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17, 2019 By Order of the Board of Directors, FARO Technologies, Inc. 250 Technology Park, Lake Mary, Florida 32746 Proposals Election of the following persons as directors: • John Donofrio • Yuval Wasserman Our Board of Directors consists of seven members, comprised of six independent directors and our President and CEO. Only the independent directors serve on the Audit, Compensation, Governance and Nominating, and Operational Audit Committees. Shareholder Engagement
FARO TECHNOLOGIES, INC.250 Technology ParkLake Mary, Florida 32746NOTICE OF 20162019 ANNUAL MEETING OF SHAREHOLDERSTO BE HELD ON MAY 13, 201630, 2019April 1, 2016To our shareholders:You are cordially invited to attend the 2016 2019Annual Meeting of Shareholders (the “Annual Meeting”) of FARO Technologies, Inc. (the “Company”“Company,” “FARO,” “we,” “us” or “FARO”“our”) on May 13, 2016,30, 2019 at 9:00 a.m., Eastern time, at our principal executive offices, located at 250 Technology Park, Lake Mary, Florida 32746. At the meeting,Annual Meeting, shareholders will vote on the following matters:1. the election of twothree directors, John E. Caldwell, and John Donofrio and Yuval Wasserman, to the Board of Directors, each to serve for a three-year term expiring at the Annual Meeting of Shareholders in 2019;2022;2. the ratification of Grant Thornton LLP as our independent registered public accounting firm for 2016;2019;3. a non-binding resolution to approve the compensation of our named executive officers; and 4. any other business that may properly come before the Annual Meeting or any postponements or adjournments of the Annual Meeting. Holders of record of FARO common stock at the close of business on March 24, 201629, 2019 are entitled to vote at the Annual Meeting.FARO is pleased to be providing access to our proxy materials primarily by taking advantage of the Securities and Exchange Commission rule that allows issuers to furnish proxy materials to their shareholders over the Internet. On or about April 1, 2016, the Company17, 2019, we will mail a Notice of Internet Availability of Proxy Materials (the “Notice”) to the majority of itsour shareholders, and on or about the same date, the Companywe will mail a printed copy of the proxy statement and a proxy card to shareholders who have requested to receive them. On the mailing date of the Notice, all shareholders will have the ability to access all of the proxy materials, including the proxy statement, on a website referred to in the Notice and the proxy statement. The Company believesWe believe this method allows the Companyus to provide you with the information you need more expeditiously, while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting.Your vote is important, and it is important that your shares be represented at the Annual Meeting, no matter how many shares you own. Please promptly submit your proxy or voting instructions over the Internet or by telephone by following the instructions on the Notice and in the proxy statement so that your shares can be voted, regardless of whether you expect to attend the Annual Meeting. If you received your proxy materials by mail, you may submit your proxy or voting instructions over the Internet or by telephone, or you may submit your proxy by marking, dating, signing and mailing the proxy card or voting instruction card using the postage paid envelope provided. If you attend the Annual Meeting, you may withdraw your proxy and vote in person if you would like to do so.Thank you for your continued support. 
JODY S. GALE Senior Vice President, General Counsel and Secretary 20162019 Proxy Statement SummaryThe following is a summary of certain key disclosures in this proxy statement.Proxy Statement. This is only a summary, and it may not contain all of the information that is important to you. For more complete information, please review this proxy statementProxy Statement as well our 20152018 Annual Report on Form 10-K.Annual Meeting of ShareholdersFriday, May 13, 2016 at30, 2019, 9:00 a.m., Eastern time Record Date: March 24, 201629, 2019 Proposals to be Voted on and Board Voting RecommendationsRecommendations Recommendations• John Caldwell • John E. Caldwell FOR FOR FOR Ratification of Grant Thornton LLP as Auditors for 20162019 FOR AdvisoryNon-binding vote to approve the compensation of our named executive officersFOR 2015 Business2018 HighlightsOur fiscal 2015 results reflectedIn 2018, we crossed the effect$400 million milestone in annual sales for the first time in our history. We recorded $403.6 million in total sales in 2018, an increase of 11.8% over 2017. We achieved over $425 million in new order bookings in 2018, up 12.8% compared to 2017. We executed on our strategic sales growth initiative by expanding our sales organization headcount 16.2% compared to the end of 2017. We maintained a strong balance sheet with no debt and cash and cash equivalents and short-term investments of $133.6 million as of December 31, 2018.We achieved numerous milestones in 2018 involving significant strengtheningproduct launches and acquisitions:Product innovation – In 2018, we launched fourteen new products including:◦ FARO ScanPlan – The FARO ScanPlan is a handheld mapper that captures two-dimensional (“2D”) floor plans. The FARO ScanPlan performs real-time capturing and diagramming of as-built floor plans of buildings for threat assessment, pre-incident planning and fire protection engineering.◦ FARO TracerSI – The FARO TracerSI accurately projects a laser line onto a surface or object, providing a virtual template that operators and assemblers can use to quickly and accurately position components with confidence. ◦ FARO Design ScanArm®2.5C and FARO PrizmTM – The FARO Design ScanArm®2.5C is a color-capable, portable lightweight 3D ScanArm. Using the new FARO PrizmTM full-color Laser Line Probe with 3D design and modeling software, the FARO Design ScanArm®2.5C delivers high-resolution, color point-cloud data, enabling more insight into object design and creation.◦ FARO 8-Axis FaroArm®–This comprehensive solution combines either the portable Quantum FaroArm®, Quantum ScanArm or Design ScanArm® portfolio products with a functionally integrated, yet physically separate, 8th axis.◦ 6DoF FARO Vantage Laser Tracker – Together with the hand-held 6Probe, a fully-integrated hand-held probe, the 6DoF FARO Vantage Laser Tracker expands the capabilities of large volume measurement by allowing users to access hidden, hard-to-reach locations by probing and scanning.◦ FARO Digi-Cube®– FARO Digi-Cube® is a high-precision, high scan rate, digital auto-controlled scan head that is easily integrated into a variety of laser scanning products.Acquisitions – We expanded our product portfolio through four acquisitions in 2018, including: ◦ Opto-Tech SRL and its subsidiary Open Technologies SRL - a 3D structured light scanning solution company located in Brescia, Italy. The acquisition supports our 3D Design vertical and our long-term strategy to establish a presence in 3D measurement technology used in other industries and applications, especially dental and medical.◦ Lanmark Controls, Inc. - a high-speed laser marking control boards and laser marking software provider located in Acton, Massachusetts. The acquisition supports the development of components used in new 3D laser inspection product development in order to further expand the product portfolio of our Photonics vertical.Compensation HighlightsIn 2018, the U.S. dollar throughout 2015 and other macroeconomic conditions that negatively impacted the capital budgets of manycompensation of our customers. Althoughnamed executive officers primarily consisted of base salary, annual short-term cash incentive compensation, stock options whose value is dependent on our financial resultsstock price appreciating and time-based restricted stock units. We did not meet all of the financial goals we set for ourselves in 2018, and thus our internal targets, there werenamed executive officers earned only between 11.50% and 12.65% of their target short-term incentive compensation for 2018. However, during 2018, our executive officers contributed substantial efforts in growing our global sales force, launching new products and executing strategic acquisitions, as described in the Compensation Discussion and Analysis in this Proxy Statement. As a numberresult, we believe that the compensation our named executive officers earned in 2018 reflects both our financial performance in 2018 and the individual efforts of highlights in 2015:•Product innovation—In the first quarter of 2015, we launched the FARO Freestyle3D laser scanner. This handheld laser scanner can quickly document rooms, structures and objects in 3D and create high-definition point clouds. We also launched the FARO Freestyle3DX in the third quarter of 2015, which delivers enhanced scanning accuracy of 1 millimeter at a 1 meter range.•Strategic acquisitions—In the first quarter of 2015, we completed the acquisition of kubit GmbH and ARAS 360 Technologies Inc. These software businesses provide us with the opportunity to offer our customers a complementary suite of integrated 3D documentation products within the public safety and Building Information Modeling (BIM)/ Construction Information Management (CIM) markets.•Infrastructure investment—To support future growth and to enhance our business information and transactions systems and financial reporting, we implemented SAP, an enterprise resource planning (“ERP”) system. SAP was implemented in phases, beginning with the Americas region, where implementation commenced at the start of the fourth quarter of 2014. The implementation continued in 2015 in the Europe/Africa region and was completed in the Asia-Pacific region in the fourth quarter of 2015.
our executive officers.•Share repurchases—In October 2015, our Board of Directors authorized an increase to our existing share repurchase program from $30 million to $50 million. In the fourth quarter of 2015, we repurchased 809,241 shares under the program for a total cash payment of $22.8 million. As of December 31, 2015, we had authorization to repurchase $18.3 million remaining under the repurchase program.President and Chief Executive Officer TransitionLeadership TransitionIn December 2015,On January 9, 2019, we announcedentered into a letter agreement with Dr. Simon Raab, setting forth the resignationterms of Jay Freeland, who had servedDr. Raab’s retirement as our President and Chief Executive Officer since 2006,(“CEO”) and as a member of our Board of Directors. Dr. Raab agreed to continue to serve as our President and CEO and to remain on our Board of Directors until the appointment of Dr. Simon Raab,his successor. On April 5, 2019, our co-founder and Chairman,Board of Directors appointed Michael D. Burger as interimour President and Chief Executive Officer. Under Dr. Raab’s leadership, we are undertaking several important initiatives to target specific vertical markets, better leverage our sales organization through process modernization, and harmonize our global functions to improve effectiveness and reduce SG&A expensesCEO, effective as of June 17, 2019. Mr. Burger has over 20 years of experience as a percentageglobal executive in the industrial technology segment. Mr. Burger’s background is discussed in more detail on page 26 of sales, while also acceleratingthis Proxy Statement. In connection with Mr. Burger’s appointment, Dr. Raab will retire as our President and maintainingCEO and as a consistent schedulemember of new product introductions.Compensation HighlightsThe compensation our named executive officers earned in 2015 reflects our financial performance in 2015, as described in ourBoard of Directors on June 16, 2019. The Compensation Discussion and Analysis section of this Proxy Statement has more information regarding the compensation payable to Dr. Raab during this transition period pursuant to the letter agreement and the compensation payable to Mr. Burger upon the commencement of his service as reflected inour President and CEO. In addition, on April 5, 2019, the Summary Compensation Table in this proxy statement.We did not meetBoard elected John Donofrio to serve as the goals we set for ourselves and, thus, our eligible executive officers received between 21% and 39%independent Chairman of their target short-term incentive compensation.To better align the interests and rewards of our named executive officers with the long-term interests of our shareholders and drive the achievement of our purpose and vision, we changed our long-term equity awards granted to our executives in 2015 to be exclusively performance-based incentive compensation, with awards earned based on both quantitative and qualitative factors.Corporate GovernanceOur corporate governance policies reflect many components of what are widely considered to be best practices:Executive sessions of the independent directors are held at each in-person Board meeting.Our Company policy prohibits hedging and pledging of Company securities by our directors and executive officers.We have a stock ownership policy for our non-employee directors and executive officers, as further described on pages 19 and 39 of this Proxy Statement, respectively. Among other things, this policy provides that our President and CEO must hold at least six times his base salary in Company common stock, our other executives must hold at least two times their respective base salaries in Company stock, and our non-employee directors must own Company stock with a value of at least $300,000.We maintain a compensation clawback policy, as further described on page 39 of this Proxy Statement.We have a director resignation policy for those director nominees who receive more “withheld”“withhold” than “for” votes in uncontested elections.Five of our six current directors are independent and only independent directors serve on the Audit, Compensation, and Governance and Nominating Committees.Executive sessions of the independent directors are held at each in-person Board meeting.Hedging transactions of our stock are prohibited for all directors and executive officers.Significant stock ownership requirements are in place for directors and executive officers. Under these guidelines, our Chief Executive Officer is required to own stock having a value equal to at least six times his annual base salary, the other named executive officers are required to own stock having a value equal to at least two times their respective annual base salaries and our non-employee directors are required to own stock having a value equal to at least $300,000.Our clawback policy applies to executive officers’ performance-based incentive compensation in the event of a restatement of our financial statements due to misconduct.We believe that building positive relationships with our shareholders is critical to our long-term success. We value our relationship with our shareholders and believe that we strengthen our ability to lead the Company by constructively engaging with our shareholders in discussing our business and operations. For this reason, our management team regularly offers to, and frequently does, frequently, meet with shareholders to discuss our quarterly and annual results, operations and other topics of interest to shareholders.We were pleased that our shareholders, overwhelmingly approved the non-binding advisory vote on ourincluding executive compensation in 2015 withmatters.At our 2018 annual meeting of shareholders, approximately 98%78% of the votes cast on the annual say-on-pay vote were voted in favor of the proposal. Nevertheless, we continue to examineThis was a significant decrease from the 2017 annual meeting of shareholders, at which approximately 99% of the votes cast were voted in favor of the say-on-pay proposal. During 2018, before our annual meeting of shareholders, our management team discussed our executive compensation programprograms, policies and practices with certain of our shareholders. As a result of the lower say-on-pay approval level in 2018, and based on the discussions management had with those shareholders during 2018, the Compensation Committee decided to assure alignment between the interestsundertake a comprehensive review of our executive officerscompensation programs, policies and our shareholders as notedpractices, including engaging its independent compensation consultant to assist in the review of our 2018 say-on-pay voting results, shareholder outreach considerations and recommendations for the 2019 long-term equity incentive award design. As a result of this initiative, the Compensation Highlights above.
TABLE OF CONTENTSCommittee approved the following significant changes to our executive compensation to more closely align with current best practices, respond to shareholder concerns regarding the pay-for-performance features of our executive compensation programs, and strengthen the pay-for-performance alignment of our executive compensation programs, as described in more detail in our Compensation Discussion and Analysis in this Proxy Statement:
| Prior Approach | What We Heard | Our Actions |
Short-term cash incentives could be earned based on the achievement of established performance metrics; however, the Compensation Committee had discretionary authority to increase (or decrease) the amount earned. The Compensation Committee approved discretionary cash bonuses to be paid to our named executive officers for 2017 even though the performance requirements were not met under our short-term cash incentive plan. | Annual cash bonus awards are not tied to the achievement of established performance metrics. | For 2018, the short-term cash incentive plan had pre-established performance metrics, consisting of sales growth and operating income. In determining the bonuses earned by, and paid to, our named executive officers based on 2018 performance, these performance metrics were strictly adhered to, and no discretionary bonuses were awarded to our named executive officers for 2018. |
| Our long-term incentive compensation in recent years consisted of a mix of stock options and restricted stock units, both subject to only time-based vesting. | Long-term incentive compensation is not tied to objective performance metrics. | For 2019, the Compensation Committee redesigned the long-term equity incentive awards granted to our named executive officers to eliminate the use of stock options and introduce performance-based restricted stock units. |
| The Compensation Committee adjusted the mix and vesting of the equity awards granted to our named executive officers in 2019 as follows: (1) 50% of the value of the equity awards was in the form of performance-based restricted stock units, which vest at the end of three years based on the satisfaction of pre-established goals related to our total shareholder return (“TSR”) compared to the TSR of the companies in the Russell 2000 Growth Index; and (2) 50% of the value of the equity awards was in the form of time-based restricted stock units that vest in equal installments over three years. | ||
2016
| 1. | the election of |
| 2. | the ratification of Grant Thornton LLP as our independent registered public accounting firm for |
| 3. | a non-binding resolution to approve the compensation of our named executive officers. |
17, 2019.
The Notice of 20162019 Annual Meeting of Shareholders;
This Proxy Statement for the Annual Meeting; and
Our 20152018 Annual Report, which includes our Annual Report on Form 10-K for the year ended December 31, 2015,2018, as filed with the SEC on February 29, 201621, 2019 (the “Annual Report”).
Nancy Setteducati
View our proxy materials for the Annual Meeting; and
Instruct us to send future proxy materials to you by e-mail.
bring a copy of your bank or brokerage statement reflecting your stock ownership as of the Record Date to gain admission to the Annual Meeting. Shareholders must also present a form of personal photo identification to be admitted to the Annual Meeting.
over the Internet, through the website shown on your Notice or proxy card;
by telephone, by calling toll-free 1-800-690-6903 in the United States from any touch-tone telephone and following the instructions; or
If you received a printed set of proxy materials, by mailing your signed proxy card in the postage paid envelope provided.
How many shares must be present to consider each matter at the Annual Meeting?
The presence, in person or by proxy, of a majority of the votes entitled to be cast on a specific proposal will constitute a quorum for that proposal. Even if a quorum is established for the Annual Meeting, it is possible that a quorum may not be established for a specific proposal presented at the Annual Meeting. Shares that are voted “ABSTAIN” or properly executed proxy cards or voting instructions cards that are returned without voting instructions will be counted as present for the purpose of determining whether the quorum requirement is satisfied for all proposals at the Annual Meeting. If your shares are held in street name and you do not provide
voting instructions to your bank or broker, your shares will not affect the determination of whether a quorum exists for proposals 1 or 3, but your shares will be counted as present for the purpose of determining whether the quorum requirement is satisfied for proposal 2.
FOR the election of John E. Caldwell, and John Donofrio, and Yuval Wasserman to the Board of Directors;
FOR the ratification of Grant Thornton LLP as our independent registered public accounting firm for 2016;2019; and
FOR the approval of the compensation of our named executive officers.
properly completing and signing another proxy card with a later date and returning the proxy card prior to the Annual Meeting;
voting again by telephone or the Internet until 11:59 pm, Eastern time, on May 12, 2016;
giving written notice of your revocation to FARO Technologies, Inc., Attention: Secretary, 250 Technology Park, Lake Mary, Florida 32746, prior to or at the Annual Meeting; or
voting in person at the Annual Meeting.
election of directors.
solicitations. We will bear the cost of soliciting proxies and have engaged Alliance Advisors, LLC to assist in the solicitation of proxies. ArrangementsAlliance Advisors, LLC will receive a fee of approximately $10,000 plus reasonable out-of-pocket expenses for this work. In addition, arrangements will be made, as appropriate, with banks, brokerage houses, and other custodians, nominees or fiduciaries to forward soliciting materials to the beneficial owners of the shares,our common stock, and we will reimburse such persons for their out-of-pocket expenses incurred in providing those services.
However, we reserve the right not to forward to Board members any abusive, threatening or otherwise inappropriate materials.
shareholders.
Dr. Raab will retire from the Board on June 16, 2019 upon his retirement as our President and CEO.
We have a director resignation policy for those director nominees who receive more “withhold” than “for” votes in uncontested elections, which requires such director nominees to tender their resignation to the Board following certification of the shareholder vote. The Governance and Nominating Committee will then act to determine whether to accept the director’s resignation and submit such recommendation for prompt consideration by the Board.
Name | Age | Director Since | Term Expires | Position | ||||||||||
John Caldwell | 66 | 2002 | 2019 | Director and Nominee | ||||||||||
John Donofrio | 54 | 2008 | 2019 | Director and Nominee | ||||||||||
| Name | Age | Director Since | Term Expires | Position | |||||
| John E. Caldwell | 69 | 2002 | 2022 | Director and Nominee | |||||
| John Donofrio | 57 | 2008 | 2022 | Director and Nominee | |||||
| Yuval Wasserman | 64 | 2017 | 2022 | Director and Nominee | |||||
Before joining SMTC, Mr. Caldwell held positions in the Mosaic Group, a marketing services provider, as Chair of the Restructuring Committee of the Board of Directors from October 2002 to September 2003; in GEAC Computer Corporation Limited, a computer software company, as President and Chief Executive Officer from October 2000 to December 2001; and in CAE Inc., a provider of simulation technologies and integrated training solutions for the civil aviation and defense industries, as President and Chief Executive Officer from June 1993 to October 1999. In addition, Mr. Caldwell served in a variety of senior executive positions in finance, including Senior Vice President of Finance and Corporate Affairs of CAE and Executive Vice President of Finance and Administration of Carling O’Keefe Breweries of Canada. Over the course of his career, Mr. Caldwell has served on the audit committees of 11 public companies. Also, for the past several years, Mr. Caldwell has been an instructor on board risk oversight for the Institute of Corporate Directors in Canada. Mr. Caldwell has been a directoris currently Chairman of the Board of Advanced Micro Devices, Inc., an innovative semiconductor provider, where he has served as a director since 2006 and2006. Mr. Caldwell has also been a director of IAMGOLD Corporation, a mid-tier gold producer, since 2006. Mr. Caldwell has also served on the board of directors of ATI Technologies Inc. from 2003 to 2006, Rothmans Inc. from 2004 to 2008, Cognos Inc. from 2000 to 2008, Stelco Inc. from 1997 to 2006 and Sleeman Breweries Ltd. from 2003 to 2005. Mr. Caldwell holds a Bachelor of Commerce degree and is a Chartered Professional Accountant.
Name | Age | Director Since | Term Expires | Position | ||||||||||
Stephen R. Cole | 64 | 2000 | 2017 | Director | ||||||||||
Marvin R. Sambur, Ph.D. | 70 | 2007 | 2017 | Director | ||||||||||
Lynn Brubaker | 58 | 2009 | 2018 | Director | ||||||||||
Simon Raab, Ph.D. | 63 | 1982 | 2018 | Director | ||||||||||
| Name | Age | Director Since | Term Expires | Position | |||||
| Stephen R. Cole | 67 | 2000 | 2020 | Director | |||||
| Lynn Brubaker | 61 | 2009 | 2021 | Director | |||||
| Jeffrey A. Graves, Ph.D. | 57 | 2017 | 2021 | Director | |||||
| Simon Raab, Ph.D. | 66 | 1982 | 2021 | Director | |||||
Chartered Institute of Business Valuators, Senior Member of the American Society of Appraisers and Full Member of the ADR Institute of Canada, Inc. He is currentlyserves as lead director of The Westaim Corporation, a directorTSX Venture Exchange-listed company where he also serves as a member of the audit committee and chairman of the compensation committee of Westaim Corporation, a TSX Venture Exchange listed company.and nominating and governance committee. Previously, Mr. Cole was a director of H. Paulin & Co. Limited, a TSX listedTSX-listed company, where he also served as chairman of the audit committee. Mr. Cole has also held a positionor currently holds positions as an advisory committee member or director of various private companies and charitable and professional organizations.
