UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ | Preliminary Proxy Statement |
[ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
[ | Definitive Proxy Statement |
[ ] | Definitive Additional Materials |
[ ] | Soliciting Material Pursuant to §240.14a-12 |
CRYOLIFE, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
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1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
____________________________
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
March 26, 201931, 2020
To Our Stockholders:
On behalf of the Board of Directors, we invite you to attend the Annual Meeting of Stockholders of CryoLife, Inc. to be held at CryoLife, Inc.’s Corporate Headquarters, 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144, on May 15, 201920, 2020 at 9:00 a.m., EDT. Due to health and safety concerns from the coronavirus (COVID-19) outbreak 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 Meeting of Stockholders will be held this year as a virtual only meeting, 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 Annual Meeting and Proxy Statement, which describes the formal business to be transacted and procedures for voting on matters to be considered atduring the Annual Meeting.
It is important that your shares be represented atduring the Annual Meeting. Whether or not you plan to attend, we request that you follow the instructions provided on the noticeNotice or proxy card you received by mail and further described herein to review the Proxy Statement and vote your shares via internet, telephone, or mail. You may, of course, choose to attend the Annual Meeting and vote in person.
your shares during the meeting. If you planwish to attendparticipate in the Annual Meeting, are a stockholder of record, and received our notice by mail, please bring a form of identificationmeeting, you will need to have your 16-digit Control Number included on your Notice or your proxy card to join the Annual Meeting. If your shares are not registered in your own name but rather are held in street name and you would like to attend the Annual Meeting, please ask the broker, trust, bank, or other nominee that holds the shares to provide you with evidence of your share ownership and bring it along with your identification to the Annual Meeting.meeting.
However you choose to participate, we encourage you to review this Proxy Statement and vote your shares.
Sincerely,
J. PATRICK MACKIN
Chairman, President, and Chief Executive Officer
CRYOLIFE, INC. | 20192020 Proxy Statement
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF CRYOLIFE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CRYOLIFE, INC. (the “Annual Meeting”) will be held at CryoLife, Inc.’s Corporate Headquarters, 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144, on May 15, 2019,20, 2020, at 9:00 a.m., EDT,EDT. Due to health and safety concerns from 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 Annual Meeting this year. The Annual Meeting of Stockholders will be held as a virtual only meeting, accessible at the following website address: www.virtualshareholdermeeting.com/CRY2020, for the following purposes:
1. | To elect as directors the nine nominees named in the attached Proxy Statement to serve until the next Annual Meeting of Stockholders or until their successors are duly qualified or until their earlier death, resignation, or removal. |
2. | To approve, by non-binding vote, the compensation paid to CryoLife’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion. |
3. | To approve |
4. | To ratify the approval of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, |
5. | To transact such other business as may be properly brought before the Annual Meeting or any adjournments thereof. |
Only record holders of CryoLife’s common stock at the close of business on March 6, 2019,11, 2020, will be eligible to vote atduring the Annual Meeting. Your attendance atduring the Annual Meeting is very much desired. However, if there is any chance you may not be able to attend the Annual Meeting, please follow the instructions on the noticeNotice or proxy card you received by mail to execute your vote by internet, telephone, or mail.
Important notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on May 15, 2019.20, 2020. 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 Proxy Statement and our 2019 Annual Report to Stockholders, on the internet athttp://www.astproxyportal.com/ast/01609www.proxyvote.com and providing the means whereby you can request a paper copy of proxy materials be sent via U.S. mail.
By Order of the Board of Directors:
JEAN F. HOLLOWAY
Corporate Secretary
Date: March 26, 201931, 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, 2018,2019, containing financial statements, is available via the proxy information website provided on your proxy notice.Notice or proxy card.
CRYOLIFE, INC. | 20192020 Proxy Statement
TABLE OF CONTENTS
Page | |
QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING | 2 |
PROPOSAL ONE – ELECTION OF DIRECTORS | 8 |
CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS | 12 |
Procedures for Stockholders Who Wish to Submit Recommendations to the Board of | 15 |
CryoLife, Inc. Code of Conduct | 15 |
Policies and Procedures for Review, Approval, or Ratification of Transactions with Related Parties | 16 |
Compensation Committee Interlocks and Insider Participation | 17 |
Communication with the Board of Directors and | 17 |
Availability of Corporate Governance Documents | 17 |
DIRECTOR COMPENSATION | 17 |
REPORT OF THE AUDIT COMMITTEE | 20 |
PROPOSAL TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATION | 21 |
COMPENSATION DISCUSSION AND ANALYSIS | 22 |
REPORT OF THE COMPENSATION COMMITTEE | 40 |
EXECUTIVE COMPENSATION | 41 |
CERTAIN BENEFICIAL OWNERSHIP | 61 |
PROPOSAL THREE – APPROVAL | 63 |
PROPOSAL FOUR – RATIFICATION OF THE APPROVAL OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 66 |
Householding | 68 |
TRANSACTION OF OTHER BUSINESS | 68 |
WHERE YOU CAN FIND ADDITIONAL INFORMATION | 68 |
APPENDIX A – | A-1 |
APPENDIX B – | B-1 |
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1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
___________________________
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to our stockholders as of the close of business on March 6, 2019,11, 2020, 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 Meeting of Stockholders (the “Annual Meeting”) to be held on May 15, 2019,20, 2020, at 9:00 a.m., EDT. The Annual Meeting will be held in the auditoriumvirtually only at the CryoLife Corporate Headquarters, 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144.following web address: www.virtualshareholdermeeting.com/CRY2020. The voting of shares will not affect a stockholder’s right to attend the Annual Meeting. A paper proxy that is signed may be changed by sending in a timely, but later dated, signed paper proxy. Any stockholder sending in or completing a proxy may also revoke it at any time before it is exercised by giving timely notice to Jean F. Holloway, General Counsel and Corporate Secretary, CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144, (770) 419-3355. We are making our proxy materials available to stockholders beginning on March 26, 2019.31, 2020.
QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING ATDURING THE ANNUAL 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 March | |
At the close of business on the record date, CryoLife had outstanding a total of | ||
Who is entitled to attend and vote | Only holders of record of shares of our common stock at the close of business on March |
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How many shares must be present or represented to conduct business | The presence |
CRYOLIFE, INC. | 2019 Proxy Statement
2
What items of business will be voted on | The items of business to be voted on
1. To elect as directors the nine nominees named in the
2. To approve, by non-binding vote, the compensation paid to CryoLife’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion.
3. To approve
4. To ratify the approval of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31,
5. To transact such other business as may be properly brought before the Annual Meeting or any adjournments thereof. | |
What happens if additional matters are presented | Other than the matters set forth in items 1 – 5 above, management is not aware of any other matters that may come before the Annual Meeting. If any other matter or matters are properly brought before the Annual Meeting, the person(s) named as your proxyholder(s) on the enclosed proxy card will have discretionary authority to vote the shares represented by the effective proxies as they deem advisable. | |
How does the Board of Directors recommend that I vote? | Our Board of Directors recommends that you vote your sharesFOR the election of each of the director nominees identified in this Proxy Statement,FOR the approval, on an advisory basis, of the compensation of our named executive officers,FOR the approval and funding of | |
What shares can I vote | You may vote shares you owned as of March |
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What is the difference between holding shares as a stockholder of record and as a beneficial owner? | Most of our stockholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between common stock held of record and those owned beneficially. |
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Stockholders of Record. If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, thestockholder of record, and these proxy materials are being sent directly to you by us. As thestockholder of record, you have the right to vote | ||
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, 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 Annual Meeting? | Whether you hold shares directly as the stockholder of record or as a beneficial owner, you may vote in advance of the Annual Meeting by:
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
Voting by Internet. If you are a stockholder of record, you may vote in advance of the Annual Meeting by following the instructions provided on your proxy card. Most brokers, trustees, and similar nominees also provide beneficial owners with the option to vote by Internet, although practices may vary. If you are a beneficial owner, you must follow the instructions provided to you by your broker, trustee, or other nominee on your voting instruction card.
Voting by Telephone.If you are a stockholder of record, you may vote in advance of the Annual Meeting by telephone by following the instructions provided on your proxy card. Most brokers, trustees, and similar nominees also provide beneficial owners with the option to vote by telephone, although practices may vary. If you are a beneficial owner, you must follow the instructions provided to you by your broker, trustee, or other nominee on your voting instruction card.
