(1) | Amount Previously Paid: |
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1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144____________________________
NOTICE OF ANNUALSPECIAL MEETING
AND
PROXY STATEMENT
March 31, 2020October [●], 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. (the “Special Meeting”) on May 20, 2020November 16, 2021 at 9:00 a.m., EDT. Due Eastern time. We have adopted a virtual only format for the Special Meeting, due to the continuing health and safety concerns fromrelated to the coronavirus (COVID-19) outbreakpandemic and the increasingly severe protocols that federal, state, and local governments have imposed, we have adopted a virtual format for our Annual Meeting this year. The Annual Meetingsuccessful use of Stockholders will be held this year as athe virtual only meeting,format at prior annual meetings. The Special Meeting will be accessible at the following website address: www.virtualshareholdermeeting.com/CRY2020[●]. We currently intend to resume holding in-person meetings for our 2021 annual meeting and thereafter, assuming normal circumstances.
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 duringat the AnnualSpecial Meeting.
It is important that your shares be represented during 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 Notice 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.meeting online. If you wish to participate in the meeting, you will need to have your 16-digit Control Number included on your Notice or your proxy cardcontrol number to join the meeting.
HoweverWhether or not you chooseplan to participate,attend the virtual Special Meeting, we encourage you to review this Proxy Statement and vote your shares.
Sincerely, | |
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J. PATRICK MACKIN | |
Chairman, President, and Chief Executive Officer |
J. PATRICK MACKINChairman, President, and Chief Executive Officer
CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144___________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL 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 on May 20, 2020,November 16, 2021 at 9:00 a.m., EDT. Due to health and safety concerns from Eastern time. Like the coronavirus (COVID-19) outbreak and increasingly severe protocols that federal, state, and local governments have imposed, we have adopted a virtual format for our Annual2021 annual meeting of stockholders, the Special Meeting this year. The Annual Meeting of Stockholders will be held as a virtual only meeting,meeting. The Special Meeting will be accessible at the following website address: www.virtualshareholdermeeting.com/CRY2020,[●], for the following purposes:
1. | To |
2. | To approve |
3. | To approve |
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Only record holders of CryoLife’s common stock at the close of business on March 11, 2020,September 21, 2021, will be eligible to attend and vote at the Special 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 Annualdate of the Special Meeting.
Your attendance during 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 Notice 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 20, 2020.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.proxyvote.com [●] 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: | |
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JEAN F. HOLLOWAY | |
Corporate Secretary | |
Date: October [●], 2021 |
JEAN F. HOLLOWAYCorporate Secretary
Date: March 31, 2020
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, 2019, containing financial statements, is available via the proxy information website provided on your proxy Notice or proxy card.
CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
TABLE OF CONTENTS
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CRYOLIFE, INC. | 2020 Proxy Statement
1655 ROBERTS BOULEVARD, NWKENNESAW, 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 11, 2020,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 20, 2020,November 16, 2021, at 9:00 a.m., EDT. Eastern time. The AnnualSpecial Meeting will be held virtually only at the following web address: www.virtualshareholdermeeting.com/CRY2020.[●]. 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 31, 2020.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 DURING THE ANNUAL MEETING3
TABLE OF CONTENTS |
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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 |
| Only holders of record of shares of our common stock at the close of business on |
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CRYOLIFE, INC. | 2020 Proxy Statement
How many shares must be present or represented to conduct business during the |
| The presence during the |
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. |
CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting
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What items of business will be voted on during the |
| The items of business to be voted on during the
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 during the |
| You may vote shares you owned as of |
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CRYOLIFE, INC. | 2020 Proxy Statement
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 |
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 returning to your broker, trustee, or other nominee your voting instruction card (if you are a beneficial owner). |
CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting
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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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CRYOLIFE, INC. | 2020 Proxy Statement
How can I vote my shares during the |
| 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 process you used to cast your original vote. Note, internet voting through |
CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting
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What do I need to attend the | Attendance during the Attending the virtual Special Meeting as a Stockholder of Record. You will need your Registering to attend the virtual Special Meeting as a Beneficial Owner. After obtaining a valid legal proxy from your broker, bank, or other agent, you may then register to attend the Special Meeting by submitting proof of your legal proxy as described above in, “How can I vote my shares during the virtual Special Meeting?” | |
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 during the Proposal One: Reincorporation Proposal. The affirmative vote of the |
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CRYOLIFE, INC. | 2020 Proxy Statement
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Proposal Two: Exclusive Forum Proposal.The | ||
Proposal Three: Adjournment of Special Meeting, if Necessary, to | ||
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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 | |
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CRYOLIFE, INC. | 2020 Proxy Statement
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 during the |
CRYOLIFE, INC. | 2021 Proxy Statement – Special Meeting
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General
7On September 20, 2021, for the reasons discussed below, the Board of Directors approved and declared it advisable and in the best interest of the Company and its stockholders to change the Company’s state of incorporation from the State of Florida 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 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. |
CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
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PROPOSAL ONE – ELECTION OF DIRECTORS
DirectorsPlan of CryoLife elected during the Annual Meeting to be held on May 20, 2020, will hold office until the next annual meeting, until their successors are duly qualified, or until their earlier death, resignation, or removal.Conversion
Director Nominees
Each ofTo accomplish 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 asReincorporation, the Board of Directors may recommend.has adopted the Plan of Conversion, in the 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.
The following table sets forth the name and ageAssuming that holders of each nominee, the period during which each such person has served as a directormajority of CryoLife, the number of shares of CryoLife’s common stock beneficially owned, either directly or indirectly, by such person, and the percentage ofour outstanding shares of CryoLife’s common stock such ownership represented at the close of business on March 11, 2020, according to information received by CryoLife. Nonevote in favor of the sharesReincorporation Proposal and the Board of stock noted below are subjectDirectors does not elect to a pledgedelay or similar arrangement. Except for J. Patrick Mackin, our President, Chief Executive Officer,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 Chairman(2) the Secretary of State of the Board, noneState 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 nominees holds any other position or office with CryoLife.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.
Name of Nominee | Director | Age | Shares of CryoLife | Percentage of |
Thomas F. Ackerman | 2003 | 65 | 108,150(2) | * |
Daniel J. Bevevino | 2003 | 60 | 108,150(2) | * |
Marna P. Borgstrom | 2018 | 66 | 7,619(2) | * |
James W. Bullock | 2016 | 63 | 17,067(2) | * |
Jeffrey H. Burbank | 2017 | 57 | 12,327(2) | * |
J. Patrick Mackin | 2014 | 53 | 541,431(3) | 1.4 |
Ronald D. McCall | 1984 | 83 | 143,865(4) | * |
Harvey Morgan | 2008 | 78 | 85,400(5) | * |
Jon W. Salveson | 2012 | 55 | 88,150(2) | * |
*Ownership represents less than 1% of the outstanding shares of CryoLife common stock.
(1) Except as otherwise noted, the nature of the beneficial ownership for all shares is sole voting and investment power. (2) Includes 4,163 shares of unvested restricted stock. (3) Includes 283,790 shares subject to options that are either presently exercisable or will become exercisable within 60 days after March 11, 2020. This amount also includes 82,112 shares of unvested restricted stock subject to forfeiture which Mr. Mackin holds as of March 11, 2020. This amount does not include 15,807 shares earned under 2018 and 2019 performance stock unit awards that had not vested as of March 11, 2020, and that will not vest within 60 days thereafter. (4) Includes 16,000 shares of common stock held by Ms. Marilyn B. McCall, Mr. McCall’s spouse, and 4,163 shares of unvested restricted stock. (5) Includes 40,617 shares held by Ms. Suzanne B. Morgan, Mr. Morgan’s spouse, and 4,163 shares of unvested restricted stock. (6) There were 37,679,978 outstanding shares of CryoLife common stock as of the proxy record date. | ||||
Director Nominee QualificationsIf the Reincorporation is approved by our stockholders and Biographical Informationthe 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.
Thomas F. AckermanReasons for Reincorporation has served as a director of CryoLife since December 2003. Until February 2017, Mr. Ackerman served as a consultant to Charles River Laboratories International, Inc. (NYSE: CRL) (“Charles River Laboratories”). Charles River Laboratories is a leading global provider of solutions that accelerate 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. Until early 2016, Mr. Ackerman served as a Senior Financial Advisor of Charles River Laboratories, a position he held since August 2015. From 2005 to 2015, he served as Executive Vice President and
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CRYOLIFE, INC. | 2020 Proxy Statement
Chief Financial Officer of Charles River Laboratories. From 1999 to 2005, he served as Senior Vice President and Chief Financial Officer of Charles River Laboratories. Mr. Ackerman served as Vice President and Chief Financial Officer of Charles River Laboratories from 1996 to 1999, where he was employed since 1988. Mr. Ackerman is a director of the University of Massachusetts Amherst Foundation and serves on the audit committee of Olin College of Engineering. Mr. Ackerman received a B.S. in Accounting from the University of Massachusetts and became a Certified Public Accountant in 1979. Mr. Ackerman’s license is currently inactive.
The Board of Directors has determinedapproved the Reincorporation because we believe that Mr. Ackerman should serve as a director of CryoLife because of his expertise in accounting and financial reporting, particularly in the biotechnology industry.
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 primarily 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 included 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 integrationcorporate laws of the combined companies. HeState 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 currently an independent consultant providing interim chief financial officer services inrecognized for adopting comprehensive, modern, and flexible corporate laws, which are amended periodically to respond to the life sciences industry,changing legal and he currently serves asbusiness needs of corporations. As a director of oneresult of the private companies for which he provides services. He began his careerflexibility and responsiveness of the Delaware corporate laws to the legal and business needs of corporations, many major corporations are incorporated in 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 familiar with corporate law matters, and a substantial body of court decisions has developed construing the laws 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 a Certified Public Accountant with Ernst & Young LLP. Mr. Bevevino’s license is currently inactive. Mr. Bevevino received a B.S.to the validity and consequences of those decisions and actions. For these and other reasons, we believe that reincorporating in Business Administration from Duquesne University and an MBA from the University of Notre Dame.Delaware will directly benefit our stockholders.
The Board of Directors has determined that Mr. Bevevino should serve asis not proposing the Reincorporation to prevent a directorchange in control of CryoLife becausethe Company, nor is it aware of his expertise in accounting and financial reporting, particularly inany present attempt by any person to acquire control of the medical device industry.Company or to obtain representation on the Board of Directors.
Marna P. Borgstrom Why You Should Vote for Reincorporationhas served as
Delaware is a director of CryoLife since June 2018. Since 2005, Ms. Borgstrom has been President, Chief Executive Officer, and a board member of the Yale New Haven Health System, an integrated health care delivery system that operates in Connecticut, western Rhode Island, and Westchester County, New York. Additionally, Ms. Borgstrom currently serves on several nationally recognized boardsleader 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 Vizient, Inc., a privately held, member-driven healthcare performance improvement company, the Coalition to Protect America’s Healthcare,Florida Business Corporation Act (the “FBCA”).
In addition, Delaware courts (such as the Court of Chancery and the Healthcare Institute. Ms. Borgstrom received her BachelorDelaware Supreme Court) are highly regarded for their considerable expertise in dealing with corporate legal issues and for producing a substantial body of Arts from Stanford University andaMasterscase law construing Delaware law, with multiple cases concerning areas that Florida courts may not have considered. Because the judicial system is based largely on legal precedents, the abundance of Delaware case law should serve to enhance the relative clarity and predictability of many areas of corporate law, which in Public Health from Yale University.
Theturn may offer added advantages to us by allowing the Board of Directors has determined that Ms. Borgstrom should serveand management to make corporate decisions and take corporate actions with greater assurance as a directorto the validity and consequences of CryoLife because of her extensive experience as a senior executive leading a large, complex organization in the healthcare sector.those decisions and actions.
James W. Bullock has served as a director of CryoLife since October 2016. Mr. Bullock previously served as the President and Chief Executive Officer of Zyga Technology, Inc. (“Zyga Technology”), a privately-held medical device company focused on products that treat conditions of the lumbar spine, until January 2018, when RTI Surgical, Inc. (NASDAQ: RTIX) acquired Zyga Technology. Prior 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 acquired by Boston Scientific (NYSE: BSX). Prior to that, he served for nine years as President and Chief Executive Officer and was a member of 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 serves as Chairman 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, and CardioNxt, Inc., a private health company. Mr. Bullock received a B.S. in Public Administration from the University of Arizona.
The Board of Directors has determined that Mr. Bullock should serve as a director of CryoLife because of his business acumen and substantial senior leadership experience in the global medical device industry.
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. (formerly NASDAQ: NXTM)
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(“NxStage Medical”), a leading medical technology company, positions he held since he founded NxStage Medical in 1998, until Fresenius Medical Care completed its acquisition
The Reincorporation also may make it easier to attract future candidates willing to serve on the Board of NxStage Medical in February 2019. 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 ChairmanDirectors, because many such candidates are already familiar with Delaware law, including provisions of the Board. Mr. Burbank has over 30 yearsDGCL relating to fiduciary duties and director indemnification.
In addition, underwriters and other members of senior leadership experiencethe financial services industry may be more willing and better able to assist in capital-raising programs for corporations having the medical device industry, developing, marketing,greater flexibility afforded by Delaware law. Certain investment funds and manufacturing productsinstitutional investors may be more comfortable and more willing to invest in a Delaware corporation than in 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.
Effects of Reincorporation
Other than being governed by the Delaware Certificate of Incorporation, the Delaware Bylaws, Delaware law, and certain other purposes, CryoLife-Delaware will be deemed to be the same entity as CryoLife-Florida immediately prior to the Reincorporation. 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 end-stage renal disease patients. During his career he has been an inventor on over 50 U.S. patentsnew stock certificates. Following the effective time of the Reincorporation, any stock certificates submitted to our transfer agent for medical devices. Mr. Burbank received a B.S. in Industrial Engineering from Lehigh University.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 has determined that Mr. Burbank should serve as a director of CryoLife because of his business acumen and substantial global senior leadership experience inprior to effecting the medical device industry.
J. Patrick Mackin was named President and Chief Executive Officer of CryoLife in September 2014. He was appointed toReincorporation if the CryoLife 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 plc (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 senior leadership experience in the global 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 Morgan What 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, from 2007 to 2015, when Family Dollar Stores, Inc. was acquired by Dollar Tree Inc. (NASDAQ: DLTR), and Cybex International, Inc. (NASDAQ: CYBI), a leading manufacturer of premium exercise equipment, from 2003 to 2013. 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 extensive business experience, including in the healthcare sector, particularly with respect to investment banking and capital markets.
Jon W. Salveson has 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 Sandler Companies (NYSE: PIPR) (“Piper Sandler”), formerly Piper Jaffray Companies, a U.S. investment bank and asset management firm. Mr. Salveson has served in his present position as Vice Chairman, Investment Banking since July 2010. Mr. Salveson was appointed Global Head of Investment Banking and a member of the Executive Committee of Piper Jaffray in 2004. 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 also serves on the Board of Directors of CHF Solutions, Inc. (NASDAQ: CHFS), an early-stage medical device company, and Asklepios
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| 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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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.
| 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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The Board of Directors has determined that Mr. Salveson should serve as a director of CryoLife because of his broad and deep experience in the healthcare industry and the medical technology sector, and, particularly, his extensive experience in strategic advisory roles for global healthcare companies in hundreds of transactions.16
| 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. | |||
Required Vote
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Nominees for election as17
| 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
This 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’ Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF“FOR” THE nineREINCORPORATION PROPOSAL. NOMINEES FOR DIRECTOR LISTED IN THIS PROPOSAL ONE.
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CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS
Our BoardGeneral
In the event the Reincorporation Proposal is approved, the Delaware Certificate of Directors believesIncorporation will include a provision (such provision, the “Exclusive Forum Provision”) providing that, unless the purposeCompany consents to the selection of corporate governance is to servean alternative forum, the interestsCourt of Chancery of the CompanyState of Delaware shall be the sole and exclusive forum for any derivative action or proceeding brought on the Company’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 the Company or to its stockholders, and any civil action to interpret, apply, or enforce any provision of the 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 a manner that is consistent with the Board of Director’s fiduciary duties and the Company’s mission and core values. The Board of Directors has adopted and adheres to corporate governance practicesevent that the BoardCourt of DirectorsChancery of the State of Delaware lacks jurisdiction over such action, the sole and senior management believe promote this purpose, are sound, and represent best practices. The Board of Directors reviews these practices on an ongoing basis and revises them as appropriate.
Director Independence
In connection with its annual review in February 2020, and based on the information available to it, the Board of Directors determined that none of Ms. Borgstromexclusive forum for such action would be another state or Messrs. Ackerman, Bevevino, Bullock, Burbank, McCall, Morgan, or Salveson, has or had a material relationship with CryoLife, and that each qualified as an independent director 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.
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.