Relevant experience and skills: senior operations and engineering management, high level executive and financial management, research and development management, government acquisitions management, and international negotiations.
Lynn Brubaker has served as a director of the Company since July 2009. Ms. Brubaker is a seasoned executive with over 35 years’years of experience in aviation and aerospace in a variety of executive, operations, sales, marketing, customer support and independent consultant roles. She has over 15 years of Boardboard experience and over ten years of experience advising high technology, international, multi-industry and global companies. Since 2005, Ms. Brubaker has had an advisory practice focused on strategy and business development. She is currently a director of Hexcel Corporation, a New York Stock Exchange-listed company in leading advanced materials and technology, The Nordam Group, a private aerospace company in high technology manufacturing and repair, and QinetiQ Group plc, a London Stock Exchange–listed leading research and technology company. Ms. Brubaker alsopreviously served on the board of directors of Force Protection, Inc., a developer and manufacturer of military survivability technology listed on the NASDAQNasdaq Stock Market (“NASDAQ”Nasdaq”) from March 2011 until its merger with an affiliate of General Dynamics Corporation in December 2011. Ms. Brubaker spent 10 years at Honeywell International, Inc., retiring as Vice President and General Manager—Commercial Aerospace for Honeywell International, a position she held from 1999 to 2005. Prior to Honeywell International, Ms. Brubaker held a variety of management positions with McDonnell Douglas Corporation, Northwest Airlines Corporation, and ComAir.ComAir Limited. Ms. Brubaker currently serves on the board of a variety of private companies and other business organizations.
marketing management, and research and development management.
Reviewsreviews and approves operating, organizational, financial and strategic plans;
Reviewsreviews our operational, financial and strategic performance;
Overseesoversees and evaluates management’s systems for internal control, financial reporting and public disclosure;
Overseesoversees our global risk management;
Establishesestablishes corporate governance standards;
Selects,selects, evaluates and compensates our executive officers, including the President and CEO;
Overseesoversees and evaluates senior management performance and compensation; and
Plansplans for effective development and succession of the President and CEO and senior management.
The Governance and Nominating Committee focuses on risks relating to our corporate governance structure and practices.
TheDirector, with Stephen R. Cole serving as Lead Director until May 2018 and John Donofrio serving as Lead Director from May 2018 until April 5, 2019. On April 5, 2019, the Board appointed Michael D. Burger as our President and CEO, andeffective June 17, 2019. On that same date, the Board elected John Donofrio as our independent Chairman of the Board, effective immediately. The Board believes that having an independent Chairman of the Board will allow Dr. Raab to focus on assisting Mr. Burger through this executive transition and will allow Mr. Burger to concentrate on overseeing the management of our business when he begins his service as our President and CEO, while Mr. Donofrio oversees the functioning of the Board and our corporate governance. Because we currently have an independent Chairman of the Board, there is currently no Lead Director.
In addition, none of our directors are a party to any agreement or arrangement that would require disclosure pursuant to Nasdaq Rule 5250(b)(3).
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Lynn Brubaker John E. Caldwell Stephen R. Cole* John Donofrio
Jeffrey A. Graves, Ph.D. Yuval Wasserman | Lynn Brubaker John E. Caldwell Stephen R. Cole John Donofrio
Jeffrey A. Graves, Ph.D. Yuval Wasserman* | Lynn Brubaker John E. Caldwell* Stephen R. Cole John Donofrio
Jeffrey A. Graves, Ph.D. Yuval Wasserman | Lynn Brubaker* John E. Caldwell Stephen R. Cole John
Jeffrey A. Graves, Ph.D. Yuval Wasserman | |||
| * | Committee |
provide oversight regarding our accounting and financial reporting process, system of internal control, external and internal audit process, and our process for monitoring compliance with laws and regulations;
review the independence and qualifications of our independent public accountants and our financial policies, control procedures and accounting staff;
review and make appropriate inquiry of financial performance and financial position, including comparison of actual to budgeted results;
appoint and retainoversee our independent public accountants;
oversee internal audit and compliance functions;
review and approve our financial statements and other regulatory filings; and
review transactions between the Company and any officer or director, any entity in which an officer or director of the Company has a material interest, or any other related person transactions.
reviewing our operational performance against certain predetermined metrics; focusing on improving our short-term and long-term operating performance and continuously reviewing the metrics against which we measure our performance;Operational Audit CommitteeThe Operational Audit Committee met four times in 2015.2018. The Operational Audit Committee acts under the terms of a written charter that is available on our website atwww.faro.com, by first clicking “Investor Relations” and then “Leadership and Governance.”www.faro.com/about-faro/leadership-and-governance. The primary objective of the Operational Audit Committee is to provide operating insight to the Board so as to better enable the directors to discharge the Oversight Functions of the Board. In that context, the Operational Audit Committee’s role includes:
meeting with executives and department heads to review progress against operational goals; and
addressing operational risk management issues.
examination of management and leadership development and programs; review of the design of incentive plans; review and approval of senior management objectives; evaluation of the performance of all officers at the making bonus and equity incentive award determinations in accordance with our short-term incentive plan and our long-term equity addressing other compensation and employment matters, including specific review of the performance of our President and CEO; ensuring that the philosophy and operation of our compensation program reinforce our culture and values, create a balance between risk and reward, attract, motivate and retain executives over the long-term and align their interests with those of our shareholders; advising on selection of certain executive officer positions; establishing the terms of all executive severance and Compensation CommitteeThe Compensation Committee held ninefive meetings during 2015.2018. In addition to its formal meetings, the Compensation Committee Chairman and other members of the committee met frequently throughout 20152018 and in the first quarter of 20162019 among themselves without the presence of management, as well as with the Compensation Committee’s advisors, our Chairman of the Boardconsultant and our former President and CEO. Areas of consideration at these various meetings included but were not limited to:establishment of executive compensation for 2015 and 2016;Vice President level and above;plans,plan, respectively;reviewconsultations with Compensia, Inc. (“Compensia”), the compensation consultant to the Compensation Committee for 2018 and approval2019 board and executive compensation, regarding, among other matters, updated market data and compensation trends generally and specific updated market data regarding compensation for the President and CEO and certain other named executives officers;establishment of senior management development objectivesexecutive compensation for 2018 and related matters; and2019;developing the CEOcompensation arrangements and terms of our Chairman, President and CEO’s retirement and with respect to services to be provided by him during the transition period until his compensation.successor commences his employment; anddeveloping, with the advice of Compensia, Mr. Burger’s compensation arrangements and terms as our new President and CEO.Each of the Compensation Committee members qualifies as independent for Compensation Committee membership, as defined in the NASDAQNasdaq rules, as a non-employee director, as defined under Rule 16b-3 of the Exchange Act, and as an outside director, as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).The Compensation Committee acts under the terms of a written charter that is available on our website atwww.faro.com, by first clicking “Investor Relations” and then “Leadership and Governance.”www.faro.com/about-faro/leadership-and-governance. As discussed in its charter, the Compensation Committee reviews our executive compensation policies and programs and endeavors to ensure they are aligned and implemented in accordance with our overall strategy, including enhancement of shareholder value. Although the Compensation Committee annually reviews annually and determines the President and CEO’s compensation, it works with the Chairman of the Board, President and CEO in evaluating the performance of all other officers at the Vice President level and above reporting to the President and CEO and in reviewing and approving annually all compensation programs and awards (including setting the base compensation for the upcoming year and approving bonus and equity incentive awards) for all officers at the Vice President level and above (other thanreporting to the CEO).President and CEO. The Compensation Committee maintains final authority in the determination of individual executive compensation packages to ensure compliance with our compensation policy objectives.The Compensation Committee’s duties and responsibilities include, among other things:oversight ofoverseeing our long-term equity plans, including reviewing and approving changes in such plans, granting equity awards to officers at the Vice President level and above reporting to the President and CEO, as well as approving the total amount of equity grants below the Vice President level and related parameters of such grants;oversight of our management succession plan, including succession for the CEO position;change in controlchange-in-control benefits;
reviewing and approving on an annual basis long-long-term and short-term corporate objectives relevant to the President and CEO’s compensation, evaluating the President and CEO’s performance not less than semi-annually in light of those objectives and, without the input or participation of the President and CEO, approving the individual components of, and the overall compensation levels for, the President and CEO based on such evaluation;
reviewing and approving, with the input and recommendation of the President and CEO, the annual base salaries, annual incentive and other compensation arrangements of all other named executive officers and all other Senior Vice Presidents and Vice President levelPresident-level employees, including reviewing and approving on an annual basis long-long-term and short-term corporate objectives relevant to their performance evaluation and compensation, as well as approving the total amount of short-term incentives below the Vice President level and related parameters;
reviewing and monitoring all compensation and significant benefit plans that affect all employees and annually approving overall employee salary policies, as well as equity-based programs for all levels of employees;
reviewing and recommending any proposed changes in director compensation to the Board;
reviewing and discussing with management the Compensation Discussion and Analysis that is included in our proxy statement for our annual meeting of shareholders;
preparing the report of the Compensation Committee for inclusion in the proxy statement; and
engaging, on an as-needed basis, the services of outside expertiseexperts in areas of compensation and benefits practices. Specifically, the Compensation Committee has engaged Pearl Meyer & Partners (“Pearl Meyer”),Compensia, a compensation expert, to informally update the Compensation Committee on an annual basis and from time to time on matters that have been delegated to the Compensation Committee, and from time to time to provide a formal executive and director compensation study and, in 2018, to provide a formal executive compensation study, including recommendingrecommended best practices and median compensation inat comparable companies.
each director must display high personal and professional ethics, integrity and values;
each director must have the ability to exercise sound business judgment and demonstrate basic financial literacy;
each director must be highly accomplished in his or her respective field, with broad experience and demonstrated senior levelsenior-level leadership in business, government, education, technology or public interest;
each director must have relevant expertise and experience, and be able to offer advice and guidance based on that expertise and experience;
each director must be independent of any particular constituency, be able to represent all shareholders of the Company and be committed to enhancing long-term shareholder value; and
each director must have sufficient time available to devote to activities of the Board and to enhance his or her knowledge of our business.
suitable candidate to fulfill the Board’s needs. In addition, our Corporate Governance Guidelines provide that any director who undergoes a change of occupation must notify the Chairman of the Board and the Chairman of the Governance and Nominating Committee of the change and offer to submit his or her resignation.
We may require any proposed nominee to furnish such other information as may reasonably be required to determine his or her eligibility to serve as an independent director or that could be material to a reasonable shareholder’s understanding of the nominee’s independence.
Communications with Board of Directors
Shareholders may communicate with the full Board or individual directors by submitting such communications in writing to FARO Technologies, Inc., Attention: Board of Directors (or the individual director(s)), 250 Technology Park, Lake Mary, Florida 32746. Communications should be sent by overnight or certified mail, return receipt requested. Such communications will be delivered directly to the Board or the individual director(s) designated on such communication.
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2)(3) | All Other Compensation ($) | Total ($) | ||||||||||||
Lynn Brubaker | 87,500 | 80,000 | — | 167,500 | ||||||||||||
John E. Caldwell | 97,500 | 80,000 | — | 177,500 | ||||||||||||
Stephen Cole | 112,500 | 97,500 | — | 210,000 | ||||||||||||
John Donofrio | 92,500 | 80,000 | — | 172,500 | ||||||||||||
Simon Raab, Ph.D. | 110,000 | 130,000 | 20,602 | (4) | 260,602 | |||||||||||
Marvin R. Sambur, Ph.D. | 92,500 | 80,000 | — | 172,500 | ||||||||||||
| Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2)(4) | All Other Compensation ($) | Total ($) | |||||||||
| Lynn Brubaker | 70,000 | 99,987 | — | 169,987 | |||||||||
| John E. Caldwell | 76,250 | 99,987 | — | 176,237 | |||||||||
| Stephen R. Cole | 96,250 | 99,987 | — | 196,237 | |||||||||
| John Donofrio | 90,000 | 139,972 | — | 229,972 | |||||||||
| Jeffrey A. Graves, Ph.D. | 67,500 | 99,987 | — | 167,487 | |||||||||
| Marvin R. Sambur, Ph.D. (3) | 54,375 | — | — | 54,375 | |||||||||
| Yuval Wasserman | 70,000 | 99,987 | — | 169,987 | |||||||||
| (1) | Includes cash retainers earned by each non-employee director during the year ended December 31, |
| (2) | Reflects the grant date fair value of restricted stock awards granted to our non-employee directors in |
| (3) | Effective May 11, 2018, Dr. Marvin R. Sambur retired from his position as a member of the Board of Directors in adherence with the Company’s mandatory retirement policy for directors, which requires a director who attains the age of 72 during his or her term to retire from the Board immediately prior to the first annual meeting of shareholders following such director’s 72nd birthday. |
| (4) | As of December 31, |
Name | Restricted Stock Awards (#) | |||
Lynn Brubaker | 1,883 | |||
John E. Caldwell | 1,883 | |||
Stephen R. Cole | 1,883 | |||
John Donofrio | 2,636 | |||
| 3,903 | |||
Marvin R. Sambur, Ph.D. | — | |||
| Yuval Wasserman | 3,903 | |||
Name | Restricted Stock Awards (#) | Full Grant Date Fair Value of Award ($) | ||||||
Lynn Brubaker | 1,868 | 80,000 | ||||||
John E. Caldwell | 1,868 | 80,000 | ||||||
Stephen Cole | 2,276 | 97,500 | ||||||
John Donofrio | 1,868 | 80,000 | ||||||
Simon Raab, Ph.D. | 3,035 | 130,000 | ||||||
Marvin R. Sambur, Ph.D. | 1,868 | 80,000 | ||||||
| Name | Restricted Stock Awards (#) | Full Grant Date Fair Value of Award ($) | ||||
| Lynn Brubaker | 1,883 | 99,987 | ||||
| John E. Caldwell | 1,883 | 99,987 | ||||
| Stephen R. Cole | 1,883 | 99,987 | ||||
| John Donofrio | 2,636 | 139,972 | ||||
| Jeffrey A. Graves, Ph.D. | 1,883 | 99,987 | ||||
| Yuval Wasserman | 1,883 | 99,987 | ||||
Annual Cash Retainer: | $ | 60,000 | ||
Additional Annual Retainers: | ||||
Governance and Nominating Committee Chairperson | $ | 10,000 | ||
Operational Audit Committee Chairperson | $ | 10,000 | ||
Audit Committee Chairperson | $ | 20,000 | ||
Compensation Committee Chairperson | $ | 15,000 | ||
Governance and Nominating Committee Non-Chair Member | $ | 5,000 | ||
Operational Audit Committee Non-Chair Member | $ | 5,000 | ||
Audit Committee Non-Chair Member | $ | 10,000 | ||
Compensation Committee Non-Chair Member | $ | 7,500 | ||
Lead Director | $ | 35,000 | (a) | |
Chairman | $ | 100,000 | (a) | |
Initial Equity Grant | $ | 100,000 | (b) | |
Annual Equity Grant | $ | 80,000 | (c) |
| Annual Cash Retainer: | $ | 40,000 | |||
| Additional Annual Retainers: | |||||
| Governance and Nominating Committee Chairperson | $ | 10,000 | |||
| Operational Audit Committee Chairperson | $ | 10,000 | |||
| Audit Committee Chairperson | $ | 20,000 | |||
| Compensation Committee Chairperson | $ | 15,000 | |||
| Governance and Nominating Committee Non-Chair Member | $ | 5,000 | |||
| Operational Audit Committee Non-Chair Member | $ | 5,000 | |||
| Audit Committee Non-Chair Member | $ | 10,000 | |||
| Compensation Committee Non-Chair Member | $ | 7,500 | |||
| Lead Director | $ | 80,000 | (a) | ||
| Non-Employee Chairman | $ | 100,000 | (a) | ||
| Initial Equity Grant | $ | 100,000 | (b) | ||
| Annual Equity Grant | $ | 100,000 | (c) | ||
| (a) | Payable 50% in cash and 50% in shares of restricted stock. Shares of restricted stock will be granted annually on the day following the annual meeting of shareholders, and the number of shares to be granted will be determined by dividing the dollar value of the retainer by the closing price of our common stock on the date of grant. The shares of restricted stock will vest on the day prior to the following year’s annual meeting date, subject to the Lead Director’s or non-employee Chairman’s, as applicable, continued membership on the Board as of such date. |
| (b) | Upon election to the Board, each non-employee director will receive shares of restricted stock with a value equal to $100,000, calculated by using the closing price of our common stock on the date of the non-employee director’s election to the Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the non-employee director’s continued membership on the Board as of such date. |
| (c) | On the day following the annual meeting of shareholders, each |
In the fall of 2015, the Compensation Committee engaged Pearl Meyer to conduct a competitive market study of director compensation. The study was delivered in December 2015. Pearl Meyer recommended no change in the total compensation of our directors but it did recommend a change in the mix of cash- and stock-based compensation. Based on such recommendation, the Compensation Committee approved, effective January 1, 2016, a $20,000 reduction of the non-employee directors’ annual cash retainer to $40,000 and a $20,000 increase to the non-employee directors’ annual equity grant to $100,000. In addition to these adjustments, the Compensation Committee approved an increase to the Lead Director’s compensation from $35,000 to $80,000 for 2016 in recognition of the Lead Director’s increased time commitment and responsibilities following the appointment of Dr. Raab as interim President and CEO.
