SHARPS COMPLIANCE CORP. Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
OnApril 8, 2021 , the Compensation Committee of the Board of Directors ofSharps Compliance Corp. (the "Company", "Sharps" or "we".) ("Compensation Committee"): (i) approved changes to the Executive Compensation and Incentive Plan ("ECIP") effective for fiscal year 2021 (endingJune 30, 2021 ) (the "FY 2021 ECIP"), (ii) established a ECIP for fiscal year 2022 (endingJune 30, 2022 ) (the "FY 2022 ECIP"), (iii) approved certain other changes to executive compensation, including base compensation changes and (iv) approved stock retention guidelines for officers and directors. FY 2021 ECIP Changes: The Compensation Committee will consider, on a discretionary basis, paying out higher cash bonuses than those included in the current FY 2021 ECIP. The current FY 2021 ECIP includes a potential cash bonus to be paid to specific Company executives assuming achievement of predetermined goals and based on a percentage of their base compensation, including a payout to the Chief Executive Officer ("CEO") at 30% of his base salary, the Chief Financial Officer ("CFO") at 25% of her base salary and the remainder to other specific Company executives at 20% of their respective base salaries. The Compensation Committee replaced the existing potential stock option awards in the FY 2021 ECIP, totaling 294,400 stock options, with restricted stock to be awarded if Budgeted financial targets are achieved by the Company. Such stock awards to be awarded will be calculated as the difference between the Company's stock price on the Measurement Date (defined as two business days after the Company's fiscal year end earnings release date) and$7.00 per share, multiplied by the original number of stock options assigned to specific Company executives and employees as shown below. The restricted stock will be issued at the Measurement Date and vest ratably over four years (25% per year). For example purposes, should the Company's stock price at the Measurement Date be$18 per share, the Company would award 179,910 total restricted stock awards as shown in the table below.
Example: Restricted Shares
Original ECIP Stock Options at $18
CEO 102,400 62,578
CFO 51,200 31,289
Other Officers and Management 76,800 46,932
Other Employees 64,000 39,111
The Compensation Committee also approved a potential one-time cash performance
bonus to the Company's CFO in the amount of $50,000 associated with an
individual performance goal related to the 2021 fiscal year to be evaluated and
determined at the Measurement Date.
FY 2022 ECIP:
The FY 2022 ECIP provides an annual short-term cash bonus and an annual long-term restricted stock pool.
Award Opportunities. Covered participants under the FY 2022 ECIP will be eligible for an annual incentive cash bonus, weighted by Performance Measure, if the Company achieves certain FY 2022 ECIP Performance Measures as specified below. If the financial and discretionary targets are achieved, a cash bonus (estimated total of$473,250 ) will be paid to specific Company executives based on a percentage of their base compensation, including a payout -------------------------------------------------------------------------------- to the CEO at 50% of his base salary, the CFO at 40% of her base salary and the remainder to other specific Company executives at 25% of their respective base salaries. The FY 2022 ECIP also includes an equity component as follows (i) time based restricted stock to be awarded onJuly 1, 2021 and (ii) performance based restricted stock to be awarded if the Performance Measures as specified below are achieved. The restricted stock would vest ratably over the four years after the award date and be issued onJuly 1, 2021 for time based restricted stock or the Measurement Date for performance based restricted stock. The following table shows long-term equity awards by recipient, assuming all targets are met, with restricted shares estimated based on a stock price of$18 . The actual number of shares will change based on the stock price at the award date. Time Based Awards Performance Based Awards % of Base Comp Estimated # of Shares (1) % of Base Comp Estimated # of Shares (1) CEO 80 % 17,778 120 % 26,667 CFO 60 % 9,167 100 % 15,278 Other Executives and Management 40 % 18,177 60 % 27,267 Other Employees n/a (2) 10,587 n/a (2) 16,235 Total 55,706 85,446 (1) Estimated number of shares as base compensation x % of base compensation divided by an estimated$18 /share stock price. The actual number of shares awarded will be determined by the price of the Company's stock onJuly 1, 2021 for time based restricted stock or the Measurement Date for performance based restricted stock. (2) Employee shares will be calculated as 19% of the total shares awarded to executives and management. Performance for the annual cash bonus and performance based restricted stock awards is measured at the Measurement Date (the close of business two business days after the Company's earnings release for the most recently completed fiscal year). Performance Measures - The FY 2022 ECIP performance targets include the following: • Achievement of a pre-established amount of annual revenue for the period - weighted 50% • Achievement of a pre-established amount of annual net income before income taxes - weighted 25% • Discretionary Portion - weighted 25% - approved by the Committee based on positioning the Company for future growth.
Base Compensation and Other:
The Compensation Committee approved changes to base compensation for certain executive officers and a title change for the CFO, all of which are effective onApril 8, 2021 , as shown below. Executive Officer Position New Base Salary Chief Executive Officer and President (Principal David P. Tusa Executive Officer)$ 400,000 Executive Vice President and Chief Financial Officer Diana P. Diaz (Principal Financial and Accounting Officer)$ 275,000 Gregory C. Davis Vice President of Operations$ 243,750 Dennis Halligan Vice President of Marketing$ 209,000
-------------------------------------------------------------------------------- The CEO's Employment Agreement was amended to state the cash portion of the severance payment applicable in the event of termination without cause, including Employment Agreement non-renewal or termination following a change in control to$525,000 . Stock Retention Guidelines: The Compensation Committee approved stock retention guidelines, effectiveJuly 1, 2021 , which require each officer and director to beneficially own certain amounts of the Company's common stock over a four-year period. Stock ownership includes: (i) common stock owned, (ii) time-vested restricted stock and (iii) performance based restricted stock already earned and subject to continued time vesting. Ownership guidelines vary based on position and require the officers and directors to own, at a minimum, either a specified number of shares or a number of shares of common stock having a market value equal to or in excess of a specified multiple of the officer's base compensation or director's annual cash retainer as follows: Holding Requirement: Lower of Share Value / Base Compensation or Annual Retainer Number of Shares Officers: CEO 4x 88,900 CFO 3x 45,800 Other Officers 2x 27,000 Directors: Chair 4x 16,700 Other Directors 4x 11,100 Any officer or director not meeting the ownership guidelines will be required to retain 75% of after-tax shares granted on or afterJuly 1, 2021 until the ownership guideline is achieved. Each officer or director has four years from the effective date of the policy, hire date or election date to achieve compliance. Each officer and director is currently in compliance, or within the four year grace period.
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