agreement), Mr. Leffler, upon execution of a general release of claims in our favor and subject to continued complianceconnection with the terms of such release and the restrictive covenants set forth in the Amended and Restated CFO Employment Agreement, will be eligible to receive:
A continuation of his then-current annual base salary (determined before any reduction that gave rise to executive’s right to terminate employment for “good reason”) for 18 months, and
Continuation of his health insurance coverage as though he had continued to be an active employee of the Company, or if he is unable to so participate and elects COBRA, monthly reimbursement for the difference between the monthly COBRA premium over the monthly premium he would have paid had he continued to be an active employee, for 18 months, provided that this benefit will cease if Mr. Leffler becomes reemployed with another employer that offers medical insurance prior to the expiration of the 18 month period.
Under the Amended and Restated CFO Employment Agreement, “cause” generally means Mr. Leffler’s (i) disclosure of confidential information or trade secrets of the Company, the Sponsors or any of their affiliates or any of their respective customers or suppliers, which use or disclosure causes or is likely to cause a material injury to any of these parties, (ii) conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States, Canada or any jurisdiction in which Mr. Leffler resides, (iii) fraud, willful misconduct or gross neglect in the performance of his duties or engagement in any other willful misconduct or willful engagement in any act or omission involving dishonesty, unethical business conduct or moral turpitude which has caused a material injury to the Company, the Sponsors or any of their affiliates or any of their respective customers or suppliers, (v) intentional failure to perform assigned duties after a written notification from our Board or (vi) breach of the Amended and Restated CFO Employment Agreement.
Under the Amended and Restated CFO Employment Agreement, “good reason” generally means (i) any material reduction in Mr. Leffler’s title, status or authority, (ii) any material reduction of Mr. Leffler’s responsibilities, annual base salary, annualdeparture on August 4, 2023.
| 2024 Notice and Proxy Statement |
POTENTIAL TERMINATION PAYMENTSPotential Termination Payments
Potential Payments Upon Termination or Change in Control
bonus opportunity, other compensation or the aggregate value of Mr. Leffler’s benefits, (iii) relocation of Mr. Leffler’s primary place of employment by more than 50 miles or (iv) the failure to grant certain IPO Equity Awards to Mr. Leffler.
Potential Payments to Mr. Michael P. Rutz
InUnder the Rutz Employment Agreement, in the event of a termination of employment by us without “cause” or by him for “good reason” (in each case as defined in the Rutz Employment Agreement), Mr. Rutz, upon execution of a general release of claims in our favor and subject to continued compliance with the terms of such release and the restrictive covenants set forth in the Rutz Employment Agreement, will be eligible to receive:
A continuation of his then-current annual base salary (determined before any reduction that gave rise to executive’s right to terminate employment for “good reason”) for 12 months, and
| • | His then-current annual base salary (determined before any reduction that gave rise to executive’s right to terminate employment for “good reason”) for 12 months following the termination of his employment, and |
Continuation of his health insurance coverage as though he had continued to be an active employee of the Company, or if he is unable to so participate and elects COBRA, monthly reimbursement for the difference between the monthly COBRA premium over the monthly premium he would have paid had he continued to be an active employee, for 12 months, provided that this benefit will cease if Mr. Rutz becomes reemployed with another employer that offers medical insurance prior to the expiration of the 12 month period.
| • | Continuation of his health insurance coverage as though he had continued to be an active employee of the Company, or if he is unable to so participate and elects COBRA, monthly reimbursement for the difference between the monthly COBRA premium over the monthly premium he would have paid had he continued to be an active employee, for 12 months, provided that this benefit will cease if Mr. Rutz becomes reemployed with another employer that offers medical insurance prior to the expiration of the 12 month period. |
Under the Rutz Employment Agreement, “cause” generally means Mr. Rutz’s (i) disclosure of confidential information or trade secrets of the Company, the Sponsors or any of their affiliates or any of their respective customers or suppliers, which use or disclosure causes or is likely to cause a material injury to any of these parties, (ii) conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States, Canada or any jurisdiction in which Mr. Rutz resides, (iii) fraud, willful misconduct or gross neglect in the performance of his duties or engagement in any other willful misconduct or willful engagement in any act or omission involving dishonesty, unethical business conduct or moral turpitude which has caused or is demonstrably likely to cause a material injury to the Company, the Sponsors or any of their affiliates or any of their respective customers or suppliers, (iv) intentional failure to perform assigned duties after a written notification from our Board and failure to correct such deficiencies within 30 days or (v) breach of the Rutz Employment Agreement.
Under the Rutz Employment Agreement, “good reason” generally means (i) any material reduction in Mr. Rutz’s title, status or authority, any material reduction of Mr. Rutz’s responsibilities, annual base salary, annual bonus opportunity, other compensation or the aggregate value of Mr. Rutz’s benefits, (iii)(ii) relocation of Mr. Rutz’s primary place of employment by more than 50 miles or (iv)(iii) the failure to grant the title of President, Sterigenics to Mr. Rutz by December 31, 2020.2021.
In addition, under the terms of the Rutz Employment Agreement, Mr. Rutz is entitled to receive a one-time lump sum cash payment equal to $1,500,000, less applicable tax withholdings, upon a change in control, contingent upon his continued employment through the consummation of a change in control.
Potential Payments to Mr. Terrence G. Hammons, Jr.Alexander Dimitrief
InThe Dimitrief Offer Letter does not provide for any severance payments in the event of a termination of his employment by Mr. Dimitrief or us, with or without cause or advance notice.
Potential Payments to Mr. Jonathan Lyons
Under the Lyons Offer Letter, in the event of a termination of employment by us without “cause” (as defined in the HammonsLyons Offer Letter), Mr. Hammons,Lyons, upon execution of a general release of claims in our favor and subject to continued compliance with the terms of such release and the restrictive covenants set forth in the Hammons Offer Letter,Lyons RCA, will be eligible to receive:
A continuation ofreceive his then-current annual base salary for 12 months.months following the termination of his employment.
Under the HammonsLyons Offer Letter, “cause” generally means Mr. Hammons’sLyons’ (i) intentional unauthorized use or disclosure of the confidential Informationinformation or trade secrets of the Company and its affiliates or any of their respective customers or suppliers, (ii) conviction of, or a plea of “guilty” or “no contest” to, or indictment for a felony under the laws of the United States, Canada or any province or state thereof or the laws of any other jurisdiction in which Mr. HammonsLyons resides, (iii) engagement in any fraud, willful misconduct or gross neglect in the performance of his duties or engagement in any other willful misconduct which has caused material injury to the Company or any of its affiliates or any of their respective customers or suppliers, (iv) willful
| 51 | |
Potential Termination Payments
Potential Payments Upon Termination or Change in Control
engagement in any act or omission involving dishonesty, breach of trust, unethical business conduct or moral turpitude, in each case involving the Company or any of its affiliates, or any of their respective customers or suppliers, (v) failure to perform lawful assigned duties or (v) breach of any restrictive covenant to which he is subject.
POTENTIAL TERMINATION PAYMENTS
Potential Payments Upon Termination or Change in Control
Potential Payments to Mr. Matthew J. Klaben
In the event of a termination of employment by us without “cause” (as defined in the Klaben Offer Letter), Mr. Klaben, upon execution of a general release of claims in our favor and subject to continued compliance with the terms of such release and the restrictive covenants set forth in the Klaben Offer Letter, will be eligible to receive:
A continuation of his then-current annual base salary for 12 months.
Under the Klaben Offer Letter, “cause” generally means Mr. Klaben’s (i) intentional unauthorized use or disclosure of the confidential Information or trade secrets of the Company and its affiliates or any of their respective customers or suppliers, (ii) conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States, Canada or any province or state thereof or the laws of any other jurisdiction in which Mr. Klaben resides, (iii) fraud, willful misconduct or gross neglect in the performance of his duties or engagement in any other willful misconduct which has caused material injury to the Company or any of its affiliates or any of their respective customers or suppliers, (iv) willful engagement in any act or omission involving dishonesty, breach of trust, unethical business conduct or moral turpitude, in each case involving the Company or any of its affiliates, or any of their respective customers or suppliers, (v) failure to perform lawful assigned duties or (v)(vi) breach of any restrictive covenant to which he is subject.
Treatment of IPO and 2021NEO Equity Awards Upon Termination or Change in Control
In addition to the treatment on termination described above, our NEOs are entitled to the following vesting treatment upon certain terminations or a change in control of the Company pursuant to the terms of the IPO Equity Awards, the 2022 Equity Awards and the 2023 Equity Awards (in each case, as defined below) (collectively the “NEO Equity Awards”). See “Compensation Elements for 2023 — Long-Term Equity Incentive Compensation” and “Outstanding Equity Awards at 2023 Year-End” for additional information on the terms of the NEO Equity Awards.
For purposes of this section, the “IPO Equity Awards” means the stock options and RSUs granted under the 2020 Incentive Plan to Mr. Petras and Mr. Rutz in connection with our IPO, in lieu of our formal 2021 equity award grant cycle, wecycle.
For purposes of this section, the “2022 Equity Awards” means (i) the stock options and RSUs granted IPOunder the 2020 Incentive Plan to Mr. Petras and Mr. Rutz in March 2022, (ii) the stock options granted to Mr. Petras under the 2020 Incentive Plan in November 2022 and (iii) the stock options and restricted stock granted to Mr. Dimitrief under the 2020 Incentive Plan in November 2022 (the “Dimitrief Equity AwardsAward”).
For purposes of this section, the “2023 Equity Awards” means (i) the stock options and RSUs granted under the 2020 Incentive Plan to our NEOsMr. Petras and Mr. Rutz in March 2023 and (ii) the form ofstock options and RSUs and nonqualified optionsgranted under the 2020 Incentive Plan to purchase shares of our common stock with grant date fair values based on the IPO price. See “Compensation Elements for 2021—Long-Term Equity Incentive Compensation” and “Outstanding Equity Awards at 2021 Year-End”. In additionMr. Lyons in August 2023.
Treatment upon Termination due to the treatment upon a termination without “cause”Death or for “good reason” described above, underDisability
Under the terms of the IPONEO Equity Awards, each of Messrs. Petras, Leffler, Rutz and Klabenthe grantee will receive two (2)2 years of additional time-based vesting credit in respect of all outstanding unvested IPO Equity Awardsequity awards, upon a termination of employment by reason of the grantee’s death or Disability (as defined in the 2020 Incentive Plan). Messrs. Leffler
Treatment upon Qualifying Retirement
Mr. Rutz and RutzMr. Lyons will each receive an additional two (2)2 years of time-based vesting credit in respect of all outstanding unvested IPONEO Equity Awards in the event that,if, following the two (2)2 year anniversary of the IPONEO Equity Award grant date, the granteeMr. Rutz or Mr. Lyons retires at or older than age fifty-five (55)55 with ten (10)10 or more years of service to the Company. With respect to Mr. Petras, all unvested IPO Equity Awards shall vest in full upon Mr. Petras’s voluntary retirement following the date on which the sum of Mr. Petras’s attained age and years of service with the Company equals or exceeds sixty-five (65). Notwithstanding the foregoing, the IPONEO Equity Awards for Mr. Rutz and Mr. Lyons do not qualify for such vesting credit to the extent they were granted within the twelve (12)24 month period immediately prior to a grantee’sthe NEO’s retirement.
