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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION


Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment (Amendment No. )

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Check the appropriate box:

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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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Inspire Medical Systems, Inc.


(Name of Registrant as Specified In Itsin its Charter)


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

Payment of Filing Fee (Check the appropriate box):

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Payment of Filing Fee (Check the appropriate box):
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Fee paid previously with preliminary materials.
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Fee computed on table belowin exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:INSPIRE MEDICAL SYSTEMS, INC. 5500 WAYZATA BLVD., SUITE 1600 | GOLDEN VALLEY, MN 55416
 
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March 16, 2022
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Dear Fellow Stockholders:
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On behalf of the Board of Directors, I cordially invite you to attend the 2022 annual meeting of stockholders (the “Annual Meeting”) of Inspire Medical Systems, Inc., which will be held on Thursday, April 28, 2022, beginning at 8:00 a.m. Central Time. The Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast.
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In accordance with the Securities and Exchange Commission rules allowing companies to furnish proxy materials to their stockholders over the Internet, we have sent stockholders of record at the close of business on March 3, 2022 a Notice of Internet Availability of Proxy Materials. The notice contains instructions on how to access our Proxy Statement and Annual Report, and how to vote online. If you would like to receive a printed copy of our proxy materials from us instead of downloading a printable version from the Internet, please follow the instructions for requesting such materials included in the notice, as well as in the attached Proxy Statement.
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Attached to this letter are a Notice of Annual Meeting of Stockholders and Proxy Statement, which describe the business to be conducted at the meeting.
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Your vote is important to us. Please act as soon as possible to vote your shares. It is important that your shares be represented at the meeting whether or not you plan to attend the annual meeting via the Internet. Please vote electronically over the Internet, by telephone or if, you receive a paper copy of the proxy card by mail, by returning your signed proxy card in the envelope provided. You may also vote your shares online during the Annual Meeting. Instructions on how to vote while participating at the meeting live via the Internet are posted at www.virtualshareholdermeeting.com/INSP2022.
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On behalf of the Board of Directors and management, it is my pleasure to express our appreciation for your continued support.
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Inspire Medical Systems, Inc.
5500 Wayzata Blvd., Suite 1600
Golden Valley, MN 55416

March 20, 2019

Dear Fellow Stockholders:

On behalf of the Board of Directors, I cordially invite you to attend the 2019 annual meeting of stockholders (the “Annual Meeting”) of Inspire Medical Systems, Inc., which will be held on Thursday, May 2, 2019, beginning at 8:00 a.m., Eastern Time. The Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast.

In accordance with the Securities and Exchange Commission rules allowing companies to furnish proxy materials to their stockholders over the Internet, we have sent stockholders of record at the close of business on March 7, 2019 a Notice of Internet Availability of Proxy Materials. The notice contains instructions on how to access our Proxy Statement and Annual Report and vote online. If you would like to receive a printed copy of our proxy materials from us instead of downloading a printable version from the Internet, please follow the instructions for requesting such materials included in the notice, as well as in the attached Proxy Statement.

Attached to this letter are a Notice of Annual Meeting of Stockholders and Proxy Statement, which describe the business to be conducted at the meeting.

Your vote is important to us. Please act as soon as possible to vote your shares. It is important that your shares be represented at the meeting whether or not you plan to attend the annual meeting via the Internet. Please vote electronically over the Internet, by telephone or if, you receive a paper copy of the proxy card by mail, by returning your signed proxy card in the envelope provided. You may also vote your shares online during the Annual Meeting. Instructions on how to vote while participating at the meeting live via the Internet are posted at www.virtualshareholdermeeting.com/INSP2019.

On behalf of the Board of Directors and management, it is my pleasure to express our appreciation for your continued support.

 
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Marilyn Carlson Nelson
 
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Chair of the Board

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Inspire Medical Systems, Inc.
5500 Wayzata Blvd., Suite 1600
Golden Valley, MN 55416

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2019

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Inspire Medical Systems, Inc., a Delaware corporation, will be held on Thursday, May 2, 2019, at 8:00 a.m., Eastern Time. The Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast. You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/INSP2019. For instructions on how to attend and vote your shares at the Annual Meeting, see the information in the accompanying proxy statement in the section titled “General Information about the Annual Meeting and Voting—How can I attend and vote at the Annual Meeting?”

The Annual Meeting is being held:


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Inspire Medical Systems, Inc. 5500 Wayzata Blvd., Suite 1600 | Golden Valley, MN 55416
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 2022
Date
THURSDAY
APRIL 28, 2022
Time
8:00 A.M.
CENTRAL TIME
Place
www.
virtualshareholdermeeting
.com/INSP2022
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Inspire Medical Systems, Inc., a Delaware corporation, will be held on Thursday, April 28, 2022, at 8:00 a.m. Central Time. The Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast. You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/INSP2022. For instructions on how to attend and vote your shares at the Annual Meeting, see the information in the accompanying Proxy Statement in the section titled “General Information about the Annual Meeting and Voting — How can I attend and vote at the Annual Meeting?”
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The Annual Meeting is being held:
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1.
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to elect Shelley G. Broader, Timothy P. Herbert, Chau Khuong and Shawn T McCormick as Class I directors to hold office until the Company’s annual meeting of stockholders to be held in 20222025 and until their respective successors have been duly elected and qualified;
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to ratify, in a non-binding vote, the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019;2022;
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to approve, on an advisory (non-binding) basis, the compensation of our named executive officers; and
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to transact such other business as may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof.

These items of business are described in the Proxy Statement that follows this notice. Holders of record of our common stock as of the close of business on March 7, 2019 are entitled to notice of and to vote at the Annual Meeting, or any continuation, postponement or adjournment thereof.

Your vote is important. Voting your shares will ensure the presence of a quorum at the Annual Meeting and will save us the expense of further solicitation. Please promptly vote your shares by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials or, if you received a paper or electronic copy of our proxy materials, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described on your proxy card.

 
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These items of business are described in the Proxy Statement that follows this notice. Holders of record of our common stock as of the close of business on March 3, 2022 are entitled to notice of and to vote at the Annual Meeting, or any continuation, postponement or adjournment thereof. This Notice of Annual Meeting and Proxy Statement are first being distributed or made available, as the case may be, on or about March 16, 2022.
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Your vote is important. Voting your shares will ensure the presence of a quorum at the Annual Meeting and will save us the expense of further solicitation. Please promptly vote your shares by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials or, if you received a paper or electronic copy of our proxy materials, by completing, signing, dating, and returning your proxy card or by Internet or telephone voting as described on your proxy card.
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By Order of the Board of Directors
 
 
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Timothy P. Herbert
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Bryan K. Phillips
 
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Senior Vice President, Chief Executive OfficerGeneral Counsel, and Secretary
Golden Valley, MN
March 16, 2022
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting: This Proxy Statement and our Annual Report are available free of charge at www.proxyvote.com.

Golden Valley, MN
March 20, 2019

This Notice of Annual Meeting and Proxy Statement are first being distributed or made available, as the case may be, on or about March 20, 2019.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting:
This Proxy Statement and our Annual Report are available free of charge at www.proxyvote.com.

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CONTENTS

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GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
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1
When and where will the Annual Meeting be held?
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What are the purposes of the Annual Meeting?
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Are there any matters to be voted on at the Annual Meeting that are not included in this Proxy Statement?
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Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a paper copy of proxy materials?
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What does it mean if I receive more than one Notice and Access Card or more than one set of proxy materials?
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Can I vote my shares by filling out and returning the Notice and Access Card?QUESTIONS AND ANSWERS
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Who is entitled to vote at the Annual Meeting?
2
What is the difference between being a “record holder” and holding shares in “street name”?
2
What do I do if my shares are held in “street name”?
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How many shares must be present to hold the Annual Meeting?
2
What are “broker non-votes”?
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What if a quorum is not present at the Annual Meeting?
3
How do I vote my shares without attending the Annual Meeting?
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How can I attend and vote at the Annual Meeting?
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What if during the check-in time or during the Annual Meeting I have technical difficulties or trouble accessing the virtual meeting website?
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How does the Board recommend that I vote?
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How many votes are required to approve each proposal?
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What if I do not specify how my shares are to be voted?
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Who will count the votes?
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Can I revoke or change my vote after I submit my proxy?
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Who will pay for the cost of this proxy solicitation?
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PROPOSAL NO. 1 — ELECTION OF DIRECTORS
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Board Size and Structure
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Current Directors and Terms
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Nominees for Director
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Information About Board Nominees and Continuing Directors
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Class I Director Nominees for Election to Three-Year Terms Expiring No Later thanat the 20222025 Annual Meeting of Stockholders
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711
Class II Directors Whose Terms Expire at the 20202023 Annual Meeting of Stockholders
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812
Class III Directors Whose Terms Expire at the 20212024 Annual Meeting of Stockholders
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Board Recommendation
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PROPOSAL NO. 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Appointment of Independent Registered Public Accounting Firm
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Audit, Audit-Related, Tax, and All Other Fees
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Pre-Approval Policies and Procedures
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Board Recommendation
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Audit Committee Report
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1117
EXECUTIVE OFFICERS
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1218
CORPORATE GOVERNANCE
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1320
Corporate Governance Guidelines
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1320
Board Leadership Structure
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1320
Director Independence
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1421
Board Committees
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Audit Committee
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1423
Organization and Compensation Committee
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1524
Nominating and Corporate Governance Committee
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1625
Board and Board Committee Meetings and Attendance
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1625
Executive Sessions
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1626
Director Attendance at Annual Meeting of Stockholders
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1626
Director Nominations Process
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1626
Board Role in Risk Oversight
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1827
Our Environmental, Social, and Governance Principles
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Committee Charters and Corporate Governance Guidelines
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1831
Code of Business Conduct and Ethics
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1831
Anti-Hedging Policy
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1832
Communications with the Board
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EXECUTIVE COMPENSATION
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OverviewCompensation Discussion and Analysis
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Organization and Compensation Committee Report
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Summary Compensation Table
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Grants of Plan-Based Awards - Fiscal 2021
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Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
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Outstanding Equity Awards at Fiscal Year-End
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DIRECTOR COMPENSATIONOption Exercises - Fiscal 2021
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IPO Grants to Non-Employee Directors under the 2018 PlanPotential Payments Upon Termination or Change in Control
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CEO PAY RATIO
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DIRECTOR COMPENSATION
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Non-Employee Director Compensation Policy
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2560
STOCK OWNERSHIP
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2763
Security Ownership of Certain Beneficial Owners and Management
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2763
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
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2965
CERTAIN TRANSACTIONS WITH RELATED PERSONS
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3066
Policies and Procedures on Transactions with Related Persons
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3066
Participation in Our Initial Public Offering
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Investor Rights Agreement
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Voting Agreement
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Right of First Refusal and Co-Sale Agreement
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Director and Officer Indemnification and Insurance
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PROPOSAL NO. 3 — APPROVAL, ON AN ADVISORY (NON-BINDING) BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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Background
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Board Recommendation
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STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
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3268
HOUSEHOLDING
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3268
20182021 ANNUAL REPORT
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Proxy Summary
The information provided in this Proxy Summary is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date
THURSDAY
APRIL 28, 2022
Time
8:00 A.M.
CENTRAL TIME
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There are four ways to vote:
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• by Internet at www.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on April 27, 2022 (have your Notice or proxy card in hand when you visit the website);
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•  by toll-free telephone until 11:59 p.m. Eastern Time on April 27, 2022 at 1-800-690-6903 (be sure to have your Notice or proxy card in hand when you call);
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• by completing and mailing your proxy card so it is received prior to the Annual Meeting (if you received printed proxy materials); or
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• by attending and voting at the virtual Annual Meeting by visiting www.virtualsharehold ermeeting.com/ INSP2022, where stockholders may vote and submit questions (before and during) the Annual Meeting. Please have your proxy card or Notice and Access card in hand when you visit the website.
Our Board of Directors Recommendation:
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Proposal 1
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The election of Shelley G. Broader, Timothy P. Herbert, and Shawn T McCormick as Class I directors.
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The three nominees receiving the largest number of affirmative “FOR” votes will be elected as Class I directors
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FOR
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Proposal 2
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Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2022.
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Majority of votes cast
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FOR
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Proposal 3
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Approval, on an advisory (non-binding) basis, of the compensation of our named executive officers.
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Majority of votes cast
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FOR
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Inspire Medical Systems, Inc.
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Inspire Medical Systems, Inc.
5500 Wayzata Blvd., Suite 1600
Golden Valley, MN 55416

PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2019

2022 Annual Meeting of Stockholders
Thursday, April 28, 2022 at 8:00 A.M. Central Time
This proxy statement (the “Proxy Statement”) and our annual report for the fiscal year ended December 31, 20182021 (the “Annual Report” and, together with the Proxy Statement, the “proxy materials”) are being furnished by and on behalf of the board of directors (the “Board” or the “Board of Directors”) of Inspire Medical Systems, Inc. (the “Company,” “Inspire,” “we,” “us,” or “our”), in connection with our 20192022 annual meeting of stockholders (the “Annual Meeting”).

This Notice of Annual Meeting and Proxy Statement are first being distributed or made available, as the case may be, on or about March 16, 2022.

In connection with our solicitation of proxies for our 2023 annual meeting of stockholders, we intend to file a proxy statement and WHITE proxy card with the SEC. Stockholders may obtain our proxy statement (and any amendments and supplements thereto) and other documents as and when filed with the SEC without charge from the SEC’s website at: www.sec.gov.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

General Information about the Annual Meeting and Voting

Questions and Answers
When and where will the Annual Meeting be held?

The Annual Meeting will be held on Thursday, May 2, 2019April 28, 2022 at 8:00 a.m., Eastern Central Time. The Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast. You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/INSP2019INSP2022 and entering your 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials. If you lose your 16-digit control number, you may join the Annual Meeting as a “Guest” but you will not be able to vote, ask questions or access the list of stockholders as of the close of business on March 3, 2022 (the “Record Date”).

What are the purposes of the Annual Meeting?

The purpose of the Annual Meeting is to vote on the following items described in this Proxy Statement:

Proposal No. 1: Election of the director nominees listed in this Proxy Statement.
Inspire Medical Systems, Inc.
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QUESTIONS AND ANSWERS
Proposal No. 2: Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019.2022.
Proposal No. 3: Approval, on an advisory (non-binding) basis, of the compensation of our named executive officers.

Are there any matters to be voted on at the Annual Meeting that are not included in this Proxy Statement?

At the date this Proxy Statement went to press, we did not know of any matters to be properly presented at the Annual Meeting other than those referred to in this Proxy Statement. If other matters are properly presented at the meeting or any adjournment or postponement thereof for consideration, and you are a stockholder of record and have submitted a proxy card, the persons named in your proxy card will have the discretion to vote on those matters for you.

Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a paper copy of proxy materials?

The rules of the Securities and Exchange Commission (the “SEC”) permit us to furnish proxy materials, including this Proxy Statement and the Annual Report, to our stockholders by providing access to such documents on the Internet instead of mailing printed copies. Stockholders will not receive paper copies of the proxy materials unless they request them. Instead, the Notice of Internet Availability of Proxy Materials (the “Notice and Access Card”) provides instructions on how to access and review on the Internet all of the proxy

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materials. The Notice and Access Card also instructs you as to how to authorize, via the Internet, or telephone your proxy to vote your shares according to your voting instructions. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials described in the Notice and Access Card.

What does it mean if I receive more than one Notice and Access Card or more than one set of proxy materials?

It means that your shares are held in more than one account at the transfer agent and/or with banks or brokers. Please vote all of your shares. To ensure that all of your shares are voted, for each Notice and Access Card or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating, and returning the enclosed proxy card in the enclosed envelope.

Can I vote my shares by filling out and returning the Notice and Access Card?

No. The Notice and Access Card identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and Access Card and returning it. If you would like a paper proxy card, you should follow the instructions in the Notice and Access Card. The paper proxy card you receive will also provide instructions as to how to authorize via the Internet or telephone your proxy to vote your shares according to your voting instructions. Alternatively, you can mark the paper proxy card with how you would like your shares voted, sign the proxy card, and return it in the envelope provided.

Who is entitled to vote at the Annual Meeting?

Holders of record of shares of our common stock as of the close of business on March 7, 2019 (the “Record Date”)the Record Date will be entitled to notice of and to vote at the Annual Meeting and any continuation, postponement or adjournment thereof. At the close of business on the record date,Record Date, there were 23,457,46927,549,950 shares of our common stock issued and outstanding and entitled to vote. Each share of our common stock is entitled to one vote on any matter presented to stockholders at the Annual Meeting. You will need to obtain your own Internet access if you choose to attend the Annual Meeting online and/or vote over the Internet.
Inspire Medical Systems, Inc.
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QUESTIONS AND ANSWERS
To attend and participate in the Annual Meeting, you will need the 16-digit control number included in your Notice and Access Card, on your proxy card or on the instructions that accompanied your proxy materials. If your shares are held in “street name,” you should contact your bank or broker to obtain your 16-digit control number or otherwise vote through the bank or broker. If you lose your 16-digit control number, you may join the Annual Meeting as a “Guest” but you will not be able to vote, ask questions or access the list of stockholders as of the Record Date. The meeting webcast will begin promptly at 8:00 a.m., Eastern Central Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 7:45 a.m., Eastern Central Time, and you should allow ample time for the check-in procedures.

What is the difference between being a “record holder” and holding shares in “street name”?

A record holder (also called a “registered holder”) has an Inspire stock certificate or holds their Inspire shares in his or her name.an account with our transfer agent, American Stock Transfer & Trust Company, LLC. Shares held in “street name” means that shares are held in the name of a bank, broker or other nominee on the holder’s behalf.

What do I do if my shares are held in “street name”?

If your shares are held in a brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in “street name.” The Notice and Access Card or the proxy materials, if you elected to receive a hard copy, has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by following their instructions for voting. Please refer to information from your bank, broker or other nominee on how to submit your voting instructions.

How many shares must be present to hold the Annual Meeting?

A quorum must be present at the Annual Meeting for any business to be conducted. The holders of a majority in voting power of the Company’s capital stock issued and outstanding and entitled to vote, present in person, or by remote communication, or represented by proxy constitutes a quorum. If you sign and return your paper proxy card or authorize a proxy to vote electronically or telephonically, your shares will be counted to determine whether we have a quorum even if you abstain or fail to vote as indicated in the proxy materials.

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Broker non-votes will also be considered present for the purpose of determining whether there is a quorum for the Annual Meeting.

What are “broker non-votes”?

A “broker non-vote” occurs when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a proposal because (1) the broker has not received voting instructions from the stockholder who beneficially owns the shares and (2) the broker lacks the authority to vote the shares at their discretion.

Under current New York Stock Exchange (“NYSE”) interpretations that govern broker non-votes, Proposal No.Nos. 1 for the election of directors isand 3 are considered a non-discretionary matter,matters, and a broker will lack the authority to vote uninstructed shares at their discretion on such proposal.proposals. Proposal No. 2 ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm is considered a discretionary matter, and a broker will be permitted to exercise its discretion to vote uninstructed shares on thethis proposal.

What if a quorum is not present at the Annual Meeting?

If a quorum is not present or represented at the scheduled time of the Annual Meeting, (i) the chairpersonChair of the Annual Meeting or (ii) a majority in voting power of the stockholders entitled to vote at the Annual Meeting, present electronically or represented by proxy, may adjourn the Annual Meeting until a quorum is present or represented.

Inspire Medical Systems, Inc.
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QUESTIONS AND ANSWERS
How do I vote my shares without attending the Annual Meeting?

We recommend that stockholders vote by proxy even if they plan to attend the Annual Meeting and vote electronically. If you are a stockholder of record, there are three ways to vote by proxy:

by Telephone—You can vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card;
•
by Internet—You can vote over the Internet atwww.proxyvote.com by following the instructions on the Internet Notice or proxy card; or
by Mail—You can vote by mail by signing, dating, and mailing the proxy card, which you may have received by mail.

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on May 1, 2019.

April 27, 2022. If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions on how to vote from the bank, broker or holder of record. You must follow the instructions of such bank, broker or holder of record in order for your shares to be voted.

How can I attend and vote at the Annual Meeting?

We will be hosting the Annual Meeting live via audio webcast. Any stockholder can attend the Annual Meeting live online at www.virtualshareholdermeeting.com/INSP2019INSP2022. If you were a stockholder as of the Record Date, or you hold a valid proxy for the Annual Meeting, you can vote at the Annual Meeting. A summary of the information you need to attend the Annual Meeting online is provided below:

•
Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/INSP2019.INSP2022.
•
Assistance with questions regarding how to attend and participate via the Internet will be provided at www.virtualshareholdermeeting.com/INSP2019INSP2022 on the day of the Annual Meeting.
Webcast starts at 8:00 a.m., Eastern Central Time, and online check-in begins at 7:45 a.m. Central Time.
You will need your 16-Digit Control Number to enter the Annual Meeting.
Stockholders may submit questions while attending the Annual Meeting via the Internet.
Webcast replay ofTo attend and participate in the Annual Meeting, you will need the 16-digit control number included in your Notice and Access Card, on your proxy card or on the instructions that accompanied your proxy materials. If your shares are held in “street name,” you should contact your bank or broker to obtain your 16-digit control number or otherwise vote through the bank or broker. If you lose your 16-digit control number, you may join the Annual Meeting as a “Guest” but you will not be available until May 1, 2020.able to vote, ask questions or access the list of stockholders as of the Record Date.

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What if I have technical difficulties or trouble accessing the virtual meeting website during the check-in time or during the Annual Meeting I have technical difficulties or trouble accessing the virtual meeting website?

Meeting?

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the Annual Meeting login page.

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QUESTIONS AND ANSWERS
Will I be able to ask questions at the Annual Meeting?
As part of the Annual Meeting, we will hold a live Q&A session, during which we intend to answer appropriate questions submitted during the meeting and that relate to the matters to be voted on. We intend to reserve up to fifteen minutes before the closing of the polls to address questions submitted. Only stockholders that have accessed the Annual Meeting as a stockholder (rather than a “Guest”) by following the procedures outlined above in “How can I attend and vote at the Annual Meeting?” will be able to submit questions during the Annual Meeting. Additionally, our Annual Meeting will follow “Rules of Conduct,” which will be available on our Annual Meeting webpage for stockholders that have accessed the Annual Meeting as a stockholder (rather than a “Guest”). Under these Rules of Conduct, a stockholder may ask up to two questions, and we will not address questions that are, among other things:
irrelevant to the business of the Company or to the business of the Annual Meeting;
related to material non-public information of the Company;
related to personal grievances;
derogatory references to individuals or that are otherwise in bad taste;
repetitious statements already made by another stockholder;
in furtherance of the stockholder’s personal or business interests; or
out of order or not otherwise suitable for the conduct of the Annual Meeting as determined by the Chair or Corporate Secretary in their reasonable judgment.
Additional information regarding the Q&A session will be available in the “Rules of Conduct” available on the Annual Meeting webpage for stockholders that have accessed the Annual Meeting as a stockholder (rather than a “Guest”) by following the procedures outlined above in “How can I attend and vote at the Annual Meeting?”.
How does the Board recommend that I vote?

The Board recommends that you vote:

FOR the nominees to the Board set forth in this Proxy Statement.
FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019.2022.
FOR the approval, on an advisory (non-binding) basis, of the compensation of our named executive officers.
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QUESTIONS AND ANSWERS
How many votes are required to approve each proposal?

The table below summarizes the proposals that will be voted on, the vote required to approve each item, and how votes are counted:

​
Proposal
​​
Votes Required
​​
Voting Options
​​
Impact of
“Withhold” or
“Abstain” Votes
​​
Broker
Discretionary
Voting
Allowed
​
​
Proposal No. 1:
Election of
Directors
​​
The plurality of the votes cast. This means that the twothree nominees receiving the highest number of affirmative “FOR”FOR votes will be elected as Class I directors.
​​
“FOR ALL”
“WITHHOLD “WITHHOLD ALL”
“FOR “FOR ALL EXCEPT”
​​
None(1)
​​
No(3)
​
​
Proposal No. 2:
Ratification of
Appointment of
Independent
Registered Public
Accounting Firm
​​
The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled to vote thereon.
​​
“FOR”
“AGAINST”
“ABSTAIN” “ABSTAIN”
​​
None(2)
​​
Yes(4)
​
​
Proposal No. 3:
Approval, on an
advisory (non-
binding) basis, of
the compensation
of our named
executive officers
​​
The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled to vote thereon.
​​
“FOR”
“AGAINST” “ABSTAIN”
​​
None(2)
​​
No(3)
​
(1)
Votes that are “withheld” will have the same effect as an abstention and will not count as a vote “FOR” or “AGAINST” a director, because directors are elected by plurality voting.
(2)
A vote marked as an “Abstention” is not considered a vote cast and will, therefore, not affect the outcome of this proposal.
(3)
As this proposal is not considered a discretionary matter, brokers lack authority to exercise their discretion to vote uninstructed shares on this proposal.
(4)
As this proposal is considered a discretionary matter, brokers are permitted to exercise their discretion to vote uninstructed shares on this proposal.

