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ALIGN TECHNOLOGY, INC. |
Roger E. George |
Vice President, Corporate and Legal Affairs, General |
Counsel and Corporate Secretary |
TABLE OF CONTENTS | Page |
Time and Date | 10:00 a.m., Pacific Daylight Time, on Wednesday, May 13, 2015 |
Place | Corporate Headquarters, 2560 Orchard Parkway, San Jose, California 95131 |
Items of Business | 1. To elect the eight (8) directors named in this proxy statement 2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accountants for the fiscal year ending December 31, 2015 3. To conduct an advisory (non-binding) vote on executive compensation 4. To consider such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof |
Adjournments and Postponements | Any action on the items of business described above may be considered at the annual meeting at the time and on the date specified above or at any time and date to which the annual meeting may be properly adjourned or postponed. |
Record Date | Only stockholders who owned shares of our common stock at the close of business on March 18, 2015 are entitled to vote. |
Meeting Admission | All stockholders as of the record date, or their duly appointed proxies, may attend the Annual Meeting. Registration will begin at 9:30 a.m. If you attend, please know that you may be asked to present valid picture identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. |
Voting | Your vote is very important. Regardless of whether you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote your shares over the Internet or by telephone. If you received a paper copy of a proxy card by mail, you may submit your proxy for the annual meeting by completing, signing, dating and returning your proxy card in the pre-addressed envelope provided. For specific instructions on how to vote your shares, please refer to the section entitled General Information - How do I vote? in the proxy statement. |
Item | Voting Standard | Vote Recommendation | Page Reference | |
1 - | Annual Election of Directors | Majority of votes cast | FOR each nominee | 6 |
2 - | Ratification of Independent Registered Public Accounting Firm | Majority of votes present in person or by proxy | FOR | 17 |
3 - | Advisory Vote on Named Executive Officer Compensation | Majority of votes present in person or by proxy | FOR | 20 |
Committee Memberships* | ||||||||
Name | Age | Director Since | Primary Occupation | Independent? | AC | CC | NCGC | TC |
Joseph Lacob | 59 | 1997 | Managing Partner & CEO of The Golden State Warriors | Yes | C | X | ||
C. Raymond Larkin (1) | 66 | 2004 | Principal of Group Outcome LLC | Yes | X | |||
George J. Morrow | 63 | 2006 | Retired, EVP of Worldwide Sales & Marketing, Amgen, Inc. | Yes | C | |||
David C. Nagel | 69 | 2009 | Retired, President & CEO, PalmSource | Yes | X | C | ||
Thomas M. Prescott | 59 | 2002 | President & CEO, Align Technology, Inc. | No | ||||
Andrea L. Saia | 57 | 2013 | Retired, Global Head of Vision Care, Novartis AG | Yes | X | |||
Greg J. Santora | 63 | 2004 | Retired, CFO, Shopping.com | Yes | C | X | ||
Warren S. Thaler | 52 | 2004 | President, Gund Investment Corporation | Yes | X | X | X |
(1) | Mr. Larkin is Chairman of the Board of Directors |
INDEPENDENCE | BEST PRACTICES |
7 of 8 director nominees are independent Independent Chairman of the Board has strong role with significant governance responsibilities All Board committees that meet regularly are comprised wholly of independent directors Independent directors meet regularly in executive session without management present | Stock ownership requirements for directors and executives that are reviewed annually Anti-hedging and anti-pledging policies |
ACCOUNTABILITY | RISK OVERSIGHT |
Annual election of all directors Majority voting in uncontested elections Annual performance self-evaluations by Board and committees | Board oversight of overall Company risk management infrastructure Committee oversight of certain risks related to each committee’s areas of responsibility |
COMPENSATION ELEMENT: | DESCRIPTION: |
Salary | Annual base pay |
Actual Cash Incentive (bonus) | Cash-based Incentive Compensation; annual performance-based bonus |
Restricted Stock Units | Other equity whose value increases with stock price |
Market Stock Units | Performance-based equity using 3-year relative stock price |
Other Compensation | Includes limited perquisites and other personal benefits |
Q: | Why am I receiving these materials? |
A: | Our Board of Directors (the “Board”) is providing these materials to you in connection with the solicitation of proxies for use at Align’s 2015 Annual Meeting of Stockholders, which will take place on Wednesday, May 13, 2015 at 10:00 a.m. local time, at our corporate headquarters located at 2560 Orchard Parkway, San Jose, California 95131 (referred to in this proxy statement as the “Annual Meeting”). As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this proxy statement. |
Q: | What information is contained in these materials? |
A: | The proxy materials include our proxy statement for the Annual Meeting and our 2014 Annual Report on Form 10-K. If you received a paper copy of these materials by mail, the proxy materials also include a proxy card for the Annual Meeting. If you received a notice of the Internet availability of the proxy materials instead of a paper copy of the proxy materials, see "How do I vote?" below. The information in this proxy statement contains important information regarding our Annual Meeting. Specifically, it identifies the proposals on which you are being asked to vote, provides information you may find useful in determining how to vote and describes the voting procedures. |
A: | This year, we are once again pleased to be using the SEC rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to many of our stockholders a notice of the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All stockholders receiving the notice will have the ability to access the proxy materials over the Internet and request a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice of the Internet availability of the proxy materials. In addition, the notice contains instructions on how you may request to access proxy materials in printed form by mail or electronically on an ongoing basis. |
A: | We provide some of our stockholders with paper copies of the proxy materials instead of a notice of the Internet availability of the proxy material. |
Q: | What proposals will be voted on at the Annual Meeting and how does the Board recommend that I vote? |
A: | The proposals that will be presented at the Annual Meeting and our Board’s voting recommendations are set forth in the table below: |
Proposal | Board’s Voting Recommendation | |
Proposal 1 — The election of eight (8) director nominees | For Each Director Nominee | |
Proposal 2 — To Ratify the Appointment of PwC as the Company’s Independent Registered Public Accounting Firm for Fiscal 2015 | For | |
Proposal 3 — An advisory vote to approve the compensation of our named executive officers | For | |
Q: | Who can vote at the Annual Meeting? |
A: | If you are a stockholder of record or a beneficial owner who owned our common stock at the close of business on March 18, 2015, the record date for the Annual Meeting, you are entitled to vote at the Annual Meeting. As of the record date, 80,727,147 of our common stock were issued and outstanding and no shares of our preferred stock were issued and outstanding. |
Q: | What is the difference between holding shares directly or as a beneficial owner, in street name? |
A: | Most of our stockholders hold their shares as a beneficial owner through a brokerage firm, bank or other nominee. As summarized below, there are some differences between shares held of record and those owned beneficially. |
Q: | How do I vote? |
A: | Voting by Mail. Stockholders who received a paper copy of a proxy card by mail may submit proxies by completing, signing and dating their proxy card and mailing it in the accompanying pre-addressed envelope. Proxy cards submitted by mail must be received prior to the closing of the polls at the Annual Meeting in order for the votes to be recorded. |
Q: | What if I don’t give specific voting instructions? |
A: | In the election of directors, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you elect to “ABSTAIN” in the election of directors, the abstention will not impact the election of directors. In tabulating the voting results for the election of directors, only "FOR" and "AGAINST" votes are counted. |
Q: | Can I change or revoke my vote? |
A: | Subject to any rules your broker or other nominee may have, you may change your proxy instructions at any time before your proxy is voted at the Annual Meeting. |
• | Sign and return another proxy bearing a later date prior to the time we take the vote at the Annual Meeting; |
• | Submit a timely and valid Internet or telephone vote on a later date but prior to the time we take the vote at the Annual Meeting; |
• | provide written notice of the revocation to: |
• | attend the Annual Meeting and vote in person. Your attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request. |
• | submit new voting instructions to your broker or other nominee; or |
• | if you have obtained a legal proxy from your broker or other nominee giving you the right to vote your shares at the Annual Meeting, attend the Annual Meeting and vote in person. |
Q: | What vote is required to approve each item? |
A: | The vote required and the way the vote is calculated for the proposals is as follows: |
PROPOSAL | VOTE REQUIRED | BROKER DISCRETIONARY VOTING ALLOWED | ||
Proposal 1 — To Elect Eight (8) Director Nominees | A nominee must receive more "for" votes than "against" votes and the number of votes "for" must be the majority of the required quorum | NO | ||
Proposal 2 — To Ratify the Appointment of PwC as the Company’s Independent Registered Public Accounting Firm for Fiscal 2015 | Majority of Shares Entitled to Vote and Present in Person or Represented by Proxy | YES | ||
Proposal 3 — To Consider an Advisory Vote to Approve the Compensation of our Named Executive Officers | Majority of Shares Entitled to Vote and Present in Person or Represented by Proxy | NO | ||
Q: | What constitutes a quorum? |
A: | A quorum, which is a majority of the outstanding shares of our common stock as of the record date, must be present or represented by proxy in order to hold the Annual Meeting and to conduct business. As of the record date, 80,727,147 shares of common stock, representing the same number of votes, were outstanding. That means that we need the holders of at least 40,363,574 shares of common stock to be represented for us to have a quorum. Your shares will be counted as present at the Annual Meeting if you attend the Annual Meeting in person. Your shares will be considered present and represented by proxy if you submit a properly executed proxy card or vote via the Internet or by telephone. Under the General Corporation Law of the State of Delaware, abstentions and broker “non-votes” are counted as present and entitled to vote and so are included for purposes of determining whether a quorum is present at the Annual Meeting. |
Q: | Who will bear the cost of soliciting votes for the Annual Meeting? |
A: | We will bear the entire cost of proxy solicitation, including the preparation, assembly, printing and mailing of proxy materials. The original solicitation of proxies by mail may be supplemented by solicitation by telephone and other means by directors, and employees of Align. None of these officers, directors or employees will receive special compensation for such services. In addition, we may reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding these proxy materials to you. |
Q: | Who will count the vote? |
A: | We expect a representative from the Company will tabulate the proxies and act as inspector of the election. |
Q: | What is the Company’s website address? |
A. | Our website address is www.aligntech.com. We make this proxy statement, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended available on our website in the Investor Relations section, as soon as reasonably practicable after electronically filing such material with the Securities and Exchange Commission (“SEC”). |
