ICU MEDICAL INC/DE
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
ý
Filed by a Party other than the Registrant
o
Check the appropriate box:
o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to §240.14a-12
ICU MEDICAL, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
ý
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o
Fee paid previously with preliminary materials.
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ICU MEDICAL, INC.
951 Calle Amanecer
San Clemente, California 92673-6213
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held
June 15, 2015
The
2015
Annual Meeting of Stockholders ("Annual Meeting") of ICU Medical, Inc. (the ''Company'') will be held virtually, via live webcast at
www.virtualshareholdermeeting.com/ICUI2015
on Monday,
June 15, 2015
at 9:00 a.m., Pacific Daylight Time, for the following purposes:
|
1.
|
To elect six directors of the Company to serve for a term of one year or until their successors have been elected and qualified;
|
|
2.
|
To ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm for the Company for the year ending
December 31, 2015
;
|
|
3.
|
To hold an advisory vote to approve our named executive officer compensation; and
|
|
4.
|
To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
|
The Board of Directors has determined that only holders of Common Stock of record as of the close of business on
April 24, 2015
will be entitled to receive notice of, and to vote at, the Annual Meeting or any adjournment thereof.
You may attend the Annual Meeting virtually by visiting
www.virtualshareholdermeeting.com/ICUI2015
.
By Order of the Board of Directors
Scott E. Lamb, Secretary
San Clemente, CA
May 8, 2015
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON
JUNE 15, 2015
The proxy statement and annual report to stockholders are available at
http://ir.icumed.com
.
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the Annual Meeting via live webcast, please vote as soon as possible to ensure your vote is counted at the meeting. Please complete, sign, date and return the enclosed proxy promptly or submit your proxy over the Internet or by telephone. If you are a stockholder of record and attend the virtual Annual Meeting, you may withdraw your proxy and vote in person via facsimile. You will find information on submitting your proxy over the Internet and by telephone and information about voting in person at the Annual Meeting on the reverse side of this notice.
THANK YOU FOR ACTING PROMPTLY
How do I submit my proxy?
You will have the opportunity to attend the virtual Annual Meeting and vote during the Annual Meeting if you choose. Whether or not you vote during the Annual Meeting, it is important that your shares be represented and voted. If you are a stockholder of record, you can give a proxy to have your shares voted at the Annual Meeting either:
|
•
|
by mailing the enclosed proxy card in the enclosed envelope;
|
1
|
•
|
electronically, using the Internet; or
|
|
•
|
over the telephone by calling a toll-free number.
|
The Internet and telephone proxy submission procedures are set up for your convenience and are designed to verify your identity, to allow you to give voting instructions, and to confirm that those instructions have been properly recorded. If you are a stockholder of record and you would like to submit your proxy by telephone or by using the Internet, please refer to the specific instructions on the attachment to the enclosed proxy card. Alternatively, you may submit your proxy by mail by returning your signed proxy card in the enclosed envelope. If we receive your proxy by mail, electronically or by telephone before the Annual Meeting, we will vote your shares as you direct.
If you hold your shares in “street name,” you must give voting instructions in the manner prescribed by your broker or nominee. Your broker or nominee has enclosed or provided a voting instruction card for you to use in directing the broker or nominee how to vote your shares.
How can I vote my shares in person at the meeting?
If you are a stockholder of record, as opposed to voting by proxy you may vote your shares during the Annual Meeting by facsimile. The procedures for voting during the Annual Meeting are designed to verify your identity and allow you to vote. You should retain the attachment to the proxy card enclosed with this Proxy Statement on which your unique control number appears. You will need to write this control number on your ballot to verify your identity.
To vote during the meeting, visit
www.virtualshareholdermeeting.com/ICUI2015
and cast your vote. Alternatively, you may request that a ballot be faxed to you by calling Investor Relations at (800) 824-7890 any time before 4:00 PM PDT on June 12, 2015. After you have marked your votes and recorded your control number on your ballot, you may fax the ballot to the Company at (949) 366-4264. Ballots must be received before the polls are closed during the Annual Meeting to be counted. We anticipate that the polls will be open from approximately 9:05 to 9:20 AM PDT on
June 15, 2015
.
Even if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the Annual Meeting. If you vote by proxy and then decide to attend the Annual Meeting, you will be able to vote during the Annual Meeting, even if you have previously submitted your proxy.
How can I request proxy materials?
To request a print or electronic copy of our Proxy Statement, Annual Report to Stockholders and proxy card, you may call our toll-free telephone number at (800) 824-7890; email us at ir@icumed.com or visit our web site at
www.icumed.com
.
Your vote is important. Thank you for voting.
2
ICU MEDICAL, INC.
951 Calle Amanecer
San Clemente, California 92673
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of ICU Medical, Inc. (the ''Company'') for use at the 2015 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting is to be held virtually at
www.virtualshareholdermeeting.com/ICUI2015
, on Monday,
June 15, 2015
at 9:00 a.m., Pacific Daylight Time, and at any adjournments thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
The approximate date of mailing of this Proxy Statement, the Annual Report to Stockholders and the proxy card is
May 8, 2015
. The principal executive offices of the Company are located at 951 Calle Amanecer, San Clemente, California 92673.
Attendance
The Annual Meeting will be held entirely virtually, as permitted by Delaware law. There will be no physical location at which stockholders may attend the Annual Meeting, but stockholders may attend and participate in the meeting electronically. Stockholders who participate in the virtual Annual Meeting will be deemed to be present in person and will be able to vote during the Annual Meeting at the times that the polls are open. Stockholders who wish to attend the meeting should go to
www.virtualshareholdermeeting.com/ICUI2015
, at least 10 minutes before the beginning of the meeting to register their attendance and complete the verification procedures to confirm that they were stockholders of record as of
April 24, 2015
, the record date. Stockholders of record will need to provide the control number on the attachment to the enclosed proxy card to verify their identity.
Beneficial owners whose stock is held for them in street name by their brokers or other nominees may also attend the meeting by going to
www.virtualshareholdermeeting.com/ICUI2015
, at least 10 minutes before the beginning of the meeting to register their attendance and complete the verification procedures to confirm that they were stockholders of record as the record date. Such beneficial owners may not vote at the meeting, and may only cause their shares to be voted by providing voting instructions to the persons who hold the beneficial owners’ shares for them. Beneficial owners will need to provide the name of the broker or other nominee that holds their shares to gain access to the meeting.
There is additional information about voting at the Annual Meeting on the opposite page. Stockholders may also obtain additional information about accessing and voting during the Annual Meeting by calling Investor Relations at (800) 824-7890.
Proxy Information
A stockholder giving a proxy may revoke it at any time before it is exercised by filing with the Secretary of the Company a written notice of revocation or a duly executed proxy bearing a later date. The powers of the proxy holders will be suspended if the person executing the proxy is present at the Annual Meeting electronically and elects to vote in person. Subject to such revocation or suspension, all shares represented by each properly executed proxy received by the Company will be voted in accordance with the instructions indicated thereon, and if instructions are not indicated, will be voted in favor of (i) the election of the nominees for director named in, or otherwise nominated as set forth in this Proxy Statement, (ii) the ratification of the selection of the independent registered public accounting firm, (iii) the approval, on an advisory basis, of our named executive officer compensation and (iv) in the discretion of the proxy holders, any other business that comes before the meeting. Currently, no matter is expected to be considered at the Annual Meeting other than the proposals set forth in the accompanying Notice of Annual Meeting of Stockholders. However, if any other matters are properly brought before the Annual Meeting for action, it is intended that the shares of our Common Stock represented by proxies will be voted by the persons named as proxies on the proxy card in accordance with their discretion on such matters.
Record Date and Voting
As of
April 24, 2015
the outstanding voting securities of the Company consisted of 15,777,942 shares of $0.10 par value Common Stock. Each stockholder of record at the close of business on
April 24, 2015
is entitled to one vote for each share held as of that date on each matter submitted to a vote of stockholders. The presence in person electronically or by proxy of holders of a majority of the issued and outstanding Common Stock will constitute a quorum for the transaction of such business as shall properly come before the meeting.
1
Assuming that a quorum is present, the votes required to approve the matters before the Annual Meeting are as follows:
|
•
|
Election of Directors: The election of directors will be decided by a plurality of the votes. The six director nominees receiving the most votes will be elected. Abstentions and broker non-votes have no effect on this matter.
|
|
•
|
Ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm: Stockholder approval of this matter requires the affirmative vote of a majority of the outstanding shares of common stock of the Company entitled to vote thereon and present in person or by proxy. Abstentions and broker non-votes will therefore have the same effect as an “Against” vote with respect to this proposal.
|
|
•
|
Advisory Vote on our Named Executive Officer Compensation: Stockholder approval of this matter requires the affirmative vote of a majority of the outstanding shares of common stock of the Company entitled to vote thereon and present in person or by proxy. Abstentions will therefore have the same effect as an “Against” vote with respect to this proposal, but broker non-votes are not counted as votes cast affirmatively or negatively and will have no effect on the vote for these matters.
|
The term ''broker non-votes'' refers to shares held by a broker in street name that are present by proxy but are not voted pursuant to rules prohibiting brokers from voting on non-routine matters without instructions from the beneficial owner of the shares. Broker non-votes on non-routine matters are not counted as entitled to vote on a matter in determining the number of affirmative votes required for approval of the matter but are counted as present for quorum purposes. Of the proposals to be considered at the Annual Meeting, only the ratification of the selection of independent registered public accountants is considered to be a routine matter on which brokers may vote without instructions from beneficial owners. The approval of the election of directors and the advisory vote to approve named executive officer compensation are considered non-routine matters on which your brokers may not vote without instructions from beneficial owners.
Board Recommendations
The Board of Directors recommends that you vote:
|
•
|
FOR the election of the six nominees for election to the Board of Directors to serve for a term of one year or until their successors have been elected and qualified;
|
|
•
|
FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the year ended
December 31, 2015
; and
|
|
•
|
FOR the approval, on an advisory basis, of our named executive officer compensation.
|
2
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as to shares of Common Stock owned as of April 7, 2015, by (a) each director and nominee, (b) each named executive officer and (c) all directors and executive officers as a group. Unless otherwise indicated in the footnotes following the table, and subject to community property laws where applicable, the Company believes that the persons as to whom the information is given have sole voting and investment power over the shares listed as beneficially owned. The business address of the Company’s directors and officers, the George A. Lopez, M.D. Second Family Limited Partnership and the Lopez Family Trust is 951 Calle Amanecer, San Clemente, California 92673.
Stock Ownership of Management
|
|
Shares of Common Stock Owned
|
Options Exercisable within 60 days
|
Total Shares Beneficially Owned
|
Percent of Outstanding Shares (1)
|
|
|
||||||
|
Jack W. Brown
|
17,537
|
|
46,053
|
63,590
|
|
*
|
|
|||||
|
John J. Connors
|
1,840
|
|
28,553
|
30,393
|
|
*
|
|
|||||
|
Joseph R. Saucedo
|
940
|
|
46,053
|
46,993
|
|
*
|
|
|||||
|
Richard H. Sherman, M.D.
|
67,791
|
|
27,053
|
94,844
|
|
*
|
|
|||||
|
Robert S. Swinney, M.D.
|
17,215
|
|
46,053
|
63,268
|
|
*
|
|
(4)
|
||||
|
Alison D. Burcar
|
—
|
|
25,396
|
25,396
|
|
*
|
|
|||||
|
Vivek Jain
|
40,791
|
|
153,778
|
194,569
|
|
1.2
|
%
|
|||||
|
Scott E. Lamb
|
3,372
|
|
120,466
|
123,838
|
|
*
|
|
|||||
|
George A. Lopez, M.D.
|
1,489,759
|
|
488,800
|
1,978,559
|
|
12.5
|
%
|
(2)
|
||||
|
George A. Lopez, M.D. Second Family Limited Partnership
|
1,086,843
|
|
1,086,843
|
|
6.9
|
%
|
(3)
|
|||||
|
Tom McCall
|
—
|
|
14,365
|
14,365
|
|
*
|
|
|||||
|
Steven C. Riggs
|
3,115
|
|
121,016
|
124,131
|
|
*
|
|
|||||
|
David C. Greenberg
|
500
|
|
—
|
500
|
|
*
|
|
(5)
|
||||
|
Richard A. Costello
|
364
|
|
7,000
|
7,364
|
|
*
|
|
(6)
|
||||
|
All directors and named executive officers as a group (11 persons)
|
1,642,360
|
|
1,117,586
|
2,759,946
|
|
17.5
|
%
|
(7)
|
||||
|
* Represents less than 1% of our outstanding common stock
|
||||||||||||
|
(1)
|
Based on total shares of common stock outstanding plus outstanding options to acquire common stock currently exercisable or exercisable within 60 days held by the beneficial owner whose percent of outstanding stock is calculated.
|
|||||||||||
|
(2)
|
Includes the 1,086,843 shares owned by the George A. Lopez, M.D. Second Family Limited Partnership (the “Partnership”), as to which shares Dr. Lopez disclaims any beneficial ownership except to the extent described in Note (3). Includes 4,002 shares owned by the Lopez Family Trust. Dr. Lopez is a trustee and beneficiary of the Lopez Family Trust. Includes 173,950 shares held by Dr. Lopez as Trustee of the Lopez Charitable Remainder Trust #1 for the benefit of Dr. Lopez.
|
|||||||||||
|
(3)
|
Dr. Lopez is the general partner of the Partnership and holds a 1% general partnership interest in the Partnership. As general partner, he has the power to vote and power to dispose of the 1,086,843 shares owned by the Partnership and may be deemed to be a beneficial owner of such shares. Trusts for the benefit of Dr. Lopez’s children, the Christopher George Lopez Children’s Trust and the Nicholas George Lopez Children’s Trust, own a 99% limited partnership interest in the Partnership. Dr. Lopez is not a trustee of and has no interest in his children’s Trusts. Except to the extent of the undivided one percent general partnership interest in the assets of the Partnership, Dr. Lopez disclaims any beneficial ownership of the shares owned by the Partnership.
