Item 11.
Executive Compensation
Information on Executive Compensation
Compensation Discussion and Analysis
Overview
Pursuant to its charter, the responsibilities of the Compensation Committee are (i) to assist the Board of Directors in discharging its responsibilities in respect of compensation of our senior executive officers; (ii) review and analyze the appropriateness and adequacy of our annual, periodic or long-term incentive compensation programs and other benefit plans and administer those compensation programs and benefit plans.
The Compensation Committee is responsible for the review of our compensation and benefit plans to ensure that they meet our objectives, as well as review the Chief Executive Officers performance, recommend the annual compensation of the Chief Executive Officer, review the Chief Executive Officers recommendations on compensation for our other named executive officers and make recommendations for adopting and changing compensation policies and practices and review and recommend compensation for directors, consultants and advisors. The Compensation Committee reports its recommendations for executive compensation to the full Board of Directors for approval and authorization.
Except for the delegation of authority to the Chief Executive Officer to grant certain de minimus equity compensation awards to our non-executive employees, the Compensation Committee has not delegated any of its responsibilities to any other person.
Objectives of Compensation Program
Our compensation practices are intended to attract, motivate and retain highly competent executives in a competitive marketplace. The program provides the named executive officers listed in our summary compensation table with a compensation package that is competitive, internally equitable and commensurate with their skills, knowledge, experience and responsibilities.
The executive compensation program primary objective is to align total executive compensation with the achievement of our annual and long-term performance goals. The annual goals are primarily based on revenues and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and the long-term goals are based on our stock price.
Compensation is paid to our named executive officers in both fixed and discretionary amounts which are established by the Board of Directors based on existing contractual agreements and the determinations of the Compensation Committee after recommendations by our Chief Executive Officer (other than with respect to himself). Executive officer compensation consists of base salary, cash bonuses and long-term incentive compensation in the form of stock options to purchase shares of our common stock. From time to time, we may also
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pay other expenses on behalf of a named executive officer to include a vehicle allowances, key man life insurance and legal fees.
Use of Consultants and Peer Group Data
We do not engage in specific numerical benchmarking in determining executive compensation. The Compensation Committee periodically considers available compensation data from available resources, but uses the information as a guideline in exercising its discretion in determining executive officer compensation.
In September 2015, the Compensation Committee, acting on behalf of the Board of Directors, retained Northbrook Compensation Associates, to analyze the Companys current base salary levels for its executive officers, establish typical market annual cash incentive award values, and provide recommendations regarding base salary ranges, annual bonus values and long-term incentive compensation.
In establishing executive compensation for fiscal 2016, the Compensation Committee largely followed the methodology recommended in the Northbrook Compensation Associates report. The Compensation Committee determined that Northbrook Compensation Associates was independent and that its engagement did not present any conflicts of interest. Northbrook Compensation Associates provided no other service to us.
Base Salaries
As noted previously, the Compensation Committee evaluates the performance of our Chief Executive Officer and recommends his salary to the full Board of Directors in light of that evaluation. Base salaries, being the first element of the compensation program, are reviewed on an annual basis. The Compensation Committee reviews the Chief Executive Officers base salary annually, giving consideration to his performance during the previous year. Dr. McGann, who was appointed Chief Executive Officer on January 16, 2015, was paid based a base annual salary of $270,000. On July 1, 2015, Dr. McGanns base annual compensation was increased to $300,000 per annum. In performing their evaluation of Dr. McGanns performance, the Compensation Committee considered the following quantitative and qualitative factors in establishing fiscal 2016 compensation for our Dr. McGann:
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the value of Dr. McGanns leadership;
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our financial performance and relative shareholder return;
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the achievement of several regulatory approvals necessary in our industry to compete; and
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leadership of our strategic alternative review process, which culminated with executing an asset purchase agreement with L-3 Communications Corporation on October 10, 2016 to sell the assets used in our explosives trace detection business.
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the compensation plans of chief executive officers in comparable companies.
The base salaries of our other named executive officers, other than the Chief Executive Officer, are reviewed and recommended annually by the Compensation Committee to the full Board of Directors, after consultation with and upon the recommendation of the Chief Executive Officer. The base salary of each named executive officer is recommended by the Chief Executive Officer to the Compensation Committee after evaluating each named executive officers performance over the year, giving consideration to our financial performance, the individuals performance during the year and their contributions to the Company and other relevant factors.
The Compensation Committee considers several factors in evaluating the base salary recommendations for the other named executive officers that are recommended by the Chief Executive Officer. Periodically, the Compensation Committee will review industry specific compensation data that provides detailed information regarding compensation practices of industry peers, competitors and companies of similar size.
Annual Cash Incentives
Annual cash incentives are a significant component of executive compensation, reflecting our belief that managements contribution to long-term shareholder returns is derived from increasing current earnings and preparing the Company for future earnings growth. We believe bonuses are key and enable us to attract, retain and motivate our executives.
For fiscal 2015 and 2016, the Board of Directors established bonus targets as a percentage of base salary for each named executive. These levels were designed to result in total cash compensation, the sum of base salary and target bonus, at the market median, while also taking into account internal pay equity considerations. Fiscal year-end bonuses are discretionarily determined, guided by a framework designed to consider both quantitative and qualitative performance against goals established by the Board of Directors. Bonus targets are based on
9
performance milestones which are established by mutual agreement between the Company and executive within 60 days after commencement of each such fiscal year. For fiscal 2015, each of the named executive officers were eligible to receive a bonus equal to 50% of their base annual salary.
The bonus targets established for the executive officers named in the Summary Compensation Table were based on the achievement of Company-wide revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) targets established by the Board for the fiscal year and qualitative evaluations of performance against strategic goals determined by the Board of Directors. Our revenues for fiscal 2015 were $12,991,000 and our adjusted earnings before interest, taxes, depreciation and amortization was a loss of $9,053,000. Based on our actual results each of the named executive officers did not earn any quantitative bonus for fiscal 2015.
For fiscal 2015, the Board of Directors determined that the addition of our QS-B220 product to the Transportation Security Administrations (TSA) Qualified Product List for passenger checkpoint screening; the execution of an indefinite delivery / indefinite quantity contact with the TSA; and, the receipt of a deliver order under that contract were significant qualitative achievements, and recommended qualitative bonuses of $67,500 for Dr. McGann, $61,250 for Dr. Jones, $100,000 for Mr. Silvestri and $57,500 for Mr. Deschenes. Mr. Liscouski was not eligible to participant in our bonus program during fiscal 2015. With the exception of Mr. Silvestri who was awarded a bonus amount that represented 50% of his base salary, the bonuses represent 25% of the named executives base compensation (base salary as of the commencement of the fiscal year). The Compensation Committee recommended and the Board of Directors approved a bonus of 50% of Mr. Silvestris base salary in recognition of his efforts towards our achievement of the regulatory approvals that were attained in fiscal 2015. Per the terms of his separation agreement, the Board of Directors approved a $50,000 bonus payable to Mr. Bolduc, our former President and Chief Executive Officer for fiscal 2015.
