The following table sets forth, for our current directors, including the Class III nominee to be elected at this meeting, and non-director Executive Officers, information with respect to their ages as of April 1, 2016 and their background:
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Name
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Principal Occupation
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Age
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Director
Since
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|
Class I directors whose terms expire at the 2017 Annual Meeting of Stockholders:
|
|
Morris S. Young
|
|
Director, Chief Executive Officer
|
|
71
|
|
1989
|
David C. Chang
|
|
Director
|
|
74
|
|
2000
|
|
Class II director whose term expires at the 2018 Annual Meeting of Stockholders:
|
|
Jesse Chen
|
|
Chairman of the Board
|
|
58
|
|
1998
|
|
|
|
|
|
|
|
Class III director whose term expires at the 2016 Annual Meeting of Stockholders:
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|
Leonard J. LeBlanc
|
|
Director
|
|
75
|
|
2003
|
|
Non-director Executive Officers:
|
|
Gary L. Fischer
|
|
Chief Financial Officer and Corporate Secretary
|
|
65
|
|
|
Robert G. Ochrym
|
|
Vice President, Business Development, Strategic Sales and Marketing
|
|
64
|
|
|
Members of the Board of Directors
Morris S. Young, Ph.D.
co-founded AXT in 1986 and has served as a director since 1989. Dr. Young served as our chairman of the Board of Directors from February 1998 to May 2004 and as our president and chief executive officer from 1989 to May 2004. From 2004 until his retirement in 2006, Dr. Young served as our chief technology officer. He was reappointed as our chief executive officer on July 16, 2009. From 1985 to 1989, Dr. Young was a physicist at Lawrence Livermore National Laboratory. Dr. Young has a B.S. degree in metallurgical engineering from National Cheng Kung University, Taiwan, a M.S. degree in metallurgy from Syracuse University, and a Ph.D. in metallurgy from Polytechnic University.
The Board has determined that Dr. Young’s long history with the Company, as well as his breadth of experience and on-going, active involvement in the semiconductor industry, make him a valuable asset to the Board.
David C. Chang, Ph.D.
has served as one of our directors since December 2000. Dr. Chang has served as president of Polytechnic University in New York (now known as Polytechnic Institute of New York University) from 1994 to 2005 and President Emeritus and chancellor from 2005 to present. Previously, Dr. Chang was dean of the College of Engineering and Applied Sciences at Arizona State University. Dr. Chang served as a director of the NSF/Industry Corporate Research Center for Microwave and Millimeter-Wave Computer Aided Design from 1981 to 1989. Dr. Chang is a member of the board of directors of Time Warner Cable. Dr. Chang has a M.S. degree and a Ph.D. in applied physics from Harvard University and a B.S. degree in electrical engineering from National Cheng Kung University, Taiwan.
The Board has determined that Dr. Chang’s extensive experience in the semiconductor industry allows him to make significant contributions to the strategic direction of the Company.
Jesse Chen
has served as one of our directors since February 1998 and was Chairman of the Board of Directors from May 2004 until October 2007, at which time he was appointed our lead independent director. Since March 2009, Mr. Chen has served as our Chairman of the Board of Directors. Since May 1997, Mr. Chen has served as a managing director of Maton Ventures, an investment company. From 1990 to 1996, Mr. Chen served as chief executive officer of BusLogic, Inc., a fabless semiconductor and computer peripherals company. Mr. Chen serves on the board of directors of several private companies. Mr. Chen has a B.S. degree in aeronautical engineering from National Cheng Kung University, Taiwan and a M.S. degree in electrical engineering from Loyola Marymount University.
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·
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reviewing the accounting principles and auditing practices and procedures to be used in preparing our financial statements; and
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·
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reviewing our internal controls.
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For additional information concerning the Audit Committee, see “Audit Committee Report” and “Proposal No. 3 - Ratification of Appointment of Independent Registered Public Accounting firm.”
Compensation Committee
The members of our Compensation Committee during 2015 were David C. Chang, Jesse Chen, Leonard J. LeBlanc and Nai-Yu Pai, whose term expired on May 21, 2015. The Board has determined that all members of the Compensation Committee are “independent” as the term is defined by applicable Nasdaq listing standards and SEC rules.
The Compensation Committee has been delegated the responsibility by the Board to oversee the programs under which compensation is paid or awarded to our executive officers and to evaluate the performance of our executive officers. The Compensation Committee has been delegated the authority to: (i) oversee our compensation policies and practices; (ii) review and approve compensation and compensation procedures for our executive officers; (iii) oversee and approve director compensation, and (iv) oversee and approve equity awards to our employees, officers and directors. More specifically, the Compensation Committee’s responsibilities include: overseeing our general compensation structure, policies and programs, and assessing whether our compensation structure establishes appropriate incentives for management and employees; administering our incentive compensation and equity
‑based compensation plans, including our stock option plans; reviewing and approving compensation procedures for our executive officers; approving the compensation of the Chief Executive Officer based on relevant corporate goals and objectives and the Board’s performance evaluation of the Chief Executive Officer; reviewing and approving the compensation of executive officers other than the Chief Executive Officer; approving employment and retention agreements and severance arrangements for executive officers, including change-in-control provisions, plans or agreements; and approving the compensation of directors for service on the Board and its committees and recommending changes in compensation to the Board. The Chief Executive Officer does not participate in discussions or approvals related to his compensation. Regarding most compensation matters, including executive and director compensation, our management provides recommendations to the Compensation Committee. In addition, the Compensation Committee has engaged Compensia, an outside compensation consulting firm, to review our compensation programs for executive officers and to provide advice on executive officer compensation matters.
The agenda for meetings of the Compensation Committee is determined by its Chairman with the assistance of the Chief Executive Officer and the Chief Financial Officer. Compensation Committee meetings are regularly attended by the Chief Executive Officer and the Chief Financial Officer. The Compensation Committee periodically meets in executive session without members of management present. The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee reviews the total fees paid to outside compensation consultants by us to ensure that the consultant maintains its objectivity and independence when rendering advice to the committee.
Nominating and Corporate Governance Committee
The members of our Nominating and Corporate Governance Committee during 2015 were David C. Chang, Jesse Chen, Leonard J. LeBlanc and Nai-Yu Pai, whose term expired on May 21, 2015. The Board has determined that all members of the Nominating and Corporate Governance Committee are “independent” as the term is defined by applicable Nasdaq listing standards and SEC rules. The Nominating and Corporate Governance Committee is responsible for evaluating and selecting director nominees, determining criteria for selecting new directors, developing and reviewing on an ongoing basis the adequacy of the corporate governance principles and guidelines adopted by the Board, overseeing the evaluation of the Board and committees of the Board, and adopting, approving, monitoring and enforcing compliance with our Code of Business Conduct and Ethics.
of the proxy statement that was mailed to stockholders in connection with the prior year’s annual meeting of stockholders and must contain the following information:
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·
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the candidate’s name, age, contact information and present principal occupation or employment;
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·
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a description of the candidate’s qualifications, skills, background, and business experience during, at a minimum, the last five years, including his/her principal occupation and employment and the name and principal business of any corporation or other organization in which the candidate was employed or served as a director; and
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·
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a statement signed by the candidate that the candidate is willing to be considered and willing to serve as a director if nominated and elected.
|
The Nominating and Corporate Governance Committee will evaluate incumbent directors, as well as candidates for director nominee submitted by directors, management, and stockholders consistently using the criteria stated in this policy and will select the nominees that in the Nominating and Corporate Governance Committee’s judgment best suit the needs of the Board at that time.
Communications with Directors
Stockholders may communicate with the Board by writing to us at AXT, Inc., 4281 Technology Drive, Fremont, CA 94538, Attention: Corporate Secretary. Your letter should indicate that you are an AXT stockholder. Stockholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded as appropriate. Depending on the subject matter, management will (i) forward the communication to the director or directors to whom it is addressed; (ii) attempt to handle the inquiry directly, for example where it is a request for information about us or it is a stock related matter; or (iii) not forward the communication if it is primarily commercial in nature, comprises spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, business solicitations, or relates to otherwise inappropriate matters.
