UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

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BIO-TECHNE CORPORATION

(Name of Registrant as Specified In Its Charter)

 

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

 

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September 15, 2020

 

Dear Fellow Shareholders:

 

On behalf of the Bio-Techne Board of Directors, we are pleased to invite you to join us at the 2020 Annual Meeting of Shareholders of Bio-Techne Corporation (the “Company”). The meeting will be held virtually on October 29, 2020, at 8:30 a.m. Central Time. We will cover items of business as described in this Proxy and provide attendees with an opportunity for questions.

 

Given the current pandemic, we plan to conduct this year’s meeting solely as a webcast. You will be able to join the annual meeting online, vote your shares electronically and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/TECH20. We are pleased to offer this virtual meeting to provide ready access for our shareholders in this unprecedented global pandemic. After the meeting, we will post any questions and answers regarding topics of material interest to shareholders.

 

Only shareholders of record shown on the books of the Company at the close of business on September 3, 2020 will be entitled to attend and vote at the Annual Meeting of Shareholders or any adjournment thereof. Each shareholder is entitled to one vote per share on all matters to be voted on at the Annual Meeting of Shareholders.

 

We hope that you will join the webcast of the Annual Meeting of Shareholders. Whether or not you plan to attend, we encourage you to designate the proxies to vote your shares as soon as possible. Any shareholder may vote over the telephone or Internet using the instructions provided. Your cooperation in promptly signing and returning the Proxy or voting by Internet will help avoid further solicitation expense to the Company.

 

Thank you for your continued support of and interest in Bio-Techne.

 

Sincerely,

 

Charles (“Chuck”) R. Kummeth

President and Chief Executive Officer

 

 

 

NOTICE OF 2020 ANNUAL MEETING

OF SHAREHOLDERS

 

 


 

 

 

 

 

Time and Date

Thursday, October 29, 2020

8:30 a.m. Central Time

   

Items of Business:

 

        1.    Set the number of members of the Board of Directors at nine (9), as recommended by our Board of Directors;
        2.    Elect directors of the Company, each of which is recommended by our Board of Directors;
 
 
 

 

Place

Via Webcast

www.virtualshareholder

meeting.com/TECH20

    3.    Approve, on an advisory basis, the compensation of our executive officers as disclosed in the Proxy Statement, as recommended by our Executive Compensation Committee;
        4.    Approve amendments to the Bio-Techne Equity Plan, including allocation of additional shares, as recommended by our Board; and
        5.    Ratify the appointment of KPMG, LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year, as recommended by our Audit Committee.

 

 

How to Vote

Whether or not you plan to attend the meeting, please provide your proxy by either using the Internet or telephone as further explained in this Proxy Statement or filling in, signing, dating, and promptly mailing a proxy card.

 

 

Annual Report

 

Our 2020 Annual Report, which is not part of the proxy soliciting materials, is enclosed if the proxy materials were mailed to you. The Annual Report is accessible on the Internet by visiting www.proxyvote.com, if you have received the Notice of Internet Availability of Proxy Materials or previously consented to the electronic delivery of proxy materials.

 

By order of the Board of Directors

 

Brenda S. Furlow

General Counsel and Corporate Secretary

September 15, 2020

 

 

 

By Telephone

In the U.S. or Canada, you can vote your shares toll-free by calling 1-800-690-6903.

 

   
 
 

By Internet

You can vote your shares online at www.proxyvote.com.

 

   
 
 

By Mail

You can vote by mail by marking, dating, and signing your proxy card or voting instruction form and returning it in the postage-paid envelope

 

   

YOUR VOTE IS IMPORTANT.

 

We encourage you to read the Proxy Statement and vote your shares as soon as possible. You may vote via the Internet at www.proxyvote.com or by telephone at 1-800-690-6903. If you received paper copies of your proxy materials in the mail, you may vote by mail, and a return envelope for your proxy card is enclosed for your convenience. The Proxy Statement and 2020 Annual Report to Shareholders are available at www.proxyvote.com.

 

Attending the Meeting

If you wish to attend the Annual Meeting via the webcast, you will need to register using the 16-digit control number included in your materials in order to be admitted to the Annual Meeting. Please refer to the section entitled “Attending the Annual Meeting” on page 61 of the Proxy Statement for further details.

   

 

 

 

 

 

Table of Contents

 

 

Page

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

1

   

PROXY OVERVIEW

1

2020 Annual Meeting of Shareholders

1

Business Highlights

2

The Company’s Response to the COVID-19 Pandemic

4

Governance Proposals

4

Governance Highlights

5

Executive Compensation Highlights

7

   

PROPOSAL 1. ESTABLISHING THE NUMBER OF DIRECTORS AT NINE

10

   

PROPOSAL 2. ELECTION OF DIRECTORS

10

Nominees for Director

11

Corporate Governance – The Role and Governance of the Board

15

Corporate Governance -- Board Committees

16

Corporate Governance – Meetings and Attendance

17

Shareholder Engagement and Communications

17

Director Qualifications, Diversity and Refreshment

18

Director Compensation

19

Corporate Sustainability

21

   

EXECUTIVE COMPENSATION

22

Compensation Discussion and Analysis

22

Executive Summary

22

Compensation Philosophy and Objectives

28

Our Process for Establishing Executive Compensation

28

Elements of the 2020 Compensation Program

30

Compensation Policies and Practices

34

   

EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

35

   

ADDITIONAL COMPENSATION DISCLOSURES

36

2020 Summary Compensation Table

36

2020 Grants of Plan-Based Awards

39

2020 Outstanding Equity Awards at Fiscal Year-End

40

2020 Option Exercises and Stock Vested

42

Executive Employment Agreements and Change in Control Arrangements

42

Compensation Arrangements

42

Benefits

42

Potential Severance Events

43

Pay Ratio Disclosure

44

   

PROPOSAL 3. ADVISORY VOTE ON EXECUTIVE COMPENSATION

45

   

SHARE INFORMATION

45

Equity Compensation Plan Information

45

   

PRINCIPLE SHAREHOLDERS

46

   

MANAGEMENT SHAREHOLDINGS

47

   

PROPOSAL 4. APPROVE AN AMENDMENT AND RESTATEMENT OF THE COMPANY’S EQUITY PLAN

49

Background and Summary of Amendments

49

 

2020 Proxy Statement
 

 

Analysis of Number of Additional Shares

50

Shareholder Approval Requirement

54

Summary of the Amended Plan

54

Shares Available for Awards

54

New Plan Benefits

56

   

PROPOSAL 5. RATIFICATION OF APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2021

57

Audit Committee Report

57

Independent Registered Public Accountants

57

Audit Fees

58

Pre-Approval Policies and Procedures

58

   

ADDITIONAL CORPORATE GOVERNANCE MATTERS

58

   

ADDITIONAL VOTING INFORMATION

59

   

BIO-TECHNE CORPORATION 2020 EQUITY INCENTIVE PLAN

Appendix A

 

2020 Proxy Statement
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Proxy Statement contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “may,” “estimate,” “intend” and other similar words. Forward-looking statements in this proxy statement include, but are not limited to, statements regarding individual and Company performance objectives and targets and statements relating to the benefits of the Company’s acquisitions, product launches and business strategies. These and other forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. Factors that may cause actual results to differ materially from those contemplated by the statements in this proxy statement can be found in the Company’s periodic reports on file with the Securities and Exchange Commission (the “SEC”). The forward-looking statements speak only as of the date of this Proxy Statement and undue reliance should not be placed on these statements. We do not undertake to publicly update or revise any forward-looking statements. This cautionary statement is applicable to all forward-looking statements contained in this document.

 

PROXY OVERVIEW

 

We provide below highlights of certain information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider before you decide how to vote. You should read the entire proxy statement carefully before voting.

 

To assist you in reviewing the proposals to be acted upon, we are providing information about business, governance and compensation highlights for fiscal year 2020. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and the complete Proxy Statement.

 

2020 ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time

October 29, 2020 at 8:30 a.m. (Central Time)

Place

Webcast at www.virtualshareholdermeeting/TECH20

Record Date

September 3, 2020

Voting

Holders of common stock are entitled to vote online at www.proxyvote.com, by telephone at 1-800-690-6903, by completing and returning a proxy card, or in person at the Annual Meeting (see the section captioned “Attending the Annual Meeting” for further information).

 

Our Board of Directors is asking you to take the following actions at the Annual Shareholder Meeting:

 

Item.

Your Board’s

Recommendation

Page

1.

Set the number of members of the Board of Directors at nine (9)

FOR

10

2.

Elect the persons nominated to be directors of the Company

FOR

10

3.

Approve, on an advisory basis, the compensation of our executive officers as disclosed in the Proxy Statement

FOR

45

4.

Approve an amendment and restatement of the Company’s Equity Plan, including allocation of additional shares

FOR

49

5.

Ratify the appointment of KPMG, LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year

FOR

57

 

2020 Proxy Statement   1
 

 

BUSINESS HIGHLIGHTS

 

Our team continued to deliver on our long-term strategy in fiscal year 2020, leading to another year of strong financial results.

 

Highlights of our fiscal year 2020 performance include:

 

 

Despite the material impact on revenues caused by the pandemic in the third and fourth quarter of our fiscal year 2020, our revenue increased 4% to $739 million. Organic revenue was also 4% over the prior year, with currency translation and acquisitions having an immaterial impact on revenue.

 

We remained at the forefront of COVID-19 research and therapeutic development with the release of new SARS-CoV-2-related antibodies and viral proteins. Additionally, our multiplexing ELISA instrument, Ella, provided clinically relevant data regarding the immunologic response to the virus while our newly developed COVID-19 RNAscope™ probes allowed researchers to visualize and estimate the viral load in any infected tissue and cell.

 

We partnered with Mount Sinai Health System’s commercial affiliate, Kantaro Biosciences LLC, to scale the manufacturing and distribution capabilities of quantitative COVID-19 serology testing. The co-branded quantitative test will aid in determining immunity levels of patients exposed to the virus.

 

GAAP earnings were $229 million, while adjusted earnings were $179 million. GAAP earnings per share were $5.82 per diluted share versus $2.47 last fiscal year, impacted primarily by changes in fair value of our investments. Adjusted earnings per share were $4.55, 1% above last year. Currency exchange impacted earnings per share negatively by $0.04, or 1%.

 

GAAP operating margins for the fiscal year were 21.3%, while adjusted operating margins were 33.3%, down 0.8% from last year due to business impacts associated with the COVID-19 pandemic.

 

Cash from operations was $205 million for the year, increasing 13% over the prior year. We returned $49 million to our shareholders in the form of dividends.

 

2

2020 Proxy Statement

 

 

We are accelerating our momentum to innovate best-in-class life sciences tools and products for our customers in the fields of research, diagnostics and therapeutics. Our acquisitions in fiscal year 2019 of Quad Technologies, B-MoGen Biotechnologies and Exosome Diagnostics give us even more runway into the growing and scalable markets of cell and gene therapy and cancer diagnostics, with customers that already know our brands for research reagents and tools. During fiscal 2020, we further strengthened our cell and gene therapy portfolio through the launch of a joint venture, rounding out our offering with a complete portfolio addressing cell and gene therapy workflow. We continued construction of a state-of-the-art GMP protein facility to meet forecasted demand as the growing pipeline of cell and gene therapies make it through clinical drug development phases and gain regulatory approvals. We pivoted significant resources to develop and commercialize products enabling SARS-CoV-2 research, diagnostic and therapeutic development, and partnered with a Mount Sinai-led joint venture to develop and scale a quantitative COVID-19 serology test. We are very proud of these accomplishments and believe that we are well-positioned to continue our strong performance and growth.

 

2020 Proxy Statement   3
 

 

THE COMPANY’S RESPONSE TO THE COVID-19 PANDEMIC

 

As the pandemic unfolded in the third and fourth quarters of the Company’s fiscal year, management and the Board responded in a number of ways. The Company focused first and foremost on employee health and safety. Specifically, week by week as the crisis unfolded, the Company took the protective steps necessary to keep our employees safe while ensuring continued operations as an essential business supporting our customers’ COVID-19 discoveries and other important medical research, diagnostics and therapeutics development. The Company implemented a number of measures to protect the safety of those employees who were required to work on site, including having employees who could work remotely do so, modifying work schedules, establishing alternating shifts, implementing health measures such as mandatory mask usage, improving site cleaning and segregating the workplace into work areas to limit employee interaction. The Board was kept apprised of these safety measures through regular communications from management that also included copies of the weekly emails that were sent to all employees globally. As a result of the Company’s robust focus on health and safety and our employees’ cooperation, we have had minimal disruption to the business caused by employee illness and, to date, no known virus transmissions on site.

 

While the pandemic temporarily impacted revenues, the Board believes the Company is well-positioned to not only survive but thrive once the pandemic has subsided. Consequently, both the Board and its Executive Compensation Committee were focused on preserving business and retaining employees so that the Company is prepared to capitalize on future opportunities. As a result of the Company’s disciplined cash management and strong balance sheet, thus far the Company has chosen not to furlough any employees or reduce compensation. In fact, as described in more detail in the CD&A, the Company chose to award annual bonuses based on financial performance that excluded the fourth quarter, and to do so broadly throughout the Company. Annual cash bonuses were paid for the first time to all management, not just middle and upper management. In addition, sales employees with commission plans were given reduced revenue targets in light of the pandemic. Broadly speaking, the Board and Executive Compensation Committee was very focused on maintaining employee morale and retaining key employees, believing that doing so was the best way to secure the Company’s long-term future.

