DEF 14A 1 osur-def14a_20210518.htm DEF 14A osur-def14a_20210518.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.      )

Filed by the Registrant   Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

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Soliciting Material Pursuant to §240.14a-12

OraSure Technologies, Inc.

 

(Name of Registrant as Specified In Its Charter)

  

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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2021 

 

 

Proxy Statement

Notice of Annual Meeting of Stockholders

Tuesday, May 18, 2021 10:00 a.m. (Eastern Time)

 

 

 

 

 


Letter to the Stockholders

Stephen S. Tang, Ph.D.

President and

Chief Executive Officer

 

April 8, 2021

Dear Fellow Stockholders:

You are cordially invited to attend the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday, May 18, 2021 at 10:00 a.m. Eastern Time. Once again, this year’s Annual Meeting will be a completely virtual meeting, conducted as a live webcast. You will be able to attend the Annual Meeting online, vote your shares electronically if you wish, and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/OSUR2021.

Pursuant to the Securities and Exchange Commission (“SEC”) rule allowing companies to furnish proxy materials to their stockholders over the internet, a Notice of Internet Availability of Proxy Materials (the “Notice”) was sent to stockholders on or about April 8, 2021. The Notice contains information on how to access copies of the proxy materials and vote your shares.

At the Annual Meeting, you will be asked to (i) elect three Class III Directors to serve on the Board of Directors until the Annual Meeting of Stockholders in 2024; (ii) ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2021 fiscal year; (iii) approve, by an advisory (non-binding) vote, the compensation of the Company’s named executive officers as disclosed in the proxy materials; and (iv) transact such other business as may properly come before the meeting, and any adjournment(s) or postponement(s) thereof.

The Board of Directors has approved the nominees for Class III Directors and recommends that you vote FOR their election to the Board of Directors. In addition, the Board of Directors recommends that you vote FOR the ratification of KPMG LLP’s appointment, and FOR the approval of the Company’s executive compensation.

Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting online, we urge you to submit your vote as soon as possible. You will have the option to vote by telephone, via the internet, or by completing, signing, dating and returning a paper Proxy Card. Additional details on these options can be found in the Notice sent to you and in the other proxy materials. You may, of course, attend the Annual Meeting online and vote your shares during the meeting regardless of whether you have previously voted by phone, the internet or mail.

 

Thank you for your cooperation and your ongoing support of, and continued interest in, OraSure Technologies, Inc.  

 

Sincerely yours,

 

Stephen S. Tang, Ph.D.

President and Chief Executive Officer


 


 

 

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

OF ORASURE TECHNOLOGIES, INC.

 

DATE AND TIME

 

Tuesday May 18, 2021

10:00 a.m. (Eastern Time)

 

To be held virtually by visiting

www.virtualshareholdermeeting.com/OSUR2021

 

ITEMS OF BUSINESS

 

The 2021 Annual Meeting of Stockholders will be held for the following purposes:

 

•    To elect three (3) Class III Directors, each to serve for a term expiring at the Company’s Annual Meeting of Stockholders in 2024;

 

•    To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021;

 

•    To approve, by an advisory (non-binding) vote, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement accompanying this Notice; and

 

•    To consider such other business as may properly come before the meeting, and any adjournment(s) or postponement(s) thereof.

 

HOW TO VOTE

 

 

Via the Internet.    Go to www.proxyvote.com to vote your shares online prior to the Annual Meeting. Have the control number that is printed in your Notice of Internet Availability of Proxy Materials or Proxy Card available and follow the instructions. You may also vote online during the Annual Meeting by going to www.virtualshareholdermeeting.com/OSUR2021 and following the instructions.

 

By Phone.    Call the toll-free number on your Notice of Internet Availability of Proxy Materials or Proxy Card and follow the prompts.

 

By Mail.    You can vote by mail by requesting a paper copy of the materials, which will include a Proxy Card. Please review your Notice of Internet Availability of Proxy Materials for instructions on how to request a paper copy of the materials. Mark, sign and date your Proxy Card and return it as indicated on the Proxy Card.

 

 

 

Who Can Vote:  Only holders of shares of the Company’s Common Stock of record at the close of business on March 26, 2021 will be entitled to vote at the Annual Meeting of Stockholders and any adjournment(s) or postponement(s) thereof. Additional information is included in the Proxy Statement accompanying this Notice. 

 

By Order of the Board of Directors,

Jack E. Jerrett

Secretary

April 8, 2021

 


 

  Proxy Statement Table of Contents  

 

 

Proxy Statement Summary

1

 

2021 Annual Meeting Information

1

 

Proposals for Stockholder Consideration

1

 

2020 Performance Highlights

3

 

Most Significant Compensation Components

3

 

Key Features of our Executive Compensation Program

4

 

Questions and Answers About the 2021 Annual Meeting and Voting

5

 

Why Did I Receive These Proxy Materials?

5

 

What Is a Proxy?

5

 

What Is the Record Date and What Does It Mean?

5

 

What Is the Difference Between a Stockholder of Record and a Stockholder Who Holds Stock in Street Name?

6

 

How Can I Vote My Shares for the Annual Meeting?

6

 

How Will My Shares Be Voted If I Send In a Proxy?

6

 

Will My Shares Be Voted If I Do Not Provide My Proxy?

7

 

How Many Shares Must Be Present To Hold the Annual Meeting?

7

 

How Can I Revoke a Proxy?

7

 

What Items Will Be Voted On At The Annual Meeting?

7

 

Who Will Pay The Cost of This Proxy Solicitation?

7

 

How Can I Participate in The Annual Meeting?

8

 

What if I Have Technical Difficulties or Trouble Accessing the Virtual Meeting?

8

 

Are Votes Confidential?

8

 

Who Counts The Votes?

8

 

May Stockholders Ask Questions at the Annual Meeting?

8

 

Stock Ownership of Certain Beneficial Owners and Management

9

 

Corporate Governance

10

 

Board Responsibilities, Operation and Composition

10

 

Governance Guidelines and Code of Conduct

10

 

Environmental, Social and Governance Issues

10

 

Independent Board Chairman

12

 

Director Independence

12

 

Oversight of Risk Management

13

 

Annual Meeting Attendance and Stockholder Communications

13

 

Committees of the Board

13

 

Nomination of Directors

16

 

Director Qualifications

16

 

Insider Trading

17

 

Prohibition Against Short Sales, Hedging and Pledging

17

 

Stock Ownership and Retention Guidelines

17

 

 

 


 

 

 

Audit Committee Matters

18

 

Report of the Audit Committee for Year Ended December 31, 2020

18

 

Audit Fees; Audit-Related Fees; Tax Fees; All Other Fees

19

 

Pre-Approval Procedures

19

 

Compensation Committee Matters

19

 

Compensation Processes and Procedures

19

 

Annual Performance Evaluations

19

 

Role of the Compensation Committee

20

 

Role of the CEO

20

 

Role of the Compensation Consultant

20

 

Compensation Committee Interlocks and Insider Participation

21

 

Compensation Committee Report

21

 

Executive Officers

22

 

Transactions with Related Persons

24

 

Delinquent Section 16(a) Reports

24

 

Compensation Discussion and Analysis – Table of Contents

25

 

Compensation Discussion and Analysis

26

 

Executive Summary

26

 

Compensation Philosophy

33

 

Benchmarking

34

 

2020 Executive Compensation Components

35

 

Other Compensation

44

 

CEO Pay Ratio

45

 

Compensation Tables

46

 

Employment Agreements and Potential Payments Upon Termination or Change of Control

53

 

Stock Award Plan Information

57

 

Director Compensation

57

 

Annual Fees

57

 

Initial and Annual Equity Awards

58

 

Equity Award Terms

58

 

Deferred Compensation

58

 

Director Compensation During 2020

59

 

Proposals Requiring Your Vote

60

 

Proposal No. 1 – Election of Directors

60

 

Background

60

 

Vote Required; Board Recommendation

65

 


 

 

 

 


 

PROXY STATEMENT SUMMARY

 

 

 

We are providing these proxy materials to stockholders of OraSure Technologies, Inc., a Delaware corporation (as used herein, “we,” “us,” “our”, “OraSure” or the “Company”), in connection with the Company’s solicitation of proxies (each, a “Proxy”) for use at the Annual Meeting of Stockholders to be held on May 18, 2021 at 10:00 a.m. Eastern Time, and at any adjournment(s) or postponement(s) thereof (the “Annual Meeting”).

As a stockholder, you are invited to participate in the Annual Meeting and are requested to vote on the matters described in this Proxy Statement. The Annual Meeting will be conducted in a completely virtual manner through a live

webcast that you can access online by going to www.virtualshareholdermeeting.com/OSUR2021. The webcast will not include a presentation by management. A question and answer session will be provided at the Annual Meeting only for questions that are germane to the matters being discussed and voted on at the meeting.

This summary highlights information contained elsewhere in this Proxy Statement, but does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting your shares.

 

 

 

2021 ANNUAL MEETING INFORMATION

 

 

Date and Time:  Tuesday, May 18, 2021 at 10:00 a.m. (ET)

 

Location:            Online by visiting www.virtualshareholdermeeting.com/OSUR2021

 

Record Date:      March 26, 2021

   

 

PROPOSALS FOR STOCKHOLDER CONSIDERATION

 

 

  

 

Proposals

Board

Recommendation

Page Reference

for More Detail

 

 

 

 

 

1.)

 

Election of three Class III Directors

FOR EACH NOMINEE

60

 

 

 

 

 

2.)

 

Ratification of Appointment of Independent

Registered Public Accounting Firm for 2021

FOR

65

 

 

 

 

 

3.)

 

Advisory (Non-Binding) Vote to Approve

Executive Compensation

FOR

65

 

Proposal No. 1 – Election of Directors

The table below provides summary information about each of our nominees for Class III Directors, whose new terms will expire at the 2024 Annual Meeting of Stockholders. The Board is recommending that stockholders vote for each Director nominee.

 

  

 

 

 

Committee

Memberships1

Other

Name and Principal Occupation

Age

Director

Since

Independent

AC

CC

N&

CG

Public

Boards

Michael Celano2

Chief Financial Officer, Larimar Therapeutics, Inc.

62

2006

Yes

 

No

James A. Datin

President and Chief Executive Officer, BioAgilytix Labs, LLC

58

2019

Yes

 

Yes

Lelio Marmora

  President, The Management Lab

54

2020

Yes

 

No

 

 

1 

AC = Audit Committee; CC = Compensation Committee; N&CG = Nominating & Corporate Governance Committee; C = Chairman; Ö = Member.

2 Mr. Celano is Chairman of our Board of Directors.

 

 


1


 

Proposal No. 2 – Ratification of Appointment of Independent Registered Public Accounting Firm

 

Our Audit Committee has selected KPMG LLP (“KPMG”) to be our independent registered public accounting firm for the 2021 fiscal year. The Board believes KPMG is well qualified to serve in this capacity and is

recommending that the engagement of KPMG be ratified by our stockholders. The Board is recommending that stockholders vote for the appointment of KPMG as provided above.

 

Proposal No. 3 – Advisory (Non-Binding) Vote to Approve Executive Compensation

 

 

Our compensation program is designed to focus and reward our executives for balancing both short and long-term priorities.   To fulfill this mission, we have adopted a pay-for-performance philosophy that forms the foundation for executive compensation decisions made by our Board and the Compensation Committee of the Board (the “Compensation Committee”).

The Compensation Discussion and Analysis portion of this Proxy Statement (the “CD&A”) contains a detailed description of our executive compensation philosophy and program, the compensation decisions the Board and Compensation Committee have made under that program and the factors considered in making those decisions, focusing on the compensation of our named executive officers (“NEOs”) for the year ended December 31, 2020, who were:

 

 

Stephen S. Tang, Ph.D., President and Chief Executive Officer (“CEO”)

Roberto Cuca, Chief Financial Officer (“CFO”)

Lisa Nibauer, Executive Vice President, Business Unit Leader, Diagnostics1

Kathleen G. Weber, Executive Vice President, Business Unit Leader, Molecular Solutions

Jack E. Jerrett, Senior Vice President, General Counsel and Chief Compliance Officer

Anthony Zezzo, II, Former Executive Vice President, Business Unit Leader, Infectious Disease1

____________________

 

1 Ms. Nibauer was appointed as the Company’s Executive Vice President, Business Unit Leader, Diagnostics, effective as of May 11, 2020, replacing Anthony Zezzo, II who retired effective as of June 30, 2020.

 

As described further in the CD&A and elsewhere in this Proxy Statement, the following should be considered by stockholders in evaluating the compensation of our NEOs for 2020:

 

 

OraSure is a diverse and growing business operating in highly competitive and evolving markets; this was especially true in 2020 given the challenges and opportunities presented by the COVID-19 pandemic.

 

We annually solicit input from our stockholders on executive compensation matters.  The 2020 Say-on-Pay results (94% approval), combined with feedback from stockholders, suggest strong support for our programs and policies.

 

We maintain a full suite of good governance policies and processes.

 

We achieved strong financial performance during 2020 despite the challenges posed by the COVID-19 pandemic.

 

We made no COVID-19 related adjustments to our 2020 incentive bonus plan or performance-vested restricted unit (“PRUs”) performance measures and the Compensation Committee applied no positive discretion in determining performance and payouts for our NEOs.

 

The Board is recommending that stockholders vote in favor of the compensation of our NEOs, as described in this Proxy Statement.