What if I do not specify how my shares are to be voted?

If you submit a proxy but do not indicate any voting instructions, the persons named as proxies will vote in accordance with the recommendations of the Board. The Board’s recommendations are set forth above, as well as with the description of each proposal in this Proxy Statement.

Who will count the votes?

Representatives of Broadridge Investor Communications Services (“Broadridge”) will tabulate the votes, and a representative of Broadridge will act as inspector of election.

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QUESTIONS AND ANSWERS

Can I revoke or change my vote after I submit my proxy?

Yes. Whether you have voted by Internet, telephone or mail, if you are a stockholder of record, you may change your vote and revoke your proxy by:

sending a written statement to that effect to the attention of our Secretary at our corporate offices, provided such statement is received no later than May 1, 2019;
April 27, 2022;
voting again by Internet or telephone at a later time before the closing of those voting facilities at 11:59 p.m., Eastern time, on May 1, 2019;
April 27, 2022;
submitting a properly signed proxy card with a later date that is received no later than May 1, 2019;April 27, 2022; or
attending the Annual Meeting, revokerevoking your proxy and voting again.

If you hold shares in street name, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your proxy at the Annual Meeting if you obtain a signed proxy from the record holder (broker, bank or other nominee) giving you the right to vote the shares.

Your most recent proxy card or telephone or Internet proxy is the one that is counted. Your attendance at the Annual Meeting by itself will not revoke your proxy unless you give written notice of revocation to the Company before your proxy is voted or you vote at the Annual Meeting.

Who will pay for the cost of this proxy solicitation?

We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (for no additional compensation) in person or by telephone, electronic transmission, and facsimile transmission. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable expenses.

Why hold a virtual meeting?
We are excited to continue using the latest technology to provide expanded access, improved communication, and cost savings for our stockholders and the Company while providing stockholders the same rights and opportunities to participate as they would have at an in-person meeting. Furthermore, as part of our effort to maintain a safe and healthy environment for our directors, members of management, and stockholders who wish to attend the Annual Meeting, in light of the COVID-19 pandemic, we believe that hosting a virtual meeting is in the best interest of the Company and its stockholders and enables increased stockholder attendance and participation because stockholders can participate from any location around the world.

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PROPOSAL NO. 1 ELECTION OF DIRECTORS

Election of Directors
Board Size and Structure

Our certificate of incorporation as currently in effect (“Certificate of Incorporation”) provides that the number of directors shall be established from time to time by our Board of Directors. Our Board of Directors has fixed the number of directors at nine, and we currently have nine directors serving on the Board.

Our Certificate of Incorporation provides that the Board be divided into three classes, designated as Class I, Class II, and Class III. Each class must consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board. Each class of directors must stand for re-election no later than the third annual meeting of stockholders subsequent to their initial appointment or election to the Board, provided that the term of each director will continue until the election and qualification of his or her successor and is subject to his or her earlier death, resignation or removal. Generally, vacancies or newly created directorships on the Board will be filled only by vote of a majority of the directors then in office and will not be filled by the stockholders, unless the Board determines by resolution that any such vacancy or newly created directorship will be filled by the stockholders. A director appointed by the Board to fill a vacancy will hold office until the next election of the class for which such director was chosen, subject to the election and qualification of his or her successor and his or her earlier death, resignation or removal.

Current Directors and Terms

Our current directors and their respective classes and terms are set forth below.

​
Class I Director –
Current Term Ending at
2019
this Annual Meeting
​​
Class II Director –
Current Term Ending at
2020
2023 Annual Meeting
​​
Class III Director –
Current Term Ending at
2021
2024 Annual Meeting
​
​
Shelley G. Broader
​​
Gary L. Ellis
​​
Marilyn Carlson Nelson
​
​
Timothy P. Herbert
Chau Khuong
​​
Georgia Garinois-Melenikiotou
​​
Jerry C. Griffin, M.D.
​
​
Shawn T McCormick
​​
Joyce Erony
Mudit K. Jain
Dana G. Mead, Jr.
​​
Marilyn Carlson Nelson
Jerry Griffin, M.D.
Casey M. Tansey
​

Nominees for Director

Messrs.

Ms. Broader, Mr. Herbert, Khuong and Mr. McCormick have been nominated by the Board to stand for election. As the directors assigned to Class I, Messrs.Ms. Broader, Mr. Herbert, Khuong and McCormick’sMr. McCormick's current terms of service will expire at the Annual Meeting. If elected by the stockholders at the Annual Meeting, Messrs.Ms. Broader, Mr. Herbert, Khuong and Mr. McCormick will each serve for a term expiring at the annual meeting to be held in 20222025 (the “2022“2025 Annual Meeting”) and until the election and qualification of her or his successor, or until her or his earlier death, resignation or removal.

Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unable to serve. If, however, prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this
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PROPOSAL NO. 1
nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. The Board has no reason to believe that any of the nominees will be unable to serve.

Information About Board Nominees and Continuing Directors

The following pages contain certain biographical information as of March 7, 20193, 2022 for each nominee for director and each director whose term as a director will continue after the Annual Meeting, including all positions she or he holds, her or his principal occupation and business experience for the past five years, and the names of other publicly-held companies of which the director or nominee currently serves as a director or has served as a director during the past five years.

We believe that all of our directors and nominees: displaynominees have or display: personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of our Boardboard of Directorsdirectors and its committees; skills and personality that complement those of our other directors and that helps build a board that is effective, collegial and responsive to the needs of our Company;company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and

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background; and the ability to represent the interests of all of our stockholders. The information presented below regarding each nominee and continuing director also sets forth specific experience, qualifications, attributes and skills that led our Boardboard of Directorsdirectors to the conclusion that such individual should serve as a director in light of our business and structure.

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PROPOSAL NO. 1
Class I Director Nominees for Election to Three-Year Terms Expiring No Later thanat the 20222025 Annual Meeting

of Stockholders
​
Class I Directors
​​
Age
​​
Served as a
Director Since
​​
Current Positions
with Inspire
​
​
Shelley G. Broader
​​
57
​​
October 2020
​​
Director
​
​
Timothy P. Herbert
​​
5659
​​
November 2007
​​
Chief Executive Officer, President, and Director
​
Chau Khuong
​
43
April 2014
Director
Shawn T McCormick
​​
5457
​​
January 2017
​​
Director
​
Shelley G. Broader has served as a member of our Board since October 2020. Ms. Broader served as Chief Executive Officer and President of Chico’s FAS, Inc., a fashion retailer, from December 2015 to April 2019. Prior to this, Ms. Broader served at Walmart Inc., a multinational retail company, from 2009 to 2015 in various executive roles, including as President and Chief Executive Officer of the Walmart Europe, Middle East and Sub-Saharan Africa region from 2014 to 2015, President and Chief Executive Officer of Walmart Canada Corp. from 2011 to 2014, Chief Merchandising Officer of Walmart Canada Corp. from 2010 to 2011 and Senior Vice President for Sam’s Club (a division of Walmart) from 2009 to 2010. Since September 2021, Ms. Broader has served on the board of directors of Dutch Bros Inc., a drive-through coffee chain, and is a director nominee for Chobani Inc., a food company specializing in dairy products, and will serve as a director upon the completion of that company’s initial public offering. Ms. Broader previously served on the board of directors of Chico’s FAS, Inc. from 2015 to April 2019 and Raymond James Financial, Inc. from 2008 to February 2020. Ms. Broader is a member of the board of directors of the Moffitt Cancer Center’s National Board of Advisors. Ms. Broader holds a B.A. from Washington State University. We believe Ms. Broader’s significant C-suite leadership experience at a multitude of leading multinational brands enable her to make valuable contributions to our Board.

Timothy P. Herbert,, our founder, has served as our Chief Executive Officer and President and as a member of our Board since November 2007. Prior to joining us, Mr. Herbert spent 11 years at Medtronic plc, a medical equipment development company, where he held management positions in product development, clinical research, sales, marketing, and healthcare reimbursement. Mr. Herbert holds a B.S. in electrical engineering from North Dakota State University and an M.B.A. from the University of St. Thomas. We believe Mr. Herbert’sHerbert's experience in the industry, his role as our Chief Executive Officer and President and his knowledge of the Company enable him to make valuable contributions to our Board.

Chau Khuong has served as a member of our Board since April 2014. Mr. Khuong is a Partner at OrbiMed Advisors, L.L.C., a venture capital and asset management firm, which he joined in 2003. Mr. Khuong has served on the boards of directors of Aerpio Pharmaceuticals, Inc. since April 2014, Synlogic, Inc. since February 2016 and Bellus Health Inc. since December 2018. Mr. Khuong previously served as a member of the boards of directors of Otonomy, Inc. from August 2013 to July 2016, Pieris, Inc. from July 2014 to November 2017 and Nabriva Therapeutics plc (formerly Nabriva Therapeutics AG) from May 2015 to August 2017. Mr. Khuong holds a B.S. in molecular, cellular and development biology and an M.P.H. with concentration in infectious diseases, both from Yale University. We believe Mr. Khuong’s extensive public and private board experience and his experience as a venture capital investor enable him to make valuable contributions to our Board.

Shawn T McCormick has served as a member of our Board since January 2017. Mr. McCormick served as Chief Financial Officer of Aldevron, LLC, a technology company specializing in the manufacture of plasmid DNA, mRNA and proteins, from November 2020 to February 2021. Aldevron was acquired by Danaher Corporation in August 2021. Previously, Mr. McCormick served as Chief Financial Officer of Tornier N.V., a global orthopedic company, from September 2012 until October 2015 when Tornier merged with Wright Medical Group, Inc. Before Tornier, Mr. McCormick served as Chief Operating Officer of Lutonix, Inc., a medical device company, from April 2011 to February 2012, and as Chief Financial Officer and Senior Vice President of ev3 Inc., a global endovascular company, from January 2009 to July 2010, when ev3 was acquired by Covidien plc. From 20021992 to 2009, Mr. McCormick held various positions at Medtronic plc, including as its Vice President, Corporate Development, where he was responsible for leading Medtronic’sMedtronic's worldwide business development activities.activities, and Vice President of Finance for the Spinal, Biologics and Navigation business. In addition to serving on our Board, of Directors, Mr. McCormick has served on the board of directors of Nevro Corp. since September 2014 and Surmodics, Inc. since December 2015.2014. Mr. McCormick also served on the board of directors of Entellus Medical, Inc. from November 2014 to February 2018.2018, and Surmodics, Inc. from 2015 to December 2020. Mr. McCormick holds a B.S. in Accounting from Arizona State University and an M.B.A. from the University of Minnesota’sMinnesota's Carlson School of Management and is a certified public accountantCertified Public Accountant (inactive). We believe Mr. McCormick’sMcCormick's financial expertise and extensive experience in the medical device industry enable him to make valuable contributions to our Board.

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PROPOSAL NO. 1

Class II Directors Whose Terms Expire at the 20202023 Annual Meeting of Stockholders

​
Class II Directors
​​
Age
​​
Served as Director Since
​​
Current Position
atPositions with Inspire
​
​
Joyce EronyGary L. Ellis
​​
5965
​​
November 2016July 2019
​​
Director
​
​
Mudit K. JainGeorgia Garinois-Melenikiotou
​​
5062
​​
May 2009July 2020
​​
Director
​
​
Dana G. Mead, Jr.
​​
5962
​​
January 2008
​​
Director
​

Joyce EronyGary L. Ellis has served as a member of our Board since NovemberJuly 2019. Mr. Ellis was formerly with Medtronic plc and its subsidiary, Medtronic, Inc., a global medical technology company, until his retirement in December 2016. Since 2015, Ms. Erony hasWhile at Medtronic, he served as Managing Partner at Amzak Health Investors, LLC, a private investment company focused on investments in the healthcare sector. From 2008various executive capacities, including: Executive Vice President, Global Operations, Information Technology and Facilities & Real Estate of Medtronic plc from June 2016 to 2016, Ms. Erony served as a Managing Director at Signet Healthcare Partners, a venture capital investment firm. From March 2009December 2016; Executive Vice President and Chief Financial Officer of Medtronic, Inc. from 2014 to March 2014, Ms. Erony served2016; Senior Vice President and Chief Financial Officer of Medtronic, Inc. from 2005 to 2014; and Vice President, Corporate Controller and Treasurer of Medtronic, Inc. from 1999 to 2005. Mr. Ellis currently serves on the board of directors of Teligent,The Toro Company, a manufacturer of outdoor maintenance equipment, and previously served on the boards of directors of Hill-Rom Holdings, Inc., a specialty generic pharmaceutical company. Ms. Eronymedical equipment manufacturing company from 2017 to December 2021, and Itamar Medical Ltd., a maker of home medical equipment for sleep apnea from 2007 to 2017. Mr. Ellis holds a B.S.C. from Case Western Reserve University and a Graduate DiplomaB.S. in Accounting from the London SchoolUniversity of Economics.South Dakota and is a Certified Public Accountant (inactive). We believe Ms. Erony’sMr. Ellis’ financial expertise and extensive experience in the healthcare investmentmedical device industry enables herenable him to make valuable contributions to our Board.

Mudit K. Jain

Georgia Garinois-Melenikiotou has served as a member of our Board since July 2020. Ms. Garinois-Melenikiotou was formerly Executive Vice President, Corporate Marketing at The Estée Lauder Companies (“ELC”), a global beauty products company, from 2015 through July 2020 and ELC’s Senior Vice President, Corporate Marketing from 2010 through 2014. Prior to ELC, Ms. Garinois-Melenikiotou had a 27-year career at Johnson & Johnson, a global manufacturer of medical devices, pharmaceutical products, and consumer packaged goods, including several senior leadership positions, most recently as President, Beauty Global Business Unit Strategy and New Growth from 2007 to 2010 and, prior to that, as President, Beauty Care, EAME from 2006 to 2007. Ms. Garinois-Melenikiotou has served on the Board of Directors of Almirall, S.A., a Spanish pharmaceutical company, since 2015, Pulmonx Corporation, a medical technology company, since September 2020, and Natura & Co, a personal care cosmetics company, since May 2009. Mr. Jain currently serves as a Founding General Partner at Strategic Healthcare Investment Partners, LLC, a venture capital investment firm, and previously served as a Managing Director at Synergy Venture Partners, LLC, a venture capital investment firm, from 2013 to September 2018. Mr. Jain2021. Ms. Garinois-Melenikiotou holds a B.E.B.S. and an M.S. in engineering from the Visvesvaraya Regional CollegeNational Technical University of Engineering,Athens and an M.B.A. from the WhartonSloan School of the University of Pennsylvania and a Ph.D. in biomedical engineering from Duke University.Management at M.I.T. We believe Mr. Jain’s experience as a venture capital investor andMs. Garinois-Melenikiotou’s expertise in biomedical engineeringglobal consumer marketing, as well as broad corporate management experience through various senior level roles at multinational companies, enable himher to make valuable contributions to our Board.

Dana G. Mead, Jr. has served as a member of our Board since JanuaryJuly 2008. Mr. Mead currently servesserved from May 2019 to February 2021 as the Chief Executive Officer and President of HeartFlow, Inc., a digital health company transforming how heart disease is diagnosed and treated. From 2016 to May 2019, Mr. Mead served as the Chief Executive Officer and President of Beaver-Visitec International, Inc., a surgical device developer and manufacturer. From May 2016 to December 2016, Mr. Mead served on the board of directors of Teladoc, Inc., a telehealth company. From 2005 to 2016, Mr. Mead served as a Partner at Kleiner Perkins Caufield & Byers, a venture capital investment firm. In addition to serving on our Board of Directors, Mr. Mead has served on the board of directors of Intersect ENT, Inc., a medical technology company, since June 2015.2015, Inari Medical Inc., a commercial-stage medical device company since October 2021, and Pulmonx Corporation, a medical technology company since November 2020. Mr. Mead holds a B.A. from Lafayette College and an M.B.A. from the University of Southern California. We believe Mr. Mead’s extensive directorship experience and his broad experience in the healthcare industry enable him to make valuable contributions to our Board.

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PROPOSAL NO. 1
Class III Directors Whose Terms Expire at the 20212024 Annual Meeting of Stockholders

​
Class III Directors
​​
Age
​​
Served as Director Since
​​
Current Position
atPositions with Inspire
​
​
Marilyn Carlson Nelson
​���
7982
​​
November 2016
​​
Chair of the Board
​
​
Jerry C. Griffin, M.D.
​​
7477
​​
January 2008
​​
Director
​
​
Casey M. Tansey
​​
6164
​​
January 2008
​​
Director
​

Marilyn Carlson Nelson has served as a member of our Board and as its Chair since November 2016. Since 1999, Ms. Nelson has served as Co-Chair of the board of directors and Co-Chief Executive Officer of Carlson Holdings, Inc., an international holdings company.company, from 1999 until her retirement in June 2020. Ms. Nelson previously served as a member of the board of directors of Carlson, Inc., a hospitality and travel company, from 1989 to 2015, and as its Chief Executive Officer from 1998 to 2008. Ms. Nelson also served on the board of directors of ExxonMobil from 1991 to 2012. Ms. Nelson holds a B.A. in international economics from Smith College and honorary doctorates from Smith College, the University of Minnesota, Johnson & Wales University, Gustavus Adolphus College, and the College of St. Catherine. We believe Ms. Nelson’s extensive public and private board experience and her knowledge of the Company as one of our early investors enable her to make valuable contributions to our Board of Directors.

Board.

Jerry C. Griffin, M.D. has served as a member of our Board since January 2008. Since 2006, Dr. Griffin has served as President of Griffin & Schwartz, Scientific Services, Inc., a management consulting firm in the healthcare products industry. From September 2000 to June 2006, Dr. Griffin served as President, Chief Executive Officer and a Director of POINT Biomedical Corp., a developer of pharmaceutical products for use with ultrasound imaging. Dr. Griffin has also been a professor or assistant professor in the Department of Medicine, Division of

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Cardiology at various teaching institutions. Dr. Griffin holds a B.S. from the University of Southern Mississippi and a M.D. from the University of Mississippi. We believe Dr. Griffin’sGriffin's public and private board experience and his extensive experience in the healthcare products industry enable him to make valuable contributions to our Board.

Casey M. Tansey has served as a member of our Board since January 2008. Since August 2014, Mr. Tansey has served as a Managing Partner of U.S. Venture Partners (“USVP”), a venture capital investment firm, and, from April 2005 to July 2014, as a Managing Member of USVP. Mr. Tansey previously served on the board of directors of Intersect ENT, Inc. from 2006 to 2017 and Reshape Medical, Inc. from October 2008 to October 2017. Mr. Tansey holds a B.S. and M.B.A. from the College of Notre Dame. We believe Mr. Casey’s extensive experience in the medical device industry enables him to make valuable contributions to our Board.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the election of Shelley G. Broader, Timothy P. Herbert, Chau Khuong and Shawn T McCormick as Class I directors to hold office until the 2022 Annual MeetingCompany’s annual meeting of stockholders to be held in 2025 and until their respective successors have been duly elected and qualified.

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PROPOSAL NO. 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ratification of Appointment of Independent Registered Public Accounting Firm

Appointment of Independent Registered Public Accounting Firm
The audit committee appoints our independent registered public accounting firm. In this regard, the audit committee evaluates the qualifications, performance, and independence of our independent registered public accounting firm and determines whether to re-engage our current firm. As part of its evaluation, the audit committee considers, among other factors, the quality and efficiency of the services provided by the firm, including the performance, technical expertise, industry knowledge, and experience of the lead audit partner and the audit team assigned to our account; the overall strength and reputation of the firm; the firm’s global capabilities relative to our business; and the firm’s knowledge of our operations. Ernst & Young LLP has served as our independent registered public accounting firm since 2015. Neither the accounting firm nor any of its members has any direct or indirect financial interest in or any connection with us in any capacity other than as our auditors and providing audit and permissible non-audit related services. Upon consideration of these and other factors, the audit committee has appointed Ernst & Young LLP to serve as our independent registered public accounting firm for the year ending December 31, 2019.

2022.

Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm and it is a good corporate governance practice. If our stockholders do not ratify the selection, it will be considered as notice to the Board and the audit committee to consider the selection of a different firm. Even if the selection is ratified, the audit committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

Representatives of Ernst & Young LLP are expected to attend the Annual Meeting and to have an opportunity to make a statement and be available to respond to appropriate questions from stockholders.

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PROPOSAL NO. 2
Audit, Audit-Related, Tax, and All Other Fees

The table below sets forth the aggregate fees billed to Inspire for services related to the fiscal years ended December 31, 20182021 and 2017,2020, respectively, by Ernst & Young LLP, our independent registered public accounting firm.

 
Year Ended December 31,
 
2018
2017
Audit Fees(1)
$
605,061
 
$
76,438
 
Audit-Related Fees(2)
 
0
 
 
0
 
Tax Fees(3)
 
55,711
 
 
31,658
 
All Other Fees(4)
 
2,000
 
 
0
 
Total
$
662,772
 
$
108,096
 
​
 
​​
Year Ended December 31,
​
​
​​
2021
​​
2020
​
​
Audit Fees(1)
​​
$400,000
​​
$473,528
​
​
Audit-Related Fees(2)
​​
20,000
​​
25,800
​
​
Tax Fees(3)
​​
119,496
​​
116,393
​
​
All Other Fees(4)
​​
2,545
​​
3,325
​
​
Total
​​
542,041
​​
619,046
​
(1)
Audit Fees for both years presented consist of fees billed for professional services by Ernst & Young LLP for the audit of our annual consolidated financial statements, related services that are normally provided in connection with statutory and regulatory filings or engagements, and, in fiscal 2020 only, fees in connection with our Form S-1 registration statements for our initial public offering (“IPO”) and, in 2018 only, our follow-on offering.
(2)
Audit-Related Fees for both years consist of fees billed by Ernst & Young LLP for assurance and relatedan audit of the Company’s 401(k) plan. Fees for the same services that are reasonably relatedin fiscal 2020 have been reclassified to conform to the performance of the audit or review of our financial statements.current presentation.
(3)
Tax Fees consist of fees for professional services, including tax consulting and compliance performed by Ernst & Young LLP.
(4)
All Other Fees consist of an online accounting research tool subscription.

Pre-Approval Policies and Procedures

The formal written charter for our audit committee requires that the audit committee pre-approve all audit services to be provided to us, whether provided by our principal auditor or other firms, and all other services (review, attest, and non-audit) to be provided to us by our independent registered public accounting firm, other than de minimis non-audit services approved in accordance with applicable SEC rules.

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The audit committee has adopted a pre-approval policy that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by our independent registered public accounting firm may be pre-approved. This pre-approval policy generally provides that the audit committee will not engage an independent registered public accounting firm to render any audit, audit-related, tax or permissible non-audit service unless the service is either (i) explicitly approved by the audit committee or (ii) entered into pursuant to the pre-approval policies and procedures described in the pre-approval policy. Unless a type of service to be provided by our independent registered public accounting firm has received this latter general pre-approval under the pre-approval policy, it requires specific pre-approval by the audit committee.

On an annual basis, the audit committee reviews and generally pre-approves the services (and related fee levels or budgeted amounts) that may be provided by the Company’s independent registered public accounting firm without first obtaining specific pre-approval from the audit committee. The audit committee may revise the list of general pre-approved services from time to time, based on subsequent determinations. Any member of the audit committee to whom the committee delegates authority to make pre-approval decisions must report any such pre-approval decisions to the audit committee at its next scheduled meeting. If circumstances arise where it becomes necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories or above the pre-approved amounts, the audit committee requires pre-approval for such additional services or such additional amounts.
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PROPOSAL NO. 2
The services provided to us by Ernst & Young LLP in 2017fiscal 2020 and 2018fiscal 2021 were provided in accordance with our pre-approval policies and procedures, as applicable.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019.

2022.
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Audit Committee Report

The audit committee operates pursuant to a charter which is reviewed annually by the audit committee. Additionally, a brief description of the primary responsibilities of the audit committee is included in this Proxy Statement under the discussion of “Corporate Governance— Audit Committee.” Under the audit committee charter, management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the application of accounting and financial reporting principles, and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States.

