Exhibit 10.1

 

January 21, 2008

 

Holly Grey

 

RE:     OFFER OF EMPLOYMENT AND EMPLOYMENT TERMS

 

Dear Holly,

 

Accuray Incorporated (the “Company”) is pleased to offer you employment as our
Senior Vice President of Finance on the terms and conditions set forth in this
letter, effective as of March 3, 2008 (the “Effective Date”). Your employment
Start Date will be the Effective Date.  In the event that you do not commence
employment with the Company on the Effective Date, this Agreement shall be of no
further force or effect, and you shall have no rights to compensation, benefits
or other consideration hereunder.  This offer of employment is contingent upon
successful completion of a reference and background check as mentioned in the
release you submitted.

 

1.                         TERM.  The employment relationship between you and
the Company will be at-will.  You and the Company will have the right to
terminate the employment relationship at any time and for any reason whatsoever,
with or without cause, and without any liability or obligation except as may be
expressly provided herein.

 

2.                         POSITION, DUTIES AND RESPONSIBILITIES.  During the
period of the employment relationship between you and the Company (the “Term”),
the Company will employ you, and you agree to be employed by the Company, as
Senior Vice President, Finance.  In the capacity of Senior Vice President,
Finance, you will have such duties and responsibilities as are normally
associated with such position and will devote your full business time and
attention serving the Company in such position.  Your duties may be changed from
time to time by the Company, consistent with your position.  You will report to
Robert E. McNamara, Chief Financial Officer (the “CFO”) of the Company, and will
work full-time at our principal offices located at 1310 Chesapeake Terrace,
Sunnyvale, California 94089 (or any other location the Company may utilize as
its principal offices), except for travel to other locations as may be necessary
to fulfill your responsibilities.

 

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3.                         BASE COMPENSATION.  During the Term, the Company will
pay you a base salary of $230,000 per year, less payroll deductions and all
required withholdings, payable in accordance with the Company’s normal payroll
practices and prorated for any partial month of employment.  Your base salary
may be subject to increase pursuant to the Company’s policies as in effect from
time to time.

 

4.                         ANNUAL BONUS.  In addition to the base salary set
forth above, during the Term, you will be eligible to participate in the
Company’s executive bonus plan applicable to similarly situated executives of
the Company.  The amount of your annual bonus will be based on the attainment of
performance criteria established and evaluated by the Company in accordance with
the terms of such bonus plan as in effect from time to time, provided that,
subject to the terms of such bonus plan, your target (but not necessarily
maximum) annual bonus shall be 40% of your base salary actually paid for such
year.

 

In addition to the executive bonus plan you will also have an opportunity to
realize     an additional one time bonus of $10,000, if you meet specific goals
set for your first six months with the company.

 

5.                         STOCK OPTIONS.  As an added incentive, we will
recommend to the Compensation Committee of the Board of Directors that you be
granted an option (the “Option”) to purchase 50,000 shares of Accuray common
stock at a per share exercise price equal to the fair market value of a share of
our common stock on the date of the grant, as determined in accordance with the
Accuray Incorporated 2007 Incentive Award Plan (the “Incentive Plan”).   The
grant of the Option is subject to and conditioned on approval of the grant and
its terms by the Compensation Committee, and will be made as soon as practicable
following your Start Date.  Subject to your continued employment, the Option
would vest with respect to 25% of the shares subject thereto on the first
anniversary of your Start Date, and with respect to an additional 1/48th of the
shares subject thereto on each monthly anniversary thereafter, such that the
entire Option would be vested on the fourth anniversary of your Start Date.  The
Option will be subject to the terms and conditions of the Incentive Plan and a
stock option agreement in a form prescribed by Accuray, which you will be
required to sign as a condition to receiving the Option (the “Option
Agreement”).

 

6.                         RESTRICTED STOCK UNITS.  We will recommend to the
Compensation Committee of the Board of Directors that you be granted 6,000
restricted stock units (“RSUs”) under the Accuray 2007 Incentive Award Plan. The
grant of the RSUs is subject to and conditioned on approval of the grant and its
terms by the Compensation Committee, and will be made as soon as practicable
following your Start Date.  Subject to the your continued service as an Employee
through the applicable vesting date, twenty-five percent (25%) of the RSUs shall
vest on the first anniversary of the Grant Date and an additional twenty-five
percent (25%) of the RSUs shall vest on each of the second, third and fourth
anniversaries of the Grant Date.

