United states

Upon the effective date of our initial public offering, we intend to implement a new compensation program for our non-employee directors. Under this program, all non-employee directors will receive an annual cash fee of $50,000. The Chairperson of the Board will receive an additional fee of $25,000 and a lead director (if we were to have a lead director and the lead director is not the Chairperson of the Board) will receive an additional fee of $15,000. In addition, each member of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee will receive an additional annual cash fee of $10,000, $7,500 and $5,000, respectively. The chairperson of each such committee will receive an additional annual cash fee of $15,000, $12,500 and $10,000, respectively.

In addition, upon initial appointment to the Board, each non-employee director will receive an option award with a grant date fair value of $200,000, which award will vest over four years, subject to the director

 

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continuing to be a service provider to us through each applicable vesting date. Each non-employee director will receive an annual restricted stock unit award with a grant date fair value of approximately $60,000, which award will vest in full on the first anniversary of the grant date, subject to the director continuing to be a service provider to us through the vesting date.

In the event of a “Sale Event” (as defined in our Amended and Restated 2015 Stock Option and Incentive Plan), the then-outstanding and unvested equity awards held by the non-employee directors that were granted pursuant to this compensation program will become 100% vested. An initial public offering of our common stock would not constitute a Sale Event under this plan.

We will reimburse all reasonable out-of-pocket expenses incurred by non-employee directors for their attendance at meetings of the Board or any committee thereof.

 

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EXECUTIVE COMPENSATION

Executive Compensation Overview

Historically, our executive compensation program has reflected our growth and development-oriented corporate culture. To date, the compensation of our executive officers has consisted of a combination of base salary and annual performance-based cash compensation. As we transition from a private company to a publicly-traded company, we have engaged the services of an independent executive compensation consulting firm to review our current compensation plans and procedures and to provide additional information about comparative compensation offered by peer companies, market survey information and information about trends in executive compensation. At a minimum, we expect to review executive compensation annually with periodic input from a compensation consultant. As part of this review process, we expect the board of directors and the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure that our executive compensation program remains competitive. We will also review whether we are meeting our employee retention objectives.

Summary Compensation Table

The following table presents information regarding the compensation earned by or paid to our chief executive officer and the two most highly compensated executive officers other than our chief executive officer, or our named executive officers, during the years ended December 31, 2015 and 2014.

SUMMARY COMPENSATION TABLE

 

Name and Principal Position		Year				Salary ($)				Stock Awards ($) (2)				Option Awards ($) (3)				Non-Equity Incentive Plan Compensation ($) (4)				All Other Compensation ($) (5)				Total ($)
Steven C. Lockard			2015				352,875	(1)			3,005,952				3,793,351				250,000				3,101				7,405,279
President and Chief Executive Officer			2014				348,774				—				—				242,500				2,861				594,135
Wayne G. Monie			2015				296,563	(1)			1,115,490				1,408,912				106,000				6,446				2,933,411
Chief Manufacturing Technology Officer			2014				293,272				—				—				102,500				6,063				401,835
William E. Siwek			2015				270,625	(1)			861,080				1,087,581				110,000				4,670				2,333,956
Chief Financial Officer

 

(1)	Mr. Lockard’s annual salary was increased from $345,000 to $355,500 effective April 1, 2015; Mr. Monie’s annual salary was increased from $290,000 to $298,750 effective April 1, 2015; and Mr. Siwek’s annual salary was increased from $257,500 to $275,000 effective April 1, 2015.

 

(2)

The amounts reported represent the grant date fair value of the restricted stock units awarded to the named executive officers during the year ended December 31, 2015, calculated in accordance with FASB ASC Topic 718. Such grant date fair values do not take into account any estimated forfeitures related to service vesting conditions. The assumptions used in calculating the grant date fair values of the restricted stock units reported in this column are set forth in the Notes to Consolidated Financial Statements included elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for these restricted stock units and do not correspond to the actual economic value that may be received by the named executive officers upon vesting and/or settlement of the restricted stock units.

 

(3)

The amounts reported represent the grant date fair value of the stock options awarded to the named executive officer during the year ended December 31, 2015, calculated in accordance with FASB ASC Topic 718. Such grant date fair values do not take into account any estimated forfeitures related to service vesting conditions. The assumptions used in calculating the grant date fair values of the stock options

 

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reported in this column are set forth in the Notes to Consolidated Financial Statements included elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for stock options and do not correspond to the actual economic value that may be received by the named executive officers upon exercise of the stock options.

 

(4)

Amounts for the years ended December 31, 2015 and 2014 represent the actual bonus compensation payable for such year pursuant to each named executive officer’s achievement of certain performance metrics. For 2015, Messrs. Lockard and Monie were each awarded approximately 70% of their target bonus while Mr. Siwek was awarded 80% of his target bonus. Messrs. Lockard and Monie were each awarded 70% of their target bonus in 2014.

