DEF 14A 1 a14-8358_1def14a.htm DEF 14A

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

o

Preliminary Proxy Statement

 

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x

Definitive Proxy Statement

 

o

Definitive Additional Materials

o

Soliciting Material Under §240.14a-12

 

GRAPHIC

 

REVA Medical, Inc.

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14(a)-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (sets forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



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April 2, 2014

 

Dear Stockholders:

 

We cordially invite you to attend the REVA Medical, Inc. 2014 Annual General Meeting of Stockholders, also referred to as the “AGM” or the “Annual Meeting.” The meeting will be held Tuesday, 13 May 2014, at 10:30 a.m., Australian Eastern Standard Time (which is 5:30 p.m. Monday, May 12, 2014 U.S. Pacific Daylight Time), in the AGL Theatre in the Museum of Sydney, located at the corner of Phillip and Bridge Streets, Sydney, NSW 2000, Australia.

 

The matters to be acted upon are described in the accompanying Notice of 2014 Annual Meeting of Stockholders and Proxy Statement. Following the formal business of the meeting, management will provide an update on REVA’s operations; a copy of the management presentation will be posted on our website the day of the meeting.

 

All stockholders are invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, you are urged to vote or submit your proxy or CHESS Depositary Interest (or “CDI”) Voting Instruction Form as soon as possible so that your shares can be voted at the Annual Meeting in accordance with your instructions. Telephone and Internet voting are available. For specific instructions on voting, please refer to the instructions in the Notice of Annual Meeting of Stockholders or the proxy card or CDI Voting Instruction Form. If you hold your shares through an account with a brokerage firm, bank, or other nominee, please follow the instructions you receive from them to vote your shares.

 

We look forward to seeing you at our Annual Meeting.

 

 

 

Very Truly Yours,

 

 

 

/s/ Robert B. Stockman

 

 

 

Robert B. Stockman

 

Chairman of the Board

 

Chief Executive Officer

 



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NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS
To Be Held 13 May 2014 (Australian Eastern Standard Time)

May 12, 2014 (U.S. Pacific Daylight Time)

 

The 2014 Annual General Meeting (the “AGM” or “Annual Meeting”) of Stockholders of REVA Medical, Inc. will be held on 13 May 2014, at 10:30 a.m., Australian Eastern Standard Time (which is 5:30 p.m. on May 12, 2014 U.S. Pacific Daylight Time) at the AGL Theatre in the Museum of Sydney, located at the corner of Phillip and Bridge Streets, Sydney, NSW 2000, Australia, for the following purposes:

 

1.              To elect the two Class I directors named in the Proxy Statement to hold office for a term of three years and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal;

 

2.              To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014;

 

3.              For the purposes of Australian Securities Exchange (“ASX”) Listing Rule 10.14 and for all other purposes, to approve the grant of 15,000 options to purchase 15,000 shares of common stock to Brian H. Dovey on the terms and conditions set forth in the Proxy Statement;

 

4.              For the purposes of ASX Listing Rule 10.14 and for all other purposes, to approve the grant of 15,000 options to purchase 15,000 shares of common stock to Anne Keating on the terms and conditions set forth in the Proxy Statement;

 

5.              For the purposes of ASX Listing Rule 10.14 and for all other purposes, to approve the grant of 15,000 options to purchase 15,000 shares of common stock to Gordon E. Nye on the terms and conditions set forth in the Proxy Statement;

 

6.              For the purposes of ASX Listing Rule 10.14 and for all other purposes, to approve the grant of 15,000 options to purchase 15,000 shares of common stock to James J. Schiro on the terms and conditions set forth in the Proxy Statement;

 

7.              For the purposes of ASX Listing Rule 10.14 and for all other purposes, to approve the grant of 15,000 options to purchase 15,000 shares of common stock to Robert Thomas on the terms and conditions set forth in the Proxy Statement;

 

8.              For the purposes of ASX Listing Rule 7.1A and for all other purposes, to approve the issuance of equity securities up to 10% of the issued capital of the company (calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A) on the terms and conditions set forth in the Proxy Statement;

 

9.              To approve, on an advisory basis, the compensation of the named executive officers for the fiscal year ended December 31, 2013, as set forth in the Proxy Statement;

 

10.       To approve the Amended and Restated 2010 Equity Incentive Plan for purposes of complying with Section 162(m) of the U.S. Internal Revenue Code;

 



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11.       For the purposes of ASX Listing Rule 7.2 (Exception 9) and for all other purposes, to approve the issuance and transfer of securities under the Amended and Restated 2010 Equity Incentive Plan on the terms and conditions set forth in the Proxy Statement, as an exception to ASX Listing Rule 7.1; and

 

12.       To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting.

 

Our Board of Directors recommends that our stockholders vote “FOR” Proposals 1 through 11, except for Brian H. Dovey with respect to Proposal 3 only, Anne Keating with respect to Proposal 4 only, Gordon E. Nye with respect to Proposal 5 only, James J. Schiro with respect to Proposal 6 only, and Robert Thomas with respect to Proposal 7 only, all of who abstain from making a recommendation on those Proposals due to their personal interests in those Proposals.

 

You are entitled to vote only if you were a REVA Medical, Inc. stockholder as of 4:30 p.m. on 15 March 2014 Australia Eastern Daylight Time (which was 10:30 p.m. on March 14, 2014 U.S. Pacific Daylight Time), the Record Date for the Annual Meeting. This means that owners of common stock as of that date are entitled to vote at the Annual Meeting and any adjournments or postponements of the meeting. Record holders of CHESS Depositary Interests (or “CDIs”) as of the close of business on the Record Date, are entitled to receive notice of and to attend the meeting or any adjournment or postponement of the meeting and may instruct our CDI Depositary, CHESS Depositary Nominees Pty Ltd, or “CDN,” to vote the shares underlying their CDIs by following the instructions on the CDI Voting Instruction Form or by voting online at www.investorvote.com.au. Doing so permits CDI holders to instruct CDN to vote on behalf of the CDI holders at the meeting in accordance with the instructions received via the CDI Voting Instruction Form or online. For ten days prior to the meeting, a complete list of stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose relating to the meeting, during ordinary business hours at our principal offices located at 5751 Copley Drive, San Diego, California 92111, U.S.A.

 

The Proxy Statement that accompanies and forms part of this Notice of Annual Meeting provides information in relation to each of the matters to be considered. This Notice of Annual Meeting and the Proxy Statement should be read in their entirety. If stockholders are in doubt as to how they should vote, they should seek advice from their legal counsel, accountant, solicitor, or other professional advisor prior to voting.

 

By order of the Board of Directors:

 

 

 

/s/ Katrina L. Thompson

 

 

 

Katrina L. Thompson

 

Chief Financial Officer and Secretary

 

 

IMPORTANT:  To ensure that your shares are represented at the meeting, please vote (or, for CDI holders, direct CDN to vote) your shares via the Internet, by telephone, or by marking, signing, dating, and returning a proxy card or CDI Voting Instruction Form to the address specified. If you attend the meeting, you may choose to vote in person even if you have previously voted your shares, except that CDI holders may only instruct CDN to vote on their behalf by completing and signing the CDI Voting Instruction Form or voting online at www.investorvote.com.au and may not vote in person.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT 10:30 a.m. AUSTRALIAN EASTERN STANDARD TIME ON 13 MAY 2014 (which is 5:30 p.m. on May 12, 2014 U.S. Pacific Daylight Time):

 

This Proxy Statement and our 2013 Annual Report on Form 10-K are available at

www.envisionreports.com/RVA (for shareholders) and at

www.investorvote.com.au (for CDI holders).

 



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GENERAL INFORMATION

1

 

 

BOARD OF DIRECTORS INFORMATION

9

 

 

GOVERNANCE OF OUR COMPANY

16

 

 

AUDIT-RELATED MATTERS

19

 

 

EXECUTIVE COMPENSATION

21

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS

36

 

 

PROPOSAL 2 — RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

36

 

 

PROPOSALS 3 THROUGH 7 — APPROVAL OF THE GRANT OF STOCK OPTIONS TO NON-EXECUTIVE DIRECTORS OF THE COMPANY UNDER THE 2010 EQUITY INCENTIVE PLAN

37

 

 

PROPOSAL 8 — APPROVAL OF THE ISSUANCE OF SECURITIES OF UP TO 10% OF THE ISSUED CAPITAL OF THE COMPANY

40

 

 

PROPOSAL 9 — APPROVAL, ON AN ADVISORY BASIS, OF EXECUTIVE COMPENSATION

45

 

 

PROPOSAL 10 — APPROVAL OF THE AMENDED AND RESTATED 2010 EQUITY INCENTIVE PLAN FOR PURPOSES OF COMPLYING WITH SECTION 162(m) OF THE U.S. INTERNAL REVENUE CODE

46

 

 

PROPOSAL 11 — APPROVAL OF THE ISSUANCE AND TRANSFER OF SECURITIES UNDER THE AMENDED AND RESTATED 2010 EQUITY INCENTIVE PLAN

56

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

58

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

60

 

 

RELATED PARTY TRANSACTIONS

60

 

 

ADDITIONAL INFORMATION

61

 

 

OTHER BUSINESS

61

 

 

APPENDIX A — AMENDED AND RESTATED 2010 EQUITY INCENTIVE PLAN

 

 

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REVA MEDICAL, INC.
5751 Copley Drive

San Diego, California 92111, U.S.A.

 

PROXY STATEMENT FOR THE ANNUAL GENERAL MEETING OF STOCKHOLDERS
13 May 2014
(AUSTRALIAN EASTERN STANDARD TIME)

MAY 12, 2014 (U.S. PACIFIC DAYLIGHT TIME)

 

This Proxy Statement, along with a proxy card and CDI Voting Instruction Form,

is being made available to our stockholders and CDI holders on or about April 2, 2014

 

GENERAL INFORMATION

 

Why am I receiving these materials?

 

We have made these proxy materials available to you in connection with the solicitation by the Board of Directors (the “Board”) of REVA Medical, Inc. (the “Company” or “REVA”) of proxies to be voted at the REVA Medical, Inc. 2014 Annual General Meeting of Stockholders (the “AGM” or “Annual Meeting”) to be held on 13 May 2014, at 10:30 a.m., Australian Eastern Standard Time (which is 5:30 p.m. on May 12, 2014 U.S. Pacific Daylight Time), at the AGL Theatre in the Museum of Sydney, and at any postponements or adjournments of the Annual Meeting. If you held shares of our common stock as of 4:30 p.m. on 15 March 2014 Australian Eastern Daylight Time (which was 10:30 p.m. on March 14, 2014 U.S. Pacific Daylight Time), the Record Date for the Annual Meeting, you are invited to attend the Annual Meeting and vote on the proposals described below under the heading “On what proposals am I voting?” Those persons holding CHESS Depositary Interests (“CDIs”) are entitled to receive notice of and to attend the AGM and may instruct CHESS Depositary Nominees Pty Ltd. (“CDN”) to vote at the Annual Meeting by following the instructions on the CDI Voting Instruction Form or by voting online at www.investorvote.com.au.

 

Why did I receive a notice of Internet availability of proxy materials instead of a full set of proxy materials?

 

In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”), we are permitted to furnish proxy materials, including this Proxy Statement and our 2013 Annual Report on Form 10-K (the “2013 Annual Report”), to stockholders by providing access to these documents on the Internet instead of mailing printed copies. Most stockholders will not receive printed copies of the proxy materials unless requested. Instead, the notice provides instructions on how to access and review the proxy materials on the Internet. The notice also provides instructions on how to cast your vote via the Internet. If you would like to receive a printed or email copy of our proxy materials, please follow the instructions for requesting the materials in the notice.

 

On what proposals am I voting?

 

There are 11 proposals scheduled to be voted on at the Annual Meeting:

 

·            Election of the two Class I directors named in this Proxy Statement to hold office for a term of three years and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal;

 

·            Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014;

 

·            Approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Brian H. Dovey on the terms and conditions set forth in this Proxy Statement;

 



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·            Approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Anne Keating on the terms and conditions set forth in this Proxy Statement;

 

·            Approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Gordon E. Nye on the terms and conditions set forth in this Proxy Statement;

 

·            Approval of the grant of 15,000 options to purchase 15,000 shares of common stock to James J. Schiro on the terms and conditions set forth in this Proxy Statement;

 

·            Approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Robert Thomas on the terms and conditions set forth in this Proxy Statement;

 

·            Approval of the issuance of equity securities up to 10% of the issued capital of the Company on the terms and conditions set forth in this Proxy Statement;

 

·            Approval, on an advisory basis, of the compensation of the named executive officers for the fiscal year ended December 31, 2013, as set forth in this Proxy Statement;

 

·            Approval of the Amended and Restated 2010 Equity Incentive Plan for purposes of complying with Section 162(m) of the U.S. Internal Revenue Code; and

 

·            Approval of the issuance and transfer of securities under the Amended and Restated 2010 Equity Incentive Plan on the terms and conditions set forth in this Proxy Statement.

 

How does the Board recommend that I vote?

 

Our Board recommends that you vote your shares:

 

·            “FOR” the election of each of the Class I directors named in this Proxy Statement to hold office for a term of three years and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal.

 

·            “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014.

 

·            “FOR” the approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Brian H. Dovey on the terms set forth in this Proxy Statement (except Brian H. Dovey who abstains from making a recommendation due to his personal interest in the proposal).

 

·            “FOR” the approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Anne Keating on the terms set forth in this Proxy Statement (except Anne Keating who abstains from making a recommendation due to her personal interest in the proposal).

 

·            “FOR” the approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Gordon E. Nye on the terms set forth in this Proxy Statement (except Gordon E. Nye who abstains from making a recommendation due to his personal interest in the proposal).

 

·            “FOR” the approval of the grant of 15,000 options to purchase 15,000 shares of common stock to James J. Schiro on the terms set forth in this Proxy Statement (except James J. Schiro who abstains from making a recommendation due to his personal interest in the proposal).

 

·            “FOR” the approval of the grant of 15,000 options to purchase 15,000 shares of common stock to Robert Thomas on the terms set forth in this Proxy Statement (except Robert Thomas who abstains from making a recommendation due to his personal interest in the proposal).

 

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·            “FOR” the approval of the issuance of equity securities of up to 10% of the issued capital of the Company on the terms and conditions set forth in this Proxy Statement.

 

·            “FOR” the approval, on an advisory basis, of the compensation of the named executive officers for the fiscal year ended December 31, 2013, as set forth in this Proxy Statement.

 

·            “FOR” the approval of the Amended and Restated 2010 Equity Incentive Plan for purposes of complying with Section 162(m) of the U.S. Internal Revenue Code.

 

·            “FOR” the approval of the issuance and transfer of securities under the Amended and Restated 2010 Equity Incentive Plan on the terms and conditions set forth in this Proxy Statement.

 

Who is entitled to vote at the Annual Meeting?

 

If you were a holder of REVA common stock, either as a stockholder of record or as the beneficial owner of shares held in street name as of 4:30 p.m. on 15 March 2014 Australian Eastern Daylight Time (which was 10:30 p.m. on March 14, 2014 U.S. Pacific Daylight Time), the Record Date for the Annual Meeting, you may vote your shares at the Annual Meeting. As of the Record Date, there were 33,459,203 shares of our common stock outstanding (equivalent to 334,592,030 CDIs assuming all shares of common stock were converted into CDIs on the Record Date). Each stockholder has one vote for each share of common stock held as of the Record Date. Each CDI holder is entitled to direct CDN to vote one vote for every ten (10) CDIs held by such holder. As summarized below, there are some distinctions between shares held of record and those owned beneficially and held in street name.

 

What does it mean to be a “stockholder of record?”

 

You are a “stockholder of record” if your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. As a stockholder of record, you have the right to grant your voting proxy directly to REVA or to vote in person at the Annual Meeting. You may vote by Internet, telephone, or mail, as described below under the heading “How do I vote my shares of REVA common stock?” Holders of CDIs are entitled to receive notice of and to attend the Annual Meeting and may direct CDN to vote at the Annual Meeting by following the instructions on the CDI Voting Instruction Form or by voting online at www.investorvote.com.au.

 

What does it mean to beneficially own shares in “street name?”

 

You are deemed to beneficially own your shares in “street name” if your shares are held in an account at a brokerage firm, bank, broker-dealer, trust, custodian, or other similar organization. If this is the case, proxy materials were forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank, trustee, or nominee how to vote your shares, and you are also invited to attend the Annual Meeting. If you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposals on which your broker does not have discretionary authority to vote (a “broker non-vote”).

 

Since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares at the meeting. If you do not wish to vote in person or you will not be attending the Annual Meeting, you may vote by proxy. You may vote by proxy by Internet or telephone, as described below under the heading “How do I vote my shares of REVA common stock?”

 

How many shares must be present or represented to conduct business at the Annual Meeting?

 

The quorum requirement for holding the Annual Meeting and transacting business is that holders of a majority of the voting power of the issued and outstanding shares of common stock of REVA entitled to vote generally in the election of directors must be present in person or represented by proxy. Abstentions and shares represented by “broker non-votes” are counted for the purpose of determining the presence of a quorum. As of the Record Date, there were 33,459,203 shares of our common stock outstanding, and each share is entitled to one vote at the Annual Meeting.

 

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What is the voting requirement to approve each of the proposals?

 

Proposal 1 — Election of Directors

 

Directors are elected by a plurality of the votes, which means that the director nominees receiving the highest number of “FOR” votes will be elected. Neither abstentions nor broker non-votes will count as a vote cast “FOR” or “AGAINST” a director nominee, and they will have no direct effect on the outcome of the election of directors.

 

Proposal 2 — Ratification of the Appointment of our Independent Registered Public Accounting Firm

 

The proposal to ratify the appointment of Ernst & Young LLP requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

Proposals 3 through 7 — Approval of the Grant of Stock Options to Non-Executive Directors of the Company

 

The proposals to approve the grant of 15,000 options to purchase 15,000 shares of common stock under the 2010 Equity Incentive Plan to each of Brian H. Dovey, Anne Keating, Gordon E. Nye, James J. Schiro, and Robert Thomas require the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Annual Meeting and voting on such proposals. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” these proposals. Broker non-votes will have no direct effect on the outcome of these proposals.

 

Proposal 8  — Approval of the Issuance of up to 10% of the Issued Capital of the Company

 

The proposal to approve the issuance of equity securities of up to 10 percent of the issued capital of the Company requires the affirmative vote of the holders of 75 percent of the shares present in person or represented by proxy at the Annual Meeting and voting on such proposals. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

Proposal 9 — Approval, on an Advisory Basis, of Executive Compensation

 

The proposal to approve, on an advisory basis, the compensation awarded to the named executive officers for the fiscal year ended December 31, 2013 requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

Proposal 10 — Approval of the Amended and Restated 2010 Equity Incentive Plan for the purposes of complying with Section 162(m) of the U.S. Internal Revenue Code.

 

The proposal to approve the Amended and Restated 2010 Equity Incentive Plan for purposes of complying with Section 162(m) of the Internal Revenue Code requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

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Proposal 11 — Approval of the Issuance and Transfer of Securities under the Company’s Amended and Restated

2010 Equity Incentive Plan.

 

The proposal to approve the issuance and transfer of securities under the Amended and Restated 2010 Equity Incentive Plan requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

Voting exclusion statement:

 

The Company will disregard any votes cast on Proposals 3 through 7 and on Proposal 11 by:

 

·            the directors of REVA Medical, Inc.; and

 

·            any associate of the directors of REVA Medical, Inc.

 

The Company will disregard any votes cast on Proposal 8 by:

 

·                  a person who may participate in the proposed issue of any securities under the additional 10% placement capacity that is the subject of this Proposal;

 

·                  a person who might obtain a benefit, except a benefit solely in the capacity of a holder of shares of our common stock, if Proposal 8 is passed; and

 

·                  any associate of those persons.

 

However, the Company need not disregard a vote cast on Proposals 3 through 8 or Proposal 11 if:

 

·            it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the direction on the proxy card; or

 

·            it is cast by the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance with the direction on the proxy card to vote as the proxy decides.

 

As at the date of this Proxy Statement, the Company has no specific plans to issue placement securities under ASX Listing Rule 7.1A and therefore it is not known who may participate in a potential issuance of securities, if any, under ASX Listing Rule 7.1A. Accordingly, as at the date of this Proxy Statement, the Company is not aware of any person who would be excluded from voting on Proposal 8.

 

How do I vote my shares of REVA common stock?

 

If you are a stockholder of record, you can vote in the following ways:

 

·            By Internet:  by following the Internet voting instructions included in the Notice of Annual Meeting of Stockholders at any time up until 4:30 p.m. on 9 May 2014 Australian Eastern Standard Time (which is 11:30 p.m. on May 8, 2014 U.S. Pacific Daylight Time).

