(1) | Amount Previously Paid: | |
(2) | Form, Schedule or Registration Statement No.: | |
(3) | Filing Party: | |
(4) | Date Filed: | |
[PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 2021]
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
NOTICE OF ANNUALSPECIAL MEETING
AND
PROXY STATEMENT
March 26, 2019October [●], 2021
To Our Stockholders:
On behalf of the Board of Directors, we invite you to attend the Annual Meetinga special meeting of Stockholdersstockholders of CryoLife, Inc. to be held at CryoLife, Inc.’s Corporate Headquarters, 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144,(the “Special Meeting”) on May 15, 2019November 16, 2021 at 9:00 a.m., EDT. Eastern time. We have adopted a virtual only format for the Special Meeting, due to the continuing health and safety concerns related to the coronavirus (COVID-19) pandemic and our successful use of the virtual only format at prior annual meetings. The Special Meeting will be accessible at the following website address: [●].
Please review this Notice of AnnualSpecial Meeting and Proxy Statement (this “Notice” and “Proxy Statement,” respectively), which describes the formal business to be transactedconducted and procedures for voting on matters to be considered at the AnnualSpecial Meeting.
It is important that your shares be represented at the Annual Meeting. Whether or notYOUR VOTE IS IMPORTANT. Regardless of whether you plan to attend the virtual Special Meeting, we request that you please take a few minutes now and follow the instructions provided on the noticeNotice or proxy card you received by mail, and further described herein, to review the Proxy Statement and vote your shares via internet, telephone, or mail. You may, of course, choose to attend the AnnualSpecial Meeting virtually and vote your shares during the meeting online. If you wish to participate in person.the meeting, you will need your control number to join the meeting.
IfWhether or not you plan to attend the Annualvirtual Special Meeting, are a stockholder of record, and received our notice by mail, please bring a form of identification to the Annual Meeting. If your shares are not registered in your own name but rather are held in street name and you would like to attend the Annual Meeting, please ask the broker, trust, bank, or other nominee that holds the shares to provide you with evidence of your share ownership and bring it along with your identification to the Annual Meeting.
However you choose to participate, we encourage you to review this Proxy Statement and vote your shares.
Sincerely, | |
| |
J. PATRICK MACKIN | |
Chairman, President, and Chief Executive Officer |
CRYOLIFE, INC. | 20192021 Proxy Statement – Special Meeting
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
NOTICE OF ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 2021
TO THE STOCKHOLDERS OF CRYOLIFE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meetinga special meeting of Stockholdersstockholders of CRYOLIFE, INC.CryoLife, Inc. (the “Annual“Special Meeting”) will be held at CryoLife, Inc.’s Corporate Headquarters, 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144, on May 15, 2019,November 16, 2021 at 9:00 a.m. Eastern time. Like the 2021 annual meeting of stockholders, the Special Meeting will be held as a virtual only meeting. The Special Meeting will be accessible at the following website address: [●], EDT, for the following purposes:
1. |
To approve |
2. | To |
3. | To |
Only record holders of CryoLife’s common stock at the close of business on March 6, 2019,September 21, 2021, will be eligible to attend and vote at the AnnualSpecial Meeting. A list of stockholders entitled to vote at the Special Meeting will be available for inspection by our stockholders at the meeting and upon request during ordinary business hours beginning ten days prior to the date of the Special Meeting.
Your attendance atduring the AnnualSpecial Meeting is very much desired. However, if there is any chance you may not be able to attend the AnnualSpecial Meeting, please follow the instructions on the noticeNotice or proxy card you received by mail to execute your vote by internet, telephone, or mail.
Important notice regarding the availability of proxy materials for the AnnualSpecial Meeting of Stockholdersstockholders to be held on May 15, 2019.November 16, 2021. Pursuant to rules promulgated by the Securities and Exchange Commission, we have elected to provide access to our proxy materials both by notifying you of the availability of our proxy materials, including the Notice of Special Meeting and Proxy Statement, and our 2019 Annual Report to Stockholders, on the internet athttp://www.astproxyportal.com/ast/01609 [●] and providing the means whereby you can request a paper copy of proxy materials to be sent via U.S. mail.
By Order of the Board of Directors: | |
 | |
JEAN F. HOLLOWAY | |
Corporate Secretary | |
Date: October [●], 2021 |
Date: March 26, 2019
An electronic copy of CryoLife’s 2019 Annual Report to Stockholders, which includes CryoLife’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, containing financial statements, is available via the proxy information website provided on your proxy notice.
CRYOLIFE, INC. | 20192021 Proxy Statement – Special Meeting
TABLE OF CONTENTS
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
| |
CRYOLIFE, INC. | 2019 Proxy Statement
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1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
PROXY STATEMENT
FOR ANNUALSPECIAL MEETING OF STOCKHOLDERS
NOVEMBER 16, 2021
This Proxy Statement is furnished to our stockholders of record as of the close of business on March 6, 2019,September 21, 2021, the record date, for the solicitation of proxies by the Board of Directors of CryoLife, Inc. (“CryoLife,” the “Company,” “we,” “our,” or “us”) for CryoLife’s Annual Meetingspecial meeting of Stockholdersstockholders (the “Annual“Special Meeting”) to be held on May 15, 2019,November 16, 2021, at 9:00 a.m., EDT. Eastern time. The AnnualSpecial Meeting will be held in the auditoriumvirtually only at the CryoLife Corporate Headquarters, 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144.following web address: [●]. The voting of shares will not affect a stockholder’s right to attend the AnnualSpecial Meeting. A paper proxy that is signed may be changed by sending in a timely, but later dated, signed paper proxy. Any stockholder sending in or completing a proxy may also revoke it at any time before it is exercised by giving timely notice to Jean F. Holloway, General Counsel and Corporate Secretary, CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144, (770) 419-3355. We are making our proxy materials available to stockholders beginning on March 26, 2019.October [●], 2021. CryoLife is providing notice of the Special Meeting and access to the Proxy Statement via the “Notice and Access” method.
CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting
QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING AT THE ANNUAL MEETING3
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AND VOTING DURING THE SPECIAL MEETING |
Why am I receiving this Proxy Statement? | You are receiving this Proxy Statement from us because you were a stockholder of record at the close of business on the record date of | |
At the close of business on the record date, CryoLife had outstanding a total of | ||
What does it mean if I receive more than one Notice or more than one set of proxy materials? | It means that your shares are held in more than one account at the transfer agent and/or with banks or brokers. Please vote all of your shares. To ensure that all of your shares are voted, for each Notice or set of proxy materials, please submit your proxy by phone, via the internet, or, if you received printed copies of the proxy materials, by signing, dating, and returning the enclosed proxy card in the enclosed envelope. | |
Who is entitled to attend and vote at the | Only holders of record of shares of our common stock at the close of business on | |
How many shares must be present or represented to conduct business | The presence | |
What is a broker non-vote? | Broker non-votes occur when a broker, bank, or other nominee holds shares in “street name” for a beneficial owner and that nominee does not vote the shares because it (i) has not received voting instructions from the beneficial owner and (ii) lacks discretionary voting power to vote those shares with respect to a particular proposal. Broker non-votes are counted for purposes of determining whether or not a quorum exists for the transaction of business but will not be counted as votes cast “for” or “against” any proposal and will have no effect on the voting results for any proposal. |
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What items of business will be voted on | The items of business to be voted on
1. To
2. To approve
3. To approve
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How does the Board of Directors recommend that I vote? | Our Board of Directors recommends that you vote your ● FOR the ● FOR the Exclusive Forum Proposal; and ● FOR the proposal to adjourn the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the | |
What shares can I vote | You may vote shares you owned as of | |
What is the difference between holding shares as a stockholder of record and as a beneficial owner? | Most of our stockholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between common stock held of record and those owned |
beneficially (often referred to as holding shares in “street name”).
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| Stockholders of Record. If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, thestockholder of record, and these proxy materials are being sent directly to you by us. As thestockholder of record | ||
Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered thebeneficial owner of shares held instreet name. As the beneficial owner of shares as of the record date for the Special Meeting, you have the right to direct your broker, trustee, or nominee to vote your shares as you instruct. The broker, trustee, or other nominee may either vote | ||
How can I vote my shares without attending the | Whether you hold shares directly as the stockholder of record or as a beneficial owner, you may vote in advance of the
Voting by Mail. You may vote by filling out and returning your proxy card (if you are a stockholder of record), or by filling out and |
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Voting by Internet. If you are a stockholder of record, you may vote in advance of the
Voting by Telephone.If you are a stockholder of record, you may vote in advance of the
Whether you hold shares directly as the stockholder of record or as a beneficial owner, you may direct how your shares are voted without attending the |
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How can I vote my shares | Shares held in your name as the stockholder of record may be voted You may vote shares held beneficially in street name Online access to the | |
Can I change my vote or revoke my proxy? | If you are the stockholder of record, and you have submitted a vote via the internet, telephone, or by mail, you may revoke your vote by submitting a timely later-dated vote via the same |
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What do I need to attend the | Attendance Attending the virtual Special Meeting as a Registering to attend the | |
Is my vote confidential? | Electronic votes, proxy cards, voting instructions, ballots, and voting tabulations that identify individual stockholders are not secret; however, all such materials will be handled in a manner intended to reasonably protect your voting privacy. Your vote will not be disclosed, except as required by law and except | |
How are votes counted and what vote is required to approve each | Each outstanding share of common stock entitles the holder thereof to one vote on each matter considered Proposal One: Reincorporation Proposal. The affirmative vote of the |
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| practical effect of a vote against the proposal. Proposal Two: Exclusive Forum Proposal.The | ||
Proposal Three: Adjournment of Special Meeting, if Necessary, to Solicit Additional Proxies. The affirmative vote of the holders of a majority of the outstanding shares of our common stock present or represented by proxy at the Special Meeting and entitled to vote thereon is required to approve adjourning the meeting. Abstentions and broker non-votes will not be counted as votes cast, and they will not have any effect on the outcome of this proposal. | ||
Who should I contact if I experience technical difficulties accessing the virtual Special Meeting? | American Stock Transfer & Trust Company, LLC will provide technical support for all stockholders attending the Special Meeting. Stockholders experiencing technical difficulties accessing the meeting may visit https://go.lumiglobal.com/faq for assistance. We encourage you to access the Special Meeting starting one hour prior to the | |
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What else should I know about the virtual process for the Special Meeting? | Stockholders of record or those who have received a “legal proxy” will be able to submit questions related to the business of the meeting while attending the Special Meeting, from the time the meeting is first called to order through the end of the question and answer period, and will be alerted prior to the end of the question and answer period. A replay of the Special Meeting, as well as a list of stockholder questions and Company answers, will be available after the Special Meeting concludes. | |
Who is soliciting my vote, and who will bear the costs of this solicitation? | The Proxy Statement is being solicited on behalf of our Board of Directors. We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing, and delivery of this Proxy Statement, via electronic means or paper means upon stockholder request. In addition, our non-employee directors, executive officers, employees, and agents may also solicit proxies in person, by telephone, by electronic mail, or by other means of communication. We will not pay any additional compensation to our non-employee directors, executive officers, or other employees for soliciting proxies. | |
Where can I find the voting results of the | We intend to announce preliminary voting results | |
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PROPOSAL ONE–ELECTION OF DIRECTORS
Directors of CryoLife elected at the Annual Meeting to be held on May 15, 2019, will hold office until the next annual meeting, until their successors are duly qualified, or until their earlier death, resignation, or removal.
Director Nominees
Each of the nominees is currently a director of CryoLife. Should any nominee for the office of director become unable to accept nomination or election, it is the intention of the persons named on the proxy card, unless otherwise specifically instructed in the Proxy Statement, to vote for the election of such other person as the Board of Directors may recommend.
The following table sets forth the name and age of each nominee, the period during which each such person has served as a director of CryoLife, the number of shares of CryoLife’s common stock beneficially owned, either directly or indirectly, by such person, and the percentage of outstanding shares of CryoLife’s common stock such ownership represented at the close of business on March 6, 2019, according to information received by CryoLife. None of the shares of stock noted below are subject to a pledge or similar arrangement. Except for J. Patrick Mackin, our President, Chief Executive Officer, and Chairman of the Board, none of the nominees holds any other position or office with CryoLife.
| Name of Nominee | Director Since | Age | Shares of CryoLife Stock Beneficially Owned(1)(#) | Percentage of Outstanding Shares of CryoLife Stock(7) (%) |
| Thomas F. Ackerman | 2003 | 64 | 103,987(2) | * |
| Daniel J. Bevevino | 2003 | 59 | 103,987(2) | * |
| Marna P. Borgstrom | 2018 | 65 | 3,456(3) | * |
| James W. Bullock | 2016 | 62 | 12,904(2) | * |
| Jeffrey H. Burbank | 2017 | 56 | 8,164(2) | * |
| J. Patrick Mackin | 2014 | 52 | 517,019(4) | 1.4 |
| Ronald D. McCall | 1984 | 82 | 153,699(5) | * |
| Harvey Morgan | 2008 | 77 | 81,237(6) | * |
| Jon W. Salveson | 2012 | 54 | 83,987(2) | * |
Director Nominee Qualifications and Biographical InformationGeneral
Thomas F. Ackerman has served as a directorOn September 20, 2021, for the reasons discussed below, the Board of CryoLife since December 2003. Until early 2016, Mr. Ackerman served as a Senior Financial Advisor of Charles River Laboratories International, Inc. (NYSE: CRL) (“Charles River Laboratories”), a position he held since August 2015. Until February 2017, Mr. Ackerman served as a consultant to Charles River Laboratories. Charles River Laboratories is a leading global provider of solutions that accelerateDirectors approved and declared it advisable and in the early-stage drug discovery and development process, with a focus onin vivo biology, including research models and services required to enablein vivo drug discovery and development. From 2005 to 2015, he served as Executive Vice President and Chief Financial Officer, from 1999 to 2005, he served as Senior Vice President and Chief Financial Officer, and from 1996 to 1999, he served as Vice President and Chief Financial Officer of Charles River Laboratories, where he was employed since 1988. Mr. Ackerman is a directorbest interest of the UniversityCompany and its stockholders to change the Company’s state of Massachusetts Amherst Foundation and serves on the audit committee of Olin College of Engineering. Mr. Ackerman received a B.S. in Accountingincorporation from the UniversityState of MassachusettsFlorida to the State of Delaware, subject to approval by the stockholders at the Special Meeting. The Reincorporation will be effected pursuant to the plan of conversion to be entered into by the Company (the “Plan of Conversion”). In accordance with Florida and became a Certified Public Accountant in 1979 (his license is currently inactive)Delaware Law, the Plan of Conversion includes the certificate of conversion and the certificate of incorporation that will govern the resulting Delaware corporation (the “Delaware Certificate of Conversion” and the “Delaware Certificate of Incorporation,” respectively). Accordingly, approval of the Reincorporation Proposal to reincorporate the Company from the State of Florida to the State of Delaware pursuant to the Plan of Conversion (the “Reincorporation”) will also constitute approval and adoption of the Delaware Certificate of Conversion, the Delaware Certificate of Incorporation, and an authorization pursuant to the Plan of Conversion to adopt the Delaware bylaws (the “Delaware Bylaws”) to conform to the requirements of the General Corporation Law of the State of Delaware (the “DGCL”).
The principal effects of the Reincorporation, if approved by our stockholders and effected, will be that:
● | The affairs of the Company will cease to be governed by Florida law and will become subject to Delaware law. |
● | The resulting Delaware corporation (referred to in this section as “CryoLife-Delaware”) will be deemed to be the same entity as the Company as currently incorporated in Florida (referred to in this section as “CryoLife-Florida”) and all of the rights, privileges, and powers of CryoLife-Florida, and all property, real, personal, and mixed, and all debts due to CryoLife-Florida, as well as all other things and causes of action belonging to CryoLife-Florida, shall remain vested in CryoLife Delaware. All rights of creditors and all liens upon any property of CryoLife-Florida shall be preserved unimpaired, and all debts, liabilities, and duties of CryoLife-Florida shall remain attached to CryoLife-Delaware, and may be enforced against CryoLife-Delaware to the same extent as if said debts, liabilities, and duties had originally been incurred or contracted by it in its capacity as a corporation of the State of Delaware. CryoLife-Delaware will have the same name as CryoLife-Florida and will continue with the same officers and directors of CryoLife-Florida immediately prior to the Reincorporation, as more fully described below. |
● | If and when the Reincorporation becomes effective, all of the issued and outstanding shares of common stock of CryoLife-Florida will be automatically converted into issued and outstanding shares of common stock of CryoLife-Delaware, without any action on the part of our stockholders. We will continue to file periodic reports and other documents with the SEC. The Reincorporation will not change the respective positions of the Company or stockholders under federal securities laws. Shares of our common stock that are freely tradable prior to the Reincorporation will continue to be freely tradable after the Reincorporation, and shares of our common stock that are subject to restrictions prior to the Reincorporation will continue to be subject to the same restrictions after the Reincorporation. For purposes of computing compliance with the holding period requirement of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), stockholders will be deemed to have acquired the CryoLife-Delaware common stock on the date they acquired their shares of CryoLife-Florida common stock. |
● | Upon effectiveness of the Reincorporation and pursuant to the Plan of Conversion, all of our employee benefit and incentive plans will become CryoLife-Delaware plans, and each option, equity award, or other right issued under such plans will automatically be converted into an option, equity award, or right to purchase or receive the same number of shares of CryoLife-Delaware common stock, at the same price per share, upon the same terms and subject to the same conditions as before the Reincorporation. In addition, our employment agreements and other employee benefit arrangements also will be continued by CryoLife-Delaware upon the terms and subject to the conditions in effect at the time of the Reincorporation. |
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ThePlan of Conversion
To accomplish the Reincorporation, the Board of Directors has determined that Mr. Ackerman should serve as a directoradopted the Plan of CryoLife because of his expertise in accounting and financial reporting, particularlyConversion, in the biotechnology industry.form attached to this Proxy Statement as Annex A. The Plan of Conversion provides that we will convert into a Delaware corporation and thereafter will be subject to all of the provisions of the DGCL. As required by Florida and Delaware law, the Plan of Conversion includes the Delaware Certificate of Conversion, the Delaware Certificate of Incorporation, and the Delaware Bylaws for CryoLife-Delaware.
Assuming that holders of a majority of our outstanding shares of common stock vote in favor of the Reincorporation Proposal and the Board of Directors does not elect to delay or terminate the Reincorporation, we will cause the Reincorporation to be effected at such time as we determine by filing with (1) the Florida Department of State Division of Corporations articles of conversion, substantially in the form attached hereto as Annex B (the “Florida Articles of Conversion”), and (2) the Secretary of State of the State of Delaware the (i) Delaware Certificate of Conversion, substantially in the form attached hereto as Annex C and (ii) Delaware Certificate of Incorporation, which will govern CryoLife-Delaware, substantially in the form attached hereto as Annex D.
Approval of this Proposal by our stockholders will constitute approval of the Plan of Conversion, the Florida Articles of Conversion, the Delaware Certificate of Conversion, the Delaware Certificate of Incorporation, and the authorization to adopt the Delaware Bylaws (in the form attached hereto as Annex E) for CryoLife-Delaware.
If the Reincorporation is approved by our stockholders and the Board of Directors does not elect to delay or terminate the Reincorporation, the Reincorporation would become effective upon the filing (and acceptance thereof by the Secretary of State of the State of Florida) of the Florida Articles of Conversion and the filing (and acceptance thereof by the Secretary of State of the State of Delaware) of the Delaware Certificate of Conversion and the Delaware Certificate of Incorporation, or at such later date and time specified therein, which date will not be more than 90 days after the date on which we file the Florida Articles of Conversion with the Florida Department of State Division of Corporations.
Daniel J. Bevevino has served as a director of CryoLife since December 2003. From 1996 until March 2008, Mr. Bevevino served as the Vice President and Chief Financial Officer of Respironics, Inc., a company that developed, manufactured and marketed medical devices used primarilyReasons for the treatment of patients suffering from sleep and respiratory disorders. He was employed by Respironics beginning in 1988. In March 2008, Respironics was acquired by Royal Philips Electronics (NYSE: PHG)(“Philips”), whose businesses include a variety of medical solutions including medical diagnostic imaging and patient monitoring systems, as well as businesses focused on energy efficient lighting and consumer products. From March 2008 to December 31, 2009, Mr. Bevevino was employed by Philips as the Head of Post-Merger Integration – Respironics, as well as in various operating capacities, to help facilitate the integration of the combined companies. He is currently an independent consultant providing interim chief financial officer services in the life sciences industry, and he currently serves as a director of one of the private companies for which he provides services. He began his career as a Certified Public Accountant with Ernst & Young (his license is currently inactive). Mr. Bevevino received a B.S. in Business Administration from Duquesne University and an MBA from the University of Notre Dame.Reincorporation
The Board of Directors has determinedapproved the Reincorporation because we believe that Mr. Bevevino should serve asthe corporate laws of the State of Delaware are more comprehensive, widely-used, and extensively interpreted than the corporate laws of other states, including the State of Florida. The State of Delaware is recognized for adopting comprehensive, modern, and flexible corporate laws, which are amended periodically to respond to the changing legal and business needs of corporations. As a directorresult of CryoLife becausethe flexibility and responsiveness of his expertisethe Delaware corporate laws to the legal and business needs of corporations, many major corporations are incorporated in accounting and financial reporting,Delaware or have changed their corporate domiciles to Delaware in a manner similar to the Reincorporation that we are proposing. Delaware has established a specialized court, the Court of Chancery that has exclusive jurisdiction over matters relating to the DGCL. The Delaware judiciary has become particularly in the medical device industry.
Marna P. Borgstromhas served as a director of CryoLife since June 2018 and was recommended by a third party search firm. Since 2005, Ms. Borgstrom has been President, Chief Executive Officer,familiar with corporate law matters, and a board membersubstantial body of court decisions has developed construing the Yale New Haven Health System, an integrated health care delivery systemlaws of Delaware, thus providing greater clarity and predictability with respect to our corporate legal and governance affairs. We believe this will assist our Board of Directors and management in making corporate decisions and taking corporate actions with greater assurance as to the validity and consequences of those decisions and actions. For these and other reasons, we believe that operatesreincorporating in Connecticut, western Rhode Island, and Westchester County, New York. Additionally, Ms. Borgstrom currently serves on several nationally recognized boards including Vizient, Inc., a privately held, member-driven health care performance improvement company, the Coalition to Protect America's Healthcare, and the Healthcare Institute. Ms. Borgstrom received her Bachelor of Arts from Stanford University and Masters in Public Health from Yale University.Delaware will directly benefit our stockholders.
The Board of Directors has determined that Ms. Borgstrom should serve asis not proposing the Reincorporation to prevent a directorchange in control of CryoLife becausethe Company, nor is it aware of her extensive experience, coupled with her knowledgeany present attempt by any person to acquire control of and recognition within the healthcare industry.Company or to obtain representation on the Board of Directors.
James W. BullockWhy You Should Vote for Reincorporation has served as
Delaware is a director of CryoLife since October 2016. Mr. Bullock previously servednationally recognized leader in adopting and implementing comprehensive, modern, and flexible corporate laws. The DGCL is frequently revised and updated to accommodate changing legal and business needs and is more comprehensive, widely used, and interpreted than other state corporate laws, including the Florida Business Corporation Act (the “FBCA”).
In addition, Delaware courts (such as the PresidentCourt of Chancery and Chief Executive Officerthe Delaware Supreme Court) are highly regarded for their considerable expertise in dealing with corporate legal issues and for producing a substantial body of Zyga Technology, Inc. (“Zyga Technology”), a privately-held medical device company focusedcase law construing Delaware law, with multiple cases concerning areas that Florida courts may not have considered. Because the judicial system is based largely on products that treat conditionslegal precedents, the abundance of Delaware case law should serve to enhance the lumbar spine, until January 2018, when RTI Surgical, Inc. (NASDAQ: RTIX) acquired Zyga Technology. Priorrelative clarity and predictability of many areas of corporate law, which in turn may offer added advantages to that, he served for six years as President and Chief Executive Officer of Atritech, Inc. Atritech was a privately-held cardiovascular manufacturing company that was acquiredus by Boston Scientific (NYSE: BSX). Prior to that, he served for nine years as President and Chief Executive Officer and was a member ofallowing the board of directors of Endocardial Solutions, Inc.(NASDAQ: ECSI), a cardiac-focused medical device company that was acquired by St. Jude Medical, which was itself acquired by Abbott Laboratories (NYSE: ABT). He also served in that position at Stuart Medical, Inc., and began his career working in a variety of sales and marketing leadership positions at Baxter Healthcare, Inc. (NYSE: BAX), and American Hospital Supply Corporation. In addition to his service on the board of Endocardial Solutions, Inc., Mr. Bullock has also served on the boards of directors of several private companies. Currently, in addition to CryoLife’s Board of Directors Mr. Bullock also servesand management to make corporate decisions and take corporate actions with greater assurance as Chairmanto the validity and consequences of the board of directors of Stimdia, Inc., a privately-held company that is conducting research for the development of medical devices for use in the critical care treatment of ventilator induced diaphragmatic dysfunction. Mr. Bullock also serves as a director for Surgical Information Science, Inc., a private health company,those decisions and CardioNxt, Inc, a private health company. Mr. Bullock received a B.S. in Public Administration from the University of Arizona.actions.
The Board of Directors has determined that Mr. Bullock should serve as a director of CryoLife because of his business acumen and substantial worldwide experience in the medical device industry, particularly in the area of company growth.
Jeffrey H. Burbank has served as a director of CryoLife since October 2017. Mr. Burbank is the Chief Technology Officer at Fresenius Medical Care North America, a division of Fresenius Medical Care (NYSE: FMS), the world’s largest provider of products and services for individuals with renal diseases. Prior to that, Mr. Burbank served as Chief Executive Officer and a member of the board of directors of NxStage Medical, Inc. (NASDAQ: NXTM) (“NxStage Medical”), a leading medical technology company, positions he held since he founded NxStage Medical in 1998, until Fresenius Medical Care completed its acquisition of NxStage Medical in February 2019. Mr. Burbank has over 30 years of management experience with companies developing, marketing, and manufacturing products for end-stage renal disease patients. Prior to founding NxStage Medical, Mr. Burbank was a co-founder of Vasca, Inc., a company that provided innovative implantable access devices, where he was the President and Chief Executive Officer, as well as Chairman of the Board. During his career he has been an inventor on over 50 U.S. patents for medical devices. Mr. Burbank received a B.S. in Industrial Engineering from Lehigh University.
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The Reincorporation also may make it easier to attract future candidates willing to serve on the Board of Directors, has determined that Mr. Burbank should serve asbecause many such candidates are already familiar with Delaware law, including provisions of the DGCL relating to fiduciary duties and director indemnification.
In addition, underwriters and other members of the financial services industry may be more willing and better able to assist in capital-raising programs for corporations having the greater flexibility afforded by Delaware law. Certain investment funds and institutional investors may be more comfortable and more willing to invest in a director of CryoLife because of his business acumen and substantial global experienceDelaware corporation than in the medical device industry.a corporation incorporated in another U.S. jurisdiction whose corporate laws may be less well-understood or are otherwise perceived to be unresponsive to stockholder rights.
J. Patrick MackinEffects of Reincorporation was named President
Other than being governed by the Delaware Certificate of Incorporation, the Delaware Bylaws, Delaware law, and Chief Executive Officer of CryoLife in September 2014. He was appointedcertain other purposes, CryoLife-Delaware will be deemed to be the same entity as CryoLife-Florida immediately prior to the CryoLifeReincorporation. By virtue of the Reincorporation, all of the rights, privileges, and powers of CryoLife-Florida, all property owned by CryoLife-Florida, all debts due to CryoLife-Florida, and all other causes of action belonging to CryoLife-Florida immediately prior to the Reincorporation will remain vested in CryoLife-Delaware following the Reincorporation. In addition, by virtue of the Reincorporation, all debts, liabilities, and duties of CryoLife-Florida immediately prior to the Reincorporation will remain attached to CryoLife-Delaware following the Reincorporation. The Reincorporation will not result in any change in our business, management, or operations or the location of our principal executive offices.
Upon effectiveness of the Reincorporation, all of our issued and outstanding shares of common stock automatically will be converted into issued and outstanding shares of common stock of CryoLife-Delaware, without any action on the part of our stockholders. The Reincorporation will have no effect on the transferability of our shares or the trading of our shares of common stock on the NYSE under the same trading symbol “CRY.” We will continue to file periodic reports and other documents as and to the extent required by the rules and regulations of the SEC. Shares of our common stock that are freely tradable prior to the Reincorporation will continue to be freely tradable after the Reincorporation, and shares of our common stock that are subject to restrictions prior to the Reincorporation will continue to be subject to the same restrictions after the Reincorporation. The Reincorporation will not change the relative positions of our company or our stockholders under federal securities laws.
Upon effectiveness of the Reincorporation, our directors and officers will become the directors and officers of CryoLife-Delaware, our employee benefit and incentive plans will become CryoLife-Delaware plans, and each option, equity award, or other right issued under such plans automatically will be converted into an option, equity award, or right to purchase or receive the same number of shares of CryoLife-Delaware common stock, at the same price per share, upon the same terms, and subject to the same conditions as before the Reincorporation. Our employee benefit arrangements also will be continued by us upon the terms and subject to the conditions in effect at the time of the Reincorporation.
We believe that the Reincorporation will not affect any of our material contracts with any third parties, and that our rights and obligations under such material contractual arrangements will continue as our rights and obligations after the Reincorporation.
Our stockholders will not be required to exchange their stock certificates for new stock certificates. Following the effective time of the Reincorporation, any stock certificates submitted to our transfer agent for transfer will automatically be exchanged for stock certificates of CryoLife-Delaware (to the extent the shares represented by such stock certificates continue to remain certificated). Our stockholders should not destroy any stock certificates and should not submit any certificates to us or our transfer agent unless and until requested to do so.
The Reincorporation will have no effect on the number of shares of common stock and preferred stock that we are authorized to issue. Under our existing articles of incorporation, we are authorized to issue up to 75,000,000 shares of common stock and up to 5,000,000 shares of preferred stock. Similarly, as a Delaware corporation and under our Delaware Certificate of Incorporation after the Reincorporation, we will be authorized to issue up to 75,000,000 shares of common stock and up to 5,000,000 shares of preferred stock.
