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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 (Amendment No.          )

 

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NOTICE OF
2011 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2011

To our Stockholders:

        You are cordially invited to attend the 2011 Annual Meeting of Stockholders of Accuray Incorporated, a Delaware corporation, which will be held at the offices of Gibson, Dunn & Crutcher, LLP, located at 1881 Page Mill Road, Palo Alto, California 94304 on Friday, November 18, 2011 at 9:00 am PST. We are holding the annual meeting for the following purposes:

1.

to elect three Class II directors named in the proxy statement to hold office until our 2014 Annual Meeting of Stockholders, or until their respective successors have been duly elected or appointed;



2.

to approve the performance measures available under the Accuray Incorporated 2007 Incentive Award Plan;



3.

to hold an advisory vote on the compensation of our named executive officers;



4.

to hold an advisory vote on how frequently (every one, two or three years) you prefer we conduct an advisory vote of stockholders on the compensation of our named executive officers;



5.

to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2012; and



6.

to transact any other business as may properly come before the meeting, including any motion to adjourn to a later date to permit further solicitation of proxies, if necessary, or any adjournment or postponement of the meeting.

        These items of business to be transacted at the meeting are more fully described in the Proxy Statement.

        The annual meeting will begin promptly at 9:00 a.m. PST and check-in will begin at 8:30 a.m. PST. Only holders of record and beneficial owners of shares of our common stock at the close of business on September 22, 2011, the record date, are entitled to notice of, to attend and to vote at the annual meeting and any adjournments or postponements of the annual meeting. If a beneficial owners wishes to vote in person at the meeting, you must obtain a "legal proxy" from the broker, trustee or other nominee that holds your shares, giving you the right to vote your shares at the meeting.

        We are pleased to again be using the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders primarily over the Internet. We believe that this process should expedite stockholders' receipt of proxy materials, lower the costs of our annual meeting and help to conserve natural resources. On October 6, 2011, we mailed our stockholders a notice containing instructions on how to access our 2011 Proxy Statement (the "Proxy Statement") and 2011 Annual Report (the "Annual Report") and vote online. The notice also included instructions on how to receive a paper copy of your annual meeting materials, including the notice of annual meeting, Proxy Statement and proxy card. If you received your annual meeting materials by mail, the notice of annual meeting, Proxy Statement and proxy card were enclosed. If you received your annual meeting

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materials via e-mail, the e-mail contained voting instructions and links to the Annual Report and the Proxy Statement on the Internet, which are both available at https://materials.proxyvote.com/004397.

        For a period of at least 10 days prior to the annual meeting, a complete list of stockholders entitled to vote at the annual meeting will be available and open to the examination of any stockholder for any purpose germane to the annual meeting during normal business hours at our principal executive offices.

        All stockholders are cordially invited to attend the annual meeting in person. Even if you plan to attend the annual meeting, please cast your vote as instructed in the Notice of Internet Availability of Proxy Materials as promptly as possible. If you choose to receive paper copies of your proxy materials, including the proxy card, please complete, sign and date the proxy card and return it promptly in the postage-paid return envelope in order to ensure that your vote will be counted if you later decide not to, or are unable to, attend the annual meeting. Even if you have given your proxy, you may still attend and vote in person at the meeting.

By order of the Board of Directors,

Euan S. Thomson, Ph.D.
President and Chief Executive Officer

Sunnyvale, California
October 6, 2011

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PROXY STATEMENT FOR
ACCURAY INCORPORATED
2011 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2011

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        This Proxy Statement is furnished to our stockholders of record as of September 22, 2011, the record date, in connection with the solicitation of proxies by our Board of Directors for use at our 2011 Annual Meeting of stockholders, to be held at the offices of Gibson, Dunn & Crutcher, LLP, located at 1881 Page Mill Road, Palo Alto, California 94304 on Friday November 18, 2011 at 9:00 a.m. PST. The address of our principal executive office is 1310 Chesapeake Terrace, Sunnyvale, California 94089. This Proxy Statement and the proxy card, together with a copy of our Annual Report on Form 10-K for our fiscal year ended June 30, 2011, is first being made available to our stockholders on or about October 6, 2011. Our Company's fiscal year ended on June 30, 2011.

QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION
AND VOTING AT THE ANNUAL MEETING

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PROPOSAL ONE—ELECTION OF DIRECTORS

Classes of our Board of Directors

        Our Amended and Restated Certificate of Incorporation provides that our Board of Directors shall be divided into three classes, designated as Class I, Class II and Class III, respectively, with the classes of directors serving for staggered three-year terms. Our Board of Directors currently consists of eight directors, with two directors in Class I, and three directors in each of Classes II and III. Proxies cannot be voted for more than three persons.

        The names of each continuing member of our Board of Directors, including each nominee for election to our Board of Directors, the classes in which they serve, their ages as of July 31, 2011, principal occupation and length of service on our Board of Directors, are as follows:

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Director Nominees

        Our Board of Directors has nominated Louis J. Lavigne, Jr., Dennis L. Winger and Jack Goldstein, Ph.D. for election, as Class II directors. Each nominee for director has consented to being named in this Proxy Statement and has indicated a willingness to serve if elected. Although we do not anticipate that any nominee will be unavailable for election, if a nominee is unavailable for election, the persons named as proxyholders will use their discretion to vote for any substitute nominee in accordance with their best judgment as they deem advisable. Listed below are the biographies of each director nominee. The biographies include information regarding each nominee's service as a director of the Company, business experience and principal occupations for at least the past five years, director positions at public companies held currently or at any time during the past five years, and the experiences, qualifications, attributes or skills that led the Nominating and Corporate Governance Committee to recommend, and the Board to determine, that the person should serve as a director for the Company.

        Louis J. Lavigne, Jr. has served as a member of our Board of Directors since September 2009 and as the Chairperson of our Board of Directors since April 2010. Mr. Lavigne has served as an independent management consultant specializing in the areas of corporate finance, accounting and strategy since 2005. From 1983 to 2005, Mr. Lavigne served in various executive capacities with Genentech, Inc., a healthcare company, namely, Executive Vice President and Chief Financial Officer from 1997 to 2005; Senior Vice President and Chief Financial Officer from 1994 to 1997; Vice President and Chief Financial Officer from 1988 to 1994; Vice President from 1986 to 1988; and Controller from 1983 to 1986. Mr. Lavigne has also served on the boards of directors of Allergan, Inc., a technology-driven, global health care company that provides specialty pharmaceutical products worldwide since 2005 and BMC Software, Inc., an independent systems software vendor that specializes in software solutions that allow companies to manage their information technology infrastructure from a business perspective since 2008, and he previously served on BMC Software's board of directors from 2004 to 2007. Mr. Lavigne also currently serves as a member of the board of directors of SafeNet, Inc., a private information security company. Within the past five years, Mr. Lavigne also served as a director of the following public companies: Arena Pharmaceuticals, Inc., Equinix, Inc. and Kyphon, Inc, as well as private companies Emphasis Search, Inc. and Life Masters Supported Self Care. Mr. Lavigne also serves as a faculty member of Babson College's Bio-Pharma: Mastering the business of Science Program and as a Trustee of Babson College (and Babson Global) and of the California Institute of Technology (CalTech) and of the Seven Hills School. Mr. Lavigne holds a B.S. in Finance from Babson College in Babson Park, Massachusetts, and an M.B.A. from Temple University in Philadelphia, Pennsylvania.

        As a former Chief Financial Officer of a large, complex publicly traded company in the healthcare industry, and a current and former member of several public company boards, Mr. Lavigne brings to our Board extensive experience in business operations and management, strategy, finance, accounting and public company governance.

        Dennis L. Winger has served as a member of our Board of Directors since September 2009. Mr. Winger most recently served as Senior Vice President and Chief Financial Officer of Applied Biosystems, Inc. from 1997 to 2008. Mr. Winger has also served on the boards of directors of Cephalon, Inc., a drug developer and seller, with activities focusing on central nervous system disorders since 2003; Vertex Pharmaceuticals, a company that discovers, develops and markets small molecule drugs that address viruses, cancer and autoimmune, inflammatory and neurological diseases since 2009; and Nektar Therapeutics, a biopharmaceutical company, since 2009. In the last five years, Mr. Winger also served as a director of Cell Genesys, Inc. and A.P. Pharma Inc. Mr. Winger also serves on the Board of Trustees of Siena College. Mr. Winger holds a B.A. in History from Siena College in Loudonville, New York and an M.B.A. from Columbia University in New York, New York.