 

·            By Telephone:  by following the telephone voting instructions included in the Notice of Annual Meeting of Stockholders at any time up until 4:30 p.m. on 9 May 2014 Australian Eastern Standard Time (which is 11:30 p.m. on May 8, 2014 U.S. Pacific Daylight Time).

 

·            By Mail:  by marking, dating, and signing your proxy card in accordance with the instructions on it and returning it by mail in the pre-addressed reply envelope. The proxy card must be received prior to the Annual Meeting.

 

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If your shares are held through a benefit or compensation plan or in street name, your plan trustee or your bank, broker, or other nominee should give you instructions for voting your shares. In these cases, you may vote by Internet, telephone, or mail by submitting a Voting Instruction Form.

 

If you satisfy the admission requirements to the Annual Meeting, as described below under the heading “How do I attend the Annual Meeting?” you may vote your shares in person at the meeting. Even if you plan to attend the Annual Meeting, we encourage you to vote in advance by Internet, telephone, or mail so that your vote will be counted in the event you later decide not to attend the Annual Meeting. Shares held through a benefit or compensation plan cannot be voted in person at the Annual Meeting.

 

How do I vote if I hold CDIs?

 

Each CDI holder is entitled to direct CDN to vote one vote for every ten (10) CDIs held by such holder. Those persons holding CDIs are entitled to receive notice of and to attend the Annual Meeting and any adjournment or postponement thereof, and may direct CDN to vote their underlying shares of common stock at the Annual Meeting by voting online at www.investorvote.com.au, or by returning the CDI Voting Instruction Form to Computershare, the agent we designated for the collection and processing of voting instructions from our CDI holders, no later than 4:30 p.m. on 9 May 2014 Australian Eastern Standard Time (which is 11:30 p.m. on May 8, 2014 U.S. Pacific Daylight Time) in accordance with the instructions on such form. Doing so permits CDI holders to instruct CDN to vote on their behalf in accordance with their written directions.

 

Alternatively, CDI holders have the following options in order to vote at the Annual Meeting:

 

·            informing REVA that they wish to nominate themselves or another person to be appointed as CDN’s proxy for the purposes of attending and voting at the meeting; or

 

·            converting their CDIs into a holding of shares of REVA’s common stock and voting these at the meeting (however, if thereafter the former CDI holder wishes to sell their investment on ASX, it would be necessary to convert shares of common stock back into CDIs). This must be done prior to the record date for the meeting.

 

As holders of CDIs will not appear on REVA’s share register as the legal holders of the shares of common stock, they will not be entitled to vote at our stockholder meetings unless one of the above steps is undertaken.

 

How do I attend the Annual Meeting?

 

Admission to the Annual Meeting is limited to REVA stockholders or holders of CDIs, one member of their respective immediate families, or their named representatives. We reserve the right to limit the number of immediate family members or representatives who may attend the meeting. Stockholders of record, holders of CDIs of record, immediate family member guests, and representatives will be required to present government-issued photo identification (e.g., driver’s license or passport) to gain admission to the Annual Meeting.

 

To register to attend the Annual Meeting, please contact REVA Investor Relations as follows:

 

·            by e-mail at IR@revamedical.com;

 

·            by phone at (858) 966-3045 in the U.S. or at +61 2 9229 2700 in Australia;

 

·            by fax to (858) 966-3089; or

 

·            by mail to Investor Relations at 5751 Copley Drive, San Diego, California 92111, U.S.A.

 

Please include the following information in your request:

 

·            your name and complete mailing address;

 

·            whether you require special assistance at the meeting;

 

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·            if you will be naming a representative to attend the meeting on your behalf, the name, complete mailing address, and telephone number of that individual;

 

·            proof that you own shares of REVA’s common stock or hold CDIs as of the Record Date (such as a letter from your bank, broker, or other financial institution; a photocopy of a current brokerage, Computershare, or other account statement; or, a photocopy of a holding statement); and

 

·            the name of your immediate family member guest, if one will accompany you.

 

Please be advised that no cameras, recording equipment, electronic devices, large bags, briefcases, or packages will be permitted in the Annual Meeting.

 

What does it mean if I receive more than one Notice of Annual Meeting of Stockholders?

 

It generally means you hold shares registered in multiple accounts. To ensure that all your shares are voted, please submit proxies or voting instructions for all of your shares.

 

May I change my vote or revoke my proxy?

 

Yes.

 

If you are a stockholder of record, you may change your vote or revoke your proxy by:

 

·      filing a written statement to that effect with our Corporate Secretary at or before the taking of the vote at the Annual Meeting;

 

·      voting again via the Internet or telephone at a later time before the closing of those voting facilities at 4:30 p.m. on 9 May 2014 Australian Eastern Standard Time (which is 11:30 p.m. on May 8, 2014 U.S. Pacific Daylight Time);

 

·      submitting a properly signed proxy card with a later date that is received at or prior to the Annual Meeting; or

 

·      attending the Annual Meeting, revoking your proxy, and voting in person.

 

The written statement or subsequent proxy should be delivered to REVA Medical, Inc., 5751 Copley Drive, San Diego, California 92111, U.S.A., Attention:  Corporate Secretary, or hand delivered to the Corporate Secretary, before the taking of the vote at the Annual Meeting. If you are a beneficial owner and hold shares through a broker, bank, or other nominee, you may submit new voting instructions by contacting your broker, bank, or other nominee. You may also change your vote or revoke your voting instructions in person at the Annual Meeting if you obtain a signed proxy from the record holder (broker, bank, or other nominee) giving you the right to vote the shares.

 

If you are a holder of CDIs and you direct CDN to vote by completing the CDI Voting Instruction Form, you may revoke those directions by delivering to Computershare, no later than 4:30 p.m. on 9 May 2014 Australian Eastern Standard Time (which is 11:30 p.m. on May 8, 2014 U.S. Pacific Daylight Time), a written notice of revocation bearing a later date than the CDI Voting Instruction Form previously sent.

 

Could other matters be decided at the Annual Meeting?

 

We are currently unaware of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement. If other matters are properly presented for consideration at the Annual Meeting and you are a stockholder of record and have submitted your proxy, the persons named in your proxy will have the discretion to vote on those matters for you.

 

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Who will pay for the cost of soliciting proxies?

 

We will pay the cost of soliciting proxies, including the cost of preparing and mailing proxy materials. Proxies may be solicited on our behalf by directors, officers, or employees (for no additional compensation) in person or by telephone, electronic transmission, and facsimile transmission.

 

If we hire soliciting agents, we will pay them a reasonable fee for their services. We will not pay directors, officers, or other regular employees any additional compensation for their efforts to supplement our proxy solicitation. We anticipate that banks, brokerage houses, and other custodians, nominees, and fiduciaries may forward soliciting material to the beneficial owners of shares of common stock entitled to vote at the Annual Meeting and that we will reimburse those persons for their out-of-pocket expenses incurred in this connection.

 

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BOARD OF DIRECTORS INFORMATION

 

Overview

 

Our Company was founded in California in June 1998 under the name MD3, Inc. In March 2002, we changed our name to REVA Medical, Inc. In October 2010, we reincorporated from the State of California to the State of Delaware and, as a result, the rights of our stockholders are now governed by the Delaware General Corporation Law. In December 2010, we completed an initial public offering (our “IPO”) of common stock. Our stock is traded in the form of CHESS Depositary Interests (or “CDIs”) and our CDIs commenced trading publicly on the Australian Securities Exchange (the “ASX”) on December 23, 2010 (Australian Eastern Daylight Time).

 

Nominees for Election as Directors

 

Our Board currently consists of six members and is divided into three classes, each comprised of two directors. The directors in each class serve three-year terms and in each case until their respective successors are duly elected and qualified. On January 20, 2014, the Board unanimously nominated Brian H. Dovey and Anne Keating, the two current Class I directors whose terms expire at the Annual Meeting, for re-election as directors.

 

Directors are elected by a plurality of the votes cast at the Annual Meeting, which means that the two director nominees receiving the highest number of “FOR” votes will be elected as Class I directors. Both of the nominees have indicated their willingness to serve if elected, but if either should be unable or unwilling to stand for election, the shares represented by proxies may be voted for a substitute as REVA may designate, unless a contrary instruction is indicated in the proxy.

 

The following table sets forth information as of March 15, 2014 regarding members of our Board, including the director nominees for election at the Annual Meeting. The information includes each member’s business experience and service on other boards of directors, in addition to the qualifications, attributes and skills that led our Board to the conclusion that each member should serve as a director. While our Diversity Policy doesn’t contain specific guidelines in considering whether to recommend any director nominee, including any candidate recommended by stockholders, we believe that the backgrounds and qualifications of the directors, considered as a group, should provide a significant mix of experience, knowledge, and abilities that will allow our Board to fulfill its responsibilities. As set forth in our corporate governance guidelines, these criteria generally include, among other things, an individual’s business experience and skills (including skills in core areas such as operations, management, technology, accounting and finance, strategic planning, and international markets), as well as independence, judgment, knowledge of our business and industry, professional reputation, leadership, integrity, and the ability to represent the best interests of the Company’s stockholders. In addition, the nominating and corporate governance committee also considers a Board member’s ability to commit sufficient time and attention to the activities of the Board, as well as the absence of any potential conflicts with the Company’s interests. The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Our Board will be responsible for selecting candidates for election as directors based on the recommendation of the nominating and corporate governance committee.

 

We believe that our current Board includes individuals with strong backgrounds in executive leadership and management, accounting and finance, and Company and industry knowledge. In addition, each of our directors has a strong professional reputation and has shown a dedication to his or her profession and community. We also believe that our directors’ diversity of backgrounds and experiences results in different perspectives, ideas, and viewpoints, which makes our Board more effective in carrying out its duties. We believe that our directors hold themselves to the highest standards of integrity and that they are committed to representing the long-term interests of our stockholders.

 

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Nominees for Election as Class I Directors

(Term Expires 2017)

 

 

 

 

BRIAN H. DOVEY
Director (age 72)

 

Mr. Dovey has served as our director since June 2001. Mr. Dovey has been a Partner of Domain Associates, LLC, a private venture capital management firm focused on life sciences, since 1988. Since joining Domain, he has served on the boards of directors of over 35 private and public companies and has been Chairman of five. Prior to joining Domain, Mr. Dovey spent six years at Rorer Group, Inc. (now part of Sanofi-Aventis), a pharmaceutical and medical device company listed on the NYSE, including as President from 1986 to 1988. Previously, Mr. Dovey was President of Survival Technology, Inc., a start-up medical products company. He also held management positions with Howmedica, Inc., Howmet Corporation, and New York Telephone Company. Mr. Dovey has served as both President and Chairman of the National Venture Capital Association. He is former Chair and currently serves on the Board of Trustees of the Wistar Institute, a non-profit preclinical biomedical research company. Mr. Dovey serves on the board of directors and is also Chairman at the Center for Venture Education (Kauffman Fellows Program). He was also a former board member of the industry association representing the medical device industry, as well as the association representing consumer pharmaceuticals. He recently accepted membership on the Venture Advisory Board of the Skolkovo Foundation. Mr. Dovey currently sits on the board of Orexigen Therapeutics, Inc., a biopharmaceutical company focused on the development of pharmaceutical product candidates for the treatment of obesity. Mr. Dovey has also served as board member for the following publicly traded companies: Align Technology, Inc., Cardiac Science, Inc., and Neose Technologies, Inc. Mr. Dovey received his B.A. from Colgate University and his M.B.A. from the Harvard Business School.

 

 

 

 

Qualifications: We believe Mr. Dovey is qualified to sit on our Board due to his strong financial expertise, his experience in corporate governance and risk management, his service as a director on over 35 private and public companies, his broad executive experience with medical device companies, and his extensive experience at a health care venture capital firm.

 

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Nominees for Election as Class I Directors

(Term Expires 2017)

 

 

 

ANNE KEATING
Director (age 60)

 

Ms. Keating has served as our director since October 2010. Ms. Keating is currently a director of a number of ASX-listed companies in a range of different industries, including GI Dynamics, Inc., a U.S.-based medical device company, Ardent Leisure Limited, a general management service provider, and Goodman Group Limited (formerly Macquarie Goodman), a property development and management company. She is a member of the Advisory Council of CIMB Australia. Ms. Keating is also a Director for the Garvan Institute of Medical Research and an Inaugural Governor for the Cerebral Palsy Foundation. From 1993 to 2001, Ms. Keating held the position of General Manager, Australia for United Airlines, and from 1994 to 1998, she was a Governor for the American Chamber of Commerce. She was also a Delegate to the Australian/American Leadership Dialogue for 14 years. Ms. Keating previously served on the board of ClearviewWealth Ltd., a fully diversified life insurance and wealth management company listed on the ASX, from December 2010 until December 2012, was an inaugural board member of the Victor Chang Cardiac Research Institute for ten years and also previously served on the board of NRMA/Insurance/IAG Ltd. for nine years. She has also previously held directorships with Spencer Street Station Redevelopment Holdings Limited, Easy FM China Pty Ltd, Radio 2CH Pty Ltd, and Workcover Authority of New South Wales.

 

Qualifications: We believe Ms. Keating is qualified to sit on our Board due to her extensive business, management, and governance experience, including her positions on a number of boards of ASX-listed companies. Ms. Keating also brings Australian medical research and cardiac experience from her years of service with the Garvan Institute of Medical Research and the Victor Chang Cardiac Research Institute.

 

 

 

Class II Directors Continuing in Office

(Term Expires 2015)

 

GORDON E. NYE

Director (age 59)

 

Mr. Nye has served as our director since 1999. He is a Managing Director of Group Outcome LLC, a U.S.-based merchant banking firm which deploys its capital and that of its financial partners in private equity and venture capital investments in medical technology companies. He served as Chief Executive Officer of Zeltiq Aesthetics, Inc., a medical device company, from September 2009 to April 2012. From August 2003 to July 2009, Mr. Nye served as general partner of Prism Venture Partners, a venture capital firm, where he was a member of the life sciences investment team. Prior to that time, he served as our Chief Executive Officer from 2001 to 2003 and President and Chief Executive Officer of two former Johnson & Johnson divisions (“A” Company Orthodontics, Inc. and Critikon Company, LLC) after they were acquired in management buyouts. He has also held a variety of marketing, sales, and general management roles for L.A. Gear, Inc., Olin Ski Company, Inc., Reebok, Ltd., and The Gillette Company. Mr. Nye received his MBA from the Amos Tuck School of Business at Dartmouth College where he also received his undergraduate degree.

 

Qualifications:  We believe Mr. Nye’s qualifications to sit on our Board include his knowledge of the medical device business, his broad operating experience as a senior executive of Zeltiq Aesthetics, Inc. and two former Johnson & Johnson divisions, his extensive consumer marketing background, and his other board service.

 

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ROBERT THOMAS

Director (age 68)

 

Class II Directors Continuing in Office

(Term Expires 2015)

 

Mr. Thomas has served as our director since July 2010. He has also been a director and non-executive Chairman of the Board of HeartWare Limited/HeartWare International, Inc., a U.S. medical device company listed on ASX and NASDAQ, since November 2004. He is currently a director of a number of Australian public companies, including Virgin Australia Limited, Biotron Limited, TAL Limited and Starpharma. Between October 2004 and September 2008, Mr. Thomas was a consultant to Citigroup Corporate and Investment Bank. Between March 2003 and September 2004, he was Chairman of Global Corporate and Investment Bank, Citigroup Global Markets, Australia and New Zealand. Prior to that time, Mr. Thomas was Chief Executive Officer of Citigroup’s Corporate and Investment Bank (formerly known as Salomon Smith Barney), Australia and New Zealand from October 1999 until February 2003. Mr. Thomas is Chairman of Aus Bio Limited, a director of O’Connell Street Associates and Grahger Capital Securities, and President of the State Library Council of New South Wales in Australia. He also is a member of the advisory board of Inteq Limited. Mr. Thomas holds a Bachelor of Economics from Monash University, Australia. He is a member of the Stockbrokers Association of Australia and is a Master Stockbroker. Mr. Thomas is also a Fellow of the Financial Services Institute of Australia and the Australian Institute of Company Directors.

 

Qualifications:  We believe Mr. Thomas is qualified to sit on our Board due to his extensive investment banking experience, including his leadership of finance and strategic transactions, his involvement with medical device companies, and his experience in governance and risk management across a wide range of industries. Mr. Thomas also brings capital market and economics expertise to the Board from his years of service as a securities analyst and experience as a director of ASX-listed companies.

 

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Class III Directors Continuing in Office

(Term Expires 2016)

 

ROBERT B. STOCKMAN

Chairman of the Board

(age 60)

 

Chief Executive Officer

REVA Medical, Inc.

 

 

 

Mr. Stockman, our co-founder, has served as our Chairman of the Board and director since 1999 and our Chief Executive Officer since August 2010. He has also served as a director of HeartWare Limited/HeartWare International, Inc., a medical device company listed on ASX and NASDAQ, since December 2006. Mr. Stockman also serves as a Board member for MuseAmi, Inc., a privately held advanced music software company that Mr. Stockman co-founded. He previously served on the board of Zeltiq Aesthetics, Inc., a medical technology company listed on NASDAQ, from July 2010 until April 2012. Since 1999, Mr. Stockman has been the President and Chief Executive Officer of Group Outcome LLC, a U.S.-based merchant banking firm that deploys its capital and that of its financial partners in private equity and venture capital investments in medical technology companies. Mr. Stockman also co-founded Centrimed, Inc., an internet-based software company, that was acquired by the Global Healthcare Exchange, LLC, and led the buyouts of Ioptex, an intraocular lens manufacturer, and two Johnson & Johnson divestitures, “A” Company Orthodontics, Inc. and Critikon Company, LLC, each of which was subsequently acquired. Prior to establishing Group Outcome LLC, Mr. Stockman spent 18 years with Johnston Associates, Inc. and Narragansett Capital Corporation, where he focused on venture capital investments and merger advisory work in health care. Mr. Stockman holds a Bachelor’s Degree from Harvard College and a Master in Business Administration from The Amos Tuck School of Business at Dartmouth College, where he is on the Board of Overseers.

 

Qualifications:  We believe Mr. Stockman is qualified to sit on our Board due to his extensive experience as an entrepreneur driving the growth of five medical products companies, his experience as an executive of several medical device companies, and his experience as an executive in the investment banking industry, particularly in private equity and venture capital investments in medical technology. Mr. Stockman’s qualifications also include his strong financial background, including his work early in his career at Price Waterhouse, a provider of tax, audit, and advisory services, and his ability to provide financial expertise to the Board, including an understanding of financial statements, corporate finance, accounting, and capital markets.

 

JAMES J. SCHIRO

Director (age 68)

 

 

Mr. Schiro has served as our director since November 2010. Mr. Schiro was Chief Executive Officer of Zurich Financial Services from May 2002 to December 2009, after serving as Chief Operating Officer — Group Finance from March 2002. He joined Price Waterhouse in 1967, where he held various management positions. In 1995, he was elected Chairman and Chief Executive Officer of Price Waterhouse, and in 1998 became Chief Executive Officer of PricewaterhouseCoopers LLP, after the merger of Price Waterhouse and Coopers & Lybrand, where he served until 2002. Mr. Schiro is also the Lead Director of Goldman Sachs, Vice Chairman of the Supervisory Board of Royal Philips Electronics, Senior Advisor of CVC Capital Partners, and a Director of PepsiCo, Inc. Mr. Schiro is involved in numerous non-profit organizations, including the Institute for Advanced Studies, American Friends of the Lucerne Festival, and St. Michael’s Special School.

 

Qualifications:  We believe Mr. Schiro is qualified to sit on our Board due to his extensive executive experience, strong financial background, experience in governance and risk management, and his service on other public company boards and not-for-profit organizations.

 

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Committees of the Board of Directors/Corporate Governance

 

Directors are expected to attend meetings of the Board and any Board committees on which they serve. The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities:  audit, compensation, and nominating and corporate governance. Each of these committees has the responsibilities described in the committee charters, which are available on our website at www.revamedical.com. Our Board may also establish other committees from time to time to assist in the discharge of its responsibilities.

 

Membership of the committees of our Board is as follows:

 

Director

 

Audit
Committee

 

Compensation
Committee

 

Nominating
and Corporate
Governance
Committee

 

 

 

 

 

 

 

 

 

Mr. Stockman (Chairman)

 

 

 

 

Mr. Dovey(1)

 

X

 

X

 

 

Ms. Keating(2)

 

 

 

Chair

 

Mr. Nye(2)

 

 

Chair

 

X

 

Mr. Schiro(2)

 

X

 

 

X

 

Mr. Thomas(2)

 

Chair

 

X

 

 

 


(1)   Independent Director under the rules of NASDAQ and the SEC, but not considered independent under the ASX.