With respect to Mr. Petras, all unvested NEO Equity Awards will vest in full upon Mr. Petras’ voluntary retirement following the date on which the sum of Mr. Petras’ attained age and years of service with the Company equals or exceeds 65. Notwithstanding the foregoing, the NEO Equity Awards for Mr. Petras do not qualify for such vesting credit to the extent they were granted within the 12 month period immediately prior to Mr. Petras’ retirement.
No NEO was eligible for retirement on December 31, 2021.2023.
Treatment upon a Change in Control
Under the terms of the IPONEO Equity Awards, in the event of a Change in Control (as defined in the 2020 Incentive Plan) where any outstanding unvested portion of the IPONEO Equity Awards are not assumed or substituted by the acquirer, such unvested awards will generally vest as of the date of such Change in Control. In the event of a Change in Control where outstanding IPONEO Equity Awards (other than with respect to the Dimitrief Equity Award) are assumed or substituted by the acquirer and Messrs. Petras, Leffler, Rutz and Klabenthe grantee is terminated by the acquirer without “cause” (as defined in such NEO’s employment agreement)agreement or offer letter, as applicable) or with respect to Mr. Petras and Mr. Rutz such executive terminates his employment for “good
| 2024 Notice and Proxy Statement | 52 |
Potential Termination Payments
Potential Payments Upon Termination or Change in Control
“good reason” (as defined in such NEO’s employment agreement), in each case, within the one (1)1 year period immediately following such Change in Control, any then unvested IPONEO Equity AwardAwards will vest as of the date of such NEO’s termination.
In connection withStock Option Exercise Period
With respect to the commencementNEOs’ stock options, the following stock option exercise periods generally apply: (i) 90 days following a termination of histhe NEO’s employment withother than upon death or Disability or for “cause,” (ii) 12 months following a termination of the NEO’s employment due to death or Disability and (iii) the earlier of (x) the 2 year anniversary of a “qualifying retirement” (or in the case of Mr. Petras, 3 year anniversary of a “qualifying retirement” (as defined in the applicable equity award agreement) or termination of employment by the Company without “cause” or by Mr. Hammons was granted an awardPetras with “good reason” (as each is defined in the Amended and Restated CEO Employment Agreement)) and (y) the original expiration date of such stock option.
Treatment Specific to Mr. Dimitrief’s Awards
With respect to the stock options and RSUsrestricted stock granted to Mr. Dimitrief under ourthe 2020 Incentive Plan onin November 11, 2021 (the “Hammons Equity Awards”). Under the terms of the Hammons Equity Awards, Mr. Hammons will receive two (2) years of additional time-based vesting credit in respect of all outstanding unvested equity awards2022, upon a termination of Mr. Dimitrief’s employment by reason of his death or Disability (as defined in the 2020 Incentive Plan). In the event of a Change in Control (as defined in the 2020 Incentive Plan) where any outstanding unvested portion of the Hammons Equity Awards are not assumed or substituted by the acquirer, such unvested awards will vest as of the date of such Change in Control. In the event of a Change in Control where the outstanding Hammons Equity Awards are assumed or substituted by the acquirer and Mr. Hammons is terminated by the acquirerCompany without “cause” (as defined in the 2020 Incentive Plan) within, such awards will fully vest. Mr. Dimitrief will also be afforded (i) 30 days following termination of employment by the Company with “cause” and (ii) one (1) year period immediately following such Changetermination by the Company without “cause” to exercise the stock options that he was granted in Control, any then unvested Hammons Equity Award will vest as of the date of Mr. Hammons’s termination.November 2022.
|
Potential Termination Payments
Potential Post-Employment Payments Table
Potential Post-Employment Payments Table
With respect to Mr. Petras, Mr. Lyons, Mr. Rutz and Mr. Dimitrief, the following table shows the estimated payments and value of benefits that we would provide if the triggering events described in the heading of the table had occurred on December 31, 2023. Mr. Biehl, whose employment terminated on August 4, 2023, did not receive any separation payments or benefits in connection with such termination.
The payments that each of our NEOs would be entitled to if a termination of employment or a change in control had taken place on December 31, 20212023 are as follows:
| Benefit | Termination without “Cause” or Resignation for “Good Reason” | Termination due to Death or Disability | Qualifying Retirement (1) | Termination in Connection with a Change in Control (2) | ||||||||||||||
Michael B. Petras, Jr. | Cash Severance(3) | $ | 2,000,000 | — | — | $ | 2,000,000 | |||||||||||
| COBRA continuation(4) | 14,186 | — | — | 14,186 | |||||||||||||
|
| Value of accelerated Options and RSUs(5) | 3,379,186 | $ | 3,379,186 | — | 5,068,779 | ||||||||||||
Scott J. Leffler | Cash Severance(3) | $ | 675,000 | — | — | $ | 675,000 | |||||||||||
| COBRA continuation(4) | 20,816 | — | — | 20,816 | |||||||||||||
|
| Value of accelerated Options and RSUs(5) | — | $ | 675,828 | — | 1,013,741 | ||||||||||||
Michael P. Rutz | Cash Severance(3) | $ | 430,000 | — | — | $ | 430,000 | |||||||||||
| COBRA continuation(4) | 13,884 | — | — | 13,884 | |||||||||||||
| Change in Control Bonus |
|
|
| — | — | 1,500,000 | (6) | ||||||||||
|
| Value of accelerated Options and RSUs(5) | — | $ | 337,908 |
|
|
| 506,862 | ||||||||||
Terrence G. Hammons, Jr. | Cash Severance(3) | $ | 425,000 | — | — | $ | 425,000 | |||||||||||
| COBRA continuation | — | — | — | — | |||||||||||||
|
| Value of accelerated Options and RSUs(7) | — | $ | 474,338 | — | 948,675 | ||||||||||||
Matthew J. Klaben | Cash Severance(3) | $ | 300,000 | — | — | $ | 300,000 | |||||||||||
| COBRA continuation | — | — | — | — | |||||||||||||
|
| Value of accelerated Options and RSUs(5) | — | $ | 405,499 | — | 608,248 | ||||||||||||
| Benefit | Termination without “Cause” or Resignation for “Good Reason” (1) | Termination due to Death or Disability | Qualifying Retirement (2) | Termination in Connection with a Change in Control (3) | ||||||||||||||
Michael B. Petras, Jr. | Cash Severance(4) | $ | 2,100,000 |
|
|
|
|
|
| $ | 2,100,000 | |||||||
| COBRA continuation(5) | 16,465 |
|
|
|
|
|
| 16,465 | |||||||||
|
| Value of accelerated Options and RSUs(6)(8) | 21,050,294 | $ | 21,050,294 |
|
|
| 22,271,654 | ||||||||||
Jonathan Lyons | Cash Severance(4) | $ | 475,000 |
|
|
|
|
|
| $ | 475,000 | |||||||
| COBRA continuation |
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Value of accelerated Options and RSUs(11) |
|
|
| $ | 855,950 |
|
|
| 1,296,894 | ||||||||
Michael P. Rutz | Cash Severance(4) | $ | 470,000 |
|
|
|
|
|
| $ | 470,000 | |||||||
| COBRA continuation(5) | 16,465 |
|
|
|
|
|
| 16,465 | |||||||||
| Change in Control Bonus(7) |
|
|
|
|
|
|
|
|
| 1,500,000 | |||||||
|
| Value of accelerated Options and RSUs(6)(10) |
|
|
| $ | 707,810 |
|
|
| 870,657 | ||||||||
Alexander Dimitrief | Cash Severance |
|
|
|
|
|
|
|
|
|
|
|
| |||||
| COBRA continuation |
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Value of accelerated Options and RSUs(9) | $ | 1,983,902 | $ | 1,983,902 |
|
|
| $ | 1,983,902 | ||||||||
|
| (2) | Qualifying retirement means, in the case of Mr. Petras, voluntary retirement following the date on which the sum of Mr. |
Assumes termination of employment results from involuntary termination without “cause,” or in the |
As further described above, cash severance is based on each executive’s annual base salary and the severance period specified in the executive’s employment agreement or offer letter and reflects the cash severance each NEO is entitled to upon a termination without “cause” or, in the |
Amounts reflect the Company’s portion of health and dental insurance premiums payable to |
The IPO Equity Awards were granted on November 20, 2020 and vest in four equal installments on each of the first four anniversaries of the date of grant. Amounts shown here reflect the value of the acceleration of the following portion of each executive’s outstanding unvested IPO Equity Awards |
| 2024 Notice and Proxy Statement | 54 |
Potential Termination Payments
Potential Post-Employment Payments Table
| as of December 31, |
Potential Termination Payments
Potential Post-Employment Payments Table
| price of our stock on December |
Mr. Rutz is entitled to receive a one-time lump sum cash payment equal to $1,500,000, less applicable tax withholdings, upon a change in control, contingent upon his continued employment through the consummation of a change in control. |
Mr. |
| (9) | In connection with the commencement of Mr. Dimitrief’s employment, Mr. Dimitrief was granted stock options and restricted stock on November 7, 2022, the remaining half of which will vest on October 31, 2024, subject to his continued employment with the Company through such vesting date. Amounts shown here include the value of acceleration of the unvested awards in the event of a termination by the Company without “cause” or termination due to death or Disability. The value of accelerated stock options that vest is calculated as the number of shares underlying options that will vest on each qualifying termination multiplied by the difference between the strike price of outstanding stock options, which was $6.37 and the price of our stock on December 29, 2023, which was $16.85. The value of accelerated restricted stock is calculated as the number of shares underlying restricted stock that will vest on each qualifying termination multiplied by the price of our stock on December 29, 2023, which was $16.85. In the event an acquirer does not assume or substitute |
| (10) | Mr. Rutz was granted stock options and RSUs on March 2, 2022 that vest on the first three anniversaries of the date of grant. Mr. Rutz was also granted stock options and RSUs on March 6, 2023 that vest on March 2, 2024, March 2, 2025 and March 2, 2026. Amounts shown here include the value of acceleration of outstanding unvested equity awards in the event of a termination due to death or Disability. The value of accelerated stock options that vest is calculated as the number of shares underlying options that will vest on each qualifying termination multiplied by the difference between the strike price of outstanding stock options, which was $20.03 for stock options granted in 2022 and $17.59 for stock options granted in 2023 and the price of our stock on December 29, 2023, which was $16.85. The value of accelerated RSUs is calculated as the number of shares underlying RSUs that will vest on each qualifying termination multiplied by the price of our stock on December 29, 2023, which was $16.85. In the event (i) an acquirer does not assume or substitute the equity awards or (ii) the acquirer does assume or substitute the unvested portion of the equity award and the NEO’s employment is terminated by the acquiror without “cause” or, in the case or Mr. Rutz, by him for “good reason” within 12 months following a Change in Control, in each case all unvested equity awards will vest in full. |
| (11) | Mr. Lyons was granted stock options and RSUs on August 7, 2023 that vest on August 5, 2024, August 5, 2025 and August 5, 2026. Amounts shown here include the value of acceleration of outstanding unvested equity awards in the event of a termination due to death or Disability. The value of accelerated stock options that vest is calculated as the number of shares underlying options that will vest on each qualifying termination multiplied by the difference between the strike price of outstanding stock options, which was $16.89 and the price of our stock on December 29, 2023, which was $16.85. The value of accelerated RSUs is calculated as the number of shares underlying RSUs that will vest on each qualifying termination multiplied by the price of our stock on December 29, 2023, which was $16.85. In the event (i) an acquirer does not assume or substitute the equity awards or (ii) the acquirer does assume or substitute the unvested portion of the equity award and the NEO’s employment is terminated by the acquiror without “cause” within 12 months following a Change in Control, in each case all unvested equity awards will vest in full. |
|
EQUITY COMPENSATION PLAN INFORMATIONEquity Compensation Plan Information
2020 Omnibus Incentive Plan
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 20212023 with respect to the shares of our common stock that may be issued under our 2020 Incentive Plan.