Q: | Where can I find the voting results of the meeting? |
A: | The preliminary results will be announced at the Annual Meeting. The final results will be published in a Current Report on Form 8-K, which we will file with the SEC by May 19, 2015. |
Q: | Is there any information that I should know regarding future annual meetings? |
A: | Stockholder proposals may be included in our proxy statement for an annual meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. For a stockholder proposal to be considered for inclusion in our proxy statement for the annual meeting to be held in 2016, we must receive the proposal at our principal executive offices, addressed to the Corporate Secretary, no later than December 3, 2015. In addition, a stockholder proposal that is not intended for inclusion in our proxy statement under Rule 14a-8 may be brought before the 2016 annual meeting so long as we receive information and notice of the proposal in compliance with the requirements set forth in our Bylaws, addressed to the Corporate Secretary at our principal executive offices, not later than February 13, 2016 nor earlier than January 14, 2016. |
Joseph Lacob Age: 59 Director since 1997 Board committees: Nominating and Governance (Chair) and Technology | Mr. Lacob has served as a director of Align since August 1997 and has been a partner of Kleiner Perkins Caufield & Byers (KPCB), a venture capital firm, since May 1987. In 2011, Mr. Lacob acquired The Golden State Warriors of the National Basketball Association. He is currently the Managing Partner and CEO of the Warriors. Prior to joining KPCB in 1987, Mr. Lacob was an executive with Cetus Corporation (now Chiron), FHP International, a health maintenance organization, and the management consulting firm of Booz, Allen & Hamilton. He was previously on the board of directors of Orexigen Therapeutics, a biopharmaceutical company focused on the development of pharmaceutical product candidates for the treatment of obesity. Mr. Lacob received his B.S. in Biological Sciences from the University of California at Irvine, his Masters in Public Health from the University of California at Los Angeles and his M.B.A. from Stanford University Mr. Lacob has demonstrated success in his business and leadership skills, serving as a partner of KPCB since 1987. In his role at KPCB, he has gained considerable technology, health care and life sciences industry experience. During his career at KPCB, Mr. Lacob has been closely involved with investments in over fifty life science companies, including the start-up or incubation of a dozen ventures, and with KPCB's medical technology practice, which includes over thirty therapeutic and diagnostic medical device companies. With this extensive business background, Mr. Lacob also brings considerable finance and investment experience that has proven to be valuable in addressing issues that arise at Align. | |
C. Raymond Larkin Jr. (Chairman of the Board) Age: 66 Director since 2004 Board committees: Nominating and Governance | Mr. Larkin has served as a director of Align since March 2004. In February 2006, Mr. Larkin was appointed as Chairman of the Board. He currently is a Principal of Group Outcome L.L.C., a merchant banking firm concentrating on medical technologies. From 2001 to 2007, he served as a part time Venture Partner at Cutlass Capital, a venture capital firm. Mr. Larkin was previously Chairman and Chief Executive Officer at Eunoe, Inc., a medical device company. From 1983 to March 1998, he held various executive positions with Nellcor Puritan Bennett, Inc., a medical instrumentation company, for which he served as President and Chief Executive Officer from 1989 until 1998. Mr. Larkin also held various positions of increasing responsibility at Bentley Laboratories/American Hospital Supply from 1976 to 1983. He serves on the board of directors of Heartware, Inc., a medical device company developing implant devices for the treatment of advanced heart failure. Mr. Larkin received his B.S. in Industrial Management from LaSalle University. Mr. Larkin brings with him considerable business experience in the medical device industry serving as President and CEO of a large public company. In his role as President and CEO of Nellcor Puritan Bennett, Inc., Mr. Larkin took on significant management, strategic and operational responsibilities leading that business through significant growth, including numerous mergers & acquisitions. This operational experience has proven valuable in addressing issues that have arisen at Align. With his knowledge of the medical device and health care industry, Mr. Larkin provides valuable insight to our Board. Mr. Larkin’s experience as a member of the board of directors of various public companies provides Mr. Larkin a deep understanding of the role of the board of directors and positions him well to serve as our Chairman. |
George J. Morrow Age: 63 Director since 2006 Board committees: Compensation (Chair) | Mr. Morrow has served as a director of Align since February 2006. From February 2011 until January 2013, Mr. Morrow served as a consultant to Amgen Inc., a global biotechnology company. From 2003 until his retirement in February 2011, he was the Executive Vice President, Global Commercial Operations at Amgen Inc., where he also served as Executive Vice President of Worldwide Sales and Marketing between 2001 and 2003. From 1992 to 2001, Mr. Morrow held multiple leadership positions at GlaxoSmithKline Inc. and its subsidiaries, including President and Chief Executive Officer of Glaxo Wellcome Inc. He is a member of the board of directors of Vical Incorporated, a company that researches and develops biopharmaceutical products, Safeway Inc., a food and drug retailer and was a member of the board of directors of Human Genome Sciences, Inc., a biopharmaceutical discovery and development company, from March 2011 until its acquisition in August 2012 by GlaxoSmithKline plc. Mr. Morrow holds a B.S. in Chemistry from Southampton College, Long Island University, an M.S. in Biochemistry from Bryn Mawr College and an M.B.A. from Duke University. As a former executive vice president at Amgen and Glaxo, two large public companies, Mr. Morrow brings to our Board considerable business experience in the medical technology industry. As part of the executive leadership at Amgen, Mr. Morrow has recent front-line exposure to many of the issues facing public companies today, particularly on the operational, regulatory, financial and corporate governance fronts. Mr. Morrow's leadership skills and experience make him knowledgeable of the complex issues facing global companies today and give him an understanding of what makes businesses work effectively and efficiently. These skills and experience are extremely valuable to our Board and enable Mr. Morrow to be an effective Compensation Committee chairman. | |
Dr. David C. Nagel Age: 69 Director since 2009 Board committees: Compensation and Technology (Chair) | Dr. David C. Nagel has served as a director of Align since July 2009. Dr. Nagel was President and CEO of PalmSource from 2001 to 2005, now known as ACCESS Systems Americas, Inc., a subsidiary of ACCESS which develops the Palm OS PDA operating system. Dr. Nagel also served as a member of the Palm board of directors. Prior to joining Palm, Dr. Nagel was the Chief Technology Officer at AT&T and President of AT&T Labs from 1996 to 2001. Earlier in his career, Dr. Nagel was Senior Vice President at Apple Computer where he led the worldwide research and development group responsible for Mac OS software, Macintosh hardware, imaging and other peripheral products development. Before joining Apple, Dr. Nagel was head of NASA human factors research at NASA's Ames Research Center. Dr. Nagel serves on the board of directors of Vonage Holdings Corp., a leading provider of high-quality voice and messaging services over broadband networks. Previously, Mr. Nagel served on the board of directors of Unwired Planet, Inc. (formerly Openwave Systems Inc.), an independent provider of software solutions for the communications and media industries, Tessera Technologies, Inc., an independent licensor of intellectual property and a designer and manufacturer of digital optics and imaging technology to the mobility industry, and Leapfrog Enterprises, Inc., a leading designer, developer and marketer of innovative technology-based learning platforms and related proprietary content for children. Dr. Nagel holds B.S. and M.S. degrees in engineering and a Ph.D. in perception and mathematical psychology, all from University of California Los Angeles. Dr. Nagel has considerable business experience in the technology industry serving as President and Chief Executive officer of PalmSource and Chief Technology Officer at AT&T. Dr. Nagel's drive for innovation, evidenced during his tenure at PalmSource, AT&T and Apple, enhances the knowledge of our Board and provides useful insights to management in connection with our focus on technology innovation. Dr. Nagel's experience as a member of the board of directors of various public companies, including as member or chairman of their Compensation Committees, gives him insight and perspective into current best practices at the Board and Compensation Committee level and enables him to be an effective contributing member. |
Thomas M. Prescott Age: 59 Director since 2002 No Board committees | Mr. Prescott has served as our President and Chief Executive Officer and a member of the Board since March 2002. Prior to joining Align, Mr. Prescott was President and Chief Executive Officer of Cardiac Pathways, Inc. from May 1999 to August 2001 and a consultant for Boston Scientific Corporation from August 2001 to January 2002 after its acquisition of Cardiac Pathways in August 2001. Prior to Cardiac Pathways, Mr. Prescott held various sales, general management and executive roles at Nellcor Puritan Bennett, Inc. from April 1994 to May 1999, and various management positions at GE Medical Systems from October 1987 to April 1994. In addition, Mr. Prescott served in sales, marketing and management roles at Siemens AG from December 1980 to July 1986. He received his B.S. in Civil Engineering from Arizona State University and Masters in Management from Northwestern University. As CEO, Mr. Prescott is the only officer to sit on our Board. With over 10 years of experience at our Company, he has deep knowledge and understanding of Align and its business. Mr. Prescott’s prior experience as CEO of another publicly traded medical device company demonstrates his leadership capability and business acumen. His experience with strategic and operational issues in the life sciences industry along with his service on the board of directors of other companies in this industry gives him insight into the issues facing this industry and brings valuable expertise to our Board. | |
Andrea L. Saia Age: 57 Director since 2013 Board committees: Audit | Ms. Saia has served as a director of Align since July 2013. Ms. Saia was previously the Global Head of Vision Care in the Alcon division of Novartis AG, from 2011 until her retirement in 2012. Prior to this role, she served as President and Chief Executive Officer of CibaVision Corporation, a subsidiary of Novartis, from 2008 to 2011. From 2005 to 2007, she relocated to Switzerland and served as President of Europe, Middle East, and Africa operations, CibaVision’s largest regional business unit. She initially joined CibaVision in 2002 as Global Head of Marketing and was promoted to President of the Global Lens Business the following year. Prior to Novartis, Ms. Saia was the Chief Marketing Officer for GCG Partners Inc. Ms. Saia also held senior management and marketing positions with global consumer products companies such as Procter & Gamble Co., Unilever, and Revlon, Inc.. Ms. Saia earned an M.B.A. from J.L. Kellogg Graduate School of Business and a B.S. in Business Administration from Miami University. Ms. Saia also serves on the board of directors of Coca-Cola Enterprises, Inc., the marketer, producer and distributor of Coca-Cola products in European markets. Ms. Saia brings to the Board extensive global business experience, a broad understanding of the healthcare, medical device and consumer products industries, strong management skills and operational expertise through her positions at Novartis. In those positions, she dealt with a wide range of issues as they rebuilt and strengthened the innovation and operating functions, and delivered industry leading sales and profit growth. The Board believes that her extensive knowledge of healthcare, medical device and consumer products industries provides her with insights that are particularly helpful and valuable to our board. In addition, Ms. Saia also serves on the board of directors of another publicly traded company, which gives her insight and perspective into current best practices at the board level and enables her to be an effective contributing member of our Board and our Audit Committee. |
