UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
| | | | | | | | | | | |
| Filed by the Registrant ☒ | | Filed by a Party other than the Registrant ☐ |
| Check the appropriate box: |
| ☐ |
| Preliminary Proxy Statement |
☐ |
|
☐ |
| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ |
|
☒ |
| Definitive Proxy Statement |
☐ |
|
☐ |
| Definitive Additional Materials |
☐ |
|
☐ |
| Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-2§240.14a-12 |
IRHYTHM TECHNOLOGIES, INC.
| | | |
| | | |
| IRHYTHM TECHNOLOGIES, INC. |
| (Name of Registrant as Specified In Its Charter) |
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
| Payment of Filing Fee (Check all boxes that apply): |
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
April 12, 2023
To Our Stockholders:
You are cordially invited to attend the 2023 Annual Meeting of Stockholders of iRhythm Technologies, Inc. (the “Annual Meeting”), which will be held virtually at www.virtualshareholdermeeting.com/IRTC2023 on Wednesday, May 24, 2023, at 9:00 a.m. Pacific Time. We believe that a virtual stockholder meeting provides greater access to those who may want to attend and therefore we have chosen this over an in-person meeting. This approach also lowers costs and enables participation from our global community. The matters expected to be acted upon at the Annual Meeting are described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. The Annual Meeting materials include the Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report to stockholders, each of which has been furnished to you over the internet or, if you have requested a paper copy of the materials, by mail.
Your vote is important. Whether or not you plan to attend the Annual Meeting, please cast your vote as soon as possible by Internet, telephone or, if you received a paper copy of the meeting materials by mail, by completing and returning the enclosed proxy card in the postage-prepaid envelope to ensure that your shares will be represented. Your vote by written proxy will ensure your representation at the Annual Meeting regardless of whether or not you attend virtually. Returning the proxy does not affect your right to attend the Annual Meeting or to vote your shares at the Annual Meeting.
| | | | | | | | |
| | |
| Sincerely, |
| /s/ Quentin S. Blackford |
| |
| Quentin S. Blackford |
| Chief Executive Officer |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON WEDNESDAY, MAY 24, 2023. THE PROXY STATEMENT AND ANNUAL REPORT ARE AVAILABLE AT WWW.PROXYVOTE.COM.
IRHYTHM TECHNOLOGIES, INC.
699 8th Street, Suite 600
San Francisco, California 94103
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
| | | | | | | | | | | |
| Time and Date: | | Wednesday, May 24, 2023, at 9:00 a.m. Pacific Time |
| Place: | | Virtually at www.virtualshareholdermeeting.com/IRTC2023. There is no physical location for the Annual Meeting. |
| Items of Business: | | 1.Elect seven directors to serve until our next annual meeting of stockholders or until their successors are duly elected and qualified. |
| | 2.Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2023. |
| | 3.Approve on a non-binding advisory basis, the compensation of our named executive officers. |
| | 4.Transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
| Record Date: | | March 30, 2023, which we refer to as our Record Date. Only stockholders of record at the close of business on the Record Date are entitled to notice of, and attendance of and voting at, the meeting and any adjournments thereof. |
Participation in Annual Meeting:
| | We are pleased to invite you to participate in our Annual Meeting, which will be conducted exclusively online at www.virtualshareholdermeeting.com/IRTC2023. We believe the virtual format makes it easier for stockholders to attend, and participate fully and equally in, the Annual Meeting because they can join with any internet-connected device from any location around the world at no cost. Our virtual meeting format helps us engage with all stockholders–regardless of size, resources, or physical location, saves us and stockholders’ time and money, and reduces our environmental impact. Please see “General Information About the Meeting” for additional information. Your vote is very important to us. Please act as soon as possible to vote your shares, even if you plan to participate in the Annual Meeting. For specific instructions on how to vote your shares, please see “Information About Solicitation and Voting” beginning on page 12 of this Proxy Statement. |
| Voting: | | Each share of common stock that you own represents one vote. For questions regarding your stock ownership, you may contact us through our website at https://investors.irhythmtech.com or, if you are a registered holder, through our transfer agent, Equiniti Trust Company, through its website at www.shareowneronline.com or by phone at (800) 468-9716. |
This Notice of the Annual Meeting, Proxy Statement, and form of proxy are being distributed and made available on or about April 12, 2023.
Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit your proxy through the Internet or by telephone or request and submit your proxy card as soon as possible, so that your shares may be represented at the meeting.
| | | | | | | | |
| | By Order of the Board of Directors, |
| /s/ Quentin S. Blackford |
| Quentin S. Blackford |
| Chief Executive Officer |
| San Francisco, California |
| April 12, 2023 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement (“Proxy Statement”) includes forward-looking statements, which are all statements other than statements of historical facts. These statements include, but are not limited to, statements regarding our business, our business strategy and plans, our objectives and future operations and our social responsibility initiatives. In some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “believe,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seeks,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.
Forward-looking statements are based upon various estimates and assumptions, as well as information known to us as of the date hereof and are subject to risks and uncertainties. Accordingly, actual results could differ materially due to a variety of factors. These risks and uncertainties include, but are not limited to, those described under the caption “Risk Factors” in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2022, and our other U.S. Securities and Exchange Commission (“SEC”) filings, which are available on the Investor Relations page of our website at https://investors.irhythmtech.com and on the SEC website at www.sec.gov.
All forward-looking statements contained herein are based on information available to us as of the date hereof and you should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Proxy Statement or to conform these statements to actual results or revised expectations, except as required by law. Undue reliance should not be placed on forward-looking statements.
PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement before voting.
Proposals to be Voted On and Board Voting Recommendations
| | | | | | | | | | | |
| PROPOSAL NO. 1 | |
P BOARD’S RECOMMENDATION “FOR” this Proposal |
| ELECTION OF DIRECTORS | |
| Our board is currently comprised of eight members, and after the board meeting the board will be comprised of seven members. In accordance with our amended and restated certificate of incorporation, beginning with our 2023 annual meeting, each member of our board of director shall be elected for terms expiring at the next succeeding annual meeting of the stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified. We are asking our stockholders to elect seven of our directors for a one-year term expiring at the 2024 annual meeting of stockholders and until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Additional information about our director nominees and their respective qualifications can be found under the section titled “Proposal No. 1 Election of Directors—Nominees to Our Board of Directors.” | |
| | | |
| PROPOSAL NO. 2 | | P BOARD’S RECOMMENDATION “FOR” this Proposal |
| RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
| We are asking our stockholders to ratify the audit committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2023. Information regarding fees paid to PricewaterhouseCoopers LLP during 2022 and 2021 can be found under the section titled “Proposal No. 2 Ratification of Appointment of Independent Registered Public Accounting Firm—Independent Registered Public Accounting Firm Fees and Services.” | |
| | | |
| PROPOSAL NO. 3 | | P BOARD’S RECOMMENDATION “FOR” this Proposal |
| ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS | |
| We are asking our stockholders to approve, on a non-binding advisory basis, the compensation of our named executive officers. Additional information about the advisory vote on the compensation of our named executive officers can be found under the section titled “Proposal No. 3 Advisory Vote on the Compensation of Our Named Executive Officers.” | |
Key Business Highlights
We are a leading digital healthcare company that is in the business of designing, developing, and commercializing device-based technology to provide remote cardiac monitoring services that we believe allow clinicians to diagnose certain arrhythmias quicker and with greater efficiency than other services that rely on traditional technology. Each of our Zio Systems combines a U.S. Food and Drug Administration (“FDA”)-cleared and CE-marked, wire-free, patch-based, 14-day wearable biosensor that continuously records electrocardiogram (“ ECG”) data with our proprietary cloud-based data analytic software to help physicians monitor patients and diagnose arrhythmias. We have provided the Zio Services to over six million patients and have collected over 1.5 billion hours of curated heartbeat data.
In 2022, we continued to see a significant growth in core business, and we believe that our ongoing accomplishments and investments will provide the foundation for sustained high growth over the long term. Over the past five years, our revenue CAGR grew over 30%, reflecting continued resilience in the midst of various micro- and macro-economic challenges. Our significant financial and operational highlights for 2022 included:
•Revenue of $410.9 million, a 27.3% increase compared to full year 2021;
•Gross margin of 68.5%, a 238 basis point increase compared to full year 2021;
•Net loss of $116.2 million, reflecting an increase of $14.8 million compared to full year 2021;
•Adjusted EBITDA of negative $11.3 million, reflecting a $24.4 million improvement compared to full year 2021;
•Strong cash balance of $213 million as of December 31, 2022;
•Centers of Medicare & Medicaid Services Medicare Physician Fee Schedule Final Rule released for 2023, which contained national rates for Current Procedural Terminology codes that we use to seek reimbursement for its Zio® XT service;
•Health economic analysis of our mSToPS trial showed that Zio® XT demonstrated gain in quality adjusted life expectancy while providing excellent value to healthcare systems by enabling early diagnosis after proactive screening for atrial fibrillation in an at-risk population;
•FDA clearance gained for software modifications to our clinically integrated Zio ECG Utilization Software ("ZEUS") System;
•First “Know Your Rhythm” commercial pilot term sheet signed; and
•Hired key executive leadership talent to advance our mission in the core symptomatic U.S. market and international expansion.
Key Financial Metrics
(1) Adjusted EBITDA calculated as net loss or income excluding interest, taxes, depreciation and amortization, stock-based compensation expense, impairment and restructuring charges, and transformation costs. For further discussion refer to the section titled “Non-GAAP Financial Measures.”
We continue to create and build long-term value for our stockholders. The following depicts our relative Total Shareholder Return (“TSR”) for the one, three and five-year periods ending on December 31, 2022, compared to the S&P Healthcare Equipment Select Industry Index.
Compensation Highlights
iRhythm’s executive compensation programs and policies are designed to retain and motivate a strong, capable, and experienced executive team with the ability to execute on our strategic growth and expansion goals, while aligning compensation with business performance and the interests of our stockholders. Please see the section “Compensation Discussion and Analysis” below for a description of the key elements of our 2022 executive compensation program and the decisions of the Compensation and Human Capital Management Committee (also referred to as the “Committee”) for the following named executive officers (“NEOs”) during 2022:
•Quentin Blackford, President and Chief Executive Officer;
•Brice Bobzien, Chief Financial Officer;
•Douglas Devine, former Chief Operating Officer and former Chief Financial Officer;
•Patrick Murphy, Chief Business Officer and Chief Legal Officer;
•Chad Patterson, Chief Commercial Officer; and
•Minang Turakhia, M.D., M.S., Chief Medical Officer, Chief Scientific Officer and EVP, Product Innovation.
Leadership Changes in 2022
•On April 28, 2022, we announced that Minang Turakhia, M.D. M.S., planned to join the company as the Chief Medical Officer and Chief Scientific Officer on June 6, 2022, to drive continued innovation, lead research and evidence generation, and enhance and augment the portfolio of clinical products and services.
•On July 18, 2022, we announced that Mr. Dave Vort, our Chief Commercial Officer resigned effective July 25, 2022, and Mr. Vort continued to serve the company as a strategic advisor and actively engage with our leadership team through March 31, 2023.
•On July 18, 2022, we also announced that Mr. Chad Patterson planned to join the company as the new Chief Commercial Officer on July 25, 2022, to manage the company’s commercial strategy, operations and execution.
•On July 25, 2022, we announced that Mr. Brice Bobzien planned to join the company as the Chief Financial Officer on August 8, 2022, to lead all financial operations of the company as well as to advance the culture of operational excellence and prepare the company for future growth.
Corporate Governance Highlights
We are committed to good corporate governance, which strengthens the accountability of our board of directors and promotes the long-term interests of our stockholders. Key elements of our independent board and leadership practices are outlined below, and discussed further in this proxy statement:
| | | | | |
| Independent Chairman of the Board | Abhijit Y. Talwalkar serves as the independent chairperson of our board of directors. Our board of directors believes that Mr. Talwalkar’s deep knowledge of our industry and experience in leadership roles at other technology companies make him well qualified to serve as chair of our board of directors. |
Independent Board and Committee Oversight | Our Corporate Governance Guidelines provide that there will at all times be a majority of independent directors on our board of directors. A majority of our current directors are independent (six out of seven directors). Our independent directors conduct regular executive sessions. All committees of the board of directors are composed of independent directors. |
| Board Diversity | In evaluating potential members of the board of directors, including directors who are eligible for re-election, our Nominating and Corporate Governance committee takes into account diversity including professional background, education, race, ethnicity, and gender. The Nominating and Corporate Governance Committee, and any search firm it engages, will include women, minority and underrepresented community candidates in the pool of each director search. |
| Comprehensive Risk Oversight Practices and Review of Internal Controls | Our board of directors oversees our comprehensive risk oversight practices, including cybersecurity, data privacy, legal and regulatory matters, and other critical evolving areas. Our board of directors executes its oversight responsibility directly and through its committees, particularly the Audit Committee. |
Environmental, Social and Governance Matters
| Our Nominating and Corporate Governance committee oversees iRhythm’s strategies, activities, risks and opportunities related to ESG matters. |
Robust Board Evaluation Process
| Our board of directors and each of its committees conducts annual self-evaluations to assess performance. Such evaluations help inform board practices and assist the board of directors and its committees in identifying how it can improve. |
| Declassified Board of Directors | Beginning with this Annual Meeting, each member of our board of directors will serve a one-year term and be subject to re-election at the following year’s annual meeting. |
Board of Directors Highlights
Our board of directors was composed of eight directors during 2022 and will be composed of seven members. Beginning with this Annual Meeting, all our directors will stand for election and the board of directors will no longer have three classes.
Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, or removal. At the 2023 annual meeting of our stockholders, all directors will stand for election and the Board of Directors will no longer have three classes.
2022 Director Board Composition and Diversity
| | | | | | | | |
| Board Independence | Board Tenure | Age Mix |
Independent Directors: 7
Non-Independent Directors: 1 | Average Tenure: 4.3 Years
0-3 Years: 3 3-5 Years: 3 6+ Years: 2 | Average Age: 63.4
40-49 Years: 1 50-59 Years: 2 60-69 Years: 3 70-79 Years: 1 80-89 Years: 1 |
See below for the diversity matrix of our board of directors as of April 12, 2023. The diversity matrix for our board of directors as of April 14, 2022 is available in our proxy statement for our 2022 annual meeting of stockholders,
filed with the SEC on April 14, 2022:
| | | | | | | | |
37.5% Gender Diversity | 25% Racial Diversity | 50% Overall Diversity |
| | | | | | | | | | | |
| Female | Male |
| Gender Identity |
| Directors | 3 | 5 |
| Demographic Background | | |
| Asian | 1 | 1 |
| White | 1 | 4 |
Director Nominee Expertise, Skills, and Experience
Our director nominees possess relevant individual experiences, qualifications and skills that allow the board of directors to effectively oversee the company’s strategy and management. Our directors’ principal areas of expertise include:
| | | | | | | | | | | | | | |
Payment of Filing Fee (Check the appropriate box): | | | | | | | | |
☒Skill |
Abhijit Y. Talwalkar
(Chairman) | No fee required.Quentin Blackford | Bruce G. Bodaken | Karen Ling | C. Noel Bairey Merz, M.D. | Mark J. Rubash | Ralph Snyderman, M.D. |
☐Healthcare/Medical Device Industry |
| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.X | X | X | X | X | X |
Technology and Data Security |
X | (1) |
| Title of each class of securities to which transaction applies: | | X | |
Marketing & Commercial |
| (2)X |
| Aggregate number of securities to which transaction applies: | X | | X |
Senior Leadership |
X | (3)X |
X | 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):X | X | X | X |
Finance |
X | (4)X |
X | Proposed maximum aggregate value of transaction: | | X | X |
Public Company Governance |
X | (5)X |
X | Total fee paid:X | | X | X |
☐Global Operations |
X | Fee paid previously with preliminary materials.X | | X | | X | |
☐Medical Experience |
| 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. | | | X | | X |
Regulatory & Compliance |
| (1) |
| Amount Previously Paid: | X | | X |
Human Capital Management |
X | (2)X |
X | Form, Schedule or Registration Statement No.:X | | | X |
Enterprise Risk Management |
X | (3)X |
X | Filing Party: | | X | |
Environmental, Social & Governance |
X | (4) |
X | Date Filed:X | | X | |
Skill Matrix - Definitions
| | | | | | | | |
| Skill | Definition | Percentage of the Current Board with the Relevant Skill |
| Healthcare/Medical Device Industry | Management-level experience in an industry involving healthcare products or services, including medical devices and IDTF/MCT services. | 75% |
| Technology and Data Security | Significant experience or expertise in the use and deployment of technologies to facilitate business objectives, including cybersecurity and data privacy. | 38% |
| Marketing & Commercial | Significant strategic or management experience in the sales and marketing of medical devices and/or provision of services as an IDTF, and an understanding of the reimbursement environment in the United States and regions the Company has identified as potential areas for growth and expansion. | 38% |
| Senior Leadership | Experience in a senior management position, preferably a C-level executive (i.e., chief executive officer, etc.), at a publicly traded or private company with global operations, or other large complex organization (such as government, academic institution or not-for-profit). | 100% |
| Finance | Significant experience in senior management positions, preferably a C-level executive (i.e., chief executive officer, chief financial officer or chief accounting officer, etc.), requiring financial knowledge and analysis, including in accounting, corporate finance, treasury functions or risk management from a financial perspective. | 75% |
| Public Company Governance | Experience in and understanding of the board of directors’ oversight and fiduciary responsibilities and other key corporate governance matters for public companies in the healthcare and/or medical device industry, including legal and regulatory obligations and risks. | 75% |
| Global Operations | Significant strategic or management experience in an organization that operates internationally, especially on a broad basis and/or in the geographic regions the company has identified as potential areas for growth and expansion. | 63% |
| Medical Experience | A medical degree and significant work experience as a cardiac EP or cardiologist or expertise with personalized health care. | 25% |
| Regulatory and Compliance | Significant work experience with relevant regulatory requirements involving the development and distribution of medical devices or the development and provision of IDTF/MCT services. | 25% |
| Human Capital Management | Significant work experience in senior management positions with responsibility for, or to oversee, the Human Resources function (i.e., Chief Human Resources Officer or Chief Executive Officer with a Chief Human Resources Officer as a direct report) for an organization that operates in the US and internationally, including responsibility for attracting, developing, motivating and retaining high-quality people, compensation, DE&I, and succession planning. | 75% |
| Enterprise Risk Management | Experience overseeing corporate risk management process, including the effective identification, prioritization, and management of a broad spectrum of risks relevant to the company. | 63% |
| Environmental, Social & Governance | Experience in environmental, social and broader governance matters to facilitate the long-term sustainability of the company’s business and enable the company to address the needs of various stakeholders. | 38% |
Environment, Social and Governance Highlights
We believe that effectively managing ESG risks and opportunities drives business success, and that when fully integrated into the business, ESG can provide a competitive advantage. In 2022, we set out on a journey to develop iRhythm’s approach to ESG by conducting an ESG Priority Assessment to identify the ESG priority topics that are important to internal and external stakeholders. We also began operationalizing ESG within the organization by forming an ESG Steering Committee and multiple ESG Working Groups, which focus on specific ESG substantive areas or work streams. In addition, in 2023, we established formal board oversight of ESG by revising the charters of two committees or our board of directors, including the Nominating and Corporate Governance Committee and the Compensation and Human Capital Management Committee. We continue to work as an organization to advance our strategic ESG roadmap by pursuing ESG work streams.
Our strategic ESG roadmap is by no means static, and as we move forward, we plan to regularly review and revisit our ESG priority topics, our ESG measures and initiatives, and any ESG goals so that we can dynamically support the success of our business by addressing those topics, that make our business more sustainable. We believe that advancing the interests of our stakeholders supports the sustainability and success of our business, and so as we implement our ESG program, we plan to regularly consult internal and external stakeholders to take into account the views and perspectives of those groups that are critical to our business and which we impact by virtue of operating our business, our employees, customers, suppliers, investors, communities and others.
IRHYTHM TECHNOLOGIES, INC.
699 8th Street, Suite 600
San Francisco, California 94103
NOTICE OFPROXY STATEMENT FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS
To Be HeldApril 12, 2023
Information About Solicitation and Voting
The accompanying proxy is solicited on behalf of the board of directors of iRhythm Technologies, Inc. for use at 10:our 2023 Annual Meeting of Stockholders, or Annual Meeting, to be held virtually at www.virtualshareholdermeeting.com/IRTC2023 on Wednesday, May 24, 2023, at 9:00 a.m. Pacific Time, on June 18, 2021
Dear Stockholdersand any adjournment or postponement thereof. The Notice of iRhythm Technologies, Inc.:
We cordially invite you to attend the virtual 2021 annual meetingInternet Availability of stockholders (the “Annual Meeting”) of iRhythm Technologies, Inc., a Delaware corporation, which will be held on Friday, June 18, 2021, at 10:00 a.m. Pacific Time, via live webcast at www.virtualshareholdermeeting.com/IRTC2021. You will be able to attend the meeting onlineProxy Materials and submit questions during the meeting by visiting the website listed above. You will also be able to vote your shares electronically at the annual meeting. This meeting is being heldthis Proxy Statement for the following purposes, as more fully described in the accompanying proxy statement:
1.To elect three Class II directors to serve until the 2022 annual meeting of stockholders and until their successors are duly elected and qualified;
2.To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2021;
3.To approve, on an advisory basis, Named Executive Officer compensation; and
4.To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.