 

In addition to overseeing the health and welfare of the Company’s employees, management focused on business continuity, ensuring that its suppliers were able to continue supply of critical components for key products required by our customers. Management closely monitored financial impacts and adjusted expenditures to mitigate revenue losses resulting from customers’ site closures. Management also monitored internal controls to ensure remote working did not negatively impact company processes and financial reporting and disclosures.

 

The Board and its committees received detailed reports on management’s activities during the pandemic, both at Board and committee meetings and in interim written reports, thereby fulfilling its risk oversight and strategic guidance roles. The Board also received regular reports from management regarding the Company’s significant initiatives to develop and launch new products specifically for research, diagnostic and therapeutic efforts to respond to the COVID-19 disease, as described above.

 

GOVERNANCE PROPOSALS

 

PROPOSAL Set the number of directors at nine. 
FOR setting the number of directors at nine.

Set the number of directors at nine.

Page 10

PROPOSAL Elect the nine director nominees identified in this Proxy Statement, each for a term of one year. FOR electing each of the nine director nominees

Our nominees are exemplary leaders who offer a diverse set of expertise and experience, together with a mix of tenured experience and fresh insight.

Page 10

4

2020 Proxy Statement

 

 

GOVERNANCE HIGHLIGHTS

 

Many of our corporate governance practices are the direct result of feedback from our shareholders and other stakeholders. The result of our continuous efforts to improve the governance of our company can be seen in our well-balanced, strong and experienced board, our ongoing shareholder engagement efforts, our executive compensation program and our incorporation of many market best practices.

 

The Company values the perspectives of its shareholders. Management meets frequently with key shareholders to discuss the Company’s financial performance and strategies. In fiscal year 2020, directors and management once again undertook a robust engagement process with our largest shareholders. We reached out to shareholders representing over 50% of our shares outstanding. Our shareholders were generally positive about the company’s financial performance and governance positions, as well as our decision to issue our first Corporate Sustainability Report, as described below in “Corporate Sustainability.”

 

At the recommendation of the Nominations and Governance Committee, the Board recently amended its Principles of Corporate Governance to respond to feedback from shareholders and formalize the Company’s commitment to diversity of leadership in all respects, including specifically diversity of gender, ethnicity and race. In furtherance of this goal, in late June 2020, the Board appointed a second woman, Julie Bushman, to serve as a director; she is one of the nominees listed below.

 

Board Nominees

 

The following is an overview of our director nominees submitted for election at the 2020 Annual Meeting. Each director nominee is elected annually by a majority of votes cast.

 

       

Committee Membership

Name

Age

Year First

Elected By

Shareholders

Principal Occupation

# of Other Public

Company Boards

Audit

Executive

Compensation

Nominations &

Governance

Science &

Technology

Robert V. Baumgartner

64

2003

Former Executive Chairman, Center for Diagnostic Imaging,

0

X

 

C*

 

Julie L. Bushman**

59

2020

Former Executive VP International Operations, 3M

2

X***

     

John L. Higgins

50

2009

President and, CEO, Ligand Pharmaceuticals

1

C

 

X

 

Joseph D. Keegan

67

2017

Advisor and Independent Director

1

 

X

   

Charles R. Kummeth

60

2013

President and CEO, Bio-Techne Corporation

1

 

 

 

 

Roeland Nusse

70

2010

Professor, Stanford University

0

     

C

Alpna Seth

57

2017

President and CEO, Nura Bio Inc.

1

 

 

X

X

Randolph Steer

70

1990

Independent Biotechnology Consultant and Board Director

0

 

C

 

X

Rupert Vessey

55

2019

President of Global Research & Early Development, Bristol Myers Squibb

0

 

X***

 

X

*

“C” denotes Committee Chair

**

Ms. Bushman will be standing for election for the first time at the Annual Shareholder Meeting

***

Membership begins following Annual Shareholder Meeting

 

2020 Proxy Statement   5
 

 

Board and Corporate Governance Highlights

 

Our strong performance during fiscal year 2020, and the past several years, can be at least partially attributed to our experienced board of directors. Our predominantly independent board includes a range of newer and tenured directors with a balanced and diverse background of experience, education and talent. The following is information about our current slate of nominees:

 

BOARD COMPOSITION.

BOARD ACCOUNTABILITY.

Total of 9 directors- all independent except for CEO

Annual election of directors

Separate Board Chairperson and CEO roles

Effective majority voting standard in uncontested director elections (through director resignation policy)

All chairpersons and members of all Board committees are independent

Annual Board and committee evaluations

Balance of industry, scientific and functional expertise among directors

Regularly-held executive sessions of non-management directors

Policy requiring directors to retire upon reaching the age of 75

Executive and director equity ownership guidelines

Regular refreshment, with a current average tenure of 9.1 years of service

Regular engagement by directors to discuss governance with key shareholders, both proactively and in response to requests from shareholders

 

6

2020 Proxy Statement

 

 

Director Qualifications and Experience

 

As a highly acquisitive science-based company, we focus on a mix of science/technology and business expertise. Our directors reflect this balance, as well as a diverse mix of other skills and experience needed to help drive our strategies. The following describes the specific skills and experience we seek in directors to better align with the Company’s strategic vision and business, and the number of our director-nominees with that identified skill:

 

SHAREHOLDER INTERESTS.

RISK MANAGEMENT.

First Corporate Sustainability Report issued

Enterprise risk discussed at least annually in the context of strategic planning process

Annual Say on Pay vote

Periodic reports to the Board on cybersecurity, privacy and compliance risks by management

One single voting class – common stock class

Compensation Committee oversight of compensation and other employee-related risks

No shareholder rights plan

Audit Committee oversight of financial, fraud and conflicts risks

Proxy access to nominate director candidates

Nominations and Governance Committee oversight of ethics, conflict of interest and other governance risks

 

EXECUTIVE COMPENSATION HIGHLIGHTS

 

PROPOSAL Approve, on an advisory basis, the compensation of our executive officers as disclosed in the Proxy Statement.
FOR the advisory proposal on executive compensation.
Our compensation practices align executive compensation with Company financial performance, business unit performance, and shareholder return.
Page 45

 

2020 Proxy Statement   7
 

 

Our Pay-for-Performance Culture

 

With our strategic focus on growing the business over the long term, it is imperative that our executive compensation program motivates our talented management team in such a manner as to encourage and reward successful execution of this business strategy. To achieve this, we have established an executive pay program with a strong pay-for-performance foundation. We utilize the following compensation elements:

 

Type

Element

Performance Period

Objective

Fixed

Base Salary

Annual

Recognizes an individual’s role and responsibilities and serves as an important retention vehicle

Performance-based

Annual Bonus

Annual

Rewards achievement of annual Company-wide and segment financial objectives

Performance-based

Performance-based Stock Options and Restricted Stock Units

Long-Term

Supports the achievement of corporate strategic goals that drive the creation of long-term, sustainable shareholder value

Performance- and Time-based

Time-Based Stock Options and Restricted Stock Units

Long-Term

Aligns the interests of management and shareholders and serves as an important retention vehicle

 

We believe that pay should be linked to performance – and that executives and long-term shareholders alike should benefit from our success and growth. Consequently, while the balance of the above components may change slightly from year to year based on corporate strategy and objectives, among other considerations, the mix of pay is heavily weighted toward performance.

 

8

2020 Proxy Statement

 

 

PROPOSAL Approve an amendment and restatement of the Company’s Equity Plan, including allocation of an additional 1.3 million shares. FOR amendments to the Bio-Techne Equity Plan.
In order to retain and motivate management, the Board recommends that an additional 1.3 million shares be allocated to the Bio-Techne Equity Plan and to make certain additional amendments.  Page 49

 

The Executive Compensation Committee believes that equity incentive grants to key employees and management are vital to the success of our Company and our shareholders. Equity incentives play an important role in our ability to attract and retain key employees and management, strategically align employee compensation with long-term performance, and link employee interests with those of shareholders. As we acquire companies, we also believe providing equity incentives to employees of those acquired companies enhances and supports our strategic objectives.

 

We are seeking shareholder approval to add 1.3 million shares to our Bio-Techne Equity Plan. Every August, as we begin a new fiscal year, we issue annual equity grants to our key non-management employees, management team and executives, representing approximately 10% of our employees. We issued approximately 700,000 shares on August 5, 2020. Since this occurred after the end of our Annual Report on Form 10-K, we have provided an updated disclosure of share usage and availability as of August 31, 2020 to assist you in analyzing our share request. See Equity Compensation Plan Information as of August 31, 2020.

 

PROPOSAL Ratify the appointment of KPMG, LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year. FOR ratification of the appointment of KPMG for the 2021 fiscal year.
Based on its assessment of the qualifications and performance of KPMG, the Audit Committee has recommended the appointment of KPMG for the 2021 fiscal year.  Page 57

 

2020 Proxy Statement   9
 

 

PROPOSALS 1 AND 2: ELECTION OF DIRECTORS

 

PROPOSAL 1. ESTABLISHING THE NUMBER OF DIRECTORS AT NINE

 

Your Board unanimously recommends a vote “FOR” setting the number of directors at nine.

 

Our bylaws provide that the number of directors shall be determined by the shareholders at each Annual Meeting. Your Board unanimously recommends that the number of directors be set at nine.

 

Under applicable Minnesota law and the Company’s bylaws, approval of the proposal to set the number of directors at nine requires the affirmative vote of the holders of the greater of: (1) a majority of the voting power of the shares represented in person or by proxy at the Annual Meeting with authority to vote on such matter; or (2) a majority of the voting power of the minimum number of shares that would constitute a quorum for the transaction of business at the Annual Meeting.

 

PROPOSAL 2. ELECTION OF DIRECTORS

 

Your Board unanimously recommends a vote “FOR” each of the nine director nominees presented in this proposal.

 

Over the last six years, we have undergone a thoughtful, gradual board refreshment process as we have also significantly expanded the Company. In 2014, we implemented a director retirement provision in our Principles of Corporate Governance and have subsequently followed that policy. As a result, the average director tenure has dropped from 13.8 years in 2013 to 9.1 years currently.

 

While refreshment is important, it is also critical to the effectiveness of the Board to make replacements gradually so that the Board retains a balance of experience and new perspectives. In 2017, with three directors reaching the retirement age of 75, the Nominations and Governance Committee recommended, and the Board unanimously approved, a transition plan that staggered these individuals’ retirement to provide for continuity and a smooth transition. At the 2017 and 2018 Annual Meetings, the shareholders elected three new Board members as part of the refreshment process. Mr. Harold Wiens is reaching retirement age this year and is not up for re-election. In anticipation of his retirement, the Board appointed Ms. Julie L. Bushman on July 31, 2020, and she is now standing for election for the first time at the current Annual Meeting. Ms. Bushman was recommended for nomination by retiring director Harold Wiens.

 

The nine directors elected at the Annual Meeting will hold office until the 2021 Annual Meeting of Shareholders and until their successors have been elected and qualified, or until their earlier death, resignation or removal. Each nominee has informed the Board that he or she is willing to serve as a director. If any nominee should decline or become unable or unavailable to serve as a director for any reason, your proxy (the “Proxy”) authorizes the persons named in the Proxy to vote for a replacement nominee, if the Board names one, as such persons determine in their best judgment. As an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting.

 

Under the Company’s Amended and Restated Articles of Incorporation, directors will be elected as follows: (i) if the number of director nominees is equal to (or less than) the number of directors to be elected, directors will be elected by a majority vote, meaning that directors who receive a greater number of “FOR” votes than “AGAINST” votes will be elected; (ii) if the number of director nominees exceeds the number of directors to be elected, directors will be elected by a plurality of votes cast. Under the Board’s director resignation policy, an incumbent director who does not receive a majority of the votes cast “FOR” his or her election, in an election where the majority vote standard applies, must offer to tender his or her resignation to the Company’s Nominations and Governance Committee. The policy further provides that the Board, taking into account the recommendation of the Nominations and Governance Committee, will act on a tendered resignation and publicly disclose its decision within 90 days of receiving certification of the election results. If the Board does not accept such director’s resignation, the director will continue to serve until the next annual meeting and until his or her successor is duly elected.

 

10

2020 Proxy Statement

 

 

Nominees for Director

 

The following is a brief description of each nominee, including age, years of service on this Board, other public company directorships, as well as principal occupation, position and business experience for at least the past five years. Each director’s biographical information includes a description of the director’s experience, qualifications, attributes or skills that qualify the director to serve on the Company’s Board.

 

Robert V. Baumgartner, Chairman

Age: 64

Independent Director Since: 2003

Until July of 2019, Mr. Bob Baumgartner served as Executive Chairman, Director of the Center for Diagnostic Imaging, Inc., an operator of diagnostic imaging centers. Prior to August 2015, Mr. Baumgartner also served as Chief Executive Officer of that company, a position he had held since 2001. He has also held numerous executive positions previously, including as Chief Executive Officer and Director of American Coating International, President and Chief Executive Officer of First Solar and President of the Apogee Glass Group. He began his professional career at KPMG LLP, an international accounting firm. He received a bachelor’s degree in business administration from the University of Notre Dame. Mr. Baumgartner also currently serves as a director of the boards of Carestream and OIA Global, both privately held companies, and serves as an advisor to Sirona Medical.