In the performance of its oversight function, the audit committee reviewed and discussed with management and Ernst & Young LLP, as the Company’s independent registered public accounting firm, the Company’s audited financial statements for the fiscal year ended December 31, 2018.2021. The audit committee also discussed with the Company’s independent registered public accounting firm the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board (the “PCAOB”). and the SEC. In addition, the audit committee received and reviewed the written disclosures and the letters from the Company’s independent registered public accounting firm required by applicable requirements of the PCAOB regarding such independent registered public accounting firm’s communications with the audit committee concerning independence, and discussed with the Company’s independent registered public accounting firm their independence from the Company.

Based upon the review and discussions described in the preceding paragraph, the audit committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 20182021 filed with the SEC.

Submitted by the Audit Committeeaudit committee of the Company’s Board of Directors:

Shawn T McCormick (Chair)
Mudit K. Jain
Georgia Garinois-Melenikiotou
Dana G. Mead, Jr.

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Executive Officers
EXECUTIVE OFFICERS

The table below identifies and sets forth certain biographical and other information regarding our executive officers as of March 7, 2019.3, 2022. There are no family relationships among any of our executive officers or directors.

Executive Officer
Age
Position
In Current
Position Since
Timothy Herbert
56
Chief Executive Officer, President and Director
2007
Richard Buchholz
51
Chief Financial Officer
2014
Randy Ban
54
Senior Vice President, Global Sales and Marketing
2009
Steven Jandrich
52
Chief Compliance Officer and Vice President, Human Resources
2017
​
Executive Officer
​​
Age
​​
Position
​​
In Current
Position Since
​
​
Timothy P. Herbert
​​
59
​​
Chief Executive Officer, President, and Director
​​
2007
​
​
Richard J. Buchholz
​​
54
​​
Chief Financial Officer
​​
2014
​
​
Randall A. Ban
​​
57
​​
Chief Commercial Officer
​​
2009
​
​
Philip J. Ebeling
​​
51
​​
Chief Operating Officer
​​
2020
​
​
Steven L. Jandrich
​​
55
​​
Vice President, Human Resources
​​
2017
​
​
Bryan K. Phillips
​​
50
​​
Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer
​​
2021
​

See page 711 of this Proxy Statement for Timothy P. Herbert’s biography.

Richard J. Buchholz has served as our Chief Financial Officer since May 2014. Prior to joining us, Mr. Buchholz served as the Chief Financial Officer, Secretary, and Treasurer at superDimension, Ltd., a medical device manufacturer (which was acquired by Covidien plc in May 2012), from August 2006 to July 2013. Mr. Buchholz holds a B.B.A. from the University of Wisconsin, Eau Claire and is a certified public accountantCertified Public Accountant (inactive).

Randy

Randall A. Ban has served as our Chief Commercial Officer since July 2019. Prior to that, he served as our Senior Vice President, Sales and Marketing from July 2009 to December 2018 and, in December 2018, his title was changed to Senior Vice President, Global Sales and Marketing. Prior toBefore joining us, Mr. Banhe served as Chief Operating Officer at Vertebral Technologies Inc., a medical device company, from 2008 to 2009. From 20061994 to 2008, Mr. Ban served as Vice Presidentworked in a variety of Global Marketing, CRMsales and marketing leadership positions while at Guidant Corporation (Guidant was acquired by Boston Scientific.Scientific in 2006). He began his career at Eli Lilly and Company in 1990. Mr. Ban holds a B.S. in marketing and an M.B.A., both from Indiana University.

Steven Jandrich

Philip J. Ebeling has served as our Chief ComplianceOperating Officer since June 2020. Prior to joining Inspire, he worked for Abbott Laboratories as Vice President and Chief Technology Officer in the Cardiovascular and Neuromodulation Division from January 2017 to March 2018. From January 2016 to January 2017, Mr. Ebeling was Chief Technology Officer of St. Jude Medical, Inc., a medical device company that was acquired by Abbott Laboratories in January 2017. Prior to that, Mr. Ebeling served in various other roles at St. Jude Medical, Inc., including Senior Vice President, Research and Development in the Cardiovascular and Electrophysiology Division from 2012 to January 2016 and Vice President of Research and Development for the Cardiovascular Division from 2008 to 2011. Before joining St. Jude Medical in 2008, Mr. Ebeling spent 12 years at Boston Scientific Corporation where he held numerous positions including Director of Program Management—Risk Management. Mr. Ebeling has a B.S. in Chemical Engineering from the University of Minnesota and an MBA from the University of St. Thomas. He is a member of the National Society of Professional Engineers.
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EXECUTIVE OFFICERS
Steven L. Jandrich has served as our Vice President, Human Resources since September 2017. From May 20152017, and as our Chief Compliance Officer from September 2017 to September 2017,January 2021. Mr. Jandrich served as Vice President, Human Resources for Link Snacks, Inc., a multinational retail snack producer where he led human resources functions including talent management and employee relations.from 2015 to September 2017. From April 2001 tothrough April 2015, Mr. Jandrich was an employee ofheld several leadership positions at St. Jude Medical Inc., and from January 2013 to April 2015 Mr. Jandrich served as itswhich included Vice President of Commercial OperationsHuman Resources, leading the International Division's human resources and was responsible for establishing its global sales training program.commercial operations functions through rapid development. Mr. Jandrich holds a B.B.A. and M.B.A., both from the University of St. Thomas.

Bryan K. Phillips has served as our Senior Vice President, General Counsel, Secretary and Chief Compliance Officer since January 2021. From December 2019 to January 2021, Mr. Phillips served as Chief Legal Officer of Cerevel Therapeutics Holdings, Inc., a biopharmaceutical company. From 2005 to November 2019, Mr. Phillips held several positions of increasing responsibility at Surmodics, Inc., a medical technology company, most recently as its Senior Vice President, Legal and Human Resources, General Counsel, and Secretary. Previously, Mr. Phillips served as Patent Counsel at Guidant Corporation’s Cardiac Rhythm Management Group (now part of Boston Scientific) from 2001 to 2005. Mr. Phillips began his legal career at a Minneapolis-based intellectual property law firm. Mr. Phillips earned a B.S. in mechanical engineering from the University of Kansas and a J.D. from the University of Minnesota Law School.

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Corporate Governance
CORPORATE GOVERNANCE

Corporate Governance Guidelines

Our Board of Directors has adopted Corporate Governance Guidelines. A copy of these Corporate Governance Guidelines can be found in the “Corporate Governance—Governance Documents” section of the “Investors” page of our website located at www.inspiresleep.com, or by writing to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. Among the topics addressed in our Corporate Governance Guidelines are:

​
•
​​
Board size, independence and qualifications
​​
•
​​
Stock ownership
​
​
•
​​
Executive sessions of independent directors
​​
•
​​
Board access to senior management
​
​
•
​​
Board leadership structure
​​
•
​​
Board access to independent advisors
​
​
•
​​
Selection of new directors
​​
•
​​
Board self-evaluations
​
​
•
​​
Director orientation and continuing education
​​
•
​​
Board meetings
​
​
•
​​
Limits on board service
​​
•
​​
Meeting attendance by directors and non-directors
​
​
•
​​
Change of principal occupation
​​
•
​​
Meeting materials
​
​
•
​​
Term limits
​​
•
​​
Board committees, responsibilities and independence
​
​
•
​​
Director responsibilities
​​
•
​​
Succession planning
​
​
•
​​
Director compensation
​​
​​
​
Board size, independence and qualifications
Executive sessions of independent directors
Board leadership structure
Selection of new directors
Director orientation and continuing education
Limits on board service
Change of principal occupation
Term limits
Director responsibilities
Director compensation
Stock ownership
Board access to senior management
Board access to independent advisors
Board self-evaluations
Board meetings
Meeting attendance by directors and non-directors
Meeting materials
Board committees, responsibilities and independence
Succession planning

Board Leadership Structure

Our Corporate Governance Guidelines provide our Board of Directors with flexibility to combine or separate the positions of ChairpersonChair of the Board and Chief Executive Officer in accordance with its determination that utilizing one or the other structure would be in the best interests of the Company and its stockholders. If the ChairpersonChair of the Board is a member of management or does not otherwise qualify as independent, our Corporate Governance Guidelines provide for the appointment by the independent directors of a lead independent director (the “Lead Director”). by the independent directors of the Board. The Lead Director’s responsibilities include, but are not limited to: presiding over all meetings of the Board at which the ChairpersonChair of the Board is not present, including any executive sessions of the independent directors; approving Board meeting schedules and agendas; and acting as the liaison between the independent directors and the Chief Executive Officer and ChairpersonChair of the Board. Our Corporate Governance Guidelines provide that, at such times as the ChairpersonChair of the Board qualifies as independent, the ChairpersonChair of the Board will serve as Lead Director.

The positions of Ourour Chair of the Board and our Chief Executive Officer and President are currently served by two separate persons. Ms. Nelson serves as ChairmanChair of the Board, and Mr. Herbert serves as our Chief Executive Officer and President. In her capacity as the independent Board Chair, Ms. Nelson performs the functions of the Lead Director.
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CORPORATE GOVERNANCE
The Board believes that our current leadership structure of Chief Executive Officer and Chair of the Board being held by two separate individuals is in the best interests of the Company and its stockholders and strikes the appropriate balance between the Chief Executive Officer and President’s responsibility for the strategic direction, day-to day-leadership, and performance of our Company and the Chair of the Board’s responsibility to guide the overall strategic direction of our Company, and provide oversight of our corporate governance and guidance to our Chief Executive Officer and President and to set the agenda for and preside over Board meetings. We recognize that different leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies. Accordingly, the Board will continue to periodically review our leadership structure and make such changes in the future as it deems appropriate and in the best interests of the Company and its stockholders.

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Director Independence

Under our Corporate Governance Guidelines and the NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with us or any of our subsidiaries.us. In addition, the director must meet the bright-line tests for independence set forth by the NYSE rules.

Our Board has undertaken a review of its composition, the composition of its committees, and the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that none of Ms. Erony,Broader, Mr. Ellis, Ms. Garinois-Melenikiotou, Dr. Griffin, Mr. Jain, Mr. Khuong, Mr. McCormick, Mr. Mead, Ms. Nelson or Mr. Tansey, representing eight of our nine directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors qualifies as “independent” as that term is defined under the rules of the NYSE. In making this determination,these determinations, our Board of Directors considered the relationships that each non-employee director has with us and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the director’s beneficial ownership of our common stock and the relationships of our non-employee directors with certain of our significant stockholders.

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CORPORATE GOVERNANCE
Board Committees

Our Board of Directors has three standing committees: an audit committee, aan organization and compensation committee, and a nominating and corporate governance committee, each of which has the composition and the responsibilities described below. In addition, from time to time, special committees may be established under the direction of our Board when necessary to address specific issues. Each of the audit committee, the organization and compensation committee, and the nominating and corporate governance committee operates under a written charter.

​
Director
​​
Audit
Committee
​​
Organization and
Compensation
Committee(1)
​​
Nominating and Corporate
Governance Committee
​
​
Joyce EronyShelley G. Broader
​​
—
​​
—X
Chair
​
Jerry Griffin, M.D.
​
—
X
X
​
​
Timothy HerbertGary L. Ellis
​​
—
—
​		​
—
​​
Chair
​
​
Mudit K. JainGeorgia Garinois-Melenikiotou
​​
X
—
​
—
Chau Khuong
​
—
X
​		​
—
​
​
Jerry C. Griffin, M.D.
​​
—
​​
X
​​
X
​
​
Timothy P. Herbert
​​
—
​​
—
​​
—
​
​
Dana G. Mead, Jr.
​​
X
​​
—
​​
—
​
​
Shawn T McCormick
​​
Chair
​​
—
​​
—
​
​
Marilyn Carlson Nelson
—
​		​
—
X
​
Casey Tansey
​
—
​​
ChairX
​
​
Casey M. Tansey
​​
—
​​
Chair
​​
—
​
(1)
In early 2022, the Board of Directors approved revisions to the compensation committee’s charter which, among other things, changed the name of that committee to the organization and compensation committee.
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CORPORATE GOVERNANCE

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process and assists our Board of Directors in its oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our risk management program, (iv) the performance of our independent auditor, and (v) the design and implementation of our internal audit function and internal controls. Our audit committee is responsible for, among other things:

appointing, compensating, retaining, and overseeing the work of our independent auditor and any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for us;
discussing with our independent auditor any audit problems or difficulties and management’s response;
pre-approving all audit and non-audit services provided to us by our independent auditor (other than those provided pursuant to appropriate preapproval policies established by the committee or exempt from such requirement under SEC rules);

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reviewing and discussing our annual and quarterly financial statements with management and our independent registered public accounting firm;
discussing and overseeing our policies with respect to risk assessment and risk management;management, including major financial risk exposures and the steps management has taken to monitor and control such exposures; and
establishing, and annually reviewing, procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and for the confidential and anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

The audit committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time. The audit committee has the authority to engage independent legal, accounting, and other advisors as it deems necessary or appropriate to assist in carrying out its responsibilities, and we must pay the compensation of such advisors.

Our audit committee currently consists of Messrs. Jain,Ms. Garinois-Melenikiotou, Mr. McCormick, and Mr. Mead, with Mr. McCormick serving as chair. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the NYSE. Our Board of Directors has affirmatively determined that each of Messrs. Jain,Ms. Garinois-Melenikiotou, Mr. McCormick, and Mr. Mead qualifies as “independent” under NYSE’s heightenedadditional standards applicable to audit committee members and Rule 10A-3 of the Exchange Act of 1934, as amended (the “Exchange Act”) applicable audit committee members.. In addition, our Board of Directors has determined that Messrs. Jain,Ms. Garinois-Melenikiotou, Mr. McCormick, and Mr. Mead each qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

The determination by our Board of Directors for Mr. McCormick was made based on experience and education which demonstrate his attributes as an audit committee financial expert, including the fact that he has been the chief financial officer of several medical technology companies and is a Certified Public Accountant (inactive), holding a degree in accounting and a M.B.A. Both Ms. Garinois-Melenikiotou and Mr. Mead also have education and experience supporting their determination by the Board of Directors as audit committee financial experts, including that both have M.B.A. degrees and financial oversight experience, with Ms. Garinois-Melenikiotou gaining this experience as a president at Johnson & Johnson and Mr. Mead gaining this experience as a chief executive officer of several medical technology companies.
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CORPORATE GOVERNANCE
Organization and Compensation Committee

Our organization and compensation committee oversees our human capital strategies and programs, and our compensation policies, plans, and benefits programs. Our compensationThe committee is responsible for, among other things:

reviewing and approving corporate goals and objectives with respect to the compensation of our Chief Executive Officer, evaluating our Chief Executive Officer’s performance in light of these goals and objectives, and setting the Chief Executive Officer’s compensation;
reviewing and setting or making recommendations to our Board of Directors regardingapproving the compensation of our other executive officers;
reviewing and making recommendations to our Board of Directors regarding director compensation;
reviewing and approving or making recommendations to our Board of Directors regarding our incentive compensation and equity-based plans and arrangements;
reviewing the Company’s human capital management strategies, programs, and initiatives;
overseeing the Company’s strategy policies and practices and related reporting with respect to significant environmental, social and governance (“ESG”) matters, in coordination with other Board committees, with a focus on social matters; and
appointing and overseeing any compensation consultants.

The organization and compensation committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time.

Our organization and compensation committee currently consists of Ms. Broader, Dr. Griffin, Mr. Khuong and Mr. Tansey, with Mr. Tansey serving as chair. Our Board of Directors has determined that each of Ms. Broader, Dr. Griffin, and Messrs. Khuong andMr. Tansey qualify as “independent” under NYSE’s heightenedadditional standards applicable to compensation committee members and as a “non-employee directors” as defined in SectionRule 16b-3 of the Exchange Act.

The organization and compensation committee has the authority to retain or obtain the advice of compensation consultants, legal counsel, and other advisors to assist in carrying out its responsibilities. Before selecting any such consultant, counsel or advisor, the organization and compensation committee reviews and considers the independence of such consultant, counsel, or advisor in accordance with applicable NYSE rules. We must provide appropriate funding for payment of reasonable compensation to any advisor retained by the organization and compensation committee.

Compensation Consultants

COMPENSATION CONSULTANTS
The organization and compensation committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable. In accordance with this authority, the organization and compensation committee has engaged the services of Aon, which is part of the Rewards Solutions practice at Aon plc, as its independent outside compensation consultant.

All executive compensation services provided by Aon during 2018fiscal 2021 were conducted under the direction or authority of the organization and compensation committee, and all work performed by Aon was pre-approved by the organization and compensation

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committee. Aon’s services during fiscal 2021 included, among other things, reviewing the Company’s executive compensation policy, evaluating the Company’s peer group used to set executive compensation, providing benchmark data as well as broad market data regarding compensation for executives serving in similar capacities, and providing information on current trends and developments in executive and director compensation. Neither Aon nor any of its affiliates maintains any other direct or indirect business relationships with us or any of our subsidiaries. The organization and compensation committee evaluated whether any work provided by Aon raised any conflict of interest for services performed during 2018fiscal 2021 and determined that it did not.

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CORPORATE GOVERNANCE
Additionally, during 2018,fiscal 2021, Aon did not provide any services to us unrelated to executive and director compensation.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 2021 fiscal year, the members of our organization and compensation committee were Ms. Broader, Dr. Griffin, and Mr. Tansey, none of whom was, during the fiscal year, an officer or employee of the Company and none of whom was formerly an officer of the Company. During fiscal 2021, none of our executive officers served as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that had one or more executive officers serving on our Board or organization and compensation committee. During the fiscal year ended December 31, 2021, no other relationships required to be disclosed by the rules of the SEC existed aside from those identified herein.
Nominating and Corporate Governance Committee

Our nominating and corporate governance committee oversees and assists our Board of Directors in reviewing and recommending nominees for election as directors. Our nominating and corporate governance committee is responsible for, among other things:

identifying individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors;
recommending to our Board of Directors the nominees for election to our Board of Directors at annual meetings of our stockholders;
overseeing the Company’s strategy policies and practices and related reporting with respect to significant ESG matters, in coordination with other Board committees; and
overseeing the annual self-evaluations of our Board of Directors and management; and
developing and recommending to our Board of Directors a set of corporate governance guidelines and principles.

The nominating and corporate governance committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time. The nominating and corporate governance committee has the authority to retain any search firm to be used to identify director nominees and independent legal and other advisors as it deems necessary or appropriate to carry out its responsibilities and we will pay the compensation of any such firm or advisor engaged.

During fiscal 2021, the nominating and governance committee retained Russell Reynolds Associates Inc. (“Russell Reynolds”), a global executive search firm to assist in the identification and assessment of potential director candidates.

Our nominating and corporate governance committee currently consists of Ms. Erony,Mr. Ellis, Dr. Griffin, and Ms. Nelson, with Ms. EronyMr. Ellis serving as chair. Our Board has determined that each of Ms. Erony,Mr. Ellis, Dr. Griffin, and Ms. Nelson qualifies as “independent” under applicable NYSE rules for purposes of serving on the nominating and corporate governance committee.

Board and Board Committee Meetings and Attendance

During fiscal 2018,2021, our Board of Directors met 12seven times, the audit committee met 11four times, the organization and compensation committee met threefive times, and the nominating and corporate governance committee met twofour times. In 2018,fiscal 2021, each of our directors attended at least 75%80% of the meetings of the Board and committees on which he or she served as a member.

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CORPORATE GOVERNANCE
Executive Sessions

Executive sessions, which are meetings of the non-management members of the Board, are regularly scheduled throughout the year. In addition, at least once a year, the independent directors meet in a private session that excludes management and any non-independent directors. AtThe Chair of the Board presides at each of these meetings and, in her absence, the non-management and independent directors in attendance, as applicable, determine which member will preside at such session.

Director Attendance at Annual Meeting of Stockholders

We do not have a formal policy regarding the attendance of our Board members at our annual meetings of stockholders, but we expect all directors to make every effort to attend any meeting of stockholders.

All of our directors attended our annual meeting of stockholders held in fiscal 2021.

Director Nominations Process

The nominating and corporate governance committee is responsible for recommending candidates to serve on the Board and its committees. In considering whether to recommend any particular candidate to serve on the Board or its committees or for inclusion in the Board’s slate of recommended director nominees for election at the annual meeting of stockholders, the nominating and corporate governance committee considers the criteria set forth in our Corporate Governance Guidelines. Specifically, the nominating and corporate governance committee considers candidates who have a high level of personal and professional integrity, strong ethics and values, and

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the ability to make mature business judgments. In addition to any factors they deem relevant, the nominating and corporate governance committee may consider: the candidate’s experience in corporate management, such as serving as an officer or former officer of a publicly held company; the candidate’s experience as a board member of another publicly held company; the candidate’s professional and academic experience relevant to the Company’s industry; the strength of the candidate’s leadership skills; the candidate’s experience in finance and accounting and/or executive compensation practices; whether the candidate has the time required for preparation, participation, and attendance at Board meetings and committee meetings, if applicable; and the candidate’s geographic background, gender, age, and ethnicity.

We do not have a formal policy with regard to the consideration ofconsider diversity, such as, gender, race, and ethnicity, in identifying director nominees. nominees and view such diversity characteristics as meaningful factors to consider. Currently, three of our Board members, self-identify as women. Moreover, the nominating and corporate governance committee is committed to identifying qualified diverse candidates for our Board, including diversity of gender, race and ethnicity. In furtherance of this commitment, the nominating and corporate governance committee will seek to include women, and ethnically and racially diverse candidates in the initial list of candidates from which it will select prospective director candidates in each future director search, and will require that any search firm it may engage to assist with a director search do the same. The nominating and corporate governance committee has set as a goal the addition of a new director who is ethnically or racially diverse before our 2023 annual meeting of stockholders.
The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. In determining whether to recommend a director for re-election, the nominating and corporate governance committee may also consider potential conflicts of interest with the candidatescandidate’s other personal and profession pursuits.

In identifying prospective director candidates, the nominating and corporate governance committee may seek referrals from other members of the Board, management, stockholders, and other sources, including third party recommendations. The nominating and corporate governance committee also may, but need not, retain a third-party search firm in order to assist it in identifying candidates to serve as directors of the Company. The nominating and corporate governance committee uses the same criteria for evaluating candidates regardless of the source of the referral or recommendation. When considering director candidates, the nominating and corporate governance
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committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent directors, provide a blend of skills and experience to further enhance the Board’s effectiveness. In connection with its annual recommendation of a slate of nominees, the nominating and corporate governance committee also may assess the contributions of those directors recommended for re-election in the context of the Board evaluation process and other perceived needs of the Board.

Prior to our initial public offering

The Nominating and in connection with their investment inCorporate Governance Committee has recommended, and the Company, certainBoard of our pre-IPO investors were entitled to designate a member to serve on our Board pursuant to a Voting Agreement. Pursuant to this Voting Agreement, Joyce Erony was designated by Amzak Health Investors, LLC, Mudit K. Jain was designated by Synergy Life Science Partners, Chau Khuong was designated by OrbiMed Private Investments V, L.P., DanaDirectors selected, Shelley G. Mead, Jr. was designated by KPCB Holdings, Inc., Marilyn Carlson Nelson was designated by GDN Holdings, LLC.,Broader, Timothy P. Herbert, and Casey Tansey was designated by U.S. Venture Partners IX, L.P. Mr. Griffin was identified by a former member of our Board, and Mr.Shawn T McCormick was identified by management, in each case, to be considered as a nominee to serve on the Board.Board's nominees for election as Class I directors at the Annual Meeting. Each of the director nominees to be elected at the Annual Meeting was evaluated in accordance with our standard review process for director candidates in connection with their initial appointment and their nomination for election or re-election, as applicable, at the Annual Meeting. The Voting Agreement terminated by its terms in connectionMs. Broader was identified with the closingassistance of our IPO, and none of our stockholders currently have any continuing rights regarding the election or designation of members of our Board of Directors.

Russell Reynolds.

When considering whether the directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focused primarily on the information discussed in each of the board member’s biographical information set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. This process resulted in the Board’s nomination of the incumbent directors named in this Proxy Statement and proposed for election by you at the Annual Meeting.

The nominating and corporate governance committee will consider director candidates recommended by stockholders, and such candidates will be considered and evaluated under the same criteria described above. Any recommendation submitted to the Company should be in writing and should include any supporting material the stockholder considers appropriate in support of that recommendation, but must include information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such candidate and a written consent of the candidate to serve as one of our directors if elected and must otherwise comply with the requirements under our bylaws for stockholders to recommend director nominees.elected. Stockholders wishing to propose a candidate for consideration may do so by submitting the above information to the attention of the Secretary, Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. All recommendations for director nominations received by the Secretary that satisfy our by-law requirements relating

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to such director nominations will be presented to the nominating and corporate governance committee for its consideration. Stockholders intending to nominate a director candidate for consideration at a stockholder meeting also must satisfy the notification, timeliness, consent and information requirements set forth in our bylaws. These timing requirements are also described under the caption “Stockholder Proposals and Director Nominations.”

