UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant ☒ |
Filed by a Party other than the Registrant ☐ |
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Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
QUOTIENT LIMITED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing: |
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Amount previously paid: |
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Form, Schedule or Registration Statement No: |
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Date Filed: |
EXPLANATORY NOTE
We are filing this Amendment No. 1 to our Definitive Proxy Statement on Schedule 14A that we filed with the U.S. Securities and Exchange Commission on July 26, 2018 (the "Original Proxy Statement") to revise Resolution 9 therein to disclose that our board of directors on August 2, 2018 determined to grant to Franz Walt, our chief executive officer, 45,000 restricted share units (equal in value to approximately $339,300, based on the closing bid price of our ordinary shares on The NASDAQ Global Market on August 2, 2018 of $7.54 per share) and options to purchase 70,000 ordinary shares at an exercise price of $7.54 per share, as further described herein, each subject to the condition that our shareholders approve an amendment during 2018 to the 2014 Stock Incentive Plan to increase the number of ordinary shares authorized for issuance thereunder (the "Additional Conditional Grant"). We are also making certain other amendments in the Original Proxy Statement to refer to the Additional Conditional Grant. Although the changes we are making to the Original Proxy Statement relate only to the Additional Conditional Grant, we are restating our full Definitive Proxy Statement on Schedule 14A for the convenience of our shareholders (the "Amended Proxy Statement"). We have not mailed the Original Proxy Statement and expect to mail the Amended Proxy Statement on or about September 19, 2018. Accordingly, our shareholders will only receive the Amended Proxy Statement. We have also posted this Amended Proxy Statement on our website at http://quotientbd.com under “Investor Relations.”
September 19, 2018
To our shareholders:
I am pleased to invite you to the Annual General Meeting of Shareholders of Quotient Limited (“Quotient” or the “Company”) to be held on October 31, 2018, at 10:00 a.m., local time, at B1, Business Park Terre Bonne, Route de Crassier 13, 1262 Eysins, Switzerland. Information about the meeting is presented on the following pages.
Details regarding admission to the meeting and the business that will be conducted are described in the accompanying Notice of Annual General Meeting and Proxy Statement.
Rules adopted by the U.S. Securities and Exchange Commission (“SEC”) allow companies to make materials available to security holders using either the “notice and access” or “full set delivery” options. This year, we have elected to mail proxy materials and our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed with the SEC on May 30, 2018, to our shareholders using the “full set delivery” option. However, in the future, we may take advantage of the “notice and access” option.
Whether or not you plan to attend the meeting, your vote is important, and we encourage you to review the proxy materials and vote as soon as possible using the instructions provided in the Notice. All voters may sign, date and mail the proxy card in the envelope provided. If you hold your shares in street name, you may also vote your shares over the Internet or via a toll-free (in the United States) telephone number contained in the voting instructions included with your proxy materials. Instructions regarding the methods of voting are contained in the Notice or proxy card.
Thank you for your continued support of Quotient. We look forward to seeing you on October 31, 2018.
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Sincerely, |
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Heino von Prondzynski Chairman of the Board of Directors |
Notice of Annual General Meeting of Shareholders
To Be Held on October 31, 2018 at B1, Business Park Terre Bonne, Route de Crassier 13, 1262 Eysins, Switzerland
DATE: October 31, 2018
TIME: 10:00 a.m., local time
PLACE: B1, Business Park Terre Bonne, Route de Crassier 13, 1262 Eysins, Switzerland
RECORD DATE: August 29, 2018
PURPOSE OF MEETING: Presenting the Company’s accounts for the fiscal year ended March 31, 2018, together with the auditors’ reports on those accounts, to the shareholders at the Annual General Meeting and passing the following ordinary resolutions and transacting such other business as may properly come before the Annual General Meeting:
ORDINARY RESOLUTIONS
Re-election of directors
1) THAT Franz Walt be re-elected as a director of the Company.
2) THAT Thomas Bologna be re-elected as a director of the Company.
3) THAT Frederick Hallsworth be re-elected as a director of the Company.
4) THAT Brian McDonough be re-elected as a director of the Company.
5) THAT Sarah O’Connor be re-elected as a director of the Company.
6) THAT Heino von Prondzynski be re-elected as a director of the Company.
7) THAT Zubeen Shroff be re-elected as a director of the Company.
8) THAT John Wilkerson be re-elected as a director of the Company.
Increase in shares available for issuance under the 2014 Equity Plan
9) THAT the second amended and restated 2014 Stock Incentive Plan (the “Second Amended and Restated 2014 Plan”), which reflects amendments to the Amended and Restated 2014 Stock Incentive Plan (the “2014 Plan”) to increase the number of ordinary shares authorized for issuance by 550,000 shares and to increase the maximum number of shares that may be issued upon the exercise of incentive share options by 550,000 shares, be approved.
Auditors
10) THAT Ernst & Young LLP be re-appointed as the auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the Annual Meeting of the Company to be held in 2019, that the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for purposes of United States securities law reporting for the fiscal year ending March 31, 2019 be ratified and that the directors be authorized to determine the fees to be paid to the auditors.
Record Date
You are entitled to vote only if you were a shareholder of Quotient at the close of business on August 29, 2018. Holders of ordinary shares of Quotient are entitled to one vote for each share held of record on the record date.
Attendance at the Annual General Meeting
We hope you will be able to attend the Annual Meeting in person and you are cordially invited to attend. If you expect to attend, please check the appropriate box on the proxy card when you return your proxy. If you hold your shares in street name, you may also follow the instructions on your proxy card to vote and confirm your attendance by telephone or Internet.
Where to Find More Information about the Resolutions and Proxies
Further information regarding the above business and resolutions is set out in the proxy statement (the “Proxy Statement”) and other proxy materials, which are available at http://investors.quotientbd.com.
Rules adopted by the U.S. Securities and Exchange Commission (the “SEC”) allow companies to send security holders a notice of Internet availability of proxy materials, rather than mail them full sets of proxy materials. This year, we chose to mail full packages of materials to shareholders. However, in the future, we may take advantage of the notice and access distribution option. If, in the future, we choose to send such notices, they will contain instructions on how shareholders can access our notice of meeting and proxy statement via the Internet. They will also contain instructions on how shareholders can request to receive their materials electronically or in printed form on a one-time or ongoing basis.
You are entitled to appoint one or more proxies to attend the Annual Meeting and vote on your behalf and your proxy need not also be a shareholder of the Company. Instructions on how to appoint a proxy are set out in the Proxy Statement and on the proxy card.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Heino von Prondzynski Chairman |
PLEASE NOTE THAT YOU WILL NEED PROOF THAT YOU OWN QUOTIENT SHARES AS OF THE RECORD DATE TO BE ADMITTED TO THE ANNUAL GENERAL MEETING
Record shareholder: If your shares are registered directly in your name, please bring proof of such ownership.
Shares held in street name by a broker or a bank: If your shares are held for your account in the name of a broker, bank or other nominee, please bring a current brokerage statement, letter from your stockbroker or other proof of ownership to the meeting together with a proxy issued in your name should you wish to vote in person at the Annual General Meeting.
This Notice of Annual General Meeting and the Proxy Statement are being distributed on or about September 19, 2018.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on October 31, 2018
Our 2018 Annual Report, notice of 2018 Annual General Meeting, the Proxy Statement and proxy card are available in the “Financials & Filings” section of our website at http://investors.quotientbd.com.
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QUOTIENT LIMITED
PROXY STATEMENT
FOR
ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Board of Directors of QUOTIENT LIMITED (“Quotient,” the “Company,” or “we”) is soliciting proxies for use at the 2018 Annual General Meeting of Shareholders to be held on October 31, 2018 (the “Annual Meeting”), and at any adjournment or postponement of the Annual Meeting. A notice of the Annual Meeting will be distributed to shareholders who hold ordinary shares of Quotient as of August 29, 2018, the record date for the Annual Meeting, on or about September 19, 2018. Quotient Limited is a limited liability no par value company incorporated under the laws of Jersey, Channel Islands.
What am I voting on?
You will be voting on the following proposals at our Annual Meeting:
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to re-elect eight directors; |
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to approve the Second Amended and Restated 2014 Plan, which reflects amendments to the 2014 Plan to increase the number of ordinary shares authorized for issuance by 550,000 shares and to increase the maximum number of shares that may be issued upon the exercise of incentive share options by 550,000 shares. |
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to re-appoint Ernst & Young LLP as the Company’s auditors, ratify their appointment as independent registered public accounting firm and to authorize the directors to determine the fees to be paid to the auditors; and |
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to transact such other business as may properly come before the Annual Meeting. |
What are the recommendations of the Board?
All shares represented by a properly executed proxy will be voted unless the proxy is revoked and, if a choice is specified, your shares will be voted in accordance with that choice. If no choice is specified but the proxy card is signed, the proxy holders will vote your shares according to the recommendations of the Board, which are included in the discussion of each matter later in this proxy statement. The Board recommends that you vote:
FOR the re-election of each of the nominees as directors; and
FOR the re-appointment of Ernst & Young LLP as our auditors, ratification as our independent registered public accounting firm and the authorization of the directors to determine the fees to be paid to the auditors;
In addition, the proxy holders may vote in their discretion with respect to any other matter that properly comes before the Annual Meeting.
Who is entitled to vote?
For each proposal to be voted on, each shareholder is entitled to one vote for each ordinary share, no par value owned at the close of business on August 29, 2018, the record date for the Annual Meeting. As of the close of business on July 25, 2018, there were 49,949,478 ordinary shares outstanding.
How do I vote by proxy in lieu of attending the annual meeting?
If you are a shareholder of record, you may vote by proxy by completing, dating and signing your proxy card and mailing it in the envelope provided. You must sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as officer of a corporation, guardian, executor, trustee or custodian), you must indicate your name and title or capacity.
If you vote via the Internet or by telephone, your vote must be received by 11:59 p.m., Eastern Standard Time, on October 30, 2018. If you vote by Internet or telephone, you should not return your proxy card.
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You may also vote in person at the Annual Meeting or you may be represented by another person at the Annual Meeting by executing a proxy designating that person.
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the beneficial owner of shares held in “street name.” The street name holder will provide you with instructions that you must follow in order to have your shares voted.
If you hold your shares in street name and you wish to vote in person at the Annual Meeting, you must obtain a proxy issued in your name from the street name holder.
May I change my mind after submitting a proxy?
If you are a shareholder of record, you may revoke your proxy before it is exercised by:
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Written notice to Roland Boyd, care of Quotient Limited, 5 James Hamilton Way, Milton Bridge, Penicuik, Midlothian, EH26 0BF, United Kingdom; or |
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Voting in person at the Annual Meeting. |
If you are a beneficial owner of shares held in street name, you may submit new voting instructions by contacting your brokerage firm, bank or other holder of record.
What are broker non-votes?
A broker non-vote occurs when the broker that holds your shares in street name is not entitled to vote on a matter without instruction from you and you do not give any instruction. Unless instructed otherwise by you, brokers will not have discretionary authority to vote on any matter other than Resolution 10, which is considered to be routine for these purposes. It is important that you cast your vote for your shares to be represented on all matters.
What is the required vote?
To be approved, Resolutions 1 to 10 require a simple majority of the votes cast at the Annual Meeting in favor of each Resolution. If a director does not receive a majority of the vote for his or her re-election, then that director will not be re-elected to the Board and the Board may fill the vacancy with a different person, or the Board may reduce the number of directors to eliminate the vacancy. Votes that are withheld with respect to the election of directors and abstentions on the other matters are not counted as votes cast.
What will constitute the quorum for the Annual Meeting?
A quorum will consist of one or more shareholders present in person or by proxy who hold or represent shares of not less than a majority of the total voting rights of all of the shareholders entitled to vote at the Annual Meeting.
How can I attend the Annual Meeting?
If you plan to attend the Annual Meeting, you will not be admitted without proof that you own Quotient shares.
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Record Shareholders. If you are a record shareholder (i.e., a person who owns shares registered directly in his or her name with Continental Stock Transfer & Trust Company, Quotient’s transfer agent) and plan to attend the Annual Meeting, please indicate this when voting by marking the attendance box on the proxy card. |
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Owners of Shares Held in Street Name. Beneficial owners of Quotient ordinary shares held in street name by a broker, bank or other nominee will need proof of ownership to be admitted to the Annual Meeting. A recent brokerage statement or letters from the broker, bank or other nominee are examples of proof of ownership. If your shares are held in street name and you want to vote in person at the Annual Meeting, you must obtain a written proxy from the broker, bank or other nominee holding your shares. |
Can I access these proxy materials on the Internet?