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        As a former Chief Financial Officer of multiple publicly traded life sciences companies, and a member of multiple public company boards, Mr. Winger has extensive experience in finance, accounting, operations, strategy, and public company governance.

        Jack Goldstein, Ph.D., has served as a member of our Board of Directors since May 2010. Dr. Goldstein has been an independent consultant since 2006 specializing in human medical diagnostics, biopharmaceuticals and medical devices. He served as President and Chief Operating Officer of Chiron Corporation from 2004 until its acquisition by Novartis in 2006, and from 2002 to 2004 he served as President of Chiron's Blood Testing Division. From 2000 to 2002, he was a general partner at Windamere Venture Partners, a private venture capital investment fund. From 1997 to 2001, he served as President and Chief Executive Officer at Applied Imaging Corporation, and from 1999 until 2002, he also served as Chairman of the Board of Applied Imaging. From 1986 to 1997, Dr. Goldstein served in various executive positions at Johnson & Johnson, including President of Ortho Diagnostic Systems and Executive Vice President of Professional Diagnostics. Dr. Goldstein also serves as Chairman of the Board of Directors of OncoGenex Pharmaceuticals, Inc. In the past five years, Dr. Goldstein has also served on the following public company boards of directors: Applied Imaging Corporation, Immucor, Illumina, Inc. and Orasure Technologies, Inc. Dr. Goldstein holds a B.A. in biology from Rider University and an M.S. in immunology and a Ph.D. in microbiology from St. John's University.

        As a former executive of several life sciences companies and member of other health care industry public company boards, Dr. Goldstein has extensive industry experience in management, strategy, operations, business development, and capital equipment sales and marketing. Dr. Goldstein also has relevant scientific, research and development and manufacturing expertise.

        If elected, Messrs. Lavigne and Winger and Dr. Goldstein will hold office as Class II directors until our annual meeting of stockholders to be held in 2014, or until their earlier resignation or removal.

How votes are counted

        Stockholders are not entitled to cumulate their votes in the election of directors or with respect to any matter submitted to a vote of the stockholders. The election of directors requires the affirmative vote of a majority of the votes cast for or against the proposal. You may vote either "FOR" or "AGAINST" each director nominee or you may abstain. A properly executed proxy marked "ABSTAIN" with respect to any director will be counted for purposes of determining whether there is a quorum, but it will not be counted for purposes of determining the number of votes cast with respect to the election of such a director, and thus it will not have the same effect as a vote against the proposal.

Board of Directors' Recommendation

        OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE THREE NOMINEES FOR CLASS II DIRECTOR LISTED ABOVE.

Directors Whose Terms Extend Beyond the 2011 Annual Meeting

        Listed below are the biographies of each of our Class I and Class III directors. The biographies include information regarding each director's service as a director of the Company, business experience and principal occupations for at least the past five years, director positions at public companies held currently or at any time during the past five years, and the experiences, qualifications, attributes or skills that led the Nominating and Corporate Governance Committee to recommend, and the Board to determine, that the person should serve as a director for the Company. There are no family relationships among any of our directors or executive officers.

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        Elizabeth Dávila has served as a member of our Board of Directors since February 2008 and as Vice Chairperson of our Board of Directors since September 2008. Ms. Dávila was the former Chairman and Chief Executive Officer of VISX, Incorporated ("VISX"), a manufacturer of laser vision correction systems, which was acquired by Advanced Medical Optics in May 2005. Prior to becoming Chairman and Chief Executive Officer of VISX in 2001, she served as President and Chief Operating Officer of VISX from 1999 to 2001 and as Executive Vice President and Chief Operating Officer from 1995 to 1999. Ms. Dávila currently serves as a member of the board of directors of NuGEN Technologies, Inc., a private company that develops and commercializes rapid, high-sensitivity and high-throughput amplification and labeling systems for genomic analysis, and Afaxys, Inc., a private company that supplies family planning providers with pharmaceuticals and supplies. Within the last five years, Ms. Dávila also served on the public company boards of directors of Advanced Medical Optics, Inc. (now Abbott Medical Optics) and Cholestech Corp., medical device companies that were acquired in 2009 and 2007, respectively. Ms. Dávila holds a B.S. in Chemistry from St. Mary's College in Notre Dame, Indiana, an M.S. in Chemistry from the University of Notre Dame in Notre Dame, Indiana, and an M.B.A. from Stanford University in Stanford, California.

        As a former Chief Executive Officer of VISX and a member and former member of several public and private company boards, Ms. Dávila has extensive healthcare industry experience in management, business development, operations, strategy and capital equipment sales.

        Peter S. Fine has served as a member of our Board of Directors since June 2010. Since November 2000, Mr. Fine has served as President and Chief Executive Officer and a member of the board of directors of Phoenix-based Banner Health, a nonprofit hospital system. From 1997 until 2000, he served as Executive Vice President and Chief Operating Officer of Milwaukee-based Aurora Healthcare, a large integrated system serving all of eastern Wisconsin, and from 1993 until 1997 he served Aurora as President of West Allis Memorial Hospital. Prior to joining Aurora, he served in several hospital leadership positions, including President and Chief Executive Officer of Grant Hospital of Chicago from 1991 to 1993, Senior Vice President of Operations at Northwestern Memorial Corporation from 1987 to 1991, President of Northwestern Healthcare Corporation from 1985 to 1987, and assistant administrator of Porter Memorial Hospital in Valparaiso, Indiana from 1978 to 1985. Mr. Fine is a fellow in the American College of Healthcare Executives and previously served as a member of its Board of Governors. He is also a member of the American Hospital Association, Health Management Academy, Greater Phoenix Leadership, Business Coalition Leadership Council, and serves on the boards of directors of the Translational Genomics Research Institute and the Heard Museum. He served on the board of directors of Premier, Inc. from 2003 to 2009. In addition, Mr. Fine was appointed to the Arizona Commission on Medical Education and Research and has served on the Citizen's Task Force on the Maricopa County Health Care System and the Citizen's Finance Review Commission for the state of Arizona. Mr. Fine holds a B.A. in general studies from Ohio University and an M.A. degree in healthcare administration from George Washington University.

        As Chief Executive Officer of a hospital system, Mr. Fine brings to our Board extensive experience in the healthcare industry with insurance reimbursement, regulatory matters, strategy and finance.

        Euan S. Thomson, Ph.D. has served as our Chief Executive Officer and a member of our Board of Directors since March 2002 and as our President since October 2002. Dr. Thomson also serves on the board of directors of Hospice of the Valley, a hospice facility serving individuals with life-limiting illnesses. Prior to joining our Company, Dr. Thomson served as Chief Executive Officer of Photoelectron Corporation, a medical device company, and held various positions as a medical physicist and manager within the United Kingdom National Health Service. He also previously worked as a consultant for other medical device companies, including Varian Oncology Systems and Radionics, Inc. Dr. Thomson holds a B.S. in Physics, an M.S. in Radiation Physics and a Ph.D. in Physics, with an emphasis on stereotactic brain radiotherapy, each from the University of London, United Kingdom.

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        As President and Chief Executive Officer of Accuray, Dr. Thomson brings to our Board healthcare industry expertise, extensive experience in management, strategy, leadership, reimbursement, and an understanding of the Company's technology and user base. In addition, Dr. Thomson has academic training as a medical physicist and research scientist.

        Robert S. Weiss has served as a member of our Board of Directors since January 2007. Since November 2007, Mr. Weiss has served as the Chief Executive Officer of The Cooper Companies, Inc. ("Cooper"), a global specialty medical products company. He was also given the title of President of Cooper in March 2008. Mr. Weiss has served in various senior executive management positions with Cooper since 1989. From January 2005 through October 2007, Mr. Weiss served as the Executive Vice President and Chief Operating Officer of Cooper, and from March 2007 to March 2008, he also served as President of CooperVision, Cooper's contact lens subsidiary. Prior to that, he served as Cooper's Chief Financial Officer from September 1989 to January 2005 and held the additional title of Executive Vice President from October 1995 until November 2007. From March 1984 until October 1995 he served at Cooper in various other roles, including Senior Vice President, Vice President and Corporate Controller. Mr. Weiss has also served on the board of directors of Cooper since 1996. Mr. Weiss holds a B.S. in Accounting from the University of Scranton in Scranton, Pennsylvania.

