Any individual who was covered by the guidelines at the time of adoption or who becomes
subject to the guidelines following adoption is required to meet the guidelines within five years. Any individual already subject to the guidelines who becomes subject to a higher ownership requirement, due to a promotion, a further amendment to the
guidelines or an increase in compensation, is required to meet the new ownership requirement
within five years following the effective date of promotion, change in compensation or guideline amendment. In determining whether an individual meets the required ownership requirement, shares
owned directly or indirectly, restricted stock (including both time and performance vested) and shares deferred under our deferred compensation plan will be counted. Compliance will be determined as of December 31 of each fiscal year. The
guidelines also require each covered individual to retain at least 50% of the net shares acquired upon the exercise of stock options and the vesting of restricted stock until the individuals holdings of Common Stock equal or exceed the
applicable ownership requirement. As of December 31, 2015, all covered officers and non-employee Directors were in compliance with the stock ownership guidelines.
Compensation Committee Report
The information contained in this report shall not be deemed to be soliciting material or filed for
purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. This report shall not be deemed to be
incorporated by reference into any document filed under the Securities Act or the
Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing.
The Compensation Committee of OraSure Technologies, Inc. has reviewed and discussed with the Companys management the
Section entitled, Compensation Discussion and Analysis, contained in this Proxy Statement. Based on that review and discussion, the Compensation Committee recommended to the Companys Board of Directors that the foregoing
Compensation Discussion and Analysis be included in the Companys 2015 Annual Report on Form 10-K Report and Proxy Statement for the 2016 Annual Meeting of Stockholders.
COMPENSATION COMMITTEE:
Stephen S. Tang, Ph.D., Chairman
Eamonn P. Hobbs
Roger L. Pringle
Ronny B. Lancaster
Douglas
G. Watson
March 29, 2016
24
The table below provides information about the executive officers of the Company as of March 24,
2016. Officers of the Company hold office at the discretion of the Board.
|
|
|
|
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Name
|
|
Age
|
|
Position
|
Douglas A. Michels
|
|
59
|
|
President and Chief Executive Officer
|
Ronald H. Spair
|
|
60
|
|
Chief Financial Officer and Chief Operating Officer
|
Anthony Zezzo II
|
|
62
|
|
Executive Vice President, Marketing and Sales
|
Jack E. Jerrett
|
|
57
|
|
Senior Vice President, General Counsel and Secretary
|
Mark L. Kuna
|
|
53
|
|
Senior Vice President, Finance, Controller and Assistant Secretary
|
|
|
|
|
|
Douglas A. Michels has been the Companys President and Chief Executive Officer since June 2004. Prior to that,
Mr. Michels served as Group Vice President, Global Marketing of Ortho-Clinical Diagnostics, President of Ortho-Clinical Diagnostics International, and President of Johnson & Johnson Healthcare Systems, Inc. Earlier in his career,
Mr. Michels held various sales and marketing positions of increasing responsibility within the Johnson & Johnson family of companies and with the Diagnostics Division of Abbott Laboratories. Mr. Michels received a B.S. degree in
Public Health Administration from the University of Illinois and an M.B.A. from Rutgers University. Mr. Michels also serves on the Presidential Advisory Council on HIV/AIDS (PACHA) and on the board of directors of West Pharmaceutical Services,
Inc.
|
|
|
|
|
|
Ronald H. Spair has been the Companys Chief Financial Officer and Chief Operating Officer since September 2006 and
served as Executive Vice President and Chief Financial Officer since November 2001. Prior to that time, Mr. Spair served as Chief Financial Officer for various companies in the pharmaceutical industry, including Delsys Pharmaceutical
Corporation, SuperGen, Inc., Sparta Pharmaceuticals, Inc. and Environgen, Inc. Mr. Spair received both his B.S. in Accounting and M.B.A. from Rider College. He is also a licensed Certified Public Accountant, a Chartered Global Management
Accountant, a member of the New Jersey Society of Certified Public Accountants and the American Institute of Certified Public Accountants, and serves on the boards of Fulton Financial Corporation and Pennsylvania Bio.
|
25
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Anthony Zezzo II has been the Companys Executive
Vice President, Marketing and Sales since January 2011. From 2004 to December 2010, Mr. Zezzo was Vice President, North American Sales and Marketing at the Ortho-Clinical Diagnostics Division of Johnson & Johnson. Prior to that time,
Mr. Zezzo held a series of sales and marketing positions of increasing responsibility within Johnson & Johnson. Mr. Zezzo received his B.A. in Political Science from Grove City College.
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|
Jack E. Jerrett has been the Companys Senior Vice
President and General Counsel since February 2003 and served as Vice President and General Counsel since November 2000. He has also served as the Companys Secretary since February 2001. Prior to joining the Company, Mr. Jerrett worked as
an Associate at Morgan, Lewis & Bockius and held positions of increasing legal responsibilities with companies in the transportation and energy industries. Mr. Jerrett received his B.S. in Accounting from Villanova University and his
J.D. from the Villanova University School of Law. He is a member of the Pennsylvania Bar and the American and Pennsylvania Bar Associations.
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Mark L. Kuna has been the Companys Senior Vice
President, Finance and Controller since September 2006, and served as Vice President and Controller since February 2003 and as Controller since February 2001. Mr. Kuna has also served as the Companys Assistant Secretary since May 2002 and
provided accounting and financial analysis support since joining the Company in October 2000. Prior to that time, Mr. Kuna served as an accountant with Deloitte and Touche and held senior accounting and management positions with companies in
the petrochemical, manufacturing, and telecommunications industries. Mr. Kuna received his B.S. in Accounting from the University of Scranton and is a licensed Certified Public Accountant, a Chartered Global Management Accountant, and a member
of the Pennsylvania and American Institutes of Certified Public Accountants.
|
Transactions With Related Persons
Since January 1, 2015, there have been no transactions
with related persons that would require disclosure in this Proxy Statement. The Audit Committee is required to review and approve in advance all transactions with related persons involving the Company. The Audit Committee may approve a related party
transaction if the transaction is on terms comparable to those that could be obtained in arms length dealings with an unrelated third party. The Audit Committee also reviews any public disclosures of a related party transaction contained in
our SEC filings. These responsibilities are described in the Audit Committees charter, a copy of which is available on our website at
www.orasure.com
.
26
Information regarding employment and severance agreements between our executive
officers and the Company is set forth in the Section entitled, Employment Agreements and Potential Payments Upon Termination or Change of Control, in this Proxy Statement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the
Exchange Act requires that our executive officers, Directors and persons who own more than ten percent of our Common Stock (collectively, Reporting Persons) file reports of ownership and changes in ownership with the SEC. Reporting
Persons are required by the SECs regulations to furnish us with copies of all Section 16(a) forms they file.
As a matter of practice, our administrative staff assists each of the Reporting Persons who are employees and Directors of the
Company in preparing initial reports of ownership and reports of changes in beneficial ownership and filing such reports with the SEC and the NASDAQ. Based solely on a review of the copies of forms filed by or on behalf of the Reporting Persons and
on written representations (if any) from each of the Reporting Persons, we believe that all Reporting Persons complied on a timely basis with all applicable filing requirements with respect to the 2015 fiscal year.
27
Compensation
Discussion and Analysis - Table of Contents
Compensation Tables Table of Contents
28
Compensation
Discussion and Analysis
Overview
This Compensation Discussion and Analysis, or CD&A, describes the material elements of the compensation of our NEOs and
describes the objectives and principals underlying the Companys executive compensation program, the compensation decisions we have recently made under this program and the factors we considered in making these decisions.
Our NEOs for 2015 who are covered in this CD&A include:
|
|
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Name
|
|
Position during 2015
|
Douglas A. Michels
|
|
President and Chief Executive Officer
|
Ronald H. Spair
|
|
Chief Financial Officer and Chief Operating Officer
|
Anthony Zezzo, II
|
|
Executive Vice President, Marketing and Sales
|
Jack E. Jerrett
|
|
Senior Vice President, General Counsel and Secretary
|
Mark L. Kuna
|
|
Senior Vice President, Finance, Controller and Assistant Secretary
|
Our Performance in 2015
Our financial performance for 2015 represented another year of substantial improvement over the prior- year period,
highlighted by record revenues and full-year profitability. The following charts and summary describe our consolidated financial performance (expressed in thousands) and several of the principal contributors to the growth we achieved.
|
2015 was another year of record consolidated net revenues and is the first full year of profitability since 2007. Our consolidated net
revenues for 2015 were $119.7 million, a 12% increase over 2014. Our 2015 consolidated net income was $8.2 million, or $0.14 per share, an improvement of $12.8 million over our 2014 net loss.
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29
2015 Business Highlights in Detail
|
Consolidated net revenues were $119.7 million (12% increase over
2014), a new record level for our Company.
Revenue growth and lower operating expenses resulted in four
consecutive quarters of profitability and consolidated net income of $8.2 million for 2015. This represents a $12.8 million improvement from the ($4.6) million net loss reported for 2014.
We generated $15.8 million in cash from operations during 2015.
Aggregate cash and cash equivalents totaled $101 million at
year-end.
Gross margin improved to 67% in 2015, compared to 63% in 2014.
Molecular collection systems revenues of $29.9 million increased
26% over 2014.
OraQuick
®
HCV
product revenues reached an all-time record high of $11.4 million, representing a 57% increase over 2014. We reported four quarters of sequential HCV revenue growth in 2015.
Net revenues related to our HCV business (i.e. product sales plus
AbbVie exclusivity payments) totaled $24.9 million, a 68% improvement over 2014.
Net revenues from our newest business lines (i.e. DNA Genotek,
HCV-related, HIV OTC and Ebola) totaled $65.8 million, or 55%, of consolidated net revenues for 2015.
We obtained FDA Emergency Use Authorization for our OraQuick
®
rapid Ebola test and secured up to $10.8 million in federal funding for clinical development of this product during 2015.
Initial Ebola product sales totaled $2.3 million during 2015.
We secured initial sales of our new microbiome product and service
offerings in 2015.
|
NEO Compensation At a Glance 2015
Compensation for the NEOs in 2015 was directly or indirectly tied to the performance of both the executives and the Company,
resulting in the following actions:
|
|
|
Base Salary
:
The base salaries paid to our management (including the NEOs) during 2015 increased 2.8% on average, with
Mr. Michels receiving a 2.75% increase for the year. These adjustments were based on the performance of each executive and the Company during 2014, the results of a competitive marketplace assessment prepared by Pearl Meyer & Partners,
an independent compensation consultant engaged by the Compensation Committee for that purpose, and our Company-wide salary merit increase budget of 3.0%.
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|
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|
|
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|
NEO
|
|
2014 Performance Rating
|
|
2014 Salary
|
|
2015 Salary
|
|
|
Change (%)
|
Douglas A. Michels
|
|
N/A
|
|
$580,920
|
|
|
$596,895
|
|
|
2.75%
|
Ronald H. Spair
|
|
N/A
|
|
$456,290
|
|
$
|
468,838
|
|
|
2.75%
|
Anthony Zezzo II
|
|
Meets
|
|
$376,480
|
|
|
$384,010
|
|
|
2.00%
|
Jack E. Jerrett
|
|
Outstanding
|
|
$328,000
|
|
$
|
344,400
|
|
|
5.00%
|
Mark L. Kuna
|
|
Meets/Exceeds
|
|
$262,135
|
|
|
$269,344
|
|
|
2.75%
|
|
|
|
Annual Incentive Bonuses
:
Incentive cash bonus awards for 2015 performance ranged from 99.6% to 124.5% of target for the NEOs and for
Mr. Michels specifically was 121.8% of his target. The bonus amounts equaled or exceeded the applicable targets for each NEO primarily due to the strong financial performance of the Company during 2015, as described under the 2015
Business Highlights in Detail Section above. In approving these bonus awards, the Board recognized the importance of broader Company performance such as total stockholder return (TSR) and considered the fact that our TSR
|
30
|
declined in 2015. Bonus payments at or above target were approved pursuant to the formula in our bonus plan because of the Boards belief that continuing annual financial improvement, such
as that achieved in 2015, should be rewarded as a critical factor for delivering value to our stockholders.
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Actual 2015 Bonus Payments
|
|
|
NEO
|
|
2015
Performance
Rating
|
|
2015 Target
(% Salary)
|
|
($)
|
|
(% Salary)
|
|
(% Target)
|
|
|
Douglas A.
Michels
|
|
N/A
|
|
70%
|
|
$508,787
|
|
85.2%
|
|
121.8%
|
|
|
Ronald H.
Spair
|
|
N/A
|
|
50%
|
|
$285,452
|
|
60.9%
|
|
121.8%
|
|
|
Anthony Zezzo
II
|
|
Meets
|
|
40%
|
|
$153,036
|
|
39.9%
|
|
99.6%
|
|
|
Jack E.
Jerrett
|
|
Meets
|
|
35%
|
|
$140,110
|
|
40.7%
|
|
116.2%
|
|
|
Mark L. Kuna
|
|
Meets/Exceeds
|
|
35%
|
|
$117,402
|
|
43.6%
|
|
124.5%
|
|
|
|
|
|
Long-Term Incentive Awards
:
Incentive equity awards to NEOs in February 2015 were earned based on each executives performance
during 2014 and ranged from 80% to 240% of the executives base salary. The value of Mr. Michels award was 240% of his salary. Mr. Michels award was toward the upper end of the range for his position because of the strong
financial performance and the significant positive accomplishments during 2014, as described under the 2015 Base Salaries Section on page 46. The mix for each award was 60% stock options and 40% restricted stock. As described in greater
detail below, the equity incentive awards granted to the NEOs during 2015 are time-vested, i.e., they vest subject to the NEOs continuing employment with the Company. The 60% portion of these awards consisting of stock options provides no value to
the recipient unless our stock price appreciates after the grant date.
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|
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2015 Awards
|
NEO
|
|
2014
Performance
Rating
|
|
Target Range
(% Salary)
|
|
($)
|
|
(% Salary)
|
Douglas A. Michels
|
|
N/A
|
|
150% - 250%
|
|
$1,394,208
|
|
240%
|
Ronald H. Spair
|
|
N/A
|
|
90% - 160%
|
|
$ 661,621
|
|
145%
|
Anthony Zezzo II
|
|
Meets
|
|
75% - 125%
|
|
$ 338,832
|
|
90%
|
Jack E. Jerrett
|
|
Outstanding
|
|
55% - 95%
|
|
$ 295,200
|
|
90%
|
Mark L.
Kuna
|
|
Meets/Exceeds
|
|
55% - 95%
|
|
$ 209,708
|
|
80%
|
As described further in the Compensation Changes section of the
CD&A, below, beginning with the equity incentive awards made in February 2016 for performance during 2015, executives are now receiving equity awards that are 50% performance-vested and 50% time-vested. The decision to structure a substantial
portion of our executives equity compensation as performance-vested awards was made in response to stockholder feedback and further strengthens the link between performance and executive compensation.
