UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
_____________________
Filed by the Registrant x Filed by a Party other than the Registrant o
Check the appropriate box:
| o | Preliminary Proxy Statement | ||||
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||||
| x | Definitive Proxy Statement | ||||
| o | Definitive Additional Materials | ||||
| o | Soliciting Material under §240.14a-12 | ||||
ViewRay, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. | |||||||
| o | Fee paid previously with preliminary materials. | |||||||
| o | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||||||
VIEWRAY, INC.
2 Thermo Fisher Way
Oakwood Village, OH 44146
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 2022
To the Stockholders of ViewRay, Inc.:
NOTICE IS HEREBY GIVEN that the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of ViewRay, Inc., a Delaware corporation (referred to herein as the “Company,” “we” or “our”), will be held virtually via live audio webcast on June 10, 2022, at 8:30 a.m. Pacific Time, for the following purposes:
1.To elect the three Class I directors named in the Proxy Statement to hold office until the annual meeting of stockholders to be held in 2024 and until their successors are duly elected and qualified;
2.To approve an amendment to our Amended and Restated 2015 Equity Incentive Award Plan (the “2015 Plan”) in order to increase the number of shares available for issuance under the 2015 Plan;
3.To ratify the selection, by the audit committee (the “Audit Committee”) and our board of directors (the “Board”), of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022;
4.To conduct an advisory vote to approve ViewRay’s 2021 executive compensation; and
5.To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
These proposals are more fully described in the Proxy Statement following this Notice. Only stockholders who owned our common stock at the close of business on April 18, 2022 (the “Record Date”) can vote at this meeting or any adjournments that take place.
We have elected to use the Internet as our primary means of providing our proxy materials to stockholders. Consequently, stockholders will not receive paper copies of our proxy materials unless they specifically request them. We will send a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 29, 2022 to our stockholders of record as of the close of business on the Record Date. We are also providing access to our proxy materials over the Internet beginning on or about April 29, 2022. Electronic delivery of our proxy materials will significantly reduce our printing and mailing costs, and the environmental impact of the proxy materials.
The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/VRAY2022, where you will be able to listen to the meeting live, submit questions and vote online. To participate in the Annual Meeting, you will need the 16-digit control number included on the Notice or on the proxy card that you request and receive by mail or e-mail. The Notice contains instructions for accessing the proxy materials, including the Proxy Statement and our annual report, and provides information on how stockholders may obtain paper copies free of charge. The Notice also provides the date and time of the Annual Meeting; the matters to be acted upon at the meeting and the recommendation from our board of directors with regard to each matter; and information on how to attend the meeting and vote online.
It is important that your shares be represented and voted whether or not you plan to attend the virtual Annual Meeting. You may vote on the Internet, by telephone or by completing and mailing a proxy card or the form forwarded by your bank, broker or other holder of record. Voting over the Internet, by telephone or by written proxy will ensure your shares are represented at the Annual Meeting. Please review the instructions on the proxy card or the information forwarded by your bank, broker or other holder of record regarding each of these voting options.
The Board recommends that you vote (i) FOR the election of the Class I director nominees named in Proposal No. 1, (ii) FOR the amendment to the 2015 Plan in order to increase the number of shares available for issuance under the 2015 Plan as described in Proposal No. 2, (iii) FOR the ratification of the selection, by the Audit Committee and the Board, of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 as described in Proposal No. 3, and (iv) FOR the approval, on an advisory basis, of ViewRay’s 2021 executive compensation as described in Proposal No. 4.
| By order of the Board of Directors, | |||||
| /s/ Scott W. Drake | |||||
Scott W. Drake President and Chief Executive Officer | |||||
Oakwood Village, Ohio
April 29, 2022
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY AUTHORIZE A PROXY TO CAST YOUR VOTES THROUGH THE INTERNET FOLLOWING THE VOTING PROCEDURES DESCRIBED IN THE NOTICE OR, IF YOU HAVE REQUESTED AND RECEIVED PAPER COPIES OF THE PROXY MATERIALS, BY TELEPHONE OR BY SIGNING, DATING AND RETURNING THE PROXY CARD SENT TO YOU.
TABLE OF CONTENTS
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VIEWRAY, INC.
2 Thermo Fisher Way
Oakwood Village, OH 44146
PROXY STATEMENT
FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIAL FOR THE
STOCKHOLDER MEETING TO BE HELD ON JUNE 10, 2022
The Board of ViewRay, Inc. is soliciting your proxy to vote at our 2022 Annual Meeting of Stockholders to be held virtually via live audio webcast on June 10, 2022, at 8:30 a.m. Pacific Time, and any adjournment or postponement of that meeting (the “Annual Meeting”). The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/VRAY2022, where you will be able to listen to the meeting live, submit questions and vote online. To participate in the Annual Meeting, you will need the 16-digit control number included on the Notice of Internet Availability of Proxy Materials or on the proxy card that you request and receive by mail or e-mail.
This Proxy Statement is dated as of April 29, 2022. As used in this Proxy Statement henceforward, unless otherwise stated or the context clearly indicates otherwise, the terms the “Company,” the “Registrant,” “ViewRay,” “we,” “us” and “our” refer to ViewRay, Inc., a Delaware corporation.
In addition to solicitations by mail, our directors, officers and regular employees, without additional remuneration, may solicit proxies by telephone, e-mail and personal interviews. All costs of solicitation of proxies will be borne by us. Brokers, custodians and fiduciaries will be requested to forward proxy soliciting material to the owners of stock held in their names, and we will reimburse them for their reasonable out-of-pocket expenses incurred in connection with the distribution of proxy materials.
We have elected to provide access to our proxy materials on the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials to our stockholders of record as of April 18, 2022 (the “Record Date”), while brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar notice. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials, or to request a printed set of the proxy materials. Instructions on how to request a printed copy by mail or e-mail may be found in the Notice of Internet Availability of Proxy Materials and on the website referred to in the Notice of Internet Availability of Proxy Materials, including an option to request paper copies on an ongoing basis. We are making this Proxy Statement available on the Internet on or about April 29, 2022 and are mailing the Notice of Internet Availability of Proxy Materials to all stockholders entitled to vote at the Annual Meeting on or about April 29, 2022. We intend to mail or e-mail this Proxy Statement, together with a proxy card, to those stockholders entitled to vote at the Annual Meeting who have properly requested copies of such materials by mail or e-mail, within three business days of request.
The only voting securities of ViewRay are shares of common stock, $0.01 par value per share (the “common stock”), of which there were 180,455,595 shares outstanding as of the Record Date. We need the holders of a majority in voting power of the shares of common stock issued and outstanding and entitled to vote, present by remote communication or represented by proxy, to hold the Annual Meeting.
The Company’s Annual Report on Form 10-K, which contains financial statements for fiscal year December 31, 2021 (the “Annual Report”), accompanies this Proxy Statement if you have requested and received a copy of the proxy materials in the mail. Stockholders that receive the Notice of Internet Availability of Proxy Materials can access this Proxy Statement and the Annual Report at the website referred to in the Notice of Internet Availability of Proxy Materials. The Annual Report and this Proxy Statement are also available on the “SEC Filings” section of our investor relations website at http://investors.viewray.com and at the website of the Securities and Exchange Commission (the “SEC”) at www.sec.gov. Please note that the information on our website is not part of this Proxy Statement. You also may obtain a copy of ViewRay’s Annual Report, without charge, by writing to our Investor Relations department at the above address.
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THE PROXY PROCESS AND STOCKHOLDER VOTING
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Who can vote at the Annual Meeting?
Only stockholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting. At the close of business on the Record Date, there were 180,455,595 shares of common stock issued and outstanding and entitled to vote. A list of stockholders entitled to vote at the Annual Meeting will be available during the Annual Meeting by visiting www.virtualshareholdermeeting.com/VRAY2022 and for ten days prior to the meeting during normal business hours at our offices at 2 Thermo Fisher Way, Oakwood Village, Ohio 44146. If you wish to examine the list, you may contact our Corporate Secretary, and arrangements will be made for you to review the list.
Stockholder of Record: Shares Registered in Your Name
If, on the Record Date, your shares were registered directly in your name with the transfer agent for our common stock, American Stock Transfer & Trust Company, LLC (“AST”), then you are a stockholder of record. As a stockholder of record, you may: vote electronically at the Annual Meeting; vote by proxy on the Internet or by telephone; or vote by returning a proxy card, if you request and receive one. Whether or not you plan to attend the Annual Meeting, to ensure your vote is counted, we urge you to vote by proxy on the Internet as instructed in the Notice of Internet Availability of Proxy Materials, by telephone as instructed on the website referred to on the Notice of Internet Availability of Proxy Materials, or (if you request and receive a proxy card by mail or e-mail) by signing, dating and returning the proxy card sent to you or by following the instructions on such proxy card to vote on the Internet or by telephone.
Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Agent
If, on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the virtual Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares electronically at the Annual Meeting, unless you request and obtain a legal proxy from your broker or other agent who is the record holder of the shares, authorizing you to vote at the Annual Meeting.
What am I being asked to vote on?
You are being asked to vote on four proposals:
•Proposal No. 1: the election of three Class I directors to hold office until the annual meeting of stockholders to be held in 2024 and until their successors are duly elected and qualified;
•Proposal No. 2: a proposal to approve an amendment to the 2015 Plan in order to increase the number of shares available for issuance under the 2015 Plan;
•Proposal No. 3: the ratification of the selection, by the Audit Committee, of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; and
•Proposal No. 4: the advisory vote to approve ViewRay’s 2021 executive compensation.
In addition, you are entitled to vote on any other matters that are properly brought before the Annual Meeting.
How does the board of directors recommend I vote on the Proposals?
The Board recommends that you vote:
•FOR each of the Class I director nominees;
•FOR the amendment to the 2015 Plan in order to increase the number of shares available for issuance under the 2015 Plan;
•FOR ratification of the selection, by the Audit Committee, of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; and
•FOR the approval, on an advisory basis, of ViewRay’s 2021 executive compensation.
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How do I vote?
•For Proposal No. 1, you may either vote “For,” or choose that your vote be “Withheld” from, any of the nominees to the Board.
•For Proposal No. 2, you may either vote “For” or “Against” the proposal, or “Abstain” from voting.
•For Proposal No. 3, you may either vote “For” or “Against” the proposal, or “Abstain” from voting.
•For Proposal No. 4, you may either vote “For” or “Against” the proposal, or “Abstain” from voting.
Please note that by casting your vote by proxy you are authorizing the individuals listed on the proxy to vote your shares in accordance with your instructions and in their discretion with respect to any other matter that properly comes before the Annual Meeting or any adjournments or postponements thereof. The procedures for voting, depending on whether you are a stockholder of record or a beneficial owner, are as follows:
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in any of the following manners:
•To vote over the Internet prior to the Annual Meeting, follow the instructions provided on the Notice of Internet Availability of Proxy Materials or on the proxy card that you request and receive by mail or e-mail. We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
•To vote by telephone, call the toll-free number found on the proxy card you request and receive by mail or e-mail, or the toll-free number that you can find on the website referred to on the Notice of Internet Availability of Proxy Materials.
•To vote by mail, complete, sign and date the proxy card you request and receive by mail or e-mail and return it promptly. As long as your signed proxy card is received before the Annual Meeting, we will vote your shares as you direct.
•To vote via the virtual meeting website, visit www.virtualshareholdermeeting.com/VRAY2022. You will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials or on the proxy card that you request and receive by mail or e-mail in order to participate in the virtual Annual Meeting. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/VRAY2022.
Even if you plan to participate in the Annual Meeting online, we recommend that you also vote by proxy as described above so that your vote will be counted if you later decide not to participate in the Annual Meeting. The Internet and telephone voting facilities for eligible stockholders of record will close at 11:59 p.m. Eastern Time on June 9, 2022. Even if you have submitted your vote before the Annual Meeting, you may still attend the virtual Annual Meeting and vote electronically. In such case, your previously submitted proxy will be disregarded.
Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent
If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a voting instruction card and voting instructions with these proxy materials from that organization, rather than from us. Simply complete and mail the voting instruction card to ensure that your vote is counted or follow the instructions to submit your vote by the Internet or telephone, if those instructions provide for Internet and telephone voting. To vote at the virtual Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.
Who counts the votes?
Broadridge Financial Solutions, Inc. (“Broadridge”) has been engaged as our independent agent to tabulate stockholder votes, or the Inspector of Election. If you are a stockholder of record, and you choose to vote over the Internet prior to the Annual Meeting or by telephone, Broadridge will access and tabulate your vote electronically, and if you have requested and received proxy materials via mail or e-mail and choose to sign and mail your proxy card, your executed proxy card is returned directly to Broadridge for tabulation. As noted above, if you hold your shares through a broker, your broker (or its agent for tabulating votes of shares held in “street name”) returns one proxy card to Broadridge on behalf of all its clients.
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How are votes counted?
Votes will be counted by the Inspector of Election appointed for the Annual Meeting. For Proposal 1, the Inspector of Election will separately count “For” and “Withheld” votes and broker non-votes for each nominee. For Proposal 2, Proposal 3, and Proposal 4, the Inspector of Election will separately count “For” and “Against” votes, abstentions and broker non-votes, if any. If your shares are held by your broker as your nominee (that is, in “street name”), you will need to follow the instructions provided by your broker to instruct your broker how to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “routine” items, but not with respect to “non-routine” items. See below for more information regarding: “What are “broker non-votes”?” and “Which ballot measures are considered “routine” and “non-routine”?”
What are “broker non-votes”?
Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are “routine,” but not with respect to “non-routine” matters. In the event that a broker, bank, custodian, nominee or other record holder of common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal. Accordingly, if you own shares through a nominee, such as a broker or bank, please be sure to instruct your nominee how to vote to ensure that your vote is counted on each of the proposals.
Which ballot measures are considered “routine” or “non-routine”?
The ratification of the selection, by the Audit Committee, of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2022 (Proposal 3) is considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 3. The election of directors (Proposal 1), vote on the amendment to the 2015 Plan in order to increase the number of shares available for issuance under the 2015 Plan (Proposal 2), and advisory vote to approve ViewRay’s executive compensation (Proposal 4) are considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposal 1, Proposal 2, and Proposal 4.
How many votes are needed to approve the proposal?
With respect to Proposal 1, the election of directors, the three nominees receiving the highest number of “For” votes will be elected. “Withheld” votes and broker non-votes will have no effect on the outcome of this proposal.
With respect to Proposal 2, the affirmative vote of the majority of votes cast (excluding abstentions and broker non-votes) is required for approval. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
With respect to Proposal 3, the affirmative vote of the majority of votes cast (excluding abstentions) is required for approval. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
With respect to Proposal 4, the affirmative vote of the majority of votes cast (excluding abstentions and broker non-votes) is required for approval. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as of the Record Date.
What if I return a Proxy Card, but do not make specific choices?
If we receive a signed and dated Proxy Card and that Proxy Card does not specify how your shares are to be voted, your shares will be voted “For” the election of each of the three nominees for director, “For” the amendment to the 2015 Plan in order to increase the number of shares available for issuance thereunder, “For” the ratification of the selection, by the Audit Committee, of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2022, and “For” the approval, on an advisory basis, of ViewRay’s 2021 executive compensation. If any other matter is properly presented at the Annual Meeting, your proxy (one of the individuals named on your Proxy Card) will vote your shares using his or her best judgment.
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Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to those proxy materials received by mail or on the Internet, our directors, officers and employees may also solicit proxies in person, by telephone or by other means of communication. Directors, officers and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials or more than one set of printed materials?
If you receive more than one Notice of Internet Availability of Proxy Materials or more than one set of printed materials, your shares are registered in more than one name or are registered in different accounts. In order to vote all the shares you own, you must follow the instructions for voting on each Notice of Internet Availability of Proxy Materials or proxy card you receive via mail or e-mail upon your request, which include voting over the Internet, telephone or by signing and returning any of the proxy cards you request and receive.
Can I change my vote after submitting my proxy vote?
Yes. You can revoke your proxy vote at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy vote in any one of three ways:
•You may submit a new vote on the Internet or by telephone or submit a properly completed proxy card with a later date.
•You may send a written notice that you are revoking your proxy to ViewRay’s Corporate Secretary at 2 Thermo Fisher Way, Oakwood Village, Ohio 44146.
•You may attend the virtual Annual Meeting and vote electronically at the Annual Meeting. Simply attending the virtual Annual Meeting will not, by itself, revoke your proxy.
If your shares are held by your broker, bank or other agent, you should follow the instructions provided by them.
How will voting on any business not described in this Proxy Statement be conducted?
We are not aware of any business to be considered at the Annual Meeting other than the items described in this Proxy Statement. If any other matter is properly presented at the Annual Meeting, your proxy will vote your shares using his or her best judgment.
When are stockholder proposals due for next year’s Annual Meeting?
To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by December 30, 2022, to ViewRay’s Secretary at 2 Thermo Fisher Way, Oakwood Village, Ohio 44146. If you wish to submit a proposal that is not to be included in our proxy materials for the next year’s annual meeting pursuant to the SEC’s shareholder proposal procedures or to nominate a director, you must do so between February 10, 2023 and March 12, 2023; provided that if the date of that annual meeting is more than 30 days before or more than 60 days after June 10, 2023, you must give notice not later than the 90th day prior to the annual meeting date or, if later, the 10th day following the day on which public disclosure of the annual meeting date is first made. You are also advised to review our Amended and Restated Bylaws (the “bylaws”), which contain additional requirements about advance notice of stockholder proposals and director nominations. In addition to satisfying the deadlines in the advance notice provisions of our bylaws, a stockholder who intends to solicit proxies in support of nominees under these advance notice provisions must provide the notice required under Rule 14a-19 to ViewRay’s Secretary no later than April 11, 2023.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if the holders of a majority in voting power of the shares of common stock issued and outstanding and entitled to vote are present by remote communication or represented by proxy at the Annual Meeting. On the Record Date, there were 180,455,595 shares of common stock outstanding and entitled to vote.
If you are a stockholder of record, your shares will be counted towards the quorum only if you submit a valid proxy vote or vote at the Annual Meeting. If you are a beneficial owner of shares held in “street name,” your shares will be counted towards the quorum if your broker or nominee submits a proxy for your shares at the Annual Meeting, even if the
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proxy results in a broker non-vote due to the absence of voting instructions from you. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, either the Chair of the Annual Meeting or a majority in voting power of the stockholders entitled to vote at the Annual Meeting, present by remote communication or represented by proxy, may adjourn the Annual Meeting to another time or place.
How can I find out the results of the voting at the Annual Meeting?
Voting results will be announced by the filing of a Current Report on Form 8-K within four business days after the Annual Meeting. If final voting results are unavailable at that time, we will file an amended Current Report on Form 8-K within four business days of the day the final results are available.
Attending the Annual Meeting
The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/VRAY2022, where you will be able to listen to the meeting live, submit questions and vote online. To participate in the Annual Meeting, you will need the 16-digit control number included on the Notice or on the proxy card that you request and receive by mail or e-mail.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Until the election of directors at the 2024 annual meeting of stockholders, the Board is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors, and each class has a three-year term. Unless the Board determines that vacancies (including vacancies created by increases in the number of directors) shall be filled by the stockholders, and except as otherwise provided by law, vacancies on the Board may be filled only by the affirmative vote of a majority of the remaining directors.
The Board currently consists of nine seated directors, divided into the three following classes:
•Class I directors: Scott W. Drake, B. Kristine Johnson and Phillip M. Spencer, whose current terms will expire at the Annual Meeting;
•Class II directors: Daniel Moore, Gail Wilensky, Ph.D., and Susan Schnabel, whose current terms will expire at the annual meeting of stockholders to be held in 2023; and
•Class III directors: Caley Castelein, M.D., Brian K. Roberts and Karen Prange, whose current terms will expire at the annual meeting of stockholders to be held in 2024.
Each director elected at the Annual Meeting shall be elected for a two-year term expiring at the annual meeting of stockholders to be held in 2024. Each director elected at the 2023 annual meeting of stockholders shall be elected for a one-year term expiring at the annual meeting of stockholders to be held in 2024. At the 2024 annual meeting of stockholders and each annual meeting of stockholders thereafter, all directors shall be elected for a one-year term expiring at the next annual meeting of stockholders held after such director’s election.
Each director to be elected at the Annual Meeting will hold office from the date of his or her election by the stockholders until the annual meeting of stockholders to be held in 2024 and until that director’s successor is duly elected and has been qualified, or until that director’s earlier death, resignation or removal.
Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, those shares will be voted for the election of those substitute nominees as the Board may propose. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unable to serve.
Directors are elected by a plurality of the votes cast at the meeting. However, under our corporate governance guidelines, any nominee for director in an uncontested election (i.e., an election where the only nominees are those recommended by the Board) who receives a greater number of votes “withheld” from his or her election than votes “for” such election (a “Majority Withheld Vote”) will, within five business days of the certification of the shareholder vote by the inspector of elections, tender a written offer to resign from the Board. The nominating and corporate governance committee of the Board (“Nominating and Corporate Governance Committee”) will promptly consider the resignation offer and recommend to the Board whether to accept it. The Nominating and Corporate Governance Committee will consider all factors its members deem relevant in considering whether to recommend acceptance or rejection of the resignation offer. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following the certification of the shareholder vote by the inspector of elections. In considering whether to accept the resignation offer, the Board will consider the factors considered by the Nominating and Corporate Governance Committee and any additional information and factors that the Board believes to be relevant. Any director who tenders his or her offer to resign from the Board pursuant to this provision shall not participate in the Nominating and Corporate Governance Committee or Board deliberations regarding whether to accept the offer of resignation.
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The following table sets forth, for the Class I directors and for our other current directors, information with respect to their position/office held with the Company and their ages as of April 18, 2022:
| Name | Age | Position with Company | Position Since | |||||||||||||||||
| Class I Directors whose terms expire at the Annual Meeting and who are standing for election at the Annual Meeting | ||||||||||||||||||||
| Scott W. Drake | 54 | President, Chief Executive Officer and Director | 2018 | |||||||||||||||||
| B. Kristine Johnson (2) | 70 | Director | 2020 | |||||||||||||||||
| Phillip M. Spencer (2) | 59 | Director | 2021 | |||||||||||||||||
| Class II Directors whose terms expire at the annual meeting of stockholders to be held in 2023 | ||||||||||||||||||||
| Daniel Moore (1)(3) | 61 | Board Chair | 2018 | |||||||||||||||||
| Gail Wilensky, PhD. (3) | 78 | Director | 2019 | |||||||||||||||||
| Susan C. Schnabel | 60 | Director | 2022 | |||||||||||||||||
| Class III Directors whose terms expire at the annual meeting of stockholders to be held in 2024 | ||||||||||||||||||||
| Caley Castelein, M.D. (1)(3) | 51 | Director | 2008 | |||||||||||||||||
| Brian K. Roberts (1)(2) | 51 | Director | 2015 | |||||||||||||||||
| Karen N. Prange (3) | 58 | Director | 2021 | |||||||||||||||||
(1)Member of the Audit Committee.
(2)Member of the Compensation Committee.
(3)Member of the Nominating and Corporate Governance Committee.
Set forth below is biographical information for the nominees and each person whose term of office as a director will continue after the Annual Meeting. The following includes certain information regarding our directors’ individual experience, qualifications, attributes and skills that led the Board to conclude that they should serve as directors.
Nominees for Election to a Two-Year Term Expiring at the Annual Meeting of Stockholders to be Held in 2024
Scott W. Drake has served as our President and Chief Executive Officer and as a member of the Board since July 2018. Mr. Drake has over 30 years of experience in the medical device field. From August 2011 to August 2017, he served as President and Chief Executive Officer, and as a member of the board of directors of The Spectranetics Corporation (NASDAQ: SPNC), a medical device company. From November 2009 to July 2011, he was a Senior Vice President of DaVita Corporation (NYSE: DVA), a provider of kidney care and dialysis. Mr. Drake has served on the board of directors of Paragon 28, Inc. (NYSE: FNA) a medical device manufacturer, since August 2021. Mr. Drake served as the Board Chair of AtriCure, Inc. (NASDAQ: ATRC) from 2013 to April 2021, as well as a member of the board of directors of Zayo Group Holdings, Inc. (NYSE: ZAYO) from November 2018 to March 2020. He has served on the board of directors of Cordis, a privately held medical device manufacturer, since August 2021. He serves as the Chair of the AdvaMed Radiation Therapy Sector as well as a board member for the Medical Device Manufacturers Association. Mr. Drake holds a B.S. in Business Administration from Miami University of Ohio. We believe that Mr. Drake is qualified to serve on our board of directors based on his experience in leading innovative medical technology companies, delivering value to patients and customers, as well as growth for stockholders.
B. Kristine Johnson has served as a member of the Board since April 2020. Since 2000, Ms. Johnson has been President and General Partner of Affinity Capital Management, a venture capital firm. In April 2021, she was appointed Board Chair of AtriCure, Inc. (NASDAQ: ATRC), a medical device company, where she has also served as a member of the board of directors since March 2017. In December 2021, she was appointed to the board of directors of Paragon 28, Inc. (NASDAQ: FNA), a medical device company. Ms. Johnson has served as a member of the board of directors of ClearPoint Neuro (NASDAQ: CLPT), a medical device company, since August 2019. She served as a member of the board of directors of Piper Sandler, an investment banking firm, from 2003 to 2019. Ms. Johnson served as a member of the board of directors of The Spectranetics Corporation (NASDAQ: SPNC), a medical device company, from 2012 to 2017. She held various executive leadership positions at Medtronic (NYSE: MDT) from 1982 to 1999. Ms. Johnson serves as a member of the board of directors of the University of Minnesota Foundation Investment Advisors. She holds a B.A. from St. Olaf College. We believe Ms. Johnson is qualified to serve on our board based on her extensive experience in the medical device industry as well as her depth of knowledge in the investment banking and capital management arenas.