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 2019, Yale New Haven Health paid CryoLife $341,000 for tissue preservation services, and BioGlue and On-X products, 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.
The Board of Directors’ Right to Retain AdvisorsUnited States.
The Board of Directors has authorized committeesbelieves that the Exclusive Forum Provision is an important piece of the Company’s governance structure to provide increased consistency in the 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.
If this Exclusive Forum Proposal and the Reincorporation Proposal are approved by the holders of a majority of shares of the Company’s common stock, then the Company will include the Exclusive Forum Provision in the Delaware Certificate of Incorporation. 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 be included in the Delaware Certificate of Incorporation.
Required Vote
This Exclusive Forum Proposal will be approved if a majority of the outstanding shares of our common stock, present or represented by proxy at the Special Meeting and entitled to vote thereon, votes in favor of the Exclusive Forum Proposal.
The Board of Directors’ Recommendation
The Board of Directors regularly 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 Structure
The 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:
● | 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; |
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● | 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 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 schedulesExclusive Forum Provision to insure there is sufficient time for discussion of all agenda items, approves certain information sent to the Board, and has the authority to call meetings of the independent directors. Stockholders, can seek to directly consult with independent directors.
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CRYOLIFE, INC. | 2020 Proxy Statement
The Board of Directors’ Role in Risk Oversight
The 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.
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, risk assessment and risk management, including cyber security oversight, 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 exercises oversight of our compliance with certain laws and regulations, such as the European Union General Data Protection Regulation (“GDPR”) and the United States Foreign Corrupt Practices Act, and such policies as our Code of Conduct.
Board of Directors and Committee Meetings, Annual Meeting of Stockholders and Attendance
During 2019, 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 nine meetings during 2019. All of the then-current members of the Board of Directors attended the 2019 Annual Meeting of Stockholders. The Company does not have a policy requiring directors to attend the annual meeting, but attendance is strongly encouraged.
Standing Committees of the Board of Directors; Committee Assignments
During 2019, the Board of Directors had four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee, and the Compliance Committee. In 2019, the Audit Committee met eleven times, the Compensation Committee meteight times, the Corporate Governance Committee metsix 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:
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CRYOLIFE, INC. | 2020 Proxy Statement
Audit 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 2019. 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. See Policies and Procedures for Review, Approval, or Ratification of Transactions with Related Parties beginning on page 16; see also the Report of the Audit Committee on page20.
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 2019. Each member of the Compensation Committee meets 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 the performance of officers, including the CEO, and setting the annual compensation for them. 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 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.
Pursuant 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 2019. 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, its committees, and individual directors. 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
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CRYOLIFE, INC. | 2020 Proxy Statement
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, Ms. Borgstrom, Mr. Bullock, and Mr. Morgan. Ms. Borgstrom and Messrs. Salveson, Bullock, and Morgan each served on the Compliance Committee for all of 2019. 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 policies with respect to GDPR and the United States Foreign Corrupt Practices Act.
Procedures for Stockholders Who Wish to Submit Recommendations to the Board of Directors
Stockholders 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, ethnicity, race, 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 backgrounds and 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 2020 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 at Communication with the Board of Directors and its Committees on page 17.
The 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 Conduct
CryoLife has established a Code of Conduct that clarifies the Company’s standards of conduct in potentially challenging 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.
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CRYOLIFE, INC. | 2020 Proxy Statement
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 Parties
The Board of Directors has adopted policies and procedures for review, approval, or ratification of transactions with related parties.
Types of Transactions Covered
It 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 Transactions
The 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.
When 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 Transactions
At 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 2019 ongoing related party transactions is located at DirectorIndependence beginning on page 12.
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CRYOLIFE, INC. | 2020 Proxy Statement
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serve, or served during fiscal 2019, as a member of the compensation committee ofoutweigh 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 2019, 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 Committees
Interested 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 Documents
You 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.
DIRECTOR COMPENSATION
Elements of Non-Employee Director Compensation
Annual Retainer and Committee Chair Fees
Absent exceptional circumstances, every other year, the Compensation and Corporate Governance Committees each consider whether to make adjustments to non-employee director compensation and recommend those adjustments, if any, to the Board of Directors.
Each 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.
2019 Board of Director Retainers | ||
Annual Board Service | $45,000 | |
Presiding Director(1) | $25,000 | |
Committee | Committee Chair | 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. | ||
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CRYOLIFE, INC. | 2020 Proxy Statement
Restricted Stock Grants
A 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 2019 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 2019, the Company granted 4,163 shares of restricted stock to each of the non-employee directors at the time of grant, which will vest on May 16, 2020. The size and terms of the grants are subject to periodic re-evaluation jointly by the Compensation and the Corporate Governance Committees. All equity grants to non-employee directors in 2019 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.
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CRYOLIFE, INC. | 2020 Proxy Statement
Fiscal 2019 Director Compensation
The following table provides compensation information for the one-year period ended December 31, 2019, for each person who was a member of our Board of Directors in 2019, other than J. Patrick Mackin:
Name | Fees Earned or Paid in Cash(1) | Stock | Total |
(a) | (b) | (c) | (d) |
Thomas F. Ackerman | 62,500 | 125,015 | 187,515 |
Daniel J. Bevevino | 70,000 | 125,015 | 195,015 |
Marna P. Borgstrom | 50,000 | 125,015 | 175,015 |
James W. Bullock | 55,000 | 125,015 | 180,015 |
Jeffrey H. Burbank | 50,000 | 125,015 | 175,015 |
Ronald D. McCall | 70,000 | 125,015 | 195,015 |
Harvey Morgan | 70,000 | 125,015 | 195,015 |
Jon W. Salveson | 60,000 | 125,015 | 185,015 |
(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 2019. (2) The amount shown represents the aggregate grant date fair value of the 4,163 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 16, 2019, and we valued them at $30.03 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, 2019, for assumptions we used in valuing restricted stock awards. The restricted stock represented here vests on May 16, 2020; accordingly, these shares remained subject to vesting restrictions as of December 31, 2019. | |||
J. Patrick Mackin, Chairman, President, and Chief Executive Officer received no compensation in 2019 for his services as a director of the Company. His compensation as an executive officer of the Company is detailed in the Summary Compensation Table on page41.
Director Stock Ownership Requirements
In 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 became a director in July 2018. The Compensation and Corporate Governance Committees generally evaluate stock ownership requirements for non-employee directors on a biennial basis.
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CRYOLIFE, INC. | 2020 Proxy Statement
REPORT OF THE AUDIT COMMITTEE
The 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 each audit committee member 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 and the Company’s cyber security preparedness 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 2019 and discussed them 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 2019, 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 2019, 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 2019 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 2020.
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 and management 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, 2019, 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 2020.
Audit Committee
HARVEY MORGAN, CHAIRTHOMAS F. ACKERMANDANIEL J. BEVEVINO
This 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 the Company’s under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent the Company specifically incorporates this report by reference.
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CRYOLIFE, INC. | 2020 Proxy Statement
PROPOSAL TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATION
CryoLife 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 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. 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’ Recommendationperceived harms.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THECOMPENSATION PAID TO CRYOLIFE’S NAMED EXECUTIVE OFFICERS.“FOR” the EXCLUSIVE FORUM PROPOSAL.
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CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
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COMPENSATION DISCUSSION AND ANALYSIS
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 named executive officers included in the Summary Compensation Table of this Proxy Statement (collectively, our “Named Executive Officers” or “NEOs”). For 2019, our NEOs were:
EXECUTIVE SUMMARY
The Compensation Committee, referred to hereinafter 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.General
2018 Say on Pay Vote and 2019 Program DecisionsIf 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.
At CryoLife’s Annual Meeting of Stockholders on May 23, 2018, over 86%Required Vote
This proposal will be approved if a majority of the stockholder votes cast wereat the Special Meeting votes in favor of our NEOs’ 2017 compensation. This advisory vote indicated strong stockholder supportthe 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 executive compensation program, which was usedadjournment of the Special Meeting, if necessary, to determine NEO compensation.solicit additional proxies if there are not sufficient votes in favor of the Reincorporation Proposal or the Exclusive Forum Proposal.
The Committee considered these 2018 advisory vote results as it evaluated its compensation policies and made compensation decisions subsequentBoard of Directors’ Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” the proposal to adjourn the 2018 Annual Meeting. Based
Special Meeting, if necessary, to solicit additional proxies if there are not sufficient
votes 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 to make only very modest adjustments to the existing annual executive compensation programs for 2019. The Committee added a new 5-year performance-based equity award, as discussed in more detail below. The following is a summaryfavor of the Committee’s significant decisions regarding NEO compensation for 2019:Reincorporation Proposal OR the Exclusive Forum Proposal.
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CRYOLIFE, INC. | 20202021 Proxy Statement
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Pay-for-Performance Alignment – Special Meeting
The Committee believes it has developed a compensation program that ensures that the interests of the Company’s executives, including its NEOs, are aligned with those of its stockholders by strongly linking executive compensation with Company and personal performance at levels such that executives are incented to drive long-term value creation. The key pay-for-performance aspects of the executive compensation program are described below:
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As described in this Proxy Statement, in 2019 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 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 2019, as presented in our 2019 Form 10-K filed on February 19, 2020.
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CRYOLIFE, INC. | 2020 Proxy Statement
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ROLES AND RESPONSIBILITIES
Compensation Committee
The Committee determines and approves the compensation of CryoLife’s executive officers, including the NEOs. The Committee is supported by the CEO, other 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 2019, the Committee made compensation decisions based on its own considerations and analyses, the compensation philosophy of the Committee, as well as on recommendations from management and the Committee’s independent compensation consultant. Our CEO does not exercise any decision-making authority over his own compensation or participate in Compensation or Corporate Governance Committee or Board meetings regarding his own compensation, except to discuss his own performance and 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 2019 and regarding 2019 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. The independent compensation consultant provides no other services to CryoLife. The independent compensation consultant generally performs an annual review of officer and biennial review of non-employee director compensation, analyzes the relationship between officer pay, including that of our CEO, and Company performance, compares officer and non-employee director compensation against such compensation of 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 2019, and again in February 2020, the Committee assessed the independence of Willis Towers Watson pursuant to applicable SEC and NYSE rules and concluded that Willis Towers 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, 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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CRYOLIFE, INC. | 2020 Proxy Statement
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CRYOLIFE, INC. | 2020 Proxy Statement
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. The Committee believes that this results in a pay program that aligns pay and performance. The following chart summarizes the target pay mix for the NEOs for fiscal 2019:
Compensation Component | Mackin | Lee | Holloway | Davis | Simpson |
Salary($) | 686,000 | 433,543 | 360,124 | 347,583 | 335,000 |
Short-Term Incentive (Target)($) | 686,000 | 260,126 | 180,062 | 173,792 | 167,500 |
Long-Term Incentive - Annual Equity (Grant Date Fair Value at target)($)(1) | 2,128,007 | 524,988 | 440,023 | 440,023 | 399,978 |
Long-Term Incentive – 5-Year LTIP (Grant Date Fair Value at target)($)(2) | 2,999,997 | 500,000 | 400,000 | 400,000 | 400,000 |
Target Total Direct Compensation($) | 6,500,004 | 1,718,657 | 1,380,209 | 1,361,398 | 1,302,478 |
% Fixed(3) % Variable(4) | 10.6 89.4 | 25.2 74.8 | 26.1 73.9 | 25.5 74.5 | 25.7 74.3 |
% Short-Term Compensation(5) % Long-Term Compensation(6) | 21.1 78.9 | 40.4 59.6 | 39.1 60.9 | 38.3 61.7 | 38.6 61.4 |
(1) Long-Term Incentive - Annual Equity (Grant Date Fair Value at target) is based on a grant date closing share price of $29.62 for both restricted stock and performance stock units. (2) Long-Term Incentive - 5-Year LTIP (Grant Date Fair Value at target) is based on a grant date closing share price of $29.70 for performance stock units. The compensation amount shown associated with the 5-Year LTIP is eligible to be earned and vested over three performance periods across 5 years, from 2019 to 2023. (3) Salary as a percentage of Target Total Direct Compensation. (4) Short-Term Incentive plus Long-Term Incentive (Annual Equity and 5-Year LTIP) as a percentage of Target Total Direct Compensation. (5) Salary plus Short-Term Incentive as a percentage of Target Total Direct Compensation. (6) Long-Term Incentive (Annual Equity and 5-Year LTIP) as a percentage of Target Total Direct Compensation. | |||||
MARKET ANALYSIS
As part of its decision-making process, the Committee requests and reviews relevant 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 to 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 executive compensation study prepared by Willis Towers Watson, 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 2019 officer compensation was prepared in October 2018 and presented to the Committee in the fourth quarter of 2018. We refer to this study as the “2018 Study.” The Committee reconsidered the 2018 Study for continued applicability at the January 2019 meeting. As in prior years, the 2018 Study assessed both the competitiveness of pay levels and the alignment of pay with Company performance.
The Company’s 2019 compensation peer group, which is described in more detail below, had median revenues, based on the latest figures available at the time the 2018 Study was prepared, of $278.7 million and median market capitalization as of June 2018, of $1,070.7 million. In addition to using officer pay information as disclosed by companies in the compensation peer group, the 2018 Study used survey data drawn from three compensation surveys of U.S. companies, including biotech and healthcare companies, with targeted revenues of $151.5-$501.0 million (with a median of $278.7 million), in order to approximate the Company’s estimated revenue for 2019. With respect to all NEOs included in the 2018 Study, the data in the study was an even blend of the 2019 peer group and the survey information. In each case, Willis Towers Watson trended the compensation data forward to January 1, 2019 by a factor of 3.0%. We refer to the blended 2019 peer group and survey compensation data for all NEOs as the “2019 Peer Group Information.”
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CRYOLIFE, INC. | 2020 Proxy Statement
The following peer companies were used for the 2018 Study:
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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.
The following survey sources were used in the 2018 Study:
● Willis Towers Watson US General Industry Executive Compensation Survey;
● Mercer General Industry Executive Compensation Survey; and,
● Radford Global Life Sciences Survey.
The peer companies were recommended by Willis Towers Watson 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, or projected revenues. Nonetheless, the Committee reviews and considers changes to the peer group and survey sources in connection with each year’s study. It does so to ensure that the peer group and survey sources continue to reflect appropriate reference points for CryoLife.
2019 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.
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CRYOLIFE, INC. | 2020 Proxy Statement
2019 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 2018 and early 2019, the Committee determined it was appropriate to increase NEOs’ base salaries, for those who were considered for an increase, from 3.5% to 4.0% above 2018 levels.
Comparison of 2018 and 2019 Base Salaries | |||
Executive | 2018 | 2019 | Increase |
Mackin | 660,000 | 686,000 | 3.9 |
Lee | 418,882 | 433,543 | 3.5 |
Holloway | 346,273 | 360,124 | 4.0 |
Davis | 334,214 | 347,583 | 4.0 |
Simpson(1) | 335,000 | 335,000 | 0.0 |
(1) For 2018, the annualized salary for Mr. Simpson is provided. He began employment at CryoLife in December 2018 and did not receive a base salary increase for 2019 due to his short tenure. | |||
Analysis
The 2018 Study showed that the base salaries for our NEOs, other than for Mr. Simpson, were within a competitive range of 97-109% of the median for similarly situated employees at companies in the Company’s peer group. Because Mr. Simpson was hired after the 2018 Study was completed, he is not included in that study. Rather, his base salary was set by use of a similar methodology, which indicated that his base pay was within 3% of the median of similarly situated employees at companies in the Company’s peer group. Based on input from management and in consultation with Willis Towers Watson, the Committee approved merit increases for 2019 for all officers, ranging from 3.0% to 4.1%, with the exception of officers whose employment responsibilities or job title had changed between 2018 and 2019 and Mr. Simpson, who started after October 1, 2018. NEO 2019 salary increases ranged from 3.5% to 4.0%, except for Mr. Simpson. In approving salary increases for NEOs, the Committee considered current market positioning, both individual and Company performance during 2018, and the Company’s budget for salary increases generally for all employees.
2019 Short-Term Incentives – the 2019 Cash Bonus Plan
The Committee approved the 2019 short-term incentive program (the “2019 Cash Bonus Plan”) in February 2019. The 2019 Cash Bonus Plan provides for the same performance metrics (adjusted for projected changes in 2019 levels of revenue and adjusted net income) and substantially the same design as the 2018 program, with unchanged target short-term incentive opportunities (as a percentage of base pay) from the 2018 program for the NEOs. The target short-term incentive opportunity for the CEO, the Executive Vice President/COO/CFO, and the Senior Vice Presidents remained at 100%, 60%, and 50% respectively of base salary. The Committee set these opportunities to be market competitive.