        As a current Chief Executive Officer and former Chief Financial Officer of a publicly traded medical products company, Mr. Weiss brings to our board extensive experience in the healthcare industry in finance, accounting, management, strategy, manufacturing, and public company governance.

        Wayne Wu has served as a member of our Board of Directors since April 1998, and he served as the Chairperson of our Board of Directors from May 2004 until April 2010. Since June 2005, Mr. Wu has been the President of Pacific Health Investment, Inc., a life science investments company. From February 1998 through May 2005, he served as manager of Pacific Republic Capital Group, a life science investments fund. Mr. Wu also serves on the boards of directors of Dallen Medical Inc., a private company that engages in bone fixation and repair, WaveSense, Inc., a developer and manufacturer of analytical nanotechnologies for use in cellular and molecular assay markets, Synaptic Medical, Inc., a medical device company in the cardiac electrophysiology space, and 02 Medtech Inc., an early stage medical device company. Within the last five years, Mr. Wu also served on the board of directors of Green Tree Investment Company, a chain of upscale budget business hotels in the People's Republic of China. Mr. Wu holds a B.S. in Mathematics from the National Central University in Taiwan and an M.A. in Mathematics from the University of Southern California in Los Angeles, California.

        As a member of our Board of Directors for twelve years, Chairperson of our Board for six of those years, President of a life science investments company, and member of several other boards of directors, Mr. Wu brings to our Board experience in the healthcare industry, management and strategy, as well as an understanding of the Company's technology, business and governance practices.

PROPOSAL TWO—APPROVAL OF THE PERFORMANCE MEASURES
AVAILABLE UNDER THE ACCURAY INCORPORATED 2007 INCENTIVE AWARD PLAN

        The Board is asking for your approval of the performance measures under the 2007 Accuray Incorporated Incentive Award Plan, or the 2007 Plan. The purpose of asking our stockholders to approve the performance measures under the 2007 Plan is to allow certain future equity awards granted under the plan to qualify as exempt "performance-based compensation" pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. To satisfy the performance-based compensation exception, Section 162(m) of the Code requires, among other things, such performance measures to be approved by stockholders every five years.

        Following our initial public offering, the 2007 Plan was approved by the Company's stockholders at the Company's 2007 annual meeting of stockholders on December 12, 2007. The Company's Board of

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Directors has since adopted amendments to the 2007 Plan that did not require shareholder approval. This proposal will be approved upon the affirmative vote of a majority of the votes cast by holders of shares of Common Stock voting in person or by proxy at the annual meeting.

        Important facts about this proposal:

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It does not seek to increase the number of shares that may be issued under the 2007 Plan;



•

It does not seek to extend the term of the 2007 Plan;



•

It does not seek to add any types of awards that may be issued under the 2007 Plan; and



•

The proposal will not result in any additional cost to the Company.

Tax Issues

        Section 162(m) of the Internal Revenue Code limits the deductibility of compensation of "covered employees" to $1 million per year unless the compensation qualifies as "performance-based." Compensation in the form of equity grants can be deductible if four conditions set forth by the Internal Revenue Service are met. These conditions are:

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The compensation is payable on the attainment of one or more pre-established, objective performance criteria;



•

The performance criteria are established by a committee that is comprised solely of two or more outside directors;



•

The material terms of the compensation and performance criteria are disclosed to and approved by the stockholders before payment; and



•

The committee that established the performance criteria certifies that the performance criteria have been satisfied before payment.

        Section 162(m) contains a special rule for stock options and stock appreciation rights, or SARs, which provides that stock options and SARs will satisfy the qualified performance-based compensation exception if the awards are made by a qualifying compensation committee, the plan sets forth the maximum number of shares that can be granted to any person within a specified period and the compensation is based solely on an increase in the stock price after the grant date. The 2007 Plan has been designed to permit our compensation committee to grant stock options and other awards which will qualify as qualified performance-based compensation under Section 162(m) of the Code.

Summary of 2007 Plan and Performance Criteria

        The following summary of the 2007 Plan is qualified in its entirety by reference to the specific provisions of the 2007 Plan, the full text of which is set forth as Appendix A to this proxy statement. The Compensation Committee has full and final authority to determine who is eligible for awards, the number of shares and units awarded, the period of the award and whether or not the award is performance-based.

        The key provisions of the 2007 Plan are as follows:

Shares Subject to the 2007 Plan

        Subject to any adjustment in connection with a change in the Company's capitalization and the share counting rules prescribed by the 2007 Plan, the aggregate number of shares of the Company's common stock which may be issued or transferred pursuant to awards under the 2007 Plan is 4,500,000. In addition to the foregoing, subject to any adjustment in connection with a change in the Company's capitalization, commencing on July 1, 2008 and on the first day of each fiscal year of the Company

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thereafter during the term of the 2007 Plan, the aggregate number of shares of common stock which may be issued or transferred pursuant to awards under the 2007 Plan will be increased by that number of shares of common stock equal to the least of (i) three percent (3%) of the Company's outstanding shares on such date, (ii) 1,500,000 shares, or (iii) a lesser amount determined by the Board of Directors. As of June 30, 2011, a total of 9,000,000 shares had been reserved for issuance under the 2007 Plan.

Administration

        With respect to stock option grants and other awards granted to our independent directors, the 2007 Plan will be administered by our full board of directors. With respect to all other awards, the plan must be administered by a committee of the Board of Directors consisting of at least two directors, each of whom qualifies as a non-employee director pursuant to Rule 16b-3 of the Exchange Act, an "outside director" pursuant to Section 162(m) of the Code and an independent director under the rules of the principal securities market on which our shares are traded. This committee is currently our Compensation Committee. In addition, our board may at any time exercise any rights and duties of the committee under the plan except with respect to matters which under Rule 16b-3 under the Exchange Act or Section 162(m) of the Code are required to be determined in the sole discretion of the committee.

        The plan administrator will have the authority to administer the 2007 Plan, including, but not limited to, the power to determine award recipients, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction. The Committee may from time to time delegate to a committee of one or more members of the Board of Directors or one or more officers of the Company the authority to grant or amend awards to participants other than (a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) covered employees within the meaning of Section 162(m) of the Code, or (c) officers of the Company (or members of the Board of Directors) to whom authority to grant or amend awards has been delegated thereunder.

Eligibility

        Persons eligible to participate in the 2007 Incentive Award Plan include all members of our board of directors and all employees and consultants of our company and our subsidiaries, as determined by the plan administrator. Only our employees and employees of our qualifying corporate subsidiaries are eligible to be granted options that are intended to qualify as "incentive stock options" under Section 422 of the Code.

        Awards and Performance Criteria.    The following types of awards have been made under the 2007 Plan:

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Stock Options (including both nonqualified stock options and incentive stock options):    Options to purchase shares of the Company's common stock are granted at not less than 100% of the fair market value of our stock on the date of grant. Options vest on the schedule set forth under the terms of the award. No incentive stock option may be granted to a grantee who owns more than 10% of our stock unless the exercise price is at least 110% of the fair market value at the time of grant.             



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Restricted stock units:    This is an arrangement where no shares of stock are granted until the vesting conditions set by the plan administrator are achieved.



•

Performance stock units:    Awards of performance stock units are denominated in unit equivalent of shares of our stock and/or units of value, including dollar value of shares of our stock, and may be linked to any one or more performance criteria determined appropriate by the plan administrator, in each case on a specified date or dates or over any period(s) determined by the plan administrator.

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Awards may also be made under the 2007 Plan in the form of restricted stock, stock appreciation rights (or SARs), performance shares, dividend equivalents, stock payments, deferred stock, performance bonus awards and performance-based awards.

        For performance-based awards, the Compensation Committee sets the measurement period and the performance criteria no later than 90 days after the beginning of the measurement period. The performance criteria may be applied to the Company as a whole, or to a particular division, business unit, or individual. The Compensation Committee may use one or more of the performance criteria, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to the results of a peer group. The Compensation Committee may select the performance criteria from the following: net earnings (either before or after interest, taxes, depreciation and amortization), economic value-added, sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on stockholders' equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share of stock, and market share.

        The maximum number of shares of common stock with respect to one or more awards that may be granted to any one participant during any calendar year is 500,000. The maximum amount that may be paid in cash during any calendar year with respect to any performance-based award (including, without limitation, any performance bonus award) is $1,000,000.