Mr. Baumgartner brings to the Board valuable strategic skills and financial and operational management expertise. His more than 20 years serving as Chief Executive Officer and Executive Chairman of large, complex businesses gives him extensive experience in finance, accounting, and business leadership. Mr. Baumgartner also offers important board-level experience, as well as knowledge of the business and industry of the Company gleaned in his 17 years serving on the Board.

Julie L. Bushman

Age: 59

Independent Director Since: 2020

Other Public Directorships: Adient, plc. and Phillips 66

Ms. Julie L. Bushman retired from 3M Corporation in February 2020, where she most recently served as Executive Vice President of International Operations. She joined 3M in 1983, and previously served in various executive positions at 3M, including as Senior Vice President of Business Transformation and Information Technology; Executive Vice President of Safety, Security and Protection Services; Executive Vice President of Safety and Graphics; Division Vice President of the Occupational Health and Environmental Safety Division; and Chief Information Officer. Ms. Bushman also serves as an independent director at Adient plc, an automotive seating company and Phillips 66, an energy manufacturing and logistics company.

Ms. Bushman brings valuable strategic, operational and international expertise to the Board. In her various roles with 3M, she developed extensive global experience from managing 3M’s international operations as well as a global business in personal safety. She also has extensive digital, software and CIO experience, which will bring important expertise as the Company continues to expand globally and integrate systems to increase operational efficiencies. Her experience with public company requirements as both an executive officer and as a director for public companies is also valuable.

 

2020 Proxy Statement   11
 

 

John L. Higgins

Age: 50

Independent Director Since: 2009

Other Public Directorships: Ligand Pharmaceuticals, Inc.

Mr. John Higgins has been President and Chief Executive Officer of Ligand Pharmaceuticals, Inc. since January 2007 and has been a member of Ligand’s Board of Directors since March 2007. From 1997 until joining Ligand, Mr. Higgins was with Connetics Corporation, a specialty pharmaceutical company, as its Chief Financial Officer, and also served as Executive Vice President, Finance and Administration and Corporate Development at Connetics from January 2002 until its acquisition by Stiefel Laboratories, Inc. in December 2006. Mr. Higgins was previously a member of the executive management team and a director at BioCryst Pharmaceuticals, Inc., a biopharmaceutical company. Before joining BioCryst in 1994, Mr. Higgins was a member of the healthcare banking team of Dillon, Read & Co. Inc., an investment banking firm. Mr. Higgins has served as a director of numerous public and private companies. He graduated Magna Cum Laude with a bachelor’s degree from Colgate University.

Mr. Higgins offers the Board over 20 years of industry experience through his role as Chief Executive Officer of Ligand Pharmaceuticals and leadership roles in other pharmaceutical companies. His role with Ligand has given him vital experience in the application of strategic leadership skills within our industry, as well as extensive public company executive and board experience. Mr. Higgins also brings to the Board deep knowledge in accounting and financial matters.

Joseph D. Keegan, Ph.D.

Age: 67

Independent Director Since: 2017

Other Public Directorships: Interpace Diagnostics

Dr. Joseph Keegan currently serves as a director and advisor for Interpace Diagnostics as well as a number of privately held life science companies. From 2007 until its sale to Pall Corporation in 2012, Dr. Keegan served as President and Chief Executive Officer of ForteBio, Inc. Dr. Keegan joined ForteBio from Molecular Devices Corporation, where he served as President and Chief Executive Officer from 1998 to 2007. Prior to Molecular Devices, Dr. Keegan held leadership positions at Becton Dickinson, Leica, Inc. and GE Medical Systems. He has also served on numerous public and private company boards of life science tools companies, including as Chair of Fluidic Analytics and Executive Chair of Halo Labs. Dr. Keegan holds a Ph.D. in Physical Chemistry from Stanford University.

Dr. Keegan brings an important life science background to the Board through his career working at a number of life sciences companies, with a focus on diagnostics. His knowledge of the Company's customers and products is especially valuable. Dr. Keegan further offers extensive executive management experience and board level experience through his past and present service on other private and public company boards.

Charles R. Kummeth

Age: 60

Director Since: 2013

Other Public Directorships: Gentherm, Inc.

Charles R. Kummeth has been President, Chief Executive Officer, and member of the Board of the Company since April 1, 2013. Prior to joining the Company, he served as President of Mass Spectrometry and Chromatography at Thermo Fisher Scientific Inc. from September 2011. He was President of that company’s Laboratory Consumables Division from 2009 to September 2011. Prior to joining Thermo Fisher, Mr. Kummeth served in various roles at 3M Corporation, most recently as the Vice President of the company’s Medical Division from 2006 to 2008. Mr. Kummeth also serves on the board of one other public company, Gentherm, Inc., developer of thermal management technologies.

As the only member of Company management to serve on the Board, Mr. Kummeth provides the board with key insight into the day-to-day operations of the Company and its primary challenges and opportunities. Mr. Kummeth’s service on the Board also promotes strategy development and implementation and facilitates the flow of information between the Board and management. Mr. Kummeth further offers extensive significant executive management experience and expertise leading the growth of biotechnology companies.

 

12

2020 Proxy Statement

 

 

Roeland Nusse, Ph.D.

Age: 70

Independent Director Since: 2010

Dr. Nusse has been a professor or associate professor in the Department of Developmental Biology at Stanford University and an investigator at the Howard Hughes Medical Institute since 1990. He has also been the chair of the Department of Developmental Biology at Stanford since 2007. Dr. Nusse was previously at the Netherlands Cancer Institute (Amsterdam, The Netherlands) as a staff scientist and ultimately head of the Department of Molecular Biology. Dr. Nusse was elected to the United States National Academy of Sciences in April 2010, the European Molecular Biology Organization in 1988, the Royal Dutch Academy of Sciences in 1997, and the American Academy of Arts and Sciences in 2001. Dr. Nusse was awarded the Breakthrough Prize in Life Sciences in 2016. Dr. Nusse earned a bachelor’s degree in biology from the University of Amsterdam and a doctorate in molecular biology from the Netherlands Cancer Institute in 1980.

Dr. Nusse brings valuable experience to the Board from his longstanding career as a researcher and department chair at Stanford University, including strategic leadership and scientific and industry knowledge. This experience allows him to provide the Board with insight into the Company's products, customers, and markets. Dr. Nusse also has a deep understanding of and contacts within the international life science research community.

Alpna Seth, Ph.D.

Age: 57

Independent Director Since: 2017

Other Public Directorships: Seattle Genetics, Inc.

Dr. Alpna Seth was appointed President and Chief Executive Officer of Nura Bio Inc., f/k/a Proneurotech, in August 2019. Dr. Seth is also a member of the Board of Directors of Seattle Genetics, Inc. Until January 2019, she was Chief Operating Officer of Vir Biotechnology, Inc. Prior to joining Vir in July 2017, Dr. Seth was at Biogen Inc. for nearly two decades, most recently as Senior Vice President and Global head of its Biosimilars business, headquartered in Switzerland. For the period from 1998 through 2014, Dr. Seth held a range of senior leadership roles across R&D and commercial arenas, primarily based out of Biogen’s global headquarters in Cambridge, US. This includes leading several major drug development programs and product launches, along with strategic, business development and long-range planning initiatives. In another international general management assignment, she served as the founding Managing Director of an India affiliate and was a member of Biogen’s Asia Pacific Leadership Team. She holds a Ph.D. in Biochemistry and Molecular Biology from University of Massachusetts Medical School and conducted her post-doctoral research at Harvard University in Immunology and Structural Biology, both as a Howard Hughes Medical Institute Fellow.

Dr. Seth brings a breadth of experience in research, drug discovery, marketing, international operations, financial management and business development. Dr. Seth’s extensive background in the pharmaceutical industry and in international business and her deep knowledge of critical areas of science provide a valuable strategic perspective for our business generally and for a key customer group for the Company.

 

2020 Proxy Statement   13
 

 

Randolph Steer, M.D., Ph.D.

Age: 70

Independent Director Since: 1990

Dr. Randolph Steer is currently an independent biotechnology consultant and board director. He served as President and Chief Operating Officer of Capstone Therapeutics Corp. from April 2006 to October 2011. Dr. Steer was elected to the Mayo Clinic Board of Trustees in November 2011, and until recently served as a director of publicly-traded Vital Therapies, Inc. From 1989 to 2006 Dr. Steer was a consultant to the pharmaceutical and biotechnology industries, where he advised companies in business development, medical marketing and regulatory and clinical affairs. His prior experience includes service as Associate Director of Medical Affairs at Marion Laboratories and as Medical Director at Ciba Consumer Pharmaceuticals. Dr. Steer received his undergraduate degree in physiology and Ph.D. in pathobiology from the University of Minnesota and his medical degree from the Mayo Medical School.

Dr. Steer offers the Board a strong medical and scientific background. Moreover, his experience in executive leadership and in board management, together with his knowledge of the pharmaceutical and biotechnology industries allow him to provide valuable strategic insight. Dr. Steer also offers an understanding of the development of the Company as the longest tenured member of the Board.

Dr. Rupert Vessey,

MA, BM BCh, FRCP, DPhil

Age: 55

Independent Director Since: 2019

Dr. Rupert Vessey, MA, BM BCh, FRCP, DPhil, is currently the President of Research and Early Development at Bristol-Myers Squibb. Previously, he was President of Global Research and Early Development at Celgene prior to its acquisition by Bristol0Myers Squibb. While at Celgene, Dr. Vessey also served on the board of Juno Therapeutics from April 2017 until its acquisition by Celgene in March of 2018. Before joining Celgene, Dr. Vessey held various research and development senior management positions at Merck. Dr. Vessey holds an MA in physiological sciences and a BM BCh in clinical medicine from Oxford University where he completed his DPhil at the Institute for Molecular Medicine, Oxford along with additional clinical training at various hospitals in the UK. He is a member of the Royal College of Physicians of London UK. He also serves on the Board of privately held therapeutics company Pharmakea.

Dr. Vessey was selected to serve on the Board because of his exceptional background in medical and life science research and development with Bristol-Myers Squibb, Celgene, Merck, and other companies, and his extensive experience as an executive in the pharmaceutical industry, a key customer group for the Company. His international research and business experience is also important to the Board as the Company continues its expansion in markets outside of the United States.

 

14

2020 Proxy Statement

 

 

Corporate Governance – The Role and Governance of the Board

 

The Board of Directors is the Company’s governing body, with responsibility for oversight, counseling and direction of the Company’s management to serve the short- and long-term interests of the Company and its shareholders. The Board’s goal is to build long-term value for the Company’s shareholders and to ensure the vitality of the Company for its customers, employees and other individuals and organizations that depend on the Company. To achieve its goal, the Board monitors both the performance of the Company and the performance of the CEO. It is also integrally involved in strategic planning, in partnership with the management team. It regularly undertakes an in-depth review of management’s long term and short-term strategic plan, and periodically provides input as the strategic plan is implemented and evolves.

 

The Board has adopted Principles of Corporate Governance applicable to all directors, which can be found on the Investor Relations page of our website at www.bio-techne.com. The Principles describe the Company’s corporate governance practices and policies and provide a framework for the governance of the Company. Among other things, they require a majority of the members of the Board to be independent directors and require candidates for director to meet minimum qualifications including high moral character and mature judgment. The Principles also specify that the Company shall maintain Audit, Executive Compensation and Nominations and Governance Committees which consist entirely of independent directors.

 

Board Independence

 

The Board annually reviews the independence of each director. The Board has affirmatively determined that all of the Company’s non-employee directors are “independent” as such term is defined in the applicable requirements of the SEC and Nasdaq (collectively, the “Applicable Rules”). Mr. Kummeth is not independent based on his service as the Company’s CEO and President. In making its independence determinations, the Board reviewed transactions and relationships between the director, or any member of his or her immediate family, and the Company and its subsidiaries based on information provided by the director, Company records and publicly available information.

 

Board Leadership Structure

 

Mr. Baumgartner, an independent director, serves as Chair of the Board. The Board has determined that dividing the roles of Chair and CEO is currently the most effective leadership structure for the Company because of the differences between the two roles. The Board is responsible for setting the strategic direction for the Company. The Chair of the Board sets the agenda for Board meetings and presides over meetings of the full Board and executive sessions of the independent directors. The CEO executes the Board’s direction and is responsible for the day-to-day leadership and performance of the Company. In addition, the independent directors of the Board meet in executive session without members of management present on a regularly scheduled basis.

 

The Board has determined that maintaining an independent Chair, along with the independence of a majority of directors, helps maintain the Board’s independent oversight of management and ensures that the appropriate level of independence is applied to all Board decisions. In addition, each of the four Board committees consists entirely of independent directors.

 

Risk Oversight

 

Risk assessment and oversight is an integral part of Board and Committee deliberations throughout the year. The Company’s Board administers its risk oversight function through its Committees, as described below. It oversees some categories of risk as an entire board directly, specifically with respect to strategic, technology, cybersecurity and operational risks, as well as risks related to environmental and social matters. In performing their oversight responsibilities, the Board and Committees review policies and guidelines that senior management use to manage the Company’s exposure to material categories of risk. In addition, the Board and Committees review the performance and functioning of the Company’s overall risk management function and management’s establishment of appropriate systems for managing risk.

