DEF 14A of Sanara MedTech Inc.
Filed Apr 15, 2024 · FY20230001493152-24-014548
Are any of the proposals conditioned on the approval of another proposal?
Are any of the proposals conditioned on the approval of another proposal? Yes. The election of one director to fill a newly created vacancy due to an increase in the size of the Board under Proposal 3 is conditioned on the approval of the amendment and restatement of the Certificate of Formation under Proposal 2. If Proposal 2 is not approved at the Annual Meeting, then Proposal 3 will not be presented. Do I have any dissenters’ or appraisal rights with respect to any of the matters to be voted on at the Annual Meeting? No. None of our shareholders has any dissenters’ or appraisal rights with respect to the matters to be voted on at the Annual Meeting. What are the solicitation expenses and who pays the cost of this proxy solicitation? The Board is asking for your proxy and we will pay all of the costs of asking for shareholder proxies. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of common stock and collecting voting instructions. We may use officers and employees of the Company to ask for proxies, as described below. Is this Proxy Statement the only way that proxies are being solicited? No. In addition to the solicitation of proxies, officers and employees of the Company may solicit the return of proxies, either by mail, telephone, email or through personal contact. These officers and employees will not receive additional compensation for their efforts but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees and fiduciaries, in connection with shares of the common stock registered in their names, will be requested to forward solicitation material to the beneficial owners of shares of common stock. Are there any other matters to be acted upon at the Annual Meeting? Management does not intend to present any business at the Annual Meeting for a vote other than the matters set forth in the Notice and has no information that others will do so. If other matters requiring a vote of the shareholders properly come before the Annual Meeting, it is the intention of the persons named in the form of proxy to vote the shares represented by the proxies held by them in accordance with applicable law and their judgment on such matters. Where can I find voting results? We expect to publish the voting results in a Current Report on Form 8-K, which we expect to file with the SEC within four business days after the Annual Meeting. Who can help answer my questions? The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this Proxy Statement. We urge you to carefully read this entire Proxy Statement, including the documents we refer to in this Proxy Statement. If you have any questions, or need additional materials, please feel free to contact our Chief Financial Officer, Michael D. McNeil, at 817-529-2300. PROPOSAL 1: ELECTION OF DIRECTORS At the Annual Meeting, our shareholders will consider and vote upon the election of the Director Nominees (as defined below), to serve as directors. If elected, each Director Nominee will serve for a one-year term that will expire at our 2025 annual meeting of shareholders or until his or her successor is elected and qualified. The Board has nominated eight directors, Ronald T. Nixon, Robert A. DeSutter, Roszell Mack III, Eric D. Major, Sara N. Ortwein, Ann Beal Salamone, James W. Stuckert and Eric D. Tanzberger for election at the Annual Meeting by the shareholders (collectively, the “Director Nominees” and each, a “Director Nominee”). If a quorum is present, the Director Nominees will be elected by a plurality of the votes cast at the Annual Meeting. Abstentions and broker non-votes have no effect on the vote. The Director Nominees receiving the highest number of affirmative votes will be elected directors of the Company. Shares of common stock represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the eight Director Nominees. 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 may nominate or designate. Each Director Nominee has agreed to serve, if elected, and the Board has no reason to believe that any Director Nominee will be unable to serve. Pursuant to Proposal 3, Zachary B. Fleming, our current Chief Executive Officer, has been nominated to fill a new vacancy to be created from an increase in the size of the Board. The election of Mr. Fleming as a director in Proposal 3 is contingent on the affirmative approval of Proposal 2 to amend and restate the Certificate of Formation to, among other things, provide that the number of directors constituting the Board be fixed from time to time pursuant to the Bylaws. The Bylaws provide that the number of directors who shall constitute the whole Board shall be such number as the Board shall from time to time have designated, except that in the absence of any such designation, such number shall be eight. On March 21, 2024, the Board approved, subject to shareholder approval of Proposal 2 and the filing of the Amended and Restated Certificate of Formation with the Secretary of State of the State of Texas, an increase of the size of the Board from eight to nine directors. The election of the eight Director Nominees is not subject to the approval of any other proposal in this Proxy Statement. For convenience, information about Mr. Fleming is included in this Proposal 1, however he is not a Director Nominee with respect to Proposal 1. The Board believes that each Director Nominee possesses personal and professional integrity, good judgment, a high level of ability and business acumen. Directors and Director Nominees The following table sets forth the name, position, age and year first elected, if applicable, for the directors currently serving on our Board and the Director Nominees (and Mr. Fleming):
Are any of the proposals conditioned on the approval of another proposal?
| Name | Position and Offices | Age | Year First Elected | | Ronald T. Nixon | Executive Chairman | 68 | 2019 | | Robert A. DeSutter | Director | 55 | 2020 | | Zachary B. Fleming(1) | Chief Executive Officer | 49 | – | | Roszell Mack III | Director | 57 | 2022 | | Eric D. Major | Director | 54 | 2023 | | Sara N. Ortwein | Director | 65 | 2020 | | Ann Beal Salamone | Director | 73 | 2019 | | James W. Stuckert | Director | 86 | 2015 | | Eric D. Tanzberger | Director | 55 | 2022 |
Are any of the proposals conditioned on the approval of another proposal?
| (1) The Board, upon recommendation of the nominating and corporate governance committee, has nominated, subject to approval of Proposal 2, Zachary B. Fleming as a new director to fill a newly created vacancy from an increase in the Board. |
Are any of the proposals conditioned on the approval of another proposal?
The biographies of our current directors and Director Nominees (and Mr. Fleming) are as follows: Ronald T. Nixon, age 68, has been a director of the Company since March 2019 and has served as Executive Chairman of the Board since May 2019. As Executive Chairman, he has been involved in strategic planning, execution and identifying prospective partnerships and acquisition opportunities for the Company. Mr. Nixon is the Founder and Managing Partner of The Catalyst Group, Inc. (“Catalyst”), a private investment firm that provides growth capital and strategic advisory services to private companies. Mr. Nixon serves on the board of directors of LHC Group, Inc. as well as a number of private companies, including Superior Plant Rentals LLC, Rochal Industries, LLC (“Rochal”), Next Level Medical LLC and Aviditi Advisors LLC. Mr. Nixon also serves on the Engineering Advisory Board for the Cockrell School of Engineering at the University of Texas at Austin. Mr. Nixon holds a Bachelor’s degree in Mechanical Engineering from the University of Texas at Austin and is a registered professional engineer (inactive) in Texas. We believe that Mr. Nixon’s extensive experience with acquisitions and the capital markets contributes greatly to the composition of the Board and its ability to oversee the Company’s strategic growth strategy. Robert A. DeSutter, age 55, is a managing director in Piper Sandler healthcare investment banking. Mr. DeSutter has over 30 years of investment banking experience. He served as healthcare global group head from 2003 to 2018. Mr. DeSutter has decades of medical technology transaction experience on numerous buy and sell-side, friendly and hostile, strategic and financial buyer and public and private deals on a global basis. Mr. DeSutter has completed financing transactions involving public and private equity, convertible debt and senior/sub debt. Mr. DeSutter was an investor and Board member for his family’s sporting goods business, Great Plains Sporting Goods LLC, from 2002 to 2009, which ultimately sold to a public company. Mr. DeSutter is a graduate of the University of Minnesota Carlson School of Management and the University of Virginia’s Darden Graduate School of Business. Recognized as a global leader in healthcare investment banking, we believe that Mr. DeSutter is an invaluable contributing member of the Board. Zachary B. Fleming, age 49, has served as the Company’s Chief Executive Officer since January 1, 2022. Mr. Fleming joined the Company as Vice President of Sales in November 2017 and was promoted to Vice President, Surgical in September 2018. Mr. Fleming then served as the Company’s President, Surgical Division beginning on May 28, 2019 and as the Company’s Co-Chief Operating Officer beginning on January 28, 2020. Prior to joining the Company, Mr. Fleming spent over fourteen years in the medical industry with Healthpoint Biotherapeutics and Smith & Nephew. Mr. Fleming earned a Bachelor of Science from Indiana University. We believe Mr. Fleming’s knowledge of the operations of the Company developed as Chief Executive Officer and formerly as Chief Operating Officer, along with his extensive experience in the medical industry, would make him a valuable contributor to the Board. Roszell Mack III, age 57, has been the Chief Executive Officer and Managing Member of Mack & Co., LLC, a private investment and independent family office advisory firm since 2010. He also serves as the Chief Executive Officer and Managing Partner of Mack & Co. Partners, LP, a Dallas, Texas-based registered investment adviser. Prior to forming Mack & Co., Mr. Mack co-founded Ascend Venture Group, LLC, a technology focused venture capital firm. Prior to the formation of Ascend, Mr. Mack was an investment banker for more than a decade with Goldman Sachs and Salomon Smith Barney where he worked on the origination, structuring and execution of mergers and acquisitions, capital raising and private placement transactions for institutional clients. Mr. Mack earned a Bachelor of Arts (Engineering Sciences, Chemical) degree from Yale University and a Master of Business Administration degree from Harvard Business School. We believe Mr. Mack’s venture capital, investment banking and other financial expertise make him a valuable contributor to the Board. Eric D. Major, age 54, has more than 30 years of experience in the medical technology industry as an entrepreneur, CEO, Chairman, board member and investor. Mr. Major’s experience includes startup development, early-stage funding, venture capital, private equity, IPO, public company management, public and private board leadership, global operations, M&A, and integration strategy and management. Mr. Major has raised over $1.0 billion in private and public capital and led over $2.0 billion in acquisitions. Mr. Major is currently the Executive Chairman of the Board of Directors of Highridge Medical, a leader in the global spinal device market. Mr. Major was the President of Stryker Spine from 2018 to 2021. Mr. Major joined Stryker as part of its 2018 $1.4 billion acquisition of K2M, a MedTech company Eric founded in 2004 and took public in 2014. At K2M, Mr. Major served as the company’s Chairman, President, and CEO. Under his leadership, K2M grew from a start-up to a portfolio of over 100 unique products protected by 750 patents. K2M operated in over 40 countries during the company’s 14 straight years of uninterrupted revenue growth. Upon joining Stryker, Mr. Major led the global strategy and integration of K2M and Stryker Spine delivering top and bottom-line growth in the business. Prior to K2M Mr. Major was the founder of a MedTech company, American OsteoMedix, which he started in 1998 and sold to Interpore Cross in 2001. Mr. Major is also an active member of the medical device industry and has served on the board of directors of the Medical Device Manufacturers Association, as well as the AdvaMed CEO Advisory Council. We believe Mr. Major’s public company, M&A and industry experience make him a valuable contributor to the Board. Sara N. Ortwein, age 65, retired from ExxonMobil in March 2019, after a thirty-eight-year career. Prior to retiring, she was president of XTO Energy, a subsidiary of ExxonMobil, from November 2016 through February 2019 and was responsible for ExxonMobil’s unconventional oil and gas business. Ms. Ortwein also served in various roles including president of ExxonMobil Upstream Research Company, senior manager within ExxonMobil’s U.S. production operations, and corporate upstream advisor to senior management at ExxonMobil’s headquarters in Irving, Texas. Ms. Ortwein earned a Bachelor of Science degree in civil engineering at the University of Texas at Austin before joining Exxon Company, U.S.A. in 1980. We believe that Ms. Ortwein’s extensive leadership experience with a top five global company contributes greatly to the composition of the Board.
