of any incentive compensation (whether cash- or equity-based) that such executive officer received during the three fiscal years preceding the year such restatement is determined to be required, to the extent that such incentive-based compensation exceeds what such officer would have received based on an applicable restatement performance measure or target. In addition, we willmay reduce, cancel, or otherwise recoup incentive-based compensation from executive officers to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules, regulations and listing standards that may be issued thereunder.
•Supermajority Voting Requirements. We are aware that proxy advisory firms and certain institutional investors disfavor certain anti-takeover provisions for mature public companies, including supermajority voting thresholds to amend governing documents. Our amended and restated certificate of incorporation and our amended and restated bylaws, which were adopted in connection with our initial public offering in April 2018, each require the vote of at least sixty-six and two-thirds percent (66-2/3%) of the total voting power of our outstanding voting securities to approve an amendment to such governing document. Our board of directors and nominating and corporate governance committee continue to review and assess our corporate governance practices in light of our business and growth prospects as a relatively new public company and believe the supermajority voting thresholds remain appropriate at this time. Our board of directors and nominating and corporate governance committee intend to review and reassess the supermajority voting thresholds and other anti-takeover provisions in our governing documents on an ongoing basis.
•Enhancing Director Diversity. On January 31, 2020, our board of directors amended our corporate governance guidelines to update and clarify the responsibilities of the nominating and corporate governance committee related to director candidate identification and selection. The amendedOur corporate governance guidelines now explicitly provide that the nominating and corporate governance committee may consider diversity, with respect to professional background, education, race, ethnicity, gender, age and geography, as one factor in assessing director candidate qualifications. In addition, our board
Board Diversity Matrix as of directors is committed to appointing at least one female director in the near term. Our nominating and corporate governance committee has identified specific director candidates and is engaged in ongoing discussions.April 28, 2022
| | | | | | | | | | | | | | |
Board size: | | | | |
Total number of directors | 8 |
| Male | Female | Non-Binary | Did Not Disclose Gender |
Part I: Gender Identity | | | | |
Directors | 4 | 1 | | 3 |
Part II: Demographic Background |
African American or Black | | | | |
Alaskan Native of American Indian | | | | |
Asian | 1 | | | |
Hispanic or Latinx | | 1 | | |
Native Hawaiian or Pacific Islander | | | | |
White | 3 | | | |
Two or More Races or Ethnicities | | | | |
LGBTQ+ | | | | |
Did Not Disclose Demographic Background | 3 |
Risk Management
The
Our board of directors plays an active role, as a whole and also at the committee level, in overseeing the management of our risks. The board of directors is responsible for general oversight of risks and regular review of information regarding our risks, including the technology, data and national security risks formerly overseen by our technology security compliance committee.ESG-related risks. The audit committee is responsible for the initial review and oversight of risk assessment and risk management for the company, as well as overseeing the
management of risks relating to accounting matters, financial reporting and potential conflicts of interest. The compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The information and technology security committee is responsible for overseeing the management of risks relating to the security of our information, intellectual property, personnel, and facilities. The nominating and corporate governance committee is responsible for overseeing the management of risks associated withrelating to our corporate governance practices, the independence of the board of directors.directors and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors is regularly informed through discussions from committee members about such risks. The board of directors believes its administration of its risk oversight function has not affected the board of directors’ leadership structure.
Outside Director Compensation Policy
The compensation committee previously retained Compensia, Inc., or Compensia, to provide recommendations on director compensation based on an analysis of market data compiled from certain public technology companies. Based on the recommendation of Compensia, ourOur board of directors approved certain compensation to our non-employee directors under our Outside Director Compensation Policy,outside director compensation policy, which was adopted by our board of directors in connection with our initial public offering. Our boardoffering, in consultation with an independent compensation consultant. The compensation committee periodically reviews the type and form of directors recently reviewedcompensation paid to our non-employee directors. As part of this review, the Outside Director Compensation Policycompensation committee analyzes non-employee director compensation trends and approved increasesdata from companies comprising the same executive compensation peer group used by the compensation committee in annual fees. However, in lightconnection with its review of the ongoing COVID-19 pandemic,executive compensation.
The compensation committee recommended, and our board of directors resolvedapproved, market-competitive amendments to nullifyour outside director compensation policy, which became effective in April 2021 (the "2021 Policy Amendment"), based on an analysis of the compensation of non-employee directors relative to the compensation of the non-employee directors of our peer group. In this analysis, our board of directors used the same peer group that fee increase before it took effect. The Outside Director Compensation Policy provideswe use to evaluate the compensation of our executive officers.
Under our outside director compensation policy as in effect for fiscal year 2021, non-employee directors received compensation in the followingform of equity and cash, compensation program for non-employee directors:as described below:
|
| | | | |
2021 Annual Fees(1) | Amount(1) |
Annual Fees for Board | |
Board memberOutside director | $15,000 |
Annual Fees for Lead Independent Director | |
Lead independent director | $5,000 |
Annual Fees for Audit Committee | |
ChairChairperson of the audit committee | $5,000 |
Member of the audit committee | $2,000 |
Annual Fees for Compensation Committee | |
ChairChairperson of the compensation committee | $5,000 |
Member of the compensation committee | $1,500 |
Annual Fees for Nominating and Corporate Governance Committee | |
ChairChairperson of the nominating and corporate governance committee | $2,000 |
Member of the nominating and corporate governance committee | $1,000 |
Annual Fees for Technology Security Compliance Committee(1)
| |
Chair of the technology security compliance committee | $2,000 |
Member of the technology security compliance committee | $2,000 |
| |
(1)(1) As a result of the 2021 Policy Amendment, and effective January 1, 2022, (i) annual fees for each outside director increased to $30,000; (ii) the chairperson of the information and technology security committee receives $2,000 in annual fees; and (iii) each member of the information and technology security committee other than the chair receives $1,000 in annual fees.
| Effective September 10, 2019, our board of directors reallocated oversight of the areas overseen by the technology security compliance committee to the full board, due to the importance of these areas. |
In addition to the cash compensation structure described above, our Outside Director Compensation Policyoutside director compensation policy provides for the following equity incentive compensation program for non-employee directors.
Election to Receive RSUs in lieu of Cash Retainers. Subject to the limits under our 2018 Equity Incentive Plan (the "2018 Plan"), each non-employee director may elect to convert his or her annual cash compensation under the non-employeeoutside director compensation policy into an award of RSUsrestricted stock units ("RSUs") under our 2018 Plan. If the non-employee director makes this election in a timely manner in accordance with the outside director compensation policy, each such award of RSUs automatically will be granted on the first trading day after January 1 of the calendar year for which the election applies and have a value (as defined in theour outside director compensation policy) equal to the aggregate amount of such annual cash compensation, rounded down to the nearest whole share. In 2021, we also approved the grant of $8,356 in additional RSUs to each of our non-employee directors, effective as of the date of our 2021 annual meeting and, for board members serving on the information and technology security committee, the annual fees for the information and technology security committee. Each such award of RSUs will vest as to 100% of the award on the last date of the calendar year in which the date of grant of the award occurs, in each case, subject to the non-employee director's continued service with us through the applicable vesting date.
Initial Award. Subject to the limits in the 2018 Plan, each person who first becomes a non-employee director is expected to receive an initial award of RSUs, orwhich we refer to as the initial award, covering a number of shares of our common stock having a value (determined in accordance with the outside director compensation policy) equal to $120,000 (or a lesser amount determined by our board of directors in its sole discretion before the grant date), which grant is expected to be effective on the first trading date on which such person first becomes a non-employee director, whether through election by theour stockholders of the Company or appointment by the board of directors to fill a vacancy; provided, however, that the number of shares covered by an initial award will be rounded down to the nearest whole share. Each initial award is expected to vest one-third on each of the first three anniversaries of the date the initial award is granted, in each case, subject to the non-employee director continuing to be a service provider through the applicable vesting date.
Annual Award. Subject to the limits in the 2018 Plan, each non-employee director is expected to automatically receive,receives, on the date of each annual meeting of the Company'sour stockholders, an annual award of RSUs, each of which we refer to as an annual award, covering a number of shares of our common stock having a value (determined in accordance with the outside director compensation policy) of $40,000,$80,000, rounded down to the nearest whole share;share under our outside director compensation policy; provided that, for any annual award scheduled to be granted on the date of an annual meeting, any non-employee director who is not continuing as a director following the applicable annual meeting will not receive an annual award with respect to such annual meeting. Each annual award will vest on the earlier of (i) the one-year anniversary of the date the annual award is granted or (ii) the day prior to the date of the next annual meeting following the date the annual award is granted, in each case, subject to the non-employee director continuing to be a service provider through the applicable vesting date.
Under our outside director compensation policy, no non-employee directors may be paid, issued or granted, in any fiscal year, cash compensation with an aggregate value greater than $150,000 and equity compensation with an aggregate value greater than $300,000 (with the value of each award determined in accordance with the outside director compensation policy). Any cash compensation paid or equity awards granted to an individual for his or her services as an employee, or for his or her services as a consultant (other than as a non-employee director), will not count against this limitation.
We have a practice of reimbursing directors for travel, lodging and other reasonable expenses incurred in connection with their attendance at board or committee meetings. We encourage directors to participate in continuing education pertinent to their service on our board, and we reimburse directors for such expenses up to an annual limit of $2,000.
In addition, our non-employee directors are subject to equity ownership guidelines described above under "— Stakeholder Engagement and Governance Practices." As of December 31, 2021, all of our non-employee directors and executive officers had met or were on track to comply with these equity ownership guidelines described inwithin the “Environmental, Social, and Governance Considerations-Governance Practices.”
applicable time period.
Director Compensation for Fiscal Year 20192021
The following table sets forth information concerning the compensation paid or accrued for services rendered to us by non-employee members of the board of directors for the year ended December 31, 2019.2021. Mr. Keeney, our president, chief executive officer and director, did not receive any additional compensation for his service as a director. Compensation paid or accrued for services rendered to us by Mr. Keeney in his role as chief executive officer is set forth in the section titled “Executive Compensation.”
| | Name | Fees Earned or Paid in Cash($)(1) | Stock Awards($) (2) | All Other Compensation($) | Total ($) | Name | Fees Earned or Paid in Cash($)(1) | Stock Awards($) (2) | | Total ($) |
Bandel Carano | 16,397 |
| | 40,000 |
| | — |
| | 56,397 |
| Bandel Carano | 24,356 | | (3) | 80,000 | | | | 104,356 | |
Douglas Carlisle | 18,000 |
| (3) | 40,000 |
| | — |
| | 58,000 |
| Douglas Carlisle | 26,356 | | (3) | 80,000 | | | | 106,356 | |
Bill Gossman | 19,000 |
| (3) | 40,000 |
| | | | 59,000 |
| Bill Gossman | 25,356 | | (3) | 80,000 | | | | 105,356 | |
Raymond Link | 26,500 |
| | 40,000 |
| | — |
| | 66,500 |
| Raymond Link | 34,856 | | (4) | 80,000 | | | | 114,856 | |
Gary Locke | 17,000 |
| (3) | 40,000 |
| | — |
| | 57,000 |
| Gary Locke | 25,356 | | (3) | 80,000 | | | | 105,356 | |
Geoffrey Moore | 20,000 |
| (3) | 40,000 |
| | — |
| | 60,000 |
| Geoffrey Moore | 30,356 | | (3) | 80,000 | | | | 110,356 | |
David Osborne (4)
| 6,552 |
| | — |
| | — |
| | 6,552 |
| |
Camille Nichols | | Camille Nichols | 24,356 | | (3) | 80,000 | | | | 104,356 | |
| |
(1)(1) Amounts reported represent the aggregate annual board, lead independent director, committee chairperson and committee membership retainers earned by each non-employee director in 2021, and reflect the changes to our outside director compensation policy adopted effective on April 1, 2021.