Additional information regarding NEO compensation for 2015 is provided below in this CD&A and in the
accompanying tables, including the Summary Compensation Table (SCT) set forth on page 58. This information demonstrates the reasonableness of the compensation paid to executives when compared to our improved financial performance during
2015. For example, as shown in the SCT, the aggregate compensation for Messrs. Michels and Spair in 2015 increased a modest 2% and 0.8%, respectively, when compared to 2014. This level of increase is fully supported by the 12% revenue increase in
2015 and improvement from a ($4.6) million net loss in 2014 to $8.2 million in net income for 2015.
31
Pay for Performance
We follow a pay-for-performance approach in compensating executives. Our program pays executives for performance by rewarding
the achievement of predetermined financial and other performance objectives.
A significant portion of each NEOs
compensation is paid out in variable and long-term compensation that is intended to align with the long-term interests of our stockholders. Both our annual and long-term compensation are tied to the Companys overall performance in a variety of
ways, including our financial results and share price performance.
An important feature of our compensation program is the use of performance targets to
incentivize management to achieve improving financial results on a year-to-year basis. We believe continuous revenue growth and sustained and increasing profitability are key factors for increasing the price of our Common Stock and for delivering
long-term value for our stockholders.
The use of performance targets to drive growth is clearly illustrated by the annual
bonus plan established each year. As described further in this CD&A, annual financial objectives are selected in order to determine the amount of pool funding available to pay individual bonus awards each year. When establishing these
objectives, the Board and Compensation Committee generally select targets that, if achieved, will result in improved financial performance on an annual basis and that are consistent with our business plans. Set forth below are the Target performance
levels used to determine pool funding in our bonus plans for the three-year period 2013-2015. This provided an important incentive for the significantly improved financial performance over that period, as shown on page 29.
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|
|
|
|
|
|
Annual Bonus Plan Targets
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Consolidated Net Revenue
|
|
$
|
100.8.8
|
|
|
$
|
112.2
|
|
|
$
|
121.7
|
|
Operating (Loss)/Income
|
|
$
|
(24.5)
|
|
|
$
|
(13.6)
|
|
|
$
|
5.5
|
|
More recently, we issued annual equity awards to executives that consist of 50%
performance-vested restricted units and 50% time-vested restricted stock. The performance units will only vest if (i) the recipient remains employed by the Company for three years following the date of grant and (ii) the performance
criteria determined by the Committee and Board are met. The restricted stock piece of the award vests in equal annual installments over the three-year period following the grant date, subject to the recipients continued employment by the
Company.
32
For each award of performance units, one-half of that portion of the award shall
be earned based on the achievement of a compound annual growth rate (CAGR) target for consolidated product revenues for the three year period 2016-2018 and the remaining half shall be earned based on achievement of a one-year adjusted
earnings per share (EPS) target for the fiscal year 2016. The three-year product revenue CAGR target reflects a blending of projected growth taken from our internal long-range plan and growth rates contained in several published market
research growth forecasts for the medical diagnostics and molecular testing markets. The one-year EPS target represents the Companys net income as projected in our 2016 budget or operating plan. Recipients of the awards can increase the number
of shares they receive if we exceed these performance targets. If we achieve less than 80% of a performance target, the affected restricted units will not vest and the corresponding shares will not be received.
We believe the combination of the performance targets and three-year service period in these equity awards compliment the
short-term incentives in our annual bonus plans. In combination, we believe this approach will incentivize management to deliver substantially improved financial performance both on an annual basis and over a longer term period.
Realizable Pay vs. TSR
To ensure that we are adhering to a pay-for-performance approach, we evaluated the degree of alignment between our CEOs
total realizable pay versus total stockholder return (TSR) over the prior three fiscal years (2013-2015) relative to our compensation peer group (listed on page 43 of this Proxy Statement). We have adopted this approach to ensure our
compensation program is operating as intended and to respond to stockholder feedback we received on our executive compensation. The graph below shows the comparison of three-year TSR and realizable pay relative to our peer group. We
provide further detail regarding the companies in our compensation peer group in the Benchmarking section of this CD&A.
Realizable pay includes base salary, incentive cash bonus and all other cash compensation reported in the Summary Compensation
Table. Realizable pay also includes the value of equity awards using each companys closing stock price on December 31, 2015. Restricted stock awards are valued by multiplying the number of shares granted by the closing stock price on
December 31, 2015. Option awards are valued as the difference between the closing stock price on December 31, 2015 and the exercise price multiplied by the number of option shares granted during the period. An option award with an exercise
price greater than the closing stock price on December 31, 2015 is valued at $0.
33
As the graph indicates, our three-year TSR performance has been below median
(50%) over the measurement period. The realizable pay for our CEO, Mr. Michels, was also below median relative to the peer group, highlighting the strong link between pay and performance embedded in our compensation program.
Realizable Pay vs. SCT Compensation
As described further below, we believe long-term equity awards are a key incentive for our executives to drive long-term
growth. The Summary Compensation Table includes the estimated value of long-term incentive equity awards at the time of grant during each applicable year. However, the value of these awards that may be realizable by our executives will vary
depending on the Companys stock performance and often differs significantly from what is reported in the Summary Compensation Table.
Comparing the realizable value of long-term equity incentive awards with the values reported in the Summary Compensation Table
provides clarity in how compensation outcomes can be impacted by our performance. This comparison also shows the degree of alignment between our stock performance and the level of compensation provided to executives.
34
The table below shows the differences between the compensation reported in the
Summary Compensation Table , i.e. pay opportunity, and the value of realizable pay (RP), i.e. how much the same compensation opportunity is actually worth today, for the three year period 2013-2015 for our CEO,
Mr. Michels.
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|
|
Mr. Michels realizable pay for the three years 2013 2015 of $4.9 million is 31%
lower than his SCT compensation opportunity for the same period. This shows a strong link between pay and performance as our TSR over the three year period was below the expectations of the Board and stockholders at (10.3%).
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Pay vs. Other Company Measures of Performance
While TSR is a common measure of performance that is often used to evaluate a companys compensation practices, at our
stage of development we consider other performance measures to be, at times, more reflective of the success of our business. It is important to recognize that our TSR is extremely volatile, as evidenced by the substantial movements in our stock
price during the past several years. Specifically, in 2013 our stock price declined 12%, but rose 61% in 2014 and declined again by 36.5% in 2015. These price changes are not solely tied to our performance as shown by the decline in TSR from 2014 to
2015 even though we achieved record financial performance in both years with substantial growth and full year profitability in 2015.
As a result, our executive compensation does not follow a linear relationship with TSR. Rather, we have tried to align our
executive compensation with performance results that are part of our overall business strategy that we believe will drive stock price improvement and increased value for our stockholders over time. For example, in past years we have had a number of
first-of-their-kind achievements in the diagnostics field. Specifically, we developed and commercialized the first and only rapid HCV test in the U.S. along with the first ever rapid in-home HIV test. More recently, we entered into an
HCV co-promotion agreement with AbbVie, which, to our knowledge, is an unprecedented arrangement between a diagnostics company and a pharmaceutical firm. We successfully completed the acquisition of DNA Genotek in late 2011, providing us with an
entrance into the high growth molecular diagnostics field. This acquisition is now contributing double digit growth to our business and accounted for 24% of our 2015 consolidated net revenues. More recently, we made significant progress in
developing and commercializing a new rapid Ebola test. These achievements, and particularly contributions from our newest business lines (i.e., molecular collection systems, HCV-related, HIV-OTC and Ebola), are the primary reasons for our
profitability in 2015 and our overall strong and continually improving financial performance for the past two fiscal years.
When establishing and evaluating our executive compensation program generally, and performance-based incentive plans in
particular, we believe that TSR alone will not always immediately account for the value of our accomplishments and, in many cases, it may take time for the impact of our strategic and other accomplishments to be fully reflected in the value of our
stock. Thus, while obviously important, TSR is only one of several factors we consider in making compensation decisions for our executives.
35
Say on Pay Results in 2015 and Company Response
At our 2015 Annual Meeting, stockholders were asked to vote on an advisory (non-binding) basis on the compensation paid to our
NEOs for 2014. We obtained stockholder approval of our NEO compensation with approximately 54% of stockholder votes cast in favor of our say-on-pay or SOP resolution. In response to these results, we instituted an outreach effort to
contact certain of our major stockholders in order to understand their concerns regarding our compensation practices. We also contacted both ISS Proxy Advisory Services (ISS) and Glass Lewis & Co. (Glass Lewis), two
leading proxy advisory firms, in order to solicit their views on these issues. Several of our independent Directors participated in this outreach, including the Chairman of our Board, the Chairman of our Compensation Committee, the Chairman of our
Audit Committee and the Chairman of our Nominating and Corporate Governance Committee. Overall, we had conversations with stockholders who, in the aggregate, beneficially held approximately 22% of our outstanding Common Stock entitled to participate
in the 2015 SOP vote. This outreach effort was similar to the outreach efforts we implemented following the SOP votes at our 2013 and 2014 Annual Meetings.
As a general matter, the following input was provided by the stockholders we contacted during our latest outreach:
|
|
|
Acknowledged our compensation changes as
positive improvements and responsive to stockholder concerns.
|
Supported our adoption of performance-vesting
for 50% of long-term incentive equity awards.
|
Supported our enhanced stock ownership
guidelines.
|
Supported the elimination of excise tax gross up
from executive employment agreements and the change from modified single trigger severance to double trigger severance in CEOs employment agreement.
|
Encouraged the use of meaningful targets for
equity with performance vesting.
|
Acknowledged that TSR is only one relevant
performance measure.
|
Supported the use of financial and other
Company-specific performance targets other than TSR, over a multi-year period;
|
Encouraged the exclusion of the impact of stock
repurchases and acquisitions in determining if performance metrics are met.
|
Encouraged additional efforts to offset dilution
from annual equity awards.
|
Emphasized the need to create incentives for
increasing profitability through our compensation program.
|
Encouraged clear and detailed disclosure as to
how performance metrics are developed and how they will raise stockholder value.
|
Encouraged the Board to consider other governance changes, such as a declassified
board, majority voting, the right of stockholders to call special meetings, and reasonable proxy access.
|
In addition, the Compensation Committee engaged an independent compensation consultant, Pay
Governance, to assist in responding to the 2015 SOP vote. We believe our stockholder engagement was beneficial and the Board intends to continue ongoing dialogue with our stockholders to ensure our executive compensation programs are well understood
by all stakeholders.
Compensation Changes
In response to input from stockholders, the Compensation Committee and Board adopted a number of changes in 2015 to
specifically respond to stockholder concerns and better align our compensation program with performance. We believe these changes were the primary reason a majority of stockholders approved our SOP proposal at the 2015 Annual Meeting. As a result,
we concluded the best response to the latest stockholder input is to continue to implement these recent changes to our compensation program, particularly the adoption of 50%
36
performance-vested equity awards for executives which was implemented in early 2016 for performance during 2015. In addition, we decided to extend our stock buy-back program at the end of 2015
and early 2016 in direct response to concerns by stockholders regarding the dilutive effect of our annual equity awards to executives and non-employee Directors.
The following is a summary of these changes, along with our rationale for making them:
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Change
|
|
Old
|
|
New
|
|
Rationale
|
|
Effective
|
Performance-Vested Long-Term Incentive Equity Awards.
|
|
Awards consisted of 60% Stock Options and 40% Restricted Stock, all time-vested over three or four years.
|
|
Awards consist of 50% performance-vested restricted units and 50% time-vested restricted stock.
|
|
Directly
responds to stockholder input.
Enhances link between compensation and
longer-term performance.
Focuses executives on
long-term priorities.
Alignment with market practice.
|
|
2016 for 2015 performance year.
|
Changes to Executive Employment Agreements.
|
|
Contained excise tax gross up and modified single trigger change of control severance provisions. Adopted policy that new agreements will contain no
excise tax gross up and will provide for double trigger change of control severance.
|
|
CEO employment agreement amended to remove excise tax gross up and change modified single trigger to double trigger change of control
severance. Other NEO agreements amended to remove excise tax gross up.
|
|
Responds to
stockholder input.
Consistent with good governance practices.
|
|
2015
|
Enhanced Stock Ownership and Retention Guidelines.
|
|
CEO 2x salary
CFO/COO 1x salary
Other Executives None
|
|
CEO 6x salary
CFO/COO 2x salary
Other Executives 1x
salary.
|
|
Consistent
with good governance practices.
Supported by stockholders.
Strengthens alignment between executives and stockholders.
|
|
2015
|
Limit on Discretionary Bonus Pool Adjustments.
|
|
Compensation Committee and Board historically have had unlimited discretion to adjust bonus pool funding.
|
|
Discretionary adjustments will be limited to +/-10% of aggregate pool funding determined under applicable Incentive Plan
formula.
|
|
Responds to concerns about discretionary bonus awards and misalignment of pay and
performance.
Ensures bonus pool amount/payouts are predominately tied to
previously agreed performance goals
Allows for reasonable, but limited,
discretion to accommodate unforeseen circumstances.
|
|
2015 and 2016
|
37
|
|
|
|
|
|
|
|
|
Change
|
|
Old
|
|
New
|
|
Rationale
|
|
Effective
|
Extension of stock buyback program.
|
|
Buyback program originally authorized in 2008, with no active purchasing in recent years.
|
|
Buyback program extended in late 2015 to repurchase 1.2 million shares of common stock, which approximates shares used for annual
management and non-employee Director equity awards.
|
|
Directly responds to stockholder input.
Offsets dilutive impact of any annual equity incentive awards to executives and
non- employee Directors.
|
|
2015-2016
|
Performance Based Equity Awards
The value of long-term incentive equity awards granted to an executive is based upon the performance of the executive for the
prior year. In the past, these awards generally consisted of a mix of 60% stock options and 40% restricted stock, all of which vested annually and/or monthly based on the passage of time during which the recipient remained employed by the Company
and the value of which fluctuated, including potentially to zero in the case of stock options, with our share price. Accordingly, more than half of these awards (i.e. the stock options) provide no value to the recipient unless our stock price
increases after the grant date.
Based on input from our stockholders and advice from Pay Governance, we recently
implemented performance vesting for a significant portion of the incentive equity awards for our executives. The new performance vesting program began with the 2015 performance year. As a result, the first incentive equity awards with performance
vesting were made in early 2016 with the value of individual awards based on performance during 2015. This approach was selected due to our pay-for-performance practice of making equity awards in a particular year dependent on and sized in relation
to the recipients performance during the prior fiscal year.