Analysis – Program Design
The chart below shows the performance metrics set for the 2019 Cash Bonus Plan:
2019 Performance Goals | ||||
Performance | Weight | Threshold | Target | Benchmark |
Revenue | 50 | 269,800,000 | 284,000,000 | 303,880,000 |
Adjusted Net Income | 50 | 49,636,000 | 58,395,000 | 70,074,000 |
The final payout can be increased or decreased, up to 20%, based on an individual executive’s performance. The final payout cannot exceed 200% of target payout. | ||||
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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CRYOLIFE, INC. | 2020 Proxy Statement
The Committee believed that the performance metrics of revenue and adjusted net income used in the 2018 short-term incentive program would continue to motivate executives to achieve significant growth in 2019 revenues and adjusted net income, as well as provide appropriate retention incentives.As a result, the Committee approved the same revenue and adjusted net income metrics (as adjusted for 2019 projections) that it used in the 2018 Cash Bonus Plan.
The Committee believed that 2019 threshold and target performance levels for revenue and adjusted net income were challenging. The 2019 revenue target performance level was within the range of 2019 product and service revenue guidance publicly announced by CryoLife.
For the 2019 Cash Bonus Plan, the performance metrics were updated and weights were changed from 2018, with a 100% payout for performance at target levels, a 200% total cap on payout, and the following additional primary features:
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The performance metrics required for payout are challenging in order to focus executives on achieving business performance goals that are aligned with business plans and communicated guidance and that further stockholder value creation.
In arriving at its decision to approve the 2019 Cash Bonus Plan design, metrics, and goals, the Committee took into consideration the following:
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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 retain for 2019 two of the three metrics of the 2018 short-term incentive program, as discussed above, as it believed that these two performance metrics, revenue and adjusted net income, would continue to motivate executives to achieve financial measures core to shareholder value creation. The Committee increased the weights applicable to each of these metrics from 40% to 50%. The Committee also believed that changing the personal performance metric to a modifier of the overall bonus would better reflect the Committee’s intent to align pay with performance.
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CRYOLIFE, INC. | 2020 Proxy Statement
With respect to adjusted net income, the Committee made no adjustments to exclude items over which it believed that executives had insufficient control or could distort the underlying operating performance of the Company. The Committee did adjust revenue achievement for constant currency, over which management has no control, by translating foreign currency at the budgeted FX rate, a change the Committee intends to carry forward absent unforeseen, changed, or exceptional circumstances.
The Committee discussed management’s recommended 2019 performance targets and payout opportunities with its independent compensation consultant and with management and determined that the recommended modifications to the 2018 program design, with updated targets to reflect 2019 goals, and the possibility for increased payout opportunities for executives, was consistent with the Committee’s 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 the 2019 Cash Bonus Plan was appropriately incentivizing given the executives’ roles and authority with CryoLife, and that the size of the incentives were appropriate based on the 2019 Peer Group Information and internal pay equity considerations.
Analysis – Plan Payout
The 2019 Cash Bonus Plan payouts in early 2020 were based on actual financial performance results of CryoLife relative to the pre-determined goals. Based on reviews conducted by the CEO of individual performance relative to individual goals, Mr. Mackin increased certain individual NEO’s payouts by an individual performance modifier. The final 2019 Cash Bonus Plan payouts for each NEO (other than the CEO) were approved by the Compensation Committee after certification of 2019 performance metrics.
Mr. Mackin’s 2019 Cash Bonus Plan payout in early 2020 was also based on actual financial performance results of CryoLife relative to the pre-determined goals. The Board of Directors reviewed Mr. Mackin’s individual performance relative to his individual goals for 2019, and, the Compensation Committee having certified the 2019 performance metrics, the Board, upon the recommendation of the Compensation Committee, approved his bonus payout at the amount below.
The following tables show the performance results for 2019 and the actual amount of short-term incentive paid to each NEO:
2019 Annual Incentive Program (Cash Bonus Plan) | |||||
Performance Measure | Weight | Actual | Target | Performance | Payout |
Revenue | 50 | 279,537,000(1) | 284,000,000 | 98.4 | 87.4 |
Adjusted Net Income | 50 | 55,466,000 | 58,395,000 | 95.0 | 86.6 |
The final payout can be increased or decreased, up to 20%, based on an individual executive’s performance. The final payout cannot exceed 200% of target payout. | |||||
(1) To account for fluctuations in foreign currency, over which management has no control, the revenue performance metric was adjusted from the Company’s revenue performance reflected in the 10-K to adjust for constant currency by translating foreign currency at the budgeted FX rate. | |||||
2019 Annual Incentive Program (Cash Bonus Plan) | |||
Executive | Actual | Target | Payout |
Mackin | 596,985 | 686,000 | 87.0 |
Lee | 249,009 | 260,126 | 95.7 |
Holloway | 172,367 | 180,062 | 95.7 |
Davis | 151,240 | 173,792 | 87.0 |
Simpson | 145,765 | 167,500 | 87.0 |
(1) Actual payout reflects all adjustments made for each executive’s personal performance. Mr. Lee and Ms. Holloway’s cash bonuses were each increased by 10% based on their individual personal performance for 2019. No adjustments were made for Messrs. Mackin, Davis, or Simpson. | |||
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CRYOLIFE, INC. | 2020 Proxy Statement
These tables demonstrate how the 2019 Cash Bonus Program design effectively aligned performance and compensation, as the Company’s below-target performance with respect to revenue and adjusted net income yielded a below-target payout at 87.4% and 86.6% respectively for the portion of the bonus payout attributable to each metric, and an overall cash bonus payout at 87% of target, adjusted for performance in the cases of Mr. Lee and Ms. Holloway.
2019 Long-Term Incentives – Annual Equity
Based on input from management and in consultation with Willis Towers Watson, the Committee considered the Annual Long-Term Incentive Program and determined to continue in the design of the 2019 program the 2018 program’s mix of equity awards as an equal one-third allocation of total value among stock options, restricted stock, and performance stock units. This mix may be altered for executives located outside of the United States to accommodate local tax issues.
The Committee determined that the estimated grant date fair value of the awards under the Annual Long-Term Incentive Program in 2019 would be established at higher levels to remain market competitive, as reflected in the 2018 Study, based on the anticipated (and later realized) growth of the Company, as well as the continued increase in the complexity of the Company’s business following the acquisition of JOTEC AG and the Company’s growth in international markets.
To determine the number of options, shares of restricted stock, and target performance stock units to be granted, 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 grant date, and to also determine the number of stock options using the estimated fair value of the options as of the same date. Grants generally were made on the first permissible trading day following the Committee’s approval of such awards. In this instance, grant values approved by the Committee were converted to shares using a stock price of $29.62, the closing price on March 5, 2019, the date the grants were made.
See Appendix A for further details regarding the adjusted EBITDA measure and the reconciliation of that measure to CryoLife’s 2019 net income as reported under U.S. GAAP. For 2019, the performance stock units are subject to a single performance measure, adjusted EBITDA, as further described under Analysis, below.
The following table provides the 2019 equity awarded through the Annual Long-Term Incentive Program, to the NEOs, as approved by the Committee:
2019 Annual Equity Grant Level | |||
Executive | Perf. Stock | Stock | Restricted |
Mackin | 23,948 | 61,842 | 23,948 |
Lee | 5,908 | 15,257 | 5,908 |
Holloway | 4,952 | 12,787 | 4,952 |
Davis | 4,952 | 12,787 | 4,952 |
Simpson | 4,501 | 11,625 | 4,501 |
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Analysis – Program Design
In approving the 2019 long term incentive grant values awarded through the Annual Long-Term Incentive Plan, the Committee considered the following factors:
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CRYOLIFE, INC. | 2020 Proxy Statement
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The Committee determined vesting schedules in consultation with Willis Towers Watson and management and believed that such vesting provided the appropriate long-term incentive and retention for executives’ continued employment. All annual long-term incentive (time-based) awards vest over a three-year period. For performance share units (“PSU”s), while the Committee considered other metrics, it determined that the single adjusted EBITDA metric is a reasonable and sufficient proxy for CryoLife’s overall performance that allows for adjustments to eliminate items that might provide improper incentives or items over which executives have little or no control. The Committee also believed that the adjusted EBITDA threshold and target performance levels were challenging. The 2019 adjusted EBITDA calculation methodology was consistent with the methodology used in 2018. 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 – Plan Payout – PSUs Earned
In arriving at its decision in February 2020 to certify the Company’s adjusted EBITDA performance with respect to the 2019 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 threshold, target, and maximum adjusted EBITDA performance levels associated with threshold, target, and maximum award opportunities, which fall on the sliding scale for the 2019 PSU annual award grants. The table also provides the actual performance level for 2019, as certified by the Committee, together with the associated level of shares that were earned.
2019 Performance Stock Units – Annual AwardActual vs. Threshold/Target/Maximum Performance
Performance | Threshold | Target | Maximum | Actual | Performance | Payout |
Adjusted EBITDA | $ 57,258,000 | $ 67,362,000 | $ 77,466,000 | 62,933,000 | 93.4 | 82.5 |
The annual performance stock units are earned based on a sliding scale, which list several points of payout against performance as shown in the chart below.
EBITDA | ||
Performance | Payout | |
<85.0 | 0 | |
85.0 | 60.0 | |
88.0 | 68.0 | |
91.0 | 76.0 | |
94.0 | 84.0 | |
97.0 | 92.0 | |
100.0 | 100.0 | |
103.0 | 110.0 | |
106.0 | 120.0 | |
109.0 | 130.0 | |
112.0 | 140.0 | |
115.0 | 150.0 | |
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CRYOLIFE, INC. | 2020 Proxy Statement
Pursuant to the terms of the annual performance stock award grants made in 2019, the total number of performance stock units that were eligible to be earned were determined based on the results under the single performance metric during the 2019 year. Thereafter, the awards will vest based on the executive’s continued service: 50% of the shares earned vested on March 5, 2020 (following certification of the performance metrics); 25% of the shares earned will vest on March 5, 2021; and the remaining 25% of the shares earned will vest on March 5, 2022, assuming the executive continues to be employed by the Company on those dates and the Committee takes 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.
Annual Target Total Direct Compensation
The Committee believed that the blend of annual salary, cash bonus, stock options, restricted stock, and PSUs appropriately achieved the performance, stockholder alignment, and retention objectives of CryoLife’s compensation program. The Committee believes that the use of multiple award types is a common practice among industry peers and that the use of PSUs creates an even stronger alignment between pay and performance. The Committee believes that, in addition to incenting long-term performance, annual equity awards encourage continuous performance and retention by reflecting metric success (and changes in the stock price) year over year.
The Committee used a value-based approach, rather than number of shares, to determine the size of 2019 annual 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 2019 equity awards that it believes provided the appropriate annual long-term incentive to retain executives.
In determining the individual components of the executives’ 2019 annual compensation (i.e., salary, target short-term incentive, and annual long-term incentive), the Committee evaluated the resulting target annual total direct compensation against market benchmarks, as set forth below, taking into account the Committee’s desire to have target annual total direct compensation generally within a competitive range of the Company’s peer group median. The following table summarizes the NEOs’ 2019 target annual total direct compensation, the peer group median, and the primary rationale for each NEO’s compensation at the level shown:
Executive | 2019 Target Total Direct Compensation Opportunity(1) ($) | Peer Median(2) ($) | Primary Rationale(3) |
Mackin | 3,500,007 | 3,330,000 | Within a competitive range of the 50th percentile |
Lee | 1,218,657 | 1,215,000 | Within a competitive range of the 50th percentile |
Holloway | 980,209 | 900,000 | Within a competitive range of the 50th percentile |
Davis | 961,398 | 905,000 | Within a competitive range of the 50th percentile |
Simpson | 902,478 | 840,000 | Within a competitive range of the 50th percentile |
(1) Equity grant value based on a grant date closing stock price of $29.62 for restricted stock and performance stock units (Annual), and a grant date Black-Scholes Option Value of $11.47. Performance stock units are included at target award levels/values. (2) Based on data provided by Willis Towers Watson in the 2018 Study and the November 2018 analysis performed for Mr. Simpson’s role. (3) Competitive range for CEO, CFO, and SVPs total direct compensation is within 80-120% of the peer group 50th percentile; the NEO’s actual compensation fell within 10% of the peer group 50th percentile. Willis Towers Watson provided guidance for compensation for Mr. Mackin, Mr. Lee, Ms. Holloway, and Mr. Davis in the 2018 Study. Guidance for compensation for Mr. Simpson was provided in November 2018 in anticipation of his employment offer. | |||
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CRYOLIFE, INC. | 2020 Proxy Statement
2019 Long-term Incentives – 5-Year LTIP
As discussed in the Company’s Form DEF 14A (Definitive Proxy Statement) filed in advance of the 2019 Annual Meeting of Stockholders (the “2019 Proxy Statement”), on February 28, 2019, the Committee approved an additional equity grant outside of the regular annual compensation program for NEOs. This special long-term incentive, performance-based equity grant has three performance periods that in total span five years for executives and certain other members of senior management (the “5-Year LTIP”). The 5-Year LTIP was approved as an additional equity vehicle to supplement already existing annual compensation programs, including but not limited to, the 2019 annual equity grants discussed above under Long-term Incentives at page 31.
In deciding to make the 5-Year LTIP award, the Committee considered that the award was not intended to be annual and that the Committee would not likely make any similar such awards in the foreseeable future absent significantly changed circumstances or compelling reasons to do so. Instead, the 5-Year LTIP was designed by the Compensation Committee, with input from management and Willis Towers Watson, to reward long-term exceptional performance with additional equity compensation that would, if annualized over three years, at target move the CEO’s total compensation to a competitive range of the peer group’s 75th percentile. The actual plan design calls for award amounts to be earned and vested over a five-year, rather than a three-year, period.
Based on input from management and other sources, and in consultation with Willis Towers Watson, the Committee designed the 5-Year LTIP award to award PSUs only, rather than a mix of equity vehicles, and to have three performance periods, which span a total of five years. Performance for each period is measured against Adjusted Annual Revenue Growth rate targets measured on a constant currency basis, with a threshold performance level for each performance period under which no PSUs will be earned. The payout for each performance period is subject to negative or positive adjustment by a modifier that is correlated with the Company’s gross margin achievement at the end of the performance period. The form of grant agreement for the 5-Year LTIP was disclosed as Appendix B to the Company’s 2019 Proxy Statement.
The Committee established the Adjusted Annual Revenue Growth rate performance required for payouts under the 5-Year LTIP after a review of historical and projected future revenue growth rates of comparable industry peers. The Committee also determined that Adjusted Annual Revenue Growth would only include organic revenue growth. While the Committee also considered the Company’s strategic plan, it did not base the 5-Year LTIP performance goals on management long term revenue forecasts or projections. Instead, the Committee established the Adjusted Annual Revenue Growth rate necessary to earn the target shares at a level above the 50th percentile of industry growth rates and at a level above the Company’s average historical organic revenue growth rate. The objective of this design is to incent exceptional performance and to insure shares will be earned only if Company performance exceeds the 50th percentile of industry performance and exceeds the Company’s historical performance.
The Committee selected Adjusted Annual Revenue Growth, limited to organic growth and measured on a constant currency basis, as the primary performance measure due to its belief that this measure strongly correlates with long term shareholder value creation and total shareholder return. The Committee also added a gross margin modifier to incent management to drive profitable Adjusted Annual Revenue Growth and align with the Company’s strategic plan.
The Committee designed the 5-year LTIP to use Adjusted Annual Revenue Growth rate as the sole performance metric for threshold PSU payout performance. Payouts will be determined on a sliding scale, from 10% of target at threshold Adjusted Annual Revenue Growth rate to 250% at maximum performance (for Mr. Mackin, the maximum is 166.66% of target). This threshold payout, 10% of target, is significantly lower percentage to target than the threshold payout for annual PSU awards, demonstrating the Committee’s desire to use the 5-Year LTIP to reward only exceptional performance.
In designing the 5-Year LTIP, the Committee determined that, to calculate the final number of PSUs to be paid out, the actual PSU payout determined on the basis of the Adjusted Annual Revenue Growth rate should be multiplied by 85%, 100%, or 115% based on specified levels of Gross Margin achieved at the end of the designated performance period. Thus, the 5-Year LTIP awards represent the right to receive PSUs in an amount up to 287.5% (191.66% in the case of Mr. Mackin) of the target PSUs at both Adjusted Annual Revenue Growth and gross margin maximum performance.
Due to the confidential and strategic nature of the 5-Year LTIP performance goals, the Company is not disclosing them at this time but currently anticipates doing so at the end of the first performance period. However, the Committee believes that the performance goals are rigorous and require the Company to achieve strong results in order for any of the 5-Year LTIP shares to be earned and that outstanding results are required in order for the number of shares actually earned by participating members of management to equal or exceed the target award. The Company’s Adjusted Annual Revenue Growth rate performance has only met the threshold level for payout under the 5-Year LTIP once in the
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CRYOLIFE, INC. | 2020 Proxy Statement
past 5 years, in a year where it also met the target level for payout. Further, the Company’s 2019 Adjusted Annual Revenue Growth rate performance, if repeated in 2020 and 2021, and no adjustments are made by the Committee upon certification of performance metrics, would result in no payout under the first performance period of the 5-Year LTIP.