 

 

 


 

2


 

 

 

2020 PERFORMANCE HIGHLIGHTS

 

 

 

Despite the negative impact the COVID-19 pandemic had on our core businesses, we delivered a strong year in 2020. New COVID related revenues generated by our Molecular Solutions business unit, coupled with increased international HIV sales, more than offset a decline in our core diagnostics business and our core molecular business caused by the COVID pandemic. We believe that compensation awarded for 2020 was closely aligned with our performance.

 

During 2020, we actively engaged with several laboratories and researchers to demonstrate the effectiveness of several of our existing collection products for use with molecular COVID-19 testing. As a result, our molecular collection kits have been included in eight Emergency Use Authorizations (“EUA”) granted by the U.S. Food and Drug Administration (“FDA”) to certain of our customers. Separately, we received EUAs for two of our collection devices which will allow them to be used for unsupervised collection at home or in a healthcare setting when used as part of an approved or validated COVID-19 test. We also made significant progress in the development of a new COVID-19 rapid antigen test and a lab-based oral fluid antibody test during the year, which we believe could generate significant future revenues once the applicable EUAs have been obtained.

We continued to advance our innovation growth strategy in 2020 with the acquisition of UrSure, Inc. This company develops laboratory and rapid tests to measure an individual’s adherence to HIV medication, including pre-exposure prophylaxis, or PrEP, a daily medication to prevent HIV. We believe these products will be an important contributor to our future diagnostics business.

 

Our consolidated revenues of $171.7 million in 2020 represented an 11% increase over 2019.  This was largely driven by sales of collection devices for molecular COVID-19 testing and growth in sales of our HIV Self-Test primarily in Africa. Our total molecular product and services revenues were $102.8 million during 2020, an increase of 45% from 2019. This increase included almost $50 million in sales of oral fluid sample collection devices for COVID-19 molecular testing. International sales of our HIV diagnostic products grew 16% for the year, largely driven by a 24% increase in HIV Self-Test sales in Africa.

We generated cash from operations of $5.8 million in 2020 and we ended the year with approximately $257 million in cash and short-term investments on our balance sheet, which we can use for future investment and growth. 

 

 

 

 

 

MOST SIGNIFICANT COMPENSATION COMPONENTS

 

We have structured the components of our executive compensation program to be directly tied to the performance of both the Company and our executives and aligned with the best interests of our stockholders. These components consist of the following:

 

 

Base Salary

 

 

Salaries are based on the individual executive’s position relative to market and the executive’s individual performance and contribution.

 

 

 

Annual Cash Incentive Plan Bonuses

 

 

Annual incentive cash bonuses reflect market-based targets and are contingent upon (i) our achievement of corporate financial and/or strategic objectives, which are used to determine overall bonus pool funding, and (ii) the executive’s individual performance against pre-determined objectives, for such executive, which are used to determine individual bonus payouts.

 

 

 

Equity Awards under our Long-Term Incentive Policy (“LTIP”)

 

 

Long-term incentive equity compensation reflects market-based targets with the value of individual awards contingent upon each executive’s individual performance against pre-determined objectives during the fiscal year prior to award. Fifty percent (50%) of each NEO’s annual LTIP award consists of PRUs which require achievement of certain financial performance measures selected by the Board and Compensation Committee and the satisfaction of a 3-year service period for vesting of the award.  The other fifty percent (50%) consists of time-vested restricted stock (“RS”) which vests in equal installments over a three-year service period.

 

 

 


3


 

 

 

KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

 

Key features of our compensation program illustrate our commitment to pay-for-performance, the strong alignment of our executives’ interests with those of our stockholders and strong corporate governance. Several of the more significant of these features are summarized below:

 

 

 

 

 

 

Compensation is market driven with total compensation of our executives targeted at the 50th percentile of the Peer Group.

 

 

Regular stockholder outreach on compensation/ governance matters.

 

 

 

 

 

 

Compensation is predominantly variable or performance-based.

 

Use of a third-party compensation consultant to provide executive compensation market assessment and independent advice on compensation matters.

 

 

 

 

 

 

Balanced mix of cash/equity, fixed/variable, short-term/long-term compensation components.

 

 

Strong stock ownership/retention requirements for executives and Directors.

 

 

 

 

 

 

In order to incentivize growth, performance objectives for annual bonus pool funding target key financial measures and/or important strategic goals.

 

 

As a general matter, no perquisites for NEOs that are not offered to all employees of the Company.

 

 

 

 

 

The Board’s discretionary ability to adjust annual incentive bonus pool funding is limited to +/- 10% of pool amount in order to avoid excessive discretionary bonus pool adjustments.

 

 

Use of peer company benchmarking.

 

 

 

 

 

 

 Long-term equity incentive awards include 50% PRUs that vest only if (i) a three-year compound average growth rate for revenues and/or a one-year earnings per share (“EPS”) or income before income taxes (“IBIT”) target is met and (ii) a three-year service period is satisfied.

 

 

Compensation recoupment policy.

 

 

 No excise tax gross-up in any of our NEO employment agreements and no “single trigger” change-in-control severance in any of our new executive employment agreements, including our CEO’s and CFO’s agreements.

 

 

No hedging or pledging of our Common Stock.

 

 

 

 


4


 

QUESTIONS AND ANSWERS ABOUT THE 2021 ANNUAL MEETING AND VOTING

 

 

 

  1.        WHY DID I RECEIVE THESE PROXY MATERIALS?

 

 

 

Our Board of Directors (the “Board”) is furnishing proxy materials, including this Proxy Statement, a Proxy Card and the Company’s Annual Report to Stockholders for the year ended December 31, 2020 (the “2020 Annual Report”), to our stockholders in order to solicit proxies to be voted at the Annual Meeting (each, a “Proxy”). Each stockholder can access these documents on the internet in accordance with the rules and regulations of the SEC. On or about April 8, 2021, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to each stockholder at the holder’s address of record, indicating that this Proxy Statement is now available to our stockholders of record entitled to vote at the Annual Meeting.

SEC rules permit us to deliver only one copy of the Notice or a single set of proxy materials to multiple stockholders sharing the same address. Upon written or oral request, we will deliver separate Notices and/or copies of our 2020 Annual Report and/or this Proxy Statement to any stockholder at a shared address to which a single copy of the Notice was delivered. Stockholders may notify the

Company of their requests by calling or writing us at OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary; (610) 882-1820.

All stockholders and beneficial holders have the ability to access a copy of our proxy materials on the internet at the website referred to in the Notice. Stockholders will not receive printed copies of the proxy materials unless they request those copies. The Notice also instructs stockholders as to how to submit a Proxy through the internet. If you would like to receive a paper or e-mail copy of your proxy materials, you should follow the instructions for requesting such materials included in the Notice. We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials and/or vote over the internet, you are responsible for any internet access charges you may incur.

 

 

 

  2.        WHAT IS A PROXY?

 

 

 

A Proxy is your legal designation of another person to vote the shares of Common Stock you own. That other person is called a “proxy.” If you designate someone as your proxy in a written document, that document also is called a Proxy or a Proxy Card.

 

Jack E. Jerrett and Michele Miller, each of whom are officers of the Company, have been designated as proxies by the Board of Directors for the Annual Meeting.

 

 

 

  3.        WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN?

 

 

 

The record date for the Annual Meeting is March 26, 2021 (the “record date”). The record date is established by the Board as required by Delaware law. Only stockholders of record at the close of business on the record date are entitled to:

 

(a)

receive notice of the Annual Meeting; and

 

(b)

vote at the Annual Meeting and any adjournment(s) or postponement(s) of the meeting.

Each stockholder of record on the record date is entitled to one vote for each share of Common Stock held. On the record date, there were 72,646,480 shares of our Common

Stock outstanding and entitled to vote at the Annual Meeting.

 

A list of stockholders will be open for examination by any stockholder for any purpose germane to the Annual Meeting for a period of 10 days prior to the meeting at our principal executive offices at 220 East First Street, Bethlehem, PA 18015, and electronically during the Annual Meeting at www.virtualshareholdermeeting.com/OSUR2021 when you enter the control number provided in the Notice sent to you.

 

 

5


 

 

  4.        WHAT IS THE DIFFERENCE BETWEEN A STOCKHOLDER OF RECORD AND A STOCKHOLDER WHO HOLDS STOCK IN STREET NAME?

 

 

 

If your shares of stock are registered in your name on the books and records of our transfer agent, Computershare, Inc., you are a stockholder of record.

If your shares of stock are held for you in the name of your broker, bank or other nominee, your shares are held in street name. The answer to Question 7 describes brokers’ discretionary voting authority and when your broker, bank or

other nominee is permitted to vote your shares of stock without instructions from you.

It is important that you vote your shares if you are a stockholder of record and, if you hold shares in street name, that you provide appropriate voting instructions to your broker, bank or other nominee as discussed in the answer to Question 7.

 

 

  5.        HOW CAN I VOTE MY SHARES FOR THE ANNUAL MEETING?

 

 

 

All stockholders have a choice of voting via the internet, over the telephone or by completing and mailing a paper Proxy Card, as described below.

Voting via the Internet or by Telephone. Stockholders of record desiring to vote online via the internet or by telephone prior to the Annual Meeting, should go to www.proxyvote.com or call the toll free number indicated on the Proxy Card or Notice. You may vote via the internet or by telephone provided you do so by 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) on May 17, 2021. Stockholders who attend the Annual Meeting via the internet may vote their shares at that time up to and during the Annual Meeting by following the instructions at www.virtualshareholdermeeting.com/OSUR2021.

Street name holders may vote via the internet or by telephone if their brokers, banks or other nominees make those methods available. If that is the case, each broker, bank or nominee will include instructions with the Notice or Proxy Statement.

The telephone and internet voting procedures, including the use of control numbers, are designed to authenticate your identity, to allow you to give your voting instructions and

to confirm that your instructions have been recorded properly.

If you vote via the internet, you should understand that you will be responsible for any costs associated with this method of voting, such as usage charges from internet access providers and telephone companies.

Voting by Mail. If you desire to vote prior to the Annual Meeting by mail by using a paper Proxy Card instead of by telephone or via the internet, you will need to either print a copy of the Proxy Card from the website indicated in your Notice or follow the instructions in your Notice to request that a paper copy be sent to you. You will then need to complete, sign, date and return the Proxy Card, as described on the Proxy Card. Street name holders should complete and return the voting card provided by their broker, bank or nominee.

Voting at the Annual Meeting. All stockholders of record may vote online during the Annual Meeting, as described above. Submitting a Proxy via the internet, over the telephone or by mail will not affect your right to withdraw your Proxy and vote during the Annual Meeting.

 

 

 

 

  6.        HOW WILL MY SHARES BE VOTED IF I SEND IN A PROXY?

 

 

 

If you are represented by a properly executed Proxy, whether delivered by phone, the internet or mail, your shares will be voted in accordance with your instructions.

If you do not provide instructions with your Proxy, your shares will be voted according to the recommendations of our Board as stated on the Proxy.

 

 

6


 

 

  7.        WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?

 

 

 

Stockholders of Record:    If you are a stockholder of record, your shares will not be voted if you do not provide your Proxy, unless you vote online during the Annual Meeting. It is, therefore, important that you vote your shares.

Street Name Holders:    If your shares are held in street name and you do not provide your signed and dated voting instruction form to your bank, broker or other nominee, your shares may be voted by your broker, bank or other nominee but only under certain circumstances. Specifically, under rules of the NASDAQ Stock Exchange (“NASDAQ”), shares held in the name of your broker, bank or other nominee may be voted by your broker, bank or other nominee on certain “routine” matters if you do not provide voting instructions.

 

At the upcoming Annual Meeting, only the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at our Annual Meeting (specifically, the election of Director nominees and the advisory vote to approve the compensation of the Company’s NEOs are not considered “routine” under NASDAQ rules, so the broker, bank or other nominee cannot vote your shares on either of these proposals unless you provide to the broker, bank or other nominee voting instructions for each of these matters. If you do not provide voting instructions on these matters, your shares will not be voted on the matter, which is referred to as a “broker non-vote.” It is, therefore, important that you vote your shares.

 

 

 

  8.        HOW MANY SHARES MUST BE PRESENT TO HOLD THE ANNUAL MEETING?

 

 

 

Your shares are counted as present at the meeting if you attend the meeting and vote online or if you properly return a Proxy by internet, telephone or mail. In order for us to conduct our Annual Meeting, a majority of our outstanding shares of Common Stock as of the March 26, 2021 record

date, must be present online or by Proxy at the meeting. This is referred to as a quorum. Broker non-votes, votes withheld and abstentions are included in determining whether there are a sufficient number of shares present to constitute a quorum.

 

 

 

 

  9.        HOW CAN I REVOKE A PROXY?

 

 

 

You can revoke a Proxy before the completion of voting at the Annual Meeting by:

 

(a)

Giving written notice to the Corporate Secretary of the Company to revoke your Proxy; or

 

(b)

Delivering a later-dated Proxy that indicates the change in your vote; or

 

(c)

Logging on to www.proxyvote.com in the same manner you would to submit your Proxy electronically or calling the telephone number indicated in your Notice, and in each case, following the instructions to revoke or change your vote; or

 

 

(d)

Attending the Annual Meeting online and voting, which will automatically cancel any Proxy previously given. Attendance alone will not revoke any Proxy that you have given previously.

If you choose any of the first three methods, you must take the described action no later than 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) on May 17, 2021. Once voting on a particular matter is completed at the Annual Meeting, you will not be able to revoke your Proxy or change your vote. If your shares are held in street name by a broker or other nominee, you must contact that institution to change or revoke your vote.