Greg J. Santora Age: 63 Director since 2003 Board committees: Audit (Chair) and Compensation | Mr. Santora has served as a director of Align since July 2003. Mr. Santora served as Chief Financial Officer at Shopping.com, a provider of internet-based comparison shopping resources, from December 2003 until September 2005. From 1997 through 2002, he served as Senior Vice President and Chief Financial Officer for Intuit, Inc., a provider of small business and personal finance software. Prior to Intuit, Mr. Santora spent nearly 13 years at Apple Computer in various senior financial positions including Senior Finance Director of Apple Americas and Senior Director of Internal Consulting and Audit. Mr. Santora, who began his accounting career with Arthur Andersen L.L.P., has been a CPA since 1974. He serves on the board of directors of RetailMeNot, Inc., a digital coupon site, since May 2013. In addition, he served on the board of directors of Taleo Corporation, a provider of on-demand talent management solutions until its acquisition by Oracle Corporation in April 2012. Mr. Santora holds a B.S. in Accounting from the University of Illinois and an M.B.A. from San Jose State University. Mr. Santora is an experienced financial leader with over 35 years of finance and accounting experience gained through his education and work at a major accounting firm and his later positions as Chief Financial Officer of Intuit and Shopping.com. The compliance, financial reporting and audit expertise Mr. Santora gained in his senior finance and operations roles, including as chief financial officer, has proven valuable in addressing issues that have arisen at Align during Mr. Santora’s tenure as Audit Committee chairman. Mr. Santora service on the board of directors and audit committee of another publicly traded company, gives him insight and perspective into current best practices with respect to finance organizations and the audit committee function. | |
Warren S. Thaler Age: 52 Director since 2004 Board committees: Audit, Nominating and Governance, and Technology | Mr. Thaler has served as a director of Align since June 2004. Since 2001, Mr. Thaler has been President of Gund Investment Corporation, an investment firm owned by Gordon Gund with holdings in real estate as well as public and private equity securities. Since 1990, Mr. Thaler has served on the board of directors of several privately held companies owned by the Gund family. From 1990 to 2005, Mr. Thaler was on the board of directors of the Cleveland Cavaliers and Gund Arena Company and from 2001 to 2005 represented the Cleveland Cavaliers as its Alternate Governor at meetings of the National Basketball Association’s Board of Governors. Mr. Thaler received his B.A. from Princeton University and his M.B.A. from Harvard University. Mr. Thaler’s demonstrated executive level management skills make him an important advisor to our Board. His success in building businesses as well as his finance and investment experience gained at Gund and through his education makes Mr. Thaler well suited for our Audit Committee. Mr. Thaler’s business background makes him a valuable component of a well rounded Board and a key member of the Board’s audit, nominating and governance, and technology committees. |
• | Director Stock Ownership Guidelines. The guidelines provide that each director should own shares of Align’s common stock equal in market value to five times the cash portion of the Board’s annual retainer. The guideline for the Chairman of the Board is equal to the amount calculated for each of the other non-executive members of the Board. By way of example, assuming the cash portion of the Board’s annual retainer is $40,000, the target ownership level for a director, including the Chairman, would be $200,000. Directors are expected to attain the minimum level of target ownership within a period of five years from the effective date of the policy. Any new director will be expected to attain the minimum level of target ownership within a period of five years from the date he or she is first elected to the Board. Currently, all directors are in compliance with this policy. |
• | Executive Officer Stock Ownership Guidelines. The target ownership guideline set for each executive is based on that person’s relative level of seniority and responsibility. For our CEO, the ratio is 5.0 times his annual base salary. For each executive officer other than our CEO, the ratio is 1.0 times his or her annual base salary. Once established, an executive officer’s target ownership guideline does not re-adjust automatically as a result of changes in his or her base salary or changes in the price of the company’s stock. Executive officers are required to achieve the guideline within five years of becoming an executive officer, or, in the case of persons who were executive officers at the time the guidelines were adopted, within five years of the date of adoption of the guidelines. Currently, each executive officer is in compliance with the stock ownership guidelines. |
• | shares of Align common stock held directly by the director or officer or in trust for the benefit of the director or officer or his or her family member living in the same household, |
• | 50% of the gain on vested in-the-money stock options, and |
• | shares of underlying Align restricted stock units held directly by a director or officer, whether or not yet vested. |
Audit Committee | |
2014 Meetings: 11 Members: Greg J. Santora (Chair) Andrea L. Saia Warren S. Thaler | Oversees and monitors our accounting and financial reporting processes, our financial statement audits, the qualifications, independence and performance of our independent auditors and our internal accounting and financial controls. |
Pre-approves audit and non-audit services. | |
Provides oversight and monitors our Internal Audit Department. | |
Reviews, approves and monitors our Code of Business Conduct and Ethics. | |
Oversees and reviews our risk management policies. | |
Establishes procedures for receiving, retaining and treating complaints regarding accounting, internal accounting controls or auditing matters. | |
None of the Audit Committee members are employees of Align, and our Board has determined that each member is independent within the meaning of the NASDAQ listing standards and the rules and regulations of the SEC. | |
Our Board has determined that Mr. Santora is qualified as an “audit committee financial expert” within the meaning of the rules of the SEC and has confirmed that the other members of the Audit Committee are able to read and understand financial statements. |
Compensation Committee | |
2014 Meetings: 8 Members: George Morrow (Chair) Dr. David C. Nagel Greg Santora | Ensures that the Company’s compensation programs successfully align the interest of employees, including executive officers, with those of the Company’s stockholders. |
Reviews and administers all compensation arrangements for executive officers, and reviews general compensation goals and guidelines for Align’s employees and the criteria for which bonuses are to be determined. | |
Retains, oversees, and assesses the independence of compensation consultants and advisors. | |
Assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. | |
May form and delegate authority to subcommittees when appropriate, although no such delegation is currently in effect. | |
None of the Compensation Committee members are employees of Align, and our Board has determined that each member is independent within the meaning of the NASDAQ listing standards. |
Nominating and Governance Committee | |
2014 Meetings: 2 Members: Joseph Lacob(Chair) C. Raymond Larkin Jr. Warren S. Thaler | Identifies, evaluates and recommends nominees to the Board. |
Evaluates the composition, organization and governance of the Board and its committees. | |
Develops and recommends corporate governance principles applicable to Align |
Technology Committee | |
2014 Meetings: 1 Members: Dr. David C. Nagel (Chair) Joseph Lacob Warren Thaler | Reviews Align's technology and development activities. |
Oversees and advises the Board on matters of innovation and technology. | |
• | the highest personal and professional ethics and integrity; |
• | proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment; |
• | skills and experience that are complementary to those of the existing Board; |
• | the ability to assist and support management and make significant contributions to Align’s success; and |
• | an understanding of the fiduciary responsibilities that is required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities. |
• | our compensation program is designed to provide a balanced mix of cash and equity, annual, and longer-term incentives in order to encourage strategies and actions that are in Align’s long-term best interests; |
• | base salaries are consistent with an employee’s responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security; |
• | we establish performance goals under our annual cash incentive plan that we believe (A) are reasonable in light of past performance and market conditions, and (B) encourage success without encouraging excessive risk taking to achieve short-term results, and, therefore, do not encourage unnecessary or excessive risk-taking; |
• | the performance goals that determine payouts under our annual cash incentive plans are company-wide in order to encourage decision-making that is in the best long-term interests of Align and our stockholders as a whole; |
• | the performance goals under our annual cash incentive plan include the achievement of non-financial, key strategic objectives that put an emphasis on the achievement of results intended to build value over the longer-term; |
• | under our annual cash incentive plans, achievement of performance goals at levels below full target reduces only the payout related to that goal, not the other goals, and therefore does not result in an “all-or-nothing” approach; |
• | each performance goal under our annual cash incentive plan has a maximum cap on achievement; |
• | the Compensation Committee has discretion over annual cash incentive program payouts; |
• | for our executive officers, we use a portfolio of equity based incentives that incent performance over a variety of time periods with respect to several balanced goals: |
• | Restricted Stock Units ("RSUs") retain value even in a depressed market making it less likely that employees take unreasonable risks to get, or keep, equity grant “in the money”; and |
• | performance-based market stock units ("MSUs") measure relative stockholder return over a three-year performance cycle; and |
• | executive officers are subject to share ownership guidelines. |
Description | Fee | ||
Annual retainer for Chairman of the Board (1) | $ | 210,000 | |
Monthly retainer for membership on the Board (excluding the Chairman of the Board) | $ | 3,000 | |
Additional monthly retainer for Chair of Audit and Compensation Committees | $ | 1,500 | |
Additional monthly retainer for Chair of Technology Committee | $ | 833 | |
Additional monthly retainer for Chair of Nominating and Governance Committee | $ | 500 | |