This proxy statement and our 2018 Annual Report on Form 10-K are available at http://investors.quotientbd.com.
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Can I get electronic access to the proxy materials?
You may choose to receive future proxy materials by email. Choosing to receive your future proxy materials by email will lower our costs of delivery and is beneficial for the environment. If you choose to receive your future proxy materials by email, you will receive an email next year with instructions containing a link to view those proxy materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it or for so long as the email address provided by you is valid.
Who pays for this proxy solicitation and how much did it cost?
We will pay the cost for soliciting proxies for the Annual Meeting. Quotient will distribute proxy materials and follow-up reminders by mail and electronic means. We have engaged Okapi Partners LLC (“Okapi”) at 437 Madison Avenue, New York, New York 10022 to assist with the solicitation of proxies. We will pay Okapi an aggregate fee, including reasonable out-of-pocket expenses, of up to $10,000, depending on the level of services actually provided. Certain Quotient employees, officers, and directors may also solicit proxies by mail, telephone, or personal visits. They will not receive any additional compensation for their services.
We will reimburse brokers, banks, and other nominees for their expenses in forwarding proxy materials to beneficial owners.
How can I obtain the Company’s corporate governance information?
These documents are posted on Quotient’s website at www.quotientbd.com. Click on the tab “Investors” and then the caption “Corporate Governance.”
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Corporate Governance Guidelines |
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Board Committee Charters |
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Code of Business Conduct and Ethics |
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Insider Trading Policy |
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Related Party Transaction Policy |
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Shareholder Communication Policy |
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Disclosure Procedure Policy |
Where can I find voting results for this Annual Meeting?
The voting results will be published in a current report on Form 8-K, which will be filed with the SEC no later than four business days after the Annual Meeting. The voting results will also be published on our website at www.quotientbd.com at the same time.
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MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the fiscal year ended March 31, 2018, the Board held seven in person or telephonic meetings. The audit committee met seven times during the fiscal year ended March 31, 2018. Attendance at board and audit committee meetings exceeded 90% and no director attended less than 80% of the aggregate number of such board and committee meetings for meetings that they were eligible to attend. The remuneration committee met five times during the fiscal year ended March 31, 2018. The nominating and corporate governance committee met three times during the fiscal year ended March 31, 2018. The strategy and regulatory committee met twice during the fiscal year ended March 31, 2018.
Our Board currently has four committees, as described below. Each committee has a separate written charter that is available on Quotient’s website at www.quotientbd.com.
Our business and affairs are managed under the direction of our Board of Directors. Our Board of Directors is currently composed of eight directors. At each annual meeting of our shareholders, each of our directors must “retire,” and, if they wish to continue to serve as a director, they become subject to re-election to the Board of Directors by our shareholders.
We are subject to the listing standards of NASDAQ, which require that, subject to specified exceptions and permitted phase-in periods, each member of a listed company’s audit, remuneration and nominating and corporate governance committees be independent. In addition, the listing standards of NASDAQ require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and that the remuneration committee members satisfy independence criteria set forth in Rule 5605(d) of NASDAQ rules. The listing standards of NASDAQ further provide that a director will only qualify as an “independent director” if, in the opinion of that company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
In addition, the listing standards of NASDAQ require that a majority of the members of a listed company’s board of directors be independent. Our Board of Directors has determined that Messrs. Bologna, Hallsworth, McDonough, von Prondzynski, Shroff and Wilkerson and Ms. O’Connor are independent directors under the applicable NASDAQ listing rules. In making these determinations, our Board of Directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that our Board of Directors deemed relevant in determining their independence, including beneficial ownership of our ordinary shares.
Messrs. Shroff and Wilkerson are currently not independent as defined in the applicable Exchange Act rules related to audit committee composition.
Audit Committee
Our audit committee is composed of Messrs. Bologna, Hallsworth, McDonough and Ms. O’Connor, with Mr. Hallsworth serving as chairman of the committee. Our Board of Directors has determined that all these committee members meet the independence requirements of Rule 10A-3 under the Exchange Act and the applicable listing standards of NASDAQ. Our Board of Directors has determined that Mr. Hallsworth is an “audit committee financial expert” within the meaning of SEC regulations and applicable listing standards of NASDAQ. The audit committee met seven times during the year ended March 31, 2018. The audit committee’s responsibilities include:
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appointing, approving the compensation of, and assessing the qualifications, performance and independence of our independent registered public accounting firm; |
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pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; |
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reviewing the internal audit plan with the independent registered public accounting firm and members of management responsible for preparing our financial statements; |
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reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us; |
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reviewing the adequacy of our internal control over financial reporting; |
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establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns; |
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reviewing and discussing with management and our independent registered public accounting firm our audited financial statements to be included in our Annual Report on Form 10-K; |
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monitoring our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters; |
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preparing the audit committee report required by the rules of the SEC to be included in our annual proxy statement; |
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reviewing and assessing the adequacy of the committee charter and submitting any changes to our Board of Directors for approval; |
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viewing all related party transactions for potential conflict of interest situations and approving all such transactions; and |
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reviewing and discussing with management and our independent registered public accounting firm our earnings releases and scripts. |
Remuneration Committee
Our remuneration committee is composed of Messrs. Bologna, Hallsworth, McDonough, von Prondzynski and Shroff, with Mr. von Prondzynski serving as chairman of the committee. Our Board of Directors has determined that all these committee members are independent as defined under the applicable listing standards of NASDAQ. The remuneration committee met five times during the fiscal year ended March 31, 2018. The remuneration committee’s responsibilities include:
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reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer; |
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evaluating the performance of our chief executive officer in light of such corporate goals and objectives and determining and approving the compensation of our chief executive officer; |
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reviewing and approving the compensation of our other executive officers; |
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appointing, compensating and overseeing the work of any compensation consultant, legal counsel or other advisor retained by the remuneration committee; |
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conducting the independence assessment outlined in the rules of NASDAQ with respect to any compensation consultant, legal counsel or other advisor retained by the remuneration committee; |
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producing a remuneration committee report on executive compensation as required by the rules of the SEC to be included in our annual proxy statement; |
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annually reviewing and reassessing the adequacy of the committee charter in its compliance with the listing requirements of NASDAQ; |
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reviewing and establishing our overall management compensation philosophy and policy; |
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overseeing and administering our compensation and equity-based plans; |
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reviewing and approving our policies and procedures for the grant of equity-based awards; and |
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reviewing and making recommendations to our Board of Directors with respect to director compensation. |
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee is composed of Ms. O’Connor and Messrs. von Prondzynski and Shroff, with Ms. O’Connor serving as chair of the committee. Our Board of Directors has determined that these committee members are independent as defined under the applicable listing standards of NASDAQ. The committee met three times during the fiscal year ended March 31, 2018. The nominating and corporate governance committee’s responsibilities include:
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establishing a policy under which our shareholders may recommend a candidate to the nominating and corporate governance committee for consideration for nomination as a director; |
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identifying individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors; |
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recommending to our Board of Directors the persons to be nominated for election as directors and to each of the committees of our Board of Directors; |
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developing and recommending to our Board of Directors a set of corporate governance principles; |
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articulating to each director what is expected, including reference to the corporate governance principles and directors’ duties and responsibilities; |
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reviewing and recommending to our Board of Directors practices and policies with respect to directors; |
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recommending to our Board of Directors qualified individuals to serve as members of the committees of our Board of Directors; |
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reviewing and assessing the adequacy of the committee charter and submitting any changes to our Board of Directors for approval; |
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overseeing the systems and processes established by us to ensure compliance with our Code of Business Conduct and Ethics; and |
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performing an evaluation of the performance of the committee. |
Strategy and Regulatory Committee
Our strategy and regulatory committee is composed of Messrs. Walt, McDonough, von Prondzynski and Shroff, with Mr. Shroff serving as chairman of the committee. The committee met twice during the fiscal year ended March 31, 2018. The strategy and regulatory committee’s responsibilities include:
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reviewing and recommending to our Board of Directors the Company’s long-term strategy, including strategic decisions with regard to the entry and exit of specific business lines, acquisitions and divestitures, joint ventures and investments, as well as the financing of related transactions; |
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overseeing the Company’s research and development activities, including the review of strategic goals, objectives, progress and direction of specific product programs, as well as the allocation of Company resources to specific product programs; |
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overseeing the Company’s technology position and strategic initiatives relative to emerging technologies, new therapeutic concepts and changes to health care market requirements; |
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overseeing the Company’s intellectual property portfolio, including the acquisition and development of new technologies; and |
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overseeing the Company’s regulatory affairs and health and safety compliance. |
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To help our shareholders better understand our Board practices, we are including the following description of current practices. The nominating and corporate governance committee periodically reviews these practices.
Size of the Board
The Board currently consists of the eight directors named above. Our Memorandum and Articles of Association provides that our Board must consist of a minimum of two directors. The exact number of members on our Board will be determined from time to time by our full Board.
Leadership Structure
During the year ended March 31, 2018 Mr. Paul Cowan served as the Company’s Chief Executive Officer and also as Chairman of the Board until March 21, 2018. Following the retirement of Mr. Cowan on March 21, 2018, Mr. von Prondzynski was appointed Chairman and Mr. Walt was initially appointed as Interim Chief Executive Officer. On May 24, 2018 Mr. Walt was appointed as Chief Executive Officer for a two-year term.
Director Independence
The Board believes that a substantial majority of its members should be independent, non-employee directors. Only one member of the Board, Mr. Walt, who serves as our Chief Executive Officer, is an employee of Quotient. The non-employee directors of the Company are Messrs. Bologna, Hallsworth, McDonough, von Prondzynski, Shroff and Wilkerson and Ms. O’Connor. Messrs. Bologna, Hallsworth, McDonough, von Prondzynski, Shroff and Wilkerson and Ms. O'Connor are independent directors under the applicable NASDAQ listing rules. Messrs. Shroff and Wilkerson are currently not independent as defined in the applicable Exchange Act rules related to audit committee composition.
The Exchange Act independence rules relate only to the audit committee. As described above, Mr. Shroff does not serve on our audit committee. Mr. Shroff serves on our remuneration and nominating and corporate governance committees and satisfies all applicable NASDAQ independence criteria related to his service on such committees. Mr. Shroff also serves on our strategy and regulatory committee. Mr. Wilkerson does not serve on any of our board committees.
Audit Committee Financial Expert
The Board has determined that all of the members of the audit committee are financially literate and that Mr. Hallsworth is an “audit committee financial expert” within the meaning of SEC regulations and applicable listing standards of NASDAQ.
Evaluation of Board Performance
The nominating and corporate governance committee coordinates an annual evaluation process by which the directors evaluate the Board’s and its committees’ performance and procedures. This self-evaluation leads to a full Board discussion of the results. The committees of the Board each conduct an annual evaluation of their committee’s performance and procedures.
Nomination of Directors
The nominating and corporate governance committee recommends individuals for membership on the Board. In making its recommendations, the nominating and corporate governance committee considers an individual’s independence based on NASDAQ independence requirements and the criteria determined by the Board.
The nominating and corporate governance committee considers not only a candidate’s qualities, performance and professional responsibilities, but also the composition of the Board and the challenges and needs of the Board at that time. The Board as a whole is constituted to be strong in its diversity and collective knowledge of accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, industry knowledge, corporate governance and global markets.
The culture of the Board enables the Board to operate swiftly and effectively in making key decisions and when facing major challenges. Board meetings are conducted in an environment of trust, confidentiality, open dialogue, mutual respect and constructive commentary.
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The nominating and corporate governance committee views diversity in its broadest sense, which includes gender, ethnicity, education, experience and leadership qualities. The nominating and corporate governance committee will use the same process and criteria for evaluating all nominees, regardless of who submits the nominee for consideration.
Shareholders are encouraged to submit the name of any candidate they believe to be qualified to serve on the Board, together with background information on the candidate, to the chair of the nominating and corporate governance committee. In accordance with procedures set forth in our Memorandum and Articles of Association, shareholders may propose, and the nominating and corporate governance committee will consider, nominees for election to the Board at the next annual general meeting by giving timely written notice to the Company Secretary, which must be received at our registered office no later than the close of business on the date that is 90 days before the first anniversary of the last annual general meeting of the Company, or August 2, 2019, and no earlier than the date that is 120 days before the first anniversary of the last annual general meeting of the Company, or July 3, 2019. The notice periods may change in accordance with the procedures set out in our Memorandum and Articles of Association. Any such notice must include the name of the nominee, a biographical sketch and resume, contact information and such other background materials on such nominee as the nominating and corporate governance committee may request.