The bonus targets established for the executive officers named in the Summary Compensation Table were based on the achievement of Company-wide revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) targets established by the Board for the fiscal year and qualitative evaluations of performance against strategic goals determined by the Board of Directors.
For fiscal 2016, the Compensation Committee and the Board of Directors determined that executive officers would be eligible for incentive compensation equal to a maximum of 100% of the executive officers base salary on the achievement of Company-wide revenue, based on a sliding scale. Revenues for the year ended June 30, 2016 were $53,061,000 as compared with $12,991,000 for the comparable prior year period, an increase of $40,070,000, or 308.4% and our adjusted earnings before interest, taxes, depreciation and amortization was $1,960,000. Maximum potential incentive compensation table, based on our revenue achievement, is as follows:
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Annual Revenues
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Named Executive Officers
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$13 million
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$26 million
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$39 million
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< $45 million
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Dr. William J. McGann
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25%
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50%
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75%
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100%
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Robert P. Liscouski
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25%
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50%
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75%
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100%
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Dr. Darryl K. Jones
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25%
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50%
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75%
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100%
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Todd A. Silvestri
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25%
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50%
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75%
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100%
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Roger P. Deschenes
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25%
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50%
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75%
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100%
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(1)
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Bonus is calculated as a percent of named executive officers base salary as of July 1, 2015, the first day of our 2016 fiscal year, with the exception of Mr. Silvestri. Mr. Silvestris bonus is calculated as a percent of his base annual salary as of September 28, 2015.
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Based on our Company-wide revenues for the fiscal year ended June 30, 2016, the Board of Directors recommended bonuses of $300,000 for Dr. McGann and Mr. Liscouski, $262,500 for Dr. Jones, $250,000 for Mr. Silvestri and $246,100 for Mr. Deschenes. Each of the Named Executive Officers bonuses is equal to 100% of the executive officerss base salary as of the commencement of the fiscal year, with the exception of Mr. Silvestri. Further, on July 1, 2015, the Board of Directors approved a sign-on bonus of $200,000 payable to Mr. Liscouski.
The Compensation Committee retains full discretion to award discretionary bonuses to the Chief Executive Officer and other named executive officers. In determining discretionary bonuses, the Compensation Committee considers the Chairman of the Boards recommendation for the Chief Executive Officer and considers the Chief Executive Officers recommendation for the other named executive officers in determining discretionary bonuses.
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The Chairmans and Chief Executive Officers recommendations are guided by their evaluations of our actual financial performance against our financial performance goals and their assessment of the effectiveness of the individual and collective efforts of our named executive officers in achieving our business objectives. The Compensation Committee will also consider extraordinary efforts by executive officers in various project or key business initiatives during the year.
Equity Compensation
We view equity compensation to be a key element of our executive compensation program and is intended to more closely align total compensation with the long-term financial interests of our stockholders. The equity compensation component of our compensation program consists of awards of stock options to purchase shares of our common stock.
We have granted stock options to our named executive officers at an exercise price equal to the closing price of our common stock as reported on the OTC Bulletin Board. Beginning in fiscal 2014, to more closely align our named executive compensation with the long-term financial interests of our stockholders, we began to issue stock options with performance target that affects the vesting of the options. On August 13, 2013 options were granted to our named executive officers that were exercisable in three equal annual installments commencing on August 13, 2014, subject to the our achievement of certain performance milestones on or before February 1, 2014. We did not achieve the milestones and, therefore, the options expired on February 1, 2014. Subsequent options grants to our named executive officers on March 6, 2014 and July 2, 2014, included performance target vesting provisions. Please refer to Outstanding Equity Awards at 2016 Fiscal Year-End for further discussion of the performance target vesting provisions of these option grants.
Annual equity awards to our named executive officers are typically made in the first quarter of the fiscal year, following the close of our prior fiscal year and the approval of our annual operating budget for the current fiscal year.
Our Compensation Committee administers our stock option plan, the purpose of which is to advance our interest by:
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providing directors, officers, employees and other eligible person with additional incentives;
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encouraging ownership of our common stock by eligible persons;
·
increasing the proprietary interest of eligible persons in our success;
·
encouraging eligible persons to remain with us; and
·
attracting new directors, officers and directors.
In determining whether to grant stock options and how many of such options to grant to persons eligible under our stock option plan, consideration is given to each individuals past performance and contribution to the Company, as well as that individuals expected ability to contribute to our future success. As part of our annual performance evaluation process, both the Chairman and Chief Executive Officer, after consultation with each named executive officer, establish the executives performance objectives for the coming fiscal year. These performance objectives serve as a framework to evaluate an executives overall performance and can be subject to change during the fiscal year as circumstances warrant. Individual performance objectives may include operational or financial metrics that support corporate or departmental goals and may include specific operational objectives within the executives area of responsibility. The performance objectives may include demonstration of leadership and decision making, effective communication, efforts towards our strategic initiatives, commitment to our key initiatives and core values and may also include specific objectives such as the completion of identified major projects. Evaluation of an executives performance relative to their objectives is subjective, involving a high degree of judgment based on either the Chairmans or Chief Executive Officers observations or interactions with the executive officer during the year. The Chairman and Chief Executive Officer may also consider an executives prospects for future development and advancement within the Company in determining equity compensation recommendations. Additionally, the Chairman and Chief Executive Officer may consider our overall performance in light of the market we compete in as part of an individual executives performance.
The above evaluation forms the basis for recommendations of stock options awards to the Compensation Committee for each named executive officer. The Compensation Committee meets with the Chairman and Chief Executive Officer to discuss their recommendations with them before meeting separately in executive session to discuss their recommendations and make a final determination of the stock option awards to the named executive
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officers. The Compensation Committees evaluation of stock option awards to the Chairman and Chief Executive Officer are also inherently subjective, involving a high degree of judgment.
Employment Agreements
We have entered into employment agreements with Drs. McGann and Jones, Messrs. Liscouski, Silvestri and Deschenes and Ms. Baron. On January 6, 2016, we amended each of the employment agreements with Drs. McGann and Jones, Messrs. Liscouski, Silvestri and Deschenes and Ms. Baron. On February 26, 2015, our Board of Directors amended and restated the Change in Control Plan which was originally adopted by the Board of Directors on September 7, 2012 (the Original Plan, and as amended and restated, the Amended Plan). Further, on August 26, 2016, by Written Consent of the Board of Directors, Mr. Simon, a member of our Board of Directors and certain of our employees, Messrs. Hacene Boudries, Andrew Anderson and Michael Moody were added as participants in the Change in Control Plan.
Each of the named executive officers has executed a Change in Control Payment Agreement with us. Detailed discussion of the named executive officer employment agreements and change in control agreements, can be found in Employment Agreements; Change in Control and Severance Provisions.
