(Amendment (Amendment No. )
| ¨ | Preliminary Proxy Statement | |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2) | |
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| x | Definitive Proxy Statement | |
| ¨ | Definitive Additional Materials | |
| ¨ | Soliciting Material under | |
| x | No fee required. | |||
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
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(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
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| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
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5, 2019
26, 2019
| 1. | To elect the |
| 2. | To ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm for Penumbra for the fiscal year ending December 31, |
| 3. | To |
| 5. | To conduct any other business properly brought before the Annual Meeting. |
If you have any questions or need assistance in voting your shares, please call the following firm, which is assisting the Company in the solicitation of proxies:
Morrow & Co., LLC
470 West Avenue
Stamford, CT 06902
1-800-607-0088
Robert D. Evans
Table of Contents9922233034394040Appendix A—Penumbra, Inc. Amended and Restated 2014 Equity Incentive PlanA-1
One Penumbra Place
26, 2019.
Will I receive any other proxy materials by mail?
We may send you a proxy card, along with a second Proxy Availability Notice, by mail on or after May 16, 2016.
identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts or by a bank or other nominee may be required to show a brokerage statement or account statement reflecting stock ownership as of the Record Date. Cameras, recording devices, and other electronic devices will not be permitted at the Annual Meeting.
the Company’s independent registered public accounting firm, and “For” the advisory approval of compensation of the Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other NomineeIf you are a beneficial owner of shares registered in the name of your broker, bank, or other nominee, you should have received a Proxy Availability Notice containing voting instructions from that organization rather than from Penumbra. Simply follow the voting instructions in the Proxy Availability Notice to ensure that your vote is counted. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other nominee. Follow the instructions from your broker, bank or other nominee included with these proxy materials, or contact your broker, bank or other nominee to request a proxy form.How many votes do I have?On each matter to be voted upon, you have one vote for each share of common stock you own as of April 15, 2016,16, 2019, the Record Date.What if I return a proxy card or otherwise vote but do not make specific choices?If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of bothall nominees for director, “For” the ratification of Deloitte as2014 Equity Incentive Plan.Named Executive Officers. If any other matter is properly presented at the Annual Meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.3Will my vote be kept confidential?Proxies, ballots and voting tabulations are handled on a confidential basis to protect your voting privacy. This information will not be disclosed, except as required by law.Who is paying for this proxy solicitation?The accompanying proxy is solicited on behalf of the Board for use at the Annual Meeting. Accordingly, the Company will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees and Morrow & Co., LLC may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees of the Company will not be paid any additional compensation for soliciting proxies, but Morrow & Co., LLC will be paid its customary fee of approximately $6,500 plus out-of-pocket expenses if it solicits proxies. We may also reimburse brokerage firms, banks and other nominees for the cost of forwarding proxy materials to beneficial owners.Can I change my vote after submitting my proxy?Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:You may submit another properly completed proxy card with a later date.
stockholders must notify our Secretary by a written notice, which notice must be received at our principal executive offices not less than 120 days nor more than 150 days prior to the anniversary date of the immediately preceding year’s annual meeting of stockholders.
Named Executive Officers.
voting instructions and the broker, bank or other nominee lacks discretionary voting authority to vote the shares because the matter is considered “non-routine” under the NYSE rules. The “non-routine” matters on the agenda for the Annual Meeting include Proposa1Proposal No. 1—Election of Directors, and Proposal No. 3—RatificationAdvisory Vote on Compensation of the 2014 Equity Incentive Plan.
Named Executive Officers.
Proposal | Vote Required | Discretionary Voting Allowed? | ||
No. 1. Election of Directors | Plurality | No | ||
No. 2. Ratification of the Selection by the Board of the Company’s Independent Registered Public Accounting Firm | Majority Cast | Yes | ||
No. 3. | Named Executive Officers | Majority Cast | No | |
If you have any questions or need assistance in voting your shares, please call the following firm, which is assisting the Company in the solicitation of proxies:
Morrow & Co., LLC
470 West Avenue
Stamford, CT 06902
1-800-607-0088
JOBS Act Explanatory Note
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act).
For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies but not to “emerging growth companies,” including, but not limited to:
We could be an emerging growth company until the last day of the fiscal year following September 23, 2020, the fifth anniversary of the closing of our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur at the end of the fiscal year during which the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. Under Section 107(b) of the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Because we have elected to take advantage of certain reduced disclosure obligations and may elect to take advantage of other reduced reporting requirements in future filings, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
and Persons Chosen to Become Director Name Nominees Continuing Directors the University of Washington. commercialization.7INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPONThe Board of Directors knows of no matters to come before the Annual Meeting other than the matters referred to in this Proxy Statement. However, if any other matters should properly come before the meeting, the persons named in the enclosed proxy intend to vote in accordance with their best judgment. No director, nominee for election as director, or executive officer of Penumbra has any special interest in any matter to be voted upon other than election to the Board of Directors.PROPOSAL NO. 1: ELECTION OF DIRECTORSThe Company’s Board of Directors is presently comprised of sixseven members, who are divided into three classes, designated as Class I, Class II and Class III. One class of directors is elected by the stockholders at each annual meeting to serve from the time of their election until the third annual meeting of stockholders following their election. Class I directors consist of Don Kassing, Thomas Wilder, and Kevin Sullivan;Janet Leeds; Class II directors consist of Arani Bose, M.D., and Walter Wang;Bridget O’Rourke; and Class III directors consist of Adam Elsesser and Harpreet Grewal.The Nominating & Corporate Governance Committee of the Board (the NCG Committee) has renominated each of our Class I directors, Messrs. Kassing and Sullivan,Wilder, and Ms. Leeds, as nominees for a three-year term expiring at the 20192022 annual meeting of stockholders and until their respective successors are duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. Each of Mr.Messrs. Kassing and Mr. SullivanWilder and Ms. Leeds is currently a director of the Company. Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. The twothree nominees receiving the highest number of affirmative votes will be elected.Proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.Proxy Statement. If any nominee should become unavailable to serve for any reason, it is intended that votes will be cast for a substitute nominee designated by the NCG Committee and approved by the Board. We have no reason to believe that any nominee namedMr. Kassing, Mr. Wilder, or Ms. Leeds will be unable to serve if elected.8Nominees for Director, and Continuing Directors,The names and ages of the nominees andfor director, continuing directors, and persons chosen to become director, and their occupation(s), length of service with the Company and Board committee memberships are set forth in the table below.Age Director Since Current Term Expires Occupation Independent AC CC NCG EC Don Kassing(1)Kassing(1)7476 February 2008 20162022 Annual MeetingPresident Emeritus, San
Jose State UniversityYes M, F M C M Thomas Wilder 55 January 2017 2022 Annual Meeting Chief Executive Officer, Neuros Medical, Inc. Yes M, F C M CM Kevin Sullivan57 74January 2019February 201620162022 Annual MeetingPrivate investor;Former humanresources executiveAdministrative Director, Seattle Cancer Care Alliance Yes — — — M— Adam Elsesser(2)5457 June 2004 20182020 Annual MeetingChief Innovator, Penumbra No — — — — Bridget O’Rourke 51 April 2017 2020 Annual Meeting Former human resources executiveYes M, F M M — Adam Elsesser(2)57 June 2004 2021 Annual Meeting Chief Executive
Officer and President,
PenumbraNo — — — C Harpreet Grewal 52 April 2015 2021 Annual Meeting Former General Manager/Chief Financial Officer, Constant Contact, Inc. Yes C, F M M — Appointed to the Board Effective July 1, 2019 — — CArani Bose, M.D.33 54n/aJune 20042017Appointed as a Class II director with a term expiring at the 2020 Annual MeetingChief Innovator,PenumbraNo— — — — Walter Wang48January 20152017 Annual MeetingCEO Orlucent, Inc.and Founder, nVision Medical Corp Yes MC— — MHarpreet Grewal49April 20152018 Annual MeetingGeneral Manager,Constant Contact, Inc.YesC, FMM— — AC: Audit Committee EC: Executive Committee F: Financial Expert CC: Compensation Committee C: Chair NCG: Nominating &and Corporate Governance CommitteeM: Member (1)Presiding Director(2)Chair of the Board(1) Presiding Director(2) Chair of the BoardA brief biography of each nominee for director, continuing director and each continuingperson chosen to become director is also set forth below, which includes information, as of the date of this Proxy Statement, regarding specific and particular experience, qualifications, attributes or skills of each nominee that led the NCG Committee to believe that the director should continue to serve on the Board:Director NomineesDon Kassinghas served on the Board since February 2008 and as Presiding Director of the Board since August 2015. Mr. Kassing is President Emeritus of San Jose State University. Mr. Kassing served as President of San Jose State University from 2004 to 2008, Interim President from 2010 to 2011, and Vice President, Administration and Finance and Chief Financial Officer from 1993 to 2004. Prior to his tenure at San Jose State University, Mr. Kassing spent 18 years in higher education and 11 years in private industry, including eight years in merchandising/marketing and operations management at Caleres, Inc. (formerly known as the Brown Group, Inc.), a leading footwear retailer and wholesaler, and spent 3 years in corporate finance at the General Motors Corporation. Mr. Kassing received a B.A. and an M.B.A. from Saint Louis University.The Board has nominated Mr. Kassing based on his extensive business and leadership experience, including valuable skills related to strategic planning, based on his long tenure leading a major educational institution, including overseeing the development and construction of two high-profile campus facilities and having primary responsibility for university business and financial affairs.Kevin Sullivan9Janet Leeds has served on the Board since February 2016. Mr. SullivanJanuary 2019. Ms. Leeds has held a number of senior executiveleadership and leadership positionsconsulting roles in academic healthcare settings over more than thirty years. Currently, Ms. Leeds serves as an Administrative Director at the Seattle Cancer Care Alliance (SCCA), a cancer center comprising Fred Hutchinson Cancer Research Center, Seattle Children’s Hospital and has deep experience across multiple industries and across a combination of mature and high growth companies. Since his retirement in 1999, Mr. Sullivan has been a private investor in Angel Forum (1999-present) and Nucleus Partners (2001-2013).UW Medicine. From 1987 until his retirement in 1999, Mr. Sullivan2005 to 2009, Ms. Leeds served as a senior human resources executive.the Administrator for the Fred Hutchinson/University of Washington Cancer Consortium. From 