 

 

  10.        WHAT ITEMS WILL BE VOTED ON AT THE ANNUAL MEETING?

 

 

 

At the Annual Meeting, action will be taken on the matters set forth in the accompanying Notice and described in this Proxy Statement. The Board knows of no other matters to be presented for action at the Annual Meeting.

If any other matters do properly come before the Annual Meeting, the persons named in the Proxy Card will have discretionary authority to vote on those matters in accordance with their best judgment.

 

 

  11.        WHO WILL PAY THE COST OF THIS PROXY SOLICITATION?

 

 

 

Solicitation of Proxies is made on behalf of the Board. The cost of soliciting Proxies will be borne by the Company. In addition to solicitations by e-proxy and/or by mail, certain of our Directors, officers and regular employees may solicit

Proxies personally or by telephone or other means without additional compensation.

 

7


 

We have also engaged Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902, to provide proxy solicitation services at an estimated fee of $7,500 plus expenses. Arrangements will be made with brokerage firms and other

custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of stock held of record by such persons, and we will, upon request, reimburse them for their reasonable expenses in so doing.

 

 

 

  12.        HOW CAN I PARTICIPATE IN THE ANNUAL MEETING?

 

 

 

This year’s Annual Meeting will be a completely virtual meeting of stockholders, and will be conducted via live webcast on the Internet. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on March 26, 2021, the record date for the meeting, or if you hold a valid Proxy for the Annual Meeting.  

 

 

You will be able to participate in the Annual Meeting online and submit your questions during the meeting by

visiting www.virtualshareholdermeeting.com/OSUR2021. To participate in the Annual Meeting, you will need the control number that is included on your Notice, on our proxy card or on the instructions that accompanied your proxy materials. The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time, and you should allow ample time to complete the online check-in procedures.

 

 

 

 13.        WHAT IF I HAVE TECHNICAL DIFFICULTIES OR TROUBLE VIEWING THE VIRTUAL MEETING

 

We have technicians ready to assist you with any technical difficulties during the virtual Annual Meeting.  If you encounter any difficulties accessing the virtual meeting

or during the meeting, please call one of the following numbers:

 

Toll-Free:  (844) 986-0822

International:  (303) 562-9302

 

 

 

  14.        ARE VOTES CONFIDENTIAL?

 

 

 

We will continue our long-standing practice of holding the votes of each stockholder in confidence from Directors, officers and employees, except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) in the case of a contested

proxy solicitation; (c) if a stockholder makes a written comment on the Proxy Card or otherwise communicates his or her vote to the Company; or (d) as needed to allow the independent inspectors of election to certify the results of the vote.

 

 

 

  15.        WHO COUNTS THE VOTES?

 

 

 

We will continue, as we have for many years, to retain an independent inspector of election to receive and tabulate

the Proxies and certify the results. These activities will be handled electronically.

 

 

 

 

 

  16.        MAY STOCKHOLDERS ASK QUESTIONS AT THE ANNUAL MEETING?

 

 

 

Yes. The Chairman of the Board will answer stockholders’ written questions submitted during the question and answer period of the meeting. Stockholders should confine their questions to matters that relate to the business of the meeting. The Chairman will determine which questions are appropriate to answer during the meeting.

We reserve the right to edit or reject any questions we deem profane or otherwise inappropriate.  Detailed

guidelines for submitting written questions during the meeting are available at www.virtualshareholdermeeting.com/OSUR2021.

 

 

8


 

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

               The following table sets forth information, as of the March 26, 2021 record date, (except for Mr. Zezzo, as described below), regarding the beneficial ownership of the Company’s Common Stock by (a) each person who is known by us to be the beneficial owner of more than five percent of the Common Stock outstanding; (b) each Director and nominee for election as Director; (c) each of our executive officers named in the Summary Compensation Table in this Proxy Statement; and (d) all of our Directors and executive officers as a group. Unless otherwise indicated, the address of each person identified below is c/o OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015.

 

               Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shares of Common Stock which a person has a right to acquire pursuant to the exercise of stock options held by that person that are exercisable within 60 days of March 26, 2021 are deemed to be outstanding for the purpose of computing the ownership percentage of that person, but are not deemed outstanding for computing the ownership percentage of any other person.

 

 

Name and Address of

Beneficial Owner

Amount and Nature of

the Beneficial Ownership1,2

Percent

of Class

 

Black Rock, Inc.3

   55 East 52nd Street

   New York, NY 10055

 

 

11,031,726

 

 

15.2%

 

The Vanguard Group4

   100 Vanguard Blvd.

   Malvern, PA 19355

 

 

4,964,223

 

 

6.8%

 

American Capital Management, Inc.5

   551 Madison Ave., Suite 902

   New York, NY 10022

 

 

4,308,685

 

 

5.9%

 

Managed Account Advisors, LLC6

   101 Hudson Street, 9th Floor

   Jersey City, NJ 073302

 

 

3,949,904

 

 

5.4%

 

Stephen S. Tang, Ph.D.

 

 

260,201

 

 

*

 

Jack E. Jerrett

 

 

164,932

 

 

*

 

Lisa Nibauer

 

 

33,840

 

 

*

 

Kathleen G. Weber

 

 

128,167

 

 

*

 

Michael Celano

 

 

106,942

 

 

*

 

Eamonn P. Hobbs

 

 

74,355

 

 

*

 

Mara Aspinall

 

 

66,760

 

 

*

 

Roberto Cuca

 

 

108,838

 

 

*

 

Ronny B. Lancaster

 

 

23,830

 

 

*

 

James A. Datin

 

 

18,331

 

 

*

 

David J. Shulkin, M.D.

 

 

15,542

 

 

*

 

Lelio Marmora

 

 

7,015

 

 

*

 

Anthony Zezzo II7

 

 

205,674

 

 

*

 

All Directors and executive officers as a group

(14 people)

 

 

1,268,258

 

 

1.7%

 

_______________________

*

Less than 1%

1

Subject to community property laws where applicable, beneficial ownership consists of sole voting and investment power except as otherwise indicated.

2  Includes shares subject to options exercisable within 60 days of March 26, 2021, as follows: Mr. Jerrett, 20,057 shares; Ms. Weber, 14,533 shares; Mr. Celano, 40,000 shares; Mr. Hobbs, 40,000 shares; and Ms. Aspinall, 40,000 shares; and all Directors and executive officers as a group, 191,537 shares. Also includes unvested RS, as follows:  Dr. Tang, 130,007 shares; Mr. Cuca, 56,645 shares; Mr. Jerrett, 40,564 shares; Ms. Nibauer 33,840 shares; Ms. Weber, 39,895 shares; Mr. Celano, 8,143 shares; Mr. Hobbs, 6,577 shares; Ms. Aspinall, 6,577 shares;; shares; Mr. Lancaster, 6,577 shares; Mr. Datin, 6,577 shares; Dr. Shulkin, 15,542 shares; and Mr. Marmora 7,015 shares; and all Directors and executive officers as a group, 366,399 shares. Does not include unvested PRUs.

3

Based on information contained in a Schedule 13G filed January 25, 2021. The filing person has sole voting power with respect to 10,897,737 shares and sole dispositive power with respect to all of the indicated shares.

4

Based on information contained in a Schedule 13G/A filed February 10, 2021.  The filing person has shared voting power with respect to 126,983 shares, sole dispositive power with respect to 4,778,824 shares and shared dispositive power with respect to 185,399 shares.

5

Based on information contained in a Schedule 13G filed February 16, 2021. The filing person has sole voting with respect to 18,828 shares and sole dispositive power with respect to all of the indicated shares.

9


 

6

Based on information contained in a Schedule 13G filed February 3, 2021. The filing person has sole dispositive power with respect to 3,941,924 shares and shared dispositive power with respect to 7,980 shares.

7 Mr. Zezzo, who served as the Company’s Executive Vice President, Business Unit Leader, Infectious Disease retired on June 30, 2020.  The indicated shares reflect Mr. Zezzo’s ownership as of his retirement date and do not include a RS award granted with immediate vesting on February 1, 2021, net of shares withheld to cover taxes, for 5,175 shares or PRUs vested on February 1, 2021, net of shares withheld to cover taxes, for 4,900 shares.

 

 

CORPORATE GOVERNANCE

 

 

 

BOARD RESPONSIBILITIES, OPERATION AND COMPOSITION

               The primary responsibility of the Board of Directors is to promote the long-term success of the Company. In fulfilling this role, each Director must exhibit good faith business judgment as to what is in the best interests of the Company. The Board is responsible for establishing broad corporate policies, setting strategic direction and overseeing management. The Company’s management is responsible for the day-to-day operations of the Company.

               The Board is divided into three classes with each class consisting of one-third of the total number of Directors on the Board. There are currently eight Directors serving on the Board. At each annual meeting of stockholders, the nominees for the class of Directors whose term is expiring at that annual meeting are elected for a three-year term. A Director holds office until the annual meeting of stockholders for the year in which his or her term expires or until his or her successor is elected and duly qualified, subject to prior death, resignation, retirement, disqualification or removal. Each nominee for election at our upcoming Annual Meeting currently serves as a Director.

 

               The Board typically holds regular meetings in February, May, August and November of each year, with special meetings held as needed. The Board’s organizational meeting follows the annual meeting of stockholders. The Board usually meets in executive session at all regularly scheduled meetings. The Board held 14 meetings and acted by written consent on three occasions during the fiscal year ended December 31, 2020. Each member of the Board attended more than 75 percent of the combined total of meetings of the Board and of the Committees of the Board on which such member served during the period in the year in which he or she served as a Director.

 

 

The Board holds four regularly scheduled meetings each year and special meetings as needed.  Directors attended greater than 75% of all Board and Committee meetings during 2020.

 

 

GOVERNANCE GUIDELINES AND CODE OF CONDUCT

               The Board has adopted Corporate Governance Principles which, along with the Charters for each of its Committees and the Company’s Code of Business Conduct and Ethics, provide a framework for the governance of the Company. The Company’s Corporate Governance Principles address matters such as the responsibilities and composition of the Board, Director independence and the conduct of Board and Committee meetings. The Company’s Code of Business Conduct and Ethics sets forth guiding principles of business ethics and certain legal requirements applicable to all Company employees and non-employee Directors. Copies of the current Corporate Governance Principles and Code of Business Conduct and Ethics are available on the Company’s website, www.orasure.com.

 

 

We operate under a Code of Business Conduct and Ethics and Corporate Governance Principles, which apply to all employees and non-employee Board members.

 

 

Environmental, Social and Governance Issues

 

We believe that conducting our business in a socially, environmentally and ethically responsible manner, and in compliance with applicable legal requirements, is important to our long-term success and the health and well-being of our employees, customers, the communities that we serve and other stakeholders. As a result, environmental, social and governance (“ESG”) issues have become an increasingly important focus for our management team and our Board.

 

ESG Oversight

 

Historically, ESG issues have been addressed by the management teams in our various companies with the primary focus on regulatory and legal compliance, ethical operations and development of our human capital resources. Material risks in these areas have been regularly reviewed with our Board, either directly or through the Audit Committee. Beginning

10


 

in 2021, our management will be forming a cross functional team to review ESG issues more formally in order to identify material ESG risks impacting our business and determining appropriate mitigation and corrective strategies. These risks will be discussed with our Board beginning in 2021 and at least annually thereafter as part of the Board’s oversight of risk management.

 

Environmental

 

We endeavor to implement responsible and sustainable environmental practices throughout our organization. Our goal is to eliminate or minimize any harm to our employees, the communities that we serve and the environment. 

We follow practices to reduce our energy usage and operate more efficiently, including through the use of motion detectors and timers to reduce electricity usage.  We also have implemented a Company-wide waste recycling program under which recyclable materials are segregated for removal and appropriate handling.  Hazardous and medical waste is also segregated and disposed of in accordance with applicable laws and regulations.

During 2020, our management team formed a Sustainability Committee to focus on identifying additional steps we can take to reduce our carbon footprint, including through the use of solar and renewable energy sources and promoting clean communities by encouraging the use of bicycles and public transportation by our employees to commute to work.  

 

Social

 

We believe our employees are among our most important resources and are critical to our continued success.  The health and safety of our workforce is a critical priority across our organization.  We safeguard our people, projects and reputation by striving for zero employee injuries and illnesses, while operating and delivering our work responsibly and sustainably.  We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively communicated and implemented.  Personal protective equipment is provided to those employees where needed for the employees to safely perform their job function.  We have formed a Safety Committee consisting of employees from various functional departments to administer our internal safety inspection program, investigate safety incidents and oversee the effectiveness of our safety procedures and policies.

During 2020, in response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees, our subcontractors and our customers.  These protocols include complying with social distancing and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines from the Centers for Disease Control and Prevention and other public health authorities.  In addition, we modified the way we conduct many aspects of our business to reduce the number of in-person interactions.  For example, we significantly expanded the use of virtual interactions in all aspects of our business, including customer facing activities, and we eliminated or substantially reduced the need for our employees to travel.  Many of our administrative and operational functions during this time have required modification as well, including much of our workforce working remotely.

As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefits programs for our employees in order to attract and retain superior talent.  In addition to competitive base wages, additional programs include annual bonus opportunities, a Company matched 401(k) Plan or other savings plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs.