Stock Ownership Guidelines
We do not have a formal policy regarding minimum stock ownership requirements for our named executive officers. However, we do encourage ownership of our common stock through stock options grants.
Retirement Plans
We have a defined contribution plan, the Implant Sciences Corporation 401(k) Profit Sharing Plan, established under Section 401(k) of the Internal Revenue Code. All full-time employees who are 21 years of age are eligible to participate on the beginning of the first month after 30 days of employment. The companys contributions are discretionary. We made no matching contributions during fiscal 2016 or 2015.
Our named executive officers do not participate in any special or separate executive retirement plan.
Perquisites
We do not have a formal perquisites program. From time to time, personal benefits may be provided to named executive officers when it is determined that such personal benefits are an integral part of an executives compensation package.
Compensation for Fiscal Year 2017
In determining executive compensation for fiscal 2017, the Compensation Committee largely followed the same methodology recommended in the Northbrook Compensation Associates report and based in part on its consideration of the results of the shareholder advisory vote on our executive compensation, at the Annual Meeting of Stockholders held on July 1, 2015, in which over 81% of shares present at the meeting and entitled to vote supported the compensation of our named executive officers.
The Compensation Committee recommended and the Board of Directors approved fiscal year 2017 base salaries for our named executive officers as follows: Dr. McGann, $300,000; Mr. Liscouski, $300,000; Dr. Jones, $262,150; Mr. Silvestri, $250,000; and, Mr. Deschenes, $246,100. The base salaries reflect no increase from the fiscal year 2016 base salaries.
Each of the named executive officers is eligible to receive a maximum bonus equal to 50% of their base annual salary for fiscal 2017, which will be based on Company-wide revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) targets established by the Board for the fiscal year and qualitative evaluations of performance against strategic goals determined by the Board of Directors. Named executive compensation for fiscal 2017 may be subject to change.
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Summary Compensation Table
The following table provides information concerning compensation earned in our last three fiscal years, ended June 30, 2016 and 2015, by our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, our other most highly compensated named executive officers, whose total compensation exceeded $100,000 for the fiscal years ended June 30, 2016 and 2015 (together, the Named Executive Officers):
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Name and Principal Position
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Fiscal
Year
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Salary
($)
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Bonus
($) (1) (2)
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Option
Awards
($) (3)
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All Other
Compensation
($) (5)
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Total
($)
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Named Executive Officers
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Dr. William J. McGann
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2016
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$
300,000
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$
300,000
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$
238,797
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$
1,256
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$
840,053
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Chief Executive Officer
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2015
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270,000
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67,500
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261,501
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1,135
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600,136
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Robert P. Liscouski (4)
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2016
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$
300,000
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$
500,000
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$
76,008
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$
1,980
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$
877,988
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President
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2015
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115,385
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-
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131,281
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609
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247,275
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Dr. Darryl K. Jones
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2016
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$
262,500
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$
262,500
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$
212,665
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$
1,099
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$
738,764
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Vice President, Sales,
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2015
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248,298
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61,250
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233,038
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1,022
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543,608
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Marketing and Technical
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Services
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Todd A. Silvestri
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2016
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$
241,923
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$
250,000
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$
76,008
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$
438
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$
568,369
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Chief Operating Officer and
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2015
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203,846
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100,000
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142,443
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276
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446,565
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Chief Technology Officer
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Roger P. Deschenes
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2016
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$
246,100
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$
246,100
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$
76,008
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$
1,017
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$
569,225
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Vice President, Finance and
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2015
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233,096
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57,500
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142,443
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944
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433,983
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Chief Financial Officer
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(1)
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The following table provides the information concerning named executive bonus targets and bonus amounts approved by the Board of Directors for the fiscal year ended June 30, 2016:
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Named Executive Officers
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Target Bonus as a Percentage of Base Salary
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Target Bonus
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Actual Bonus
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Actual bonus as a Percentage of Target Bonus
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Dr. William J. McGann
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100%
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$
300,000
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$
300,000
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100%
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Robert P. Liscouski
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100%
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300,000
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300,000
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100%
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Dr. Darryl K. Jones
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100%
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262,500
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262,500
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100%
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Todd A. Silvestri
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100%
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250,000
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250,000
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100%
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Roger P. Deschenes
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100%
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246,100
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246,100
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100%
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(1)
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For fiscal 2016, the Compensation Committee and the Board of Directors determined that executive officers would be eligible for incentive compensation equal to a maximum of 100% of the executive officers base salary on the achievement of Company-wide revenue, based on a sliding scale. Revenues for the year ended June 30, 2016 were $53,061,000 as compared with $12,991,000 for the comparable prior year period, an increase of $40,070,000, or 308.4%. The Board of Directors approved 100% bonuses for the Named Executive Officers in view of the achievement of the revenue target.
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(2)
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Given Mr. Silvestris efforts towards the Companys achievement of regulatory approvals, namely the placement of the QS-B220 desktop ETD system on the Transportation Security Administrations Qualified Product List (QPL) on August 28, 2014; the approval of the QS-B220 by the European Civil Aviation Conference's (ECAC) Common Evaluation Process of Security Equipment (CEP) for airport checkpoint screening of passengers and baggage, on October 6, 2014; and, the Civil Aviation Administration of China (CAAC) approval our QS-B220 desktop ETD system for airport screening of passengers and baggage, in December 2014, the Board of Directors approved 100% of Mr. Silvestris target bonus for the fiscal year ended June 30, 2015. The Board of Directors approved 50% bonuses for the other Named Executive Officers in view of these regulatory approvals.
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(3)
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The amount reported in this column for the Named Executive Officer represents the dollar amount recognized for financial statement reporting purposes in fiscal 2016, 2015 and 2014, with respect to options granted to the Named Executive Officers, determined in accordance with Accounting Standards Codification 718-11-25 Compensation Stock Compensation. See Note 2 of Notes to Consolidated Financial Statements set forth in our Annual Report on Form 10-K for the assumptions used in determining the value of such awards. For the fiscal year ended June 30, 2016,
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(4)
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Mr. Liscouski joined us on February 2, 2015 as Executive Vice President, Business Development and was promoted to President on September 1, 2015.
