DEF 14A of KORU Medical Systems, Inc.
Filed Mar 28, 2024 · FY20230001161697-24-000162
What percentage of the vote is required to elect the nominees to the Board of Directors?
What percentage of the vote is required to elect the nominees to the Board of Directors? To be elected as a director (Proposal 1), each director nominee must receive a plurality of the votes cast at the Annual Meeting by the shareholders entitled to vote in the election of directors. Should any director nominee become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies for the election, in his or her stead, of any other person the Board of Directors may nominate or designate. Each director nominee has expressed his intention to serve the entire term for which election is sought. Broker non-votes and votes “withheld” will have no impact on the outcome of Proposal 1.
Donna French
| Members | Meetings in 2023 (#) | Principal Responsibilities | | Joseph M. Manko, Jr. (Chair) R. John Fletcher Shahriar Matin | 8 | ● Recommends compensation of our CEO to the independent members of the Board and approves the compensation of our other executive officers ● Approves all employment, severance and change in control agreements with our executive officers ● Serves as the granting and administrative committee for our equity compensation plans ● Administers our Annual Incentive Compensation Plan ● Oversees our policies relating to employee compensation and benefits ● Reviews and recommends to the Board director compensation, including equity awards |
Non-employee director compensation
Non-employee director compensation The Board believes that providing competitive compensation is necessary to attract and retain qualified non-employee directors. The key elements of KORU Medical’s non-employee director compensation are a cash retainer, stock compensation and Committee chair fees. Of the base compensation paid to non-employee directors (cash retainer and stock), slightly more than half is paid in shares of common stock. Ms. Tharby does not receive compensation for her service as a director. The Compensation Committee reviews the annual compensation of our non-employee directors and makes recommendations to the Board. The following table summarizes the Company’s non-employee director compensation plan in effect in 2023.
Non-employee director compensation
| Annual Compensation(1) | Amount | | Cash Retainer | $50,000 | | Common Stock Award | $60,000(2) | | Additional Common Stock Award for Chairman | $40,000(2) | | Audit Committee Chair Retainer | $15,000 | | Compensation Committee Chair Retainer | $11,500 | | Nominating and Corporate Governance Committee Chair Retainer | $7,500 |
Non-employee director compensation
(1) Paid in quarterly installments. (2) Number of shares of common stock issued determined by the average of the high and low prices of the Company’s common stock on the last day of the quarter as reported by the Nasdaq Capital Market. The Board believes that directors should hold meaningful equity ownership positions in the Company. To that end, a significant portion of non-employee director compensation is in the form of equity awards to further align the interests of our non-employee directors with our shareholders. Under the Board’s stock ownership guidelines, each non-employee director is required to own shares of KORU Medical common stock valued at four times the annual cash retainer and must comply with the guidelines within five years of joining the Board. All of our non-employee directors have achieved the required share ownership or are on track to meet their ownership target. The following table sets forth the compensation earned or received by our non-employee directors during fiscal year 2023.
