Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On April 8, 2021, the Compensation Committee of the Board of Directors of Sharps
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 (ending June 30, 2021) (the "FY 2021 ECIP"), (ii)
established a ECIP for fiscal year 2022 (ending June 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
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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 on July 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 on July 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 on July 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 on
April 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
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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, effective July
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 after July 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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