awards granted by us, the values of which are calculated based on the higher of requirement, with the exception of Dr. Graves and Mr. Wasserman, who have through December 31, 2019 to attain the minimum share ownership requirement. FIRM FOR 2019. 2019. Audit fees(1) Audit related fees(2) All other fees Total fees page 28 of this Proxy Statement.Mandatory Board of Director Stock Ownership and Holding PeriodsEffective in 2009, ourOur non-employee directors are subject to minimum share ownership guidelines. Within two years after joining the Board, each non-employee director is required to own shares of our common stock with an aggregatea value ofequal to at least $300,000. The ownership requirement may be satisfied through (i) holdings of equity(x)(a) the then currentthen-current value of the equity awards on the date of determining compliance with the minimum share ownership guidelines and (y)(b) the grant date fair value of the equity awards, and/or (ii) shares of common stock purchased by the non-employee director independently, the values of which are calculated based on the closing price of our common stock on the purchase date. Also, each non-employee director must hold shares of our common stock acquired pursuant to the exercise of stock options or vesting of restricted stock for one year after exercise or vesting, as applicable, or until his or her retirement, whichever is earlier. In 2012, the Board amended the holding period requirement to permit sales by non-employee directors to the extent necessary to satisfy tax obligations arising from the vesting of their restricted stock awards. As of December 31, 2015,2018, all of our directors were in compliance withmet or exceeded the minimum share ownership guidelines.Director Deferred Compensation PlanIn October 2018, the Compensation Committee approved the adoption of the FARO Technologies, Inc. 2018 Non-Employee Director Deferred Compensation Plan (the “Deferred Compensation Plan”). This plan encourages our directors to hold a substantial portion of their compensation in the form of equity, which can only be monetized at the end of their tenure on the Board or in other limited circumstances.Prior to the first day of each calendar year beginning on or after January 1, 2019, each non-employee director may (i) elect to convert all of his or her annual cash retainer fees as well as any annual committee and chair fees other than reimbursements otherwise payable to him or her by the Company into deferred stock units, and (ii) elect to receive all of his or her annual equity grant received during the calendar year in the form of restricted stock units, or defer payment of all such restricted stock units granted to the non-employee director in the calendar year. Each deferred stock unit represents the right to receive one share of our common stock no later than 60 business days following the date the non-employee director incurs a separation of service from the Company, or, in limited circumstances upon a change in control of the Company, cash equal to the fair market value of one share of our common stock on the date of the change in control, pursuant to the 2014 Incentive Plan and the Deferred Compensation Plan.PROPOSAL 2RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTHE BOARD OF DIRECTORS RECOMMENDS THAT OUR SHAREHOLDERS VOTE “FOR” PROPOSAL 2, THE RATIFICATION OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.The Sarbanes-Oxley Act of 2002 requires the Audit Committee to be directly responsible for the appointment, compensation and oversight of the audit work of our independent registered public accounting firm. Grant Thornton LLP has audited our financial statements for the fiscal years ended December 31, 2015 and 2014.since 2004. The Audit Committee has appointed Grant Thornton LLP as our independent registered public accounting firm for 2016.Representatives of Grant Thornton LLP will be present at the meeting.Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions of shareholders.Shareholders are not required to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm. However, we are submitting the ratification to our shareholders as a matter of good corporate practice. If our shareholders fail to ratify the appointment of Grant Thornton LLP, the Audit Committee may reconsider the retention of Grant Thornton LLP. Even if the selection of Grant Thornton LLP is ratified, the Audit Committee in its discretion may select a different independent accounting firm at any time during the year if it determines that such change would be in the best interests of the Company and our shareholders.The affirmative vote of a majority of the votes cast is necessary for approval of the ratification of Grant Thornton LLP. Abstentions will have no impact on the ratification of our independent registered public accounting firm. Because this matter is a routine proposal, there will be no broker non-votes associated with this proposal.INDEPENDENT PUBLIC ACCOUNTANTSThe following table presents fees for professional audit services rendered by Grant Thornton LLP for the audit of our financial statements for the fiscal years ended December 31, 20152018 and 2014,2017, and fees for other services rendered by Grant Thornton LLP during those periods. 2015 2014 $ 2,093,606 $ 1,894,835 90,208 37,392 — — $ 2,183,814 $ 1,932,227 2018 2017 Audit fees (1) $ 1,818,514 $ 1,934,954 Audit-related fees (2) 32,552 35,740 Tax fees — — All other fees — — Total fees $ 1,851,066 $ 1,970,694 (1) Amounts for 20152018 and 20142017 include the audit of financial statements, review of financial statements included in Quarterly Reports on Form 10-Q, audit of the effectiveness of our internal control over financial reporting and statutory audits required internationally. AuditAlso, the amount for 2018 includes fees for 2015 increased from 2014 primarily due toincurred in connection with our implementation of SAP, a new enterprise resource planning system,registration statement on Form S-8 filed with the SEC in the Asia-Pacific and Europe/Africa regions in 2015.August 2018.(2) Amounts for 20152018 and 20142017 include fees related to the audit of our employee benefit plan. Audit related fees included an evaluation of our SAP readiness in Europe/Africa in 2015 and the issuance of a consent related to a Form S-8 Registration Statement in 2014.The Audit Committee has concluded that the provision of the audit and permitted non-audit services by Grant Thornton LLP in 20152018 and 20142017 is consistent with maintaining the independence of Grant Thornton LLP.Pursuant to the Audit Committee charter, the Audit Committee pre-approved all such services provided by Grant Thornton LLP. The Audit Committee has established pre-approval policies and procedures with respect to audit and permitted non-audit services to be provided by our independent auditors. Pursuant to these policies and procedures, the Audit Committee may form and delegate authority to subcommittees consisting of one or more members, when appropriate, to grant such pre-approvals, provided that decisions of such subcommitteesubcommittee(s) to grant pre-approvals are presented to the full Audit Committee at its next scheduled meeting. The Audit Committee’s pre-approval policies do not permit the delegation of the Audit Committee’s responsibilities to management.REPORT OF THE AUDIT COMMITTEEUnder the Audit Committee charter, the Audit Committee is responsible for overseeing the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the system of internal control over financial reporting and the financial reporting process. The independent accountants have the responsibility to express an opinion on the financial statements based on an audit conducted in accordance with generally accepted auditing standards. The Audit Committee has, among other things, the responsibility to monitor and oversee these processes.The Audit Committee has:(1) reviewed and discussed the Company’s audited financial statements with management;(2) discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, “Communications with Audit Committees,” as adopted bythe applicable rules of the Public Company Accounting Oversight Board; and(3) received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.The Audit Committee also considered the impact of non-audit services on the auditor’s independence.The Audit Committee reviewed with the independent accountants the overall scope and specific plans for its audit. Without management present, the Committee met with the independent accountants to review the results of their examinations, their evaluation of the Company’s internal control over financial reporting, and the overall quality of the Company’s accounting and financial reporting. The Audit Committee reviewed and discussed the Company’s audited financial statements with the independent accountants.Based on the review and discussions described above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20152018 for filing with the SEC.Audit Committee:John Caldwell,Stephen R. Cole, Audit Committee Member (Chair)Lynn Brubaker, Audit Committee MemberStephen Cole,John E. Caldwell, Audit Committee MemberJohn Donofrio, Audit Committee MemberMarvin Sambur,Jeffrey A. Graves, Ph.D., Audit Committee MemberYuval Wasserman, Audit Committee MemberPROPOSAL 3ADVISORY VOTE ON EXECUTIVE COMPENSATIONTHE BOARD OF DIRECTORS RECOMMENDS THAT OUR SHAREHOLDERS VOTE “FOR” PROPOSAL 3, THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.The Dodd-Frank Wall Street Reform and Consumer ProtectionSection 14A of the Exchange Act of 2010 (the “Dodd-Frank Act”) provides shareholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our named executive officers. This advisory vote is commonly known as “Say-on-Pay.” Accordingly, the Board of Directors is asking our shareholders to indicate their support for the compensation of our named executive officers, as disclosed in this Proxy Statement.This proposal is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our executive compensation program and practices. The Compensation Committee endeavors to ensure that the philosophy and operation of our compensation program reinforces our culture and values, creates a balance between risk and reward, attracts, motivates, and retains executives over the long-term and aligns their interests with those of our shareholders. The Compensation Committee strives to provide total compensation relating to the President and CEO, the other named executive officers and all other employees at the Vice President level and above, that is fair, reasonable and achieves the objective described above. Our executive compensation program includes a significant performance-based component, in the form of a short-term annual incentive award, as well as a substantial emphasis on “at-risk,” equity-based long-term incentives. Please read the Compensation Discussion and Analysis, together with the related compensation tables and narrative disclosure below, for a detailed explanation of our executive compensation program and practices.At our annual meetings of shareholders held in May 2013,2016, May 20142017 and May 2015,2018, approximately 95%98%, 98%99% and 98%78%, respectively, of the votes cast on the Say-on-Pay proposal at each of those meetings were voted in favor of the proposal. The Compensation Committee believes this affirmsDuring 2018, before our shareholders’ support forannual meeting of shareholders, our approach tomanagement team discussed our executive compensation programs, policies and no significant changes were made to this approach for 2015 aspractices with certain of our shareholders. As a result of the voteslower say-on-pay approval level in prior years. However,2018, and based on the discussions management had with those shareholders during 2018, the Compensation Committee decided to better align executive officer interests and rewards with the long-term interestsundertake a comprehensive review of our shareholdersexecutive compensation programs, policies and drivepractices, including engaging its independent compensation consultant to assist in the achievementreview of our purpose2018 say-on-pay voting results, shareholder outreach considerations and vision, our annualrecommendations for the 2019 long-term equity awards grantedincentive award design. As a result of this initiative, the Compensation Committee approved significant changes to our executives in 2015 were exclusively performance-based,executive compensation to more closely align with awards earned basedcurrent best practices, respond to shareholder concerns regarding the pay-for-performance features of our executive compensation programs, and strengthen the pay-for-performance alignment of our executive compensation programs. For more information regarding the changes made to our executive compensation program, see “Executive Compensation—Compensation Discussion and Analysis—Consideration of Prior Year Say-on-Pay Vote,” beginning on both quantitative and qualitative factors.The Board is asking our shareholders to vote “FOR” the following non-binding resolution:“Resolved, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis and the related compensation tables and narrative disclosure, in the Proxy Statement is hereby approved on an advisory basis.”The approval of this proposal requires the affirmative vote of a majority of the votes cast by the shareholders. Abstentions and broker non-votes will have no impact on the outcome of this matter. As an advisory vote, the result will not be binding on the Board; however, the Compensation Committee, which is comprised solely of independent directors, will consider the outcome of the vote when evaluating the effectiveness of our compensation policies and practices.The Board of Directors has determined, in line with the recommendation of our shareholders, to have an annual advisory vote on the compensation of our named executive officers. Accordingly, the next advisory vote on executive compensation will occur at our Annual Meeting of Shareholders in 2017. The next advisory vote on the frequency of Say-on-Pay votes will be conducted at our Annual Meeting of Shareholders in 2017.OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
The Board of Directors and management do not know of any matters before the Annual Meeting other than those to which we refer in the Notice of Annual Meeting and this Proxy Statement. If any other matters properly come before the Annual Meeting, the proxy holders will vote the shares in accordance with their best judgment. To bring business before an Annual Meeting, a shareholder must give written notice to our Secretary before the meeting and comply with the terms and time periods specified in our bylaws and described under “Deadline for Receipt of 2017 Shareholder Proposals and Director Nominees.” No shareholder has given written notice that he or she intends to bring business before the Annual Meeting in compliance with the terms and time periods specified in our bylaws.
Name Principal Position Simon Raab, Ph.D Electrical Engineering from New Mexico State University and a certificate from the Stanford University International Executive Management Program. Name Title Simon Raab, Ph.D. Kathleen J. Hall $133.6 million as of December 31, 2018. Performance Measure Sales growth Gross margin Net income Net change in cash flow excluding equity inflows EXECUTIVE OFFICERSThe following table provides information regarding our executive officers as of March 24, 2016:29, 2019: Age 66 63 President and Chief Executive Officer DirectorJoseph Arezone 44 50 Senior Vice President, Managing Director, Europe, Middle East, and Africa and Asia-Pacific RegionsChief Financial OfficerJody Gale 58 41 Chief Operating Officer Jody S. Gale 44 Senior Vice President, General Counsel and Secretary Kathleen J. Hall 56 55 Senior Vice President, Managing Director, Americas RegionChief People OfficerRobert Seidel 45 41 Vice President, Finance and Investor RelationsChief R&D OfficerSimon Raab, Ph.D. has served as interim President and Chief Executive OfficerCEO of the Company since December 2015. Please refer to the biography of Dr. Raab provided under the heading “Proposal 1—Election of Directors—Directors Whose Terms Will Continue After the Annual Meeting,” on page 1110 of this Proxy Statement.Joseph Arezone hasRobert E. Seidel was appointed our Chief Financial Officer in December 2016. Prior to this appointment, Mr. Seidel served as Senior Vice President, Managing Director, Europe, Middle East and Africa and Asia-Pacific Regions since November 2014. He previously served as Senior Vice President, Managing Director, Asia-Pacific Region from August 2009 to November 2014 and as our Vice President of Sales for Asia-Pacific from January 2008 to August 2009. Prior to that, Mr. Arezone was our Area Vice President of Sales for the Eastern U.S. market from July 2005 to January 2009. From February 2001 until July 2005, Mr. Arezone served as our Regional Sales Manager. Mr. Arezone serves on the board of directors of the Cleveland Film Society. He holds a Bachelor of Science in Civil Engineering from The Ohio State University and a Master of Business Administration from Cleveland State University.Jody Gale has served as Senior Vice President, General Counsel and Secretary of the Company since February 2014. Prior to joining FARO, Mr. Gale served as Vice President and Associate General Counsel – M&A, Securities and Governance at Biomet, Inc., a global medical device company, from December 2008 to January 2014. Previously, Mr. Gale was a Partner at Kirkland & Ellis LLP, where he worked from 1999 through 2008. Mr. Gale holds a Bachelor of Arts degree from Albion College in Albion, MI and a JD/MBA from Case Western Reserve University.Kathleen J. Hall has served as our Senior Vice President, Managing Director for our Americas region since July 2013. Prior to joining FARO, Ms. Hall served as Vice President & General Manager of Avery Dennison’s Graphics and Reflective Solutions and Performance Tapes Americas’ businesses from November 2008 to October 2012. Between October 2012 and July 2013, Ms. Hall provided independent consulting services. From 1982 to 2008, Ms. Hall held roles of increasing responsibility at E.I DuPont De Nemours & Company, ranging from operations and sourcing to sales, marketing and global business leadership. Ms. Hall holds a Bachelor of Science degree in Industrial Engineering from Lehigh University.Robert Seidel was appointed the Vice President, Finance and Investor Relations and interim principal financial officer of the Company onsince March 10, 2016. Mr. Seidel previously held the positions of Vice President, Americas Finance and Accounting from November 2015 to March 2016, Vice President, Corporate FP&AFinancial Planning & Analysis and Americas Finance from March 2015 to November 2015, and Director, Corporate Financial Planning and Analysis from May 2014 to March 2015. Prior to joining the Company, Mr. Seidel was employed at Trinseo S.A., a global materials company, serving as Global Finance Manager for its latex chemicals segment from 2011 to 2014. Previously, Mr. Seidel served as Plant Controller at Anheuser-Busch InBev from 2006 to 2010. Mr. Seidel began his finance and accounting career as a treasury intern at Exxon Mobil Corporation in 2002, then served in various financial planning and analysis roles of increasing responsibility at Air Products and Chemicals, Inc. from 2003 to 2006. He holds a B.S.Bachelor of Science degree in Mechanical Engineering from Stanford University and an MBAa Master of Business Administration from Cornell’s Johnson School.EffectiveKathleen J. Hall was appointed our Chief Operating Officer in April 2016. Prior to this appointment, Ms. Hall served as Senior Vice President, Managing Director for our Americas region from July 2013 to April 2016. Between October 2012 and July 2013, Ms. Hall provided independent consulting services. Prior to that, Ms. Hall served as Vice President & General Manager of Avery Dennison Corporation’s Graphics and Reflective Solutions and Performance Tapes Americas’ businesses from November 2008 to October 2012. From 1982 to 2008, Ms. Hall held roles of increasing responsibility at E.I. du Pont De Nemours & Company, ranging from operations and sourcing to sales, marketing and global business leadership. Ms. Hall holds a Bachelor of Science degree in Industrial Engineering from Lehigh University.Jody S. Gale has served as Senior Vice President, General Counsel and Secretary of the Company since February 2014. Prior to joining the Company, Mr. Gale served as Vice President and Associate General Counsel – M&A, Securities and Governance at Biomet, Inc., a global medical device company, from December 4, 2015, Jay W. Freeland resigned2008 to January 2014. Previously, Mr. Gale was a Partner at Kirkland & Ellis LLP, where he worked from his position1999 through 2008. Mr. Gale holds a Bachelor of Arts degree from Albion College in Albion, Michigan and a Juris Doctor/Master of Business Administration from Case Western Reserve University.Katrona Tyrrell has served as Chief People Officer of the Company since January 2017. Prior to joining the Company, Ms. Tyrrell served as Global Senior Vice President, Human Resources for IDT Corporation, a global telecommunications and payment services provider, from 2010 to January 2017, leading a team that was responsible for global succession planning, leadership development, performance management, employee engagement and organizational effectiveness. From 2006 to 2010, Ms. Tyrrell held roles of increasing human resources management responsibility at IDT Corporation. Prior to joining IDT Corporation in 2006, Ms. Tyrrell held leadership and management positions at Towergate Partnership, Ltd. and Robert & Partners Managed Services in the United Kingdom. Ms. Tyrrell holds a post-graduate diploma in strategic management from Crawley College in the United Kingdom.Yazid Tohme, Ph.D. was appointed as our PresidentChief Research and Chief Executive Officer. Mr. Freeland hadDevelopment Officer in March 2019. Prior to his appointment, Dr. Tohme served in this position since December 2006. Effective March 10, 2016, Laura Murphy-Wolf resigned from her position as our Senior Vice President, R&D, Group 1 since March 2017. Dr. Tohme previously held the positions of Vice President, Engineering, Metrology Technologies from January 2014 to March 2017 and Director of Engineering, 3D Imaging from June 2011 to December 2013. Prior to joining the Company, Dr. Tohme served as the Chief Technology Officer for Rochester Precision Optics, a company that specializes in developing lightweight electro-optical products, from January 2011 until June 2011. Prior to that, Dr. Tohme held various research and development leadership roles of increasing responsibility at Moore Nanotechnology Systems, a company that manufactures precision machines. Dr. Tohme holds a Bachelor of Science degree in Mechanical Engineering from the University of Kentucky as well as a Master of Science and Ph.D. in Mechanical Engineering from the University of Florida and a Master of Business Administration from the University of Massachusetts.New President and CEOOn April 5, 2019, the Board appointed Michael D. Burger as the President and CEO of the Company, effective June 17, 2019, to succeed Dr. Raab, who is retiring as our President and CEO and as a member of our Board on June 16, 2019. Mr. Burger, age 60, most recently served as President and Chief Financial Officer. Ms. Murphy-Wolf hadExecutive Officer and as a member of the board of directors of Electro Scientific Industries, Inc., a leading supplier of innovative laser-based microfabrication solutions for industries reliant on microtechnologies, from October 2016 to February 2019, when it was acquired by MKS Instruments, Inc. Prior to joining Electro Scientific Industries, Inc., Mr. Burger was President and Chief Executive Officer and a member of the board of directors of Cascade Microtech, Inc., a manufacturer of advanced wafer probing, thermal and reliability solutions for the electrical measurement and testing of high performance semiconductor devices, from July 2010 to June 2016. From April 2007 to February 2010, Mr. Burger served as the President and Chief Executive Officer and as a member of the board of directors of Merix Corporation (“Merix”), a printed circuit board manufacturer. Mr. Burger also served as a member of the board of directors of ViaSystems Group, Inc. from February 2010 after it acquired Merix until May 2015. From November 2004 until joining Merix, Mr. Burger served as President of the Components Business of Flextronics Corporation. From 1999 to November 2004, Mr. Burger was employed by ZiLOG, Inc., a supplier of devices for embedded control and communications applications. From May 2002 until November 2004, Mr. Burger served as ZiLOG’s President and a member of its board of directors. Mr. Burger holds a B.S. degree in this position since August 2015.EXECUTIVE COMPENSATIONCompensation Discussion and AnalysisInThe Compensation Committee oversees, among other things, the paragraphs that follow, we provide an overview and analysisdevelopment of our executive compensation programprograms, policies and policies, the material compensation decisions the Committee has made under those programs and policies with respect to our named executive officers, and the material factors the Compensation Committee considered in making those decisions. Following thispractices. This Compensation Discussion and Analysis under(“CD&A”) describes our executive compensation program for 2018. The guiding principles and fundamental objectives of the heading “Executive Compensation”executive compensation program are as follows:establish clear performance goals that are quantifiable and focused on our success while balancing both short-term and long-term initiatives;align our senior leadership team’s interests with the interests of our shareholders;retain and motivate our senior leadership team;provide operational, financial and strategic objectives to each member on our senior leadership team; andrecognize our performance in addition to individual performance.Following this CD&A, you will find a series of tables and narrative disclosures containing specific data about the compensation earned in 20152018 by the following individuals, whom we refer to as our named executive officers:President and Chief Executive Officer (“CEO”) Joseph ArezoneSenior Vice President, Managing Director, Europe, Middle East and Africa and Asia-Pacific RegionsChief Financial OfficerChief Operating Officer Jody S. Gale Senior Vice President, General Counsel and Corporate Secretary Kathleen HallSenior Vice President, Managing Director, AmericasJanet D’AnjouVice President and Corporate Controller and former interim principal financial officerJay W. FreelandFormer President and Chief ExecutivePeople OfficerPeter G. AbramJoseph Arezone Former Senior Vice President and Chief FinancialCommercial OfficerLaura A. Murphy-WolfFormer Senior Vice President and Chief Financial OfficerWe experienced several changesChanges in our senior executive team in 2015. InExecutive LeadershipEffective as of March 2015, Mr. Abram resigned5, 2018, Joseph Arezone reduced his duties and responsibilities due to his desire to relocate to be closer to his family, stepping down from his position as Senior Vice PresidentChief Commercial Officer and Chief Financial Officer in connection with a family tragedy and other reasons. In connection with his departure, we appointed Ms. D’Anjou to serve as our interim principal financial officer and principal accounting officer, and she served in that capacity from March 2015 until August 2015 when we hired Ms. Murphy-Wolfserving as our Senior Vice President, Corporate Strategy & Initiatives through June 5, 2018. As a result, Mr. Arezone also ceased serving as an “executive officer” within the meaning of Rule 3b-7 under the Exchange Act. On June 5, 2018, Mr. Arezone entered into a Transition and Chief Financial Officer. In December 2015, Mr. Freeland resignedSeparation Agreement (the “Transition Agreement”) with us and stepped down as President and Chief Executive Officer to pursue other business and personal interests. Dr. Raab, our co-founder and Chairman, has been appointed interim President and Chief Executive Officer. In March 2016, Ms. Murphy-Wolf resigned as Senior Vice President, Corporate Strategy & Initiatives. Mr. Arezone served as an at-will employee of the Company through November 30, 2018.On January 9, 2019, we entered into a letter agreement with Dr. Raab, setting forth the terms of Dr. Raab’s retirement as our President and Chief Financial Officer to pursue other businessCEO and personal interests.Executive SummaryOur BusinessWe design, develop, manufacture, market and support software driven, three-dimensional (3D) measurement, imaging and realization systems. We sell the majorityas a member of our products throughBoard of Directors (the “Board”). Dr. Raab agreed to continue to serve as our President and CEO and to remain on the Board until the appointment of his successor. On April 5, 2019, the Board appointed Michael D. Burger as our President and CEO, effective as of June 17, 2019. Mr. Burger has over 20 years of experience as a direct sales force across a broad number of customers in a range of manufacturing, industrial, architecture, surveying, building information modeling, construction, public safety, cultural heritage and other applications. Our FaroArm®, FARO Laser ScanArm®, FARO Gage, FARO Laser Tracker™, FARO Cobalt Array 3D Imager, and their companion CAM2® software, provide for Computer-Aided Design, or CAD, based inspection and/or factory-level statistical process control and high-density surveying. Together, these products integrate the measurement, quality inspection, and reverse engineering functions with CAD software to improve productivity, enhance product quality and decrease rework and scrapglobal executive in the manufacturing process. Our FARO Focus3Dindustrial technology segment. Mr. Burger’s background is discussed in more detail on page 26 of this Proxy Statement. In connection with Mr. Burger’s appointment, Dr. Raab will retire as our President and FARO Freestyle3D laser scanners,CEO and their companion SCENE, FARO public safety software and FARO 3D software, are utilized foras a wide variety of 3D modeling, documentation and high-density surveying applications, including in two of our key vertical markets—Building Information Modeling (BIM)/Construction Information Management (CIM) and public safety.Business HighlightsOur fiscal 2015 results reflected the effectmember of the significant strengtheningBoard on June 16, 2019. In addition, on April 5, 2019, the Board elected John Donofrio to serve as the independent Chairman of the U.S. dollar throughout 2015Board, effective immediately. See “Retirement of Dr. Raab and other macroeconomic conditions that negatively impactedCompensation Arrangements with Mr. Burger” below for information regarding Dr. Raab’s compensation during this transition and Mr. Burger’s compensation as our President and CEO.Executive SummaryCompany Performance in 2018In 2018, we crossed the capital budgets$400 million milestone in annual sales for the first time in our history. We recorded $403.6 million in total sales in 2018, an increase of many11.8% over 2017. We achieved over $425 million in new order bookings in 2018, up 12.8% compared to 2017. We executed on our strategic sales growth initiative by expanding our sales organization headcount 16.2% compared to the end of 2017. Our release of new products into the market continued during 2018, with fourteen new product launches. In addition, we expanded our customers. Although our financial results did not meet our internal targets, there wereproduct portfolio through four acquisitions in 2018. We maintained a numberstrong balance sheet with no debt and cash and cash equivalents and short-term investments of highlights in 2015:•Product innovation—In the first quarter of 2015, we launched the FARO Freestyle3D laser scanner. This handheld laser scanner can quickly document rooms, structures and objects in 3D and create high-definition point clouds. We also launched the FARO Freestyle3DX in the third quarter of 2015, which delivers enhanced scanning accuracy of 1 millimeter at a 1 meter range.•Strategic acquisitions—In the first quarter of 2015, we completed the acquisition of kubit GmbH and ARAS 360 Technologies Inc. These software businesses provide us with the opportunity to offer our customers a complementary suite of integrated 3D documentation products within the public safety and Building Information Modeling (BIM)/ Construction Information Management (CIM) markets.•Infrastructure investment—To support future growth and to enhance our business information and transactions systems and financial reporting, we implemented SAP, an enterprise resource planning (“ERP”) system. SAP was implemented in phases, beginning with the Americas region, where implementation commenced at the start of the fourth quarter of 2014. The implementation continued in 2015 in the Europe/Africa region and was completed in the Asia-Pacific region in the fourth quarter of 2015.•Share repurchases—In October 2015, our Board of Directors authorized an increase to our existing share repurchase program from $30 million to $50 million. In the fourth quarter of 2015, we repurchased 809,241 shares under the program for a total cash payment of $22.8 million. As of December 31, 2015, we had authorization to repurchase $18.3 million remaining under the repurchase program.Total Shareholder ReturnOur five-year and one-year Total Shareholder Return (TSR) is substantially below(“TSR”) as of December 31, 2018 was above our industry group and our peer group. Ourgroup, while our three-year TSR is substantiallyas of December 31, 2018 was above our peerindustry group but substantiallyand below our industrypeer group. For a discussion of the companies in our peer group, see “Review of Peer Group Practices” below. We use the Global Industry Classification Standard (GICS) Subcode 4520 (Technology Hardware and Equipment) developed by Standard & Poor’s Financial Services LLC and MSCI BarraInc. as our industry group.