19972000 to 1999, Mr. Sullivan was an Executive Vice-President2005, Ms. Leeds served as the Director of Planning at Wells Fargothe Fred Hutchinson Cancer Research Center. From 1996 to 2000, Ms. Leeds served in various positions that were instrumental to the formation and Company.development of the SCCA. Prior to Wells Fargo, Mr. Sullivan was an Executive Consultant at Watson-Wyatt Worldwide and before that, he was Senior Vice President—Human Resources at Apple Computer Company. Priorfrom 1987 to joining Apple, from 1976 to 1987, Mr. Sullivan1995, Ms. Leeds held various personnel management consultant positions of increasing responsibility at Digital Equipment Corporation. Mr. SullivanECG Management Consultants, where she primarily consulted with academic medical centers. Ms. Leeds received a B.A. from ColumbiaStanford University and an M.A.M.B.A. from Wesleyan University.The Board has nominated Ms. Leeds based on her strong healthcare background with extensive experience in organizational development and governance.Thomas Wilder has served on the Board since January 2017. Since August 2017, Mr. Wilder has served as the Chief Executive Officer of Neuros Medical, Inc., a neuro-modulation company. From February 2010 through July 2016, Mr. Wilder served as the Chief Executive Officer of Sequent Medical, Inc., a company dedicated to the development of innovative catheter-based neurovascular technologies. From April 2006 to 2009, Mr. Wilder served as the President and CEO of PhotoThera, Inc., a company that was developing a unique therapy for acute ischemic stroke patients. From 2002 to 2006, he served as the President and CEO of MicroTherapeutics, Inc. (MTIX), a company also focused on the neurovascular space. Mr. Wilder served in positions of increasing responsibility at Medtronic, Inc. from 1991 through 2002, most recently as Vice President and General Manager of its endovascular stent grafts division. Mr. Wilder began his career in the Financial Statement Audit Practice of Price Waterhouse (now known as PricewaterhouseCoopers), where he worked from 1986 to 1989. He received a B.A. from Stanford University and an M.B.A. from Northwestern University’s Kellogg Graduate School of Management and currently serves on the Board of Directors of Endologix, Inc. (ELGX).The Board has nominated Mr. SullivanWilder based on his valuable experience based on his tenure as Chief Executive Officer at several medical device companies, as well as his tenure as a financial executive at a large medical device company.Continuing DirectorsArani Bose, M.D.,co-founded Penumbra in June 2004 and has served as a member of the Board since our inception. Dr. Bose was Chairman of the Board and Chief Medical Officer from 2005 until 2015 and currently serves as Chief Innovator. Prior to founding Penumbra, Dr. Bose was an Assistant Professor of Radiology and Neurology at New York University (NYU) School of Medicine from 1997 to 2004, where he also had a clinical practice. While at NYU, Dr. Bose co-founded SMART Therapeutics. Dr. Bose received a B.A. from Stanford University and an M.D. from the University of Colorado School of Medicine with residency and fellowships at Yale University School of Medicine and NYU Medical Center.Dr. Bose brings to the Board his extensive knowledge of the Company and the medical device industry, his training and expertise in interventional radiology and neurology, and his skills and experience in analyzing, investing inclinical research and advising medical device development and emerging growth companies and his strong human resources background.Continuing DirectorsAdam Elsesser co-founded Penumbra and has served as Chief Executive Officer and a member of the Board since our inception in June 2004 and as President and Chairman of the Board since January 2015. Prior to Penumbra, Mr. Elsesser led SMART Therapeutics, Inc., a medical device company focused on devices for neuro-intervention, as its Chief Executive Officer from 2000 to 2002 and, after its acquisition by Boston Scientific Corporation, President of SMART Therapeutics within Boston Scientific Corporation from 2002 to 2005. Before his work in the medical device industry, Mr. Elsesser was a partner in the law firm of Shartsis Friese LLP. Mr. Elsesser received a B.A. from Stanford University and a J.D. from Hastings College of the Law.Mr. Elsesser brings to the Board his extensive knowledge of the Company, the medical device industry and the competitive landscape, as well as his expertise in building and leading successfulcommercializing medical device companies and commercializing devices.Arani Bose, M.D., co-founded Penumbra in June 2004 and has served as a member of the Board since our inception. Dr. Bose was Chairman of the Board and Chief Medical Officer from 2005 until 2015 and currently serves as Chief Innovator. Prior to founding Penumbra, Dr. Bose was an Assistant Professor of Radiology andNeurology at New York University (NYU) School of Medicine from 1997 to 2004, where he also had a clinical practice. While at NYU, Dr. Bose co-founded SMART Therapeutics. Dr. Bose received a B.A. from StanfordUniversity and an M.D. from the University of Colorado School of Medicine with residency and fellowships at Yale University School of Medicine and NYU Medical Center.Dr. Bose brings to the Board his extensive knowledge of the Company and the medical device industry, as well as his training and expertise in interventional radiology and neurology and his skills and experience in clinical research and device development and commercialization.Walter Wanghas served on the Board since January 2015. Mr. Wang has served as the Chief Executive Officer of Orlucent, Inc., an early stage diagnostics company, since 2012. From 1999 to the present, Mr. Wang has researched, advised and invested in medical device, financial and technology start-up companies through Wang Ventures, LLC, a family investment partnership and other related entities. In addition, Mr. Wang invests, develops and manages real estate through W5 Investments, a real estate company. Mr. Wang began his career in 1989 with U-Jin Enterprises, Inc., a food processing and import/export company. Mr. Wang received a B.S. from the University of Southern California.Mr. Wang brings to the Board his extensive experience in emerging growth companies, particularly in healthcare.10Harpreet Grewal has served on the Board since April 2015. Since November 2015,August 2017, Mr. Grewal has been an advisor to a number of technology companies. From February 2016 through April 2017, Mr. Grewal served as General Manager of Constant Contact, Inc. (Constant Contact), a technology company primarily focused on marketing tools and a wholly-owned indirect subsidiary of Endurance International Group Holdings, Inc. (Endurance). Prior to the acquisition of Constant Contact by Endurance, from 2010 to November 2015,February 2016, Mr. Grewal served as Executive Vice President and Chief Financial Officer of Constant Contact. From 2008 to 2009, Mr. Grewal worked as an independent consultant to small businesses and early-stage entrepreneurs. From 2006 through 2008, Mr. Grewal was Executive Vice President and Chief Financial Officer of VistaPrint, Ltd., a publicly-traded online printing and marketing services company. Prior to VistaPrint, Mr. Grewal was Senior Vice President and Chief Financial Officer of GoldenSource Corporation, a data management company, from 2002 to 2006, Chief Financial Officer of eGain Communications Corporation, a customer engagement services company, from 1999 to 2002, and held various financial and strategic planning positions with PepsiCo, Inc., a publicly-traded food and beverage company, from 1996 to 1999. Mr. Grewal received a B.A. from the University of California, Berkeley and a M.A. from Johns Hopkins University.Mr. Grewal brings to the Board his extensive business and leadership experience, including financial expertise and strategic planning skills. Mr. Grewal also brings to the Board valuable experience based on his tenure as General Manager of Constant Contact and Chief Financial Officer at several publicly-traded high growth companies.Bridget O’Rourke has served on the Board since April 2017. Ms. O’Rourke has held a number of executive and leadership positions over more than twenty years, with expertise across different industries. Most recently, Ms. O’Rourke served as Executive Director of the executive search and consulting practice of O’Rourke & Associates, a boutique firm providing services exclusively for the credit union industry, until May 2017. From August 2008 to June 2016, Ms. O’Rourke was Head of Human Resources at Passport Capital, LLC, a global asset management firm. Prior to Passport Capital, LLC, from 1997 to 2007 Ms. O’Rourke served in various positions in the financial services and executive search industries, including as Executive Search Director at O’Rourke Career Connections, Controller at Sigma Partners, a multi-fund venture capital firm, and Vice President for Citibank Global Asset Management’s Alternative Investment Strategies group. From July 1991 to December 1996, Ms. O’Rourke held audit and internal audit consulting positions of increasing responsibility at Coopers & Lybrand (now known as PricewaterhouseCoopers). Ms. O’Rourke received a B.A. from the University of California, Santa Barbara and became a Certified Public Accountant in 1995. She currently serves on the Board of Directors of the San Francisco Fire Credit Union.Ms. O’Rourke brings to the Board her extensive business and leadership experience, including valuable skills related to human resources management and financial accounting.Appointed to the Board Effective July 1, 2019Surbhi Sarna was appointed to the Board on January 21, 2019, with her appointment effective on July 1, 2019. Ms. Sarna is the CEO and founder of nVision Medical Corp (nVision), a healthcare company developing pioneering technology to enable early detection of ovarian cancer. Ms. Sarna founded nVision in 2011, with the intention of fulfilling an unmet clinical need. She has led the company from its inception and through its earliest days of product development, funding and initial clinical trials. In April 2018, nVision was acquired by Boston Scientific. Ms. Sarna now leads the efforts to commercialize the technology developed by nVision at Boston Scientific. Prior to her founding of nVision, Ms. Sarna held a variety of roles in healthcare, including roles at BioCardia and Abbott Vascular. Ms. Sarna received a B.A. from the University of California, Berkeley.Ms. Sarna brings to the Board her valuable experience based on her tenure as Chief Executive Officer of a pioneering medical device company.THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.11INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCEThis section describes key corporate governance guidelines and practices that we have adopted. Complete copies of our Corporate Governance Guidelines, the charters of the committees of the Board and our Code of Business Conduct and Ethics, described below, can be found in the Governance—Corporate Governance section of the Investors section of our website at www.penumbrainc.com. Alternatively, you can request a copy of any of these documents free of charge by writing to: Robert D. Evans,Johanna Roberts, Executive Vice President, General Counsel and Secretary, c/o Penumbra, Inc., One Penumbra Place, Alameda, CA 94502. Information on our website is not incorporated by reference in this Proxy Statement.BOARD COMPOSITIONOur Board currently consists of sixseven members. In accordance with our Restated Certificate of Incorporation and our Bylaws, our Board is divided into three classes with staggered terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. The authorized number of directors may be changed by resolution of the Board. Our directors are divided among the three classes as follows:Class I directors consist of Don Kassing, Janet Leeds, and Kevin Sullivan,Thomas Wilder, whose terms expire at the Annual Meeting;Meeting;
believe that a combined Chief Executive Officer and Chair is better positioned to act as a bridge between management and the Board, maintaining the regular flow of information. The Board believes that the current board leadership structure, coupled with a strong emphasis on board independence, provides effective independent oversight of management while allowing the Board and management to benefit from Mr. Elsesser’s demonstrated senior leadership skills, expertise from years of experience in the medical device industry, and his experience and familiarity with our business as co-founder and Chief Executive Officer. Our Independent Directors bring experience, oversight and expertise from outside of our Company, while Mr. Elsesser brings company-specific experience and expertise.
