The audit committee is responsible for overseeing our accounting and financial reporting processes and internal control systems, the appointment, compensation, retention and oversight of KPMG, our independent registered public accounting firm, and audits of our financial statements, all pursuant to the audit committee’s written charter. KPMG reports directly to the audit committee. The audit committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the audit committee deems necessary to carry out its duties.
With respect to the company’s financial reporting process, the management of the company is responsible for (1) establishing and maintaining internal controls and (2) preparing the company’s consolidated financial statements. KPMG is responsible for auditing these financial statements. It is the responsibility of the audit committee to oversee these activities. It is not the responsibility of the audit committee to prepare the company’s financial statements. These are the fundamental responsibilities of management. In the performance of its oversight function, the audit committee has:
•received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding KPMG’s communications with the audit committee concerning independence, and has discussed with KPMG itsthe independence from the company and its management, as required by Public Company Accounting Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence.of KPMG.
Based on the audit committee’s review and discussions with management and KPMG, the audit committee recommended to the board of directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20182022, for filing with the Securities and Exchange Commission.SEC.
Respectfully submitted by the members of the audit committee of the board of directors:
Raymond Link (Chair)(chairperson)
Douglas Carlisle
Bill GossmanGeoffrey Moore
This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (“Securities Act”), or under the Securities Exchange Act, of 1934, as amended (“Exchange Act”), except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
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PROPOSAL NO. 3 ADVISORYVOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS |
At our 2021 annual meeting of stockholders, our board of directors recommended and our stockholders approved holding a non-binding advisory vote on the compensation of our named executive officers every one year. Accordingly, pursuant to Section 14A of the Exchange Act and in accordance with SEC rules, we are providing our stockholders with the opportunity to cast a non-binding advisory vote to approve the compensation of our named executive officers as described in this proxy statement. This proposal gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation program.
Advisory Non-Binding Vote on Compensation of Named Executive Officers
We believe that our compensation philosophy and program, as described below in the “Compensation Discussion and Analysis” section of this proxy statement, are effective in achieving our goals, and that the executive compensation reported in this proxy statement is appropriate, competitive, and aligned with our results. The compensation program for our named executive officers embodies a pay-for-performance philosophy. The program is designed to attract, motivate, and retain executive officers in a competitive market for executive talent, and to align the executive officers’ interests with the interests of our stockholders to create long-term value, while at the same time avoiding the encouragement of excessive risk-taking. Our executive officers can achieve higher overall compensation if and to the extent we achieve challenging financial and strategic performance goals and our stock outperforms the market.
For a more detailed discussion of our compensation philosophy, objectives, principles, and programs, we strongly encourage our stockholders to review this proxy statement, and in particular the information contained in “Executive Compensation—Compensation Discussion and Analysis” and in the compensation tables and narrative that follow it in the “Executive Compensation” section of this proxy statement.
The vote on executive compensation is not intended to address any specific element of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies and practices described in this proxy statement.
Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to our named executive officers and will not be binding on us, our compensation committee, or our board of directors. Although the vote is non-binding, our compensation committee and our board of directors value the opinions expressed by our stockholders in their vote and will consider the outcome of the vote in making future compensation decisions for our named executive officers. After the vote held at the Annual Meeting, our next non-binding advisory vote on the compensation of our named executive officers is scheduled to be held at our 2024 annual meeting of stockholders.
At the Annual Meeting, we are asking stockholders to vote on the following non-binding advisory resolution:
RESOLVED, that the stockholders approve the compensation of nLIGHT’s named executive officers as disclosed pursuant to the compensation disclosure rules of the SEC, in this proxy statement, including in the “Executive Compensation—Compensation Discussion and Analysis” section and in the compensation tables and narrative that follow it in the “Executive Compensation” section.
Vote Required
Approval of the compensation of our named executive officers requires the affirmative vote of a majority of the voting power of the shares of our common stock present virtually or represented by proxy at the Annual
Meeting and entitled to vote thereon. Abstentions will have the effect of a vote "AGAINST" this proposal and broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE APPROVAL ON AN ADVISORY, NON-BINDING BASIS OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
The following table identifies certain information about our executive officers as of April 24, 2019.28, 2023. Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
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Name | Age | Position |
Scott Keeney | 5458 | President, Chief Executive Officer and Chairman of the Board |
Ran BareketJoseph Corso | 5242 | Chief Financial Officer |
Robert Martinsen | 57 | Chief Technology Officer |
Scott Keeney.See “Board of Directors and Corporate Governance – Nominee for Director”—Continuing Directors” for Mr. Keeney’s biographical information.
Ran Bareket
Joseph Corsohas served as our chief financial officer since January 2018. Previously, from July 2015 to January 2018,March 2022. Mr. Bareket served as corporate vice president and chief financial officer for Orbotech Ltd., a publicly-traded company. Prior to that, he served as vice president, finance and operations for the printed circuit boards division of Orbotech from July 2014 to June 2015. Before joining Orbotech, Mr. Bareket served as vice president and chief financial officer of IVC Industries, Inc., a manufacturer of nutritional supplements and non-pharmaceutical drug products from January 2012 to June 2014. From January 2000 to December 2011, he held various finance positions at Kulicke & Soffa Industries, Inc., a global designer and manufacturer of semiconductor, LED and electronic assembly equipment, including corporate vice president and principal accounting officer. Mr. Bareket is a Certified Public Accountant. Mr. Bareket received a B.A. in accounting and management from the Tel Aviv Management College and an M.B.A from Pennsylvania State University.
Robert Martinsen hasCorso previously served as our chief technology officer since September 2013. Previously,Vice President of Corporate Development and Investor Relations from October 2004August 2020 to September 2013, Mr. Martinsen served as our vice president, product engineering.February 2022. Prior to joining us, from February 2002 to September 2004, Mr. MartinsenCorso served as director, product development for the semiconductor business unit of Coherent, Inc.in various roles at Stifel Financial Corp., a publicly-traded laser company. Prior to that, he served as director, product design at Novalux LED Ltd., a laser systems company,full-service investment banking and global wealth management firm, from July 20002010 to February 2002.August 2020, most recently as Global Co-Head of Electronics and Industrial Technology. From May 2004 through July 2010, Mr. Martinsen receivedCorso worked at Thomas Weisel Partners, which was acquired by Stifel in 2010, in a B.E.variety of roles. Mr. Corso holds a B.A. in marine engineeringEconomics from the State University of New York Maritime College, an M.E. in mechanical engineering and in aerospace engineering from the University of Virginia and a S.M. in ocean engineering and a minor in electrical engineering from the Massachusetts Institute of Technology.Swarthmore College.
Processes
Compensation Discussion and ProceduresAnalysis
This compensation discussion and analysis describes our compensation philosophy, objectives, and program structure for our named executive officers listed below. These were our only executive officers during 2022:
•Scott Keeney, our chief executive officer ("CEO"),
•Joseph Corso, our chief financial officer ("CFO")(1), and
•Ran Bareket, our former CFO(2).
(1) Mr. Corso became our CFO on March 1, 2022.
(2) Mr. Bareket resigned as our CFO effective March 1, 2022. Mr. Bareket remained employed after that transition as a special advisor and ceased to be an employee as of June 30, 2022.
2022 Business Highlights
During 2022, we delivered strong revenue growth outside of China, continued to execute on our strategy of growing in key strategic markets (non-China Industrial and Aerospace & Defense) and made key business infrastructure investments in support of our long-term growth objectives. Specifically, we:
•generated record revenue(1) from customers outside of China of $171 million, an increase of 14% over 2021;
•continued execution of our strategy to grow sales outside of China; non-China revenue represented 91% of total revenue in 2022, up from 80% in 2021;
•grew non-China Microfabrication revenue 11% in 2022;
•grew non-China Industrial revenue 6% in 2022;
•demonstrated power exceeding program objectives in critical High Energy Laser Scaling Initiative (HELSI) directed energy program;
•secured new platform wins in core defense business;
•released new products for the cutting, welding and additive manufacturing market;
•expanded automated manufacturing capacity in the United States;
•implemented new enterprise resource planning (ERP) system; and
•ended the year with $108 million of cash and no debt.
(1) Revenue amounts in this 2022 Business Highlights section are reported on a U.S generally accepted accounting principles (“GAAP”) basis.
Following our 2022 annual meeting and continuing into 2023, we engaged in discussions with various stockholders to solicit feedback on matters of corporate governance and executive compensation, among other topics. See “—Stockholder Engagement and Governance Practices” above.
Stockholder Engagement and Response to 2022 Say-on-Pay Results
In evaluating and establishing our executive compensation policies and programs, our compensation committee values and actively considers the opinions expressed by our stockholders through the “say-on-pay” advisory vote at each annual stockholder meeting, as well as through our ongoing stockholder engagement efforts.
At our 2022 annual meeting of stockholders, a majority the voting power of the shares of our common stock present virtually or represented by proxy at the 2022 annual meeting voted against our advisory, non-binding proposal to approve the compensation of our named executive officers as described in the proxy statement for the 2022 annual meeting. Our board of directors recognized that a significant portion of our stockholder base expressed a desire for changes to our executive compensation program, and, over the past year, we expanded engagement efforts to better understand our stockholders' views and concerns.
Following the annual meeting, we contacted stockholders representing 66% of our common stock outstanding and conducted calls or met with stockholders representing 54% of our stockholder base.In these conversations, institutional stockholders generally expressed strong support for our strategy, performance, management, and compensation philosophy. Many stockholders, while supporting the majority of our compensation policies, nonetheless suggested modifications to specific elements of our plan design, in particular on the metrics and performance mix used in our long-term equity award program.
After considering this input from our stockholders, as well as evaluating practices related to executive compensation by public companies generally, and our peer group specifically, our compensation committee effected several key responsive changes to our compensation program.
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What We Heard from Stockholders | Actions Taken in 2022 |
A preference for a greater proportion of long-term equity to be subject to performance-vesting requirements
| •Increased the proportion of new long-term performance-based equity from 33% to 50% in the annual equity grant.
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A preference for a longer performance period
| •Extended the performance period of new long-term performance-based equity grants from two years to three years. |
Performance metrics used in long-term awards should be more aligned with stockholder returns, with enhanced disclosure of pre-established goals and metrics | •Changed performance metrics of new long-term performance-based equity awards, transitioning from a combination of financial metrics and business, operational and strategic objectives to a relative Total Shareholder Return ("relative TSR”) measurement with target performance at the 50th percentile of the peer group (Russell 2000), aligning long-term equity compensation of our named executive officers with total stockholder returns. •Included an Absolute TSR modifier to cap performance-based equity awards at 100% if stock returns are negative, even if we outperform the Russell 2000. •The transition to a relative TSR measurement allows us to fully disclose plan details for the long-term performance-based equity awards without risk of disclosing competitively sensitive details or forward-looking financial metrics. |
In our outreach to stockholders, we received positive feedback that these changes address the major areas of stockholder concern on our compensation program at last year’s annual meeting.
In addition to these changes, we also took steps to update and strengthen our cash bonus program based on stockholder discussions, including the following changes for 2023:
•we transitioned from a combination of financial metrics and key business objectives to two key financial metrics of revenue and adjusted EBITDA, in order to more directly align incentives with our corporate objectives to increase revenue and improve margins; and
•we transitioned from semi-annual goals that were set twice per year, to annual goals separated into semi-annual targets and payments.
We appreciate the feedback received from stockholders on our compensation program and we intend to continue engagement efforts to ensure our programs continue to remain aligned with stockholder preferences and policies, promote a robust pay-for-performance culture, and align the compensation of executives with the key drivers of long-term stockholder value.
2022 and 2023 Executive Compensation DecisionsHighlights
Our 2022 executive compensation program emphasizes long-term equity compensation as the most significant component of each named executive officer’s compensation, aligning the compensation of our named executive officers with stockholder returns. The only fixed component of our named executive officers’ annual compensation is base salary. Short-term cash incentives are tied to our performance and were paid below target at 42% for the first half of 2022 and 0% for the second-half of 2022. Performance goals for our 2020 performance-based equity awards, which were measured over a performance period ended June 30, 2022, were achieved below target at 86.6%.
The formal evaluationfollowing key compensation actions were taken with respect to our named executive officers for 2022:
•Target cash compensation – We increased the base salary of our CEO for the second half of 2022 by 5.5%, in line with average increases of other salaried employees in the same region. We did not change the percentage target bonus opportunity of our CEO.For our newly appointed CFO, we provided an initial base salary and percentage target bonus opportunity beginning March 1, 2022, and we increased the base salary and percentage target bonus opportunity of our CFO for the second half of 2022, based on peer comparisons.
•Semi-annual cash bonus plan – We designed our 2022 cash bonus plan to focus on key performance measures, setting rigorous stretch financial, operational and strategic objectives that were achievable only through focused leadership efforts by our executive team. In 2022, we significantly increased the weight on financial measures, and set semi-annual Adjusted EBITDA thresholds required for payment of bonuses to the named executive officers. Bonus achievement for the named executive officers was approved at 42% for 1H 2022 and 0% for 2H 2022, against aggregate stretch targets of 150%.
•Long-term equity awards – We changed the design of our long-term equity program in 2022 as follows: (1) we increased the percentage of performance-based RSU awards from 33% to 50% of awarded units based on target achievement of performance goals; (2) we changed the performance objectives of our performance-based RSU awards from a combination of financial metrics and business, operational and strategic objectives to a relative Total Shareholder Return (“relative TSR”) measurement against the Russell 2000; (3) we capped performance-based equity awards at 100% if stock returns are negative, even if we outperform the Russell 2000; (4) we extended the performance period of our performance-based RSU awards from two years to three years; and (5) we aligned the vesting period of our time-based RSU awards with our performance-based RSU awards at three years.
In January 2022 we entered into a Transition Agreement and Release with Mr. Bareket (the “Transition Agreement”), under which Mr. Bareket resigned as our CFO effective as of March 1, 2022 and remained employed as a special advisor to our CEO until June 30, 2022.For a description of this agreement, see the section titled “Employment Arrangements—Ran Bareket” below.