Board Leadership Structure
The Board has determined that the positions of Chairman of the Board and Chief Executive Officer should be separated. Mr. Chen currently serves as our Chairman of the Board and Dr. Young currently serves as our Chief Executive Officer. The Board believes that the separation of these positions allows the Chief Executive Officer to focus more on the operations of the Company, and provides a more effective channel for the Board to express its views on management.
Board’s Role in Risk Oversight
The Board’s risk oversight function is administered through Board committees. Generally, the committee with subject matter expertise in a particular area is responsible for overseeing the management of risk in that area. For example, the Audit Committee oversees the management of financial, accounting and internal control risks, the Compensation Committee oversees the management of risks in the Company’s compensation programs, and the Nominating and Corporate Governance Committee oversees compliance with Company policies.
We have an internal audit function that reports directly to the Audit Committee. The Audit Committee reviews and approves the internal audit plan once a year and receives periodic updates of internal audit activity in meetings held at least quarterly throughout the year. Updates include discussion of audit project results, quarterly assessment of internal controls and risks of fraud.
In carrying out their risk oversight duties, the committees review management’s implementation of risk policies and procedures, and review reports from management, independent auditors, internal audit, legal counsel, regulators and outside experts, as appropriate, regarding risks the Company faces.
The Board and its committees are committed to ensuring effective risk management oversight and work with management to ensure that effective risk management strategies are incorporated into the Company’s culture and day-to-day business operations.
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that AXT specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.
The Audit Committee oversees our financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including internal control systems. Burr Pilger Mayer, Inc., our independent registered public accounting firm, is responsible for expressing an opinion as to the conformity of our audited financial statements with generally accepted accounting principles. The Audit Committee has met with Burr Pilger Mayer, Inc., with and without management present, to discuss the overall scope of Burr Pilger Mayer, Inc.’s audit, the results of its examinations and the overall quality of our financial reporting.
The Audit Committee currently consists of three directors, each of whom, in the judgment of the Board, is an “independent director” as defined in the listing standards for The Nasdaq Stock Market. The Audit Committee acts pursuant to a written charter that has been adopted by the Board. A copy of this charter is posted under the “Investors” section on our website at
www.axt.com
.
We have an internal audit function that reports directly to the Audit Committee. The Audit Committee reviews and approves the internal audit plan once a year and receives periodic updates of internal audit activity in meetings held at least quarterly throughout the year. Updates include discussion of audit project results, quarterly assessment of internal controls and risks of fraud.
The Audit Committee has discussed and reviewed the audited financial statements with management, and has discussed and reviewed with our independent registered public accounting firm all matters required to be discussed by the statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has received from Burr Pilger Mayer, Inc. the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent public accounting firm’s communications with the Audit Committee concerning independence, discussed with the independent registered public accounting firm any relationships that may impact their objectivity and independence, and satisfied itself as to the independent registered public accounting firm’s independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
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AUDIT COMMITTEE
|
|
|
|
Leonard J. LeBlanc, Chair
|
|
David C. Chang
|
|
Jesse Chen
|
EXECUTIVE OFFICERS
The following sets forth information regarding our current non-director executive officers. Information regarding Dr. Morris Young, our Chief Executive Officer, is set forth under Proposal No. 1 Election of Directors.
Robert G. Ochrym
joined AXT as Vice President, Business Development in June 2005. On October 26, 2009, Mr. Ochrym was appointed as our Vice President, Business Development, Strategic Sales and Marketing. From 2003 to May 2005, Mr. Ochrym was national sales manager at Aixtron, Inc., where he was responsible for North American sales and marketing functions. From 1973 to 2003, Mr. Ochrym held various positions in sales and marketing, business development and product management at Uniroyal Optoelectronics, Northrop Grumman and Rhone
‑Poulenc, and had extensive involvement with rare earths and gallium businesses. Mr. Ochrym has a B.A. degree in Biology from Le Moyne College in Syracuse, New York.
Gary L. Fischer
was appointed as our Vice President, Chief Financial Officer and Corporate Secretary in August, 2014. From June 2014 to August 2014, Mr. Fischer served as a financial consultant to the Company. Prior to serving as a financial consultant to the Company, Mr. Fischer served as a consultant to eRide, Inc., a fabless semiconductor company that develops both GPS devices and software for location-based services, since 2009. Prior to that position, Mr. Fischer served as Vice President and Chief Financial Officer of eRide from 2005 until 2009, when eRide was acquired. From 1993 to 2005, Mr. Fischer held various positions at Integrated Silicon Solution, Inc.(“ISSI”), a leader in advanced memory solutions, most recently as President and Chief Operating Officer. Mr. Fischer has a B.A. degree from the University of California, Santa Barbara, and an M.B.A. from Santa Clara University.
In August 2007, the SEC filed a complaint against ISSI and Mr. Fischer. The complaint alleged violations of securities laws related to the backdating of stock option grants. In September 2007, Mr. Fischer, without admitting or denying the allegations of the SEC’s complaint, agreed to settle the matter by consenting to (i) a permanent injunction against violations of the securities laws and rules thereunder, including in particular knowingly circumventing or failing to implement a system of internal accounting controls or knowingly falsifying any book, record or account, (ii) the disgorgement of profits and interest thereon that the SEC alleged he gained from backdating options and civil penalties, and (iii) consenting to an order barring him from acting as an officer or director of a public company for five years, which expired in September 2012.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Compensation Discussion and Analysis
Overview of Compensation Programs and Philosophy
Our philosophy is to provide a total compensation package that is competitive with the prevailing practices for our industry and markets. We believe that there should be a strong link between pay and performance, both at the Company level and the individual level. Although we believe that exceptional individual performance should be rewarded, we believe that such rewards should not be made unless there has been strong Company performance as well as strong individual performance.
Our compensation programs are intended to assure that our compensation and benefits policies attract, motivate and retain the key employees necessary to support our operations and our strategic growth. To meet these objectives, we have adopted the following overriding policies:
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·
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Pay total compensation that is competitive with the practices of other companies of similar size and in similar industries;
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·
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Use total cash compensation (salary plus annual cash bonus, payable quarterly) to recognize appropriately each individual officer’s scope of responsibility, role in the organization, experience and contributions;
|
|
·
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providing short-term bonus compensation by establishing a bonus plan to reward achievement at specified levels of financial and individual performance, with a significant portion of each executive’s goals related to key financial measures, including company
‑specific measures comprising achievement of targeted revenue, gross profit and operating expense levels, all being line items upon which executive officer performance can have a significant impact and that can show beneficial financial performance improvement and ,therefore, value to stockholders, and a portion of each executive’s goals related to individual metrics for each individual executive officer that represent an improvement over such officer’s performance in the prior fiscal year; and
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|
·
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|
providing long-term incentives in the form of stock options and restricted stock awards, in order to retain those individuals with the leadership abilities necessary for increasing long-term stockholder value while aligning the interests of our officers with those of our stockholders.
|
On May 21, 2015, we held a stockholder advisory vote on the compensation of our named executive officers, commonly referred to as a say-on-pay vote. Our stockholders approved the compensation of our named executive officers, with over 90.70% of the votes cast in favor of our say-on-pay resolution. As we evaluated our compensation practices throughout fiscal 2015, we were mindful of the strong support our stockholders expressed for our philosophy of linking compensation to performance. For fiscal 2015, our Compensation Committee (the “Committee”) decided to retain our general approach to executive compensation. Moreover, in determining how often to hold a stockholder advisory vote on executive compensation, our Board took into account our stockholders’ preference for an annual vote at our 2011 annual meeting of stockholders. Based on stockholder input, the Board determined that we will continue to hold an annual advisory stockholder vote on our named executive officer compensation until the frequency is modified by a stockholder vote.
Components of Our Compensation Program
There are five major elements that comprise our executive officer compensation programs: (i) base salary; (ii) annual cash bonus, payable quarterly; (iii) long-term incentives, such as stock options and restricted stock awards; (iv) retirement benefits provided under a 401(k) plan; and (v) perquisites and benefit programs that are generally available to all of our employees. In addition, we provide certain benefits to U.S. employees who spend a significant amount of their time in our Beijing facilities. We have selected these elements because each is considered useful and/or necessary to meet one or more of the principal objectives of our compensation policy. For instance, base salary and bonus target percentages are set with the goal of attracting and retaining employees, adequately compensating them on a
day-to-day basis for the time spent and the services they perform, and rewarding them for achievement at specified levels of financial and individual performance. Our stock option grants and restricted stock awards are intended to provide an incentive and reward for the achievement of long-term business objectives, including achievement of our financial goals, our growth, and retaining key employees. We believe that these elements of compensation, when combined, are effective, and will continue to be effective, in achieving the objectives of our compensation programs.
