This Compensation Discussion and Analysis describes the principles underlying the material components of our fiscal 2018 executive compensation program for our executive officers, including the Named Executive Officers in the “Summary Compensation Table.” We also provide an overview of the overall objectives of the program and the factors relevant to an analysis of these policies and decisions. For the fiscal year ended March 31, 2018, our “Named Executive Officers” and their respective titles are as follows:
On May 15, 2018, we entered into a definitive agreement with Zoetis Inc., a Delaware corporation (“Zoetis”), and Zeus Merger Sub, Inc., a California corporation and an indirect wholly-owned subsidiary of Zoetis (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and indirect wholly-owned, subsidiary of Zoetis (the “Merger”). As a result of the Merger, each share of common stock, no par value, of the Company issued and outstanding immediately prior to the effective time of the Merger (other than shares, if any, held by the Company, Zoetis, Merger Sub or any of their subsidiaries and shares with respect to which dissenters rights have been properly demanded in accordance with the Corporations Code of the State of California) will be converted into the right to receive $83.00 in cash, without interest, per share. The Merger is subject to the satisfaction or waiver of various closing conditions, including the approval of the Merger by the Company's shareholders.
The Compensation Committee establishes the philosophy, approves the design of, and administers our executive compensation programs. We strive to provide a competitive compensation package to our executives that ties a significant portion of pay to performance and uses components that align the interests of our executives with those of shareholders. The Compensation Committee believes our executive compensation program reflects a strong pay-for-performance philosophy and is well-aligned with the short- and long-term interests of shareholders.
The key executive compensation decisions taken by our Compensation Committee during fiscal 2018 with respect to Named Executive Officer compensation were as follows:
The goals of our executive compensation program are to attract, retain, motivate and reward executive officers who contribute to our success and to incentivize these executives on both a short-term and long-term basis to achieve our business objectives. This program combines cash and equity awards in the forms and proportions that we believe will motivate our executive officers to increase shareholder value over the long term.
Our executive compensation program is designed to achieve the following specific objectives:
We also offer our executive officers participation in our 401(k) plan, health care insurance, flexible spending accounts and certain other benefits available generally to all full-time employees.
Our executive compensation is weighted heavily toward at-risk, performance-based compensation designed to align the interests of our Named Executive Officers with those of our shareholders. Annual cash incentive bonus and equity incentive awards (in the form of RSUs and PSUs) comprise a significant portion of the Named Executive Officers’ total compensation. Based on our fiscal 2018 financial plan, the Compensation Committee sets the performance metrics and establishes target compensation at the beginning of the performance period. Performance goals for the annual cash incentive bonus and PSUs are set to be rigorous, requiring significant performance achievement, and payout is capped at 2x target (for the annual cash incentive bonus) and 1x target (for PSUs).
Performance-Based Cash Bonus
The fiscal 2018 corporate performance metrics and specific financial targets for the Named Executive Officers to earn a cash bonus payout were as follows:
Performance Metric
(and Weighting)
|
Target
Performance
Goal
|
Achievement
Threshold (1)
|
|
Actual
Achievement
as a Percentage
of Target
|
|
Payout
Percentage (2)
|
|
Revenues (50% Weight)
|
|
|
|
|
|
|
|
•
|
|
Revenues worldwide (3)
|
$250.6 million
|
|
|
90
|
%
|
|
|
98
|
%
|
|
|
90
|
%
|
•
|
|
Revenues for North America veterinary market and revenues from Latin America and the U.S. Government (4)
|
$169.3 million
|
|
|
90
|
%
|
|
|
96
|
%
|
|
|
80
|
%
|
Income from continuing operations before income tax provision (50% Weight) (5)
|
$44.3 million
|
|
|
90
|
%
|
|
|
99
|
%
|
|
|
95
|
%
|
(1)
|
“Threshold” refers to the minimum level of achievement of the target performance goal necessary to earn any bonus payout under the plan.
|
(2)
|
The bonus payout percentage depends on the level of the performance metric achieved over the threshold. Additional information on bonus payment calculation is described in “Executive Compensation Components - Annual Cash Incentive Bonus—Bonus Calculations.”
|
(3)
|
Revenues target for the Named Executive Officers (other than Dr. Tockman) were based on revenues worldwide.
|
(4)
|
Revenues target for Dr. Tockman was based on revenues for the North America veterinary market and from Latin America and the U.S. Government.
|
(5)
|
Actual achievement and the resulting payout percentage figures above reflect exclusion of expenses related to due diligence and legal expenses that occurred in connection with Zoetis’ acquisition of Abaxis from November 2017 to January 2018, pursuant to the terms of our management incentive plan for fiscal 2018, thereby increasing actual fiscal 2018 income from continuing operations before income tax provision by $0.6 million.
|
Annual cash incentive bonuses for our Named Executive Officers in fiscal 2018 were contingent on the achievement of the specified corporate performance goals described above. As further described under “Executive Compensation Components—Annual Cash Incentive Bonus—Bonus Calculations,” the Compensation Committee determined that the pre-determined revenues and income from continuing operations before income tax provision goals for fiscal 2018 were satisfied at an aggregate performance level of 98% (96% in the case of the revenues target for Dr. Tockman) and 99%, respectively, and therefore, each of Mr. Severson, Mr. Taylor, Dr. Aron and Mr. Wood earned 92.5% of his target annual bonus award for fiscal 2018 and Mr. Tockman earned 87.5% of his target annual bonus award for fiscal 2018.
Performance-Based Equity Incentive Awards
The PSUs granted to our Named Executive Officers in fiscal 2018 vested based on (1) achieving a specified financial goal over a single-fiscal year performance period and (2) the executive officer remaining in the service of Abaxis over a four-year vesting period. The specific fiscal 2018 financial goal and vesting schedule for the PSUs granted to our Named Executive Officers were as follows:
Performance Metric
(and Weighting)
|
Performance
Goal
|
Performance-Based Vesting Schedule
|
Service-Based
Vesting Date
|
Income from continuing operations before income tax provision
|
$39.9 million
|
• Achievement > performance goal, 50% vest
|
May 1, 2020
|
|
|
• Achievement > performance goal, 50% vest
|
May 1, 2021
|
|
|
|
|
For fiscal 2018, the Compensation Committee determined that our actual performance and corresponding vesting percentage, with respect to the performance goal were as follows:
Performance Metric
(and Weighting)
|
Actual
Performance
|
Actual Performance as a
Percentage of Performance Goal
|
Actual Performance Criteria
Vesting Percentage
|
Income from continuing operations before income tax provision
|
$43.4 million
|
109%
|
100%
|
(1) Actual achievement and the resulting payout percentage figures above does not include any adjustments since the achieved criteria exceeded the performance goal of $39.9 million.
In April 2018, the Compensation Committee determined that the income from continuing operations before income tax provision for fiscal 2018 was above 100% of the performance goal required to vest, and accordingly, the performance criteria based on the PSU financial goal was achieved during fiscal 2018, and therefore each executive officer became eligible to earn his fiscal 2018 PSU award if he satisfies the additional service criteria for the award to vest.
Significant At-Risk Compensation
We continue to deliver a significant portion of our executive officer compensation in the form of variable, at-risk pay in furtherance of our pay-for-performance philosophy. The charts below illustrate the fiscal 2018 target total direct compensation pay mix, comprised of base salary, target bonus opportunity under the fiscal 2018 cash bonus incentive plan and actual fiscal 2018 long-term incentive awards (presented using their grant date fair values as computed in accordance with Accounting Standards Codification 718, or ASC 718) for the Chief Executive Officer and other Named Executive Officers. As illustrated below, approximately 85% of our Chief Executive Officer’s and our other Named Executive Officers’ total target direct compensation was variable and at-risk (consisting of target cash incentive bonus and long-term equity awards, presented using their grant date fair value and incremental fair value, as calculated in accordance with ASC 718).
Fiscal 2018 CEO
Target Total Direct Compensation Pay Mix
Fiscal 2018 Named Executive Officers’ (other than CEO)
Target Total Direct Compensation Pay Mix
As shown in the above charts, for fiscal 2018, we structured approximately 64% of our Chief Executive Officer’s target total direct compensation and approximately 58% for the other Named Executive Officers’ target total direct compensation in the form of long-term incentive awards, the actual economic value of which will depend directly on our long-term success and the performance of our stock price over the period during which the awards vest
.
The following charts illustrate the mix of non-performance-based equity compensation (RSUs) and performance-based equity compensation (PSUs) awarded to our Chief Executive Officer and our other Named Executive Officers, for fiscal 2018, based on the grant date of the RSUs and PSUs awarded, as calculated in accordance with ASC 718.
Fiscal 2018 CEO
Target Equity Compensation Mix
Fiscal 2018 Named Executive Officers’ (other than CEO)
Target Equity Compensation Mix
As shown in the above charts, the equity awards granted to our Named Executive Officers are heavily weighted toward PSUs, which will only be eligible to vest if the specified performance goal and a four-year service period are met.
Compensation-Setting Process
Role of Our Compensation Committee
Our Compensation Committee, which operates under a written charter adopted by the Board of Directors, is primarily responsible for reviewing and recommending to the Board of Directors the compensation arrangements for our executive officers for approval by the Board of Directors. In carrying out these responsibilities, the Compensation Committee reviews all components of executive officer and director compensation for consistency with the Compensation Committee’s compensation philosophy as in effect. In connection with its review and recommendations, our Compensation Committee also considers the recommendations of our Chief Executive Officer, Mr. Severson, regarding the compensation of our executive officers who report directly to him. These recommendations generally include annual adjustments to compensation levels and an assessment of each executive officer’s overall individual contribution, scope of responsibilities and level of experience. Our Compensation Committee gives considerable weight to Mr. Severson’s recommendations because of his direct knowledge of each executive officer’s performance and contribution to our financial performance. However, Mr. Severson does not participate in the determination of his own compensation.
No other executive officers participate in the determination or recommendation of the amount or form of executive officer compensation, except that our Compensation Committee may discuss with our Chief Executive Officer or Chief Financial Officer our financial, operating and strategic business objectives, bonus targets or performance goals. The Compensation Committee reviews and determines the appropriateness of the financial measures and performance goals, as well as assesses the degree of difficulty in achieving specific bonus targets and performance goals. Our Compensation Committee does not delegate any of its functions in determining executive and/or director compensation. To date, our Compensation Committee has not established any formal policies or guidelines for allocating compensation between long-term and currently paid out compensation, cash and non-cash compensation, or among different forms of non-cash compensation. However, as described above, our Compensation Committee does aim for a significant portion of our executive officer compensation in the form of variable, at-risk pay.