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Phillip M. Spencer has served as a member of the Board since February 2021. He has served as President and Chief Executive Officer and as a member of the board of directors of MBI (Mega-Broadband Investments), a private cable and communications company, since 2017. Mr. Spencer served as Chief Executive Officer of Rural Broadband Investments from 2011 to 2017. He has served as a member of the board of directors of Halftime Institute, a leadership organization, since October 2020. From August 2015 to August 2018, Mr. Spencer served as a member of the board of directors of the Truman Medical Foundation, a non-profit medical provider that serves as the public health system for residents of Jackson County and Kansas City, Missouri. He holds a B.S. from Marquette University. We believe Mr. Spencer is qualified to serve on our board of directors based on his extensive technical experience and operational leadership expertise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE ELECTION OF EACH CLASS I NOMINEE NAMED ABOVE
Directors Continuing in Office Until the Annual Meeting of Stockholders to be Held in 2023
Daniel Moore has served as a member of the Board and our Board Chair since February 2018. Mr. Moore has served as Board Chair for medical device company LivaNova, PLC (NASDAQ: LIVN) since September 2015. He served as a member of the board of directors for GI Dynamics, Inc. (ASX: GID), a medical device company from 2014 to 2020. From 2012 to 2019, Mr. Moore served as a member of the board of directors of medical device company, BrainScope. He served as a member of the board of directors of TriVascular (NASDAQ: TRIV), a medical device company, from 2010 to 2016. From 2007 to 2015, Mr. Moore served as Chief Executive Officer as well as a member of the board of directors of Cyberonics, Inc. (NASDAQ: CYBX), a medical device company. From 1989 to 2007, Mr. Moore held various positions in sales, marketing and senior management for Boston Scientific Corporation (NYSE: BSX). From 2009 to 2016, Mr. Moore was a member of the board of directors of the Medical Device Manufacturers Association, serving as Board Chair from 2012 to 2014. He was a member of the board of directors of the Medical Device Innovation Consortium from 2012 to 2014. Mr. Moore has served on the board of the Epilepsy Foundation of America since 2014. He holds a B.A. from Harvard University, and an M.B.A. from Boston University. We believe Mr. Moore is qualified to serve on our board of directors based on his diverse domestic and global business experience in the medical device industry.
Gail Wilensky, Ph.D. has served as a member of the Board since July 2019. She has served as a member of the board of directors of UnitedHealth Group, Inc. (NYSE: UNH), a health and well-being services company, since 1993. Dr. Wilensky has served as a member of the board of directors of Quest Diagnostics, Inc. (NYSE: DGX), a diagnostic testing and information company, since 1997. She has served as a Senior Fellow at Project HOPE, an international non-profit health foundation, since 1993. Dr. Wilensky has served in the U.S. Department of Defense as President and Chair, Health Care Advisory Subcommittee from 2008 to 2009, and from 2006 to 2008 as Co-Chair, Task Force on the Future of Military Health. She served as Co-Chair and Presidential Appointee of the Task Force to Improve Healthcare Delivery for the Nation’s Veterans from 2001 to 2003. From 1997 to 2001, Dr. Wilensky served as Chair of the Medicare Payment Advisory Committee. She served as Chair of the Physician Payment Review Commission from 1995 to 1997. From March 1992 to January 1993, Dr. Wilensky served as Deputy Assistant to the President for Policy Development. She served as Administrator of the Health Care Financing Administration (now known as the Centers for Medicare and Medicaid Services) directing the Medicaid and Medicare programs for the United States from 1990 to 1992. Dr. Wilensky serves on the Board of Regents of the Uniformed Services University of the Health Sciences (USUHS) and the Geisinger Health System Foundation and is an elected member of the National Academy of Medicine. She holds a B.A., M.A. and Ph.D. from the University of Michigan. We believe Dr. Wilensky is qualified to serve on the Board based on her extensive experience as an economist, as well as her advisory and policy making work in the medical technology and healthcare fields.
Susan C. Schnabel has served as a member of the Board since March 2022. Ms. Schnabel is a founder and has served as the Co-Managing Partner of aPriori Capital Partners, a private equity investment firm, since April 2014. She has served on the board of directors of Altice USA (NYSE: ATUS), a broadband communication and video service provider, since July 2021. Ms. Schnabel has served on the board of directors of Kayne Anderson BDC, a private management investment company, since September 2020. Ms. Schnabel served on the board of directors of Versum Materials, Inc. (NYSE: VSM), a technology driven semiconductor materials supplier, from October 2016 to October 2019. Ms. Schnabel has served on numerous other private company boards for the past twenty years. Ms. Schnabel has served on the Cornell University Board of Trustees since July 2019. She has served on the California Institute of Technology Investment Committee since May 2017. Ms. Schnabel has served on the Board of Directors of the US Olympic & Paralympic Foundation since January 2016. She served on the Harvard Business School Alumni Advisory Board from September 2014 to June 2019. Ms. Schnabel holds a B.S. from Cornell University and a M.B.A. from Harvard Business School. Ms. Schnabel was appointed to the board pursuant to a Cooperation Agreement entered into between the Company and Hudson Executive Capital LP and certain of its affiliates (“Hudson”) on March 8, 2022. We believe Ms. Schnabel is qualified to
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serve on the Board based on her extensive capital markets and investment banking experience, as well as her deep executive and board leadership experience.
Directors Continuing in Office Until the Annual Meeting of Stockholders to be Held in 2024
Caley Castelein, M.D. has served as a member of our Board since January 2008. Since March 2006, he has served as a Managing Director and founder of Kearny Venture Partners, L.P., a healthcare venture capital fund. Additionally, he founded KVP Capital, L.P. in 2013 and manages the fund, which invests in small and mid-cap healthcare companies. Since February 2017, Dr. Castelein has served as a member of the board of directors of Aerpio Therapeutics, Inc. (NASDAQ: ARPO), a biopharmaceutical company, which merged with Aadi Bioscience, Inc. (NASDAQ: AADI) in August 2021, where he now serves as Chair. He served as a member of the board of directors for Boreal Genomics, Inc., a diagnostics company, from October 2010 until its successful sale in September 2021. He has served as a director at NewBridge Pharmaceuticals FZ, LLC, a specialty therapeutics company, since March 2015. Dr. Castelein served as a member of the board of directors for Waterstone Pharmaceuticals, Inc., a pharmaceutical company from March 2015 to March 2018; AliveCor, Inc., a medical device company from April 2015 to March 2020; Wellpartner, Inc., a pharmaceutical distribution solutions company, from March 2015 to November 2017; and Neos Therapeutics, Inc. (NASDAQ: NEOS), a pharmaceutical company from March 2015 to July 2015. He holds an A.B. from Harvard College and an M.D. from the University of California, San Francisco. We believe Dr. Castelein is qualified to serve on our Board based on his extensive investment experience in the healthcare industry.
Brian K. Roberts has served as a member of the Board since December 2015. Since September 2020, Mr. Roberts has served as President and Chief Executive Officer of Tarveda Therapeutics, Inc., a biopharmaceutical company, where he also served as Chief Financial Officer from January 2018 to September 2020. From July 2016 to April 2020, he served as a member of the board of directors for Valeritas Holdings, Inc. (NASDAQ: VLRX), a medical technology company. Mr. Roberts served as Chief Operating and Financial Officer at Avedro, Inc., a pharmaceutical and medical device company, from January 2015 to October 2016. He served as Chief Financial Officer at Insulet Corporation (NASDAQ: PODD), also a medical device company, from 2009 to 2014. Mr. Roberts served as Chief Financial Officer at Jingle Networks, Inc., an advertising and technology solutions company, from September 2007 to December 2008. From 2001 to 2007, he held various leadership roles, including serving as Chief Financial Officer of Digitas, Inc. (NASDAQ: DTAS), (a/k/a DigitasLBi, Inc.), a marketing and technology agency. Mr. Roberts served as Vice President of Finance at Idiom Technologies, Inc., a provider of globalization management, from 2000 to 2001. From 1997 to 1999, he served as U.S. Controller of The Monitor Group, a consulting firm. Mr. Roberts served as an Auditor with Ernst & Young LLP from 1993 to 1997. He holds a B.S. from Boston College. We believe Mr. Roberts is qualified to serve on the Board because of his over 25 years of financial, operational and strategic experience in private and public companies.
Karen N. Prange has served as a member of the Board since June 2021. She has served as a member of the board of directors of Cantel Medical (NYSE: CMD), a medical equipment company, since October 2019 until its sale to Steris Corp in June 2021. Ms. Prange has served as a member of the board of directors of Atricure (NASDAQ: ATRC), a medical device company, since December 2019. She has served as a member of the board of directors of Nevro (NASDAQ: NVRO), a medical device company, since December 2019. Ms. Prange has served as a member of the board of directors of WS Audiology, a hearing aid manufacturer, since March 2020. Ms. Prange has served on the board of Embecta (NASDAQ: EMBC since April 2022. She has served as Strategic Advisor to Nuvo Group, LLC, a medical device company, since September of 2019 and Industrial Advisor to EQT Group, a global investment organization, since March 2020. From May 2016 to April 2018, Ms. Prange was Executive Vice President and Chief Executive Officer for the Global Animal Health, Medical and Dental Surgical Group at Henry Schein as well as a member of the Executive Committee. She served as Senior Vice President of Boston Scientific and President of its Urology and Pelvic Health business from 2012 to 2016. From 1995 to 2012, Ms. Prange held various roles of increasing leadership at Johnson & Johnson Company (NYSE: JNJ), most recently as General Manager of the Micrus Endovascular and Codman Neurovascular businesses. She holds a B.S. in Business Administration from the University of Florida. We believe Ms. Prange is qualified to serve on the Board based on her other public medical device board service and her extensive experience in commercial, operational and strategic leadership roles in healthcare companies.
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Director Compensation
There were no changes to the amounts payable to non-employee directors in 2021 as compared to 2020. Pursuant to the Company’s Director Compensation Policy for 2021, each non-employee director received the following cash amounts for their service:
| Compensation element | ||||||||
| Director annual retainer | $ | 45,000 | ||||||
| Board of Directors chair | $ | 35,000 | ||||||
| Audit Committee chair | $ | 20,000 | ||||||
| Audit Committee member | $ | 10,000 | ||||||
| Compensation Committee chair | $ | 15,000 | ||||||
| Compensation Committee member | $ | 7,000 | ||||||
| Nominating and Corporate Governance Committee chair | $ | 10,000 | ||||||
| Nominating and Corporate Governance Committee member | $ | 5,000 | ||||||
Under the Director Compensation Policy, each non-employee director may elect to receive the Annual Retainer in cash or Deferred Stock Units (“DSUs”). If the non-employee director elects to receive the Annual Retainer in the form of cash, the Annual Retainer will be paid in equal quarterly installments in arrears following the close of each calendar quarter, subject to pro-ration (rounded down to the nearest month) if a non-employee director serves less than a full calendar quarter. If the non-employee director elects to receive the Annual Retainer in the form of DSUs, the underlying shares of our common stock subject to such DSUs will not be issued to the non-employee director until the earlier of the date the non-employee director separates from service with us or upon a change of control of our Company (as defined in the 2015 Plan).
In addition to the cash fees outlined above, each non-employee director receives an annual grant of RSUs valued at $115,000 (“Annual Grant”). This Annual Grant is made on the date of the annual meeting of stockholders or, if later, the date of the non-employee director’s appointment to the Board. Non-employee directors appointed after the annual meeting receive a pro-rated grant to reflect their partial year of service. The Annual Grants vest on the one-year anniversary of the annual meeting, subject to the director’s continued service through such vesting date.
Upon the director’s initial appointment or election to the Board, each non-employee director received an initial equity grant with an aggregate grant date fair value equal to $175,000, either (i) 100% in the form of Restricted Stock Units (“RSUs”), or (ii) at the director’s written election, 50% in the form of RSUs and 50% in the form of stock options (an “Initial Grant”). Unless a different vesting schedule is specified, an Initial Grant will vest as to 1/36th of the shares subject to the award on each monthly anniversary of the applicable grant date, subject to continued service through each applicable vesting date.
Pursuant to the terms of the 2021 Director Compensation Policy, all equity awards outstanding and held by a non-employee director will vest in full immediately prior to the occurrence of a change in control (as defined in the applicable equity plan under which such awards were granted).
In approving the Director Compensation Policy, the Board considered, among other factors, market data provided by our compensation consultant regarding the compensation paid to directors at peer companies, as described below in the “Executive Compensation – Overview of Executive Compensation Program – Use of Market Data for Comparison Against Peer Companies” section, regarding compensation paid to directors of similarly situated companies in our industry and determined that the levels of cash for director compensation, are appropriate. While the Board considers director compensation annually, market data is currently compiled and assessed every other year.
In connection with his appointment to the Board, in March 2021, we granted Mr. Spencer an Initial Grant of 37,553 RSUs that vest in equal installments of 1/36th of the shares subject to the grant on each monthly anniversary beginning on April 1, 2021, subject to Mr. Spencer’s continued service through each applicable vesting date. In addition, in March 2021 Mr. Spencer received a prorated Annual Grant of 7,166 RSUs that vested on June 15, 2021, subject to the Mr. Spencer’s continued service through such vesting date.
In connection with her appointment to the Board, in June 2021, we granted Ms. Prange an Initial Grant of 26,395 RSUs that vest in equal installments of 1/36th of the shares subject to the grant on each monthly anniversary beginning on August 1, 2021, subject to Ms. Prange’s continued service through each applicable vesting date. In addition, in June 2021
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Ms. Prange received an Annual Grant of 19,759 RSUs that vest on June 15, 2022, subject to the Ms. Prange’s continued service through such vesting date.
2021 Director Compensation Table
The following table sets forth information for the year ended December 31, 2021 regarding the compensation awarded to, earned by, or paid to our non-employee directors.
| Name of Director | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Total ($) | |||||||||||||||||
| Caley Castelein, M.D. | $ | 60,833 | $ | 114,997 | $ | 175,830 | ||||||||||||||
| Keith Grossman (3) | 8,333 | — | 8,333 | |||||||||||||||||
| Scott Huennekens (3) | 35,000 | — | 35,000 | |||||||||||||||||
| B. Kristine Johnson | 56,667 | 114,997 | 171,664 | |||||||||||||||||
| Daniel Moore | 95,000 | 114,997 | 209,997 | |||||||||||||||||
| Karen N. Prange (4) | 29,167 | 289,996 | 319,163 | |||||||||||||||||
| Brian K. Roberts | 72,000 | 114,997 | 186,997 | |||||||||||||||||
| Phillip M. Spencer (5) | 47,667 | 323,388 | 371,055 | |||||||||||||||||
| Gail Wilensky, Ph.D. | 50,000 | 114,997 | 164,997 | |||||||||||||||||
| Kevin Xie, Ph.D. | 45,000 | 114,997 | 159,997 | |||||||||||||||||
(1)Includes the following fees earned in 2021 that were satisfied through the grant of DSUs for which the underlying common stock will be issued upon the earlier of a change in control or the director’s separation from service.
| Name of Director | Fees Satisfied in DSUs ($) | |||||||
| Caley Castelein, M.D. | 60,833 | |||||||
| Keith Grossman | 8,333 | |||||||
| Scott Huennekens | — | |||||||
| B. Kristine Johnson | — | |||||||
| Daniel Moore | 95,000 | |||||||
| Karen N. Prange | — | |||||||
| Brian K. Roberts | — | |||||||
| Phillip M. Spencer | 47,667 | |||||||
| Gail Wilensky, Ph.D. | 50,000 | |||||||
| Kevin Xie, Ph.D. | — | |||||||
(2)Amounts shown represent the aggregate grant date fair value of RSUs granted, as calculated in accordance with FASB ASC Topic 718 excluding the impact of estimated forfeitures related to service-based vesting provisions. See Footnote 13 of the financial statements included in our Annual Report on Form 10-K filed February 25, 2022 for the assumptions used in calculating this amount.
(3)Mr. Grossman and Mr. Huennekens ceased serving on the Board in February 2021 and June 2021, respectively.
(4)Amounts shown for Ms. Prange under “Fees Earned or Paid in Cash” reflect prorated retainer fees (rounded down to the nearest month) since she served less than a full calendar year following her appointment to the Board in June 2021. Amounts shown for Ms. Prange under “Stock Awards” include the Initial Grant that she received in connection with her appointment to the Board as well as her prorated Annual Grant.
(5)Amounts shown for Mr. Spencer under “Fees Earned or Paid in Cash” reflect prorated retainer fees (rounded down to the nearest month) since he served less than a full calendar year following her appointment to the Board in February 2021. Amounts shown for Mr. Spencer under “Stock Awards” include the Initial Grant that he received in connection with his appointment to the Board as well as his prorated Annual Grant.
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As of December 31, 2021, each of our non-employee directors held the following outstanding DSUs, RSUs and options to purchase shares of our common stock:
| Name of Director | Deferred Stock Units (#) | Restricted Stock Units (#) | Shares Subject to Outstanding Options(#) | |||||||||||||||||
| Caley Castelein, M.D. | 70,937 | 19,759 | 84,305 | |||||||||||||||||
| Keith Grossman* | — | — | — | |||||||||||||||||
| Scott Huennekens** | — | — | — | |||||||||||||||||
| B. Kristine Johnson | — | 63,253 | — | |||||||||||||||||
| Daniel Moore | 52,857 | 19,759 | 71,169 | |||||||||||||||||
| Karen N. Prange | — | 42,489 | — | |||||||||||||||||
| Brian K. Roberts | 27,875 | 19,759 | 84,305 | |||||||||||||||||
| Phillip M. Spencer | 9,708 | 47,924 | — | |||||||||||||||||
| Gail Wilensky, Ph.D. | 21,972 | 19,759 | — | |||||||||||||||||
| Kevin Xie, Ph.D. | 11,097 | 19,759 | — | |||||||||||||||||
* Mr. Grossman ceased serving on the Board in February 2021.
**Mr. Huennekens ceased serving on the Board in June 2021.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE 2015 PLAN IN ORDER TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE 2015 PLAN
On April 19, 2022, the Board approved an amendment to the ViewRay, Inc. Amended and Restated 2015 Equity Incentive Award Plan (the “2015 Plan”) that increases the shares authorized for issuance thereunder by an additional 6,300,000 shares of our common stock, subject to approval by our stockholders. The 2015 Plan is a critical tool for attracting, retaining, and incentivizing our key employees and directors and provides for the grant of stock options, restricted stock, restricted stock units, performance awards, dividend equivalents, deferred stock, deferred stock units, stock payments, and stock appreciation rights.
If the amendment to the 2015 Plan is not approved, we currently expect that we will not be able to continue to grant equity-based compensation awards beyond December 31, 2022. We are asking our stockholders to consider and vote to approve the amendment to the 2015 Plan.
The following table sets forth certain information about the Company and the 2015 Plan:
| As of March 31, 2022 | ||||||||
| Common shares outstanding | 180,442,026 | |||||||
| Number of additional shares reserved for issuance under the 2015 Plan by the amendment | 6,300,000 | |||||||
| Number of shares available for future awards under the 2015 Plan (1) | 1,133,564 | |||||||
| Number of shares subject to outstanding stock options | 3,592,187 | |||||||
| Number of shares subject to awards of restricted stock and restricted stock units (including performance awards) (1) | 8,080,625 | |||||||
| Maximum option term | 10 years | |||||||
| Minimum exercise price (relative to the market value on date of grant) | 100% | |||||||
| Weighted average remaining term of outstanding options | 5.69 years | |||||||
| Weighted average exercise price of outstanding options | $ | 6.71 | ||||||
| Approximate number of shares available for awards under the 2015 Plan if this proposal is approved | 7,433,564 | |||||||
(1) Balance assumes 150% and Target achievement of the performance-based awards granted in 2021 and 2022, respectively.
In addition to the above, as of March 31, 2022, the Company had a total of 113,845 outstanding restricted stock units and 2,942,998 outstanding stock options with a weighted average remaining term of 6.7 years and a weighted average exercise price of $8.19 that had been granted as inducement awards under its 2018 Inducement Program, a total of 468,304 outstanding stock options with a weighted average remaining term of 2.1 years and a weighted average exercise price of $1.19 that had been granted under its 2008 Plan, and an additional 3.2 million shares remaining available for issuance under its 2015 Employee Stock Purchase Plan.
If this proposal is approved, the Company’s total potential dilution from the shares available for issuance under its equity incentive plans would increase from 9.9% as of March 31, 2022 to 12.7%. The compensation committee of the Board (“Compensation Committee”) has considered this potential dilution level in the context of competitive data from its peer group, and believes that the resulting dilution levels would be within normal competitive ranges. If the amendment to the 2015 Plan is approved, the Company’s potential dilution will increase by approximately 2.9%, and then would be expected to decline as awards are exercised and/or become vested.
The Company manages its long-term dilution goal by monitoring the number of shares subject to equity awards that it grants annually, commonly referred to as burn rate. Burn rate shows how rapidly a company is depleting its shares reserved for equity compensation plans, and is defined as the number of shares granted under the Company’s equity incentive plans divided by the weighted average number of common shares outstanding at the end of the year. The Company has calculated the burn rate under the 2015 Plan and the 2018 Inducement Program for the past three years, as set forth in the following table:
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| Options Granted | Full-Value Shares Granted (1) | Weighted Average Number of Common Shares Outstanding | Burn Rate | |||||||||||||||||||||||
| Fiscal 2019 | 2,652,505 | 3,356,820 | 102,001,954 | 5.89 | % | |||||||||||||||||||||
| Fiscal 2020 | 736,579 | 6,079,659 | 147,895,561 | 4.61 | % | |||||||||||||||||||||
| Fiscal 2021 | — | 3,802,798 | 164,521,064 | 2.31 | % | |||||||||||||||||||||
The Company’s three-year average burn rate is 4.27%, which the Company believes is in line with peer group practices.
When considering the size of the share reserve under the amended 2015 Plan, the Compensation Committee also reviewed, among other things, projected future share usage and projected future forfeitures. The projected future usage of shares for long-term incentive awards under the 2015 Plan was reviewed under scenarios based on a variety of assumptions. Depending on assumptions, the Compensation Committee currently anticipates that the additional 6,300,000 shares under the amended 2015 Plan, in combination with the shares remaining available under the 2015 Plan and the shares added back to the 2015 Plan from forfeitures or cash settlement of awards previously granted, are expected to satisfy the Company’s equity compensation needs for approximately one year of similar levels of awards.
In order to minimize shareholder dilution, the 2015 Plan provides that, if the exercise price or withholding obligation of any award granted under the 2015 Plan is satisfied by tendering shares to the Company or by withholding shares, such tendered or withheld shares will not again be made available for issuance under the 2015 Plan.
The closing price of a share of our common stock on the NASDAQ Stock Market on April 18, 2022 was $3.36.
Why You Should Vote to Approve the Amendment to the 2015 Plan
The Board recommends that our shareholders approve the amendment to the 2015 Plan because it believes that the 2015 Plan promotes the success and enhances the value of the Company by linking the individual interests of employees, consultants and non-employee directors of the Company and its affiliates to those of the Company’s stockholders and provides such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The 2015 Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of such individuals upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. The approval of the amendment to the 2015 Plan will enable us to continue to provide such incentives.
Highlights of the 2015 Plan (as amended). Specific features of the 2015 Plan that are consistent with good corporate governance practices include, but are not limited to:
•There can be no repricing of options or stock appreciation rights without stockholder approval, either by canceling the award in exchange for a replacement award at a lower price or by reducing the exercise price of the award (other than in connection with a change in our capitalization).
•Dividend, distribution and dividend equivalent rights may not be paid on any unvested restricted stock or restricted stock units or unearned performance-based awards. No dividend, distribution and dividend equivalent rights may be granted on stock options or SARs.
•The 2015 Plan includes a $500,000 cap on the aggregate dollar value of equity-based (based on grant date fair value) and cash compensation granted under the plan or otherwise during any calendar year to any non-employee director, which limit is increased by 200% in the calendar year in which the non-employee director first joins the Board or is designated as Chairman of the Board.
•Awards are subject to a minimum vesting period of one year after the grant date with respect to 95% of the shares reserved for issuance under the 2015 Plan. This minimum vesting requirement does not apply to the other 5% of the share pool. Exceptions to this minimum vesting provision apply in the case of awards that accelerate and vest on a change of control, death or disability or awards made to non-employee directors that vest at the next annual shareholder meeting, provided that annual meetings are at least 50 weeks apart. Such awards do not count against the 5% share pool reserve or be subject to the minimum vesting requirement.
•Awards under the 2015 Plan, including any shares subject to an award, may be subject to any recovery, recoupment, clawback and/or other forfeiture policy maintained by the Company now or in the future.
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2015 Plan Summary
The following is qualified in its entirety by the full text of the 2015 Plan as amended, which is attached to this Proxy Statement as Appendix A and is incorporated by reference into this proposal.
Purpose and Eligibility
The purpose of the 2015 Plan is to promote the success and enhance the value of the Company by linking the individual interests of the members of the board, employees, and consultants of the Company and its affiliates to those of the Company’s stockholders and provide such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The 2015 Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the board, employees, and consultants of the Company and its affiliates upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.
Awards may be granted under the 2015 Plan to employees, non-employee directors, advisors and consultants of the Company and its affiliates, as selected by the Administrator. As of April 18, 2022, there were approximately 280 individuals who would be eligible to receive awards under the 2015 Plan. Further, only our employees or employees of our subsidiaries are eligible to receive incentive stock options.
Effective Date and Term; Amendment and Termination
The 2015 Plan was adopted by the Board on April 14, 2020, and became effective upon approval by the Company’s stockholders on June 12, 2020 (the “Effective Date”). The 2015 Plan will remain available for the grant of awards until the tenth (10th) anniversary of the Effective Date. However, incentive stock options may not be granted under the 2015 Plan after April 14, 2030. The 2015 Plan may be terminated at such earlier time as the Board may determine (subject to certain limitations described in the following paragraph).
The 2015 Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Compensation Committee. However, without approval of the Company’s stockholders given within 12 months before or after the action by the Administrator, no action of the Administrator may (other than in connection with changes in the Company’s capital stock) increase the limits on the maximum number of shares which may be issued under the 2015 Plan. Except for changes intended to comply with the requirements of Section 409A of the Internal Revenue Code, no amendment, suspension or termination of the 2015 Plan will, without the consent of the award holder, materially and adversely affect any rights or obligations under any award theretofore granted or awarded, unless the award itself otherwise expressly so provides. No awards may be granted or awarded during any period of suspension or after termination of the 2015 Plan.
Administration
The Compensation Committee (or another committee or a subcommittee of the Board or the Compensation Committee assuming the functions of the Committee under the 2015 Plan) will administer the 2015 Plan (except as otherwise permitted under the 2015 Plan). However, the full Board, acting by a majority of its members in office, will conduct the general administration of the 2015 Plan with respect to awards granted to non-employee directors. The Board or Compensation Committee may delegate its authority to the extent permitted by the 2015 Plan.
The Administrator will conduct the general administration of the 2015 Plan in accordance with its provisions. The Administrator will have the power to interpret the 2015 Plan, any program adopted pursuant to the 2015 Plan and the applicable award agreement, and to adopt such rules for the administration, interpretation and application of the 2015 Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any such program or applicable award agreement. However, the rights or obligations of the holder of an award that is the subject of any such program or award agreement cannot be affected materially and adversely by such amendment, unless the consent of the holder is obtained or such amendment is otherwise intended to comply with the requirements of Section 409A of the Internal Revenue Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the 2015 Plan (except with respect to matters which under Rule 16b-3 under the Exchange Act or any successor rule or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee).