We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations, and our management team routinely reviews employee turnover rates at various levels of the organization.  Management also reviews employee engagement and satisfaction surveys to monitor employee morale and receive feedback on a variety of issues.

The OraSure family of companies is committed to creating and fostering a diverse, equitable, and inclusive workplace that reflects and contributes to the global communities in which we do business and the customers and partners we serve.  This includes all communities impacted by our corporate presence.   Our management teams and all of our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.  All of our employees must adhere to a Code of Business Conduct and Ethics that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination. We strive to recruit the best people for the job regardless of gender, ethnicity or other protected trait and it is our policy to fully comply with all laws (domestic and foreign) applicable to discrimination in the workplace. We have established a hotline and other communication methods that employees can use to anonymously submit discrimination or other complaints.

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We have an active Diversity, Equity and Inclusion Council that strives to drive diversity, equity and inclusion within the workplace.  At OraSure, we believe a variety of perspectives are critical to achieving success, and that diversity, equity and inclusion are key drivers to growth-based innovation and profitability.  We are committed to creating a culture where all people feel valued, supported, and inspired to be themselves fearlessly, without judgement.  We believe that when all voices are heard, we honor and exemplify our core values and best serve our customers and communities.

 

Governance

 

Our overall corporate mission is to do good and help solve the world’s greatest health challenges. We are committed to making a difference in the world of individual and public health by enabling access to discovery and diagnostics. Our innovative diagnostic and specimen collection devices have significantly contributed to public health on a global basis.

 

In pursuing our mission, we are committed to operating our business in accordance with the highest moral, legal and ethical standards. As previously mentioned, we have adopted a Code of Business Conduct and Ethics in order to define the high standards under which all members of our Board and all of our employees are expected to operate. We also have an Anti-Corruption Policy, a Policy on Interactions with Healthcare Professionals and other policies which further require honest, ethical and lawful behavior. These policies are part of a broader compliance program designed to ensure that all policies and legal requirements are followed, that we make and sell high-quality products in accordance with applicable regulatory requirements and that we otherwise operate in a responsible, ethical and compliant manner.

 

 

 

INDEPENDENT BOARD CHAIRMAN

 

 

The positions of Chairman of the Board and CEO of the Company are held by different individuals, with the Chairman being independent of management.

 

 

Currently, the Company’s Chief Executive Officer does not hold the position of Chairman of the Board as the Company believes it is appropriate for the Board to be led by an individual who is independent of management. The Board has carefully considered its leadership structure and believes at this time that the Company and its stockholders are best served by having the positions of Chairman and Chief Executive Officer filled by different individuals. This allows the Chief Executive Officer to, among other things, focus on the Company’s day-to-day business, while allowing the Chairman to lead the Board in its fundamental role of providing strategic advice and oversight of management. In the future, however, the Board may reconsider whether its Chief Executive Officer should also serve as Board Chairman or may elect to rotate the position of Board Chairman to other independent Directors.

 

 

 

 

 

 

 

DIRECTOR INDEPENDENCE

 

               Our Corporate Governance Guidelines require, among other things, that a majority of the members of the Board meet the independence requirements of the SEC and NASDAQ, on which our Common Stock is listed. Each year our Board, with assistance from the Nominating and Corporate Governance Committee, conducts a review of Director independence. The most recent annual review occurred in the first quarter of 2021, during which the Board considered transactions and  relationships, if any, between each Director and any member of such Director’s immediate family

 

A majority of our Directors are independent as required under applicable SEC and NASDAQ rules. All standing Board Committees consist of independent Directors.

 

and the Company. As a result of this review, the Board determined that Mara Aspinall, Michael Celano, James A. Datin, Eamonn P. Hobbs, Ronny B. Lancaster, Lelio Marmora and David J. Shulkin, M.D., are “independent,” as that term is defined in the applicable rules of NASDAQ and the SEC. Stephen S. Tang, Ph.D., was determined by the Board not to be independent because he is currently an executive officer employed by the Company. Based on the foregoing, the Board of Directors is comprised of a majority of independent Directors. All standing Committees of the Board are also comprised solely of independent Directors.

12


 

 

 

OVERSIGHT OF RISK MANAGEMENT

 

               As part of its oversight of the Company’s operations, the Board and Audit Committee monitor the management of risks by the Company’s executives. The Audit Committee reviews the risks that the Company may face and receives reports from senior management on the nature of these risks and the procedures and processes in place to manage and mitigate such risks. Substantive areas of risk reviewed by the Audit Committee include financial, legal, regulatory, operational, information technology, cybersecurity and employment matters. The Audit Committee provides a report to the full Board on the matters covered during each of its meetings, including

 

The Board and Audit Committee monitor the major risks facing the Company and the procedures and processes implemented by management to mitigate those risks.

its risk monitoring activities. In addition, senior management provides periodic reports to the full Board on the major risks facing the Company and the processes and procedures in place to manage such risks. Management also conducts a risk assessment of the Company’s compensation policies and practices, including its executive compensation program, as described in greater detail in the Section of this Proxy Statement entitled, “Compensation Committee Matters.”

 

ANNUAL MEETING ATTENDANCE AND STOCKHOLDER COMMUNICATIONS

               The Board has approved a policy concerning Board members’ attendance at our Annual Meeting of Stockholders and a process for security holders to send communications to members of the Board. A description of the Board’s policy on annual meeting attendance is provided on our website, at www.orasure.com. As a general matter, each Board member is required to attend each Annual Meeting of Stockholders. Our 2020 Annual Meeting was attended by all members of the Board.

 

               Security holders may communicate with the Board by sending their communications to OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary, fax: (610) 882-2275, email: corporatesecretary@orasure.com.

 

 

All Board members are required to attend each Annual Meeting of Stockholders. The entire Board attended the 2020 Annual Meeting.

 

 

COMMITTEES OF THE BOARD

               The Board currently has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Members of these committees are each “independent,” as defined in the Exchange Act and NASDAQ rules applicable to such Committees. In addition, the Board has determined that Michael Celano is an “audit committee financial expert,” as that term is defined by applicable rules of the SEC. Each committee operates pursuant to a written charter, copies of which are available on our website, at www.orasure.com. Additional information on each standing committee is provided below:


13


 

 

 

 

AUDIT COMMITTEE

 

Committee Members*:

 

 

 

Responsibilities:

 

•      Oversees accounting and financial reporting process, internal controls and audits.

 

•      Consults with management and the Company’s independent registered public accounting firm on, among other items, matters related to the annual audits, the published financial statements and the accounting principles applied.

 

•      Appoints, evaluates and retains our independent registered public accounting firm.

 

•      Responsible for the compensation, termination and oversight of our independent registered public accounting firm.

 

•      Evaluates the independent registered public accounting firm’s qualifications, performance and independence.

 

•      Approves all services provided by the independent registered public accounting firm.

 

•      Monitors the Company’s major risk exposures and reviews risk assessment and mitigation policies.

 

•      Maintains procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters.

 

 

Mara G. Aspinall

 

(C, I)

 

Michael Celano

 

(,I)

 

James A. Datin

 

(I)

 

Lelio Marmora

 

(I)

David J. Shulkin, M.D.

(I)

 

Number of Meetings during
fiscal 2020: 10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C – Committee Chair

– Determined by the Board to be an audit committee financial expert as defined under applicable SEC Rules.

I – Determined by the Board to be independent under applicable SEC and NASDAQ rules.

* - In April 2020, Dr. Shulkin was appointed as a Class I Director and a member of the Audit Committee and Nominating and Corporate Governance Committee.  Ms. Aspinall was appointed as Chairman of the Audit Committee in May 2020. In June 2020, Mr. Marmora was appointed as a Director and a member of the Audit Committee and Nominating and Corporate Governance Committee.

 

 

 

 

 

COMPENSATION COMMITTEE

 

Committee Members:

 

 

 

Responsibilities:

 

•      Oversees compensation for executives and non-employee Directors.

 

•      Reviews and recommends to the Board for approval the performance criteria and goals and objectives for CEO compensation.

 

•      In consultation with other independent non-employee Directors, evaluates the CEO’s annual performance.

 

•      Evaluates and recommends to the Board for approval the CEO’s compensation.

 

•      In consultation with the CEO, reviews and approves the compensation of other executive officers.

 

•      Establishes performance measures and goals and evaluates the attainment of such goals under performance-based incentive compensation plans.

 

•      Reviews compensation and benefits issues relating to the Company.

 

•      Reviews and recommends for Board approval, the terms of any employment or retirement agreements between the Company and each executive officer.

 

•      Periodically reviews and administers the Company’s Compensation Recoupment Policy for executive officers and non-employee Directors.

 

•      Reviews compliance with the Company’s Stock Ownership Guidelines.

 

 

Ronny B. Lancaster

 

(C, I)  

 

Mara G. Aspinall

 

(I)

 

Michael Celano

 

(I)

 

James A. Datin

 

(I)

Eamonn P. Hobbs

(I)

 

Number of Meetings during
fiscal 2020: 8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


14


 

 

 

 

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

Committee Members*:

 

 

 

Responsibilities:

 

•      Identifies, evaluates and recommends candidates for nomination or re-election to the Board.

 

•      Reviewsand makes recommendations to the Board on the range of skills, qualifications and expertise required for service as a Director.

 

•      Reviewsand recommends for Board approval the appropriate structure of the Board.

 

•      Reviews and recommends for Board approval the appropriate structure of Board committees, and recommends committee assignments and candidates for the position of Chairman of each committee.

 

•      Develops and recommends for Board approval a set of Corporate Governance Guidelines and a Code of Business Conduct and Ethics, and procedures for the implementation thereof.

 

•      Periodically reviews and recommends for Board approval the Board’s leadership structure, including whether the same person should serve as both CEO and Chairman of the Board.

 

•      Assists in the development of succession plans for the Company’s CEO and other executives.

 

•      Assists the Board in evaluating the independence of individual Directors for purposes of Board and committee service.

 

•      Develops and implements an annual self-evaluation process for the Board and its committees

 

Eamonn P. Hobbs

 

(C, I)  

 

Ronny B. Lancaster

 

(I)

 

Lelio Marmora

 

(I)

 

David J. Shulkin, M.D.

 

(I)

 

Number of Meetings during
fiscal 2020: 4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C – Committee Chair

I – Determined by the Board to be independent under applicable SEC and NASDAQ rules.

* - In April 2020, Dr. Shulkin was appointed as a Director and a member of the Audit Committee and Nominating and Corporate Governance Committee. In June 2020, Mr. Marmora was appointed as a Director and a member of the Audit Committee and Nominating and Corporate Governance Committee.


15


 

 

NOMINATION OF DIRECTORS

 

               Our Bylaws provide that nominations for election to the Board may be made by the Board or by any stockholder entitled to vote for the election of Directors at the Annual Meeting. A stockholder’s notice of nomination must be made in writing to the Company’s Corporate Secretary and must be delivered to or received at our principal executive offices not less than ninety (90) days nor more than one hundred twenty (120) days prior to the meeting. However, in the event that less than one hundred

 

 

Stockholders can nominate individuals to serve on the Board by following the procedures described in the Company’s Bylaws.

(100) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, in order for notice by the stockholder to be timely, notice must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. The notice to the Corporate Secretary must set forth, with respect to the nominee, the name, age, business address, residence address, principal occupation or employment of the person, the class and number of shares of capital stock of the Company which are beneficially owned by the person, and any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Regulation 14A under the Exchange Act.  The notice must also include, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (i) the name and address of the stockholder and such beneficial owner; (ii) the class and number of shares of capital stock of the Company which are held of record or beneficially owned by such stockholder and such beneficial owner and any other direct or indirect pecuniary or economic interest in any capital stock of the Company of such stockholder and beneficial owner, including without limitation, any derivative instrument, swap, option, warrant, short interest, hedge, profit sharing arrangement or borrowed or loaned shares; (iii) a description of any arrangements or understandings between such stockholder and beneficial owner and each proposed nominee and any other person (including their names) pursuant to which the nomination(s) are to be made by such stockholder and such beneficial owner or with respect to actions to be proposed or taken by such nominee if elected as a Director; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors, or may otherwise be required pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. We may also require any proposed nominee to furnish such other information as we may reasonably require to determine the eligibility of the proposed nominee to serve as a Director of the Company.

               The Nominating and Corporate Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates. Candidates recommended by stockholders will be considered by the Nominating and Corporate Governance Committee in the same manner as candidates recommended by other sources, but only if the stockholder makes a recommendation in accordance with the advance notification provisions set forth in the Company’s Bylaws.

 

 

 

DIRECTOR QUALIFICATIONS

 

 

The Board considers diversity, including personal factor such as race and gender, and other relevant factors in evaluating Director candidates.  In determining whether incumbent Directors will be nominated for re-election, we evaluate the individual’s background, experience and prior service as a Director.

 

               Although there is no formal policy governing Board diversity, the Nominating and Corporate Governance Committee considers diversity as one of many factors in identifying new candidates for the Board. Such diversity includes personal characteristics such as race and gender as well as diversity in background and skills and experience that relate to our Board’s performance of its responsibilities.  Currently, of the eight Directors on the Board, one is a woman, one is African-American and one is Chinese-American. The Nominating and Corporate Governance Committee does not assign specific weight to any particular criteria when reviewing candidates and may not apply the same criteria to all prospective nominees.

 


16


 

 

INSIDER TRADING

 

 

Our Insider Trading Policy prohibits trading by Directors, executive officers or employees who are in possession of material nonpublic information about the Company.