 

Each of the Board’s committees has risk oversight duties corresponding to its areas of responsibility, as described in its charter. The Audit Committee has oversight responsibility with respect to the Company’s financial risk assessment and financial risk management. The Audit Committee meets regularly with management and the Company’s independent auditors to review the Company’s risk exposures, the potential financial impact those risks may have on the Company, the steps management takes to address those risks, and how management monitors emerging risks. With respect to the Company’s compensation plans and programs, the Executive Compensation Committee structures such plans and programs to balance risk and reward, while mitigating the incentive for excessive risk-taking by the Company’s executive officers and employees. The Nominations and Governance Committee oversees the management of risks associated with the composition and independence of the Company’s Board, as well as general corporate governance risks and policies and maintenance of the Code of Ethics and Business Conduct.

 

2020 Proxy Statement   15
 

 

The risk oversight roles described above are not merely academic exercises. In response to the pandemic, which had a material impact on the Company particularly in the fourth quarter of fiscal year 2020, the Board received regular reports from management on the various implications and effects of the pandemic on the Company’s business, discussed management’s responses and provided guidance in a variety of related matters.

 

Corporate Governance – Board Committees

 

The Board currently has four standing Committees: the Audit Committee, the Executive Compensation Committee, the Nominations and Governance Committee and the Science and Technology Committee. Each of these committees is governed by a written charter approved by the Board in compliance with the Applicable Rules. The charter of each committee requires an annual review by such committee. The charters are available on our website at http://www.bio-techne.com in the “Investor Relations” section under “Corporate Governance.”

 

Each member of our Audit, Nominations and Governance and Executive Compensation committees is independent, as determined by the Board, under the Applicable Rules. In addition, each member of the Audit Committee and the Executive Compensation Committee meets the additional independence standards for committee members under the Applicable Rules. The members of each standing committee are appointed by the Board each year for a term of one year and until their successors are elected, or until the earlier death or resignation or removal from the committee or the Board. In addition, the Board has, on occasion, established committees to deal with particular matters the Board believes appropriate to be addressed in that manner.

 

Audit Committee

 

The Audit Committee is responsible for the appointment, supervision and evaluation of the Company’s independent registered public accounting firm and for reviewing the Company’s internal audit procedures, the quarterly and annual financial statements of the Company, and monitoring the Company’s internal controls over financial reporting and the results of the annual audit. The Audit Committee’s other responsibilities include approval of related party transactions, oversight of the Company’s cash investment policy and monitoring the Company’s financial fraud hotline and other compliance matters having financial impact. The Board has determined that, for FY 2020, Messrs. Baumgartner and Higgins are “audit committee financial experts” as such term is defined in the Applicable Rules.

 

Executive Compensation Committee

 

The Executive Compensation Committee determines base and incentive compensation for executive officers of the Company, establishes overall policies for executive compensation and reviews the performance of the executive officers. The Executive Compensation Committee works with Mr. Kummeth to establish compensation and performance goals for the other executive officers and, acting independently, establishes the compensation and performance goals for Mr. Kummeth. The Executive Compensation Committee also recommends to the Board and administers director compensation policies and practices.

 

Nominations and Governance Committee

 

The Nominations and Governance Committee recruits well-qualified candidates for the Board, selects persons to be proposed in the Company’s Proxy Statement for election as directors at annual meetings of shareholders, determines whether each member of the Board is independent under Applicable Rules, establishes governance standards and procedures to support and enhance the performance and accountability of management and the Board, considers the composition of the Board’s standing committees and recommends any changes, evaluates overall Board performance, assists committees with self-evaluations, and monitors emerging corporate governance trends. In fulfilling its responsibilities, the Nominations and Governance Committee assesses the appropriate size of the Board of Directors, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominations and Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Nominations and Governance Committee through current members of the Board of Directors, professional search firms, shareholders or other persons and may be considered at any point during the year. Additional detail regarding the Nominations and Governance Committee’s process for identifying and evaluating candidates is described in the section below entitled “Director Qualifications, Diversity and Refreshment.”

 

16

2020 Proxy Statement

 

 

Science and Technology Committee

 

The Science and Technology Committee assists the Board in providing oversight of management's actions and judgments relating to the Company's research and development activities, including its strategies, objectives and priorities as they relate to the Company's current and planned R&D programs and technology initiatives. The Committee also assists the Board in evaluating the scientific elements of the Company's acquisitions and business development activities, and risks related to research and development. The Committee also reviews and advises the Board and management on the overall intellectual property strategy of the Company.

 

Corporate Governance – Meetings and Attendance

 

The Board met four times during FY 2020. Each director attended 100% of the Board meetings and at least 75% of meetings of the committees on which he or she served. Directors meet their responsibilities not only by attending Board and committee meetings but also by conducting business via written actions in lieu of meetings and otherwise communicating informally throughout the year on various Board and committee matters with executive management, advisors and others on matters affecting the Company. All directors attended the Annual Meeting of Shareholders in October 2019.

 

The membership of each standing committee as of June 30, 2020 and the number of committee meetings held during FY 2020 are identified in the table below.

 

Director

Audit

Executive

Compensation

Nominations

&

Governance

Science &

Technology

Robert V. Baumgartner

X

 

Chair

 

John L. Higgins

Chair

 

X

 

Joseph Keegan, Ph.D.

 

X

 

 

Charles R. Kummeth

 

 

 

 

Roeland Nusse, Ph.D.

 

 

X

Chair

Alpna Seth, Ph.D.

 

 

X

X

Randolph C. Steer, M.D., Ph.D.

 

Chair

 

X

Rupert Vessey, MA, BM BCh, FRCP, DPhil

 

 

 

X

Harold J. Wiens*

X

X

 

 

Number of meetings held during FY 2020

6

4

3

2

*

Mr. Wiens is not being re-nominated; he is retiring effective after the Annual Shareholder Meeting. Ms. Julie Bushman joined the Board after the end of FY2020.

 

Shareholder Engagement and Communications

 

The Company values the perspectives of its shareholders. Management meets frequently with key shareholders to discuss the Company’s financial performance and strategies. In addition, over the last several years the Company has carried out and expanded a shareholder engagement program to discuss governance matters with key shareholders, both proactively and in response to requests from shareholders.

 

In fiscal year 2020, the Company undertook a robust engagement process with our largest shareholders. Our Board chair, Mr. Baumgartner, who also serves as the Chair of the Nominations and Governance Committee and as a member of the Audit Committee, and Dr. Steer, Chair of our Executive Compensation Committee, led the efforts. We reached out to shareholders representing over 50% of our shareholdings and held nine meetings with shareholders representing over 35% of our shares outstanding. Our shareholders were generally positive about the company’s financial performance and governance positions, as well as our decision to issue our first Corporate Sustainability Report, as described below in “Corporate Sustainability.”

 

2020 Proxy Statement   17
 

 

Communications from shareholders are always welcome. Shareholders may communicate directly with the Board of Directors. All communications should be directed to the Corporate Secretary of the Company at 614 McKinley Place N.E., Minneapolis, MN 55413, and should prominently indicate on the outside of the envelope that such communication is intended for the Board of Directors, for non-management directors, or for a particular director.

 

Director Qualifications, Diversity and Refreshment

 

The Nominations and Governance Committee periodically assesses the skills and experience needed of directors to properly oversee the short- and long-term interests of the Company. The Committee utilizes a variety of methods for identifying and evaluating candidates for director, with the ultimate goal of maintaining a well-rounded Board that functions collegially and independently. Candidates for the Board are considered and selected on the basis of the criteria set forth in our Principles of Corporate Governance, including outstanding achievement in their professional careers, experience, wisdom, personal and professional integrity, their ability to make independent, analytical inquiries, and their understanding of the business environment. Candidates must have the experience and skills necessary to understand the principal operational and functional objectives and plans of the Company, the results of operations and financial condition of the Company, and the position of the Company in its industry. Candidates must have a perspective that will enhance the Board’s strategic discussions and be capable of and committed to devoting adequate time to Board duties. With respect to incumbent directors, the Nominations and Governance Committee also considers past performance on the Board and contributions to the Company, in part through an annual assessment process.

 

While the Company does not have a formal diversity policy for board membership, the Company seeks directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions. The Nominations and Governance Committee considers, among other factors, diversity with respect to perspectives, backgrounds, skills and experience in its evaluation of candidates for board membership. Such diversity considerations are discussed by the Nominations and Governance Committee in connection with the general qualifications of each potential nominee. The Nominations and Governance Committee also appreciates and is taking into account recent shareholder feedback regarding the importance of board diversity. At the recommendation of the Nominations and Governance Committee, the Board recently amended its Principles of Corporate Governance to reflect that feedback and formalize the Company’s commitment to diversity in all respects, including specifically diversity of gender, ethnicity and race. In furtherance of this goal, the Company is committed to actively seeking out highly qualified diverse candidates (including women and minority candidates) to include in the pool from which Board nominees are chosen.

 

The Nominations and Governance Committee will apply the same criteria in evaluating candidates recommended by shareholders as is used for candidates recommended by other sources, which criteria are described above. Recommendations may be sent to the attention of the Nominations and Governance Committee at the Company’s address: 614 McKinley Place N.E., Minneapolis, MN 55413. Any such recommendations should provide whatever supporting material the shareholder considers appropriate, but should at a minimum include such background and biographical material as will enable the Nominations and Governance Committee to make an initial determination as to whether the nominee satisfies the criteria for directors set forth in our Principles of Corporate Governance. Shareholders who intend to nominate a candidate for election by the shareholders at the Annual Meeting (in cases where the Board does not intend to nominate the candidate or where the Nominations and Governance Committee was not requested to consider his or her candidacy) must comply with the procedures described under the section of this Proxy Statement entitled “Additional Corporate Governance Matters—Shareholder Proposals for 2021 Meeting,” and with Bio-Techne’s bylaws.

 

As described in the first paragraph of “Item 2 Election of Directors,” above, three directors retired in FY 2017 and FY 2018 after meeting the retirement age as specified in our Principles of Corporate Governance. In 2017, with three directors reaching the retirement age of 75, the Nominations and Governance Committee recommended, and the Board unanimously approved, a transition plan that staggered these individuals’ retirement to provide for continuity and a smooth transition. At the 2017 and 2018 Annual Meetings, the shareholders elected three new Board members as part of the refreshment process. This year, Mr. Harold Wiens is reaching retirement age and is not up for re-election. In anticipation of his retirement, the Board conducted a search and ultimately elected Ms. Julie L. Bushman as the Company’s newest director on July 31, 2020; Ms. Bushman is now standing for election for the first time at the current Annual Meeting.

 

18

2020 Proxy Statement

 

 

Director Compensation

 

The Company believes that compensation for non-employee directors should be competitive and should encourage ownership of the Company’s stock. The Executive Compensation Committee periodically reviews the level and form of the Company’s director compensation and, if it deems appropriate, recommends to the Board changes in director compensation.

 

Director Compensation for FY 2020

 

Effective after the 2019 Annual Shareholder Meeting, each non-employee member of the Board receives an annual retainer fee of $75,000. Additional cash compensation is paid for the following roles:

 

Board Chair – $120,000

Chair of Audit Committee – $25,000

Chair of Executive Compensation Committee – $17,500

Chairs of Nominations and Governance and Science and Technology Committee – $15,000

 

No additional compensation is paid for membership on committees or attendance at meetings.

 

In addition, on an annual basis, each non-employee director receives an equity grant valued at $200,000 that vests upon the sooner of the one-year anniversary of the date of grant or the next annual shareholder meeting. Equity grants are provided 50% in stock options, with an exercise price equal to the fair market value of Bio-Techne’s Common Stock on the grant date, and 50% in restricted stock.

 

Non-employee directors who join the Board other than by election at an annual meeting of shareholders receive a pro-rated equity grant based on the portion of the year served. Non-employee directors are also paid their reasonable expenses for attending Board and Committee meetings. Directors who are employees of the Company or its subsidiaries do not receive any compensation for service on the Board.

 

Director Stock Ownership Guidelines

 

The Board has adopted stock ownership guidelines for all directors and executive officers to better align their interests with other shareholders. Non-employee directors are required to own stock at least equivalent in value to three times their annual retainer fee within five years. Although they have five years from July 1, 2016 (or their appointment or election to the Board), all directors met the requirements as of June 30, 2020.

 

Directors who are not employees of the Company were compensated for fiscal year 2020 as follows (note that Ms. Bushman did not join the Board until after our fiscal year, and therefore received no compensation or equity in fiscal year 2020):

 

Name

 

Fees Earned

or Paid

in Cash(1)

   

Stock

Awards(2)

   

Option

Awards(3)

   

All Other

Compensation(4)

   

Total

 

Robert V. Baumgartner

  $ 185,000     $ 99,812     $ 99,974     $ 640     $ 385,426  

John L. Higgins

    98,333       99,812       99,974       640     $ 298,759  

Joseph Keegan, Ph.D.

    73,333       99,812       99,974       640     $ 273,759  

Roeland Nusse, Ph.D.

    88,333       99,812       99,974       640     $ 288,759  

Alpna Seth, Ph.D.

    73,333       99,812       99,974       640     $ 273,759  

Randolph C Steer, M.D., Ph.D.

    90,833       99,812       99,974       640     $ 291,259  

Rupert Vessey, MA, BM BCh, FRCP, DPhi

    73,333       130,762       130,573       522     $ 335,190  

Harold J. Wiens

    73,333       99,812       99,974       640     $ 273,759  

 

(1)

Amounts consist of annual director fees and chair fees for services as members of the Company's Board and its Committees. For further information concerning such fees, see the discussion above this table.