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 Annual Meeting. If you provide specific instructions with regard to items of business to be voted on |
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How can I vote my shares | Shares held in your name as the stockholder of record may be voted | |
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 | |
What do I need to attend the Annual Meeting? | Attendance | |
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 as required to our transfer agent to allow for the tabulation of votes and certification of the vote and to facilitate a successful proxy solicitation. | |
How are votes counted and what vote is required to approve each item? | Each outstanding share of common stock entitles the holder thereof to one vote on each matter considered |
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Nominees for election as directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Since there are nine directorships to be filled, this means that the nine individuals receiving the most votes will be elected. Abstentions and broker non-votes will therefore not be relevant to the outcome. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority and has not received voting instructions from the beneficial owner. |
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CRYOLIFE, INC. | 2020 Proxy Statement
The advisory votes cast for the approval of the compensation paid to CryoLife’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, must exceed the votes cast against the approval of such compensation in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome. | ||
The proposal to approve | ||
The votes cast for the ratification of the approval of the appointment of Ernst & Young LLP as CryoLife’s independent registered accounting firm must exceed the votes cast against the ratification in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome. Please note that brokers holding shares for a beneficial owner that have not received voting instructions with respect to the ratification of the approval of the appointment of Ernst & Young LLP will have discretionary voting authority with respect to this matter. | ||
There are no rights of appraisal or similar dissenters’ rights with respect to any matter to be acted upon pursuant to this Proxy Statement. | ||
What happens if the Annual Meeting is adjourned? | Assuming the presence of a quorum, if our Annual Meeting is adjourned to another time and place, no additional notice will be given of the adjourned meeting if the time and place of the adjourned meeting is announced | |
What else should I know about the virtual process for the Annual Meeting? | We will provide technical support for all stockholders attending the Annual Meeting. Stockholders of record or those who have received a “legal proxy” will be able to submit questions while attending the Annual Meeting. A replay of the Annual Meeting will be available after it concludes. | |
What should I do in the event that I receive more than one set of proxy materials? | You may receive more than one notice mailing or, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. Please execute votes for each communication to ensure that all your shares are voted. |
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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, 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, officers, or other employees for soliciting proxies. | |
Where can I find the voting results of the Annual Meeting? | We intend to announce preliminary voting results | |
What is the deadline for submitting proposals for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as | Appropriate proposals of stockholders intended to be presented at CryoLife’s
Therefore, for the |
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CRYOLIFE, INC. | 20192020 Proxy Statement
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PROPOSAL ONE–ELECTION OF DIRECTORS
Directors of CryoLife elected atduring the Annual Meeting to be held on May 15, 2019,20, 2020, will hold office until the next annual meeting, until their successors are duly qualified, or until their earlier death, resignation, or removal.
Director Nominees
Each of the nominees is currently a director of CryoLife. Should any nominee for the office of director become unable to accept nomination or election, it is the intention of the persons named on the proxy card, unless otherwise specifically instructed in the Proxy Statement, to vote for the election of such other person as the Board of Directors may recommend.
The following table sets forth the name and age of each nominee, the period during which each such person has served as a director of CryoLife, the number of shares of CryoLife’s common stock beneficially owned, either directly or indirectly, by such person, and the percentage of outstanding shares of CryoLife’s common stock such ownership represented at the close of business on March 6, 2019,11, 2020, according to information received by CryoLife. None of the shares of stock noted below are subject to a pledge or similar arrangement. Except for J. Patrick Mackin, our President, Chief Executive Officer, and Chairman of the Board, none of the nominees holds any other position or office with CryoLife.
Name of Nominee | Director Since | Age | Shares of CryoLife Stock Beneficially Owned(1)(#) | Percentage of Outstanding Shares of CryoLife Stock(7) (%) |
Thomas F. Ackerman | 2003 | 64 | 103,987(2) | * |
Daniel J. Bevevino | 2003 | 59 | 103,987(2) | * |
Marna P. Borgstrom | 2018 | 65 | 3,456(3) | * |
James W. Bullock | 2016 | 62 | 12,904(2) | * |
Jeffrey H. Burbank | 2017 | 56 | 8,164(2) | * |
J. Patrick Mackin | 2014 | 52 | 517,019(4) | 1.4 |
Ronald D. McCall | 1984 | 82 | 153,699(5) | * |
Harvey Morgan | 2008 | 77 | 81,237(6) | * |
Jon W. Salveson | 2012 | 54 | 83,987(2) | * |
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 Qualifications and Biographical Information
Thomas F. Ackerman has served as a director of CryoLife since December 2003. Until early 2016, Mr. Ackerman served as a Senior Financial Advisor of Charles River Laboratories International, Inc. (NYSE: CRL) (“Charles River Laboratories”), a position he held since August 2015. Until February 2017, Mr. Ackerman served as a consultant to Charles River Laboratories.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 fromof Charles River Laboratories. From 1999 to 2005, he served as Senior Vice President and Chief Financial Officer and from 1996 to 1999, heof 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 (his1979. Mr. Ackerman’s license is currently inactive).inactive.
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The Board of Directors has determined 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 includeincluded a variety of medical solutions including medical diagnostic imaging and patient monitoring systems, as well as businesses focused on energy efficient lighting and consumer products. From March 2008 to December 31, 2009, Mr. Bevevino was employed by Philips as the Head of Post-Merger Integration – Respironics, as well as in various operating capacities, to help facilitate the integration of the combined companies. He is currently an independent consultant providing interim chief financial officer services in the life sciences industry, and he currently serves as a director of one of the private companies for which he provides services. He began his career as a Certified Public Accountant with Ernst & Young (hisLLP. Mr. Bevevino’s license is currently inactive).inactive. Mr. Bevevino received a B.S. in Business Administration from Duquesne University and an MBA from the University of Notre Dame.
The Board of Directors has determined that Mr. Bevevino should serve as a director of CryoLife because of his expertise in accounting and financial reporting, particularly in the medical device industry.
Marna P. Borgstromhas served as 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 boards including Vizient, Inc., a privately held, member-driven health carehealthcare performance improvement company, the Coalition to Protect America'sAmerica’s Healthcare, and the Healthcare Institute. Ms. Borgstrom received her Bachelor of Arts from Stanford University and MastersandaMasters in Public Health from Yale University.
The Board of Directors has determined that Ms. Borgstrom should serve as a director of CryoLife because of her extensive experience coupled with her knowledge of and recognition withinas a senior executive leading a large, complex organization in the healthcare industry.sector.
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: (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 Boardboard 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,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 worldwidesenior leadership experience in the global medical device industry, particularly in the area of company growth.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. (NASDAQ:(formerly NASDAQ: NXTM) (“
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CRYOLIFE, INC. | 2020 Proxy Statement
(“NxStage Medical”), a leading medical technology company, positions he held since he founded NxStage Medical in 1998, until Fresenius Medical Care completed its acquisition of NxStage Medical in February 2019. Mr. Burbank has over 30 years of management experience with companies developing, marketing, and manufacturing products for end-stage renal disease patients. Prior to founding NxStage Medical, Mr. Burbank was a co-founder of Vasca, Inc., a company that provided innovative implantable access devices, where he was the President and Chief Executive Officer, as well as Chairman of the Board. Mr. Burbank has over 30 years of senior leadership experience in the medical device industry, developing, marketing, and manufacturing products for end-stage renal disease patients. During his career he has been an inventor on over 50 U.S. patents for medical devices. Mr. Burbank received a B.S. in Industrial Engineering from Lehigh University.
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The 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 in the medical device industry.
J. Patrick Mackin was named President and Chief Executive Officer of CryoLife in September 2014. He was appointed to the CryoLife Board of Directors in October 2014, and he was appointed Chairman of the Board of Directors in April 2015. Mr. Mackin has more than 25 years of experience in the medical device industry. Prior to joining CryoLife, Mr. Mackin served as President of Cardiac Rhythm Disease Management, the then largest operating division of Medtronic Inc.plc (NYSE: MDT)(“Medtronic”), from August 2007 to August 2014. At Medtronic, he previously held the positions of Vice President, Vascular, Western Europe 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 the 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 graduate of the U.S. Military Academy at West Point.
The Board of Directors has determined that Mr. Mackin should serve as a director of CryoLife because of his business acumen and substantial globalsenior leadership experience in the global medical device industry. In addition, the Board of Directors believes that it is appropriate and useful to have the President and Chief Executive Officer of CryoLife serve as a member of the Board of Directors.
Ronald D. McCall has served as a director of CryoLife since January 1984. From 1985 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. and a J.D. from the University of Florida.
The Board of Directors has determined that Mr. McCall should serve as a director of CryoLife because of his legal training and experience. Also, the Board of Directors believes that his long-standing involvement with CryoLife provides him with a unique perspective on current issues facing the Company.
Harvey Morganhas served 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 Director of the investment banking firm Bentley Associates, L.P. from 2004 to December 31, 2012, and from 2001 to 2004 he was a Principal of Shattuck Hammond Partners, an independent investment banking 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, whichfrom 2007 to 2015, when Family Dollar Stores, Inc. was acquired by Dollar Tree Inc. (NASDAQ: DLTR) in 2014,, and Cybex International, Inc. (NASDAQ: CYBI), a leading manufacturer of premium exercise equipment.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.
The Board of Directors has determined that Mr. Morgan should serve as a director of CryoLife because of his pastextensive business experience, including in the healthcare sector, particularly with respect to investment banking and capital markets.