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(5)
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All other compensation also includes, but is not limited to, vehicle allowances, legal fees, key man life insurance premiums and premiums paid by us for disability and group term life insurance for the chief executive officer and all named executive officers, are set forth in the following table:
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Accrued Vacation / Severance
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Disability
and Group
Term Life
Insurance
Premiums
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Vehicle
Allowance
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Legal
Fees
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Key Man
Life
Insurance
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Total
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Fiscal Year 2016
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Named Executive Officers
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Dr. William J. McGann
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$
-
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$
1,256
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$
-
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$
-
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$
-
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$
1,256
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Robert P. Liscouski
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-
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1,980
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-
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-
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-
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1,980
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Dr. Darryl K. Jones
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-
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1,099
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-
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-
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-
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1,099
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Todd A. Silvestri
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-
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438
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-
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-
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-
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438
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Roger P. Deschenes
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-
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1,017
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-
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-
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-
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1,017
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Fiscal Year 2015
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Named Executive Officers
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Dr. William J. McGann
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$
-
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$
1,135
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$
-
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$
-
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$
-
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$
1,135
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Robert P. Liscouski
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-
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609
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-
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-
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-
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609
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Dr. Darryl K. Jones
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-
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1,022
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-
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-
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-
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1,022
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Todd A. Silvestri
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-
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276
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-
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-
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-
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276
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Roger P. Deschenes
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-
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944
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-
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-
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-
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944
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14
Grants of Plan-Based Awards to Named Executive Officers
The following table sets forth the individual grants of plan-based awards to the Named Executive Officers in the fiscal year ended June 30, 2016. Please see the Outstanding Equity Awards at 2016 Fiscal Year-End for the outstanding stock option awards and unvested stock awards held by each of the Named Executive Officers as of June 30, 2016:
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Fiscal 2016 Grants of Plan-Based Awards
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All Other Option Awards: Number of Securities Underlying Options (#)
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Exercise or Base Price of Option Awards ($/sh)
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Grant Date Fair Value of Stock and Option Awards
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Estimated Future Payouts Under Non-Equity Incentive Plan Award
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Estimated Future Payouts Under Equity Incentive Plan Awards
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Named Executive Officers
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Grant Date (1)
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
|
|
Dr. William J. McGann
|
|
8/14/2015
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
1,498,972
|
|
$
0.78
|
|
$
554,620
|
Dr. Darryl K. Jones
|
|
8/14/2015
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,258,418
|
|
0.78
|
|
465,644
|
(1)
Options vest in three equal installments commencing on August 15, 2016.
Employment Agreements; Change in Control and Severance Provisions
Terms of Employment Agreement with Named Executive Officers and Former Executive Officer
Named Executive Officers
Dr. William J. McGann
In March 2012, we entered into a three-year employment agreement with Dr. William J. McGann, our Chief Operating Officer, pursuant to which Dr. McGann receives a base salary of $250,000 per year, commencing on April 2, 2012. After the third year, the agreement will automatically continue unless notice of termination is given by either party.
On January 16, 2015, the Board of Directors appointed Dr. McGann as our President and Chief Executive Officer and amended and restated the employment agreement with Dr. McGann. The new agreement will remain in effect until the first to occur of the following events: 1) the voluntary termination of Dr. McGann; 2) Dr. McGann resigns for Good Reason, as defined in the restated and amended agreement; 3) we terminate Dr. McGanns employment for Cause, as defined in the restated and amended agreement; 4) the death or disability of Dr. McGann; or 5) the Board of Directors elects a new President of CEO, in which case Dr. McGann would continue his employment as our Chief Operating Officer. On January 6, 2016, we amended Dr. McGanns amended and restated employment agreement.
The amended and restated employment agreement establishes Dr. McGanns base salary at the rate of $270,000 per year, which amount is equal to Dr. McGanns annualized base salary immediately prior to the agreement. Dr. McGanns base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.
We may terminate the agreement at any time without cause, on 30 days written notice. The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Dr. McGann employment is terminated by us without cause or Dr. McGann resigns for good reason (as those terms are defined in the agreement). Dr. McGanns base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee. In the event Dr. McGann resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twenty-four (24) months of his base salary then in effect.
The agreement provides for Dr. McGann to be eligible to receive incentive compensation in an amount up to $135,000, for each of the fiscal years ended June 30, 2016 and June 30, 2015 upon the achievement of certain performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $67,500 was payable to Dr. McGann for the fiscal year ended June 30, 2015. For the fiscal year ended June 30, 2016, Dr. McGann was eligible to receive incentive compensation in an amount up to $300,000 upon the
15
achievement of performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $300,000 was payable to Dr. McGann as of June 30, 2016. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Dr. McGann within 60 days after commencement of each such fiscal year.
The agreement also provides that within 30 days after the completion of an equity financing, the gross proceeds of which to the Company are not less than $15,000,000, the Company will grant Dr. McGann an incentive stock option to purchase that number of shares of common stock of the Company which, together with all other option and equity awards previously issued by the Company, will equal approximately 1% of the Companys fully diluted equity.
Mr. Robert P. Liscouski
On December 15, 2015, we entered into an employment agreement with Mr. Robert Liscouski, our President, pursuant to which Mr. Liscouski will receive a base annual salary of $300,000 per year, commencing on December 15, 2015. The employment agreement does not contain a specified term of employment. We may terminate the agreement at any time without cause, on 30 days written notice. The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Mr. Liscouski employment is terminated by us without cause or Mr. Liscouski resigns for good reason (as those terms are defined in the agreement). In the event Mr. Liscouski resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twelve (12) months of his base salary then in effect. Mr. Liscouskis base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.
The agreement provides for Mr. Liscouski to be eligible to receive incentive compensation in an amount equal to 50% of his annual base salary and provided for a sign on bonus in the amount of $200,000. For the fiscal year ended June 30, 2016, Mr. Liscouski was eligible to receive incentive compensation in an amount up to $300,000 upon the achievement of performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $300,000 was payable to Mr. Liscouski as of June 30, 2016. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Mr. Liscouski within 60 days after commencement of each such fiscal year.
Dr. Darryl K. Jones
In May, 2012, we entered into a three-year employment agreement with Dr. Darryl Jones, our Vice President of Sales and Marketing, pursuant to which Dr. Jones will receive a base annual salary of $235,000 per year, commencing on May 7, 2012. After the third year, the agreement will automatically continue unless notice of termination is given by either party. On January 6, 2016, we amended Dr. Jones employment agreement. We may terminate the agreement at any time without cause, on 30 days written notice. The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Dr. Jones employment is terminated by us without cause or Dr. Jones resigns for good reason (as those terms are defined in the agreement). In the event Dr. Jones resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twelve (12) months of his base salary then in effect.
Dr. Joness base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.
The agreement provides for Dr. Jones to be eligible to receive incentive compensation in an amount of up to $122,500 for each of the fiscal year ended June 30, 2015 and June 30, 2014 upon the achievement of certain performance milestones to be established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $61,250 was payable to Dr. Jones for the fiscal year ended June 30, 2015. For the fiscal year ended June 30, 2016, Dr. Jones was eligible to receive incentive compensation in an amount up to $262,500 upon the achievement of performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $262,500 was payable to Dr. Jones as of June 30, 2016. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Dr. Jones within 60 days after commencement of each such fiscal year.
16
The agreement also provides that within 30 days after the completion of an equity financing, the gross proceeds of which to the Company are not less than $15,000,000, the Company will grant Dr. Jones an incentive stock option to purchase that number of shares of common stock of the Company which, together with all other option and equity awards previously issued by the Company, will equal approximately 1% of the Companys fully diluted equity.