Under our new Long-Term Incentive Policy
(LTIP), 50% of an executives total equity award consists of performance-vested restricted units that will not vest until three years after the grant date and only if certain performance measures are met during that three-year
period. The awards granted in February 2016 incorporated two performance metrics: (i) a three-year CAGR for consolidated product revenues during the period 2016-2018 and (ii) a one-year EPS target for 2016 followed by a further two-year
vesting requirement. The remaining 50% of each executives most recent incentive equity award consists of time-vested restricted stock and will utilize a three-year ratable vesting period as we have done in the past.
The structure of the new equity awards reflects market-based good governance practices as well as the input from our
stockholders, several of whom advocated that a meaningful portion of the equity awards should have performance vesting. We believe 50% is a meaningful portion and is consistent with or exceeds the performance orientation of our peer companies. In
addition, although some stockholders have mentioned TSR as a possible performance target, most of the stockholders we contacted indicated that other measures such as financial or operational objectives would also be appropriate. The Board decided to
use consolidated net product revenue and EPS targets because they are important for our business, especially as we continue improving our profitability, and because of the Boards belief that these measures will directly influence the
performance of our stock price over time. As discussed above, the Board does not believe that the use of TSR as a performance metric in the long-term incentive plan is appropriate at this time, although the choice of performance metrics will be
reviewed from time-to-time.
The adoption of new three-year performance-based vesting conditions for 50% of an
executives annual equity award substantially strengthens the link between pay and performance and creates an appropriate long-term incentive for our executives. At the same time, the use of time-based vesting conditions for the remaining
38
50% of each award achieves the equally important goal of share ownership/accumulation through a share price sensitive vehicle that directly promotes alignment with stockholders and further
supports employee retention. Overall, the Compensation Committee and Board believe that these changes represent a balanced performance-based improvement to our executive compensation program that is appropriate for our Company, directly responds to
feedback from our stockholders, is consistent with executive pay governance best practices and exceeds the performance-based focus of compensation programs used by our peer companies, the majority of which do not use performance-vested equity at
all.
Employment Agreement Changes
The Companys employment agreements with Mr. Michels and the other NEOs were put in place in 2004 and 2006, except
for Mr. Zezzos agreement which was entered into in 2011 when he joined the Company. These agreements required the Company to provide a gross up for excise tax imposed under Section 280G of the Internal Revenue Code on compensation
paid as a result of a change of control, in an amount up to $1.0 million for Mr. Michels and $500,000 for the other NEOs. These agreements also included a modified single trigger severance provision, which would permit the executive
to voluntarily terminate his employment within a specified period following a change of control and receive increased severance even though that executives position or scope of responsibilities following the change had not been adversely
affected. Beginning with Mr. Zezzos agreement in 2011, we implemented a new policy of no longer providing any excise tax gross up or single or modified single trigger severance provisions. Instead,
Mr. Zezzos agreement contains a double trigger severance provision under which there needs to be both a change of control and an adverse impact to Mr. Zezzos position or responsibilities before he is entitled to
terminate his employment and receive increased cash severance.
In 2015, Mr. Michels and the other NEOs agreed to
amend their employment agreements to remove the excise tax gross up provision. In addition, Mr. Michels agreed to change the modified single trigger severance provision in his agreement to a double trigger severance
provision.
These changes were implemented in direct response to input from several stockholders. In considering this
matter, the Board was mindful that these changes required amendments to long-standing employment agreements with our executives. Neither Mr. Michels nor any of the other NEOs were obligated to agree to any changes to their agreements, nor
did they receive direct compensation in exchange for the revised employment agreements. Our leadership team agreed to these changes, in an effort to be responsive to the concerns of our stockholders and in order to improve our compensation
governance practices.
Enhanced Stock Ownership/Retention Guidelines
Another change made by the Compensation Committee and Board in 2015 was to adopt enhanced stock ownership and retention
guidelines for our executives. Specifically, the following changes were made:
|
|
|
|
|
Position
|
|
Old Guideline
|
|
New Guideline
|
President and CEO
|
|
2x
|
|
6x
|
Chief Financial Officer and Chief Operating Officer
|
|
1x
|
|
2x
|
Other Executive Officers
|
|
None
|
|
1x
|
In addition, the guidelines were changed to require an executive to retain at least 50% of the
net shares acquired upon the exercise of stock options or the vesting of restricted shares until the executives stock holdings meet or exceed the applicable ownership guideline.
The Compensation Committee and Board believe these changes were appropriate in order to respond to stockholder concerns about
pay for performance, more closely align the interests of our executives with those of our stockholders and make our guidelines consistent with what we believe to be market practice.
39
Limited Bonus Pool Funding Discretion
Under our Management Incentive Plan, adopted each year for the payment of incentive cash bonuses to executives, the aggregate
pool used to pay bonuses is determined in a formulaic manner based on the achievement of specific, short-term financial objectives. However, the Compensation Committee and the Board historically retained discretion to increase or decrease the size
of the bonus pool based on performance conditions, market conditions or other factors deemed appropriate.
Beginning with
the Management Incentive Plan adopted for performance during 2015, the Compensation Committee and Board limited any discretionary adjustments that may be made to +/- 10% of the bonus pool calculated under the plan formula. The Compensation Committee
and Board believe this change is appropriate in order to make our incentive cash bonus plans more performance-based and to bring our plans in line with what we believe to be market practice and provide plan participants with better line of sight
between their actions, Company performance and any bonus results. This change also directly responds to feedback from stockholders. We included the same limit on discretionary pool funding in the Management Incentive Plan for 2016.
Extension of Stock Buyback Program
Our Board previously approved a $25.0 million stock buyback program and prior to 2015 a total of 1,256,023 shares of stock had
been repurchased at a total cost of approximately $5.4 million. Stock purchases under this program largely stopped in 2008. Although we had temporarily suspended stock repurchases, this program was never terminated by the Board.
In direct response to concerns from stockholders regarding the dilutive impact of annual equity awards and based on a review
of our Common Stock valuation, in late 2015 the Board decided to extend the stock buyback program. Specifically, the Board directed management to repurchase up to 1.2 million shares of stock. The 1.2 million share target represented the
approximate number of shares historically used for annual equity incentive awards for management and non-employee Directors.
Other Good Compensation Governance and Practices
We are committed to maintaining good corporate governance and practices. Apart
from the changes discussed above, there are many other aspects of our compensation program that reflect this commitment:
|
Performance Mix -
The vast majority of our NEOs
compensation is performance-based. For example, approximately 75% of Mr. Michels 2015 compensation consisted of an incentive cash bonus and long-term incentive equity awards, which are awarded based on Company and/or individual performance.
For the other NEOs, 59% of their aggregate 2015 compensation consisted of performance-based compensation.
|
Diversified Portfolio -
Our executive compensation consists of
a mix of cash/equity, fixed/variable and short-term/long-term compensation. Equity awards in 2015 consisted of a mix of stock options (60%) and restricted stock (40%) and, as discussed above, transitioned to 50% performance-vested
restricted units and 50% time-vested restricted stock with the February 2016 equity awards.
|
Threshold Bonus Objectives -
Threshold financial performance
objectives for annual bonus pool funding are set at levels that meet or exceed the Companys actual financial performance for the prior fiscal year. Target financial performance objectives generally increase or improve each year and thereby
help drive improved financial performance on a year-over-year basis.
|
40
|
Performance Value of Options and Restricted Stock Awards -
Because stock options, even though time-vested, only provide value to executives if the price of our stock increases after the date of grant, the issuance of 60% of an executives annual equity award during 2015 as stock options means that the
realizable value of long-term equity awards provided to executives is heavily weighted and dependent on the Companys future performance and improvement in the price of our Common Stock. Further, the value of time-vested restricted stock awards
also tracks the experience of our stockholders as our share price fluctuates.
|
Multiple Performance Metrics -
Variable compensation is based
on a combination of corporate and individual performance measurements to help ensure balanced incentives for executives.
|
Long-Term Focus -
Equity awards are subject to long-term
vesting requirements, with restricted shares vesting over 3 years and stock options vesting over a minimum of 4 years. Structuring our equity awards in this manner helps align the interests of our executives with the long-term interests of our
stockholders.
|
Prudent Benchmarking -
The total compensation paid to
executives is targeted at the 50
th
percentile of a peer group of comparable companies based on achievement of performance objectives. We use a peer group (listed on page 43 of this Proxy
Statement) consisting of companies in the medical diagnostic and healthcare industries comparable in size to the Company based on total revenues and market value.
|
Tally Sheets -
The Compensation Committee reviews tally sheets
as part of making individual compensation decisions.
|
Stockholder Outreach -
Since our 2013 SOP vote, the Board has
implemented a robust outreach effort annually to ask our stockholders for feedback on our compensation and governance practices. This Board outreach effort is in addition to our regular investor relations program where we routinely discuss our
business with investors.
|
Independent Compensation Consultants -
The Board and
Compensation Committee regularly utilize independent compensation consultants to provide compensation advice, including competitive assessments of our program compared to compensation paid to executives at the peer group of comparable medical
diagnostic and healthcare companies (listed on page 43 of this Proxy Statement). During 2015, the Compensation Committee engaged Pay Governance as its independent consultant and also reviewed market data prepared by another consultant, Pearl
Meyer & Partners.
|
Recoupment Policy -
Our Board has adopted a compensation
recoupment or clawback policy, under which the Board or Compensation Committee will seek to recover excess compensation paid to our executives if our financial statements are restated due to misconduct by that executive.
|
No Repricing -
Our Stock Award Plan prohibits both the
repricing and repurchase of under-water stock options or other equity awards without stockholder approval.
|
No Perquisites -
We do not provide executives with any
perquisites that are not offered to all employees of the Company.
|
Risk Review Process -
We regularly assess the risks associated
with our compensation programs.
|
No Hedging -
Our policy prohibits Directors and NEOs from
engaging in hedging activities with our stock.
|
No Pledging -
Our Directors and NEOs are not permitted to
pledge our stock.
|
Confidentiality/Non-Compete Agreements
-
Our NEOs are
subject to confidentiality and non-compete agreements.
|
Compensation Risk Assessment
Management periodically conducts a risk assessment of the Companys compensation policies and practices, including its
executive compensation program. In its review, management considers the attributes of the Companys policies and practices and other factors, including:
|
|
|
The mix of fixed and variable compensation opportunities;
|
|
|
|
The balance between annual and long-term performance opportunities;
|
41
|
|
|
The corporate and individual performance objectives established for annual and long-term incentive compensation;
|
|
|
|
The internal controls and procedures in place to mitigate risks facing the Company, including the Companys clawback policy and
stock ownership guidelines; and
|
|
|
|
The risk that unintended consequences could result from various aspects of the Companys compensation policies and practices.
|
Based on its review and assessment, management has concluded that the Companys policies and
practices are designed with the appropriate balance of risk and reward in relation to the Companys overall business strategy and do not incentivize employees to take unnecessary or excessive risks. The Company has also concluded that any risks
arising from the Companys compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
The primary objectives of our compensation program for executive officers are to:
|
Set compensation opportunities at levels sufficient to attract and retain high quality
executives and to motivate them to contribute to our success.
|
Ensure the
compensation opportunities provided align the interests of executives with the interests of our stockholders;
|
Focus our
executives on both short and longer-term individual and Company priorities established by the Board and appropriately reward them for performance against these objectives;
|
The total direct compensation provided to each executive consists of an annual base salary,
incentive cash bonus and long-term incentive equity awards. The amount of the incentive cash bonus and the size of annual incentive equity awards are variable and depend on an executives and the Companys achievement of predetermined
financial and other objectives. As a result, a substantial portion of each executives annual compensation is based on performance.
We believe it is useful to regularly compare our compensation program against compensation paid to executives at other
comparable medical diagnostic and healthcare companies. With the assistance of Pearl Meyer & Partners (PM&P), an independent compensation consultant previously engaged by the Compensation Committee, a peer group of companies
was selected using criteria based on industry, revenues and market capitalization and a competitive assessment of our executive compensation was prepared.
The Compensation Committee seeks to set total direct compensation opportunity levels for each executive near the fiftieth (50
th
) percentile of amounts paid by the peer companies for performance consistent with the Companys target financial and other business plans for the applicable year. Use of the fiftieth (50
th
) percentile is intended as a market-based reference and not as an absolute target. As a result, the total direct compensation opportunity and the value of specific compensation components for
individual executives may fall below or exceed the fiftieth (50
th
) percentile depending on the individual performance of the executive, the criticality of his or her role, the
executives contribution to our business, and other factors.
42
The following provides information about the peer group used by the Compensation
Committee for benchmarking purposes in setting executive compensation in 2015 and how we compare to these companies (all dollars in millions):
|
|
|
|
|
|
|
Peer Company
1
|
|
2015 Revenue
2
|
|
12/31/15 Market
Capitalization
|
|
Business
3
|
Abaxis, Inc.
|
|
$214
|
|
$1,265
|
|
Healthcare Equipment
|
ABIOMED Inc.
|
|
$303
|
|
$3,829
|
|
Healthcare Equipment
|
Anika Therapeutics,
Inc.
|
|
$ 93
|
|
$ 559
|
|
Healthcare Supplies
|
Array Biopharma, Inc.
|
|
$ 34
|
|
$ 602
|
|
Biotechnology
|
ATRION Corp.
|
|
$146
|
|
$ 695
|
|
Healthcare Supplies
|
Cardiovascular Systems, Inc.
|
|
$178
|
|
$ 491
|
|
Healthcare Equipment
|
Cerus Corp.
|
|
$ 34
|
|
$ 614
|
|
Healthcare Supplies
|
Cynosure, Inc.
|
|
$339
|
|
$1,015
|
|
Healthcare Equipment
|
Enzo Biochem, Inc.
|
|
$ 99
|
|
$ 207
|
|
Life Sciences Tools & Services
|
Fluidigm Corp.
|
|
$115
|
|
$ 311
|
|
Life Sciences Tools & Services
|
Genomic Health, Inc.
|
|
$287
|
|
$1,145
|
|
Biotechnology
|
Harvard Bioscience, Inc.
|
|
$111
|
|
$ 118
|
|
Life Sciences Tools & Services
|
Luminex Corp.
|
|
$238
|
|
$ 921
|
|
Life Sciences Tools & Services
|
Meridian Bioscience, Inc.
|
|
$192
|
|
$ 863
|
|
Healthcare Supplies
|
Neogenomics, Inc.
|
|
$100
|
|
$ 477
|
|
Life Sciences Tools & Services
|
Quidel Corp.
|
|
$194
|
|
$ 705
|
|
Healthcare Supplies
|
Rockwell Medical,
Inc.
|
|
$ 55
|
|
$ 523
|
|
Healthcare Equipment
|
Sequenom, Inc.
|
|
$128
|
|
$ 194
|
|
Life Sciences Tools & Services
|
The Spectrnetics
Corp.
|
|
$242
|
|
$ 642
|
|
Healthcare Supplies
|
STAAR Surgical Co.
|
|
$ 77
|
|
$ 285
|
|
Healthcare Supplies
|
Vascular Solutions,
Inc.
|
|
$146
|
|
$ 596
|
|
Healthcare Supplies
|
|
|
|
|
|
|
|
25
th
Percentile
|
|
$ 99
|
|
$ 477
|
|
|
Median
|
|
$146
|
|
$ 602
|
|
|
75
th
Percentile
|
|
$214
|
|
$ 863
|
|
|
OraSure Technologies, Inc.
|
|
$120
|
|
$ 364
|
|
|
Source: Standard & Poors Capital I.Q.