(2) The amounts reported represent the aggregate grant-date fair value of awards of RSUs granted to the director in 2021, calculated in accordance with FASB ASC Topic 718. The grant date fair value of time-based RSUs is determined using the fair value of our common stock on the date of the grant. (3) Represents RSUs received in lieu of cash. These RSUs became fully vested on December 31, 2021. (4) The amount reported includes RSUs valued at $8,356 received in lieu of cash. These RSUs became fully vested on December 31, 2021.
| Amounts reported represent the aggregate annual board, lead independent director, committee chairman and committee membership retainers earned by each non-management director in 2019. |
| |
(2)
| The amounts reported represent the aggregate grant-date fair value of awards of restricted stock units (“RSUs”) granted to the director in 2019, calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant-date fair value of the RSUs reported in this column are set forth in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K, filed with the SEC on March 9, 2020.
|
| |
(3)
| Represents RSUs received in lieu of cash. These RSUs became fully vested on December 31, 2019. |
| |
(4)
| Mr. Osborne served as a director until June 7, 2019. |
The table below shows the aggregate number of shares subject to stock options and RSUs outstanding for each of our non-employee directors as of December 31, 2019:2021:
| | | | | | | | |
Name | Shares Subject to Options | Restricted Stock Units |
Bandel Carano | — | | 2,861 |
Douglas Carlisle | — | | 2,861 |
Bill Gossman | 72,313 | 2,861 |
Raymond Link | 15,250 | 2,861 |
Gary Locke | 69,725 | 2,861 |
Geoffrey Moore | 77,590 | 2,861 |
Camille Nichols | — | | 6,032 |
|
| | | |
Name | Shares Subject to Options |
| Restricted Stock Units |
Bandel Carano | — |
| 2,095 |
Douglas Carlisle | — |
| 2,095 |
Bill Gossman | 72,313 |
| 2,095 |
Raymond Link | 26,700 |
| 2,095 |
Gary Locke | 69,725 |
| 2,095 |
Geoffrey Moore | 77,590 |
| 2,095 |
|
| | | | | | | | | | | | | |
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Our board of directors is currently comprised of seveneight members. In accordance with our certificate of incorporation, our board of directors is divided into three staggered classes of directors. At the Annual Meeting, threetwo Class III directors will be elected for three-year terms to succeed the same class whose term is then expiring.
Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company.
Nominees
Our nominating and corporate governance committee has recommended, and our board of directors has approved, each of Bandel Carano, Raymond Link,Scott Keeney and Geoffrey MooreCamille Nichols as nominees for election as Class III directors at the Annual Meeting. If elected, each of Messrs. Carano, Link,Mr. Keeney and MooreMajor General Nichols will serve as a Class III director until our 20232025 annual meeting of stockholders and until his or her successor is duly elected and qualified. Each nominee is currently a director of our company. For information concerning each nominee, please see the section titled “Board of Directors and Corporate Governance.”
If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with respect to the voting of directors, your shares will be voted “FOR” the election of Messrs. Carano, LinkMr. Keeney and Moore.Major General Nichols. We expect that each director nominee will accept such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee designated by our board of directors to fill such vacancy. If you are a street name stockholder and you do not give voting instructions to your broker or nominee, your broker will leave your shares unvoted on this matter.
Vote Required
The election of directors requires a plurality vote of the shares of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon to be approved. Broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH OF THE NOMINEES NAMED ABOVE.
|
| | | | | | | | | | | | | |
PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Our audit committee has appointed KPMG, LLP (“KPMG”), independent registered public accountants, to audit our consolidated financial statements for our fiscal year ending December 31, 2020.2022. During our fiscal year ended December 31, 2019,2021, KPMG served as our independent registered public accounting firm.
Notwithstanding the appointment of KPMG and even if our stockholders ratify the appointment, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our audit committee believes that such a change would be in the best interests of our company and our stockholders. At the Annual Meeting, our stockholders are being asked to ratify the appointment of KPMG as our independent registered public accounting firm for our fiscal year ending December 31, 2020.2022. Our audit committee is submitting the appointment of KPMG to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of KPMG will attend the Annual Meeting, and they will have an opportunity to make a statement and will be available to respond to appropriate questions from our stockholders.
If our stockholders do not ratify the appointment of KPMG, our audit committee may reconsider the appointment.
Fees Paid to the Independent Registered Public Accounting Firm
The following table presents fees for professional audit services and other services rendered to our company by KPMG for the fiscal years ended December 31, 20192021 and 20182020 (in thousands):
|
| | | | | | |
| 2019 | 2018 |
Audit fees(1) | $ | 805 |
| $ | 877 |
|
Audit-related fees(2) | 17 |
| 32 |
|
Tax fees(3) | 73 |
| 265 |
|
All other fees(4) | 2 |
| 2 |
|
Total fees | $ | 897 |
| $ | 1,176 |
|
| | | | | | | | |
| 2021 | 2020 |
Audit fees(1) | $ | 1,389 | | $ | 1,412 | |
Audit-related fees | — | | — | |
| | |
Tax fees | — | | — | |
All other fees(2) | 2 | | 2 | |
Total fees | $ | 1,391 | | $ | 1,414 | |
| |
(1)Audit fees consist of fees billed for professional services provided in connection with the audit of our annual consolidated financial statements, the effectiveness of our internal controls over financial reporting, and the review of our quarterly consolidated financial statements included in our quarterly reports for fiscal years 2021 and 2020. Audit fees also include services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. (2) All other fees include any fees billed that are not audit or audit-related. In 2021 and 2020, these fees related to accounting research software.
(1)
| Audit fees consist of fees for professional services provided in connection with the audit of our annual consolidated financial statements, review of our quarterly consolidated financial statements and our public offerings. |
| |
(2)
| Audit-related fees in 2019 and 2018 consist of professional services related to the implementation of procedures required under the Sarbanes-Oxley Act of 2002 and new accounting standards, respectively. |
| |
(3)
| Tax fees consist of fees for professional services for tax compliance, tax advice and tax planning. |
| |
(4)
| All other fees include any fees billed that are not audit or audit-related. In 2019 and 2018, these fees related to accounting research software. |
Auditor Independence
Pursuant to its charter and the policy described further below, our audit committee pre-approves audit and non-audit services rendered by our independent registered public accounting firm, KPMG. Our audit committee has determined that the rendering of non-audit services for tax compliance is compatible with maintaining the independence of KPMG.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The charter of the audit committee provides for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, KPMG. The chairperson of the audit committee, or a member of the audit committee delegated by the chairperson of the audit committee, may pre-approve all audit and permissible non-audit and tax services that may be provided by our independent registered public accounting firm, as long as this pre-approval is reported to the full audit committee at its scheduled meetings.
Vote Required
The ratification of the appointment of KPMG as our independent registered public accounting firm requires the affirmative vote of a majority of the voting power of the shares of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions will have the effect of a vote AGAINST thethis proposal and broker non-votes will have no effect.effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP.
|
| | | | | | | | | | | | | |
REPORT OF THE AUDIT COMMITTEE |
The audit committee is responsible for overseeing our accounting and financial reporting processes and internal control systems, the appointment, compensation, retention and oversight of KPMG, our independent registered public accounting firm, and audits of our financial statements, all pursuant to the audit committee’s written charter. KPMG reports directly to the audit committee. The audit committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the audit committee deems necessary to carry out its duties.
With respect to the company’s financial reporting process, the management of the company is responsible for (1) establishing and maintaining internal controls and (2) preparing the company’s consolidated financial statements. KPMG is responsible for auditing these financial statements. It is the responsibility of the audit committee to oversee these activities. It is not the responsibility of the audit committee to prepare the company’s financial statements. These are the fundamental responsibilities of management. In the performance of its oversight function, the audit committee has:
•reviewed and discussed the audited financial statements with management;
•discussed with KPMG the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the "PCAOB") and the SEC; and
•received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding KPMG’s communications with the audit committee concerning independence, and has discussed with KPMG the independence of KPMG.
Based on the audit committee’s review and discussions with management and KPMG, the audit committee recommended to the board of directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20192021, for filing with the Securities and Exchange Commission.SEC.
Respectfully submitted by the members of the audit committee of the board of directors:
Raymond Link (Chair)(chairperson)
Douglas Carlisle
Geoffrey Moore
This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (“Securities Act”), or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
| | | | | | | | | | | | | | |
PROPOSAL NO. 3 ADVISORYVOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS |
As required by Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to cast a non-binding advisory vote to approve the compensation of our named executive officers as described in this proxy statement. This proposal gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation program.
Advisory Non-Binding Vote on Compensation of Named Executive Officers
We believe that our compensation philosophy and program, as described below in the “Compensation Discussion and Analysis” section of this proxy statement, are effective in achieving our goals, and that the executive compensation reported in this proxy statement is appropriate, competitive, and aligned with our results. The compensation program for our named executive officers is focused on pay-for-performance principles. The program is designed to attract, motivate, and retain executive officers in a competitive market for executive talent, reward them with more than base salary if and to the extent we achieve challenging financial performance goals, and align the executive officers’ interests with the interests of our stockholders to create long-term value, while at the same time avoiding the encouragement of excessive risk-taking.
For a more detailed discussion of our compensation philosophy, objectives, principles, and programs, we strongly encourage our stockholders to review this proxy statement, and in particular the information contained in “Executive Compensation—Compensation Discussion and Analysis” and in the compensation tables and narrative that follow it in the “Executive Compensation” section of this proxy statement.
The vote on executive compensation is not intended to address any specific element of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies and practices described in this proxy statement.
Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to our named executive officers and will not be binding on us, our compensation committee, or our board of directors. Although the vote is non-binding, our compensation committee and our board of directors value the opinions of our stockholders and will consider the outcome of the vote in making future compensation decisions.
Vote Required
Approval of the compensation of our named executive officers requires the affirmative vote of a majority of the voting power of the shares of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions will have the effect of a vote AGAINST this proposal and broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
The following table identifies certain information about our executive officers as of April 21, 2020.28, 2022. Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
|
| | | | | | | |
Name | Age | Position |
Scott Keeney | 5557 | President, Chief Executive Officer and Chairman of the Board |
Ran BareketJoseph Corso | 5341 | Chief Financial Officer |
Robert Martinsen | 58 | Chief Technology Officer |
Scott Keeney. See “Board of Directors and Corporate Governance – —Continuing Directors” for Mr. Keeney’s biographical information.
Ran Bareket
Joseph Corso has served as our chief financial officer since January 2018. Previously, from July 2015 to January 2018,March 2022. Mr. Bareket served as corporate vice president and chief financial officer for Orbotech Ltd., a publicly-traded company. Prior to that, he served as vice president, finance and operations for the printed circuit boards division of Orbotech from July 2014 to June 2015. Before joining Orbotech, Mr. Bareket served as vice president and chief financial officer of IVC Industries, Inc., a manufacturer of nutritional supplements and non-pharmaceutical drug products from January 2012 to June 2014. From January 2000 to December 2011, he held various finance positions at Kulicke & Soffa Industries, Inc., a global designer and manufacturer of semiconductor, LED and electronic assembly equipment, including corporate vice president and principal accounting officer. Mr. Bareket is a Certified Public Accountant. Mr. Bareket received a B.A. in accounting and management from the Tel Aviv Management College and an M.B.A from Pennsylvania State University.
Robert Martinsen hasCorso previously served as our chief technology officer since September 2013. Previously,Vice President of Corporate Development and Investor Relations from October 2004August 2020 to September 2013, Mr. Martinsen served as our vice president, product engineering.February 2022. Prior to joining us, from February 2002 to September 2004, Mr. MartinsenCorso served as director, product development for the semiconductor business unit of Coherent, Inc.in various roles at Stifel Financial Corp., a publicly-traded laser company. Prior to that, he served as director, product design at Novalux LED Ltd., a laser systems company,full-service investment banking and global wealth management firm, from July 20002010 to February 2002.August 2020, most recently as Global Co-Head of Electronics and Industrial Technology. From May 2004 through July 2010, Mr. Martinsen receivedCorso worked at Thomas Weisel Partners, which was acquired by Stifel in 2010, in a B.E.variety of roles. Mr. Corso holds a B.A. in marine engineeringEconomics from the State UniversitySwarthmore College.