|
|||||||||||
|
(4)
|
Does not include 1,125 shares owned by Dr. Swinney's wife as to which he has no voting or investment power and disclaims any beneficial ownership.
|
|||||||||||
|
(5)
|
Includes 500 shares held by David C. Greenberg, TTEE David C. Greenberg, Declaration of Trust. Mr. Greenberg is a director nominee. His business address is Medline Industries, Inc., One Medline Place, Mundelein, IL 60060
|
|||||||||||
|
(6)
|
Information for Mr. Costello is as of April 5, 2014, the effective date of his separation with the Company. The "Options Exercisable within 60 days" column reflects the exercisable stock options for Mr. Costello at his separation date.
|
|||||||||||
|
(7)
|
Does not include shares held by Mr. Greenberg or Mr. Costello because they were not directors or executive officers at the record date.
|
|||||||||||
3
5% or More Beneficial Ownership
|
Name and Address of Beneficial Owner
|
Shares of Common Stock Owned
|
Percent of Outstanding Shares
|
|||||||
|
BlackRock Fund Advisors
|
1,341,414
|
|
(1)(2)
|
||||||
|
55 East 52nd Street, New York, NY 10022
|
|||||||||
|
Wellington Management Co. LLP
|
1,337,429
|
|
(1)(3)
|
||||||
|
280 Congress Street, Boston, MA 02210
|
|||||||||
|
The Vanguard Group, Inc.
|
940,394
|
|
(1)(4)
|
||||||
|
100 Vanguard Blvd, Malvern, PA 19355
|
|||||||||
|
(1
|
)
|
Information included solely in reliance on information included in statements filed with the Securities and Exchange Commission ("SEC") pursuant to Section 13(d) or Section 13(g) of the Securities Act of 1934, as amended, by the indicated holder.
|
|||||||
|
(2
|
)
|
BlackRock, Inc. stated in its Schedule 13G/A filing with the SEC on January 22, 2015 that, of the 1,341,414 shares beneficially owned, it has sole voting power with respect to 1,295,139 shares and sole dispositive power with respect to all 1,341,414 shares.
|
|||||||
|
(3
|
)
|
Wellington Management Company, LLP stated in its Schedule 13G/A filing with the SEC on February 12, 2015 that, of the 1,337,429 shares beneficially owned, it has shared voting power with respect to 1,086,682 shares and shared dispositive power with respect to all 1,337,429 shares.
|
|||||||
|
(4
|
)
|
The Vanguard Group, Inc. stated in its Schedule 13G/A filing with the SEC on February 10, 2015 that, of the 940,394 shares beneficially owned, it has sole voting power with respect to 19,280 shares, sole dispositive power with respect to 923,014 shares and shared dispositive power with respect to 17,380 shares.
|
|||||||
4
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes important information regarding the executive compensation program at ICU Medical Inc. It details our compensation philosophy, objectives regarding the compensation of our named executive officers, our policies, and practices, and determinations related to executive compensation specific to 2014 and moving into 2015. The term “named executive officers” represents the five current executive officers and one former executive officer in the compensation tables below: Vivek Jain, Chief Executive Officer ("CEO") and Chairman of the Board; Scott E. Lamb, Treasurer and Chief Financial Officer (“CFO”); Steve C. Riggs, Vice President of Operations; Alison D. Burcar, Vice President & General Manager of Infusion Systems; Tom McCall, Vice President & General Manager of Critical Care; and Richard A. Costello, former Vice President of Sales. See "Potential Payments upon Termination or Change in Control" section for more information about payments to Mr. Costello upon his separation with the Company.
Executive Summary
Our fiscal year 2014 was a year of significant, positive transition. Beginning in February 2014, Vivek Jain joined the Company as Chief Executive Officer and Chairman of the Board. Following a deep review of the organization, competitive influences, and an exhaustive review of the strengths of our portfolio, the executive team set in place a series of targeted actions to align the organization with a strategy that establishes a path for long term growth; connecting patients and caregivers through safe, life-saving and life-enhancing medical devices.
In August of 2014, the Company initiated a restructuring event resulting in the establishment of two distinct business units; Infusion Systems and Critical Care. Alison D. Burcar was appointed as Vice President & General Manager of Infusion Systems and Tom McCall was named Vice President & General Manager of Critical Care. Each market segment, set with a defined strategy, began to diligently work towards its respective goals for 2014, demonstrating both solid results and a foundation for future growth.
Fiscal year 2014 revenue was $309.3 million. GAAP net income was $26.3 million, or $1.68 per diluted share. Our adjusted diluted earnings for fiscal year 2014 were $2.38 per share. Also, adjusted EBITDA was $73.9 million for fiscal year 2014. (See "Annex A" for a reconciliation of the non-GAAP measures).
Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 for a more detailed description of our fiscal year 2014 financial results.
|
(in millions, except per share data)
|
|||||||||||||||||||||
|
2014
|
2013
|
2012
|
2011
|
2010
|
|||||||||||||||||
|
Total revenue
|
$
|
309.3
|
|
$
|
313.7
|
|
$
|
316.9
|
|
$
|
302.2
|
|
$
|
283.0
|
|
||||||
|
Gross profit
|
$
|
151.4
|
|
$
|
154.7
|
|
$
|
156.5
|
|
$
|
142.4
|
|
$
|
129.0
|
|
||||||
|
Operating income
|
$
|
39.0
|
|
$
|
51.9
|
|
$
|
61.3
|
|
$
|
65.2
|
|
$
|
47.7
|
|
||||||
|
Net income
|
$
|
26.3
|
|
$
|
40.4
|
|
$
|
41.3
|
|
$
|
44.7
|
|
$
|
29.9
|
|
||||||
|
Diluted earnings per share
|
$
|
1.68
|
|
$
|
2.65
|
|
$
|
2.80
|
|
$
|
3.15
|
|
$
|
2.16
|
|
||||||
|
Operating cash flow
|
$
|
60.6
|
|
$
|
65.7
|
|
$
|
66.3
|
|
$
|
64.5
|
|
$
|
33.1
|
|
||||||
Financial performance was a key factor in the bonus decisions and outcomes for the 2014 fiscal year. For 2014, payment of performance bonuses was principally based on over-achievement of targets linked to total revenue, operating income and diluted earnings per share. The performance against the target levels for the 2014 financial performance goals accounted for 100% of the named executive officers bonus pay for fiscal 2014. Ms. Burcar and Mr. McCall initially also had specific individual goals that were impacted as a result of the restructuring efforts mid-year. As a result, the Compensation Committee approved a modification to the bonus plan to have incentive payouts directly linked to the above Company financial results for fiscal 2014.
5
Executive Compensation Overview
Our executive compensation program is further designed to align our named executive officers’ interests with those of our stockholders by establishing a direct and meaningful link between our business financial results and their compensation. Consistent with our pay for performance philosophy, our Compensation Committee approves annual goals for the named executive officers’ incentive compensation with the objective of increasing stockholder value. Our named executive officers’ total compensation is comprised of a mix of base salary, performance-based bonuses and performance and time-based equity awards.
In determining total compensation of our named executive officers, the Compensation Committee of our Board of Directors considers many factors that include:
|
•
|
the overall business and financial performance of the Company;
|
|
•
|
the individual’s performance, experience and skills;
|
|
•
|
the terms of employment agreements or other arrangements with the individual;
|
|
•
|
competitive market data for similar positions based on the Company’s peer group; and
|
|
•
|
voting results from the prior year’s advisory vote on the compensation of our named executive officers.
|
For 2014, the Compensation Committee approved an executive compensation program that included three elements: base salary, annual performance-based cash bonuses, and long-term based incentives. Our executive compensation objectives are:
|
•
|
to provide competitive total pay opportunities that help attract, reward and retain leadership and key talent;
|
|
•
|
to establish a direct and meaningful link between business financial results, individual/team performance and rewards; and
|
|
•
|
to provide strong incentives to promote the profitability and growth of the Company, create stockholder value and reward superior performance.
|
The Compensation Committee believes that a critical factor in ensuring the Company’s ability to attract, retain and motivate its executive officers is ensuring that their compensation is competitive with companies that it considers to be competitors. In determining the appropriate level and form of compensation, the Compensation Committee reviews market data relating to the cash and equity compensation of similarly-sized medical device and life sciences companies that is provided by Compensia, a national compensation consulting firm engaged by our Compensation Committee. The market data also includes a specific set of peer companies comprised of publicly-held health care equipment and supply companies that generally met the following characteristics: positive revenue growth, annual revenues of 0.5-2.0 times our revenues and aggregate market values of 0.5-3.0 times our aggregate market value.
Compensia conducted a compensation analysis (which our Compensation Committee used as the basis for setting our executive compensation levels), using the following peer companies:
Abaxis ArthroCare Merit Medical Systems
Abiomed Cantel Medical Natus Medical Thoratec
Align Technology Insulet NxStage Medical Volcano
Analogic Masimo RTI Biologics Wright Medical Group
AngioDynamics Meridian Bioscience Symmetry Medical
All market data used for the comparative analysis, which includes the foregoing companies and supplemental survey data, comprises our peer group.
The Compensation Committee reviews and determines the compensation of all executive officers. See “Compensation Committee” elsewhere in this Proxy Statement. In setting compensation levels for executive officers, the Compensation Committee considers each element of compensation separately as well as the aggregate value of all elements of compensation for each individual. Amounts realized or realizable from awards under prior bonus or incentive plans, including stock options, do not significantly influence the pay setting process of current compensation levels. The significant compensation components are base salary, bonus pay and equity awards.
6
Primary Components of Our 2014 Executive Compensation Program
|
Component
|
Form of compensation
|
Objectives and basis of compensation
|
|
Base Salary
|
Cash
|
Compensation is competitively based, taking into account the officer’s responsibilities and experience.
|
|
Base salary is reviewed by the Compensation Committee annually or when position responsibilities change.
|
||
|
Performance-Based Bonuses
|
Cash
|
The bonus is intended to further align the interests of the executive officer with the objectives of the Company, which are based on what the Company believes will produce the best return for the Company’s stockholders.
|
|
The bonus is based on the achievement of target levels for financial measures determined at the start of the fiscal year.
|
||
|
The bonus is a percentage of the executive officer’s base salary.
|
||
|
The bonus is funded based on the percentage of the Company financial goal achieved at the fiscal year end.
|
||
|
The Compensation Committee may exercise its discretion to award cash bonuses outside the plan in circumstances of special individual achievement.
|
||
|
Performance and Time-Based Equity Awards
|
Performance and Time-Based Stock Options/ Time-Based Restricted Stock Unit Awards
|
Stock options and RSU awards retain executive officers through long-term vesting and potential wealth accumulation.
|
|
Stock options and RSU awards promote stockholder value creation.
|
||
|
Stock options and RSU awards are intended to make compensation practices consistent with our peer group. performance-based stock options are effective tools in better aligning equity compensation with Company performance
.
|
||
We have entered into an employment agreement with Mr. Jain and retention agreements with each of our other named executive officers because our Compensation Committee believes that the occurrence, or potential occurrence, of a change in control would create uncertainty and disruption during a critical time for the Company. In addition, our Compensation Committee believes these agreements:
|
•
|
contribute to overall competitiveness of executive total compensation and enhance the Company’s ability to attract/retain key executives,
|
|
•
|
further align the interests of key executives with those of the Company’s shareholders and promote objective evaluations of strategy alternatives by executives,
|
|
•
|
motivate executives to drive business success independent of the possible occurrence of any change-of-control transaction and reduce distractions associated with the potential for a transaction or termination of employment,
|
|
•
|
maximize shareholder value by retaining "key" personnel through deal close so that the Company is delivered in the condition bargained for by a potential acquirer,
|
|
•
|
protect the Company in the event the transaction is not completed, and
|
|
•
|
avoid "one-off" severance negotiations and encourage prompt, rational decisions around executive "viability" and continued employment.
|
Base Salaries
The Compensation Committee will generally review base salaries annually and when position responsibilities change during the year.
In reviewing the base salaries of our named executive officers, the Compensation Committee considered the market for similar positions based on the peer group and took into account individual performance in addition to terms of employment agreements and offer letters.
7
For 2014, the Compensation Committee determined base pay increases were merited for the named executive officers as follows with the exception of (i) Mr. Jain who began his employment during the fiscal year and (ii) Mr. Costello who separated with the Company in April 2014:
|
Name
|
Position
|
2013 Base Salary Rate
|
2014 Base Salary Rate
|
|||||||
|
Vivek Jain
|
Chief Executive Officer/ Chairman of the Board
|
not applicable
|
|
$
|
650,000
|
|
||||
|
Scott E. Lamb
|
Chief Financial Officer
|
$
|
383,622
|
|
$
|
395,150
|
|
|||
|
Steven C. Riggs*
|
Vice President of Operations
|
$
|
350,093
|
|
$
|
360,582
|
|
|||
|
Alison D. Burcar
|
Vice President and General Manager Infusion Systems
|
$
|
300,000
|
|
$
|
315,000
|
|
|||
|
Tom McCall
|
Vice President and General Manager of Critical Care
|
$
|
285,000
|
|
$
|
293,550
|
|
|||
*During his term as Acting President and CEO, from October 2013 to February 2014, Mr. Riggs’ salary was adjusted to $600,000 per year. In February 2014, Mr. Riggs stepped down from this role and returned to his role as our Vice President of Operations when Mr. Jain was appointed CEO and Chairman of the Board.
