CMD Cantel Medical Corp

Certain Relationships and Related Person Transactions

Our Corporate Governance Guidelines address, among other things, the consideration and approval of any related person transactions. Under these Governance Guidelines, any related person transaction that would require disclosure by us under Item 404(a) of Regulation S-K of the rules and regulations of the SEC, including those with respect to a director, a nominee for director or an executive officer, must be reviewed and approved or ratified by the Nominating Committee, excluding any director(s) interested in such transaction. Any such related person transactions will only be approved or ratified if the Nominating Committee determines that such transaction will not impair the involved person(s)’ service to, and exercise of judgment on behalf of, the Company, or otherwise create a conflict of interest that would be detrimental to the Company.

Mark N. Diker, our Chairman’s son, has served as a director of Cantel since October 18, 2007. Because of such family relationship, he is not treated as an independent director. During fiscal year 2020, as with our other non-employee directors, Mr. Mark Diker received compensation of $30,000 and was awarded 1,935 RSUs under the 2016 Equity Plan in connection with his directorship at Cantel.

Other than compensation paid to our executive officers and directors and disclosed in this Proxy Statement or otherwise approved by our Compensation Committee or Board, we did not engage in any related person transactions in fiscal year 2020.

BOARD MATTERS; COMMITTEES

Board Meetings and Attendance of Directors

The Board held six meetings, four regular meetings and two special meetings, during fiscal year 2020. During fiscal year 2020, each of the directors attended 75% or more of the combined total meetings of the Board and the respective committees on which she or he served. Directors are required to make every reasonable effort to attend the Annual Meeting of Stockholders. All ten individuals then serving as members of the Board attended our last Annual Meeting of Stockholders.

Director Independence

In determining independence pursuant to NYSE standards, each year the Board affirmatively determines whether directors have a direct or indirect material relationship with the Company that may interfere with their ability to exercise their independence from the Company. When assessing the materiality of a director’s relationship with the Company, the Board considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. The Board has affirmatively determined that the following seven directors have no material relationship with us and are independent within the meaning of Rule 10A-3 of the Exchange Act and within the NYSE definition of “independence”: Alan R. Batkin, Ann E. Berman, Anthony B. Evnin, Laura L. Forese, Ronnie Myers, Karen N. Prange and Peter J. Pronovost. Our Board has also concluded that none of these directors possessed the objective relationships set forth in the NYSE listing standards that prevent independence. None of our independent directors has any relationship with the Company other than his or her service as a director and on committees of the Board. Independent directors receive no compensation from us for service on the Board or the Committees other than directors’ fees and equity grants under our 2016 Equity Plan (and, if approved at the meeting, our 2020 Equity Plan).

Executive Sessions; Lead Independent Director

As required by the NYSE listing standards, our non-management directors meet in executive sessions at which only non-management directors are present. Such meetings are held following every regular meeting of the board of directors. Meetings of non-management directors are generally followed by meetings of the independent directors.

Mr. Batkin serves as the lead independent director and is the chairperson for all non-management and independent director meetings. He was selected by our non-management directors to serve in such position last year after serving as presiding director each year since December 2004. The lead independent director’s responsibilities include presiding at all meetings of the Board at which the chairman is not present, including executive sessions of the independent directors; serving as liaison between the chairman and the independent directors; approving information sent to the Board; approving meeting agendas for the Board; approving meeting schedules to assure that there is sufficient time for discussion of all agenda items; having the authority to call meetings of the independent directors; and if requested by any major shareholders, ensuring that he or she is available for consultation and direct communication.

Communications with Directors; Hotline

Cantel takes seriously the concerns of its employees, stockholders and other interested parties. Cantel's global third-party hotline site provides these individuals with the ability to report anonymously where local law permits or requires, including matters to be addressed to the Board, any individual director, any Committee or the lead independent director. Cantel’s Speak-Up! Line is accessible at https://secure.ethicspoint.com/domain/media/en/gui/61652/index.html. You may file a report or inquiry through the online portal; the site also provides telephone numbers to access the hotline in over 100 countries. An outside vendor collects all reports or complaints and delivers them to our General Counsel and Chief Compliance Officer, who, in appropriate cases, forwards them to the Audit Committee or the appropriate director or group of directors or members of management.

All stockholders and other interested parties may contact the entire Board, any Committee, the Lead Independent Director, or any other non-management directors as a group or any individual director through Cantel's Speak-Up! Line. An outside vendor collects all reports or complaints and delivers them to our General Counsel, who, in appropriate cases, forwards them to the Audit Committee and/or the appropriate director or group of directors or member of management.

Additional information regarding the hotline can be found by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com.

Committees

The Board has three standing committees: the Audit Committee, the Compensation Committee and the Nominating Committee. All members of the Audit Committee, the Compensation Committee and the Nominating Committee are independent directors within the definition in the NYSE listing standards and Rule 10A-3 of the Exchange Act. Each of the Committees has the authority to retain independent advisors and consultants, with all fees and expenses to be paid by the Company. The Board-approved charters of each of the committees can be found by clicking on the “Corporate Governance” link in the “Investor Relations” section of our website at www.cantelmedical.com or (free of charge) by sending a written request to Cantel Medical Corp., 150 Clove Road, Little Falls, NJ 07424, Attn: Secretary.