Executive Sessions
Non-employee directors meet together as a group during each Board meeting, without the Chief Executive Officer or any other employees in attendance. Mr. von Prondzynski, as our Board’s Chairman, presides over each executive session of the Board. There is also an executive session during each committee meeting at which committee members meet without the Chief Executive Officer or any other employees in attendance. In addition, as required under NASDAQ listing standards, independent directors must meet together as a group at least twice a year.
Board’s Role in Risk Oversight
The Board takes an active role in risk oversight related to the Company both as a full Board and through its committees. While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board is responsible for monitoring management’s actions and decisions. The Board, as apprised by the audit committee, determines that appropriate risk management and mitigation procedures are in place and that senior management takes the appropriate steps to manage all major risks.
Attendance at Shareholder Meetings
The Board does not have a formal policy regarding director attendance at shareholder meetings. However, all directors are expected to attend.
Governance Principles
The Board maintains a formal statement of Corporate Governance Guidelines that sets forth the corporate governance practices for Quotient. The Corporate Governance Guidelines are available on our website at www.quotientbd.com. Click on the tab “Investors” and then the caption “Corporate Governance.”
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer and principal financial officer. A current copy of the code is posted on the investor section of our website, www.quotientbd.com. We intend to disclose any amendment to the code, or any waivers of its requirements, on our website.
Communications with the Board of Directors
The Board believes that it is in the best interests of the Company and its shareholders to provide to every shareholder the ability to communicate with the Board as a whole, or with an individual director, through an established process for shareholder communication. The shareholder communication policy is posted on Quotient’s website at www.quotientbd.com. Click on the tab “Investors” and then the caption “Corporate Governance.”
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RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions, since April 1, 2017, in which (a) we were a participant, (b) the amount involved exceeded $120,000 and (c) one or more of our executive officers, directors or 5% shareholders, or their immediate family members, each of whom we refer to as a “related person,” had a direct or indirect material interest. We refer to these as “related person transactions.”
Public Share Offerings
On April 10, 2017, as part of a public offering, we issued the following amounts of ordinary shares at a price of $6.00 per share:
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2,900,000 ordinary shares to Polar Capital LLP for a total consideration of $17,400,000; |
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650,000 ordinary shares to Cormorant Asset Management, LLC for a total consideration of $3,900,000; |
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650,000 ordinary shares to Perceptive Advisors LLC for a total consideration of $3,900,000; |
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150,000 ordinary shares to Sio Capital Management, LLC for a total consideration of $900,000. |
Private Placement of Shares and Warrants
On October 24, 2017, as part of a private placement of ordinary shares and warrants, we issued the following:
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2,306,034 ordinary shares to Perceptive Advisors LLC at $4.64 per share and 2,306,034 warrants at a purchase price of $0.125 per underlying warrant share exercisable for up to 2,306,034 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $10,998,252; |
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2,306,033 ordinary shares to Highbridge Capital Management, LLC at $4.64 per share and 2,306,033 warrants at a purchase price of $0.125 per warrant exercisable for up to 2,306,033 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $10,998,247; |
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1,174,137 ordinary shares to Polar Capital LLP at $4.64 per share, 550,000 pre-funded warrants at a purchase price of $4.755 per warrant exercisable for up to 550,000 ordinary shares at an exercise price of $0.01 per ordinary shares and 1,724,137 warrants at a purchase price of $0.125 per warrant exercisable for up to 1,724,137 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $8,278,763; |
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538,791 ordinary shares to Sio Capital Management, LLC at $4.64 per share and 538,791 warrants at a purchase price of $0.125 per warrant exercisable for up to 538,791 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $2,567,339; |
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1,012,930 ordinary shares to Cormorant Asset Management, LLC at $4.64 per share and 1,012,930 warrants at a purchase price of $0.125 per warrant exercisable for up to 1,012,930 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $4,826,611; |
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419,728 ordinary shares to Galen Partners V LP at $4.64 per share and 419,728 warrants at a purchase price of $0.125 per warrant exercisable for up to 419,728 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $2,000,004; |
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31,479 ordinary shares to Paul Cowan at $4.64 per share and 31,479 warrants at a purchase price of $0.125 per warrant exercisable for up to 31,479 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $149,997; |
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2,099 ordinary shares to Thomas Bologna at $4.64 per share and 2,099 warrants at a purchase price of $0.125 per warrant exercisable for up to 2,099 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $10,002; |
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5,247 ordinary shares to Frederick Hallsworth at $4.64 per share and 5,247 warrants at a purchase price of $0.125 per warrant exercisable for up to 5,247 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $25,002; |
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10,493 ordinary shares to Brian McDonough at $4.64 per share and 10,493 warrants at a purchase price of $0.125 per warrant exercisable for up to 10,493 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $49,999; |
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2,099 ordinary shares to Sarah O’Connor at $4.64 per share and 2,099 warrants at a purchase price of $0.125 per warrant exercisable for up to 2,099 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $10,002; |
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1,049 ordinary shares to Heino von Prondzynski at $4.64 per share and 1,049 warrants at a purchase price of $0.125 per warrant exercisable for up to 1,049 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $4,998; |
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2,099 ordinary shares to Jeremy Stackawitz at $4.64 per share and 2,099 warrants at a purchase price of $0.125 per warrant exercisable for up to 2,099 ordinary shares at an exercise price of $5.80 per ordinary share, for a total consideration of $10,002. |
Separation Agreement
On May 7, 2018, we entered into a Separation Agreement with Paul Cowan, our former Chief Executive Officer and Chairman, and Deidre Cowan, Mr. Cowan’s spouse and the sole shareholder of Quotient Biodiagnostics Group Limited, one of the Company’s significant shareholders, in relation to Mr. Cowan's retirement from the Company. For additional information, see “Executive Compensation—Agreements with our Executive Officers—Separation Agreement.”
Employment Agreements
We are party to service or employment agreements with our executive officers. For additional information, see “Executive Compensation—Agreements with our Executive Officers—Employment Agreements.”
Equity Awards
We have issued certain shares and granted share options, or multi-year, performance-based restricted share units, or MRSUs and/or restricted share units, or RSUs, to our executive officers and our directors. For additional information, see “Executive Compensation—Outstanding Equity Awards at Fiscal Year End” and “—Director Compensation.”
Change of Control
We are party to change of control agreements with certain of our executive officers. For additional information, see “Executive Compensation—Agreements with our Executive Officers—Change of Control Agreements.”
Indemnification
We have entered into indemnification agreements with each of our officers and directors to indemnify them against certain liabilities and expenses arising from their being an officer or director (but specifically excluding any circumstance where they are determined to have violated their fiduciary duty to us). Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Non-Employee Director Appointment Letters
We have entered into letters of appointment with each of our non-employee directors. These letters set forth the main terms on which each of our non-employee directors serve on our Board of Directors. Continued appointment under the letter is contingent on continued satisfactory performance, re-nomination by the nominating and corporate governance committee and approval of the Board of Directors, re-election by the shareholders and any relevant statutory provisions and provisions of our articles of association relating to removal of a director.
Procedures for Approval of Related Party Transactions
Currently, under our Related Party Transaction Policy, our audit committee is charged with the primary responsibility for determining whether, based on the facts and circumstances, a related person has a direct or indirect material interest in a proposed or existing transaction. To assist our audit committee in making this determination, the policy sets forth certain categories of transactions that are deemed not to involve a direct or indirect material interest on behalf of the related person. If, after applying these categorical standards and weighing all of the facts and circumstances, our audit committee determines that the related person would have a direct or indirect material interest in the transaction, the audit committee must review and either approve or reject the transaction in accordance with the terms of the policy. If any executive officer becomes aware of a related party transaction that the audit committee has not approved or ratified, he or she shall promptly inform the audit committee or such other person designated by the audit committee.
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Composition of our Board of Directors and Director Independence
For information about the composition of our Board of Directors and director independence, please see “Directors, Executive Officers and Corporate Governance—Composition of our Board of Directors and Director Independence.”
Remuneration Committee Interlocks and Insider Participation
None of the members of our remuneration committee has at any time during the prior three years been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Board of Directors or remuneration committee of any entity that has one or more executive officers serving on our Board of Directors or remuneration committee.
Family Relationships
There is no family relationship between any director, executive officer or person nominated to become a director or executive director.
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ELECTION OF DIRECTORS (RESOLUTIONS 1 TO 8)
All of our current directors are nominated for one-year terms expiring in 2018. The Board has been informed that each nominee is willing to serve as a director. If a director does not receive a majority of the vote for his or her re-election then that director will not be re-elected to the Board and the Board may fill the vacancy with a different person, or the Board may reduce the number of directors to eliminate the vacancy.
The following sets forth information concerning the eight nominees for director. Each member of our Board, other than Mr. Walt, Ms. O’Connor and Mr. von Prondzynski, was a member of our Board of Directors immediately prior to our initial public offering. Information below as to each such member’s tenure on our Board also reflects their tenure on our Board prior to our initial public offering.
Franz Walt
Mr. Walt, 59, joined the Board of Directors in February 2018 and was appointed Interim Chief Executive Officer upon the retirement of Mr. Paul Cowan in March 2018 and was subsequently appointed Chief Executive Officer in May 2018. Mr. Walt served as President of Siemens Healthineers Laboratory Diagnostics, the laboratory diagnostics provider within the healthcare division of Siemens AG, the German based conglomerate, from March 2014 to December 2017. From January 2012 to February 2014, Mr. Walt was the Senior Vice President and head of Siemen Healthineers’ Diagnostic Division North America. Prior to joining Siemens Healthineers, from June 1989 to November 2011, Mr. Walt served in various capacities at F. Hoffman-La Roche Ltd., a Swiss based healthcare company that develops diagnostics and therapeutic products, including as Geschäftsführer (CEO) of Roche Diagnostics GmbH in Mannheim from January 2007 to November 2011, and as a board member of the Roche Diagnostic Executive Committee (DiaEC), from November 1998 to December 2006. During his time as a board member of the DiaEC, Mr. Walt served, among other capacities, as President and Consejero Delegado (CEO) of Roche Diagnostics Spain and Regional President for the LATAM Region from October 2004 to December 2006, and as Managing Director of Roche Diagnostics Asia Pacific Pte Ltd. and Regional President for the APAC Region from November 1998 to September 2004. Mr. Walt holds undergraduate degrees in management from the IMAKA Institute of Management in Zürich, and in marketing from the Swiss Institute of Economics in Zürich, and an MBA from City University of Seattle.
The Board believes that Mr. Walt is qualified to serve as a Director based upon his extensive leadership, executive, managerial, business and healthcare industry experience, along with his years of experience in the development of healthcare diagnostic products.
Thomas Bologna
Thomas Bologna, 70, was appointed a Director in February 2012. From December 2011 through the sale of the company in October 2015, Mr. Bologna was Chairman and Chief Executive Officer of Response Genetics, Inc., a healthcare laboratory service company focused on molecular diagnostics. In connection with the sale of the company, Response Genetics, Inc. filed voluntary bankruptcy petitions under chapter 11 of the Bankruptcy Code. From April 2006 to December 2011, Mr. Bologna served as President and Chief Executive Officer and a Director of Orchid Cellmark, Inc., a public corporation that provided DNA testing services. Mr. Bologna turned around and sold Orchid Cellmark to Laboratory Corporation of America (LabCorp). He was Chief Executive Officer, President, and a Director of Quorex Pharmaceuticals, Inc. (2004 to 2005), a pre-clinical stage anti-infective company which Mr. Bologna sold to Pfizer. From 1997 through the sale of the company to Inverness Medical Innovations (Alere) in 2003, Mr. Bologna was Chairman, President and Chief Executive Officer of Ostex International, Inc. a biotechnology company that developed, manufactured and marketed products for the management of osteoporosis. From 1996 to 1997, Mr. Bologna was a principal at Healthcare Venture Associates, a consulting firm. He was Chief Executive Officer, President, and a Director of Scriptgen Pharmaceuticals, Inc. (1994 to 1996), a biotechnology company that developed orally active drugs to regulate gene expression, and Chairman, President and Chief Executive Officer of Gen-Probe Incorporated (1987 to 1994), a company commercializing molecular diagnostics products which Mr. Bologna took public and subsequently sold. Mr. Bologna’s prior experience also includes senior-level positions with Becton Dickinson & Company including President of the Diagnostic Instrument Systems Division and Mr. Bologna was a Vice President at the Warner-Lambert Company (Pfizer). Mr. Bologna has also served on the boards of several public and private companies, including Aperio Technologies until its sale to Danaher in 2012. Mr. Bologna is currently Chairman of CDx Diagnostics, a company that provides laboratory analysis to clinicians with unique sampling and computer-assisted tools to enhance detection of precancerous change. Mr. Bologna received an M.B.A. and a B.S. from New York University.