2015 Performance and CompensationOur 2015 results did not meet all
Consideration of Prior Year Say-on-Pay VoteAt our 2018 annual meeting of shareholders, approximately 78% of the internal performance goals that we setvotes cast on the annual say-on-pay vote were voted in favor of the proposal. This was a significant decrease from the 2017 annual meeting of shareholders, at which approximately 99% of the votes cast were voted in favor of the say-on-pay proposal. During 2018, before our annual meeting of shareholders, our management team discussed our executive compensation programs, policies and practices with certain of our shareholders. As a result of the lower say-on-pay approval level in 2018, and based on the discussions management had with those shareholders during 2018, the Compensation Committee decided to undertake a comprehensive review of our executive compensation programs, policies and practices, including engaging its independent compensation consultant, Compensia, Inc. (“Compensia”), to assist in the review of our 2018 say-on-pay voting results, shareholder outreach considerations and recommendations for the 2019 long-term equity incentive award design. As a result of this initiative, the Compensation Committee approved the following significant changes to our 2015executive compensation to more closely align with current best practices, respond to shareholder concerns regarding the pay-for-performance features of our executive compensation programs, and strengthen the pay-for-performance alignment of our executive compensation programs:Prior Approach What We Heard Our Actions Short-term cash incentives could be earned based on the achievement of established performance metrics; however, the Compensation Committee had discretionary authority to increase (or decrease) the amount earned. The Compensation Committee approved discretionary cash bonuses to be paid to our named executive officers for 2017 even though the performance requirements were not met under our short-term cash incentive plan. Annual cash bonus awards are not tied to the achievement of established performance metrics. For 2018, the short-term cash incentive plan had pre-established performance metrics, consisting of sales growth and operating income. In determining the bonuses earned by, and paid to, our named executive officers based on 2018 performance, these performance metrics were strictly adhered to, and no discretionary bonuses were awarded to our named executive officers for 2018. Our long-term incentive compensation in recent years consisted of a mix of stock options and restricted stock units, both subject to only time-based vesting. Long-term incentive compensation is not tied to objective performance metrics. For 2019, the Compensation Committee redesigned the long-term equity incentive awards granted to our named executive officers to eliminate the use of stock options and introduce performance-based restricted stock units. The Compensation Committee adjusted the mix and vesting of the equity awards granted to our named executive officers in 2019 as follows: (1) 50% of the value of the equity awards was in the form of performance-based restricted stock units, which vest at the end of three years based on the satisfaction of pre-established goals related to our total shareholder return (“TSR”) compared to the TSR of the companies in the Russell 2000 Growth Index; and (2) 50% of the value of the equity awards was in the form of time-based restricted stock units that vest in equal installments over three years Going forward, future advisory votes on executive compensation will serve as an additional tool to guide the Board and the Compensation Committee in evaluating the alignment of our executive compensation program which were intentionally aggressive. The Compensation Committee selectedwith the following internalinterests of the Company performance objectivesand our shareholders. Our management team will continue to meet with shareholders to discuss topics of interest to our shareholders, including executive compensation matters.When determining how often to hold our advisory votes on executive compensation, our Board took into account the strong preference for an annual vote expressed by our shareholders at our 2017 annual meeting of shareholders. Consistent with this preference, the 2015 short-term incentive awards forBoard determined to implement an advisory vote on executive compensation on an annual basis until the next required vote on the frequency of shareholder votes on the compensation of our named executive officers, (other than Dr. Raab) ($ in millions): 2015 Goals Current Year (2015)
Actual Result 15.3 % (7.1 )% 56.0 % 52.8 % $ 34.6 $ 12.8 $ 23.7 $ 8.6 (1) (1)Adjusted for our 2015 acquisitions and the repurchase of shares in the fourth quarter of 2015.The Compensation Committee selected these performance metricswhich will be conducted at the beginningour 2023 annual meeting of 2015 because they are key drivers of our success, and the compensation realized by our named executive officers was directly affected by the internal financial performance objectives achieved in 2015. For example:The short-term incentive opportunity for Mr. Freeland, Ms. Murphy-Wolf, Mr. Gale, Ms. D’Anjou and Mr. Abram was weighted 50% to certain Company-wide financial metrics, 30% to individual operating objectives, and 20% to individual strategic metrics. The short-term incentive opportunity for
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The stock options and restricted stock units granted to Mr. Freeland, Ms. Hall, Mr. Arezone, Mr. Gale, Ms. D’Anjou and Mr. Abram in 2015 were exclusively performance-based awards, with awards earned based on both quantitative and qualitative factors. As noted above, we did not achieve satisfactory financial, operating or strategic results in 2015 and did not meet most of our performance goals. As a result, the named executive officers eligible for vesting as of the determination date in February 2016 only earned a portion of their long-term incentive award payouts tied to our fiscal 2015 performance, ranging from 20% to 25% of target vesting amounts.
CEO Pay and Impact of Resignation
Mr. Freeland was not eligible to receive a short-term incentive awardCompany Performance Alignment
exercise price of the stock options.
incentives, which in 2018 took the form of stock options for Dr. Raab and a combination of stock options and restricted stock units (“RSUs”) for the other NEOs. In 2019, the equity awards granted to our named executive officers consist of performance-based RSUs (instead of stock options) and time-based RSUs.
determination of appropriate salary levels is largely subjective. TheIn 2018, the Compensation Committee approved an increase inchanges to the base salaries of eachcertain of theour named executive officers to the following levels:
Name | 2015 Base Salary | % Increase from 2014 | ||||||
Mr. Freeland | $ | 489,038 | 5.0 | % | ||||
Ms. Murphy-Wolf | $ | 335,000 | N/A | |||||
Ms. Hall | $ | 351,500 | 5.0 | % | ||||
Mr. Arezone | $ | 351,500 | 134.3 | % | ||||
Mr. Gale | $ | 299,237 | 5.0 | % | ||||
Ms. D’Anjou | $ | 168,000 | 5.0 | % | ||||
Ms. Murphy-Wolf’s initial base salary of $335,000 was established at the outset of her employment with us in August 2015. In 2015, Mr. Arezone’s compensation was adjusted to better align with the breadth of his management responsibilities. Effective March 19, 2015, Mr. Arezone received a base salary of $351,500 and was eligible for our short-term cash incentive plan and was no longer entitled to receive commissions. Prior to this change, Mr. Arezone received a base salary of $150,000 plus commissions and was not eligible to participate in our short-term cash incentive plan. As a consequence of these changes, Mr. Arezone’s base pay increased considerably as a result of the impact of exchanging his commission pay component for a base pay component. However, Mr. Arezone’s aggregate cash compensation for 2015 was below his aggregate cash compensation for 2014.
In addition to the above, effective upon his appointment as our interim President and Chief Executive Officer in December 2015, Dr. Raab’s base salary was set at $500,000 by the Compensation Committee.
| Name | 2018 Base Salary | % Increase (Decrease) from 2017 | |||||
| Dr. Raab | $ | 775,000 | 3.3 | % | |||
| Mr. Seidel | $ | 334,000 | 26.0 | % | (1) | ||
| Ms. Hall | $ | 420,000 | 5.0 | % | |||
| Mr. Gale | $ | 362,000 | 3.1 | % | |||
| Ms. Tyrrell | $ | 281,000 | 12.4 | % | |||
| Mr. Arezone | $ | 263,280 | (32.5 | )% | (2) | ||
| (1) | Effective upon his promotion as our Chief Financial Officer in December 2016, Mr. Seidel’s base salary was set at $265,000 by the Compensation Committee. In February 2018, after evaluating Mr. Seidel’s performance as our Chief Financial Officer and reviewing and evaluating a competitive review of our executive compensation program and advice received from its executive compensation consultant, Compensia, the Compensation Committee approved an increase of Mr. Seidel’s base salary to $334,000. |
| (2) | Mr. Arezone’s base salary was decreased effective March 2018 due to his change in position from Chief Commercial Officer to Senior Vice President, Corporate Strategy & Initiatives. |
Due to the timing of his appointment in December 2015, Dr. Raab was not eligible to receive a short-term cash incentive opportunity for 2015 performance, but he will be eligible to participate in the short-term cash incentive plan in future years, with a target award value of 50% of his base salary.
Company Financial Performance. In 2015, fifty percent (50%) of the short-term incentive opportunity for Messrs. Freeland, Gale and Abram and Mses. Murphy-Wolf and D’Anjou waswere based on achievement of Company-wide financial performance goals. For Ms. Hall and Mr. Arezone, fifteen percent (15%) of their short-term incentive opportunity was based on achievement of Company-wide financial performance goals and thirty-five percent (35%) was based on achievement of region-wide financial performance goals. For each of thesethe named executive officers, the Compensation Committee selected the following CompanyCompany-wide performance objectives for 2015, with different weighting for each metric:2018: sales growth gross margin, net(weighted 50%) and operating income (weighted 50%). In 2016, we reorganized our business to align our sales, marketing and net change in cash flow excluding equity inflows.
Eachproduct management to specific vertical markets and better redefine our end market applications and modernize our sales process to improve the efficiency of these performance metrics isour sales organization, accelerate and maintain a consistent schedule to new product introductions and harmonize our global functions to improve efficiencies. Sales growth and operating income are key indicatorindicators of our financial performance.performance and used to evaluate the success of our reorganization initiatives and to focus our named executive officers on growing the business. Additionally, operating income focuses our named executive officers on margin expansion, operating efficiencies and profitability and was used as a Company-wide performance objective for 2018 because the Compensation Committee determined that it was more reflective of the contributions that our executive officers made during 2018, as operating income is less impacted by external factors that are outside the control of our executive officers, as compared to net income, which was used in 2017.
| Target | Actual | |||||||
Sales growth | 15.3 | % | (7.1 | %) | ||||
Gross margin | 56.0 | % | 52.8 | % | ||||
Net income | $ | 34.6 | $ | 12.8 | ||||
Net change in cash flow excluding equity inflows | $ | 23.7 | $ | 8.6 | (1) | |||
If we had achieved the threshold level of performance for each of the | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The region-wide financial performance metrics for Mr. Arezone and Ms. Hall were based on sales growth, gross margin and operating income for the Europe, Middle East and Africa and Asia-Pacific regions and the Americas region, respectively.
Operational Performance. In 2015, thirty percent (30%)set forth above in 2018, payouts would equal 50% of the short-term incentivetarget award opportunity for each of these named executive officers wasofficer. If we had achieved or exceeded the maximum level of performance for each of the performance metrics set forth above in 2018, payouts would equal 200% of the target award opportunity for each named executive officer.
Individual Strategic. In 2015, twenty percent (20%) of the short-term incentive opportunity for each of these named executive officers was based on achievement of individual strategic objectives.
The material strategic initiatives for each of these named executive officers for 2015 are summarized below.
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Aggregate Performance Results. We did not achieve any of our corporate financial performance targets for 2015, but we did achieve certain of our region-wide financial performance targets. Accordingly, the Compensation Committee determined that the named executive officers would not be eligible for the portion of the short-term incentive opportunity that was based on achievement of financial performance targets by the Company, but that Mr. Arezone and Ms. Hall would be eligible for a portion of the thirty-five percent (35%) of their short-term incentive opportunity that was based on achievement of financial performance targets by their individual regions, depending on the targets for each executive. The operating metrics were reviewed quarterly by the Operational Audit Committee of the Board of Directors. The Compensation Committee determined the eligible portion of the thirty percent (30%) of the short-term incentive opportunity based on the achievement of the operational metrics assigned to the named executive officer for each quarter as well as for the full year. The Compensation Committee then applied each executive’s individual performance factor to the remaining twenty percent (20%) of the target award, which reflected the strategic achievements by such executive. The resulting amount was then adjusted downward to approximately 60% of the amounts otherwise determined as a consequence of the downward adjustment by the Board of the aggregate short-term cash incentive opportunity discussed on page 34. The calculation of the actual award for each of our eligible named executive officers was determined as follows:
Name | Financial Performance | Operational Performance | Strategic Objectives | Board Adjustment | Actual Award as % of Target | |||||||||||||||
Ms. Murphy-Wolf | 0 | % | 76 | % | 60 | % | 60 | % | 21 | % | ||||||||||
Ms. Hall | 51 | % | 78 | % | 83 | % | 60 | % | 39 | % | ||||||||||
Mr. Arezone | 10 | % | 72 | % | 64 | % | 60 | % | 24 | % | ||||||||||
Mr. Gale | 0 | % | 76 | % | 60 | % | 60 | % | 21 | % | ||||||||||
Ms. D’Anjou | 0 | % | 72 | % | 110 | % | 56 | % | 24 | % | ||||||||||
As a result, the Compensation Committee awarded short-term incentives to Messrs. Arezone and Gale and Seidel and Dr. Raab was 1.0 and for Mses. Murphy-Wolf , Hall and D’Anjou, as follows:
Name | 2015 Target Award | 2015 Actual Award | Actual Award as % of Target | |||||||||
Ms. Murphy-Wolf | $ | 52,500 | $ | 10,894 | 21 | % | ||||||
Ms. Hall | $ | 140,600 | $ | 54,903 | 39 | % | ||||||
Mr. Arezone | $ | 140,600 | $ | 33,463 | 24 | % | ||||||
Mr. Gale | $ | 119,695 | $ | 24,837 | 21 | % | ||||||
Ms. D’Anjou | $ | 50,400 | $ | 12,196 | 24 | % | ||||||
Under the terms of Messrs. Freeland’s and Abram’s separation agreements, they were not eligibleTyrrell was 1.1 due to receive a short-term incentive award for 2015 performance.
In recognition of Ms. D’Anjou’s performance as interim principal financial officer and interim principal accounting officer from March 2015 until August 2015, she was awarded a one-time, discretionary cash bonus of $15,000 in October 2015.
In December 2015, the Compensation Committee received reports from its executive compensation consultant Pearl Meyer on the Company’s executive compensation program, including its short-term cash incentive award program. The observations of Pearl Meyer were consistent with those shared by management and by certain investors who have communicated concerns to the Company with respect to its cash incentive programs, specifically that the Company’s short-term cash incentive program was overly complex with too many performance categories and measures to be effective. Accordingly, the Compensation Committee adopted a simpler short-term cash incentive plan beginning in 2016, in which awards for executives will be determined based on achievement of financial performance goals for revenue (30%) and profitability (70%), which amount will then be multiplied by an individual performance factor normalized at 1.0. The effect of the individual performance factor will be to adjust, on a performance basis, the amount otherwise determined upward or downward based upontheir achievement of individual objectives, performance against operational metrics assigned to the executivethem for each quarter in the prior year as well as for the full prior year and overall contribution for the prior year, without ascribing specific percentagesyear.
named executive officer was adjusted downward to 11.5% of such executive’s short-term incentive award target, as further adjusted by their individual performance factor.
| Name | 2018 Target Award | 2018 Short-Term Incentive Payout | Actual Short-Term Incentive Payout as % of Target Award | |||||||
| Dr. Raab | $ | 775,000 | $ | 89,100 | 11.50 | % | ||||
| Mr. Seidel | $ | 133,600 | $ | 15,364 | 11.50 | % | ||||
| Ms. Hall | $ | 210,000 | $ | 26,565 | 12.65 | % | ||||
| Mr. Gale | $ | 144,800 | $ | 16,652 | 11.50 | % | ||||
| Ms. Tyrrell | $ | 112,400 | $ | 14,219 | 12.65 | % | ||||
Our
ratio of 75% and 25%, respectively.
In addition, Ms. Murphy-Wolf received an initial grant of stock options in connection with her commencement of employment with us in August 2015. Dr. Raab received a grant of stock options when he assumed the role of interim President and Chief Executive Officer in December 2015.
2018.
In 2015, we began granting performance-based stock options and RSUs to certain executives, including certainother named executive officers. These awards vest in three annual installments beginning one year aftercriteria incorporate elements of individual performance and are intended to reflect the grant date ifcontributions made by the performance goals or strategicnamed executive officer toward our overall objectives for the applicable fiscal year are achieved.
2015 Grants. The Compensation Committee establishedand the following target long-term equity award values for the 2015 grants for Messrs. Freeland, Arezone, Gale and Abram and Ms. Hall, expressed as a percentage of base salary: 150% for Mr. Freeland and 100% for Messrs. Arezone, Gale and Abram and Ms. Hall. The size of Ms. D’Anjou’s equity grant in 2015 was determined as stated above. The exercise price of all stock options is based on the closing price of our common stock on the date of grant. Options and RSUs granted in 2015 to executives as part of the annual equity grant program are earned and vest in three annual installments, provided that the grantee is employed by us on the vesting date and provided that the applicable performance conditions are satisfied, as follows:
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The materialnamed executive officer’s individual strategic objectives for each eligible executive for 2015 are summarized below.
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The following RSUs and stock options were granted in relation to the 2015 annual equity grant:
Name | Grant Date | RSUs | Stock Options | |||||||||
Mr. Freeland | 2/27/2015 | — | 41,846 | |||||||||
Ms. Hall | 2/27/2015 | 1,465 | 15,038 | |||||||||
Mr. Arezone | 3/19/2015 | — | 19,836 | |||||||||
Mr. Gale | 2/27/2015 | 1,247 | 12,803 | |||||||||
Ms. D’Anjou | 2/27/2015 | — | 5,000 | |||||||||
Mr. Abram | 2/27/2015 | 1,397 | 14,333 | |||||||||
In addition to the 2015 annual equity grants described above, Ms. Murphy-Wolf received an initial grant of stock options to purchase 23,452 shares of our common stock in connection with her commencement of employment with us in August 2015, and Dr. Raab received a grant of stock options to purchase 60,000 shares of our common stock in connection with his assumption of the role of interim President and Chief Executive Officer in December 2015.
Grant Policy. Beginning in 2008, the Compensation Committee established a policy to (i) grant stock options and other equity incentives for current employees annually on the later to occur of (a) the date the award is approved and (b) the second business day following the filing of our Annual Report on Form 10-K, which usually occurs in late February or early March of each year, and (ii) grant stock options and other equity incentives for newly hired individuals on the date of hire. The annual grant of stock options and other equity incentive awards is made without regard to the timing of the release of any other material information that may not be contained in the annual earnings release, as well as without regard to whether possible positive or negative information is contained in the annual earnings release.
| Name | Grant Date | RSUs | Stock Options | ||||||
| Dr. Raab | 3/20/2018 | — | 78,403 | ||||||
| Mr. Seidel | 3/20/2018 | 1,090 | 8,563 | ||||||
| Ms. Hall | 3/20/2018 | 2,027 | 15,917 | ||||||
| Mr. Gale | 3/20/2018 | 1,198 | 9,412 | ||||||
| Ms. Tyrrell | 3/20/2018 | 924 | 924 | 7,260 | |||||
| Mr. Arezone | 3/20/2018 | 932 | 7,320 | ||||||
Compensation Governance Highlights
The Compensation Committee and Company management are mindful of evolving practices in executive compensation and corporate governance. In response, we have adopted the following policies and practices:
Pursuant to a policy adopted in 2010, we will not offer newly-hired executives any “single-trigger” change-in-control features similar to a lump sum in cash payment payable uponwithin 30 days following June 17, 2019. Mr. Burger will be required to repay the occurrencesigning bonus if, prior to June 17, 2021: (i) he voluntarily terminates his employment with us other than for “good reason” (as defined in the Employment Agreement), (ii) the Employment Agreement expires as a result of his election not to renew the annual term of the Employment Agreement, or (iii) his employment is terminated by us for “cause” (as defined in the Employment Agreement).
Theour Amended and Restated Change in Control Severance Policy does(the “Policy”), as described below under “—Employment Agreements and Change in Control Severance Policy,” with the additional provision that if the target amount of Mr. Burger’s annual cash bonus for the year in which a qualifying termination (as defined in the Policy) takes place is greater than the aggregate of (i) the bonus amount (as defined in the Policy) and (ii) the pro-rated bonus amount provided for in the Policy, then he will receive such target amount in lieu of the bonus amounts described in clauses (i) and (ii) above. In addition, if during the period of time beginning with a change in control (as defined in the Policy) and ending 12 months following such change in control, we terminate Mr. Burger’s employment other than for cause or his employment terminates due to his resignation for good reason, as of the date of such termination, (a) any outstanding and unvested stock options held by him will become fully exercisable, (b) any outstanding time-based equity awards held by him will become fully vested and payable and (c) any outstanding performance-based equity awards will become fully vested and payable at the greater of actual performance or target.