Plan category | | Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#)(a) |
| | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($)(b) | | | Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))(c) | | | Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#)(a) |
| | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($)(b) | | Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c) | ||||||||
Equity compensation plans approved by security holders | 3,060,506(1) | $23.02(2) | 24,681,302(3) | |||||||||||||||||||||
Equity compensation plans approved by security holders | ||||||||||||||||||||||||
Equity compensation plans approved by security holders | ||||||||||||||||||||||||
Equity compensation plans approved by security holders | 9,139,420(1) | $15.17(2) | 17,649,161(3) | |||||||||||||||||||||
Equity compensation plans not approved by security holders | ||||||||||||||||||||||||
Equity compensation plans not approved by security holders | ||||||||||||||||||||||||
Equity compensation plans not approved by security holders | ||||||||||||||||||||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||||||||||||
Total | 3,060,506 | $23.02 | 24,681,302 | |||||||||||||||||||||
Total | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||
Total | 9,139,420 | $15.17 | 17,649,161 | |||||||||||||||||||||
Includes (i) |
Excludes RSUs as they have no exercise price. |
Reflects shares available for future issuance under the 2020 Incentive Plan, excluding shares underlying outstanding awards. |
Prior to our IPO, our Board adopted, and our sole stockholdershareholder approved, our 2020 Omnibus Incentive Plan. The maximum number of shares of our common stock that may be issued under our 2020 Incentive Plan is 27,900,000 shares.
Any employee, director or consultant of the Company is eligible to receive an award under the 2020 Incentive Plan, to the extent that a grant of such award is permitted by applicable law, stock market or exchange rules and regulations, or any accounting or tax rules and regulations. The 2020 Incentive Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), restricted stock awards, RSUs and other cash-based, equity-based or equity-related awards. Each award granted under the 2020 Incentive Plan will be set forth in a separate award agreement and will indicate the type and terms and conditions of the award.
As provided for under the 2020 Incentive Plan, the administrator of the 2020 Incentive Plan shall be either the Board or a committee appointed by the Board to administer the 2020 Incentive Plan. The Board has designated the LD&CLDC Committee to administer the 2020 Incentive Plan and grant awards thereunder. Pursuant to the terms of the 2020 Incentive Plan, the administrator has the authority to authorize a subcommittee consisting of one or more members of the Board (including members who are employees of the Company) or employees of the Company to grant awards to persons who are not “executive officers” of the Company. The LD&CLDC Committee has delegated to Mr. Petras, in his capacity as both a Board member and employee, the power to grant, without any further action required by the LD&CLDC Committee, a predetermined number of equity awards to employees who are not executive officers of the Company. The purpose of this delegation of authority is to enhance the flexibility of equity award administration within the Company and to facilitate the timely grant of equity incentives to non-executive officer employees, within the limits approved by the LD&CLDC Committee or the Board.
Corporate Reorganization & Distribution of Shares
Before our IPO, we were a wholly owned subsidiary of Topco Parent, a Delaware limited partnership. Pursuant to the terms of the corporate reorganization that we completed prior to our IPO, Topco Parent dissolved and in liquidation distributed shares of Sotera Health Company common stock to its limited partners in accordance with the limited partnership agreement of Topco Parent. Each holder of limited partnership interests in Topco Parent prior to our IPO, including Messrs.Mr. Petras Leffler,and Mr. Rutz and Klaben, Ms. Klee and the Sponsors, received an in-kind distribution of shares of our common stock (in certain circumstances subject to restrictions as described below) with respect to those interests as part of the corporate reorganization.
Equity Compensation Plan Information
Corporate Reorganization & Distribution of Shares
In connection with such distribution, each individual holder of limited partnership interests in Topco Parent prior to the IPO, including our named executive officers and Ms. Klee, executed the Restricted Stock Agreement and Acknowledgment (the “RSA”) in the form filed as an exhibit to our registration statement. The RSA provides that any shares of our common stock distributed to an individual in respect of any partnership interests that were vested as of the distribution were not subject to any vesting or forfeiture restrictions following the IPO. With respect to shares of common stock distributed in respect of any partnership interests that were unvested as of the distribution, the RSA generally provides that such shares shall be subject to the same vesting and forfeiture restrictions that applied to such unvested partnership interests prior to the distribution. Pursuant to the terms of our Stockholders’Stockholders Agreement, following the distribution, shares of our common stock held by members of our management team and certain members of our Board (including Mr. Petras) are subject to transfer restrictions unless such restrictions are otherwise waived by the LD&CLDC Committee. See “Stockholders’ Agreement”.“Stockholders Agreement,” on page 71, for additional information on our Stockholders Agreement.
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(a) | (b) (1) | (c) (2) | (d) (3) | (e) (4) | (f) (5) | (g) (6) | (h) (7) | (i) (8) | ||||||||||||||||||||||||
Year | Summary Compensation Table Total for CEO | Compensation Actually Paid to CEO | Average Summary Compensation Table Total for Non-CEO NEOs | Average Compensation Actually Paid to Non-CEO NEOs | Value of initial fixed $100 investment based on: | Net Income (Loss) ($ Millions) | Adjusted EBITDA ($ Millions) | |||||||||||||||||||||||||
Company Total Shareholder Return | Peer Group Total Shareholder Return | |||||||||||||||||||||||||||||||
| 2023 | $9,701,005 | $ | 31,189,170 | $ | 1,405,960 | $3,514,502 | $67 | $ | 132 | $51,376 | $ | 528,029 | ||||||||||||||||||||
| 2022 | 16,659,858 | 5,908,688 | 2,000,869 | (872,149 | ) | 33 | 130 | (233,570 | ) | 506,249 | ||||||||||||||||||||||
| 2021 | 2,197,574 | (2,362,888 | ) | 658,885 | (789,682 | ) | 94 | 132 | 116,182 | 481,229 | ||||||||||||||||||||||
| 2020 | 17,204,248 | 22,420,874 | 5,012,582 | 14,102,915 | 109 | 105 | (38,617 | ) | 419,859 | |||||||||||||||||||||||
| (1) | The CEO in all four reporting years is Michael B. Petras, Jr.; reflects compensation amounts reported in the Summary Compensation Table (“SCT”) for Mr. Petras for the years ended December 31 2023, 2022, 2021 and 2020, respectively. |
| (2) | “Compensation actually paid” (“CAP”) to our CEO in 2023, 2022, 2021 and 2020 reflects the respective amounts in the SCT, adjusted as required pursuant to 402(v) of Regulation S-K. |
| (3) | The following non-CEO NEOs are included in the average figures shown: |
| (4) | Average CAP to our non-CEO NEOs in 2023, 2022, 2021 and 2020 reflects the respective amounts in the SCT, adjusted pursuant to 402(v) of RegulationS-K. |
| (5) | Represents the cumulative total shareholder return (“TSR”) of the Company for the period commencing from market close on December 31, 2019, and ending on each of December 31, 2020, December 31, 2021, December 31, 2022, and December 31, 2023. |
| (6) | Represents the cumulative TSR of the S&P 500 Healthcare Index for the period commencing from market close on December 31, 2019, and ending on each of December 31, 2020, December 31, 2021, December 31, 2022, and December 31, 2023. |
| (7) | Reflects “Net Income (Loss)” in the Consolidated Statements of Operations and Comprehensive Income (Loss) included in the Company’s Annual Reports on Form 10-K for the years ended December 31, 2023, 2022, 2021 and 2020 (“Net Income” and “Net Loss”, as applicable). 2022 Net Loss includes a $408 million legal reserve recorded in the fourth quarter of 2022 related to the binding term sheets to settle the ethylene oxide claims in Cook County, Illinois, subject to the satisfaction or waiver by the Company of the various conditions set forth in the term sheets. |
| (8) | The Company-selected Measure is Adjusted EBITDA, which is described below. |
| 2024 Notice and Proxy Statement | 58 |
Grant Year (1) | Expected volatility | Expected life (years) | Risk-free interest rate | |||
2023 (2) | 50.0% - 55.0% | 5.2 - 6.0 years | 3.8 - 4.2% | |||
2022 (3) | 57.5% | 4.3 - 4.9 years | 3.8 - 3.9% | |||
2020 (3) | 62.5% | 3.5 - 3.6 years | 4.0 - 4.6% |
| (1) | No NEO had option grants in 2021. |
| (2) | Reflects grant date assumptions for option awards granted in 2023 and assumptions for valuation of those options as of December 31, 2023. |
| (3) | Reflects 2023 option vesting date assumptions and assumptions for valuation as of December 31, 2023 for option awards that were granted in 2022 and 2020. |
CEO | ||||||||||||||||||||||||||
Year | Summary Compensation Table Total Compensation | Less: stock award and option award values reported in Summary Compensation Table for the covered year | Plus: fair value for stock and option awards granted in the covered year | Change in fair value of outstanding unvested stock and option awards from prior years | Change in fair value of stock and option awards from prior years that vested in the covered year | Less: fair value of stock and option awards forfeited during the covered year | CEO CAP | |||||||||||||||||||
| 2023 | $9,701,005 | $(7,495,691 | ) | $7,067,443 | $16,061,642 | $5,854,771 | $— | $ | 31,189,170 | |||||||||||||||||
| 2022 | 16,659,858 | (14,462,702 | ) | 13,019,821 | (5,926,198 | ) | (3,382,091 | ) | — | 5,908,688 | ||||||||||||||||
| 2021 | 2,197,574 | — | — | (3,167,607 | ) | (1,392,855 | ) | — | (2,362,888 | ) | ||||||||||||||||
| 2020 | 17,204,248 | (15,000,000 | ) | 20,216,626 | — | — | — | 22,420,874 | ||||||||||||||||||
Average Non-CEO NEOs | ||||||||||||||||||||||||||
Year | Average Summary Compensation Table Total Compensation | Less: average stock award and option award values reported in Summary Compensation Table for the covered year | Plus: average fair value for stock and option awards granted in the covered year | Average change in fair value of outstanding unvested stock and option awards from prior years | Average change in fair value of stock and option awards from prior years that vested in the covered year | Less: average fair value of stock and option awards forfeited during the covered year | Non-CEO NEO CAP | |||||||||||||||||||
| 2023 | $1,405,960 | $(649,546 | ) | $634,064 | $1,306,199 | $817,826 | $— | $3,514,502 | ||||||||||||||||||
| 2022 | 2,000,869 | (1,248,894 | ) | 948,453 | (1,149,366 | ) | (268,001 | ) | (1,155,210) | (872,149 | ) | |||||||||||||||
| 2021 | 658,885 | (125,000 | ) | 139,448 | (991,451 | ) | (471,564 | ) | — | (789,682 | ) | |||||||||||||||
| 2020 | 5,012,582 | (4,350,000 | ) | 10,973,027 | 2,387,163 | 80,143 | — | 14,102,915 | ||||||||||||||||||
| 59 | |
| 2024 Notice and Proxy Statement | 60 |
Financial Performance Metrics | ||
| Adjusted EBITDA | Sterigenics Segment Income | |
| 61 | |
Proposal 2: Advisory Vote on Say-on-pay FrequencyCEO Pay Ratio
PROPOSAL 2: ADVISORY VOTE ON SAY-ON-PAY FREQUENCY
CEO PAY RATIO
In accordance with Section 14A of the Securities ExchangeDodd-Frank Act of 1934,and applicable SEC rules, we are asking stockholdersproviding the following information about the relationship of our CEO’s compensation to indicate their preference regarding how often we should provide our stockholders an opportunity to vote, on an advisory basis, on the compensation of all our employees. For 2023:
| • | the annual total compensation of our median employee was $79,773 |
| • | the annual total compensation of our CEO, as reported in the Summary Compensation Table, was $9,701,005 |
| • | the ratio of our CEO’s annual total compensation to the median employee’s annual total compensation was 122 to 1 |
We believe there has been no change to our employee population and compensation arrangements that would result in a significant change to our pay ratio disclosure. However, our original median employee from 2022 is no longer employed by the Company and, as permitted under SEC rules, we have substituted a new median employee with substantially similar fiscal 2022 compensation as the original median employee for purposes of our pay ratio disclosure for fiscal year 2023. We identified our median employee using the methodology and the material assumptions, adjustments, and estimates described below.