Our Board of Directors has fixed the close of business on April 29, 2021, as the record date for the Annual Meeting. Only stockholders of record on April 29, 2021 are entitled to notice of and to vote at the Annual Meeting. Further information regarding voting rights(the “Proxy Statement”) and the matters to be voted upon is presented in the accompanying form of proxy statement.
On or about May 5, 2021, we expect to mail to our stockholders a Notice of 2021 Annual Meeting of Stockholders (the “Notice”), together with our proxy statementwere first distributed and our annual report. The Notice provides instructionsmade available on how to vote via the Internet by telephone or by proxy card. The accompanying proxy statement and our annual report can be accessed directly at the following Internet address: www.proxyvote.com. You will need to enter the control number located on your proxy card.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the virtual Annual Meeting, we urge you to submit your vote via the Internet, telephone or mail.
We appreciate your continued support of iRhythm.
| | | | | |
| By order of the Board of Directors, |
|
|
| /s/ Michael J. Coyle |
| |
| Michael J. Coyle
Chief Executive Officer
San Francisco, California
April 30, 2021
|
Important Notice Regarding Proxy Materials for the Shareholder Meeting
to be Held on June 18, 2021
The Notice of Annual Meeting, Proxy Statement and Form of Proxy are first being mailedstockholders on or about May 5, 2021 to all shareholders entitled to vote at the Annual Meeting. This Proxy Statement and our 2020April 12, 2023. Our Annual Report are also available on the Company’s website.
Virtual Meeting Admission
Shareholders of record as of April 29, 2021 will be able to participate in the virtual Annual Meeting by visiting our Annual Meeting website at www.virtualshareholdermeeting.com/IRTC2021. To participate in the virtual Annual Meeting, you will need the 16-digit control number included on your proxy card.
The Annual Meeting will begin promptly at 10:00 a.m. Pacific time on Friday, June 18, 2021. Online check-in will begin at 9:45 a.m. Pacific time, and you should allow approximately 15 minutes for the online check-in procedures.
Voting. Whether or not you plan to virtually attend the Annual Meeting and regardless of the number of shares of common stock that you own, please cast your vote, at your earliest convenience, as instructed on your proxy card and/or voting instruction form. Your votefiscal year ended December 31, 2022, is very important. Your vote before the Annual Meeting will ensure representation of your shares at the Annual Meeting even if you are unable to virtually attend. You may submit your vote by the internet, telephone, mail or virtually at the Annual Meeting. Voting over the internet or by telephone is fast and convenient, and your vote is immediately confirmed and tabulated. By using the Internet or telephone, you help us reduce postage, printing and proxy tabulation costs. We encourage all holders of record to vote in accordance with the instructions on the proxy card and/or voting instruction form prior to the Annual Meeting even if they plan on virtually attending the Annual Meeting. Submitting a vote before the Annual Meeting will not preclude you from voting your shares at the Annual Meeting should you decide to virtually attend. You may vote using the following methods:
| | | | | |
Computer: | Prior to the Annual Meeting, visit the website listed on your proxy card/voting instruction form to vote via the internet. During the Annual Meeting, visit our Annual Meeting website at www.virtualshareholdermeeting.com/IRTC2021
|
Mail: | Sign, date and return your proxy card/voting instruction form to vote by mail. |
Phone: | Call the telephone number on your proxy card/voting instruction form to vote by telephone. |
TABLE OF CONTENTS
| | | | | |
| Page |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
PROPOSAL NO. 3 ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION | 19 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
IRHYTHM TECHNOLOGIES, INC.
PROXY STATEMENT
FOR 2021 ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 10:00 a.m. Pacific Time on June 18, 2021
This Proxy Statement and the enclosed form of proxy are furnished in connection with the solicitation of proxies by our Board of Directors for use at the virtual 2021 annual meeting of stockholders of iRhythm Technologies, Inc., a Delaware corporation (the “Company” or “iRhythm”), and any postponements, adjournments or continuations thereof (together with any adjournments or postponements, the “Annual Meeting”). The Annual Meeting will be held via live webcast at www.virtualshareholdermeeting.com/IRTC2021 on Friday, June 18, 2021 at 10:00 a.m. Pacific Time. The Notice of 2020 Annual Meeting of Stockholders (the “Notice”), togetheravailable with this Proxy Statement and our annual report is first being mailed on or about May 5, 2021 to all stockholders entitled to vote atby following the Annual Meeting.
| | |
Virtual Stockholder Meeting |
In light of the current COVID-19 pandemic and government orders related to activities in the state and county where we usually hold our annual meeting of shareholders, we believe a virtual meeting would allow the greatest number of shareholders to attend. As such, our 2021 Annual Meeting will be conducted exclusively online via live webcast, allowing all of our shareholders the option to participate in the live, online meeting from any location convenient to them, providing shareholder access to our Board and management, and enhancing participation while supporting the safety of our shareholders and maintaining legal compliance with government orders. Shareholders at the close of business on April 29, 2021 will be allowed to communicate with us and ask questions in our virtual shareholder meeting forum before and during the meeting. All directors and key executive officers are expected to be available to answer questions. For further information on the virtual meeting, please see the Q&A section below. Please note that there will not be a physical meeting. |
The information providedinstructions in the “questionNotice of Internet Availability of Proxy Materials. References to our website in this Proxy Statement are not intended to function as hyperlinks and answer” format below 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.
Internet Availability of Proxy Materials
In accordance with U.S. Securities and Exchange Commission (“SEC”)rules, we are using the Internet as our primary means of furnishing proxy materials to stockholders. Consequently, most stockholders will not receive paper copies of our proxy materials. We will instead send these stockholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our Proxy Statement and referencesAnnual Report, and voting via the Internet. The Notice of Internet Availability of Proxy Materials also provides information on how stockholders may obtain paper copies of our proxy materials if they so choose. We believe this rule makes the proxy distribution process more efficient, less costly and helps in conserving natural resources.
General Information About the Meeting
Purpose of the Annual Meeting
You are receiving this Proxy Statement because our board of directors is soliciting your proxy to our website addressvote your shares at the Annual Meeting with respect to the proposals described in this Proxy Statement. This Proxy Statement includes information that we are inactive textual references only.required to provide to you pursuant to the rules and regulations of the SEC and is designed to assist you in voting your shares.
What matters am IWe intend to ensure that our stockholders are afforded the same rights and opportunities to participate virtually as they would at an in-person meeting. We believe the virtual format makes it easier for stockholders to attend, and participate fully and equally in, the Annual Meeting because they can join with any Internet-connected device from any location around the world at no cost. Our virtual meeting format helps us engage with all stockholders–regardless of size, resources, or physical location, saves us and stockholders’ time and money, and reduces our environmental impact.
Record Date; Quorum
Only holders of record of our common stock at the close of business on March 30, 2023, (the “Record Date”) will be entitled to vote at the Annual Meeting. At the close of business on the Record Date, we had 30,462,929 shares of common stock outstanding and entitled to vote. At the close of business on the Record Date, our directors and executive officers and their respective affiliates beneficially owned and were entitled to vote 129,573 shares of common stock at the Annual Meeting, or approximately 0.43% of the voting on?power of the shares of our common stock outstanding on such date. For at least ten days prior to the Annual Meeting, a complete list of the stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose relating to the Annual Meeting during ordinary business hours at our headquarters, at 699 8th Street, Suite 600, San Francisco, California 94103.
The holders of a majority of the voting power of the shares of our common stock entitled to vote at the Annual Meeting as of the Record Date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This presence is called a quorum. Your shares are counted as present at the Annual Meeting if you are present and vote in person at the Annual Meeting or if you have properly submitted a proxy.
Participating in the Annual Meeting
•Instructions on how to attend the Annual Meeting are posted at www.proxyvote.com.
•You may log in to the meeting platform beginning at 8:45 a.m. Pacific Time on May 24, 2023. The meeting will begin promptly at 9:00 a.m. Pacific Time.
•You will need the 16-digit control number provided in your proxy materials to attend the Annual Meeting at www.virtualshareholdermeeting.com/IRTC2023.
•Stockholders of record and beneficial owners as of the Record Date may vote their shares electronically during the Annual Meeting.
•If you wish to submit a question during the Annual Meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/IRTC2023, type your question into the “Ask a Question” field, and click “Submit.” If your question is properly submitted during the relevant portion of the meeting agenda, we will respond to your question during the live webcast, subject to time constraints. Questions that are substantially similar may be grouped and answered together to avoid repetition. We reserve the right to exclude questions that are irrelevant to meeting matters, irrelevant to the business of iRhythm, or derogatory or in bad taste; that relate to pending or threatened litigation; that are personal grievances; or that are otherwise inappropriate (as determined by the chair of the Annual Meeting). A webcast replay of the Annual Meeting, including the Q&A session, will be archived on the “Investor Relations” section of our website, which is located at https://investors.irhythmtech.com.
•If we experience technical difficulties during the meeting (e.g., a temporary or prolonged power outage), we will determine whether the meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via www.virtualshareholdermeeting.com/IRTC2023. If you encounter technical difficulties accessing our meeting or asking questions during the meeting, a support line will be available on the login page of the virtual meeting website.
Voting Rights; Required Vote
In deciding all matters at the Annual Meeting, as of the close of business on the Record Date, each share of common stock represents one vote. We do not have cumulative voting on:
•rights for the election of three Class II directorsdirectors. You may vote all shares owned by you as of the Record Date, including (i) shares held directly in your name as the stockholder of record and (ii) shares held for you as the beneficial owner in street name through a broker, bank, trustee, or other nominee.
Stockholder of Record: Shares Registered in Your Name. If, on the Record Date, your shares were registered directly in your name with our transfer agent, Equiniti Trust Company, then you are considered the stockholder of record with respect to serve until our 2022 annual meetingthose shares. As a stockholder of stockholders and until their successors are duly elected and qualified;
•a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2021;
•an advisoryrecord, you may vote to approve Named Executive Officer Compensation; and
•any other business as may properly come beforeat the Annual Meeting.Meeting or vote by telephone, through the Internet or, if you request or receive paper proxy materials, by filling out and returning the proxy card.
How doesBeneficial Owner: Shares Registered in the BoardName of Directors recommend Ia Broker or Nominee. If, on the Record Date, your shares were held in an account with a brokerage firm, bank or other nominee, then you are the beneficial owner of the shares held in street name. As a beneficial owner, you have the right to direct your nominee on how to vote the shares held in your account, and your nominee has enclosed or provided voting instructions for you to use in directing it on these proposals?how to vote your shares. However, the organization that holds your shares is considered the stockholder of record for purposes of voting at the Annual Meeting. Because you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from the organization that holds your shares giving you the right to vote the shares at the Annual Meeting.
Our Board
Each director will be elected by a plurality of Directors recommends a vote:
•“FOR” the votes cast, which means that the seven individuals nominated for election to our board of Cathleen Noel Bairey Merz, M.D., Mark J. Rubash and Renee Budig as Class II directors;
•“FOR”directors at the ratificationAnnual Meeting receiving the highest number of “FOR” votes will be elected. You may vote “FOR ALL NOMINEES,” “WITHHOLD AUTHORITY FOR ALL NOMINEES,” or vote “FOR ALL EXCEPT” one or more of the nominees you specify. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for ourthe fiscal year ending December 31, 2021; and
•“FOR” the approval of Named Executive Officer compensation.
Who is entitled to vote?
Holders of our common stock as of the close of business on April 29, 2021, the record date for the Annual Meeting, may vote at the Annual Meeting. As of the record date, there were 29,303,050 shares of our common stock outstanding. In deciding all matters at the Annual Meeting, each stockholder2023, will be entitled to one vote for each share of our common stock held by them on the record date. Stockholders are not permitted to cumulate votes with respect to the election of directors.
Registered Stockholders. If shares of our common stock are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares and the Notice was provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or vote while virtually attending the Annual Meeting. Throughout this Proxy Statement, we refer to these registered stockholders as “stockholders of record.”
Street Name Stockholders. If shares of our common stock are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” and the Notice was forwarded to you by your broker or nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your shares. Beneficial owners are also invited to virtually attend the Annual Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote your shares of our common stock during the virtual Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy. If you request a printed copy of our proxy materials by mail, your broker, bank or other nominee will providea voting instruction form for you to use. Throughout this Proxy Statement, we refer to stockholders who hold their shares through a broker, bank or other nominee as “street name stockholders.”
How many votes are needed for approval of each proposal?
•Proposal No. 1: The election of directors requires a plurality vote of the shares of our common stock present in attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon to be approved. “Plurality” means that the nominees who receive the largest number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether as a result of stockholder abstention or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. You may vote “for” or “withhold” on each of the nominees for election as a director.
•Proposal No. 2: The ratification of the appointment of PricewaterhouseCoopers LLP requiresobtained if the affirmative vote of a majority of the shares of our common stock present in attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon to be approved. Abstentions and broker non-votes are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effectApproval, on the outcomea non-binding advisory basis, of this proposal.
•Proposal No. 3: The advisory vote to approve the compensation of our Named Executive Officers,named executive officers will be approvedobtained if the majority of the shares of our common stock present in attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon vote for approval. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against”“against” the proposal. Broker non-votes will have no effect on the outcome of this proposal. The result
Recommendations of this vote will be considered an advisory voteOur Board of our stockholders.
What isDirectors on Each of the quorum?
A quorum is the minimum number of shares requiredProposals Scheduled to be presentVoted on at the Annual Meeting for the Annual Meeting
| | | | | | | | | | | |
| PROPOSAL | BOARD RECOMMENDATION | PAGE REFERENCE |
| Proposal No. 1 | The election of the seven directors named in this Proxy Statement. | FOR
ALL NOMINEES | |
| Proposal No. 2 | The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. | FOR | |
| Proposal No. 3 | The approval, on a non-binding advisory basis, of the compensation of our named executive officers. | FOR | |
None of our non-employee directors have any substantial interest in any matter to be properly held under our amended and restated bylaws and Delaware law. The presence, in attendance or by proxy, of a majority of all issued and outstanding sharesacted upon except with respect to the directors so nominated. None of our common stock entitledexecutive officers have any substantial interest in any matter to vote at the virtual Annual Meeting will constitute a quorum at the virtual Annual Meeting. be acted upon other than Proposal No. 3.
Abstentions withhold votes and broker non-votesWithhold Votes; Broker Non-Votes
Under Delaware law, abstentions are counted as shares present and entitled to vote for purposes of determining whether a quorum.quorum is present. At the Annual Meeting, abstentions or withhold votes will have no effect on Proposal No. 1, Proposal No. 2, or Proposal No. 3.
Broker non-votes occur when shares held by a broker for a beneficial owner are not voted because the broker did not receive voting instructions from the beneficial owner and lacked discretionary authority to vote the shares. Under Delaware law, broker non-votes are counted as present and entitled to vote for purposes of determining whether a quorum is present. However, brokers have limited discretionary authority to vote shares that are beneficially owned. While a broker is entitled to vote shares held for a beneficial owner on “routine” matters without instructions from the beneficial owner of those shares, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on “non-routine” matters. At our Annual Meeting, only Proposal No. 2 is considered a routine matter and brokers have discretionary authority to vote shares that are beneficially owned on Proposal No. 2. If a broker chooses not to vote shares for or against Proposal No. 2, it will have the same effect as an abstention. The other proposals presented at the Annual Meeting are non-routine matters and therefore broker non-votes are not deemed to be shares entitled to vote on and will have no effect on the other proposals.
Who will count
Voting Instructions; Voting of Proxies
| | | | | | | | |
| Vote By Internet | Vote By Telephone or Internet | Vote By Mail |
| You may vote via the virtual meeting website—any stockholder can attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/IRTC2023. where stockholders may vote and submit questions during the meeting. The meeting starts at 9:00 a.m. Pacific Time. Please have your 16-Digit Control Number to join the Annual Meeting. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.proxyvote.com. | You may vote by telephone or through the Internet—in order to do so, please follow the instructions shown on your proxy card. | You may vote by mail—if you request or receive a paper proxy card and voting instructions by mail, simply complete, sign and date the enclosed proxy card and promptly return it in the envelope provided or, if the envelope is missing, please mail your completed proxy card to Vote Processing, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New York 11717.Your completed, signed, and dated proxy card must be received prior to the Annual Meeting. |
Votes submitted by telephone or through the votes?
Broadridge Financial Services, Inc., our independent proxy tabulator, will tabulate the votes.
How do I vote?
If you are a stockholder of record, there are four ways to vote:
•Internet must be received by internet at www.proxyvote.com, 24 hours a day, seven days a week, until8:59 p.m. Pacific Time / 11:59 p.m. Eastern Standard time on June 17, 2021 (haveMay 23, 2023. Submitting your proxy, card in hand whenwhether by telephone, through the Internet or, if you visit the website);
•by toll-free telephone at 1-800-690-6903 until 11:59 p.m. Eastern Standard time on June 17, 2021 (have yourrequest or receive a paper proxy card, by mail will not affect your right to vote in hand whenperson should you call);
•decide to attend the Annual Meeting. If you are not the stockholder of record, please refer to the voting instructions provided by completing and mailing your proxy card;nominee to direct your nominee on how to vote your shares. Your vote is important. Whether or
•by attending the virtual Annual Meeting via the Internet and voting during the meeting (have your proxy card in hand and follow the directions).
Even if not you plan to attend the Annual Meeting, virtually, we recommend thaturge you alsoto vote by proxy soto ensure that your vote is counted.
All proxies will be counted if you later decide not to attend virtually.
If you are a street name stockholder, you will receive voting instructions from your broker, bank or other nominee. You must follow the voting instructions provided by your broker, bank or other nominee in order to instruct your broker, bank or other nominee on how to vote your shares. Street name stockholders should generally be able to vote by returning an instruction card, or by telephone or via the Internet. However, the availability of telephone and Internet voting will depend on the voting process of your broker, bank or other nominee. As discussed above, if you are a street name stockholder, you may not vote your shares during the virtual Annual Meeting unless you obtain a legal proxy from your broker, bank or other nominee.
Can I change my vote?
Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time before the virtual Annual Meeting by:
•entering a new vote by internet or by telephone;
•signing a later-dated proxy card and submitting it so that is received prior to the Annual Meetingvoted in accordance with the instructions included inspecified on the proxy card;
•sendingcard. If you sign a written notice of revocationphysical proxy card and return it without instructions as to the Secretary of iRhythm Technologies, Inc. at 699 8th Street, Suite 600, San Francisco, CA 94103, that must be received prior to the Annual Meeting, stating that you revoke your proxy; or
•virtually attending the meeting and votinghow your shares by electronic ballot at the virtual Annual Meeting.
If you areshould be voted on a street name stockholder, your broker, bank or other nominee can provide you with instructions on how to change your vote.
Where is the Annual Meeting?
The Annual Meeting will be held virtually at www.virtualshareholdermeeting.com/IRTC2021.
Why are you holding a virtual meeting instead of a physical meeting?
In light of the current COVID-19 pandemic, we believe that a virtual Annual Meeting would allow the greatest number of shareholders to attend. We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our shareholders and our company. We believe that hosting a virtual Annual Meeting will enable more of our shareholders to attend and participate in the meeting since our shareholders can participate from any location around the world with Internet access.
How can I attend the virtual Annual Meeting?
The Annual Meeting will be a completely virtual meeting of shareholders conducted exclusively by a live audio webcast.
If you are a shareholder of record as of the close of business on April 29, 2021, the record date for the Annual Meeting, you will be able to virtually attend the Annual Meeting, vote your shares and submit your questions online during the meeting by visiting www.virtualshareholdermeeting.com/IRTC2021. You will need to enter the 16-digit control number included on your notice, on your proxy card or on the instructions that accompanied your proxy materials.
If you are a shareholder holding your shares in “street name” as of the close of business on April 29, 2021, you may gain access to the meeting by following the instructions in the voting instruction card provided by your broker, bank, trustee or other nominee. You may not vote your shares electronicallyparticular proposal at the Annual Meeting, unless you receive a valid “legal proxy” from your broker, bank, trustee or other nominee.