 

(2)   Independent Director under the rules of NASDAQ, ASX, and the SEC.

 

During the year ended December 31, 2013, all directors attended 75 percent or more of the meetings of the Board of Directors and committees thereof on which he or she served with the exception of Mr. Dovey who attended two of the three compensation committee meetings and Mr. Schiro who attended one of the two nominating and corporate governance committee meetings. Following is a summary of Board and Committee meeting attendance:

 

Director

 

Board of
Directors

 

Audit
Committee

 

Compensation
Committee

 

Nominating
and Corporate
Governance
Committee

 

 

 

 

 

 

 

 

 

 

 

Number of Meetings Held

 

5

 

4

 

3

 

2

 

Meeting Attendance:

 

 

 

 

 

 

 

 

 

Mr. Stockman

 

5

 

  2*

 

  2*

 

  2*

 

Mr. Dovey

 

5

 

4

 

2

 

 

Ms. Keating

 

5

 

 

  1*

 

2

 

Mr. Nye

 

5

 

 

3

 

2

 

Mr. Schiro

 

5

 

4

 

  1*

 

1

 

Mr. Thomas

 

5

 

3

 

3

 

 

 


* Indicates attendance at a meeting of a Committee on which the Director was not a member.

 

Audit Committee

 

Our audit committee oversees our corporate accounting and financial reporting, including auditing of our financial statements. Among other things, our audit committee:

 

·      determines the engagement of, and approves fees paid to, our independent registered public accounting firm;

 

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·      monitors the qualifications, independence activities, and performance of our independent registered public accounting firm;

 

·      approves the retention of our independent registered public accounting firm to perform any proposed and permissible non-audit services;

 

·      reviews our financial statements and critical accounting estimates; and

 

·      discusses the annual audit results with management and the independent registered public accounting firm.

 

Our audit committee reviews the effectiveness of internal controls and the adequacy of our disclosure controls and procedures. In addition, our audit committee is responsible for the performance of our internal audit function, as well as preparing any reports required under SEC rules. The audit committee will also provide advice to the Board and report on the status of business risks pursuant to our risk management policy.

 

We have adopted an audit committee charter, a copy of which is available in the “Investors — Corporate Governance” section of our website at www.revamedical.com.

 

Compensation Committee

 

Our compensation committee establishes, amends, reviews, and approves the compensation and benefit plans with respect to senior management and employees, including determining individual elements of total compensation of the Chief Executive Officer and other executive officers, and reviews our performance and the performance of our executive officers with respect to these elements of compensation. In carrying out its responsibilities, the compensation committee reviews all components of compensation for consistency with our compensation philosophy and with the interests of stockholders. Our compensation committee will review compensation practices and trends, identify performance goals of our Company and our executive officers, and set compensation in light of these objectives. Our compensation committee also determines annual retainer, meeting fees, equity awards, and other compensation for members of the Board and administers the issuance of stock options and other awards under our equity incentive plans.

 

Our compensation committee reviews and evaluates potential risks related to our compensation policies and practices for employees and has determined that we have no compensation risks that are reasonably likely to have a material adverse effect on the Company. We structure our compensation to address Company-wide risk. We believe the combination of base salary, bonus potential, and stock-based incentive awards with four-year vesting periods is balanced and serves to motivate our employees to accomplish our business plan without creating risks that are reasonably likely to have a material adverse effect on our Company.

 

We have adopted a compensation committee charter, a copy of which is available in the “Investors — Corporate Governance” section of our website at www.revamedical.com.

 

Nominating and Corporate Governance Committee

 

Our nominating and corporate governance committee recommends the director nominees for each annual general meeting and ensures that the Board and the committees of the Board have the benefit of qualified and experienced independent directors. The committee’s primary responsibilities are to:

 

·            review the size and composition of our Board;

 

·            select, or recommend to our Board, nominees for each election of directors;

 

·            develop and recommend to our Board criteria for selecting qualified director candidates;

 

·    consider committee member qualifications, appointment, and removal;

 

·            recommend corporate governance principles, codes of conduct, and applicable compliance mechanisms; and

 

·            provide oversight in the evaluation of our Board and each committee.

 

We have adopted a nominating and corporate governance committee charter, a copy of which is available in the “Investors — Corporate Governance” section of our website at www.revamedical.com.

 

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GOVERNANCE OF OUR COMPANY

 

Corporate Governance Guidelines

 

Our corporate governance guidelines are designed to ensure effective corporate governance of the Company. Our corporate governance guidelines cover topics including, but not limited to, director qualification criteria, director compensation, director orientation and continuing education, communications from stockholders to the Board, succession planning, and the annual evaluations of the Board and its committees. Our corporate governance guidelines will be reviewed regularly by the nominating and corporate governance committee and revised when appropriate. The full text of our corporate governance guidelines can be found in the “Investors — Corporate Governance” section of our website accessible to the public at www.revamedical.com. A printed copy may also be obtained by any stockholder upon request.

 

Code of Business Conduct and Ethics

 

Our Board adopted a code of business conduct and ethics to ensure that our business is conducted in a consistently legal and ethical manner. The code of business conduct and ethics establishes policies pertaining to, among other things, employee conduct in the workplace, securities trading, confidentiality, conflicts of interest, reporting violations, and compliance procedures. All of our employees, including our executive officers, as well as members of our Board, are required to comply with our code of business conduct and ethics. The full text of the code of business conduct and ethics can be found in the “Investors — Corporate Governance” section of our website accessible to the public at www.revamedical.com. A printed copy may also be obtained by any stockholder upon request. Any waiver of the code of business conduct and ethics for our executive officers or directors must be approved by our Board after receiving a recommendation from our audit committee. We will disclose future amendments or waivers to our code of business conduct and ethics on our website, www.revamedical.com, within four business days following the date of the amendment or waiver.

 

Stockholder Recommendations for Director Nominees

 

In nominating candidates for election as director, the nominating and corporate governance committee will consider a reasonable number of candidates for director recommended by a single stockholder who has held over 0.1 percent of REVA’s shares of common stock for over one year and who satisfies the notice, information, and consent provisions set forth in our amended and restated bylaws and corporate governance guidelines. Stockholders who wish to recommend a candidate may do so by writing to the nominating and corporate governance committee in care of the Corporate Secretary, REVA Medical, Inc., 5751 Copley Drive, San Diego, California 92111, U.S.A. The nominating and corporate governance committee will use the same evaluation process for director nominees recommended by stockholders as it uses for other director nominees.

 

Communicating with the Board

 

Our nominating and corporate governance committee establishes procedures by which stockholders and other interested parties may communicate with the Board, any committee of the Board, any individual director, or the independent or non-employee directors as a group. Such parties can send communications by mail to the Board in care of the Corporate Secretary, REVA Medical, Inc., 5751 Copley Drive, San Diego, California 92111, U.S.A. In addition, parties can contact the Board by emailing the Corporate Secretary at boardmember@revamedical.com. The name or title of any specific recipient or group should be noted in the communication. Communications from stockholders are distributed by the Corporate Secretary to the Board or to the committee or director(s) to whom the communication is addressed, however the Corporate Secretary will not distribute items that are unrelated to the duties and responsibilities of the Board, such as spam, junk mail and mass mailings, business solicitations and advertisements, and communications that advocate the Company’s engaging in illegal activities or that, under community standards, contain offensive, scurrilous, or abusive content.

 

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Identification and Evaluation of Nominees for Directors

 

Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating nominees for director. The committee regularly assesses the appropriate size and composition of the Board, the needs of the Board and the respective committees of the Board, and the qualifications of candidates in light of these needs. Candidates may come to the attention of the committee through stockholders, management, current members of the Board, or search firms. The evaluation of these candidates may be based solely upon information provided to the nominating and corporate governance committee or may also include discussions with persons familiar with the candidate, an interview of the candidate or other actions the nominating and corporate governance committee deems appropriate, including the use of third parties to review candidates.

 

Director Attendance at Annual Meetings of Stockholders

 

We encourage all of the directors to attend each annual meeting of stockholders. All of our directors attended the 2013 AGM that was held in Sydney, Australia; three directors attended in person and three directors attended by teleconference. We currently anticipate a majority of our directors to be present at the 2014 Annual Meeting.

 

Director Independence

 

In accordance with our corporate governance guidelines, the majority of our Board members are independent directors. Our Board considers that a director is independent when the director is not an officer or employee of the Company or its subsidiaries, does not have any relationship which would, or could reasonably appear to, materially interfere with independent judgment, and otherwise meets the independence requirements under the rules of NASDAQ, ASX, and the SEC. Our Board has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based on this review, our Board has determined that:

 

·            Robert B. Stockman is not considered to be an independent director under the rules of NASDAQ, ASX, or the SEC;

 

·            Anne Keating, Gordon E. Nye, James J. Schiro, and Robert Thomas are considered to be independent directors under the rules of NASDAQ, ASX, and the SEC; and

 

·            Brian H. Dovey is considered to be an independent director under the rules of NASDAQ and the SEC, but is not considered to be independent under ASX standards.

 

There are no family relationships among our directors and officers, nor are there any arrangements or understandings between any of our directors or officers or any other person pursuant to which any director or officer was, or is, to be selected as a director or officer.

 

Board Leadership Structure

 

The position of Chairman of the Board and Chief Executive Officer of the Company has been combined since the appointment of Robert B. Stockman as Chief Executive Officer in August 2010. The Board believes that, although the combined role does not comply with ASX Corporate Governance Principles and Recommendations, it is currently in the best interest of our Company and the Company’s Stockholders. The ASX Corporate Governance Principles and Recommendations provide guidance on corporate governance practices but are not binding rules or regulations. Mr. Stockman possesses detailed and in-depth knowledge of the issues, opportunities, and challenges facing the Company, and we believe he is the person best positioned to develop agendas that ensure the Board’s time and attention is focused on the most critical matters. Further, our Board believes that his combined role enables decisive leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to stockholders, employees, customers, and suppliers. Each of the directors other than Mr. Stockman is independent under the rules of NASDAQ and the SEC, and the Board believes that the independent directors provide effective oversight of management. Although the Board currently believes that the combination of the Chairman and Chief Executive Officer roles is appropriate in the current circumstances, our amended and restated bylaws and corporate governance principles provide the flexibility to combine or separate the positions and the Board may determine to separate the roles in the future.

 

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The Board’s Role in Risk Oversight

 

Our Board’s role in risk oversight includes receiving reports from members of management on a regular basis regarding material risks faced by the Company and applicable mitigation strategies and activities, at least on a quarterly basis. The reports cover the critical areas of development, regulatory and quality affairs, intellectual property, clinical development, operations, sales and marketing, and legal and financial affairs. Our Board and its committees consider these reports, discuss matters with management, and identify and evaluate any potential strategic or operational risks and appropriate activities to address those risks.

 

We have adopted a risk management policy that sets out how we identify, assess, and manage risk in business operations, a copy of which is available in the “Investors — Corporate Governance” section of our website at www.revamedical.com.

 

Compensation Committee Interlocks and Insider Participation

 

No member of our compensation committee has at any time been our employee with the exception of Gordon E. Nye who served as our Chief Executive Officer from 2001 to 2003. Except as set forth herein, none of our executive officers serves, or has served during the last fiscal year, as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or our compensation committee.

 

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AUDIT-RELATED MATTERS

 

Report of the Audit Committee

 

The audit committee of our board currently has three members, all of whom have been determined by our board to be independent under NASDAQ and SEC rules. Mr. Schiro is considered to be an “audit committee financial expert” under applicable SEC rules.

 

In performing its functions, the audit committee acts only in an oversight capacity and necessarily relies on the work and assurances of the Company’s management, the internal audit function as currently performed by an independent third party, and Ernst & Young LLP, the Company’s independent registered public accounting firm (the “independent auditor”), which, in its reports, express opinions on the conformity of the Company’s annual financial statements with U.S. generally accepted accounting principles. The audit committee recognizes the importance of maintaining the independence of the Company’s independent auditor, both in fact and appearance. Each year, the audit committee evaluates the qualifications, performance and independence of the Company’s independent auditor and determines whether to re-engage the current independent auditor. In doing so, the audit committee considers the quality and efficiency of the services provided by the auditors, the auditors’ capabilities and the auditors’ technical expertise and knowledge of the Company’s operations and industry.

 

Management is responsible for the financial reporting process, the system of internal controls, including internal control over financial reporting, risk management, and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The independent auditor is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with U.S. generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting.

 

The audit committee held four meetings during the fiscal year ended December 31, 2013. At each meeting, the audit committee met with the independent auditor, with and without management present, to discuss the overall scope and plans for the Company’s audit; the results of its audit and quarterly reviews of the Company’s financial statements, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; the clarity of disclosures in the financial statements; its review of the Company’s compliance with internal controls; and overall quality of the Company’s financial reporting. The audit committee also discussed with the independent auditor the matters required to be discussed by the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), including PCAOB Auditing Standard No. 16, Communications With Audit Committees, the rules of the Securities and Exchange Commission, and other applicable regulations.

 

The audit committee and/or the Board also received from the Company’s independent auditor the written disclosures and the letter required by applicable requirements of the PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, regarding their communications with the audit committee concerning independence and has discussed with the independent auditor its independence from the Company. The audit committee also has considered whether the provision of non-audit services to the Company is compatible with the independence of the independent auditor.

 

The audit committee has reviewed and discussed the annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 with management and the independent auditor and the results of management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the independent auditor’s audit of internal control over financial reporting.

 

Based on the review of the consolidated financial statements and discussions with management and Ernst & Young LLP, the audit committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and were filed with the SEC.

 

Submitted by the Audit Committee of the Board of Directors:

 

Robert Thomas (Chair)

Brian H. Dovey

James J. Schiro

 

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Audit and Non-Audit Fees

 

The following table presents the fees for professional services earned by Ernst & Young LLP for services rendered to the Company for the fiscal years ended December 31, 2013 and 2012.

 

Type of Service

 

2013

 

2012

 

 

 

 

 

 

 

Audit Fees (1)

 

$

296,000

 

$

263,000

 

Tax Fees (2)

 

82,000

 

62,000

 

Total

 

$

378,000

 

$

325,000

 

 


 (1)      Includes services in connection with the integrated audit of our consolidated financial statements included in the Annual Reports on Form 10-K, reviews of Quarterly Reports on Form 10-Q, the audit of internal control over financial reporting, and the issuance of consents related to our Form S-8 filings.

 

(2)         Includes services related to tax compliance, including the preparation of tax returns, and tax planning and tax advice.

 

Policy Regarding Pre-Approval of Services Provided by the Independent Auditor

 

The audit committee has established an audit and non-audit services compliance policy (the “Policy”) requiring pre-approval of all audit and permissible non-audit services performed by the independent auditor to monitor the auditor’s independence from the Company. The Policy provides for the annual pre-approval of specific types of services pursuant to policies and procedures adopted by the audit committee, and gives detailed guidance to management as to the specific services that are eligible for such annual pre-approval.

 

The Policy requires the specific pre-approval of all other permitted services. For both types of pre-approval, the audit committee considers whether the provision of a non-audit service is consistent with the SEC’s rules on auditor independence. Additionally, the audit committee considers whether the independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Company’s business, people, culture, accounting systems, risk profile, and other factors, and whether the service might enhance the Company’s ability to manage or control risk or improve audit quality. Also, unless a service is a pre-approved service set forth in the Policy and within the established guidelines, it will require approval by the audit committee in order for it to be provided by the independent auditor. In its review, the audit committee will also consider the relationship between fees for audit and non-audit services in deciding whether to pre-approve such services.

 

As provided under the Sarbanes-Oxley Act of 2002 and the SEC’s rules, the audit committee has delegated pre-approval authority to the chair of the audit committee to address certain requests for pre-approval of services, and the chair must report his or her pre-approval decisions to the audit committee at its next regular meeting. The Policy is designed to help ensure that there is no delegation by the audit committee of authority or responsibility for pre-approval decisions to management. The audit committee monitors compliance by requiring management to report to the audit committee on a regular basis regarding the pre-approved services rendered by the independent auditor. Management has also implemented internal procedures to promote compliance with the Policy.

 

The audit committee has selected Ernst & Young LLP to serve as our independent auditor for the fiscal year ending December 31, 2014, subject to ratification by our stockholders. Ernst & Young LLP has served as the independent auditor of the Company since 2006. Representatives of Ernst & Young LLP will be present at the Annual Meeting. The representatives will have an opportunity to make a statement, if desired, and will be available to respond to appropriate questions.

 

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EXECUTIVE COMPENSATION

 

The following discussion and analysis of compensation arrangements is designed to provide stockholders with an understanding of our compensation philosophy and objectives as well as an overview of the analysis that we performed in setting executive compensation. It discusses the compensation committee’s determination of how and why, in addition to what, compensation actions were taken during 2013 for each person serving as our chief executive officer, our chief financial officer, and the three other most highly compensated executive officers (the “named executive officers”), who were as follows:

 

·            Robert B. Stockman, our Chief Executive Officer;

 

·            Katrina L. Thompson, our Chief Financial Officer and Secretary;

 

·            Jeffrey A. Anderson, our Senior Vice President, Clinical and Regulatory Affairs;

 

·            Donald K. Brandom, Ph.D., our Senior Vice President, Product Development; and

 

·            Robert K. Schultz, Ph.D., our President and Chief Operating Officer.

 

This discussion contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding our business objectives and anticipated achievement under existing and future compensation programs. Actual compensation programs that we may adopt in the future may differ materially from currently planned programs as summarized in this discussion.

 

Compensation Discussion and Analysis

 

Overview of Executive Compensation Program

 

Our compensation committee oversees our executive compensation program and determines executive compensation. Our compensation program is intended to align our named executive officers’ interests with those of our stockholders by rewarding performance for the achievement of goals as established by the compensation committee. Our compensation approach is tied to our stage of development and the current performance goals are set with the objectives of advancing our product development and testing in advance of commercialization and, thereby, increasing stockholder value.

 

In an effort to ensure our 2013 executive compensation practices are comparable to those of similar public medical device companies, the compensation committee engaged Radford, an Aon Hewitt Company (“Radford”), an independent compensation consultant, to provide compensation advisory services that included the following:

 

·            an assessment of our executive compensation philosophy and plan structures and objectives;

 

·            a review and update of our peer group of companies for compensation comparison purposes;

 

·            a review of considerations and market practices related to short-term cash incentive plans and a review of long-term equity and other incentive trends in the medical device industry;

 

·            the collection of competitive compensation levels for each of our executive positions;

 

·            an assessment of our executives’ base salaries, cash bonuses, and equity compensation levels;

 

·            a review of our equity compensation strategy, including the development of award guidelines; and

 

·            a review of broader equity trends, including burn rate, share overhang, and share allocation.

 

The compensation committee reviews and approves all compensation decisions relating to our executives, including our named executive officers, and oversees and administers our executive compensation programs and initiatives. Our compensation program is designed to attract and retain talented employees, to motivate them to achieve our key financial, operational, and strategic goals, and to reward them for superior performance. As we continue to meet our product development milestones, add to our senior management team, and progress toward commercialization, we expect that the specific direction, emphasis, and components of our executive compensation program will continue to evolve. During 2013, the objectives of the compensation program included:

 

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·            a program structure to attract and retain the most highly qualified executive officers;

 

·            appropriate guiding principles, including a comparative peer group and targeted market positioning for different compensation elements;

 

·            continued harmonization of salary, bonuses, equity awards, and other compensation benefits for long-serving executive officers hired under significantly different circumstances;

 

·            alignment of executive compensation, individually and as a team, to long-term interests of stockholders by rewarding performance for achievement of goals;

 

·            program flexibility to permit the accommodation of appropriate individual circumstances; and

 

·            clear, aligned, and easily measured performance goals.

 

We intend to evaluate our philosophy and compensation programs as circumstances require, and at a minimum, we will review executive compensation annually.

 

Compensation Process

 

Our compensation committee is responsible for establishing our compensation philosophy and setting the compensation levels for our executives, including base salaries, cash bonuses, and stock-based incentive awards. To assist the compensation committee in their executive compensation evaluations, our Chief Executive Officer prepares a report at the beginning of each fiscal year recommending base salaries, bonus targets, and stock-based incentive awards for each executive officer. In addition to this report, our compensation committee considers market compensation data presented by Radford. The compensation committee in its sole discretion may accept or adjust the compensation recommendations it is provided. No executive officer is allowed to be present at the time his or her compensation is being discussed or determined by the compensation committee.

 

Benchmarking

 

As part of Radford’s compensation advisory services to the compensation committee, Radford developed and recommended a “peer” group of companies comprised of 17 medical device or medical technology companies to be our peer group for purposes of benchmarking our compensation program in 2013. Each member of the peer group was selected based on an evaluation of the nature of its operations, number of employees, operating income or loss, outstanding securities, and market capitalization. Since we are a development stage company and have not yet generated revenue or operating income, the selection of peer companies focused on those with smaller amounts of annual revenues, operating or net income of less than $10 million, and a market capitalization similar to ours at the time of approximately $200 million.