To identify our median employee, we used the base salary as of December 31, 2022 of our global population, which included 3,122 employees, excluding our CEO, of which 1,826 were U.S. employees and 1,296 were non-U.S. employees. We have chosen annual base salary as the consistently applied compensation measure used to identify the median employee. Base salary is the primary compensation component for a large portion of our workforce and is the one pay component that has a similar definition and is reported in a similar manner globally. Therefore, annual base salary provides an accurate depiction of total earnings for the purposes of identifying our median employee. Base salaries for employees outside the United States were converted to United States Dollars by applying the applicable foreign exchange rates in effect on December 31, 2022.
In compliance with Item 402(u) and as permitted by SEC rules under a de minimis exemption, we excluded all employees in 3 countries (China (86 employees), Costa Rica (17 employees) and Thailand (30 employees)) totaling 133 employees (approximately 4.26% of our total workforce) when identifying our median employee. After accounting for the de minimis exemption, 2,989 employees in the U.S. and outside the U.S. were considered for identifying our median employee.
No cost of living adjustments were applied in our methodology. Our median employee’s total compensation of $79,773 was calculated in the same manner as we calculated total compensation for each of the named executive officers (commonly known as a “say-on-pay” vote). Stockholders may specify whether they prefer such votes to occur every one (1) year, every two (2) years, or every three (3) years, or they may abstain from voting. The Board recommends that the Company hold a say-on-pay vote every one (1) year.
Because this is an advisory vote, the result is not binding on the Company or the Board. Nevertheless, the Board values the opinions of our stockholders and will give careful consideration to the voting results on this proposal when making future decisions regarding the frequency of say-on-pay votes. Notwithstanding the Board’s recommendation or the outcome of the stockholder vote, the Board may in the future decide to conduct say-on-pay votes on a more or less frequent basis and may vary its practice based on factors including discussions with stockholders or the adoption of material changes to compensation programs. Regardless of the frequency determined by the Board, it is expected that the first say-on-pay vote will be held at the 2023 Annual Meeting of Stockholders, in accordance with the transition rules for post-emerging growth companies.Summary Compensation Table.
|
|
Proposal 3: Ratification of Selection of Independent Registered Public Accounting Firm
Independent Registered Public Accounting Firm Fees
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We are asking stockholdersshareholders to ratify the appointment of Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for the fiscal year ending December 31, 2022.2024. The Audit Committee and the Board believe that the retention ofretaining Ernst & Young to serve as our independent registered public accounting firm is in the best interests of the Company and its stockholders.shareholders. Although ratification is not legally required, we are submitting the appointment of Ernst & Young to our shareholders for ratification as a matter of good corporate governance. InIf the event that this appointment is not ratified, the Audit Committee of the Board will reconsider the appointment. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the fiscal year if itthe Committee determines that such a change would be in the best interest of the Company and its stockholders.shareholders.
The Audit Committee is directly responsible for the appointment, compensation, retention, oversight, evaluation and, when appropriate, replacement of the independent registered public accounting firm that serves as the Company’s independent accountants. Ernst & Young has served as the Company’s independent registered public accounting firm since 2019. In selecting the independent auditor, the Audit Committee annually evaluates the qualifications, performance and independence of the independent auditor, including review ofreviewing the lead audit partner and taking into accountconsidering the opinionsassessments of management and the head (and any other senior personnel, as appropriate) of the internal audit function.
Representatives of Ernst & Young will be present at the Annual Meeting. They will be given an opportunity to make a statement if they wish and will be available to respond to appropriate questions.
Independent Registered Public Accounting Firm Fees
The following table shows fees paid by Sotera Health paid for professional services rendered by Ernst & Young for 20212023 and 2020. All of2022. The Audit Committee approved the fees shown in the table were approved by the Audit Committee in accordance with its pre-approval process.
Fee Category (In thousands) | 2021 | 2020 | 2023 | 2022 | ||||||||||||
Audit Fees | $ | 2,788 | $ | 2,551 | ||||||||||||
Audit Fees | ||||||||||||||||
Audit Fees | ||||||||||||||||
Audit Fees | $ | 2,953 | $ | 2,979 | ||||||||||||
Audit-Related Fees | ||||||||||||||||
Audit-Related Fees | ||||||||||||||||
Audit-Related Fees | ||||||||||||||||
Audit-Related Fees | 19 | 17 | 22 | 21 | ||||||||||||
Tax Fees | 307 | 738 | ||||||||||||||
Tax Fees | ||||||||||||||||
Tax Fees | ||||||||||||||||
Tax Fees | 430 | 449 | ||||||||||||||
All Other Fees | ||||||||||||||||
All Other Fees | ||||||||||||||||
All Other Fees | ||||||||||||||||
All Other Fees | — | — | — | — | ||||||||||||
Total Fees | $ | 3,114 | $ | 3,306 | ||||||||||||
Total Fees | ||||||||||||||||
Total Fees | ||||||||||||||||
Total Fees | $ | 3,405 | $ | 3,449 | ||||||||||||
Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Sotera Health’s consolidated financial statements, (b) the audit of Sotera Health’s internal control over financial reporting, (c) review of the interim consolidated financial statements included in quarterly reports and (d) services that are typically provided by an independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees included fees for assurance and related services that were reasonably related to the performance of the audit or review of Sotera Health’s consolidated financial statements and are not reported under “Audit Fees.” These services include due diligence services pertaining to potential business acquisitions/dispositions; financial audits of employee benefit plans; agreed-upon or expanded audit procedures required to comply with local market requirements; assistance with internal control documentation requirements; and annual subscriptions or licensing of online content, such as accounting, tax or regulatory reference tools.
Tax Fees consisted of fees for professional services for tax compliance and review, and tax planning and advice. These services include assistance regarding federal, state and international tax matters, including compliance, return preparation, tax audits, tax advisory and consulting services.
|
Proposal 3: Ratification of Selection of Independent Registered Public Accounting Firm
Independent Registered Public Accounting Firm Fees
All Other Fees would include fees for permitted services other than those that meet the criteria above.
The Audit Committee has concluded that the provision of the non-audit services described above was compatible with maintaining the independence of Ernst & Young.
|
The Board recommends a vote “FOR” the ratification of the appointment of Ernst & Young as Sotera Health’s independent registered public accounting firm for fiscal |
Policy on Audit Committee’s Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The Audit Committee reviews and pre-approves all audit and non-audit services provided to Sotera Health by the registered public accounting firm, as well as certain audit services provided to Sotera Health or its consolidated subsidiaries by any separate accounting firm on which, in the case of the consolidated subsidiaries, the registered public accounting firm expressly relies, to assure that any such services (together, the “covered services”) do not impair the independence of the registered public accounting firm. Covered services may include audit services, audit-related services and tax services, as well asand specifically designated non-audit services which, in the opinion of the Audit Committee, will not impair the independence of the independent registered public accounting firm. The policy provides for the general pre-approval of predictable and recurring covered services and their related fee estimates or fee arrangements by the full Audit Committee on an annual basis. General pre-approval of any covered services shall beis effective for the applicable fiscal year.
The policy delegates to the chairChair of the Audit Committee the authority to pre-approve any individual covered services that are not the subject of general pre-approval and for which the aggregate estimated fees do not exceed $250,000. In considering whether to pre-approve such a service, the Chair shallis to consider the nature and scope of the proposed service in light of applicable law as well asand the principles and other guidance enunciated by the SEC and the Public Company Accounting Oversight Board (“PCAOB”) with respect to independence of the registered public accounting firm.firms. The policy designates the CFO to monitor the performance of all services provided by the registered public accounting firm provides and to determine whether such services are in compliance withadhere to the policy. The CFO is required to report quarterly to the Audit Committee detailing the status of the covered services and fees previously approved by the Audit Committee (or the chair,Chair, as applicable) for the fiscal year, the amounts allocated and used for each such covered service, any additional covered services and fees request to be approved by the Audit Committee, any services that may require application of the de minimis exception for permissible non-audit services described in the policy and any other results of the CFO’s monitoring.
Audit Committee Report
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Sotera Health specifically incorporates itthis report by reference into a document filed under the Securities Act or the Exchange Act.
Composition. The Audit Committee of the Board is composed of the directors named below. Each member ofcomprises Vincent Petrella, Karen Flynn (who was appointed to the Audit Committee meets the financial experience requirements under applicable SEC rules and Nasdaq listing standards. Vincent Petrella,following its meeting in February 2024), Ann Klee and David Wheadon, who all meet the independence and financial experience requirements under applicable SEC rules and Nasdaq listing standards. In addition, the Board has determined that Mr. Petrella is an “audit committee financial expert” as defined by SEC rules. Stephanie Geveda was a member of the Audit Committee until November 1, 2021, when she resigned to ensure the Company’s ongoing compliance with applicable independence standards for Audit Committee membership. The Board had previously determined that Ms. Geveda did not satisfy the applicable independence standards for Audit Committee membership because of the equity ownership in our Company held by investment funds and entities affiliated with Warburg Pincus, of which Ms. Geveda is a managing director, but determined that Ms. Geveda was permitted to remain on the Audit Committee for a period of up to one year after the date of our IPO in accordance with the phase-in period under the Nasdaq rules.