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Effect of Vote for Reincorporation
A vote in favor of the Reincorporation is a vote in favor of the Plan of Conversion, Florida Articles of Conversion, Delaware Certificate of Conversion, Delaware Certificate of Incorporation, and Delaware Bylaws. If stockholders approve the proposal to reincorporate the Company from the State of Florida to the State of Delaware and the Company files the Florida Articles of Conversion with the Florida Department of State Division of Corporations and the Delaware Certificate of Conversion and Delaware Certificate of Incorporation with the Secretary of State of the State of Delaware, and such filings become effective, the Company will become subject to Delaware law, the Delaware Certificate of Incorporation, and the Delaware Bylaws.
Effect of Not Obtaining Required Vote for Approval
If we fail to obtain the requisite vote of our stockholders for approval of the Reincorporation, the Reincorporation will not be consummated, and we will continue to be incorporated under the laws of the State of Florida and governed by the FBCA, the existing articles of incorporation of CryoLife-Florida, and our existing bylaws.
Amendments, Termination, and Abandonment of the Plan of Conversion
The Plan of Conversion may be amended or modified by the Board of Directors prior to effecting the Reincorporation if the Board of Directors determines that such amendment would be in October 2014,the best interests of CryoLife-Florida and he was appointed Chairmanour stockholders, and provided that, if stockholder approval has been obtained, the amendment does not change (1) the amount or kind of shares or other securities; eligible interests; obligations; rights to acquire shares, other securities or eligible interests; cash; other property; or any combination of the foregoing, to be received by any of our stockholders under the Plan of Conversion; (2) the Delaware Certificate of Incorporation or the Delaware Bylaws, as will be in effect immediately after the Reincorporation, except for changes that do not require approval of stockholders of CryoLife-Delaware under the DGCL, the Delaware Certificate of Incorporation, or the Delaware Bylaws; or (3) any other terms or conditions of the Plan of Conversion if the change would adversely affect such stockholders in any material respect.
The Reincorporation may be delayed by the Board of Directors, or the Plan of Conversion may be terminated and abandoned by action of the Board of Directors, in April 2015. Mr. Mackin has more than 25 yearsat any time prior to the effective time of experiencethe Reincorporation, whether before or after approval by our stockholders, if the Board of Directors determines for any reason that such delay or termination would be in the medical device industry. Prior to joining CryoLife, Mr. Mackin served as Presidentbest interests of Cardiac Rhythm Disease Management, the then largest operating division of Medtronic, Inc. (NYSE: MDT)(“Medtronic”), from August 2007 to August 2014. At Medtronic, he previously held the positions of Vice President, Vascular, Western EuropeCryoLife-Florida and Vice President and General Manager, Endovascular Business Unit. Prior to joining Medtronic in 2002, Mr. Mackin worked for six years at Genzyme, Inc., serving as Senior Vice President and General Manager for the Cardiovascular Surgery Business Unit and as Director of Sales, Surgical Products division. Before joining Genzyme, Inc., Mr. Mackin spent four years at Deknatel/Snowden-Pencer, Inc. in various roles and three years as a First Lieutenant in theour stockholders.
Material U.S. Army. Mr. Mackin has served as a director of Opsens, Inc. (TSXV: OPS and OTCQX: OPSSF), a fiber optic sensors manufacturer, since 2016. Mr. Mackin has served as a director of Wright Medical Group N.V. (NASDAQ: WMGI), a global medical device company focused on extremities and biologics, since July 2018. Mr. Mackin received an MBA from the Kellogg Graduate School of Management at Northwestern University and is a graduateFederal Income Tax Consequence of the Reincorporation to U.S. Military Academy at West Point.Holders
The following is a summary of the material United States federal income tax consequences to U.S. holders (as defined below) of the Reincorporation. The discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under the Code by the U.S. Treasury Department (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the Internal Revenue Service (the “IRS”), and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. Such change could materially and adversely affect the tax consequences described below. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual investment circumstances. For example, it does not consider the effect of any applicable state, local, or non-U.S. tax laws, or any non-income tax laws (such as estate and gift tax laws). In addition, it does not address all aspects of U.S. federal income taxation that may affect particular holders in light of their particular investment or tax circumstances, including, without limitation, holders subject to special tax rules, such as partnerships, subchapter S corporations, or other entities that are fiscally transparent for U.S. federal income tax purposes, banks, financial institutions, tax-exempt entities, insurance companies, regulated investment companies, real estate investment trusts, trusts and estates, dealers in stocks, securities or currencies, traders in securities that have elected to use the mark-to-market method of accounting for their securities, persons holding our common stock as part of an integrated transaction, including a “straddle,” “hedge,” “constructive sale,” or “conversion transaction,” persons whose functional currency for tax purposes is not the U.S. dollar, persons who acquired our common stock pursuant to the exercise of stock options or otherwise as compensation, persons whose common stock constitutes qualified business stock within the meaning of Section 1202 of the Code, and persons who are not “U.S. persons” as defined below. This summary also does not consider any alternative minimum or Medicare “net investment income” tax considerations. Furthermore, this summary does not address the tax consequences of transactions occurring prior to or after the Reincorporation (whether or not such transactions are in connection with the Reincorporation). This summary only applies to persons who hold our common stock and will hold CryoLife-Delaware common stock as capital assets (generally, property held for investment) under the Code. Stockholders are urged to consult their tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations of the Reincorporation.
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For purposes of this summary, a “U.S. holder” is a beneficial owner of our common stock who is, for United States federal income tax purposes (1) an individual who is a citizen or resident of the United States, (2) a corporation created in, or organized under the laws of, the United States or any state or political subdivision thereof or the District of Columbia, (3) an estate, the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (4) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that otherwise elected to be treated as a United States person under applicable United States Treasury regulations.
We believe that the Reincorporation of the Company from Florida to Delaware should constitute a tax-free “reorganization” within the meaning of Section 368(a) of the Code. Assuming that the Reincorporation will be treated for United States federal income tax purposes as a reorganization, (1) holders of the Company’s common stock will not recognize any gain or loss as a result of the consummation of the Reincorporation, (2) the aggregate tax basis of shares of CryoLife-Delaware’s common stock therefor, and (3) the holding period of the shares of CryoLife-Delaware’s common stock received in the Reincorporation will include the holding period of the shares of Company common stock.
No ruling will be sought from the IRS with respect to the United States federal income tax consequences of the Reincorporation, and no assurance can be given that the United States federal income tax consequences described above will not be challenged by the IRS or, if challenged, will be upheld by a court. Accordingly, U.S. holders are urged to consult their tax advisors regarding the tax consequences of the Reincorporation.
EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR FEDERAL TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE REINCORPORATION, AS
WELL AS THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN, AND OTHER LAWS.
Accounting Treatment
We expect that the Reincorporation will have no effect from an accounting perspective because there is no change in the entity as a result of the Reincorporation. As such, our financial statements previously filed with the SEC will remain our financial statements following the Reincorporation.
Regulatory Approvals
The Reincorporation will not be consummated unless and until stockholder approval is obtained as described in this Proxy Statement. We will obtain all required consents of governmental authorities, including the filing of the Florida Articles of Conversion with the Florida Department of State Division of Corporations and the filing of the Delaware Certificate of Conversion and the Delaware Certificate of Incorporation with the Secretary of State of the State of Delaware.
Appraisal Rights
Pursuant to Section 607.1302(2)(a)(1) of the FBCA, stockholders are not entitled to appraisal rights in connection with the Reincorporation.
Blank Check Preferred Stock
The Delaware Certificate of Incorporation authorizes the Board of Directors, has determinedby resolution or resolutions thereof, to provide and issue from time to time out of the unissued shares of preferred stock for one or more series of preferred stock, and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the powers (including voting powers), if any, of the shares of such series and the preferences and relative, participating, optional, special or other rights, if any, and the qualifications, limitations, or restrictions, if any, of the shares of such series. Frequently, opportunities arise that Mr. Mackin should serve as a director of CryoLife because of his business acumenrequire prompt action, and substantial global experience in the medical device industry. In addition, the Board of Directors believes that it is appropriatethe delay necessary for stockholder approval of a new series of preferred stock and useful to have the President and Chief Executive Officer of CryoLife serve asissuance thereof would be a member of the Board of Directors.
Ronald D. McCall has served as a director of CryoLife since January 1984. From 1985detriment to the present, Mr. McCall has been the owner of the law firm Ronald D. McCall, P.A., based in Tampa, Florida. Mr. McCall was admitted to the practice of law in Florida in 1961. Mr. McCall received a B.A.Company and a J.D. from the University of Florida.
our stockholders. The Board of Directors has determined that Mr. McCall should servedoes not currently intend to seek stockholder approval prior to any designation or issuance of a new class or series of preferred stock if the Reincorporation is approved, except as a director of CryoLife because of his legal training and experience. Also,required by law or regulation. Should the Board of Directors believesdetermine to designate and/or issue a new series of preferred stock, it will only do so upon terms that his long-standing involvementthe Board of Directors deems to be in the best interests of the Company and our stockholders.
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The powers (including voting powers) and other rights to be accorded to any new series of preferred stock of the Company remain to be fixed by the Board of Directors. If the Board of Directors so authorizes, the holders of a new series of preferred stock may be entitled to vote separately as a class in connection with CryoLife provides himapproval of certain extraordinary corporate transactions, might be given a disproportionately large number of votes, or might be given preferences in dividend payment, liquidation, or other rights. Such new series of preferred stock also could be convertible into a large number of shares of our common stock under certain circumstances or have other terms that might make acquisition of a controlling interest in the Company more difficult or more costly, including the right to elect additional directors to the Board of Directors. Potentially, a new series of preferred stock could be used to create voting impediments or to frustrate persons seeking to effect a conversion or otherwise to gain control of the Company. In addition, a new series of preferred stock could be privately placed with purchasers who might side with our management opposing a unique perspective on current issues facinghostile tender offer or other attempt to obtain control of the Company.
Harvey MorganWhat are the Changes to Stockholder Rights Before and After the Reincorporation?has served
Set forth below is a table summarizing the material differences in the rights of the stockholders of the Company before and after the Reincorporation is effective, as a director of CryoLife since May 2008. Mr. Morgan has more than 40 years of investment banking experience, with significant expertise in strategic advisory services, mergers and acquisitions, private placements, and underwritings. He served as a Managing Directorresult of the investment banking firm Bentley Associates, L.P. from 2004 to December 31, 2012,differences between Florida law and from 2001 to 2004 he was a PrincipalDelaware law, differences between the Company’s existing articles and bylaws, and the Delaware Certificate of Shattuck Hammond Partners, an independent investment bankingIncorporation and financial advisory firm. Mr. Morgan also served on the Board of Directors of Family Dollar Stores, Inc. (NYSE: FDO), a leading operator of discount variety stores, which was acquired by Dollar Tree Inc. (NASDAQ: DLTR) in 2014, and Cybex International, Inc. (NASDAQ: CYBI), a leading manufacturer of premium exercise equipment. Mr. Morgan received his undergraduate degree from the University of North Carolina at Chapel Hill and an MBA from the Harvard Business School.Delaware Bylaws.
The Board of Directors has determined that Mr. Morgan should serve as a director of CryoLife because of his past business experience, particularly with respect to investment banking and capital markets.
Jon W. Salvesonhas served as a director of CryoLife since May 2012. Mr. Salveson is the Vice Chairman, Investment Banking and Chairman of the Healthcare Investment Banking Group at Piper Jaffray Companies (NYSE: PJC)(“Piper Jaffray”), a U.S. investment bank and asset management firm. He joined Piper Jaffray in 1993 as an associate, was elected Managing Director in 1999, and was named the Group Head of Piper Jaffray’s international healthcare investment banking group in 2001. Mr. Salveson was appointed Global Head of Investment Banking and a member of the Executive Committee of Piper Jaffray in 2004 and has served in his present position as Vice Chairman, Investment Banking since July 2010. Mr. Salveson also serves on the Board of Directors of CHF Solutions, Inc. (NASDAQ: CHFS), an early-stage medical device company, and Asklepios Biopharmaceuticals, Inc., a private company specializing in gene therapy technologies. Mr. Salveson received his undergraduate degree from St. Olaf College in 1987 and an M.M.M. in finance from the Kellogg Graduate School of Management at Northwestern University.
The Board of Directors has determined that Mr. Salveson should serve as a director of CryoLife because of his broad experience in the healthcare industry and the medical technology sector, and, particularly, his extensive experience in strategic advisory roles for healthcare companies in hundreds of transactions.
| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Amendment of Charter Documents | Florida law requires a vote of the corporation’s board of directors followed by the affirmative vote of the majority of shares present or in person and entitled to vote to approve any amendment to the articles of incorporation. If any proposed amendment would adversely alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series adversely affected by the amendment. Florida law provides that, unless (i) the articles of incorporation or Florida law reserves the power to adopt, amend, or repeal any bylaw exclusively to the stockholders or (ii) the stockholders, in amending, repealing, or adopting the bylaws generally or a particular bylaw provision, expressly provide that the board may not amend, repeal, adopt, or reinstate the bylaws or such particular bylaw provision, the board may amend or repeal the bylaws. Florida law also states that the stockholders may amend or repeal the bylaws even though the bylaws may also be amended or repealed by the board. | For amendments to the certificate of incorporation, Delaware law requires that the corporation’s board of directors adopt a resolution setting forth the amendment proposed, declaring its advisability and, subject to limited exceptions, either calling a special meeting of the stockholders entitled to vote in respect thereof for the consideration of such amendment or directing that the amendment proposed be considered at the next annual meeting of the stockholders. Unless a greater percentage vote is required by the certificate of incorporation, a majority of the outstanding stock entitled to vote thereon, and a majority of the outstanding stock of each class or series entitled to vote thereon as a class or series are required to be voted in favor of the adoption of the certificate of incorporation amendment proposed. Further, Delaware law states that the holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment to the certificate of incorporation, whether or not entitled to vote thereon by the certificate of incorporation, if such amendment would increase or decrease the aggregate number of authorized shares of such class, increase or decrease the par value of the shares of such class, or alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely, provided that, if any proposed amendment to the certificate of incorporation would alter or change the powers, preferences, or special rights of one or more series of any class so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for purposes of the foregoing, provided further, that the number of authorized shares of any such class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the corporation entitled to vote irrespective of the foregoing, if so provided in the original certificate of incorporation, in any amendment thereto which created such class or classes of stock or which was adopted prior to the issuance of any shares of such class or classes of stock, or in any amendment thereto which was authorized by a resolution or resolutions adopted by the affirmative vote of the holders of a majority of such class or classes of stock.
Delaware law provides that after a corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the bylaws of a corporation shall be in the stockholders entitled to vote, provided that the corporation may, in its certificate of incorporation, confer the power to adopt, amend, or repeal bylaws upon the board of directors. If such power has been so conferred upon the board of directors, it shall not divest the stockholders of the power, nor limit their power to adopt, amend, or repeal bylaws. | Delaware law restricts the ability of the Board of Directors to amend the Company’s bylaws unless the certificate of incorporation of the Company otherwise provides. The Delaware Certificate of Incorporation does confer on the Board of Directors the ability to amend the Delaware Bylaws, subject to certain limitations, as described below. | ||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| The Company’s existing bylaws provide that the bylaws of the Company may be altered, amended, or repealed and new bylaws may be adopted by the Board of Directors or stockholders, except that the Board of Directors may not amend or repeal a bylaw if: (a) the articles of incorporation or Florida law reserves such power exclusively to the stockholders; (b) the stockholders expressly provide that the Board of Directors may not amend or repeal such bylaw; or (c) such bylaw had been altered, amended or adopted by a vote of the stockholders, until a period of two years after such vote. Any bylaw or amendment to a bylaw adopted by the Board of Directors may be altered, amended, or repealed by vote of the stockholders entitled to vote, or a new bylaw in lieu thereof may be adopted by the stockholders. | The Delaware Certificate of Incorporation and the Delaware Bylaws provide that the Board of Directors is authorized to adopt, amend, or repeal the bylaws; provided that (i) the Board of Directors may not amend or repeal a bylaw if such power is reserved exclusively to the stockholders and (ii) the stockholders may amend, alter, or repeal any bylaw whether adopted or amended by Board of Directors or otherwise. | The Delaware Bylaws modify the powers granted to the stockholders in the Company’s existing bylaws by (A) preserving the stockholders’ power to alter, amend, or repeal any bylaw and by (B) removing the restriction on the Board of Directors to adopt, amend, or repeal bylaws (i) if the stockholders expressly provide that the Board of Directors may not amend or repeal such bylaw or (ii) if such bylaw had been amended or adopted by a vote of the stockholders, until a period of two years after such vote. The Board of Directors or the stockholders may adopt, amend, or repeal bylaws; provided that, the Board of Directors is restricted in its ability to alter or repeal bylaws if such power is reserved exclusively to the stockholders by applicable law or in the certificate of incorporation. | |||
| Number of Directors | Florida law provides that a corporation must have at least one director, and may provide in its articles of incorporation or in its bylaws for a fixed number of directors or a variable number of directors, and for the manner in which the number of directors may be increased or decreased. | Delaware law provides that a corporation must have at least one or more directors to be fixed by, or in the manner provided in, the bylaws of the corporation, unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment of the certificate of incorporation. | Florida and Delaware law are substantially similar in respect to setting the number of directors of the Company. | ||
| The Company’s existing bylaws provide that the Board of Directors shall consist of no less than one nor more than 15 members, the number of the same to be fixed by the Board of Directors. | The Delaware Certificate of Incorporation does not fix the number of directors. The Delaware Bylaws provide that the Board of Directors shall consist of no less than one nor more than 15 members, the number of the same to be fixed by the Board of Directors. | The Delaware Bylaws are substantially similar to the Company’s existing bylaws. In both the Delaware Bylaws and the Company’s existing bylaws, the stockholders have the right to amend the bylaws to set a specific number of directors. | |||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Classified Board of Directors | Under Florida law, the articles of incorporation or the bylaws may provide for the classification of directors into as many as three classes with staggered terms of office or as to their election by one or more authorized classes or series of shares. | Under Delaware law, the certificate of incorporation or the bylaws may provide for the classification of directors into as many as three classes with staggered terms of office. | Florida and Delaware law are substantially similar in respect to classification of the Board of Directors. | ||
| The Company’s existing articles of incorporation and existing bylaws do not provide for a classified board of directors. | The Delaware Certificate of Incorporation and the Delaware Bylaws do not provide for a classified board of directors. | The Delaware Certificate of Incorporation and the Delaware Bylaws are substantially similar to the existing governing documents in respect to classification of the Board of Directors. The Board of Directors does not believe that classification is in the best interests of the stockholders, who should be able to vote on the election of all directors at each annual meeting of stockholders. | |||
| Term of Board of Directors | Florida law provides that, absent classification of the board, each director shall hold office until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until there is a decrease in the number of directors. | Absent classification, the default rule in Delaware is that each director shall hold office until the next annual meeting of stockholders (and until such director’s successor is elected and qualified) or until such director’s earlier resignation or removal. | Florida and Delaware law are substantially similar in respect to the term of directors. | ||
| The Company’s existing bylaws provide that each director shall hold office until the next annual stockholders meeting and until his or her successor is qualified, unless sooner removed by the stockholders or such director’s earlier death or resignation. | The Delaware Bylaws provide that each director shall hold office until the next annual stockholders meeting and until his or her successor is elected and qualified, unless sooner removed by the stockholders or such director’s earlier death, resignation, or disqualification. | The Delaware Bylaws and the Company’s existing bylaws are substantially similar in this regard. | |||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Removal of Directors | Florida law provides that any director may be removed, with or without cause, from office by the vote of stockholders unless the articles of incorporation provide that directors may be removed only for cause. With respect to corporations that elect directors with cumulative voting, a director may not be removed if, in the case of a meeting, the number of votes sufficient to elect the director are cast against such director’s removal and, if action is taken by less than unanimous written consent, voting stockholders entitled to the number of votes sufficient to elect such director do not consent to the removal. | Delaware law provides that any director or the entire Board of Directors may be removed with or without cause by the holders of a majority in voting power of the issued and outstanding stock entitled to vote at an election of directors, except that (1) members of a classified board of directors may be removed only for cause, unless the certificate of incorporation provides otherwise, and (2) in the case of a corporation having cumulative voting, directors may not be removed in certain situations without satisfying certain stockholder approval requirements. | Florida and Delaware law are substantially similar in respect to the removal of directors. The Delaware Certificate of Incorporation provides that there shall be no cumulative voting in the election of directors of the Company. | ||
| The Company’s existing bylaws provide that directors may be removed by the stockholders at any general or special meeting. | The Delaware Bylaws provide that directors may be removed by the stockholders at any general or special meeting. | The Delaware Bylaws and the Company’s existing bylaws are identical in this regard. | |||
| Filling Vacancies on the Board of Directors | Florida law provides that all vacancies, including those caused by an increase in the number of directors, may be filled by the stockholders or by the directors, though less than a quorum, unless it is otherwise provided in the articles of incorporation. Further, if at the time of filling any vacancy, the directors then in office shall constitute less than a quorum, the vacancy may be filled by the affirmative vote of a majority of all the directors then remaining in office. Unless otherwise provided in the articles of incorporation, pursuant to a resignation by a director, the board of directors may fill the vacancy or vacancies with each director so appointed to hold office during the remainder of the term of office of the resigning director or directors. | Delaware law provides that, unless otherwise provided in the certificate of incorporation or bylaws of a corporation, vacancies and newly created directorships may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Further, if at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board of directors (as constituted immediately prior to any such increase), the Delaware Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. | Delaware law provides greater protection to the Company’s stockholders by permitting stockholders representing at least 10% of the issued and outstanding shares to apply to the Delaware Court of Chancery to have an election of directors in the situation where the directors in office constitute less than a majority of the whole Board of Directors. | ||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| The Company’s existing bylaws provide that vacancies on the Board of Directors, including vacancies created by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum. | The Delaware Bylaws provide that vacancies on the Board of Directors, including vacancies created by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum or by the sole remaining director. | The Delaware Bylaws provide substantially the same appointment rights as the Company’s existing bylaws. | |||
| Board of Directors Action by Unanimous Consent | Under Florida law, unless otherwise stated in the articles of incorporation or bylaws, any action required or permitted to be taken at a meeting of the board of directors or committee of the board of directors may be taken without a meeting if, before or after the action, a written consent thereto is signed by all the members of the board of directors except any interested directors. | Under Delaware law, unless otherwise restricted in the certificate of incorporation or bylaws, any action required or permitted to be taken at any meeting of the board of directors or committee of the board of directors may be taken without a meeting if all members of the board of directors or committee consent thereto in writing, or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of the proceedings of the board of directors, or the committee thereof, in the same paper or electronic form as the minutes are maintained. | Florida and Delaware law are substantially similar in respect to the action by written consent of the Board of Directors. | ||
| The Company’s existing articles of incorporation and bylaws do not change this statutory provision. | The Delaware Certificate of Incorporation and the Delaware Bylaws do not change this statutory provision. | The Delaware Bylaws and the Company’s existing bylaws are substantially similar in respect to action by written consent of the Board of Directors. | |||
| Stockholder Voting- Quorum | Florida law provides that a majority of the voting power, present in person or by proxy at a meeting of stockholders (regardless of whether the proxy has authority to vote on all matters), constitutes a quorum for the transaction of business. | Delaware law provides that unless otherwise provided in the certificate of incorporation or bylaws, a majority of shares entitled to vote, present in person or by proxy, constitutes a quorum at a stockholder meeting. | Florida and Delaware law are substantially similar in respect to quorum requirements. | ||
| The Company’s existing bylaws provide that, unless the articles of incorporation or applicable law provide otherwise, a majority of the votes entitled to be cast on a matter by a voting group constitutes a quorum of that voting group for action on that matter. | The Delaware Bylaws provide that, unless applicable law provides otherwise, a majority of the votes entitled to vote on a matter by a voting group constitutes a quorum of that voting group for action on that matter. | The Delaware Bylaws and the Company’s existing bylaws are substantially similar in respect to stockholder quorum requirements. | |||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Director Elections | Florida law provides that, unless otherwise stated in the articles or bylaws, the election of directors shall be by a plurality of the vote. | Delaware law provides that, unless otherwise stated in the articles or bylaws, the election of directors shall be by a plurality of the vote. | Florida and Delaware law are substantially similar in respect to the election of directors. | ||
| The Company’s existing bylaws are silent on the vote required for election of directors. Florida law by default provides that election of directors is by a plurality of the vote. | The Delaware Bylaws are silent on the vote required for election of directors. Delaware law by default provides that election of directors is by a plurality of the vote. | The Delaware Bylaws and the Company’s existing bylaws are substantially similar in respect to director elections. | |||
| Stockholder Action by Consent | Florida law provides that, unless the articles of incorporation provide otherwise, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice, and without a vote if the action is taken by the holders of the outstanding shares having at least the minimum number of votes that would be necessary to authorize or take such action at a meeting consent to the action in writing. | Delaware law provides that, unless the certificate of incorporation provides otherwise, any action required to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice, and without a vote, if a consent or consents, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation. In addition, the corporation is required to give prompt notice of the taking of the corporate action without a meeting by less than unanimous consent to those stockholders who did not so consent. | Florida and Delaware law are substantially similar in relation to action by consent of the stockholders in lieu of a meeting. | ||
| The Company’s existing articles of incorporation provide that the stockholders may not take action by written consent, and that all stockholder action is required to be taken at an annual or special meeting of the stockholders. | The Delaware Certificate of Incorporation provides that the stockholders may not take action by consent without a meeting, and that all stockholder action is required to be taken at an annual or special meeting of the stockholders. | The Delaware Certificate of Incorporation and the Company’s existing articles of incorporation are substantially similar in respect to action by consent of the stockholders in lieu of a meeting. | |||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Limitation on Director Liability | Under Florida law, a director is not individually liable to the corporation or any other person for any damages as a result of any act or failure to act in his or her capacity as a director unless it is proven that: (a) the director breached or failed to perform his or her duties and (b) the breach of, or failure to perform, those duties constituted any of the following: (i) a violation of criminal law, (ii) any transaction in which the director received an improper personal benefit, (iii) voting for or assenting to any unlawful distribution, (iv) in a proceeding by or in the right of the corporation or a stockholder, for acts or omissions constituting a conscious disregard for the best interest of the corporation or willful or intentional misconduct, and (v) in a proceeding by or in the right of someone other than the corporation or a stockholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. | Under Delaware law, if a corporation’s certificate of incorporation so provides, the personal liability of a director for breach of fiduciary duty as a director may be eliminated or limited. A corporation’s certificate of incorporation, however, may not limit or eliminate a director’s personal liability (a) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (b) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (c) for the payment of unlawful dividends, stock repurchases or redemptions, or (d) for any transaction in which the director received an improper personal benefit. | Under Florida law, such exculpatory provisions apply automatically under the FBCA, whereas in Delaware, such exculpatory provisions must be included in the certificate of incorporation, which such provisions are included in the Company’s Delaware Certificate of Incorporation. | ||
| The Company’s existing articles of incorporation do not change this statutory provision. | The Delaware Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL, a director shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. | The Delaware Certificate of Incorporation eliminates personal liability of a director for breach of fiduciary duty as a director to the fullest extent permitted by the DGCL. | |||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Declaration and Payment of Dividends | Under Florida law, except as otherwise provided in the articles of incorporation, a board of directors may authorize and the corporation may make distributions to its stockholders, including distributions on shares that are partially paid. However, no distribution may be made if, after giving effect to such distribution: (a) the corporation would not be able to pay its debts as they become due in the usual course of business; or (b) except as otherwise specifically allowed by the articles of incorporation, the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved and wound up at the time of distribution, to satisfy the preferential rights upon dissolution and winding up of stockholders whose preferential rights are superior to those receiving the distribution. | Under Delaware law, subject to any restriction contained in a corporation’s certificate of incorporation, the board of directors may declare, and the corporation may pay, dividends upon the shares of its capital stock either (a) out of “surplus” or (b) in the event that there is no surplus, out of the net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, unless net assets (total assets in excess of total liabilities) are less than the amount determined to be capital or if following payment of the dividend the corporation will either have an unreasonably small amount of capital for the business in which it is engaged or intends to engage in or not be able to pay its debts as they become due. “Surplus” is defined as the excess, if any, of the net assets of the corporation over the amount determined to be the capital of the corporation by the board of directors (which amount cannot be less than the aggregate par value of all issued shares of capital stock). | Delaware law provides different guidelines under which the Company may declare and pay dividends. | ||
| The Company’s existing articles of incorporation do not change this statutory provision. | The Delaware Certificate of Incorporation provides that, subject to applicable law and the rights of the preferred stock, if any, dividends may be declared and paid on the common stock at such times and in such amounts as the Board of Directors determines. | ||||
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| Provision | Florida Law, Florida Articles of Incorporation, and Florida Bylaws | Delaware Law, Delaware Certificate of Incorporation, and Delaware Bylaws | Notes | ||
| Taxes and Fees | Florida imposes an annual corporate income tax, which is computed using federal taxable income, modified by certain adjustments set forth by the state of Florida. Adjusted federal taxable income is apportioned to Florida using a three-factor formula. The formula is a weighted average, designating 25% each to factors for property and payroll, and 50% to sales. Florida also provides a $50,000 exemption to arrive at Florida taxable net income. The tax is calculated by multiplying Florida taxable net income by (i) 4.458% for taxable years beginning on or after January 1, 2019 and (ii) 5.5% for taxable years beginning on or after January 1, 2022. | Delaware imposes annual franchise tax fees on non-exempt corporations incorporated in Delaware. The minimum annual tax using the authorized shares method (based on an equation consisting of the number of shares authorized) is $175 and the minimum annual tax using the assumed par value capital method (based on an equation consisting of the number of shares authorized, the number of shares outstanding, and the gross assets of the corporation) is $400 and, in each case, the maximum annual tax is $200,000 unless a corporation qualifies as a “large corporate filer” in which case the maximum annual tax is increased to $250,000. A “large corporate filer” is a corporation that as of December 1 of the applicable calendar year (i) had a class or series of stock listed on a national securities exchange and (ii) reported in its financial statements prepared in accordance with United States GAAP or IFRS and included in its most recent annual report filed with the United States Securities and Exchange Commission or any similar agency outside the United States with responsibility for enforcing securities laws or serving as a public repository for the corporation’s financial disclosures, both of the following: (a) consolidated annual gross revenues equal to or greater than $750,000,000 or consolidated assets equal to or greater than $750,000,000 and (b) consolidated annual gross revenues not less than $250,000,000 and consolidated assets not less than $250,000,000. | The Company is subject to franchise tax filing requirements in the State of Delaware. Stockholders are urged to consult their tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations of the Reincorporation. |
Required Vote
Nominees for election as directorsThis proposal will be elected byapproved if a pluralitymajority of the votes castoutstanding shares of our common stock, present or represented by proxy at the holders of sharesSpecial Meeting and entitled to vote thereon, votes in favor of the election. Since there are nine directorships to be filled, this means thatproposal. Accordingly, an abstention will have the nine individuals receiving the most voteseffect of a negative vote. Shares represented by executed proxies on proxy cards without specific instructions will be elected. Accordingly, abstentions and broker non-votes will not be relevant tovoted FOR the outcome.Reincorporation Proposal.