 

(2)

For all directors except Dr. Vessey, the amounts represent the total grant date fair value of equity-based compensation for 495 shares of restricted stock granted pursuant to the Company's Second Amended and Restated 2010 Equity Incentive Plan in FY 2020 at the grant date market value of $201.64 per share, in accordance with Financial Accounting Standards Board's Accounting Standards Codification (ASC) Topic 718.

 

2020 Proxy Statement   19
 

 

In addition to the restricted stock grant of 495 shares mentioned above and granted to all directors in October 2019, Dr. Vessey also received a partial year grant upon commencement of his service as a director on July 1, 2019 in the amount of 147 shares at a grant date market value of $209.26 per share. As of June 30, 2020, each non-employee director other than Ms. Bushman held 495 unvested shares of restricted stock.

 

(3)

For all directors except Dr. Vessey, the amounts represent the total grant date fair value of equity-based compensation for 2,011 stock option awards granted pursuant to the Company's Second Amended and Restated 2010 Equity Incentive Plan in FY 2020, as calculated in accordance with the Financial Accounting Standards Board's Accounting Standards Codification (ASC) Topic 718. In addition to the 2,011 stock option awards granted to all directors in October 2019, Dr. Vessey also received a partial year grant upon commencement of his service as a director on July 1, 2019 in the amount of 588 stock options. Assumptions used in the calculation of these amounts are described in Note 10 to the Company's audited financial statements for FY 2020, included in the Company's Annual Report on Form 10-K. As of June 30, 2020, the following non-employee directors held options to purchase the following number of shares of the Company's Common Stock: Mr. Baumgartner-28,279; Mr. Higgins-33,279; Dr. Keegan 7,034; Dr. Nusse-33,279; Dr. Seth-7,034; Dr. Steer-33,279; Dr. Vessey-2,599; and Mr. Wiens-7,034.

 

(4)

Amounts represent the total dollar value of dividends paid on restricted stock awards, as those amounts were not factored into the grant date fair value.

 

20

2020 Proxy Statement

 

 

Corporate Sustainability

 

We have built a creative, caring team of colleagues who bring unique perspectives and talents in support of our strategic goals. We have grown from approximately 700 employees in 2013 to approximately 2,300 employees globally today, adding people both through organic growth and by acquisition. Ensuring that our employees -- both those who have been with us for years and those who recently joined Bio-Techne – share a common vision and set of values has been and will be critical to our success. One way we have achieved that is through implementation of a common set of four key EPIC values – Empowerment, Passion, Innovation and Collaboration. Employees’ dedication to these values are leading the Company to develop and launch innovative technologies that help our customers address some of society's most difficult challenges in the healthcare and life sciences fields.

 

We understand that delivering on our mission over the long term requires a focus by management on corporate sustainability, including environmental, social, and governance (“ESG”) considerations, with oversight by the Board, both directly and through its committees. Specifically, management focuses on what the Company terms the “Four Pillars” of corporate sustainability, and periodically report its progress on initiatives under these Four Pillars to the Board.

 

Pillar

Commitment

Description

Pillar One

Our Commitment to Our People

Our four key EPIC values, described above, are the backbone for the way we approach everything related to our people. As a science organization, we value continuous learning and development opportunities for our employees, as well as a diverse and inclusive work environment that values employees from all cultures and backgrounds.

Pillar Two

Our Commitment to Our Communities

Our Company supports a number of scientific, educational and community-focused organizations and activities. We also encourage and support our employees as they contribute to our communities, both through team initiatives and as individuals.

Pillar Three

Our Commitment to the Environment

We are passionate about minimizing environmental impacts of our operations, conserving natural resources, and providing effective stewardship of the environment. Our commitment to environmental sustainability is demonstrated through our ISO 14001 certifications at our Minneapolis, MN headquarters and our European headquarters in the UK.

Pillar Four

Our Commitment to Governance and Operational Integrity

We adhere to many governance best practices, which we believe form an important foundation for actions and decisions of management and the Board in the best interests of all of our stakeholders. We are also committed to ethical and legal conduct, and have policies and processes to ensure our partners and suppliers operate with integrity as well.

 

For the first time this year, we have prepared and published our inaugural Corporate Sustainability Report. In it, we describe what we mean by each of these Four Pillars and provide examples of how we incorporate them into our values and commitment to a sustainable business. Our Corporate Sustainability Report is posted on our website.

 

2020 Proxy Statement   21
 

 

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

In this Compensation Discussion and Analysis (“CD&A”), we provide an overview of our executive compensation philosophy and objectives as well as a description of the material components of our executive compensation program. This CD&A is intended to be read in conjunction with the tables which immediately follow this section, which provide further historical compensation information.

 

As of June 30, 2020, the following officers constituted our Named Executive Officers (collectively, our “NEOs”):

 

Name

Title

Charles Kummeth

President and Chief Executive Officer

James Hippel

Executive Vice President – Finance and Chief Financial Officer

David Eansor

President – Protein Sciences

Kim Kelderman

President – Diagnostics and Genomics

Brenda Furlow

Senior Vice President – General Counsel and Corporate Secretary

 

Executive Summary

 

We continued to execute on our long-term growth strategy in FY 2020, despite the challenges resulting from the pandemic in the latter half of our fiscal year. Our CEO has led a strategy of growth through investments in the core business as well as through our most recent acquisitions, together with new COVID-19 products that yielded additional revenue, all of which has resulted in another year of positive financial performance. The Company ended the year with 4% organic revenue growth, with total revenues of $739 million for FY 2020. The Company continues to diversify in many adjacent life science areas that we expect will provide accelerated growth and stability for investors, including diagnostics and tools for use in therapeutics as well as research. Our acquisitions are fundamental to our growth plans and, we believe, enable us to meet or exceed our long-term strategic targets. At the same time, we continue to focus on investing in the core of our business, as well as maintaining operational productivity, managing costs and investing prudently. As a result, we were able to maintain operating income in our core business and return approximately $49 million to our shareholders in the form of dividends this year.

 

22

2020 Proxy Statement

 

 

FY 2020: Incentive Payouts Reflect Continued Positive Performance Despite the Impact of the Pandemic

 

Our Executive Compensation Committee aligns pay with performance and strategic initiatives by tying a significant portion of awards to rigorous revenue- and earnings-based financial goals and by using both short- and long-term incentives.

 

Due to the COVID-19 pandemic, 2020 has been an unprecedented year for all companies, and financial goals and business strategies have been fundamentally changed. At the end of the second quarter of FY 2020, the Company was on track for a record year with an expected organic revenue growth rate of greater than 10%. During Q3 (February in China and March in Europe and the U.S.), sales in most sectors began to stall as the pandemic forced many of our customers to close labs. Despite that, management was able to guide the Company through the remainder of the fiscal year with no employee furloughs or restructuring, and with an array of new products developed and launched addressing diagnosis and treatment of COVID-19, all while maintaining a strong cash position.

 

Based on the previously set performance targets, the Company would not have paid bonuses for fiscal year 2020, as shown in the table below (note that minimum of 97% of target for organic revenue and 95% of adjusted operating income is required to receive a bonus payout):

 

Metric

 

Target

   

Actual

   

% of Target

Achieved

 

Company Organic Revenue through Q4 FY 2020

  $ 787.1M     $ 743.2M       94.4  

Company Adjusted Operating Income through Q4 FY 2020

  $ 266.0M     $ 249.8M       93.9  

 

In its review of FY 2020 performance, the Executive Compensation Committee (the “Committee”) determined that Company management provided outstanding leadership through the pandemic and led the Company to a superior position than was expected at the beginning of the pandemic. Among the matters considered by the Committee were: (i) the strength of the Company’s performance through the third quarter (which reflected some negative revenue impact of the pandemic); (ii) the Company’s performance for the entire fiscal year despite material impacts of customer lab closures particularly in the fourth quarter; (iii) concerns about retention of key employees; and (iv) the Company’s strong stock performance in the fourth quarter as investors recognized the Company’s excellent management of the pandemic and strong growth expectations post-pandemic.

 

In light of all of the factors described above, and taking into consideration the enormous effort and operational excellence management demonstrated through the COVID-19 crisis, the Committee believed that not paying bonuses would not reflect the actual performance of management and would not be in the best interests of the Company due to harm to the Committee’s retention goals. Instead, the Committee determined that paying a bonus based on performance through Q3 more accurately reflected management performance and encouraged retention.

 

Moreover, the Committee believed that such evaluation of performance should be applied to all management and other key employees who helped the Company manage through the pandemic, not just the NEOs. In fact, for the first time this year, all levels of management employees received a Company performance-based bonus, resulting in over 20% of employees receiving an annual bonus. For those employees on sales commission plans, the Company adjusted targets for the fourth quarter of fiscal year 2020 to make the plans more achievable in light of the pandemic. Those sales employees who were entitled to receive commissions under their revised plans were paid; in some cases the payments were significant to recognize achievement significantly above their revised plan.

 

Consequently, the Committee approved annual cash incentive payouts for all executive officers, as well as all other management and key employees, at 116% of target. It based the calculation on FY 2020 performance through the third quarter, which had the effect of reflecting some but not all of the negative impact of the pandemic, as follows:

 

Metric

 

Target

   

Actual

   

% of Target

Achieved

 

Company Organic Revenue through Q3 FY 2020

  $ 575.2M     $ 565.9M       98.4  

Company Adjusted Operating Income through Q3 FY 2020

  $ 188.5M     $ 194.1M       102.9  

 

Cash bonus performance payments for each NEO are reflected in the 2020 Summary Compensation Table. As usual, organic revenue and adjusted operating income measures for cash bonus consideration exclude the impact of actual foreign currency translation compared to our plan, certain acquisitions and acquisition-related amortization, costs and expenses, non-recurring litigation expenses, stock-based compensation expense and other unusual items. For a comprehensive discussion of our financial results, please refer to our Annual Report on Form 10-K for FY 2020.

 

2020 Proxy Statement   23
 

 

Longer Term: Incentive Pay Aligned with Performance Through the Third Quarter

 

For the past five years, NEOs have received performance-based equity awards (half the value in restricted stock units and half in stock options) that vest as follows: (i) 50% on a three-year adjusted revenue goal and (ii) 50% on a three-year adjusted operating income goal. The three-year performance equity awards granted in FY 2018 vested in August 2020 based on performance for the previous 12 quarters. The targets set three years ago for these grants were as follows:

 

Metric

 

Threshold

   

Target

   

Maximum

 

Adjusted Revenue for FY 2020

  $ 664.0M     $ 698.9M     $ 733.8M  

Adjusted Operating Income for FY 2020

  $ 249.0M     $ 262.1M     $ 275.2M  

 

Similar to the Committee’s annual cash bonus analysis described above, it determined that management had been on track to substantially exceed the maximums set out above for both Revenue and Operating Income. In fact, the Committee noted that the Company had actually exceeded those maximums (on a trailing twelve-month basis) one quarter early, at the end of the third quarter of fiscal year 2020. Specifically, as of the end of the third quarter of fiscal year 2020, which was the 11th of a 12-quarter measurement period, the Company had achieved the following, resulting in a maximum vesting of 150% of target (note that the maximum vesting is capped at 105% of target):

 

Metric

 

Target

   

Actual

   

% of Target

Achieved

 

Adjusted Revenue (TTM) through Q3 FY 2020

  $ 698.9M     $ 737.2M       105.5  

Adjusted Operating Income (TTM) through Q3 FY 2020

  $ 262.1M     $ 289.9M       110.6  

 

Even if the Committee would have included the fourth quarter of fiscal year 2020 and measured results for the full twelve quarters, performance would still have substantially exceeded target. Specifically, achievements for the full year, as shown below, would have resulted in a payout at 141%, still well above target.

 

Metric

 

Target

   

Actual

   

% of Target

Achieved

 

Adjusted Revenue (TTM) for FY 2020

  $ 698.9M     $ 721.2M       103.2  

Adjusted Operating Income (TTM) for FY 2020

  $ 262.1M     $ 275.6M       105.2  

 

In light of the strong performance through the first eleven quarters of the three-year measurement period and outstanding leadership through the pandemic, as well as the other factors discussed above, the Committee used its discretion to analyze achievement on a trailing twelve-month basis through the end of Q3 and pay at the full maximum amount of 150%.

 

24

2020 Proxy Statement

 

 

How Our Pay Program Works

 

While our Committee deemed it be appropriate to account for the unusual circumstances of the pandemic to appropriately reflect Company performance when calculating cash bonuses and long-term performance awards in fiscal year 2020, the overall compensation structure and process for executive pay remains the same. Our Committee oversees our executive compensation program, which includes several compensation elements that have each been tailored to reward specific aspects of Company-wide and business line performance that the Board believes are central to delivering long-term shareholder value. Executive compensation packages are focused on our key business and performance objectives. In particular, we strive to align executive compensation with our key strategic objectives: building core products and innovation, geographic expansion, commercial execution, operational excellence and talent retention and recruitment.

 

Base Salary

Base salaries are set to be competitive in the marketplace. Base salaries are not automatically adjusted annually but instead are adjusted when the Committee judges that an increase is earned due to a change in an executive officer’s responsibilities, demonstrated performance or relevant market data.

Short-Term Incentives

The annual cash incentive award plan is based on achieving certain strategic goals for each executive which may be based on Company-wide and/or segment Organic Revenue and Adjusted Operating Income, depending on the responsibility and oversight of the executive.

Long-Term Incentives

Long-term equity awards incentivize executives to deliver long-term shareholder value, while also providing a retention vehicle for our executives. The LTI mix is currently 50% time-based awards and 50% performance-vesting awards. LTI awards include stock options and RSUs.