 

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Payment in respect of any RSUs that vest in accordance with the grant agreement
will be made to you in whole shares of our common stock as soon as practicable
after the applicable vesting date, but in no event later than 60 days after such
vesting date.  The RSUs will be subject to the terms and conditions of the
Incentive Plan and a restricted stock unit grant agreement in a form prescribed
by Accuray, which you will be required to sign as a condition to receiving the
RSUs (the “RSU Agreement”).

 

7.                         BENEFITS AND PAID TIME OFF.  During the Term, you
will be eligible to participate in all incentive, savings and retirement plans,
practices, policies and programs maintained or sponsored by the Company from
time to time which are applicable to other similarly situated executives of the
Company, subject to the terms and conditions thereof.  During the Term, you will
also be eligible for standard benefits, such as medical, vision and dental
insurance, paid time off, and holidays to the extent applicable generally to
other similarly situated executives of the Company, subject to the terms and
conditions of the applicable Company plans or policies.  The benefits described
in this Section 7 will be subject to change from time to time as deemed
appropriate and necessary by the Company.

 

8.        TERMINATION OF EMPLOYMENT.

 

(a)     In the event of a termination of your employment by the Company without
Cause or by you for Good Reason (each as defined below) then, in addition to any
other accrued amounts payable to you through the date of termination of your
employment (including any earned but unpaid bonus),

 

i)    the Company will no later than the date that is six (6) months and one
(1) day after the date of your termination of employment, or the last day of
such shorter period upon such termination of employment that is sufficient to
avoid the imposition of additional tax under Section 409A(a)(l)(B) of the
Internal Revenue Code of 1986, as amended (the “Code”), or any other taxes or
penalties imposed under Section 409A of the Code, pay you a lump-sum severance
payment (the “Severance Payment”) in an amount equal to the sum of (x) six
(6) months of your annual base salary as in effect on the date of termination
plus (y) a pro rata portion of your target annual bonus for the fiscal year of
the Company in which such termination occurs, calculated based on the number of
days elapsed in such fiscal year through the date of termination plus (z) 50% of
your target annual bonus for the fiscal year of the Company in which such
termination occurs, and

 

ii)   provided that you properly elect COBRA continuation coverage, the Company
will pay the COBRA premium for health care coverage for you and your spouse and
children, as applicable and to the extent eligible (the “Severance Benefits”),
for the six (6) month period immediately following the date of such termination
of your employment. Such payments for the Severance Benefits will begin no later
than the date that is six (6) months

 

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and one (1) day after the date of your termination of employment, or the last
day of such shorter period upon such termination of employment that is
sufficient to avoid the imposition of additional tax under
Section 409A(a)(l)(B) of the Code or any other taxes or penalties imposed under
Section 409A of the Code (the “Deferred COBRA Payment Date”), and on the
Deferred COBRA Payment Date, the Company will pay you an amount equal to the
Severance Benefits for the period beginning on the date of your termination of
employment and ending on the Deferred COBRA Payment Date.

 

(b)    If a Change in Control (as defined in Exhibit A hereto) occurs within the
first thirty-six (36) months of employment (measured from the Effective Date)
and your employment with the Company is terminated by the Company without Cause
or by you for Good Reason, in each case within the twelve (12) month period
immediately following the effective date of the Change in Control, then, in
addition to the amounts payable to you pursuant to paragraph (a) of this
Section 8, each of your then outstanding stock options and Restricted Stock
Units (“RSUs”) to purchase shares and units of the Company’s common stock and
RSUs shall become fully vested and exercisable immediately prior to the
effective time of the termination of your employment.

 

(c)     Notwithstanding the foregoing, your right to receive the payments and
benefits set forth in this Section 8 is conditioned on and subject to your
execution and non-revocation of a general release of claims against the Company
and its affiliates, in a form prescribed by the Company.  In no event shall you
or your estate or beneficiaries be entitled to any of the payments or benefits
set forth in this Section 8 upon any termination of your employment by reason of
your total and permanent disability or your death.

 

(d)    For purposes of this letter:

 

i)    “Cause” shall mean (i) your commission of a felony, (ii) your commission
of a crime involving moral turpitude or your commission of any other act or
omission involving dishonesty, disloyalty, breach of fiduciary duty or fraud
with respect to the Company or any of its subsidiaries or any of their customers
or suppliers, or (iii) your failure to perform the normal and customary duties
of your position with the Company as reasonably directed by the CFO, provided,
that any of the acts or omissions described in the foregoing clauses (i),
(ii) or (iii) are not cured to the Company’s reasonable satisfaction within
thirty (30) days after written notice thereof is given to you; and

 

ii)   “Good Reason” shall mean the occurrence of any one or more of the
following events without your prior written consent, unless the Company fully
corrects the circumstances constituting Good Reason within 30 days after notice
from you that Good Reason exists:  (i) a material reduction of

 

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your duties and responsibilities hereunder; (ii) a relocation of your principal
workplace more than 35 miles outside the Company’s Sunnyvale corporate
headquarters; or (iii) the Company’s reduction of your annual base salary or
bonus opportunity, each as in effect on the date hereof or as the same may be
increased from time to time; provided that written notice of your resignation
for Good Reason must be delivered to the Company within 30 days after the date
you first know or should reasonably know of the occurrence of any such event in
order for your resignation with Good Reason to be effective hereunder.