Processes
Compensation Discussion and ProceduresAnalysis
This compensation discussion and analysis describes our compensation philosophy, objectives, and program structure for Compensation Decisionsour named executive officers listed below. These were our only executive officers during 2021:
The formal evaluation of the
•Scott Keeney, our chief executive officer, and
•Ran Bareket, our former chief financial officer.
2021 Business Highlights
During 2021, we delivered strong financial and operational performance and continued to execute on our strategy in spite of the unprecedented challenges created by the COVID-19 global pandemic:
•generated revenue of $270.1 million, an increase of 21% over 2020;
•executed on strategy to grow sales outside of China; non-China revenue grew 41% in 2021;
•grew Microfabrication revenue by 36% in 2021;
•reported our fifth consecutive year of growth in our Aerospace & Defense business;
•increased our Products gross margin to 36%, which was approximately 500 basis points higher than our Products gross margin in 2020;
•increased our adjusted EBITDA(1) to $22.6 million, an increase of 24% over 2020;
•released multiple new products for the cutting, welding and additive manufacturing markets;
•achieved important technical milestones in high-power directed energy laser programs;
•acquired the assets of plasmo Industrietechnik GmbH to expand quality assurance and process monitoring capabilities;
•invested in automation-related capital expenditures to increase advanced manufacturing capabilities in the U.S.; and
•ended the year with $147 million of cash.
______________________
(1) Adjusted EBITDA is a non-GAAP measure. Please refer to Appendix A for a reconciliation of net loss to adjusted EBITDA.
Following our 2021 annual meeting and continuing into 2022, we engaged in discussions with various stockholders to solicit feedback on matters of corporate governance and executive compensation, among other topics. See “—Stakeholder Engagement and Governance Practices” above.
2021 Executive Compensation Highlights
Our 2021 executive compensation program reflected our ongoing transition from a late-stage private company to a publicly traded company as we continued to emphasize long-term equity compensation as the most significant component of each named executive officer’s compensation.
The following key compensation actions were taken with respect to our named executive officers is madefor 2021:
•Limited increase to target cash compensation – We increased the base salary of each of our named executive officers as of July 2021 by 3.8%, in line with average increases of other salaried employees in the contextsame region, and following a year with no base salary increase. We did not make any changes to the percentage target annual bonus opportunities of annualour named executive officers.
•Semi-annual cash bonus plan – We designed our 2021 semi-annual cash bonus plan to focus on key performance measures, setting rigorous stretch financial, operational and strategic objectives that were achievable only through focused leadership efforts by our executive team. Bonus achievement was approved at 110% for 1H 2021 and 75% for 2H 2021, against aggregate stretch targets of 150%.
•Long-term equity awards – We granted equity awards to our named executive officers with a mix of two-thirds time-vested restricted stock awards (“RSAs") and one-third performance-based RSAs.
Executive Compensation Philosophy
Our executive compensation review byprogram is designed to achieve the following three primary objectives:
•Attract, retain and motivate highly skilled individuals based upon their contribution to the success of our company, and that of our stockholders;
•Drive outstanding achievement of business objectives and reinforce our strong pay-for-performance culture; and
•Align our named executive officers’ interests with the long-term interests of our stockholders with a focus on performance that drives value creation for our stockholders.
The compensation committee of our board of directors oversees our executive compensation program and seeks to provide compensation opportunities for our executive officers in a manner consistent with our business strategy, competitive market practice, sound corporate governance principles and stockholder interests. The core principle of our executive compensation philosophy is to pay-for-performance.
Our compensation philosophy in 2021 continued to have a focus on pay-for-performance. We closely aligned the compensation committee, which may include appropriate input from other members of the board of directors. The chief executive officer’s compensation is recommended by the compensation committee for approval by the full board of directors. The compensation committee’s evaluation is based on objective criteria, including performance of the individual, performance of the business, and accomplishment of long-term strategic objectives and annual operating plan performance in
accordance with the principles and criteria established by the compensation committee. The evaluation of the compensation ofpaid to our named executive officers other than thewith achievement of both near-term and long-term financial, operational and strategic objectives. In 2021, our chief executive officer is done in consultation withreceived approximately 7% of his total target compensation from base pay. We structured our compensation mix such that approximately 93% of the target total direct compensation awarded to our chief executive officer.officer was in the form of equity awards and variable cash incentives. The allocation of shares in our equity awards was approximately two-thirds time-based and one-third performance-based to reward long-term performance consistent with retention incentives. The graphic below reflects the general allocation of the core elements of chief executive officer compensation for 2021, with performance-based equity valued based on target shares at the fair market value on the date of the award.
Corporate Governance Practices
What We Do
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Independent Compensation Committee and Compensation Consultant. The compensation committee iscomprised solely of independent directors. Additionally, the compensation committee’s independent compensation consultant, Aon's Human Capital Solutions, formerly known as Radford, is retained directly by the compensation committee.
Risk Analysis. Compensation programs arestructured to avoid inappropriate risk taking by our executives and all employees by having the appropriate pay philosophy to support reasonable business objectives.
Incentive Award Opportunities Capped. We limitour performance-based cash incentive awards to 150% of the target, and we limit our performance-based equity incentive awards to 180-200% of the target.
Pay-for-Performance. The majorityof executive officer compensation is directly linked to achievement of financial, operational and/or strategic objectives with both cash incentives and performance-based equity being earned based upon achievement of pre-established goals. | | Double-Trigger Change in Control Provisions. All equity awards granted to senior executives since our initial public offering in 2018 are subject to "double-trigger" provisions under our change in control agreements, and the level of severance thereunder is reasonable and comparable to market-competitive levels.
Annual Executive Compensation Review. The compensation committee conducts anannual review of our executive compensation program, including a review and determination of our compensation peer group used for comparative purposes and other factors.
Strict Equity Ownership Guidelines. We have adoptedstrict equity ownership guidelines for our executive officers and directors.
Robust Clawback Policy. The compensation committeehas adopted a compensation recoupment policy that allows us to recover certain incentive-based compensation payable to an executive officer if we are required to prepare an accounting restatement due to our material noncompliance, as a result of an executive officer’s misconduct or grossly negligent conduct, with any financial reporting requirement under applicable securities laws. |
What We Don't Do
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No Special Perquisites. We did not provide, nor do we have any plans to provide, anyspecial benefits or perquisites to our named executive officers in 2021.
No Hedging or Pledging. Our insider trading policy strictly prohibits our directors and executive officers from purchasing options on our securities, pledging our stock in a margin account or otherwise entering into transactions designed to hedge or offset any decrease in the market value of our stock.
No Guarantees of Employment. We do not have any employment contracts with any of our executive officers that guarantee a term of employment, contain extraordinary severance provisions or guarantee salary increases or bonus amounts. | | No Special Retirement or Health and Welfare Benefit Plans. We do not offer, nor do we have plans to offer, supplemental pensionarrangements, defined benefit retirement plans, nonqualified deferred compensation plans, or any special health and welfare benefits programs to our executive officers that are different from or in addition to what is offered to our other employees.
No Dividends or Dividend Equivalents Payable on Unvested Equity Awards. We do not pay, nor do we have any plans to pay,dividends or dividend equivalents on unvested or unearned equity compensation awards. |
Compensation-Setting Process
The compensation committee is authorizedresponsible for determining our executive compensation philosophy, objectives, policies and programs and retains authority to determine all matters of compensation and benefits for our named executive officers. With respect to our named executive officers, the compensation committee reviews and approves their annual base salaries, cash bonus opportunities and cash bonus payments, long-term equity compensation and other compensation, if any.
Our chief executive officer provides input with respect to adjustments to annual base salaries, annual cash bonus opportunities, long-term equity incentive compensation opportunities, program structures and other compensation-related matters for our named executive officers (other than with respect to his own compensation). The compensation committee reviews and discusses these recommendations and proposals with our chief executive officer and uses them as one factor in determining and approving the compensation for our named executive officers.
The independent compensation consultant hired by the compensation committee, Aon's Human Capital Solutions, formerly known as Radford, is retained directly by the compensation committee. Aon works directly with the compensation committee, and not on behalf of our management, to provide advice and recommendations on competitive market practices and input on specific compensation decisions.
Peer Group
The compensation committee examines the compensation practices of a defined peer group of companies, supplemented by survey data using similar peer group parameters, to assess the competitiveness of the elements of our executive officer compensation programs. The compensation committee completed its annual review of our peer group, taking into consideration the perspectives of outside investors and governance advisory groups, and after consulting with Aon. Based on this review, and the recommendation that we broaden our peer group, eight new companies were added to the peer group for 2021 and Hurco was removed. In selecting the specific companies, the compensation committee considered objective criteria, such as industry, market capitalization, revenues and headcount, as well as if the company considered us a peer. The revised peer group consisted of 18 companies for the purposes of evaluating the competitiveness of our executive officer compensation in 2021. Our peer group includes companies in related industries with market capitalization ranging from 0.3x to 3.5x our market capitalization and revenues ranging between 0.6x and 6.5x our annual revenues.
2021 Peer Group
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3D Systems | FormFactor | Onto Innovation |
Advanced Energy | Ichor | Photronics |
Axcelis Technologies | Impinj | Rogers Corporation |
Cohu | MACOM Technology Solutions | SiTime |
CTS Corporation | MaxLinear | Veeco Instruments |
FARO Technologies | Novanta | VPG |
The compensation committee used the competitive market data to inform its judgment about 2021 executive compensation decisions but did not benchmark or target compensation of any executive officer to a specific percentile.
Elements of Executive Compensation
Our executive compensation program emphasizes the following three primary components:
•base salary;
•performance-based cash incentives that will only be paid based on achievement of key semi-annual financial, operational and strategic objectives approved by the compensation committee; and
•long-term equity incentives that are issued in the form of both performance-based RSAs, for encouraging performance based on goals aligned with delivering value for our stockholders, and time-vested RSAs, for retention and reinforcing our ownership culture and alignment with stockholders.
In addition, our executive officers participate in a variety of benefit plans that are generally available to all U.S. employees.
The compensation committee takes a holistic view on setting pay to ensure the overall program is meeting the company’s objectives while providing the compensation committee with the flexibility to structure individual compensation packages that are market-competitive.
We focus on total target direct compensation, and factor in all aspects of pay, including base salary, performance-based cash incentives and time- and performance-based long-term equity incentives, to maintain an executive compensation program that is competitive. The compensation committee does not have a specific formula that is used between the elements of pay but applies its business judgment in providing compensation opportunities for our executives that promote the interests of our stockholders over both the near-term and long-term. To inform its judgment, the compensation committee examines peer group compensation practices, and with an understanding of those practices, seeks to create an appropriately leveraged, variable compensation program for our named executive officers that reinforces our pay-for-performance culture.
Base Salaries
Base salaries are designed to provide a level of fixed compensation, which allows us to attract and retain the serviceshighly skilled executives required to drive business results and stockholder value.
The compensation committee typically reviews base salaries for our executive officers annually during the second quarter. Adjustments are determined by the compensation committee based on a number of one or morefactors,
including the level of responsibility, expertise, and experience of the individual, internal equity, individual and company performance, competitive conditions in the industry, and base salaries for individuals in comparable positions at comparable companies, while taking into account the company’s cash flow considerations. The compensation committee also considers recommendations made by our chief executive officer regarding salary rate adjustments for his direct reports.
During 2021, the only change the compensation advisors, as it sees fit,committee made to the base salaries of our named executive officers was an increase in connectionline with the establishmentaverage increase for eligible salaried employees participating in the same U.S. annual review cycle. The salary change was effective June 27, 2021.