The online meeting will begin promptly at 10:00 a.m., Pacific time on June 18, 2021. We encourage you to access the meeting prior to the start time. Online check-in will begin at 9:45 a.m., Pacific time, and you should allow approximately 15 minutes for the online check-in procedures.
If you wish to submit a question for the Annual Meeting, you may do so in advance at www.virtualshareholdermeeting.com/IRTC2021, or you may type it into the dialog box provided at any point during the virtual meeting (until the floor is closed to questions).
What can I do if I need technical assistance during the Annual Meeting?
If you encounter any difficulties accessing the virtual Annual Meeting webcast please call the technical support number that will be posted on the Annual Meeting website log-in page.
What is the effect of giving a proxy?
Proxies are solicited by and on behalf of our Board of Directors. Abhijit Talwalkar and Michael Coyle have been designated as proxy holders by our Board of Directors. When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of our Boardboard of Directorsdirectors stated above.
If you do not vote and you hold your shares in street name, and your broker does not have discretionary power to vote your shares, your shares may constitute “broker non-votes” (as described above) and will not be counted in determining the number of shares necessary for approval of the proposals. However, broker non-votes will be counted for the purpose of establishing a quorum for the Annual Meeting.
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on each proxy card and vote each proxy card by telephone, through the Internet, or by mail. If you requested or received paper proxy materials and you intend to vote by mail, please complete, sign, and return each proxy card you received to ensure that all of your shares are voted.
We strongly recommend that you vote your shares in advance of the meeting as described above. Ifinstructed above, even if you plan to attend the Annual Meeting virtually.
Revocability of Proxies
A stockholder of record who has given a proxy may revoke it at any matters not described in this Proxy Statement are properly presentedtime before it is exercised at the Annual Meeting by:
•delivering to our Secretary by mail a written notice stating that the proxy holders will use their own judgment to determine how to voteis revoked;
•signing and delivering a proxy bearing a later date;
•voting again by telephone or through the shares. IfInternet; or
•attending virtually and voting during the Annual Meeting is adjourned, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have properly revoked your proxy instructions, as described above.
How are proxies solicited for the Annual Meeting?
Our Board of Directors is soliciting proxies for use(although attendance at the Annual Meeting. All expenses associated with this solicitationMeeting will be bornenot, by us. We will reimburse brokers or other nominees for reasonable expensesitself, revoke a proxy).
Please note, however, that they incur in sending our proxy materials to you if your shares are held of record by a broker, bank, or other nominee holdsand you wish to revoke a proxy, you must contact that firm to revoke any prior voting instructions.
Expenses of Soliciting Proxies
We will pay the expenses of soliciting proxies, including preparation, assembly, printing, and mailing of this Proxy Statement, the proxy, and any other information furnished to stockholders. Following the original mailing of the soliciting materials, we and our agents, including directors, officers, and other employees, without additional compensation, may solicit proxies by mail, email, telephone, facsimile, by other similar means, or in person. Following the original mailing of the soliciting materials, we will request brokers, custodians, nominees, and other record holders to forward copies of the soliciting materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, we, upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials or vote through the Internet, you are responsible for any Internet access charges you may incur.
Voting Results
Voting results will be tabulated and certified by the inspector of elections appointed for the Annual Meeting. The preliminary voting results will be announced at the Annual Meeting. The final results will be tallied by the inspector of elections and filed with the SEC in a current report on Form 8-K within four business days of the Annual Meeting.
Corporate Governance Standards and Director Independence
We are strongly committed to good corporate governance practices. These practices provide an important framework within which our board of directors and management can pursue our strategic objectives for the benefit of our common stockstockholders.
Corporate Governance Principles
Our board of directors has adopted Corporate Governance Guidelines that set forth expectations for directors, director independence standards, board committee structure and functions, and other policies for the governance of the Company. Among other things, our Corporate Governance Guidelines provide:
•To satisfy their duty in overseeing company management and the ethical operation of the company, the directors will take a proactive, focused approach to their position, and set standards to ensure that the company is committed to business excellence, ethical and honest conduct, and highest levels of integrity.
•There will at all times be a majority of independent directors serving on your behalf. In addition,the board of directors. Six out of seven of our directors at the time of the Annual Meeting are independent.
•The board of directors shall have responsibility for succession planning concerning the Chief Executive Officer, and the company’s named executive officers and the Compensation and Human Capital Management Committee shall plan for and conduct reviews with respect to succession planning for other key employees may also solicit proxiesidentified by the Chief Executive Officer.
•The Audit Committee, Compensation and Human Capital Management Committee and Nominating and Corporate Governance Committee must each be, and currently are, composed of a majority of independent directors.
•The Nominating and Corporate Governance Committee and the board of directors will evaluate each individual director or potential director in person,the context of the membership of the board of directors as a group, with the objective of having a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of background and experience in the various areas.
Our Corporate Governance Guidelines are available without charge on the “Investor Relations” section of our website, which is located at https://investors.irhythmtech.com, by telephone, or by other meansclicking “Governance Documents and Charters” in the “Governance” section of communication.our website. Our Nominating and Corporate Governance Committee reviews the Corporate Governance Guidelines periodically, and changes are recommended to our board of directors as warranted.
Board of Directors and Committee Self-Evaluations
Throughout the year, our board of directors discusses corporate governance practices with management and third-party advisors to ensure that the board of directors and employees will notits committees follow practices that are optimal for the company and its stockholders. Based on an evaluation process established and implemented by our nominating and corporate governance committee pursuant to the committee’s authority set forth in its charter, the board of directors, each committee thereof and each director conduct an annual self-evaluation in order to determine whether the board of directors and its committees and directors are functioning effectively. The Nominating and Corporate Governance Committee is responsible for establishing the evaluation criteria and implementing the process for this evaluation, as well as considering other corporate governance principles that may, from time to time, merit consideration by the board of directors.
The assessment of the board of directors is administered by the company’s Chief Legal Officer and Corporate Secretary and the chairman of the board of directors. Committee assessments are administered the company’s Chief Legal Officer and Corporate Secretary and the applicable chairperson of each committee.
The board of directors and committees assess on an annual basis several factors they believe to be paid any additional compensation for soliciting proxies.
How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?
Brokerage firms and other intermediaries holding shares of our common stock in street name for their customers are generally required to vote such sharesessential in the manner directed by their customers. Ineffective performance of the absenceboard of timely directions, your broker will have discretiondirectors and each committee, including:
•overall effectiveness of the board of directors and its committees, including in relation to vote your shares on our “routine” matter,progress in addressing the proposalannual board or committee priorities;
•structure and composition of the board of directors and committees, including with respect to ratifydirector independent, skills and diversity;
•effective oversight and risk management;
•sufficient and substantive communications between the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. Your broker will not have discretion to vote on the electionboard of directors and the votecompany’s management;
•facilitation of board impact on the frequency of advisory votes on Named Executive Officer compensation, which are “non-routine” matters, absent direction from you.stockholder value creation; and
Where can I find the voting results of the Annual Meeting?
We will announce preliminary voting results at the virtual Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the Securities•suggested improvements and Exchange Commission (the “SEC”) within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the Annual Meeting, we will file a Current Report on Form 8-K to publish preliminary results and will provide the final results in an amendment to the Current Report on Form 8-K as soon as they become available.
I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and our proxy materials to multiple stockholders who share the same address unless we have received contrary instructions from one or more of such stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will promptly deliver a separate copy of the Notice and our proxy materials to any stockholder of record at a shared address to which we delivered a single copy of any of these materials. To receive a separate copy, or, if a stockholder is receiving multiple copies and wishes to request that we only send a single copy of the Notice and our proxy materials, such stockholder may contact the following firm, which is assisting us in the solicitation of proxies:
Broadridge Financial Solutions
Attention: Householding Department
51 Mercedes Way
Edgewood, New York 11717
Tel: 1 (866) 540-7095
Street name stockholders may contact their broker, bank or other nominee to request information about householding.
What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?
Stockholder Proposals
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to our Secretary in a timely manner.
For a stockholder proposal to be considered for inclusion in our proxy statement for our 2022 annual meeting of stockholders, our Secretary must receive the written proposal at our principal executive offices not later than December 31, 2021. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals should be addressed to our principal executive offices at:
iRhythm Technologies, Inc.
Attention: Secretary
699 8th Street, Suite 600
San Francisco, California 94103
Our amended and restated bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders but do not intendbest practices for the proposalboard of directors or committees.
To ensure candid feedback, directors submit their evaluation responses to be included in our proxy statement. Our amendedan independent third party, who anonymizes all responses and restated bylaws provide thatcompiles them into reports for the only business that may be conducted at an annual meetingboard of stockholders is business that is (i) specified in our proxy materials with respect to such meeting, (ii) otherwise properly brought before such meeting by or at the direction of our Board of Directors, or (iii) properly brought before such meeting by a stockholder of record entitled to vote at the annual meeting who has delivered timely written notice to our Secretary, which notice must contain the information specified in our amendeddirectors and restated bylaws. To be timely for our 2022 annual meeting of stockholders, our Secretary must receive the written notice at our principal executive offices:
•not earlier than February 14, 2022; and
•not later than the close of business on March 16, 2022.
In the event that we hold our 2022 annual meeting of stockholders more than 30 days before or more than 60 days after the one-year anniversary of the Annual Meeting, notice of a stockholder proposal that is not intended to be included in our proxy statement must be received no earlier than the close of business on the 120th day before our 2022 annual meeting of stockholders and no later than the close of business on the later of the following two dates:
•the 90th day prior to our 2022 annual meeting of stockholders; or
•the 10th day following the day on which public announcement of the date of our 2022 annual meeting of stockholders is first made.
If a stockholder who has notified us of his, her or its intention to present a proposal at an annual meeting does not appear to present his, her or its proposal at such annual meeting, we are not required to present the proposal for a vote at such annual meeting.
Nomination of Director Candidates
You may propose director candidates for consideration by ourcommittees. The Nominating and Corporate Governance Committee. Any such recommendations should includeCommittee reviews evaluations of the nominee’s nameboard of directors, and qualifications for membership on our each committee reviews its respective report. All evaluation responses are shared with the full board of directors.
Following the annual evaluation process, the board of directors and its committees assess the opportunities and suggestions provided in the feedback received and implement updates and changes as appropriate.
Board Nomination Process
The board of Directors and should be directed to our Secretary at the address set forth above. For additional information regarding stockholder recommendations fordirectors considers any nominations of director candidates see “Board of Directors and Corporate Governance—Stockholder Recommendations for Nominations to the Board of Directors.”
In addition, our amended and restated bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, the stockholder must provide the information requiredvalidly made by our amended and restated bylaws. In addition, the stockholder must give timely notice to our Secretaryshareholders in accordance with our amendedapplicable laws, rules and restated bylaws, which, in general, require thatregulations and the notice be received by our Secretary within the time periods described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in a proxy statement.
Availability of Amended and Restated Bylaws
A copy of our amended and restated bylaws may be obtained by accessing our public filings on the SEC’s website at www.sec.gov. You may also contact our Secretary at our principal executive offices for a copyprovisions of the relevant bylaw provisions regardingcompany’s bylaws.
In accordance with the requirements for making stockholder proposals and nominating director candidates.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our business affairs are managed under the direction of our Board of Directors, which is currently composed of eight members. Our directors are independent within the meaning of the listing standards of The NASDAQ Stock Market. Our Board of Directors is currently divided into three staggered classes of directors. At each annual meeting of stockholders beginning with this one, a class of directors will be elected for a one-year term to succeed the same class whose term is then expiring.
The following table sets forth the names, ages as of April 29, 2021, and certain other information for each of the directors with terms expiring at the Annual Meeting (who are also nominees for election as a director at the Annual Meeting) and for each of the continuing members of our Board of Directors: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Directors with Terms Expiring at the Annual Meeting/Nominees |
| Class |
| Age |
| Position |
| Director Since |
| Current Term Expires |
| Expiration of Term For Which Nominated |
Cathleen Noel Bairey Merz, M.D. (2) |
| II |
| 65 |
| Director |
| 2018 |
| 2021 |
| 2022 |
Mark J. Rubash (1)(3) |
| II |
| 64 |
| Director | | 2016 |
| 2021 |
| 2022 |
Renee Budig (1) |
| II |
| 60 |
| Director |
| 2020 |
| 2021 |
| 2022 |
| | | | | | | | | | | | |
| Continuing Directors |
|
|
|
|
|
|
|
|
|
|
|
|
| Kevin M. King | | I | | 64 | | Director | | 2012 | | 2023 | | — | |
Raymond W. Scott(1)(3) | | I | | 74 | | Director | | 2013 | | 2023 | | — | |
| Michael J. Coyle | | I | | 59 | | President, Chief Executive Officer, Director | | 2021 | | 2023 | | — | |
Ralph Snyderman, M.D (1) |
| III |
| 81 |
| Director |
| 2017 |
| 2022 |
| — | |
Abhijit Y. Talwalkar (2)(3) |
| III |
| 57 |
| Director and Chairman of the Board |
| 2016 |
| 2022 |
| — | |
Bruce G. Bodaken (2) | | III | | 69 | | Director | | 2017 | | 2022 | | — | |
(1)Member of our Audit Committee
(2)Member of our Compensation Committee
(3)Member of our Nominating and Corporate Governance Charter, the Nominating and Corporate Governance Committee
Nominees determines and make recommendations to the full board of directors for Director
Cathleen Noel Bairey Merz, M.D has servedits approval, the desired qualifications, qualities, skills and other expertise required to be considered in selecting nominees for director, such as a membercharacter, professional ethics and integrity, judgment, business acumen, proven achievement and competence in one’s field, the ability to exercise sound business judgment, tenure on the board of our Boarddirectors and skills that are complementary to the board of Directors since April 2018. Dr. Bairey Merz has been the Medical Directordirectors, an understanding of the Preventive and Rehabilitative Center at the Cedars-Sinai Medical Center in Los Angeles, California, since 1991. She also has been the Medical Director and Endowed Chaircompany’s business, an understanding of the Barbra Streisand Women’s Heart Center at the Smidt Cedars-Sinai Heart Institute since 2001, and a Professorresponsibilities that are required of Medicine at Cedars-Sinai Medical Center and the David Geffen School of Medicine at the University of California at Los Angeles. From 2005 to 2009, she served on the Scientific Advisory Board of CV Therapeutics, Inc. She also has extensive experience on nonprofit boards, councils, and guideline panels ,including the American College of Cardiology, the American Heart Association and the National Heart, Lung, and Blood Institute. Since 2016, Dr. Bairey Merz has been servingon multiple editorial boards, including the Journal of the American College of Cardiology, Circulation, and European Heart Journal.Dr. Bairey Merz holds a B.A. (Honors) in Biological Sciences from the University of Chicago and an M.D. (Honors) from Harvard Medical School. She completed her training in Internal Medicine at the University of California, San Francisco,and Cardiology at Cedars-Sinai Medical Center.
We believe that Dr. Bairey Merz is qualified to serve as a member of our Board of Directors because of her medical experience and her experience with for-profit and non-profit organizations.
Mark J. Rubash has served as a member of our Board of Directors since March 2016. Most recently, from November 2016 to August 2018, Mr. Rubash served as a Strategic Advisor to Eventbrite, Inc., a publicly-held e-commerce company, where he previously
served as the Chief Financial Officer from June 2013 to November 2016. Prior to Eventbrite, Mr. Rubash was the Chief Financial Officer at HeartFlow, Inc., a privately-held medical device company, which he joined in March 2012, and at Shutterfly, Inc., a publicly-held e-commerce company, which he joined in November 2007. Mr. Rubash was also the Chief Financial Officer of Deem, Inc. (formerly, Rearden Commerce), a privately-held e-commerce company, from August 2007 to November 2007. From February 2007 to August 2007, Mr. Rubash was a Senior Vice President at Yahoo! Inc. and he held various senior finance positions at eBay Inc. from February 2001 to July 2005. Prior to that, Mr. Rubash was an audit partner at PricewaterhouseCoopers LLP, where he was most recently the Global Leader for their Internet Industry Practice and Managing Partner for their Silicon Valley Software Industry Practice. Mr. Rubash has served as a member of the board of directors, other time commitments, diversity with respect to professional background, education, race, ethnicity, gender, being a member of an underrepresented community, age and Chairmangeography, as well as other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on the board of directors.
Further, the Nominating and Corporate Governance Committee searches for, identifies, evaluates and selects, or recommends for the selection by the board of directors, candidates to fill new positions or vacancies on the board of directors consistent with the company’s director criteria, as included in the Corporate Governance Guidelines, and reviews any candidates recommended by shareholders, provided such shareholder recommendations are made in compliance with the Corporation’s bylaws and its stockholder nominations and recommendations policies and procedures. The Nominating and Corporate Governance Committee shall select prospective members of the audit committeeboard of Intuitive Surgical, Inc.,directors that are of high character and integrity. As stated in our Corporate Governance Guidelines, the composition of the board of directors should reflect a medical device company, since October 2007,diversity of background and experience to best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment. Accordingly, the Nominating and Corporate Governance Committee, and any search firm it engages, will include women, minority and underrepresented community candidates in the pool of each director search.
Board Succession
The Nominating and Corporate Governance Committee evaluates the current size, composition, organization and governance of the board of directors and its committees, determines future requirements and makes recommendations to the board of directors for approval consistent with our director criteria.
As part of the refreshment process for the board of directors, the Nominating and Corporate Governance Committee evaluates the performance of individual members of the board of directors eligible for re-election, and selects, or recommends for the selection by the board of directors, the director nominees for election to the board of directors by the stockholders at the company’s annual meeting of stockholders or any special meeting of stockholders at which directors are to be elected.
We also develop and review periodically the policies and procedures for considering stockholder nominees for election to the board of directors, and evaluate and recommend termination of membership of individual directors for cause or for other appropriate reasons.
The Nominating and Corporate Governance Committee does not have a written policy on the consideration of director candidates recommended by shareholders. It is the view of the board of directors that all candidates, whether recommended by a shareholder or the Nominating and Corporate Governance Committee, shall be evaluated based on the same established criteria for persons to be nominated for election to the board of directors and its committees. The established criteria for persons to be nominated for election to the board of directors and its committees, taking into account the composition of the board of directors as a whole, at a minimum, includes:
•character, professional ethics and integrity, judgment, and business acumen;
•proven achievement and competence in the candidate’s field;
•the ability to exercise sound business judgment;
•tenure on the board of directors and skills that are complementary to the board of directors;
•an understanding of the company’s business;
•an understanding of the responsibilities that are required of a member of the board of directorsdirectors;
•other time commitments;
•diversity with respect to professional background, education, race, ethnicity, gender, being a member of an underrepresented community, age and Chairmangeography, as well as other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on the board of directors; and
•for incumbent members of the audit committeeBoard, the past performance of Line 6, Inc., a music technology company, from April 2007 to January 2014, as a member ofthe incumbent director.
In addition, the Nominating and Corporate Governance Committee and the board of directors and audit committee of IronPlanet, Inc.,consider a privately-held e-commerce platform for used heavy equipment, from March 2010 to May 2017, and as Chairman of the audit committee from October 2015 to May 2017. Mr. Rubash received his B.S. in Accounting from California State University, Sacramento.
We believe that Mr. Rubash is qualified to serve as a member of our Board of Directors because of his financial expertise and his experience with private and public company financial accounting matters and risk management.
Renee Budig has served as a member of our Board of Directors since April 2020. Ms. Budig has served as a member of the board of directors and as Chair of the audit committee of Chegg, Inc. since November 2015. Since September 2012, Ms. Budig has served as the Executive Vice President and Chief Financial Officer of CBS Interactive, a division of ViacomCBS, the world’s largest publisher of premium digital content and a perennial top 10 Internet company. Previously, Ms. Budig served as Chief Financial Officer of Hightail, Inc. (formerly branded YouSendIt and acquired by OpenText), a cloud service that allowed users to send, receive, digitally sign and synchronize files. Prior, Ms. Budig was the Vice President of Finance at Netflix, Inc. and the Vice President of Finance for Veritas Software. Ms. Budig holds a B.S. in Business Administration from the University of California, Berkeley.
We believe that Ms. Budig is qualified to serve as a member of our Board of Directors because of her extensive financial experience as a chief financial officer and her experience serving on the board of directors and the audit committee of another public company.