 

The following companies comprised our peer group for 2013:

 

Alphatec Holdings

 

Exactech

 

Response Genetics

AngioDynamics

 

HeartWare International

 

Rochester Medical

Anika Therapeutics

 

iCad

 

Solta Medical

Conceptus

 

IRIS International

 

Synergetics USA

Endologix

 

Kensey Nash

 

Utah Medical Products

Escalon Medical Corp.

 

Misonix

 

 

 

The compensation committee reviewed market data made available by Radford to benchmark our executive compensation relative to the peer group. The compensation committee used this data to evaluate whether our executive compensation levels, including base salary and incentive awards, were within industry norms, and determined that our total cash compensation levels were close to the 50th percentile of our peer group for most executives as further described below, with total potential equity ownership of the named executives (which includes both equity compensation and share purchases) positioned at or above the 75th percentile to emphasize long-term stockholder alignment.

 

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During the second half of 2013, the compensation committee analyzed updated market data with the assistance of Radford and made a determination to revise the Company’s peer group for 2014. Each member of the revised peer group was selected based on an evaluation of the nature and location of its operations, number of employees, revenues, operating income or loss, current cash and cash equivalents, outstanding securities, and market capitalization. The selection of the new peer companies focused on those companies with annual revenues of less than $100 million and a market capitalization of less than $500 million, which the compensation committee believes can serve as a better comparative for 2014. When examining the Company’s 2013 peer group against the revised criteria, several of the Company’s 2013 peer group companies fell outside some of the key selection factors or had been acquired. As a result, the compensation committee replaced those companies with companies that met the new selection criteria.

 

The following companies comprise our peer group for 2014:

 

Alphatec Holdings

 

Cutera

 

Rochester Medical

Anika Therapeutics

 

Exactech

 

Solta Medical

Atricure

 

Hansen Medical

 

STAAR Surgical Company

Cardica

 

Harvard Bioscience

 

SurModics

Cardiovascular Systems

 

iCad

 

Synergetics

Cerus

 

Misonix

 

Utah Medical Products

Cryolife

 

Response Genetics

 

Vascular Solutions

 

Determination of Executive Compensation

 

In setting compensation for our executive officers, our compensation committee’s philosophy is to consider market levels of compensation, an executive’s contributions and responsibilities, and the goals and overall progress of the Company. Compensation for this purpose comprises total cash compensation, which includes base salary and annual cash bonus incentives, and long-term equity incentives. During 2013, with the assistance of Radford, the compensation committee reaffirmed our philosophy to target total cash compensation for most named executives at close to the 50th percentile of market, based on the peer group, with total potential equity ownership of the named executives (which includes both equity compensation and shares purchased) positioned at or above the 75th percentile to emphasize long-term stockholder alignment.

 

In addition to market benchmarking, the compensation committee reviews the compensation recommendations of our Chief Executive Officer (other than with respect to determining his own compensation), considers the Company’s overall performance during the prior fiscal year, each executive’s individual contributions during the prior fiscal year, and the individual’s annual performance reviews based on achievement of annual goals. With respect to new hires, our compensation committee considers an executive’s background and historical compensation in lieu of prior year performance.

 

Components of Executive Compensation

 

Our current executive compensation program consists of the following components:

 

·            base salary;

 

·            performance-based cash awards;

 

·            equity-based incentives; and

 

·            other benefits.

 

We combine these elements in order to formulate compensation packages that provide competitive pay; reward achievement of financial, operational, and strategic objectives; and align the interests of our named executive officers with those of our stockholders.

 

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Base Salary:  We have provided, and will continue to provide, our executive officers with a base salary to compensate them for services provided to us during the fiscal year. In setting base salaries for our executive officers, our compensation committee considered, and will continue to consider, the executive’s position, our success in achieving our prior year corporate goals, the individual’s contribution and performance during the prior fiscal year, relevant market data, and benchmark levels. The evaluations and recommendations proposed by our Chief Executive Officer are also considered. With respect to new hires, the compensation committee considers an executive’s background and historical compensation in lieu of prior year performance. Our compensation committee evaluates and sets the base salaries for our executives following annual performance evaluations, as well as upon a promotion or other change in responsibility. We expect our compensation committee to continue these policies going forward.

 

In setting the base salaries for our executives for 2013, our compensation committee did so based on the assessment of our compensation programs by Radford, with the philosophy to set total cash compensation close to the 50th percentile of market for most named executive officers, with most named executive officers positioned within five percent of the 50th percentile. Our executive officers have been paid the base salaries for the year ended December 31, 2013, and are currently being paid the annualized salaries for the year ending December 31, 2014, as set forth in the following table:

 

Name and Title

 

2013
Base Salary

 

2014
Base Salary (1)

 

 

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

$

360,500

 

$

371,300

 

Katrina L. Thompson, Chief Financial Officer and Secretary

 

267,800

 

275,800

 

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

 

257,500

 

275,000

 

Donald K. Brandom, Ph.D., SVP, Product Development

 

243,500

 

260,000

 

Robert K. Schultz, Ph.D., President and Chief Operating Officer

 

329,600

 

339,500

 

 


(1)   Annual increases were targeted at 3.0% with additional increases awarded to Messrs. Anderson and Brandom upon promotion.

 

Performance-Based Cash Bonus Awards:  To help align each executive officer’s efforts with the Company’s financial, operational, and strategic goals, we worked to develop a bonus program. For the year ended December 31, 2011, although we had the framework, we had not developed all aspects of a formal bonus plan. For 2011, we awarded discretionary bonuses to our named executive officers that ranged from approximately nine percent to 15 percent of annual base salary.

 

During 2012, with the assistance of Radford, we refined our approach and established a formal bonus award program which we again utilized in 2013. The program utilizes benchmarking as well as assessment of achievement to defined Company milestones and individual goals. Each executive’s target bonus was weighted to his or her expected contributions and achievement of Company and individual goals for the year.

 

We defined the Company’s 2013 performance milestones as follows, in consideration of our primary objective of testing and advancing our product toward commercialization:

 

·            completing enrollment of at least 100 patients with our ReZolve2 scaffold in a clinical study by September 30, 2013;

 

·            preparing the commercial readiness of our ReZolve2 scaffold to support our European CE Marking application, including scale-up of our manufacturing processes; and

 

·            managing our cash and financial resources within the financial budget and strategies approved by the Board.

 

Additionally, during 2013 the compensation committee set the target bonus potential for each named officer, primarily based on benchmarking to our peer group of medical device companies. We also defined individual achievement goals for each named executive officer for the year ended December 31, 2013 and weighted the achievement of these goals based on individual responsibilities and significance to the Company performance milestones. Following are the 2013 bonus targets (based on a percentage of 2013 base salary) and individual achievement goals set for our named executive officers:

 

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Target Bonus

 

Achievement Weighting

 

Name and Title

 

% of
Salary

 

Potential
Amount

 

Company
Milestones

 

Individual
Goals

 

 

 

 

 

 

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

60

%

$

216,300

 

70

%

30

%(1)

Katrina L. Thompson, Chief Financial Officer and Secretary

 

45

%

120,510

 

40

%

60

%(2)

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

 

35

%

90,125

 

40

%

60

%(3)

Donald K. Brandom, Ph.D., SVP, Product Development

 

35

%

85,225

 

50

%

50

%(4)

Robert K. Schultz, Ph.D., President and Chief Operating Officer

 

50

%

164,800

 

70

%

30

%(5)

 


(1)   Individual achievement goals included positioning the Company for a subsequent financing, securing a new strategic or research and development partnership, and performing strategic commercialization efforts.

 

(2)   Individual achievement goals included execution of financial goals and alignment of regulatory filings to support Company milestones and financing needs, implementing a systematic recruitment and retention plan, conducting certain tax analysis, and completing a systematic cost savings project.

 

(3)   Individual achievement goals included obtaining clinical data and commencement of clinical studies within requisite timelines, developing and implementing clinical strategies to support European CE Marking, and completing a systematic cost savings project.

 

(4)   Individual achievement goals included developing and implementing a facility and personnel manufacturing plan to support European CE Marking and commercialization readiness, advancing development of the Company’s next generation technologies, executing a transition plan with respect to quality assurance, and completing a systematic cost savings project.

 

(5)   Individual achievement goals included securing new suppliers for key components, execution of operational goals to support Company milestones and financing needs, implementing a systematic recruitment and retention plan for operating personnel, and completing a systematic cost savings project.

 

Measurement of achievement of the Company milestones and individual achievement goals was made as of December 31, 2013. The compensation committee determined that 55 percent of the Company milestones had been achieved during 2013. In addition, each named executive was evaluated as to achievement of his or her individual 2013 goals, resulting in the following awards under the bonus program as of December 31, 2013:

 

Name and Title

 

2013 Bonus
Potential

 

2013 Bonus
Program
Award

 

% of
Potential

 

 

 

 

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

$

216,300

 

138,400

 

64

%

Katrina L. Thompson, Chief Financial Officer and Secretary

 

120,510

 

95,203

 

79

%

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

 

90,125

 

73,903

 

82

%

Donald K. Brandom, Ph.D., SVP, Product Development

 

85,225

 

66,050

 

78

%

Robert K. Schultz, Ph.D., President and Chief Operating Officer

 

164,800

 

110,416

 

67

%

 

To reward exceptional performance in certain circumstances, the compensation committee may determine from time to time that a supplemental bonus in excess of the target bonus under the program is appropriate and justified, or that a bonus is appropriate for an executive officer who otherwise would not be entitled to receive one. However, individual incentive payments will not be an entitlement. In 2013, certain named executives spent a considerable amount of time on the Company’s next generation scaffold, and as a result of the Company’s progress, the compensation committee awarded the following discretionary bonuses to the named executive officers in addition to the awards under the annual bonus program:

 

Name and Title

 

2013
Discretionary
Bonus

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

 

Katrina L. Thompson, Chief Financial Officer and Secretary

 

$

7,997

 

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

 

3,997

 

Donald K. Brandom, Ph.D., SVP, Product Development

 

11,050

 

Robert K. Schultz, Ph.D., President and Chief Operating Officer

 

11,984

 

 

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Our compensation committee also approved the bonus plan for 2014 using the Company’s new peer group. The following sets forth the target bonus amounts for 2014:

 

Name and Title

 

2014
Bonus Target
(% of Salary)

 

Amount
at Target

 

 

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

60

%

$

222,780

 

Katrina L. Thompson, Chief Financial Officer and Secretary

 

45

%

124,110

 

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

 

35

%

96,250

 

Donald K. Brandom, Ph.D., SVP, Product Development

 

35

%

91,000

 

Robert K. Schultz, Ph.D., President and Chief Operating Officer

 

50

%

169,750

 

 

When combined with base salaries, the bonus award program provides for total cash compensation that is generally aligned at close to the 50th percentile of our peer group. The compensation committee believes this program puts more pay at risk through high cash incentive opportunities, which is consistent with a pay-for-performance approach.

 

Equity-Based Incentive Awards:  In addition to base salary, we provide long-term stock-based incentive awards to our executive officers (in the case of executive directors, these awards are subject to stockholder approval). These stock-based incentive awards generally consist of options to purchase shares of our common stock, and in some cases, shares of restricted stock. We believe that equity awards help further our compensation objectives by encouraging our executives to remain with us through at least the vesting period for these awards and providing them with an incentive to continue to focus on our long-term financial performance and stockholder value.

 

Historically, our executive officers have received grants of equity awards at the time of hire or promotion, and occasionally on an ad-hoc basis. The grants of equity awards are made in accordance with our 2010 Equity Incentive Plan. During the year ended December 31, 2013, we continued to complement our cash salary and bonus incentives with annual long-term equity awards based on their value at the date of grant that would provide our named executive officers with total potential equity ownership (which includes both equity compensation and share purchases), on an aggregate basis, positioned at or above the 75th percentile to emphasize long-term stockholder alignment. Our equity incentive philosophy also calls for vesting over a relevant period (generally four years) combined with annual awards to help ensure long-term performance and to provide for reasonable executive retention. The compensation committee recommended equity awards based on each individual’s performance and the overall compensation philosophy of achieving target compensation. Our Board awarded the following equity incentives to each of our named executive officers during 2013:

 

·            Robert Stockman, Chief Executive Officer — following approval by our stockholders, options to purchase 150,000 shares of common stock and 47,500 shares of restricted common stock (all subject to vesting over a 4-year period). Mr. Stockman’s grants were made, in part, to offset below market cash compensation and the lack of equity grants made to him during 2011 and 2012.

 

·            Katrina L. Thompson, Chief Financial Officer and Secretary — options to purchase 25,000 shares of common stock and 20,000 shares of restricted common stock (all subject to vesting over a 4-year period).

 

·            Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs — options to purchase 35,000 shares of common stock (subject to vesting over a 4-year period).

 

·            Donald K. Brandom, Ph.D., SVP, Product Development — options to purchase 35,000 shares of common stock (subject to vesting over a 4-year period).

 

·            Robert K. Schultz, Ph.D., President and Chief Operating Officer — options to purchase 25,000 shares of common stock and 20,000 shares of restricted common stock (all subject to vesting over a 4-year period).

 

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We plan to continue to grant equity incentive awards, including grants of stock options and/or restricted stock, to our executive officers in connection with their initial hire, following promotions, and on an annual basis. The guidelines for initial grants are based on the executive’s position and the guidelines for annual grants are designed to partially replace the number of equity awards initially granted to the executive at hiring that vest after one year. With respect to new hires, we also will consider the executive’s background and historical compensation when determining the number of options or shares of restricted stock to grant to the executive. The actual number of options or shares of stock for an executive may be higher or lower than these guidelines, based on their individual performance or extraordinary achievements.

 

Stock and Option Grant Practices:  All equity awards to our employees, consultants, and directors have been granted at no less than the fair market value on the date of the award or grant. The amount of realizable value related to such grants and awards is determined by our stock price following the dates of vesting and, therefore, will be determined by our financial performance in the time after award but prior to vesting. Whether the stock price moves up or down shortly after the award date is largely irrelevant for purposes of the equity awards.

 

The exercise price of any option grant and the value of any restricted stock award are determined by reference to the fair market value of the underlying shares, which our 2010 Equity Incentive Plan (the “2010 Plan”) defines as the closing price of our common stock. The closing price of our common stock is calculated in U.S. dollars based on the closing price of our CDIs traded on the ASX on the date of grant or award. However, because options have been, and will continue to be, granted at fair market value, such options only have cash value to the holder to the extent that the price of our common stock increases during the term of the option. Restricted stock awards generally have cash value equal to the current stock price.

 

Option grants under the 2010 Plan generally vest over four years, with 25 percent of the option vesting on the one-year anniversary of the vesting commencement date and 2.0833 percent vesting each month thereafter. All vesting is subject to continued service to the Company. All of our stock options are exercisable at any time but, if exercised, are subject to a lapsing right of repurchase until fully vested. All options have a 10-year term. Restricted stock awarded in accordance with the 2010 Plan generally vests over four years, with 25 percent vesting on each annual anniversary date of the award, subject to continued service to the Company. Additional information regarding accelerated vesting prior to, upon, or following a change in control is discussed below under “Potential Payments upon Termination or Change in Control.”

 

Severance and Change of Control Benefits

 

We have entered into employment agreements that require specific payments and benefits to be provided to certain executive officers in the event their employment is terminated following a change of control or in the event their employment is terminated without cause or by the executive for good reason. See “Employment Agreements” below.

 

Other Benefits

 

In order to attract and retain qualified individuals and pay market levels of compensation, we have historically provided, and will continue to provide, our executives with the following benefits:

 

·            Health Insurance — We provide each of our executives and their spouses and children the same health, dental, and vision insurance coverage we make available to our other eligible employees.

 

·            Life and Disability Insurance — We provide each of our executives with the same life and disability insurance as we make available to our other eligible employees.

 

·            Pension Benefits — We do not provide pension arrangements or post-retirement health coverage for our executives or employees. Our executives and other eligible employees are eligible to participate in our 401(k) defined contribution plan. We currently make matching contributions to participants in the 401(k) plan in an amount equal to 25 percent of the employee’s deferral up to a maximum of four percent of an employee’s salary, to the statutory limits.

 

·            Nonqualified Deferred Compensation — We do not provide any nonqualified defined contribution or other deferred compensation plans to any of our employees.

 

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·            Perquisites — We limit the perquisites that we make available to our executive officers. Our executives are entitled to relocation expenses on their initial hire and other benefits with de minimis value that are not otherwise available to all of our employees.

 

Employment Agreements

 

Robert B. Stockman

 

In August 2010, we entered into an employment offer letter with Mr. Stockman to serve as our Chief Executive Officer. Mr. Stockman’s offer letter provided for, among other things:  (i) an annual base salary, subject to annual review, (ii) eligibility to participate in the Company’s bonus plan, (iii) award of options to purchase shares of our common stock at an exercise price equal to the fair market value on the grant date, and (iv) reimbursement for commuting expenses of up to $6,000 per month for travel and up to $2,500 per month for hotel expenses for regular visits from his home in Princeton, New Jersey, to the Company’s offices in San Diego, California. In the event Mr. Stockman’s employment terminates, any options exercised prior to vesting will be subject to a repurchase right by us at the lesser of cost or fair market value. In addition, in the event Mr. Stockman’s employment is terminated without cause (as defined in the employment offer letter), we will pay Mr. Stockman severance equal to (i) six months of base salary and (ii) continuation in our medical and dental insurance plans for six months. The offer letter also provides that if Mr. Stockman resigns for good reason or his employment is terminated without cause within one year following a change of control transaction, Mr. Stockman will receive immediate vesting of all of his outstanding stock options.

 

Katrina L. Thompson

 

In October 2010, we entered into an employment offer letter with Ms. Thompson to serve as our Chief Financial Officer. Ms. Thompson’s offer letter provides for, among other things:  (i) an annual base salary, subject to annual review, (ii) eligibility to participate in the Company’s bonus plan, and (iii) award of options to purchase shares of our common stock at an exercise price equal to the fair market value on the grant date. In the event Ms. Thompson’s employment terminates, any options exercised prior to vesting will be subject to a repurchase right by us at the lesser of cost or fair market value. In addition, in the event Ms. Thompson’s employment is terminated without cause (as defined in the employment offer letter) or if she resigns for good reason (as defined in the employment offer letter), we will pay Ms. Thompson severance equal to (i) six months of base salary and (ii) continuation in our medical and dental insurance plans for six months.

 

Jeffrey A. Anderson

 

In February 2011, we entered into an employment offer letter with Mr. Anderson, to serve as our Vice President of Clinical and Regulatory Affairs. Mr. Anderson’s offer letter provides for, among other things:  (i) an annual base salary, subject to annual review, (ii) eligibility to participate in the Company’s bonus plan, and (iii) award of options to purchase shares of our common stock at an exercise price equal to the fair market value on the grant date. In the event Mr. Anderson’s employment terminates, any options exercised prior to vesting will be subject to a repurchase right by us at the lesser of cost or fair market value. In addition, in the event Mr. Anderson’s employment is terminated without cause (as defined in the employment offer letter) or if he resigns for good reason (as defined in the employment offer letter), we will pay Mr. Anderson severance equal to (i) three months of base salary and (ii) continuation in our medical and dental insurance plans for three months.

 

Robert K. Schultz, Ph.D.

 

In October 2010, we entered into an employment offer letter with Dr. Schultz to serve as our Chief Operating Officer. Dr. Schultz’s offer letter provides for, among other things:  (i) an annual base salary, subject to annual review, (ii) eligibility to participate in the Company’s bonus plan, and (iii) award of options to purchase shares of our common stock at an exercise price equal to the fair market value on the grant date. In the event Dr. Schultz’s employment terminates, any options exercised prior to vesting will be subject to a repurchase right by us at the lesser of cost or fair market value. In addition, in the event Dr. Schultz’s employment is terminated without cause (as defined in the employment offer letter) or if he resigns for good reason (as defined in the employment offer letter), we will pay Dr. Schultz severance equal to (i) six months of base salary and (ii) continuation in our medical and dental insurance plans for six months.

 

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Table of Contents

 

Compensation Committee Report

 

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management and, based on such review and discussion, the compensation committee recommended to the Board that it be included in this Proxy Statement.

 

By the Compensation Committee of the Board of Directors on March 15, 2014:

 

Gordon E. Nye (Chair)

Brian H. Dovey

Robert Thomas

 

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Table of Contents

 

2013 Summary Compensation Table

 

The following table presents the compensation provided during 2013 to our principal executive officer, our principal financial officer, and our three other most highly compensated persons serving as our executive officers as of December 31, 2013. We refer to these executive officers as our “named executive officers.”