Competitive Market Analysis
In February 2016, our Compensation Committee engaged Pay Governance, an independent executive compensation advisor, to review our executive and director compensation programs. Pay Governance, with input from the Compensation Committee, reviewed the prior peer group used by the Compensation Committee and, developed an updated group of 15 companies, or the Compensation Peer Group, that it determined were appropriate as a comparative frame of reference in making compensation decisions. This Compensation Peer Group represented similarly-situated medical device and diagnostic companies that were identified by Pay Governance as companies with similar financial growth and as competitors for executive talent. The following companies comprised the Compensation Peer Group used for reference in making fiscal 2018 executive compensation decisions:
Compensation Peer Group
|
Abiomed, Inc.
|
ICU Medical, Inc.
|
Quidel Corporation
|
|
AngioDynamics, Inc.
|
Luminex Corporation
|
Sequenom, Inc.
|
|
Cepheid
|
Meridian Bioscience, Inc.
|
SurModics, Inc.
|
|
DexCom, Inc.
|
Neogen Corporation
|
|
|
Genomic Health, Inc.
|
NxStage Medical, Inc.
|
|
|
HeartWare International, Inc.
|
OraSure Technologies, Inc.
|
|
Certain information regarding the size and value of the Compensation Peer Group companies relative to Abaxis is set forth below.
Comparison Group Data
|
|
|
Revenue
|
Market Capitalization
|
EBITDA (1)
|
|
Employees
|
|
Compensation Peer Group Range (2)
|
|
$64 million - $539 million
|
$168 million - $5,551 million
|
$(46) million - $100 million
|
|
|
168 – 3,600
|
|
Compensation Peer Group Median (2)
|
|
$287 million
|
$837 million
|
$24 million
|
|
|
752
|
|
Abaxis, Inc. (2)
|
|
$214 million
|
$1,028 million
|
$42 million
|
|
|
582
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents earnings before interest, taxes, depreciation and amortization.
|
(2)
|
Data is based on information at the time of the review of the executive and director compensation programs and development of the Compensation Peer Group in February 2016.
|
In April 2016, Pay Governance prepared an analysis of the market data obtained from the Compensation Peer Group and the executive compensation program in comparison to such market data. The market data obtained regarding the Compensation Peer Group was considered by the Compensation Committee in its fiscal 2018 executive compensation decisions as a point of reference. Our Compensation Committee and Board of Directors may engage compensation consultants in the future as they deem it necessary or appropriate and intend to retain one each year.
Independent Compensation Consultant
The Compensation Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rules 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, as amended, that could give rise to a potential conflict of interest with respect to Pay Governance’s work. The Compensation Committee determined, based on its analysis of these factors, that the work of Pay Governance, and the individual compensation advisors employed by Pay Governance as compensation consultants, did not create any conflict of interest.
Shareholder Advisory Vote on Executive Compensation
At our Annual Meeting of Shareholders held on October 25, 2017, we held an advisory vote on executive compensation. Over 97% of the votes cast on the proposal were in favor of our Named Executive Officer compensation as disclosed in the proxy statement. Our Compensation Committee reviewed these final vote results and determined that, given the level of support, no material changes to our executive compensation policies and programs were necessary as a result of the advisory vote on executive compensation.
Executive Compensation Components
Base Salary
We provide an annual base salary to each of our executive officers to compensate them for services rendered during the year. Salaries are reviewed annually by the Compensation Committee and adjusted for the ensuing year based on (i) both qualitative and quantitative factors such as job level, responsibilities and prior experience and expertise, individual performance, future potential, (ii) internal review of the executive officer’s total compensation, individually and relative to our other executive officers with similar levels of responsibility within Abaxis and (iii) an evaluation of the compensation levels of similarly-situated executive officers in our Compensation Peer Group and in our industry generally.
For fiscal 2018 base salaries, our Compensation Committee recommended, and our Board of Directors approved, that we make no increases to our Named Executive Officer base salaries because the fiscal 2017 base salary amounts remained appropriate, considering the report prepared in April 2016 by Pay Governance as a point of reference, to ensure an appropriate balance in the Named Executive Officers’ compensation mix between cash and equity, to retain employees with the qualifications desired for each particular position and to reward each of the Named Executive Officers for his performance in the prior year.
Based on the recommendations of the Compensation Committee, and after considering an analysis of total cash compensation for our executive officers compared to the Compensation Peer Group prepared by Pay Governance, our Board of Directors approved the following fiscal 2018 base salaries (effective July 2017) for our Named Executive Officers:
Named Executive Officer
|
|
Fiscal 2018
Base Salary
|
|
|
Fiscal 2018
Percent Increase
In Base Salary
from Fiscal 2017
|
|
Clinton H. Severson
|
|
$
|
575,000
|
|
|
|
0
|
%
|
Ross Taylor
|
|
$
|
257,500
|
|
|
|
0
|
%
|
Kenneth P. Aron, Ph.D.
|
|
$
|
298,700
|
|
|
|
0
|
%
|
Craig M. Tockman, DVM
|
|
$
|
298,700
|
|
|
|
0
|
%
|
Donald P. Wood
|
|
$
|
360,500
|
|
|
|
0
|
%
|
When considering base salaries for fiscal 2019, the Compensation Committee recommended, and the Board of Directors approved, the following fiscal 2019 base salaries (effective July 2018) for our Named Executive Officers: Mr. Severson: $592,250; Mr. Taylor: $265,225; Dr. Aron: $307,661; Mr. Tockman: $307,661; Mr. Wood $371,314.
Annual Cash Incentive Bonus
Our Compensation Committee annually reviews the design of our annual cash incentive bonus program to ensure that the program continues to reward the achievement of key short-term corporate objectives that ultimately drive long-term corporate achievement. The bonus plan is an “at-risk” compensation arrangement designed to provide market competitive cash incentive opportunities that reward our executive officers for the achievement of the key financial performance goals established. This means that the bonus compensation is not guaranteed. Most importantly, the program is structured to align our short-term incentives with important financial and operational measures and the long-term interests of our shareholders, and to incentivize and reward corporate performance.
The cash incentive bonuses are paid quarterly upon meeting pre-determined quarterly financial goals, with the fourth quarter payout based on annual goals. This quarterly structure is designed to align compensation with our quarterly corporate financial performance, reward achievement of consistent short-term profit growth and profitability and provide executives with a meaningful total cash compensation opportunity (base salary and quarterly bonus). At the beginning of fiscal 2018, the Compensation Committee approved the quarterly and annual financial targets that would support Abaxis’ annual operating plan. The bonus program, along with the specific financial performance goals, is a key element of the Compensation Committee’s pay-for-performance philosophy, and consistent with this philosophy for fiscal 2018, our Named Executive Officers earned bonuses at 92.5% (87.5% in the case of Mr. Tockman whose goals differed from the other Named Executive Officers as a result of his role) of their targets, which was commensurate with the level of achievement of the corporate performance goals as determined by our Compensation Committee and Board of Directors.
Target Bonus Opportunities for Fiscal 2018
For fiscal 2018, in evaluating target bonus opportunities, our Compensation Committee aimed to ensure that target bonus levels continued to serve their desired purpose to incentivize our Named Executive Officers with respect to future company performance, to place a higher portion of our Named Executive Officers’ compensation at-risk when compared to executives in the Compensation Peer Group and to maintain total compensation at an appropriately competitive level in the industry. Considering the Compensation Peer Group analysis of total compensation prepared by Pay Governance in April 2016, the Compensation Committee recommended to the Board of Directors to make no increases to the Named Executive Officer target bonus opportunities for fiscal 2018.
In April 2017, our Compensation Committee and Board of Directors (with Mr. Severson abstaining) approved the fiscal 2018 target bonus levels for our executive officers. The following table summarizes the fiscal 2018 target bonus amounts for our Named Executive Officers:
Named Executive Officer
|
|
Fiscal 2017
Target Bonus
|
|
|
Fiscal 2018
Target Bonus
|
|
|
Fiscal 2018
Target Bonus
Increase From
Fiscal 2017
|
|
Clinton H. Severson
|
|
$
|
850,000
|
|
|
$
|
850,000
|
|
|
|
0
|
%
|
Ross Taylor
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
0
|
%
|
Kenneth P. Aron, Ph.D.
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
0
|
%
|
Craig M. Tockman, DVM
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
0
|
%
|
Donald P. Wood
|
|
$
|
600,000
|
|
|
$
|
600,000
|
|
|
|
0
|
%
|
Corporate Performance Measures
For fiscal 2018, our Compensation Committee selected revenues and income from continuing operations before income tax provision at the beginning of the fiscal year as the two equally weighted corporate financial performance measures for our executive officer bonus program, which we believe are the most important measures of both annual financial performance and long-term shareholder value.
Fiscal 2018 Cash Incentive Bonus Elements
Each of the fiscal 2018 corporate financial performance measures and target goals are disclosed above under “Executive Compensation Program Overview—Pay-for-Performance Philosophy.” The Compensation Committee selected quarterly revenues and income from continuing operations before income tax provision as the performance metrics under the bonus plan with equal weightings, because it believes that as we are a growth company, revenues is a key element in value creation for our shareholders and an important indicator of our potential for increasing long-term shareholder value. Similarly, income from continuing operations before income tax provision is an important indicator of our current profitability, which is also a priority to our shareholders. Quarterly target goals are selected to align compensation with our quarterly corporate financial performance achievement and reward achievement of consistent short-term profit growth.
We annually review the target goals used in our cash incentive bonus program to ensure that they remain aligned with our strategic plan. These growth goals are derived from a rigorous process that involves input from and discussions among the Chief Executive Officer, Chief Financial Officer and the Compensation Committee. Then the Compensation Committee establishes bonus targets for the two equally-weighted performance measures, that are set to be achievable, yet are at a level of difficulty that does not assure that the goals will be met. The bonus targets require executive officers to achieve significant performance of annual corporate financial metrics during the applicable fiscal year. Accordingly, meeting the bonus targets and requires executive officers to improve financial performance on a year-over-year basis and, thus, a substantial portion of our executive officers’ compensation is at risk if corporate financial metrics results are not achieved during a particular fiscal year. In addition to meeting financial goals, we must not exceed a certain failure rate on our reagent discs in order for cash incentives to be paid to our executive officers. Our Compensation Committee has the discretion to reduce bonuses from those calculated from the formulaic calculation methodology established under our annual bonus program as well as to grant bonuses even if the performance goals are not met, which it has done in the past in very special circumstances. The Compensation Committee did not approve any discretionary bonuses for fiscal 2018.