Each face to face meeting of the Board | $ | 1,500 | |
Each telephonic meeting of the Board | $ | 750 | |
Each face to face Committee meeting | $ | 1,000 | |
Each telephonic Committee meeting | $ | 500 |
(1) | The Chairman of the Board does not receive any compensation for Board or committee attendance other than the annual retainer. |
Description | Current Fee | ||
Annual Retainer for Board Membership (other than Chairman) | $ | 50,000 | |
Additional Annual Retainer for Chair of Compensation Committee and Audit Committee | $ | 13,500 | |
Additional Annual Retainer for Chair of Nominating and Governance Committee and Technology Committee | $ | 5,000 | |
Annual Retainer for Chairman of the Board | $ | 210,000 |
Name | Fees earned or paid in cash ($) | Stock awards ($)(1) | Total ($) | ||||||
Joseph Lacob | 58,750 | 273,295 | 332,045 | ||||||
C. Raymond Larkin Jr. (2) | 210,000 | 397,520 | 607,520 | ||||||
George Morrow | 76,500 | 273,295 | 349,795 | ||||||
Dr. David Nagel | 69,998 | 273,295 | 343,293 | ||||||
Andrea L. Saia | 60,000 | 273,295 | 333,295 | ||||||
Greg Santora | 88,250 | 273,295 | 361,545 | ||||||
Warren Thaler | 66,500 | 273,295 | 339,795 |
(1) | The amounts shown in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of awards of RSUs. There can be no assurance that the grant date fair value amounts will ever be realized. The RSUs are time based awards and are not subject to performance or market conditions. |
(2) | Mr. Larkin is the Chairman of the Board. The Chairman of the Board does not receive any compensation for Board or committee attendance other than the annual retainer. |
Name | Option Awards | Stock Awards | |||
Mr. Lacob | 40,000 | 5,500 | |||
Mr. Larkin | 75,000 | 8,000 | |||
Mr. Morrow | 50,000 | 5,500 | |||
Dr. Nagel | 60,000 | 5,500 | |||
Ms. Saia | — | 12,633 | |||
Mr. Santora | 20,000 | 5,500 | |||
Mr. Thaler | 20,000 | 5,500 |
2014 | 2013 | ||||||
Audit fees (1) | $ | 2,298,528 | $ | 1,995,206 | |||
Audit-related fees (2) | 147,443 | 359,000 | |||||
Tax fees (3) | 778,159 | 945,201 | |||||
All other fees (4) | 6,150 | 9,073 | |||||
Total fees: | $ | 3,230,280 | $ | 3,308,480 |
(1) | Audit fees — These are fees for professional services performed by PwC for the annual audit of Align’s financial statements and review of financial statements included in Align’s quarterly filings, and services that are normally provided in connection with statutory and regulatory filings or engagements, and attest services, except those not required by statute or regulation. |
(2) | Audit-related fees — These are fees for technical advisory consultations performed by PwC that are reasonably related to the performance of the audit or review of Align’s financial statements and are not reported under “Audit fees”, including fees for due diligence services. |
(3) | Tax fees — These are fees for professional services performed by PwC with respect to tax compliance, tax advice and tax planning. |
(4) | All other fees — These consist of all other fees billed to us for professional services performed by PwC and not reported under "Audit fees," "Audit-related fees" and "Tax fees." |
• | the integrity of Align’s financial statements; |
• | Align’s compliance with legal and regulatory requirements; |
• | the independent registered public accountant’s qualifications, independence and performance; |
• | adequacy of Align’s internal accounting and financial controls; and |
• | Align’s internal audit department. |
• | providing guidance with respect to Align’s relationship with the independent auditors, including having responsibility for their appointment, compensation and retention; |
• | reviewing the results and audit scope; |
• | approving audit and non-audit services; |
• | reviewing and discussing with management the quarterly and annual financial reports; |
• | overseeing and reviewing Align’s risk management policies; and |
• | overseeing management’s implementation and maintenance of effective systems of internal controls. |
Respectfully submitted by: |
AUDIT COMMITTEE |
Greg J. Santora, Chair |
Andrea L. Saia |
Warren S. Thaler |
• | Approximately 85% — 90% of their target total direct compensation opportunity is variable and tied to achievement of internal performance targets or Align's stock price performance; |
• | Since Align’s achievement of internal performance targets was below target in 2014 compared to at or slightly above target in 2013, each named executive officer received less cash incentive award compensation compared to fiscal 2013; |
• | Granted long-term equity awards, including performance-based market stock units, which are earned based on a comparison of Align’s stock price performance to the NASDAQ Composite index over a three-year performance period; |
• | Executive officers are not entitled to any tax gross-up treatment on any severance or change-of-control benefits; |
• | Align’s compensation programs are reviewed regularly by the Compensation Committee, which has determined the Company’s compensation programs do not create inappropriate or excessive risk that is likely to have a material adverse effect on the Company; and |
• | Align continued to demonstrate its prudent use of equity while balancing stockholder concerns with the motivation of our executive officers to achieve the Company’s business goals and create long-term stockholder value. In 2014, Align’s overall equity award adjusted burn rate (which counts each RSU and earned MSU award as 2.0 shares) was 3.01%. |
Plan Category | Number of securities to be issued upon exercise of outstanding options, RSUs and MSUs (1) | Weighted average exercise price of outstanding options (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (2) (3) | |||
Equity compensation plans approved by security holders | 3,288,512 | $15.43 | 8,688,957 | |||
Equity compensation plans not approved by security holders | — | — | — | |||
Total | 3,288,512 | $15.43 | 8,688,957 |
(1) | Includes 2,123,351 restricted stock units, including 497,500 market-performance based restricted stock units at target, which have an exercise price of zero. |
(2) | Includes 1,363,827 shares available for issuance under our ESPP. We are unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights or the weighted average exercise price of outstanding rights under the ESPP. |
(3) | Our 2005 Incentive Plan, as amended, provides for the granting of incentive stock options, non-statutory stock options, restricted stock units, market stock units, stock appreciation rights, performance units and performance shares to employees, non-employee directors, and consultants. Shares granted on or after May 16, 2013 as an award of restricted stock, restricted stock unit, market stock units, performance share or performance unit ("full value awards") are counted against the authorized share reserve as one and nine-tenths (1 9/10) shares for every one (1) share subject to the award, and any shares canceled that were counted as one and nine-tenths against the plan reserve will be returned at the same ratio. Full value awards granted prior to May 16, 2013 were counted against the authorized share reserve as one and one half (1 1/2) share for every one (1) share subject to the award, and any shares canceled that were counted as one and one half against the plan reserve will be returned at this same ratio. As of December 31, 2014, we have a total of 23,283,379 shares authorized and reserved, of which 7,325,130 shares are available for issuance which excludes 418,187 of potentially issuable MSUs if performance targets are achieved at maximum payout. |
• | Thomas M. Prescott, our President and Chief Executive Officer |
• | David L. White, our Chief Financial Officer |
• | Emory M. Wright, our Vice President, Operations |
• | Raphael S. Pascaud, our Vice President, International |
• | Roger E. George, our Vice President, Corporate and Legal Affairs and General Counsel |
• | Net revenue growth of 15.4%, with net revenues of $761.7 million in 2014 compared to $660.2 million in 2013; |
• | 478.0 thousand Invisalign cases shipped, up 13.2% from 422.4 cases in 2013, with 28.6% year-over-year volume growth from our International doctors; and |
• | Operating margins of 25.4% of our net revenues. |
• | we further expanded our directly covered country markets in Europe by converting 23 countries previously managed by our Europe, Middle East and Africa ("EMEA") distributor back into direct sales geographies; |
• | we announced multiple innovations designed to improve clinical applicability and predictability of treatment outcome, including: |
◦ | the launch of Invisalign G5 for Deep Bite; |
◦ | the launch of ClinCheck Pro software, designed to give doctors more precise control over the final tooth position to better achieve their treatment goals; and |
◦ | the announcement of the 2015 launch of Invisalign G6 for treatment of severe crowding and bimaxillary protrusion. |
• | we grew our Invisalign teenage segment 16.1% year over year demonstrating our continued progress and share gain among teenage patients. |
• | we grew international Invisalign case shipments 28.6% year over year driven by increased adoption in Europe and Asia Pacific. |
• | Under our CEO’s leadership, we have created long-term, sustained value for our stockholders. Although our stock price declined approximately 2% in 2014, for the three-year period ending December 31, 2014, our stock price increased from $23.95 to $55.91 per share, reflecting strong price appreciation of approximately 233% and an annualized total stockholder return of 33%. |
• | Stockholders indicated strong support for our executive compensation program in 2014. In 2014, we held our third annual stockholder advisory vote on the compensation of our named executive officers. Approximately 93% of the total votes cast at our 2014 annual meeting voted in favor of our named executive officer compensation. As we evaluated our executive compensation practices since that vote, we were mindful of the strong support our stockholders expressed for our executive compensation program. As a result, the Compensation Committee generally believes that the stockholder advisory vote |
• | Our compensation program continues to emphasize performance-based pay. Our compensation program is designed to pay more when our financial and strategic performance is robust and less when it is not, providing built-in flexibility in the management of our operating expenses and enabling us to preserve strategic programs when economic conditions are unfavorable. A significant portion of our executive officers’ compensation is variable and tied to the success of our business and the individual performance of our executives. Consistent with this pay-for-performance orientation, Align believes that annual cash incentive (bonus) awards and long-term equity compensation should together represent the most significant portion of total direct compensation. As a result, a larger portion of our executive officers’ total compensation is at risk relative to Align’s other employees. We believe this is appropriate because our executive officers bear the greatest responsibility for Align’s results and can exert the greatest influence on Align’s performance. As illustrated by the charts below, in fiscal 2014, approximately 93% of our CEO’s total-compensation and approximately 82% of our other named executive officers total compensation was subject to annual performance goals or tied to the value of our common stock. |
• | Annual cash incentive awards subject to annual performance goals. The Committee seeks to motivate management to continuously improve the financial performance of the Company and to achieve our key strategic priorities through a cash incentive (bonus) plan that rewards higher performance with increased incentive opportunities. This provides us with a variable expense structure, allowing us to reduce our compensation costs in challenging times and reward performance when business conditions and results warrant. Despite delivering strong financial performance during the year and making significant progress against our key strategic initiatives, our performance relative to pre-established targets for revenue and operating income was below expectations. As a result, the annual incentive payments for our NEOs ranged from 90% to 109% of their target award opportunity. |