Board Role in Risk Oversight

The Board of Directors has overall responsibility for risk oversight, including, as part of regular Board and committee meetings, general oversight of executives’ management of risks relevant to the Company. A fundamental part of risk oversight is not only understanding the material risks a company faces and the steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The involvement of the Board of Directors in reviewing our business strategy is an integral aspect of the Board’s assessment of management’s tolerance for risk and its determination of what constitutes an appropriate level of risk for the Company. While the full Board has overall responsibility for risk oversight, it is supported in this function by its audit committee, organization and compensation committee, and nominating and corporate governance committee. Each of the committees regularly reports to the Board.

The audit committee assists the Board in fulfilling its risk oversight responsibilities by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls, our compliance with legal and regulatory requirements, and our enterprise risk management program. Through its regular meetings with management, including the finance, legal, internal audit, tax, compliance, and information technology functions, the audit committee reviews and discusses significant areas of our business and summarizes for the Board areas of risk and the appropriate mitigating factors.factors, including the Company's major financial risk exposures. The organization and compensation committee assists the Board by overseeing and evaluating risks related to the Company’s compensation structure and compensation programs, including the
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formulation, administration and regulatory compliance with respect to compensation matters, and coordinating, along with the Board’s Chair, succession planning discussions. The nominating and corporate governance committee assists the Board by overseeing and evaluating programs and risks associated with Board organization, membership and structure, and corporate governance. The organization and compensation committee and the nominating and corporate governance committee jointly oversee ESG-related risks. In addition, our Board receives periodic detailed operating performance reviews from management.

Our Environmental, Social, and Governance Principles
As a leading medical technology company, Inspire is committed to improving the economic, social, and environmental (“ESG”) impacts that our business has on the communities in which we operate, as well as our customers, business partners, suppliers, team members, and stockholders. We understand our responsibilities as a corporate citizen and are focused on developing ESG programs and initiatives that are sustainable and have real impact. In order to ensure adequate oversight and ultimate accountability by the Board relating to ESG issues, during fiscal 2021, the Board amended the charter of the nominating and corporate governance committee to expand its authority and responsibility for ESG matters. In particular, the nominating and corporate governance committee will, in coordination with other Board committees, as appropriate, periodically review and oversee the Company’s strategy, policies, and practices and related reporting with respect to significant environmental, social, and governance matters.
The following principles and philosophies are foundational to our approach to ESG matters and are integrated into our business operations.
OUR COMMITMENT TO ETHICAL BUSINESS CONDUCT
Inspire is committed to conducting business in accordance with the highest ethical standards and applicable laws. We maintain, and all of our employees are expected to adhere to, our Code of Business Conduct and Ethics (the “Code of Conduct”), which serves as the foundation of Inspire’s core values that drive our Company’s culture. In addition, our employees regularly complete training and education on a range of important issues related to our Code of Conduct and their roles within the Company, such as:
Information security and cyber-risk awareness
Workplace diversity and inclusion
Preventing discrimination and harassment
Prevention of insider trading
Workplace safety
Quality
Data protection
All employees must certify they understand and comply with the expectations contained in the Code of Conduct. We also maintain an anonymous hotline for employees to report concerns regarding violations of the Code of Conduct.
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OUR PEOPLE
At Inspire, our corporate culture defines who we are and how we act, and our diverse employee base who embody our culture is the driving force behind our success. We pride ourselves on our innovative and collaborative work environment, which we believe has driven our success and which we seek to uphold through a diverse workforce, generous compensation and benefits, open communication, a focus on employee health, wellbeing and engagement, and robust training and development programs.
We employ approximately 500 people worldwide. Over 90% of our employees work in the United States, a significant number of which are at our headquarters in Golden Valley, Minnesota. We also have a substantial sales organization working remotely across the country. Internationally, we also have employees based in Europe, including in Germany, France, Austria, and Switzerland, and one employee supporting our international expansion efforts in Japan.
WORK ENVIRONMENT
We strive to create a culture in which all employees feel heard, respected, and valued. All new employees participate in training focused on appropriate, respectful, and inclusive workplace behavior. In 2020, we created an engaging training initiative for all employees which encourages awareness of unconscious bias and microaggressions. Building on our 2020 program, during fiscal 2021, we implemented sessions specifically for Inspire leaders in their roles to create respectful culture within their teams. The goals of these programs are to encourage broad and diverse viewpoints to achieve the best outcomes for our patients, customers, and employees, and to build awareness of how our own behaviors impact our colleagues.
TALENT MANAGEMENT & DEVELOPMENT
With our aggressive growth objectives, it is imperative that we continue to hire exceptional talent and invest in the growth and development of our existing employees. We seek to foster a culture where learning is continuous, and strive to promote from within. We believe in our people and their ability to accept new responsibilities and challenges, and to grow with us to contribute to our success. Growth is fostered through professional development and learning programs, as well as practical experience leading projects or teams. To support newly promoted leaders, we have implemented a leadership program specially designed to help them succeed in their expanded roles. Additionally, we provide leadership coaching opportunities through external partners. On an annual basis, our leadership team participates in a talent review and succession planning exercise to identify organizational needs, development opportunities, and potential future leaders. This enables us to identify the resources and skill sets needed to meet our growth objectives.
COMPENSATION PHILOSOPHY TO DRIVE HIGH PERFORMING TEAMS
Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our Board to assure alignment with the Company’s overall business strategies. We continue to evaluate all reward-related strategies to remain competitive. At the direction of the organization and compensation committee of our Board, we continue to partner with an independent consulting firm to assess the market competitiveness of our compensation programs and offerings. We believe strongly in providing employees the opportunity to participate as owners in the Company. All of our full-time employees are eligible to receive annual grants of stock awards, which may include stock options, restricted stock units, or performance share units, and can elect to participate in our employee stock purchase program. Additionally, beginning in fiscal 2022, we have incorporated a 401(k) employer match for all U.S.-based employees.
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CORPORATE GOVERNANCE
ENVIRONMENT
Inspire is committed to conducting its business in compliance with all applicable environmental laws and regulations and to reducing its impact on the environment wherever possible. Our products are typically single-use sterile devices which limits our ability to completely reduce our environmental footprint. Despite this, in furtherance of our commitment to the environment, we consider the following principles, among other things, when operating our business:
minimize our electrical consumption;
recycle, reuse, and reduce our use of resources such as paper, metal, wood products and electrical cabling;
utilize product packaging that incorporates recyclable materials and efficient design; and
evaluate the environmental policies and responsibilities of vendors and suppliers as part of our selection process.
We have not received any regulatory notices regarding material environmental issues in our history, nor are we aware of any regulatory notices or complaints raised regarding environmental matters against any of our suppliers in respect of the products we manufacture.
QUALITY MANAGEMENT SYSTEM; PRODUCT SAFETY
The effectiveness of our quality management system is evaluated and improved through the establishment of the quality policy and quality objectives, internal and external audits, identifying corrective and preventive actions, and analysis of data, including data collected during the manufacturing process, quality inspection, and post-market product surveillance. These inputs into the quality management system are then evaluated by senior management at meetings held as needed, but at a minimum, at least semi-annually. The goal of these meetings is to ensure that quality objectives are being met, that product risk is acceptable, and that the quality management system is effective in controlling product quality, safety, and effectiveness. Additionally, these meetings evaluate the effectiveness of our quality management system to support regulatory requirements.
Product safety and quality are priorities at Inspire. We have established processes that aim to ensure our quality management system meets or exceeds international regulatory requirements and standards. A risk-based approach is applied to control the processes of our quality management system and is applied throughout the product life-cycle, from design through commercialization and distribution. Continuous monitoring of product performance and safety in the field is a fundamental part of product risk management and development to ensure safe and effective products. Additionally, our quality management system requirements include reporting and communication with regulators to monitor and ensure the safety and effectiveness of our products.
In September 2021, we issued the Inspire Patient Experience Report which summarizes, among other things, the post-market surveillance system that we utilize to collect and analyze experiences about our products, patient satisfaction data, quality of life and compliance data, and surgical revision and device explant data. A copy of the Inspire Patient Experience Report is available in the “For Health Care Professionals” section of our website at https://professionals.inspiresleep.com/. Information on or accessible through our website is not incorporated by reference in this Proxy Statement.
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CORPORATE GOVERNANCE
PRIVACY AND DATA SECURITY
At Inspire, we recognize our data privacy responsibilities for managing employee data (including current, former, and prospective employees), customer data, as well as data collected when prospective patients and others visit our websites or call our advisor care program. We recognize the need to maintain the security and confidentiality of personally identifiable information, protected health information, and other protected data under the Privacy Act (together referred to as “sensitive data”) that we collect and use in connection with our business. Internally, Inspire protects data by:
1.
providing safeguard practices to ensure the security of personal information,
2.
protecting the information against loss or theft, and
3.
safeguarding the information from unauthorized access, disclosure, copying, use, or modification.
Inspire has established an incident response process that ensures that, should a data breach occur, the Company will notify all affected parties and individuals whose sensitive data may have been compromised. The notice will be accompanied by a description of actions being taken to mitigate any damage as a result of the data breach. Notices will be provided as expeditiously as possible. On our website, we provide transparency on what data we collect and how that data is used.
COMMITMENT TO IMPLEMENT LEADING DATA SECURITY SAFEGUARDS
Inspire has implemented cyber security measures intended to prevent, detect, and respond to malicious cyber activities that could adversely affect the confidentiality, integrity, or availability of Inspire’s, or our customers’ information or information systems. These measures include (a) security design and engineering for existing and emerging technologies, (b) awareness training, (c) identification of high value/risk information, (d) implementation of sophisticated monitoring capabilities, and (e) rapid incident response.
GOVERNANCE
Inspire is dedicated to corporate governance practices that are transparent, responsive to the interests of our stakeholders, and compliant with applicable laws and regulations. Inspire’s standards for corporate governance are established by law, regulation, and internal corporate documents and policies, including those discussed below.
Committee Charters and Corporate Governance Guidelines

Our Corporate Governance Guidelines, charters of the audit committee, organization and compensation committee and nominating and corporate governance committee and other corporate governance information are available under the Corporate Governance section of the Investors page of our website located at
www.inspiresleep.com
, or by writing to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics (the “Code of Conduct”) that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of our Code of Business Conduct and Ethics is available under the Corporate Governance section of the Investors page of our website located at
www.inspiresleep.com
, or by writing to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. We intend to make any legally required disclosures regarding amendments to, or waivers of, provisions of our Code of Conduct on our website rather than by filing a Current Report on Form 8-K.

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CORPORATE GOVERNANCE
Anti-Hedging Policy
Our Board of Directors has adopted an Insider Trading Compliance Policy, which applies to all of our directors, officers, and employees. The policy prohibits our directors, officers, and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, short sales, and transactions in publicly traded options, such as puts, calls, and other derivatives involving our equity securities.
Communications with the Board
Any stockholder or any other interested party who desires to communicate with our Board of Directors, our
non-management directors or any specified individual director, may do so by directing such correspondence to the attention of the Secretary, Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. The Secretary will forward the communication to the appropriate director or directors as appropriate.
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Executive Compensation
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
In this Compensation Discussion and Analysis (“CD&A”), we provide an overview of the compensation awarded to or earned by our named executive officers (“NEOs”) identified below during fiscal 2021. The following discussion and analysis details the Company’s philosophy and policies regarding executive compensation, the process that is used to set executive compensation within the Company, the elements of the executive compensation program, and other elements and aspects of our executive compensation program. In fiscal 2021, our “named executive officers” were as follows:
Timothy P. Herbert, who served as President and Chief Executive Officer;
Richard J. Buchholz, who served as Chief Financial Officer;
Randall A. Ban, who served as Chief Commercial Officer;
Philip J. Ebeling, who served as Chief Operating Officer; and
Bryan K. Phillips; our Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer. Mr. Phillips joined the Company effective January 19, 2021.
FISCAL 2021 KEY BUSINESS HIGHLIGHTS
We had a strong year in fiscal 2021, with outstanding financial results and excellent progress in our product development programs, despite the effects of the COVID-19 pandemic. Key highlights include the following:
Revenue increased $118.0 million, or 102%, to $233.4 million, for fiscal 2021, compared to $115.4 million for fiscal 2020. Revenue growth was primarily due to increased market penetration in existing territories, expansion into new territories, and increased physician and patient awareness of our Inspire system.
Over the last several years, we have been executing a strategy to expand our capacity to meet the significant demand that we believe exists for Inspire therapy. In executing this strategy, during fiscal 2021:
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we activated 259 new U.S. implanting centers (bringing the total to 684 U.S. medical centers implanting Inspire therapy) and created 50 new U.S. sales territories (bringing the total to 157 U.S. sales territories); and
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We signed an exclusive distribution agreement for the commercialization of Inspire therapy in Japan.
Continued to make significant progress in our efforts to develop and bring to market new products and features that are intended to improve patient outcomes and the overall functionality of Inspire therapy. In this regard, during fiscal 2021, we received approval from the U.S. Food and Drug Administration (“FDA”) for:
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an improved surgical procedure for Inspire therapy that only requires two incisions, which reduces average procedure time by approximately 30%;
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a new Inspire physician programmer platform; and
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the Inspire Bluetooth®-enabled patient remote control.
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EXECUTIVE COMPENSATION
Continued to achieve success in gaining additional commercial insurance coverage, having now secured positive policies with over 60 payors, including most large national commercial insurers, encompassing approximately 260 million lives under policy.
We achieved significant therapy utilization milestones, including the 20,000th patient to receive Inspire therapy.
KEY ASPECTS OF 2021 EXECUTIVE COMPENSATION: STRONG PERFORMANCE ORIENTATION
Delivered Very Strong Stock Price Performance and Total Shareholder Return
As shown in the graphic below, our Total Shareholder Return (“TSR”) for 2021 was 22.4%, and our cumulative TSR since our May 2018 IPO through the end of fiscal 2021 was 821.7%, outperforming relevant indices.

*
TSR was calculated assuming 1-trading day averaging periods and reinvested dividends.
**
The Company completed its initial public offering in May 2018.
Substantial Majority of Compensation, Total and Equity, is Variable and At-Risk; Added Performance Share Units in 2022
Compensation Philosophy. Our compensation philosophy is performance-based and focuses on aligning the financial interests of our executive officers with those of our stockholders. Generally, this is accomplished by placing a substantial portion of our executive officers’ total compensation “at risk.” We consider compensation to be “at-risk” if it is subject to achievement of meaningful pre-set, objective financial or operating goals, such as in our annual incentive program, or if it depends on stock price appreciation or value, as in our long-term incentive program.
Consistent with the market practice of similar, newly-public companies in our industry, and in order to focus executives on growth and increasing stockholder value at our early stage of development, our long-term incentive (“LTI”) program has historically consisted solely of stock options. In our view, stock options are simple and inherently performance-based, requiring stock price appreciation before there is any real value earned.
Performance Stock Units. In addition, as the Company has continued to evolve and mature following its IPO in 2018, the organization and compensation committee has correspondingly sought to evolve the executive compensation program as appropriate for a company of our stage of development and size. In particular, the organization and compensation committee is in the midst of a multi-year plan to transition the amounts and forms of compensation to those aligned with public companies, including our peer group, by having a more typical, regular program of equity grants.
In the first quarter of 2022, the organization and compensation committee, with the assistance of its independent compensation consultant, took the first step toward growing the performance nature of long-term incentive equity
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EXECUTIVE COMPENSATION
grants by introducing grants of performance stock units, or PSUs. The performance-based metrics, in conjunction with the proportion of total compensation that was variable and at-risk, further enhanced the link between pay and performance for the Chief Executive Officer (“CEO”) and executive officers, as well as strengthened the alignment of the interests of the executive officers with those of our stockholders.
As shown in the graphic below, in fiscal 2021, 88% of our CEO’s target total direct compensation was variable and at-risk compensation, and on average, 81% of the target total direct compensation of our other named executive officers was variable and at-risk.