Non-employee director compensation
| Name | Fees earned or paid in cash ($) | Stock awards ($) | All other compensation ($) | Total ($) | | R. John Fletcher Chairman of the Board Nominating and Governance Committee Chair | 50,000 | 90,000 | -- | 140,000 | | Robert A. Cascella Audit Committee Chair | 65,000 | 60,000 | -- | 125,000 | | Donna French | 50,000 | 60,000 | -- | 110,000 | | Joseph M. Manko, Jr. Compensation Committee Chair | 61,500 | 60,000 | -- | 121,500 | | Shahriar (Shar) Matin | 50,000 | 60,000 | -- | 110,000 | | Edward Wholihan(1) | 12,772 | 15,326 | -- | 28,098 |
Non-employee director compensation
(1) Joined Board in Sept 2023 KORU Medical reimburses non-employee directors for travel and other business expenses incurred in the performance of their services for the Company. Our insider trading policy prohibits all of our directors from, among other things, margining or pledging any Company shares. Proposal 2: Advisory vote to approve named executive officer compensation The Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 14A to the Securities Exchange Act of 1934, as amended (“Exchange Act”), which requires that we provide shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers. Commonly known as a “say-on-pay” vote, this proposal gives our shareholders the opportunity to express their views on our executive compensation policies and programs and the compensation paid to the named executive officers. At the Company’s 2020 Annual Meeting of Shareholders, 95% of the votes cast were in favor of the Board of Directors’ recommendation to hold an advisory vote on executive compensation every year. The Board of Directors and the Governance Committee (then, our compensation committee) reviewed these results and determined that the Company’s shareholders should hold an advisory vote on executive compensation every year. Accordingly, a say-on-pay vote is being taken at the 2023 Annual Meeting. We believe that the most effective compensation program is one that is designed to reward all of our employees, including but not limited to, our named executive officers, for the achievement of our short-term and long-term strategic goals using a pay for performance system to ultimately drive toward the achievement of increased total shareholder return. Through this strategy, we seek to closely align the interests of our named executive officers with the interests of our shareholders. Our named executive officers’ total compensation is comprised of a mix of base salary, performance-based cash bonus, long-term incentive compensation, retirement and other benefits intended to fulfill these objectives. We are asking our shareholders to indicate their support for the compensation of our named executive officers as described in this proxy statement by approving the following resolution at the Annual Meeting: “RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation paid to the named executive officers, as disclosed in the Company’s proxy statement for the 2024 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation tables and accompanying narrative disclosure.” We strongly encourage shareholders to read “Compensation of Named Executive Officers” in this proxy statement, including the tabular and narrative disclosure regarding executive compensation, for additional details. The vote on this proposal is advisory and therefore not binding on the Company, the Board of Directors or the Compensation Committee. However, the Board of Directors and the Compensation Committee will review and consider the voting results in future decisions regarding executive compensation. Executive Compensation Our goal is to provide an executive compensation program that best serves the long-term interests of our shareholders. We believe that attracting and retaining superior talent and rewarding performance is key to delivering long-term shareholder returns, and that a competitive compensation program is critical to that end.
Non-employee director compensation
| What We Do | What We Don’t Do | | ✔ Use a balanced mix of cash and equity compensation and annual and long-term incentives ✔ Tie a significant portion of executive pay to performance against targets, both short- and long-term ✔ Align performance goals with shareholder value ✔ Ensure undue weight is not given to any single performance metric ✔ Consider peer groups ✔ Engage an independent compensation consultant ✔ Solicit annual say on pay vote ✔ Stock ownership guidelines ✔ Clawback provisions for performance-based compensation ✔ “Double trigger” for accelerated equity vesting upon change in control | x Encourage excessive risk-taking by management x Grant discounted stock options x Reprice stock options x Allow hedging or pledging of Company shares x Tax gross-ups on severance or change in control x Provide excessive executive perquisites |
Principal elements of our executive compensation
In addition, the Company’s employment agreement with our Chief Executive Officer provides that if the Company’s financial results are subsequently restated and such restatement shows any bonus, option or restricted stock award was incorrectly paid or vested, she will be required to forfeit the portion of such compensation that was incorrectly paid and, to the extent her fraud or other misconduct resulted in the receipt or vesting of such compensation, she shall will be required to forfeit such improperly paid or vested compensation. The Company may also recover any bonus paid and cancel outstanding equity awards and recover any shares received upon the exercise or vesting of such awards (or any gain realized on the sale of such shares) to the extent she breaches certain restrictive covenants in her employment agreement. Stock ownership guidelines To increase executive share ownership and promote a long-term perspective when managing our business, our Chief Executive Officer and certain other executives identified by the Board are required to achieve the required ownership level set forth below within 5 years of becoming subject to the guidelines and to maintain such ownership while they are employed by the Company. Shares subject to unvested stock options or otherwise subject to a right to acquire are not included in the ownership level for this purpose.