• | Equity awards are tied to the value of our common stock. Value received under our annual equity awards varies based on our stock price performance. In particular, payouts of our MSUs awarded to our executive officers vary based on the relative performance of our stock compared to the NASDAQ Composite Index. MSUs granted in 2014 are earned based on Align’s relative stockholder return over a three-year performance period, with 100% of the earned shares vesting at the end of three years. For MSUs granted in 2011 that vested in February 2014, Align stock outperformed the NASDAQ Composite Index by 135% during the applicable performance period. As a result, the NEOs who were granted 2011 MSUs earned 150% of their target awards due to Align’s continued outstanding stock price performance compared to the NASDAQ Composite Index. Our Compensation Committee specifically designed our MSU award program to closely tie actual long-term performance with long-term pay, and total stockholder return has been, and is expected to continue to be, the key measurement of our performance under this program. |
• | Relationship between Company Performance, Stock Price and CEO Compensation. The following illustrates the directional relationship between Align’s performance, based on two of our key financial metrics and our stock price, and the compensation of our CEO from 2012 to 2014. These two key financial metrics are used in our cash incentive compensation plan and reflect our continued focus on growth and profitability over the long term. The charts below demonstrate a robust relationship between CEO compensation and Company performance. The substantial increase in |
• | The Compensation Committee is composed solely of independent directors and it directly retains an independent compensation consultant. |
• | We elected to hold an annual stockholder advisory ("say-on-pay") vote, and the Compensation Committee considers the outcome of the advisory vote in making compensation decisions. |
• | We maintain stock ownership guidelines for our executive officers. In 2014, Mr. Prescott's stock ownership ratio was 5.0 times his annual base salary. Our CEO currently holds 216,968 shares of our common stock outright with a value as of fiscal year end of more than 18 times his 2014 base salary. The target ownership guidelines for each executive officer other than the CEO is 1.0 time such individual's annual base salary. |
• | Align’s executive compensation policies are structured to discourage inappropriate risk-taking by our executives. The Compensation Risk Assessment located on page 14 of this proxy statement describes the Compensation Committee’s assessment that the risks arising from our company-wide compensation programs are reasonable, in the best interest of our stockholders, and not likely to have a material adverse effect on us. |
• | Our insider trading policy prohibits our executive officers from “hedging” ownership in Align by engaging in any short sales or trading in any options contracts involving our securities. |
• | We are committed to carefully managing the dilutive impact of equity compensation awards. Align’s overall equity-award-based gross burn rate for fiscal 2014 was 1.5% and Align's adjusted gross burn rate was 3.01%. Gross burn rate is defined as the number of equity awards granted in the year divided by shares outstanding. Adjusted gross burn rate includes a premium applied to full-value shares (e.g., RSUs and MSUs) of 2:1. |
• | Offer competitive compensation. We seek to provide competitive compensation opportunities to attract, retain and incent superior talent. |
• | Reward performance. A significant portion of total compensation for our NEOs is tied to the achievement of financial and strategic objectives. We believe that this supports our pay-for-performance philosophy by directly and substantially linking rewards to the achievement of measurable financial targets and a shared set of critical strategic priorities. By also rewarding individual performance, we seek to foster a meritocracy. |
• | Link the interests of our executives with those of our stockholders. A significant portion of total compensation for our NEOs is tied to the achievement of financial and strategic objectives and is in the form of long-term equity-based compensation. This structure is designed to focus decision-making and behavior on goals that are consistent with Align’s overall strategy. |
Responsible Party | Roles and Responsibilities | |
Compensation Committee | Sets Align's overall compensation philosophy, which is reviewed and approved by the Board of Directors. | |
Reviews and approves our compensation programs; designs and monitors the execution of these programs. | ||
Reviews and approves all cash based compensation arrangements for our executive officers (other than our CEO). | ||
Reviews and recommends to our Board of Directors all cash based compensation arrangements for our CEO. | ||
No member of the Committee is a former or current officer of Align or any of its subsidiaries. No executive officer of Align serves as a member of the Board or compensation committee of any entity that has one or more executive officers serving on Align's Board or Compensation Committee. | ||
Consultant to the Compensation Committee (Compensia, Inc. an independent executive compensation consulting firm retained directly by the Compensation Committee to assist it in performing its responsibilities. | Compensia attends meetings of the Committee and communicates outside of meetings with its members and management with respect to the design and assessment of compensation packages for our executive officers. In 2014, Compensia provided the following services on behalf of the Committee: | |
Analyzed whether the compensation packages of our executive officers were consistent with our compensation philosophy and competitive within the market relative to our peer companies. | ||
Assisted in defining the appropriate peer group of comparable companies. | ||
Assisted in the design of our compensation programs for executives and board members, including discussing evolving compensation trends. | ||
Reviewed the effectiveness of our compensation programs. | ||
Provided advice on stock ownership guidelines for executive officers and directors. | ||
Compiled and provided market data to assist in setting our compensation philosophy, plan parameters and measures. | ||
Conducted a comprehensive review of compensation paid to the Board and provided recommendations to the Committee and the Board regarding director pay structure. | ||
Provided updates on NASDAQ listing standards, Say-on-Pay results, and Dodd-Frank regulatory developments. | ||
In addition, the Committee conducted a formal review of Compensia’s independence and is satisfied with the qualifications, performance and independence of Compensia. Compensia performed no other work for the Company. |
Executive Officers (Assisted by Company Staff) | Management's role is to advise the Committee regarding the alignment and weighting of our performance measures under our annual cash incentive awards with our overall strategy, the impact of the design of our equity incentive awards on our ability to attract, motivate and retain highly talented executives and the competitiveness of our compensation program. Our CEO plays a significant role in setting the compensation for other NEOs. The CEO conducts performance reviews for the other NEOs, and makes recommendations to the Compensation Committee with respect to the other NEOs’ compensation. The Committee has the discretion to accept, reject, or modify the CEO's recommendations. Any executive officer who participates in Compensation Committee meetings leaves the meetings during discussions and deliberations of individual compensation actions affecting them personally and during the Compensation Committee’s executive sessions. Ultimately all decisions regarding executive compensation are made by the Compensation Committee or in the case of CEO cash compensation, the full Board upon the recommendation of the Compensation Committee. |
• | market comparison data (peer group data and survey data); |
• | subjective elements, such as: |
• | the scope of the executive’s role; |
• | the executive’s: |
• | experience; |
• | qualifications; |
• | skills; and |
• | performance during the fiscal year (see discussion below on “Role of Individual Performance”); |
• | internal equity; and |
• | Align’s operational and financial performance. |
• | Industry-medical device companies and software as a service companies (SaaS). We believe that the SaaS industry is a relevant industry for market comparison purposes due to the integral role that software systems and software development has in our products and services; |
• | Market Capitalization-companies with a market capitalization of between approximately $985 million and $8.9 billion, based upon the companies’ trading ranges at the time of selection; and |
• | Revenue-companies with revenue of between approximately $190 million to $1.7 billion, based upon the last four quarters of revenue at the time of selection. |
Software-as-a Service | Medical Device | |
ANSYS | Cooper Companies | |
athenahealth | Genomic Health | |
CommVault* | Haemonetics* | |
Concur Technologies | Illumina* | |
Informatica | Integra LifeSciences* | |
j2 Global | Insulet | |
MicroStrategy | Masimo | |
NetSuite | NuVasive | |
Quality Systems | Resmed | |
Rackspace Hosting | Sirona Dental Systems | |
ServiceNow* | Thoratec | |
TIBCO Software | Volcano |
* | Indicates new additions to the peer group. In addition, Ariba, Inc. and Gen-Probe Incorporated were removed from our peer group because they were acquired. |
Element of Compensation | Target Percentile |
Base salary | 50th percentile |
Target total cash compensation | 65th to 75thpercentile |
Equity compensation | 50th to 75thpercentile |
• | base salary; |
• | annual cash incentive awards; |
• | long-term equity-based incentive grants; and |
• | severance and change of control arrangements. |
Name | Percentage Increase over 2013 | 2014 Base Salary | ||
Thomas M. Prescott | 6% | $650,000 | ||
David L. White | 2% | $407,000 | ||
Emory M. Wright | 7% | $352,052 | ||
Raphael S. Pascaud | 13% | $350,000 | ||
Roger E. George | 6% | $353,853 |
Measure/Weight/Calculated | Why do we use this measure? | Target (in millions) | Achievement (in millions) | Level of Achievement of Target | Impact on Company Multiplier | |||||||||
Revenue (1) (40%) | Improvement in this measure aligns with our overall growth strategy. | $768.5 | $761.6 | 99.1 | % | 38.6 | % | |||||||
Adjusted Non-GAAP Operating income (1) (2) (30%) | Directly links incentive payments to Company profitability and we want our employees (including our executives) to share in our profitability. Because profitability encompasses both revenue and expense management, the Compensation Committee believes this measure encourages a balanced, holistic approach by our executives to manage our business. The Compensation Committee considers operating profit before taxes because our executives cannot predict or directly affect our taxes or our tax rate. | $231.9 | $225.9 | 97.4 | % | 27.1 | % | |||||||
Roadmap Elements (30%) Delivering key elements of Company roadmap projects or initiatives, including meeting delivery dates and feature set requirements. (4) | Critical to our achievement of our multi-year strategic corporate priorities, specifically, increased adoption and frequency of use by our customers, the orthodontist and general practitioner dentist and increased consumer demand. (3) | 100 | % | 97.1 | % | 97.1 | % | 29.1 | % | |||||
COMPANY MULTIPLIER: | 94.7 | % |
(1) | The threshold performance and the level of performance at which the funding for that particular performance measure will be capped as follows: |