director or committee member. The Company’s directors are encouraged to attend our annual meetings of stockholders, but we do not currently have a policy relating to director attendance. We did not hold a 2015 annual meetingOne of stockholders because we were not a publicly-traded company prior to September 2015.
the six directors serving at the time of the 2018 Annual Meeting of Stockholders attended that meeting.
2019.
Walter Wang
Committee meet the independence requirements under SEC rules and NYSE listing standards. During 2015, the Compensation Committee met three times and took action by written consent on one occasion.
listing standards.
In
advisor.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||
| (a) | (b) | (c) | |||||||
| Equity compensation plans approved by stockholders | 1,830,378 | (1) | $16.83 | (3) | 10,204,708 | (4) | |||
| Equity compensation plans not approved by stockholders | 145,000 | $7.75 | (3) | — | |||||
Total(2) | 1,975,378 | $16.17 | (3) | 10,204,708 | |||||
| (1) | Amount does not include any shares of common stock issuable under the Penumbra, Inc. Employee Stock Purchase Plan (the ESPP). The Company issues shares under the ESPP once every six months based on employee elections in the preceding six months. Pursuant to the terms of the ESPP, the number of shares to be issued and the price per share is not determined until immediately before the date of issuance. |
| (2) | As of December 31, 2018, the weighted average remaining term of the 1,688,881 options outstanding was 5.9 years. |
| (3) | Excludes restricted stock units, which have no exercise price. |
| (4) | The number of shares available for issuance under the Amended and Restated Penumbra, Inc. 2014 Equity Incentive Plan increases automatically on the first day of each fiscal year of the Company beginning with the 2016 fiscal year and ending with the 2025 fiscal year, in an amount equal to the least of (i) 2,500,000 shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Board, to the extent allowed by Section 422 of the Internal Revenue Code (the Code), and the regulations promulgated thereunder. |
the independence requirements under SEC rules and NYSE listing standards.
intends or is part of a group that intends to (i) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the voting power of the Company’s outstanding capital stock required to approve or adopt the proposal or to elect each such nominee and/or (ii) otherwise to solicit proxies from stockholders in support of such proposal or nomination; (7) any other information relating to such stockholder, beneficial owner, if any, or director nominee or proposed business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies in support of such nominee or proposal pursuant to Section 14 of the Exchange Act; and (8) such other information relating to any proposed item of business as the Company may reasonably require to determine whether such proposed item of business is a proper matter for stockholder action. Stockholder recommendations should be addressed to the NCG
Both
2018.
One Penumbra Place, Alameda, CA 94502, c/o Robert D. Evans,Johanna Roberts, Executive Vice President, General Counsel and Secretary. All communications received by Mr. EvansMs. Roberts will be sent directly to the Board or any particular director.
Board. The Board believes these stock ownership guidelines are an important tool in aligning the interests of our directors with the long-term interests of our stockholders. As
We do not have specific equity or other security ownership requirements or guidelines for executive officers. However, given management’s significant equity stakeour Chief Executive Officer. These requirements are discussed in the Company, we do not believe ownership guidelines are needed at this time.
greater detail under
Executive Compensation.Director Position | Annual Cash Compensation(1) | |||
All Independent Directors(2) | $ | 25,000 | ||
Audit Committee Chair | $ | 25,000 | ||
| Director Position | Annual Cash Compensation(1)(2) | ||
| All Non-Employee Directors | $ | 40,000 | |
| Audit Committee Chair | $ | 25,000 | |
| (1) | The annual cash compensation that the Company pays to its Board members, other than Mr. Elsesser and Dr. Bose, is based on their positions on the Board, and the Company does not compensate the Board members on a per meeting basis. The amounts reflected in the table above were approved by the Board in |
| (2) |
The annual cash compensation is payable in quarterly installments on or about the last day of each calendar quarter. In 2015, one half of the fee was payable immediately upon approval by the Board in August 2015, with the balance payable in quarterly installments on or about the last day of
Each Independent Director is also grantednon-employee directors was awarded an annual grant of 2,000 shares of restricted stock or restricted stock units1,215 RSUs under the Penumbra, Inc. 2014 Equity Incentive Plan, which vestsvested in quarterlyfour equal installments on the last day of each calendar quarter subject to each such director’s continued service on the Board through the vesting date. These amounts were approved by the Board in August 2015. These equity awards continue to vest only while the Independent Director serves on the Board.
In 2015, 2,000 shares of restricted stock were awarded to each of the Independent Directors (other than Mr. Sullivan) under the Penumbra, Inc. 2014 Equity Incentive Plan, effective immediately prior to the closing of our IPO (the Effective Time), which vested one half at the Effective Time and one quarter on the last day of each of the third and fourth quarters of 2015.2018 starting March 31, 2018. The following table lists actual compensation paid to each of the non-employee directors during 2015 other than (i) Mr. Sullivan, who2018. Ms. Leeds joined the Board in February 2016, (ii)January 2019 and did not receive any compensation in 2018. Mr. Elsesser who is also an NEO, and (iii) Dr. Bose, who is an executive officer, other than an NEO, and doeseach of whom are also NEOs, do not receive any additional compensation for services provided as a director.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (4) | Total ($) | |||||||||
Walter Wang | 25,000 | (1) | $ | 83,340 | $ | 108,340 | ||||||
Don Kassing | 25,000 | (2) | $ | 83,340 | $ | 108,340 | ||||||
Harpreet Grewal | 50,000 | (3) | $ | 83,340 | $ | 133,340 | ||||||
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Total ($) |
| Harpreet Grewal | 65,000 | 119,921 | 184,921 |
| Don Kassing | 40,000 | 119,921 | 159,921 |
| Bridget O’Rourke | 40,000 | 119,921 | 159,921 |
| Thomas Wilder | 40,000 | 119,921 | 159,921 |
| (1) |
| (2) |
Description of Services Provided by Deloitte Audit Fees(1) Audit Related Fees(2) Tax Fees(3) All Other Fees TOTAL 22PROPOSAL NO. 2: RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR PENUMBRAOn April 4, 2016,1, 2019, the Board selected and approved of Deloitte & Touche LLP (Deloitte) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016.2019. Deloitte has served as our independent registered public accounting firm since September 17, 2008. Representatives of Deloitte plan to attend the Annual Meeting and will be available to answer appropriate questions from stockholders. They will have the opportunity to make a statement if they desire to do so.Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection of Deloitte as the Company’s independent registered public accounting firm. However, the Board is submitting the selection of Deloitte to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Board will reconsider whether or not to retain Deloitte. Even if the selection is ratified, the Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Board determines that such a change would be in the best interest of the Company and its stockholders.Independent Registered Public Accounting FirmThe following is a summary of the fees and services provided by Deloitte to the Company for fiscal years 20152017 and 2014: Fiscal Year Ended December 31, 2015 2014 $ 2,145,895 $ 581,000 $ 2,000 — $ 126,047 $ 87,283 — — $ 2,273,942 $ 668,283 Fiscal Year Ended December 31, Description of Services Provided by Deloitte 2018 2017 Audit Fees (1)$ 2,176,530 $ 2,332,839 Audit Related Fees - - Tax Fees (2)$ 143,830 $ 24,405 All Other Fees (3)- $ 3,200 TOTAL $ 2,320,360 $ 2,360,444 (1) Audit fees for Deloitte for 20152018 and 20142017 were for professional services rendered for the audits of our financial statements and of our internal controls over financial reporting, review of interim financial statements, assistance with registration statements filed with the SEC and services that are normally provided by Deloitte in connection with statutory and regulatory filings or engagements. Fees for the year ended December 31, 2015, included $1,050,500 billed in connection with the filing of our Registration Statements on Form S-1 in connection with our IPO.(2) Reflects fees paid in connection with our subscription to an accounting research tool provided by Deloitte.tax consulting and compliance services.(3) Reflects fees paid in connection with the preparation of tax returns.training provided by Deloitte.