The Board of Directors'Directors’ Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF“FOR” THEnine REINCORPORATION PROPOSAL. NOMINEES FOR DIRECTOR LISTED IN THIS PROPOSAL ONE.
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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS
In If this Exclusive Forum Proposal and the Reincorporation Proposal are approved by the The Board of Directors’ The Board of Directors ● The Delaware courts have established a substantial and influential body of case law construing Delaware’s corporate law and long-standing precedent regarding corporate governance; ● The Exclusive Forum Provision would reduce the risk of duplicative lawsuits in multiple jurisdictions relating to such disputes, thus saving significant costs and effort in addressing cases brought in multiple jurisdictions; ● The Exclusive Forum Provision will reduce the risk that the outcome of cases in multiple jurisdictions could be inconsistent, even though each jurisdiction may purport to follow Delaware law; CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting 24 ● The Exclusive Forum Provision will regulate only the forum in which our stockholders may file claims relating to the specified intra-corporate disputes; it does not restrict the ability of our stockholders to bring such claims, nor does it affect the remedies available if such claims are ultimately successful; ● The Company will retain the ability to consent to an alternative forum in appropriate circumstances if the Company determines that its interests and those of its stockholders are best served by permitting a particular dispute to proceed in a forum outside the State of Delaware; and ● The Exclusive Forum Provision was not adopted in anticipation of any specific litigation or transaction. The Company has not recently suffered material harm as a result of multiple stockholder suits filed in different jurisdictions, but the Board of Directors believes it is in the best interest of the Company and THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE Our Board of Directors believes that the purpose of corporate governance is toserve the interests of the Company and the Company’s stockholders in a manner that is consistent with its fiduciary duties and the Company’s mission and core values.Director IndependenceGeneralconnection with its annual review in March 2019,the event the Reincorporation Proposal is approved, the Delaware Certificate of Incorporation will include a provision (such provision, the “Exclusive Forum Provision”) providing that, unless the Company consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and basedexclusive forum for any derivative action or proceeding brought on the information availableCompany’s behalf, any action asserting a claim of breach of fiduciary duty owed by any of the Company’s stockholders, directors, officers, or other employees to it, the BoardCompany or to its stockholders, and any civil action to interpret, apply, or enforce any provision of Directors determinedthe DGCL, any civil action to interpret, apply, enforce, or determine the validity of the provisions of the Delaware Certificate of Incorporation or the Delaware Bylaws, or any action asserting a claim governed by the internal affairs doctrine; provided, however, in the event that nonethe Court of Ms. BorgstromChancery of the State of Delaware lacks jurisdiction over such action, the sole and exclusive forum for such action would be another state or Messrs. Ackerman, Bevevino, Bullock, Burbank, McCall, Morgan, or Salveson, or Dr. Ronald C. Elkins, who served as a director until his retirement in May 2018, has or had a material relationship with CryoLife, and that each qualified as independent directors under NYSE Listing Standards.In addition to qualifying as “independent”federal court located within the meaningState of Section 303A.02Delaware, in all cases, subject to such court having personal jurisdiction over the indispensable parties named as defendants. Additionally, the Delaware Certificate of Incorporation will provide that the federal district courts of the NYSE Listing Company Standards, each memberUnited States shall be the sole and exclusive forum for causes of action arising under the Compensation Committee must be a “non-employee director” withinSecurities Act. The Delaware Certificate of Incorporation will also provide that the meaningExclusive Forum Provision will not impact the exclusive federal jurisdiction of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the respective rules and at least two membersregulations promulgated thereunder, such actions under which must be brought in the federal district courts of the Compensation Committee must be “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. In determining the independence of any director who will serve on the Compensation Committee, the Board of Directors will consider all factors relevant to determining whether such director has a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including, but not limited to (i) the source of compensation of such director, including any consulting, advisory, or other compensatory fee paid by us to the director and (ii) whether such director is affiliated with us, one of our subsidiaries, or an affiliate of one of our subsidiaries.United States.In addition to qualifying as “independent” within the meaning of Section 303.A02 of the NYSE Listing Standards, each member of the Audit Committee must also meet the criteria of Section 303.A06 and Rule 10A-3 promulgated under the Exchange Act.Until February 2017, Mr. Ackerman served as a Consultant to Charles River Laboratories. Prior to that date, Mr. Ackerman held various positions at Charles River Laboratories, including most recently, as Senior Financial Advisor. CryoLife has made purchases from Charles River Laboratories relating to supplies, including supplies for certain of its clinical trials, in each of the last several years, although the amount spent in recent years does not meet the threshold for a related party transaction as discussed below, and anticipates doing so in the current year. CryoLife’s purchases from Charles River Laboratories were made on an arm’s-length basis. The amount of these purchases falls within the categorical standards for commercial relationships that are deemed not material and would not impair a director’s independence. The Board of Directors understoodbelieves that Mr. Ackerman’s compensation from Charles River Laboratories wasthe Exclusive Forum Provision is an important piece of the Company’s governance structure to provide increased consistency in no way impactedthe application of Delaware law for the specified types of actions and proceedings and is in the best interests of the Company and its stockholders. Additionally, the Exclusive Forum Provision reinforces the rationale for the Company’s Reincorporation into the State of Delaware.size or amountholders of a majority of shares of the business transacted betweenCompany’s common stock, then the two companies. The BoardCompany will include the Exclusive Forum Provision in the Delaware Certificate of Directors determined that Mr. Ackerman’s relationship with Charles River LaboratoriesIncorporation. Alternatively, if less than a majority of shares of the Company’s common stock vote for this Exclusive Forum Proposal but the Reincorporation Proposal is approved, then the Exclusive Forum Provision will not a material relationship that could impair his independence as a director asbe included in the Delaware Certificate of CryoLife.Incorporation.Since 2005, Ms. Borgstrom has served as the CEO of Yale New Haven Health. Prior to that date, Ms. Borgstrom held various senior leadership positions at Yale New Haven Health. In 2018, Yale New Haven Health paid CryoLife $326,732 for tissue preservation services and BioGlue and On-X products provided by CryoLife, and we expect this relationship to continue. These purchases were made on an arm’s-length bases. The Board of Directors considered this relationship and determined that Ms. Borgstrom’s relationship with Yale New Haven Health is not a material relationship that could impair her independence as a director of CryoLife.Required VoteDr. Elkins isThis Exclusive Forum Proposal will be approved if a former Chiefmajority of the Sectionoutstanding shares of Thoracic and Cardiovascular Surgeryour common stock, present or represented by proxy at the University of Oklahoma Health Services CenterSpecial Meeting and is a Professor Emeritusentitled to vote thereon, votes in favor of the Center. In 2018, the Center paid CryoLife $54,989 for tissue preservation services and BioGlue and On-X products provided by CryoLife. Dr. Elkins’ son, Charles Craig Elkins, M.D., is a cardiac surgeon who has implanted CryoLife preserved cardiac tissues at Integris Baptist Medical Center in Oklahoma City. Integris Health, including Integris Baptist Medical Center, paid CryoLife $692,108 for tissue preservation services and BioGlue and On-X products in 2018, and we expect this relationship to continue. These purchases were made on an arm’s-length basis. The Board of Directors considered these relationships and determined that they are not material relationships that would have impaired Dr. Elkins’s independence.Exclusive Forum Proposal.CRYOLIFE, INC. | 2019 Proxy Statement12Right to Retain AdvisorsRecommendationhas authorized committeesregularly reviews the corporate governance policies and practices of the Company to determine whether they are appropriate for the Company and will advance the Board of Directors’ and management’s goal of maximizing long-term stockholder value. As part of that review, the Board of Directors to retain their own advisors, such as auditors, compensation consultants, search firms, legal counsel, and others, toconsidered whether the extent the committees deem it appropriate.The Board of Directors’ Leadership StructureThe President and Chief Executive Officer of CryoLife serves as the Chairmaninclusion of the BoardExclusive Forum Provision in the Delaware Certificate of Directors.Incorporation is advisable. The Board of Directors believesevaluated both the advantages and disadvantages of including the Exclusive Forum Provision and determined that this structure promotes fluid communicationincluding the Exclusive Forum Provision is in the best interest of the Company and coordination betweenits stockholders for the following reasons:management. Also,its stockholders to take preventive measures against the potential harm from such litigation tactics, particularly contemporaneously with the Company’s Reincorporation in Delaware. While an exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder favors, it does not deprive a stockholder of the right to assert claims or obtain any type of relief; therefore, the Board of Directors believes that Mr. Mackin is well-suited to fill his management and Board of Directors roles and that the Board of Directors benefits from his serving in these dual roles.In order to foster the Board of Directors’ independence from management, the leadership structure of the Board of Directors also includes a Presiding Director, a position held by an independent director. Mr. McCall assumed the role of Presiding Director in December 2005. The Presiding Director has frequent contact with Mr. Mackin and other members of management on a broad range of matters and has additional corporate governance responsibilities for the Board of Directors. Mr. McCall also serves as liaison between Mr. Mackin and the independent directors, approves meeting agendas and schedules to insure there is sufficient time for discussion of all agenda items, approves certain information sentExclusive Forum Provision to the Board, has the authority to call meetings of the independent directors,Company and can, if requested by majorits stockholders consult with them directly.outweigh any perceived harms.The Board of Directors’ Role in Risk OversightThe Board of Directors has an active role, as a whole and also at the committee level, in overseeing the management of our risks. Management is primarily responsible for risk management, and management reports directly to the committees and the Board of Directors with respect to risk management. The Board of Directors is responsible for general oversight of risks and regular review of information regarding our risks, including credit risks, liquidity risks, and operational risks. In its risk oversight role, the Board of Directors reviews periodically the Company’s strategic plan, as well as an assessment of potential material risks facing the Company. While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board of Directors also have responsibility for risk management.In particular, the Compensation Committee is responsible for ensuring that our compensation policies and practices do not incent excessive or inappropriate risk-taking by employees or non-employee directors. The Audit Committee is primarily responsible for, in coordination with our independent registered public accounting firm, oversight of our internal controls, operation of our internal audit, and various financial and compliance functions. The Corporate Governance Committee monitors risk by ensuring that proper corporate governance standards are maintained and that the Board of Directors is comprised of qualified directors. The Compliance Committee is primarily responsible for oversight of our healthcare compliance function, including our compliance with quality systems and regulatory assurance laws and regulations, as well as our compliance with other healthcare compliance laws and regulations. Together with the Audit Committee, the Compliance Committee also assists in oversight of our compliance with certain laws and regulations, such as the Foreign Corrupt Practices Act, and such policies as our Code of Conduct.Board of Directors and Committee Meetings, Annual Meeting of Stockholders and AttendanceDuring 2018, each director attended, either in person or by telephone, at least 75% of the meetings of the Board of Directors and the committees of the Board of Directors on which s/he served. In general, members of the Board of Directors become members of committees immediately following the Annual Meeting of Stockholders.The Board of Directors held ten meetings during 2018. All of the then-current members of the Board of Directors attended the 2018 Annual Meeting of Stockholders. The Company does not have a policy requiring directors to attend the annual meeting, but attendance is encouraged.Standing Committees of the Board of Directors; Committee AssignmentsDuring 2018, the Board of Directors had four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee, and the Compliance Committee. In 2018, the Audit Committee met fourteen times, the Compensation Committee met fifteen times, the Corporate Governance Committee met eight times, the Compliance Committee met four times, the Compensation Committee and the Corporate Governance Committee met jointly one time, and the Audit Committee and the Compliance Committee met jointly one time. These committees are described below, and the following table lists the members of each of the standing committees as of the date of this Proxy Statement:CRYOLIFE, INC. | 2019 Proxy Statement13DirectorAudit CommitteeCompensation CommitteeCorporate Governance CommitteeCompliance CommitteeJ. Patrick Mackin,Chairman, President, and Chief Executive OfficerThomas F. Ackerman√√Daniel J. Bevevino√ChairMarna P. Borgstrom√James W. Bullock√√Jeffrey H. Burbank√Ronald D. McCall,Presiding Director√ChairHarvey MorganChair√Jon W. Salveson√ChairAudit Committee— The Audit Committee operates under a written charter that sets out the committee’s functions and responsibilities. The Audit Committee currently consists of three non-employee directors: Mr. Morgan, Chair, Mr. Ackerman, and Mr. Bevevino, each of whom served on the Audit Committee for all of 2018. Each of the members of the Audit Committee meets the requirements of independence of Section 303A.02 of the current NYSE Listing Standards and also meets the criteria of Section 303A.06, as set forth in Rule 10A-3 promulgated under the Exchange Act, regarding listing standards related to audit committees. No member of the Audit Committee serves on the audit committee of more than three public companies. In addition, the Board of Directors has determined that all of the current members of the Audit Committee satisfy the definition of an “audit committee financial expert,” as promulgated by the Securities and Exchange Commission (the “SEC”).The Audit Committee charter gives the Audit Committee the authority and responsibility for the appointment, retention, compensation, and oversight of CryoLife’s independent registered public accounting firm, including pre-approval of all audit and non-audit services to be performed by CryoLife’s independent registered public accounting firm. The Audit Committee also oversees, and must review and approve, all significant related party transactions. SeePolicies and Procedures for Review, Approval, or Ratification of Transactions with Related Parties beginning on page 16; see also theReport of the Audit Committee on page 20.The Audit Committee reviews the general scope of CryoLife’s annual audit and the nature of services to be performed for CryoLife in connection with it, acting as liaison between the Board of Directors and the independent registered public accounting firm. The Audit Committee also reviews various Company policies, including those relating to accounting practices and internal control systems of CryoLife. In addition, the Audit Committee is responsible for reviewing and monitoring the performance of CryoLife’s independent registered public accounting firm, for engaging or discharging CryoLife’s independent registered public accounting firm, and for assisting the Board of Directors in its oversight of risk management and legal and financial regulatory requirements.Compensation Committee— The Compensation Committee operates under a written charter that sets out the committee’s functions and responsibilities. The Compensation Committee currently consists of three non-employee directors: Mr. Bevevino, Chair, Mr. Ackerman, and Mr. McCall, each of whom served on the Compensation Committee for all of 2018. Until February 2018, Dr. Elkins was Compensation Committee chair, and he remained a member of the Compensation Committee until his retirement in May 2018. Each member of the Compensation Committee meets, or met, the independence requirements of Sections 303A.02(a)(i) and (ii) of the current NYSE Listing Standards, is a non-employee director within the meaning of Rule 16b-3 under the Exchange Act and is a disinterested director within the meaning of Section 162(m) of the Internal Revenue Code of 1986. Pursuant to the Compensation Committee charter, the Compensation Committee is responsible for reviewing with the Company CEO, the performance of officers and setting the annual compensation for all officers, including the salary and the compensation package of officers. The Compensation Committee also oversees the issuance of stock options, restricted stock awards, restricted stock units, performance stock units, and other stock rights and cash incentives under CryoLife’s stock and incentive plans. In conjunction with the Corporate Governance Committee and Board of Directors, the Compensation Committee approves severance arrangements for the CEO and other officers. The Compensation Committee reviews and approves the performance metrics upon which a portion of the compensation of CryoLife’s CEO and other officers is based, and together with the Corporate Governance Committee, annually reviews the CEO’s objectives and performance, recommends changes thereto, and sets the CEO’s compensation package. SeeCompensation Discussion and Analysis on page 22 for information concerning the Compensation Committee’s role, processes, and activities in overseeing executive compensation.CRYOLIFE, INC. | 2019 Proxy Statement14Pursuant to its charter, the Compensation Committee has the authority to delegate any of its decisions to a sub-committee of the Compensation Committee consisting of two committee members, provided that a full report of any action taken is promptly made to the full Compensation Committee.The Compensation Committee has the power to retain, determine the terms of engagement and compensation of, and terminate any consulting firm that may assist it in its decisions.Corporate Governance Committee— The Corporate Governance Committee operates under a written charter that sets out the committee’s functions and responsibilities. The Corporate Governance Committee currently consists of four non-employee directors: Mr. McCall, Chair, Mr. Bullock, Mr. Burbank, and Mr. Salveson, each of whom served on the Corporate Governance Committee for all of 2018. Each of these individuals meets the requirements of independence of Section 303A.02 of the current NYSE Listing Standards. The Corporate Governance Committee recommends potential candidates for the Board of Directors and oversees the annual self-evaluations of the Board of Directors and its committees. The Corporate Governance Committee is also responsible for overseeing succession planning for the Board and officers, including the CEO. Each year the Corporate Governance Committee, together with the Compensation Committee, evaluates the performance of CryoLife’s CEO and sets his compensation. The Corporate Governance Committee also recommends to the Board of Directors how the other committees of the Board of Directors should be structured and which non-employee directors should be members of those committees. The Corporate Governance Committee also reviews and makes recommendations to the Board of Directors regarding the development of, and compliance with, the Company’s corporate governance guidelines and other governance policies, procedures, and practices.Compliance Committee— The Compliance Committee operates under a written charter that sets out the committee’s functions and responsibilities. The Compliance Committee currently consists of four non-employee directors: Mr. Salveson, Chair, Mr. Bullock, Mr. Morgan, and Ms. Borgstrom. Messrs. Salveson, Bullock, and Morgan each served on the Compliance Committee for all of 2018. Ms. Borgstrom was appointed to the committee in July 2018. Dr. Elkins was a member of the Compliance Committee until his retirement in May 2018. Each of these individuals meets the requirements of independence of Section 303A.02 of the current NYSE Listing Standards. The charter of the Compliance Committee requires that a majority of its members be independent. Among other things, the Compliance Committee assists the Company in its oversight of CryoLife’s compliance with healthcare laws and regulations, including regulations and laws related to regulatory affairs and quality assurance, and general healthcare compliance such as the Anti-Kickback Statute. The Compliance Committee also receives periodic reports from the Company’s senior management regarding quality and regulatory systems and provides input into certain internal regulatory affairs and quality assurance and healthcare compliance policies. Finally, pursuant to its charter, the Compliance Committee, jointly with the Audit Committee, assists in the oversight of compliance with certain policies and procedures such as the Company’s Code of Conduct and our policy with respect to the Foreign Corrupt Practices Act.Procedures for Stockholders Who Wish to Submit Recommendations to the Board of DirectorsStockholders may recommend potential candidates for director to the Corporate Governance Committee. The policy of the Corporate Governance Committee is to give the same consideration to nominees recommended by stockholders that it gives to individuals whose names are submitted by management or non-employee directors, provided such recommendations from stockholders are made in accordance with procedures described in this Proxy Statement under the FAQ “What is the deadline for submitting proposals for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?” When considering a potential candidate, the Corporate Governance Committee considers, among other things, demonstrated character, judgment, relevant business, functional, and industry experience, degree of intellectual and business acumen, and, when contemplating overall board diversity, ethnic background and gender. The Corporate Governance Committee does not have a formal policy with respect to diversity; however, the Board of Directors and the Corporate Governance Committee believe that it is important that the members of the Board of Directors represent diverse viewpoints. The Corporate Governance Committee’s process for identifying and evaluating nominees typically involves a series of internal discussions, review of information concerning candidates, and interviews of selected candidates. From time to time, we have also engaged one or more executive search consulting firms to assist in the identification and recruitment of potential director candidates.The Corporate Governance Committee has not received any recommended director nominees for election at the 2019 Annual Meeting from any CryoLife stockholder or group of stockholders beneficially owning in excess of 5% of CryoLife’s outstanding common stock. Stockholders may communicate with the Corporate Governance Committee or the Board of Directors by following the procedures set forth below atCommunication with the Board of Directors and its Committees on page 17.CRYOLIFE, INC. | 2019 Proxy Statement15The current policy of the Board of Directors requires each director to offer to voluntarily resign upon a change in such director’s principal employment or line of business. The Corporate Governance Committee will then review whether such director continues to meet the needs of the Board of Directors and whether to make a recommendation to the Board of Directors that it should accept the director’s offer to resign.Current policy of the Board of Directors also limits the number of other public company boards on which CryoLife’s directors may serve. Non-employee directors may serve on no more than three public company boards in addition to service on the Company’s Board of Directors, and the CEO’s service on the board of any other organization is restricted by his employment agreement with the Company and is subject to prior approval by the Board of Directors.CryoLife, Inc. Code of ConductCryoLife has established a Code of Conduct that clarifies the Company’s standards of conduct in potentially sensitive situations; makes clear that CryoLife expects all employees, officers, and non-employee directors to abide by applicable legal and regulatory requirements and to understand and appreciate the ethical considerations of their decisions; and reaffirms the Company’s long-standing commitment to a culture of corporate and individual accountability and responsibility for the highest ethical and business practices.In addition to the Code of Conduct, the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, Assistant Controller, and all other senior financial officers are also subject to the Company’s Code of Ethics for Senior Financial Officers. In the event that CryoLife amends or waives any of the provisions of the Code of Conduct or Code of Ethics for Senior Financial Officers applicable to its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, or Assistant Controller, the Company will disclose that information on the Company’s website athttp://investors.cryolife.com/corporate-governance/cryolifes-code-conduct.Policies and Procedures for Review, Approval, or Ratification of Transactions with Related PartiesThe Board of Directors has adopted policies and procedures for review, approval, or ratification of transactions with related parties.Types of Transactions CoveredIt is our policy to enter into or ratify related party transactions only when the Board of Directors, acting through the Audit Committee or as otherwise described herein, determines that the related party transaction in question is in, or is not inconsistent with, the best interests of CryoLife and its stockholders. We follow the policies and procedures below for any transaction in which we are, or are to be, a participant and the annual amount involved exceeds $50,000 and in which any related party, as defined below, had, has, or will have a direct or indirect interest. Pursuant to the policy, compensatory arrangements with an officer or non-employee director that are approved or ratified by the Compensation Committee or compensation received under our employee benefit plans that are available to all employees do not require additional Audit Committee approval.The Company subjects the following related parties to these policies: non-employee directors (and nominees); executive officers; beneficial owners of more than 5% of our stock; any immediate family members of these persons; and, any entity in which any of these persons is employed, or is a general partner or principal, or has a similar position, or in which the person has a 10% or greater beneficial ownership interest.Standards Applied and Persons Responsible for Approving Related Party TransactionsThe Corporate Secretary is responsible for submitting to the Audit Committee for its advance review and approval any related party transaction, other than on-going transactions, into which we propose to enter. If the Corporate Secretary determines that it is not practicable or desirable to wait until the next regularly scheduled Audit Committee meeting, she will submit the related party transaction for approval or ratification to the Chair of the Audit Committee, who possesses delegated authority to act between Audit Committee meetings. The Chair will report any action he has taken under this delegated authority to the Audit Committee at its next regularly scheduled meeting and seek ratification of such approval. If any related party transaction inadvertently occurs before the Audit Committee has approved it, the Corporate Secretary will submit the transaction to the Audit Committee for ratification as soon as reasonably practicable. If the Audit Committee does not ratify the transaction, the Audit Committee will direct management as to what action it proposes management take regarding the transaction.CRYOLIFE, INC. | 2019 Proxy Statement16When considering a related party transaction, the Audit Committee will examine all factors it deems relevant. The Audit Committee, or the Chair, will approve only those transactions that they have determined in good faith are in, or are not inconsistent with, the best interests of CryoLife and its stockholders.The Corporate Secretary may delegate her duties under the policy to another officer of CryoLife if she gives notice of the delegation to the Audit Committee at a regularly scheduled Audit Committee meeting.Review of Ongoing TransactionsAt a meeting of the Audit Committee in the first quarter of each fiscal year, the Audit Committee reviews all related party transactions that are ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from CryoLife of more than $50,000 annually. Based on all relevant facts and circumstances, the Audit Committee will determine whether it is, or is not inconsistent with, the best interests of CryoLife and its stockholders to continue, modify, or terminate the on-going related party transaction. Review of 2018 ongoing related party transactions is located atDirector Independence beginning on page 12.Compensation Committee Interlocks and Insider ParticipationNone of our executive officers currently serve, or served during fiscal 2018, as a member of the compensation committee of any other company that has or had an executive officer serving as a member of our Board of Directors. None of our executive officers currently serve, or served during fiscal 2018, as a member of the board of directors of any other company that has or had an executive officer serving as a member of our Compensation Committee.Communication with the Board of Directors and Its CommitteesInterested parties may communicate with the Board of Directors, the Presiding Director, the non-employee directors as a group, committee chairs, committees, and individual directors by directing communications to the Corporate Secretary, who will forward them as appropriate, unless they clearly constitute unsolicited general advertising or inappropriate material. Please send all communications in care of Jean F. Holloway, General Counsel and Corporate Secretary, CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144.Availability of Corporate Governance DocumentsYou may view current copies of the charters of the Audit, Compensation, Corporate Governance, and Compliance Committees, as well as the Company’s Corporate Governance Guidelines and Code of Conduct, on the CryoLife website athttp://investors.cryolife.com/corporate-governance/governance-highlights.Notwithstanding anything to the contrary set forth in any of CryoLife’s filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate other CryoLife filings, including this Proxy Statement, in whole or in part, neither of the following Reports of the Audit Committee and the Compensation Committee shall be incorporated by reference into any such filings.CRYOLIFE, INC. | 2019 Proxy Statement17DIRECTOR COMPENSATIONElements of Non-Employee Director CompensationAnnual Retainer and Committee Chair FeesEach of the non-employee directors of CryoLife receives an annual cash retainer for service on the Board of Directors, service on committees of the Board of Directors, service as the Chair of the committees of the Board of Directors, and service as Presiding Director, as applicable and as noted in the table below. CryoLife pays all cash retainers on a prorated monthly basis. Currently, the Presiding Director is also the Chair of the Corporate Governance Committee, and he does not receive any additional compensation for his position as Chair of that committee.2018 Board of Director Retainers Annual Board Service $45,000 Presiding Director(1) $25,000 Committee Committee Chair Retainer(2) Committee Membership Retainer Audit $20,000 $10,000 Compensation $15,000 $7,500 Corporate Governance $10,000 $5,000 Compliance $10,000 $5,000 (1)In addition to annual board service retainer.(2)Includes committee membership retainer.Restricted Stock GrantsA portion of the non-employee directors’ annual compensation is issued as restricted stock. The shares of restricted stock are issued each year generally following the annual meeting of stockholders. With respect to 2018 grants, the Compensation and Corporate Governance Committees recommended, and the Board of Directors approved a grant value of $125,000 per non-employee director and in May 2018, the Company granted 4,638 shares of restricted stock to each of the non-employee directors at the time of the grant, which will vest on May 24, 2019. In August 2018, Ms. Borgstrom was granted 3,456 shares of restricted stock, pro-rated for her service from July 2018 to May 2019, which will vest on August 9, 2019. The size and terms of the grants are subject to periodic re-evaluation jointly by the Compensation Committee and the Corporate Governance Committee. All equity grants to non-employee directors in 2018 were made pursuant to the CryoLife, Inc. Equity and Cash Incentive Plan (the “ECIP”). The non-employee director will forfeit any unvested portion of the award if he ceases to serve as a director, other than for specific reasons under certain circumstances as described within the ECIP.CRYOLIFE, INC. | 2019 Proxy Statement18Fiscal2018Director CompensationThe following table provides compensation information for the one-year period ended December 31, 2018, for each person who was a member of our Board of Directors in 2018, other than J. Patrick Mackin:Name Fees Earned or Paid in Cash(1) ($) Stock Awards(2) ($) Total ($) (a) (b) (c) (d) Thomas F. Ackerman 58,333 124,994 183,327 Daniel J. Bevevino 64,792 124,994 189,786 Marna P. Borgstrom 25,000 114,566 139,566 James W. Bullock 51,875 124,994 176,869 Jeffrey H. Burbank 47,396 124,994 172,390 Ronald C. Elkins, M.D.(3) 17,083 - 17,083 Ronald D. McCall 67,917 124,994 192,911 Harvey Morgan 65,312 124,994 190,306 Jon W. Salveson 56,354 124,994 181,348 (1)Amounts shown include annual board service retainer, committee Chair and committee membership retainers, and, for Mr. McCall, a Presiding Director retainer, earned by our non-employee directors during 2018.(2)The amount shown represents the aggregate grant date fair value of the 4,638 restricted shares granted to each of the non-employee directors, as calculated in accordance with FASB ASC Topic 718. We issued the awards on May 24, 2018, and we valued them at $26.95 per share, which was the closing price on the grant date. Ms. Borgstrom was issued 3,456 shares on August 9, 2018, valued at $33.15 per share, which was the closing price on the grant date. See Notes 1 and 17 of the Notes to Consolidated Financial Statements filed with CryoLife’s Annual Report on Form 10-K for the year ended December 31, 2018, for assumptions we used in valuing restricted stock awards. The restricted stock represented here vests on May 24, 2019, and for Ms. Borgstrom, August 9, 2019; accordingly, these shares remained subject to vesting restrictions as of December 31, 2018.(3)Dr. Elkins retired from the CryoLife, Inc. Board of Directors in May 2018 and did not stand for re-election at the 2018 Annual Meeting.J. Patrick Mackin, Chairman, President, and Chief Executive Officer received no compensation in 2018 for his services as a director of the Company. His compensation as an executive officer of the Company is detailed in theSummary Compensation Table on page 37.Director Stock Ownership RequirementsIn November 2015, the Corporate Governance Committee approved a change to the non-employee director stock ownership requirements to five times the then current annual board service retainer for non-employee directors. All non-employee directors currently satisfy this standard, except Ms. Borgstrom, who only became a director in July 2018. The Compensation and Corporate Governance Committees evaluate stock ownership requirements for non-employee directors on an annual basis.CRYOLIFE, INC. | 2019 Proxy Statement19REPORT OF THE AUDIT COMMITTEEThe Board of Directors maintains an Audit Committee of three non-employee directors. The Board of Directors and the Audit Committee believe that the Audit Committee’s current member composition satisfies the rules of the NYSE that govern audit committee composition, including the requirement that all audit committee members be “Independent Directors” as that term is defined by Sections 303A.02 and 303A.06 of the NYSE Listing Standards and Rule 10A-3 promulgated under the Securities Exchange Act of 1934.The Audit Committee oversees CryoLife’s financial processes on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements included in CryoLife’s Annual Report on Form 10-K for fiscal 2018 with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Board of Directors and the Audit Committee have adopted a written Audit Committee Charter. Since the first quarter of 2004, CryoLife has retained a separate accounting firm to provide internal audit services. The internal audit function reports directly to the Audit Committee and, for administrative purposes, to the Chief Financial Officer.During the course of fiscal 2018, management completed the documentation, testing, and evaluation of CryoLife’s system of internal controls over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept informed of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Ernst & Young LLP, CryoLife’s independent registered public accounting firm, at each regularly scheduled Audit Committee meeting. The Audit Committee also reviewed the report of management on internal controls over financial reporting contained in CryoLife’s Annual Report on Form 10-K for fiscal 2018, as well as Ernst & Young LLP’s Reports of Independent Registered Public Accounting Firm included in CryoLife’s Annual Report on Form 10-K for fiscal 2018 related to its audit of (i) CryoLife’s consolidated financial statements and (ii) the effectiveness of CryoLife’s internal controls over financial reporting. The Audit Committee continues to oversee CryoLife’s efforts related to CryoLife’s internal controls over financial reporting and management’s preparations for the evaluation thereof for fiscal 2019.The Audit Committee reviewed with Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of CryoLife’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. Ernst & Young LLP also provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence. The Audit Committee discussed with Ernst & Young LLP that firm’s independence from management and CryoLife.The Audit Committee discussed with Ernst & Young LLP the overall scope and plans for its audit. The Audit Committee met with Ernst & Young LLP, with and without management present, to discuss the results of its examination, its evaluation of CryoLife’s internal controls, and the overall quality of CryoLife’s financial reporting.In reliance on the reviews and discussions referred to above, the Audit Committee members did not become aware of any material misstatement in the audited financial statements and recommended to the Board of Directors that the audited financial statements be included in CryoLife’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the Securities and Exchange Commission. The Audit Committee has approved Ernst & Young LLP as CryoLife’s independent registered public accounting firm for fiscal 2019.Audit CommitteeHARVEY MORGAN, CHAIRTHOMAS F. ACKERMANDANIEL J. BEVEVINOThis foregoing audit committee report is not “soliciting material,” is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.CRYOLIFE, INC. | 2019 Proxy Statement20PROPOSAL TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATIONCryoLife seeks a non-binding vote from its stockholders to approve the compensation paid to our named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion. This vote is commonly referred to as a “Say on Pay” vote because it gives stockholders an opportunity to express their approval or disapproval to the Company regarding its pay practices.As discussed in detail in the Compensation Discussion and Analysis that follows, our executive compensation programs are designed to attract, retain, motivate, and reward executive talent that is capable of, and appropriately incented to, deliver on CryoLife’s short and long-term growth and other strategic objectives and on CryoLife’s commitments to its stockholders, in particular, long-term value creation. We believe that the form and amount of compensation we provide our current named executive officers appropriately reflects their extensive management experience, continued high performance, and exceptional service to CryoLife and our stockholders.We invite you to consider the details of our executive compensation program as disclosed more fully throughout this Proxy Statement. Regardless of the outcome of this “Say on Pay” vote, CryoLife welcomes input from its stockholders regarding executive compensation and other matters related to the Company’s success generally. We believe in a corporate governance structure that is responsive to stockholder concerns, and we view this vote as a meaningful opportunity to gauge stockholder approval of our executive compensation policies. Given the information provided in this Proxy Statement, the Board of Directors asks you to approve the following advisory resolution:“Resolved, that CryoLife’s stockholders approve, on an advisory basis, the compensation paid to CryoLife’s named executive officers, as disclosed in this Proxy Statement.”Required VoteThe votes cast for this proposal must exceed the votes cast against it in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome. As previously disclosed and approved by the stockholders, the Board of Directors currently submits a say on pay proposal annually. The annual frequency of this disclosure and approval was the subject of a vote of the stockholders at the Company’s 2017 Annual Meeting and was supported by more than 77% of the stockholder votes.The Board of Directors' RecommendationFOR THE APPROVAL OF THE COMPENSATION PAID TO CRYOLIFE’S NAMED EXECUTIVE OFFICERS.“FOR” the EXCLUSIVE FORUM PROPOSAL.