Continuing Directors
Kevin M. King has served as a member of our Board of Directors since July 2012. Until his retirement on January 12, 2021, Mr. King also served as our President and Chief Executive Officer. Mr. King has nearly three decades of experience in the healthcare and IT industries in leadership roles. In January 2007, Mr. King joined Affymetrix, Inc., a publicly traded technology innovator in the field of genetic analysis, as President of Life Sciences Business and Executive Vice President. Mr. King was promoted to President of Affymetrix in September 2007 and then served as President and Chief Executive Officer and a director of Affymetrix from January 2009 until June 2011, leading Affymetrix on a growth strategy into new markets for downstream validation and molecular diagnostics and overseeing several acquisitions. Prior to Affymetrix, from February 2005 until June 2006, Mr. King served as President and Chief Executive Officer of Thomson Healthcare, an information services business which focused on a range of healthcare-related businesses. From March 1997 until November 2004, Mr. King was a senior executive at GE Healthcare, where he led several business units including Magnetic Resonance Imaging and Global Clinical Systems Business. Mr. King began his career at Hewlett-Packard’s Medical Products Group and during his 14-year tenure held leadership roles in Sales, Marketing, R&D, and Business Development. Mr. King holds a B.A. in Economics and Biology from the University of Massachusetts and an M.B.A. from New Hampshire College.
We believe that Mr. King is qualified to serve as a member of our Board of Directors because of his extensive business experience and knowledge of digital healthcare company operations, and his experience working with companies, regulators and other stakeholders in the medical industry.
Raymond W. Scott has served as a member of our Board of Directors since December 2013. Mr. Scott has been the Chairman of the board at Health Level, Inc., since January 2013. He has served as a member of the board of directors of Health Fidelity, Inc. since August 2013, as a member of the board of directors at Stella Technologies, Inc., a healthcare technology provider, since October 2015, and as a member of the board of directors of Empatica, Inc. since October 2019. Mr. Scott co-founded Axolotl Corporation in 1995 and served as its Chief Executive Officer until its acquisition by United Health Group in August 2010, at which point he became
Executive Vice President of Product Strategy for OptumInsight, Inc., a subsidiary of United Health Group. Mr. Scott is a Member of the British Computing Society (MBCS), a Chartered Engineer and holds a B.Sc. (Honors) in Mathematics.
We believe that Mr. Scott is qualified to serve as a member of our Board of Directors because of his extensive experience serving on the boards of public and private companies, his knowledge of the healthcare industry, and his financial and business expertise.
Michael J. Coyle has served as the Company’s President and Chief Executive Officer since January 2021. From December 2009 until December 2020, Mr. Coyle served in leadership positions at Medtronic, a global medical device company, including as Executive Vice President and President for the Cardiovascular Portfolio of Medtronic, Plc. since November 2020 and as Executive Vice President and Group President, Cardiac and Vascular Group of Medtronic, Plc. since January 2015 and of Medtronic, Inc. since December 2009. Prior to that, Mr. Coyle served as President of the Cardiac Rhythm Management division at St. Jude Medical, Inc., an international medical device company, from 2001 to 2007, and prior positions included serving as President of St. Jude’s Daig Catheter division and numerous leadership positions at Eli Lilly & Company, a global pharmaceutical company. Mr. Coyle received an M.B.A. from the Wharton School of Business at the University of Pennsylvania and a Bachelor of Science in Chemical Engineering from Case Western Reserve University.
We believe that Mr. Coyle is qualified to serve as a member of our Board of Directors because of his extensive businesscandidate’s experience in the healthcare industry and position as our Chief Executive Officer.
Bruce G. Bodaken has served as a member of our Board of Directors since July 2017. Mr. Bodaken served as Chairmanother relevant industries. The priorities and CEO of Blue Shield of California from 2000 to 2012, where he was responsible for strategy and management of California’s third largest insurer. He previously served as Blue Shield of California’s President and COO from 1996 to 2000. Mr. Bodaken has served on the board of directors of Rite Aid Corporation since May 2013. Mr. Bodaken was a visiting scholar at the Brookings Institution from 2013-2015 and a visiting lecturer at the University of of California School of Public Health from 2013-2016. Mr. Bodaken holds a M.A. from the University of Colorado and a B.A. from Colorado State University.
We believe that Mr. Bodaken is qualified to serve as a member of our Board of Directors because of his extensive business experience in the healthcare industry.
Ralph Snyderman, M.D., has served as a member of our Board of Directors since July 2017. Dr. Snyderman is Chancellor Emeritus, James B. Duke Professor of Medicine, and Directoremphasis of the Center for Research on Personalized Health Care at Duke University. From 1989 to 2004, he served as Chancellor for Health Affairs at DukeNominating and was the founding CEOCorporate Governance Committee and President of the Duke University Health System. Simultaneously, from 2006 to 2009, he was a venture partner with New Enterprise Associates, a venture capital firm. Dr. Snyderman currently serves on the board of directors of CareDx, Inc., Liquida Technologies, Inc., Sengenix, Inc., Veritas Collaborative Holdings, and Essential Health Solutions, Inc. He previously served on the Board of Directors of The Procter and Gamble Company (P&G), Pharmaceutical Product Development, LLC (PPD), Trevena, Inc., Crescendo Bioscience, Inc. and Targacept, Inc. Dr. Snyderman is a member of the Association of American Physicians, where he served as president from 2003 to 2004, the Association of American Medical Colleges, where he served as chair from 2001 to 2002, the National Academy of Medicine, and the American Academy of Arts & Sciences. Dr. Snyderman holds a B.S. in Pre-Medical Studies from Washington College and an M.D. from the State University of New York, Downstate Medical Center. He completed his internship and residency in Medicine at Duke University.
We believe that Dr. Snyderman is qualified to serve as a member of our Board of Directors because of his extensive experience serving on the board of directors of public and private companies and his knowledge of the healthcare industry.
Abhijit Y. Talwalkar has served as a member and Chairman of our Board of Directors since May 2016. Mr. Talwalkar is the former President and Chief Executive Officer of LSI Corporation, a leading provider of silicon, systems and software technologies for the storage and networking markets, a position he held from May 2005 until the completion of LSI’s merger with Avago Technologies in May 2014. From 1993 to 2005, Mr. Talwalkar was employed by Intel Corporation. At Intel, he held a number of senior management positions, including Corporate Vice President and Co-General Manager of the Digital Enterprise Group, which was comprised of Intel’s business client, server, storage and communications business, and Vice President and General Manager for the Intel Enterprise Platform Group. Prior to joining Intel, Mr. Talwalkar held senior engineering and marketing positions at Sequent
Computer Systems, a multiprocessing computer systems design and manufacturer, Bipolar Integrated Technology, Inc., a VLSI bipolar semiconductor company, and Lattice Semiconductor Inc., a service driven developer of programmable design solutions. Mr. Talwalkar has served on the board of directors for Advanced Micro Devices, a leading provider of high-performance computing, graphics, and visualization solutions since August 2017. Since March 2017, Mr. Talwalkar has served as a member of the board of directors with regard to these factors change from time to time to take into account changes in the company’s business and other trends, as well as the portfolio of TE Connectivity Ltd.skills and previously served as an advisor toexperience of current and prospective members of the board of directors. The Nominating and Corporate Governance Committee and the board of directors since August 2016. Since 2011, Mr. Talwalkar has servedreview and assess the continued relevance of and emphasis on the boardof directors of Lam Research Corporation and has previously servedthese factors as a memberpart of the board of directors’ annual self-assessment process and in connection with candidate searches to determine if they are effective in helping to satisfy the board of directors’ goal of creating and sustaining a board of directors that can appropriately support and oversee the company’s activities.
Independence of LSI from May 2005 to May 2014 and the U.S. Semiconductor Industry Association, a semiconductor industry trade association, from May 2005 to May 2014. He has served as the ChairmanDirectors
The listing rules of the Bay Area chapter of the nationwide nonprofit organization Friends of the Children since January 2015. He holds aB.S. in Electrical Engineering from Oregon State University.
We believe that Mr. Talwalkar is qualified to serve as Chairman of our Board of Directors because of his experience in leadership roles at major technology companies and his years of experience serving on public company boards of directors.
Director Independence
Our common stock is listed on The NASDAQ Global Select Market. Under the listing standards of The NASDAQNasdaq Stock Market LLC (“Nasdaq”) generally require that independent directors must compriseconstitute a majority of a listed company’s board of directors. In addition, the listing standards of The NASDAQ Stock MarketNasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees must be independent.an “independent director.” Under the listing standardsrules of The NASDAQ Stock Market,Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that listed company’s board of directors, that directorperson does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, compensation committee members must not have a relationship with the listed company that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.
Audit
In addition, audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the listing standardsaudit committee, the board of The NASDAQ Stock Market. Compensation committee members must also satisfydirectors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the additional independence criteria set forth in Rule 10C-1 underlisted company or any of its subsidiaries; or be an affiliated person of the Exchange Act and the listing standardslisted company or any of The NASDAQ Stock Market.its subsidiaries.
Our Boardboard of Directorsdirectors has undertaken a review of the independence of each of our directors. There are no material proceedings to which any director officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, any associate of any suchand considered whether each director officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverserelationship with us that could compromise his or her ability to the Company or its subsidiary. Based on information provided by each director concerning their background, employment and affiliations, our Board of Directors has determined that Messrs. Bodaken, Rubash, Scott, Talwalkar, Ms. Budig and Drs. Bairey Merz and Snyderman do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilitieshis or her responsibilities. As a result of a director andthis review, our board of directors determined that each of theseour directors is “independent”other than Mr. Blackford are “independent directors” as that term is defined under the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and the listing standardsrequirements and rules of The NASDAQ Stock Market.Nasdaq. In making these determinations, our Boardboard of Directors considereddirectors reviewed and discussed information provided by the currentdirectors and priorby us with regard to each director’s business and personal activities and relationships that each non-employee director has withas they may relate to us and our company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence,management, including the beneficial ownership of our capitalcommon stock by each non-employee director and the transactions involving them described in the section titled “Related Person“Certain Relationships and Related Party Transactions.”
Board Leadership Structure
The roles
Our Corporate Governance Guidelines provide that our board of Chairmandirectors shall be free, in accordance with our bylaws, to choose its chairperson in any way that it considers in the best interests of our company, and in making this determination, directors may take into consideration the interests of other stakeholders.
Currently, our board of directors believes that it should maintain flexibility to select the chairperson of our board of directors and adjust our board leadership structure from time to time.
| | | | | |
| Independent Chairperson of our Board | Chief Executive Officer |
Abhijit Y. Talwalkar has served as the independent chairperson of our board of directors since May 2016.
Our board of directors believes that Mr. Talwalkar’s deep knowledge of our industry and experience in leadership roles at other technology companies make him well qualified to serve as chair of our board of directors.
| Quentin Blackford has served our Chief Executive Officer since October 2021.
As CEO, Mr. Blackford manages the business of the company and executes the strategy developed with our board of directors. |
Our Corporate Governance Guidelines also provide that, when the board of directors does not have an independent chairperson, our board of directors will appoint a “lead independent director.” In the event a lead independent director is appointed, he or she will be responsible for calling separate meetings of the Boardindependent directors, serving as chairperson of meetings of independent directors, serving as the principal liaison between the chairperson of the board of directors and Chief Executive Officer arethe independent directors, being available for consultation and direct communication with major stockholders as requested and performing such other responsibilities as may be designated by a majority of the independent directors from time to time.
Presiding Director of Non-Employee Director Meetings
The non-employee directors meet in regularly scheduled executive sessions without management directors or management to promote open and honest discussion. Our chairman, currently filled by separate individuals.Mr. Talwalkar, is the presiding director at these meetings.
Committees of Our Board of Directors believes that the separation of the offices of the Chairman and Chief Executive Officer is appropriate at this time because it allows our Chief Executive Officer to focus primarily on our business strategy, operations and corporate vision. However, as described in further detail in our corporate governance guidelines, our Board of Directors does not have a policy mandating the separation of the roles of Chairman and Chief Executive Officer. Our Board of Directors elects our Chairman and Chief Executive Officer, and each of these positions may be held by the same person or by different people. We believe that it is important that the Board of Directors retain flexibility to determine whether these roles should be separate or combined based upon the Board’s assessment of our needs and our leadership at a given point in time.
We believe that independent and effective oversight of our business and affairs is maintained through the composition of our Board of Directors, the leadership of our independent directors and the committees of our Board of Directors and our governance structures and processes already in place. The Chairman of our Board of Directors is an independent director. In addition, the Board of
Directors consists of a majority of independent directors, and the committees of our Board of Directors are composed solely of independent directors.
Board Meetings and Committees
During our fiscal year ended December 31, 2020, our Board of Directors held seven meetings (including regularly scheduled and special meetings) and acted by written consent once, and each director attended at least 75% of the aggregate of (i) the total number of meetings of our Board of Directors held during the period for which he or she has been a director and (ii) the total number of meetings held by all committees of our Board of Directors on which he or she served during the periods that he or she served. During our fiscal year ended December 31, 2020, our Board of Directors acted by written consent six times.
Although we do not have a formal policy regarding attendance by members of our Board of Directors at annual meetings of stockholders, we strongly encourage our directors to attend. All of our Board members attended the annual meeting of stockholders in 2020.
Our Boardboard of Directorsdirectors has established an Audit Committee,committee, a Compensation Human Capital Management Committee, and a Nominating and Corporate Governance Committee. The composition and responsibilities of each committee are described below. Each of these committees has a written charter approved by our board of directors. Copies of the committeescharters for each committee are available, without charge, in the “Investor Relations” section of our Boardwebsite, which is located at https://investors.irhythmtech.com, by clicking on “Governance Documents and Charters” in the “Governance” section of Directors is described below.our website. Members will serve on these committees until their resignationresignations or until as otherwise determined by our board of directors.
| | | | | | | | | | | |
| COMMITTEE MEMBERSHIPS |
| Current Members | Audit Committee | Compensation and Human Capital Management Committee | Nominating and Corporate Governance Committee |
| Quentin Blackford | | | |
| Abhijit Y. Talwalkar | ● | ● | ● |
| C. Noel Bairey Merz, M.D. | | ● | |
| Bruce G. Bodaken | | ● | ○ |
| Karen Ling | | ○ | |
| Mark J. Rubash | ○ | | ● |
| Ralph Snyderman, M.D. | ● | | |
| Total Meetings Held in 2022 | 7 | 5 | 4 |
| Average Meeting Attendance | 100% | 100% | 100% |
○ Chair● Member
Board and Committee Meetings and Attendance
Our board of Directors.directors and its committees meet regularly throughout the year; they also hold special meetings and act by written consent from time to time. During fiscal 2022, our board of directors met four times, the Audit Committee met seven times, the Compensation and Human Capital Management Committee met five times, and the Nominating and Corporate Governance Committee met four times. During fiscal 2022, each member of our board of directors attended at least 75% of the aggregate of all meetings of our board of directors and of all meetings of committees of our board of directors on which such member served that were held during the period in which such director served.
Board Attendance at Annual Stockholders’ Meeting
Our policy is to invite and encourage each member of our board of directors to be present at our annual meetings of stockholders. Six of eight of our then-current directors attended the 2022 annual meeting of stockholders.
Audit Committee
OurFollowing our Annual Report, our Audit Committee consistsis composed of Messrs.Mark J. Rubash and Scott,Ralph Snyderman, M.D. and Abhijit Y. Talwalkar. Mr. Rubash is the chair of our Audit Committee. Ms. Budig and Dr. Snyderman with Mr. Rubash serving asis currently on the chair. Messrs. Rubash, Scott, Ms. Budig, and Dr. SnydermanAudit Committee but will not stand for reelection at the Annual Meeting. The members of our Audit Committee meet the independence requirements for independence and financial literacy for Audit Committee members under the listing standards of The NASDAQ Stock MarketNasdaq and SEC rules and regulations. Each member of our audit committee is financially proficient. In addition, our Boardboard of Directorsdirectors has determined that Mr. Rubash is an Audit Committee“audit committee financial expert within the meaning ofexpert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”). amended. This designation does not impose any duties, obligations or liabilities that are greater than those generally imposed on other members of our Audit committee and our board of directors.
Our Audit Committee is responsible for, among other things:things, overseeing:
•appointing, approvingour accounting and financial reporting processes and internal controls over financial reporting, as well as the compensationaudit and integrity of and assessing our financial statements;
•the qualifications, independence and independenceperformance of our independent registered public accounting firm, which currently is PricewaterhouseCoopers LLP;firm;
•reviewingthe design, implementation and discussingperformance of our internal audit function, if any;
•our compliance with applicable law (including U.S. federal securities laws and other legal and regulatory requirements);
•all matters related to the security of and risks related to computerized information and technology systems across our company, as well as by product and/or service (including privacy, data security, and cybersecurity matters); and
•risk assessment and risk management program, policies and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures;procedures.
•preparing the Audit Committee report required by SEC rules to be includedAs previously disclosed in our annual proxy statements;
•monitoring our internal control over financial reporting, disclosure controls and procedures;
•reviewing our risk management status;
•establishing policies regarding hiring employees from our independent registered public accounting firm and proceduresAnnual Report on Form 10-K for the receipt and retention of accounting related complaints and concerns;
•meeting independently with our independent registered public accounting firm and management; and
•monitoring compliance with our code of business conduct and ethics for financial management.
Our Audit Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the listing standards of The NASDAQ Stock Market. A copy of the charter of our Audit Committee is available on our website at www.irhythmtech.com under “Investors—Policies, Procedures and Charters.” During our fiscal year ended December 31, 2020,2021, management identified multiple deficiencies that constitute a material weakness, in the aggregate, related to the number of professionals at the company with an appropriate level of accounting and internal control knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. The material weakness resulted in the misstatement of our prior financial statements for the years ended December 31, 2017 and 2018, respectively, and each interim period therein, as well as for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019. Our Audit Committee was fully engaged and supportive of management’s efforts to remediate the material weakness and has reviewed and discussed remediation during the audit committee’s standing meetings held six meetings and did not act by written consent.in fiscal 2022.
Compensation and Human Capital Management Committee
Our Compensation and Human Capital Management Committee consistsis composed of Messrs.Bruce G. Bodaken, and Talwalkar, and Dr.Karen Ling, C. Noel Bairey Merz, with Mr. Bodaken serving asM.D. and Abhijit Y. Talwalkar. Ms. Ling is the chair. Each memberchair of our Compensation and Human Capital Management Committee. The members of our Compensation and Human Capital Management Committee meetsmeet the independence requirements for independence for compensation committee members under the listing standards of The NASDAQ Stock MarketNasdaq and SEC rules and regulations, including Rule 10C-1 under the
Exchange Act.regulations. Each member of our Compensation Committeethis committee is also a non-employee director, as defined pursuant to“non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act. Our Compensation Committeeand Human Capital Management committee is responsible for, among other things:
•annually reviewing and approving corporate goals and objectives relevant to compensationproviding oversight of our Chief Executive Officercompensation policies, plans and benefits programs and overall compensation philosophy;
•overseeing our other executive officers;strategies and policies related to the management of human capital;
•determiningdischarging the board of directors’ responsibilities relating to (1) review and recommendations to the board of directors regarding the compensation of our Chief Executive Officer and ourthe non-employee directors and (2) the evaluation and approval of compensation of the other individuals who are deemed to be “officers” under Rule 16a-1(f) promulgated under the Exchange Act, or the executive officers; and
•reviewing and making recommendations to our Board of Directors with respect to director compensation; and
•overseeing and administering our cash- and equity-based compensation plans for our directors, executive officers, and employees and granting equity incentiveawards pursuant to plans approved by our stockholders or outside of such plans.
Our Compensation Committee operates under a written charterboard of directors has also established an equity award grant committee that satisfiesis composed of Mr. Blackford, Mr. Bobzien and Ms. Fernandez to make ordinary course equity awards grants to employees that are not our executive officers or non-employee directors, subject to certain limitations on the applicable rulesequity grant amounts per grantee and regulations of the SEC and the listing standards of The NASDAQ Stock Market. A copy of the charter of our Compensation Committee is available on our website at www.irhythmtech.com under “Investors—Policies, Procedures and Charters.” During our fiscal year ended December 31, 2020, our Compensation Committee held seven meetings and acted by written consent twice.
aggregate grant amounts.
Compensation and Human Capital Management Committee Interlocks and Insider Participation
DuringThe members of our Compensation and Human Capital Management committee during the last fiscal year Messrs.ended December 31, 2022 included Mr. Bodaken, and Talwalkar, andMs. Ling, Dr. Bairey Merz served on our Compensation Committee.and Mr. Talwalkar. None of the members of ourthe Compensation and Human Capital Management Committee isin fiscal 2022 was at any time during fiscal 2022 or has beenat any other time an officer or employee of the Company. Noneours or any of our subsidiaries, and none had or have any relationships with us that are required to be disclosed under Item 404 of Regulation S-K. During fiscal 2022, none of our executive officers currently serves, or in the past year has served as a member of theour board of directors, or as a member of the compensation or similar committee, (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers servingwho served on our Boardboard of Directorsdirectors or Compensation Committee.and Human Capital Management committee.