 

Target Pay

 

We utilize the above-mentioned compensation elements to create executive compensation packages that are heavily weighted to variable, at-risk pay in order to align pay with performance. The Executive Compensation Committee does not have any formal policies for allocating total compensation among the various components. Instead, the Executive Compensation Committee uses its judgment, in consultation with its independent compensation consultant, to establish a mix of current, short-term and long-term incentive compensation, and cash and equity compensation for each Named Executive Officer. The balance between these components may change from year to year based on corporate strategy and objectives, among other considerations. For fiscal year 2020, our NEOs had the following target pay mix:

 

2020 Proxy Statement   25

 

 

Pay Aligned with Performance

 

As is demonstrated below, since Chuck Kummeth became the CEO in 2013, the Company has done exceptionally well. Our pay packages focused on Company-wide and segment performance objectives, particularly in operating income and organic revenue, have driven strong growth and shareholder value. While reported CEO pay has increased, total shareholder return has increased at a far faster pace.

 

 

Best Practices in Compensation Governance

 

The table below summarizes what we do and what we don’t do with respect to our compensation governance practices. We maintain these best practices to encourage actions that are in the long-term interests of our shareholders and the Company.

 

Pay for performance. Approximately 91% of CEO target total direct compensation was directly or indirectly tied to Company performance and approximately 77% of other NEOs’ target total direct compensation was directly or indirectly tied to Company performance.

Emphasize long-term performance. Approximately 60% of our NEOs’ target direct compensation is equity-based with multi-year vesting.

Minimum required vesting. We do not allow vesting of options, full-value or stock appreciation rights to occur in a period of less than one year, subject to possible exceptions, none of which has been utilized to date.

Develop sound financial goals. Financial goals for incentive plans are based on targets that are challenging but achievable.

Use double-trigger vesting provisions. Vesting connected with a change in control requires qualifying termination of employment (“double-trigger” provision).

Impose stock ownership requirements. Align executives with shareholders by requiring the CEO to own stock valued at 3x his base salary and other executive officers to hold stock valued at 1x their base salaries.

No hedging or pledging. Directors and executive officers may not hedge Company securities and, subject to limited exceptions, may not pledge Company securities as collateral for any loan.

No repricing of stock options or stock appreciation rights. No re-pricing or exchange of stock options or stock appreciation rights without shareholder approval.

Mitigate undue risk. Annually review all incentive programs for material risk.

 

26

2020 Proxy Statement

 

 

Independent Board Chair. Effective independent Board leadership and oversight of management.

Engage independent consultants. The Committee engages independent compensation and legal consultants.

Review tally sheets. Review of executive compensation program components includes potential severance and change in control payouts.

No golden parachute tax gross-ups. We do not enter into new agreements with executive officers providing for golden parachute tax gross-ups.

 

2020 Proxy Statement   27
 

 

Executive Compensation Initiatives to Align with Shareholders

 

In FY 2014 through FY 2016, the Committee made a series of progressive changes to develop and evolve our executive compensation program in order to accomplish the objectives of attracting and retaining highly qualified executives, tying pay to performance and Company strategy, aligning executives’ incentives with long-term shareholder interests, and encouraging internal pay equity.

 

The Committee believes the plan design in place since FY 2016 has worked well, resulting in a stable executive team and strong financial performance. We believe shareholders agree. After improving disclosures around our compensation program in recent years, we have received favorable Say on Pay votes of approximately 98% from shareholders at our Annual Shareholder Meetings in 2018 and 2019. Believing that it is important to maintain a consistent approach to executive compensation, combined with good financial results, the Committee retained the same structure in FY 2020.

 

Compensation Philosophy and Objectives

 

The Committee reviews and approves each executive’s compensation annually and is responsible for assuring that compensation for the executive officers is consistent with the objectives of attracting and retaining highly qualified executives, tying pay to performance and Company strategy, aligning executives’ incentives with long-term shareholder interests, and encouraging internal pay equity. The Committee determines the appropriate level for each compensation component based on these overall compensation objectives. The Committee’s philosophy is to strive to provide market competitive compensation and emphasize at-risk cash bonus opportunities and equity compensation that reflect the Company’s performance goals and are commensurate with each executive’s scope of responsibility within the organization.

 

The target-setting process for our incentive plans is intended to align pay with performance and long-term shareholder interests. The Company’s business planning process and strategic direction is foundational to this effort. Bio-Techne’s business planning process is determined by the overall business environment, industry and competitive factors and our goals and strategies. The business planning process drives our annual operating plan as well as establishes our long-term financial, operational and strategic objectives.

 

Key Considerations in Development of Annual and Long-Term Goals

Business Environment

Competitive Factors

Company-Specific Factors

Market Outlook

Industry Trends

Historical Trends

International Trends

Competitive Landscape

Historical Performance

Analyst Expectations

Market Growth

Strategic Initiatives

Tax Policy

   

Capital Deployment Opportunities

       

Recent Capital Deployment Decisions

 

The Committee reviews and oversees the development and implementation of compensation programs that are aligned with Bio-Techne’s business strategy. The financial performance goals approved by the Committee for the annual and long-term incentive plans are informed by the annual operating plan and Bio-Techne’s long-term strategy.

 

Our Process for Establishing Executive Compensation

 

Responsibility of the Executive Compensation Committee

 

The Executive Compensation Committee of the Board of Directors is responsible for establishing the compensation programs of the Company’s CEO and other NEOs. The Committee participates in the consideration of employment of prospective executive officers of the Company. The Committee also administers the Company’s equity-based and performance-based compensation plans, including plans under which restricted stock and options are awarded. Accordingly, it is responsible for reviewing cash and equity incentives payable to executives and has the authority to grant restricted shares of Company Common Stock and options to purchase shares of the Company’s Common Stock to all participants under the Company’s equity award plans, and to determine all terms and conditions of such awards.

 

28

2020 Proxy Statement

 

 

Role of the Chief Executive Officer in Compensation Decisions

 

The Committee annually assesses the base compensation and the potential compensation that the named executive officers will be eligible to earn by achieving the Company’s financial targets. As part of this assessment, the CEO makes recommendations to the Committee regarding the base compensation and target incentive amounts for the executive officers that report to him. Such recommendations take into account internal pay equity, position within an internal compensation range, changes in responsibilities, compensation levels for similar positions that considers industry and location and other factors the CEO considers important in establishing competitive compensation for the executives that report to him. Among these other factors is a philosophy that there should be a reasonable relationship between executive salaries and the average employee or mid-level manager salaries within an organization; executive bonuses should be based on performance; and long-term incentives should primarily be equity-based arrangements that are tied to long-term improvements in financial results and other factors that lead to appreciation in the Company’s stock price.

 

The Committee discusses the CEO’s recommendations and accepts or adjusts them, in whole or in part, based on its own assessment of company strategic goals, executive responsibilities, internal pay equity and its independent review of local comparative data for all industries. The executive officers are not present during the Committee’s final discussion and determination of the type and amount of compensation to be paid.

 

Role of Consultants

 

The Committee has retained Aon as its independent outside compensation consultant since 2013 to assist with setting executive compensation. The Committee has sole authority to retain or replace such independent compensation consultants. The Committee annually evaluates the independent compensation consultant’s independence and performance under the applicable Nasdaq listing standards. The Committee believes that working with an independent compensation consultant furthers the Company’s objectives to recruit and retain qualified executives, align their interests with those of shareholders and ensure that their compensation packages will appropriately motivate and reward ongoing achievement of business goals.

 

In FY 2020, the Committee determined that Aon continued to be independent under applicable Nasdaq listing standards and retained them to advise the Committee with respect to compensation of the CEO and other executive officers. In that capacity, Aon provided the Committee with a peer group analysis and assisted the Committee in structuring the compensation program for the CEO and other executive officers. Aon did not provide any additional services to the Company during FY 2020.

 

Use of Peer Group

 

The Committee refers to a comparative group of life sciences companies when evaluating executive compensation. Although it is not possible to compile a peer group of companies that directly compete with the Company, the companies identified for inclusion in the comparative group operate in the same general industry as the Company, and the Committee believes that such companies compete for a similar pool of executive talent. Furthermore, the peer companies are strategically aligned with the goals of the Company and are similar to the Company with regard to one or more of the EBITDA, market capitalization and revenue measures.

 

While shareholders and advisory groups sometimes rely solely on revenue to assess the appropriateness of a peer group, the Committee believes that using EBITDA and market capitalization in addition to revenue is beneficial because these metrics directly relate to the creation of shareholder value and provide a more appropriate measure of the Company’s place in the market than revenue alone. This is especially true with respect to a high-growth company such as ours. Anticipating continued strong growth, the Committee is looking to hire and retain executives who are able to not only manage the Company as it exists today, but also as it continues to grow organically and through acquisition in the future. For that reason, the Committee has determined that market capitalization is the primary metric for identifying peers.

 

The Committee uses our compensation peer group as one data point when setting executive pay packages. Although useful as a reference, the Committee does not target any percentile within this peer group as a specific objective. Instead, our compensation decisions are based on the full consideration of many factors, including, but not limited to individual and company performance, market data, internal equity, experience, strategic needs, responsibilities, and the portion of long-term incentive compensation allocated to performance-based versus time-based awards.

 

2020 Proxy Statement   29
 

 

In advance of setting FY 2020 compensation opportunities for the NEOs, the Executive Compensation Committee, with the assistance of Aon, reviewed the peer group to ensure the constituents remained reasonable for pay and performance comparisons. Based on the review, a small modification was made to the peer group as follows: (i) Luminex Corporation was removed from the peer group as a result of its comparatively much smaller revenue and market capitalization levels and (ii) IDEXX Laboratories was added to the peer group.

 

For compensation decisions for fiscal year 2020, the following companies were selected as our peer group:

 

ABIOMED, Inc.

Align Technology, Inc.

Alkermes plc

Bio-Rad Laboratories, Inc.

Globus Medical, Inc.

Haemonetics Corporation

IDEXX Laboratories

Insulet Corporation

Integra LifeSciences Holdings Corp

Masimo Corporation

Myriad Genetics, Inc.

NuVasive, Inc.

PerkinElmer, Inc.

QIAGEN N.V.

Seattle Genetics, Inc.

 

 

At the time the peer group was confirmed, the peer group had the following median statistics:

 

Measure

Peer Median

Bio-Techne’s Position

Market capitalization

$6.9 billion

53rd percentile (11% above Median)

Revenues

$1.1 billion (trailing four quarters)

7th percentile (35% below Median)

Net Income

$203 million (trailing four quarters)

40th percentile (25% below Median)

 

Elements of the 2020 Compensation Program

 

The Company’s executive compensation program consists of base salaries, annual cash performance bonuses, long-term equity awards and various benefits, including the Company’s Profit Sharing and Savings Plan in which all qualified employees of the Company participate.

 

Pay Element

Alignment with Shareholder Value Creation

Base Salary

Attracts and retains high-performing executives by providing market-competitive fixed pay

Annual Cash Incentive

Drives Company-wide and segment performance

 

Focuses efforts on growing revenue and earnings and achieving strategic business goals

Long-Term Equity Awards

Aligns executives’ interests with those of shareholders

 

Motivates executives to deliver sustained long-term growth to the business and to the Company’s share price

 

Retains high-performing executives by providing a meaningful incentive to stay with the Company

Other Compensation and Benefits

Attracts and retains high-performing executives by offering competitive benefits

 

Base Salary

 

Base salary is the only fixed component of our executive officers’ total cash compensation and provides competitive pay to attract and retain our talented executives. Annual salary decisions are made in recognition of competitive data as well as the skills and experience each individual brings to the Company, the length of time each has been with the Company and the performance contributions each makes. Base salary changes in FY 2020 were primarily the result of executives’ performance and the Company’s growth in revenues and market capitalization.

 

30

2020 Proxy Statement

 

 

Our NEOs received the following base salaries for fiscal year 2020:

 

Named Executive Officer

 

2019

   

2020

   

% Change

 

Charles Kummeth

  $ 957,000     $ 1,053,000       10.0 %

James Hippel

  $ 541,188     $ 566,000       10.1 %

David Eansor

  $ 501,380     $ 552,000       10.1 %

Kim Kelderman

  $ 452,400     $ 500,000       10.5 %

Brenda Furlow

  $ 431,400     $ 475,000       10.1 %

 

Annual Cash Incentives

 

Executives are eligible to receive cash performance bonuses under the Company’s Short-Term Incentive Plan if predetermined, objective goals are achieved. Challenging goals are set each year to incentivize each executive to focus attention on strategically important goals. Executives may earn between zero and 200% of their target bonus opportunities.

 

FY 2020 Performance Metrics

 

For FY 2020, the annual bonus plan was again set based upon the Company’s consolidated adjusted operating income results, consolidated organic revenue results, and, with respect to the presidents who lead our reporting segments, FY 2020 adjusted operating income and organic revenue results for their respective segments. The Committee used this approach to align pay with performance over which the executive has significant influence (or line of sight). However, at least one-half of each NEO’s annual bonus plan payout is based on Corporate performance to drive enterprise-wide behaviors.