Forfeiture of Unvested Awards

        Except as otherwise determined by the plan administrator, in the event that the employment or services of the holder of an award is terminated, the unvested portion of the award will generally be forfeited and will cease to vest or become exercisable after the termination. However, the plan administrator may provide in any award agreement that an award will vest in whole or in part in the event of a termination in certain cases.

Foreign Participants

        In order to comply with the laws in other countries in which we and our subsidiaries operate or have persons eligible to participate in the plan, the plan administrator will have the power to determine which of our subsidiaries will be covered by the plan, determine which of our directors, employees and consultants outside the United States are eligible to participate in the plan, modify the terms and conditions of any award granted to such eligible individuals to comply with applicable foreign laws, establish subplans and modify any terms and procedures (with certain exceptions), and take any action that it deems advisable with respect to local governmental regulatory exemptions or approvals. For example, in May 2007, our board of directors approved subplans pursuant to which options and restricted stock units may be granted to our employees in France. We may adopt additional subplans pursuant to which equity awards may be granted to employees in other countries.

Adjustments

        If there is any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares of our stock or the share price of our stock, the plan administrator will make proportionate adjustments to any or all of the following in order to reflect such change: (i) the aggregate number and type of shares that may be issued under the plan, (ii) the terms and conditions of any outstanding awards (including, without limitation, any applicable performance targets or criteria with respect thereto), and (iii) the grant or exercise price per

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share for any outstanding awards under the plan. Any adjustment affecting an award intended as "qualified performance-based compensation" will be made consistent with the requirements of Section 162(m) of the Code. The plan administrator also has the authority under the 2007 Plan to take certain other actions with respect to outstanding awards in the event of a corporate transaction, including provision for the cash-out, termination, assumption or substitution of such awards.

Change of Control

        Except as may otherwise be provided in any written agreement between the participant and us, in the event of a change of control of our company in which awards are not converted, assumed, or replaced by the successor, such awards will become fully exercisable and all forfeiture restrictions on such awards will lapse. Upon, or in anticipation of, a change of control, the plan administrator may cause any and all awards outstanding under the 2007 Plan to terminate at a specific time in the future and will give each participant the right to exercise such awards during a period of time as the plan administrator, in its sole and absolute discretion, determines.

Amendment and Termination of the 2007 Plan

        With the approval of our board of directors, the plan administrator may terminate, amend, or modify the 2007 Plan at any time. However, stockholder approval is required for any amendment to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, to increase the number of shares available under the plan, to permit the grant of options with an exercise price below fair market value on the date of grant, or to extend the exercise period for an option beyond ten years from the date of grant. In addition, absent stockholder approval, no option may be amended to reduce the per share exercise price of the shares subject to such option below the per share exercise price as of the date the option was granted and, except to the extent permitted by the plan in connection with certain changes in capital structure, no option may be granted in exchange for, or in connection with, the cancellation or surrender of an option having a higher per share exercise price.

Estimate of Benefits

        Because this proposal relates only to the approval of the material terms of the performance goals under the 2007 Plan, the approval of this proposal will not result in any new benefits being provided to participants. Awards granted under the 2007 Plan are subject to the discretion of the Compensation Committee. Amounts that may be received by participants in the 2007 Plan are not presently determinable. Approximately 1,100 persons were eligible to participate in the 2007 Stock Plan as of

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June 30, 2011. The following chart describes the amounts that the participants specified below were awarded under the 2007 Plan in fiscal year 2011.

        With the exception of stock options and SARs, which under Section 162(m) are generally considered performance-based, in the table above, none of the awards are performance-based. However, the Compensation Committee has approved awarding performance stock units to executive officers and other employees beginning in fiscal year 2012.

How votes are counted

        The approval of the Accuray Incorporated 2007 Incentive Award Plan in accordance 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. You may vote either "FOR" or "AGAINST" the approval of the Accuray Incorporated 2007 Incentive Award Plan, or you may abstain. A properly executed proxy marked "ABSTAIN" with respect to the approval of the Accuray Incorporated 2007 Incentive Award Plan will not be voted with respect to such proposal, although it will be counted for purposes of determining whether there is a quorum. Abstentions will be treated as being present and entitled to vote on the proposal and, therefore, will have the same effect as a vote against the proposal.

Board of Directors' Recommendation

        OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE PERFORMANCE MEASURES AVAILABLE UNDER THE ACCURAY INCORPORATED 2007 INCENTIVE AWARD PLAN.

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Equity Compensation Plan Information

        The following table sets forth as of June 30, 2011 certain information regarding our equity compensation plans. All of our equity compensation plans have been approved by our security holders.

PROPOSAL THREE—ADVISORY VOTE
ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
("SAY-ON-PAY VOTE")

        The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), which was enacted on July 21, 2010, enables our stockholders to approve, on an advisory (non-binding) basis, no less frequently than once every three years, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC's rules.

        Accordingly, we are asking our stockholders to provide advisory approval of the compensation of our named executive officers, as such compensation is described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure set forth in this Proxy Statement, beginning on page 18. In fiscal 2011, our executive compensation programs were designed to enable us to attract, retain, motivate and appropriately reward the individuals who can help us successfully execute our business strategy and promote the best interests of our stockholders.

        In deciding how to vote on this proposal, the Board urges you to consider the following factors, which are more fully discussed in the Compensation Discussion and Analysis section below:

•

We tie pay to performance.  



•

NEO base salaries were modestly increased in fiscal 2011 over their fiscal 2010 levels, both in recognition of Company and individual performance in fiscal 2010 and in an effort to maintain base salaries in the range of the 50^th to 60^th percentiles of the competitive market as reported in the Radford 2010 High-Tech Industry Survey for companies with $200-$500 million in annual revenue and by a peer group of 13 medical device companies with whom we compete for executive talent which are in our industry sector and which have comparable financial and organizational characteristics.

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•

While the funding methodology established at the beginning of the year for our annual cash incentive awards would have resulted in funding the bonus pool for NEOs at 67.6% of the target level, the Compensation Committee exercised its negative discretion to reduce the annual incentive awards payable to NEOs to approximately 49.5% to exclude any results of operations that would have been attributable to the TomoTherapy product line during the period of June 10-30, 2011 because the bonus metrics had been developed solely on the basis of pre-acquisition Accuray products.            



•

In addition, for fiscal year 2012, the Compensation Committee has approved a performance equity program, thereby tying an even greater portion of NEO compensation directly to performance going forward.



•

We have reasonable employment agreements.  In 2011, we amended each NEO's employment agreement to reduce non-change of control related severance benefits, eliminate single-trigger change of control acceleration for equity awards, and fix the term of each at two years.



•

We mitigate unnecessary risk.  We have implemented robust Board and management-level processes to identify risk, and we mitigate undue risk with business controls, including maximum payout levels under our annual incentive award plan, a sales compensation committee and a recoupment policy.



•

We have strong corporate governance standards.  Our Compensation Committee uses an independent compensation consultant, and has incorporated compensation analytical tools such as market data, tally sheets and compensation history for each executive officer as part of its annual executive compensation review.



•

We have adopted stock ownership requirements.  In fiscal 2010, the Compensation Committee adopted guidelines that suggested that executives and non-employee directors hold a minimum amount of our common stock, in order to align their interests with those of our stockholders. Effective July 1, 2011, we revised our stock ownership guidelines such that they are requirements rather than merely suggested guidelines. While each NEO has five years from the later of July 1, 2010 and the date of employment to achieve the required ownership levels, each NEO who is currently employed by the Company , already meets the applicable ownership requirement.



•

We do NOT engage in the following compensation practices:  



•

We do not provide perquisites or other personal benefits to our NEOs.



•

We do not currently offer pension arrangements, retirement plans (other than our Section 401(k) employee savings plan), or nonqualified deferred compensation plans or arrangements to our executives, including the NEOs.



•

We do not provide excise tax gross-ups.

How votes are counted

        The adoption of the non-binding advisory resolution to approve the compensation of our named executive officers requires the affirmative vote of a majority of shares present at the annual meeting, in person or by proxy, and entitled to vote on the proposal. A properly executed proxy marked "ABSTAIN" with respect to the approval of the compensation of our named executive officers will not be voted with respect to such proposal, but it will be counted for purposes of determining whether there is a quorum. Abstentions will be treated as being present and entitled to vote on the proposal and, therefore, will have the same effect as a vote against the proposal.

