Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
2018 Incentive Plan
On February 19, 2018, the Board of Directors (the Board) of OraSure Technologies, Inc. (the Company) approved the
terms of the Companys 2018 Incentive Plan (the 2018 Incentive Plan), based on the recommendation of the Compensation Committee of the Board (the Committee). The 2018 Incentive Plan provides for the payment of incentive
cash bonuses to the management of the Company and its subsidiary, DNA Genotek, Inc. (DNAG), based on performance during 2018.
Pursuant to the 2018 Incentive Plan, incentive cash bonuses may be paid out of a cash pool to be funded based on the Companys
achievement of certain consolidated financial objectives. For 2018, specific financial objectives were established for consolidated revenues and operating income. These objectives will each be weighted at 50% in determining the pool funding amount.
The impact of acquisitions and divestitures, exchange rate fluctuations and new litigation will be excluded in calculating consolidated revenues and operating income for purposes of determining bonus pool funding.
Under the 2018 Incentive Plan, Threshold, Target, High and Maximum performance levels have been established for each of the financial
objectives to be used to fund the bonus pool. The Threshold levels represent the Companys actual consolidated financial results for 2017 adjusted to exclude a $12.5 million litigation settlement payment received during 2017. The Target
levels represent the Companys projected consolidated financial results as set forth in its 2018 Operating Plan as adopted by the Board. The 2018 Operating Plan does not include costs associated with the expected retirement of the
Companys President and Chief Executive Officer (CEO) and its Chief Financial Officer (CFO) and Chief Operating Officer (COO), or the onboarding compensation for its new President and CEO. The High and
Maximum performance levels (i) represent performance at 105% and 110% of product sales and 100% of other revenues reflected in the Companys 2018 Operating Plan, respectively, and (ii) include a target operating margin higher than the
operating margin reflected in the Companys 2018 Operating Plan for incremental sales above those set forth in the 2018 Operating Plan. Subject to Board approval, adjustments to the financial objectives may be made, where deemed appropriate, to
reflect unexpected events, circumstances or market conditions.
Funding of the Bonus Pool.
If the Company meets the Target
performance levels for each of the objectives, then the pool would be initially funded at 100% of the aggregate target bonuses for all participants in the 2018 Incentive Plan. If only the Threshold performance levels are achieved, then the pool
would be initially funded at 50% of those aggregate target bonuses. If the High performance levels are achieved, then the pool would be initially funded at 150% of those aggregate target bonuses. If the Company achieves a Maximum performance level,
the pool can be initially funded up to 200% of the aggregate target bonuses. The foregoing funding amounts are then increased by a 14% performance distribution factor to reflect the projected range or mix of individual performance assessments for
participants in the plan, (i.e. Outstanding, Exceeds, Meets or Does Not Meet), which as described below can increase the amount of individual bonuses paid to participants.
As a result, preliminary pool funding could be as follows, depending on the performance level
achieved by the Company (dollars in millions):
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Performance Level
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Threshold
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Target
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High
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Maximum
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Potential Funding:
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$
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1.312
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$
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2.622
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$
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3.934
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$
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5.244
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Performance below Threshold will accrue no bonus pool funding for the applicable objective. Thus, management
must deliver performance above our actual 2017 consolidated financial results (adjusted as described above) in order to receive funding for a particular objective. Performance between Threshold and Target, Target and High and High and Maximum
performance levels, will result in
pro-rated
funding on a linear basis for the applicable objectives.
The Committee and the Board have the discretion to approve bonus pool funding less than or in excess of amounts generated by the formula set
forth in the 2018 Incentive Plan; provided that any such discretionary adjustments to pool funding shall be limited to +/- 10% of the aggregate pool amount otherwise determined by the plans self-funding formula.
Payments from the Bonus Pool
. Specific bonus payments from the pool to the Companys senior management (other than the CEO
and CFO/COO) will generally depend on an evaluation of the participants achievement of individual performance objectives for 2018. Bonus payments for the CEO and CFO/COO will be based on an assessment of the Companys overall performance.
Bonus payments will be based on target bonus amounts, which are expressed as a percentage of annual base salary. Targets for the companys named executive officers are set forth below, were established with input from an independent executive
compensation consultant engaged by the Committee, and are similar to bonus targets offered at medical diagnostic and healthcare companies comparable to the Company.
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Title
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Target Payouts
(% of Base Salary)
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President and CEO
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85%
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CFO/COO
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50%
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Executive Vice President
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40%
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Senior Vice President
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35%
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Based on an assessment of performance, as described above, bonus payments of 100% of
target may be awarded for a Meets Requirements assessment, bonus payments of 101% - 125% of target may be awarded for an Exceeds Requirements assessment and bonus payments of 125% - 150% of target may be awarded for
an Outstanding assessment. Awards may be adjusted on a pro rata basis as determined in the Committees or Boards discretion to the extent any participant is employed for only a portion of the year.
The Committee recommends for Board approval any bonus awards for the CEO. The CEO recommends individual awards for the other executive
officers for approval by the Committee. The Committee and the Board shall have the right, in their sole discretion, to reject any or all of the recommended bonus awards or approve different bonus awards, even if the bonus pool has been funded and
any and all applicable performance criteria have or have not been satisfied, based on the business conditions of the Company or other factors deemed relevant by the Committee or Board. All bonus awards under the 2018 Incentive Plan are subject to
the Companys Compensation Recoupment Policy (i.e. clawback policy).
As previously discussed, the Companys current President and CEO and its CFO/COO will be
retiring during 2018. Pursuant to retirement agreements entered into with each executive, these individuals will receive their respective target bonus under the 2018 Incentive Plan (as adjusted to reflect final bonus pool funding)
pro-rated
to the date of retirement.