Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers
On February 19, 2008, the Compensation Committee (the Committee) of the Board
of Directors (the Board) of OraSure Technologies, Inc. (the Company) approved the terms of the 2008 Self-Funding Management Incentive Plan (the 2008 MIP) and the 2008 Stock Grant Guidelines (the 2008 Stock
Guidelines) for the Companys senior management, which includes the Companys principal executive officer, principal financial officer, and named executive officers. Based on the Committees recommendation, the terms of both the
2008 MIP and the 2008 Stock Guidelines were approved by the Board on February 19, 2008.
2008 Self-Funding Management Incentive Plan.
The purpose of the 2008 MIP is to provide the Companys senior management with the opportunity to receive incentive cash bonuses based on both the
Companys and each participants performance during 2008.
Pursuant to the 2008 MIP, incentive cash bonuses may be paid out of a cash pool to be
funded based on the Companys achievement of certain financial and strategic objectives. For 2008, specific financial objectives were established for revenues and operating income. In addition, several strategic objectives were incorporated
into the bonus pool funding determination. The objectives for revenues and operating income, and the strategic objectives as a group, will be weighted at 30%, 30% and 40%, respectively, in determining the pool amount.
Funding of the Bonus Pool
With respect to the revenue and
operating income objectives, Threshold, Target and Maximum performance levels have been established for 2008. With respect to the strategic objectives, Threshold and Target performance levels have been established for 2008. The Committee and Board
will retain discretion to determine Maximum performance levels for each of the strategic objectives.
If the Company meets the Target performance levels
for revenues, operating income and the strategic objectives, then the pool would be funded at 100% of the aggregate target bonuses for all participants, which currently is approximately $2.0 million. If only the Threshold objectives are achieved,
the pool would be funded at 50% of those aggregate target bonuses or approximately $1.0 million, and if the Maximum objectives are achieved, the pool would be funded at 150% of those aggregate target bonuses or approximately $3.0 million. A pro-rata
adjustment to the amount of funding for the pool will be made where a specific performance level falls in between the Threshold, Target and Maximum amounts. To the extent a particular performance level falls below Threshold, there would be no
funding for that particular objective. The Board may, in its sole discretion, approve a total pool funding of up to 200% of the aggregate target bonuses if it determines that the Company has achieved a breakthrough
performance by substantially exceeding the objectives for 2008. The amount of bonus pool funding will be adjusted to reflect the aggregate target bonuses for
individuals who are participants in the 2008 MIP at the time the bonuses are awarded.
Payments from the Bonus Pool
Once the amount of pool funding has been determined, specific payments from the pool to the Companys senior management will depend on an evaluation of the
participants achievement of individual performance objectives for 2008. Bonus payments will be based on the target bonus amounts set forth below, which are expressed as a percentage of base salary. The following targets were established with
input from Radford Surveys & Consulting (Radford Consulting), a business unit of Aon and an independent executive compensation consultant, and are similar to bonus targets offered at medical diagnostic and healthcare companies
comparable to the Company.
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Title
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Target Payouts
(% of Base Salary)
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Chief Executive Officer
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60%
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Chief Operating Officer/Chief Financial Officer
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50%
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Executive Vice President
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40%
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Senior Vice President
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35%
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Individual performance objectives for 2008 are derived from the Companys 2008 strategic objectives
concerning financial performance, strategic planning, research and development, business development, regulatory affairs and quality control, manufacturing, engineering, information systems, sales and marketing, human resources, investor relations
matters and/or other objectives approved by the Board or the Committee.
Individual bonus awards reflect a weighted average measurement of each
participants achievement of his or her individual performance objectives. A rating of Meets Expectations means that a participant has generally met his or her individual performance objectives for the year and would be eligible to
receive up to 100% of his or her target bonus, depending on the size of the bonus pool. A rating of Exceeds Expectations means that a participant has exceeded his or her individual performance objectives and would be eligible to receive
up to 125% of his or her target bonus. Finally, a rating of Outstanding means that a participant has substantially exceeded his or her individual performance objectives and would be eligible to receive up to 150% of his or her target
bonus. Where a participant is rated below Meets Expectations, no bonus would normally be payable unless the Board or Committee determines a bonus is nevertheless warranted in their discretion.