The Committee established these challenging performance goals intending that there be a greater likelihood – as compared to the Company’s annual PSU awards – that none of the shares will be earned. If the Company does, in fact, achieve performance levels such that target 5-Year LTIP shares are earned, the Committee believes shareholders will benefit significantly such that the additional compensation earned by participating management will be justified.
The Committee determined that the estimated grant date fair value for each recipient’s 5-Year LTIP award, at target, should reflect approximately 90-100% of each recipient’s 2019 target annual equity grant (other than Mr. Mackin), with a minimum target award value of $50,000. Mr. Mackin’s 5-Year LTIP award was established at a level reflecting the approximate total value of 141% of his 2019 target annual equity grant, reflecting the Committee’s belief that this enhanced award compared to his target annual equity grant would further incent Mr. Mackin to drive superior performance of the organization.
To determine the number of target PSUs for the 5-Year LTIP that would deliver such grant date fair value, the Committee directed management to determine the number of PSUs using the closing share price of the Company’s stock on the first available trading date immediately following the award date, and to make the grants on that date. Under this method, the grant values approved by the Committee replicate as much as practicable the grant date fair value of the equity granted. The Committee approved the 5-Year LTIP grants on February 28, 2019, and the grants were made on March 1, 2019, the first available trading day following Committee approval. Award values approved by the Committee were converted to PSUs using a stock price of $29.70, the closing price on March 1, 2019, the date of grant.
The target number of PSUs awarded under the 5-Year LTIP to each are as follows:
2019 5-Year LTIPTarget PSUs by NEO Recipient
Target Number of PSUs | ||||
NEO | Performance Period 1 | Performance Period 2 | Performance Period 3 | |
| January 1, 2019 | January 1, 2022 | January 1, 2023 | Total |
Mackin | 60,606 | 20,202 | 20,202 | 101,010 |
Lee | 10,101 | 3,367 | 3,367 | 16,835 |
Holloway | 8,080 | 2,694 | 2,694 | 13,468 |
Davis | 8,080 | 2,694 | 2,694 | 13,468 |
Simpson | 8,080 | 2,694 | 2,694 | 13,468 |
Analysis – Plan Design
In approving the 5-Year LTIP award levels and grant design, the Committee considered each of the following factors, among others:
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CRYOLIFE, INC. | 2020 Proxy Statement
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The Committee determined vesting schedules in consultation with management and Willis Towers Watson, and based on other sources, and believed that the 5-Year LTIP’s vesting schedule, in which no portion of the grant vests in less than three years and all portions of the grant vest over three to five years, provides a longer retention incentive for executives than annual equity grants, which vest over a one to three-year period and that it also incents executives to drive superior performance over a longer period of time than annual, one-year performance period awards.
In short, the Committee believes that the 5-Year LTIP directly seeks to achieve the core elements of Committee’s compensation philosophy “to attract, retain, motivate, and reward executive talent that has the capability, 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.” See Compensation Philosophy and Objectives on page 24.
The target PSUs for each performance period, if earned, vest on the following dates in the percentages listed in the chart below:
Percentage of 5-Year LTIP PSUs Vesting by Date
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When shares are earned at target performance levels, the vesting schedule results in 1/3 of the total award vesting approximately three, four, and five years after the performance period commencement date. Recipients of a 5-Year LTIP grant must be continuously employed through the vesting date for each performance period (or, in the case of performance period 1, for each tranche) for any PSUs related to a performance period to vest. Further, the Committee has the discretion to award pro-rated 5-Year LTIP grants for recipients who are hired after a performance period has begun.
Analysis – PSUs Earned
No PSUs have been earned as of the record date under any 5-Year LTIP Award because the first performance period, Performance Period 1, will not be completed until December 31, 2021.
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CRYOLIFE, INC. | 2020 Proxy Statement
Equity and Cash Incentive Plan (“ECIP”)
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 a separate, lower cap for awards to individual non-employee directors and a higher annual cap for awards 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. The current ECIP expires May 21, 2021. This Proxy Statement includes a proposal for a new 2020 ECIP, starting on page 63.
2019 Deferred Compensation
The CryoLife, Inc. Executive Deferred Compensation Plan allows certain key employees of CryoLife, including the NEOs, to defer receipt of up to 75% of each 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 each of base salary, commissions, and the annual cash bonus for 2019. Because this plan provides for tax-deferred growth of deferred compensation, it is a tool the Company uses to attract and retain executive-level talent.
2019 Perquisites
It is CryoLife’s policy not to provide perquisites to its executives 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 NEOs are generally required to reimburse CryoLife for any incremental cost of such personal benefit. Other than these incidental personal benefits, none of our NEOs 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 at Employment, Separation and Release, and Change of Control Agreements below, and except for supplemental disability insurance and airline club memberships provided to certain of the NEOs. In keeping with CryoLife’s practice with respect to all full-time employees, NEOs are also eligible to receive certain one-time benefits upon achieving employment milestones, including receiving $5,000 upon reaching 15 years of service with CryoLife and $10,000 upon reaching 20 and 25 years of service with CryoLife.
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 effective September 3, 2014, 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 at Potential Payments Upon Termination or Change of Control – J. Patrick Mackin beginning on page 51.
Employment Agreements with Other Named Executive Officers
CryoLife is not party to employment agreements with Messrs. Lee, Davis, or Simpson 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 Mr. Lee, Ms. Holloway, and Mr. Davis. Mr. Mackin’s change of control arrangements are set forth in the Mackin Agreement. The change of control agreements, which automatically renew absent Company action, generally, provide that the Company will pay a severance payment if the NEO 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.
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CRYOLIFE, INC. | 2020 Proxy Statement
This is a “double-trigger” provision that requires not only a change of control of CryoLife but also an employment action before payments are required pursuant to the agreements. The Committee approved termination payments under the agreements for NEOs 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 Ms. Holloway and Mr. 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, which was amended in October 2019, retroactively applying to any performance-based cash or equity incentive awarded prior to the amendment. The amended Clawback Policy requires the Company to recover excess incentive compensation – in cash bonus or equity form – that was paid to any current or former officer during the three fiscal years prior to a material accounting restatement of the Company’s financial statements as a result of noncompliance with any financial reporting requirement under federal securities law, unless the Committee determines that the cost of recovery exceeds the amount to be recovered. The amended Clawback Policy does not require fault or negligence on the part of the officer for the clawback to occur.
Mr. Mackin, under the Mackin agreement, also must repay any portion of severance payments he has received from the Company if he fails to comply with certain post-employment protective covenants.
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:
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:
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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 PSUs (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 PSUs whose performance metric requirements were not met.
These guidelines became effective for all currently employed NEOs on November 17, 2015. As of March 11, 2020, Messrs. Mackin, Lee, and Davis and Ms. Holloway are in compliance with all of the guidelines, and Mr. Simpson, who has been employed by the Company for less than 2 years, is in compliance with retention guidelines.
Anti-Hedging Policy
All CryoLife employees, including NEOs, 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 at http://investors.cryolife.com/corporate-governance/cryolifes-code-conduct from derivative securities or hedging
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CRYOLIFE, INC. | 2020 Proxy Statement
transactions with respect to the Company’s securities. Specifically, NEOs 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 NEOs may not engage in such transactions.
Equity Grants/Inside Information
The Committee generally adheres to a policy of the Company not making equity grants at times when insiders, which includes members of the Committee, are in possession of material, non-public information, including during regular financial blackout periods. If the Committee approves the grant of equity at such times, it is the Committee’s general policy to delay the grant and pricing of the option and/or issuance of the awarded equity until two full trading days after the public dissemination of all such material, non-public information.
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 NEOs. 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 factor in the Committee’s compensation decisions for 2019 although the Committee continues to believe it is appropriate to employ 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 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, 2019 at page 23. The Company does not undertake to update its forward-looking statements.
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CRYOLIFE, INC. | 2020 Proxy Statement
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 2020 Proxy Statement on Schedule 14A, for filing with the SEC.
Compensation Committee
DANIEL J. BEVEVINO, CHAIRTHOMAS F. ACKERMANRONALD D. MCCALL
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CRYOLIFE, INC. | 2020 Proxy Statement
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. Davis and Simpson, who were the three most highly compensated of the other executive officers of CryoLife employed at the end of fiscal 2019.
Name and Principal | Year | Salary | Bonus(1) | Stock | Option | Non-Equity | Change in | All Other | Total |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
J. Patrick Mackin, Chairman, President and Chief Executive Officer | 2019 | 688,638 | — | 4,418,677 | 709,328 | 596,985 | — | 39,913 | 6,453,541 |
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 | |
D. Ashley Lee Executive Vice President, Chief Operating Officer, and Chief Financial Officer | 2019 | 435,210 | 22,637 | 849,989 | 174,998 | 226,372 | — | 28,442 | 1,737,648 |
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 | |
Jean F. Holloway, Senior Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer | 2019 | 361,509 | 15,670 | 693,356 | 146,667 | 156,697 | — | 17,166 | 1,391,065 |
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 | |
John E. Davis, Senior Vice President, Global Sales and Marketing | 2019 | 348,919 | — | 693,639 | 146,667 | 151,240 | — | 14,726 | 1,355,191 |
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 | |
Michael S. Simpson, Senior Vice President, Regulatory Affairs and Quality Assurance(6) | 2019 | 336,289 | 75,000 | 666,639 | 133,339 | 145,765 | — | 14,161 | 1,371,193 |
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CRYOLIFE, INC. | 2020 Proxy Statement
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CRYOLIFE, INC. | 2020 Proxy Statement
Grants of Plan-Based Awards
Estimated Possible | Estimated Possible | All Other | All Other | Exercise | Closing | Grant | ||||||
Name | Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Shares of | Securities | Price of | Committee | and |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | (m) |
J. Patrick Mackin | 3/5/19 | 411,600 | 686,000 | 1,372,000 | ||||||||
3/5/19 | 23,948 | 709,340 | ||||||||||
3/5/19 | 61,842 | 29.62 | 29.62 | 709,328 | ||||||||
3/5/19 | 14,369 | 23,948 | 35,922 | 709,340 | ||||||||
3/1/19(4) | 8,586 | 101,010 | 193,596 | 2,999,997 | ||||||||
D. Ashley Lee | 3/5/19 | 156,075 | 260,125 | 520,250 | ||||||||
3/5/19 | 5,908 | 174,995 | ||||||||||
3/5/19 | 15,257 | 29.62 | 29.62 | 174,998 | ||||||||
3/5/19 | 3,545 | 5,908 | 8,862 | 174,995 | ||||||||
3/1/19(4) | 3,030 | 16,835 | 48,401 | 500,000 | ||||||||
Jean F. Holloway | 3/5/19 | 108,037 | 180,062 | 360,124 | ||||||||
3/5/19 | 4,952 | 146,678 | ||||||||||
3/5/19 | 12,787 | 29.62 | 29.62 | 146,667 | ||||||||
3/5/19 | 2,971 | 4,952 | 7,428 | 146,678 | ||||||||
3/1/19(4) | 2,424 | 13,468 | 38,721 | 400,000 | ||||||||
John E. Davis | 3/5/19 | 104,275 | 173,792 | 347,583 | ||||||||
3/5/19 | 4,952 | 146,678 | ||||||||||
3/5/19 | 12,787 | 29.62 | 29.62 | 146,667 | ||||||||
3/5/19 | 2,971 | 4,952 | 7,428 | 146,678 | ||||||||
3/1/19(4) | 2,424 | 13,468 | 38,721 | 400,000 | ||||||||
Michael S. Simpson | 3/5/19 | 100,500 | 167,500 | 335,000 | ||||||||
3/5/19 | 4,501 | 133,320 | ||||||||||
3/5/19 | 11,625 | 29.62 | 29.62 | 133,339 | ||||||||
3/5/19 | 2,701 | 4,501 | 6,752 | 133,320 | ||||||||
3/1/19(4) | 2,424 | 13,468 | 38,721 | 400,000 | ||||||||
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CRYOLIFE, INC. | 2020 Proxy Statement
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CRYOLIFE, INC. | 2020 Proxy Statement
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Equity Awards
Equity awards, including long-term performance annual and 5-Year LTIP awards, granted in fiscal 2019 to our named executive officers were subject to the terms of the ECIP and the equity grant agreements.
Annual Performance-Based Bonus Program
The 2019 bonus program provided for bonuses based on a percentage of participants’ 2019 base salaries, varying among participants, based on three metrics:
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All bonus criteria relate to Company and individual performance for the full 2019 fiscal year. See Compensation Discussion and Analysis beginning on page 22 for further details regarding the 2019 fiscal year plan and results.
Salary and Bonus in Proportion to Target Total Direct Compensation | |||
Executive | % Salary | Short-Term Incentive (Cash Bonus) | |
% Personal | % Non-Equity | ||
J. Patrick Mackin | 10.6 | 0 | 9.2 |
D. Ashley Lee | 25.2 | 1.3 | 13.2 |
Jean F. Holloway | 26.1 | 1.1 | 11.4 |
John E. Davis | 25.5 | 0 | 11.1 |
Michael S. Simpson | 25.7 | 0 | 11.2 |
(1) Consistent with the Summary Compensation table on page 41, the Bonus represents the personal performance component of the annual award paid pursuant to the short-term incentive plan.
(2) The amounts represent the revenue and adjusted net income performance components of the awards earned pursuant to the applicable short-term incentive plan and the ECIP. | |||
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CRYOLIFE, INC. | 2020 Proxy Statement
Outstanding Equity Awards at December 31, 2019(*)
Option Awards | Stock Awards | |||||||
Name | Number of | Number of | Option | Option | Number of | Market Value | Equity Incentive | Equity Incentive |
(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 | ||||||
65,549 | 10.24 | 2/19/2023 | ||||||
35,535 | 23,690(1) | 16.30 | 2/21/2024 | |||||
24,792 | 50,823(2) | 21.55 | 3/12/2025 | |||||
61,842(3) | 29.62 | 3/5/2026 | ||||||
21,554(4) | 583,898 | |||||||
7,000(5) | 189,630 | |||||||
29,749(6) | 805,900 | |||||||
11,858(7) | 321,233 | |||||||
23,948(8) | 648,751 | |||||||
19,757(9) | 535,217 | |||||||
101,010(10) | 2,736,361 | |||||||
D. Ashley Lee | 16,666 | 9.97 | 2/26/2021 | |||||
34,042 | 11.00 | 2/19/2022 | ||||||
36,822 | 10.24 | 2/19/2023 | ||||||
17,110 | 8,555(1) | 16.30 | 2/21/2024 | |||||
7,293 | 14,584(2) | 21.55 | 3/12/2025 | |||||
15,257(3) | 29.62 | 3/5/2026 | ||||||
9,111(4) | 246,817 | |||||||
2,050(5) | 55,535 | |||||||
8,507(6) | 230,455 | |||||||
3,403(7) | 92,187 | |||||||
5,908(8) | 160,048 | |||||||
4,874(9) | 132,037 | |||||||
16,835(10) | 456,060 | |||||||
Jean F. Holloway | 8,653 | 9.64 | 9/10/2022 | |||||
13,236 | 10.24 | 2/19/2023 | ||||||
14,153 | 7,076(1) | 16.30 | 2/21/2024 | |||||
6,364 | 12,728(2) | 21.55 | 3/12/2025 | |||||
12,787(3) | 29.62 | 3/5/2026 | ||||||
7,536(4) | 204,150 | |||||||
1,696(5) | 45,945 | |||||||
7,425(6) | 201,143 | |||||||
2,970(7) | 80,457 | |||||||
4,952(8) | 134,150 | |||||||
4,085(9) | 110,663 | |||||||
13,468(10) | 364,848 | |||||||
John E. Davis | 8,745 | 10.24 | 2/19/2023 | |||||
6,781 | 6,781(1) | 16.30 | 2/21/2024 | |||||
5,304 | 10,606(2) | 21.55 | 3/12/2025 | |||||
12,787(3) | 29.62 | 3/5/2026 | ||||||
7,222(4) | 195,644 | |||||||
1,625(5) | 44,021 | |||||||
6,187(6) | 167,606 | |||||||
2,475(7) | 67,048 | |||||||
4,952(8) | 134,150 | |||||||
4,085(9) | 110,663 | |||||||
13,468(10) | 364,848 | |||||||
Michael S. Simpson | 11,625(3) | 29.62 | 3/5/2026 | |||||
11,022(11) | 298,674 | |||||||
4,501(8) | 121,932 | |||||||
3,713(9) | 100,585 | |||||||
13,468(10) | 364,848 | |||||||
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CRYOLIFE, INC. | 2020 Proxy Statement
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CRYOLIFE, INC. | 2020 Proxy Statement
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Option Exercises and Stock Vested(1)
| Option Awards | Stock Awards | ||
Name | Number of | Value | Number of | Value |
(a) | (b) | (c) | (d) | (e) |
J. Patrick Mackin | — | — | 55,624 | 1,624,149 |
D. Ashley Lee | 16,666 | 420,471 | 26,839 | 782,051 |
Jean F. Holloway | 21,654 | 453,383 | 20,224 | 589,389 |
John E. Davis | — | — | 16,728 | 486,883 |
Michael S. Simpson(4) | — | — | — | — |
(1) This table provides information regarding stock option exercises and vesting of restricted stock and performance stock units during 2019. (2) Value Realized on Exercise is equal to the number of shares acquired multiplied by the difference between the exercise price and the share price on the NYSE at the time of exercise without regard to any proceeds that may have been received upon any sale of the underlying shares. (3) Value Realized on Vesting is equal to the number of shares acquired multiplied by the closing share price on the NYSE on the date of vesting, without regard to any proceeds that may have been received upon any sale of the underlying shares. (4) Mr. Simpson started with the Company in December 2018, and, therefore, did not have any vested equity in 2019. | ||||
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 2018. 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
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CRYOLIFE, INC. | 2020 Proxy Statement
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.