The following additional key compensation actions were taken with respect to our named executive officers for 2023:
•Timing of compensation decisions – We advanced the timing of the compensation committee review and annual compensation decisions for our named executive officers to be completed before the filing of the proxy, in order to accelerate further changes in response to stockholder feedback.
•Target cash compensation – We did not increase the base salaries or percentage target annual bonus opportunity for our named executive officers. Target cash compensation is unchanged for 2023.
•Annual cash bonus plan – We re-designed our cash bonus plan for 2023 to incentivize our named executive officers solely on the achievement of profitability and revenue growth.Our annual cash bonus plan is now focused on two key financial performance measures, revenue and adjusted EBITDA, with targets established for each half at the beginning of the year based on our annual operating plan. Overall achievement will be weighted 25% on revenue and 75% on adjusted EBITDA.
Executive Compensation Philosophy
Our executive compensation program is designed to achieve the following three primary objectives:
•Attract, retain and motivate highly skilled individuals based upon their contribution to the success of our company, and that of our stockholders;
•Drive outstanding achievement of business objectives and reinforce our strong pay-for-performance culture; and
•Align our named executive officers’ interests with the long-term interests of our stockholders, with a focus on performance that drives value creation for our stockholders.
The compensation committee of our board of directors oversees our executive compensation program and seeks to provide compensation opportunities for our executive officers in a manner consistent with our business strategy, competitive market practice, sound corporate governance principles and stockholder interests. The core principle of our executive compensation philosophy is to pay-for-performance.
Our compensation philosophy in 2022 continued to have a focus on pay-for-performance. We closely aligned the compensation paid to our named executive officers with achievement of both near-term and long-term financial, operational and strategic objectives. In 2022, we structured our compensation mix such that approximately 87% of the target total direct compensation awarded to our chief executive officer was in the form of equity awards and variable cash incentives and only 13% in the form of base salary. The allocation of shares in our equity awards was one-half time-based and one-half performance-based to reward long-term performance consistent with retention incentives. The graphic below shows the target total direct compensation mix for 2022 for our chief executive officer. The target total direct compensation mix for 2022 reflects actual salary, target cash bonus, and the grant date fair value of the annual grant of time-vested and performance-based equity awards, with the performance-based equity valued based on target shares.
Compensation Governance Practices
What We Do
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Independent Compensation Committee and Compensation Consultant. The compensation committee is comprised solely of independent directors. The compensation committee solicits advice from independent compensation consultants retained directly by the compensation committee.
Risk Analysis. Compensation programs arestructured to avoid inappropriate risk taking by our executives and all employees by having the appropriate pay philosophy to support reasonable business objectives.
Incentive Award Opportunities Capped. We limitour performance-based cash incentive awards to 150% of the target, and we limit our performance-based equity incentive awards to 200% of the target.
Pay-for-Performance. Named executive officer compensation is heavily weighted toward at-risk performance-based compensation, with both cash incentives and performance-based equity being earned based upon achievement of pre-established financial, operational, strategic objectives or relative Total Shareholder Return. | | Double-Trigger Change in Control Provisions. All equity awards granted to named executive officers since our initial public offering in 2018 are subject to "double-trigger" provisions under our change in control agreements, and the level of severance thereunder is reasonable and comparable to market-competitive levels.
Annual Executive Compensation Review. The compensation committee conducts anannual review of our executive compensation program, including a review and determination of our compensation peer group used for comparative purposes and other factors.
Strict Equity Ownership Guidelines. We have adoptedstrict equity ownership guidelines for our executive officers and directors.
Robust Clawback Policy. The compensation committeehas adopted a compensation recoupment policy that allows us to recover certain incentive-based compensation payable to an executive officer if we are required to prepare an accounting restatement due to our material noncompliance, as a result of an executive officer’s misconduct or grossly negligent conduct, with any financial reporting requirement under applicable securities laws. |
What We Don't Do
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No Special Perquisites. We did not provide, nor do we have any plans to provide, anyspecial benefits or perquisites to our named executive officers in 2022.
No Hedging or Pledging. Our insider trading policy strictly prohibits our directors and executive officers from purchasing options on our securities, pledging our stock in a margin account or otherwise entering into transactions designed to hedge or offset any decrease in the market value of our stock.
No Guarantees of Employment. We do not have any employment contracts with any of our executive officers that guarantee a term of employment, contain extraordinary severance provisions or guarantee salary increases or bonus amounts. | | No Special Retirement or Health and Welfare Benefit Plans. We do not offer, nor do we have plans to offer, supplemental pensionarrangements, defined benefit retirement plans, nonqualified deferred compensation plans, or any special health and welfare benefits programs to our executive officers that are different from or in addition to what is offered to our other employees.
No Dividends or Dividend Equivalents Payable on Unvested Equity Awards. We do not pay, nor do we have any plans to pay,dividends or dividend equivalents on unvested or unearned equity compensation awards. |
Compensation-Setting Process
The compensation committee is responsible for determining our executive compensation philosophy, objectives, policies and programs and retains authority to determine all matters of compensation and benefits for our named executive officers. With respect to our named executive officers, the compensation committee
reviews and approves their annual base salaries, cash bonus opportunities and payments, long-term equity compensation opportunities and payments and other compensation, if any.
Our chief executive officer provides input with respect to adjustments to annual base salaries, annual cash bonus opportunities, long-term equity incentive compensation opportunities, program structures and other compensation-related matters for our named executive officers (other than with respect to his own compensation). The compensation committee reviews and discusses these recommendations and proposals with our chief executive officer and the other executive officers is madeuses them as one factor in the context of annual compensation review bydetermining and approving the compensation committee, which may include appropriate input from other members of the board of directors. for our named executive officers.
The chief executive officer’sindependent compensation is recommendedconsultants hired by the compensation committee for approval2022 compensation decisions, Aon's Human Capital Solutions ("Aon"), formerly known as Radford, and for 2023 compensation decisions, Semler Brossy, are retained directly by the full boardcompensation committee. Our independent compensation consultant works directly with the compensation committee, and not on behalf of directors. our management, to provide advice and recommendations on competitive market practices and input on specific compensation decisions.
Peer Group
The compensation committee’s evaluation iscommittee examines the compensation practices of a defined peer group of companies, supplemented by survey data using similar peer group parameters, to assess the competitiveness of the elements of our executive officer compensation programs. The compensation committee completed its annual review of our peer group, consulting with Aon and taking into consideration changes in our market capitalization and the perspectives of outside investors and governance advisory groups. Based on this review, eight companies were removed from our peer group (Advanced Energy, Form Factor, MACOM Technology Solutions, MaxLinear, Novanta, Onto Innovation, Rogers Corporation and SiTime), and five new companies were added to the peer group for 2022 as shown below. In selecting the specific companies, the compensation committee considered objective criteria, such as industry, market capitalization, revenues and headcount, as well as stage of the company and if the company considered us a peer. The revised peer group consisted of 15 companies for the purposes of evaluating the competitiveness of our executive officer compensation in 2022. Our peer group includes companies in related industries with market capitalization ranging from approximately 0.4x to 3.0x our market capitalization and revenues ranging between approximately 0.1x and 4.5x our annual revenues, as of the date of the analysis.
2022 Peer Group
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3D Systems | Ichor | Photronics |
Axcelis Technologies | Impinj | SkyWater Technology* |
Cohu | Knowles* | Veeco Instruments |
CTS Corporation | NeoPhotonics* | Velodyne Lidar* |
FARO Technologies | Ouster* | VPG |
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*New to peer group for 2022 | | |
The compensation committee used the competitive market data to inform its judgment about 2022 executive compensation decisions but did not benchmark or target compensation of any executive officer to a specific percentile.
Elements of Executive Compensation
Our executive compensation program emphasizes the following three primary components:
•base salary;
•performance-based cash incentives that will only be paid based on objective criteria,achievement of key financial targets and operational and strategic objectives approved by the compensation committee; and
•long-term equity incentives that are issued in the form of both performance-based RSUs, for encouraging performance based on goals aligned with delivering value for our stockholders, and time-vested RSUs, for retention and reinforcing our ownership culture and alignment with stockholders.
In addition, each of our executive officers participates in a variety of benefit plans that are generally available to all U.S. employees, and has an employment agreement providing for severance benefits in connection with a qualifying termination.
The compensation committee takes a holistic view on our executive compensation program, seeking to ensure the overall program is meeting the company’s objectives while providing the compensation committee with the flexibility to structure individual compensation packages that are market-competitive.
We focus on total target direct compensation, and factor in all aspects of pay, including performancebase salary, performance-based cash incentives and time- and performance-based long-term equity incentives, to maintain an executive compensation program that is competitive. The compensation committee does not have a specific formula that is used between the elements of pay but applies its business judgment in providing compensation opportunities for our executives that promote the interests of our stockholders over both the near-term and long-term. To inform its judgment, the compensation committee examines peer group compensation practices, and with an understanding of those practices, seeks to create an appropriately leveraged, variable compensation program for our named executive officers that reinforces our pay-for-performance culture.
Base Salaries
Base salaries are designed to provide a level of fixed compensation.
The compensation committee reviews base salaries for our executive officers on an annual basis. Adjustments are determined by the compensation committee based on a number of factors, including the level of responsibility, expertise, and experience of the individual, internal equity, individual and company performance, competitive conditions in the industry, and base salaries for individuals in comparable positions at comparable companies, while taking into account the company’s cash flow considerations. The compensation committee also considers recommendations made by our chief executive officer regarding salary rate adjustments for his direct reports.
During 2022, the compensation committee increased Mr. Keeney’s base salary by 5.5%, in line with the average increase for eligible salaried employees participating in the same U.S. annual review cycle. We provided Mr. Corso an initial base salary of $270,000 as of the date of his appointment as CFO. After review of peers, the compensation committee increased his base salary by 11.1%. The annual review salary changes for both Mr. Keeney and Mr. Corso were effective June 26, 2022.
In January 2022, we entered into the Transition Agreement with Mr. Bareket, under which Mr. Bareket resigned as our CFO effective as of March 1, 2022, and remained employed as a special advisor to our CEO until June 30, 2022. Under the terms of the Transition Agreement, Mr. Bareket’s salary was reduced from $270,000 per year to $120,000 per year for his period of service from March 1, 2022 to June 30, 2022. Separately, the Transition Agreement provided Mr. Bareket with an opportunity to become eligible for a severance payment equal in amount to the additional salary he would have received during this period if his salary had continued at $270,000 per year. The conditions of this payment were satisfied, so Mr. Bareket received this severance payment. For more on the terms and conditions of the Transition Agreement, see the section titled “Employment Arrangements—Ran Bareket” below.
The table below summarizes for each of our named executive officers the annual base salaries and salary increases for 2022:
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Named Executive Officer | Annual Base Salary ($) 1H 2022 | Salary Increase | Annual Base Salary ($) 2H 2022 |
Scott Keeney | 415,200 | 5.5% | 438,000 |
Joseph Corso(1) | 270,000 | 11.1% | 300,000 |
Ran Bareket | 270,000 | n/a | n/a |
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(1) For Mr. Corso, 1H 2022 base salary is as of the date of his promotion to CFO, March 1, 2022. Prior to that date, his annual base salary for 1H 2022 was $240,000.
Performance-Based Cash Incentive Plan
For 2022, consistent with recent practice, we provided our named executive officers with a performance-based cash incentive opportunity through semi-annual bonus opportunities under our cash bonus plan, which awards cash bonuses to our named executive officers and other employees based upon the achievement of corporate financial targets and operational and strategic objectives that are reviewed by our board of directors and approved by the compensation committee. We determine these corporate objectives for each fiscal half-year of 2022, based upon our operating plans, drivers of our performance and long-term growth, and our financial and key strategic objectives.
Target Performance-Based Cash Incentive Opportunities
Each named executive officer was assigned a target semi-annual cash bonus opportunity, the amount of which was calculated as a percentage of his 2022 semi-annual base salary paid for each half of the year. There were no changes to Mr. Keeney’s target cash bonus percentage in 2022.Mr. Corso’s target cash bonus percentage was 50% in the first half of 2022 and was increased to 65% for the second half of 2022, based on peer comparisons.
The following table shows the target bonus of each named executive officer for each half of 2022:
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Named Executive Officer(1) | 1H 2022 Target Bonus (as a % of 1H 2022 Base Salary) | 1H 2022 Target Bonus ($)(2) | 2H 2022 Target Bonus (as a % of 2H 2022 Base Salary) | 2H 2022 Target Bonus ($)(2) |
Scott Keeney | 100% | 191,631 | 100% | 234,969 |
Joseph Corso | 50% | 60,000 | 65% | 104,250 |
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(1) Mr. Bareket did not participate in our 2022 bonus program in light of his resignation as our CFO and his subsequent termination of employment with us.
(2) Due to the timing of pay dates in 2022, 1H 2022 included 12 pay periods and 2H 2022 included 14 pay periods instead of the typical 13 pay periods per half year.
2022 Bonus Structure and Objectives
For 2022, the actual amount of the semi-annual cash bonuses for our named executive officers were determined based on the achievement of corporate performance objectives as set forth below. Our 2022 bonus plan was designed to keep management focused on specific semi-annual corporate goals, and included specific financial targets and key operational, product, and business development objectives, as
described below. These key objectives are company-wide goals and are aligned with our long-term corporate strategy. We set semi-annual goals that were meant to be challenging, but achievable through diligent efforts and leadership during the performance period. We believe that these semi-annual goals encourage our management team to make business decisions that are aligned with the long-term interests of our stockholders. Each of our objectives is assigned a specific weight with a maximum aggregate bonus payout of 150% of the target opportunity. Measurement of achievement for each objective may result in zero, partial or full achievement. The corporate bonus plan for each half of 2022 was subject to a threshold level of adjusted EBITDA for any payout to be made for our executive officers.