Audit Committee. The Audit Committee is composed of Ms. Berman (Chair), Ms. Prange, Mr. Batkin and Dr. Myers. All of the Audit Committee members are financially literate, and at least one member has accounting and financial management expertise. The Board has determined that Ms. Berman qualifies as an “audit committee financial expert” for purposes of the federal securities laws. Ms. Berman developed such qualifications through her skills as a CPA and her service as a Vice President of Finance and CFO of Harvard University.

The Audit Committee performs the following functions: (1) assisting the Board in fulfilling its oversight responsibilities with respect to (a) the integrity of our financial statements, (b) our compliance with legal and regulatory requirements, (c) the independent registered public accounting firm’s qualifications and independence and (d) the performance of our internal audit function and independent registered public accounting firm and (2) preparing a report in accordance with the rules of the SEC to be included in our annual proxy statement.

Additionally, the Audit Committee supervises our enterprise risk management committee, which monitors and escalates enterprise level issues, including cybersecurity matters, to the appropriate management levels within our organization and to members of our Board of Directors as appropriate. The Audit Committee receives regular reports from both the enterprise risk management committee and the internal auditor. Matters determined by the enterprise risk management committee to present potential material impacts to our financial results, operations or reputation are immediately reported by management to the chair of our Audit Committee. In addition, the Audit Committee regularly meets in executive session with the internal and external auditors, as well as the Company’s General Counsel and Chief Compliance Officer.

The Audit Committee held seven meetings during fiscal year 2020, of which four were meetings held prior to the filing of our Quarterly Reports on Form 10-Q or Annual Report on Form 10-K for the primary purpose of reviewing such reports and the quarterly financial closing process.

Compensation Committee. The Compensation Committee is composed of Mr. Batkin (Chair), Ms. Berman, and Drs. Forese and Myers. The Compensation Committee performs the following functions: (1) discharging the Board's responsibilities relating to compensation of our executive officers; (2) producing an annual report on executive compensation for inclusion in our proxy statement in accordance with applicable rules and regulations and (3) administering our equity incentive plans in accordance with the terms of such plans. The Compensation Committee held six meetings during fiscal year 2020. In discharging its responsibilities, the Compensation Committee, among other things, evaluates the CEO’s performance and determines and approves the CEO’s compensation level based on such evaluation. The Compensation Committee also determines and approves the compensation of other executive officers. The CEO makes recommendations to the Compensation Committee regarding the amount and form of his compensation and the compensation of our other executive officers.

As described further in “Compensation Discussion and Analysis” below, the Compensation Committee retained Frederic W. Cook & Co., Inc. (FW Cook), an independent compensation consultant, to provide advice with respect to executive compensation for fiscal year 2020. FW Cook’s primary responsibilities in fiscal year 2020 included updating our peer group companies, benchmarking the compensation of our CEO and other executive officers, incentive design and facilitating the compensation risk assessment.

Compensation Committee Interlocks and Insider Participation. None of the directors who served on the Compensation Committee during fiscal year 2020 is or has been an officer or employee of the Company or had any relationship that is required to be disclosed as a transaction with a related person. During fiscal year 2020, none of our executive officers served as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board or our Compensation Committee.

Nominating Committee. The Nominating Committee is composed of Dr. Forese (Chair), Mr. Evnin and Dr. Pronovost. The Nominating Committee performs the following functions: (1) identifying individuals qualified to become Board members, consistent with criteria approved by the Board and recommending that the Board select the director nominees for the next Annual Meeting of Stockholders; (2) developing and recommending to the Board the Corporate Governance Guidelines; (3) overseeing evaluation of the Board and management and (4) reviewing and assessing the compensation paid to members of the Board and its committees. The Nominating Committee held four meetings during fiscal year 2020. The Nominating Committee is also responsible for overseeing the management team’s effort concerning diversity, equity and inclusion.

Board Leadership Structure

The CEO and Chairman roles at Cantel are separated between George L. Fotiades and Charles M. Diker, respectively, in recognition of their differing responsibilities. The CEO is responsible for leading the organization’s day-to-day performance, executing the Company’s strategies and ensuring the success of our acquisition program. The Chairman is responsible for advising the CEO on matters such as the strategic direction of the Company, collaborating on acquisitions and presiding over meetings of the Board. Although we do not have a formal policy regarding whether the offices of Chairman and CEO should be separate, our Board believes that the existing leadership structure, with the separation of the Chairman of the Board and CEO roles and a strong Lead Independent Director role, enhances the accountability of the CEO to the Board and strengthens the Board’s independence from management. In addition, the Board believes that having a separate Chairman creates an environment that is more conducive to the objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board to monitor whether management’s actions are in the best interests of the Company and our stockholders.

Board Role in Risk Oversight

The Board, through its Audit Committee, is responsible for oversight of the Company’s management of enterprise risks, including cybersecurity. Cantel’s senior management is responsible for the Company’s risk management process and the day-to-day supervision and mitigation of enterprise risks, as well running its enterprise risk management committee, which is supervised by the Audit Committee. Additional details are set forth above under “Audit Committee.”

Management of the Company advises the Audit Committee and Board on areas of material Company risk, including strategic, operational, financial, legal and regulatory risks. We do not believe our Board’s oversight of risk influences our leadership structure, though we believe our leadership structure helps mitigate risk by separating oversight of our day-to-day business from the oversight of our Board.