COMPANY’S NAMED EXECUTIVE OFFICERS
The Board and our stockholders approved the 2014 Equity Incentive Plan in August 2015, prior
Under pertinent IRS regulations, grants made to “Covered Employees” (as defined in Section 162(m)an advisory and non-binding basis, the compensation of the Code) underCompany’s NEOs as disclosed in this Proxy Statement. This is commonly referred to as a Say-on-Pay proposal. This advisory vote is not intended to address any specific item of compensation, but rather the 2014 Equity Incentive Plan prior to the earlier of (i) the material modificationoverall compensation of the 2014 Equity Incentive Plan or (ii) our 2019Company’s NEOs and the philosophy, policies and practices described in this Proxy Statement. At the 2017 annual meeting of stockholders, (the Reliance Period) are notour stockholders expressed preference that we hold an advisory vote on named executive officer compensation each year. The Board affirmed the stockholders’ preference and will hold “Say-on-Pay” votes on an annual basis until the next required stockholder vote on “say-on-pay” frequency, which is scheduled to be held at the 2023 annual meeting of stockholders.
The Board believes that the ratification of the material provisions 2014 Equity Incentive Plan for purposes of Section 162(m) of the Codevote is in the best interest of our stockholders. We arenot asking for any additional shares under the 2014 Equity Incentive Plan or any other modification to the 2014 Equity Incentive Plan.
Summary of Material Features of the 2014 Equity Incentive Plan
Stock awards. The 2014 Equity Incentive Plan provides for the grant of incentive stock options (ISOs), nonstatutory stock options (NSOs), stock appreciation rights, restricted stock, restricted stock units, performance awards and other awards (collectively, Awards). ISOs may be granted only to employees of the Company or any parent or subsidiary of the Company. All other Awards may be granted to employees, directors and consultants. 207 employees, directors and consultants received awards under the 2014 Equity Incentive Plan in 2015.
Shares subject to the 2014 Equity Incentive Plan. The aggregate number of shares of our common stock initially reserved for issuance pursuant to Awards under the 2014 Equity Incentive Plan after our IPO was 3,000,000, plus up to 2,203,534 shares of common stock subject to stock options or similar awards previously granted under the Penumbra, Inc. 2005 Stock Plan (the 2005 Plan) and the Penumbra, Inc. 2011 Equity Incentive Plan (the 2011 Plan) that expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2005 Plan and the 2011 Plan that are forfeited to or repurchased by the Company. In addition, there were 1,911,709 outstanding awards under the 2014 Equity Incentive Plan at the time of our IPO. If an Award granted under the 2014 Equity Incentive Plan is forfeited back to us because of the failure to meet a contingency or condition required to vest, such shares will become available for subsequent issuance under the 2014 Equity Incentive Plan. In addition, shares withheld to satisfy income or employment withholding taxes and shares used to pay the exercise price of a stock option will become available for the grant of new Awards under the 2014 Equity Incentive Plan.
Automatic increase in share reserve.The number of shares available for issuance under the 2014 Equity Incentive Plan increases automatically on the first day of each fiscal year of the Company beginning with the 2016 fiscal year and ending with the 2025 fiscal year, in an amount equal to the least of (i) 2,500,000 shares,
(ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year or (iii) such number of shares determined by the Board, to the extent allowed by Section 422 of the Code, and the regulations promulgated thereunder. On January 1, 2016, the number of shares available for issuance under the 2014 Equity Incentive Plan automatically increased by 1,494,893 shares.
Section 162(m) Limits on Awards.The maximum number of shares with respect to which any Awards may be granted to any one participant in any calendar year is (a) 5,000,000 in the case of stock options and stock appreciation rights, (b) 2,000,000 in the case of stock-based performance awards, and (c) $10,000,000 in the case of cash-based performance Awards.
Limitations on Non-Employee Awards. No non-employee director may be granted, in any calendar year, (i) stock-based Awards with a grant date fair value of more than $1,000,000 (increased to $2,000,000 in connection with his or her initial year of service); and (ii) cash-based Awards with a grant date fair value of more than $1,000,000 (increased to $1,500,000 in connection with his or her initial year of service).
Administration. Our Board, or one or more duly authorized committees thereof, have the authority to administer the 2014 Equity Incentive Plan (in such capacity, the Committee). Subject to the terms of the 2014 Equity Incentive Plan, the Committee determines recipients, dates of grant, the numbers and types of Awards to be granted and the terms and conditions of the Awards, including the period of their exercisability and vesting schedule applicable to an Award. Subject to the limitations set forth below, the Committee will also determine the exercise price, strike price or purchase price of Awards granted and the types of consideration to be paid for the Award. The Committee has the authority to modify outstanding awards under the 2014 Equity Incentive Plan. Subject to the terms of the 2014 Equity Incentive Plan, the Committee has the authority to extend the post-termination exercisability period of option awards and to extend the maximum term of an option award. To the extent that the Committee determinesadvisory, it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the 2014 Equity Incentive Plan will be administered by a committee of two or more “outside directors” within the meaning of Section 162(m) of the Code.
Stock Options. ISOs and NSOs are granted pursuant to stock option agreements adopted by the Committee. The Committee determines the exercise price for a stock option, within the terms and conditions of the 2014 Equity Incentive Plan, provided that the exercise price of a stock option cannot be less than 100% of the fair market value of our common stock on the date of grant. In the case of an ISO granted to an employee who owns stock representing more than 10% of the voting power of all classes of our stock or any parent or subsidiary of us, the exercise price will be no less 110% of the fair market value on the date of the grant. Options vest at the rate specified by the Committee. At the time an option is granted, the Committee will fix the period within which the option may be exercised and will determine any conditions that must be satisfied before the option may be exercised. No ISOs may be issued more than ten years following the earlier of (i) the date of adoption or (ii) the most recent date of approval of the 2014 Equity Incentive Plan by the Company’s stockholders, except as permitted by Section 422 of the Code.
The Committee determines the term of stock options granted under the 2014 Equity Incentive Plan, up to a maximum of ten years. In the case of an ISO granted to an employee who owns stock representing more than 10% of the voting power of all classes of our stock or the stock of any of our parents or subsidiaries, the maximum term will be 5 years. Unless the terms of an option holder’s stock option agreement provide otherwise, if an option holder’s service relationship with us ceases for any reason other than disability or death, the option holder may generally exercise any vested options for a period of three months following the cessation of service or within such longer or shorter period of time as specified in the Award agreement. If an option holder’s service relationship with us ceases due to disability or death, the option holder or a beneficiary may generally exercise any vested options within six months following termination or within such longer or shorter period of time as is specified in the Award agreement. In no event may an option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the Committee and may include (i) cash, (ii) check, (iii) promissory note, (iv) other shares, (v) a broker-assisted cashless exercise, (vi) net exercise, (vii) such other consideration and method of payment for the issuance of shares to the extent permitted by applicable laws, or (viii) combination of the foregoing methods of payment.
Unless the Committee provides otherwise, options generally are not transferable except by will or by the laws of descent and distribution. An option holder may designate a beneficiary, however, who may exercise the option following the option holder’s death.
Stock Appreciation Rights. The 2014 Equity Incentive Plan permits the grant of stock appreciation rights. Stock appreciation rights give recipients the right to acquire a specified number of shares of stock at a predetermined price. The terms of any stock appreciation rights granted under the 2014 Equity Incentive Plan will be determined by the Committee in the Award agreement evidencing the Award, including the number of shares, exercise price, expiration date and other terms.
Restricted Stock and Restricted Stock Units. The 2014 Equity Incentive Plan permits the grant of restricted stock and/or restricted stock units. Restricted stock awards are grants of shares of our common stock. Restricted stock units represent the right to receive shares of our common stock (or a cash amount equal to the value of our common stock) on future specified dates. The terms of the restricted stock and/or restricted stock units granted under the 2014 Equity Incentive Plan are determined by the Committee in the Award agreement evidencing the Award, including the number of shares, period of restriction or vesting schedule, and other terms.
Performance Awards. The 2014 Equity Incentive Plan permits the grant of performance awards. Performance awards may be denominated as a cash amount, number of shares, or combination thereof, and may be earned upon achievement or satisfaction of performance conditions specified by the Committee, at its discretion, subject to the terms of the 2014 Equity Incentive Plan. The Committee may specify another award as a performance award by conditioning the right of a participant to exercise or have it settled upon achievement or satisfaction of such performance conditions as may be specified by the Committee.
If the Committee intends that a performance award be considered qualified performance-based compensation under Section 162(m) of the Code, such performance award will include a pre-established formula such that payment, retention or vesting of the award is subject to achievement of a level or levels of, or increases in, in each case as determined by the Committee, one or more of the following performance measures with respect to the Company: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); net earnings; earnings per share; net income or loss (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of share price; market share; gross profits; earnings or loss (including earnings or loss before taxes, before interest and taxes, or before earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; cash margin; year-end cash; debt reduction; shareholder equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; research and development achievements; manufacturing achievements (including obtaining particular yields from manufacturing runs and other measurable objectives related to process development activities); regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the Company or the Company’s third-party manufacturer) and validation of manufacturing processes (whether the Company’s or the Company’s third-party manufacturer’s)); financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other
capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); and implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel. Performance criteria may be measured on an absolute or relative basis and may be established on a corporate-wide basis or with respect to a business unit or division thereof. Relative performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. To the extent permitted by Section 162(m) of the Code, with respect to an award intended to qualify under Section 162(m) of the Code, the Award agreement may provide that if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or other events or circumstances render the performance objectives unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the committee deems appropriate and equitable.
Notwithstanding any provision of the 2014 Equity Incentive Plan to the contrary, with respect to any Award intended to qualify under Section 162(m) of the Code, the Committee is not authorized to increase the amount payable under any such Award upon attainment of such pre-established formula. Performance awards intended to qualify under Section 162(m) of the Code will be settled only after the end of the relevant performance period in cash, shares, other awards, other property, net settlement, or any combination thereof, in the discretion of the Committee. The Committee will specify the circumstances in which, and the extent to which, performance awards will be paid or forfeited in the event of a participant’s termination as a service provider.