(1)
The total direct compensation of our executive officers as reflected in the above graphic differs from the total in the “Summary Compensation Table” because it only includes cash incentive opportunity at-goal, rather than actual payout, and the aggregate grant date fair value of stock options and PSUs granted in February 2022 as discussed in the section entitled “Long-term Incentives” below, and excludes all other amounts. The February 2022 PSU awards are used in the target total direct compensation this year because there were no annual LTI awards granted in fiscal 2021 due to the grant-timing shift as discussed in the section entitled “Long-term Incentives” below. The organization and compensation committee views target total direct compensation as a useful measure of pay because it reflects the intended aggregate value of key elements of pay at the time the pay decision is made.
The performance-based metrics and the proportion of total compensation that was variable and at-risk further enhanced the link between pay and performance for the CEO and executive officers and strengthened the alignment of the interests of our executive officers with those of our stockholders. See the following pages for more details on the elements of our compensation program.
Short-Term Annual Cash Incentive: Rigorous, Pre-Set Financial, Operating, and Regulatory/Product Development Goals, Strong Performance Achievement, and Annual Incentive Plan Payouts Reflecting Pay for Performance Alignment
At the outset of 2021, we established goals for the Revenue, Operating Loss, Global Insurance Reimbursement Approvals, and Regulatory and Product Development objectives metrics under our annual cash Management Incentive Program. These objectives were rigorous, aggressive, and challenging, attainable only with strong performance, and took into account the relevant opportunities and risks. The revenue target represented a 72% increase over the prior year’s actual results, reflecting our ambitious business and operational plans for the year. In order to earn any payout with respect to this most heavily weighted goal, a minimum of 80% of target performance had to be achieved. The organization and compensation committee also set similarly challenging targets and threshold levels for the other performance metrics, and evaluated performance achievement relative to the goals.
I. Compensation Philosophy and Objectives
The Company is a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea. We believe that for us to be successful, we must hire and retain highly-skilled and experienced people who can continue to develop and execute our strategy, innovate our products and services and lead our team.
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EXECUTIVE COMPENSATION
Our compensation philosophy is performance-based and focuses on aligning the financial interests of our executive officers with those of our stockholders. Generally, this is accomplished by placing a substantial portion of our executive officers’ total compensation “at risk,” while providing overall compensation opportunities that are comparable to market levels. With this in mind, our executive compensation programs are designed to:
attract, motivate, reward, and retain employees at the executive level who contribute to our long-term success;
link pay to performance;
effectively align our executives’ interests with those of our stockholders, in part by focusing on long-term equity incentives that correlate with the growth of sustainable long-term value for our stockholders;
align our performance metrics with our corporate strategy and the achievement of our business objectives; and
provide compensation packages to our executives that are fair and competitive with the market.
EXECUTIVE COMPENSATION GOVERNANCE HIGHLIGHTS
We are committed to having strong governance standards with respect to our compensation programs, procedures and practices. Our key compensation practices include the following:
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What We Do
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What We Do Not Do
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We emphasize performance-based, at-risk compensation.
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We do not provide any compensation-related tax gross-ups.
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We deliver rewards that are based on the achievement of long-term objectives and the creation of stockholder value.
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We do not provide significant perquisites.
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We provide a mix of short-term and long-term incentive compensation to promote executive retention and reward exceptional performance.
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We do not encourage unnecessary risk-taking as a result of our compensation policies.
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We engage an independent compensation consultant to advise our organization and compensation committee and management.
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We do not guarantee annual salary increases or bonuses.
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We consider stockholder input in evaluating the design of our executive compensation and the compensation decisions for each of the named executive officers.
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We do not have contracts that guarantee employment with any executives (all employment is terminable at will).
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We develop a peer group of companies based on industry, revenue, stage, and market capitalization to reference for compensation decisions.
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We prohibit employees and non-employee directors from engaging in hedging, pledging or short sale transactions in Company securities.
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We have double trigger vesting on equity and severance in the event of a change of control.
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EXECUTIVE COMPENSATION
II. Process for Determination of Compensation
ROLE OF ORGANIZATION AND COMPENSATION COMMITTEE
The organization and compensation committee establishes our compensation philosophy and objectives, determines the structure, components, and other elements of executive compensation, and reviews and approves the compensation of the named executive officers or recommends it for approval by the Board. The organization and compensation committee structures the executive compensation program to accomplish its articulated objectives in light of the compensation philosophy described above.
The organization and compensation committee obtains input from executive officers regarding the annual operating plan, including the expected range of financial and operating results and the potential opportunities and risks that could impact those results. Based on this information, the organization and compensation committee establishes the performance-based metrics and targets used in connection with our performance-based annual cash incentives (as discussed below). For each metric, the organization and compensation committee sets appropriate threshold and maximum levels of performance designed to motivate achievement without incentivizing excessive risk-taking. The organization and compensation committee reviews the elements of our executive compensation program to verify the alignment of the program with our business strategy and with the items that we believe drive the creation of stockholder value, and to determine whether any changes would be appropriate.
After the end of the annual performance period, the organization and compensation committee evaluates achievement relative to the performance targets, and determines corresponding payouts earned. With the input of the CEO, the organization and compensation committee also establishes the compensation for all the other executive officers.
ROLE OF THE EXECUTIVE OFFICERS
The organization and compensation committee works with our CEO to set the target total direct compensation of each of our named executive officers other than with respect to his own compensation. As part of this process, our CEO evaluates each other named executive officer, determines his recommendations about the target compensation of each such named executive officer, and delivers his evaluations and compensation recommendations to the organization and compensation committee. The committee gives significant weight to the recommendations of the CEO in light of his greater familiarity with the day-to-day performance of his direct reports and the importance of incentive compensation in driving the performance of the business. Nevertheless, the committee makes the ultimate determination regarding the compensation of the executive officers.
When the organization and compensation committee discusses and formulates the compensation recommendation for our CEO, he does not play any role with respect to any matter affecting his own compensation and is not present.
To design and develop the compensation program, the organization and compensation committee coordinates with the Vice President, Human Resources, and collaborates with the finance and legal teams as appropriate. This group supports the organization and compensation committee through the preparation of analyses of financial data, peer comparisons and other materials, and helps to implement the committee’s decisions.
ROLE OF COMPENSATION CONSULTANT
The organization and compensation committee recognizes that there is value in procuring independent, objective expertise and counsel in connection with fulfilling its duties, and has the authority to retain an independent compensation consultant to assist it in carrying out its responsibilities and duties.
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EXECUTIVE COMPENSATION
Since 2017, the organization and compensation committee has engaged Aon’s Human Capital Solutions practice, a division of Aon plc, as its independent compensation consultant for compensation decisions. Aon reported directly to the organization and compensation committee, and the organization and compensation committee has the sole authority to retain, terminate and obtain the advice of Aon at the Company’s expense.
The organization and compensation committee worked with Aon to develop a peer group, provide a competitive market analysis of the base salary, annual cash incentive awards, and long-term incentive compensation of our executive officers compared against the compensation peer group, report on share utilization, and review other market practices and trends.
Although the organization and compensation committee took into consideration the review and recommendations of Aon when making decisions about our executive compensation program, ultimately, the organization and compensation committee made its own independent decisions in determining our executives’ compensation.
The organization and compensation committee assessed the independence of Aon pursuant to SEC and NYSE rules. In doing so, the organization and compensation committee considered each of the factors set forth by the SEC and NYSE with respect to a compensation consultant’s independence. The organization and compensation committee also considered the nature and amount of work performed for the organization and compensation committee and the fees paid for those services in relation to the firm’s total revenues. On the basis of its consideration of the foregoing and other relevant factors, the organization and compensation committee concluded that Aon was independent and that there were no conflicts of interest.
COMPENSATION PEER GROUP AND PEER SELECTION PROCESS
The organization and compensation committee believes that obtaining relevant market and benchmark data is of paramount importance in the executive compensation determination. Such information provides helpful context and a solid reference point when making compensation decisions, though, unique aspects of the Company and our business may ultimately drive compensation decisions that differ from our peers. The organization and compensation committee takes into consideration the structure and components of, and the amounts paid under, the executive compensation programs of other comparable peer companies. This information is derived from public filings and other sources when making decisions about the structure and component mix of our executive compensation program.
The organization and compensation committee, with the assistance of Aon, developed a peer group using criteria designed to identify companies that reflect our size (measured by revenue, market capitalization, number of employees, and other size measures) and business profile (generally medical device companies). Based on these criteria, the organization and compensation committee approved the following peer group:
​
Accelerate Diagnostics, Inc.
​​
Glaukos Corporation
​​
OraSure Technologies, Inc.
​
​
AtriCure, Inc.
​​
Globus Medical, Inc.
​​
Penumbra, Inc.
​
​
Atrion Corporation
​​
Intersect ENT, Inc.
​​
STAAR Surgical Company
​
​
AxoGen, Inc.
​​
iRhythm Technologies, Inc.
​​
Surmodics, Inc.
​
​
Cardiovascular Systems, Inc.
​​
LeMaitre Vascular, Inc.
​​
Tactile Systems Technology, Inc.
​
​
CareDx, Inc.
​​
Mesa Laboratories, Inc.
​​
Tandem Diabetes Care, Inc.
​
​
Cerus Corporation
​​
Nevro Corp.
​​
​
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EXECUTIVE COMPENSATION
The following table summarizes our scale relative to our peer group. Financial data reflects fiscal year-end data available as of July 26, 2021.
​
​​
2021 Peer Group Comparison
​
​
​​
Revenue
​​
Market Cap
​​
Employees
​
​
25th Percentile
​​
$147.4
​​
$1,339.4
​​
441
​
​
Median
​​
$225.7
​​
$2,758.1
​​
614
​
​
75th Percentile
​​
$314.0
​​
$4,767.4
​​
867
​
(1)
All dollar amounts in millions.
(2)
Data source: S&P Capital IQ.
Consistent with best practices for corporate governance, the organization and compensation committee reviews our peer group at least annually. In addition to the selected peer group, as discussed above, the organization and compensation committee references general and specific industry surveys from other sources.
With the assistance of Aon, the committee uses data from the peer group to establish a market reference for each executive position. For fiscal 2021, the organization and compensation committee determined that the appropriate market reference continues to be the market 50th percentile, and that an executive officer’s target and actual total direct compensation may be above or below this reference depending on individual factors and performance. We do not formally set total compensation, or any specific element of compensation, at a specific percentile of the peer groups for that position. Instead, the market data is used as a reference point to provide information on the range of competitive pay levels and current compensation practices in our industry.
In May 2018, we completed our initial public offering. As the Company has continued to evolve and mature following its IPO, the organization and compensation committee has correspondingly sought to evolve the executive compensation program as appropriate for a company of Inspire Medical’s stage of development and size. In particular, the organization and compensation committee is in the midst of a multi-year plan to transition the amounts and forms of compensation from those more typical of a private company to those aligned with public companies, including the Company’s peer group.
In the first quarter of 2022, the organization and compensation committee, with the assistance of its independent compensation consultant, took the first step toward growing the performance nature of long-term incentive equity grants by introducing grants of performance stock units, or PSUs. The performance-based metrics, in conjunction with the proportion of total compensation that was variable and at-risk, further enhanced the link between pay and performance for the CEO and executive officers, as well as strengthened the alignment of the interests of the executive officers with those of our stockholders.
STOCKHOLDER INPUT ON EXECUTIVE COMPENSATION
At last year’s annual meeting, over 90% of the votes cast on the 2021 “say-on-pay vote” were voted in favor of the proposal. We have considered the 2021 say-on-pay vote and we believe that the overwhelming support of our stockholders for the 2021 say-on-pay vote indicates that our stockholders are generally supportive of our approach to executive compensation.
We are committed to ongoing engagement with our investors on all appropriate matters, including executive compensation and governance. Following the advisory votes at the Annual Meeting, the organization and compensation committee has considered stockholder input in evaluating the design of our executive compensation and the compensation decisions for each of the named executive officers.
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III. Elements of our Executive Compensation Program
In order to achieve our objectives, the organization and compensation committee utilizes the components of compensation set forth below. The organization and compensation committee regularly reviews all components of the program in order to verify that each component is aligned with our strategy and ensure that each executive officer’s total compensation is consistent with our compensation philosophy.
The primary elements of our named executive officers’ compensation and the main objectives of each are:
Base Salary. Base salary attracts and retains talented executives, recognizes individual roles and responsibilities, and provides stable income;
Annual Performance-Based Incentive Compensation. Performance-based cash bonuses and commissions promote short-term performance objectives and reward executives for their contributions toward achieving those objectives; and
Equity-Based Long-Term Incentive Compensation. Equity compensation, provided in the form of stock options and beginning in 2022, PSUs, aligns executives’ interests with our stockholders’ interests and emphasizes long-term financial performance.
In addition, our named executive officers are eligible to participate in our health and welfare programs and our 401(k) plan on the same basis as our other employees. Each of these elements of compensation for fiscal 2021 is described further below.
BASE SALARIES
The base salaries of our named executive officers are an important part of their total compensation package. Base salary is a visible and stable fixed component of our compensation program. In determining base salary levels, the organization and compensation committee considers individual contributions to business outcomes, the scope and complexity of each role, future potential, market data, and internal pay equity. Mr. Herbert’s increase was intended bring his salary closer to the market median for CEOs in our peer group. The following table sets forth the base salaries of our named executive officers for fiscal 2021:
​
Named Executive Officer
​​
2020 Base
Salary ($)(1)
​​
2021 Base
Salary ($)(1)
​​
% Change
​
​
Timothy P. Herbert
​​
505,856
​​
620,700
​​
23%
​
​
Randall A. Ban
​​
327,782
​​
339,254
​​
3%
​
​
Richard J. Buchholz
​​
383,379
​​
411,100
​​
7%
​
​
Philip J. Ebeling
​​
370,000
​​
407,000
​​
10%
​
​
Bryan K. Phillips(2)
​​
N/A
​​
375,000
​​
N/A
​
(1)
Reflects the base salaries approved by the committee prior to start of each applicable year. The amount of base salary actually received during fiscal 2021 is shown in the Summary Compensation Table below.
(2)
Mr. Phillips’ employment with the Company began on January 19, 2021.
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ANNUAL INCENTIVE CASH COMPENSATION
All of our employees, including our named executive officers, are eligible to receive performance-based cash incentive compensation. We believe that performance-based cash incentives motivate our employees, including our named executive officers, to achieve both short and long-term goals. This approach is critical to the execution of our overall business strategy which, if achieved, has the potential to significantly enhance stockholder value.
In fiscal 2021, with the exception of Mr. Ban, the performance-based cash incentive opportunity available to each of our named executive officers was provided pursuant to the terms of our Management Incentive Program (“MIP”). Given the specific nature of his role as our Chief Commercial Officer, Mr. Ban’s performance-based cash incentive opportunity was commission-based and tied to certain sales-related performance metrics.
Management Incentive Program
Target Opportunities. Consistent with our compensation philosophy and objectives, the organization and compensation committee generally sets the target incentive opportunity under the MIP within the median range of annual cash incentive target pay for comparable executives at our peer group. For fiscal 2021, based on a review of the market data and the individual role and duties for each executive, the organization and compensation opportunity increased the target incentive opportunity for Mr. Herbert from 80% to 90%. The following table summarizes the target incentive opportunity for each of our named executive officers under the MIP:
​
Named Executive Officer
​​
Target Incentive
Opportunity
(as a % of Base Salary)
​
​
Timothy P. Herbert
​​
90%
​
​
Richard J. Buchholz
​​
50%
​
​
Philip J. Ebeling
​​
50%
​
​
Bryan K. Phillips
​​
50%
​
Performance Measures. Under the MIP, the amount of the payout, if any, is based upon the achievement of financial metrics (weighted 70%) and strategic metrics (weighted 30%). Specifically, the following performance metrics were used to determine payouts under the fiscal 2021 MIP:
i.
Global Revenue: the organization and compensation committee emphasized revenue growth as the highest priority, given the Company’s stage of development and market opportunity.
ii.
Adjusted Operating Income (Loss): the organization and compensation committee selected this metric to focus management on improving profitability and managing expenses.
iii.
Global Insurance Reimbursement Approvals: the organization and compensation committee included this metric because securing reimbursement from payors is critical to the Company’s strategy and financial performance.
iv.
Specified Product Development and Regulatory Approvals: the organization and compensation committee used these metrics to emphasize continuing product development as a key component of the execution of the Company’s overall strategy.
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Payout Opportunities. Pursuant to the MIP, each participant’s target incentive opportunity is payable upon the 100% achievement of each of the applicable performance measures. At the beginning of the fiscal year, the organization and compensation committee approved the target performance goal and performance range for each performance metric. The targets for each performance metric are based on the Board-approved annual operating plan. The performance range for each metric defines threshold and above-target levels of performance. The threshold payout for the revenue and reimbursement approval metrics is 80% of the target incentive opportunity.
There is no payout opportunity below the target for the adjusted operating income (loss) metric. The payout opportunity associated with the regulatory and product development metrics, and quality and operations metrics could range between 0% (if none of the metrics were achieved) and 100% (if all of the metrics were achieved) of the target opportunity for those metrics. The maximum payout for the operating income (loss) metric and reimbursement approval metric is 120% of the target incentive opportunity for those metrics. The maximum payout for the regulatory and product development metrics, and quality and operations metrics is 100% of the target incentive opportunity for each of those metrics. There is no maximum payout percentage established for revenue performance that exceeds target. For performance levels between the specified threshold, target and above-target levels (where applicable, and for revenue that exceeds the above-target level), the resulting payout percentage is determined on a linear interpolation basis, and in the case of regulatory and product development metrics, and quality and operations metrics, based upon the percentage of the total number of those metrics actually achieved. The table below sets forth the weight, threshold, target, above-target, and actual performance for each performance metric:
​
Performance Metric
​​
Weight
​​
Threshold
​​
Target
​​
Above-
Target
​​
Actual
Achievement
​​
Weighted
Achievement
​
​
Global Revenue
(in millions)
​​
50%
​​
$176.0
​​
$198.0
​​
$220.0
​​
$233.4
​​
66.0%
​
​
Adjusted Operating
Income (Loss)(1)
(in millions)
​​
20%
​​
N/A
​​
$(25.4)
​​
$(21.6)
​​
$(13.2)(2)
​​
24.0%
​
​
Global Insurance Reimbursement Approvals
​​
10%
​​
5,500
​​
6,000
​​
6,500
​​
7,152
​​
12.0%
​
​
Regulatory and Product Development Metrics
​​
10%
​​
At least
one metric
​​
Complete
all metrics
​​
N/A
​​
Completed
all metrics
​​
10.0%
​
​
Quality and Operations Metrics
​​
10%
​​
At least
one metric
​​
Complete
all metrics
​​
N/A
​​
Completed 50%
of the metrics
​​
5.0%
​
​
​​
​​
​​
​​
​​
Overall Achievement:
​​
117.0%
​
(1)
For purposes of 2021 MIP, adjusted operating income (loss) was defined as income (loss) from operations, calculated in accordance with generally accepted accounting principles, excluding expenses associated with non-cash stock-based compensation and commercial launch activities in Japan.
(2)
Reflects the Company’s fiscal 2021 reported operating loss of $39.9 million adjusted to exclude $26.2 million in stock-based compensation expense and $0.4 million in expenses associated with commercial launch activities in Japan.
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Payout Determination. At its January 2022 meeting, the organization and compensation committee reviewed and confirmed the Company's performance for each of the performance metrics. The committee then determined the achievement percentage associated with each metric by interpolating actual performance within the applicable performance range. Following this approach, as shown in the table above, the committee determined that the overall achievement percentage for the MIP was 117.0%. The actual incentive payouts for each executive were determined by multiplying the executive’s eligible earnings by his target incentive opportunity, and then by the overall achievement percentage. The following table summarizes the compensation earned by our named executive officers under the MIP:
​
Executive
​​
Base
Salary
($)(1)
​​
Target
Opportunity
(%)
​​
Target
Opportunity
($)(2)
​​
MIP
Achievement
Percentage (%)
​​
Actual
MIP Payout
($)(3)
​
​
Timothy P. Herbert
​​
620,028
​​
90%
​​
558,025
​​
117.0%
​​
652,889
​
​
Richard J. Buchholz
​​
411,020
​​
50%
​​
205,510
​​
117.0%
​​
240,447
​
​
Philip J. Ebeling
​​
407,000
​​
50%
​​
203,500
​​
117.0%
​​
238,095
​
​
Bryan K. Phillips(4)
​​
375,000
​​
50%
​​
187,500
​​
117.0%
​​
208,170
​
(1)
Reflects the base salaries approved by the organization and compensation committee prior to the start of fiscal 2021.
(2)
Amounts shown are calculated as a percentage of the base salary approved by the committee for fiscal 2021.
(3)
The actual payout under the MIP is based on the base salary actually earned by each named executive in fiscal 2021 as shown in the Summary Compensation Table.
(4)
Mr. Phillips’ employment with the Company began on January 19, 2021. His base salary and actual payout under the MIP were pro-rated based on the period in which he was employed by the Company during fiscal 2021.
Ban Commissions
Mr. Ban is eligible to receive commissions based on the achievement of certain sales-related performance metrics, which are determined and paid on a quarterly basis. The organization and compensation committee established the target incentive opportunity for Mr. Ban in reference to the median range for annual cash incentive target pay for comparable executives at our peer group. Following this approach, the committee established Mr. Ban’s target cash incentive opportunity for fiscal 2021 at $149,000.
Under this program, during fiscal 2021, Mr. Ban was eligible to earn performance-based cash incentive compensation based on the following: (i) quarterly global sales, (ii) quarterly global sales plan achievement, (iii) quarterly U.S. patient procedure readiness metrics, and (iv) quarterly U.S. implant productivity metrics. The committee selected these metrics based on its judgment that they represent meaningful categories of sales performance based on our 2021 annual operating plan. The table below sets out the quarterly and annual target opportunities for Mr. Ban for fiscal 2021:
​
Component
​​
Quarterly Target
Opportunity
($)
​​
Annual Target
Opportunity
($)
​
​
Quarterly Global Sales Bonus
​​
16,000
​​
64,000
​
​
Quarterly Global Sales Plan Achievement
​​
12,500
​​
50,000
​
​
Quarterly U.S. Procedure Readiness Bonus
​​
4,250
​​
17,000
​
​
Quarterly U.S. Implant Productivity Bonus
​​
4,500
​​
18,000
​
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Based on the achievement of the applicable quarterly performance metrics, and consistent with the doubling of revenues in fiscal 2021 over fiscal 2020 and the large increase in sales territories, Mr. Ban earned commission-based cash incentives totaling an aggregate $270,470, which represents 181% of his annual target commission amount. In fiscal 2021, Mr. Ban received quarterly incentive payments of $38,290, $76,640, $77,370, and $78,170.
The actual cash incentives earned by each named executive officer for fiscal 2021 are set forth below in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation.”
LONG-TERM INCENTIVES
As described above, the third and largest primary component of our executive compensation program is long-term equity incentives. The organization and compensation committee designed this long-term incentive opportunity to motivate executive officers to achieve multi-year strategic goals and to deliver sustained, long-term value to stockholders. Our long-term incentives create a strong link between payouts and performance and align our executive officers’ interests with the interests of our stockholders. Long-term equity incentives promote retention, as executive officers will only receive value if they remain employed by us over the required term, and they foster an ownership culture among our executive officers by making executive officers stockholders with a personal stake in the value they intend to create.
The organization and compensation committee intends to make grants of long-term incentive awards annually. Special, one-time awards are used in limited circumstances, including, as may be necessary to attract, retain and motivate experienced and well-qualified executive officers, as recognition of an increase in the scope of an executive’s responsibilities or major accomplishments. In January 2021, the committee approved special equity awards to Mr. Phillips in connection with his hiring as our Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer, including (1) a stock option to purchase 15,000 shares of the Company’s common stock, and (2) an award of 2,275 restricted stock units.
Equity Vehicle. Historically, and consistent with the market practice of similar, newly-public companies in our industry, our long-term incentive compensation has consisted solely of stock options.
Beginning with fiscal 2022, the organization and compensation committee approved a change in the mix of long-term incentive compensation to be granted to executives. In particular, the committee determined that long-term incentive compensation would be granted as a mix of stock options and revenue-based PSUs (each constituting 50% of the target LTI value, respectively). The committee determined that this mix was appropriate given the current stage of our business taking into consideration the relative growth of the Company as we continue to execute our business strategy. The organization and compensation committee believes that the addition of PSUs encourages focus on long-term stockholder value creation through growth and increase in stock price over time, aligns compensation with key indicators of the success of our strategy, and promotes retention through long-term performance achievement and vesting requirements.
Our PSUs have a three-year performance period and will be settled in stock. The actual number of PSUs that will vest will be based on the Company’s cumulative revenue during the three-year performance period. The organization and compensation committee selected this metric because it focuses on revenue growth, which is a critical driver of our success. The addition of the PSUs also reinforces the pay-for-performance nature of the long-term incentive grants and the executive compensation program overall. The organization and compensation committee also believes it is important to continue to utilize stock options because it believes that stock options are very effective tools for motivating executives to increase long-term value and align our executives' interests with those of our stockholders.
In future years, the committee will continue to evaluate and select the form and mix of long-term incentive compensation (which may include stock options, restricted shares, restricted share units, performance share units, or other long-term incentives) provided to our executive officers that it believes best accomplishes the goals discussed above.
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New Grant Timing Practice for 2022. During fiscal 2021, the organization and compensation committee approved a shift in the timing of our annual equity grants to the first quarter of a new fiscal year, instead of our previous practice of granting equity to executive officers in December, which is the last month of our fiscal year. This grant timing allows for consideration of full-year financial results for the most recently completed fiscal year prior to making the grants. Due to this grant timing shift, the equity grant that would have traditionally been made in December 2021 (during fiscal 2021) was instead made in February 2022 (during fiscal 2022). As a result, the executive officers’ compensation as reported in the “Summary Compensation Table” for fiscal 2021 is significantly lower than prior years because it does not include any annual equity grants.
Target Opportunities. The organization and compensation committee established target long-term incentive opportunities for each of the named executive officers in December 2021. As noted above, the committee shifted the timing of our annual equity grants to the February 2022. The grant date value of the long-term incentive compensation granted to our executive officers in February 2022 is as follows:
​
Name
​​
Stock Options
($)
​​
Performance
Share Units
($)
​​
Target Total LTI
Compensation
($)
​
​
Timothy P. Herbert
​​
2,100,000
​​
2,100,000
​​
4,200,000
​
​
Randall A. Ban
​​
700,000
​​
700,000
​​
1,400,000
​
​
Richard J. Buchholz
​​
700,000
​​
700,000
​​
1,400,000
​
​
Philip J. Ebeling
​​
700,000
​​
700,000
​​
1,400,000
​
​
Bryan K. Phillips
​​
700,000
​​
700,000
​​
1,400,000
​
The organization and compensation committee intends to make grants of long-term incentive awards annually. Special, one-time awards are used in limited circumstances, including, as may be necessary to attract, retain, and motivate experienced and well-qualified executive officers, as recognition of an increase in the scope of an executive’s responsibilities or major accomplishments.
IV. Other Elements of Executive Compensation and Other Aspects of Executive Compensation Program
RETIREMENT PLANS
We currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.
EMPLOYEE BENEFITS
All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans, including (a) medical, dental, and vision benefits; (b) medical and dependent care flexible spending accounts; (c) long-term disability insurance; and (d) life insurance.
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We believe the general benefits described above are necessary to provide a competitive compensation package to our named executive officers. We do not currently provide perquisites or other special benefit arrangements to our named executive officers. In the future we may provide perquisites or other personal benefits in limited circumstances where our organization and compensation committee deems appropriate to assist an individual executive officer in the performance of his duties or for motivation or retention purposes, though we do not expect these perquisites to be a significant component of our compensation program.
Severance and Other Benefits Payable Upon Termination of Employment or Change in Control
Pursuant to their respective employment agreements and/or option agreements, each of our named executive officers is entitled to certain payments and benefits in certain termination situations or upon a change in control. See “— Potential Payments Upon Termination or Change-In-Control” for information regarding benefits under Company Executive Severance.
Tax and Accounting Considerations
COMPENSATION DEDUCTIBILITY / SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code, as amended by the Tax Cuts and Jobs Act of 2017, generally prohibits executive compensation in excess of $1 million per year to be deducted by us as a compensation expense. The organization and compensation committee has approved, and may continue to approve, compensation exceeding the $1 million limitation, including with respect to a portion of base salary, annual bonus, and long-term incentives. While compensation tax deductions are relevant issues to consider, the organization and compensation committee believes that stockholder interests are best served by not restricting flexibility in designing compensation programs, even though such programs may result in nondeductible compensation expenses for tax purposes.
Accounting Standards. Accounting Standards Codification Topic 718 (“ASC 718”) requires us to calculate the grant date “fair value” of our stock-based awards using a variety of assumptions. ASC 718 also requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock options, restricted stock, RSUs and PSUs under our equity incentive award plans will accounted for under ASC 718. The organization and compensation committee will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align the accounting expense of our equity awards with our overall executive compensation philosophy and objectives.
Anti-Hedging Policy
Our Board of Directors has adopted an Insider Trading Compliance Policy, which applies to all of our directors, officers, and employees. The policy prohibits our directors, officers, and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts; short sales; and transactions in publicly traded options, such as puts, calls and other derivatives involving our equity securities.

Communications with the Board

Any stockholder or any other interested party who desires to communicate with our Board of Directors, our non-management directors or any specified individual director, may do so by directing such correspondence to the attention

Clawbacks
Section 954 of the Secretary, Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416.Dodd-Frank Wall Street Reform and Consumer Protection Act directs the SEC to issue rules to require national securities exchanges and national securities associations to list only those companies that implement a policy requiring the mandatory recoupment of incentive compensation paid to current and former executive officers for the three-year period preceding a restatement of a listed company’s financial statements that would not have been paid under the restated financial statements. The Secretary will forward the communication to the appropriate director or directors as appropriate.

SEC has not yet adopted final rules implementing these

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EXECUTIVE COMPENSATION

requirements. The Company will adopt a clawback policy that complies with the final rules as adopted by the SEC and the NYSE. In the event the Company restates its financial statements, the Board or Committee would evaluate whether compensation adjustments are appropriate based upon the facts and circumstances surrounding the restatement.
EXECUTIVE COMPENSATION

Overview

Organization and Compensation Committee Report

This section discussesorganization and compensation committee report shall not be deemed to be incorporated by reference into any filing made by the material componentsCompany under the Securities Act of 1933 or the executiveExchange Act, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent the Company incorporates this report by specific reference.
The organization and compensation program for our executive officers who are named incommittee reviewed and discussed the “Summary Compensation Table” below. As an “emerging growth company” and “smaller reporting company,” each as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis and have elected to comply with the scaled disclosure requirements applicablemanagement of the Company. Based on this review and these discussions, we have recommended to emerging growth companiesthe Board of Directors that the Compensation Discussion and smaller reporting companies. In 2018, our “named executive officers”Analysis be included in the Company’s Annual Report on Form 10-K and their positions were as follows:the Company’s proxy statement.
The preceding report has been furnished by the following members of the organization and compensation committee:
Casey M. Tansey, Chair
Shelley G. Broader
Jerry C. Griffin, M.D.
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Timothy Herbert, President and Chief

EXECUTIVE COMPENSATION
Compensation of Our Named Executive Officer;Officers
Richard Buchholz, Chief Financial Officer; and
Randy Ban, Senior Vice President of Global Sales and Marketing.

Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for the fiscal years presented.

Name and Principal Position
Year
Salary
($)
Option Awards
($)(1)
Non-Equity
Incentive Plan
Compensation
($)(2)
Total
($)
Timothy Herbert
President and Chief Executive Officer
 
2018
 
 
417,606
 
 
2,424,007
 
 
419,156
 
 
3,260,769
 
 
2017
 
 
380,000
 
 
83,901
 
 
135,660
 
 
599,561
 
Richard Buchholz
Chief Financial Officer
 
2018
 
 
311,269
 
 
656,960
 
 
190,603
 
 
1,158,832
 
 
2017
 
 
255,748
 
 
8,708
 
 
65,216
 
 
329,672
 
Randy Ban
Senior Vice President of Global Sales and Marketing
 
2018
 
 
287,907
 
 
538,000
 
 
237,444
 
 
1,063,351
 
 
2017
 
 
278,168
 
 
19,818
 
 
215,225
 
 
513,211
 
​
​​
Year
​​
Salary
($)(1)
​​
Bonus
($)
​​
Stock
Awards
($)(2)
​​
Option
Awards
($)(2)
​​
Non-Equity
Incentive Plan
Compensation
($)(3)
​​
Total
($)
​
​
Timothy P. Herbert
President and Chief
Executive Officer
​​
2021
​​
620,028
​​
—
​​
—
​​
—
​​
652,889
​​
1,272,917
​
​
2020
​​
505,856
​​
—
​​
—
​​
3,918,240
​​
441,511
​​
4,865,607
​
​
2019
​​
439,875
​​
—
​​
—
​​
2,047,305
​​
412,383
​​
2,899,563
​
​
Richard J. Buchholz
Chief Financial Officer
​​
2021
​​
411,020
​​
—
​​
—
​​
—
​​
240,447
​​
651,467
​
​
2020
​​
383,379
​​
—
​​
—
​​
1,569,110
​​
209,133
​​
2,161,622
​
​
2019
​​
333,373
​​
—
​​
—
​​
629,940
​​
187,523
​​
1,150,836
​
​
Randall A. Ban
Chief Commercial Officer
​​
2021
​​
339,254
​​
—
​​
—
​​
—
​​
270,470
​​
609,724
​
​
2020
​​
327,782
​​
—
​​
—
​​
1,569,110
​​
250,860
​​
2,147,752
​
​
2019
​​
297,984
​​
—
​​
—
​​
1,438,640
​​
240,040
​​
1,976,664
​
​
Philip J. Ebeling(4)
Chief Operating Officer
​​
2021
​​
407,000
​​
—
​​
—
​​
—
​​
238,095
​​
645,095
​
​
2020
​​
215,833
​​
—
​​
—
​​
3,206,830
​​
117,737
​​
3,540,400
​
​
Bryan K. Phillips(5)
Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer
​​
2021
​​
356,730
​​
75,000(6)
​​
458,435
​​
1,589,100
​​
208,170
​​
2,687,436
​
(1)
(1)Amounts reflect the actual base salary paid to each named executive officer in each applicable year.
(2)
Amounts reflect the full grant date fair value of stock options and restricted stock units granted during 2018 computed in accordance with FASB ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all stock option awards made to named executive officers in Note 97 to our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2021.
(2)(3)
Amounts forreflect, in the case of Messrs. Herbert, Buchholz, Ebeling, and Buchholz represent 2018 earned annual bonusesPhillips, cash incentive compensation under our Management Incentive Program, (“MIP”),and in the case of $419,156 and $190,603. Amount for Mr. Ban, represents 2018 earned commissions based on the achievement of $237,444.sales-related performance metrics.