These policies were established by our Committee in setting executive officer compensation, including the assessment of the appropriate allocation between current cash compensation, short-term bonus compensation, and long-term compensation. Other considerations include our business objectives, competitive practices and trends, and regulatory requirements.
Oversight of Executive Compensation and Role of Management
Our executive compensation program is overseen and administered by the Committee, which is comprised entirely of independent directors as determined in accordance with various Nasdaq and SEC rules and the Internal Revenue Code. The Committee operates under a written charter adopted by our Board. A copy of the charter is available under the “Investors” section on our website at
www.axt.com
.
During fiscal 2015, the Committee met regularly with our Chief Executive Officer, Dr. Young, to obtain recommendations with respect to Company compensation programs, practices and packages for executives, other employees and directors. Dr. Young made recommendations to the Committee on the base salary, bonus targets and equity compensation for the executive team and other employees for fiscal 2015 compensation. The Committee considers, but is not bound by and does not always accept, Dr. Young’s recommendations with respect to executive compensation. For fiscal 2015, the Committee determined that Dr. Young was well placed to know what would motivate his team financially, both in terms of long-term and short-term compensation.
Dr. Young attended most of the Committee’s meetings, but the Committee also regularly held executive sessions not attended by any members of management or the non-independent directors. The Committee discussed Dr. Young’s compensation package with him, but made decisions with respect to Dr. Young’s compensation without him present. The Committee has not delegated any of its authority with respect to the compensation of executive officers.
The Committee reviews the compensation programs applicable to executive officers on an annual basis, other than deferred compensation and retirement benefits, which are reviewed from time to time to ensure that benefit levels remain competitive but are not included in the annual determination of an executive’s compensation package. In setting compensation levels for a particular executive, the Committee takes into consideration the proposed compensation package as a whole and each element individually, as well as the executive’s past and expected future contributions to our business.
Reliance on Compensation Consultants
The Committee has the authority to engage its own independent advisors to assist in carrying out its responsibility. For the years 2015 and 2013, the Committee retained Compensia, an independent compensation consulting firm, to review our executive compensation practices. Compensia advised the Committee on the principal aspects of executive compensation, including base salaries, bonuses and long-term equity incentives. Compensia reported on its evaluation of the competitiveness of our current executive officer compensation program as compared to peer companies. Compensia provided market information about the competitive framework for executive pay and performance benchmarking.
Representatives of Compensia communicated with the chair of the Committee outside of meetings with the Committee. Compensia reported to the Committee and did not perform services for the Company other than for the Committee.
Based on the consideration of the various factors as set forth in the rules of
Nasdaq
, the Committee does not believe that its relationship with Compensia and the work of Compensia on behalf of the Committee has raised any conflict of interest.
Compensation Benchmarking
For the year 2015, in order to determine each officer’s target total annual cash compensation (salary and bonuses) for upcoming periods, the Committee reviewed compensation information from a peer group of 15 companies identified by Compensia, with input from our management. The peer group included companies with market capitalizations and annual revenues similar to ours, and that are in the same high-technology industries in which we compete for executive officer talent. The peer group consisted of the following companies:
Alliance Fiber Optic Products
ANADIGICS
Audience
EMCORE
GSI Technology
GT Advanced Technologies
Intermolecular
Intevac
Molycorp
Oclaro
Pericom Semiconductor
Pixelworks
QuickLogic
Rubicon Technology
Zhone Technologies
Data on the compensation practices of the above
‑mentioned peer group was gathered by Compensia in 2015 through searches of publicly available information, including publicly available databases. The Committee relied upon Compensia to benchmark target cash compensation levels against the above peer group. Peer group data was gathered by Compensia with respect to base salary, bonuses and long term equity incentives. It does not include deferred compensation benefits or generally available benefits, such as 401(k) plans or health care coverage.
Base Salary
Effective August 1, 2015, the annual base salaries for our current named executive officers were established as follows:
|
|
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|
|
|
|
Fiscal 2015
|
|
|
|
Base Salary
|
|
Morris S. Young, Chief Executive Officer
|
|
$
|
410,000
|
|
Gary L. Fischer, Chief Financial Officer and Corporate Secretary
|
|
$
|
275,000
|
|
Robert G. Ochrym, Vice President Business Development, Strategic Sales and Marketing
|
|
$
|
250,000
|
|
In setting Dr. Young’s salary, target bonus and stock option grant, the Committee relied on market
‑competitive pay data from 2015 and the strong belief that the Chief Executive Officer significantly and directly influences our overall performance. The Committee also took into consideration the overall compensation policies discussed above. The fiscal 2015 actual base salaries paid to our named executive officers were as follows:
|
|
|
|
|
|
Fiscal 2015
|
|
|
Salary Paid
|
Morris S. Young, Chief Executive Officer
(1)
|
|
$
|
435,712
|
Gary L. Fischer, Chief Financial Officer and Corporate Secretary
|
|
$
|
259,615
|
Davis Zhang, President China Operations
(2)
|
|
$
|
201,884
|
Robert G. Ochrym, Vice President Business Development, Strategic Sales and Marketing
(3)
|
|
$
|
275,005
|
Hong Q. Hou, Chief Operating Officer
(4)
|
|
$
|
162,154
|
|
(1)
|
|
Includes retro-active payment of salary reduction program.
|
|
(2)
|
|
Includes retro-active payment of salary reduction program. Effective May 15, 2015, Mr. Davis Zhang resigned as President, China Operations of the Company.
|
|
(3)
|
|
Includes retro-active payment of salary reduction program.
|
|
(4)
|
|
On June 29, 2015, the Board appointed Hong Q. Hou, to serve as Chief Operating Officer of the Company. Effective January 8, 2016, Mr. Hong Hou resigned as
Chief Operating Officer
of the Company.
|
For fiscal 2014,
the Committee decreased the salary of each of Dr. Young, Mr. Zhang and Mr. Ochrym by 15% effective March 3, 2014. In March 2015, the Committee awarded the deducted amount to each of these officers in the amount equal to his salary reduction and restored his salary to the previous base.
Key Executive Non-Equity Incentive Plan/Bonus Plan
We maintain an incentive bonus program for key executive officers to encourage and award achievement of our business goals and to assist us in attracting and retaining executives by offering an opportunity to earn a competitive level of compensation (the “Bonus Plan”). Based on these and the objectives described above, the form of the Bonus Plan was initially approved by the Committee for fiscal 2006. Thereafter, the Committee extended operation of the Bonus Plan for fiscal years 2007 to 2015, with revised metrics to reflect the revisions in the operating plans for each fiscal year. In February 2016, the Committee recommended, and the Board approved, the 2016 Executive Incentive Plan (the “Executive Incentive Plan”), which revised and updated the Bonus Plan.
In recommending the Executive Incentive Plan, the Committee confirmed that its philosophy was to use total cash compensation (salary plus cash bonus) to recognize appropriately each individual officer’s scope of responsibility, role in the organization, experience and contributions. The Committee believes that the Executive Incentive Plan appropriately reflects the benchmarking information provided by Compensia.
Cash bonuses are paid quarterly in order to motivate the achievement of our business goals, and are based in part upon achievement of Company financial measures and in part upon individual performance metrics established for each executive officer, including both financial and operating metrics. The Committee intends that bonus payments reward achievement at specified levels of financial and individual performance, with a significant portion of each executive’s goals related to key financial measures.
For fiscal 2015, the shared financial goals applicable to all executive officers under the Bonus Plan included achievement of predetermined revenues, gross profit, operating expense levels, and net income, with 70% of the total target bonus based upon achievement of these shared financial goals. Achievement of target revenue represented 10%, achievement of target gross profit represented 10%, achievement of target operating expenses represented 10% and achievement of net income represented 40%. We use revenue, gross profit, operating expense levels and net income because these four operational metrics focus the executive team on overall business growth and profitability, provide direct “line-of-sight” between decisions and outcomes and are key factors that influence our financial results, and therefore stockholder value. The maximum bonus payable to any executive officer under the Bonus Plan for fiscal 2015 was 120% of the target bonus established for such executive officer.
