|
Name
|
|
Position
|
|
Age
|
|
Directors:
|
|
|
|
|
|
Dr.
Gary N. Wilner
|
|
Chairman
of the Board of Directors
|
|
67
|
|
John
B. Rush
|
|
President,
Chief Executive Officer and Director
|
|
49
|
|
L.
Michael Cutrer
|
|
Executive
Vice President, Chief Technology Officer and Director
|
|
51
|
|
Dr.
Wilfred E. Jaeger
|
|
Director
|
|
51
|
|
John
M. Sabin
|
|
Director
|
|
53
|
|
Richard
A. Sandberg
|
|
Director
|
|
64
|
|
Nancy
J. Wysenski
|
|
Director
|
|
50
|
|
Roderick
A.Young
|
|
Director
|
|
64
|
|
Non-Director
Officers:
|
|
|
|
|
|
Troy
A. Barring
|
|
Senior
Vice-President & Chief Operating Officer
|
|
48
|
|
James
W. Klingler
|
|
Senior
Vice-President & Chief Financial Officer
|
|
60
|
|
|
|
|
|
|
The
terms
of all directors will expire at the next annual meeting of the stockholders,
or
when their successors are elected and qualified. Directors are elected each
year, and all directors serve one-year terms. Officers serve at the pleasure
of
the Board of Directors. On June 6, 2006, we entered into a Securities Purchase
Agreement with Three Arch Partners whereby we provided the right to Three Arch
Partners to designate two nominees who are reasonably acceptable to us to serve
on the Board of Directors. If at any time, Three Arch Partners owns less than
3,500,000 shares (including shares of common stock issuable upon exercise of
warrants, and as adjusted for stock splits, stock dividends and
recapitalization), but more than 2,000,000 shares, Three Arch Partners would
then have the right to designate one nominee who is reasonably acceptable to
us
to serve on the Board of Directors. In that case, one of the designees must
resign from the Board effective immediately. Our obligations pursuant to the
Securities Purchase Agreement terminates if at any time Three Arch Partners
owns
less than 2,000,000 shares. If Three Arch Partners owns less than 2,000,000
shares at any time, any director previously nominated by Three Arch Partners
is
obligated to resign from the Board immediately. On June 13, 2006, the Board
elected the two designees of Three Arch Partners, Dr. Jaeger and Mr. Young,
both
of whom continue to serve on the Board.
On
December 12, 2007, we entered into a Securities Purchase Agreement with Three
Arch Partners whereby, at or by the time of the our next annual stockholders
meeting, we shall decrease the number of members of our Board of Directors
from
nine (9) members to seven (7) members and the Board of Directors shall include
at least one (1) representative from Three Arch Partners (the “Three Arch
Partners Board Member”) and two (2) new independent members (the “New
Independent Board Members”) with relevant industry experience. The Three Arch
Partners Board Member shall be reimbursed for all out-of-pocket expenses related
to attending meetings of the Board of Directors. In addition if our Board
members receive any additional fees or compensation, Three Arch Partners shall
be entitled to equivalent payment. We further covenant and agree to use
commercially reasonable efforts to place the Three Arch Partners Board Member
on
the slate of directors presented to its stockholders at each annual meeting
at
which directors are elected and to place the New Independent Board Members
on
the slate of directors presented to its stockholders at the next annual meeting
at which directors are elected, in all cases subject to compliance with relevant
Nasdaq rules and regulations and subject to the approval of such nominees by
the
Nominating and Corporate Governance Committee of the Board of Directors. If
the
Nominating and Corporate Governance Committee of the Board of Directors does
not
approve any proposed Three Arch Partners Board Member, Three Arch Partners
shall
be entitled to propose another candidate who shall be reasonably acceptable
to
us. Our obligations under the Securities Purchase Agreement with respect to
the
Three Arch Partners Board Member shall terminate in their entirety if at any
time Three Arch Partners beneficially owns less than 5,000,000 shares of Common
Stock (including shares of Common Stock issuable upon exercise of warrants,
and
as appropriately adjusted for stock splits, stock dividends and
recapitalizations), in such case, the Three Arch Partners Board Member shall
resign from the Board effective immediately.
There
are
no other arrangements or understandings between us and any other person pursuant
to which such person was or is to be selected as a director, executive officer
or nominee. We have, however, entered into employment agreements with three
of
our executive officers, which are described on page 14 below under the heading
“Potential Payments Upon Termination or Change-in-Control.”
Dr.
Gary N. Wilner
has served on our Board of Directors since December,
2002 and Chairman of the Board of Directors since March 2006. He retired from
the practice of medicine in January 2005, having been an academic and
consultative cardiologist for the past 30 years. Dr. Wilner serves as a Trustee
and Chairman of the Board of Trustees of the Oakmark Family of Funds. He has
had
prior service as a Director of the American Heart Association and the Albert
Einstein Peace Prize Foundation.
John
B. Rush
has
served as our President and Chief Executive Officer since April 2007, and became
a Director in June, 2007. Previously, Mr. Rush has served since 2002 as
President and Chief Executive Officer of Sanarus Medical, a leading developer
of
minimally invasive medical devices for diagnosing and treating breast disease.
Prior to joining Sanarus, Mr. Rush was President and Chief Executive Officer of
Micro Therapeutics, Inc. (now owned by ev3, Inc.), a publicly traded medical
device company focused on the treatment of cerebral and peripheral vascular
disorders worldwide. Mr. Rush has over twenty-four years of experience in the
medical device sector, with a background in sales, marketing and management
at
such companies as Scimed Life Systems/Boston Scientific and
Cilco/CooperVision/Alcon Surgical.
L.
Michael Cutrer
served
as our President and Chief Executive Officer since 1990, and transitioned from
those positions to become our Executive Vice President and Chief Technology
Officer upon the appointment of Mr. Rush in April 2007. Previously,
Mr. Cutrer was a Manager of Isotope Products Laboratory, Inc., a
radioisotope manufacturing company, where he was responsible for industrial
product manufacturing, research and development.
Dr.
Wilfred E. Jaeger
has
served on our Board of Directors since June 2006. Dr. Jaeger is the cofounder
of
Three
Arch Partners. Previously he was a general partner at Schroder Ventures. Dr.
Jaeger began his medical career in private practice. He was subsequently
recruited by Chec Medical, a venture capital backed ambulatory care startup
in
Seattle. He subsequently attended business school and began working in venture
capital in 1989. He has since been an active early stage investor in numerous
successful biotechnology, healthcare service, and medical device companies.
Dr.
Jaeger serves on the boards of many private healthcare companies, and he
currently serves as a director of Threshold Pharmaceuticals, Inc.