 

9.        CODE SECTION 280G.

 

(a)     In the event it shall be determined that any payment or distribution to
you or for your benefit which is in the nature of compensation and is contingent
on a change in the ownership or effective control of the Company or the
ownership of a substantial portion of the assets of the Company (within the
meaning of Section 280G(b)(2) of the Code), whether paid or payable pursuant to
this letter or otherwise (a “Payment”), would constitute a “parachute payment”
under Section 280G(b)(2) of the Code and would be subject to the excise tax
imposed by Section 4999 of the Code (together with any interest or penalties
imposed with respect to such excise tax, the “Excise Tax”), then the Payments
shall be reduced to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code but only if, by
reason of such reduction, the net after-tax benefit received by you shall exceed
the net after-tax benefit received by you if no such reduction was made.  For
purposes of this Section 9(a), “net after-tax benefit” shall mean (i) the
Payments which you receive or are then entitled to receive from the Company that
would constitute “parachute payments” within the meaning of Section 280G of the
Code, less (ii) the amount of all federal, state and local income taxes payable
with respect to the Payments calculated at the maximum marginal income tax rate
for each year in which the Payments shall be paid to you (based on the rate in
effect for such year as set forth in the Code as in effect at the time of the
first payment of the foregoing), less (iii) the amount of Excise Taxes imposed
with respect to the Payments.

 

(b)    All determinations required to be made under this Section 9 shall be made
by such nationally recognized accounting firm as may be selected by the Audit
Committee of the Board of Directors of the Company as constituted immediately
prior to the change in control transaction (the “Accounting Firm”), provided,
that the Accounting Firm’s determination shall be made based upon “substantial
authority” within the meaning of Section 6662 of the Code.  The Accounting Firm
shall provide its determination, together with detailed supporting calculations
and documentation, to you and the Company within 15 business days following the
date of termination of your employment, if applicable, or such other time as
requested by you (provided that you reasonably believe that any of the Payments
may be subject to the Excise Tax)

 

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or the Company.  All fees and expenses of the Accounting Firm shall be borne
solely by the Company.

 

10.      RESTRICTIVE COVENANTS.

 

(a)     As a condition of your employment with the Company, you agree that
during the Term and thereafter, you will not directly or indirectly disclose or
appropriate to your own use, or the use of any third party, any trade secret or
confidential information concerning the Company or its subsidiaries or
affiliates (collectively, the “Company Group”) or their businesses, whether or
not developed by you, except as it is required in connection with your services
rendered for the Company.  You further agree that, upon termination of your
employment, you will not receive or remove from the files or offices of the
Company Group any originals or copies of documents or other materials maintained
in the ordinary course of business of the Company Group, and that you will
return any such documents or materials otherwise in your possession.  You
further agree that, upon termination of your employment, you will maintain in
strict confidence the projects in which any member of the Company Group is
involved or contemplating.

 

(b)    You further agree that during the Term and continuing through the first
anniversary of the date of termination of your employment, you will not directly
or indirectly solicit, induce, or encourage any employee, consultant, agent,
customer, vendor, or other parties doing business with any member of the Company
Group to terminate their employment, agency, or other relationship with the
Company Group or such member or to render services for or transfer their
business from the Company Group or such member and you will not initiate
discussion with any such person for any such purpose or authorize or knowingly
cooperate with the taking of any such actions by any other individual or entity.

 

(c)     While employed by the Company, you agree that you will not engage in any
business activity in competition with any member of the Company Group nor make
preparations to do so.

 

(d)    Upon the termination of your relationship with the Company, you agree
that you will promptly return to the Company, and will not take with you or use,
all items of any nature that belong to the Company, and all materials (in any
form, format, or medium) containing or relating to the Company’s business.

