CRYOLIFE, INC. CORPORATE GOVERNANCE GUIDELINES
As adopted by the Board of Directors On November 17, 2015, as amended
The Board of Directors (“the Board”) of CryoLife, Inc. (“the Corporation”) has adopted the following Corporate Governance Guidelines (“the Guidelines”) to assist the Board in the exercise of its responsibilities and to serve the interests of the Corporation and its shareholders in a manner that is consistent with its fiduciary duties and the Corporation’s mission and core values.
- THE BOARD
- 1.1 Role
It is the principal duty of the Board to exercise its powers in accordance with its fiduciary duties to the Corporation and in a manner it reasonably believes to be in the best interests of the Corporation and its shareholders. It is also the Board’s duty to oversee senior management in the competent and ethical operation of the Corporation. To satisfy this duty, the non-employee directors will set standards to ensure that the Corporation is committed to business excellence, ethical conduct, the highest levels of integrity and the furtherance of the Corporation’s mission. Non-Employee directors bring to the Corporation a wide range of experiences, knowledge and judgment, and will use their skills and competencies in the exercise of their duties as non-employee directors of the Corporation.
- 1.2 Size
The size of the Board is currently set at nine (9) members. The number of directors that constitute the Board will be fixed from time to time by a resolution adopted by the Board in conformity with the Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate”) and Amended and Restated By-Laws (the “By-Laws”). The Corporate Governance Committee of the Board periodically reviews the size of the Board to ensure that the current number of directors most effectively supports the Corporation.
- 1.3 Composition
There will at all times be a majority of independent non-employee directors on the Board. An “independent director” is a person who meets the definition of independent director under the New York Stock Exchange (“NYSE”) listing requirements, and other applicable laws and regulations, and does not have any other relationship with the Corporation that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out director responsibilities.
- 1.4 Presiding Director
If the Board does not have an Independent Chair, a Presiding Director will be appointed by the Board. The Presiding Director will be responsible for serving as the liaison between the Chair of the Board and the independent non-employee directors, including promptly communicating to the
Chair messages and directives approved by the Board in executive session, approving, in conjunction with the Chair, Board agendas and meeting schedules (to ensure sufficient time for discussion of agenda items), calling the meeting of the independent non-employee directors and presiding over such meetings, and, if requested by major shareholders, being available for direct communication with them. The presiding director shall also perform such other responsibilities as may be designated from time to time by a majority of the independent non-employee directors. If a Presiding Director is appointed, his or her identity will be disclosed in the Corporation’s annual proxy statement or published in the Corporate Governance section of the Corporation’s external website.
- 1.5 Executive Sessions
The non-employee directors will meet in executive session without management directors or management present on a periodic basis, but no less than one (1) time per calendar year. “Non- employee directors” are all directors who are not employees of the Corporation, including both non-employee independent directors and such non-employee directors who are not independent directors by virtue of a material relationship, former status, or family membership, or for any other reason concluded by the Board.
In addition, if the non-employee directors include non-employee directors who are not independent directors, the independent non-employee directors will also meet on a periodic basis but not less than one (1) time per year in an independent non-employee director executive session.
- 1.6 Director Qualifications
The Corporate Governance Committee works with the Board to determine periodically, as appropriate, the desired qualifications for director qualifications, expertise and characteristics, including such factors as experience, diversity, age, skills, time available and the number of other boards the director sits on in the context of the needs of the Board and the Corporation. With respect to diversity, the Corporate Governance Committee may consider such factors as differences in professional background, education, skill and other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on the Board.
The Corporate Governance Committee and the Board evaluate each individual in the context of the membership of the Board as a whole, with the objective of having a Board that can best work to ensure the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of background and experience in various areas. Each director should be an individual of high character and integrity. In determining whether to recommend a director for re-election, the Corporate Governance Committee also considers the director’s past attendance at meetings, participation in and contributions to the activities of the Board and the Corporation.
Each director must ensure that other existing and anticipated future commitments do not materially interfere with the director’s service as a director for the Corporation. Any employee director must submit his or her offer of resignation from the Board in writing upon termination of employment with the Corporation. Upon change of his or her principal employer or position, a non- employee director must submit his or her offer of resignation from the Board in writing to the Chair of the Corporate Governance Committee. The Board, through the Corporate Governance Committee, will determine whether to accept or reject such resignation and the Corporate
Governance Committee will make a recommendation to the Board as to whether to accept or reject the offer of resignation or whether other action should be taken.