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COMPENSATION DISCUSSION AND ANALYSIS
– Special Meeting
This Compensation Discussion and Analysis describes the principles, objectives, and features of our executive compensation program as applied to our chief executive officer and the other executive officers included in the Summary Compensation Table of this Proxy Statement (collectively, our “named executive officers”). For 2018, our named executive officers were:
EXECUTIVE SUMMARY
The Compensation Committee, referred to hereafter as the “Committee,” generally considers and approves executive compensation each year at a meeting held in the first quarter of the fiscal year. These compensation decisions take into account a variety of information and analyses, including alignment of compensation vehicles with the Committee’s compensation philosophy, prior-year Company and individual executive performance, current-year performance expectations, any changes in roles and responsibilities, and competitive market data provided by the Committee’s independent compensation consultant and by management.
2017 Say on Pay Vote and 2018 Program Decisions
At CryoLife’s Annual Meeting of stockholders on May 17, 2017, over 81% of the stockholder votes cast were in favor of our named executive officers’ 2016 compensation. This advisory vote indicated strong stockholder support for the executive compensation program.
The Committee considered these 2017 advisory vote results as it evaluated its compensation policies and made compensation decisions subsequent to the 2017 Annual Meeting. Based in part on this consideration, together with the individual executive’s performance and the Company’s actual and expected performance, as well as competitive market data provided by the Committee’s independent compensation consultant and by management, and after also considering recommendations from its independent compensation consultant and from management, the Committee decided not to make significant changes to the executive compensation programs for 2018. The Committee also worked within the parameters of the ECIP when making compensation decisions for 2018. The following is a summary of the Committee’s significant decisions regarding named executive officer compensation for 2018:
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Pay-for-Performance Alignment
The Committee believes it has developed a compensation program that ensures that the interests of the Company’s executives are aligned with those of its stockholders by strongly linking executive compensation with Company and personal performance at levels such that officers are incented to drive long-term value creation. The key pay-for-performance aspects of the executive compensation program are described below:
As described in this Proxy Statement, in 2018 the executive compensation program effectively delivered pay-for-performance, as follows:
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Throughout this Proxy Statement, we refer to revenue, adjusted net income, and adjusted EBITDA. Adjusted net income and adjusted EBITDA reflect adjustments to similar measures reported under U.S. GAAP. Appendix A to this Proxy Statement provides certain required information regarding these non-GAAP measures, including a reconciliation to our audited U.S. GAAP financial statement measures for 2018, as presented in our 2018 Form 10-K filed on February 26, 2019.
ROLES AND RESPONSIBILTIES
Compensation Committee
The Committee determines and approves the compensation of CryoLife’s officers, including the named executive officers. The Committee is supported by the CEO, executive management, and an independent compensation consultant, who attends Committee meetings when invited and provides input and information as requested by the Committee. The Committee regularly meets in executive session without the CEO or any members of management present. For 2018 the Committee made compensation decisions based on its own considerations and analyses, as well as recommendations from management and its independent compensation consultant. Our CEO does not make recommendations to the Compensation or Corporate Governance Committees or participate in Compensation or Corporate Governance Committee or Board meetings regarding his own compensation, except to discuss his own compensation with those Committees or the Board during his annual performance review.
Independent Compensation Consultant
The Committee has the authority to engage independent consultants, including independent compensation consultants, to assist with its responsibilities. With respect to general executive compensation decisions made during fiscal 2018 and regarding 2018 compensation, the Committee retained Willis Towers Watson & Co. (“Willis Towers Watson”) as its primary independent compensation consultant for general executive compensation matters. The independent compensation consultant reports directly to the Committee, is directed by the Committee, and provides only those services authorized by the Committee; it provides no other services to CryoLife. The independent compensation consultant generally performs an annual review of officer and non-employee director compensation, analyzes the relationship between officer, including our CEO, pay and Company performance, compares officer and non-employee director compensation against such compensation provided by appropriate comparator companies and industry standards, informs the Committee of emerging practices and trends, assists with special projects at the request of the Committee, and attends Committee meetings when invited. In February 2018, and again in February 2019, the Committee assessed the independence of Willis Towers Watson pursuant to applicable SEC and NYSE rules and concluded that Willis Tower Watson was independent and its work for the Committee did not raise any conflict of interest concerns.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee’s compensation philosophy is to attract, retain, motivate, and reward executive talent that has the capability to, and is appropriately incented to, deliver on the Company’s short and long-term growth and other strategic objectives and on the Company’s commitments to its stockholders, in particular long-term value creation. To that end, the Company has designed the compensation program to align with corporate strategy and short-term and long-term objectives, achieve market competitiveness, emphasize pay for performance, align with stockholder interests, balance the interests of key stakeholders, and recognize the unique attributes specific to CryoLife and its executive team. Each primary component of compensation is intended to accomplish one or more of these objectives, as summarized in the following chart:
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COMPENSATION MIX
The Committee approves the primary components of the executive compensation program and generally intends for it to provide more variable pay opportunities than fixed pay opportunities and to place significant weight on long-term incentive opportunities. These objectives result in a pay program that aligns pay and performance. The following chart summarizes the target pay mix for the named executive officers for fiscal 2018:
| Compensation Component | Mackin | Lee | Holloway | McDermid | Davis |
| Salary($) | 660,000 | 418,900 | 346,300 | 332,100 | 334,200 |
| Short-Term Incentive (Target)($) | 660,000 | 251,300 | 173,200 | 166,000 | 167,100 |
| Long-Term Incentive (Grant Date Fair Value)($)(1) | 1,905,815 | 549,981 | 480,008 | 399,986 | 399,986 |
| Target Total Direct Compensation($) | 3,225,815 | 1,220,181 | 999,508 | 898,086 | 901,286 |
| % Fixed(2) | 20.5 | 34.3 | 34.6 | 37.0 | 37.1 |
| % Variable(3) | 79.5 | 65.7 | 65.4 | 63.0 | 62.9 |
| % Short-Term Compensation(4) | 40.9 | 54.9 | 52.0 | 55.5 | 55.6 |
| % Long-Term Compensation(5) | 59.1 | 45.1 | 48.0 | 44.5 | 44.4 |
MARKET ANALYSIS
As part of its decision-making process, the Committee requests and reviews relevant and credible market data regarding executive compensation levels, Company performance, and the relative relationship between executive pay and Company performance. However, the Committee views this data as one of many inputs in its decision-making process, which also includes other assessments of the Company’s performance, assessments of each executive’s performance, significant changes in roles and responsibilities, internal pay equity among executives, and retention considerations.
Each year, the Committee reviews and considers an officer compensation study prepared by its independent compensation consultant, additional compensation survey data provided by management, and internal equity information. The executive compensation study is generally completed in the fourth quarter of the year and is used to inform the Committee’s decisions regarding the subsequent year’s compensation. Accordingly, the relevant study and market information reviewed by the Committee with regard to 2018 officer compensation was prepared in October 2017 and presented to the Committee in the fourth quarter of 2017. We refer to this study as the “2017 Study.” An updated version of the 2017 Study was considered at the March 2018 Committee meeting. As in prior years, the 2017 Study assessed both the competitiveness of pay levels and the alignment of pay with Company performance.
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The Company’s 2018 compensation peer group, which is described in more detail below, had median revenues, based on the latest figures available at the time the 2017 Study was prepared, of $236 million and median market capitalization as of July 2017, of $846 million. In addition to using officer pay information as disclosed by companies in the compensation peer group, the 2017 Study used survey data drawn from four compensation surveys of U.S. companies, including biotech and healthcare companies, with targeted revenues of $200-250 million, in order to approximate the Company’s estimated revenue for 2018. With respect to all named executive officers included in the 2017 Study, the data in the study was an even blend of the 2018 peer group and the survey information. In each case, Willis Towers Watson trended the compensation data forward to January 1, 2018 by a factor of 3.0%. We refer to the blended 2018 peer group and survey compensation data for all named executive officers as the “2018 Peer Group Information.”
The following peer companies were used for the 2017 Study:
The Committee believed that the pay practices of these companies provided a useful reference point for pay and performance comparisons at CryoLife, especially considering CryoLife’s anticipated growth.General
If we fail to receive a sufficient number of votes to approve the Reincorporation Proposal or the Exclusive Forum Proposal, we may propose to adjourn the Special Meeting for a period of not more than 30 days, for the purpose of soliciting additional proxies to approve the Reincorporation Proposal or the Exclusive Forum Proposal. We currently do not intend to propose adjournment of the Special Meeting if there are sufficient votes to approve the Reincorporation Proposal or the Exclusive Forum Proposal.
Required Vote
This proposal will be approved if a majority of the votes cast at the Special Meeting votes in favor of the proposal. Accordingly, abstentions will not have any effect on the outcome of this proposal. Shares represented by executed proxies on proxy cards will be voted, if specific instructions are not otherwise given, for the adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Reincorporation Proposal or the Exclusive Forum Proposal.
The following survey sources were usedBoard of Directors’ Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” the proposal to adjourn the
Special Meeting, if necessary, to solicit additional proxies if there are not sufficient
votes in favor of the 2017 Study:Reincorporation Proposal OR the Exclusive Forum Proposal.
Both the peer companies and survey sources were recommended by Willis Towers Watson, the Committee’s independent compensation consultant at that time, and approved by the Committee. In approving the peer group, the Committee considered the fact that each company is (or was at the time) publicly-traded, operates in a similar industry, is similar in size, scope, and complexity and is representative of our pool for executive talent. The Committee also concluded that the companies are (or were at the time) within a reasonable range of CryoLife’s historical, current, and projected revenues. Nonetheless, the Committee reviews and considers changes to the peer group and survey sources in connection with each year’s study. This is done to ensure that the peer group and survey sources continue to reflect the most appropriate reference points for CryoLife.
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2018 COMPENSATION COMPONENTS
The primary components of CryoLife’s executive compensation program are base salary, short-term incentives, and long-term incentives. CryoLife also provides executives with tax-deferred savings opportunities, participation in Company-wide benefits programs, and limited perquisites.
2018 Base Salary
The Committee generally reviews base salary levels each February as part of its overall review and approval of the executive compensation program. Based on its review in late 2017 and early 2018, the Committee determined it appropriate to increase named executive officers’ base salaries, on average, by 4% above 2017 levels.
| Comparison of 2018 and 2017 Base Salaries | |||
| Executive | 2018 ($) | 2017 ($) | Increase (%) |
| Mackin | 660,000 | 640,000 | 3.1 |
| Lee | 418,900 | 402,800 | 4.0 |
| Holloway | 346,300 | 329,800 | 5.0 |
| McDermid | 332,100 | 319,300 | 4.0 |
| Davis | 334,200 | 321,400 | 4.0 |
Analysis
The 2017 Study of peer group base salaries found our named executive officer salaries to be within a competitive range of 97-110% of the median of their peer group. Based on input from management and in consultation with Willis Towers Watson, the Committee approved merit increases for 2018 for all officers, ranging from 3% to 5%, with named executive officer raises ranging from 3.1% to 5%. In approving salary increases to named executive officers, the Committee considered current market positioning, both individual and Company performance during 2017, and the Company’s overall salary increase budget for employees.
2018 Short-Term Incentives
The Committee approved the 2018 short-term incentive program (the “2018 Cash Bonus Plan”) in March 2018, with the understanding that in the absence of an agreement between the Company and the executive, the Committee could alter the 2018 Cash Bonus Plan at any time. The 2018 Cash Bonus Plan provides for the same performance measures (adjusted for projected changes in 2018 levels of revenue and adjusted net income) and the same design as the 2017 program, with increased target incentive opportunities from the 2017 program for the CEO and the Senior Vice Presidents. The CEO’s target incentive opportunity increased from 85% of his base salary to 100% of his base salary and the Senior Vice Presidents’ target incentive opportunity increased from 45% of their base salaries to 50% of their base salaries (other than the Senior Vice President, Global Sales and Marketing, whose target incentive opportunity was already 50% of his base salary). The target incentive opportunity for the Executive Vice President, COO, and CFO remained the same from 2017 to 2018 at 60% of his base salary. The increase in opportunity for certain executives reflects the impact of the increased size, scope, and business complexity of the Company following its acquisition of JOTEC AG, and the impact of those increases upon market competitiveness, as well as the Committee’s ongoing assessment of Company performance.
Analysis
The chart below shows the performance metrics set for the 2018 Cash Bonus Plan:
| 2018 Performance Goals | ||||
| Performance Measure | Weight (%) | Threshold ($) | Target ($) | Benchmark ($) |
| Revenue | 40 | 245,961,000 | 258,906,000 | 271,851,000 |
| Adjusted Net Income | 40 | 48,925,000 | 57,559,000 | 66,193,000 |
| Individual Performance | 20 | - | - | - |
See Appendix A to this Proxy Statement for further details regarding the revenue and adjusted net income performance measure and the reconciliation of that measure to net income as reported for purposes of U.S. GAAP.
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Upon review and consideration, the Committee believed that the performance measures of revenue and adjusted net income used in the 2018 short-term incentive program would motivate management to achieve increases in 2018 revenues and adjusted net income, as well as drive personal performance and provide appropriate retention incentives. As a result, the Committee approved the same revenue and adjusted net income measures (as adjusted for 2018 forecast results) that it used with respect to 2017 for use in the 2018 Cash Bonus Plan, with the increased target payouts as previously discussed.
The Committee believed that 2018 revenue and adjusted net income thresholds and target performance levels were challenging. The 2018 revenue and adjusted net income targets are within the range of 2018 product and service revenue guidance previously publicly announced by CryoLife.
For 2018, the performance measures and weights for the short-term incentive program remained the same as in 2017, with a 100% payout for performance at target levels, a 140% total cap on payout for performance, and the following additional primary features:
The performance ranges are generally narrow relative to the payout ranges in order to focus executives on achieving business performance goals in a manner consistent with business plans and communicated guidance.
Analysis – Program Design
In arriving at its decision to approve the 2018 short-term incentive program design, measures, and goals, the Committee took into consideration the following:
The Committee sets short-term incentive opportunities, in conjunction with a review of base salaries, as part of executives’ overall “target total cash compensation.” The Committee decided to carry forward for 2018 the design of the 2017 short-term incentive program (with adjusted targets, as discussed below), as it believed that the performance measures of revenue and adjusted net income used in the 2017 program would continue to motivate management to achieve improvements in those metrics. The Committee also believed that these goals would drive the personal performance of the named executive officers and provide appropriate retention incentives.
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With respect to adjusted net income and revenue, the Committee made no adjustments to exclude items over which it believed that management has insufficient control or could distort the underlying operating performance of the Company.
The Committee discussed management’s recommended 2018 performance targets and payout opportunities with its independent compensation consultant and with management and determined that the recommended continuation of the 2017 program design, with updated targets to reflect the 2018 goals, and increased payout opportunities for most senior executives, were consistent with its desire to ensure that no short-term incentives would be paid unless challenging performance was achieved and then only at levels commensurate with such performance. The Committee believed that the 2018 short-term incentive program target percentages provided each officer warranted increases, in most cases, to maintain market competitiveness and to reflect the recent growth of the Company and the increasing complexity of its business. With these previously discussed increases, the Committee believed the 2018 short-term incentive program was appropriately incentivizing given the senior executive’s position with CryoLife, and that the incentives were appropriately sized based on the 2018 Peer Group Information and the internal pay equity information reviewed by the Committee.
Analysis – Plan Payout
The 2018 short-term incentive payouts in early 2019 through the 2018 Cash Bonus Plan were based on actual financial performance results of CryoLife relative to the pre-determined goals and on the individual performance results of each executive officer with respect to the individual performance component. Individual performance bonuses for each named executive officer (other than that for the CEO) were based on reviews conducted by the CEO of individual performance relative to individual goals. Mr. Mackin’s 2018 individual performance bonus reflected a review of his 2018 performance jointly by the Compensation Committee and Corporate Governance Committee. Having certified the other performance metrics, and considered Mr. Mackin’s individual performance, the Compensation and Corporate Governance Committees approved his bonus payout at the amount below.
The following tables show the performance results for 2018 and the actual amount of short-term incentive paid to each named executive officer:
2018 Annual Incentive Program (Cash Bonus) Actual vs. Target Performance | |||||
| Performance Measure | Weight (%) | Actual Performance ($) | Target Performance ($) | Performance % of Target (%) | Payout % of Target (%) |
| Revenue | 40 | 262,841,000 | 258,906,000 | 101.5 | 112.2 |
| Adjusted Net Income | 40 | 52,158,000 | 57,559,000 | 90.6 | 75.0 |
| Individual Performance | 20 | 1 – 5 performance ratings 0% - 200% of target payout based on individual performance of officer | |||
2018 Annual Incentive Program (Cash Bonus) Actual(1) vs. Target Payout | |||
| Executive | Actual Payout ($) | Target Payout ($) | Payout % of Target (%) |
| Mackin | 626,040 | 660,000 | 94.9 |
| Lee | 238,397 | 251,300 | 94.9 |
| Holloway | 164,228 | 173,200 | 94.9 |
| McDermid | 157,493 | 166,000 | 94.9 |
| Davis | 158,509 | 167,000 | 94.9 |
These tables demonstrate how the short-term incentive program design effectively aligned performance and compensation, as the Company’s below-target performance with respect to adjusted net income yielded a payout at 75.0% for that portion of the bonus payout.
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2018 Long-Term Incentives
Based on input from management and in consultation with Willis Towers Watson, the Committee considered the long-term incentive program and determined to continue the design of the 2018 program to have the mix of equity awards be based on an equal allocation of value among stock options, restricted stock, and performance stock units, with approximately one-third of the value being granted allocated to each type of award. This mix is altered for Company officers located outside of the United States to accommodate local tax issues.
The Committee determined that the estimated grant date fair value of the awards to officers in 2018 would be established at new levels reflecting the values in the market analysis contained in the 2017 Study which took into consideration the anticipated (and later realized) growth of the Company, as well as the increase in the complexity of its business following the acquisition of JOTEC AG. To determine the number of options, shares of restricted stock, and target performance shares to be used to deliver such grant date fair value, the Committee directed management to determine the numbers of shares of restricted stock and target performance stock units using the closing share price of the Company’s stock on the date before the date of grant, and to also determine the number of stock options using the estimated fair value of the options as of the same date. Grants were made on the first permissible day following approval. As anticipated, this method results in the grant values approved by the Committee being slightly different from the grant date fair value of the equity granted. In this instance, grant values approved by the Committee were converted to shares using a stock price of $21.70, the closing price on March 9, 2018, the trading date before the grants were made, and the grant date fair value was determined using a stock price of $21.55, the closing price on March 12, 2018, the date the grants were made.
See Appendix A for further details regarding the adjusted EBITDA measure and the reconciliation of that measure to the appropriate figures as reported under U.S. GAAP. For 2018, the performance stock units are subject to a single performance measure, adjusted EBITDA, as further described underAnalysis, below.
The following table provides the 2018 equity awards to the named executive officers, as approved by the Committee:
| 2018 Annual Equity Grant Level | |||
| Executive | Perf. Stock Units(1)(#) | Stock Options(2)(#) | Restricted Stock(3)(#) |
| Mackin | 29,284 | 75,615 | 29,749 |
| Lee | 8,507 | 21,877 | 8,507 |
| Holloway | 7,425 | 19,092 | 7,425 |
| McDermid | 6,187 | 15,910 | 6,187 |
| Davis | 6,187 | 15,910 | 6,187 |
Analysis
In approving the 2018 equity award levels, the Committee considered the following factors:
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The Committee determined vesting schedules in consultation with Willis Towers Watson and believed that such vesting provided the appropriate long-term incentive for executives’ continued employment. Time-based awards vest over a three-year period. For performance share units, the Committee believed that adjusted EBITDA is generally a reasonable proxy for CryoLife’s performance, but allows for adjustments to eliminate items that might provide improper incentives and items over which management has little or no control. The Committee believed that the adjusted EBITDA threshold and target performance levels were challenging. The 2018 adjusted EBITDA calculation methodology was consistent with the methodology used in 2017, and based on management’s expectations, the target performance level was consistent with the range of 2018 earnings per share guidance previously publicly announced by CryoLife. See Appendix A for further details regarding the adjusted EBITDA measure and the reconciliation of that measure to the relevant U.S. GAAP measures.
Analysis – PSUs Earned
In arriving at its decision in March 2019 to certify the Company’s adjusted EBITDA performance with respect to the 2018 performance stock units, the Committee took into consideration the Company’s actual performance results relative to the pre-determined performance goals. The following table presents the target, threshold, and maximum adjusted EBITDA performance levels associated with target, threshold, and maximum award opportunities under the 2018 performance stock unit grants. The table also provides the actual performance level for 2018, as certified by the Committee, together with the associated levels of shares that were earned.
2018 Performance Stock Units
Actual vs. Target/Threshold/Maximum Performance
| Performance Measure | Target Performance | Threshold Performance | Maximum Performance | Actual Performance | Performance % of Target (%) | Payout % of Target (%) |
| Adjusted EBITDA | $62,360,000- | $ 55,220,000 | $ 75,361,000 | $ 59,458,000 | 91.5 | 80.0 |
The performance stock units are earned based on two different payout methods, as set forth in the chart below. First, for performance to target from 85.0% to 103.9%, the performance levels are defined in ranges, and payout is as associated below with a range of performance. Second, for performance to target from 104.0% to 116.0%, performance and payout is assessed on a sliding scale, with the data points listed in the chart representing points along that scale.
EBITDA (100% of shares) | |
| Performance Tier (% of Target) | Payout (% of Target) |
| <85.0 | 0 |
| 85.0 – 89.9 | 60 |
| 90.0 – 95.9 | 80 |
| 96.0 – 103.9 | 100 |
| 104.0 | 110 |
| 107.0 | 120 |
| 110.0 | 130 |
| 113.0 | 140 |
| 116.0 | 150 |
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Pursuant to the terms of the performance stock award granted in 2018, the total number of performance stock units that are eligible to be earned are determined based on the results of the single performance metric during the 2018 year. Thereafter, the awards will vest based on the officer’s continued service: 50% of the shares earned vested on March 12, 2019 (following certification of the performance metrics), 25% of the shares earned will vest on March 12, 2020, and the remaining 25% of the shares earned will vest on March 12, 2021, assuming the officer continues to be employed by the Company on those dates and the Committee took no action to waive the employment requirement. See Appendix A for further details regarding the adjusted EBITDA performance measure and the reconciliation of that measure to net income as reported for purposes of U.S. GAAP.
Target Total Direct Compensation
The Committee believed that the blend of stock options, restricted stock, and performance stock units appropriately balanced the performance, stockholder alignment, and retention objectives of CryoLife’s long-term incentive program. The use of multiple award types is a common practice among industry peers, and the Committee believes that the use of performance stock units creates an even stronger alignment between pay and performance. In addition, the annual grant frequency results in more continuous performance and retention strength by reflecting changes in the stock price year over year.
The Committee used a value-based approach to determine the size of 2018 equity grants, as it believed that such an approach more accurately matched the intended value of the equity and intended compensation. The Committee applied vesting schedules for the 2018 equity awards that it believes provided the appropriate long-term incentive to retain officers.
In determining the individual components of the officers’ 2018 compensation (i.e., salary, target short-term incentive, and long-term incentive), the Committee evaluated the resulting target total direct compensation against market benchmarks, as follows below, taking into account the Committee’s desire to have target total direct compensation generally within a competitive range of the Company’s peer group median. The following table summarizes the named executive officers’ 2018 target total direct compensation; the positioning of that compensation relative to the peer group median; and the primary rationale for approving each named executive officer’s compensation at the level shown:
2018 Target Total Direct Compensation Compared to Peer Median | ||||
| Executive | 2018 Target Total Direct Compensation Opportunity(1)($) | Peer Median(2)($) | CRY vs. Median (%) | Primary Rationale(3) |
| Mackin | 3,225,815 | 3,195,000 | 101 | Within a competitive range of the 50th percentile |
| Lee | 1,220,181 | 1,273,000 | 96 | Within a competitive range of the 50th percentile |
| Holloway | 999,508 | 851,000 | 117 | Within a competitive range of the 50th percentile |
| McDermid(4) | 898,086 | * | * | * |
| Davis | 901,286 | 869,000 | 104 | Within a competitive range of the 50th percentile |
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Equity and Cash Incentive Plan
In May 2015, the stockholders approved certain amendments to the ECIP that were recommended by the Board of Directors based on management’s recommendation and in consultation with Willis Towers Watson. The 2015 amendments included new provisions for cash-based incentive payments that were intended to comply with the requirements to be “qualified performance-based compensation” under Section 162(m). In May 2016, the stockholders approved certain further amendments to the ECIP that were also recommended by the Board of Directors based on management’s recommendation and in consultation with Willis Towers Watson. The approved 2016 amendments included establishing a separate, lower cap for awards available for grant to individual non-employee directors and a higher annual cap for awards available for grant to individual employees. In May 2018, the stockholders approved a proposal for authorization of an additional 1.9 million shares for the ECIP, which were registered in February 2019.
2018 Deferred Compensation
The CryoLife, Inc. Executive Deferred Compensation Plan allows certain key employees of CryoLife, including the named executive officers, to defer receipt of some or all of their salaries, commissions, and/or the cash portion of any bonus awarded pursuant to the short-term executive incentive plan. The plan’s administrative committee, subject to ratification and approval of the Committee, establishes the maximum and minimum percentages of bonus awards that plan participants may defer in each plan year. These percentages were from 0 to 75% for base salary, commissions, and the annual cash bonus for 2018. Because this plan provides for tax-deferred growth of deferred compensation, it is a tool the Company uses to attract and retain officer-level talent.
2018 Perquisites
It is CryoLife’s policy not to provide perquisites to its officers without prior approval of the Committee. To the extent that perquisites are incidental to a business-related expense, such as personal use of a business club, the named executive officers are generally required to reimburse CryoLife for any incremental cost of such personal benefit. Other than these incidental personal benefits, none of our named executive officers receive any perquisites that are not also provided on a non-discriminatory basis to all full-time employees, except for Mr. Mackin, whose compensation is discussed atEmployment, Separation and Release, and Change of Control Agreements below, and except for supplemental disability insurance and airline club memberships provided to certain of the named executive officers. In keeping with CryoLife’s practice with respect to all full-time employees, executive officers are also eligible to receive certain one-time benefits upon achieving employment milestones, including receiving $5,000 towards a vacation upon reaching 15 years of service with CryoLife and $10,000 towards a vacation upon reaching 20 years of service with CryoLife.
2019 Long-Term Incentive Performance-Based Equity Grant
On February 28, 2019, the Committee approved a long-term incentive performance-based equity grant (“LTIP”) for executives and certain other members of senior management. The LTIP will be an additional equity vehicle and is not intended to replace already existing compensation programs.
The LTIP has three performance periods, which span a total of five years. Performance for each period is measured against adjusted revenue growth targets, with the payout subject to negative or positive adjustment, by a modifier that is correlated with the Company’s gross margin achievement over the performance period.