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Board of Directors' Recommendation

        Based on the information provided above and within the "Compensation Disclosure" section of this Proxy Statement, we request that you indicate your support for our executive compensation philosophy and practices, by voting in favor of the following resolution:

        "RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's named executive officers as described in this Proxy Statement, including the "Compensation Discussion and Analysis" section, the compensation tables, and the other narrative compensation disclosures."

        The opportunity to vote on this Proposal Three is required pursuant to Section 14A of the Exchange Act. Because your vote is advisory, however, it will not be binding on the Board of Directors. However, the Compensation Committee, which is responsible for designing and administering our executive compensation program, and the Board value the opinions expressed by stockholders, and will consider the outcome of the vote when making future compensation decisions for our named executive officers.

        OUR BOARD RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT.

PROPOSAL FOUR—ADVISORY VOTE ON FREQUENCY OF
HOLDING THE SAY-ON-PAY VOTE IN THE FUTURE
("FREQUENCY VOTE")

        In addition to the Say-on-Pay Vote, the Dodd-Frank Act requires that our stockholders have the opportunity to vote on how often they believe the Say-on-Pay Vote (described in Proposal Three beginning on page 13) should occur. Accordingly, we are seeking an advisory determination from our stockholders as to the frequency with which we should present a Say-on-Pay Vote to our stockholders. By voting on this proposal, you may indicate whether you would prefer that we hold the Say-on-Pay Vote every one, two or three years (or you may abstain).

For the following reasons, our Board recommends that the stockholders select a frequency of One Year:

        In formulating its recommendation, our Board considered that an annual advisory vote on executive compensation will allow our stockholders to provide us with timely input on the compensation of our named executive officers as disclosed in the proxy statement. The Board believes that it is a good corporate governance practice and is in the best interests of our stockholders to give our stockholders the right to cast an advisory vote every year on their approval of the compensation arrangements of our named executive officers, allowing them to provide us on an annual basis with their input on our executive compensation philosophy, policies and practices as disclosed in our Proxy Statement.

        For the above reasons, the Board recommends that you vote to hold the Say-on-Pay Vote every year. Your vote, however, is not to approve or disapprove the Board's recommendation. When voting on this Proposal Four, you have four choices: you may elect that we hold a Say-on-Pay Vote every year, every two years or every three years, or you may abstain from voting. The number of years that receives the highest number of votes will be the frequency that stockholders approve. The opportunity to vote on this Proposal Four is required pursuant to Section 14A of the Exchange Act. However, as an advisory vote, the vote on Proposal Four is not binding upon us, and the Compensation Committee and the Board may decide that it is in the best interests of our stockholders and our Company to hold a Say-on-Pay Vote more or less frequently than the option approved by our stockholders. Regardless, the

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Compensation Committee and the Board will consider the outcome of the vote when making future decisions on executive compensation.

How votes are counted

        The frequency that receives the highest number of votes will be considered the frequency recommended by our stockholders to hold a non-binding, advisory vote on the compensation of our named executive officers. A properly executed proxy marked "ABSTAIN" with respect to the approval of the frequency of the Say-on-Pay Vote will not be voted with respect to such ratification, but it will be counted for purposes of determining whether there is a quorum. Abstentions will not be treated as a vote in favor of any of the three other choices.

Board of Directors' Recommendation

        OUR BOARD RECOMMENDS THAT YOU VOTE TO HOLD AN ADVISORY VOTE ON EXECUTIVE COMPENSATION EVERY ONE YEAR.

PROPOSAL FIVE—RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        The Audit Committee of our Board of Directors has selected Grant Thornton LLP as our independent registered public accounting firm to perform the audit of our consolidated financial statements for the fiscal year ending June 30, 2012. Grant Thornton LLP audited our consolidated financial statements for the fiscal years ended June 30, 2011, 2010, 2009, 2008 and 2007.

        Stockholder ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2012 is not required by law, by the NASDAQ Stock Market listing requirements or by our Amended and Restated Certificate of Incorporation or Bylaws. However, our Board of Directors is submitting the selection of Grant Thornton LLP to our stockholders for ratification as a matter of good corporate governance and practice. If the stockholders fail to ratify the appointment, the Audit Committee of our Board of Directors will reconsider whether or not to retain that firm. Even if the selection is ratified, we may appoint a different independent registered public accounting firm during the year if the Audit Committee of our Board of Directors determines that such a change would be in the best interests of our Company and our stockholders.

        Representatives of Grant Thornton LLP are expected to be present at the annual meeting of stockholders. They will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from our stockholders.

How votes are counted

        Stockholder ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2012 is not required by law or by governing instruments. However, our Board of Directors is submitting the selection of Grant Thornton LLP to our stockholders for ratification as a matter of good corporate governance and practice. The ratification of the appointment of Grant Thornton LLP requires a majority of the shares present in person or represented by proxy at the annual meeting. You may vote either "FOR" or "AGAINST" ratification of the appointment, or you may abstain. A properly executed proxy marked "ABSTAIN" with respect to the ratification of the appointment will not be voted with respect to such ratification, but it will be counted for purposes of determining whether there is a quorum. Abstentions will be treated as being present and entitled to vote on the proposal and, therefore, will have the same effect as a vote against the proposal. If the stockholders fail to ratify the appointment, the Audit Committee of our Board of Directors will reconsider whether or not to retain this firm.

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Board of Directors' Recommendation

        OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE 30, 2012.

Audit and Non-Audit Services

        The Audit Committee is directly responsible for the appointment, compensation, and oversight of our independent auditors. The Audit Committee retained Grant Thornton LLP to audit our consolidated financial statements for the fiscal year ended June 30, 2011. The estimated aggregate fees billed by Grant Thornton LLP for all services relating to 2011 and 2010 are as follows:

        In the above table, in accordance with the SEC's definitions and rules, "audit fees" are fees for professional services for the audit of our consolidated financial statements included in our Annual Report on Form 10-K, for the review of our financial statements included in our quarterly reports on Form 10-Q, for the review of registration statements and issuance of consents and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements except those not required by statute or regulation; "audit-related fees" are fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements, including attestation services that are not required by statute or regulation; "tax fees" are fees for tax compliance, tax advice and tax planning; and "all other fees" are fees for any services not included in the first three categories.

Audit Committee Pre-Approval Policies and Procedures

        The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services and tax services, as well as, to a very limited extent, specifically designated non-audit services that, in the opinion of the Audit Committee, will not impair the independence of the registered public accounting firm. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this

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pre-approval, including the fees for the services performed to date. In addition, the Audit Committee also may pre-approve particular services on a case-by-case basis, as required. During fiscal 2011, all of the non-audit services performed by Grant Thornton LLP were pre-approved in accordance with Audit Committee policy.

AUDIT COMMITTEE REPORT

        The Audit Committee of our Board of Directors is responsible for overseeing our accounting and financial reporting processes and internal control systems, the appointment, compensation, retention and oversight of Grant Thornton LLP, our independent registered public accounting firm, and audits of our financial statements, all pursuant to the Audit Committee's written charter. Grant Thornton LLP reports directly to the Audit Committee. The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties and to receive appropriate funding, as determined by the Audit Committee, from our Company for such advice and assistance.

        Management is responsible for preparing our financial statements and for our financial reporting processes, accounting policies, systems of internal controls and disclosure controls and procedures. For our fiscal year ended June 30, 2011, Grant Thornton LLP was responsible for expressing an opinion on the effectiveness of our internal control over financial reporting. Grant Thornton LLP was also responsible for performing an independent audit and expressing an opinion on the conformity of our audited financial statements with accounting principles generally accepted in the United States. In this context, the Audit Committee hereby reports as follows:

1.

The Audit Committee has reviewed and discussed our audited financial statements for fiscal 2011 with our management.



2.

The Audit Committee has discussed with Grant Thornton LLP the matters required to be discussed by the statement on Accounting Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.



3.

The Audit Committee has received the written disclosures and the letter from Grant Thornton LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence and has discussed with Grant Thornton LLP its independence.



4.

Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2011, for filing with the SEC.

        AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Robert S. Weiss, Chairperson
Elizabeth Dávila
Peter S. Fine
Dennis L. Winger

        The foregoing Audit Committee report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under these acts, except to the extent we incorporate by reference into such filings.