Responsibilities. The Audit Committee operates under a written charter that has been adopted by the Board. The charter is reviewed annually for changes, as appropriate. The Audit Committee is responsible for general oversight of Sotera Health’s accounting and financial reporting processes, Sotera Health’s relationship with its independent registered public accounting firm, Sotera Health’s compliance with legal and regulatory requirements and Sotera Health’s policies and procedures with respect to risk assessment and risk management.management, including cybersecurity and data security. Sotera Health’s management is responsible for: (a) maintaining Sotera Health’s books of account and preparing periodic financial statements based thereon; and (b) maintaining the system of internal control over financial reporting. The independent registered public accounting firm is responsible for auditing Sotera Health’s annual consolidated financial statements.statements and internal controls over financial reporting.
Review with Management and Independent Registered Public Accounting Firm.
The Audit Committee hereby reports as follows:
| 1. | The Audit Committee has reviewed and discussed with management and the independent registered public accounting firm, Ernst & Young, together and separately, Sotera Health’s audited consolidated financial statements contained in Sotera Health’s Annual Report on Form 10-K for fiscal year |
| 2. | The Audit Committee has discussed with Ernst & Young the matters required to be discussed by applicable standards of the PCAOB. |
| 3. | The Audit Committee has received from Ernst & Young the written disclosures and the letter required by applicable requirements of the PCAOB regarding Ernst & Young’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young its independence. |
Based on the review and discussions referred to in paragraphs 1-3 above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for fiscal year 20212023 for filing with the SEC.
The Audit Committee has appointed Ernst & Young as Sotera Health’s independent registered public accounting firm for fiscal year 20222024 and recommends to shareholders that they ratify the appointment of Ernst & Young as Sotera Health’s independent registered public accounting firm for fiscal year 2022.2024.
Respectfully submitted,
The Audit Committee
Vincent K. Petrella, Chair
Karen A. Flynn
Ann R. Klee
David E. Wheadon
|
Proposal 4: Approval of an Officer Exculpation Amendment to our Amended and Restated Certificate of Incorporation
PROPOSAL 4: APPROVAL OF AN OFFICER EXCULPATION AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Effective in August 2022, Section 102(b)(7) of the DGCL was amended to authorize Delaware corporations to eliminate or limit the personal liability of certain officers of the corporation for monetary damages associated with claims of breach of the duty of care in certain instances (commonly referred to as “exculpation”). Prior to this amendment, exculpation from personal liability for monetary damages associated with breaches of the duty of care could be provided to directors of the corporation but not to officers.
Our amended and restated certificate of incorporation provides for the exculpation of our directors from personal liability for monetary damages associated with breaches of the duty of care but does not have a similar limitation of liability for our officers. We are asking our shareholders to approve an amendment to the amended and restated certificate of incorporation to add a provision exculpating officers of the Company from personal liability for monetary damages associated with claims of breach of the duty of care as is now permitted under the DGCL (the “Officer Exculpation Amendment”).
Proposed Charter Amendment
As part of the Board’s ongoing evaluation of our corporate governance practices, the Board has determined that the Officer Exculpation Amendment would reduce the unequal and inconsistent treatment of directors and officers with respect to claims related to alleged breach of the duty of care and would improve alignment of officers and directors on their duty of care responsibilities. The Officer Exculpation Amendment also would better position the Company to continue to attract and retain top management talent by providing this additional protective provision for its officers.
Consistent with the recent amendment to the DGCL, the Officer Exculpation Provision permits exculpation only for direct claims brought by shareholders (as opposed to derivative claims made by shareholders on behalf of the corporation or claims brought by the Company itself). Further, as with the director exculpation provision currently contained in our amended and restated certificate of incorporation the Officer Exculpation Amendment does not apply to breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or liability arising out of any transaction in which the officer derived an improper personal benefit.
Therefore, considering the narrow class and type of claims for which officers’ liability would be exculpated, and the benefits the Board believes would accrue to the Company and its shareholders in the form of an enhanced ability to attract and retain talented officers, the Board has determined that it is in the best interests of the Company and its shareholders to approve the Officer Exculpation Amendment.
The text of the proposed Officer Exculpation Amendment, which would modify Section 1 of Article VII of the amended and restated certificate of incorporation is included below under the heading “Officer Exculpation Amendment.” On February 21, 2024, the Board approved the Officer Exculpation Amendment and declared that it was advisable to submit the amendment to shareholders for a vote. If approved by our shareholders, the Officer Exculpation Amendment would become effective upon its filing with the Secretary of State of the State of Delaware, which the Company would file promptly following the Annual Meeting.
| 2024 Notice and Proxy Statement | 66 |
Proposal 4: Approval of an Officer Exculpation Amendment to our Amended and Restated Certificate of Incorporation
Proposed Officer Exculpation Amendment
Section 1. Elimination of Certain Liability of Directors and Officers. To the fullest extent permitted by the DGCL, a director or officer of the Corporation shall not be personally liable to the Corporation (in the case of directors) or its stockholders (in the case of directors and officers) for monetary damages for breach of fiduciary duty as a director or officer. If the DGCL is amended after the Effective Time to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer of the corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended.
| The Board recommends a vote “FOR” approval of the Officer Exculpation Amendment to our Amended and Restated Certificate of Incorporation. |
| 67 | |
Security Ownership of Certain Beneficial Owners and Management
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common stock as of April 1, 2022March 28, 2024 by:
each person or group who is known by us to own beneficially more than 5% of our outstanding shares of common stock;
| • | each person or group who is known by us to own beneficially more than 5% of our outstanding shares of common stock; |
each of our Named Executive Officers;
| • | each of our Named Executive Officers; |
each of our directors; and
| • | each of our directors; and |
all of the executive officers and directors as a group.
| • | all the executive officers and directors as a group. |
We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. We have based the calculation of the percentage of beneficial ownership on 282,817,234[●] shares of common stock outstanding, as of April 1, 2022.March 28, 2024. For purposes of calculating each person’s percentage ownership, common stock issuable pursuant to options exercisable within 60 days of April 1, 2022March 28, 2024 and common stock issuable in connection with outstanding RSUs which will vest within 60 days of March 28, 2024 are included as outstanding and beneficially owned for that person, or group, butand are not deemed outstanding for purposes of computing the percentage ownership of any person.that person only. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each stockholdershareholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.shareholder. Unless otherwise indicated, this table is based upon information supplied by officers, directors and principal stockholdersshareholders and Schedules 13D and 13G filed with the SEC.
Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o Sotera Health, 9100 South Hills Blvd, Suite 300, Broadview Heights, Ohio 44147.
Name of Beneficial Owner | | Number of Shares Beneficially Owned (1) |
| | Percentage of Shares Beneficially Owned |
| ||||||||||
5% Stockholders: | ||||||||||||||||
Investment funds and entities affiliated with Warburg Pincus(2) | 105,417,315 | 37.27 | % | |||||||||||||
Investment funds and entities affiliated with GTCR(3) | 70,278,209 | 24.85 | % | |||||||||||||
Named Executive Officers and Directors: | ||||||||||||||||
Michael B. Petras, Jr.(4) | 6,694,388 | 2.37 | % | |||||||||||||
Scott J. Leffler(5) | 717,977 | * | ||||||||||||||
Michael P. Rutz(6) | 560,518 | * | ||||||||||||||
Matthew J. Klaben(7) | 353,315 | * | ||||||||||||||
Terrence G. Hammons, Jr. | — | — | % | |||||||||||||
Ruoxi Chen(8) | 105,432,520 | 37.28 | % | |||||||||||||
Sean L. Cunningham(9) | 70,293,414 | 24.85 | % | |||||||||||||
David A. Donnini(9) | 70,293,414 | 24.85 | % | |||||||||||||
Stephanie M. Geveda(8) | 105,432,520 | 37.28 | % | |||||||||||||
Ann R. Klee(10) | 66,130 | * | ||||||||||||||
Constantine S. Mihas(9) | 70,293,414 | 24.85 | % | |||||||||||||
James C. Neary(8) | 105,432,520 | 37.28 | % | |||||||||||||
Vincent K. Petrella(11) | 15,205 | * | ||||||||||||||
David E. Wheadon(12) | 9,336 | * | ||||||||||||||
All Executive Officers and Directors as a group (14 Persons) | 184,203,623 | 65.13 | % | |||||||||||||
Name of Beneficial Owner | Number of Shares Beneficially Owned (1) | Percentage of Shares Beneficially Owned | ||||||||||||||
5% Shareholders: | ||||||||||||||||
Investment funds and entities affiliated with Warburg Pincus(2) | 88,822,952 | [●] | % | |||||||||||||
Investment funds and entities affiliated with GTCR(3) | 59,215,301 | [●] | % | |||||||||||||
Named Executive Officers and Directors: | ||||||||||||||||
Michael B. Petras, Jr.(4) | 8,166,928 | [●] | % | |||||||||||||
Michael F. Biehl | — | — | ||||||||||||||
Jonathan M. Lyons | — | — | ||||||||||||||
Michael P. Rutz(5) | 620,726 | [●] | % | |||||||||||||
Alexander Dimitrief(6) | 536,671 | [●] | % | |||||||||||||
Ruoxi Chen(7) | 88,864,512 | [●] | % | |||||||||||||
Sean L. Cunningham(8) | 59,256,861 | [●] | % | |||||||||||||
David A. Donnini(8) | 59,256,861 | [●] | % | |||||||||||||
Robert B. Knauss(7) | 88,838,664 | [●] | % | |||||||||||||
Ann R. Klee(9) | 86,735 | [●] | % | |||||||||||||
Constantine S. Mihas(8) | 59,256,861 | [●] | % | |||||||||||||
James C. Neary(7) | 88,864,512 | [●] | % | |||||||||||||
Vincent K. Petrella(10) | 41,560 | [●] | % | |||||||||||||
David E. Wheadon(11) | 35,691 | [●] | % | |||||||||||||
Karen A. Flynn | — | — | ||||||||||||||
All Executive Officers and Directors as a group (14 Persons) | 157,750,076 | [●] | % | |||||||||||||
| * | Represents beneficial ownership of less than 1% |
| 2024 Notice and Proxy Statement | 68 |
Security Ownership of Certain Beneficial Owners and Management
| (1) | Shares shown in the table above include shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account. |
Security Ownership of Certain Beneficial Owners and Management
Consists of (i) |
Effective August 5, 2021, the Warburg Pincus Sponsors (as defined below), other than WP Bull, distributed their shares of common stock (the “Contributed Shares”) to Bull Holdco, pursuant to the terms of a Contribution and Exchange Agreement among such persons and Bull Holdco. The Warburg Pincus Sponsors (as defined below and other than WP Bull) share limited partnership ownership in Bull Holdco on a pro rata basis in accordance with their respective numbers of Contributed Shares. WP Bull Holdco GP LLC, a Delaware limited liability company, is the general partner of Bull Holdco, and WP XI (as defined below) is the sole member of WP Bull Holdco GP LLC. |
The |
Warburg Pincus XI, L.P., a Delaware limited partnership (“WP XI GP”), is the general partner of each of (i) WP XI, (ii) WP XI-B, (iii) WP XI Partners and (iv) WP XIP. WP Global LLC, a Delaware limited liability company (“WP Global”), is the general partner of WP XI GP. Warburg Pincus Partners II, L.P., a Delaware limited partnership (“WPP II”), is the managing member of WP Global. Warburg Pincus Partners GP LLC, a Delaware limited liability company (“WPP GP LLC”), is the general partner of WPP II. Warburg Pincus & Co., a New York general partnership (“WP”), is the managing member of WPP GP LLC. |
Warburg Pincus (Cayman) XI, L.P., a Cayman Islands exempted limited partnership (“WP XI Cayman GP”), is the general partner of WP XI-C (WP XI-C and, together with WP XI, WP XI-B, WP XI Partners and WP XIP, the “WP XI Funds”). Warburg Pincus XI-C, LLC, a Delaware limited liability company (“WP XI-C LLC”), is the general partner of WP XI Cayman GP. Warburg Pincus Partners II (Cayman), L.P., a Cayman Islands exempted limited partnership (“WPP II Cayman”), is the managing member of WP XI-C LLC. Warburg Pincus (Bermuda) Private Equity GP Ltd., a Bermuda exempted company (“WP Bermuda GP”), is the general partner of WPP II Cayman. WP Bull Manager LLC, a Delaware limited Liability company (“WP Bull Manager”), is the general partner of WP Bull. WP is managing member of WP Bull Manager. Warburg Pincus LLC, a New York limited liability company (“WP LLC”), is the manager of the WP XI Funds. The address of the Warburg Pincus |
Includes (i) |
Mr. Petras is the grantor and trustee of |
Consists of |
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Certain Relationships and Related Party Transactions
Secondary OfferingRegistration Rights Agreement
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Under SEC rules, a related person is an officer, director, nominee for director or beneficial holder of more than 5% of any class of our voting securities since the beginning of the last fiscal year or an immediate family member of any of the foregoing.