 

Name & Principal Position

 

Year

 

Salary

 

Bonus

 

Stock
Awards (2)

 

Option
Awards (2)

 

Non-Equity
Incentive Plan
Comp

 

All Other
Comp

 

Total
Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert B. Stockman

 

2013

 

$

359,692

 

 

 

$

263,625

 

$

469,500

 

$

138,400

 

$

16,995

(3)

$

1,248,212

 

Chief Executive Officer

 

2012

 

343,077

 

 

 

 

$

126,000

 

30,169

(3)

499,246

 

 

 

2011

 

325,000

 

$

30,000

 

 —

 

 —

 

 

55,345

(3)

410,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Katrina L. Thompson
Chief Financial Officer and Corporate Secretary

 

2013
2012
2011

 

267,200
250,103
230,000

 

7,997

35,000

 

102,000
95,700

 

71,500
282,230

 

95,203
99,500

 

5,280
2,500
2,300

(4)

(4)
(4)

549,180
730,033
267,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey A. Anderson (1)
SVP, Clinical and Regulatory Affairs

 

2013
2012
2011

 

256,923
248,224
201,923

 

3,997
 —
25,000

 


 —
 —

 

100,100
208,750
417,500

 

73,903
70,000

 

5,280
5,212
3,384

(5)
(5)
(5)

440,203
532,186
647,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald K. Brandom, Ph.D.
SVP, Product Development

 

2013
2012
2011

 

242,923
235,769
223,077

 

11,050

30,000

 


 —
 —

 

100,100
275,550
626,300

 

66,050
62,000

 

1,873
 —
 —

(6)

 

 

421,996
573,319
879,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert K. Schultz, Ph.D.
President and Chief Operating Officer

 

2013
2012
2011

 

328,861
310,897
290,000

 

11,984

40,000

 

102,000
95,700

 

71,500
282,230

 

110,416
96,000

 

5,280
5,230
3,815

(7)
(7)
(7)

630,041
790,057
333,815

 

 


(1)   Mr. Anderson was employed as our Vice President, Clinical and Regulatory Affairs in February 2011.

 

(2)   Amounts do not reflect compensation received by our named executive officers. Rather, the amounts represent the aggregate grant date fair value of restricted stock and option awards. Restricted stock value is determined by multiplying the ASX closing market price of our CDIs on the date of award, as converted to shares and U.S. dollars, by the number of shares awarded. The fair value of stock options is determined using the Black-Scholes option model. For the assumptions used in our valuations, see “Note 6 — Stock Based Compensation” of our notes to consolidated financial statements in the Form 10-K for the year ended December 31, 2013, as filed with the SEC.

 

(3)   Consists of 401(k) matching contributions of $906, $939, and $816 for 2013, 2012, and 2011, respectively; phone allowance of $2,730, $2,730, and $1,365 for 2013, 2012, and 2011, respectively; and commuting and living expense reimbursements of $13,359, $26,500, and $53,164 in 2013, 2012, and 2011, respectively. For additional information regarding the commuting and living expense reimbursement, see “Employment Agreements — Robert B. Stockman” above.

 

(4)   Consists of 401(k) matching contributions of $2,550, $2,500, and $2,300 for 2013, 2012, and 2011, respectively; and a phone allowance of $2,730 for 2013.

 

(5)   Consists of 401(k) matching contributions of $2,550, $2,482, and $2,019 and phone allowances of $2,730, $2,730 and $1,365 for 2013, 2012 and 2011, respectively.

 

(6)  Consists of 401(k) matching contributions.

 

(7)   Consists of 401(k) matching contributions of $2,550, $2,500, and $2,450 for 2013, 2012, and 2011, respectively, and phone allowances of $2,730, $2,730 and $1,365 for 2013, 2012 and 2011, respectively.

 

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Table of Contents

 

Grants of Plan-Based Awards in 2013

 

The following table describes the grants of plan-based awards made to our named executive officers in 2013:

 

Name

 

Award Type

 

Grant
Date

 

Estimated
Future
Payouts
under Non-
Equity
Incentive
Plan Awards
Target (1)

 

All Other
Stock
Awards:
Number of
Shares of
Common
Stock (2)

 

All Other
Option
Awards:
Number
of Securities
Underlying
Option (3)

 

Exercise
Price of
Option
Award

 

Grant Date
Fair Value
of Stock and
Option
Awards (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert B. Stockman

 

Restricted Stock

 

5/29/13

 

 

47,500

 

 

 

$

 

263,625

 

Chief Executive Officer

 

Stock Options

 

5/29/13

 

 

 

150,000

 

$

5.55

 

469,500

 

 

 

Cash Bonus

 

 

$

216,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Katrina L. Thompson
Chief Financial Officer and Corporate Secretary

 

Restricted Stock

Stock Options

Cash Bonus

 

1/14/13
 1/14/13
 —

 



 120,510

 

20,000
 —
 —

 


 25,000
 —

 


 5.10

 

102,000
71,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey A. Anderson
SVP, Clinical and Regulatory Affairs

 

Stock Options

Cash Bonus

 

1/14/13

 


 90,125

 


 —

 

35,000
 —

 

5.10

 

100,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald K. Brandom, Ph.D.
SVP, Product Development

 

Stock Options

Cash Bonus

 

1/14/13

 


 85,225

 


 —

 

35,000
 —

 

5.10

 

100,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert K. Schultz, Ph.D.
President and Chief Operating Officer

 

Restricted Stock

Stock Options

Cash Bonus

 

1/14/13
 1/14/13
 —

 


 —
 164,800

 

20,000
 —
 —

 


 25,000
 —

 

5.10

 

102,000
71,500

 

 


(1)   The target annual cash bonus awards are granted under our bonus program and are based on 2013 pre-established Company and individual performance goals for the named executive officers. For a discussion of this plan and the achievement of the performance criteria, see our Compensation Discussion and Analysis section above. Actual amounts paid for 2013 are listed in the Summary Compensation table above.

 

(2)   Restricted stock is awarded under our 2010 Equity Incentive Plan; it vests in four equal installments beginning on the first anniversary of the date of award.

 

(3)   Stock options are granted under our 2010 Equity Incentive Plan; they vests over four years with 25% vesting on the first anniversary of the vesting commencement date and the remaining 75% vesting in equal monthly installments over the subsequent 36-month period.

 

(4)   The fair value of restricted stock and stock options disclosed herein is equal to the aggregate fair value on the date of grant or award, based on the ASX closing market price of our CDIs on the date of grant or award, as converted to shares and U.S. dollars; stock option value is determined using the Black-Scholes option model. For the assumptions used in our valuations, see “Note 6 — Stock Based Compensation” of our notes to consolidated financial statements in the Form 10-K for the year ended December 31, 2013, as filed with the SEC.

 

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Table of Contents

 

Outstanding Equity Awards at December 31, 2013

 

The following comprises outstanding equity awards held by our named executive officers at December 31, 2013:

 

 

 

Option Awards

 

Stock Awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
Exercisable (1)

 

Option
Exercise
Price
($/Share)

 

Option
Expiration
 Date

 

Number of 
Shares
 of Stock that
 have not
 Vested

 

Market
Value of
Shares
of Stock that
 have not
Vested(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert B. Stockman
Chief Executive Officer

 

750,000

150,000

(2)

(3)

$

11.00
5.55

 

10/21/20

5/29/23

 

47,500

(10)

$

204,250

 

 

 

 

 

 

 

 

 

 

 

 

 

Katrina L. Thompson
Chief Financial Officer and Corporate Secretary

 

20,000

20,000

75,000

190,000

84,500

25,000

(4)

(4)

(4)

(5)

(6)

(7)

1.00

1.25
 1.40
 11.00
5.80

5.10

 

10/22/14

7/13/15

11/20/18

10/21/20

7/17/22

1/14/23

 

12,375

20,000

(11)

(12)

53,213
86,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey A. Anderson
SVP, Clinical and Regulatory Affairs

 

20,000

15,000

50,000

62,500

35,000

(4)

(4)

(8)
(6)
(7)

 

1.00
1.25
13.70
5.80
5.10

 

10/22/14

7/13/15

3/15/21

7/17/22

1/14/23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald K. Brandom, Ph.D.
SVP, Product Development

 

25,000

50,000

50,000
75,000

82,500

35,000

(4)

(4)

(4)
(9)
(6)

(7)

1.00

1.25

1.40

13.70

5.80

5.10

 

10/22/14

7/13/15

11/20/18

3/15/21

7/17/22

1/14/23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert K. Schultz, Ph.D.
President and Chief Operating Officer

 

85,000

175,000

130,000

215,000

84,500

25,000

(4)

(4)

(4)

(5)

(6)

(7)

1.00

1.25

1.40

11.00

5.80

5.10

 

10/22/14

7/13/15

11/20/18

10/21/20

7/17/22

1/14/23

 

12,375

20,000

(11)

(12)

53,213
86,000

 

 


(1)              All options are immediately exercisable upon grant and are subject to repurchase by REVA at the exercise price in the event an employee terminates service prior to vesting. There are no securities that are unexercisable.

 

(2)              Options vest 25% on July 1, 2011 and in equal monthly installments for a period of 36 months thereafter.

 

(3)              Options vest 25% on May 29, 2014 and in equal monthly installments for a period of 36 months thereafter.

 

(4)              Options were 100% vested as of December 31, 2013.

 

(5)              Options vest 25% on October 21, 2011 and in equal monthly installments for a period of 36 months thereafter.

 

(6)              Options vest 25% on July 17, 2013 and in equal monthly installments for a period of 36 months thereafter.

 

(7)              Options vest 25% on January 14, 2014 and in equal monthly installments for a period of 36 months thereafter.

 

(8)              Options vest 25% on February 22, 2012 and in equal monthly installments for a period of 36 months thereafter.

 

(9)              Options vest 25% on March 15, 2012 and in equal monthly installments for a period of 36 months thereafter.

 

(10)       11,875 shares of restricted stock vest on each annual anniversary date of May 29, 2013.

 

(11)       4,125 shares of restricted stock vest on each annual anniversary date of July 17, 2012.

 

(12)       5,000 shares of restricted stock vest on each annual anniversary date of January 14, 2013.

 

(13)       Market value is calculated based on the ASX closing price of our CDIs as of December 31, 2013, as converted to shares and U.S. dollars.

 

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Table of Contents

 

2013 Option Exercises and Restricted Stock Vested

 

The table below sets forth the options exercised and restricted stock vested during 2013 for each of our named executive officers. Option award value realized is calculated as the difference between the ASX closing market price of our common stock on the date of exercise, as converted to shares and U.S. dollars, and the exercise price of the option. Stock award value realized is calculated by multiplying the number of shares shown in the table by the ASX closing market price of our common stock on the date of vesting, as converted to shares and U.S. dollars.

 

Name

 

Number of
Shares
 Acquired on
 Exercise

 

Value Realized 
on Exercise

 

Number of
Shares
Acquired on
Vesting

 

Valued 
Realized 
on Vesting

 

 

 

 

 

 

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Katrina L. Thompson, Chief Financial Officer and Corporate Secretary

 

 

 

4,125

 

$

21,950

 

 

 

 

 

 

 

 

 

 

 

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald K. Brandom, Ph.D., SVP, Product Development

 

27,850

 

$

130,449

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert K. Schultz, Ph.D., President and Chief Operating Officer

 

 

 

4,125

 

21,950

 

 

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Table of Contents

 

Potential Payments upon Termination or Change in Control

 

The table below describes the potential payments or benefits to our named executive officers under the arrangements discussed above, for various scenarios involving a change of control or termination of employment of each of our named executive officers, assuming a December 31, 2013 termination date. Please see the employment offer letters described in “Employment Agreements” for additional information.

 

Name

 

Base
Salary

 

Health
Insurance

 

Stock Option
Vesting(1)(2)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Robert B. Stockman, Chief Executive Officer

 

 

 

 

 

 

 

 

 

Termination Without Cause

 

$

180,250

 

$

10,143

 

 

$

190,393

 

Termination for Good Reason

 

 

 

 

 

Qualifying Termination after Change of Control

 

 

 

(3)

 

 

 

 

 

 

 

 

 

 

 

Katrina L. Thompson, Chief Financial Officer and Secretary

Termination Without Cause

Termination for Good Reason

Qualifying Termination after Change of Control

 

133,900

133,900

 —

 

3,330

 3,330

 —

 

 —

 

137,230

137,230

 —

 

 

 

 

 

 

 

 

 

 

 

Jeffrey A. Anderson, SVP, Clinical and Regulatory Affairs

Termination Without Cause

Termination for Good Reason

Qualifying Termination after Change of Control

 

64,375

64,375

 —

 

5,072

 5,072

 —

 

 —

 —

 

69,447

69,447

 —

 

 

 

 

 

 

 

 

 

 

 

Donald K. Brandom, Ph.D., SVP, Product Development

Termination Without Cause

Termination for Good Reason

Qualifying Termination after Change of Control

 

 —

 —

 

 —

 —

 

 —

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Robert K. Schultz, Ph.D., President and Chief Operating Officer

Termination Without Cause

Termination for Good Reason

Qualifying Termination after Change of Control

 

164,800

164,800

 —

 

7,841

 7,841

 —

 

 —

 —

 

172,641

172,641

 —

 

 


(1)   Represents the value of shares of common stock subject to options which would accelerate upon a termination of the executive’s employment. The amount indicated in the table is calculated as the spread value of the options subject to accelerated vesting on December 31, 2013, but assuming a price per share of $4.30, calculated based on the closing price of REVA’s common stock traded in the form of CDIs on the ASX.

 

(2)   Requires a change of control plus a qualifying termination of employment before vesting of options would be accelerated.

 

(3)   Terms of Mr. Stockman’s employment offer letter provide for the immediate vesting of all his outstanding stock options upon a termination without cause or a resignation for good reason within one year following a change of control. As of December 31, 2013, a total of 259,375 options remained subject to accelerated vesting. The exercise price of these options exceeded the market value of the underlying shares on December 31, 2013 and, therefore, no value is attributable to the potential acceleration of vesting at that date.

 

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Table of Contents

 

Non-Employee Director Compensation

 

The following table presents compensation to our non-employee directors for 2013. Employee directors do not receive compensation for their services as directors.

 

Name

 

Fees Earned or
Paid in Cash

 

Option
Awards (1)

 

Total

 

 

 

 

 

 

 

 

 

Brian H. Dovey

 

$

35,000

 

$

46,950

 

$

81,950

 

Anne Keating

 

40,000

 

46,950

 

86,950

 

Gordon E. Nye

 

40,000

 

46,950

 

86,950

 

James J. Schiro

 

35,000

 

46,950

 

81,950

 

Robert Thomas

 

40,000

 

46,950

 

86,950

 

 


(1)   Amounts do not reflect compensation received by our directors. Rather, the amounts represent the aggregate grant date fair value of option awards. The fair value is determined using the Black-Scholes option model. For the assumptions used in our valuations, see “Note 6 — Stock Based Compensation” of our notes to consolidated financial statements in the Form 10-K for the year ended December 31, 2013, as filed with the SEC.

 

In October 2010, our Board adopted our non-employee director compensation policy, pursuant to which non-employee directors will be compensated for their services on our Board. Pursuant to the policy:

 

·                  each non-employee director will receive an annual fee of $35,000 payable as cash compensation for the director’s service during the year; and

 

·                  the Chair of each committee will receive an additional annual fee of $5,000 as cash compensation for the Chair’s service during the year.

 

The fees payable pursuant to the non-employee director compensation policy are payable quarterly within thirty days of the beginning of each quarter. In addition, under the policy each director may receive an annual grant of options to purchase shares of our common stock at the discretion of the Board. Any such grant will be subject to stockholders’ approval in accordance with ASX Listing Rules. Any option grants to directors will be immediately exercisable and will have an exercise price per share determined at the fair market value on the date of grant. Any options granted during and prior to the year ended December 31, 2013 vest over four years, with 25 percent of options vesting one year from the date of the grant, and 75 percent of options vesting in equal monthly installments over the subsequent 36-month period.  In January 2014, our Board revised the vesting policy such that any options granted in 2014 will vest in quarterly installments over a 12-month period beginning on the three month anniversary of the grant date. Any options exercised prior to vesting will be subject to a repurchase right by us until fully vested at the lesser of cost or fair market value. Each director is also entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending Board meetings and any committee meetings on which he or she serves as a committee member.

 

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PROPOSAL 1 — ELECTION OF DIRECTORS

 

At the Annual Meeting, our stockholders will be asked to elect two directors nominated for election as Class I directors. Our Board of Directors currently consists of six members and is divided into three classes, each comprised of two directors. The directors in each class serve three-year terms and in each case until their respective successors are duly elected and qualified. On January 20, 2014, the Board unanimously nominated Brian H. Dovey and Anne Keating, the two current Class I directors whose terms expire at the Annual Meeting, for re-election as directors.

 

If elected, the two directors nominated for election as Class I directors will serve until the Company’s annual meeting of stockholders in 2017, and in each case until his or her successor is elected and qualified, or until his or her earlier resignation or removal. Both of the nominees have indicated their willingness to serve if elected, but if either should be unable or unwilling to stand for election, the shares represented by proxies may be voted for a substitute as REVA may designate, unless a contrary instruction is indicated in the proxy.

 

Vote Required for Approval

 

Directors are elected by a plurality of the votes cast at the Annual Meeting, which means that the director nominees receiving the highest number of “FOR” votes will be elected as Class I directors. Abstentions and broker non-votes are not counted as votes cast with respect to that director, and will have no direct effect on the outcome of the election of directors.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED ABOVE.

 

PROPOSAL 2 — RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

 

The audit committee has selected Ernst & Young LLP as the Company’s independent registered public accounting firm (the “independent auditor”) to audit our financial statements for the fiscal year ending December 31, 2014. We are asking our stockholders to ratify the appointment of Ernst & Young LLP as our independent auditor because we value our stockholders’ views on the Company’s independent auditor even though the ratification is not required by our bylaws or otherwise. If our stockholders fail to ratify the appointment, the audit committee will reconsider whether or not to retain Ernst & Young LLP as our independent auditor or whether to consider the appointment of a different firm. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent auditor at any time during the fiscal year ending December 31, 2014.

 

A representative of Ernst & Young LLP is expected to be present at the Annual Meeting, will have an opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions.

 

Vote Required for Approval

 

Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014 requires the affirmative vote of a majority of the shares of common stock of the Company present in person or represented by proxy at the Annual Meeting and entitled to vote. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” THE RATIFICATION OF OUR APPOINTMENT OF ERNST & YOUNG LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2014.

 

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PROPOSALS 3 THROUGH 7 — APPROVAL OF THE GRANT OF STOCK OPTIONS TO NON-EXECUTIVE DIRECTORS OF THE COMPANY UNDER THE 2010 EQUITY INCENTIVE PLAN

 

Introduction

 

On January 20, 2014, our Board of Directors, upon the recommendation of the compensation committee, approved the grant of an aggregate 75,000 options to purchase 75,000 shares of our common stock (the “Options”) under the REVA Medical, Inc. 2010 Equity Incentive Plan (the “Plan”) in the amounts of 15,000 Options to each of Brian H. Dovey, Anne Keating, Gordon E. Nye, James J. Schiro, and Robert Thomas (the “Non-Executive Directors”), subject to obtaining stockholder approval for each grant at the 2014 Annual Meeting as required by the ASX Listing Rules.

 

The market value of the shares issuable on exercise of the Options proposed to be granted to each of the Non-Executive Directors is in aggregate $253,500 based upon the closing price of our CDIs on the ASX on March 15, 2014 (Australian Eastern Daylight Time).

 

As of March 15, 2014, the Company had a total of 2,935,336 options reserved for issuance for employees and non-executive directors. Proposals 3 through 7 recommend the issuance of the Options to the non-executive directors that constitute approximately 2.6 percent of the total number of stock options reserved for issuance.

 

Approvals

 

Our CHESS Depositary Interests, or CDIs, each representing one-tenth of a share of our common stock, are listed on the Australian Securities Exchange (the “ASX”). ASX Listing Rule 10.14 provides that a company must not permit a director to acquire securities under an employee incentive scheme without the prior approval of stockholders. Accordingly, stockholder approval is now being sought for the purposes of ASX Listing Rule 10.14 and for all other purposes for the grant of the Options to each of the Non-Executive Directors of the Company as described below.

 

Principal Terms of the Options

 

If Proposals 3 through 7 (inclusive) are approved by stockholders, the Options will be issued to the Non-Executive Directors as soon as practicable after the Annual Meeting and, in any case, no later than three years after the Annual Meeting. The Options to be issued to each of the Non-Executive Directors will be issued on the following terms and conditions:

 

(a)   Grant Price:  There is no consideration payable for the grant of the Options.