Other Awards. The 2014 Equity Incentive Plan permits the grant of such other Awards, subject to limitations under applicable law, that may be denominated or payable in, valued in whole or in part by reference to, or otherwise basedbinding on or related to, shares or factors that may influence the value of shares, including convertible or exchangeable debt securities, other rights convertible or exchangeable into shares, purchase rights for shares, awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee. The Committee will determine the terms and conditions of such Awards. Such shares delivered pursuant to an Award in the nature of a purchase right will be purchased for such consideration, paid for at such times, by such methods and in such forms, including cash, shares, other awards, other property, or any combination thereof, as the Committee will determine.
Tax Limitations on Incentive Stock Options. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an option holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (i) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (2) the option is not exercisable after the expiration of five years from the date of grant. No ISO may be issued more than ten years following the earlier of (i) the date of adoption or (ii) the most recent date of approval of the 2014 Equity Incentive Plan by the Company’s stockholders, except as permitted by Section 422 of the Code.
Section 409A.With respect to Awards subject to Section 409A of the Code, the 2014 Equity Incentive Plan is intended to comply with the requirements of Section 409A of the Code and the regulations thereunder (Section 409A). In any provision of the 2014 Equity Incentive Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition will be interpreted and deemed amended so as to avoid this conflict.
Adjustments; Corporate Transactions. In the event of certain changes in our corporate structure, including any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, splitup, spinoff, combination, repurchase, or exchange of shares of the Company, the Committee will make appropriate adjustments to outstanding awards to prevent diminutionBoard or enlargementthe Compensation Committee of the benefitsBoard. Nevertheless, the views expressed by the stockholders, whether through this vote or potential benefits available underotherwise, are important to our management, the 2014 Equity Incentive Plan.
Merger or ChangeBoard and the Compensation Committee. Our management, Board and Compensation Committee all intend to consider the results of Control. In the event of certain corporate transactions specifiedthis vote in making determinations in the 2014 Equity Incentive Plan, including a merger or change of control, as defined in the 2014 Equity Incentive Plan, each outstanding Award will be treated as the Committee determines, without a participant’s consent, including that (i) the Awards will be continued by the Company or assumed or substituted by the succeeding corporation; (ii) the Awards will terminate; (iii) outstanding Awards will vest and become exercisable, (iv) the Awards will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of the Award or realization of the rights under the Award as of the date of the transaction, (v) the replacement of any Award with rights or property selected by the Committee or (vi) any combination of the above.
In the event that the Company does not continue,future regarding our executive compensation arrangements and the successor corporation does not assume or substituteCompany’s executive compensation program, policies and practices.
Amendment and Termination. The 2014 Equity Incentive Plan will continue in effect until terminatedshares cast by the Board. The Committee has the authorityholders of shares present in person or represented by proxy and entitled to amend or alter the 2014 Equity Incentive Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent.
Tax Aspects under the Code
The following is a summary of the principal federal income tax consequences of certain transactions under the 2014 Equity Incentive Plan. It does not describe all federal tax consequences under the 2014 Equity Incentive Plan, nor does it describe state or local tax consequences. Participants in the 2014 Equity Incentive Plan should review the current tax treatment with their individual tax advisorsvote at the time of grant, exercise or any other transaction relating to an Award or the underlying shares.
ISOs. No taxable income is generally realized by the optionee upon the grant or exercise of an ISO. If shares of common stock issued to an optionee pursuant to the exercise of an ISO are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (ii) the Company will not be entitled to any deduction for federal income tax purposes. The exercise of an ISO will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee. If shares of common stock acquired upon the exercise of an ISO are disposed of prior to the expiration of the two-year and one-year holding periods described above (a disqualifying disposition), generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock at exercise (or, if less, the amount realized on a sale of such shares of common stock) over the exercise price thereof and (ii) the Company will be entitled to deduct such amount. Special rules apply where all or a portion of the exercise price of the ISO is paid by tendering shares of common stock.
If an ISO is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as an NSO. Generally, an ISO will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.
NSOs. No income is realized by the optionee at the time the option is granted. Generally, (i) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares of common stock on the date of exercise, and the Company receives a tax deduction for the same amount and (ii) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held. Special rules apply where all or a portion of the exercise price of the NSO is paid by tendering shares of common stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.
Other Awards. The Company generally will be entitled to a tax deduction in connection with an Award under the 2014 Equity Incentive Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income. Participants typically are subject to income tax and recognize such tax at the time that an Award is exercised, vests or becomes non-forfeitable, unless the Award provides for a further deferral.
Parachute Payments. The vesting of any portion of an option or other Award that is accelerated due to the occurrence of a change in control (such as a sale event) may cause a portion of the payments with respect to such accelerated Awards to be treated as “parachute payments,” as defined in the Code. Any such parachute payments may be non-deductible to the Company, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).
Limitation on Deductions. Under Section 162(m) of the Code, the Company’s deduction for certain awards under the 2014 Equity Incentive Plan may be limited to the extent that the chief executive officer or other executive officer whose compensation is required to be reported in the summary compensation table (other than the principal financial officer) receives compensation in excess of $1 million a year (other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Code). The 2014 Equity Incentive Plan is structured to allow certain awards to qualify as performance-based compensation.
Stock Price
On April 21, 2016, the closing price of our common stock as reported by the NYSE was $54.40.
Plan Benefits
Because the grant of awards under the 2014 Equity Incentive Plan is within the discretion of the Board, or one or more duly authorized committee thereof, and dependent upon individual and corporate performance, among other factors, it is not possible to determine at this time the amount or dollar value to be received by a person or group under the 2014 Equity Incentive Plan.
Equity Compensation Plan Information
The following table provides certain information with respect to all of Penumbra’s equity compensation plans as of December 31, 2015.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
Equity compensation plans approved by stockholders(1) | 4,210,791 | $ | 13.16 | 2,452,533 | (3) | |||||||
Equity compensation plans not approved by stockholders | 394,125 | $ | 7.55 | |||||||||
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Total(2) | 4,604,916 | $ | 12.68 | 2,452,533 | ||||||||
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The Board believes that it is in the Company’s best interest and in the best interest of the Company’s stockholders to ratify the 2014 Equity Incentive Plan to allow the Company to continue to grant equity awards under this plan. The Company’s Named Executive Officers have an interest in this proposal as they are eligible to receive awards under the 2014 Equity Incentive Plan.
Annual Meeting.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Common Stock(1) | ||||||
5% stockholders | ||||||||
FMR LLC(2) | 3,827,591 | 12.5 | % | |||||
Directors and Named Executive Officers | ||||||||
Adam Elsesser(3) | 1,700,982 | 5.5 | % | |||||
Arani Bose, M.D.(4) | 1,545,662 | 5.0 | % | |||||
Don Kassing(5) | 18,500 | * | ||||||
Walter Wang(6) | 1,483,431 | 4.8 | % | |||||
Harpreet Grewal | 16,639 | * | ||||||
Kevin Sullivan | 28,949 | * | ||||||
Sri Kosaraju(7) | 539,607 | 1.8 | % | |||||
Daniel Davis(8) | 212,292 | * | ||||||
All current executive officers and directors as a group (11 persons) | 5,546,062 | 22.0 | % | |||||
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Common Stock(1) | |
| 5% stockholders | |||
FMR LLC(2) | 5,024,916 | 14.5 | % |
The Vanguard Group(3) | 2,900,591 | 8.4 | % |
Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, Wellington Management Company LLP(4) | 2,061,247 | 5.9 | % |
| (1) | Based on |
| (2) | Beneficial ownership is as of December 31, |
| a parent holding company or control person for various subsidiaries, may be deemed to beneficially own the indicated shares and has sole dispositive power over |
| (3) | Beneficial ownership is as of December 31, 2018 and is based solely on information contained in the Schedule 13G/A filed with the SEC on February 11, 2019, by The Vanguard Group (Vanguard). The Vanguard Group, a registered investment adviser, has shared voting power with respect to 5,300 shares, shared dispositive power with respect to 19,227 shares, sole dispositive power with respect to 2,881,364 shares, and sole voting power with respect to 16,945 shares. Vanguard filed the report on behalf of itself and its wholly owned subsidiaries, Vanguard Fiduciary Trust Company (beneficial owner of 13,927 shares) and Vanguard Investments Australia, Ltd. (beneficial owner of 8,318 shares). |
| (4) | Beneficial ownership is as of December 31, 2018 and is based solely on information contained in the Schedule 13G jointly filed by the stockholders (collectively, Wellington) with the SEC on February 12, 2019. Each such entity reported that it has shared voting power with respect to 1,715,102 shares and shared dispositive power with respect to 2,061,247 shares, except for Wellington Management Company LLP, which reported that it has shared voting power with respect to 1,691,469 shares and shared dispositive power with respect to 1,979,455 shares. The securities held by Wellington Management Group LLP, as parent holding company of certain holding companies and the entities known as the Wellington Investment Advisers (Wellington Management Company LLP, Wellington Management Canada LLC, Wellington Management Singapore Pte Ltd, Wellington Management Hong Kong Ltd, Wellington Management International Ltd, Wellington Management Japan Pte Ltd, and Wellington Management Australia Pty Ltd), are owned of record by clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly, or indirectly through Wellington Management Global Holdings, Ltd., the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP. Wellington Group Holdings LLP is owned by Wellington Management Group LLP. |
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Common Stock(1) | |
| Directors and Named Executive Officers | |||
Adam Elsesser(2) | 1,693,482 | 4.8 | % |
Arani Bose, M.D.(3) | 590,662 | 1.7 | % |
Don Kassing(4) | 10,314 | * | |
| Harpreet Grewal | 13,180 | * | |
Thomas Wilder(5) | 3,106 | * | |
| Bridget O’Rourke | 2,798 | * | |
| Janet Leeds | 300 | * | |
Sri Kosaraju(6) | 271,966 | * | |
Daniel Davis(7) | 154,195 | * | |
Lynn Rothman(8) | 229,194 | * | |
| All current executive officers and directors as a group (11 persons) | 3,394,442 | 9.6 | % |
| * | Represents less than 1% of Penumbra’s outstanding common stock. |
| (1) | Based on 34,716,119 shares of common stock outstanding on March 31, 2019. Shares of common stock subject to restricted stock awards as of March 31, 2019, are deemed outstanding as of March 31, 2019. Shares of common stock subject to exercise of stock options that will vest within 60 days of March 31, 2019 are deemed outstanding and beneficially owned by the person holding the options or awards for the purpose of computing the percentage ownership of the person or any group including that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
| (2) | Mr. Elsesser has (i) sole voting power and sole dispositive power with respect to |
| (3) | Dr. Bose has (i) sole voting power and sole dispositive power with respect to |
| (4) | Mr. Kassing has (i) sole voting power and sole dispositive power with respect to |
| (5) | Mr. Wilder has |
| (6) | Mr. Kosaraju has (i) sole voting power and sole dispositive power with respect to |
| (7) | Mr. Davis |
| (8) | Ms. Rothman has (i) sole voting and sole dispositive power with respect to 104,387 shares, which includes (x) 12,012 shares held by Ms. Rothman, and (y) options to purchase 92,375 shares that are exercisable within 60 days of March 31, 2019, and (ii) shared voting and shared investment power with respect to 124,807 shares held by the Trust of Richard E. Koch & Lynn D. Rothman for which Ms. Rothman is Trustee. |
Name | Age | Position with Penumbra | ||||
Adam Elsesser | 57 | Chairman, Chief Executive Officer and President | ||||
Arani Bose, M.D. | 57 | Chief Innovator | ||||
Sri Kosaraju | 41 | Chief Financial Officer and Head of Strategy | ||||
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James Pray | 55 | President, International | ||||
Lynn Rothman | 58 | Executive Vice President, Chief Business Officer | ||||
| 47 | Executive Vice President, General Counsel and Secretary | ||||
Daniel Davis joined Penumbra in 2007. He has served as President, North America, since 2015. Mr. Davis previously served as Vice President of Strategy from 2013 to 2014 and as Director of Marketing from 2011 to 2012. Mr. Davis joined our sales team in 2007, serving as a Sales Trainer from 2008 to 2011. Before joining Penumbra, Mr. Davis held various sales and marketing positions at Boston Scientific Corporation. Mr. Davis received a B.A. from Duke University.