The 2014 Equity Plan prohibits cash buyoutsseverance equal to the sum of stock options.
We maintain a compensation clawback policy, as further described on page 46 of this Compensation Discussion and Analysis.
Since 2008, we have had a stock ownership policy for our non-employee directors and executive officers, as further described on pages 21, 22 and 46 of this Proxy Statement, respectively. Among other things, this policy provides that our CEO must hold at least six times(i) his annual base salary in Company stock, our other executives must hold at least two times their respective base salaries in Company stock, and our non-employee directors must own Company stock with a valueplus (ii) an amount equal to his target bonus for the annual performance period during which the date of at least $300,000.
Company policy prohibits hedging and limits any pledging by our directors and executive officers.
The Compensation Committee does not believe thattermination occurs, pro-rated for the workduration of its compensation consultant has raised any conflicts of interest.
The Compensation Committee has retained compensation consultants from time to time, including for formal executive and director compensation studies in 2010, 2012 and 2015. Such consultants are frequently consulted during the year on various mattersthat Mr. Burger was employed by us, payable in a lump sum cash payment within 90 days following the date of termination (provided that he has executed and annuallynot revoked a general release of claims and covenant not to informally update the Compensation Committee on matters that are relevant to the matters delegated to the Committee under its charter.
To better align the interestssue in favor of us and rewardscomplies with certain non-competition restrictions);
Company Industry Description Axcelis Technologies, Inc. Badger Meter, Inc. Brooks Automation, Inc. Cognex Corporation Cohu, Inc. Daktronics, Inc. Electro Scientific Industries, Inc. FormFactor, Inc. GSI Group, Inc. IPG Photonics Corporation LoJack Corporation Mercury Systems, Inc. MTS Systems Corporation Nanometrics Incorporated Newport Corporation PAR Technology Corporation Rofin-Sinar Technologies Inc. RadiSys Corporation Rudolph Technologies, Inc. Ultratech, Inc. FARO Technologies, Inc. control. Upon his commencement of service as our President and CEO, Mr. Burger will be covered by our Amended and Restated Change in Control Severance Policy, with the additional provision set forth in his employment agreement, as described above under “Retirement of Dr. Raab and Compensation Arrangements with Mr. Burger.” The Compensation Committee believes that this “double trigger” provides appropriate protections to officer-level employees and encourages retention in situations that may result in the loss of their jobs. The change in control benefits are intended to retain the executives during the time of an actual or threatened change in control and ensure that executives are able to devote their entire attention to maximizing shareholder value and safeguarding employee interests. 35% reduction after the age of 65; an additional 25% of the original amount at the age of 70; and an additional 15% of the original amount at the age of 75. Internal Revenue Service. 29, 2019. 21, 2019. Name and Principal Position Simon Raab, Ph.D.(6) President and Chief Executive Officer Jay W. Freeland Former President and Chief Executive Officer Laura A. Murphy-Wolf(7) Former Senior Vice President, Chief Financial Officer Kathleen Hall Senior Vice President, Managing Director, Americas Joseph Arezone Senior Vice President, Middle East and Africa and Jody Gale Senior Vice President, General Counsel and Secretary Janet D’Anjou(7) Vice President and Corporate Controller and former Peter G. Abram(7) Former Senior Vice President Reflects the grant date fair value of stock and option awards granted in the applicable year, determined in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair values of the option awards and RSUs are included in Note 14 (“Stock Compensation Plans”) to our auditedRole of the Compensation ConsultantThe Compensation Committee has the authority to retain consultants and to obtain advice and assistance from other external legal, accounting or other advisors, at our expense. Since 2008, theThe Compensation Committee has engaged Pearl MeyerCompensia as its compensation consultant with respect to advise it on2018 board and executive and outside director compensation matters.compensation. In this role, Pearl Meyerthe designated compensation consultant reports to and is instructed by the Compensation Committee. Compensia provides no other services to the Company. The Compensation Committee has the sole authority to approve the fees and other terms and conditions of any engagement with its independent advisor. The Compensation Committee annually considers the independence of Pearl Meyerits designated compensation consultant relative to the six factors prescribed by the SECSecurities and NASDAQ,Exchange Commission (the “SEC”) and the Nasdaq Stock Market (“Nasdaq”), and has concluded that the work of Pearl MeyerCompensia as the Compensation Committee’s compensation consultant does not raise any conflict of interest.During 2015, Pearl Meyer’s2018, Compensia’s services to the Compensation Committee were primarily with respect to consultations regarding, among other matters, (i) high levelupdated market data and compensation trends generally; (ii) specific updated market data regarding compensation for each of our executive officer roles; and (iii) a high-level evaluation of our executive compensation program relative to best practices andpractices.In the views of various proxy advisory firms, (ii) assisting with the development of the Compensation Discussion and Analysis for the proxy statement filed in connection with our 2015 Annual Meeting of Shareholders, and (iii) conductingyears when a full competitive review of our director and executive compensation programs. The competitive review of the director and executive compensation programs was completed by Pearl Meyer in the fourth quarter of 2015. In the years when such a study is not done, the Compensation Committee retains the compensation consultant to informally update the Compensation Committee on matters that have been delegated to the Compensation Committee under its charter.Role of the Executive Officers in Compensation DecisionsExecutive officers play a role in the administration, oversight, and determination of executive compensation. At the beginning of each fiscal year, each executive officer sets annual performance goals for those employees who report directly to him or her, which may include other executive officers. Throughout the year, each executive officer reviews the performance of the employees who report directly to him or her and evaluates those employees against their performance goals. In addition, we conduct a comprehensive performance and compensation review annually in the first quarter of each year across all levels of the organization, which includes a final performance review by each executive for each employee who reports directly to him or her. Following those reviews, the executive officers recommend to the President and CEO any equity and non-equity based awards, based upon the performance of those employees for the prior year and annual compensation adjustments for the current year.The President and CEO similarly reviews and evaluates, on both an annual and mid-year basis, the employees who report directly to him.him, including the other named executive officers. The President and CEO also reviews and evaluates the recommendations made with respect to other executive officers and recommends any modifications that he deems appropriate. The President and CEO reviews his overall findings with the Compensation Committee, including his review of the employees who report directly to him, and then recommends to the Compensation Committee equity and non-equity awards and annual compensation adjustments for all executive officers, other than himself. In an effort to assist the CEO with these responsibilities, we hired a Director of Talent and Organizational Development in October 2015.Review of Peer Group PracticesThe Compensation Committee reviews and analyzes the executive compensation program to determine whether it provides reasonable compensation at appropriate levels and remains competitive and effective. The Compensation Committee periodically engages Pearl Meyeran independent compensation consultant to provide competitive market data to assist in this process and to update and advise the Compensation Committee on various executive compensation matters. The most recent comprehensive competitive market study conducted by Pearl MeyerCompensia was completed in the fourth quarter of 20152017 and updated information was provided during 2018, including a summary study for purposes of assisting the Compensation Committee in making its 20162018 compensation decisions. The previous competitive market study conducted by Pearl Meyer was completed in 2012.With respect to making its 20152018 compensation decisions, and specifically with respect to determining our peer group for purposes of the portion of our performance-based long-term equity awards granted in 2015 to executives as part of our annual equity grant program that vest based on Total Shareholder Return, the following companies as identified by Institutional Shareholder Services as our pay-for-performance peer group, were selected by the Compensation Committee as our peer group: Ticker Latest
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Revenue Market Cap
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Sales% # of
Employees ACLS Semiconductor Equipment $ 301 $ 195 25 % 774 BMI Electronic Equipment and Instruments $ 136 $ 721 16 % 1,514 BRKS Semiconductor Equipment $ 553 $ 680 64 % 1,426 CGNX Electronic Equipment and Instruments $ 451 $ 3,559 73 % 1,305 COHU Semiconductor Equipment $ 270 $ 282 81 % 1,600 DAKT Electronic Equipment and Instruments $ 145 $ 480 20 % 2,420 ESIO Electronic Equipment and Instruments $ 159 $ 181 89 % 739 FORM Semiconductor Equipment $ 282 $ 375 77 % 958 GSIG Electronic Equipment and Instruments $ 374 $ 394 59 % 1,355 IPGP Electronic Manufacturing Services $ 901 $ 3,506 85 % 3,740 LOJN Electronic Equipment and Instruments $ 130 $ 94 30 % 582 MRCY Semiconductor Equipment $ 235 $ 367 2 % 629 MTSC Electronic Manufacturing Services $ 564 $ 999 72 % 2,400 NANO Electronic Equipment and Instruments $ 187 $ 372 80 % 518 NEWP Semiconductor Equipment $ 603 $ 690 62 % 2,480 PAR Electronic Equipment and Instruments $ 234 $ 61 13 % 1,221 RSTI Electronic Equipment and Instruments $ 520 $ 612 72 % 2,231 RSYS Electronic Manufacturing Services $ 185 $ 117 55 % 710 RTEC Electronic Equipment and Instruments $ 222 $ 306 79 % 572 UTEK Semiconductor Equipment $ 149 $ 665 81 % 312 Average $ 733 57 % 1,374 Median $ 385 68 % 1,263 FARO Electronic Equipment and Instruments $ 318 58 % 1,288 Company Ticker Industry Description Bel Fuse Inc. BELFB Electronic Components Cohu, Inc. COHU Semiconductor Equipment Control4 Corporation CTRL Electronic Equipment and Instruments CTS Corporation CTS Electronic Components Daktronics, Inc. DAKT Electronic Equipment and Instruments Electro Scientific Industries, Inc.* ESIO Electronic Equipment and Instruments FormFactor, Inc. FORM Semiconductor Equipment II-VI Incorporated IIVI Electronic Components Nanometrics Incorporated NANO Semiconductor Equipment Novanta Inc. NOVT Electronic Equipment and Instruments Photronics, Inc. PLAB Semiconductor Equipment Rudolph Technologies, Inc. RTEC Semiconductor Equipment Veeco Instruments Inc. VECO Semiconductor Equipment Vishay Precision Group, Inc. VPG Electronic Equipment and Instruments Xcerra Corporation XCRA Semiconductor Equipment Xperi Corporation XPER Semiconductor Equipment * This company was acquired subsequent to its selection to our peer group. While it was included in the review for purposes of setting 2018 compensation, it is not included in the TSR chart on page 28 of this Proxy Statement.These companies were selected based on a variety of criteria, with a focus on being reasonably comparable to FAROthe Company in terms of industry focus, global operational scope, revenue size, and market value.When setting compensation levels, the Compensation Committee reviews and considers the competitive market information obtained from these studies and intends for total direct compensation (base salary, annual incentive plusawards and the grant date fair value of long-term equity awards) to approximate the median of the peer group. The peer group data, however, is not determinative of the executives’ compensation; instead, the Compensation Committee uses the peer group data as one of many inputs in its deliberations, which also includesinclude discussions of economic and industry conditions, current and anticipated Company performance, individual executive performance and potential performance, and internal pay equity. In considering these and other factors, the Compensation Committee does not seek to specifically weight each factor but rather considers them in the aggregate and exercises judgment.Consideration of Last Year’s Advisory Shareholder Vote on Executive CompensationAt the 2015 Annual Meeting of Shareholders, approximately 98% of the votes cast by the shareholders were voted to approve the compensation of our named executive officers as discussed and disclosed in the 2015 Proxy Statement. The Board and the Compensation Committee appreciate and value the views of our shareholders. In considering the results of this advisory vote on executive compensation, the Compensation Committee concluded that the compensation paid to our named executive officers and our overall pay practices enjoy shareholder support and did not make any material changes to the executive compensation program in response to the shareholder vote.Going forward, future advisory votes on executive compensation will serve as an additional tool to guide the Board and the Compensation Committee in evaluating the alignment of our executive compensation program with the interests of the Company and our shareholders. Shareholders may communicate with the Board, the Compensation Committee or individual directors regarding our executive compensation program by submitting such communications in writing to FARO Technologies, Inc., Attention: Board of Directors (or the Compensation Committee or the individual director(s)), 250 Technology Park, Lake Mary, Florida 32746. Communications should be sent by overnight or certified mail, return receipt requested. Such communications will be delivered directly to the Board, the Compensation Committee or the individual director(s), as designated on such communication.In December 2015, the Compensation Committee received reports from its executive compensation consultant Pearl Meyer on our executive compensation program, including our short-term cash incentive and long-term equity incentive award programs. The observations of Pearl Meyer were consistent with those shared by management and by certain investors who have communicated concerns to the Company with respect to such incentive programs, specifically that our short-term cash incentive program and performance-based long-term equity incentive program were overly complex with too many performance categories and measures to be effective incentive compensation programs. Accordingly, the Compensation Committee decided to transition to a simpler short-term cash incentive plan and long-term equity incentive plan beginning in 2016 as further described on pages 36, 39 and 40.At the 2011 Annual Meeting of Shareholders, our shareholders expressed a preference that advisory votes on executive compensation be held on an annual basis. Consistent with this preference, the Board determined to implement an advisory vote on executive compensation on an annual basis until the next required vote on the frequency of shareholder votes on the compensation of executive officers, which will be conducted at our Annual Meeting of Shareholders in 2017.Employment Agreements and Change in Control Severance PolicyEmployment Agreements. We have entered into employment agreements with Messrs. Freeland,Seidel and Gale and Abram and Mses. Murphy-Wolf andMs. Hall that provide orfor severance benefits. We also entered into an employment agreement with Mr. Arezone that provided for severance benefits and, in the casebenefits. The employment agreement we entered into with Mr. Burger on April 5, 2019, which is effective as of Mr. Freeland, change in controlJune 17, 2019, provides for severance benefits. As described in greater detail in the Potentialunder “Potential Payments Upon Termination or Change in Control sectionControl” on page 46 of this Proxy Statement, and for Mr. Burger above under “Retirement of Dr. Raab and Compensation Arrangements with Mr. Burger,” pursuant to the employment agreements, (i) Mr. Freeland was entitled to a lump sum cash payment upon the occurrence of a change in controlMessrs. Seidel and severance benefits in the event of his termination without cause or resignation for good reason, (ii) Mr. AbramGale and Ms. Murphy-Wolf wereHall are, Mr. Arezone was, and Mr. Burger will be, entitled to severance benefits in the event of the executive’s termination withoutby us other than for cause or resignation for good reason, and (iii) Mr. Gale and Ms. Hall are entitled to severance benefitsdisability, by our providing written notice of non-extension of the employment period set forth in the event ofagreement or resignation by the executive’s termination without cause or resignationexecutive officer for good reason. Severance protection plays an important role in attracting, motivating and retaining highly talented executives. In addition, the change in control benefits are intended to retain the executives during a time of an actual or threatened change in control and ensure that the executives are able to devote their entire attention to maximizing shareholder value and safeguarding employee interests. In December 2010, we amended Mr. Freeland’s employment agreement to provide that the change in control payment would be made on the earlier to occur of (i) Mr. Freeland’s separation from service by the Company or by Mr. Freeland for good reason or (ii) the one-year anniversary of such change in control. This amendment provided an additional retention element to the change in control benefits provided under the employment agreement.In order to promote consistency within our change in control arrangements, on April 2, 2009, the Compensation Committee approved an amendment to each of the employment agreements then in effect, including the employment agreement with Mr. Freeland, so that the change in control definition provided therein parallels the definition provided in the Amended and Restated Change in Control Severance Policy described below. This amendment requires the consummation of a qualifying merger or similar transaction, rather than shareholder approval of the transaction, in order to constitute a change in control, and excludes from thedefinition of change in control any sales of substantially all of our assets to an entity in which our shareholders hold at least 50% of the voting securities, rather than 75%, as originally provided in the employment agreements.On March 20, 2015, we entered into a separation and release letter agreement with Mr. Abram. Pursuant to the agreement, Mr. Abram received an aggregate amount of $122,744 under our 2014 short-term incentive plan and a lump sum amount of $140,898.32 as consideration for all of his outstanding equity awards under our 2009 Equity Plan and 2014 Equity Plan, which were terminated and forfeited. In addition, we reimbursed the monthly COBRA payments made by Mr. Abram for a period of six months.On December 4, 2015, we entered into a Transition and Separation Agreement with Mr. Freeland. Pursuant to the agreement, Mr. Freeland stepped down as our President and Chief Executive Officer and as a member of the Board effective December 4, 2015 but continued to serve as an at-will employee of the Company through March 4, 2016 to provide assistance and input concerning ongoing business matters to effectively transition matters to other executives. In consideration for his services during the transition period, we paid Mr. Freeland an amount equal to $50,000, and Mr. Freeland also received a payment of $450,000 in exchange for agreeing to a two-year covenant not to compete or solicit and a general release, and continuing to comply with customary confidentiality and non-disparagement provisions.On December 4, 2015, in connection with Dr. Raab’s appointment as interim President and CEO, the Compensation Committee approved the following compensation arrangements for Dr. Raab:•Base salary- $500,000 per year•Short-term incentive opportunity - Target award value of 50% of base salary.•Long-term incentive opportunity - A one-time equity grant of 60,000 time-based nonqualified stock options. Fifty percent of the options will vest, subject to his continued membership on the Board, upon the earlier to occur of (i) the date a successor President and CEO is appointed and (ii) the one year anniversary of the date of grant, and the remaining 50% of the options will vest on the second anniversary of the date of grant. Upon a change in control, the options will become fully vested and exercisable.Such amounts are in addition to Dr. Raab’s annual retainer for his service as Chairman of the Board and the annual cash retainer paid and annual equity grants awarded to members of the Board, as described under “2015 Director Compensation-Terms of Director Compensation Program,” which he will continue to receive.On March 10, 2016, we entered into a Transition and Separation Agreement with Ms. Murphy-Wolf. Pursuant to the agreement, Ms. Murphy-Wolf stepped down as our Senior Vice President and Chief Financial Officer effective March 10, 2016. Ms. Murphy-Wolf will continue to serve as an at-will employee of the Company through April 8, 2016 (or such earlier date as determined by the Company, in its sole discretion, upon notice to Ms. Murphy-Wolf) to provide assistance and input concerning ongoing business matters to effectively transition matters to other executives or to perform such other duties as reasonably directed by our President and Chief Executive Officer. In consideration for her services during the transition period, the Company will pay Ms. Murphy-Wolf an amount equal to $25,000. Ms. Murphy-Wolf will also receive a payment of $226,250 during the transition period in exchange for agreeing to a two-year covenant not to compete or solicit and a general release, and continuing to comply with customary confidentiality and non-disparagement provisions. In addition, Ms. Murphy-Wolf will receive an aggregate gross amount equal to $32,000 to cover the remaining lease payments under her apartment lease, relocation costs and attorneys’ fees. In addition, we will reimburse the monthly COBRA payments made by Ms. Murphy-Wolf for a period not to exceed eight months.Amended and Restated Change in Control Severance Policy. During 2015,2018, Messrs. Arezone,Seidel and Gale and Abram and Mses. Murphy-Wolf andMs. Hall were covered by our Change in Control Severance Policy, which was amended and restated in April 2015 (the “Amended and Restated Change in Control Severance Policy”) and entitles certain employees to severance benefits in the event their employment with us is terminated without cause or for good reason within twelve months following a change inExecutive Severance Plan. On February 14, 2019, the Board adopted the FARO Technologies, Inc. Executive Severance Plan (the “Executive Severance Plan”), which provides eligible employees at the senior vice president level or above who are not otherwise covered by an individual employment agreement that provides severance benefits with benefits in the event they are involuntarily terminated by us other than for cause or as a result of his or her death or disability. This plan was adopted to formalize severance benefits for those eligible employees. Dr. Raab and Ms. Tyrrell are participants in the Executive Severance Plan.Transition Agreement with Mr. Arezone. Effective as of March 5, 2018, Mr. Arezone stepped down from his role as Chief Commercial Officer due to his desire to relocate to be closer to his family and served as our Senior Vice President, Corporate Strategy & Initiatives from March 5, 2018 until June 5, 2018. In connection with his reduced role, on March 5, 2018, we entered into a letter agreement with Mr. Arezone terminating his employment agreement. Pursuant to the terms of the letter agreement, Mr. Arezone also acknowledged and agreed that effective as of March 5, 2018, he was no longer a participant under our Change in Control Severance Policy. On June 5, 2018, we entered into the Transition Agreement with Mr. Arezone, pursuant to which Mr. Arezone agreed to resign from his officer position and to serve as an at-will employee through November 30, 2018, and we agreed to provide him with certain consideration during the transition period and continued vesting of certain equity awards