• | A rating of zero if achievement is below 90% (in prior years, the minimum threshold was 80%). Company performance below target automatically reduces only the payout related to that goal, not the other goals, as we want executives to have the same incentive to achieve other financial goals as well as their individual performance goals even if our performance tracks below the target during the course of the year; |
• | A rating ranging from 60% to 100% if achievement meets or exceeds the minimum performance level but does not achieve the target performance level; and |
• | A rating of 101% to 200% if achievement meets or exceeds the target performance level. |
(2) | Adjusted Non-GAAP Operating Income was adjusted to exclude stock based compensation expense. The Compensation Committee also has the discretion to exclude the following items: |
(a) | significant and/or extraordinary items that are not indicative of our core operating performance that are separately stated on our financial statements; |
(b) | items identified as non-GAAP in the Company’s quarterly earnings announcements; and |
(c) | other discrete items as necessary that may result in unintended gain or loss under the bonus plan. |
(3) | Management believes, and the Committee concurs, that the specific strategic initiatives and performance goals established for each of these strategic priorities represent confidential business information, the disclosure of which would result in meaningful competitive harm. |
(4) | For each strategic performance measure, a rating ranging from 0% to 150% based on relative achievement of the particular measure. |
• | Mr. Prescott’s overall leadership of the Company, including maximizing productivity of recent senior management hires as well as his leadership in developing a comprehensive plan to shape an effective long-term strategy. The Committee believes, however, that the CEOs compensation should be tied more closely to the Company's performance when compared to the other NEOs and consequently his actual award approximated the Company Multiplier. |
• | Mr. White's strong leadership in managing the Company's finance and information technology departments, including continued maintenance of a strong system of internal controls, design and implementation of an ERP system, and development of a capital allocation strategy. |
• | Mr. Wright’s operational leadership across functional areas, his input on the longer-term strategic direction of the business, and his ability to effectively work with other members of the management team. |
• | Promoted to VP, International in January 2014, Mr. Pascaud successfully led our international sales team to exceed their revenue plan and continued to grow adoption of Invisalign in our international regions with case shipments increasing 28.6% in 2014 from 2013. |
• | Mr. George’s leadership of a high quality legal and patent department and regulatory function, including successful management of litigation and pre-litigation matters, and analysis, negotiation and execution of various corporate and commercial arrangements. |
Name | Target Incentive Award (as % of Base Salary) | Target Incentive Award (1) | Company Multiplier | Individual Multiplier | Actual Incentive Award | Actual Award as % of Target | |||||
Thomas M. Prescott | 100% | $650,000 | 94.7% | 95% | $585,000 | 90% | |||||
David L. White | 60% | $244,000 | 94.7% | 105% | $241,700 | 99% | |||||
Emory M. Wright | 60% | $211,000 | 94.7% | 111% | $221,400 | 105% | |||||
Raphael S. Pascaud | 60% | $210,000 | 94.7% | 115% | $228,600 | 109% | |||||
Roger E. George | 60% | $212,000 | 94.7% | 106% | $212,000 | 100% |
Award Type | Rationale for 2014 portfolio |
Why RSUs? | We believe RSUs reward retention (even in the event of a decline in Align’s share price) and provide an incentive to grow the value of Align’s stock. In addition, RSUs enable our executives to accumulate stock ownership in the Company. |
Why MSUs? | We believe MSUs provide a vehicle that has more consistent value delivery compared to stock options which also aligns the long-term interests of our executive officers and stockholders by rewarding executives for Align’s performance measured in relation to other companies over a specified period. The actual number of shares of our common stock issuable under MSUs varies based on over-or under-performance of Align’s stock price compared to the NASDAQ Composite Index during the three-year performance period. If Align under-performs the NASDAQ Composite Index, the percentage at which the MSUs convert into shares of Align stock will be reduced from 100%, at a rate of two to one (two-percentage-point reduction in units for each percentage point of under-performance), with a minimum percentage of 0%. This means that no shares will vest if Align underperforms the NASDAQ Composite by 50 percentage points. If Align outperforms the NASDAQ Composite Index, the percentage at which the MSUs convert to shares will be increased from 100%, at a rate of two to one (two-percentage-point increase in units for each percentage point of over-performance), with a maximum percentage of 150%. This means that if Align outperforms the NASDAQ Composite by 25 percentage points, the maximum number of shares that will vest is 150% of the award amount. For example, if the NASDAQ Composite index increased by 10% over the performance period and our stock price increased by 30% over the performance period, then the number of shares issuable under the MSUs would be 140% of target or (130%-110%)*2=140%. |
Award Type | Vesting Detail |
RSUs | Typically vests over four-years with 1/4 vesting annually. The special RSU awards described below vest as follows: 50% vests on the second anniversary of the date of grant and the remaining 50% vest on the third anniversary of the date of grant. |
MSUs | Three year performance period beginning February 2014 and ending February 2017 |
Name | RSUs | Target MSUs (1) | ||
Thomas M. Prescott | 40,000 | 60,000 | ||
David L. White | 7,500 | 7,500 | ||
Emory M. Wright | 15,750 | 15,750 | ||
Raphael S. Pascaud | 9,800 | 9,800 | ||
Roger E. George | 14,100 | 14,100 |
(1) | The number of MSUs set forth in this column represents the Target Shares; however, the actual number of MSUs to be earned, if any, is determined based on the formula set forth in the Market Stock Unit Agreement up to a maximum of 150% of the amount of the Target Shares. |
Name | RSUs (1) | Target MSUs (2) | ||
Thomas M. Prescott | 20,000 | 30,000 | ||
David L. White | 8,000 | 8,000 | ||
Emory M. Wright | 8,100 | 8,100 | ||
Raphael S. Pascaud | 1,000 | 1,000 | ||
Roger E. George | 7,800 | 7,800 |
(2) | The number of MSUs set forth in this column represents the Target Shares; however, the actual number of MSUs to be received, if any, is determined based on the formula set forth in the Market Stock Unit Agreement up to a maximum of 150% of the amount of the Target Shares. |
• | a change of control; and |
• | termination without cause or for convenience. |
THE COMPENSATION COMMITTEE |
George J. Morrow, Chair |
David C. Nagel |
Greg Santora |
Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Thomas M. Prescott, President & Chief Executive Officer | 2014 | 645,962 | — | 7,948,800 | — | 585,000 | 10,464 | 9,190,226 | |||||||||||||||
2013 | 615,000 | — | 4,406,900 | — | 900,000 | 11,355 | 5,933,255 | ||||||||||||||||
2012 | 610,385 | — | 3,541,875 | — | 650,000 | 13,022 | 4,815,282 | ||||||||||||||||
David L. White Chief Financial Officer | 2014 | 406,192 | — | 1,645,480 | — | 241,700 | 9,268 | 2,302,640 | |||||||||||||||
2013 | 153,846 | — | 3,239,864 | — | 159,656 | 4,978 | 3,558,344 | ||||||||||||||||
Emroy M. Wrght | 2014 | 349,543 | — | 2,531,916 | — | 221,400 | 8,667 | 3,111,526 | |||||||||||||||
Vice President, Operations | 2013 | 330,288 | — | 2,016,600 | — | 350,898 | 8,367 | 2,706,153 | |||||||||||||||
2012 | 328,082 | — | 957,723 | — | 238,862 | 8,174 | 1,532,841 | ||||||||||||||||
Raphael S. Pascaud | 2014 | 334,007 | 125,453 | 2,371,593 | — | 228,600 | 43,278 | 3,102,931 | |||||||||||||||
Vice President, International | |||||||||||||||||||||||
Roger E. George | 2014 | 351,699 | — | 2,324,904 | — | 212,000 | 8,667 | 2,897,270 | |||||||||||||||
Vice President, Legal & Corporate Affairs | 2013 | 335,183 | — | 1,724,193 | — | 372,790 | 8,367 | 2,440,533 | |||||||||||||||
2012 | 333,518 | 790 | 935,055 | — | 235,067 | 8,165 | 1,512,595 |
(1) | In connection with our previous VP, International, Richard Twomey's departure, Mr. Pascaud was granted a special bonus in October 2013 in the amount of 100,000 Euros (approximately $125,000 U.S. Dollars). This amount vested over a one year period and was intended to serve as an additional retention while we determined Mr. Twomey's successor. Mr. Pascaud was promoted to VP, International in January 2014. |
(2) | The amounts shown in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used in the calculations of these amounts are included in Note 9 to our audited financial statements for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2015. This same method was used for years ended December 31, 2013 and 2012. There can be no assurance that the grant date fair value amounts will ever be realized. |
Name | Dollar Value of Life Insurance Premiums | Matching contributions under Align’s 401(k) Plan | Housing/Auto Allowance | Airfare for Family Members | Employee Discount Program | ||||||||||||||
Mr. Prescott | $ | 867 | $ | 7,800 | — | $ | 1,797 | — | |||||||||||
Mr. White | $ | 867 | $ | 7,800 | — | — | $ | 601 | |||||||||||
Mr. Wright | $ | 867 | $ | 7,800 | — | — | — | ||||||||||||
Mr. Pascaud | $ | — | $ | — | 43,278 | — | — | ||||||||||||
Mr. George | $ | 867 | $ | 7,800 | — | — | — |
• | cash amounts that could have been received in 2014 by our NEOs under the terms of our performance-based cash incentive plan (CIP); and |
• | time-vested RSUs and performance-based MSUs awards granted by the Compensation Committee to our NEOs in 2014 reflected on an individual grant basis. |
Type of Award | Grant Date | Approval Date | Estimated Future Payouts Under Non-Equity Incentive Awards | Estimated Future Payouts Under Equity Incentive Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair value of Options and Awards ($) | ||||||||||||||||
Name | Target ($) | Target (#) | Maximum (#) | |||||||||||||||||||
Thomas M. Prescott | CIP | $ | 650,000 | |||||||||||||||||||
RSU | 2/20/2014 | 2/3/2014 | 40,000 | $ | 2,140,800 | |||||||||||||||||
RSU (1) | 2/20/2014 | 2/3/2014 | 20,000 | $ | 1,070,400 | |||||||||||||||||
MSU | 2/20/2014 | 2/3/2014 | 90,000 | 135,000 | $ | 4,737,600 | ||||||||||||||||
David L. White | CIP | $ | 244,000 | |||||||||||||||||||
RSU | 2/20/2014 | 2/3/2014 | 7,500 | $ | 401,400 | |||||||||||||||||
RSU (1) | 2/20/2014 | 2/3/20014 | 8,000 | $ | 428,160 | |||||||||||||||||
MSU | 2/20/2014 | 2/3/2014 | 15,500 | 23,250 | $ | 815,920 | ||||||||||||||||
Emory M. Wright | CIP | $ | 211,000 | |||||||||||||||||||
RSU | 2/20/2014 | 2/3/2014 | 15,750 | $ | 842,940 | |||||||||||||||||
RSU (1) | 2/20/2014 | 2/3/2014 | 8,100 | $ | 433,512 | |||||||||||||||||
MSU | 2/20/2014 | 2/3/2014 | 23,850 | 35,775 | $ | 1,255,464 | ||||||||||||||||
Raphael S. Pascaud | CIP | $ | 210,000 | |||||||||||||||||||
RSU | 1/20/2014 | 1/15/2014 | 23,190 | $ | 1,483,000 | |||||||||||||||||
RSU | 2/20/2014 | 2/3/2014 | 9,800 | $ | 524,496 | |||||||||||||||||
RSU (1) | 2/20/2014 | 2/3/2014 | 1,000 | $ | 53,520 | |||||||||||||||||
MSU | 2/20/2014 | 2/3/2014 | 5,900 | 8,850 | $ | 310,576 | ||||||||||||||||
Roger E. George | CIP | $ | 212,000 | |||||||||||||||||||
RSU | 2/20/2014 | 2/3/2014 | 14,100 | $ | 754,632 | |||||||||||||||||
RSU (1) | 2/20/2014 | 2/3/2014 | 7,800 | $ | 417,456 | |||||||||||||||||
MSU | 2/20/2014 | 2/3/2014 | 21,900 | 32,850 | $ | 1,152,816 |
(1) | These RSUs were granted as a one-time, special recognition award to reward contributions towards our record-setting 2013 results and the strengthen retention. These RSUs vest over a three-year period, with 50% vesting on the second anniversary or the date of grant and the remaining 50% vesting on the third anniversary of the date of grant. |
