Item 1.01 Entry into a Material Definitive Agreement.
On January 4, 2018, OraSure Technologies, Inc. (the Company) announced a succession plan for its President and Chief Executive Officer
(CEO) and for its Chief Financial Officer (CFO) and Chief Operating Officer. Pursuant to this plan, Stephen S. Tang, Ph.D., who currently serves as a member of the Companys Board of Directors (the Board), as
the Chairman of the Board and as a member of the Audit and Nominating and Corporate Governance Committees, has been appointed by the Board as the Companys new President and CEO, effective as of April 1, 2018. Dr. Tang will replace
Douglas A. Michels, who will retire as President and CEO, and as a member of the Board, on March 31, 2018. In addition, Ronald H. Spair, the Companys CFO and Chief Operating Officer, will be retiring in 2018 with his exact retirement date
to be determined based on the timing for the Companys appointment of a new CFO.
In connection with the foregoing, the Company has entered into (i)
an Employment Agreement, dated as of January 3, 2018 (the Employment Agreement), with Dr. Tang, and (ii) a Retirement Agreement, dated as of January 3, 2018 (the Retirement Agreement), with Mr. Michels.
Employment Agreement
Pursuant to the Employment
Agreement, Dr. Tang will receive (i) an annual base salary of $565,000, (ii) an annual cash bonus opportunity under the Companys annual incentive plan with a bonus target of 85% of his base salary, and (iii) annual equity awards
under the Companys long-term incentive policy ranging from 150% to 250% of his base salary (with a target of 200%). The Employment Agreement has an initial term of 3 years and will automatically renew for successive
1-year
periods unless the Company elects not to renew or the Employment Agreement is otherwise terminated pursuant to its terms.
Dr. Tang will also receive
sign-on
compensation consisting of a cash bonus of $230,000 and an award of 37,116
shares of restricted stock (valued at $700,000 based on the average of the high and low sales prices of the Companys Common Stock on December 29, 2017). The award of restricted stock will be made on Dr. Tangs employment date
and will vest on the fifth anniversary of the grant date.
In the event Dr. Tangs employment is terminated without cause or for
good reason, if such termination does not occur during a change of control period (all such terms as defined in the Employment Agreement), Dr. Tang will be entitled to a lump sum payment equal to 18 months of his annual
salary, a cash bonus for the calendar year during which the termination occurs equal to his target bonus for such year, and reimbursement for certain COBRA premiums. In the event such termination takes place during a change of control
period, Dr. Tang will receive a lump sum payment equal to 36 months of his annual salary, and the other severance payments will remain the same. In addition, in connection with a termination not for cause or for good
reason, during a change of control period, Dr. Tangs unvested equity awards will immediately vest. In the event Dr. Tang does not receive his onboarding grant of restricted stock under certain circumstances
specified in the Employment Agreement, he will receive a cash payment in lieu of such award.
The foregoing description is qualified in its entirety by
reference to the specific terms of the Employment Agreement, a copy of which is attached as Exhibit 10.1 to this Report and incorporated by reference herein.
Retirement Agreements
Pursuant to the Retirement
Agreement, in recognition of Mr. Michels long service to the Company and in consideration of his performance of certain transitional services for Dr. Tang and the Board, the Board has agreed to the following:
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i.
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The unvested portions of stock options and time-vested restricted stock (Restricted Stock) awards received by Mr. Michels prior to the date of the Retirement Agreement will vest in full as of his
retirement date.
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ii.
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The unvested portions of performance-vested restricted units (PVRUs) received by Mr. Michels prior to the date of the Retirement Agreement will vest in full three years after the grant date, subject to
the satisfaction of performance measures applicable to such PVRUs, in accordance with the original terms of the relevant award agreement pursuant to which such PVRUs were granted to Mr. Michels, but without the requirement that Mr. Michels
continue to be employed by the Company after his retirement date.
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iii.
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Mr. Michels will receive his normal annual equity award in 2018 for his performance during 2017 pursuant to the Companys Long-Term Incentive Policy (LTIP) (2018 LTIP Award), with a
grant date value at least equal to 200% of Mr. Michels base salary. Consistent with past practices, the 2018 LTIP Award will consist of 50% Restricted Stock and 50% PVRUs. The terms and conditions of the 2018 LTIP Award will be the same
as the 2018 awards made to other senior executives under the LTIP, except that (a) the Restricted Stock portion of the award will vest on Mr. Michels retirement date and (b) the PVRUs will vest three years after the grant date,
subject to the satisfaction of performance measures determined by the Board, but without the requirement that Mr. Michels continue to be employed by the Company after his retirement date.
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iv.
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Mr. Michels will receive a
pro-rated
bonus payment under the Companys 2018 Incentive Plan equal to (a) 85% of his base salary, subject to adjustment to reflect actual
bonus pool funding approved by the Board, multiplied by (b) the number of days Mr. Michels remains employed during 2018 to and including his retirement date, divided by 365.
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v.
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If after retirement Mr. Michels elects to receive continuation coverage under the Companys group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and
maintains such coverage for the full period permitted by law, he will have the right to elect to continue such coverage at his own cost and expense under the terms of the Companys group health plan.
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The foregoing description is qualified in its entirety by reference to the specific terms of the Retirement Agreement, a copy of which is attached as Exhibit
10.2 to this Report and incorporated by reference herein.