Nominating and Corporate Governance Committee
Our nominating and Corporate Governance Committee is composed of Bruce G. Bodaken, Mark J. Rubash and Abhijit Y. Talwalkar. Mr. Bodaken is the chair of our Nominating and Corporate Governance Committee consists of Messrs. Rubash, Scott, and Talwalkar, with Mr. Scott serving as the chair. Each memberCommittee. The members of our Nominating and Corporate Governance Committee meetsmeet the independence requirements for independence under the listing standards of The NASDAQ Stock MarketNasdaq and SEC rules and regulations. Our Nominating and Corporate Governance Committee is responsible for, among other things:
•assisting the board of directors in identifying, individuals qualified to become members of our Board of Directors;
•recommending to our Board of Directors the persons to be nominated for election as directors and to each of our Board’s committees;
•reviewing and making recommendations to our Board of Directors with respect to management succession planning;
•developing, updatingconsidering and recommending to our Boardcandidates for membership on the board of Directorsdirectors;
•recommending members for each committee of the board of directors;
•developing and maintaining corporate governance principlespolicies applicable to the company, and policies; andany related matters required by applicable securities laws;
•overseeing the evaluation of the board of directors;
•advising the board of directors on corporate governance matters;
•overseeing our strategies, activities, risks and opportunities related to ESG matters; and
•reviewing and monitoring key public policy trends, issues, regulatory matters and other concerns that may affect the company.
Special Committee
Our special committee consists of Bruce G. Bodaken, Mark J. Rubash and Abhijit Y. Talwalkar. Mr. Talwalkar is the chair of our special committee. Our special committee is responsible for, among other things:
•overseeing investigations conducted by regulatory authorities and administrative proceedings or court actions related thereto;
•coordinating with management and outside legal counsel on litigation matters brought against us, including securities class action lawsuits;
•monitoring actions related to the FDA, Center for Medicare and Medicaid Services, Medicare Administrative Contractor, and other reimbursement activities; and
•reviewing employment matters including violations of our Code of Business Conduct and Ethics.
Our Board of Directors and committees.Directors’ Role in Risk Oversight
Our Nominating and Corporate Governance Committee operates underboard of directors, as a written charter that satisfieswhole, has responsibility for risk oversight, although the applicable listing standards of The NASDAQ Stock Market. A copy of the charter of our Nominating and Corporate Governance Committee is available on our website at www.irhythmtech.com under “Investors—Policies, Procedures and Charters.” During our fiscal year ended December 31, 2020, our Nominating and Corporate Governance Committee held five meetings and acted by written consent once.
Considerations in Evaluating Director Nominees
Our Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating director nominees. In its evaluation of director candidates, our Nominating and Corporate Governance Committee will consider the current size and composition of our Board of Directors and the needs of our Board of Directors and the respective committees of our Boardboard of Directors. Somedirectors oversee and review risk areas that are particularly relevant to them. The risk oversight responsibility of our board of directors and its committees is supported by our management reporting processes, which are designed to provide visibility to our board of directors and to our personnel that are responsible for risk assessment and information about the qualificationsidentification, assessment and management of critical risks and management’s risk mitigation strategies.These areas of focus include competitive, economic, operational, financial (accounting, credit, investment, liquidity and tax), legal, regulatory, cybersecurity, privacy, compliance and reputational risks.
| | | | | | | | |
| THE BOARD |
| Our board of directors reviews strategic and operational risk in the context of discussions, question and answer sessions, and reports from the management team at each regular board meeting, as well as reports from other third-party experts from time to time, receives reports on all significant committee activities at each regular board meeting, and evaluates the risks inherent in significant transactions. |
| | |
| AUDIT COMMITTEE |
| Our Audit Committee assists our board of directors in fulfilling its oversight responsibilities with respect to risk management. Our Audit Committee reviews our major financial and enterprise risk exposures, including technology, privacy, cybersecurity and other information technology risks, among other things, discusses with management, our independent auditor and our internal auditor guidelines and policies with respect to risk assessment and risk management. |
| | |
| COMPENSATION AND HUMAN CAPITAL MANAGEMENT COMMITTEE | | GOVERNANCE COMMITTEE |
| Our Compensation and Human Capital Management Committee evaluates our major compensation-related risk exposure and the steps management has taken to monitor or mitigate such exposures. | | Our Nominating and Corporate Governance Committee assesses risks relating to ESG matters. |
We believe this division of responsibilities is an effective approach for addressing the risks we face and that our Nominating and Corporate Governance Committee considers include, without limitation, issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and other commitments. Nominees must also have the ability to offer advice and guidance to our Chief Executive Officer based on past experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Director candidates must have sufficient time available in the judgmentboard leadership structure supports this approach. Each committee of our Nominatingboard of directors meets with key management personnel and representatives of outside advisors to oversee risks associated with their respective principal areas of focus.
Cybersecurity and Privacy Risk Oversight
We understand that our customers, patients, and stakeholders entrust us with sensitive data including Protected Health Information (“PHI”), and we take this responsibility seriously. We also recognize that the cyber security threat landscape continues to evolve, and we are committed to continually investing in and prioritizing the protection of our systems and data.
Our board of directors is responsible for overseeing the cyber security program and has delegated all matters related to the security of and risks related to computerized information and technology systems across the company as well as by product (including privacy, data security, and cybersecurity matters) to the Audit Committee.
At the management level, the Information Technology department is responsible for cybersecurity program and the Risk department is responsible for the privacy program.
At iRhythm, we take a holistic approach to cybersecurity that aligns with leading frameworks such as the National Institute of Standards and Corporate Governance CommitteeTechnology’s (“NIST”) Cyber Security Framework and the Health Insurance Portability and Accountability Act of 1996 (“ HIPAA”) Security Rule focusing on both the technology environment and our people. iRhythm holds both a SOC 2 Type II and SOC 3 Type II certification for its Zio Services, which encompasses security, confidentiality, availability, and privacy. iRhythm has also received the NIST Federal Information Processing Standard (FIPS)140-2 validation for data encryption, which achieves an added level of security. Our security and privacy stance also meets the Cyber Essentials, and Data Security & Protection Toolkit (DSPT) accreditations in the United Kingdom.
We have established policies to perform all board of director and committee responsibilities. Membersgovern the security of our Boardsystems and the protection of Directors are expectedcustomer and patient data. These include regular system updates and patches, employee training on cybersecurity and HIPAA best practices, incident reporting, and the use of encryption to preparesecure sensitive information. In addition, we also regularly perform phishing tests of our employees and update our training plan at least annually.
We provide annual privacy and security training for attend,all employees. Our security training incorporates awareness of cyber threats (including malware, ransomware and participate in all Boardsocial engineering attacks), password hygiene, incident reporting process, as well as physical security best practices. Privacy training addresses the data protection and privacy responsibilities which apply to iRhythm, including HIPAA, the UK General Data Protection Regulation (“GDPR”), European Union GDPR, and the California Consumer Privacy Act of Directors and applicable committee meetings. Our Nominating and Corporate Governance Committee may also consider such other factors2018, as it may deem, from time to time, are in our and our stockholders’ best interests.
Although our Board of Directors does not maintain a specific policy with respect to board diversity, our Board of Directors believes that our Board of Directors should be a diverse body, and our Nominating and Corporate Governance Committee considers a broad range of backgrounds and experiences. In making determinations regarding nominations of directors, our Nominating and Corporate Governance Committee may take into accountamended by the benefits of diverse viewpoints. Our Nominating and Corporate Governance Committee also considers these and other factors as it oversees the annual board of director and committee evaluations. After completing its review and evaluation of director candidates, our Nominating and Corporate Governance Committee recommends to our full Board of Directors the director nominees for selection.California Privacy Rights Act.
Stockholder Recommendations for NominationsEngagement Process
The company regularly engages with stockholders to the Board of Directors
Our Nominating and Corporate Governance Committee will consider candidates for director recommended by stockholders, so long as such recommendations are in accordancebetter understand their perspectives. During fiscal 2022, we held discussions with our charter, our amended and restated certificate of incorporation and amended and restated bylaws and applicable laws, rules and regulations, including those promulgated by the SEC, our policies and procedures for director candidates, as well as the regular director nominee criteria described above. This process is designed to ensure that our Board of Directors includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business. Eligible stockholders wishing to recommend a candidate for nomination should contact our Secretary in writing. Such recommendations must include information about the candidate, a statement of support by the recommending stockholder, evidence of the recommending stockholder’s ownershipmany of our common stock and a signed letter from the candidate confirming willingness to serve on our Board of Directors. Our Nominating and Corporate Governance Committee has discretion to decide which individuals to recommend for nomination as directors.
Under our amended and restated bylaws,largest stockholders may also nominate persons for our Board of Directors. Any nomination must comply with the requirements set forth in our amended and restated bylaws and should be sent in writing to our Secretary at iRhythm Technologies, Inc. 699 8th Street, Suite 600, San Francisco, California 94103. To be timely forduring scheduled events, including our 2022 annual meeting of stockholders our Secretary must receiveand annual investor day, as well as in regularly held private meetings throughout the nomination no earlier than February 14, 2022 and no later than March 16, 2022.year.
CommunicationsCommunication with the Board of Directors
Our stockholders wishingStockholders and interested parties who wish to communicate with our Boardboard of Directors or with an individual member ordirectors, non-management members of our Boardboard of Directorsdirectors as a group, a committee of our board of directors or a specific member of our board of directors (including our chairperson) may do so byin writing, to our Board of Directors ordelivered to the particular memberCorporate Secretary by registered or members ofovernight mail at our Board of Directors, and mailingprincipal executive office.
All communications are reviewed by the correspondence to our Secretary at iRhythm Technologies, Inc. 699 8th Street, Suite 600, San Francisco, California 94103. OurCorporate Secretary, in consultation with appropriate directors, as necessary, and provided to the members of our Boardboard of Directorsdirectors as necessary, will review all incoming communicationsappropriate. Unsolicited items, sales materials, abusive, threatening or otherwise inappropriate materials and if appropriate, all such communications will be forwardedother routine items and items unrelated to the appropriate member or membersduties and responsibilities of our Boardboard of Directors, or if none is specified,directors will not be provided to the Chairman of our Board of Directors.directors.
The address for these communications is:
iRhythm Technologies, Inc.
c/o Corporate Secretary Legal Department
699 8th Street, Suite 600
San Francisco, California 94103
Corporate Governance Guidelines and
Code of Business Conduct and Ethics
Our Board of Directors has adopted Corporate Governance Guidelines that address items such as the qualifications and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. In addition, our Board of Directors has
We have adopted a Code of Business Conduct and Ethics that applies to all of the members of our employees,board of directors, officers and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. The full text of our Corporate Governance Guidelines and ouremployees. Our Code of Business Conduct and Ethics is posted on the Corporate Governance portion“Investor Relations” section of our website, which is located at www.irhythmtech.comhttps://investors.irhythmtech.com under “Investors—Policies, Procedures“Governance Documents and Charters.”Charters” in the “Governance” section of our website. We will post amendmentsintend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiverswaiver from, a provision of our Code of Business Conduct and Ethics for directorsby posting such information on our website at the address and executive officers on the same website.location specified above.
Stock Ownership Guidelines
Environment, Social and Governance
iRhythm’s Approach to Environment, Social and Governance (“ESG”) Matters
At iRhythm, we believe that effectively managing ESG risks and opportunities drives business success, and that when fully integrated into the business, ESG can provide a competitive advantage.In 2022, we further developed iRhythm’s approach to ESG by (i) conducting an ESG Priority Assessment to identify the ESG priority topics that are important to internal and external stakeholders and (ii) operationalizing ESG within the organization by forming an ESG Steering Committee and multiple ESG Working Groups focusing on specific ESG substantive areas or work streams.In addition, in 2023, we established formal board oversight of ESG by revising the charters of two committees of the board of directors—the Nominating and Corporate Governance Committee and the Compensation and Human Capital Management Committee. We have adopted stock ownership guidelines forcontinue to work as an organization to advance our non-employeestrategic ESG roadmap by pursuing key ESG work streams.
ESG Oversight
Given the importance of ESG to the long-term success of our business, our board of directors and Chief Executive Officer to help ensure that they each maintain an equity stakeits committees play a critical role in the Company and, by doing so, appropriately link their interests with those of our stockholders. The guideline for non-employee directors is for each director to hold a number of shares of our stock with an aggregate value equal to at least three times the value of his or her annual cash retainer fees for service on the overseeing ESG matters.
Board of Directors (including retainer fees for servicing as a member or chair
Our board of any Board committee). The guidelines for the Chief Executive Officer is to hold a number of shares of our stock with an aggregate value equal to at least three times the value of his or her annual base salary for service as the Chief Executive Officer (not including incentive compensation). Non-employee directors and the Chief Executive Officer are expected to achieve these ownership levels within the later of (i) December 31, 2023 and (ii) five years from the date the applicable individual becomes a non-employee director or the Chief Executive Officer (whether through being newly hired or promoted).
Risk Management
Risk is inherent with every business, and we face a number of risks, including strategic, financial, business and operational, political, regulatory, legal and compliance, and reputational. We have designed and implemented processes to manage risk in our operations. Management is responsible for the day-to-day management of risks that we face, while our Board of Directors, as a whole and assisted by its committees, has responsibility for the(i) oversight of risk management. In its risk oversight role,ESG risks and opportunities and (ii) the integration of ESG into strategy, to the extent material to the business.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee oversees our Board of Directorsstrategies, activities, risks and opportunities related to ESG matters. The Nominating and Corporate Governance Committee has the responsibility to satisfy itself that the risk management processes designed and implemented by management are appropriate and functioning as designed.
Our Board of Directors believes that open communication between management and our Board of Directors is essential for effective risk management and oversight. Our Board of Directors meets with our Chief Executive Officer and other members of the senior management team at quarterly meetings of our Board of Directors, where, among other topics, they discuss strategy and risks facing the Company, as well as at such other times as they deem appropriate.
While our Board of Directors is ultimately responsible for risk oversight, our Board committees assist our Board of Directors in fulfilling its oversight responsibilities in certain areas of risk. Our Audit Committee assists our Board of Directors in fulfilling its oversightfollowing responsibilities with respect to risk management inESG:
•Oversee and evaluate ESG risks, opportunities, policies, strategies, programs and our performance related to ESG matters.
•Review our ESG priority assessments and ESG reports and ensure that reporting with respect to both voluntary and involuntary ESG disclosures reflects our ESG priorities.
•Review and evaluate our goals with respect to ESG matters and monitor progress against these goals.
•Report to the areasboard of internal control over financialdirectors for discussion, at least annually, ESG matters that may affect our business, operations and performance, including our strategies, initiatives, policies and performance metrics with respect to ESG matters.
•Coordinate with the Audit Committee to oversee our reporting standards with respect to ESG matters and disclosure controls and procedures andensure compliance with legal and regulatory compliance,requirements, as and when appropriate.
•Oversee our engagement with relevant stakeholders on ESG matters, which may include customers, employees and community representatives, in addition to stockholders.
Compensation and Human Capital Management Committee
The Compensation and Human Capital Management Committee oversees our human capital management function.The Compensation and Human Capital Management Committee has the following responsibilities with respect to ESG:
•Periodically discuss with management the implementation and effectiveness of our policies, strategies, programs and practices relating to its human capital management function, including but not limited to those relating to talent recruiting, development, progression and retention, diversity, equity and inclusion, culture, human health and safety and total rewards.
•Periodically review and assess any human capital measures or objectives that we focus on in managing the business or are required to be disclosed by the SEC. Review and discuss annually with management the risks arising from iRhythm’s human capital management function, review the relationship between risk management policies and human capital management and evaluate policies and practices that could mitigate such risks.
Audit Committee
The Audit Committee reviews and discusses with management, and theour independent auditor guidelines and policies with respect to risk assessment and risk management. Our Audit Committee also reviewsour internal auditor, our major financial and information technology risk exposures and the steps management has taken to monitor and control thesethose exposures. OurThe Audit Committee also, monitors certain key risks on a regular basis throughoutat least annually, updates the fiscal year, such as risk associated with internalboard of directors information technology cybersecurity control over financial reportingenvironment.
The Audit Committee also oversees our business continuity and liquidity risk. Ourdisaster preparedness planning.
ESG Steering Committee
The purpose of the ESG Steering Committee is to (i) establish programs, policies and practices relating to ESG matters and (ii) assist the Nominating and Corporate Governance Committee assists our Board of Directors in fulfilling its oversight responsibilities with respect to ESG matters.The ESG Steering Committee is chaired by our Chief Risk Officer, who is the executive leader with oversight of ESG, enterprise risk management, and diversity, equity and inclusion.
ESG Working Groups
We have established four ESG Working Groups: (i) Climate and Environmental Sustainability, (ii) Human Capital Management, (iii) Human Rights and (iv) Legal, Risk and Disclosure. Our ESG Working Groups are responsible for tactically advancing the ESG workstreams in our strategic ESG roadmap.
ESG Priority Topics
In 2022, we conducted our first ESG Priority Assessment, one of the resources that guides our overall ESG strategy. The ESG Priority Assessment was designed to identify the environmental, social and governance topics with the greatest impact on our business strategy, operations and value creation.Through this process, we identified a list of 33 relevant ESG issues and opportunities that were consolidated into 12 ESG topics using the outputs from our business analysis, peer benchmarking and review of stockholder priorities.To prioritize the 12 ESG topics and conduct an inventory of recently completed and ongoing workstreams, we engaged with members of our leadership team and internal technical specialists closest to the relevant issues and opportunities. Using questionnaires and targeted interviews, we collected data on the relative importance of the ESG topics and their potential impacts on our business and success. ESG priority topics identified included the following:
Access and Affordability
Access and affordability are high priority ESG topics for the life sciences industry. As a leading digital healthcare company, our vision is to provide better health for all, and we work to ensure fair pricing practices given our customer base while we find and realize new opportunities associated with expanded access to health care.We aim to provide the best clinical care to the patient, irrespective of their ability to pay.We are dedicated to helping patients get the care they need and have demonstrated a commitment to providing financial support for those patients who need it.
Human Capital Management and Diversity, Equity and Inclusion
At iRhythm, the growth and success of our employees is a top priority, as it impacts our performance as a digital healthcare company and our ability to redefine the way cardiac arrhythmias are clinically diagnosed.We are committed to an inclusive and representative culture. We recognize, celebrate and leverage a diversity of ideas, skills and experiences, and this approach defines how we build our teams, cultivate leaders, and create an inclusive environment where each employee can bring their full self to work.
Product Development and Safety
The safe and effective treatment of patients is crucial to the success of the company.Our quality management system is designed to ensure best practice in safety and quality and is certified to ISO 13485.Additionally, we have earned The Joint Commission’s Gold Seal of Approval® for Ambulatory Health Care Accreditation by demonstrating continuous compliance with its nationally recognized standards. The Gold Seal of Approval® is a symbol of quality that reflects an organization’s commitment to providing safe and effective patient care.
Sustainability
We recognize that environmental sustainability is integral to producing world-class products, and we see environmental sustainability and efficiency as important sources of value creation at iRhythm.Having a strong sustainability program in place is important to meet the growing expectations of our stakeholders, including patients, providers and stockholders. And we see our sustainability strategy as a key cost saving initiative, where reductions in the amount of materials used in our products, improvements in the energy efficiency of our products and expanding circularity measures at the end of our product lifecycle help to improve our bottom line.Our sustainability strategy covers our own operational footprint, including our limited use of energy and water, efforts to minimize the amount of waste generated and managing climate-related risks and greenhouse gas emissions.As the leading provider of single-use cardiac diagnostic devices, our sustainability strategy also includes efforts to minimize the environmental impact of our products.
PROPOSAL NO. 1 ELECTION OF DIRECTORS
Our board of directors will be composed of seven members. At the Annual Meeting, each of our director nominees will be elected for a one-year term. Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, or removal.
Nominees for Director
| | | | | | | | | | | |
| Name of Director | Age | Position | Director Since |
| Quentin Blackford | 44 | Chief Executive Officer and Director | October 2021 |
| Abhijit Y. Talwalkar | 58 | Chairman of the Board | May 2016 |
| Cathleen Noel Bairey Merz, M.D. | 66 | Director | April 2018 |
| Bruce G. Bodaken | 71 | Director | July 2017 |
| Karen Ling | 59 | Director | November 2021 |
| Mark J. Rubash | 65 | Director | March 2016 |
| Ralph Snyderman, M.D. | 82 | Director | July 2017 |
Quentin S. Blackford has served as our President and Chief Executive Officer since October 2021. From September 2017to September 2021, Mr. Blackford, held various roles, the most recent one as the Chief Operating Officer at Dexcom Inc., a company that develops, manufactures, produces, and distributes continuous glucose monitoring systems for diabetes management. From February 2009 to September 2017, Mr. Blackford was the Chief Financial Officer at Nuvasive Inc., a medical device company for minimally invasive spine surgery. From June 1999 to September 2009, Mr. Blackford was the Director of Finance and Controller of the Dental Division at Zimmer Holdings, Inc., a medical device company. Mr. Blackford has served as an independent member of the Board of Directors of Alphatec Holdings, Inc. since October 2017 and Paragon 28, Inc. since August 2022. He is a Certified Public Accountant (inactive) and received dual B.S. degrees in Accounting and Business Administration from Grace College.