1
Dyax Corp. was removed from the peer group due to its acquisition by Shire Pharmaceuticals
International.
2
Reflects revenue reported for fiscal year 2015.
3
Reflects Global Industry Classification Standard sub-industry designation.
Because the competitive assessment by PM&P was prepared fairly recently (i.e. in 2014), the Compensation Committee decided
that a new assessment was not needed at this time. Consequently, the Compensation Committee elected to use the 2014 assessment in setting the executive compensation for the 2015 fiscal year.
In preparing its 2014 competitive assessment of executive compensation, PM&P compared the compensation of our NEOs with a
50/50 blend of proxy data from the peer group of companies and data for each NEO position from the 2014 Radford Global Life Sciences Survey. Since compensation market data can be volatile from year to year, the Committee believes a blend of specific
peer group proxy data and broader survey data better reflect market trends. PM&P also compared the mix of executive compensation and the relative compensation levels of the NEOs with data from the peer group. Based on this analysis, PM&P
reached the following conclusions:
|
|
|
On average, salaries, total cash compensation (salaries plus incentive cash bonuses) and target total direct compensation (total cash compensation
and incentive equity awards) for our executives are competitive with the market median;
|
43
|
|
|
The long-term incentive equity targets are competitive with the median;
|
|
|
|
Mr. Michels target total direct compensation is competitive with the market median;
|
|
|
|
The mix of cash and long-term incentive compensation for our executives is generally competitive with the market median; and
|
|
|
|
No significant changes to the target compensation for our executives were recommended by PM&P based on their assessment.
|
We follow a pay-for-performance approach to executive compensation, with a significant portion of our executives
compensation consisting of annual incentive cash bonuses and long-term incentive equity awards that are based on the executives and the Companys achievement of predetermined performance objectives.
The following illustrates the relative proportion of 2015 base salaries, and the performance-based compensation consisting of
incentive cash bonuses and long-term incentive equity awards, for Mr. Michels and the other NEOs, respectively:
|
|
Approximately 75% of Mr. Michels aggregate
compensation and 59% of the other NEOs aggregate compensation for 2015 consisted of variable or performance-based compensation.
|
44
2
015 Executive Compensation Components
Overview
Our compensation program consists of the following components:
|
|
|
|
|
Compensation
|
|
Form
of Compensation
|
|
Purpose
|
Base Salary
|
|
Cash
|
|
Base salaries provide fixed compensation necessary to attract and retain key executives. Salary levels are
established for each position based on competitive market data, with annual adjustments tied to performance and market changes as appropriate.
|
Annual Incentive Bonus Awards
|
|
Cash
|
|
Annual incentive bonus awards provide performance-based incentives to our executives to achieve both Company-wide financial and strategic goals and the executives
individual performance objectives. Targets for individual bonuses are set at levels consistent with those offered in the marketplace.
Beginning in 2015, the Board has limited discretionary adjustments to bonus pool funding to +/- 10% of the pool
amount otherwise determined under the incentive plan formula
.
|
Long-Term Incentive Awards
|
|
2015
Stock Options and Restricted Stock
2016
Performance-Vested Restricted Units and Time-Vested
Restricted Stock
|
|
The largest component of our executive compensation is paid in equity. For the past several years, awards
consisted of 60% stock options and 40% restricted shares and strongly incentivized our executives to perform at their highest levels to achieve our long-term strategic business plans and increase our share price, thereby aligning the interests of
our executives with those of our stockholders.
Beginning in 2016 with respect to the 2015 performance year, executive LTIP awards consisted of 50% performance-vested restricted units and 50% time-vested restricted stock in order to strengthen the
link between pay and performance
.
|
45
|
|
|
|
|
Compensation
|
|
Form
of Compensation
|
|
Purpose
|
Benefits
|
|
401(k) Plan
Health and Welfare Benefits
|
|
Retirement and health and welfare benefits provide a complete compensation package that is competitive with the market and addresses the needs
of all employees and their families, including our executives.
|
Employment Agreements
|
|
Cash severance and accelerated equity vesting
|
|
Severance and accelerated equity vesting are provided to our executive officers in order to ensure they are not
distracted by the possibility of termination in the event of a change of control and to encourage continued dedication to the Company.
In 2015, we eliminated the excise tax gross up from all NEO employment agreements and Mr. Michels agreed to
change his modified single trigger change of control severance provision to a double trigger provision
.
|
Compensation Components in Detail
2015 Base Salaries
The Compensation Committee believes that competitive salaries must be paid in order to provide fixed compensation necessary to
attract and retain key executives. Each year, the Compensation Committee evaluates and determines the annual base salaries for the NEOs. The Compensation Committee considers the annual performance evaluation of the CEO prepared by non-employee
members of the Board and the annual performance evaluations prepared by the CEO for all other NEOs. The Committee also considers the Companys budget for expected salary adjustments, salary levels paid at the peer group companies (listed on
page 43 of this Proxy Statement) and any recommendations that may be made by any compensation consultant engaged to assist the Compensation Committee. An executives annual salary adjustment will tend to be at the higher end of the range
budgeted by the Company if the executive receives a performance rating of Meets Expectations or better and such executives pre-adjustment salary level is below the 50
th
percentile for his or her position at the peer group companies.
Annual base salaries paid in 2015 to our NEOs were
established by the Compensation Committee at the beginning of 2015 based on a review of the Companys performance during 2014, an evaluation of the individual contributions of each officer compared to pre-established performance objectives for
2014 and a review of the competitive data and recommendations provided by PM&P, the Compensation Committees independent compensation consultant at the time.
Based on these factors, the Compensation Committee approved an annual base salary increase for our management (including the
NEOs) averaging approximately 2.83%. This compares with our Company-wide salary increase budget of 3.0%. In order to reflect the Companys performance and each executives contributions, and to equitably move salaries towards the fiftieth
(50
th
) percentile of amounts paid by the peer
46
group companies or maintain them at approximately that level, the Compensation Committee used the following guidelines to assist in determining annual base salary increases.
|
|
|
Performance
Rating
|
|
Merit Increase Range
|
|
|
|
Outstanding
|
|
5.0% - 7.0%
|
Exceeds Requirements
|
|
3.0% - 4.0%
|
Meets Requirements
|
|
2.0% - 2.5%
|
Does Not Consistently Meet
|
|
1.0% - 1.5%
|
Does Not Meet Requirements
|
|
0%
|
In establishing NEO base salaries for 2015, the Compensation Committee recognized that the
Companys 2014 consolidated net revenues of $106.5 million exceeded the $100 million threshold for the first time in the Companys history. These revenues represented an 8% increase over 2013. The Compensation Committee also noted that the
Companys $4.6 million consolidated net loss represented a $6.6 million or 59% reduction in the Companys 2014 net loss compared to 2013. Other specific factors considered by the Compensation Committee in setting 2015 salaries included the
following:
|
Execution of a major HCV co-promotion agreement with AbbVie.
|
The 17% growth in molecular collection systems revenues compared to 2013;
|
The 42% growth in
OraQuick
®
HCV net product revenues compared to 2013;
|
The $45.1 million in revenues generated by our newest business lines (i.e., DNA
Genotek, HCV-related and HIV-OTC);
|
The improved profitability of our OraQuick
®
In-Home HIV product line;
|
The launch of our next generation Intercept i2
®
collector with a NIDA-5 panel of high-throughput fully-automated oral fluid drug assays;
|
Progress towards the funded development and commercialization of a new rapid,
Ebola antigen test;
|
Improved investor relations and outreach strengthened the Companys
relationships with institutional investors; and
|
Extensive and aggressive review of multiple business development opportunities by management.
|
47
Although the Compensation Committee generally uses the performance rating labels
mentioned above (i.e., Meets Expectations, Exceeds Expectations, etc.), the Compensation Committee has decided that those labels should not be used for Messrs. Michels and Spair. Given the senior positions of Messrs. Michels and Spair, the
Compensation Committee believes it is more appropriate to evaluate these executives based on the overall performance of the Company. As a result, the Compensation Committee approved the following 2015 salary adjustments for Mr. Michels and the
other NEOs:
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
2014 Individual
Performance Assessment
|
|
2014
Performance
Rating
|
|
2014
Salary
|
|
2015
Salary
|
|
%
Increase
|
Douglas A. Michels President and Chief Executive Officer
|
|
Strong corporate performance, as described above, including 8% revenue growth and 54% reduction in our consolidated net loss.
|
|
N/A
1
|
|
$580,920
|
|
$596,585
|
|
2.75%
|
Ronald H. Spair Chief Financial Officer and Chief
Operating Officer
|
|
Strong corporate
performance, as described above, including 8% revenue growth and 59% reduction in our consolidated net loss.
|
|
N/A
1
|
|
$456,290
|
|
$468,838
|
|
2.75%
|
Anthony Zezzo II Executive Vice President, Marketing and
Sales
|
|
Leadership in negotiating unique HCV co-promotion agreement with AbbVie, leading to substantial increased
revenues.
57% growth in OraQuick
®
HCV
sales.
Substantial achievement of overall sales goals.
Organizational and staffing improvement within Sales and Marketing Department.
|
|
Meets
|
|
$376,480
|
|
$384,010
|
|
2.0%
|
Jack E. Jerrett Senior Vice President and General Counsel
|
|
Leadership in negotiating unique HCV co-promotion agreement with AbbVie, leading to substantial increased
revenues.
Leadership in negotiating reduced royalty obligations.
Assistance on numerous important commercial matters.
Leadership in resolving various disputes and claims.
Oversight of SEC and other compliance matters.
Ongoing advice and counsel to Board and senior management.
|
|
Outstanding
|
|
$328,000
|
|
$344,400
|
|
5.0%
|
1
Assessment based on overall corporate performance during 2014.
48
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
2014 Individual
Performance Assessment
|
|
2014
Performance
Rating
|
|
2014
Salary
|
|
2015
Salary
|
|
%
Increase
|
Mark L. Kuna Senior Vice President, Finance, Controller and
Assistant Secretary
|
|
Leadership in implementing new enterprise resource management system at DNA Genotek.
Implementation of new revenue recognition policy for
OraQuick
®
In-Home HIV product.
Tax and accounting
support for HCV co-promotion agreement with AbbVie.
Oversight of financial reporting, SEC filings and
Sarbanes-Oxley compliance.
|
|
Meets/Exceeds
|
|
$262,135
|
|
$269,344
|
|
2.75%
|
2015 Annual Incentive Cash Bonuses
Annual cash bonuses are included as part of executive compensation because the Compensation Committee believes that a
significant portion of each executives compensation should be structured as a variable incentive tied to both the overall performance of the Company and the individual contributions of the executive. On an annual basis, the Compensation
Committee has adopted, with approval of the Board, a Management Incentive Plan (the Incentive Plan), which is intended to be the principal vehicle for incentive cash bonus awards.
Incentive cash bonuses are generally paid out of a cash pool funded under the Incentive Plan based on the Companys
achievement of specific financial objectives determined using a formula established by the Compensation Committee and approved by the Board at the beginning of each fiscal year. The financial objectives typically consist of annual short-term targets
that represent improvement in financial performance compared to the prior year. The objectives are each weighted to determine their respective contributions to the pool amount. Each objective can be adjusted annually by the Compensation Committee or
Board in an equitable manner to reflect unexpected changes in the Companys business or assumptions underlying the original objective or other factors.
With respect to each financial objective, a Threshold, Target, High and Maximum performance level is established. The Target
levels generally reflect the Companys financial budget or operating plan for the current year and incorporate the expected improved performance from the prior year. Except in special circumstances, the Threshold levels equal or exceed
financial performance achieved during the prior year and represent a minimum level of performance for which the Compensation Committee is willing to provide bonus pool funding. Thus, the Company must meet or exceed the prior years performance
in order to obtain any funding for a Threshold objective. The High levels reflect outstanding performance for which the Compensation Committee is willing to reward executives with bonuses above the Target level payout. The Maximum levels represent
breakthrough performance at which the maximum bonus pool funding can be provided.
If the Company meets all
the Target levels, the pool is funded at 100% of the aggregate target bonuses for all participants in the Incentive Plan, as described below. The pool is funded at 50% of the aggregate target bonuses if all of the Threshold levels are met and at
150% if all of the High levels are met. If the Company achieves a Maximum performance level, the pool can be funded up to 200% of the aggregate target bonuses. Pro-rata adjustments to the amount of funding for each objective are made where a
particular performance is in between the pre-established performance levels. To the extent a performance level is below the Threshold
49
objective, generally there is no funding for that particular item unless the Compensation Committee or Board determines, in its limited discretion, that some funding is warranted to recognize
extraordinary circumstances.
The amount of the cash bonus pool is determined by the Compensation Committee and
recommended for Board approval. The Compensation Committee and Board also retain discretion to increase or decrease the size of the pool in order to reflect specific performance or market conditions affecting the Company and the final performance
assessments for each participant for the applicable year. The cash bonus pool is used to pay bonuses not only to the Companys NEOs, but also to all other officers and certain higher-level employees of the Company. Beginning with the 2015
Incentive Plan, the Compensation Committee and Board have limited their ability to make discretionary bonus pool adjustments to +/- 10% of the pool size otherwise determined pursuant to the formula under the Incentive Plan.
Individual payments from the bonus pool to executives are calculated using a formula that considers the size of the bonus
pool, the executives achievement of individual performance objectives (except in the case of Messrs. Michels and Spair, as described below), the number of individuals participating in the plan at the time bonuses are awarded and the
executives target bonus percentage. Bonuses are paid, based on an assessment of each executives performance for the applicable year, using targets expressed as a percentage of the executive officers annual base salary.
If an executive officer has met or exceeded his or her individual performance objectives and/or the Companys
expectations for the applicable year, he or she may be eligible to receive up to 150% of his or her target bonus, depending on the size of the bonus pool. The Compensation Committee and Board retain the discretion to adjust an individual
executives performance evaluation and to increase or decrease the bonus paid to such individual to reflect the specific contributions of that executive, the Companys overall performance, market conditions or other circumstances.
The Compensation Committee recommends for Board approval any bonus award for the CEO based on an assessment of his
performance. The CEO recommends individual awards for the other executive officers for approval by the Compensation Committee based on an assessment of each executives performance against his or her applicable individual performance
objectives. The Compensation Committee and Board have the right, in their sole discretion, to reject any or all of the recommended bonus awards, even if the bonus pool has been funded and any or all applicable performance criteria have been
satisfied, based on the business conditions of the Company or other factors deemed relevant by the Compensation Committee or Board.