 

(b)   Exercise Price:  The exercise price of the Options will be equal to the closing price of the Company’s CDIs on the ASX on the date of grant of the Options. The Options are immediately exercisable.

 

(c)   Vesting Conditions:  The Options are scheduled to vest in equal quarterly installments over a 12-month period beginning on the three month anniversary of the date of grant. Any shares issued as a result of Option exercises prior to vesting will be subject to a repurchase right by the Company until fully vested at the lesser of cost or fair market value. There are no performance conditions or other requirements attaching to the Options other than the requirement that the Non-Executive Director to whom they are granted continue to be a director of the Company at each relevant vesting date.

 

(d)   Lapsing of Options:  The Options will lapse in circumstances where:

 

(i)    the Options have been exercised and settled;

 

(ii)   the Non-Executive Director ceases to be a director of the Company;

 

(iii)  there has been a change in control event (as defined in the Plan), in which event vesting and settlement of the Options will occur; or

 

(iv)  the Options have not been exercised by the tenth anniversary of the date of grant.

 

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As required by ASX Listing Rule 10.15A, the following additional information is provided in relation to Proposals 3 through 7.

 

The maximum aggregate number of Options that may be granted by the Company under Proposals 3 through 7 is 75,000 Options, comprising:

 

·    15,000 Options to Brian H. Dovey;

 

·    15,000 Options to Anne Keating;

 

·    15,000 Options to Gordon E. Nye;

 

·    15,000 Options to James J. Schiro; and

 

·    15,000 Options to Robert Thomas.

 

Upon exercise, each Option will entitle the relevant Non-Executive Director to receive one share of REVA’s common stock. No loan will be made by the Company to any of the Non-Executive Directors in connection with the acquisition or exercise of any of the Options or the underlying shares of common stock.

 

Our directors received the following securities under ASX Listing Rule 10.14 at the 2013 Annual Meeting of stockholders following approval by our stockholders; the directors did not receive options or any other equity awards subsequently:

 

·      Mr. Dovey was issued 15,000 options to purchase 15,000 shares of common stock under the 2010 Plan on 30 May 2013 (Australian time) for nil consideration;

 

·      Ms. Keating was issued 15,000 options to purchase 15,000 shares of common stock under the 2010 Plan on 30 May 2013 (Australian time) for nil consideration;

 

·      Mr. Nye was issued 15,000 options to purchase 15,000 shares of common stock under the 2010 Plan on 30 May 2013 (Australian time) for nil consideration;

 

·      Mr. Schiro was issued 15,000 options to purchase 15,000 shares of common stock under the 2010 Plan on 30 May 2013 (Australian time) for nil consideration;

 

·      Mr. Thomas was issued 15,000 options to purchase 15,000 shares of common stock under the 2010 Plan on 30 May 2013 (Australian time) for nil consideration; and

 

·      Mr. Stockman was issued 150,000 options to purchase 150,000 shares of common stock and 47,500 shares of restricted common stock under the 2010 Plan on 30 May 2013 (Australian time) for nil consideration.

 

All directors, being Brian H. Dovey, Anne Keating, Gordon E. Nye, James J. Schiro, Robert B. Stockman, and Robert Thomas, are entitled to participate in the Plan. Details of any securities issued under the Plan will be published in the Company’s Annual Report relating to the period in which securities have been issued, together with a statement that approval for this issue of securities was obtained under ASX Listing Rule 10.14.

 

Any additional persons who become entitled to participate in the Plan after approval of Proposals 3 through 7 and who are not named in this Proxy Statement will not participate until any applicable approval is obtained under ASX Listing Rule 10.14.

 

Voting Exclusion Statement

 

The Company will disregard any votes cast on Proposals 3 through 7 by the directors of REVA Medical, Inc. or any associate of the directors of REVA Medical, Inc. However, the Company need not disregard a vote if:

 

·    it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the direction on the proxy card; or

 

·    it is cast by the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance with direction on the proxy card to vote as the proxy decides.

 

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Vote Required and Board of Directors Recommendation

 

Approval of Proposals 3 through 7 requires the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Annual Meeting and voting on such proposals. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

THE BOARD OF DIRECTORS (EXCLUDING BRIAN H. DOVEY (with respect to Proposal No. 3 only), ANNE KEATING (with respect to Proposal No. 4 only), GORDON E. NYE (with respect to Proposal No. 5 only), JAMES J. SCHIRO (with respect to Proposal No. 6 only), AND ROBERT THOMAS (with respect to Proposal No. 7 only) WHO DO NOT MAKE A RECOMMENDATION WITH RESPECT TO THE PROPOSAL IN BRACKETS AFTER THEIR NAME DUE TO THEIR PERSONAL INTEREST IN THAT PROPOSAL) RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF PROPOSALS 3 THROUGH 7 (INCLUSIVE).

 

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PROPOSAL 8 — APPROVAL OF THE ISSUANCE OF SECURITIES OF UP TO 10% OF THE ISSUED CAPITAL OF THE COMPANY

 

Introduction

 

We are a U.S. public reporting company listed on ASX and, therefore, are required to comply with the U.S. federal securities laws and the ASX Listing Rules. We are seeking stockholder approval for the potential issuance of securities in the future solely for purpose of ASX Listing Rules, as further described below. While our stockholders approved this proposal at our 2013 Annual Meeting, the prior approval will expire at our 2014 Annual Meeting.

 

ASX Listing Rule 7.1 allows a company to issue a maximum of 15 percent of its issued capital in any 12-month period without obtaining stockholder approval. In accordance with ASX Listing Rule 7.1A, eligible companies can issue a further 10 percent of their issued capital over a 12-month period (the “Placement Securities”) without obtaining stockholder approval for the individual issues, provided that stockholder approval is obtained at the company’s annual meeting (and the company is an “eligible entity” at the time of the annual meeting). The Company is an “eligible entity” as of the date of this Proxy Statement.

 

Under ASX Listing Rule 7.1A, the Placement Securities must be in the same class as an existing quoted class of equity securities of the Company. As of the date of this Proxy Statement, the Company has only one quoted class of equity securities on issue, namely CDIs (and the shares of common stock underlying those CDIs).

 

The purpose of this Proposal 8 is to provide us with flexibility to meet future business and financial needs. We believe that it is advantageous for us to have the ability to act promptly with respect to potential opportunities and that approval of the issuance of the Placement Securities is desirable in order to have the securities available, as needed, for possible future financing transactions, strategic transactions, or other general corporate purposes that are determined by our board to be in the Company’s best interests.

 

Approval of this Proposal 8 would enable us to issue shares of common stock or CDIs without the expense and delay of holding a stockholders’ meeting, except as may be required by applicable law or regulations. The cost, prior notice requirements, and delay involved in obtaining stockholder approval at the time a corporate action may become necessary could eliminate the opportunity to effect the action or could reduce the expected benefits.

 

If approved, subject to the limitations described below with respect to the additional 10 percent placement capacity, we will generally be permitted to issue up to 25 percent of our issued and outstanding capital without any further stockholder approval, unless such stockholder approval is required by applicable law, the rules of ASX, or the rules or another stock exchange on which our securities may be listed. Currently, we have no definitive plans, understandings, agreements, or arrangements to issue securities for any purpose, other than equity awards under our 2010 Equity Incentive Plan. We believe that the adoption of this Proposal 8 will enable us to promptly and appropriately respond to business opportunities or to raise additional equity capital. Our board of directors will determine the terms of any issuance of securities in the future.

 

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The Company is seeking stockholder approval to have the ability to issue Placement Securities under ASX Listing Rule 7.1A. The exact number of Placement Securities that may be issued by the Company under ASX Listing Rule 7.1A will be determined in accordance with the formula prescribed in ASX Listing Rule 7.1A.2, as follows:

 

(A x D) - E

 

A =  Number of fully paid ordinary securities on issue 12 months before the date of issue or agreement:

 

·    plus the number of fully paid ordinary securities issued during the 12 months under an exception in ASX Listing Rule 7.2;

 

·    plus the number of partly paid ordinary securities that became fully paid during the 12 months;

 

·    plus the number of fully paid ordinary securities issued during the 12 months with stockholder approval under ASX Listing Rules 7.1 and 7.4; and,

 

·    less the number of fully paid ordinary securities cancelled during the 12 months.

 

D =  10%

 

E =  Number of equity securities issued or agreed to be issued under Listing Rule 7.1A.2 in the 12 months before the date of issue or agreement to issue that are not issued with stockholder approval under ASX Listing Rules 7.1 or 7.4.

 

If passed, Proposal 8 will allow our board of directors to issue up to an additional 10 percent of the Company’s issued capital during the 12-month period following the date of the annual meeting without requiring further stockholder approval. This is in addition to the 15 percent annual placement capacity provided in ASX Listing Rule 7.1.

 

As of the date of this Proxy Statement, the Company has no specific plans to issue Placement Securities under ASX Listing Rule 7.1A.

 

As required by ASX Listing Rule 7.3A, the following information is provided in relation to this Proposal 8:

 

(a) ASX Listing Rule 7.3A.1 — The minimum price at which Placement Securities may be issued pursuant to the ASX Listing Rule 7.1A approval will be no less than 75% of the volume weighted average price of the Company’s CDIs calculated over the 15 trading days on which trades in that class were recorded immediately before:

 

·    the date on which the issue price of the Placement Securities is agreed; or

 

·    if Placement Securities are not issued within 5 trading days of the date on which the issue price is agreed, the date on which Placement Securities are issued.

 

In accordance with ASX listing rules, if the Placement Securities are issued for non-cash consideration, the Company will provide a valuation to the market that demonstrates the non-cash consideration issue price of the Placement Securities complies with ASX Listing Rule 7.3A.

 

(b) ASX Listing Rule 7.3A.2 — If stockholders approve Proposal 8 and the Company issues Placement Securities under ASX Listing Rule 7.1A, the existing stockholders of the Company face the risk of economic and voting dilution as a result of the issue of Placement Securities, to the extent that such Placement Securities are issued, including the risk that:

 

·    the market price for Placement Securities may be significantly lower on the issue date than on the date of the approval under ASX Listing Rule 7.1A; and

 

·    Placement Securities may be issued at a price that is at a discount to the market price for those securities on the issue date.

 

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The following table describes the potential dilution to existing stockholders on the basis of three different issue prices and values for variable ‘A’ in the formula in ASX Listing Rule 7.1A.2. The prices and values set out in the table are examples only and include scenarios prescribed by the ASX Listing Rules. Accordingly, they provide no indication of the actual market price of the Company’s CDIs or the price at which issues of Placement Securities under ASX Listing Rule 7.1A will be made (assuming Proposal 8 is approved by stockholders).

 

 

 

 

 

Dilution

Variable ‘A’
in Listing Rule 7.1A.2

 

 

 

Issue price of A$0.19
(50% of the current
market price of the
Company’s CDIs)

 

Issue price of A$0.38
(current market
price of the
Company’s CDIs)

 

Issue price of A$0.76
(100% increase in the
market price of the
Company’s CDIs)

334,592,030 CDIs
(current variable ‘A’)

 

10% Voting Dilution

 

33,459,203 CDIs

 

33,359,203 CDIs

 

33,459,203 CDIs

 

Funds raised

 

A$6,357,249

 

A$12,676,497

 

A$25,428,994

 

 

 

 

 

 

 

 

 

501,888,045 CDIs
(50% increase in
variable ‘A’)

 

10% Voting Dilution

 

50,188,805 CDIs

 

50,188,805 CDIs

 

50,188,805 CDIs

 

Funds raised

 

A$9,535,873

 

A$19,071,746

 

A$38,143,492

 

 

 

 

 

 

 

 

 

669,184,060 CDIs
(100% increase in
variable ‘A’)

 

10% Voting Dilution

 

66,918,406 CDIs

 

66,918,406 CDIs

 

66,918,406 CDIs

 

Funds raised

 

A$12,714,497

 

A$25,428,994

 

A$50,857,989

 


The above table has been prepared based on the following assumptions:

 

(1) The Company issues (as CDIs) the maximum number of Placement Securities available under the 10% placement capacity prescribed by ASX Listing Rule 7.1A.

 

(2) No options are exercised before the date of issue of Placement Securities under ASX Listing Rule 7.1A.

 

(3) The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.

 

(4) The table shows only the effect of issues of Placement Securities under ASX Listing Rule 7.1A, not under the Company’s 15% placement capacity under ASX Listing Rule 7.1.

 

(5) The issue price of A$0.38 is the last closing price of the Company’s CDIs on ASX as of March 15, 2014.

 

(6) Assuming all shares of common stock are held as CDIs.

 

(c) ASX Listing Rule 7.3A.3 — The date Placement Securities must be issued by (assuming Proposal 8 is approved by stockholders) is the date that is 12 months after the date of the Company’s 2014 annual general meeting (i.e., 13 May 2015 (Australian Time)) unless the Company approves a transaction under ASX Listing Rule 11.1.2 (a significant change to the nature or scale of the Company’s activities) or ASX Listing Rule 11.2 (disposal of the Company’s main undertaking), in which case the ASX Listing Rule 7.1A approval under Proposal 8 will fall away on the date of stockholder approval for the relevant transaction.

 

(d) ASX Listing Rule 7.3A.4 — The Placement Securities will be issued for the purpose of funding the Company’s operations, including research and development, preclinical and clinical studies, commercial process development, and sales and marketing related to commercialization.

 

(e) ASX Listing Rule 7.3A.5 — The Company’s allocation policy for issues of Placement Securities pursuant to approval under this Proposal 8 will depend on prevailing market conditions and the Company’s circumstances at the time of any proposed issue. The form and timing of any issue of Placement Securities under ASX Listing Rule 7.1A and the identity of the allottees of Placement Securities will be determined on a case by case basis having regard to any one or more of the following:

 

·    the methods of raising funds available to the Company including, but not limited to, rights issues or other issues in which existing stockholders of the Company can participate;

 

·    the effect of the issue of Placement Securities on the control of the Company;

 

·    the financial situation of the Company; and

 

·    advice from any one or more of the Company’s professional advisers.

 

Allottees for the purposes of the issue of Placement Securities under ASX Listing Rule 7.1A have not been determined as at the date of this Proxy Statement but may include existing substantial stockholders and/or new stockholders who are not related parties or associates of a related party of the Company. In addition, if the Company is successful in acquiring new assets or investments, it is possible that allottees for the purpose of the issue of Placement Securities under ASX Listing Rule 7.1A will be or include vendors of the new assets or investments.

 

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As of the date of this Proxy Statement, the Company has not formed an intention as to the parties which it may approach to participate in an issue of Placement Securities under ASX Listing Rule 7.1A including whether such an issue would be made to existing stockholders or to new investors.

 

(f)  ASX Listing Rule 7.3A.6 — The Company previously obtained stockholder approval under ASX Listing Rule 7.1A at its 2013 Annual Meeting on 30 May 2013. The Company has not issued any securities pursuant to that ASX Listing Rule 7.1A approval. Since last obtaining approval under ASX Listing Rule 7.1A, the Company has issued a total of 8,554,150 equity securities on a fully diluted basis (assuming all shares of common stock were held as CDIs) representing 2.6% of the total number of equity securities on issue 12 months prior to the date of the Annual Meeting, details of which are set out in the table below:

 

Type of Equity
Securities

 

Issue Date
(Australian
Time)

 

Number Issued

 

Name of recipient
or basis on which
recipient
determined

 

Issue price of
Equity Securities
and discount to
Market Price on
the trading day
prior to issue

 

Total
consideration,
what it was spent
on and the
intended use of
any remaining
 funds

 

Shares of restricted common stock(1)

 

30 May 2013

 

47,500

 

Robert Stockman — Chief Executive Officer

 

No monetary consideration is payable for the grant of shares of restricted stock.

 

The shares of restricted stock were issued to the Chief Executive Officer as an inducement and incentive.

 

 

 

 

 

 

 

 

 

 

 

 

The aggregate market value of the shares of restricted common stock as at the date of issue was US$260,850.(2)

 

Options(3)

 

30 May 2013

 

150,000

 

Robert Stockman — Chief Executive Officer

 

No monetary consideration is payable for the grant of options.

 

The options were issued to the Chief Executive Officer as an inducement and incentive.

 

The aggregate market value of the options as at the date of issue was US$832,500.(2)

 

 

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Type of Equity
Securities

 

Issue Date
(Australian
Time)

 

Number Issued

 

Name of recipient
or basis on which
recipient
determined

 

Issue price of
Equity Securities
and discount to
Market Price on
the trading day
prior to issue

 

Total
consideration,
what it was spent
on and the
intended use of
any remaining
 funds

 

Options(3)

 

30 May 2013

 

75,000

 

Non-Executive Directors

 

No monetary consideration is payable for the grant of options.

 

The options were issued to the non-executive directors as an inducement and incentive.

 

The aggregate market value of the options as at the date of issue was US$416,250.(2)

 

Options(4)

 

23 October 2013

 

100,000

 

Issue of options to a consultant of the Company.

 

No monetary consideration is payable for the grant of options.

 

The options were issued as an inducement and incentive to an existing independent consultant to the Company.

 

The aggregate market value of the options as at the date of issue was US$560,000.(2)

 

Shares of common stock(5)

 

13 November 2013

 

20,000

 

Issue of shares of common stock upon exercise of options by employees.

 

US$12,200.00 was payable on exercise of the options to which the share issue relates.

 

The funds received by the Company upon exercise were used for the Company’s operating expenses.

 

Shares of common stock(5)

 

2 January 2014 - 9 January 2014

 

189,150

 

Issue of shares of common stock upon exercise of options by employees and consultants.

 

US$170,031.50 was payable on exercise of the options to which the share issue relates.

 

The funds received by the Company upon exercise were used for the Company’s operating expenses.

 

Options(6)

 

21 January 2014

 

562,000

 

Issue of options to employees and consultants of the Company.

 

No monetary consideration is payable for the grant of options

 

The options were issued as an inducement and incentive to existing employees and consultants of the Company.

 

The aggregate market value of the options as at the date of issue was US$2,135,600.(2)

 

 


(1) Each share of restricted common stock is issued for no monetary consideration and is issued in accordance with the Company’s 2010 Equity Incentive Plan. Each share of restricted stock is subject to restrictions until vesting occurs with vesting occurring over four years with 25% of the shares of restricted stock vesting on each anniversary of the date of issue.

 

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(2) Market value was determined by multiplying the closing price of the Company’s CDIs on ASX (as converted to shares of common stock and US dollars) on the date of grant by the number of restricted shares or options issued.

 

(3) Each option is issued for no monetary consideration and, upon vesting, entitles the holder to purchase one share of common stock in the Company for a price of US$5.55. Each option has a 10 year term, is exercisable immediately, and is issued in accordance with the Company’s 2010 Equity Incentive Plan. Vesting occurs over four years with 25% of the grant vesting on the first annual anniversary of the date of grant and 75% of the options vesting in equal monthly instalments over the subsequent 36-month period.

 

(4) Each option is issued for no monetary consideration and, upon vesting, entitles the holder to purchase one share of common stock in the Company for a price of US$5.60. Each option has a 10 year term, is exercisable immediately, and is issued in accordance with the Company’s 2010 Equity Incentive Plan. Vesting occurs over four years with 25% of the grant vesting on the first annual anniversary of the date of grant and 75% of the options vesting in equal monthly instalments over the subsequent 36-month period.

 

(5) Fully paid shares of common stock in the capital of the Company (terms are set out in the Company’s Bylaws).

 

(6) Each option is issued for no monetary consideration and, upon vesting, entitles the holder to purchase one share of common stock in the Company for a price of US$3.80. Each option has a 10 year term, is exercisable immediately, and is issued in accordance with the Company’s 2010 Equity Incentive Plan. 30,000 of the options were 100% vested on the date of grant. Vesting of the remaining 532,000 options occurs over four years with 25% of the grant vesting on the first annual anniversary of the date of grant and 2.0833% of the options vesting on each monthly anniversary thereafter.

 

Voting Exclusion Statement

 

The Company will disregard any votes cast in respect of Proposal 8 by a person who may participate in the proposed issue of any Placement Securities and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of shares, if Proposal 8 is passed, and any associates of those persons. However, the Company need not disregard a vote if:

 

·  it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the direction on the proxy card; or

 

·  it is cast by the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance with direction on the proxy card to vote as the proxy decides.

 

As at the date of this Proxy Statement, the Company has no specific plans to issue Placement Securities under ASX Listing Rule 7.1A and therefore it is not known who, if any, may participate in a potential issue of Placement Securities, if any, under ASX Listing Rule 7.1A. Accordingly, as at the date of this Proxy Statement, the Company is not aware of any person who would be excluded from voting on this Proposal 8.