The Board believes that Mr. Bologna is qualified to serve as a Director based upon his extensive experience in the diagnostics industry, experience with operations, and his prior experience as the chief executive officer of multiple public and private companies.
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Frederick Hallsworth, 65, was appointed as a Director in February 2011. Mr. Hallsworth spent 25 years with Arthur Andersen, becoming a partner in 1989. At Arthur Andersen, Mr. Hallsworth held a number of senior management positions, including Head of Corporate Finance, Head of Audit and Managing Partner of Cambridge, UK office of Arthur Andersen and Managing Partner and Head of Audit of Arthur Andersen, Scotland. He joined Deloitte in 2002, where he served as Senior Client Service Partner and Head of TMC Practice in Scotland until 2005. He is also currently a director of memsstar (2006), CMA Scotland (2007), and Offshore Renewable Energy Catapult (2015). Former directorships include: Scottish Enterprise (2004-2010), Microvisk (2006-2012), Forth Dimension Displays (2007-2011), Elonics (2006-2010), Golden Charter (2009-2011), Infinite Data Storage plc (2005-2007), 3Way Networks (2005-2007), Innovata plc (2005-2007), Metaforic (2009-2014) and AT Communications plc (2008-2009). Mr. Hallsworth has been a Member of the Institute of Chartered Accountants of Scotland since 1978. Mr. Hallsworth received a Bachelor of Accountancy from Glasgow University 1974.
The Board believes that Mr. Hallsworth is qualified to serve as a Director based upon his extensive accounting experience and experience providing strategic direction to multiple life science and technology companies.
Brian McDonough
Brian McDonough, 71, was appointed as a Director in May 2012. Mr. McDonough is presently a Principal of Dx Consulting, a consultancy specializing in transfusion diagnostics. From 2003 through 2009, Mr. McDonough was Vice President, Worldwide Marketing, Donor Screening at Ortho-Clinical Diagnostics. From 2000 through 2003, he was President of the North American Blood Products Group of the Medical Division of Pall Corporation, a company specializing in medical filtration products. Prior to holding these senior executive positions, Mr. McDonough had an extensive career at the American Red Cross spanning over 30 years. From 1968 through 1982 Mr. McDonough worked in American Red Cross BioMedical Services as Executive Head of the St. Louis Regional Blood Services Unit. In 1982, he became the Executive Director of the Irwin Memorial Blood Bank of San Francisco, where he also served on several public health committees addressing the spread of AIDS. In 1987, Mr. McDonough returned to the American Red Cross as Regional Vice President of BioMedical Services and in 1994 served under Elizabeth Dole as Chief Operating Officer, Blood Services of the American Red Cross BioMedical Services, with overall responsibility for national blood and plasma programs. Brian received a B.A. in liberal arts from Wichita State University and an M.H.A. from Central Michigan University.
The Board believes that Mr. McDonough is qualified to serve as a Director based upon his extensive experience within the transfusion diagnostics industry and operational experience at the American Red Cross.
Sarah O’Connor
Sarah O’Connor, 58, was appointed as a Director in July 2014. Ms. O’Connor served as the Senior Vice President, Strategic Development and Chief Legal Officer of Arch Chemicals, Inc., a global biocides company, where she was responsible for the company’s legal and strategic development functions, as well as enterprise risk management and government relations, from September, 2009 to October, 2011. Ms. O’Connor was Vice President and General Counsel of Arch Chemicals Inc. from February 1999 to September 2009. During this period Ms. O’Connor also had responsibility for the Regulatory Affairs function at Arch Chemicals. Prior to joining Arch Chemicals, Ms. O’Connor was an attorney in the legal departments of American Home Products Corporation and the Reader’s Digest Association. Since September 2012, Ms. O’Connor has been an adjunct professor at Mercy College. Ms. O’Connor became a member of the Board of Trustees of Mercy College in January 2018 and is a member of the school’s Audit and Development Committees. Ms. O’Connor received a B.S. in Business Administration from Mercy College, a J.D. from Fordham University School of Law and an MBA from Columbia University.
The Board believes that Ms. O’Connor is qualified to serve as a Director based on her background, experience and judgment as a senior executive of a publicly traded company, and her legal, regulatory and governance expertise.
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Heino von Prondzynski, 68, was appointed as our Chairman following the retirement of Mr. Cowan in March 2018. He joined the Board as our Lead Independent Director in September 2014. Mr. von Prondzynski served as chief executive officer of Roche Diagnostics and as a member of the executive committee of F. Hoffman-La Roche Ltd., a Swiss based healthcare company that develops diagnostics and therapeutic products, from early 2000 to 2006, retiring from Roche at the end of 2006. From 1996 to 2000, Mr. von Prondzynski held several executive positions, including president of the vaccine business, at Chiron Corporation, a multinational biotechnology firm that developed biopharmaceuticals, vaccines and blood-testing products. Earlier in his career, Mr. von Prondzynski held sales and marketing and general management positions at Bayer AG, a German based maker of healthcare products, specialty materials and agricultural products. Mr. von Prondzynski also serves on the boards of Koninklijke Philips Electronics NV and Epigenomics AG. Within the past five years, Mr. von Prondzynski also has served as a director of Hospira, Inc. (from 2009 to 2015), Nobel Biocare Holding AG, Switzerland (from 2010 to 2011) and Qiagen NV (from 2007 to 2013). Mr. von Prondzynski studied maths, geography and history at Westfälische Wilhelms University, Münster, Germany.
The Board believes that Mr. von Prondzynski’s substantial history of leadership positions at major international healthcare companies allows him to provide a global business perspective to his service on the Board and makes him well qualified to serve on the Board.
Zubeen Shroff
Zubeen Shroff, 53, was appointed as a Director in July 2013. Mr. Shroff is a Managing Director of Galen Partners, a leading healthcare growth equity firm founded in 1990. Mr. Shroff has over 25 years of experience working with entrepreneurs and their Boards of Directors in building high-growth healthcare companies. Mr. Shroff joined Galen in 1996 from The Wilkerson Group, where he was a Principal with a client base including pharmaceutical, diagnostics, device and biotech companies, plus a select number of venture capital firms. Prior to joining The Wilkerson Group, Mr. Shroff worked at Schering-Plough France, a manufacturer of healthcare products and medicines, where he helped launch their biotech product, alpha-Interferon, in several new indications. Currently, Mr. Shroff is Treasurer and on the Executive Committee of the Board for The Westchester Medical Center Public Benefit Corporation, as well as Chairman of its Foundation. Since 2004, he has served on the Advisory Committees to Boston University Medical School and The Center for Global Health & Development. Mr. Shroff is also on the Advisory Board of the Joslin Diabetes Center. In addition to the above positions, over the past 18 years, Mr. Shroff has served on the Board of Directors of numerous privately held Galen portfolio companies. Mr. Shroff served on the public Board of Directors of Pet DRx Corporation until July 2010 and Encore Medical until June 2006. Mr. Shroff received a BA in Biological Sciences from Boston University and an MBA from the Wharton School, University of Pennsylvania.
The Board believes that Mr. Shroff is qualified to serve as a Director based upon his extensive experience in providing strategic guidance to companies in the healthcare industry, particularly in the areas of medical devices, diagnostics, and capital equipment.
Dr. John Wilkerson
Dr. John Wilkerson, 75, was appointed as a Director in February 2012. Dr. Wilkerson co-founded Galen Partners in 1990 and currently serves as a Senior Advisor to Galen. Dr. Wilkerson has focused on healthcare throughout his career, beginning as a Group Product Director for Ortho-Clinical Diagnostics Inc. He was a Vice President covering medical device companies at Smith Barney before moving in 1980 to Channing, Weinberg & Co., Inc., a management consulting firm for pharmaceutical, diagnostic, medical device and biotechnology companies, which he acquired and renamed The Wilkerson Group. The Wilkerson Group was subsequently acquired by IBM in 1996.
Dr. Wilkerson currently serves as a director of Sonacare Medical, and was previously the Chairman of Atlantic Health Systems, a New Jersey hospital system. He is a trustee and former President of the Museum of American Folk Art and founder of the E.L. Rose Conservancy. Dr. Wilkerson received a Ph.D. from Cornell University.
The Board believes that Mr. Wilkerson is qualified to serve as a Director based upon his extensive experience providing strategic direction to companies in the life sciences industry, as well as his operational experience in the transfusion diagnostics industry.
The Board of Directors recommends a vote “FOR” each of the eight director nominees named above. If you complete the enclosed proxy card, unless you direct to the contrary on that card, the shares represented by that proxy will be voted FOR the election of all eight nominees.
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APPROVAL OF THE SECOND AMENDED AND RESTATED 2014 PLAN, WHICH REFLECTS AMENDMENTS TO THE 2014 PLAN TO INCREASE THE NUMBER OF ORDINARY SHARES AUTHORIZED FOR ISSUANCE BY 550,000 SHARES AND TO INCREASE THE MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED UPON THE EXERCISE OF INCENTIVE SHARE OPTIONS BY 550,000 SHARES (RESOLUTION 9).
Background and Purpose of the Proposal
The 2014 Plan was previously adopted by the board of directors and approved by our shareholders to be effective April 24, 2014, and an amendment and restatement of the plan to increase the awards available under the plan, and the maximum number of shares that may be issued upon the exercise of incentive share options under the plan, by 750,000 was approved at the Annual Shareholder meeting on October 31, 2016. The use of share-based awards under the 2014 Plan continues to be a key element of our compensation program. The 2014 Plan currently authorizes a total of 3,020,205 ordinary shares for issuance in connection with awards under the 2014 Plan, but as of July 25, 2018, only 70,117 ordinary shares remained available. The closing sale price of our ordinary shares as of July 25, 2018 was $7.72 per share, as reported on The NASDAQ Global Market. The remuneration committee is concerned that there are not sufficient ordinary shares available for issuance under the 2014 Plan to meet our needs for future grants during the coming years, and an increase in available ordinary shares is appropriate to continue to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business depends. Accordingly, shareholders are being asked to approve the Second Amended and Restated 2014 Plan, which provides for the issuance of an additional 550,000 ordinary shares thereunder and a 550,000 increase of the maximum number of shares that may be issued upon the exercise of incentive share options under the plan. If approved, 115,872 options and 136,473 restricted share units, or RSUs, will immediately be issued to Mr. Walt pursuant to the terms of his employment agreement dated May 24, 2018, as well as the Additional Conditional Grant, which is described in more detail under “—New Plan Benefits and Grants to be Made Under the Second Amended and Restated 2014 Plan.” If our shareholders approve this proposal, we intend to file, pursuant to the Securities Act, a registration statement on Form S-8 to register the 550,000 additional ordinary shares available for issuance pursuant to the Second Amended and Restated 2014 Plan.
The increase of 550,000 ordinary shares was determined subjectively by the remuneration committee based on the number of ordinary shares currently available. The remuneration committee feels it important to have adequate ordinary shares available to appropriately compensate current and future employees.
Summary of the Second Amended and Restated 2014 Plan
The following summary of the Second Amended and Restated 2014 Plan and the material changes to the 2014 Plan are qualified in their entirety by the actual text of the Second Amended and Restated 2014 Plan, which is attached to this proxy statement as Exhibit A.
The Second Amended and Restated 2014 Plan will provide us flexibility with respect to our ability to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business depends, and to provide additional incentives to such persons to devote their effort and skill to the advancement and betterment of our company, by providing them an opportunity to participate in the ownership of our company and thereby have an interest in its success and increased value.