The following table presents each current named executive officer’s earned salary for 2014 and the percentile such salary represents compared to our peer group.
|
Named Executive Officer
(1)
|
Salary
|
%
|
||
|
Vivek Jain
|
$ 574,162
|
50th to 75th
|
||
|
Scott E. Lamb
|
$ 395,150
|
~75th
|
||
|
Steven C. Riggs
(2)
|
$ 390,509
|
~50th
|
||
|
Alison D. Burcar
|
$ 315,000
|
<50th
|
||
|
Tom McCall
|
$ 293,550
|
<50th
|
||
(1) The salary for Mr. Costello is excluded from the table above. He separated with the Company on April 5, 2014.
(2) The percentile of earned salary for Mr. Riggs for 2014 is based on his annual salary of $360,582 as Vice President of Operations.
Performance-Based Bonuses
Our 2008 Performance-Based Incentive Plan (the “Performance-Based Incentive Plan”) was approved by stockholders in 2008 and re-approved by stockholders in 2014. The Performance-Based Incentive Plan is intended to permit the grant of bonuses designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code (the “Code”). Pursuant to the terms of the plan, the Compensation Committee sets target bonus opportunities and selects performance measures and related target levels for each year. Bonus awards are based on our actual performance for the year based on the Company’s achievement of the performance measure target levels.
For 2014, the cash bonus opportunities of our named executive officers, excluding Mr. Costello who separated with the Company in April 2014, were provided pursuant to the Performance-Based Incentive Plan. Each target bonus opportunity was weighted so that achievement of the pre-established performance goals paid 1/3
rd
of the officer’s target award if threshold performance was achieved and 140% of the target award if maximum “stretch” performance was achieved. Ms. Burcar and Mr. McCall initially also had individual goals tied to a portion of their potential bonus. After both were promoted to new positions in 2014 in connection with the restructuring plan, these goals were removed. The following table presents the 2014 target bonus opportunities and the eligible bonus range as a percentage of total salary for each named executive officer, excluding Mr. Costello.
8
|
% of salary bonus range if performance targets are met
|
|||||||||
|
Named Executive Officer
|
% of salary target award
|
Threshold performance
|
Stretch performance
|
||||||
|
Vivek Jain
|
100
|
%
|
100
|
%
|
140
|
%
|
|||
|
Scott E. Lamb
|
65
|
%
|
100
|
%
|
140
|
%
|
|||
|
Steven C. Riggs
|
65
|
%
|
100
|
%
|
140
|
%
|
|||
|
Alison D. Burcar
|
60
|
%
|
100
|
%
|
140
|
%
|
|||
|
Tom McCall
|
35
|
%
|
100
|
%
|
140
|
%
|
|||
The 2014 corporate performance measures were weighted equally between total revenue, operating income and diluted earnings per share. Based on a review of economic conditions, the Compensation Committee set performance goals under the Performance-Based Incentive Plan based on achievement of the following financial target levels:
|
•
|
1/3 of target award based on total revenue of $285 million to $300 million;
|
|
•
|
1/3 of target award based on operating income of $26 million to $33 million; and
|
|
•
|
1/3 of target award based on $1.15 to $1.45 diluted earnings per share.
|
The following table presents target and stretch bonus payouts and the actual amounts earned under the Performance-Based Incentive Plan for each named executive officer, excluding Mr. Costello, for 2014 as approved by the Compensation Committee.
|
Named Executive Officer
|
Salary
|
Potential bonus payout of target at 100%
|
Potential additional stretch bonus payout
|
Potential maximum bonus payout
|
Actual bonus earned
|
Actual bonus earned % of salary
|
|||||||||||||||||
|
Vivek Jain
|
$
|
650,000
|
|
$
|
650,000
|
|
$
|
260,000
|
|
$
|
910,000
|
|
$
|
910,000
|
|
140
|
%
|
||||||
|
Scott E. Lamb
|
$
|
395,150
|
|
$
|
256,848
|
|
$
|
102,739
|
|
$
|
359,587
|
|
$
|
359,587
|
|
91
|
%
|
||||||
|
Steven C. Riggs
|
$
|
360,582
|
|
$
|
234,378
|
|
$
|
93,752
|
|
$
|
328,130
|
|
$
|
328,130
|
|
91
|
%
|
||||||
|
Alison D. Burcar
|
$
|
315,000
|
|
$
|
189,000
|
|
$
|
75,600
|
|
$
|
264,600
|
|
$
|
264,600
|
|
84
|
%
|
||||||
|
Tom McCall
|
$
|
293,550
|
|
$
|
102,743
|
|
$
|
41,097
|
|
$
|
143,840
|
|
$
|
143,840
|
|
49
|
%
|
||||||
In 2014, Mr. Jain joined our Company as the CEO and Chairman of the Board. Mr. Jain was eligible for participation in the Performance-Based Incentive Plan, pursuant to which his target bonus opportunity is not less than 100% of his base salary (and it was agreed for fiscal year 2014, the amount of the actual bonus payable to Mr. Jain would not be less than 66% of his base salary).
9
Performance and Time-Based Equity Awards
We grant equity awards to our executive officers and certain employees to align their interest with the interest of our stockholders and to achieve our retention objectives. The use of equity awards further promotes our efforts to encourage the profitability and growth of the Company through the establishment of strong incentives.
The following table presents the equity award grants to our named executive officers for 2014. There were no equity awards granted to Mr. Costello.
|
Name
|
Restricted stock units
|
Time-based option grants
|
Performance stock option grants
|
||||||
|
Vivek Jain
|
68,039
|
|
365,241
|
|
317,125
|
|
|||
|
Scott E. Lamb
|
—
|
|
—
|
|
100,000
|
|
|||
|
Steven C. Riggs
|
—
|
|
—
|
|
125,000
|
|
|||
|
Alison D. Burcar
|
—
|
|
—
|
|
75,000
|
|
|||
|
Tom McCall
|
—
|
|
7,500
|
|
—
|
|
|||
Consistent with our overall pay philosophy, our Compensation Committee sized 2014 executive equity awards such that total executive pay levels fell in the competitive market range, as appropriate, after considering factors such as Company and individual performance, experience, longevity with the Company, internal pay parity considerations and unique requirements of the position. All named executive officer performance grants included the following provisions:
|
•
|
The performance stock options vest 25% on each of the first, second, third and fourth anniversaries of the option grant date. Fifty percent of the vested shares shall become exercisable if, during the term of the option, the closing price of our common stock is equal to or more than 125% of the exercise price of $58.79 per share for 30 consecutive trading days. The remaining 50% of the vested shares shall become exercisable if the closing price of our common stock is equal to or more than 150% of the exercise price of $58.79 per share for 30 consecutive trading days.
|
|
•
|
The time-based stock options vest 25% on the first anniversary of the option grant date and monthly thereafter for the following 36 months.
|
|
•
|
The restricted stock units ("RSUs") vest in equal annual increments over a three year period.
|
In February 2014, in connection with Mr. Jain's appointment as the CEO and Chairman of the Board, his signing award included $11.9 million in performance and time-based stock options, determined using a "Monte Carlo Simulation" valuation for the performance stock options and a "Black Scholes" valuation for the time-based stock options and $4.0 million of restricted stock units. Roughly one-half of the stock option award value is performance-based and one-half is time-based. We believe the equity awards and performance goals directly align with creating value for stockholder.
Benefits
The Company does not provide pension or other post-retirement benefits, other than matching contributions under the Company’s 401(k) retirement plan. The Company does not provide, except to the limited extent described in this discussion, any significant perquisites or other personal benefits to its officers.
Stock Ownership Guidelines
In 2011, we established stock ownership guidelines for our CEO and members of our Board of Directors. In 2014, we established stock ownership guidelines for our other executive officers. Our CEO has up to five years to acquire and retain shares of our common stock that equal or exceed five times the CEO's annual salary. Our directors have up to five years to acquire and retain shares of our common stock that equal or exceed three times the director's annual base retainer. Our other executive officers have up to five years to acquire and retain shares of our common stock that equal the annual salary of the executive officer. Shares beneficially owned by a director, directly or indirectly, including vested restricted shares and shares represented by vested RSUs, count toward meeting the stock ownership guidelines.
10
Anti-Pledging / Hedging Policies
All executive officers and directors are prohibited from engaging in any speculative transactions in Company securities, including share pledging, engaging in short sales, engaging in transactions in put options, call options or other derivative securities, or engaging in any other forms of hedging transactions.
Results of 2014 Stockholder Advisory Vote
The Compensation Committee considers the Say-On-Pay vote results from the prior Annual Meeting of stockholders to assist in its evaluation of the compensation program for our named executive officers. The 2014 Say-On-Pay vote approved by the stockholders with over 87% support, confirming to the Compensation Committee that stockholders approved of the recent efforts of the Committee to more effectively align executive compensation with performance.
For 2015, the Compensation Committee has positioned the targeted total compensation with reference to the competitive market range (e.g. 50th percentile), with adjustments upwards or downwards based on factors such as Company and individual performance, experience, longevity with the Company, internal pay parity considerations and unique requirements of the position.
2015 PLAN ADOPTIONS
2015 Executive Compensation
Base Salary
In December 2014, our Compensation Committee considered the compensation for our current named executive officers for the 2015 fiscal year. The Compensation Committee determined not to modify the base salary for all named executive officers.
Annual Cash Incentives
For 2015, the Compensation Committee approved a new annual incentive plan for the executive management team referred to as the Management Incentive Program ("MIP"). We feel it is critical to build a culture that emphasizes company success first, teamwork, accountability, and pay for performance. An important part of building this culture is developing a total compensation program that rewards the executive team members who achieve results that positively impact the organization. There are two key components to our MIP:
|
1.
|
Company Performance
- The funding mechanism for MIP. ICU Medical Inc. will have a financial target established at the beginning of the fiscal year. Funding of the MIP will be based on attainment of the financial target. In setting the Company-wide MIP performance goal for fiscal 2015, the Company determined that the goal would be based on performance to Adjusted EBITDA.
|
|
2.
|
Individual Performance Factor ("IPF")
- The IPF provides a mechanism for our Compensation Committee to exercise discretion to recommend a MIP payment above or below the individual named executive officer’s target amount based on the individual’s contributions to the Company’s success and performance towards stated goals and objectives for the fiscal year. The IPF reinforces our pay for performance philosophy.
|
For fiscal 2015, our MIP has a funding range of 0%-150% payment based on the Company's performance to Adjusted EBITDA.
In addition, the Compensation Committee may assign an individual performance factor of 0%-150% related to the IPF of the named executive officer, which can result in an increase or decrease in the actual MIP payment, provided that no MIP payment shall exceed 150% of a named executive officer’s MIP target.
As part of the review and introduction of the MIP, the Compensation Committee reviewed the 2015 MIP targets as a percentage of base salary. The Compensation Committee approved the following MIP targets for the following named executive officers:
|
•
|
Mr. Jain - No change in his target as a percentage of base pay; remains at 100%.
|
|
•
|
Mr. Lamb - Target decreased by 5%; 60% for 2015.
|
11
|
•
|
Mr. Riggs - Target decreased by 5%; 60% for 2015.
|
|
•
|
Ms. Burcar - No change in her target as a percentage of base pay; remains at 60%.
|
|
•
|
Mr. McCall - Target increased by 25%; 60% for 2015.
|
The following table outlines the decisions of our Compensation Committee with respect to our current named executive officers annual base pay and MIP targets for the 2015 fiscal year.
|
Name
|
Position
|
2015 Base Salary
|
2015 Target MIP %
|
2015 Total Cash Compensation at Target
|
||||||||
|
Vivek Jain
|
Chief Executive Officer/ Chairman of the Board
|
$
|
650,000
|
|
100%
|
$
|
1,300,000
|
|
||||
|
Scott E. Lamb
|
Chief Financial Officer
|
$
|
395,150
|
|
60%
|
$
|
632,240
|
|
||||
|
Steven C. Riggs
|
Vice President of Operations
|
$
|
360,582
|
|
60%
|
$
|
576,931
|
|
||||
|
Alison D. Burcar
|
Vice President and General Manager Infusion Systems
|
$
|
315,000
|
|
60%
|
$
|
504,000
|
|
||||
|
Tom McCall
|
Vice President and General Manager of Critical Care
|
$
|
293,550
|
|
60%
|
$
|
469,680
|
|
||||
Long Term Equity
In February 2015, our Compensation Committee reviewed and approved the fiscal 2015 annual Long Term Incentive ("LTI") award, which included equity-based awards for our named executive officers. Our philosophy on Long Term Equity for our current named executive offices is built on our pay for performance philosophy. Fifty percent of the LTI award is tied directly to Company performance.