Narrative to Summary Compensation Table

2018 Salaries

The named executive officers receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. For 2018, the base salaries for Messrs. Herbert, Ban and Buchholz were initially increased as compared to 2017, respectively: from $380,000 to $397,860; from $278,168 to $287,907; and from $255,748 to $282,346. The base salaries for Messrs. Herbert and Buchholz were subsequently increased effective April 9, 2018, to $425,000 and $322,100, respectively.

2018 Bonuses and Commissions

Each of Messrs. Herbert and Buchholz are eligible to participate in our MIP, under which eligible participants may receive cash bonuses based on our achievement of certain performance metrics. For 2018, the annual target bonus amounts under the MIP expressed as a percentage of base salary for Messrs. Herbert and Buchholz were increased as compared to 2017 from 35% to 60% and from 25% to 40%, respectively, and, effective April 9, 2018, were further increased to 75% and 45%, respectively. For 2018, Messrs. Herbert and Buchholz earned cash bonuses under the MIP equal to 131.5% of their respective target bonus amounts that went into effect on April 9, 2018, totaling $419,156 and $190,603, respectively.

(4)
Mr. Ebeling’s employment with the Company began on June 1, 2020.
(5)
Mr. Phillips’ employment with the Company began on January 19, 2021.
(6)
Amount reflects a sign-on bonus paid to Mr. Phillips in connection with his hiring in January 2021.

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Mr. Ban is eligible

EXECUTIVE COMPENSATION

Grants of Plan-Based Awards - Fiscal 2021
The following table provides supplemental information relating to receive commissions based on achievementgrants of certain performance metrics, which are determined and paid on a quarterly basis. For 2018, Mr. Ban earned quarterly cash commissions totaling $237,444.

The actual cash bonuses and commissions earned by each named executive officer for 2018 performance are set forthplan-based awards made during fiscal 2021 to help explain information provided above in theour Summary Compensation Table inTable. This table presents information regarding all grants of plan-based awards which the column entitled “Non-Equity Incentive Plan Compensation.”

Equity Compensation

PriorCompany granted to our IPO, we maintained two equity incentive plans, the 2007 Stock Incentive Plan, as amended (the “2007 Plan”) and the 2017 Stock Incentive Plan, as amended (the “2017 Plan”), which have provided our employees (including the named executive officers), non-employee directors, consultants and independent contractors the opportunity to participate in the equity appreciation of our business through the receipt of stock options to purchase shares of our common stock. We believe that such stock options function as a compelling retention tool. The 2007 Plan terminated in accordance with its terms on November 28, 2017. Accordingly, we may no longer grant stock options under the 2007 Plan; however, outstanding stock options may continue to be exercised in accordance with their terms. Immediately following the termination of the 2007 Plan, we adopted the 2017 Plan, which contains substantially similar terms and conditions as the 2007 Plan. In connection with the IPO we adopted, and our shareholders approved, the 2018 Incentive Award Plan (the “2018 Plan”) in order to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of us and certain of our affiliates and to enable us and certain of its affiliates to obtain and retain services of these individuals, which is essential to our long-term success.

Under the 2017 Plan, on April 9, 2018, we granted incentive stock options to purchase 112,781 shares of our common stock and 22,556 shares of our common stock to Messrs. Herbert and Buchholz, respectively. Each such stock option has a $10.38 per share exercise price.

The share totals and exercise prices listed above reflect adjustments made in connection with the 1-for-6.650 reverse stock split of our common stock effected on April 20, 2018.

Under the 2018 Plan, on December 18, 2018, we granted incentive stock options to purchase 85,000 shares of our common stock, 25,000 shares of our common stock and 25,000 shares of our common stock to Messrs. Herbert, Ban and Buchholz, respectively. Each such stock option has a $42.15 per share exercise price.

The foregoing stock options have the same vesting schedule, which provides for 25% to vest on the first anniversary of the grant date and the remaining 75% to vest in 36 equal monthly installments thereafter (such that the stock option would fully vest on the fourth anniversary of the grant date), subject to the recipient’s continuous employment through the relevant vesting dates; provided that a stock option award will fully accelerate in vesting in the event of a termination of the recipient’s employment by us without “Cause” (as defined in the named executive officer’s employment agreement) within one year following a “Change in Control” (as defined in the applicable equity plan).

Other Elements of Compensation

Retirement Plans

We currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.

Employee Benefits and Perquisites

Health/Welfare Plans. All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans, including:

medical, dental and vision benefits;during fiscal 2021.
​
​​
​​
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
​​
All Other
Stock
Awards:
Number of
Shares or
Units
(#)(2)
​​
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
​​
Exercise or
Base Price
of Option
Awards
($/sh)
​​
Grant Date
Fair Value of
Stock and
Option
Awards
($)(3)
​
​
​​
Grant Date
​​
Threshold
($)
​​
Target
($)
​
​
Timothy P. Herbert
​​
​​
446,420
​​
558,025
​​
—
​​
—
​​
—
​​
—
​
​
Richard J. Buchholz
​​
​​
164,408
​​
205,510
​​
—
​​
—
​​
—
​​
—
​
​
Randall A. Ban
​​
​​
—
​​
149,000
​​
—
​​
—
​​
—
​​
—
​
​
Philip J. Ebeling
​​
​​
162,800
​​
203,500
​​
—
​​
—
​​
—
​​
—
​
​
Bryan K. Phillips
​​
​​
150,000
​​
187,500
​​
—
​​
—
​​
—
​​
—
​
​
01/29/21
​​
—
​​
—
​​
2,275
​​
—
​​
—
​​
458,435
​
​
01/29/21
​​
—
​​
—
​​
—
​​
15,000
​​
201.51
​​
1,589,100
​
(1)
Amounts shown in this column represent the potential cash payout amounts under the fiscal 2021 MIP. The actual cash payout amounts are disclosed in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.
(2)
Amounts represent the number of restricted stock units and stock options, respectively, granted to Mr. Phillips in connection with his hiring in January 2021.
(3)
Amounts represent the grant date fair value of the awards determined in accordance with ASC 718. For a discussion of assumptions made in determining the grant date fair value of stock options granted by the Company, see Note 7 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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EXECUTIVE COMPENSATION
medical
Narrative to Summary Compensation Table and dependent care flexible spending accounts;Grants of Plan-Based Awards Table
EXECUTIVE COMPENSATION ARRANGEMENTS
long-term disability insurance; and
life insurance.

We believe the perquisites described above are necessary and appropriate to provide a competitive compensation package to our named executive officers.

No Tax Gross-Ups

We do not make gross-up payments to coverEach of our named executive officers’ personal income taxes thatemployment is “at will” and may pertainbe terminated at any time, subject to anycertain notice requirements, described below. We have entered into new employment agreements with each of the compensation or perquisites paid or provided by our company.

Employment Agreements

named executive officers. The written descriptions and material terms of such new employment agreements are discussed below.

NAMED EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
Timothy P. Herbert

We entered into an employment agreement with Mr. Herbert, dated November 16, 2007, as was subsequently amended and restated effective as of April 9, 2018 (the “Herbert Employment Agreement”), providing for his position as President and Chief Executive Officer and an initial annual base salary of $200,000 (which was increased to $397,860 for 2018 and, effective April 9, 2018, was further increased to $425,000). The Herbert Employment Agreement provides for an indefinite term and is terminable at will by us or Mr. Herbert, provided that one month’s advance notice must be provided by the terminating party in the event of a termination of employment without “Cause” by us or a resignation without “Good Reason” by Mr. Herbert.

The Herbert Employment Agreement provides for Mr. Herbert’s eligibility to receive discretionary annual bonuses and/or long term incentive compensation with an initial(expressed as a target percentage of 25% of Mr. Herbert’s annual base salary (which was increased to 60% for 2018 and, effective April 9, 2018, was further increased to 75%),salary) based upon achievement of annual performance targets.targets, and/or long term incentive compensation. Pursuant to the Herbert Employment Agreement, upon termination of employment by us without Cause or by Mr. Herbert for Good Reason, or following a “Change of Control” if Mr. Herbert does not receive an offer of employment with the new controlling entity under an agreement that provides him with the same base pay and comparable incentives, benefits and terms, Mr. Herbert will receive the sum of his (x) then current annual base salary and an additional one month(y) a pro rata portion of his then current base salary for each year of Mr. Herbert’s employment with us beyond his second year of employment,target annual bonus, with such amount payable in a lump sum,installments over the 12-month period following such termination, as well as subsidized COBRA premiums for 12 months following his termination of employment. Notwithstanding the foregoing, in the event such a termination of employment occurs on or within the 12-month period following a Change of Control, Mr. Herbert will be entitled to receive: (A) the sum of (x) 18 months of his then current base salary and (y) target annual bonus, payable in substantially equal installments for 18 months following his termination of employment, (B) subsidized COBRA premiums for 18 months following his termination of employment and (C) acceleration in full of the vesting of his outstanding equity awards. Mr. Herbert will be required to execute a release of claims in favor of us in order to receive his severance benefits.

The Herbert Employment Agreement also provides for a Code Section 280G “cutback” such that payments or benefits that he receives in connection with a Change of Control will be reduced to the extent necessary to avoid the imposition of any excise tax under Code Sections 280G and 4999 if such reduction would result in a greater after-tax payment amount to Mr. Herbert.
“Change of Control” is defined in the Herbert Employment Agreement as the occurrence of one of the following: (i) a sale by our stockholders of a substantial portion of their stock in us, or a merger, reorganization or consolidation, whereby our equity holders existing immediately prior to such sale, merger, reorganization or consolidation do not, immediately after consummation of such sale, reorganization, merger or consolidation, own more than fifty percent (50%) of the combined voting power of the surviving entity’s then outstanding voting securities entitled to vote generally in the election of directors but only if such event results in a change in board of directors composition such that the directors immediately preceding such events do not comprise a majority of the board of directors following such event, or (ii) the sale or other disposition of all or substantially all of our assets to an entity in which we, any of our subsidiaries, or our equity holders existing immediately prior to such sale beneficially own less than fifty percent (50%) of the combined voting power of such acquiring entity’s then outstanding voting securities entitled to vote generally in the election of directors but only if such event results in a change in board of directors composition such that the directors immediately preceding such events do not comprise a majority of the board of directors following such event.

“Cause” is defined in the Herbert Employment Agreement as (i) Mr. Herbert’s material breach of his obligations under the Herbert Employment Agreement, or his repeated failure or refusal to perform or observe his duties, responsibilities
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EXECUTIVE COMPENSATION
and obligations as an executive, for reasons other than disability, if such breach, failure or refusal continues or it or another breach, failure or refusal is repeated following written notice thereof to him; (ii) any material dishonesty or other breach of the duty of loyalty affecting us or any of our customers, vendors or employees; (iii) use of alcohol or other drugs in a manner which materially affects the performance of Mr. Herbert’s duties, responsibilities and obligations as an employee, if such use continues or is repeated

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following written notice thereof to him; (iv) conviction of, or a plea of guilty or nolo contendrecontendere to, a charge of commission of a felony or of any crime involving misrepresentation, moral turpitude or fraud; (v) commission by Mr. Herbert of any other willful or intentional act which materially injures our reputation, business or business relationships if such act occurs or continues following written notice to him of the same or of a prior willful or intentional act injuring our reputation, business or business relationships; or (vi) the existence of any court order or settlement agreement prohibiting Mr. Herbert’s continued employment with us.

“Good Reason” is defined in the Herbert Employment Agreement as (i) a material reduction, without Mr. Herbert’s consent, in Mr. Herbert’s duties or responsibilities, (provided no such reduction shall be deemed to have occurred solely by reason of our having hired a new Chief Executive or President as long as Mr. Herbert continues to have responsibilities that are consistent with executive status); (ii) a material reduction of Mr. Herbert’s base salary, unless such reduction is part of an overall reduction in salary for executive employees and Mr. Herbert’s reduction is proportionate to the overall reduction in salary; (iii) us moving Mr. Herbert’s place of employment, without his consent, more than 50 miles from the place of his employment prior to such move, although business travel shall not be deemed to be a move of his place of employment; or (iv) our material breach of the Herbert Employment Agreement, provided Mr. Herbert has provided us detailed written notice of such alleged breach and we have not, within thirty (30) days of receipt of such notice, cured such alleged breach.

The Herbert Employment Agreement contains non-competition and employee non-solicitation covenants that apply through one year following termination of employment.

Richard J. Buchholz

We entered into an employment agreement with Mr. Buchholz, dated June 1, 2014, as was subsequently amended and restated effective as of April 9, 2018 (the “Buchholz Employment Agreement”), providing for his position as Chief Financial Officer and an initial annual base salary of $235,000 (which was increased to $282,346 for 2018 and, effective April 9, 2018, was further increased to $322,100). The Buchholz Employment Agreement provides for an indefinite term and is terminable at will by us or Mr. Buchholz, provided that one month’s advance notice must be provided by us in the event of a termination of employment without “Cause” and two weeks’ advance notice must be provided by Mr. Buchholz in the event of a resignation for any reason.

The Buchholz Employment Agreement provides for Mr. Buchholz’s eligibility to receive discretionary annual bonuses and/or long term incentive compensation with an initial(expressed as a target percentage of 25% of Mr. Buchholz’s annual base salary (which was increased to 40% for 2018 and, effective April 9, 2018, was further increased to 45%),salary) based upon achievement of annual performance targets.targets, and/or long term incentive compensation. Pursuant to the Buchholz Employment Agreement, upon termination of employment by us without Cause, or following a “Change of Control” if Mr. Buchholz does not receive an offer of employment with the new controlling entity under an agreement that provides him with the same base pay and comparable incentives, benefits and terms, Mr. Buchholz will receive the sum of six(x) nine months of his then current annual base salary and an additional one month(y) a pro rata portion of his then current base salary for each full year of Mr. Buchholz’s employment with us beyond his second year of employment,target annual bonus, with such amount payable in a lump sum,installments over the nine-month period following such termination, as well as subsidized COBRA premiums for a numbernine months following his termination of employment. Notwithstanding the foregoing, in the event such a termination of employment correspondingoccurs on or within the twelve-month period following a Change of Control, Mr. Buchholz will be entitled to receive: (A) the numbersum of (x) 12 months of his then current base salary to which he would be entitled as severance.and (y) target annual bonus, payable in substantially equal installments for 12 months following his termination of employment, (B) subsidized COBRA premiums for 12 months following his termination of employment and (C) acceleration in full of the vesting of his outstanding equity awards. Mr. Buchholz will be required to execute a release of claims in favor of us in order to receive his severance benefits.

The Buchholz Employment Agreement also provides for a Code Section 280G “cutback” such that payments or benefits that he receives in connection with a Change of Control will be reduced to the extent necessary to avoid the imposition of any excise tax under Code Sections 280G and 4999 if such reduction would result in a greater after-tax payment amount to Mr. Buchholz.
For purposes of the Buchholz Employment Agreement, “Change of Control” has the same meaning as used in the Herbert Employment Agreement.
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“Cause” is defined in the Buchholz Employment Agreement as (i) Mr. Buchholz’s breach of his obligations under the Buchholz Employment Agreement, or his repeated failure or refusal to perform or observe his duties, responsibilities and obligations as an executive, for reasons other than disability; (ii) any material dishonesty or other breach of the duty of loyalty affecting us or any of our customers, vendors or employees; (iii) use of alcohol or other drugs in a manner which affects the performance of Mr. Buchholz’s duties, responsibilities and obligations as an employee; (iv) conviction of, or a plea of guilty or nolo contendrecontendere to, a charge of commission of a felony or of any crime involving misrepresentation, moral turpitude or fraud; (v) commission by Mr. Buchholz of any other willful or intentional act which materially injures our reputation, business or business relationships; or (vi) the existence of any court order or settlement agreement prohibiting Mr. Buchholz’s continued employment with us.

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The Buchholz Employment Agreement contains non-competition and employee non-solicitation covenants that apply through one year following termination of employment.

Randy

Randall A. Ban

We entered into an employment agreement with Mr. Ban, dated July 20, 2009, as was subsequently amended and restated effective as of April 9, 2018 (the “Ban Employment Agreement”), providing for his position as Senior Vice President of Marketing and an initial annual base salary of $200,000 (which was increased to $287,907 for 2018). The Ban Employment Agreement provides for an indefinite term and is terminable at will by us or Mr. Ban, provided that one month’s advance notice must be provided by us in the event of a termination of employment without “Cause” and two weeks’ advance notice must be provided by Mr. Ban in the event of a resignation for any reason.

The Ban Employment Agreement provides for Mr. Ban’s eligibility to receive discretionary annual bonuses and/or long term incentive compensation, with an initial target of 25% ofas well as Mr. Ban’s annual base salary, based upon achievement of annual performance targets (Mr. Ban currently participatescurrent participation in a commission program in lieu of the foregoing).foregoing. The Ban Employment Agreement provides that Mr. Ban will be eligible for an annual target commission amount as determined at the beginning of each calendar year. Pursuant to the Ban Employment Agreement, upon termination of employment by us without Cause, or following a “Change of Control” if Mr. Ban does not receive an offer of employment with the new controlling entity under an agreement that provides him with the same base pay and comparable incentives, benefits and terms, Mr. Ban will receive the sum of two(x) nine months of his then current annual base salary and an additional one month(y) a pro rata portion of his then current base salary for each full year of Mr. Ban’s employment with us beyond his second year of employment,target annual commission, with such amount payable in a lump sum,installments over the 9-month period following such termination, as well as subsidized COBRA premiums for a numbernine months following his termination of employment. Notwithstanding the foregoing, in the event such a termination of employment correspondingoccurs on or within the twelve-month period following a Change of Control, Mr. Ban will be entitled to receive: the numbersum of (A) 12 months of his then current base salary to which he would be entitled as severance.and (B) target annual commission, payable in substantially equal installments for 12 months following his termination of employment, (C) subsidized COBRA premiums for 12 months following his termination of employment and (D) acceleration in full of the vesting of his outstanding equity awards. Mr. Ban will be required to execute a release of claims in favor of us in order to receive his severance benefits.

The Ban Employment Agreement also provides for a Code Section 280G “cutback” such that payments or benefits that he receives in connection with a Change of Control will be reduced to the extent necessary to avoid the imposition of any excise tax under Code Sections 280G and 4999 if such reduction would result in a greater after-tax payment amount to Mr. Ban.
For purposes of the Ban Employment Agreement, “Change of Control” has the same meaning as used in the Herbert Employment Agreement and “Cause” is defined as in the Buchholz Employment Agreement.
The Ban Employment Agreement contains non-competition and employee non-solicitation covenants that apply through one year following termination of employment.
On July 1, 2019, Mr. Ban was promoted to the role of Chief Commercial Officer.
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Philip J. Ebeling
We entered into an employment agreement with Mr. Ebeling, dated June 1, 2020 (the “Ebeling Employment Agreement”). The Ebeling Employment Agreement provides for an indefinite term and is terminable at will by us or Mr. Ebeling, provided that one month’s advance notice must be provided by us in the event of a termination of employment without “Cause” and two weeks’ advance notice must be provided by Mr. Ebeling in the event of a resignation for any reason.
The Ebeling Employment Agreement provides for Mr. Ebeling’s eligibility to receive discretionary annual bonuses (expressed as a target percentage of base salary) based upon achievement of annual performance targets, and/or long term incentive compensation. Pursuant to the Ebeling Employment Agreement, upon termination of employment by us without Cause, Mr. Ebeling will receive the sum of (x) nine months of his then current annual base salary and (y) a pro rata portion of his target annual bonus, as well as subsidized COBRA premiums for nine months following his termination of employment. Notwithstanding the foregoing, in the event such a termination of employment occurs on or within the twelve-month period following a Change of Control, Mr. Ebeling will be entitled to receive: the sum of (A) 12 months of his then current base salary and (B) target annual bonus, payable in substantially equal installments for 12 months following his termination of employment, (C) subsidized COBRA premiums for 12 months following his termination of employment and (D) acceleration in full of the vesting of his outstanding equity awards. Mr. Ebeling will be required to execute a release of claims in favor of us in order to receive his severance benefits.
The Ebeling Employment Agreement also provides for a Code Section 280G “cutback” such that payments or benefits that he receives in connection with a Change of Control will be reduced to the extent necessary to avoid the imposition of any excise tax under Code Sections 280G and 4999 if such reduction would result in a greater after-tax payment amount to Mr. Ebeling.
For purposes of the Ebeling Employment Agreement, “Change of Control” has the same meaning as used in the Herbert Employment Agreement.
“Cause” is defined in the BanEbeling Employment Agreement as in the Buchholz Employment Agreement, except as follows: (v) commission by Mr. Ebeling of any other willful or intentional act which materially injures our reputation, business or business relationships if such act occurs or continues following written notice to him of the same or of a prior willful or intentional act injuring our reputation, business or business relationships.
“Good Reason” is defined in the Ebeling Employment Agreement as (i) a material reduction, without Mr. Ban’sEbeling’s consent, in Mr. Ebeling’s duties or responsibilities provided no such reduction shall be deemed to have occurred solely by reason of the Company’s having hired a new Chief Operating Officer as long as Mr. Ebeling continues to have responsibilities that are consistent with his status and further provided that no such reduction shall be deemed to have occurred solely due to the change in the Company’s status from that of an independent company to that of a subsidiary or division of a buyer of the Company following a Change of Control; (ii) a material reduction, without Mr. Ebeling’s consent, of the Base Salary, unless such reduction is part of an overall reduction in salary for executive employees and Mr. Ebeling’s reduction is proportionate to the overall reduction in salary; (iii) the Company’s moving Mr. Ebeling’s place of employment, without Mr. Ebeling’s consent, more than fifty (50) miles from the place of Mr. Ebeling’s employment prior to such move, although business travel shall not be deemed to be a move of Executive’s place of employment; or (iv) the Company’s material breach of the Ebeling Employment Agreement. Notwithstanding the foregoing, Mr. Ebeling may only terminate his employment for Good Reason within two (2) years following the occurrence of one or more of the foregoing conditions, subject to Mr. Ebeling first providing thirty (30) days written notice of Mr. Ebeling’s claimed Good Reason to the Company within ninety (90) days after the initial existence of such condition and the Company failing to cure the basis for such claimed Good Reason within thirty (30) days following such notice.
The Ebeling Employment Agreement contains non-competition and employee non-solicitation covenants that apply through one year following termination of employment.
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EXECUTIVE COMPENSATION
Bryan K. Phillips
We entered into an employment agreement with Mr. Phillips, dated October 14, 2020 (the “Phillips Employment Agreement”), providing for his position as Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer. The Phillips Employment Agreement provides for an indefinite term and is terminable at will by us or Mr. Phillips, provided that one month’s advance notice must be provided by us in the event of a termination of employment without “Cause” and two weeks’ advance notice must be provided by Mr. Phillips in the event of a resignation for any reason.
The Phillips Employment Agreement provides for Mr. Phillips’ eligibility to receive discretionary annual bonuses (expressed as a target percentage of base salary) based upon achievement of annual performance targets, and/or long term incentive compensation. Pursuant to the Phillips Employment Agreement, upon termination of employment by us without Cause, Mr. Phillips will receive the sum of (x) nine months of his then current annual base salary and (y) a pro rata portion of his target annual bonus, as well as subsidized COBRA premiums for nine months following his termination of employment. Notwithstanding the foregoing, in the event such a termination of employment occurs within the twelve-month period following a Change of Control, Mr. Phillips will be entitled to receive the sum of (A) 12 months of his then current base salary and (B) target annual bonus, payable in substantially equal installments for 12 months following his termination of employment; (C) subsidized COBRA premiums for 12 months following his termination of employment; and (D) acceleration in full of the vesting of his outstanding equity awards. Mr. Phillips will be required to execute a release of claims in favor of us in order to receive his severance benefits.
The Phillips Employment Agreement also provides for a Code Section 280G “cutback” such that payments or benefits that he receives in connection with a Change of Control will be reduced to the extent necessary to avoid the imposition of any excise tax under Code Sections 280G and 4999 if such reduction would result in a greater after-tax payment amount to Mr. Phillips.
For purposes of the Phillips Employment Agreement, “Change of Control” has the same meaning as used in the Herbert Employment Agreement.
“Cause” is defined in the Phillips Employment Agreement as in the Buchholz Employment Agreement, except as follows: (i) Mr. Phillips’ material breach of his obligations under the BanPhillips Employment Agreement, or his repeated failure or refusal to perform or observe his duties, responsibilities and obligations as an executive, for reasons other than disability;disability.
“Good Reason” is defined in the Phillips Employment Agreement as (i) a material reduction, without Mr. Phillips’ consent, in Mr. Phillips’ duties or responsibilities; (ii) anya material dishonestyreduction, without Mr. Phillips’ consent, of the Base Salary, unless such reduction is part of an overall reduction in salary for executive employees and Mr. Phillips’ reduction is proportionate to the overall reduction in salary; (iii) the Company’s moving Mr. Phillips’ place of employment, without Mr. Phillips’ consent, more than fifty (50) miles from the place of Mr. Phillips’ employment prior to such move, although business travel shall not be deemed to be a move of Executive’s place of employment; or other(iv) the Company’s material breach of the dutyPhillips Employment Agreement. Notwithstanding the foregoing, Mr. Phillips may only terminate his employment for Good Reason within two (2) years following the occurrence of loyalty affecting usone or anymore of our customers, vendors or employees; (iii) use of alcohol or other drugs in a manner which affects the performanceforegoing conditions, subject to Mr. Phillips first providing thirty (30) days written notice of Mr. Ban’s duties, responsibilities and obligations as an employee; (iv) conviction of, or a plea of guilty or nolo contendrePhillips’ claimed Good Reason to a charge of commission of a felony or of any crime involving misrepresentation, moral turpitude or fraud; (v) commission by Mr. Ban of any other willful or intentional act which injures our reputation, business or business relationships; or (vi) the Company within ninety (90) days after the initial existence of any court order or settlement agreement prohibiting Mr. Ban’s continued employment with us.

such condition and the Company failing to cure the basis for such claimed Good Reason within thirty (30) days following such notice.