Selection of Nominees for Election to the Board

The Nominating Committee has established a process for identifying and evaluating nominees for director. The Nominating Committee will consider nominees recommended by stockholders and believes that its process produces nominees that possess the educational, professional, business and personal attributes that are best suited to further our purposes. Any interested person may recommend a nominee by submitting the nomination, together with appropriate biographical information, to the Nominating Committee, c/o Cantel Medical Corp., 150 Clove Road, Little Falls, NJ 07424, Attn: Secretary. All recommended candidates will be considered using the criteria set forth in our Corporate Governance Guidelines.

The Nominating Committee and the Board select candidates on the basis of qualification and experience, without discriminating on the basis of race, color, national origin, gender, sex, sexual orientation or religion. The Nominating Committee will consider, among other things, the following factors to evaluate potential nominees: the Board’s current composition, including expertise, diversity (including diversity of background, skills, experience, gender, race and ethnicity), independence and other qualifications required or recommended by applicable laws, rules and regulations (including NYSE requirements) and Company policies or procedures. The Board believes that diversity leads to better and more effective governance and, therefore, seeks a diverse pool of candidates. Personal integrity is also foremost in the Nominating Committee’s consideration, as are other more general qualifications such as concern for the Company’s success and welfare; experience at strategy/policy setting level; high-level leadership experience in business or administrative activity; breadth of knowledge about issues affecting Cantel; an ability to work effectively with others; sufficient time to devote to the Company and freedom from conflicts of interests.

Annual Performance Evaluation of the Board

The Board conducts a self-evaluation annually to determine whether it, its Committees, and its individual directors are functioning effectively. This evaluation is required to be performed by an external evaluator at least once every three years, which is scheduled to be performed next in fiscal year 2021. The full Board discusses the evaluation report to determine what, if any, action could improve Board, Board committee, and individual director performance.

Sustainability

In addition to our corporate governance policies, sustainability and social responsibility are key focuses of our business. At Cantel, our mission has always been to deliver infection prevention services and solutions that improve outcomes and save lives. Our commitment to our patients, customers, communities and investors includes a commitment to responsible business practices and transparent disclosure of our environmental, social and governance performance, and has been the driving force behind several expanded and new initiatives. Addressing our environmental footprint improves the well-being of our patients, customers, employees, communities and investors. For more information, please see our 2020 Corporate Responsibility Report available at www.cantelmedical.com/CRR-2020 or use the barcode below.

Set forth below is certain biographical information concerning our current executive officers who are not also directors.

Mr. Blakeman has served as Senior Vice President and Chief Financial Officer of the Company since May 2019. In this role, he is responsible for all financial reporting, financial planning and analysis, auditing, treasury, strategic planning and management, and investor relations. Mr. Blakeman worked for Cantel from 2016 to 2018 serving as the Vice President of Finance for Cantel’s Medical division. Prior to rejoining the Company, Mr. Blakeman was Senior Finance Director at Medtronic plc. Prior to that, he held leadership roles with increasing responsibility including Vice President, Diaphragm and Dosing Pump Platform business at IDEX Corporation and Controller for Latin American Operations for Warren Rupp, Inc., another division of IDEX.

Mr. Clifford has served as the President and Chief Operating Officer of the Company since August 2020, and as Executive Vice President and Chief Operating Officer since May 2019. Prior to his appointment as Chief Operating Officer, Mr. Clifford served as Executive Vice President and Chief Financial Officer of the Company since May 2015. Prior to joining the Company, Mr. Clifford served in various financial positions with increasing responsibility for over twenty years. For more than five years prior to joining the Company, he was Group Vice President of Operations Finance and Information Technology for IDEX Corporation.

Mr. Yellin has served as Executive Vice President and Chief Growth Officer of the Company since February 2020, and prior to that as Executive Vice President, Strategy and Corporate Development since September 2016. Previously, from March 2013 to September 2016, he served as Senior Vice President, Corporate Development, and from April 2012 through March 2013, he served as Vice President, Corporate Development. From January 2011 through January 2012, Mr. Yellin was an analyst in the Medical Devices & Life Science Tools segment of Citadel Asset Management.

Mr. Capone was appointed Senior Vice President, Corporate Controller and Chief Accounting Officer in October 2018, having previously served as Vice President, Chief Accounting Officer and Vice President, Corporate Controller for the Company since April 2017. Prior to joining the Company, Mr. Capone served as the Assistant Corporate Controller for Stryker Corporation from October 2014 to April 2017, and Director, External Financial Reporting and Technical Accounting for Quest Diagnostics Incorporated from March 2012 to October 2014. Prior to those roles, Mr. Capone served in various financial reporting roles at Genzyme Corporation and CVS Health Corporation.

Ms. Casner has served as the Company’s Senior Vice President and Chief Human Resources Officer since March 2019. In this role, she is responsible for the global human resources function, including its people strategy, policies, systems and processes such as talent management, succession planning, learning and development, compensation and benefits, performance and recruiting. Ms. Casner joined Cantel in 2017 as Vice President, Benefits, Compensation and HR Operations. Prior to Cantel, Ms. Casner held HR leadership positions at the National Basketball Association from July 2008 to May 2015, Merck & Co., Inc. from January 2004 to June 2008, The Dial Corporation (now owned by Henkel Corporation) from July 1993 to July 2001, Johnson & Johnson from 1991 to 1993, and ORC Worldwide (now owned by Mercer LLC) from September of 1980 to December 1990.