Jon W. Salvesonhas served as a director of CryoLife since May 2012. Mr. Salveson is the Vice Chairman, Investment Banking and Chairman of the Healthcare Investment Banking Group at Piper JaffraySandler Companies (NYSE: PJC)(“PIPR) (“Piper Jaffray”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 was appointed Global Head of Investment Banking and a member of the Executive Committee of Piper Jaffray in 2004 and has served in his present position as Vice Chairman, Investment Banking since July 2010. Mr. Salveson also serves on the Board of Directors of CHF Solutions, Inc. (NASDAQ: CHFS), an early-stage medical device company, and Asklepios
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CRYOLIFE, INC. | 2020 Proxy Statement
Biopharmaceuticals, Inc., a private company specializing in gene therapy technologies. Mr. Salveson received his undergraduate degree from St. Olaf College in 1987 and an M.M.M. in finance from the Kellogg Graduate School of Management at Northwestern University.
The Board of Directors has determined that Mr. Salveson should serve as a director of CryoLife because of his broad 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.
CRYOLIFE, INC. | 2019 Proxy Statement
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Required Vote
Nominees for election as directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Since there are nine directorships to be filled, this means that the nine individuals receiving the most votes will be elected. Accordingly, abstentions and broker non-votes will not be relevant to the outcome.
The Board of Directors'Directors’ Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THEnine NOMINEES FOR DIRECTOR LISTED IN THIS PROPOSAL ONE.
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CRYOLIFE, INC. | 20192020 Proxy Statement
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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS
Our Board of Directors believes that the purpose of corporate governance is toserve the interests of the Company and the Company’s stockholders in a manner that is consistent with itsthe 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 practices that the Board of Directors 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 March 2019,February 2020, and based on the information available to it, the Board of Directors determined that none of Ms. Borgstrom or Messrs. Ackerman, Bevevino, Bullock, Burbank, McCall, Morgan, or Salveson, or Dr. Ronald C. Elkins, who served as a director until his retirement in May 2018, has or had a material relationship with CryoLife, and that each qualified as an independent directorsdirector under NYSE Listing Standards.
In addition to qualifying as “independent” within the meaning of Section 303A.02 of the NYSE Listing Company Standards, each member of the Compensation Committee must be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and at least two members 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.
Until February 2017, Mr. Ackerman served as a Consultant to Charles River Laboratories. Prior to that date, Mr. Ackerman held various positions at Charles River Laboratories, including most recently, as Senior Financial Advisor. CryoLife has made purchases from Charles River Laboratories relating to supplies, including supplies for certain of its clinical trials, in each of the last several years and anticipates doing so in the current year. CryoLife’s purchases from Charles River Laboratories were made on an arm’s-length basis. The amount of these purchases falls within the categorical standards for commercial relationships that are deemed not material and would not impair a director’s independence. The Board of Directors understood that Mr. Ackerman’s compensation from Charles River Laboratories was in no way impacted by the size or amount of the business transacted between the two companies. The Board of Directors determined that Mr. Ackerman’s relationship with Charles River Laboratories is not a material relationship that could impair his independence as a director as of CryoLife.
Since 2005,Ms. Borgstrom has served as the CEO of Yale New Haven Health. Prior to that date, Ms. Borgstrom held various senior leadership positions at Yale New Haven Health. In 2018,2019, Yale New Haven Health paid CryoLife $341,000 for tissue preservation services, and BioGlue and On-X products, provided by CryoLife, and we expect this relationship to continue. These purchases were made on an arm’s-length bases. The Board of Directors considered this relationship and determined that Ms. Borgstrom’s relationship with Yale New Haven Health is not a material relationship that could impair her independence as a director of CryoLife.
Dr. Elkins is a former Chief of the Section of Thoracic and Cardiovascular Surgery at the University of Oklahoma Health Services Center and is a Professor Emeritus of the Center. In 2018, the Center paid CryoLife for tissue preservation services and BioGlue and On-X products provided by CryoLife. Dr. Elkins’ son, Charles Craig Elkins, M.D., is a cardiac surgeon who has implanted CryoLife preserved cardiac tissues at Integris Baptist Medical Center in Oklahoma City. Integris Health, including Integris Baptist Medical Center, paid CryoLife for tissue preservation services and BioGlue and On-X products in 2018, and we expect this relationship to continue. These purchases were made on an arm’s-length basis. The Board of Directors considered these relationships and determined that they are not material relationships that would have impaired Dr. Elkins’s independence.
CRYOLIFE, INC. | 2019 Proxy Statement
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The Board of Directors’ Right to Retain Advisors
The Board of Directors has authorized committees of the Board of Directors to retain their own advisors, such as auditors, compensation consultants, search firms, legal counsel, and others, to the extent the committees deem it appropriate.
The Board of Directors’ Leadership Structure
The President and Chief Executive Officer of CryoLife serves as the Chairman of the Board of Directors. The Board of Directors believes that this structure promotes fluid communication and coordination between the Board of Directors and management. Also, the Board of Directors believes that Mr. Mackin is well-suited to fill his management and Board of Directors roles and that the Board of Directors benefits from his serving in these dual roles.
In order to foster the Board of Directors’ independence from management, the leadership structure of the Board of Directors also includes a Presiding Director, a position held by an independent director. Mr. McCall assumed the role of Presiding Director in December 2005. The Presiding Director has frequent contact with Mr. Mackin and other members of management on a broad range of matters and has additional corporate governance responsibilities for the Board of Directors. Mr. McCall also serves as liaison between Mr. Mackin and the independent directors, approves meeting agendas and schedules to insure there is sufficient time for discussion of all agenda items, approves certain information sent to the Board, and has the authority to call meetings of the independent directors, anddirectors. Stockholders, can if requested by major stockholders,seek to directly consult with them directly.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. While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board of Directors also have responsibility for risk management.
In particular, the Compensation Committee is responsible for ensuring that our compensation policies and practices do not incent excessive or inappropriate risk-taking by employees or non-employee directors. The Audit Committee is primarily responsible for, in coordination with our independent registered public accounting firm, oversight of our internal controls, operation of our internal audit, 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 assists inexercises 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 2018,2019, 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 tennine meetings during 2018.2019. All of the then-current members of the Board of Directors attended the 20182019 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 2018,2019, the Board of Directors had four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee, and the Compliance Committee. In 2018,2019, the Audit Committee met fourteeneleven times, the Compensation Committee met fifteeneight times, the Corporate Governance Committee met eightsix times, the Compliance Committee met four times, the Compensation Committee and the Corporate Governance Committee met jointly one time, and the Audit Committee and the Compliance Committee met jointly one time. These committees are described below, and the following table lists the members of each of the standing committees as of the date of this Proxy Statement:
CRYOLIFE, INC. | 2019 Proxy Statement
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Director | Audit | Compensation | Corporate | Compliance |
J. Patrick Mackin, Chairman, President, and Chief Executive Officer | ||||
Thomas F. Ackerman | ✔ | ✔ | ||
Daniel J. Bevevino | ✔ | Chair | ||
Marna P. Borgstrom | ✔ | |||
James W. Bullock | ✔ | ✔ | ||
Jeffrey H. Burbank | ✔ | |||
Ronald D. McCall, Presiding Director | ✔ | Chair | ||
Harvey Morgan | Chair | ✔ | ||
Jon W. Salveson | ✔ | Chair |
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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 2018.2019. 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. SeePolicies and Procedures for Review, Approval, or Ratification of Transactions with Related Parties beginning on page 16; see also theReport of the Audit
Compensation Committee on page 20.
The Audit Committee reviews the general scope of CryoLife’s annual audit Interlocks and the nature of services to be performed for CryoLife in connectionInsider Participation
17
Communication with it, acting as liaison between the Board of Directors and Its Committees
17
Availability of Corporate Governance Documents
17
DIRECTOR COMPENSATION
17
REPORT OF THE AUDIT COMMITTEE
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PROPOSAL TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATION
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COMPENSATION DISCUSSION AND ANALYSIS
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REPORT OF THE COMPENSATION COMMITTEE
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EXECUTIVE COMPENSATION
41
CERTAIN BENEFICIAL OWNERSHIP
61
PROPOSAL THREE – APPROVAL and funding OF A new equity and cash incentive plan
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PROPOSAL FOUR – RATIFICATION OF THE APPROVAL OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Householding
68
TRANSACTION OF OTHER BUSINESS
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
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APPENDIX A – NON-GAAP FINANCIAL MEASURE INFORMATION
A-1
APPENDIX B – Proposed new equity and cash incentive plan
B-1
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CRYOLIFE, INC. | 2020 Proxy Statement
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
___________________________
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to our stockholders as of the close of business on March 11, 2020, 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 Meeting of Stockholders (the “Annual Meeting”) to be held on May 20, 2020, at 9:00 a.m., EDT. The Annual 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 Annual 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.
QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING DURING THE ANNUAL 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 | |
At the close of business on the record date, CryoLife had outstanding a total of 37,679,978 shares of common stock, excluding a total of 1,484,017 shares of treasury stock held by CryoLife, which are not entitled to vote. Each outstanding share of common stock will be entitled to one vote, non-cumulative, at the Annual Meeting. | ||
Who is entitled to attend and vote during the Annual Meeting? | Only holders of record of shares of our common stock at the close of business on March 11, 2020, are entitled to notice of, to attend, and to vote during the Annual Meeting and to notice of any adjournments or postponements of such Annual Meeting. |
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CRYOLIFE, INC. | 2020 Proxy Statement
How many shares must be present or represented to conduct business during the Annual Meeting (that is, what constitutes a quorum)? | The | |
What items of business will be voted on during the Annual Meeting? | The items of business to be voted on during the Annual Meeting are as follows: 1. To elect as directors the nine nominees named in the enclosed Proxy Statement to serve until the next Annual Meeting of Stockholders or until their successors are duly qualified or until their earlier death, resignation, or removal. 2. To approve, by non-binding vote, the compensation paid to CryoLife’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and 3. To approve and fund a new equity and cash incentive plan. 4. To ratify the 5. To transact such other business as may be properly brought before the Annual Meeting or | |
What happens if additional matters are presented during the Annual Meeting? | Other than the matters set forth in items 1 – 5 above, management is not aware of any other matters that may come before the Annual Meeting. If any other matter or matters are properly brought before the Annual Meeting, the person(s) named as your proxyholder(s) on the enclosed proxy card will have discretionary authority to vote the shares represented by the effective proxies as they deem advisable. | |
How does the Board of Directors recommend that I vote? | Our Board of Directors recommends that you vote your shares FOR the election of each of the director nominees identified in this Proxy Statement, FOR the approval, on an advisory basis, of the compensation of our named executive officers, FOR the approval and funding of a new equity and cash incentive plan, and FOR the ratification of the approval of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2020. | |
What shares can I vote during the Annual Meeting? | You may vote shares you owned as of March 11, 2020, the record date, including shares held directly in your name as the stockholder of recordand all shares held for |
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CRYOLIFE, INC. | 2020 Proxy Statement
What is the difference between holding shares as a stockholder of | Most of our stockholders hold their shares through a broker or other nominee rather than directly in | |
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 | ||
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, 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 during the Annual Meeting or grant a proxy and direct the proxyholder to vote your shares during the Annual Meeting as you have instructed. If you hold shares through a broker, trustee, or nominee you may also vote during the Annual Meeting, but only after you obtain a “legal proxy” from the broker, trustee, or nominee that holds your shares in advance of the Annual Meeting, giving you the right to vote your shares during the Annual Meeting. If you are a beneficial owner, you may attend the Annual Meeting as a guest without obtaining a “legal proxy” but will be unable to vote your shares or submit questions. | ||
How can I vote my shares without attending the Annual Meeting? | Whether you hold shares directly as the stockholder of record or as a beneficial owner, you may vote in advance of the Annual Meeting by:
Voting by Internet. If you are a stockholder of record, you may vote in advance of the Annual Meeting by following the instructions provided on your proxy card. Most brokers, trustees, and similar nominees also provide beneficial owners with the option to vote by Internet, although practices may vary. If you are a beneficial owner, you must follow the instructions provided to you by your broker, trustee, or other nominee on your voting instruction card. Voting by Telephone. If you are a stockholder of record, you may vote in advance of the Annual Meeting by telephone by following the instructions provided on your proxy card. Most brokers, trustees, and similar nominees also provide beneficial owners with the option to vote by telephone, although practices may vary. If you are a beneficial owner, you must follow the instructions provided to you by your broker, trustee, or other nominee on your voting instruction card. 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 Annual Meeting. If you provide specific instructions with regard to items of business to be voted on during the Annual Meeting, your shares will be voted as you instruct on those items. Proxies properly submitted to us that |
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CRYOLIFE, INC. | 2020 Proxy Statement
How can I vote my shares during the Annual Meeting? | Shares held in your name as the stockholder of record may be voted during the Annual Meeting. You may vote shares held beneficially in street name during the Annual Meeting only if you obtain a “legal proxy” from the broker, trustee, or nominee that holds your shares giving you the right to vote the shares during the Annual Meeting. You will need your 16-digit control number to vote your shares at the Annual Meeting. You will be able to join the Annual Meeting beginning at 8:45 a.m., EDT. The Annual Meeting will begin promptly at 9:00 a.m., EDT. Even if you plan to attend the Annual Meeting, we recommend that you also vote via internet or telephone in advance to ensure that your vote will be counted if you decide later not to attend the Annual Meeting. | |
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 www.proxyvote.com and telephone voting is available only until 11:59 p.m., EDT, the day before the Annual Meeting. You may also revoke your vote by providing written notice of revocation to our Corporate Secretary, Jean F. Holloway, or by attending the Annual Meeting and voting in person. Attendance during the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request. If you are a beneficial owner, you may revoke your vote by submitting a later-dated vote via the internet or by telephone (if those options are available to you), or you may revoke your vote by submitting a new voting instruction card to your broker, trustee, or nominee, or, if you have obtained a “legal proxy” from your broker, trustee, or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting. | |
What do I need to attend the Annual Meeting? | Attendance during the Annual Meeting will be limited to our stockholders as of March 11, 2020, the record date, their authorized proxy holders, and guests of CryoLife. You will need your 16-digit control number to attend the Annual 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 as required to our transfer agent to allow for the tabulation of votes and certification of the vote and to facilitate a successful proxy solicitation. | |
How are votes counted and what vote is required to approve each item? | Each outstanding share of common stock entitles the holder thereof to one vote on each matter considered during the Annual Meeting. Stockholders are not entitled to cumulate their votes in the election of directors or with respect to any other matter submitted to a vote of the stockholders pursuant to this Proxy Statement. | |
Nominees for election as directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Since there are nine directorships to be filled, this means that the nine individuals receiving the most votes will be elected. Abstentions and broker non-votes will therefore not be relevant to the outcome. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority and has not received voting instructions from the beneficial owner. |
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CRYOLIFE, INC. | 2020 Proxy Statement
The advisory votes cast for the approval of the compensation paid to CryoLife’s
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The
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There are no rights of appraisal or similar dissenters’ rights with respect to any matter to be acted upon pursuant to this Proxy Statement. | ||
What happens if the Annual Meeting is adjourned? | Assuming the presence of a quorum, if our Annual Meeting is adjourned to another time and place, no additional notice will be given of the adjourned meeting if the time and place of the adjourned meeting is announced during the Annual Meeting, unless the adjournment is for more than 120 days, in which case a new record date must be fixed, and notice distributed of the adjourned meeting. At the adjourned meeting, we may transact any items of business that might have been transacted during the Annual Meeting. | |
What else should I know about the virtual process for the Annual Meeting? | We will provide technical support for all stockholders attending the Annual Meeting. Stockholders of record or those who have received a “legal proxy” will be able to submit questions while attending the Annual Meeting. A replay of the Annual Meeting will be available after it concludes. | |
What should I do in the event that I receive more than one set of proxy materials? | You may receive more than one notice mailing or, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. Please execute votes for each communication to ensure that all your shares are voted. |
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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
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Where can I find the | We intend to announce preliminary voting results during the Annual Meeting and publish the final voting results in a Current Report on Form 8-K filed within four business days after the Annual Meeting. | |
What is the deadline for submitting proposals for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as | Appropriate proposals of stockholders intended to be presented at CryoLife’s 2021 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated under the
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CRYOLIFE, INC. | 2020 Proxy Statement
PROPOSAL ONE – ELECTION OF DIRECTORS
Directors 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.
Director Nominees
Each of the nominees is currently a director of CryoLife. Should any nominee for the office of director become unable to accept nomination or election, it is the intention of the persons named on the proxy card, unless otherwise specifically instructed in the Proxy Statement, to vote for the election of such other person as the Board of Directors may recommend.
The following table sets forth the name and age of each nominee, the period during which each such person has served as a director of CryoLife, the number of shares of CryoLife’s common stock beneficially owned, either directly or indirectly, by such person, and the percentage of outstanding shares of CryoLife’s common stock such ownership represented at the close of business on March 11, 2020, according to information received by CryoLife. None of the shares of stock noted below are subject to a pledge or similar arrangement. Except for J. Patrick Mackin, our President, Chief Executive Officer, and Chairman of the Board, none of the nominees holds any other position or office with CryoLife.
Name of Nominee | Director | 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 Qualifications and Biographical Information
Thomas F. Ackerman 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 determined 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 integration of the combined companies. He is currently an independent consultant providing interim chief financial officer services in the life sciences industry, and he currently serves as a director of one of the private companies for which he provides services. He began his career as a Certified Public Accountant with Ernst & Young LLP. Mr. Bevevino’s license is currently inactive. Mr. Bevevino received a B.S. in Business Administration from Duquesne University and an MBA from the University of Notre Dame.
The Board of Directors has determined that Mr. Bevevino should serve as a director of CryoLife because of his expertise in accounting and financial reporting, particularly in the medical device industry.
Marna P. Borgstrom has served as 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 boards including Vizient, Inc., a privately held, member-driven healthcare performance improvement company, the Coalition to Protect America’s Healthcare, and the Healthcare Institute. Ms. Borgstrom received her Bachelor of Arts from Stanford University andaMasters in Public Health from Yale University.
The Board of Directors has determined that Ms. Borgstrom should serve as a director of CryoLife because of her extensive experience as a senior executive leading a large, complex organization in the healthcare sector.