 

 

 

               We have a policy designed to prevent any trading in the Company’s Common Stock or other securities by Directors, executive officers and certain other employees of the Company and its affiliates while such person is in possession of material nonpublic information. The policy prohibits trading in the Company’s securities on the basis of material nonpublic information, requires preapproval of transactions in Company securities for Directors, executive officers and all other employees and establishes regular trading windows after each calendar quarter following the Company’s announcement of its quarterly financial results.

 

 

 

 

 

PROHIBITION AGAINST SHORT SALES, HEDGING AND PLEDGING

 

               We believe it is inappropriate for any employee of the Company or its affiliates or any member of the Board to engage in short-term or speculative transactions involving Company securities, including entering into financial instruments or engaging in other transactions that hedge or offset, or that are designed to hedge or offset, any decrease in the market value of our Common Stock. As a result, our insider trading policy prohibits Directors, executive officers and all other employees from entering into transactions involving our Common Stock, such as short sales, the buying or selling of puts or calls, the purchase of securities on margin, prepaid variable forward contracts, equity swaps, collars, exchange funds and other similar financial instruments. Our policy also prohibits employees and Directors from pledging shares of our Common Stock as collateral.

 

We have implemented several governance policies related to our Common Stock. Our policies prohibit short-term, speculative transactions in our stock, such as hedging, pledging and short sales.

 

 

 

STOCK OWNERSHIP AND RETENTION GUIDELINES

 

We have implemented stock ownership and retention guidelines for our CEO, other executives and members of the Board.

 

 

               The Board has adopted stock ownership and retention guidelines applicable to our President and CEO, our CFO and all of our other executive officers and all non-employee members of the Board. Under these guidelines, the covered individuals must meet the following ownership requirements, expressed either as a multiple of base salary (in the case of Company officers) or annual cash fees (in the case of non-employee Board members):

 

 

Covered Individual

Multiple of Base Salary

or Director Fees

President and Chief Executive Officer

6x

Chief Financial Officer

2x

Other Executive Officers

1x

Non-Employee Directors

3x

 

               Any individual who becomes subject to the guidelines is required to meet the guidelines within five years. Any individual already subject to the guidelines who becomes subject to a higher ownership requirement, due to a promotion, a further amendment to the guidelines or an increase in compensation, is required to meet the new ownership requirement within five years following the effective date of promotion, change in compensation or guideline amendment. In determining whether an individual meets the required ownership requirement, shares owned directly or indirectly, restricted stock (including both time and performance-based) and shares deferred under our deferred compensation plan will be counted. Compliance will be determined as of December 31 of each fiscal year. The guidelines also require each covered individual to retain at least 50% of the net shares acquired upon the exercise of stock options and the vesting of restricted stock until the individual’s holdings of Common Stock equal or exceed the applicable ownership requirement. As of December 31, 2020, all covered officers and non-employee Directors were in compliance with the stock ownership guidelines.


17


 

 

AUDIT COMMITTEE MATTERS    

 

 

REPORT OF THE AUDIT COMMITTEE FOR THE YEAR ENDED DECEMBER 31, 2020

The information contained in this report shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that Section. This report shall not be deemed “incorporated by reference” into any document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing.

The role of the Audit Committee is to assist the Board of Directors in fulfilling its responsibilities to oversee management’s conduct of the Company’s financial reporting process, including monitoring (1) the participation of management and the outside independent registered public accounting firm in the financial reporting process, (2) the Company’s systems of internal accounting and financial controls, (3) the annual independent audit of the Company’s financial statements and (4) the qualifications, independence and performance of the outside independent registered public accounting firm. The Audit Committee selects the Company’s outside independent registered public accounting firm, and once selected, the outside independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee is responsible for approving both audit and non-audit services to be provided by the outside independent registered public accounting firm. The Audit Committee is composed of five (5) non-employee directors and operates pursuant to a Charter that was last amended and restated by the Board on May 18, 2020 (which can be found on the Company’s website at www.orasure.com).

Management of the Company is responsible for the preparation, presentation and integrity of the Company’s financial statements, the Company’s accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles. The Audit Committee’s responsibility is to monitor and review these processes. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews.

In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with management, which included a discussion of not only the quality, but also the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee met with the independent registered public accounting firm, with and without management, to discuss the results of their audit and their judgments regarding the Company’s accounting policies. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed under applicable standards, including those in Public Company Accounting Oversight Board Auditing Standard No. 1301, as currently in effect. Finally, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board as currently in effect, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Company is compatible with maintaining the firm’s independence and has discussed with the independent registered public accounting firm the firm’s independence.

Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Audit Committee’s Charter, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the SEC and selected KPMG LLP as the independent registered public accounting firm for fiscal year 2021. The Board is recommending that stockholders ratify that selection at the Annual Meeting.

Submitted by the Audit Committee of the Company’s Board of Directors:

 

Mara G. Aspinall, Chairman

Michael Celano

James A. Datin

Lelio Marmora

David J. Shulkin, M.D.

February 26, 2021


18


 

 

 

AUDIT FEES; AUDIT RELATED FEES; TAX FEES; ALL OTHER FEES

The following table presents fees for professional audit services rendered by KPMG LLP (i) for the audits of our annual consolidated financial statements and review of the financial statements in our Quarterly Reports on Form 10-Q for the fiscal years ended December 31, 2020 and 2019, and (ii) for the audits of our internal control over financial reporting as of December 31, 2020 and 2019. The following table also includes fees billed for other services rendered by KPMG:

 

 

2020

 

2019

 

Audit fees1

$

1,231,138

 

$

1,095,750

 

Audit-related fees2

$

50,000

 

$

201,000

 

Tax fees3

$

250,408

 

$

216,512

 

Total fees

$

1,531,546

 

$

1,513,262

 

 

1

Includes fees related to the audits of our consolidated annual financial statements, interim reviews of our quarterly financial statements and audits of our internal control over financial reporting for each indicated year and procedures related to business combination transactions which occurred in 2020 and 2019. Includes fees for the preparation of a comfort letter for a stock offering under a shelf registration in 2020 and preparation of a written consent for a Registration Statement on Form S-8 in 2020 related to the OraSure Technologies, Inc. Stock Award Plan.

2

Includes fees for due diligence related to several acquisitions in 2020 and 2019.

3

During the fiscal years ended December 31, 2020 and 2019, KPMG was engaged to provide tax compliance, planning and consulting services.  

 

PRE-APPROVAL PROCEDURES

The Audit Committee has adopted a general practice of pre-approving all audit and non-audit services provided to the Company by our independent registered public accounting firm. The Chairman of the Audit Committee has been delegated the authority to pre-approve audit and non-audit services having an aggregate value of up to $50,000 between meetings of the Audit Committee, provided that such pre-approval is communicated to the Audit Committee at its next scheduled meeting. All services by KPMG in 2020 and 2019 were approved in accordance with these practices.

COMPENSATION COMMITTEE MATTERS    

 

The Compensation Committee assists the Board in developing and managing the compensation provided to executive officers of the Company and non-employee members of the Board. The Compensation Committee is responsible for developing and overseeing the implementation of the Company’s compensation philosophy and for setting executive compensation at levels that are sufficiently competitive so that the Company can attract, retain, motivate and reward high quality executives who can contribute to the Company’s success.

 

COMPENSATION PROCESSES AND PROCEDURES

Compensation for executives is established by the Compensation Committee in accordance with the compensation philosophy established under its charter as set forth in the CD&A Section of this Proxy Statement. In setting executive compensation, the Compensation Committee considers the Company’s and each executive’s performance against previously established objectives, internal pay equity, the compensation practices of the Company’s peer group (as set forth in the CD&A) (“Peer Group”), the Company’s industry position and general industry compensation data. The Compensation Committee periodically retains independent compensation consultants to review our executive compensation practices and to assist in establishing competitive compensation levels for our executives.

 

ANNUAL PERFORMANCE EVALUATIONS

On an annual basis, the Compensation Committee and other non-employee Directors evaluate the performance of the CEO, based on the overall performance of the Company. The CEO also evaluates the performance of the other NEOs against their respective predetermined performance objectives. Annual performance objectives for the NEOs are established at the beginning of the applicable year and generally include two parts: (1) the Company’s overall target financial objectives, and (2) individual objectives in the functional areas for which the executive is responsible.

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Depending on the Company’s overall performance and the extent to which an executive achieves his or her individual objectives for a particular year, the executive will be rated as “Does Not Meet,” “Does Not Consistently Meet,” “Meets Expectations,” “Exceeds Expectations” or “Outstanding.” On occasion, a blended rating such as “Meets/Exceeds” or “High Meets” will be used to indicate performance between the foregoing performance rating levels. The Compensation Committee uses the performance ratings and other factors to determine base salary adjustments, incentive cash bonuses and long-term incentive equity awards. Although this approach was also followed in evaluating Dr. Tang’s performance for 2020, Dr. Tang’s performance assessment is primarily based on the Company’s overall performance.

 

ROLE OF THE COMPENSATION COMMITTEE

The Compensation Committee is comprised of independent non-employee Directors who oversee our executive compensation program. Each year, the Compensation Committee determines or recommends (in the case of the CEO) the appropriate level of compensation for all NEOs. As an initial guideline, the Compensation Committee sets the total direct compensation opportunity (base salary, annual incentive bonus target, and long-term incentive equity target) for each of our executive officers within a range around the 50th percentile of comparable medical diagnostics and healthcare companies. The variation of actual pay relative to the market data is dependent on the executive officer’s performance, experience, knowledge, skills, level of responsibility, potential to impact our performance and future success, and the need to retain and motivate strategic talent.

The Compensation Committee generally determines an executive officer’s compensation based upon the objectives of our executive compensation program. The Compensation Committee makes compensation recommendations to the Board for the CEO and approves decisions for the other NEOs after careful review and analysis of appropriate performance information and market compensation data. Compensation for the CEO is approved by the independent members of the Board of Directors.

Beyond determining and recommending (in the case of the CEO) specific compensation for the NEOs, the Compensation Committee works with the executive management team to review and adjust compensation policies and practices to ensure that they remain consistent with the Company’s values and philosophy, support the recruitment and retention of executive talent, and help the Company achieve its business objectives.  The Compensation Committee also determines a market-based level of compensation for non-employee Directors.

 

ROLE OF THE CEO

The CEO provides performance assessments and recommendations to the Compensation Committee on the compensation for each executive of the Company. The CEO’s recommendations are based on his review of each executive’s performance, job responsibilities, importance to our overall business strategy, and our compensation philosophy. Although the CEO’s recommendations are given significant weight, the Compensation Committee retains full discretion when determining compensation.

 

ROLE OF THE COMPENSATION CONSULTANT

To assist in the review of executive compensation and to obtain information regarding market trends and governance best practices, the Compensation Committee engages independent executive compensation consultants to analyze our executive compensation structure and plan designs, and to assess whether our compensation program is competitive and supports our goal of aligning the interests of our executive officers with those of our stockholders. Such consultants also provide the Compensation Committee with the Peer Group and other market data that is discussed in the CD&A, which the Compensation Committee evaluates when establishing programs and features and determining compensation for executive officers. In connection with its 2020 compensation decisions, the Compensation Committee engaged Pay Governance LLC (“Pay Governance”) to provide market assessments of the target compensation for our executives and consult on the preparation of this Proxy Statement.

The Compensation Committee has the sole authority to approve any independent compensation consultant’s fees and terms of engagement. The Compensation Committee annually reviews its relationship with each consultant to ensure their independence. The process in 2020 included a review of the services Pay Governance provides, the quality of those services, and the fees associated with those services during the fiscal year as well as consideration of the factors impacting independence that NASDAQ rules require and a review of Pay Governance’s independence policy. The Compensation Committee concluded that there were no conflicts of interest that prevented Pay Governance from serving as an independent consultant to the Compensation Committee on executive compensation matters.


20


 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mara G. Aspinall, Michael Celano, James A., Datin, Eamonn P. Hobbs and Ronny B. Lancaster each served as members of the Compensation Committee during 2020, with Mr. Lancaster serving as Chairman. None of these Directors has served or is currently serving as an officer or employee of the Company, nor have they engaged in any transactions involving the Company which would require disclosure as a transaction with a related person. There are no Compensation Committee interlocks between the Company and any other entity involving the Company’s or such entity’s executive officers or board members.

 

COMPENSATION COMMITTEE REPORT

The information contained in this report shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. This report shall not be deemed to be incorporated by reference” into any document filed under the Securities Act or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing.

The Compensation Committee of OraSure Technologies, Inc. has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis, contained in this Proxy Statement. Based on that review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the foregoing Compensation Discussion and Analysis be included in the Company’s 2020 Annual Report on Form 10-K Report and Proxy Statement for the 2021 Annual Meeting of Stockholders.

COMPENSATION COMMITTEE:

Ronny B. Lancaster, Chairman

Mara G. Aspinall

Michael Celano

James A. Datin

Eamonn P. Hobbs

March 28, 2021


21


 

 

EXECUTIVE OFFICERS    

 

The table below provides information about the executive officers of the Company as of March 26, 2021. Officers of the Company hold office at the discretion of the Board.