Are any of the proposals conditioned on the approval of another proposal?
Ann Beal Salamone, M.S., age 73, has been a director of the Company since August 2019. Ms. Salamone is a co-founder of Rochal and has served as its chairman since September 2019, prior to which she served as its president from 1986 to September 2019. Ms. Salamone has been a consultant to the Company since the Company’s acquisition of assets from Rochal in July 2021. She is one of the principal inventors of Rochal’s liquid bandages, antimicrobial compositions and skin regeneration products for burn and wound treatment, and she is a principal inventor and participant in the development of products for electronics, water purification, personal care and healthcare. Ms. Salamone is co-founder, President, and board member of Rochal Partners LLP (since December 2014) which is not affiliated with the Company. Ms. Salamone has co-founded six companies and invested in and served on the board of directors of several private entrepreneurial companies. Ms. Salamone is a member of the National Academy of Engineering and The Academy of Medicine, Engineering & Science of Florida. We believe that Ms. Salamone’s medical research and development background, along with her company leadership experience provides a valuable scientific and business perspective to the Board. James W. Stuckert, age 86, has been a director of the Company since September 2015. He has been engaged in personal investing activities since 2004. Mr. Stuckert served as Chairman and Chief Executive Officer of J.J.B. Hilliard, W.L. Lyons, LLC from December 1995 until December 2003, prior to which he served in executive and broker positions from 1963. J.J.B. Hilliard, W.L. Lyons, LLC is a full-service financial asset management firm headquartered in Louisville, Kentucky. Mr. Stuckert was an initial investor and served 24 years on the board of directors of Royal Gold, Inc. He previously has served as chairman of SenBanc Fund; a director of DataBeam, Inc.; a board member of the Securities Industry Association and chairman of its regional firms committee; and a past member of the nominating committee of the New York Stock Exchange. Mr. Stuckert has served as a member of the board of trustees of the University of Kentucky and as chairman of its Finance Committee and as chairman of its Presidential Search Committee. He has also served as chairman of a local hospital’s investment committee. Mr. Stuckert earned a bachelor’s degree in Mechanical Engineering and a Master of Business Administration degree from the University of Kentucky. We believe that Mr. Stuckert’s experience as an accomplished CEO, along with his many years of experience serving as a member of numerous company boards make him a valuable contributor to the Board. Eric D. Tanzberger, age 55, has been the Senior Vice President and Chief Financial Officer of Service Corporation International (“SCI”) since June 2006. Mr. Tanzberger joined SCI in August 1996 and held various management positions prior to being promoted to Corporate Controller in August 2002. He also held the position of Treasurer from 2007 until 2017. Before joining SCI, Mr. Tanzberger served as Assistant Corporate Controller at Kirby Marine Transportation Corp., an inland waterway barge and tanker company. He also served at Coopers and Lybrand LLP. Mr. Tanzberger is a member of the Executive Committee of the Board of Trustees, Audit Committee Chair and the 2022-23 Campaign Chair of the United Way of Greater Houston. Mr. Tanzberger holds a Bachelor of Business Administration from the University of Notre Dame. We believe Mr. Tanzberger’s robust management experience and financial expertise make him a valuable contributor to the Board. Board Diversity In accordance with The Nasdaq Stock Market LLC (“Nasdaq”) Listing Rule 5606, the following chart sets forth certain self-identified personal demographic characteristics of our directors as of April 15, 2024. To see our Board Diversity Matrix as of April 21, 2023, please see the proxy statement filed with the SEC on April 21, 2023.
Corporate Development Committee
| ● | developing long-term corporate development strategies for the Company; | | ● | reviewing potential strategies for corporate development, developing the Company’s strategic plans, and executing on the strategic plans developed and approved by the Board; | | ● | reviewing progress on the Company’s development strategies and periodically reporting its evaluations and recommendations to the Board; | | ● | ensuring that the Company pursues strategic transactions that are consistent with and in furtherance of its corporate development strategies and long-term business plans; | | ● | reviewing potential strategic transactions which the corporate development committee has identified or which management has presented to the corporate development committee; and | | ● | executing on all approved strategic transactions and to integrate acquired businesses, monitoring the progress of these strategic transactions, and periodically reporting to the Board how strategic transactions completed by the Company have supported the Company’s development strategies and strategic business plans. |
Non-Employee Director Compensation Table
Non-Employee Director Compensation Table
Non-Employee Director Compensation Table
| Name | Fees earned or paid in cash ($) | Stock awards ($)(1)(2)(3) | All other compensation ($)(4) | Total ($) | | Ronald T. Nixon | 100,000(5) | 307,540(6) | - | 407,540 | | Robert A. DeSutter | - | 102,525 | - | 102,525 | | Roszell Mack III | - | 97,846 | - | 97,846 | | Eric D. Major | - | 93,202 | - | 93,202 | | Sara N. Ortwein | - | 97,846 | - | 97,846 | | Ann Beal Salamone | - | 83,878 | 177,697 | 261,575 | | James W. Stuckert | - | 97,846 | - | 97,846 | | Eric D. Tanzberger | - | 102,526 | - | 102,526 | | Kenneth E. Thorpe(7) | - | - | - | - |
Non-Employee Director Compensation Table
(1) In accordance with SEC rules, this column represents the aggregate grant date fair value of shares underlying stock awards, calculated based on the closing price of our common stock on the date of grant in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718 (“ASC 718”), with the exception that the amounts shown assumes no forfeitures. A discussion of the assumptions used in the calculation of the amounts is included in Note 2, “Summary of Significant Accounting Policies” in the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that was filed with the SEC on March 25, 2024. (2) The aggregate number of outstanding shares of unvested restricted stock held by each director as of December 31, 2023, was as follows:
Non-Employee Director Compensation Table
| Director | Shares of restricted stock | | Ronald T. Nixon | 8,808 | | Robert A. DeSutter | 2,936 | | Roszell Mack III | 2,802 | | Eric D. Major | 2,669 | | Sara N. Ortwein | 2,802 | | Ann Beal Salamone | 2,402 | | James W. Stuckert | 2,802 | | Eric D. Tanzberger | 2,936 | | Kenneth E. Thorpe | - |
Non-Employee Director Compensation Table
(3) Represents awards of restricted stock granted to the directors for their 12-month term ending on the date of the Annual Meeting. (4) Represents fees paid to Ms. Salamone pursuant to the consulting agreement entered into between the Company and Ms. Salamone on July 14, 2021 in connection with the Rochal asset acquisition. (5) Represents cash fees expected to be paid to Mr. Nixon on the date of the Annual Meeting for his service as Executive Chairman pursuant to the 2023 Director Compensation Policy. (6) On May 13, 2023, our Board also approved a grant of shares of restricted stock to Mr. Nixon for services as the Company’s Executive Chairman for the 2022 fiscal year. The grant date fair value of the award granted to Mr. Nixon in 2023 for service provided during 2022 was $223,663. In addition, the Board approved a grant of shares of restricted stock to Mr. Nixon for services as the Company’s Executive Chairman for the first six months of 2023. The grant date fair value of the award granted to Mr. Nixon in 2023 for service provided during the first six months of 2023 was $111,849. Such amounts are not included in the table above. (7) Our Board did not nominate Kenneth E. Thorpe to stand for re-election when his term expired at the 2023 annual meeting of shareholders. In February 2022, our Board adopted an annual equity compensation policy as it relates to its outside directors to provide annual retainer fees, payable in shares of restricted common stock. In May and December of 2023, our Board adopted updates to the such policy (as updated, the “2023 Director Compensation Policy”), to provide annual retainer fees, payable in shares of restricted common stock, as follows: (i) to each member of the Board, an annual retainer fee of $90,000; (ii) to the chair of each Board committee, an additional retainer fee as follows: (A) audit committee chair - $20,000, (B) compensation committee chair - $10,000, (C) nominating and corporate governance committee chair - $10,000 and (D) corporate development committee chair - $10,000; (iii) to the Executive Chairman, an annual retainer fee of $240,000 and (iv) to the other members of each Board committee, an additional retainer fee as follows: (A) audit committee member - $10,000, (B) compensation committee member - $5,000, (C) nominating and corporate governance committee member - $5,000 and (D) corporate development committee member - $5,000. The aggregate award value for each fee is determined by using the average of the closing prices for the Company’s common stock over the 20-trading-day period ending on the date of grant. In addition to the foregoing, beginning on the date of the Annual Meeting, the Executive Chairman will receive an annual cash payment of $100,000. We also reimburse each director for reasonable travel expenses related to such director’s attendance at board and committee meetings. Pursuant to the 2023 Director Compensation Policy, on June 1, 2023, each of our non-employee directors (other than Mr. Thorpe who did not stand for reelection at the 2023 annual meeting) received restricted stock grants for service on the Board and/or its committees from June 1, 2023 to June 1, 2024, which such shares will vest on the earlier of (i) the date of the Annual Meeting or (ii) June 1, 2024, provided that the applicable director is providing services to the Company through such vesting date, as follows:
Non-Employee Director Compensation Table
| Outside Director | Number of Shares Granted | Intended Value | | Ronald T. Nixon | 8,808 | $330,000 | | Robert A. DeSutter | 2,936 | $110,000 | | Roszell Mack III | 2,802 | $105,000 | | Eric D. Major | 2,669 | $100,000 | | Sara N. Ortwein | 2,802 | $105,000 | | Ann Beal Salamone | 2,402 | $90,000 | | James W. Stuckert | 2,802 | $105,000 | | Eric Tanzberger | 2,936 | $110,000 |
Non-Employee Director Compensation Table
In May 2023, our Board also approved a cash award in the amount of $50,000 for Mr. Nixon’s service as Executive Chairman for the first six months of the 2023 fiscal year as well as a cash award in the amount of $100,000 for Mr. Nixon’s service as Executive Chairman during the 2022 fiscal year. The cash awards were paid in June 2023 and are not included in the table above. The Board also approved a grant of shares of restricted stock to Mr. Nixon for service as the Company’s Executive Chairman for the 2022 fiscal year and for the first six months of the 2023 fiscal year. The intended value of the award granted to Mr. Nixon in 2023 for service provided during 2022 and the first half of 2023 was $240,000 and $120,000 respectively. The Company does not sponsor a pension benefits plan, a non-qualified deferred compensation plan or a non-equity incentive plan for its directors. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of April 5, 2024, the number and percentage of outstanding shares of our common stock owned by: (a) each person who is known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; (b) each of our current directors; (c) each of our Director Nominees to the extent that they are not also a current director; (d) the named executive officers as defined in Item 402 of Regulation S-K and (e) all current directors and executive officers, as a group. As of April 5, 2024, there were 8,622,805 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of shares beneficially owned by a person as shown in the following table does not necessarily reflect the person’s actual voting power on any particular date. Except as noted in the footnotes below, we believe, based on information provided to us, that the persons named in the table below have sole voting and investment power with respect to all vested shares of common stock beneficially owned by them, and the business address for each person is c/o Sanara MedTech Inc., 1200 Summit Ave, Suite 414, Fort Worth, Texas 76102.
Non-Employee Director Compensation Table
| | Common Stock | | | NAME | Number of shares beneficially owned | Beneficial ownership percentage | | Directors, Director Nominees and Named Executive Officers | | | | Ronald T. Nixon (1) | 3,557,486 | 41.3% | | Robert A. DeSutter (2) | 15,523 | * | | Zachary B. Fleming (3) | 48,854 | * | | Roszell Mack III (4) | 9,497 | * | | Eric D. Major (5) | 2,669 | * | | Michael D. McNeil (6) | 25,998 | * | | Sara N. Ortwein (7) | 14,082 | * | | Ann Beal Salamone (8) | 16,946 | * | | James W. Stuckert (9) | 963,532 | 11.2% | | Eric D. Tanzberger (10) | 10,300 | * | | All directors and executive officers as a group (10 persons) | 4,664,887 | 54.1% | | Certain Beneficial Owners | | | | S. Oden “Denny” Howell Jr. (11) | 490,394 | 5.7% | | CGI Cellerate RX, LLC (12) | 2,452,731 | 28.4% | | FA Sanara, LLC (13) | 963,856 | 11.2% |
Non-Employee Director Compensation Table
| * Less than 1%. |
Non-Employee Director Compensation Table
(1) Mr. Nixon is a director of the Company and a manager of Catalyst Rochal, LLC, which owns 100% of the equity interest of CGI Cellerate RX, LLC, which owns 2,452,731 shares of the Company’s common stock. Catalyst Rochal, LLC also controls the voting of 95,203 shares owned by Rochal. Mr. Bradley J. Gurasich is also a manager of Catalyst Rochal, LLC and may be deemed to share beneficial ownership of the shares of common stock beneficially owned by CGI Cellerate RX, LLC and Catalyst Rochal, LLC. FA Sanara, LLC owns 963,856 shares of the Company’s common stock. FA Sanara, LLC is managed by Family Alignment, LLC, which is managed by Catalyst, of which Mr. Nixon is President. Mr. Nixon, through a relationship of control of CGI Cellerate RX, LLC, Catalyst Rochal, LLC, and FA Sanara, LLC, may be deemed to share beneficial ownership of the shares of common stock beneficially owned by CGI Cellerate RX, LLC, Rochal and FA Sanara, LLC. Mr. Nixon may be deemed to have shared power to vote and dispose of 3,511,790 shares, and sole power to vote and dispose of 45,696 shares, which includes 8,808 shares of restricted stock that will vest on June 1, 2024. (3) Includes 23,630 shares of restricted stock held by Mr. Fleming that will vest in various installments through March 7, 2027. (4) Includes 2,802 shares of restricted stock that will vest on June 1, 2024. (5) Represents shares of restricted stock that will vest on June 1, 2024. (6) Includes 9,645 shares of restricted stock that will vest in various installments through March 7, 2027. (7) Includes 2,802 shares of restricted stock that will vest on June 1, 2024. (8) Includes 2,402 shares of restricted stock that will vest on June 1, 2024. (9) Includes 2,802 shares of restricted stock that will vest on June 1, 2024. Also includes (i) 10,000 shares held by the Diane V. Stuckert Revocable Trust, (ii) 46,500 shares held by the James W. Stuckert Family Trust, and (iii) 70,254 shares held by Ten Grand Ltd., of which Mr. Stuckert is the general partner. (10) Includes 2,936 shares of restricted stock that will vest on June 1, 2024. (11) Based on the Schedule 13D/A and Form 4 filed by S. Oden “Denny” Howell, Jr. on November 18, 2019 and February 26, 2020, respectively, and certain other information available to the Company. (12) Mr. Nixon and Mr. Gurasich are managers of Catalyst Rochal, LLC, which owns 100% of the equity interest of CGI Cellerate RX, LLC. Mr. Nixon and Mr. Gurasich, through a relationship of control of CGI Cellerate RX, LLC, may be deemed to share beneficial ownership of the shares of common stock beneficially owned by CGI Cellerate RX, LLC and have shared voting power to vote the shares held by CGI Cellerate RX, LLC. This information is based on the Schedule 13D/A filed by CGI Cellerate RX, LLC on February 12, 2020 and certain other information available to the Company. The business address for CGI Cellerate RX, LLC is 1375 Enclave Parkway Houston, Texas 77077. (13) FA Sanara, LLC is managed by Family Alignment, LLC, which is managed by Catalyst, of which Mr. Nixon is President. Mr. Nixon, through a relationship of control of FA Sanara, LLC, may be deemed to share beneficial ownership of the shares of common stock beneficially owned by FA Sanara, LLC and have shared voting power to vote the shares held by FA Sanara, LLC. This information is based on the Schedule 13D/A filed by FA Sanara, LLC on February 12, 2020 and certain other information available to the Company. The business address for FA Sanara, LLC is 7500 Rialto Blvd., Bldg. II, Suite 220, Austin, Texas 73735. There are no arrangements currently known to us, the operation of which may at a subsequent date result in a change of control of the Company. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Policies and Procedures for Approving Related Party Transactions Our audit committee is responsible for reviewing and approving all related-party transactions, defined as those transactions required to be disclosed under Items 404(a) and 404(b) of Regulation S-K and Nasdaq Rule 5630(a-b). Our audit committee is further required to keep our independent auditor informed of the audit committee’s understanding of the Company’s relationships and transactions with related parties that are significant to the Company. The audit committee is required to review and discuss with our independent auditor the auditor’s evaluation of our identification of, accounting for, and disclosure of our relationships and transactions with related parties, including any significant matters arising from the audit regarding our relationships and transactions with related parties. A “Related Party Transaction” means a transaction (including any series of related transactions or a material amendment or modification to an existing Related Party Transaction) directly or indirectly involving any Related Party that would need to be disclosed under Item 404(a) of Regulation S-K. Generally, under Item 404 of Regulation S-K, we are required to disclose any transaction occurring since the beginning of the last two fiscal years, or any currently proposed transaction, involving us or our subsidiary where the amount involved exceeds $120,000, and in which any Related Party had or will have a direct or indirect material interest. A “Related Party” means any of the following: (i) any of our directors or Director Nominees; (ii) any of our executive officers; (iii) a person known by us to be the beneficial owner of more than 5% of our common stock or (iv) an immediate family member of any of the foregoing. The Company was or is currently a participant in the following transactions