Robert EvansPennsylvania.
Connections, Inc., a publicly traded waste services company, from 2002 to 2008, and a partnerMs. Roberts had fifteen years’ experience working for several law firms, including Morrison & Foerster LLP in the law firm Shartsis Friese LLP from 1978 to 2002. Mr. EvansSan Francisco. Ms. Roberts received a B.A. from Dartmouth College and J.D. from the University of California, Berkeley.
Harvard Law School.
basis:
Lynn Rothman.
Our Named Executive Officers (NEOs)
| Element | Reason for Providing Element | Key Features |
| Base Salary | Provide our NEOs a competitive fixed level of cash compensation for their services based on their knowledge, skills, and experience | Reviewed annually for market competitiveness. Typically we do not make annual increases to the base salaries of our NEOs. |
| Short-Term Cash Incentive Compensation | Encourage our NEOs to achieve short-term individual and company goals that drive our growth | We do not have an established annual program of paying cash incentive compensation to our NEOs. However, we continually evaluate whether short-term cash incentive compensation is warranted. In 2018 we paid short-term cash incentive compensation to one NEO based on his particular responsibilities. |
| Long-Term Equity Awards | Provide long-term retention and incentives to our NEOs that align their interests with our stockholders’ interests | We do not have an established annual program of awarding equity grants to our NEOs. We continually evaluate whether long-term equity awards are needed for retention, interest alignment, or other purposes. Only one NEO has received long-term equity awards since 2015. |
Abaxis(1) | Inogen | Nevro | ||
| ABIOMED | Insulet | NxStage Medical(1) | ||
| AtriCure | Masimo | Quidel | ||
| CryoLife | Medidata Solutions | Teladoc Health | ||
| DexCom | Merit Medical Systems | Varex Imaging | ||
| Glaukos | Neogen | Veeva Systems | ||
| (1) | Abaxis was acquired in 2018 and NxStage Medical was acquired in 2019. However, compensation information was available at the time of Compensia’s 2018 review and analysis so they were included in our 2018 Peer Group. |
officers, generally the four-year vesting period of the award). We estimate the fair value of stock options using the Black-Scholes option-valuation model. This calculation is performed for accounting purposes and reported in the compensation tables below.
Name and Principal | Year | Salary | Bonus | Stock Awards(1) | Option Awards(1) | Non-Equity Incentive Plan Compensation | All Other Compensation(2) | Total | ||||||||||||||||||||||||
Adam Elsesser | 2015 | $ | 705,236 | — | — | $ | 6,086,239 | — | $ | 1,538 | $ | 6,793,013 | ||||||||||||||||||||
Chairman, Chief Executive Officer and President | 2014 | $ | 511,250 | — | — | $ | 1,162,500 | — | — | $ | 1,673,750 | |||||||||||||||||||||
Sri Kosaraju | 2015 | $ | 332,692 | — | $ | 8,746,290 | (4) | — | — | $ | 1,230 | $ | 9,080,212 | |||||||||||||||||||
Chief Financial Officer and Head of Strategy(3) | ||||||||||||||||||||||||||||||||
Daniel Davis | 2015 | $ | 487,692 | — | — | $ | 1,122,626 | — | $ | 1,538 | $ | 1,611,856 | ||||||||||||||||||||
President, North America | 2014 | $ | 300,000 | — | $ | 387,500 | — | — | — | $ | 687,500 | |||||||||||||||||||||
| Name and Principal Position | Year | Salary | Bonus | Stock Awards (1) | Option Awards (1) | Non-Equity Incentive Plan Compensation | All Other Compensation (2) | Total | ||||||||||||
| Adam Elsesser Chairman, Chief Executive Officer and President | 2018 | $ | 725,000 | − | − | − | − | $ | 1,648 | $ | 726,648 | |||||||||
| 2017 | $ | 725,000 | − | − | − | − | $ | 1,926 | $ | 726,926 | ||||||||||
| 2016 | $ | 725,000 | − | − | − | − | $ | 1,913 | $ | 726,913 | ||||||||||
| Sri Kosaraju Chief Financial Officer and Head of Strategy | 2018 | $ | 550,000 | − | − | − | − | $ | 5,537 | $ | 555,537 | |||||||||
| 2017 | $ | 500,000 | − | − | − | − | $ | 1,926 | $ | 501,926 | ||||||||||
| 2016 | $ | 500,000 | − | − | − | − | $ | 1,913 | $ | 501,913 | ||||||||||
Daniel Davis Chief Commercial Officer and former President, North America(3) | 2018 | $ | 500,000 | − | $ | 1,005,753 | − | $ | 1,000,000 | (4) | $ | 3,635 | $ | 2,509,388 | ||||||
| 2017 | $ | 500,000 | − | $ | 1,558,000 | − | $ | 1,000,000 | (5) | $ | 2,214 | $ | 3,060,214 | |||||||
| 2016 | $ | 500,000 | − | $ | 1,942,500 | − | − | $ | 2,201 | $ | 2,444,701 | |||||||||
| Arani Bose, M.D. Chief Innovator | 2018 | $ | 500,000 | − | − | − | − | $ | 1,648 | $ | 501,648 | |||||||||
| 2017 | $ | 500,000 | − | − | − | − | $ | 1,926 | $ | 501,926 | ||||||||||
| 2016 | $ | 500,000 | − | − | − | − | $ | 1,913 | $ | 501,913 | ||||||||||
| Lynn Rothman Executive Vice President, Chief Business Officer | 2018 | $ | 550,000 | − | − | − | − | $ | 3,136 | $ | 553,136 | |||||||||
| 2017 | $ | 500,000 | − | − | − | − | $ | 3,306 | $ | 503,306 | ||||||||||
| 2016 | $ | 500,000 | − | − | − | − | $ | 3,863 | $ | 503,863 | ||||||||||
| (1) | The amounts reported in this column reflect the aggregate grant date fair value of the equity awards granted to our NEOs computed in accordance with FASB ASC Topic 718. For the assumptions used in determining these grant date fair market |
| (2) | These amounts represent the amounts paid for |
| (3) | Effective January 21, 2019, the role of President, North America no longer exists. Mr. |
| (4) |
| (5) | Represents cash bonus paid to Mr. Davis in January 2018 with respect to his responsibilities over the 2017 performance of the North American sales team. |
2015
Equity-based compensation
In March 2015, in connectionfor 2018 with the promotion of Mr. Davis to President, North America, the Board granted Mr. Davis options to purchase 200,000 shares of our common stock, vesting over four years.
In connection with our hiringexception of Mr. Kosaraju and Ms. Rothman, each of whom received an increase in April 2015,their annual base salary from $500,000 to $600,000 in June 2018 as a result of a review of their prior year’s base salary relative to the competitive market and after consideration of the increased scale and complexity of the Company.
In addition, on August 27, 2015, in connection with our IPO, the Compensation Committee granted Mr. Elsesser options to purchase 450,000Davis an RSU award for 10,190 shares of our common stock, vesting over four years, which was made effective on September 17, 2015, the date of the effectiveness of our Registration Statement on Form S-1 in connection with our IPO. The Board determined the size of the grant after taking into account market equity compensation data provided by Compensia.
for retention purposes. Please see the section below entitled
| Name | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Grant Date | Date of Compensation Committee Approval | All Other Stock Awards: Number of Shares of Stock or Units(#) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||
| Threshold ($) | Target ($) | Maximum ($) | |||||
| Adam Elsesser | − | − | − | − | − | − | − |
| Sri Kosaraju | − | − | − | − | − | − | − |
| Daniel Davis | − | 1,000,000 | 1,000,000 | 2/16/18 | 2/16/18 | 10,190 | $1,005,753 |
| Arani Bose, M.D. | − | − | − | − | − | − | − |
| Lynn Rothman | − | − | − | − | − | − | − |
| (1) | Actual amounts paid in February 2019 are included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. |
| (2) | The amounts presented above represent the aggregate grant date fair value of the RSU awards computed in accordance with FASB ASC Topic 718. The grant date fair market value of the RSU awards was the closing price of our common stock on the NYSE on the date of the respective grant. For assumptions used in determining these grant date fair market value, see Note 9 to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC on February 26, 2019. |
four equal quarters on the anniversary of the date of the grant.