following the end of the transition period.For more information on Messrs. Freeland’s,Seidel’s and Gale’s and Abram’s and Mses. Murphy-Wolf’s andMs. Hall’s employment agreements, andour agreements with Mr. Arezone, the Amended and Restated Change in Control Severance Policy and the Executive Severance Plan, see “Potential Payments Upon Termination or Change in Control” beginning on page 5246 of this Proxy Statement.Policies Regarding Termination and/or Change-in-Control Benefits Payable to New Hires. It is the Compensation Committee’s intention that it will provide change-in-control protection to newly-hired executives in the form of (i) acceleration of vesting for outstanding equity awards, and (ii) severance benefits under the Amended and Restated Change in Control Severance Policy. The Compensation Committee recognizes, however, that in the context of a change-in-control transaction, certain payments, such as retention bonuses, may be advisable. Accordingly, the Compensation Committee retains the discretion to enter into such arrangements in the event of an actual change-in-control transaction.Executive Benefits and PerquisitesWe provide limited perquisites and personal benefits to our named executive officers, including, among other items, relocation and temporary housing expense benefits for newly hired executive officers. We do not provide pension arrangements, post-retirement health coverage, or similar benefits for our executives.The named executive officers participate in our Vice President and Above Life Insurance Plan (the “Life Insurance Plan”) and Executive Long-Term and Short-termShort-Term Disability Plans. Under the Life Insurance Plan, we pay all required premiums for life insurance on executive officers, which includes the named executive officers, until the executive officer reaches age 65. The named executive officers will also have a life insurance benefit of three (3) times their annual salary up to a maximum benefit of $750,000. After age 65, benefits are reduced as follows:Our Long-Term Disability Plan is intended to replace a reasonable amount of an executive officer’s income upon disability. The plan provides a total benefit in the event of a qualifying disability of up to 60% of pre-disability income, with a maximum benefit of $15,000 per month paid up until the age of 65 or longer (depending on when the participant becomes disabled).The named executive officers also participate in various health and welfare programs generally available to all employees. Historically, allAll employees, including named executive officers, who participatedparticipate in our 401(k) plan wereare eligible to receive a 100% match on the first 1% of compensation deferred and a 50% match on each additional dollar of compensation deferred, up to a maximum of 6% of their compensation, not to exceed the maximum allowed by the IRS.Corporate Tax and Accounting ConsiderationsHistorically, Section 162(m) of the Code generally disallowsdisallowed a tax deduction to public companies for compensation over $1,000,000 paid to our CEOtheir chief executive officer and the three other most highly compensatedhighest paid executive officers, other than the CFO.chief financial officer. Qualifying performance-based compensation iswas not subject to the deduction limit if certain requirements arewere met. With the passage of the U.S. Tax Cuts and Jobs Act of 2017, Section 162(m) was amended to repeal the performance-based compensation exemption from the deduction limit and to include compensation paid to chief financial officers, effective for taxable years beginning after December 31, 2017. As a result, compensation paid in 2018 and later years to our named executive officers in excess of $1 million will not be deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017. The Compensation Committee considers tax deductibility when making executive compensation decisions, but reserves the right to award compensation that is not fully tax deductible when viewed as necessary to accomplish other compensation program objectives.Stock Ownership GuidelinesIn February 2008, the Compensation Committee adopted stock ownership guidelines to directly align the interests of executive officers with the interests of our shareholders. Under these guidelines, as updated by the Compensation Committee in 2014, the President and CEO is required to own stock having a value equal to six times his annual base salary and the other named executive officers are required to own stock having a value equal to two times their annual base salary. The ownership requirement may be satisfied through holdings of (i) equity awards granted by the Company, the values of which are calculated based on the higher of (x)(a) the grant date fair value of the equity awards or (y)(b) the then-current value of the equity awards on the date compliance is determined, and/or (ii) shares of common stock purchased by the executive independently, the values of which are calculated based on the closing price of our common stock on the purchase date. Each executive officer must comply with the minimum ownership requirements within five years after he or she becomes subject to the policy or the executive will be precluded from subsequent sales and transfer of shares and options awarded to the executive under our equity incentive plans. The Compensation Committee periodically reviews the status of each executive’s equity holdings relative to our stock ownership guidelines. Our current executive officers are in compliance with the policy as of March 24, 2016.Compensation Clawback PolicyIn April 2011, the Compensation Committee adopted a clawback policy with respect to the performance-based compensation awarded to our executive officers. The clawback policy requires that, in the event of a restatement of our financial statements that reduces the amount of performance-based compensation an executive officer would have received under the restated results, and if a court determines that an executive officer engaged in fraud or intentional illegal conduct that materially contributed to the need for the restatement, an independent committee of the Board must seek, subject to certain exceptions, to recover from that executive officer the after-tax difference between the performance-based compensation actually awarded to the officer and the amount the officer would have received under the restated financials.Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), all public companies will be required to adopt a formal recoupment policy relating to incentive compensation impacted by restated financial statements, and the recovery of impacted compensation will not be contingent on any person’s misconduct. The SEC has not yet issued final regulations describing the specific requirements for the policy required under the Dodd-Frank Act. WeIf necessary, we will revise our clawback policy in accordance with the new requirements after final regulations are released.Insider Trading PolicyIn February 2013,2017, the Governance and Nominating Committee amended our Insider Trading Policy to prohibit hedging and limit any pledging of Company securities by our directors and executive officers. None of our directors or executive officers have any shares that are pledged to third parties.Compensation Committee ReportThe Compensation Committee has the overall responsibility of evaluating the performance and determining the compensation of the President and CEO and approving the compensation structure for the Company’s other executive officers. In fulfilling its responsibilities, the Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for the 20162019 Annual Meeting of Shareholders for filing with the SEC, and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2015,2018, as filed with the SEC on February 29, 2016.Compensation Committee:Stephen ColeJohn E. Caldwell (Chair)Lynn BrubakerJohn CaldwellStephen R. ColeJohn DonofrioMarvin Sambur,Jeffrey A. Graves, Ph.D.Yuval WassermanSummary Compensation TableThe following table sets forth information concerning compensation paid to or earned by our named executive officers for the years ended December 31, 20152018, and, if applicable, December 31, 20142017 and December 31, 2013. Year Salary
($)(1) Bonus
($)(2) Stock
Awards
($)(3) Option
Awards
($)(3) Non-Equity
Incentive Plan
Compensation
($)(4) All Other
Compensation
($)(5) Total
($) 2015 19,231 — — 564,000 — 166 583,397 2015 465,751 — — 767,550 — 464,670 1,697,971 2014 462,722 — — 146,703 214,245 7,542 831,212 2013 447,059 — — 142,628 47,250 8,307 645,244 2015 122,404 — — 324,341 10,894 83,966 541,605 2015 348,279 — 80,301 275,829 54,903 14,630 773,942 2014 333,529 — 23,419 70,294 132,565 10,956 570,763 2013 143,750 — — 325,000 18,200 1,987 488,937 2015 345,297 — — 363,837 33,463 321,133 1,063,730
Managing Director, Europe, 2014 150,000 — 7,998 24,045 — 543,869 725,912 2013 150,000 — 7,350 22,164 — 361,627 541,142
Asia-Pacific 2015 296,500 — 68,344 234,836 24,837 8,355 632,872 2014 252,115 50,000 — 213,745 104,880 41,076 661,816 2015 166,462 15,000 — 91,711 12,196 8,820 294,189
interim principal financial
officer 2015 83,750 — 76,559 262,898 — 177,861 601,068
and Chief Financial Officer 2014 244,808 50,000 — 334,997 122,744 134,396 886,945 Name and Principal Position Year Salary($)(1) Bonus($)(2) StockAwards($)(3) OptionAwards($)(3) Non-EquityIncentive PlanCompensation($)(4) All OtherCompensation($)(5) Total($)Simon Raab, Ph.D. (6) 2018 770,673 — — 1,837,110 89,100 7,038 2,703,921 President and ChiefExecutive Officer2017 701,923 190,606 — 1,562,499 — 9,697 2,464,725 2016 590,000 87,500 149,968 999,992 — 8,866 1,836,326 Robert E. Seidel 2018 322,058 — 66,817 200,645 15,364 11,210 616,094 Chief Financial Officer 2017 258,500 24,380 53,691 161,156 — 10,960 508,687 2016 195,789 22,575 19,929 59,988 — 6,554 304,835 Kathleen J. Hall 2018 416,539 — 124,255 372,961 26,565 14,845 955,165 Chief Operating Officer 2017 395,192 50,600 114,050 342,173 — 14,598 916,613 2016 366,865 78,750 105,430 317,279 — 12,300 880,624 Jody S. Gale 2018 360,096 — 73,437 220,538 16,652 8,078 678,801 Senior Vice President,General Counsel and Secretary2017 351,000 32,292 74,559 223,756 — 7,848 689,455 2016 339,055 49,140 65,803 198,008 — 7,910 659,916 Katrona Tyrrell 2018 275,635 — 56,641 170,114 14,219 7,053 523,662 Chief People Officer Joseph Arezone 2018 279,960 — 207,699 642,679 — 132,130 1,262,468 Former Chief Commercial Officer (7) 2017 385,192 44,850 111,182 333,556 — 28,188 902,968 2016 360,326 76,650 105,430 317,279 — 95,920 955,605 (1) Salary adjustments, if any, are applied each year in March. Accordingly, the amounts in this column, which represent actual amounts earned in the applicable fiscal year, may differ from the base salary amounts discussed in the Compensation Discussion and Analysis. (2) The amounts reportedshown in this column for Messrs. Abram and Gale2017 represent the one-time, cash-based signingdiscretionary cash bonus providedawarded to them when they were hired, which was earnedthe named executive officers for 2017 and paid in full2018, and for 2016 represent the discretionary cash bonus awarded to the named executive officer for 2016 and paid in 2014. The amount reported for Ms. D’Anjou represents a one-time, cash-based discretionary bonus provided in recognition of her performance in 2015.2017.(3)
| financial statements for the fiscal year ended December 31, |
| (4) | The amounts shown in this column reflect the named executive officer’s annual short-term incentive awards |
| (5) | Includes for |
| Short-Term Disability Premiums ($) | Long-Term Disability Premiums ($) | Life Insurance Premiums ($) | 401(k) Match ($) | Commissions, Housing and Other Allowances ($) | Separation Consideration ($) | Total ($) | ||||||||||||||||||||||
Dr. Raab | 40 | 33 | 93 | — | — | — | 166 | |||||||||||||||||||||
Mr. Freeland | 484 | 436 | 1,115 | 4,943 | 7,692 | (a) | 450,000 | (a) | 464,670 | |||||||||||||||||||
Ms. Murphy-Wolf | 200 | 165 | 465 | 2,706 | 80,430 | (b) | — | 83,966 | ||||||||||||||||||||
Ms. Hall | 484 | 412 | 1,134 | 12,600 | — | — | 14,630 | |||||||||||||||||||||
Mr. Arezone | 484 | 352 | 1,017 | 7,563 | 311,717 | (c) | — | 321,133 | ||||||||||||||||||||
Mr. Gale | 484 | 400 | 1,134 | 6,300 | 37 | (d) | 8,355 | |||||||||||||||||||||
Ms. D’Anjou | 484 | 246 | 757 | 7,296 | 37 | (d) | 8,820 | |||||||||||||||||||||
Mr. Abram | 124 | 115 | 293 | 2,931 | — | 174,398 | (e) | 177,861 | ||||||||||||||||||||
Short-Term Disability Premiums ($) | Long-Term Disability Premiums ($) | Life Insurance Premiums ($) | 401(k) Match ($) | Tax Equalization Payments ($) | Total ($) | ||||||||||||||
| Dr. Raab | 684 | 503 | 351 | 5,500 | — | 7,038 | |||||||||||||
| Mr. Seidel | 684 | 361 | 540 | 9,625 | — | 11,210 | |||||||||||||
| Ms. Hall | 684 | 396 | 540 | 13,225 | — | 14,845 | |||||||||||||
| Mr. Gale | 684 | 379 | 540 | 6,475 | — | 8,078 | |||||||||||||
| Ms. Tyrrell | 684 | 329 | 540 | 5,500 | — | 7,053 | |||||||||||||
| Mr. Arezone | 684 | 326 | 540 | 3,463 | 126,387 | 131,400 | |||||||||||||
| (6) | The amounts shown for Dr. Raab |
| 2016 | ||||
| Fees Earned or Paid in Cash (reported in the “Salary” column) | $ | 90,000 | ||
| Stock Awards (annual director restricted stock grants) | 149,968 | |||
| Total Director Compensation | $ | 239,968 | ||
| (7) | The amounts shown for Mr. Arezone for 2018 in the Stock Awards and Option Awards columns include the $471,171 and $150,567 incremental fair value of the stock options and RSUs, respectively, granted to Mr. Arezone in 2016 and 2017 that were modified in 2018 so they continue to vest in accordance with their respective vesting schedules as if his employment had continued in effect through and including each applicable vesting date pursuant to his |
| ▪ | the median of the annual total compensation of all employees of our Company (other than our President and |
| ▪ | the |
Name Estimated Future Payouts Under Estimated Future Payouts Under Dr. Raab(4) Mr. Freeland(5) Ms. Murphy-Wolf(4) Ms. Hall Mr. Arezone Mr. Gale Ms. D’Anjou Mr. Abram(6) Name RSUs Stock Options Mr. Freeland Ms. Hall Mr. Arezone Mr. Gale Ms. D’Anjou Mr. Abram2015Based on this information for 2018, we reasonably estimate that the ratio of our President and CEO’s annual total compensation to the annual total compensation of our median employee was 50:1. Our pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K.The median employee was identified by reviewing the base salary and wages actually paid during 2018 to all of our employees, excluding our President and CEO, who were employed by the Company on December 31, 2018. All of our employees were included, whether employed on a full-time, part-time or seasonal basis. Adjustments were made to annualize the compensation of employees who were not employed by the Company for the entire year.After identifying the median employee based on base salary and wages, we then determined that median employee’s 2018 annual total compensation, including any perquisites and other benefits, using the same methodology used to determine the annual total compensation of our President and CEO for purposes of the Summary Compensation Table. The total compensation of our median employee was determined to be $54,068. This total compensation amount for our median employee was then compared to the total compensation of our President and CEO, disclosed above in the Summary Compensation Table, of $2,703,921. The elements included in the President and CEO’s total compensation are fully discussed above in the footnotes to the Summary Compensation Table.2018 Grants of Plan-Based AwardsThe following table summarizes grants of plan-based awards made to each of the named executive officers during 2015: Grant
Date Date of
Compensation
Committee
Action All
Other
Option
Awards:
Number of
Securities
Underlying
Options(#)(2) Exercise
or Base
Price
of Option
Awards($) Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)(3) Non-Equity Incentive Plan
Awards(1) Equity Incentive Plan
Awards(1) Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#) 12/4/2015 12/4/2015 — — — — — — 60,000 29.98 564,000 — — — 244,519 — — — — — — 2/27/2015 2/19/2015 — — — — 41,846 — — 59.97 767,550 — — — 52,500 — — — — — — — 8/10/2015 7/16/2015 — — — — — — 23,452 42.92 324,341 — — — 140,600 — — — — — — — 2/27/2015 2/19/2015 — — — — 1,465 — — — 80,301 2/27/2015 2/19/2015 — — — — 15,038 — — 59.97 275,829 — — — 140,600 — — — — — — — 3/19/2015 3/19/2015 — — — — 19,836 — — 60.76 363,837 — — — 119,695 — — — — — — — 2/27/2015 2/19/2015 — — — — 1,247 — — — 68,344 2/27/2015 2/19/2015 — — — — 12,803 — — 59.97 234,836 — — — 50,400 — — — — — — — 2/27/2015 2/19/2015 — — — — 5,000 — — 59.97 91,711 — — — 134,000 — — — — — — — 2/27/2015 2/19/2015 — — — — 1,397 — — — 76,559 2/27/2015 2/19/2015 — — — — 14,333 — — 59.97 262,898 Name GrantDate Estimated Possible PayoutsUnder Non-Equity Incentive Plan Awards (1) All Other Stock Awards: Number of Shares or Units of Stock (#)(2) AllOtherOptionAwards:Number ofSecuritiesUnderlyingOptions (#)(3) Exerciseor BasePriceof OptionAwards ($/Sh) Grant DateFair Valueof Stockand OptionAwards ($)(4) Threshold($) Target($) Maximum($) Dr. Raab — 193,750 775,000 1,550,000 — — — — 3/20/2018 — — — — 78,403 61.30 1,837,110 Mr. Seidel — 33,400 133,600 267,200 — — — — 3/20/2018 0 — — 1,090 — — 66,817 3/20/2018 0 — — — 8,563 61.30 200,645 Ms. Hall — 52,500 210,000 420,000 — — — — 3/20/2018 0 — — 2,027 — — 124,255 3/20/2018 0 — — — 15,917 61.30 372,961 Mr. Gale — 36,200 144,800 289,600 — — — — 3/20/2018 0 — — 1,198 — — 73,437 3/20/2018 0 — — — 9,412 61.30 220,538 Ms. Tyrrell — 28,100 112,400 224,800 — — — — 3/20/2018 0 — — 924 — — 56,641 3/20/2018 0 — — — 7,260 61.30 170,114 Mr. Arezone — 19,746 78,984 157,968 — — — — 3/20/2018 0 — — 932 — — 57,132 3/20/2018 0 — — — 7,320 61.30 171,508 (1) Reflects potential targetpossible payout opportunities under our short-term cash and long-term equity incentive award programs. The short-term cash and long-term equity incentive award programs do not provide threshold or maximum opportunities.program. Additional information about our short-term cash and long-term equity incentive award programsprogram is included in the Compensation Discussion and Analysis under “Executive Compensation Components.Components—Short-Term Incentives.” For theUnder Mr. Arezone’s Transition Agreement, he was not eligible to receive a short-term cash incentive awards earned based on 2015 performance, see the Summary Compensation Table. The following equity awards vested based on 2015 performance:payout for 2018. — — 123 1,269 — 1,322 103 1,066 — 355 — — (2) ReflectsFor named executive officers other than Dr. Raab, reflects time-based stock optionsRSUs granted under the 2014 EquityIncentive Plan, as described in the Compensation Discussion and Analysis.(3) Reflects time-based stock options granted under the 2014 Incentive Plan, as described in the Compensation Discussion and Analysis. (4) Determined pursuant to FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair values of the option awards and RSUs are included in Note 14 (“Stock Compensation Plans”) to our audited financial statements for the fiscal year ended December 31, 2015,2018, included in our Annual Report on Form 10-K filed with the SEC on February 29, 2016.21, 2019.(4)Awards granted in 2015 to Dr. Raab and Ms. Murphy-Wolf represented one-time awards granted to them when they joined the Company, in the case of Ms. Murphy-Wolf, or assumed the role of interim President and Chief Executive Officer, in the case of Dr. Raab.(5)Under the terms of his separation agreement, Mr. Freeland’s unvested stock options as of December 4, 2015 terminated and were forfeited and he was not eligible to receive a short-term cash incentive award for 2015 performance.(6)Under the terms of his separation agreement, Mr. Abram’s RSUs and stock options as of March 20, 2015 terminated and were forfeited.
Name Dr. Raab Mr. Freeland(3) Ms. Murphy-Wolf Ms. Hall Mr. Arezone Mr. Gale Ms. D’AnjouOutstanding Equity Awards at 20152018 Fiscal Year-EndThe following table sets forth information on outstanding option and stock awards held by the named executive officers as of December 31, 2015. Option Awards Stock Awards Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) Option
Exercise
Price
($) Option
Expiration
Date Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)(1) Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(1) — 60,000 (2) 29.98 12/4/2022 — — — — 60,000 — — 13.04 3/4/2016 — — — — 38,739 — — 24.30 3/1/2017 — — — — 38,680 — — 35.90 2/25/2018 — — — — 19,355 — — 57.01 3/1/2019 — — — — 6,499 — — 44.28 3/1/2020 — — — — 2,471 — — 57.54 2/28/2021 — — — — — 23,452 (4) — 42.92 8/10/2022 — — — — 17,501 8,751 (5) — 38.57 7/15/2020 — — — — 1,184 2,368 (6) — 57.54 2/28/2021 — — — — — — 15,038 (7) 59.97 2/27/2022 — — — — 272 (12) 8,029 — — 1,465 (13) 43,247 3,122 — — 57.01 3/1/2019 — — — — 505 505 (8) — 44.28 3/1/2020 — — — — 405 810 (6) — 57.54 2/28/2021 — — — — — — 19,836 (9) 60.76 3/19/2022 — — — — 56 (14) 1,653 — — 93 (12) 2,745 — — 4,532 9,065 (10) — 49.60 2/3/2021 — — — — — — 12,803 (7) 59.97 2/27/2022 — — — — — — 1,247 (13) 36,811 833 1,667 (11) — 43.26 5/27/2021 — — — — — — 5,000 (7) 59.97 2/27/2022 — — — — Option Awards Stock Awards Name Number of SecuritiesUnderlying UnexercisedOptions (#) Exercisable Number of SecuritiesUnderlying UnexercisedOptions (#) Unexercisable Option ExercisePrice($) OptionExpirationDate Number of Sharesor Units of StockThat Have NotVested (#) Market Valueof Shares orUnits of StockThat HaveNot Vested ($)(1) Dr. Raab 37,908 — 29.98 12/4/2022 — — 69,475 — 39.05 12/7/2023 — — 36,083 72,168 (2) 34.55 3/3/2024 — — — 78,403 (3) 61.30 3/20/2025 — — Mr. Seidel 2,000 — 43.33 5/12/2021 — — 3,000 — 59.97 2/27/2022 — — 3,231 1,616 (4) 33.05 3/2/2023 — — 3,721 7,444 (2) 34.55 3/3/2024 — — — 8,563 (3) 61.30 3/20/2025 — — — — — — 1,554 (5) 63,155 — — — — 1,090 (6) 44,298 Ms. Hall 3,552 — 57.54 2/28/2021 — — 4,610 — 59.97 2/27/2022 — — — 8,546 (4) 33.05 3/2/2023 — — 6,928 15,804 (2) 34.55 3/3/2024 — — — 15,917 (3) 61.30 3/20/2025 — — — — — — 3,190 (7) 129,642 — — — — 3,301 (5) 134,153 — — — — 2,027 (6) 82,377 Mr. Gale 2 — 59.97 2/27/2022 — — — 5,333 (4) 33.05 3/2/2023 — — — 10,335 (2) 34.55 3/3/2024 — — — 9,412 (3) 61.30 3/20/2025 — — — — — — 1,991 (7) 80,914 — — — — 2,158 (5) 87,701 — — — — 1,198 (6) 48,687 Ms. Tyrrell — 6,495 (2) 34.55 3/3/2024 — — — 7,260 (3) 61.30 3/20/2025 — — — — — — 1,356 (5) 55,108 — — — — 924 (6) 37,551 Mr. Arezone — 8,546 (4) 33.05 3/2/2023 — — — 15,407 (2) 34.55 3/3/2024 — — — — — — 3,190 (7) 129,642 — — — — 3,218 (5) 130,780 (1) Based on the closing price of our common stock of $29.52$40.64 on December 31, 2015,2018, the last trading day of the most recently completed fiscal year, as reported on NASDAQ.Nasdaq.(2)The stock options vest 50% upon the earlier of (i) the date a successor President and CEO is appointed and (ii) the one year anniversary of the date of grant. The remaining 50% of the options will vest on the second anniversary of the date of grant.
| The stock options vest in three equal annual installments beginning March |
| The stock options vest in three equal annual installments beginning |
2018 Name Dr. Raab Mr. Freeland Ms. Murphy-Wolf Ms. Hall Mr. Arezone Mr. Gale Ms. D’Anjou Mr. Abram(4) The stock options vest in three equal annual installments beginning March 2, 2017.(5) The RSUs vest on March 3, 2020, provided that the executive is employed by the Company on the vesting date.(6) The RSUs vest on March 20, 2021, provided that the executive is employed by the Company on the vesting date.(7) The RSUs vest on March 2, 2019, provided that the executive is employed by the Company on the vesting date.Option Exercises and Stock Vested in Fiscal Year 2015This table summarizes amounts received upon the exercise of stock options and vesting of RSUs for the named executive officers during the year ended December 31, 2015 and the value realized upon exercise of stock options by each named executive officer during 2015. Option Awards Stock Awards Number of Shares Acquired
on Exercise (#) Value Realized on
Exercise ($)(1) Number of Shares Acquired
on Vesting (#)(2) Value Realized on
Vesting ($)(2) — — — — 40,000 1,190,000 — — — — — — — — 135 7,943 — — 239 14,063 — — — — — — — — — — — — Option Awards Stock Awards Name Number of Shares Acquiredon Exercise (#) Value Realized onExercise ($)(1) Number of Shares Acquiredon Vesting (#)(2) Value Realized onVesting ($)(2)Dr. Raab 22,092 680,610 — — Mr. Seidel — — — — Ms. Hall 44,316 1,389,185 163 9,992 Mr. Gale 32,984 697,317 104 6,375 Ms. Tyrrell 3,247 99,196 — — Mr. Arezone 35,863 772,490 — — (1) Value realized represents the number of shares underlying the exercised option multiplied by the difference between the fair market valueclosing price of the sharesour common stock on the exercise date and the exercise price of the option.(2) Reflects performance-based RSUs granted in 2012, 2013 and 20142015 that vested in 2015.2018 based on our performance in 2017. Value realized represents the closing price of our common stock on the 2015 vesting datesdate multiplied by the number of shares vested. Upon the vesting of the RSUs, 7846 and 3726 shares were withheld from Mr. Arezone’s and Ms. Hall’s and Mr. Gale’s vested RSUs for taxes, respectively.