The remaining 30% of the target bonus for fiscal 2015 was based upon achievement of individual goals
and the performance of the individual executive as measured subjectively by our Chief Executive Officer for each quarter and approved by the Committee. The remaining 30% of the target bonus for fiscal 2015 for our Chief Executive Officer was measured subjectively by the Committee and approved by the Committee.
Bonuses are payable in cash; we do not maintain any program that allows an executive to defer any portion of his salary or bonus, and we do not maintain a deferred compensation plan.
The performance goals and their respective weightings are reviewed periodically and can be changed at the discretion of the Committee in order to better align bonus compensation and goals for our executives with the achievement of Company performance. The Committee believes that the shared financial goals of achievement of revenues, gross profit, operating expense levels and net income were all line items upon which executive performance can have a significant impact and that can show beneficial financial performance improvement and therefore value to stockholders.
In December 2014, the Committee set the bonus formula and performance goals that were used to determine
bonuses, if any, under the Bonus Plan for fiscal 2015. The fiscal 2015 target bonuses were as follows:
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Percentage of Salary of
|
|
Named Executive Officer
|
|
Amount
|
|
Fiscal 2015 Target Bonus
|
|
Morris S. Young
|
|
|
$
|
307,500
|
|
75.0
|
%
|
Gary L. Fischer
|
|
|
$
|
137,500
|
|
50.0
|
%
|
Davis Zhang(1)
|
|
|
$
|
150,000
|
|
50.0
|
%
|
Robert G. Ochrym
|
|
|
$
|
112,500
|
|
45.0
|
%
|
Hong Q. Hou(2)
|
|
|
$
|
224,400
|
|
60.0
|
%
|
|
(1)
|
|
Mr. Davis Zhang resigned as President, China Operations of the Company, effective in May 15, 2015. He was eligible to receive a bonus for the first quarter of 2015 only.
|
|
(2)
|
|
The
Board appointed Hong Q. Hou to serve as Chief Operating Officer of the Company, effective June 29, 2015.
Mr. Hou’s annual bonus target was set at 60% of his annual salary of $374,000, pro-rated based on his start date.
Mr. Hong Hou resigned as
Chief Operating Officer
of the Company,
effective January 8, 2016
.
|
In fiscal 2015, executive officers achieved approximately 33.7% of the target bonus amounts, based on Company and individual performance. The Committee evaluated achievement of individual targets for the executive officers and assigned appropriate multipliers based on such achievement quarterly.
Bonuses were paid quarterly.
Actual bonuses paid to our named executive officers for fiscal 2015 were:
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Salary
|
|
Named Executive Officer
|
|
Amount
|
|
Earned in Fiscal 2015
|
|
Morris S. Young
|
|
$
|
152,772
|
|
35.1
|
%
|
Gary L. Fischer
|
|
$
|
67,511
|
|
26.0
|
%
|
Davis Zhang(1)
|
|
$
|
27,148
|
|
13.4
|
%
|
Robert G. Ochrym
|
|
$
|
45,238
|
|
16.4
|
%
|
Hong Q. Hou(2)
|
|
$
|
21,481
|
|
13.2
|
%
|
|
(1)
|
|
Mr. Davis Zhang resigned as President, China Operations of the Company, effective May 15, 2015. He was eligible to receive a bonus for the first quarter of 2015 only.
|
|
(2)
|
|
The Board appointed Hong Q. Hou to serve as Chief Operating Officer of the Company, effective June 29, 2015.
Mr. Hou’s annual bonus target was set at 60% of his annual salary of $374,000, pro-rated based on his start date.
Mr. Hong Hou resigned as
Chief Operating Officer
of the Company, e
ffective January 8, 2016
|
Determination of Target Bonus Amounts for Fiscal 2016
In February 2016, the Committee recommended, and the Board approved, the Executive Incentive Plan, which revised and updated the Bonus Plan. For fiscal 2016, the Corporate targets are weighted 10% for each of the total revenue target, gross profit target and operating expense target and 30% for the net income target, for a total of 60% of the total bonus, and achievement of the individual targets represents 40% of the total bonus. The Committee made no changes for the target bonus amounts, which are as follows:
|
|
|
|
|
|
Percentage of
|
|
|
|
Salary of Fiscal
|
|
|
|
2016 Target
|
|
Named Executive Officer
|
|
Bonus
|
|
Morris S. Young
|
|
75
|
%
|
Gary L. Fischer
|
|
50
|
%
|
Robert G. Ochrym
|
|
45
|
%
|
Other Bonuses
At its discretion, the Committee may award management bonuses to certain of our named executive officers outside of the Executive Incentive Plan. Further, the Committee may modify the Executive Incentive Plan at its discretion.
Long-Term Incentive Compensation
Historically we have provided long-term incentive compensation through grants of stock options and restricted stock awards that generally vest over multiple years. Our equity compensation program is intended to align the interests of our officers with those of our stockholders by creating an incentive for our officers to maximize stockholder value. The equity compensation program also is designed to encourage our officers to remain employed with us despite a very competitive labor market. The Committee believes that appropriate equity incentives are critical to attracting and retaining the best employees in the industry, and that stock awards can be an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock awards to our performance in the future.
The number of stock awards the Committee grants to each executive officer and the vesting schedule for each grant is determined based on a variety of factors, including the Committee’s goal to increase the proportion of compensation awarded to executive officers as long-term incentive compensation. In 2015 we determined that the value of our equity awards was below the 25
th
percentile of the peer group mentioned above, based on the benchmarking information provided at that time by Compensia.
The Committee typically grants equity awards to executive officers at its regularly scheduled quarterly meetings. All grants of stock options and restricted stock awards or other equity awards to newly
‑hired employees are also made by the Committee at scheduled meetings, unless the Board or the Committee determines that unusual circumstances, such as in the case of retention of an executive officer, directors or other employees, call for consideration of the grant of awards other than at a regular quarterly meeting, in which case consideration of and action with respect to such awards shall take place at a special meeting and not by unanimous written consent. The Committee has not granted, nor does it intend in the future to grant, equity compensation awards to executives in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement. Similarly, the Committee has not timed, nor does it intend in the future to time, the release of material nonpublic information based on equity award grant dates. Further, because equity compensation awards to executive officers typically vest over a three
‑ or four-year period, the value to recipients of any immediate increase in the price of our stock following a grant will be attenuated.
All equity awards approved during scheduled meetings become effective and are priced as of the second trading day after the earnings release for the quarter in which the grants were approved, provided that if public announcement of material information is anticipated, the grant date may be deferred at the discretion of the Board or Committee until the second trading day after release of such information. With respect to grants of incentive stock options, the exercise price of all options granted at regular quarterly meetings shall be the closing price of our common stock on the grant date, as reported by the Nasdaq Global Select Market.
Retirement Benefits under the 401(k) Plan, Executive Perquisites and Generally Available Benefit Programs
We do not maintain a deferred compensation plan, other than our AXT, Inc. Employee Savings and Retirement Plan (the “401(k) Plan”). The 401(k) Plan is available to all full-time U.S. based employees, including named executive officers. Under the 401(k) Plan, participating employees are eligible to receive matching contributions from us that are subject to vesting over time. We also make an annual “reconciling match” designed to more evenly determine the amount of matching contributions that each eligible employee receives. This reconciling match works by recalculating the regular matching contribution as if it were paid on an annualized, instead of payroll-by-payroll, basis. If the annualized matching contribution would have been higher, we contribute a matching contribution equal to the difference between the two. We do not provide defined benefit pension plans or defined contribution retirement plans to our executives or other employees other than the 401(k) Plan.
We also offer a number of other benefits to our US based employees, including the named executive officers, pursuant to benefit programs that provide for broad
‑based employee participation. These benefits programs include medical, dental and vision insurance, long-term and short-term disability insurance, life and accidental death and dismemberment insurance, health and dependent care flexible spending accounts, wellness programs, relocation/expatriate programs and services, educational assistance and certain other benefits.