Ms. Brenda L. Baron
On March 13, 2015, we entered into an employment agreement with Ms. Brenda Baron, our Vice President of Manufacturing, pursuant to which Ms. Baron will receive a base annual salary of $180,000 per year, commencing on March 13, 2015. On January 6, 2016, we amended Ms. Barons employment agreement. As amended, the employment agreement does not contain a specified term of employment. We may terminate the agreement at any time without cause, on 30 days written notice. The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Ms. Baron employment is terminated by us without cause or Ms. Baron resigns for good reason (as those terms are defined in the agreement). In the event Ms. Baron resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twelve (12) months of her base salary then in effect.
Ms. Barons base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.
The agreement provides for Ms. Baron to be eligible to receive incentive compensation in an amount equal to 50% of her annual base salary. Ms. Baron was eligible to receive incentive compensation of $90,000 for the fiscal year ended June 30, 2015 upon the achievement of certain performance milestones to be established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $45,000 was payable to Ms. Baron for the fiscal year ended June 30, 2015. For the fiscal year ended June 30, 2016, Ms. Baron was eligible to receive incentive compensation in an amount up to $187,200 upon the achievement of performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $187,200 was payable to Ms. Baron as of June 30, 2016. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Ms. Baron within 60 days after commencement of each such fiscal year.
Mr. Todd A. Silvestri
On March 13, 2015, we entered into an employment agreement with Mr. Todd Silvestri, our Vice President of Advanced Technology and Product Development, pursuant to which Mr. Silvestri will receive a base annual salary of $200,000 per year, commencing on March 13, 2015. On January 6, 2016, we amended Mr. Silvestris employment agreement. As amended, the employment agreement does not contain a specified term of employment. We may terminate the agreement at any time without cause, on 30 days written notice. The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Mr. Silvestri employment is terminated by us without cause or Mr. Silvestri resigns for good reason (as those terms are defined in the agreement). In the event Mr. Silvestri resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twelve (12) months of his base salary then in effect.
Mr. Silvestris base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.
The agreement provides for Mr. Silvestri to be eligible to receive incentive compensation in an amount equal to 50% of his annual base salary. Mr. Silvestri was eligible to receive incentive compensation of $100,000 for the fiscal year ended June 30, 2015 upon the achievement of certain performance milestones to be established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $100,000 was payable to Mr. Silvestri for the fiscal year ended June 30, 2015. For the fiscal year ended June 30, 2016, Mr. Silvestri was eligible to receive incentive compensation in an amount up to $250,000 upon the achievement of performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $250,000 was payable to Mr. Silvestri as of June 30, 2016. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Mr. Silvestri within 60 days after commencement of each such fiscal year.
17
Mr. Roger P. Deschenes
On September 16, 2015, we entered into an employment agreement with Mr. Roger Deschenes, our Chief Financial Officer, pursuant to which Mr. Deschenes will receive a base annual salary of $246,000 per year, commencing on September 16, 2015. On January 6, 2016, we amended Mr. Deschenes employment agreement. As amended, the employment agreement does not contain a specified term of employment. We may terminate the agreement at any time without cause, on 30 days written notice. The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Mr. Deschenes employment is terminated by us without cause or Mr. Deschenes resigns for good reason (as those terms are defined in the agreement). In the event Mr. Deschenes resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twelve (12) months of his base salary then in effect.
Mr. Deschenes base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.
The agreement provides for Mr. Deschenes to be eligible to receive incentive compensation in an amount equal to 50% of his annual base salary. Mr. Deschenes was eligible to receive incentive compensation of $117,000 for the fiscal year ended June 30, 2015 upon the achievement of certain performance milestones to be established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $57,500 was payable to Mr. Deschenes for the fiscal year ended June 30, 2015. For the fiscal year ended June 30, 2016, Mr. Deschenes was eligible to receive incentive compensation in an amount up to $246,100 upon the achievement of performance milestones established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $246,100 was payable to Mr. Deschenes as of June 30, 2016. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Mr. Deschenes within 60 days after commencement of each such fiscal year.
Separation Agreement
On January 16, 2015, Glenn D. Bolduc, resigned from his positions as Chief Executive Officer and President of the Company), as well as his seat on the Companys Board of Directors and his position as Chairman of the Board effective on that date.
In connection with and prior to Mr. Bolducs resignations, Mr. Bolduc entered into a Separation Agreement and Release (the Separation Agreement) with the Company. The Separation Agreement provides that Mr. Bolducs resignation will be deemed an involuntary termination without cause pursuant to his Amended and Restated Employment Agreement dated as of June 25, 2013. In this regard, and subject to the terms contained in the Employment Agreement, Mr. Bolduc is entitled to receive: (i) annual base salary for 18 months on a regular payroll basis; (ii) a pro rata portion of any bonus earned in 2015; (iii) continuation of coverage under and contributions to health care, dental and life insurance benefits for a 12 month period; and (iv) transfer of any key man life insurance.
In connection with Mr. Bolducs resignation, we recorded a non-recurring charge of $725,000 in our consolidated statements of operations and comprehensive loss for the year ended June 30, 2015.
The agreement provides for Mr. Bolduc to be eligible to receive pro-rate incentive compensation in an amount equal to 25% of his annual base salary. Mr. Bolduc was eligible to receive incentive compensation of $50,000 for the fiscal year ended June 30, 2015 upon the achievement of certain performance milestones to be established by the Board of Directors. We did achieve these milestones and a bonus in the amount of $50,000 was payable to Mr. Bolduc for the fiscal year ended June 30, 2015.
Additionally, pursuant to the terms of the Separation Agreement: (i) Mr. Bolduc agreed to consent to a modification of the Companys Change of Control Payment Plan (CIC Plan), currently being considered by the Board of Directors, under which, in the event the Company is sold, Mr. Bolducs share in the CIC Plan will be reduced to 4% of the net sales price of the Company, as defined in an amended CIC Plan, and under which the aggregate share of all other participants in the CIC Plan will be 8.5% of the net sales price; (ii) the Company agreed that Mr. Bolduc shall continue to have the use of an apartment in New York City through the end of the current lease, all lease obligations of said apartment, including but not limited to rent payments and utilities, to be paid by the Company; (iii) the Company agreed to pay Mr. Bolducs attorney the sum of $40,000 towards legal fees related to the negotiation of the Separation Agreement and related matters; (iv) the Company amended Mr. Bolducs existing stock options permitting Mr. Bolduc to exercise those options which are vested as of his separation date through the maturity date of said options and to provide for the ability to exercise the vested options on a cashless
18
basis, all other terms of Mr. Bolducs options remained unchanged ; and (v) Mr. Bolduc agreed to release all claims against the Company.
We recorded a non-cash charge of $440,000 in our consolidated statements of operations and comprehensive loss in the year ended June 30, 2015 to record additional stock-based compensation expense resulting from the amendments to Mr. Bolducs existing vested stock options.