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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CRYOLIFE, INC. | 2020 Proxy Statement
(“NxStage Medical”), a leading medical technology company, positions he held since he founded NxStage Medical in 1998, until Fresenius Medical Care completed its acquisition of NxStage Medical in February 2019. Prior to founding NxStage Medical, Mr. Burbank was a co-founder of Vasca, Inc., a company that provided innovative implantable access devices, where he was the President and Chief Executive Officer, as well as Chairman of the Board. Mr. Burbank has over 30 years of senior leadership experience in the medical device industry, developing, marketing, and manufacturing products for end-stage renal disease patients. During his career he has been an inventor on over 50 U.S. patents for medical devices. Mr. Burbank received a B.S. in Industrial Engineering from Lehigh University.
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 in the medical device industry.
J. Patrick Mackin was named President and Chief Executive Officer of CryoLife in September 2014. He was appointed to the CryoLife Board of Directors in October 2014, and he was appointed Chairman of the Board of Directors in April 2015. Mr. Mackin has more than 25 years of experience in the medical device industry. Prior to joining CryoLife, Mr. Mackin served as President 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 Europe 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 the 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 graduate of the U.S. Military Academy at West Point.
The Board of Directors has determined that Mr. Mackin should serve as a director of CryoLife because of his business acumen and substantial senior leadership experience in the global medical device industry. In addition, the Board of Directors believes that it is appropriate and useful to have the President and Chief Executive Officer of CryoLife serve as a member of the Board of Directors.
Ronald D. McCall has served as a director of CryoLife since January 1984. From 1985 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. and a J.D. from the University of Florida.
The Board of Directors has determined that Mr. McCall should serve as a director of CryoLife because of his legal training and experience. Also, the Board of Directors believes that his long-standing involvement with CryoLife provides him with a unique perspective on current issues facing the Company.
Harvey Morgan has served 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 Director of the investment banking firm Bentley Associates, L.P. from 2004 to December 31, 2012, and from 2001 to 2004 he was a Principal of Shattuck Hammond Partners, an independent investment banking 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.
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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CRYOLIFE, INC. | 2020 Proxy Statement
Biopharmaceuticals, Inc., a private company specializing in gene therapy technologies. Mr. Salveson received his undergraduate degree from St. Olaf College in 1987 and an M.M.M. in finance from the Kellogg Graduate School of Management at Northwestern University.
The Board of Directors has determined that Mr. Salveson should serve as a director of CryoLife because of his broad 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.
Required Vote
Nominees for election as directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Since there are nine directorships to be filled, this means that the nine individuals receiving the most votes will be elected. 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 EACH OF THE nine NOMINEES FOR DIRECTOR LISTED IN THIS PROPOSAL ONE.
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CRYOLIFE, INC. | 2020 Proxy Statement
CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS
Our Board of Directors believes that the purpose of corporate governance is to serve the interests of the Company and the Company’s stockholders 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 practices that the Board of Directors 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. Borgstrom 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” within the meaning of Section 303A.02 of the NYSE Listing Company Standards, each member of the Compensation Committee must be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and at least two members 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 Advisors
The Board of Directors has authorized committees of the Board of Directors to retain their own advisors, such as auditors, compensation consultants, search firms, legal counsel, and others, to the extent the committees deem it appropriate.
The Board of Directors’ Leadership Structure
The President and Chief Executive Officer of CryoLife serves as the Chairman of the Board of Directors. The Board of Directors believes that this structure promotes fluid communication and coordination between the Board of Directors and management. Also, the Board of Directors believes that Mr. Mackin is well-suited to fill his management and Board of Directors roles and that the Board of Directors benefits from his serving in these dual roles.
In order to foster the Board of Directors’ independence from management, the leadership structure of the Board of Directors also includes a Presiding Director, a position held by an independent director. Mr. McCall assumed the role of Presiding Director in December 2005. The Presiding Director has frequent contact with Mr. Mackin and other members of management on a broad range of matters and has additional corporate governance responsibilities for the Board of Directors. Mr. McCall also serves as liaison between Mr. Mackin and the independent directors, approves meeting agendas and schedules to insure there is sufficient time for discussion of all agenda items, approves certain information 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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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:
| Audit | Compensation | Corporate | Compliance |
J. Patrick Mackin, Chairman, President, and Chief Executive Officer | ||||
Thomas F. Ackerman | ✔ | ✔ | ||
Daniel J. Bevevino | ✔ | Chair | ||
Marna P. Borgstrom | ✔ | |||
James W. Bullock | ✔ | ✔ | ||
Jeffrey H. Burbank | ✔ | |||
Ronald D. McCall, Presiding Director | ✔ | Chair | ||
Harvey Morgan | Chair | ✔ | ||
Jon W. Salveson | ✔ | Chair |
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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
Compensation Committee Interlocks and Insider Participation
17
None of our executive officers currently serve, or served during fiscal 2018, as a member of the compensation committee of any other company that has or had an executive officer serving as a member of our Board of Directors. None of our executive officers currently serve, or served during fiscal 2018, as a member of the board of directors of any other company that has or had an executive officer serving as a member of our Compensation Committee.
Communication with the Board of Directors and Its Committees
17
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
17
DIRECTOR COMPENSATION
17
REPORT OF THE AUDIT COMMITTEE
20
PROPOSAL TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATION
21
COMPENSATION DISCUSSION AND ANALYSIS
22
REPORT OF THE COMPENSATION COMMITTEE
40
EXECUTIVE COMPENSATION
41
CERTAIN BENEFICIAL OWNERSHIP
61
PROPOSAL THREE – APPROVAL and funding OF A new equity and cash incentive plan
63
PROPOSAL FOUR – RATIFICATION OF THE APPROVAL OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
66
Householding
68
TRANSACTION OF OTHER BUSINESS
68
WHERE YOU CAN FIND ADDITIONAL INFORMATION
68
APPENDIX A – NON-GAAP FINANCIAL MEASURE INFORMATION
A-1
APPENDIX B – Proposed new equity and cash incentive plan
B-1
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CRYOLIFE, INC. | 2020 Proxy Statement
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
___________________________
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to our stockholders as of the close of business on March 11, 2020, 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 Meeting of Stockholders (the “Annual Meeting”) to be held on May 20, 2020, at 9:00 a.m., EDT. The Annual 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 Annual 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.
QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING DURING THE ANNUAL 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 March 11, 2020. As a stockholder of record, you are invited to attend our Annual Meeting and are entitled to vote on the items of business described in this Proxy Statement. This Proxy Statement contains important information about the Annual Meeting and the items of business to be transacted at such Annual Meeting. You are strongly encouraged to read this Proxy Statement, which includes information that you may | |
At the close of business on the record date, CryoLife had outstanding a total of 37,679,978 shares of common stock, excluding a total of 1,484,017 shares of treasury stock held by CryoLife, which are not entitled to vote. Each outstanding share of common stock will be entitled to one vote, non-cumulative, at the Annual Meeting. | ||
Who is entitled to attend and vote during the Annual Meeting? | Only holders of record of shares of our common stock at the close of business on March 11, 2020, are entitled to notice of, to attend, and to vote during the Annual Meeting and to notice of any adjournments or postponements of such Annual Meeting. |
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CRYOLIFE, INC. | 2020 Proxy Statement
How many shares must be present or represented to conduct business during the Annual Meeting (that is, what constitutes a quorum)? | The presence during the Annual Meeting, in person at the virtual meeting or represented by proxy, of at least a majority of the | ||||||||||||||||||||||||||||||||||
What items of business will be voted on during the Annual Meeting? | The items of business to be voted on during the Annual Meeting are as
2. To approve, by non-binding vote, the compensation paid to CryoLife’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion. 3. To approve and fund a new equity and cash incentive plan. 4. To ratify the approval of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2020. 5. To transact such other business as may be properly brought before the Annual Meeting or any adjournments thereof. | ||||||||||||||||||||||||||||||||||
What happens if additional matters are presented during the Annual Meeting? | Other than the matters set forth in items 1 – 5 above, management is not aware of any | ||||||||||||||||||||||||||||||||||
| Our Board of Directors
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What shares can I vote during the Annual Meeting? | You may vote shares you owned as of March 11, 2020, the record date, including shares held directly in your name as the stockholder of record and all shares held for you as the |
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CRYOLIFE, INC. | 2019 Proxy Statement
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| Most of our stockholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between common stock held of record and those owned beneficially. | |
Stockholders 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, 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 during the Annual Meeting or grant a proxy and direct the proxyholder to vote your shares during the Annual Meeting as you have instructed. If you hold shares through a broker, trustee, or nominee you may also vote during the Annual Meeting, but only after you obtain a “legal proxy” from the broker, trustee, or nominee that holds your shares in advance of the Annual Meeting, giving you the right to vote your shares during the Annual Meeting. If you are a beneficial owner, you may attend the Annual Meeting as a guest without obtaining a “legal proxy” but will be unable to vote your shares or submit questions. | ||
How can I vote my shares without attending the Annual Meeting? | Whether you hold shares directly as the stockholder of record or as a beneficial owner, you may vote in advance of the Annual Meeting by:
Voting by Internet. If you are a stockholder of record, you may vote in advance of the Annual Meeting by following Voting by Telephone. If you are a stockholder of record, you may vote in advance of the Annual Meeting by telephone by following the instructions provided on your proxy card. Most brokers, trustees, and similar nominees also provide beneficial owners with the option to vote by telephone, although practices may vary. If you are a beneficial owner, you must follow the instructions provided to you by your broker, trustee, or other nominee on your voting instruction card. 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 Annual Meeting. If you provide specific instructions with regard to items of business to be voted on during the Annual Meeting, your shares will be voted as you instruct on those items. Proxies properly submitted to us that are signed but do not contain voting instructions and are not revoked prior to the Annual Meeting will be voted FOR the election of each of the director nominees identified in this Proxy Statement, FOR the approval, on an advisory basis, of the compensation |
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CRYOLIFE, INC. | 2020 Proxy Statement