Under the 2015 Incentive Plan, the Compensation Committee established performance levels for two equally weighted financial
objectives to be used to fund the bonus pool. The Threshold financial objectives in our 2015 Incentive Plan reflected improved performance over 2014 that would result in a break-even level of consolidated operating income. The Target levels
reflected our annual budget or operating plan for 2015. The following table summarizes these objectives and performance levels (dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Objective/
Weight
|
|
Threshold
|
|
|
Target
|
|
|
High
|
|
|
Breakthrough
|
|
|
|
Consolidated Net Revenues (50%)
|
|
|
$112.5
|
|
|
|
$121.7
|
|
|
|
$127.8
|
|
|
|
$133.9
|
|
|
|
Consolidated Net Operating Income (50%)
|
|
|
$ 0
|
|
|
|
$ 5.5
|
|
|
|
$ 9.2
|
|
|
|
$ 12.8
|
|
|
|
Incentive Plan Payout
(% of Target)
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
200
|
%
|
|
|
50
In establishing the 2015 Incentive Plan, the Compensation Committee decided on a
50%/50% weighting for the revenue and operating income objectives. The Compensation Committee believed an equal weighting provided an appropriate balance of incentives for both top and bottom line financial performance. The following sets forth the
weighting and potential bonus pool funding for both objectives at each performance level established under the 2015 Incentive Plan, based on the participants covered by the Plan at year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
Weight
|
|
Threshold
|
|
Target
|
|
High
|
|
Maximum
|
|
|
Consolidated Net Revenues
|
|
50%
|
|
$544,000
|
|
$1,088,000
|
|
$1,632,000
|
|
$2,176,000
|
|
|
Consolidated Net Operating Income
|
|
50%
|
|
$544,000
|
|
$1,088,000
|
|
$1,632,000
|
|
$2,176,000
|
|
|
Potential Total Pool Funding
|
|
|
|
$1,088,000
|
|
$2,176,000
|
|
$3,264,000
|
|
$4,352,000
|
|
|
During 2015, we reported consolidated net revenues totaling $119.7 million. This performance
exceeded the Threshold performance level but was slightly less than the Target performance level for this objective (98% of Target), resulting in funding of $971,000 (89% of Target funding). The Companys 2015 consolidated net operating income
was $8.1 million, which was above the Target (147% of Target performance), but below the High performance level for this objective. In evaluating this objective, the Compensation Committee decided to adjust our operating income to eliminate $363,000
of unbudgeted, business development expenditures in order to reward managements aggressive efforts to find attractive acquisitions and other business development transactions. As a result, an adjusted consolidated income amount of $8.4 million
was used to determine $1.518 million of bonus pool funding for this objective (139.5% of Target funding).
Based on
the foregoing, the total bonus pool funding calculated for 2015 performance was $2,489,000, as follows:.
|
|
|
|
|
Objective
|
|
Funding
|
|
Consolidated Net Revenues
|
|
$
|
971,000
|
|
Consolidated Net Operating Income
|
|
$
|
1,518,000
|
|
Total 2015 Pool Funding
|
|
$
|
2,489,000
|
|
The bonus pool amount was approved by the full Board and used to pay bonuses to the
Companys NEOs and 17 other members of our management team. The specific target payouts for NEO bonuses (expressed as a percentage of annual base salary) are shown below:
|
|
|
Title
|
|
Target Payouts
|
Chief Executive Officer
|
|
70%
|
Chief Financial Officer and Chief Operating Officer
|
|
50%
|
Executive Vice President
|
|
40%
|
Senior Vice President
|
|
35%
|
In January 2016, the Compensation Committee authorized the payout of individual bonus awards
to executive officers from the bonus pool for 2015, based on the target bonus amounts described above and an assessment of each officers performance during 2015 against pre-established performance objectives. The calculation of individual
bonus awards was based on a formula that adjusted the foregoing target payments for both the executives individual performance during 2015 and the degree to which the approved bonus pool funding was sufficient to pay the aggregate bonuses
after adjustment for individual performance.
In evaluating Mr. Michels and the Companys performance, the
Compensation Committee recognized the record level of consolidated net revenues of $119.7 million and the full year profitability in 2015 and the
51
substantial improvement in the Companys 2015 performance compared to 2014. In addition, the Compensation Committee considered the following other factors:
|
The 26% growth in molecular collection systems revenues compared to 2014;
|
The 57% growth in OraQuick
®
HCV net product revenues
compared to 2014;
|
The improvement in gross margin to 67% in 2015, compared to 63% in 2014;
|
The $15.8 million in cash generated from operations in 2015, compared to $7.5 million in 2014;
|
The $24.9 million in net revenues related to our HCV business, which represents a 68% improvement over
2014;
|
A $65.8 million in net revenues from our newest business lines (i.e. DNA Genotek, HCV related, HIV OTC and
Ebola), which represents 55% of consolidated net revenues for 2015;
|
The receipt of FDA Emergency Use Authorization for our
OraQuick
®
rapid Ebola test, the securing of up to $10.8 million in Federal funding for the clinical development of this product and the generation of $2.3 million in initial sales of this
product during 2015;
|
The extensive review of multiple business development opportunities by management; and
|
The successful maintenance of strong relationships with our investors.
|
In view of the foregoing factors, the Compensation Committee determined that Messrs. Michels
and Spair should receive above-target bonuses for 2015. The remaining NEOs were evaluated based on their 2015 performance against individual objectives established for their respective positions, with Mr. Zezzo receiving a Meets
Expectations performance rating, Mr. Jerrett receiving a high Meets Expectations performance rating and Mr. Kuna receiving a Meets/Exceeds performance rating. Using these performance ratings, the Compensation Committee developed individual
performance factors to adjust the target bonuses for Mr. Michels, the other NEOs and the other participants in the 2015 Incentive Plan to reflect their performance assessments for 2015. The aggregate pool funding that would be required to
pay the performance-adjusted target bonus amounts for all participants in the 2015 Incentive Plan totaled $2,249,000. As a final step, the Compensation Committee calculated a pool funding factor of 110.7% ($2,489,000 in aggregate pool funding
divided by 2,249,000 in aggregate performance-adjusted bonuses) in order to calculate individual performance bonuses consistent with the bonus pool funding formula.
Using the approach described above, a final 2015 incentive cash bonus of $508,787 was calculated for Mr. Michels, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Base Salary
|
|
X
|
|
Target %
|
|
X
|
|
2015 Individual Performance Factor
|
|
X
|
|
2015 Pool Funding Factor
|
|
=
|
|
2015 Bonus
|
$596,895
|
|
|
70%
|
|
|
110%
|
|
|
110.7%
|
|
|
$508,787
|
52
This same formula was used to calculate the 2015 bonus awards for all NEOs, as
follows:
2015 Bonus Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
2015 Salary
|
|
Bonus
Target (%
salary)
|
|
2015 Performance Rating
|
|
Individual
2015
Performance
Factor
|
|
2015
Pool
Funding
Factor
|
|
2015
Bonus
|
Douglas A. Michels President and Chief
Executive Officer
|
|
$596,895
|
|
70%
|
|
Above Target
Strong corporate
performance including record revenues and full-year profitability, as described above.
|
|
110%
|
|
110.7%
|
|
$508,787
|
Ronald H. Spair Chief Financial Officer and
Chief Operating Officer
|
|
$468,838
|
|
50%
|
|
Above Target
Strong corporate
performance including record revenues and full-year profitability, as described above.
|
|
110%
|
|
110.7%
|
|
$285,452
|
Anthony Zezzo II Executive Vice President,
Marketing and Sales
|
|
$384,010
|
|
40%
|
|
Meets Expectations (High)
57% growth in OraQuick
®
HCV sales.
Substantial achievement of overall
sales goals.
Organizational improvements within the Sales and Marketing Department.
Leadership in the implementation of the HCV co-promotion agreement with AbbVie.
|
|
90%
|
|
110.7%
|
|
$153,036
|
Jack E. Jerrett
Senior Vice President and
General Counsel
|
|
$344,400
|
|
35%
|
|
Meets Expectations
Leadership in directing
various litigation and claims resolution.
Leadership in evaluating various business development
opportunities.
Negotiation of reduced royalty obligations.
Assistance on numerous important commercial matters.
Ongoing advice and counsel to Board and senior management.
|
|
105%
|
|
110.7%
|
|
$140,110
|
Mark L. Kuna Senior Vice President, Finance,
Controller
|
|
$269,344
|
|
35%
|
|
Meets/Exceeds
Leadership in
evaluating various business development opportunities.
Implementation of tax strategies for DNA
Genotek.
Oversight of financial reporting, SEC filings and Sarbanes-Oxley Compliance.
|
|
112.5%
|
|
110.7%
|
|
$117,402
|
53
2015 Long-Term Incentive Awards
An additional way that we promote the long-term growth of the Company and align the interests of executives with those of our
stockholders is by compensating executives with equity in the Company that vests over a multi-year period. To accomplish this, the Compensation Committee administers the Companys LTIP, pursuant to which grants of stock options and restricted
shares have been made to executive officers on an annual basis.
We view all awards under our LTIP as performance-based
since the grant value of each annual award is based on an assessment of the executives performance during the prior year. In addition, until 2016 60% of each award to our executives consists of stock options that provide no value to the
recipient unless our stock price increases after the date of grant. Subject to continued employment through the vesting period, awards of restricted shares provide some immediate value to executives but are also performance-based in that the
executives compensation will increase or decrease with the market price of our stock. Therefore, our LTIP requires that our NEOs first earn their awards based upon their prior year performance and continue to perform for the Company throughout
the vesting period to realize any value from such awards.
Incentive equity awards under the LTIP are made on an annual
basis, and are discretionary and subject to approval by the Compensation Committee and/or Board. Awards to individual participants under the LTIP are based on an evaluation of a number of factors, including:
|
|
|
Performance of the participant for the applicable year;
|
|
|
|
The participants level of responsibilities and relative contribution to the Companys business;
|
|
|
|
A competitive assessment of awards at peer group companies (listed on page
43
of this Proxy Statement);
|
|
|
|
History of equity awards to the participant; and
|
|
|
|
Other factors deemed relevant by the Compensation Committee and/or Board.
|
Each participants individual performance for the applicable year is evaluated against his or her individual performance
objectives for that year. A Meets Expectations performance is typically the threshold requirement to receive an equity award under the LTIP. Awards below this performance level may be considered on an exception basis at the discretion of
the Compensation Committee and/or the Board.
The value of potential incentive equity awards that could be granted in 2015
under the LTIP (expressed as a percentage of annual base salary) based on performance during 2014, are summarized below:
|
|
|
|
|
|
|
|
|
Performance
|
Position
|
|
Lower End
|
|
Target
|
|
Maximum
|
President/CEO
|
|
150%
|
|
200%
|
|
250%
|
CFO/COO
|
|
90%
|
|
125%
|
|
160%
|
EVP
|
|
75%
|
|
100%
|
|
125%
|
SVP
|
|
55%
|
|
75%
|
|
95%
|
The percentages set forth above were established at levels that the Compensation Committee
believed represented an appropriate long-term incentive compensation value for each executive, based on the results of a competitive assessment of long-term incentive awards at the peer group companies (listed on page
43
of this Proxy
Statement). Awards under the LTIP in 2015 consisted of 60% stock options and 40% restricted stock. Once the aggregate dollar value of an award has been established by applying the Committee approved award percentage to a participants base
salary, the value is converted into shares based on a valuation of the restricted stock and stock option portions of the award as of the grant date. Restricted stock is valued based on the average of the high and low stock price on the grant date as
reported on the NASDAQ Stock Market and stock options are valued based on a corresponding Black-Scholes value in accordance with FASB ASC Topic 718.
54
Stock option awards granted under the LTIP have an exercise price equal to the
fair market value of the Companys Common Stock on the date of grant, which is calculated using the average high and low stock price on that date. Stock options generally vest over four years, with the first 25% vesting after one year and the
remaining 75% vesting on a monthly basis over the next three years following the first anniversary of the grant date. Grants of restricted stock generally vest in equal annual installments over a three-year period. These vesting restrictions serve
to promote the Companys long-term growth by restricting executives ability to realize short-term gains from their awards. The Compensation Committee believes the terms of its incentive equity awards to executives are competitive with the
terms of equity awards offered at comparable medical diagnostics and healthcare companies.
Equity awards are generally
made by the Compensation Committee each year as part of the normal annual compensation cycle. The awards for a particular year generally occur in late January or early February of the following year after the Companys full year financial
results are known and performance evaluations for the executive officers have been prepared. Equity awards approved by the Compensation Committee for the CEO are then reviewed and approved by the Board. In addition to the annual equity awards, the
Compensation Committee may approve stock option and restricted stock awards for newly hired officers or in recognition of an executives promotion or expansion of responsibilities. These latter grants may have vesting or other terms that differ
from the terms generally approved for annual equity awards. Notwithstanding the terms of the LTIP, equity awards are made at the discretion of the Compensation Committee or Board.
Effective February 3, 2015, the Compensation Committee approved stock option and restricted stock awards for the NEOs
under the LTIP based on the performance evaluations of such officers for 2014, as summarized below. A description of the basis for each NEOs 2014 performance evaluation is set forth above under the Section entitled, 2015 Base
Salaries, in this Proxy Statement.
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
2014 Performance
Assessment
|
|
Restricted Stock
|
|
Stock Options
|
|
Award Value
(% of Base Salary)
|
Douglas A.
Michels
President and Chief
Executive Officer
|
|
N/A
1
|
|
59,934 Shs
2
|
|
171,919 Shs
2
|
|
240%
|
Ronald H. Spair
Chief Financial
Officer and Chief
Operating Officer
|
|
N/A
1
|
|
28,442 Shs
|
|
81,584 Shs
|
|
145%
|
Anthony
Zezzo II
Executive Vice
President, Marketing
and Sales
|
|
Meets
|
|
14,566 Shs
|
|
41,781 Shs
|
|
90%
|
Jack E. Jerrett
Senior Vice President
and General Counsel
|
|
Outstanding
|
|
12,690 Shs
|
|
36,401 Shs
|
|
90%
|
Mark L.