We believe Mr. Blackford is qualified to serve on our board of directors due to his experience gained from serving as our Chief Executive Officer, combined with his previous training and qualifications and the skills and experience he has developed during his extensive career in the medical devices industry.
Abhijit Y. Talwalkarhas served as a member and Chairman of our board of directors since May 2016. Mr. Talwalkar served as President and Chief Executive Officer of LSI Corporation, a leading provider of silicon, systems and software technologies for the storage and networking markets, from May 2005 to May 2014. From 1993 to 2005, Mr. Talwalkar was employed by Intel Corporation and held a number of senior management positions, including Corporate Vice President and Co-General Manager of the Digital Enterprise Group, which was comprised of Intel’s business client, server, storage and communications business, and Vice President and General Manager for the Intel Enterprise Platform Group. Prior to joining Intel, Mr. Talwalkar held senior engineering and marketing positions at Sequent Computer Systems, a multiprocessing computer systems design and manufacturer, Bipolar Integrated Technology, Inc., a VLSI bipolar semiconductor company, and Lattice Semiconductor Inc., a service-driven developer of programmable design solutions. Mr. Talwalkar has served on the board of directors for Advanced Micro Devices, a leading provider of high-performance computing, graphics and visualization solutions since August 2017. Since March 2017, Mr. Talwalkar has served as a member of the board of directors of TE Connectivity Ltd. and previously served as an advisor to the board of directors from August 2016 to March 2017. Since 2011, Mr. Talwalkar has served on the boardof directors of Lam Research Corporation and has previously served as a member of the board of directors of LSI from May 2005 to May 2014 and the U.S. Semiconductor Industry Association from May 2005 to May 2014. He has served as the Chairman of the Bay Area chapter of the nationwide non-profit organization Friends of the Children since January 2015. He holds aB.S. in Electrical Engineering from Oregon State University.
We believe that Mr. Talwalkar is qualified to serve as Chairman of our board of directors because of his experience in leadership roles at major technology companies and his years of experience serving on public company boards of directors.
Cathleen Noel Bairey Merz, M.D.has served as a member of our board of directors since April 2018. Dr. Bairey Merz has been the Medical Director of the Preventive and Rehabilitative Center at the Cedars-Sinai Medical Center in Los Angeles, California since 1991. She also has been the Medical Director and Endowed Chair of the Barbra Streisand Women’s Heart Center at the Smidt Heart Institute at Cedars-Sinai since 2001, and a Professor of Medicine at Cedars-Sinai Medical Center and the David Geffen School of Medicine at the University of California at Los Angeles. From 2005 to 2009, she served on the Scientific Advisory Board of CV Therapeutics, Inc, a biopharmaceutical company. She also has extensive experience on non-profit boards, councils and guideline panels, including the American College of Cardiology, the American Heart Association and the National Heart, Lung, and Blood Institute. Since 2016, Dr. Bairey Merz has served on multiple editorial boards, including for the Journal of the American College of Cardiology, Circulation, and European Heart Journal. Dr. Bairey Merz holds a B.A. (Honors) in Biological Sciences from the University of Chicago and a M.D. (Honors) from Harvard Medical School. She completed her training in Internal Medicine at the University of California, San Francisco, and Cardiology at Cedars-Sinai Medical Center.
We believe that Dr. Bairey Merz is qualified to serve as a member of our board of directors because of her extensive medical training and her leadership experience with for-profit and non-profit organizations.
Bruce G. Bodaken has served as a member of our board of directors since July 2017. Mr. Bodaken previously served as Chairman and Chief Executive Officer of Blue Shield of California, where he was responsible for strategy and management of California’s third largest insurer. He served as Blue Shield of California’s President and Chief Operating Officer from January 1996 to December 2000. Mr. Bodaken was previously a member of the faculty of the University of California, Berkeley in the Department of Public Health, and a visiting fellow at the Brookings Institution, focused on value-based care. Mr. Bodaken has served on the board of directors of Rite Aid Corporation since May 2013. Mr. Bodaken holds a B.A. in Philosophy from Colorado State University and a M.A. in Philosophy from the University of Colorado.
We believe that Mr. Bodaken is qualified to serve as a member of our board of directors because of his extensive business and leadership experience in the healthcare industry.
Karen Linghas served as a member of our board of directors since November 2021. From July 2019 to May 2021, Ms. Ling was the Executive Vice President and Chief Human Resources Officer for American International Group, Inc. In this role, Ms. Ling oversaw all aspects of human capital management, including talent acquisition, training, development, compensation and benefits, and diversity and inclusion. From March 2015 to July 2019, Ms. Ling was the Executive Vice President and Chief Human Resources Officer at Allergan plc., a pharmaceutical company. There, Ms. Ling developed and oversaw a global human resources strategy. From January 2014 to March 2015, Ms. Ling was the Senior Vice President and Chief Human Resources Officer at Forest Laboratories, Inc. and then Actavis plc., prior to its acquisition of Allergan plc. Previously, Ms. Ling was global Senior Vice President, Human Resources for Merck & Co., Inc.’s Global Human Health and Consumer Care business. Prior to Merck, she was Group Vice President, Global Compensation & Benefits at Schering-Plough. Ms. Ling also spent 14 years at Wyeth in various positions of increasing responsibility, developing human resources strategies for business units and working in Wyeth’s Labor & Employment department. She has also served as a member of the board of directors of Mallinckrodt PLC since August 2022, and a member of the Advisory Committee of Galderma SA since March 2022. Ms. Ling has a B.A. in Economics from Yale University and a Juris Doctor from Boston University School of Law.
We believe that Ms. Ling is qualified to serve as a member of our board of directors because of her extensive business and leadership experience in the healthcare industry.
Mark J. Rubash has served as a member of our board of directors since March 2016. Most recently, from December 2016 to September 2018, Mr. Rubash served as a Strategic Advisor to Eventbrite, Inc., a publicly held e-commerce company, where he previously served as the Chief Financial Officer from June 2013 to November 2016. Prior to Eventbrite, Mr. Rubash was the Chief Financial Officer at HeartFlow, Inc., a privately held medical device company, which he joined in March 2012, and at Shutterfly, Inc., a publicly held e-commerce company, which he joined in November 2007. Mr. Rubash was also the Chief Financial Officer of Deem, Inc. (formerly, Rearden Commerce), a privately held e-commerce company, from August 2007 to November 2007. From February 2007 to August 2007, Mr. Rubash was a Senior Vice President at Yahoo! Inc. and he held various senior finance positions at eBay Inc. from February 2001 to July 2005. Prior to that, Mr. Rubash was an audit partner at PricewaterhouseCoopers LLP, where he was most recently the Global Leader for their Internet Industry Practice and Managing Partner for their Silicon Valley Software Industry Practice. Mr. Rubash has served as a member of the board of directors and Chairman of the audit committee of Intuitive Surgical, Inc., a medical device company, since October 2007, as Chairman of the Intuitive Foundation, a not-for-profit organization since August 2018, as a member of the board of directors and Chairman of the audit committee of Line 6, Inc., a music technology company, from April 2007 to January 2014, as a member of the board of directors and audit committee of IronPlanet, Inc., a privately held e-commerce platform company for used heavy equipment, from March 2010 to May 2017, and as Chairman of IronPlanet’s audit committee from October 2015 to May 2017, and as a member of the board of directors of Minted Inc., a privately-held e-commerce company since June 2022. Mr. Rubash received his B.S. in Accounting from California State University, Sacramento.
We believe that Mr. Rubash is qualified to serve as a member of our board of directors because of his financial expertise and his experience with private and public company financial accounting matters and risk associatedmanagement.
Ralph Snyderman, M.D. has served as a member of our board of directors since July 2017. Dr. Snyderman is Chancellor Emeritus, James B. Duke Professor of Medicine, and Director of the Center for Research on Personalized Health Care at Duke University. From 1989 to 2004, he served as Chancellor for Health Affairs at Duke and was the founding Chief Executive Officer and President of the Duke University Health System. From 2006 to 2009, he was a venture partner of New Enterprise Associates, a venture capital firm. Dr. Snyderman currently serves on the board of directors of each of DNAnexus, Inc. and ZealCare, Inc., as well as several not-for-profit boards, including the Whole Health Institute. He previously served on the board of directors of each of CareDx, Inc., The Procter and Gamble Company, Pharmaceutical Product Development, LLC, Liquidia Technologies, Inc., Targacept, Inc., Trevena, Inc., and Press Ganey Associates, Inc. Dr. Snyderman is a member of the Association of American Physicians, where he served as President from 2003 to 2004, the Association of American Medical Colleges, where he served as Chair from 2001 to 2002, the National Academy of Medicine and the American Academy of Arts & Sciences. Dr. Snyderman holds a B.S. in Pre-Medical Studies from Washington College and an M.D. from the State University of New York, Downstate Medical Center. He completed his internship and residency in Medicine at Duke University.
We believe that Dr. Snyderman is qualified to serve as a member of our board of directors because of his extensive experience serving on the boards of directors of public and private companies and his deep knowledge of the healthcare industry.
Vote Required
If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with respect to the voting of directors, your shares will be voted “FOR” the election of Cathleen Noel Bairey Merz, M.D., Bruce G. Bodaken, Mark J. Rubash, Ralph Snyderman, M.D. and Abhijit Y. Talwalkar. We expect that each of Cathleen Noel Bairey Merz, M.D., Bruce G. Bodaken, Mark J. Rubash, Ralph Snyderman, M.D. and Abhijit Y. Talwalkar will accept such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee designated by our board organization, membershipof directors to fill such vacancy. If you are a street name stockholder and structure, and corporate governance. Our Compensation Committee assesses risks createdyou do not give voting instructions to your broker or nominee, your broker will leave your shares unvoted on this matter.
The election of directors requires a plurality of the votes cast by the incentives inherentholders of the shares of our common stock present virtually or represented by proxy at the virtual Annual Meeting and entitled to vote thereon, which means that the seven individuals nominated for election to our board of directors receiving the highest number of “FOR” votes will be elected. Broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL”
NOMINEES IN THE ELECTION OF SEVEN DIRECTORS
Non-Employee Director Equity Compensation
Our compensation and human capital management committee, after considering the information, analysis, and recommendation provided by our independent compensation consultant engaged at the time of such consideration and decision, Compensia, Inc. (“Compensia”), including data regarding compensation paid to non-employee directors by companies in our compensation policies. Finally, our full Board of Directors reviews strategic and operational risk in the context of reports from the management team, receives reports on all significant committee activities at each regular meeting, andpeer group, evaluates the risks inherent in significant transactions.
Director Compensation
Each non-employee director is eligible to receiveappropriate level and form of compensation for his or her service consistingnon-employee members of annual cash retainersour board of directors and equity awards asrecommends changes to our board of directors when appropriate. The compensation of our non-employee directors is described below. Our BoardWe do not pay management directors for service on our board of Directors will have the discretion to revise non-employee director compensation as it deems necessary or appropriate. Our Board of Directors most recently reviewed and adjusted non-employee director compensation as noted below based on a review of market data provided by Compensia, Inc., the Company’s compensation consultant.directors.
Cash Compensation. All non-employee directors will beare entitled to receive the following cash compensation for their services:
•$45,000 per year for service as a Board member;member of the board of directors;
•$50,000 per year additionally for service as a Chairmanchair of the Board;board of directors;
•$20,000 per year additionally for service as Chairmanchair of the Audit Committee;audit committee;
•$8,00010,000 per year additionally for service as an Audit Committeeaudit committee member;
•$15,000 per year additionally for service as Chairmanchair of the Compensation Committee;compensation and human capital management committee;
•$6,0007,500 per year additionally for service as a Compensation Committeecompensation and human capital management committee member;
•$10,000 per year additionally for service as Chairmanchair of the Nominatingnominating and Corporate Governance Committee;corporate governance committee; and
•$5,000 per year additionally for service as a Nominatingnominating and Corporate Governance Committeecorporate governance committee member.
All cash payments to non-employee directors or the Retainer Cash Payments, will bewere paid quarterly in arrears on a prorated basis.
Equity Compensation. Nondiscretionary,Non discretionary, automatic grants of restricted stock units will beare made to our non-employee directors.
•Initial Grant. Each person who first becomes a non-employee director has been or will be granted Restricted Stock Unitsrestricted stock units having a grant date fair value equal to $300,000 or the Initial Award,(the “Initial Award”) on the date of the first meeting of our Boardboard of Directorsdirectors or Compensation Committeecompensation and human capital management committee occurring on or after the date on which the individual first became a non-employee director. The shares underlying the Initial Award will vest as to one third of the shares subject to such Initial Award on each yearly anniversary of the commencement of the non-employee director’s service as a director, subject to the continued service as a director through the applicable vesting date.
•Annual Grant. On the date of each annual stockholder’s meeting, each non-employee director will bewas granted Restricted Stock Unitsrestricted stock units having a grant date fair value equal to $150,000 or the Annual Award.(the “Annual Award”). The shares underlying the Annual Award will vest and become exercisable on the one yearone-year anniversary of the date of grant.
Any award granted under our outside director compensation policy will fully vest and become exercisable in the event of a change in control as(as defined in our 2016 Equity Incentive Plan,Plan) provided that the grantee remains a director through such change in control.
Pursuant to our outside director compensation policy, no non-employee director may be issued, in any fiscal year, cash payments (including the fees under our outside director compensation policy) with a value greater than $200,000, provided that such limit will be $300,000 with respect to any non-employee director who serves in the capacity of Chairmanchair of the Board,board of directors, lead outside director, or chairmanchair of the Audit Committee at any time during the fiscal year. No non-employee director may be granted, in any fiscal year, equity awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of greater than $300,000, increased to $500,000 in the fiscal year of his or her initial service as a non-employee director.
Non-Employee Director Compensation
The following table sets forthprovides information for 2022 regarding all compensation awarded to, earned by, or paid to each person who served as a director for some portion or all of 2022, other than Mr. Blackford, our non-employeeChief Executive Officer. Mr. Blackford is not included in the table below as he is an employee and receives no compensation for his service as a director. The compensation received by Mr. Blackford as an employee is set forth in the section titled “Executive Compensation” below. | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash |
| Stock Awards(3) |
| Total |
| Abhijit Y. Talwalkar | | $ | 112,500 | |
| $ | 157,704 | |
| $ | 270,204 | |
| Cathleen Noel Bairey Merz, M.D. | | $ | 52,500 | |
| $ | 157,704 | |
| $ | 210,204 | |
| Bruce G. Bodaken | | $ | 65,000 | |
| $ | 157,704 | |
| $ | 222,704 | |
Renee Budig (1) | | $ | 55,000 | |
| $ | 157,704 | | | $ | 212,704 | |
Kevin M. King (2) | | $ | 11,250 | |
| $ | — | | | $ | 11,250 | |
| Karen Ling | | $ | 52,500 | |
| $ | 89,161 | | | $ | 141,661 | |
| Mark J. Rubash | | $ | 70,000 | |
| $ | 157,704 | |
| $ | 227,704 | |
| Ralph Snyderman, M.D. | | $ | 55,000 | |
| $ | 157,704 | |
| $ | 212,704 | |
(1)Ms. Budig was not nominated for reelection to our board of directors duringat the fiscal year ended December 31, 2020: | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash |
| Stock Awards(1)(2) |
| Total |
| Abhijit Y. Talwalkar | | $ | 90,300 | |
| $ | 134,904 | |
| $ | 225,204 | |
| Bruce G. Bodaken | | $ | 49,500 | |
| $ | 134,904 | |
| $ | 184,404 | |
| Cathleen Noel Bairey Merz, M.D. | | $ | 40,875 | |
| $ | 134,904 | |
| $ | 175,779 | |
| Mark J. Rubash | | $ | 54,000 | |
| $ | 134,904 | |
| $ | 188,904 | |
| Ralph Snyderman, M.D. | | $ | 45,000 | |
| $ | 134,904 | |
| $ | 179,904 | |
| Raymond W. Scott | | $ | 54,983 | |
| $ | 134,904 | |
| $ | 189,887 | |
| Renee Budig | | $ | 32,500 | | | $ | 236,216 | | | $ | 268,716 | |
(1)Amounts shown represent(2)Mr. King resigned from our board of directors in March 2022.
(3)The values of the stock awards reflect the grant date fair value of options and stock awards granted during 2020, as calculated2022 and are based on the Company’s closing price on the grant date in accordance with FASB ASC Topic 718. TheFor a discussion of our valuation assumptions, used in calculating the grant-date fair value of the options reported in this column are set forth in the sectionsee Note 1 and Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation.”
(2)Value of Stock Awards differs for existing directors due to transition from granting annual awards2022, filed with the SEC on individual anniversary service dates to the annual meeting date.February 23, 2023.
Restricted Stock Units(4)For information regarding the number of restricted stock awards and Options outstandingstock options held by each non-employee director as of December 31, 2020, held by our non-employee directors were as follows: | | | | | | | | | | | | | | |
| Name |
| Shares Subject to Outstanding Awards |
| Shares Subject to Outstanding Options |
| Abhijit Y. Talwalkar |
| 1,056 | |
| 24,230 | |
| Bruce G. Bodaken |
| 1,056 | |
| 228 | |
| Cathleen Noel Bairey Merz, M.D. |
| 2,096 | |
| — | |
| Mark J. Rubash |
| 1,056 | |
| 23,901 | |
| Ralph Snyderman, M.D. |
| 1,056 | |
| 3,839 | |
| Raymond W. Scott |
| 1,056 | |
| — | |
| Renee Budig | | 1,916 | | | — | |
| | | | | | | | | | | | | | |
| Name |
| Shares Underlying Option Awards held as of December 31, 2022 | | Shares Underlying Stock Awards Held as of December 31, 2022 |
| Abhijit Y. Talwalkar |
| 24,230 | | | 1,155 | |
| Cathleen Noel Bairey Merz, M.D. |
| — | | | 1,155 | |
| Bruce G. Bodaken |
| 228 | | | 1,155 | |
| Renee Budig | | — | | | 1,738 | |
| Karen Ling | | — | | | 3,533 | |
| Mark J. Rubash |
| 23,901 | | | 1,155 | |
| Ralph Snyderman, M.D. |
| 3,839 | | | 1,155 | |
Our directors who are also our employees receive no additional compensation for their service as directors. During our fiscal year ended December 31, 2020, Kevin M. King was our employee. See the section titled “Executive Compensation” for additional information about the compensation paid to Mr. King.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board of Directors is currently composed of nine members. In accordance with our Amended and Restated Certificate of Incorporation, which we refer to herein as our Certificate of Incorporation, our Board of Directors is divided into three staggered classes of directors. At the Annual Meeting, three Class II directors will be elected for a one-year term to succeed the same class whose term is then expiring.
Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our Board of Directors may have the effect of delaying or preventing changes in control of our company.
Nominees
Our Nominating and Corporate Governance Committee has recommended, and our Board of Directors has approved, Cathleen Noel Bairey Merz, M.D., Mark J. Rubash and Renee Budig, as nominees for election as Class II directors at the Annual Meeting. If elected, each of Cathleen Noel Bairey Merz, M.D., Mark J. Rubash and Renee Budig will serve as a Class II director until our 2022 annual meeting of stockholders and until his or her successor is duly elected and qualified. Each of the nominees is currently a director of our company. For information concerning the nominees, please see the section titled “Board of Directors and Corporate Governance.”
If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with respect to the voting of directors, your shares will be voted “FOR” the election of Cathleen Noel Bairey Merz, M.D., Mark J. Rubash and Renee Budig. We expect that each of Cathleen Noel Bairey Merz, M.D., Mark J. Rubash and Renee Budig will accept such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee designated by our Board of Directors to fill such vacancy. If you are a street name stockholder and you do not give voting instructions to your broker or nominee, your broker will leave your shares unvoted on this matter.
Vote Required
The election of directors requires a plurality vote of the shares of our common stock present by attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon. Broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH OF THE NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointedselected PricewaterhouseCoopers LLP (“PwC”), independent registered public accountants, to audit our consolidated financial statements for our fiscal year ending December 31, 2021. During our fiscal year ended December 31, 2020, PwC served as our independent registered public accounting firm.