We are amending the 2014 Plan to increase the number of ordinary shares reserved for issuance to an aggregate of 4,300,000 ordinary shares under the Second Amended and Restated 2014 Plan, which reflects an increase in the base number of ordinary shares authorized for issuance from 3,750,000 under the 2014 Plan to 4,300,000 under the Second Amended and Restated 2014 Plan, and includes the 770,205 additional ordinary shares we are authorized to issue under the 2014 Plan as a result of automatic annual increases in the numbers of shares authorized for issuance pursuant to the terms of the 2014 Plan, as described further below. In addition, we are amending the 2014 Plan to increase the number of ordinary shares that may be issued upon the exercise of incentive share options to an aggregate of 4,300,000 shares, which reflects a 550,000 increase from 3,750,000 under the 2014 Plan. The aggregate number of ordinary shares will be subject to adjustment in the event of a recapitalization, share split, share consolidation, reclassification, share dividend or other change in our capital structure. To the extent that an award terminates, or expires for any reason, then any shares subject to the award may be used again for new grants. However, shares which are (i) not issued or delivered as a result of the net settlement of outstanding share appreciation rights, or SARs, or options, (ii) used to pay the exercise price related to outstanding options, (iii) used to pay withholding taxes related to outstanding options or SARs or (iv) repurchased on the open market with the proceeds from an option exercise, will not be available for re-grant under the 2014 Plan.
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Under the 2014 Plan, the number of ordinary shares reserved for issuance automatically increases on April 1 of each year, from April 1, 2015 through April 1, 2023, by the lesser of 1% of the total number of our ordinary shares outstanding on March 31 of the preceding year, 200,000 shares or such smaller amount as determined by our Board of Directors. As of April 1, 2018, we were authorized to issue 770,205 additional ordinary shares under the 2014 Plan as a result of such automatic annual increases. Under the Second Amended and Restated 2014 Plan, the number of ordinary shares reserved for issuance will continue to automatically increase on April 1 of each year, from April 1, 2017 through April 1, 2023, by the lesser of 1% of the total number of our ordinary shares outstanding on March 31 of the preceding year, 200,000 shares or such smaller amount as determined by our Board of Directors.
The Second Amended and Restated 2014 Plan will permit us to make grants of (i) incentive share options pursuant to Section 422 of the Code and (ii) non-qualified share options. Incentive share options may only be issued to our employees. Non-qualified share options may be issued to our employees, directors, consultants and other service providers. The option exercise price of each option granted pursuant to the Second Amended and Restated 2014 Plan will be determined by our remuneration committee and may not be less than 100% of the fair market value of the ordinary shares on the date of grant, subject to certain exceptions. The term of each option will be fixed by our remuneration committee and may not exceed ten years from the date of grant. All option grants under the Second Amended and Restated 2014 Plan will be made pursuant to a written option agreement.
The Second Amended and Restated 2014 Plan will permit us to sell or make grants of restricted shares. Restricted shares may be sold or granted to our employees, directors, consultants and other service providers (or of any current or future parent or subsidiary of our company). Restricted shares issued under the Second Amended and Restated 2014 Plan will be sold or granted pursuant to a written restricted shares purchase agreement.
The Second Amended and Restated 2014 Plan will also permit us to issue SARs. SARs may be issued to our employees, directors, consultants and other service providers. The base price per share of ordinary shares covered by each SAR may not be less than 100% of the fair market value of the ordinary shares on the date of grant, subject to certain exceptions. SAR grants under the Second Amended and Restated 2014 Plan will be made pursuant to a written SAR agreement.
Further, the Second Amended and Restated 2014 Plan will permit us to issue RSUs. RSUs may be issued to our employees, directors, consultants and other service providers. RSU grants under the Second Amended and Restated 2014 Plan will be made pursuant to a written RSU agreement.
As of March 31, 2018, 347 employees and eight directors were eligible to participate in the 2014 Plan. Such employees, directors and consultants will continue to be eligible to participate in the Second Amended and Restated 2014 Plan. The Second Amended and Restated 2014 Plan will be administered by our remuneration committee, which has the authority to control and manage the operation and administration of the 2014 Plan. In particular, the remuneration committee has the authority to determine the persons to whom, and the time or times at which, incentive share options, nonqualified share options, restricted shares, SARs or RSUs shall be granted, the number of shares to be represented by each option agreement or covered by each restricted share purchase agreement, SAR agreement or RSU agreement and the exercise price of such options and the base price of such SARs. In addition, our remuneration committee has the authority to accelerate the exercisability or vesting of any award, and to determine the specific terms, conditions and restrictions of each award. The remuneration committee is composed exclusively of individuals intended to be, to the extent provided by Rule 16b-3 of the Exchange Act, independent directors.
Unless provided otherwise within each written option agreement, restricted share purchase agreement, SAR agreement or RSU agreement as the case may be, the vesting of all options, restricted share, SARs and RSUs granted under the Second Amended and Restated 2014 Plan shall accelerate automatically in the event of a “change in control” (as defined in the Second Amended and Restated 2014 Plan) effective as of immediately prior to the consummation of the change in control unless such equity awards are to be assumed by the acquiring or successor entity (or parent thereof) or equity awards of comparable value are to be issued in exchange therefor or the equity awards granted under the Second Amended and Restated 2014 Plan are to be replaced by the acquiring entity with other incentives under a new incentive program containing such terms and provisions as our remuneration committee in its discretion may consider equitable.
Our Board may from time to time alter, amend, suspend or terminate the Second Amended and Restated 2014 Plan in such respects as our Board may deem advisable, provided that no such alteration, amendment, suspension or termination shall be made which shall substantially affect or impair the rights of any participant under any awards previously granted without such participant’s consent.
No awards may be granted under the Second Amended and Restated 2014 Plan after April 24, 2024.
- 16 -
Federal Income Tax Consequences
The following discussion is for general information only and is intended to summarize briefly the U.S. federal tax consequences to participants arising from participation in the Second Amended and Restated 2014 Plan. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of participants in the Second Amended and Restated 2014 Plan may vary depending on the particular situation and therefore may be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state or local tax consequences.
Incentive Options; Nonqualified Options; SARs
Participants will not realize taxable income upon the grant of a nonqualified stock option or a SAR. Upon the exercise of a nonqualified stock option or a SAR, a participant will recognize ordinary compensation income (subject to withholding) in an amount equal to the excess of (1) the amount of cash and the fair market value of the ordinary shares received, over (2) the exercise price (if any) paid. A participant will generally have a tax basis in any ordinary shares received pursuant to the exercise of a SAR, or pursuant to the cash exercise of a nonqualified stock option, that equals the fair market value of such shares on the date of exercise. We will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described above.
Participants eligible to receive an incentive stock option will not recognize taxable income on the grant of an incentive stock option. Upon the exercise of an incentive stock option, a participant will not recognize taxable income, although the excess of the fair market value of the ordinary shares received upon exercise of the incentive stock option (“ISO Shares”) over the exercise price will increase the alternative minimum taxable income of the participant, which may cause such participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an incentive stock option would be allowed as a credit against the participant’s regular tax liability in a later year to the extent the participant’s regular tax liability is in excess of the alternative minimum tax for that year. Upon the disposition of ISO Shares that have been held for the requisite holding period (generally, at least two years from the date of grant and one year from the date of exercise of the incentive stock option), a participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the participant for the ISO Shares. However, if a participant disposes of ISO Shares that have not been held for the requisite holding period (a “Disqualifying Disposition”), the participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Shares at the time of exercise of the incentive stock option (or, if less, the amount realized in the case of an arm’s-length disposition to an unrelated party) exceeds the exercise price paid by the participant for such ISO Shares. A participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Shares on the exercise date. If the exercise price paid for the ISO Shares exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss.
Generally, we will not be entitled to any federal income tax deduction upon the grant or exercise of an incentive stock option, unless a participant makes a Disqualifying Disposition of the ISO Shares. If a participant makes a Disqualifying Disposition, we will then be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described in the preceding paragraph.
Restricted Shares; RSUs
In general, a participant will recognize ordinary compensation income as a result of the receipt of shares pursuant to a restricted share award, in an amount equal to the fair market value of the shares when such shares are received; provided, however, that if the shares are not transferable and are subject to a substantial risk of forfeiture when received, a participant will recognize ordinary compensation income in an amount equal to the fair market value of the shares (1) when the shares first becomes transferable or no longer subject to a substantial risk of forfeiture in cases where a participant does not make an valid election under Section 83(b) of the Code or (2) when the shares are received in cases where a participant makes a valid election under Section 83(b) of the Code.
A participant will generally not recognize taxable income at the time of grant of an award in the form of an RSU award denominated in shares, but rather, will generally recognize ordinary compensation income at the time he receives cash or shares.
A participant will be subject to withholding for federal, and generally for state and local, income taxes at the time he recognizes income under the rules described above for shares or cash received. Dividends that are received by a participant before the shares are taxed to the participant under the rules described in the preceding paragraph are taxed as additional compensation, not as dividend income. The tax basis in the ordinary shares received by a participant will equal the amount recognized by him as compensation income under the rules described in the preceding paragraph, and the participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse.
- 17 -
We will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described above.
New Plan Benefits and Grants to be Made Under the Second Amended and Restated 2014 Plan
In accordance with the terms and provisions of Mr. Walt's employment agreement, dated May 24, 2018, to continue to serve as our chief executive officer, we agreed, subject to the condition that our shareholders approve an amendment during 2018 to the 2014 Plan to increase the number of ordinary shares authorized for issuance thereunder (the "Condition"), as soon as reasonably practicable after the Condition is satisfied, to grant Mr. Walt (a) 91,743 RSUs (equal in value to approximately $600,000, based on the closing sale price of our ordinary shares on The NASDAQ Global Market on May 24, 2018 of $6.54 per share) and (b) options to purchase 45,872 ordinary shares at an exercise price of $6.54 per share. In addition, on August 2, 2018, the Board, subject to the Condition, determined to grant Mr. Walt, as soon as reasonably practicable after satisfaction of the Condition: (a) 45,000 RSUs (equal in value to approximately $339,300, based on the closing bid price of our ordinary shares on The NASDAQ Global Market on August 2, 2018 of $7.54 per share) and (b) options to purchase 70,000 ordinary shares at an exercise price of $7.54 per share (the "Additional Conditional Grant"). Our agreements to grant RSU and option awards to Mr. Walt are intended to create a further incentive for Mr. Walt to increase shareholder value over time through share price growth, thereby aligning his interests with those of our shareholders. If our shareholders do not approve the Second Amended and Restated 2014 Plan during 2018, we will not be required to grant these awards. We have not made any agreements to issue any awards to any other directors or officers of the company. The awards we have agreed to grant Mr. Walt upon approval of the Second Amended and Restated 2014 Plan are summarized below:
Second Amended and Restated 2014 Plan
|
|
Dollar Value ($) |
|
|
Number of securities underlying option award (1) |
|
|
Number of securities underlying RSU award (2) |
|
|||
Franz Walt, Chief Executive Officer |
|
$ |
1,455,389 |
|
|
|
115,872 |
|
|
|
136,743 |
|
(1) |
The option awards provided for in Mr. Walt's employment agreement (the "Employment Agreement Options") will have an exercise price per share equal to $6.54, the closing sale price of our ordinary shares on The NASDAQ Global Market on May 24, 2018, the date of Mr. Walt's employment agreement. The Employment Agreement Options will vest in two equal annual instalments beginning on the first anniversary of May 24, 2018. The Employment Agreement Options will terminate on May 24, 2028. The option awards contemplated by the Additional Conditional Grant (the "Additional Options") will have an exercise price per share equal to $7.54, the closing sale price of our ordinary shares on The NASDAQ Global Market on August 2, 2018, the date the Board approved the Additional Conditional Grant. The Additional Options will vest in two equal annual instalments beginning on the first anniversary of August 2, 2018. The Additional Options will terminate on August 2, 2028. |
(2) |
The RSUs provided for in Mr. Walt's employment agreement (the "Employment Agreement RSUs") will be equal in value to approximately $600,000, based on the closing sale price of our ordinary shares on The NASDAQ Global Market on May 24, 2018 of $6.54 per share. The Employment Agreement RSUs will vest in 12 equal monthly instalments beginning on the first monthly anniversary of May 24, 2018 as if the Employment Agreement RSUs had been issued on May 24, 2018. The RSUs contemplated by the Additional Conditional Grant (the "Additional RSUs") will be equal in value to approximately $339,300, based on the closing sale price of our ordinary shares on The NASDAQ Global Market on August 2, 2018 of $7.54 per share. The Additional RSUs will vest in 12 equal monthly instalments beginning on the first monthly anniversary of August 2, 2018 as if the Additional RSUs had been issued on August 2, 2018. |
Notwithstanding the foregoing, each such option and RSU will not be granted to Mr. Walt if our shareholders do not approve during 2018 the Second Amended and Restated 2014 Plan in 2018 to increase the number of shares authorized for issuance thereunder.