 

(e)     In recognition of the facts that irreparable injury will result to the
Company in the event of a breach by you of your obligations under Sections
10(a), (b), (c) or (d) above, that monetary damages for such breach would not be
readily calculable, and that the Company would not have an adequate remedy at
law therefore, you acknowledge, consent and agree that in the event of such
breach, or the threat thereof, the Company shall be entitled, in addition to any
other

 

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legal remedies and damages available, to specific performance thereof and to
temporary and permanent injunctive relief (without the necessity of posting a
bond) to restrain the violation or threatened violation of such obligations by
you.

 

11.      COMPANY RULES AND REGULATIONS.  As an employee of the Company, you
agree to abide by Company policies, procedures, rules and regulations as set
forth in the Company’s Employee Handbook, Code of Conduct and Ethics, or as
otherwise promulgated.  In addition, as a condition of your employment, you will
be required to complete, sign, return, and abide by the Employee Confidentiality
and Inventions Agreement.

 

12.      WITHHOLDING.  The Company may withhold from any amounts payable under
this letter such federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

 

13.      ARBITRATION.  Except as set forth in Section 10(e) above, any
disagreement, dispute, controversy or claim arising out of or relating to this
letter or the interpretation of this letter or any arrangements relating to this
letter or contemplated in this letter or the breach, termination or invalidity
thereof shall be settled by final and binding arbitration administered by
JAMS/Endispute in Santa Clara County, California in accordance with the then
existing JAMS/Endispute Arbitration Rules and Procedures for Employment
Disputes.  Except as provided herein, the Federal Arbitration Act shall govern
the interpretation, enforcement and all proceedings.  The arbitrator shall apply
the substantive law (and the law of remedies, if applicable) of the state of
California, or federal law, or both, as applicable, and the arbitrator is
without jurisdiction to apply any different substantive law.  The arbitrator
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure.  Judgment upon the award may
be entered in any court having jurisdiction thereof.  Each party shall pay his
or its own attorneys’ fees and expenses associated with such arbitration to the
extent permitted by applicable law.

 

14.      ENTIRE AGREEMENT.  As of the Effective Date, this letter constitutes
the final, complete and exclusive agreement between you and the Company with
respect to the subject matter hereof and replaces and supersedes any and all
other agreements, offers or promises, whether oral or written, made to you by
any member of the Company Group.

 

15.      SEVERABILITY.  Whenever possible, each provision of this letter will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this letter is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision of this letter, but such invalid, illegal or unenforceable
provision will be reformed, construed and enforced so as to

 

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render it valid, legal, and enforceable consistent with the intent of the
parties insofar as possible.

 

16.      ACKNOWLEDGEMENT.  You hereby acknowledge (a) that you have consulted
with or have had the opportunity to consult with independent counsel of your own
choice concerning this letter, and have been advised to do so by the Company,
and (b) that you have read and understand this letter, are fully aware of its
legal effect, and have entered into it freely based on your own judgment.

 

17.      SECTION 409A OF THE CODE.  To the extent that any payments or benefits
under this letter are deemed to be subject to Section 409A of the Code, this
letter will be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretive guidance issued there
under in order to (a) preserve the intended tax treatment of the benefits
provided with respect to such payments and (b) comply with the requirements of
Section 409A of the Code.

 

[SIGNATURE PAGE FOLLOWS]

 

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Please confirm your agreement to the foregoing by signing and dating the
enclosed duplicate original of this letter in the space provided below for your
signature and returning it to us in the enclosed, self-addressed stamped
envelope.  Please retain one fully-executed original for your files.

 

Sincerely,

 

ACCURAY INCORPORATED, a Delaware corporation

 

 

/s/ Robert E. McNamara

 

Robert E. McNamara

 

Chief Financial Officer

 

 

 

Accepted and Agreed,

 

 

/s/ Holly Grey

 

Signature

 

 

 

1-22-08

 

Date

 

 

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EXHIBIT A

 

FOR PURPOSES OF THIS LETTER, “CHANGE IN CONTROL” MEANS AND INCLUDES EACH OF THE
FOLLOWING:

 