The table below summarizes for each of our named executive officers the annual base salary and salary increases for 2021:
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Named Executive Officer | Base Salary ($) 1H 2021 | Salary Increase | Base Salary ($) 2H 2021 |
Scott Keeney | 400,000 | 3.8% | 415,200 |
Ran Bareket | 260,000 | 3.8% | 270,000 |
Performance-Based Cash Incentive Plan
We provide a performance-based cash incentive opportunity through our semi-annual corporate bonus plan, which awards cash bonuses to our named executive officers and other employees based upon the achievement of corporate financial, operational and strategic objectives that are reviewed by our board of directors and approved by the compensation programscommittee. We determine these corporate objectives based upon our operating plans, drivers of our performance and long-term growth, and our financial and strategic objectives. We set targets that we believe are challenging but achievable through diligent efforts and leadership. We believe the semi-annual incentive structure, as opposed to an annual structure, allows us to more accurately set challenging goals and flexibility to adapt to changing sector dynamics.
Target Performance-Based Cash Incentive Opportunities
Each named executive officer was assigned a target semi-annual cash bonus opportunity, the amount of which was calculated as a percentage of his 2021 semi-annual base salary. There were no changes to the target cash bonus percentages of our named executive officers in 2021.
The following table shows the target bonus of each named executive officer:
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Named Executive Officer | 1H 2021 Target Bonus (as a % of Salary) | 1H 2021 Target Bonus ($)(1) | 2H 2021 Target Bonus (as a % of Salary) | 2H 2021 Target Bonus ($)(1) |
Scott Keeney | 100% | 184,615 | 100% | 222,985 |
Ran Bareket | 65% | 78,000 | 65% | 94,250 |
_________________
(1) Due to the timing of pay dates in 2021, 1H 2021 included 12 pay periods and 2H 2021 included 14 pay periods instead of the typical 13 pay periods per half year.
2021 Bonus Structure and Objectives
For 2021, the actual amount of the semi-annual cash bonuses for our named executive officers depended upon meeting corporate performance objectives as set forth below. Our 2021 bonus plan was designed to keep management focused on specific semi-annual corporate goals, and included specific operational, product, and business development corporate objectives. These corporate objectives are company-wide goals and are aligned with our long-term corporate strategy. We set semi-annual goals that were meant to be challenging, but achievable through diligent efforts and leadership during the performance period. We believe that these semi-annual goals encourage our management team to make business decisions that are aligned with the long-term interests of our stockholders. Each of our objectives is assigned a specific weight with a maximum aggregate bonus payout of 150% of the target opportunity. Measurement of achievement for each objective may result in zero, partial or full achievement. The corporate bonus plan for each half of 2021 was subject to a threshold level of adjusted EBITDA for any payout to be made.
For 2021, our key objectives were based on initiatives related policies. to:
•directed energy product launches, program management and business development activities;
•managing the business through transitions in China;
•new product introductions and business development activities in targeted industrial end-market applications;
•launching initial products for new markets;
•achieving targeted product performance of next generation semiconductor lasers;
•implementing enhanced security measures to protect our intellectual property;
•achieving targeted environmental, health and safety goals;
•achieving specific automation targets; and
•attracting, developing and retaining employees
The following is an illustration of the calculation of individual cash incentive payments for our named executive officers.
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% Achievement against Semi-Annual Company Objectives | x | Individual Target Bonus | = | Semi-Annual Bonus Plan Payout |
Following each half of 2021, the compensation committee evaluated our performance during such portion of the year to determine the actual achievement in relation to our financial, operational and strategic objectives.
The following table shows the level of achievement against the applicable performance objectives for each half of 2021:
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2021 Performance Objectives | 1H 2021 | 2H 2021 |
Target | Actual | Weight | Achievement | Target | Actual | Weight | Achievement |
Revenue (GAAP) | $126.0 | $130.5 | 10% | 10% | $145.0 | $139.7 | 5% | —% |
Total Gross Margin (GAAP) | 29.5% | 29.1% | 5% | 4% | N/A | N/A | N/A | N/A |
Product Gross Margin (GAAP) | N/A | N/A | N/A | N/A | 37.0% | 35.2% | 5% | —% |
Key Objectives | | | 135% | 96% | | | 140% | 75% |
Total | | | 150% | 110% | | | 150% | 75% |
In accordance with our 2021 bonus plan, we paid semi-annual bonuses to our named executive officers equal to 110% of each named executive officer’s first-half 2021 target bonus and 75% of each named executive officer’s second-half 2021 target bonus. The total aggregate bonus payments for 2021 are set forth in the "Summary Compensation Table" below.
Long-Term Equity Incentives
Our 2018 Plan authorizes us to grant different types of equity awards, including stock options, time-based RSAs or RSUs and performance-based RSAs or RSUs. Equity awards to our named executive officers are determined by the compensation committee in accordance with the 2018 Plan and our administrative guidelines. Equity compensation is used to reward performance and contributions to our company, as well as to promote retention.
The compensation committee believes that equity compensation is a key component of our pay-for-performance compensation philosophy and is an effective way to align compensation for named executive officers over a multi-year period directly with the interests of our stockholders by motivating and rewarding creation and preservation of stockholder value. Equity awards to our named executive officers are generally made on an annual basis, along with the annual equity awards made to other employees of our company. All annual grants are historically approved at a regularly scheduled meeting of the compensation committee under our guidelines for equity awards and vest during an open trading window under our insider trading policy. The compensation committee also considers and grants equity awards for special situations, such as promotions, from time to time.
2021 Annual Equity Awards
In 2021, the compensation committee issued annual equity awards in the form of a combination of time-vested and performance-based RSAs to our named executive officers, consistent with our historical practices. Time-vested RSAs, which make up two-thirds of the equity award value, were given because their value is directly impacted by all stock price changes and therefore tied directly to stockholder value. Performance-based RSAs were given to our named executive officers in 2021, constituting, at the targeted number of shares, a third of their annual equity awards. The vesting of performance-based RSAs is tied to achievement of multi-year financial and strategic objectives.
The size of the 2021 annual equity grants made to our named executive officers was determined in light of the compensation committee’s objective of providing total target direct compensation that is competitive with market practices. The time-based RSAs will vest annually in equal installments over a period of four years from the effective date, subject to the executive officer’s continued employment, and further subject to vesting acceleration as described in the “Potential Payments upon Termination or Change-In-Control” section below.
The performance-based RSAs awarded in 2021 will be earned based on achievement of performance conditions set forth below, during a two-year performance period ending June 30, 2023. The amount vested depends on how many of the awards are earned (between 0% and 180% of the target amount), as approved by the compensation committee based on achievement of these performance conditions. Any earned 2021 performance-based RSAs vest 50% after the measurement is determined, and 50% on the anniversary of the first vesting date, subject to such named executive officer’s continued service, and further subject to the vesting acceleration as described in the "Potential Payments upon Termination or Change In Control" section below. The two-year vesting pattern is used to promote retention.
The individual amounts for the 2021 annual equity awards to our named executive officers are set forth in the table below:
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Named Executive Officer | 2021 Annual Time-Based RSAs (#) | 2021 Annual Performance-Based RSAs (#)(1) |
Scott Keeney | 106,667 | 53,333 |
Ran Bareket | 40,000 | 20,000 |
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(1) Performance-based RSAs reflect the "target" number of shares that can be earned based on performance. Actual shares earned may vary from 0% to 180% of the "target" number.
The 2021 performance-based RSAs will be measured as of June 30, 2023, based on the performance conditions set forth below, with the achievement against those targets to be determined by the compensation committee. In addition to specific revenue and gross margin targets, these performance-based RSAs include targets related to attainment of key objectives. We believe that clear and well-understood objectives enable our named executive officers to make strategic decisions that create long-term value for stockholders. Our key objectives are focused primarily on product development, business development, technology innovation and operational activities that will help us achieve our long-term objectives. Each of our objectives is assigned a specific weight and may earn a scaled number of shares on partial or above-target achievement, with a maximum total RSAs earned of 180% of the target opportunity, including the revenue and gross margin targets.
Our key objectives are based on initiatives related to:
•directed energy product launches, program management and business development activities;
•securing key design wins and increasing market share with targeted customers in industrial end-markets;
•achieving targeted performance in specific semiconductor and fiber laser products;
•launching initial products for new markets;
•increasing automation;
•achieving key information technology objectives for global security and system enhancements;
•strengthening our supply chain; and
•improving our human capital.
The 2021 performance-based RSAs for our named executive officers will be measured based on the following performance conditions:
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Performance Measures | Weight | Minimum | Maximum |
Revenue (GAAP, excluding China)(1) | 40% | 0% | 80% |
Laser Products Segment Gross Margin (GAAP) | 20% | 0% | 20% |
Key Objectives | 40% | 0% | 80% |
Total | 100% | 0% | 180% |
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(1) Revenue goal measured based on total GAAP revenue, less certain exclusions, for the period July 1, 2022 through June 30, 2023. Measurement excludes from the calculation revenue from China sales and revenue from any acquisitions closed after July 1, 2021.
See the table entitled “Grants of Plan-Based Awards in Fiscal Year 2021” in this section of the proxy statement for additional information regarding these equity awards to our named executive officers in 2021.
Achievement of 2019 Performance-Based Award Goals for Performance Period Ended in 2021
Our performance-based RSAs awarded in May 2019 were measured as of June 30, 2021 and earned based on achievement of revenue and key objectives, as set forth below. Performance measures were initially approved in February 2020, with a range of potential achievement of 0% to 200%. Due to global uncertainties, the compensation committee retained Radford Associates, a unit of Aon Hewitt (“Radford”), a national compensation consultant,the discretion to provide it with information, recommendations and other advice relatingadjust the performance measures in response to executive compensation on an ongoing basis.market changes. The compensation committee engaged Radfordconfirmed the initially approved performance measures in March 2021 without making any adjustments or changes. The value of the performance-based RSAs awarded in 2019 were not included in the summary compensation table until 2021 when the performance measures were confirmed and fair value could be determined.
Ultimate achievement for these awards was based on two categories of performance measures, including a specific revenue target as set forth below and the achievement of key objectives. We believe performance measures including revenue and key objectives provided balanced incentives which create long-term value for our stockholders. Our key objectives were focused primarily on product development, business development, technology innovation and cost reductions.
Our key objectives included objectives related to:
•directed energy business development activities;
•securing key design wins, introducing new products, increasing market share with targeted customers and improving quality and service metrics in industrial end-markets;
•introducing new products and sustaining technology leadership in our semiconductor laser products;
•developing new markets;
•reducing product costs through cost reduction efforts and increasing automation; and
•enhancing information technology and human resources infrastructure to support long-term growth.
The achievement for our 2019 performance-based awards for our named executive officers was as follows (in millions of dollars, except for percentages):
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Performance Measures | Threshold | Goal | Actual | Min Payout | Max Payout | Achieved |
Revenue (GAAP)(1) | $220.0 | $250.0 | $257.9 | 0% | 80% | 55.8% |
Key objectives | | | | 0% | 120% | 120.0% |
Total | | | | 0% | 200% | 175.8% |
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(1) Revenue goal measured based on the 12 month trailing period ending June 30, 2021 GAAP revenue.
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Named Executive Officer | Target Performance-Based RSAs Scheduled to Begin Vesting in 2021 (#) | Number of Performance-Based RSAs Achieved (#) | % of Target Achievement |
Scott Keeney | 60,000 | 105,480 | 175.8% |
Ran Bareket | 26,667 | 46,881 | 175.8% |
Change of Control and Severance Benefits
Our change of control severance agreements with our named executive officers and certain of our other officers are described in this Proxy Statement under “Employment Arrangements.”