For 2022, in addition to our financial targets, key objectives were based on initiatives related to:
•directed energy product launches, program management and business development activities;
•managing the business through transitions in China;
•new product introductions and business development activities in targeted industrial end-market applications;
•launching initial products for new markets;
•achieving targeted product performance of next generation semiconductor lasers;
•implementing enhanced security measures to protect our intellectual property;
•achieving targeted environmental, health and safety goals;
•achieving specific automation and supply chain targets;
•implementation of a new enterprise resource planning ("ERP") system; and
•attracting and developing employees.
The following is an illustration of the business,calculation of individual cash incentive payments for our named executive officers.
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% Achievement against Semi-Annual Company Objectives | x | Individual Target Bonus Opportunity | = | Semi-Annual Cash Bonus Plan Payout |
Following each half of 2022, the compensation committee evaluated our performance during such portion of the year to determine the actual achievement in relation to our financial targets and accomplishmentkey objectives.
The following table shows the level of achievement against the applicable performance objectives for each half of 2022:
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2022 Performance Objectives | 1H 2022 | 2H 2022 |
Target | Actual | Weight | Achievement | Target | Actual | Weight | Achievement |
Revenue | $142.0 | $125.3 | 25% | 0% | $130.0 | $116.8 | 20% | 0% |
Product Gross Margin | 34.0% | 30.0% | 25% | 0% | 28.0% | 18.8% | 20% | 0% |
Adjusted EBITDA (Non-GAAP) | $6.8 | $2.2 | 25% | 0% | $2.0 | $(10.9) | 20% | 0% |
Key Objectives | | | 75% | 42% | | | 90% | 0% |
Total | | | 150% | 42% | | | 150% | 0% |
In accordance with our 2022 cash bonus plan, we paid semi-annual bonuses to our named executive officers equal to 42% of each named executive officer’s first-half 2022 target bonus opportunity. For the second-half, the threshold level of adjusted EBITDA required for a bonus payment to our executive officers was not met, and annual operating plan performanceeach named executive officer’s second-half 2022 actual bonus was $0. A reconciliation of GAAP net loss to adjusted EBITDA for each half of 2022 is provided in Appendix A. The total aggregate bonus payments for 2022 are set forth in the "Summary Compensation Table" below.
Long-Term Equity Incentives
Our 2018 Plan authorizes us to grant different types of equity awards, including stock options, time-based restricted stock awards ("RSAs") or RSUs and performance-based RSAs or RSUs. Equity awards to our named executive officers are determined by the compensation committee in accordance with the principles2018 Plan and criteria established by theour administrative guidelines. Equity compensation committee. The evaluation of the compensation of executive officers other than the chief executive officer is done in consultation with the chief executive officer.used to reward performance and contributions to our company, as well as to promote retention.
The compensation committee believes that equity compensation is authorizeda key component of our pay-for-performance compensation philosophy and is an effective way to retainalign compensation for named executive officers over a multi-year period directly with the servicesinterests of oneour stockholders by motivating and rewarding creation and preservation of stockholder value. Equity awards to our named executive officers are generally made on an annual basis, along with the annual equity awards made to other employees of our company. All annual grants are approved by the compensation committee under our guidelines for equity awards and typically are scheduled to vest during what we anticipate will be an open trading window under our insider trading policy. The compensation committee also considers and grants equity awards for special situations, such as promotions, from time to time.
2022 Annual Equity Awards
In 2022, the compensation committee issued annual equity awards in the form of a combination of time-vested and performance-based RSUs to our named executive officers.
Time-vested RSUs, which made up half of the 2022 named executive officer equity awards, were granted for their retentive effect and because their value is directly impacted by all stock price changes and therefore tied directly to stockholder value. Performance-based RSUs ("PRSUs") were granted to our named executive officers in 2022, constituting, at the targeted number of shares, half of their 2022 annual equity awards. The vesting of these PRSUs is subject to our achievement of a three-year Total Shareholder Return goal (“TSR”) based on our TSR relative to the Russell 2000 index. As a result, the value of these PRSUs is directly impacted by our stock performance relative to peers and tied to stockholder value, reflecting our continued commitment to a pay-for-performance philosophy.
The size of the 2022 annual equity grants made to our named executive officers was determined in light of the compensation committee’s objective of providing total target direct compensation that is competitive with market practices but also taking into account recent stock price performance, resulting in equity grants with lower fair market value than 2021 equity grants.
The individual amounts for the 2022 annual equity awards granted to our named executive officers are set forth in the table below:
| | | | | | | | |
Named Executive Officer | 2022 Annual Time-Based RSUs (#) | 2022 Annual Performance-Based RSUs (#)(1) |
Scott Keeney | 116,666 | 116,667 |
Joseph Corso | 42,500 | 42,500 |
Ran Bareket(2) | — | — |
______________
(1) Performance-based RSUs reflect the "target" number of shares that can be earned based on performance. Actual shares earned may vary from 0% to 200% of the "target" number.
(2) In light of Mr. Bareket’s resignation as our CFO effective as of March 1, 2022 and separation from service as of June 30, 2022, Mr. Bareket did not participate in our grant of 2022 equity incentive awards. Mr. Bareket was no longer an employee when the annual equity awards were approved.
The time-based RSUs granted to our named executive officers in 2022 will vest over a period of three years from the effective date, with one-third vesting on June 1, 2023 and one-twelfth vesting each quarter thereafter for the next eight calendar quarters subject to the executive officer’s continued service with us, and further subject to vesting acceleration as described in the “Potential Payments upon Termination or moreChange-In-Control” section below.
The PRSUs granted to our named executive officers in 2022 will vest following the end of a three-year performance period, subject to the executive officer’s continued service to us, with the number of units eligible for vesting determined based on performance of our TSR for the period from July 1, 2022 through June 30, 2025 (the period is subject to adjustment in the event of we experience a change in control as described below) relative to the TSRs for the same time period of the companies identified as being part of the Russell 2000 Index as of July 1, 2022, that remain listed on any established stock exchange or national market system as of June 30, 2025. The PRSUs that become eligible for vesting based on our relative TSR performance will be between 0% and 200% of the target amount, with a maximum vesting of 100% if our TSR is negative, as measured by a third-party valuation firm and approved by the compensation advisors,committee.
The table below reflects selected details relating to the PRSUs granted to our named executive officers in 2022.
| | | | | | | | | | | | | | |
Objective | Below Threshold | Threshold | Target | Maximum(1) |
Percentile Rank of our TSR against the Russell 2000 | Below the 25th percentile | 25th percentile | 50th percentile | 75th percentile or higher |
Percentage of PRSUs Eligible for Vesting (2) | 0% - no PRSUs vest | 50% | 100% | 200% |
_________________(1) The percentage of PRSUs eligible for vesting is capped at 100% if our TSR over the performance period is negative.
(2) If our TSR over the performance period is between the 25th and 50th percentile, or it is positive and between the 50th and 75th percentile, then the percentage of the target number of PRSUs that will be eligible to vest will be interpolated linearly between the corresponding percentages designated for those percentiles.
In the event that we experience a change in control as it sees fit,defined in the 2018 Plan before June 30, 2025, then performance on the relative TSR goal for these PRSUs will be measured over a reduced period from July 1, 2022 to the third trading day prior to the date of the change in control, and our TSR for this period will be measured using the per share price payable in the change in control as the ending stock price. The PRSU awards do not provide for acceleration of the requirement that service continue to August 14, 2025, but allow for the possibility of double-trigger vesting upon a qualifying termination if provided under another agreement, such as an employment agreement.
See the table entitled “Grants of Plan-Based Awards in Fiscal Year 2022” in this section of the proxy statement for additional information regarding these equity awards to our named executive officers in 2022.
Achievement of 2020 Performance-Based Award Goals for Performance Period Ended in 2022
Our performance-based RSAs or RSUs awarded in July 2020 were subject to achievement of performance goals for the period ending June 30, 2022. Performance goals were not established on the date of the award in order to maintain flexibility due to the global pandemic and evolving global economy. In April 2021, the compensation committee approved the performance goals set forth below, with possible achievement ranging from a minimum of 0% to a maximum of 180% of the target amount. After the close of the performance period, the compensation committee determined that 86.6% of these awards were eligible to vest based on achievement of revenue, laser products gross margin and key objectives, as set forth below. Any performance-based RSAs or RSUs eligible for vesting were vested 50% after the measurement was determined and 50% will vest on the anniversary of the first vesting date, subject to such named executive officer’s continued service, and further subject to the vesting acceleration as described in the "Potential Payments upon Termination or Change In Control" section below. The two-year vesting pattern was used to promote retention.
Ultimate achievement for these awards was based on three categories of performance measures, including a specific revenue target and product gross margin target as set forth below and the achievement of key objectives. We believe performance measures including revenue, product gross margin and key objectives provided balanced incentives which create long-term value for our stockholders. Our key objectives were focused primarily on product development, business development, technology innovation and cost reductions.
Our key objectives included objectives related to:
•directed energy product launches, program management and business development activities;
•securing key design wins and increasing market share with targeted customers in industrial end-markets;
•achieving targeted performance in specific semiconductor and fiber laser products;
•achieving customer satisfaction targets;
•reducing product costs through cost reduction efforts and increasing automation;and
•strengthening our supply chain and human capital to support long-term growth.
The achievement for our 2020 performance-based awards for our named executive officers was as follows (in millions of dollars, except for percentages):
| | | | | | | | | | | | | | | | | | | | |
Performance Measures | Threshold | Goal | Actual | Min Payout | Max Payout | Achieved |
Revenue(1) | $260 | $285 | $265 | 0% | 80% | 8.0% |
Laser Products Gross Margin(2) | 31.5% | 31.5% | 34.1% | 0% | 20% | 20.0% |
Key objectives | 50 pts | 80 pts | 94 pts | 0% | 80% | 58.6% |
Total | | | | 0% | 180% | 86.6% |
_________________
(1) Revenue goal measured based on GAAP revenue for the 12-month trailing period ended June 30, 2022.
(2) GAAP gross margin objective measured based on Laser Products gross margin, as calculated for segment reporting, for the period July 1, 2021 through June 30, 2022.
| | | | | | | | | | | |
Named Executive Officer | Target Performance-Based RSAs or RSUs Scheduled to Begin Vesting in 2022 (#) | Number of Performance-Based RSAs or RSUs Achieved (#) | % of Target Achievement |
Scott Keeney | 60,000 | 51,960 | 86.6% |
Joseph Corso | 16,666 | 14,432 | 86.6% |
Ran Bareket(1) | 26,667 | — | — |
_________________
(1) In light of Mr. Bareket’s resignation as our CFO effective as of March 1, 2022 and separation from service as of June 30, 2022, Mr. Bareket did not vest in his 2020 performance-based awards.
Change of Control and Severance Benefits; Transition Arrangements
Our change of control severance agreements with our named executive officers and certain of our other officers are described in this Proxy Statement under “Employment Arrangements.”
The compensation committee believes that these agreements protect the interests of our stockholders by providing a framework for avoiding the distraction and loss of key management personnel that may occur in connection with rumored or actual fundamental corporate changes. The uncertainty about the establishmentfuture status of employment among management that can arise in the face of a potential change of control could result in the untimely departure or distraction of key officers. Change of control severance agreements provide support to officers to remain with our company despite uncertainties while a change of control is under consideration or pending and the compensation committee believes that the potential benefits under these agreements are reasonable and generally comparable to competitive agreements offered by our peer companies to their senior executives. Except for outstanding equity awards granted prior to the effective date of executive employment agreements, which vest following a change of control, severance benefits are “double-trigger,” which means that they are provided to the executive only in the event that the executive is terminated, or the
executive involuntarily experiences material changes in terms of employment, following a change of control. We do not provide for gross ups for excise taxes under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”).
Under our 2018 Plan, if a change in control occurs, any outstanding equity awards that are not assumed or substituted for in the transaction will become fully vested and exercisable, and all such performance-based equity awards will be deemed earned at the greater of target or actual results immediately prior to the change in control.
In connection with Mr. Bareket’s resignation as our CFO, which was effective as of March 1, 2022, we entered into the Transition Agreement with Mr. Bareket in January 2022. We entered into this agreement in order to provide for a smooth transition of Mr. Bareket’s duties and responsibilities to Mr. Corso, and to provide Mr. Corso and the Company with the benefit of Mr. Bareket’s advice, expertise and history with the Company during the course of this transition. For additional information regarding this agreement, please see the description in this Proxy Statement under “Employment Arrangements.”
Other Benefits and Perquisites
Our named executive officers participate in various employee benefit plans, including health, dental and vision care plans, life insurance and our 401(k) plan and stock purchase plans. These benefit plans are the same plans offered to our other employees.
Consideration of Stockholder Advisory Vote on Executive Compensation
At our 2022 Annual Meeting of Stockholders, 35% of the votes on our non-binding, advisory proposal to approve compensation provided to our named executive officers in 2021 voted “FOR” the approval of the proposal. Although this advisory vote is not binding on our compensation committee, the compensation committee considers this result in its review and approval of our executive compensation programs and related policies. In 2018,For details on the compensation committee retained Radford Associates, a unit of Aon Hewitt ("Radford"), a national compensation consultant,committee’s response to the 2022 advisory vote, please see the section titled “Stockholder Engagement and CompensiaResponse to provide it with information, recommendations and other advice relating to executive compensation on an ongoing basis. The compensation committee engaged Radford to provide information based on an appropriate group of peer companies to help us determine the appropriate level of overall compensation2022 Say-on-Pay Results” above.
Equity Ownership Guidelines
We have equity ownership guidelines for our executive officers as well as assess each separate elementour non-employee directors. For more information about our equity ownership guidelines for non-employee directors, see ““Board of Directors and Corporate Governance—Outside Director Compensation—Director Equity Ownership Guidelines.” The guidelines require our chief executive officer to hold shares equal in value to three times annual base salary. Other executive officers must hold shares equal in value to their annual salary. Executive officers have five years from November 1, 2019, when the guidelines were adopted, or if later, from the time they become executive officers, to meet the ownership guidelines. Shares counted for this purpose include issued shares owned by the executive officer or members of the executive officer’s immediate family members residing in the same household, including shares held in trusts, limited partnerships, or similar entities for the sole benefit of the executive officer or his immediate family members residing in the same household.