The 401(k) Plan and other generally available benefit programs allow us to remain competitive for key employees, and we believe that the availability of the benefit programs generally enhances employee productivity and loyalty. The main objectives of our benefits programs are to give our employees access to quality healthcare, assistance
in achieving retirement financial goals and enhanced health and productivity. These generally available benefits typically do not specifically factor into decisions regarding an individual executive’s total compensation or equity award package.
Stock Ownership Guidelines
The Board has not adopted stock ownership guidelines applicable to our executive officers or directors.
Compensation of the Chief Executive Officer
In July 2010, the Committee relied on market-competitive pay data and increased the Chief Executive Officer’s annual salary to $375,000 and set his target bonus at 75% of his salary, both effective August 1, 2010. In addition, Dr. Young was granted an option to purchase 110,000 shares of common stock and 35,000 shares of restricted stock awards on August 2, 2010. In 2011, Dr. Young was granted an option to purchase 90,000 shares of common stock and 30,000 shares of restricted stock awards on October 28, 2011. In 2012, Dr. Young was granted an option to purchase 108,000 shares of common stock on and 36,000 shares of restricted stock awards on November 5, 2012. In 2013, Dr. Young was granted an option to purchase 90,000 shares of common stock on and 30,000 shares of restricted stock awards on November 4, 2013. In March 2014, based on decisions to focus the executives on reducing operating expenses, the Committee reduced Dr. Young’s salary, along with the salaries of other executive officers, by 15% to $329,567. In 2014, Dr. Young was granted an option to purchase 96,000 shares of common stock on and 32,000 shares of restricted stock awards on November 3, 2014. In early 2015, in light of improving operating results, the Committee increased Dr. Young’s salary to $375,000. In July 2015, the Committee relied on market-competitive pay data and increased the Chief Executive Officer’s annual salary to $410,000, effective August 1, 2015. In 2015, Dr. Young was granted an option to purchase 360,000 shares of common stock and received 120,000 shares of restricted stock awards. All of the stock options and restricted stock awards granted are subject to time-based vesting over a four year period.
Accounting and Tax Considerations
In designing our compensation programs, we take into consideration the accounting and tax effect that each element will or may have on us and the executive officers and other employees as a group. We have not provided any executive officer or director with a gross-up or other reimbursement for tax amounts the executive might pay pursuant to Section 280G or Section 409A of the Internal Revenue Code. Section 280G and related Internal Revenue Code sections provide that executive officers, directors who hold significant stockholder interests and certain other service providers could be subject to significant additional taxes if they receive payments or benefits in connection with a change of control that exceeds certain limits, and that we or our successor could lose a deduction on the amounts subject to the additional tax. Section 409A also imposes additional significant taxes in the event that an executive officer, director or service provider receives “deferred compensation” that does not meet the requirements of Section 409A. We structure our equity awards in a manner intended to comply with the applicable Section 409A requirements.
In determining which elements of compensation are to be paid, and how they are weighted, we also take into account whether a particular form of compensation will be considered “performance
‑based” compensation for purposes of Section 162(m) of the Internal Revenue Code. Under Section 162(m), we generally receive a federal income tax deduction for compensation paid to any of our named executive officers only if the compensation is less than $1 million during any fiscal year or is “performance
‑based” under Section 162(m). Our Committee currently intends to continue seeking a tax deduction for all of our executive compensation, to the extent we determine it is in our best interests. All of the stock options granted to our executive officers qualify under Section 162(m) as performance
‑based compensation.
Compensation Committee Report
The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that AXT specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
We, the Compensation Committee of the Board of Directors of AXT, Inc., have reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management. Based on such review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
|
|
|
THE COMPENSATION COMMITTEE
|
|
|
|
|
|
David C. Chang, Chair
|
|
Leonard J. LeBlanc
|
|
Jesse Chen
|
|
|
Summary Compensation Table
The following table sets forth information concerning the compensation earned during the fiscal years ended December 31, 2015, 2014 and 2013, by our current Chief Executive Officer, our Chief Financial Officer, and each of our other executive officers (together, the “named executive officers”):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
All Other
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morris S. Young
|
|
2015
|
|
$
|
435,712
|
(3)
|
$
|
—
|
|
$
|
261,600
|
|
$
|
322,668
|
|
$
|
152,772
|
|
$
|
30,971
|
(4)
|
$
|
1,203,723
|
|
Chief Executive Officer
|
|
2014
|
|
$
|
329,567
|
|
$
|
—
|
|
$
|
79,040
|
|
$
|
116,698
|
|
$
|
200,082
|
|
$
|
29,593
|
(5)
|
$
|
754,980
|
|
|
|
2013
|
|
$
|
375,000
|
|
$
|
—
|
|
$
|
70,800
|
|
$
|
96,543
|
|
$
|
6,435
|
|
$
|
30,134
|
(6)
|
$
|
578,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. Fischer
|
|
2015
|
|
$
|
260,345
|
|
$
|
—
|
|
$
|
71,940
|
|
$
|
88,734
|
|
$
|
67,511
|
|
$
|
15,207
|
(7)
|
$
|
503,737
|
|
Chief Financial Officer and Corporate Secretary
|
|
2014
|
|
$
|
91,346
|
(8)
|
$
|
—
|
|
$
|
9,880
|
|
$
|
231,331
|
|
$
|
49,631
|
|
$
|
5,980
|
(9)
|
$
|
388,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Davis Zhang
|
|
2015
|
|
$
|
201,884
|
(10)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
27,148
|
|
$
|
270,998
|
(11)
|
$
|
500,030
|
|
President, China Operations
|
|
2014
|
|
$
|
263,654
|
|
$
|
—
|
|
$
|
54,340
|
|
$
|
80,230
|
|
$
|
93,771
|
|
$
|
29,933
|
(12)
|
$
|
521,928
|
|
|
|
2013
|
|
$
|
300,000
|
|
$
|
—
|
|
$
|
51,920
|
|
$
|
70,798
|
|
$
|
3,432
|
|
$
|
27,211
|
(13)
|
$
|
453,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert G. Ochrym
|
|
2015
|
|
$
|
275,005
|
(14)
|
$
|
—
|
|
$
|
15,260
|
|
$
|
18,822
|
|
$
|
45,238
|
|
$
|
13,205
|
(15)
|
$
|
367,530
|
|
Vice President, Business Development, Strategic Sales and Marketing
|
|
2014
|
|
$
|
212,241
|
|
$
|
—
|
|
$
|
19,760
|
|
$
|
29,174
|
|
$
|
70,100
|
|
$
|
11,912
|
(16)
|
$
|
343,187
|
|
|
|
2013
|
|
$
|
241,500
|
|
$
|
—
|
|
$
|
18,880
|
|
$
|
25,745
|
|
$
|
2,471
|
|
$
|
13,082
|
(17)
|
$
|
301,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Q. Hou
|
|
2015
|
|
$
|
181,518
|
(18)
|
$
|
—
|
|
$
|
792,800
|
|
$
|
26,889
|
|
$
|
21,481
|
|
$
|
15,212
|
(19)
|
$
|
1,037,900
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Valuation based on the dollar amount recognized for financial statement reporting purposes pursuant to ASC topic 718,
Stock Compensation
(“ASC 718”). Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown are the value of option awards and stock awards calculated based on the grant date fair value as determined pursuant to ASC 718.
|
|
(2)
|
|
Amounts consist of bonuses earned for services rendered in fiscal years 2013 to 2015. Performance
‑based bonuses are generally paid under our Bonus Plan and reported as Non-Equity Incentive Plan Compensation. Includes amounts earned for the fourth quarter of fiscal 2014, but not paid until March 2015.
|
|
(3)
|
|
Includes payment of $55,904, amount equal to Dr. Young’s salary reduction between March 2014 and March 2015, which was approved by the Committee in March 2015.
|
|
(4)
|
|
Includes our matching contribution of $15,538 under the tax-qualified 401(k) Plan, travel allowance of $2,966, and our payment on behalf of Dr. Young of $12,467 in term life insurance premiums.
|
|
(5)
|
|
Includes our matching contribution of $13,183 under the tax-qualified 401(k) Plan, travel allowance of $7,262, and our payment on behalf of Dr. Young of $9,149 in term life insurance premiums.