Bonus Calculations
Payment of the target bonus is equally weighted between achievement of our quarterly revenues performance goal and our quarterly income from continuing operations before income tax provision performance goal. Bonuses are earned for the first, second and third quarter only if we achieve at least 90% of either of our pre-established quarterly revenues and/or quarterly income from continuing operations before income tax provision goals and also meet any operational goals set by the Compensation Committee. Bonuses are earned in the fourth quarter based on the annual, rather than quarterly, achievement of at least 90% of either of our pre-established annual revenues and/or income from continuing operations before income tax provision goals for the year and also the achievement of any operational goals set by the Compensation Committee. After the initial threshold is met, the amount of the target bonus paid is based on a sliding scale relative to the proportionate achievement of the performance goals. If we achieve 90% of only one performance goal, the payout would be limited to 25% of the aggregate target bonus. For each 1% above 90% of that performance goal, the payout would increase by 2.5% for the aggregate target bonus. The target bonus will be fully earned if at least 100% of both performance goals are achieved. For each 1% above 100% of a performance goal, the payout would increase by 1.5% for the aggregate target bonus.
The maximum potential bonus payout is 200% of the target bonus, provided we achieve greater than 133% of at least one of the performance goals. Assuming targets are reached, the bonus payments are paid as follows: 15% of the applicable bonus amount for the first quarter, 25% in the second and third quarters, and 35% in the fourth quarter. At the end of the fourth quarter, the final amount of the bonus earned will be adjusted to reflect overall performance for the fiscal year.
Bonus Decisions and Analysis
The Compensation Committee evaluated our financial performance for each quarter of fiscal 2018 and the level of achievement of each of the two corporate performance measures for those quarters. As noted above, the fiscal 2018 bonus awarded to each Named Executive Officer was based upon the achievement of two equally-weighted financial goals, our revenues (worldwide, or, for solely Dr. Tockman, from North America veterinary market and revenues from Latin American and the U.S. Government) and income from continuing operations before income tax provision. In addition, the Compensation Committee determined that we had satisfied the threshold goal relating to the failure rate on our reagent discs necessary for any bonuses to be paid.
Based on our actual financial performance results, the Compensation Committee determined that each of Mr. Severson, Mr. Taylor, Dr. Aron and Mr. Wood had achieved, on an overall basis, 98.5% of his target performance goals for fiscal 2018 and Mr. Tockman had achieved, on an overall basis, 97.7% of his target performance goals for fiscal 2018. The actual quarterly and annual results and quarterly and annual targets for fiscal 2018 are summarized below.
Fiscal 2018
|
|
Revenues Worldwide
|
|
|
Revenues from North America
Veterinary Market, Latin America
and the U.S. Government (1)
|
|
|
Income from Continuing Operations
Before Income Tax Provision (2)
|
|
(in millions)
|
|
Actual
|
|
|
Target
|
|
|
Actual
|
|
|
Target
|
|
|
Actual
|
|
|
Target
|
|
First quarter
|
|
$
|
58.3
|
|
|
$
|
59.0
|
|
|
$
|
39.6
|
|
|
$
|
40.0
|
|
|
$
|
9.8
|
|
|
$
|
8.7
|
|
Second quarter
|
|
$
|
58.9
|
|
|
$
|
61.0
|
|
|
$
|
38.9
|
|
|
$
|
41.1
|
|
|
$
|
10.2
|
|
|
$
|
10.4
|
|
Third quarter
|
|
$
|
59.7
|
|
|
$
|
61.0
|
|
|
$
|
38.0
|
|
|
$
|
40.1
|
|
|
$
|
10.0
|
|
|
$
|
10.4
|
|
Fourth quarter
|
|
$
|
67.9
|
|
|
$
|
69.7
|
|
|
$
|
46.2
|
|
|
$
|
48.1
|
|
|
$
|
14.0
|
|
|
$
|
14.7
|
|
Fiscal 2018
|
|
$
|
244.7
|
|
|
$
|
250.6
|
|
|
$
|
162.8
|
|
|
$
|
169.3
|
|
|
$
|
44.0
|
|
|
$
|
44.3
|
|
(1)
|
Applicable for Dr. Tockman only, as Dr. Tockman is responsible for the North America market.
|
(2)
|
The actual and target bonus levels for income from continuing operations before income tax provision include bonus expense, if earned. As described above, the actual level for income from continuing operations before income tax provision in the table also reflects the exclusion of expenses related to due diligence and legal expenses that occurred in connection with Zoetis’ acquisition of Abaxis from November 2017 to January 2018. With such expenses included, the fiscal 2018 actual income from continuing operations before income tax provision is $43.4 million.
|
At least 90% achievement of the target level of the pre-established corporate goal is necessary for any bonus payout. The Compensation Committee recommends and the Board of Directors (with Mr. Severson abstaining) approves the extent of achievement of the performance goals and resulting bonus awards each quarter. On April 21, 2018, the Compensation Committee approved the fiscal 2018 bonuses awarded to each of our Named Executive Officers, based on such achievement, which were as follows:
Named Executive Officer
|
|
Total
Fiscal 2018
Bonus Awarded
|
|
|
Percentage of
Target Bonus
|
|
Clinton H. Severson
|
|
$
|
786,250
|
|
|
|
92.5
|
%
|
Ross Taylor
|
|
$
|
462,500
|
|
|
|
92.5
|
%
|
Kenneth P. Aron, Ph.D.
|
|
$
|
462,500
|
|
|
|
92.5
|
%
|
Craig M. Tockman, DVM
|
|
$
|
437,500
|
|
|
|
87.5
|
%
|
Donald P. Wood
|
|
$
|
555,000
|
|
|
|
92.5
|
%
|
Target Bonus Opportunities for Fiscal 2019
When considering target bonus amounts for fiscal 2019, the Compensation Committee recommended, and the Board of Directors approved, no changes from the target bonus amounts in place for fiscal 2018.
Long-Term Equity Incentive Compensation
Long-term incentive equity awards are designed as a key element of compensation for our executive officers so that a substantial portion of their total direct compensation is tied to increasing the market value of Abaxis. We make annual grants of long-term incentive equity awards in the first quarter of each fiscal year (or during the fiscal year if necessary for a newly hired or promoted employee) to align our executives’ interests with those of our shareholders, to promote executives’ focus on the long-term financial performance of Abaxis, and, through time-based and performance-based vesting requirements, to enhance long-term performance and retention. The Compensation Committee annually reviews the long-term incentive program to ensure that the program continues to support our executive compensation philosophy and compensation program objectives. The Compensation Committee approves all equity award grants to our Named Executive Officers and other executive officers.
In determining the size of equity-based awards, the Compensation Committee considers competitive grant values for comparable positions among the Compensation Peer Group as well as various subjective factors primarily relating to the responsibilities of the individual executive, past performance, and the executive’s expected future contributions and value to Abaxis. The Compensation Committee also considers, in its decision-making process, the executives’ historical total compensation, including prior equity grants, their tenure, responsibilities, experience and value to Abaxis. No one factor is given any specific weighting and the Compensation Committee exercises its judgment to determine the appropriate size and mix of awards.
Under our 2014 Plan (and its predecessor plan, our 2005 Equity Incentive Plan), we are permitted to award a variety of share-based awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance cash awards, performance shares, performance units, deferred compensation awards or other share-based awards. Since fiscal 2007 we have granted RSUs to our executive officers, and since fiscal 2013, we have also granted RSUs to our executive officers that vest only if certain financial and/or operating goals were achieved, which we refer to as PSUs. Our Compensation Committee has determined that a mix of time-based and performance-based vesting for the equity awards provides an effective tool for incentivizing and retaining those executive officers who are most responsible for direct impact on corporate performance by balancing variable compensation dependent on performance goal achievement in addition to share value (PSUs) and variable compensation with a more predictable value (RSUs subject to time-based vesting).
Fiscal 2018 Equity Incentive Grants
In April 2017, after considering an analysis of total compensation for our Named Executive Officers and the Compensation Peer Group prepared by Pay Governance, the Compensation Committee determined that for fiscal 2018, a mix of RSU and PSU awards would continue to provide an effective tool for incentivizing and retaining those executive officers who are most responsible for direct impact on corporate performance by balancing the two types of variable compensation. The Compensation Committee believed that the equity award program for fiscal 2018 aligns the executives’ focus on the achievement of specific performance goals intended to help position us for future growth. Furthermore, the Compensation Committee believed that our grants of PSUs and RSUs will enhance executive share ownership, further aligning their interests with those of shareholders.
Vesting Structure
The vesting terms of the RSUs and PSUs awarded for fiscal 2018 is summarized in the chart below.
Fiscal 2018 Long-Term
Equity Incentive Compensation
|
Type
|
Vesting
|
RSUs
|
Annual vesting over four years (5%, 10%, 15% and 70% on the first, second, third and fourth anniversary of the grant date, respectively)
|
PSUs
|
If performance goal is met, vesting on the third and fourth anniversary date of grant
|
RSUs subject to time-based vesting granted to the Named Executive Officers in fiscal 2018, or the FY2018 RSUs, were subject to the following vesting schedule: 5% vesting on the first anniversary of the grant date; additional 10% on the second anniversary of the grant date; additional 15% on the third anniversary of the grant date; and the remaining 70% on the fourth anniversary of the grant date, in each case subject to continuous service to Abaxis during the vesting period. Our Compensation Committee believes that retention of the Named Executive Officers is key to our success and that the time-based vesting schedule of the RSUs helps to retain our Named Executive Officers, particularly because it is heavily weighted towards the end of the four-year vesting period.
The PSUs granted to our Named Executive Officers in fiscal 2018, or the FY2018 PSUs, consist of the right to receive shares of common stock, only if both of the following criteria are satisfied: (1) Abaxis’ income from continuing operations before income tax provision for the fiscal year ending March 31, 2018, as certified by the Compensation Committee, is equal to or in excess of the applicable target amount set forth in the table below; and (2) the recipient remains in the service of Abaxis until the applicable vesting date set forth below. The FY2018 PSUs are designed with a one-year performance period in order to motivate executive officers to focus their efforts on annual goals and, at the same time, to strengthen and encourage retention as an executive officer must continue employment with us for the awards to vest over the longer-term. Accordingly, the Compensation Committee believes that the FY2018 PSUs act as an incentive over the long-term.
The FY2018 PSUs granted to the Named Executive Officers vest as follows.
Shares Issuable Upon
Settlement of
Fiscal 2018 PSUs
(as a percentage of target shares)
|
Performance Metric:
Income From Continuing Operations
Before Income Tax Provision
for the Year Ending March 31, 2018
|
Vesting Date
|
50%
|
$39.9 million
|
May 1, 2020
|
50%
|
$39.9 million
|
May 1, 2021
|
The Compensation Committee determined the target level of achievement of the performance metric was sufficiently rigorous to incentivize and reward for performance designed to increase shareholder value. The FY2018 PSUs are capped at target, so the greatest number of shares a Named Executive Officer could earn, regardless of performance, is the target number of PSUs awarded.