Subject to the by-laws of the Company, the charter of the Compensation Committee and any specific designation in the 2015 Plan, the Administrator has the exclusive power, authority and sole discretion to:
•designate eligible individuals to receive awards;
•determine the type or types of awards to be granted to each eligible individual;
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•determine the number of awards to be granted and the number of shares to which an award will relate subject to the limitations set forth in the 2015 Plan;
•subject to limitations set forth in the 2015 Plan, determine the terms and conditions of any award granted pursuant to the 2015 Plan;
•determine whether, to what extent, and pursuant to what circumstances an award may be settled in, or the exercise price of an award may be paid in cash, shares, other Awards, or other property, or an award may be canceled, forfeited, or surrendered;
•prescribe the form of each award agreement;
•decide all other matters that must be determined in connection with an award;
•establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the 2015 Plan;
•interpret the terms of, and any matter arising pursuant to, the 2015 Plan, any program adopted pursuant to the 2015 Plan or any award agreement;
•make all other decisions and determinations that may be required pursuant to the 2015 Plan or as the Administrator deems necessary or advisable to administer the 2015 Plan; and
•accelerate wholly or partially the vesting or lapse of restrictions of any award or portion thereof at any time after the grant of an Award (subject to certain limitations set forth in the 2015 Plan).
Shares Subject to 2015 Plan (As Amended)
Subject to certain limitations set forth in the 2015 Plan, the number of shares which may be issued or transferred pursuant to awards under the 2015 Plan, as amended, on or after the Effective Date will be equal to (i) 9,550,000 Shares, plus (ii) the 1,133,564 shares that remained available for issuance under the prior restatement of the 2015 Plan as of June 12, 2020, plus (iii) any shares subject to outstanding awards under the 2015 Plan that are forfeited, expire or are settled in cash (the “Share Limit”). The maximum number of Shares with respect to incentive stock options which may be granted under the 2015 Plan on or after the Effective Date will be 9,550,000 Shares.
If any shares subject to an award are forfeited or expire or such award is settled for cash (in whole or in part), the shares subject to such award will, to the extent of such forfeiture, expiration or cash settlement, again be available for future grants of awards under the 2015 Plan and will be added back to the Share Limit. In addition, the following shares will not be available for future grants of awards under the 2015 Plan and will not be added back to the Share Limit: (i) shares tendered by a holder of an award or withheld by the Company in payment of the exercise price of an stock option or a stock appreciation right; (ii) shares tendered by the holder of an award or withheld by the Company to satisfy any tax withholding obligation with respect to an award; and (iii) shares purchased on the open market with the proceeds from the exercise of awards.
Substitute awards granted under the plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction will not reduce the shares authorized for grant under the 2015 Plan. Additionally, in the event that a company acquired by the Company or any affiliate or with which the Company or any affiliate combines has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for awards under the 2015 Plan and will not reduce the shares authorized for grant under the 2015 Plan.
Non-Employee Director Limitations
Subject to adjustment provisions in the 2015 Plan, the aggregate grant date fair market value of share subject to awards granted under the 2015 Plan, together with any cash compensation paid or payable, during any calendar year to any one non-employee director will not exceed $500,000. However, with respect to the calendar year in which a non-employee director first joins the Board or is designated as Chairman of the Board or Lead Director, such maximum dollar value may be up to two hundred percent (200%) of the dollar value set forth in the foregoing limit.
Minimum Vesting
Awards granted under the 2015 Plan may not become exercisable, vest or settle, in whole or in part, prior to the one-year anniversary of the date of grant. The following are exceptions: (1) the Compensation Committee may provide that awards become exercisable, vest or settle prior to such date in the event of the participant’s death or disability or in connection with a change in control, (2) awards to non-employee directors may vest on the Company’s next annual
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meeting of shareholders (provided that such annual meetings are at least fifty (50) weeks apart), and (3) up to 5% of the aggregate number of shares authorized for issuance under the 2015 Plan may be issued without regard to the restrictions of the sentence.
Awards
Awards under the 2015 Plan may be made in the form of stock options, restricted stock, restricted stock units, performance awards, dividend equivalents, deferred stock, deferred stock units, stock payments, and stock appreciation rights.
•Nonqualified Stock Options, or NQSOs: Nonqualified Stock Options, or NQSOs, will provide for the right to purchase shares of common stock at a specified price that may not be less than the fair market value of a share of common stock on the date of grant, and usually will become exercisable (at the discretion of the Administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with the Company and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NQSOs may be granted for any term specified by the Administrator that does not exceed 10 years. Holders of a NQSO will not have any voting rights and will have no rights to receive dividends or dividend equivalents in respect of a NQSO or shares subject to a NQSO until the holder of such a stock option becomes the holder of record of such shares.
•Incentive Stock Options: Incentive Stock Options will be designed in a manner intended to comply with the provisions of Section 422 of the Internal Revenue Code and will be subject to specified restrictions contained in the Internal Revenue Code. Among such restrictions, Incentive Stock Options must have an exercise price of not less than the fair market value of a share of our common stock on the date of grant, may only be granted to employees of the Company and its subsidiaries, and must not be exercisable after a period of 10 years measured from the date of grant. In the case of an Incentive Stock Option granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of the capital stock of the Company, the 2015 Plan provides that the exercise price must be at least 110% of the fair market value of a share of our common stock on the date of grant and the Incentive Stock Option must not be exercisable after a period of five years measured from the date of grant. Holders of Incentive Stock Options will not have any voting rights and will have no rights to receive dividends or dividend equivalents in respect of Incentive Stock Options or shares subject to an Incentive Stock Option until the holder of such a stock option becomes the holder of record of such shares.
•Restricted Stock Awards: Restricted Stock Awards may be granted to any eligible individual and made subject to such restrictions as may be determined by the Administrator. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. A holder of restricted stock, unlike recipients of stock options, will have all the rights of a stockholder with respect to the shares. However, all dividends and other distributions paid prior to the vesting of the award of restricted stock will only be paid to the holder when and to the extent that any vesting conditions on such award are satisfied and the underlying share of restricted stock vests.
•Restricted Stock Unit Awards: Restricted Stock Unit Awards may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the Administrator. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike Restricted Stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.
•Deferred Stock Awards: Deferred Stock Awards represent the right to receive shares of common stock on a future date. Deferred stock may not be sold or otherwise hypothecated or transferred until issued. Deferred stock will not be issued until the deferred stock award has vested, and recipients of deferred stock will have no voting or dividend rights prior to the time when the vesting conditions are satisfied and the shares are issued. Deferred stock awards generally will be forfeited, and the underlying shares of deferred stock will not be issued, if the applicable vesting conditions and other restrictions are not met.
•Deferred Stock Units: Deferred Stock Units are denominated in units equivalent of shares of common stock, and vest pursuant to a vesting schedule or performance criteria set by the Administrator. The common stock underlying deferred stock units will not be issued until the deferred stock units have vested, and recipients of deferred stock units will have no voting rights prior to the time when vesting conditions are satisfied.
•Stock Appreciation Rights, or SARs: Stock Appreciation Rights, or SARs, entitle the holder to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the
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exercise price per share of the Stock Appreciation Right from the fair market value on the date of exercise of the Stock Appreciation Right by the number of shares with respect to which the Stock Appreciation Right will have been exercised, subject to any limitations the Administrator may impose. The exercise price of any Stock Appreciation Right granted under the 2015 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. There are no restrictions specified in the 2015 Plan on the exercise of SARs or the amount of gain realizable therefrom, although restrictions may be imposed by the Administrator in the SAR agreements. SARs under the 2015 Plan will be settled in cash or shares of common stock, or in a combination of both, at the election of the Administrator. Holders of SARs will not have any voting rights and will have no rights to receive dividends or dividend equivalents in respect of SARs or shares subject to a SAR until the holder of such a SAR becomes the holder of record of such shares.
•Dividend Equivalent Awards: Dividend Equivalent Awards represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the award. Dividend equivalents may be settled in cash or shares and will only be paid out if and to the extent that the vesting conditions applicable to the underlying award are subsequently satisfied.
•Performance Awards: Performance Awards may be granted by the Administrator. Generally, these awards will be based upon specific performance targets and may be paid in cash or in common stock or in a combination of both. Performance awards may also include bonuses that may be granted by the Administrator and that may be payable in cash or in common stock or in a combination of both.
•Stock Payment Awards: Stock Payment Awards may be authorized by the Administrator in the form of common stock or an option or other right to purchase common stock as part of a deferred compensation or other arrangement in lieu of all or any part of compensation, including bonuses, that would otherwise be payable in cash to the employee, consultant or non-employee director.
Effect of a Change in Control
In the event of a change in control where the acquirer does not assume or replace awards granted prior to the consummation of such transaction, awards issued under the 2015 Plan will be subject to accelerated vesting such that 100% of such awards will become vested and exercisable or payable, as applicable. Performance awards will vest in accordance with the terms and conditions of the applicable award agreement.
In the event that, within the 12-month period immediately following a change in control, a participant’s services are terminated other than for cause (as defined in the 2015 Plan) or by such participant for good reason (as defined in the 2015 Plan), then the vesting and, if applicable, exercisability of 100% of the then-unvested shares subject to the outstanding equity awards held by such participant under the 2015 Plan will accelerate effective as of the date of such termination. The Administrator may also make appropriate adjustments to awards under the 2015 Plan.
Under the 2015 Plan, a change in control is generally defined as:
•A transaction or series of transactions (other than an offering of common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition;
•During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction otherwise described in this definition) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;
•The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: (i) which results in the Company’s voting securities
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outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and (ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this definition as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
•The Company’s stockholders approve a liquidation or dissolution of the Company.
Adjustments of Awards
In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock other than an “equity restructuring” (as defined below), the Administrator may make equitable adjustments to reflect the event giving rise to the need for such adjustments, with respect to:
•the aggregate number and type of shares subject to the 2015 Plan;
•the number and kind of shares subject to outstanding awards;
•the number and kind of shares for which grants are subsequently made to new and continuing non-employee directors;
•the terms and conditions of outstanding awards; and
•the grant or exercise price per share of any outstanding awards under the 2015 Plan.
In the event of one of the adjustments described above or other corporate transactions, in order to prevent dilution or enlargement of the potential benefits intended to be made available under the 2015 Plan, the Administrator has the discretion to make such equitable adjustments and may also:
•provide for the termination or replacement of an award in exchange for cash or other property;
•provide that such award may be assumed by the successor or survivor corporation or shall be substituted for by similar options, rights or awards covering stock of the successor or survivor corporation with appropriate adjustments as to the number and kind of shares and prices;
•make adjustments in the number and type of shares of subject to outstanding awards, and in the number and kind of outstanding restricted stock or deferred stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding awards and awards which may be granted in the future;
•provide that such award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the 2015 Plan or the applicable program under the 2015 Plan or award agreement; and
•provide that the award cannot vest, be exercised or become payable after such an event.
In the event of an equity restructuring, the Administrator will make appropriate, proportionate adjustments to the number and type of securities subject to each outstanding award and the exercise price or grant price thereof, if applicable. In addition, the Administrator will make equitable adjustments, as the Administrator in its discretion may deem appropriate to reflect such equity restructuring, with respect to the aggregate number and type of shares subject to the 2015 Plan. The adjustments upon an equity restructuring are nondiscretionary and will be final and binding on the affected holders and the Company.
For purposes of the 2015 Plan, “equity restructuring” means a nonreciprocal transaction between us and our stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of shares (or other securities) or the share price of our common stock (or other securities) and causes a change in the per share value of the common stock underlying outstanding stock-based awards granted under the 2015 Plan.
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Federal Income Tax Consequences
The following summarizes the currently applicable U.S. federal income tax consequences of awards that may be granted under the 2015 Plan.
Incentive Stock Options. An option holder will not realize taxable income upon the grant or of an incentive stock option under the 2015 Plan. In addition, an option holder generally will not realize taxable income upon the exercise of an incentive stock option. An option holder’s alternative minimum taxable income, however, will be increased by the amount by which the aggregate fair market value of the shares underlying the option, which is generally determined as of the date of exercise, exceeds the aggregate exercise price of the option. Further, except in the case of an option holder’s death or disability, if an option is exercised more than three months after the option holder’s termination of employment, the option will cease to be treated as an incentive stock option and will be subject to taxation under the rules applicable to non-qualified stock options, as summarized below.
If an option holder sells the option shares acquired upon exercise of an incentive stock option, the tax consequences of the disposition will depend upon whether the disposition is “qualifying” or “disqualifying.” The disposition of the option shares will be a qualifying deposition if it is made at least two years after the date on which the incentive stock option was granted and at least one year after the date on which the incentive stock option was exercised. If the disposition of the option shares is qualifying, any excess of the sale price of the option shares over the exercise price of the option will be treated as long-term capital gain taxable to the option holder at the time of the sale. If the disposition is a disqualifying disposition, the excess of the fair market value of the option shares on the date of disposition over the exercise price will be taxable income to the option holder at the time of the disposition. Of that income, the amount up to the excess of the fair market value of the shares at the time the option was exercised over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long-term or short-term capital gain, depending upon whether or not the shares were sold more than one year after the option was exercised.
Unless an option holder engages in a disqualifying disposition, the Company will not be entitled to a deduction with respect to an incentive stock option. If an option holder engages in a disqualifying disposition, the Company will be entitled to a deduction equal to the amount of compensation income taxable to the option holder.
If an option holder pays the exercise price of an incentive stock option by tendering shares with a fair market value equal to part or all of the exercise price, the exchange of shares will be treated as a nontaxable exchange, except that this treatment will not apply if the option holder acquired the shares being tendered pursuant to the exercise of an incentive stock option and has not satisfied the special holding period requirements summarized above. The tax basis of the shares tendered to pay the exercise price will be treated as the substituted tax basis for an equivalent number of shares received, and the new shares will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares.
Non-Qualified Stock Options. An option holder will not realize taxable income upon the grant of a non-qualified stock option. When an option holder exercises the option, however, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will constitute compensation income taxable to the option holder. The Company will be entitled to a deduction equal to the amount of compensation income taxable to the option holder. If an option holder tenders shares in payment of part or all of the exercise price of a non-qualified stock option, no gain or loss will be recognized with respect to the shares tendered, even if the shares were acquired pursuant to the exercise of an incentive stock option. In such an event, the option holder will be treated as receiving an equivalent number of shares pursuant to the exercise of the option in a nontaxable exchange. The tax basis of the shares tendered will be treated as the substituted tax basis for an equivalent number of shares received, and the shares received will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares. The difference between the aggregate exercise price and the aggregate fair market value of the shares received pursuant to the exercise of the option will be taxed as ordinary income, just as if the option holder had paid the exercise price in cash.
Restricted Stock. A grantee of restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award if the common stock is subject to restrictions (that is, the restricted stock is nontransferable and subject to a substantial risk of forfeiture). The grantee, however, may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the grantee does not make such a Section 83(b) election, the fair market value of the shares on the date on which the restrictions lapse will be treated as compensation income to the grantee and will be taxable in the year in which the restrictions lapse. The Company generally will be entitled to a deduction for compensation paid equal to the amount treated as compensation income to the grantee in the year in which the grantee is taxed on the income, if the Company complies with applicable reporting requirements.
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Restricted Stock Units. A grantee of restricted stock units does not recognize any taxable income for federal income tax purposes in the year of the award if the award is subject to restrictions. However, when the restricted stock units vest, the grantee generally recognize ordinary income in an amount equal to the fair market value of the restricted stock units at such time. The Company generally will be entitled to a deduction for compensation paid equal to the amount treated as compensation income to the grantee in the year in which the grantee is taxed on the income, if the Company complies with applicable reporting requirements.
Performance Awards. A distribution of common stock or a payment of cash in satisfaction performance awards will be taxable as ordinary income when the distribution or payment is actually or constructively received by the recipient. The amount taxable as ordinary income is the aggregate fair market value of the common stock determined as of the date it is received or the amount of the cash payment. The Company will be entitled to deduct the amount of such payments when such payments are taxable as compensation to the recipient if the Company complies with applicable reporting requirements.
Stock Appreciation Rights. The grant of SARs will not result in taxable income to the participant or a deduction to the Company. Upon exercise of a SAR, the holder will recognize ordinary income in an amount equal to the cash or the fair market value of the Common Stock received by the holder. The Company will be entitled to a deduction equal to the amount of any compensation income taxable to the grantee, and, as to SARs that are settled in shares of common stock, if the Company complies with applicable reporting requirements.
Plan Benefits
The following table sets forth information on stock options and full value awards (i.e., restricted stock, restricted stock units, and deferred awards with outstanding performance-based awards shown at target performance) granted under the 2015 Plan and includes awards subsequently forfeited, if any, as of March 31, 2022.
| Name | Stock Options | Full Value Awards | ||||||||||||
Scott W. Drake President & Chief Executive Officer | 314,044 | 4,431,216 | ||||||||||||
Zachary Stassen Chief Financial Officer | — | 654,665 | ||||||||||||
Paul Ziegler Chief Commercial Officer | 79,000 | 533,466 | ||||||||||||
Robert McCormack Chief Legal Officer | 61,779 | 854,742 | ||||||||||||
| All Current Executive Officers as a Group | 1,258,425 | 8,259,084 | ||||||||||||
| All Non-Employee Directors as a Group | 239,779 | 950,377 | ||||||||||||
| All Employees (excluding Executive Officers as a Group) | 9,985,348 | 6,859,873 | ||||||||||||
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Equity Compensation Plan Information
As of December 31, 2021, the Company had an active stock-based incentive compensation plan, an employee stock purchase plan and an equity inducement plan: the 2015 Plan, the 2015 Employee Stock Purchase Plan (as amended and restated, the “ESPP”), and the 2018 Equity Inducement Award Program (the “2018 Plan”), respectively. All new equity compensation grants are issued under these three plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans.
The following table sets forth the number of shares of common stock subject to outstanding options and other rights, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of December 31, 2021 in each of the equity compensation plans.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)(1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) | |||||||||||||||||
| Equity Compensation Plans Approved by Stockholders(2)(3) | 10,869,657 | (4) | $ | 6.13 | 15,195,997 | |||||||||||||||
| Equity Compensation Plans Not Approved by Stockholders(5) | 3,056,843 | (6) | $ | 8.19 | 4,558,147 | |||||||||||||||
| Total | 13,926,500 | 19,754,144 | ||||||||||||||||||
(1) Represents the weighted average exercise price of outstanding options.
(2) Includes the ViewRay Incorporated 2008 Stock Option and Incentive Plan; the 2015 Plan; and the ESPP.
(3) The purpose of the ESPP is to assist employees in acquiring shares of common stock in the Company pursuant to a plan which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. The ESPP contains an “evergreen” provision, pursuant to which the number of shares of common stock reserved for issuance under such plan shall be increased on the first day of each year beginning in 2016 and ending in 2025, in each case subject to the approval of the Compensation Committee on or prior to the applicable date, equal to the lesser of (A) one percent (1%) of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by the Board; provided, however, no more than 3,500,000 shares of stock may be issued under the ESPP.
(4) Consists of the following: (i) 3,743,580 stock options under the 2015 Plan, (ii) 6,324,614 restricted stock units under the 2015 Plan, (iii) 470,198 stock options under the 2008 Plan, and (iv) 331,265 shares purchased under the ESPP.
(5) Includes the 2018 Plan.
(6) Consists of the following: (i) 2,942,998 stock options under the 2018 Plan, and (ii) 113,845 restricted stock units under the 2018 Plan.
The following table sets forth the number of shares of common stock subject to outstanding options and other rights, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of March 31, 2022 in each of the equity compensation plans.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)(1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) | ||||||||||||||||||||
| Equity Compensation Plans Approved by Stockholders(2)(3) | 12,472,381 | (4) | $ | 6.07 | 13,605,945 | (7) | |||||||||||||||||
| Equity Compensation Plans Not Approved by Stockholders(5) | 3,056,843 | (6) | $ | 8.19 | 4,558,147 | ||||||||||||||||||
| Total | 15,529,224 | 18,164,092 | |||||||||||||||||||||
(1) Represents the weighted average exercise price of outstanding options.
(2) Includes the ViewRay Incorporated 2008 Stock Option and Incentive Plan; the 2015 Plan; and the ESPP.
(3) The purpose of the ESPP is to assist employees in acquiring shares of common stock in the Company pursuant to a plan which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. The ESPP contains an “evergreen” provision, pursuant to which the number of shares of common stock reserved for issuance under such plan shall be increased on the first day of each year beginning in 2016 and ending in 2025, in each case subject to the approval of the Compensation Committee on or prior to the applicable date, equal to the lesser of (A) one percent (1%) of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of
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shares of stock as determined by the Board; provided, however, no more than 3,500,000 shares of stock may be issued under the ESPP.
(4) Consists of the following: (i) 3,592,187 stock options under the 2015 Plan, (ii) 8,080,625 restricted stock units under the 2015 Plan (assuming a 150% payout of the 2021 PSUs), (iii) 468,304 stock options under the 2008 Plan, and (iv) 331,265 shares purchased under the ESPP.
(5) Includes the 2018 Plan. The Board determined that the 2018 Plan was no longer required under ViewRay’s compensation program and terminated the 2018 Plan effective April 19, 2022.
(6) Consists of the following: (i) 2,942,998 stock options under the 2018 Plan, and (ii) 113,845 restricted stock units under the 2018 Plan.
(7) Consists of the following: (i) 12,472,381 securities reflected in column (a), and (ii) 1,133,564 shares available for future awards under the 2015 Plan excluding the ESPP (assuming a 150% payout of the 2021 PSUs).
The 2018 Plan was adopted by the Board as of July 22, 2018 and was not approved by our stockholders in accordance with the exception from the requirement for the Company’s stockholders to approve equity incentive plans under Nasdaq Listing Rule 5635(c)(4). The purpose of the 2018 Plan was to further the long-term stability and success of the Company by providing a program to reward selected individuals hired as employees of the Company with grants of inducement awards. Unless otherwise provided in the 2018 Plan, the operative terms of any inducement awards granted under the 2018 Plan adhered to the terms and conditions of the 2015 Plan. The Board (or any committee of the Board to whom such authority has been delegated) approves the shares that may be issued under the 2018 Plan, which shares do not count against the shares reserved for issuance or per participant limits that apply under the 2015 Plan. The Board or such committee determines the type, size, exercise price, if applicable, and the methods by which any award granted under the 2018 Plan may be exercised, if applicable, cancelled, forfeited or suspended. The Board or such committee may amend the 2018 Plan as it deems advisable and the Board may terminate the 2018 Plan at any time, except with regard to outstanding awards.
The Board determined that the 2018 Plan was no longer required under ViewRay’s compensation program and terminated the 2018 Plan effective April 19, 2022. No further awards will be granted under this plan and no such awards have been granted since August 16, 2021. As a result, all 1,501,304 shares previously available for issuance under the 2018 Plan have been restored to the Company’s general authorized but unissued share reserve and are no longer set aside for grants under the 2018 Plan.
THE BOARD RECOMMENDS A VOTE “FOR” THE AMENDMENT TO THE 2015 PLAN IN ORDER TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE 2015 PLAN
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PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee has engaged Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2022 and is seeking ratification of this selection by our stockholders at the Annual Meeting. Deloitte & Touche LLP has audited our financial statements since the year ended December 31, 2010. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Deloitte & Touche LLP to our stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Deloitte & Touche LLP. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that a change would be in the best interests of the Company and our stockholders.
Audit and Non-Audit Services
The following table provides information regarding the fees incurred to Deloitte & Touche LLP during the years ended December 31, 2021 and 2020. All fees described below were approved by the Audit Committee.
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| (in thousands) | |||||||||||
| Audit Fees (1) | $ | 1,157 | $ | 776 | |||||||
| Audit-Related Fees | — | — | |||||||||
| Tax Fees (2) | — | 5 | |||||||||
| All Other Fees | — | — | |||||||||
| Total | $ | 1,157 | $ | 781 | |||||||
(1)Audit Fees of Deloitte & Touche LLP for 2021 and 2020 were for professional services rendered for the annual audit of our consolidated financial statements, the reviews of our quarterly condensed consolidated financial statements and the issuance of consents and comfort letters in connection with registration statement filings with the SEC. In 2021, the audit fees also included fees associated with the annual audit of our internal controls over financial reporting.
(2)Tax Fees consist of fees for tax compliance, tax advice and tax planning.
Audit Committee Pre-Approval Policies and Procedures
Before an independent registered public accounting firm is engaged by the Company to render audit or non-audit services, the Audit Committee must review the terms of the proposed engagement and pre-approve the engagement. The Audit Committee may delegate authority to one or more of the members of the Audit Committee to provide these pre-approvals for audit or non-audit services, provided that the person or persons to whom authority is delegated must report the pre-approvals to the full Audit Committee at its next scheduled meeting. Audit Committee pre-approval of non-audit services (other than review and attest services) is not required if those services fall within available exceptions established by the SEC.
The Audit Committee pre-approved all audit, audit-related, tax and other services provided by Deloitte & Touche LLP for 2021 and 2020 and the estimated costs of those services. Actual amounts billed, to the extent in excess of the estimated amounts, were periodically reviewed and approved by the Audit Committee.
THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022.
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REPORT OF THE AUDIT COMMITTEE
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of ViewRay, Inc. (“ViewRay”) under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The primary purpose of the Audit Committee is to oversee our financial reporting processes on behalf of the Board. The Audit Committee’s functions are more fully described in its charter, which is available in the “Corporate Governance” section of ViewRay’s investor relations website at https://investors.viewray.com/corporate-governance/esg. Management has the primary responsibility for ViewRay’s financial statements and reporting processes, including its systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management ViewRay’s audited financial statements as of and for the year ended December 31, 2021.
The Audit Committee has discussed with Deloitte & Touche LLP, ViewRay’s independent registered public accounting firm, the matters required to be discussed under applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. In addition, the Audit Committee discussed Deloitte & Touche LLP’s independence with their representatives and has received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence. Finally, the Audit Committee discussed with Deloitte & Touche LLP, with and without management present, the scope and results of Deloitte & Touche LLP’s audits of ViewRay’s financial statements.