Participants must be employed by the Company as of December 31, 2008 and at the time of the bonus award in order to participate in the 2008 MIP. Awards may be
adjusted on a pro rata basis as determined in the Committees discretion to the extent any participant is employed for only a portion of the year. The Chief Executive Officer will recommend individual awards for all participants (other than
himself) for approval by the Committee based on an assessment of each individuals performance against his or her applicable performance objectives. The Committee shall recommend for Board approval any bonus award for the Chief Executive
Officer based on an assessment of his performance against his individual performance objectives for 2008.
The Committee and the Board shall have the right in their sole discretion to reject any or all of the recommended bonus
awards or approve different bonus awards, even if the bonus pool has been funded and any and all applicable performance criteria have been satisfied, based on the business conditions of the Company or other factors deemed relevant by the Committee
or Board.
2008 Stock Guidelines.
The purpose
of the 2008 Stock Guidelines is to establish a framework for granting stock awards in order to reward performance by the Companys senior management against each participants individual performance objectives for 2008.
Awards under the 2008 Stock Guidelines will depend on a participants position in the Company and achievement of individual performance objectives for 2008. Each
participants individual performance will be evaluated against his or her individual performance objectives to determine if that individual Meets Expectations, Exceeds Expectations or has performed in an Outstanding manner. Set forth below are
the range of annual award targets for 2008 (expressed in number of shares) based on the participants position and performance evaluation:
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Meets Expectations
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Exceeds Expectations
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Outstanding
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Restricted
Stock
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Stock
Options
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Restricted
Stock
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Stock
Options
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Restricted
Stock
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Stock
Options
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Level I - CEO
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53,620 Shs.
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90,990 Shs.
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67,020 Shs.
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113,740 Shs.
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105,910 Shs.
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179,740 Shs.
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Level IA COO/CFO
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43,440 Shs.
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73,720 Shs.
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54,160 Shs.
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91,910 Shs.
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64,880 Shs.
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110,110 Shs.
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Level II - EVP
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21,450 Shs.
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36,400 Shs.
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26,820 Shs.
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45,490 Shs.
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32,170 Shs.
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54,610 Shs.
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Level III - SVP
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14,300 Shs.
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24,260 Shs.
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17,870 Shs.
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30,350 Shs.
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21,450 Shs.
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36,380 Shs.
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In prior years, the stock guidelines have reflected a split of 66% restricted stock and 34% stock options for each
potential award. The Committee determined that the split for awards under the 2008 Stock Guidelines should be changed to 60% restricted stock and 40% stock options.
In developing the 2008 Stock Guidelines, the dollar amounts set forth above were established at levels which the Committee believes represent an appropriate value for long-term incentive
compensation for each executive. These values were established based on an assessment of compensation levels for executives at comparable medical diagnostic
and healthcare companies provided by Radford Consulting.
Participants must be employed by the Company on December 31, 2008 and at the time of grant
in order to receive a stock award under the 2008 Stock Guidelines. Awards may be adjusted on a pro rata basis as determined in the Committees discretion to the extent any employee is employed for only a portion of a year. The Chief Executive
Officer will recommend individual awards for all participants (other than himself) to the Committee based on an assessment of each individuals performance against his or her applicable performance objectives for 2008. The Committee will
evaluate the performance of the Chief Executive Officer and recommend an appropriate award in accordance with the 2008 Stock Guidelines and such evaluation for Board approval. The Committee and Board may approve or disapprove any recommended award
in whole or in part and may approve awards that differ from the amounts indicated under the 2008 Stock Guidelines, in its sole discretion.