The Compensation Committee selected annual income from continuing operations before income tax provision operations as the performance metric on which the target goal for the FY2018 PSUs to vest is measured, as it believes that this is an important measurement of Abaxis’ performance and effectiveness of achieving financial strategies, in terms of cost controls, and for that reason, it establishes target levels to achieve operating income growth and return long-term shareholder value.
On April 25, 2018, the Compensation Committee determined that our income from continuing operations before income tax provision for fiscal 2018 was exceeded and, accordingly, the FY2018 PSUs for all of our Named Executive Officers became eligible to vest in full, if each executive officer completes the remaining timed-based service criteria necessary for the award to vest.
Amount and Mix of Awards
In determining the appropriate amount of equity incentive grants to award to the Named Executive Officers for fiscal 2018, the Compensation Committee generally aimed for long-term equity incentive compensation awards, when taken together with the base salary and annual incentive compensation opportunities provided to the Named Executive Officers, to result in actual total direct compensation to the Named Executive Officers to fall above the median of the Compensation Peer Group, so that the Named Executive Officers would have the opportunity to earn above median pay when key performance targets were achieved. However, the Compensation Committee used the Compensation Peer Group data solely as a reference point in making equity award decisions, considering individual, company, and stock performance, as compared to similarly-situated executive officers in our Compensation Peer Group and in our industry generally. The Compensation Committee has determined that providing compensation at these levels, allowing for above median pay when performance goals are achieved, would provide incentives to attract and retain highly qualified executives over the long-term.
For fiscal 2018, the Compensation Committee considered the prior equity grants awarded to our Named Executive Officers and determined it was appropriate to deliver the same number of RSUs and PSUs granted to each of our Named Executive Officers in fiscal 2017, except that the Compensation Committee decreased the number of PSUs granted to Mr. Severson from 51,000 PSUs to 36,000 PSUs, the same number of PSUs granted for Fiscal 2016, because Mr. Severson’s 2017 PSU grant reflected a one-time increased amount for special performance, leadership and incentive purposes. The Compensation Committee awarded the same size grant to each of the Named Executive Officers to maintain internal pay equity amongst the executive team, excluding Mr. Severson.
In April 2017, our Compensation Committee and Board of Directors (with Mr. Severson abstaining) approved the fiscal 2018 long-term equity incentive compensation awards for our Named Executive Officers. The following table summarizes the fiscal 2018 RSUs and PSUs awarded to our Named Executive Officers.
Named Executive Officer
|
|
RSUs Granted in
Fiscal 2018 (#)
|
|
|
PSUs Granted in
Fiscal 2018
Target Shares (#)
|
|
Clinton H. Severson
|
|
|
19,000
|
|
|
|
36,000
|
|
Ross Taylor
|
|
|
9,000
|
|
|
|
16,000
|
|
Kenneth P. Aron, Ph.D.
|
|
|
9,000
|
|
|
|
16,000
|
|
Craig M. Tockman, DVM
|
|
|
9,000
|
|
|
|
16,000
|
|
Donald P. Wood
|
|
|
9,000
|
|
|
|
16,000
|
|
The Compensation Committee chose to structure the fiscal 2018 equity awards granted to the Named Executive Officers to be more heavily weighted towards those with performance-based vesting (the PSUs), to further its policy of providing performance-based pay that is directly aligned with our performance. Accordingly, our CEO received 65% of his fiscal 2018 equity awards in the form of PSUs and our other Named Executive Officers received 64% of their fiscal 2018 equity awards in the form of PSUs.
Fiscal 2019 Equity Incentive Grants
In April 2018, after considering an analysis of total compensation for our Named Executive Officers, the Compensation Committee again determined that a mix of RSU and PSU awards would be appropriate, for the reasons described above. RSUs granted in fiscal 2019 to the Named Executive Officers continued to have the four-year time-based vesting terms as described above for RSUs granted in fiscal 2018 and PSUs granted in fiscal 2019 to the Named Executive Officers continued to have the same performance metric and vesting structure as described above for PSUs granted in fiscal 2018, provided that the performance goal is increased from the fiscal 2018 performance goal.
In April 2018, our Compensation Committee and Board of Directors (with Mr. Severson abstaining) approved the fiscal 2019 long-term equity incentive compensation for our Named Executive Officers. As in fiscal 2018, our Named Executive Officers received a substantially greater portion of their fiscal 2019 restricted stock units in the form of PSUs. The Compensation Committee and Board of Directors determined not to increase the shares awarded under any of the fiscal 2019 equity awards granted to each of our Named Executive Officers. The following table summarizes the fiscal 2019 RSUs and PSUs awarded to our Named Executive Officers.
Named Executive Officer
|
|
RSUs Granted in
Fiscal 2019 (#)
|
|
|
PSUs Granted in
Fiscal 2019
Target Shares (#)
|
|
Clinton H. Severson
|
|
|
19,000
|
|
|
|
36,000
|
|
Ross Taylor
|
|
|
9,000
|
|
|
|
16,000
|
|
Kenneth P. Aron, Ph.D.
|
|
|
9,000
|
|
|
|
16,000
|
|
Craig M. Tockman, DVM
|
|
|
9,000
|
|
|
|
16,000
|
|
Donald P. Wood
|
|
|
9,000
|
|
|
|
16,000
|
|
Other Compensation Policies and Benefits
Benefits and Perquisites
We do not provide any of our executive officers with any material perquisites. Currently, all benefits offered to our executive officers, including an opportunity to participate in our 401(k) plan, medical, dental, vision, life insurance, disability coverage, long-term care insurance benefits and flexible spending accounts, are also available on a non-discriminatory basis to other full-time employees. We also provide vacation and other paid holidays to all full-time employees, including our Named Executive Officers. From time to time when determined appropriate by the Compensation Committee, we may provide benefits to executive officers in unique circumstances necessary to assist them in their services to our Company.
Clawback Policy
Since January 2014, we have maintained a compensation clawback policy that includes, among other things, provisions permitting our Board to require executive officers to repay to us certain amounts in the event of a restatement of our financial statements due to material noncompliance with any financial reporting requirement. The policy permits our Board to seek recoupment from executive officers from any of the following sources: prior incentive compensation payments; future payments of incentive compensation; cancellation of outstanding equity awards; future equity awards; and direct repayment. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 further expanded the reach of mandatory recoupment policies, but the Securities and Exchange Commission has yet to provide final guidance for implementation of such requirements. We will comply with any final recoupment policy guidance.
Stock Ownership Guidelines
We maintain stock ownership guidelines for our executive officers and directors, as follows:
Position
|
Stock Ownership Guideline
|
Chief Executive Officer
|
7x base salary
|
Executive Officers (other than the Chief Executive Officer)
|
3x base salary
|
Directors
|
5x annual cash retainer
|
These guidelines require that executives and directors be meaningfully invested in Abaxis’ stock and therefore be personally invested in Abaxis’ performance to ensure strong alignment with shareholder interests. Our stock ownership guidelines were adopted in 2011 and require all executive officers and directors through the first day of each of Abaxis’ fiscal years beginning with April 1, 2016 to accumulate enough shares to satisfy the stock ownership requirements. All of our Named Executive Officers meet these guidelines and our Chief Executive Officer’s stock ownership was 114.5 times his base salary as of June 26, 2018.
Employment Agreements
We may enter into employment agreements or offer letter agreements with our executive officers that include negotiated provisions regarding their initial base salary, relocation bonus, as well as provisions regarding repayment thereof in the event of cessation of employment. Severance is generally governed by our Severance Plan (described more fully in “Executive Compensation—Severance and Change in Control Agreements”), and salaries (and target bonus and equity awards) for all of our Named Executive Officers are determined by our Compensation Committee as described herein. For a description of the terms of each such agreement, see “Executive Compensation—Summary Compensation Table—Employment Agreements.”
Severance and Change in Control Agreements
We have adopted a Severance Plan to reduce the distraction of executives and potential loss of executive talent that could arise from a potential change of control. Participants in the Severance Plan include our senior managers who are selected by the Board of Directors. Each of our Named Executive Officers is designated as a participant in the Severance Plan. For a description of the terms of our Severance Plan, see “Executive Compensation—Severance and Change in Control Agreements.”
Compensation Policies and Practices as They Relate to Risk Management
The Company believes that its compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on the Company. The mix of fixed and variable, annual and long-term, and cash and equity compensation is designed to encourage actions in the Company’s long-term best interests.
The Compensation Committee oversees the risk associated with our executive compensation program and considers the impact of incentives created by the compensation awards that it administers, on the Company’s risk profile. The Compensation Committee works periodically with our outside compensation consultant Pay Governance to ensure our compensation plans are appropriately balanced and incentivize employees to act in the best interests of our shareholders. In fiscal 2018, our Compensation Committee assessed the risks related to the Company’s compensation policies and concluded that the mix and design of these policies and practices do not encourage our employees to take excessive risks that are reasonably likely to have a material adverse effect.
Tax Considerations
Deductibility of Executive Compensation
Section 162(m) of the Code and related Treasury Regulations disallows a deduction to any publicly held corporation and its affiliates for certain compensation paid to “covered employees” in a taxable year to the extent that compensation to a covered employee exceeds $1 million. Prior to the recent enactment of the Tax Cuts and Jobs Act in December 2017, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code was not subject to this deduction limitation. Pursuant to the Tax Cuts and Jobs Act, this exception for “performance-based compensation” under Section 162(m) of the Code was repealed, with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided by the Tax Cuts and Jobs Act for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. As a result, compensation paid to any of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the regulations issued thereunder, including the uncertain scope of the transition relief provided by the Tax Cuts and Jobs Act, no assurance can be given that any compensation paid by the Company will be eligible for such transition relief and, therefore, eligible for the “performance-based compensation” exception under Section 162(m) of the Code. The Compensation Committee will continue to monitor the applicability of Section 162(m) of the Code to its ongoing compensation arrangements and intends to continue to compensate our Named Executive Officers in a manner consistent with the best interests of our company and our shareholders.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has ever been an executive officer or employee of Abaxis. None of our executive officers currently serves, or has served during the last completed fiscal year, on the Compensation Committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
COMPENSATION COMMITTEE REPORT
(1)
The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis included in this Annual Report on Form 10-K/A for the fiscal year ended March 31, 2018.
Based upon this review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K/A for the fiscal year ended March 31, 2018.
|
THE COMPENSATION COMMITTEE
|
|
|
|
Richard J. Bastiani, Ph.D., Chairman
|
|
Michael D. Casey
|
|
Prithipal Singh, Ph.D.
|
(1)
|
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Abaxis under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in any such filing.
|
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for fiscal 2018, 2017 and 2016, the compensation awarded or paid to, or earned by, our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers as of March 31, 2018 (collectively, our “Named Executive Officers”).