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CRYOLIFE, INC. | 2020 Proxy Statement
The following table presents components of nonqualified deferred compensation under the Executive Deferred Compensation Plan for each named executive officer.
Name | Executive | Company | Aggregate | Aggregate | Aggregate |
(a) | (b) | (c) | (d) | (e) | (f) |
J. Patrick Mackin | — | — | — | — | — |
D. Ashley Lee | 21,177 | — | 120,031 | — | 677,480 |
Jean F. Holloway | 211,124 | — | 176,828 | — | 1,009,335 |
John E. Davis | 79,255 | — | 63,489 | — | 375,549 |
Michael S. Simpson | — | — | — | — | — |
(1) Contributions to the deferred compensation plan that relate to an executive’s deferrals from salary and/or annual short-term incentives are included in the amounts reflected in the “Salary,” “Bonus,” and/or “Non-Equity Incentive Plan Compensation” columns, as applicable, of the Summary Compensation Table for fiscal 2019 on page 41. (2) A participant’s account under the Executive Deferred Compensation Plan is deemed to be invested in hypothetical investment options selected by the participant from among a menu of non-proprietary mutual funds. The account is credited/debited with gains and/or losses linked to the performance of those hypothetical investment options. The plan does not have investment options that provide for above-market or preferential earnings; accordingly, the amounts provided in this column are not included in column (h) of the Summary Compensation Table for fiscal 2019 on page 41. (3) Amounts shown include the executive’s contributions, withdrawals, and associated hypothetical gains/losses during 2019, as well as deferrals of salary and annual incentives (together with associated hypothetical earnings) from prior years’ participation in the plan. The amounts shown in this column, with the exception of aggregate earnings, have been reported in the “Salary,” “Bonus,” and/or “Non-Equity Incentive Plan Compensation” columns, as applicable, of the Summary Compensation Table of prior year Company Proxy Statements, if the individuals were listed as named executive officers in those prior year periods. The total year prior contributions to the Executive Deferred Compensation Plan are as noted in the table below: | |||||
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CRYOLIFE, INC. | 2020 Proxy Statement
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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
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CRYOLIFE, INC. | 2020 Proxy Statement
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 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.
Terms of the Change of Control Agreements
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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:
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CRYOLIFE, INC. | 2020 Proxy Statement
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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:
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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 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 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 54. 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, 2019, the last business day of CryoLife’s 2019 fiscal year.
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CRYOLIFE, INC. | 2020 Proxy Statement
J. Patrick Mackin, Chairman, President and Chief Executive Officer(1)
Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary | Good | For Cause | Death | Disability | Change | Certain |
Cash Compensation | 596,985(2) | 1,968,060(3) | 596,985(2) | 596,985(2) | 596,985(2) | — | 3,280,100(4) |
Accelerated Stock Option Exercisability | — | — | — | — | — | 537,175(5) | 537,175(5) |
Accrued Vacation Pay | — | — | — | — | — | — | — |
Medical Benefits | — | 33,145 (6) | — | 33,145 (6) | 33,145 (6) | — | 33,145 (6) |
Spread Value of Vested Options | 3,083,311(7) | 3,083,311(7) | 3,083,311(7) | 3,083,311(7) | 3,083,311(7) | 3,083,311(7) | 3,083,311(7) |
Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 5,934,525(8) | 5,934,525(8) |
Total | 3,680,296 | 5,084,516 | 3,680,296 | 3,713,441 | 3,713,441 | 9,555,011 | 12,868,256 |
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CRYOLIFE, INC. | 2020 Proxy Statement
D. Ashley Lee, Executive Vice President, Chief Operating Officer and Chief Financial Officer(1)
Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary | Good | For Cause | Death | Disability | Change | Certain |
Cash Compensation | 226,372(2) | 226,372(2) | 226,372(2) | 226,372(2) | 226,372(2) | — | 1,343,880(3) |
Accelerated Stock Option Exercisability | — | — | — | — | — | 173,104(4) | 173,104(4) |
Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
Medical Benefits | 32,090 (6) | 32,090 (6) | 32,090 (6) | 32,090 (6) | |||
Spread Value of Vested Options | 1,678,529(7) | 1,678,529(7) | 1,678,529(7) | 1,678,529(7) | 1,678,529(7) | 1,678,529(7) | 1,678,529(7) |
Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 1,401,122(8) | 1,401,122(8) |
Total | 1,904,901 | 1,936,991 | 1,904,901 | 1,936,991 | 1,936,991 | 3,252,755 | 4,628,725 |
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CRYOLIFE, INC. | 2020 Proxy Statement
Jean F. Holloway, Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer (1)
Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary | Good | For Cause | Death | Disability | Change | Certain |
Cash Compensation | 156,697(2) | 156,697(2) | 156,697(2) | 156,697(2) | 156,697(2) | — | 786,528(3) |
Accelerated Stock Option Exercisability | — | — | — | — | — | 146,863(4) | 146,863(4) |
Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
Spread Value of Vested Options | 561,989(6) | 561,989(6) | 561,989(6) | 561,989(6) | 561,989(6) | 561,989(6) | 561,989(6) |
Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 1,164,762(7) | 1,164,762(7) |
Total | 718,686 | 718,686 | 718,686 | 718,686 | 718,686 | 1,873,614 | 2,660,142 |
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CRYOLIFE, INC. | 2020 Proxy Statement
John E. Davis, Senior Vice President, Global Sales and Marketing(1)
Executive Benefits and Payments Upon Termination ($) | |||||||
| Voluntary | Good | For Cause | Death | Disability | Change | Certain |
Cash Compensation | 151,240(2) | 151,240(2) | 151,240(2) | 151,240(2) | 151,240(2) | — | 759,138(3) |
Accelerated Stock Option Exercisability | — | — | — | — | — | 131,924(4) | 131,924(4) |
Accrued Vacation Pay(5) | — | — | — | — | — | — | — |
Medical Benefits | 32,090 (6) | 32,090 (6) | 32,090 (6) | 32,090 (6) | |||
Spread Value of Vested Options | 249,904(7) | 249,904(7) | 249,904(7) | 249,904(7) | 249,904(7) | 249,904(7) | 249,904(7) |
Accelerated Vesting of Restricted Stock and Performance Stock Units | — | — | — | — | — | 1,107,412(8) | 1,107,412(8) |
Total | 401,144 | 433,234 | 401,144 | 433,234 | 433,234 | 1,489,240 | 2,280,468 |
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CRYOLIFE, INC. | 2020 Proxy Statement
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, 2019, 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 | Weighted Average | Number of |
(a) | (b) | (c) | |
Equity compensation plans approved by stockholders | 2,070,263 | $16.14 | 2,306,492 |
Equity compensation plans not approved by stockholders | — | — | — |
Total | 2,070,263 | $16.14 | 2,306,492 |
(1) Plans include the ECIP and the Employee Stock Purchase Plan (“ESPP”). As of December 31, 2019, 2,102,852 shares remain available for grant in the ECIP and 203,640 shares remain available for grant in the ESPP. (2) Amounts in column (a) include 1,129,262 Stock Options, 224,674 Restricted Stock Units (RSUs), 716,327 Performance Stock Units (PSUs) (including shares whose performance period has not concluded, which are calculated at maximum payout which is 369,336 shares above target). The amounts in column (a) do not include 242,650 Restricted Stock Awards (RSAs) that were unvested and outstanding as of December 31, 2019. (3) Amounts in column (b) only reflect outstanding Stock Options. | |||
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CRYOLIFE, INC. | 2020 Proxy Statement
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.
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| PEO | Median |
Total Compensation (2) | 6,453,545 | 50,776 | |
PEO to Median Employee Pay Ratio (3) | 127.1 : 1 | ||
(1) Median employee was determined using all employees as of December 31, 2019. Wages and salaries were annualized for those employees that were not employed for the full year of 2019. Base salary, commission payments, cash bonus, and equity awards were considered when determining the median employee. All 2019 compensation not paid in US dollars was converted to US dollars using the historic exchange rate made available by the Federal Reserve System of the U.S. as of December 31, 2019. All equity was recorded at grant date fair value. (2) Total Compensation includes all components recorded in the Summary Compensation Table. (3) PEO total annual compensation includes the entire grant date fair value of the 5-Year LTIP grant at target performance, $2,999,997. This is not an annual grant, and instead will be earned or vested, if at all, over 3 performance periods which span 5 years. If the 60% of the target potential benefit of the 5-Year LTIP attributable to the first performance period, were annualized over that three year performance period, and $600,000 of it was attributed to 2019 compensation, PEO total compensation would be $4,053,545, and the pay ratio would be 79.8 : 1 . | |||
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that 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 2019, it complied with all Section 16(a) filing requirements applicable to its executive officers, non-employee directors, and greater than 10% beneficial owners.
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CRYOLIFE, INC. | 2020 Proxy Statement
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 11, 2020,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 11, 2020,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 | Percentage of Outstanding |
J. Patrick Mackin |
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| 1.5 |
D. Ashley Lee |
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Jean F. Holloway |
| 137,257 | * |
John E. Davis |
| 114,953 | * |
Michael S. Simpson(6) |
| 46,592 | * |
Thomas F. Ackerman |
| 119,695 | * |
Daniel J. Bevevino |
| 119,860 | * |
Marna P. Borgstrom |
| 18,887 | * |
James W. Bullock |
| 38,446 | * |
Jeffrey H. Burbank |
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Harvey Morgan |
| 97,110 | * |
Jon W. Salveson |
| 99,639 | * |
Blackrock, Inc. |
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| 17.3 |
Wasatch Advisors, Inc. | — | 2,711,670(9) | 6.9 |
The Vanguard Group, Inc. |
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Macquarie Group Limited | — | 2,039,839(11) | 5.2 |
All current directors and |
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* | Ownership represents less than 1% of outstanding CryoLife common stock. |
(1) | 39,329,580 outstanding shares of CryoLife common stock as of September 21, 2021, the proxy record date. |
(2) | Amount includes |
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(4) | Amount includes |
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CRYOLIFE, INC. | 2020 Proxy Statement
(5) | Amount includes |
(6) | As previously reported by the Company, Mr. Simpson retired from the Company on March 31, 2021. |
(7) | Amount includes 12,894 shares subject to options that are either presently exercisable or will become exercisable within 60 days after September 21, 2021. |
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(8) | Information based on Schedule |
| Information based on Schedule 13G filed on February 11, 2021 by Wasatch Advisors, Inc. (“Wasatch”). Per this schedule, Wasatch has the power to vote, or to direct the vote of, and power to dispose, or to direct the disposition of, these shares of CryoLife common stock. The address for Wasatch is: Wasatch Advisors, Inc., 505 Wakara Way, Salt Lake City, UT 84108. |
(10) | Information based on Schedule 13G filed on February 10, |
| Information based on Schedule 13G filed on February 12, 2021 by Macquarie Group Limited (“Macquarie”). Per this schedule, Macquarie has the power to vote, or to direct the vote of, and power to dispose, or to direct the disposition of, these shares of CryoLife common stock. The address for Macquarie is: Macquarie Group Limited, 50 Martin Place, Sydney, New South Wales, Australia. |
(12) | The business address for all CryoLife non-employee directors and employees is: c/o CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, GA 30144. |
| Amount includes: |
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515,792 shares subject to options that are presently exercisable or will become exercisable within 60 days after September 21, 2021; 52,842 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 185,272 shares of unvested restricted common stock subject to forfeiture that all current directors and named executive officers as a group hold as of September 21, 2021. This amount does not include 31,361 shares earned under 2019 and |
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CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
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PROPOSAL THREE – APPROVAL and funding OF A new equity and cash incentive plan
The CryoLife, Inc. Equity and Cash Incentive Plan (the “ECIP”) is the governing vehicle through which the Company awards equity and cash compensation to employees and non-employee directors. It expires on May 21, 2021, and the establishment of a new plan requires the approval of the stockholders.
In anticipation of that expiration, on March 24, 2020, upon recommendation of the Compensation Committee (the “Committee”), the Board of Directors adopted the 2020 Equity and Cash Incentive Plan (the “2020 ECIP”), subject to stockholder approval. If approved by the stockholders during the Annual Meeting, the 2020 ECIP will become effective on May 20, 2020, and it will be funded with 2,675,000 shares, and any remaining equity shares in the existing ECIP, which, upon its expiration, will be transferred into the 2020 ECIP. The 2020 ECIP is attached hereto as Appendix B and we urge stockholders to review the 2020 ECIP carefully.
Current Awards Outstanding
Set forth below is information regarding shares currently outstanding under the ECIP, as well as the shares remaining for grant under the ECIP. The Company made its annual award grant to employees on February 27, 2020, and those awards are included in the data below.
Selected Data as of March 11, 2020:
For additional information regarding stock-based awards previously granted, please see note 17 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Outstanding awards and shares available for future grants under the ECIP (“overhang”) total 1,493,473 and represent 3.96% of our 37,679,978 outstanding shares of Common Stock, as of the proxy record date. If the additional shares are approved by our stockholders, the additional 2,675,000 shares under the plan would increase our overhang at such time to 11.06%.
The proposed 2020 ECIP is similar to the current ECIP, with some substantive changes, including the deletion of now unnecessary references to Section 162(m) of the IRS Code (the relevant portions of which were repealed in December 2017), an extension of eligibility for participation in the 2020 ECIP to include consultants and agents, the removal of the 500,000 share limit on distributions through the plan, and, a prohibition on dividends and dividend equivalents on options and SARs.
In advising stockholders to vote for this proposal, the Board of Directors and the Committee, in consultation with management and Willis Towers Watson, the Committee’s independent compensation consultant, considered many factors, including stockholder support at the 2018 annual meeting of the existing ECIP, from which the 2020 ECIP is largely derived, the remaining shares available for grant under the existing ECIP, the number of previously awarded options and shares outstanding under the existing ECIP, our equity utilization rates, our compensation program design,
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CRYOLIFE, INC. | 2020 Proxy Statement
and our business plans. In addition, our Board and the Committee believe this proposal is reasonable when compared to peer group practices and proxy advisory firm guidelines. The Board and the Committee also believe that the funding level will ensure we have the means to provide competitive long-term incentive compensation to retain key employees, attract new talent, and further align the interests of equity recipients with those of stockholders.
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CRYOLIFE, INC. | 2020 Proxy Statement
Key Terms of the 2020 ECIP
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Required VoteHouseholding
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 and funding OF THE new equity and cash incentive plan.
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CRYOLIFE, INC. | 2020 Proxy Statement
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, 2020. Representatives of Ernst & Young are expected to attend the 2020 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, that being the selection of our independent registered public accounting firm. 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 Audit 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 2020 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 2019 and Fiscal 2018
The following table presents Ernst & Young’s professional service fees for the audit of the Company’s annual financial statements for fiscal years ending 2019 and 2018, as well as fees for other services rendered during those periods.
| 2019(1) | 2018 | ||
Audit fees(2) | $1,888,636 | $1,787,141 | ||
Audit-related fees(3) | $104,710 | — | ||
Tax fees(4) | $74,770 | $334,827 | ||
All other fees | — | — | ||
Total | $2,068,116 | $2,121,000 | ||
(1) The 2019 fees are not final and include some best estimate accruals. (2) Includes work performed for the audit of our annual consolidated financial statements, the review of financial statements included in our quarterly Form 10-Q reports, the audit of internal control over financial reporting, and the services that an independent auditor would customarily provide in connection with statutory requirements, regulatory filings, and similar engagements for the fiscal year, such as comfort letters, attest services, consents, and assistance with review of documents filed with the SEC. (3) Audit related fees include work performed to provide assurance and related services that are reasonably related to the performance of the audit, such as accounting consultations and due diligence services related to transactions or acquisitions. (4) Includes tax compliance and reporting services, as well as fees related to tax advisory services for the acquisition and integration of JOTEC AG. | ||||
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.