As of December 31, 2022, all of our executive officers satisfy the equity ownership guidelines for executive officers.
Compensation Recoupment Policy
In 2021, our board of directors adopted a compensation with a goal of providing compensationrecoupment policy applicable to our executive officers. Pursuant to the compensation recoupment policy, if, as a result of an executive officer’s misconduct or grossly negligent conduct, we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under applicable securities laws, our board of directors (or a designated committee of members thereof) has the authority, to the extent permitted by applicable law, to require reimbursement or forfeiture to the company of the amount of any incentive compensation (whether cash- or equity-based) that such executive officer received during the three fiscal years preceding the year such restatement is determined to be required, to the extent that such incentive-based compensation exceeds what such officer would have received based on an applicable restatement performance measure or target. In addition, we will reduce, cancel, or otherwise recoup incentive-based compensation from executive officers to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules, regulations and listing standards that may be issued thereunder.
Hedging and Pledging Prohibitions
We have an Insider Trading Policy, which, among other things, prohibits our employees, including officers, and our directors from making short sales, engaging in transactions in publicly-traded options (such as puts and calls) and other derivative securities relating to our common stock, pledging any of our securities as collateral for a loan and holding any of our securities in a margin account, whether such securities are granted as compensation or are held, directly or indirectly, by the employee or director. This prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding our securities.
Deductibility of Executive Compensation
Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our chief executive officer and certain other executive officers to $1 million per executive officer per year, subject to certain exceptions. Neither our compensation committee nor its authorized committee has adopted a policy that all equity or other compensation must be deductible.
When approving the amount and form of compensation for our executive officers, we generally consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m) of the Code, as well as our need to maintain flexibility in compensating executive officers in a manner designed to promote our goals. Our compensation committee or its authorized subcommittee, as applicable, may, in its judgment, authorize compensation payments that will or may not be deductible when it believes that such payments are appropriate to attract, retain or motivate executive talent.
No Gross-Ups for Taxes on Parachute Payments and Deferred Compensation
We do not provide, and have no obligation to provide, any of our named executive officers with a “gross-up” or other reimbursement payment for any tax liability he or she might owe because of the application of Sections 280G, 4999 or 409A of the Code. If any of the payments or benefits provided for under the change of control and severance agreements or otherwise payable to a named executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax, he or she would receive either full payment of such payments and benefits or such lesser amount that would cause no portion of the payments and benefits being subject to the excise tax, whichever results in the greater after-tax benefits to our named executive officer.
Accounting for Stock-Based Compensation
Our compensation committee considers accounting effects in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is competitiveASC 718, the standard which governs the accounting treatment of stock-based compensation awards. ASC 718 generally requires companies to measure the compensation expense for all share-based payment awards made to employees and fair.directors, including stock options and restricted stock-based awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may realize no value from their awards. ASC 718 also generally requires companies to recognize the compensation cost of their share-based payment awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
Compensation Committee Report
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis provided above with management. Based on such review and discussions, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the year ended December 31, 2022, and this proxy statement.
Respectfully submitted by the members of the compensation committee of the board of directors*:
Geoffrey Moore (Chair)
Bill Gossman
Raymond Link
*This compensation committee report is required by the SEC and, in accordance with the SEC's rules, will not be deemed to be a part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed "soliciting material" or "filed" under either the Securities Act or the Exchange Act.
Compensation Risk Analysis
Our compensation committee reviews and discusses with management the risks arising from our executive compensation philosophy and practices applicable to all employees to determine whether they encourage excessive risk-taking and to evaluate compensation policies and practices that could mitigate such risks. Based on those reviews, the compensation committee structures our executive compensation program to align the executive officers’ interests with the interests of our stockholders to create long-term value, while at the same time avoiding the encouragement of excessive risk-taking. We do believe that any potential risks arising from our compensation programs, policies and practices, including our executive compensation program, are not reasonably likely to have a material adverse effect on us.
Summary Compensation Table
The following table sets forth information regarding the compensation of our named executive officers for the years ended December 31, 20182022, 2021 and December 31, 2017.2020. We refer to these persons as our “named executive officers” elsewhere in this proxy statement. The following table includes all compensation earned by the named executive officers for the respective periods, regardless of whether such amounts were actually paid during the period.
| | Name and Principal Position | Year | Salary($) | Bonus($)(1) | Stock Awards($)(2) | Option Awards($)(3) | Non-equity Incentive Plan Compensation($)(4) | All Other Compensation($)(5) | Total($) | Name and Principal Position | Year | Salary($) | Bonus($) | Stock Awards($)(1) | | Non-equity Incentive Plan Compensation($)(2) | All Other Compensation($)(3) | Total($) |
Scott Keeney | 2018 | 350,277 |
| — |
| 2,229,000 |
| — |
| 214,583 |
| 414 |
| 2,794,274 |
| Scott Keeney | 2022 | $ | 426,600 | | $ | — | | $ | 2,900,332 | | | $ | 80,485 | | $ | 12,019 | | $ | 3,419,436 | |
President and Chief Executive Officer | 2017 | 313,433 |
| — |
| — |
| 246,000 |
| 239,505 |
| 414 |
| 799,352 |
| President and Chief Executive Officer | 2021 | 407,600 | | — | | 4,953,069 | | | 370,315 | | 10,081 | | 5,741,065 | |
Ran Bareket Chief Financial Officer | 2018 | 247,115 |
| 60,000 |
| 1,114,500 |
| 1,040,000 |
| 115,625 |
| 51,394 |
| 2,628,634 |
| |
Robert Martinsen | 2018 | 225,423 |
| — |
| 928,750 |
| — |
| 61,447 |
| 774 |
| 1,216,394 |
| |
Chief Technology Officer | 2017 | 216,234 |
| — |
| — |
| 24,600 |
| 82,616 |
| 774 |
| 324,224 |
| |
| | | 2020 | 315,385 | | — | | 4,736,078 | | | 399,385 | | 5,697 | | 5,456,545 | |
Joseph Corso(4) | | Joseph Corso(4) | 2022 | 280,385 | | — | | 1,209,950 | | | 25,200 | | 8,899 | | 1,524,434 | |
Chief Financial Officer | | Chief Financial Officer | | | |
| Ran Bareket(5) | | Ran Bareket(5) | 2022 | 105,693 | | — | | — | | | — | | 49,970 | | 155,663 | |
Former Chief Financial Officer | | Former Chief Financial Officer | 2021 | 265,000 | | — | | 1,857,400 | | | 156,488 | | 7,744 | | 2,286,632 | |
| | | 2020 | 218,000 | | — | | 2,113,835 | | | 168,740 | | 5,814 | | 2,506,389 | |
|
| |
(1)
| Mr. Bareket became our Chief Financial Officer in January 2018. The amount disclosed in this column represents Mr. Bareket’s signing bonus pursuant to the terms of his offer letter.
|
| |
(2)
|
(1)The amounts reported in the Restricted Stock Awards ("RSAs") column represent the aggregate grant date fair value of time-based RSAs and performance-based RSAs granted under our Plan to each of our named executive officers in 2018 calculated in accordance with FASB ASC Topic 718. The grant date fair value of time-based RSAs is determined using the fair value of our |
common stock on the date of grant, and the grant date fair value of time-based RSAs and RSUs and performance-based RSAs or RSUs ("PRSUs" or "PRSAs") granted under our 2018 Plan to each of our named executive officers calculated in accordance with FASB ASC Topic 718. The grant date fair value of the 2020 and 2021 performance-based RSAs or RSUs and all time-based RSAs or RSUs is calculated based ondetermined using the fair value of our common stock on the date of grant. The grant and probable outcome of the performance measures for applicable performance period as of the date on which the performance-based RSAs are granted. This estimated fair value forof 2022 performance-based RSAsRSUs is the same as the maximum value of performance-based RSAs set forth below.determined using a Monte Carlo simulation pricing model. These amounts do not necessarily correspond to the actual value recognized by our named executive officers. For a discussion of valuation assumptions, see the notes to our audited financial statements included in our Annual Report on Form 10-K.
| |
(3)
| (2) The amounts disclosed in this column for each year represent bonuses earned and payable upon determination of achievement of corporate objectives, part of which were paid in the following year. For more information regarding bonuses paid in 2022, please see the “Performance-Based Cash Incentive Plan” section above. (3) The amounts disclosed in this column represent the aggregate grant date fair value of the award as calculated in accordance with FASB ASC Topic 718 using the Black-Scholes option pricing model without regard to estimated forfeitures. These amounts do not correspond to the actual value that may be recognized by the named executive officers upon vesting of the applicable awards. For a discussion of valuation assumptions, see the notes to our financial statements included in our Annual Report on Form 10-K. |
| |
(4)
| The amounts disclosed in this column for 2017 represent bonuses earned and payable upon the achievement of corporate objectives, part of which were paid in 2018. The amounts reported for 2018 represent bonuses earned and payable upon the achievement of corporate objectives, part of which were paid in 2019. For more information please see the section titled "—Non-Equity Incentive Plan Compensation" below. |
| |
(5)
| These amounts disclosed in this column represent for each named executive officer, company-paid premiums for such named executive officer’s life insurance in 2018 and 2017. The amount disclosed for Mr. Bareket represents $380 for Company-paid life insurance premiums, $38,731 of reimbursed moving expenses, and $12,283 for the tax gross-up of the reimbursed expenses. |
Non-Equity Incentive Plan Compensation
2018 Fiscal Year
Each of our named executive officers was awarded an annual cash bonus for 2018 based on attainment of corporate objectives for the first half and second half of 2018. Each of the first and second half 2018 target bonus amounts (expressed as a percentage of one half of the executive's base salary) for each named executive officer, company-paid 401(k) matching contributions and life insurance premiums for such named executive officer, for Mr. Keeney and Mr. Corso, company-paid HSA matching contribution, and for Mr. Bareket, a severance payment.
(4) Mr. Corso became an executive officer upon his appointment as our chief financial officer in March 2022 and, accordingly, compensation information for 2021 and 2020 is not included.
(5) Mr. Bareket ceased to be our CFO effective March 1, 2022 and ceased to be an employee as of June 30, 2022. In 2022, Mr. Bareket was not eligible for new stock awards or bonus.
Grants of Plan-Based Awards in Fiscal Year 2022
The following table presents information regarding grants of plan-based awards during 2022 to our named executive officers. The non-equity incentive plan awards were granted under our 2022 Bonus Plan, as described in greater detail above. The equity awards were granted under our 2018 Plan. The vesting schedule for the awards is set forth below in the table “Outstanding Equity Awards at Fiscal Year Ended December 31, 2022.”
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Grant date for Stock and Option Awards | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stocks or Units | Grant Date Fair Value of Stock and Option Awards ($) |
Threshold ($)(1) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
Scott Keeney | | — | | $ | 426,600 | | $ | 639,900 | | — | | — | | — | | — | | $ | — | |
| 7/4/2022 | — | | — | | — | | 58,333 | | 116,667 | | 233,334 | | — | | 1,737,172 | |
| 7/4/2022 | — | | — | | — | | — | | — | | — | | 116,666 | | 1,163,160 | |
Joseph Corso | | — | | 164,250 | | 246,375 | | — | | — | | — | | — | | — | |
| 3/1/2022 | — | | — | | — | | — | | — | | — | | 10,000 | | 153,400 | |
| 7/4/2022 | — | | — | | — | | 21,250 | | 42,500 | | 85,000 | | — | | 632,825 | |
| 7/4/2022 | — | | — | | — | | — | | — | | — | | 42,500 | | 423,725 | |
Ran Bareket | | — | | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | |
(1) If Adjusted EBITDA threshold is not met, our named executive officers receive no payout. If the threshold is met, our named executive officers are eligible for a payout in the range of 0% to 150%.
CEO Pay Ratio Disclosure
Under the Dodd-Frank Act and Item 402 of Regulation S-K under the Securities Act, we are required to disclose the ratio of the annual total compensation of our median-compensated employee to the annual total compensation of our CEO.
We selected December 31, 2022, the last day of our fiscal year 2022, as the date on which to determine our median employee. In order to identify our median-compensated employee, we aggregated compensation for all of our world-wide employees as of December 31, 2022, as follows: Annual base salary for regular salaried employees, or hourly rate multiplied by the expected annual work schedule for regular hourly employees, plus target annual bonus or commission. Components of compensation paid in foreign currency were converted to U.S. dollars based on currency exchange rates as of December 31, 2022 (other than our CEO). We then ranked this compensation measure for all of our worldwide employees and identified the median employee. Our median-compensated employee on a worldwide basis is a Manufacturing Lead in the United States. The compensation of our median employee does not include certain company-provided benefits such as health insurance, life insurance or employee stock purchase plan.
For 2022, the annual total compensation for Mr. Keeney, from the Summary Compensation Table above, was $3,419,436, and the annual total compensation for our median-compensated employee was $54,870, resulting in an estimated pay ratio of approximately 62:1.
As noted above, Mr. Keeney's cash compensation for 2022 was $519,104. The Summary Compensation Table total for Mr. Keeney for 2022 includes the full value of an annual grant of time-based equity compensation that will be earned over three years, and the value ofan annual grant of performance-based equity compensation that will be measured and earned in three years based on relative Total Shareholder Return, which is valued for purposes of the Summary Compensation Table and this pay ratio disclosure based on a Monte Carlo simulation of value at the time of the grant.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations, worldwide locations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay Versus Performance
Under rules adopted pursuant to the Dodd-Frank Act (the "PvP Rules"), we are required to disclose certain information about the relationship between the compensation actually paid to our named executive officers and certain measures of company performance. The material that follows is provided in compliance with these rules; however additional information regarding our compensation philosophy, the structure of our performance-based compensation programs, and compensation decisions made this year is described above in our Compensation Discussion and Analysis.
The following table provides information regarding compensation actually paid to our principal executive officer ("PEO"), and other key employees, along withnamed executive officers ("Other NEOs") for each year from 2020 to 2022, compared to our TSR from December 31, 2019, through the related 2018 corporate objectives, were approved byend of each such year, and our net income and total revenue for each such year.