The 2015 equity awards for Mr. Jain, Mr. Lamb, Mr. Riggs, Ms. Burcar and Mr. McCall include a combination of restricted stock units and performance-based stock options. The restricted stock units vest in equal annual increments over a three-year period. The performance-based stock options vest in equal annual increments over a three-year period and become exercisable if the closing price of our common stock is 30% higher than the exercise price of $88.76 for at least 30 consecutive trading days within four years from the grant date.
|
Name
|
Position
|
Total Target Award
|
Restricted Stock Units
|
Performance-Based Stock Options
|
||||||||
|
Vivek Jain
|
Chief Executive Officer/ Chairman of the Board
|
$
|
2,925,000
|
|
16,478
|
|
61,373
|
|
||||
|
Scott E. Lamb
|
Chief Financial Officer
|
$
|
790,300
|
|
4,452
|
|
16,583
|
|
||||
|
Steven C. Riggs
|
Vice President of Operations
|
$
|
721,164
|
|
4,063
|
|
15,132
|
|
||||
|
Alison D. Burcar
|
Vice President and General Manager Infusion Systems
|
$
|
630,000
|
|
3,549
|
|
13,219
|
|
||||
|
Tom McCall
|
Vice President and General Manager of Critical Care
|
$
|
352,260
|
|
1,985
|
|
7,392
|
|
||||
Compensation Policies and Practices and Risk Management
Our Compensation Committee considers potential risks when reviewing and approving the compensation programs for our executive officers and other employees. We have designed our compensation programs, including our incentive compensation plans, with specific features to address potential risks while rewarding employees for achieving long-term financial and strategic objectives through prudent business judgment and appropriate risk taking. The following elements have been incorporated in our programs available for our executive officers:
|
•
|
A balanced mix of compensation components
- The target compensation mix for our executive officers is composed of base salary, annual cash bonus incentives, and long-term equity awards.
|
|
•
|
Multiple performance factors
- Our incentive compensation plans use both Company-wide metrics and individual performance metrics for all executive officers, excluding Mr. Jain, to establish funding of our MIP and IPF which encourage focus on the achievement of objectives for the overall benefit of the Company.
|
|
•
|
Capped cash incentive awards
- Beginning in 2015, MIP awards are capped at 150% of target.
|
12
|
•
|
Multi-year vesting
- Equity awards vest over multiple years requiring long-term commitment on the part of employees.
|
|
•
|
Competitive positioning
- The Compensation Committee has compared our executive compensation to our peers to ensure our compensation program is consistent with industry practice.
|
|
•
|
Corporate governance programs
- We have implemented corporate governance guidelines, a code of conduct and other corporate governance measures and internal controls.
|
The Compensation Committee also reviews
the key design elements of our compensation programs in relation to industry practices, as well as the means by which any potential risks may be mitigated, such as through our internal controls and oversight by management and the Board of Directors. Based on this review, our Compensation Committee concluded that based on a combination of factors, our compensation policies and practices do not incentivize excessive risk-taking that could have a material adverse effect on our Company.
Summary Compensation Table
The following table shows all compensation awarded to, earned by or paid to each of our principal executive officers, principal financial officer and the next three most highly compensated executive officers, including one former executive officer, in
2014
whose
2014
total compensation exceeded $100,000 (collectively, the “named executive officers”). Bonus and non-equity incentive plan compensation in the table below are included in the year awarded rather than the year actually paid; a portion of certain amounts may be paid in the following year.
SUMMARY COMPENSATION TABLE
|
Name and principal position
|
Year
|
Salary ($)
|
Bonus ($) (1)
|
Stock Awards ($) (2)
|
Option Awards ($) (3)
|
Non-equity incentive plan compensation ($) (4)
|
All other compensation ($) (5)
|
Total ($)
|
|||||||
|
Vivek Jain, Chairman of the Board and Chief Executive Officer
|
2014
|
574,162
|
|
—
|
|
4,000,013
|
|
11,898,739
|
|
910,000
|
|
—
|
|
17,382,914
|
|
|
Scott E. Lamb, Treasurer and Chief Financial Officer
|
2014
|
395,150
|
|
—
|
|
—
|
|
1,906,000
|
|
359,587
|
|
9,100
|
|
2,669,837
|
|
|
2013
|
383,622
|
|
23,000
|
|
104,029
|
|
489,902
|
|
48,336
|
|
8,925
|
|
1,057,814
|
|
|
|
2012
|
372,448
|
|
—
|
|
109,872
|
|
373,402
|
|
230,174
|
|
14,028
|
|
1,099,924
|
|
|
|
Steven C. Riggs, Vice President of Operations (6)
|
2014
|
390,509
|
|
—
|
|
—
|
|
2,382,500
|
|
328,130
|
|
9,100
|
|
3,110,239
|
|
|
2013
|
399,390
|
|
—
|
|
104,029
|
|
489,902
|
|
61,931
|
|
8,925
|
|
1,064,177
|
|
|
|
2012
|
339,900
|
|
—
|
|
95,615
|
|
324,883
|
|
175,049
|
|
15,750
|
|
951,197
|
|
|
|
Alison D. Burcar, Vice President and General Manager of Infusion Systems
|
2014
|
315,000
|
|
—
|
|
—
|
|
1,429,500
|
|
264,600
|
|
9,559
|
|
2,018,659
|
|
|
2013
|
300,000
|
|
15,000
|
|
104,029
|
|
489,902
|
|
31,500
|
|
8,925
|
|
949,356
|
|
|
|
2012
|
231,750
|
|
—
|
|
43,556
|
|
147,982
|
|
119,351
|
|
9,916
|
|
552,555
|
|
|
|
Tom McCall, Vice President and General Manager of Critical Care
|
2014
|
293,550
|
|
40,000
|
|
—
|
|
70,360
|
|
143,840
|
|
8,085
|
|
555,835
|
|
|
Richard A. Costello, Former Vice President of Sales (7)
|
2014
|
123,378
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
123,378
|
|
|
2013
|
356,462
|
|
—
|
|
104,029
|
|
489,902
|
|
37,429
|
|
—
|
|
987,822
|
|
|
|
2012
|
346,080
|
|
—
|
|
64,005
|
|
217,505
|
|
160,927
|
|
—
|
|
788,517
|
|
|
|
(1)
|
The 2014 bonus for Mr. McCall was for additional duties he assumed when he was promoted to Vice President and General Manager of Critical Care. The 2013 bonus for Mr. Lamb was an additional discretionary cash bonus approved by our Compensation Committee for his extraordinary efforts in a strategic transaction that ultimately did not proceed. The 2013 bonus for Ms. Burcar was an additional discretionary cash bonus approved by our Compensation Committee for her efforts in new product development. Mr. Lamb and Ms. Burcar voluntarily agreed not to accept any payment associated with their 2013 discretionary bonuses, as well as their 2013 performance bonuses.
|
|
(2)
|
The 2014 stock award represents the grant date fair value of time-based restricted stock granted in 2014. The 2012 and 2013 stock awards represent the grant date fair value of performance-based restricted stock granted in the period. See Note 4 in our Consolidated Financial Statements included in our 2014 Annual Report on Form 10-K for assumptions made in valuation of the time-based and performance-based restricted stock.
|
|
(3)
|
Represents the grant date fair value of stock options granted in the period. See Note 4 in our Consolidated Financial Statements included in our 2014 Annual Report on Form 10-K for assumptions made in valuation of stock options.
|
13
|
(4)
|
The amounts for all named executive officers represent the achievement of each respective officer's fiscal year 2014, 2013 and 2012 performance and stretch performance goals, consistent with the terms of the Performance-Based Incentive Plan. Mr. Lamb, Mr. Riggs and Ms. Burcar voluntarily agreed not to accept any payment associated with their 2013 performance bonuses as well as their 2013 discretionary bonuses.
|
|
(5)
|
Other compensation in 2014, 2013 and 2012 is our match on the officer’s 401(k) contributions.
|
(6) Mr. Riggs served as Acting President and Chief Executive Officer from October 21, 2013 to February 13, 2014.
|
(7)
|
Mr. Costello, the Company’s Former Vice President of Sales, separated with the Company, effective April 5, 2014.
|
14
Grants of Plan-Based Awards
The following table presents awards in
2014
under the Company’s various incentive award plans. No awards were granted to Mr. Costello in 2014.
GRANTS OF PLAN-BASED AWARDS FOR
2014
|
Estimated possible payouts under non-equity incentive plan awards
|
Estimated Future Payouts Under Equity Incentive Plan Awards
|
Exercise or base price of option awards ($/sh)
|
Grant date fair value of stock and option awards
|
|||||||||||||||||||||||||||||
|
Name
|
Grant date
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
|||||||||||||||||||||||||
|
Vivek Jain
|
||||||||||||||||||||||||||||||||
|
Performance bonus (1)
|
$
|
—
|
|
$
|
650,000
|
|
$
|
910,000
|
|
—
|
|
—
|
|
$
|
—
|
|
||||||||||||||||
|
Performance stock option (2)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
317,125
|
|
317,125
|
|
$
|
58.79
|
|
$
|
6,044,403
|
|
||||||||||
|
Time-based stock option (3)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
365,241
|
|
365,241
|
|
$
|
58.79
|
|
$
|
5,854,336
|
|
||||||||||
|
RSUs (4)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
68,039
|
|
68,039
|
|
$
|
4,000,013
|
|
|||||||||||||
|
Scott E. Lamb
|
||||||||||||||||||||||||||||||||
|
Performance bonus (1)
|
$
|
—
|
|
$
|
256,848
|
|
$
|
359,587
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Performance stock option (2)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
100,000
|
|
100,000
|
|
$
|
58.79
|
|
$
|
1,906,000
|
|
||||||||||
|
Steven C. Riggs
|
||||||||||||||||||||||||||||||||
|
Performance bonus (1)
|
$
|
—
|
|
$
|
234,378
|
|
$
|
328,130
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Performance stock option (2)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
125,000
|
|
125,000
|
|
$
|
58.79
|
|
$
|
2,382,500
|
|
||||||||||
|
Alison D. Burcar
|
||||||||||||||||||||||||||||||||
|
Performance bonus (1)
|
$
|
—
|
|
$
|
189,000
|
|
$
|
264,600
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Performance stock option (2)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
75,000
|
|
75,000
|
|
$
|
58.79
|
|
$
|
1,429,500
|
|
||||||||||
|
Tom McCall
|
||||||||||||||||||||||||||||||||
|
Performance bonus (1)
|
$
|
—
|
|
$
|
102,743
|
|
$
|
143,840
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||
|
Time-based stock option (3)
|
02/24/14
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
7,500
|
|
7,500
|
|
$
|
58.79
|
|
$
|
70,360
|
|
||||||||||
|
(1)
|
Performance bonuses are payable under the Performance-Based Incentive Plan if certain annual financial achievements are met or exceeded. The amounts earned by our named executive officers from this bonus arrangement in
2014
are reflected in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. The material terms of the Performance-Based Incentive Plan are discussed above under the caption “Performance-Based Bonuses.”
|
|
(2)
|
Performance stock options to purchase our common stock were granted under the 2011 Plan and the 2014 Inducement Incentive Plan ("2014 Plan"). The exercise price of the options is the fair market value of a share of common stock on the date of grant. The options expire 10 years from issuance and vest ratably at 25% per year over four years. The performance stock options are exercisable if the common stock price condition is met. Fifty percent of the vested performance stock options become exercisable if the closing price of our common stock is equal to or more than 125% of the exercise price for 30 consecutive trading days during the term of the grant. The remaining 50% of the vested performance stock options become exercisable if the closing price of our common stock is equal to or more than 150% of the exercise price for 30 consecutive trading days during the term of the grant.
|
|
(3)
|
Time-based stock options to purchase our common stock were granted under the 2011 Plan. The exercise price of the options is the fair market value of a share of common stock on the date of grant. The options expire 10 years from issuance and vest over four years, 25% on the first anniversary of issuance and the balance vests ratably on a monthly basis over the remaining 36 months.
|
|
(4)
|
RSUs were granted under the 2014 Plan and vest ratably on the anniversary of the grant over three years. The fair value of the RSUs is based on the price of the common stock on the grant date.
|
15
Outstanding Equity Awards at
December 31, 2014
The following table contains information about stock and option awards held at
December 31, 2014
, by our named executive officers.