 

Our NEOs in FY 2020 had the following weighting to their respective annual incentives based on Company-wide performance goals:

 

   

Company-Wide Goals

   

Segment Goals

 

Executive

 

Adjusted

Operating

Income*

   

Organic

Revenue**

   

Adjusted

Operating

Income

   

Organic

Revenue

 

Charles Kummeth

    50 %     50 %     0 %     0 %

James Hippel

    50 %     50 %     0 %     0 %

David Eansor

    25 %     25 %     25 %     25 %

Kim Kelderman

    25 %     25 %     25 %     25 %

Brenda Furlow

    50 %     50 %     0 %     0 %

 

*

The Company’s adjusted operating income target for management’s incentive plan excludes the impact of foreign currency translation, certain acquisitions and acquisition-related amortization, costs and expenses, stock-based compensation expense, non-recurring litigation expenses and other unusual items in the discretion of the Committee. While these adjustments to operating income are closely aligned to our external operating results, there are some minor differences in our external adjusted operating income and the adjusted operating income used for management’s incentive plan.

 

**

Organic revenue targets for management’s incentive plan exclude foreign currency impacts and acquisition-related revenues. However, certain acquisition revenues occurring within 12-months of the acquisition date maybe included in the results for management’s incentive plan if those revenues are also included within management’s target amount. Our externally reported organic revenue excludes all revenue prior to 12-months from the acquisition date.

 

The range of eligible payouts for FY 2020 at threshold, target, and maximum performance was based on a percentage of each NEO’s salary, as follows:

 

   

Revenue Goals

   

Operating Income Goals

 

Performance Level

 

Performance

Achievement

(% of performance target)

   

Payout Range

(% of Target award

opportunity)

   

Performance

Achievement

(% of performance target)

   

Payout Range

(% of Target award

opportunity)

 

Threshold

    97 %     50 %     95 %     50 %

Target

    100 %     100 %     100 %     100 %

Maximum

    103 %     200 %     105 %     200 %

 

2020 Proxy Statement   31
 

 

To calculate the payout for each executive, the percentage of the bonus for each metric is calculated and the resulting percentages are averaged to determine the applicable blended percentage rate.

 

The Committee retains the discretion to determine the bonus amounts and criteria for any new participants and to adjust them from time to time, including adjusting bonus payouts to reflect unexpected circumstances that were not taken into account when bonus targets were set. As described above, the Committee chose to exercise that discretion in light of the unprecedented circumstances relating to the pandemic and its impact on the business.

 

A participant must be employed on the last day of the fiscal year to receive any portion of the annual cash incentive payment she or he earns. If the person resigns for any reason before the end of the fiscal year, he or she will forfeit the entire bonus.

 

FY 2020 Actual Earned Incentives

 

As described above, in light of the unprecedented disruptions caused by the pandemic, the Executive Compensation Committee approved payment of incentives based on company-wide organic revenue and adjusted operating income for the company as a whole as of the end of the third quarter of FY 2020, resulting in an across-

the-board percentage of 116% of target. Payouts under the Short-Term Incentive Plan for FY 2020 for our NEOs were as follows:

 

           

FY 2020 Opportunity

   

Actual

 

Executive

 

2020 Base Salary

   

Target Annual

Incentives

(as % of base

salary)

   

Target Annual

Incentives

($)

   

2020 Earned

Award

   

As a %

of Target

 

Charles Kummeth

  $ 1,053,000       137.5 %   $ 1,447,875     $ 1,679,535       116 %

James Hippel

  $ 566,000       85 %   $ 481,100     $ 558,076       116 %

David Eansor

  $ 552,000       80 %   $ 441,600     $ 512,256       116 %

Kim Kelderman

  $ 500,000       80 %   $ 400,000     $ 464,000       116 %

Brenda Furlow

  $ 475,000       60 %   $ 285,000     $ 330,600       116 %

 

Long-Term Incentive Compensation

 

Long-term incentive compensation is a critical component of our executive compensation program. This element of compensation serves to align our executives’ financial interests with sustained shareholder value creation and long-term Company financial results. It also functions as an important retention tool and facilitates the positioning of our NEOs’ total pay within the range of the competitive median of our compensation peer group.

 

FY 2020 Grants

 

In FY 2020, long-term incentive awards were granted to all NEOs, including our CEO, in the first quarter of the fiscal year. The following table sets forth the target value of the long-term incentive awards granted to our NEOs in FY 2020. Additional detail with respect to each award granted is provided below.

 

   

Stock Options*

   

Restricted Stock Units*

 

Executive

 

Time-based

   

Performance-

vesting

   

Time-based

   

Performance-

vesting**

 

Charles Kummeth

  $ 2,150,000     $ 2,150,000     $ 2,150,000     $ 2,150,000  

James Hippel

  $ 1,000,000     $ 500,000           $ 500,000  

David Eansor

  $ 800,000     $ 400,000           $ 400,000  

Kim Kelderman

  $ 600,000     $ 300,000           $ 300,000  

Brenda Furlow

  $ 500,000     $ 250,000           $ 250,000  

 

*

Amounts shown above represent the total grant date fair value of equity-based compensation, and for the performance-based grants, assumes target. The fair value of equity awards is determined pursuant to the Financial Accounting Standards Board's Accounting Standards Codification (ASC) Topic 718. Assumptions used in the calculation of the fair value are described in Note 10 to the Company's audited financial statements for FY 2020, included in the Company's Annual Report on Form 10-K.

 

32

2020 Proxy Statement

 

 

**

Cash performance units were also granted solely to compensate executives for dividends that may be granted to shareholders but that are not paid for unvested restricted stock units during the three-year vesting period. The percent of cash performance awards that vest equal the percent of performance-based equity awards that vest.

 

Stock Options

 

The Company makes annual stock option grants to executives in order to align the interests of executives with those of shareholders. Executives recognize value only if the market value of the Company’s stock appreciates over time. The Company’s time-vesting stock option grants generally vest 25% on each of the first four anniversaries of the grant date and have a seven-year term. The Committee determines the appropriate stock option award value by considering how the value of equity awards will impact each NEO’s total direct compensation as well as the balance between annual and long-term compensation, fixed and at-risk compensation, the Company’s strategic and operational objectives, the responsibilities and performance of the NEOs, internal equity, the grants made by companies in our compensation peer group and other factors the Committee deems relevant.

 

Restricted Stock

 

Bio-Techne’s CEO also receives time-vested restricted stock awards that generally vest over a three-year period. These awards are intended to further align the CEO’s interests with those of shareholders and to provide competitive total compensation to the CEO. The Committee determines the appropriate number of restricted stock awards by considering the CEO’s total direct compensation as well as the balance between annual and long-term compensation, fixed and at-risk compensation, the Company’s strategic and operational objectives, the CEO’s performance, the grants made by companies in our compensation peer group and other factors the Committee deems relevant.

 

Performance-vesting Stock Options and RSUs

 

FY 2020 Performance Metrics for LTIP Awards. Under the Long-Term Incentive Plan for FY 2020, the Committee approved grants of stock options and restricted stock units (as well as cash performance units to compensate for dividends that would not be received during the vesting period for those restricted stock units) to all executives. These grants have a three-year cliff vesting schedule and therefore vest following the Company’s 2023 fiscal year if the Company achieves threshold, target or maximum consolidated adjusted operating income and consolidated organic revenue goals for FY 2023. These targets promote long-term achievement of the Company’s strategic objectives.

 

 

Company-Wide Adjusted Operating Income. Operating income is an important driver of share price valuation and shareholder expectations. It determines 50% of the awards for our NEOs.

 

Company-Wide Organic Revenue. Revenue growth is the best long-term driver of consistent cash generation. It determines 50% of the awards for our NEOs.

 

The following table sets forth the threshold, target, and maximum potential amounts that will vest for our NEOs under the performance-vested equity for FY 2020:

 

   

Stock Options

   

Restricted Stock Units*

 

Executive

 

Threshold

   

Target

   

Maximum

   

Threshold

   

Target

   

Maximum

 

Charles Kummeth

  $ 1,075,000     $ 2,150,000     $ 3,225,000     $ 1,075,000     $ 2,150,000     $ 3,300,000  

James Hippel

  $ 250,000     $ 500,000     $ 750,000     $ 250,000     $ 500,000     $ 750,000  

David Eansor

  $ 200,000     $ 400,000     $ 600,000     $ 200,000     $ 400,000     $ 600,000  

Kim Kelderman

  $ 150,000     $ 300,000     $ 450,000     $ 150,000     $ 300,000     $ 450,000  

Brenda Furlow

  $ 125,000     $ 250,000     $ 375,00     $ 125,000     $ 250,000     $ 375,000  

 

*

Executives also received cash performance unit grants to compensate for dividends that may be paid to shareholders during the three-year vesting period, in the following amounts at Threshold, Target and Maximum, respectively: Kummeth — $23,712, $47,423, and $71,135; Hippel — $5,514, $11,027, and $16,540; Eansor — $4,412, $8,823, and $13,234; Kelderman — $3,308, $6,617, and $9,925; Furlow — $2,757, $5,513, and $8,270.

 

Awards will vest on a linear scale depending on the level of performance between threshold and maximum levels. Adjusted operating income and organic revenue exclude the impact of foreign currency translation, acquisitions and acquisition-related amortization, costs and expenses, non-recurring litigation expenses and other unusual items.

 

2020 Proxy Statement   33

 

 

Compensation Policies and Practices

 

Clawback Provisions

 

Our employment agreements with our NEOs provide that we will recoup incentive compensation paid to our NEOs to the extent required by any law, government regulation, stock exchange listing requirement, or Company policy promulgated under such standards.

 

Executive Stock Ownership Guidelines

 

Effective July 2016, we implemented stock ownership guidelines applicable to all NEOs. The guidelines are determined in comparison to base salary as follows:

 

Named Executive Officer

Applicable Multiple

President and CEO

3x base salary

Other executive officers

1x base salary

 

The guidelines are met based on the value of an NEO’s directly owned or beneficially owned stock plus the value of restricted stock or restricted stock units that are issued and outstanding, whether or not vested. NEOs must meet the guideline within five years of becoming subject to the guidelines and must meet the guidelines at all times following such date.

 

Although our NEOs have until at least July 1, 2021 to meet the guidelines, all of the NEOs already meet the guidelines.

 

Succession Planning

 

The Committee maintains a succession plan for the Company’s executive officers that is reviewed by the full Board of Directors on a periodic basis. As part of its role in succession planning, the Board periodically reviews with the CEO the performance of the CEO’s direct reports, as well as succession plans for each role. The Board also receives formal reports from such individuals and is given the opportunity to interact with such individuals in social settings.

 

Accounting and Tax Treatment

 

The Company accounts for equity-based compensation paid to employees under FASB ASC Topic 718, which requires the Company to estimate and record an expense over the service period of an option award. Thus, the Company may record an expense in one year for awards granted in earlier years. Accounting rules also require the recording of cash compensation as an expense at the time the obligation is accrued.

 

While the Executive Compensation Committee considers the deductibility of awards as one factor in determining executive compensation, the Committee also looks at other factors in making its decisions and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by us for tax purposes.

 

In addition to considering the tax consequences, the Committee considers the accounting consequences of its decisions, including the impact of expenses being recognized in connection with equity-based awards, in determining the size and form of different equity-based awards.

 

34

2020 Proxy Statement

 

 

EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

 

The Executive Compensation Committee of the Board of Directors (the “Committee”) is responsible for reviewing and approving total compensation programs and levels for the Company’s executive officers, including the NEOs. The Committee’s responsibilities are specified in the Executive Compensation Committee Charter.

 

The Committee reviewed and discussed the Compensation Discussion and Analysis above with management. Based on the Committee’s review and its discussions with management, the Committee approved the inclusion of the Compensation Discussion and Analysis in the Company’s Proxy Statement for the 2020 Annual Meeting.

 

  Randolph C. Steer, M.D., Ph.D. (Chair)
  Harold Wiens
  Joseph Keegan, Ph.D.
  Members of the Executive Compensation Committee

 

2020 Proxy Statement   35
 

 

ADDITIONAL COMPENSATION DISCLOSURES

 

2020 SUMMARY COMPENSATION TABLE

 

The NEOs received compensation for the fiscal years ended June 30, 2020, 2019 and 2018 as set forth in the chart below.

 

Name and Principal Position

Fiscal

Year

 

Salary(1)

   

Bonus

   

Stock

Awards(2)

   

Option

Awards(2)

   

Non-Equity

Incentive Plan

Compensation(3)

   

All Other

Compensation

   

Total

 

Charles Kummeth,

2020

  $ 1,053,000           $ 4,310,652 (4)   $ 4,310,748 (5)   $ 1,767,957 (6)   $ 41,425 (7)   $ 11,484,782  
President and CEO

2019

    957,000             3,999,925 (4)     4,000,343 (5)     2,008,183       45,688       11,011,138  
 

2018

    911,000             3,550,008 (4)     3,550,081 (5)     1,610,925       42,860       9,664,874  
                                                           

James Hippel,

2020

    566,000             502,389 (8)     1,502,483 (9)     576,716 (10)     9,470 (11)     3,157,716  
Senior Vice President

2019

    514,188             399,916 (8)     1,200,090 (9)     634,254       9,342       2,757,790  
of Finance and CFO

2018

    476,100             370,000 (8)     1,110,007 (9)     483,485       9,295       2,448,887  
                                                           
David Eansor,

2020

    552,000             401,988 (12)     1,201,974 (13)     521,387 (14)     8,400 (15)     2,685,749  
President, Protein

2019

    501,380             299,907 (12)     900,053 (13)     613,448       8,250       2,323,038  
Sciences

2018

    455,000             181,248 (12)     543,753 (13)     403,181       8,100       1,591,282  
                                                           

Kim Kelderman,

2020

    500,000             301,459 (17)     901,452 (18)     464,000 (19)     8,400 (20)     2,175,310  
President, Diagnostics

2019

    452,400             199,899 (17)     600,028 (18)     304,796       8,250       1,565,373  
and Genomics(16)

2018

    72,500               753,900       301,603       36,250       1,004       1,165,256  
                                                           

Brenda Furlow,

2020

    475,000             251,195 (21)     751,223 (22)     337,841 (23)     8,400 (24)     1,823,658  
Senior Vice President –

2019

    431,400             162,425 (21)     487,524 (22)     350,574       8,250       1,483,773  
General Counsel

2018

    385,000             143,731 (21)     431,239 (22)     250,132       8,100       1,218,202  

 

(1)

Includes amounts deferred under the Company's Profit Sharing and Savings Plan, a qualified deferred compensation plan under Section 401(10) of the Internal Revenue Code.