Name and Principal Position
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($) (2)(3)
|
|
|
Non-Equity
Incentive Plan
Compensation
($) (4)
|
|
|
All Other
Compensation
($) (5)
|
|
|
|
|
Total
($)
|
|
Clinton H. Severson
|
2018
|
|
|
575,000
|
|
|
|
|
|
|
2,521,200
|
|
|
|
786,251
|
|
|
|
14,818
|
|
(6
|
)
|
|
|
3,897,269
|
|
Chief Executive Officer and
|
2017
|
|
|
571,346
|
|
|
|
-
|
|
|
|
3,231,980
|
|
|
|
616,251
|
|
|
|
12,493
|
|
(6
|
)
|
|
|
4,432,070
|
|
Chairman of the Board (1)
|
2016
|
|
|
542,115
|
|
|
|
-
|
|
|
|
3,029,400
|
|
|
|
776,000
|
|
|
|
13,679
|
|
(6
|
)
|
|
|
4,361,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross Taylor
(7)
|
2018
|
|
|
257,500
|
|
|
|
|
|
|
|
1,146,000
|
|
|
|
462,500
|
|
|
|
30,035
|
|
(8
|
)
|
|
|
1,896,035
|
|
Chief Financial Officer,
|
2017
|
|
|
256,731
|
|
|
|
-
|
|
|
|
1,141,180
|
|
|
|
362,500
|
|
|
|
26,230
|
|
(8
|
)
|
|
|
1,786,641
|
|
Vice President of Finance and
|
2016
|
|
|
239,808
|
|
|
|
-
|
|
|
|
1,377,000
|
|
|
|
412,250
|
|
|
|
25,044
|
|
(8
|
)
|
|
|
2,054,102
|
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth P. Aron, Ph.D
.
|
2018
|
|
|
298,700
|
|
|
|
|
|
|
|
1,146,000
|
|
|
|
462,500
|
|
|
|
30,487
|
|
(9
|
)
|
|
|
1,937,687
|
|
Chief Technology Officer
|
2017
|
|
|
297,808
|
|
|
|
-
|
|
|
|
1,141,180
|
|
|
|
362,500
|
|
|
|
26,791
|
|
(9
|
)
|
|
|
1,828,279
|
|
|
2016
|
|
|
289,808
|
|
|
|
-
|
|
|
|
1,817,640
|
|
|
|
412,250
|
|
|
|
26,895
|
|
(9
|
)
|
|
|
2,546,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig M. Tockman, DVM
|
2018
|
|
|
298,700
|
|
|
|
|
|
|
|
1,146,000
|
|
|
|
437,500
|
|
|
|
30,523
|
|
(10
|
)
|
|
|
1,912,723
|
|
Vice President of Animal Health
|
2017
|
|
|
297,808
|
|
|
|
-
|
|
|
|
1,141,180
|
|
|
|
362,500
|
|
|
|
26,681
|
|
(10
|
)
|
|
|
1,828,169
|
|
Sales and Marketing for
|
2016
|
|
|
284,962
|
|
|
|
-
|
|
|
|
1,817,640
|
|
|
|
412,251
|
|
|
|
26,768
|
|
(10
|
)
|
|
|
2,541,621
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald P. Wood
|
2018
|
|
|
360,500
|
|
|
|
|
|
|
|
1,146,000
|
|
|
|
555,000
|
|
|
|
23,208
|
|
(11
|
)
|
|
|
2,084,708
|
|
President and
|
2017
|
|
|
359,423
|
|
|
|
-
|
|
|
|
1,141,180
|
|
|
|
435,000
|
|
|
|
20,304
|
|
(11
|
)
|
|
|
1,955,907
|
|
Chief Operating Officer
|
2016
|
|
|
348,462
|
|
|
|
-
|
|
|
|
1,817,640
|
|
|
|
509,250
|
|
|
|
21,090
|
|
(11
|
)
|
|
|
2,696,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Mr. Severson is not compensated in his role as a director. The amounts shown reflect compensation earned as an employee only.
(2)
Awards consist of RSUs and PSUs granted to the Named Executive Officer in the fiscal year specified. Amounts shown do not reflect whether the Named Executive Officer has actually realized a financial benefit from the awards (such as by vesting in a restricted stock unit award). Amounts listed in this column represent the grant date fair value and incremental fair value as of the modification date, as applicable, of the awards granted (or modified) in the fiscal year indicated, as computed in accordance with Accounting Standards Codification 718, “Compensation-Stock Compensation,” or ASC 718. For a discussion of the assumptions used in determining the fair value of awards of RSUs and PSUs in the above table and other additional information on the RSUs and PSUs granted, see Note 15 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on May 30, 2018.
(3)
For PSUs, such grant date fair value is based on the probable outcome of the performance conditions as of the grant date, in accordance with ASC 718. Assuming the highest level of performance conditions were met, the grant date fair value of FY2018 PSUs would be as follows: (a) Mr. Severson, $1.7 million, (b) Mr. Taylor, $0.7 million, (c) Dr. Aron, $0.7 million, (d) Dr. Tockman, $0.7 million and (e) Mr. Wood, $0.7 million.
(4)
Represents the cash performance bonuses earned during each fiscal year based on achievement of corporate financial performance goals, as described under our “Compensation Discussion and Analysis” above. The annual cash bonuses were paid in four quarterly installments within one month following the end of the applicable quarter upon achieving the established quarterly revenues and/or quarterly income before income tax provision goals for that quarter. Amounts do not include bonuses paid during a fiscal year, with respect to bonuses earned in a prior fiscal year.
(5)
Amounts listed are based upon our actual costs expensed in connection with such compensation.
(6)
In fiscal 2018, consists of $6,915 in supplemental health plan expenses reimbursed by us, $247 in group life insurance paid by us, $431 in disability insurance premiums paid by us, $444 in long-term care insurance premiums paid by us and $6,781 in matching contributions made by us to Mr. Severson’s 401(k) account. In fiscal 2017, consists of $6,249 in supplemental health plan expenses reimbursed by us, $377 in group life insurance paid by us, $423 in disability insurance premiums paid by us, $444 in long-term care insurance premiums paid by us and $5,000 in matching contributions made by us to Mr. Severson’s 401(k) account. In fiscal 2016, consists of $5,773 in supplemental health plan expenses reimbursed by us, $419 in group life insurance paid by us, $418 in disability insurance premiums paid by us, $444 in long-term care insurance premiums paid by us and $6,625 in matching contributions made by us to Mr. Severson’s 401(k) account.
(7)
Mr. Taylor was appointed to the position of Chief Financial Officer, Vice President of Finance and Secretary effective August 1, 2015. The amounts for fiscal 2016 reflect all of Mr. Taylor’s compensation from Abaxis earned from April 1, 2015 to March 31, 2016.
(8)
In fiscal 2018, consists of $22,700 in supplemental health plan expenses reimbursed by us, $362 in group life insurance paid by us, $192 in long-term care insurance premiums paid by us and $6,781 in matching contributions made by us to Mr. Taylor’s 401(k) account. In fiscal 2017, consists of $20,636 in supplemental health plan expenses reimbursed by us, $371 in group life insurance paid by us, $233 in disability insurance premiums paid by us, $192 in long-term care insurance premiums paid by us and $4,798 in matching contributions made by us to Mr. Taylor’s 401(k) account. In fiscal 2016, consists of $19,152 in supplemental health plan expenses reimbursed by us, $334 in group life insurance paid by us, $380 in disability insurance premiums paid by us, $192 in long-term care insurance premiums paid by us and $4,986 in matching contributions made by us to Mr. Taylor’s 401(k) account.
(9)
In fiscal 2018, consists of $22,700 in supplemental health plan expenses reimbursed by us, $273 in group life insurance paid by us, $431 in disability insurance premiums paid by us, $302 in long-term care insurance premiums paid by us and $6,781 in matching contributions made by us to Dr. Aron’s 401(k) account. In fiscal 2017, consists of $20,636 in supplemental health plan expenses reimbursed by us, $430 in group life insurance paid by us, $423 in disability insurance premiums paid by us, $302 in long-term care insurance premiums paid by us and $5,000 in matching contributions made by us to Dr. Aron’s 401(k) account. In fiscal 2016, consists of $19,152 in supplemental health plan expenses reimbursed by us, $398 in group life insurance paid by us, $418 in disability insurance premiums paid by us, $302 in long-term care insurance premiums paid by us and $6,625 in matching contributions made by us to Dr. Aron’s 401(k) account.
(10)
In fiscal 2018, consists of $22,700 in supplemental health plan expenses reimbursed by us, $419 in group life insurance paid by us, $431 in disability insurance premiums paid by us, $192 in long-term care insurance premiums paid by us and $6,781 in matching contributions made by us to Dr. Tockman’s 401(k) account. In fiscal 2017, consists of $20,636 in supplemental health plan expenses reimbursed by us, $430 in group life insurance paid by us, $423 in disability insurance premiums paid by us, $192 in long-term care insurance premiums paid by us and $5,000 in matching contributions made by us to Dr. Tockman’s 401(k) account. In fiscal 2016, consists of $19,152 in supplemental health plan expenses reimbursed by us, $382 in group life insurance paid by us, $417 in disability insurance premiums paid by us, $192 in long-term care insurance premiums paid by us and $6,625 in matching contributions made by us to Dr. Tockman’s 401(k) account.
(11)
In fiscal 2018, consists of $15,827 in supplemental health plan expenses reimbursed by us, $274 in group life insurance paid by us, $326 in long-term care insurance premiums paid by us and $6,781 in matching contributions made by us to Mr. Wood’s 401(k) account. In fiscal 2017, consists of $14,357 in supplemental health plan expenses reimbursed by us, $377 in group life insurance paid by us, $244 in disability insurance premiums paid by us, $326 in long-term care insurance premiums paid by us and $5,000 in matching contributions made by us to Mr. Wood’s 401(k) account. In fiscal 2016, consists of $13,301 in supplemental health plan expenses reimbursed by us, $419 in group life insurance paid by us, $419 in disability insurance premiums paid by us, $326 in long-term care insurance premiums paid by us and $6,625 in matching contributions made by us to Mr. Wood’s 401(k) account.
Salary and Bonus in Proportion to Total Compensation
The following table sets forth the percentage of base salary and annual cash incentive bonus that was earned by each Named Executive Officer as a percentage of total compensation for fiscal 2018.
Named Executive Officer
|
|
Base Salary
As a Percentage of
Total Compensation (1)
|
|
|
Annual Cash
Incentive Bonus
As a Percentage of
Total Compensation (1)
|
|
Clinton H. Severson
|
|
|
15
|
%
|
|
|
20
|
%
|
Ross Taylor
|
|
|
14
|
%
|
|
|
24
|
%
|
Kenneth P. Aron, Ph.D.
|
|
|
15
|
%
|
|
|
24
|
%
|
Craig M. Tockman, DVM
|
|
|
16
|
%
|
|
|
23
|
%
|
Donald P. Wood
|
|
|
17
|
%
|
|
|
27
|
%
|
(1)
Total compensation is defined as total compensation as reported in the “Summary Compensation Table” for fiscal 2018. Included in the total compensation are long-term equity incentive awards with performance-based vesting criteria. PSUs only provide an economic benefit if the performance goals are achieved.