John
M. Sabin
has
served on our Board of Directors since August 2005. He has served as Chief
Financial Officer and General Counsel of Phoenix Health Systems, a health care
IT consulting and outsourcing firm, since October 2004. From January 2000
to October 2004, he served as Chief Financial Officer and General Counsel of
NovaScreen Biosciences Corporation, a developer of biotechnology-based tools
to
accelerate drug discovery and development. From September 1999 to January
2000, he was a business consultant. From May 1998 to September 1999, he
served as Executive Vice President and Chief Financial Officer of Hudson Hotels
Corporation, a limited service hotel development and management company.
Prior to May 1998, he was an executive at Vistana, Inc., Choice Hotels
International, Inc., Manor Care Inc. and Marriott International, Inc. Mr.
Sabin has served as a Trustee of Hersha Hospitality Trust, a publicly
traded hospitality real estate investment trust since 2003, and as a Trustee
of
Prime Group Realty Trust, a real estate investment trust since 2005.
Richard
A. Sandberg
has
served on our Board of Directors since August 2005. He is currently the Chief
Financial Officer of Oxford Immunotec, Ltd, a T-cell diagnostics company
developing tests for tuberculosis and other infectious diseases. From 2002
to
2007, he served as Chief Financial Officer of MZT Holdings, Inc. (formerly
Matritech, Inc.), a publicly traded developer and manufacturer of cancer
diagnostic test products, and has also been on that company’s board of directors
since 1999 (excluding the period from June to September 2002). Mr.
Sandberg has also served as Manager and Chief Financial Officer of Battery
Asset
Management, LLC, a firm specializing in foreign exchange transactions.
From 1997 to 2001, Mr. Sandberg served as Chairman of the Board of Lifecodes
Corporation, a manufacturer of DNA test kits and a provider of DNA testing
services and from May 1997 to September 1998, as its Chief Financial
Officer. From 1983 to 1997, Mr. Sandberg held financial and operating
positions at Dianon Systems, Inc., an anatomic pathology testing and
genetic and clinical chemistry testing company he founded in 1983, including
Chief Executive Officer and Chief Financial Officer. Since 2003, Mr.
Sandberg has been a director of Ethan Allen Interiors, Inc., a publicly traded
home furnishings company.
Nancy
J. Wysenski
has
served on our Board of Directors since May 2004. Ms. Wysenski
has
been
the Chief Operating Officer of Endo Pharmaceuticals since September 2007. From
August 1999 to October 2006 she
was
the
President and a founding member of EMD Pharmaceuticals, Inc., a United States
pharmaceutical company owned by Merck KGaA. Ms. Wysenski also served as a member
of the Merck KGaA Ethical Pharmaceuticals Executive Committee and managed their
ethical pharmaceutical product portfolio. Ms. Wysenski was also responsible
for
Dey Laboratories, a specialty pharmaceutical company owned by Merck KGaA focused
on the development of drugs used in the treatment of respiratory diseases and
allergies. Prior to joining and founding EMD Pharmaceuticals, Inc. in August
1999, Ms. Wysenski was the Senior Vice President of Operations at NetGenics
from
1998 to 1999. Prior thereto, Ms. Wysenski held a number of positions at Astra
Merck, culminating at Vice President of Field Sales. Prior to joining Astra
Merck in 1990, Ms. Wysenski held a number of positions at Merck Human Health
from 1984 to 1990.
Roderick
A. Young
has
served on our Board of Directors since June 2006. Mr. Young has been a Venture
Partner of Three Arch Partners since May 2006. From February 2003 to July 2005,
Mr. Young was President and CEO of Vivant Medical, Inc., a venture-backed
medical device company that was acquired by Tyco International, Ltd. Prior
to
his tenure at Vivant, Mr. Young was President and CEO of Targesome, Inc., a
biotechnology company, from October 1998 to October 2002. Prior to Targesome,
Mr. Young also served as Chairman and CEO of General Surgical Innovations,
President & CEO of Focus Surgery, President of Toshiba America MRI and
President and COO of Diasonics.
Troy
A. Barring
has
served as our Senior Vice-President and Chief Operating Officer since September
2007. Previously, Mr. Barring has served since 2001 in a number of positions
with Biosense Webster, a Division of Johnson and Johnson, including Vice
President, World Wide Services, Vice President of Operations, and Senior Vice
President of Research and Development and Operations. Mr. Barring has over
13
years of management experience in the medical device sector, with a background
in manufacturing, operations, and research and development at such companies
as
Scimed Life Systems, a Division of Boston Scientific, and Sorin
Biomedical.
James
W. Klingler
has
served as our Senior Vice President and Chief Financial Officer since July
2004.
Previously, he was Vice President-Finance and Chief Financial Officer of Troy
Group, Inc., a provider of secure check printing products and wireless
connectivity solutions, from January 2002 to July 2004. From
February 2001 to November 2001, he served as Senior Vice President,
Business Operations and Chief Financial Officer of Trinagy, Inc., a
software company that was merged into Hewlett-Packard Company. In prior
positions, Mr. Klingler was Vice President, Finance and Administration of
Triconex Corporation, a supplier of products, systems and services for safety,
critical control and turbomachinery applications and a subsidiary of Invensys
plc, from February 1999 to February 2001, and Vice President and Chief
Financial Officer of Wilshire Technologies Inc., a company that
manufactures polyurethane products, from October 1994 to
February 1999.
Michael
C. Ryan
served
as the Senior Vice President and General Manager of our NOMOS Radiation Oncology
Division from January 2006 until it was sold in September 2007.
Previously, from 1992 through 2005, he served in a variety of positions
with InterV (now known as Angiotech), originally as Vice President of Sales
& Marketing, then as Senior Vice President of Sales & Marketing, and
lastly as Executive Vice President of Business Development.
InterV manufactures and sells image guided, interventional medical devices
for radiology, oncology, cardiology, and endo-vascular surgery. Prior to
InterV, Mr. Ryan held senior management positions, in sales, marketing, business
development, and general management, with several companies, including Johnson
& Johnson, Medtronic, Healthdyne, NAMIC, and Coeur Laboratories.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934 (the “Act”) requires our officers, directors
and persons who own more than 10% of any class of our securities registered
under Section 12(g) of the Act to file reports of ownership and
changes in ownership with the SEC. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
Based
solely on a review of copies of such reports furnished to us during the fiscal
year ended October 31, 2007, we believe that all persons subject to the
reporting requirements pursuant to Section 16(a) complied with all
applicable reporting requirements.