with related parties since January 1, 2022. CGI Cellerate RX, LLC As of April 5, 2024, CGI Cellerate RX, LLC beneficially owned 2,452,731 shares, or 28.4%, of our common stock. CGI Cellerate RX, LLC is an affiliate of Catalyst, whose Founder and Managing Partner is our Executive Chairman, Mr. Nixon. Sublicense Agreement In August 2018, we entered into an exclusive, world-wide sublicense agreement (the “Sublicense Agreement”) with CGI Cellerate RX, LLC to distribute CellerateRX Surgical and HYCOL products into the surgical and wound care markets. In January 2021, we amended the term of the Sublicense Agreement to extend the term to May 17, 2050, with automatic successive one-year renewals so long as annual net sales of the licensed products exceed $1.0 million. Prior to the Applied Asset Purchase (as defined below), we paid royalties based on the annual Net Sales of licensed products (as defined in the Sublicense Agreement) consisting of 3% of all collected Net Sales each year up to $12.0 million, 4% of all collected Net Sales each year that exceed $12.0 million up to $20.0 million and 5% of all collected Net Sales each year that exceed $20.0 million. For the years ended December 31, 2023 and 2022, royalty expense was $1.0 million and $1.8 million, respectively, under the terms of this agreement. In August 2023, we acquired the underlying intellectual property of, as well as the rights to manufacture and sell, CellerateRX Surgical and HYCOL products from Applied Nutritionals, LLC, a Delaware limited liability company (“Applied,” and the transaction, the “Applied Asset Purchase”). In connection with this acquisition, Applied assigned its license agreement with CGI Cellerate RX, LLC to Sanara MedTech Applied Technologies, LLC, a wholly owned subsidiary of the Company (“SMAT”), and no further royalties will be due to Applied thereunder. Since the closing of the Applied Asset Purchase, we indirectly make intercompany royalty payments to SMAT at the same rate as set forth in the Sublicense Agreement. These intercompany royalty payments and the offsetting cost of goods sold were eliminated in consolidation effective as of August 1, 2023. The Catalyst Group, Inc.
Non-Employee Director Compensation Table
As discussed above, our Executive Chairman, Mr. Nixon, is the Founder and Managing Partner of Catalyst, and Catalyst and its affiliates collectively beneficially own more than 5% of the Company’s outstanding common stock. On March 20, 2023, we entered into a Transaction Advisory Services Agreement (the “Services Agreement”), effective as of March 1, 2023, with Catalyst. Pursuant to the Services Agreement, Catalyst, by and through its directors, officers, employees and affiliates that are not simultaneously serving as directors, officers or employees of the Company (collectively, the “Covered Persons”), agreed to perform certain transaction advisory, business and organizational strategy, finance, marketing, operational and strategic planning, relationship access and corporate development services for the Company in connection with any merger, acquisition, recapitalization, divestiture, financing, refinancing, or other similar transaction in which we may be, or may consider becoming, involved, and any such additional services as mutually agreed upon in writing by and between us and Catalyst (the “Services”). Pursuant to the Services Agreement, we agreed to reimburse Catalyst for (i) compensation actually paid by Catalyst to any of the Covered Persons at a rate no more than a rate consistent with industry practice for the performance of services similar to the Services, as documented in reasonably sufficient detail, and (ii) all reasonable out-of-pocket costs and expenses payable to unaffiliated third parties, as documented in customary expense reports, as each of (i) and (ii) is incurred in connection with the Services rendered under the Services Agreement, with all reimbursements being contingent upon the prior approval of the audit committee. The audit committee authorized the entry into the Services Agreement at a meeting duly called and held in March 2023 and approved up to $250,000 in fees to be paid under the Services Agreement for the 2023 calendar year. We incurred $174,486 of costs pursuant to the Catalyst Services Agreement during 2023. Rochal Industries, LLC As of April 5, 2024, Rochal beneficially owned 95,203 shares, or 1.1%, of our common stock. Mr. Nixon, our Executive Chairman, is a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority shareholder of Rochal. Additionally, Ms. Salamone, one of our directors, is also a director and significant shareholder of Rochal. Product License Agreements On July 7, 2019, we executed a license agreement with Rochal whereby we acquired an exclusive world-wide license to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications (the “BIAKŌS License Agreement”). Pursuant to the BIAKŌS License Agreement, following the closing of the Company’s common stock offering in February of 2021, the Company made the $750,000 Post Capital Raise Payment (as defined in the BIAKŌS License Agreement) to Rochal in the form of 20,834 shares of our common stock. Pursuant to the BIAKŌS License Agreement, the Company incurred royalty expense of $120,000 and $130,000 in 2022 and 2023, respectively. The royalty expense incurred in 2022 and 2023 represented the annual minimum royalty for the applicable year. Subsequent payments pursuant to the BIAKŌS License Agreement will be in the form of (i) a 2%-4% royalty on net sales of BIAKŌS products, subject to an annual minimum of up to $150,000 and (ii) a 25% royalty on net profit in excess of target up to an annual maximum of $1.0 million. On October 1, 2019, we executed a license agreement with Rochal whereby we acquired an exclusive world-wide license to market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care market utilizing certain Rochal patents and pending patent applications (the “ABF License Agreement”). Currently, the products covered by the ABF License Agreement are CuraShield Antimicrobial Barrier Film and no sting skin protectant. No royalties were paid pursuant to the ABF License Agreement in 2022 or 2023. Future payments pursuant to the ABF License Agreement will be in the form of (i) a 2%-4% royalty on net sales of products covered in the ABF License Agreement, subject to an annual minimum of up to $75,000 and (ii) a 25% royalty on net profit in excess of target up to an annual maximum of $500,000. No commercial sales or royalties have been recognized under this agreement as of December 31, 2023. On May 4, 2020, we executed a license agreement with Rochal, whereby we acquired an exclusive world-wide license to market, sell and further develop an autolytic debrider for human medical use to enhance skin condition or treat or relieve skin disorders, excluding uses primarily for beauty, cosmetic, or toiletry purposes (the “Debrider License Agreement”). Pursuant to the Debrider License Agreement, in July 2022, we paid Rochal a $0.6 million milestone payment for the first good manufacturing practice run of the licensed product. Rochal is entitled to additional milestone payments under the Debrider License Agreement of $0.5 million in cash and $1.0 million payable in either cash or common stock upon FDA clearance of the licensed product. Subsequent payments pursuant to the Debrider License Agreement will be in the form of (i) a 2%-4% royalty on net sales of products covered in the Debrider License Agreement, subject to an annual minimum of up to $150,000 and (ii) a 25% royalty on net profit in excess of target up to an annual maximum of $1.0 million. Asset Purchase On July 14, 2021, we entered into an asset purchase agreement (the “Asset Purchase Agreement”), effective July 1, 2021, with Rochal pursuant to which we purchased certain assets of Rochal, including, among others, Rochal’s intellectual property, furniture and equipment, supplies, goodwill, rights and claims, other than certain excluded assets (collectively, the “Purchased Assets”) and assumed certain Assumed Liabilities (as defined in the Asset Purchase Agreement), upon the terms and subject to the conditions set forth in the Asset Purchase Agreement (such transaction, the “Rochal Asset Purchase”). The Purchased Assets were purchased for an aggregate purchase price of approximately $1.0 million (the “Purchase Price”), consisting of (i) approximately $0.5 million in cash and (ii) 14,369 shares of our common stock, representing an amount equal to $500,000, based on the average closing sale price of our common stock for the twenty (20) trading days immediately preceding the closing of the Rochal Asset Purchase. The product license agreements discussed above were retained by Rochal and were excluded from the Purchased Assets. Pursuant to the Asset Purchase Agreement, for the three-year period after July 1, 2021, Rochal is entitled to receive consideration for any new product relating to the Business (as defined in the Asset Purchase Agreement) that is directly and primarily based on an invention conceived and reduced to practice by a member or members of Rochal’s science team. For the three-year period after July 1, 2021, Rochal is also entitled to receive an amount in cash equal to twenty-five percent (25%) of the proceeds actually received for any Grant (as defined in the Asset Purchase Agreement) by either the Company or Rochal. In addition, we agreed to use commercially reasonable efforts to perform Minimum Development Efforts (as defined in the Asset Purchase Agreement) with respect to certain products under development, which, if obtained, will entitle the Company to intellectual property rights from Rochal in respect of such products.