Kuna
Senior Vice President,
Finance, Controller and
Assistant Secretary
|
|
Meets/Exceeds
|
|
9,015 Shs
|
|
25,859 Shs
|
|
80%
|
1
|
Assessment based on overall corporate performance during 2014.
|
2
|
As discussed previously, equity awards made in 2015 for performance during 2014 were time-vested. Beginning in February 2016, 50% of each equity
award to the NEOs consisted of performance-vested restricted units with a three-year service period. A further description of these performance-vested awards is set forth on page
38
.
|
55
We provide minimal additional benefits outside of our primary elements of compensation, as follows:
Retirement Programs
All of our employees, including executive officers, are eligible to participate in our 401(k) profit sharing plan (the
401(k) Plan). We make matching contributions for participants on a dollar-for-dollar basis up to $4,000 per year. Payments of employer-provided benefits accrued for a 401(k) Plan participant will be made upon retirement or upon
termination of employment prior to retirement, provided certain vesting conditions have been met by the participant prior to termination. In addition, the Company maintains the OraSure Technologies, Inc. Deferred Compensation Plan (the
Deferred Compensation Plan) for the benefit of the Companys highly compensated employees, including all of the NEOs, and its non-employee Directors. The Deferred Compensation Plan allows participants to defer up to 100% of their
annual base salaries (or fees in the case of non-employee Directors) and up to 100% of annual incentive cash bonuses and, upon vesting, restricted shares of the Companys Common Stock awarded to the participant. The Company may also make
discretionary contributions to the participants accounts that vest over one or more years as determined by the Company, as well as upon death, disability or a change of control. Since the Deferred Compensation Plan was put in place, the
Company has made no discretionary contributions. Participants may elect to receive distributions of deferred amounts on a specified date, separation from service, a change of control, disability and/or death.
Perquisites and Other Compensation
As a general matter, the Compensation Committee and Board do not believe that executive officers should be treated differently
than other employees by receiving special perquisites unrelated to our general compensation program. Therefore, our healthcare, disability, and other insurance programs and benefits are the same for all eligible employees, including executive
officers. Executive officers do not receive any additional perquisites.
Potential Payments Upon Termination
or Change of Control Pursuant to Employment Agreements
The Company has entered into employment agreements with each
of the NEOs. In addition to the compensation elements discussed above, these agreements provide for post-employment severance payments and benefits in the event of termination of employment by the Company without cause or by the
executive for good reason and provide enhanced severance payments upon such terminations in connection with a change of control of the Company. The terms of these agreements are discussed in more detail under the Section
entitled, Employment Agreements and Potential Payments Upon Termination or Change of Control, in this Proxy Statement. The Compensation Committee believes that these agreements are generally consistent with industry practice at the peer
group companies (listed on page
43
of this Proxy Statement), provide an incentive to the applicable executive to remain with the Company, and serve to align the interests of stockholders and the executives in the event of a change of control
of the Company.
Accounting and Tax Treatment of Compensation.
In approving the amount and form of compensation for the NEOs, the Compensation Committee considers all elements of the cost
to the Company of providing such compensation, including accounting and tax implications. In particular, it considers the potential impact of Section 162(m) of the Internal Revenue Code. Section 162(m) which disallows a tax deduction for
any publicly-held corporation for individual compensation exceeding $1 million in any taxable year for the CEO and for the three most highly compensated officers (other than the Chief Financial Officer) unless compensation is performance-based. The
Compensation Committee intends to maintain flexibility to pay compensation that is not entirely deductible when the best interests of the Company would make that advisable.
56
Compensation Recoupment Policy
The Board has adopted a compensation recoupment or clawback policy, applicable to all officers subject to
Section 16 of the Exchange Act. Under this policy, the Board and the Compensation Committee will pursue recoupment of any excess compensation, including incentive cash bonuses, restricted stock, stock options or other compensation, which was
awarded to a covered officer based on financial statements of the Company where such statements are required to be restated as a result of the gross negligence, intentional misconduct or fraud of the covered officer. In addition to recoupment, the
Board or Compensation Committee shall take such other remedial actions deemed necessary against a covered employee, including recommending disciplinary actions up to and including termination and other available remedies. The recovery period for
recoupment of any compensation is up to three fiscal years preceding the date on which the Company is required to prepare and file the restated financial statements. This policy has been proactively adopted in advance of final guidance under
Section 954 of the Dodd-Frank Act, and will be amended to conform with this Section when final guidance is available.
57
S
ummary Compensation Table
The following table summarizes the compensation of our CEO and the other NEOs, for the fiscal years ended December 31,
2015, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position
|
|
Year
|
|
|
Salary
1
($)
|
|
|
Bonus
($)
|
|
Stock
Awards
2
($)
|
|
|
Option
Awards
3
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
4
($)
|
|
|
Change
in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All other
Compen-
sation
5
($)
|
|
|
Total
($)
|
|
Douglas A. Michels
|
|
|
2015
|
|
|
$
|
619,054
|
|
|
|
|
$
|
557,686
|
|
|
$
|
836,523
|
|
|
$
|
508,787
|
|
|
|
|
$
|
4,000
|
|
|
$
|
2,526,050
|
|
President and Chief Executive
|
|
|
2014
|
|
|
$
|
580,139
|
|
|
|
|
$
|
507,606
|
|
|
$
|
761,400
|
|
|
$
|
620,000
|
|
|
|
|
$
|
4,000
|
|
|
$
|
2,473,145
|
|
Officer
|
|
|
2013
|
|
|
$
|
563,408
|
|
|
|
|
$
|
440,003
|
|
|
$
|
659,799
|
|
|
$
|
469,470
|
|
|
|
|
$
|
4,000
|
|
|
$
|
2,136,680
|
|
Ronald H. Spair
|
|
|
2015
|
|
|
$
|
486,243
|
|
|
|
|
$
|
264,653
|
|
|
$
|
396,971
|
|
|
$
|
285,452
|
|
|
|
|
$
|
4,000
|
|
|
$
|
1,437,319
|
|
Chief Financial Officer
|
|
|
2014
|
|
|
$
|
455,677
|
|
|
|
|
$
|
256,941
|
|
|
$
|
385,411
|
|
|
$
|
322,970
|
|
|
|
|
$
|
4,000
|
|
|
$
|
1,424,999
|
|
and Chief Operating Officer
|
|
|
2013
|
|
|
$
|
442,450
|
|
|
|
|
$
|
240,798
|
|
|
$
|
361,091
|
|
|
$
|
263,390
|
|
|
|
|
$
|
4,000
|
|
|
$
|
1,311,729
|
|
Anthony Zezzo II
|
|
|
2015
|
|
|
$
|
398,403
|
|
|
|
|
$
|
135,537
|
|
|
$
|
203,298
|
|
|
$
|
153,036
|
|
|
|
|
|
|
|
|
$
|
890,274
|
|
Executive Vice President
|
|
|
2014
|
|
|
$
|
375,812
|
|
|
|
|
$
|
166,524
|
|
|
$
|
249,779
|
|
|
$
|
206,840
|
|
|
|
|
|
|
|
|
$
|
998,955
|
|
Marketing and Sales
|
|
|
2013
|
|
|
$
|
362,000
|
|
|
|
|
$
|
79,637
|
|
|
$
|
119,424
|
|
|
$
|
193,320
|
|
|
|
|
|
|
|
|
$
|
752,381
|
|
Jack E. Jerrett
|
|
|
2015
|
|
|
$
|
356,826
|
|
|
|
|
$
|
118,080
|
|
|
$
|
177,120
|
|
|
$
|
140,110
|
|
|
|
|
$
|
4,000
|
|
|
$
|
796,136
|
|
Senior Vice President
|
|
|
2014
|
|
|
$
|
327,631
|
|
|
|
|
$
|
102,401
|
|
|
$
|
153,599
|
|
|
$
|
207,850
|
|
|
|
|
$
|
4,000
|
|
|
$
|
795,481
|
|
and General Counsel
|
|
|
2013
|
|
|
$
|
319,662
|
|
|
|
|
$
|
106,077
|
|
|
$
|
159,070
|
|
|
$
|
133,180
|
|
|
|
|
$
|
4,000
|
|
|
$
|
721,989
|
|
Mark L. Kuna
|
|
|
2015
|
|
|
$
|
279,343
|
|
|
|
|
$
|
83,885
|
|
|
$
|
125,825
|
|
|
$
|
117,402
|
|
|
|
|
$
|
4,000
|
|
|
$
|
610,455
|
|
Senior Vice President,
|
|
|
2014
|
|
|
$
|
261,783
|
|
|
|
|
$
|
81,439
|
|
|
$
|
122,161
|
|
|
$
|
127,060
|
|
|
|
|
$
|
4,000
|
|
|
$
|
596,443
|
|
Finance, Controller and
|
|
|
2013
|
|
|
$
|
254,183
|
|
|
|
|
$
|
83,983
|
|
|
$
|
125,932
|
|
|
$
|
105,920
|
|
|
|
|
$
|
4,000
|
|
|
$
|
574,018
|
|
Assistant Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Salary in 2015 reflects twenty-seven bi-weekly payroll periods, as compared to twenty-six bi-weekly payroll periods in 2014 and 2013. This
additional pay period caused the actual amounts received by the NEOs during 2015 to be somewhat higher than their annual base salaries. Base salaries for 2015 were as follows: Mr. Michels, $596,895; Mr. Spair, $468,838; Mr. Zezzo,
$384,010; Mr. Jerrett, $344,400; and Mr. Kuna, $269,344.
|
2
|
The indicated amounts reflect the aggregate grant date fair value of restricted stock awards made to the NEOs during the applicable year, computed
in accordance with Financial Accounting Standards Board (FASB) ASC Topic 718. Certain assumptions used in the calculation of those amounts are set forth for the applicable year of award in footnote 8 to the Companys audited
consolidated financial statements for the year ended December 31, 2015, included in the Companys Annual Report on Form 10-K filed with the SEC on March 14, 2016 (the 2015 10-K Report).
|
|
3
|
The values set forth in this column reflect the aggregate grant date fair value of stock option awards made to the NEOs during the applicable year,
computed in accordance with FASB ASC Topic 718. Certain assumptions used in the calculation of those amounts are set forth for the applicable year of award in footnote 8 to the Companys audited consolidated financial statements for the year
ended December 31, 2015, included in the Companys 2015 10-K Report.
|
|
4
|
The indicated amounts reflect incentive cash bonuses paid to the NEOs pursuant to an Incentive Plan, based on performance during the applicable
year. For a description of incentive cash bonus payments for performance during 2015, see the Section entitled, 2015 Annual Incentive Cash Bonuses, in the CD&A. The 2014 amounts include special achievement awards for Messrs. Zezzo
and Jerrett of $40,000 and $10,000, respectively, for their contributions in negotiating the HCV co-promotion agreement with AbbVie.
|
58
|
5
|
The indicated amounts reflect cash contributed to a 401(k) profit sharing plan as an employer-matching contribution, which was offered to all
employees of the Company during each of the indicated years.
|
G
rants of Plan-Based Awards
The following table summarizes information concerning possible incentive cash bonuses and possible and actual restricted stock
and stock option awards for the NEOs during the fiscal year ended December 31, 2015 as well as possible payouts under the 2015 Incentive Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
Under Non-Equity Incentive
Plan
Awards
2
|
|
|
Estimated Possible Payouts Under
Equity Incentive Plan
Awards
3
|
|
|
All other
Stock
Awards:
Number
of Shares
of Stock
or Units
4
(#Shs.)
|
|
|
All
other
Option
Awards:
Number
of
Securities
Underlying
Options
4
(#Shs.)
|
|
|
Exercise
or Base
Price of
Option
Awards
5
($/Sh)
|
|
|
Grant
Date Fair
Value
of
Stock
and
Option
Awards
6
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
1
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(# Shs.)
|
|
|
Target
(# Shs.)
|
|
|
Maximum
(# Shs.)
|
|
|
|
|
|
Douglas A.
Michels
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,934
|
|
|
|
|
|
|
|
|
|
|
$
|
557,686
|
|
President and
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,919
|
|
|
$
|
9.305
|
|
|
$
|
836,523
|
|
Chief Executive
|
|
N/A
|
|
|
$208,913
|
|
|
|
$417,827
|
|
|
|
$626,740
|
|
|
|
37,459 RS
|
|
|
|
49,945 RS
|
|
|
|
62,431 RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Officer
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,450 SO
|
|
|
|
143,266 SO
|
|
|
|
179,083 SO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Ronald H. Spair
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,442
|
|
|
|
|
|
|
|
|
|
|
$
|
264,653
|
|
Chief Financial
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,584
|
|
|
$
|
9.305
|
|
|
$
|
396,971
|
|
Officer and
|
|
N/A
|
|
$
|
117,210
|
|
|
$
|
234,419
|
|
|
$
|
351,629
|
|
|
|
17,653 RS
|
|
|
|
24,519 RS
|
|
|
|
31,384 RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Chief Operating
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,638 SO
|
|
|
|
70,331 SO
|
|
|
|
90,024 SO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony Zezzo II
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,566
|
|
|
|
|
|
|
|
|
|
|
$
|
135,537
|
|
Executive Vice
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,781
|
|
|
$
|
9.305
|
|
|
$
|
203,298
|
|
President,
|
|
N/A
|
|
|
$76,802
|
|
|
|
$153,604
|
|
|
|
$230,406
|
|
|
|
12,138 RS
|
|
|
|
16,184 RS
|
|
|
|
20,230 RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Marketing and
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,818 SO
|
|
|
|
46,424 SO
|
|
|
|
58,030 SO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Jerrett
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,690
|
|
|
|
|
|
|
|
|
|
|
$
|
118,080
|
|
Senior Vice
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,401
|
|
|
$
|
9.305
|
|
|
$
|
177,120
|
|
President
|
|
N/A
|
|
$
|
60,270
|
|
|
$
|
120,540
|
|
|
$
|
180,810
|
|
|
|
7,755 RS
|
|
|
|
10,575 RS
|
|
|
|
13,395 RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
and General Counsel
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,245 SO
|
|
|
|
30,334 SO
|
|
|
|
38,423 SO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Mark L. Kuna
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,015
|
|
|
|
|
|
|
|
|
|
|
$
|
83,885
|
|
Senior Vice
|
|
2/03/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,859
|
|
|
$
|
9.305
|
|
|
$
|
125,825
|
|
President,
|
|
N/A
|
|
|
$47,135
|
|
|
|
$94,270
|
|
|
|
$141,406
|
|
|
|
6,198 RS
|
|
|
|
8,451 RS
|
|
|
|
10,705 RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Finance, Controller and Assistant Secretary
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,778 SO
|
|
|
|
24,243 SO
|
|
|
|
30,708 SO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
1
|
Annual incentive equity awards to NEOs, consisting of a combination of restricted stock (RS) and stock options (SO), were
determined for 2015 pursuant to the LTIP, based on performance during 2014. Annual equity awards made during 2015 were approved by the Compensation Committee effective on February 3, 2015. For a description of these equity awards and their
terms, see the Section entitled, 2015 Long-Term Incentive Awards, in the CD&A.
|
|
2
|
The indicated amounts represent potential incentive cash bonus payments to the NEOs under the 2015 Incentive Plan. On January 25, 2016, bonus
payments under the 2015 Incentive Plan were approved by the Compensation
|
59
|
Committee for the NEOs, based on performance during 2015. A further description of the payments approved under the 2015 Incentive Plan is set forth in the Section entitled, 2015 Annual
Incentive Cash Bonuses, in the CD&A.