Our
Board
of Directors held 9 meetings during the fiscal year ended October 31, 2007,
and acted by unanimous written consent on 3 occasions. All of the directors
who
were on the Board during fiscal year 2007 attended at least 75% of the total
number of meetings of the Board of Directors and committees on which they
served. The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee, and the Nominating and Corporate
Governance Committee.
Audit
Committee.
During
the fiscal year ended October 31, 2007, the members of the Audit Committee
were
Mr. John Sabin (Chairman), Mr. Richard Sandberg, and Dr. Wilner, each of whom
is
“independent” as defined under current Rule 4200(a)(15) of the Nasdaq
listing standards. During the fiscal year ended October 31, 2007, the Audit
Committee met on 10 occasions.
Audit
Committee Financial Experts.
The
Board
of Directors has determined that John M. Sabin and Richard A. Sandberg each
qualify as an “audit committee financial expert” as defined under the applicable
Securities and Exchange Commission rules.
Compensation
Committee.
From
November 1, 2006 to June 4, 2007, the Compensation Committee consisted of Ms.
Nancy Wysenski (Chairperson), Dr. Jonathan Gertler, and Mr. Richard Sandberg.
From June 5, 2007 through October 31, 2007, the Compensation Committee consisted
of Mr. Richard Sandberg (Chairman), Mr. John Friede, and Ms. Nancy Wysenski,
all
non-employee Directors who meet the Nasdaq listing standards for “independence”.
The Compensation Committee oversees the Company’s executive compensation
programs and policies and is responsible for determining grants of options
to
purchase common stock under the North American Scientific, Inc. 2006 Stock
Plan. During the fiscal year October 31, 2007, the Compensation Committee met
on
6 occasions.
Nominating
and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee is responsible for recommending
candidates for election to the Board of Directors and reviewing matters of
corporate governance. The Nominating and Corporate Governance Committee will
consider director nominees recommended by stockholders if properly submitted.
This Committee currently consists of Ms. Wysenski (Chairperson), Mr. Sabin,
and
Dr. Wilner, each of whom is “independent” under current Nasdaq listing
standards. During fiscal year 2007, the Committee met on 4
occasions.
We
have a
written Code of Ethics that applies to all employees, including our Chief
Executive Officer, Chief Financial Officer, and Corporate Controller. The full
text of our Code of Ethics is published on our website at
www.nasmedical.com
under
the “Investor Center-Corporate Governance” caption. We will disclose any future
amendments to, or waivers from, certain provisions of the Code of Ethics
applicable to our Chief Executive Officer, Chief Financial Officer and Corporate
Controller on our website within four business days following the date of such
amendment or waiver.
Item
11.
EXECUTIVE
COMPENSATION
General
The
following discussion and analysis of compensation arrangements of our named
executive officers for fiscal year 2007 should be read together with the
compensation tables and related disclosures set forth below.
Our
Compensation Objectives
n
The
primary objective of our executive compensation program is to attract and retain
talented executives to lead our company and create value for our stockholders.
Executive compensation generally consists of a base salary, an annual short-term
incentive payment based upon achievement of personal and/or corporate objectives
and long-term equity-based incentive awards, which to date have generally been
in the form of stock options. The equity component of our compensation is
designed to align executive officers compensation with the goal of creation
of
long-term value for our stockholders. The current goal of our compensation
program is to attract and provide incentives to a new management team to lead
the process of creating a profitable company and rebuilding shareholder value.
In light of the risks associated with these goals, we believe we must offer
financial opportunities which, at a minimum, are competitive with other
companies in the medical device industry.
Role
of Compensation Committee
Our
Compensation Committee was appointed by our Board of Directors, and consists
entirely of directors who are independent directors under applicable Nasdaq
regulations, “outside directors” for purposes of Section 162(m) of the
Code, and “non-employee directors” for purposes of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or Exchange Act. Our Compensation
Committee reviews and recommends to our Board of Directors our executive
compensation and benefit policies. Our Compensation Committee is responsible
for, among other things, analyzing individual and corporate achievements and
recommending to our Board of Directors appropriate compensation packages for
our
named executive officers. In addition, the Compensation Committee administers
our equity-based compensation plans.
Our
Compensation Committee solicits input from our chief executive officer (“CEO”)
in determining executive compensation, in particular with respect to salary
and
option grant awards to our executive officers other than the CEO. While the
CEO
discusses his recommendations for other executives with the Compensation
Committee, he does not participate in deliberation or determination of his
own
compensation. None of our other executive officers participate in the
Compensation Committee’s discussions regarding executive compensation. In fiscal
2007, the Compensation Committee accepted the CEO’s recommendations for
executive officer compensation in all material respects. The Compensation
Committee does not delegate any of its functions to others in determining
executive compensation, but is authorized to engage consultants to advise it
with respect to compensation related matters as it deems appropriate. The
compensation of our executive officers is ultimately approved by our Board
of
Directors, upon recommendation of the Compensation Committee. The CEO abstains
from voting with respect to his compensation. In fiscal 2007, the Board of
Directors approved the Compensation Committee’s recommendations for executive
officer compensation without change.
We
believe that in order to attract and retain executive talent needed to rebuild
shareholder value, it may be necessary to compensate our executive officers
at a
level at least comparable to the compensation amounts provided to executives
at
comparable medical device companies. The Compensation Committee relies on their
experience with other medical device companies and publicly available data
relating to compensation of executives at other medical device companies to
establish compensation for our executive officers. Some of the publicly traded
companies used as comparable companies in the last year are set forth below
under “Compensation Components — Base Salary.”
We
believe the components of our current compensation program, which include cash
salary, short-term cash incentive payments and long term equity awards are
generally consistent with the compensation components of other comparable
medical device companies, including those identified under “Compensation
Components —
Base Salary,” although we generally do not benchmark the type of compensation
awards with those of other companies.
The
compensation program is administered with guidelines and policies intended
to
provide adequate incentives from and consistent approaches to each element
of
compensation discussed above. The role of each element of compensation changes
from time to time, and the Compensation Committee does not have any long-term
policies or guidelines for allocating compensation between short-term and
long-term incentive compensation, or between cash and non-cash compensation.
In
determining the amount and mix of compensation elements and whether each element
provides the correct incentives and rewards for performance consistent with
our
short and long-term goals and objectives, our Compensation Committee relies
on
its judgment in establishing the appropriate balance between these elements
in
light of changes in the current business environment, and the Company’s present
business financial circumstances, goals and objectives.
Compensation
Components
Executive
compensation currently consists of the following components:
Base
Salary
We
generally determine our executive officers’ salaries based on job
responsibilities, individual experience and expected level of contribution
and
take into account salaries of executive officers at comparable companies within
the medical device industry.