Notwithstandingfirm to perform the appointmentaudit of PwCour consolidated financial statements for the year ending December 31, 2023, and therecommends that stockholders vote for ratification of such appointment by our stockholders, our Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our Audit Committee believes that such a change would be inselection. The ratification of the best interests of our company and our stockholders. At the Annual Meeting, our stockholders are being asked to ratify the appointmentselection of PwC as our independent registered public accounting firm for our fiscalthe year ending December 31, 2021. Our2023, requires the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and voting affirmatively or negatively on the proposal. In the event that PwC is not ratified by our stockholders, the Audit Committee is submitting the appointmentwill review its future selection of PwC to our stockholders because we value our stockholders’ views onas our independent registered public accounting firm and as a matter of good corporate governance.firm.
PwC audited our financial statements for the year ended December 31, 2022. Representatives of PwC willare expected to be present at the Annual Meeting and they will havebe given an opportunity to make a statement at the Annual Meeting if they desire to do so, and will be available to respond to appropriate questions from our stockholders.questions.
If our stockholders do not ratify the appointment of PwC, our Board of Directors may reconsider the appointment.
Fees Paid to the Independent Registered Public Accounting Firm | | | | | | | | | | | |
| 2020 | | 2019 |
Audit Fees (1) | $ | 2,680,000 | |
| $ | 2,968,000 | |
| Audit-Related Fees | — | |
| — | |
| Tax Fees | — | |
| — | |
| All Other Fees | — | |
| — | |
| Total Fees | $ | 2,680,000 | |
| $ | 2,968,000 | |
(1)Audit Fees consist of professionaland Services
We regularly review the services rendered forand fees from our independent registered public accounting firm. These services and fees are also reviewed with our audit committee annually.
During the audits of our financial statements and reviews of quarterly financial statements.
Auditor Independence
In our fiscal yearyears ended December 31, 2020, there were no other professional2021 and 2022, fees for services provided by PwC that would have requiredwere as follows:
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| Fees Billed to iRhythm | | 2021 | | 2022 |
Audit fees(1) | | $ | 2,866,944 | | | $ | 2,585,962 | |
Audit-related fees(2) | | — | | | — | |
Tax fees(3) | | — | | | — | |
Other fees(4) | | 15,941 | | | 11,351 | |
| Total fees | | $ | 2,882,885 | | | $ | 2,597,313 | |
| | | | | |
| (1) | “Audit fees” consist of fees and expenses billed for professional services rendered for the audit of our consolidated financial statements and services that are normally provided by the auditor in connection with regulatory filings. |
| (2) | “Audit-related fees” consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. |
| (3) | “Tax fees” consist of fees for tax compliance and advice. Tax advice fees encompass a variety of permissible tax services, including technical tax advice related to federal and state and international income tax matters, assistance with sales tax and assistance with tax audits. |
| (4) | “Other fees” consist of fees for services other than the services reported in audit fees, audit-related fees and tax fees. |
Policy on Audit Committee to consider their compatibility with maintaining the independence of PwC.
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our Audit Committee has established aCommittee’s policy governing our use of the services of our independent registered public accounting firm. Under this policy, our Audit Committee is required to pre-approve all audit and permissible non-audit services performedprovided by ourthe independent registered public accounting firm, the scope of services provided by the independent registered public accounting firm, and the fees for the services to be performed. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in orderaccordance with this pre-approval, and the fees for the services performed to ensure thatdate.
All of the provision of such services does not impairrelating to the public accountants’ independence. All fees paid to PwC for our fiscal years ended December 31, 2020 and 2019described in the table above were pre-approvedapproved by our Audit Committee.
Vote Required
The ratification of the appointment of PricewaterhouseCoopers LLPPwC as our independent registered public accounting firm requires the affirmative vote of a majority of the shares of our common stock present by attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon. Abstentions will have the effect of a vote AGAINST the proposal and broker non-votes will have no effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
PROPOSAL NO. 3
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with the rules and regulations of the SEC, pursuant to Section 14A of the Exchange Act, we are providing stockholders with an advisory vote on the overall compensation of our named executive officers. In accordance with the results of the stockholder vote at the 2018 Annual Meeting, advisory votes on the overall compensation of our named executive officers are held every year.
We are asking stockholders to approve, on an advisory basis, the compensation of our Named Executive Officers (“NEOs”), as disclosed pursuant to SEC rules, including in the section titled “Compensation Discussion and Analysis,” the executive compensation tables and related material included in this Proxy Statement. This proposal, commonly known as a say-on-pay proposal, gives stockholders the opportunity to express their views on our executive compensation program and policies. The vote is not intended to address any specific item of compensation, but rather to address our overall approach to the compensation of our NEOs described in this Proxy Statement.
Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to our Named Executive Officers, as disclosed in the Proxy Statement for the Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion and other related disclosure.”
Vote Required
The advisory vote to approve the compensation of our Named Executive Officers, will be approved ifyear ending December 31, 2023 requires the majority of the shares of our common stock present byin attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon vote for approval. The result of this vote will be considered the advisory vote of our stockholders. Abstentions will have the effect of a vote AGAINST the proposal and broker non-votes will have no effect.
Yourare considered votes present and entitled to vote on this proposal, is advisory, and therefore not binding onthus, will have the Company orsame effect as a vote “against” the Board, and will not be interpreted as overruling a decision by, or creating or implying any additional fiduciary duty for, the Board. Nevertheless, our Board values the opinions of our stockholders and will take into account the outcome of this vote when making future decisions regarding the frequency of holding future advisory votes on the compensation of our NEOs.proposal.
THE
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”“FOR” THE APPROVALRATIFICATION OF THE COMPENSATIONAPPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR NAMED EXECUTIVE OFFICERS.INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDING DECEMBER 31, 2023.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is a committee of the Board of Directors comprised solely of independent directors as required by the listing standards of The NASDAQNasdaq Stock Market and rules and regulations of the SEC. The Audit Committee operates under a written charter approved by the Board of Directors, which is available on the Company’scompany’s website at www.irhythmtech.com under “Investors—Policies, Procedures and Charters.” The composition of the Audit Committee, the attributes of its members and the responsibilities of the Audit Committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter and the Audit Committee’s performance on an annual basis.
With respect to the Company’scompany’s financial reporting process, the management of the Companycompany is responsible for (1) establishing and maintaining internal controls and (2) preparing the Company’scompany’s consolidated financial statements. The Company’scompany’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), is responsible for auditing these financial statements. It is the responsibility of the Audit Committee to oversee these activities. It is not the responsibility of the Audit Committee to prepare the Company’scompany’s consolidated financial statements. These are the fundamental responsibilities of management. In the performance of its oversight function, the Audit Committee has:
•reviewed and discussed the audited consolidated financial statements with management and PwC;
•discussed with PwC the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued bythe applicable requirements of the Public Company Accounting Oversight Board;Board and the SEC; and
•received the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence.
Based on the Audit Committee’s review and discussions with management and PwC, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20202022 for filing with the SEC.
Respectfully submitted by the members of the Audit Committee of the Board of Directors:
Mark J. Rubash (Chair)
Ralph Snyderman, M.D.
Raymond W. Scott
Renee Budig
This report of the Audit Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
PROPOSAL NO. 3 ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with the rules of the SEC, we are providing stockholders with an opportunity to make a non-binding, advisory vote on the compensation of our named executive officers. This non-binding advisory vote is commonly referred to as a “say on pay” vote and gives our stockholders the opportunity to express their views on our named executive officers’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies, and practices described in this Proxy Statement. This “say on pay” vote is conducted on an annual basis.
Stockholders are urged to read the section titled “Executive Compensation,” which discusses how our executive compensation policies and procedures implement our compensation philosophy and contains tabular information and narrative discussion about the compensation of our named executive officers. Our compensation and human capital management committee and board of directors believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving our goals. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that our stockholders approve, on a non-binding advisory basis, the compensation of the Named Executive Officers, as disclosed in the Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and narrative discussion and the other related disclosures.”
As an advisory vote, this proposal is not binding. However, our board of directors and compensation and human capital management committee, which is responsible for designing and administering our executive compensation program, value the opinions expressed by stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
Vote Required
The approval, on an advisory basis, of the compensation of our named executive officers requires the majority of the shares of our common stock present in attendance or by proxy at the virtual Annual Meeting and entitled to vote thereon vote for approval. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table identifiessets forth certain information aboutwith respect to the beneficial ownership of our executive officers or former executive officerscommon stock as of April 28, 2021. Our executive officers are appointed by, and serve at the discretionMarch 30, 2023, by:
• each of our Boardnamed executive officers;
• each of Directors. There are no family relationships among anyour directors or director nominees;
• all of our directors and executive officers or former executive officers.as a group; and
| | | | | | | | | | | | | | |
Name |
| Age |
| Position |
Michael J. Coyle | | 59 | Pre | President, Chief Executive Officer and Director |
Kevin M. King (1)
|
| 64 |
| Former President and Chief Executive Officer, current Director |
Douglas J. Devine | | 51 | | Chief Financial Officer |
Matthew C. Garrett (2)
|
| 53 |
| Former Chief Financial Officer |
Daniel G. Wilson |
| 39 |
| Executive Vice President of Strategy, Corporate Development and Investor Relations |
David A. Vort |
| 55 |
| Executive Vice President, Sales |
Mark J. Day |
| 50 |
| Executive Vice President of Research & Development |
• each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of our common stock.(1) Effective January 12, 2021, Mr. King retired as Chief Executive Officer.
(2) Effective June 22, 2020, Mr. Garrett resigned as Chief Financial Officer.
ForWe have determined beneficial ownership in accordance with the biographies of Mr. Coyle and Mr. King, please see “Board of Directors and Corporate Governance—Continuing Directors.”
Matthew C. Garrett served as our Chief Financial Officer from January 2013 until his resignation in June 2020. From March 2010 until December 2012, he served as Chief Financial Officer of Navigenics, Inc., a provider of genetic testing for common health conditions, where he led all finance functions, strategic partnerships, and successfully facilitated the salerules of the companySEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to Life Technologies Corp. From October 2008 untilus, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares beneficially owned, subject to applicable community property laws.
Applicable percentage ownership is based on 30,462,929 shares of common stock outstanding as of March 2010, Mr. Garrett served30, 2023. Shares of our common stock subject to stock options that are currently exercisable or exercisable within 60 days of March 30, 2023 or restricted stock units that may vest and settle within 60 days of March 30, 2023 are deemed to be outstanding and to be beneficially owned by the person holding the stock options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as Directoroutstanding for the purpose of Business Development at Corventis Inc., a health monitor applications company, where he was responsible for directing corporate operations and business collaborations related tocomputing the advancement and promotionpercentage ownership of any other person. Unless otherwise indicated, the address of each of the company’s health monitor applications. From October 2006 until September 2008, Mr. Garrett served as Vice President of Finance, Chief Accounting Officerindividuals and Treasurer for Cogentus Pharmaceuticals Inc., a developer of prescription pharmaceutical products. Earlier in his career, Mr. Garrett served as Finance Director in Research & Development and, subsequently, Director of Strategic Marketing and Pricing at Affymetrix, Inc. Prior to Affymetrix, he held various finance roles at Guidant Corporation, a medical technology company focused on cardiac and vascular solutions. Mr. Garrett holds a B.A. in Finance from the University of Iowa, Iowa City and an M.B.A. from the Kelley School of Business, Indiana University Bloomington.
Douglas J. Devine has served as our Chief Financial Officer since June 2020. From November 2017 until June 2020, Mr. Devine served as the Senior Vice President and Chief Financial Officer of GlobalFoundries, a global foundry for technology companies. From January 2014 to November 2017, Mr. Devine served as Chief Financial Officer and Sr. Vice President of UTAC Holdings Ltd., a semiconductor testing and assembly company. Mr. Devine was also Chief Financial Officer of Soraa Laser Diode, Inc., a lighting company, from January 2013 to December 2013 and Stion Corp., a solar company, from February 2011 to December 2013. Mr. Devine also served as Vice President of Finance of NVIDIA Corp., a computer gaming company, from September 2009 to March 2011 and as Senior Controller of Intel Corp. from April 1997 to September 2009. Mr. Devine received an M.B.A. in Finance and a Bachelor of Science in Engineering from the University of Michigan and is also a certified public accountant.
Daniel G. Wilson has served as our Executive Vice President of Strategy, Corporate Development and Investor Relations since June 2019. Previously, he served as Director and Head of Business Development at Penumbra, Inc., a global healthcare company focused on innovative therapies. Prior to Penumbra, he held various positions at J.P. Morgan over a 10-year tenure, most recently as Executive Directorentities listed in the Healthcare Investment Banking group focused on digital health, medical technology and emerging healthcare companies. Earlier in his career, he held various positions in Piper Jaffray’s Healthcare Investment Banking group. He started his career at KPMG as an Audit Associate. Mr. Wilson has a B.S. in Business Administration from California Polytechnic State University at San Luis Obispo.
David A. Vort has served as our Executive Vice President of Sales since January 2014. From April 2012 to December 2013, he served as Vice President of US Sales at InTouchtable below is c/o iRhythm Technologies, Inc., a provider699 8th Street, Suite 600, San Francisco, California 94103.
| | | | | | | | | | | | | | | | | |
| Name of Beneficial Owner | | Beneficial Ownership |
| | Number | | Percentage |
| Directors and named executive officers: | | | | |
| Quentin S. Blackford(1) | | 13,265 | | | * |
| Brice Bobzien(2) | | 553 | | | * |
| Douglas J. Devine(3) | | 17,225 | | | * |
| Patrick M. Murphy(4) | | 4,083 | | | * |
| Chad Patterson | | — | | | * |
| Minang Turakhia, M.D., M.S.(5) | | 300 | | | * |
| Abhijit Y. Talwalkar(6) | | 33,270 | | | * |
| C. Noel Bairey Merz, M.D.(7) | | 4,887 | | | * |
| Bruce G. Bodaken(8) | | 8,271 | | | * |
| Karen Ling(9) | | 2,093 | | | * |
| Mark. J. Rubash(10) | | 33,094 | | | * |
| Ralph Snyderman, M.D.(11) | | 12,532 | | | * |
| All executive officers and directors as a group (12 persons)(12) | | 129,573 | | | * |
| Other 5% or greater stockholders: | | | | |
| The Vanguard Group, Inc.(13) | | 2,876,849 | | | 9.44% |
| Sands Capital Management, LLC(14) | | 2,667,428 | | | 8.76% |
| BlackRock, Inc.(15) | | 2,288,507 | | | 7.51% |
________________________* Less than one percent.
(1) Consists of telemedicine and remote presence solutions. From July 2007 to April 2012, Mr. Vort was at Intuitive Surgical, Inc., the manufacturer13,265 shares of the da Vinci Surgical Robotics system, where he served most recently as Area Vice Presidentcommon stock.
(2) Consists of Western Sales. From 2004 until 2007, Mr. Vort was the Revision Business Sales Director for Stryker Corporation. From 1999 until 2004, Mr. Vort held several positions domestically and in Europe for the553 shares of common stock.
(3) Consists of 17,225 shares of common stock.
(4) Consists of 4,083 shares of common stock.
(5) Consists of 300 shares of common stock.
Global Healthcare Exchange,(6) Consists of (i) 7,885 shares of common stock; (ii) 24,230 shares issuable upon the exercise of options exercisable within 60 days of March 30, 2023; and (iii) 1,155 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(7) Consists of (i) 3,732 shares of common stock; and (ii) 1,155 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(8) Consists of (i) 6,888 shares of common stock; (ii) 228 shares issuable upon the exercise of options exercisable within 60 days of March 30, 2023; and (iii) 1,155 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(9) Consists of (i) 1,440 shares of common stock; and (ii) 653 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(10) Consists of (i) 8,038 shares of common stock; (ii) 23,901 shares issuable upon the exercise of options exercisable within 60 days of March 30, 2023; and (iii) 1,155 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(11) Consists of (i) 7,538 shares of common stock; (ii) 3,839 shares issuable upon the exercise of options exercisable within 60 days of March 30, 2023; and (iii) 1,155 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(12) Consists of (i) 70,947 shares of common stock; (ii) 52,198 shares issuable upon the exercise of options exercisable within 60 days of March 30, 2023; and (iii) 6,428 RSUs held that are scheduled to vest within 60 days of March 30, 2023.
(13) As reported on Schedule 13G/A filed with the SEC on February 9, 2023. The report states that The Vanguard Group has shared voting power over 51,290 shares, sole dispositive power over 2,795,360 shares and shared dispositive power over 81,489 shares. The address of The Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355.
(14) As reported on Schedule 13G/A filed with the SEC on February 14, 2023. The report states that Sands Capital Management, LLC where he was a founder. From 1992 until 1997, he held several positionshas shared voting power over 1,763,046 shares and shared dispositive power over 2,667,428 shares. The address of Sands Capital Management, LLC is 1000 Wilson Blvd., Suite 3000, Arlington, VA 22209.
(15) As reported on Schedule 13G/A filed with U.S. Surgical Corporation, prior to its sale to Covidien plc. Mr. Vort holds a B.S. in Political Science from the UniversitySEC on January 31, 2023. The report states that BlackRock, Inc. has sole voting power over 2,249,133 shares and sole dispositive power over 2,288,507 shares. The address of the Pacific.BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
Mark J. Day has served as our Executive Vice President of Research & Development since 2012 and has had other leadership roles in Research & Development and systems development since joining the Company in 2007. Previously he worked in Medtronic’s Cardiac Rhythm Disease Management division. Prior to that, Mr. Day was Chief Technical Officer of CarePages, Inc., a blogging site for patients. Mr. Day has an M.B.A. in Marketing from the Wharton School, University of Pennsylvania, a Ph.D. in Computation Flow Physics from Stanford University, and also received an M.S. from Stanford, and a B.Sc. from Queen’s University, both in Mechanical Engineering.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSISEXECUTIVE OFFICERS
The names of our executive officers, their ages as of the date of this Proxy Statement, and their positions are shown below.
| | | | | | | | | | | | | | |
| Name |
| Age |
| Position |
| Quentin Blackford | | 44 | | President, Chief Executive Officer and Director |
| Brice Bobzien | | 44 | | Chief Financial Officer |
| Patrick Murphy | | 44 | | Chief Business Officer and Chief Legal Officer |
| Chad Patterson | | 41 | | Chief Commercial Officer |
| Minang Turakhia, M.D., M.S. |
| 49 |
| Chief Medical Officer, Chief Scientific and EVP, Product Innovation Officer |
| Mark Day, Ph.D. | | 52 | | Chief Technology Officer |
| Reyna Fernandez | | 56 | | Executive Vice President, Chief Human Resources Officer |
| Sumi Shrishrimal | | 44 | | Executive Vice President, Chief Risk Officer |
| Daniel Wilson |
| 41 |
| Executive Vice President, Corporate Development and
Investor Relations |
Our board of directors chooses executive officers, who then serve at the discretion of our board of directors. There is no family relationship between any of the directors or executive officers and any of our other directors or executive officers. For information regarding Mr. Blackford, please refer to “Proposal No. 1—Election of Directors.”
Brice Bobzien has served as our Chief Financial Officer since August 2022. From January 2018 to August 2022, Mr. Bobzien held various positions, most recently as the Senior Vice President, Global FP&A, Investor Relations and Strategic Pricing at Dexcom, Inc., a company that develops, manufactures, produces and distributes continuous glucose monitoring systems for diabetes management. From January 2013 to December 2017, Mr. Bobzien held various positions, most recently Vice President, Finance at NuVasive, Inc., a company which develops medical devices and procedures for minimally invasive spine surgery. From September 2010 to January 2013, Mr. Bobzien served as the Finance Director at Macs Convenience Stores, LLC and from January 2005 to September 2010, Mr. Bobzien held various roles, most recently Associate Director of Finance/Controller at Zimmer Inc., a medical device company. From January 2002 to December 2004, Mr. Bobzien served as an Assurance Auditor at BKD, LLP. an accounting and advisory firm. Mr. Bobzien has a B.S. in Business Administration from Indiana University, Fort Wayne, and is a Certified Public Accountant (inactive) in the state of Indiana.
Patrick Murphy has served as our Chief Legal Officer since November 2021 and as our Chief Business Officer since April 2023. From January 2016 to November 2021, Mr. Murphy held various roles at DexCom, Inc., most recently as Executive Vice President and Chief Legal Officer. From September 2003 to January 2016, Mr. Murphy was an attorney at Stradling Yocca Carlson & Rauth law firm, where he specialized in corporate finance, mergers and acquisitions and general corporate matters. Mr. Murphy received a J.D. from the St. Louis University School of Law and a B.S. from the Truman State University. Mr. Murphy is a member of the State Bar of California.