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COMPENSATION COMMITTEE REPORT

        This report, filed in accordance with Item 407(e)(5) of Regulation S-K, should be read in conjunction with the other information relating to executive compensation which is contained elsewhere in this Proxy Statement and is not repeated here.

        In this context, the Compensation Committee hereby reports as follows:

1.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section contained herein with management.



2.

Based on the review and discussions referred to in paragraph (1) above, the Compensation Committee recommended to our Board of Directors, that the Compensation Discussion and Analysis be included in this Proxy Statement.

        COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Louis J. Lavigne, Jr., Chairperson
Elizabeth Dávila
Jack Goldstein, Ph.D.

        The foregoing Compensation Committee Report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under these acts, except to the extent that we expressly incorporate it by reference into such filings.

COMPENSATION DISCUSSION & ANALYSIS

Introduction

        This Compensation Discussion and Analysis provides information regarding the fiscal 2011 compensation program for the principal executive officer, the principal financial officer, the three executive officers (other than the principal executive officer and principal financial officer) at fiscal year-end who were the most highly compensated executive officers of Accuray Incorporated, and one former executive officer who was one of the three most highly compensated executive officers during fiscal 2011 but was not serving as an officer at the end of the fiscal year. During fiscal 2011, these individuals were:

•

Euan S. Thomson, Ph.D., our President and Chief Executive Officer;



•

Derek A. Bertocci, our Senior Vice President and Chief Financial Officer;



•

Chris A. Raanes, our Senior Vice President, Chief Operating Officer, who was promoted to Executive Vice President, Chief Operating Officer effective July 25, 2011;



•

Eric Pauwels, our former Senior Vice President, Chief Marketing Officer, who joined the Company on January 17, 2011 and terminated his employment effective September 20, 2011;



•

Theresa Dadone, our Senior Vice President, Human Resources; and



•

Eric P. Lindquist, our former Senior Vice President, Chief Marketing Officer, who resigned from the Company effective September 2, 2010.

        These executives were Accuray Incorporated's Named Executive Officers ("NEO" or "NEOs"), for fiscal 2011. (In this Compensation Discussion and Analysis, Accuray Incorporated is referred to as "our," "us," "we," or "the Company.")

        This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal 2011. It also provides an overview of our executive compensation

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philosophy, including our principal compensation policies and practices. Finally, it analyzes how and why the Compensation Committee of our Board of Directors arrived at the specific compensation decisions for our executives, including the NEOs, in fiscal 2011, and discusses the key factors that the Compensation Committee considered in determining their compensation.

Fiscal 2011 Highlights

        Accuray Incorporated is a technology company focused on the design, development, and marketing of radiation oncology treatment solutions that revolve around the patient.

        Fiscal 2011 Business Results.    In June 2011, the Company completed its acquisition of TomoTherapy Incorporated, thereby broadening the Company's product portfolio to include both radiosurgery and radiation therapy products and significantly increasing the Company's global presence. The TomoTherapy acquisition reflected the achievement of one of the Company's fiscal 2011 strategic objectives, which was to implement a product expansion strategy. The Company anticipates financial benefits from the acquisition, arising out of scale, operational efficiencies and synergies in particular in the G&A and marketing areas, as well as other areas.

        In addition, although the volatility in the global economic environment over the past few fiscal years has presented several challenges for the Company, in fiscal 2011 we achieved several significant financial results, as follows:

•

Generated $225.7 million in revenue (excluding adjustments associated with mergers and acquisitions) at 97.3% of our annual operating plan;



•

Achieved improvements in operational efficiency while reducing the expenses associated with our cost structure to levels that produced pre-tax and bonus profit (excluding expenses associated with mergers and acquisitions, major litigation and settlement expenses and any special charges) of $8.0 million; and



•

Generated new orders to backlog (comprising new purchase agreements as well as the addition of existing customer contracts to backlog upon the contracts' satisfaction of our backlog criteria) at 81% of our annual operating plan.

        The foregoing metrics are the metrics under the Executive Performance Bonus Plan, and are further discussed under the heading Fiscal 2011 Cash Incentive Award Opportunities and Payouts below.

        Significant Executive Compensation Actions.    As reflected in our compensation philosophy, we set the compensation of our executives, including the NEOs, based on their ability to achieve annual operational objectives that we believe further our long-term business objectives and to create sustainable long-term stockholder value in a cost-effective manner. Accordingly, our fiscal 2011 compensation actions and decisions were based on our executives' accomplishments in these dual areas.

        For fiscal 2011, the Compensation Committee determined that growth in new orders to backlog, maintenance of revenue despite the numerous challenges presented by the uncertain economic climate, and improved profits (through, among other things, enhanced operational efficiency) continued to represent the objectives most important to creating long-term stockholder value. At the same time, the Compensation Committee sought to maintain the stability and continuity of our management team, whose composition they viewed to be critical to the successful execution of our long-term business objectives. Accordingly, the Compensation Committee addressed the primary elements of our executives' compensation packages (base salary, annual cash incentive awards, and equity awards) with these goals in mind. For fiscal 2011, the Compensation Committee took the following actions with respect to the compensation of our executives, including the NEOs:

•

Moderately increased base salaries.  The base salaries of Dr. Thomson, Mr. Raanes and Ms. Dadone increased approximately 2.5%. This represented the first increase in Dr. Thomson's

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base salary in three years. The salary of Mr. Bertocci, our Chief Financial Officer was increased by 4% in order to bring his base salary more in line with the competitive market and closer in line with the market position of the base salaries of the other executive officers of Accuray.

•

Funded the bonus pool for annual cash incentive awards for executives at approximately 49.5% of the target level established at the beginning of the year.  While the funding methodology established at the beginning of the year for our annual cash incentive awards would have resulted in funding of the bonus pool for annual cash incentive awards for executives at 67.6% of the target level, the Compensation Committee exercised its negative discretion to reduce the annual incentive awards payable to NEOs to approximately 49.5% to exclude any results of operations that would have been attributable to the TomoTherapy product line during the period of June 10-30, 2011 because the bonus metrics had been developed solely on the basis of pre-acquisition Accuray products.



•

Approved stock option and RSU awards to address competitive market concerns, satisfy our retention objectives, and reward individual performance during fiscal 2010.  In making equity awards, the Compensation Committee took into consideration the fact that, consistent with our compensation philosophy, such awards further increased the NEOs' stake in the Company, thereby reinforcing their incentive to manage our business as owners and subjecting a significant portion of their total compensation to Company performance. Equity awards align with our growth strategy and provide significant leverage if our growth objectives are achieved, and place a significant portion of executive compensation at risk if our business strategy and results to do not result in returns to our stockholders.



•

Amended executive officers' employment letter agreements to reduce non-change of control-related severance benefits, eliminate single-trigger change of control acceleration for equity awards, and fix the term of each at two years.

        We also continued to maintain good governance standards in our executive compensation practices. The following policies remained in effect in fiscal 2011:

•

We do not provide perquisites or other personal benefits to our executives, including the NEOs. Our executives participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.



•

Separation of Board Chairperson and Chief Executive Officer positions. We have operated with these roles separated for several years.



•

No pension or nonqualified deferred compensation plans. We do not currently offer pension arrangements, retirement plans (other than our Section 401(k) employee savings plan), or nonqualified deferred compensation plans or arrangements to our executives, including the NEOs.



•

Use of an independent compensation consultant who reports directly to the Compensation Committee.

        Fiscal 2012 Compensation Actions.    In light of our acquisition of TomoTherapy, as well as ongoing assessments of industry best practices and a desire to more closely align executive officer compensation with Company performance, the Compensation Committee and Board of Directors have recently taken the following actions to enhance our compensation and governance practices, which are effective for fiscal year 2012:

•

Our Compensation Committee clarified our compensation philosophy, which continues to reflect objectives that tie executive pay to Company performance, drive business growth and link shareholder and executive interests.

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•

Our Compensation Committee adjusted our compensation peer group for fiscal year 2012, such that (a) our peer group includes a larger number of peers, (b) our peer selection criteria reflects criteria more closely aligned to those of our growing company, and (c) we added a group of reference peers for the purposes of providing key labor market compensation data, and an understanding of the compensation practices and pay levels of larger industry companies.



•

Amended the Company's stock ownership guidelines for our executive officers and non-employee directors such that they require mandatory ownership levels rather than merely suggested guidelines. The amended requirements took effect July 1, 2011.