- 1.7 Limitations on Other Board Service
Directors should advise the Chair of Board and the Chair of the Corporate Governance Committee of any invitations to join the Board of Directors of any other company prior to accepting such directorship. No director should serve on more than three additional public company boards. The Corporation’s Chief Executive Officer must obtain prior written authorization from the Board to serve on the Board of any other public company. Directors should also advise the Chair of the Board and the Chair of the Corporate Governance Committee of any changes to the role, position or areas of responsibility that he or she held when she was elected to the Board so that the Board, through its Corporate Governance Committee, will have the opportunity to review the appropriateness of the continued service of that director.
Service on other boards or committees should be consistent with the Corporation’s conflict of interest policies.
- 1.8 Selection of New Directors
Each director will stand for election or re-election to the Board annually, if nominated by the Board to do so. Each year, at the annual meeting, the Board will recommend a slate of candidates for election by the shareholders. In accordance with the By-Laws, the Board will also be responsible for filling vacancies or newly-created directorships on the Board that may occur between annual meetings for shareholders. The Corporate Governance Committee is responsible for identifying and screening candidates for Board membership, and recommending candidates to the entire Board for Board membership.
- 1.9 Directors Who Become Aware of Circumstances that May Adversely Reflect Upon the Director or the Corporation
When a director, including any director who is currently an officer or employee of the Corporation, becomes aware of circumstances that may adversely reflect upon the director, any other director, or the Corporation, the director should notify the Chair of the Corporate Governance Committee of such circumstances. The Chair, in consultation with the full Corporate Governance Committee, shall consider the circumstances and may request that the director take mitigating action, up to and including resigning from the Board.
- 1.10 Term Limits
The Board does not believe that it is in the best interests of the Corporation to establish term limits. Term limits may result in the loss of long-serving directors who over time have developed unique and valuable insights into the Corporation’s business and therefore can provide a significant contribution to the Board. Each director is subject to election annually by the Corporation’s shareholders, thereby mitigating the potential for continued Board service by underperforming directors.
- 1.11 Compensation
The compensation of non-employee directors will be approved by the Board upon recommendation of the Compensation and Corporate Governance Committees. Senior management and/or a compensation consultant will report periodically to the Compensation and Corporate Governance Committees regarding the status of the Corporation’s non-employee director compensation in relation to comparable companies. This report will include consideration of both direct and indirect forms of compensation to the Corporation’s non-employee directors, including any charitable contributions by the Corporation to organizations in which a non-employee director is involved. Following a review of the report, the Compensation and Corporate Governance Committees will recommend any changes in non-employee director compensation to the Board, which will ultimately approve any non-employee director compensation. Corporation employees who serve as directors will not receive compensation for their services as directors beyond their regular employee compensation.
- 1.12 Stock Ownership
It is in the best interest of the Corporation and its shareholders that the Corporation’s non- employee directors and certain of its officers beneficially own shares of common stock of the Corporation. Accordingly, the Board has established the following stock ownership requirements for non-employee directors and Section 16 officers:
- Non-employee directors: Each non-employee director should continuously hold a value of the Corporation’s common stock equal to five (5) times the then current annual cash retainer paid to such non-employee director by the Corporation.
- Section 16 Officers: Each Section 16 officer of the Corporation shall continuously hold a value of the Corporation’s common stock equal to the value of a multiple of that officer’s then current base pay at the Corporation. The multiples applicable to such officers are as follows:
- Chief Executive Officer & President: Four (4) times;
- Executive Vice Presidents and Senior Vice Presidents: Two (2) times; and
- All other Section 16 officers: One (1) time.
- Retention requirements: Each Section 16 Officer who has not yet acquired ownership of the required value of common stock set forth above must retain at least 50% of the net number of shares acquired upon the exercise of any employee stock option or the vesting of any performance shares, restricted stock or restricted stock units, the net number of shares acquired shall be the number of shares remaining after shares are tendered, sold or netted to pay any applicable exercise price and withholding taxes.
- Waivers: The Chair of the Compensation Committee or Corporate Governance Committee shall have the authority to grant waivers from these stock ownership requirements in compelling circumstances such as undue hardship.