Mr. Mann was appointed Senior Vice President, General Counsel and Secretary of the Company as of August 1, 2019, and has additionally served as the Chief Compliance Officer for the Company since March 2020. During fiscal year 2020, Mr. Mann also served as the interim leader for Global R&D. Prior to that, Mr. Mann served as the Vice President, Deputy General Counsel of the Company since June 2018. Mr. Mann joined the Company after serving in various legal leadership roles at Boston Scientific Corporation since 2004.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

This Compensation Discussion and Analysis (CD&A) describes our executive compensation philosophy and program, the compensation decisions made under this program and the specific factors we considered in making those decisions. This CD&A focuses on the compensation of our “Named Executive Officers” (NEOs) for fiscal year 2020, who were:

Fiscal Year 2020 Performance Results

Fiscal year 2020 has proved to be one of the most challenging years in history for Cantel and our shareholders. The year began with the transformative acquisition of Hu-Friedy Mfg. Co., LLC, only to be followed by the worldwide COVID-19 pandemic. The pandemic, lockdowns and ongoing changes in patient behavior had a significant negative impact on elective medical and dental procedures in hospitals and clinics, which directly impacted our Medical and Dental segments. During this unprecedented time, Cantel took substantial actions to continue serving our customers, protect our employees, manage expenses, and preserve cash.

Key financial results for fiscal year 2020 compared with fiscal year 2019 were as follows:

Executive Compensation Program Best Practices

Our Compensation Committee believes that a strong foundation for our compensation program is necessary to execute our executive compensation philosophy effectively. The following best practices serve as the foundation for our executive compensation program.

WHAT WE DO
Mixture of short-term and long-term incentives		Stock ownership guidelines
Mixture of fixed and variable compensation		Peer group reviews
Clawbacks		Independent compensation consultant
Double-trigger for change in control vesting		Compensation risk assessment
WHAT WE DON’T DO
General tax gross ups		Stock repricing
Executive perquisites		Hedging or pledging

How Pay Was Tied to the Company’s Performance in Fiscal Year 2020

As discussed below, payment of cash incentive awards is tied to financial performance and we have, since fiscal year 2017, granted performance-based equity grants in addition to strictly time-based equity grants for our senior corporate executives. Our fiscal year 2020 results and compensation decisions illustrate that our pay-for-performance philosophy works as intended, with incentive-based cash bonuses and equity awards being driven by performance. As seen across industries, the COVID-19 pandemic significantly impacted the financial performance of the Company, particularly in the second half of fiscal year 2020. Due to the Company’s financial metric achievements during the pandemic falling below our fiscal year 2020 minimum thresholds as established for purposes of executive compensation, our NEOs did not receive annual cash bonuses. In addition, the Company implemented multiple cash-preserving actions throughout the pandemic, including temporary reductions of pay or temporary suspensions of pay, as the case may be, across our senior corporate executive team.

Regardless of the external factors largely outside of Company control, we regard the non-achievement and non-payment of cash bonuses as consistent with our pay-for-performance philosophy, and the non-payment of cash bonuses, alongside our cash-preserving actions, as a testament to our commitment to meeting short-term and long-term business objectives and preserving stockholder value.

Compensation Philosophy and Objectives

The approach to our compensation is designed to accomplish the following objectives:

What the Company’s Compensation Program is Designed to Reward

The Company’s business plan emphasizes growth through the expansion of existing operations (i.e., organic growth), the addition of new businesses and products through acquisitions, and product development. This strategy is advanced by identifying and acquiring businesses; effectively integrating acquired operations, employees, products, and technologies into the organization; retaining and motivating key employees throughout the Company; and attracting and retaining customers. In addition, the Company relies on its executives to sustain and efficiently manage current businesses while adapting and growing its business segments in response to the ever-changing competitive landscape. The compensation program is designed to reward the NEOs and other executives for successfully managing these tasks, increasing earnings of the Company, and creating stockholder value.

The abilities and performance of the Company’s executives are critical to the Company’s long-term success, and the objectives of the compensation program are designed to complement each other by balancing the Company’s interest in achieving both its short-term and long-term goals. Base salary and incentive-based cash bonuses are paid to reward performance and the achievement of short-term objectives, and equity awards are used to align the executives’ interests with the long-term success of the Company and to attract and retain executives.

Responsibilities in Setting Executive Compensation

The Compensation Committee has responsibility for determining executive compensation. The Compensation Committee is made up entirely of independent directors as defined by our Governance Guidelines and NYSE listing standards. It regularly reviews the design and implementation of our executive compensation program and reports on its discussions and actions to the Board. In particular, the Compensation Committee (i) oversees our executive compensation program, (ii) approves the performance goals for our NEOs and other executives and evaluates results against those targets each year, (iii) determines and approves the compensation of our CEO and our other NEOs, as well as any other executive officers of the Company and division and region presidents and (iv) makes recommendations to the Board with respect to the structure of overall cash incentive and equity-based plans. The Compensation Committee makes its determinations regarding executive compensation after consulting with the CEO and the Compensation Committee’s independent compensation consultant (as further described below). Its decisions are based on a variety of factors, including the Company’s performance, individual executives’ performance, and input and recommendations from the CEO. Additional factors considered in executive compensation decisions include each individual’s skill set relative to industry peers, overall experience and time in the position, the critical nature of the individual’s role, difficulty of replacement, expected future contributions, readiness for promotion to a higher level, and role relative to that of other executive officers. NEOs and other executives do not have a role in the determination of their own compensation, but the CEO does discuss his or her compensation with the Compensation Committee.