The compensation committee believes that these agreements protect the interests of our stockholders by providing a framework for avoiding the distraction and loss of key management personnel that may occur in connection with rumored or actual fundamental corporate changes. The uncertainty about the future status of employment among management that can arise in the face of a potential change of control could result in the untimely departure or distraction of key officers. Change of control severance agreements provide informationsupport to officers to remain with our company despite uncertainties while a change of control is under consideration or pending and the compensation committee believes that the potential benefits under these agreements are reasonable and generally comparable to competitive agreements offered by our peer companies to their senior executives. Except for outstanding equity awards granted prior to the effective date of executive employment agreements, which vest following a change of control, severance benefits are “double-trigger,” which means that they are provided to the executive only in the event that the executive is terminated, or the executive involuntarily experiences material changes in terms of employment, following a change of control. We do not provide for gross ups for excise taxes under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”).
Under our 2018 Plan, if a change in control occurs, performance-based equity awards will be deemed earned at the greater of target or actual results immediately prior to the change in control and, unless the awards are replaced, they will be settled immediately prior to the change in control.
Other Benefits and Perquisites
Our named executive officers participate in various employee benefit plans, including health, dental and vision care plans, life insurance and our 401(k) plan and stock purchase plans. These benefit plans are the same plans offered to our other employees.
Consideration of Shareholder Advisory Vote on Executive Compensation
At our 2021 Annual Meeting of Shareholders, we held our first non-binding advisory shareholder vote to approve compensation provided to our named executive officers. At this meeting, 80.3% of votes on this proposal voted for approval of the compensation provided to our named executive officers in 2020 as disclosed in the proxy solicitation for that meeting. Although this advisory vote is not binding on our Compensation Committee, the Committee considers this result in its review of the Company’s executive compensation programs and policies.
Equity Ownership Guidelines
We have equity ownership guidelines for our executive officers. The guidelines require our chief executive officer to hold shares equal in value to three times annual base salary. Other executive officers must hold shares equal in value to their annual salary. Executive officers have five years from November 1, 2019, when the guidelines were adopted, or from time they become executive officers, to meet the ownership guidelines. Shares counted for this purpose include issued shares owned by the executive officer or members of the executive officer’s immediate family members residing in the same household, shares owned jointly with, or separately by spouse and/or minor children, including shares held in trusts, limited partnerships, or similar entities for the sole benefit of the executive officer or his immediate family members residing in the same household.
As of December 31, 2021, each of the named executive officers was in compliance with our guidelines.
Compensation Recoupment Policy
In 2021, our board of directors adopted a compensation recoupment policy applicable to our executive officers. Pursuant to the compensation recoupment policy, if, as a result of an executive officer’s misconduct or grossly negligent conduct, we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under applicable securities laws, our board of directors (or a designated committee of members thereof) has the authority, to the extent permitted by applicable law, to require reimbursement or forfeiture to the company of the amount of any incentive compensation (whether cash- or equity-based) that such executive officer received during the three fiscal years preceding the year such restatement is determined to be required, to the extent that such incentive-based compensation exceeds what such officer would have received based on an appropriate groupapplicable restatement performance measure or target. In addition, we will reduce, cancel, or otherwise recoup incentive-based compensation from executive officers to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules, regulations and listing standards that may be issued thereunder.
Hedging and Pledging Prohibitions
We have an Insider Trading Policy, which, among other things, prohibits our employees, including officers, or directors from making short sales, engaging in transactions in publicly-traded options (such as puts and calls) and other derivative securities relating to our common stock, pledging any of peer companiesour securities as collateral for a loan and holding any of our securities in a margin account, whether such securities are granted as compensation or are held, directly or indirectly, by the employee or director. This prohibition extends to help us determineany hedging or similar transaction designed to decrease the appropriate levelrisks associated with holding our securities.
Deductibility of overallExecutive Compensation
Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our chief executive officer and certain other executive officers to $1 million per executive officer per year, subject to certain exceptions. Neither our compensation committee nor its authorized committee has adopted a policy that all equity or other compensation must be deductible.
When approving the amount and form of compensation for our executive officers, we generally consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m) of the Code, as well as assess each separate elementour need to maintain flexibility in compensating executive officers in a manner designed to promote our goals. Our compensation committee or its authorized subcommittee, as applicable, may, in its judgment, authorize compensation payments that will or may not be deductible when it believes that such payments are appropriate to attract, retain or motivate executive talent.
Taxation of compensation,Parachute Payments and Deferred Compensation
We do not provide, and have no obligation to provide, any of our named executive officers with a goal“gross-up” or other reimbursement payment for any tax liability he or she might owe because of providingthe application of Sections 280G, 4999 or 409A of the Code. If any of the payments or benefits provided for under the change of control and severance agreements or otherwise payable to a named executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax, he or she would receive either full payment of such payments and benefits or such lesser amount that would cause no portion of the payments and benefits being subject to the excise tax, whichever results in the greater after-tax benefits to our named executive officer.
Accounting for Stock-Based Compensation
Our compensation tocommittee considers accounting effects in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is ASC 718, the standard which governs the accounting treatment of stock-based compensation awards. ASC 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options and restricted stock-based awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may realize no value from their awards. ASC 718 also requires companies to recognize the compensation cost of their share-based payment awards in their income statements over the period that an executive officer is competitiverequired to render service in exchange for the option or other award.
Compensation Committee Report
The compensation committee has reviewed and fair.discussed the Compensation Discussion and Analysis provided above with management. Based on such review and discussions, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the year ended December 31, 2021, and this proxy statement.
Respectfully submitted by the members of the compensation committee of the board of directors*:
Geoffrey Moore (Chair)
Raymond Link
*Bill Gossman was appointed to the compensation committee in April 2022, and did not participate in the review and discussions described above.
This compensation committee report is required by the SEC and, in accordance with the SEC's rules, will not be deemed to be a part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed "soliciting material" or "filed" under either the Securities Act or the Exchange Act.
Summary Compensation Table
The following table sets forth information regarding the compensation of our named executive officers for the years ended December 31, 20192021, 2020 and 2018.2019. We refer to these persons as our “named executive officers” elsewhere in this proxy statement. The following table includes all compensation earned by the named executive officers for the respective periods, regardless of whether such amounts were actually paid during the period.
| | Name and Principal Position | Year | Salary($) | Bonus($)(1) | Stock Awards($)(2) | Option Awards($)(3) | Non-equity Incentive Plan Compensation($)(4) | All Other Compensation($)(5) | Total($) | Name and Principal Position | Year | Salary($) | Bonus($)(1) | Stock Awards($)(2), (3) | | Non-equity Incentive Plan Compensation($)(4) | All Other Compensation($)(5) | Total($) |
Scott Keeney | 2019 | 393,654 |
| 10,127 |
| 2,365,680 |
| �� |
| 342,462 |
| 774 |
| 3,112,697 |
| Scott Keeney | 2021 | 407,600 | | — | | 4,953,069 | | | 370,315 | | 10,081 | | 5,741,065 | |
President and Chief Executive Officer | 2018 | 350,277 |
| — |
| 2,229,000 |
| — |
| 214,583 |
| 414 |
| 2,794,274 |
| President and Chief Executive Officer | 2020 | 315,385 | | — | | 4,736,078 | | | 399,385 | | 5,697 | | 5,456,545 | |
| | | 2019 | 393,654 | | 10,127 | | 4,237,680 | | | 342,462 | | 774 | | 4,984,697 | |
Ran Bareket | 2019 | 255,769 |
| 75,000 |
| 1,618,934 |
| — |
| 139,615 |
| 414 |
| 2,089,732 |
| Ran Bareket | 2021 | 265,000 | | — | | 1,857,400 | | | 156,488 | | 7,744 | | 2,286,632 | |
Chief Financial Officer | 2018 | 247,115 |
| 60,000 |
| 1,114,500 |
| 1,040,000 |
| 115,625 |
| 51,394 |
| 2,628,634 |
| Chief Financial Officer | 2020 | 218,000 | | — | | 2,113,835 | | | 168,740 | | 5,814 | | 2,506,389 | |
Robert Martinsen | 2019 | 234,998 |
| — |
| 661,394 |
| — |
| 71,554 |
| 774 |
| 968,720 |
| |
Chief Technology Officer | 2018 | 225,423 |
| — |
| 928,750 |
| — |
| 61,447 |
| 774 |
| 1,216,394 |
| |
| | | 2019 | 255,769 | | 75,000 | | 2,450,944 | | | 139,615 | | 414 | | 2,921,742 | |
|
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(1)
| The amounts disclosed in this column represent the following: (1) a one-time discretionary bonus to Mr.Keeney, paid to him to compensate him for the delay of his annual base salary increase in 2019 as compared to the rest of the executive team, and (2) a signing bonus and incentive payment to Mr. Bareket for continued service as our Chief Financial Officer through June 2019 pursuant to the terms of his offer letter. Mr. Bareket became our Chief Financial Officer in January 2018.
|
| |
(2)
| (1) The amounts disclosed in this column represent the following: (1) a one-time discretionary bonus paid in 2019 to Mr. Keeney, and (2) a signing bonus and incentive payment to Mr. Bareket for continued service as our Chief Financial Officer through June 2019 pursuant to the terms of his offer letter. (2)The amounts reported in the Stock Awards column represent the aggregate grant date fair value of time-based restricted stock awards (“RSAs”) and performance-based RSAs granted under our 2018 Plan to each of our named executive officers calculated in accordance with FASB ASC Topic 718. For 2019, the amounts reported in the Stock Awards column also represent a modification expense we recognized in 2019 with respect to certain amendments to the performance goals for the 2018 performance-based RSAs. For a more detailed discussion of these amendments, see the table below entitled “Outstanding Equity Awards at December 31, 2019.” The grant date fair value of time-based RSAs and performance-based RSAs granted under our 2018 Plan to each of our named executive officers calculated in accordance with FASB ASC Topic 718. The grant date fair value of both time-based RSAs and performance-based RSAs is determined using the fair value of our common stock on the date of grant. The grant date fair value of performance-based RSAs also assumes 100% achievement of the performance measures for applicable performance period as of the date on which the performance-based RSAs are granted. These amounts do not necessarily correspond to the actual value recognized by our named executive officers. For a discussion of valuation assumptions, see the notes to our audited financial statements included in our Annual Report on Form 10-K. (3) In prior years, the performance-based RSAs approved for our named executive officers for 2020 and 2019 were not reflected in the Stock Awards column of the Summary Compensation Table because the performance goals for those awards had not been finalized as of December 31, 2020, and therefore the grant date fair values were not determined for financial accounting purposes. During 2021, performance goals for these awards were finalized and the grant date fair values were determined. Consequently, the value of Stock Awards for years 2020 and 2019 have been updated in the table above to include the grant date fair value of the 2020 and 2019 performance-based RSAs excluded in prior years. This change increased the disclosed value of 2020 Stock Awards and Total compensation for Scott Keeney and Ran Bareket by $1,913,400 and $850,411, respectively, which represents the grant date fair value of 60,000 and 26,667 performance-based RSA’s, respectively, and increased the disclosed value of 2019 Stock Awards and Total compensation for Scott Keeney and Ran Bareket by $1,872,000 and $832,010, respectively, which represents the grant date fair value of 60,000 and 26,667 performance-based RSA’s, respectively. If the grant date fair value of performance-based RSAs is calculated based on the fair value of our common stock on the date of grant and probable outcome of the performance measures for applicable performance period as of the date on which the performance-based RSAs are granted. This estimated fair value for performance-based RSAs is the same as the maximum value of performance-based RSAs set forth below. These amounts do not necessarily correspond to the actual value recognized by our named executive officers. For a discussion of valuation assumptions, see the notes to our audited financial statements included in our Annual Report on Form 10-K. The performance-based RSAs granted to our named executive officers in 2019 are not reflected in the Stock Awards column above because the performance goals for those awards have not been established as of December 31, 2019, and therefore there is no value for financial accounting purposes with respect to those awards in 2019. The value of these awards will be reflected in the Stock Award column in a future year proxy statement when the |
performance metrics are established for these awards. The target number of shares subject to each 2019 performance-based RSA granted to our named executive officers is: 60,000 (Mr. Keeney), 26,667 (Mr. Bareket),approved in 2020 and 16,667 (Mr. Martinsen).2019 were reflected in the table above for the year 2021, the year in which the performance goals were finalized, then Stock Awards for Scott Keeney and Ran Bareket in 2021 would be $8,738,469 and $3,539,821, respectively, and Total compensation in 2021 for Scott Keeney and Ran Bareket would be $9,526,466 and $3,969,052, respectively.