Principal elements of our executive compensation
| Name and Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Nonequity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | Linda Tharby President & CEO | 2023 | 563,063 | — | — | — | 137,106 | 13,200 | 713,369 | | | 2022 | 550,000 | — | — | — | 440,400 | 12,200 | 962,600 | | Brian Case Chief Technology Officer | 2023 | 350,000 | — | — | — | 12,994 | 8,163 | 371,157 | | | 2022 | 247,917 | — | — | 945,215 | 101,981 | 6,417 | 1,301,529 | | Thomas Adams Chief Financial Officer | 2023 | 302,917 | — | — | 174,937 | 64,350 | 13,200 | 555,404 | | | 2022 | 240,000 | 50,000 | — | — | 81,900 | 10,000 | 381,900 | | Kenneth Miller Chief Commercial Officer | 2023 | 45,000 | — | — | 590,686 | 19,800 | 61,737 | 717,224 | | | 2022 | — | — | — | — | — | — | — |
Pay versus performance
Pay versus performance The following tables and related disclosures provide information about (i) the “total compensation” of our CEO, and our other named executive officers (the “Other NEOs” or the “Non-CEO NEOs”) as presented in the Summary Compensation Table above, (ii) the “compensation actually paid” to our CEO and our Other NEOs, as calculated pursuant to the SEC’s pay-versus-performance rules, (iii) certain financial performance measures, and (iv) the relationship of the “compensation actually paid” to those financial performance measures. This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Exchange Act, and does not necessarily reflect value actually realized by the executives or how our Compensation Committee evaluates compensation decisions in light of Company or individual performance.
Pay versus performance
| Year | Summary Compensation Table Total for CEO(1) | Compensation Actually Paid to CEO(1)(2)(3) | Average Summary Compensation Table Total for Non-CEO NEOs(1) | Average Compensation Actually Paid to Non-CEO NEOs(1)(2)(3) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return(4) | Net Income/ (Loss) (in thousands) | | 2023 | $713,369 | $(1,193,861) | $547,298 | $359,612 | $53.25 | $(13,741,062) | | 2022 | $962,600 | $1,446,209 | $841,715 | $1,019,809 | $118.55 | $(8,661,142) | | 2021 | $7,052,291 | $5,179,379 | $602,560 | $535,540 | $49.83 | $(4,562,823) |
Pay versus performance
__________
Pay versus performance
| (1) The CEO for 2023 and 2022 is Linda Tharby. The Non-CEO NEOs for whom the average compensation is presented in this table are for 2023, Thomas Adams, Brian Case and Kenneth Miller, and for 2022, Thomas Adams and Brian Case. Brian Case joined the Company in April 2022. | | (2) The amounts shown as Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually realized or received by the Company’s CEO and Non-CEO NEOs. These amounts reflect total compensation as set forth in the Summary Compensation Table for each year, adjusted as described in footnote 3 below. | | (3) Compensation Actually Paid reflects the exclusions and inclusions for the CEO and the Non-CEO NEOs set forth below. Amounts excluded, which are set forth in the “Minus Stock and Option Awards from Summary Compensation Table” columns below, represent the stock awards and option awards reported in the Stock Awards and Option Awards columns of the Summary Compensation Table for each applicable year. See - Narrative Disclosure to Summary Compensation Table – Options and Restricted Stock Awards on page 21. Amounts added back to determine Compensation Actually Paid are made up of the following components which are set forth in the table below, as applicable: (i) the fair value as of the end of the fiscal year of outstanding and unvested equity awards granted in that year; (ii) the change in fair value during the year of equity awards granted in prior years that remained outstanding and unvested at the end of the year; (iii) the fair value as of the vesting date of equity awards that were granted and vested in that year; and (iv) the change in fair value during the year through the vesting date of equity awards granted in prior years that vested during that year. The fair value at the end of the prior year of awards granted in any prior year that failed to meet applicable vesting conditions during the covered year are subtracted, although there were no such awards for the CEO or the Non-CEO NEOs in 2022 or 2023. Equity values are calculated in accordance with ASC Topic 718. |