 

Vote required and Board of Directors Recommendation

 

Under ASX Listing Rule 7.1A, Proposal 8 is required to be passed as a special resolution for the purposes of the ASX Listing Rules, which means that it must be approved by at least 75 percent of the votes cast by stockholders entitled to vote on Proposal 8. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ISSUANCE OF SECURITIES OF UP TO 10% OF THE ISSUED CAPITAL OF THE COMPANY.

 

PROPOSAL 9 — APPROVAL, ON AN ADVISORY BASIS, OF EXECUTIVE COMPENSATION

 

The Board of Directors is providing stockholders with the opportunity to cast an advisory vote on the compensation of our named executive officers in accordance with the rules of the SEC. This proposal, commonly known as a “Say on Pay” proposal, gives you, as a stockholder, the opportunity to endorse or not endorse our executive compensation programs and policies and the compensation paid to our named executive officers.

 

The Say on Pay vote is advisory, and therefore not binding on the compensation committee or the Board. Although the vote is non-binding, the compensation committee and the Board will review the voting results, seek to determine the cause or causes of any significant negative voting, and take them into consideration when making future decisions regarding executive compensation programs.

 

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We design our executive compensation programs to implement our core objectives of providing competitive pay, pay for performance, and alignment of management’s interests with the interests of long-term stockholders. Stockholders are encouraged to read the Compensation Discussion and Analysis section of this Proxy Statement for a more detailed discussion of how our compensation programs reflect our core objectives.

 

We believe stockholders should consider the following key aspects of executive compensation with respect to our named executive officers when voting on this proposal:

 

·            base salaries in fiscal year 2013 increased between 3.0 percent and 3.2 percent from the 2012 salary amounts;

 

·            in addition to base salaries, the executives have a potential for variable bonuses and equity awards that would comprise a significant percentage of total compensation and are tied to achievement of internal performance targets;

 

·            the Company grants long-term equity awards that link the interests of our executives with those of our stockholders;

 

·            our compensation programs were reviewed by the compensation committee and determined not to create inappropriate or excessive risk that is likely to have a material adverse effect on the Company; and

 

·            any change-of-control benefits are based on a double-trigger philosophy, i.e., requiring a change-of-control plus a qualifying termination of employment before benefits are paid.

 

Recommendation

 

The Board believes the Company’s executive compensation programs use appropriate structures and sound pay practices that are effective in achieving our core objectives. Accordingly, the Board recommends that you vote in favor of the following resolution:

 

“RESOLVED, that the stockholders of REVA Medical, Inc. approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis and Executive Compensation sections of this Proxy Statement.”

 

Approval of the Say on Pay proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL, ON AN ADVISORY BASIS, OF EXECUTIVE COMPENSATION.

 

PROPOSAL 10 — APPROVAL OF THE AMENDED AND RESTATED 2010 EQUITY INCENTIVE PLAN FOR PURPOSES OF COMPLYING WITH SECTION 162(M) OF THE U.S. INTERNAL REVENUE CODE

 

General

 

Prior to our initial public offering in November 2010, our Board of Directors and our stockholders approved our 2010 Equity Incentive Plan (the “2010 Plan”).  Under Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), most compensation paid to “Covered Employees” (as defined in Section 162(m) of the Code — generally the executive officers named in the “Summary Compensation Table,” other

 

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than the Chief Financial Officer in the “Executive Compensation” section of this Proxy Statement) — under the 2010 Plan prior to the earlier of (i) the material modification of the 2010 Plan; and (ii) our 2014 annual meeting of stockholders (the “Reliance Period”), are generally not subject to the limitation on our tax deduction imposed by Section 162(m) of the Code with respect to compensation in excess of $1,000,000 per Covered Employee in any year.

 

We are asking stockholders to approve an amendment and restatement of the 2010 Plan so that certain awards made to Covered Employees under the 2010 Plan after the Reliance Period, including stock options, restricted stock units, restricted stock, other stock-based awards, and cash awards subject to performance-based vesting, may qualify as “performance-based compensation” under Section 162(m) of the Code and therefore be exempt from the limitation on our tax deduction imposed by Section 162(m) of the Code. A copy of the Amended and Restated 2010 Equity Incentive Plan (the “Restated Plan”) is included as Appendix A to this Proxy Statement.  The Restated Plan was adopted by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) on March 15, 2014 and shall be effective upon its approval by the stockholders of the Company.

 

The 2010 Plan specifies the objective performance measures which the Compensation Committee may choose from as the basis for granting, and/or vesting of “performance-based” compensation.  In addition, as amended, the Restated Plan will contain limitations on the amount of awards intended to qualify as performance-based compensation under Section 162(m) of the Code that may be granted to any employee.

 

Note that approval of the Restated Plan will not result in any increase to the number of shares of our common stock available for issuance under the Restated Plan. No other changes are being proposed with regard to the terms of the 2010 Plan at this time. If the Restated Plan is not approved, we will not be able to make certain grants of awards subject to performance-based vesting under the 2010 Plan to “Covered Employees” as defined in Section 162(m) of the Code and continue to deduct for federal income tax purposes the compensation paid if such compensation exceeds $1,000,000 in any single year.

 

Our executive officers and directors have an interest in this proposal by virtue of their being eligible to receive equity awards under the Restated Plan.

 

Section 162(m) of the Code Performance-Based Compensation

 

If our stockholders approve the Restated Plan, it will continue to provide us with the potential benefit to take tax deductions associated with certain types of executive equity compensation.  Awards granted under the Restated Plan may be designed to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.  Pursuant to Section 162(m) of the Code, as summarized above, we generally may not deduct for federal income tax purposes compensation paid to our Chief Executive Officer, or our three other highest paid executive officers treated as named executive offers (excluding the Chief Financial Officer) to the extent that any of these persons receive more than $1,000,000 in compensation in any single year. However, if compensation qualifies as “performance-based” for Section 162(m) of the Code purposes, we can deduct for federal income tax purposes the compensation paid even if such compensation exceeds $1,000,000 in a single year.  For certain awards granted under the Restated Plan to qualify as “performance-based compensation” under Section 162(m) of the Code, our stockholders must approve the grant limits described below, re-approve the performance criteria in the 2010 Plan, and re-approve other material terms of the Restated Plan for purposes of Section 162(m) of the Code (e.g., eligibility requirements) for performance-based awards on or before the earlier of (i) a material modification of the 2010 Plan, or (ii) the 2014 Annual Meeting.

 

To better enable compensation in connection with awards granted under the 2010 Plan to qualify as “performance-based” within the meaning of Section 162(m) of the Code, the 2010 Plan must be amended to include limitations on the number of shares that may be granted on an annual basis through individual awards.  The following sets forth the proposed limits included in the Restated Plan:  subject to adjustment for changes in our capital structure set forth in the Restated Plan, no Covered Employee shall be granted within any fiscal year one or more awards intended to qualify for treatment as performance-based compensation which in the aggregate are for more than 500,000 shares or, if applicable, which could result in such Covered Employee receiving more than $2,000,000 in compensation for each full fiscal year contained in the performance period for such performance award.  These limits are doubled with respect to the fiscal year in which an individual is hired.

 

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Specific performance factors currently in the 2010 Plan that will continue in the Restated Plan are also required to be re-approved to permit deductibility of performance awards conditioned upon the satisfaction of performance objectives.  The current (and proposed for re-approval) performance criteria are any one of, or combination of, the following: sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; total stockholder return; employee satisfaction; employee retention; market share; customer satisfaction; product development; research and development expenses; completion of an identified special project; and completion of a joint venture or other corporate transaction. The performance measures applicable to the performance award shall be calculated prior to the accrual of expense for any performance award for the same performance period and excluding the effect (whether positive or negative) on the performance measures of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Compensation Committee, occurring after the establishment of the performance goals applicable to the performance award.

 

Further, solely for purposes of qualifying certain awards as performance-based compensation under Section 162(m) of the Code, the stockholders are also being asked to re-approve the eligibility provisions of the Restated Plan (which are the same as the 2010 Plan) which are that all employees of the Company and any parent or subsidiary corporation or other affiliate of the Company are eligible to be granted stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other stock-based or cash-based awards under the Restated Plan.

 

A favorable vote for this proposal will allow us to continue to grant awards intended to qualify as performance-based compensation.  While we believe that compensation provided by such awards under the Restated Plan generally will be deductible by the Company for federal income tax purposes, under certain circumstances, compensation paid in settlement of certain awards may not qualify as performance-based. Further, the Compensation Committee retains the discretion to grant awards to Covered Employees that are not intended to qualify for deduction in full under Section 162(m) of the Code.

 

We believe that the approval of the Restated Plan and the ability to grant awards intended to qualify as performance-based compensation under Section 162(m) of the Code is important to our success.  The Compensation Committee believes that equity awards motivate high levels of performance, align the interests of employees and stockholders by giving employees the perspective of an owner with an equity stake in the company, and provide an effective means of recognizing employee contributions to our success.  The Compensation Committee believes that awards authorized by the Restated Plan are a competitive necessity in the environment in which we operate, and are essential to recruiting and retaining the highly qualified technical and other key personnel who help us meet our goals, as well as rewarding and encouraging current employees.

 

Description of Restated Plan

 

The material terms of the Restated Plan are summarized below. This summary is qualified in its entirety by the complete text of the Restated Plan set forth in Appendix A to this Proxy Statement.

 

Shares Authorized.  The maximum aggregate number of shares of our common stock initially authorized for issuance under the 2010 Plan is 2,628,838.  As approved by our stockholders in November 2010, the 2010 Plan (and the Restated Plan) also provides that the number of authorized shares automatically increases on January 1 of each subsequent year through 2020, by an “Annual Increase” equal to the smaller of (a) 3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (b) a lesser amount determined by the Board of Directors.  Accordingly, on January 1, 2011, the share reserve was increased by 981,615 shares to 2,142,953 shares; on January 1, 2012, the share reserve was increased by 984,315 shares to 2,740,768 shares; on January 1, 2013, the share reserve was increased by 993,966 shares to 3,166,234 shares; and on January 1, 2014, the share reserve was increased by 998,102 shares to 3,497,336 shares, in each case, net of forfeits.

 

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As of March 15, 2014, there were 3,526,000 outstanding options issued under the 2010 Plan and a total of 102,250 unvested shares that had been awarded as restricted stock.  As of that date, a total of 2,935,336 shares remained available for the future grant of awards under the 2010 Plan.

 

Our average annual burn rate (number of shares granted during the year divided by the weighted average number of common shares outstanding) for the three years ending December 31, 2013 was 1.68%.  On an annual basis, the burn rate for the prior three (3) years was approximately 2.04%, 1.74%, and 1.24% for the years ending December 31, 2013, December 31, 2012, and December 31, 2011, respectively.

 

As is the case with the 2010 Plan, if any award granted under the Restated Plan expires or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by the Company for not more than the participant’s purchase price, any such shares reacquired or subject to a terminated award will again become available for issuance under the Restated Plan.  Shares that are withheld or reacquired by the Company in satisfaction of a tax withholding obligation or that are tendered in payment of the exercise price of an option will not be made available for new awards under the Restated Plan.  Upon the exercise of a stock appreciation right or net-exercise of an option, the number of shares available under the Restated Plan will be reduced by the gross number of shares for which the award is exercised.

 

Adjustments for Capital Structure Changes.  Appropriate and proportionate adjustments will be made to the number of shares authorized under the Restated Plan, to the numerical limits on certain types of awards described below, and to outstanding awards in the event of any change in our common stock through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in our capital structure, or if we make a distribution to our stockholders in a form other than common stock.

 

Section 162(m) Award Limits.  As described above, the Restated Plan establishes a limit on the maximum aggregate number of shares or dollar value for which such awards may be granted to an employee in any fiscal year which are intended to qualify as performance-based awards under Section 162(m) of the Code, as follows:

 

·                  No more than 500,000 shares under stock-based awards within any fiscal year.

 

·                  No more than $2,000,000 for each full fiscal year contained in the performance period under cash-based awards.

 

These amounts are doubled with respect to the first fiscal year in which an employee is hired.

 

Administration.  The Restated Plan generally is administered by the Compensation Committee, although the Board of Directors retains the right to administer it directly or to appoint another of its committees to administer the Restated Plan. In the case of awards intended to qualify for the performance-based compensation exemption under Section 162(m) of the Code, administration of the Restated Plan must be by a compensation committee comprised solely of two or more “outside directors” within the meaning of Section 162(m) of the Code. (For purposes of this summary, the term “Compensation Committee” will refer to either such duly appointed committee or the Board of Directors.)  Subject to the provisions of the Restated Plan, the Compensation Committee determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of awards, and all of their terms and conditions. The Compensation Committee may, subject to certain limitations on the exercise of its discretion required by Section 162(m) of the Code or otherwise provided by the Restated Plan, amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The Restated Plan provides, subject to certain limitations, for indemnification by the Company of any director, officer or employee against all reasonable expenses, including attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the Restated Plan. All awards granted under the Restated Plan will be evidenced by a written or digitally signed agreement between the Company and the participant specifying the terms and conditions of the award, consistent with the requirements of the Restated Plan. The Compensation Committee will interpret the Restated Plan and awards granted thereunder, and all determinations of the Compensation Committee generally will be final and binding on all persons having an interest in the Restated Plan or any award.

 

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Prohibition of Option and SAR Repricing.  The Restated Plan expressly provides that, without the approval of a majority of the votes cast in person or by proxy at a meeting of our stockholders, the Compensation Committee may not provide for any of the following with respect to underwater options or stock appreciation rights: (1) either the cancellation of such outstanding options or stock appreciation rights in exchange for the grant of new options or stock appreciation rights at a lower exercise price or the amendment of outstanding options or stock appreciation rights to reduce the exercise price, (2) the issuance of new full value awards in exchange for the cancellation of such outstanding options or stock appreciation rights, or (3) the cancellation of such outstanding options or stock appreciation rights in exchange for payments in cash.

 

Eligibility.  Awards may be granted to employees, directors and consultants of the Company or any present or future parent or subsidiary corporation or other affiliated entity of the Company.  Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company.  As of March 15, 2014, we had approximately 87 employees, including seven executive officers, and five non-employee directors who would be eligible under the Restated Plan.

 

Stock Options.  The Compensation Committee may grant nonstatutory stock options, incentive stock options within the meaning of Section 422 of the Code, or any combination of these.  The exercise price of each option may not be less than the fair market value of a share of our common stock on the date of grant.  However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a “10% Stockholder”) must have an exercise price equal to at least 110% of the fair market value of a share of common stock on the date of grant.  As of March 15, 2014, the last closing price of our common stock as reported on the ASX was $3.38 per share as adjusted to account for conversion of CDIs into shares of common stock and converted into U.S. dollars based on the prevailing exchange rate on March 15, 2014.

 

The Restated Plan provides that the option exercise price may be paid in cash, by check, or cash equivalent; by means of a broker-assisted cashless exercise; by means of a net-exercise procedure; to the extent legally permitted, by tender to the Company of shares of common stock owned by the participant having a fair market value not less than the exercise price; by such other lawful consideration as approved by the Compensation Committee; or by any combination of these.  Nevertheless, the Compensation Committee may restrict the forms of payment permitted in connection with any option grant.  No option may be exercised unless the participant has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by the Company, through the participant’s surrender of a portion of the option shares to the Company.

 

Options will become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Compensation Committee.  The maximum term of any option granted under the Restated Plan is ten (10) years, provided that an incentive stock option granted to a 10% Stockholder must have a term not exceeding five (5) years.  Unless otherwise permitted by the Compensation Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date, and provided further that an option will terminate immediately upon a participant’s termination for cause (as defined by the Restated Plan).

 

Options are nontransferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participant’s lifetime only by the participant.  However, a nonstatutory stock option may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Compensation Committee.

 

Stock Appreciation Rights.  The Compensation Committee may grant stock appreciation rights either in tandem with a related option (a “Tandem SAR”) or independently of any option (a “Freestanding SAR”).  A Tandem SAR requires the option holder to elect between the exercise of the underlying option for shares of common stock or the surrender of the option and the exercise of the related stock appreciation right.  A Tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a Freestanding SAR is exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Compensation Committee.  The exercise price of each stock appreciation right may not be less than the fair market value of a share of our common stock on the date of grant.

 

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Upon the exercise of any stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for such shares.  Payment of this amount upon the exercise of a Tandem SAR may be made only in shares of common stock whose fair market value on the exercise date equals the payment amount.  At the Compensation Committee’s discretion, payment of this amount upon the exercise of a Freestanding SAR may be made in cash or shares of common stock.  The maximum term of any stock appreciation right granted under the Restated Plan is ten (10) years.

 

Stock appreciation rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant’s lifetime only by the participant.  If permitted by the Compensation Committee, a Tandem SAR related to a nonstatutory stock option and a Freestanding SAR may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Compensation Committee.  Other terms of stock appreciation rights are generally similar to the terms of comparable stock options.

 

Restricted Stock Awards.  The Compensation Committee may grant restricted stock awards under the Restated Plan either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase common stock, or in the form of a restricted stock bonus, in which stock is issued in consideration for services to the Company rendered by the participant.  The Compensation Committee determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock.  Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Compensation Committee specifies, including the attainment of one or more performance goals similar to those described below in connection with performance awards.  Shares acquired pursuant to a restricted stock award may not be transferred by the participant until vested.  Unless otherwise provided by the Compensation Committee, a participant will forfeit any shares of restricted stock as to which the vesting restrictions have not lapsed prior to the participant’s termination of service.  Unless otherwise determined by the Compensation Committee, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award and dividends paid in cash may be subject to such restrictions.

 

Restricted Stock Units.  The Compensation Committee may grant restricted stock units under the Restated Plan, which represent rights to receive shares of our common stock at a future date determined in accordance with the participant’s award agreement.  No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant’s services to the Company.  The Compensation Committee may grant restricted stock unit awards subject to the attainment of one or more performance goals similar to those described below in connection with performance awards, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards.  Unless otherwise provided by the Compensation Committee, a participant will forfeit any restricted stock units which have not vested prior to the participant’s termination of service.  Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards.  However, the Compensation Committee may grant restricted stock units that entitle their holders to dividend equivalent rights, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends the Company pays.

 

Performance Awards.  The Compensation Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Compensation Committee determines in writing and sets forth in a written agreement between the Company and the participant.  These awards may be designated as performance shares or performance units, which consist of unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of a share of common stock in the case of performance shares and a monetary value established by the Compensation Committee at the time of grant in the case of performance units.  Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more performance goals are attained within a predetermined performance period.  To the extent earned, performance awards may be settled in cash, shares of common stock (including shares of restricted stock that are subject to additional vesting) or any combination thereof.

 

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Prior to the beginning of the applicable performance period or such later date as permitted under Section 162(m) of the Code, the Compensation Committee will establish one or more performance goals applicable to the award.  Performance goals will be based on the attainment of specified target levels with respect to one or more measures of business or financial performance of the Company and each subsidiary corporation consolidated with the Company for financial reporting purposes, or such division or business unit of the Company as may be selected by the Compensation Committee.  The Compensation Committee, in its discretion, may base performance goals on one or more of the following such measures: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; total stockholder return, employee satisfaction; employee retention; market share; customer satisfaction; product development; research and development expense; completion of an identified special project; and completion of a joint venture or other corporate transaction.

 

The target levels with respect to these performance measures may be expressed on an absolute basis or relative to an index, budget or other standard specified by the Compensation Committee. The degree of attainment of performance measures will be calculated in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any performance award for the same performance period, and, according to criteria established by the Compensation Committee, excluding the effect (whether positive or negative) of changes in accounting standards or any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance goals applicable to a performance award.

 

Following completion of the applicable performance period, the Compensation Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant.  The Compensation Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable on the basis of the performance goals attained to a participant who is a Covered Employee within the meaning of Section 162(m) of the Code (with respect to awards intended to qualify as performance-based awards under Section 162(m) of the Code).  However, no such reduction may increase the amount paid to any other participant.  The Compensation Committee may make positive or negative adjustments to performance award payments to participants other than Covered Employees to reflect the participant’s individual job performance or other factors determined by the Compensation Committee.  In its discretion, the Compensation Committee may provide for a participant awarded performance shares of to receive dividend equivalent rights with respect to cash dividends paid on the Company’s common stock.  The Compensation Committee may provide for performance award payments in lump sums or installments.  If any payment is to be made on a deferred basis, the Compensation Committee may provide for the payment of dividend equivalent rights or interest during the deferral period.