Other awards, if any, that will be made to eligible persons under the Second Amended and Restated 2014 Plan are subject to the discretion of the remuneration committee and, therefore, we cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to our executive officers, employees, directors and other eligible persons under the Second Amended and Restated 2014 Plan. Therefore, a New Plan Benefits Table is not provided for any other awards.
- 18 -
Consequences of Failing to Approve the Proposal
The Second Amended and Restated 2014 Plan will not be implemented unless it is approved by our shareholders. If the Second Amended and Restated 2014 Plan is not approved by our shareholders, the 2014 Plan will remain in effect in its present form. Failure of our shareholders to approve this proposal also will not affect the rights of existing award holders under the 2014 Plan or under any previously granted awards under the 2014 Plan. Failure of our shareholders to approve this proposal during 2018 will result in Mr. Walt not receiving certain RSUs and options pursuant to his employment agreement, as described above.
The Board of Directors recommends a vote “FOR” the approval of the Second Amended and Restated 2014 Plan, which reflects amendments to the 2014 Plan to increase the number of ordinary shares authorized for issuance by 550,000 shares and to increase the maximum number of shares that may be issued upon the exercise of incentive share options by 550,000 shares. If you complete the enclosed proxy card, unless you direct to the contrary on that card, the shares represented by that proxy will be voted FOR approval of the Second Amended and Restated 2014 Plan.
- 19 -
NON-EMPLOYEE DIRECTOR COMPENSATION
Seven out of eight of our directors are non-employee directors. Five of our non-employee directors are unaffiliated with our significant shareholders: Messrs. Bologna, Hallsworth, McDonough, von Prondzynski and Ms. O’Connor. We seek to maintain a director compensation program for our non-employee directors to enable us to attract and retain, on a long-term basis, high-caliber non-employee directors. Employee directors do not receive compensation in respect of their service as a director.
Pursuant to our director compensation program, with effect from January 1, 2016 through the year ended March 31, 2018, the annual retainers were as follows:
Board Member Compensation |
|
Annual Retainer ($) |
Lead Independent Director(1) |
|
145,000(2) |
Director, unaffiliated with our significant shareholders |
|
40,000 |
Committee Chairperson Compensation |
|
Annual Retainer ($) |
Audit Committee |
|
15,000 |
Remuneration Committee |
|
12,000 |
Nominating and Corporate Governance Committee |
|
11,000 |
Strategy and Regulatory Committee |
|
11,000 |
Committee Member Compensation |
|
Annual Retainer ($) |
Audit Committee |
|
8,000 |
Remuneration Committee |
|
6,000 |
Nominating and Corporate Governance Committee |
|
6,000 |
Strategy and Regulatory Committee |
|
6,000 |
(1) |
On March 21, 2018, in connection with Paul Cowan’s retirement from his positions at the Company, Mr. von Prondzynski, the Company’s Lead Independent Director, was appointed to serve as the Chairman of the Board. |
(2) |
35% was paid in cash and 65% was paid in RSUs. In respect of the year ended March 31, 2018, the RSUs associated with this retainer were granted on September 4, 2017, and vest in two equal instalments on the first and second anniversary of their date of grant. In recognition of Mr. von Prondzynski’s increased responsibilities as Chairman of the Board during the Company’s transition to new leadership, the Board increased Mr. von Prondzynski’s annual compensation for the fiscal year ending March 31, 2019 from $145,000, payable 35% in cash and 65% in RSUs, to CHF 350,000 (which equals $352,645 based on the exchange rate in effect on July 25, 2018), of which 57% will be payable quarterly in cash and 43% will be payable by the grant of 33,150 RSUs. The RSUs will vest quarterly in equal installments over 12 months. These payments and grants are in lieu of any compensation Mr. von Prondzynski is entitled to receive as Lead Independent Director of the Board, and exclusive of any other compensation, including option grants, which he may become entitled to receive for his service as an independent director, member and chairperson of the Company’s Remuneration Committee and member of the Company’s Nominating and Corporate Governance and Strategy and Regulatory Committees. |
Pursuant to our director compensation program, on the date of each annual general meeting, each non-employee director who is continuing to serve as a director following such meeting is also eligible to be granted: (i) options to purchase ordinary shares with an underlying fair market value of $50,000; and (ii) RSUs with an underlying fair market value of $30,000. The share options vest in equal installments on the first, second and third anniversary of grant and the RSUs will vest in equal installments on the first and second anniversary of grant.
Our non-employee directors are generally eligible to receive restricted shares, options and other share based equity awards under our 2014 Plan and, if approved, the Second Amended and Rested 2014 plan. Newly appointed non-employee directors will be granted options to purchase shares with an aggregate underlying fair market value of $100,000 based on the trading price of our ordinary shares at the time of grant.
- 20 -
The foregoing compensation is in addition to reimbursement of all out-of-pocket expenses incurred by directors in attending meetings of the Board of Directors. Stock-based awards and option awards in the following table are computed in accordance with the valuation principles used in the Company’s financial statements to compute the fair value of each award on the date of grant.
|
|
Fiscal Year Ended March 31, |
|
Fees earned in cash |
|
|
Stock-based awards |
|
|
Option awards |
|
|
Non-equity incentive plan compensation |
|
|
Change in pension value and nonqualified deferred compensation earnings |
|
|
All other compensation |
|
|
Total |
|
|||||||
|
2018 |
|
$ |
74,750 |
|
|
$ |
124,249 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
229,702 |
|
|
|
|
2017 |
|
$ |
81,438 |
|
|
$ |
124,251 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
228,603 |
|
Thomas Bologna |
|
2018 |
|
$ |
54,000 |
|
|
$ |
29,999 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
114,702 |
|
|
|
2017 |
|
$ |
56,250 |
|
|
$ |
30,002 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
109,166 |
|
Frederick Hallsworth |
|
2018 |
|
$ |
61,000 |
|
|
$ |
29,999 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
121,702 |
|
|
|
2017 |
|
$ |
63,500 |
|
|
$ |
30,002 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
116,416 |
|
Brian McDonough |
|
2018 |
|
$ |
60,000 |
|
|
$ |
29,999 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
120,702 |
|
|
|
2017 |
|
$ |
63,000 |
|
|
$ |
30,002 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
115,916 |
|
Sarah O'Connor |
|
2018 |
|
$ |
59,000 |
|
|
$ |
29,999 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
119,702 |
|
|
|
2017 |
|
$ |
62,000 |
|
|
$ |
30,002 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
114,916 |
|
Zubeen Shroff |
|
2018 |
|
$ |
23,000 |
|
|
$ |
29,999 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
83,702 |
|
|
|
2017 |
|
$ |
25,500 |
|
|
$ |
30,002 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
78,416 |
|
Franz Walt(1) |
|
2018 |
|
$ |
6,806 |
|
|
$ |
— |
|
|
$ |
100,001 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
106,807 |
|
John Wilkerson |
|
2018 |
|
$ |
— |
|
|
$ |
29,999 |
|
|
$ |
30,703 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
60,702 |
|
|
|
2017 |
|
$ |
— |
|
|
$ |
30,002 |
|
|
$ |
22,914 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
52,916 |
|
(1) |
Mr. Walt was appointed to the Board of Directors on February 1, 2018. On March 21, 2018, in connection with Paul Cowan’s retirement from his positions at the Company, Mr. Walt was appointed to serve as Interim Chief Executive Officer, and on May 24, 2018, Mr. Walt was appointed as the Company’s Chief Executive Officer. The amounts reflected in the table reflect compensation Mr. Walt received as a non-employee director prior to his appointment as Interim Chief Executive Officer. |
- 21 -
The following table sets forth the share options held by the directors as of March 31, 2018. On April 1, 2018, Mr. Walt received additional share incentive awards in connection with his appointment as Interim Chief Executive Officer. For information regarding Mr. Walt’s executive compensation see “Executive Compensation—Agreements with Our Executive Officers—Franz Walt” below. All options are options to purchase ordinary shares.
Name |
|
Vesting start date |
|
Number of securities underlying exercisable options |
|
|
Number of securities underlying unexercisable options(1) |
|
|
Option exercise price(2) |
|
|
Option expiration date |
|||
Heino von Prondzynski |
|
October 31, 2016 |
|
|
2,868 |
|
|
|
1,435 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
5,817 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
Thomas Bologna |
|
April 29, 2015 |
|
|
3,500 |
|
|
|
— |
|
|
$ |
8.00 |
|
|
April 28, 2024 |
|
|
October 31, 2015 |
|
|
5,025 |
|
|
|
- |
|
|
$ |
9.95 |
|
|
October 30, 2024 |
|
|
October 31, 2016 |
|
|
2,868 |
|
|
|
1,435 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
5,817 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
Frederick Hallsworth |
|
February 13, 2014 |
|
|
20,014 |
|
|
|
— |
|
|
$ |
1.44 |
|
|
August 30, 2022 |
|
|
April 29, 2015 |
|
|
5,000 |
|
|
|
— |
|
|
$ |
8.00 |
|
|
April 28, 2024 |
|
|
October 31, 2015 |
|
|
5,025 |
|
|
|
— |
|
|
$ |
9.95 |
|
|
October 30, 2024 |
|
|
October 31, 2016 |
|
|
5,004 |
|
|
|
2,501 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
5,817 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
Brian McDonough |
|
November 14, 2014 |
|
|
40,029 |
|
|
|
— |
|
|
$ |
1.44 |
|
|
August 30, 2022 |
|
|
April 29, 2015 |
|
|
10,000 |
|
|
|
— |
|
|
$ |
8.00 |
|
|
April 28, 2024 |
|
|
October 31, 2015 |
|
|
5,025 |
|
|
|
— |
|
|
$ |
9.95 |
|
|
October 30, 2024 |
|
|
October 31, 2016 |
|
|
2,868 |
|
|
|
1,435 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
5,817 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
Sarah O'Connor |
|
August 6, 2015 |
|
|
10,800 |
|
|
|
— |
|
|
$ |
9.26 |
|
|
August 5, 2024 |
|
|
October 31, 2015 |
|
|
5,025 |
|
|
|
— |
|
|
$ |
9.95 |
|
|
October 30, 2024 |
|
|
October 31, 2016 |
|
|
2,868 |
|
|
|
1,435 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
8,726 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
Zubeen Shroff |
|
April 29, 2015 |
|
|
5,000 |
|
|
|
— |
|
|
$ |
8.00 |
|
|
April 28, 2024 |
|
|
October 31, 2015 |
|
|
5,025 |
|
|
|
— |
|
|
$ |
9.95 |
|
|
October 30, 2024 |
|
|
October 31, 2016 |
|
|
5,004 |
|
|
|
2,501 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
5,817 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
Franz Walt(3) |
|
February 19, 2019 |
|
|
— |
|
|
|
22,676 |
|
|
$ |
4.41 |
|
|
February 18, 2018 |
John Wilkerson |
|
April 29, 2015 |
|
|
3,500 |
|
|
|
— |
|
|
$ |
8.00 |
|
|
April 28, 2024 |
|
|
October 31, 2015 |
|
|
5,025 |
|
|
|
— |
|
|
$ |
9.95 |
|
|
October 30, 2024 |
|
|
October 31, 2016 |
|
|
5,004 |
|
|
|
2,501 |
|
|
$ |
11.62 |
|
|
October 30, 2025 |
|
|
October 31, 2017 |
|
|
2,909 |
|
|
|
5,817 |
|
|
$ |
5.73 |
|
|
October 30, 2026 |
|
|
October 31, 2018 |
|
|
— |
|
|
|
9,597 |
|
|
$ |
5.21 |
|
|
October 30, 2027 |
(1) |
Vesting of all options is subject to continued service through to the applicable vesting date. |
(2) |
In certain cases, the option exercise prices are lower than the fair market value of the underlying securities on the date of grant. As part of the preparation for our initial public offering, the Board of Directors reviewed the fair value of our ordinary shares at the various dates in recent years when option and share awards were granted. This review resulted in certain instances in the Board of Directors concluding that the fair value of the underlying securities was higher than the option exercise prices determined at the time. The resulting increase in compensation expense has been reflected in our financial statements. |
(3) |
Mr. Walt was appointed to the Board of Directors on February 1, 2018. On March 21, 2018, in connection with Paul Cowan's retirement from his positions at the Company, Mr. Walt was appointed to serve as Interim Chief Executive Officer, and on May 24, 2018, Mr. Walt was appointed as the Company's Chief Executive Officer. The awards reflected in the table reflect awards Mr. Walt received as a non-employee director prior to his appointment as Interim Chief Executive Officer. |
- 22 -
In connection with his appointment as a director on February 1, 2018, Mr. Walt received, effective February 19, 2018, share options to purchase 22,676 of our ordinary shares at an exercise price of $4.41, which was the closing price of our ordinary shares on February 18, 2018. The share options will vest and become exercisable in three equal annual installments beginning February 19, 2019.