|
|
3
|
The indicated amounts represent the potential number of shares which could have been granted to the NEOs in 2015 in the form of restricted stock
and stock options pursuant to the LTIP, based on each officers performance during 2014. For restricted stock, the individual share numbers were calculated by dividing 40% of the long-term incentive targets for each NEO set forth in the LTIP by
the mean between the high and low sales price of the Common Stock as reported by NASDAQ on the date of grant. For stock options, the individual option numbers were calculated by dividing 60% of the long-term incentive targets for each NEO set forth
in the LTIP by the corresponding estimated Black-Scholes value of the Companys Common Stock on the date of grant.
|
|
4
|
The indicated amounts represent the actual number of restricted shares or stock options granted to the NEOs in 2015 under the LTIP, based on
performance during 2014. Specific RS and SO awards were approved by the Compensation Committee for the NEOs effective on February 3, 2015 based on performance during 2014. A further description of these equity awards and their terms is set
forth in the Section entitled, 2015 Long-Term Incentive Awards, in the CD&A.
|
|
5
|
The exercise price for stock options is the fair market value of the Companys Common Stock on the date of grant, which is calculated as the
mean between the high and low sales price of the Common Stock as reported by NASDAQ on such date.
|
|
6
|
The indicated amounts represent the grant date fair value calculated in accordance with FASB ASC Topic 718.
|
O
utstanding Equity Awards at December 31, 2015
The following table summarizes information regarding unexercised stock options and unvested restricted stock held by the NEOs
as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
1
|
|
|
Stock Awards
1
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
2
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($/Sh.)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested
2
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
8
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|
Douglas A. Michels
President and Chief
Executive Officer
|
|
|
67,500
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
9.56
|
|
|
|
1/23/2016
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
45,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.28
|
|
|
|
2/01/2017
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
56,250
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.06
|
|
|
|
2/01/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
90,990
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
2.81
|
|
|
|
1/23/2019
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
102,365
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
5.19
|
|
|
|
1/25/2020
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
193,300
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
6.63
|
|
|
|
2/01/2021
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
192,580
|
|
|
|
8,374
|
3(a)
|
|
|
--
|
|
|
$
|
11.30
|
|
|
|
2/01/2022
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
128,833
|
|
|
|
53,050
|
3(b)
|
|
|
--
|
|
|
$
|
7.05
|
|
|
|
2/01/2023
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
116,441
|
|
|
|
137,613
|
3(c)
|
|
|
--
|
|
|
$
|
5.72
|
|
|
|
2/03/2024
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
171,919
|
3(d)
|
|
|
--
|
|
|
$
|
9.31
|
|
|
|
2/03/2025
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
20,818
|
3(e)
|
|
$
|
134,068
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
59,213
|
3(f)
|
|
$
|
381,332
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
59,934
|
3(g)
|
|
$
|
385,975
|
|
|
|
--
|
|
|
|
--
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
1
|
|
|
Stock Awards
1
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
2
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($/Sh.)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested
2
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
8
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|
Ronald H. Spair
Chief Financial Officer and
Chief Operating Officer
|
|
|
27,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
9.56
|
|
|
|
1/23/2016
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
45,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.28
|
|
|
|
2/01/2017
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
45,500
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.06
|
|
|
|
2/01/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
18,720
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
2.81
|
|
|
|
1/23/2019
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
82,815
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
5.19
|
|
|
|
1/25/2020
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
116,100
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
6.63
|
|
|
|
2/01/2021
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
119,989
|
|
|
|
5,218
4(a)
|
|
|
|
--
|
|
|
$
|
11.30
|
|
|
|
2/01/2022
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
70,507
|
|
|
|
29,033
4(b)
|
|
|
|
--
|
|
|
$
|
7.05
|
|
|
|
2/01/2023
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
58,941
|
|
|
|
69,658
4(c)
|
|
|
|
--
|
|
|
$
|
5.72
|
|
|
|
2/03/2024
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
81,854
4(d)
|
|
|
|
--
|
|
|
$
|
9.31
|
|
|
|
2/03/2025
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
11,393
|
4(e)
|
|
$
|
73,371
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
29,972
|
4(f)
|
|
$
|
193,020
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
28,442
|
4(g)
|
|
$
|
183,166
|
|
|
|
--
|
|
|
|
--
|
|
Anthony Zezzo II
Executive Vice President,
Marketing and Sales
|
|
|
115,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
5.94
|
|
|
|
1/03/2021
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
34,695
|
|
|
|
1,509
5(a)
|
|
|
|
--
|
|
|
$
|
11.30
|
|
|
|
2/01/2022
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
23,319
|
|
|
|
9,602
5(b)
|
|
|
|
--
|
|
|
$
|
7.05
|
|
|
|
2/01/2023
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
38,199
|
|
|
|
45,144
5(c)
|
|
|
|
--
|
|
|
$
|
5.72
|
|
|
|
2/03/2024
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
41,781
5(d)
|
|
|
|
--
|
|
|
$
|
9.31
|
|
|
|
2/03/2025
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
3,768
|
5(e)
|
|
$
|
24,266
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
19,425
|
5(f)
|
|
$
|
125,097
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
14,566
|
5(g)
|
|
$
|
93,805
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Jerrett
Senior Vice President and
General Counsel
|
|
|
18,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
9.56
|
|
|
|
1/23/2016
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
12,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.28
|
|
|
|
2/01/2017
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
12,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.06
|
|
|
|
2/01/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
6,065
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
2.81
|
|
|
|
1/23/2019
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
30,350
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
5.19
|
|
|
|
1/25/2020
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
25,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
6.63
|
|
|
|
2/01/2021
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
33,237
|
|
|
|
1,446
6(a)
|
|
|
|
--
|
|
|
$
|
11.30
|
|
|
|
2/01/2022
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
31,060
|
|
|
|
12,790
6(b)
|
|
|
|
--
|
|
|
$
|
7.05
|
|
|
|
2/01/2023
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
23,490
|
|
|
|
27,761
6(c)
|
|
|
|
--
|
|
|
$
|
5.72
|
|
|
|
2/03/2024
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
36,401
6(d)
|
|
|
|
--
|
|
|
$
|
9.31
|
|
|
|
2/03/2025
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
5,019
|
6(e)
|
|
$
|
32,322
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
11,945
|
6(f)
|
|
$
|
76,926
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
12,690
|
6(g)
|
|
$
|
81,724
|
|
|
|
--
|
|
|
|
--
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
1
|
|
|
Stock Awards
1
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
2
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($/Sh.)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested
2
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
8
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|
Mark L. Kuna
Senior Vice President,
Finance, Controller and
Assistant Secretary
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.28
|
|
|
|
2/01/2017
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
8.06
|
|
|
|
2/01/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
6,956
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
2.81
|
|
|
|
1/23/2019
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
15,175
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
5.19
|
|
|
|
1/25/2020
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
33,700
|
|
|
|
--
|
|
|
|
--
|
|
|
$
|
6.63
|
|
|
|
2/01/2021
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
26,258
|
|
|
|
1,142
7(a)
|
|
|
|
--
|
|
|
$
|
11.30
|
|
|
|
2/01/2022
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
24,589
|
|
|
|
10,126
7(b)
|
|
|
|
--
|
|
|
$
|
7.05
|
|
|
|
2/01/2023
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
18,682
|
|
|
|
22,079
7(c)
|
|
|
|
--
|
|
|
$
|
5.72
|
|
|
|
2/03/2024
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
25,859
7(d)
|
|
|
|
--
|
|
|
$
|
9.31
|
|
|
|
2/03/2025
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
3,973
|
7(e)
|
|
$
|
25,586
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
9,500
|
7(f)
|
|
$
|
61,180
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
9,015
|
7(g)
|
|
$
|
58,057
|
|
|
|
--
|
|
|
|
--
|
|
1
|
The table does not include restricted stock and restricted units awarded to the NEOs in February 2016 pursuant to the LTIP in respect of performance during 2015.
|
2
|
Stock options vest over four years, with the first 25% vesting on the first anniversary of the grant date and the remaining 75% vesting on a monthly basis over the
next three years following the first anniversary of the grant date. Grants of restricted stock vest over a three-year period, with one-third vesting on the first anniversary of the grant date, a second third vesting on the second anniversary and the
final third vesting on the third anniversary.
|
3
|
The indicated stock options and restricted stock vest as follows:
|
|
(a)
|
4,187 options on January 1 and February 1, 2016;
|
|
(b)
|
3,789 options on the 1
st
of each month, from January 1, 2016 through February 1, 2017;
|
|
(c)
|
5,293 options on the 3
rd
of each month, from January 3, 2016 through February 3, 2018;
|
|
(d)
|
42,980 options on February 3, 2016 and 3,582 options on the 3
rd
of each month from March 3, 2016 through February 3, 2019;
|
|
(e)
|
20,818 restricted shares on February 1, 2016;
|
|
(f)
|
29,607 restricted shares on February 3, 2016 and 2017; and
|
|
(g)
|
19,978 restricted shares on February 3, 2016, 2017 and 2018.
|
4
|
The indicated stock options and restricted stock vest as follows:
|
|
(a)
|
2,609 options on January 1 and February 1, 2016;
|
|
(b)
|
2,074 options on the 1
st
of each month, from January 1, 2016 through February 1, 2017;
|
|
(c)
|
2,679 options on the 3
rd
of each month, from January 3, 2016 through February 3, 2018;
|
|
(d)
|
20,464 options on February 3, 2016 and 1,705 options on the 3
rd
of each month from March 3, 2016 through February 3, 2019;
|
|
(e)
|
11,393 restricted shares on February 1, 2016;
|
|
(f)
|
14,986 restricted shares on February 3, 2016 and 2017; and
|
|
(g)
|
9,481 restricted shares on February 3, 2016, 2017 and 2018.
|
62
5
|
The indicated stock options and restricted stock vest as follows:
|
|
(a)
|
754 options on January 1, and February 1, 2016;
|
|
(b)
|
686 options on the 1
st
of each month, from January 1, 2016 through February 1, 2017;
|
|
(c)
|
1,736 options on the 3
rd
of each month, from January 3, 2016 through February 3, 2018;
|
|
(d)
|
10,445 options on February 3, 2016 and 870 options on the 3
rd
of each month from March 3, 2016 through February 3, 2019;
|
|
(e)
|
3,768 restricted shares on February 1, 2016;
|
|
(f)
|
9,713 restricted shares on February 3, 2016 and 2017; and
|
|
(g)
|
4,855 restricted shares on February 3, 2016, 2017 and 2018.
|
6
|
The indicated stock options and restricted stock vest as follows:
|
|
(a)
|
723 options on January 1 and February 1, 2016;
|
|
(b)
|
913 options on the 1
st
of each month, from January 1, 2016 through February 1, 2017;
|
|
(c)
|
1,068 options on the 3
rd
of each month, from January 3, 2016 through February 3, 2018;
|
|
(d)
|
9,100 options on February 3, 2016, and 758 options on the 3
rd
of each month from March 3, 2016 through February 3, 2019;
|
|
(e)
|
5,019 restricted shares on February 1, 2016;
|
|
(f)
|
5,973 restricted shares on February 3, 2016 and 2017; and
|
|
(g)
|
4,230 restricted shares on February 3, 2016, 2017 and 2018.
|
7
|
The indicated stock options and restricted stock vest as follows:
|
|
(a)
|
571 options on January 1 and February 1, 2016;
|
|
(b)
|
723 options on the 1
st
of each month, from January 1, 2016 through February 1, 2017;
|
|
(c)
|
849 options on the 3
rd
of each month, from January 3, 2016 through February 3, 2018;
|
|
(d)
|
6,465 options on February 3, 2016, and 539 options on the 3
rd
of each month from March 3, 2016 through February 3, 2019;
|
|
(e)
|
3,973 restricted shares on February 1, 2016;
|
|
(f)
|
4,750 restricted shares on February 3, 2016 and 2017; and
|
|
(g)
|
3,005 restricted shares on February 1, 2016, 2017 and 2018.
|
8
|
The indicated values were determined by multiplying the number of unvested shares of restricted stock shown in this table by $6.44 per share, the closing price of the
Companys Common Stock as reported by NASDAQ on December 31, 2015.
|
63
|
O
ption Exercises and Stock Vested
|
The following table summarizes information with respect to the exercise of stock options and
vesting of restricted stock for each of the NEOs during the fiscal year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value
Realized
on
Exercise
($)
|
|
|
Number Of
Shares
Acquired
on Vesting
(#)
|
|
|
Value
Realized
on
Vesting
1
($)
|
|
Douglas A.
Michels
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
62,644
|
|
|
|
577,121
|
|
Ronald H.
Spair
Chief Financial Officer and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
33,675
|
|
|
|
310,075
|
|
Anthony
Zezzo II
Executive Vice President, Marketing and Sales
|
|
|
|
|
|
|
|
|
|
|
16,993
|
|
|
|
156,846
|
|
Jack E.
Jerrett
Senior Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
14,356
|
|
|
|
132,116
|
|
Mark L.
Kuna
Senior Vice President, Finance, Controller and Assistant Secretary
|
|
|
|
|
|
|
|
|
|
|
11,382
|
|
|
|
104,749
|
|
1
|
The indicated amounts were calculated by multiplying the number of restricted shares acquired
upon vesting by the market value of the Companys Common Stock on the applicable vesting date. The market value was determined by calculating the mean between the high and low sales prices of the Common Stock as reported by NASDAQ on the
vesting date.
|
The NEOs are eligible to participate in our 401(k) Plan on the same terms and conditions
applicable to all of our employees. For a further description of the terms of the 401(k) Plan, see the Section entitled, Retirement Programs, in the CD&A.
|
N
onqualified Deferred Compensation
|
The OraSure Technologies, Inc. Deferred Compensation Plan (the Plan) is a
non-qualified deferred compensation plan designed to provide deferred compensation benefits to a select group of the Companys highly compensated employees, including all of the NEOs, and to non-employee members of the Board.
The Plan allows for deferrals by participants of up to 100% of their annual base salaries (or in the case of non-employee
Directors, 100% of fees payable under the Companys Non-Employee Director Compensation Policy) and up to 100% of annual incentive cash bonuses and, upon vesting, restricted shares of the Companys Common Stock awarded under the
Companys Stock Award Plan. The Company may also make discretionary contributions to the accounts of employees participating in the Plan. Cash balances in participants accounts may be invested in a list of investment options that are
similar to the fund choices offered in the Companys 401(k) plan. Participants will be permitted to sell vested restricted shares in their accounts, subject to compliance with the Companys Insider Trading Policy and applicable securities
laws, and invest the proceeds of any such sale in the investment options available under the Plan. Participants will be 100% vested in their accounts and the restricted shares they defer, except that Company contributions will vest over one or more
years as determined by
64
the Company. In the event of death, disability or change of control, a participant will become 100% vested in any then unvested Company contributions.