- Qualifying shares: For purposes of satisfying these stock ownership requirements, the following shall be included: Shares owned directly or indirectly through a stock purchase plan
sponsored by the Corporation, by the person's spouse, or in a revocable trust of which the person or the person’s spouse is the trustee, that are, related to or underlying 1) vested or unvested restricted stock awards, 2) vested or unvested performance stock awards (at actual, earned levels and only if and to the extent that any applicable performance criteria have been satisfied), 3) vested restricted stock units, and 4) vested performance share units (at actual, earned levels and only if and to the extent that any applicable performance criteria have been satisfied). It shall not include shares held through any other form of indirect beneficial ownership, including unexercised options.
- 1.13 Code of Conduct
The Corporation maintains a Code of Conduct for its employees, officers and non-employee directors, including its Chief Executive Officer, principal financial officer, and principal accounting officer/controller. All non-employee directors are expected to adhere to the Corporation’s Code of Conduct.
- 1.14 Interaction with the Press and Others
The Board believes that management speaks and acts for the Corporation. Each non- employee director should refer all inquiries from the press and others regarding the Corporation’s operations to the Chief Executive Officer, the Chief Financial Officer or where appropriate to the General Counsel. Individual non-employee directors may, from time to time at the request of management, meet or otherwise communicate with various constituencies that are involved in the Corporation. If comments from the Board are appropriate, they should, in most circumstances, come from the Board Chair or the Presiding Director in compliance with the Corporation’s external communications policies. In limited circumstances, such as when an inquiry involves a complaint or concern regarding senior management, the non-employee director should refer such inquiry to the Presiding Director and the General Counsel (except if such matter involves the General Counsel).
- 1.15 Board Access to Senior Management
The Board has access to senior management to ensure that non-employee directors can ask any questions and receive all information necessary to perform their duties. Non-employee directors should exercise good judgment to ensure that their contact with senior management does not distract managers from their jobs or disturb the operations of the Corporation and, where appropriate, inform the Chief Executive Officer of all such contacts.
- 1.16 Board Access to Independent Advisors
The Board and the committees may hire external advisors, such as auditors, compensation consultants, search firms and legal counsel, as each considers necessary or advisable in performing its responsibilities. Such advisors need not be “independent” except as required by law. The Board as a whole will have access to these advisors.
- 1.17 Director Orientation and Continuing Education
The directors and the Corporation are committed to ensuring that all directors receive orientation and continuing education. The General Counsel, in consultation with the Presiding Director and the Chief Executive Officer shall be responsible for implementing a director orientation program and ensuring directors have access to continuing education.
- 1.18 Annual self-evaluation
The Corporate Governance Committee will oversee a periodic self-evaluation by the Board, each committee and each Board member. The Corporate Governance Committee will be responsible for establishing the evaluation criteria and evaluation process and ensuring the implementation of periodic evaluations.
The Corporate Governance Committee will consider the results of this evaluation process in evaluating enhancements to Board and Committee functioning, as well as in assessing and determining the characteristics and critical skills required of directors, current and prospective.
- BOARD MEETINGS; SHAREHOLDER MEETINGS; INVOLVEMENT OF SENIOR MANAGEMENT
- 2.1 Board meeting attendance
The Board will meet at least four (4) times per year. In addition, special meetings may be called from time to time. Directors are expected to attend meetings of the Board and committees of which they are a member (and, in no event, fewer than 75% of all meetings), to invest the time and effort necessary to understand the Corporation’s business, strategies, finances, risks and opportunities. The basic duties of a director include being prepared for, attending and actively participating in meetings of the Board and committees of which they are members. Non-employee directors are also expected to make themselves available outside of board meetings for advice and consultation. A director who is unable to attend a Board or committee meeting should notify the Corporate Secretary in the advance of the meeting so that he or she can appropriately advise the Board or committee Chair.
- 2.2 Annual Shareholder Meeting
Each director is strongly encouraged to attend each annual shareholder meeting.
- 2.3 Attendance of Non-Directors
From time to time, the Board may invite management and outside advisors or consultants to participate in Board or committee meetings. Attendance of any non-directors at Board meetings is at the discretion of the Board.