Following the Compensation Committee’s determination of the Chairman’s annual equity award and other compensation, the Board is given the opportunity to consider and ratify such compensation.

Role of Compensation Data and Independent Consulting Firm

The Compensation Committee retained FW Cook as an independent compensation consultant to provide advice with respect to executive compensation for fiscal year 2020. With respect to the compensation of our CEO and other senior executives in fiscal year 2020, FW Cook conducted a review for the Compensation Committee of the Company’s peer group, which consists of public companies engaged in our industry, in related industries, or that possess size or other characteristics which are similar to ours, as well as compensation data of the peer group companies, and survey data and benchmarking information.

After review, FW Cook confirmed that the peer group identified and updated for fiscal year 2019 was still the appropriate group. That group consists of: CONMED Corporation, DENTSPLY SIRONA, Inc., Globus Medical, Inc., Haemonetics Corporation, ICU Medical, Inc., Integer Holdings Corporation (f/k/a Greatbatch, Inc.), Integra LifeSciences Corporation, Masimo Corporation, Merit Medical Systems Inc., Natus Medical Inc., NEOGEN Corporation, NuVasive, Inc., Steris plc, Varian Medical Systems, Inc., and Wright Medical Group, Inc.

The Compensation Committee used the peer group data principally to obtain a general understanding of median base salary, bonus and long-term incentive levels paid to chief executive officers in the healthcare industry and to determine where compensation levels of the Company’s CEO and other executives fell relative to median compensation levels of comparable industry executives. The data showed that the combined base salaries and short-term cash incentives were within a competitive range relative to the medians in the peer group, but that the combined long-term incentives were significantly below the median of the comparative group. The Compensation Committee utilized this and additional benchmarking data to assess salaries, incentives, and benefits of the CEO and other executives which informed compensation setting for fiscal year 2021. This same process was conducted within fiscal year 2019 and led to an in-depth revision of the perquisites which were provided exclusively to executives, all of which were discontinued by the Compensation Committee in fiscal year 2020, effective December 1, 2019. See “Post-Retirement and Other Benefits” for more information about the eliminated perquisites.

FW Cook’s primary responsibilities in fiscal year 2020 included identifying our peer group companies, benchmarking the compensation of our CEO and other executive officers, assessing the existing annual and long-term incentive plan designs, facilitating the compensation risk assessment, and providing advice to the Compensation Committee on refinements and modifications to the plans in preparation for fiscal year 2021. FW Cook presented peer based data and market trends on the competitiveness of the Company’s executive compensation program, incentive plan design, risk and reward structure of executive compensation plans, and compensation benchmarking for the CEO and other executives.

The Compensation Committee has assessed the independence of FW Cook pursuant to the NYSE listing standards and SEC rules and is not aware of any conflict of interest that would prevent FW Cook from providing independent advice to the Committee concerning executive compensation matters.

Elements of the Compensation Program; Why the Compensation Committee Chose Each Element and How Each Relates to the Company’s Objectives

The two principal elements comprising executive compensation are cash and equity awards. The cash element is divided into base salary and annual cash incentives. The equity element for new grants consists of RSUs under the Company’s 2016 Equity Plan. These elements complemented each other and gave the Compensation Committee flexibility to create compensation packages that provided short-term and long-term incentives in line with the Company’s approach to compensation. Such approach was designed to provide the executive sufficient cash to be competitive with other employment opportunities, while at the same time providing the executive with an incentive to build stockholder value by aligning the executive’s interests with those of our stockholders.

Commencing with fiscal year 2017, equity awards are granted at the beginning of the fiscal year and include performance-based equity grants, as described below, in addition to time-based equity grants. Therefore, the equity grants made to executives at the beginning of fiscal year 2020 (in October 2019) were attributable to fiscal year 2020, and were in the form of time-based and performance-based RSUs.

Cash

Base salary is the primary fixed element of the Company’s compensation program and is used to attract and retain, as well as motivate and reward, executive officers. In determining the base salary of NEOs, the Compensation Committee considers the experience, skills, knowledge, and responsibilities required of the executive officer in his or her role, specifically, the functional role of the position, the level of the individual’s responsibility and the Company’s ability to replace the individual.

Short-term incentive compensation is an opportunity for executives to receive cash bonuses based on the Company’s or its divisions’ or regions’ annual financial performance. The short-term incentive compensation is intended to reward performance for the most recently completed fiscal year when financial objectives are achieved and to motivate and retain qualified individuals who have the opportunity to influence future results, advance business objectives and enhance stockholder value. Likewise, this element of compensation is designed to provide a reduced award or no award when financial objectives are not achieved. Target amounts for the annual bonus opportunity are historically established within 75 days after the commencement of the fiscal year and are based on achievement of one or more financial metrics. The exact annual metric and targets are determined and approved by the Compensation Committee each year.

For fiscal year 2020, the Compensation Committee also established a target level, as a percentage of base salary, for each member of senior management (exclusive of Mr. Diker) for purposes of determining cash bonuses. Mr. Diker is excluded because the Compensation Committee determines his annual bonus on a discretionary basis. Factors included in the process of determining senior management target levels were business performance, scope of responsibilities and accountability, competitive and other industry compensation data, special circumstances and expertise, individual performance, comparison with compensation of our other senior managers and recommendations of the CEO. Achievement of the target levels was based on attainment of the Company’s fiscal year 2020 targeted net sales, non-GAAP EBITDAS (earnings before interest, taxes, depreciation, amortization, and stock-based compensation), and, in the case of division and region presidents, non-GAAP operating income for the applicable division or region. For all executives, Company net sales and non-GAAP EBITDAS results were also required to meet or exceed fiscal year 2019 results for any payout to occur. In regards to our NEOs, target bonus levels were weighted 50% tied to the net sales metric and 50% tied to the non-GAAP EBITDAS metric.