Based on these reviews and discussions, the Audit Committee has recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021 for filing with the SEC. The Audit Committee also has engaged Deloitte & Touche LLP as ViewRay’s independent registered public accounting firm for the fiscal year ending December 31, 2022 and is seeking ratification of this selection by the stockholders.
| Audit Committee | |||||
| Brian K. Roberts, Chair | |||||
| Dr. Caley Castelein | |||||
| Daniel Moore | |||||
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PROPOSAL NO. 4
ADVISORY VOTE TO APPROVE THE COMPANY’S 2021 EXECUTIVE COMPENSATION
We are providing our stockholders an opportunity to indicate whether they approve of our 2021 named executive officer compensation as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the related narrative discussion in this proxy statement. This proposal is required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended. Although this vote is advisory and is not binding on the Company, the Compensation Committee and the Board will take into account the outcome of this vote when making future executive compensation decisions. We believe that our compensation philosophy and practices are consistent with market practices, designed to attract and retain key executives and reward company performance, and aligned with long-term stockholder interests. Accordingly, stockholders are being asked to vote “FOR” the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion of the Company’s 2022 proxy statement, is hereby APPROVED.”
This advisory vote, commonly referred to as a “say on pay” vote is not intended to address any specific item of compensation, but instead relates to the Compensation Discussion and Analysis, the tabular disclosures regarding named executive officer compensation, and the narrative disclosure accompanying such tables. These disclosures allow you to view the trends in our executive compensation program and the application of our compensation philosophy for the years presented.
ViewRay’s compensation program is designed and administered by the Compensation Committee, which is composed entirely of independent directors within the meaning of the Nasdaq Stock Market Rules. We carefully consider many different factors and engaged in a robust shareholder engagement effort throughout 2021, as described on page 32 of the Compensation Discussion and Analysis, in order to provide appropriate compensation for our executives and consider shareholder viewpoints on such compensation. Our executive compensation program is designed to attract, motivate and reward the executive talent required to achieve our corporate objectives and increase stockholder value. The Compensation Committee has designed our compensation program to be competitive with the compensation offered by those peers with whom we compete for executive talent. Targets for base salaries, annual cash incentive and long-term incentive awards for executives factor in competitive data. A majority of our executive officers’ total compensation is performance-based in order to align their interests with those of our stockholders and place more of their compensation at risk and emphasize a long-term strategic view. As discussed in the Compensation Discussion and Analysis beginning on page 32 of this proxy statement, we believe that our executive compensation program properly links executive compensation to Company performance and aligns the interests of our executive officers with those of our stockholders.
Following the vote to be conducted at the Annual Meeting, it is anticipated that the next advisory vote to approve named executive officer compensation will be conducted at the Company’s 2023 Annual Meeting of Stockholders.
Required Vote
The vote on Proposal No. 4 is advisory in nature and, therefore, are not binding on ViewRay. However, the Board and Compensation Committee will review the results of the vote in making future compensation decisions. For purposes of determining the number of votes cast on the matter, only those cast “For” or “Against” are included. Abstentions and broker non-votes are not included.
Unless otherwise indicated, properly executed proxies will be voted in favor of Proposal No. 4 to approve the compensation of ViewRay’s named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in this proxy statement set forth under the caption “Executive Compensation” of this proxy statement.
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION ON VIEWRAY’S 2021 EXECUTIVE COMPENSATION
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INFORMATION ABOUT STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as to the beneficial ownership of our common stock as of April 18, 2022, unless noted otherwise, for:
•each person, or group of affiliated persons, known by us to beneficially own more than five percent of our common stock;
•each named executive officer as set forth in the summary compensation table included in this proxy statement;
•each of our directors; and
•all current executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to common stock warrants, options that are currently exercisable or exercisable within 60 days of April 18, 2022, and restricted stock units and performance share awards that vest within 60 days of April 18, 2022, are deemed to be outstanding and to be beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Percentage ownership of our common stock in the table is based on 180,455,595 shares of our common stock issued and outstanding on April 18, 2022. Unless noted otherwise, the address of each of the individuals and entities named below is c/o ViewRay, Inc., 2 Thermo Fisher Way, Oakwood Village, Ohio 44146.
| Name of Beneficial Owner | Number of Outstanding Common Shares Beneficially Owned | Number of Common Shares Exercisable Within 60 Days | Number of Common Shares Beneficially Owned | Percent of Beneficial Ownership | ||||||||||||||||||||||
| Greater than 5% Shareholders: | ||||||||||||||||||||||||||
| Entities affiliated with Artisan Partners Limited Partnership (1) | 23,246,293 | — | 23,246,293 | 12.9 | % | |||||||||||||||||||||
| Entities affiliated with Fosun International Limited (2) | 15,519,500 | 1,418,116 | 16,937,616 | 9.3 | % | |||||||||||||||||||||
| Entities affiliated with Hudson Executive Capital L.P. (3) | 15,752,093 | — | 15,752,093 | 8.7 | % | |||||||||||||||||||||
| Entities affiliated with Pura Vida Investments, LLC (4) | 14,106,860 | — | 14,106,860 | 7.8 | % | |||||||||||||||||||||
| Entities affiliated with BlackRock, Inc (5) | 10,004,218 | — | 10,004,218 | 5.5 | % | |||||||||||||||||||||
| Entities affiliated with Millennium Management LLC (6) | 9,597,359 | — | 9,597,359 | 5.3 | % | |||||||||||||||||||||
| Named Executive Officers and Directors: | ||||||||||||||||||||||||||
| Scott W. Drake (7) | 2,085,356 | 398,544 | 2,483,900 | 1.4 | % | |||||||||||||||||||||
| Zachary Stassen (8) | 143,496 | 156,357 | 299,853 | * | ||||||||||||||||||||||
| Paul Ziegler (9) | 80,485 | 23,339 | 103,824 | * | ||||||||||||||||||||||
| Robert McCormack (10) | 153,419 | 10,906 | 164,325 | * | ||||||||||||||||||||||
| Caley Castelein, M.D. (11) | 786,515 | 59,487 | 846,002 | * | ||||||||||||||||||||||
| B. Kristine Johnson (12) | 130,708 | 24,876 | 155,584 | * | ||||||||||||||||||||||
| Daniel Moore (13) | 122,164 | 19,759 | 141,923 | * | ||||||||||||||||||||||
| Karen N. Prange (14) | 6,598 | 21,226 | 27,824 | * | ||||||||||||||||||||||
| Susan C. Schnabel (15) ** | 25,000 | 13,588 | 38,588 | * | ||||||||||||||||||||||
| Brian K. Roberts (16) | 112,002 | 19,759 | 131,761 | * | ||||||||||||||||||||||
| Phillip M. Spencer (17) | 16,554 | 21,846 | 38,400 | * | ||||||||||||||||||||||
| Gail Wilensky, Ph.D. (18) | 103,786 | 20,862 | 124,648 | * | ||||||||||||||||||||||
| Common shares all directors and executive officers own as a group (12 persons) (19) | 3,766,083 | 790,549 | 4,556,632 | 2.5 | % | |||||||||||||||||||||
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*Represents beneficial ownership of less than one percent of our outstanding shares of common stock.
**Ms. Schnabel was elected to the Board on March 8, 2022.
(1)Consists of 23,246,293 shares of common stock held by Artisan Partners Limited Partnership (“APLP”), which includes 12,462,299 shares of common stock held on behalf of Artisan Partners Funds, Inc. (“Artisan Funds”). Artisan Partners Holdings LP (“Artisan Holdings”) is the sole limited partner of APLP and the sole member of Artisan Investments GP LLC, which in turn is the general partner of APLP. Artisan Partners Asset Management Inc. is the general partner of Artisan Holdings. Except for Artisan Funds, each of the reporting persons beneficially owns and has shared dispositive power over 23,246,293 shares of common stock and has shared voting power over 18,681,843 of such shares. Artisan Funds beneficially owns and has shared dispositive power over 12,462,299 shares of common stock and has shared voting power over 12,462,299 of such shares. The address of each of the reporting persons is 875 East Wisconsin Avenue, Suite 800, Milwaukee, WI 53202. Based on the Schedule 13G/A filed on February 4, 2022.
(2)Consists of (i) 2,813,834 shares of common stock held by Fosun International Limited, (ii) 11,108,222 shares of common stock and warrants exercisable within 60 days for 1,418,116 shares of Common Stock held by Strong Influence Limited, an indirect wholly-owned subsidiary of Fosun International Limited, and (iii) 1,597,444 shares of common stock held by Fosun Atlas Capital SICAV RAIF S.C.S., a fund managed by an indirect wholly-owned subsidiary of Fosun International Limited. Fosun International Limited may be deemed to beneficially own 16,937,616 shares of common stock, has sole voting and dispositive power over 2,813,834 of such shares, and has shared voting and dispositive power over 14,123,782 of such shares. Strong Influence Limited may be deemed to beneficially own, and have shared voting and dispositive power over, 12,526,338 of such shares. The address of Strong Influence Limited is Maples Corporate Services Centre (BVI) Limited of Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands. The address of Fosun International Limited is Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong. Based on the Schedule 13G filed with the SEC on November 10, 2021..
(3)Consists of shares held of record or deemed to be beneficially owned by Hudson Executive Capital LP (“Hudson Executive”), HEC Management GP LLC (“Management GP”), and Douglas L. Braunstein. Hudson Executive serves as investment advisor to certain affiliated investment funds. Management GP is the general partner of Hudson Executive. Mr. Braunstein is the managing partner of Hudson Executive and the managing member of Management GP. Each of Hudson Executive, Management GP, and Mr. Braunstein may be deemed to beneficially own and share voting and dispositive power over all such shares of common stock. The address of each of Hudson Executive, Management GP, and Mr. Braunstein is 570 Lexington Avenue, 35th Floor, New York, New York 10022. Based on the Schedule 13D/A filed with the SEC on March 9, 2022.
(4)Consists of shares held by Pura Vida Master Fund, Ltd. (the “Pura Vida Master Fund”) and certain separately managed accounts (the “Pura Vida Accounts”). Pura Vida Investments, LLC (“PVI”) serves as the investment manager to the Pura Vida Master Fund and the Pura Vida Accounts. Efrem Kamen serves as the managing member of PVI. By virtue of these relationships, PVI and Efrem Kamen may be deemed to have shared voting and dispositive power with respect to the shares owned directly by the Pura Vida Master Fund and the Pura Vida Accounts. The address of each of PVI and Efrem Kamen is 888 7th Avenue, 6th Floor, New York, New York 10106. Based on the Schedule 13G/A filed with the SEC on February 14, 2022.
(5)Consists of shares held by subsidiaries of BlackRock, Inc. (“BlackRock”). BlackRock is the parent holding company or control person with respect to such subsidiaries and has sole voting power of 9,855,855 shares and sole disposition power of 10,004,218 shares. Based on the Schedule 13G filed with the SEC on February 4, 2022.
(6)Consists of shares held by entities subject to voting control and investment discretion by Millennium Management LLC and/or other investment managers that may be controlled by Millennium Group Management LLC (the managing member of Millennium Management LLC) and Mr. Israel A. Englander (the sole voting trustee of the managing member of Millennium Group Management LLC). Millennium Management LLC, Millennium Group Management LLC, and Mr. Englander have shared voting and dispositive power and may be deemed beneficial owners of the shares. The address of each of Millennium Management LLC, Millennium Group Management LLC, and Mr. Englander is 399 Park Avenue, New York, New York 10022. Based on the Schedule 13G filed with the SEC on March 9, 2022.
(7)Consists of (i) 2,085,356 shares held by Mr. Drake and (ii) 398,544 shares that may be acquired pursuant to stock options and RSUs within 60 days of April 18, 2022.
(8)Consists of (i) 143,496 shares held by Mr. Stassen and (ii) 156,357 shares that may be acquired pursuant to stock options and RSUs within 60 days of April 18, 2022.
(9)Consists of (i) 80,485 shares held by Mr. Ziegler and (ii) 23,339 shares that may be acquired pursuant to stock options and RSUs within 60 days of April 18, 2022.
(10)Consists of (i) 153,419 shares held by Mr. McCormack and (ii) 10,906 shares that may be acquired pursuant to stock options within 60 days of April 18, 2022.
(11)Consists of (i) 655,915 shares held by Dr. Castelein, (ii) 130,600 shares beneficially owned by KVP Capital L.P., and (iii) 59,487 shares that may be acquired pursuant to stock options, common stock warrants, and RSUs within 60 days of April 18, 2022. Dr. Castelein is a Managing Director of KVP Capital L.P. Dr. Castelein disclaims beneficial ownership of the shares held by KVP Capital L.P, except to the extent of any pecuniary interest therein, if any.
(12)Consists of (i) 130,708 shares held by Ms. Johnson and (ii) 24,876 shares that may be acquired pursuant to RSUs within 60 days of April 18, 2022.
(13)Consists of (i) 122,164 shares held by Mr. Moore and (ii) 19,759 shares that may be acquired pursuant to RSUs within 60 days of April 18, 2022.
(14)Consists of (i) 6,598 shares held by Ms. Prange and (ii) 21,226 shares that may be acquired pursuant to RSUs within 60 days of April 18, 2022.
(15)Consists of (i) 25,000 shares held by Ms. Schnabel and (ii) 13,588 shares that may be acquired pursuant to RSUs within 60 days of April 18, 2022.
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(16)Consists of (i) 112,002 shares held by Mr. Roberts and (ii) 19,759 shares that may be acquired pursuant to RSUs within 60 days of April 18, 2022.
(17)Consists of (i) 16,554 shares held by Mr. Spencer and (ii) 21,846 shares that will be acquired pursuant to RSUs within 60 days of April 18, 2022.
(18)Consists of (i) 103,786 shares held by Dr. Wilensky and (ii) 20,862 shares that will be acquired pursuant to RSUs within 60 days of April 18, 2022.
(19)Includes 3,766,083 shares beneficially owned by our current executive officers and directors, which includes 130,600 shares beneficially owned by an entity affiliated with Dr. Castelein, and 790,549 shares that may be acquired pursuant to stock options, RSUs and common stock warrants within 60 days of April 18, 2022.
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EXECUTIVE OFFICERS
The following is biographical information for our executive officers, including their ages, as of April 18, 2022.
| Name | Age | Title | ||||||||||||
| Scott W. Drake | 54 | President, Chief Executive Officer and Director | ||||||||||||
| Zachary Stassen | 43 | Chief Financial Officer | ||||||||||||
| Paul Ziegler | 49 | Chief Commercial Officer | ||||||||||||
| Robert McCormack | 55 | Chief Legal Officer | ||||||||||||
Scott W. Drake has served as our President and Chief Executive Officer and as a member of the Board since July 2018. Please see Mr. Drake’s biography set forth above in the section entitled “Proposal 1—Election of Directors.”
Zachary Stassen has served as our Chief Financial Officer since May 2020. Prior to joining ViewRay, from 2017 to 2020 he served as Chief Financial Officer and Chief Operating Officer for Bolder Surgical, an innovative, privately held company that develops and markets laparoscopic surgical devices. From 2014 to 2017, he held various finance and business development roles at The Spectranetics Corporation, including Vice President of Finance, before its acquisition by Royal Philips. Between 2013 to 2014, Mr. Stassen served as an Account Executive for NetSuite, Inc., and from 2011 to 2013 maintained his self-established strategic planning consultancy, Z Stassen, LLC. Between 2010 to 2011, Mr. Stassen served as Co-founder and Chief Financial Officer at Emerge Medical, a device company focused on generic orthopedic trauma products, which was acquired by Cardinal Health. From 2005 to 2008, he worked for Piper Sandler’s (formerly Piper Jaffray) medical technology investment banking group. Mr. Stassen earned a master’s degree in business administration from the Kellogg School of Management at Northwestern University, and a bachelor’s degree from Drake University.
Paul Ziegler has served as our Chief Commercial office since July 2021. Prior to joining ViewRay, from 2015 to 2019, he served as Vice President of Sales for TransEnterix, leading commercial efforts for the surgical robotics platform, Senhance. From 2006 to 2015, he held various sales roles at Intuitive Surgical, including Regional Vice President. From 2002 to 2006, he held various sales roles at CardioVations and Dianon/LapCorp. He learned leadership and discipline in his eight years in the U.S. Navy, holds a B.A. from Norwich University in Northfield, VT and a J.D. from William and Mary in Williamsburg, VA.
Robert McCormack has served as our Chief Legal Officer since August 2018. Prior to joining ViewRay, between 2017 to 2018, he served as Deputy General Counsel at Cherwell Software. From 2015 to 2017, he served as Deputy General Counsel at The Spectranetics Corporation.. From 2011 to 2015, he served as Senior Counsel at GE Healthcare. From 2008 to 2011, he served as Senior Counsel at Covidien. Prior to that, Mr. McCormack worked in private practice where he focused on corporate, securities, mergers and acquisitions, and general business matters. Mr. McCormack holds a J.D. from the University of Denver, College of Law and a B.S. in Finance from Metropolitan State University of Denver.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis discusses our 2021 compensation program and elements of compensation for the year for each of the following named executive officers:
•Scott W. Drake, President, Chief Executive Officer and Director;
•Zachary Stassen, Chief Financial Officer;
•Paul Ziegler, Chief Commercial Officer; and
•Robert McCormack, Chief Legal Officer.
Executive Summary and Overview of 2021 Compensation
Our Company’s long-term success depends on our ability to fulfill the expectations of our customers in a competitive environment and deliver value to stockholders. To achieve these goals, it is critical that we attract, retain and develop highly talented individuals at all levels of the organization who are committed to the Company’s values and objectives. Accordingly, the Company strives to provide compensation that is (a) linked to stockholder value creation, (b) reflective of the overall performance of the Company, and (c) considerate of the competitive market levels of compensation needed to attract, retain and develop top executive talent, while remaining consistent with the other objectives.
As part of the Company’s continued focus on delivering improved stockholder value, the Compensation Committee designs its executive compensation plans to closely align executive compensation with stockholders’ multi-year time horizon and reinforce a pay for performance culture while encouraging retention.
We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance goals and near-term corporate targets as well as long-term business objectives.
Our compensation decisions in 2021 were designed to meet these goals. As set forth in more detail below, our Compensation Committee reinforced our pay for performance philosophy by paying cash incentives under our Amended and Restated 2015 Equity Incentive Award Plan (“2015 Plan”), to our named executive officers (“NEOs”) and other members of management only when pre-established financial performance metrics for the Company were met.
In 2021, the Company also added a performance based long-term equity incentive component. Long-term equity incentives for the year were delivered two-thirds in restricted stock units and one-third in performance shares, each granted under the 2015 Plan. Performance shares may become earned at between 0% and 300% of the target number of performance shares awarded based on the Company’s compound annual revenue growth rate over a three-year period, a metric that is important to the Company’s investors.
Fiscal Year 2021 Business Performance
Due to pandemic-related factors like the delays in service from our global supply chain partners and travel and quarantine restrictions imposed by government agencies and our customers in response to the spread of coronavirus, we continue to experience delays in installation of systems in the United States, Asia and Europe. Similarly, our ability to conduct commercial efforts with our customers has been and is likely to continue to be disrupted as customers are reintroducing in-person sales calls. Since the pandemic began, many customers have reduced spending on capital equipment and redirected financial resources to pandemic-related spending and otherwise preserved capital.
Despite these headwinds, during 2021:
•we received a total of 28 orders;
•we generated total revenue of $70.1 million;
•our total backlog increased to $313.4 million as of December 31, 2021; and,
•our cash usage was approximately $66.9 million excluding net aggregate proceeds from our January and November 2021 public offerings of approximately $128.5 million.
Say on Pay and Shareholder Engagement
The Compensation Committee seeks feedback from shareholders annually on the Company’s compensation programs and provides shareholders the opportunity to cast an annual, non-binding advisory vote on executive compensation, commonly referred to as Say on Pay. In 2021, we conducted an advisory vote on our 2020 executive compensation program with approximately 79% of shareholders voting in favor of our program.
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Our senior leaders and Compensation Committee continue to seek to understand our shareholder’s concerns and perspectives on our compensation program, particularly with regard to those shareholders who voted against our 2020 Say on Pay proposal. In the aggregate, we reached out to shareholders holding approximately 80% of our outstanding common stock to solicit their views and feedback on a wide variety of matters including our compensation programs. The feedback we heard throughout these engagements is summarized below:
•shareholders remained supportive of the Company’s use of the performance share plan;
•shareholders encouraged the Company to continue to determine annual incentive payouts without discretionary adjustments; and,
•shareholders evidenced support for the Company’s limited use of retention grants.
In direct response to this shareholder feedback as well as our continued evaluation of peer group activity, we took the following actions:
•In March 2021, we introduced a performance share plan (the “2021 PSU Plan”) as a component of our equity grants for 2021. The 2021 PSU Plan provides for the award of performance share units that vest based on the Company’s compound annual revenue growth rate over a three-year period, in light of the importance of this metric to the Company’s investors. We continued to grant PSUs under our 2022 compensation program with a three-year compound annual revenue growth rate performance metric. A larger percentage of PSU shares, as compared to time-based RSUs, were granted in 2022, with 50% of grants in PSUs and 50% in RSUs.
•We continue to disclose details of our short-term incentive plan. In 2021 short-term incentive payments were based on actual performance against established financial, operational, and strategic goals and did not include any discretionary payments or adjustments.
•No retention grants were provided to the CEO or other NEOs in 2021. No additional retention grants are currently anticipated.
The Compensation Committee recognizes the importance of having ongoing and open conversations with our shareholders to solicit their feedback. The committee values the insights gained from such conversations and finds them helpful even when points of view vary. The Compensation Committee, as well as the members of the Board, will consider such stockholder feedback when adopting policies and practices affecting our executive compensation program and will continue to seek ongoing opportunities to have dialogues with our shareholders. The Compensation Committee is committed to maintaining or bettering such level of shareholder engagement going forward.
Compensation Philosophy and Objectives
The Company’s executive compensation program is based on the same objectives that guide the Company in establishing all of its compensation programs:
•Compensation promotes the long-term focus required for the Company’s success by aligning executive officers’ interests with those of stockholders.
•Compensation reflects the level of job responsibility and Company and individual performance. As employees progress to higher levels in the organization, an increasing proportion of their pay is linked to Company performance because those employees are more able to affect the Company’s results.
•Compensation reflects the value of the job in the marketplace. To attract and retain a highly skilled work force, we must remain competitive with the pay of other premier employers with whom we compete for talent.
Components of Executive Compensation
For 2021, the primary components of compensation for the NEOs were: (1) base salary, (2) annual incentives, and (3) long-term equity incentives, comprised of both time-based RSUs and performance shares. In determining the amount and relative allocation among each component of compensation for each NEO, the Compensation Committee considered, among other factors, the Company’s and each executive officer’s performance during the year, historical rates of executive compensation, data obtained from management’s recruitment activities, equity previously awarded to employees and equity available for issuance, the comparative review and analysis provided by Willis Towers Watson and alignment with the Company’s overall compensation philosophy.
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Base Salary
Base salaries are set at levels sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. Base salaries are also set with the goal of rewarding executive officers on a day-to-day basis for their time and services while encouraging them to strive for long-term company performance. For 2021, the Compensation Committee set the following annual base salary levels for our NEOs after considering market data of similar positions within our peer group with Willis Towers Watson and each executive’s individual performance and responsibilities.
| Name | Position | Base Salary (per annum) | Increase from 2020 | |||||||||||||||||
| Scott W. Drake | President, Chief Executive Officer and Director | $ | 746,750 | 3.0 | % | |||||||||||||||
| Zachary Stassen | Chief Financial Officer | $ | 353,600 | 4.0 | % | |||||||||||||||
| Paul Ziegler | Chief Commercial Officer | $ | 350,200 | 3.0 | % | |||||||||||||||
| Robert McCormack | Chief Legal Officer | $ | 401,057 | 3.0 | % | |||||||||||||||
Annual Incentive Plan
We pay annual incentives to management which vary in size depending on the level of achievement of specific financial, operational, and strategic goals considered by the Board to be critical in building long-term value for stockholders. When designing the 2021 annual incentive program for the NEOs, in December 2020, the Board set certain goals, using a mixture of financial and operational performance objectives after receiving input from Mr. Drake. These objectives included financial, system reliability, innovation, quality, and other strategic objectives. Each NEO’s target annual incentive opportunity is expressed as a percentage of base salary which can be earned at between 0% and 200% of target by meeting or exceeding the performance goals. The following table sets forth a breakdown of the performance objectives, the weighting of each performance objective, actual performance against the target for each performance objective and the resulting payout factor based on such performance.
| Objectives | Maximum | Target | Threshold | ||||||||||||||||||||
| Payout Range | 200% | 100% | 50% | Actual Results | Weight | Achievement | AIP Contribution | ||||||||||||||||
| Orders | 30 | 24 | 18 | 28 | 20% | 167% | 33% | ||||||||||||||||
| Revenue | $75M | $65M | $55M | $70.1M | 10% | 151% | 5% | ||||||||||||||||
| Adj. Cash Usage | $47M | $55M | $63M | $62.3M | 20% | 54% | 30% | ||||||||||||||||
| System Reliability (Uptime %) | 99.0% | 98.0% | 97.0% | 98.1% | 5% | 110% | 6% | ||||||||||||||||
| Innovation Initiatives (completed by) | October 2021 | December 2021 | February 2022 | October 2021 | 15% | 200% | 30% | ||||||||||||||||
| Strategic Objectives | 14 | 10 | 6 | 13 | 30% | 175% | 53% | ||||||||||||||||
| Total | 157% | ||||||||||||||||||||||
Our NEOs’ annual incentive is paid out of a bonus pool, the size of which is determined based on the achievement of the goals, discussed above. Corporate goals and performance targets are reviewed and approved by the Board prior to any allocation of individual annual incentive bonuses.
The 2021 annual incentive plan was weighted 50% towards financial goals, 5% towards system reliability initiatives, 15% towards innovation initiatives, and 30% towards other strategic initiatives related to specific objectives in the areas of: (i) technology and innovation, (ii) clinical, strategic and economic, and (iii) customers and employees.
The Compensation Committee applied purposeful business judgment in selecting the objectives, setting the performance targets, and weighting the performance objectives. The following performance objectives were included for the following reasons:
•Financial: Taken together, these performance objectives targeted incremental improvement over our previous fiscal year orders and revenue and improved cash management, including year-over-year reductions in operating expenses and capital expenditure spending.
•System Reliability Initiatives: Quality objectives were targeted to maintain and continuously improve customer and patient experience with the MRIdian System.
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•Innovation Initiatives: Innovation objectives were targeted towards the successful FDA approval of MRIdian A3i.