 

Name1

Age

Position

Stephen S. Tang

60

President and Chief Executive Officer

Roberto Cuca

53

Chief Financial Officer

Lisa Nibauer

53

Executive Vice President, Business Unit Leader, Diagnostics

Kathleen G. Weber

54

Executive Vice President, Business Unit Leader, Molecular Solutions

Jack E. Jerrett

62

Senior Vice President, General Counsel and Chief Compliance Officer

Michele Miller

47

Vice President, Finance, Controller and Assistant Secretary

____________________

1Anthony Zezzo II, who served as the Company’s Executive Vice President, Business Unit Leader, Infectious Disease and was an executive officer during 2020, left the Company in June 2020. Ms. Nibauer joined the Company in May 2020.

 

 

Stephen S. Tang, Ph.D., President and Chief Executive Officer

 

 

 

 

 

Stephen S. Tang, Ph.D., became a member of the Board in April 2011 and served as the Company’s Chairman until he became the Company’s President and CEO on April 1, 2018. From January 2008 to March 2018, Dr. Tang served as President and Chief Executive Officer of the University City Science Center, an urban research park and business incubator owned by over thirty leading universities, medical schools and health networks in the greater Philadelphia, Pennsylvania area.  Prior to his tenure at the University City Science Center, Dr. Tang held senior management and business development positions with several firms in the life sciences industry, including Olympus America, Inc., Millennium Cell Inc. and A.T. Kearney Inc. Dr. Tang holds a B.S. degree in Chemistry from The College of William and Mary, an M.S. and Ph.D. in Chemical Engineering from Lehigh University and an M.B.A. from The Wharton School of Business at the University of Pennsylvania.

 

 

 

 

Roberto Cuca, Chief Financial Officer

 

 

 

 

 

Roberto Cuca joined the Company in May 2018, initially serving as Senior Advisor until his appointment as the Company’s Chief Financial Officer in June 2018.  Prior to joining the Company, Mr. Cuca served as Senior Vice President and Chief Financial Officer of Trevena, Inc., a clinical stage biopharmaceutical company, where he led the finance and investor relations functions and worked with senior management to establish and execute overall corporate strategy.  Prior to his tenure with Trevana, Mr. Cuca held various leadership positions in the finance organization of Endo Health Solutions Inc., a pharmaceutical company, including Treasurer and Senior Vice President, Finance, where he was responsible for capital raises and cash management, mergers, acquisitions and licensing transactions, tax planning and compliance, and risk management.  Before he joined Endo, Mr. Cuca served as the Director, Corporate and Business Development at moksha8 Pharmaceuticals, Inc., an emerging markets-focused pharmaceutical company, and as an equity analyst covering U.S. pharmaceutical companies at J.P. Morgan Chase & Co. Mr. Cuca received an M.B.A. from The Wharton School of the University of Pennsylvania, a Juris Doctor from Cornell Law School, and an A.B. from Princeton University.  Mr. Cuca is also a CFA Charterholder.

 


22


 

 

 

 

 

Lisa Nibauer, Executive Vice President, Business Unit Leader, Diagnostics

 

 

 

 

  

 

Lisa Nibauer joined the Company as Executive Vice President, Business Unit Leader, Diagnostics in May 2020. Prior to that, Ms. Nibauer spent eight years at BD Becton Dickinson, Inc. (“BD”), most recently as VP/GM, Global Medication Delivery Solutions. In that role, she had general management responsibility for $1.6 billion in annual revenue and a team of over 300 people globally and was also accountable for the Global Marketing function for the largest business unit in BD. Prior to that, Ms. Nibauer held the positions at BD of VP/GM, Global PreAnalytical Systems Business & Global Marketing and Senior Director, Global Blood Collection Acquisition Platform. Prior to joining BD, she held general management, sales and marketing positions with increasing responsibilities at Adlens Beacon Inc., Schering-Plough Consumer Healthcare (Bayer), General Mills, Elf Atochem, and ICI (now part of AstraZeneca, Henkel and AkzoNobel). Ms. Nibauer earned an M.B.A. from the UCLA Anderson School of Management and a B.S. in Chemical Engineering from Lehigh University.

 

Kathleen G. Weber, Executive Vice President, Business Unit Leader, Molecular Solutions

DNA Genotek, Inc.

 

 

 

 

Kathleen G. Weber has served as the Executive Vice President, Business Unit Leader, Molecular Solutions at DNAG since January 1, 2019.  Prior to that, she served as the Senior Vice President and General Manager, Consumer Products at the Company since November 2012.  Prior to her time at OraSure, Ms. Weber served in executive leadership roles at Pfizer, Johnson and Johnson, and Wyeth.  Ms. Weber began her career in the finance industry at Chase Manhattan Bank (now known as JP Morgan Chase). Ms. Weber received a B.S. in business administration from Georgetown University and an M.B.A. from New York University’s Stern School of Business.

 

 

 

 

Jack E. Jerrett, Senior Vice President, General Counsel and Chief Compliance Officer

 

 

 

 

  

 

Mr. Jerrett has been the Company’s Senior Vice President, General Counsel and Chief Compliance Officer since February 2020.  He served as Senior Vice President and General Counsel since February 2003 and served as Vice President and General Counsel since November 2000. He has also served as the Company’s Secretary since February 2001. Prior to joining the Company, Mr. Jerrett worked as an Associate at Morgan, Lewis & Bockius and held positions of increasing legal responsibilities with companies in the transportation and energy industries. Mr. Jerrett received his B.S. in Accounting from Villanova University and his J.D. from the Villanova University School of Law. He is a member of the Pennsylvania Bar and the American and Pennsylvania Bar Associations.

 

 

 

Michele Miller, Vice President, Finance and Controller

 

 

 

 

  

 

Michele Miller has been the Company’s Vice President, Finance and Controller since October 2018 and served as the Company’s Director, Financial Reporting since December 2011 and as Manager, Financial Reporting since August 2007.  Prior to joining the Company, Ms. Miller served as Manager, Financial Reporting at Knoll, Inc. and as an accountant with Beard Miller Company and Ernst & Young.  Ms. Miller received her B.S. in Accounting from Bloomsburg University and is a licensed Certified Public Accountant, a Chartered Global Management Accountant, and a member of the Pennsylvania and American Institutes of Certified Public Accountants.

 

23


 

TRANSACTIONS WITH RELATED PERSONS    

 

Since January 1, 2020 there have been no transactions with related persons that would require disclosure in this Proxy Statement. The Audit Committee is required to review and approve in advance all transactions with related persons involving the Company. The Audit Committee may approve a related party transaction if the transaction is on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party. The Audit Committee also reviews any public disclosures of a related party transaction contained in our SEC filings. These responsibilities are described in the Audit Committee’s charter, a copy of which is available on our website at www.orasure.com.

Information regarding employment, severance and retirement agreements between our executive officers and the Company is set forth in the Section entitled, “Employment Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy Statement.

 

Delinquent section 16(a) reports

 

Section 16(a) of the Exchange Act requires that our executive officers and Directors and persons who own more than ten percent of our Common Stock (collectively, “Reporting Persons”) file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by the SEC’s regulations to furnish us with copies of all Section 16(a) forms they file.

As a matter of practice, our administrative staff assists each of the Reporting Persons who are employees and Directors of the Company in preparing initial reports of ownership and reports of changes in beneficial ownership and filing such reports with the SEC and the NASDAQ. Based solely on a review of the copies of forms filed by or on behalf of the Reporting Persons and on written representations (if any) from each of the Reporting Persons, we believe that all Reporting Persons complied on a timely basis with all applicable filing requirements with respect to the year 2020, except for Kathleen Weber, the Company’s Executive Vice President, Business Unit Leader, Molecular Solutions. Due to an administrative error, a Form 4 required in connection with the sale of vested restricted stock by Ms. Weber under a 10b5-1 sales plan on December 23, 2020 was filed on January 4, 2021.

 

 

 

 


24


 

 

 

Compensation Discussion and Analysis - Table of Contents

 

EXECUTIVE SUMMARY

26

 

 

Overview

26

2020 Performance

26

2020 Business Highlights

27

2020 NEO Compensation at a Glance

28

Pay for Performance

29

Compensation Governance Practices

30

Realizable Pay vs. TSR

31

Realizable Pay vs. SCT Compensation

31

Pay vs. Other Company Measures of Performance

32

Say-on-Pay Results in 2020 and the Company’s Response

32

Compensation Risk Assessment

33

COMPENSATION PHILOSOPHY

33

BENCHMARKING

34

2020 EXECUTIVE COMPENSATION COMPONENTS

35

Overview

35

Pay Mix

35

Compensation Components in Detail

36

OTHER COMPENSATION

44

Retirement Programs

44

Perquisites and Other Compensation

44

Potential Payments Upon Termination or Change of Control Pursuant to Employment Agreements

44

Accounting and Tax Treatment of Compensation

45

Compensation Recoupment Policy

45

CEO PAY RATIO

45

 

 

Compensation Tables – Table of Contents

 


25


 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

EXECUTIVE SUMMARY

 

Overview

This Compensation Discussion and Analysis, or CD&A, describes the material elements of the compensation of our NEOs and describes the objectives and principles underlying the Company’s executive compensation program, the compensation decisions we have recently made under this program and the factors we considered in making these decisions.

Our NEOs for 2020 who are covered in this CD&A include:

 

Name

Position

Stephen S. Tang, Ph.D.

President and Chief Executive Officer

Roberto Cuca

Chief Financial Officer

Lisa Nibauer

Executive Vice President, Business Unit Leader, Diagnostics

Kathleen G. Weber

Executive Vice President, Business Unit Leader, Molecular Solutions

Jack E. Jerrett

Senior Vice President, General Counsel and Chief Compliance Officer

Anthony Zezzo, II1

Former Executive Vice President, Business Unit Leader, Infectious Disease

_________________

1 Mr. Zezzo retired from the Company in June 2020 and was replaced by Ms. Nibauer who joined the Company in May 2020.

 

2020 Performance

The following charts describe our consolidated financial performance during the last three fiscal years, expressed in dollars (thousands).

 

 

 

 

 

26


 

 

__________

12018 operating income includes $9.6 million in executive transition costs and $1.2 million in transaction costs   associated with two acquisitions. 2019 operating income includes a $10.1 million gain related to the sale of the Company’s cryosurgical systems business, $664,000 of income associated with the change in the fair value of acquisition-related contingent consideration, and $1.8 million of transaction costs associated with the acquisitions in 2019. 2020 operating loss includes $1.1 million of income associated with the change in the fair value of acquisition-related contingent consideration, and $393,000 of transaction costs associated an acquisition in 2020. 2020 operating loss also reflects a significant investment in research and development activities associated with the development of COVID-19 testing products.

 

Despite the negative impact of the COVID-19 pandemic on our core business, we delivered a strong financial performance during 2020. Our consolidated net revenues for the year rose 11% over 2019. This included a 45% increase in revenues from our Molecular Solutions business unit.  This increase was primarily the result of almost $50 million in sales of sample collection devices for COVID-19 molecular testing. Sales of our international HIV products also rose 16% from 2019, driven primarily by higher sales of our HIV self-test in Africa. These increases more than offset declines in other parts of our business caused by the COVID-19 pandemic.  As a result, we made no COVID-19 related adjustments to the funding objectives for our 2020 incentive bonus plan or PRU performance measures and the Compensation Committee applied no positive discretion in determining performance and payouts for our NEOs.

 

 

2020 Business Highlights

Business highlights from 2020 and the principal factors driving our financial performance are summarized below:

 

Total net consolidated revenues for the full year 2020 were $171.7 million, an 11% increase over 2019.

Total 2020 product and services revenues for our Molecular Solutions business were $102.8 million, an increase of 45% over 2019.

Full year 2020 international sales of our HIV products grew 16% over 2019.

During 2020, our Molecular Solutions business generated almost $50 million in sales of sample collection devices for COVID-19 molecular testing.  This revenue, along with the growth in international HIV sales, more than offset the negative impact of the COVID-19 pandemic on our other businesses.

Our molecular sample collection kits were included in eight Emergency Use Authorizations (“EUAs”) granted by the U.S. Food and Drug Administration (“FDA”) to our customers for use in COVID-19 testing.

We separately obtained EUAs for two of our molecular collection devices for use in COVID-19 testing and these devices received interim authorization for use in COVID-19 testing in Canada.

27


 

We completed development and initiated the EUA process for our laboratory-based oral fluid COVID-19 antibody assay and made substantial progress towards the development of a rapid COVID-19 antigen test.

We began to substantially expand our manufacturing capacity in order to enable us to meet the expected significant demand for our new COVID-19 assays and molecular collection devices for COVID-19 testing.

We completed the acquisition of UrSure, Inc. which adds the capability to develop and commercialize products that measure adherence to HIV medications, including pre-exposure prophylaxis or PrEP, the daily medication to prevent HIV, and anti-retroviral medications to suppress HIV.

In response to the COVID-19 pandemic, we implemented a number of safety protocols and modified the way we do business in order to protect our employees, subcontractors and customers.

We established a Diversity, Equity and Inclusion Council in order to help drive diversity, equity and inclusion throughout our organization.

We established a Sustainability Committee to focus on steps we can take to reduce our carbon footprint and environmental impact on the communities we serve.

 

 

2020 NEO Compensation at a Glance

NEO compensation for 2020 was as follows:

 

Base Salary: The base salaries paid to our senior management (including the NEOs) during 2020 increased from 2019 by 3.3% on average. Salary adjustments for 2020 were based on the performance of each executive and the Company during 2019, the marketplace compensation data provided to the Compensation Committee in 2019 by its compensation consultant and the Company-wide average salary merit increase budget of 3.0%. Generally, an executive’s annual salary adjustment tended to be at the higher end of the range budgeted by the Company if the executive received a performance rating of “Meets Expectations” or better and such executive’s pre-adjustment salary level was below the 50th percentile for his or her position as reflected in marketplace and the Peer Group compensation data.  The increase in Dr. Tang’s base salary reflects a merit increase of 2.5%. Additional detail on these salaries is provided in the “2020 Base Salaries” Section, below.