Other than the transactions described below, and compensation agreements and other arrangements which are described in the sections “Compensation Discussion and Analysis” and “Employment Agreements” since January 1, 20212023, there has not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any related person had or will have a direct or indirect material interest. We believe the terms of the transactions described below were comparable to the terms we could have obtained in arms-length dealings with unrelated third parties.
From time to time, we do business with other companies affiliated with certain holders of our common stock. We believe that all such arrangements have been entered into in the ordinary course of business and have been conducted on an arm’s-length basis.
On March 22, 2021, we closed an underwritten secondary offering of our common stock, at a price to the public of $27.00 per share, in which all 25,000,000 shares were offered by selling stockholders, including Warburg Pincus and GTCR, as well as certain current and former members of our management. The Company did not offer any shares in the offering and did not receive any of the proceeds from the offering. In accordance with the Registration Rights Agreement as described below, we paid certain offering expenses, exclusive of the underwriting discounts and commissions.
We are a party to a second amended and restated registration rights agreement (the “Registration Rights Agreement”) with certain holders of our common stock. Pursuant to the Registration Rights Agreement, we have agreed to register under the Securities Act the sale of shares of our common stock under specified circumstances, including the 175,695,524148,038,253 shares held by the Sponsors as of April 1, 2022.March 28, 2024. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act.
Notwithstanding any contractual restrictions on the sale of our shares, we may be required by investment funds and entities affiliated with either Warburg Pincus or GTCR may require us to register all or part of their shares of common stock in accordance with the Securities Act and the Registration Rights Agreement. The net aggregate offering price of shares that investment funds and entities affiliated with either Warburg Pincus or GTCR propose to sell in any demand registration must be at least $50 million, or such holder must propose to sell all of such holder’s shares if the net aggregate offering price of such shares is less than $50 million. Each of Warburg Pincus and GTCR is entitled to request unlimited demand registrations, but in each case, we are not obligated to effect more than three long-form registrations on Form S-1 or four marketed underwritten shelf take-downs each year at the request of Warburg Pincus or more than three long-form registrations on Form S-1 or four marketed underwritten shelf take-downs each year at the request of GTCR. We also are not obligated to effect more than one marketed underwritten offering in any consecutive 90-day period without the consent of investment funds and entities affiliated with either Warburg Pincus or GTCR. There is no limitation on the number of unmarketed underwritten offerings that we may be obligated to effect at the request of investment funds and entities affiliated with either Warburg Pincus or GTCR. We have specified rights to delay the filing or initial effectiveness of, or suspend the use of, any registration statement filed or to be filed in connection with an exercise of a holder’s demand registration rights.
In addition, if we propose to file a registration statement under the Securities Act with respect to specified offerings of shares of our common stock, we must allow holders of shares subject to registration rights to include their shares in that registration, subject to specified conditions and limitations.
Certain Relationships and Related Party Transactions
Stockholders’ Agreement
These registration rights are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration in certain circumstances and our right to delay a registration statement under specified circumstances. Pursuant to the Registration Rights Agreement, we are required to pay all registration expenses and indemnify each participating holder with respect to each registration of registrable shares that is affected.
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Certain Relationships and Related Party Transactions
Stockholders Agreement
Stockholders Agreement
We and the Sponsors are party to a Stockholders’Stockholders Agreement. Our Stockholders’Stockholders Agreement provides that, for so long as the Stockholders’Stockholders Agreement is in effect, we and the Sponsors are required to take all actions reasonably necessary, subject to applicable regulatory and stock exchange listing requirements (including director independence requirements), to cause the membership of the Board and any committees of the Board to be consistent with the terms of the agreement.
In accordance withlate February 2024, the Stockholders’ Agreement, Warburg Pincus has designated Mr. Chen, Ms. GevedaDelaware Court of Chancery issued a decision that invalidated certain provisions of a stockholder agreement between another company and Mr. Neary as nomineesthe controlling stockholder of that company on the grounds that that those provisions violated Section 141(a) of the DGCL. While the stockholder agreement at issue contains some similarities to our BoardStockholders Agreement, our overall governance arrangements also differ in significant respects from those at issue in the Chancery Court’s decision. The decision remains subject to appeal to the Delaware Supreme Court, and GTCR has designated Messrs. Cunningham, Donnini and Mihas as nomineeswe will continue to our Board.monitor how Delaware law in this area evolves.
Director Designees; Committee Membership
Under the terms of our Stockholders’Stockholders Agreement, for so long as each of our Sponsors Warburg PIncus and GTCR, hold aholds certain percentagepercentages of the shares of common stock that they held immediately following our IPO, each of them is entitled to designate a certain number of directors for election to our Board.Board, which designees are reviewed by the NCG Committee. See “Corporate Governance — Structure and Role of the Board of Directors — Certain Sponsor Rights”.Rights.” Warburg Pincus has designated Mr. Chen, Mr. Knauss and Mr. Neary as nominees to our Board; GTCR has designated Mr. Cunningham, Mr. Donnini and Mr. Mihas as nominees to our Board.
The NCG Committee reviews Board committee composition annually. Subject to any restrictions under applicable law or the Nasdaq rules, each ofthe Stockholders Agreement entitles Warburg Pincus and GTCR is entitled to representation on each Board committee proportionate to the number of directors they are entitled to designate on our Board. In addition, the Stockholders Agreement entitles Warburg Pincus is entitled to appoint the chairpersonchair of our LD&CLDC Committee for so long as Warburg Pincus has the right to designate at least one director for election to our Board.
Removal of Directors
For so long as investment funds and entities affiliated with either Warburg Pincus or GTCR, collectively, hold at least a majority of our outstanding capital stock, a director designated by investment funds and entities affiliated with either Warburg Pincus or GTCR, respectively, may be removed with or without cause by the affirmative vote of the holders of a majority of our outstanding capital stock and with the consent of Warburg Pincus or GTCR, respectively.
Quorum
For so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least one director for election to our Board and for so long as investment funds and entities affiliated with GTCR have the right to designate at least one director for election to our Board, in each case, a quorum of our Board will not exist without at least one director designee of each of Warburg Pincus and GTCR present at such meeting; provided that if a meeting of our Board fails to achieve a quorum due to the absence of a director designee of Warburg Pincus or GTCR, as applicable, the presence of at least one director designee of Warburg Pincus or GTCR, as applicable, will not be required in order for a quorum to exist at the next meeting of our Board.
Transfer Restrictions
Unless otherwise waived by the LD&C Committee and exceptExcept for certain permitted transfers, management stockholders may transfershareholders are restricted from transferring more than a number of vested shares of our common stock equal to the product of (i) the number of shares of our common stock then owned by suchthe management stockholdershareholder multiplied by (ii) a fraction, the numerator of which is the number of shares of our common stock sold by the Sponsors in a public or private sale to a third party and the denominator of which is the total number of shares of our common stock held by the Sponsors immediately prior to such public or private sale. These transfer restrictions apply
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Certain Relationships and Related Party Transactions
Stockholders Agreement
only apply to shares of common stock held by management stockholdersshareholders at closing of the IPO (or securities issued in respect thereof) and remain in effect until, expire upon the sixth anniversary of the completion of the IPO.
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Certain RelationshipsIPO and Related Party Transactions
Stockholders’ Agreement
may be waived prior to their expiration at the discretion of the LDC Committee.
Corporate Opportunities
To the fullest extent permitted by law, we have, on behalf of ourselves, our subsidiaries and our and their respective stockholders,shareholders, renounced any interest or expectancy in, or in being offered an opportunity to participate in, any business opportunity that may be presented to Warburg Pincus, GTCR or any of their respective affiliates, partners, principals, directors, officers, members, managers, employees or other representatives, and no such person has any duty to communicate or offer such business opportunity to us or any of our subsidiaries or shall be liable to us or any of our subsidiaries or any of our or its stockholdersshareholders for breach of any duty, as a director or officer or otherwise, by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us or our subsidiaries, unless, in the case of any such person who is a director or officer of ours, such business opportunity is expressly offered to such director or officer in writing solely in his or her capacity as a director or officer of ours.
Indemnification
Under the Stockholders’Stockholders Agreement, we have agreed, subject to certain exceptions, to indemnify the Sponsors, and various affiliated persons and indirect equityholdersequity holders of the Sponsors, from certain losses arising out of any threatened or actual litigation by reason of the fact that the indemnified person is or was a holder of our common stock or of equity interests in Sotera Health Company. Public stockholders will not benefit from this indemnification provision. This indemnification is in addition to a similar indemnification provision under Topco Parent’s limited partnership agreement, which survived the termination of such agreement. Two of our subsidiaries, GTCR, and GTCR, LLC are currently Warburg Pincus have been named co-defendants in past and present tort lawsuits alleging personal injury and related claims resulting fromto purported emissions and releases of EO from a former Sterigenics facility in Willowbrook, Illinois.Illinois and a Sterigenics facility in Los Angeles, California. The Company, certain current and former directors and officers, the Sponsors, and the financial institutions that served as underwriters in the Company’s IPO and its March 2021 Secondary Public Offering have been named co-defendants in a putative shareholder class action alleging violations of federal securities laws. Our sponsors have also received subpoenas in connection with various lawsuits against the Company. In satisfaction of our indemnity obligations, our legal counsel is jointly engaged to also represent GTCR, LLC in these proceedings and we are bearing the cost of this combined defense effort.costs incurred by indemnitees in defending these actions and/or responding to subpoenas.