| |
(3)
| (4) The amounts disclosed in this column for each year represent bonuses earned and payable upon determination of achievement of corporate objectives, part of which were paid in the following year. For more information regarding bonuses paid in 2021, please see the “Performance-Based Cash Incentive Plan” section above. (5)The amounts disclosed in this column represent the aggregate grant date fair value of the award as calculated in accordance with FASB ASC Topic 718 using the Black-Scholes option pricing model without regard to estimated forfeitures. These amounts do not correspond to the actual value that may be recognized by the named executive officers upon vesting of the applicable awards. For a discussion of valuation assumptions, see the notes to our financial statements included in our Annual Report on Form 10-K. |
| |
(4)
| The amounts disclosed in this column for 2018 represent bonuses earned and payable upon the achievement of corporate objectives, part of which were paid in 2019. The amounts reported for 2019 represent bonuses earned and payable upon the achievement of corporate objectives, part of which were paid in 2020. For more information please see the section titled “Non-Equity Incentive Plan Compensation” below. |
| |
(5)
| These amounts disclosed in this column represent for each named executive officer, company-paid premiums for such named executive officer’s life insurance in 2019 and 2018. The amount disclosed for Mr. Bareket for 2018 represents $380 for Company-paid life insurance premiums, $38,731 of reimbursed moving expenses, and $12,283 for the tax gross-up of the reimbursed expenses. |
Non-Equity Incentive Plan Compensation
2019 Fiscal Year
Each of our named executive officers was awarded an annual cash bonus for 2019 based on attainment of corporate objectives for the first half and second half of 2019. Each of the first and second half 2019 target bonus amounts (expressed as a percentage of one half of the executive's base salary) for each named executive officer, company-paid 401(k) matching contributions and other key employees, along withlife insurance premiums for such named executive officer, and for Mr. Keeney, company-paid HSA matching contribution.
Grants of Plan-Based Awards in Fiscal Year 2021
The following table presents information regarding grants of plan-based awards during 2021 to our named executive officers. The non-equity incentive plan awards were granted under our 2021 Bonus Plan, as described in greater detail above. The equity awards were granted under our 2018 Plan. The vesting schedule for the related 2019 corporate objectives, were approved by ourawards is set forth below in the table “Outstanding Equity Awards at Fiscal Year Ended December 31, 2021.”
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Name | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | Grant date for Stock and Option Awards | All Other Stock Awards: Number of Shares of Stocks or Units | Grant Date Fair Value of Stock and Option Awards ($) |
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
Scott Keeney | — | | 407,600 | | 611,400 | | — | | 53,333 | | 95,999 | | 7/8/2021 | 106,667 | | 4,953,069 | |
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Ran Bareket | — | | 172,250 | | 258,375 | | — | | 20,000 | | 36,000 | | 7/8/2021 | 40,000 | 1,857,400 |
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CEO Pay Ratio Disclosure
Under the Dodd-Frank Act and Item 402 of Regulation S-K under the Securities Act, we are required to disclose the ratio of the annual total compensation committee of our boardmedian-compensated employee to the annual total compensation of directors for the first half and second half of 2019. Each of the first half and second half of 2019 corporate objectives were comprised of weighted goals with regard to sales, product and financial objectives.our CEO.
In August 2019 and January 2020, theorder to identify our median-compensated employee, we aggregated compensation committeefor all of our boardworld-wide employees as of directors assessedDecember 31, 2021, as follows: Annual base salary for regular salaried employees, or hourly rate multiplied by the achievement againstexpected annual work schedule for regular hourly employees, plus target annual bonus or commission. Components of compensation paid in foreign currency were converted to U.S. dollars based on currency exchange rates as of December 31, 2021. We then ranked this compensation measure for our employees and identified the applicable first half and second half 2019 corporate objectives, respectively, determined that 80% and 94% of the performance objectives had been achievedmedian employee. Our median-compensated employee on a worldwide basis is a Manufacturing Specialist in the first half and second halfUnited States. The compensation of 2019, respectively, and approved a bonus inour median employee does not include certain company-provided benefits such as health insurance, life insurance or employee stock purchase plan.
For 2021, the amount of 80% and 94% of the respective target bonus amountannual total compensation for the first and second half of 2019, respectively. The amounts inMr. Keeney, from the Summary Compensation Table underabove, was $5,741,065, and the column “Non-Equity Incentive Plan Compensation”annual total compensation for our median-compensated employee was $42,759, resulting in an estimated pay ratio of 134:1.
As noted above, Mr. Keeney's cash compensation for 2021 was $787,996. The Summary Compensation Table for 2021 includes annual grants of time-based equity compensation that will be earned over four years, and annual grants of variable performance-based equity awards that will be earned over three years and are based on attainment of certain performance criteria, valued at the bonuses awarded underfair value or stock price at the above-described bonus program.time of the grant.
2018 Fiscal YearThe pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Each
Outstanding Equity Awards at December 31, 2021
The following table presents information concerning equity awards held by our named executive officers was awarded an annual cash bonus for 2018 based on attainmentas of corporate objectives for the first half and second half of 2018. December 31, 2021.
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Name | Option Awards(1) | Stock Awards |
Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price($)(2) | Option Expiration Date | Number of Shares of Stock that Have Not Vested (#)
|
Market Value of Shares of Stock that Have Not Vested($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested(#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($)(4) |
Scott Keeney | 318,541 | | (5) | — | | | 0.75 | 02/26/2025 | 5,000 | | (10) | 119,750 | | 52,740 | | (14) | 1,263,123 | |
| 266,404 | | (6) | — | | | 0.75 | 06/27/2025 | 60,000 | | (11) | 1,437,000 | | 60,000 | | (15) | 1,437,000 | |
| 50,000 | | (7) | — | | | 1.10 | 07/01/2026 | 90,000 | | (12) | 2,155,500 | | 53,333 | | (16) | 1,277,325 | |
| 360,000 | | | 40,000 | | (8) | 1.45 | 06/02/2027 | 106,667 | | (13) | 2,554,675 | | | | |
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Ran Bareket (17) | 37,188 | | | 62,503 | | (9) | 9.70 | 02/17/2028 | 2,500 | (10) | 59,875 | 23,441 | (14) | 561,412 |
| | | | | | | 36,667 | (11) | 878,175 | 26,667 | (15) | 638,375 |
| | | | | | | 40,000 | (12) | 958,000 | 20,000 | (16) | 479,000 |
| | | | | | | 40,000 | | (13) | 958,000 | | | | |
(1)Each of the first and second half 2018 target bonus amounts (expressedoutstanding options to purchase shares of our common stock was granted pursuant to our 2001 Stock Option Plan, as amended.
(2)This column represents the fair market value of a percentageshare of one halfour common stock on the date of grant of the executive's base salary) foroption (including options granted pursuant to our February 2015 stock option exchange program), in each named executive officer and other key employees, along with the related 2018 corporate objectives, were approvedcase as determined by our compensation committee of our board of directors fordirectors.
(3)The market value of unvested shares is calculated by multiplying the first half and second halfnumber of 2018. Eachunvested shares by the closing market price of our common stock on the Nasdaq Global Select Market on December 31, 2021, the last trading day of the first half and second halfyear, which was $23.95 per share.
(4) Market value was calculated by multiplying the target number of 2018 corporate objectives were comprisedperformance shares by the closing market price of weighted goals with regardour common stock on the Nasdaq Global Select Market on December 31, 2021, the last trading day of the year, which was $23.95 per share.
(5) This option became fully vested on February 26, 2016.
(6) This option became fully vested on June 9, 2020.
(7) This option became fully vested on July 1, 2021.
(8) One-fifth of the shares subject to sales, product and financial objectives.
In Augustthe option vested on June 1, 2018, and one-twentieth of the remaining shares subject to the option vest in quarterly installments thereafter subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested.
(9) One-fifth of the shares subject to the option vested on January 4, 2019, and one-twentieth of the compensation committeeshares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our board2001 Stock Option Plan, 100% of directors assessedthe then outstanding shares subject to the option will become vested.
(10) Time-based RSAs that were granted in 2018. One-fourth of the RSAs vested on June 1, 2019, and one-fourth of the RSAs vest in yearly installments thereafter, subject to continued service with us through each such vesting date.
(11) Time-based RSAs that were granted in 2019. One-fourth of the RSAs vested on June 1, 2020, and one-fourth of the RSAs vest in yearly installments thereafter, subject to continued service with us through each such vesting date.
(12) Time-based RSAs that were granted in 2020. One-fourth of the RSAs vested on June 1, 2021, and one-fourth of the RSAs vest in yearly installments thereafter, subject to continued service with us through each such vesting date.
(13) Time-based RSAs that were granted in 2021 that have not vested as of December 31, 2021. One-fourth of the RSAs will vest on June 1, 2022, and one-fourth of the RSAs vest in yearly installments thereafter, subject to continued service with us through each such vesting date.
(14) Performance-based RSAs that were granted in 2019. Upon the achievement againstof the applicable first half and second half 2018 corporate objectives, respectively, determined that 125% andspecified performance conditions, 50% of the performance objectives had been achieved in the first half and second half of 2018, respectively, and approved a bonus in the amount of 125% andearned shares vested on August 16, 2021. The remaining 50% of the respective target bonus amount forearned shares will vest on August 16, 2022, subject to continued service to us through such date.
(15) Performance-based RSAs granted in 2020. Upon the firstachievement of the specified performance conditions, 50% of the earned shares will vest on August 17, 2022 and second halfthe remaining 50% of 2018, respectively. The amountsthe earned shares will vest on August 17, 2023, subject to continued service to us through such date.
(16) Performance-based RSAs granted in 2021. Upon the achievement of the specified performance conditions, 50% of the earned shares will vest on August 17, 2023 and the remaining 50% of the earned shares will vest on August 17, 2024, subject to continued service to us through such date.
(17) On January 18, 2022, in connection with Mr. Bareket's retirement and resignation, Mr. Bareket entered into a transition agreement which forfeited his equity awards which were scheduled to vest after June 30, 2022. Consequently, 37,504 unvested options and 140,109 restricted stock awards included in the Summary Compensationtable above were forfeited subsequent to December 31, 2021 on January 18, 2022.
Table under
Option Exercises and Stock Vested for Fiscal Year Ended December 31, 2021
The following table presents information concerning the column “Non-Equity Incentive Plan Compensation” areexercise of options during 2021 by our named executive officers, and the vesting of stock awards held by them during 2021 (with the reported value based on the bonuses awarded undermarket price on the above-described bonus program.applicable date and for exercised options, less the applicable exercise price).
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Name | Option Awards | Stock Awards |
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting |
Scott Keeney | 350,000 | | $ | 11,183,755 | | 141,741 | | $ | 3,862,435 | |
Ran Bareket | 32,500 | | $ | 851,393 | | 74,607 | | $ | 2,054,596 | |
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Employment Arrangements
Below is a summary of the employment arrangements for our named executive officers. Each of our named executive officers has executed our standard form of confidential information, invention assignment and arbitration agreement.
Scott Keeney
We entered into an employment agreement with Mr. Keeney in March 2018. The employment agreement does not have a specific term and provides that Mr. Keeney is an at-will employee. From July 1, 2018 through June 1, 2019, Mr. Keeney's annual base salary was $385,000, and his annual target bonus opportunity was 100% of his base salary, with opportunities for over-achievement of up to 150% of Mr. Keeney's annual base salary. Effective June 2, 2019, Mr. Keeney’s annual base salary increased to $400,000, and his annual target bonus opportunity remained at 100% of his base salary, with opportunities for over-achievement of up to 150% of Mr. Keeney's annual base salary. Effective April 19, 2020 through October 17, 2020, Mr. Keeney’s effective annual base salary is reduced to $200,000. In connection with this salary reduction, Mr. Keeney was granted 9,742 RSUs. One-third of the RSUs vest on each of June 30, 2020, September 30, 2020, and December 31, 2020, subject to Mr. Keeney’s continued service through each such vesting dateemployee
. Any 2020 bonus for Mr. Keeney will be based on his pre-April 19, 2020 annual base salary of $400,000.