Employment Agreements
In October 2010, we entered into an employment agreement with Clinton H. Severson, our Chief Executive Officer, which amended, restated and superseded Mr. Severson’s existing Employment Agreement, dated July 11, 2005. The amended and restated employment agreement provides Mr. Severson with a severance payment equal to two years of salary, bonus and benefits if his employment with us is terminated for any reason other than cause. Additionally, upon Mr. Severson’s termination without cause or resignation for good reason, all of Mr. Severson’s unvested stock options, RSUs, PSUs and other equity awards would vest in full. Certain severance benefits provided pursuant to the Severance Plan (described below in “Severance and Change in Control Agreements”) with respect to a change of control supersede those provided pursuant to the employment agreement.
On April 29, 2015, we entered into an offer letter agreement with Mr. Taylor in connection with his appointment as Chief Financial Officer, effective as of August 1, 2015. The offer letter provides a relocation bonus of $25,000, which was paid to Mr. Taylor when he was hired in October 2015 as the Vice President of Business Development and Investor Relations. The relocation bonus must be repaid, up to the full $25,000 amount, if Mr. Taylor resigns from employment or is terminated by us for Cause (as defined in Severance Plan described below) before October 20, 2018, the four year anniversary of Mr. Taylor’s initial employment start date with Abaxis, with the repayment amount pro-rated based on the time of such resignation or termination. However, if there is a change in control of Abaxis prior to October 20, 2018, and Mr. Taylor remains an employee of our Company through such change in control, he does not need to repay the relocation bonus. Additionally, the offer letter agreement provides that Mr. Taylor will be a participant in the Severance Plan, on the specific terms and adjustments described in “Severance and Change in Control Agreements.”
On May 1, 2014, we entered into an employment agreement with Dr. Tockman providing for the terms of his promotion to Vice President of Sales and Marketing for North America Animal Health on May 5, 2014, which superseded our previous employment agreement with Dr. Tockman in place prior to his promotion. The employment agreement provides Dr. Tockman with a $100,000 relocation bonus, with repayment terms, up to the full $100,000 amount, if Dr. Tockman resigns from employment or is terminated by us for Cause (as defined in Severance Plan described below) before May 5, 2018, the four year anniversary of Dr. Tockman’s promotion date, with the repayment amount pro-rated based on the time of such resignation or termination. However, if there is a change in control of Abaxis prior to May 5, 2018 and Dr. Tockman remains an employee of our Company through such change in control, he does not need to repay the relocation bonus. Dr. Tockman’s employment agreement further provides that he will be a participant in the Severance Plan, on the specific terms and adjustments described in “Severance and Change in Control Agreements.”
Grants of Plan-Based Awards in Fiscal 2018
The following table sets forth the grants of plan-based awards to our Named Executive Officers during fiscal 2018.
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (1)
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards (2)
|
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
|
|
|
Grant
Date Fair
Value of
Stock and
Option
|
|
Name
|
Grant
Date
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
or Units
(#) (3)
|
|
|
Awards
($) (4)
|
|
Clinton H. Severson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual cash incentive bonus
|
|
|
|
212,500
|
|
|
|
850,000
|
|
|
|
1,700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,000
|
|
|
|
870,960
|
|
PSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
36,000
|
|
|
|
36,000
|
|
|
|
|
|
|
|
1,650,240
|
|
Ross Taylor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual cash incentive bonus
|
|
|
|
125,000
|
|
|
|
500,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
412,560
|
|
PSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
16,000
|
|
|
|
16,000
|
|
|
|
|
|
|
|
733,440
|
|
Kenneth P. Aron, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual cash incentive bonus
|
|
|
|
125,000
|
|
|
|
500,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
412,560
|
|
PSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
16,000
|
|
|
|
16,000
|
|
|
|
|
|
|
|
733,440
|
|
Craig M. Tockman, DVM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual cash incentive bonus
|
|
|
|
125,000
|
|
|
|
500,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
412,560
|
|
PSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
16,000
|
|
|
|
16,000
|
|
|
|
|
|
|
|
733,440
|
|
Donald P. Wood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual cash incentive bonus
|
|
|
|
150,000
|
|
|
|
600,000
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
412,560
|
|
PSUs
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
16,000
|
|
|
|
16,000
|
|
|
|
|
|
|
|
733,440
|
|
(1)
|
Actual cash performance bonuses, which were approved by the Board of Directors (with Mr. Severson abstaining) upon recommendation by the Compensation Committee based on achievement of corporate financial performance goals for fiscal 2018, were paid within one month following the end of the quarter upon achieving the established quarterly revenues and/or quarterly income before income tax provision goals. Actual cash performance bonuses are shown in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” above. “Threshold” refers to the minimum amount of annual bonus payable for a certain level of performance under the plan.
|
(2)
|
Awards consist of PSUs granted under, and are subject to, the terms of our 2014 Equity Incentive Plan. PSUs were subject to vesting only if both of the Performance Vesting Condition and the Service Vesting Condition were satisfied as follows:
|
(i) 50% shares issuable upon settlement of FY2018 PSUs upon satisfying the Performance Vesting Condition target, and time-based vesting on May 1, 2020 and
(ii) 50% shares issuable upon settlement of FY2018 PSUs upon satisfying the Performance Vesting Condition target, and time-based vesting on May 1, 2021.
(3)
|
Awards consist of RSUs granted under, and are subject to, the terms of our 2014 Equity Incentive Plan. The four-year time-based vesting terms of the RSUs are as follows, assuming continuous employment: 5% of the shares vest after the first year; 10% of the shares vest after the second year; 15% of the shares vest after the third year; and 70% of the shares vest after the fourth year. Additional information on PSUs granted is described above in “Compensation Discussion and Analysis—Executive Compensation Components—Long-Term Equity Incentive Compensation—Fiscal 2018 Equity Incentive Grants.”
|
(4)
|
Represents the fair value of the RSUs and PSUs on the date of grant, pursuant to ASC 718. See Note 15 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on May 30, 2018, for additional information.
|
Additional information on the FY2018 PSUs is described above in “Compensation Discussion and Analysis—Executive Compensation Components—Long-Term Equity Incentive Compensation— Fiscal 2018 Equity Incentive Grants.”
Outstanding Equity Awards at Fiscal Year End 2018
The following table shows, for the fiscal year ended March 31, 2018, certain information regarding outstanding equity awards at fiscal year-end for our Named Executive Officers.
|
|
|
|
Stock Awards
|
|
Name
|
|
Grant
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
|
|
|
Market Value of
Shares or
Units of
Stock
That Have
Not Vested
($) (1)
|
|
Clinton H. Severson
|
|
4/28/2014
|
|
|
13,300
|
(2
|
)
|
|
|
939,246
|
|
|
|
4/28/2014
|
|
|
18,000
|
(3
|
)
|
|
|
1,271,160
|
|
|
|
5/4/2015
|
|
|
16,150
|
(2
|
)
|
|
|
1,140,513
|
|
|
|
5/4/2015
|
|
|
36,000
|
(3
|
)
|
|
|
2,542,320
|
|
|
|
5/2/2016
|
|
|
18,050
|
(2
|
)
|
|
|
1,274,691
|
|
|
|
5/2/2016
|
|
|
51,000
|
(3
|
)
|
|
|
3,601,620
|
|
|
|
5/1/2017
|
|
|
19,000
|
(2
|
)
|
|
|
1,341,780
|
|
|
|
5/1/2017
|
|
|
36,000
|
(3
|
)
|
|
|
2,542,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross Taylor
|
|
10/23/2014
|
|
|
7,000
|
(2
|
)
|
|
|
494,340
|
|
|
|
5/4/2015
|
|
|
7,650
|
(2
|
)
|
|
|
540,243
|
|
|
|
5/4/2015
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
5/2/2016
|
|
|
8,550
|
(2
|
)
|
|
|
603,801
|
|
|
|
5/2/2016
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
5/1/2017
|
|
|
9,000
|
(2
|
)
|
|
|
635,580
|
|
|
|
5/1/2017
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth P. Aron, Ph.D.
|
|
4/28/2014
|
|
|
6,300
|
(2
|
)
|
|
|
444,906
|
|
|
|
4/28/2014
|
|
|
12,000
|
(3
|
)
|
|
|
847,440
|
|
|
|
5/4/2015
|
|
|
7,650
|
(2
|
)
|
|
|
540,243
|
|
|
|
5/4/2015
|
|
|
24,000
|
(3
|
)
|
|
|
1,694,880
|
|
|
|
5/2/2016
|
|
|
8,550
|
(2
|
)
|
|
|
603,801
|
|
|
|
5/2/2016
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
5/1/2017
|
|
|
9,000
|
(2
|
)
|
|
|
635,580
|
|
|
|
5/1/2017
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig M. Tockman, DVM
|
|
4/28/2014
|
|
|
6,300
|
(2
|
)
|
|
|
444,906
|
|
|
|
4/28/2014
|
|
|
8,000
|
(3
|
)
|
|
|
564,960
|
|
|
|
5/4/2015
|
|
|
7,650
|
(2
|
)
|
|
|
540,243
|
|
|
|
5/4/2015
|
|
|
24,000
|
(3
|
)
|
|
|
1,694,880
|
|
|
|
5/2/2016
|
|
|
8,550
|
(2
|
)
|
|
|
603,801
|
|
|
|
5/2/2016
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
5/1/2017
|
|
|
9,000
|
(2
|
)
|
|
|
635,580
|
|
|
|
5/1/2017
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald P. Wood
|
|
4/28/2014
|
|
|
6,300
|
(2
|
)
|
|
|
444,906
|
|
|
|
4/28/2014
|
|
|
12,000
|
(3
|
)
|
|
|
847,440
|
|
|
|
5/4/2015
|
|
|
7,650
|
(2
|
)
|
|
|
540,243
|
|
|
|
5/4/2015
|
|
|
24,000
|
(3
|
)
|
|
|
1,694,880
|
|
|
|
5/2/2016
|
|
|
8,550
|
(2
|
)
|
|
|
603,801
|
|
|
|
5/2/2016
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
|
|
5/1/2017
|
|
|
9,000
|
(2
|
)
|
|
|
635,580
|
|
|
|
5/1/2017
|
|
|
16,000
|
(3
|
)
|
|
|
1,129,920
|
|
(1)
|
The value of the equity award is based on the closing price of our common stock of $70.62 on March 30, 2018, the last day of trading for our fiscal year ended March 31, 2018 as reported on the Nasdaq Global Market.
|
(2)
|
The four-year vesting terms of the RSUs are as follows, assuming continuous employment: 5% of the shares vest after the first year; 10% of the shares vest after the second year; 15% of the shares vest after the third year; and 70% of the shares vest after the fourth year. Additional information on RSUs granted during fiscal 2018 is described above in “Compensation Discussion and Analysis—Executive Compensation Components—Long-Term Equity Incentive Compensation—Fiscal 2018 Equity Incentive Grants.”
|
(3)
|
The RSUs vest upon satisfying both performance and service criteria. On April 25, 2018, the Compensation Committee determined that Abaxis’ income from continuing operations before income tax provision for fiscal 2018 was above of the performance target and accordingly, because the performance criteria were achieved during fiscal 2018, the FY2018 PSUs became eligible to vest in full, if each executive officer provides continuous employment through the vest date on the third and fourth year following the date of grant.
|
Option Exercises and Stock Vested in Fiscal 2018
The following table shows all shares of common stock acquired from and the value realized upon vesting of all stock awards held by our Named Executive Officers during fiscal 2018.