• | Threshold. There is no threshold performance level. Rather, the Company's financial performance below a specific target automatically reduces only the payout related to that specific goal, not the other goals, because we want executives to have the same incentive to achieve strategic priorities as well as their individual performance goals even if our financial performance tracks below the target during the course of the year. |
• | Target. The target amounts assume a corporate performance percentage of 100% and that the NEO received 100% of his target. |
• | Maximum. Although each financial objective is capped at 200% for funding the total pool available for distribution, there is no maximum amount that an NEO could receive. |
• | Align does not plan to time, nor has it timed, the release of material non-public information for the purpose of affecting the exercise price of its stock options; |
• | consistent with the policy described in the bullet point above, all awards of equity compensation for new employees (other than new executive officers described in the next bullet point) are made on the first day of the month for those employees who started during the period between the 16th day of the month that is two months prior to the grant date and the 15th day of the month prior to the month of the grant date. For example, May 1, 2015 grants will cover new hires starting between March 16, 2015 and April 15, 2015; and |
• | annual incentive grants are made on or about the same day for all employees (including executive officers); in each of 2014, 2013 and 2012 such date was February 20. The Compensation Committee sets the actual grant date approximately one week following approval of the size of each grant in order to provide Align managers with adequate time to inform each employee individually of their grant. |
Name | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Number of securities underlying unexercised options (#) Exercisable | Number of securities underlying unexercised options (#) Unexercisable | F o o t n o t e | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | F o o t n o t e | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested (#) | F o o t n o t e | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||
Thomas M. Prescott | 9,375 | 3,750 | (1 | ) | 20.79 | 2/18/2018 | |||||||||||||||||||||||||||
31,250 | (2 | ) | 1,747,188 | ||||||||||||||||||||||||||||||
41,250 | (4 | ) | 2,306,288 | ||||||||||||||||||||||||||||||
40,000 | (7 | ) | 2,236,400 | ||||||||||||||||||||||||||||||
20,000 | (8 | ) | 1,118,200 | ||||||||||||||||||||||||||||||
62,500 | (3 | ) | 3,494,375 | ||||||||||||||||||||||||||||||
75,000 | (5 | ) | 4,193,250 | ||||||||||||||||||||||||||||||
90,000 | (9 | ) | 5,031,900 | ||||||||||||||||||||||||||||||
David White | 55,237 | (6 | ) | 3,088,301 | |||||||||||||||||||||||||||||
7,500 | (7 | ) | 419,325 | ||||||||||||||||||||||||||||||
8,000 | (8 | ) | 447,280 | ||||||||||||||||||||||||||||||
15,500 | (9 | ) | 866,605 | ||||||||||||||||||||||||||||||
Emory M. Wright | 4,187 | 838 | (1 | ) | 20.79 | 2/18/2018 | |||||||||||||||||||||||||||
8,450 | (2 | ) | 472,440 | ||||||||||||||||||||||||||||||
22,500 | (4 | ) | 1,257,975 | ||||||||||||||||||||||||||||||
15,750 | (7 | ) | 880,583 | ||||||||||||||||||||||||||||||
8,100 | (8 | ) | 452,871 | ||||||||||||||||||||||||||||||
16,900 | (3 | ) | 944,879 | ||||||||||||||||||||||||||||||
30,000 | (5 | ) | 1,677,300 | ||||||||||||||||||||||||||||||
23,850 | (9 | ) | 1,333,454 | ||||||||||||||||||||||||||||||
Raphael Pascaud | 5,400 | — | (10 | ) | 17.97 | 12/1/2017 | |||||||||||||||||||||||||||
2,000 | (2 | ) | 111,820 | ||||||||||||||||||||||||||||||
5,625 | (4 | ) | 314,494 | ||||||||||||||||||||||||||||||
9,800 | (7 | ) | 547,918 | ||||||||||||||||||||||||||||||
1,000 | (8 | ) | 55,910 | ||||||||||||||||||||||||||||||
3,750 | (11 | ) | 209,663 | ||||||||||||||||||||||||||||||
23,190 | (12 | ) | 1,296,553 | ||||||||||||||||||||||||||||||
5,900 | (9 | ) | 329,869 | ||||||||||||||||||||||||||||||
Roger E. George | 1,708 | 855 | (1 | ) | 20.79 | 2/18/2018 | |||||||||||||||||||||||||||
8,250 | (2 | ) | 461,258 | ||||||||||||||||||||||||||||||
19,237 | (4 | ) | 1,075,541 | ||||||||||||||||||||||||||||||
14,100 | (7 | ) | 788,331 | ||||||||||||||||||||||||||||||
7,800 | (8 | ) | 436,098 | ||||||||||||||||||||||||||||||
16,500 | (3 | ) | 922,515 | ||||||||||||||||||||||||||||||
25,650 | (5 | ) | 1,434,092 | ||||||||||||||||||||||||||||||
21,900 | (9 | ) | 1,224,429 |
(1) | 25% of the shares subject to this option vest on February 20, 2012 with 1/48th vesting monthly thereafter for full vesting on February 20, 2015. |
(2) | Restricted stock units vest at a rate of 25% of the total number of shares subject to the restricted stock unit on the first year, second year, third year and fourth year anniversary of the date of grant for vesting on February 20, 2013, February 20, 2014, February 20, 2015 and February 20, 2016. |
(3) | Market stock units vest at a rate of 100% on February 20, 2015 for full vesting at the end of the three-year performance cycle. |
(4) | Restricted stock units vest at a rate of 25% of the total number of shares subject to the restricted stock unit on the first year, second year, third year and fourth year anniversary of the date of grant for vesting on February 20, 2014, February 20, 2015, February 20, 2016 and February 20, 2017. |
(5) | Market stock units vest at a rate of 100% on February 20, 2016 for full vesting at the end of the three-year performance cycle. |
(6) | Restricted stock units vest at a rate of 25% of the total number of shares subject to the restricted stock unit on the first year, second year, third year and fourth year anniversary of the date of grant for vesting on August 20, 2014, August 20, 2015, August 20, 2016, and August 20, 2017. |
(7) | Restricted stock units vest at a rate of 25% of the total number of shares subject to the restricted stock unit on the first year, second year, third, fourth year anniversary of the date of grant for vesting on February 20, 2015, February 20, 2016, February 20, 2017, and February 20, 2018. |
(8) | Restricted stock units vest at the rate of 50% on February 20, 2016 and 50% on February 20, 2017. |
(9) | Market stock units vest at a rate of 100% on February 20, 2017 for full vesting at the end of three-year performance cycle. |
(10) | Fully vested on December 1, 2014. |
(11) | Restricted stock units vest at a rate of 25% of the total number of shares subject to the restricted stock unit on the first year, second year, third and fourth year anniversary of the date of grant for vesting on November 20, 2014, November 20, 2015, November 20, 2016, and November 20, 2017. |
(12) | Restricted stock units vest at a rate of 25% of the total number of shares subject to the restricted stock unit on the first year, second year, third year and fourth year anniversary of the date of grant for vesting on January 20, 2015, January 20, 2016, January 20, 2017, and January 20, 2018. |
Option Awards | Stock Awards | |||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized Upon Exercise (1) | Number of Shares Acquired on Vesting (2) | Value Realized on Vesting (3) | ||||||||||
Thomas M. Prescott | 251,875 | $ | 9,032,251 | 93,125 | $ | 5,076,000 | ||||||||
David L. White | — | $ | — | 18,413 | $ | 1,014,372 | ||||||||
Emory M. Wright | 57,575 | $ | 2,037,751 | 29,482 | $ | 1,604,419 | ||||||||
Raphael Pascaud | — | $ | — | 4,125 | $ | 222,776 | ||||||||
Roger E. George | 15,636 | $ | 554,271 | 26,371 | $ | 1,435,569 |
(1) | The value realized on exercise equals the difference between (a) either (i) the actual sales price of our common stock underlying the options exercised if the shares were immediately sold or (ii) the closing price per share of our common stock as reported on the NASDAQ Global Market on the date of exercise if the shares were held and (b) the applicable exercise price of such stock options. |
(2) | For each NEO, such number of shares represents the gross number of shares acquired by the NEO on the vesting date; however, because RSUs and MSUs are taxable to the individuals when they vest, the number of shares we issue to each of our NEOs is net of applicable withholding taxes which are paid by us on their behalf. |
(3) | The value realized on vesting equals the closing price per share of our common stock as reported on the NASDAQ Global Market on the vesting date multiplied by the gross number of shares acquired on vesting as described above in note (2). |
Name | Type of Payment | Payments Upon Involuntary or Good Reason Termination Unrelated to Change of Control | Payments Upon Involuntary or Good Reason Termination Related to a Change of Control | Change of Control Only | |||||||||
David L. White | Severance Payment | $ | 895,000 | $ | 895,000 | — | |||||||
Equity | |||||||||||||
Stock Options (No stock option awards have been granted) | n/a | n/a | n/a | ||||||||||
RSUs | $ | 1,029,443 | $ | 3,850,074 | $ | 1,029,443 | |||||||
MSUs | $ | 249,321 | $ | 866,605 | $ | 249,321 | |||||||
Health and Welfare Benefits | $ | 19,758 | $ | 19,758 | — | ||||||||
Total | $ | 2,193,522 | $ | 5,631,437 | $ | 1,278,764 | |||||||
Emory M. Wright | Severance Payment | $ | 913,950 | $ | 913,950 | — | |||||||
Equity | |||||||||||||
Stock Options | $ | 29,431 | $ | 29,431 | $ | 29,431 | |||||||
RSUs | $ | 875,690 | $ | 3,063,868 | $ | 875,690 | |||||||
MSUs | $ | 1,138,029 | $ | 3,955,633 | $ | 1,138,029 | |||||||
Health and Welfare Benefits | $ | 28,726 | $ | 28,726 | — | ||||||||
Total | $ | 2,985,826 | $ | 7,991,608 | $ | 2,043,150 | |||||||
Raphael Pascuad | Severance Payment | $ | 910,000 | $ | 910,000 | — | |||||||
Equity | |||||||||||||
Stock Options | n/a | n/a | n/a | ||||||||||
RSUs | $ | 691,746 | $ | 2,536,357 | $ | 691,746 | |||||||
MSUs | $ | 94,903 | $ | 329,869 | $ | 94,903 | |||||||
Health and Welfare Benefits | — | ||||||||||||
Total | $ | 1,696,649 | $ | 3,776,226 | $ | 786,649 | |||||||
Roger E. George | Severance Payment | $ | 938,643 | $ | 938,643 | — | |||||||
Equity | |||||||||||||
Stock Options | $ | 30,028 | $ | 30,028 | $ | 30,028 | |||||||
RSUs | $ | 786,234 | $ | 2,761,227 | $ | 786,234 | |||||||
MSUs | $ | 1,030,258 | $ | 3,581,036 | $ | 1,030,258 | |||||||
Health and Welfare Benefits | $ | 28,726 | $ | 28,726 | — | ||||||||
Total | $ | 2,813,889 | $ | 7,339,660 | $ | 1,846,520 |
(i) | if Align under-performs the NASDAQ Composite index, the percentage at which the MSUs convert into shares of Align stock will be reduced from 100% at a rate of two to one (two-percentage-point reduction in units for each percentage point of under-performance); and |
(ii) | if Align outperforms the index, the percentage at which the MSUs convert to shares will be increased from 100% at a rate of two to one (two-percentage-point increase in units for each percentage point of over-performance). |
(i) | the then current annual base salary; |
(ii) | the then current year’s target bonus, prorated for the number of days such executive has been employed during the year; and |
(iii) | the greater of the then current year’s target bonus or the prior year’s actual bonus. |
• | the performance period shall be deemed to end upon the closing of the change of control in order to determine Align’s stock price performance relative to the NASDAQ Composite index for the purpose of calculating the amount that Align has over or underperformed the NASDAQ Composite index (with the MSUs converting into shares of Align stock either being reduced from 100% (in the case of underperformance) or increased from 100% (in the case of overperformance) at a rate of two to one (the “Performance Multiplier”); and |
• | Align’s stock price performance will be based on the per share value of the Company’s common stock paid to its stockholders in connection with the change of control. |
(1) | immediately vest in all outstanding equity awards; and |
(2) | be entitled to a payment (payable in a lump sum) equal to: |
(i) | executive’s then current annual base salary; |
(ii) | executive’s then current year’s target bonus prorated for the number of days employed during the year, and |
(iii) | the greater of the then current year’s target bonus or the prior year’s actual bonus. |