 

Cash-Based Awards and Other Stock-Based Awards.  The Compensation Committee may grant cash-based awards or other stock-based awards in such amounts and subject to such terms and conditions as the Compensation Committee determines.  Cash-based awards will specify a monetary payment or range of payments, while other stock-based awards will specify a number of shares or units based on shares or other equity-related awards.  Such awards may be subject to vesting conditions based on continued performance of service or subject to the attainment of one or more performance goals similar to those described above in connection with performance awards.  Settlement of awards may be in cash or shares of common stock, as determined by the Compensation Committee.  A participant will have no voting rights with respect to any such award unless and until shares are issued pursuant to the award.  The Compensation Committee may grant dividend equivalent rights with respect to other stock-based awards.  The effect on such awards of the participant’s termination of service will be determined by the Compensation Committee and set forth in the participant’s award agreement.

 

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Deferred Compensation Awards.  The Restated Plan authorizes the Compensation Committee to establish a deferred compensation award program. If and when implemented, participants designated by the Compensation Committee, who may be limited to directors or members of a select group of management or highly compensated employees, may make an advance election to receive an award of stock options, stock appreciation rights, restricted stock or restricted stock units in lieu of director fees or bonuses otherwise payable in cash. The Compensation Committee will determine basis on which the number of shares subject to an equity award granted in lieu of cash compensation will be determined.  Such awards will be subject to the applicable provisions of the Restated Plan.

 

Change in Control.  Unless otherwise defined in a participant’s award or other agreement with the Company, the Restated Plan provides that a “Change in Control” occurs upon (a) a person or entity (with certain exceptions described in the Restated Plan) becoming the direct or indirect beneficial owner of more than 50% of the Company’s voting stock; (b) stockholder approval of a liquidation or dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of the Company’s voting stock; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).

 

If a Change in Control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. If so determined by the Compensation Committee, stock-based awards will be deemed assumed if, for each share subject to the award prior to the Change in Control, its holder is given the right to receive the same amount of consideration that a stockholder would receive as a result of the Change in Control.  In general, any awards which are not assumed, substituted for or otherwise continued in connection with a Change in Control or exercised or settled prior to the Change in Control will terminate effective as of the time of the Change in Control.  Subject to the restrictions of Section 409A of the Code, the Compensation Committee may provide for the acceleration of vesting or settlement of any or all outstanding awards upon such terms and to such extent as it determines. The Restated Plan also authorizes the Compensation Committee, in its discretion and without the consent of any participant, to cancel each or any award denominated in shares of stock upon a Change in Control in exchange for a payment to the participant with respect each vested share (and each unvested share if so determined by the Compensation Committee) subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the Change in Control transaction over the exercise price per share, if any, under the award. The vesting of all awards held by non-employee directors will be accelerated in full upon a Change in Control.

 

Awards Subject to Section 409A of the Code.  Certain awards granted under the Restated Plan may be deemed to constitute “deferred compensation” within the meaning of Section 409A of the Code, providing rules regarding the taxation of nonqualified deferred compensation plans, and the regulations and other administrative guidance issued pursuant to Section 409A of the Code.  Any such awards will be required to comply with the requirements of Section 409A of the Code.  Notwithstanding any provision of the Restated Plan to the contrary, the Compensation Committee is authorized, in its sole discretion and without the consent of any participant, to amend the Restated Plan or any award agreement as it deems necessary or advisable to comply with Section 409A of the Code.

 

Amendment, Suspension or Termination.  The Restated Plan will continue in effect until its termination by the Compensation Committee, provided that no awards may be granted under the Restated Plan following the tenth anniversary of the date the Restated Plan became effective.  The Compensation Committee may amend, suspend or terminate the Restated Plan at any time, provided that no amendment may be made without stockholder approval that would increase the maximum aggregate number of shares of stock authorized for issuance under the Restated Plan, change the class of persons eligible to receive incentive stock options or require stockholder approval under any applicable law.  No amendment, suspension or termination of the Restated Plan may affect any outstanding award unless expressly provided by the Compensation Committee, and, in any event, may not have a materially adverse effect an outstanding award without the consent of the participant unless necessary to comply with any applicable law, regulation or rule, including, but not limited to, Section 409A of the Code, or unless expressly provided in the terms and conditions governing the award.

 

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Summary of U.S. Federal Income Tax Consequences

 

The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Restated Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.

 

Incentive Stock Options.  A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code.  Participants who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon the sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares.  If a participant satisfies such holding periods upon a sale of the shares, we will not be entitled to any deduction for federal income tax purposes.  If a participant disposes of shares within two years after the date of grant or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition.  Any gain in excess of that amount will be a capital gain.  If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss.  Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

 

In general, the difference between the option exercise price and the fair market value of the shares on the date of exercise of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year.  Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.

 

Nonstatutory Stock Options.  Options not designated or qualifying as incentive stock options are nonstatutory stock options having no special tax status.  A participant generally recognizes no taxable income upon receipt of such an option.  Upon exercising a nonstatutory stock option, the participant normally recognizes ordinary income equal to the difference between the exercise price paid and the fair market value of the shares on the date when the option is exercised.  If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes.  Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the exercise date, will be taxed as capital gain or loss.  We generally should be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of a nonstatutory stock option, except to the extent such deduction is limited by applicable provisions of the Code.

 

Stock Appreciation Rights.  A participant recognizes no taxable income upon the receipt of a stock appreciation right.  Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price.  If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.

 

Restricted Stock.  A participant acquiring restricted stock generally will recognize ordinary income equal to the excess of the fair market value of the shares on the “determination date” over the price paid, if any, for such shares.  The “determination date” is the date on which the participant acquires the shares unless the shares are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture (e.g., when they become vested). If the determination date follows the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to designate the date of acquisition as the determination date by filing an election with the Internal Revenue Service no later than 30 days

 

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after the date on which the shares are acquired.  If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date, will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

 

Restricted Stock Unit, Performance, Cash-Based and Other Stock-Based Awards.  A participant generally will recognize no income upon the receipt of a restricted stock unit, performance share, performance unit, cash-based or other stock-based award.  Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any substantially vested shares of stock received.  If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes.  If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above under “Restricted Stock.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date (as defined above under “Restricted Stock”), will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

 

New Restated Plan Benefits

 

Because it is within the Compensation Committee’s discretion to determine which directors, employees, and consultants receive awards under the Restricted Plan, and the types and amounts of those awards, it is not possible at present to specify the persons to whom awards will be granted in the future or the amounts and types of individual grants.  However, it is anticipated that, among others, all of our current executive officers, including our named executive officers, will continue to receive awards under the Restated Plan.

 

Options Granted to Certain Persons

 

The following table shows the number of shares subject to options issued under the 2010 Plan since its inception to:

 

·                  The named executive officers;

 

·                  All current executive officers as a group;

 

·                  All current directors who are not executive officers; and

 

·                  All employees as a group (excluding executive officers).

 

Name and Position

 

Number of Shares
Subject to Options

 

 

 

 

 

Robert B. Stockman
Chief Executive Officer

 

900,000

 

 

 

 

 

Robert K. Schultz, Ph.D.
President and Chief Operating Officer

 

424,500

 

 

 

 

 

Katrina L. Thompson
Chief Financial Officer and Corporate Secretary

 

369,500

 

 

 

 

 

Jeffrey A. Anderson
SVP, Clinical and Regulatory Affairs

 

197,500

 

 

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Name and Position

 

Number of Shares
Subject to Options

 

 

 

 

 

Donald K. Brandom, Ph.D.

SVP, Product Development

 

242,500

 

 

 

 

 

All current executive officers as a group (6 persons)

 

2,324,000

 

 

 

 

 

All current directors who are not executive officers, as a group (5 persons)

 

450,000

 

 

 

 

 

All employees as a group (excluding current executive officers)

 

580,000

 

 

Section 162(m) of the Code

 

As described above, we have attempted to structure the Restated Plan in such a manner that the compensation attributable to stock options, stock appreciation rights and other performance-based awards which meet the other requirements of Section 162(m) of the Code will not be subject to the $1,000,000 tax deduction limitation. We have not, however, requested a ruling from the Internal Revenue Service or an opinion of counsel regarding this issue.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED 2010 EQUITY INCENTIVE PLAN FOR PURPOSES OF SECTION 162(m) OF THE INTERNAL REVENUE CODE.

 

PROPOSAL 11 — APPROVAL OF THE ISSUANCE AND TRANSFER OF SECURITIES UNDER THE AMENDED AND RESTATED 2010 EQUITY INCENTIVE PLAN

 

Introduction

 

ASX Listing Rule 7.1 provides that the prior approval of our stockholders is required for an issue of equity securities if the securities will, when aggregated with the securities issued by the Company during the previous 12 months, exceed 15% of the number of securities on issue at the commencement of that 12 months.

 

ASX Listing Rule 7.2 (Exception 9) sets out an exception to ASX Listing Rule 7.1. This rule provides that issues under an employee incentive scheme are exempt for a period of three years if stockholders approve the issue of securities under the scheme for the purposes of this exception.

 

Accordingly, Proposal 11 seeks approval from our stockholders to approve the issuance and transfer of securities under the Amended and Restated 2010 Equity Incentive Plan. A complete copy of the Amended and Restated 2010 Equity Incentive Plan is set forth in Appendix A to this Proxy Statement.

 

Approval of this Proposal 11 will mean that for the period of three years following the date of this Annual Meeting, any issues or transfers of securities made under the Amended and Restated 2010 Equity Incentive Plan will be excluded from the calculation of the Company’s 15% issue capacity under ASX Listing Rule 7.1 and, to the extent applicable, from the Company’s additional 10% placement capacity under ASX Listing Rule 7.1A (assuming Proposal 8 is approved by stockholders).

 

The Board of Directors last sought and obtained approval of its stockholders to approve the issuance of equity securities under the 2010 Equity Incentive Plan in May 2013. As a result of the amendments being made to the 2010 Equity Incentive Plan (as described in Proposal 10 above), the Company is now requesting that its stockholders approve the issuance of securities under the Amended and Restated 2010 Equity Incentive Plan at this Annual Meeting for the purposes of ASX Listing Rule 7.2 (Exception 9) so that we may continue to offer a compensation program that will attract, retain, motivate, and reward the experienced, highly qualified, and performance-based directors, employees, and consultants who will contribute to our success and align their and the Company’s interests with those of our stockholders through our ability to grant a variety of equity-based awards.

 

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A summary of the principal provisions of the Amended and Restated 2010 Equity Incentive Plan is set out in the notes to Proposal 10 above.

 

The number of equity awards granted under the 2010 Equity Incentive Plan since its last approval for ASX purposes in May 2013 is 887,000 options (exercisable over 887,000 shares of common stock) and 47,500 shares of restricted stock.

 

Voting Exclusion Statement

 

The Company will disregard any votes cast in respect of Proposal 11 by a Director of the Company or any associate of such Directors.

 

However, the Company need not disregard any vote cast by any such persons if:

 

·                              it is cast as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

 

·                              it is cast by a Director who is chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

 

Vote Required for Approval

 

Approval of the issuance and transfer of securities under Amended and Restated 2010 Equity Incentive Plan requires the affirmative vote of a majority of the shares of common stock of the Company present in person or represented by proxy at the Annual Meeting and entitled to vote. Abstentions are considered shares present and entitled to vote and thus will have the effect of a vote “AGAINST” this proposal. Broker non-votes will have no direct effect on the outcome of this proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ISSUE AND TRANSFER OF SECURITIES UNDER THE PLAN.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table presents information about the beneficial ownership of our common stock (as converted and aggregated for any holdings in the form of CHESS Depositary Interests) as of March 15, 2014 by:

 

·            each stockholder known to beneficially own five percent or more of our stock (“principal stockholders”);

 

·            each of our directors;

 

·            each of our named executive officers; and,

 

·            all of our directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned and the percentage ownership by a person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of March 15, 2014 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name, based on information provided to us by such stockholders. Except as otherwise indicated, the address of each stockholder is c/o REVA Medical, Inc., 5751 Copley Drive, San Diego, California 92111, U.S.A.

 

Name and Address of Beneficial
Owner

 

Number of
Shares of
Common Stock (1)

 

Percent of
Common Stock (1)

 

 

 

 

 

 

 

Principal Stockholders:

 

 

 

 

 

Domain Partners (2)

 

3,691,188

 

11.0

%

Elliott Associates, L.P. (3)

 

3,227,031

 

9.6

%

Saints Capital Everest, L.P. (4)

 

3,223,513

 

9.6

%

Brookside Capital Partners Fund, LP (5)

 

2,965,022

 

8.9

%

Stephen Feinberg (6)

 

2,884,426

 

8.6

%

Medtronic, Inc. (7)

 

2,635,479

 

7.9

%

 

 

 

 

 

 

Directors and Named Executive Officers:

 

 

 

 

 

Robert Stockman(8)

 

2,992,595

 

8.7

%

Katrina L. Thompson (9)

 

576,000

 

1.7

%

Jeffrey A. Anderson (10)

 

232,500

 

*

 

Donald K. Brandom, Ph.D. (11)

 

397,550

 

1.2

%

Robert K. Schultz, Ph.D. (12)

 

966,000

 

2.8

%

Brian H. Dovey (13)

 

3,781,188

 

11.3

%

Anne Keating (14)(15)

 

111,482

 

*

 

Gordon E. Nye (15)

 

923,131

 

2.8

%

James J. Schiro (15)

 

99,091

 

*

 

Robert Thomas (15)(16)

 

155,000

 

*

 

 

 

 

 

 

 

All directors and executive officers as a group (11 persons)

 

10,544,537

 

28.6

%

 


*                 Indicates beneficial ownership of less than 1% of our shares of common stock.

 

(1)         Number of shares owned as shown both in this table and the accompanying footnotes and percentage ownership is based on 33,459,203 shares of common stock (which is equivalent to 334,592,030 CDIs) outstanding on March 15, 2014.

 

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(2)         The address of Domain Partners is One Palmer Square, Suite 515, Princeton, NJ 08542. 3,606,002 of the shares of common stock are held directly by Domain Partners V, L.P. and 85,186 of the shares of common stock are held directly by DP V Associates, L.P. One Palmer Square Associates V, L.L.C. is the general partner of Domain Partners V, L.P. and DP V Associates L.P. and has voting and dispositive power with respect to the shares. The managing members of One Palmer Square Associates V, L.L.C. consist of James C. Blair, Brian H. Dovey, Jesse I. Treu, and Kathleen K. Schoemaker. Each of these individuals disclaims beneficial ownership except to the extent of their respective pecuniary interest therein.

 

(3)         The address of Elliott Associates, L.P. is 40 West 57th Street, 30th Floor, New York, NY 10019. Elliott Associates, L.P. has voting and dispositive power with respect to the shares. The general partners of Elliott Associates, L.P. are Paul E. Singer (“Singer”), Elliott Capital Advisors, L.P., a Delaware limited partnership (“Capital Advisors”), which is controlled by Singer, and Elliott Special GP, LLC, a Delaware limited liability company (“Special GP”), which is controlled by Singer.

 

(4)         The address of Saints Capital Everest, L.P. is 475 Sansome Street, Suite 1850, San Francisco, CA 94111. Saints Capital Everest, LLC is the general partner of Saints Capital Everest, L.P. and has voting and dispositive power with respect to the shares. The Managing Members of Saints Capital Everest, LLC consist of Scott Halsted, Ken Sawyer, David Quinlivan, and Ghia Griarte. Each of these individuals disclaims beneficial ownership except to the extent of their respective pecuniary interest therein.

 

(5)         The address of Brookside Capital Partners Fund, L.P. is John Hancock Tower, 200 Clarendon St., Boston, MA 02116. 2,783,204 of the shares are held directly by Brookside Capital Partners Fund, LP and 181,818 of the shares are held by Brookside Capital Trading Fund L.P. Matt McPherron, the Managing Director of Brookside Capital Partners Fund, LP, has voting and dispositive power with respect to the shares. Mr. McPherron disclaims beneficial ownership except to the extent of his pecuniary interests therein.

 

(6)         The address for Stephen Feinberg is c/o Cerberus Capital Management, L.P., 299 Park Avenue, New York, NY 10171. Cerberus America Series Two Holdings, LLC holds 26,167 shares of common stock, Cerberus International, Ltd. holds 995,553 shares of common stock, Cerberus Partners, L.P. holds 520,641 shares of common stock, Cerberus Series Four Holdings, LLC holds 1,046,486 shares of common stock, and Gabriel Assets, LLC (collectively with Cerberus America Series Two Holdings, LLC, Cerberus International, Ltd., Cerberus Partners, L.P. and Cerberus Series Four Holdings, LLC, the “Cerberus Entities”) holds 295,579 shares of common stock. Stephen Feinberg, through one or more entities, possesses the sole power to vote and the sole power to direct the disposition of all securities of REVA held by the Cerberus Entities.

 

(7)         The address of Medtronic, Inc. is 710 Medtronic Parkway, Minneapolis, MN 55432.

 

(8)         Includes 335,294 shares of common stock held by Group Outcome Investors I, LLC. A trust established for the benefit of one of Mr. Stockman’s children who resides in Mr. Stockman’s household beneficially owns the 335,294 shares. Also includes 1,347,070 shares of common stock held by Kenneth Rainin Administrative Trust U/D/T Dated 3/26/1990 and 227,718 shares held by Mr. Stockman’s spouse Lisa Stockman. Mr. Stockman, along with Jennifer Rainin, are co-trustees of the Kenneth Rainin Administrative Trust U/D/T Dated 3/26/1990 and have voting and dispositive power with respect to these shares. Mr. Stockman disclaims beneficial ownership except to the extent of his pecuniary interest therein. Includes options to purchase 900,000 shares that are immediately exercisable.

 

(9)         Includes options to purchase 464,500 shares that are immediately exercisable.

 

(10)  Includes options to purchase 232,500 shares that are immediately exercisable.

 

(11)  Includes options to purchase 342,500 shares that are immediately exercisable.

 

(12)  Includes 5,000 shares held by the Schultz Family Trust.  Also includes options to purchase 729,500 shares that are immediately exercisable.

 

(13)  Includes 3,606,002 shares of common stock held by Domain Partners V, L.P., 85,186 shares of common stock held by DP V Associates, L.P., and options to purchase 90,000 shares that are immediately exercisable. One Palmer Square Associates V, L.L.C. is the general partner of Domain Partners V, L.P. and DP V. Associates L.P. and has voting and dispositive power with respect to the shares. The managing members of One Palmer Square Associates V, L.L.C. consist of James C. Blair, Brian H. Dovey, Jesse I. Treu, and Kathleen K. Schoemaker. Mr. Dovey disclaims beneficial ownership except to the extent of his pecuniary interest therein.

 

(14)  Includes 21,432 shares held by Sratford Gem Pty Ltd., as trustee for the Anne Keating Super Fund. Ms. Keating is the beneficial owner and has voting and dispositive power with respect to these shares.

 

(15)  Includes options to purchase 90,000 shares that are immediately exercisable.

 

(16)  Includes 65,000 shares held by two superannuation funds established by Mr. Thomas. Mr. Thomas is the beneficial owner and has voting and dispositive power with respect to these shares.

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the common stock and other equity securities of our Company. Officers, directors, and greater than ten percent beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. Based solely upon information furnished to us and contained in reports filed with the SEC, as well as any written representations that no other reports were required, we believe that all required reports were timely filed during 2013.

 

RELATED PARTY TRANSACTIONS

 

Policy for Approval of Related Party Transactions

 

Pursuant to the written charter of our audit committee, the audit committee is responsible for reviewing and approving all transactions in which we are a participant and in which any parties related to us, including our executive officers, our directors, beneficial owners of more than five percent of our securities, immediate family members of the foregoing persons, and any other persons whom our Board determines may be considered related parties, has or will have a direct or indirect material interest. If advanced approval is not feasible, the audit committee has the authority to ratify a related party transaction at the next audit committee meeting. For purposes of our audit committee charter, a material interest is deemed to be any consideration received by such a party in excess of $120,000 per year.

 

In reviewing and approving such transactions, the audit committee shall obtain, or shall direct our management to obtain on its behalf, all information that the committee believes to be relevant and important to a review of the transaction prior to its approval. Following receipt of the necessary information, a discussion shall be held of the relevant factors if deemed to be necessary by the committee prior to approval. If a discussion is not deemed to be necessary, approval may be given by written consent of the committee. This approval authority may also be delegated to the Chair of the audit committee in respect of any transaction in which the expected amount is less than $250,000. No related party transaction may be entered into prior to the completion of these procedures.

 

The audit committee or its Chair, as the case may be, shall approve only those related party transactions that are determined to be in, or not inconsistent with, the best interests of us and our stockholders, taking into account all available facts and circumstances as the committee or the Chair determines in good faith to be necessary. These facts and circumstances will typically include, but not be limited to, the material terms of the transaction, the nature of the related party’s interest in the transaction, the significance of the transaction to the related party and the nature of our relationship with the related party, the significance of the transaction to us, and whether the transaction would be likely to impair (or create an appearance of impairing) the judgment of a director or executive officer to act in our