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| | | | | | | | | | Value of Initial Fixed $100 Investment | | | | |
Year | | Summary Compensation Table Total for PEO(1)(2) | | Compensation Actually Paid to PEO(1)(3) | | Average Summary Compensation Table Total for Other NEOs(4) | | Average Compensation Actually Paid to Other NEOs(5) | | Company Total Shareholder Return(6) | | Peer Group Total Shareholder Return(7) | | Net Income (in thousands)(8) | | Total Revenue (in thousands)(9) |
2022 | | $ | 3,419,436 | | | $ | (2,827,678) | | | $ | 840,049 | | | $ | (2,323,427) | | | $ | 50 | | | $ | 110 | | | $ | (54,579) | | | $ | 242,058 | |
2021 | | 5,741,065 | | | 2,568,562 | | | 2,286,632 | | | 430,621 | | | 118 | | | 138 | | | (29,669) | | | 270,146 | |
2020 | | 5,456,545 | | | 10,998,677 | | | 1,801,666 | | | 4,451,831 | | | 161 | | | 120 | | | (20,932) | | | 222,789 | |
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(1) Our PEO was Scott Keeney for each year indicated.
(2) Represents the total compensation committeepaid to our PEO in each listed year, as shown in the "Total" column of our board of directorsSummary Compensation Table for such listed year.
(3) Compensation actually paid does not mean that our PEO was actually paid those amounts in the first half and second half of 2018. Eachlisted year, but this is a dollar amount derived from the starting point of the first half and second half of 2018 corporate objectives were comprised of weighted goals with regard to sales, product and financial objectives.
In August 2018 and January 2019,compensation reported in the compensation committee of our board of directors assessed the achievement against the applicable first half and second half 2018 corporate objectives, respectively, determined that 125% and 50%"Total" column of the performance objectives had been achievedsummary compensation table total under the methodology prescribed under the relevant rules as shown in the first halfadjustment table below.
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| | 2020 | | 2021 | | 2022 |
PEO Summary Compensation Table Total(a) | | $5,456,545 | | $5,741,065 | | $3,419,436 |
Subtract Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year(b) | | $(4,736,078) | | $(4,953,069) | | $(2,900,332) |
Add Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year(c) | | $5,877,000 | | $3,832,000 | | $2,910,470 |
Adjust for Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years(c) | | $3,839,613 | | $(1,848,380) | | $(3,814,958) |
Adjust for Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year(c) | | $254,565 | | $0 | | $0 |
Adjust for Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year(c) | | $307,033 | | $(203,054) | | $(2,442,294) |
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Subtract Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | $0 | | $0 | | $0 |
Add Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | | $0 | | $0 | | $0 |
Compensation Actually Paid | | $10,998,677 | | $2,568,562 | | $(2,827,678) |
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a.We have not reported any amounts in our Summary Compensation Table with respect to “Change in Pension and second half of 2018, respectively,Nonqualified Deferred Compensation” and, approved a bonusaccordingly, the adjustments with respect to such items prescribed by the pay-versus-performance rules are not relevant to our analysis and no adjustments have been made.
b.The amounts reflect the aggregate grant-date fair value reported in the amount of 125%“Stock Awards” and 50% of the respective target bonus amount for the first and second half of 2018, respectively. The amounts“Option Awards” columns in the Summary Compensation Table for the applicable year.
c.In accordance with PvP Rules, the fair values of unvested and outstanding equity awards to our PEO were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. The assumptions used for determining the fair values shown in this table do not differ materially from those used to determine the fair values disclosed as of the grant date of such awards. Please see “Accounting Assumption Disclosures” for further discussion on the assumptions used for these remeasurements.
(4) This figure is the average of the total compensation paid to our Other NEOs in each listed year, as shown in the “Total” column our Summary Compensation Table for such listed year. The names of the Other NEOs in each year are listed in the table below.
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2020 | | 2021 | | 2022 |
Ran Bareket | | Ran Bareket | | Ran Bareket |
Robert Martinsen | | | | Joseph Corso |
(5) This figure is the average of compensation actually paid for our Other NEOs in each listed year. Compensation actually paid does not mean that these Other NEOs were actually paid those amounts in the listed year, but this is a dollar amount derived from the starting point of Summary Compensation Table total compensation under the column "Non-Equity Incentive Plan Compensation" are based on the bonuses awardedmethodology prescribed under the above-described bonus program.
2017 Fiscal Year
Each of our named executive officers, other than Mr. Bareket, was awarded an annual cash bonus for 2017 based on attainment of corporate objectives for each ofSEC's PvP Rules as shown in the first half and second half of 2017. Each of the first and second half 2017 target bonus amounts (expressed as a percentage of one half of the executive's base salary) for each named executive officer, as well as other key employees, alongtable below, with the related 2017 corporate objectives, were approvedindicated figures showing an average of such figure for all Other NEOs in each listed year.
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| | 2020 | | 2021 | | 2022 |
Summary Compensation Table Total(a), (b) | | $1,801,666 | | $2,286,632 | | $840,049 |
Subtract Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year(c) | | $(1,446,605) | | $(1,857,400) | | $(604,975) |
Add Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year(d) | | $2,122,250 | | $1,437,000 | | $580,822 |
Adjust for Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years(d) | | $1,840,853 | | $(1,317,793) | | $(616,137) |
Adjust for Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year(d) | | $96,480 | | $0 | | $0 |
Adjust for Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year(d) | | $37,187 | | $(117,819) | | $(528,435) |
Subtract Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | $0 | | $0 | | $(1,994,750) |
Add Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | | $0 | | $0 | | $0 |
Compensation Actually Paid | | $4,451,831 | | $430,621 | | $(2,323,427) |
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a.We have not reported any amounts in our Summary Compensation Table with respect to “Change in Pension and Nonqualified Deferred Compensation” and, accordingly, the adjustments with respect to such items prescribed by the pay-versus-performance rules are not relevant to our compensation committee of our board of directors for each ofanalysis and no adjustments have been made.
b.The amounts reflect the first and second half of 2017. Each of the first and second half of 2017 corporate objectives were comprised of weighted goals with regard to sales product and financial objectives.
In July 2017 and January 2018, the compensation committee of our board of directors assessed the achievement against the applicable first and second half 2017 corporate objectives, respectively, determined that 133% and 120% of the performance objectives had been achievedamounts reported in the first and second half of 2017,
respectively, and approved a bonus in the amount of 133% and 120% of the respective target bonus amount. The amounts"Total" column in the Summary Compensation Table for the applicable year and, with respect to Mr. Martinsen for 2020, as reported in the Summary Compensation Table in our proxy filed with the SEC on April 30, 2021.
c.The amounts reflect the average of the aggregate grant-date fair value reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year and, with respect to Mr. Martinsen for 2020, as reported in the Summary Compensation Table in our proxy filed with the SEC on April 30, 2021.
d.In accordance with PVP Rules, the fair values of unvested and outstanding equity awards to our Other NEOs were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. The assumptions used for determining the fair values shown in this table do not differ materially from those used to determine the fair values disclosed as of the grant date of such awards. Please see “Accounting Assumption Disclosures” for further discussion on the assumptions used for these remeasurements.
(6) Total shareholder return is calculated by assuming that a $100 investment was made on the trading day prior to the earliest fiscal year reported in the Pay versus Performance table to which this footnote relates and reinvesting all dividends until the last day of each reported fiscal year.
(7) The peer group used is the Russell 2000 Index, as used in our performance graph in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. We include a comparison against the Russell 2000 Index because it represents small cap market capitalization companies similar to us. We do not believe that there is a published industry or line-of-business index, or a readily definable peer group of publicly traded companies, that provides a more meaningful comparison of the cumulative return of our common stock or that there is otherwise a reasonably identifiable peer group for purposes of such performance graph. Total shareholder return is calculated by assuming that a $100 investment was made on the trading day prior to the first fiscal year reported below and reinvesting all dividends until the last day of each reported fiscal year.
(8) The dollar amounts reported are our net income as reflected in our audited financial statements.
(9) In our assessment, total revenue is the financial performance measure that is the most important financial performance measure (other than total shareholder return) used by us in 2022 to link compensation actually paid to performance.
Tabular List of Performance Measures
The list below includes the four financial performance measures that in our assessment represent the most important financial performance measures used to link compensation actually paid to our named executive officers for 2022 to our performance.
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Tabular List |
Total Revenue |
Product Gross Margin |
Adjusted EBITDA |
Relative TSR |
Description of Relationships Between Compensation Actually Paid and Performance
We believe our pay-for-performance philosophy is well reflected in the table above because the “compensation actually paid (as reported in the Pay versus Performance table above) tracks well to the performance measures disclosed in such tables. The graphs below describe, in a manner compliant with the relevant rules, the relationship between Compensation Actually Paid and the individual performance measures shown.
Compensation Actually Paid Versus TSR
Compensation Actually Paid Versus Net Income
Compensation Actually Paid Versus Total Revenue
Accounting Assumption Disclosures
In accordance with the PvP Rules, the fair values of unvested and outstanding equity awards to our named executive officers were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the Pay versus Performance table above. We approached the determination of fair value in the same way as we historically have determined fair value and fair values as of each measurement date were determined using valuation assumptions and methodologies that are generally consistent with those used to estimate fair value at grant under GAAP. Other than as disclosed below, all other valuation assumptions are materially consistent with the grant date assumptions. See Note 18 “Stockholders' Equity and Stock-Based Compensation” to the Consolidated Financial Statements of the Form 10-K for additional details on the valuation assumptions used at grant for the most-recently disclosed fiscal year.
Option Awards: The range of estimates used in the option fair value calculations are as follows:
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Assumption | 2022 | 2021 | 2020 |
Expected Term | 1.50 years-2.57 years | 1.63 years-3.57 years | 1.91 years-4.57 years |
Volatility | 58.41%-67.30% | 63.32%-72.45% | 61.11%-69.76% |
Dividend Yield | 0% | 0% | 0% |
Risk-Free Rate | 0.91%-4.44% | 0.13%-1.05% | 0.14%-1.63% |
TSR Awards: For PSUs with a TSR metric, the fair values as of each measurement date (prior to the end of the performance period) were determined using a Monte Carlo simulation pricing model, with assumptions and methodologies that are generally consistent with those used to estimate the fair value at grant under US GAAP. The range of estimates used in the Monte Carlo calculations are as follows:
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Assumption | 2022 |
Volatility | 60.20% |
Dividend Yield | 0% |
Risk-Free Rate | 4.21% |
Correlation Coefficient | 0.5651 |
Performance Awards Without Market Conditions: For performance-based awards with only performance conditions, the fair values reflect the probable outcome of the performance vesting conditions as of each measurement date.
Outstanding Equity Awards at December 31, 2022
The following table presents information concerning equity awards held by our named executive officers as of December 31, 2022.
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Name | Option Awards(1) | Stock Awards |
Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price($)(2) | Option Expiration Date | Number of Shares of Stock that Have Not Vested (#)
|
Market Value of Shares of Stock that Have Not Vested($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested(#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($)(4) |
Scott Keeney | 18,252 | |
| — | | | $ | 1.10 | | 07/01/2026 | — | | | — | | — | | | — | |
| 136,206 | | | — | | | 1.45 | 06/02/2027 | — | | | — | | — | | | — | |
| 318,541 | | | — | | | 0.75 | 02/26/2025 | — | | | — | | — | | | — | |
| 31,748 | | | — | | | 1.10 | 07/01/2026 | — | | | — | | — | | | — | |
| 263,794 | | | — | | | 1.45 | 06/02/2027 | — | | | — | | — | | | — | |
| | | | | | | 30,000 | | (5) | $ | 304,200 | | 25,980 | | (10) | $ | 263,437 | |
| | | | | | | 60,000 | | (6) | 608,400 | | 53,333 | | (11) | 540,797 | |
| | | | | | | 80,001 | | (7) | 811,210 | | 116,667 | | (12) | 1,183,003 | |
| | | | | | | 116,666 | | (8) | 1,182,993 | | — | | | — | |
Joseph Corso | — | | | — | | | — | | — | | 41,667 | | (6) | 422,503 | | 7,216 | | (10) | 73,170 | |
| — | | | — | | | — | | — | | 20,001 | | (7) | 202,810 | | 13,333 | | (11) | 135,197 | |
| — | | | — | | | — | | — | | 42,500 | | (8) | 430,950 | | 42,500 | | (12) | 430,950 | |
| — | | | — | | | — | | — | | 10,000 | | (9) | 101,400 | | — | | | — | |
Ran Bareket (13) | — | | | — | | | — | | — | | — | | | — | | — | | | — | |
(1) Each of the outstanding options to purchase shares of our common stock was granted pursuant to our 2001 Stock Option Plan, as amended.
(2) Each of the exercise prices in this column "Non-Equity Incentiverepresents the fair market value of a share of our common stock on the date of grant of the option (including options granted pursuant to our February 2015 stock option exchange program), in each case as determined by our board of directors.
(3) The market value of unvested shares is calculated by multiplying the number of unvested shares by the closing market price of our common stock on the Nasdaq Global Select Market on December 30, 2022, the last trading day of the year, which was $10.14 per share.
(4) Market value was calculated by multiplying the target number of performance shares by the closing market price of our common stock on the Nasdaq Global Select Market on December 30, 2022, the last trading day of the year, which was $10.14 per share.
(5) Represents time-based RSAs that were granted under our 2018 Plan Compensation" arein 2019 that have not vested as of December 31, 2022. One-fourth of the RSAs vested or will vest on each of June 1, 2020, 2021, 2022 and 2023, subject to continued service with us through each such vesting date.
(6) Represents time-based RSAs or RSUs that were granted under our 2018 Plan in 2020 that have not vested as of December 31, 2022. One-fourth of the RSAs or RSUs vested or will vest on each of June 1, 2021, 2022, 2023 and 2024, subject to continued service with us through each such vesting date.
(7) Represents time-based RSAs that were granted under our 2018 Plan in 2021 that have not vested as of December 31, 2022. One-fourth of the RSAs vested or will vest on each of June 1, 2022, 2023, 2024 and 2025, subject to continued service with us through each such vesting date.