•Strategic Initiatives: Strategic targets were established to focus efforts on pressing business priorities in specific areas such as innovation, clinical, and service initiatives that align the Company’s short and long-term strategy.
In early 2022, the Board reviewed our 2021 performance against these pre-established objectives. In the aggregate, participants earned their incentives at 157% of their respective targets. No discretion was used in determining 2021 bonus payouts. The target and actual annual incentives earned by each of the NEOs are set forth in the below table. Target bonus levels as a percentage of base salary remained unchanged from those in place in 2020 for continuing NEOs.
| Fiscal Year 2021 Opportunity | Actual Performance | |||||||||||||||||||||||||||||||
| Name | Base Salary | Target (As a % of base) | Target Bonus | As a % of target | Earned Incentive | |||||||||||||||||||||||||||
| Scott W. Drake | $ | 746,750 | 100 | % | $ | 746,750 | 157 | % | $ | 1,172,397 | ||||||||||||||||||||||
| Zachary Stassen | $ | 353,600 | 50 | % | $ | 176,800 | 157 | % | $ | 277,576 | ||||||||||||||||||||||
| Paul Ziegler | $ | 350,200 | 50 | % | $ | 175,100 | 157 | % | $ | 274,907 | ||||||||||||||||||||||
| Robert McCormack | $ | 401,057 | 50 | % | $ | 200,529 | 157 | % | $ | 314,830 | ||||||||||||||||||||||
Long-Term Equity Incentives
The Compensation Committee sets award levels for grants under the 2015 Plan to NEOs that it believes are sufficient to attract, retain and motivate highly talented executive officers capable of fulfilling the Company’s key objectives.
In December 2020, the Board and Compensation Committee determined that each of the NEOs would receive the following time-based RSUs (weighted at 67% of total target units granted) and performance-based shares (weighted at 33% of total target units granted) under the 2015 Plan:
| Name | RSUs (#) | Performance Shares (at target) (#) | Total Long-Term Equity (target grant date value) | |||||||||||||||||
| Scott W. Drake | 579,399 | 285,375 | $ | 4,029,848 | ||||||||||||||||
| Zachary Stassen | 112,660 | 55,489 | $ | 783,574 | ||||||||||||||||
| Paul Ziegler (1) | 100,590 | 49,544 | $ | 699,624 | ||||||||||||||||
| Robert McCormack | 112,660 | 55,489 | $ | 783,574 | ||||||||||||||||
1)In addition to his annual award in March 2021, Mr. Ziegler was granted a supplemental award of 60,137 time-based RSUs valued at approximately $350,000 on June 14, 2021 in connection with his promotion to Chief Commercial Officer.
Our annual long-term incentives were granted on March 1, 2021. We determined the aggregate number of RSUs and performance shares to be granted to each NEO by dividing each NEO’s target grant date fair value indicated above by the closing market price of our stock as of March 1, 2021. For 2021, the Compensation Committee determined that a total of 67% of the target long-term incentive units would be granted in time-based RSUs that vest ratably over a three-year period with 1/3 vesting on each anniversary of the grant date. RSUs are subject to each NEO remaining a service provider through each such vesting date and allow NEOs to build an equity ownership interest in the Company providing retention and motivation for executive talent.. The remaining 33% of the target long-term incentive units were granted in the form of performance shares that will vest at from 0 to 300% of the target units granted based on our compound annual revenue growth rate over a three-year performance period that runs from January 1, 2021 through December 31, 2023. More specifically, achievement of a compound annual revenue growth rate as follows will result in a payout of the following percentage of the target Performance Shares awarded. If the Company’s compound annual revenue growth rate is between threshold and target or between target and maximum, payouts will be linearly interpolated.
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| Performance Level | Achieved Revenue CAGR | Percentage of Target Performance Shares that Vest | ||||||||||||
| Threshold | 10 | % | 50 | % | ||||||||||
| Target | 20 | % | 100 | % | ||||||||||
| Stretch | 30 | % | 200 | % | ||||||||||
| Maximum | 35 | % | 300 | % | ||||||||||
When determining the Company’s compound annual revenue growth rate, revenue will be adjusted by the Compensation Committee to exclude the effect of accounting policy changes, legal or regulatory rule or law changes; the impact of any acquisitions or divestitures; the effect of any regulatory, legal or tax settlements; the effect of differences between actual foreign currency exchange rates and those assumed in the financial plans; and any other extraordinary, unusual, and/or nonrecurring items.
Further details regarding the RSUs and Performance Shares that we granted to each of the NEOs under the 2015 Plan in 2021 can be found in the “2021 Grants of Plan Based Awards” table below. The Compensation Committee continually reviews the value and mix of equity awards granted to executive officers and determined to increase the overall proportion of performance shares granted in 2022 to 67% of the annual long-term grant.
Other Compensation
Other compensation amounts typically include ViewRay 401(k) plan employer matching contributions. ViewRay sponsors a 401(k) Retirement Savings Plan for employees. Under the 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit and to have the amount of such reduction contributed to the 401(k) plan. All eligible employees of the Company, including the executive officers, are eligible to participate in the 401(k) plan and eligible to receive matching contributions from the Company of fifty percent (50%) of the first six percent (6%) of compensation contributed to the plan by the employee. In response to the business impact of COVID-19, the Company 401(k) match was suspended for all employees from April 2020 through December 2020. In January 2021, the Company provided a discretionary contribution to all employees’ 401(k) accounts in the amount of the suspended employee match from 2020. The Company does not maintain any non-qualified deferred compensation or supplemental retirement plans for our executive officers. Further details regarding other compensation can be found in the “2021 Summary Compensation Table” below.
Compensation Program Process
The Compensation Committee
The Compensation Committee has responsibility for establishing, implementing and monitoring adherence with the Company’s compensation philosophy. Accordingly, the Compensation Committee strives to develop and maintain competitive, progressive programs that reward executives for continuous improvement on key financial metrics that drive Company performance and stockholder value. The Compensation Committee also recognizes the need for compensation programs to attract, retain and develop high-caliber employees, foster teamwork, and maximize the long-term success of ViewRay by appropriately rewarding our executives for their achievements. The Compensation Committee evaluates risk and rewards associated with the Company’s overall compensation philosophy and structure. Pursuant to the Compensation Committee Charter, the Compensation Committee may delegate authority to subcommittees when appropriate.
The Compensation Committee has the authority to engage independent advisors to assist in making determinations with respect to the compensation of executives and other employees. For 2021, the Compensation Committee engaged Willis Towers Watson to conduct a competitive review of executive compensation and advise the Compensation Committee on other compensation related matters. The Compensation Committee assessed the independence of Willis Towers Watson pursuant to applicable rules and regulations of the SEC and the Nasdaq Stock Market and concluded that the engagement of Willis Towers Watson did not raise any conflicts of interest during fiscal 2021 and currently does not raise any conflicts of interest.
Role of Executive Officers in Compensation Decisions
The Compensation Committee meets with the Company’s Chief Executive Officer and other senior executives, including Chief Executive Officer direct reports and certain senior vice presidents, in order to obtain recommendations with respect to the Company’s compensation programs and practices for executives and other employees. The Compensation Committee takes management’s recommendations into consideration, but is not bound by management’s recommendations with respect to executive compensation. The Chief Executive Officer’s compensation is recommended
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by the Compensation Committee to the Board for its review and approval. While management attends certain meetings of the Compensation Committee, the Compensation Committee also holds executive sessions not attended by any members of management or by non-independent directors.
Use of Market Data for Comparison Against Peer Companies
One factor that the Compensation Committee considers when making compensation decisions is the compensation paid to similar executives at our peer companies. The Compensation Committee also considers other factors discussed above under the heading “Components of Executive Compensation.”
The Compensation Committee annually reviews the composition of the peer group to ensure it remains an appropriate set of companies to use for comparison purposes. The list of peer companies used for setting 2021 compensation levels consisted of the following 16 publicly traded companies of roughly similar size or operations to ViewRay, all of which are from related industries including the medical device equipment and electromedical and electrotherapeutic apparatus industries and each of which competes with ViewRay for executive talent. In selecting this peer group for 2021, the Committee screened for companies whose revenues were between $40 million and $560 million in the Healthcare Equipment GICS industry classification that were traded on a major U.S. exchange. From this list, the Committee also reviewed headquarters location, beneficial ownership of management, company business and product descriptions, and market capitalization. In 2021, Penumbra, Inc., Orthofix Medical Inc. and TransEnterix were removed from the peer group and Axonics, Inc. and ShockWave Medical, Inc. were added to better meet the screening criteria.
| Peer Companies | ||||||||||||||
| Accuray, Inc. | Cutera, Inc. | ShockWave Medical, Inc. | ||||||||||||
| AtriCure, Inc. | GenMark Diagnostics, Inc. | Surmodics, Inc. | ||||||||||||
| AxoGen, Inc. | Glaukos Corporation | Tactile Systems Technology, Inc. | ||||||||||||
| Axonics | Inogen, Inc. | Tandem Diabetes Care, Inc. | ||||||||||||
| Artivion | iRhythm Technologies, Inc. | |||||||||||||
| Cardiovascular Systems, Inc. | Nevro Corp. | |||||||||||||
The Compensation Committee does not rely solely on peer data to assess the competitiveness of executive target compensation. In addition to peer data, the Compensation Committee reviews compiled survey data that reflects a custom group of 39 medical device companies with revenues between $50 million and $500 million in Radford’s 2020 Global Technology, Global Life Sciences and Global Sales Surveys.
In evaluating the base salaries of our executive officers for fiscal 2021, establishing target annual cash incentive award opportunities and granting equity awards, the Compensation Committee reviewed this market data to inform its decisions on individual compensation elements, in particular the competitive reasonableness of such elements and to ensure that its decisions were consistent with our compensation philosophy and strategy. While the Compensation Committee considered the market data, it did not make its decisions solely based on targeting compensation to specific benchmarks against the market data. Instead, the Compensation Committee took an approach consistent with its intention to (i) set performance objectives for incentive compensation so that target level payouts would only be made if our executive officers and the Company performed at a superior level that would be difficult to achieve and (ii) provide our executive officers with the ability to earn above-market compensation for exceptional performance that furthered our long-term financial and strategic goals.
Compensation Recoupment (“Clawback”) Policy
Pursuant to its general authority to determine the terms and conditions applicable to awards under the 2015 Plan, the administrator of the 2015 Plan has the right to provide, in an award agreement or otherwise, or to require a holder of an award to agree by separate written or electronic instrument, that: (1) any proceeds, gains or other economic benefit actually or constructively received by the holder upon any receipt or exercise of an award, or upon the receipt or resale of any shares underlying an award, must be paid to the Company, and an award will terminate and any unexercised portion of an award (whether or not vested) will be forfeited, if (a) a termination of service occurs prior to a specified date, or within a specified time period following receipt or exercise of an award, or (b) the holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Compensation Committee or Board, or (c) the holder incurs a termination of service for “cause”; and (2) all awards (including any proceeds, gains or other economic benefit actually or constructively received by a holder upon any receipt or exercise of any award or upon the receipt or resale of any shares underlying the award) will be subject to the provisions of any clawback policy implemented by the Company, including, without limitation, any clawback policy adopted to comply with the requirements of applicable law, including, without limitation,
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the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable award agreement.
Stock Ownership Guidelines
The Company’s Corporate Governance Guidelines require its officers and non-employee directors to hold minimum stock ownership positions based upon multiples of their base salary. For the Chief Executive Officer, the multiplier is no less than three (3) times his base salary. For other Company officers, the multiplier is no less than one (1) times their base salary. For non-employee directors, the multiplier is no less than three (3) times their annual cash retainer for their director service, exclusive of any retainers for committee membership or committee chair service, each is within the later of: (i) January 1, 2021; or (ii) their appointment to the Board. As of December 31, 2021, all officers and non-employee directors are in compliance with these requirements.
Anti-Hedging Policy
The Company’s insider trading policy prohibits all employees, officers, directors and their family and controlled entities from engaging in any hedging transactions with respect to the Company’s common stock.
Tax and Accounting Implications
When determining the compensation packages of our NEOs, the board of directors and Compensation Committee considers all factors that may have an impact on our financial performance such as accounting rules and tax regulations, including Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows a tax deduction to publicly traded corporations for compensation in excess of $1 million paid for any fiscal year to certain covered executives. Prior to the Tax Cuts and Jobs Act enacted in 2017 (the “Tax Reform Act”), certain performance-based compensation was potentially exempt from the $1 million deduction limit. However, under the Tax Reform Act, only qualifying performance-based compensation that is paid pursuant to a written binding contract in effect on November 2, 2017 will be exempt from the deduction limit. Accordingly, any compensation paid pursuant to new compensation arrangements entered into after November 2, 2017, even if performance based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive, including all of our NEOs.
Risk Assessment
In 2021, the Company, with the assistance of Willis Towers Watson, conducted a review of the formal risk assessment for all our incentive compensation programs that have a material impact on our financial statements. Willis Towers Watson inventoried incentive compensation programs across the Company and then collected key information about each program including the number of participants, target annual awards, performance metrics, and summary design features. No programs were found reasonably likely to have a material adverse effect on the Company.
Compensation Committee Report
The Compensation Committee of the Board has reviewed and discussed with management this Compensation Discussion and Analysis. Based upon the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for its 2022 Annual Meeting of Stockholders. The members of the Compensation Committee are listed below.
Compensation Committee
B. Kristine Johnson, Chair
Brian K. Roberts
Phillip M. Spencer
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2021 Summary Compensation Table
The following table sets forth compensation paid to our NEOs for the years ended December 31, 2021, 2020 and 2019. Mr. Stassen was not employed by the Company prior to 2020 and Messrs. Ziegler and McCormack were not NEOs for 2020 or 2019.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
| Scott W. Drake | 2021 | $ | 746,750 | $ | — | $ | 4,029,848 | $ | — | $ | 1,172,397 | $ | — | $ | 5,948,995 | |||||||||||||||||||||||||||||||||||
| President and Chief Executive Officer | 2020 | $ | 725,000 | $ | — | $ | 5,735,856 | $ | — | $ | 677,989 | $ | 3,126 | $ | 7,141,971 | |||||||||||||||||||||||||||||||||||
| 2019 | $ | 700,000 | $ | 105,000 | $ | 2,794,832 | $ | 1,525,000 | $ | 420,000 | $ | 8,400 | $ | 5,553,232 | ||||||||||||||||||||||||||||||||||||
| Zachary Stassen | 2021 | $ | 353,600 | $ | — | $ | 783,574 | $ | — | $ | 277,576 | $ | 6,790 | $ | 1,421,540 | |||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2020 | $ | 209,231 | $ | — | $ | 625,000 | $ | 625,000 | $ | 99,231 | $ | — | $ | 1,558,462 | |||||||||||||||||||||||||||||||||||
| Paul Ziegler | 2021 | $ | 350,200 | $ | — | $ | 1,049,624 | $ | — | $ | 274,907 | $ | 3,624 | $ | 1,678,355 | |||||||||||||||||||||||||||||||||||
| Chief Commercial Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Robert McCormack | 2021 | $ | 401,057 | $ | — | $ | 783,574 | $ | — | $ | 314,830 | $ | 2,317 | $ | 1,501,778 | |||||||||||||||||||||||||||||||||||
| Chief Legal Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Amounts shown represent the aggregate grant date fair value of performance shares, restricted stock units and stock options, respectively, granted in each applicable year, as calculated in accordance with FASB ASC Topic 718 with the option grant date fair value determined using the Black-Scholes option-pricing model and excluding, in each case, the impact of estimated forfeitures related to service-based vesting provisions. See footnote 13 of the financial statements included in our Annual Report on Form 10-K filed February 25, 2022 for the assumptions used in calculating these amounts. For performance shares granted in 2021, this table reflects target performance. The value for 2021 performance shares that would be included in this table assuming the maximum performance level is achieved with respect to such awards would be as follows: Mr. Drake - $3,989,543, Mr. Stassen - $775,736, Mr. Ziegler - $692,625, and Mr. McCormack - $775,736.
(2)Represents amount paid under our cash incentive programs which are earned by our NEOs pursuant to the achievement of certain performance objectives. For each fiscal year presented above, these amounts were paid to our NEOs early the following year. Please see the descriptions of the 2021 annual bonuses paid to our NEOs in “Components of Executive Compensation—Annual Incentive Plan” above.
(3)Represents 401(k) employer matching contributions. Please see the descriptions of these payments and benefits paid to our NEOs in “Components of Executive Compensation—Other Compensation” above.
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2021 Grants of Plan-Based Awards
The following table shows all plan-based awards granted to each of the NEOs during 2021. The unvested portion of the stock awards identified in the table below are also reported in the Outstanding Equity Awards at 2021 Year-End Table on the following page.
| Estimated Future Potential Payouts Under Non-Equity Incentive Plan (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units (3) (#) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Scott W. Drake | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan | $ | 373,375 | $ | 746,750 | $ | 1,493,500 | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | 142,688 | 285,375 | 856,125 | — | $ | 1,329,848 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | — | — | — | 579,399 | $ | 2,700,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Zachary Stassen | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan | $ | 88,400 | $ | 176,800 | $ | 353,600 | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | 27,745 | 55,489 | 166,467 | — | $ | 258,579 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | — | — | — | 112,660 | $ | 524,996 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Paul Ziegler | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan | $ | 87,550 | $ | 175,100 | $ | 350,200 | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | 24,772 | 49,544 | 148,632 | — | $ | 230,875 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | — | — | — | 100,590 | $ | 468,750 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 6/14/2021 | — | — | — | 60,137 | $ | 349,997 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Robert McCormack | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive Plan | $ | 100,264 | $ | 200,529 | $ | 401,058 | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | 27,745 | 55,489 | 166,467 | — | $ | 258,579 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Incentive Plan | 3/1/2021 | — | — | — | 112,660 | $ | 524,996 | |||||||||||||||||||||||||||||||||||||||||||||||||
(1)The target bonus amount equals a specified percentage of each NEO’s base salary as of December 31, 2021, as described in more detail above under “Components of Executive Compensation – Annual Incentive Plan.” Each NEO would receive 50% of his target bonus amount for achieving threshold performance goals under the annual incentive plan and could receive a maximum payout of 200% of his target bonus for achieving or exceeding the maximum performance goals. Actual bonuses received by these NEOs for 2021 are reported in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation.”
(2)Reflects threshold, target and maximum potential payouts for Performance Shares that will vest between 0% and 300% of the target amount following completion of the three-year performance period based on the Company’s compound annual revenue growth rate as compared to targets established by the Compensation Committee.
(3)Reflects RSUs that vest in equal installments of 1/3 on each anniversary of the grant date. These awards are described in more detail above under “Components of Executive Compensation - Long-Term Equity Incentives.”
(4)The values of the RSUs and Performance Shares are based on the fair value as of the grant date of such award determined pursuant to FASB ASC Topic 718 excluding the impact of estimated forfeitures related to service-based vesting provisions. See footnote 13 of the financial statements included in our Annual Report on Form 10-K filed February 25, 2022 for the assumptions used in calculating these amounts.
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2021 Outstanding Equity Awards at Fiscal Year End
The following table lists all outstanding equity awards held by our NEOs as of December 31, 2021.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Number of Unvested Shares or Units (#)(3) | Market Value of Unvested Shares or Units ($)(4) | Equity Incentive Plan Awards: Number of unearned Units that Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market Value of Unvested Shares or Units ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Vesting Commencement Date | Exercisable (#) | Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Scott W. Drake | 7/22/2018 | 1,644,272 | 280,728 | (2) | $ | 9.66 | 7/22/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2019 | 215,914 | 98,130 | (1) | $ | 8.47 | 3/1/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2019 | 60,016 | $ | 330,688 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/24/2019 | 168,636 | $ | 929,184 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/2/2020 | 431,573 | $ | 2,377,967 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/2/2020 | 170,606 | $ | 940,039 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6/15/2020 | 530,296 | $ | 2,921,931 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 579,399 | $ | 3,192,488 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 428,063 | $ | 2,358,627 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Zachary Stassen | 6/1/2020 | 220,035 | 275,044 | (2) | $ | 1.81 | 6/1/2030 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 6/1/2020 | 230,202 | $ | 1,268,413 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 112,660 | $ | 620,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 83,234 | $ | 458,619 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paul Ziegler | 1/15/2019 | 40,109 | 14,891 | (2) | $ | 7.03 | 1/15/2029 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2019 | 16,500 | 7,500 | (1) | $ | 8.47 | 3/1/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/24/2019 | 10,000 | $ | 55,100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/2/2020 | 82,742 | $ | 455,908 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 100,590 | $ | 554,251 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 74,316 | $ | 409,481 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6/14/2021 | 60,137 | $ | 331,355 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Robert McCormack | 9/15/2018 | 166,672 | 33,328 | (2) | $ | 9.18 | 9/15/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2019 | 42,474 | 19,305 | (1) | $ | 8.47 | 3/1/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2019 | 11,806 | $ | 65,051 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/24/2019 | 75,000 | $ | 413,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/2/2020 | 171,395 | $ | 944,386 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 112,660 | $ | 620,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/1/2021 | 83,234 | $ | 458,619 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)These options vest and become exercisable as to 1/48th of the shares on each monthly anniversary of the vesting commencement date, such that all shares subject to an option will be vested and exercisable on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to us through the applicable vesting date.
(2)These options vest and become exercisable as to 25% of the shares on the first anniversary of the vesting commencement date and as to 1/48th of the shares on each monthly anniversary thereafter, such that all shares subject to the option will be vested on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to us through the applicable vesting date.
(3)These RSUs vest one-third annually such that all units will be vested on the third anniversary of the vesting commencement date, subject to the holder continuing to provide services to us through the applicable vesting date.
(4)Reflects the number of RSUs or Performance Shares multiplied by $5.51, the closing price of the Company’s common stock on the Nasdaq Global Market on December 31, 2021.
(5)These Performance Shares vest at between 0% and 300% of the target number of units granted following the completion of a three-year performance period based on the Company’s compound annual revenue growth rate as compared to targets established by the Compensation Committee. Awards are shown assuming 150% performance.
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2021 Option Exercises and Stock Vested
The following table shows all stock awards vested and the gross value realized upon vesting, by the NEOs during 2021. None of the NEOs exercised any stock options during 2021.
| Option Awards | Share Awards | |||||||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||
| Scott W. Drake | — | $ | — | 1,395,481 | $ | 7,759,440 | ||||||||||||||||||||
| Zachary Stassen | — | $ | — | 115,101 | $ | 688,304 | ||||||||||||||||||||
| Paul Ziegler | — | $ | — | 51,371 | $ | 254,683 | ||||||||||||||||||||
| Robert McCormack | — | $ | — | 172,504 | $ | 952,264 | ||||||||||||||||||||
(1)The value realized on vesting equals the market value of the Company’s common stock on the release date, multiplied by the number of shares that vested.
Potential Payments upon Termination or Change in Control
Each of Messrs. Drake, Stassen, Ziegler, and McCormack have entered into employment or severance agreements that provide for severance and change in control payments and benefits.
Mr. Drake’s Employment Agreement
If the Company terminates Mr. Drake’s employment without “Cause” (as defined below), or Mr. Drake resigns for “Good Reason” (as defined below), then, provided that he executes and delivers, and does not revoke, a general release of claims (i) the Company will pay Mr. Drake an amount equal to two times the sum of his base salary and target annual incentive bonus, both as in effect at the date of his termination, payable in substantially equal monthly installments during the 24-month period following termination, and (ii) the Company will pay Mr. Drake an amount equal to 12 multiplied by the difference between the monthly COBRA premium cost for continued health coverage and the monthly contribution previously paid by Mr. Drake as an active employee for the same coverage prior to such termination or resignation.
In addition, Mr. Drake’s equity award agreements provide that, if the Company terminates his employment without Cause, or he resigns for Good Reason, then such equity awards that would otherwise (absent the termination) have vested during the 24 month period following Mr. Drake’s termination shall accelerate and become fully-vested as of the date of termination. Mr. Drake’s equity award agreements also provide that he will have 12 months from the date of any such termination to exercise any remaining stock options. Any other unvested equity awards will be forfeited upon any termination of employment.
Neither Mr. Drake nor his estate or beneficiaries are entitled to any of these payments or benefits upon termination of his employment by reason of his disability or death other than the right to a pro rata annual incentive bonus based on the number of months Mr. Drake was employed in the calendar year prior to such death or disability.
In the event that a Change in Control occurs during Mr. Drake’s employment and his employment is terminated by the Company (or its successor) without Cause or by Mr. Drake for Good Reason at any time three months prior to or 18 months following such Change in Control, then all equity awards issued to and held by Mr. Drake will accelerate and become vested and exercisable as of the date of such termination. A “Change in Control” has the same meaning given to such term in the 2015 Plan.
Pursuant to the employment agreement, “Cause” means Mr. Drake’s: (i) theft or embezzlement of Company funds or assets; (ii) conviction of, or guilty or no contest plea, to a felony charge or any misdemeanor involving moral turpitude; (iii) material violation of any express direction or any rule, regulation or policy established by the board of directors of the Company that is consistent with the terms of the employment agreement; (iv) material breach of the employment agreement or material breach of his fiduciary duties to the Company; (v) fraud, gross incompetence, gross neglect, or gross misconduct in the performance of his duties (including a material violation or breach of any Company policy); or (vi) repeated and consistent failure to perform the duties under the employment agreement during normal business hours except during vacation periods or absences due to temporary illness. If the Board determines in good faith (if Mr. Drake is a member of the Board at such time he shall not be entitled to participate in such determination) that Cause for termination exists and such trigger is curable, he will be given written notice by the Board that provides the factual basis for the
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determination and Mr. Drake will have 10 business days to respond and to try and cure the condition(s) giving rise to the determination prior to that determination becoming final.
Pursuant to the employment agreement, “Good Reason” means a resignation by Mr. Drake that occurs within 30 days following his first having knowledge of any (i) material reduction in his base salary, (ii) material breach of his employment agreement by the Company, (iii) material diminution of his authority, duties or title or responsibilities imposed by the Board (other than in response to an event constituting Cause), (iv) material reduction in his annual performance bonus or equity compensation opportunity or (v) requirement that Mr. Drake relocate, without consent, in excess of 25 miles beyond the geographic limits of Mountain View, California, Denver, Colorado or Oakwood Village, Ohio or such other location as has been established by the Company as its headquarters in consultation with Mr. Drake; provided, however, with respect to subclause (i) that any reduction of the base salary that is consistent with general reductions in the base salaries of other executives of the Company as part of a plan to avoid insolvency of the Company or manage any financial distress or hardship of the Company will not be deemed to constitute a material reduction in the base salary; and provided, further, with respect to subclause (ii) above, that in the case of a material breach, Good Reason will only exist where Mr. Drake has provided the Company with written notice of the breach within 30 days of the occurrence of the events constituting “Good Reason,” the Company has failed to cure such breach within 10 business days of such written notice of breach and Mr. Drake actually resigns his employment within 45 days of the occurrence of the events constituting “Good Reason.”