Participants may elect to receive a distribution from his or her account upon a specified date, separation from service,
change of control, disability and/or death. Distributions will be made in a lump sum or installments, as allowed under the Plan.
Amounts contributed to a participants account through elective deferrals or through the Companys discretionary
contributions are generally not subject to income tax, and the Company does not receive a deduction until they are distributed pursuant to the Plan.
However, cash deferrals are subject to the Federal Insurance Contributions Act Tax imposed at the time of deferral (the
FICA tax). Deferrals of restricted shares are subject to the FICA tax at the time the restricted shares vest, but are not subject to income tax, and the Company does not receive the deduction until the restricted shares are distributed
pursuant to the Plan. The Company may amend or terminate the Plan at any time in accordance with applicable law.
The
following table summarizes information for each NEO with respect to the Plan for the fiscal year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
1
($)
|
|
|
Registrant
Contributions
($)
|
|
Aggregate
Earnings/Loss
2
($)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance
at 12/31/15
1,2
($)
|
|
Douglas A. Michels
President and Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald H.
Spair
Chief Financial Officer
and Chief Operating Officer
|
|
$
|
238,323
|
|
|
|
|
$
|
(106,577
|
)
|
|
|
|
$
|
966,233
|
|
Anthony
Zezzo II
Executive Vice President,
Marketing and Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E.
Jerrett
Senior Vice President and
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark L.
Kuna
Senior Vice President,
Finance, Controller and Assistant Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The indicated amounts of NEO contributions have been reported as compensation in the Summary
Compensation Table.
|
2
|
There were no earnings or deferred compensation at above market or preferential rates and,
therefore, no earnings have been reported as compensation in the Summary Compensation Table for 2015. Aggregate earnings include dividends and interest earned during the period, as well as the net unrealized depreciation of the underlying
investments in the participants account.
|
65
|
Employment Agreements and Potential Payments Upon Termination or
Change of Control
|
We have entered into employment agreements with all of our NEOs. We believe such agreements
are necessary to attract and retain critical talent, and are in-line with market practices.
In March 2015, the employment
agreements with Mr. Michels and the other NEOs were amended to eliminate a provision requiring the Company to pay a gross-up for excise tax payments under Section 280G of the Internal Revenue Code. In addition, Mr. Michels
agreement was amended to change a modified single trigger change of control severance provision to a double trigger provision. The following summary describes the material terms of the employment agreements with
Mr. Michels and the other NEOs, as so amended.
Mr. Michels employment agreement with the Company provides
for the various components of compensation described in the CD&A. In addition, upon a termination of employment, Mr. Michels contract provides for certain post-employment severance and other benefits, as described below.
Mr. Michels employment agreement will terminate upon his death or disability. In addition, Mr. Michels may
terminate his employment at any time and for any reason upon 90 days written notice to the Company or for good reason (as defined below). Mr. Michels employment agreement can also be terminated by the Company for
cause (as defined below) or without cause.
As used in Mr. Michels agreement, the term
good reason means (i) a material breach of the agreement by the Company that is not cured within 30 days of written notice, (ii) a material diminution in Mr. Michels base compensation or authority, duties or
responsibilities (following a change of control, such a diminution shall occur if Mr. Michels no longer functions as the sole chief executive officer of the successor organization), (iii) a material diminution in the authority, duties or
responsibilities of the person to whom Mr. Michels reports, including a change in Mr. Michels reporting obligation from the Board to another employee of the Company, if applicable (following a change of control, such a diminution
shall occur if Mr. Michels no longer reports to the board of directors of a public company), (iv) a material diminution of the budget over which Mr. Michels exercises control, or (v) a material change in Mr. Michels
job location.
A change of control generally is defined to take place when disclosure of such a change would
be required by the proxy rules promulgated by the SEC or when:
|
|
|
any person, or more than one person acting as a group within the meaning of Section 409A of the Internal Revenue Code (the Code) and the regulations issued thereunder, acquires ownership of stock of the
Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company;
|
|
|
|
any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition) ownership of stock of the Company possessing 30 percent or more of the total voting power of the Companys stock;
|
|
|
|
a majority of the members of the Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or
election; or
|
|
|
|
a person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most
recent acquisition) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions.
|
66
A change of control period is the period which begins on the
occurrence of a change of control and ends 18 months thereafter.
Upon the termination of Mr. Michels
employment upon his death or disability, by Mr. Michels for any reason other than good reason or by the Company for cause, Mr. Michels will be entitled to receive his salary through the date of termination and any bonus approved by the
Board or the Compensation Committee prior to the date of termination but not yet paid and, in the case of a termination upon his death or disability, a cash bonus for the calendar year in which termination occurs that Mr. Michels would have
received but for his death or disability, prorated through the date of death or commencement of disability. Upon termination of the agreement by Mr. Michels with good reason or by the Company without cause (which includes the Companys
failure to renew the agreement), Mr. Michels would be entitled to receive his salary through the date of termination and any bonus that has been approved by the Board or the Compensation Committee prior to the date of termination but not yet
paid, a cash bonus for the calendar year in which termination occurs equal to Mr. Michels target bonus for such year, and for a period of one year after the date of termination, benefits for Mr. Michels and/or his family at levels
substantially equal to those that would have been provided to them by the Company if Mr. Michels employment had not been terminated. If termination is for good reason or without cause (which includes the Companys failure to renew
the agreement) and does not occur during a change of control period, Mr. Michels would also receive a lump sum amount equivalent to 12 months of his annual salary. If, however, termination is for good reason or without cause (which includes the
Companys failure to renew the agreement) and occurs during a change of control period, Mr. Michels will receive a lump sum amount equivalent to 36 months of his annual salary. If Mr. Michels is a specified employee within
the meaning of Code Section 409A at the time of the termination of his employment and any of the foregoing payments would subject him to any tax, interest or penalty under Code Section 409A or regulation thereunder, then the payment shall
not be made until the first day which is at least six months after the date of termination of his employment.
Upon
termination of Mr. Michels employment as a result of disability, for good reason, or by the Company without cause, Mr. Michels can elect to receive medical and dental insurance coverage for himself and his family under any plans
offered by the Company to the extent the Company is self-insured or coverage for former employees is available on reasonable terms (as determined by the Company) from the Companys providers of medical and dental coverage.
All stock awards granted to Mr. Michels are required to immediately vest (i) in the event of a change of control or
(ii) if Mr. Michels employment is terminated for good reason by Mr. Michels or by the Company without cause during a change of control period, and 50% of such stock awards shall vest in the event Mr. Michels
employment is terminated for good reason or by the Company without cause during any period other than a change of control period.
The termination and severance provisions in the employment agreements for the other NEOs are substantially similar to
Mr. Michels employment agreement, with the following exceptions. Mr. Spair is entitled to receive severance equal to 36 months of his annual salary and Messrs. Jerrett and Kuna are entitled to receive severance equivalent to 24
months of their annual salary, rather than 36 months, in the event of a termination of their agreements for good reason or without cause during a change of control period or after a change of control. Mr. Zezzo will be entitled to receive
severance equal to 24 months of his annual salary only if he is terminated for good reason or without cause during a change of control period. In the employment agreements with Messrs. Spair, Zezzo, Jerrett and Kuna, the term good reason
means (i) a material breach of the agreement by the Company that is not cured within 30 days of written notice, (ii) a material diminution in base compensation or authority, duties or responsibilities, (iii) a material diminution in
the authority, duties or responsibilities of the person to whom the executive reports, including a change in the executives reporting obligation from the Board to another employee of the Company, if applicable, (iv) a material diminution
of the budget over which the executive exercises control, or (v) a material change in the executives job location.
67
The following table provides estimates of the potential severance and other
post-termination benefits the NEOs would receive assuming their employment was terminated as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Benefit
|
|
|
Voluntary
Termination
or
Termination
for Cause
|
|
|
Termination
for Death
or
Disability
1
|
|
|
Termination
for Good
Reason or
Without
Cause
Not
Within
Change of
Control
Period
1
|
|
|
Termination
after Change of
Control
(except
Mr. Michels), or for
Good Reason or
Without Cause
Within Change of
Control Period
1
|
|
Douglas A. Michels
|
|
|
Salary Continuation
|
|
|
|
|
|
|
|
|
|
|
$
|
596,895
|
|
|
$
|
1,790,685
|
|
President and Chief Executive Officer
|
|
|
Bonus
|
|
|
|
|
|
|
$
|
508,787
|
|
|
$
|
417,827
|
|
|
$
|
417,827
|
|
|
|
Accelerated Option Vesting
|
|
|
|
|
|
|
|
|
|
|
$
|
49,885
|
|
|
$
|
99,769
|
|
|
|
Accelerated Restricted
Stock Vesting
|
|
|
|
|
|
|
$
|
901,375
|
|
|
$
|
450,687
|
|
|
$
|
901,375
|
|
|
|
Health Care Benefits
|
|
|
|
|
|
|
|
|
|
|
$
|
22,191
|
|
|
$
|
22,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
$
|
1,410,162
|
|
|
$
|
1,537,485
|
|
|
$
|
3,231,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald H. Spair
|
|
|
Salary Continuation
|
|
|
|
|
|
|
|
|
|
|
$
|
468,838
|
|
|
$
|
1,406,514
|
|
Chief Financial Officer and Chief Operating Officer
|
|
|
Bonus
|
|
|
|
|
|
|
$
|
285,452
|
|
|
$
|
234,419
|
|
|
$
|
234,419
|
|
|
|
Accelerated Option Vesting
|
|
|
|
|
|
|
|
|
|
|
$
|
25,251
|
|
|
$
|
50,502
|
|
|
|
Accelerated Restricted
Stock Vesting
|
|
|
|
|
|
|
$
|
449,557
|
|
|
$
|
224,778
|
|
|
$
|
449,557
|
|
|
|
Health Care Benefits
|
|
|
|
|
|
|
|
|
|
|
$
|
21,969
|
|
|
$
|
21,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
$
|
735,009
|
|
|
$
|
975,255
|
|
|
$
|
2,162,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony Zezzo II
|
|
|
Salary Continuation
|
|
|
|
|
|
|
|
|
|
|
$
|
384,010
|
|
|
$
|
768,020
|
|
Executive Vice President, Marketing and Sales
|
|
|
Bonus
|
|
|
|
|
|
|
$
|
153,036
|
|
|
$
|
153,604
|
|
|
$
|
153,604
|
|
|
|
Accelerated Option Vesting
|
|
|
|
|
|
|
|
|
|
|
$
|
16,365
|
|
|
$
|
32,729
|
|
|
|
Accelerated Restricted
Stock Vesting
|
|
|
|
|
|
|
$
|
243,168
|
|
|
$
|
121,585
|
|
|
$
|
243,168
|
|
|
|
Health Care Benefits
|
|
|
|
|
|
|
|
|
|
|
$
|
3,972
|
|
|
$
|
3,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
$
|
396,204
|
|
|
$
|
679,536
|
|
|
$
|
1,201,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Jerrett
|
|
|
Salary Continuation
|
|
|
|
|
|
|
|
|
|
|
$
|
344,400
|
|
|
$
|
688,800
|
|
Senior Vice
President and General Counsel
|
|
|
Bonus
|
|
|
|
|
|
|
$
|
140,110
|
|
|
$
|
120,540
|
|
|
$
|
120,540
|
|
|
|
Accelerated Option Vesting
|
|
|
|
|
|
|
|
|
|
|
$
|
10,063
|
|
|
$
|
20,127
|
|
|
|
Accelerated Restricted
Stock Vesting
|
|
|
|
|
|
|
$
|
190,972
|
|
|
$
|
95,486
|
|
|
$
|
190,972
|
|
|
|
Health Care Benefits
|
|
|
|
|
|
|
|
|
|
|
$
|
21,941
|
|
|
$
|
21,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
$
|
331,082
|
|
|
$
|
592,430
|
|
|
$
|
1,042,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark L. Kuna
|
|
|
Salary Continuation
|
|
|
|
|
|
|
|
|
|
|
$
|
269,344
|
|
|
$
|
538,688
|
|
Senior Vice President,
Finance, Controller and
Assistant Secretary
|
|
|
Bonus
|
|
|
|
|
|
|
$
|
117,402
|
|
|
$
|
94,270
|
|
|
$
|
94,270
|
|
|
|
Accelerated Option Vesting
|
|
|
|
|
|
|
|
|
|
|
$
|
8,004
|
|
|
$
|
16,007
|
|
|
|
Accelerated Restricted
Stock Vesting
|
|
|
|
|
|
|
$
|
144,823
|
|
|
$
|
72,411
|
|
|
$
|
144,823
|
|
|
|
Health Care Benefits
|
|
|
|
|
|
|
|
|
|
|
$
|
28,056
|
|
|
$
|
28,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
$
|
262,225
|
|
|
$
|
472,085
|
|
|
$
|
821,844
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The indicated values for the accelerated vesting of stock options reflect (i) the number
of option shares which would vest on an accelerated basis, multiplied by (ii) the excess, if any, of the $6.44 per share closing price for the Companys Common Stock, as reported by NASDAQ on December 31, 2015, over the applicable
exercise price for each option. The indicated values for the accelerated vesting of restricted stock reflect the $6.44 per share closing price on December 31, 2015 multiplied by the number of shares which would vest on an accelerated basis.
|
68
|
Equity Compensation Plan Information
|
The following table provides information as of December 31, 2015 about the shares of
Common Stock that may be issued upon the exercise of options under all of our equity compensation plans. These plans include the OraSure Technologies, Inc. Stock Award Plan (Award Plan), the Epitope, Inc. 1991 Stock Award Plan (the
1991 Plan), and the Agritope, Inc. 1992 Stock Award Plan (the Agritope Plan). The Award Plan, the 1991 Plan and the Agritope Plan were Epitope equity compensation plans. In connection with the merger of Epitope and STC into
the Company on September 29, 2000, the Award Plan was adopted by the Company, and the Company assumed the obligation to issue shares for the then outstanding stock options granted under the Award Plan, the 1991 Plan, and the Agritope Plan.
Additional grants of equity compensation may only be made under the Award Plan.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options
(a)
|
|
|
Weighted-Average Exercise
Price of Outstanding
Options
(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
|
|
|
6,090,262
|
|
|
$
|
7.51
|
|
|
3,695,756
1
|
Equity compensation plans not approved by
security holders
|
|
|
125,552
|
2
|
|
$
|
4.42
|
2
|
|
|
Total
|
|
|
6,215,814
|
|
|
|
|
|
|
3,695,756
|
1
|
Represents shares remaining available for future issuance as of December 31, 2015 under
the Award Plan.
|
2
|
Represents shares issuable as of December 31, 2015, under options at a weighted-average
exercise price of $4.42 per share, pursuant to the 1991 Plan and the Agritope Plan.
|