|
|
(6)
|
|
Includes our matching contribution of $15,000 under the tax-qualified 401(k) Plan, travel allowance of $5,985, and our payment on behalf of Dr. Young of $9,149 in term life insurance premiums.
|
|
(7)
|
|
Includes our matching contribution of $10,385 under the tax-qualified 401(k) Plan, and our payment on behalf of Mr. Fischer of $4,822 in term life insurance premiums.
|
|
(8)
|
|
Mr. Fischer was hired in August 2014 and his annual salary was $250,000.
|
|
(9)
|
|
Includes our matching contribution of $3,077 under the tax-qualified 401(k) Plan, and our payment on behalf of Mr. Fischer of $2,903 in term life insurance premiums.
|
|
(10)
|
|
Mr. Zhang resigned as President, China Operations of the Company, effective May 15, 2015, and his annual salary was $300,000. Includes payment of $44,723, amount equal to Mr. Zhang’s salary reduction between March 2014 and March 2015, which was approved by the Committee in March 2015.
|
|
(11)
|
|
Includes consulting service compensation of $257,134 between May 2015 and November 2015, our matching contribution of $4,846 under the tax-qualified 401(k) Plan, travel allowance of $4,393 and our payment on behalf of Mr. Zhang of $4,625 in term life insurance premiums.
|
|
(12)
|
|
Includes our matching contribution of $10,546 under the tax-qualified 401(k) Plan, travel allowance of $9,276, car allowance of $4,800 and our payment on behalf of Mr. Zhang of $5,311 in term life insurance premiums.
|
|
(13)
|
|
Includes our matching contribution of $12,000 under the tax-qualified 401(k) Plan, travel allowance of $5,100, car allowance of $4,800 and our payment on behalf of Mr. Zhang of $5,311 in term life insurance premiums.
|
|
(14)
|
|
Includes payment of $36,402, amount equal to Mr. Ochrym’s salary reduction between March 2014 and March 2015, which was approved by the Committee in March 2015.
|
|
(15)
|
|
Includes our matching contribution of $9,783 under the tax-qualified 401(k) Plan and our payment on behalf of Mr. Ochrym of $3,422 in term life insurance premiums.
|
|
(16)
|
|
Includes our matching contribution of $8,490 under the tax-qualified 401(k) Plan, and our payment on behalf of Mr. Ochrym of $3,422 in term life insurance premiums.
|
|
(17)
|
|
Includes our matching contribution of $9,660 under the tax-qualified 401(k) Plan, and our payment on behalf of Mr. Ochrym of $3,422 in term life insurance premiums.
|
|
(18)
|
|
The
Board appointed Hong Q. Hou to serve as Chief Operating Officer of the Company, effective June 29, 2015,
and his annual salary was $374,000.
Mr. Hong Hou resigned as
Chief Operating Officer
of the Company, effective January 8, 2016.
|
|
(19)
|
|
Includes travel allowance of $15,000, and our payment on behalf of
Mr.
Hou of $212 in term life insurance premiums.
|
Grants of Plan-Based Awards
The following table sets forth certain information with respect to option awards and other plan-based awards granted to our named executive officers during the fiscal year ended December 31, 2015:
2015 GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option:
|
|
Stock Awards:
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
Number of
|
|
Number of
|
|
Exercise or
|
|
Fair Value of
|
|
|
|
|
|
Non-Equity Incentive Bonus Plan Awards (1)
|
|
Securities
|
|
Shares of
|
|
Base Price
|
|
Stock and
|
|
|
|
Grant
|
|
Threshold
|
|
|
|
|
Maximum
|
|
Underlying
|
|
Stock or
|
|
of Option
|
|
Option
|
|
Name
|
|
Date
|
|
($)
|
|
Target ($)
|
|
($)
|
|
Options (#)
|
|
Units (#)
|
|
Awards ($/Sh)
|
|
Awards ($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morris S. Young
|
|
11/02/15
|
|
|
|
|
|
|
|
|
|
|
360,000
|
|
120,000
|
|
$
|
2.18
|
|
$
|
584,268
|
|
|
|
02/22/16
|
|
$
|
0
|
|
$
|
307,500
|
|
$
|
369,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. Fischer
|
|
11/02/15
|
|
|
|
|
|
|
|
|
|
|
99,000
|
|
33,000
|
|
$
|
2.18
|
|
$
|
160,674
|
|
|
|
02/22/16
|
|
$
|
0
|
|
$
|
137,500
|
|
$
|
165,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Davis Zhang
|
|
11/02/15
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
|
02/22/16
|
|
$
|
0
|
|
$
|
150,000
|
|
$
|
180,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert G. Ochrym
|
|
11/02/15
|
|
|
|
|
|
|
|
|
|
|
21,000
|
|
7,000
|
|
$
|
2.18
|
|
$
|
34,082
|
|
|
|
02/22/16
|
|
$
|
0
|
|
$
|
112,500
|
|
$
|
135,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Q. Hou
|
|
06/29/15
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
$
|
2.57
|
|
$
|
771,000
|
|
|
|
11/02/15
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
10,000
|
|
$
|
2.18
|
|
$
|
48,689
|
|
|
|
02/22/16
|
|
$
|
0
|
|
$
|
224,400
|
|
$
|
269,280
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
We award bonuses pursuant to the Bonus Plan, which provides for the award of annual cash bonuses based upon threshold, target and maximum payout amounts set by the Board at the beginning of each fiscal year. See “Compensation Discussion and Analysis—Plan-Based Awards.” The actual amount paid to each named executive officer for the fiscal year ended December 31, 2015 is set forth in the Summary Compensation Table under the heading, “Non-Equity Incentive Bonus Plan Compensation.”
|
|
(2)
|
|
The value of an option or stock award is based on the fair value as of the grant date of such award determined pursuant to ASC topic 718,
Stock Compensation
(“ASC 718”),
excluding the impact of estimated forfeitures related to service-based vesting conditions
. The exercise price for all options granted to the named executive officers is 100% of the fair market value of the shares on the grant date. The option exercise price has not been deducted from the amounts indicated above. Regardless of the value placed on a stock option on the grant date, the actual value of the option will depend on the market value of our common stock at such date in the future when the option is exercised. The proceeds to be paid to the individual following this exercise do not include the option exercise price.
|
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to the value of all unexercised options previously awarded to our named executive officers as of December 31, 2015.
OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
|
Name
|
|
Grant Date(1)
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
|
|
Date
|
|
Vested(#)
|
|
Vested($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morris S. Young
|
|
07/16/2009
|
|
212,896
|
|
—
|
|
$
|
1.59
|
|
07/16/19
|
|
—
|
|
|
—
|
|
|
|
08/02/2010
|
|
110,000
|
|
—
|
|
$
|
5.83
|
|
08/02/20
|
|
—
|
|
|
—
|
|
|
|
10/28/2011
|
|
90,000
|
|
—
|
|
$
|
4.79
|
|
10/28/21
|
|
—
|
|
|
—
|
|
|
|
11/05/2012
|
|
83,250
|
|
24,750
|
|
$
|
2.91
|
|
11/05/22
|
|
—
|
|
|
—
|
|
|
|
11/04/2013
|
|
46,875
|
|
43,125
|
|
$
|
2.36
|
|
11/04/23
|
|
—
|
|
|
—
|
|
|
|
11/03/2014
|
|
26,000
|
|
70,000
|
|
$
|
2.47
|
|
11/03/24
|
|
—
|
|
|
—
|
|
|
|
11/02/2015
|
|
—
|
|
360,000
|
|
$
|
2.18
|
|
11/02/25
|
|
—
|
|
|
—
|
|
|
|
11/05/2012
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
9,000
|
|
$
|
22,320
|
|
|
|
11/04/2013
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
15,000
|
|
$
|
37,200
|
|
|
|
11/03/2014
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
24,000
|
|
$
|
59,520
|
|
|
|
11/02/2015
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
120,000
|
|
$
|
297,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. Fischer
|
|
06/02/2014
|
|
75,000
|
|
125,000
|
|
$
|
2.29
|
|
06/02/24
|
|
—
|
|
|
—
|
|
|
|
11/03/2014
|
|
3,250
|
|
8,750
|
|
$
|
2.47
|
|
11/03/24
|
|
—
|
|
|
—
|
|
|
|
11/02/2015
|
|
—
|
|
99,000
|
|
$
|
2.18
|
|
11/02/25
|
|
—
|
|
|
—
|
|
|
|
11/03/2014
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
3,000
|
|
$
|
7,440
|
|
|
|
11/02/2015
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
33,000
|
|
$
|
81,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert G. Ochrym
|
|
10/22/2007
|
|
431
|
|
—
|
|
$
|
6.31
|
|
10/22/17
|
|
—
|
|
|
—
|
|
|
|
10/26/2009
|
|
28,125
|
|
—
|
|
$
|
2.04
|
|
10/26/19
|
|
—
|
|
|
—
|
|
|
|
08/02/2010
|
|
33,000
|
|
—
|
|
$
|
5.83
|
|
08/02/20
|
|
—
|
|
|
—
|
|
|
|
10/28/2011
|
|
30,000
|
|
—
|
|
$
|
4.79
|
|
10/28/21
|
|
—
|
|
|
—
|
|
|
|
11/05/2012
|
|
25,438
|
|
7,562
|
|
$
|
2.91
|
|
11/05/22
|
|
—
|
|
|
—
|
|
|
|
11/04/2013
|
|
12,500
|
|
11,500
|
|
$
|
2.36
|
|
11/04/23
|
|
—
|
|
|
—
|
|
|
|
11/03/2014
|
|
6,500
|
|
17,500
|
|
$
|
2.47
|
|
11/03/24
|
|
—
|
|
|
—
|
|
|
|
11/02/2015
|
|
—
|
|
21,000
|
|
$
|
2.18
|
|
11/02/25
|
|
—
|
|
|
—
|
|
|
|
11/05/2012
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2,750
|
|
$
|
6,820
|
|
|
|
11/04/2013
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
4,000
|
|
$
|
9,920
|
|
|
|
11/03/2014
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
6,000
|
|
$
|
14,880
|
|
|
|
11/02/2015
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
7,000
|
|
$
|
17,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Q. Hou
|
|
11/02/2015
|
|
—
|
|
30,000
|
|
$
|
2.18
|
|
11/02/25
|
|
—
|
|
|
—
|
|
|
|
06/29/2015
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
196,875
|
|
$
|
488,250
|
|
|
|
11/02/2015
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
10,000
|
|
$
|
24,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Except as otherwise noted, all options awards granted to named executive officers vest at the rate of
1
/
4
of the underlying shares on the first anniversary of the date of grant and
1
/
48
of the shares each month thereafter. After four years, the shares become fully vested and exercisable.
Restricted stock awards granted to named executive officers vest over a four-year period, at a rate of 25% on the each anniversary of the vesting commencement date.
|
|
(2)
|
|
The market value of the restricted stock awards that have not vested is calculated by multiplying the number of units that have not vested by the closing price of our common stock at December 31, 2015, which was $2.48.
|
Option Exercises and Stock Vested During Last Fiscal Year
The following table shows all stock options exercised and value realized upon exercise, and the number of shares acquired on vesting and the value realized on vesting by the named executive officers during the fiscal year ended December 31, 2015:
OPTION EXERCISES AND STOCK VESTED FOR FISCAL 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Restricted Stock
|
|
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
Value Realized
|
|
Shares
|
|
Value Realized
|
|
|
|
Acquired on
|
|
on Exercise
|
|
Acquired on
|
|
on Vesting
|
|
Name
|
|
Exercise (#)
|
|
($)(1)
|
|
Vesting (#)
|
|
($)(2)
|
|
Morris S. Young
|
|
50,000
|
|
$
|
66,500
|
|
32,000
|
|
$
|
71,665
|
|
Davis Zhang
|
|
50,000
|
|
$
|
40,500
|
|
26,609
|
|
$
|
59,546
|
|
Robert G. Ochrym
|
|
—
|
|
|
—
|
|
9,250
|
|
$
|
20,730
|
|
Hong Q. Hou
|
|
—
|
|
|
—
|
|
103,125
|
|
$
|
263,063
|
|
|
(1)
|
|
Based on the difference between the market price of our common stock on the date of exercise and the exercise price.
|
|
(2)
|
|
Reflects the market price of our common stock on the vesting date.
|
Potential Payments upon Termination or Change in Control
Acceleration of Stock Options
Stock option grants were made to employees under our 1997 Stock Option Plan (the “1997 Plan”) pursuant to a standard form of stock option agreement. The standard form of stock option agreement provided that in the event of a “change in control,” as defined therein, and termination of employment or resignation for “good reason” as defined therein, within twelve months after the change in control, the vesting and exercisability of the option will accelerate such that the option will become immediately exercisable and vested in full as of the date of termination or resignation. Options granted to all of our employees from 2002 until the adoption of our 2007 Equity Incentive Plan (the “2007 Plan”), including options granted to our named executive officers and directors, include these provisions which provide for acceleration in full upon a change of control event in which the employee is terminated or constructively dismissed within 12 months after the change in control. Options granted to our directors accelerate in full upon the change in control event, whether or not there is a termination of their service to the Company. All options so accelerated remain exercisable for the earlier of the term of the option or six months after the effective date of the termination.
The following are the applicable definitions under the 1997 Plan:
A
“Change in Control”
shall mean an event or a series of related events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of our voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
An
“Ownership Change Event”
shall be deemed to have occurred if any of the following occurs with respect to the Company:
|
·
|
|
the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company;
|
|
·
|
|
a merger or consolidation in which the Company is a party;
|
|
·
|
|
the sale, exchange, or transfer of all or substantially all of the assets of the Company; or
|
|
·
|
|
a liquidation or dissolution of the Company.
|
“Termination After Change in Control”
shall mean any of the following events occurring within twelve (12) months after a Change in Control:
|
·
|
|
termination by the Participating Company Group of the Optionee’s Service with the Participating Company Group for any reason other than for Cause (as defined below); or
|
|
·
|
|
the Optionee’s resignation for Good Reason (as defined below) from all capacities in which the Optionee is then rendering Service to the Participating Company Group within a reasonable period of time following the event constituting Good Reason.
|
|
·
|
|
Notwithstanding any provision herein to the contrary, Termination After Change in Control shall not include any termination of the Optionee’s Service with the Participating Company Group which (1) is for Cause (as defined below); (2) is a result of the Optionee’s death or disability; (3) is a result of the Optionee’s voluntary termination of Service other than for Good Reason; or (4) occurs prior to the effectiveness of a Change in Control.
|
“Cause”
shall mean any of the following: (i) the Optionee’s theft, dishonesty, or falsification of any Participating Company documents or records; (ii) the Optionee’s improper use or disclosure of a Participating Company’s confidential or proprietary information; (iii) any action by the Optionee which has a detrimental effect on a Participating Company’s reputation or business; (iv) the Optionee’s failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability; (v) any material breach by the Optionee of any employment agreement between the Optionee and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vi) the Optionee’s conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs the Optionee’s ability to perform his or her duties with a Participating Company.
“Good Reason”
shall mean any one or more of the following:
|
·
|
|
without the Optionee’s express written consent, the assignment to the Optionee of any duties, or any limitation of the Optionee’s responsibilities, substantially inconsistent with the Optionee’s positions, duties, responsibilities and status with the Participating Company Group immediately prior to the date of the Change in Control;
|
|
·
|
|
without the Optionee’s express written consent, the relocation of the principal place of the Optionee’s Service to a location that is more than thirty (30) miles from the Optionee’s principal place of Service immediately prior to the date of the Change in Control, or the imposition of travel requirements substantially more demanding of the Optionee than such travel requirements existing immediately prior to the date of the Change in Control; or
|
|
·
|
|
any failure by the Participating Company Group to pay, or any material reduction by the Participating Company Group of, (1) the Optionee’s base salary in effect immediately prior to the date of the Change in Control by more than 15% (unless reductions comparable in amount and duration are concurrently made for all other employees of the Participating Company Group with responsibilities, organizational level and title comparable to the Optionee’s), or (2) the Optionee’s bonus compensation, if any, in effect immediately prior to the date of the Change in Control (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned by the Optionee).
|
Stock option grants and restricted stock awards made to our named executive officers and directors under our 2007 Plan provide that in the event of a “Change in Control,” as defined therein, the vesting and exercisability of the option will accelerate such that the option will become immediately exercisable and vested in full as of the date of termination or resignation.