OUTSTANDING EQUITY AWARDS AT
DECEMBER 31, 2014
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||
|
Name
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares or Units Of Stock That Have Not Vested ($)
|
||||||||||||||||||
|
Vivek Jain
|
—
|
|
317,125
|
|
$
|
58.79
|
|
(1)
|
02/24/24
|
68,039
|
|
$
|
5,572,394
|
|
(11
|
)
|
||||||||
|
—
|
|
365,241
|
|
$
|
58.79
|
|
(2)
|
02/24/24
|
||||||||||||||||
|
—
|
|
682,366
|
|
68,039
|
|
$
|
5,572,394
|
|
||||||||||||||||
|
Scott E. Lamb
|
15,000
|
|
—
|
|
$
|
38.85
|
|
(3)
|
07/22/19
|
1,680
|
|
$
|
137,592
|
|
(12
|
)
|
||||||||
|
15,000
|
|
—
|
|
$
|
32.31
|
|
(4)
|
02/04/20
|
||||||||||||||||
|
15,000
|
|
—
|
|
$
|
37.00
|
|
(5)
|
07/21/20
|
||||||||||||||||
|
14,375
|
|
625
|
|
$
|
43.12
|
|
(6)
|
02/02/21
|
||||||||||||||||
|
12,812
|
|
2,187
|
|
$
|
43.62
|
|
(7)
|
07/20/21
|
||||||||||||||||
|
16,839
|
|
6,934
|
|
$
|
46.53
|
|
(8)
|
02/01/22
|
||||||||||||||||
|
10,828
|
|
12,796
|
|
$
|
61.76
|
|
(9)
|
02/06/23
|
||||||||||||||||
|
—
|
|
100,000
|
|
$
|
58.79
|
|
(1)
|
02/24/24
|
||||||||||||||||
|
99,854
|
|
122,542
|
|
1,680
|
$137,592
|
|||||||||||||||||||
|
Steven C. Riggs
|
15,000
|
|
—
|
|
$
|
38.85
|
|
(3)
|
07/22/19
|
1,462
|
$119,738
|
(12)
|
||||||||||||
|
15,000
|
|
—
|
|
$
|
32.31
|
|
(4)
|
02/04/20
|
||||||||||||||||
|
15,000
|
|
—
|
|
$
|
37.00
|
|
(5)
|
07/21/20
|
||||||||||||||||
|
14,375
|
|
625
|
|
$
|
43.12
|
|
(6)
|
02/02/21
|
||||||||||||||||
|
12,812
|
|
2,188
|
|
$
|
43.62
|
|
(7)
|
07/20/21
|
||||||||||||||||
|
14,650
|
|
6,033
|
|
$
|
46.53
|
|
(8)
|
02/01/22
|
||||||||||||||||
|
10,828
|
|
12,796
|
|
$
|
61.76
|
|
(9)
|
02/06/23
|
||||||||||||||||
|
—
|
|
125,000
|
|
$
|
58.79
|
|
(1)
|
02/24/24
|
||||||||||||||||
|
97,665
|
|
146,642
|
|
1,462
|
$119,738
|
|||||||||||||||||||
|
Alison D. Burcar
|
—
|
|
417
|
|
$
|
43.12
|
|
(6)
|
02/02/21
|
666
|
|
$
|
54,545
|
|
(12
|
)
|
||||||||
|
209
|
|
1,458
|
|
$
|
43.62
|
|
(7)
|
07/20/21
|
||||||||||||||||
|
—
|
|
2,748
|
|
$
|
46.53
|
|
(8)
|
02/01/22
|
||||||||||||||||
|
10,223
|
|
12,796
|
|
$
|
61.76
|
|
(9)
|
02/06/23
|
||||||||||||||||
|
—
|
|
75,000
|
|
$
|
58.79
|
|
(1)
|
02/24/24
|
||||||||||||||||
|
10,432
|
|
92,419
|
|
666
|
|
$
|
54,545
|
|
||||||||||||||||
|
Tom McCall
|
1,917
|
|
83
|
|
$
|
43.12
|
|
(6)
|
02/02/21
|
|||||||||||||||
|
3,542
|
|
1,458
|
|
$
|
46.53
|
|
(8)
|
02/01/22
|
||||||||||||||||
|
2,708
|
|
2,292
|
|
$
|
60.40
|
|
(10)
|
10/11/22
|
||||||||||||||||
|
2,062
|
|
2,438
|
|
$
|
61.76
|
|
(9)
|
02/06/23
|
||||||||||||||||
|
—
|
|
7,500
|
|
$
|
58.79
|
|
(2)
|
02/24/24
|
||||||||||||||||
|
10,229
|
|
13,771
|
|
—
|
|
$
|
—
|
|
||||||||||||||||
|
Richard A. Costello
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
||||||||||||||||
|
(1)
|
Performance stock options were granted on 02/24/2014 and vest ratably at 25% per year over four years. The performance stock options are exercisable if the common stock price condition is met. Fifty percent of the vested performance stock options become exercisable if the closing price of our common stock is equal to or more than 125% of the exercise price for 30 consecutive trading days during the term of the grant. The remaining 50% of the vested performance stock options become exercisable if the closing price of our common stock is equal to or more than 150% of the exercise price for 30 consecutive trading days during the term of the grant.
|
|
(2)
|
Time-based stock options were granted on 02/24/2014 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(3)
|
Time-based stock options were granted on 07/22/2009 and vest 25% after one year, monthly for 36 months thereafter.
|
16
|
(4)
|
Time-based stock options were granted on 02/04/2010 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(5)
|
Time-based stock options were granted on 07/21/2010 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(6)
|
Time-based stock options were granted on 02/02/2011 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(7)
|
Time-based stock options were granted on 07/20/2011 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(8)
|
Time-based stock options were granted on 02/01/2012 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(9)
|
Time-based stock options were granted on 02/06/2013 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(10)
|
Time-based stock options were granted on 10/11/2012 and vest 25% after one year, monthly for 36 months thereafter.
|
|
(11)
|
Award granted on 02/24/2014 and vests one-third annually. Market value is determined based on the closing price of our stock at
December 31, 2014
.
|
|
(12)
|
Award granted on 02/01/2012 and vests one-third annually. By meeting a market performance goal in 2012, the named executive officers earned 200% of this original stock award, which is reflected in the number of shares unvested in the table. Market value is determined based on the closing price of our stock at
December 31, 2014
.
|
Options Exercised and Stock Vested
The following table contains information about stock options exercised and PRSUs vested during
2014
, by the named executive officers of the Company.
|
Option awards
|
Stock Awards
|
|||||||||||||
|
Name
|
Number of shares acquired on exercise (#)
|
Value realized on exercise ($)
|
Number of shares acquired on vesting
(1)
(#)
|
Value realized on vesting
(2)
($)
|
||||||||||
|
Scott E. Lamb
|
80,000
|
|
$
|
3,812,069
|
|
1,680
|
|
$
|
106,596
|
|
||||
|
Steven C. Riggs
|
58,500
|
|
$
|
2,949,987
|
|
1,462
|
|
$
|
92,764
|
|
||||
|
Alison D. Burcar
|
20,000
|
|
$
|
924,727
|
|
666
|
|
$
|
42,258
|
|
||||
|
Richard A. Costello
|
29,846
|
|
$
|
622,584
|
|
978
|
|
$
|
62,054
|
|
||||
(1) Reflects 200% of the original award because our TSR was greater than the 75th percentile.
(2) Represents the amounts realized based on the fair market value of our stock on 02/01/2014, the vesting date for PRSUs. Fair market value is determined based on the closing price of our stock on the applicable date.
Potential Payments upon Termination or Change in Control
On February 7, 2014, we entered into an employment agreement with Mr. Jain. Under his employment agreement, any amounts payable upon termination are subject to tax withholdings and will be made on the sixtieth day following the date of termination.
Payments to Mr. Jain would have been the following if a change in control of the Company had occurred at
December 31, 2014
and he continued in his position as CEO and Chairman of the board:
|
•
|
100% of the shares subject to the initial performance-based stock option, the initial time-based stock option and the initial restricted stock unit award granted to him in his employment agreement would have vested.
|
Payments to Mr. Jain would have been the following if a change in control of the Company had occurred at
December 31, 2014
and his employment had been terminated without cause by the Company or for good reason by Mr. Jain or as a result of his death or disability at December 31, 2014:
|
•
|
Mr. Jain would have received a cash payment equal to 300% of his annual salary and his target bonus.
|
|
•
|
100% of the shares subject to the initial performance-based stock option, the initial time-based stock option and the initial restricted stock unit award granted to him in his employment agreement would have vested.
|
Payments to Mr. Jain would have been the following if his employment had been terminated without cause by the Company or for good reason by Mr. Jain or as a result of his death or disability at December 31, 2014:
|
•
|
Mr. Jain would have received a cash payment equal to 300% of his annual salary and his target bonus.
|
|
•
|
100% of the shares subject to the initial time-based stock option and the initial restricted stock unit award granted to him in his employment agreement would have vested. In addition, all of Mr. Jain’s outstanding stock options would remain exercisable, to the extent vested, for a period of three years following the date of termination.
|
17
|
•
|
If any of these payments or benefits were subject to excise tax under Section 4999 of the Code, Mr. Jain would have been entitled to the payments and benefits either (i) delivered in full or (ii) reduced such that no portion of the payments or benefits would be subject to the excise tax, whichever would be more favorable to Mr. Jain on an after tax basis.
|
Under Mr. Jain’s employment agreement, the cash severance payable in connection with involuntary terminations on or after February 13, 2016 is reduced to 100% of his annual salary and target bonus (200% of these amounts for termination in connection with a change in control).
On December 2, 2013, we entered into retention agreements with Mr. Lamb, Mr. Riggs, Ms. Burcar, Mr. McCall and Mr. Costello that are effective until December 1, 2016 (unless the employee is terminated prior to this date). Mr. Costello separated with the Company on April 5, 2014, at which time he received $27,419 for his accrued vacation. The retention agreements provide that, if within three months prior or 12 months after a change in control of the Company, as defined in the agreements, their employment is terminated for other than cause, disability or death or for good reason the officer will be entitled to the items that follow. These retention agreements do not contain any tax gross-up provisions but, instead provide for the same most favorable excise tax option.
Payments will be made within sixty days following the date of termination. Payments to Mr. Lamb, Mr. Riggs, Ms. Burcar and Mr. McCall would have included the following if termination without cause or for good reason in connection with a change in control had occurred at
December 31, 2014
:
|
◦
|
Mr. Lamb, Mr. Riggs and Ms. Burcar would have received 200% of their annual base salary. Mr. McCall would have received 150% of his annual base salary.
|
|
◦
|
Mr. Lamb, Mr. Riggs and Ms. Burcar would have received 200% of their target annual bonuses. Mr. McCall would have received 150% is his target annual bonus.
|
|
◦
|
Mr. Lamb, Mr. Riggs and Ms. Burcar's benefits for medical insurance, dental insurance, vision insurance, life insurance and disability insurance would continue through December 31, 2016. Mr. McCall's benefits for medical insurance, dental insurance, vision insurance, life insurance and disability insurance would continue through June 30, 2016.
|
|
◦
|
Unvested stock options or other equity awards would vest 100% for Mr. Lamb, Mr. Riggs and Ms. Burcar and would vest 90% for Mr. McCall.
|
The retention agreements provide that, if employment is terminated by the Company other than for cause, disability or death, change of control or by the employee for "good reason", the employee would be entitled to receive 100% of their annual salary and 12 months of benefits.
For the purposes of Mr. Jain's employment agreement and the retention agreements, a change in control generally means the following:
|
•
|
the acquisition by an individual, entity or group of beneficial ownership of 50% or more of either the outstanding common stock or voting securities of the Company; or
|
|
•
|
a change in the composition of the majority of the Board of Directors, which is not supported by a majority of the current Board of Directors; or
|
|
•
|
a major corporate transaction, such as a reorganization, merger or consolidation or sale or disposition of all or substantially all of the Company’s assets (unless certain conditions are met); or
|
|
•
|
approval of the stockholders of the Company of a complete liquidation or dissolution of the Company.
|
For the purposes of Mr. Jain's employment agreement, cause generally means the following:
|
•
|
his gross neglect and willful and repeated failure to substantially perform his assigned duties, which failure is not cured within 30 days after a written demand for substantial performance is received by him from the Board which identifies the manner in which the Board believes he has not substantially performed his duties; or
|
|
•
|
his engagement in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or
|
|
•
|
his conviction of, or plea of no contest to, a felony or a crime involving fraud, embezzlement, or theft; or
|
|
•
|
his improper and willful disclosure of the Company’s confidential or proprietary information where such disclosure causes (or should reasonably be expected to cause) significant harm to the Company.
|
18
For the purposes of the retention agreements, cause generally means the following:
|
•
|
the employee’s intentional, willful and continuous failure to substantially perform his or her reasonable assigned duties (other than any such failure resulting from incapacity due to physical or mental illness or any failure after the employee gives notice of termination for good reason), which failure is materially and demonstrably injurious to the Company, and which failure is not cured within 30 days after a written demand for substantial performance and is received by the employee from the Board which specifically identifies the manner in which the Board believes the employee has not substantially performed the employee’s duties; or
|
|
•
|
the employee’s intentional and willful engagement in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or is intended to result in substantial personal enrichment; or
|
|
•
|
the employee’s conviction for a felony or the employee’s plea of nolo contendere in connection with a felony indictment.
|
For the purposes of Mr. Jain's employment agreements, good reason generally means the following and occurs without the employee's written consent and is not due to a circumstance applied by the Company to a group of similarly situated employees:
|
•
|
any significant diminution in his duties, responsibilities or authority; or
|
|
•
|
a material reduction in his annual base salary; or
|
|
•
|
a requirement that he reports to a corporate officer or employee instead of reporting directly to the Board; or
|
|
•
|
a material change in the location that he performs his principal duties, resulting in a material increase in the daily commuting distance; or
|
|
•
|
a material breach by the Company
|
For the purposes of the retention agreements, good reason generally means the following and occurs without the employee's written consent and is not due to a circumstance applied by the Company to a group of similarly situated employees:
|
•
|
any significant diminution in the employee’s duties, responsibilities or authority; or
|
|
•
|
a material reduction in the employee’s annual base salary; or
|
|
•
|
failure by the Company to continue a material compensation or benefit plan; or
|
|
•
|
a material change in the location the employee performs their principal duties, resulting in a material increase in the daily commuting distance; or
|
|
•
|
a material breach by the Company
|
The following table summarizes the payments and benefits that would have been made if the employment of a named executive officer had been terminated without cause or for good reason in connection with a change in control of the Company on
December 31, 2014
:
|
Vivek Jain
|
Scott E. Lamb
|
Steven C. Riggs
|
Alison D. Burcar
|
Tom McCall
|
||||||||||||||||
|
Number of options that would accelerate
|
682,366
|
|
72,542
|
|
84,142
|
|
54,919
|
|
12,394
|
|
||||||||||
|
Number of PRSU/RSUs that would accelerate
|
68,039
|
|
1,680
|
|
1,462
|
|
666
|
|
—
|
|
||||||||||
|
Intrinsic value of accelerated options and equity awards
|
$
|
21,341,872
|
|
$
|
1,904,022
|
|
$
|
2,143,186
|
|
$
|
1,348,064
|
|
$
|
326,498
|
|
|||||
|
Salary
|
$
|
1,950,000
|
|
$
|
790,300
|
|
$
|
721,164
|
|
$
|
630,000
|
|
$
|
440,325
|
|
|||||
|
Bonus
(1)
|
$
|
1,950,000
|
|
$
|
513,670
|
|
$
|
468,756
|
|
$
|
378,000
|
|
$
|
154,115
|
|
|||||
|
Benefits
|
$
|
—
|
|
$
|
47,176
|
|
$
|
48,187
|
|
$
|
43,887
|
|
$
|
37,028
|
|
|||||
|
Total
|
$
|
25,241,872
|
|
$
|
3,255,168
|
|
$
|
3,381,293
|
|
$
|
2,399,951
|
|
$
|
957,966
|
|
|||||
(1) The bonus amounts included are based on the target performance bonuses for 2014.