In
fiscal
2007, however, our goal was to rapidly attract a new management team to lead
our
company and, in that process, we focused more on attracting appropriately
qualified individuals reflecting a willingness to pay such individuals amounts
sufficient to convince them to join the Company, and less on how comparable
their compensation was to executive officers at competitive companies. In
recruiting executives other than the CEO, we negotiated base salaries by
starting with compensation data of comparable officers’ salaries at other
publicly traded medical device companies of similar size, including Theragenics,
IsoRay, and Endocare. In addition, we also considered information regarding
compensation at private medical device firms which is available to us. Because
our goal was to rapidly attract a new management team, we also took into
consideration other factors such as the executive officer’s experience level,
the cost of living differences between the areas where our executives are
located and the locations of the peer companies, the needs, risks and rewards
of
our current business strategy and financial structure, as well as our desire
to
attract and retain high quality individuals. The Compensation Committee
recognized that its approach could result in executive base salaries that would
be higher than the median level of base salaries at peer companies for
comparable positions.
During
the second quarter of fiscal 2007, we concluded a search for a new CEO with
the
hiring of Mr. John Rush. The compensation package offered to Mr. Rush was
structured by taking into account similar factors to those discussed above.
In
particular, the equity compensation award was structured in a manner intended
to
tie its value to stockholder success, thereby aligning Mr. Rush’s interest with
those of our stockholders. Mr. Rush’s final compensation, as reflected in the
employment agreement entered into on March 22, 2007, was the result of
arms-length negotiation between Mr. Rush and our Board of Directors. As part
of
Mr. Rush’s initial compensation package, he receives an annual base salary of
$350,000.
Our
Compensation Committee generally reviews the salaries of our executives annually
at the beginning of each calendar year and recommends changes in salaries to
our
Board of Directors based primarily upon comparative market data, significant
changes in responsibilities during the prior calendar year and individual
performance.
Short-Term
Incentive Program
Our
Compensation Committee believes that cash-based annual incentive payments for
achievement of defined objectives that create value in our Company align the
executive’s compensation with the interests of our stockholders.
Our
executive officers, including the CEO, are eligible to receive cash-based
incentive payments based upon a target bonus percentage of salary (determined
by
the Compensation Committee or, in some instances, by a management contract
with
the employee). In fiscal 2007, half of the target bonus percentage was
multiplied by a factor based upon the achievement of corporate objectives,
and
the other half was multiplied by a factor based upon the achievement of personal
objectives. For example, if an executive with a 30% target bonus achieved 60%
of
his personal objectives and the Company achieved 80% of its corporate
objectives, that executive would receive 30% of his target bonus (60% x 50%)
for
achievement of his personal objectives and would receive 40% of his target
bonus
(80% x 50%) as a result of the Company meeting its corporate objectives, for
a
total bonus of 21% ([30% + 40%] x 30%) of his base salary.
Corporate
Objectives
Each
year, the CEO recommends corporate objectives to our Compensation Committee,
which are discussed and modified and then submitted to the Board of Directors
for review and approval. The Compensation Committee and the CEO discuss and
assign weights to the corporate objectives based on their level of importance
to
our operating plan and corporate development. In fiscal 2007, the Compensation
Committee accepted the CEO’s recommendations, and the Board of Directors
approved the Compensation Committee’s recommendations. In establishing the
corporate objectives, particularly the financial objectives, the Compensation
Committee believed that each of these objectives would enhance shareholder
value
if they were achieved.
In
fiscal
2007, the components of our corporate objectives (which, if entirely achieved,
would entitle executive officers to at least 50% of their target bonus), along
with their relative weight, were as follows:
|
Fiscal
2007 Corporate Objectives
|
|
|
|
|
|
|
Annual
revenue targets
|
|
|
15
|
%
|
|
|
Operating
loss targets
|
|
|
10
|
%
|
|
|
Undertake
strategic solution for NOMOS
|
|
|
4
|
%
|
|
|
Raise
targeted amounts of new equity
|
|
|
3
|
%
|
|
|
Complete
numerous ClearPath milestones
|
|
|
18
|
%
|
|
|
Total
|
|
|
50
|
%
|
|
At
the
end of fiscal 2007, the Compensation Committee evaluated the performance against
each of these objectives and determined that the performance of the management
team in meeting those objectives would entitle each officer to receive 22%
of
his target bonus based upon achieving corporate objectives.
Personal
Objectives
After
the
corporate objectives are approved by the Compensation Committee and reviewed
by
the Board of Directors, the Compensation Committee establishes personal
objectives for the CEO, and the CEO establishes personal objectives for each
officer of the Company for that fiscal year. The personal objectives are
generally (but not exclusively) translations of the corporate objectives into
more specific achievements related to that part of our business for which the
officer has primary responsibility.
Historically,
and in 2007, the performance of the CEO was reviewed by our Compensation
Committee against his established personal objectives. The CEO’s personal
objectives for his period of service in 2007 related to identifying and
attracting both executives and directors with appropriate experience to lead
the
process of rebuilding the Company and its shareholder value, to accelerate
the
pace of new product development and to reduce the risks of such programs, to
complete a strategic solution for our NOMOS subsidiary and to complete an equity
financing. The Compensation Committee determined that the achievements of Mr.
Rush entitled him to receive 44% of his target bonus with regard to achieving
his personal objectives.
The
performance of our other executive officers was reviewed by the CEO and by
our
Compensation Committee against the established personal objectives at the same
time as that of our CEO. The CEO evaluates the degree of achievement of the
other executive officer’s personal objectives, as well as a subjective
determination of the officer’s overall contribution to our company, and then
recommends a personal bonus achievement percentage for the other executive
officers. In some instances involving outstanding performance or contribution
by
an individual, he has recommended a personal bonus achievement percentage of
more than the 50% normally allocated for rewarding personal achievement. In
2007, the Compensation Committee approved the CEO’s recommendations in all
material respects and the Board of Directors approved the Compensation
Committee’s recommendations without change.
Based
upon the evaluation of the degree of achievement of the corporate and personal
objectives, the Board of Directors approved, based upon the recommendation
of
the Compensation Committee, cash incentive payments for Messrs. Rush, Cutrer,
Klingler and Ryan equal to 66% (22% corporate, 44% personal), 27% (22%
corporate, 5% personal), 78% (22% corporate, 56% personal), and 50% (22%
corporate, 28% personal) of their respective target bonus amounts, which equates
to 40%, 7%, 16% and 12% of their respective annual salaries. Mr. David N. King
was not eligible for a bonus in 2007 due to his resignation from the Company
on
May 31, 2007.