Severance Agreements with Other NEOs
Each of the NEOs (other than Mr. Drake) has entered into a standard severance agreement with the Company. An executive is eligible to receive severance payments and benefits in connection with a termination of employment by the Company without “Cause” (as defined below) or due to their resignation for “Good Reason” (as defined below).
If such a termination of employment occurs within the period commencing 90 days before the occurrence of a “Change in Control” (as defined below) and ending on the 18-month anniversary following the Change in Control (the “Covered Period”), then the executive would be eligible to receive a lump sum severance payment in an amount equal to the sum of: (i) 100% of the executive’s annual base salary; (ii) the executive’s then-current target annual bonus; and (iii) a pro-rata portion of the executive’s target annual bonus for the fiscal year in which the date of termination occurs. If such a termination of employment occurs outside of the Covered Period, then the executive would be eligible to receive a lump sum severance payment in an amount equal to 100% of his annual base salary. In the Company’s sole discretion based on the circumstances of an executive’s termination, an executive may be eligible for up to a maximum of $10,000 in outplacement related services.
To the extent that an executive timely and properly elects health insurance continuation coverage under the Company’s group health insurance plan under COBRA, the Company will pay for the cost of the monthly COBRA premium for continuing health insurance coverage as elected by the executive until the earliest of: (i) 18 months (in the event the termination of employment occurs during the Covered Period) or 12 months (in the event the termination of employment occurs outside of the Covered Period); (ii) the date that the executive is no longer eligible to receive COBRA continuation coverage under the Company’s group health insurance plan; and (iii) the date on which the executive secures other employment.
In addition, in the event that (i) a Change of Control occurs during an executive’s employment and (ii) the executive’s employment with the Company is terminated by the Company (or its successor) without Cause or if the executive resigns for Good Reason at any time during the 12-month period following such Change of Control, then (x) without further action by the Company (or its successor) or the Board (or its successor’s board), all unvested units or shares issued under the Company’s equity incentive program will accelerate and become vested and exercisable as of the date of such termination.
An executive’s receipt of such payments and benefits would be subject to their execution and non-revocation of a release of claims in the form attached to their severance agreement and compliance with the restrictive covenants set forth in his severance agreement.
Pursuant to the standard severance agreement, “Cause” means: (i) an executive’s willful failure to perform their duties (other than any such failure resulting from incapacity due to physical or mental illness); (ii) an executive’s willful failure to comply with any valid and legal directive of the person or entity to whom they report; (iii) an executive’s willful engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates; (iv) an executive’s embezzlement, misappropriation or fraud, related to their employment with the Company; (v) an executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude, if such felony or other crime is work-
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related, materially impairs an executive’s ability to perform services for the Company or results in material reputational or financial harm to the Company or its affiliates; or (vi) an executive’s violation of a material policy of the Company. For purposes of this definition, no act or failure to act on an executive’s part will be considered “willful” unless it is done, or omitted to be done, by an executive in bad faith or without reasonable belief that their action or omission was in the best interests of the Company.
Pursuant to the standard severance agreement, “Good Reason” means: (i) a reduction in an executive’s base salary; (ii) a reduction in an executive’s target annual bonus opportunity; (iii) a relocation of an executive’s principal place of employment by more than 50 miles; (iv) the Company’s failure to obtain an agreement from any successor to assume and agree to perform the obligations in the same manner and to the same extent that the Company would be required to perform, except where such assumption occurs by operation of law; or (iv) a material, adverse change in an executive’s title, reporting relationship, authority, duties or responsibilities (other than temporarily while an executive is physically or mentally incapacitated or as required by applicable law).
Pursuant to the standard severance agreement, “Change in Control” means: (i) a sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole or (ii) a merger, consolidation or other similar business combination involving the Company, if, upon completion of such transaction the beneficial owners of voting equity securities of the Company immediately prior to the transaction beneficially own less than 50% of the successor entity’s voting equity securities; provided, that “Change of Control” will not include a transaction where the consideration received or retained by the holders of the then outstanding capital stock of the Company does not consist primarily of (i) cash or cash equivalent consideration, (ii) securities which are registered under the Securities Act of 1933, as amended (the “Securities Act”), or any successor statute and/or (iii) securities for which the Company or any other issuer thereof has agreed, including pursuant to a demand, to file a registration statement within 90 days of completion of the transaction for resale to the public pursuant to the Securities Act.
Performance Shares
Upon a Change in Control (as defined in the 2015 Plan) prior to the end of the applicable performance period, outstanding performance shares will vest immediately prior to such Change in Control at the greater of the target number of units granted or the performance shares that would have otherwise vested based on actual performance through the end of the fiscal quarter the immediately precedes the date of the Change in Control. Upon a Change in Control that occurs after completion of the performance period but prior to settlement of the award, outstanding performance shares will vest based on actual performance through the end of the performance period.
The following table describes the potential payments and benefits under the Company’s compensation and benefit plans and arrangements to which the listed NEOs would have been entitled upon a change in control and/or termination of employment as of December 31, 2021.
| Name | Prorated target bonus (1) | Cash Severance ($) (2) | Accelerated Equity Awards ($) (3) | Target Bonus ($) (4) | Benefits ($) (5) | Total ($) | ||||||||||||||||||||||||||||||||
| Scott W. Drake | ||||||||||||||||||||||||||||||||||||||
| With Cause | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Voluntary Termination | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Termination without Cause or with Good Reason | $ | — | $ | 1,493,500 | $ | 9,628,146 | $ | 1,493,500 | $ | 30,000 | $ | 12,645,146 | ||||||||||||||||||||||||||
| Change in Control Termination without Cause or with Good Reason | $ | — | $ | 1,493,500 | $ | 12,264,715 | $ | 1,493,500 | $ | 30,000 | $ | 15,281,715 | ||||||||||||||||||||||||||
| Death / Disability | $ | 746,750 | $ | — | $ | — | $ | — | $ | — | $ | 746,750 | ||||||||||||||||||||||||||
| Zachary Stassen | ||||||||||||||||||||||||||||||||||||||
| With Cause | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Voluntary Termination | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Termination without Cause or with Good Reason | $ | — | $ | 353,600 | $ | — | $ | — | $ | 30,000 | $ | 383,600 | ||||||||||||||||||||||||||
| Change in Control Termination without Cause or with Good Reason | $ | 176,800 | $ | 353,600 | $ | 3,212,577 | $ | 176,800 | $ | 45,000 | $ | 3,964,777 | ||||||||||||||||||||||||||
| Death / Disability | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Paul Ziegler | ||||||||||||||||||||||||||||||||||||||
| With Cause | $ | — | $ | — | $ | — | — | $ | — | $ | — | |||||||||||||||||||||||||||
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| Name | Prorated target bonus (1) | Cash Severance ($) (2) | Accelerated Equity Awards ($) (3) | Target Bonus ($) (4) | Benefits ($) (5) | Total ($) | ||||||||||||||||||||||||||||||||
| Voluntary Termination | $ | — | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||
| Termination without Cause or with Good Reason | $ | — | $ | 350,200 | $ | — | $ | — | $ | 30,000 | $ | 380,200 | ||||||||||||||||||||||||||
| Change in Control Termination without Cause or with Good Reason | $ | 175,100 | $ | 350,200 | $ | 1,669,602 | $ | 175,100 | $ | 45,000 | $ | 2,415,002 | ||||||||||||||||||||||||||
| Death / Disability | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Robert McCormack | ||||||||||||||||||||||||||||||||||||||
| With Cause | $ | — | $ | — | $ | — | — | $ | — | $ | — | |||||||||||||||||||||||||||
| Voluntary Termination | $ | — | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||
| Termination without Cause or with Good Reason | $ | — | $ | 401,057 | $ | — | $ | — | $ | 30,000 | $ | 431,057 | ||||||||||||||||||||||||||
| Change in Control Termination without Cause or with Good Reason | $ | 200,529 | $ | 401,057 | $ | 2,349,189 | $ | 200,529 | $ | 45,000 | $ | 3,196,303 | ||||||||||||||||||||||||||
| Death / Disability | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
(1)The amount in this column assumes a December 31, 2021 termination date.
(2)Mr. Drake to receive payment equal to two times his then current annual base salary paid in substantially equal monthly installments during the 24 month period following termination. Each other NEO to receive 100% of his base salary in a lump sum.
(3)Values are calculated based on the closing price of our common stock of $5.51 on December 31, 2021. The value for the acceleration of stock option awards is calculated as the difference between the closing price of our common stock of $5.51 on December 31, 2021 and the exercise price per share of the award (if any) multiplied by the number of shares vesting. Mr. Drake’s values upon a termination without cause or for good reason reflect the accelerated vesting of awards that would vest during a 24 month period following December 31, 2021. The values reported in connection with a Change in Control reflect the accelerated vesting of all of the awards, including Performance Shares at target, held by the executive as of the date of termination.
(4)Mr. Drake to receive a payment equal to two times his then current target bonus paid in substantially equal monthly installments during the 24 month period following termination. Each other NEO to receive 100% of his target bonus in connection with a change in control termination without cause or for good reason.
(5)Mr. Drake to receive continuation of medical insurance for 12 months following the date of termination. Each other NEO to receive continuation of insurance for 12 months following a termination without cause or with good reason and 18 months following a change in control termination without cause or with good reason.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions
The Board is committed to upholding the highest legal and ethical standards of conduct in fulfilling its responsibilities and recognizes that transactions with the Company involving related parties can present a heightened risk of potential or actual conflicts of interest.
Except as described below and except for compensation for employment or services provided in other roles, there has not been, since January 1, 2021, nor is there currently proposed, any transaction to which ViewRay, Inc. is or was a party in which the amount involved exceeds $120,000, and in which any of our current directors, executive officers, holders of more than 5% of any class of our voting securities or any of their respective affiliates or immediate family members, had, or will have, a direct or indirect material interest.
Hudson Cooperation Agreement and Consulting Agreement
Pursuant to the Cooperation Agreement with Hudson Executive Capital LP and certain of its affiliates (collectively, “Hudson”), the Company concurrently entered into a Consulting Agreement with Sai Nanduri, a Senior Investment Analyst and representative of Hudson, pursuant to which the Company expects to pay Mr. Nanduri $160,000 during 2022 and will consider Mr. Nanduri as a candidate for election to the Board at the 2023 Annual Meeting.
License Agreement with University of Florida Research Foundation, Inc.
In December 2004, we entered into a Standard Exclusive License Agreement with Sublicensing Terms with University of Florida Research Foundation, Inc., or UFRF, under which we licensed certain patents from UFRF in exchange for royalty payments and an equity issuance, or the UFRF License Agreement. We entered into an amendment of the UFRF License Agreement in December 2007. Since December 2004 to December 2018, we have paid UFRF $1,652,763 in royalties and $63,000 in patent and legal fees pursuant to the terms of the UFRF License Agreement. In addition, in December 2004, we issued 11,312 shares of common stock to UFRF pursuant to the terms of the UFRF License Agreement, which required us to issue UFRF a certain number of shares of common stock upon execution of the UFRF License Agreement, as well as issue UFRF additional shares of common stock to maintain UFRF’s ownership of 5% of our outstanding equity until certain financing conditions were satisfied. We satisfied these financing conditions in 2013 and have no further obligations to issue UFRF shares of our common stock pursuant to the terms of the UFRF License Agreement. Prior to the consummation of the private placement on 2015, UFRF was a beneficial owner of approximately 0.10% of our capital stock on an as-converted basis. In connection with his former employment at the University of Florida and his role in the development of the licensed patents under the UFRF License Agreement, as amended, James F. Dempsey, Ph.D., our Chief Scientific Officer, receives a percentage of the royalty payments we pay to UFRF and is entitled to a percentage of any proceeds from the sale of common stock by UFRF. Specifically, under the University of Florida’s intellectual property policy, Dr. Dempsey is entitled to (i) 40% of any royalty payments we pay to UFRF or proceeds from the sale of common stock by UFRF of up to $500,000 and then (ii) 25% of any royalty payments we pay to UFRF or proceeds from the sale of common stock by UFRF over $500,000.
Distribution Agreement with Chindex Shanghai International Trading Company Limited
In November 2019, the Company entered into a distribution agreement with Chindex Shanghai International Trading Company Limited, or Chindex, which became effective in February 2020. Chindex is a subsidiary of Fosun International Limited, or Fosun.
Under the distribution agreement, Chindex acts as the Company’s distributor and regulatory agent for the sale and delivery of its MRIdian products within the People’s Republic of China, excluding Hong Kong, Macau and Taiwan. The distribution agreement has an initial term of five years with an option to renew for an additional five years. Under the distribution agreement, the Company will supply its products and services to Chindex based on an agreed upon price between the Company and Chindex. In accordance with the agreement, Chindex agreed to pay ViewRay an upfront fee, portions of which may be refundable under certain conditions, of $3.5 million, payable in three installments: (i) the first installment of $1.5 million due approximately 60 days after the effectiveness of the distribution agreement; (ii) the second installment of $1.0 million due on the first anniversary from the effective date of the agreement; and (iii) the third installment of $1.0 million due on the second anniversary from the effective date of the agreement. The Company received payment of the first installment during the fourth quarter of 2020.
2021 Public Offering of Common Stock
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On November 16, 2021, we entered into an underwriting agreement with Piper Sandler & Co. and Stifel, Nicolaus & Company, as representatives of several underwriters named therein, in connection with the issuance and sale of 12,500,000 shares of our common stock at a public offering price of $5.60 per share. In addition, we granted the underwriters a 30-day option to purchase up to 1,875,000 additional shares of common stock on the same terms, which the underwriters exercised in full. We completed the offering on November 18, 2021 and received net proceeds of approximately $75.1 million, after deducting underwriting discounts and commissions and offering expenses payable by us.
In connection with the offering Mr. Drake, our President, Chief Executive Officer and a Director, and Mr. Stassen, our Chief Financial Officer, purchased 89,285 and 17,857 shares of common stock, respectively, at the public offering price of $5.60 per share. The offering and the participation of these officers therein was approved by the Board.
Indemnification of Directors and Officers
Our certificate of incorporation and bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his, her or its actions in that capacity regardless of whether we would otherwise be permitted to indemnify him, her or it under Delaware law.
In addition to the indemnification required in our certificate of incorporation and bylaws, we have or will enter into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer.
Director and Executive Officer Compensation
Please see “Director Compensation” and “Executive Compensation” for information regarding compensation of directors and executive officers.
Employment Agreements
We have previously entered into employment agreements with our executive officers. For more information regarding these agreements, see “Executive Compensation—Potential Payments upon Termination or Change in Control.”
Policies and Procedures for Related Party Transactions
The Board has adopted a written related party transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year and a related person has or will have a direct or indirect material interest. Related party transactions are subject to review and approval by the Nominating and Corporate Governance Committee. The committee shall review all relevant information available to it about a related party transaction and may approve the transaction only if it determines in good faith that, under all of the circumstances, the transaction is in the best interests of the Company and its shareholders. The committee, in its sole discretion, may impose such conditions as it deems appropriate on the Company or the related party in connection with its approval. No director shall participate in any discussion or vote regarding approval or ratification of a related party transaction with respect to which the director or his or her immediate family members is the related person.
In determining whether to approve or ratify a related party transaction, the committee shall take into account, among other factors it deems appropriate, (i) whether the transaction was undertaken in the ordinary course of business of the Company, (ii) whether the related party transaction was initiated by the Company or the related party, (iii) whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party, (iv) the purpose of, and the potential benefits to the Company of, the related party transaction, (v) the approximate dollar value of the amount involved in the related party transaction, particularly as it relates to the related party, (vi) the related party’s interest in the related party transaction and (vii) any other information regarding the related party transaction or the related party that would be material to investors in light of the circumstances of the particular transaction.
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Pursuant to the policy, certain related party transactions are deemed to be pre-approved by the committee, unless specifically determined otherwise by the committee. Such pre-approved transactions are limited to:
•employment of executive officers and director compensation, subject in each case to certain conditions;
•transactions with any at which a related party’s only relationship is Any transaction with another company at which a related party’s only relationship is as (i) an employee (other than an executive officer) or director, (ii) a beneficial owner of less than 10%, together with his or her immediate family members, of that company’s outstanding equity, or (iii) in the case of partnerships, a limited partner, if the limited partner, together with his or her immediate family members, has an interest of less than 10% and the limited partner does not hold another position in the partnership, if the aggregate amount involved does not exceed the greater of $100,000 or two percent of the other company’s consolidated gross revenues;
•charitable contributions at which a related party’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the greater of $100,000 or two percent of the charitable organization’s total revenues;
•transactions where the related party’s interest arises solely from the ownership of a class of equity securities of the Company and all holders of that class of equity securities received the same benefit on a pro rata basis; and
•indemnification and advancement of expenses pursuant to the Company’s charter or bylaws or pursuant to any agreement.
A summary of each new related party transaction deemed pre-approved will be provided to the committee for its review at each regularly scheduled committee meeting.
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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS MATTERS
Code of Business Conduct and Ethics
The Company adopted a revised code of business conduct and ethics (the “Code”) effective January 1, 2021, that applies to all of our employees, officers and directors, including those officers responsible for financial reporting to clearly reflect the Company’s commitment to sustainability. The code of business conduct and ethics is available in the “Corporate Governance” section of our investor relations website at https://investors.viewray.com/corporate-governance/esg. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website. The reference to our web address does not constitute incorporation by reference of the information contained at or available through our website.
Corporate Governance Guidelines
We believe in sound corporate governance practices and have adopted formal Corporate Governance Guidelines to enhance our effectiveness. The Board adopted these Corporate Governance Guidelines to ensure that it has the necessary practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices the Board follows with respect to board and committee composition and selection, board meetings, Chief Executive Officer performance evaluation and management development and succession planning for senior management, including the Chief Executive Officer position, as well as minimum shareholding requirements for our officers and directors. Effective January 1, 2021, the Corporate Governance Guidelines were revised to clearly reflect the Company’s commitment to sustainability. Effective March 4, 2022, the Corporate Governance Guidelines were further revised to clearly reflect the Company’s commitment to diversity, equity and inclusion principles and cybersecurity. A copy of our Corporate Governance Guidelines is available on the “Corporate Governance” section of our investor relations website at https://investors.viewray.com/corporate-governance/esg.
Director Independence
As required under Nasdaq rules and regulations, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. The board of directors consults with the Company’s counsel to ensure that the board of directors’ determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent Nasdaq listing standards, as in effect from time to time.
Consistent with these considerations, the Board has determined that Messrs. Moore, Roberts, and Spencer, Drs. Castelein, and Wilensky, and Ms. Johnson, Schnabel and Prange qualify as “independent” directors in accordance with the Nasdaq listing requirements. Mr. Drake is not considered independent because he is an employee of ViewRay. During their service on the board of directors, former directors Messrs. Grossman and Huennekens and Dr. Xie also qualified as an “independent” director in accordance with the Nasdaq listing requirements.
The Nasdaq independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, the Board has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the Board considered information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.
As required under Nasdaq rules and regulations, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present. The Audit, Compensation and Nominating and Corporate Governance committees are comprised entirely of directors determined by the Board to be independent within the meaning of Nasdaq and SEC rules and regulations applicable to the members of these committees.
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Leadership Structure of the Board of Directors
Our amended and restated bylaws and corporate governance guidelines provide the Board with flexibility to combine or separate the positions of Board Chair and Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing either structure would be in the best interests of our Company.
The Board continues to believe that it is in the best interests of the Company and its stockholders to separate the Board Chair and Chief Executive Officer roles and for our Board Chair to be independent. Currently, Mr. Moore serves as our independent Board Chair. Our Board believes that our current structure gives our Board a strong leadership and corporate governance structure that best serves the needs of the Company and its stockholders.
The Board will continue to periodically review our leadership structure and may make any changes in the future as it deems appropriate.
Role of Board of Directors in Risk Oversight Process
Risk assessment and oversight are an integral part of our governance and management processes. The Board encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Senior management reviews these risks with the board of directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.
The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure, and our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures. The Audit Committee also monitors compliance with legal and regulatory requirements. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines and considers and approves or disapproves any related party transactions. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.
Board Committees
The board of directors has established three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The composition, duties and responsibilities of each of these committees are described below. Each of these committees reports to the board of directors as provided in the applicable committee charter, as they deem appropriate and as the board of directors may request.
The following table provides information on the board of director’s current committee memberships.
| Name | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Independent | ||||||||||||||||||||||
| Caley Castelein, M.D. | X | X | X | |||||||||||||||||||||||
| B. Kristine Johnson | Chair | X | ||||||||||||||||||||||||
| Daniel Moore | X | X | X | |||||||||||||||||||||||
| Karen N. Prange | Chair | X | ||||||||||||||||||||||||
| Brian K. Roberts | Chair | X | X | |||||||||||||||||||||||
| Phillip M. Spencer | X | X | ||||||||||||||||||||||||
| Gail Wilensky, Ph.D. | X | X | ||||||||||||||||||||||||
| Susan C. Schnabel | X | |||||||||||||||||||||||||
| Committee Meetings During 2021 | 8 | 4 | 4 | |||||||||||||||||||||||
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Audit Committee
Our Audit Committee oversees our corporate accounting and financial reporting process. Among other matters, the Audit Committee:
•appoints our independent registered public accounting firm;
•evaluates the independent registered public accounting firm’s qualifications, independence and performance;
•determines the engagement of the independent registered public accounting firm;
•reviews and approves the scope of the annual audit and the audit fee;
•discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;
•approves the retention of the independent registered public accounting firm to perform any proposed permissible audit and non-audit services;
•monitors the rotation of partners of the independent registered public accounting firm on our engagement team as required by law;
•is responsible for reviewing our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC;
•reviews our critical accounting policies and estimates;
•annually reviews the audit committee charter and the audit committee’s performance; and
•reviews with our independent registered public accounting firm and management, significant issues that may arise regarding accounting principles and financial statement presentation, as well as matters concerning the scope, adequacy and effectiveness of our disclosure and financial controls.
The current members of the Audit Committee are Messrs. Roberts and Moore, and Dr. Castelein. Mr. Roberts serves as the Chair of the committee. All members of the Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. The Board has determined that Mr. Roberts and Dr. Castelein are audit committee financial experts as defined under the applicable rules of the SEC and have the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations. Under the rules of the SEC and Nasdaq, members of the Audit Committee must also meet heightened independence standards. The Board has determined that each of the members of the Audit Committee meet these heightened independence standards. The Audit Committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq. A copy of the Audit Committee charter is available to security holders on the “Corporate Governance” section of our investor relations website at https://investors.viewray.com/corporate-governance/esg.
Compensation Committee
The Compensation Committee has responsibility for establishing, implementing and monitoring adherence with the Company’s compensation philosophy. Accordingly, the Compensation Committee strives to develop and maintain competitive, progressive programs that reward executives for continuous improvement in key financial metrics that drive company performance and stockholder value. The Compensation Committee also recognizes the need for compensation programs to attract, retain and develop high-caliber employees, foster teamwork, and maximize the long-term success of ViewRay by appropriately rewarding our executives for their achievements. The Compensation Committee evaluates risk and rewards associated with the Company’s overall compensation philosophy and structure. Pursuant to the Compensation Committee Charter, the Compensation Committee may delegate authority to subcommittees when appropriate.
The Compensation Committee has the authority to engage independent advisors to assist in making determinations with respect to the compensation of executives and other employees. For the 2021 fiscal year, the Compensation Committee engaged Willis Towers Watson, a national executive compensation consulting firm, to conduct a competitive review of executive compensation and advise the Committee on other compensation related matters. Willis Towers Watson has not provided any other services to the Company or the Compensation Committee and has not received compensation other than with respect to the services provided to the Compensation Committee.
The Compensation Committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The Compensation Committee reviews and approves corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and sets the compensation of these officers, other than the Chief Executive Officer, based on their evaluations. In setting executive officer compensation, our Compensation Committee considers the recommendations of our Chief Executive Officer, who evaluates the performance of all other executive officers. The Board
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retains the authority to determine and approve, upon the recommendation of the Compensation Committee, the compensation of the Chief Executive Officer, unless that authority has been delegated to the Compensation Committee. The Compensation Committee also approves grants of stock options, restricted stock units and other awards under our stock plans for our executive officers. The Compensation Committee will review and evaluate, at least annually, the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter. The current members of the Compensation Committee are Messrs. Roberts, and Spencer and Ms. Johnson. Ms. Johnson serves as the Chair of the committee. Each of the members of the Compensation Committee is an independent and non-employee director under the applicable rules and regulations of the SEC and Nasdaq relating to Compensation Committee independence. The Compensation Committee may delegate any or all of its responsibilities to a subcommittee of its members. The Compensation Committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq. A copy of the Compensation Committee charter is available to security holders on the “Corporate Governance” section of our investor relations website at https://investors.viewray.com/corporate-governance/esg.
In 2021, the Compensation Committee retained Willis Towers Watson to conduct market research and analysis on our various executive positions, to assist the committee in developing appropriate incentive plans for our executives on an annual basis and to provide the committee with advice and ongoing recommendations regarding material executive compensation decisions. In compliance with the disclosure requirements of the SEC, the Compensation Committee evaluated each of the six independence factors established by the SEC in assessing the consultant’s independence. Based on this assessment, the Compensation Committee determined that the engagement of the consultant does not raise any conflicts of interest or similar concerns. The Compensation Committee also evaluated the independence of other outside advisors to the Compensation Committee, including outside legal counsel, considering the same independence factors and concluded their work for the Compensation Committee does not raise any conflicts of interest.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board regarding candidates for directorships and composition and organization of the Board. In addition, the Nominating and Corporate Governance Committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to the Board concerning governance matters, and considers and approves or disapproves any related party transactions. The current members of our Nominating and Corporate Governance Committee are Drs. Castelein and Wilensky, Mr. Moore, and Ms. Prange. Ms. Prange serves as the Chair of the committee. Each of the members of the Nominating and Corporate Governance Committee is an independent director under the applicable rules and regulations of the SEC and Nasdaq relating to nominating and corporate governance committee independence. The Nominating and Corporate Governance Committee operates under a written charter. A copy of the Nominating and Corporate Governance Committee charter is available to security holders on the “Corporate Governance” section of our investor relations website at https://investors.viewray.com/corporate-governance/esg.