Pay versus performance
| Year | Summary Comp. Table Total for CEO | Minus Stock and Option Awards from Summ. Comp. Table | Plus Year- End Equity Value of Unvested Awards Granted During Year | Plus Change in Value of Unvested Awards Granted in Prior Years | Plus Value of Awards Granted and Vested During Year | Plus Change in Value of Prior Years’ Awards Vested During Year | Comp. Actually Paid to CEO | | 2023 | $713,369 | — | — | $(1,810,232) | — | $(96,998) | $(1,193,861) | | 2022 | $962,600 | — | — | $554,102 | — | $(70,493) | $1,446,209 | | 2021 | $7,052,291 | $6,327,122 | $4,454,210 | — | — | — | $5,179,379 |
Pay versus performance
| Year | Avg. Summary Comp. Table Total for Other NEOs | Minus Avg. Stock and Option Awards from Summ. Comp. Table | Plus Avg. Year-End Equity Value of Unvested Awards Granted During Year | Plus Avg. Change in Value of Unvested Awards Granted in Prior Years | Plus Avg. Value of Awards Granted and Vested During Year | Plus Avg. Change in Value of Prior Years’ Awards Vested During Year | Average Comp. Actually Paid to Other NEOs | | 2023 | $547,928 | $255,208 | $270,931 | $(192,609) | — | $(11,430) | $359,612 | | 2022 | $841,715 | $472,607 | $640,287 | $15,607 | — | $(5,193) | $1,019,809 | | 2021 | $602,560 | $532,560 | $465,540 | — | — | — | $535,540 |
Pay versus performance
(4) Total Shareholder Return illustrates the value, as of the last day of the indicated fiscal year, of an investment of $100 in KORU Medical common stock on December 31, 2020. Description of Relationship Between NEO Compensation Actually Paid and Company Total Shareholder Return (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Non-CEO NEOs, and the Company’s TSR over the fiscal three year period from 2021 through 2023. Description of Relationship Between NEO Compensation Actually Paid and Net Loss The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Non-CEO NEOs, and the Company’s Net Loss over the fiscal three year period from 2021 through 2023. Proposal 3: Ratification of selection of independent registered public accounting firm McGrail Merkel Quinn & Associates, P.C. has been selected by the Audit Committee as the Company’s independent auditors for fiscal year 2024. The Audit Committee is solely responsible for the appointment, compensation, retention and oversight of its independent auditors. Shareholders are being asked to ratify the Audit Committee’s selection of McGrail Merkel Quinn & Associates, P.C. If ratification is withheld, the Audit Committee will reconsider its selection. A representative of McGrail Merkel Quinn & Associates, P.C. is expected to attend the 2024 Annual Meeting to respond to appropriate questions and will have the opportunity to make a statement. Listed below are the fees billed to the Company by McGrail Merkel Quinn & Associates, P.C. for services rendered during fiscal years 2023 and 2022.
Pay versus performance
| | 2023 | 2022 | | | Audit Fees | $50,000 | $45,250 | “Audit Fees” consist of aggregate fees billed for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in quarterly reports or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2023 and December 31, 2022, respectively. | | Audit Related Fees | $— | $— | | | Tax Fees | $— | $— | | | All Other Fees | $— | $— | | | Total | $50,000 | $45,250 | |
Pay versus performance
The Audit Committee of the Board of Directors is responsible for the appointment, compensation, and oversight of the work of the independent auditors and has approved in advance any services to be performed by the independent auditors, whether audit-related or not. The Audit Committee has reviewed each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent auditors. All of the Audit Fees shown above were pre-approved by the Audit Committee.