 

NEO

2019 Performance Rating

2019 Salary

 

2020 Salary

 

Change (%)

 

Stephen S. Tang, Ph.D.

Meets

$

609,000

 

$

624,225

 

2.50%

 

Roberto Cuca

High Meets

$

426,413

 

$

439,205

 

3.00%

 

Lisa Nibauer1

N/A

N/A

 

$

410,000

 

N/A

 

Kathleen G. Weber

High Meets

$

355,000

 

$

365,650

 

3.00%

 

Jack E. Jerrett2

Exceeds

$

380,152

 

$

415,358

 

9.26%

 

Anthony Zezzo, II3

Low Meets

$

418,726

 

$

418,726

 

0.00%

 

____________

1Ms. Nibauer joined the Company in May 2020 and the 2020 salary reflects her annualized salary for the full year.

2Mr. Jerrett’s 2020 salary reflects a 4% merit increase plus a $20,000 adjustment to reflect his assumption of additional responsibilities as the Company’s Chief Compliance Officer in early 2020.

3Mr. Zezzo retired from the Company in June 2020 and was replaced by Ms. Nibauer.  The 2020 salary reflects his annualized salary for the full year.

 

Annual Incentive Bonuses: Incentive cash bonus awards for 2020 performance ranged from 173% to 242%1 of target for each of the NEOs.  The bonus amounts were above the applicable targets for Dr. Tang and the other NEOs, primarily due to the strong financial performance of the Company, despite significant challenges caused by the COVID-19 pandemic, as described under “2020 Business Highlights in Detail” Section, above. Additional detail on these bonus payments is provided in the “2020 Annual Incentive Cash Bonuses” Section, below.

 

 

 

 

 

 

Actual 2020 Bonus Payments

 

NEO

2020

Performance

Rating

2020 Target

(% Salary)

 

($)

 

(% Salary)

 

(% Target)

 

Stephen S. Tang, Ph.D.

Outstanding

85%

 

$

1,239,196

 

199%

 

234%

 

Roberto Cuca

Outstanding

50%

 

$

493,886

 

112%

 

225%

 

Lisa Nibauer1

Exceeds

40%

 

$

340,464

 

83%

 

208%

 

Kathleen G. Weber

Outstanding

40%

 

$

354,242

 

97%

 

242%

 

Jack E. Jerrett

Meets

40%

 

$

287,428

 

69%

 

173%

 

Anthony Zezzo, II

N/A2

40%

 

$

289,758

 

69%

 

173%

 

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___________________

1Ms. Nibauer also received a sign-on bonus of $50,000 when she joined the Company in May 2020.

2Pursuant to his retirement agreement, Mr. Zezzo’s bonus payment under the 2020 Incentive Plan was equal to 40% of his base salary, subject to adjustment to reflect the actual bonus pool funding approved by the Board.

 

 

Long-Term Incentive Awards: Incentive equity awards granted to Dr. Tang and the other NEOs (except for Ms. Nibauer who received an onboarding equity award) in February 2020 were based on the Company’s financial performance and/or each executive’s performance during 2019, as described under the “2020 Base Salaries” Section, below. The value of the awards ranged from 119% to 200% of each executive’s base salary, as shown below. The NEOs received equity awards consisting of 50% time-vested RS and 50% PRUs.

 

 

 

 

2020 Equity Awards

 

NEO

2019

Performance Rating

Target Range

(% Salary)

($)

 

(% Salary)

 

Stephen S. Tang, Ph.D.

Meets

150%-250%

$

1,218,000

 

200%

 

Roberto Cuca

High Meets

105%-175%

$

686,525

 

161%

 

Lisa Nibauer1

N/A

95%-155%

$

499,995

 

122%

 

Kathleen G. Weber

High Meets

95%-155%

$

465,938

 

131%

 

Jack E. Jerrett

Exceeds

95%-155%

$

513,205

 

135%

 

Anthony Zezzo, II

Low Meets

95%-155%

$

497,237

 

119%

 

_______________________

1 Ms. Nibauer received an onboarding equity award when she joined the company in May 2020 consisting of 50% time-vested RS and 50% PRUs, with terms substantially the same as the terms of awards made to the Company’s other executives in February 2020.  The indicated amount reflects the aggregate grant date fair value of the award on May 11, 2020.

Additional information regarding NEO compensation for 2020 is provided below in this CD&A and in the accompanying tables, including the Summary Compensation Table (“SCT”) set forth below.

 

Pay for Performance

We follow a pay-for-performance approach in compensating executives. Our program pays executives for performance by rewarding the achievement of predetermined financial and/or strategic objectives.

A significant portion of each NEO’s compensation is paid out in variable and long-term compensation that is intended to align such compensation with the long-term interests of our stockholders. Both our annual and long-term compensation are tied to the Company’s overall performance in a variety of ways, including our financial results and share price performance. A further discussion of our pay mix for the NEOs is set forth in the “Pay Mix” Section, below.

One aspect of our compensation program is the use of performance targets to incentivize management to achieve improved financial results on a year-to-year basis. For many years, annual financial objectives have been used to determine the amount of pool funding available to pay individual awards under our annual cash bonus plan.  These objectives are generally set at levels intended to incentivize annual financial growth.  A combination of financial and strategic objectives may also be considered, and in the past have been used, where the Compensation Committee and the Board desire to incentivize management to meet certain near-term strategic objectives which could help drive improved financial performance in a year with increased financial uncertainty.  Each year the Compensation Committee and the Board evaluate whether financial objectives, strategic objectives, or some combination thereof, would provide the most appropriate near-term incentives for our NEOs to achieve improved financial performance.

In addition, for the past several years we have followed a policy of granting annual equity awards to executives that consist of 50% PRUs and 50% time-vested RS. The PRUs will only vest if (i) the NEO remains employed by the Company for three years following the date of grant and (ii) the performance criteria determined by the Committee and the Board are met. For the PRUs granted in 2020, a compound annual growth target for consolidated net revenues for the three-year period 2020-2022 and a one-year income before income taxes (“IBIT”) target for the fiscal year 2020 were established as the performance criteria. The time-vested RS portion of the award vests in equal annual installments over the three-year period following the grant date, subject to the NEO’s continued employment by the Company.

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We believe the performance targets in the PRUs and the three-year service periods applicable to both the RS and PRU awards complement the short-term incentives in our annual bonus plan. We also believe the combination of the structure of our annual bonus plan and the structure of our equity award policy appropriately incentivize management to deliver substantially improved financial performance both on an annual basis and over a longer term period and help drive long-term growth in stockholder value.

As noted above, despite the significant pandemic-related impact on our business, we made no COVID-19 adjustments to the funding objectives for our 2020 incentive bonus plan or PRU performance measures and the Compensation Committee applied no positive discretion in determining performance and payouts for our NEOs.

Compensation Governance Practices

We are committed to maintaining good corporate governance and practices. As a result, and in response to input from stockholders, the Compensation Committee and the Board have adopted a number of changes over the past several years to specifically respond to stockholder concerns and better align our compensation program with performance. The most significant of these changes was the adoption of PRUs for 50% of the value of annual long-term equity awards for our executives. These changes and certain other important aspects of our compensation practices are summarized below:

 

 

Performance Mix – The vast majority of our NEOs’ compensation is performance-based. For example, approximately 80% of Dr. Tang’s 2020 annual compensation opportunity consists of an incentive cash bonus and equity award, both of which are performance-based and varying with some combination of financial, strategic and/or share price performance. For the other NEOs (other than Mr. Zezzo), 66% of their aggregate annual compensation consists of performance-based compensation.

 

 

Diversified and Performance Based Portfolio – Our executive compensation consists of a mix of cash/equity, fixed/variable and short-term/long-term compensation. 

 

Performance Vested Equity – 50% of our NEOs’ annual equity awards consist of PRUs that will not vest until three years after the grant date and only if certain performance measures are met during the three-year period.

 

 

Long-Term Focus – Equity awards are subject to long-term vesting requirements, with time-vested RS vesting over 3 years. PRUs also vest only after three years. Structuring our equity awards in this manner helps align the interests of our executives with the long-term interests of our stockholders.

 

 

Target Bonus Objectives – Our annual bonus pool is funded based on the achievement of annual financial objectives, strategic objectives or a combination thereof, in order to incentivize management to achieve improved financial performance on a year-over-year basis.

Limited Bonus Pool Discretion – The aggregate bonus pool funding for annual cash bonuses is determined pursuant to a plan funding formula tied to the Company’s achievement of specific financial objectives. The Board and Compensation Committee can make discretionary adjustments to the pool, but such adjustments are limited to +/– 10% of the pool amount determined under the plan’s self-funding formula.

 

Balanced Performance Metrics – Variable compensation is based on a combination of corporate and individual performance, measured over varying timeframes to help ensure balanced incentives for executives. 

 

Change-in-Control Severance and Tax Gross Ups – Our policy is that employment agreements with our executives provide for “double trigger” change-in-control severance rather than “single trigger” change-in-control severance and do not provide for a 280G income tax gross up.  This policy was most recently followed in the employment agreement for Lisa Nibauer, who was hired as the new head of our Diagnostics business unit in May 2020.

 

Strong Stock Ownership and Retention Conditions – We have implemented stock ownership requirements of six (6) times salary for our President and CEO, two (2) times salary for our CFO and one (1) times salary for other NEOs. 

 

Prudent Benchmarking – The total compensation paid to our executives is targeted at the 50th percentile of our Peer Group of comparable companies based on achievement of performance objectives. We use a Peer Group consisting of companies in the medical diagnostic and healthcare industries comparable in size to the Company based on total revenues and market value. 

 

Independent Compensation Consultants – The Compensation Committee regularly utilizes independent compensation consultants to provide compensation governance, design and benchmarking advice. During 2020, the Compensation Committee engaged Pay Governance as its independent consultant. 

 

Recoupment Policy – The Company maintains a compensation recoupment or “clawback” policy, under which we will seek to recover excess compensation paid to an executive if our financial statements are restated due to misconduct by that executive. 

30


 

 

No Repricing – Our LTIP prohibits both the repricing and repurchase of underwater stock options or other equity awards without stockholder approval. 

No Perquisites – As a general matter, we do not provide executives with any perquisites that are not offered to all employees of the Company.

Risk Review Process – We periodically assess the risks associated with our compensation programs.

No Hedging - Our policy prohibits Directors and NEOs from engaging in hedging activities with respect to our stock.

No Pledging – Our Directors and NEOs are not permitted to pledge our stock.

Confidentiality/Non-Compete Agreements – Our NEOs are subject to confidentiality and non-compete agreements.

 

Realizable Pay vs. TSR

To ensure that our executive compensation program and compensation levels are consistent with our pay-for-performance philosophy, we evaluated the degree of alignment between our CEO’s total realizable pay versus our TSR over the prior three fiscal years (2018 to 2020) relative to our Peer Group. The graph below shows the comparison of our three-year TSR and “realizable pay” relative to our Peer Group.

 

 

 

Dr. Tang’s compensation for each year includes base salary, incentive cash bonus and all other compensation reported in the Summary Compensation Table. Equity awards are valued using the closing stock price on December 31, 2020 for each company in our Peer Group. Restricted stock and restricted unit awards are valued by multiplying the number of shares or units by the applicable closing stock price.  The number of restricted units included in the calculations for Dr. Tang reflects a payout based on the Company’s currently expected performance against the applicable performance measures for those awards.  Option awards are valued as the difference between the closing stock price on December 31, 2020 and the exercise price multiplied by the number of option shares granted during the period. An option award with an exercise price greater than the closing stock price on December 31, 2020 is valued at $0.

 

As indicated by the graphical display of this realizable pay versus performance analysis relative to peers, there is reasonable alignment between our TSR performance (which is only one perspective in assessing our performance) and the realizable pay for our CEO relative to our Peer Group companies. This analysis confirms the strong link between pay and performance embedded in our compensation program.

Realizable Pay vs. SCT Compensation

As described further below, we believe long-term equity awards are a key incentive for our executives to drive the Company’s long-term growth and align the interests of our executives with those of our stockholders. The SCT includes the estimated value of long-term incentive equity awards at the time of grant based on the accounting valuation determined under ASC 718. The actual value of these awards that may be realizable by our executives may vary from these accounting-based estimates depending on the Company’s financial and stock performance and can differ significantly from what is reported in the SCT.

31


 

A comparison of the realizable value of long-term equity incentive awards as of December 31, 2020 against the values reported in the SCT indicates how compensation outcomes may be impacted by our performance. Such a comparison also shows the degree of alignment between our stock performance and the level of compensation provided to executives.

 

The table below compares the compensation values reported in the SCT and the value of realizable pay (“RP”) for the compensation awarded during the three-year period 2018 to 2020 for our CEO, Dr. Tang.

 

 

 

 

 

 

Our CEO’s RP for the three years 2018–2020 of $7.5 million is 3% above the CEO’s $7.3 million SCT compensation for the same period. This shows a close alignment between actual pay and performance versus expectations as reflected in the aggregate STC values for the last three years.