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Vesting
(#)
|
|
|
Value
Realized on
Vesting
($) (1)
|
|
Clinton H. Severson
|
|
|
37,000
|
|
|
|
1,699,880
|
|
Ross Taylor
|
|
|
2,850
|
|
|
|
137,364
|
|
Kenneth P. Aron, Ph.D.
|
|
|
21,000
|
|
|
|
964,440
|
|
Craig M. Tockman, DVM
|
|
|
14,550
|
|
|
|
680,658
|
|
Donald P. Wood
|
|
|
21,000
|
|
|
|
964,440
|
|
(1)
|
The value realized on vesting of RSUs equals the fair market value of our common stock on the settlement date, multiplied by the number of shares that vested.
|
Severance and Change in Control Agreements
Employment Agreements
As described more fully above in “Summary Compensation Table—Employment Agreements,” our Chief Executive Officer, Chief Financial Officer and Vice President of Sales and Marketing for North America Animal Health are entitled to certain severance and change in control payments pursuant to their respective employment or offer letter agreement with us.
Executive Change of Control Severance Plan
In July 2006, our Board of Directors, after considering a change of control program analysis from the peer company analysis prepared by our compensation advisor at that time and upon the recommendation of our Compensation Committee, approved and adopted the Abaxis, Inc. Executive Change of Control Severance Plan (the “Severance Plan”). The Severance Plan was adopted by our Board of Directors to reduce the distraction of executives and potential loss of executive talent that could arise from a potential change of control. Participants in the Severance Plan include Abaxis’ senior managers who are selected by the Board of Directors. Each of our Named Executive Officers is designated as a participant in the Severance Plan.
The Board of Directors has amended the Severance Plan from time to time to ensure its compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). In May 2014, our Compensation Committee determined to discontinue the practice of providing “single-trigger” equity vesting acceleration upon a change of control and the tax “gross up” provisions in the Severance Plan, as further described below. Accordingly, Mr. Taylor’s and Dr. Tockman’s offer letter agreements with us provide that, notwithstanding the terms of the Severance Plan, they will not be entitled to automatic vesting acceleration and the tax payment described above upon a change of control. Instead, Mr. Taylor and Dr. Tockman will be entitled to automatic equity vesting acceleration only on a “double-trigger” basis, requiring a termination in connection with a change of control, and will not be entitled to an excise tax gross up.
The Severance Plan (with respect to Mr. Taylor and Dr. Tockman, as adjusted by their respective offer letter agreement or employment agreement, respectively) provides that if the participant’s employment is terminated by us (or any successor of Abaxis) for any reason other than cause, death, or disability within 18 months following the change of control date and such termination constitutes a separation in service, the participant is eligible to receive severance benefits as follows:
|
·
|
on the 60th day after the termination date, a lump sum cash payment equal to two times the sum of the participant’s annual base salary and the participant’s target annual bonus amount for the year in which the change of control occurs;
|
|
·
|
payment of up to 24 months of premiums for medical, dental and vision benefits, provided, however, that if the participant becomes eligible to receive comparable benefits under another employer’s plan, our benefits will be secondary to those provided under such other plan;
|
|
·
|
reimbursement, on a monthly basis, of up to 24 months of premiums for disability and life insurance benefits if the participant elects to convert his or her disability and/or life insurance benefits under our plans into individual policies following termination;
|
|
·
|
for a participant who joined the Severance Plan on or after May 2014, full vesting of all equity awards;
|
|
·
|
for a participant who joined the Severance Plan on or after May 2014, a “better after tax” provision providing that any payment or benefit the participant may receive that would be a “parachute payment” within the meaning of 280G of the Code subject to an excise tax imposed under Section 4999 of the Code (the “Excise Tax”) will be either paid in full and subject to such Excise Tax or cut back to an amount that will not trigger the Excise Tax, whichever results in the greatest economic benefit to the participant; and
|
|
·
|
for a participant who joined the Severance Plan prior to May 2014, payment of an amount equal to any Excise Tax, as well as a payment in reimbursement of Excise Taxes and income taxes arising from the initial Excise Tax payment, provided, however, that payment of such amount is capped at $1,000,000 per participant.
|
Payment of the foregoing severance benefits is conditioned upon the participant’s execution of a valid and effective release of claims against us.
In addition, for participants who joined the Severance Plan prior to May 2014, the Severance Plan provides that upon the occurrence of a change of control, the participant’s outstanding stock option(s) and other unvested equity-based instruments will accelerate in full, and any such stock awards shall become immediately exercisable. Under the 2005 Equity Incentive Plan, all equity awards held by executive officers accelerate upon a change in control. This equity acceleration does not apply to Mr. Taylor and Dr. Tockman. Our 2014 Equity Incentive Plan does not contain this automatic vesting acceleration provision.
Incentive Plans
Under our 2005 Equity Incentive Plan, or the 2005 Plan, in the event of a “change in control,” as such term is defined by the 2005 Plan, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue in effect any or all outstanding options and stock appreciation rights or substitute substantially equivalent options or rights for its stock. Any options or stock appreciation rights which are not assumed or continued in connection with a change in control or exercised prior to the change in control will terminate effective as of the time of the change in control. Our Compensation
Committee may provide for the acceleration of vesting of any or all outstanding options or stock appreciation rights upon such terms and to any extent it determines. The 2005 Plan also authorizes our Compensation Committee, in its discretion and without the consent of any participant, to cancel each or any outstanding option or stock appreciation right upon a change in control in exchange for a payment to the participant with respect to each vested share (and each unvested share if so determined by our Compensation Committee) subject to the cancelled award of an amount of cash, stock or other property equal to the fair market value of the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise price per share under the award. The Compensation Committee, in its discretion, may provide in the event of a change in control for the acceleration of vesting and/or settlement of any stock award, restricted stock unit award, performance share or performance unit, cash-based award or other share-based award held by a participant upon such conditions and to such extent as determined by our Compensation Committee. The vesting of non-employee director awards and officer awards (including awards held by the Named Executive Officers) granted under the 2005 Plan will automatically accelerate in full upon a change in control. However, our offer letter agreements with new executive officers hired starting in fiscal 2015 (Mr. Taylor and Dr. Tockman) provide that, notwithstanding the terms of the 2005 Plan, they will not be entitled to automatic vesting acceleration upon a change of control.
Under our 2014 Equity Incentive Plan, or the 2014 Plan, in the event of certain specified significant corporate transactions, including a change in control, unless otherwise provided in a participant’s award agreement or other written agreement with us or one of our affiliates, we have the discretion to take any of the following actions with respect to stock awards: (1) arrange for the assumption, continuation or substitution of a stock award by a surviving or acquiring entity or parent company; (2) arrange for the assignment of any reacquisition or repurchase rights held by us to the surviving or acquiring entity or parent company; (3) accelerate the vesting of the stock award, in whole or in part, and provide for its termination prior to the effective time of the corporate transaction; (4) arrange for the lapse, in whole or in part, of any reacquisition or repurchase right held by us; (5) cancel or arrange for the cancellation of the stock award, to the extent not vested or not exercised prior to the effective time of the corporate transaction, in exchange for such cash consideration, if any, as the Board may deem appropriate; (6) make a payment equal to the excess of (a) the value of the property the participant would have received upon exercise of the stock award or (b) the exercise price otherwise payable in connection with the stock award. We are not obligated to treat all stock awards, even those that are of the same type, in the same manner. No automatic vesting acceleration occurs under the 2014 Plan upon a change of control, however we may provide, in an individual award agreement or in any other written agreement between a participant and us that the stock award will be subject to additional acceleration of vesting and exercisability in the event of a change of control. Our form of restricted stock unit award agreement for non-employee directors provides that such awards will vest in full upon a change of control.
As described above, certain additional compensation is payable to a Named Executive Officer (i) if his employment was involuntarily terminated without cause or he resigned for good cause, (ii) upon a change in control or (iii) if his employment was terminated involuntarily following a change in control. The amounts shown in the table below assume that such termination was effective as of March 31, 2018, and do not include amounts in which the Named Executive Officer had already vested as of March 31, 2018. The actual compensation to be paid can only be determined at the time of the change in control and/or a Named Executive Officer’s termination of employment.
Potential Payments Upon Termination or Change in Control
The following table includes an estimate of the potential compensation and benefits payable to our Named Executive Officers, in certain termination and change of control situations, assuming that the involuntary termination, change in controls or involuntary termination without cause following a change in control, respectively, occurred on March 31, 2018.
For additional details regarding the interests of our Named Executive Officers in the Merger and the compensation that may be payable to our Named Executive Officers in connection with the Merger, please refer to Merger Proxy Statement.
Executive Benefits and Payments Upon Separation
|
|
Involuntary
Termination (1)
|
|
|
|
|
Change In Control
(No Termination)
|
|
|
|
|
Involuntary
Termination Without
Cause Following a
Change In Control (2)
|
|
|
|
Clinton H. Severson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary and bonus
|
|
$
|
2,850,000
|
|
|
|
|
|
-
|
|
|
|
|
$
|
2,850,000
|
|
|
|
Vesting of RSUs
|
|
$
|
4,696,230
|
|
(3
|
)
|
|
$
|
4,696,230
|
|
(3
|
)
|
|
$
|
4,696,230
|
|
(3
|
)
|
Vesting of PSUs
|
|
$
|
9,957,420
|
|
(3
|
)
|
|
$
|
9,957,420
|
|
(3
|
)
|
|
$
|
9,957,420
|
|
(3
|
)
|
Health and welfare benefits
|
|
$
|
16,074
|
|
(4
|
)
|
|
|
-
|
|
|
|
|
$
|
16,074
|
|
(4
|
)
|
Excise tax reimbursement and related gross up
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
0
|
|
(5
|
)
|
Total
|
|
$
|
17,519,724
|
|
|
|
|
$
|
14,653,650
|
|
|
|
|
$
|
17,519,724
|
|
|
|
Ross Taylor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary and bonus
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
1,515,000
|
|
|
|
Vesting of RSUs
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
2,273,964
|
|
(3
|
)
|
Vesting of PSUs
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
3,389,760
|
|
(3
|
)
|
Health and welfare benefits
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
46,124
|
|
(6
|
)
|
Excise tax reimbursement and related gross up
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
(7
|
)
|
Total
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
7,224,848
|
|
(8
|
)
|
Kenneth P. Aron, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary and bonus
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
1,597,400
|
|
|
|
Vesting of RSUs
|
|
|
-
|
|
|
|
|
$
|
2,224,530
|
|
(3
|
)
|
|
$
|
2,224,530
|
|
(3
|
)
|
Vesting of PSUs
|
|
|
-
|
|
|
|
|
$
|
4,802,160
|
|
(3
|
)
|
|
$
|
4,802,160
|
|
(3
|
)
|
Health and welfare benefits
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
46,808
|
|
(6
|
)
|
Excise tax reimbursement and related gross up
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
0
|
|
(5
|
)
|
Total
|
|
|
-
|
|
|
|
|
$
|
7,026,690
|
|
|
|
|
$
|
8,670,898
|
|
|
|
Craig M. Tockman, DVM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary and bonus
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
1,597,400
|
|
|
|
Vesting of RSUs
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
2,224,530
|
|
(3
|
)
|
Vesting of PSUs
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
4,519,680
|
|
(3
|
)
|
Health and welfare benefits
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
47,102
|
|
(6
|
)
|
Excise tax reimbursement and related gross up
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
(7
|
)
|
Total
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
8,388,712
|
|
(8
|
)
|
Donald P. Wood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary and bonus
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
1,921,000
|
|
|
|
Vesting of RSUs
|
|
|
-
|
|
|
|
|
$
|
2,224,530
|
|
(3
|
)
|
|
$
|
2,224,530
|
|
(3
|
)
|
Vesting of PSUs
|
|
|
-
|
|
|
|
|
$
|
4,802,160
|
|
(3
|
)
|
|
$
|
4,802,160
|
|
(3
|
)
|
Health and welfare benefits
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
32,200
|
|
(6
|
)
|
Excise tax reimbursement and related gross up
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
$
|
0
|
|
(5
|
)
|
Total
|
|
|
-
|
|
|
|
|
$
|
7,026,690
|
|
|
|
|
$
|
8,979,890
|
|
|
|
(1)
|
The amounts listed for Mr. Severson are payments upon a termination without cause or upon his resignation for good reason, and are based on the aggregate of two years of salary, bonus, unvested RSUs, unvested PSUs and benefits if his employment with us is terminated for any reason other than cause or if he resigns for good reason (as defined in Mr. Severson’s amended and restated employment agreement effective October 2010).
|
(2)
|
Amounts assume that the Named Executive Officer was terminated without cause or due to constructive termination during the 18-month period following a change in control.
|
(3)
|
The values of the RSUs and PSUs assume that the market price per share of our common stock on the date of termination of employment was equal to the closing price of our common stock of $70.62 on March 30, 2018, the last day of trading for our fiscal year ended March 31, 2018 as reported on the Nasdaq Global Market.
|
(4)
|
Health and welfare benefits include payment of 24 months of premiums for medical, dental, vision, disability, life insurance and long-term care benefits.
|
(5)
|
For purposes of computing the Excise Tax reimbursement and related gross up payments, base amount calculations are based on the Named Executive Officer’s taxable wages for fiscal years 2014 through 2018. No Excise Tax reimbursement or related gross up is estimated for Mr. Severson, Dr. Aron or Mr. Wood because the payment or benefit they may receive that would be a “parachute payment” within the meaning of 280G of the Code is estimated to be less than the Code safe harbor limit and thus not subject to Excise Tax.
|
(6)
|
Health and welfare benefits include payment of 24 months of premiums for medical, dental, vision, disability and life insurance benefits.
|
(7)
|
Mr. Taylor and Dr. Tockman do not receive an excise tax reimbursement or related gross-up benefit.
|
(8)
|
Pursuant to the “best after tax” provision of the Severance Plan, as adjusted by each of Mr. Taylor’s and Dr. Tockman’s respective offer letters, any payment or benefit each may receive that would be a “parachute payment” within the meaning of 280G of the Code subject to an Excise Tax imposed under Section 4999 of the Code will be either paid in full and subject to such Excise Tax or cut back to an amount that will not trigger the Excise Tax, whichever results in the greatest economic benefit to the participant. Based on this provision, Mr. Taylor would have received the greatest economic benefit to receive his full severance amount and personally pay his Excise Tax liability. Dr. Tockman would have received the greatest economic benefit by reducing his payment of approximately $97,000. The estimated Excise Tax liability that Mr. Taylor and Dr. Tockman would have been responsible for personally paying was $579,000 and $559,000, respectively.
|
Pay Ratio Disclosure
Under SEC rules, we are required to calculate and disclose the annual total compensation of our median employee, as well as the ratio of the annual total compensation of our median employee as compared to the annual total compensation of our CEO (“CEO Pay Ratio”). To identify our median employee, we used the following methodology:
|
•
|
To determine our total population of employees, we included all full-time employees as of March 31, 2018.
|
|
•
|
To identify our median employee from our employee population, we calculated the aggregate amount of each employee’s fiscal 2018 base salary (using the hours worked and overtime actually paid during fiscal 2018 for hourly employees and actual salary paid for our remaining employees), annual cash incentive awards earned during fiscal 2018, and the value of equity awards granted in fiscal 2018 using the same methodology we use
for estimating the value of the equity awards granted to our named executive officers and reported in our Summary Compensation Table
.
|
|
•
|
In making this determination, compensation of employees who were employed by us for less than the entire calendar year were not annualized.
|
|
•
|
Compensation paid in foreign currencies was converted to U.S. dollars based on the average exchange rates during fiscal 2018
|
Using this approach, we determined our median employee and then calculated the annual total compensation of this employee for fiscal 2018 in accordance with the requirements of the Summary Compensation Table.
For fiscal 2018, the median of the annual total compensation of our employees (other than our CEO) was $74,408 and the annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Annual Report on Form 10-K/A, was $3,897,269. Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 52 to 1.
The CEO Pay Ratio above represents our reasonable estimate calculated in a manner consistent with SEC rules and applicable guidance. SEC rules and guidance provide significant flexibility in how companies identify the median employee, and each company may use a different methodology and make different assumptions particular to that company. As a result, and as explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, stockholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.
Neither the Compensation Committee nor our management used our CEO Pay Ratio measure in making compensation decisions.
DIRECTOR COMPENSATION
Director Compensation Table
The table below summarizes the compensation paid to our non-employee directors for fiscal 2018.
Name (1)
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Stock
Awards
($) (2) (3)
|
|
|
Total
($)
|
|
Vernon E. Altman
|
|
|
37,750
|
|
|
|
252,120
|
|
|
|
289,870
|
|
Richard J. Bastiani, Ph.D.
|
|
|
38,250
|
|
|
|
252,120
|
|
|
|
290,370
|
|
Michael D. Casey
|
|
|
30,750
|
|
|
|
252,120
|
|
|
|
282,870
|
|
Henk J. Evenhuis
|
|
|
42,250
|
|
|
|
252,120
|
|
|
|
294,370
|
|
Prithipal Singh, Ph.D.
|
|
|
36,750
|
|
|
|
252,120
|
|
|
|
288,870
|
|
(1)
|
Clinton H. Severson, our Chief Executive Officer and Director, is not included in this table as he is an employee of Abaxis and receives no compensation for his services as a director. The compensation received by Mr. Severson as an employee is shown in the “Summary Compensation Table” above.
|
(2)
|
Each non-employee director listed in the table above was granted an award of 5,500 RSUs on May 1, 2017 under our 2014 Plan. Amounts listed in this column represent the grant date fair value of the awards in accordance with ASC 718. Amounts shown do not reflect whether the non-employee director has actually realized a financial benefit from the awards (such as by vesting in a RSU award). For a discussion of the assumptions used in determining the fair value of awards of RSUs in the above table, see Note 15 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K filed with the SEC on May 30, 2018. No stock awards were forfeited by our non-employee directors during fiscal 2018.
|
(3)
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As of March 31, 2018, each of our non-employee directors held 5,500 shares subject to outstanding RSUs.
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Overview
Our Compensation Committee regularly reviews the elements of our non-employee director compensation program, including, with input as appropriate from outside advisors. In 2016, concurrent with review of the executive compensation programs, Pay Governance also reviewed our non-employee director compensation programs against those of our Compensation Peer Group. We did not implement any modifications to our non-employee director compensation program following such review. The current components of our non-employee director compensation program include cash retainers and meeting fees, as well as reasonable expense reimbursement, as well as discretionary equity awards. We also maintain stock ownership guidelines for directors as indicated above under “Compensation Discussion and Analysis—Other Compensation Policies and Benefits—Stock Ownership Guidelines.” All of our directors meet these guidelines.
Cash Compensation Paid to Board Members
During fiscal 2018, all non-employee directors received an annual retainer of $15,000, pro-rated based on the period of services provided by the non-employee director. The non-employee Chairs of our Audit Committee, Compensation Committee and Nominating Committee received an annual supplement of $13,500, $7,500, and $5,000, respectively. Our non-employee directors each received $1,250 per board meeting attended and $1,000 per committee meeting attended. Mr. Altman is our lead independent director and receives an annual supplement of $7,000 in connection therewith. We also reimburse our non-employee directors for reasonable travel expenses incurred in connection with attending board and committee meetings. Directors who are employees receive no compensation for their service as directors.
Equity Compensation Paid to Board Members
Non-employee directors are eligible to receive equity awards under our equity compensation plans, as applicable, but such awards are discretionary and not automatic. In fiscal 2018, 2017 and 2016, each non-employee director received an annual equity award of 5,500, 5,500 and 5,000 RSUs, respectively, under our equity compensation plans, as applicable, for the services provided by the non-employee director during the respective period. Each RSU represents the right of the participant to receive, without payment of monetary consideration, on the vesting date, a number of shares of common stock equal to the number of units vesting on such date. Subject to the director’s continued service with us through the applicable vesting date, each RSU award will vest in full 12 months after the grant date. Under the terms of the 2005 Plan and of the director awards under the 2014 Plan, the vesting of each non-employee director RSU award will also be accelerated in full in the event of a “change in control,” as defined in the applicable equity compensation plan.