•

Expanded the Company's recoupment policy (which is reflected in both our Performance Bonus Plan and 2007 Incentive Award Plan) to include potential recoupment of performance-based or incentive compensation paid to executive officers in the event of a material reduction in the Company's publicly disclosed backlog figures, if the compensation received by such executive officers is greater than would have been paid or awarded if calculated based on the materially reduced backlog figures.



•

Approved awarding performance-based grants of restricted stock units to executives which will be released only on the achievement of performance goals established by the Compensation Committee, thereby putting a greater percentage of executive compensation at-risk, linking a greater percentage of executive compensation to measures of our business success, and further linking our executives' compensation to the creation of long-term stockholder value.



•

Amended Dr. Thomson's employment letter agreement to eliminate his guarantee to receive an annual option to purchase 40,000 shares of Company common stock.

        The Compensation Committee's decisions with respect to fiscal year 2011 and certain of its decisions with respect to fiscal year 2012 are discussed in further detail below. In addition, the compensation and benefits provided to our named executive officers for the last three years are set forth in the Summary Compensation Table and other tables that follow this Compensation Discussion and Analysis, and in the footnotes and narrative material that accompany those tables.

Background and Compensation Philosophy

        To achieve the Company's objectives, we need a highly talented and seasoned management team with the integrity, skills and dedication necessary to oversee a dynamic and growing organization and the vision to anticipate and respond to future market developments. Our executives must be capable of fulfilling the Company's long-term business strategy, including the successful integration of the newly acquired TomoTherapy organization and technologies into our business.

        Our executive compensation program is designed to attract, retain, motivate and appropriately reward individuals who can help us successfully execute our business strategy and promote the best interests of our stockholders. To achieve these objectives, our executive compensation program has been based on the following core principles:

•

Our executives should view their compensation as being tied to the long-term best interests of our stockholders;



•

Our executive compensation program should motivate and reward behavior consistent with Company and individual performance objectives as well as the Company's culture and organizational values;



•

Our executive compensation program should be sufficiently competitive relative to comparable medical device companies to attract and retain executives who can achieve the Company's strategic goals and create long-term stockholder value;

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•

Our executive compensation program should recognize individual contributions as well as overall business results;



•

An executive's compensation should be appropriate in light of his or her experience, responsibilities and performance; and



•

Our executive compensation program should not encourage excessive or unnecessary risk-taking.

        In light of our acquisition of TomoTherapy, and due to ongoing assessments of industry best practices and a desire to more closely align executive officer compensation with Company performance, the Compensation Committee clarified the executive compensation philosophy for fiscal year 2012. The overarching philosophy approved by the Compensation Committee is to maintain an executive compensation program that emphasizes pay for performance, drives business growth, and links shareholder value and executive interests.

        The key objectives of the revised compensation philosophy include:

•

Attract, retain, motivate and reward the top talent that is necessary to make the most of the TomoTherapy acquisition and drive future business success;



•

Link short-term rewards with Company performance (both financial and strategic) and individual performance; and



•

Link long-term compensation with the creation of shareholder value.

        The foregoing principles and objectives form the foundation of our executive compensation philosophy, which is reflected in the various compensation elements—base salary, annual cash incentives, annual equity awards, performance equity awards and other benefits—that comprise our executive compensation program.

Compensation Process

        The Compensation Committee oversees our executive compensation philosophy and administers our executive compensation program. The Compensation Committee is responsible for reviewing the performance and approving the compensation of our executives, including the NEOs. The independent members of our Board of Directors are responsible for reviewing the performance of our Chief Executive Officer and approving his compensation. The Compensation Committee is also responsible for reviewing and recommending to our Board of Directors the compensation of our non-employee directors and establishing and regularly reviewing the compensation and benefits policies for our executives and salaried employees. For additional information on the Compensation Committee, including the scope of its authority, see Corporate Governance and Board of Directors Matters—Compensation Committee, below.

        At the beginning of each fiscal year, the Board of Directors, after consulting with management, establishes the corporate performance objectives for the Company, and the Compensation Committee, after consulting with management, reviews and approves the individual performance objectives for each executive officer other than the CEO, and makes decisions with respect to any base salary adjustment, target annual cash incentive award opportunities, and equity awards for our executives, including the NEOs, but excluding the CEO, for the upcoming year. The independent members of the Board of Directors, with recommendations from the Compensation Committee, review and approve the individual performance objectives for the CEO, and make decisions with respect to any base salary adjustment, target annual cash incentive award opportunities, and equity awards for our CEO. After the end of the fiscal year, the Compensation Committee assesses the performance of our executives, including the NEOs but excluding our CEO, to determine the payouts for the annual cash incentive award opportunities for the previous year, and the independent members of our Board of Directors

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assess the performance of our Chief Executive Officer to determine his annual cash incentive award payout.

Role of Management

        To aid in its deliberations, each year our Chief Executive Officer provides recommendations to the Compensation Committee regarding the individual compensation elements for each of our executives, including the NEOs (other than himself). Prior to formulating these recommendations, our Chief Executive Officer conducts an annual performance review of our other executives to evaluate their performance for the prior fiscal year. Our Chief Executive Officer then presents the results of these evaluations, along with his recommendations with regard to their compensation, including base salary adjustments, annual cash incentive award opportunities and payouts, and equity awards, to the Compensation Committee for its consideration. Similarly, our Chief Executive Officer's performance is reviewed annually by the Compensation Committee as well as the independent members of the Board of Directors as part of their deliberations with respect to his compensation.

        Our Chief Executive Officer also meets with the Compensation Committee at the beginning of each year to assist the Compensation Committee in formulating the Company's performance objectives for each fiscal year and the individual performance objectives for each executive. For Executive Officers other than himself, the Chief Executive Officer considers performance and makes recommendations to the Compensation Committee with respect to base salary, annual incentive and long term equity compensation. In advance of making such recommendations, the Chief Executive Officer often consults with our Senior Vice President, Human Resources, who may discuss a range of pay for him to consider for executive officers other than our Senior Vice President, Human Resources and himself, which range is based on the Company's compensation philosophy, market data provided by the Compensation Committee's independent consultant, achievement of individual performance goals and objectives, and internal equity. The Compensation Committee reviews, discusses and modifies as appropriate the compensation recommendations made by the Chief Executive Officer.

        The Compensation Committee itself makes recommendations regarding the compensation of the Chief Executive Officer to the independent members of the Board of Directors, who approve all elements of the Chief Executive Officer's compensation.

        Typically, our Chief Executive Officer is present at Compensation Committee meetings where executive compensation and corporate and individual performance are discussed and evaluated (except when his own compensation and performance are discussed). From time to time, our Chief Financial Officer, General Counsel, and Senior Vice President of Human Resources may also attend Compensation Committee meetings at which executive compensation matters are discussed and participate in those discussions (except when their own compensation and performance are discussed).

Role of Compensation Consultants

        Through March 2011, the Company and the Compensation Committee had engaged separate advisors to provide advice with respect to our compensation programs. Effective in April of 2011:

•

Management ceased to retain a separate compensation advisor (management had used Compensia, Inc. ("Compensia") for these purposes) such that it no longer has an advisor;



•

The Compensation Committee terminated its relationship with its prior advisor, Towers Watson and its predecessor, Watson Wyatt Worldwide Inc. ("Towers"), and



•

The Compensation Committee engaged a senior compensation consultant from Compensia (different from the prior consultant to management) to serve as its independent advisor to provide advice with respect to our compensation programs.

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        Compensia advises the Compensation Committee with respect to trends in executive compensation, peer group selection, the determination of pay programs, the assessment of competitive pay levels and mix (for example, the proportion of fixed pay to incentive pay, and the proportion of annual cash pay to long-term incentive pay), and setting compensation levels. Compensia also consults with the Compensation Committee to formulate and design new programs to better align management performance with the interests of the Company's stockholders.

        Aside from its service to management through March of 2011 and engagement by the Compensation Committee beginning in April, 2011, Compensia did not perform any other services for the Company or the Compensation Committee in fiscal 2011.