Pursuant to the employment agreement with Mr. Keeney, if we terminate the employment of Mr. Keeney other than for death, “disability,” or “cause” (as such terms are defined in Mr. Keeney's employment agreement) outside of a change in control period (as defined below), and Mr. Keeney executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. Keeney will be entitled to (i) continuing payments of his base salary for a period of 12 months and (ii) premium payments to maintain group health insurance continuation benefits pursuant to “COBRA” for him and his respective dependents for up to 12 months, or taxable monthly payments of an equivalent amount for the same period. Mr. Keeney's then-outstanding equity awards will remain outstanding for three months or until the occurrence of a “change in control” (as defined in Mr. Keeney's employment agreement) (whichever is earlier) so that Mr. Keeney will be eligible to receive the vesting acceleration benefits described below to the extent applicable.
In addition, pursuant to the employment agreement with Mr. Keeney, if, within the period beginning three months prior to and ending 12 months following a “change in control” (as defined in Mr. Keeney's employment agreement) (such period referred to as the “change in control period”), the employment of Mr. Keeney is terminated other than for death, “disability,” or “cause” or Mr. Keeney resigns for “good reason” and Mr. Keeney executes a waiver and release of claims in our favor that becomes effective and irrevocable within
60 days following his termination, Mr. Keeney will be entitled to (i) a lump sum payment equal to 18 months of his base salary, (ii) premium payments to maintain group health insurance continuation benefits pursuant to “COBRA” for him and his respective dependents for up to 18 months, or taxable monthly payments of an equivalent amount for the same period, and (iii) 100% of the then-unvested shares subject to his outstanding equity awards will immediately become vested and exercisable (in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at
the greater of actual performance measured as of the date of termination or 100% of target levels, unless the applicable equity award agreement provides otherwise).
Pursuant to the employment agreement, in the event of a “change in control” (as defined in our 2001 Stock Option Plan), Mr. Keeney's outstanding equity awards granted prior to the effective date of his employment agreement will immediately become 100% vested and exercisable subject to him remaining a service provider with us through such date.
Ran Bareket
We entered into an employment agreement with Mr. Bareket in March 2018. The employment agreement does not have a specific term and provides that Mr. Bareket is an at-will employee. From July 1, 2018 through June 1, 2019, Mr. Bareket's annual base salary was $250,000. Effective June 2, 2019, Mr. Bareket's annual base salary increased to $260,000. Effective April 19, 2020 through October 17, 2020, Mr. Bareket’s effective annual base salary is reduced to $156,000. In connection with this salary reduction, Mr. Bareket was granted 5,066 RSUs. One-third
As of the RSUs vest on each of June 30, 2020, September 30, 2020, and December 31, 2020, subject to Mr. Bareket’s continued service through each such vesting date.
From July 1, 2018 through June 30, 2019, Mr. Bareket's annual target bonus opportunity was to 60% of his annual base salary, with opportunities for over-achievement of up to 90% of Mr. Bareket's annual base salary. Effective July 1, 2019, Mr. Bareket's annual target bonus opportunity increased to 65% of his annual base salary, with opportunities for over-achievement of up to 97.5% of Mr. Bareket's annual base salary. The 2019 bonus for Mr. Bareket reflected2021, the 60% rate as it applied up to June 30, 2019, and the new rate after that date. Any 2020 bonus for Mr. Bareket will be based on his pre-April 19, 2020 annual base salary of $260,000.
Mr. Bareket received a signing bonus of $60,000following employment terms were in January 2018 and a bonus of $75,000 in 2019 as a result of continued employment as our chief financial officer through June 2019.
effect. Pursuant to the employment agreement with Mr. Bareket, if we terminate the employment of Mr. Bareket other than for death, “disability,” or “cause” (as such terms are defined in Mr. Bareket's employment agreement) outside the change in control period (as defined below), and Mr. Bareket executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. Bareket will be entitled to (i) continuing payments of his base salary for a period of six months and (ii) premium payments to maintain group health insurance continuation benefits pursuant to “COBRA” for him and his respective dependents for up to six months, or taxable monthly payments of an equivalent amount for the same period. Mr. Bareket's then-outstanding equity awards will remain outstanding for three months or until the occurrence of a “change in control” (as defined in Mr. Bareket's employment agreement) (whichever is earlier) so that Mr. Bareket will be eligible to receive the vesting acceleration benefits described below to the extent applicable.
In addition, pursuant to the employment agreement with Mr. Bareket, if, within the period beginning three months prior to and ending 12 months following a “change in control” (as defined in Mr. Bareket's employment agreement) (such period referred to as the “change in control period”), the employment of Mr. Bareket is terminated other than for death, “disability,” or “cause” or Mr. Bareket resigns for “good reason” and Mr. Bareket executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. Bareket will be entitled to (i) a lump sum payment equal to 12 months of his base salary, (ii) premium payments to maintain group health insurance continuation
benefits pursuant to “COBRA” for him and his respective dependents for up to 12 months, or taxable monthly payments of an equivalent amount for the same period, and (iii) 100% of the then-unvested shares subject to his outstanding equity awards will immediately become vested and exercisable (in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at the greater of actual performance measured as of the date of termination or 100% of target levels, unless the applicable equity award agreement provides otherwise).
Pursuant to the employment agreement, in the event of a “change in control” (as defined in our 2001 Stock Option Plan), Mr. Bareket's outstanding equity awards granted prior to the effective date of his employment agreement will immediately become 100% vested and exercisable subject to him remaining a service provider with us.
Robert Martinsen
WeOn January 18, 2022, in connection with Mr. Bareket's retirement and resignation, we entered into an employmenta transition agreement and release with Mr. Martinsen inBareket that sets forth the terms of a transition period for Mr. Bareket and includes Mr. Bareket’s release of the company. Pursuant to this agreement, Mr. Bareket resigned from his
position as our chief financial officer, effective as of March 2018. The1, 2022. From March 2, 2022, through the last day of his employment agreement does not have a specific termon June 30, 2022, Mr. Bareket’s work schedule was reduced to 30 hours per week and provides that Mr. Martinsen is an at-will employee. From July 1, 2018 through June 1, 2019, Mr. Martinsen’shis annualized base salary was $231,000, and his annual target bonus opportunity was 35%reduced to $120,000. Until the last day of his annual base salary, with opportunities for over-achievement of upemployment, Mr. Bareket is eligible to 52.5% ofparticipate in our benefits and plans as an employee and continues to vest in his equity grants. Mr. Martinsen’s annual base salary. Effective July 1, 2019,Bareket is not eligible to participate in the Company’s 2022 bonus program or receive a compensation increase or any new equity grants. In addition, Mr. Martinsen's annual base salary increasedBareket forfeited his equity awards that were scheduled to $237,930, andvest after June 30, 2022.
If Mr. Martinsen's annual target bonus opportunity remained at 35%Bareket is terminated without cause during the period from March 2, 2022, until June 30, 2022, Mr. Bareket would be entitled to continued payment of his annual basereduced salary with opportunitiesthrough June 30, 2022, reimbursement for over-achievement of up to 52.5% of Mr. Martinsen's annual base salary. Effective April 19, 2020premium payments he makes for COBRA coverage through October 17, 2020, Mr. Martinsen’s effective annual base salary is reduced to $190,344. Inconnection with this salary reduction, Mr. Martinsen was granted 2,318 RSUs. One-thirdJune 30, 2022, and acceleration of the RSUs vest on eachvesting of equity awards that would have vested had Mr. Bareket remained employed through June 30, 2020, September 30, 2020, and December 31, 2020,2022, in each case, subject to Mr. Martinsen’s continued service through each such vesting date. Any 2020 bonus for Mr. Martinsen will be based on his pre-April 19, 2020 annual base salarythe terms and conditions of $237,930.the transition agreement.
PursuantIf Mr. Bareket continues to the employment agreement with Mr. Martinsen, if we terminate the employmentbe employed through June 30, 2022, or is terminated without cause earlier, satisfactorily completes of Mr. Martinsen other than for death, “disability,” or “cause” (as such terms are defined in Mr. Martinsen's employment agreement) outside the change in control period (as defined below),his transition duties and Mr. Martinsen executes a waiver andsupplemental release, of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. MartinsenBareket will be entitled to receive (i) continuing payments of his base salary for a period of six months and (ii) premium payments to maintain group health insurance continuation benefits pursuant to “COBRA” for him and his respective dependents for up to six months, or taxable monthly payments of an equivalent amount for the same period. Mr. Martinsen's then-outstanding equity awards will remain outstanding for three months or until the occurrence of a “change in control” (as defined in Mr. Martinsen's employment agreement) (whichever is earlier) so that Mr. Martinsen will be eligible to receive the vesting acceleration benefits described below to the extent applicable.
In addition, pursuant to the employment agreement with Mr. Martinsen, if, within the period beginning three months prior to and ending 12 months following a “change in control” (as defined in Mr. Martinsen's employment agreement) (such period referred to as the “change in control period”), the employment of Mr. Martinsen is terminated other than for death, “disability,” or “cause” or Mr. Martinsen resigns for “good reason” and Mr. Martinsen executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. Martinsen will be entitled to (i) a lump sumseverance payment equal to 12 months ofthe difference in salary between his prior base salary (ii) premium payments to maintain group health insurance continuation benefits pursuant to “COBRA”of $270,000 per year for himthe period of March 2, 2022 through June 30, 2022 and his respective dependentsactual salary paid for up to 12 months, or taxable monthly payments of an equivalent amount for the same period, and (iii) 100% of the
then-unvested shares subject to his outstanding equity awards will immediately become vested and exercisable (in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at the greater of actual performance measured as of the date of termination or 100% of target levels, unless the applicable equity award agreement provides otherwise).
Pursuant to the employment agreement, in the event of a “change in control” (as defined in our 2001 Plan), Mr. Martinsen's outstanding equity awards granted prior to the effective date of his employment agreement will immediately become 100% vested and exercisable subject to him remaining a service provider with us.
We do not provide, and have no obligation to provide, any of our named executive officers with a “gross-up” or other reimbursement payment for any tax liability he or she might owe because of the application of Sections 280G, 4999 or 409A of the Internal Revenue Code of 1986, as amended (the “Code”). If any of the payments or benefits provided for under the employment agreements described above or otherwise payable to a named executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax, he would receive either full payment of such payments and benefits or such lesser amount that would cause no portion of the payments and benefits being subject to the excise tax, whichever results in the greater after-tax benefits to our named executive officer.