Burger.” Change in Control Severance Policy.As of December 31, 12 months following the occurrence of a change in control (as defined in the Policy), the executive’s employment with the Company is terminated without Cause or the executive resigns for Good Reason, the executive is entitled to receive: a lump sum cash payment equal to the sum of (i) his or her highest annual rate of base salary during the if the executive has not received an annual cash bonus for the fiscal year in which his or her employment is terminated, a cash payment equal to a continuation of group medical and life insurance coverage for the executive (and his or her eligible dependents) for 12 months following the date of termination. Dr. Raab Cash Payment(s) Equity Acceleration(6) Health Benefits(2) Total Ms. Murphy-Wolf(7) Cash Payment(s) Equity Acceleration(6) Health Benefits(2) Total Ms. Hall Cash Payment(s) Equity Acceleration(6) Health Benefits(2) Total Mr. Arezone Cash Payment(s) Equity Acceleration(6) Health Benefits(2) Total Mr. Gale Cash Payment(s) Equity Acceleration(6) Health Benefits(2) Total Ms. D’Anjou Cash Payment(s) Equity Acceleration(6) Total Reflects an amount equal to (i) the executive’s base salary plus the average of the annual cash bonus earned by the executive during our last three completed fiscal years, payable in a lump sum, plus (ii) if thePotential Payments Upon Termination or Change in ControlEmployment AgreementAgreements. We entered into an employment agreement with Mr. Freeland.We entered intoSeidel on December 21, 2016, an amended and restated employment agreement with Ms. Hall on April 27, 2016 and an amended and restated employment agreement with Mr. FreelandGale on November 7, 2008.April 27, 2016. Pursuant to this employment agreement, as subsequently amended,these agreements, in the event that Mr. Freeland’s employment with the Company was terminated by the Company without “Cause” or by him for “Good Reason,” Mr. Freeland would receive:a lump sum payment of all earned but unpaid compensation through the date of such termination;severance in an amount equal to his base salary plus the average of the annual cash bonus earned by him during our last three completed fiscal years, payable in installments for one year following such termination in accordance with our standard payroll practices;accelerated vesting of all of his equity awards; andcontinued coverage under our “employee welfare benefit plans” for up to twelve months following such termination.As defined in this employment agreement, “Cause” means (i) an act of fraud or embezzlement against the Company or acceptance of a bribe or kickback, (ii) the conviction or a plea of no contest of a felony or of a crime involving fraud, dishonesty, violence or moral turpitude, (iii) willful and continued refusal to substantially perform assigned duties (other than any refusal resulting from incapacity due to physical or mental illness or disability), or (iv) willful engagement in gross misconduct materially and demonstrably injurious to the Company. “Good Reason” means (i) a material breach by the Company of its obligations under the employment agreement, which breach is not cured within ten days after written notice, (ii) a reduction in his base annual salary, (iii) a material reduction in benefits (except consistent with a general reduction of such benefits to executives of the Company as a whole), (iv) an ongoing material and substantial diminution in his duties not consistent with that of an executive with his position and duties, or (v) relocation of his principal office to a location more than 25 miles from our headquarters.The employment agreement also provided that, upon a change in control of the Company, Mr. Freeland would be entitled to:accelerated vesting of his outstanding unvested equity awards; anda lump sum payment equal to 2.99 times Mr. Freeland’s base salary, plus the average of the annual cash bonuses that he earned during our last three completed fiscal years, paid on the earlier to occur of (i) Mr. Freeland’s separation of service from the Company or by Mr. Freeland for Good Reason or (ii) the one-year anniversary of the change in control.Separation Agreement with Mr. Freeland. On December 4, 2015, we entered into a Transition and Separation Agreement with Mr. Freeland. Pursuant to the agreement, Mr. Freeland stepped down as our President and Chief Executive Officer and as a member of the Board effective December 4, 2015 but continued to serve as an at-will employee of the Company through March 4, 2016 to provide assistance and input concerning ongoing business matters to effectively transition matters to other executives. In consideration for his services during the transition period, we paid Mr. Freeland an amount equal to $50,000, and Mr. Freeland also received a payment of $450,000 in exchange for agreeing to a two-year covenant not to compete or solicit and a general release, and continuing to comply with customary confidentiality and non-disparagement provisions. As of December 4, 2015, any unvested stock options were terminated and forfeited, and any outstanding vested stock options remained exercisable until March 4, 2016.Stock Option Award Agreement with Dr. Raab. On December 4, 2015, we entered into a Nonqualified Stock Option Award Agreement with Dr. Raab. Pursuant to the agreement, Dr. Raab received a one-time equity grant of 60,000 time-based nonqualified stock options. Fifty percent of the options will vest, subject to his continued membership on the Board, upon the earlier to occur of (i) the date a successor President and CEO isappointed and (ii) the one year anniversary of the date of grant, and the remaining 50% of the options will vest on the second anniversary of the date of grant. Upon a change in control, the options will become fully vested and exercisable.Employment Agreement with Ms. Hall.On July 15, 2013, we entered into an employment agreement with Ms. Hall. Pursuant to the agreement, in the event Ms. Hall’sexecutive’s employment is terminated by the Companyus other than for Cause or disability, by our providing written notice of non-extension of the employment period set forth in the agreement or is terminated by Ms. Hallthe executive’s resignation for Good Reason, shethe executive will be entitled to receive severance equal to his or her annual base salary, payable in approximately equal installments over a 12-month period (provided that he or she has executed and not revoked a general release of claims and covenant not to sue in favor of the Company and complies with certain non-competition restrictions), and herthe executive’s outstanding and unvested stock options and RSUs will become fully vested as of the date of termination. Upon a change in control, all outstanding unvested equity awards granted to the executive will become fully vested.As defined in the agreement, “Cause” meansmeans: (i) failure to perform substantially herthe executive’s duties with the Company and/or any affiliate after written demand for substantial performance is delivered to him or her by or on behalf of the Board and such failure is not cured within 30 days, (ii) engagement in illegal conduct or gross misconduct that is materially injurious to the Company or any affiliate, (iii) engagement in conduct or misconduct that materially harms the reputation or financial position of the Company or any affiliate, (iv) conviction of, or plea of nolo contonderecontendere to, a felony or to a crime involving fraud, dishonesty, violence or moral turpitude, (v) being found liable in any SEC or other civil or criminal securities law action, (vi) commission of an act of fraud or embezzlement against the Company or any affiliate, or (vii) accepting a bribe or kickback.As defined in the agreement, “Good Reason” means,means: (i) an uncured material breach by the Company of the Company’s obligations to the executive under the agreement, (ii) an ongoing material and substantial diminution in the duties of the executive not consistent with that of an executive with his or her position and duties or (iii) without the executive’s consent, our relocation of her principal office more than 50 miles from her current office location in Kennett Square, PA.Employment Agreement with Mr. Gale.On February 3, 2014, we entered into an employment agreement with Mr. Gale. Pursuant to the agreement, in the event Mr. Gale’s employment is terminated by the Company other than for Causehis or disability or by Mr. Gale for Good Reason, he will be entitled to receive severance equal to his annual base salary, payable in approximately equal installments over a 12-month period (provided that he has executed and not revoked a general release of claims and covenant not to sue in favor of the Company and complies with certain non-competition restrictions), and his outstanding and unvested stock options and RSUs will become fully vested as of the date of termination.As defined in the agreement, “Cause” means (i) failure to perform substantially his duties with the Company or any affiliate, (ii) engagement in illegal conduct or gross misconduct that is materially injurious to the Company or any affiliate, (iii) engagement in conduct or misconduct that materially harms the reputation or financial position of the Company or any affiliate, (iv) conviction of, or plea of nolo contondere to, a felony or to a crime involving fraud, dishonesty, violence or moral turpitude, (v) being found liable in any SEC or other civil or criminal securities law action, (vi) commission of an act of fraud or embezzlement against the Company or any affiliate, or (vii) accepting a bribe or kickback. “Good Reason” means without the executive’s consent, our relocation of hisher principal office more than 50 miles from his current office located in Lake Mary, Florida.Employment Agreement withFlorida in the case of Messrs. Seidel and Gale and Exton, Pennsylvania in the case of Ms. Hall.For a description of Mr. Abram.On March 7, 2014,Burger’s employment agreement that we entered into on April 5, 2019, with an employment agreementeffective date of June 17, 2019, see “Executive Compensation—Compensation Discussion and Analysis—Retirement of Dr. Raab and Compensation Arrangements with Mr. Abram. Pursuant to the agreement, in the event Mr. Abram’s employment was terminated by the Company other than for Cause or disability or by Mr. Abram for Good Reason, he would be entitled to receive severance equal to his annual base salary, payable in approximately equal installments over a 12-month period (provided that he has executed and not revoked a general release of claims and covenant not to sue in favor of the Company and complies with certain non-competition restrictions), and his outstanding and unvested stock options and RSUs would become fully vested as of the date of termination.As defined in the agreement, “Cause” means (i) failure to perform substantially his duties with the Company or any affiliate, (ii) engagement in illegal conduct or gross misconduct that is materially injurious to the Company or any affiliate, (iii) engagement in conduct or misconduct that materially harms the reputation or financial position of the Company or any affiliate, (iv) conviction of, or plea of nolo contondere to, a felony or to a crime involving fraud, dishonesty, violence or moral turpitude, (v) being found liable in any SEC or other civilor criminal securities law action, (vi) commission of an act of fraud or embezzlement against the Company or any affiliates, or (vii) accepting a bribe or kickback. “Good Reason” means (i) a material breach by the Company of the Company’s obligations to Mr. Abram under the agreement, (ii) an ongoing material and substantial diminution in duties not consistent with that of an executive with his position or duties, or (iii) without the executive’s consent, our relocation of his principal office more than 50 miles from his current office located in Lake Mary, Florida.Separation Agreement with Mr. Abram. On March 20, 2015, we entered into a separation and release letter agreement with Mr. Abram. Pursuant to the agreement, subject to the expiration of a seven-day revocation period, Mr. Abram received an aggregate amount of $122,744 under our 2014 short-term incentive plan and a lump sum amount of $140,898.32 as consideration for all of his outstanding equity awards under our 2009 Equity Plan and 2014 Incentive Plan, which were terminated and forfeited. In addition, we reimbursed the monthly COBRA payments made by Mr. Abram for a period of six months.Employment Agreement with Ms. Murphy-Wolf.On July 29, 2015, we entered into an employment agreement with Ms. Murphy-Wolf. Pursuant to the agreement, in the event Ms. Murphy-Wolf’s employment was terminated by the Company other than for Cause or disability or by Ms. Murphy-Wolf for Good Reason, she would be entitled to receive severance equal to her annual base salary, payable in approximately equal installments over a 12-month period (provided that she has executed and not revoked a general release of claims and covenant not to sue in favor of the Company and complies with certain non-competition restrictions), and her outstanding and unvested stock options and RSUs would become fully vested as of the date of termination.As defined in the agreement, “Cause” means (i) failure to perform substantially her duties with the Company or any affiliate, (ii) engagement in illegal conduct or gross misconduct that is materially injurious to the Company or any affiliate, (iii) engagement in conduct or misconduct that materially harms the reputation or financial position of the Company or any affiliate, (iv) conviction of, or plea of nolo contondere to, a felony or to a crime involving fraud, dishonesty, violence or moral turpitude, (v) being found liable in any SEC or other civil or criminal securities law action, (vi) commission of an act of fraud or embezzlement against the Company or any affiliate, or (vii) accepting a bribe or kickback. “Good Reason” means without the executive’s consent, our relocation of her principal office more than 50 miles from the Company’s current headquarters location in Lake Mary, Florida.Separation Agreement with Ms. Murphy-Wolf. On March 10, 2016, we entered into a Transition and Separation Agreement with Ms. Murphy-Wolf. Pursuant to the agreement, Ms. Murphy-Wolf stepped down as our Senior Vice President and Chief Financial Officer effective March 10, 2016. Ms. Murphy-Wolf will continue to serve as an at-will employee of the Company through April 8, 2016 (or such earlier date as determined by the Company, in its sole discretion, upon notice to Ms. Murphy-Wolf) to provide assistance and input concerning ongoing business matters to effectively transition matters to other executives or to perform such other duties as reasonably directed by our President and Chief Executive Officer. In consideration for her services during the transition period, the Company will pay Ms. Murphy-Wolf an amount equal to $25,000. Ms. Murphy-Wolf will also receive a payment of $226,250 in exchange for agreeing to a two-year covenant not to compete or solicit and a general release, and continuing to comply with customary confidentiality and non-disparagement provisions. In addition, Ms. Murphy-Wolf will receive an aggregate gross amount equal to $32,000 to cover the remaining lease payments under her apartment lease, relocation costs and attorneys’ fees. In addition, we will reimburse the monthly COBRA payments made by Ms. Murphy-Wolf for a period not to exceed eight months. Ms. Murphy-Wolf’s unvested equity awards were terminated and forfeited as of March 10, 2016.2015,2018, Messrs. ArezoneSeidel and Gale and Mses. Murphy-Wolf andMs. Hall were covered by the Change-in-ControlChange in Control Severance Policy adopted by the Company on November 7, 2008 and amended and restated on April 9, 2015.2015 (the “Policy”). Pursuant to the terms of this policy,the Policy, if, within12 month12-month period immediately prior to his or her date of termination, plus (ii) the average of the annual cash bonus earned by him or her during our last three completed fiscal years;proratedpro-rated portion of the average annual cash bonus earned by him or her during our last three completed fiscal years; andAs defined in the Policy, “Cause” meansmeans: (i) the failure to perform substantially a participant’s duties with the Company and/or any subsidiary (excluding any such failure resulting from the participant’s disability), after written demand for substantial performance is delivered to such participant by or on behalf of the Board and such failure is not cured within 30 days, (ii) engagement in illegal conduct or gross misconduct that is materially injurious to the Company or any subsidiary, (iii) engagement in conduct or misconduct that materially harms the reputation or financial position of the Company or any subsidiary, (iv) obstruction or impediment of, or failure to materially cooperate with, an “investigation” (as defined in the Policy), (v) conviction of, or plea of nolo contendere to, a felony or of a crime involving fraud, dishonesty, violence or moral turpitude, (vi) being found liable in any SEC or other civil or criminal securities law action, (vii) commission of an act of fraud or embezzlement against the Company or any subsidiary, or (viii) accepting a bribe or kickback. “Good“Good Reason” means, without the executive’s express written consent, (i) an ongoing material diminution in the participant’s duties or responsibilities that is inconsistent in any material and adverse respect with the participant’s position, duties, or responsibilities with the Company immediately prior to the change in control, excluding a change in duties or responsibilities as a result of the Company no longer being a publicly tradedpublicly-traded entity; (ii) a reduction in the participant’s annual base salary as in effect immediately prior to such change in control; (iii) a material reduction in the participant’s cash bonus opportunities in the aggregate under our applicable incentive plan, as in effect immediately prior to such change in control; (iv) relocation of more than fifty (50) miles from the office where the participant is located at the time of the change in control; (v) a material reduction in the benefits (including retirement, Company-paid insurance, sick leave, expense reimbursement and vacation time) in which the participant participated immediately prior to such change in control; or (vi) the failure of an acquiring company to assume the obligations under the Policy.Mr. Burger will be covered by the Policy upon the commencement of his service as our President and CEO, with the additional provision that if the target amount of Mr. Burger’s annual cash bonus for the year in which a qualifying termination (as defined in the Policy) takes place is greater than the aggregate of (i) the bonus amount (as defined in the Policy) and (ii) the pro-rated bonus amount provided for in the Policy, then he will receive such target amount in lieu of the bonus amounts described in clauses (i) and (ii) above. In addition, if during the period of time beginning with a change in control (as defined in the Policy) and ending 12 months following such change in control, we terminate Mr. Burger’s employment other than for cause or his employment terminates due to his resignation for good reason, as of the date of such termination, (a) any outstanding and unvested stock options held by him will become fully exercisable, (b) any outstanding time-based equity awards held by him will become fully vested and payable and (c) any outstanding performance-based equity awards will become fully vested and payable at the greater of actual performance or target.Executive Severance Plan. On February 14, 2019, the Board adopted the Executive Severance Plan, which provides eligible employees at the senior vice president level or above who are not otherwise covered by an individual employment agreement that provides severance benefits (each, a “participant”), with benefits in the event they are involuntarily terminated by us other than for cause or as a result of the participant’s death or disability. The Executive Severance Plan does not apply in the event there is a change in control of the Company and the participant collects severance benefits pursuant to a change in control agreement or any other agreement in place between the Company and the participant. Severance benefits include (i) 12 months of the participant’s annual salary, payable in a single lump sum, (ii) up to 12 months of the employer portion of any COBRA premiums incurred for any medical, dental and/or vision insurance a participant elects to continue and (iii) up to 12 months’ use of our employee assistance plan. Payment of severance benefits is conditioned upon a participant’s execution of a compete release of claims against the Company that has not been revoked during the applicable rescission period. Dr. Raab and Ms. Tyrrell are participants in the Executive Severance Plan.Transition Agreement with Mr. Arezone. On June 5, 2018, we entered into the Transition Agreement with Mr. Arezone, pursuant to which Mr. Arezone agreed to resign from his officer position and to serve as an at-will employee through November 30, 2018. In accordance with the Transition Agreement, we continued to pay Mr. Arezone his base salary of $263,280 per annum through November 30, 2018, and the stock options and RSUs granted to Mr. Arezone in 2016 and 2017 are continuing to vest following the conclusion of the transition period, in accordance with their respective vesting schedules, as if his employment had continued in effect through and including each applicable vesting date. In addition, with respect to Mr. Arezone’s stock options granted in 2016 and 2017, once vested, such stock options will continue to be exercisable for a period of two years following the conclusion of the transition period, but in no event later than the expiration date of expiration of such stock options. We also agreed to reimburse Mr. Arezone for the monthly COBRA payments that he makes, for a period of up to six months. The Transition Agreement includes non-compete and non-solicit covenants pursuant to which Mr. Arezone has agreed not to compete against or solicit any customer or employee of the Company for a period of two years after the conclusion of the transition period.Payments in Connection with a Termination of Employment.Employment or Upon a Change in Control.The following table presents estimates of the amounts of compensation that would have been payable to the named executive officers, (otherother than Messrs. Freeland and Abram)Mr. Arezone, upon their termination of employment without Cause, by us providing written notice of the non-extension of the employment period set forth in the named executive officer’s respective employment agreement or resignation for Good Reason, or upon their death or disability or upon the occurrence of a change in control regardless of whether they incurred a subsequent termination of employment, as of December 31, 2015.2018. The amounts in the table exclude distributions under our 401(k) retirement plan that are generally available to all salaried employees. For a description of the amounts paid to Messrs. Freeland and Abram in connection with their separation from the Company, see footnote 5 to the Summary Compensation Table on page 48 of this Proxy Statement. Termination of
Employment without
Cause or for Good
Reason (in connection
with a Change in Control)($) Termination of
Employment without
Cause or for Good
Reason (not in connection
with a Change in Control)($) Death($) Disability($) — — 750,000 (3) 142,000 (4) — — — — — — — — — — 750,000 142,000 345,894 (5) 335,000 (1) 750,000 (3) 142,000 (4) — — — — 7,021 — — — 352,915 335,000 750,000 142,000 420,056 (5) 351,500 (1) 750,000 (3) 142,000 (4) 51,276 51,276 51,276 51,276 7,505 — — — 478,837 402,776 801,276 193,276 384,963 (5) — 750,000 (3) 142,000 (4) 4,398 — 4,398 4,398 10,152 — — — 399,513 — 754,398 146,398 364,096 (5) 299,237 (1) 750,000 (3) 141,775 (4) 36,811 36,811 36,811 36,811 24,554 — — — 425,461 336,048 786,811 (3) 178,586 — — 504,000 (3) 102,000 (4) — — — — — — 504,000 102,000 Termination ofEmployment without Cause or By Executive for GoodReason (in connectionwith a Change in Control)($) Termination ofEmployment withoutCause, By Not Extending the Employment Period or By Executive for GoodReason (not in connectionwith a Change in Control)($) Termination upon Death($) Termination upon Disability ($) Upon Change in Control without Termination of Employment ($) Dr. Raab Cash Payment(s) (5) — — 750,000 (3) 142,000 (4) — Equity Acceleration (6) 439,503 — — — 439,503 Health Benefits (5)(7) — — — — — Total 439,503 — 750,000 142,000 439,503 Mr. Seidel Cash Payment(s) 375,546 (1) 334,000 (2) 750,000 (3) 142,000 (4) — Equity Acceleration (6) 165,052 165,052 — — 165,052 Health Benefits (7) 6,477 — — — — Total 547,075 499,052 750,000 142,000 165,052 Ms. Hall Cash Payment(s) 523,943 (1) 420,000 (2) 750,000 (3) 142,000 (4) — Equity Acceleration (6) 507,282 507,282 — — 507,282 Health Benefits (7) 6,477 — — — — Total 1,037,702 927,282 750,000 142,000 507,282 Mr. Gale Cash Payment(s) 427,389 (1) 362,000 (2) 750,000 (3) 142,000 (4) — Equity Acceleration (6) 320,720 320,720 — — 320,720 Health Benefits (7) 16,248 — — — — Total 764,357 682,720 750,000 142,000 320,720 Ms. Tyrrell Cash Payment(s) (5) — — 750,000 (3) 142,000 (4) — Equity Acceleration (6) 132,214 — — — 132,214 Health Benefits (5)(7) — — — — — Total 132,214 — 750,000 142,000 132,214 (1) Reflects for Mr. Gale, and Mses. Murphy-Wolf and Hall an amount equal to the executive’s base salary, payable in installments over 12 months.(2)Reflects the value of continued coverage to the executive under our employee welfare benefit plans for 12 months based on 2015 rates for the applicable time period.(3)Reflects a payment equal to three times the executive’s annual base salary with a maximum of $750,000, pursuant to the terms of the Vice President and Above Life Insurance Plan.(4)Reflects a payment equal to one year of benefits, pursuant to the terms of the Executive Long-Term and Short-Term Disability Plan.(5)
| executive has not received an annual cash bonus for the fiscal year in which the termination occurs, a pro rata share of the average of the annual cash bonus earned by the executive during our last three completed fiscal |
| (2) | Reflects for Messrs. Seidel and |
| (3) | Reflects a payment equal to three times the executive’s annual base salary with a maximum of $750,000, pursuant to the terms of the Vice President and Above Life Insurance Plan. |
| (4) | Reflects a payment equal to one year of benefits, pursuant to the terms of the Executive Long-Term and Short-Term Disability Plan. |
| (5) | Effective February 14, 2019, Dr. Raab and Ms. Tyrrell are covered under our Executive Severance Plan. The amounts in this table are as of December 31, 2018, and therefore do not include any benefits that would be received under the Executive Severance Plan because it was not in effect on such date. For a description of the benefits payable under the Executive Severance Plan, see “Executive Severance Plan” above. |
| (6) | For Messrs. Seidel and Gale and Ms. Hall, their outstanding and unvested stock options and RSUs will become fully vested and exercisable as of the date of their termination without Cause or for Good Reason pursuant to their employment agreements or if we have provided written notice of non-extension of the employment period set forth in their employment agreements. In the event of a change in control: |
for Mr. Gale and Mses. Murphy-Wolf and Hall, all outstanding and unvested stock options and RSUs will become fully vested and exercisable pursuant to their employment agreements;
for Dr. Raab, his outstanding and unvested stock options will become fully vested and exercisable pursuant to his equity award agreement; and
for the other named executive officers
| ▪ | for Messrs. Seidel and Gale and Ms. Hall, all outstanding and unvested stock options and RSUs will become fully vested and exercisable pursuant to their employment agreements; and |
| ▪ | for Dr. Raab and Ms. Tyrrell, all outstanding and unvested stock options and RSUs granted |
exercisable pursuant to the 2014 Incentive Plan if |
|
| (7) |
Payments in Connection with a Change in Control.The table below presents estimates of the amounts of compensation payable to the named executive officers (other than Messrs. Freeland and Abram) upon the occurrence of a change in control as of December 31, 2015, regardless of whether they incurred a subsequent termination of employment.