        Towers served as the Compensation Committee's advisor from fiscal 2008 until April 2011. Through March of 2011, the Compensation Committee engaged Towers to serve as its advisor with respect to implementing our executive compensation program and determining the appropriate base salary levels, annual cash incentive awards, and equity awards for our executives by assessing the reasonableness of individual compensation elements and total direct compensation. Towers Watson also provided market data and advice with regard to the remuneration of our independent non-employee board members. Towers Watson did not perform any other services for the Compensation Committee or the Company in fiscal 2011.

Competitive Positioning

        For fiscal 2011, the Compensation Committee allocated the compensation of our executives, including our NEOs, between cash and equity based on an analysis of the data reflected in the Radford 2010 High-Tech Industry Survey (the "Radford Survey") for companies with $200 to $500 million in annual revenue, as well as an assessment of the Company's performance and compensation practices against a peer group of 13 medical device companies with whom we compete for executive talent, which are in our industry sector and which have similar financial and organizational characteristics (collectively, the "Relevant Market Data"). The Radford Survey is a survey of companies in the medical device, software, and other high-technology industries. The peer group of 13 medical device companies was initially developed by the Company, with the assistance of Compensia, and submitted to the Compensation Committee for its review. The Compensation Committee, with the assistance of Towers Watson, evaluated the proposed peer group and provided input to the Company with respect to its composition. The final peer group for fiscal 2011 was approved by the Compensation Committee in March 2010.

        The companies comprising the peer group were selected on the basis of the following five criteria:

•

similar business focus (i.e., companies that develop and design highly technical devices and that have at least 30% of their business from international operations),



•

total revenue of approximately $100 million to $500 million,



•

employee population of up to approximately four times the number of employees of the Company,



•

market capitalization of .5 times to three times that of the Company, and



•

revenue per employee of .5 times to two times that of the Company.

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        The table below summarizes where the Company falls relative to its peer group with respect to each of the five peer group criteria.

        The Compensation Committee intends to annually review the composition of the peer group to ensure it is the most relevant set of companies to use for comparison purposes.

        For fiscal 2011, the Compensation Committee removed Intuitive Surgical, Inc from the fiscal 2010 peer group list, and replaced it with NuVasive, Inc. The Compensation Committee made this change to the fiscal 2011 peer group based on a determination that NuVasive more directly fit the criteria set forth above than did Intuitive Surgical, Inc. The peer group for fiscal 2011 comprised the following companies:

        In evaluating the base salaries of our executives for fiscal 2011, establishing target award opportunities for annual cash incentive awards, and making equity awards, the Compensation Committee reviewed the Relevant Market Data to inform its decisions on individual compensation elements, including the competitive reasonableness of arrangements, and to ensure that its decisions were consistent with the Company's compensation philosophy and strategy. The Compensation Committee did not make its decisions based on targeting compensation to specific benchmarks against the survey and peer group data. The Compensation Committee took the above approach consistent with its intention to (i) set performance milestones for cash incentive compensation so that target level payouts would only be made if our executives and the Company performed at a superior level that would be difficult to achieve and (ii) provide our executives with the ability to earn above market compensation tied to performance in order to attract and retain the quality of executives necessary to successfully manage the Company.

        The Compensation Committee used a similar process to identify the fiscal year 2012 peer group, but revised the criteria in light of the changes in the Company following the TomoTherapy acquisition. The Compensation Committee also decided to increase the size of the peer group to 17 companies to provide more robust data samples. Three companies (Cardiac Science, Healthtronics and TomoTherapy) were removed from the 2011 list, as they had been acquired. The fiscal year 2012 peer group was selected based on the following criteria:

Primary Factors:

•

similar business focus (i.e., companies that develop and design highly technical devices and that have at least 30% of their business from international operations);



•

total revenue of approximately $200 million to $900 million; and



•

positive revenue growth.

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Secondary Factors:

•

employee population of up to approximately three times the number of employees of the Company;



•

market capitalization of two-thirds times to three and a half times that of the Company; and



•

revenue per employee of one half times to two times that of the Company.

        The fiscal 2012 peer group approved by the Compensation Committee in May 2011 includes the following companies:

        In addition to the above core peer group, for fiscal year 2012, the Compensation Committee also approved a group of seven reference peers in order to provide key labor market compensation data and an understanding of the compensation practices and pay levels of larger industry companies. The reference peers were selected based on the following criteria:

•

Medical device, life science or pharmaceutical industry companies engaged in the development of technical products or pharmaceuticals that go through the clinical testing processes;



•

Revenue of approximately $1 billion to $5 billion; and



•

Based in the U.S., primarily California.

        The fiscal year 2012 reference peers include the following seven companies:

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(1)

Mr. Raanes was promoted to Executive Vice President, Chief Operating Officer effective July 25, 2011.

(2)

Mr. Pauwels joined the Company effective January 17, 2011, and terminated his employment with the Company effective September 20, 2011.

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(1)

Note, the salaries reflected for both fiscal 2011 and fiscal 2012 became, and will become, effective on October 1 of each such year, respectively.

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(1)

Excludes adjustments associated with mergers and acquisitions.

(2)

Excludes expenses associated with mergers and acquisitions, creation of strategic relationships and alliances, major litigation and settlements and any special charges.

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(1)

Mr. Lindquist's employment as Senior Vice President, Chief Marketing Officer terminated effective as of his resignation on September 2, 2010.

(2)

Mr. Pauwels terminated his employment as Senior Vice President, Chief Marketing Officer effective as of September 20, 2011.

(3)

The fiscal 2011 Total Actual Opportunity is derived by multiplying the approximate 49.5% funding level by the at-target annual cash incentive award opportunity for each NEO.

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(1)

Represents pro-rated amounts for fiscal 2009, as Mr. Bertocci's employment commenced on January 1, 2009.

(2)

Mr. Pauwels was not a named executive officer of the Company in fiscal 2009 or 2010, and fiscal 2011 amounts are pro-rated, as Mr. Pauwels' employment commenced on January 17, 2011. Mr. Pauwels terminated his employment as Senior Vice President, Chief Marketing Officer effective as of September 20, 2011. We did not provide any severance payments or benefits to him in connection with his termination.

(3)

Ms. Dadone was not a named executive officer of the Company in fiscal 2009 or 2010.

(4)

Mr. Lindquist's employment as Senior Vice President, Chief Marketing Officer terminated effective as of his resignation on September 2, 2010. We provided certain severance payments and benefits as described in further detail under Employment, Change in Control and Severance Arrangements—Eric P. Lindquist, below.

(5)

The NEO salaries approved by the Board of Directors in August 2010 became effective three months into fiscal 2011, on October 1, 2010.

(6)

Refers to payment of bonuses for patent inventions.

(7)

The amounts shown represent the aggregate full grant date fair value as determined in accordance with FASB ASC Topic 718. These amounts do not correspond to the actual value that will be realized by our NEOs. The assumptions used to calculate the value of stock and stock option awards are set forth under Note 9 of the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2011.

(8)

Fiscal 2011 amounts refer to annual cash incentive award payouts earned in fiscal 2011, which were paid in fiscal 2012; fiscal 2010 amounts refer to annual cash incentive award payouts earned in fiscal 2010, which were paid in fiscal 2011; and fiscal 2009 amounts refer to annual cash incentive award payouts earned in fiscal 2009, which were paid in fiscal 2010.

(9)

All Other Compensation consists of the following:

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(a)

Mr. Pauwels' Employment Letter Agreement provided that the Company would provide certain relocation assistance to Mr. Pauwels for his move from Massachusetts to California. The relocation assistance included temporary housing for up to 180 days, reimbursement of certain expenses incurred in connection with home buying trips, reimbursement of certain home sale and home purchase expenses, reimbursement of certain moving expenses, and reimbursement of travel expenses for up to six return trips to Massachusetts. The Company reimbursed $12,519 of such expenses in fiscal 2011.

(b)

Mr. Lindquist's employment as Senior Vice President, Chief Marketing Officer terminated effective as of his resignation on September 2, 2010. We entered into a General Release and Termination Agreement with him on October 1, 2010, pursuant to which we provided certain severance payments and benefits as described in further detail under Employment, Change in Control and Severance Arrangements—Eric P. Lindquist, below. The amount reflected in this column includes (a) $383,926 in severance payment made to Mr. Lindquist by the Company in accordance with the General Release and Termination Agreement, (b) payment of $45,613 for the 300 hours of PTO Mr. Lindquist had accrued as of the time of his termination, and (c) $15,703 in COBRA payments made by the Company pursuant to the General Release and Termination Agreement.