Potential Payments Upon Termination or Change in Control
The following table describes the estimated compensation upon (i) termination by the Company of the Named Executive Officer without cause, or (ii) termination by the Named Executive Officer for good reason, excluding certain changes in control involving the Company. The estimated incremental compensation assumes the triggering event had occurred on June 30, 2016. Benefits generally available to all employees are not included in the table. The actual amount of compensation can only be determined at the time of termination.
|
|
|
|
|
|
|
|
| |
|
Named Executive Officers
|
|
Base Salary Continuation (1)
|
|
COBRA Premiums (2)
|
|
Life Insurance Premiums (3)
|
|
Dr. William J. McGann
|
|
$
300,000
|
|
$
21,642
|
|
$
1,487
|
|
Mr. Robert P. Liscouski
|
|
300,000
|
|
24,340
|
|
1,487
|
|
Dr. Darryl K. Jones
|
|
262,500
|
|
24,340
|
|
1,407
|
|
Todd A. Silvestri
|
|
250,000
|
|
21,642
|
|
1,379
|
|
Roger P. Deschenes
|
|
246,100
|
|
21,642
|
|
1,373
|
|
|
|
|
|
|
|
|
(1)
|
We are required to continue to pay Drs. McGann and Jones, Messrs. Liscouski, Silvestri and Deschenes annual base salary then in effect for 12 months on a regular payroll basis.
|
(2)
|
Represents estimated out-of-pocket COBRA health insurance and dental premium expenses to be paid by us on behalf of Drs. McGann and Jones, and, Messrs. Liscouski, Silvestri and Deschenes after termination. Estimated out-of-pocket COBRA health insurance premium incurred by Drs. McGann and Jones and for Messrs. Liscouski, Silvestri and Deschenes over the 12-month period following termination.
|
(3)
|
Represents estimated life insurance premiums to be paid by us on behalf of Drs. McGann and Jones, and Messrs. Silvestri and Deschenes after termination. We are required to continue in full force and effect, at our expense, the life insurance benefits provided in these officers employment agreements for a period of 12 months after termination of the respective officers employment, for each Named Executive Officer.
|
Each of the Named Executive Officers employment agreement, as amended on January 6, 2016, provides that in the event the Named Executive Officer resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined, the Named Executive Officer shall receive, in addition to any severance to which he is entitled under the agreement as amended, an additional sum equal to twelve (12) months of his base salary then in effect. The additional severance payable to each of the Named Executive Officers who resigns for Good Reason within twelve (12) months after a Change of Control is as follows:
|
|
| |
Named Executive Officers
|
|
Change of Control Severance Payable
|
|
Dr. William J. McGann
|
|
$
300,000
|
|
Mr. Robert P. Liscouski
|
|
300,000
|
|
Dr. Darryl K. Jones
|
|
262,500
|
|
Todd A. Silvestri
|
|
250,000
|
|
Roger P. Deschenes
|
|
246,100
|
|
Adoption of the Change of Control Payment Plan
On September 7, 2012, the Board of Directors adopted the Implant Sciences Corporation Change of Control Payment Plan (the COC Plan), the purpose of which is to reward management for the increases in shareholder value generated between January 2009 and September 7, 2012.
On January 2, 2009, the closing price of our common stock on the NYSE Amex LLC was $0.18 per share. On the date the plan was adopted, the closing price of the common stock on the OTC Markets Groups OTCPK tier was $1.40. Our Board of Directors believes that this increase in shareholder value is directly attributable to the dedication and hard work of our management team, employees and directors. Accordingly, our management and
19
directors have not significantly benefitted from the increase in shareholder value between January 2009 and September 7, 2012, and the COC Plan is intended to provide value to our management and directors equivalent to the value they would have earned had they owned a more significant portion of our equity.
Pursuant to the COC Plan, the Board established a target level of stock ownership for each officer as a percentage of our fully diluted capitalization, and a corresponding ownership percentage for directors. To reflect the increase in shareholder value between January 2009 and the adoption of the plan, the Board determined that each officer and director should be allocated a Change of Control Payment equal to the product of (x) the closing price of our common stock on September 7, 2012 (
i.e
., $1.40) less a floor price, multiplied by (y) the number of additional stock options granted to each participant on the same date. The floor price applicable to directors and officers who served us at the beginning of the turn-around is $0.20,
i.e
., slightly above the closing price of the common stock on January 2, 2009. The floor prices for Dr. McGann and Dr. Jones are $0.51 and $0.67, respectively, reflecting the closing prices of the common stock on the dates those officers joined us. The benefits under the plan are payable upon, and only upon, a Change of Control, as defined in the plan, involving the company. Accordingly, the payment of the benefits allocated under the plan will be further deferred until such time that all shareholders receive payments for or in respect of their common stock in a transaction constituting a Change of Control.
Pursuant to the terms of the Separation Agreement (see Note 16): (i) Mr. Bolduc agreed to consent to a modification of the Companys Change in Control Payment Plan (CIC Plan), currently being considered by the Board of Directors, under which, in the event the Company is sold, Mr. Bolducs share in the CIC Plan will be reduced to 4% of the net sales price of the Company, as defined in an amended CIC Plan, and under which the aggregate share of all other participants in the CIC Plan will be 8.5% of the net sales price. The Company amended Mr. Bolducs existing stock options permitting Mr. Bolduc to exercise those options.
On February 26, 2015, our Board of Directors amended and restated the Change in Control Plan which was originally adopted by the Board of Directors on September 7, 2012 (the Original Plan, and as amended and restated, the Amended Plan). The Amended Plan modifies certain provisions of the Original Plan relating to the calculation and amounts of payment to which certain key employees and directors of the Company are entitled following a Change in Control (as defined in the Amended Plan) as well as certain terms and conditions of payment, as described below.
The Original Plan provided that Participants would receive certain fixed amounts upon a Change of Control. The Amended Plan does not provide such fixed amounts. Instead, the Amended Plan provides for Change of Control Payments based on a percentage of Net Proceeds of a Change of Control after subtracting amounts that the Participant would receive in the Change of Control transaction as a result of the Participants ownership of certain stock options of the Company. Change of Control Payments are calculated as (a) the product of (i) Net Proceeds of a Change of Control, multiplied by (ii) the applicable percentage granted to the Participant, reduced, but not below zero, by (b) any portion of the Net Proceeds or any other consideration which are payable to such Participant with respect to the At-Risk Options or with respect to shares of capital stock of the Company acquired upon the exercise of the At-Risk Options. The options deemed to be At- Risk are identified in Appendix A of the Amended Plan.