Under the 2007 Plan, a “
Change in Control
” is defined as any of the following:
|
·
|
|
any person becomes the direct or indirect beneficial owner of more than 50% of the voting power of our stock;
|
|
·
|
|
any one or related series of the following in which the stockholders immediately before the transaction do not retain immediately after the transaction direct or indirect beneficial ownership of more than 50% of our voting securities, our successor or the entity to which our assets were transferred;
|
|
·
|
|
the sale or exchange by the stockholders of more than 50% of our voting stock or a merger to which we are a party; or
|
|
·
|
|
the sale of all or substantially all of our assets.
|
Under our
2015 Equity Incentive Plan (the “2015 Plan”),
in
the event of a merger or our “change in control” (as defined in the 2015 Plan), the administrator of the 2015 Plan (the “Administrator”) will have authority to determine the treatment of outstanding awards, including, without limitation, that awards be assumed or substituted by the successor corporation or a parent or subsidiary of the successor corporation. The Administrator will not be required to treat all outstanding awards similarly.
If the successor corporation does not assume or substitute outstanding awards, then options and stock appreciation rights will become fully vested and exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to awards with performance-based vesting, unless determined otherwise by the Administrator, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met. In addition, if an option or stock appreciation right is not assumed or substituted for in the event of a change in control, the Administrator will notify the participant that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.
If the successor corporation assumes or substitutes outstanding awards held by a non-employee director and the non-employee director’s status as a director of the Company or a director of the successor company terminates other than upon voluntary resignation by the non-employee director (unless such resignation is at the request of the acquirer), then his or her options and stock appreciation rights will fully vest and become immediately exercisable, all restrictions on restricted stock and restricted stock units held by such non-employee director will lapse, and all performance goals or other vesting requirements will be deemed achieved at 100% and all other terms and conditions met.
If we had been the subject of a change in control that resulted in the termination of employment or resignation for good reason of any of our executive officers or a merger or change in control
in which the successor corporation did not assume or substitute outstanding awards
as of December 31, 2015, the last business day of our fiscal 2015, the number of options to purchase our common stock and restricted shares held by each executive officer as indicated below would have accelerated and become immediately exercisable and vested in full as of such date. In addition, based on the difference between the weighted average exercise price of the options and $2.48, the closing price of our common stock on December 31, 2015, the net value of these options and of unvested restricted shares would be as set forth below:
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Options/Shares
|
|
Value of Accelerated
|
|
Name
|
|
Accelerated
|
|
Options/Shares(1)
|
|
Morris S. Young
|
|
665,875
|
|
$
|
530,515
|
|
Gary L. Fischer
|
|
268,750
|
|
$
|
142,818
|
|
Robert G. Ochrym
|
|
77,312
|
|
$
|
56,835
|
|
Hong Q. Hou
|
|
236,875
|
|
$
|
522,050
|
|
|
(1)
|
|
Based on a common stock price of $2.48 per share, the closing price of our common stock on the Nasdaq Global Select Market on December 31, 2015, less the applicable exercise price for each in-the-money option for which vesting is accelerated. In this calculation, restricted stock awards are valued at $2.48.
|
Young Employment Contract
On December 4, 2012, we entered into an amended and restated employment offer letter with Dr. Morris Young, Chief Executive Officer.
In the event that Dr. Young is terminated without cause, we shall pay Dr. Young an amount equal to twelve (12) months of his then current salary and reimbursement of twenty-four (24) months of health benefits.
Alternatively, if, after a Change of Control (as defined below), Dr. Young’s employment is terminated by us without cause or by Dr. Young as a result of a defined constructive termination, and provided that Dr. Young executes a general release of claims in a form acceptable to AXT or the acquiring company, Dr. Young
will receive the following severance benefits: (a) continuing payment of his last base salary for eighteen (18) months after the date his employment terminates; (b) provided he timely elects to continue his health insurance benefits under the applicable COBRA laws, the Company will reimburse him for the premiums necessary to maintain his health insurance coverage for a period of twenty-four (24) months following termination of his employment; and (c)
full vesting acceleration and exercisability of his outstanding equity awards.
Further, notwithstanding any provision to the contrary contained in any plan or agreement evidencing the options held by Dr. Young, in the event of a Change of Control in which the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the
“
Acquiror
”
), does not assume the Company’s rights and obligations under the then-outstanding portion of options held by Dr. Young or substitute for such portion of such options substantially equivalent options for the Acquiror’s stock, then the vesting and exercisability of such options shall be accelerated in full effective as of the date ten (10) days prior to but conditioned upon the consummation of the Change of Control, provided that Dr. Young remains an employee or other service provider with the Company immediately prior to the Change of Control. Except as set forth above, the treatment of stock-based compensation upon the consummation of a Change of Control shall be determined in accordance with the terms of the plans or agreements providing for such awards or options.
For purposes of Dr. Young’s employment agreement, a “Change of Control” means a merger, consolidation, sale of substantially all assets of the Company or transfer of beneficial ownership (as determined pursuant to Rule 13d-3 under the Exchange Act) of outstanding shares of the capital stock of the Company by 1 (one) or more shareholders of the Company, in which the shareholders of the Company immediately prior to such merger, consolidation, sale or transfer do not own at least 50% (fifty percent) of the combined voting power of the capital stock of the Company or surviving or successor corporation or entity immediately after such transaction.
In addition, in the event of a change in control, if Dr. Young’s employment is terminated or he resigns for “good reason” within twelve months after the change in control or
a merger or change in control
in which the successor corporation did not assume or substitute outstanding awards
, then Dr. Young’s stock options will become immediately exercisable and vested as of the date of termination or resignation. See “Acceleration of Stock Options” above.
If we had terminated Dr. Young’s employment without cause and not as a result of a Change of Control on December 31, 2015, the last business day of our fiscal 2015, Dr. Young would have received severance benefits under his employment agreement equal to (a) a payment of $410,000, equal to twelve (12) months of his current base salary, and (b) reimbursement of twenty-four (24) months of health benefits of $24,618.
Ochrym Employment Contract
On October 26, 2009, we entered into an employment agreement with Mr. Robert Ochrym, our Vice President Business Development, Strategic Sales and Marketing. In the event that Mr. Ochrym is terminated without cause, we shall pay Mr. Ochrym an amount limited to the payment of his salary and other earned compensation through the effective date of termination in addition to any severance to which he may be entitled under our severance pay plan or policy or may be granted by the Compensation Committee.
If a change in control of AXT takes place, and within twelve (12) months thereafter, Mr. Ochrym incurs an involuntary separation from service (within the meaning of Treas. Reg. § 1.409A-1(n)), our total liability to Mr. Ochrym will be limited to the payment of his salary and other earned compensation through the effective date of the involuntary separation from service plus severance in a gross amount equal to one (1) year of his then current annual salary, plus continuation of coverage in our group health plan for twelve months and acceleration of stock options and any other equity awards.
Fischer Employment Contract
On August 11, 2014, we entered into an employment agreement with Mr. Gary L. Fischer, our Vice President and Chief Financial Officer. In the event that Mr. Fischer is terminated without cause, we shall pay Mr. Fischer an amount limited to the payment of his salary and other earned compensation through the effective date of termination in addition to any severance to which he may be entitled under our severance pay plan or policy or may be granted by the Compensation Committee.
If a change in control of AXT takes place, and within twelve (12) months thereafter, Mr. Fischer incurs an involuntary separation from service (within the meaning of Treas. Reg. § 1.409A-1(n)), our total liability to Mr. Fischer will be limited to the payment of his salary and other earned compensation through the effective date of the involuntary separation from service plus severance in a gross amount equal to one (1) year of his then current annual salary, plus continuation of coverage in the our group health plan for twelve months and acceleration of stock options and any other equity awards.
Release of Claims
As a condition to each executive’s entitlement to receive the base salary amounts and equity award acceleration referenced in the tables on page 17 and page 29, respectively, the executive is required to execute a release of claims against us, which may include a non-competition agreement, which prohibits the executive from working in the our industry for a period equal to the greater of one year from the executive’s termination of employment, or, in the case of a change in control, two years from the date of the change in control.