How can I vote my shares during the Annual Meeting? | Shares held in your name as the stockholder of record may be voted during the Annual Meeting. You may vote shares held beneficially in street name during the Annual Meeting only if you obtain a “legal proxy” from the broker, trustee, or nominee that holds your shares giving you the right to vote the shares during the Annual Meeting. You will need your 16-digit control number to vote your shares at the Annual Meeting. You will be able to join the Annual Meeting beginning at 8:45 a.m., EDT. The Annual Meeting will begin promptly at 9:00 a.m., EDT. Even if you plan to attend the Annual Meeting, we recommend that you also vote via internet or telephone in advance to ensure that your vote will be counted if you decide later not to attend the Annual Meeting. | |
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 www.proxyvote.com and telephone voting is available only until 11:59 p.m., EDT, the day before the Annual Meeting. You may also revoke your vote by providing written notice of revocation to our Corporate Secretary, Jean F. Holloway, or by attending the Annual Meeting and voting in person. Attendance during the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request. If you are a beneficial owner, you may revoke your vote by submitting a later-dated vote via the internet or by telephone (if those options are available to you), or you may revoke your vote by submitting a new voting instruction card to your broker, trustee, or nominee, or, if you have obtained a “legal proxy” from your broker, trustee, or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting. | |
What do I need to attend the Annual Meeting? | Attendance during the Annual Meeting will be limited to our stockholders as of March 11, 2020, the record date, their authorized proxy holders, and guests of CryoLife. You will need your 16-digit control number to attend the Annual 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 as required to our transfer agent to allow for the tabulation of votes and certification of the vote and to facilitate a successful proxy solicitation. | |
How are votes counted and what vote is required to approve each item? | Each outstanding share of common stock entitles the holder thereof to one vote on each matter considered during the Annual Meeting. Stockholders are not entitled to cumulate their votes in the election of directors or with respect to any other matter submitted to a vote of the stockholders pursuant to this Proxy Statement. | |
Nominees for election as directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Since there are nine directorships to be filled, this means that the nine individuals receiving the most votes will be elected. Abstentions and broker non-votes will therefore not be relevant to the outcome. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority and has not received voting instructions from the beneficial owner. |
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CRYOLIFE, INC. | 2020 Proxy Statement
The advisory votes cast for the approval of the compensation paid to CryoLife’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, must exceed the votes cast against the approval of such compensation in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome. | ||
The proposal to approve and fund a new equity and cash incentive plan will pass if the majority of shares present in person or by proxy vote are cast to approve the proposal. Abstentions and Broker non-votes will not be relevant to the outcome. Please note that brokers holding shares for a beneficial owner that have not received voting instructions with respect to the proposal to approve and fund a new equity and cash incentive plan will not have discretionary voting authority with respect to this matter; therefore, if you are a beneficial owner and you do not provide your broker with instructions, a broker non-vote will result on your shares. | ||
The votes cast for the ratification of the approval of the appointment of Ernst & Young LLP as CryoLife’s independent registered accounting firm must exceed the votes cast against the ratification in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome. Please note that brokers holding shares for a beneficial owner that have not received voting instructions with respect to the ratification of the approval of the appointment of Ernst & Young LLP will have discretionary voting authority with respect to this matter. | ||
There are no rights of appraisal or similar dissenters’ rights with respect to any matter to be acted upon pursuant to this Proxy Statement. | ||
What happens if the Annual Meeting is adjourned? | Assuming the presence of a quorum, if our Annual Meeting is adjourned to another time and place, no additional notice will be given of the adjourned meeting if the time and place of the adjourned meeting is announced during the Annual Meeting, unless the adjournment is for more than 120 days, in which case a new record date must be fixed, and notice distributed of the adjourned meeting. At the adjourned meeting, we may transact any items of business that might have been transacted during the Annual Meeting. | |
What else should I know about the virtual process for the Annual Meeting? | We will provide technical support for all stockholders attending the Annual Meeting. Stockholders of record or those who have received a “legal proxy” will be able to submit questions while attending the Annual Meeting. A replay of the Annual Meeting will be available after it concludes. | |
What should I do in the event that I receive more than one set of proxy materials? | You may receive more than one notice mailing or, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each |
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CRYOLIFE, INC. | 2020 Proxy Statement
Who is soliciting my vote, and who | The Proxy Statement is being solicited on behalf of our Board of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Where can I find the voting results of the Annual Meeting? | We intend to announce preliminary voting results during the Annual Meeting and publish the final voting results in a Current Report on Form 8-K filed within four business days after the Annual Meeting. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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? | Appropriate proposals of stockholders intended to be presented at CryoLife’s 2021 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) must be received by CryoLife by December 1, 2020, 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 2021 without inclusion of such proposals in our Proxy Statement relating to such annual meeting must be received not later than
Therefore, for the 2021 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 22, 2021, but no earlier than January 20, 2021, 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 2021 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 annual meeting to which this Proxy Statement relates, CryoLife shall, in a timely manner, inform its stockholders of the change, and the date by which proposals of stockholders must be received.
CRYOLIFE, INC. | 2020 Proxy Statement PROPOSAL ONE – ELECTION OF DIRECTORS Directors 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. Director Nominees Each of the nominees is currently a director of CryoLife. Should any nominee for the office of director become unable to accept nomination or election, it is the intention of the persons named on the proxy card, unless otherwise specifically instructed in the Proxy Statement, to vote for the election of such other person as the Board of Directors may recommend. The following table sets forth the name and age of each nominee, the period during which each such person has served as a director of CryoLife, the number of shares of CryoLife’s common stock beneficially owned, either directly or indirectly, by such person, and the percentage of outstanding shares of CryoLife’s common stock such ownership represented at the close of business on March 11, 2020, according to information received by CryoLife. None of the shares of stock noted below are subject to a pledge or similar arrangement. Except for J. Patrick Mackin, our President, Chief Executive Officer, and Chairman of the Board, none of the nominees holds any other position or office with CryoLife.
Director Nominee Qualifications and Biographical Information Thomas F. Ackerman 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
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 determined 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 integration of the combined companies. He is currently an independent consultant providing interim chief financial officer services in the life sciences industry, and he currently serves as a director of one of the private companies for which he provides services. He began his career as a Certified Public Accountant with Ernst & Young LLP. Mr. Bevevino’s license is currently inactive. Mr. Bevevino received a B.S. in Business Administration from Duquesne University and an MBA from the University of Notre Dame. The Board of Directors has determined that Mr. Bevevino should serve as a director of CryoLife because of his expertise in accounting and financial reporting, particularly in the medical device industry. Marna P. Borgstrom has served as 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 boards including Vizient, Inc., a privately held, member-driven healthcare performance improvement company, the Coalition to Protect America’s Healthcare, and the Healthcare Institute. Ms. Borgstrom received her Bachelor of Arts from Stanford University andaMasters in Public Health from Yale University. The Board of Directors has determined that Ms. Borgstrom should serve as a director of CryoLife because of her extensive experience as a senior executive leading a large, complex organization in the healthcare sector. 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)
CRYOLIFE, INC. | 2020 Proxy Statement (“NxStage Medical”), a leading medical technology company, positions he held since he founded NxStage Medical in 1998, until Fresenius Medical Care completed its acquisition of NxStage Medical in February 2019. Prior to founding NxStage Medical, Mr. Burbank was a co-founder of Vasca, Inc., a company that provided innovative implantable access devices, where he was the President and Chief Executive Officer, as well as Chairman of the Board. Mr. Burbank has over 30 years of senior leadership experience in the medical device industry, developing, marketing, and manufacturing products for end-stage renal disease patients. During his career he has been an inventor on over 50 U.S. patents for medical devices. Mr. Burbank received a B.S. in Industrial Engineering from Lehigh University. 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 in the medical device industry. J. Patrick Mackin was named President and Chief Executive Officer of CryoLife in September 2014. He was appointed to the CryoLife Board of Directors in October 2014, and he was appointed Chairman of the Board of Directors in April 2015. Mr. Mackin has more than 25 years of experience in the medical device industry. Prior to joining CryoLife, Mr. Mackin served as President 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 Europe 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 the 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 graduate of the U.S. Military Academy at West Point. The Board of Directors has determined that Mr. Mackin should serve as a director of CryoLife because of his business acumen and substantial senior leadership experience in the global medical device industry. In addition, the Board of Directors believes that it is appropriate and useful to have the President and Chief Executive Officer of CryoLife serve as a member of the Board of Directors. Ronald D. McCall has served as a director of CryoLife since January 1984. From 1985 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. and a J.D. from the University of Florida. The Board of Directors has determined that Mr. McCall should serve as a director of CryoLife because of his legal training and experience. Also, the Board of Directors believes that his long-standing involvement with CryoLife provides him with a unique perspective on current issues facing the Company. Harvey Morgan has served 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 Director of the investment banking firm Bentley Associates, L.P. from 2004 to December 31, 2012, and from 2001 to 2004 he was a Principal of Shattuck Hammond Partners, an independent investment banking 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. 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
CRYOLIFE, INC. | 2020 Proxy Statement Biopharmaceuticals, Inc., a private company specializing in gene therapy technologies. Mr. Salveson received his undergraduate degree from St. Olaf College in 1987 and an M.M.M. in finance from the Kellogg Graduate School of Management at Northwestern University. The Board of Directors has determined that Mr. Salveson should serve as a director of CryoLife because of his broad 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. Required Vote Nominees for election as directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Since there are nine directorships to be filled, this means that the nine individuals receiving the most votes will be elected. 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 EACH OF THE nine NOMINEES FOR DIRECTOR LISTED IN THIS PROPOSAL ONE.