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CRYOLIFE, INC. | 2020 Proxy Statement
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, if any. The Audit Committee annually evaluates the qualifications and performance of the independent registered public accounting firm, including those of its lead partner, and reports on such evaluation to the Board of Directors.
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 of ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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CRYOLIFE, INC. | 2020 Proxy Statement
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 2020 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, 2019.2020. 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, 2019,2020, may also be obtained without charge through the SEC’s website at www.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
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Date: March 31, 2020October [●], 2021
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CRYOLIFE, INC. | 20202021 Proxy Statement – Special Meeting
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APPENDIX
Annex A – NON-GAAP FINANCIAL MEASURE INFORMATION
Set forth below in this Appendix A is important information about the following non-GAAP financial measures discussed in this Proxy Statement:
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Although we believe that these measures are useful tools, no single financial measure provides all Plan 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.
Although not technically a non-GAAP financial measure, the 2019 annual Cash Bonus used GAAP revenues, adjusted for currency.
Adjusted Net Income
As discussed in 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 2019 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 2019 was calculated as net income and exclusive of:
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The table below provides a reconciliation of 2019 adjusted net income to 2019 net income under GAAP:
2019 Adjusted Net Income (in Thousands)Conversion
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CRYOLIFE, INC. | 2020 Proxy Statement
Adjusted EBITDA
As discussed in this Proxy Statement, the 2019 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:
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The table below provides a reconciliation of 2019 adjusted EBITDA to 2019 net income under GAAP:
2019 Adjusted EBITDA Reconciliation (in Thousands)
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CRYOLIFE, INC. | 2020 Proxy Statement
APPENDIX B – Proposed new equity and cash incentive plan
PLAN OF CONVERSION
FOR CONVERTING
CRYOLIFE, INC.,2020 EQUITY AND CASH INCENTIVE PLANa Florida corporation
TO
CRYOLIFE, INC.,
a Delaware corporation
SECTION 1GENERALThis Plan of Conversion (together with all of the exhibits attached hereto, this “Plan”), dated November [●], 2021, is hereby adopted by CryoLife, Inc., a Florida corporation (the “Corporation”), 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 “FBCA”).
1.1 RECITALS
PurposeWHEREAS. The CryoLife, Inc. 2020 Equity, the Corporation is a corporation organized and Cash Incentive Planexisting under the laws of the State of Florida;
WHEREAS, the Board of Directors of the Corporation (the “Plan”“Board”) has been established by CryoLife, Inc. (the “Company”) to (i) attract, retain, and reward persons eligible to participatedetermined that it is in the Plan; (ii) motivate Participantsbest 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 in Section 1.2 below)4), by means of appropriate incentives,the Corporation shall be converted from a Florida corporation to achieve annual and long-term goals; (iii) provide equity compensationa Delaware corporation pursuant to DirectorsSection 265 of the Company; (iv) provide incentive compensation opportunities to employee Participants that are competitive with those of companies with whom the Company competes for talent;DGCL and (iv) further align Participants’ interests with thoseSection 607.11930 of the Company’s stockholders through compensation that is basedFBCA (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 Company’s common stock; and thereby promotedate the long-term interestsCorporation commenced its existence in the State of the Company and its Subsidiaries, as Subsidiaries are defined in Section 11(i), including the growth in value of the Company’s equity and enhancement of long-term stockholder return. Pursuant to the Plan, Participants may receive Options, SARs, Other Stock Awards, or Cash-Based Awards, each as defined herein (collectively referred to as “Awards”).Florida.
1.2 Participation. Subject tob. Following the terms and conditionsadoption of the Plan, the Committee (as definedCorporation shall cause the Conversion to be effective by:
i. filing articles of conversion pursuant to Section 607.11933 of the FBCA, in the form attached hereto as Exhibit A (the “Florida Articles of Conversion”), with the Department of State of the State of Florida;
ii. filing a certificate of conversion, pursuant to Section 8)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 Effective Date. Upon the Effective 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 shares of Resulting Corporation Common Stock, upon the same terms and conditions as 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 Corporation existing immediately prior to the Effective Time shall continue in their respective offices as members of the Board and officers of the Resulting Corporation.
8. Further Assurances. If, at any time after the Effective Date, the Resulting Corporation shall determine and designate, from time to time, from amongor be advised that any deeds, bills of sale, assignments, agreements, documents, or assurances or any other acts or things are necessary, desirable, or proper, consistent with the Eligible Grantees, as defined in Section 11(f), those persons who will be granted one or more Awards under the Plan, and thereby become “Participants” in the Plan. In the discretion of the Committee, a Participant may be granted any Award permitted under the provisionsterms of the Plan, (a) to vest, perfect, or confirm, of record or otherwise, in the Resulting Corporation 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, or (b) to otherwise carry out the purposes of the Plan, the Resulting Corporation and more than one Awardits 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.
9. Termination; Amendment. At any time prior to the Effective Date, the Plan may be grantedterminated or amended by action of the Board if, in the opinion of the Board, such action would be in the best interests of the Corporation and its 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 a Participant. Subjectbe 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 provisionsextent of Section 8.2(e), Awards may be granted as alternatives tosuch prohibition or replacement of awards outstanding underinvalidity, without invalidating the Plan, or any other plan or arrangementremainder of the Company orPlan.
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IN WITNESS WHEREOF, the Corporation has caused this Plan to be duly executed as of the date first above written.
| CRYOLIFE, INC. | |||
By: | |||
Name: | J. Patrick Mackin | ||
Title: | Chief Executive Officer | ||
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Annex B – florida Articles of Conversion
Articles of Conversion
For
Florida Profit Corporation
Into
Non-Florida Business Entity
These Articles of Conversion are submitted to convert the following Florida Profit Corporation into a Subsidiary (including a plan or arrangementDelaware Profit Corporation in accordance with Section 607.11933 of a business or entity, all or a portion of which is acquired by the Company or a Subsidiary)Florida Business Corporation Act (the “FBCA”).
1.3 Operation, Administration, and Definitions.1. The operation and administrationname of the Plan, includingFlorida Profit Corporation converting into the Awards maderesulting business entity is CryoLife, Inc., a corporation incorporated under the Plan,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 be subjecttake 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 provisionsState of Section 7 (relatingFlorida.
2. The date on which the Non-Delaware Corporation was first incorporated is January 19, 1984.
3. The name of the Non-Delaware Corporation immediately prior to operation and administration). Capitalized terms infiling this Certificate of Conversion is CryoLife, Inc., a Florida corporation.
4. The name of the Plan shall be definedDelaware Corporation as set forth in the Plan (including the definition provisionsCertificate of Incorporation filed in accordance with subsection (b) of Section 11265 of the Plan).General Corporation Law of the State of Delaware is CryoLife, Inc.
SECTION 2OPTIONS AND SARS5. 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.
2.1 DefinitionsIN 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 all powers necessary to carry out its business and affairs under the laws of the State of Delaware.
Article V
CAPITAL STOCK
(a) The granttotal number of an “Option” entitles the Participant to purchase shares of Stock at an Exercise Price establishedcapital stock authorized to be issued by the Committee. Options granted under this Section 2 may eithercorporation is Eighty Million (80,000,000), and shall be Incentivedivided 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 Options (“ISOs”) or Non-Qualified Options (“NQOs””), as determined in the discretionand (b) Five Million (5,000,000) shares of the Committee. An “ISO” is an Option that is intended to satisfy the requirements applicable to an “incentivepreferred stock, option” described in Section 422(b)each with a par value of the Code. An “NQO” is an Option that is not intended to be an “incentive stock option” as that term is described in Section 422(b) of the Code.One Cent ($0.01) (“Preferred Stock”).
(b) A stock appreciation right (a “SAR”Common Stock. The powers (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 declared and paid on the Common Stock at such times and in such amounts as the Board of Directors of the corporation (the “Board”) entitlesin its discretion shall determine.
(ii) Voting Rights. Except as otherwise provided by or pursuant to the Participantprovisions 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 cashproportion 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 (asfor 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. The designations, powers (including voting powers), preferences, and relative, participating, optional, special, and other rights, if any, of each series of Preferred Stock and the qualifications, limitations, or restrictions, if any, thereof, may differ from those of any and all other series of Preferred 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, as 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 of the corporation entitled to vote irrespective of Section 242(b)(2) of the DGCL, without the separate vote of the holders of the Preferred Stock as a class.
(d) In the election of directors of the corporation, there shall be no cumulative voting of the stock entitled to vote at such election.
Article VI
AMENDMENT OF CERTIFICATE OF INCORPORATION
The corporation reserves the right to amend, alter, change, or repeal any provisions contained in this Certificate of Incorporation, and other provisions may be added or inserted, in the manner now or hereafter prescribed by law, and all rights, preferences and privileges conferred upon the stockholders, directors, or other persons herein are subject to this reservation.
Article VII
AMENDMENT OF BYLAWS
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 Subsection 2.5), value equal to (or otherwise based on)Section 145(d) of the excess of: (a) the Fair Market Value (as defined in Section 11)DGCL that indemnification of a specified numberpresent or former director or officer is proper in the circumstances because such person has met the applicable standard of sharesconduct set forth in subsections (a) and (b) Section 145 of Stock atthe DGCL, then the corporation shall indemnify such person in the manner and to the extent contemplated by Section 145 of the 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 shall inure to the benefit of the heirs, executors and administrators of such a person.
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 exercise; over (b) an Exercise Price established by the Committee.such amendment, repeal, elimination or modification.
2.2 Exercise Price. The Exercise Price of each Option and SAR granted under this Section 2 shall be not less than 100% of the Fair Market Value of a share of Stock on the date of grant of the Award, unless a higher price is established by the Committee or determined by a method established by the Committee at the time the Option or SAR is granted.
2.3. Exercise. An Option and an SAR shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee, before or after grant.
2.4 Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under this Section 2 shall be subject to the following:
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(a) Subject
Article X
STOCKHOLDERS PROHIBITED FROM TAKING
ACTION WITHOUT A MEETING
The stockholders may not take action by consent without a meeting. Any and all action by a stockholder is required to be taken at the annual stockholders meeting or at a special stockholders meeting. This provision applies to Common Stock and all classes of Preferred Stock.
Article XI
SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders for any purpose may be called at the request in writing of stockholders 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 followingSecretary of the corporation and describing the purposes for which the meeting is to be held.
Article 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 exclusive 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 Subsection 2.4,Certificate of Incorporation or the full Exercise PriceBylaws or (5) any action asserting a claim governed by the internal affairs doctrine; provided, however, in the event that the Court of Chancery of the State of Delaware lacks jurisdiction over such action, the sole and exclusive forum for shares of Stock purchased upon the exercise of any Optionsuch action shall be paid atanother state or federal court located within the timeState of Delaware, in all cases, subject to such exercise (except that,court having personal jurisdiction over the indispensable parties named as defendants. The choice of forum provision set forth in this Section (a) of Article XII does not apply to any actions arising under the caseSecurities Act of an exercise arrangement approved by1933, as amended (the “Securities Act”), or the Committee and described in paragraph 2.4(c), payment may be madeSecurities Exchange Act of 1934, as soon as practicable after the exercise)amended (the “Exchange Act”).
(b) The Exercise Price shall be payableUnless the corporation consents in cash or by tendering (by actual delivery of shares) unrestricted shares of Stock that are acceptablewriting to the Committee, valued at Fair Market Value asselection of an alternative forum, the federal district courts of the dayUnited States shall, to the shares are tendered,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 in any combinationdirector or officer of cash or shares, as determined by the Committee.corporation.
(c) ToFailure to enforce the foregoing provisions of this Article XII would cause the corporation irreparable harm and the 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 ParticipantDelaware Corporation)
Article I
OFFICES
Section 1. Principal and Business Offices. The corporation may electhave 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 paytime determine or the Exercise Price uponbusiness of the exercisecorporation 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 Optionannual 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 irrevocably authorizing a third party to sell shareslaw or by the Certificate of Stock (or a sufficient portionIncorporation, special meetings of the shares) acquired upon exercisestockholders for any purposes may be called by the President or Secretary at the request in writing of the Option and remitmajority 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 Companypurposes stated in the notice thereof.
Section 3. Place of Meeting. The Board may designate a sufficient portionplace, 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 sale proceeds to paystockholders. If no designation is made, the entire Exercise Price andplace 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 tax withholding resulting from such exercise.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”).
2.5 SettlementSection 4. Notice of AwardMeeting. SharesWhenever stockholders are required or permitted to take any action at a meeting, a notice of Stockthe 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 exercisecorporation’s notice of an Optionmeeting (or any supplement thereto);
(B) by or an SAR shall be subject to such conditions, restrictions and contingencies asat the Committee may establish indirection of the applicable Award Agreement. SettlementBoard or any committee thereof; or
(C) by any stockholder of SARs may be made in sharesthe corporation who (1) was a stockholder of Stock (valued at their Fair Market Valuerecord at the time of exercise)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”), in cash, or in a combination thereof, as determinedand included in the discretioncorporation’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 Committee. The Committee, in its discretion, may impose such conditions, restrictionscorporation not earlier than the close of business on the 120th day and contingencies with respect to sharesnot later than the close of Stock acquired pursuantbusiness on the 60th day prior to the exercisefirst anniversary of an Option or an SAR as the Committee determines to be desirable.
2.6 Restrictions on Options and SAR Awards. Each Option and SAR shall bepreceding year’s annual meeting; provided, however, that subject to the following:
(a) The term of any Option or SAR granted underfollowing sentence, in the Plan shall not exceed seven years fromevent that the date of grant.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.
(b) No option or SAR shall carry dividend rights or dividend equivalent rights.To be in proper form, a stockholder’s notice to the Secretary must:
(b) Any such Award shall be subject(A) set forth, as to such conditions, restrictionsthe stockholder giving the notice and contingencies as the Committee shall determine.beneficial owner, if any, on whose behalf the nomination or proposal is made:
SECTION 3OTHER STOCK AWARDS(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;
3.1 Definitions. The term “Other Stock Awards” means any of(2) a. the following:
(a) A “Stock Unit” Award is the grant of a right to receive shares of Stock in the future.
(b) A “Performance Share” Award is a grant of a right to receive shares of Stockclass or Stock Units, which is contingent on the achievement of performance or other objectives during a specified period.
(c) A “Restricted Stock” Award is a grant of shares of Stock,series and a “Restricted Stock Unit” Award is the grant of a right to receive shares of Stock in the future, with such shares of Stock or right to future delivery of such shares of Stock subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Committee.
3.2�� Restrictions on Other Stock Awards. Each Stock Unit Award, Restricted Stock Award, Restricted Stock Unit Award and Performance Share Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine.
SECTION 4CASH-BASED AWARDS
4.1 Definitions. The term “Cash-Based Award” means a right or other interest granted to a Participant under Section 4.2 of the Plan that may be denominated or payable in cash, other than an Award pursuant to which the amount of cash is determined by reference to the value of a specific number of shares of Stock. For the avoidancecorporation that are, directly or indirectly, owned beneficially and of doubt, dividend equivalents constitute Cash-Based Awards.record by such stockholder and such beneficial owner;
4.2 Grantb. 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 Cash-Based Awards. The Committee is authorized to grant Awards to Participants in the form of Cash-Based Awards, as deemed by the Committee to be consistent with the purposesshares of the Plan, subject to such vesting and other conditions as the Committee shall determine in its sole discretion. At the time of the grant of Cash-Based Awards, the Committee may place restrictions on the payoutcorporation or vesting of Cash-Based Awards that shall lapse,with a value derived in whole or in part only uponfrom the attainmentvalue of Performance Goals. The Committee shall determine the terms and conditionsany class or series of such Awards at the date of grant. The maximum dollar amount that may be covered by all Cash-Based Awards granted to any individual during any fiscal year under the Plan is $2 million for employees and $500,000 for
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non-employee directors. At the discretionshares of the Committee, Cash-Based Awards under this Plan may be issued jointly under this Plan and any other cash incentivecorporation, whether or similar plan of the Company; provided, however, that if a Cash-Based Award is issued under this Plan and another plan of the Company, to the extent of a conflict in the provisions of this Plan and the other plan, the terms of this Plan shall control.
SECTION 5PERFORMANCE-BASED COMPENSATION
5.1 Grant of Performance-Based Compensation. The Committee may determine that any Awards granted to a Covered Employee shall be considered performance-based compensation, in which case the provisions of this Section 5 shall apply. When Awards are made under this Section 5, the Committee shall establish in writing (i) the objective Performance Goals that must be met, (ii) the period during which performance will be measured, (iii) the maximum amounts that may be paid if the Performance Goals are met, and (iv) any other conditions that the Committee deems appropriate.