In the Amended Plan, Net Proceeds is defined as the aggregate consideration paid in connection with a Change of Control, after payment of (i) all secured indebtedness of the Company and any controlled subsidiary, together with all accrued but unpaid interest thereon and all other obligations related thereto, including without limitation all indebtedness owed to DMRJ Group, LLC, and to the holders of promissory notes issued pursuant to that certain Note Purchase Agreement dated as of March 19, 2014, between the Company and certain other parties thereto, and (ii) all other obligations and liabilities of the Company and any Controlled Subsidiary, including all expenses related to such Change of Control. Net Proceeds shall be deemed to include (i) any consideration to be paid to the Company, any Controlled Subsidiary, or the Companys stockholders (as the case may be) that is to be held in escrow and (ii) any consideration to be paid to the Company, any Controlled Subsidiary, or the Companys stockholders (as the case may be) that is based on the future outcome or performance of the Company or any Controlled Subsidiary in the form of an earn-out according to the terms of the Change of Control. Upon any release from escrow and/or any payment of an earn-out, the Company shall make the Change of Control Payments attributable to such amounts upon the same payment schedule and under the same terms and conditions as apply to the corresponding payments to the Company, any Controlled Subsidiary, or the Companys stockholders (as the case may be) and in compliance with Section 409A of the Code.
20
In the Amended Plan, the definition of Change of Control was revised to mean the occurrence of any one of the following events:
(a)
a merger or consolidation in which:
(i)
the Company is a constituent party, or
(ii)
more than fifty percent (50%) owned subsidiary of the Company, measured by the total fair market value and the total voting power of the outstanding shares of the capital stock of such subsidiary (a Controlled Subsidiary) is a constituent party, where any one Person, or more than one Person Acting as a Group, other than Excluded Person(s), acquires ownership of the stock of the Company or Controlled Subsidiary that, together with the stock then held by such Person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company or Controlled Subsidiary (determined on a fully diluted basis assuming the exercise, conversion or exchange of all exercisable, convertible or exchangeable securities, respectively). However, if any one Person or more than one Person Acting as a Group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person or Persons is not considered to cause a Change of Control.
(b)
the sale, lease, transfer, exclusive license or other disposition by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole to any one Person, or more than one Person Acting as a Group, other than Excluded Person(s), in a single transaction or in a series of related transactions during the twelve (12) month period ending on the date of the most recent disposition to such Person or Persons, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company; or
(c)
the sale, exchange or transfer to any one Person, or more than one Person Acting as a Group, other than Excluded Person(s), in a single transaction or in a series of related transactions during the twelve (12) month period ending on the date of the most recent transfer to such Person or Persons, of at least a majority, by voting power (determined on a fully diluted basis, assuming the exercise, conversion or exchange of all exercisable, convertible or exchangeable securities, respectively), of the outstanding shares of capital stock of the Company.
Under the Original Plan a termination of employment of a Participant did not affect such Participants ability to receive a Change of Control Payment. Under the Amended Plan, in the event that a Participant is terminated by the Company for Cause or resigns without Good Reason, such Participants eligibility immediately terminates.
Additionally, a Participants termination without Cause or Resignation for Good Reason prior to or after a Change of Control will not affect the eligibility of such Participant or his or her Beneficiary to receive a Change of Control Payment; provided, however, that, (x) in the event of a Participants termination without Cause or Resignation for Good Reason after the Effective Date but on or before June 30, 2015, then, for purposes of the definition of Change of Control Payment, the percentage applicable to such Participant shall be as set forth in Column B of Appendix B of the Amended Plan; and (y) in the event of a Participants termination without Cause or Resignation for Good Reason after June 30, 2015 but on or before December 31, 2015, the percentage applicable to such Participant shall be as set forth in Column C of Appendix B of the Amended Plan.
Termination for Cause is defined as the termination by the Company or any affiliate of any Participants employment with the Company or any affiliate for any of the following reasons: (a) the Participants conviction or entry of a plea of nolo contendere to any felony or a crime involving moral turpitude, fraud or embezzlement of the property of the Company or any affiliate; or (b) the Participants dishonesty, gross negligence or gross misconduct that is materially injurious to the Company or any affiliate or material breach of his duties to the Company or any affiliate, which has not been cured by the Participant within 10 days (or longer period as is reasonably required to cure such breach, negligence or misconduct) after he shall have received written notice from the Company or such affiliate stating with reasonable specificity the nature of such breach; or (c) the Participants illegal use or abuse of drugs, alcohol, or other related substances that is materially injurious to the Company or any affiliate.
Resignation for Good Reason is defined as the voluntary resignation of a Participants employment with the Company or any affiliate for any of the following reasons: (a) a material diminution (as such term is used in Section 409A of the Code) of the duties assigned to Participant; or (b) a material reduction in the Participants base salary or other benefits (other than a reduction or change in benefits generally applicable to all executive employees of the Company and its affiliates); or (c) relocation by the Company or any affiliate of any Participant who is an employee of the Company to an office more than 50 miles outside the Participants current workplace. However,
21
resignation by a Participant shall be not deemed to be a Resignation for Good Reason unless (i) the Participant reports the event or condition to the Board, in writing, within 45 days of such event or condition occurring and (ii) within 30 days after the Participant provides such written notice, the Company or the appropriate affiliate.
The Change in Control Payments will be payable to Participants, or their respective beneficiaries, in cash, no later than 30 days after the Net Proceeds are received by the Company.
The Original Plan stated that any termination or amendment of the Original Plan that imposed additional obligations on, or impaired the rights of, a Participant would not be effective without the written consent of the Participant. The Amended Plan states that any termination or amendment to the Plan that imposes additional obligations on, or impairs the rights of, a Participant shall not be effective without the Participants written consent unless such termination or amendment shall apply with the same force and effect to all of the Participants, in which case no consent of the Participants, or of any individual Participant, shall be required.
The applicable percentage of Net Proceeds to be received by each Participant is set forth below and in Appendix B of the Amended Plan. As described above, the Change in Control Payment to which a Participant will be entitled based upon the applicable percentage below will be reduced by any consideration that the Participant receives as a result of the At-Risk Options.
On August 26, 2016, by Written Consent of the Board of Directors, Messrs. Hacene Boudries, Andrew Anderson and Michael Moody were added as Participants in the Change in Control Plan.
PARTICIPANTS AND CHANGE IN CONTROL PERCENTAGES
|
|
|
|
| |
|
Applicable Percentage
|
Participant
|
A
|
|
B*
|
|
C**
|
Glenn D. Bolduc
|
4.00%
|
|
4.00%
|
|
4.00%
|
William McGann
|
1.47%
|
|
1.47%
|
|
1.47%
|
Darryl Jones
|
1.10%
|
|
0.60%
|
|
0.80%
|
Roger P. Deschenes
|
0.97%
|
|
0.60%
|
|
0.80%
|
Todd Silvestri
|
1.00%
|
|
0.60%
|
|
0.80%
|
Brenda Baron
|
1.00%
|
|
0.60%
|
|
0.80%
|
Robert Liscouski
|
1.10%
|
|
1.10%
|
|
1.10%
|
Howard Safir
|
0.32%
|
|
0.32%
|
|
0.32%
|
John Keating
|
0.32%
|
|
0.32%
|
|
0.32%
|
Michael Turmelle
|
0.64%
|
|
0.64%
|
|
0.64%
|
Estate of Joseph Levangie
|
0.25%
|
|
0.25%
|
|
0.25%
|
Hacene Boudries
|
0.08%
|
|
0.08%
|
|
0.08%
|
Michael Moody
|
0.08%
|
|
0.08%
|
|
0.08%
|
Andrew Anderson
|
0.08%
|
|
0.08%
|
|
0.08%
|
James Simon
|
0.09%
|
|
0.09%
|
|
0.09%
|
Totals
|
12.50%
|
|
10.83%
|
|
11.63%
|
______________________________________
*Applicable percentage received by a Participant in the event of Participants termination without Cause or Resignation for Good Reason after the Effective Date but on or before June 30, 2015.