The Committee believes the LTIP will serve several purposes, all of which support the Committee’s compensation philosophy as described above on page 24. First, the LTIP is designed to focus management on achieving superior Company revenue and gross margin performance over a five year period, both of which are closely aligned with stockholder value. Second, the LTIP has been awarded to executives and certain members of management who have been identified as key to the accomplishment of important, long-term strategic objectives and goals of the Company. The Committee intends for the LTIP to serve as a long-term retention device for these employees. Because the LTIP has longer performance periods and longer vesting periods than existing equity programs, the Committee believes the LTIP will have an even stronger impact on superior Company performance and on employee retention than do the existing programs. The LTIP is also intended to reward employees should their efforts over the performance period prove successful in driving superior Company performance, as payouts under the LTIP require revenue growth beyond the historical Company average.
The text of the form of grant agreement for the LTIP, which is also the Company’s form of grant agreement for all performance-based equity grants going forward, is attached hereto as Appendix B. More detailed information regarding the LTIP, including precise metric targets and payout amounts for named executive officers will be provided in the Company’s Form DEF 14A (Definitive Proxy Statement) to be filed in advance of the 2020 Annual Meeting of Stockholders.
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EMPLOYMENT, SEPARATION AND RELEASE, AND CHANGE OF CONTROL AGREEMENTS
Employment Agreement with J. Patrick Mackin
In July 2014 the Board of Directors appointed Mr. Mackin as President and CEO, and CryoLife and Mr. Mackin entered into an employment agreement (the “Mackin Agreement”). The Mackin Agreement addresses Mr. Mackin’s role and responsibilities as our President and Chief Executive Officer, his rights to compensation and benefits during active employment, and his termination benefits. The Board of Directors determined that it was appropriate to provide Mr. Mackin with an employment agreement due to the Company’s desire to attract and retain high-performing individuals for this role.
The material terms of the Mackin Agreement and his potential termination payments are further described and quantified atPotential Payments Upon Termination or Change of Control – J. Patrick Mackin beginning on page 47.
Employment Agreements with Other Named Executive Officers
CryoLife is not party to employment agreements with Messrs. Lee, McDermid, or Davis or with Ms. Holloway that provide any guarantee of employment and they are at-will employees.
Change of Control Agreements with Other Named Executive Officers
On November 21, 2016, CryoLife entered into change of control agreements with each of the named executive officers other than Mr. Mackin (whose change of control arrangements are set forth in the Mackin Agreement). The change of control agreements, which automatically extend absent Company action, generally, provide that the Company will pay a severance payment if the officer is terminated by the Company without cause or terminates his or her own employment for good reason during a period extending from six months before to two years after a change of control of CryoLife. This is a “double-trigger” provision that requires not only a change of control of CryoLife but also an employment action before CryoLife is required to make payments pursuant to the agreements. The Committee approved termination payments under the agreements for executives based on their officer status and ability to influence decisions regarding whether or not a change of control transaction should be pursued, with Mr. Lee receiving a payment of 2 times base salary and cash bonus plus healthcare coverage and the Senior Vice Presidents, including Ms. Holloway and Messrs. McDermid and Davis, receiving 1.5 times base salary and cash bonus plus healthcare coverage.
ADDITIONAL POLICIES AND PRACTICES
Clawback Policy
CryoLife has a standalone Clawback Policy. This clawback allows CryoLife to recover bonus awards that were paid in the 12-month period prior to a significant financial statement restatement. The amounts may be recovered at the discretion of the Committee and subject to applicable laws if the award was made on the basis of CryoLife having met or exceeded specific performance targets for performance periods affected by the restatement. In such an event, the Committee may require participants to repay to CryoLife the difference between the bonus actually received by the participant and the amount of the recalculated bonus, using the restated financial results. Furthermore, Mr. Mackin’s employment agreement contains an additional requirement that he repay any portion of severance payments he has previously received from the Company if he fails to comply with certain post-employment protective covenants.
To the extent not addressed by the provisions above, the Committee continues to consider the appropriate structure for additional clawback provisions, including whether or not the clawback should require executive fault or negligence, should be mandatory, and/or should include performance-based equity. The Committee intends to adopt and disclose an updated policy in compliance with, and to the extent required by, the Dodd–Frank Act, and will do so following the issuance of final guidance by the Securities and Exchange Commission, if not earlier.
Stock Ownership Guidelines
CryoLife maintains stock ownership guidelines for executives that have been recommended and approved by the Committee, along with the Corporate Governance Committee, and approved by the Board of Directors. The current stock ownership guidelines were adopted in November 2015 and require the following stock ownership requirements for the named executive officers:
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a. Section 16 Officers: Each Section 16 officer of the Company shall continuously hold a value of the Company’s common stock equal to the value of a multiple of that officer’s then current base pay at CryoLife. The multiples applicable to such officers are as follows:
b. Retention requirements: Each Section 16 Officer who has not yet acquired ownership of the required value of common stock set forth above must retain at least 50% of the net number of shares acquired upon the exercise of any employee stock option or the vesting of any performance shares, restricted stock, or restricted stock units (the net number of shares acquired shall be the number of shares remaining after shares are tendered, sold, or netted to pay any applicable exercise price and withholding taxes).
c. Waivers: The Chairs of the Committee and the Corporate Governance Committee shall have the authority to grant waivers from these stock ownership requirements in compelling circumstances such as undue hardship.
d. Qualifying shares: For purposes of satisfying these stock ownership requirements, the following shall be included: shares owned directly or indirectly (1) through a stock purchase plan sponsored by the Company; (2) by the person’s spouse; (3) in a revocable trust of which the person or the person’s spouse is the trustee; (4) any other shares related to or underlying vested or unvested restricted stock awards and performance share awards (after performance metric has been certified); or, (5) vested restricted stock units and vested performance share units (at actual, earned levels and only if and to the extent that any applicable performance criteria have been satisfied). It shall not include shares held through any other form of indirect beneficial ownership or shares underlying unexercised options or unvested performance share units whose performance metric requirements were not met.
These guidelines became effective for all currently employed named executive officers on November 17, 2015. As of March 6, 2019, all named executive officers are in compliance with the ownership levels set forth in the guidelines.
Anti-Hedging Policy
All CryoLife employees, including executive officers, are expressly prohibited in the CryoLife, Inc. Insider Trading Policy and Guidelines with Respect to Certain Transactions in Securities (the “Insider Trading Policy”), which is available for review athttp://investors.cryolife.com/corporate-governance/cryolifes-code-conduct from derivative securities or hedging transactions with respect to the Company’s securities. Specifically, executive officers are prohibited from engaging in transactions in publicly-traded options, such as puts and calls, and other derivative securities with respect to the Company’s securities. This prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding Company securities, including but not limited to prepaid variable contracts, equity swaps, collars, and exchange funds. Stock options, stock appreciation rights, and other securities issued pursuant to Company benefit plans or other compensatory arrangements with the Company are not subject to this prohibition.
Furthermore, both short sales, which are the sale of a security that must be borrowed to make delivery, and “selling short against the box,” which is transacting a sale with a delayed delivery, are prohibited with respect to Company securities under the Insider Trading Policy and executive officers may not engage in such transactions.
Equity Grants/Inside Information
The Committee generally adheres to a policy of not granting equity-based compensation awards at times when insiders are in possession of material, non-public information. In all other instances, if the Committee approves the grant of an option or equity award at a time when it is in possession of material, non-public information, it is the Committee’s general policy to delay the grant and pricing of the option and/or issuance of the equity award until a date after the public dissemination of all such material, non-public information.
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TAX IMPACT OF COMPENSATION DECISIONS
Section 162(m)
During the 2017 fiscal year, Section 162(m) generally limited to $1 million the compensation, other than certain “performance-based” compensation, that CryoLife may deduct for federal income tax purposes with respect to the compensation of each of our “covered employees,” which for 2017 included the chief executive officer, the chief financial officer, and the other 2017 named executive officers. Beginning in 2018, Section 162(m) no longer contained an exception for “performance-based” compensation for arrangements that are not considered “grandfathered.” Therefore, Section 162(m) was not a significant factor in the Committee’s compensation decisions for 2018 although the Committee continues to believe it is appropriate to emphasize performance-based compensation.
Section 409A
Since Section 409A of the Internal Revenue Code, which deals with deferred compensation arrangements, was enacted, the Committee’s policy has been to structure all executive compensation arrangements to comply, to the extent feasible, with the provisions of Section 409A so that the executives do not have to pay additional tax and CryoLife does not incur additional withholding obligations. The Committee intends to continue this practice.
FORWARD-LOOKING STATEMENTS
Statements made in this Proxy Statement that look forward in time or that express management's beliefs, expectations, or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These statements include those regarding future plans and intentions of the Committee and/or Board of Directors related to compensation decisions, and expectations that certain performance targets for management are achievable. These future events may not occur as and when expected, if at all, and, together with the Company's business, are subject to various risks and uncertainties. Along with risks specific to our business, management’s ability to attain certain performance targets is subject to risks affecting the economy generally and other factors that are beyond our control. For additional risks impacting the Company’s business, see the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The Company does not undertake to update its forward-looking statements.
REPORT OF THE COMPENSATION COMMITTEE
The Committee reviewed and discussed the Compensation Discussion and Analysis with management. In reliance on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion & Analysis be included in CryoLife’s 2019 Proxy Statement on Schedule 14A, for filing with the SEC.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information with respect to each of the named executive officers — Mr. Mackin, our Chief Executive Officer; Mr. Lee, our Chief Financial Officer; and Ms. Holloway and Messrs. McDermid and Davis, who were the three most highly compensated of the other executive officers of CryoLife employed at the end of fiscal 2018.
| Name and Principal Position | Year | Salary ($) | Bonus(1)($) | Stock Awards(2)($) | Option Awards(3)($) | Non-Equity Incentive Plan Compensation(4) ($) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) | All Other Compen-sation(5)($) | Total ($) | |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |
| J. Patrick Mackin, Chairman, President and Chief Executive Officer | 2018 | 660,000 | 132,000 | 1,272,140 | 633,654 | 494,040 | — | 39,336 | 3,231,170 | |
| 2017 | 640,000 | 108,800 | 1,014,219 | 523,193 | 414,903 | — | 36,189 | 2,737,304 | ||
| 2016 | 620,000 | 93,000 | 870,072 | 435,606 | 477,072 | — | 36,569 | 2,532,319 | ||
| D. Ashley Lee Executive Vice President, Chief Operating Officer, and Chief Financial Officer | 2018 | 418,900 | 50,266 | 366,652 | 183,329 | 188,131 | — | 54,392 | 1,261,670 | |
| 2017 | 402,771 | 72,499 | 297,019 | 153,220 | 184,313 | — | 24,280 | 1,134,102 | ||
| 2016 | 387,280 | 69,710 | 306,092 | 134,032 | 238,401 | — | 20,604 | 1,156,119 | ||
| Jean F. Holloway, Senior Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer | 2018 | 346,300 | 34,627 | 320,017 | 159,991 | 129,601 | — | 41,405 | 1,031,941 | |
| 2017 | 329,784 | 59,361 | 245,674 | 126,737 | 113,185 | — | 18,433 | 893,174 | ||
| 2016 | 314,080 | 49,468 | 221,457 | 95,499 | 145,005 | — | 17,490 | 842,999 | ||
| James M. McDermid, Senior Vice President, Chief Human Resources Officer(6) | 2018 | 332,100 | 33,207 | 266,660 | 133,326 | 124,286 | — | 36,495 | 926,074 | |
| John E. Davis, Senior Vice President, Global Sales and Marketing | 2018 | 334,200 | 33,421 | 266,660 | 133,326 | 125,088 | — | 30,674 | 923,369 | |
| 2017 | 321,360 | 32,136 | 235,437 | 121,454 | 122,549 | — | 8,100 | 841,036 | ||
| 2016 | 309,000 | 46,350 | 190,751 | 95,499 | 158,511 | — | 5,300 | 805,411 | ||
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Grants of Plan-Based Awards
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Closing Market Price on Committee Action | Grant Date Fair Value of Stock and Option | ||||||
| Name | Grant Date | Threshold ($) | Target ($) | Benchmark ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#) | Options (#)(3) | Awards ($/Sh) | Date ($/Sh) | Awards ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | (m) |
| J. Patrick Mackin | 3/12/18 | 396,000 | 660,000 | 924,000 | ||||||||
| 3/12/18 | 29,749 | 641,091 | ||||||||||
| 3/12/18 | 75,615 | 21.55 | 21.55 | 633,654 | ||||||||
| 3/12/18 | 17,570 | 29,284 | 43,296 | 631,070 | ||||||||
| D. Ashley Lee | 3/12/18 | 150,780 | 251,300 | 351,820 | ||||||||
| 3/12/18 | 8,507 | 183,326 | ||||||||||
| 3/12/18 | 21,877 | 21.55 | 21.55 | 183,329 | ||||||||
| 3/12/18 | 5,104 | 8,507 | 12,761 | 183,326 | ||||||||
| Jean F. Holloway | 2/21/17 | 103,920 | 173,200 | 242,480 | ||||||||
| 2/21/17 | 7,425 | 160,009 | ||||||||||
| 3/12/18 | 19,092 | 21.55 | 21.55 | 159,991 | ||||||||
| 3/12/18 | 4,455 | 7,425 | 11,138 | 160,009 | ||||||||
| James M. McDermid | 3/12/18 | 99,600 | 166,000 | 232,400 | ||||||||
| 3/12/18 | 6,187 | 133,330 | ||||||||||
| 3/12/18 | 15,910 | 21.55 | 21.55 | 133,326 | ||||||||
| 3/12/18 | 3,712 | 6,187 | 9,281 | 133,330 | ||||||||
| John E. Davis | 3/12/18 | 100,200 | 167,000 | 233,800 | ||||||||
| 3/12/18 | 6,187 | 133,330 | ||||||||||
| 3/12/18 | 15,910 | 21.55 | 21.55 | 133,326 | ||||||||
| 3/12/18 | 3,712 | 6,187 | 9,281 | 133,330 | ||||||||
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Equity Awards
Equity awards, including long-term performance awards, granted in fiscal 2018 to our named executive officers were subject to the terms of the ECIP and the equity grant agreements.
Annual Performance-Based Bonus Program
The 2018 bonus program provided for bonuses based on a percentage of participants’ 2018 base salaries, varying among participants, based on three metrics:
All bonus criteria relate to Company and individual performance for the full 2018 fiscal year. SeeCompensation Discussion and Analysis beginning on page 22 for further details regarding the 2018 fiscal year plan and results.
| Salary and Bonus in Proportion to Target Total Direct Compensation | ||
| Executive | % Salary | % Bonus(1) |
| J. Patrick Mackin | 20.5 | 4.1 |
| D. Ashley Lee | 34.3 | 4.1 |
| Jean F. Holloway | 34.6 | 3.5 |
| James M. McDermid | 37.0 | 3.7 |
| John E. Davis | 37.1 | 3.7 |
CRYOLIFE, INC. | 2019 Proxy Statement
39
Outstanding Equity Awards at December 31, 2018(*)
| Option Awards | Stock Awards | |||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) |
| (a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) |
| J. Patrick Mackin | 45,734 | 10.18 | 9/2/2021 | |||||
| 42,553 | 11.00 | 2/19/2022 | ||||||
| 39,890 | 25,659(1) | 10.24 | 2/19/2023 | |||||
| 14,606 | 44,619(2) | 16.30 | 2/21/2024 | |||||
| 75,615(3) | 21.55 | 3/12/2025 | ||||||
| 21,932(4) | 622,430 | |||||||
| 15,124(5) | 429,219 | |||||||
| 21,554(6) | 611,703 | |||||||
| 14,000(7) | 397,320 | |||||||
| 29,749(8) | 844,277 | |||||||
| 23,427(9) | 664,858 | |||||||
| D. Ashley Lee | 16,666 | 6.12 | 2/15/2020 | |||||
| 16,666 | 9.97 | 2/26/2021 | ||||||
| 34,042 | 11.00 | 2/19/2022 | ||||||
| 24,548 | 12,274(1) | 10.24 | 2/19/2023 | |||||
| 8,555 | 17,110(2) | 16.30 | 2/21/2024 | |||||
| 21,877(3) | 21.55 | 3/12/2025 | ||||||
| 13,072(4) | 370,983 | |||||||
| 3,662(10) | 103,928 | |||||||
| 4,653(5) | 132,052 | |||||||
| 9,111(6) | 258,570 | |||||||
| 4,099(7) | 116,330 | |||||||
| 8,507(8) | 241,429 | |||||||
| 6,806(9) | 193,154 | |||||||
| Jean F. Holloway | 17,307 | 9.64 | 9/10/2022 | |||||
| 17,491 | 8,745(1) | 10.24 | 2/19/2023 | |||||
| 7,077 | 14,152(2) | 16.30 | 2/21/2024 | |||||
| 19,092(3) | 21.55 | 3/12/2025 | ||||||
| 9,314(4) | 264,331 | |||||||
| 3,316(5) | 94,108 | |||||||
| 2,930(10) | 83,153 | |||||||
| 7,536(6) | 213,872 | |||||||
| 3,391(7) | 96,237 | |||||||
| 7,425(8) | 210,722 | |||||||
| 5,940(9) | 168,577 | |||||||
| James M. McDermid | 2,264 | 1,132(11) | 17.24 | 9/9/2023 | ||||
| 5,897 | 11,794(2) | 16.30 | 2/21/2024 | |||||
| 15,910(3) | 21.55 | 3/12/2025 | ||||||
| 3,396(12) | 96,378 | |||||||
| 6,280(6) | 178,226 | |||||||
| 2,826(7) | 80,202 | |||||||
| 6,187(8) | 175,587 | |||||||
| 4,950(9) | 140,481 | |||||||
| John E. Davis | 8,745(1) | 10.24 | 2/19/2023 | |||||
| 13,562(2) | 16.30 | 2/21/2024 | ||||||
| 15,910(3) | 21.55 | 3/12/2025 | ||||||
| 9,314(4) | 264,331 | |||||||
| 3,316(5) | 94,108 | |||||||
| 7,222(6) | 204,960 | |||||||
| 3,249(7) | 92,207 | |||||||
| 6,187(8) | 175,587 | |||||||
| 4,950(9) | 140,481 | |||||||
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CRYOLIFE, INC. | 2019 Proxy Statement
41
Option Exercises and Stock Vested(1)
| Option Awards | Stock Awards | |||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(2) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(3) ($) |
| (a) | (b) | (c) | (d) | (e) |
| J. Patrick Mackin | 150,000 | 3,296,610 | 69,922 | 1,288,677 |
| D. Ashley Lee | 16,666 | 437,783 | 25,071 | 461,235 |
| Jean F. Holloway | 7,000 | 154,590 | 23,202 | 555,151 |
| James M. McDermid | N/A | N/A | 2,826 | 54,118 |
| John E. Davis | 34,273 | 571,327.94 | 16,565 | 462,735 |
NONQUALIFIED DEFERRED COMPENSATION
The CryoLife, Inc. Executive Deferred Compensation Plan allows certain key employees of CryoLife, including the named executive officers, to defer receipt of some or all of their salaries, commissions and/or the cash portion of any bonus awarded pursuant to the short-term executive incentive plan. The plan’s administrative committee, subject to ratification and approval of the Committee, establishes the maximum and minimum percentages of bonus awards that plan participants may defer in each plan year. These percentages were from 0 to 75% for base salary, commissions, and the annual cash bonus for 2017. Plan participants may establish their respective deferral amounts for their base salaries and commissions prior to the beginning of each calendar year, and prior to July for their short-term incentive compensation for that year, which is calculated and paid after the completion of the plan year.
The plan provides for tax-deferred growth of deferred compensation and, pursuant to the terms of the plan, CryoLife agrees to distribute to participants the deferred amounts, credited/debited with hypothetical gains and/or losses linked to the performance of investment options selected by participants from among the non-proprietary investment options available under the plan. The plan does not have investment options that provide for above-market or preferential earnings. Distribution of all deferred compensation, including any gains or losses, occurs upon death, disability, retirement, or termination. Plan participants may elect to receive the distribution in a lump sum or in annual installments of up to 15 years, or via a combination thereof upon death, disability, or retirement. Also, a plan participant may elect to receive distributions while still employed by CryoLife if at least two years have elapsed from the plan year in which the deferred amounts would have otherwise been paid to the plan participant if not for the deferral. Distributions made while the plan participant is still employed by CryoLife and distributions made pursuant to termination will be paid in a lump sum to the plan participant. Hardship withdrawals during any plan year may be made upon the occurrence of an unforeseeable emergency for a particular plan participant or if a plan participant receives a hardship distribution under CryoLife’s 401(k) plan. All deferred amounts and deemed earnings thereon are fully vested at all times.
CRYOLIFE, INC. | 2019 Proxy Statement
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The following table presents components of nonqualified deferred compensation under the Executive Deferred Compensation Plan for each named executive officer.
| Name | Executive Contributions in Fiscal 2018(1) ($) | Company Contributions in Fiscal 2018 ($) | Aggregate Earnings in Fiscal 2018(2) ($) | Aggregate Withdrawals and Distributions in Fiscal 2018 ($) | Aggregate Balance at December 31, 2018(3) ($) |
| (a) | (b) | (c) | (d) | (e) | (f) |
| J. Patrick Mackin | - | - | - | - | - |
| D. Ashley Lee | 20,944 | - | (45,340) | 132,759 | 536,271 |
| Jean F. Holloway | 215,978 | - | (40,162) | - | 621,383 |
| James M. McDermid | 16,261 | - | (1,847) | - | 15,079 |
| John E. Davis | 77,343 | - | (20,041) | - | 232,805 |
| |
CRYOLIFE, INC. | 2019 Proxy Statement
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
We have entered into certain agreements and maintain certain plans that will require us to provide compensation to the named executive officers in the event of specified terminations of their employment or upon a change of control of CryoLife.
Employment, Separation and Release, and Change of Control Agreements
Employment Agreement with J. Patrick Mackin
Pursuant to the Mackin Agreement, Mr. Mackin will receive certain compensation upon the termination of his employment, other than termination for cause or voluntary termination without good reason.
The Mackin Agreement has an initial term of three years following the effective date, extended by one day for each day beginning on the second anniversary of the effective date. The Mackin Agreement provides that commencing January 1, 2015, Mr. Mackin is entitled to participate in annual long-term incentive opportunities as determined by the Committee consistent with those provided to similarly situated CryoLife executive officers and in accordance with CryoLife’s plans and applicable award agreements. Benefits currently include participation in CryoLife’s plan-based awards with other CryoLife executives for performance stock units, stock options, and restricted stock subject to continued employment and achievement of corporate/Board of Directors objectives set by the Committee.
The Mackin Agreement provides for an initial target cash bonus of 60% of base salary, a $200,000 signing bonus and new hire grants of options to purchase 400,000 shares of Company common stock and a performance share grant with respect to 250,000 shares of Company common stock, the performance metric thereto having been determined satisfied by the Committee as of December 31, 2015. In the event Mr. Mackin’s employment is terminated without cause or Mr. Mackin resigns for good reason, he is entitled to a cash severance payment of 1.5 times his base salary and annual cash bonus for the year of termination (or the prior year bonus if termination is prior to the date bonuses are awarded) paid in regular payroll installments over eighteen months plus continued Company medical coverage for the same period. If Mr. Mackin’s employment is terminated without cause, or Mr. Mackin resigns for good reason during the period beginning six months prior to and ending two years following a change of control of the Company, Mr. Mackin is entitled to receive a termination payment, in lieu of the severance described in the prior sentence, of 2.5 times his base salary and annual cash bonus for the year of termination (or the prior year bonus if termination is prior to the date bonuses are awarded), paid in a lump sum. The agreement also includes various post-employment prohibitions regarding competing with us, soliciting our employees and customers, and disclosing our confidential information.
For purposes of the Mackin Agreement, “cause” generally means (i) an intentional act of fraud, embezzlement, theft, or any other material violation of law that occurs during or in the course of the executive’s employment, (ii) intentional damage of Company assets, (iii) intentional disclosure of Company confidential information contrary to the Company’s policies, (iv) material breach of the executive’s obligations under the agreement, (v) intentional engagement by the executive in any activity that would constitute a breach of his duty of loyalty or of his assigned duties, (vi) intentional breach by the executive of any Company policies or procedures, (vii) willful and continued failure by the executive to perform his assigned duties, other than as a result of incapacity due to physical or mental illness, (viii) executive is prevented from performing certain duties contemplated by the agreement by reason of an agreement with a prior employer or (ix) willful conduct by the executive that is demonstrably and materially injurious to the Company, monetarily or otherwise.
For purposes of the Mackin Agreement, “good reason” generally means (i) the assignment to the executive, without his consent, of any duties materially inconsistent with his position, authority, duties, or responsibilities, including changes in status, offices, or titles and any change in the executive’s reporting requirements that would cause him to report to an officer who is junior in seniority to the officer to whom he previously reported, (ii) requiring the executive to be based other than within 25 miles of Company headquarters as of the effective date or (iii) any other action that results in a material diminution in his position, authority, duties, responsibilities, or aggregate base salary and cash bonus.
Change of Control Agreements with Other Named Executive Officers
On November 21, 2016, CryoLife entered into change of control agreements with each of Messrs. Lee, McDermid, and Davis and Ms. Holloway that provide that the Company will pay severance payments if he or she is terminated by the Company without cause or if he or she terminates their employment for good reason during a period extending from six months before to two years after a change of control of CryoLife. This is a “double trigger” provision that requires not only a change of control of CryoLife but also an adverse employment action.
CRYOLIFE, INC. | 2019 Proxy Statement
44
Terms of the Change of Control Agreements
We will not be required to make a severance payment in connection with the change of control agreements if we terminate an executive’s employment for cause, which means:
An executive may terminate his or her employment for good reason in connection with a change of control without forfeiting his or her severance pay if any of the following events occur during the term of the agreement:
CRYOLIFE, INC. | 2019 Proxy Statement
45
The change of control agreements provide that we will pay any severance payment due in a lump sum not later than 30 days following the date of termination in the event of a termination following a change of control, or 30 days following a change of control in the event of a termination occurring within the six-month period preceding the change of control. We will delay payment of the severance payment until six months after the executive’s termination if necessary to prevent him or her from having to pay additional tax under Section 409A of the Internal Revenue Code. We will also subject any severance payment to normal payroll tax withholding and compliance with non-compete obligations.
Agreement Not to Solicit or Compete
Messrs. Lee, McDermid, and Davis and Ms. Holloway agree not to solicit any actual or prospective customers of CryoLife with whom they have had contact for a competing business or to solicit employees of CryoLife to leave CryoLife. Messrs. Lee, McDermid, and Davis agree, and Ms. Holloway agrees, subject to applicable professional and ethical obligations and other legal requirements, not to join a competing business during the term of the agreement and for a period of one year following the termination of employment. CryoLife or an acquiring company is not required to make the severance payment, and the officer is required to repay any portion of the severance payment already received, if he or she solicits customers or employees of CryoLife during the term of the agreement and for a period of one year following the termination of employment.
Termination and Change of Control Payments
The amount of compensation we would be required to pay to each named executive officer under certain termination and change of control scenarios is provided in the tables beginning on page 47. Amounts included in the tables are estimates and are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may differ materially. The tables provided in this section for all named executive officers assume that the relevant termination or change of control event occurred on December 31, 2018, the last business day of CryoLife’s 2018 fiscal year.
CRYOLIFE, INC. | 2019 Proxy Statement
46
J. Patrick Mackin, Chairman, President and Chief Executive Officer(1)
| Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary Retirement | Good Reason or Involuntary Not for Cause Termination | For Cause Termination | Death | Disability | Change of Control Without Regard to Termination | Certain Termination Events Following/Preceding a Change of Control(9) | |
| Cash Compensation | 494,040(2) | 1,775,555(3) | 494,040(2) | 494,040(2) | 494,040(2) | — | 2,959,258(4) |
| Accelerated Stock Option Exercisability | — | — | — | — | — | 1,520,902(5) | 1,520,902(5) |
| Accrued Vacation Pay | — | — | — | — | — | — | — |
| Medical Benefits | — | 34,649(6) | — | 34,649(6) | 34,649(6) | — | 34,649(6) |
| Spread Value of Vested Options | 2,471,975(7) | 2,471,975(7) | 2,471,975(7) | 2,471,975(7) | 2,471,975(7) | 2,471,975(7) | 2,471,975(7) |
| Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 3,736,028(8) | 3,736,028(8) |
| Total | 2,966,015 | 4,282,179 | 2,966,015 | 3,000,664 | 3,000,664 | 7,728,905 | 10,722,812 |
CRYOLIFE, INC. | 2019 Proxy Statement
47
D. Ashley Lee, Executive Vice President, Chief Operating Officer and Chief Financial Officer(1)
| Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary Termination | Good Reason or Involuntary Not for Cause Termination | For Cause Termination | Death | Disability | Change of Control Without Regard to Termination | Certain Termination Events Following/Preceding a Change of Control | |
| Cash Compensation | 188,131(2) | 188,131(2) | 188,131(2) | 188,131(2) | 188,131(2) | — | 1,351,424(3) |
| Accelerated Stock Option Exercisability | — | — | — | — | — | 578,759(4) | 578,759(4) |
| Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
| Medical Benefits | 30,376(6) | 30,376(6) | 30,376(6) | 30,376(6) | |||
| Spread Value of Vested Options | 1,818,101(7) | 1,818,101(7) | 1,818,101(7) | 1,818,101(7) | 1,818,101(7) | 1,818,101(7) | 1,818,101(7) |
| Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 1,464,720(8) | 1,464,720(8) |
| Total | 2,006,232 | 2,036,608 | 2,006,232 | 2,036,608 | 2,036,608 | 3,861,580 | 5,243,380 |
CRYOLIFE, INC. | 2019 Proxy Statement
48
Jean F. Holloway, Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer(1)
| Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary Termination | Good Reason or Involuntary Not for Cause Termination | For Cause Termination | Death | Disability | Change of Control Without Regard to Termination | Certain Termination Events Following/Preceding a Change of Control | |
| Cash Compensation | 129,601(2) | 129,601(2) | 129,601(2) | 129,601(2) | 129,601(2) | — | 778,269(3) |
| Accelerated Stock Option Exercisability | — | — | — | — | — | 459,989(4) | 459,989(4) |
| Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
| Spread Value of Vested Options | 727,110(6) | 727,110(6) | 727,110(6) | 727,110(6) | 727,110(6) | 727,110(6) | 727,110(6) |
| Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 1,173,144(7) | 1,173,144(7) |
| Total | 856,711 | 856,711 | 856,711 | 856,711 | 856,711 | 2,360,243 | 3,138,512 |
CRYOLIFE, INC. | 2019 Proxy Statement
49
James M. McDermid, Senior Vice President, Chief Human Resources Officer(1)
| Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary Termination | Good Reason or Involuntary Not for Cause Termination | For Cause Termination | Death | Disability | Change of Control Without Regard to Termination | Certain Termination Events Following/Preceding a Change of Control | |
| Cash Compensation | 124,286(2) | 124,286(2) | 124,286(2) | 124,286(2) | 124,286(2) | — | 705,636(3) |
| Accelerated Stock Option Exercisability | — | — | — | — | — | 263,747(4) | 263,747(4) |
| Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
| Medical Benefits | 101(6) | 101(6) | 101(6) | 101(6) | |||
| Spread Value of Vested Options | 96,457(7) | 96,457(7) | 96,457(7) | 96,457(7) | 96,457(7) | 96,457(7) | 96,457(7) |
| Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 705,981(8) | 705,981(8) |
| Total | 220,743 | 220,844 | 220,743 | 220,844 | 220,844 | 1,066,185 | 1,771,922 |
CRYOLIFE, INC. | 2019 Proxy Statement
50
John E. Davis, Senior Vice President, Global Sales and Marketing(1)
| Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary Termination | Good Reason or Involuntary Not for Cause Termination | For Cause Termination | Death | Disability | Change of Control Without Regard to Termination | Certain Termination Events Following/Preceding a Change of Control | |
| Cash Compensation | 125,088(2) | 125,088(2) | 125,088(2) | 125,088(2) | 125,088(2) | — | 733,328(3) |
| Accelerated Stock Option Exercisability | — | — | — | — | — | 431,129(4) | 431,129(4) |
| Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
| Medical Benefits | 30,376(6) | 30,376(6) | 30,376(6) | 30,376(6) | |||
| Spread Value of Vested Options | 0(7) | 0(7) | 0(7) | 0(7) | 0(7) | 0(7) | 0(7) |
| Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 1,006,781(8) | 1,006,781(8) |
| Total | 125,088 | 155,464 | 125,088 | 155,464 | 155,464 | 1,437,910 | 2,201,614 |
CRYOLIFE, INC. | 2019 Proxy Statement
51
Compensation Risk Assessment
In accordance with the requirements of Item 402(s) of Regulation S-K, to the extent that risks may arise from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on us, we are required to discuss our policies and practices for compensating our employees (including our employees that are not named executive officers) as they relate to our risk management practices and risk-taking incentives. The Committee has determined that our compensation policies and practices for our employees, including our named executive officers, are not reasonably likely to have a material adverse effect on us because unacceptable risks that may be encouraged, directly or indirectly, through a compensation method are mitigated through policy or practice, the Company’s training programs, the Company’s internal controls, or external factors such as risk of civil or criminal prosecution, which are made known to employees through training.