(A)     A TRANSACTION OR SERIES OF TRANSACTIONS (OTHER THAN AN OFFERING OF THE
COMPANY’S COMMON STOCK TO THE GENERAL PUBLIC THROUGH A REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION) WHEREBY ANY “PERSON” OR
RELATED “GROUP” OF “PERSONS” (AS SUCH TERMS ARE USED IN SECTIONS 13(D) AND
14(D)(2) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE
ACT”)) (OTHER THAN THE COMPANY, ANY OF ITS SUBSIDIARIES, AN EMPLOYEE BENEFIT
PLAN MAINTAINED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OR A “PERSON” THAT,
PRIOR TO SUCH TRANSACTION, DIRECTLY OR INDIRECTLY CONTROLS, IS CONTROLLED BY, OR
IS UNDER COMMON CONTROL WITH, THE COMPANY) DIRECTLY OR INDIRECTLY ACQUIRES
BENEFICIAL OWNERSHIP (WITHIN THE MEANING OF RULE 13D-3 UNDER THE EXCHANGE ACT)
OF SECURITIES OF THE COMPANY POSSESSING MORE THAN 50% OF THE TOTAL COMBINED
VOTING POWER OF THE COMPANY’S SECURITIES OUTSTANDING IMMEDIATELY AFTER SUCH
ACQUISITION; OR

 

(B)    DURING ANY PERIOD OF TWO CONSECUTIVE YEARS, INDIVIDUALS WHO, AT THE
BEGINNING OF SUCH PERIOD, CONSTITUTE THE BOARD OF DIRECTORS OF THE COMPANY
TOGETHER WITH ANY NEW DIRECTOR(S) (OTHER THAN A DIRECTOR DESIGNATED BY A PERSON
WHO SHALL HAVE ENTERED INTO AN AGREEMENT WITH THE COMPANY TO EFFECT A
TRANSACTION DESCRIBED IN CLAUSE (A) OR CLAUSE (C) HEREOF) WHOSE ELECTION BY THE
BOARD OF DIRECTORS OF THE COMPANY OR NOMINATION FOR ELECTION BY THE COMPANY’S
STOCKHOLDERS WAS APPROVED BY A VOTE OF AT LEAST TWO-THIRDS OF THE DIRECTORS THEN
STILL IN OFFICE WHO EITHER WERE DIRECTORS AT THE BEGINNING OF THE TWO-YEAR
PERIOD OR WHOSE ELECTION OR NOMINATION FOR ELECTION WAS PREVIOUSLY SO APPROVED,
CEASE FOR ANY REASON TO CONSTITUTE A MAJORITY THEREOF; OR

 

(C)     THE CONSUMMATION BY THE COMPANY (WHETHER DIRECTLY INVOLVING THE COMPANY
OR INDIRECTLY INVOLVING THE COMPANY THROUGH ONE OR MORE INTERMEDIARIES) OF (X) A
MERGER, CONSOLIDATION, REORGANIZATION, OR BUSINESS COMBINATION OR (Y) A SALE OR
OTHER DISPOSITION OF ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS IN ANY
SINGLE TRANSACTION OR SERIES OF RELATED TRANSACTIONS OR (Z) THE ACQUISITION OF
ASSETS OR STOCK OF ANOTHER ENTITY, IN EACH CASE OTHER THAN A TRANSACTION:

 

I)    WHICH RESULTS IN THE COMPANY’S VOTING SECURITIES OUTSTANDING IMMEDIATELY
BEFORE THE TRANSACTION CONTINUING TO REPRESENT (EITHER BY REMAINING OUTSTANDING
OR BY BEING CONVERTED INTO VOTING SECURITIES OF THE COMPANY OR THE PERSON THAT,
AS A RESULT OF THE TRANSACTION, CONTROLS, DIRECTLY OR INDIRECTLY, THE COMPANY OR
OWNS, DIRECTLY OR INDIRECTLY, ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS
OR OTHERWISE SUCCEEDS TO THE BUSINESS OF THE COMPANY (THE COMPANY OR SUCH
PERSON, THE “SUCCESSOR ENTITY”)) DIRECTLY OR INDIRECTLY, AT

 

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LEAST A MAJORITY OF THE COMBINED VOTING POWER OF THE SUCCESSOR ENTITY’S
OUTSTANDING VOTING SECURITIES IMMEDIATELY AFTER THE TRANSACTION, AND

 

II)   AFTER WHICH NO PERSON OR GROUP BENEFICIALLY OWNS VOTING SECURITIES
REPRESENTING 50% OR MORE OF THE COMBINED VOTING POWER OF THE SUCCESSOR ENTITY;
PROVIDED, HOWEVER, THAT NO PERSON OR GROUP SHALL BE TREATED FOR PURPOSES OF THIS
CLAUSE (C) (II) AS BENEFICIALLY OWNING 50% OR MORE OF COMBINED VOTING POWER OF
THE SUCCESSOR ENTITY SOLELY AS A RESULT OF THE VOTING POWER HELD IN THE COMPANY
PRIOR TO THE CONSUMMATION OF THE TRANSACTION; OR

 

(d)    The Company’s stockholders approve a liquidation or dissolution of the
Company.

 

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