Dr. Raab | ||||
Cash | — | |||
Equity Acceleration(1) | — | |||
Total | $ | — | ||
Ms. Murphy-Wolf(2) | ||||
Cash | — | |||
Equity Acceleration(1) | — | |||
Total | $ | — | ||
Ms. Hall | ||||
Cash | — | |||
Equity Acceleration(1) | 51,276 | |||
Total | $ | 51,276 | ||
Mr. Arezone | ||||
Cash | — | |||
Equity Acceleration(1) | 4,398 | |||
Total | $ | 4,398 | ||
Mr. Gale | ||||
Cash | — | |||
Equity Acceleration(1) | 36,811 | |||
| $ | 36,811 | |||
Ms. D’Anjou | ||||
Cash | — | |||
Equity Acceleration | — | |||
Total | $ | — |
Plan Category Equity compensation plans approved by security holders(1) Equity compensation plans not approved by security holders(5) Total Risk Assessment of Overall Compensation ProgramThe Compensation Committee has reviewed with management the design and operation of our incentive compensation arrangements for all employees, including executive officers, for the purpose of determining whether such programs might encourage inappropriate risk-taking that could have a material adverse effect on the Company. Management compiled an inventory of all incentive compensation arrangements applicable to our employees at all levels, which plans and arrangements were reviewed for the purpose of identifying any aspects of such programs that might encourage behaviors that could exacerbate business risks. In conducting this assessment, the Compensation Committee considered, among other things, the performance objectives used in connection with these incentive awards and the features of our compensation program that are designed to mitigate compensation-related risk. The Compensation Committee concluded that any risks arising from our compensation plans, policies and practices are not reasonably likely to have a material adverse effect on the Company.Equity Compensation Plan InformationThe following table provides information as of December 31, 20152018 regarding equity compensation plans under which our common stock is authorized for issuance. Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a) Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c) 1,181,718 (2) $ 48.14 (3) 1,460,663 (4) — — — 1,181,718 $ 48.14 1,460,663 Plan Category Number of securities tobe issued upon exerciseof outstanding options,warrants and rights(a) Weighted-averageexercise price ofoutstanding options,warrants and rights(b) Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in column (a))(c) Equity compensation plans approved by security holders(1) 1,091,892 (2) $ 47.59 (3) 2,012,837 (4) Equity compensation plans not approved by security holders(5) — — — Total 1,091,892 $ 47.59 2,012,837 (1) Consists of the 2004 Equity Plan, the 2009 Equity Plan and the 2014 EquityIncentive Plan.(2) We had 1,178,585792,943 options outstanding as of December 31, 2015,2018, all of which are included in column (a). We also had 3,133298,949 RSUs outstanding as of December 31, 2015,2018, which are included in column (a), and 12,78312,051 shares of restricted stock, which are not included in column (a).(3) Calculation of weighted average exercise price of outstanding awards includes stock options but does not include RSUs that convert to shares of common stock for no consideration. Weighted average remaining life of stock options is 4.24.4 years.(4) Of such shares, all are available for issuance pursuant to grants of full-value awards. In addition to this amount, the number of shares available for issuance under the 2014 EquityIncentive Plan includes any shares underlying awards outstanding under the 2009 Equity Plan and 2004 Equity Plan as of the effective date of the 2014 EquityIncentive Plan that thereafter terminate or expire unexercised, or are cancelled,canceled, forfeited or lapse for any reason.(5) We do not maintain any equity compensation plans that have not been approved by our shareholders.
29, 2019. Name of Beneficial Owner Jay W. Freeland Simon Raab, Ph.D.(1) John Donofrio(2) Stephen R. Cole(3) Marvin R. Sambur, Ph.D.(4) John E. Caldwell(5) Lynn Brubaker(6) Kathleen J. Hall(7) Jody Gale(8) Joseph Arezone(9) Peter Abram(10) Laura A. Murphy-Wolf(11) Janet D’Anjou(12) All current directors and executive officers as a group (10 persons)(13) PRIMECAP Management Company(14) BlackRock, Inc.(15) The Vanguard Group, Inc.(16) Barrow, Hanley, Mewhinney & Strauss LLC(17)SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe following table sets forth the number of shares of our common stock beneficially owned as of March 24, 201629, 2019 (except as noted in the footnotes below) by each of our directors and named executive officers, all of our current directors and executive officers as a group, and each person known to us to own beneficially more than 5% of our common stock. The percentage of beneficial ownership is based on 16,651,62217,318,875 shares of common stock outstanding as of March 24, 2016.To our knowledge, except as noted in the footnotes below, the persons named below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Unless otherwise noted in the footnotes below, the address of each beneficial owner is in the care of FARO Technologies, Inc., 250 Technology Park, Lake Mary, Florida 32746. Number of
Shares Percent 63,903 * 174,179 1.0 % 19,759 * 21,686 * 21,273 * 14,111 * 7,392 * 21,411 * 11,200 * 6,487 * 950 * 0 * 2,021 * 299,831 1.8 % 1,807,000 10.9 % 1,673,796 10.1 % 1,313,244 7.9 % 1,626,283 9.8 % Name of Beneficial Owner Number ofShares Percent Simon Raab, Ph.D. (1) 360,046 2.1 % John Donofrio (2) 20,547 * Stephen R. Cole (3) 24,494 * John E. Caldwell (4) 21,855 * Lynn Brubaker (5) 12,956 * Yuval Wasserman (6) 3,903 * Jeffrey A. Graves, Ph.D. (7) 3,903 * Kathleen J. Hall (8) 39,660 * Jody S. Gale (9) 16,317 * Robert E. Seidel (10) 20,143 * Katrona Tyrrell (11) 5,667 * Joseph Arezone (12) 15,491 * All current directors and executive officers as a group (12 persons)(13) 544,771 3.1 % PRIMECAP Management Company (14) 1,587,078 9.2 % BlackRock, Inc. (15) 2,510,748 14.5 % The Vanguard Group, Inc. (16) 1,770,347 10.2 % Barrow, Hanley, Mewhinney & Strauss LLC (17) 1,089,545 6.3 % Dimensional Fund Advisors LP (18) 978,662 5.7 % Paradice Investment Management LLC (19) 934,056 5.4 % Credit Suisse AG (20) 1,011,772 5.8 % * Represents less than one percent of our outstanding common stock. (1) Includes 44,315 shares held by Xenon Research, Inc., over which Dr. Raab and his spouse have investment control, and 110,00080,000 shares held by a revocable trust of which Dr. Raab is settlor and trustee. Also includes 3,035 shares of restricted stock. Does not include options to purchase 60,000(i) 37,908 shares at $29.98 per share, (ii) 69,475 shares at $39.05 per share, (iii) 72,167 shares at $34.55 per share and (iv) 26,134 shares at $61.30 per share that are not exercisable within 60 days of March 24, 2016.currently exercisable.(2) Includes 1,8682,636 shares of restricted stock.(3) Includes 2,2761,883 shares of restricted stock.stock and 469 deferred stock units, which represent the right to receive one share of our common stock following Mr. Cole’s separation of service from the Company. Includes 490 shares held by Shanklin Investments in trust for Mr. Cole, who holds such shares in trust from Snow Powder Ridge Limited, a company owned by Mr. Cole, his wife and his children, and 2,0007,000 shares held by Snow Powder Ridge Limited.Limited, and 10,630 shares held by Seeonee Inc., over which Mr. Cole has investment control.(4) Includes 1,8681,883 shares of restricted stock.(5) Includes 1,8681,883 shares of restricted stock and 8,200 shares held by the Cornelius-Brubaker Trust.(6) Includes 3,903 shares of restricted stock. (6)(7) Includes 1,8683,903 shares of restricted stock.(7)Includes options to purchase (i) 17,501 shares at $38.57 per share, (ii) 2,368 shares at $57.54 per share and (iii) 1,269 shares at $59.97 per share that are currently exercisable. Does not include options to purchase (i) 8,751 shares at $38.57 per share, (ii) 1,184 shares at $57.54 per share, (iii) 10,026 shares at $59.97 per share or (iv) 25,636 shares at $33.05 per share that are not exercisable within 60 days of March 24, 2016. Does not include 4,303 RSUs that represent a contingent right to receive one share of common stock per RSU that will not vest within 60 days of March 24, 2016.
| (8) | Includes options to purchase (i) |
| (9) | Includes options to purchase (i) |
| (10) |
| (11) |
| (12) | Includes options to purchase (i) |
| (13) | Includes options to purchase |
| (14) | The number of shares reported is based on the Schedule 13G/A filed with the SEC on February |
| (15) | The number of shares reported is based on the Schedule 13G/A filed with the SEC on January |
| (16) | The number of shares reported is based on the Schedule 13G/A filed with the SEC on February |
| (17) | The number of shares reported is based on the Schedule 13G filed with the SEC on February |
Any person who is, or at any time since the beginning of our last fiscal year was, our executive officer or director or a nominee to become one of our directors; Any shareholder beneficially owning in excess of 5% of our outstanding common stock; Any immediate family member of any of the foregoing persons; or Any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in which such person has a 10% or greater beneficial ownership interest. The benefits to the Company from the proposed transaction; The impact of the proposed transaction on the independence of the members of the Board, The availability of unrelated parties to perform similar work for a similar price in a similar timeframe; The terms of the proposed transaction; and The terms available to unrelated third parties or employees generally. were required for such persons, we believe that all of our directors, executive officers and persons who beneficially own more than ten percent of our common stock complied with the Section 16(a) filing requirements during the year ended December 31, 2018. March 1, 2020. March 1, 2020. shareholders. furnishing them. 17, 2019(18) The number of shares reported is based on the Schedule 13G/A filed with the SEC on February 8, 2019 by Dimensional Fund Advisors LP, an investment advisor. The address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746. According to the Schedule 13G/A, Dimensional Fund Advisors LP has sole voting power with respect to 927,671 shares and sole dispositive power with respect to 978,662 shares. (19) The number of shares reported is based on the Schedule 13G filed with the SEC on February 14, 2019 by Paradice Investment Management LLC, an investment advisor, and Paradice Investment Management Pty Ltd, a parent holding company. The address of Paradice Investment Management LLC is 257 Fillmore Street, Suite 200, Denver, Colorado 80206. The address of Paradice Investment Management Pty Ltd is Level 27, The Chifley Tower, 2 Chifley Square, Sydney NSW 2000, Australia. According to the Schedule 13G, Paradice Investment Management LLC and Paradice Investment Management Pty Ltd have shared voting power with respect to 767,588 shares and shared dispositive power with respect to 934,056 shares. (20) The number of shares reported is based on the Schedule 13G filed with the SEC on February 13, 2019 by Credit Suisse AG, a parent holding company or control person. The address of Credit Suisse AG is Uetlibergstrasse 231, P.O. Box 900, CH 8070, Zurich, Switzerland. According to the Schedule 13G, Credit Suisse AG has shared voting and dispositive power with respect to 1,011,772 shares. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSReview, Approval or Ratification of Transactions with Related PersonsOur Board of Directors has adopted a Statement of Policy and Procedures with respect to Related Person Transactions, which sets forth in writing the policies and procedures for the review, approval or ratification of any transaction (or any series of similar transactions) in which the Company, including any of its subsidiaries, were, are or will be a participant, in which the amount involved exceeds $10,000, and in which any related person had, has or will have a direct or indirect material interest. For purposes of the policy, a “related person” is:Our Board of Directors has charged the Audit Committee with reviewing and approving related person transactions. Prior to the approval of, entry into, or amendment to a related person transaction, our Audit Committee reviews the proposed transaction and considers all relevant facts and circumstances, including:of Directors, if applicable;The Audit Committee approves only those related person transactions that are in, or are not inconsistent with, the best interests of the Company and our shareholders. The Audit Committee may approve a proposed related person transaction if it finds that it has been fully apprised of all significant conflicts that may exist or otherwise may arise on account of the transaction, and it nonetheless believes that we are warranted in entering into the related person transaction, and the Audit Committee has developed an appropriate plan to manage the potential conflicts of interest.Other than a transaction involving compensation, including the grant of equity awards, that is approved by our Board of Directors or Compensation Committee, we will only consummate or continue a related person transaction if it has been approved or ratified by our Audit Committee in accordance with the guidelines set forth in the policy.There were no transactions in 2015,2018, and none are currently proposed, in which the Company was or is a participant, the amount exceeded $120,000 and a related person had or will have a direct or indirect material interest.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of their security ownership and changes in such ownership with the SEC. Officers, directors and ten percent beneficial owners also are required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the Section 16(a) forms furnished to us in 20152018 and certifications from our executive officers and directors that no other reports2015.OTHER MATTERS TO COME BEFORE THE ANNUAL MEETINGThe Board of Directors and management do not know of any matters before the Annual Meeting other than those to which we refer in the Notice of 2019 Annual Meeting of Shareholders and this Proxy Statement. If any other matters properly come before the Annual Meeting, the proxy holders will vote the shares in accordance with their best judgment. To bring business before an annual meeting of shareholders, a shareholder must give written notice to our Secretary before the meeting and comply with the terms and time periods specified in our Bylaws and described under “Deadline for Receipt of 2020 Shareholder Proposals and Director Nominees.” No shareholder has given written notice that he or she intends to bring business before the Annual Meeting in compliance with the terms and time periods specified in our Bylaws.DEADLINE FOR RECEIPT OF 20172020 SHAREHOLDER PROPOSALS AND DIRECTOR NOMINEESIf a shareholder wants to have a proposal formally considered at the 2017 Annual Meeting2020 annual meeting of Shareholdersshareholders and included in our proxy statement for that meeting pursuant to SEC Rule 14a-8, we must receive the proposal in writing on or before December 2, 201619, 2019 and the proposal must comply with SEC rules; provided, however, that if the date of our 2017 Annual Meeting2020 annual meeting of Shareholdersshareholders is more than 30 days before or after May 13, 201730, 2020 (the one-year anniversary date of the 2016 Annual Meeting of Shareholders)Meeting), the deadline will be a reasonable time before we begin to print and send our proxy materials to shareholders.In addition, if a shareholder wants to make a proposal for consideration at the 2017 Annual Meeting2020 annual meeting of Shareholdersshareholders other than pursuant to SEC Rule 14a-8, the shareholder must comply with the advance notice provisions and other requirements set forth in our bylaws.Bylaws. Under our bylaws,Bylaws, we must receive the proposal not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting of shareholders. In the event that the date of the annual meeting is advanced more than 30 days before or delayed more than 60 days after such anniversary date, notice by the shareholder must be received not more than 120 days prior to such annual meeting and not less than the later of 90 days prior to such annual meeting or ten days following the day on which public announcement of the date of the annual meeting is first made. For the 2017 Annual Meeting2020 annual meeting of Shareholders,shareholders, we must receive the proposal, which must conform to the notice requirements set forth in our bylaws,Bylaws, between January 13, 201731, 2020 and February 12, 2017.If a shareholder wants to nominate a person for election to the Board of Directors, the shareholder must comply with the advance notice provisions and other requirements set forth in our bylaws, as described under the heading “Corporate Governance and Board Matters—Board Meetings and Committees—Governance and Nominating Committee,” beginning on page 1715 of this Proxy Statement. For the 2017 Annual Meeting2020 annual meeting of Shareholders,shareholders, we must receive the nomination, which must conform to the notice requirements set forth in our bylaws,Bylaws, between January 13, 201731, 2020 and February 12, 2017.If we do not receive a shareholder proposal or director nomination by the appropriate deadline and in compliance with applicable requirements, then such proposal may not be brought before the 2017 Annual Meeting2020 annual meeting of Shareholders.20152018 ANNUAL REPORTOn February 29, 2016,21, 2019, we filed with the SEC our Annual Report on Form 10-K for the year ended December 31, 2015.2018. Copies of our 20152018 Annual Report on Form 10-K, including the financial statements thereto, without the accompanying exhibits, may be obtained without charge by writing to: FARO Technologies, Inc., Attention: Investor Relations, 250 Technology Park, Lake Mary, Florida 32746; by accessing our website atwww.faro.com and first clicking “Investor Relations” and then “SEC Filings;”www.faro.com/about-faro/investor-relations/sec-filings or by accessing the SEC’s EDGAR database atwww.sec.gov.By Order A list of exhibits is included in the 2018 Annual Report on Form 10-K, and exhibits are available from us upon payment to us of the Boardcost of DirectorsBy Order of the Board of Directors, JODY S. GALE Senior Vice President, General Counsel and Secretary April 1, 2016
VOTE BY INTERNET - www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLYTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of theThe Board of Directors recommends you vote FOR the following: nominee(s) on the line below.1. Election of DirectorsNominees01 John Caldwell 02 John DonofrioThe Board of Directors recommends you vote FOR proposals 2 and 3.2. The ratification of Grant Thornton LLP as the Company’s independent registered public accounting firm for 20163. Non-binding resolution to approve the compensation of the Company’s named executive officersNOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof.For Against Abstain0000279575_1 R1.0.1.25For address change/comments, mark here.(see reverse for instructions) Yes NoPlease indicate if you plan to attend this meetingPlease sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, 10-K Wrap is/are available at www.proxyvote.comFARO TECHNOLOGIES, INC. Annual Meeting of Shareholders May 13, 2016 9:00 AM, EDTThis proxy is solicited by the Board of DirectorsThe undersigned hereby appoint(s) Dr. Simon Raab, Chairman, President and CEO, and Jody S. Gale, Senior Vice President, General Counsel & Secretary, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this proxy card, all of the shares of Common Stock of FARO TECHNOLOGIES, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 9:00 AM, EDT on May 13, 2016, at FAROTechnologies, Inc., 250 Technology Park, Lake Mary, FL 32746, and any adjournment or postponement thereof.0000279575_2 R1.0.1.25This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted “FOR” each of the director nominees listed in Proposal 1 and “FOR” Proposals 2 and 3.Address change/comments:(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)Continued and to be signed on reverse side