Non-Employee Director Compensation Table
In connection with the Asset Purchase Agreement, we hired certain employees of Rochal on an “at will” basis, with the terms of each such employment being consistent with the Company’s current employment agreements. Consulting Agreement Concurrent with the Rochal Asset Purchase, on July 14, 2021, we entered into a consulting agreement with Ms. Salamone pursuant to which Ms. Salamone agreed to provide us with consulting services with respect to, among other things, writing new patents, conducting patent intelligence, and participating in certain grant and contract reporting. In consideration for the consulting services provided to us, Ms. Salamone is entitled to receive an annual consulting fee of $177,697, with payments to be paid once per month. The consulting agreement has an initial term of three years, unless earlier terminated by us, and is subject to renewal. The consulting agreement also contains customary provisions related to, among other things, confidentiality and termination for cause provisions. EXECUTIVE COMPENSATION The following discussion provides compensation information pursuant to the scaled disclosure rules applicable to “smaller reporting companies” under SEC rules and may contain statements regarding future individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of the Company’s compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution shareholders not to apply these statements to other contexts. Executive Officers The following table sets forth the names, ages and positions of our executive officers as of April 15, 2024:
Non-Employee Director Compensation Table
| Name | Age | Position | | Zachary B. Fleming | 49 | Chief Executive Officer | | Michael D. McNeil | 59 | Chief Financial Officer | | Jacob A. Waldrop(1) | 42 | Chief Operating Officer |
Non-Employee Director Compensation Table
(1) Mr. Waldrop will be appointed to the position of Chief Operating Officer, effective as of April 15, 2024. Zachary B. Fleming, age 49, has served as the Company’s Chief Executive Officer since January 1, 2022. His business experience is discussed above in “Proposal 1 — Election of Directors.” Michael D. McNeil, age 59, has served as the Company’s Chief Financial Officer since April 2018. Prior to joining the Company, Mr. McNeil served as Controller for Smith and Nephew’s U.S. Advanced Wound Management Division from 2012 to 2018. Mr. McNeil previously served as Controller and Assistant Controller with Healthpoint Biotherapeutics from 1999 to 2012. Prior to his employment at Healthpoint, Mr. McNeil held several finance and internal audit positions with Burlington Resources, Snyder Oil Corporation, and Union Pacific Corporation. Mr. McNeil earned his Bachelor of Science in Business Administration from the University of Nebraska and is a Texas certified public accountant. Jacob A. Waldrop, age 42, will be joining the Company to serve as Chief Operating Officer, effective as of April 15, 2024. Prior to joining the Company, Mr. Waldrop served as the Vice President of Finance and Integrations for the newly founded Foot and Ankle division of Enovis (formally DJO). Prior to Trilliant Surgical’s sale to Enovis in 2021, Mr. Waldrop served as Chief Financial Officer for Trilliant Surgical. Prior to his employment at Trilliant Surgical, Mr. Waldrop held several finance, management and controller positions with Alert Logic and The Planet. Mr. Waldrop began his career in public accounting with KMPG in 2005. Mr. Waldrop earned a Bachelor of Science in Accounting and Management Information Systems from Texas A&M University and is a Texas certified public accountant. Executive Compensation Overview The compensation program for our executive officers, as presented in the Summary Compensation Table below, is administered by our Board. The intent of our compensation program is to align our executives’ interests with those of our shareholders, while providing reasonable and competitive compensation. The purpose of this Executive Compensation discussion is to provide information about the material elements of compensation that we pay or award to, or that is earned by: (i) the individuals who served as our principal executive officer during fiscal 2023; (ii) our two most highly compensated executive officers, other than the individuals who served as our principal executive officer, who were serving as executive officers, as determined in accordance with the rules and regulations promulgated by the SEC, as of December 31, 2023, with compensation during fiscal year 2023 of $100,000 or more; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) but for the fact that such individuals were not serving as executive officers on December 31, 2023. We refer to these individuals as our “named executive officers.” For 2023, our named executive officers and the positions in which they served are listed below:
Non-Employee Director Compensation Table
| ● | Zachary B. Fleming, our Chief Executive Officer; and | | ● | Michael D. McNeil, our Chief Financial Officer. |
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Summary Compensation Table The following table and the accompanying notes provide summary information for each of the last two fiscal years concerning cash and noncash compensation awarded to, earned by or paid to our named executive officers.
Non-Employee Director Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock awards ($)(3) | All other compensation ($) | Total ($) | | Zachary B. Fleming | 2023 | 290,000 | 245,000 | 362,046 | 12,599(4) | 909,645 | | Chief Executive Officer | 2022 | 290,000 | 290,000 | 507,275 | 13,643(5) | 1,100,918 | | Michael D. McNeil | 2023 | 215,000 | 107,500 | 175,006 | 8,600(6) | 506,105 | | Chief Financial Officer | 2022 | 215,000 | 215,000 | 163,675 | 8,680(6) | 602,355 |
Non-Employee Director Compensation Table
| (1) Represents the amount of base salary actually earned by the named executive officer. For additional information concerning our named executive officer base salaries, see “Narrative Disclosure to Summary Compensation Table” below. | | (2) Represents cash bonuses earned in the respective years. For additional information concerning our named executive officer bonuses, including information regarding when such bonuses were paid, see “Narrative Disclosure to Summary Compensation Table” below. | | (3) The amounts reported in this column do not reflect the actual economic value realized by our named executive officers. In accordance with SEC rules, this column represents the aggregate grant date fair value of shares underlying stock awards, calculated based on the closing price of our common stock on the date of grant in accordance with ASC 718, with the exception that the amounts shown assumes no forfeitures. A discussion of the assumptions used in the calculation of the amounts is included in Note 2, “Summary of Significant Accounting Policies” in the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that was filed with the SEC on March 25, 2024. | | (4) Consists of (i) $10,800 in auto allowances, (ii) $1,295 for personal travel costs and (iii) $504 for certain employee business gifts. | | (5) Consists of (i) $10,800 in auto allowances, (ii) $2,352 for personal travel costs and (iii) $491 for certain employee business gifts. | | (6) Represents a 4% matching contribution under our 401(k) savings plan. |
Non-Employee Director Compensation Table
Narrative Disclosure to Summary Compensation Table Executive Compensation Overview Our compensation committee determines and approves the compensation provided to our executive officers. Executive compensation typically consists of a base salary, an annual cash bonus and longer-term incentive compensation of equity-based incentive awards. The intent of our compensation program is to, among other things, align our executives’ interests with those of our shareholders, while providing reasonable and competitive compensation. The compensation committee may invite such members of management to its meetings as it deems appropriate. However, no executive officer may be present during compensation committee or Board deliberations or voting at which his or her compensation is discussed or determined. The compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and shall be directly responsible for the appointment, compensation, and oversight of the work of any such compensation adviser. Any recommendations made by such compensation adviser are nonbinding and authority to determine compensation structure remains the sole responsibility of the compensation committee. Base Salary The base salaries of our named executive officers are described in further detail below:
Non-Employee Director Compensation Table
| | Base Salaries | | | | Name | 2022 | 2023 | % Change | | Zachary B. Fleming(1) | 290,000 | 290,000 | 0% | | Michael D. McNeil(1) | 215,000 | 215,000 | 0% |
Non-Employee Director Compensation Table
| (1) As discussed in further detail below under “Employment Agreements”, the base salaries of Messrs. Fleming and McNeil were increased as of January 1, 2022 pursuant to their respective employment agreements. |
Non-Employee Director Compensation Table
Effective January 1, 2024, the compensation committee of the Board approved a base salary increase for each of Mr. Fleming and Mr. McNeil. Mr. Fleming’s annual base salary was increased from $290,000 to $350,000, less applicable taxes and other legal withholdings, which may be periodically adjusted at the discretion of the compensation committee of the Board. Mr. McNeil’s annual base salary was increased from $215,000 to $225,000, less applicable taxes and other legal withholdings, which may be periodically adjusted at the discretion of the compensation committee of the Board. Stock Awards On March 8, 2022, our Board approved the following annual restricted stock grants to our named executive officers:
Non-Employee Director Compensation Table
| Named Executive Officer | Shares of Restricted Stock(1) | | Zachary B. Fleming | 8,831 | | Michael D. McNeil | 6,547 |
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| (1) The shares of restricted stock vest in three equal installments, with one-third of the shares having vested on each of March 1, 2023 and 2024, and the remaining one-third of such shares vesting on March 1, 2025. |
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In addition, on January 1, 2022, in connection with Mr. Fleming’s appointment as Chief Executive Officer, the Board granted Mr. Fleming a one-time award of 10,000 shares of restricted stock, one-third of which vested on each of January 1, 2023 and 2024, and one-third of which will vest on January 1, 2025. On March 1, 2023, our Board approved the following annual restricted stock grants to our named executive officers:
Non-Employee Director Compensation Table
| Named Executive Officer | Shares of Restricted Stock(1) | | Zachary B. Fleming | 8,724 | | Michael D. McNeil | 4,217 |
Non-Employee Director Compensation Table
| (1) The shares of restricted stock vest in three equal installments, with one-third of the shares having vested on March 1, 2024, and the remaining two-thirds vesting in equal instalments on March 1, 2025 and 2026. |
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Cash Bonuses In February 2023, the compensation committee approved discretionary cash bonuses, as shown above in the Summary Compensation Table, for our named executive officers based on Company and individual performance in 2022. In March 2024, the compensation committee approved discretionary cash bonuses, as shown above in the Summary Compensation Table, for our named executive officers based on Company and individual performance in 2023. Other Compensation Benefits and Retirement Plans. We provide company benefits that we believe are standard in the industry to all of our employees, including our named executive officers. These benefits consist of a group medical insurance program for employees and their qualified dependents, the majority of which is currently paid for by the Company. We sponsor a 401(k) tax deferred savings plan, whereby we match a portion of each employees’ contributions in cash. Participation in the plan is voluntary and all employees of the Company who are 18 years of age are eligible to participate. The Company matches employee contributions dollar-for-dollar on the first 4% of an employee’s pre-tax earnings, subject to individual IRS limitations. We do not sponsor any pension benefit plans and none of our named executive officers contribute to such a plan. Non-Qualified Deferred Compensation. We do not sponsor any non-qualified defined compensation plans or other non-qualified deferred compensation plans and none of our named executive officers contribute to any such plans. Perquisites and Indemnification. We do not typically provide perquisites to our named executive officers that are not available to employees generally. However, from time to time, we may provide perquisites for recruitment or retention purposes. Mr. Fleming receives an auto allowance each year in the amount of $900 per month. In 2022 and 2023, our named executive officers received an incentive trip in connection with the Company’s retreat for its sales team and additional incentive gifts. In addition, pursuant to our organizational documents, we are required to indemnify, to the fullest extent permitted by applicable law, any person who was or is made, or is threatened to be made, a party, or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he or she, or a person for whom he or she is a legal representative, is or was a director or an officer of the Company, including our named executive officers. Employment Agreements We have employment agreements with our named executive officers, which are described below. Fleming Agreement. Effective June 1, 2019, we entered into an employment agreement with Mr. Fleming (the “Prior Fleming Agreement”). The Prior Fleming Agreement provided for an initial two-year term, with automatic one-year renewals unless either party were to give prior notice to the other party of its desire to terminate the agreement. The Prior Fleming Agreement provided for an initial base salary of $225,000, a one-time bonus payment of $25,000, an annual bonus opportunity equal to 50% of base salary, and an initial stock grant equal to $112,500. The initial stock grant was to vest in one-third increments for each year completed after the date of issuance. In the event that Mr. Fleming was terminated by the Company without cause, Mr. Fleming would have been entitled to receive a severance package, which included one year of base salary following the effective date of termination, paid in twelve equal monthly installments, and continued participation in any health care benefits provided by the Company to its employees, provided that Mr. Fleming delivered to the Company an executed release of claims. On December 22, 2021, the Board appointed Mr. Fleming as the Chief Executive Officer of the Company, effective January 1, 2022. In connection with his appointment, on April 28, 2022, we entered into an Amended and Restated Employment Agreement with Mr. Fleming (the “Fleming Employment Agreement”). Pursuant to the Fleming Employment Agreement, Mr. Fleming’s annual base salary was increased from $225,000 to $290,000, less applicable taxes and other legal withholdings, which may be periodically adjusted at the discretion of the compensation committee of the Board. In addition, Mr. Fleming is eligible to receive an annual award of shares of restricted common stock equal to an amount of up to 75% of his base salary, subject to approval of the Board. In accordance with the Fleming Employment Agreement, Mr. Fleming is also eligible to receive an annual cash bonus of up to 50% of his base salary based on annual performance metrics during the term of his employment, customary benefits and reimbursement for reasonable business expenses, as well as other customary employment benefits including paid vacation. In connection with Mr. Fleming’s appointment as Chief Executive Officer of the Company, the Board granted Mr. Fleming a one-time award of 10,000 shares of restricted stock, one-third of which vested on each of January 1, 2023 and 2024, and one-third of which will vest on January 1, 2025. McNeil Agreement. On April 28, 2022, we entered into an employment agreement (the “McNeil Employment Agreement”) with Mr. McNeil pursuant to which Mr. McNeil’s annual base salary was increased, effective January 1, 2022, to $215,000, less applicable taxes and other legal withholdings, which may be periodically adjusted at the discretion of the compensation committee of the Board. In addition, Mr. McNeil is eligible to receive an annual award of shares of restricted common stock equal to an amount of up to 75% of his base salary, subject to approval of the Board. The McNeil Employment Agreement also provides that Mr. McNeil is eligible to receive an annual cash bonus of up to 50% of his base salary based on annual performance metrics during the term of his employment, customary benefits and reimbursement for reasonable business expenses, as well as other customary employment benefits including paid vacation. Fleming and McNeil Severance. In the event that the employment of Mr. Fleming or Mr. McNeil is terminated for “cause” (as defined in each respective employment agreement), by the employee for any reason except for “good reason” (as defined in each respective employment agreement), then such employee is entitled to receive their base salary earned and accrued through the effective date of termination, plus reimbursement for any approved expenses incurred but unpaid as of such date. In the event that the employment of Mr. Fleming or Mr. McNeil is terminated by the Company without cause or due to the employee for good reason, such employee shall be entitled to receive a severance package which includes one year of base salary following the effective date of termination, paid in 24 equal semi-monthly installments in accordance with the Company’s regular payroll practices, and continued participation in any health care benefits provided by the Company to its employees for the period of time during which severance payments are paid to such employee, which continued participation in health care benefits may be through participation under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) and reimbursement of COBRA premiums paid by the employee for such continued participation; provided that the employee executes and delivers a release of claims to the Company.
Non-Employee Director Compensation Table
As discussed above, effective January 1, 2024, the compensation committee of the Board approved a base salary increase for each of Mr. Fleming and Mr. McNeil. Mr. Fleming’s annual base salary was increased from $290,000 to $350,000, less applicable taxes and other legal withholdings, which may be periodically adjusted at the discretion of the compensation committee of the Board. Mr. McNeil’s annual base salary was increased from $215,000 to $225,000, less applicable taxes and other legal withholdings, which may be periodically adjusted at the discretion of the compensation committee of the Board. Equity Compensation Plan Information The following table includes information regarding securities authorized for issuance under our equity compensation plans as of December 31, 2023.