- 2.4 Advance Receipt of Meeting Materials
Information regarding topics to be considered at a meeting is essential to the Board’s and committee’s understanding of the business and the preparation of the directors for productive meetings. To the extent feasible, the meeting agenda and any written materials relating to each Board or committee meeting will be distributed to the directors sufficiently in advance of each meeting to allow for review of the agenda and materials. Directors are expected to have reviewed and be prepared to discuss all materials distributed in advance of any meeting.
- COMMITTEE MATTERS
- 3.1 Number, Name, Responsibilities and Independence of Committees
The Board currently has four (4) standing committees: Audit, Compensation, Corporate Governance, and Compliance. From time to time, the Board may form or disband an ad hoc or standing Board committee. Each committee will perform its duties as assigned by the Board in compliance with the By-Laws and the committee’s charter. All of the members of the Audit, Compensation and Corporate Governance Committees shall be independent non-employee directors to the extent required under the listing standards of the NYSE, as well as Securities and Exchange Commission laws, regulations and rules and will meet all other applicable legal requirements. The Compliance Committee shall be comprised of members, a majority of which are independent under NYSE listing standards.
3,2 Assignment and Rotation of Committee Members
The Board appoints committee members and committee Chairs, based on the recommendations of the Corporate Governance Committee and subject to applicable law and according to any criteria set forth in the applicable committee charter and any other criteria that the Board determines to be relevant to the responsibilities of each committee. Committee membership and the position of the committee Chair will not be rotated on a mandatory or regular basis unless the Board determines that rotation is in the best interest of the Corporation.
- 3.3 Frequency of Committee Meetings and Agendas
Generally, each committee will meet three (3) times per year, in conjunction with regularly scheduled Board meetings, except that the Audit Committee shall meet four (4) times per year. The committee Chairs and appropriate members of management, in accordance with the committee’s charter and, as appropriate, in consultant with committee members, will determine the frequency and length of committee meetings and assist in the development of the agendas. Committee Chairs will summarize committee discussions and actions with the full Board.
- 3.4 Committee Charters
Each committee will periodically review its charter and recommend to the Board any changes it deems appropriate.
- LEADERSHIP DEVELOPMENT
- 4.1 Annual Review of the Chief Executive Officer
The Corporate Governance Committee, in conjunction with the Compensation Committee, with input from other non-employee directors, and any other person they deem appropriate, will conduct at least annually a review of the performance of the Chief Executive Officer. These Committees jointly will establish the evaluation process and determine the specific criteria on which to evaluate the performance of the Chief Executive Officer, in accordance with the charters and principles of these Committees.
- 4.2 Succession Planning
The Corporate Governance and Compensation Committees will work with the Chief Executive Officer and Chief Human Resources Officer to plan for officer succession, including, Chief Executive Officer succession, as well as to develop plans for interim succession for the Chief Executive Officer, should circumstances so require. In addition, the Chief Executive Officer and Chief Human Resources Officer will also periodically report to these Committees on management and leadership development.
- SHAREHOLDER—DIRECTOR COMMUNICATION
- 5.1 Policy
The Board believes that shareholders should have an opportunity to send communications to the Board.
- 5.2 Procedures
Any communication from a shareholder to the Board generally or a particular director should be in writing and should be delivered to the General Counsel by mail to the principal executive office of the Corporation, 1655 Roberts Blvd., N.W., Kennesaw, GA 30144. Each communication should set forth (i) the name and address of the shareholder, as it appears on the Corporation’s books, and if the shares are held by a nominee, the name and address of the beneficial owner of the stock; and (ii) the class and number of shares of the Corporation’s stock that are owned of record by the record holder and beneficially by the beneficial owner.
The General Counsel will, in consultation with appropriate directors as necessary, generally screen communications from shareholders to identify communications that (i) are solicitations for products and services; (ii) relate to matters of a personal nature not relevant for the Corporation’s shareholders to act on or for the Board to consider or (iii) matters that are of a type that render
them improper or irrelevant to the functioning of the Board or the Corporation. All other communications will be forwarded to the appropriate director for consideration.
- INTERPRETATION, AMENDMENT AND DISCLOSURE
These Guidelines should be interpreted and construed in the context of all applicable law and the Certificate, the By-Laws and other corporate governance documents. They shall be posted on the Corporation’s website at http://www.cryolife.com and available in hard copy upon written request to the Office of the Corporate Secretary. The Corporation reserves the right to amend these Guidelines at any time, for any reason, subject to applicable law.