Long-Term
Equity-Based Incentive Awards
We
believe that equity ownership in our company is important to provide our
executive officers with long-term incentives to build value for our
stockholders. Long-term equity can be awarded to executives by the Board of
Directors in the form of stock options or restricted stock. Equity grants or
awards are made to our executives by our Board of Directors at regularly
scheduled meetings. The exercise price of our options are set at the closing
price of our common stock on the date of the individual’s commencing employment
or the date of grant. Each executive officer was provided with an option grant
when they joined our company based upon their position with us, expected level
of contribution and relevant prior experience. Historically, initial grants
typically vest over four years, and no shares vest before the one year
anniversary of the option grant, except under the terms of the CEO’s initial
option grant the shares vest monthly from the date of the grant. We spread
the
vesting of our options over four years to compensate executives for their
contribution over a period of time and to more properly align the executive’s
interest with our stockholders’ interests.
In
addition to the initial option grants, our Board of Directors has from time
to
time granted additional options to retain and provide incentives to some of
our
executives who have been with us for a number of years. Options are granted
based on a combination of individual contributions to our performance, and
on
expectations of general corporate achievements. Additional option grants are
not
communicated to executives in advance and generally vest over a period of four
years. While our Compensation Committee may benchmark our executive officers’
equity ownership against our peer companies in establishing equity grants for
new hires, it does not generally do so in approving additional equity grants
for
existing executives.
In
2007,
i
n
addition to his base compensation and bonus, as an inducement to join as our
CEO, Mr. Rush received an initial grant of 1.8 million options to purchase
stock, priced at the fair market value of our stock on the date Mr. Rush began
employment as the CEO. In addition, we agreed that, in the event that within
24
months of the effective date of our employment agreement with Mr. Rush, we
issue
additional shares of common stock in connection with raising capital in a
private placement transaction, we would be required to grant options to Mr.
Rush
to acquire an additional number of shares of common stock equal to 3% of the
number of shares issued in connection with such transaction.
From
time
to time, our Compensation Committee intends to assess the contribution of
individual executives and the expectation for future performance by each
executive, and as a result we may provide additional awards in the form of
stock
options or restricted stock based upon this assessment. We expect that we will
continue to provide new employees with initial stock option grants in 2008
to
provide long-term compensation incentives.
Other
Benefits
We
have a
401(k) plan for the benefit of all of our eligible employees, including the
named executive officers. We provide for matching contributions under the 401(k)
plan of up to 3% of base salary. We also provide health, dental, vision and
life
insurance and other customary employee assistance plans to all full-time
employees, including the named executive officers.
Accounting
and Tax Considerations
Effective
January 1, 2006, we adopted the fair value provisions of Financial
Accounting Standards Board Statement No. 123(R) (revised 2004),
“Share-Based Payment,” or SFAS 123(R). Under SFAS 123(R), we are
required to estimate and record an expense for each award of equity compensation
(including stock options) over the vesting period of the award.
Section 162(m)
of the Code limits the amount that we may deduct for compensation paid to our
CEO and to each of our four most highly compensated officers to $1,000,000
per
person, unless certain exemption requirements are met. Exemptions to this
deductibility limit may be made for various forms of “performance-based
compensation.” In the past, annual cash compensation to our executive officers
has not exceeded $1,000,000 per person, so the compensation has been deductible.
In addition to salary and bonus compensation, upon the exercise of stock options
that are not treated as incentive stock options, the excess of the current
market price over the option price, or option spread, is treated as compensation
and accordingly, in any year, such exercise may cause an officer’s total
compensation to exceed $1,000,000.
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
Stock
Awards
($)
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan Compensa-tion ($)
|
|
All
Other Compensa
-tion
($)
|
|
Total
($)
|
|
|
John
B. Rush (2)
|
|
|
2007
|
|
|
175,000
|
|
|
72,904
|
|
|
—
|
|
|
1,167,120
|
|
|
—
|
|
|
—
|
|
|
1,415,024
|
|
|
President
and Chief
|
|
|
2006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Executive
Officer
|
|
|
2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Klingler
|
|
|
2007
|
|
|
236,120
|
|
|
46,466
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,479
|
|
|
288,065
|
|
|
Senior
Vice President and
|
|
|
2006
|
|
|
229,500
|
|
|
20,000
|
|
|
—
|
|
|
70,353
|
|
|
—
|
|
|
5,300
|
|
|
325,153
|
|
|
Chief
Financial Officer
|
|
|
2005
|
|
|
225,000
|
|
|
17,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,800
|
|
|
244,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.
Michael Cutrer (3)
|
|
|
2007
|
|
|
310,340
|
|
|
15,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,212
|
|
|
332,952
|
|
|
Executive
Vice
President
|
|
|
2006
|
|
|
340,700
|
|
|
30,000
|
|
|
—
|
|
|
81,176
|
|
|
—
|
|
|
7,600
|
|
|
459,476
|
|
|
and
Chief
Technology
|
|
|
2005
|
|
|
334,000
|
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,300
|
|
|
366,300
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
N. King (4)
|
|
|
2007
|
|
|
123,231
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,873
|
|
|
126,104
|
|
|
Vice
President,
|
|
|
2006
|
|
|
155,000
|
|
|
13,000
|
|
|
—
|
|
|
54,118
|
|
|
—
|
|
|
3,400
|
|
|
225,518
|
|
|
General
Counsel and
|
|
|
2005
|
|
|
147,000
|
|
|
5,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
|
280,104
|
|
|
Corporate
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
C. Ryan (5)
|
|
|
2007
|
|
|
205,779
|
|
|
24,047
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59,488
|
|
|
289,314
|
|
|
Senior
Vice
President,
|
|
|
2006
|
|
|
163,200
|
|
|
18,000
|
|
|
—
|
|
|
86,588
|
|
|
—
|
|
|
53,092
|
|
|
320,880
|
|
|
General
Manager
|
|
|
2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
NOMOS
Division
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All
Other Compensation consists of the Company’s contribution to such
executive officer’s 401(k) plan, Company paid life insurance
premiums, relocation payments, and severance
payments.
|
|
(2)
|
Mr. Rush
began his employment on April 23,
2007.
|
|
(3)
|
Mr.
Cutrer served as the Company’s President and Chief Executive Officer until
April 23, 2007
.
|
|
(4)
|
Mr.
King resigned from the Company on May 31,
2007.
|
|
(5)
|
Mr.