Outstanding Equity Awards at December 31, 2019
The following table presents information concerning equity awards held by our named executive officers as of December 31, 2019.
|
| | | | | | | | | | | | | | | | | | |
| Option Awards(1) | Stock Awards |
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price($)(2) | Option Expiration Date | Number of Shares of Stock that Have Not Vested (#)
| |
Market Value of Shares of Stock that Have Not Vested($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested(#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($)(4) |
Scott Keeney | 392,945 |
| (6) | — |
| | 0.75 | 02/26/2025 | 15,000 |
| (15) | 304,200 |
| 48,000 |
| (17) | 973,440 |
|
| 60,000 |
| (9) | — |
| | 0.75 | 02/26/2025 | 120,000 |
| (16) | 2,433,600 |
| 60,000 |
| (18) | 1,216,800 |
|
| 95,000 |
| | 5,000 |
| (10) | 0.75 | 04/18/2025 | | | | | | |
| 450,000 |
| | 50,000 |
| (11) | 0.75 | 06/27/2025 | | | | | | |
| 32,500 |
| | 17,500 |
| (12) | 1.10 | 07/01/2026 | | | | | | |
| 200,000 |
| | 200,000 |
| (13) | 1.45 | 06/02/2027 | | | | | | |
| | | | | | | | |
|
| | |
|
|
Ran Bareket | 12,190 |
| | 162,501 |
| (14) | 9.70 | 02/17/2028 | 7,500 |
| (15) | 152,100 |
| 24,000 |
| (17) | 486,720 |
|
| | | | | | | 83,333 |
| (16) | 1,689,993 |
| 26,667 |
| (18) | 540,807 |
|
| | | | | | | | |
|
| | |
|
|
Robert Martinsen | 49,878 |
| (6) | — |
| | 0.75 | 02/26/2025 | 9,375 |
| (15) | 190,125 |
| 15,000 |
| (17) | 304,200 |
|
| 21,500 |
| (7) | — |
| | 0.75 | 02/26/2025 | 33,333 |
| (16) | 675,993 |
| 16,667 |
| (18) | 338,007 |
|
| 22,000 |
| (8) | — |
| | 0.75 | 02/26/2025 | | | | | | |
| 18,500 |
| (9) | — |
| | 0.75 | 02/26/2025 | | | | | | |
| 30,500 |
| (5) | — |
| | 0.75 | 04/18/2025 | | | | | | |
| 36,500 |
| | 2,000 |
| (10) | 0.75 | 04/18/2025 | | | | | | |
| 32,500 |
| | 4,000 |
| (11) | 0.75 | 06/27/2025 | | | | | | |
| 11,500 |
| | 7,000 |
| (12) | 1.10 | 07/01/2026 | | | | | | |
| 18,500 |
| | 20,000 |
| (13) | 1.45 | 06/02/2027 | | | | | | |
| |
(1)
| Each of the outstanding options to purchase shares of our common stock was granted pursuant to our 2001 Stock Option Plan, as amended. |
| |
(2)
| This column represents the fair market value of a share of our common stock on the date of grant of the option (including options granted pursuant to our February 2015 stock option exchange program), in each case as determined by our board of directors. |
| |
(3)
| The market value of unvested shares is calculated by multiplying the number of unvested shares by the closing market price of our common stock on the Nasdaq Stock Market on December 31, 2019, the last trading day of the year, which was $20.28 per share. |
| |
(4)
| Market value was calculated by multiplying the target number of performance shares by the closing market price of our common stock on the Nasdaq Stock Market on December 31, 2019, the last trading day of the year, which was $20.28 per share.
|
| |
(5)
| This option became fully vested on February 23, 2016. |
| |
(6)
| This option became fully vested on February 26, 2016. |
| |
(7)
| This option became fully vested on February 26, 2018. |
| |
(8)
| This option became fully vested on February 26, 2019. |
| |
(9)
| This option became fully vested on May 26, 2019. |
| |
(10)
| One-fifth of the shares subject to the option vested on March 6, 2016, and one-twentieth of the shares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(11)
| One-fifth of the shares subject to the option vested on June 9, 2016, and one-twentieth of the shares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(12)
| One-fifth of the shares subject to the option vested on July 1, 2017, and one-twentieth of the remaining shares subject to the option vest in quarterly installments thereafter subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(13)
| One-fifth of the shares subject to the option vested on June 1, 2018, and one-twentieth of the remaining shares subject to the option vest in quarterly installments thereafter subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(14)
| One-fifth of the shares subject to the option vested on January 4, 2019, and one-twentieth of the shares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Plan, 100% of the then outstanding shares subject to the option will become vested.
|
| |
(15)
| Time-based RSAs that were granted in 2018. One-fourth of the RSAs vested on June 1, 2019, and one-fourth of the RSAs vest in yearly installments thereafter, subject to continued service with us through each such vesting date. |
| |
(16)
| Time-based RSAs that were granted in 2019 that have not vested as of December 31, 2019. One-fourth of the RSAs will be vested on June 1, 2020, and one-fourth of the RSAs vest in yearly installments thereafter, subject to continued service with us through each such vesting date. |
| |
(17)
| Performance-based RSAs that were granted in 2018. Upon the achievement of certain revenue and gross margin targets or performance conditions, a number of shares equal to (a) 50% of the Target Shares multiplied by a payout multiple adjusted for the revenue performance conditions achieved, plus (b) 50% of the Target Shares multiplied by a payout multiple adjusted for the achievement of certain performance objectives, plus (c) 20% of the Target Shares for closing a significant acquisition by June 30, 2020. 50% of those earned shares (if any) vest on the later of (i) the date following June 30, 2020 that our compensation committee of the board approves the achievement of the performance conditions and (ii) August 17, 2020. The remaining 50% of the earned shares (if any) vest on the one-year anniversary of the date on which the initial 50% of the earned shares (if any) vest, subject to continued service to us through such date. |
| |
(18)
| Performance-based RSAs granted in 2019 (the “Target Shares”) for which the performance goals have not been established as of December 31, 2019. See the discussion above in “Summary Compensation Table”, footnote 2, for additional information.
|
Potential Payments upon Termination or Change-In-Control
Our named executive officers
The following tables provide information concerning the estimated payments and benefits that would be provided in the circumstances described above, assuming that the triggering event took place on December 31, 2021, the last day of our fiscal year. For purposes of valuing accelerated vesting, the values indicated in the tables below are eligiblecalculated, with respect to (1) RSAs, as $23.95 the closing price of a share of our common stock on December 31, 2021 (the last trading day of 2021), multiplied by the number of unvested shares subject to the RSAs as of December 31, 2021 that are being accelerated (and for performance-based RSAs, based on the severancetarget number of shares) and (2) options, as $23.95 the closing price of a share of our common stock on December 31, 2021 (the last trading day of 2021) less the per share exercise price of such options multiplied by the number of unvested shares subject to options as of December 31, 2021.
Payments under employment agreements, as of December 31, 2021:
No change in control benefits described– involuntary termination without cause
| | | | | | | | | |
| Scott Keeney | Ran Bareket | |
Base Salary ($) | 415,200 | | 135,000 | | |
| | | |
| | | |
Health Benefits ($) | 20,136 | | 13,302 | | |
| | | |
Total ($) | 435,336 | | 148,302 | | |
Change in “Executive Compensation—Employment Arrangements.”control - termination without cause or for good reason three months prior to or 12 months following change in control
Equity Ownership Guidelines | | | | | | | | | |
| Scott Keeney | Ran Bareket | |
Base Salary ($) | 622,800 | | 270,000 | | |
Stock Options ($)(1) | 900,000 | | 890,668 | | |
Stock Awards ($) | 10,244,373 | | 4,533,136 | | |
Health Benefits ($) | 30,204 | | 26,604 | | |
| | | |
Total ($) | 11,797,377 | | 5,720,408 | | |
_______________________
Our named executive officers are(1)The amount is the same as, and not in addition to, the amount set forth in the "Change in control - no termination" table below.
Change in control - no termination
| | | | | | | | | |
| Scott Keeney | Ran Bareket | |
| | | |
Stock Options ($) | 900,000 | | 890,668 | | |
| | | |
| | | |
| | | |
Total ($) | 900,000 | | 890,668 | | |
Payments under Mr. Bareket's transition agreement, as of January 18, 2022:
The following table provides information concerning the estimated severance payments that would be provided after termination, under Mr. Bareket's transition agreement, executed on January 18, 2022, assuming continued employment through June 30, 2022, subject to equity ownership guidelines described inmeeting the “Environmental, Socialterms and Governance Considerations-Governance Practices.”
Compensation Recoupment Policy
Our named executive officers are subject to the compensation recoupment policy described in the “Environmental, Social and Governance Considerations-Governance Practices.”
401(k) Plan
We maintain a tax-qualified retirement plan for the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees are provided an opportunity to save for retirement on a tax advantaged basis by electing to defer a portion of their compensation, within the limits prescribed by the Code, on pre-tax or after-tax (Roth) basis. The 401(k) plan permits us to make discretionary matching contributions to eligible participants, and we have made discretionary matching contributions in recent years. The 401(k) plan is intended to qualify under Sections 401(a) and 501(a)conditions of the Code. As a tax-qualified retirement plan, pre-tax contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and earnings on Roth contributions are not taxable when distributed from the 401(k) plan.agreement:
| | | | | | |
| Ran Bareket | |
| | |
Severance ($) | 49,726 | | |
| | |
| | |
| | |
Total ($) | 49,726 | | |
Securities Authorized for Issuance under Equity Compensation Plans
The following table summarizes our equity compensation plan information as of December 31, 2019.2021.
| | Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (2) | Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (2) |
Equity compensation plans approved by stockholders: | | Equity compensation plans approved by stockholders: | |
2001 Stock Option Plan | 4,239,394 |
| $1.54 | — |
| 2001 Stock Option Plan | 2,453,869 | | $1.61 | — | |
2018 Equity Incentive Plan | 2,865,460 |
| — |
| 2,624,215 |
| 2018 Equity Incentive Plan | 3,244,218 | | — | | 3,758,068 | |
2018 Employee Stock Purchase Plan | — |
| — |
| 1,508,961 |
| 2018 Employee Stock Purchase Plan | — | | — | | 2,918,211 | |
Equity compensation plans not approved by stockholders: | — |
| — |
| — |
| Equity compensation plans not approved by stockholders: | — | | — | | — | |
Total | 7,104,854 |
| | 4,133,176 |
| Total | 5,698,087 | | | 6,676,279 | |
The following table sets forth certain information with respect to the beneficial ownership of our capital stock as of March 31, 2020April 11, 2022 for:
Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules take into account shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable on or before the 60th day after March 31, 2020.April 11, 2022. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for each person or entity listed in the table is c/o nLIGHT, Inc., 5408 NE 88th Street, Vancouver,4637 NW 18th Avenue, Camas, Washington 98665.98607.
We have a formal, written policy that our executive officers, directors (including director nominees), holders of more than 5% of any class of our voting securities and any member of the immediate family of or any
entities affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the approval or, in the case of pending or ongoing related party transactions, ratification of our audit committee. For purposes of our policy, a related party transaction is a transaction, arrangement or relationship where we were, are or will be involved and in which a related party had, has or will have a direct or indirect material interest.
The audit committee of our board of directors has the primary responsibility for reviewing and approving transactions with related parties. Our audit committee charter provides that the audit committee shall review and approve any related party transactions. In reviewing proposed related party transactions, the audit committee will only approve or ratify related party transactions that are in, or not inconsistent with, the best interests of us and our stockholders.
We have entered into separate indemnification agreements with each of our directors and certain of our officers. For a description of these agreements, see the section titled “Certain Relationships and Related Party Transactions—Limitation ofLimitations on Director and Officer Liability and Indemnification.”
We have entered into employment arrangements with our executive officers that, among other things, provide for certain severance and change in control benefits. For a description of these arrangements, see the section titled “Executive Compensation—Employment Arrangements.”
Our certificate of incorporation and bylaws provide the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law. In addition, theour certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director and that if the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
As permitted by the Delaware General Corporation Law, we have entered into separate indemnification agreements with each of our directors and certain of our officers that require us, among other things, to indemnify them against certain liabilities which may arise by reason of their status as directors, officers or
certain other employees. We maintain insurance policies under which our directors and officers are insured, within the limits and subject to the limitations of those policies, against certain expenses in connection with the defense of, and certain liabilities that might be imposed as a result of, actions, suits or proceedings to which they are parties by reason of being or having been directors or officers. The coverage provided by these policies may apply whether or not we would have the power to indemnify such person against such liability under the provisions of the Delaware General Corporation Law.
We believe that these provisions and agreements are necessary to attract and retain qualified persons as our officers and directors. At present, there is no pending litigation or proceeding involving our directors or officers for whom indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
The board of directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the shares of our common stock they represent in accordance with their own judgment on such matters.
It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.