CRYOLIFE, INC. | 2020 Proxy Statement CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS Our Board of Directors believes that the purpose of corporate governance is to serve the interests of the Company and the Company’s stockholders 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 practices that the Board of Directors 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. Borgstrom 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” within the meaning of Section 303A.02 of the NYSE Listing Company Standards, each member of the Compensation Committee must be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and at least two members 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 Advisors The Board of Directors has authorized committees of the Board of Directors to retain their own advisors, such as auditors, compensation consultants, search firms, legal counsel, and others, to the extent the committees deem it appropriate. The Board of Directors’ Leadership Structure The President and Chief Executive Officer of CryoLife serves as the Chairman of the Board of Directors. The Board of Directors believes that this structure promotes fluid communication and coordination between the Board of Directors and management. Also, the Board of Directors believes that Mr. Mackin is well-suited to fill his management and Board of Directors roles and that the Board of Directors benefits from his serving in these dual roles. In order to foster the Board of Directors’ independence from management, the leadership structure of the Board of Directors also includes a Presiding Director, a position held by an independent director. Mr. McCall assumed the role of Presiding Director in December 2005. The Presiding Director has frequent contact with Mr. Mackin and other members of management on a broad range of matters and has additional corporate governance responsibilities for the Board of Directors. Mr. McCall also serves as liaison between Mr. Mackin and the independent directors, approves meeting agendas and schedules to insure there is sufficient time for discussion of all agenda items, approves certain information sent to the Board, and has the authority to call meetings of the independent directors. Stockholders, can seek to directly consult with independent directors.
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:
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
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.
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.
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 of any other company that has or had an executive officer serving as a member of our Board of Directors. None of our executive officers currently serve, or served during fiscal 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.
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.
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:
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
CRYOLIFE, INC. |
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
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
During the course of fiscal
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,
Audit Committee
HARVEY MORGAN, CHAIR
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
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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
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
CRYOLIFE, INC. |
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
EXECUTIVE SUMMARY
The Compensation Committee, referred to
At CryoLife’s Annual Meeting of
The Committee considered these
CRYOLIFE, INC. |
Pay-for-Performance Alignment
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
As described in this Proxy Statement, in
Throughout this Proxy Statement, we refer to revenue, adjusted net income, and adjusted EBITDA. Adjusted net income and adjusted EBITDA reflect adjustments to
CRYOLIFE, INC. | 2020 Proxy Statement ROLES AND
Compensation Committee
The Committee determines and approves the compensation of CryoLife’s executive officers, including the
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
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee’s compensation philosophy is to attract, retain, motivate, and reward executive talent that has the capability,
CRYOLIFE, INC. | 2020 Proxy Statement
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.
MARKET ANALYSIS
As part of its decision-making process, the Committee requests and reviews relevant
Each year, the Committee reviews and considers an
The Company’s
CRYOLIFE, INC. | 2020 Proxy Statement The following peer companies were used for the
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
● Willis Towers Watson ● Mercer General Industry Executive Compensation Survey; and, ● Radford Global Life Sciences Survey.
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.
CRYOLIFE, INC. | 2020 Proxy Statement
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
Analysis The
The Committee approved the Analysis – Program Design
The chart below shows the performance metrics set for the
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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The Committee believed that
For
The performance
In arriving at its decision to approve the
The Committee sets short-term incentive opportunities, in conjunction with a review of base salaries, as part of executives’ overall
CRYOLIFE, INC. |
With respect to adjusted net income,
The Committee discussed management’s recommended
Analysis – Plan Payout
The Mr. Mackin’s 2019 Cash Bonus Plan payout in early 2020 was also based on actual financial performance results of CryoLife relative to the
The following tables show the performance results for
CRYOLIFE, INC. | 2020 Proxy Statement These tables demonstrate how the
Based on input from management and in consultation with Willis Towers Watson, the Committee considered the
The Committee determined that the estimated grant date fair value of the awards To determine the number of options, shares of restricted stock, and target performance
See Appendix A for further details regarding the adjusted EBITDA measure and the reconciliation of that measure to
The following table provides the
Analysis – Program Design
In approving the
CRYOLIFE, INC. |
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.
Analysis – Plan Payout – PSUs Earned
In arriving at its decision in
– Annual Award
The annual performance stock units are earned based on
CRYOLIFE, INC. |
Pursuant to the terms of the annual performance stock award
Annual Target Total Direct Compensation
The Committee believed that the blend of annual salary, cash bonus, stock options, restricted stock, and
The Committee used a value-based approach, rather than number of shares, to determine the size of
In determining the individual components of the
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
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 LTIP
Analysis – Plan Design In approving the 5-Year LTIP award levels and grant design, the Committee considered each of the following factors, among others:
CRYOLIFE, INC. | 2020 Proxy Statement
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
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.
CRYOLIFE, INC. |
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
The CryoLife, Inc. Executive Deferred Compensation Plan allows certain key employees of CryoLife, including the
It is CryoLife’s policy not to provide perquisites to its
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 atPotential Payments Upon Termination or Change of Control – J. Patrick Mackin beginning on page
Employment Agreements with Other Named Executive Officers CryoLife is not party to employment agreements with Messrs. Lee, Change of Control Agreements with Other Named Executive Officers On November 21, 2016, CryoLife entered into change of control agreements with
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
ADDITIONAL POLICIES AND PRACTICES Clawback Policy
CryoLife has a standalone Clawback Mr.
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
a. Section 16 Officers: Each Section 16 officer of the Company shall continuously hold a value of the Company’s common stock equal to the value of a multiple of that officer’s then current base pay at CryoLife. The multiples applicable to such officers are as follows:
b. Retention requirements: Each Section 16 Officer who has not yet acquired ownership of the required value of common stock set forth above must retain at least 50% of the net number of shares acquired upon the exercise of any employee stock option or the vesting of any performance shares, restricted stock, or restricted stock units (the net number of shares acquired shall be the number of shares remaining after shares are tendered, sold, or netted to pay any applicable exercise price and withholding taxes).
c. Waivers: The Chairs of the Committee and the Corporate Governance Committee shall have the authority to grant waivers from these stock ownership requirements in compelling circumstances such as undue hardship.
d. Qualifying shares: For purposes of satisfying these stock ownership requirements, the following shall be included: shares owned directly or indirectly (1) through a stock purchase plan sponsored by the Company; (2) by the person’s spouse; (3) in a revocable trust of which the person or the person’s spouse is the trustee; (4) any other shares related to or underlying vested or unvested restricted stock awards and performance share awards (after performance metric has been certified); or, (5) vested restricted stock units and vested
These guidelines became effective for all currently employed
Anti-Hedging Policy
All CryoLife employees, including
CRYOLIFE, INC. | 2020 Proxy Statement transactions with respect to the Company’s securities. Specifically,
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 Equity Grants/Inside Information
The Committee generally adheres to a policy of the Company not
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
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
FORWARD-LOOKING STATEMENTS
Statements made in this Proxy Statement that look forward in time or that express
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
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information with respect to each of the named executive officers — Mr. Mackin, our Chief Executive Officer; Mr. Lee, our Chief Financial Officer; and Ms. Holloway and Messrs.
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Grants of Plan-Based Awards
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table Equity Awards
Equity awards, including long-term performance annual and 5-Year LTIP awards, granted in fiscal
Annual Performance-Based Bonus Program
The
All bonus criteria relate to Company and individual performance for the full
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Outstanding Equity Awards at December 31,
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Option Exercises and Stock Vested(1)
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
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
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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The following table presents components of nonqualified deferred compensation under the Executive Deferred Compensation Plan for each named executive officer.