**Applicable percentage received by a Participant in the event of Participants termination without Cause or Resignation for Good Reason after June 30, 2015 but on or before December 31, 2015.
The applicable percentage of Net Proceeds to be received by each Participant set forth in Column A above were fully vested as of June 30, 2016.
22
Outstanding Equity Awards at 2016 Fiscal Year-End
The following table provides information regarding outstanding stock options held by each Named Executive Officer as of June 30, 2016.
|
|
|
|
|
|
|
| |
Named Executive Officers
|
|
Number of Securities Underlying Unexercised Options Exercisable
|
|
Number of Securities Underlying Unexercised Options Unexercisable
|
|
Option Exercise Price ($ per Share)
|
|
Option Expiration Date
|
Dr. William J. McGann
|
(3)
|
200,000
|
|
-
|
|
$
0.54
|
|
03/31/2021
|
|
(2)
|
75,000
|
|
-
|
|
$
0.79
|
|
03/05/2024
|
|
(4)
|
300,000
|
|
-
|
|
$
1.10
|
|
07/02/2024
|
|
(5)
|
499,607
|
|
999,365
|
|
$
0.78
|
|
08/15/2025
|
|
|
1,074,607
|
|
999,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P. Liscouski
|
(6)
|
200,000
|
|
-
|
|
$
0.08
|
|
06/26/2019
|
|
(1)
|
806,798
|
|
-
|
|
$
1.40
|
|
09/06/2022
|
|
(2)
|
25,000
|
|
-
|
|
$
0.79
|
|
03/05/2024
|
|
(4)
|
300,000
|
|
-
|
|
$
1.10
|
|
07/02/2024
|
|
|
1,331,798
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Darryl K. Jones
|
(2)
|
50,000
|
|
-
|
|
$
0.79
|
|
03/05/2024
|
|
(4)
|
300,000
|
|
-
|
|
$
1.10
|
|
07/02/2024
|
|
(5)
|
419,431
|
|
838,987
|
|
$
0.78
|
|
08/15/2025
|
|
|
769,431
|
|
838,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd A. Silvestri
|
(1)
|
730,949
|
|
-
|
|
$
1.40
|
|
09/06/2022
|
|
(2)
|
50,000
|
|
-
|
|
$
0.79
|
|
03/05/2024
|
|
(4)
|
300,000
|
|
-
|
|
$
1.10
|
|
07/02/2024
|
|
|
1,080,949
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger P. Deschenes
|
(1)
|
1,058,498
|
|
-
|
|
$
1.40
|
|
09/06/2022
|
|
(2)
|
50,000
|
|
-
|
|
$
0.79
|
|
03/05/2024
|
|
(4)
|
300,000
|
|
-
|
|
$
1.10
|
|
07/02/2024
|
|
|
1,408,498
|
|
-
|
|
|
|
|
(1)
Exercisable in two equal annual installments commencing on September 7, 2012.
(2)
Exercisable in full upon the later of (i) the addition of the Companys QS-B220 Product to the Transportation Security Administration (TSA) Qualified Product List for passenger checkpoint screening and (ii) the receipt of an initial order for such products under an indefinite delivery/indefinite quantity contract with the TSA.
(3)
Exercisable on April 1, 2012.
(4)
Options vest one-third upon the last to occur of (i) addition of the Companys QS-B220 Product to the Transportation Security Administration (TSA) Qualified Product List for passenger checkpoint screening, (ii) the execution of an indefinite delivery/indefinite quantity contract with the TSA, and (iii) receipt of orders under that contract. The remaining options will vest in two equal installments on the first and second anniversary of the initial vesting date. We achieved the three criteria established for the July 2, 2014 option grant and, as such, the initial one-third vested on November 10, 2014.
(5)
Options vest in three equal annual installments commencing on the August 15, 2016.
(6)
Exercisable on June 26, 2009.
23
2016 Option Exercises and Stock Vested
During the year ended June 30, 2016, there were no exercises of option awards by any of the Named Executive Officers.
Directors Compensation
The following table sets forth the annual compensation of our non-employee directors for the fiscal year ended June 30, 2016, which consists of annual cash retainers, board and committee meeting fees and equity awards in the form of options pursuant to the 2014 Stock Option Plan.
|
|
|
|
|
|
|
| |
Director
|
|
Fees Earned or Paid in Cash
($)
|
|
Option Awards
($) (1)
|
|
All Other Compensation
($) (2) (3)
|
|
Total
($)
|
Michael C. Turmelle
|
|
$
96,500
|
|
$
75,996
|
|
$
-
|
|
$
172,496
|
James M. Simon, Jr.
|
|
79,250
|
|
28,316
|
|
-
|
|
107,566
|
(1)
The amount reported in this column for the non-employee director represents the dollar amount recognized for financial statement reporting purposes in fiscal 2016, with respect to options granted to non-employee directors, determined in accordance with Statement of Accounting Standards Codification 718-10-25 Compensation Stock Compensation. See Note 2 of Notes to Consolidated Financial Statements set forth in this Annual Report on Form 10-K for the assumptions used in determining the value of such awards.
Grants of Plan-Based Awards to Non-Employee Directors
The following table sets forth the individual grants of plan-based awards to our non-employee directors in fiscal year ended June 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fiscal 2016 Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option Awards: Number of Securities Underlying Options (#)
|
|
Exercise or Base Price of Option Awards ($/sh)
|
|
Grant Date Fair Value of Stock and Option Awards
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
|
|
Estimated Future Payouts Under Equity Incentive Plan Awards
|
|
|
|
Named Executive Officers
|
|
Grant Date (1)
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
|
|
James M. Simon, Jr.
|
|
7/1/2015
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
50,000
|
|
0.82
|
|
$
28,316
|
(1)
Options vested on July 1, 2015.
Additional Information to Understand the Director Compensation Table
Fees paid to our non-employee directors in connection with their service as directors, during the fiscal year ended June 30, 2016, were as follows: $30,000 annual retainer to each director; $1,000 for each Board of Directors meeting attended; $750 for each committee meeting attended; and $500 for each Board of Directors meeting or committee meeting in which the director participates by telephone conference call.
Effective July 1, 2015, fees paid to our non-employee directors in connection with their service as a director are as follows: Chairman of the Board, $60,000 annual retainer and, Director, $45,000 annual retainer.