(8) Represents time-based RSUs that were granted under our 2018 Plan in July 2022 that have not vested as of December 31, 2022. One-third of the RSUs will vest on June 1, 2023, and one-twelfth of the RSUs will vest each of the next eight quarters thereafter, subject to continued service with us through each such vesting date.
(9) Represents time-based RSUs that were granted under our 2018 Plan in March 2022 that have not vested as of December 31, 2022. One-fourth of the RSUs will vest on each of March 1, 2023, 2024, 2025 and 2026, subject to continued service with us through each such vesting date.
(10) Represents performance-based RSAs or RSUs granted in 2020. Upon the achievement of the specified performance conditions, 50% of the earned shares vested on August 17, 2022 and the remaining 50% of the earned shares will vest on August 17, 2023, subject to continued service to us through such date.
(11) Represents performance-based RSAs or RSUs granted in 2021. Upon the achievement of the specified performance conditions, 50% of the earned shares will vest on August 17, 2023 and the remaining 50% of the earned shares will vest on August 17, 2024, subject to continued service to us through such date.
(12) Represents performance-based RSUs granted in 2022. Upon the achievement of the specified performance conditions, 100% of the earned RSUs will vest on August 14, 2025, subject to continued service to us through such date.
(13) Mr. Bareket's retirement was effective June 30, 2022 and, accordingly, he does not have any outstanding equity awards at December 31, 2022.
Option Exercises and Stock Vested for Fiscal Year Ended December 31, 2022
The following table presents information concerning the exercise of options during 2022 by our named executive officers, and the vesting of stock awards held by them during 2022 (with the reported value based on the bonuses awarded undermarket price on the above-described bonus program.applicable date and for exercised options, less the applicable exercise price).
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Name | Option Awards | Stock Awards |
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting |
Scott Keeney | 266,404 | | $ | 3,961,427 | | 170,386 | | $ | 2,235,457 | |
Joseph Corso | — | | — | | 34,715 | | 420,918 | |
Ran Bareket | 62,187 | | 422,149 | | 49,166 | | 619,000 | |
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Employment Arrangements
Below is a summary of the employment arrangements for our named executive officers. Each of our named executive officers has executed our standard form of confidential information, invention assignment and arbitration agreement.
Scott Keeney
We entered into an employment agreement with Mr. Keeney in March 2018. The employment agreement does not have a specific term and provides that Mr. Keeney is an at-will employee. From March 2017 through June 2018, Mr. Keeney's annual base salary was $315,554, and he was eligible for an annual target cash incentive payment equal to 60% of his annual base salary. Effective July 1, 2018, Mr. Keeney's annual base salary increased to $385,000, and his annual target bonus opportunity increased to 100% of his base salary, with opportunities for over-achievement of up to 150% of Mr. Keeney's annual base salary. The performance goals for Mr. Keeney are related to various weighted goals with regard to sales, product and financial objectives. The 2018 bonus for Mr. Keeney reflected the 60% rate as it applied up to June 30, 2018, and the new rate after that date.
Pursuant to the employment agreement with Mr. Keeney, if we terminate the employment of Mr. Keeney other than for death, "disability,"“disability,” or "cause"“cause” (as such terms are defined in Mr. Keeney's employment agreement)
outside of a change in control period (as defined below), and Mr. Keeney executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. Keeney will be entitled to receive (i) continuing payments of his base salary for a period of 12 months and (ii) premium payments to maintain group health insurance continuation benefits pursuant to "COBRA"“COBRA” for him and his respective dependents for up to 12 months, or taxable monthly payments of an equivalent amount for the same period. Mr. Keeney's then-outstanding equity awards will remain outstanding for three months or until the occurrence of a "change“change in control"control” (as defined in Mr. Keeney's employment agreement) (whichever is earlier) so that Mr. Keeney will be eligible to receive the vesting acceleration benefits described below to the extent applicable.
In addition, pursuant to the employment agreement with Mr. Keeney, if, within the three-month period beginning three months prior to or theand ending 12 month periodmonths following a "change“change in control"control” (as defined in Mr. Keeney's employment agreement) (such period referred to as the "change“change in control period"period”), the employment of Mr. Keeney is terminated other than for death, "disability,"“disability,” or "cause"“cause” or Mr. Keeney resigns for "good reason"“good reason” and Mr. Keeney executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. Keeney will be entitled to receive (i) a lump sum payment equal to 18 months of his base salary, (ii) premium payments to maintain group health insurance continuation benefits pursuant to "COBRA"“COBRA” for him and his respective dependents for up to 18 months, or taxable monthly payments of an equivalent amount for the same period, and (iii) 100% of the then-unvested shares subject to his outstanding equity awards will immediately become vested and exercisable (in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at the greater of actual performance measured as of the date of termination or 100% of target levels, unless the applicable equity award agreement provides otherwise).
Pursuant to the employment agreement, in the event of a "change“change in control"control” (as defined in our 2001 Stock Option Plan), Mr. Keeney's outstanding equity awardsstock options granted prior to the effective date of his employment agreement will immediately become 100% vested and, if applicable, exercisable subject to him remaining a service provider with us.us through such date. As of December 31, 2022, all of these stock options had vested.
Ran Bareket
Mr. Keeney’s employment agreement includes a Section 280G “best results” provision, which provides that if the severance payments or other benefits provided to the NEOs constitute “parachute payments” under Section 280G of the Internal Revenue Code, his severance and other benefits will be either (i) delivered in full or (ii) delivered only to a lesser extent that would result in no portion of such severance benefits being subject to applicable excise tax, whichever results in the greatest amount of after-tax benefits. We included this provision in the employment agreements to be clear that no Section 280G tax gross-ups would be provided.
Joseph Corso
We entered into an employment agreement with Mr. BareketCorso in March 2018.August 2020. The employment agreement does not have a specific term and provides that Mr. BareketCorso is an at-will employee. Mr. Bareket's current annual base salary is $250,000, and with respect to the period from January 2018 through June 2018, he was eligible for an annual target cash incentive payment equal to 50% of his annual base salary. Effective July 1, 2018, Mr. Bareket's annual target bonus opportunity increased to 60% of his annual base salary, with opportunities for over-achievement of up to 90% of Mr. Bareket's annual base salary. The performance goals for Mr. Bareket are related to various weighted goals with regard to sales, product and financial objectives. The 2018 bonus for Mr. Bareket reflected the 50% rate as it applied up to June 30, 2018, and the new rate after that date.
Mr. Bareket received a signing bonus of $60,000 in January 2018 and is entitled to receive a bonus of $75,000 if he remains employed as our chief financial officer through June 2019. If Mr. Bareket leaves or is terminated by us for "cause" (as defined in Mr. Bareket's employment agreement), in either case, before June 4, 2019, then he is required to repay the entire signing bonus amount that he has received. He also received $51,014 for relocation expenses.
Pursuant to the employment agreement with Mr. Bareket,Corso, if we terminate the employment of Mr. BareketCorso other than for death, "disability,"“disability,” or "cause"“cause” (as such terms are defined in Mr. Bareket'sCorso's employment agreement) outside the change in control period (as defined below), and Mr. BareketCorso executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. BareketCorso will be entitled to receive (i) continuing payments of his base salary for a period of six months and (ii) premium payments to maintain group health insurance continuation benefits pursuant to "COBRA"“COBRA” for him and his respective dependents for up to six months, or taxable monthly payments of an equivalent amount for the same period. Mr. Bareket'sCorso's then-outstanding equity awards will remain outstanding for three months or until the occurrence of a "change“change in control"control” (as defined in Mr. Bareket'sCorso's employment agreement) (whichever is earlier) so that Mr. BareketCorso will be eligible to receive the vesting acceleration benefits described below to the extent applicable.
In addition, pursuant to the employment agreement with Mr. Bareket,Corso, if, within the three-month period beginning three months prior to or theand ending 12 month periodmonths following a "change“change in control"control” (as defined in Mr. Bareket'sCorso's employment agreement) (such period referred to as the "change“change in control period"period”), the employment of Mr. BareketCorso is terminated other than for death, "disability,"“disability,” or "cause"“cause” or Mr. BareketCorso resigns for "good reason"“good reason” and Mr. BareketCorso executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days following his termination, Mr. BareketCorso will be entitled to receive (i) a lump sum payment equal to 12 months of his base salary, (ii) premium payments to maintain group health insurance continuation benefits pursuant to "COBRA"“COBRA” for him and his respective dependents for up to 12 months, or taxable monthly payments of an equivalent amount for the same period, and (iii) 100% of the then-unvested shares subject to his outstanding equity awards will immediately become vested and exercisable (in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at the greater of actual performance measured as of the date of termination or 100% of target levels, unless the applicable equity award agreement provides otherwise).
Pursuant to theMr. Corso’s employment agreement in the event ofincludes a "change in control" (as defined in our 2001 Plan),Section 280G “best results” provision as described above for Mr. Bareket's outstanding equity awards granted prior to the effective date of his employment agreement will immediately become 100% vested and exercisable subject to him remaining a service provider with us.Keeney.
Robert Martinsen
Ran Bareket
We entered into an employment agreement with Mr. MartinsenBareket in March 2018. The employment agreement doesdid not have a specific term and providesprovided that Mr. Martinsen isBareket was an at-will employee. Mr. Bareket’s employment agreement provided the same severance and change in control benefits as described above for Mr. Corso, on the same terms and conditions, and included the same vesting acceleration provisions upon a change in control for stock options granted prior to his employment agreement as described above for Mr. Keeney.
Mr. Bareket’s employment agreement was generally superseded by the Transition Agreement and Release (the “Transition Agreement”) entered into with Mr. Bareket on January 18, 2022 in connection with his resignation as our CFO, which resignation was effective as of March 1, 2022. The Transition Agreement entitled Mr. Bareket to continue to receive his regular base salary (“CFO Salary”) and benefits during the period from January 18, 2022 through March 1, 2022, the “Initial Transition Period.” The Transition Agreement included a release of claims by Mr. Bareket in favor of the Company.
Pursuant to the Transition Agreement, following the Initial Transition Period and subject to the execution of a supplemental release, Mr. Bareket remained employed by the Company as a special advisor through June 30, 2022, to assist with the transition of his duties to Mr. Corso. From March 20172, 2022, through May 2018,his last day of his employment (the “Subsequent Transition Period”), Mr. Martinsen's annualBareket’s annualized base salary was $217,697, and he was eligible for an annual target cash incentive payment equalreduced to 30%$120,000 (“Transition Salary”). Until his last day of his annual base salary. Effectiveemployment, Mr. Bareket remained eligible to receive a bonus payment for the second half of the 2021 calendar year, participate in Company benefits and plans as an employee and vest in his stock options and restricted stock, in each case, outstanding as of January 18, 2022 (each, an “Equity Award”), subject to the terms and conditions of the applicable Company equity plan under which such Equity Award was granted and the award agreement memorializing such Equity Award. As of January 18, 2022, Mr. Bareket forfeited his Equity Awards that were scheduled to vest after June 1, 2018,30, 2022. Mr. Martinsen's base salary increasedBareket was not eligible to $231,000, and effective July 1, 2018,participate in the Company’s 2022 bonus program or to receive any compensation increase or new equity grants.
Further, under the terms of the Transition Agreement, if Mr. Martinsen's annual target bonus opportunity increased to 35% of his annual base salary, with opportunities for over-achievement of up to 52.5% of Mr. Martinsen's annual base salary. The performance goals for Mr. Martinsen are related to various weighted goals with regard to sales, product and financial objectives. The 2018 bonus for Mr. Martinsen reflected the 30% rate as it applied upBareket had been terminated without cause on or after March 2, 2022 but prior to June 30, 2018,2022, and subject to his execution of a supplemental release and the new rate afterterms and conditions of the Transition Agreement, Mr. Bareket would have been entitled to (i) continued payment of his Transition Salary through June 30, 2022, (ii) reimbursement for the premium payments he makes for COBRA coverage for each of the full calendar months that date.
Pursuant tooccur during the employment agreement with Mr. Martinsen, if we terminate the employment of Mr. Martinsen other than for death, "disability," or "cause" (as such terms are defined in Mr. Martinsen's employment agreement) outside the change in control period (as defined below), and Mr. Martinsen executes a waiver and release of claims in our favor that becomes effective and irrevocable within 60 days followingbetween his termination Mr. Martinsen will be entitledand June 30, 2022 (or until he, and his eligible dependents, were no longer eligible to receive (i) continuing payments of his base salary for a period of six months and (ii) premium payments to maintain group health insurance continuation benefits pursuant to "COBRA" for him and his respective dependents for up to six months, coverage under COBRA), or taxable monthly payments of an equivalent amount for the same period.
period, (iii) if his termination occurs prior to the date on which the Company paid bonuses to its executive officers with respect to the second half of the 2021 calendar year, bonus payment in an amount equal to the second half of the 2021 calendar year bonus Mr. Martinsen's then-outstanding equity awards will remain outstandingBareket would have received had he remained employed through the bonus payment date and (iv) acceleration of the vesting of his Equity Awards with respect to the number of shares subject to such Equity Awards that would have vested had Mr. Bareket remained employed through June 30, 2022, in each case, subject to the terms and conditions of the Transition Agreement.
Pursuant to the terms of the Transition Agreement, if Mr. Bareket was not terminated for three months or untilcause and did not resign before June 30, 2022, then contingent upon satisfactory completion of his transition duties and his continued employment through at least March 2, 2022, subject to the occurrenceexecution of a "change in control" (as defined in Mr. Martinsen's employment agreement) (whichever is earlier) so that Mr. Martinsen will be eligible to receive the vesting acceleration benefits described below to the extent applicable.