Name | Type of Payment | Payments Upon Involuntary or Good Reason Termination Unrelated to Change of Control | Payments Upon Involuntary or Good Reason Termination Related to a Change of Control | Change of Control Only | |||||||||
Thomas M. Prescott | Severance Payment | $ | 2,925,000 | $ | 2,925,000 | $ | — | ||||||
Equity | |||||||||||||
Stock Options | — | 131,700 | 131,700 | ||||||||||
RSUs | — | 7,408,075 | 7,408,075 | ||||||||||
MSUs | — | 10,098,744 | 10,098,744 | ||||||||||
Health and Welfare Benefits | 29,637 | 29,637 | — | ||||||||||
Total | $ | 2,954,637 | $ | 20,593,156 | $ | 17,638,519 |
(1) | twice his then current annual base salary; |
(2) | the then current year’s target bonus, prorated for the number of days Mr. Prescott has been employed during the year; and |
(3) | the greater of 150% of the then current year’s target bonus or the prior year’s actual bonus. |
(1) | twice his then current annual salary; |
(2) | the then current year’s target bonus, prorated for the number of days Mr. Prescott has been employed during the year; and |
(3) | the greater of 150% of the then current year’s target bonus or the prior year’s actual bonus. |
• | unauthorized use or disclosure of the confidential information or trade secrets of Align; |
• | any breach of the employment agreement or the Employee Proprietary Information and Inventions Agreement between the executive and Align; |
• | conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States or any state thereof; |
• | misappropriation of the assets of Align or any act of fraud or embezzlement by the executive, or any act of dishonesty by the executive in connection with the performance of his or her duties for Align that adversely affects its business or affairs; |
• | intentional misconduct; or |
• | the executive’s failure to satisfactorily perform his or her duties after the executive received written notice of such failure and was provided at least thirty (30) days to cure such failure. |
• | the executive’s position, authority or responsibilities being significantly reduced; |
• | the executive being asked to relocate his principal place of employment such that the commuting distance from his or her residence prior to the change of control is increased by over thirty-five (35) miles; |
• | the executive’s annual base salary or bonus being reduced; or |
• | the executive’s benefits being materially reduced. |
• | a sale of all or substantially all of Align’s assets; |
• | the acquisition of more than 50% of the common stock of Align by any person or group of persons; |
• | a reorganization of Align wherein the holders of common stock of Align receive stock in another company (other than a subsidiary of Align), a merger of Align with another company wherein there is a 50% or greater change in the ownership of the common stock of Align as a result of such merger, or any other transaction in which Align (other |
• | in the event that the common stock is traded on an established securities market, a public announcement that any person has acquired or has the right to acquire beneficial ownership of more than 50% of the then outstanding common stock, or the commencement of or public announcement of an intention to make a tender offer or exchange offer for more than 50% of the then outstanding common stock. |
• | each stockholder known by us to own beneficially more than 5% of our common stock; |
• | each of our executive officers named in the summary compensation table on page 36 of this proxy statement; |
• | each of our directors; and |
• | all of our directors and executive officers as a group. |
Name and Address | Number of Outstanding Shares Beneficially Owned | Number of Shares Underlying Options Exercisable and RSUs vesting on or before May 18, 2015 (1) | Total Shares Beneficially Owned | Percentage of Outstanding Shares Beneficially Owned | |||||||
Gordon Gund, family members and affiliated entities (2) | 7,218,717 | — | 7,218,717 | 9.0 | % | ||||||
BlackRock, Inc. (3) | 5,019,285 | — | 5,019,285 | 6.0 | % | ||||||
The Vanguard Group (4) | 4,406,077 | — | 4,406,077 | 5.0 | % | ||||||
T. Rowe Price Associates, Inc.(5) | 4,091,885 | — | 4,091,885 | 5.0 | % | ||||||
FMR LLC (6) | 4,033,575 | — | 4,033,575 | 5.0 | % | ||||||
Thomas M. Prescott | 216,968 | 115,000 | 331,968 | * | |||||||
David L. White | 6,426 | 1,875 | 8,301 | * | |||||||
Emory M. Wright | 33,343 | 37,588 | 70,931 | * | |||||||
Raphael S. Pascaud | 767 | 10,725 | 11,492 | * | |||||||
Roger E. George | — | 33,126 | 33,126 | * | |||||||
Joseph Lacob (7) | 708,755 | 45,500 | 754,255 | * | |||||||
C. Raymond Larkin, Jr. | 62,460 | 83,000 | 145,460 | * | |||||||
George J. Morrow | 35,400 | 55,500 | 90,900 | * | |||||||
David C. Nagel | 21,400 | 65,500 | 86,900 | * | |||||||
Andrea L. Saia | 3,567 | 5,500 | 9,067 | * | |||||||
Greg J. Santora | 30,400 | 25,500 | 55,900 | * | |||||||
Warren S. Thaler (8) | 130,184 | 25,500 | 155,684 | * | |||||||
All current executive officers and directors as a group (17 persons) | 1,261,298 | 579,123 | 1,840,421 | 2.2 | % |
* | Less than 1% |
(1) | Except as otherwise set forth in the footnotes below, represents shares of common stock that can be acquired upon the exercise of stock options and vesting of restricted stock units on or before May 17, 2015. This column includes the full amount of restricted stock units that will vest on or before May 17, 2015, although each executive officer will actually receive the number of shares that have vested net of the number of shares necessary to cover any applicable withholding taxes which Align will pay on their behalf. |
(2) | Based on a filing with the Securities and Exchange Commission on Schedule 13G/A on February 14, 2014, indicating beneficial ownership as of December 31, 2013. Includes shares held in trust for immediate family members and shares held by immediate family members. The mailing address for Gordon Gund is P.O. Box 449, Princeton, New Jersey 08542. |
(3) | Based on a filing with the Securities and Exchange Commission on Schedule 13G/A on January 30, 2015, indicating beneficial ownership as of December 31, 2014. Includes shares held by direct and indirect subsidiaries. The mailing address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10022. |
(4) | Based on a filing with the Securities and Exchange Commission on Schedule 13G/A, on February 11, 2015, indicating beneficial ownership as of December 31, 2014. Includes shares held by direct and indirect subsidiaries. The mailing address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
(5) | Based on a filing with the Securities and Exchange Commission on Schedule 13G on February 12, 2015, indicating beneficial ownership as of December 31, 2014. The address for R. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202. |
(6) | Based on a filing with the Securities and Exchange Commission on Schedule 13G/A on February 13, 2015, indicating beneficial ownership as of December 31, 2014. The principal office of FMR is located at 82 Devonshire Street, Boston MA 02109. |
(7) | Includes 555,895 shares held by the Joseph S. Lacob Trust and 148,767 shares held by Lacob Children’s Trust. Principal address is 2750 Sand Hill Road, Menlo Park, CA 94025. |
(8) | Includes 33,900 shares held by Mr. Thaler and 88,584 shares held by The Thaler Family Trust, for the benefit of family members, as to which Mr. Thaler disclaims beneficial ownership. |
• | you are a director or officer of Align and you desire to enter into a transaction with a Related Party (as defined above); or |
• | you are an employee (other than a director or officer) and you desire to enter into a transaction with a Related Party that the Chief Financial Officer (in consultation with legal counsel) has deemed to be material to Align and is reportable under the rules and regulations of the Exchange Act, |
THE BOARD OF |
ALIGN TECHNOLOGY, INC. |
April 1, 2015 |
Year Ended | |||||||||||
December 31, 2014 | December 31, 2013 | December 31, 2012 | |||||||||
GAAP Profit from Operations | $ | 193,576 | $ | 94,212 | $ | 85,592 | |||||
Acquisition and integration costs (1) | — | — | 1,271 | ||||||||
Severance and benefit costs (2) | — | — | 780 | ||||||||
Impairment of goodwill (3) | — | 40,693 | 36,591 | ||||||||
Impairment of long lived assets (4) | — | 26,320 | — | ||||||||
Non-GAAP Profit from Operations | $ | 193,576 | $ | 161,225 | $ | 124,234 |
Reconciliation of GAAP to Non-GAAP Net Profit | |||||||||||
(in thousands, except per share amounts) | |||||||||||
Year Ended | |||||||||||
December 31, 2014 | December 31, 2013 | December 31, 2012 | |||||||||
GAAP Net profit | $ | 145,832 | $ | 64,295 | $ | 58,691 | |||||
Acquisition and integration costs (1) | — | — | 1,271 | ||||||||
Severance and benefit cost (2) | — | — | 780 | ||||||||
Impairment of goodwill (3) | — | 40,693 | 36,591 | ||||||||
Impairment of long lived assets (4) | — | 26,320 | — | ||||||||
Tax effect on non-GAAP adjustments (5) | — | (3,788 | ) | (3,900 | ) | ||||||
Non-GAAP Net profit | $ | 145,832 | $ | 127,520 | $ | 93,433 | |||||
GAAP net profit per diluted share | $ | 1.77 | $ | 0.78 | $ | 0.71 | |||||
Non-GAAP net profit per diluted share | $ | 1.77 | $ | 1.54 | $ | 1.13 | |||||
Shares used in computing diluted GAAP net profit per share | 82,283 | 82,589 | 83,040 | ||||||||
Shares used in computing diluted non-GAAP net profit per share | 82,283 | 82,589 | 83,040 |
(1) | Acquisition costs and integration related. We have incurred acquisition-related and other expenses which include legal, banker, accounting and other advisory fees of third parties, retention bonuses, integration and professional fees. We do not engage in acquisitions in the ordinary course of business. We believe that it is important to understand these charges; however, we do not believe that these charges are indicative of future operating results. We believe that eliminating these expenses from our non-GAAP measures is useful because we generally would not have otherwise incurred such expenses in the periods presented as part of our continuing operations. |
(2) | Severance and benefits costs. We have engaged in various restructuring and exit activities in 2011 that have resulted in costs associated with severance and benefits. Such activity has been a discrete event based on a unique set of business objectives or circumstances, and each has differed from the others in terms of its operational implementation, business impact and scope. We do not engage in restructuring and/or exit activities in the ordinary course of business. We believe that it is important to understand these charges and, we believe that investors benefit from excluding these charges from our operating results to facilitate a more meaningful evaluation of current operating performance and comparisons to past operating performance. |
(3) | Impairment of goodwill. This charge represents non-cash write-downs of our goodwill. During the third quarter of 2012, we determined that there were sufficient indicators such as the termination of our distribution agreement with Straumann for iTero intra-oral scanners as well as the market conditions and business trends within our Scanners and Services ("Scanner") reporting unit for an impairment of goodwill. In the first quarter of 2013, changes in the competitive environment for intra-oral scanners, including announcements from our competitors of new low-priced scanners targeted at orthodontists and general practitioner dentists in North America, caused us to lower our expectations for growth and profitability for our Scanner reporting unit which resulted in the impairment of our remaining Scanner goodwill. We remove the impact of these charges to our operating performance to assist in assessing our ability to generate cash from operations. We believe this may be useful information to users of our financial statements and therefore we have excluded |
GAAP Profit from Operations | $ | 193,576 | |
Stock-based compensation | 39,823 | ||
Medical Device Excise Tax(6) | (7,799 | ) | |
Other one-time adjustment (7) | 300 | ||
Adjusted Non-GAAP Profit from Operations for Company Multiplier | $ | 225,900 |