The BanPhillips Employment Agreement contains non-competition and employee non-solicitation covenants that apply through one year following termination of employment.

Amendment and Restatement

Effective as of April 9, 2018, we entered into amended and restated employment agreements with each of our named executive officers, which modified existing severance provisions (as described below) under each named executive officer’s existing employment agreement, but were otherwise substantially similar in all other respects.

Mr. Herbert’s amended and restated employment agreement provides for severance equal to (i) in the event of a severance-eligible termination of employment that occurs on or within the twelve-month period following a Change of Control, (A) the sum of (x) eighteen months of his then current base salary and (y) annual target bonus, payable in substantially equal installments for eighteen months following his termination of employment (B) subsidized COBRA premiums for eighteen months following his termination of employment and (C) acceleration in full of the vesting of his outstanding equity awards, and (ii) in the event of a severance-eligible termination of employment that does not occur on or within the twelve-month period following a Change of Control, (A) the sum of (x) twelve months of his then current base salary and (y) a prorated portion of his annual bonus, payable in substantially equal installments for twelve months following his termination of employment, and (B) subsidized COBRA premiums for twelve months following his termination of employment.

The amended and restated employment agreements for each of Messrs. Ban and Buchholz provide for severance equal to (i) in the event of a severance-eligible termination of employment that occurs on or within the

23

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twelve-month period following a Change of Control, (A) the sum of (x) twelve months of his then current base salary and (y) annual target bonus or commission amount, payable in substantially equal installments for twelve months following his termination of employment (less, with respect to Mr. Ban, any quarterly commissions already earned and paid during the calendar year in which the date of termination occurs), (B) subsidized COBRA premiums for twelve months following his termination of employment and (C) acceleration in full of the vesting of any outstanding equity awards that are granted by us on or following April 9, 2018, and (ii) in the event of a severance-eligible termination of employment that does not occur on or within the twelve-month period following a Change of Control, (A) the sum of (x) nine months of his then current base salary and (y) a prorated portion of his annual target bonus or commission amount, payable in substantially equal installments for nine months following his termination of employment (less, with respect to Mr. Ban, any quarterly commissions already earned and paid during the calendar year in which the date of termination occurs), and (B) subsidized COBRA premiums for nine months following his termination of employment.


EXECUTIVE COMPENSATION

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2018.

Name
Grant Date
Number of Securities
Underlying
Unexercised
Options (#)
Exercisable(2)
Number of Securities
Underlying
Unexercised
Options (#)
Unexercisable(2)
Option
Exercise
Price ($)(2)
Option
Expiration Date
Timothy P. Herbert
 
8/15/2009
 
 
30,075
 
 
—
 
 
3.26
 
 
8/14/2019
 
 
 
5/1/2012
 
 
167,067
 
 
—
 
 
1.47
 
 
4/30/2022
 
 
 
9/12/2013
 
 
134,586
 
 
—
 
 
1.14
 
 
9/11/2023
 
 
 
3/31/2014
 
 
176,691
 
 
—
 
 
2.07
 
 
3/30/2024
 
 
 
1/1/2017
 
 
27,740
 
 
30,154
 
 
0.94
 
 
12/31/2026
 
 
 
4/1/2017
 
 
63,408
 
 
88,772
 
 
0.94
 
 
3/31/2027
 
 
 
4/9/2018
 
 
—
 
 
112,781
 
 
10.38
 
 
4/8/2028
 
 
 
12/18/2018
 
 
—
 
 
85,000
 
 
42.15
 
 
12/18/2028
 
Richard J. Buchholz
 
6/1/2014
 
 
82,706
 
 
—
 
 
2.07
 
 
5/31/2024
 
 
 
1/1/2017
 
 
2,881
 
 
3,134
 
 
0.94
 
 
12/31/2026
 
 
 
4/1/2017
 
 
6,578
 
 
9,211
 
 
0.94
 
 
3/31/2027
 
 
 
4/9/2018
 
 
—
 
 
22,556
 
 
10.38
 
 
4/8/2019
 
 
 
12/18/2018
 
 
—
 
 
25,000
 
 
42.15
 
 
12/18/2028
 
Randy A. Ban
 
5/1/2012
 
 
46,390
 
 
—
 
 
1.47
 
 
4/30/2022
 
 
 
9/12/2013
 
 
75,187
 
 
—
 
 
1.14
 
 
9/11/2023
 
 
 
3/31/2014
 
 
27,067
 
 
—
 
 
2.07
 
 
3/30/2024
 
 
 
1/1/2017
 
 
6,484
 
 
7,049
 
 
0.94
 
 
12/31/2026
 
 
 
4/1/2017
 
 
15,037
 
 
21,053
 
 
0.94
 
 
3/31/2027
 
 
 
12/18/2018
 
 
—
 
 
25,000
 
 
42.15
 
 
12/18/2028
 
2021.
​
​​
Option Awards(1)
​​
Stock Awards
​
​
​​
​​
No. of Securities Underlying
Unexercised Options
​​
Option
Exercise
Price(2)
​​
Option
Expiration
Date
​​
Award
Grant
Date
​​
Shares or Unites of Stock
That Have Not Vested
​
​
Executive
​​
Grant Date
​​
Exercisable
(#)(2)
​​
Unexercisable
(#)(2)
​​
Number
(#)(3)
​​
Market
Value ($)(4)
​
​
Timothy P. Herbert
​​
05/01/12
​​
9,221
​​
—
​​
1.47
​​
05/01/22
​​
​​
​​
​
​
09/12/13
​​
8,196
​​
—
​​
1.14
​​
09/12/23
​​
​​
​​
​
​
03/31/14
​​
176,691
​​
—
​​
2.07
​​
03/31/24
​​
​​
​​
​
​
01/01/17
​​
12,062
​​
—
​​
0.94
​​
01/01/27
​​
​​
​​
​
​
04/01/17
​​
50,302
​​
—
​​
0.94
​​
04/01/27
​​
​​
​​
​
​
04/09/18
​​
103,382
​​
9,399
​​
10.38
​​
04/09/28
​​
​​
​​
​
​
12/18/18
​​
63,750
​​
21,250
​​
42.15
​​
12/18/28
​​
​​
​​
​
​
12/16/19
​​
32,500
​​
32,500
​​
71.00
​​
12/16/29
​​
​​
​​
​
​
12/14/20
​​
10,800
​​
32,400
​​
194.82
​​
12/14/30
​​
​​
​​
​
​
Richard J. Buchholz
​​
04/09/18
​​
1,410
​​
1,880
​​
10.38
​​
04/09/28
​​
​​
​​
​
​
12/18/18
​​
3,602
​​
6,250
​​
42.15
​​
12/18/28
​​
​​
​​
​
​
12/16/19
​​
7,966
​​
10,000
​​
71.00
​​
12/16/29
​​
​​
​​
​
​
12/14/20
​​
4,325
​​
12,975
​​
194.82
​​
12/14/30
​​
​​
​​
​
​
Randall A. Ban
​​
03/31/14
​​
8,567
​​
—
​​
2.07
​​
03/31/24
​​
​​
​​
​
​
01/01/17
​​
7,273
​​
—
​​
0.94
​​
01/01/27
​​
​​
​​
​
​
04/01/17
​​
36,090
​​
—
​​
0.94
​​
04/01/27
​​
​​
​​
​
​
12/18/18
​​
18,750
​​
6,250
​​
42.15
​​
12/18/28
​​
​​
​​
​
​
07/31/19
​​
15,104
​​
9,896
​​
67.63
​​
07/31/29
​​
​​
​​
​
​
12/16/19
​​
10,000
​​
10,000
​​
71.00
​​
12/16/29
​​
​​
​​
​
​
12/14/20
​​
4,325
​​
12,975
​​
194.82
​​
12/14/30
​​
​​
​​
​
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EXECUTIVE COMPENSATION
​
​​
Option Awards(1)
​​
Stock Awards
​
​
​​
​​
No. of Securities Underlying
Unexercised Options
​​
Option
Exercise
Price(2)
​​
Option
Expiration
Date
​​
Award
Grant
Date
​​
Shares or Unites of Stock
That Have Not Vested
​
​
Executive
​​
Grant Date
​​
Exercisable
(#)(2)
​​
Unexercisable
(#)(2)
​​
Number
(#)(3)
​​
Market
Value ($)(4)
​
​
Philip J. Ebeling
​​
06/30/20
​​
15,000
​​
25,000
​​
87.02
​​
06/30/30
​​
​​
​​
​
​
12/14/20
​​
4,325
​​
12,975
​​
194.82
​​
12/14/30
​​
​​
​​
​
​
Bryan K. Phillips
​​
01/29/21
​​
0
​​
15,000
​​
201.51
​​
01/29/31
​​
01/29/21
​​
2,275
​​
523,387
​
(1)
Each stock option award has the same vesting schedule, which provides for 25% of the award to vest on the first anniversary of the grant date and the remaining 75% of the award to vest in 36 equal monthly installments thereafter (such that the award would fully vest on the fourth anniversary of the grant date), subject to the recipient’s continuous employment with us through the relevant vesting dates; provided that a stock option award will fully accelerate in vesting in the event of a termination of the recipient’s employment by us without “Cause” (as defined in the named executive officer’s employment agreement) within one year following a “Change in Control”. For additional details, please refer to the section titled “Executive Compensation—Narrative to Summary Compensation Table—Equity Compensation” above.
(2)
Pursuant to provisions in the 2007 Plan and 2017 Plan, the exercise price and number of shares subject to the options granted under the 2007 Plan and 2017 Plan were adjusted in connection with the 1-for-6.650 reverse stock split of our common stock effected on April 20, 2018. Accordingly, the share totals and exercise prices shown in the table above (and in the corresponding footnotes) reflect our named executive officers’ post reverse stock split holdings.
(3)
Represents restricted stock units that vest in four equal installments beginning on the first anniversary of the date of grant.
(4)
The market value of restricted share units that have not vested equals the number of such units multiplied by $230.06, which was the closing price per share of the Company’s common stock as listed on the New York Stock Exchange on December 31, 2021.
Option Exercises — Fiscal 2021
The following table shows for fiscal 2021 the number of shares acquired upon exercise of option awards and the value realized upon such exercise.
​
 
​​
Option Awards
​
​
​​
Number of Shares
Acquired on Exercise(#)
​​
Value Realized on
Exercise ($)(1)
​
​
Timothy P. Herbert
​​
—
​​
—
​
​
Richard J. Buchholz
​​
17,255
​​
3,283,565
​
​
Randall A. Ban
​​
39,947
​​
7,779,376
​
​
Philip J. Ebeling
​​
—
​​
—
​
​
Bryan K. Phillips
​​
—
​​
—
​
(1)
Represents the difference between the option exercise price and the closing price of our common stock, as reported on the New York Stock Exchange, on the date of exercise, multiplied by the number of shares of our common stock underlying the stock options that were exercised.

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EXECUTIVE COMPENSATION

DIRECTOR COMPENSATION

The following table sets forth information concerning the compensationPotential Payments Upon Termination or Change-in-Control

We have entered into certain agreements with each of our directorsnamed executive officers, as described below, that provide for potential payments upon either a termination of employment or upon a change in control. Please see the “Named Executive Officer Employment Agreements” section above for a description of these potential payments and related benefits. The table below describe the payments that may be made to our named executive officers upon several events of termination, assuming the termination event occurred on the last day of fiscal year ended December 31, 2018:

Name
Fees Earned or
Paid in Cash ($)
Option
Awards ($)(2)(3)
Total ($)
Joyce Erony
 
33,104
 
 
110,000
 
 
143,104
 
Jerry Griffin, M.D.
 
34,760
 
 
110,000
 
 
144,760
 
Mudit K. Jain
 
33,032
(1) 
 
110,000
 
 
143,032
 
Chau Khuong
 
31,384
(1) 
 
110,000
 
 
141,384
 
Dana G. Mead, Jr.
 
33,104
 
 
110,000
 
 
143,104
 
Shawn T McCormick
 
39,725
 
 
110,000
 
 
149,725
 
Marilyn Carlson Nelson
 
52,084
(1) 
 
110,000
 
 
162,084
 
Casey Tansey
 
36,365
(1) 
 
110,000
 
 
146,365
 
2021 (except as otherwise noted).
Potential Payments Table
​
Name
​​
Benefit
​​
Death
($)
​​
Disability
($)
​​
Termination
Without Cause
or for Good
Reason / Cause
(no Change in
Control)
($)
​​
Change in
Control (no
Termination)
($)
​​
Termination
Without Cause or
for Good Reason /
Cause in
Connection with a
Change in Control
($)
​
​
Timothy P. Herbert
​​
Cash
​​
—
​​
—
​​
1,178,052
​​
—
​​
1,488,066
​
​
Equity Acceleration(1)
​​
—
​​
—
​​
—
​​
—
​​
28,737,084
​
​
All Other Payments or Benefits
​​
—
​​
—
​​
23,930
​​
—
​​
35,895
​
​
Total
​​
—
​​
—
​​
1,201,982
​​
—
​​
30,261,045
​
​
Richard J. Buchholz
​​
Cash
​​
—
​​
—
​​
513,776
​​
—
​​
616,531
​
​
Equity Acceleration(1)
​​
—
​​
—
​​
—
​​
—
​​
7,336,269
​
​
All Other Payments or Benefits
​​
—
​​
—
​​
17,948
​​
—
​​
23,930
​
​
Total
​​
—
​​
—
​​
531,723
​​
—
​​
7,976,730
​
​
Randall A. Ban
​​
Cash
​​
—
​​
—
​​
403,441
​​
—
​​
488,254
​
​
Equity Acceleration(1)
​​
—
​​
—
​​
—
​​
—
​​
8,732,389
​
​
All Other Payments or Benefits
​​
—
​​
—
​​
17,948
​​
—
​​
23,930
​
​
Total
​​
—
​​
—
​​
421,388
​​
—
​​
9,244,574
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EXECUTIVE COMPENSATION
​
Name
​​
Benefit
​​
Death
($)
​​
Disability
($)
​​
Termination
Without Cause
or for Good
Reason / Cause
(no Change in
Control)
($)
​​
Change in
Control (no
Termination)
($)
​​
Termination
Without Cause or
for Good Reason /
Cause in
Connection with a
Change in Control
($)
​
​
Philip J. Ebeling
​​
Cash
​​
—
​​
—
​​
508,750
​​
—
​​
610,500
​
​
Equity Acceleration(1)
​​
—
​​
—
​​
—
​​
—
​​
6,341,566
​
​
All Other Payments or Benefits
​​
—
​​
—
​​
17,948
​​
—
​​
23,930
​
​
Total
​​
—
​​
—
​​
526,698
​​
—
​​
6,975,996
​
​
Bryan K. Phillips
​​
Cash
​​
—
​​
—
​​
468,750
​​
—
​​
562,500
​
​
Equity Acceleration(1)
​​
—
​​
—
​​
—
​​
—
​​
954,746
​
​
All Other Payments or Benefits
​​
—
​​
—
​​
—
​​
—
​​
—
​
​
Total
​​
—
​​
—
​​
468,750
​​
—
​​
1,517,246
​
(1)
EachThe value of Messrs. Jain, Khuong and Tansey and Ms. Nelson elected to receive such amounts in the formaccelerated stock options is calculated based on the number of fully vested shares of our common stock in lieu of cash payment, which resulted insubject to accelerated unvested stock options multiplied by the issuance of 763 sharesdifference between $230.24, the closing price for a share of our common stock to Mr. Jain, 725 shareson the New York Stock Exchange on December 31, 2021, and the per share exercise price. The value of the accelerated restricted stock units is calculated based on the number of unvested restricted stock units multiplied by $230.24, the closing price for a share of our common stock to Mr. Khuong, 1,203 shareson the New York Stock Exchange on December 31, 2021.
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CEO Pay Ratio
As required by Item 402(u) of Regulation S-K, we are providing pay ratio information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Timothy P. Herbert, our Chief Executive Officer. For 2021, our last completed fiscal year:
the median of the annual total compensation of all employees of our Company (other than our CEO), was $205,859; and
the annual total compensation of our CEO, as reported in the Summary Compensation Table presented elsewhere in this document was $1,272,917.
Based on this information, the ratio of the CEO’s fiscal 2021 annual total compensation to that of the median employee 6 to 1.
Methodology, Assumptions and Estimates Used in Determining our Pay Ratio Disclosure
In determining the pay ratio calculation, we used the methodology, assumptions, and estimates set forth below in determining the median employee.
1.
We selected October 1, 2021, which is within the last three months of fiscal 2021, as the date upon which we would identify the median employee.
2.
We determined that, as of October 1, 2021, our employee population consisted of 455 individuals working at the Company.
3.
For purposes of measuring the compensation of our common stock to Ms. Nelson and 840 sharesemployee population, we selected a “consistently applied compensation measure” (“CACM”). We chose a CACM that closely approximates the annual target total direct compensation of our common stock to Mr. Tansey.
(2)Amounts reflectemployees. Specifically, we identified the fullmedian employee by aggregating, for each employee as of October 1, 2021: (1) annual base pay, (2) the actual cash incentive opportunity using the payout under the 2021 MIP, and (3) the grant date fair value for equity awards granted through December 31, 2021. In identifying the median employee, we annualized the compensation values of stock options grantedpermanent employees that joined our Company during 2018 (in connection withfiscal 2021. Amounts paid in foreign currencies were converted to U.S. Dollars based on the IPO) computedaverage annual exchange rate as of October 1, 2021.
4.
After applying our CACM methodology, we identified the median employee. Once the median employee was identified, we calculated the median employee's annual target total direct compensation in accordance with FASB ASC Topic 718, rather than the amounts paidrequirements of the Summary Compensation Table.
5.
Once we identified the median employee, we identified and calculated the elements of such employee’s compensation for fiscal 2021 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $205,859. With respect to or realized by the named individual. We provide information regardingannual total compensation of our CEO, we used the assumptions used to calculateamount reported in the value“Total” column of all stock option awards made to named executive officersour Summary Compensation Table included elsewhere in Note 9 to our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.this document.
We believe the pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
(3)The table below shows the aggregate numbers of stock option awards (exercisable and unexercisable) held as of December 31, 2018 by each director who was serving as of December 31, 2018.
NameInspire Medical Systems, Inc.
Number of Shares of Common Stock Underlying
Options Outstanding at Fiscal Year End
​
​
Joyce Erony59
​		​
17,296
Jerry Griffin, M.D.
28,573
Mudit K. Jain
17,296
Chau Khuong
17,296
Dana G. Mead, Jr.
17,296
Shawn T McCormick
32,333
Marilyn Carlson Nelson
39,851
Casey Tansey
17,296
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IPO GrantsDirector Compensation
Non-Employee Director Compensation Policy
We maintain a compensation policy that provides cash and equity compensation to Non-Employee Directorsour non-employee directors for their service on the Board and its committees as discussed below. On a periodic basis, the organization and compensation committee reviews the policy to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform our Board’s duties and to compensate our directors fairly for their services and whether any recommendations for adjustment should be made to the Board. The review includes the consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the organization and compensation committee considers: (1) the time and effort involved in preparing for Board and committee meetings and the additional duties assumed by committee chairs and our chair; (2) the risks associated with fulfilling fiduciary duties; and (3) the compensation paid to directors at the same peer group of companies used to assess the competitiveness of our executive compensation programs. All cash and equity awards granted under the non-employee director compensation policy will be granted under, and subject to the limits of, the 2018 Plan

In connection withPlan.

Cash Compensation. Under the IPO, on May 2, 2018, we granted topolicy in effect at the beginning of fiscal 2021, each of our non-employee directors an award of a stock optionwas eligible to purchase 17,296 shares of our common stock under the 2018 Plan, at an exercise price per share equal to $16.00, the IPO price of our common stock. Each such stock option will vest in full on the earlier to occur of a Change in Control and the first anniversary of the date of grant, subject to the non-employee director’s continued service through the applicable vesting date, and will expire upon the tenth anniversary of the date of grant.

Non-Employee Director Compensation Policy

In connection with the IPO, we adopted, and our shareholders approved, a compensation policy for our non-employee directors that consists of annual retainer fees and long-term equity awards.

Pursuant to this policy, each eligible non-employee director receivesreceive an annual cash retainer of $40,000. The chairpersonOur non-employee directors were also eligible to receive additional annual retainers as follows:

the chair of the board of directors receivesBoard received an additional annual cash retainer of $35,000. Further, $35,000;
the chairpersonchair of the audit committee receivesreceived an additional annual cash retainer of $20,000, and each other memberthe non-chair members of the auditthat committee receivesreceived an additional annual cash retainer of $10,000, $10,000;
the chairpersonchair of the organization and compensation committee receivesreceived an additional annual cash retainer of $15,000, and each other memberthe non-chair members of the compensationthat committee receivesreceived an additional annual cash retainer of $7,500,$7,500; and
the chairpersonchair of the nominating and corporate governance committee receivesreceived an additional annual cash retainer of $10,000$15,000, and each other

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memberthe non-chair members of the nominating and governancethat committee receivesreceived an additional annual cash retainer of $5,000. Each annual$7,500.