5.2 Pre-establishment of Performance Goals. Performance Goals will, barring unusualnot such instrument or compelling circumstances, be pre-established by the Committee in writing not later than 90 days after the commencement of the period of service to which the Performance Goal relates, provided that the outcome is substantially uncertain at the time the Committee actually established the goal.
5.3 Adjustments to Performance Goals. The Committee in its sole discretion shall have the authority to make adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary of the Company or the financial statements of the Company or any Subsidiary of the Company, in response to anticipated or actual changes in applicable laws or regulations, including changes in generally accepted accounting principles or practices, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment or product line of a business, as applicable. In addition, the Committee may specify that certain equitable adjustments to the Performance Goals will be made during the applicable performance period, provided such specification occurs in writing.
5.4 Certification of Performance Results. The Committee shall certify the satisfaction of the Performance Goal for the applicable performance period specified in the Award agreement after the performance period ends and prior to any payment with respect to the Award. The Committee shall determine the amount, if any, to be paid pursuant to each Award based on the achievement of the Performance Goals and the satisfaction of all other terms of the Award agreement.
5.5 Payment Upon Death or Disability or Other Circumstances. The Committee may authorize that Awards under this Section 5 shall be payable, in whole or in part, in the event of the Participant’s death or disability, or under other circumstances.
SECTION 6STOCK SUBJECT TO THE PLAN
6.1 Awards Subject to Plan. Awards granted under the Planright shall be subject to the following:
(a) Subject to the following provisions of this Subsection 6.1, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be 2,675,000 million shares of Stock, plus the remainder of any shares available and issuable under the Equity and Cash Inventive Plan which was originally adopted by the Stockholders on May 19, 2009, and subsequently amended and restated, all shares of which (including those which were forfeited) shall be moved to, and made available under, this Plan, less the number of non-forfeited shares of Stock subject to outstanding Awards that have been granted but not yet vested. Shares of Stock issuable hereunder may, in whole or in part, be authorized but unissued shares or shares of Stock that shall have been or may be reacquired by the Companysettlement in the open market, in private transactionsunderlying class or otherwise. Notwithstanding the foregoing, with respect to SARs that are settled in Stock, the aggregate numberseries of shares of Stock subject to the SAR grant shall be counted against the shares available for issuance under the Plan as one share for every share subject thereto, regardlessstock of the number of shares used to settle the SAR upon exercise. For every share of Stock awarded hereunder in respect of Other Stock Awards, the maximum number of shares reserved for grant hereunder shall be reduced by 1.5 shares.
(b) Subject to adjustment in accordance with Subsections 6.2 and 6.3, the following additional maximums are imposed under the Plan: the maximum number of shares of Stock that may be covered by Awards granted to any one individual pursuant to Section 2 (relating to Options and SARs) shall be 800,000 for employees and 75,000 for
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non-employee directors during any fiscal year and the maximum number of shares of Stock that may be covered by Other Stock Awards granted to any one individual pursuant to Section 3 shall be 500,000 for employees and 500,000 for non-employee directors during any fiscal year; and
(c) To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the shares of Stock are not delivered because the Award is settled in cash, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. To the extent that shares of Stock subject to Other Stock Awards, and the issuance of which reduced the maximum number of shares authorized for issuance under the Plan by 1.5 shares, are forfeited or cancelled, or if such an Award terminates or expires without a distribution of shares to the Participant, the number of shares of Stock remaining for Award grants hereunder shall be increased by 1.5 for each share forfeited, cancelledcorporation or otherwise not delivered. Shares of Stock shall not again be available if(a “Derivative Instrument”), directly or indirectly owned beneficially by such shares are surrenderedstockholder or withheld as payment of either the exercise price of an Award and/ or withholding taxes in respect of an Award. Awards that are settled solely in cash shall not reduce the number of shares of Stock available for Awards. Upon the exercise ofby any Award granted in tandem withStockholder Associated Person and any other Award, such related Awards shall be cancelleddirect or indirect opportunity to the extent of the number of shares of Stock as to which the Award is exercised and, notwithstanding the foregoing, such number of shares shall no longer be available for Awards under the Plan. The maximum number of shares of Stock available for delivery under the Plan shall not be reduced for shares subject to plans assumed by the Company in an acquisition of an interest in another company.
6.2 Adjustments for Changes in Capitalization. If the outstanding shares of Stock are changed intoprofit or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, stock dividend, combination, subdivision or similar transaction, or if the Company makes an extraordinary dividend or distribution to its stockholders (including without limitation to implement a spinoff) (each, a “Corporate Transaction”) then, subject to any required action by the stockholders of the Company, the number and kind of shares of Company stock available under the Plan or subject to any limit or maximum hereunder shall automatically be proportionately adjusted, with no action required on the part of the Committee or otherwise. Subject to any required action by the stockholders, the number and kind of shares covered by each outstanding Award, and the price per share in each such Award, shall also be automatically proportionately adjusted forany profit derived from any increase or decrease in the numbervalue of issued shares of the Company resulting fromcorporation held by such stockholder or by any Stockholder Associated Person;
c. a Corporate Transactioncomplete 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 other increaseStockholder Associated Person has a right to vote, directly or decreaseindirectly, any shares of any security of the corporation;
e. any short interest in any security of the numbercorporation 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 shares,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 effectedof 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 receiptlimitation, any such interests held by members of consideration bysuch stockholder’s or any Stockholder Associated Person’s immediate family sharing the Company. Notwithstandingsame 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 foregoing, no fractional shares shall be issuedproposal or made subject to an Option, SAR or Other Stock Awardfor the election of directors in making the foregoing adjustments. All adjustments madea contested election pursuant to this Section shall be final, conclusive14 of the Exchange Act and binding upon the holders of Options, SARsrules and Other Stock Awards.regulations promulgated thereunder;
6.3 Certain Mergersb. a representation that the stockholder is a holder of record of the capital stock of the corporation entitled to vote at such meeting and Other Extraordinary Events. Ifintends to appear in person or by proxy at the Company merges or consolidates with another corporation, or if the Company is liquidated or sells or otherwise disposes of substantially all of its assets while unexercised Optionsmeeting to bring such nomination or other Awards remain outstanding under this Plan, (A) subjectbusiness before the meeting; and
c. a representation as to the provisions of clause (C) below, after the effective date of the merger, consolidation, liquidation, sale or other disposition, as the case may be, 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 Company ispercentage of the surviving corporation, each holdervoting power of anthe corporation’s outstanding Optionstock required to approve or other Award shall be entitled, upon exercise of that Option or Awardadopt the proposal or, in placethe case of it,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 receive,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 optionmeeting and any material interest of such stockholder and Stockholder Associated Person, if any, in such business, the text of the Committeeproposal 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 lieuconnection with the proposal of shares of Stock, (i)such business by such stockholder;
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(C) set forth, as to each person, if any, whom the number and classstockholder proposes to nominate for election or classes of shares of Stockreelection to the Board:
(1) all information relating to such person that would be required to be disclosed in a proxy statement or other securitiesfiling 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 propertyamong 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 holderstockholder 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 have been entitledbe in compliance, if immediatelyelected 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 merger, consolidation, liquidation, salemeeting or other disposition,any postponement or adjournment thereof, and such update and supplement shall be delivered to, or mailed and received by, the holder had beenSecretary at the holderprincipal executive offices of the corporation not later than five (5) business days after the record date for the meeting (in the case of a numberthe update and supplement required to be made as of shares of Stock equalthe record date) and not later than seven (7) business days prior to the numberdate 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 sharesthe update and supplement required to be made as of Stockten (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 which that Optiondetermine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, exercisedin accordance with the procedures set forth in the corporation’s Certificate of Incorporation, these Bylaws and applicable law and, if any proposed nomination or are subjectbusiness 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 AwardAssociated Press, or (ii)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 company that iscorporation 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 surviving corporation in such merger, consolidation, liquidation, salepreceding clauses (A) or other disposition having(B).
(iii) Notwithstanding the foregoing provisions of these Bylaws, a value, asstockholder shall also comply with all applicable requirements of the date of payment under Subsection 6.3(i) as determined byExchange Act and the Committee in its sole discretion, equalrules and regulations thereunder with respect to the value of the shares of Stock or other securities or property otherwise payable under Subsection 6.3(i); (B) whether or not the Company is the surviving corporation, if Options or other Awards have not already become exercisable, the Board of Directors may waive any limitationsmatters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Exchange Act or imposedthe 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 Plan so that all OptionsSection 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 other Awards, from
(B) of the holders of any series of preferred stock of the corporation to elect directors if and after a date prior to the effective dateextent provided for under applicable law, the corporation’s Certificate of that merger, consolidation, liquidation, saleIncorporation or other disposition,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, specifiednotwithstanding that proxies in favor thereof may have been received by the Boardcorporation. For purposes of Directors, shallthese Bylaws, to be exercisable in full; and (C) all outstanding Optionsconsidered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager or SARs may be cancelledpartner of such stockholder or authorized by the Board of Directors asa writing executed by such stockholder (or a reliable reproduction or electronic transmission of the effective date of any merger, consolidation, liquidation, sale or other disposition, provided that with respectwriting) delivered to a merger or consolidation the Company is not the surviving company, and provided further that any optionee or SAR holder shall have the right immediatelycorporation prior to such event to exercise his or her Option or SAR to the extent such optionee or holder is otherwise able to do so in accordance with this Plan or his or her individual Option or SAR agreement; provided, further, that any such cancellation pursuant to this Section 6.3 shall be contingent upon the payment to the affected Participants of an amount equal to (i) in the case of any out-of-the-money Option or SAR, cash, property or a combination thereof having an aggregate value equal to the valuepresentation of such Option or SAR,matters at the meeting stating that such person is authorized to act for such stockholder as determined byproxy at the Committee or the Boardmeeting of Directors, as applicable, in its sole discretion, andstockholders.
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(ii) in the case
Section 6. Waiver of an in-the-money Option or SAR, cash, property or a combination thereof having an aggregate value equal to the excessNotice of the valueMeeting. Any waiver of the per-share amount of consideration paid pursuant to the merger, consolidation, liquidation, sale or other disposition, as the case may be, giving rise to such cancellation, over the exercise price of such Option or SAR multipliednotice, given by the number of shares of Stock subjectperson entitled to notice, whether before or after the Option or SAR.
Any adjustments pursuant to this Subsection 6.3 shall be made by the Board or Committee, as the case may be, whose determination in that respect shall be final, binding and conclusive, regardless of whether or not any such adjustment shall have the result of causing an ISO to cease to qualify as an ISO.
6.4 Changes in Par Value. In the event of a change in the shares of the Company as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such changetime 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 shares withinpurpose of any regular or special meeting of the meaningstockholders need be specified in a waiver of this Plan.notice.
6.5 Limitation on Grantees’ RightsSection 7. Voting Lists. Except as hereinbefore expressly providedThe 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 this Section 6, a Participant shall have no rights by reasonalphabetical order, with the address of, any subdivision or consolidationand the number and class and series of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class orheld by, reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class, shall not affect, and no adjustment by reason thereof shalleach. The list must be made with respectavailable for inspection by any stockholder for any purpose germane to the number or pricemeeting for a period of shares of Stock subjectat least ten (10) days prior to an Award, unless the Committee shall otherwise determine.
6.6 Company Right and Power. The grant ofsuch meeting at any Award pursuant to this Plan shall not adversely affect in any way the right or powerone of the Company (A) to make adjustments, reclassifications, reorganizations or changes of its capital orfollowing locations: (a) during ordinary business structure, (B) to merge or consolidate, (C) to dissolve, liquidate or sell or transfer all or any part of its business or assets or (D) to issue any bonds, debentures, preferred or other preference stock ahead of or affectinghours at the Stock.
6.7 Fractional Shares. If any action described in this Section 6 results in a fractional share for any Participant under any Award hereunder, such fraction shall be completely disregarded and the Participant shall be entitled only to the whole number of shares resulting from such adjustment.
SECTION 7OPERATION AND ADMINISTRATION
7.1 Effective Date; Duration. The Plan is effective asprincipal office of the date of its initial approval bycorporation; or (b) on a reasonably accessible electronic network, provided that the stockholdersinformation required to gain access to such list is provided with the notice of the Company at the 2020 Annual Meeting of Shareholders, to be held on May 20, 2020.meeting. The Plan will have a duration of ten years from May 20, 2020, and provided that in the event of Plan termination, the Planlist shall remain in effect so long as any Awards under it are outstanding; provided further, however, that no Award may be granted under the Plan on a date that is more than ten years from May 20, 2020.
7.2 Vesting. Notwithstanding anything in the Plan to the contrary, all Options, SARs, and Other Awards (including, but not limited to, performance-based awards) shall vest or become exercisable no earlier than twelve months from the date on which such Award is granted, except for the Committee’s discretion to provide for accelerated vesting or exercisability in connection with death, disability, retirement, or events as described above at Section 6.3, and except that up to five percent (5%) of the aggregate number of shares of Stock authorized for issuance under the Plan may be issued pursuant to Options, SARs, and Other Awards without regard to the service vesting and exercisability requirements of this Section 7.2. The term of any Award granted under the Plan will not exceed seven years from the date of grant.
7.3 Uncertificated Stock. To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effectuated on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
7.4 Tax Withholding. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant, through the surrender of shares of Stock which the Participant already owns, or through the surrender of unrestricted shares of Stock to which the Participant is otherwise entitled under the Plan, but only to the extent of the minimum amount required to be withheld under applicable law.
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7.5 Use of Shares. Subject to the overall limitation on the number of shares of Stock that may be delivered under the Plan, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.
7.6 Dividends and Dividend Equivalents. An Award, excluding Options and SAR Awards, may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is earned or vested), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in shares of Stock, mayalso be subject to inspection by any stockholder or such conditions, restrictions and contingencies asstockholder’s agent or attorney during the Committee shall establish, includingwhole time of the reinvestment of such credited amounts in Stock equivalents. In the event an Award is conditioned on the achievement of one or more Performance Goals, any dividend payments or dividend equivalent payments will only be earned, vested or acquired to the extent the underlying Stock subject to the Award is earned, vested or acquired.
7.7 Payments. Awards may be settled through cash payments, the delivery of shares of Stock, the granting of replacement Awards,meeting or any combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish.
7.8 Transferability.adjournment. Except as otherwise provided by applicable law, the Committee, Awardsstock 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 Planplace 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 transferablepresent 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 designatedotherwise 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 Participant by willaffirmative vote of a majority of the remaining directors though less than a quorum of the Board or by the lawssole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of descent and distribution.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.
7.9 Form and TimeSection 11. Compensation. The compensation of Elections. Unless otherwise specified herein, each election required or permitted tonon-employee directors for their services as a director may be madefixed by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the termsresolution of the Plan, asBoard, or by a duly authorized committee of the Committee shall require.
7.10 Agreement with Company. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant, other than cash awards, shall be reflected in such form of a written or electronic document as isBoard. Unless otherwise determined by the Committee. A copy ofBoard or such documentcommittee, directors shall be made available topaid their expenses of attendance at each meeting of the Participant, andBoard or committee thereof. No payment received by a director for services as a director shall preclude a director from serving the Committee may, but need not, require that the Participant sign a copy of such document or otherwise indicate his or her consent. Such document is referred tocorporation in the Plan as an “Award Agreement” regardless of whether any Participant signature is required.other capacity.
7.11 Section 12. Action by Company or SubsidiaryUnanimous Consent of the Board. Any action required or permitted to be taken by any provisions of law, of the CompanyCertificate of Incorporation or of these Bylaws at any Subsidiary under this Plan shallmeeting of the Board or of any committee thereof may be bytaken without a meeting if, prior to such action, of its Board of Directors, or by action of one or moreall members of the Board (includingor 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 committeedescription of the Board) who are duly authorized to act formatter voted on, words that indicate the Board, or (exceptdirector’s asset to the extent prohibited by applicable lawaction taken, and a “signature,” such as any symbol, manual, facsimile, conformed, or applicable rules of any stock exchange)electronic signature adopted by a duly authorized officerperson with the intent to provide an authenticated assertion of such company.
7.12 Gender and Number. Whereapproval that meets the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
7.13 Limitationrequirements of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or propertySection 116 of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating employee the right to be retained in the employ of the Company or any Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.
7.14 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and shall be signed, made or presented by the proper party or parties.
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7.15 Termination of Employment Following Change in Control. In the event that the employment of a Participant who is an employee of the Company or a Subsidiary is terminated by the Company during the six-month period following a Change in Control, all of such Participant’s outstanding Options and SARs may thereafter be exercised by the Participant, to the extent that such Options and SARs were exercisable as of the date of such termination of employment (x) for a period of six months from such date of termination or (y) until expiration of the stated term of such Option or SAR, whichever period is the shorter.