Equity

The primary purpose of equity grants is to contribute to the motivation of key employees in accomplishing the Company’s long-term strategic, operational, and financial objectives as well as stockholder value goals. Equity awards (which may consist of restricted stock awards (RSAs), RSUs, stock options, stock appreciation rights or performance awards) are granted to NEOs under our 2016 Equity Plan in order to give them an ownership interest in the Company, thereby aligning their interests with those of the stockholders and providing a long-term incentive. RSAs and RSUs consist of awards of the Company’s common stock subject to specified vesting restrictions or conditions including, among other things, continued employment with the Company. Stock options and stock appreciation rights (rights to receive a payment equal to the increase in fair market value of the Company’s common stock since the grant date thereof) are equity awards whose value depends on an increase in the Company’s common stock price. For more than the past five years, the Compensation Committee has awarded only RSAs and RSUs and no stock options to management, other than Mr. Diker who, prior to fiscal year 2016, received stock options. Grants of RSAs and RSUs have intrinsic value regardless of price appreciation, and may create a stronger alignment of interests between management and other stockholders. In addition, the Compensation Committee believes that due to their intrinsic value, RSAs and RSUs may have a stronger retentive effect on management than stock options. Since fiscal year 2018, the Company has exclusively granted time-based and performance-based RSUs to executives.

The Compensation Committee has typically imposed time-based vesting conditions on both time-based and performance-based RSAs and RSUs because it believes that time-based vesting conditions encourage recipients of awards to remain employed by the Company and continue to provide services, and also encourages recipients to build stockholder value over a long period of time.

During fiscal year 2020 (in October 2019), RSUs were granted to senior management under the Company’s 2016 Equity Plan. One-half of the awards were time-based RSUs and one-half were performance-based RSUs. Recipients of these time-based and performance-based RSUs will accrue cash dividend equivalents equal in amount to the cash dividends that would have been paid to the recipient had he or she owned one share for each yet-unpaid RSU as of such payment date. However, recipients of RSUs will not be paid dividend equivalents unless and until their units vest. Until such time, dividend equivalents will accrue and be subject to the same vesting and forfeiture restrictions as the RSUs to which they are attributable.

Risk in Our Compensation Program

The Compensation Committee commissioned an independent review by FW Cook to consider the risks that may exist in the Company’s compensation plans and the factors that mitigate against the plans creating material risks to the Company. After considering the results of the review, the Compensation Committee believes that the risks arising from our compensation policies and practices for our employees are not likely to have a material adverse effect on the Company. The Compensation Committee further concluded that the mix and design of the short-term and long-term elements of executive compensation provides appropriate incentives to executives while mitigating excessive risk-taking.

The provisions within our overall executive compensation program that mitigate against risk-taking include:

We believe that the base salary levels of our executives mitigate excessive risk-taking behavior by providing reasonable predictability in the level of income earned by each executive and alleviating pressure on executives to focus exclusively on stock price performance to the detriment of other important business metrics. The performance measures used for both short-term and long-term incentives are intended to be challenging yet attainable, so that it is more likely than not that the executives will earn all or a substantial portion of their target bonus annually and long-term incentives over time. The Compensation Committee believes that extraordinary performance warrants a higher payout on both short-term and long-term performance-based awards but with a cap of 200% of targeted cash bonus or equity compensation, as the case may be, which further mitigates the likelihood that our executives will take excessive risks.

The financial metrics used for fiscal year 2020 short-term cash incentives were net sales, non-GAAP EBITDAS, and, in the case of division and region presidents, budgeted non-GAAP operating income for the applicable division or region. For all executives, Company net sales and non-GAAP EBITDAS results were also required to meet or exceed fiscal year 2019 results for any payout of cash awards to occur. Long-term incentives for fiscal year 2020 consisted of time-based RSUs vesting over three years and performance-related RSUs based on a three-year relative TSR performance criterion, equally weighted. For a more detailed description of the performance measures used in our compensation plan, see “How the Compensation Committee Chose Amounts and Formulas for Each Element” section. Therefore, executives always have a significant amount of value at stake through unvested awards that could decrease significantly in value if our business is not managed for the long term. The Compensation Committee further retains discretion to reduce or not pay awards under these plans due to a NEO’s misconduct or poor performance.

How the Compensation Committee Chose Amounts and Formulas for Each Element

Base Salary. Currently, the Compensation Committee approves the base salaries of all NEOs; however, the base salary of Mr. Diker, who provides services to the Company on a part time basis, is also subject to approval by the Compensation Committee in consultation with the independent members of the Board.

Base salary increases for executives, as applicable, were made effective as of December 1, 2019 as compensation in lieu of forfeited perquisites which were discontinued on the same date. Additional base salary increases (i.e., merit increases) were not provided in fiscal year 2020.

In response to business challenges resulting from the COVID-19 pandemic, the Company also implemented multiple cash-preserving actions, including temporary reductions of pay, or temporary suspensions of pay, as the case may be, across our senior corporate executive team. Additional information about the individual actions taken can be found in the footnotes of the Summary Compensation Table.