19
The following table summarizes the payments and benefits that would have been made if the employment of a named executive officer had been terminated without cause or for good reason on
December 31, 2014
:
|
Vivek Jain
|
Scott E. Lamb
|
Steven C. Riggs
|
Alison D. Burcar
|
Tom McCall
|
Richard A. Costello
(2)
|
|||||||||||||||||
|
Number of options that would accelerate
|
365,241
|
|
—
|
|
—
|
|
—
|
|
—
|
|
N/A
|
|||||||||||
|
Number of RSUs that would accelerate
|
68,039
|
|
—
|
|
—
|
|
—
|
|
—
|
|
N/A
|
|||||||||||
|
Intrinsic value of accelerated options and equity awards
|
$
|
14,013,114
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
N/A
|
||||||
|
Salary
|
$
|
1,950,000
|
|
$
|
395,150
|
|
$
|
360,582
|
|
$
|
315,000
|
|
$
|
293,550
|
|
N/A
|
||||||
|
Bonus
(1)
|
$
|
1,950,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
N/A
|
||||||
|
Benefits
|
$
|
—
|
|
$
|
23,588
|
|
$
|
24,094
|
|
$
|
21,944
|
|
$
|
24,686
|
|
N/A
|
||||||
|
Total
|
$
|
17,913,114
|
|
$
|
418,738
|
|
$
|
384,676
|
|
$
|
336,944
|
|
$
|
318,236
|
|
N/A
|
||||||
(1) The bonus amount included are based on the target performance bonus for 2014.
(2) Mr. Costello, the Company’s Former Vice President of Sales, separated with the Company, effective April 5, 2014.
Director Compensation
In
2014
, our non-employee directors received an annual cash retainer of $40,000. Our lead director and each Chairperson of a Committee of the Board of Directors also receives an annual retainer. The compensation per meeting and annual chairperson retainer amounts earned in
2014
is as follows:
|
Board of Directors
|
Audit Committee
|
Compensation Committee
|
Nominating/Corporate Governance Committee
|
|||||||||
|
Meeting daily compensation - chairperson attendance in person
|
$
|
1,000
|
|
$
|
1,500
|
|
$
|
1,125
|
|
$
|
1,125
|
|
|
Meeting daily compensation - chairperson telephonic
|
$
|
500
|
|
$
|
750
|
|
$
|
750
|
|
$
|
750
|
|
|
Meeting daily compensation - committee member attendance in person
|
$
|
1,000
|
|
$
|
1,000
|
|
$
|
750
|
|
$
|
750
|
|
|
Meeting daily compensation - committee member telephonic
|
$
|
500
|
|
$
|
500
|
|
$
|
500
|
|
$
|
500
|
|
|
Annual Retainer - lead director
|
$
|
25,000
|
|
not applicable
|
|
not applicable
|
|
not applicable
|
|
|||
|
Annual Retainer - chairperson
|
not applicable
|
|
$
|
18,500
|
|
$
|
7,500
|
|
$
|
5,000
|
|
|
In 2014, our non-employee directors received equity awards of options to purchase our common stock and RSUs valued at $150,000 in the aggregate, with 75% consisting of options and 25% consisting of RSUs. In June 2014, each non-employee director received an option grant to purchase 6,481 shares of our common stock, which is exercisable after one year and expires 10 years from the grant date. In June 2014, each of our non-employee directors received 616 RSUs which fully vest after one year.
In January 2015, our Compensation Committee approved a new compensation structure. Under the new structure, our directors that do not chair a committee will receive an annual retainer of $60,000. The chairperson of our Audit Committee will receive an annual retainer of $85,000. The chairperson of our Compensation Committee will receive an annual retainer of $80,000. The chairperson of our Nominating/Corporate Governance Committee will receive an annual retainer of $70,000. Per meeting fees have been eliminated. Our non-employee directors will continue to receive equity awards valued at $150,000 per year with 50% of that value to be in RSUs vesting after one year and 50% to be in stock options that become exercisable after one year and expire 10 years from the grant date. All director retainers will be payable on a quarterly basis.
20
The following table shows all compensation awarded to, earned by or paid to our directors for service as a director in
2014
. Dr. Lopez is an employee director and does not receive compensation for service as a director. All other directors in the table below are non-employee directors.
2014
DIRECTOR COMPENSATION TABLE
|
Name
|
Fees earned or
paid in cash ($)
|
RSU awards ($)
(1)
|
Option awards ($)
(2)(3)
|
Total ($)
|
||||||||||||
|
Jack W. Brown
|
$
|
69,250
|
|
$
|
37,490
|
|
$
|
112,506
|
|
$
|
219,246
|
|
||||
|
John J. Connors
|
$
|
88,167
|
|
$
|
37,490
|
|
$
|
112,506
|
|
$
|
238,163
|
|
||||
|
Michael T. Kovalchik, III, M.D.
(4)
|
$
|
43,979
|
|
$
|
—
|
|
$
|
—
|
|
$
|
43,979
|
|
||||
|
George A. Lopez, M.D.
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
||||
|
Joseph R. Saucedo
|
$
|
93,125
|
|
$
|
37,490
|
|
$
|
112,506
|
|
$
|
243,121
|
|
||||
|
Richard H. Sherman, M.D.
|
$
|
73,125
|
|
$
|
37,490
|
|
$
|
112,506
|
|
$
|
223,121
|
|
||||
|
Robert S. Swinney, M.D.
|
$
|
70,844
|
|
$
|
37,490
|
|
$
|
112,506
|
|
$
|
220,840
|
|
||||
(1) On June 9,
2014
, each non-employee director, excluding Dr. Kovalchik, was granted 616 RSUs of the Company with a grant date fair value of $37,490
.
The fair value of the RSUs is based on the market price of our common stock on the date of the grant, or $60.86 per share. Each non-employee director, excluding Dr. Kovalchik, has 616 RSUs outstanding at December 31,
2014
.
|
(2)
|
On June 9,
2014
, each non-employee director, excluding Dr. Kovalchik, was granted 6,481 options to purchase shares of our common stock with a grant date fair value of $112,506.
See Note 4 to our Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31,
2014
for the assumptions used in valuation of these options.
|
|
(3)
|
At December 31,
2014
, our non-employee directors held options to purchase shares of our common stock as follows: Mr. Brown 56,284; Mr. Connors 45,034; Mr. Saucedo 56,284; Dr. Sherman 45,034; and, Dr. Swinney 56,284.
|
|
(4)
|
Dr. Kovalchik's membership on our Board of Directors ended on June 9, 2014.
|
Equity Compensation Plan Information
We have a 2011 Stock Incentive Plan under which we may grant restricted stock or options to purchase our
common stock to our employees, directors and consultants. We also have a 2014 Inducement Stock Incentive Plan under which
granted 250,405 restricted stock units and options to purchase our common stock. We had a 2001 Directors’ Stock Option Plan
under which we granted options to purchase our common stock to our directors, which plan expired in November 2011. We
also had a 1993 Stock Incentive Plan and a 2003 Stock Option Plan, under which we granted options to purchase common
stock to the employees, which plans expired in January 2005 and May 2011, respectively. We also have an Employee Stock
Purchase Plan. All plans were approved by our stockholders.
Further information about the plans is in Note 4 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014
. Certain information about the plans at
December 31, 2014
, is as follows:
|
|
|
Number of shares remaining
|
||||||
|
Number of shares to be issued upon
|
Weighted-average exercise
|
available for future issuance under
|
||||||
|
exercise of outstanding options,
|
price of outstanding
|
equity compensation plans
|
||||||
|
warrants and rights
|
options, warrants and rights
|
(excluding shares reflected in column (a))
|
||||||
|
(a)
|
(b)
|
(c)*
|
||||||
|
2,556,936
|
|
$
|
49.46
|
|
1,337,420
|
|
||
*As of
December 31, 2014
, there were 222,439 shares of common stock available for issuance under our Employee Stock Purchase Plan, which are included in this amount.
Transactions with Related Persons
David C. Greenberg, a director nominee, serves as an executive officer of Medline Industries, Inc. (“Medline”). During 2014,
in the ordinary course of business, Medline distributed a net amount of approximately $15 million of the Company’s products, representing less than 1% of Medline’s annual distribution business.
Mr. Greenberg has no material interest in the sales and distributor relationship between us and Medline.
21
We have not entered into or participated in any other transaction required to be disclosed by Item 404(a) of Regulation S-K.
Policies and Procedures Regarding Transactions with Related Persons
We attempt to review all related person transactions to ensure fairness to the Company and proper disclosure under SEC rules. Pursuant to the Audit Committee charter, our Audit Committee is responsible for reviewing and approving all related person transactions. Additionally, our Board of Directors conducts annual reviews of each director to determine such director’s independence. We also require each of our executive officers and directors to complete a questionnaire that is intended to identify transactions or potential transactions that require disclosure under SEC rules or create a potential conflict of interest. In determining whether to approve a related party transaction, our Audit Committee considers the general fairness of the transaction to the Company, including the material terms and conditions of the proposed transaction, the related party’s interest, the amount involved in the transaction and whether the transaction is on terms comparable to terms available in a transaction involving an unrelated third party.
Pursuant to our written Code of Business Conduct and Ethics, each executive officer or director must receive approval of the Nominating/Corporate Governance Committee or the Board of Directors prior to engaging in certain transactions that are likely to involve a conflict of interest.
Director Independence
The Board of Directors has determined that directors Messrs. Brown, Connors and Saucedo and Drs. Sherman and Swinney and director nominee Mr. Greenberg qualify as independent under NASDAQ Listing Rules. During the course of its review, the Board of Directors considers transactions and relationships between each director or director nominee (and such director’s immediate family) and the Company and its affiliates against the independence requirements of NASDAQ, and in the case of the Audit Committee and the Compensation Committee, the SEC rules.
Board Meetings and Committees and Attendance at Meetings
During
2014
, the Board met 16 times, the Compensation Committee met 14 times, the Audit Committee met 10 times and the Nominating/Corporate Governance Committee met 9 times. All directors attended more than 75% of the total of all meetings of the Board and any committees on which they serve.
It is the policy of the Company to invite and encourage all members of the Board of Directors to attend the annual meeting of stockholders, which was held by remote communication. In
2014
, five directors attended the Annual Meeting.
Director Legal Proceedings
During the past 10 years, no director, executive officer or nominee for our Board of Directors has been involved in any legal proceedings that are material to an evaluation of their ability or integrity to become our director or executive officer. During the past 10 years, no director, executive officer or nominee for our Board of Directors has had judicial or administrative proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business entity; judicial or administrative proceedings based on violations of federal or state securities, commodities, banking, or insurance laws and regulations, or any settlement of such actions; or any disciplinary sanctions or orders imposed by stock, commodities, or derivatives exchanges or other self-regulatory organizations.
Board Leadership Structure
Vivek Jain is our CEO and Chairman of the Board. The Board of Directors believes that Mr. Jain is best situated to serve as Chairman of the Board based upon his significant leadership position with the Company and his extensive knowledge about the industry. In addition, the Board of Directors believes that Mr. Jain's combined roles as Chairman and CEO position him to effectively identify strategic priorities for the Company and to lead Board discussions on the execution of Company strategy. The Board of Directors believes that the combined role of Chairman and CEO helps promote the Company’s overall strategic development and facilitates the efficient flow of information between management and the Board.
In January 2014, the Board appointed John J. Connors, Esq. to serve as our Lead Independent Director. The independent directors regularly meet in executive sessions in connection with regular meetings of the Board, which executive sessions are presided over by the Board's Lead Independent Director.
22
Board Oversight of Risk
The Board of Directors is responsible for oversight of the various risks facing the Company. In this regard, the Board seeks to understand and oversee the most critical risks relating to our business, allocate responsibilities for the oversight of risks among the full Board and its committees, including its Audit, Nominating/Corporate Governance, and Compensation Committees, and see that management has in place effective systems and processes for managing risks facing us. Overseeing risk is an ongoing process and risk is inherently tied to our strategy and to strategic decisions. Accordingly, the Board considers risk throughout the year and with respect to specific proposed actions. While the Board is responsible for oversight and direction, management is charged with identifying risk and establishing appropriate internal processes and an effective internal control environment to identify and manage risks and to communicate information about risk to the Board. Committees of the Board also play an important role in risk oversight, including the Audit Committee, which oversees our processes for assessing risks and the effectiveness of our internal controls. In fulfilling its duties, the Audit Committee considers information from our independent registered public accounting firm, Deloitte & Touche, LLC, and our internal auditors. Additionally, the Compensation Committee periodically reviews the Company’s compensation policies and profile with management to ensure that compensation supports the Company’s goals and strategic objectives without creating risks that may have a material adverse effect on the Company.
See “Executive Officer and Director Compensation-Compensation Policies and Practices and Risk Management” for further information about our risk management policies.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics for Directors and Officers. A copy is available on the Company’s website,
www.icumed.com
. The Company will disclose any future amendments to, or waivers from, the Code of Business Conduct and Ethics for Directors and Officers on our website within four business days following the date of the amendment or waiver.
Nominating / Corporate Governance Committee
The Nominating/Corporate Governance Committee (the “Nominating Committee”) consists of Mr. Connors and Drs. Sherman (Chairman) and Swinney, each of whom the Board of Directors has determined is independent as defined by the Nasdaq Listing Rules. The Nominating Committee operates pursuant to a written charter adopted by the Board of Directors, a copy of which can be found on the Company’s website,
www.icumed.com
. The Nominating Committee’s role is to recommend to the Board of Directors policies on Board composition and criteria for Board membership, to identify individuals qualified to serve as directors and approve candidates for director and to recommend directors for appointment to committees of the Board of Directors. The Nominating Committee also makes recommendations to the Board of Directors concerning the Company’s corporate governance guidelines and codes of ethics and business conduct, oversees internal investigations of conduct of senior executives, if necessary, and conducts evaluations of the performance of the Board of Directors.