7.16 Section 409A. It is intended that all Options and SARs granted under the Plan shall be exempt from the provisions of Section 409A of the Code and that all Other Stock Awards under the Plan, to the extent that they constitute “non-qualified deferred compensation” within the meaning of Section 409A of the Code, will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder). The Plan and any Award Agreements issued hereunder may be amended in any respect deemed by the Board or the Committee to be necessary in order to preserve compliance with Section 409A of the CodeDGCL or any successor sectionthereto.
Section 13. Removal. Any director may be removed, with or without cause, by the stockholders at any general or special meeting of the Code.
7.17 Regulations and Other Approvals.
(a) The obligation of the Company to sell or deliver Stock with respect to any Award granted under the Plan or make any other distribution of benefits under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws (including, without limitation, the requirements of the Securities Act of 1933) and all applicable requirements of any securities exchange or similar entity, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(b) Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Stock, no such Award shall be granted or payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval, as applicable, has been effected or obtained free of any conditions not acceptable to the Committee.
(c) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933 and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act of 1933, as amended, or regulations thereunder, and applicable state securities laws, and the Committee may require a Participant receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such Participant is acquired for investment only and not with a view to distribution.
(d) With respect to persons subject to Section 16 of the Securities and Exchange Act of 1934, as amended, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3.
7.18 Awards to Employees Subject to Taxation Outside of the United States. Without amending the Plan, Awards may be granted to Participants who are foreign nationals or who are employed outside the United States or both, on such terms and conditions different from those specified in the Plan as may,stockholders whenever, in the judgment of the Committee, be necessary or desirable to furtherstockholders, the purposesbest interests of the Plan. Such different terms and conditionscorporation 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 reflectedgiven either by a single director or the Secretary of the corporation. Such director or directors in Addendaattendance 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 Planprotections 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 applicable Award Agreement. However, no such different termsmanner hereinafter provided.
Section 3. Removal. Any officer may be removed at any time, with or conditionswithout 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 employed ifthe chief executive officer of the corporation, as specified by the Board. The Secretary, or such termsother 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 conditions constitute, or in effect result in, an increase in the aggregate number of shares whichas may be issued underassigned to them from time to time by the PlanBoard or a change inby any officer authorized by the definitionBoard to prescribe the duties of Eligible Grantee.other officers.
SECTION 8COMMITTEE
8.1 AdministrationSection 6. Executive Compensation. The authority to controlsalaries and manage the operation and administrationother compensation of the Planofficers shall be vested in a committee (the “Committee”) in accordance with this Section 8. The Committee shall be selectedfixed from time to time by the Board, and no officer shall consist solely of twobe prevented from receiving such salary or more memberscompensation by reason of the Board who are non-employee Directors withinfact that he or she is also a director of the meaningcorporation.
Section 7. Delegation of Rule 16b-Duties3 under. In the Securities Exchange Actabsence of 1934, as amended. Ifor disability of any officer of the Committee does not exist,corporation or for any other reason determineddeemed sufficient by the Board, the Board may takedelegate its powers or duties to any action underother officer or to any other director for the Plan that would otherwise be the responsibilitytime 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 Committee. Unless otherwisedirectors 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 Board, CryoLife’s CompensationExecutive 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 designatedconducted 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 “Committee” hereunder.Board may designate, in which case the provisions of such charter shall supersede the provisions of this Section 4.
8.2 PowersSection 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 Committee’s administrationacts of a majority of the Planmembers of the Executive Committee, or such other committees, present at any meeting at which there is a quorum, shall be subjectthe 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 following: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 provisionsprinciples set forth in Section 1(b) of this Article VI, the corporation shall be obligated to indemnify any director or officer of the Plan,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 Committee will haveright of the authoritycorporation) 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 discretionwhether 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 select from amongpay 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 Eligible Grantees those persons whocorporation shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number or value of shares or amount of cash coveredindemnify 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 Awards,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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establish
Section 2. Actions by or in the terms, conditions, performance criteria, restrictions, and other provisionsRight of such Awards, and (subjectthe Corporation.
(a) Subject to the restrictions imposedprinciples 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 Section 9)or in the right of the corporation to cancelprocure a judgment in its favor by reason of the fact that such person is or suspend Awards, and to waivewas a director or otherwise modify any vestingofficer 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 restrictions contained in awards. The Committee may also, without obtaining stockholder approval, amend any outstanding award to provide the holder thereof with additional rights or benefits of the type otherwise permitted by the Plan, including without limitation, extending the term thereof;enterprise; provided however, that in no event mayshall the termcorporation 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 Optionclaim, issue or SAR exceed seven years.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 Committee will haveBoard may establish reasonable procedures for the authoritysubmission of claims for indemnification and discretionadvancement of expenses pursuant to interpretthis Article VI, determination of the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisionsentitlement of any Award Agreement madeperson thereto, and review of any such determination.
Section 5. Non-exclusivity and Limitations. The indemnification and advancement of expenses provided pursuant to the Plan, andthis Article VI shall not be deemed exclusive of any other rights to make all other determinations thatwhich a person may be necessaryentitled under any law, the corporation’s Certificate of Incorporation, Bylaws, agreement, vote of stockholders or advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(d) In controlling and managing the operation and administration of the Plan, the Committee shall takedisinterested directors, or otherwise, both as to action in a manner that conformssuch person’s official capacity and as to the certificate of incorporation and by-laws of the Company, and applicable state corporate law.
(e) Subject to Section 6.2 hereof, neither the Board, the Committee nor their respective delegates shall have the authority to (i) re-price (or cancel and regrant) any Option, SAR or, if applicable, other Award at a lower exercise, base or purchase price, (ii) takeaction in any other action (whether incapacity while holding office with the formcorporation. The Board may, at any time, approve indemnification of an amendment, cancellation or replacement grant, or a cash-outadvancement of underwater options)expenses to any other person that the corporation has the effect of repricing an Option, SAR or other Award, or (iii) grant any Option, SAR or other Award that contains a so-called “reload” feature under which additional Options, SARs or other Awards are granted automaticallypower by law to the Grantee upon exercise of the original Option, SAR or Award, without in each instance first obtaining the approval of the Company’s stockholders.
(f) Anything in the Plan to the contrary notwithstanding, neither the Board nor the Committee may accelerate the payment or vesting of any Option, SAR or other Award except in the event of death, disability, retirement or a Change in Control.
8.3 Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers hereunder,indemnify, including, without limitation, the power to designate Participants hereunderemployees, and determine the amount, timing and terms of Awards hereunder, to any person or persons selected by it, including without limitation, any executive officeragents of the Company. Any such allocation or delegation may be revoked by the Committee at any time.corporation.
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InformationSection 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 Furnisheda director or officer and shall inure to Committee. The Company and Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The recordsbenefit of the Companyheirs, executors, and Subsidiaries as to an employee’s or Participant’s employment, terminationadministrators of employment, leave of absence, reemployment and compensation shall be conclusive unless the Committee determines such records to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.person.
8.5 Indemnification. Each(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 shallwas 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 memberdirector, officer, employee, or agent of the Committee,corporation, or who is or was serving at the Board,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 and held harmless by the Company against expenses actually and from any loss, cost, liability or expense that may be imposed upon or 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 resultingother 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 action, suit or proceeding to which he or shethat 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 partynew 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 he or shethis corporation may be involvedhold securities and to otherwise exercise any and all rights and powers that the corporation may possess by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or herits ownership of securities in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall be in addition to any other rights of indemnification or elimination of liability to which such personscorporations.
Article XIII
AMENDMENTS
These Bylaws may be entitled underaltered, amended, or repealed and new Bylaws may be adopted by the Company’sBoard 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 asgenerally or the particular Bylaw or Bylaws in question exclusively to the stockholders. Any Bylaw or amendment to a matterBylaw adopted by the Board may be altered, amended, or repealed by vote of law,the stockholders entitled to vote thereon, or otherwise, or any power thata new Bylaw in lieu thereof may be adopted by the Company may have to indemnify them or hold them harmless.stockholders.
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SECTION 9AMENDMENT AND TERMINATION
(a) The Plan may be terminated or amended by the Board of Directors at any time, except that the following actions may not be taken without stockholder approval:
(i) any increase in the number of shares that may be issued under the Plan (except by certain adjustments provided for under the Plan);
(ii) any change in the class of persons eligible to receive Awards under the Plan;
(iii) any change in the requirements of Section 2.2 hereof regarding the Exercise Price of Options and SARs;
(iv) any re-pricing or cancellation and regrant of any Option or, if applicable, other Award at a lower exercise, base or purchase price, whether in the form of an amendment, cancellation or replacement grant, or a cash-out of underwater options or any action that provides for Awards that contain a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Grantee upon exercise of the original Option or Award; or
(v) any other amendment to the Plan that would require approval of the Company’s stockholders under applicable law, regulation or rule.
Notwithstanding any of the foregoing, adjustments pursuant to paragraph 6.2 shall not be subject to the foregoing limitations of this Section 9.
(b) Options, SARs and other Awards may not be granted under the Plan after the date of termination of the Plan, but Options and SARs granted prior to that date shall continue to be exercisable according to their terms and other Awards shall continue to vest in accordance with their terms.
SECTION 10CHANGE IN CONTROL
Subject to the provisions of paragraph 6.2 (relating to the adjustment of shares), and except as otherwise provided in the Plan or the Award Agreement reflecting the applicable Award, upon the occurrence of a Change in Control as defined in Section 11:
(a) All outstanding Options (regardless of whether in tandem with SARs) shall become fully exercisable.
(b) All outstanding SARs (regardless of whether in tandem with Options) shall become fully exercisable.
(c) All Stock Units, Restricted Stock, Restricted Stock Units, Performance Shares and other Awards, other than Cash-Based Awards, shall become fully vested. Whether or not Cash-Based Awards shall vest upon a Change in Control shall be determined by the Committee in its discretion, either at or after grant.
SECTION 11DEFINED TERMS
In addition to the other definitions contained herein, the following definitions shall apply:
(a) Award. The term “Award” shall mean any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, Other Stock Awards and Cash-Based awards.
(b) Board. The term “Board” shall mean the Board of Directors of the Company.
(c) Change in Control. “Change in Control” means a change in the ownership or effective control of, or in the ownership of a substantial portion of the assets of, the Company, as described in paragraphs (i) through (iii) below.
(i) Change in Ownership of the Company. A change in the ownership of the Company shall occur on the date that any one person, or more than one person acting as a group (within the meaning of paragraph (iv)), acquires ownership of the Company stock that, together with the Company stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company.
(A) If any one person or more than one person acting as a group (within the meaning of paragraph (iv) below), is considered to own more than 50% of the total voting power of the stock of the Company, the acquisition of additional the Company stock by such person or persons shall not be considered to cause a change in the ownership of the Company or to cause a change in the effective control of the Company (within the meaning of paragraph (ii) below).
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(B) An increase in the percentage of the Company stock owned by any one person, or persons acting as a group (within the meaning of paragraph (iv) below), as a result of a transaction in which the Company acquires its stock in exchange for property, shall be treated as an acquisition of stock for purposes of this paragraph (i).
(C) Except as provided in (B) above, the provisions of this paragraph (i) shall apply only to the transfer or issuance of the Company stock if such stock remains outstanding after such transfer or issuance.
(ii) Change in Effective Control of the Company.
(A) A change in the effective control of the Company shall occur on the date that either of (1) or (2) below occurs:
(1) Any one person, or more than one person acting as a group (within the meaning of paragraph (iv) below), acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or
(2) A majority of the members of the Board are replaced during any 12 month period by Directors whose appointment or election is not endorsed by a majority of the Board prior to the date of the appointment or election.
(B) A change in effective control of the Company also may occur with respect to any transaction in which either of the Company or the other entity involved in a transaction experiences a Change of Control event described in paragraphs (i) or (iii).
(C) If any one person, or more than one person acting as a group (within the meaning of paragraph (iv) below), is considered to effectively control the Company (within the meaning of this paragraph (ii)), the acquisition of additional control of the Company by the same person or persons shall not be considered to cause a change in the effective control of the Company (or to cause a change in the ownership of the Company within the meaning of paragraph (i) above).
(iii) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets shall occur on the date that any one person, or more than one person acting as a group (within the meaning of paragraph (iv) below), acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value (within the meaning of paragraph (iii)(B)) equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.
(A) A transfer of the Company’s assets shall not be treated as a change in the ownership of such assets if the assets are transferred to one or more of the following:
(1) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company stock;
(2) An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;
(3) A person, or more than one person acting as a group (within the meaning of paragraph (iv) below) that owns, directly or indirectly, 50% or more of the total value or voting power of all of the outstanding stock of the Company; or
(4) An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii)(A)(3).
For purposes of this paragraph (iii)(A), and except as otherwise provided, a person’s status is determined immediately after the transfer of assets.
(B) For purposes of this paragraph (iii), gross fair market value means the value of all the Company assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(iv) For purposes of this Section 11(c), persons shall be considered to be acting as a group if they are owners of an entity that enters into a merger, consolidation, purchase, or acquisition of assets, or similar business transaction with the Company. If a person, including an entity shareholder, owns stock in the Company and another entity with which the Company enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction, such shareholder shall be considered to be acting as a group with the other shareholders in a corporation
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only to the extent of the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Persons shall not be considered to be acting as a group solely because they purchase or own stock of the Company at the same time, or as a result of the same public offering of the Company’s stock.
(d) Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.
(e) Covered Employee. The term “Covered Employee” means an Eligible Grantee who is, or who is anticipated to become, between the time of grant and payment of the Award, a “covered employee,” as such term is defined in Section 162(m)(3) of the Code (or any successor section thereof).
(f) Eligible Grantee. The term “Eligible Grantee” shall mean any director, officer, employee, consultant, or agent of the Company or a Subsidiary, as determined by the Committee in its sole discretion. An Award may be granted to an eligible grantee, in connection with hiring, retention or otherwise, prior to the date the eligible grantee first performs services for the Company or the Subsidiaries, provided that such Award shall not become vested prior to the date the eligible grantee first performs such services or the director assumes his position.
(g) Fair Market Value. For purposes of determining the “Fair Market Value” of a share of Stock as of any date, then the “Fair Market Value” as of that date shall be the closing sale price of the Stock on that date on the New York Stock Exchange.
(h) Performance Goals. The term “Performance Goals” means performance goals based on the attainment by the Company or any Subsidiary of the Company (or any division or business unit of any such entity), or any two or more of the foregoing, of performance goals established by the Committee in its sole discretion, based on one or more of the following criteria, which shall not be required to be calculated in accordance with GAAP and which may be adjusted measures: (1) return on total stockholders’ equity; (2) earnings per share of Stock; (3) earnings before any or all of interest, taxes, minority interest, depreciation and amortization; (4) economic profit; (5) sales or revenues; (6) return on assets, capital or investment; (7) market share; (8) control of operating or non-operating expenses; (9) reductions in certain costs (including reductions in inventories or accounts receivable or reductions in operating expenses); (10) operating profit; (11) operating cash flow; (12) free cash flow; (13) return on capital or increase in pretax earnings; (14) net earnings; (15) margins; (16) market price of the Company’s securities; (17) pre-tax earnings; (18) net after-tax earnings per share; (19) working capital targets; (20) working capital and the ratio of sales to net working capital; (21) earnings before interest, taxes, depreciation and amortization (“EBITDA”); (22) sales of one or more products or service offerings; (23) control of operating and/or non-operating expenses; (24) any combination of, or a specified increase in, any of the foregoing; and (25) general comparisons with other peer companies or industry groups or classifications with regard to one or more of the foregoing criteria. The relative weights of the criteria that comprise the Performance Goals shall be determined by the Committee in its sole discretion. In establishing the Performance Goals for a performance period, the Committee may establish different Performance Goals for individual Participants or groups of Participants. Subject to the limitations in Section 5, the Committee in its sole discretion shall have the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary of the Company or the financial statements of the Company or any Subsidiary of the Company, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles or practices, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business, as applicable, or otherwise as the Committee deems appropriate. Performance Goals may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. “Performance Goals” shall also mean any other factors directly tied to the performance of the Company and/or one or more divisions and/or Subsidiaries or other performance criteria designated by the Committee.
(i) Subsidiaries. The term “Subsidiary” means any present or future subsidiary corporation of the Company within the meaning of Section 424(f) of the Code, and any present or future business venture designated by the Committee in which the Company has a significant interest, as determined in the discretion of the Committee.
(j) Stock. The term “Stock” shall mean shares of common stock of the Company.
SECTION 12GOVERNING LAW
This Plan shall be governed by, and construed in accordance with, the laws of the State of Georgia, except to the extent that the Florida Business Corporation Act shall be applicable.
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