 

(5)

Represents for Mr. Lockard, a company matching contribution under our 401(k) plan equal to $2,350 and group term life insurance equal to $751 in 2015 and a company matching contribution under our 401(k) plan equal to $2,550 and group term life insurance equal to $311 in 2014. Represents for Mr. Monie, a company matching contribution under our 401(k) plan equal to $5,886 and group term life insurance equal to $560 in 2015 and a company matching contribution under our 401(k) plan equal to $5,752 and group term life insurance equal to $311 in 2014. Represents for Mr. Siwek, a company matching contribution under our 401(k) plan equal to $3,919 and group term life insurance equal to $751 in 2015.

Perquisites, Health, Welfare and Retirement Plans and Benefits

Health and Welfare Benefits

Our named executive officers are eligible to participate in all of our employee benefit plans, including our medical, dental, life and disability insurance plans, in each case on the same basis as other employees of the same status.

401(k) Plan

We maintain a tax-qualified retirement plan that provides all regular employees with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to applicable annual Internal Revenue Code limits. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employee elective deferrals are 100% vested at all times. The 401(k) plan allows for matching contributions to be made by us. Currently, we match up to 25% of the first 8% of deferred compensation. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan and all contributions are deductible by us when made.

Perquisites and Personal Benefits

We generally do not provide perquisites or personal benefits to our named executive officers.

Employment Agreements

We have employment agreements or offer letters with our executive officers. We intend to replace these existing employment agreements and offer letters with new executive officer employment agreements in connection with this offering. These new executive officer employment agreements will set forth the terms and conditions of employment of each such executive officer, including base salary, target annual bonus opportunity and standard benefit plan participation. These agreements will also contain provisions that provide for certain payments and benefits in the event of a termination of employment under certain circumstances. Set forth below are descriptions of the current employment agreements with our named executive officers. We intend that these agreements (and the description of the terms thereof in this prospectus) will be replaced with our new executive officer employment agreements (and descriptions thereof) prior to the consummation of this offering.

 

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New Employment Agreements for Messrs. Lockard, Monie and Siwek

We will enter into new employment agreements with each of Messrs. Lockard, Monie and Siwek, effective as of the completion of this offering, pursuant to which they will continue to serve as our President and Chief Executive Officer, Chief Manufacturing Technology Officer and Chief Financial Officer, respectively. The terms of the new employment agreements are substantially similar to each other and provide for at-will employment. The agreements also set forth initial base salaries of $500,000, $310,000 and $325,000 for Messrs. Lockard, Monie and Siwek, respectively, annual target bonuses of 100%, 50% and 50% of base salaries for Messrs. Lockard, Monie and Siwek, respectively, and eligibility to participate in benefit plans generally.

Involuntary Termination of Employment

Pursuant to the new employment agreements, in the event the applicable executive is terminated by us without “cause” (as defined in the agreement) or he resigns for “good reason” (as defined in the agreement), subject to the delivery of a fully effective release of claims and continued compliance with applicable restrictive covenants, the executive will be entitled to (i) a cash severance equal to 150%, 50% and 100% of the base salaries of Messrs. Lockard, Monie and Siwek, respectively (payable in 18, 6 and 12 monthly installments for Messrs. Lockard, Monie and Siwek, respectively) and (ii) up to 18, 6 and 12 monthly cash payments equal to our monthly contribution for health insurance for Messrs. Lockard, Monie and Siwek, respectively.

Involuntary Termination of Employment in Connection with a Change in Control

In the event an executive is terminated by us without cause or he resigns for good reason, each within 12 months following a change in control (as defined in the agreement), subject to the delivery of a fully effective release of claims and continued compliance with applicable restrictive covenants, the executive will not be entitled to the severance benefits described above, but will instead be entitled to the following: (i) a lump sum cash severance equal to 150%, 100% and 100% of the base salaries of Messrs. Lockard, Monie and Siwek, respectively, and 150%, 100% and 100% of the annual target bonuses of Messrs. Lockard, Monie and Siwek, respectively, (ii) up to 18, 12 and 12 monthly cash payments for Messrs. Lockard, Monie and Siwek, respectively, equal to our monthly contribution for health insurance for the executive, (iii) for all outstanding and unvested equity awards of the Company subject to time-based vesting held by the executives, full accelerated vesting of such awards, with a post-termination exercise period, if applicable, of one year and (iv) for all outstanding and unvested equity awards of the Company subject to performance-based vesting held by the executives, fully accelerated vesting of such awards to the extent the applicable performance goals have been met at such time.

The Company may terminate each executive’s employment for cause by a vote of the board of directors at a meeting of the board of directors called and held for such purpose.

The payments and benefits provided under the new employment agreements in connection with a change in control may not be eligible for federal income tax deduction for the Company pursuant to Section 280G of the Internal Revenue Code. These payments and benefits may also be subject to an excise tax under Section 4999 of the Internal Revenue Code. If the payments or benefits payable to each executive in connection with a change in control would be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to him.

Pursuant to the new employment agreements, each of Messrs. Lockard, Monie and Siwek will be subject to standard confidentiality and nondisclosure, assignment of intellectual property work product and post-termination noncompetition and non-solicitation of employees, consultants and customers covenants.

 

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