Our Committee routinely assesses our compensation policies and practices and takes this consideration into account as part of its review.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2018, with respect to shares of CryoLife common stock that may be issued under existing equity compensation plans:
Securities Authorized for Issuance Under All Equity Compensation Plans(1)
| Plan category | Number of Securities to be Issued Upon Exercise of Outstanding Options, PSUs, and RSUs(2) | Weighted Average Exercise Price of Outstanding Options, PSUs, and RSUs(3) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||
| (a) | (b) | (c) | |||||||
| Equity compensation plans approved by stockholders | 1,772,239 | $13.04 | 1,252,000 | ||||||
| Equity compensation plans not approved by stockholders | — | — | — | ||||||
| Total | 1,772,239 | $13.04 | 1,252,000 |
CRYOLIFE, INC. | 2019 Proxy Statement
52
OTHER INFORMATION
CEO Pay Ratio Disclosure
Pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd–Frank Act”) and Item 402(u) of Regulation S-K, we are providing disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (“PEO”). The Company’s PEO is Mr. Mackin.
PEO ($) | Median Employee(1) ($) | |
| Total Compensation(2) | 3,231,170 | 62,183 |
PEO to Median Employee Pay Ratio | 52.0 : 1 | |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that the CryoLife’s executive officers and non-employee directors, as well as persons who beneficially own more than 10% of CryoLife’s stock, file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, non-employee directors, and greater than 10% beneficial owners are required by SEC regulations to furnish CryoLife with copies of all Section 16(a) forms they file.
Based solely on its review of copies of forms received pursuant to Section 16(a) of the Exchange Act or written representations from reporting persons, CryoLife believes that with respect to 2018, it complied with all Section 16(a) filing requirements applicable to its executive officers, non-employee directors, and greater than 10% beneficial owners, with the following exception: a Form 4 filed on May 8, 2018, on behalf of director Ronald D. McCall.
CRYOLIFE, INC. | 2019 Proxy Statement
53
CERTAIN BENEFICIAL OWNERSHIP
The name and address of each person or entity who beneficially owned more than 5% of the outstanding shares of common stock of CryoLife on March 6, 2019,September 21, 2021, based on information available to us, together with the number of shares owned and the percentage of outstanding shares thatsuch ownership represents, is set forth in the following table. The table also shows information concerning beneficial ownership by the namedour executive officers and by all current non-employee directors and executive officers as a group. The number of shares beneficially owned is determined under the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares that the individual has the right to acquire within 60 days after March 6, 2019,September 21, 2021 through the exercise of any stock option or other right.right to acquire shares of common stock. Unless otherwise indicated, each person has sole investment and voting powers, or shares such powers with his or her spouse, with respect to the shares set forth in the following table. To CryoLife’s knowledge, none of the shares shown in the table below isare subject to a pledge or similar arrangement.
Beneficial Owner | Title | Number of Shares of CryoLife Common Stock Beneficially Owned (#) | Percentage of Outstanding Shares of CryoLife Common Stock (%) |
J. Patrick Mackin | President, Chief Executive Officer, and Chairman of the Board of Directors |
| 1.5 |
D. Ashley Lee | Executive Vice President and |
| 1.0 |
Jean F. Holloway | Senior Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary |
| * |
John E. Davis | Senior Vice President, Global Sales and Marketing |
| * |
Michael S. Simpson(6) | — | 46,592(7) | * |
Thomas F. Ackerman | Director | 119,695 | * |
Daniel J. Bevevino | Director | 119,860 | * |
Marna P. Borgstrom | Director | 18,887 | * |
James W. Bullock | Director | 38,446 | * |
Jeffrey H. Burbank | Director | 23,595 | * |
Harvey Morgan | Director | 97,110 | * |
Jon W. Salveson | Director | 99,639 | * |
Blackrock, Inc. | — |
| 17.3 |
Wasatch Advisors, Inc. | — |
| 6.9 |
The Vanguard Group, Inc. | — |
| 6.3 |
Macquarie Group Limited | — |
| 5.2 |
| |||
| All current directors and | 1,763,492(13) | 4.5 | |
* Ownership represents less than 1% of outstanding CryoLife common stock.
(1) | 39,329,580 outstanding shares of |
(2) | Amount includes |
(3) | Amount includes |
(4) | Amount includes |
(5) | Amount includes |
CRYOLIFE, INC. | 2019 Proxy Statement
54
(6) | As previously reported by the Company, Mr. Simpson retired from the Company on March 31, 2021. |
| Amount includes |
CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting
27
(8) | Information based on Schedule |
(9) | Information based on Schedule |
(10) | Information based on Schedule 13G filed on February |
(11) | Information based on Schedule 13G filed on February |
(12) |
|
| The business address for all CryoLife non-employee directors and employees is: c/o CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, GA 30144. |
(13) | Amount includes: |
447,014515,792 shares subject to options that are presently exercisable or will become exercisable within 60 days after March 6, 2019;September 21, 2021;
59,29852,842 shares held of record by the spouses of executive officers and directors;
1,500 shares held of record by the children of an executive officer; and
189,941185,272 shares of unvested restricted common stock subject to forfeiture that all current directors and Named Executive Officersnamed executive officers as a group hold as of March 6, 2019.September 21, 2021.
This amount does not include 36,96731,361 shares earned under 20172019 and 20182020 performance stock unit awards that had not vested as of March 6, 2019,September 21, 2021, and that will not vest within 60 days thereafter.
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PROPOSAL THREE – APPROVAL OFcertain AmendmentS to the amended and restated articles of incorporation of cryolife, inc.
The Amended and Restated Articles of Incorporation of CryoLife, Inc. (the “Articles”) outline the governance of the Company under the applicable corporate statutes in the State of Florida, where the Company is incorporated.
Proposed AmendmentsHouseholding
The Board of Directors proposes to amend the Articles to: (1) replace an itemized list of corporate powers with a broader, but more typical and significantly shorter, provision that gives the Company all powers permitted under Florida law; (2) remove language regarding preferred stock, as the Company has no designated preferred stock and does not anticipate issuing any preferred stock in the future; and, (3) correct incorrect statutory citations.
These changes clarify existing Company authority to be what is allowed under Florida law and remove unnecessary language from the Company’s Articles. The changes are not intended in any way to lessen the powers of our stockholders. The text of the Articles as amended by the proposed amendments, formatted to highlight the proposed amendments, is attached hereto as Appendix C, and we urge stockholders to review Appendix C carefully.
If the Company’s stockholders approve the amendments to the Articles, the Company will file the new Amended and Restated Articles of Incorporation of CryoLife, Inc. with the Secretary of State of the State of Florida and will file a Form 8-K with the SEC, noting the amendment.
“Resolved, that CryoLife’s stockholders approve the amendments to the Amended and Restated Articles of Incorporation of CryoLife, Inc.”
Required Vote
The affirmative vote of a majority of the votes cast, either for or against, by the holders of the shares of common stock voting is required to approve this proposal. Accordingly, abstentions and broker non-votes will have no effect on the outcome of this vote.
The Board of Directors’ Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THEAmendmentS to the Amended and Restated Articles of Incorporation of cryolife, inc.
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PROPOSAL FOUR – RATIFICATION OF THE APPROVAL OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Information
The Board of Directors recommends the Company’s stockholders ratify the approval of Ernst & Young LLP (“Ernst & Young”) as the independent registered public accounting firm for the fiscal year ending December 31, 2019. Representatives of Ernst & Young are expected to attend the 2019 Annual Meeting, and representatives of the firm will have the opportunity to make a statement at the meeting if they desire to do so and will be available to respond to appropriate questions.
The submission of the approval of Ernst & Young for ratification by stockholders is not legally required; however, the Board of Directors believes that such submission is consistent with best practices in corporate governance and is an opportunity for stockholders to provide direct feedback to the Board of Directors on an important issue of corporate governance. If the stockholders do not ratify the approval of Ernst & Young, the selection of such firm as the independent registered public accounting firm for the Company will be reconsidered by the Audit Committee, provided that the committee retains sole authority with respect to all decisions regarding the engagement of the Company’s independent registered public accounting firm, including the decision as to whether or not the 2019 appointment will stand, regardless of whether the stockholders vote to ratify the approval.
Fees Incurred for Work Performed by the Independent Registered Public Accounting Firm for Fiscal 2018 and Fiscal 2017
The following table presents Ernst & Young’s professional service fees for the audit of the Company’s annual financial statements for fiscal years ending 2018 and 2017, as well as fees for other services rendered during those periods.
| 2018(1) | 2017 | |
| Audit fees(2) | $1,787,141 | $1,352,333 |
| Audit-related fees | — | — |
| Tax fees(3) | $333,827 | $646,660 |
| All other fees(4) | — | $521,326 |
| Total | $2,120,968 | $2,520,319 |
The Company’s Audit Committee approved all of the services described above. The Audit Committee has determined that the payments made to Ernst & Young for these services are compatible with maintaining such firm’s independence.
Audit Committee’s Pre-approval Policies and Procedures
The Audit Committee has the sole authority to appoint or replace, compensate, and oversee the work of any independent registered public accounting firm, who must be, when required, a registered firm as defined by law whose purpose is the preparation or issuance of an audit report or related work. The independent registered public accounting firm’s reports and other communications are to be delivered directly to the Audit Committee, and the Audit Committee is responsible for the resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting.
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The Audit Committee pre-approves all audit and non-audit services performed by the independent registered public accounting firm and all engagement fees and terms in connection therewith, except as otherwise permitted by federal law and regulations. To date, no services have been approved by the Audit Committee pursuant to 17 CFR 210.2-01(c)(7)(i)(C), which provides a limited exception to the requirement that services be approved in advance by the Audit Committee if certain conditions are met.
Required Vote
The votes cast for this proposal must exceed the votes cast against it in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome.
The Board of Directors' Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF The approval ofERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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Householding
CryoLife is providing notice of the Annual Meeting and access to the Proxy Statement and Annual Report via the “Notice and Access” method. For those stockholders who request paper copies of the Proxyproxy documents and share the same last name and address, they may receive only one copy of our Annual Report andthe Proxy Statement, unless we receive contrary instructions from any stockholder at that address. This is referred to as “householding.” If you are receiving only one copy of the Proxy Statement and prefer to receive multiple copies, of the Annual Report and Proxy Statement at the same address, additional copies will be provided to you promptly upon written or oral request. All communications should be directed as indicated on the instructions that were included on the notice mailing or to Jean F. Holloway, General Counsel and Corporate Secretary, CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144, (770) 419-3355.
If you are a beneficial owner, you can request additional copies of the Annual Report and Proxy Statement, or you can request householding by notifying your broker, bank, or nominee.
TRANSACTION OF OTHER BUSINESSStockholder Proposals
Appropriate proposals of stockholders intended to be presented at CryoLife’s 2022 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated under the Exchange Act must be received by CryoLife by November 30, 2021, for inclusion in its Proxy Statement and form of proxy relating to that meeting. Stockholder proposals must comply with the requirements of Rule 14a-8 of the Exchange Act and any other applicable rules established by the Securities and Exchange Commission. Proposals of stockholders intended to be presented during the Annual Meeting of Stockholders to be held in 2022 without inclusion of such proposals in our Proxy Statement relating to such annual meeting must be received not later than the close of business on the 60th day and not earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting.
Therefore, for the 2022 Annual Meeting of Stockholders, all stockholder proposals submitted outside of the stockholder proposal rules promulgated pursuant to Rule 14a-8 under the Exchange Act, including nominations for individuals to serve as non-employee directors, must be received by CryoLife by no later than March 20, 2022, but no earlier than January 19, 2022, in order to be considered timely. If such stockholder proposals are not timely received, proxy holders will have discretionary voting authority with regard to any such stockholder proposals that may come before the 2022 Annual Meeting of Stockholders. If the month and day of the next annual meeting is advanced or delayed by more than 30 calendar days from the month and day of the prior annual meeting, CryoLife shall, in a timely manner, inform its stockholders of the change, and the date by which proposals of stockholders must be received.
Transaction of Other Business
As of the date of this Proxy Statement, the Board of Directors is not aware of any matters other than those set forth herein and in the Notice of Annual Meeting of Stockholders that will come before the meeting. Should any other matters arise requiringIn accordance with Florida law, only business within the votepurpose described in the notice of stockholders, it is intended that proxiesthe Special Meeting will be voted in respect thereto in accordance withconducted at the best judgment of the person or persons voting the proxies.meeting.
WHERE YOU CAN FIND ADDITIONAL INFORMATIONWhere You Can Find Additional Information
Upon the written request of any record or beneficial owner of common stock of CryoLife whose proxy was solicited in connection with the 2019 AnnualSpecial Meeting, of Stockholders, CryoLife will furnish such owner, without charge, a copy of its Annual Report on Form 10-K without exhibits for its fiscal year ended December 31, 2018.2020. Requests for a copy of such Annual Report on Form 10-K should be addressed to Jean F. Holloway, General Counsel and Corporate Secretary, CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144. Copies of this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2018,2020, may also be obtained without charge through the SEC'sSEC’s website atwww.sec.gov. www.sec.gov.
In addition, we file annual, quarterly, and current reports, proxy statements, and other information with the SEC. You may readThe SEC maintains an internet site that contains reports, proxy and copy any documentinformation statements, and other information that we file electronically with the SEC at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information about the SEC’s public reference rooms. Our SEC filingsand which are also available to the public atthrough the SEC’s website at www.sec.gov andwww.sec.gov. Additionally, all filings we make with the SEC are available through our website at www.cryolife.com.
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It is important that proxies be voted promptly. Stockholders who do not expect to attend the meeting in person are urged to vote their proxies online, by telephone, or by mail, following the instructions at the beginning of this Proxy Statement.
By Order of the Board of Directors: | |
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J. PATRICK MACKIN Chairman, President, and Chief Executive Officer |
Date: March 26, 2019October [●], 2021
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APPENDIXAnnex A–NON-GAAP FINANCIAL MEASURE INFORMATION Plan of Conversion
Set forth below in this Appendix A is important information about the following non-GAAP financial measures discussed in this Proxy Statement:PLAN OF CONVERSION
FOR CONVERTING
CRYOLIFE, INC.,
a Florida corporation
TO
CRYOLIFE, INC.,
a Delaware corporation
Although we believe that these measures are useful tools, no single financial measure providesThis Plan of Conversion (together with all of the information that is necessary to gain a complete understanding of our performance, condition, and liquidity. Therefore these numbers are intended to be, and should be, evaluated in the context of the full information provided in our Annual Report on Form 10-K, including the financial statements presented in accordance with GAAP, the footnotes thereto, and the accompanying management’s discussion and analysis, as well as in our other filings with the SEC.
Adjusted Net Income
As discussed inexhibits attached hereto, this Proxy Statement, annual bonuses paid to executives under our short-term incentive plan are partially conditioned upon the achievement of specified levels of “adjusted net income.” The use of this non-GAAP, adjusted performance measure in the short-term incentive plan was intended to create a stronger performance incentive by focusing on controllable variables within the core business and to minimize unintended consequences by excluding items that were highly variable or difficult to predict during the goal-setting process. We disclosed herein the actual 2018 performance results using this non-GAAP measure so that investors may see the extent to which the goals were achieved. We believe disclosing this information is useful because it helps explain how challenging our annual bonus targets are over time.
Adjusted net income for 2018 was calculated as net income and exclusive of:
The table below provides a reconciliation of 2018 adjusted net income to 2018 net income under GAAP:
2018 Adjusted Net Income (in Thousands)
| 2018 Adjusted Net Income | $ | 52,158 | ||
| Interest income/expense, net | (15,562 | ) | ||
| Stock compensation expense, excluding stock compensation expense related to the bonus program itself | (6,810 | ) | ||
| Research and development expense, excluding that portion pertaining to salaries and related expenses | (16,250 | ) | ||
| Other income, net | (141 | ) | ||
| Income tax expense, net | 3,551 | |||
| Grant revenues | — | |||
| Charges related to acquisitions, licenses, business development, or integration costs | (8,462 | ) | ||
| Amortization | (10,792 | ) | ||
| Litigation | (249 | ) | ||
| Unbudgeted executive severance expenses and on-boarding costs | (283 | ) | ||
| 2018 GAAP Net Income | $ | (2,840 | ) |
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Adjusted EBITDA
As discussed in this Proxy Statement, the 2018 annual grants of performance stock units to executives are conditioned upon the Company’s achievement of pre-determined levels of adjusted EBITDA. The use of these non-GAAP adjusted performance measures was intended to create a stronger performance incentive by focusing on controllable variables within the core business and to minimize unintended consequences by excluding items that were highly variable or difficult to predict during the goal-setting process.
Adjusted EBITDA is calculated as net income operations and before interest, taxes, depreciation, and amortization, as further adjusted by removing the impact of the following:
The table below provides a reconciliation of 2018 adjusted EBITDA to 2018 net income under GAAP:
2018 Adjusted EBITDA Reconciliation (in Thousands)
| 2018 Adjusted EBITDA | $ | 59,458 | ||
| Interest income/expense, net | (15,562 | ) | ||
| Income tax expense, net | 3,551 | |||
| Depreciation expense | (7,300 | ) | ||
| Stock compensation expense, excluding stock compensation expense related to the bonus program itself | (6,810 | ) | ||
| Research and development expense, excluding that portion pertaining to salaries and related expenses | (16,250 | ) | ||
| Amortization | (10,792 | ) | ||
| Litigation | (249 | ) | ||
| Charges related to acquisitions, licenses, business development, or integration costs | (8,462 | ) | ||
| Other income, net | (141 | ) | ||
| Unbudgeted executive severance expenses and on-boarding costs | (283 | ) | ||
| 2018 GAAP Net Income | $ | (2,840 | ) |
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APPENDIX B–FORM OF PERFORMANCE SHARE GRANT AGREEMENT
CRYOLIFE, INC.
EQUITY AND CASH INCENTIVE PLAN
PERFORMANCE SHARE AWARD GRANT NOTICE
Pursuant to the terms and conditions of the CryoLife, Inc. Equity and Cash Incentive “Plan as amended from time to time (the “Plan”), CryoLife, Inc. (the “Company”)dated November [●], 2021, is hereby grants to the individual listed below (“you” or the “Participant”) the number of stock units, which are subject to performance conditions (the “PSUs”), set forth below. This award of PSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Performance Share Award Agreement attached hereto asExhibit A (together, the “Agreement”) and the Plan, each of which is incorporated hereinadopted by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
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By your electronic acceptance and the electronic signature of the Company representative below, you and the Company agree that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement, including exhibits hereto, all of which are made a part of this document. Should the Plan and this Agreement conflict, the Plan governs; except the Award governs where the Plan and this Agreement conflict as to limitations on vesting for a Change of Control Event. You have reviewed the Plan and this Agreement in their entirety, had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understand all provisions of the Plan and the Agreement. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Company upon any questions relating to the Plan and the Agreement. You further agree to notify the Company upon any change in the residence address indicated below.
After reviewing the documents noted above, please accept this Performance Share Award online where indicated on ETrade.com and retain a copy for your files. Please note that your electronic acceptance of this Award is required. The Award will be cancelled if not accepted within 30 days of the Grant Date noted above.
GRANTED BY:
CRYOLIFE, INC.
[NAME]
[TITLE]
GRANTED TO:
[NAME]
[ADDRESS]
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EXHIBIT A
PERFORMANCE SHARE AWARD AGREEMENT
This Performance Share Award Agreement (together with the Performance Share Award Grant Notice to which this Agreement is attached, the “Agreement”) is made as of the Date of Grant set forth in the Grant Notice by and between CryoLife, Inc., a Florida corporation (the “CompanyCorporation”), in order to set forth the terms, conditions, and procedures governing the conversion of the Corporation from a Florida corporation to a Delaware corporation pursuant to Section 265 of the General Corporation Law of the State of Delaware, as amended (the “DGCL”), and _________Section 607.11930 of the Florida Business Corporation Act, as amended (the “ParticipantFBCA”). Capitalized terms used but not specifically
RECITALS
WHEREAS, the Corporation is a corporation organized and existing under the laws of the State of Florida;
WHEREAS, the Board of Directors of the Corporation (the “Board”) has determined that it is in the best interests of the Corporation and its stockholders that the Corporation convert from a Florida corporation to a Delaware corporation pursuant to Section 265 of the DGCL and Section 607.11930 of the FBCA; and
WHEREAS, this Plan has been adopted by the Board in accordance with 607.11932 of the FBCA.
NOW, THEREFORE, in compliance with the FBCA and the DGCL, the Corporation hereby adopts this Plan as follows:
1. Conversion.
a. On the Effective Date (as defined hereinin Section 4), the Corporation shall be converted from a Florida corporation to a Delaware corporation pursuant to Section 265 of the DGCL and Section 607.11930 of the FBCA (the “Conversion”), and the Corporation, as converted to a Delaware corporation (the “Resulting Corporation”), shall thereafter be subject to all of the provisions of the DGCL, and, as provided in Section 265 of the DGCL, notwithstanding Section 106 of the DGCL, the existence of the Resulting Corporation shall be deemed to have commenced on the meanings specifieddate the Corporation commenced its existence in the State of Florida.
b. Following the adoption of the Plan, the Grant Notice, or this Performance Share Award Agreement.Corporation shall cause the Conversion to be effective by:
1. Award. Effective asi. filing articles of conversion pursuant to Section 607.11933 of the Date of Grant set forthFBCA, in the Grant Notice aboveform attached hereto as Exhibit A (the “DateFlorida Articles of GrantConversion”), with the Company hereby grantsDepartment of State of the State of Florida;
ii. filing a certificate of conversion, pursuant to Section 265 of the DGCL, in the form attached hereto as Exhibit B (the “Delaware Certificate of Conversion”), with the Secretary of State of the State of Delaware; and
iii. filing a certificate of incorporation of the Resulting Corporation, substantially in the form attached hereto as Exhibit C (the “Certificate of Incorporation”), with the Secretary of State of the State of Delaware.
c. Upon the Effective Date, the bylaws, substantially in the form attached hereto as Exhibit D (the “Delaware Bylaws”), will be the bylaws of the Resulting Corporation, and the Board of the Resulting Corporation shall adopt the Delaware Bylaws as promptly as practicable following the Effective Date.
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2. Effect of Conversion.
a. Upon the Effective Date, the name of the Resulting Corporation shall continue to be “CryoLife, Inc.”
b. Upon the Effective Date, by virtue of the Conversion and without any further action on the part of the Corporation or its stockholders, the Resulting Corporation shall, for all purposes of the laws of the State of Delaware, be deemed to be the same entity as the Corporation existing immediately prior to the ParticipantEffective Date. Upon the targetEffective Date, by virtue of the Conversion and without any further action on the part of the Corporation or its stockholders, for all purposes of the laws of the State of Delaware, all of the rights, privileges and powers of the Corporation existing immediately prior to the Effective Date, and all property, real, personal, and mixed, and all debts due to the Corporation existing immediately prior to the Effective Date, as well as all other things and causes of action belonging to the Corporation existing immediately prior to the Effective Date, shall remain vested in the Resulting Corporation and shall be the property of the Resulting Corporation and the title to any real property vested by deed or otherwise in the Corporation existing immediately prior to the Effective Date shall not revert or be in any way impaired by reason of the Conversion; but all rights of creditors and all liens upon any property of the Corporation existing immediately prior to the Effective Date shall be preserved unimpaired, and all debts, liabilities and duties of the Corporation existing immediately prior to the Effective Date shall remain attached to the Resulting Corporation upon the Effective Date, and may be enforced against the Resulting Corporation to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by the Resulting Corporation in its capacity as a corporation of the State of Delaware. The rights, privileges, powers, and interests in property of the Corporation existing immediately prior to the Effective Date, as well as the debts, liabilities and duties of the Corporation existing immediately prior to the Effective Date, shall not be deemed, as a consequence of the Conversion, to have been transferred to the Resulting Corporation upon the Effective Date for any purpose of the laws of the State of Delaware.
c. The Conversion shall not be deemed to affect any obligations or liabilities of the Corporation incurred prior to the Conversion or the personal liability of any person incurred prior to the Conversion.
3. Taxes. The Corporation intends for the Conversion to constitute a tax-free reorganization qualifying under Section 368(a) of the Internal Revenue Code of 1986, as amended. Accordingly, neither the Corporation nor any of its stockholders should recognize gain or loss for federal income tax purposes as a result of the Conversion. Stockholders are urged to consult their tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations of the Conversion.
4. Effective Date. The Conversion shall become effective upon the date on which the latest of the Florida Articles of Conversion, the Delaware Certificate of Conversion and the Delaware Certificate of Incorporation shall take effect after filing with the Department of State of the State of Florida and the Secretary of State of the State of Delaware, as applicable (such date, the “Effective Date”).
5. Effect of Conversion on the Corporation’s Securities. Upon the Effective Date, by virtue of the Conversion and without any further action on the part of the Corporation or its stockholders:
a. Each share of common stock of the Corporation, $0.01 par value per share (“Corporation Common Stock”) that is issued and outstanding immediately prior to the Effective Date shall convert into one validly issued, fully paid and nonassessable share of common stock, $0.01 par value per share, of the Resulting Corporation (“Resulting Corporation Common Stock”). Each share of preferred stock of the Corporation, $0.01 par value per share (“Corporation Preferred Stock”) that is issued and outstanding immediately prior to the Effective Date shall convert into one validly issued, fully paid and nonassessable share of preferred stock of the Resulting Corporation, $0.01 par value per share (“Resulting Corporation Preferred Stock”).
b. Each option to acquire shares of Corporation Common Stock outstanding immediately prior to the Effective Date shall convert into an equivalent option to acquire the same number of PSUs set forth inshares of Resulting Corporation Common Stock, upon the Grant Notice (the “Target PSUs”) on thesame terms and conditions set forthas were in effect immediately prior to the Effective Date.
c. Each warrant or other right to acquire shares of Corporation Common Stock outstanding immediately prior to the Effective Date shall convert into an equivalent warrant or other right to acquire the same number of shares of Resulting Corporation Common Stock, upon the same terms and conditions as were in effect immediately prior to the Effective Date.
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d. All of the outstanding certificates representing shares of Corporation Common Stock immediately prior to the Effective Date shall be deemed for all purposes to continue to evidence ownership of and to represent the same number of shares of Resulting Corporation Common Stock.
6. Effect of the Conversion on Employee Benefit, Stock Option and Other Equity-Based Plans.Upon the Effective Date, by virtue of the Conversion and without any further action on the part of the Corporation or its stockholders, each employee benefit plan, stock option plan, and other equity-based plan of the Corporation shall continue to be a plan of the Resulting Corporation. To the extent that any such plan provides for the issuance of Corporation Common Stock, upon the Effective Date, such plan shall be deemed to provide for the issuance of Resulting Corporation Common Stock.
7. Effect of Conversion on Directors and Officers. Upon the Effective Date, by virtue of the Conversion and without any further action on the part of the Corporation or its stockholders, the members of the Board and the officers of the Corporation holding their respective offices in the Grant Notice,Corporation existing immediately prior to the Performance Share Award AgreementEffective Time shall continue in their respective offices as members of the Board and officers of the Plan, which is incorporated herein by reference as a partResulting Corporation.