The base salary history of NEOs during fiscal year 2020 is as follows:

(1) Per his offer letter upon being appointed as President and Chief Executive Officer in March of 2019, Mr. Fotiades’ base salary was $850,000. As previously disclosed, Mr. Fotiades voluntarily reduced that base salary by 50% for fiscal year 2019 only.

(2) Mr. Clifford was promoted to President and Chief Operating Officer effective August 3, 2020 (in fiscal year 2021) and received a promotion-based annual salary increase to $700,000 effective on that date.

Cash Bonuses. Our NEOs (other than Mr. Diker) are eligible to receive cash bonus awards based on the Company’s achievement of performance targets for each fiscal year ending July 31. Mr. Diker receives a fixed cash bonus award approved at the discretion of the Compensation Committee.

Though when hired, Mr. Fotiades was eligible for an annual cash bonus at a target level of 100% of his base salary, he, in an effort to support supplementary compensation incentives for other executives and employees, requested that the Compensation Committee not award him a cash bonus for fiscal year 2019, effective for fiscal year 2019 only. Likewise, Mr. Diker’s bonus was capped at $50,000, as compared to the $150,000 that had been awarded for the past four years.

Subsequently at the start of fiscal year 2020, Mr. Fotiades requested that his bonus target be removed entirely, effective for fiscal year 2020 only, as a measure to support the financial performance of the Company. Likewise to support the financial performance of the Company, Mr. Diker’s fixed cash bonus award target was reduced by half, to $75,000, for fiscal year 2020 only.

For fiscal year 2020, the target incentive awards, established as a percentage of base salary of the NEO as of the fiscal year end, and as a fixed dollar amount in the case of Mr. Diker, were set by the Compensation Committee as set forth below.

During the first quarter of fiscal year 2020, the Compensation Committee chose net sales and non-GAAP EBITDAS, equally weighted, as the performance metrics for the target bonuses payable to NEOs for such fiscal year, to maintain a focus on increasing stockholder value and driving superior financial performance. As mentioned above, this cash incentive plan was also subject to a minimum threshold of meeting or exceeding prior year achievement of the same metrics. The Compensation Committee believes net sales and non-GAAP EBITDAS are key metrics in measuring the Company’s success from both a growth and profitability perspective. The performance target for these metrics for fiscal year 2020 were annual net sales of $1,179.3 million and non-GAAP EBITDAS of $230.1 million. The net sales target excludes certain acquisitions not set forth in the Company’s operating plan as well as the impact of foreign currency fluctuations relative to the budget. The non-GAAP EBITDAS requirement was determined on a non-GAAP basis in a manner consistent with both the Company’s non-GAAP reporting of operating results and the principles set forth by the Compensation Committee. Specifically, the non-GAAP EBITDAS metric is calculated based on the Company’s reported adjusted EBITDAS, after further excluding any losses reported on the disposal of fixed assets. Based on achievement of the applicable financial metrics, bonus payouts for each weighted metric were to be adjusted as follows:

For fiscal year 2020, Cantel achieved $1,016.0 million in net sales, or 86% of target, when calculated according to the criteria set forth above. Because the minimum net sales threshold was not met, there was no payout for the applicable portion of executive bonuses. For fiscal year 2020, the Company achieved $176.7 million in non-GAAP EBITDAS, or 77% of target, when calculated according to the criteria set forth above.

Because the minimum non-GAAP EBITDAS threshold was not met, there was no payout for the applicable portion of executive bonuses. In summary, there was no payout of cash bonuses for performance in fiscal year 2020.

Equity Awards. NEOs (other than Mr. Diker) are eligible to receive annual equity awards for each fiscal year. Mr. Diker receives equity awards at the discretion of the Compensation Committee. Target incentive awards expressed as a percentage are typically calculated based on an executive’s estimated base salary on the last date of the applicable fiscal year (i.e., July 31, 2020, for fiscal year 2020). For fiscal year 2020 only, the Company used this salary basis, less any adjustment made in lieu of eliminated perquisites, for purposes of final award calculations since this value would historically not have been considered in this calculation.

For fiscal year 2020, the Compensation Committee continued its practice of granting long-term equity awards at the beginning of the fiscal year with 50% of such awards to key executives being performance-related. With the advice of FW Cook, the Compensation Committee determined that for fiscal year 2020 executive compensation, 50% of the equity awards would consist of time-based RSUs vesting over 3 years and 50% of the equity awards would be performance-related RSUs based on a three-year relative TSR performance criterion. The inclusion of the performance-based RSUs into our long-term incentive program is designed to (i) continue the performance orientation of our program, (ii) provide incentives based on multiple measures of performance (i.e., in addition to net sales and non-GAAP EBITDAS, which are used in determining annual cash bonus awards) and (iii) provide additional upside potential (or downside exposure) to executives in the event high levels of performance (or low levels of performance) are achieved, without increasing target levels of compensation.