Table
| Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)(2) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(12) | ||||||||||||||||||
Adam Elsesser | 200,000 | (1) | — | 1.26 | (2) | 4/31/17 | — | — | ||||||||||||||||
| 100,000 | (1) | — | 1.26 | (2) | 9/30/17 | — | — | |||||||||||||||||
| 5,000 | (1)(3) | — | 7.75 | (2) | 3/20/24 | — | — | |||||||||||||||||
| 145,000 | (1)(4) | — | 7.75 | (2) | 3/20/24 | — | — | |||||||||||||||||
| — | 450,000 | (5) | 30.00 | (6) | 9/16/25 | — | — | |||||||||||||||||
Sri Kosaraju | — | — | — | — | 453,646 | (7) | $ | 24,410,691 | ||||||||||||||||
Daniel Davis | 65,000 | (1)(8) | — | 3.98 | (2) | 9/29/21 | 37,500 | (9) | $ | 2,017,875 | ||||||||||||||
| 2,000 | (1)(10) | — | 4.49 | (2) | 2/6/22 | — | — | |||||||||||||||||
| — | 200,000 | (11) | 12.36 | (2) | 3/22/25 | — | — | |||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(10) | ||||||||||
| Adam Elsesser | 5,000 | — | 7.75 | (1) | 3/20/24 | — | — | |||||||||
| 145,000 | — | 7.75 | (1) | 3/20/24 | — | — | ||||||||||
| 365,625 | (2) | 84,375 | (2) | 30.00 | (3) | 9/16/25 | — | — | ||||||||
| Sri Kosaraju | — | — | — | — | 151,216 | (4) | $18,478,595 | |||||||||
| Daniel Davis | 41,375 | — | 3.98 | (1) | 9/29/21 | 15,000 | (5) | $1,833,000 | ||||||||
| 1,708 | — | 4.49 | (1) | 2/6/22 | 15,000 | (6) | $1,833,000 | |||||||||
| 106,650 | (7) | 4,167 | (7) | 12.36 | (1) | 3/22/25 | 10,190 | (8) | — | |||||||
| Arani Bose | — | — | — | — | — | — | ||||||||||
| Lynn Rothman | 45,500 | — | 3.98 | (1) | 6/12/21 | — | — | |||||||||
| 41,666 | (9) | 8,334 | (9) | 22.04 | (1) | 8/11/25 | — | — | ||||||||
| Represents an amount determined by the Board to be not less than the fair market value of a share of the common stock of the Company on the grant date. |
| (2) | Options were granted under the |
|
| (3) | Represents the initial public offering price of the Company’s common stock as set forth in the final prospectus with respect to the Company’s Registration Statement on Form S-1 in connection with the IPO. |
| (4) | One fourth of the shares of restricted stock awarded on May 6, 2015, vested |
| One fourth of the |
| (6) | One fourth of the |
| (7) | Options were granted under the Penumbra, Inc. 2014 Equity Incentive Plan and vested with respect to one fourth of the shares subject to the |
| (8) | One fourth of the RSUs awarded on February 16, 2018 vested on February 16, 2019. One third of the remaining unvested RSUs will vest on each of February 16, 2020, 2021, and 2022. |
| (9) | Options were granted under the Penumbra, Inc. 2014 Equity Incentive Plan and vested with respect to one fourth of the shares subject to the options on January 26, 2016, and vest as to 1/48th of the total shares subject to the options on the 26th day of each month thereafter, subject to the executive continuing to provide services to us through each applicable vesting date. In the event of a Change in Control, as defined under the 2014 Equity Incentive Plan, the issued options will fully vest, subject to the executive continuing to provide services to us through the occurrence of the Change in Control. |
| (10) | The value of restricted stock awards and RSUs shown in the table was calculated using the closing price of our common stock on December 31, |
| Option Awards | Stock Awards | ||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | |||||
| Adam Elsesser | — | — | — | — | |||||
| Sri Kosaraju | — | — | 151,215 | 19,121,137 | |||||
| Daniel Davis | 74,417 | 8,036,691 | 25,000 | 2,627,325 | |||||
| Arani Bose, M.D. | — | — | — | — | |||||
| Lynn Rothman | 4,500 | 608,580 | 12,500 | 1,625,013 | |||||
| (1) | The value realized upon exercise of stock options reflects the price at which shares acquired upon exercise of the stock options were sold or valued for income tax purposes, net of the exercise price for acquiring the shares, multiplied by the number of shares acquired. |
| (2) | The value realized on vesting of restricted stock and RSU awards was calculated as the product of the closing price of a share of our common stock on the vesting date, multiplied by the number of shares vested. |
| Name | Intrinsic Value of Unvested Equity Awards ($) | |
| Adam Elsesser | 7,779,375 | |
| Sri Kosaraju | 18,478,595 | |
| Daniel Davis | 5,368,921 | |
| Arani Bose, M.D. | — | |
| Lynn Rothman | 834,733 | |
Parties
Indebtedness
In 2005, we made a loan to oneConsumer Protection Act, and Item 402(u) of Regulation S-K, the following presents information regarding the relationship of the annual total compensation of our executive officers, James Pray,employees and the annual total compensation of our Chief Executive Officer, Mr. Elsesser.
secured by a stock pledge agreement covering 500,000 sharessalary, wages and fringe benefits of all of our common stock held byemployees who were employed as of the Determination Date (excluding Mr. Pray. This note accrued interestElsesser), as reflected in Box 1 of Form W-2 for 2017 (for our U.S.-based employees), and information gathered from our 2017 payroll reports from our payroll providers (for our international employees) as of the Determination Date.
Other than the foregoing, none of our directors or executive officers or associates of any director or executive officer is or at any time since January 1, 2015 has been indebted to us.
calculating their own pay ratios.
Robert D. Evans
26, 2019
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
(as approved by the Board on August 12, 2015 and the stockholders on August 25, 2015)
PLAN DOCUMENT
PENUMBRA, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
This Amended and Restated 2014 Equity Incentive Plan (the “Plan”) amends and restates the 2014 Equity Incentive Plan (the “Original Plan”), effective upon the business day immediately prior to the Registration Date (the “Effective Date”).
1.Purposes of the Plan. The purposes of this Plan are:
The Plan permits the grant of Awards.
2.Definitions. As used herein, the following definitions will apply:
(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.
(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(c) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Award or Other Award.
(d) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(e) “Board” means the Board of Directors of the Company.
(f) “Change in Control” means the occurrence of any of the following events:
(i)Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Change in Control; or
(ii)Change in Effective Control of the Company. If the Company has a class of securities registered pursuant to Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii)Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this Section 2(f), persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
(g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.
(h) “Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board, or by the compensation committee of the Board, in accordance with Section 4 hereof.
(i) “Common Stock” means the common stock of the Company.
(j) “Company” means Penumbra, Inc. a Delaware corporation, or any successor thereto.
(k) “Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render bona fide services to such entity, provided the services (i) are not in connection with the offer or sale of securities in acapital-raising transaction, and (ii) do not directly promote or maintain a market for the Company’s securities.
(l) “Director” means a member of the Board.
(m) “Disability” means total and permanent disability as defined in Code Section 22(e)(3), provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
(n) “Employee” means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(p) “Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have higher or lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced or increased. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.
(q) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows, unless otherwise determined by the Administrator:
(i) If the Common Stock is listed on any established stock exchange or a national market system, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator;
provided, that notwithstanding the foregoing, if the day of determination for the Fair Market Value occurs on a weekend or holiday, the Fair Market Value will be the price as determined in accordance with the foregoing on the immediately preceeding business day, unless otherwise determined by the Administrator.
(r) “Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Code Section 422 and the regulations promulgated thereunder.
(s) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(t) “Option” means a stock option granted pursuant to the Plan.
(u) “Other Award” means an Award granted pursuant to Section 11.
(v) “Outside Director” means a Director who is not an Employee.
(w) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Code Section 424(e).
(x) “Participant” means the holder of an outstanding Award.
(y) “Performance Award” means an Award granted pursuant to Section 10.
(z) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.
(aa) “Plan” means this Amended and Restated 2014 Equity Incentive Plan.
(bb) “Registration Date” means the effective date of the first registration statement that is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s securities.
(cc) “Restricted Stock” means Shares issued pursuant to an Award of Restricted Stock under Section 8 of the Plan, or issued pursuant to the early exercise of an Option.
(dd) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(ee) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(ff) “Section 162(m)” means Section 162(m) of the Code.
(gg) “Service Provider” means an Employee, Director or Consultant.
(hh) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.
(ii) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(jj) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter exist-ing, as defined in Code Section 424(f).
3.Stock Subject to the Plan.
(a)Stock Subject to the Plan. Subject to the provisions of Section 15 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and issued under the Plan from and after the Registration Date is 3,000,000, plus up to 2,203,534 Shares subject to stock options or similar awards previously granted under the Penumbra, Inc. 2005 Stock Plan (the “2005 Plan”) or the Penumbra, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) that expire or otherwise terminate without having been exercised in full and Shares issued pursuant to awards granted under the 2005 Plan or the 2011 Plan that are forfeited to or repurchased by the Company.