In addition, pursuant to the employment agreement with Mr. Martinsen, if, within the three month period prior to or the 12 month period following a "change in control" (as defined in Mr. Martinsen's employment agreement) (such period referred to as the "change in control period"), the employment of Mr. Martinsen is terminated other than for death, "disability," or "cause" or Mr. Martinsen resigns for "good reason" and Mr. Martinsen executes a waiver andsupplemental release of claims in our favor that becomes effective and irrevocable within 60 days following his termination,the other terms and conditions of the Transition Agreement, Mr. Martinsen will beBareket would have been entitled to receive (i)a severance payment equal to the difference of (A) the total CFO Salary payments payable to Mr. Bareket for the period of March 2, 2022 through June 30, 2022, had he remained eligible for CFO Salary during such period less (B) the Transition Salary payments payable to Mr. Bareket assuming he continued to be employed through June 30, 2022.
Further, under the terms of the Transition Agreement, if Mr. Bareket had resigned prior to June 30, 2022 or failed to timely execute, or revoked, either of his supplemental releases of claims, he would have received severance equal to a lump sum paymentof $500; if he had resigned prior to June 30, 2022 and timely signed and did not revoke a second supplemental release of claims, he would have received severance equal to 12 monthsa lump sum of his base salary, (ii) premium payments$5,000.
Mr. Bareket continued to maintain group health insurance continuation benefits pursuant to "COBRA" for himbe employed by us through June 30, 2022, timely executed a supplemental release and his respective dependents for up to 12 months, or taxable monthly payments of an equivalent amount formet the same period,other terms and (iii) 100%conditions of the then-unvested shares subject to his outstanding equity awards will immediately become vested and exercisable (in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at the greater of actual performance measured as of the date of termination or 100% of target levels, unless the applicable equity award agreement provides otherwise).Transition Agreement.
Pursuant to the employment agreement, in the event of a "change in control" (as defined in our 2001 Plan), Mr. Martinsen's outstanding equity awards granted prior to the effective date of his employment agreement will immediately become 100% vested and exercisable subject to him remaining a service provider with us.
Outstanding Equity Awards at December 31, 2018
The following table presents information concerning equity awards held by our named executive officers as of December 31, 2018.
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| | | | | | | | | | | | | | |
| Option Awards(1) | Stock Awards |
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price($)(2) | Option Expiration Date | Number of Shares of Stock that Have Not Vested (#)(3) |
Market Value of Shares of Stock that Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested($)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($)(6) |
Scott Keeney | 36,000 |
| (7) | — |
| | 0.75 | 01/21/2025 | | | | |
| 332,945 |
| (8) | — |
| | 0.75 | 02/26/2025 | | | | |
| 60,000 |
| (9) | — |
| | 0.75 | 02/26/2025 | | | | |
| 57,000 |
| | 3,000 |
| (10) | 0.75 | 02/26/2025 | | | | |
| 50,769 |
| | 9,231 |
| (11) | 0.75 | 02/26/2025 | | | | |
| 75,000 |
| | 25,000 |
| (12) | 0.75 | 04/18/2025 | | | | |
| 350,000 |
| | 150,000 |
| (13) | 0.75 | 06/27/2025 | | | | |
| 22,500 |
| | 27,500 |
| (14) | 1.10 | 07/01/2026 | | | | |
| 120,000 |
| | 280,000 |
| (15) | 1.45 | 06/02/2027 | | | | |
| | | | | | | 20,000 | 355,600 |
| 40,000 | 711,200 |
|
Ran Bareket | — |
| | 250,000 |
| (16) | 9.70 | 02/17/2028 | | | | |
| | | | | | | 10,000 | 177,800 |
| 20,000 | 355,600 |
|
Robert Martinsen | 59,878 |
| (8) | — |
| | 0.75 | 02/26/2025 | | | | |
| 24,000 |
| (9) | — |
| | 0.75 | 02/26/2025 | | | | |
| 22,800 |
| | 1,200 |
| (10) | 0.75 | 02/26/2025 | | | | |
| 16,923 |
| | 3,077 |
| (11) | 0.75 | 02/26/2025 | | | | |
| 30,000 |
| | 10,000 |
| (12) | 0.75 | 04/18/2025 | | | | |
| 34,000 |
| (17) | — |
| | 0.75 | 04/18/2025 | | | | |
| 28,000 |
| | 12,000 |
| (13) | 0.75 | 06/27/2025 | | | | |
| 9,000 |
| | 11,000 |
| (14) | 1.10 | 07/01/2026 | | | | |
| 12,000 |
| | 28,000 |
| (15) | 1.45 | 06/02/2027 | | | | |
| | | | | | | 12,500 | 222,250 |
| 12,500 | 222,250 |
|
| |
(1)
| Each of the outstanding options to purchase shares of our common stock was granted pursuant to our 2001 Stock Option Plan, as amended. |
| |
(2)
| This column represents the fair value of a share of our common stock on the date of grant of the option (including options granted pursuant to our February 2015 stock option exchange program), in each case as determined by our board of directors. |
| |
(3)
| Amounts in this column represent restricted stock awards that have not vested. One-fourth of the restricted stock awards vest on June 1, 2019, and one-fourth of the restricted stock awards vest in yearly installments thereafter, subject to continued service with the Company through each such vesting date. |
| |
(4)
| The market value of unvested shares is calculated by multiplying the number of unvested shares by the closing market price of our common stock on The Nasdaq Stock Market on December 31, 2018, the last trading day of the year, which was $17.78 per share. |
| |
(5)
| This column reflects performance-based stock awards granted in 2018 (the "Target Shares"). Upon the achievement of certain revenue and gross margin targets or performance conditions, a number of shares equal to (a) 50% of the Target Shares multiplied by a payout multiple adjusted for the revenue performance conditions achieved, plus (b) 50% of the Target Shares multiplied by a payout multiple adjusted for the gross margin performance conditions achieved shall be deemed earned shares eligible for vesting credit. 50% of those earned shares vest on the later of (i) the date following June 30, 2020 that our compensation committee of the board approves the achievement of the performance conditions and (ii) August 17, 2020. The remaining 50% of the earned shares vest on the one-year anniversary of the date on which the initial 50% of the earned shares vest, subject to continued service to us through such date.
|
| |
(6)
| The 2018-2020 performance period awards are shown at maximum payout. Market value was calculated by multiplying the maximum number of performance shares by the closing market price of our common stock on the Nasdaq Stock Market on December 31, 2018, the last trading day of the year, which was $17.78 per share. |
| |
(7)
| This option became fully vested on January 21, 2016. |
| |
(8)
| This option became fully vested on February 26, 2016. |
| |
(9)
| This option became fully vested on February 26, 2018. |
| |
(10)
| Pursuant to the terms of the February 2015 stock option exchange, two-fifths of the shares subject to the option became vested on February 26, 2016, and the remaining shares subject to the option vest in twelve equal quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(11)
| Pursuant to the terms of the February 2015 stock option exchange, one-thirteenth of the shares subject to the option vest in equal quarterly installments after February 26, 2016, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested.
|
| |
(12)
| One-fifth of the shares subject to the option vested on March 6, 2016, and one-twentieth of the shares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(13)
| One-fifth of the shares subject to the option vested on June 9, 2016, and one-twentieth of the shares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(14)
| One-fifth of the shares subject to the option vested on July 1, 2017, and one-twentieth of the remaining shares subject to the option vest in quarterly installments thereafter subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(15)
| One-fifth of the shares subject to the option vested on June 1, 2018, and one-twentieth of the remaining shares subject to the option vest in quarterly installments thereafter subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Stock Option Plan, 100% of the then-outstanding shares subject to the option will become vested. |
| |
(16)
| One-fifth of the shares subject to the option will vest on January 4, 2019, and one-twentieth of the shares subject to the option vest in quarterly installments thereafter, subject to continued service with us through each such vesting date. In the event of a change in control, as defined in our 2001 Plan, 100% of the then outstanding shares subject to the option will become vested.
|
| |
(17)
| This option became fully vested on February 23, 2016. |
Potential Payments upon Termination or Change-In-Control
Our named executive officers
The following tables provide information concerning the estimated payments and benefits that would be provided in the circumstances described above, assuming that the triggering event took place on December 31, 2022, the last day of our fiscal year. For purposes of valuing accelerated vesting, the values indicated in the tables below are eligiblecalculated, with respect to RSAs or RSUs, as $10.14 the closing price of a share of our common stock on December 30, 2022 (the last trading day of 2022), multiplied by the number of unvested shares subject to the RSAs or RSUs as of December 31, 2022 that are being accelerated (and for performance-based RSAs or RSUs, based on the severance andtarget number of shares). Neither Mr. Keeney nor Mr. Corso had any unvested stock options as of December 31, 2022.
Payments under employment agreements, as of December 31, 2022:
No change in control benefits described– involuntary termination without cause
| | | | | | | | | | |
| Scott Keeney | Joseph Corso | | |
Base Salary ($) | $ | 438,000 | | $ | 150,000 | | | |
| | | | |
| | | | |
Health Benefits ($) | 21,251 | | 10,625 | | | |
| | | | |
Total ($) | $ | 459,251 | | $ | 160,625 | | | |
Change in "Executive Compensation—Employment Arrangements."control - termination without cause or for good reason three months prior to or 12 months following change in control
We maintain a tax-qualified retirement plan for the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees are provided an opportunity to save for retirement on a tax advantaged basis by electing to defer a portion of their compensation, within the limits prescribed by the Code, on pre-tax or after-tax (Roth) basis. The 401(k) plan permits us to make discretionary matching contributions to eligible participants, and we have made discretionary matching contributions in recent years. The 401(k) plan is intended to qualify under Sections 401(a) and 501(a) of the Code. As a tax-qualified retirement plan, pre-tax contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and earnings on Roth contributions are not taxable when distributed from the 401(k) plan. | | | | | | | | | |
| Scott Keeney | Joseph Corso | |
Base Salary ($) | $ | 657,000 | | $ | 300,000 | | |
| | | |
Stock Awards ($) | 4,934,803 | | 1,808,307 | | |
| | | |
280G Reduction in Severance Benefits ($) | — | | — | | |
Total ($) | $ | 5,623,679 | | $ | 2,129,557 | | |
Securities Authorized for Issuance under Equity Compensation Plans
The following table summarizes our equity compensation plan information as of December 31, 2018.2022.
| | Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (2) | Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (2) |
Equity compensation plans approved by stockholders: | | Equity compensation plans approved by stockholders: | |
2001 Stock Option Plan | 5,171,497 |
| $1.60 | — |
| 2001 Stock Option Plan | 1,827,279 | | $1.03 | — | |
2018 Equity Incentive Plan | 671,950 |
| — |
| 2,917,740 |
| 2018 Equity Incentive Plan | 3,115,029 | | — | | 4,777,081 | |
2018 Employee Stock Purchase Plan | — |
| — |
| 857,879 |
| 2018 Employee Stock Purchase Plan | — | | — | | 3,534,997 | |
Equity compensation plans not approved by stockholders: | — |
| — |
| — |
| Equity compensation plans not approved by stockholders: | — | | — | | — | |
Total | 5,843,447 |
| | 3,775,619 |
| Total | 4,942,308 | | | 8,312,078 | |
| |
(1)
| The weighted average exercise price is calculated based solely on outstanding stock options. It does not take into account the shares of our common stock underlying restricted stock units, which have no exercise price. |
| |
(2)
| Our 2018 Equity Incentive Plan (the “2018 Plan”) provides that on the first day of each fiscal year beginning in fiscal 2019, the number of shares of common stock available for issuance thereunder is automatically increased by a number equal to the lesser of (i) 3,431,515 shares, (ii) 5% of the outstanding shares of our capital stock as of the last day of our immediately preceding fiscal year, or (iii) such other amount as our board of directors may determine. Our 2018 Employee Stock Purchase Plan (the “ESPP”) provides that on the first day of each fiscal year beginning in fiscal 2019, the number of shares of common stock available for issuance thereunder is automatically increased by a number equal to the lesser of (i) 857,879 shares, (ii) 2% of the outstanding shares of our capital stock on the first day of such fiscal year, or (iii) such other amount as our board of directors may determine. On January 1, 2019, the number of shares of common stock available for issuance under our 2018 Plan and our ESPP increased by 1,835,274 shares and 734,109 shares, respectively, pursuant to these provisions. These increases are not reflected in the table above. |
Insider Trading Policy
In connection with our initial public offering, we established an insider trading policy that prohibits, among other things, short sales, hedging of stock ownership positions and transactions involving derivative securities relating to our common stock.
Our insider trading policy permits our directors and certain employees, including our named executive officers, to adopt Rule 10b5-1 trading plans. Under our insider trading policy, Rule 10b5-1 trading plans may only be adopted during an open trading window and only when such individual does not otherwise possess material nonpublic information about our company. The first trade under a Rule 10b5-1 trading plan may not occur until the later of the termination of the next quarterly blackout period and 30 calendar days after the date the Rule 10b5-1 trading plan was adopted.
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| | | | | | | |
BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK |
The following table sets forth certain information with respect to the beneficial ownership of our capital stock as of March 31, 2019April 10, 2023 for:
•each beneficial owner of more than 5% of our common stock;
•each of our directors;
•each of our named executive officers; and
•all directors and executive officers as a group.
Applicable percentage ownership is based on 36,906,11745,794,309 shares of our common stock outstanding as of March 31, 2019.April 10, 2023. The holders of common stock have the right to one vote per share.
Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules take into account shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable on or before the 60th day after March 31, 2019.April 10, 2023. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for each person or entity listed in the table is c/o nLIGHT, Inc., 5408 NE 88th Street, Vancouver,4637 NW 18th Avenue, Camas, Washington 98665.98607.
| | | | | | | | |
| Beneficial Ownership |
Name of Beneficial Owner | Number of Shares (1) | % |
5% Stockholders: | | |
The Vanguard Group(2) | 4,452,611 | 9.7 | % |
JPMorgan Chase & Co.(3) | 3,348,081 | | 7.3 | % |
BlackRock, Inc.(4) | 3,112,438 | | 6.8 | % |
| | |
| | |
Directors and Named Executive Officers: | | |
Scott Keeney | 1,849,884 | 4.0 | % |
Douglas Carlisle(5) | 216,536 | * |
Joseph Corso | 148,208 | * |
Geoffrey Moore | 101,238 | * |
Raymond Link | 98,909 | * |
Bill Gossman | 95,974 | | * |
Gary Locke | 92,060 | | * |
Camille Nichols | 18,592 | | * |
Bandel Carano | 18,243 | | * |
Ran Bareket | — | | — | |
All current executive officers and directors as a group (9 people) | 2,639,644 | 5.6 | % |
* Represents beneficial ownership of less than one percent.
|
| | | | |
| Beneficial Ownership |
Name of Beneficial Owner | Number | % |
5% Stockholders: | | |
Entities affiliated with Mohr, Davidow Ventures(1) | 4,240,690 |
| 11.5 | % |
TimesSquare Capital Management, LLC(2) | 1,940,055 |
| 5.3 | % |
Clearbridge Investments, LLC(3) | 1,928,027 |
| 5.2 | % |
Directors and Named Executive Officers: | | |
Scott Keeney(4) | 1,313,607 |
| 3.4 | % |
Ran Bareket(5) | 62,190 |
| * |
|
Robert Martinsen(6) | 269,878 |
| * |
|
Bandel Carano | — |
| — |
|
Douglas Carlisle(7) | 228,955 |
| * |
|
Bill Gossman(8) | 62,000 |
| * |
|
Raymond Link(9) | 61,889 |
| * |
|
Gary Locke(10) | 33,395 |
| * |
|
Geoffrey Moore(11) | 59,384 |
| * |
|
David Osborne(12) | 133,827 |
| * |
|
All current executive officers and directors as a group (10 persons)(13) | 2,225,125 |
| 5.8 | % |
(1) Includes shares of common stock subject to restricted stocks awards and units that will vest and options that are exercisable within 60 days after April 10, 2023 as follows:
| | | | | | | | | | | |
Directors and Named Executive Officers: | Restricted Stock Awards | Restricted Stock Units | Number of Options |
Scott Keeney | 86,667 | | 38,884 | | 768,541 | |
Joseph Corso | — | | 20,832 | | — | |
Ran Bareket | — | | — | | — | |
Bandel Carano | — | | 5,899 | | — | |
Douglas Carlisle | — | | 5,899 | | — | |
Bill Gossman | — | | 5,899 | | 72,313 | |
Raymond Link | — | | 5,899 | | 8,000 | |
Gary Locke | — | | 5,899 | | 69,725 | |
Geoffrey Moore | — | | 5,899 | | 77,590 | |
Camille Nichols | — | | 5,899 | | — | |
All current executive officers and directors as a group (9 people) | 86,667 | 101,009 | 996,169 |
(2) Based solely on a Schedule 13G filed with the SEC by The Vanguard Group, Inc. on February 9, 2023. The Vanguard Group, Inc. has shared power to vote or direct to vote 29,017 shares of our common stock, sole power to dispose of or to direct the disposition of 4,387,605 shares of our common stock, and shared power to dispose or to direct the disposition of 65,006 shares of our common stock. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(3) Based solely on a Schedule 13G filed with the SEC by JPMorgan Chase & Co. on January 23, 2023. JPMorgan Chase & Co. has sole voting power with respect to 3,216,079 shares of our common stock and sole dispositive power with respect to 3,347,931 shares of our common stock. The address for JPMorgan Chase & Co. is 383 Madison Avenue, New York, NY 10017.
(4) Based solely on a Schedule 13G filed with the SEC by BlackRock, Inc. on February 1, 2023. BlackRock, Inc. has sole voting power with respect to 3,030,155 shares of our common stock and sole dispositive power with respect to 3,112,438 shares of our common stock held through BlackRock, Inc. and its subsidiaries BlackRock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Fund Advisors, BlackRock Asset Management Ireland Limited, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, and BlackRock Investment Management, LLC. The address for Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.
(5) Includes 28,646 shares held of record by the Douglas and Lauri Carlisle Family Partnership.
| |
* | Represents beneficial ownership of less than one percent (1%). |
| |
(1)
| Consists of 4,240,690 shares held of record by Mohr, Davidow Ventures VI, L.P., as nominee for Mohr, Davidow Ventures VI, L.P., MDV VI Leaders’ Fund, L.P., MDV Entrepreneurs’ Network Fund III (A), L.P., and MDV Entrepreneurs’ Network Fund III (B), L.P. Jonathan Feiber and Nancy Schoendorf are managing members of Sixth MDV Partners, L.L.C., the general partner of each fund listed previously. Each of Jonathan Feiber and Nancy Schoendorf, and Sixth MDV Partners, L.L.C. may be deemed to share voting and investment power over the shares held of record by Mohr, Davidow Ventures VI, L.P., as nominee for Mohr, Davidow Ventures VI, L.P., MDV VI Leaders’ Fund, L.P., MDV Entrepreneurs’ Network Fund III (A), L.P., and MDV Entrepreneurs’ Network Fund III (B). The address for each of these entities is c/o Mohr Davidow Ventures, 777 Mariners Island Boulevard, Suite 550, San Mateo, California 94404. |
| |
(2)
| Based solely on a Schedule 13G filed with the SEC by TimesSquare Capital Management, LLC on February 14, 2019. TimesSquare Capital Management, LLC has sole voting and dispositive power with respect to 1,940,055 shares of our common stock. The principal business office for TimesSquare Capital Management, LLC is 7 Times Square, 42nd Floor, New York, New York 10036. |
| |
(3)
| Based solely on a Schedule 13G filed with the SEC by Clearbridge Investments, LLC on February 14, 2019. Clearbridge Investments, LLC has sole voting power with respect to 1,848,367 shares of our common stock and sole dispositive power with respect to 1,928,027 shares of our common stock. The address for Clearbridge Investments, LLC is 620 8th Avenue, New York, New York 10018. |
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(4)
| Consists of 82,162 shares held of record, 20,000 shares subject to a restricted stock award, 40,000 shares subject to a performance-based stock award and 1,171,445 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019. |
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(5)
| Consists of 10,000 shares subject to a restricted stock award, 20,000 shares subject to a performance-based stock award and 32,190 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019. |
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(6)
| Consists of 12,500 shares subject to a restricted stock award, 12,500 shares subject to a performance-based stock award and 244,878 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019. |
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(7)
| Consists of 197,809 shares held of record by Mr. Carlisle and 28,646 shares held of record by the Douglas and Lauri Carlisle Family Partnership and 2,500 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. |
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(8)
| Consists of 1,187 shares held of record and 58,313 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019 and 2,500 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. |
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(9)
| Consists of 46,889 shares held of record, 12,500 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019 and 2,500 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. |
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(10)
| Consists of 391 shares held of record, 30,504 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019 and 2,500 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. |
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(11)
| Consists of 460 shares held of record, 56,424 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019 and 2,500 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. |
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(12)
| Consists of 3,103 shares held of record by Mr. Osborne and 128,224 shares held of record by the Osborne 2002 Living Trust and 2,500 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. Mr. Osborne is the trustee of the Osborne 2002 Living Trust and exercises sole voting and investment power over the shares held thereby. |
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(13)
| Consists of 603,871 shares beneficially owned by our current directors and executive officers, including 42,500 shares subject to restricted stock awards, 72,500 shares subject to performance-based stock awards, and 1,621,254 shares issuable pursuant to outstanding options to purchase our common stock which are exercisable within 60 days of March 31, 2019 and 15,000 shares of common stock issuable upon the vesting of restricted stock units within 60 days of March 31, 2019. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS |
The following is a summary of transactions since January 1, 20182022, to which we have been a party in which the amount involved exceeded $120,000 and in which any of our executive officers, directors, promoters or beneficial holders of more than 5% of our capital stock had or will have a direct or indirect material interest, other than compensation arrangements which are described under the section of this proxy statement captioned “Executive Compensation.”
Policies and Procedures for Transactions with Related Persons
We have a formal, written policy that our executive officers, directors (including director nominees), holders of more than 5% of any class of our voting securities and any member of the immediate family of or any entities affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the approval or, in the case of pending or ongoing related party transactions, ratification of our audit committee. For purposes of our policy, a related party transaction is a transaction, arrangement or relationship where we were, are or will be involved and in which a related party had, has or will have a direct or indirect material interest.
The audit committee of our board of directors has the primary responsibility for reviewing and approving transactions with related parties. Our audit committee charter provides that the audit committee shall review and approve any related party transactions. In reviewing proposed related party transactions, the audit committee will only approve or ratify related party transactions that are in, or not inconsistent with, the best interests of us and our stockholders.
Certain of the transactions described below were consummated prior to our adoption of the formal, written policy which became effective upon the closing of our initial public offering, and therefore the foregoing policies and procedures were not followed with respect to these transactions. However, we believe that the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
Investors’ Rights Agreement
We have entered into an investors' rights agreement with certain of our stockholders, including the stockholders with which certain of our directors are affiliated. As of March 31, 2019 the holders of 4,240,690 shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act.
Voting Agreement
Prior to our initial public offering, the election of the members of the board of directors was governed by a voting agreement with certain of the holders of our outstanding capital stock, including entities with which certain of our directors are affiliated. Upon the completion of our initial public offering, the obligations of the parties to the voting agreement terminated, and none of our stockholders have any special rights regarding the nomination, election or designation of members of the board of directors or the voting of our capital stock.
Transactions
Other Transactions
We have entered into separate indemnification agreements with each of our directors and certain of our officers. For a description of these agreements, see the section titled "Certain“Certain Relationships and Related Party Transactions—Limitation ofLimitations on Director and Officer Liability and Indemnification."”
We have entered into employment arrangements with our executive officers that, among other things, provide for certain severance and change in control benefits. For a description of these arrangements, see the section titled "Executive“Executive Compensation—Employment Arrangements."”
We have granted stock options, restricted stock awardsRSAs and RSUs to our executive officers and certain of our directors. See the sections titled "Executive“Executive Compensation—Non-Equity Incentive Plan Compensation," "ExecutiveGrants of Plan-Based Awards in Fiscal Year 2022,” “Executive Compensation—Outstanding Equity Awards at December 31, 2018,"2022,” and "Board“Board of Directors and Corporate Governance-DirectorGovernance—Director Compensation for Fiscal Year 2018."2022.”
Limitations on Director and Officer Liability and Indemnification
Our certificate of incorporation and bylaws provide the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law.Law (the "DGCL"). In addition, theour certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director and that if the Delaware General Corporation LawDGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law,DGCL, as so amended.
As permitted by the Delaware General Corporation Law,DGCL, we have entered into separate indemnification agreements with each of our directors and certain of our officers that require us, among other things, to indemnify them against certain liabilities which may arise by reason of their status as directors, officers or certain other employees. We maintain insurance policies under which our directors and officers are insured, within the limits and subject to the limitations of those policies, against certain expenses in connection with the defense of, and certain liabilities that might be imposed as a result of, actions, suits or proceedings to which they are parties by reason of being or having been directors or officers. The coverage provided by these policies may apply whether or not we would have the power to indemnify such person against such liability under the provisions of the Delaware General Corporation Law.DGCL.
We believe that these provisions and agreements are necessary to attract and retain qualified persons as our officers and directors. At present, there is no pending litigation or proceeding involving our directors or officers for whom indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Third Party Compensation of Directors
None of our directors are party to any agreement or arrangement that would require disclosure pursuant to Rule 5250(b)(3) of The Nasdaq Global Stock Market.
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OTHER MATTERSDELINQUENT SECTION 16(a) REPORTS |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors and beneficial owners of greaterpersons who own more than ten percent10% of our common stock (the “Reporting Persons”) to file reports of holdingsownership and transactionschanges in our common stockownership with the SEC.
Based solely on our review of such reports filed electronically with the copies of such forms furnished to usSEC by the reporting persons, and written representations from certain reporting persons, we believe that all Section 16(a) filing requirements applicable to our executive officers, directors and 10% stockholders were met during our fiscal year ended December 31, 2018.2022, and prior fiscal years (unless previously disclosed), except that Messrs. Carano, Carlisle, Gossman, Locke and Moore and Ms. Nichols each did not timely file one Form 4 reporting the acquisition of RSUs upon the election to receive such RSUs in lieu of cash retainer fees payable for service on our board of directors in January 2022 (each filed January 6, 2022) and Mr. Bareket, our former chief financial officer, did not timely file one Form 4 reporting the forfeiture of performance-based RSAs and time-based RSAs pursuant to the terms
of that certain Transition Agreement and Release, dated as of January 18, 2022, in January 2022 (filed March 2, 2022). These late Form 4 filings were the result of inadvertent administrative error.
Fiscal Year 20182022 Annual Report and SEC Filings
Our financial statements for our fiscal year ended December 31, 20182022, are included in our Annual Report on Form 10-K, which we will make available to stockholders at the same time as this proxy statement. This proxy statement and our annual report are posted on our website at http://investors.nlight.net/IR and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual report without charge by sending a written request to nLIGHT, Inc., Attention: Investor Relations, 5408 NE 88th Street, Building E, Vancouver,4637 NW 18th Avenue, Camas, Washington 98665.98607.
* * *
The board of directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the shares of our common stock they represent in accordance with their own judgment on such matters.
It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.
THE BOARD OF DIRECTORS
Vancouver,
Camas, Washington
April 24, 201928, 2023
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APPENDIX A |
Reconciliation of Net Loss to Adjusted EBITDA |
| | | | | |
| Six Months Ended June 30, 2022 | | Six Months Ended Dec 31, 2022 | | Year Ended Dec 31, 2022 |
Net loss | $ | (18,965) | | | $ | (35,614) | | | $ | (54,579) | |
Income tax expense (benefit) | 333 | | | 11 | | | 344 | |
Other income, net | 77 | | | (415) | | | (338) | |
Interest (income) expense, net | (71) | | | (458) | | | (529) | |
Depreciation and amortization | 7,543 | | | 8,156 | | | 15,699 | |
Stock-based compensation | 13,233 | | | 13,524 | | | 26,757 | |
Restructuring charges | — | | | 3,892 | | | 3,892 | |
Adjusted EBITDA | $ | 2,150 | | | $ | (10,904) | | | $ | (8,754) | |