The following table sets forth the RSUs held by the directors as of March 31, 2018. On April 1, 2018, Mr. Walt received additional share incentive awards in connection with his appointment as Interim Chief Executive Officer. For information regarding Mr. Walt’s executive compensation see “Executive Compensation—Agreements with Our Executive Officers—Franz Walt” below. All RSUs convert into ordinary shares on a one-for-one basis.
Name |
|
Vesting start date |
|
Number of outstanding securities underlying the award |
|
|
Expiration date |
|
Heino von Prondzynski |
|
September 4, 2015 |
|
|
12,500 |
|
|
September 4, 2018 |
|
|
September 4, 2017 |
|
|
7,613 |
|
|
September 4, 2018 |
|
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
September 4, 2018 |
|
|
25,268 |
|
|
September 4, 2019 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
Frederick Hallsworth |
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
Thomas Bologna |
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
Brian McDonough |
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
Sarah O'Connor |
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
Zubeen Shroff |
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
John Wilkerson |
|
October 31, 2017 |
|
|
2,618 |
|
|
October 31, 2018 |
|
|
October 31, 2018 |
|
|
5,758 |
|
|
October 31, 2019 |
- 23 -
The information contained in this remuneration committee report shall not be deemed to be “soliciting material” or “filed” with the SEC under the Securities Act or the Exchange Act. No portion of this remuneration committee report shall be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, through any general statement incorporating by reference in its entirety this Proxy Statement in which this report appears, except to the extent that Quotient Limited specifically incorporates this statement or a portion of it by reference.
The remuneration committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the remuneration committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for the fiscal year ended March 31, 2018.
|
Respectfully submitted, |
|
Heino von Prondzynski (Chairperson) Thomas Bologna Frederick Hallsworth Brian McDonough Zubeen Shroff |
- 24 -
Compensation Discussion and Analysis
Executive Summary
Mr. Paul Cowan served as our Chief Executive and Chairman until his retirement on March 21, 2018. Mr. Franz Walt served as our Interim Chief Executive Officer from March 21, 2018 until May 24, 2018, on which date he was appointed our Chief Executive Officer. As described below in “Agreements with our Executive Officers—Employment Agreements—Franz Walt,” in connection with these appointments we entered into a part time employment agreement with Mr. Walt on April 1, 2018 and an employment agreement with Mr. Walt on May 24, 2018. As a result Mr. Walt’s remuneration for our fiscal year ended March 31, 2018 was solely comprised of the remuneration he received as a non-employee director as described above in Non-Employee Director Compensation.
Our "named executive officers" for the fiscal year ended March 31, 2018 are Paul Cowan, Franz Walt, Christopher Lindop and Jeremy Stackawitz. Our "named executive officers" for the fiscal year ended March 31, 2017 are Paul Cowan, Christopher Lindop and Edward Farrell. This Compensation Discussion and Analysis explains our executive compensation program as it relates to our “named executive officers,” whose compensation information is presented in the following tables and discussion in accordance with the SEC rules.
Name |
|
Position |
Franz Walt |
|
Interim Chief Executive Officer (from March 21, 2018 until May 24, 2018) and Chief Executive Officer (as of May 24, 2018) |
Paul Cowan |
|
Chairman & Chief Executive Officer (retired on March 21, 2018) |
Christopher Lindop |
|
Chief Financial Officer |
Edward Farrell |
|
President |
Jeremy Stackawitz |
|
President |
Our mission is to become the global leader for the development, manufacture and sale of transfusion diagnostics (blood grouping, serological disease screening and molecular disease screening), leveraging our proprietary MosaiQ™ technology platform. As MosaiQ is demonstrated to work for transfusion diagnostics, we will also seek to expand its utility elsewhere in the broader diagnostics market.
In 2016, the total addressable market for MosaiQ in transfusion diagnostics was $3.3 billion, with approximately one-third of the market represented by patient testing (blood grouping) and two-thirds of the market represented by donor testing (blood grouping, serological disease screening and molecular disease screening). We will commercialize MosaiQ in the donor testing market in North America, Europe and certain markets in the Asia/Pacific region. Our partner Ortho-Clinical Diagnostics (“OCD”) will commercialize MosaiQ in the patient testing market worldwide and the donor testing market in geographic territories we do not address. OCD’s commercial rights are limited solely to transfusion diagnostics, specifically blood grouping and serological disease screening.
To achieve our mission, we must recruit, retain and motivate exceptional leaders with the ability to deliver superior results for our shareholders. The skills and knowledge built by the management team around MosaiQ, which represents a novel and highly disruptive technology platform for the broader diagnostics field, are unique and increasingly will become highly attractive to potential competitors. Retention of existing senior management and recruitment of additional senior managers to augment the existing team is therefore critical. Our executive compensation program is instrumental in achieving this objective.
Our executive compensation program is designed to focus executive behavior on achievement of both our annual and long-term objectives and strategy as well as align the interests of management to those of our shareholders. Consequently, our executive compensation plan is comprised of four principal elements – salary, benefits, long-term equity interest and cash bonuses based on annual individual and corporate performance. Consistent with our strategic goals, we have designed and implemented a performance-based award that aligns equity compensation with outstanding returns to our shareholders over several years.
Executive compensation is discussed in greater detail below. The remuneration committee will continue to evaluate our overall compensation structure and awards to ensure they are: (i) reflective of the performance of our executive officers and the Company; and (ii) consistent with our compensation objectives.
- 25 -
Roles of the Remuneration Committee
General
It is the responsibility of the remuneration committee to administer the Company’s compensation practices, to ensure they are competitive, financially prudent and include incentives designed to appropriately drive performance. To achieve this, the remuneration committee periodically reviews commercially available, industry specific compensation data for: (i) companies in the global diagnostics industry; (ii) companies addressing the donor testing market; and (iii) companies in the European biotechnology industry, as a general guide for establishing its compensation practices and structures. The remuneration committee, along with the Board, also reviews and approves corporate objectives used in our executive compensation program to confirm that appropriate goals have been established and tracks performance against them. On an annual basis the remuneration committee reviews tally sheets reflecting each named executive officer’s compensation history with respect to each element of compensation.
The remuneration committee conducts an annual review of performance and compensation during the first quarter of each fiscal year for the purpose of determining the compensation of named executive officers. As part of this review, the CEO submits recommendations to the remuneration committee relating to the compensation of the named executive officers (other than the CEO). Following a review of these recommendations, the remuneration committee approves the compensation of these named executive officers, with such modifications to the CEO's recommendations as the remuneration committee considers appropriate.
The remuneration committee's review of the CEO's compensation is subject to separate procedures. With input from members of the entire Board, other than the CEO, the Chairman and the remuneration committee evaluate the CEO's performance and review the evaluation with him. Based on that evaluation and review, the remuneration committee then determines the CEO's compensation. The CEO is excused from meetings of the remuneration committee during voting or deliberations regarding his compensation.
Peer Group Companies
The remuneration committee seeks to identify an executive compensation peer group of approximately fifteen to twenty companies that may compete with the Company for executive talent (“Peer Group Companies”). The remuneration committee has focused on creating a peer group that:
|
• |
Represented companies working in the global diagnostics industry, companies addressing the donor testing market or companies in the European biotechnology industry; |
|
• |
Contains a mix of pre-commercial development companies and some commercial stage companies; |
|
• |
Captures comparable companies in terms of employee numbers and market capitalization; or |
|
• |
Have achieved or expect to achieve a growth profile comparable to that expected for the Company. |
Based on the above criteria, the following companies were included in the peer group:
Company |
Product Focus |
Ablynx |
Biotechnology company focused on the development of proprietary therapeutic proteins |
Accelerate Diagnostics |
In vitro diagnostics for hospital acquired and drug resistant infections |
BioCartis Group NV |
Molecular diagnostics |
Cerus Corp |
Pathogen inactivation for donor blood, plasma and platelets |
Epigenomics AG |
Molecular diagnostics – cancer |
Exact Sciences Corp. |
Molecular diagnostics – early detection of colorectal cancer |
GenMark Diagnostics Inc. |
Automated, multiplex molecular diagnostic testing systems |
Genomic Health Inc. |
Molecular diagnostics – cancer care |
Haemonetics Corporation |
Provision of innovative blood management solutions |
Meridian Bioscience Inc. |
Develops, manufacture, commercialization of a range of innovative diagnostics test kits |
Myriad Genetics Inc. |
Molecular diagnostics |
Nanostring |
Life science tools for translational research and molecular diagnostic products |
Oxford Biomedica |
Biopharmaceutical company focused on the development and commercialization of gene-based medicines |
Oxford Immunotec |
Diagnostic tests for immune-regulated conditions (e.g. Tuberculosis) |
Quidel Corp. |
Provision of cellular based virology assays and molecular diagnostics testing systems |
T2 Biosystems |
Clinical diagnostics for sepsis |
- 26 -
The remuneration committee retained Willis Towers Watson, or WTW, as its independent compensation consultant. WTW does not perform any other consulting work or other services for the Company, reports directly to the remuneration committee and takes direction from the Chairman of the remuneration committee. The remuneration committee has assessed the independence of WTW pursuant to the rules prescribed by the SEC and has concluded that no conflict of interest existed in the financial year ended March 31, 2018 or currently exists that would prevent WTW from serving as an independent consultant to the remuneration committee.
- 27 -
Below is a graph that compares the cumulative shareholder return on our ordinary shares from May 27, 2014, the date on which our ordinary shares commenced trading on NASDAQ, through March 31, 2018 against the cumulative total return for the same period on the NASDAQ Stock Market Composite Index and the NASDAQ Healthcare Index. The results are based on an assumed $100 invested on May 27, 2014.
$0 $50 $100 $150 $200 $250 $300 COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN* AMONG QUOTIENT LIMITED, THE NASDAQ STOCK MARKET COMPOSITE INDEX AND THE NASDAQ HEALTHCARE INDEX $0 $50 $100 $150 $200 $250 $300 COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN* AMONG QUOTIENT LIMITED, THE NASDAQ STOCK MARKET COMPOSITE INDEX AND THE NASDAQ HEALTHCARE INDEX 3/31/18 2/28/181/31/1812/31/1711/30/1710/31/179/30/178/31/177/31/176/30/175/31/174/30/173/31/172/28/171/31/1712/31/1611/30/1610/31/169/30/168/31/167/31/166/30/165/31/164/30/163/31/162/29/161/31/1612/31/1511/30/1510/31/159/30/158/31/157/31/156/30/155/31/154/30/153/31/152/28/151/31/1512/31/1411/30/1410/31/149/30/148/31/147/31/146/30/145/31/145/27/14 QUOTIENT LIMITED NASDAQ HEALTHCARE INDEX NASDAQ COMPOSITE * $100 invested on 5/27/14 in stock or index- including reinvestment of dividends. 46 Months ended March 31, 2018
- 28 -
Executive Compensation Programs
Overview and Objectives
Our executive compensation program for our named executive officers for fiscal years 2018 and 2019, each an Executive Compensation Program, was adopted on May 17, 2017 with respect to fiscal 2018 and on May 23, 2018 with respect to fiscal 2019. Each year, the Remuneration Committee and the Board review the Executive Compensation Program for our named executive officers for the fiscal year to ensure that it is designed to achieve the following objectives:
|
• |
Focus executive behavior on achievement of our annual and long-term strategic objectives, |
|
• |
Provide a competitive compensation package that enables the Company to attract and retain, on a long-term basis, talented executives, |
|
• |
Provide a total compensation structure that the remuneration committee believes is at least comparable with the Peer Group Companies for which we would compete for talent and which consists of a mix of base salary, equity and cash incentives, and |
|
• |
Align the interests of management and shareholders by providing management with long-term incentives through equity ownership. |
The Remuneration Committee will continue to review the Executive Compensation Program in future years to ensure that it is closely aligned with the interests of shareholders and reflects our business needs.