(b)Automatic Share Reserve Increase. The number of Shares available for issuance under the Plan will be increased on the first day of each fiscal year of the Company beginning with the 2016 fiscal year and ending with the 2025 fiscal year, in an amount equal to the least of (i) 2,500,000 Shares, (ii) 5% of the outstanding Shares on the last day of the immediately preceding fiscal year or (iii) such number of Shares determined by the Board.
(c)Lapsed Awards. If an Award outstanding under the Plan expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock or Restricted Stock Units, is forfeited to or repurchased by the Company due to the failure to vest, the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to Stock Appreciation Rights, only Shares actually issued pursuant to a Stock Appreciation Right will cease to be available under the Plan; all remaining Shares under Stock Appreciation
Rights will remain available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock or Restricted Stock Units are repurchased by the Company or are forfeited to the Company due to the failure to vest, such Shares will become available for future grant under the Plan. Shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 15, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Code Section 422 and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under the Plan pursuant to Section 3(b) and 3(c).
(d)Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan. The Shares may be authorized but unissued, or reacquired, Common Stock.
4.Administration of the Plan.
(a)Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m), the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m).
(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which Committee will be constituted to satisfy Applicable Laws.
(b)Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;
(vi) to institute and determine the terms and conditions of an Exchange Program;
(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans and Award Agreements established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 20(c) of the Plan), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards and to extend the maximum term of an Option (subject to Section 6(d));
(x) to allow Participants to satisfy withholding tax obligations in a manner prescribed in Section 16;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that otherwise would be due to such Participant under an Award; and
(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c)Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.
5.Eligibility and Limitations.
(a)Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, and Restricted Stock Units may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
(b)Outside Director Limitations. No Outside Director may be granted, in any calendar year, (i) stock-based Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of more than $1,000,000, increased to $2,000,000 in connection with his or her initial year of service) and (ii) cash-based Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of more than $1,000,000 (increased to $1,500,000 in connection with his or her initial year of service).
(c)Individual Limitations. The following limits shall apply to the amount that may be awarded to any Participant during any calendar year, subject to adjustment as provided in Section 15: (i) Options and SARs that relate to no more than 5,000,000 Shares; (B) Performance Awards that relate to no more than 2,000,000 Shares and (C) cash-based Performance Awards that relate to no more than $10,000,000.
6.Stock Options.
(a)Grant of Options. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Options in such amounts as the Administrator, in its sole discretion, will determine.
(b)Option Agreement. Each Award of an Option will be evidenced by an Award Agreement that will specify the exercise price, the term of the Option, the number of Shares subject to the Option, the exercise restrictions, if any, applicable to the Option, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(c)Limitations. Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. Notwithstanding such designation, however, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(c), Incentive Stock Options will be taken into account in the order in which they were granted, the Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted, and calculation will be performed in accordance with Code Section 422 and Treasury Regulations promulgated thereunder. No Incentive Stock Options may be issued more than ten years following the earlier of (i) the date of adoption or (ii) the most recent date of approval of this Plan by the Company’s stockholders, except as permitted by Section 422 of the Code.
(d)Term of Option. The term of each Option will be stated in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(e)Option Exercise Price and Consideration.
(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option will be determined by the Administrator, but will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(e)(i), Options may be granted with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Code Section 424(a).
(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.
(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (6) by net exercise, (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws, or (8) any combination of the foregoing methods of payment.
(f)Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable tax withholding). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within three (3) months following termination, or such longer or shorter period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to the extent that the Option is vested on the date of termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within six (6) months following termination, or such longer or shorter period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to the extent the Option is vested on the date of termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised within six (6) months following the Participant’s death, or within such longer or shorter period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to the extent that the Option is vested on the date of death, by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to the Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
7.Stock Appreciation Rights.
(a)Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b)Number of Shares. The Administrator will have complete discretion to determine the number of Shares subject to any Award of Stock Appreciation Rights.
(c)Exercise Price and Other Terms. The per Share exercise price for the Shares that will determine the amount of the payment to be received upon exercise of a Stock Appreciation Right as set forth in Section 7(f) will be determined by the Administrator and will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Otherwise, the Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan.
(d)Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e)Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) relating to the maximum term and Section 6(f) relating to exercise also will apply to Stock Appreciation Rights.
(f)Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
8.Restricted Stock.
(a)Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b)Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c)Transferability. Except as provided in this Section 8 or as the Administrator determines, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d)Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e)Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(f)Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g)Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides otherwise. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h)Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
9.Restricted Stock Units.
(a)Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units.
(b)Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon continued employment or service and/or the achievement of Company-wide, business unit, individual or other goals, or any other basis determined by the Administrator in its discretion.
(c)Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.
(d)Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) determined by the Administrator and set forth in the Award Agreement. The Administrator, in its sole discretion, may settle earned Restricted Stock Units in cash, Shares, or a combination of both.
(e)Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
10.Performance Awards. The Committee is authorized to grant Performance Awards to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:
(a) Performance Awards may be denominated as a cash amount, number of Shares or a combination thereof and are Awards which may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. Subject to the terms of the Plan, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee.
(b) If the Committee intends that a Performance Award be considered qualified performance-based compenastion under Section 162(m), such Performance Award shall include a pre-established formula, such that payment, retention or vesting of the Award is subject to the achievement during a Performance Period or Performance Periods, as determined by the Committee, of a level or levels of, or increases in, in each case as determined by the Committee, one or more of the following performance measures with respect to the Company: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); net earnings; earnings per share; net income or loss (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of share price; market share; gross profits; earnings or loss (including earnings or loss before taxes, before interest and taxes, or before earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; cash margin; year-end cash; debt reduction; shareholder equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; research and development achievements; manufacturing achievements (including obtaining particular yields from manufacturing runs and other measurable objectives related to process development activities); regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the Company or the Company’s third-party manufacturer) and validation of manufacturing processes (whether the Company’s or the Company’s third-party manufacturer’s)); financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); and implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel. Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis, and may be established on a corporate-wide basis or with respect to one or more business units, divisions, subsidiaries or business segments. Relative performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. To the extent permitted by Section 162(m), with respect to an award intended to qualify under Section 162(m), the Award Agreement may provide that if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or other events or circumstances render the performance objectives unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable. Performance measures may vary from Performance Award to Performance Award, respectively, and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. The Committee shall have the power to impose such other restrictions on Awards subject to this Section as it may deem necessary or appropriate. Notwithstanding any provision of the Plan to the contrary, with respect to any Award intended to qualify under Section 162(m), the Committee shall not be authorized to increase the amount payable under any Award to which this subsection (b) applies upon attainment of such pre-established formula. Performance Awards intended to qualify under Section 162(m) will be settled only after the end of the relevant Performance Period.
(c) Settlement of Performance Awards shall be in cash, Shares, other Awards, other property, net settlement, or any combination thereof, in the discretion of the Committee.
(d) The Committee shall specify the circumstances in which, and the extent to which, Performance Awards shall be paid or forfeited in the event of a Participant’s termination as a Service Provider.
11.Other Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of Shares, including
convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section shall be purchased for such consideration, paid for at such times, by such methods and in such forms, including cash, Shares, other Awards, other property, or any combination thereof, as the Committee shall determine. Cash awards may also be granted pursuant to this Section.
12.Compliance With Code Section 409A. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.
13.Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
14.Limited Transferability of Awards. Unless determined otherwise by the Administrator, Awards may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner other than by will or by the laws of descent and distribution, and may be exercised, during the lifetime of the Participant, only by the Participant.
15.Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a)Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of shares of stock that may be delivered under the Plan and/or the number, class, and price of shares of stock covered by each outstanding Award, and the Share limits set forth in Sections 3 and 5 of the Plan.
(b)Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c)Merger or Change in Control. In the event of a merger of the Company with or into another corporation or other entity or a Change in Control, each outstanding Award will be treated as the Administrator determines (subject to the provisions of the following paragraph) without a Participant’s consent, including,
without limitation, that (i) Awards will be continued by the Company or assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participant’s Awards will terminate upon or immediately prior to the consummation of such merger or Change in Control; (iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such merger or Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger or Change in Control; (iv) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this subsection (c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
In the event that the Company does not continue, and the successor corporation does not assume or substitute for the Award (or portion thereof), then with respect to such Award (or portion thereof), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting (including Performance Awards), unless otherwise provided in an Award Agreement, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not continued, assumed or substituted in the event of a merger or Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the merger or Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit or Performance Award, for each Share subject to such Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change in Control.
Notwithstanding anything in this subsection (c) to the contrary, unless otherwise provided in an Award Agreement, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent in a manner that would be adverse to the Participant; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
Notwithstanding anything in this subsection (c) to the contrary, if a payment under an Award Agreement is subject to Code Section 409A and if the change in control definition contained in the Award
Agreement does not comply with the definition of “change of control” for purposes of a distribution under Code Section 409A, then any payment of an amount that is otherwise accelerated under this Section will be delayed until the earliest time that such payment would be permissible under Code Section 409A without triggering any penalties applicable under Code Section 409A.
16.Tax Withholding.
(a)Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise or vesting or settlement thereof, as applicable), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise or vesting or settlement thereof, as applicable).
(b)Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the statutory amount required to be withheld, provided the delivery of such Shares will not result in any adverse accounting consequences, as the Administrator determines in its sole discretion, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld.
(c)Section 409A of the Code. With respect to Awards subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code and the regulations thereunder (“Section 409A”), and the provisions of the Plan and any Award Agreement shall be interpreted in a manner that satisfies the requirements of Section 409A, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition will be interpreted and deemed amended so as to avoid this conflict.
17.No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company or any Parent or Subsidiary of the Company, nor will they interfere in any way with the Participant’s right or the right of the Company, or any Parent or Subsidiary of the Company, to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
18.Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.
19.Term of Plan. The Plan will continue in effect until terminated by the Board.
20.Amendment and Termination of the Plan.
(a)Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b)Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c)Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
21.Conditions Upon Issuance of Shares.
(a)Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws.
(b)Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
22.Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.
23.Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Form 10-K are available atwww.proxyvote.com
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