Limitation of Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation provides for indemnification of directors and officers to the fullest extent permitted by law, including payment of expenses in advance of resolution of any such matter. Our amended and restated certificate of incorporation eliminates the potential personal monetary liability of our directors to us or our stockholdersshareholders for breaches of their duties as directors except as otherwise required underto the fullest extent permitted by the DGCL. Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the DGCL. As detailed beginning at page 66, we are also asking our shareholders to approve an amendment to our amended and restated certificate of incorporation to add a provision exculpating officers of the Company from personal liability for monetary damages associated with claims of breach of the duty of care as is now permitted under the DGCL. If this proposal is approved, then the personal liability of officers will be further limited to the greatest extent permitted by the DGCL, including as a result of any future amendments to the DGCL.
We have entered into separate indemnification agreements with our directors and officers that may beare broader than the specificmandatory indemnification provisions contained inrights required by the DGCL. Each indemnification agreement provides, among other things, for indemnification to the fullest extent permitted by law and our amended and restated certificate of incorporation and amended and restated bylaws against any and all expenses, judgments, fines and amounts paid in settlement of any claim. The indemnification agreements also provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our amended and restated certificate of incorporation and amended and restated bylaws. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and officers.officers, and in satisfaction of our
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Certain Relationships and Related Party Transactions
Limitation of Liability and Indemnification of Officers and Directors
indemnity obligations, we are bearing the costs of the defense of those current and former directors and officers who have been named as defendants or respondents to subpoenas as described in the preceding section, “Stockholders Agreement — Indemnification.”
The limitation of liability and indemnification provisions included in our amended and restated certificate of incorporation and the indemnification agreements that we have entered into or will enter into with our directors and officers may discourage stockholdersshareholders from bringing a lawsuitlawsuits against our directors and officers for breachalleged breaches of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though any such action, if successful, might benefit us and other stockholders.shareholders. Further, a stockholder’sshareholder’s investment may be adversely affected to the extent that we pay the costs of settlementsettlements and damage awards of damages against directors and officers as required by these indemnification provisions.
We maintain standardSide-A directors and officers liability insurance policies of insurance under which, subject to the limitationsterms, conditions, exclusions, and limits of the policies, defense and indemnity coverage is provided to our directors and officers against loss arising fromfor claims made by reason ofalleging a breach of duty or other wrongful acts as a director or officer, including claims relating to public securities matters.
Certain Relationships Our directors and Related Party Transactions
Policiesofficers liability insurance policies since the time of the IPO do not provide coverage to the Company for the Company’s indemnification of directors and Proceduresofficers or for Related Party Transactions
direct claims against the Company.
Certain of our non-employee directors may, through their relationships with their employers, be insured or indemnified against certain liabilities incurred in their capacity as members of our Board. Although directors designated for election to our Board by investment funds and entities affiliated with either Warburg Pincus or GTCR may have certain rights to indemnification, advancement of expenses or insurance provided or obtained by investment funds and entities affiliated with either Warburg Pincus or GTCR, respectively, we have agreed in our Stockholders’Stockholders Agreement that we will be the indemnitor of first resort, will advance the full amount of expenses incurred by each such director and, to the extent that investment funds and entities affiliated with either Warburg Pincus or GTCR or their insurers make any payment to, or advance any expenses to, any such director, we will reimburse those investment funds and entities and their insurers for such amounts.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our Company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Policies and Procedures for Related Party Transactions
Pursuant to our written related party transaction policy, the Audit Committee of the Board is responsible for evaluating each related party transaction and making a determination as todetermining whether the transaction at issue is fair, reasonable and within our policy and whether it should be ratified and approved. The Audit Committee, in making its determination,such determinations, considers various factors, including the benefit of the transaction to us, the terms of the transaction and whether they are at arm’s-length and in the ordinary course of our business, whether the transaction would impair the independence of an otherwise independent director, the direct or indirect nature of the related person’s interest in the transaction, the size and expected term of the transaction and other facts and circumstances that bear on the materiality of the related party transaction under applicable law and listing standards. The Audit Committee reviews, at least annually, a summary of our transactions with our directors and officers and with firms that employ our directors, as well as any other related person transactions.
Curia Global (“Curia”), is a contract research, development and manufacturing organization, and a customer of our Nelson Labs business segment. Curia is an affiliate of GTCR, one of our Sponsors. In fiscal year 2023, we recorded sales of $2.1 million to Curia.
Quantum Health (“Quantum”) is a consumer health care navigation company, and a vendor to us. Quantum is an affiliate of Warburg Pincus, one of our Sponsors. We expect to spend $0.4 million with Quantum in 2024.
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Other Information
2023 Stockholder2025 Shareholder Proposals
2023 Stockholder2025 Shareholder Proposals
Proposals by stockholdersshareholders for inclusion in our proxy statement and form of proxy for the Annual Meeting to be held in 20232025 pursuant to Rule 14a-8 of the Exchange Act should be addressed to the Corporate Secretary, Sotera Health Company, 9100 South Hills Blvd, Suite 300, Broadview Heights, Ohio 44147, and44147. Proposals must be received at this address no later than December 15, 2022. Any such proposals12, 2024. To be valid, the proposal must also otherwise comply withmeet the requirements of the SEC relating to stockholder proposals.Rule 14a-8. Upon receipt of a proposal, we will determine whether or not to include the proposal in the proxy statement and form of proxy in accordance with applicable law. It is suggestedWe suggest that proposals be forwarded by certified mail, return receipt requested.
Annual Meeting Advance Notice Requirements
OurUnder Article II, Section 2 of our amended and restated bylaws, establish advance notice procedures with respectfor a shareholder to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the Board, to be submitted to the stockholders for consideration at an annual meeting but without being including in the Company’s proxy statement.
To be considered timely under the Company’s amended and restated bylaws, notice of a nomination for election to the Board or notice ofsubmit a proposal or other business submitted other than pursuant to Rule 14a-8 shouldnominate any director at next year’s annual meeting of shareholders, written notice must be addressed to the Corporate Secretary, Sotera Health Company, 9100 South Hills Blvd, Suite 300, Broadview Heights, Ohio 44147 and must be received nonot earlier than the openopening of business on January 26, 2023120 days before, and nonot later than the close of business 90 days before, the first anniversary of the date of the preceding year’s annual meeting of shareholders, provided next year’s annual meeting is called for on a date that is within 30 days before or after such anniversary date. Assuming that next year’s annual meeting is held on schedule, we must receive written notice between January 23, 2025 and February 25, 2023. 24, 2025 of an intention to introduce a nomination or other item of business at that meeting that meets all the requirements contained in our amended and restated bylaws.
In addition, to comply with the universal proxy rules, (once effective), stockholdersshareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-1914a-19(b) under the Exchange Act no later than March 27, 2023.between January 23, 2025 and February 24, 2025.
Questions and Answers About the Proxy Statement and Our 2024 Annual Meeting of Shareholders
QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND OUR 2024 ANNUAL MEETING OF SHAREHOLDERS
| Q: | Why am I receiving these materials? |
| A: | The Board is providing these materials to you in connection with its solicitation of proxies for use at the Company’s Annual Meeting. The Annual Meeting will be held on Thursday, May 23, 2024. The Annual Meeting will be held online at www.virtualshareholdermeeting.com/SHC2024 via a live audio webcast. Shareholders are invited to attend the Annual Meeting via the live audio webcast and to vote on the proposals described in this Proxy Statement. |
These proxy materials are being provided on or about April [●], 2024 to all shareholders of record of Sotera Health as of March 28, 2024.
| Q: | What information is contained in these materials? |
| A: | This Proxy Statement contains important information regarding the Annual Meeting, the proposals on which you are being asked to vote, the voting process and procedures, and information you may find useful in determining how to vote. |
If you requested to receive printed proxy materials, these materials also include an accompanying proxy card. If you received more than one proxy card, this generally means your shares are registered differently or are in more than one account. Please provide voting instructions for each proxy card or, if you vote via the Internet or by telephone, vote once for each proxy card you receive to ensure all your shares are voted.
| Q: | What proposals will be voted on at the Annual Meeting? What are the Board’s recommendations? |
| A: | The following table describes the proposals to be voted on at the Annual Meeting and the Board’s voting recommendations: |
Proposal | Description | Board Voting Recommendation | ||
1. Election of directors | Election of Constantine S. Mihas, James C. Neary, Michael B. Petras, Jr. and David E. Wheadon, M.D. as Class I directors to serve three-year terms | FOR these nominees | ||
2. Vote to approve, on an advisory basis, named executive officer compensation (Say-on-Pay) | Advisory vote to approve our named executive officers’ compensation | FOR | ||
3. Ratification of appointment of independent auditors | Ratification of the appointment of Ernst & Young LLP as our independent auditors for 2024 | FOR | ||
4. Approval of an officer exculpation amendment to our amended and restated certificate of incorporation | Vote to approve an amendment to our amended and restated certificate of incorporation to adopt provisions allowing officer exculpation consistent with Delaware law | FOR | ||
At the time this Proxy Statement was mailed, we were not aware of any other matters to be presented at the Annual Meeting other than those set forth in this Proxy Statement and in the notice accompanying this Proxy Statement.
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Questions and Answers About the Proxy Statement and Our 2024 Annual Meeting of Shareholders
| Q: | What is the record date? How many shares are entitled to vote? |
| A: | Shareholders who own Sotera Health common stock at the close of business on March 28, 2024, the record date, are entitled to vote at the Annual Meeting. On the record date, there were [●] shares of Sotera Health common stock outstanding. Each share of Sotera Health common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. |
| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
| A: | Most Sotera Health shareholders hold their shares as beneficial owners (through a broker, bank, or other nominee) rather than as a shareholder of record (directly in their own name). |
Shareholders of Record. If your shares of Sotera Health
common stock are registered directly in your name with Sotera Health’s transfer agent, Computershare, youare considered the shareholder of record with respect to those shares, and these proxy materials are being sent directly to you. As a shareholder of record, you have the right to grant your voting proxy directly to Sotera Health or to vote electronically at the Annual Meeting. If you requested printed proxy materials, we have enclosed an accompanying proxy card for you to use. You may also submit voting instructions via the Internet or by telephone by following the instructions on the accompanying proxy card, as described below under “How can I vote my shares?”