Ryan began his employment on January 16, 2006, and ended his employment
with the sale of NOMOS on September 17, 2007. All Other Compensation
for
Mr. Ryan also includes $49,278 of relocation expense in 2006, and
$54,687
of severance expense in 2007.
|
Grants
of Plan-Based Awards
The
following table sets forth certain information with respect to the options
granted and potential payments under the 2006 Stock Plan and under a stand-alone
grant outside of our 2006 Stock Plan during or for the fiscal year ended
October 31, 2007 to each of our named executive officers listed in the summary
Compensation Table as shown under the caption “Executive
Compensation.”
|
Name
|
|
Grant
Date
|
|
|
Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan Awards
|
|
|
All
Other Awards:
Number
of Securities
Underlying
Options
|
|
|
Exercise
or
Base
Price of
Option
Awards
|
|
|
Grant
Date Fair
Value
of Stock and
Option
Awards
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
B. Rush
|
|
|
4/23/07
|
|
|
$
|
210,000
|
|
|
|
1,800,000
|
|
|
$
|
1.16
|
|
|
$
|
1,167,120
|
|
|
|
|
(1)
Amounts represent the estimated total fair value of stock options
granted
in 2007 under SFAS 123(R).
|
Outstanding
Equity Awards Value at Fiscal Year-End
The
following table includes certain information with respect to the value of all
unexercised options previously awarded to the executive officers named above
at
the fiscal year end, October 31, 2007. The number of options held at October
31,
2007 includes options granted under
the
1996
Stock Option Plan,
the 2006 Stock Plan
,
and a
stand-alone grant outside of our 2006 Stock Plan
.
|
|
|
|
Option
Awards
|
|
|
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
(1)
|
|
|
John
B. Rush
|
|
|
|
75,000
|
|
|
|
525,000
|
|
(2)
|
|
1.16
|
|
|
|
4/23/2017
|
|
|
|
|
|
|
150,000
|
|
|
|
1,050,000
|
|
(2)
|
|
1.16
|
|
|
|
4/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Klingler
|
|
|
|
37,500
|
|
|
|
12,500
|
|
|
|
7.49
|
|
|
|
7/26/2014
|
|
|
|
|
|
|
8,125
|
|
|
|
24,375
|
|
|
|
2.23
|
|
|
|
3/16//2013
|
|
|
|
|
|
|
—
|
|
|
|
32,500
|
|
(3)
|
|
3.35
|
|
|
|
3/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
N. King
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
7.00
|
|
|
|
11/30/2008
|
|
|
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
6.25
|
|
|
|
5/6/2009
|
|
|
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
16.75
|
|
|
|
5/26/2010
|
|
|
|
|
|
|
8,500
|
|
|
|
—
|
|
|
|
10.80
|
|
|
|
9/28/2011
|
|
|
|
|
|
|
8,500
|
|
|
|
—
|
|
|
|
7.60
|
|
|
|
9/20/2012
|
|
|
|
|
|
|
8,500
|
|
|
|
—
|
|
|
|
7.17
|
|
|
|
10/31/2013
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
2.23
|
|
|
|
3/16/2013
|
|
|
|
|
|
|
—
|
|
|
|
25,000
|
|
(3)
|
|
3.35
|
|
|
|
3/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
C. Ryan
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
2.23
|
|
|
|
3/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.
Michael Cutrer
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
23.50
|
|
|
|
4/3/2008
|
|
|
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
6.125
|
|
|
|
3/19/2009
|
|
|
|
|
|
|
55,000
|
|
|
|
—
|
|
|
|
6.25
|
|
|
|
5/6/2009
|
|
|
|
|
|
|
96,000
|
|
|
|
—
|
|
|
|
7.938
|
|
|
|
11/9/2009
|
|
|
|
|
|
|
75,000
|
|
|
|
—
|
|
|
|
16.75
|
|
|
|
5/26/2010
|
|
|
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
7.31
|
|
|
|
3/2/2001
|
|
|
|
|
|
|
55,000
|
|
|
|
—
|
|
|
|
10.80
|
|
|
|
9/28/2011
|
|
|
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
10.85
|
|
|
|
3/11/2012
|
|
|
|
|
|
|
65,000
|
|
|
|
—
|
|
|
|
7.60
|
|
|
|
9/20/2012
|
|
|
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
7.17
|
|
|
|
10/31/2013
|
|
|
|
|
|
|
36,000
|
|
|
|
—
|
|
|
|
10.01
|
|
|
|
2/25/2014
|
|
|
|
|
|
|
9,375
|
|
|
|
28,125
|
|
|
|
2.23
|
|
|
|
3/16/2013
|
|
|
|
|
|
|
—
|
|
|
|
37,500
|
|
(3)
|
|
3.35
|
|
|
|
3/16/2014
|
|
|
(1)
|
|
Except
where otherwise noted, all options expire ten years from the date
of grant
and option shares vest at the rate of 25% on the first anniversary
of the
option grant and annually thereafter, such that options are fully
vested
upon the fourth anniversary of the option grant date. In addition,
the
vesting of options may accelerate upon a change in control of the
Company.
|
|
|
|
|
|
(2)
|
|
Option
shares vest at the rate of 1/48 per month, such that options are
fully
vested upon the fourth anniversary
of
the option grant date. In addition, the vesting of options may accelerate
upon a change in control of the Company.
|
|
|
|
|
|
(3)
|
|
Option
shares vest at the rate of 25% on the second anniversary of the option
grant and 25% annually thereafter, only if certain market performance
conditions are met.
|
There
were no options exercised by our named executive officers in fiscal 2007.
Directors
who also serve as our employees of the Company or of our subsidiaries receive
no
separate compensation for serving as Directors or as members of any committees
of the Board of Directors. Each non-employee Director receives a quarterly
payment of $5,000, and receives $1,250 per Board or committee meeting if he
attends in person or $500 per meeting if he participates by telephone. Directors
may be reimbursed for certain expenses incurred in connection with attending
Board or committee meetings. In addition, the Chairman of the Board of Directors
receives compensation of $40,000 per year (in lieu of the $5,000 quarterly
payment); the Chairman of the Audit Committee receives $5,000 per year; the
Chairman of the Compensation Committee receives $2,500 per year; and the
Chairman of the Nominating and Corporate Governance Committees receives $2,500
per year.
Each
individual who is first elected or appointed as a non-employee director shall
automatically be granted, on the date of such initial election or appointment,
a
non-statutory stock option to purchase 25,000 shares of Common Stock. On the
date of each Annual Stockholders Meeting each individual who is re-elected
to
serve as a non-employee director is automatically granted a non-statutory stock
option to purchase 15,000 shares of Common Stock, except for the Chairman of
the
Board, who is automatically granted a non-statutory stock option to purchase
25,000 shares of Common Stock. The annual grant of non-statutory stock options
is only given to those non-employee directors who have served at least six
months. In lieu of receiving the non-statutory stock options, each non-employee
director may elect to receive a grant of one share of restricted Common Stock
for every three shares of Common Stock underlying such stock option. To date,
no
non-employee director has elected to receive restricted stock in lieu of stock
options.