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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
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
Terms of the Change of Control Agreements
We will not be required to make a severance payment in connection with the change of control agreements if we terminate an executive’s employment for cause, which means:
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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:
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
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
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J. Patrick Mackin, Chairman, President and Chief Executive Officer(1)
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D. Ashley Lee, Executive Vice President, Chief Operating Officer and Chief Financial Officer(1)
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Jean F. Holloway, Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer(1)
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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,
Securities Authorized for Issuance Under All Equity Compensation Plans(1)
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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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that
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
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CERTAIN BENEFICIAL OWNERSHIP
The name and address of each person or entity who beneficially owned more than 5%
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PROPOSAL THREE – APPROVAL A new equity and cash incentive plan
The
Selected Data as of March 11, 2020:
For additional information regarding stock-based awards previously granted, please see note 17 to the
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,
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.
CRYOLIFE, INC. | 2020 Proxy Statement Key Terms of the 2020 ECIP
Required Vote
The affirmative vote of a majority of the votes cast, either for or against, by the holders of the shares of common stock voting is required to approve this proposal. Accordingly, abstentions and broker non-votes will have no effect on the outcome of this vote.
The Board of Directors’ Recommendation THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL and fundingOF THE
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PROPOSAL FOUR – RATIFICATION OF THE APPROVAL OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Information
The Board of Directors recommends the Company’s stockholders ratify the approval of Ernst & Young LLP (“Ernst & Young”) as the independent registered public accounting firm for the fiscal year ending December 31,
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
Fees Incurred for Work Performed by the Independent Registered Public Accounting Firm for Fiscal
The following table presents Ernst & Young’s professional service fees for the audit of the Company’s annual financial statements for fiscal years ending
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.
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
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
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF The approval ofERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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Householding
CryoLife is providing notice of the Annual Meeting and access to the Proxy Statement and Annual Report via the “Notice and Access” method. For those stockholders who request paper copies of the Proxy documents and share the same last name and address, they may receive only one copy of our Annual Report and Proxy Statement, unless we receive contrary instructions from any stockholder at that address. This is referred to as “householding.” If you 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, 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 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 requiring the vote of stockholders, it is intended that proxies will be voted in respect thereto in accordance with the best judgment of the person or persons voting the proxies.
WHERE 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
In addition, we file annual, quarterly, and current reports, proxy statements, and other information with the SEC. You may read and copy any document we file 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 filings are also available to the public at the SEC’s website at www.sec.gov and through our website at www.cryolife.com.
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.
Date: March
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APPENDIX 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:
Although we believe that these measures are useful tools, no single financial measure provides all of the information that is necessary to gain a complete understanding of our performance, condition, and liquidity. Therefore, these numbers are intended to be, and should be, evaluated in the context of the full information provided in our Annual Report on Form 10-K, including the financial statements presented in accordance with GAAP, the footnotes thereto, and the accompanying management’s discussion and analysis, as well as in our other filings with the SEC. 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
Adjusted net income for
The table below provides a reconciliation of
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Adjusted EBITDA
As discussed in this Proxy Statement, the
Adjusted EBITDA is calculated as net income operations and before interest, taxes, depreciation, and amortization, as further adjusted by removing the impact of the following:
The table below provides a reconciliation of
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APPENDIX B – Proposed new equity and cash incentive plan
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1.1 Purpose. The CryoLife, Inc. 2020 Equity and Cash Incentive Plan (the “Plan”) has been established by CryoLife, Inc. (the “Company”) to (i) attract, retain, and reward persons eligible to participate in the Plan; (ii) motivate Participants (as defined in Section 1.2 below), by means of appropriate incentives, to achieve annual and long-term goals; (iii) provide equity compensation to Directors 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; and (iv) further align Participants’ interests with those of the Company’s stockholders through compensation that is based on the Company’s common stock; and thereby promote the long-term interests 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”). 1.2 Participation. Subject to the terms and conditions of the
1.3 Operation, Administration, and Definitions. The operation and administration of the Plan, including the Awards made under the Plan, shall be subject to the
2.1 Definitions. (a) The grant of an “Option” entitles the
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2.5 Settlement of Award. Shares of Stock delivered pursuant to the exercise of an Option or an SAR shall be subject to such conditions, restrictions and contingencies as the Committee may establish in the applicable Award Agreement. Settlement of SARs may be made in shares of Stock (valued at their Fair Market Value at the time of exercise), in cash, or in a combination thereof, as determined in the discretion of the Committee. The Committee, in its discretion, may impose such conditions, restrictions and contingencies with respect to shares of Stock acquired pursuant to the exercise 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 be subject to the following: (a) The term of any Option or SAR granted under the Plan shall not exceed seven years from the date of grant. (b) No option or SAR shall carry dividend rights or dividend equivalent rights. (b) Any such Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine. SECTION 3 3.1 Definitions. The term “Other Stock Awards” means any of 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 Stock 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, 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 SECTION 4 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 avoidance of doubt, dividend equivalents constitute Cash-Based Awards. 4.2 Grant 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
CRYOLIFE, INC. | 2020 Proxy Statement non-employee directors. At the discretion of the Committee, Cash-Based Awards under this Plan may be issued jointly under this Plan and any other cash incentive 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 SECTION 5 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 5.2 Pre-establishment of Performance Goals. Performance Goals will, barring unusual 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 5.3 Adjustments to Performance Goals. The Committee in its sole discretion shall have the authority to make adjustments to the 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 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 6 6.1 Awards Subject to Plan. Awards granted under the Plan 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 (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
CRYOLIFE, INC. | 2020 Proxy Statement 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 6.2 Adjustments for Changes in Capitalization. If the outstanding shares of Stock are changed into 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 for any increase or decrease in the 6.3 Certain Mergers and Other Extraordinary Events. If 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 Options or other Awards remain outstanding under this Plan, (A) subject 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 the Company is the surviving corporation, each holder of an outstanding Option or other Award shall be entitled, upon exercise of that Option or Award or in place of it, as the case may be, to receive,
CRYOLIFE, INC. | 2020 Proxy Statement (ii) in the case of an in-the-money Option or SAR, cash, property or a combination thereof having an aggregate value equal to the excess of the value 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 multiplied by the number of shares of Stock subject to 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 change shall be deemed to be the shares within the meaning of this Plan. 6.5 Limitation on Grantees’ Rights. Except as hereinbefore expressly provided in this Section 6, a Participant shall have no rights by reason of any subdivision or consolidation 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 or 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 shall be made with respect to, the number or price of shares of Stock subject to an Award, unless the Committee shall otherwise determine. 6.6 Company Right and Power. The grant of any Award pursuant to this Plan shall not adversely affect in any way the right or power of the Company (A) to make adjustments, reclassifications, reorganizations or changes of its capital or 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 affecting 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 7 7.1 Effective Date; Duration. The Plan is effective as of the date of its initial approval by the stockholders of the Company at the 2020 Annual Meeting of Shareholders, to be held on May 20, 2020. The Plan will have a duration of ten years from May 20, 2020, and provided that in the event of Plan termination, the Plan 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.
CRYOLIFE, INC. | 2020 Proxy Statement 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, may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including 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, 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. Except as otherwise provided by the Committee, Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution. 7.9 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made 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 terms of the Plan, as 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 is determined by the Committee. A copy of such document shall be made available to the Participant, and 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 to in the Plan as an “Award Agreement” regardless of whether any Participant signature is required. 7.11 Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary under this Plan shall be by action of its Board of Directors, or by action of one or more members of the Board (including a committee of the Board) who are duly authorized to act for the Board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company. 7.12 Gender and Number. Where 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 Limitation 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 property 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.
CRYOLIFE, INC. | 2020 Proxy Statement 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 Code or any successor section 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, in the judgment of the Committee, be necessary or desirable to further the purposes of the Plan. Such different terms and conditions may be reflected in Addenda to the Plan or in the applicable Award Agreement. However, no such different terms or conditions shall be employed if such terms or conditions constitute, or in effect result in, an increase in the aggregate number of shares which may be issued under the Plan or a change in the definition of Eligible Grantee. SECTION 8 8.1 Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 8. The Committee shall be selected by the Board and shall consist solely of two or more members of the Board who are non-employee Directors within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. Unless otherwise determined by the Board, CryoLife’s Compensation Committee shall be designated as the “Committee” hereunder. 8.2 Powers of Committee. The Committee’s administration of the Plan shall be subject to the following: (a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Grantees those persons who 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 covered by the Awards, to
CRYOLIFE, INC. | 2020 Proxy Statement establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 9) to cancel or suspend Awards, and to waive or otherwise modify any vesting 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; provided, however, that in no event may the term of any (b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan, and to make all other determinations that (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 (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) take any other action (whether in the (f) Anything in the Plan to the contrary notwithstanding, neither the Board nor the 8.3 Delegation by Committee. Except to the 8.4 Information to be Furnished 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 records of the Company and Subsidiaries as to an employee’s or Participant’s employment, termination 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. 8.5 Indemnification. Each person who is or shall have been a member of the Committee, or the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved 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 her 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 persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
CRYOLIFE, INC. | 2020 Proxy Statement SECTION 9 (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 (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 10 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 SECTION 11 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 (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
CRYOLIFE, INC. | 2020 Proxy Statement (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
CRYOLIFE, INC. | 2020 Proxy Statement 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. (g) Fair Market Value. For purposes of (h) Performance Goals. The term “Performance Goals” means performance goals based on the attainment by the Company or
(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
This Plan shall be
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