Beneficial Owners. If your shares of Sotera Health common stock are held in a brokerage account or by a broker, bank, or other nominee, you are considered thebeneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered the shareholder of record with respect to those shares. As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. However, because you are not the shareholder of record, you may not vote these shares electronically at the Annual Meeting unless you follow the instructions from your broker, bank or other nominee. Your broker, bank, or other nominee has included a voting instruction form for you to use to direct them how to vote your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them.
| Q: | Can I attend the Annual Meeting? |
| A: | Sotera Health shareholders on the record date or their legal proxy holders may attend the Annual Meeting online at www.virtualshareholdermeeting.com/SHC2024. To participate in the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card, or on the instructions that accompanied your proxy materials. |
| Q: | How can I vote my shares? |
| A: | You may vote over the Internet, by telephone, by mail, or electronically at the Annual Meeting. Votes submitted by telephone or over the Internet must be received by 11:59 p.m., Eastern Daylight Time, on Wednesday, May 22, 2024, unless otherwise indicated. |
Voting over the Internet. To vote over the Internet, please follow either the instructions included on your proxy card or the votinginstructions you receive by e-mail or that are being provided via the Internet. You will be asked to provide the 16-digit control number on your Notice of Internet Availability or Voting Instruction Form. If you vote over the Internet, you do not need to complete and mail a proxy card.
Voting by Telephone. To vote by telephone, dial 1-800-690-6903 and follow the recorded instructions. You will be asked to providethe 16-digit control number on your Notice of Internet Availability or Voting Instruction Form. If you vote by telephone, you do not need to complete and mail a proxy card.
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Questions and Answers About the Proxy Statement and Our 2024 Annual Meeting of Shareholders
Voting by Mail. If you have requested printed proxy materials, you may vote by mail by signing the proxy card and returning it in theprepaid and addressed envelope enclosed with the proxy materials. By signing and returning the proxy card, you are authorizing the individuals named on the proxy card to vote your shares at the Annual Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Annual Meeting so that your shares of Sotera Health common stock will be voted if you are unable to attend the Annual Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all your shares are voted. Your printed proxy materials may also indicate methods whereby you may vote by telephone or over the Internet instead of signing, dating and returning the proxy card by mail.
Voting Electronically at the Meeting. If you attend the virtual Annual Meeting and plan to vote electronically at the Annual Meeting,you can vote by following the instructions provided when you log in to the online virtual Annual Meeting platform. If you are a shareholder of record, you have the right to vote electronically at the Annual Meeting. If you are the beneficial owner of shares held in street name, you may also vote electronically at the Annual Meeting if you follow the instructions from your broker, bank or other nominee to vote those shares.
| Q: | Can I change my vote or revoke my proxy? |
| A: | If you are a shareholder of record, you may change your vote or revoke your proxy at any time before the Annual Meeting. To change your vote or revoke your proxy, you must: |
| • | Sign and return a later-dated proxy card, or enter a new vote over the Internet or by telephone; or |
| • | Provide written notice of the revocation to Sotera Health’s Corporate Secretary at: Sotera Health Company, Attention: Alexander Dimitrief, Secretary, 9100 South Hills Blvd., Suite 300, Broadview Heights, Ohio 44147, before the proxies vote your shares at the Annual Meeting; or |
| • | Attend the virtual Annual Meeting and vote electronically at the meeting. |
If you are a beneficial shareholder, you may revoke your proxy or change your vote only by following the separate instructions provided by your broker, trust, bank or other nominee.
Only the latest validly-executed proxy that you submit will be counted.
| Q: | What is the quorum requirement for the Annual Meeting? |
| A: | A majority of the outstanding shares entitled to vote as of the record date must be present at the Annual Meeting to constitute a quorum and to conduct business at the Annual Meeting. Your shares of Sotera Health common stock are counted as present if you vote in person at the Annual Meeting, over the Internet, by telephone, or by submitting a properly executed proxy card by mail. |
Abstentions and broker non-votes are counted as present for the purpose of determining a quorum.
| Q: | How are votes counted? |
| A: | The following table describes how voting results will be tabulated. |
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Questions and Answers About the Proxy Statement and Our 2024 Annual Meeting of Shareholders
Proposal | Voting Options | Required Vote | Effect of Abstentions and | Broker Allowed? | Advisory Proposal? | |||||
1. Election of directors | FOR, AGAINST or ABSTAIN with respect to each of the director nominees | Majority of votes cast(1) | No effect - not counted as a “vote cast” | No | No | |||||
2. Vote to approve named executive officer compensation (Say-on-Pay) | FOR, AGAINST or ABSTAIN | Majority of votes cast | No effect - not counted as a “vote cast” | No | Yes | |||||
3. Ratification of appointment of independent auditors | FOR, AGAINST or ABSTAIN | Majority of votes cast | Abstentions have no effect - not counted as Broker Non-Votes are counted | Yes | Yes | |||||
4. Approval of an officer exculpation amendment to our amended and restated certificate of incorporation | FOR, AGAINST or ABSTAIN | Majority of votes cast | Counted as a vote cast AGAINST | No | No | |||||
| (1) | In accordance with our Corporate Governance Guidelines, because the election of directors will be uncontested, a director nominee must receive more votes cast “FOR” than “AGAINST” his election to be elected. |
If you are a shareholder of record and you sign and return your proxy card without giving specific voting instructions, your shares will be voted on the proposals as recommended by our Board and in accordance with the discretion of the persons named on the proxy card with respect to any other matters that may properly come before the Annual Meeting.
If your shares are held in street name and you do not instruct your broker on a timely basis on how to vote your shares, your brokerage firm, in its discretion, may either leave your shares unvoted or vote your shares on routine matters. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm is a routine matter. Without your voting instructions, your brokerage firm cannot vote your shares on Proposal 1, Proposal 2, or Proposal 4. These unvoted shares, called “broker non-votes,” refer to shares held by brokers who have not received voting instructions from their clients and who do not have discretionary authority to vote on non-routine matters. Broker non-votes are not considered entitled to vote on non-routine proposals. Broker non-votes will have no effect on the outcome of the election of any director nominee or of the advisory vote on named executive officer compensation. Broker non-votes on the vote to approve the officer exculpation amendment will be counted as votes cast “against” the proposal.
| Q: | Who will count the votes? Where can I find the voting results of the Annual Meeting? |
| A: | An inspector of elections appointed for the Annual Meeting will tabulate the votes. Preliminary voting results will be announced at the Annual Meeting. Final voting results will be reported in a Current Report on Form 8-K, which will be filed with the SEC following the Annual Meeting. |
| Q: | Who will bear the cost of soliciting votes for the Annual Meeting? |
| A: | Sotera Health will bear the entire cost of proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. |
| Q: | Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials in the mail? |
| A: | In accordance with SEC rules, we are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. On April [●], 2024, we commenced mailing a Notice |
| 2024 Notice and Proxy Statement | 78 |
Questions and Answers About the Proxy Statement and Our 2024 Annual Meeting of Shareholders
| of Internet Availability to our shareholders (other than those who had previously requested electronic or paper delivery) containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice of Internet Availability also instructs you on how to vote over the Internet. |
This process is designed to expedite shareholders’ receipt of proxy materials, reduce the cost of the Annual Meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
| Q: | I share an address with another shareholder, and we received only one paper copy or we received multiple paper copies of the proxy materials. How can I obtain an additional copy, or a single copy, as applicable, of the proxy materials? |
| A: | Under a practice approved by the SEC called “householding,” shareholders who have the same address and last name and who do not participate in electronic delivery of proxy materials will receive only one mailed copy of our proxy materials, unless one or more of these shareholders notifies us that he or she wishes to receive individual copies. Shareholders who participate in householding will continue to receive separate proxy cards. |
If you share an address with another shareholder and received only one set of proxy materials and would like to request a separate paper copy of these materials, please contact the Broadridge Householding Department by phone at 1-866-540-7095 or by mail to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717.
If you are eligible for householding, but you and other shareholders of record with whom you share an address currently receive multiple copies of the proxy materials, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of the proxy materials for your household, please contact the Broadridge Householding Department at the aforementioned phone number or address.
| 79 | |
SOTERA HEALTH COMPANY
9100 SOUTH HILLS BLVD, SUITE 300
BROADVIEW HEIGHTS, OH 44147SCAN TOVIEW MATERIALS & VOTE
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date.on May 22, 2024. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/SHC2022
SHC2024
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date.on May 22, 2024. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:D76542-P68172
V35298-P07173 KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLYSOTERA HEALTH COMPANYThe Board of Directors recommends you vote FOR the following:1. Elect the following Class II nominees for director to hold office until the 2025 Annual Meeting of Stockholders and until their successors have been duly elected and qualified:Nominees: For Against Abstain1a. Ruoxi Chen ! ! !1b. David A. Donnini ! ! !1c. Ann R. Klee ! ! !The Board of Directors recommends you vote ONE YEAR on the following proposal:2. Approve, on an advisory basis, the frequency of future advisory votes to approve our named executive officers’ compensation.The Board of Directors recommends you vote FOR the following proposal:3. Ratification of the appointment of Ernst & Young LLP as our independent auditors for 2022.Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer.Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date1 Year 2 Years 3 Years AbstainFor Against Abstain
| DETACH AND RETURN THIS PORTION ONLY | ||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | ||
| SOTERA HEALTH COMPANY | ||||||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR the following: | ||||||||||||||||||||||||||||||
| 1. | Elect the following Class I nominees for director to hold office until the 2027 Annual Meeting of Shareholders and until their successors have been duly elected and qualified: | |||||||||||||||||||||||||||||
| Nominees: | For | Against | Abstain | |||||||||||||||||||||||||||
| 1a. Constantine S. Mihas | ☐ | ☐ | ☐ | The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||||||||||||||||||||||
| 1b. James C. Neary | ☐ | ☐ | ☐ | 4. | Approve an amendment to our amended and restated certificate of incorporation to adopt provisions allowing officer exculpation consistent with Delaware law. | ☐ | ☐ | ☐ | ||||||||||||||||||||||
1c. Michael B. Petras, Jr. | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
| 1d. David E. Wheadon, M.D. | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||||||||||||||||||||||||||
2. | Approve, on an advisory, non-binding basis, our named executive officers’ compensation. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||||||||||||||||||||||||||
3. | Ratify the appointment of Ernst & Young LLP as our independent auditors for 2024. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||
Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer. | ||||||||||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com.
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| V35299-P07173 |
SOTERA HEALTH COMPANY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
SHAREHOLDERS
MAY 26, 2022
23, 2024
The stockholder(s)shareholder(s) hereby appoint(s) Michael B. Petras, Jr. and Terrence G. Hammons, Jr.,Alexander Dimitrief, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of Sotera Health Company that the stockholder(s)shareholder(s) is/are entitled to vote at the Annual Meeting of StockholdersShareholders to be held virtually at 9:00 a.m., Eastern Time on May 26, 2022,23, 2024, at www.virtualshareholdermeeting.com/SHC2022,SHC2024, and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S)SHAREHOLDER(S). IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” ALL DIRECTOR NOMINEES, “1 YEAR” FOR“FOR” PROPOSAL 2, “FOR” PROPOSAL 3, “FOR” PROPOSAL 4, AND IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS AYOU VOTE OF “FOR” ALL DIRECTOR NOMINEES, “1 YEAR” FOR“FOR” PROPOSAL 2, “FOR” PROPOSAL 3, AND “FOR” PROPOSAL 3.
4.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE