Quotient Limited
Quotient Ltd (Form: DEF 14A, Received: 07/26/2016 17:02:06)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

 

Check the appropriate box:

¨

Preliminary Proxy Statement

¨

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

¨

Definitive Additional Materials

¨

Soliciting Material Pursuant to §240.14a-12

QUOTIENT LIMITED

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

¨

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

¨

Fee paid previously with preliminary materials.

 

¨

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing:

 

(1)

Amount previously paid:

 

 

(2)

Form, Schedule or Registration Statement No:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 

 


Table of Contents

 

September 16, 2016

To our shareholders:

I am pleased to invite you to the Annual General Meeting of Shareholders of Quotient Limited (“Quotient” or the Company) to be held on October 28, 2016, at 4:00 p.m., local time, at The Fairmont Princess Hotel, Hamilton, Bermuda. Information about the meeting is presented on the following pages.

Details regarding admission to the meeting and the business that will be conducted are described in the accompanying Notice of Annual General Meeting and Proxy Statement.

Rules adopted by the U.S. Securities and Exchange Commission (“SEC”) allow companies to make materials available to security holders using either the “notice and access” or “full set delivery” options. This year, we have elected to mail proxy materials and our Annual Report on Form 10-K for the fiscal year ended March 31, 2016, filed with the SEC on May 31, 2016, to our shareholders using the “full set delivery” option. However, in the future, we may take advantage of the “notice and access” option.

Whether or not you plan to attend the meeting, your vote is important, and we encourage you to review the proxy materials and vote as soon as possible using the instructions provided in the Notice. All voters may sign, date and mail the proxy card in the envelope provided. If you hold your shares in street name, you may also vote your shares over the Internet or via a toll-free (in the United States) telephone number contained in the voting instructions included with your proxy materials. Instructions regarding the methods of voting are contained in the Notice or proxy card.

Thank you for your continued support of Quotient. We look forward to seeing you on October 28, 2016.

 

 

Sincerely,

 

Paul Cowan

Chief Executive Officer and Chairman of the Board of Directors

 


Table of Contents

 

 

Notice of Annual General Meeting of Shareholders

To Be Held on October 28, 2016 at The Fairmont Princess Hotel, Hamilton, Bermuda

DATE: October 28, 2016

TIME: 4:00 p.m., local time

PLACE: The Fairmont Princess Hotel, 76 Pitts Bay Road, Pembroke, Hamilton, Bermuda

RECORD DATE: August 26, 2016

PURPOSE OF MEETING: Presenting the Company’s accounts for the fiscal year ended March 31, 2016, together with the auditors’ reports on those accounts, to the shareholders at the Annual General Meeting and passing the following ordinary resolutions and to transact such other business as may properly come before the Annual General Meeting:

ORDINARY RESOLUTIONS

Re-election of directors

1) THAT Paul Cowan be re-elected as a director of the Company.

2) THAT Thomas Bologna be re-elected as a director of the Company.

3) THAT Frederick Hallsworth be re-elected as a director of the Company.

4) THAT Brian McDonough be re-elected as a director of the Company.

5) THAT Sarah O’Connor be re-elected as a director of the Company.

6) THAT Heino von Prondzynski be re-elected as a director of the Company.

7) THAT Zubeen Shroff be re-elected as a director of the Company.

8) THAT John Wilkerson be re-elected as a director of the Company.

Increase in shares available for issuance under the 2014 Equity Plan

9) THAT (a) the amended and restated 2014 Stock Incentive Plan (the "Amended and Restated 2014 Plan"), which reflects amendments to the 2014 Stock Incentive Plan (the "2014 Plan") to increase the number of ordinary shares authorized for issuance by 750,000 shares and to increase the maximum number of shares that may be issued upon the exercise of incentive stock options by 750,000 shares, be approved, and (b) the material terms of the Amended and Restated 2014 Plan be approved for the purpose of complying with the shareholder approval requirements of Section 162(m) of the Internal Revenue Code.

Auditors

10) THAT Ernst & Young LLP be re-appointed as the auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the Annual Meeting of the Company to be held in 2017, that the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for purposes of United States securities law reporting for the fiscal year ending March 31, 2017 be ratified and that the directors be authorized to determine the fees to be paid to the auditors.

Record Date

You are entitled to vote only if you were a shareholder of Quotient at the close of business on August 26, 2016. Holders of ordinary shares of Quotient are entitled to one vote for each share held of record on the record date.

 


Table of Contents

Attendance at the Annual General Meeting

We hope you will be able to attend the Annual Meeting in person and you are cordially invited to attend. If you expect to attend, please check the appropriate box on the proxy card when you return your proxy. If you hold your shares in street name, you may also follow the instructions on your proxy card to vote and confirm your attendance by telephone or Internet.

Where to Find More Information about the Resolutions and Proxies

Further information regarding the above business and resolutions is set out in the proxy statement (the “Proxy Statement”) and other proxy materials, which are available at http://investors.quotientbd.com.

Rules adopted by the U.S. Securities and Exchange Commission (the “SEC”) allow companies to send security holders a notice of Internet availability of proxy materials, rather than mail them full sets of proxy materials. This year, we chose to mail full packages of materials to shareholders. However, in the future, we may take advantage of the notice and access distribution option. If, in the future, we choose to send such notices, they will contain instructions on how shareholders can access our notice of meeting and proxy statement via the Internet. They will also contain instructions on how shareholders can request to receive their materials electronically or in printed form on a one-time or ongoing basis.

You are entitled to appoint one or more proxies to attend the Annual Meeting and vote on your behalf and your proxy need not also be a shareholder of the Company. Instructions on how to appoint a proxy are set out in the Proxy Statement and on the proxy card.

 

 

BY ORDER OF THE BOARD OF DIRECTORS

 

D.J. Paul E. Cowan

Chairman

PLEASE NOTE THAT YOU WILL NEED PROOF THAT YOU OWN QUOTIENT SHARES AS OF THE RECORD DATE TO BE ADMITTED TO THE ANNUAL GENERAL MEETING

Record shareholder : If your shares are registered directly in your name, please bring proof of such ownership.

Shares held in street name by a broker or a bank : If your shares are held for your account in the name of a broker, bank or other nominee, please bring a current brokerage statement, letter from your stockbroker or other proof of ownership to the meeting together with a proxy issued in your name should you wish to vote in person at the Annual General Meeting.

This Notice of Annual General Meeting and the Proxy Statement are being distributed on or about September 16, 2016.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on October 28, 2016

Our 2016 Annual Report, notice of 2016 Annual General Meeting, the Proxy Statement and proxy card are available in the “Financials & Filings” section of our website at http://investors.quotientbd.com.

 

 

 


Table of Contents

 

TABLE OF CONTENTS

 

 

 

Page

GENERAL INFORMATION

 

 

2

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

 

 

5

BOARD PRACTICES

 

 

8

RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

 

10

ELECTION OF DIRECTORS (RESOLUTIONS 1 TO 8)

 

 

12

APPROVAL OF THE AMENDED AND RESTATED 2014 PLAN (RESOLUTION 9)

 

 

15

NON-EMPLOYEE DIRECTOR COMPENSATION

 

 

20

REMUNERATION COMMITTEE REPORT

 

 

23

EXECUTIVE COMPENSATION

 

 

24

REPORT OF THE AUDIT COMMITTEE

 

 

37

APPOINTMENT OF AND PAYMENT TO AUDITORS (RESOLUTION 10)

 

 

39

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

40

OTHER INFORMATION

 

 

42

 

 

 

 

i


Table of Contents

 

 

QUOTIENT LIMITED

PROXY STATEMENT

FOR

ANNUAL GENERAL MEETING OF SHAREHOLDERS

The Board of Directors of QUOTIENT LIMITED (“Quotient,” the “Company,” or “we”) is soliciting proxies for use at the 2016 Annual General Meeting of Shareholders to be held on October 28, 2016 (the “Annual Meeting”), and at any adjournment or postponement of the Annual Meeting. A notice of the Annual Meeting will be distributed to shareholders who hold ordinary shares of Quotient as of August 26, 2016, the record date for the Annual Meeting, on or about September 16, 2016. Quotient Limited is a limited liability no par value company incorporated under the laws of Jersey, Channel Islands.

GENERAL INFORMATION

What am I voting on?

You will be voting on the following proposals at our Annual Meeting:

 

to re-elect 8 directors;

 

to approve (a) the Amended and Restated 2014 Plan, which reflects amendments to the 2014 Plan to increase the number of ordinary shares authorized for issuance by 750,000 shares, and (b) the Amended and Restated 2014 Plan for the purpose of complying with the shareholder approval requirements of Section 162(m) of the Internal Revenue Code;

 

to re-appoint Ernst & Young LLP as the Company’s auditors, ratify their appointment as independent registered public accounting firm and to authorize the directors to determine the fees to be paid to the auditors; and

 

to transact such other business as may properly come before the Annual Meeting.

What are the recommendations of the Board?

All shares represented by a properly executed proxy will be voted unless the proxy is revoked and, if a choice is specified, your shares will be voted in accordance with that choice. If no choice is specified but the proxy card is signed, the proxy holders will vote your shares according to the recommendations of the Board, which are included in the discussion of each matter later in this proxy statement. The Board recommends that you vote:

FOR the re-election of each of the nominees as directors;

FOR the approval of (a) the Amended and Restated 2014 Plan, which reflects amendments to the 2014 Plan to increase the number of ordinary shares authorized for issuance by 750,000 shares, and (b) the material terms of the Amended and Restated 2014 Plan for the purpose of complying with the shareholder approval requirements of Section 162(m) of the Internal Revenue Code; and

FOR the re-appointment of Ernst & Young LLP as our auditors, ratification as our independent registered public accounting firm and the authorization of the directors to determine the fees to be paid to the auditors;

In addition, the proxy holders may vote in their discretion with respect to any other matter that properly comes before the Annual Meeting.

Who is entitled to vote?

For each proposal to be voted on, each shareholder is entitled to one vote for each ordinary share, no par value owned at the close of business on August 26, 2016, the record date for the Annual Meeting. As of the close of business on July 22, 2016, there were 26,263,950 ordinary shares outstanding.

 

2


Table of Contents

 

How do I vote by proxy in lieu of attending the annual meeting?

If you are a shareholder of record, you may vote by proxy by completing, dating and signing your proxy card and mailing it in the envelope provided. You must sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as officer of a corporation, guardian, executor, trustee or custodian), you must indicate your name and title or capacity.

If you vote via the Internet or by telephone, your vote must be received by 11:59 p.m., Eastern Standard Time, on October 27, 2016. If you vote by Internet or telephone, you should not return your proxy card.

You may also vote in person at the Annual Meeting or you may be represented by another person at the Annual Meeting by executing a proxy designating that person.

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the beneficial owner of shares held in “street name.” The street name holder will provide you with instructions that you must follow in order to have your shares voted.

If you hold your shares in street name and you wish to vote in person at the Annual Meeting, you must obtain a proxy issued in your name from the street name holder.

May I change my mind after submitting a proxy?

If you are a shareholder of record, you may revoke your proxy before it is exercised by:

 

Written notice to Roland Boyd, care of Quotient Limited, Pentlands Science Park, Bush Loan, Penicuik, Midlothian, EH26 OPZ, United Kingdom; or

 

Voting in person at the Annual Meeting.

If you are a beneficial owner of shares held in street name, you may submit new voting instructions by contacting your brokerage firm, bank or other holder of record.

What are broker non-votes?

A broker non-vote occurs when the broker that holds your shares in street name is not entitled to vote on a matter without instruction from you and you do not give any instruction. Unless instructed otherwise by you, brokers will not have discretionary authority to vote on any matter other than Resolution 10, which is considered to be “routine” for these purposes. It is important that you cast your vote for your shares to be represented on all matters.

What is the required vote?

To be approved, Resolutions 1 to 10 require a simple majority of the votes cast at the Annual Meeting in favor of each Resolution. If a director does not receive a majority of the vote for his or her re-election, then that director will not be re-elected to the Board and the Board may fill the vacancy with a different person, or the Board may reduce the number of directors to eliminate the vacancy. Votes that are withheld with respect to the election of directors and the approval of the Amended and Restated 2014 Plan and abstentions on the other matters are not counted as votes cast.

What will constitute the quorum for the Annual Meeting?

A quorum will consist of one or more shareholders present in person or by proxy who hold or represent shares of not less than a majority of the total voting rights of all of the shareholders entitled to vote at the Annual Meeting.

How can I attend the Annual Meeting?

If you plan to attend the Annual Meeting, you will not be admitted without proof that you own Quotient shares.

 

Record Shareholders. If you are a record shareholder (i.e., a person who owns shares registered directly in his or her name with Continental Stock Transfer & Trust Company, Quotient’s transfer agent) and plan to attend the Annual Meeting, please indicate this when voting by marking the attendance box on the proxy card.

 

Owners of Shares Held in Street Name. Beneficial owners of Quotient ordinary shares held in street name by a broker, bank or other nominee will need proof of ownership to be admitted to the Annual Meeting. A recent brokerage statement or letters from the

 

3


Table of Contents

 

 

broker, bank or other nominee are examples of proof of ownership. If your shares are held in street name and you want to vote in person at the Annual Meeting, you must obtain a written proxy from the broker, bank or other nominee holding your shares.  

Can I access these proxy materials on the Internet?

This proxy statement and our 2016 Annual Report on Form 10-K are available at http://investors.quotientbd.com.

Can I get electronic access to the proxy materials?

You may choose to receive future proxy materials by email. Choosing to receive your future proxy materials by email will lower our costs of delivery and is beneficial for the environment. If you choose to receive our future proxy materials by email, you will receive an email next year with instructions containing a link to view those proxy materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it or for so long as the email address provided by you is valid.

Who pays for this proxy solicitation and how much did it cost?

We will pay the cost for soliciting proxies for the Annual Meeting. Quotient will distribute proxy materials and follow-up reminders by mail and electronic means. We have engaged Okapi Partners LLC (“Okapi”) at 437 Madison Avenue, New York, New York 10022 to assist with the solicitation of proxies. We will pay Okapi an aggregate fee, including reasonable out-of-pocket expenses, of up to $10,000, depending on the level of services actually provided. Certain Quotient employees, officers, and directors may also solicit proxies by mail, telephone, or personal visits. They will not receive any additional compensation for their services.

We will reimburse brokers, banks, and other nominees for their expenses in forwarding proxy materials to beneficial owners.

How can I obtain the Company’s corporate governance information?

These documents are posted on Quotient’s website at www.quotientbd.com. Click on the tab “Investors” and then the caption “Corporate Governance.”

 

Memorandum and Articles of Association

 

Corporate Governance Guidelines

 

Board Committee Charters

 

Code of Ethical Business Conduct

Where can I find voting results for this Annual Meeting?

The voting results will be published in a current report on Form 8-K, which will be filed with the SEC no later than four business days after the Annual Meeting. The voting results will also be published on our website at www.quotientbd.com at the same time.

 

 

 

4


Table of Contents

 

 

MEETINGS OF THE B OARD OF DIRECTORS AND COMMITTEES OF THE BOARD

During the fiscal year ended March 31, 2016, the Board held seven in person or telephonic meetings. The audit committee met five times during our fiscal year ended March 31, 2016. Attendance at board and audit committee meetings exceeded 90% and no director attended less than 80% of the aggregate number of such board and committee meetings for meetings that they were eligible to attend. The remuneration committee met three times during the fiscal year ended March 31, 2016. The nominating and corporate governance committee met three times during the fiscal year ended March 31, 2016. The strategy and regulatory committee met once during the fiscal year ended March 31, 2016.

Our Board currently has four committees, as described below. Each committee has a separate written charter that is available on Quotient’s website at www.quotientbd.com .

Our business and affairs are managed under the direction of our Board of Directors. Our Board of Directors is currently composed of eight directors. At each annual meeting of our shareholders, each of our directors must “retire,” and, if they wish to continue to serve as a director, they become subject to re-election to the Board of Directors by our shareholders.

We are subject to the listing standards of NASDAQ, which require that, subject to specified exceptions and permitted phase-in periods, each member of a listed company’s audit, remuneration and nominating and corporate governance committees be independent. In addition, the listing standards of NASDAQ require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act and that the remuneration committee members satisfy independence criteria set forth in Rule 5605(d) of NASDAQ rules. The listing standards of NASDAQ further provide that a director will only qualify as an “independent director” if, in the opinion of that company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In addition, the listing standards of NASDAQ require that a majority of the members of a listed company’s board of directors be independent. Our Board of Directors has determined that Messrs. Bologna, Hallsworth, McDonough, von Prondzynski, Shroff and Wilkerson and Ms. O’Connor are independent directors under the applicable NASDAQ listing rules. In making these determinations, our Board of Directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that our Board of Directors deemed relevant in determining their independence, including beneficial ownership of our ordinary shares.

Messrs. Shroff and Wilkerson are currently not independent as defined in the applicable Exchange Act rules related to audit committee composition.

Audit Committee

Our audit committee is composed of Messrs. Bologna, Hallsworth, McDonough and Ms. O’Connor, with Mr. Hallsworth serving as chairman of the committee. Our Board of Directors has determined that all these committee members meet the independence requirements of Rule 10A-3 under the Exchange Act and the applicable listing standards of NASDAQ. Our Board of Directors has determined that Mr. Hallsworth is an “audit committee financial expert” within the meaning of SEC regulations and applicable listing standards of NASDAQ. The audit committee met five times during the year ended March 31, 2016. The audit committee’s responsibilities include:

 

appointing, approving the compensation of, and assessing the qualifications, performance and independence of our independent registered public accounting firm;

 

pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

 

reviewing the internal audit plan with the independent registered public accounting firm and members of management responsible for preparing our financial statements;

 

reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;

 

reviewing the adequacy of our internal control over financial reporting;

 

establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;

 

reviewing and discussing with management and our independent registered public accounting firm our audited financial statements to be included in our Annual Report on Form 10-K;

 

monitoring our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;

 

5


Table of Contents

 

 

preparing the audit committee report required by the rules of the SEC to be included in our annual proxy statement;  

 

reviewing and assessing the adequacy of the committee charter and submitting any changes to our Board of Directors for approval;

 

viewing all related party transactions for potential conflict of interest situations and approving all such transactions; and

 

reviewing and discussing with management and our independent registered public accounting firm our earnings releases and scripts.

Remuneration Committee

Our remuneration committee is composed of Messrs. Bologna, Hallsworth, McDonough, von Prondzynski and Shroff, with Mr. von Prondzynski serving as chairman of the committee. Our Board of Directors has determined that all these committee members are independent as defined under the applicable listing standards of NASDAQ. The remuneration committee met three times during the fiscal year ended March 31, 2016. The remuneration committee’s responsibilities include:

 

reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer;

 

evaluating the performance of our chief executive officer in light of such corporate goals and objectives and determining and approving the compensation of our chief executive officer;

 

reviewing and approving the compensation of our other executive officers;

 

appointing, compensating and overseeing the work of any compensation consultant, legal counsel or other advisor retained by the remuneration committee;

 

conducting the independence assessment outlined in the rules of NASDAQ with respect to any compensation consultant, legal counsel or other advisor retained by the remuneration committee;

 

producing a remuneration committee report on executive compensation as required by the rules of the SEC to be included in our annual proxy statement;

 

annually reviewing and reassessing the adequacy of the committee charter in its compliance with the listing requirements of NASDAQ;

 

reviewing and establishing our overall management compensation philosophy and policy;

 

overseeing and administering our compensation and equity-based plans;

 

reviewing and approving our policies and procedures for the grant of equity-based awards; and

 

reviewing and making recommendations to our Board of Directors with respect to director compensation.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is composed of Ms. O’Connor and Messrs. von Prondzynski and Shroff, with Ms. O’Connor serving as chair of the committee. Our Board of Directors has determined that these committee members are independent as defined under the applicable listing standards of NASDAQ. The committee met three times during the fiscal year ended March 31, 2016. The nominating and corporate governance committee’s responsibilities include:

 

establishing a policy under which our shareholders may recommend a candidate to the nominating and corporate governance committee for consideration for nomination as a director;

 

identifying individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors;

 

recommending to our Board of Directors the persons to be nominated for election as directors and to each of the committees of our Board of Directors;

 

developing and recommending to our Board of Directors a set of corporate governance principles;

 

articulating to each director what is expected, including reference to the corporate governance principles and directors’ duties and responsibilities;

 

reviewing and recommending to our Board of Directors practices and policies with respect to directors;

 

recommending to our Board of Directors qualified individuals to serve as members of the committees of our Board of Directors;

 

reviewing and assessing the adequacy of the committee charter and submitting any changes to our Board of Directors for approval;

 

6


Table of Contents

 

 

overseeing the systems and processes established by us to ensure compliance with our Code of Business Conduct and Ethics; and  

 

performing an evaluation of the performance of the committee.

Strategy and Regulatory Committee

Our strategy and regulatory committee is composed of Messrs. Cowan, McDonough, von Prondzynski and Shroff, with Mr. Shroff serving as chairman of the committee. The committee met once during the fiscal year ended March 31, 2016. The strategy and regulatory committee’s responsibilities include:

 

reviewing and recommending to our Board of Directors the Company’s long-term strategy, including strategic decisions with regard to the entry and exit of specific business lines, acquisitions and divestitures, joint ventures and investments, as well as the financing of related transactions;

 

overseeing the Company’s research and development activities, including the review of strategic goals, objectives, progress and direction of specific product programs, as well as the allocation of Company resources to specific product programs;

 

overseeing the Company’s technology position and strategic initiatives relative to emerging technologies, new therapeutic concepts and changes to health care market requirements;

 

overseeing the Company’s intellectual property portfolio, including the acquisition and development of new technologies; and

 

overseeing the Company’s regulatory affairs and health and safety compliance.

 

 

 

 

7


Table of Contents

 

BOARD PR ACTICES

To help our shareholders better understand our Board practices, we are including the following description of current practices. The nominating and corporate governance committee periodically reviews these practices.

Size of the Board

The Board currently consists of the eight directors named above. Our Memorandum and Articles of Association provides that our Board must consist of a minimum of two directors. The exact number of members on our Board will be determined from time to time by our full Board.

Leadership Structure

The Company’s Chief Executive Officer, Mr. Cowan, also serves as the Chairman of the Board. The Board believes that this leadership structure is optimal for the Company at this time because Mr. Cowan’s extensive experience and, together with his founding of and significant equity interest in the Company, provides Quotient with strong and consistent leadership.

The Board has not adopted a policy regarding the separation of the position of Chairman of the Board from the Chief Executive Officer. The Board recognizes that there may be circumstances in the future that would lead it to separate the positions, but believes that the absence of a policy requiring either the separation or combination of the positions provides the Board with the flexibility to determine the leadership structure that is in the best interests of the Company and its shareholders at the time. Mr. von Prondzynski serves as the Company’s lead independent director, and in such capacity acts as a liaison between the non-employee directors and the Company’s management, chairs the executive sessions of non-management directors and consults with the Chairman of the Board regarding agendas for Board meetings and other matters pertinent to the Company and the Board.

Director Independence

The Board believes that a substantial majority of its members should be independent, non-employee directors. Only one member of the Board, Mr. Cowan, who serves as our Chief Executive Officer, is an employee of Quotient. The non-employee directors of the Company are Messrs. Bologna, Hallsworth, McDonough, von Prondzynski, Shroff and Wilkerson and Ms. O’Connor. Messrs. Bologna, Hallsworth, McDonough, von Prondzynski, Shroff and Wilkerson and Ms. O'Connor are independent directors under the applicable NASDAQ listing rules. Messrs. Shroff and Wilkerson are currently not independent as defined in the applicable Exchange Act rules related to audit committee composition.

Audit Committee Financial Expert

The Board has determined that all of the members of the audit committee are financially literate and that Mr. Hallsworth is an “audit committee financial expert” within the meaning of SEC regulations and applicable listing standards of NASDAQ.

 

 

Evaluation of Board Performance

The nominating and corporate governance committee coordinates an annual evaluation process by which the directors evaluate the Board’s and its committees’ performance and procedures. This self-evaluation leads to a full Board discussion of the results. The committees of the Board each conduct an annual evaluation of their committee’s performance and procedures.

Nomination of Directors

The nominating and corporate governance committee recommends individuals for membership on the Board. In making its recommendations, the nominating and corporate governance committee considers an individual’s independence based on NASDAQ independence requirements and the criteria determined by the Board.

The nominating and corporate governance committee considers not only a candidate’s qualities, performance and professional responsibilities, but also the composition of the Board and the challenges and needs of the Board at that time. The Board as a whole is constituted to be strong in its diversity and collective knowledge of accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, industry knowledge, corporate governance and global markets.

The culture of the Board enables the Board to operate swiftly and effectively in making key decisions and when facing major challenges. Board meetings are conducted in an environment of trust, confidentiality, open dialogue, mutual respect and constructive commentary.

 

8


Table of Contents

 

The nominating and corporate governance committee views diversity in its broadest sense, which includes gend er, ethnicity, education, experience and leadership qualities. The nominating and corporate governance committee will use the same process and criteria for evaluating all nominees, regardless of who submits the nominee for consideration.

Shareholders are encouraged to submit the name of any candidate they believe to be qualified to serve on the Board, together with background information on the candidate, to the chair of the nominating and corporate governance committee. In accordance with procedures set forth in our Memorandum and Articles of Association, shareholders may propose, and the nominating and corporate governance committee will consider, nominees for election to the Board at the next annual general meeting by giving timely written notice to the Company Secretary, which must be received at our registered office no later than the close of business on the date that is 90 days before the first anniversary of the last annual general meeting of the Company, or July 30, 2017, and no earlier than the date that is 120 days before the first anniversary of the last annual general meeting of the Company, or June 30, 2017. The notice periods may change in accordance with the procedures set out in our Memorandum and Articles of Association. Any such notice must include the name of the nominee, a biographical sketch and resume, contact information and such other background materials on such nominee as the nominating and corporate governance committee may request.

Executive Sessions

Non-employee directors meet together as a group during each Board meeting, without the Chief Executive Officer or any other employees in attendance. Mr. von Prondzynski, as our Board’s lead independent director, presides over each executive session of the Board. There is also an executive session during each committee meeting at which committee members meet without the Chief Executive Officer or any other employees in attendance. In addition, as required under NASDAQ listing standards, independent directors must meet together as a group at least twice a year.

 

Board’s Role in Risk Oversight

The Board takes an active role in risk oversight related to the Company both as a full Board and through its committees. While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board is responsible for monitoring management’s actions and decisions. The Board, as apprised by the audit committee, determines that appropriate risk management and mitigation procedures are in place and that senior management takes the appropriate steps to manage all major risks.

Attendance at Shareholder Meetings

The Board does not have a formal policy regarding director attendance at shareholder meetings. However, all directors are expected to attend.

Governance Principles

The Board maintains a formal statement of Corporate Governance Guidelines that sets forth the corporate governance practices for Quotient. The Corporate Governance Guidelines are available on our website at www.quotientbd.com. Click on the tab “Investors” and then the caption “Corporate Governance.”

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer and principal financial officer. A current copy of the code is posted on the investor section of our website, www.quotientbd.com. We intend to disclose any amendment to the code, or any waivers of its requirements, on our website.

Communications with the Board of Directors

The Board believes that it is in the best interests of the Company and its shareholders to provide to every shareholder the ability to communicate with the Board as a whole, or with an individual director, through an established process for shareholder communication. The shareholder communication policy is posted on Quotient’s website at www.quotientbd.com. Click on the tab “Investors” and then the caption “Corporate Governance.”

 

 

 

9


Table of Contents

 

 

RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions, since April 1, 2015, in which (a) we were a participant, (b) the amount involved exceeded $120,000 and (c) one or more of our executive officers, directors or 5% shareholders, or their immediate family members, each of whom we refer to as a “related person,” had a direct or indirect material interest. We refer to these as “related person transactions.”

Public Share Offering

On February 10, 2016, as part of a public offering, we issued the following amounts of ordinary shares at a price of $9.00 per share:

 

·

222,222 ordinary shares to Galen Partners LLP and affiliated entities, or Galen, of which Zubeen Shroff and John Wilkerson are managing director and senior advisor, respectively, for a total consideration of $1,999,998;

 

·

200,000 ordinary shares to Visium Asset Management LP and affiliated entities for a total consideration of $1,800,000;

 

·

1,000,000 ordinary shares to Perceptive Capital LLC and affiliated entities for a total consideration of $9,000,000; and

 

·

333,333 ordinary shares to SIO Capital Management, LLC for a total consideration of $2,999,997.

Exercise of Warrants Originally Issued in Connection With our Initial Public Offering

On the following dates, we issued ordinary shares at a price of $8.80 per share pursuant to the exercise of warrants which the following individuals or entities owned as a result of their participation in our initial public offering in April 2014:  

 

·

on September 18, 2015, we issued 250,000 ordinary shares to Galen, for a total consideration of $2,200,000;

 

·

on September 29, 2015, we issued 4,000 ordinary shares to Stephen Unger for a total consideration of $35,200; and

 

·

on October 2, 2015, we issued 5,000 ordinary shares to Frederick Hallsworth for a total consideration of $44,000.

Employment Agreements

We are party to service or employment agreements with our executive officers. For additional information, see “Executive Compensation—Agreements with our Executive Officers.”

Equity Awards

We have issued certain shares and granted share options and/or multi-year, performance-based restricted share units, or MRSUs, to our executive officers and our directors. For additional information, see “Executive Compensation—Outstanding Equity Awards at Fiscal Year End” and “—Director Compensation.”

Indemnification

We have entered into indemnification agreements with each of our officers and directors to indemnify them against certain liabilities and expenses arising from their being an officer or director (but specifically excluding any circumstance where they are determined to have violated their fiduciary duty to us). Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Non-Employee Director Appointment Letters

We have entered into letters of appointment with each of our non-employee directors. These letters set forth the main terms on which each of our non-employee directors serve on our Board of Directors. Continued appointment under the letter is contingent on continued satisfactory performance, re-nomination by the nominating and corporate governance committee and approval of the Board of Directors, re-election by the shareholders and any relevant statutory provisions and provisions of our articles of association relating to removal of a director.

Procedures for Approval of Related Party Transactions

Currently, under our Related Party Transaction Policy, our audit committee is charged with the primary responsibility for determining whether, based on the facts and circumstances, a related person has a direct or indirect material interest in a proposed or existing transaction. To assist our audit committee in making this determination, the policy sets forth certain categories of transactions that are deemed not to involve a direct or indirect material interest on behalf of the related person. If, after applying these categorical standards and weighing all of the facts and circumstances, our audit committee determines that the related person would have a direct or indirect material interest in the transaction, the

 

10


Table of Contents

 

au dit c ommittee must review and either approve or reject the transaction in accordance with the terms of the policy. If any executive officer becomes aware of a related party transaction that the audit committee has not approved or ratified, he or she shall promptly inform the audit committee or such other person designated by the audit committee.

Composition of our Board of Directors and Director Independence

For information about the composition of our Board of Directors and director independence, please see “Directors, Executive Officers and Corporate Governance—Composition of our Board of Directors and Director Independence.”

Remuneration Committee Interlocks and Insider Participation

None of the members of our remuneration committee has at any time during the prior three years been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Board of Directors or remuneration committee of any entity that has one or more executive officers serving on our Board of Directors or remuneration committee.

Family Relationships

There is no family relationship between any director, executive officer or person nominated to become a director or executive director.

 

 

 

11


Table of Contents

 

ELECTION OF DIRECTORS (RESOLUTIONS 1 TO 8)

All of our current directors are nominated for one-year terms expiring in 2016. The Board has been informed that each nominee is willing to serve as a director. If a director does not receive a majority of the vote for his or her re-election then that director will not be re-elected to the Board and the Board may fill the vacancy with a different person, or the Board may reduce the number of directors to eliminate the vacancy.

The following sets forth information concerning the eight nominees for director. Each member of our Board, other than Ms. O’Connor and Mr. von Prondzynski, was a member of our Board of Directors immediately prior to our initial public offering. Information below as to each such member’s tenure on our Board also reflects their tenure on our Board prior to our initial public offering.

Paul Cowan

Paul Cowan, 55, is our Chief Executive Officer and Chairman of our Board of Directors. Mr. Cowan founded us through the acquisition of Alba Bioscience in 2007. He has a broad range of healthcare industry experience gained through over 16 years of employment within industry and investment banking. Previously, Mr. Cowan served as the Chief Financial Officer of Inveresk Research Group, a global contract research organization acquired by Charles River Laboratories in 2004. Prior to joining Inveresk in 2001, Mr. Cowan was a senior executive within the Investment Banking department of Bear Stearns & Co., where he led its European biotechnology practice. Prior to Bear Stearns, Mr. Cowan was a senior executive within the Investment Banking department of Morgan Grenfell (acquired by Deutsche Bank in 1990). Mr. Cowan received a Bachelor of Business in accounting from Queensland University of Technology.

The Board believes that Mr. Cowan is qualified to serve as a Director based upon his extensive leadership, executive, managerial, business and healthcare industry experience, along with his years of experience in healthcare investment banking.

Thomas Bologna

Thomas Bologna, 68, was appointed a Director in February 2012. From December 2011 through the sale of the company in October 2015, Mr. Bologna was Chairman and Chief Executive Officer of Response Genetics, Inc., a healthcare laboratory service company focused on molecular diagnostics. In connection with the sale of the company, Response Genetics, Inc. filed voluntary bankruptcy petitions under chapter 11 of the Bankruptcy Code.  From April 2006 to December 2011, Mr. Bologna served as President and Chief Executive Officer and a Director of Orchid Cellmark, Inc., a public corporation that provided DNA testing services. Mr. Bologna turned around and sold Orchid Cellmark to Laboratory Corporation of America (LabCorp). He was Chief Executive Officer, President, and a Director of Quorex Pharmaceuticals, Inc. (2004 to 2005), a pre-clinical stage anti-infective company which Mr. Bologna sold to Pfizer. From 1997 through the sale of the company to Inverness Medical Innovations (Alere) in 2003, Mr. Bologna was Chairman, President and Chief Executive Officer of Ostex International, Inc. a biotechnology company that developed, manufactured and marketed products for the management of osteoporosis. From 1996 to 1997, Mr. Bologna was a principal at Healthcare Venture Associates, a consulting firm. He was Chief Executive Officer, President, and a Director of Scriptgen Pharmaceuticals, Inc. (1994 to 1996), a biotechnology company that developed orally active drugs to regulate gene expression, and Chairman, President and Chief Executive Officer of Gen-Probe Incorporated (1987 to 1994), a company commercializing molecular diagnostics products which Mr. Bologna took public and subsequently sold. Mr. Bologna’s prior experience also includes senior-level positions with Becton Dickinson & Company including President of the Diagnostic Instrument Systems Division and Mr. Bologna was a Vice President at the Warner-Lambert Company (Pfizer). Mr. Bologna has also served on the boards of several public and private companies, including Aperio Technologies until its sale to Danaher in 2012. Mr. Bologna received an M.B.A. and a B.S. from New York University.

The Board believes that Mr. Bologna is qualified to serve as a Director based upon his extensive experience in the diagnostics industry, experience with operations, and his prior experience as the chief executive officer of multiple public and private companies.

Frederick Hallsworth

Frederick Hallsworth, 63, was appointed as a Director in February 2011. Mr. Hallsworth spent 25 years with Arthur Andersen, becoming a partner in 1989. At Arthur Andersen, Mr. Hallsworth held a number of senior management positions, including Head of Corporate Finance, Head of Audit and Managing Partner of Cambridge, UK office of Arthur Andersen and Managing Partner and Head of Audit of Arthur Andersen, Scotland. He joined Deloitte in 2002, where he served as Senior Client Service Partner and Head of TMC Practice in Scotland until 2005. He is also currently a director of memsstar (2006), CMA Scotland (2007), and Offshore Renewable Energy Catapult (2015). Former directorships include: Scottish Enterprise (2004-2010), Microvisk (2006-2012), Forth Dimension Displays (2007-2011), Elonics (2006-2010), Golden Charter (2009-2011), Infinite Data Storage plc (2005-2007), 3Way Networks (2005-2007), Innovata plc (2005-2007), Metaforic (2009-2014) and AT Communications plc (2008-2009). Mr. Hallsworth has been a Member of the Institute of Chartered Accountants of Scotland since 1978. Mr. Hallsworth received a Bachelor of Accountancy from Glasgow University 1974.

 

12


Table of Contents

 

The Board believes that Mr. Hallsworth is qualified to serve as a Director based upon his extensive accounting experience and experience providing strategic direction to multiple life science and technology companies.

Brian McDonough

Brian McDonough, 69, was appointed as a Director in May 2012. Mr. McDonough is presently a Principal of Dx Consulting, a consultancy specializing in transfusion diagnostics. From 2003 through 2009, Mr. McDonough was Vice President, Worldwide Marketing, Donor Screening at Ortho-Clinical Diagnostics. From 2000 through 2003, he was President of the North American Blood Products Group of the Medical Division of Pall Corporation, a company specializing in medical filtration products. Prior to holding these senior executive positions, Mr. McDonough had an extensive career at the American Red Cross spanning over 30 years. From 1968 through 1982 Mr. McDonough worked in American Red Cross BioMedical Services as Executive Head of the St. Louis Regional Blood Services Unit. In 1982, he became the Executive Director of the Irwin Memorial Blood Bank of San Francisco, where he also served on several public health committees addressing the spread of AIDS. In 1987, Mr. McDonough returned to the American Red Cross as Regional Vice President of BioMedical Services and in 1994 served under Elizabeth Dole as Chief Operating Officer, Blood Services of the American Red Cross BioMedical Services, with overall responsibility for national blood and plasma programs. Brian received a B.A. in liberal arts from Wichita State University and an M.H.A. from Central Michigan University.

The Board believes that Mr. McDonough is qualified to serve as a Director based upon his extensive experience within the transfusion diagnostics industry and operational experience at the American Red Cross.

Sarah O’Connor

Sarah O’Connor, 56, was appointed as a Director in July 2014. Ms. O’Connor served as the Senior Vice President, Strategic Development and Chief Legal Officer of Arch Chemicals, Inc., a global biocides company, where she was responsible for the company’s legal and strategic development functions, as well as enterprise risk management and government relations, from September, 2009 to October, 2011. Ms. O’Connor was Vice President and General Counsel of Arch Chemicals Inc. from February 1999 to September 2009. During this period Ms. O’Connor also had responsibility for the Regulatory Affairs function at Arch Chemicals. Prior to joining Arch Chemicals, Ms. O’Connor was an attorney in the legal departments of American Home Products Corporation and the Reader’s Digest Association. Since September 2012, Ms. O’Connor has been an adjunct professor at Mercy College and is a member of the school’s Development Committee. Ms. O’Connor received a B.S. in Business Administration from Mercy College, a J.D. from Fordham University School of Law and an MBA from Columbia University.

The Board believes that Ms. O’Connor is qualified to serve as a Director based on her background, experience and judgment as a senior executive of a publicly traded company, and her legal, regulatory and governance expertise.

Heino von Prondzynski

Heino von Prondzynski, 66, is our Lead Independent Director having been appointed as a Director in September 2014. Mr. von Prondzynski served as chief executive officer of Roche Diagnostics and as a member of the executive committee of F. Hoffman-La Roche Ltd., a Swiss based healthcare company that develops diagnostics and therapeutic products, from early 2000 to 2006, retiring from Roche at the end of 2006. From 1996 to 2000, Mr. von Prondzynski held several executive positions, including president of the vaccine business, at Chiron Corporation, a multinational biotechnology firm that developed biopharmaceuticals, vaccines and blood-testing products. Earlier in his career, Mr. von Prondzynski held sales and marketing and general management positions at Bayer AG, a German based maker of healthcare products, specialty materials and agricultural products. Mr. von Prondzynski also serves on the boards of Koninklijke Philips Electronics NV and Epigenomics AG. Within the past five years, Mr. von Prondzynski also has served as a director of Hospira, Inc. (from 2009 to 2015), Nobel Biocare Holding AG, Switzerland (from 2010 to 2011) and Qiagen NV (from 2007 to 2013). Mr. von Prondzynski studied maths, geography and history at Westfälische Wilhelms University, Münster, Germany.

The Board believes that Mr. von Prondzynski’s substantial history of leadership positions at major international healthcare companies allows him to provide a global business perspective to his service on the Board and makes him well qualified to serve on the Board.

Zubeen Shroff

Zubeen Shroff, 51, was appointed as a Director in July 2013. Mr. Shroff is a Managing Director of Galen Partners, a leading healthcare growth equity firm founded in 1990. Mr. Shroff has over 25 years of experience working with entrepreneurs and their Boards of Directors in building high-growth healthcare companies. Mr. Shroff joined Galen in 1996 from The Wilkerson Group, where he was a Principal with a client base including pharmaceutical, diagnostics, device and biotech companies, plus a select number of venture capital firms. Prior to joining The Wilkerson Group, Mr. Shroff worked at Schering-Plough France, a manufacturer of healthcare products and medicines, where he helped

 

13


Table of Contents

 

launch their biotech product, alpha-Interferon, in several new indications. Currently, Mr. Shroff is Treasurer and on the Executive Committee of the Board for The Westchester Medical Center Public Benefit Corporation, as well as Chairman of its Foundation. Since 2004, he has served on the Advisory Committees to Boston University Medical School and The Center for Global Health & Development. Mr. Shroff is also on the Advisory Board of the Jos lin Diabetes Center. In addition to the above positions, over the past 18 years, Mr. Shroff has served on the Board of Directors of numerous privately held Galen portfolio companies. Mr. Shroff served on the public Board of Directors of Pet DRx Corporation until July 2010 and Encore Medical until June 2006. Mr. Shroff received a BA in Biological Sciences from Boston University and an MBA from the Wharton School, University of Pennsylvania.

The Board believes that Mr. Shroff is qualified to serve as a Director based upon his extensive experience in providing strategic guidance to companies in the healthcare industry, particularly in the areas of medical devices, diagnostics, and capital equipment.

Dr. John Wilkerson

Dr. John Wilkerson, 73, was appointed as a Director in February 2012. Dr. Wilkerson co-founded Galen Partners in 1990 and currently serves as a Senior Advisor to Galen. Dr. Wilkerson has focused on healthcare throughout his career, beginning as a Group Product Director for Ortho-Clinical Diagnostics Inc. He was a Vice President covering medical device companies at Smith Barney before moving in 1980 to Channing, Weinberg & Co., Inc., a management consulting firm for pharmaceutical, diagnostic, medical device and biotechnology companies, which he acquired and renamed The Wilkerson Group.  The Wilkerson Group was subsequently acquired by IBM in 1996.

Dr. Wilkerson currently serves as a director of Sonacare Medical, Cambrooke Foods and TPS and was previously the Chairman of Atlantic Health Systems, a New Jersey hospital system. He is a trustee and former President of the Museum of American Folk Art and founder of the E.L. Rose Conservancy. Dr. Wilkerson received a Ph.D. from Cornell University.

The Board believes that Mr. Wilkerson is qualified to serve as a Director based upon his extensive experience providing strategic direction to companies in the life sciences industry, as well as his operational experience in the transfusion diagnostics industry.

The Board of Directors recommends a vote “FOR” each of the eight director nominees named above. If you complete the enclosed proxy card, unless you direct to the contrary on that card, the shares represented by that proxy will be voted FOR the election of all eight nominees .

 

 

 

14


Table of Contents

 

 

APPROVAL OF (A) THE AMENDED AND RESTATED 2014 PLAN, WHICH REFLECTS AMENDMENTS TO THE 2014 PLAN TO INCREASE THE NUMBER OF ORDINARY SHARES AUTHORIZED FOR ISSUANCE BY 750,000 SHARES and to increase the maximum number of shares that may be issued upon the exercise of incentive stock options by 750,000 shares , AND (B) THE MATERIAL TERMS OF THE AMENDED AND RESTATED 2014 PLAN FOR THE PURPOSE OF COMPLYING WITH THE SHAREHOLDER APPROVAL REQUIREMENTS OF SECTION 162(M) OF THE INTERNAL REVENUE CODE (RESOLUTION 9)

Background and Purpose of the Proposal

The 2014 Plan was previously adopted by the board of directors and approved by our shareholders to be effective April 24, 2014. At the Annual Meeting, our shareholders will be asked to approve the Amended and Restated 2014 Plan, which reflects amendments to the 2014 Stock Incentive Plan (the "2014 Plan") to increase the number of ordinary shares authorized for issuance by 750,000 shares and to increase the maximum number of shares that may be issued upon the exercise of incentive stock options by 750,000 shares, to be effective October 31, 2016, if approved (the “Effective Date”). The 750,000 ordinary shares will be utilized for awards pursuant to the Amended and Restated 2014 Plan. At the Annual Meeting, our shareholders will also be asked to approve the material terms of the Amended and Restated 2014 Plan for purposes of complying with the shareholder approval requirements of Section 162(m) of the Internal Revenue Code, or Section 162(m). We believe approval of this proposal is advisable in order to (1) ensure we have an adequate number of ordinary shares available in connection with our compensation programs and (2) allow us to grant awards that may qualify as “performance-based compensation” under Section 162(m). If our shareholders approve this proposal, we intend to file, pursuant to the Securities Act, a registration statement on Form S-8 to register the 750,000 additional ordinary shares available for issuance pursuant to the Amended and Restated 2014 Plan.

The use of share-based awards under the 2014 Plan continues to be a key element of our compensation program. The 2014 Plan currently authorizes a total of 1,870,205 ordinary shares for issuance in connection with awards under the 2014 Plan, but as of July 22, 2016, only 91,600 ordinary shares remained available. The closing market price of our ordinary shares as of July 22, 2016 was $7.34 per share, as reported on NASDAQ. The remuneration committee is concerned that there are not sufficient ordinary shares available for issuance under the 2014 Plan to meet our needs for future grants during the coming years, and an increase in available ordinary shares is appropriate to continue to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business depends.  The increase of 750,000 ordinary shares was determined subjectively by the remuneration committee based on the number of ordinary shares currently available. The remuneration committee feels it important to have adequate ordinary shares available to appropriately compensate current and future employees.

In addition to the approval of the Amended and Restated 2014 Plan, our shareholders are being asked to approve the material terms of the Amended and Restated 2014 Plan, so that awards granted under the Amended and Restated 2014 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) may be fully deductible by us. Although we have not adopted a policy that all compensation paid to our executive officers must be tax-deductible and we expect we may continue to pay compensation to our executives that is not fully deductible, the Amended and Restated 2014 Plan is intended, in part, to qualify for exemption from the deduction limitations of Section 162(m) by providing “performance-based compensation” to “covered employees” within the meaning of Section 162(m). Under Section 162(m), the federal income tax deductibility of compensation paid to our Chief Executive Officer and two other most highly compensated officers determined pursuant to the executive compensation disclosure rules under the Securities Exchange Act of 1934, or Covered Employees, may be limited to the extent such compensation exceeds $1,000,000 in any taxable year. However, we may deduct compensation paid to our Covered Employees in excess of that amount if it qualifies as “performance-based compensation” as defined in Section 162(m).

In addition to certain other requirements, in order to qualify for this exemption, the regulations under Section 162(m) require that the material terms of the Amended and Restated 2014 Plan be periodically disclosed to and approved by our shareholders. Under the Section 162(m) regulations, the material plan terms of the Amended Restated Plan are (i) the maximum amount of compensation that may be paid to an individual under the Amended and Restated 2014 Plan during a specified period, (ii) the employees eligible to receive compensation under the Amended and Restated 2014 Plan, and (iii) the business criteria on which the performance goals are based. We intend that awards under the Amended and Restated 2014 Plan may be designed to qualify for exemption from the deduction limitations of Section 162(m), in the event we choose to structure compensation in a manner that will satisfy the “performance-based compensation” exemption to Section 162(m). Accordingly, we are asking shareholders to approve the material terms of the Amended and Restated 2014 Plan for Section 162(m) purposes so that awards under the Amended and Restated 2014 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) may be deductible by us.

Summary of the Amended and Restated 2014 Plan

The following summary of the Amended and Restated 2014 Plan and the material changes to the 2014 Plan are qualified in their entirety by the actual text of the Amended and Restated 2014 Plan, which is attached to this proxy statement as Exhibit A.

 

15


Table of Contents

 

The Amended and Restated 2014 Plan will provide us flexibility with respect to our ability to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business depends, and to provide additional incentives to such persons to devote their effort and skill to the advancement and betterment of our company, b y providing them an opportunity to participate in the ownership of our company and thereby have an interest in its success and increased value.

We are amending the 2014 Plan to increase the number of ordinary shares reserved for issuance to an aggregate of 2,620,205 ordinary shares under the Amended and Restated 2014 Plan, which reflects an increase in the base number of ordinary shares authorized for issuance from 1,500,000 under the 2014 Plan to 2,250,000 under the Amended and Restated 2014 Plan, and includes the 370,205 additional ordinary shares we are authorized to issue under the 2014 Plan as a result of automatic annual increases in the numbers of shares authorized for issuance pursuant to the terms of the 2014 Plan, as described further below. In addition, we are amending the 2014 Plan to increase the number of ordinary shares that may be issued upon the exercise of incentive stock options to an aggregate of 3,750,000 shares, which reflects a 750,000 increase from 3,000,000 under the 2014 Plan. The aggregate number of ordinary shares will be subject to adjustment in the event of a recapitalization, share split, share consolidation, reclassification, share dividend or other change in our capital structure. To the extent that an award terminates, or expires for any reason, then any shares subject to the award may be used again for new grants. However, shares which are (i) not issued or delivered as a result of the net settlement of outstanding share appreciation rights, or SARs, or options, (ii) used to pay the exercise price related to outstanding options, (iii) used to pay withholding taxes related to outstanding options or SARs or (iv) repurchased on the open market with the proceeds from an option exercise, will not be available for re-grant under the 2014 Plan.

Under the 2014 Plan, the number of ordinary shares reserved for issuance automatically increases on April 1 of each year, from April 1, 2015 through April 1, 2023, by the lesser of 1% of the total number of our ordinary shares outstanding on March 31 of the preceding year, 200,000 shares or such smaller amount as determined by our Board of Directors. As of April 1, 2016, we were authorized to issue 370,205 additional ordinary shares under the 2014 Plan as a result of such automatic annual increases.  Under the Amended and Restated 2014 Plan, the number of ordinary shares reserved for issuance will continue to automatically increase on April 1 of each year, from April 1, 2017 through April 1, 2023, by the lesser of 1% of the total number of our ordinary shares outstanding on March 31 of the preceding year, 200,000 shares or such smaller amount as determined by our Board of Directors.

The Amended and Restated 2014 Plan will permit us to make grants of (i) incentive stock options pursuant to Section 422 of the Code and (ii) non-qualified stock options. Incentive share options may only be issued to our employees. Non-qualified share options may be issued to our employees, directors, consultants and other service providers. The option exercise price of each option granted pursuant to the Amended and Restated 2014 Plan will be determined by our remuneration committee and may not be less than 100% of the fair market value of the ordinary shares on the date of grant, subject to certain exceptions. The term of each option will be fixed by our remuneration committee and may not exceed ten years from the date of grant. All option grants under the Amended and Restated 2014 Plan will be made pursuant to a written option agreement.

The Amended and Restated 2014 Plan will permit us to sell or make grants of restricted shares. Restricted shares may be sold or granted to our employees, directors, consultants and other service providers (or of any current or future parent or subsidiary of our company). Restricted shares issued under the Amended and Restated 2014 Plan will be sold or granted pursuant to a written restricted shares purchase agreement.

The 2014 Plan will also permit us to issue SARs. SARs may be issued to our employees, directors, consultants and other service providers. The base price per share of ordinary shares covered by each SAR may not be less than 100% of the fair market value of the ordinary shares on the date of grant, subject to certain exceptions. SAR grants under the Amended and Restated 2014 Plan will be made pursuant to a written SAR agreement.

Further, the Amended and Restated 2014 Plan will permit us to issue restricted share units, or RSUs. RSUs may be issued to our employees, directors, consultants and other service providers. RSU grants under the Amended and Restated 2014 Plan will be made pursuant to a written RSU agreement.

As of March 31, 2016, 293 employees, eight director and two consultants were eligible to participate in the 2014 Plan. Such employees, directors and consultants will continue to be eligible to participate in the Amended and Restated 2014 Plan.  

The Amended and Restated 2014 Plan will be administered by our remuneration committee, which has the authority to control and manage the operation and administration of the Amended and Restated 2014 Plan. In particular, the remuneration committee has the authority to determine the persons to whom, and the time or times at which, incentive share options, nonqualified share options, restricted shares, SARs or RSUs shall be granted, the number of shares to be represented by each option agreement or covered by each restricted share purchase agreement, SAR agreement or RSU agreement and the exercise price of such options and the base price of such SARs. In addition, our remuneration committee has the authority to accelerate the exercisability or vesting of any award, and to determine the specific terms,

 

16


Table of Contents

 

conditions and restrictions of each award. The remuneration committee is composed exclusively of individuals intended to be, to t he extent provided by Rule 16b-3 of the Exchange Act, independent directors and will, at such times as we are subject to Section 162(m) of the Internal Revenue Code, qualify as outside directors for purposes of Section 162(m) of the Internal Revenue Code.

Unless provided otherwise within each written option agreement, restricted share purchase agreement, SAR agreement or RSU agreement as the case may be, the vesting of all options, restricted share, SARs and RSUs granted under the Amended and Restated 2014 Plan shall accelerate automatically in the event of a “change in control” (as defined in the Amended and Restated 2014 Plan) effective as of immediately prior to the consummation of the change in control unless such equity awards are to be assumed by the acquiring or successor entity (or parent thereof) or equity awards of comparable value are to be issued in exchange therefor or the equity awards granted under the Amended and Restated 2014 Plan are to be replaced by the acquiring entity with other incentives under a new incentive program containing such terms and provisions as our remuneration committee in its discretion may consider equitable.

Our Board of Directors may from time to time alter, amend, suspend or terminate the Amended and Restated 2014 Plan in such respects as our Board of Directors may deem advisable, provided that no such alteration, amendment, suspension or termination shall be made which shall substantially affect or impair the rights of any participant under any awards previously granted without such participant’s consent.

No awards may be granted under the Amended and Restated 2014 Plan after April 24, 2024.

Federal Income Tax Consequences

The following discussion is for general information only and is intended to summarize briefly the U.S. federal tax consequences to participants arising from participation in the Amended and Restated 2014 Plan. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of participants in the Amended and Restated 2014 Plan may vary depending on the particular situation and therefore may be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state or local tax consequences

Incentive Options; Nonqualified Options; SARs

Participants will not realize taxable income upon the grant of a nonqualified stock option or a SAR. Upon the exercise of a nonqualified stock option or a SAR, a participant will recognize ordinary compensation income (subject to withholding) in an amount equal to the excess of (1) the amount of cash and the fair market value of the ordinary shares received, over (2) the exercise price (if any) paid. A participant will generally have a tax basis in any ordinary shares received pursuant to the exercise of a SAR, or pursuant to the cash exercise of a nonqualified stock option, that equals the fair market value of such shares on the date of exercise. We will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described above.

Participants eligible to receive an incentive stock option will not recognize taxable income on the grant of an incentive stock option. Upon the exercise of an incentive stock option, a participant will not recognize taxable income, although the excess of the fair market value of the ordinary shares received upon exercise of the incentive stock option (“ISO Shares”) over the exercise price will increase the alternative minimum taxable income of the participant, which may cause such participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an incentive stock option would be allowed as a credit against the participant’s regular tax liability in a later year to the extent the participant’s regular tax liability is in excess of the alternative minimum tax for that year. Upon the disposition of ISO Shares that have been held for the requisite holding period (generally, at least two years from the date of grant and one year from the date of exercise of the incentive stock option), a participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the participant for the ISO Shares. However, if a participant disposes of ISO Shares that have not been held for the requisite holding period (a “Disqualifying Disposition”), the participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Shares at the time of exercise of the incentive stock option (or, if less, the amount realized in the case of an arm’s-length disposition to an unrelated party) exceeds the exercise price paid by the participant for such ISO Shares. A participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Shares on the exercise date. If the exercise price paid for the ISO Shares exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss.

Generally, we will not be entitled to any federal income tax deduction upon the grant or exercise of an incentive stock option, unless a participant makes a Disqualifying Disposition of the ISO Shares. If a participant makes a Disqualifying Disposition, we will then be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described in the preceding paragraph.

Restricted Shares; RSUs

 

17


Table of Contents

 

In general, a participant will recognize ordinary compensation income as a result of the receipt of s hares pursuant to a restricted share award, in an amount equal to the fair market value of the shares when such shares are received; provided, however, that if the shares are not transferable and are subject to a substantial risk of forfeiture when received, a participant will recognize ordinary compensation income in an amount equal to the fair market val ue of the shares (1) when the shares first becomes transferable or no longer subject to a substantial risk of forfeiture in cases where a participant does not make an valid election under Section 83(b) of the Code or (2) when the shares are received in cas es where a participant makes a valid election under Section 83(b) of the Code.  

A participant will generally not recognize taxable income at the time of grant of an award in the form of an RSU award denominated in shares, but rather, will generally recognize ordinary compensation income at the time he receives cash or shares.

A participant will be subject to withholding for federal, and generally for state and local, income taxes at the time he recognizes income under the rules described above for shares or cash received. Dividends that are received by a participant before the shares are taxed to the participant under the rules described in the preceding paragraph are taxed as additional compensation, not as dividend income. The tax basis in the ordinary shares received by a participant will equal the amount recognized by him as compensation income under the rules described in the preceding paragraph, and the participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse.

We will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described above.

Summary of Material Terms of the Amended and Restated 2014 Plan for Section 162(m) Purposes

The following is a summary of the material terms of the Amended and Restated 2014 Plan for Section 162(m) purposes, that the shareholders are being asked to approve:

Maximum amount of compensation . Under the Amended and Restated 2014 Plan, the following limits are applicable to the aggregate awards made to any one participant in any one calendar year:

In the case of stock options, the aggregate number of shares that may be acquired, or, in the case of stock appreciation rights, the aggregate number of shares covered, may not exceed 300,000 shares.

In the case of restricted stock or RSUs, the aggregate number of shares covered may not exceed 300,000 shares.

Business Criteria . Under the Amended and Restated 2014 Plan, awards may be granted subject to the following performance criteria: pre-tax income, after-tax income, net income (meaning net income as reflected in the our financial reports for the applicable period, on an aggregate, diluted and/or per share basis, or economic net income), operating income or profit, cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital, earnings per share (basic or diluted), return on equity, returns on sales or revenues, return on invested capital or assets (gross or net), cash, funds or earnings available for distribution, appreciation in the fair market value of the Company's ordinary shares, operating expenses, implementation or completion of critical projects or processes, return on investment, total return to shareholders (meaning the aggregate ordinary share price appreciation and dividends paid (assuming full reinvestment of dividends) during the applicable period), net earnings, stock appreciation (meaning an increase in the price or value of the ordinary shares after the date of grant of an award and during the applicable period), growth, related return ratios, increase in revenues, the Company’s published ranking against its peer group of real estate investment trusts based on total shareholder return, net earnings, changes (or the absence of changes) in the per share or aggregate market price of the our ordinary shares, number of securities sold, earnings before or after any one or more of the following items: interest, taxes, depreciation or amortization, as reflected in the our financial reports for the applicable period, total revenue growth (meaning the increase in total revenues after the date of grant of an award and during the applicable period, as reflected in the our financial reports for the applicable period), economic value created, operating margin or profit margin, ordinary share price or total shareholder return, cost targets, reductions and savings, productivity and efficiencies, strategic business criteria, consisting of one or more objectives based on meeting objectively determinable specified market penetration, geographic business expansion, investor satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons, objectively determinable personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions, and any combination of, or a specified increase or improvement in, any of the foregoing.

 

18


Table of Contents

 

The remaining material terms of the Amended and Restated 2014 Plan, including the employees and other in dividuals eligible to participate, are disclosed under the heading "— Summary of the Amended and Restated 2014 Plan . "

New Plan Benefits and Previously Awarded Options

The awards, if any, that will be made to eligible persons under the Amended and Restated 2014 Plan are subject to the discretion of the remuneration committee and, therefore, we cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to our executive officers, employees and directors under the Amended and Restated 2014 Plan. Therefore, a New Plan Benefits Table is not provided.

We made annual equity awards under the 2014 Plan in our fiscal year ended March 31, 2016 to the named executive officers, non-employee directors and to other eligible employees. Outstanding equity awards granted to named executive officers as of March 31, 2016 are summarized under "Executive Compensation—Outstanding Equity Awards at Fiscal Year End." Outstanding equity awards granted to non-employee directors are summarized under “Non-Employee Director Compensation."

The following table sets forth for our “named executive officers,” Roland Boyd, our Group Financial Controller and Treasurer, and certain other groups, the award grants that would have been received by or allocated to each of the following, for the fiscal year ended March 31, 2016 if the Amended and Restated 2014 Plan had been in effect.

 

2014 Plan Benefits

 

Name and Principal Position

 

Dollar

Value ($)

 

 

Restricted

Share

Grants

 

 

Shares

Underlying

Stock

Option

Grants

 

 

Shares

Underlying

RSU

Grants

 

 

Shares

Underlying

MRSU

Grants

 

Paul Cowan, Chief Executive Officer

 

$

468,538

 

 

 

 

 

 

35,000

 

 

 

 

 

 

42,000

 

Jeremy Stackawitz, President

 

$

273,798

 

 

 

 

 

 

22,500

 

 

 

 

 

 

22,500

 

Edward Farrell, President

 

$

395,514

 

 

 

 

 

 

30,000

 

 

 

 

 

 

35,000

 

Stephen Unger, Chief Financial Officer

 

$

273,798

 

 

 

 

 

 

22,500

 

 

 

 

 

 

22,500

 

Roland Boyd, Group Financial Controller & Treasurer

 

$

182,532

 

 

 

 

 

 

15,000

 

 

 

 

 

 

15,000

 

Executive Group

 

$

1,594,180

 

 

 

 

 

 

125,000

 

 

 

 

 

 

137,000

 

Non-Employee Director Group

 

$

465,010

 

 

 

 

 

 

39,727

 

 

 

20,195

 

 

 

 

Non-Executive Officer Employee Group

 

$

1,482,776

 

 

 

 

 

 

239,600

 

 

 

33,000

 

 

 

 

Consequences of Failing to Approve the Proposal

The Amended and Restated 2014 Plan will not be implemented unless it is approved by our shareholders. If the Amended and Restated 2014 Plan is not approved by our shareholders, the 2014 Plan will remain in effect in its present form. Failure of our shareholders to approve this proposal also will not affect the rights of existing award holders under the 2014 Plan or under any previously granted awards under the 2014 Plan.

The Board of Directors recommends a vote “FOR” the approval of (a) the Amended and Restated 2014 Plan, which reflects amendments to the 2014 Plan to increase the number of ordinary shares authorized for issuance by 750,000 shares and to increase the maximum number of shares that may be issued upon the exercise of incentive stock options by 750,000 shares, and (b) the material terms of the Amended and Restated 2014 Plan for the purpose of complying with the shareholder approval requirements of Section 162(m) of the Internal Revenue Code. If you complete the enclosed proxy card, unless you direct to the contrary on that card, the shares represented by that proxy will be voted FOR approval of the Amended and Restated 2014 Plan and the material terms of the 2014 Plan for the purpose of complying with the shareholder approval requirements of Section 162(m) of the Internal Revenue Code.

 

 

 

19


Table of Contents

 

NON-EMPLOYEE DIREC TOR COMPENSATION

We have five directors who are unaffiliated with our significant shareholders, Messrs. Bologna, Hallsworth, McDonough and von Prondzynski and Ms. O’Connor. We seek to maintain a director compensation program for our non-employee directors to enable us to attract and retain, on a long-term basis, high-caliber non-employee directors.

Prior to May 1, 2014, we did not pay cash compensation to the unaffiliated directors who were members of our board of directors during the applicable periods.  With effect from May 1, 2014, our Board of Directors adopted a director compensation program in connection with the completion of our initial public offering. From May 1, 2014 through April 1, 2015, under this director compensation program, we paid our non-employee directors that are unaffiliated with our significant shareholders (apart from Mr. von Prondzynski) an annual cash retainer for service on the Board of Directors of $35,000. With effect from September 4, 2014, the date of his appointment to the Board as our lead independent director, through April 1, 2015, Mr. von Prondzynski received an annual retainer of $120,000, of which 35% was paid in cash and 65% was paid in restricted share units ("RSUs").  

Pursuant to our director compensation program, commencing April 1, 2015 through January, 1 2016 each non-employee director that was unaffiliated with our significant shareholders was paid an annual cash retainer as follows:

 

Board Member Compensation

 

Annual Retainer ($)

Lead Independent Director

 

120,000(1)

Director, unaffiliated with our significant shareholders

 

35,000

 

Committee Chairperson Compensation

 

Annual Retainer ($)(2)

Audit Committee

 

12,000

Remuneration Committee

 

(3)

Nominating and Corporate Governance Committee

 

6,000

Strategy and Regulatory Committee

 

6,000

 

Committee Member Compensation

 

Annual Retainer ($)(2)

Audit Committee

 

6,000

Remuneration Committee

 

4,000

Nominating and Corporate Governance Committee

 

3,000

Strategy and Regulatory Committee

 

3,000

 

 

(1)

Our Lead Independent Director, Mr. von Prondzynski received an annual retainer of $120,000, of which 35% was paid in cash and 65% was paid in RSUs. The initial RSUs were granted on September 5, 2015, the first anniversary of his date of appointment (September 4, 2014), and vest on the second anniversary of their date of grant.

(2)

Payment of the annual retainer for chairing board committees or being a member of a board committee was introduced with effect from April 1, 2015.  

(3)

As chair of the remuneration committee, Mr von Prondzynski’s annual retainer was included within his annual retainer as Lead Independent Director of the Company.

With effect from January 1, 2016, the annual retainers were increased as follows:

 

Board Member Compensation

 

Annual Retainer ($)

Lead Independent Director

 

145,000(1)

Director, unaffiliated with our significant shareholders

 

40,000

 

Committee Chairperson Compensation

 

Annual Retainer ($)

Audit Committee

 

15,000

Remuneration Committee

 

12,000

Nominating and Corporate Governance Committee

 

11,000

Strategy and Regulatory Committee

 

11,000

 

 

20


Table of Contents

 

Committee Member Compensation

 

Annual Retainer ($)

Audit Committee

 

8,000

Remuneration Committee

 

6,000

Nominating and Corporate Governance Committee

 

6,000

Strategy and Regulatory Committee

 

6,000

 

 

(1)

35% will be paid in cash and 65% will be paid in RSUs. The RSUs associated with this retainer will be granted on the anniversary of the date of appointment of the Lead Independent Director (September 4, 2014) and will vest on the second anniversary of their date of grant.

Pursuant to our director compensation program, on the date of each annual general meeting, each non-employee director who is continuing to serve as a director following such meeting is also eligible to be granted: (i) options to purchase ordinary shares with an underlying fair market value of $50,000; and (ii) RSUs with an underlying fair market value of $30,000. The share options vest in equal installments on the first, second and third anniversary of grant and the RSUs will vest in equal installments on the first and second anniversary of grant.

Our non-employee directors are generally eligible to receive restricted shares, options and other share based equity awards under our 2014 Plan and will generally be eligible to receive restricted shares, options and other share based equity awards under our Amended and Restated 2014 Plan if approved by shareholders. For additional information, see “Approval of (a) the Amended and Restated 2014 Plan, Which Reflects Amendments to the 2014 Plan to Increase the Number of Ordinary Shares Authorized for Issuance by 750,000 Shares and to increase the maximum number of shares that may be issued upon the exercise of incentive stock options by 750,000 shares,  and (b) the Material Terms of the Amended and Restated 2014 Plan for the Purpose of Complying With the Shareholder Approval Requirements of Section 162(m) of the Internal Revenue Code (Resolution 9)— Summary of the Amended and Restated 2014 Plan” and “Executive Compensation — Equity and Incentive Plans — 2014 Stock Incentive Plan.” Newly appointed non-employee directors will be granted options to purchase shares with an aggregate underlying fair market value of $100,000 based on the trading price of our ordinary shares at the time of grant.

The foregoing compensation is in addition to reimbursement of all out-of-pocket expenses incurred by directors in attending meetings of the Board of Directors.

 

 

 

Fiscal Year Ended March 31,

 

Fees earned in cash

 

 

Stock awards

 

 

Option awards

 

 

Non-equity incentive plan compensation

 

 

Change in pension value and nonqualified deferred compensation earnings

 

 

All other

compensation

 

 

Total

 

Heino von Prondzynski

 

2016

 

$

42,000

 

 

$

186,000

 

 

$

20,472

 

 

$

 

 

$

 

 

$

 

 

$

248,472

 

 

 

2015

 

$

24,500

 

 

$

464,000

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

488,500

 

Thomas Bologna

 

2016

 

$

45,000

 

 

$

30,003

 

 

$

20,472

 

 

$

 

 

$

 

 

$

 

 

$

95,475

 

 

 

2015

 

$

32,083

 

 

$

 

 

$

31,887

 

 

$

 

 

$

 

 

$

 

 

$

63,970

 

Frederick Hallsworth

 

2016

 

$

51,000

 

 

$

 

 

$

35,705

 

 

$

 

 

$

 

 

$

 

 

$

86,705

 

 

 

2015

 

$

32,083

 

 

$

 

 

$

36,928

 

 

$

 

 

$

 

 

$

 

 

$

69,011

 

Brian McDonough

 

2016

 

$

48,000

 

 

$

30,003

 

 

$

20,472

 

 

$

 

 

$

 

 

$

 

 

$

98,475

 

 

 

2015

 

$

32,083

 

 

$

 

 

$

53,733

 

 

$

 

 

$

 

 

$

 

 

$

85,816

 

Sarah O'Connor

 

2016

 

$

47,000

 

 

$

30,003

 

 

$

20,472

 

 

$

 

 

$

 

 

$

 

 

$

97,475

 

 

 

2015

 

$

23,333

 

 

$

 

 

$

61,682

 

 

$

 

 

$

 

 

$

 

 

$

85,015

 

Zubeen Shroff

 

2016

 

$

13,000

 

 

$

 

 

$

35,705

 

 

$

 

 

$

 

 

$

 

 

$

48,705

 

 

 

2015

 

$

 

 

$

 

 

$

36,928

 

 

$

 

 

$

 

 

$

 

 

$

36,928

 

John Wilkerson

 

2016

 

$

 

 

$

 

 

$

35,705

 

 

$

 

 

$

 

 

$

 

 

$

35,705

 

 

 

2015

 

$

 

 

$

 

 

$

31,887

 

 

$

 

 

$

 

 

$

 

 

$

31,887

 

 

21


Table of Contents

 

The following table sets forth the share options held by th e direc tors as of March 31, 2016 , other than Mr. Cowan.  For information regarding Mr. Cowan’s executive compensation see “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End ” below. All options are options to purchase ordinary shares.

 

Name

 

Vesting start date

 

Number of securities underlying exercisable options

 

 

Number of securities underlying unexercisable options (1)

 

 

Option exercise price (2)

 

 

Option expiration date

Heino von Prondzynski

 

October 31, 2016

 

 

 

 

 

4,303

 

 

$

11.62

 

 

October 30, 2025

Thomas Bologna

 

April 29, 2015

 

 

1,167

 

 

 

2,333

 

 

$

8.00

 

 

April 28, 2024

 

 

October 31, 2015

 

 

1,675

 

 

 

3,350

 

 

$

9.95

 

 

October 30, 2024

 

 

October 31, 2016

 

 

 

 

 

4,303

 

 

$

11.62

 

 

October 30, 2025

Frederick Hallsworth

 

February 13, 2014

 

 

20,014

 

 

 

 

 

$

1.44

 

 

August 30, 2022

 

 

April 29, 2015

 

 

1,667

 

 

 

3,333

 

 

$

8.00

 

 

April 28, 2024

 

 

October 31, 2015

 

 

1,675

 

 

 

3,350

 

 

$

9.95

 

 

October 30, 2024

 

 

October 31, 2016

 

 

 

 

 

7,505

 

 

$

11.62

 

 

October 30, 2025

Brian McDonough

 

November 14, 2014

 

 

40,029

 

 

 

 

 

$

1.44

 

 

August 30, 2022

 

 

April 29, 2015

 

 

3,333

 

 

 

6,667

 

 

$

8.00

 

 

April 28, 2024

 

 

October 31, 2015

 

 

1,675

 

 

 

3,350

 

 

$

9.95

 

 

October 30, 2024

 

 

October 31, 2016

 

 

 

 

 

4,303

 

 

$

11.62

 

 

October 30, 2025

Sarah O'Connor

 

August 6, 2015

 

 

3,600

 

 

 

7,200

 

 

$

9.26

 

 

August 5, 2024

 

 

October 31, 2015

 

 

1,675

 

 

 

3,350

 

 

$

9.95

 

 

October 30, 2024

 

 

October 31, 2016

 

 

 

 

 

4,303

 

 

$

11.62

 

 

October 30, 2025

Zubeen Shroff

 

April 29, 2015

 

 

1,667

 

 

 

3,333

 

 

$

8.00

 

 

April 28, 2024

 

 

October 31, 2015

 

 

1,675

 

 

 

3,350

 

 

$

9.95

 

 

October 30, 2024

 

 

October 31, 2016

 

 

 

 

 

7,505

 

 

$

11.62

 

 

October 30, 2025

John Wilkerson

 

April 29, 2015

 

 

1,167

 

 

 

2,333

 

 

$

8.00

 

 

April 28, 2024

 

 

October 31, 2015

 

 

1,675

 

 

 

5,025

 

 

$

9.95

 

 

October 30, 2024

 

 

October 31, 2016

 

 

 

 

 

7,505

 

 

$

11.62

 

 

October 30, 2025

 

 

(1)

Vesting of all options is subject to continued service through to the applicable vesting date.

(2)

In certain cases, the option exercise prices are lower than the fair market value of the underlying securities. As part of the preparation for our initial public offering, the Board of Directors reviewed the fair value of our ordinary shares at the various dates in recent years when option and share awards were granted. This review resulted in certain instances in the Board of Directors concluding that the fair value of the underlying securities was higher than the option exercise prices determined at the time. The resulting increase in compensation expense has been reflected in our financial statements.

In connection with her appointment, Ms. O’Connor received, effective August 6, 2014, share options to purchase 10,800 of our ordinary shares at an exercise price of $9.26, which was the closing price of the our ordinary shares on August 5, 2014. The share options will vest and become exercisable in three equal annual installments beginning August 5, 2015.

In connection with his appointment, Mr. von Prondzynski received 50,000 RSUs. Each RSU represents the right to receive one ordinary share upon vesting. The RSUs vest annually over a four-year period with the initial vesting date being the first anniversary of the grant, and the final vesting dated being the fourth anniversary of the grant.

 

 

 

22


Table of Contents

 

REMUNERATION CO MMITTEE REPORT

The information contained in this remuneration committee report shall not be deemed to be “soliciting material” or “filed” with the SEC under the Securities Act or the Exchange Act. No portion of this remuneration committee report shall be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, through any general statement incorporating by reference in its entirety this Proxy Statement in which this report appears, except to the extent that Quotient Limited specifically incorporates this statement or a portion of it by reference.

The remuneration committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the remuneration committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for the fiscal year ended March 31, 2016.

 

 

Respectfully submitted,

 

Heino von Prondzynski (Chairperson)

Thomas Bologna

Frederick Hallsworth

Brian McDonough

Zubeen Shroff

 

 

 

23


Table of Contents

 

 

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

Our "named executive officers" for the fiscal year ended March 31, 2016 are Paul Cowan, Jeremy Stackawitz and Edward Farrell. Our "named executive officers" for the fiscal year ended March 31, 2015 are Paul Cowan, Edward Farrell and Stephen Unger.  This Compensation Discussion and Analysis explains our executive compensation program as it relates to our “named executive officers,” whose compensation information is presented in the following tables and discussion in accordance with the SEC rules, as well as Roland Boyd, our Group Financial Controller and Treasurer:

 

Name

 

Position

Paul Cowan

 

Chairman & Chief Executive Officer

Jeremy Stackawitz

 

President

Edward Farrell

 

President

Stephen Unger

 

Chief Financial Officer

Roland Boyd

 

Group Financial Controller & Treasurer

Our mission is to become the global leader for the development, manufacture and sale of transfusion diagnostics (blood grouping, serological disease screening and molecular disease screening), leveraging our proprietary MosaiQ™ technology platform. As MosaiQ TM is demonstrated to work for transfusion diagnostics, we will also seek to expand tits utility elsewhere in the broader diagnostics market.

The total addressable market for MosaiQ™ in transfusion diagnostics is $3.4 billion, with approximately one-third of the market represented by patient testing (blood grouping) and two-thirds of the market represented by donor testing (blood grouping, serological disease screening and molecular disease screening). We will commercialize MosaiQ™ in the donor testing market in North America, Europe and certain markets in the Asia/Pacific region. Our partner Ortho-Clinical Diagnostics (“OCD”) will commercialize MosaiQ™ in the patient testing market worldwide and the donor testing market in geographic territories we do not address. OCD’s commercial rights are limited solely to transfusion diagnostics, specifically blood grouping and serological disease screening.

To achieve our mission, we must recruit, retain and motivate exceptional leaders with the ability to deliver superior results for our shareholders. The skills and knowledge built by the management team around MosaiQ™, which represents a novel and highly disruptive technology platform for the broader diagnostics field, are unique and increasingly will become highly attractive to potential competitors.  Retention of existing senior management and recruitment of additional senior managers to augment the existing team is therefore critical. Our executive compensation program is instrumental in achieving this objective.

Our executive compensation program is designed to focus executive behavior on achievement of both our annual and long-term objectives and strategy as well as align the interests of management to those of our shareholders. Consequently, our executive compensation plan is comprised of four principal elements – salary, benefits, long-term equity interest and cash bonuses based on annual individual and corporate performance. Consistent with the Company’s strategic goals, we have designed and implemented a performance-based award that aligns equity compensation with outstanding returns to our shareholders over several years.

Notwithstanding a continued challenging new issuance market for emerging diagnostics companies over the last twelve months, since April 1, 2015, we have succeeded in raising $40 million in gross proceeds through a public offering of ordinary shares. Additionally, during this period, proceeds from the exercise of warrants issued at the time of our initial public offering totaled $35 million. In the period from April 1, 2015 to March 31, 2016, the price of our ordinary shares declined by 48%, notwithstanding continued strong progress with the development of MosaiQ™.  We believe this share price performance reflected volatile public equity markets in the first quarter of calendar 2016 and a perception in the market that the Company would need to raise additional equity capital.

Executive compensation is discussed in greater detail below. The remuneration committee will continue to evaluate our overall compensation structure and awards to ensure they are: (i) reflective of the performance of our executive officers and the Company; and (ii) consistent with our compensation objectives.

Roles of the Remuneration Committee

General

It is the responsibility of the remuneration committee to administer the Company’s compensation practices, to ensure they are competitive, financially prudent and include incentives designed to appropriately drive performance. To achieve this, the remuneration

 

24


Table of Contents

 

committee periodically reviews commercially available, industry specific compensation data for: (i) companies in the global diagnostics industry; (ii) companies addressing the donor testing market; and (iii) companies in the European biot echnology industry, as a general guide for establishing its compensation practices and structures. The remuneration committee, along with the Board, also reviews and approves corporate objectives used in our executive compensation program to confirm that a ppropriate goals have been established and tracks performance against them.  On an annual basis the remuneration committee reviews tally sheets reflecting each named executive officer’s compensation history with respect to each element of compensation.

The remuneration committee conducts an annual review of performance and compensation during the first quarter of each fiscal year for the purpose of determining the compensation of named executive officers other than the Chairman and Chief Executive Officer (CEO). As part of this review, the CEO submits recommendations to the remuneration committee relating to the compensation of those officers. Following a review of these recommendations, the remuneration committee approves the compensation of these named executive officers, with such modifications to the CEO's recommendations as the remuneration committee considers appropriate.

The remuneration committee's review of the CEO's compensation is subject to separate procedures. With input from members of the entire Board, other than the CEO, the Lead Independent Director and the remuneration committee (which is chaired by the Lead Independent Director) evaluate the CEO's performance and reviews the evaluation with him. Based on that evaluation and review, the remuneration committee then determines the CEO's compensation. The CEO is excused from meetings of the remuneration committee during voting or deliberations regarding his compensation.

Peer Group Companies

The remuneration committee seeks to identify an executive compensation peer group of approximately fifteen to twenty companies that may compete with the Company for executive talent (“Peer Group Companies”). The remuneration committee has focused on creating a peer group that:

 

·

Represented companies working in the global diagnostics industry, companies addressing the donor testing market or companies in the European biotechnology industry;

 

·

Contains a mix of pre-commercial development companies and some commercial stage companies;

 

·

Captures comparable companies in terms of employee numbers and market capitalization; or

 

·

Have achieved or expect to achieve a growth profile comparable to that expected for the Company.

Based on the above criteria, the following companies were included in the peer group:

 

Company

Product Focus

Ablynx

Biotechnology company focused on the development of proprietary therapeutic proteins

Accelerate Diagnostics

In vitro diagnostics for hospital acquired and drug resistant infections

BioCartis Group NV

Molecular diagnostics

Cephied

Molecular diagnostics

Cerus Corp

Pathogen inactivation for donor blood, plasma and platelets

Epigenomics AG

Molecular diagnostics – cancer

Exact Sciences Corp.

Molecular diagnostics – early detection of colorectal cancer

GenMark Diagnostics Inc.

Automated, multiplex  molecular diagnostic testing systems

Genomic Health Inc.

Molecular diagnostics – cancer care

Haemonetics Corporation

Provision of innovative blood management solutions

Meridian Bioscience Inc.

Develops, manufacture, commercialization of a range of innovative diagnostics test kits

Myriad Genetics Inc.

Molecular diagnostics

Nanostring

Life science tools for translational research and molecular diagnostic products

Oxford Biomedica

Biopharmaceutical company focused on the development and commercialization of gene-based medicines

Oxford Immunotec

Diagnostic tests for immune-regulated conditions (e.g. Tuberculosis)

Quidel Corp.

Provision of cellular based virology assays and molecular diagnostics testing systems

Sequenom Inc

Non-invasive pre-natal testing

T2 Biosystems

Clinical diagnostics for sepsis

ThromboGenics

Biopharmaceutical company focused on developing and commercializing innovative ophthalmic medicines

Trinity Biotech PLC

Development, manufacture and sale of diagnostics products

Veracyte Inc.

Molecular cytology

 

25


Table of Contents

 

TearLab, Roka Bioscience, Nanosphere, CareDx , Cancer Genetics, Response Genetics, diaDexus and BG Medicine were excluded from the analysis because their market capitalization was less than 50% of the market capitalization of the Company.

The remuneration committee retained Willis Towers Watson, or WTW, as its independent compensation consultant. WTW does not perform any other consulting work or other services for the Company, reports directly to the remuneration committee and takes direction from the Chairman of the remuneration committee. The remuneration committee has assessed the independence of WTW pursuant to the rules prescribed by the SEC and has concluded that no conflict of interest existed in the financial year ended March 31, 2016 or currently exists that would prevent Towers Watson from serving as an independent consultant to the remuneration committee.

Fiscal 2016 Business Performance

We believe that investor expectations on the performance of the Company is now almost 100% focused on advancing MosaiQ™ to commercial launch in calendar 2017.  At the outset of the fiscal year ended March 31, 2016 (“FY16”), our objectives were focused on:

 

·

delivering a commissioned and validated manufacturing system for MosaiQ™ consumables (“the MMS”);

 

·

delivering validation units of the MosaiQ™ instruments in advance of field trials;

 

·

completing assay development for the blood grouping and the initial serological disease screening (comprising CMV and Syphilis) applications;

 

·

advancing assay development for the full, mandated serological disease screening panel;

 

·

preparing for and commencing “in field” testing of MosaiQ™ (for blood grouping and the initial disease screening panel); and

 

·

advancing MosaiQ™ regulatory submissions with the U.S. Food and Drug Administration ("FDA") and the regulatory authorities in the European Union.

In most cases, we commenced FY16 with concepts and “paper plans” for a highly complex MMS and the MosaiQ™ instrument. Key development partners (The Technology Partnership, AGR Automation Ltd and STRATEC Biomedical AG) needed to be managed to ensure delivery on time of the MMS and the MosaiQ™ instrument.  Conversion of the Eysins, Switzerland manufacturing facility for MosaiQ™ consumables also needed to be completed successfully. The MosaiQ™ development team also had to continue optimizing assays for inclusion on the MosaiQ™ consumable, providing critical input into the final design and build of the MMS and the MosaiQ™ instrument. In addition to this, our management team needed to build a team in Switzerland to oversee the build, installation and validation of the manufacturing facility for MosaiQ™ consumables, installation and validation of the MMS and development of the MosaiQ™ instrument, including all necessary quality assurance and quality control systems - ultimately the team to oversee the manufacture of MosaiQ™ consumables and instruments in advance of field trials and commercial launch. Objectives set were challenging, but deemed necessary to maintain the strong progress that had been made on the project.

Critically no fundamental changes were required to the design of either the Eysins manufacturing facility, the MMS or the MosaiQ™ instrument, confirming that the planning and design process had been thorough and robust. Issues and challenges arose, were addressed on a timely basis and appropriate solutions implemented.

Set against what was always going to be a challenging timeline, the Company is approximately one to two quarters behind planned commencement of European field trials for MosaiQ™. Notwithstanding this, we believe tremendous progress has been made and we are confident about commercial launch for MosaiQ™ in Europe during the first half of 2017 (to be followed 12 months later by commercial launch in the United States).

During FY16 we also established technical feasibility for the MosaiQ™ methodology in the field of molecular disease screening, demonstrating its ability to detect both DNA and RNA. We believe this is a major development milestone for MosaiQ™, more than doubling its market potential in transfusion diagnostics alone, and offers a next stage of development for the platform. Our approach, using the MosaiQ™ methodology, is also novel and patentable.

Our conventional reagent business fell short on achieving its Total revenue goal for FY16, due to the delayed achievement of a regulatory milestone, although it did achieve its Product sales goal for the year.

During FY16, we raised gross new equity of $75 million, from the exercise of warrants issued at the time of the Company’s initial public offering and the completion of an underwritten public offering in February 2016.

Performance Graph

 

26


Table of Contents

 

Below is a graph which compares the cumulative shareholder return on our ordinary shares from May 27, 2014, the date on which our ordinary shares commenced trading on NASDAQ, through March 31, 2016 against the cumulative total return for the same period on the NASDAQ Stock Market Composite Index and the NASDAQ Healthcare Index. The results are based on an assumed $100 invested on May 27, 2014.

A Note Regarding Last Year's Proxy Statement Disclosure

Our fiscal year ends on March 31. In this proxy statement, we consider certain actions that were taken by our remuneration committee subsequent to the end of fiscal 2016 to be continuations of our Fiscal Year 2016 Executive Compensation Program, which we adopted during the first quarter of fiscal 2016. In particular, these actions include the compensation actions described below that occurred on June 1, 2016.

 

27


Table of Contents

 

This disclosure approach is in contrast to the disclosur e approach contained in last year's proxy statement, where certain actions that were taken by the remuneration committee subsequent to the end of fiscal 2015 were characterized as being part of our Fiscal Year 2016 Executive Compensation Program. In partic ular, o n May 20 , 201 5 , we granted certain share option awards and MSRUs to our named executive officers and to Mr. Boyd.  Since these awards were based primarily on fiscal 2015 performance, we believe it more appropriate to characterize these awards as part of our Fiscal Year 2015 Executive Compensation Program .   

Fiscal 2016 Executive Compensation Program

On May 15, 2015, we adopted the Fiscal 2016 Executive Compensation Program for our named executive officers. Our Fiscal 2016 Executive Compensation Program was designed to focus executive behavior on the achievement of both our annual objectives and long-term strategy, as well as align the interests of management to those of our shareholders. To that end, our Fiscal 2016 Executive Compensation Program consisted of four primary elements: salary, benefits, long-term equity interests and an annual cash bonus opportunity that is based upon individual and corporate performance.

Based on our assessment of the performance of the named executive officers and our compensation philosophy as described in this Compensation Discussion and Analysis, and to recognize the high level of performance of these individuals and their importance to the Company, we took the following actions regarding fiscal 2016 compensation:

 

·

Increased the base salaries of Messrs. Cowan, Stackawitz, Farrell and Unger to $540,000, $370,000, $375,000 and $325,000 respectively, effective June 1, 2016,

 

·

Paid between 70% and 85% of target bonus to Messrs. Cowan, Stackawitz, Farrell and Unger; and

 

·

On June 1, 2016, granted annual equity awards with time-based vesting terms to Messrs. Cowan, Stackawitz, Farrell and Unger consisting of share option awards of 35,000, 20,000, 30,000 and 15,000, respectively, with an exercise price of $11.92 per share option and multi-year performance related restricted share units (“2016 MRSUs”) of 42,000, 20,000, 50,000 and 15,000 respectively.  The vesting of the 2016 MRSUs is conditional on the volume weighted average share price of the Company’s ordinary shares exceeding $40 for a twenty day consecutive period between April 1, 2018 and December 31, 2018.

 

·

On June 1, 2016, granted one-off equity awards to Messrs. Cowan, Stackawitz and Farrell consisting of restricted share units (“2016 RSUs”) of 60,000, 45,000 and 45,000, respectively. The 2016 RSUs vest 50% upon receipt CE-Marking of the MosaiQ™ blood grouping consumable and 50% upon receipt of FDA licensing for the MosaiQ™ blood grouping consumable and the MosaiQ™ instrument.  

The amounts and mix attributable to the foregoing compensation were determined in a manner similar to the way in which we anticipate determining the amounts and mix of elements of compensation in Fiscal 2017.  See “Fiscal 2017 Executive Compensation Program”. Our executive compensation is discussed in greater detail in the sections that follow. The remuneration committee will continue to evaluate our overall compensation structure and awards to ensure they are reflective of the performance of our executive officers and our Company and consistent with our compensation objectives.

Fiscal 2017 Executive Compensation Program

Overview and Objectives

On May 18, 2016, we adopted the Fiscal 2017 Executive Compensation Program for our named executive officers. The Fiscal 2017 Executive Compensation Program for our named executive officers is designed to achieve the following objectives:

 

·

Focus executive behavior on achievement of our annual and long-term strategic objectives,

 

·

Provide a competitive compensation package that enables the Company to attract and retain, on a long-term basis, talented executives,

 

·

Provide a total compensation structure that the remuneration committee believes is at least comparable with the Peer Group Companies for which we would compete for talent and which consists of a mix of base salary, equity and cash incentives, and

 

·

Align the interests of management and shareholders by providing management with long-term incentives through equity ownership.

 

28


Table of Contents

 

The Fiscal 201 7 Executive Compensation Program has four principal elements, namely base salary, benefits, short-term incentives and long-term incentives.  A brief description of each element and their purpose at the Company is described below:

 

Compensation Element

Description

Purpose

Base salary

Fixed cash compensation based on role, job scope, experience, qualification and performance

To compensate for individual technical and leadership competences required for a specific role and to provide economic security.  Notice periods for named executive officers vary between six and 12 months.  There are no change-of-control provisions providing for enhanced severance terms.

Benefits

Competitive health, life assurance, disability and retirement benefits

To promote health and wellness in the workforce and to provide competitive retirement planning and saving opportunities.  Benefits include private health coverage, life insurance, a defined contribution pension scheme and provision of a company car.  There are no enhanced benefits for named executive officers.

Short-term incentive

Annual cash incentive opportunity payable based on achievement of corporate, business unit and individual objectives

To incentivize management to meet and exceed annual performance metrics and deliver on commitments to shareholders.

Long-term incentive

Annual equity award comprised of share options

To incentivize executive officers to increase shareholder value, reward long-term corporate performance and promote employee commitment through share ownership.

Multi-year performance-based grant of Restricted Share Units (“MRSU’s”)

To align management compensation to achievement of our multi-year strategic plan.

Our objective is to target total direct compensation for our named executive officers, including the annualized value of the MRSUs that are proposed to be granted as part of our Fiscal 2017 Executive Compensation Program, as follows: Base Salary & Benefits – 30%; Short-term Incentive – 15%; and Long-Term Incentive 55% (Annual Equity Award – 15%; and MRSUs – 40%).

All elements of compensation are considered to be at risk with the exception of base salary, particularly the MRSUs which will have no value unless the market price of our ordinary shares exceed set volume weighted average price targets over any 20 trading day period between April 1, 2018 and December 31, 2018.

The amounts and mix attributable to base salary, short-term incentives and long-term incentives are determined by reference to market norms.  Our aim is to align individual compensation with the objectives of the Fiscal 2017 Executive Compensation Program.  While executive compensation mix is evaluated on an annual basis, we do not adhere to a rigid formula when determining the actual mix of compensation elements.  Instead, our current policy is to balance the short-term and long-term focus of our compensation elements to reward short-term performance while emphasizing long-term value creation.  These objectives are achieved by placing considerable weight on long-term, equity-based compensation while offering cash and short-term compensation to attract and retain executive talent.

 

29


Table of Contents

 

Determining Executive Compensation

The primary objective of our compensation philosophy is to design and support total remuneration packages aligned with strong business performance and long-term value creation for our shareholders.  Our executive compensation plan in particular is currently designed with specific emphasis on accountability for the performance of the MosaiQ™ development program in the short-term and shareholder return over the longer term.  This alignment is created through several mechanisms:

 

Compensation  Mechanism

Methodology

Pay Positioning

To attract and retain the best executives, all components of executive compensation are targeted at the market’s 75 th percentile.

Performance Target Setting

We set ambitious but achievable goals for ourselves and for the Company aligned with our commitment to building long-term sustainable value for our shareholders.

Compensation Elements

Base Salary

Sets baseline pay level.

Annual Incentive Plan

Annual incentive payment that rewards performance relative to annual financial goals and/or MosaiQ™ development goals.

Options

Long-term incentive with 10-year term that has no intrinsic value unless value is created for shareholders. The exercise price for options is equal to the current market value of Quotient ordinary shares at the time of grant.

MRSUs

A multi-year award vesting between April 1, 2018 and December 31, 2018 that has no intrinsic value unless the Company’s ordinary shares exceed set volume weighted average share price targets over any 20 trading day period between April 1, 2018 and December 31, 2018.

Compensation Mix

Our compensation mix is weighted toward variable pay elements and long-term incentive pay elements.

By applying the above methodologies, named executive officers are compensated at the 75 th percentile when we meet our performance targets, deliver on the expectations we communicate to our shareholders and drive share price appreciation.  Should our performance exceed expectations, our executives will be compensated above target, and vice versa.  The significant weighting of long-term incentives ensures that the primary focus of our named executives is sustained long-term performance, while our short-term incentives motivate consistent annual achievement.

Summary Compensation Table

The following table summarizes information regarding the compensation for the fiscal years ended March 31, 2016 and 2015 awarded to, earned by or paid to our named executive officers. Messrs. Stackawitz and Farrell were our two most highly compensated executive officers other than our CEO during the fiscal year ended March 31, 2016.  Messrs. Unger and Farrell were our two most highly compensated executive officers other than our CEO during the fiscal year ended March 31, 2015.

 

Name and Principal Position

 

Fiscal Year Ended March 31,

 

Salary

 

 

Bonus

 

 

Option  and MRSU awards

 

 

All other

compensation

 

 

Total

 

Paul Cowan,

 

2016

 

$

503,750

 

 

$

346,800

 

 

$

468,538

 

 

$

 

 

$

1,319,088

 

  Chief Executive Officer

 

2015

 

$

468,750

 

 

$

472,500

 

 

$

302,490

 

 

$

 

 

$

1,243,740

 

Jeremy Stackawitz,

 

2016

 

$

347,667

 

 

$

131,250

 

 

$

273,798

 

 

$

 

 

$

752,715

 

  President

 

2015

 

$

333,333

 

 

$

168,000

 

 

$

201,660

 

 

$

 

 

$

702,993

 

Edward Farrell,

 

2016

 

$

311,623

 

 

$

127,013

 

 

$

395,514

 

 

$

36,525

 

 

$

870,674

 

  President

 

2015

 

$

318,607

 

 

$

150,000

 

 

$

265,519

 

 

$

39,917

 

 

$

774,043

 

Stephen Unger,

 

2016

 

$

310,000

 

 

$

109,200

 

 

$

273,798

 

 

$

 

 

$

692,998

 

  Chief Financial Officer

 

2015

 

$

300,000

 

 

$

400,000

 

 

$

170,739

 

 

$

 

 

$

870,739

 

 

30


Table of Contents

 

Outstanding Equity Awards at Fiscal Year-End

Option Awards

The following table sets forth information regarding share option awards held by our named executive officers as of March 31, 2016. All options are options to purchase ordinary shares.

 

Name and Principal Position

 

Vesting start date

 

Number of securities underlying exercisable options

 

 

Number of securities underlying unexercisable options (1)

 

 

Option exercise price (2)

 

 

Option expiration date

Paul Cowan,

 

June 28, 2014

 

 

63,958

 

 

 

59,473

 

 

$

3.29

 

 

June 27, 2023

  Chief Executive Officer

 

April 29, 2015

 

 

30,000

 

 

 

60,000

 

 

$

8.00

 

 

April 28, 2024

 

 

May 20, 2016

 

 

 

 

 

35,000

 

 

$

15.17

 

 

May 19, 2025

Jeremy Stackawitz,

 

April 29, 2015

 

 

20,000

 

 

 

40,000

 

 

$

8.00

 

 

April 28, 2024

  President

 

May 20, 2016

 

 

 

 

 

22,500

 

 

$

15.17

 

 

May 19, 2025

Edward Farrell,

 

April 11, 2014

 

 

64,000

 

 

 

32,000

 

 

$

0.005

 

 

April 10, 2023

  President

 

April 29, 2015

 

 

26,333

 

 

 

52,667

 

 

$

8.00

 

 

April 28, 2024

 

 

May 20, 2016

 

 

 

 

 

30,000

 

 

$

15.17

 

 

May 19, 2025

Stephen Unger,

 

June 28, 2014

 

 

21,334

 

 

 

10,666

 

 

$

3.29

 

 

June 27, 2023

  Chief Financial Officer

 

March 4, 2015

 

 

22,400

 

 

 

44,800

 

 

$

8.00

 

 

March 3, 2024

 

 

April 29, 2015

 

 

16,933

 

 

 

33,867

 

 

$

8.00

 

 

April 28, 2024

 

 

May 20, 2016

 

 

 

 

 

22,500

 

 

$

15.17

 

 

May 19, 2025

 

(1)

Vesting of all options is subject to continued service through the applicable vesting date.

(2)

In certain cases, the option exercise prices are lower than the fair market value of the underlying securities. As part of the preparation for our initial public offering, the Board reviewed the fair value of our ordinary shares at the various dates in recent years when option and share awards were granted. This review resulted in certain instances in the Board concluding that the fair value of the underlying securities was higher than the option exercise prices determined at the time. The resulting increase in compensation expense has been reflected in our financial statements.

MRSU Awards

The following table sets forth information regarding MRSU awards held by our named executive officers as of March 31, 2016. The vesting of the MRSUs is conditional on the volume weighted average share price of the company’s ordinary shares exceeding $60 for a twenty day consecutive period between April 1, 2018 and December 31, 2018.

Name

 

Vesting start date

 

Number of outstanding securities underlying the award

 

 

Expiration date

Paul Cowan

 

April 1, 2018

 

 

42,000

 

 

December 31, 2018

Jeremy Stackawitz

 

April 1, 2018

 

 

22,500

 

 

December 31, 2018

Edward Farrell

 

April 1, 2018

 

 

35,000

 

 

December 31, 2018

Stephen Unger

 

April 1, 2018

 

 

22,500

 

 

December 31, 2018

Incentive Compensation

Incentive Compensation for Fiscal 2015 and 2016

Mr. Cowan was granted options to acquire 90,000 ordinary shares at an exercise price of $8.00 on April 29, 2014, options to acquire 35,000 ordinary shares at a price of $15.17 on May 20, 2015 and 42,000 MRSUs also on May 20, 2015.

Mr. Stackawitz was granted options to acquire 60,000 ordinary shares with an exercise price of $8.00 per share on April 29, 2014, options to acquire 22,500 ordinary shares at a price of $15.17 on May 20, 2015 and 22,500 MRSUs also on May 20, 2015.

 

31


Table of Contents

 

Mr. Farrell was granted options to acquire 79,000 ordinary shares at an exercise price of $8.00 per share o n April 29, 2014 , options to acquire 30,000 ordinary shares at a price of $15.17 on May 20, 2015 and 35,000 MRSUs also on May 20, 2015 .

Mr. Unger was granted options to acquire 50,800 ordinary shares at an exercise price of $8.00 per share on April 29, 2014, options to acquire 22,500 ordinary shares at a price of $15.17 on May 20, 2015 and 22,500 MRSUs also on May 20, 2015.

Incentive Compensation Pursuant to Fiscal 2016 Executive Compensation Program

Subsequent to fiscal 2016, as part of our Fiscal 2016 Executive Compensation Program, the following equity grants were made to the named executive officers on June 1, 2016:

 

Name

 

2016 Share Option Grant

 

 

2016 MRSU Grant

 

 

2016 RSU

Grant

 

Paul Cowan

 

 

35,000

 

 

 

42,000

 

 

 

60,000

 

Jeremy Stackawitz

 

 

20,000

 

 

 

20,000

 

 

 

45,000

 

Edward Farrell

 

 

30,000

 

 

 

50,000

 

 

 

45,000

 

Stephen Unger

 

 

15,000

 

 

 

15,000