In evaluating and determining whether to recommend a person as a candidate for election as a director, the Nominating Committee considers, among other things, relevant management and/or industry experience; values such as integrity, accountability, judgment and adherence to high performance standards; independence pursuant to the guidelines set forth in the Nasdaq Listing Rules; diversity; ability and willingness to undertake the requisite time commitment to Board service; and an absence of conflicts of interest with the Company. Pursuant to our director retirement policy that was adopted on April 30, 2015, no person may stand for election following his or her 76th birthday, and each serving director must resign upon his or her 76th birthday.
The policy also requires that as a condition for the nomination of any director who would reach the age of 76 before the end of his or her term, he or she must submit an advance irrevocable resignation that becomes effective on the director's 76th birthday. In accordance with this policy, directors Jack W. Brown and John J. Connors, Esq., who are 75 years of age and who are standing for reelection, have tendered resignations effective as of their respective 76th birthdays.
While the Nominating Committee does not have a specific policy in place, it believes that diversity brings different perspectives to a board of directors which leads to a more varied approach to board issues. The Company has a general non-discrimination policy, which the Nominating Committee observes when considering candidates for the Board of Directors. While not giving specific weight to any aspect of diversity, the Board of Directors believes that its current composition has an appropriate level of diversity with respect to ethnicity and professional experience.
The Nominating Committee may employ a variety of methods for identifying and evaluating nominees for director. The Nominating Committee will assess the need for particular expertise on the Board of Directors, the upcoming election cycle of the Board and whether any vacancies on the Board of Directors are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating Committee will consider various potential candidates for director that may come to the Nominating Committee’s attention through current directors, the Company’s professional advisors, stockholders or others. David C. Greenberg, a nominee for election at the Annual Meeting, has not previously been elected by the Company’s stockholders. Mr. Greenberg was originally identified as a potential director nominee by one of our current executive officers.
The Nominating Committee will consider candidates recommended by stockholders. The deadlines and procedures for stockholder recommendations of director candidates are discussed below under “Nomination of Directors and Submission of Stockholder Proposals.” Following verification of the stockholder status of persons proposing candidates, the Nominating Committee will make an initial analysis of the qualifications of any candidate recommended by stockholders or others pursuant to the criteria summarized above to determine whether the candidate is qualified for service on the Company’s Board before deciding to undertake a complete evaluation of the candidate. Other than the verification of compliance with procedures and stockholder status, and the initial analysis performed by the Nominating Committee, a potential candidate nominated by a stockholder will be treated like any other potential candidate during the review process by the Nominating Committee.
The Board, upon recommendation of our Nominating Committee has approved and recommended to the Board the nominations of Vivek Jain, Jack W. Brown, John J. Connors, Esq., Joseph R. Saucedo and Richard H. Sherman, M.D. for re-election as directors at the Annual Meeting and David C. Greenberg for election as a new director at the Annual Meeting. The Nominating Committee considered the candidates’ past contributions to the Board of Directors, their willingness to continue to
23
serve and the benefits of continuity in the membership of the Board of Directors and determined that the re-election and initial election of the these candidates was appropriate.
Audit Committee
The Board of Directors has an Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, which consists of three directors, Messrs. Brown, Connors and Saucedo (Chairman) all of whom are independent directors as defined by the Nasdaq Listing Rules and Rule 10A(3)(b)(1) of the Exchange Act. As more fully described in the Audit Committee Charter, the Audit Committee oversees the accounting and financial reporting processes of the Company and audits its financial statements.
The Company’s Board of Directors adopted a revised written Audit Committee charter, a copy of which can be found on the Company’s web site,
www.icumed.com
.
The Board of Directors has determined that Joseph R. Saucedo is an “audit committee financial expert” and is “independent,” as those terms are defined by applicable Nasdaq Listing Rules and Securities and Exchange Commission (“SEC”) regulations
.
Audit Committee Report
The Company’s audited consolidated financial statements are included in the Company’s Annual Report on Form 10-K. The Audit Committee has reviewed and discussed those financial statements with management of the Company and has discussed with the independent auditors the matters required to be discussed by Auditing Standards No. 16,
as amended (
Communications with Audit Committees
), as adopted by the Public Company Accounting Oversight Board. Further, the Committee has received the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence, and has discussed the independent auditor’s independence with them. Based on these reviews and discussions, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K.
AUDIT COMMITTEE
Joseph R. Saucedo, Chairman
Jack W. Brown
John J. Connors
Compensation Committee
The Board of Directors has a Compensation Committee, consisting of Messrs. Brown and Saucedo, and Drs. Sherman and Swinney (Chairperson). The Board has determined that all members of the Compensation Committee, none of whom are employees, former employees of, or consultants to, the Company are independent directors as defined by the Nasdaq Listing Standards. The Compensation Committee operates pursuant to a written charter adopted by the Board of Directors, a copy of which can be found on the Company’s website,
www.icumed.com
.
Our Compensation Committee discharges the responsibilities of the Board of Directors relating to executive and director compensation. It reviews the performance of the Company and our CEO, sets performance objectives, establishes the compensation of the CEO, recommends to the Board of Directors the compensation of the other executive officers and authorizes the grant of options to employees, and awards under our bonus and incentive plans.
Our Compensation Committee engaged Compensia, a national compensation consulting firm, to advise on the performance-based compensation structure and awards, including the Performance-Based Incentive Plan and to provide market data and other analysis for compensation of executive officers and members of our Board of Directors. Prior to making its decisions for executive officers other than the CEO, the Compensation Committee receives recommendations from the CEO as to the amounts and types of compensation and other awards for those executive officers.
Compensation Committee Report
The Company’s Compensation Discussion and Analysis (CD&A) is included elsewhere in this Proxy Statement. Our Compensation Committee has reviewed and discussed the CD&A with management of the Company. Based on these reviews
24
and discussions, our Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement.
COMPENSATION COMMITTEE
Robert S. Swinney, M.D. (Chairman)
Jack W. Brown
Joseph R. Saucedo
Richard H. Sherman, M.D.
Stockholder Communications
The Company’s Board of Directors has an established process for stockholder communications and it can be found on the Company’s website,
www.icumed.com
.
In the past year, the Board of Directors did not receive any stockholder communications that it considered material and therefore took no action.
Compensation Committee Interlocks and Insider Participation
During
2014
, no member of the Compensation Committee was a current or former employee or officer of the Company, and no interlocking relationship existed, between any member of our Compensation Committee and any member of any other company’s board of directors or compensation committee. The Compensation Committee consists of Messrs. Brown and Saucedo, Drs. Sherman and Swinney (Chairman).
Conflict of Interest Analysis
The Compensation Committee believes that the work of Compensia, the compensation consultant engaged by our Compensation Committee during
2014
, raised no conflict of interest. In reaching this conclusion, our Compensation Committee considered the factors set forth in the SEC and NASDAQ rules regarding compensation advisor independence.
Family Relationships
Alison D. Burcar, the Company’s Vice President & General Manager of Infusion Systems, is the niece of Dr. Lopez, a director and the founder of the Company. There are no other family relationships among the executive officers or directors of the Company.
Compliance with Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s officers and directors and persons who own more than 10% of the Company’s common stock to file reports on prescribed forms regarding ownership of and transactions in the common stock with the SEC and to furnish copies of such forms to the Company. Based solely on a review of the forms received by it and written representations that no Forms 5 were required to be filed, the Company believes that with respect to
2014
, except as set forth herein, all Section 16(a) filings were filed on a timely basis.
On December 22, 2014, a Form 4 for Dr. Lopez was inadvertently filed 11 days late with respect to transactions that occurred during the period from December 3, 2014 to December 12, 2014.
Proposals Requiring Your Vote
Proposal 1- Election of Directors
Nominees and Directors
Five of the seven directors currently constituting the Board are to be elected at the Annual Meeting to serve for a one-year term or until such director's successor is elected and qualified. In addition, we are adding one new director to serve on our board, who is to be elected at the Annual Meeting to serve for a one-year term or until such director's successor is elected and qualified.
In the election of directors, the Board recommends that you vote
FOR
Jack W. Brown, John J. Connors, Esq., Vivek Jain, Joseph R. Saucedo and Richard H. Sherman, M.D., who are now members of the Board and whose current terms of office are expiring and that you vote
FOR
David C. Greenberg, who will be a new member of the Board.
It is not anticipated that the nominees will decline or be unable to serve as directors. If, however, that should occur, the proxy holders will vote the proxies in their discretion for any nominee designated to fill the vacancy by the Company’s Nominating/Corporate Governance Committee.
25
The following are summaries of the background, business experience and descriptions of the principal occupations of our director nominees.
Jack W. Brown
Mr. Brown, 75, has been a director since 1992. He is the former Chairman of the Board and President of Gish Biomedical, Inc., a manufacturer of disposable medical devices for cardiovascular surgery and vascular access devices. His experience includes management positions at Bentley Laboratories and Baxter Laboratories. Mr. Brown has a background in manufacturing, marketing and product development. The Board believes that Mr. Brown’s leadership experience at a medical device company gives him a breadth of knowledge and a unique perspective on the competitive nature of the industry. Mr. Brown’s current term expires in 2015.
John J. Connors, Esq.
Mr. Connors, 75, has been a director since 1992 and previously served as a director from December 1988 to July 1989. He is a patent attorney and the founder of Connors & Associates PC, a professional law corporation specializing in intellectual property law. Mr. Connors is a member of the Orange County Bar Association, the Orange County Patent Law Association, the Los Angeles Intellectual Property Law Association and the Association of Corporate Patent Counsel. The Board is well served by Mr. Connors' considerable technical knowledge, particularly his experience in the areas of patent acquisition, patent infringement and the negotiation of the sale and licensing of intellectual property, which brings a unique and valued perspective to the Board. Mr. Connors’ current term expires in 2015.
Vivek Jain
Mr. Jain, 42, joined the Company as CEO and Chairman of the Board in February 2014.
The Board believes that including the CEO as a director is an efficient way of ensuring continuity between the development and execution of the Company’s business strategies. Mr. Jain served as CareFusion Corporation's ("CareFusion") President of Procedural Solutions from 2011 to February 2014. Mr. Jain served as President, Medical Technologies and Services of CareFusion from 2009 until 2011. Mr. Jain served as the Executive Vice-President-Strategy and Corporate Development of Cardinal Health from 2007 until 2009. Mr. Jain served as Senior Vice President, Business Development and M&A for the Philips Medical Systems business of Koninklijke Philips Electronics N.V., an electronics company from 2006 to August 2007. Mr. Jain served as an investment banker at J.P. Morgan Securities, Inc., an investment banking firm, from 1994 to 2006. Mr. Jain's last position with J.P. Morgan was as Co-Head of Global Healthcare Investment Banking from 2002 to 2006. Mr. Jain's current term expires in 2015.
Joseph R. Saucedo
Mr. Saucedo, 72, has been a director since 2001 and serves as Chair of the Audit Committee. He is Chairman and President of Bolsa Resources, Inc., a business management consulting firm that provides both management consulting and financial accounting function support to manufacturing companies. He has a Masters in Business Administration. Mr. Saucedo’s 30 years of financial and accounting experience include serving as President and CEO of a financial institution where he was responsible for overseeing the performance of the company, as an auditor for a major auditing firm, and currently, the review, analysis and evaluation of clients’ financial statements and financial consulting to manufacturing concerns. The Board is well served by having Mr. Saucedo on the Board in part because it believes that his financial knowledge and experience is valuable to the Board, particularly with respect to his service on the Audit Committee. Additionally, his wide range of experiences from the CEO of a financial institution to an auditor at a major auditing firm provide him with insight into all financial aspects of a company. The Board has determined that Mr. Saucedo is an “audit committee financial expert” and is “independent,” as those terms are defined by applicable Nasdaq Listing Rules and SEC regulations. Mr. Saucedo’s current term expires in 2015.
Richard H. Sherman, M.D.
Dr. Sherman, 69, has been a director since 1990, and serves as Chair of the Nominating/Corporate Governance Committee and is a member of the Compensation Committee. He established and directed the Noninvasive Cardiology Laboratory, and the Cardiac Rehabilitation Program for Milford Memorial Hospital. He has been elected to local, county and state medical leadership positions and has served on nonprofit and private boards and their committees. In January 2015, he became an Honorary Medical Staff at Bayhealth Medical Center, retiring from private practice of Cardiology and Internal Medicine. He has been a participant in the National Association of Corporate Directors programs and completed the Governa
26
nce Fellow program. The Board benefits from Dr. Sherman’s broad medical and leadership experience. Dr. Sherman’s term expires in 2015.
David C. Greenberg
Mr. Greenberg, 48, has been Executive Vice President, Strategy of Medline Industries, Inc. (“Medline”) since June, 2008. In that capacity, Mr. Greenberg is a member of Medline’s Executive Board and advises top leadership/ownership on all aspects of the business. Mr. Greenberg is responsible for Strategy, Business Development and M&A. Additionally, Mr. Greenberg is a Group President and has responsibility for Medline’s distribution business and several manufacturing and marketing divisions. Previously, Mr. Greenberg spent thirteen years in a variety of leadership positions within Aon Corporation, including Chief Financial Officer of its Aon Global subsidiary. Mr. Greenberg serves on the Board of Directors for Amendia, Inc., a spinal implant company. The Board has determined to nominate Mr. Greenberg for election as a director due to his extensive knowledge and experience in the medical industry and his demonstrated extensive leadership in business.