During
the fiscal year ended October 31, 2007, Messrs. Friede, Jaeger, Sabin,
Sandberg, and Young, and Ms. Wysenski each received an annual grant of ten-year
non-statutory stock options to purchase 15,000 shares of our Common Stock,
at a
price of $1.23 per share, with one-third vesting each year for the next three
years, as measured from the grant date of June 5, 2007. During the fiscal year
ending October 31, 2007, Dr. Wilner received a grant of ten-year
non-statutory stock options to purchase 25,000 shares of our Common Stock,
at a
price of $1.23 per share, with one-third vesting each year for the next three
years, as measured from the grant date of June 5, 2007.
The
following table and footnotes provide information regarding the compensation
paid to our non-employee members of the Board of Directors in fiscal
2007.
|
|
|
Fees
Earned or
Paid
in
Cash ($)
|
|
Option
Awards
($)
|
|
Total
($)
|
|
|
Dr.
Gary N. Wilner
|
|
$
|
56,750
|
|
$
|
17,188
|
|
$
|
73,938
|
|
|
John
A. Friede
|
|
$
|
24,500
|
|
$
|
10,313
|
|
$
|
34,813
|
|
|
Dr.
Jonathan P. Gertler
|
|
$
|
11,750
|
|
$
|
—
|
|
$
|
11,750
|
|
|
Dr.
Wilfred E. Jaeger
|
|
$
|
26,500
|
|
$
|
10,313
|
|
$
|
36,813
|
|
|
John
M. Sabin
|
|
$
|
34,750
|
|
$
|
10,313
|
|
$
|
45,063
|
|
|
Richard
A. Sandberg
|
|
$
|
42,750
|
|
$
|
10,313
|
|
$
|
53,063
|
|
|
Nancy
J. Wynsenski
|
|
$
|
31,625
|
|
$
|
10,313
|
|
$
|
41,938
|
|
|
Roderick
A. Young
|
|
$
|
28,250
|
|
$
|
10,313
|
|
$
|
38,563
|
|
Potential
Payments Upon Termination or Change-in-Control
John
B. Rush
On
March
22, 2007, we entered into an employment agreement (the “Agreement”) with John B.
Rush in connection with his employment as our new President and Chief Executive
Officer. Mr. Rush’s base salary is $350,000. Mr. Rush is also eligible to
receive an annual bonus, if any, based upon performance goals approved by the
Board or the Compensation Committee of the Board, in consultation with Mr.
Rush,
in an amount, not to exceed 60% of his base salary, to be determined by the
Compensation Committee. For the period beginning on April 23, 2007 and ending
the last day of our fiscal year, October 31, 2007, Mr. Rush will receive a
guaranteed, minimum, pro-rated bonus of 30% of his base salary.
On
April
23, 2007, we granted stock options to Mr. Rush with respect to 1,800,000 shares
of our common stock. The stock options have an exercise price of $1.16, which
was equal to the fair market value per share of our common stock on the grant
date. In addition, in the event that within 24 months of April 23, 2007, we
issue additional shares of stock in connection with raising capital in a private
placement transaction, we are required to grant options to Mr. Rush to acquire
an additional number of shares of common stock equal to 3% of the number of
shares issued in connection with such transaction.
All
of
the options have a term of ten years and vest monthly over a four-year period.
The options remain exercisable until the earlier of the expiration of the term
of the option or (i) three months following Mr. Rush’s date of termination in
the case of termination for reasons other than cause, death or disability (as
such terms are defined in the Agreement) or (ii) 12 months following Mr. Rush’s
date of termination in the case of termination on account of death or
disability. In the event that Mr. Rush is terminated for cause, all outstanding
options, whether vested or not, will immediately lapse.
In
the
event (a) Mr. Rush’s employment is terminated by the Company at any time after
April 23, 2007 for any reason other than Mr. Rush’s death, disability or cause
or (b) Mr. Rush resigns for a “good reason” (as defined in the Agreement), Mr.
Rush will receive his base salary in effect on the date of termination for
a
period ending 12 months following the date of termination paid in accordance
with our standard payroll practices for salaried employees. If this event had
occurred at the end of our fiscal year, Mr. Rush would have received $350,000
in
salary payments over the following 12 months.
In
the
event of a “Control Termination” (as defined in the Agreement), Mr. Rush will be
entitled to receive his base salary in effect on the date of termination paid
in
accordance with our standard payroll practices for salaried employees and group
health benefits for a period ending 12 months following the date of termination
and, in addition, Mr. Rush shall, as of the date of the Control Termination,
become fully vested in any unvested options previously granted to him. If this
event had occurred at the end of our fiscal year, Mr. Rush would have received
$350,000 in salary payments and approximately $15,185 in group health
benefits
over the
following 12 months. At the end of our fiscal year, the exercise price per
share
of Mr. Rush’s stock options exceeded the closing market price per share of our
common stock. As a result, no value is recognized for the acceleration of his
unvested stock options.
The
Agreement also provides that we will make a tax gross-up payment to Mr. Rush
in
the event that payments to Mr. Rush on account of a change in control constitute
an excess parachute payment subject to an excise tax under Section 4999 of
the
Code. Similarly, we will make a tax gross-up payment to Mr. Rush for any excise
tax in the event that amounts or benefits payable to Mr. Rush are determined
to
be subject to the excise tax on nonqualified deferred compensation under Section
409A of the Code.
In
the
event that any amount payable upon Mr. Rush’s termination would be determined to
be “non-qualified deferred compensation” subject to Section 409A of the Code, we
may delay payment for six months, in order to comply with Section 409A of the
Code.
L.
Michael Cutrer
In
April 2002, we entered into an employment agreement with L. Michael Cutrer
in connection with his employment as our Chief Executive Officer.
Mr. Cutrer’s initial annual salary was $302,000 with a bonus to be
determined at the discretion of the Board of Directors in accordance with the
agreement. We can terminate the employment agreement at any time with or without
cause. If terminated without cause, the agreement provides, among other things,
for immediate vesting of any unvested stock options and a severance payment
equal to three times his current base salary paid as salary continuation over
a
three year period in accordance with our standard payroll practices for salaried
employees. In the event of a change of control of the Company, the agreement
also provides, among other things, for the immediate vesting of any unvested
stock options and a severance payment equal to three times (a) base salary,
(b) the highest bonus awarded in the three previous years and (c) the
Black-Scholes value of any grant of options made during the prior year paid
as
salary continuation over a one year period in accordance with our standard
payroll practices for salaried employees.