Non-Employee Director Compensation Table
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) (c) | | Equity compensation plans approved by security holders | 144,211 | $34.07 | 1,419,503(1) | | Equity compensation plans not approved by security holders | 93,892(2) | $10.22 | - | | Total | 238,103 | $24.67 | 1,419,503 |
Non-Employee Director Compensation Table
| (1) Represents shares of common stock available for issuance under the 2014 Plan (as defined below), which permits the issuance of incentive stock options, nonqualified stock options, shares of restricted stock, stock appreciation rights, restricted stock units, performance awards, dividend equivalent rights and other awards. | | (2) Represents shares of common stock issuable upon the exercise of stock options previously granted under the Precision Healing Plan (as defined below), which was assumed by the Company on April 4, 2022. |
Non-Employee Director Compensation Table
2014 Plan. On May 9, 2014, the Board approved the 2014 Omnibus Long-Term Incentive Plan (the “2014 Plan”), which went into effect on September 3, 2014. The Board subsequently amended and restated the 2014 Plan, effective February 10, 2020 to, among other things, increase the number of shares available for grant under the 2014 Plan, and the shareholders approved the amendment on July 9, 2020. We may issue up to 2,000,000 shares of common stock pursuant to awards under the 2014 Plan. The purpose of the 2014 Plan is to (i) attract and retain skilled and qualified officers, employees and directors who are expected to contribute to our success by providing long-term incentive compensation opportunities competitive with those made available by other companies; (ii) motivate participants to achieve the long-term success and growth of the Company; (iii) facilitate ownership of shares of the Company; and (iv) align the interests of the participants with those of our shareholders. Under the 2014 Plan, we are authorized to grant stock options, stock appreciation rights, restricted stock, restricted stock units, and performance share awards to our officers, directors, employees and consultants. The 2014 Plan is administered by the Board. Unless amended prior to the termination date, the 2014 Plan will terminate on September 3, 2024, but previously granted awards will remain outstanding until they expire by their terms or under the terms of the 2014 Plan. Pursuant to the terms of the 2014 Plan, except as otherwise provided in an award agreement, upon the occurrence of a Change in Control, all outstanding stock options and all restricted share awards immediately become fully exercisable and vested. Under the 2014 Plan, a “Change in Control” is defined as (i) a sale of all or substantially all of the assets of the Company to any person or entity that is not a wholly owned subsidiary of the Company; (ii) a merger or consolidation to which the Company is a party if all persons who were shareholders of the Company immediately prior to the effective date of the merger or consolidation become beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of securities having less than 50% of the total combined voting power for election of directors (or comparable governing body) of the surviving corporation or other entity following the effective date of such merger or consolidation; or (iii) the approval by shareholders of the Company of any plan or proposal for the liquidation of the Company or its subsidiaries (other than into the Company). Pursuant to the agreements governing restricted stock awards granted under the 2014 Plan, upon the termination of an employee’s employment with the Company or any of its subsidiaries for any reason, the employee shall immediately forfeit all shares of restricted stock which have not vested. Precision Healing Plan. On April 1, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, United Wound and Skin Solutions, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“UWSS”), Precision Healing Inc., a Delaware corporation (“Precision Healing”), PH Merger Sub I, Inc., a Delaware corporation (“Merger Sub I”), PH Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II”), and Furneaux Capital Holdco, LLC (d/b/a BlueIO), solely in its capacity as the representative of the securityholders of Precision Healing. On April 4, 2022 (the “Closing Date”), the transactions contemplated by the Merger Agreement closed and Merger Sub I merged with and into Precision Healing, with Precision Healing being the surviving entity and becoming a wholly owned subsidiary of UWSS and an indirect subsidiary of the Company (the “First Merger”). In addition, as part of the same overall transaction, the surviving entity of the First Merger merged with and into Merger Sub II, with Merger Sub II being the surviving entity and continuing as a wholly owned subsidiary of UWSS and an indirect subsidiary of the Company. Pursuant to the Merger Agreement, on the Closing Date, the Precision Healing options previously granted under the Precision Healing Inc. 2020 Stock Option and Grant Plan (the “Precision Healing Plan”) and outstanding immediately prior to the First Merger Effective Time (as defined in the Merger Agreement) converted pursuant to their terms into options to acquire, on the same terms and conditions as were applicable under such Precision Healing options immediately prior to the First Merger Effective Time, an aggregate of 144,191 shares of common stock, par value $0.001 per share, of the Company with a weighted exercise price of $10.71 per share. Concurrent with our assumption of the Precision Healing Plan, we terminated the ability to offer future awards under the Precision Healing Plan. Change of Control Upon a Change in Control of the Company, all restricted stock awards become fully vested. No executive officers are otherwise entitled to any payments as a result of a Change in Control of the Company. Outstanding Equity Awards at Fiscal Year-End The following table provides information concerning outstanding equity awards as of December 31, 2023, for our named executive officers. Market value was determined using the last sale price of our common stock on December 29, 2023, which was $41.10.
Non-Employee Director Compensation Table
| | OPTION AWARDS | | | | STOCK AWARDS | | | Name | Number of Securities Underlying Unexercised Options (Exercisable) (#) | Number of Securities Underlying Unexercised Options (Unexercisable) (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Zachary B. Fleming | - | - | - | - | 20,874 | 857,922 | | Michael D. McNeil | - | - | - | - | 9,618 | 395,300 |
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(1) Represents restricted shares that vested or vest as follows:
Non-Employee Director Compensation Table
| Name | Shares of Restricted Stock | Vesting Schedule | | Zachary B. Fleming | 6,988 | 33% on each of March 1, 2024 and the two subsequent anniversaries thereof | | | 5,888 | 50% on each of March 1, 2024 and the subsequent anniversary thereof | | | 1,331 | 100% on February 1, 2024 | | | 6,667 | 50% on each of January 1, 2024 and the subsequent anniversary thereof | | Michael D. McNeil | 4,217 | 33% on each of March 1, 2024 and the two subsequent anniversaries thereof | | | 4,365 | 50% on each of March 1, 2024 and the subsequent anniversary thereof | | | 1,036 | 100% on February 1, 2024 |
Non-Employee Director Compensation Table
Pay Versus Performance As required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation and our financial performance for each of the last three completed calendar years. In determining the “compensation actually paid” to our named executive officers (“NEOs”), we are required to make various adjustments to amounts that are reported in the Summary Compensation Table, as the SEC’s valuation methods for this section differ from those required in the Summary Compensation Table. The table below summarizes compensation values both reported in our Summary Compensation Table, as well as the adjusted values required in this section, for the 2023, 2022 and 2021 fiscal years.
Non-Employee Director Compensation Table
| Year | Summary Compensation Table Total for PEO (Current)(1) ($) | Compensation Actually Paid to PEO (Current)(2) ($) | Summary Compensation Table Total for PEO (Former)(1) ($) | Compensation Actually Paid to PEO (Former)(2) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(3) ($) | Average Compensation Actually Paid to Non-PEO NEOs(2)(3) ($) | Value of Initial Fixed $100 Investment based on TSR ($)(4) | Net Loss ($)(5) | | 2023 | 909,645 | 784,310 | - | - | 707,875 | 657,924 | 82.36 | (4,303,197) | | 2022 | 1,100,918 | 1,563,716 | - | - | 489,021 | 595,800 | 91.18 | (7,937,497) | | 2021 | 759,272 | 534,199 | 379,678 | 248,227 | 371,042 | 193,200 | 59.22 | (7,921,914) |
Non-Employee Director Compensation Table
| (1) The dollar amounts reported in this column are the amounts of total compensation reported in the “Total” column of the Summary Compensation Table for the 2021, 2022 and 2023 fiscal years for the persons who served as our principal executive officer (“PEO”) for the applicable year. Effective December 31, 2021, J. Michael Carmena resigned as our Principal Executive Officer. Mr. Carmena’s compensation information for 2021 is included in this table as a former PEO in accordance with Item 402(v) of Regulation S-K. Mr. Carmena’s compensation information for 2022 and 2023 is not included because he did not serve as our PEO during 2022 nor 2023. Effective January 1, 2022, Mr. Fleming was appointed as Chief Executive Officer, and since such date, has performed the duties of PEO. For additional information, see “Executive Compensation—Summary Compensation Table.” | | (2) The dollar amounts reported in this column represent the amount of “compensation actually paid” to our current and former PEO and our other NEOs (on average), as computed in accordance with Item 402(v) of Regulation S-K. “Compensation actually paid” is computed by subtracting the amounts in the “Stock Awards” column of the Summary Compensation Table for the applicable year from the “Total” column of the Summary Compensation Table for the applicable year and then, as applicable: (i) adding the fair value as of the end of the reported year of all awards granted during the reporting year that are outstanding and unvested as of the end of the reporting year; (ii) adding the amount equal to the change as of the end of the reporting year (from the end of the prior year) in fair value (whether positive or negative) of any awards granted in any prior year that are outstanding and unvested as of the end of the reporting year; (iii) adding, for awards that are granted and vest in the reporting year, the fair value as of the vesting date; (iv) adding the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value (whether positive or negative) of any awards granted in any prior year for which all applicable vesting conditions were satisfied at the end of or during the reporting year; (v) subtracting, for any awards granted in any prior year that are forfeited during the reporting year, the amount equal to the fair value at the end of the prior year and (vi) adding the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The following table reflects the adjustments made to compute “compensation actually paid”: |
Non-Employee Director Compensation Table
| | 2023 | | 2022 | | | 2021 | | | | PEO | Non-PEO NEOs | PEO | Non-PEO NEOs | PEO | FORMER PEO | Non-PEO NEOs | | Summary Compensation Table Total ($) | 909,645 | 707,875 | 1,100,918 | 489,021 | 759,272 | 379,678 | 371,042 | | Adjustments | | | | | | | | | Stock Awards ($) | (362,046) | (175,006) | (507,275) | (191,681) | (106,972) | - | (84,402) | | Fair Value of Equity Awards ($) | | | | | | | | | Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in the Covered Year | 287,207 | 173,319 | 856,811 | 189,530 | 117,993 | 104,873 | 93,097 | | Change in Fair Value of Outstanding and Unvested Equity Awards Granted in the Prior Year | (61,098) | (23,764) | 114,537 | 38,041 | (214,774) | (198,758) | (164,021) | | Change in Fair Value of Prior Year Equity Awards Vested in the Covered Year | (53,960) | (24,500) | (1,275) | 408 | (21,320) | (37,566) | (22,515) | | Fair Value on Vesting Date of Equity Awards Granted and Vested in the Covered Year | 64,562 | - | - | 70,481 | - | - | - | | Total Adjustments for Fair Value of Equity Awards ($) | 236,711 | 125,055 | 970,073 | 298,460 | (118,101) | (131,451) | (93,439) | | Compensation Actually Paid ($) | 784,310 | 657,924 | 1,563,716 | 595,800 | 534,199 | 248,227 | 193,201 |