Diversity is an integral part of the Company’s principles of corporate governance and the Board believes that its membership should be composed of highly qualified directors from diverse backgrounds, who reflect the qualities enumerated below. In recommending candidates for election to the Board, the Nominating and Corporate Governance Committee may consider the following criteria, among others: diversity in gender, age, ethnicity and geographic background, perspective and experience; personal and professional integrity, ethics and values; experience in corporate management, operations or finance, such as serving as an officer or former officer of a publicly held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today’s business environment; experience relevant to the Company’s industry and with relevant social policy concerns; experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of the Company’s operations; practical and mature business judgment, including ability to make independent analytical inquiries; and promotion of a diversity of business or career experience relevant to the success of the Company. The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.
Candidates may come to the attention of the committee through current board members, our executive officers, professional search firms, stockholders or other persons. For a stockholder to make any recommendation or nomination for election to the Board at an annual meeting, the stockholder must provide a notice to the Company, which notice must be delivered to, or mailed and received at, the Company’s principal executive offices not less than 90 days and not more than 120 days prior to the one-year anniversary of the preceding year’s annual meeting; provided, that if the date of the annual meeting is more than 30 days before or more than 60 days after that anniversary date, the stockholder’s notice must be delivered, or mailed and received, not later than 90 days prior to the date of the annual meeting or, if later, the 10th day
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following the date on which public disclosure of the date of that annual meeting is made. Further updates and supplements to the stockholder’s notice may be required at the times, and in the forms, required under our bylaws. As set forth in our bylaws, submissions must include: the name and address of the proposed nominee; information regarding the proposed nominee that is required to be disclosed in a proxy statement or other filings in a contested election pursuant to Section 14(a) under the Exchange Act of 1934, as amended (the “Exchange Act”); information regarding the proposed nominee’s indirect and direct interests in shares of the Company’s common stock; and a completed and signed questionnaire, representation and agreement of the proposed nominee. Our bylaws also specify further requirements as to the form and content of a stockholder’s notice. We recommend that any stockholder wishing to make a nomination for director review a copy of our bylaws, as amended and restated to date, which is available, without charge, from our Corporate Secretary, at 2 Thermo Fisher Way, Oakwood Village, Ohio 44146.
Ms. Schnabel was appointed to the Board in March 2022 and will stand for election as a director by stockholders for the first time at our annual meeting of stockholders in 2023. Ms. Schnabel was appointed to the board pursuant to a Cooperation Agreement entered into between the Company and Hudson on March 8, 2022.
Environmental, Social and Governance Responsibility
In 2020, the Company developed and formalized a focused Environmental, Social and Governance Responsibility (“ESG”) program, which is rooted in our business mission, core values, and our culture. Details concerning our commitment to ESG can be located at: https://investors.viewray.com/corporate-governance/esg. The Company’s management team reports and updates the Nominating & Corporate Governance Committee and the Board on the status of the ESG program on no less than a quarterly basis.
Additionally. diversity is an integral part of the Company’s principles of corporate governance and the Board believes that its membership should be composed of highly qualified directors from diverse backgrounds. In evaluating the suitability of individual candidates (both new candidates and current Board members), the Nominating and Corporate Governance Committee, in recommending candidates for election, and the Board, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company; strong finance experience; experience relevant to the Company’s industry; experience as a board or executive officer member of another publicly held company; diversity of expertise and experience in substantive matters pertaining to the Company’s business relative to other board members; diversity of background and perspective; diversity in gender, age, ethnicity and geographic background; and practical and mature business judgment, including the ability to make independent analytical inquiries. The Board is currently comprised of four female directors, constituting 44% of the Board’s membership, and one director who identified as African American or Black. The Company intends to continue to seek opportunities to add Board members with diverse backgrounds. The Company’s Board Diversity Matrix, as of April 29, 2022, follows.
| Board Diversity Matrix as of 4/29/2022 | ||||||||
| Female | Male | |||||||
| Total number of directors: | 9 | |||||||
| Part I: Gender Identity | ||||||||
| Directors | 4 | 5 | ||||||
| Part II: Demographic Background | ||||||||
| African American or Black | 0 | 1 | ||||||
| White | 4 | 4 | ||||||
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In addition, we believe a strong majority of the Board’s members satisfy the Company’s key skills and experience elements. The Company’s Board Experience Matrix, as of April 29, 2022, follows.
| Board Experience Matrix as of: 4/29/2022 | ||||||||||||||||||||||||||||||||
| Directors | Caley Castelein, M.D.1 | Scott W. Drake | B. Kristine Johnson | Daniel Moore | Karen N. Prange | Brian K. Roberts1 | Susan C. Schnabel1 | Phillip M. Spencer | Gail Wilensky, PhD. | Total | ||||||||||||||||||||||
| Year joined | 2008 | 2018 | 2020 | 2018 | 2021 | 2015 | 2022 | 2021 | 2019 | — | ||||||||||||||||||||||
| Age | 51 | 54 | 70 | 61 | 58 | 51 | 60 | 59 | 78 | — | ||||||||||||||||||||||
Independent2 | Yes | No | Yes | Yes | Yes | Yes | Yes | Yes | Yes | 8 | ||||||||||||||||||||||
Public Company Board Experience3 | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | 9 | ||||||||||||||||||||||
Strategy4 | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | 9 | ||||||||||||||||||||||
Medical Device5 | Yes | Yes | Yes | Yes | Yes | Yes | Yes | No | No | 7 | ||||||||||||||||||||||
Capital Markets6 | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | 9 | ||||||||||||||||||||||
Enterprise Risk7 | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | 9 | ||||||||||||||||||||||
Cyber Security8 | Yes | Yes | No | Yes | Yes | Yes | Yes | Yes | No | 7 | ||||||||||||||||||||||
1 Ms. Schnabel, Mr. Roberts, and Dr. Castelein are each deemed by the Board as a “Financial Expert” as defined under Section 407 of the Sarbanes-Oxley Act of 2002 (SOX).
2 Independent: One who is not an executive officer or employee of company, and who, in the Board’s determination, has no relationship which would “interfere with the exercise of independent judgment” in carrying out director responsibilities.
3 Public Company Board Experience: Substantive and relevant experience serving as a member of the board of directors of a public company or companies generally comparable in breadth and level of complexity to the Company.
4 Strategy: Substantive and relevant experience in oversight or the development (direct or indirect) of strategic planning and execution activities generally comparable in breadth and level of complexity as those of the Company.
5 Medical Devices: Substantive and relevant experience in oversight of or exposure to global development and commercialization of medical devices generally comparable in breadth and level of complexity as those marketed by the Company.
6 Capital Markets: Substantive and relevant experience in oversight of or exposure to investment banking and/or capital raising activities generally comparable in breadth and level of complexity as those utilized by the Company.
7 Enterprise Risk Management: Substantive and relevant experience in oversight or the development (direct or indirect) of enterprise risk program management generally comparable in breadth and level of complexity as that of the Company.
8 Cyber Security: Substantive and relevant experience in oversight of cyber security issues for businesses generally comparable in breadth and level of complexity as those of the Company.
Meetings of the Board of Directors, Board and Committee Member Attendance and Annual Meeting Attendance
During 2021, the Board met six times. Reference the table above included within the “Board Committees” section for the number of Compensation Committee, Audit Committee and Nominating and Corporate Governance Committee meetings held during 2021. Each Board member attended 75% or more of the aggregate of the meetings of the Board and of the committees on which they served. Our directors are expected to attend our annual meetings of stockholders. Messrs. Drake, Moore, Spencer and Roberts, and Drs. Castelein, Wilensky, and Xie, and Ms. Johnson and Prange attended our 2021 Annual Meeting.
Stockholder Communications with the Board of Directors
Should stockholders wish to communicate with the Board, any committee of the Board or any specified individual directors, they should send their correspondence to the attention of our Corporate Secretary at 2 Thermo Fisher Way, Oakwood Village, Ohio 44146. The communication should include the name, mailing address and telephone number of the stockholder sending the communication, the number of shares of stock owned by the stockholder and, if not the owner of record, the name of the owner of record of the shares beneficially owned by the stockholder, in order to permit stockholder status to be confirmed and for the Company to provide a response if deemed appropriate. The Corporate Secretary will forward the communication to the relative directors or the Board as a whole.
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ADDITIONAL INFORMATION
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements, annual reports, or notices of internet availability of proxy materials with respect to two or more stockholders sharing the same address by delivering a single proxy statement, annual report, or notice of internet availability of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Brokers with account holders who are ViewRay stockholders may be “householding” our proxy materials. A single proxy statement, annual report, or notice of internet availability of proxy materials may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you notify your broker or the Company that you no longer wish to participate in “householding.”
If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, annual report, or notice of internet availability of proxy materials, you may (1) notify your broker, (2) direct your written request to: Investor Relations, ViewRay, Inc., 2 Thermo Fisher Way, Oakwood Village, Ohio 44146 or (3) contact our Investor Relations department by telephone at 1-844-MRIdian (674-3426). Stockholders who currently receive multiple copies of the proxy statement, annual report, or notice of internet availability of proxy materials at their address and would like to request “householding” of their communications should contact their broker. In addition, the Company will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the proxy statement, annual report, or notice of internet availability of proxy materials promptly to any stockholder at a shared address to which a single copy of the documents was delivered.
Other Matters
As of the date of this Proxy Statement, the Board does not intend to present any matters other than those described herein at the Annual Meeting and is unaware of any matters to be presented by other parties. If other matters are properly brought before the meeting for action by the stockholders, proxies will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder.
Annual Reports
Our 2021 Annual Report on Form 10-K (which is not a part of our proxy soliciting materials) will be mailed with this Proxy Statement to those stockholders that request and receive a copy of the proxy materials in the mail. Stockholders that received the Notice of Internet Availability of Proxy Materials can access the Annual Report and this Proxy Statement on the website referenced on the Notice of Internet Availability of Proxy Materials. The Annual Report and this Proxy Statement are also available on the “SEC Filings” section of our investor relations website at http://investors.viewray.com and at the SEC’s website at www.sec.gov. Please note that the information on our website is not part of this Proxy Statement.
Upon written request by a ViewRay stockholder, we will mail without charge a copy of our 2021 Annual Report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits to the Annual Report on Form 10-K. Exhibits to the Annual Report on Form 10-K are available upon payment of a reasonable fee, which is limited to our expenses in furnishing the requested exhibit. All requests should be directed to our Chief Financial Officer, 2 Thermo Fisher Way, Oakwood Village, Ohio 44146.
| By Order of the Board of Directors | |||||
| /s/ Scott W. Drake | |||||
Scott W. Drake President and Chief Executive Officer | |||||
| April 29, 2022 | |||||
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Appendix A
VIEWRAY, INC.
AMENDED & RESTATED 2015 EQUITY INCENTIVE AWARD PLAN
(As proposed to be amended)
ARTICLE 1.
PURPOSE
The purpose of the ViewRay, Inc. Amended & Restated 2015 Equity Incentive Award Plan (as it may be amended from time to time, the “Plan”) is to promote the success and enhance the value of ViewRay, Inc., a Delaware corporation, (the “Company”) by linking the individual interests of the members of the Board, Employees, and Consultants to those of the Company’s stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1 “Administrator” shall mean the entity that conducts the general administration of the Plan as provided in Article 13 hereof. With reference to the duties of the Administrator under the Plan which have been delegated to one or more persons pursuant to Section 13.6 hereof, or as to which the Board has assumed, the term “Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.2“Affiliate” shall mean any Parent or Subsidiary.
2.3“Applicable Law” shall mean any applicable law, including without limitation, (i) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (ii) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state, local or foreign; and (iii) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
2.4“Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Deferred Stock Unit award, a Stock Payment award or a Stock Appreciation Right, which may be awarded or granted under the Plan (collectively, “Awards”).
2.5“Award Agreement” shall mean any written notice, agreement, terms and conditions, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine consistent with the Plan.
2.6“Board” shall mean the Board of Directors of the Company.
2.7“Cause” shall mean, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Holder and the Company applicable to an Award, the occurrence of any of the following events: (i) the Holder’s gross negligence or willful misconduct in the performance of the duties and services with the Company; (ii) the Holder’s conviction of, or plea of guilty or nolo contendere to, a felony or crime involving moral turpitude (or any similar crime in any jurisdiction outside the United States); (iii) the Holder’s willful refusal to perform the duties and responsibilities required of the Holder or as lawfully directed by the Company; (iv) the Holder’s material breach of any material provision of any employment agreement, confidentiality agreement or other agreement with the Company or corporate code or policy; (v) any act of fraud, embezzlement, material misappropriation or dishonesty committed by the Holder against the Company; or (v) any acts, omissions or statements by the Holder which the Company determines to be materially detrimental or damaging to the reputation, operations, prospects or business relations of the Company.
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2.8“Change in Control” shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(a)A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or
(b)During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.8(a) or 2.8(c)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(c)The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i)which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
(ii)after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 2.8(c)(ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
(d)The Company’s stockholders approve a liquidation or dissolution of the Company.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any portion of an Award that provides for the deferral of compensation and is subject to Section 409A of the Code, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) must also constitute a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Section 409A.
The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority is in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
2.9“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and official guidance promulgated thereunder, whether issued prior or subsequent to the grant of any Award.
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2.10“Committee” shall mean the Compensation Committee of the Board, a subcommittee of the Compensation Committee of the Board or another committee or subcommittee of the Board, appointed as provided in Section 13.1 hereof.
2.11“Common Stock” shall mean the common stock of the Company, par value $0.0001 per share.
2.12“Company” shall have the meaning set forth in Article 1 hereof or any successor thereto.
2.13“Consultant” shall mean any consultant or advisor engaged to provide services to the Company or any Affiliate who qualifies as a consultant or advisor under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement or any successor Form thereto.
2.14“Deferred Stock” shall mean a right to receive Shares awarded under Section 10.4 hereof.
2.15“Deferred Stock Unit” shall mean a right to receive Shares awarded under Section 10.5 hereof.
2.16“Director” shall mean a member of the Board, as constituted from time to time.
2.17“Dividend Equivalent” shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 10.2 hereof.
2.18“DRO” shall mean a “domestic relations order” as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
2.19“Effective Date” shall have the meaning set forth in Section 14.1 hereof.
2.20“Eligible Individual” shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Administrator.
2.21“Employee” shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code and the Treasury Regulations thereunder) of the Company or any Affiliate.
2.22“Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding stock-based Awards.
2.23“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.24“Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:
(a)If the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(b)If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which
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such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(c)If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.
2.25“Good Reason” shall mean, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Holder and the Company applicable to an Award, with respect to any particular Holder, the Holder’s resignation from all positions he or she then-holds with the Company if (A) without Holder’s written consent (I) there is a material reduction of the Holder’s base salary; provided, however, that a material reduction in the Holder’s base salary pursuant to a salary reduction program affecting all or substantially all of the employees of the Company and that does not adversely affect Holder to a greater extent than other similarly situated employees shall not constitute Good Reason; or (II) the Holder is required to relocate his or her primary work location to a facility or location that would increase the Holder’s one way commute distance by more than fifty (50) miles from the Holder’s primary work location as of immediately prior to such change, (B) the Holder provides written notice outlining such conditions, acts or omissions to the Company’s General Counsel within thirty (30) days immediately following such event or occurrence, (C) such event or occurrence is not remedied by the Company within thirty (30) days following the Company’s receipt of such written notice and (D) the Holder’s resignation is effective not later than thirty (30) days after the expiration of such thirty (30) day cure period.
2.26“Greater Than 10% Stockholder” shall mean an individual then owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any “parent corporation” or “subsidiary corporation” (as defined in Sections 424(e) and 424(f) of the Code, respectively).
2.27“Holder” shall mean a person who has been granted an Award.
2.28“Incentive Stock Option” shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.
2.29“Non-Employee Director” shall mean a Director of the Company who is not an Employee.
2.30“Non-Employee Director Equity Compensation Policy” shall have the meaning set forth in Section 4.6 hereof.
2.31“Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option or which is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.
2.32“Option” shall mean a right to purchase Shares at a specified exercise price, granted under Article 6 hereof. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.
2.33“Option Term” shall have the meaning set forth in Section 6.4 hereof.
2.34“Parent” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.35“Performance Award” shall mean a cash bonus award, stock bonus award, performance award or incentive award that is paid in cash, Shares or a combination of both, awarded under Section 10.1 hereof.
2.36“Performance-Based Compensation” shall mean a cash bonus award, stock bonus award, performance award or incentive award that is paid in cash, Shares or a combination of both, that is subject to the limitations set forth in Article 5 hereof
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2.37“Performance Criteria” shall mean the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:
(a)The Performance Criteria that shall be used to establish Performance Goals may include: (i) net earnings or losses (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation, (D) amortization and (E) non-cash equity-based compensation expense); (ii) gross or net sales or revenue or sales or revenue growth; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating income, earnings or profit (either before or after taxes); (vi) cash flow (including, but not limited to, cash flow return on investments, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital (or invested capital) and cost of capital; (ix) return on stockholders’ equity; (x) total stockholder return; (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs, reductions in costs and cost control measures; (xiv) funds from operations; (xv) expenses; (xvi) working capital; (xvii) earnings or loss per Share; (xviii) adjusted earnings or loss per share; (xix) price per Share or dividends per share (or appreciation in and/or maintenance of such price of dividends); (xx) regulatory achievements or compliance (including, without limitation, regulatory body approval for commercialization of a product); (xxi) implementation or completion of critical projects; (xxii) market share; (xxiii) economic value; (xxiv) debt levels or reduction; (xxv) customer retention; (xxvi) sales-related goals; (xxvii) comparisons with other stock market indices; (xxviii) operating efficiency; (xxix) customer satisfaction and/or growth; (xxx) employee satisfaction; (xxxi) research and development achievements; (xxxii) financing and other capital raising transactions; (xxxiii) recruiting and maintaining personnel; (xxxiv) year-end cash, and (xxxv) any other performance criteria deemed appropriate by the Committee, any of which may be measured either in absolute terms for the Company or any department or operating unit of the Company or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.
(b)The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include, but are not limited to, one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the sale or disposition of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquire in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in Applicable Laws, accounting principles or business conditions.
2.38“Performance Goals” shall mean, with respect to a Performance Period, one or more goals established in writing by the Administrator for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of an Affiliate, a division, business unit or one or more individuals.
2.39“Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Holder’s right to, and the payment of, a Performance Award.
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2.40“Performance Stock Unit” shall mean a Performance Award awarded under Section 10.1 hereof which is denominated in units of value including dollar value of shares of Common Stock.
2.41“Permitted Transferee” shall mean, with respect to a Holder, any “family member” of the Holder, as defined under the General Instructions to Form S-8 Registration Statement under the Securities Act or any successor Form thereto, or any other transferee specifically approved by the Administrator, after taking into account Applicable Law.
2.42“Plan” shall have the meaning set forth in Article 1 hereof.
2.43“Program” shall mean any program adopted by the Administrator pursuant to the Plan containing the terms and conditions intended to govern a specified type of Award granted under the Plan and pursuant to which such type of Award may be granted under the Plan.
2.44“Restricted Stock” shall mean an award of Shares made under Article 8 hereof that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.
2.45“Restricted Stock Unit” shall mean a contractual right awarded under Article 9 hereof to receive in the future a Share or the Fair Market Value of a Share in cash.
2.46“Securities Act” shall mean the Securities Act of 1933, as amended.
2.47“Shares” shall mean shares of Common Stock.
2.48“Share Limit” shall have the meaning set forth in Section 3.1(a) hereof.
2.49“Stock Appreciation Right” shall mean a stock appreciation right granted under Article 11 hereof.
2.50“Stock Appreciation Right Term” shall have the meaning set forth in Section 11.4 hereof.
2.51“Stock Payment” shall mean (a) a payment in the form of Shares, or (b) an option or other right to purchase Shares, as part of a bonus, deferred compensation or other arrangement, awarded under Section 10.3 hereof.
2.52“Subsidiary” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.53“Substitute Award” shall mean an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.54“Termination of Service” shall mean:
(a)As to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or an Affiliate is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Affiliate.
(b)As to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.
(c)As to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Affiliate is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but
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excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.
The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Terminations of Service, including, without limitation, the question of whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service; provided, however, that, with respect to Incentive Stock Options, unless the Administrator otherwise provides in the terms of the Program, the Award Agreement or otherwise, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. For purposes of the Plan, a Holder’s employee-employer relationship or consultancy relations shall be deemed to be terminated in the event that the Affiliate employing or contracting with such Holder ceases to remain an Affiliate following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1Number of Shares.
(a)Subject to Sections 14.1, 14.2 and 3.1(b) hereof, the number of Shares which may be issued or transferred pursuant to Awards under the Plan on or after the Effective Date shall be equal to the sum of (i) 3,250,000 9,550,000 Shares plus (ii) the number of Shares remaining available for issuance under the Plan as of the Effective Date (the “Share Limit”). The maximum number of Shares with respect to Incentive Stock Options which may be granted under the Plan on or after the Effective Date shall be 3,250,000 9,550,000 Shares.
(b)If any Shares subject to an Award are forfeited or expire or such Award is settled for cash (in whole or in part), the Shares subject to such Award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future grants of Awards under the Plan and shall be added back to the Share Limit. In addition, the following Shares shall not be available for future grants of Awards under the Plan and shall not be added back to the Share Limit: (i) Shares tendered by a Holder or withheld by the Company in payment of the exercise price of an Option or a Stock Appreciation Right; (ii) Shares tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to an Award; and (iii) Shares purchased on the open market with the proceeds from the exercise of Awards. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the Shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
(c)Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Affiliates immediately prior to such acquisition or combination.
3.2Stock Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.
3.3Limitation Awards to Non-Employee Directors. Subject to Section 14.2, the aggregate Fair Market Value on the date of grant of Shares subject to Awards granted under the Plan, together with
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any cash compensation paid or payable, during any calendar year to any one Non-Employee Director shall not exceed $500,000; provided, however, that in the calendar year in which a Non-Employee Director first joins the Board or is designated as Chairman of the Board, such maximum dollar value may be up to two hundred percent (200%) of the dollar value set forth in the foregoing limit. The limitation described in this Section shall be determined without regard to amounts paid to a Non-Employee Director during or for any period in which such individual was an employee or consultant, and any severance and other payments paid to a Non-Employee Director for such director’s prior or current service to the Company or any Subsidiary other than serving as a director shall not be taken into account in applying the limit provided above. For the avoidance of doubt, any compensation that is deferred shall be counted toward this limit for the year in which it was first earned, and not when paid or settled.
3.4Minimum Vesting. Notwithstanding any other provision of the Plan, Awards granted under the Plan may not become exercisable, vest or settle, in whole or in part, prior to the one-year anniversary of the date of grant, except that (1) the Committee may provide that Awards become exercisable, vest or settle prior to such date in the event of the Participant’s death or disability or in connection with a Change in Control, and (2) Awards to Non-Employee Directors may vest on the Company’s next annual meeting of shareholders (provided that such annual meetings are at least fifty (50) weeks apart). Notwithstanding the foregoing, up to 5% of the aggregate number of Shares authorized for issuance under this Plan (as described in Section 3.1(a) hereof) may be issued without regard to the restrictions of the foregoing sentence.
ARTICLE 4.
GRANTING OF AWARDS
4.1Participation. The Administrator may, from time to time, select from among all Eligible Individuals, those to whom an Award shall be granted and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. Except as provided in Section 4.6 hereof regarding the grant of Awards pursuant to the Non-Employee Director Equity Compensation Policy, no Eligible Individual shall have any right to be granted an Award pursuant to the Plan.
4.2Award Agreement. Each Award shall be evidenced by an Award Agreement that sets forth the terms, conditions and limitations for such Award, which may include the term of the Award, the provisions applicable in the event of the Holder’s Termination of Service, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award (subject to Section 3.4 hereof). Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.
4.3Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.4At-Will Service; Voluntary Participation. Nothing in the Plan or in any Program or Award Agreement hereunder shall confer upon any Holder any right to continue in the employ of, or as a Director or Consultant for, the Company or any Affiliate, or shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Holder and the Company or any Affiliate. Participation by each Holder in the Plan shall be voluntary and nothing in the Plan shall be construed as mandating that any Eligible Individual shall participate in the Plan.
4.5Foreign Holders. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in countries other than the United States in which the Company and its Affiliates operate or have Employees, Non-Employee Directors or Consultants, or in order to comply with the requirements of any foreign securities exchange, the Administrator, in its sole discretion, shall have the power and authority to: (a) determine which Affiliates shall be covered by the Plan; (b) determine which
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Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the limitations contained in Sections 3.1 and 3.3 hereof; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Code, the Exchange Act, the Securities Act, any other securities law or governing statute, the rules of the securities exchange or automated quotation system on which the Shares are listed, quoted or traded or any other Applicable Law. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the United States or a political subdivision thereof.
4.6Non-Employee Director Awards. The Administrator may, in its discretion, provide that Awards granted to Non-Employee Directors shall be granted pursuant to a written non-discretionary formula established by the Administrator (the “Non-Employee Director Equity Compensation Policy”), subject to the limitations of the Plan. The Non-Employee Director Equity Compensation Policy shall set forth the type of Award(s) to be granted to Non-Employee Directors, the number of Shares to be subject to Non-Employee Director Awards, the conditions on which such Awards shall be granted, become exercisable and/or payable and expire, and such other terms and conditions as the Administrator shall determine in its discretion. The Non-Employee Director Equity Compensation Policy may be modified by the Administrator from time to time in its discretion.
4.7Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the sole discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
ARTICLE 5.
PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION.
5.1Purpose. The Committee, in its sole discretion, may determine at the time an Award is granted or at any time thereafter whether any Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant such an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this Article 5 shall control over any contrary provision contained in the Plan. The Administrator may in its sole discretion (i) grant Awards to other Eligible Individuals that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 5 and that are not intended to qualify as Performance-Based Compensation and (ii) subject any Awards intended to qualify as Performance-Based Compensation to additional conditions and restrictions unrelated to any Performance Criteria or Performance Goals (including, without limitation, continued employment or service requirements) to the extent such Awards otherwise satisfy the requirements of this Article 5 with respect to the Performance Criteria and Performance Goals applicable thereto.
5.2Applicability. The grant of an Award to an Eligible Individual for a particular Performance Period shall not require the grant of an Award to such Eligible Individual in any subsequent Performance Period and the grant of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in such period or in any other period.