On
December 21, 2006, as part of the transition from the position of President
and
Chief Executive Officer to become our Executive Vice President and Chief
Technology Officer, we and Mr. Cutrer entered into a First Amended and Restated
Employment Agreement (the “Amended Agreement”), which became effective with the
employment of Mr. Rush on April 23, 2007 (the “Effective Date”). Under the
Amended Agreement, Mr. Cutrer’s annual base salary is $280,000. In addition, Mr.
Cutrer is eligible to receive an annual bonus, if any, based upon performance
goals approved by the Compensation Committee or the Board in an amount to be
determined in the sole discretion of the Compensation Committee or the Board.
If
Mr. Cutrer meets or exceeds the performance goals for a particular measuring
year, the annual bonus may not be less than 25% of his base salary.
In
the event Mr. Cutrer’s employment terminates at any time after the Effective
Date for any reason, except for a “Control Termination” (as defined in the
Amended Agreement), and in addition to any payment that may be due if he had
been terminated on or before October 31, 2007 as noted above, Mr. Cutrer will
be
entitled to receive (a) severance pay equal to three times his highest base
salary during his employment payable over a three year period in accordance
with
our standard payroll practices for salaried employees, and (b) any unvested
stock options shall immediately vest as of the termination date. In addition,
the exercise date of all stock options that, on the termination date, have
an
exercise price greater than the fair market value of our common stock will
be
extended to the later of (i) the last day of the year in which the stock option
would otherwise have expired or (ii) two and a half months after the date on
which the stock option would otherwise have expired (or such later date as
may
be permitted by final regulations issued pursuant to Section 409A of the Code,
as amended (the “Code”), but in no event later than the date on which the stock
option would have expired had Mr. Cutrer’s employment not been terminated). If
this event had occurred at the end of our fiscal year, Mr. Cutrer would have
received $1,022,040 in salary payments over the following 3 years. At the end
of
our fiscal year, the exercise price per share of Mr. Cutrer’s stock options
exceeded the closing market price per share of our common stock. As a result,
no
value is recognized for the acceleration of his unvested stock
options.
In
the event of a Control Termination, Mr. Cutrer will be entitled to a “Control
Severance Payment” in the gross amount equal to the total of: (a) three years’
base salary; (b) the highest annual bonus paid to Mr. Cutrer in the three years
prior to such termination multiplied by three; (c) the Black-Scholes valuation
of the stock options received by Mr. Cutrer during the one year prior to such
termination multiplied by three (3); and (d) a tax gross-up payment if any
severance payment constitutes an excess parachute payment subject to the excise
tax imposed by Section 4999 of the Code. The Control Severance Payment will
be
paid as salary continuation ratably over a one year period in accordance with
our standard payroll practices for salaried employees. In addition, any unvested
stock options will immediately vest as of the termination date. If this event
had occurred at the end of our fiscal year, Mr. Cutrer would have received
$1,022,040 in salary payments, $90,000 in bonus payments, and $243,528 valuation
of his stock options, based upon the Black-Scholes valuation of the stock
options received by Mr. Cutrer during the one year prior to such event
multiplied by three, all paid over the following 12 months. At the end of our
fiscal year, the exercise price per share of Mr. Cutrer’s stock options exceeded
the closing market price per share of our common stock. As a result, no value
is
recognized for the acceleration of his unvested stock options.
James
W. Klingler
In
July
2004, we entered into a letter agreement with James W. Klingler in connection
with his employment as our Chief Financial Officer. The letter agreement does
not provide for a specific term of employment; however, the agreement does
provide for a twelve month severance payment
if
we
terminate Mr. Klingler’s employment for any reason other than for cause, to
be
paid
as
salary continuation over a one year period in accordance with our standard
payroll practices for salaried employees
.
If
this
event had occurred at the end of our fiscal year, Mr. Klingler would have
received $236,120 in salary payments over the following 12 months.
Michael
J. Ryan
In
January 2006, we entered into a letter agreement with Michael J. Ryan in
connection with his employment as Senior Vice President and General Manager
of
our NOMOS Radiation Oncology Division. The letter agreement does not provide
for
a specific term of employment; however, the agreement does provide for a six
month severance payment if we terminate Mr. Ryan’s employment for any reason
other than for cause to be paid in a lump sum or in salary continuation, at
our
option. If Mr. Ryan’s service as Senior Vice President and General Manager of
our NOMOS Radiation Oncology Division (or any follow-on position of similar
authority) continues for three years, the agreement will provide for a nine
month severance payment if we terminate Mr. Ryan’s employment for any reason
other than for cause to be paid in a lump sum or in salary continuation, at
our
option.
In
April
2007, we entered into an amended letter agreement, increasing Mr. Ryan’s
severance payment to nine months if we terminate his employment for any reason
other than for cause, and providing a guaranteed bonus of no less than 50%
of
his target bonus for fiscal 2007 (pro-rated in the event Mr. Ryan’s employment
ends prior to the end of the fiscal year). Finally, the letter agreement
provides for an additional bonus of three months’ salary in the event Mr. Ryan
continues his employment until such time as a transaction or restructuring
shall
have occurred with respect to the NOMOS Radiation Oncology Division, but in
no
event shall such bonus be paid later than October 31, 2007. If this event had
occurred at the end of our fiscal year, Mr. Ryan would have received $164,061
in
salary payments, and a minimum bonus payment of $27,344.
From
November 1, 2006 to June 4, 2007, the Compensation Committee consisted of Ms.
Nancy Wysenski (Chairperson), Dr. Jonathan Gertler, and Mr. Richard Sandberg.
From June 5, 2007 through October 31, 2007, the Compensation Committee consisted
of Mr. Richard Sandberg (Chairman), Mr. John Friede, and Ms. Nancy Wysenski,
all
non-employee Directors who meet the Nasdaq listing standards for “independence”.
None of the members who served on the Compensation Committee during the last
fiscal year was or has been an officer or employee of the Company or any of
its
subsidiaries. None of our executive officers serves on the board of directors
or
Compensation Committee of any entity that has one or more executive officers
serving as a member of our Board of Directors or Compensation
Committee.
Compensation
Committee Report
The
Compensation Committee of the Board of Directors has reviewed and discussed
the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
with management and based on such review and discussions, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this Amendment No.1 to Form 10-K.
Compensation
Committee:
Richard
Sandberg (Chairman)
John
Sabin
Nancy
Wysenski
The
above Report of the Compensation Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing, whether under the Securities Act of 1933, as amended,
or
the Securities Exchange Act of 1934, as amended, whether made on, before or
after the date of this Amendment No.1 to Form 10-K and irrespective of any
general incorporation language in such filing, except to the extent the Company
specifically incorporates this Report by reference therein.