8. Further Assurances. If, at any time after the Effective Date, the Resulting Corporation shall determine or be advised that any deeds, bills of this Agreement. In the event ofsale, assignments, agreements, documents, or assurances or any inconsistency between the Plan and this Agreement the Performance Share Award,other acts or things are necessary, desirable, or proper, consistent with the terms of the Plan, shall control, except as(a) to treatment upon a Changevest, perfect, or confirm, of Control Event in which the terms of this Agreement control. To the extent earned, each PSU represents the right to receive one share of Stock, subject to the terms and conditions set forthrecord or otherwise, in the Grant Notice, the Performance Share Award Agreement, and the Plan; provided, however, that, depending on the level of performance determinedResulting Corporation its right, title, or interest in, to, be attained with respect to the Performance Goal, the number of shares of Stock that may be earned hereunder in respect of this Award may range from ___% to ___%or under any of the Target PSUs. Unless and until the PSUs have become vested in the manner set forth in the Grant Notice, the Participant will have no right to receive any Stockrights, privileges, immunities, powers, purposes, franchises, properties, or other payments in respect of the PSUs. Prior to settlement of this Award, the PSUs and this Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.Corporation existing immediately prior to the Effective Date, or (b) to otherwise carry out the purposes of the Plan, the Resulting Corporation and its officers and directors are hereby authorized to solicit in the name of the Resulting Corporation any third-party consents or other documents required to be delivered by any third-party, to execute and deliver, in the name and on behalf of the Resulting Corporation all such deeds, bills of sale, assignments, agreements, documents, and assurances and do, in the name and on behalf of the Resulting Corporation, all such other acts and things necessary, desirable, or proper to vest, perfect or confirm its right, title, or interest in, to, or under any of the rights, privileges, immunities, powers, purposes, franchises, properties, or assets of the Corporation existing immediately prior to the Effective Date and otherwise to carry out the purposes of the Plan.
2.9. Vesting of PSUsTermination; Amendment. Except as otherwise set forth inSection 3(b),At any time prior to the PSUs shall vest and become Earned PSUs in accordance withEffective Date, the Participant’s satisfactionPlan may be terminated or amended by action of the vesting requirements and schedule set forthBoard if, in the Grant Noticeopinion of the Board, such action would be in the best interests of the Corporation and based onits stockholders.
10. Third Party Beneficiaries. The Plan shall not confer any rights or remedies upon any person other than as expressly provided herein.
11. Severability. Whenever possible, each provision of the Plan will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent to whichof such prohibition or invalidity, without invalidating the Company has satisfied the Performance Goals set forth in the Grant Notice, which shall be determined by the Committee in its sole discretion following the endremainder of the Performance Period (and any PSUs that do not become Earned PSUs shall be automatically forfeited). Unless and until the PSUs have vested and become Earned PSUs as described in the preceding sentence, the Participant will have no right to receive any dividends or other distribution with respect to the PSUs.Plan.
3. Effect of Termination of Employment or Service. [EFFECT OF TERMINATION OF EMPLOYMENT WILL BE DETERMINED BY THE COMMITTEE FOR EACH AGREEMENT.]
4. Settlement of PSUs. As soon as administratively practicable following the date on which the PSUs vest, but in no event later than[DATE] of the calendar year following the vesting date, the Company shall deliver to the Participant (or the Participant’s permitted transferee, if applicable), a number of shares of Stock equal to the number of Earned PSUs; provided, however, that any fractional PSU that becomes earned hereunder shall be rounded down at the time shares of Stock are issued in settlement of such PSU. No fractional shares of Stock, nor the cash value of any fractional shares of Stock, shall be issuable or payable to the Participant pursuant to this Agreement. All shares of Stock, if any, issued hereunder shall be delivered either by delivering one or more certificates for such shares to the Participant or by entering such shares in book-entry form, as determined by the Committee in its sole discretion. The value of shares of Stock shall not bear any interest owing to the passage of time. Neither thisSection 4 nor any action taken pursuant to or in accordance with this Agreement shall be construed to create a trust or a funded or secured obligation of any kind.
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5. Tax WithholdingIN WITNESS WHEREOF. Unless and until satisfactory arrangements (as determined by, the Committee) have been made by Participant with respectCorporation has caused this Plan to the payment of federal, state, local, or foreign income, the Company will withhold employment and other taxes which the Committee determines must be withheld (“Tax Related Items”) with respect to the Stock so issuable. The Committee hereby allows Participant, pursuant to such proceduresduly executed as the Committee may specify from time to time, to satisfy such Tax Related Items, in whole or in part (without limitation) by one or more of the following: (a) paying cash; or (b) electing to have the Company withhold otherwise deliverable shares of Stock having a Fair Market Value, as defined in the Plan, equal to the amount of the Tax Related Items required to be withheld. If the obligation for Tax Related Items is satisfied by withholding a number of shares of Stock as describeddate first above Participant will be deemed to have been issued the full number of shares of Stock subject to the vested PSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax Related Items due as a result of any aspect of the Award. If Participant fails to make satisfactory arrangements for the payment of the Tax Related Items at the time any portion of the Award is scheduled to vest, Participant will permanently forfeit such portion of the Award and no shares of Stock will be issued to Participant pursuant to them.written.
6. Non-Transferability. During the lifetime of the Participant, the PSUs may not be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares of Stock underlying the PSUs have been issued, and all restrictions applicable to such shares have lapsed. Neither the PSUs nor any interest or right therein shall be liable for the debts, contracts, or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.
| CRYOLIFE, INC. | |||
By: | |||
Name: | J. Patrick Mackin | ||
Title: | Chief Executive Officer | ||
7. Compliance with Applicable Law. Notwithstanding any provision of this Agreement to the contrary, the issuance of shares of Stock hereunder will be subject to compliance with all applicable requirements of applicable law with respect to such securities and with the requirements of any stock exchange or market system upon which the Stock may then be listed. No shares of Stock will be issued hereunder if such issuance would constitute a violation of any applicable law or regulation or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, shares of Stock will not be issued hereunder unless: (a) a registration statement under the Securities Act is in effect at the time of such issuance with respect to the shares to be issued or (b) in the opinion of legal counsel to the Company, the shares to be issued are permitted to be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary for the lawful issuance and sale of any shares of Stock hereunder will relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority has not been obtained. As a condition to any issuance of Stock hereunder, the Company may require the Participant to satisfy any requirements that may be necessary or appropriate to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect to such compliance as may be requested by the Company.
8. Legends. If a stock certificate is issued with respect to shares of Stock issued hereunder, such certificate shall bear such legend or legends as the Committee deems appropriate in order to reflect the restrictions set forth in this Agreement and to ensure compliance with the terms and provisions of this Agreement, the rules, regulations, and other requirements of the SEC, any applicable laws or the requirements of any stock exchange on which the Stock is then listed. If the shares of Stock issued hereunder are held in book-entry form, then such entry will reflect that the shares are subject to the restrictions set forth in this Agreement.
9. Rights as a Stockholder. The Participant shall have no rights as a stockholder of the Company with respect to any shares of Stock that may become deliverable hereunder unless and until the Participant has become the holder of record of such shares of Stock, and no adjustments shall be made for dividends in cash or other property, distributions, or other rights in respect of any such shares of Stock.
10. Execution of Receipts and Releases. Any issuance or transfer of shares of Stock or other property to the Participant or the Participant’s legal representative, heir, legatee, or distributee, in accordance with this Agreement shall be in full satisfaction of all claims of such Person hereunder. As a condition precedent to such payment or issuance, the Company may require the Participant or the Participant’s legal representative, heir, legatee, or distributee to execute (and not revoke within any time provided to do so) a release and receipt therefor in such form as it shall determine appropriate; provided, however, that any review period under such release will not modify the date of settlement with respect to Earned PSUs.
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A-4
11. No Right to Continued Employment, Service or Awards. Nothing in the adoptionAnnex B – florida Articles of the Plan, nor the award of the PSUs hereunder pursuant to the Grant Notice or the Performance Share Award Agreement, shall confer upon the Participant the right to continued employment by any Eligible Employer, or any other entity, or affect in any way the rights of an Eligible Employer to terminate such employment relationship at any time. The grant of the PSUs is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future. Any future Awards will be granted at the sole discretion of the Company.Conversion
12. Legal and Equitable Remedies. The Participant acknowledges that a violation or attempted breachArticles of any of the Participant's covenants and agreements in this Agreement will cause such damage as will be irreparable, the exact amount of which would be difficult to ascertain and for which there will be no adequate remedy at law, and accordingly, the parties hereto agree that the Company and its Affiliates shall be entitled as a matter of right to an injunction issued by any court of competent jurisdiction, restraining the Participant or the affiliates, partners, or agents of the Participant from such breach or attempted violation of such covenants and agreements, as well as to recover from the Participant any and all costs and expenses sustained or incurred by the Company or any Affiliate in obtaining such an injunction, including, without limitation, reasonable attorneys' fees. The parties to this Agreement agree that no bond or other security shall be required in connection with such injunction. Any exercise by either of the parties to this Agreement of its rights pursuant to thisSection 12 shall be cumulative and in addition to any other remedies to which such party may be entitled.Conversion
For
Florida Profit Corporation
Into
Non-Florida Business Entity
13. Notices. Any notices or other communications provided for in this Agreement shall be sufficient if in writing. InThese Articles of Conversion are submitted to convert the case of Participant, such notices or communications shall be effectively delivered if hand delivered to Employee at Employee’s principal place of employment or if sent by registered or certified mail to Employee at the last address Employee has filed with the Company. In the case of the Company, such notices or communications shall be effectively delivered if sent by registered or certified mail to the Company at its principal business address.
following 14. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this and any other Award made or offered by the Company. Electronic delivery may be via the Company’s electronic mail system or by reference toFlorida Profit Corporation into a location on the Company intranet to which the Participant has access. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
15. Agreement to Furnish InformationDelaware Profit Corporation . The Participant agrees to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirement imposed upon the Company by or under any applicable statute or regulation.
16. Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to the PSUs granted hereby; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting, and/or severance agreement between the Company (or an Affiliate or other entity) and the Participant in effect as of the date a determination is to be made under this Agreement. Without limiting the scope of the preceding sentence, except as provided therein, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect. The Committee may, in its sole discretion, amend this Agreement from time to time in any manner that is not inconsistent with the Plan.
17. Severability and Waiver. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of such provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. Waiver by any party of any breach of this Agreement or failure to exercise any right hereunder shall not be deemed to be a waiver of any other breach or right. The failure of any party to take action by reason of such breach or to exercise any such right shall not deprive the party of the right to take action at any time while or after such breach or condition giving rise to such rights continues.
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18. Clawback. Notwithstanding any provision in the Grant Notice, this Performance Share Award Agreement, or the Plan to the contrary, to the extent required by (a) applicable law, including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, any SEC rule or any applicable securities exchange listing standards and/or (b) any policy that may be adopted or amended by the CryoLife, Inc. Board of Directors from time to time, all shares of Stock issued hereunder shall be subject to forfeiture, repurchase, recoupment and/or cancellation to the extent necessary to comply with such law(s) and/or policy.
19. Governing Law. This Agreement, THE RIGHTS OF THE PARTIES AND ALL ACTIONS ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION HEREWITH, SHALL BE Governed by and construed in accordance with the lawsSection 607.11933 of the UNITED STATES OF AMERICA AND OF THE State of GeORGIA, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF GEORGIA OR OF ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLIcATION OF THE LAWS OF ANY other JURISDICTION OTHER THAN THOSE OF the STATE OF GEORGIA.
20. Florida Business Corporation Act (the “Successors and AssignsFBCA. The Company may assign any of its rights under this Agreement without the Participant’s consent. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein and in the Plan, this Agreement will be binding upon the Participant and the Participant's beneficiaries, executors, administrators and the Person(s) to whom the PSUs may be transferred by will or the laws of descent or distribution.
21. Headings. Headings are for convenience only and are not deemed to be part of this Agreement.
22. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of this Agreement by facsimile or portable document format (.pdf) attachment to electronic mail shall be effective as delivery of a manually executed counterpart of the Agreement.
23. Section 409A. The PSUs are intended to be exempt from or compliant with Section 409A of the Code and the Treasury regulations and other interpretive guidance issued thereunder (collectively, “Section 409A”). If the Participant is deemed to be a “specified employee” within the meaning of Section 409A, as determined by the Committee, at a time when the Participant becomes eligible for settlement of the PSUs or payment of Dividend Equivalents upon his “separation from service” within the meaning of Section 409A, then to the extent necessary to prevent any accelerated or additional tax under Section 409A, such settlement will be delayed until the earlier of: (a) the date that is six months following Employee’s separation from service and (b) the Participant’s death. Notwithstanding the foregoing, the Company makes no representations that the payments provided under this Agreement are exempt from or compliant with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A.
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APPENDIX C–amended and restated articles of incorporation of CryoLife, Inc.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
CRYOLIFE, INC.
Articles of Restatement
1. The name of the corporationFlorida Profit Corporation converting into the resulting business entity is CRYOLIFE, INC.
2. Restated Articles of Incorporation: This Amendment and Restatement of the Articles of Incorporation doesnotcontain an amendment to the Articles requiring shareholder approval. The Board of Directors adopted these Amended and Restated Articles of Incorporation onJuly 30, 2014February 13, 2019.
3. The text of the Amended and Restated Articles of Incorporation is as follows:
ARTICLE I
NAME
The name of thisCryoLife, Inc., a corporation shall be CRYOLIFE, INC.
ARTICLE II
EXISTENCE OF CORPORATION
This corporation shall have perpetual existence.
ARTICLE III
PURPOSES
The corporation may engage in the transaction of any or all lawful business for which corporations may be incorporated under the laws of the State of Florida (the “Converting Corporation”).
2. The name of the resulting business entity is CryoLife, Inc., a corporation incorporated under the laws of the State of Delaware (the “Resulting Corporation”).
3. The Converting Corporation has converted into a Delaware corporation in compliance with the FBCA.
4. The plan of conversion was approved by the Converting Corporation in accordance with the FBCA.
5. The Certificate of Incorporation (the public organic record) of the Resulting Corporation is attached to these Articles of Conversion as Exhibit A.
6. Pursuant to 607.11933(4)(b) of the FBCA, this conversion becomes effective at the later of: (a) the date and time provided by the organic law of the resulting entity; or (b) when these Articles of Conversion take effect.
7. These Articles of Conversion shall take effect at a later date, which is not more than ninety (90) days from the date of filing. The delayed effective date is December 1, 2021.
| Signed this [●] day of November, 2021 | |||
By: | |||
Name: | J. Patrick Mackin | ||
Title: | Chief Executive Officer | ||
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Annex C – delaware Certificate of Conversion
STATE OF DELAWARE
CERTIFICATE OF CONVERSION
FROM A NON-DELAWARE CORPORATION
TO A DELAWARE CORPORATION
PURSUANT TO SECTION 265 OF THE
DELAWARE GENERAL CORPORATION LAW
1. The jurisdiction where the Non-Delaware Corporation was first incorporated, and immediately prior to filing this Certificate of Conversion, is the State of Florida.
ARTICLE IV2. The date on which the Non-Delaware Corporation was first incorporated is January 19, 1984.
GENERAL POWERS
3. The name of the Non-Delaware Corporation immediately prior to filing this Certificate of Conversion is CryoLife, Inc., a Florida corporation.
4. The name of the Delaware Corporation as set forth in the Certificate of Incorporation filed in accordance with subsection (b) of Section 265 of the General Corporation Law of the State of Delaware is CryoLife, Inc.
5. This Certificate of Conversion shall take effect at a later date, which is not more than ninety (90) days from the date of filing. The delayed effective date is December 1, 2021 at 11:59 pm Eastern time.
IN WITNESS WHEREOF, the undersigned being duly authorized to sign on behalf of the converting Non-Delaware Corporation has executed this Certificate of Conversion on the [●] day of November, 2021.
By: | |||
Name: | J. Patrick Mackin | ||
Title: | Chief Executive Officer |
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Annex D – Delaware Certificate of Incorporation
CERTIFICATE OF INCORPORATION OF
CRYOLIFE, INC.
I, the undersigned, for the purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware (“DGCL”), do execute this certificate of incorporation and do hereby certify as follows:
Article I
NAME
The name of the corporation shall be CryoLife, Inc.
Article II
EXISTENCE OF CORPORATION
The corporation shall have perpetual existence.
Article III
PURPOSES
The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
Article IV
GENERAL POWERS
The corporation shall have any and allpowers powers necessary or convenient to carry out its business and affairs under the laws of the State of Florida.:
(a) To purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use, or otherwise deal in and with real or personal property or any interest therein, wherever situated.
(b) To sell, convey, mortgage, pledge, create a security interest in, lease, exchange, transfer, and otherwise dispose of all or part of its property and assets.
(c) To lend money to, and use its credit to assist its officers and employees in accordance with Section 607.141, Florida Statutes (2015).
(d) To purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic or foreign corporations, associations, partnerships, or individuals, or direct or indirect obligations of the United States or of any other government, state, territory, governmental district, or municipality or of any instrumentality thereof.
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(e) To make contracts and guarantees and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchise, and income.
(f) To lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested.
(g) To conduct its business, carry on its operations, and have offices and exercise the powers granted by the State of Florida, within or without the state.
(h) To elect or appoint officers and agents of the corporation and define their duties and fix their compensation.
(i) To make and alter by-laws, not inconsistent with the laws of the State of Florida, for the administration and regulation of the affairs of the corporation.
(j) To make donations for the public welfare or for charitable, scientific or educational purposes.
(k) To transact any lawful business which the board of directors shall find will be in aid of governmental policy.
(I) To pay pensions and establish pension plans, profit sharing plans, stock bonus plans, stock option plans, and other incentive plans for any or all of its directors, officers, and employees and for any or all of the directors, officers, and employees of its subsidiaries.
(m) To be a promoter, incorporator, partner, member, associate, or manager of any corporation, partnership, joint venture, trust, or other enterprise.
(n) To have and exercise all powers necessary or convenient to affect its purposes.
ARTICLEArticle V
CAPITAL STOCK
(a)(1) The total number of shares of capital stock authorized to be issued by thisthe corporation is Eighty Million (80,000,000), and shall be divided into two classes as follows: (a) Seventy Five Million (75,000,000) shares of common stock, each with a par value of One Cent ($0.01) (“Common Stock”), and (b) Five Million (5,000,000) shares of preferred stock.stock, each with a par value of One Cent ($0.01) (“Preferred Stock”).
(b) Common Stock. The sharespowers (including voting powers), if any, preferences and relative, participating, optional, special, and other rights, if any, and the qualifications, limitations, and restrictions, if any, of the Common Stock are as follows:
(i) Dividends. Subject to applicable law and the rights, if any, of the holders of any series of Preferred Stock then outstanding, dividends may be divided intodeclared and issuedpaid on the Common Stock at such times and in series.
(a)(2) Pursuant to Section 607.047602 of the Florida Statutes,such amounts as the Board of Directors of the corporation (the “Board”) in its discretion shall determine.
(ii) Voting Rights. Except as otherwise provided by or pursuant to the provisions of this certificate of incorporation (including any certificate filed with the Secretary of State of the State of Delaware establishing a series of Preferred Stock) (as the same may be amended or amended and restated, this “Certificate of Incorporation”) or by applicable law, each holder of Common Stock, as such, shall be entitled to one (1) vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote.
(iii) Liquidation Rights. Subject to applicable law and the rights, if any, of the holders of any series of Preferred Stock then outstanding, in the event of any liquidation, dissolution, or winding up of the corporation, the holders of the Common Stock shall be entitled to receive the assets of the corporation available for distribution to its stockholders ratably in proportion to the number of shares of Common Stock held by them. A merger or consolidation of the corporation with or into any other corporation or other entity, or a sale or conveyance of all or any part of the assets of the corporation (which shall not in fact result in the liquidation, dissolution or winding up of the corporation and the distribution of assets to its stockholders) shall not be deemed to be a liquidation, dissolution, or winding up of the corporation within the meaning of this Section (b)(iii) of Article V.
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(c) Preferred Stock. The Board is hereby expressly authorized, by resolution or resolutions thereof, to provide from time to time out of the unissued shares of Preferred Stock for one or more series of Preferred Stock, and, empoweredwith respect to divideeach such series, to fix the number of shares constituting such series and the designation of such series, the powers (including voting powers), if any, or all of the shares of preferred stock intosuch series and within the preferences and relative, participating, optional, special, or other rights, if any, and the qualifications, limitations, set forth in Section 607.047602 of the Florida Statutes, to fix and determine the relative rights and preferencesor restrictions, if any, of the shares of such series. The designations, powers (including voting powers), preferences, and relative, participating, optional, special, and other rights, if any, series so established. The Board of Directors is expressly authorized to designate each series of preferred stock so as to distinguishPreferred Stock and the sharesqualifications, limitations, or restrictions, if any, thereof, may differ from the sharesthose of any and all other series and classes.
(a)(3) Each share of issued andPreferred Stock at any time outstanding. Except as may otherwise be provided by this Certificate of Incorporation or applicable law, no holder of any series of Preferred Stock then outstanding, commonas such, shall be entitled to any voting powers in respect thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of all of the then outstanding shares of capital stock shall entitle the holder thereof to one (1) vote on each matter with respect to which shareholders have the right to vote,to fully participate in all shareholder meetings, and to share ratably in the net assets of the corporation upon liquidation and/or dissolution. Each shareentitled to vote irrespective of issued and outstanding preferred stock shall have such rights to share in the net assetsSection 242(b)(2) of the corporation upon liquidation and/or dissolutionDGCL, without the separate vote of the holders of the Preferred Stock as are determined and fixed by the Board of Directors pursuant to Florida Statutes Section 607.047602. All or any part of said capital stock may be paid for in cash, in property or in labor or services at a fair valuation to be fixed by the Board of Directors at a meeting called for such purposes. All stockwhen issued shall be paid for andupon receipt of full payment shall be non-assessable.class.
(b)(d) In the election of directors of thisthe corporation, there shall be no cumulative voting of the stock entitled to vote at such election.
(c) There shall be a series of Preferred Stock, par value $.01 per share, of the Corporation with the following designated number of shares, relative rights, preferences, and limitations thereof:
(1) Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock" (the “Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be two million (2,000,000) shares of the five million (5,000,000) authorized preferred shares. The two million (2,000,000) Series A Preferred Stock shares shall be reserved for issuance in connection with the exercise of certain rights granted pursuant to a First Amended and Restated Rights Agreement, amended effective as of November 23, 2005, by and between the Corporation and American Stock Transfer & Trust Company, as Rights Agent thereunder. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
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(2) Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 10 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time after the issuance of Series A Preferred Stock declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
(3) Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after issuance of Series A Preferred Stock declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
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(B) Except as otherwise provided herein, in any other document or filing creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of SeriesAPreferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in subparagraph 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this subparagraph 4, purchase or otherwise acquire such shares at such time and in such manner.
(5) Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other document or filing creating a series of Preferred Stock or any similar stock or as otherwise required by law.
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(6) Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock,or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after the issuance of Series A Preferred Stock declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event both this subparagraph 7 and subparagraph 2 appear to apply to a transaction, this subparagraph 7 will control.
(8) No Redemption: No Sinking Fund. The shares of Series A Preferred Stock shall not be redeemable; provided, however, that the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund.
(9) Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences, and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions thereof.
(10) Fractional Shares. The Series A Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one one-hundredth of a share or any integral multiple of such fraction which shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Series A Preferred Stock, may elect (1) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-hundredth of a share or any integral multiple thereof or (2) to issue depository receipt evidencing such authorized fraction of a share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock.
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(11) Amendment. These Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.
ARTICLEArticle VI
AMENDMENT OF ARTICLESCERTIFICATE OF INCORPORATION
The corporation reserves the right to amend, alter, change, or repeal any provisions contained in these Articlesthis Certificate of Incorporation, and other provisions may be added or inserted, in the manner now or hereafter prescribed by statute,law, and all rights, preferences and privileges conferred upon the stockholders, directors, or other persons herein are subject to this reservation.
ARTICLEArticle VII
AMENDMENT OF BYLAWS
INDEMNIFICATION
In furtherance of, and not in limitation of, the powers conferred by the laws of the State of Delaware, the Board is expressly authorized to adopt, amend, or repeal the Bylaws or adopt new Bylaws without any action on the part of the stockholders; provided that any Bylaw adopted or amended by the Board, and any powers thereby conferred, may be amended, altered, or repealed by the stockholders.
Article VIII
Indemnification
If it is determined in accordance with Section 145(d) of the DGCL that indemnification of a present or former director or officer is proper in the judgmentcircumstances because such person has met the applicable standard of the majority of the entire Board of Directors (excluding from such majorityanythe director under consideration for indemnification), the criteriaconduct set forth in subsections (a) and (b) Section 607.014850(1) and (2), as applicable, Florida Statutes, have been met,145 of the DGCL, then the corporation shall indemnify any officer or director, or former officer or director, his personal representatives, devisees or heirs,such person in the manner and to theextent contemplated by Section 145 of the shall inure to the benefit of the heirs, executors and administrators of such a person.said Section 607.014(1)DGCL. The indemnification provided by this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and (2)
Article IX
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Neither the amendment, modification, elimination, nor repeal of this Article IX, nor the adoption of any provision of this Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law,. shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former director of the corporation under this Article IX in respect of an act or omission occurring prior to the time of such amendment, repeal, elimination or modification.
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ARTICLES VIIID-2
SHAREHOLDERSArticle X
STOCKHOLDERS PROHIBITED FROM TAKING
ACTION WITHOUT A MEETING
The shareholdersstockholders may not take action by written consent.consent without a meeting. Any and all action by a shareholderstockholder is required to be taken at the annual shareholdersstockholders meeting or at a special shareholdersstockholders meeting. This provision applies to common stockCommon Stock and all classes of preferred stock.Preferred Stock.
ARTICLE IX
Article XI
SPECIAL MEETINGS OF SHAREHOLDERSSTOCKHOLDERS
Special meetings of the shareholdersstockholders for any purpose may be called at the request in writing of shareholdersstockholders owning not less than 50% of all votes entitled to be cast on any issue proposed to be considered at the proposed meeting by delivering one or more written demands for the meeting which are signed, dated, and delivered to the Secretary of the Companycorporation and describing the purposes for which the meeting is to be held.
4. These AmendedArticle XII
EXCLUSIVE FORUM
(a) Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and Restated Articlesexclusive forum for (1) any derivative action or proceeding brought on behalf of the corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the corporation to the corporation or the corporation’s stockholders, (3) any civil action to interpret, apply, or enforce any provision of the DGCL, (4) any civil action to interpret, apply, enforce, or determine the validity of the provisions of this Certificate of Incorporation supersedeor the original ArticlesBylaws or (5) any action asserting a claim governed by the internal affairs doctrine; provided, however, in the event that the Court of IncorporationChancery of the State of Delaware lacks jurisdiction over such action, the sole and exclusive forum for such action shall be another state or federal court located within the State of Delaware, in all previous amendments thereto.
IN WITNESS WHEREOF, these Amended and Restated Articlescases, subject to such court having personal jurisdiction over the indispensable parties named as defendants. The choice of Incorporation have been executedforum provision set forth in this Section (a) of Article XII does not apply to any actions arising under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of the27th _ day of May , 20169Exchange Act”).
J. Patrick Mackin
Chairman(b) Unless the corporation consents in writing to the selection of an alternative forum, the federal district courts of the Board, President,United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act against the corporation or any director or officer of the corporation.
(c) Failure to enforce the foregoing provisions of this Article XII would cause the corporation irreparable harm and Chief Executive Officerthe corporation shall, to the fullest extent permitted by applicable law, be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Article XII and personal jurisdiction and venue in any state or federal court located in the State of Delaware for any action or proceeding set forth in the above clauses 1 to 5 of Section (a) of Article XII and any complaint set forth in Section (b) of Article XII. This Article XII shall not apply to any action asserting claims arising under the Exchange Act.
Article XIII
REGISTERED OFFICE; REGISTERED AGENT
The address of the corporation’s registered office in the State of Delaware is 850 New Burton Road, Suite 201, City of Dover, County of Kent, State of Delaware 19904. The name of its registered agent at such address is Cogency Global Inc.
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Article XIV
Incorporator
The incorporator of the corporation is Jean F. Holloway, whose mailing address is 1655 Roberts Blvd., NW, Kennesaw, Georgia 30144.
Article XV
no written ballot
Unless and except to the extent that the Bylaws of the corporation shall so require, the election of directors of the corporation need not be by written ballot.
Article XVI
Effectiveness
This Certificate of Incorporation shall be effective at 11:59 pm Eastern time on December 1, 2021.
[Remainder of page intentionally blank]
The undersigned incorporator hereby acknowledges that the foregoing Certificate of Incorporation is her act and deed on this [●] day of November, 2021.
/s/ Jean F. Holloway | |
Jean F. Holloway, Incorporator |
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BYLAWS
OF
CRYOLIFE, INC.
(a Delaware Corporation)
Article I
OFFICES
Section 1. Principal and Business Offices. The corporation may have such principal and other business offices, either within or without the State of Delaware, as the Board of Directors (the “Board”) may from time to time determine or the business of the corporation may require. The corporation’s principal office is the office where the corporation’s principal executive offices are located.
Section 2. Registered Office. The registered office of the corporation, for so long as required by applicable law, shall be maintained in the State of Delaware. The address of the registered office may be changed from time to time by the Board or the registered agent.
Article II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall be held for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting, the actual day thereof to be set forth in the Notice of Meeting or in the Waiver of Call and Notice of Meeting. The Board may, at any time prior to the holding of an annual meeting of stockholders, and for any reason, cancel, postpone, or reschedule such meeting upon public notice given prior to the time previously scheduled for such meeting of stockholders. The meeting may be postponed or rescheduled to such time and place, if any, as is specified in the notice of postponement or rescheduling of such meeting.
Section 2. Special Meetings. Unless otherwise prescribed by law or by the Certificate of Incorporation, special meetings of the stockholders for any purposes may be called by the President or Secretary at the request in writing of the majority of the Board then in office. Special meetings of the stockholders may also be called in the manner provided in the Certificate of Incorporation. Business transacted at a special meeting of the stockholders shall be limited to the purposes stated in the notice thereof.
Section 3. Place of Meeting. The Board may designate a place, if any, whether within or without the State of Delaware unless otherwise prescribed by law or by the Certificate of Incorporation, for any annual meeting or for any special meeting of the stockholders. If no designation is made, the place of meeting shall be the principal office of the corporation; provided, that the Board may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 (or any successor provision) of the General Corporation Law of the State of Delaware (“DGCL”).
Section 4. Notice of Meeting. Whenever stockholders are required or permitted to take any action at a meeting, a notice of the meeting in the form of a writing or electronic transmission shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, the notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, as of the record date for determining the stockholders entitled to notice of the meeting. Notices shall be delivered in the manner provided under applicable law. If mailed, such notice shall be deemed to be given when deposited in the United States mail, addressed to the stockholder at such stockholder’s address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.
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Section 5. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders at an annual meeting of stockholders may be made only:
(A) pursuant to the corporation’s notice of meeting (or any supplement thereto);
(B) by or at the direction of the Board or any committee thereof; or
(C) by any stockholder of the corporation who (1) was a stockholder of record at the time of giving of notice provided for in these Bylaws and at the time of the annual meeting; (2) is entitled to vote at the meeting; and (3) complies with the notice procedures and other requirements set forth in these Bylaws and applicable law.