5.3Types of Awards. Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to an Eligible Individual intended to qualify as Performance-Based Compensation, including, without limitation, Restricted Stock the restrictions with respect to which lapse upon the attainment of specified Performance Goals, Restricted Stock Units that vest and become payable upon the attainment of specified Performance Goals and any Performance Awards described in Article 10 hereof that vest or become exercisable or payable upon the attainment of one or more specified Performance Goals.
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5.4Procedures with Respect to Performance-Based Awards. With respect to any Award granted to one or more Eligible Individuals which is intended to constitute as Performance-Based Compensation, the Committee shall, in writing, (a) designate one or more Eligible Individuals, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Goals, and (d) specify the relationship between the Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Eligible Individual for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned under such Awards, unless otherwise provided in an applicable Program or Award Agreement, the Committee shall have the right to adjust or eliminate the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant, including the assessment of individual or corporate performance for the Performance Period.
5.5Payment of Performance-Based Awards. Unless otherwise provided in the applicable Program or Award Agreement or pursuant to Section 14.2 hereof, as to an Award that is intended to qualify as Performance-Based Compensation, the Holder must be employed by the Company or an Affiliate throughout the applicable Performance Period. Unless otherwise provided in the applicable Performance Goals, Program or Award Agreement, a Holder shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such applicable Performance Period are achieved.
ARTICLE 6.
GRANTING OF OPTIONS
6.1Granting of Options to Eligible Individuals. The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine which shall not be inconsistent with the Plan. Holders shall have no voting rights and will have no rights to receive dividends or Dividend Equivalents in respect of an Option or any Shares subject to an Option until the Holder has become the holder of record of such Shares.
6.2Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) of the Company. No person who qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. To the extent that the aggregate fair market value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any subsidiary or parent corporation thereof (each as defined in Section 424(f) and (e) of the Code, respectively), exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the Fair Market Value of stock shall be determined as of the time the respective options were granted. In addition, to the extent that any Options otherwise fail to qualify as Incentive Stock Options, such Options shall be treated as Nonqualified Stock Options.
6.3Option Exercise Price. Except as provided in Article 14 hereof, the exercise price per Share subject to each Option shall be set by the Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
6.4Option Term. The term of each Option (the “Option Term”) shall be set by the Administrator in its sole discretion; provided, however, that the Option Term shall not be more than ten
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(10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Options, which time period may not extend beyond the last day of the Option Term. Except as limited by the requirements of Section 409A or Section 422 of the Code and regulations and rulings thereunder, the Administrator may extend the Option Term of any outstanding Option, may extend the time period during which vested Options may be exercised following any Termination of Service of the Holder, and may amend any other term or condition of such Option relating to such a Termination of Service.
6.5Option Vesting.
(a)The period during which the right to exercise, in whole or in part, an Option vests in the Holder shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Affiliate, any of the Performance Criteria, or any other criteria selected by the Administrator. At any time after the grant of an Option, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects and Section 3.4 hereof, accelerate the vesting of the Option, including following a Termination of Service; provided, that in no event shall an Option become exercisable following its expiration, termination or forfeiture.
(b)No portion of an Option which is unexercisable at a Holder’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Program, the Award Agreement or by action of the Administrator following the grant of the Option.
6.6Substitute Awards. Notwithstanding the foregoing provisions of this Article 6 to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less than the Fair Market Value per share on the date of grant; provided that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
ARTICLE 7.
EXERCISE OF OPTIONS
7.1Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional Shares and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of Shares.
7.2Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(a)A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option;
(b)Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all Applicable Law. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
(c)In the event that the Option shall be exercised pursuant to Section 12.3 hereof by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option, as determined in the sole discretion of the Administrator; and
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(d)Full payment of the exercise price and applicable withholding taxes to the stock administrator of the Company for the shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Section 12.1 and 12.2 hereof.
7.3Notification Regarding Disposition. The Holder shall give the Company prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two (2) years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) of such Option to such Holder, or (b) one (1) year after the transfer of such shares to such Holder.
ARTICLE 8.
AWARD OF RESTRICTED STOCK
8.1Award of Restricted Stock.
(a)The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.
(b)The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock to the extent required by Applicable Law.
8.2Rights as Stockholders. Upon issuance of Restricted Stock, the Holder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said Shares, subject to the restrictions in the applicable Program or in each individual Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares; provided, however, that, all dividends and other distributions which are paid prior to vesting shall only be paid out to the Holder when and to the extent that any vesting conditions on such award are satisfied and the underlying share of Restricted Stock vests.
8.3Restrictions. All shares of Restricted Stock (including any shares received by Holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of the applicable Program or in each individual Award Agreement, be subject to such restrictions and vesting requirements as the Administrator shall provide (subject to Section 3.4 hereof). Such restrictions may include, without limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including, without limitation, criteria based on the Holder’s duration of employment, directorship or consultancy with the Company, the Performance Criteria, Company or Affiliate performance, individual performance or other criteria selected by the Administrator. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate and subject to Section 3.4 hereof, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the Program and/or the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.
8.4Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. The Company may, in its sole discretion, (a) retain physical possession of any stock certificate evidencing shares of Restricted Stock until the restrictions thereon shall have lapsed and/or (b) require that the stock certificates evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Holder deliver a stock power, endorsed in blank, relating to such Restricted Stock.
8.5Section 83(b) Election. If a Holder makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather
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than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.
ARTICLE 9.
AWARD OF RESTRICTED STOCK UNITS
9.1Grant of Restricted Stock Units. The Administrator is authorized to grant Awards of Restricted Stock Units to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator.
9.2Term. Except as otherwise provided herein, the term of a Restricted Stock Unit award shall be set by the Administrator in its sole discretion.
9.3Purchase Price. The Administrator shall specify the purchase price, if any, to be paid by the Holder to the Company with respect to any Restricted Stock Unit award; provided, however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.
9.4Vesting of Restricted Stock Units. At the time of grant, and subject to Section 3.4 hereof, the Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without limitation, vesting based upon the Holder’s duration of service to the Company or any Affiliate, one or more Performance Criteria, Company performance, individual performance or other specific criteria, in each case on a specified date or dates or over any period or periods, as determined by the Administrator.
9.5Settlement and Payment. At the time of grant, the Administrator shall specify the settlement date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Holder (if permitted by the applicable Award Agreement); provided that, except as otherwise determined by the Administrator, set forth in any applicable Award Agreement, and subject to compliance with Section 409A of the Code, in no event shall the settlement date relating to each Restricted Stock Unit occur following the later of (a) the fifteenth (15th) day of the third (3rd) month following the end of calendar year in which the Restricted Stock Unit vests; or (b) the fifteenth (15th) day of the third (3rd) month following the end of the Company’s fiscal year in which the Restricted Stock Unit vests. On the settlement date, the Company shall, subject to Section 12.4(e) hereof, transfer to the Holder one unrestricted, fully transferable Share for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited, or, in the sole discretion of the Administrator, an amount in cash equal to the Fair Market Value of such shares on the settlement date or a combination of cash and Common Stock as determined by the Administrator.
9.6Payment upon Termination of Service. An Award of Restricted Stock Units shall only be payable while the Holder is an Employee, a Consultant or a member of the Board, as applicable; provided, however, that the Administrator, in its sole and absolute discretion and subject to Section 3.4 hereof may provide (in an Award Agreement or otherwise) that a Restricted Stock Unit award may be paid subsequent to a Termination of Service in certain events, including a Change in Control, the Holder’s death, retirement or disability or any other specified Termination of Service.
9.7No Rights as a Stockholder. Unless otherwise determined by the Administrator, a Holder who is awarded Restricted Stock Units shall possess no incidents of ownership with respect to the Shares represented by such Restricted Stock Units, unless and until the same are transferred to the Holder pursuant to the terms of this Plan and the Award Agreement.
9.8Dividend Equivalents. Subject to Section 10.2 hereof, the Administrator may, in its sole discretion, provide that Dividend Equivalents shall be earned by a Holder of Restricted Stock Units based on dividends declared on the Common Stock subject to such Restricted Stock Units, to be credited as of dividend payment dates during the period between the date an Award of Restricted Stock Units is granted to a Holder and the settlement date of such Award. Any such Dividend Equivalents shall only be paid out to the Holder if and to the extent that the vesting conditions applicable to the Restricted Stock Units are subsequently satisfied.
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ARTICLE 10.
AWARD OF PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, STOCK PAYMENTS, DEFERRED STOCK, DEFERRED STOCK UNITS
10.1Performance Awards.
(a)The Administrator is authorized to grant Performance Awards, including Awards of Performance Stock Units, to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation. The value of Performance Awards, including Performance Stock Units, may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Performance Awards, including Performance Stock Unit awards may be paid in cash, Shares, or a combination of cash and Shares, as determined by the Administrator.
(b)Without limiting Section 10.1(a) hereof, the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to a Holder which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of Article 5 hereof.
10.2Dividend Equivalents.
(a)Dividend Equivalents may be granted by the Administrator based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date an Award is granted to a Holder and the date such Award vests, is exercised, is distributed or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and shall only be paid out to the Holder if and to the extent that the vesting conditions applicable to the underlying Award are subsequently satisfied. For the avoidance of doubt, with respect to Performance-Based Compensation, dividends which are paid prior to vesting shall only be paid out to the Holder to the extent that performance-based vesting conditions are subsequently satisfied and the Performance-Based Compensation vests.
(b)Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights.
10.3Stock Payments. The Administrator is authorized to make Stock Payments to any Eligible Individual. The number or value of Shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Criteria or any other specific criteria, including service to the Company or any Affiliate, determined by the Administrator (subject to Section 3.4 hereof). Shares underlying a Stock Payment which is subject to a vesting schedule or other conditions or criteria set by the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Holder of a Stock Payment shall have no rights as a Company stockholder with respect to such Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Holder. Stock Payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.
10.4Deferred Stock. The Administrator is authorized to grant Deferred Stock to any Eligible Individual. The number of shares of Deferred Stock shall be determined by the Administrator and may (but is not required to) be based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, as the Administrator determines, in each case on a specified date or dates or over any period or periods determined by the Administrator. Shares underlying a Deferred Stock award which is subject to a vesting schedule or other conditions or criteria set by the Administrator will be issued on the vesting date(s) or date(s) that those conditions and criteria have been satisfied, as applicable and subject to Section 3.4 hereof. Unless otherwise provided by the Administrator, a Holder of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award has vested and any other applicable conditions and/or criteria have been satisfied and the Shares underlying the Award have been issued to the Holder.
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10.5Deferred Stock Units. The Administrator is authorized to grant Deferred Stock Units to any Eligible Individual. The number of Deferred Stock Units shall be determined by the Administrator and may (but is not required to) be based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, as the Administrator determines, in each case on a specified date or dates or over any period or periods determined by the Administrator (subject to Section 3.4 hereof). Each Deferred Stock Unit shall entitle the Holder thereof to receive one share of Common Stock on the date the Deferred Stock Unit becomes vested or upon a specified settlement date thereafter (which settlement date may (but is not required to) be the date of the Holder’s Termination of Service). Shares underlying a Deferred Stock Unit award which is subject to a vesting schedule or other conditions or criteria set by the Administrator will not be issued until on or following the date that those conditions and criteria have been satisfied. Unless otherwise provided by the Administrator, a Holder of Deferred Stock Units shall have no rights as a Company stockholder with respect to such Deferred Stock Units until such time as the Award has vested and any other applicable conditions and/or criteria have been satisfied and the Shares underlying the Award have been issued to the Holder.
10.6Term. The term of a Performance Award, Dividend Equivalent award, Stock Payment award, Deferred Stock award and/or Deferred Stock Unit award shall be set by the Administrator in its sole discretion.
10.7Purchase Price. The Administrator may establish the purchase price of a Performance Award, Shares distributed as a Stock Payment award, shares of Deferred Stock or Shares distributed pursuant to a Deferred Stock Unit award; provided, however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.
10.8Termination of Service. A Performance Award, Stock Payment award, Dividend Equivalent award, Deferred Stock award and/or Deferred Stock Unit award is distributable only while the Holder is an Employee, Director or Consultant, as applicable. The Administrator, however, in its sole discretion (and subject to Section 3.4 hereof) may provide that the Performance Award, Dividend Equivalent award, Stock Payment award, Deferred Stock award and/or Deferred Stock Unit award may be distributed subsequent to a Termination of Service in certain events, including a Change in Control, the Holder’s death, retirement or disability or any other specified Termination of Service.
ARTICLE 11.
AWARD OF STOCK APPRECIATION RIGHTS
11.1Grant of Stock Appreciation Rights.
(a)The Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan. Holders shall have no voting rights and will have no rights to receive dividends or Dividend Equivalents in respect of an Stock Appreciation Rights or any Shares subject to a Stock Appreciation Right until the Holder has become the holder of record of such Shares.
(b)A Stock Appreciation Right shall entitle the Holder (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per Share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Except as described in (c) below or in Section 14.2 hereof, the exercise price per Share subject to each Stock Appreciation Right shall be set by the Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value on the date the Stock Appreciation Right is granted.
(c)Notwithstanding the foregoing provisions of Section 11.1(b) hereof to the contrary, in the case of a Stock Appreciation Right that is a Substitute Award, the price per Share of the Shares subject to such Stock Appreciation Right may be less than one hundred percent (100%) of the Fair Market Value per share on the date of grant; provided that the excess of: (i) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the
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shares subject to the Substitute Award, over (ii) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
11.2Stock Appreciation Right Vesting.
(a)The period during which the right to exercise, in whole or in part, a Stock Appreciation Right vests in the Holder shall be set by the Administrator and the Administrator may determine that a Stock Appreciation Right may not be exercised in whole or in part for a specified period after it is granted (subject to Section 3.4 hereof). Such vesting may be based on service with the Company or any Affiliate, any of the Performance Criteria or any other criteria selected by the Administrator. At any time after grant of a Stock Appreciation Right, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects and Section 3.4 hereof, accelerate the period during which a Stock Appreciation Right vests.
(b)No portion of a Stock Appreciation Right which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the applicable Program or Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right, including following a Termination of Service; provided, that in no event shall a Stock Appreciation Right become exercisable following its expiration, termination or forfeiture.
11.3Manner of Exercise. All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the stock administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(a)A written or electronic notice complying with the applicable rules established by the Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;
(b)Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance; and
(c)In the event that the Stock Appreciation Right shall be exercised pursuant to this Section 11.3 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right.
11.4Stock Appreciation Right Term. The term of each Stock Appreciation Right (the “Stock Appreciation Right Term”) shall be set by the Administrator in its sole discretion; provided, however, that the term shall not be more than ten (10) years from the date the Stock Appreciation Right is granted. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Stock Appreciation Rights, which time period may not extend beyond the expiration date of the Stock Appreciation Right Term. Except as limited by the requirements of Section 409A of the Code and regulations and rulings thereunder or the first sentence of this Section 11.4, the Administrator may extend the Stock Appreciation Right Term of any outstanding Stock Appreciation Right, may extend the time period during which vested Stock Appreciation Rights may be exercised following any Termination of Service of the Holder, and may amend any other term or condition of such Stock Appreciation Right relating to such a Termination of Service.
11.5Payment. Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this Article 11 shall be in cash, Shares (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Administrator.
ARTICLE 12.
ADDITIONAL TERMS OF AWARDS
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12.1Payment. The Administrator shall determine the methods by which payments by any Holder with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) other form of legal consideration acceptable to the Administrator. The Administrator shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Holders. Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
12.2Tax Withholding. To the extent required by applicable federal, state, local or foreign law, the Committee may and/or a Holder shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise with respect to any Award, or the issuance or sale of any Shares. The Company shall not be required to recognize any Holder’s rights under an Award, to issue Shares or to recognize the disposition of such Shares until such obligations are satisfied. To the extent permitted or required by the Committee, these obligations may or shall be satisfied by the Company withholding cash from any compensation otherwise payable to or for the benefit of a Holder, the Company withholding a portion of the Shares that otherwise would be issued to a Holder under such Award or any other award held by the Holder or by the Holder tendering to the Company cash or, if allowed by the Committee, Shares.
12.3Transferability of Awards.
(a)Except as otherwise provided in Sections 12.3(b) and 12.3(c) hereof
(i)No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed;
(ii)No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or the Holder’s successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed, and any attempted disposition of an Award prior to the satisfaction of these conditions shall be null and void and of no effect, except to the extent that such disposition is permitted by clause (i) of this provision; and
(iii)During the lifetime of the Holder, only the Holder may exercise an Award (or any portion thereof) granted to such Holder under the Plan, unless it has been disposed of pursuant to a DRO; after the death of the Holder, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Program or Award Agreement, be exercised by the Holder’s personal representative or by any person empowered to do so under the deceased Holder’s will or under the then applicable laws of descent and distribution.
(b)Notwithstanding Section 12.3(a) hereof, the Administrator, in its sole discretion, may determine to permit a Holder or a Permitted Transferee of such Holder to transfer an Award other than an Incentive Stock Option (unless such Incentive Stock Option is to become a Non-Qualified Stock Option) to any one or more Permitted Transferees, subject to
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the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee (other than to another Permitted Transferee of the applicable Holder) other than by will or the laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award); and (iii) the Holder (or transferring Permitted Transferee) and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal, state and foreign securities laws and (C) evidence the transfer.
(c)Notwithstanding Section 12.3(a) hereof, a Holder may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Holder and to receive any distribution with respect to any Award upon the Holder’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Program or Award Agreement applicable to the Holder, except to the extent the Plan, the Program and the Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Holder is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Holder’s spouse or domestic partner, as applicable, as his or her beneficiary with respect to more than fifty percent (50%) of the Holder’s interest in the Award shall not be effective without the prior written or electronic consent of the Holder’s spouse or domestic partner, as applicable. If no beneficiary has been designated or survives the Holder, payment shall be made to the person entitled thereto pursuant to the Holder’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time; provided that the change or revocation is filed with the Administrator prior to the Holder’s death.
12.4Conditions to Issuance of Shares.
(a)Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such shares is in compliance with all Applicable Law, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Holder make such reasonable covenants, agreements, and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with Applicable Law.
(b)All Share certificates delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with Applicable Law. The Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares.
(c)The Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.
(d)No fractional Shares shall be issued and the Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding down.
(e)Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any Applicable Law, the Company shall not deliver to any Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
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12.5Forfeiture and Claw-Back Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in an Award Agreement or otherwise, or to require a Holder to agree by separate written or electronic instrument, that:
(a)(i) Any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (x) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (y) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (z) the Holder incurs a Termination of Service for “cause” (as such term is defined in the sole discretion of the Administrator, or as set forth in a written agreement relating to such Award between the Company and the Holder); and
(b)All Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with the requirements of Applicable Law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.
12.6Repricing Prohibition. The Administrator shall not, without the approval of the stockholders of the Company, have the authority to (i) amend any outstanding Option or Stock Appreciation Right to reduce its price per Share, or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per Share exceeds the Fair Market Value of the underlying Shares.
12.7Leave of Absence. Unless the Administrator provides otherwise, vesting of Awards granted hereunder shall be suspended during any unpaid leave of absence. A Holder shall not cease to be considered an Employee, Non-Employee Director or Consultant, as applicable, in the case of any (a) leave of absence approved by the Company, (b) transfer between locations of the Company or between the Company and any of its Affiliates or any successor thereof, or (c) change in status (Employee to Director, Employee to Consultant, etc.), provided that such change does not affect the specific terms applying to the Holder’s Award.
ARTICLE 13.
ADMINISTRATION
13.1Administrator. The Committee (or another committee or a subcommittee of the Board or the Compensation Committee of the Board assuming the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and, unless otherwise determined by the Board, shall consist solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as both a “non-employee director” as defined by Rule 16b-3 of the Exchange Act or any successor rule and an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded; provided that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 13.1 or otherwise provided in any charter of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to the Board. Vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors and, with respect to such Awards, the terms “Administrator” and “Committee” as used in the Plan shall be deemed to refer to the Board and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 13.6 hereof.
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13.2Duties and Powers of Administrator. It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan, the Program and the Award Agreement, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any Program or Award Agreement; provided that the rights or obligations of the Holder of the Award that is the subject of any such Program or Award Agreement are not affected materially and adversely by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 14.9 hereof. Any such grant or award under the Plan need not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or any successor rule or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee.
13.3Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
13.4Authority of Administrator. Subject to the Company’s Bylaws, the Committee’s Charter and any specific designation in the Plan, the Administrator has the exclusive power, authority and sole discretion to:
(a)Designate Eligible Individuals to receive Awards;
(b)Determine the type or types of Awards to be granted to each Eligible Individual;
(c)Determine the number of Awards to be granted and the number of Shares to which an Award will relate subject to the limitations set forth in Section 3.3 hereof;
(d)Subject to Section 3.4 hereof, determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
(e)Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f)Prescribe the form of each Award Agreement, which need not be identical for each Holder;
(g)Decide all other matters that must be determined in connection with an Award;
(h)Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i)Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement;
(j)Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan; and
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(k)Accelerate wholly or partially the vesting or lapse of restrictions of any Award or portion thereof at any time after the grant of an Award, subject to whatever terms and conditions it selects and Sections 3.4 and 14.2(d) hereof.
13.5Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Program, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
13.6Delegation of Authority. To the extent permitted by Applicable Law, the Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to Article 13; provided, however, that in no event shall an officer of the Company be delegated the authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act or (b) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided, further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under Applicable Law. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 13.6 hereof shall serve in such capacity at the pleasure of the Board and the Committee.
ARTICLE 14.
MISCELLANEOUS PROVISIONS
14.1Term of the Plan; Amendment, Suspension or Termination of the Plan.
(a)The Plan, as herein amended and restated, was adopted by the Board on April 11, 2020, and shall become effective upon approval by the Company’s stockholders (the “Effective Date”). The Plan shall remain available for the grant of Awards until the tenth (10th) anniversary of the Effective Date; provided, however, that Incentive Stock Options may not be granted under the Plan after April 11, 2030. Notwithstanding the foregoing, the Plan may be terminated at such earlier time as the Board may determine as set forth in Section 14.1(b) hereof.
(b)Except as otherwise provided in this Section 14.1(b), the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 14.2 hereof, increase the limits imposed in Section 3.1 hereof on the maximum number of shares which may be issued under the Plan. Except as provided in Section 14.9 hereof, no amendment, suspension or termination of the Plan shall, without the consent of the Holder, materially and adversely affect any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan.
14.2Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.
(a)In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s stock or the share price of the Company’s stock other than an Equity Restructuring, the Administrator may make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 hereof on the maximum number and kind of shares which may be issued under the Plan); (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards; (iii) the number and kind of shares of Common Stock (or other securities or property) for which grants are subsequently to be made to new and continuing Non-Employee Directors pursuant to Section 3.3 hereof; (iv) the terms and conditions of any outstanding Awards (including, without
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limitation, any applicable performance targets or criteria with respect thereto); and (v) the grant or exercise price per share for any outstanding Awards under the Plan.
(b)In the event of any transaction or event described in Section 14.2(a) hereof or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i)To provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Holder’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 14.2 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Holder’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Holder’s rights had such Award been currently exercisable or payable or fully vested;
(ii)To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(iii)To make adjustments in the number and type of shares of the Company’s stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;
(iv)To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Program or Award Agreement; and
(v)To provide that the Award cannot vest, be exercised or become payable after such event.
(c)In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 14.2(a) and 14.2(b) hereof:
(i)The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted; and/or
(ii)The Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 hereof on the maximum number and kind of shares which may be issued under the Plan).
The adjustments provided under this Section 14.2(c) shall be nondiscretionary and shall be final and binding on the affected Holder and the Company.
(d)Change in Control.
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(i)In the event of a Change in Control, each outstanding Award shall be assumed or an equivalent Award substituted by the successor corporation or a parent or subsidiary of the successor corporation, in each case, as determined by the Administrator.
(ii)In the event that the successor corporation in a Change in Control and its parents and subsidiaries refuse to assume or substitute for any Award in accordance with Section 14.2(d)(i) hereof, each such non-assumed/substituted Award, except for any Performance Awards, shall become fully vested and, as applicable, exercisable and shall be deemed exercised, immediately prior to the consummation of such transaction, and all forfeiture restrictions on any or all such Awards shall lapse at such time. For the avoidance of doubt, the vesting of any Performance Awards not assumed in a Change in Control will not be automatically accelerated pursuant to this Section 14.2(d)(ii) and will instead vest pursuant to the terms and conditions of the applicable Award Agreement upon a Change in Control where the successor corporation and its parents and subsidiaries refuse to assume or substitute for any Award in accordance with Section 14.2(d)(i) hereof. If an Award vests and, as applicable, is exercised in lieu of assumption or substitution in connection with a Change in Control, the Administrator shall notify the Holder of such vesting and any applicable exercise period, and the Award shall terminate upon the Change in Control. For the avoidance of doubt, if the value of an Award that is terminated in connection with this Section 14.2(d)(ii) is zero or negative at the time of such Change in Control, such Award shall be terminated upon the Change in Control without payment of consideration therefor.
(iii)Notwithstanding anything to the contrary, in the event that, within the twelve (12) month period immediately following a Change in Control, a Holder experiences a Termination of Service by the Company for other than Cause or by a Holder for Good Reason, then the vesting and, if applicable, exercisability of that number of Shares equal to one hundred percent (100%) of the then-unvested Shares subject to the outstanding Awards held by such Holder shall accelerate upon the date of such Termination of Service.
(e)The Administrator may, in its sole discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.
(f)No adjustment or action described in this Section 14.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 of the Exchange Act unless the Administrator determines that the Award is not to comply with such exemptive conditions.
(g)The existence of the Plan, the Program, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(h)In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of thirty (30) days prior to the consummation of any such transaction.
14.3No Stockholders Rights. Except as otherwise provided herein, a Holder shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Holder becomes the record owner of such Shares.
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14.4Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.
14.5Effect of Plan upon Other Compensation Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in the Plan shall be construed to limit the right of the Company or any Affiliate: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Affiliate, or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.
14.6Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all Applicable Law, and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all Applicable Law. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such Applicable Law.
14.7Titles and Headings, References to Sections of the Code or Exchange Act. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.
14.8Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.
14.9Section 409A. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the Program pursuant to which such Award is granted and the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan, the Program and any Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Administrator determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Administrator may adopt such amendments to the Plan and the applicable Program and Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section.
14.10No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Holders or any other persons uniformly.
14.11Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Holder any rights that are greater than those of a general creditor of the Company or any Affiliate.
14.12Indemnification. To the extent allowable pursuant to Applicable Law, each member of the Committee or of the Board and any officer or other employee to whom authority to administer any component of the Plan is delegated shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that
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may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
14.13Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
14.14Expenses. The expenses of administering the Plan shall be borne by the Company and its Affiliates.
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