The following are summaries of the background, business experience and descriptions of the principal occupations of our other directors.
George A. Lopez, M.D.
Dr. Lopez, 67, has been a director since 1984. He is the founder of the Company and served as Chairman of the Board, President and CEO from 1989 to February 2014, stepping down from these positions for health reasons. His extensive experience with the Company and industry knowledge provides an invaluable insight to the Board on issues involving the Company and its goals. Dr. Lopez’s current term expires in 2016.
Robert S. Swinney, M.D.
Dr. Swinney, 68, has been a director since 1998 and previously served as a director from 1989 to October 1995. Dr. Swinney has more than 30 years of experience as a critical care physician in a large, public teaching hospital, where he has formerly served as the critical care unit director and Chair of the ICU Committee. Dr. Swinney also has experience in private primary care practice and emergency medicine. He holds two patents for medical products and, in his daily work, is frequently called upon to examine and evaluate new medical products. The Board benefits from Dr. Swinney’s medical and leadership experience, including Dr. Swinney’s work with patents, as well as his ongoing work, which has provided him with a high level of technical expertise, which keep him current on new developments in medical technology. Dr. Swinney’s current term expires in 2016.
Proposal 2 - Selection of Auditors
Deloitte & Touche, LLP (“Deloitte”) has been the Company’s independent registered public accounting firm since its selection by the Audit Committee on March 19, 2008. Deloitte was most recently ratified by the stockholders at the
2014
Annual Meeting as the independent registered public accounting firm of the Company for the year ending
December 31, 2014
.
The Audit Committee has appointed Deloitte to continue as the independent registered accounting firm of the Company for the year ended
December 31, 2015
. Representatives of Deloitte are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire and respond to appropriate questions. The Board of Directors recommends that you vote
FOR
the ratification of the appointment of Deloitte.
27
Fees Paid to Auditors
It is the policy of our Audit Committee to have the engagement of our independent registered public accounting firm to perform any audit or non-audit services approved in advance by the Audit Committee. Such approval authority is delegated to the Chairman of the Audit Committee on behalf of the Audit Committee as permitted by the Audit Committee Charter. In
2013
and
2014
, all fees to our auditors were pre-approved by the Audit Committee.
Deloitte was our independent registered public accounting firm in
2013
and
2014
. Fees billed by Deloitte for
2013
and
2014
were as follows:
|
2013
|
2014
|
|||||||
|
Audit fees
|
$
|
692,409
|
|
$
|
902,660
|
|
||
|
Audit related fees
|
$
|
—
|
|
$
|
—
|
|
||
|
Tax fees
|
$
|
—
|
|
$
|
—
|
|
||
|
All other fees *
|
$
|
256,800
|
|
$
|
377,508
|
|
||
*The 2013 fees were associated with a strategic transaction that ultimately did not proceed. The 2014 fees were for a strategic transaction that ultimately did not proceed and for fees associated with filing form S-8.
Proposal 3 - Advisory Vote to Approve Named Executive Officer Compensation
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended, our Board of Directors is requesting that stockholders approve, pursuant to a non-binding vote, the compensation of our named executive officers for
2014
as disclosed in the Compensation Discussion and Analysis and related tables in this Proxy Statement.
The stockholder advisory vote on our named executive officer compensation is not binding on the Company, our Board of Directors or our Compensation Committee, however, we believe that it is important for our stockholders to have an opportunity to vote on this proposal on an annual basis as a means to express their views regarding our executive compensation philosophy, our compensation policies and programs, and our decisions regarding executive compensation, all as disclosed in our Proxy Statement. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and, to the extent there is any significant vote against the compensation of our named executive officers as disclosed in the proxy statement, we will consider our stockholders' concerns and our Compensation Committee will evaluate whether any actions are necessary to address those concerns. In addition to our annual stockholder advisory vote on our named executive officer compensation, we are committed to ongoing engagement with our stockholders on executive compensation and corporate governance issues. These engagement efforts take place throughout the year through meetings, telephone calls and correspondence involving our senior management, directors and representatives of our stockholders.
At our 2013 Annual Meeting of Stockholders, more than 87% of the votes cast on the advisory vote on executive compensation proposal were in favor of our named executive officers' compensation as disclosed in the proxy statement for that meeting, and as a result our named executive officer compensation was approved. The Compensation Committee regularly reviews our executive compensation program in an effort to ensure that our executive compensation structure aligns with our stockholders’ interests. This includes establishing performance target levels based on financial measures believed to be important to our stockholders. The Company also monitors the compensation programs and pay levels of executives from companies of similar size and complexity, in an effort to ensure that our executive compensation program is competitive. In 2014, for example, we tied a significant portion of each executive’s total pay package to rigorous stock price performance hurdles. We believe these changes demonstrate the Compensation Committee's ongoing commitment to aligning compensation of our named executive officers with the interests of our stockholders and current market practice, including a continuing move towards increasing pay-for-performance compensation methodologies.
In light of the advisory vote at the 2011 Annual Meeting of Stockholders on the frequency of future “say-on-pay” advisory votes, our Compensation Committee has unanimously recommended, and the our Board of Directors has unanimously approved, that the Company will hold an annual stockholder advisory vote on named executive compensation, including a vote at the 2015 Annual Meeting of Stockholders. Our Board of Directors encourages stockholders to review the Compensation Discussion and Analysis in this Proxy Statement, in connection with this advisory vote. The Compensation Discussion and Analysis describes our executive compensation program and the decisions made by our Compensation Committee and the Board of Directors with respect to the compensation of our named executive officers for 2014.
28
As discussed in the Compensation Discussion and Analysis, our named executive officers' 2015 compensation is primarily comprised of base salary, cash incentive pay and equity awards and is based on the following.
|
•
|
Base salaries are competitively based on the officer's position, responsibilities and experience.
|
|
•
|
Cash incentive awards are based on our actual performance as measured pre-determined financial targets and for each executive officer' individual performance goals, excluding the Chief Executive Officer.
|
|
•
|
Equity awards are generally consistent with the level of awards granted by our peer group and are granted at levels that seek to position the total direct compensation opportunities of our named executive officers within the competitive market range (with adjustments upwards or downwards based on factors such as Company and individual performance, experience, internal pay parity considerations and unique requirements of the position).
|
Our Board of Directors believes that our executive compensation program is designed to meet the objectives discussed in the Compensation Discussion and Analysis. Accordingly, our Board recommends that stockholders approve the following resolution:
RESOLVED, that the stockholders of ICU Medical, Inc. approve, on an advisory basis, the compensation paid to the Company's named executive officers as described in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures.
This advisory vote, commonly referred to as a “say-on-pay” advisory vote, is non-binding on the Board. Although the vote is non-binding, the Board and our Compensation Committee will review and thoughtfully consider the voting results when making future decisions concerning the compensation of the Company's named executive officers.
The Board of Directors recommends a vote
FOR
approval of the compensation of the Company's named executive officers.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual Meeting. If any other matters are properly presented for action, the persons named in the accompanying proxy intend to vote on such matters in their discretion.
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the year ended
December 31, 2014
is being mailed to all stockholders together with this Proxy Statement.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND RELATED SCHEDULES, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON REQUEST IN WRITING FROM ANY PERSON WHO WAS A HOLDER OF RECORD, OR WHO REPRESENTS IN GOOD FAITH THAT HE OR SHE WAS A BENEFICIAL OWNER, OF COMMON STOCK OF THE COMPANY ON
APRIL 24, 2015
. ANY SUCH REQUEST SHALL BE ADDRESSED TO THE SECRETARY OF THE COMPANY AT 951 CALLE AMANECER, SAN CLEMENTE, CA 92673. THE COMPANY’S ANNUAL REPORT ON FORM 10-K IS ALSO POSTED ON THE COMPANY’S WEBSITE,
WWW.ICUMED.COM
.
NOMINATION OF DIRECTORS AND SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who intends to nominate persons for election as directors at an Annual Meeting shall give timely written notice to the Secretary of the Company setting forth (a) as to each nominee whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of capital stock of the corporation which are beneficially owned by the nominee and (iv) any other information concerning the nominee that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of such nominee; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of capital stock of the Company which are beneficially owned by the stockholder. Such notice shall include a signed consent of each such nominee to serve as a director of the Company, if elected. The notice shall also include certain other information about the stockholder giving notice and associates of such
29
stockholder, as required by the Company’s Bylaws, and the Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility for such proposed nominee to serve as a director of the Company.
Any stockholder who intends to propose any business at a meeting shall give timely written notice to the Secretary of the Company setting forth as to each matter the stockholder proposes to bring before the meeting (i) a brief description of the business to be brought before the meeting and the reasons for conducting the business at the meeting, (ii) the name and record address of the stockholder giving the notice, (iii) the class and number of shares of capital stock of the Company that are beneficially owned by the stockholder, and by any other stockholders known by the stockholder giving the notice to be supporting the proposal and (iv) any material or financial interest of the stockholder in such business. The notice shall also include certain other information about the stockholder giving notice and associates of such stockholder, as required by the Company’s Bylaws.
In connection with the 2016 Annual Meeting, each of the notices described above will be timely if it is delivered to or mailed and received at the Company’s executive offices not earlier than January 28, 2016 and not later than February 27, 2016. If the date of the 2016 Annual Meeting is advanced or delayed more than 30 days from
June 15
, 2016 (the one year anniversary of this year’s Annual Meeting), then in each case for notice by the stockholder to be timely, it must be delivered to the Secretary at the Company’s principal executive offices not later than the close of business on the later of (i) the 90th day prior to the 2016 Annual Meeting or (ii) the 15th day following the day on which public announcement of the date of the 2016 Annual Meeting is first made.
Consistent with SEC rules, the deadline by which notice of a proposal that a stockholder is seeking to have included in the Proxy Statement for the 2016 Annual Meeting must be received by the Company at its principal executive offices is not earlier than October 30, 2015 and not later than December 29, 2015, or if the date of the 2016 Annual Meeting is changed by more than 30 days from June 8, 2016, then a date that is a reasonable time before the Company begins to print and mail its proxy materials. In no event shall any adjournment or postponement of a meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company. Solicitations will be made by mail, telephone or telegram and personally by directors, officers and other employees of the Company, but such persons will not receive compensation for such services over and above their regular salaries. The Company will reimburse brokers, banks, custodians, nominees and fiduciaries holding stock in their names or in the names of their nominees for their reasonable charges and expenses in forwarding proxies and proxy material to the beneficial owners of such stock. The SEC has adopted rules that allow a company to deliver a single proxy statement and annual report to an address shared by two or more of its stockholders. This method of delivery, known as "householding," permits us to realize significant cost savings, reduces the amount of duplicate information stockholders receive, and reduces the environmental impact of printing and mailing documents to you. Under this process, certain stockholders will receive only one copy of our proxy materials and any additional proxy materials that are delivered until such time as one or more of these stockholders notifies us that they want to receive separate copies. Any stockholders who object to or wish to begin householding may notify Broadridge by calling toll-free at 800-542-1061, or by writing to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. We will send an individual copy of the proxy statement to any stockholder who revokes their consent to householding within 30 days of our receipt of such revocation.
BY ORDER OF THE BOARD OF DIRECTORS
Scott E. Lamb, Secretary
30
ANNEX A
Use of Non-GAAP Financial Information
This proxy contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Our management believes that the non-GAAP data provides useful supplemental information to management and investors regarding our performance and facilitates a more meaningful comparison of results of operations between current and prior periods. The non-GAAP financial measures included in this proxy are adjusted EBITDA and adjusted diluted earnings per share ("Adjusted Diluted EPS"). Adjusted EBITDA excludes intangible asset amortization expense, depreciation expense, stock compensation expense, strategic transaction expense, restructuring expense and income tax expense. Adjusted Diluted EPS excludes, net of tax, intangible asset amortization expense, stock compensation expense, strategic transaction expense and restructuring expense.
The non-GAAP financial measures should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. There are limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies.
Reconciliations of 2014 GAAP to non-GAAP Financial Measures
(in thousands, except per share data)
|
Adjusted EBITDA
|
|||
|
GAAP net income
|
$
|
26,335
|
|
|
Non-GAAP adjustments:
|
|||
|
Stock compensation expense (a)
|
9,592
|
|
|
|
Depreciation and amortization expense (b)
|
19,447
|
|
|
|
Restructuring and strategic transaction expense (c)
|
5,093
|
|
|
|
Provision for income taxes (d)
|
13,457
|
|
|
|
Total non-GAAP adjustments
|
47,589
|
|
|
|
Adjusted EBITDA
|
$
|
73,924
|
|
|
Adjusted Diluted Earnings Per Share
|
|||
|
GAAP diluted earnings per share
|
$
|
1.68
|
|
|
Non-GAAP adjustments:
|
|||
|
Stock compensation expense (a)
|
$
|
0.61
|
|
|
Amortization expense (e)
|
$
|
0.15
|
|
|
Restructuring and strategic transaction expense (c)
|
$
|
0.33
|
|
|
Estimated income tax impact from adjustments (f)
|
$
|
(0.39
|
)
|
|
Adjusted diluted earnings per share
|
$
|
2.38
|
|
|
(a) Stock-based compensation expense in accordance with ASC 718.
|
|||
|
(b) Depreciation of fixed assets and amortization of intangible assets.
|
|||
|
(c) Restructuring and strategic transaction expense
|
|||
|
(d) Income tax expense recognized during the period.
|
|||
|
(e) Amortization expense
|
|||
|
(f) Estimated income tax effect on adjustments for stock compensation expense, amortization expense and restructuring and strategic transaction expense.
|
|||
TABLE OF CONTENTS