Non-Employee Director Compensation Table
| (3) The dollar amounts reported in this column represent the average of the amounts reported for our NEOs as a group (excluding Messrs. Fleming and Carmena) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the NEOs (excluding Messrs. Fleming and Carmena) included for purposes of calculating the average amounts in each applicable year are as follows: for 2023, Mr. McNeil, for 2022, Messrs. McNeil and Morrison, and for 2021, Messrs. McNeil and Shawn M. Bowman. | | (4) The amounts reported in this column reflect our cumulative total shareholder return (“TSR”) as of December 31 of each year presented, assuming an initial fixed $100 investment on December 31, 2020. Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. No dividends were paid on stock or option awards in 2023, 2022 or 2021. | | (5) The dollar amounts reported represent the amount of net loss attributable to the Company’s shareholders as reflected in our consolidated audited financial statements for the applicable year. |
Non-Employee Director Compensation Table
Analysis of the Information Presented in the Pay Versus Performance Table We generally seek to incentivize long-term performance, and therefore do not specifically align our performance measures with “compensation actually paid” (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table. Compensation Actually Paid and Net Loss The following chart sets forth the relationship between Compensation Actually Paid to our PEO and former PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Net Loss during the three most recently completed fiscal years. Compensation Actually Paid and Cumulative TSR The following chart sets forth the relationship between Compensation Actually Paid to our PEO and former PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and the Company’s cumulative TSR over the three most recently completed fiscal years. All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. PROPOSAL 2: APPROVAL OF THE AMENDED AND RESTATED CERTIFICATE OF FORMATION TO PROVIDE THAT THE NUMBER OF DIRECTORS CONSTITUTING THE BOARD SHALL BE FIXED BY THE BYLAWS AND TO MAKE OTHER UPDATES AND MODERNIZATIONS On March 21, 2024, the Board unanimously adopted resolutions (i) approving, subject to the approval of the Company’s shareholders, an amended and restated certificate of formation which conforms the Company’s current Certificate of Formation to the provisions of the Texas Business Organizations Code (the “TBOC”) and updates the current Certificate of Formation to provide that the number of directors constituting the Board shall be fixed from time to time pursuant to the Bylaws (as amended and restated, the “Amended and Restated Certificate of Formation”), (ii) recommending that the Company’s shareholders approve the Amended and Restated Certificate of Formation and (iii) approving, subject to approval of the Amended and Restated Certificate of Formation the filing of it with the Secretary of State of the State of Texas, an increase of the size of the Board from eight to nine directors. The TBOC was promulgated to modernize applicable law governing Texas entities, including the Texas Business Corporations Act (the “TBCA”), and to consolidate existing law governing Texas entities into one set of statutory provisions. The TBOC became effective on January 1, 2006 for all entities formed in Texas on or after that date. Unless existing entities elected early adoption to be governed by the TBOC, the TBOC did not apply to them until January 1, 2010. After January 1, 2010, the Company and all other entities formed in Texas, regardless of the date of formation, became governed by the TBOC. At the time of its adoption, the TBOC was primarily not intended to effect substantive changes in Texas law governing business organizations, as many of the differences between the TBOC and the TBCA regarding Texas corporations related to terminology rather than substance. The TBOC does, however, require a Texas corporation to amend its certificate of formation (formerly articles of incorporation) to conform to the TBOC when the corporation files an amendment to its certificate of formation for any other reason. Because our Board has authorized, and we are requesting shareholder approval of, an amendment to our current Certificate of Formation to provide that the number of directors constituting the Board shall be fixed from time to time pursuant to the Bylaws, we are required by the TBOC to also amend and restate the Certificate of Formation to conform to the TBOC. Currently, Article Fifteen of our Certificate of Formation provides that the size of our Board shall be composed of no more than eight directors. The Board is proposing to amend and restate the Certificate of Formation to provide that the number of directors constituting the full Board be fixed by the Bylaws. The Bylaws provide that the number of directors who shall constitute the whole Board shall be such number as the Board shall from time to time have designated, except that in the absence of any such designation, such number shall be eight. As required by the TBOC, because the Amended and Restated Certificate of Formation is being proposed, the Amended and Restated Certificate of Formation also contains certain updates and modernizations to our current Certificate of Formation to conform to the TBOC, including, among others: (i) replacing the term “Texas Business Corporation Act” with the term “Texas Business Organizations Code”, (ii) replacing the reference to the Articles of Incorporation with a reference to the Amended and Restated Certificate of Formation, (iii) updating our registered address and registered agent and (iv) removing certain information about the Company’s initial director, which is not required to be repeated under the TBOC. The proposed Amended and Restated Certificate of Formation is set forth in its entirety in Annex A, and a marked version of the Amended and Restated Certificate of Formation, showing all of the proposed changes from the current Certificate of Formation is set forth in Annex B. If the proposed Amended and Restated Certificate of Formation is approved by shareholders at the Annual Meeting, it will become effective upon our filing it with the Secretary of State of the State of Texas. Reasons for the Amended and Restated Certificate of Formation The Board, including its committees, regularly reviews the Company’s corporate governance policies and procedures. The Board, in its continuing review of corporate governance matters, after careful consideration and upon recommendation by management, now recommends shareholders approve of a proposal to amend and restate the Certificate of Formation to provide that the number of directors constituting the Board shall be fixed from time to time pursuant to the Bylaws and to make other updates and modernizations. The Board believes that amending and restating the current Certificate of Formation to allow the number of directors to be changed in the manner provided in the Bylaws will provide flexibility, simplicity and convenience in setting the number of directors. Many companies that incorporate today permit the number of directors to be changed in this manner. The Board believes it should be able to change the number of directors without having to call a special meeting of shareholders or wait until the next annual meeting to make such change, and without having to comply with any special voting, filing or other requirements that may apply to amendments of the Company’s Certificate of Formation. The Board might want to make such a change for various reasons, including the following:
Non-Employee Director Compensation Table
| ● | if the Company, in order to maintain its listing on a national securities exchange, needs to appoint additional directors to meet independence, financial literacy or other requirements; | | ● | from time to time, the accepted best practice with respect to the size of corporate boards or boards within the Company’s industry may change, and the Board would like to be able to keep up with such changes as appropriate; and | | ● | the Board may seek in the future to broaden the diversity of experience, background, education or other criteria represented by the Company’s directors. |
Non-Employee Director Compensation Table
As discussed above, the Board has approved, subject to shareholder approval of the Amended and Restated Certificate of Formation and the filing of it with the Secretary of State of the State of Texas, an increase of the size of the Board from eight to nine directors. The Board believes that the Company would benefit from having a larger board of directors. The Board believes that increasing the size of the Board will allow for a greater variety of perspectives on the Board with increased breadth and depth of experience and skills necessary for proper oversight of the Company’s affairs and will enhance its overall collective effectiveness. Specifically, the Board believes an increase in its size will provide the opportunity to add Mr. Fleming to the Board, who has demonstrated experience and expertise relevant to our business, operations and industry. The election of Mr. Fleming in Proposal 3 is contingent on the affirmative approval of this Proposal 2 and the increase in the number of directors from eight to nine. The Board has determined that it would be in the best interests of the Company and its shareholders to make other such necessary updates and modernizations to our Certificate of Formation as described above. The Board believes these updates and modernizations align the Company with the TBOC to ensure compliance with existing law. Vote Required and Board Recommendation Assuming the presence of a quorum, the approval of the amendment and restatement of our Certificate of Formation requires the approval of the holders of a majority of the shares of the Company entitled to vote on the proposal.
Non-Employee Director Compensation Table
| The Board recommends that you vote “FOR” the approval of the amendment and restatement of the Certificate of Formation to provide that the number of directors constituting the Board shall be fixed from time to time pursuant to the Bylaws and to make other updates and modernizations. |
Non-Employee Director Compensation Table
PROPOSAL 3: APPROVAL OF THE ELECTION OF ONE DIRECTOR TO FILL A VACANCY TO BE CREATED FROM AN INCREASE IN THE SIZE OF THE BOARD OF DIRECTORS On March 21, 2024, the Board unanimously adopted a resolution approving, subject to approval of the Amended and Restated Certificate of Formation under Proposal 2 and the filing of it with the Secretary of State of the State of Texas, an increase of the size of the Board from eight to nine directors. Pursuant to this Proposal 3, Mr. Fleming has been appointed to fill the vacancy resulting from the increase in the size of the Board on or shortly after the date of the Annual Meeting. Mr. Fleming has served as the Company’s Chief Executive Officer since January 1, 2022. His business experience is discussed above in “Proposal 1 — Election of Directors.” Reasons for the Election of One Director to Fill a Newly Created Vacancy The Board believes that the Company would benefit from having a larger board of directors and that increasing the size of the Board will allow for a greater variety of perspectives on the Board with increased breadth and depth of experience and skills necessary for proper oversight of the Company’s affairs and will enhance its overall collective effectiveness. Specifically, the Board, upon recommendation of the nominating and corporate governance committee, has nominated Zachary B. Fleming, our Chief Executive Officer, as a new director nominee to serve on our Board. The Board believes that Mr. Fleming is an excellent addition to the Board and further enhances the experience and expertise in the boardroom relating to our business, operations and industry. Mr. Fleming’s nomination was informed by the Board’s continued focus on its composition and its annual evaluation process, which ensures the appropriate balance of skills, diversity, experience and tenure in light of our business needs. See “Director Nominations” under “Proposal 1: Election of Directors” for more information on our director nomination process.