Section 5(a)(i)(C) of these Bylaws shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the corporation’s notice of meeting) before an annual meeting of stockholders.
(ii) For any nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to Section 5(a)(i)(C) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary, (ii) such other business must otherwise be a proper matter for stockholder action under the DGCL and (iii) the record stockholder and the beneficial owner, if any, on whose behalf any such proposal or nomination is made, must have acted in accordance with the representations set forth in the Solicitation Statement required by these Bylaws. To be timely, a stockholder’s notice must be received by the Secretary at the principal executive offices of the corporation not earlier than the close of business on the 120th day and not later than the close of business on the 60th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that subject to the following sentence, in the event that the date of the annual meeting is scheduled for a date that is more than 30 days before or more than 30 days after such anniversary date, notice by the stockholder to be timely must be so received not later than the 10th day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall any adjournment, recess or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.
To be in proper form, a stockholder’s notice to the Secretary must:
(A) set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
(1) the name and address of such stockholder, as they appear on the corporation’s books, and of such stockholder’s Stockholder Associated Person (as defined in Section 5(b)(ii)), if any;
(2) a. the class or series and number of shares of the corporation that are, directly or indirectly, owned beneficially and of record by such stockholder and such beneficial owner;
b. any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the corporation or with a value derived in whole or in part from the value of any class or series of shares of the corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of stock of the corporation or otherwise (a “Derivative Instrument”), directly or indirectly owned beneficially by such stockholder or by any Stockholder Associated Person and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the corporation held by such stockholder or by any Stockholder Associated Person;
c. a complete and accurate description of any agreement, arrangement or understanding between or among such stockholder and such stockholder’s Stockholder Associated Person and any other person or persons in connection with such stockholder’s director nomination and the name and address of any other person(s) or entity or entities known to the stockholder to support such nomination;
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d. a complete and accurate description of any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote, directly or indirectly, any shares of any security of the corporation;
e. any short interest in any security of the corporation held by such stockholder or any Stockholder Associated Person (for purposes of these Bylaws, a person shall be deemed to have a “short interest” in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);
f. any rights to dividends on the shares of the corporation owned beneficially by such stockholder or by any Stockholder Associated Person that are separated or separable from the underlying shares of the corporation;
g. any proportionate interest in shares of the corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; and
h. any performance-related fees (other than an asset-based fee) that such stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of shares of the corporation or Derivative Instruments, if any, as of the date of such notice, including, without limitation, any such interests held by members of such stockholder’s or any Stockholder Associated Person’s immediate family sharing the same household;
(3) a. any other information relating to such stockholder and any Stockholder Associated Person, if any, that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for, as applicable, the proposal or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;
b. a representation that the stockholder is a holder of record of the capital stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to bring such nomination or other business before the meeting; and
c. a representation as to whether or not such stockholder or any Stockholder Associated Person will deliver a proxy statement or form of proxy to holders of at least the percentage of the voting power of the corporation’s outstanding stock required to approve or adopt the proposal or, in the case of a nomination or nominations, at least the percentage of the voting power of the corporation’s outstanding stock reasonably believed by the stockholder or Stockholder Associated Person, as the case may be, to be sufficient to elect such nominee or nominees (such representation, a “Solicitation Statement”);
(B) if the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, set forth:
(1) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and Stockholder Associated Person, if any, in such business, the text of the proposal or business (including the text of any resolutions proposed for consideration); and
(2) a complete and accurate description of all agreements, arrangements and understandings between or among such stockholder and such stockholder’s Stockholder Associated Person, if any, and the name and address of any other person(s) or entity or entities in connection with the proposal of such business by such stockholder;
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(C) set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board:
(1) all information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and
(2) a complete and accurate description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such stockholder and Stockholder Associated Person, if any, and their respective Affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective Affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any Affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant;
(D) set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board:
(1) a completed and signed questionnaire, representation and agreement in a form provided by the corporation which form the stockholder must request from the Secretary in writing with no less than seven (7) days advance notice; and
(2) a written representation and agreement, in a form provided by the corporation (which form the stockholder must request from the Secretary in writing with no less than seven (7) days advance notice), that such person:
a. is not and will not become a party to:
i. any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the corporation; or
ii. any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the corporation, with such person’s fiduciary duties under applicable law;
iii. is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein;
b. if elected as a director of the corporation, intends to serve a full term; and
c. in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation.
(iii) The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
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(iv) A stockholder providing notice of a nomination or proposal of other business to be brought before a meeting shall further update and supplement such notice, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any postponement or adjournment thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the corporation not later than five (5) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date) and not later than seven (7) business days prior to the date for the meeting or any postponement or adjournment thereof, if practicable (or, if not practicable, on the first practicable date prior to any postponement or adjournment thereof (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any postponement or adjournment thereof)).
(b) General.
(i) Only such persons who are nominated in accordance with the procedures set forth in these Bylaws and applicable law shall be eligible to serve as directors, and only such business shall be conducted at a meeting of stockholders as has been brought before the meeting in accordance with the procedures set forth in these Bylaws and applicable law. Except as otherwise provided by applicable law, the corporation’s Certificate of Incorporation or these Bylaws, the Board or a presiding officer at the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in the corporation’s Certificate of Incorporation, these Bylaws and applicable law and, if any proposed nomination or business is not in compliance with these Bylaws and applicable law, to declare that such defective proposal or nomination shall be disregarded.
(ii) For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by Dow Jones News Service, the Associated Press, or any other national news service or in a document publicly filed by the corporation with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder, and “Stockholder Associated Person” shall mean, for any stockholder,
(A) any person or entity controlling, directly or indirectly, or acting in concert with, such stockholder;
(B) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder; or
(C) any person or entity controlling, controlled by or under common control with any person or entity referred to in the preceding clauses (A) or (B).
(iii) Notwithstanding the foregoing provisions of these Bylaws, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to further and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 5 of these Bylaws. Nothing in these Bylaws shall be deemed to affect any rights
(A) of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 promulgated under the Exchange Act; or
(B) of the holders of any series of preferred stock of the corporation to elect directors if and to the extent provided for under applicable law, the corporation’s Certificate of Incorporation or these Bylaws.
(iv) Unless otherwise required by law, if the stockholder (or a Qualified Representative (as defined below) of the stockholder) making a nomination or proposal under this Section 5 does not appear at a meeting of stockholders to present such nomination or proposal, the nomination shall be disregarded and the proposed business shall not be transacted, as the case may be, notwithstanding that proxies in favor thereof may have been received by the corporation. For purposes of these Bylaws, to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) delivered to the corporation prior to the presentation of such matters at the meeting stating that such person is authorized to act for such stockholder as proxy at the meeting of stockholders.
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Section 6. Waiver of Notice of Meeting. Any waiver of notice, given by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders need be specified in a waiver of notice.
Section 7. Voting Lists. The Corporation shall prepare, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of, and the number and class and series of shares held by, each. The list must be made available for inspection by any stockholder for any purpose germane to the meeting for a period of at least ten (10) days prior to such meeting at any one of the following locations: (a) during ordinary business hours at the principal office of the corporation; or (b) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting. The list shall also be subject to inspection by any stockholder or such stockholder’s agent or attorney during the whole time of the meeting or any adjournment. Except as otherwise provided by applicable law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 7 or to vote in person or by proxy at any meeting of stockholders.
Section 8. Quorum and Adjournment.
(a) Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the Certificate of Incorporation or applicable law provides otherwise, a majority of the votes entitled to vote on a matter by a voting group constitutes a quorum of that voting group for action on that matter. To the fullest extent permitted by law, once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.
(b) The presiding officer of the meeting, whether or not a quorum is present, shall have the power to adjourn the meeting from time to time. No new notice need be distributed to stockholders so long as the new date, time and place, if any, for the meeting are announced at the meeting before the adjournment is taken, and the date of the adjourned meeting is no more than thirty (30) days following the date fixed for the original meeting; otherwise, a new notice must distributed in accordance with Section 4 above. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified or, in the case of a special meeting for which a new notice was distributed, which is described in the notice.
Section 9. Voting of Shares. Except as provided in the Certificate of Incorporation or applicable law, and subject to the provisions of Article VIII of these Bylaws regarding the fixing of a record date, each outstanding share, regardless of class, is entitled to one (1) vote on each matter voted on at a meeting of stockholders.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy may be appointed to vote or otherwise act for the stockholder by any method authorized by applicable law. A proxy shall be valid as provided in Section 212 of the DGCL and any successor thereto.
Section 11. Conduct of Meeting. The Chairman of the Board, and in his or her absence, the presiding director (if any), and in his or her absence, the President, and in his or her absence, any director chosen by the directors present shall call a stockholders’ meeting to order and shall act as presiding officer of the meeting. The Secretary of the corporation shall act as secretary of all meetings of the stockholders, but, in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting. The presiding officer of the meeting shall have broad discretion in conducting the meeting and determining the order of business at a stockholders’ meeting. The presiding officer’s authority to conduct the meeting shall include, but in no way be limited to, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairperson of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time allotted to questions or comments by participants; and (f) restrictions on the use of audio and video recording devices. The presiding officer also shall take such actions as are necessary and appropriate to preserve order at the meeting. The rules of parliamentary procedure need not be observed in the conduct of stockholders’ meetings.
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Section 12. Conduct of Meetings by Remote Communication. The Board may adopt guidelines and procedures for stockholders and proxy holders not physically present at an annual or special meeting of stockholders to participate in the meeting, be deemed present in person, vote, communicate and read or hear the proceedings of the meeting substantially concurrently with such proceedings, all by means of remote communication. The Board may adopt procedures and guidelines for the conduct of an annual or special meeting solely by means of remote communication rather than holding the meeting at a designated place.
Article III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall be managed by its Board.
Section 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be not less than one (1) nor more the fifteen (15), the number of the same shall be fixed by the Board at any regular or special meeting. Each director shall hold office until the next annual meeting of stockholders and until his or her successor has been duly elected and qualified, unless sooner removed by the stockholders with or without cause at any general or special meeting or earlier death, resignation or disqualification. None of the directors need be residents of the State of Delaware.
Section 3. Annual Meeting. After each annual meeting of stockholders, the Board shall hold its annual meeting immediately following such annual meeting of stockholders for the purpose of the election of officers and the transaction of such other business as may come before the meeting. The place of such annual meeting shall be the same as the place of the meeting of stockholders which precedes it, or such other suitable place as may be announced at such meeting of stockholders, and may be held remotely as provided in Section 8 below. The place and time of such meeting may also be fixed by consent of the directors.
Section 4. Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall be determined from time to time by the Board.
Section 5. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, if there be one, or the President or any two (2) directors. The persons authorized to call special meetings of the Board may fix the place for holding any special meetings of the Board called by them.
Section 6. Notice. Notice of the date, time and place of any special meeting shall be given at least two (2) days prior thereto. Notice may be communicated by any means permissible under applicable law. Any director may waive notice of such meeting, either before, at, or after such meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, and a waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except where a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of any business because the meeting is not lawfully called or convened.
Section 7. Quorum and Adjournment. A majority of the directors shall constitute a quorum, but a smaller number may adjourn, as specified in Section 8(c) below.
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Section 8. Conduct of Meetings.
(a) Presiding Officer. The Chairman of the Board shall preside at meetings of the Board. If the Chairman is an employee of the corporation, the Board shall elect from among its members a presiding director, who shall preside at executive sessions of the Board at which employees of the corporation or any of its subsidiaries shall not be present. The Chairman, and in his or her absence, the presiding director, and in his or her absence, any director chosen by the directors present, shall call meetings of the Board to order and shall act as presiding officer of the meeting.
(b) Minutes. The presiding officer shall appoint a person present to act as secretary of the meeting. Minutes of any regular or special meeting of the Board shall be prepared and distributed to each director.
(c) Adjournments. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board to another time and place. Notice of any such adjourned meeting shall be given to the directors who are not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors.
(d) Participation by Conference Call or Similar Means. The Board may permit any or all directors to participate in a regular or a special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.
Section 9. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board, except as otherwise provided by applicable law.
Section 10. Vacancies. Any vacancy occurring in the Board, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board or by the sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office or, where a vacancy has been created by an increase in the number of directors, until the next election of directors by the stockholders. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date, or otherwise) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
Section 11. Compensation. The compensation of non-employee directors for their services as a director may be fixed by resolution of the Board, or by a duly authorized committee of the Board. Unless otherwise determined by the Board or such committee, directors shall be paid their expenses of attendance at each meeting of the Board or committee thereof. No payment received by a director for services as a director shall preclude a director from serving the corporation in any other capacity.
Section 12. Action by Unanimous Consent of the Board. Any action required or permitted to be taken by any provisions of law, of the Certificate of Incorporation or of these Bylaws at any meeting of the Board or of any committee thereof may be taken without a meeting if, prior to such action, all members of the Board or of such committee, as the case may be, consent thereto in writing or by electronic transmission. A consent may include an e-mail or facsimile transmission or other electronic transmission containing a description of the matter voted on, words that indicate the director’s asset to the action taken, and a “signature,” such as any symbol, manual, facsimile, conformed, or electronic signature adopted by a person with the intent to provide an authenticated assertion of approval that meets the requirements of Section 116 of the DGCL or any successor thereto.
Section 13. Removal. Any director may be removed, with or without cause, by the stockholders at any general or special meeting of the stockholders whenever, in the judgment of the stockholders, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person removed. This Bylaw shall not be subject to change by the Board.
Section 14. Emergency Bylaws. In the event of an emergency, as described in Section 110 of the DGCL, as a result of which a quorum of the Board or a standing committee of the Board cannot readily be assembled for action, a single director or the only directors in attendance at a meeting shall constitute a quorum. The procedure for calling such a meeting shall be those applicable for calling a special meeting of the Board; provided that, notice of such meeting may be given either by a single director or the Secretary of the corporation. Such director or directors in attendance at such meeting may further take action to designate additional or substitute directors on the Board and/or appoint one (1) or more of themselves or other directors to membership on any standing or temporary committee(s) of the Board as they shall deem necessary and appropriate. Such director or directors are also empowered to take any and all other actions permitted by Section 110 of the DGCL and each is expressly entitled to the protections of Section 110(d) of the DGCL. This Bylaw shall be effective only during an emergency as described in Section 110 of the DGCL and ceases to be effective after the emergency ends, as determined by the Board (as constituted during such emergency) in its business judgment.
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Article IV
OFFICERS
Section 1. Number and Qualification. The officers of the corporation shall include a Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial Officer, and a Secretary, each of whom shall be elected by the Board. The Board may also elect one (1) or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, one (1) or more Assistant Secretaries and Assistant Treasurers and such other officers as the Board shall deem appropriate. The Board shall designate from among the officers it elects those who shall be the executive officers of the corporation responsible for all policy making functions, under the direction of the Board. Two (2) or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the Board at its first meeting after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his or her successor shall have been duly elected and qualified, or until his or her death, or until he or she shall resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer may be removed at any time, with or without cause, by the Board. An officer’s removal does not affect the officer’s contract rights, if any, with the corporation.
Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board for the unexpired portion of the term.
Section 5. Duties of Officers. The Chairman of the Board of the corporation shall preside at all meetings of the Board (other than in executive sessions) and of the stockholders which he or she shall attend, as provided in Articles II and III above. The Chairman or the President shall be the chief executive officer of the corporation, as specified by the Board. The Secretary, or such other officer as the Board may from time to time designate, shall be responsible for preparing minutes of the directors’ and stockholders’ meetings and for authenticating records of the corporation. Subject to the foregoing, the officers of the corporation shall have such powers and duties as usually pertain to their respective offices and such additional powers and duties specifically conferred by law, by the Certificate of Incorporation, by these Bylaws, or as may be assigned to them from time to time by the Board or by any officer authorized by the Board to prescribe the duties of other officers.
Section 6. Executive Compensation. The salaries and other compensation of the officers shall be fixed from time to time by the Board, and no officer shall be prevented from receiving such salary or compensation by reason of the fact that he or she is also a director of the corporation.
Section 7. Delegation of Duties. In the absence of or disability of any officer of the corporation or for any other reason deemed sufficient by the Board, the Board may delegate its powers or duties to any other officer or to any other director for the time being.
Article V
EXECUTIVE AND OTHER COMMITTEES
Section 1. Creation of Committees. The Board may designate an Executive Committee and one (1) or more other committees, each to consist of one (1) or more of the directors of the corporation.
Section 2. Executive Committees. The Executive Committee, if there shall be one, shall consult with and advise the officers of the corporation in the management of its business and shall have and may exercise, to the extent provided in the resolution of the Board creating such Executive Committee, such powers of the Board as can be lawfully delegated by the Board.
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Section 3. Other Committees. Such other committees shall have such functions and may exercise the powers of the Board as can be lawfully delegated and to the extent provided in the resolution or resolutions creating such committee or committees.
Section 4. Meetings of Committees. Regular meetings of the Executive Committee and other committees may be held without notice at such time and at such place as shall from time to time be determined by the Executive Committee or such other committees. Special meetings of the Executive Committee or such other committees may be called by any member thereof upon two (2) days’ notice to each of the other members of such committee, or on such shorter notice as may be agreed to in writing by each of the other members of such committee. Notice may be communicated by any means permissible under applicable law, including oral notice where reasonable under the circumstances. Notice may be waived as provided in Section 6 of Article III of these Bylaws (pertaining to notice for directors’ meetings). Attendance at a meeting will constitute waiver of notice and of the right to any objections to the extent provided in Section 6 of Article III. In all other respects, committee meetings shall be conducted in the same manner and in accordance with the same procedural rules applicable to the Board; provided that, the Board may adopt a charter for any committee specifying rules for the conduct of meetings and business of the committee and such other matters as the Board may designate, in which case the provisions of such charter shall supersede the provisions of this Section 4.
Section 5. Vacancies on Committees. Vacancies on the Executive Committee or on such other committees may be filled by the Board then in office at any regular or special meeting.
Section 6. Quorum of Committees. At all meetings of the Executive Committee or such other committees, a majority of the committee’s members then in office shall constitute a quorum for the transaction of business.
Section 7. Manner of Acting of Committee. The acts of a majority of the members of the Executive Committee, or such other committees, present at any meeting at which there is a quorum, shall be the act of such committee.
Section 8. Minutes of Committees. The Executive Committee, if there shall be one, and such other committees shall keep regular minutes of their proceedings and report the same to the Board when required.
Section 9. Compensation. Members of the Executive Committee and such other committees may be paid compensation in accordance with the provisions of Section 11 of Article III (pertaining to compensation of directors).
Article VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. General.
(a) Subject to the principles set forth in Section 1(b) of this Article VI, the corporation shall be obligated to indemnify any director or officer of the corporation who is or was a party, or is threatened to be made a party, to any Proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise; provided that in no event shall the corporation be obligated to indemnify any director or officer for any liability resulting from, or advance expenses in connection with, any Proceeding involving liability under Section 16(b) of the Exchange Act. A “Proceeding” includes any threatened, pending or completed action, suit, or other type of proceeding, whether civil, criminal, administrative, investigative, or otherwise, and whether formal or informal.
(b) Any person for whom indemnification is mandated under Section 1(a) of this Article VI shall be indemnified against all liabilities, including obligations to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to any employee benefit plan), and expenses (including attorneys’ fees, paralegals’ fees, and court costs) actually and reasonably incurred in connection with any such Proceeding, including any appeal thereof; provided that, except as provided in Section 8 of this Article VI with respect to proceedings to enforce rights to indemnification or advancement of expenses, the corporation shall indemnify any such indemnitee in connection with a Proceeding (or part thereof) initiated by such indemnitee only if such Proceeding (or part thereof) was authorized by the Board of the corporation, except that no such authorization shall be required in the case of counterclaims which constitute claims of the indemnitee that would be forfeited unless asserted in the Proceeding. Indemnification shall be available only if the person to be indemnified acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any such action, suit or other proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner that such person reasonably believed to be in, or not opposed to, the best interests of the corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
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Section 2. Actions by or in the Right of the Corporation.
(a) Subject to the principles set forth in paragraphs (b) and (c) of this Section 2, the corporation shall be obligated to indemnify any director or officer of the corporation who is or was a party, or is threatened to be made a party, to any Proceeding brought by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise; provided that in no event shall the corporation be obligated to indemnify any director or officer for any liability resulting from, or advance expenses in connection with, any Proceeding involving liability under Section 16(b) of the Exchange Act.
(b) Any person for whom indemnification is mandated under Section 2(a) of this Article VI shall be indemnified against expenses (including attorneys’ fees, paralegals’ fees, and court costs) and amounts paid in settlement not exceeding, in the judgment of the Board, the estimated expense of litigating the Proceeding to conclusion, that are actually and reasonably incurred in connection with the defense or settlement of such Proceeding, including any appeal thereof; provided that, except as provided in Section 8 of this Article VI with respect to proceedings to enforce rights to indemnification or advancement of expenses, the corporation shall indemnify any such indemnitee in connection with a Proceeding (or part thereof) initiated by such indemnitee only if such Proceeding (or part thereof) was authorized by the Board of the corporation, except that no such authorization shall be required in the case of counterclaims which constitute claims of the indemnitee that would be forfeited unless asserted in the Proceeding. Indemnification shall be available only if the person to be indemnified acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the corporation.
(c) Notwithstanding the foregoing, no indemnification shall be made under this Section 2 in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable unless, and only to the extent that, the court in which such Proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses as such court shall deem proper.
Section 3. �� Advancement of Expenses. Expenses (including reasonable attorneys’ fees, paralegals’ fees and court costs) incurred by a director or officer in defending a Proceeding referred to in Section 1 or 2 of this Article VI shall be paid by the corporation in advance of the final disposition thereof upon receipt by the corporation of an undertaking by or on behalf of such director or officer to repay such amount if he or she is ultimately found not to be entitled to indemnification by the corporation pursuant to this Article VI.
Section 4. Authorization and Procedural Matters.
(a) Except as otherwise provided by order of a court of competent jurisdiction, the corporation shall not be obligated to indemnify any officer or director under Section 1 or 2 of this Article VI until a determination has been made that: (a) indemnification is proper in the circumstances because the indemnified person has met the applicable standard of conduct set forth in Section 1 or 2 of this Article VI; and (b) indemnification is not prohibited by applicable law.
(b) The Board may establish reasonable procedures for the submission of claims for indemnification and advancement of expenses pursuant to this Article VI, determination of the entitlement of any person thereto, and review of any such determination.
Section 5. Non-exclusivity and Limitations. The indemnification and advancement of expenses provided pursuant to this Article VI shall not be deemed exclusive of any other rights to which a person may be entitled under any law, the corporation’s Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in any other capacity while holding office with the corporation. The Board may, at any time, approve indemnification of or advancement of expenses to any other person that the corporation has the power by law to indemnify, including, without limitation, employees, and agents of the corporation.
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Section 6. Continuation of Indemnification Right.
(a) Indemnification and advancement of expenses as provided for in this Article VI shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, and administrators of such person.
(b) For purposes of this Article VI, the term “corporation” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director or officer of a constituent corporation, or is or was serving at the request of a constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, is in the same position under this Article VI with respect to the resulting or surviving corporation as such person would have been with respect to such constituent corporation if its separate existence had continued.
Section 7. Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the corporation would have the power to, or be obligated to, indemnify such person against the liability under Section 1 or 2 of this Article VI or under applicable law.
Section 8. Right of Indemnitee to Bring Suit. If a claim under this Article VI is not paid in full by the corporation within sixty (60) days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by the indemnitee to enforce a right to indemnification or advancement of expenses hereunder it shall be a defense that the indemnitee has not met any applicable standard set forth in this Article VI or that indemnification or advancement of expenses is impermissible under applicable law. In any suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met any applicable standard for indemnification set forth in this Article VI or that indemnification is impermissible under applicable law. Neither the failure of the corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in this Article VI, nor an actual determination by the corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI or otherwise shall be on the corporation.
Section 9. Nature of Rights. The rights to indemnification and to the advancement of expenses conferred upon indemnitees in this Article VI (i) shall be contract rights based upon good and valuable consideration, pursuant to which an indemnitee may bring suit as if the provisions of this Article VI were set forth in a separate written contract between the indemnitee and the corporation, (ii) are intended to be retroactive with respect to indemnitees who are currently serving as officers and directors on the date this Bylaw is first adopted, and with respect to such persons, these rights shall be available with respect to events occurring prior to the adoption of this Article VI, (iii) shall continue as to an indemnitee who has ceased to be a director or officer of the corporation, and shall inure to the benefit of the indemnitee’s heirs, executors and administrators, and (iv) shall be deemed to have fully vested at the time the indemnitee first assumed his or her office with the corporation. No amendment, alteration or repeal of this Article VI shall adversely affect any right of an indemnitee or his or her successors, nor shall any such amendment limit or eliminate any such right with respect to any Proceeding involving an occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, alteration or repeal, regardless of whether such Proceeding is brought before or after the indemnitee has ceased to be a director or officer of the corporation.
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Section 10. Severability. If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality, and enforceability of the remaining provisions of this Article VI shall not in any way be affected or impaired thereby; and (ii) to the fullest extent permitted by law, the provisions of this Article VI (including, without limitation, each such portion of this Article VI containing any such provisions held to be invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable.
Section 11. Settlement of Claims. The corporation shall not be liable to indemnify any indemnitee under this Article VI for any amounts paid in settlement of any proceeding (or part thereof) effected without the corporation’s written consent, which consent shall not be unreasonably withheld, or for any judicial award if the corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such proceeding.
Section 12. Expenses Incurred. To the extent that a director, officer, employee, or agent has been successful on the merits or otherwise in defense of any proceeding referred to in Section 145(a) or (b) of the DGCL, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses actually and reasonably incurred by him or her in connection therewith.
Section 13. Subrogation. In the event of payment under this Article VI, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee, who shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including without limitation the execution of such documents necessary to enable the corporation effectively to bring suit to enforce such rights.
Section 14. Secondary Obligation. The corporation’s indemnification of any person who was or is serving at its request with another corporation, partnership, joint venture, trust or other entity (including serving as a trustee or fiduciary of any employee benefit plan) shall be reduced by any amounts such person may collect as indemnification from such other party.
Section 15. No Duplication of Payments. The corporation shall not be liable under this Bylaw to make any payment with respect to the liability of a person to the extent such person has otherwise actually received payment.
Article VII
STOCK
Section 1. Certificates.
(a) Every holder of capital stock of the corporation represented by certificates shall be entitled to have a certificate signed by, or in the name of, the corporation by any two (2) authorized officers of the corporation representing the number of shares registered in certificate form. The Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation.
(b) If shares are represented by certificates, each certificate shall be in such form as the Board may from time to time prescribe. Any certificate must exhibit the holder’s name, certify the number of shares owned and state such other matters as may be required by law. The certificates shall be numbered and entered on the books of the corporation as they are issued.
(c) If shares are not represented by certificates, then, within a reasonable time after issue or transfer of shares without certificates, the registered owner thereof shall be given a notice, in writing or by electronic transmission, containing the information required to be set forth pursuant to this Section 1.
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(d) If any person who signed (either manually or in facsimile or via electronic signature) a share certificate no longer holds office when the certificate is issued, the certificate shall nevertheless be valid.
Section 2. Transfer of Shares. Transfers of shares of the corporation shall be made upon its books by the holder of the shares in person or by such holder’s lawfully constituted representative, upon surrender of the certificate of stock for cancellation if such shares are represented by a certificate, or by delivery to the corporation of such evidence of transfer as may be required by the corporation if such shares are not represented by certificates. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes and the corporation shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware.
Section 3. Lost Certificate. The Board may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming their certificate of stock to be lost or destroyed. When authorizing such issue of new certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or such owner’s legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. However, in its sole discretion, the Board may choose not to direct the creation of a new certificate, but instead direct that upon receipt of such affidavit, bond and other acts as it may require as set forth above, the shares represented by the lost or destroyed certificate shall thenceforth be deemed uncertificated shares. Within a reasonable time thereafter, the corporation will send the stockholder a written statement as required by applicable law and described in Section 1(c) of this Article VII.
Article VIII
RECORD DATE
Section 1. In General. The Board may fix in advance a date as the record date for the purpose of determining stockholders entitled to notice of a stockholders’ meeting, entitled to vote, or for any other purpose. In no event may a record date fixed by the Board be a date preceding the date upon which the resolution fixing the record date is adopted or a date more than sixty (60) days before the date of meeting or action requiring a determination of stockholders.
Section 2. Special Meeting. The record date for determining stockholders entitled to demand a special meeting shall be the close of business on the date the first stockholder delivers his or her demand to the corporation.
Section 3. Absence of Board Determination for Stockholders’ Meeting. If the Board does not determine the record date for determining stockholders entitled to notice of and to vote at an annual or special stockholders’ meeting, such record date shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
Section 4. Adjourned Meeting. A record date for determining stockholders entitled to notice of or to vote at a stockholders’ meeting is effective for any adjournment of the meeting unless the Board fixes a new record date.
Article IX
DIVIDENDS
The Board may from time to time declare, and the corporation may pay, dividends on its outstanding shares of capital stock in the manner and upon the terms and conditions provided by the Certificate of Incorporation and by law. Dividends may be paid in cash or property, including shares of stock or other securities of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law.
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Article X
FISCAL YEAR
The fiscal year of the corporation shall be the twelve (12) month period selected by the Board as the taxable year of the corporation for federal income tax purposes, unless the Board establishes a different fiscal year.
Article XI
SEAL
The corporate seal shall bear the name of the corporation, which shall be between two concentric circles, and in the inside of the inner circle shall be the calendar year of incorporation.
Article XII
STOCK IN OTHER CORPORATIONS
Unless otherwise directed by the Board, the Chief Executive Officer shall have power to vote and otherwise act on behalf of the corporation, in person or by proxy, at any meeting of stockholders of, or with respect to any action of stockholders of, any other corporation in which this corporation may hold securities and to otherwise exercise any and all rights and powers that the corporation may possess by reason of its ownership of securities in other corporations.
Article XIII
AMENDMENTS
These Bylaws may be altered, amended, or repealed and new Bylaws may be adopted by the Board or the stockholders; provided that the Board may not amend or repeal any Bylaw or Bylaws if the Certificate of Incorporation or applicable law reserves the power to amend these Bylaws generally or the particular Bylaw or Bylaws in question exclusively to the stockholders. Any Bylaw or amendment to a Bylaw adopted by the Board may be altered, amended, or repealed by vote of the stockholders entitled to vote thereon, or a new Bylaw in lieu thereof may be adopted by the stockholders.
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