The cash retainer will beretainers are paid quarterly in arrears.following the completion of each calendar quarter. The Board of Directors may, in its discretion, permit a non-employee director to elect to receive any portion of the annual cash retainer in the form of fully vested and unrestricted shares of common stock in lieu of cash. Also, pursuant
Equity Compensation. In addition to this policy, on the date of any annual meetingcash compensation described above, each of our stockholders, we intendnon-employee directors is eligible to grant each eligible non-employee directorreceive an award of an option to purchasestock options as compensation for his or her service on the Board. Upon a number of shares of our common stock (at a per-share exercise price equaldirector’s initial election or appointment to the closing price per shareBoard, such director will receive an award of the common stock on the date of such annual meeting (or on the last preceding trading day)) that hasoptions having a grant date fairvalue of $165,000. On an annual basis thereafter, each non-employee director is eligible to receive an award of stock options having a grant value of $110,000. The terms of each such award will be set forth and subject to the terms contained in a written award agreement between the Company and each non-employee director, and us, which will generally provide for vesting after one year of continued service as a director. Each such award will vest in full immediately prior to the occurrence of a Change in Control (as defined in the 2018 Plan).

Also, pursuant to this policy, we intend to grant any eligible non-employee director who is elected or appointed mid-year an award of an option to purchase a number of shares of our common stock (at a per-share exercise price equal to the closing price per share of the common stock on the date of such director’s election or appointment (or on the last preceding trading day)) that has a grant date fair value of $165,000. The terms of each such award will be set forth in a written award agreement between the non-employee director and us, which will generally provide for vesting in three equal installments following the date of grant (such that such award will vest in full on the third anniversary of the date of grant). Each such award will vest in full immediately prior to the occurrence of a Change in Control.

All cash and equity awards granted under the non-employee director compensation policy will be granted under, and subject to the limits of, the 2018 Plan.

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DIRECTOR COMPENSATION
Market-Based Adjustments to Director Compensation. In April 2021, following a review of the compensation practices for non-employee directors at our peer group, the Board approved market-based increases to the compensation paid to our non-employee directors under the policy as follows, which increases became effective as of April 29, 2021: (a) the annual cash retainer paid to each non-employee director will be $45,000; (b) the additional annual cash retainer to be paid to the Board chair will be $40,000; (c) the initial award of stock options to be granted to a newly appointed non-employee director will be $210,000; and (d) the annual award of stock options to be granted to non-employee directors will be $140,000.
Director Compensation Table for Fiscal 2021
The following table sets forth information concerning the compensation of our non-employee directors for the fiscal year ended December 31, 2021:
​
Name
​​
Fees Earned or Paid
in Cash
($)
​​
Option Awards
($)(2)(3)
​​
Total
($)
​
​
Shelley G. Broader
​​
50,865(1)
​​
140,000
​​
190,865
​
​
Gary L. Ellis
​​
58,365(1)
​​
140,000
​​
198,365
​
​
Georgia Garinois-Melenikiotou
​​
53,365(1)
​​
140,000
​​
193,365
​
​
Jerry C. Griffin, M.D.
​​
58,365
​​
140,000
​​
198,365
​
​
Dana G. Mead, Jr.
​​
53,365
​​
140,000
​​
193,365
​
​
Shawn T McCormick
​​
63,365
​​
140,000
​​
203,365
​
​
Marilyn Carlson Nelson
​​
89,231(1)
​​
140,000
​​
229,231
​
​
Casey M. Tansey
​​
​58,365(1)
​​
140,000
​​
​198,365
​
(1)
Each of Ms. Broader, Mr. Ellis, Ms. Garinois-Melenikioutou, Ms. Nelson, and Mr. Tansey elected to receive such amounts, or a portion of such amounts, in the form of fully vested shares of our common stock in lieu of cash payment, which resulted in the issuance of 235 shares of our common stock to Ms. Broader, 269 shares of our common stock to Mr. Ellis, 247 shares of our common stock to Ms. Garinois-Melenikioutou, 415 shares of our common stock to Ms. Nelson, and 269 shares of our common stock to Mr. Tansey.
(2)
Amounts reflect the full grant date fair value of stock options granted during fiscal 2021 computed in accordance with ASC 718, rather than the amounts paid to or realized by the named director. We provide information regarding the assumptions used to calculate the value of all stock option awards in Note 7 to our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
(3)
The table below shows the aggregate numbers of stock option awards (exercisable and unexercisable) held as of December 31, 2021 by each director who was serving as of December 31, 2021.
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DIRECTOR COMPENSATION
​
Name
​​
Number of Shares of Common Stock Underlying
Options Outstanding at Fiscal Year End
​
​
Shelley G. Broader
​​
4,288
​
​
Gary L. Ellis
​​
9,937
​
​
Georgia Garinois-Melenikiotou
​​
3,731
​
​
Jerry C. Griffin, M.D.
​​
37,818
​
​
Dana G. Mead, Jr.
​​
26,541
​
​
Shawn T McCormick
​​
41,578
​
​
Marilyn Carlson Nelson
​​
49,096
​
​
Casey M. Tansey
​​
26,541
​
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Stock Ownership
Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information relating to the beneficial ownership of our common stock as of March 7, 20193, 2022 by:

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of common stock;
each of our directors;
each of our named executive officers for 2018;fiscal 2021; and
all directors and executive officers as a group.

The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, a person is deemed to be a “beneficial” owner of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. Except as indicated in the footnotes below, we believe, based on the information furnished to us, that the individuals and entities named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them, subject to any applicable community property laws.

The percentage of shares beneficially owned is computed on the basis of 23,457,46928,357,314 shares of our common stock outstanding as of March 7, 2019.3, 2022. Shares of our common stock that a person has the right to acquire within 60 days of March 7, 20193, 2022 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address for each beneficial owner listed is c/o Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416.

Name of Beneficial Owner
Number of Shares
Beneficially Owned
Percentage of Shares
Beneficially Owned
Holders of More than 5%:
 
 
 
 
 
 
Synergy Life Science Partners, LP(1)
 
2,095,507
 
 
8.9
%
OrbiMed Private Investments V, L.P.(2)
 
1,829,449
 
 
7.8
%
KPCB Holdings, Inc.(3)
 
1,756,306
 
 
7.5
%
Amzak Health Investors, LLC(4)
 
1,497,043
 
 
6.4
%
U.S. Venture Partners IX, L.P.(5)
 
1,392,533
 
 
5.9
%
Named executive officers and directors:
 
 
 
 
 
 
Timothy Herbert(6)
 
879,269
 
 
3.6
%
Randy Ban(7)
 
196,308
 
 
 
*
Richard Buchholz(8)
 
96,826
 
 
 
*
Marilyn Carlson Nelson(9)
 
672,505
 
 
2.9
%
Joyce Erony(10)
 
704,339
 
 
3.0
%
Jerry Griffin, M.D. (11)
 
83,685
 
 
 
*
Mudit K. Jain(12)
 
18,059
 
 
 
*
Chau Khuong(13)
 
18,021
 
 
 
*
Dana G. Mead, Jr.(14)
 
37,296
 
 
 
*
Shawn T McCormick(15)
 
42,851
 
 
 
*
Casey Tansey(16)
 
216,899
 
 
 
*
All executive officers and directors as a group (12 individuals)(17)
 
2,981,891
 
 
12.1
%
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STOCK OWNERSHIP
​
Name of Beneficial Owner
​​
Number of Shares
Beneficially Owned
​​
Percentage of Shares
Beneficially Owned
​
​
Holders of More than 5%:
​​
​​
​
​
The Vanguard Group(1)
​​
2,559,739
​​
9.0%
​
​
BlackRock, Inc.(2)
​​
1,846,227
​​
6.5%
​
​
FMR LLC(3)
​​
1,538,454
​​
5.4%
​
​
Named executive officers and directors:
​​
​​
​
​
Timothy P. Herbert(4)
​​
790,513
​​
2.8%
​
​
Marilyn Carlson Nelson(5)
​​
153,936
​​
*
​
​
Randall A. Ban(6)
​​
97,508
​​
*
​
​
Richard J. Buchholz(7)
​​
90,049
​​
*
​
​
Shawn T McCormick(8)
​​
52,096
​​
*
​
​
Dana G. Mead, Jr.(9)
​​
46,541
​​
*
​
​
Casey M. Tansey(10)
​​
45,815
​​
*
​
​
Jerry C. Griffin, M.D.(11)
​​
37,818
​​
*
​
​
Philip J. Ebeling(12)
​​
24,398
​​
*
​
​
Gary L. Ellis(13)
​​
10,159
​​
*
​
​
Bryan K. Phillips(14)
​​
5,096
​​
*
​
​
Shelley G. Broader(15)
​​
2,495
​​
*
​
​
Georgia Garinois-Melenikiotou(16)
​​
1,294
​​
*
​
​
All executive officers and directors as a group
(14 individuals)(17)
​​
1,417,781
​​
5.0%
​
*
Represents less than 1%.
(1)
Based on a Schedule 13G filed with the SEC on February 14, 201910, 2022 by Synergy Life Science Partners, LP (“Synergy Life Science Partners”), Synergy Venture Partners, LLC, (“Synergy Venture Partners”), William N. Starling, Jr. and Richard S. Stack, M.D., each of the foregoingThe Vanguard Group has shared voting andpower with respect to 50,971 shares, sole dispositive power over 2,095,507with respect to 2,484,810 shares, and shared dispositive power with respect to 74,929 shares of our common stock. The address of each of the foregoingThe Vanguard Group is c/o Synergy Life Sciences Partners, 4020 Stirrup Creek Drive, Suite 115, Durham, NC 27703.100 Vanguard Blvd., Malvern, PA 19355.

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(2)
Based on a Schedule 13G filed with the SEC on February 13, 20193, 2022 by OrbiMed Capital GP V LLC (“OrbiMed GP V”)BlackRock, Inc. has sole voting power with respect to 1,846,227 shares of our common stock and OrbiMed Advisors LLC (“OrbiMed Advisors”), each of the foregoing has shared voting andsole dispositive power over 1,829,449with respect to 1,846,227 shares of our common stock. The address of each of the foregoingBlackRock, Inc. is 601 Lexington Avenue, 54th Floor,55 East 52nd Street, New York, New York 10022.NY 10055.
(3)
Based on a Schedule 13G filed with the SEC on February 14, 2019January 10, 2022 by Kleiner Perkins Caufield & Byers XII,FMR LLC (“KPCB XII”), KPCB XII Founders Fund, LLC (“KPCB XII FF”) and KPCB XII Associates, LLC (“KPCB XII Associates”), KPCB XII has sole voting and dispositive power over 1,732,200 shares of our common stock, KPCB XII FF has sole voting and dispositive power over 24,106with respect to 64,882 shares of our common stock and KPCB XII Associates has sole voting and dispositive power over 1,756,306with respect to 1,538,454 shares of our common stock. The address of each of the foregoingFMR LLC is 2750 Sand Hill Road, Menlo Park, California 94025.245 Summer Street, Boston, MA 02210.
Inspire Medical Systems, Inc.
(4)​Based on a Schedule 13G filed with the SEC on February 14, 2019 by Amzak Health Investors LLC (“Amzak Health”), Michael D. Kazma, Joyce Erony and Anders Hove, each of the foregoing has shared voting and dispositive power over 1,497,043 shares of common stock. The address of each of the foregoing is 980 North Federal Highway, Suite 315, Boca Raton, Florida 33432.​
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(5)Based on a Schedule 13G filed with the SEC on February 8, 2019 by U.S. Venture Partners IX, L.P. (“USVP IX”), Presidio Management Group IX, L.L.C. (“PMG IX”), and Irwin Federman, Steven M. Krausz, David Liddle, Paul Matteucci, Jonathan D. Root, Casey M. Tansey and Philip M. Young (together, the “Managing Members”); each of USVP IX and PMG IX has sole voting and dispositive power over 1,084,127 shares of our common stock, each of the Managing Members has shared voting and dispositive power over 1,084,127 shares of our common stock and each of the Managing Members has sole voting and dispositive power over the following number of shares of our common stock: Irwin Federman (18,212 shares), Steven M. Krausz (22,573 shares), David Liddle (15,391 shares), Paul Matteucci (13,356 shares), Jonathan D. Root (18,982 shares), Casey M. Tansey (201,680 shares), and Philip M. Young (18,212 shares). Casey M. Tansey is a member of our Board of Directors. The address of each of the foregoing is c/o U.S. Venture Partners, 1460 El Camino Real, Suite 100, Menlo Park, California 94025.
STOCK OWNERSHIP
(6)(4)
Includes for Mr. Herbert, (i) 229,624241,237 shares of common stock held by a trust as to which Mr. Herbert serves as trustee and (ii) 649,645408,126 shares of common stock underlying options currently exercisable or exercisable within 60 days of March 7, 2019.3, 2022. Does not include 350 shares of common stock held by his daughter as to which Mr. Herbert disclaims beneficial ownership.
(7)Includes for Mr. Ban, 165,334 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.
(8)Includes for Mr. Buchholz, 92,076 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.
(9)(5)
Includes for Ms. Nelson, (i) 631,451101,130 shares of common stock held by GDN Holdings, LLC (“GDN”), as to which Ms. Nelson is the managing member and (ii) 39,85149,096 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.3, 2022.
(10)(6)
Includes for Ms. Erony, (i) 687,043 shares of common stock held by Amzak Health, as to which Ms. Erony has beneficial ownership and (ii) 17,296Mr. Ban, 97,075 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019. See footnote (4) above.3, 2022. Does not include 166 shares of common stock held by his daughter as to which Mr. Ban disclaims beneficial ownership.
(11)(7)
Includes for Mr. Griffin, 28,573Buchholz, 24,373 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.
(12)Includes for Mr. Jain, 17,2963, 2022. Does not include 1,000 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.
(13)Includes forheld by his daughter as to which Mr. Khoung, 17,296 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019. Mr. Khuong is an employee of OrbiMed Advisors butBuchholz disclaims beneficial ownership of the shares beneficially owned by OrbiMed Advisors.ownership.
(14)Includes for Mr. Mead, Jr., 17,296 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.
(15)(8)
Includes for Mr. McCormick, (i) 3,000 shares of common stock held by a trust as to which Mr. McCormick serves as trustee and (ii) 32,33341,578 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.3, 2022.
(16)(9)
Includes for Mr. Tansey, 17,296Mead, 26,541 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.3, 2022.
(17)(10)
Includes for all executive officers and directors as a group, 1,108,075Mr. Tansey, 26,541 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 7, 2019.3, 2022.
(11)
Includes for Dr. Griffin, 37,818 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.
(12)
Includes for Mr. Ebeling, 24,099 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.
(13)
Includes for Mr. Ellis, 8,184 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.
(14)
Includes for Mr. Phillips, 4,687 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.
(15)
Includes for Ms. Broader, 2,213 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.
(16)
Includes for Ms. Garinois-Melenikiotou, 1,175 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.
(17)
Includes for all executive officers and directors as a group, 807,364 shares of common stock underlying stock options currently exercisable or exercisable within 60 days of March 3, 2022.

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Delinquent Section 16(a) Beneficial Ownership Reporting Compliance

Reports

Section 16(a) of the Exchange Act requires our executive officers and directors, our chiefprincipal accounting officer and persons who beneficially own more than 10% of our common stock to file with the SEC reports of their ownership and changes in their ownership with the SEC. Such officers, directors and stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file with the SEC.our common stock. To our knowledge, based solely on review of the copies of such reports and amendments to such reports furnished to us with respect to the year ended December 31, 2018,2021 filed with the SEC and based on written representations by our directors and executive officers, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer, and beneficial owners of greater than 10% of our ordinary sharescommon stock were filed on a timely basis during the year ended December 31, 2018, other than one Form 4 for each of Messrs. Herbert, Buchholz, Ban and Jandrich reporting an option grant made to each on December 18, 2018, which was inadvertently filed late.

2021.

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Certain Transactions With Related Persons
CERTAIN TRANSACTIONS WITH RELATED PERSONS

Policies and Procedures on Transactions with Related Persons

Our Board of Directors recognizes that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). Our Board has adopted a written policy on transactions with related persons that is in conformity with the requirements for issuers having publicly-held common stock listed on the NYSE. Our related person transaction policy requires that the audit committee approve or ratify related person transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K (which are transactions, subject to specified exceptions, in which we were or are to be a participant, and the amount involved exceeds $120,000 and in which any “related person” as defined under Item 404(a) of Regulation S-K had or will have a direct or indirect material interest). It is our policy that directors interested in a related person transaction will recuse themselves from any vote on a related person transaction in which they have an interest.interest and that no director may participate in the approval of a related person transaction for which he or she is a “related person.” Each of the transactions described below entered into following the adoption of our related person transaction policy was approved in accordance with such policy.

Participation in Our Initial Public Offering

In connection with our IPO consummated in May 2018, certain of our existing stockholders and members of our Board of Directors purchased shares of our common stock from the underwriters at the public offering price of $16.00 per share, and on the same terms as other investors in our IPO. The following table summarizes purchases of shares of our common stock in our IPO by holders of more than 5% of our capital stock, certain members of our Board of Directors and an entity affiliated with a member of our Board of Directors.

Participants
Shares
Purchased
Aggregate
Purchase Price
 
 
(in thousands)
Greater than 5% Stockholders
 
 
 
 
 
 
Orbimed Private Investments V, L.P.(1)
 
312,500
 
$
5,000
 
Amzak Health Investors, LLC(2)
 
125,000
 
$
2,000
 
 
 
 
 
 
 
 
Directors and Affiliates
 
 
 
 
 
 
GDN Holdings, LLC(3)
 
62,500
 
$
1,000
 
Dana G. Mead, Jr.
 
20,000
 
$
320
 
Casey Tansey
 
187,500
 
$
3,000
 
(1)Mr. Chau Khuong, a member of our Board of Directors, is affiliated with OrbiMed Private Investments V, L.P.
(2)Ms. Joyce Erony, a member of our Board of Directors, is affiliated with Amzak Health Investors, LLC.
(3)Ms. Marilyn Carlson Nelson, a member of our Board of Directors, is the managing member of GDN Holdings, LLC.

Investor Rights Agreement

We are party to a fifth amended and restated investor rights agreement, or the Investor Rights Agreement, with each holder of our formerly outstanding convertible preferred stock, including each holder of more than 5% of our common stock and certain of our directors (or, in some cases, entities affiliated therewith). The Investor Rights Agreement imposes certain affirmative obligations on us, and also grants certain rights to the holders, including certain registration rights with respect to the registrable securities held by them. In connection with our IPO, we entered into an amendment to the Investor Rights Agreement which provided for the termination of all rights and covenants thereunder, other than the registration rights described above, immediately prior to the consummation of our IPO.

Voting Agreement

We were party to that certain fifth amended and restated voting agreement, as amended, or the Voting Agreement, pursuant to which each of U.S. Venture Partners IX, L.P., Kleiner Perkins Caufield & Byers, Synergy Life Science Partners, LP, OrbiMed Private Investments V, L.P. and Amzak Health Investors, LLC had the right

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to designate one member to be elected to our Board of Directors. The Voting Agreement terminated by its terms in connection with the closing of our IPO, and none of our stockholders currently have any continuing rights regarding the election or designation of members of our Board of Directors.

Right of First Refusal and Co-Sale Agreement

We were party to a fifth amended and restated right of first refusal and co-sale agreement with the Timothy P. Herbert 2013 Family Irrevocable GST Trust U/A/D November 27, 2013 and each holder of our convertible preferred stock, which included each holder of more than 5% of our capital stock and certain of our directors (or, in some cases, entities affiliated therewith), pursuant to which we had a right of first refusal in respect of certain sales of securities by the Timothy P. Herbert 2013 Family Irrevocable GST Trust U/A/D November 27, 2013. The right of first refusal and co-sale agreement terminated in connection with the closing of our IPO.

Director and Officer Indemnification and Insurance

We have agreed to indemnify each of our directors and executive officers against certain liabilities, costs, and expenses, and have purchased directors’ and officers’ liability insurance.

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PROPOSAL NO. 3
Approval, On An Advisory
(Non-Binding) Basis, Of The Compensation Of Our Named Executive Officers
Background
As required by Section 14A(a)(1) of the Exchange Act, the below resolution enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement. This proposal (the “Say-on-Pay Vote”), and commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. The Say-on-Pay Vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. At our 2020 Annual Meeting of Stockholders held on April 30, 2020, our stockholders recommended, on an advisory basis, that the stockholder vote on the compensation of our named executive officers occur every year. In light of the foregoing recommendation, the Board determined to hold a “say-on-pay” advisory vote every year. Accordingly, our next advisory say-on-pay vote (following the non-binding advisory vote at this Annual Meeting) is expected to occur at our 2023 Annual Meeting of Stockholders. At our 2021 Annual Meeting of Stockholders, approximately 90.3% of the votes cast on the say-on-pay proposal were voted “FOR” the proposal.
We encourage our stockholders to review the “Executive Compensation” section of this Proxy Statement for more information.
As an advisory approval, this proposal is not binding upon us or our Board of Directors. However, the organization and compensation committee, which is responsible for the design and administration of our executive compensation program, values the opinions of our stockholders expressed through your vote on this proposal. The Board and organization and compensation committee will consider the outcome of this vote in making future compensation decisions for our named executive officers. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders of Inspire Medical Systems, Inc. approve, on an advisory basis, the fiscal year 2021 compensation of Inspire Medical Systems, Inc.’s named executive officers as described in the “Executive Compensation” section and disclosed in the Summary Compensation Table and related compensation tables and narrative disclosure set forth in Inspire Medical Systems, Inc.’s Proxy Statement for the 2022 Annual Meeting of Stockholders.”
Board Recommendation
Our Board of Directors unanimously recommends you vote FOR the resolution to approve, on an advisory (non-binding) basis, the compensation of our named executive officers, as disclosed in the “Executive Compensation” section, the accompanying compensation tables and related narrative disclosure of this Proxy Statement.
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TABLE OF CONTENTSSTOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS


Stockholder Proposals And Director Nominations
Stockholders who intend to have a proposal considered for inclusion in our proxy materials for presentation at our annual meeting of stockholders to be held in 20202023 (the “2020“2023 Annual Meeting”) pursuant to Rule 14a-8 under the Exchange Act must submit the proposal to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416, in writing not later than November 20, 2019.

16, 2022.

Stockholders intending to present a proposal at our 20202023 Annual Meeting, but not to include the proposal in our proxy statement, or to nominate a person for election as a director, must comply with the requirements set forth in our bylaws. Our bylaws require, among other things, that our Secretary receive written notice from the stockholder of record of their intent to present such proposal or nomination not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the anniversary of the preceding year’s annual meeting of stockholders. Therefore, we must receive notice of such a proposal or nomination for the 20202023 Annual Meeting no earlier than the close of business on January 3, 2020December 29, 2022 and no later than the close of business on January 31, 2020.28, 2023. The notice must contain the information required by our bylaws. In the event that the date of the 20202023 Annual Meeting is more than 30 days before or more than 60 days after May 2, 2020,April 28, 2023, then our Secretary must receive such written notice not earlier than the close of business on the 120th day prior to the 20202023 Annual Meeting and not later than the close of business of the 90th day prior to the 20202023 Annual Meeting or, if later, the 10th day following the day on which public disclosure of the date of such meeting is first made by us. SEC rules permit management to vote proxies in its discretion in certain cases if the stockholder does not comply with this deadline and, in certain other cases notwithstanding the stockholder’s compliance with this deadline.

In addition to satisfying the foregoing requirements under our bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than our nominees for the 2023 annual meeting of stockholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than February 27, 2023.
We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these or other applicable requirements.

HOUSEHOLDING

Householding

SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or a single notice addressed to those stockholders. This process, which is commonly referred to as “householding,” provides cost savings for companies and helps the environment by conserving natural resources. Some brokers household proxy materials, delivering a single proxy statement or notice to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker. You can also request prompt delivery of a copy of this Proxy Statement and the Annual Report by contacting the Broadridge Financial Solutions, Inc. at (866) 540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.

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TABLE OF CONTENTS2018 ANNUAL REPORT


2021 Annual Report
Our 20182021 Annual Report, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2021, is being mailed with this Proxy Statement to those stockholders that receive this Proxy Statement in the mail. Stockholders that receive the Notice Regarding the Availability of Proxy Materials can access our 20182021 Annual Report, including our Annual Report on Form 10-K for 2018,2021, at www.proxyvote.com.

Our Annual Report on Form 10-K for the fiscal year ended December 31, 20182021 has also been filed with the SEC. It is available free of charge at the SEC’s website at www.sec.gov. Upon written request by a stockholder, we will mail without charge a copy of our Annual Report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits. Exhibits to the Annual Report on Form 10-K are available upon payment of a reasonable fee, which is limited to our expenses in furnishing the requested exhibit. All requests should be directed to the Secretary, Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416.

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Your vote is important. Please promptly vote your shares by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials or, if you received a paper or electronic copy of our proxy materials, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described on your proxy card.

By Order of the Board of Directors

 
Timothy P. HerbertBryan K. Phillips
Senior Vice President, Chief Executive OfficerGeneral Counsel, and Secretary
Golden Valley, Minnesota
March 16, 2022

Golden Valley, Minnesota
March 20, 2019

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