 

 

(2)

Amounts shown represent the total grant date fair value of equity-based compensation based on the estimated probable outcome of the performance based-objectives applicable to such awards on the grant date and excluding the effect of estimated forfeitures. The fair value of equity awards is determined pursuant to the Financial Accounting Standards Board's Accounting Standards Codification (ASC) Topic 718. Assumptions used in the calculation of the fair value are described in Note 10 to the Company's audited financial statements for FY 2020, included in the Company's Annual Report on Form 10-K.

 

 

(3)

Represents cash bonuses earned under the Company's incentive plans in effect for the applicable year, which are determined and paid in the subsequent fiscal year.

 

 

(4)

For 2020, represents 11,291 shares of time-vested restricted stock granted on August 7, 2019 plus performance based restricted stock units also granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $3,224,974. For 2019, represents 11,279 shares of time-vested restricted stock granted on August 8, 2018 plus performance based restricted stock units also granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $2,999,900. For 2018, represents 14,194 shares of time-vested restricted stock granted on October 26, 2017 plus performance based restricted stock units also granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming the highest level of performance conditions will be achieved is $2,662,500.

 

 

(5)

For 2020, includes a time-vested option to purchase 57,150 shares of Common Stock issued on August 7, 2019, plus a performance-vested option also granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $3,224,999. For 2019, includes a time-vested option to purchase 60,222 shares of Common Stock issued on August 8, 2018, plus a performance-vested option also granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $3,000,274.

 

36

2020 Proxy Statement

 

 

For 2018, includes a time-vested option to purchase 78,228 shares of Common Stock issued on October 26, 2018, plus a performance-vested option also granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $2,662,500.

 

(6)

Includes cash bonus of $1,679,535 earned under the Company’s short-term incentive plan in effect for the applicable year, and a cash performance unit payment of $89,422 vested based on actual performance achieved under the 2018 performance-based award.

 

 

(7)

Includes $8,400 for 401k match, $2,892 for a supplemental life and disability insurance policy ($2,007 to cover the cost of the premium and $885 as a tax reimbursement related to payment for the premium), and $30,133 in dividends paid on unvested restricted stock, which amount was not factored into the grant date fair value of such awards.

 

 

(8)

For 2020, represents shares of performance based restricted stock units also granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $749,835. For 2019, represents shares of performance based restricted stock units also granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $599,874. For 2018, represents shares of performance based restricted stock units granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $555,000.

 

 

(9)

For 2020, includes a time-vested option to purchase 26,581 shares of Common Stock issued on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $749,998. For 2019, includes a time-vested option to purchase 24,089 shares of Common Stock issued on August 8, 2018, plus a performance-vested option also granted on October 29, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $600,082. For 2018, includes a time-vested option to purchase 32,613 shares of Common Stock issued on October 26, 2017, plus a performance vested option also granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $555,000.

 

 

(10)

Includes cash bonus of $558,076 earned under the Company’s short-term incentive plan in effect for the applicable year, and a cash performance unit payment of $18,640 vested based on actual performance achieved under the 2018 performance-based award.

 

 

(11)

Includes $8,400 for 401k match and $1,070 for a supplemental life and disability insurance policy ($725 to cover the cost of the premium and $345 as a tax reimbursement related to payment for the premium).

 

 

(12)

For 2020, represents shares of performance based restricted stock units granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $599,982. For 2019, represents shares of performance based restricted stock units granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $449,861. For 2018, represents shares of performance based restricted stock units granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $271,875.

 

 

(13)

For 2020, includes a time-vested option to purchase 21,265 shares of Common Stock issued on August 7, 2019, plus a performance bested option also granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $599,968. For 2019, includes a time-vested option to purchase 18,066 shares of Common Stock issued on August 8, 2018, plus a performance bested option also granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $450,038. For 2018, includes a time-vested option to purchase 15,976 shares of Common Stock issued on October 26, 2017, plus a performance bested option also granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $271,875.

 

2020 Proxy Statement   37
 

 

(14)

Includes cash bonus of $512,256 earned under the Company’s short-term incentive plan in effect for the applicable year, and a cash performance unit payment of $9,131 vested based on actual performance achieved under the 2018 performance-based award.

 

 

(15)

401k match.

 

 

(16)

Mr. Kelderman joined the Company and was appointed to the position of President, Diagnostics and Genomics on April 30, 2018.

 

 

(17)

For 2020, represents shares of performance based restricted stock units granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $449,939. For 2019, represents shares of performance based restricted stock units granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $299,848. For 2018, represents shares of time vested restricted stock units granted on May 1, 2018.

 

 

(18)

For 2020, includes a time-vested option to purchase 15,948 shares of Common Stock issued on August 7, 2019, plus a performance bested option also granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $499,976. For 2019, includes a time-vested option to purchase 12,044 shares of Common Stock issued on August 8, 2018, plus a performance bested option also granted on August 8, 2018. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $300,014. For 2018, includes time vested options to purchase 10,000 shares of Common Stock issued on May 1, 2018.

 

 

(19)

Includes cash bonus of $464,000 earned under the Company’s short-term incentive plan in effect for the applicable year.

 

 

(20)

401k match.

 

 

(21)

For 2020, represents shares of performance based restricted stock units granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $374,917. For 2019, represents shares of performance based restricted stock units granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $243,638. For 2018, represents shares of performance based restricted stock units granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance conditions will be achieved is $215,625.

 

 

(22)

For 2020, includes a time-vested option to purchase 13,290 shares of Common Stock issued on August 7, 2019, plus a performance bested option also granted on August 7, 2019. The value of the 2020 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $374,999. For 2019, includes a time-vested option to purchase 9,786 shares of Common Stock issued on August 8, 2018, plus a performance bested option also granted on August 8, 2018. The value of the 2019 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $243,751. For 2018, includes a time-vested option to purchase 12,670 shares of Common Stock issued on October 26, 2017, plus a performance bested option also granted on October 26, 2017. The value of the 2018 performance-based award at the grant date assuming that the highest level of performance condition will be achieved is $215,625.

 

 

(23)

Includes cash bonus of $330,600 earned under the Company’s short-term incentive plan in effect for the applicable year, and a cash performance unit payment of $7,241 vested based on actual performance achieved under the 2018 performance-based award.

 

 

(24)

401k match.

 

38

2020 Proxy Statement

 

 

2020 GRANTS OF PLAN-BASED AWARDS

 

The following table sets forth certain information with respect to grants of plan-based awards for the named executive officers granted in FY 2020.

 

 

   

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards(1)

   

Estimated Future Payouts

Under Equity Incentive

Plan Awards(2)

   

All

Other

Stock

Awards:

Number of

   

All Other

Options

Awards:

Number of

Securities

Underlying

   

Exercise

or Base

Price of

Option

Awards

   

Grant

Date Fair

Value of

Stock and

Option

 
Name

Grant

Date

 

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

   

Shares(3)

(#)

   

Options(4)

(#)

   

(per share)

($)

   

Awards(5)

($)

 
      $ 723,938     $ 1,447,875     $ 2,895,750                                            
        23,712       47,423       71,135                                            
Charles

8/7/2019

                      5,646       11,291       16,937                         2,160,733  
Kummeth

8/7/2019

                      28,575       57,150       85,725                   190.41       2,160,749  
 

8/7/2019

                                              57,150       190.41       2,149,999  
 

8/7/2019

                                        11,291                   2,149,919  
        240,550       481,100       962,200                                            
        5,514       11,027       16,540                                            
James

8/7/2019

                      1,313       2,625       3,938                         502,389  
Hippel

8/7/2019

                      6,645       13,291       19,936                   190.41       502,499  
 

8/7/2019

                                              26,581       190.41       999,985  
        220,800       441,600       883,200                                            
        4,412       8,823       13,235                                            
David

8/7/2019

                      1,050       2,101       3,151                         401,988  
Eansor

8/7/2019

                      5,316       10,632       15,948                   190.41       401,979  
 

8/7/2019

                                              21,265       190.41       799,995  
        200,000       400,000       800,000                                            
        2,757       5,513       8,270                                            
Kim

8/7/2019

                      788       1,575       2,363                         301,459  
Kelderman

8/7/2019

                      3,987       7,974       11,961                   190.41       301,484  
 

8/7/2019

                                              15,948       190.41       599,968  
        142,500       285,000       570,000                                            
        3,309       6,617       9,926                                            
Brenda

8/7/2019

                      656       1,313       1,969                         251,195  
Furlow

8/7/2019

                      3,323       6,645       9,968                   190.41       251,249  
 

8/7/2019

                                              13,290       190.41       499,974  

 

(1)

Row 1 for each NEO represents cash bonuses that could have been earned under the Company’s Management Incentive Plan for FY 2020 and would have been paid in FY 2021. On July 29, 2020, the Committee approved the following bonuses: Mr. Kummeth in the amount of $1,679,535, Mr. Hippel in the amount of $558,076, Mr. Eansor in the amount of $512,256, Mr. Kelderman in the amount of $464,000, and Ms. Furlow in the amount of $330,600. Row 2 for each NEO represents performance-based cash units granted during the fiscal year under the Company’s Second Amended and Restated 2010 Equity Incentive Plan (“Equity Plan”). Such awards vest following the Company’s 2022 fiscal year if the Company achieves threshold, target or maximum consolidated adjusted operating income and adjusted revenue growth goals in FY 2022.

 

 

(2)

Represents the number of performance-based equity awards granted to the participant NEOs during the fiscal year under the Equity Plan. For each NEO, Row 3 represents performance-based restricted stock units and Row 4 represents performance-based options, which awards vest following the Company’s 2022 fiscal year if the Company achieves threshold, target or maximum consolidated adjusted operating income and adjusted revenue growth goals in FY 2022.

 

 

(3)

For Mr. Kummeth, represents a restricted stock award granted for the fiscal year under the Company’s Equity Plan. The risk of forfeiture for the award lapses annually in pro-rata increments over a period of three years, beginning on the first anniversary of the grant date.

 

2020 Proxy Statement   39
 

 

(4)

Represents the number of time-based stock options granted to the participant during the fiscal year under the Company’s Equity Plan. Such awards vest annually in pro-rata increments over a period of four years, beginning on August 8, 2020.

 

 

(5)

The fair value of the equity awards is determined pursuant to ASC Topic 718, based on the probable outcome of the performance conditions and excluding the effect of estimated forfeitures. Assumptions used in the calculation of the fair value of the equity awards are described in Note 10 to the Company’s audited financial statements for FY 2020, included in the Company’s Annual Report on Form 10-K.

 

2020 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

The following table shows all outstanding stock options and restricted stock held by the named executive officers on June 30, 2020.

 

   

Option Awards

 

Stock Awards

 

Name

 

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

   

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

   

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

   

Option

Exercise

Price

($)

 

Option

Expiration

Date

 

Number

of Shares

of Stock

that have

not

Vested

(#)

   

Market

Value

of Shares

of Stock

that have

not

Vested

($)

   

Number of

Unearned

Shares,

Units or

Other

Rights that have

not Vested

(#)

   

Market

Value of

Unearned

Shares

that have

not

Vested

($)

 

 

    25,157 (1)               $ 86.25  

4/1/2021

                       
      66,849 (2)               $ 94.35  

8/12/2021

                       
      79,517 (3)                 108.49  

8/7/2022

                       
      95,346 (4)                 108.49  

8/7/2022

                       
Charles     77,084 (5)     25,695             106.59  

8/18/2023

                       
Kummeth     154,169 (6)                 106.59  

8/18/2023

                       
      39,114 (7)     39,114             125.05  

8/9/2024

    4,731 (8)     1,249,315              
      (9)           117,342       125.05  

8/9/2024

    (10)           21,291       5,622,314  
      15,056 (11)     45,166             177.32  

8/8/2025

    7,519 (12)     1,985,542              
      (13)           90,334       177.32  

8/8/2025

    (14)           16,918       4,467,536  
      (15)     57,150           $ 190.41  

8/7/2026

    11,291 (16)     2,981,614              
      (17)           85,725     $ 190.41  

8/7/2026

    (18)           16,937       4,472,554  

 

    25,000 (3)                 108.49  

8/7/2022

                       
      14,988 (4)                 108.49  

8/7/2022

                       
      30,400 (5)     10,133             106.59  

8/18/2023

                       
      30,400 (6)                 106.59  

8/18/2023

                       
James     16,306 (7)     16,306             125.05  

8/9/2024

                       
Hippel      (9)           24,460       125.05  

8/9/2024

    (10)           4,438       1,171,943  
      6,022 (11)     18,067