Based on the foregoing, the Compensation Committee established the following payment percentages or amounts for the current NEOs and awarded the equity grants indicated for fiscal year 2020:

The fiscal year 2020 TSR-based RSUs, granted in October 2019, are subject to adjustment based on Cantel’s TSR performance as compared to the constituents of the S&P Healthcare Equipment Index, for the time period from August 1, 2019 through July 31, 2022, according to the following table:

Prior Year Incentive Results. Messrs. Diker, Clifford and Yellin received TSR-based RSUs in October 2017 tied to Cantel’s relative TSR, as compared to the constituents of the S&P Healthcare Index, for the time period from August 1, 2017 through July 31, 2020, with vesting subject to adjustment based on the same table used for our October 2019 TSR-based RSUs grant. Our actual relative TSR result for the three-year period ending July 31, 2020 was the 12^th percentile, which is below the minimum achievement threshold. As a result, a payout percentage of zero was applied to each individual’s target RSUs and no awards were vested, as shown in the following table:

Post-Retirement and Other Benefits

On July 3, 2019, the Company adopted an Executive Severance and Change in Control Plan, which was amended on September 23, 2019 and further amended on September 24, 2020 (the “Executive Severance Plan”). The Executive Severance Plan provides severance and benefits to eligible key employees of the Company and certain subsidiaries of the Company, including the NEOs currently employed by the Company, in connection with certain terminations of employment. The implementation of this plan is representative of the ongoing modernization efforts of the Compensation Committee and management team of the Company.

The Compensation Committee believes that post-termination benefits are an important aspect of an executive compensation program because they allow the Company to better recruit and retain executive officers by offering competitive compensation packages. Such benefits also allow the executive officers to focus on performance of their duties and eliminate distractions related to job security concerns. The severance plan also provides benefits in the event of a change in control of the Company to further align the interests of the executive with those of the stockholders. These arrangements are primarily intended to maintain the executive’s motivation to consummate the sale of the Company in circumstances where such event will maximize stockholder value, notwithstanding that such transaction may result in the executive’s loss of continued employment with the Company. We believe a “double trigger” requiring actual termination following a change of control rather than simply awarding amounts in the event of a change of control best aligns the NEOs’ interests by encouraging them to continue to perform their duties adequately rather than simply receiving an award for completing a transaction. Upon a change in control of the Company, although an executive may be subject to certain excise taxes pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (the Code), we have not agreed to reimburse any executive for any such taxes.

We believe that the severance benefits are reasonable and appropriate for our NEOs in light of the anticipated time it takes high-level executives to secure new positions with responsibilities and compensation that are commensurate with their experience. We also believe that the higher severance formulas for our CEO and COO are justified and needed in order to attract and retain the individuals we believe are best suited for the offices. Our CEO and COO are the individuals that the public and our stockholders most closely identify as the face of the Company. They have the greatest impact on our success, and face the greatest personal risks when the Company takes risks. We do not include “gross-up” provisions in the severance plan. See “Post-Termination Benefits and Change in Control” section for a more detailed description of our severance plan.

Based on market data provided by and reviewed with FW Cook in fiscal year 2019, the Compensation Committee made a decision to further modernize our executive compensation program by removing executive perquisites, which the Committee deemed not to be market practice. Effective December 1, 2019, which was within Cantel’s fiscal year 2020, Cantel discontinued all executive perquisites for NEOs (other than Mr. Diker, who did not previously receive such perquisites): (i) term life insurance equal to one years’ base salary, (ii) a car allowance equal to $750 a month plus related expenses, (iii) an executive physical and (iv) a $7,000 allowance for disability insurance or long term care insurance. Similarly, in the case of Mr. Diker, we discontinued the fixed $5,000 monthly amount for office expenses as of December 1, 2019. All NEOs, commensurate with other employees of the Company, are still provided a 401(k) plan match. In lieu of the eliminated perquisites, Cantel provided a one-time increase to base salaries in an amount commensurate with the estimated value of the eliminated perquisites, for each impacted executive except Mr. Fotiades and Mr. Diker. As part of this decision, the Committee also decided to offset the aforementioned base salary increases by not providing any additional base salary increases (i.e., merit increases) to the impacted executives as part of the fiscal year 2020 executive compensation setting or any standard base salary increases for subsequent years, as has been customary to provide in the past.

Say-on-Pay Vote Response

In evaluating our compensation process for fiscal year 2020, our Compensation Committee generally considered the results of the advisory vote of our stockholders on the compensation of the executive officers named in our last proxy statement related to our prior annual meeting of stockholders. Our Compensation Committee noted that approximately 99% of votes cast approved of the compensation of those executive officers as described in our last proxy statement. Our Compensation Committee considered these voting results as supportive of the Compensation Committee’s general executive compensation practices.

Tax Deductibility of Compensation

Section 162(m) of the Code generally disallows a federal income tax deduction to public companies for compensation in excess of $1,000,000 paid in any year to the principal executive officer (in our case, the CEO) and certain other executive officers. An exception existed with respect to compensation paid pursuant to a plan that is performance related, non-discretionary and has been approved by stockholders.

The Tax Cuts and Jobs Act of 2017 (Tax Reform) modified Section 162(m) in two important respects. First, it modified the group of individuals to whom payment of compensation in excess of $1,000,000 is not deductible to include the principal executive officer, the principal financial officer and the three other most highly compensated executive officers, and provided that each person covered by Section 162(m) of the Code for a particular year after 2016 will remain subject to this limit in subsequent years, even if not included in that group for the year. Second, it eliminated the performance based exemption from Section 162(m) of the Code. As a result, it is expected that certain of our compensation arrangements will be non-deductible when total compensation exceeds $1,000,000, except with respect to certain historical awards that meet the transition rules under Tax Reform.

There can be no assurance that any compensation awarded will be fully deductible under all circumstances. Also, with the goal of providing a compensation program that enhances stockholder value, the Compensation Committee reserves flexibility to approve compensation arrangements that are not fully tax deductible by the Company.