Exhibit 10.5


 


October 22,
2008


 


Holly Grey


1151 Church Street Unit 5


San Francisco, CA 94114


 


Re:              AMENDED AND
RESTATED EMPLOYMENT TERMS


 


Dear
Holly,


 


Accuray
Incorporated (the “Company”) is
pleased to offer you continued employment as our Senior Vice President of Finance on the terms and conditions set
forth in this letter, effective as of February 2,
2009 (the “Effective Date”).
This letter amends and restates in its entirety that certain employment letter,
dated as of January 21, 2008 between you and the Company (the “Employment Letter”). You and the Company mutually agree to
amend certain provisions of the Employment Letter as a result of Section 409A
of the Internal Revenue Code of 1986, as amended.


 


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 the 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.


 


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.


 


In
accordance with the terms of such bonus plan, payment of each bonus shall be
made in a single lump-sum cash payment not later than the last day of the
applicable two and one-half (2 1⁄2) month short-term deferral period with respect
to such bonus payment, within the meaning of Treasury Regulation Section 1.409A-1(b)(4).


 


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.


 


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 


 


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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 that you incur a “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of
the Internal Revenue Code of 1986, as amended (the “Code”),
and Treasury Regulation Section 1.409A-1(h)) (“Separation
from Service”) by reason of (i) a termination of your
employment by the Company other than for Cause (as defined below), death or disability,
or (ii) a termination of your employment by you for Good Reason (as
defined below), and provided that you execute a general release of claims in a
form prescribed by the Company (the “Release”)
within twenty-one (21) days (or, if required by applicable law, forty-five (45)
days) after the date of such Separation from Service (the “Separation
Date”) and you do not revoke such Release, and further subject to Section 17(b) below,
then, in addition to any other accrued amounts payable to you through the
Separation Date (including any earned but unpaid bonus), (1) the Company
will, no later than thirty (30) days after the Separation Date, 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 immediately prior to the Separation Date plus (y) a
pro rata portion of your target annual bonus for the fiscal year of the Company
in which such Separation from Service occurs, calculated based on the number of
days elapsed in such fiscal year through the Separation Date plus (z) 50%
of your target annual bonus for the fiscal year of the Company in which such
Separation from Service occurs, and (2) 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 Separation Date,
but in no event longer than the period of time during which you would be
entitled to continuation coverage under Section 4980B of the Code absent
this provision.


 


(b)             If a Change in Control (as defined in Exhibit A
hereto) occurs during the Term and, within the twelve (12) month period
immediately following the effective date of the Change in Control, you incur a
Separation from Service by reason of (i) a termination of your employment
by the Company other than for Cause, death or disability, or (ii) a
termination of your employment by you for Good Reason, then, subject to Section 17(b) below,
in addition to the amounts payable to you pursuant to paragraph (a) of
this Section 8, each of your then outstanding options to purchase shares
of the Company’s common stock shall become fully vested and exercisable
immediately prior to the Separation Date.


 


(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 the
Release.  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 


 


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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:  (i) a material diminution
by the Company of your duties and responsibilities hereunder; (ii) a
material change in the geographic location at which you must perform services
under this letter, provided that in no event will a change to a location within
a 35 mile radius of the Company’s Sunnyvale corporate headquarters be deemed
material for purposes of this clause; or (iii) a material diminution by
the Company of your annual base salary, each as in effect on the date hereof or
as the same may be increased from time to time; provided,
however, that a termination of your employment by you shall only
constitute a termination for “Good Reason” hereunder if (a) you provide
the Company with written notice setting forth the specific facts or
circumstances constituting Good Reason within thirty (30) days after the
initial existence of such facts or circumstances, (b) the Company has
failed to cure such facts or circumstances within thirty (30) days after
receipt of such written notice, and (c) the Separation Date occurs no
later than seventy-five (75) days after the initial occurrence of the event
constituting Good Reason.


 


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. The
specific Payments that shall be reduced and the order of such reduction shall
be determined so as to achieve the most favorable economic benefit to you, and
to the extent economically equivalent, the Payments shall be reduced pro rata,
all as determined by the Company in its sole discretion. 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 


 


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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)
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.


 


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(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 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, 


 


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construed and enforced so as to 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.


 


(a)              The compensation and benefits payable under
this letter are not intended to constitute “nonqualified deferred compensation”
within the meaning of Section 409A of the Code.  Notwithstanding any provision of this letter
to the contrary, in the event that the Company determines that any payments or
benefits payable hereunder may be subject to Section 409A of the Code, the
Company may (without any obligation to do so or to indemnify you for failure to
do so) adopt such amendments to this letter or take any other actions that the
Company determines are necessary or appropriate to (a) exempt such
payments and benefits from Section 409A of the Code in order to preserve
the intended tax treatment of such payments or benefits, or (b) comply
with the requirements of Section 409A of the Code and thereby avoid the
application of penalty taxes thereunder. 
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 thereunder.


 


(b)             Notwithstanding anything to the contrary in
this letter, no compensation or benefits, including without limitation any
severance payments or benefits payable under Section 8 above, shall be
paid to you during the six (6)-month period following your Separation from
Service to the extent that paying such amounts at the time or times indicated
in this letter would result in a prohibited distribution under Section 409A(a)(2)(b)(i) of
the Code.  If the payment of any such
amounts is delayed as a result of the previous sentence, then on the first
business day following the end of such six (6)-month period  (or such
earlier date upon which such amount can be paid under Section 409A of the
Code without resulting in a prohibited distribution, including as a result of
your death), the Company shall
pay you a lump-sum amount equal to the cumulative amount that would have
otherwise been payable to you during such six-month period.


 


(c)              To the extent that any reimbursements or
corresponding in-kind benefits provided to you under this letter are deemed to
constitute compensation to you, such amounts will be paid or reimbursed
reasonably promptly, but not later than December 31 of the year following
the year in which the expense was incurred. 
The amount of any such payments or expense reimbursements in one year
will not affect the expenses or in-kind benefits eligible for payment or
reimbursement in any other taxable year, and your right to such payments or
reimbursement of any such expenses will not be subject to liquidation or
exchange for any other benefit.


 


[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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
       /s/ Euan Thomson

  
	
   

  	
  Name:
   Euan Thomson, Ph.D.

  
	
   

  	
  Title:
   President & Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted
  and Agreed,

  	
   

  
	
  October 22,
  2008.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
       /s/ Holly Grey

  	
   

  	
   

  
	
   

  	
       Holly Grey

  	
   

  	
   

  



 


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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 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 or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or


 


(c)         The consummation by
the Company (whether directly involving the Company or indirectly involving the
Company through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or (y) a sale or
other disposition of all or substantially all of the Company’s assets in any
single transaction or series of related transactions or (z) the
acquisition of assets or stock of another entity, in each case other than a
transaction:


 


(i)            Which results in
the Company’s voting securities outstanding immediately before the transaction
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the Company or the person that, as a result of the
transaction, controls, directly or indirectly, the Company or owns, directly or
indirectly, all or substantially all of the Company’s assets or otherwise
succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a
majority of the combined voting power of the Successor Entity’s outstanding
voting securities immediately after the transaction, and


 


(ii)           After which no
person or group beneficially owns voting securities representing 50% or more of
the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated
for purposes of this 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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