 

 

 

 

 

Pay vs. Other Company Measures of Performance

While TSR is a common measure of performance that is often used to evaluate a company’s compensation practices, we consider other performance measures to be, at times, more reflective of the success of our business and more important as an incentive to focus our leaders on key priorities. It is important to recognize that our TSR can be extremely volatile, as evidenced by the substantial movements in our stock price during the past several years. Our TSR can be, and often is, influenced by a variety of macro-economic factors that are outside the control of our executives. The following summarizes our one-year TSR during the period 2013-2020:

 

 

2013

2014

2015

2016

2017

2018

2019

2020

TSR

(12%)

61%

(37%)

36%

115%

(38%)

(31%)

32%

The foregoing price changes were not solely tied to our underlying performance. For example, our stock price declined in 2015 and 2018 even though we achieved record financial performance with substantial growth and strong profitability in those years.

As a result, while our executive compensation opportunities do not follow a linear relationship with TSR, the pay realizable to our executives (as noted above for our CEO) should and does demonstrate a clear relationship with both TSR and financial results. We have tried to align our executive compensation with performance results that are part of our overall business strategy that we believe will drive stock price improvement and increased value for our stockholders over the longer term.

When establishing and evaluating our executive compensation program generally, and performance-based incentive plans in particular, we believe that TSR alone will not always immediately account for the value of our accomplishments and, in many cases, it may take time for the impact of our strategic and other accomplishments to be fully reflected in the value of our stock. Thus, while obviously important, TSR is only one of several factors we consider in making compensation decisions for our executives.

Say-on-Pay Results in 2020 and the Company’s Response

At our 2020 Annual Meeting, stockholders were asked to vote on an advisory (non-binding) basis on the compensation paid to our NEOs for 2019. We obtained strong stockholder support for our NEO compensation for 2019 with approximately 94% of stockholder votes cast in favor of our “say-on-pay” or SOP resolution. Even with this overwhelmingly

32


 

positive response, we continued our historical approach to contact certain of our major stockholders in order to continue to understand their views regarding our compensation practices. Overall, we attempted to contact stockholders who, in the aggregate, beneficially held approximately 36% of our outstanding Common Stock. As a general matter, our stockholders either did not respond or indicated that they saw no need to meet with us despite having done so in the past. One stockholder we met with supported the compensation changes made over the past several years and indicated there was good alignment of management goals and compensation.  This stockholder also believed that the use of more equity compensation and TSR as a performance measure should be considered by the Board in order to further align our executive compensation with the interests of stockholders.

We believe our stockholder engagement has been and continues to be beneficial for the Company and our stockholders. The feedback we received reaffirms that the compensation changes we made in recent years were responsive to stockholder concerns and our executive compensation is strongly aligned with performance. Based on this feedback, no material changes to our executive compensation program were made, although the Board intends to consider the specific feedback received in making future compensation decisions.  We also intend to continue ongoing dialogue with our stockholders to ensure that our executive compensation programs are well understood by all stakeholders and that we remain responsive to stockholder concerns.

Compensation Risk Assessment

Management periodically conducts a risk assessment of the Company’s compensation policies and practices, including its executive compensation program. In its review, management considers the attributes of the Company’s policies and practices and other factors, including:

 

The mix of fixed and variable compensation opportunities;

 

The balance between annual and long-term performance opportunities;  

 

The corporate and individual performance objectives established for annual and long-term incentive compensation;

 

The internal controls and procedures in place to mitigate risks facing the Company, including the Company’s “clawback” policy and stock ownership guidelines; and

 

The risk that unintended consequences could result from various aspects of the Company’s compensation policies and practices.

Based on its consideration of the foregoing, management believes that the Company’s policies and practices are designed with the appropriate balance of risk and reward in relation to the Company’s overall business strategy and do not incentivize employees to take unnecessary or excessive risks. The Company has also concluded that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

 

 

COMPENSATION PHILOSOPHY

   

The primary objectives of our compensation program for executive officers are to:

 

 

Set compensation opportunities at levels sufficient to attract and retain high quality executives, to motivate them to contribute to our success and to reward them for performance.

 

 

Ensure the compensation opportunities provided align the interests of executives with the interests of our stockholders.

 

 

Focus our executives on both short and longer-term individual and Company priorities established by the Board and appropriately reward them for performance against these objectives.

 

The total direct compensation provided to each executive consists of an annual base salary, an annual incentive cash bonus and long-term incentive equity awards. The amount of the incentive cash bonus and the size of annual incentive equity awards are variable and depend on an executive’s and the Company’s achievement of predetermined financial and other objectives. As a result, a substantial portion of each executive’s annual compensation is based on performance.

33


 

 

 

 

BENCHMARKING

  

We believe it is useful to regularly compare our compensation program against compensation paid to executives at other comparable medical diagnostic and healthcare companies. With the assistance of Pay Governance, an independent compensation consultant engaged by the Compensation Committee, we have selected a Peer Group of companies using criteria based on industry, revenues and market capitalization and a competitive assessment of our executive compensation was prepared.

The Compensation Committee seeks to set total direct compensation opportunity levels for each executive near the fiftieth (50th) percentile of amounts paid by the Peer Group of companies for performance consistent with the Company’s target financial and other business plans for the applicable year. Use of the fiftieth (50th) percentile is intended as a market-based reference and not as a strict target or limit. As a result, the total direct compensation opportunity and the value of specific compensation components for individual executives may fall below or exceed the fiftieth (50th) percentile depending on the experience and individual performance of the executive, the criticality of his or her role, the executive’s contribution to our business, and other factors.

 

Based on advice from Pay Governance, the Compensation Committee decided not to make changes to the Peer Group most recently used for benchmark purposes.  The following provides information about the Peer Group used by the Compensation Committee in setting executive compensation and how we compare to these companies (all dollars in millions):

 

 Peer Company1

FY 2020Revenue2

12/31/20 Market

Capitalization

Primary Industry

Anika Therapeutics, Inc.

 

$

128

 

 

 

$

643

 

 

Biotechnology

AtriCure, Inc.

 

$

207

 

 

 

$

2,506

 

 

Healthcare Equipment

Atrion Corporation

 

$

148

 

 

 

$

1,175

 

 

Healthcare Supplies

Cardiovascular Systems, Inc.

 

$

237

 

 

 

$

1,756

 

 

Healthcare Equipment

Endologix, Inc.3

 

 

N/A

 

 

 

 

N/A

 

 

Healthcare Supplies

Enzo Biochem, Inc.

 

$

76

 

 

 

$

121

 

 

Healthcare Services

Fluidigm Corporation

 

$

138

 

 

 

$

445

 

 

Life Sciences Tools and Services

Harvard Bioscience, Inc.

 

$

102

 

 

 

$

167

 

 

Life Sciences Tools and Services

Lantheus Holdings, Inc.

 

$

339

 

 

 

$

902

 

 

Healthcare Supplies

Luminex Corporation

 

$

417

 

 

 

$

1,076

 

 

Life Sciences Tools and Services

Meridian Bioscience, Inc.

 

$

254

 

 

 

$

806

 

 

Healthcare Supplies

NeoGenomics, Inc.

 

$

444

 

 

 

$

5,978

 

 

Life Sciences Tools and Services

Quidel Corporation4

 

$

1,662

 

 

 

$

7,557

 

 

Healthcare Supplies

Surgalign Holdings, Inc.5

 

$

298

 

 

 

$

175

 

 

Healthcare Supplies

STAAR Surgical Company

 

$

163

 

 

 

$

3,652

 

 

Healthcare Supplies

 

 

 

FY 2020Revenue1

12/31/20 Market

Capitalization

 

 

 

 

 

 

25th Percentile

$141

$   494

Median

$222

$   989

75th Percentile

$329

$2,319

OraSure Technologies, Inc.

$172

$  759

Percentile Rank

40%

36%

 

 

 

 

1 Data collected from Standard & Poor’s Capital I.Q. database.

2 FY2020 data is not yet available for Anika Therapeutics, Harvard Bioscience and Surgalign Holdings.  Reflects last twelve months revenue as of September 30, 2020.

3 Endologix was delisted from NASDAQ effective August 2020, therefore FY2020 financials are not available.

4 Quidel reflects record revenue in 2020, fueled by strong demand for its coronavirus tests.

5 RTI Surgical Holdings acquired Holo Surgical and changed its name to Surgalign Holdings.

 

34


 

In preparing its 2020 competitive assessment of executive compensation, Pay Governance compared the compensation of our NEOs with a 50/50 blend of proxy data from the Peer Group and data for each NEO position from the 2020 Radford Global Life Sciences Survey. Since compensation market data can be volatile from year to year, the Compensation Committee believes a blend of specific Peer Group proxy data and broader survey data better reflect market trends and practices.

 

 

Based on its review of the Pay Governance assessment, the Compensation Committee decided not to make any changes to our executive compensation program.

 

 

 

2020 EXECUTIVE COMPENSATION COMPONENTS

Overview

Our compensation program consists of the following components:

 

Compensation

 

Form of
Compensation

Purpose

 

Base Salary

 

 

Cash

 

 

Base salaries provide fixed compensation necessary to attract and retain key executives.

 

 

Annual Incentive Bonus Awards

 

 

Cash

 

 

Annual incentive bonus awards provide performance-based incentives to our executives to achieve both Company-wide financial and strategic goals and the executives’ individual performance objectives.

 

Long-Term Incentive Awards

 

 

Performance-Vested

Restricted Units and

Time-Vested Restricted

Stock

 

The largest component of our executive compensation is paid in equity. Annual LTIP awards for the NEOs consist of 50% PRUs and 50% time-vested RS in order to provide a strong link between pay and performance.

 

 

Benefits

 

 

401(k) Plan

 

Health and Welfare

Benefits

 

Retirement and health and welfare benefits provide a complete compensation package that is competitive with the market and addresses the needs of all employees and their families, including our executives.

 

 

Employment Agreements

 

 

Cash severance and

accelerated equity vesting

 

Severance and accelerated equity vesting are provided to our executive officers in order to ensure continued focus on the strategic matters of the Company during potentially uncertain times.

 

 

 

 

Pay Mix

We follow a pay-for-performance approach to executive compensation, with a significant portion of our executives’ compensation consisting of annual incentive cash bonuses and long-term equity awards that are based on the executives’ and the Company’s achievement of predetermined performance objectives.

The following charts illustrate the relative proportion of 2020 base salaries compared to the performance-based elements of our executive compensation for Dr. Tang and the other NEOs (except for Mr. Zezzo).

35


 

 

 

                                    

                               

 

 

Approximately 80% of Dr. Tang’s aggregate compensation and 66% of the other NEOs’ aggregate compensation for 2020 consisted of performance-based compensation.

  

 

 

Compensation Components in Detail

2020 Base Salaries

Annual base salaries paid in 2020 to our NEOs were established by the Compensation Committee at the beginning of 2020 based on a review of the Company’s performance and the individual contributions of each officer compared to pre-established performance objectives for 2019. The Compensation Committee also considered the Company’s budget for expected salary adjustments, salary levels paid at the Peer Group companies and recommendations provided by the compensation consultant engaged to assist the Compensation Committee.  

Based on these factors, the Compensation Committee approved an annual base salary increase for our senior management averaging approximately 3.3%. This was consistent with our Company-wide budgeted average salary increase of 3.0%. Individual salary increases for 2020 were determined by using the following guidelines:

 

 

Performance Rating

 

Merit Increase Range

 

 

Outstanding

 

5.0% - 7.0%

 

 

Exceeds Requirements

 

3.0% - 4.0%

 

 

Meets Requirements

 

2.0% - 2.5%

 

 

Does Not Consistently Meet

 

1.0% – 1.5%

 

 

Does Not Meet Requirements

 

0%

 

In evaluating Dr. Tang’s and the Company’s performance, the Compensation Committee recognized the significant strategic accomplishments achieved during 2019 with the acquisitions of CoreBiome, Diversigen and Novosanis and the strategic divestiture of the Company’s cryosurgical systems business.  Although 2019 revenues came in below expectations, the Compensation Committee recognized that was driven largely by developments outside of management’s control within the consumer genomics market, the strategic divestiture of the Company’s cryosurgical business and the reduced federal funding associated with the development of the Company’s Ebola and Zika tests.  Finally, the Compensation Committee recognized the underlying strength in the Company’s business, as evidenced by the continued strong

36


 

performance of its OraQuick® HIV Self-Test product line, increased domestic HCV sales, and the strong growth delivered by the Company’s microbiome products and services business.

In view of the foregoing, the Compensation Committee determined that Dr. Tang should receive a Meets performance rating for 2019 as a reflection of the mix of achievements during the year.  The remaining NEOs were evaluated based on individual objectives established for their respective positions.

 

As a result of these performance ratings, the Compensation Committee approved the 2020 salary levels set forth below for the NEOs. Dr. Tang’s new salary reflected a 2.5% merit increase in view of his Meets performance rating.

 

 NEO

2019

Performance

Rating

2019 Salary

2020

Salary

%

Increase

Stephen S. Tang, Ph.D.

  President and Chief

  Executive Officer

Meets

$609,000

$624,225

2.50%

Roberto Cuca

  Chief Financial Officer

High Meets

$426,413

$439,205

3.00%

Lisa Nibauer

   Executive Vice

   President, Business

   Unit Leader, Diagnostics

N/A

N/A

$ 410,0001

N/A

Kathleen G. Weber

  Executive Vice

   President, Business

   Unit Leader,

   Molecular Solutions

 

High Meets

$355,000

$365,650