Each Executive Compensation Program has four principal elements, namely base salary, benefits, short-term incentives and long-term incentives. A brief description of each element and their purpose at the Company is described below:
Compensation Element |
Description |
Purpose |
Base salary |
Fixed cash compensation based on role, job scope, experience, qualification and performance |
To compensate for individual technical and leadership competences required for a specific role and to provide economic security. Notice periods for named executive officers vary between six and 12 months. |
Benefits |
Competitive health, life assurance, disability and retirement benefits |
To promote health and wellness in the workforce and to provide competitive retirement planning and saving opportunities. Benefits include private health coverage, life insurance, a defined contribution pension scheme and provision of a company car. There are no enhanced benefits for named executive officers. |
Short-term incentive |
Annual cash incentive opportunity payable based on achievement of corporate, business unit and individual objectives |
To incentivize management to meet and exceed annual performance metrics and deliver on commitments to shareholders. |
Long-term incentive |
Annual equity award comprised of share options |
To incentivize executive officers to increase shareholder value, reward long-term corporate performance and promote employee commitment through share ownership. |
Multi-year performance-based grant of Restricted Share Units (“MRSUs”) |
To align management compensation to achievement of our multi-year strategic plan. |
Our objective is to target total direct compensation for our named executive officers, including the annualized value of the incentive awards that are proposed to be granted in fiscal 2019 as part of our Executive Compensation Program, as follows: Base Salary & Benefits – 30%; Short-term Incentive – 15%; and Long-Term Incentive 55%.
All elements of compensation are considered to be at risk with the exception of base salary, particularly the MRSUs which will have no value unless the market price of our ordinary shares exceed set volume weighted average price targets over a fixed trading period.
- 29 -
The amounts and mix attributable to base salary, short-term incentives and long-term incentives are determined by reference to market norms. Our aim is to align individual compensation with the objectives of the applicable Executive Compensation Program. While executive compensation mix is evaluated on an annual basis, we do not adhere to a rigid formula when determining the actual mix of compensation elements. Instead, our current policy is to balance the short-term and long-term focus of our compensation elements to reward short-term performance while emphasizing long-term value creation. These objectives are achieved by placing considerable weight on long-term, equity-based compensation while offering cash and short-term compensation to attract and retain executive talent.
The primary objective of our compensation philosophy is to design and support total remuneration packages aligned with strong business performance and long-term value creation for our shareholders. Each Executive Compensation Program in particular is designed with specific emphasis on accountability for the performance of the MosaiQ development and commercialization program in the short-term and shareholder return over the longer term. This alignment is created through several mechanisms:
Compensation Mechanism |
Methodology |
|
Pay Positioning |
To attract and retain the best executives, all components of executive compensation are targeted at the market’s 75th percentile. |
|
Performance Target Setting |
We set ambitious but achievable goals for ourselves and for the Company aligned with our commitment to building long-term sustainable value for our shareholders. |
|
Compensation Elements |
Base Salary |
Sets baseline pay level. |
Annual Incentive Plan |
Annual incentive payment that rewards performance relative to annual financial goals and/or MosaiQ development goals. |
|
RSUs |
Long-term incentive with a three-year vesting period that rewards performance that enhances shareholder value. |
|
Compensation Mix |
Our compensation mix is weighted toward variable pay elements and long-term incentive pay elements |
By applying the above methodologies, named executive officers are compensated at the 75th percentile when we meet our performance targets, deliver on the expectations we communicate to our shareholders and drive share price appreciation. Should our performance exceed expectations, our executives will be compensated above target, and vice versa. The significant weighting of long-term incentives ensures that the primary focus of our named executives is sustained long-term performance, while our short-term incentives motivate consistent annual achievement.
Fiscal 2018 Executive Compensation
Our fiscal year ends on March 31. In this proxy statement, we consider certain actions that were taken by our remuneration committee subsequent to the end of fiscal 2018 to be continuations of our Executive Compensation Program for fiscal 2018. In particular, these actions include the compensation actions described below that occurred on May 23, 2018.
Based on our assessment of the performance of the named executive officers and our compensation philosophy as described in this Compensation Discussion and Analysis, and to recognize the high level of performance of these individuals and their importance to the Company, we took the following actions regarding fiscal 2018 compensation:
|
• |
On May 24, 2017, we increased the base salaries of Messrs. Cowan, Stackawitz and Farrell to $561,600, $384,800 and $378,800, respectively, effective June 1, 2017. |
|
• |
On May 23, 2018, we decided to pay in July 2018, 90% of target bonus to Mr. Stackawitz, 80% of target bonus to Messrs. Lindop and Farrell and as part of the separation agreement entered into on May 7, 2018, we agreed to pay a bonus of $496,000 to Mr. Cowan in connection with his retirement, representing 88% of Mr. Cowan's target bonus. |
- 30 -
Fiscal 2019 Executive Compensation
Based on our assessment of the performance of the named executive officers and our compensation philosophy as described in this Compensation Discussion and Analysis, and to recognize the high level of performance of these individuals and their importance to the Company, we took the following actions regarding fiscal 2019 compensation:
|
• |
After reviewing the market for CEO compensation with advice from WTW, giving consideration to the CEO compensation of the Peer Group Companies, assessing the skills and experience of Mr. Walt and considering the need for the appointment of a CEO to fill the vacancy following Mr. Cowan’s retirement, (1) on April 1, 2018, in connection with his appointment as Interim Chief Executive Officer, we (i) issued to Mr. Walt 57,325 RSUs (equal in value to approximately $270,000, based on the closing sale price of our ordinary shares on The NASDAQ Global Market on March 29, 2018 of $4.71 per share), (ii) issued to Mr. Walt options to purchase 30,000 Ordinary Shares at an exercise price of $4.71 per share, and (iii) agreed to pay Mr. Walt a one-time cash bonus of up to CHF 230,000 based on the achievement of performance targets reasonably determined by the Board in consultation with Mr. Walt, payable upon expiration of the interim employment term; and (2) on May 24, 2018, we ended Mr. Walt’s appointment as Interim Chief Executive Officer and we entered into an employment agreement with Mr. Walt pursuant to which (i) we agreed to pay him a base salary of CHF750,000 per year, (ii) he is eligible to receive a cash bonus of CHF750,000 based on the achievement of performance targets determined by the Board, (iii) subject to the condition that our shareholders approve an amendment during 2018 to the 2014 Plan to increase the number of ordinary shares authorized for issuance thereunder, as soon as reasonably practicable after this condition is satisfied, he will be granted (a) 91,743 RSUs (equal in value to approximately $600,000, based on the closing sale price of our ordinary shares on The NASDAQ Global Market on May 24, 2018 of $6.54 per share) and (b) options to purchase 45,872 ordinary shares at an exercise price of $6.54 per share, and (iv) until the month-end following Mr. Walt's last day of employment and during such time as Mr. Walt is commuting between his current home and our offices, reimbursement for the rental cost of a 1-bedroom apartment in the Geneva area for up to CHF2,500 per month. |
|
• |
On May 23, 2018, we; |
|
o |
(i) increased the base salaries of Messrs. Lindop, Stackawitz and Farrell to $390,000, $400,192 and $401,500 respectively, effective June 1, 2018, |
|
o |
(ii) granted annual equity awards with time-based vesting terms to Messrs. Lindop, Stackawitz and Farrell consisting of RSU awards of 30,812, 30,961 and 36,773, respectively (equal in value to approximately $206,750, $207,750 and $240,400, respectively, based on the closing sale price of our ordinary shares on The NASDAQ Global Market on May 23, 2018 of $6.71 per share). |
|
o |
(iii) adopted retention bonus awards with Messrs. Lindop, Stackawitz and Farrell amounting to $150,000 each, 50% of which will be payable in cash in January 2019 subject to the achievement of certain business milestones and the individual remaining an employee until the payment date and 50% of which comprises 11,175 RSUs which will vest on May 24, 2019, subject to the same business milestones and the individual remaining an employee until the vesting date. |
|
• |
On August 2, 2018, the Board, subject to the Condition, determined to grant Mr. Walt, as soon as reasonably practicable after the Condition is satisfied: (a) 45,000 RSUs (equal in value to approximately $339,300, based on the closing bid price of the Company’s ordinary shares on The NASDAQ Global Market on August 2, 2018 of $7.54 per share) and (b) options to purchase 70,000 ordinary shares at an exercise price of $7.54 per share. |
Our executive compensation is discussed in greater detail in the sections that follow. The remuneration committee will continue to evaluate our overall compensation structure and awards to ensure they are reflective of the performance of our executive officers and our Company and consistent with our compensation objectives.
- 31 -
The following table summarizes information regarding the compensation for the fiscal years ended March 31, 2018 and 2017 awarded to, earned by or paid to our named executive officers. See “Executive Compensation—Compensation Discussion and Analysis-Executive Summary” for more information regarding our named executive officers for fiscal 2018 and 2017.
Name and Principal Position |
|
Fiscal Year Ended March 31, |
|
Salary |
|
|
Bonus |
|
|
Option, RSU and MRSU awards |
|
|
All other compensation |
|
|
Total |
|
|||||
Franz Walt |
|
2018 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Chief Executive Officer(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Cowan, |
|
2018 |
|
$ |
558,000 |
|
|
$ |
496,000 |
|
|
$ |
423,225 |
|
|
$ |
— |
|
|
$ |
1,477,225 |
|
Former Chief Executive Officer(2) |
|
2017 |
|
$ |
535,000 |
|
|
$ |
716,000 |
|
|
$ |
1,067,706 |
|
|
$ |
— |
|
|
$ |
2,318,706 |
|
Christopher Lindop, |
|
2018 |
|
$ |
375,000 |
|
|
$ |
195,000 |
|
|
$ |
— |
|
|
$ |
390,586 |
|
|
$ |
960,586 |
|
Chief Financial Officer |
|
2017 |
|
$ |
48,432 |
|
|
$ |
— |
|
|
$ |
1,486,850 |
|
|
$ |
62,259 |
|
|
$ |
1,597,541 |
|
Edward Farrell, |
|
2018 |
|
$ |
355,822 |
|
|
$ |
208,344 |
|
|
$ |
345,058 |
|
|
$ |
36,937 |
|
|
$ |
946,161 |
|
President |
|
2017 |
|
$ |
331,358 |
|
|
$ |
100,948 |
|
|
$ |
899,308 |
|
|
$ |
35,317 |
|
|
$ |
1,366,931 |
|
Jeremy Stackawitz, |
|
2018 |
|
$ |
382,333 |
|
|
$ |
242,424 |
|
|
$ |
345,058 |
|
|
$ |
— |
|
|
$ |
969,815 |
|
President |
|
2017 |
|
$ |
366,667 |
|
|
$ |
111,000 |
|
|
$ |
720,472 |
|
|
$ |
— |
|
|
$ |
1,198,139 |
|
(1) On March 21, 2018, in connection with Paul Cowan's retirement from his positions at the Company, Mr. Walt was appointed to serve as Interim Chief Executive Officer, and on May 24, 2018, Mr. Walt was appointed as the Company's Chief Executive Officer. In connection with these appointments, we entered into a part time employment agreement with Mr. Walt on April 1, 2018 and then an employment agreement with Mr. Walt on May 24, 2018. As a result Mr. Walt’s remuneration for our fiscal year ended March 31, 2018 was solely comprised of the remuneration he received as a non-employee director, as described above in Non-Employee Director Compensation.
(2) On March 21, 2018, Mr. Cowan retired from his positions at the Company.
- 32 -
Outstanding Equity Awards at Fiscal Year-End
Option Awards
The following table sets forth information regarding share option awards held by our named executive officers as of March 31, 2018. All options are options to purchase ordinary shares.
Name and Principal Position |
|
Vesting start date |
|
Number of securities underlying exercisable options |
|
|
Number of securities underlying unexercisable options(1) |
|
|
Option exercise price(2) |
|
|
Option expiration date |
|||
Franz Walt |
|
February 19, 2019 |
|
|
— |
|
|
|
22,676 |
|
|
$ |
4.41 |
|
|
February 18, 2018 |
Chief Executive Officer(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Cowan, |
|
June 28, 2014 |
|
|
123,431 |
|
|
|
— |
|
|
$ |
3.29 |
|
|
March 21, 2019 |
Former Chief Executive Officer(4) |
|
April 29, 2015 |
|
|
90,000 |
|
|
|
— |
|
|
$ |
8.00 |
|
|
March 21, 2019 |
|
|
May 20, 2016 |
|
|
23,334 |
|
|
|
11,666 |
|
|
$ |
15.17 |
|
|
March 21, 2019 |
|
|
June 1, 2017 |
|
|
11,667 |
|
|
|
11,667 |
|
|
$ |
11.92 |
|
|
March 21, 2019 |
|
|