Chad Patterson has served as our Chief Commercial Officer since July 2022. From January 2021 to July 2022, Mr. Patterson served as Executive Vice President, Chief Marketing Officer at DexCom, Inc., a company that develops, manufactures, produces and distributes continuous glucose monitoring systems for diabetes management. Mr. Patterson previously served in roles of increasing seniority at DexCom, including as Senior Vice President, Global Marketing and Product Management from March 2020 to January 2021, Vice President, Global Marketing and Product Management from March 2019 to March 2020, Senior Director, Global Consumer Marketing from March 2018 to March 2019, and Director of Marketing from November 2015 to February 2018. Prior to joining DexCom, Mr. Patterson held various positions at Nestlé, a manufacturer of food products, from 2005 to 2015. Mr. Patterson has a B.A in Marketing, Entrepreneurship and International Business from Gonzaga University and an M.B.A. from the University of Southern California, Marshall School of Business.
Minang Turakhia, M.D., M.S.has served as our Chief Medical Officer and Chief Scientific Officer since June 2022 and as our Executive Vice President, Product Innovation since April 2023. Dr. Turakhia has served as a Professor of Medicine (on leave) at the Stanford University School of Medicine since August 2008. From August 2008 to June 2022, Dr. Turakhia served as Chief, Cardiac Electrophysiology at VA Palo Alto Health Care System, where he still practices and performs catheter ablation and device implantation. Dr. Turakhia holds a B.S. in Molecular Biology and Computer Science from the University of California, Berkeley, and received his M.D. from the University of California, San Francisco. He also holds a M.S. in Clinical Research from University of California, San Francisco and received clinical training at Harvard’s Brigham & Women’s Hospital the University of California, San Francisco.
Mark Day, Ph.D. has served as our Chief Technology Officer since March 2022 and previously served as Executive Vice President of Research & Development from May 2012 to March 2022. Mr. Day has had other leadership roles in Research & Development and systems development since joining the company in August 2007. Previously, Mr. Day worked in the Cardiac Rhythm Disease Management division of Medtronic, Inc. and, prior to that, Mr. Day was Chief Technical Officer of CarePages, Inc., a blogging site for patients from January 2000 to September 2002. Mr. Day has a M.B.A. in Marketing from the Wharton School, University of Pennsylvania, a Ph.D. in Computation Flow Physics from Stanford University, and also received a M.S. from Stanford, and a B.Sc. from Queen’s University, both in Mechanical Engineering.
Reyna Fernandez has served as our Chief Human Resources Officer since July 2022. From November 2020 to July 2022, Ms. Fernandez was the Chief Human Resources Officer at Intersect ENT, Inc., a subsidiary of Medtronic, Inc. From January 2019 to November 2020, Ms. Fernandez was the Chief Human Resources Officer at Endologix Inc., a company providing innovative therapies for the interventional treatment of vascular disease. From September 2017 to January 2019, Ms. Fernandez was the Vice President, Human Resources at Canon Medical Systems USA, Inc., a medical equipment company. Ms. Fernandez has a M.S. in Social Administration from Columbia University and a B.A. in Cultural Anthropology from Haverford College in Pennsylvania.
Sumi Shrishrimalhas served as our Chief Risk Officer since May 2022. From May 2018 to May 2022, Ms. Shrishrimal held various positions with DexCom, Inc., most recently as Chief Risk Officer. From March 2016 to May 2018, Ms. Shrishrimal served as Vice President, Internal Audit at NuVasive, Inc., and previously served as their Senior Director, Internal Audit, from November 2014 to February 2016. From December 2003 to October 2014, Ms. Shrishrimal served in various roles at Corinthian Colleges, most recently as Vice President, Internal Audit. Ms. Shrishrimal holds a B.A. in Accounting and Information Systems from University of Mumbai in India.
Daniel Wilson has served as our Executive Vice President, Corporate Development and Investor Relations since April 2023 and previously served as Executive Vice President, Corporate Development, Corporate Strategy and Investor Relations since June 2019 to April 2023. Previously, he served as Director and Head of Business Development at Penumbra, Inc., a global healthcare company focused on innovative therapies. Prior to Penumbra, he held various positions at J.P. Morgan between August 2006 and May 2016, most recently as Executive Director in the Healthcare Investment Banking group focused on digital health, medical technology and emerging healthcare companies. Earlier in his career, he held various positions in Piper Jaffray’s Healthcare Investment Banking group from August 2004 to August 2006. He started his career at KPMG as an Audit Associate from September 2003 to August 2004. Mr. Wilson has a B.S. in Business Administration from California Polytechnic State University at San Luis Obispo.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describesexplains our executive compensation philosophy and programs, the decisions of the Compensation and Human Capital Management Committee (referred to in this Compensation Discussion and Analysis discussion as the “Committee”) of the board of directors made regarding those programs during fiscal 2022 and the factors considered in making those decisions. The Committee has the principal responsibility for establishing, implementing and continually monitoring adherence to our compensation philosophy and objectives. The Committee’s duties include advising the board of directors on the compensation program forof our Named Executive Officers. During 2020, these individuals were:
•Kevin M. King,executive officers, including our former President and Chief Executive Officer (our “CEO”(“CEO”);
•Douglas J. Devine, our, Chief Financial Officer (“CFO”), and Secretary;
•David A. Vort, our Executive Vice President of Sales;
•Daniel G. Wilson, our Executive Vice President of Strategy, Corporate Development and Investor Relations
•Mark J. Day, our Executive Vice President of Research & Development; and
•Matthew C. Garrett, our former Chief Financial Officer.
Management Changes in 2020
On June 3, 2020, we entered into an employment offer letter with Mr. Devine to become our Chief Financial Officer, effective June 22, 2020. On June 4, 2020, Mr. Garrett announced that he was resigning from his position as our Chief Financial Officer for personal reasons, effective June 22, 2020. On June 19, 2020, our Board of Directors appointed Mr. Devine as our Chief Financial Officer and Secretary, effective June 22, 2020. Mr. Garrett entered into a consulting agreement with us for a period of up to one year to assist with the transition of his role to Mr. Devine.
On December 14, 2020, we announced that Mr. King would be retiring from his position as our President and Chief Executive Officer, effective January 12, 2021. In connection with his retirement, we entered into a transition agreement with Mr. King pursuant to which he would assist with the transition of his role and consult for us as an executive advisor following his resignation.
At the same time, we announced that Michael J. Coyle had been appointed as our President and Chief Executive Officer, effective January 12, 2021. In connection with his appointment as President and Chief Executive Officer, we agreed to certain compensation arrangements with Mr. Coyle, the terms of which are described below.
Presidents (“EVPs”). This Compensation Discussion and Analysis describesfocuses on the material elementscompensation of our executive compensation program during 2020 and provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee of our Board of Directors (the “Compensation Committee”) arrived at the specific compensation decisions for ournamed executive officers including our Named Executive Officers,(“NEOs”) for 2020, detailing the key factors that the Compensation Committee considered in determining their compensation.year ended December 31, 2022, who were:
Executive Summary
The COVID-19 pandemic had an unprecedented impact on the global economy in 2020 and challenged us to rethink how we operate, both internally and with our patients and customers. We are proud of our overall performance in 2020, where our team demonstrated resiliency and dedication to redefining the way cardiac arrhythmias are diagnosed. In response to the challenges resulting from COVID-19, we prioritized and implemented swift changes focused on protecting the health and safety of our employees and their families, supporting our patients and customers, and maintaining our strong financial and operating position coming out of the pandemic.
During 2020, we made several changes that we determined were in the best interest of our operations, employees, patients and customers. Some of the measures taken to support our team included implementation of a work from home policy to support the majority our employees, extended paid sick leave policies to support employees and their families impacted by COVID-19, and added safety measures for those who needed to be onsite to continue critical work to support our patients and customers. To support critical onsite staff, we took preventative actions including providing personal protective equipment (“PPE”), health screening before coming onsite, maximizing physical space within facilities, adjusting shift schedules and frequent cleaning of workspaces. Ultimately, the health and safety of our employees was paramount to enable the delivery of quality care to our patients and customers.
Despite the significant impact of COVID-19 on the healthcare system in 2020, we continued to deliver service to our patients and customers through the leadership of our management team and the resiliency of our employees by executing a rapid pivot to support telemedicine and home enrollment on a larger scale. These actions early on enabled us to continue to drive our growth initiatives and deliver double digit growth over 2019. A few of our financial and operational highlights for 2020 include:
• revenue of $265.2 million, an increase of 24% from $214.6 million in 2019;
• gross profit of $194.9 million, or 73% gross margin, up from $162.1 million, or 76% gross margin, in the same period in 2019;
• loss from operations for 2020 was $43.7 million, compared to a loss of $54.5 million for 2019; and
• cash, cash equivalents, and investments were $335.2 million as of December 31, 2020.
| | | | |
2020Name | | Position |
| Quentin Blackford | | President, Chief Executive Compensation HighlightsOfficer, Director |
| Brice Bobzien | | Chief Financial Officer |
| Douglas Devine | | Former Chief Operating Officer and former Chief Financial Officer |
| Patrick Murphy | | Chief Business Officer and Chief Legal Officer |
| Chad Patterson | | Chief Commercial Officer |
| Minang Turakhia | | Chief Medical Officer, Chief Scientific Officer and EVP, Product Innovation |
Based on our overall operating environment and business results, as well as the Compensationmanagement changes summarized above, the Committee took the following key actions with respect to the compensation of our Named Executive OfficersNEOs for 2020:2022:
| | | | | | | | |
Element | 2020 Action Prior to COVID-19 | 2020 Action in Response to COVID-19 |
Base Salary | Approved annual•Base Salaries: No NEO received a base salary increase for 2022 because they were either hired in 2022 or late in 2021 (Messrs. Blackford, Bobzien, Murphy, Patterson and Turakhia) or adjusted late in 2021 (Mr. Devine). The base salary increases ranging from 4.0% to 6.0% of 2019 salaries for our Named Executive Officers, including an increase of 4.0% for our CEO. | For the period of May 2020 through July 2020, reduced the base salary of our CEO by 40% and reduced the base salaries of all of the executive leadership team, including our Named Executive Officers, by 20%. |
Annual Bonus Plan | Approved performance metrics based on achievement of revenue, gross margin and operating expense targets. | Adjusted pre-established targets of performance metrics to align to Annual Operating Plan, which was modified to account for the impact of COVID-19. Maximum payout for each metric was also capped at 125%, down from the original plan’s 225% cap. |
Long Term Incentive Compensation | Granted long term incentive awards in the form of 50% time-based restricted stock and 50% performance-based restricted stock with a multi-year metric based on achieving a unit growth target. | Modified the calculation for performance-based restricted stock granted in 2019, banking performance against the original metric and setting a stock price multiplier matrix for remainder of the performance period to determine ultimate number of shares earned. Vesting was also capped at 150% of target, reducing the original award’s 200% cap. |
COVID-19 Compensation Adjustments
As the Compensation Committee assessed the material impact of the COVID-19 pandemic on us, they evaluated each individual compensation element for potential modifications. After lengthy consideration, they decided to take the actions set forthnew executive hires is discussed later in the table above and further describedsection titled “Individual Compensation Elements.”
•Annual Bonus Opportunities: The Committee approved target annual cash bonus opportunities for our newly hired NEOs at the time of their hire, which is discussed later in thisthe section titled “Individual Compensation DiscussionElements.” For Messrs. Blackford, Devine and Analysis. In making these modifications,Murphy, the Compensation Committee considered the importance of retaining and motivating our executive leadership team to navigate our business through the COVID-19 pandemic, the effectiveness of the executive leadership team’s initial response to the pandemic, and the importance of minimizing the impact on the progress of our key strategic initiatives and future growth drivers. In addition, the Compensation Committee considered our compensation philosophy which is rooted in aligning the interests of our executive officers with our stockholders through fair pay, driving accountability and incentivizing long-term performance.did not recommend any change to their target annual cash bonus opportunities for 2022.
•2020 Annual Bonus Plan
•In spite of strong progress onPayout: Under our growth initiatives in early 2020, as the unprecedented challenges of the COVID-19 pandemic to the healthcare community and the broader society began to increase as we moved into the second quarter, we experienced a significant decrease in our revenue as a result of restrictions imposed on direct patient access, the postponement of elective procedures, and the slowdown of the payment process. In addition to withdrawing our full-year 2020 guidance in early April, our Board of Directors adjusted our annual operating plan in anticipation of reduced activity for the remainder of the year and to ensure that we maintained appropriate liquidity in the near term, taking numerous steps to reduce spend. Consistent with these actions and prior to the realization of the true impact of the COVID-19 pandemic on our financial results, in April the Compensation Committee acted to restore the retention and motivational objectives of our 2020 Annual Bonus Plan. Specifically, the Compensation Committee revised the threshold, target, and maximum performance levels tied to the revenue growth, gross margin, and operating expense performance metrics to reflect the revisions to our revised annual operating plan. In addition, they capped the payouts under our 20202022 Annual Bonus Plan, at 125%our executives are eligible to earn a cash bonus award based on actual corporate performance as measured against pre-established target goals for 2022 of total revenue and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and individual
performance. For the NEOs, the cash bonus award ranged from 100.0% to 135.3% of target down from 225% in the original plan, and agreed that any bonuses paid under the plan could be paid in the form of cash or fully-vested restricted stock unit (“RSU”) awards, as determined by the Compensation Committee and management.
•As a result of the dedicated efforts of our employees to service our existing customers and patients, coupled with the steady recovery in our registration rates beginning late in the second quarter and increased awareness and use of our platform for the remainder of the year, our financial results for the year were stronger than reforecast. Accordingly, the Compensation Committee approved annual cash bonuses under our 2020 Annual Bonus Plan for our Named Executive Officers of 122.5% of their target annual bonuses, based on performance. This included an annual cash bonus for our former CEO, Kevin King, in the amountcompany’s performance factor of $776,000, which was equal123% and individual performance factors that ranged from 81% to 122.5% of his target annual bonus.110%.
•Long-Term Incentive Compensation
•The Compensation Committee grantedCompensation: For 2022, we continued to grant annual long-term incentive compensation opportunities in the form of time-based restricted stock unit (“RSU”) awards and performance-based restricted stock unit (“PRSU”PSU”) awards that may be settled for shares of our common stock based on our achievement of pre-established performance metrics over a multi-year performance period and time-based RSU awards that may be settled for shares of our common stock, with grant date fair values ranging from approximately $0.7 million to approximately $1.8 million, as well as a PRSU award and an RSU award for our CEO with an aggregate grant date fair value of approximately $3.5 million.
•In June, in response to the impact of the COVID-19 pandemic on our near-term revenues, the Compensation Committee modified the PRSU awards granted to our Named Executive OfficersNEOs, except that in February 2019 to give them credit for producing a baseline achievement percentage for2022 the first five fiscal quarters of the performance period which was then “banked” and subject to adjustment based on our stock price performance for the rest of the original performance period ending December 31, 2020.
Compensation Arrangements with Mr. Devine
In connection with his appointment as our Chief Financial Officer, we entered into an employment offer letter dated June 3, 2020 (the “Devine Employment Letter”) with Mr. Devine. Pursuant to the Devine Employment Letter and certain actions taken by the Compensation Committee, our initial compensation arrangements with Mr. Devine were as follows:
•an initial annual base salary of $450,000;
◦a target annual cash bonus opportunity equal to 60%CEO received 100% of his annual base salary, subject to achievement of mutually agreed performance goals;equity in PSU awards.
◦a one-time signing bonus in the amount of $150,000; provided, however, that if he leaves of the Company within 12 months of his date of hire, due to a voluntary departure, terminationPay for cause, or an involuntary termination because of a significant lack of performance, he is responsible for reimbursing us for the entire signing bonus;
◦a recommendation to the Compensation Committee that he be granted an RSU award covering that number of shares of our common stock with an aggregate grant date fair value of $1 million that will vest annually over four years at the rate of 25% per year, subject to his continuing employment through each vesting date; and
◦a recommendation to the Compensation Committee that he be granted a PRSU award covering that number of shares of our common stock with an aggregate grant date fair value of $1 million that will vest pursuant to the performance-based metrics set forth in our 2020 PRSU incentive program, subject to his continuing employment through the vesting date; and
◦participation in the benefit plans and programs generally available from time to time to our employees, subject to the terms of such plans and programs.
In addition, upon his employment Mr. Devine became a participant in our Executive Change in Control and Severance Policy as a “Tier 2” eligible employee.
| | |
Pay-for-PerformancePerformance Philosophy |
We view our compensation practices as a tool to align our executive officers including our Named Executive Officers,NEO’s, with our strategic short-term and long-term goals, and reward high performance, collaboration and accountability. We believe our executive compensation program is reasonable,fair, competitive and appropriately balances the goals of attracting, motivating, rewarding and retaining our Named Executive Officersexecutives while aligning with the goal of aligning their interests with those of our stockholders.stockholder interests. To ensure this alignment and to motivate and reward individual initiative and effort, a substantial portion of our Named Executive Officers’NEO’s target total direct compensation is both performance-based and “at-risk.”
In 2020,2022, we emphasized performance-based compensation that appropriately rewards our Named Executive Officers through two separate compensation elements:
First, our Named Executive Officers participated in our 2020 Annual Bonus Plan, which provides payments if they produce short-term•The first is the annual cash bonus award that is based on the company’s performance against financial operationalobjectives specified at the beginning of the performance year and strategic results that meet or exceedan evaluation of individual accomplishments and performance during the year.
•The second key objectives set forth in our annual operating plan.
In addition, we granted PRSUelement is the grant of PSU awards which comprise approximately one-half50% of our Named Executive Officers’NEOs’ long-term incentive compensation arrangements,(except in the case of the CEO, for whom it was 100% in fiscal 2022, with the shares of our common stock subject to such awards to be earned over a three-year performance period based on our actual results as measured against the target level for revenuegoal of compound annual growth established for such period.rate (“CAGR”) in global unit volume. For the CEO’s 2022 PSU award, the Committee also approved a TSR modifier that can adjust the final award by +/-25% based on our stock performance relative to an industry index.
TheseThe performance-based and variable pay elements ensure that a substantial portion of our Named Executive Officers’NEOs’ target total direct compensation for 20202022 is contingentvariable (rather than fixed) in nature, with the amounts ultimately payable subject to variability above or below granttarget levels commensurate with ourthe company’s actual performance. Specifically, 87%90% of our CEO’s compensation is variable or at risk, while 84% of our other Named Executive Officers’ compensation is variable or at risk.
and performance-based in nature. The pay mix for our CEO and our other Named Executive Officers during 20202022 is reflected this “pay-for-performance” design:below.
We believe that our compensation design provides balanced incentives for our Named Executive OfficersNEOs to meet our business objectives and drive our long-term growth. To ensure we remain faithfulalignment to our compensation philosophy, the Compensation Committee regularlyalso evaluates the relationship between the reported values of the equity awards granted to our executive officers, and the amount of compensation realizable (and, ultimately, realized) from such awards in subsequent years and performance over this period.
| | |
Executive Compensation Policies and Practices |
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation and related policies and practices:
| | | | | | | | |
What We Do |
| What We Don’t Do |
▪Maintain an Independent Compensation Committee. The Compensation Committee consists solely of independent directors.
▪Retain an Independent Compensation Adviser. The Compensation Committee engaged its own compensation adviser to provide information and analysis with its 2020 compensation review, and other advice on executive compensation independent of management.
▪Annual Executive Compensation Review. The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review and determination of our compensation peer group used for comparative purposes, and a review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.
▪Compensation At-Risk. Our executive compensation program is designed so that a significant portion of our Named Executive Officers’ compensation is “at risk” based on our corporate performance, as well as equity-based, to align the interests of our Named Executive Officers and stockholders.
▪Use a Pay-for-Performance Philosophy. The majority of our Named Executive Officers’ compensation is directly linked to corporate performance; we also structure their target total direct compensation opportunities with a significant long-term equity component, thereby making a substantial portion of each executive officer’s target total direct compensation dependent upon our stock price and/or total stockholder return.
▪“Double-Trigger” Change-in-Control Arrangements. Our post-employment compensation arrangements in the event of a change in control of the Company are “double-trigger” arrangements that require both a change in control of the Company plus a qualifying termination of employment before payments and benefits are paid.
▪Succession Planning. We review the risks associated with our key executive officer positions to ensure adequate succession plans are in development.
▪Compensation Recovery (“Clawback”) Policy. We have adopted a compensation recovery (“clawback”) policy, which provides that, in the event of misconduct or if we are required to prepare an accounting restatement, our Board of Directors may recover from current and former executive officers.
▪Stock Ownership Guidelines. We have adopted policies that require minimum ownership of shares of our common stock by our CEO and the non-employee members of our Board.
|
| ▪No Executive Retirement Plans. We do not offer pension arrangements or retirement plans or arrangements to our Named Executive Officers that are different from or in addition to those offered to our employees generally.
▪Limited Perquisites. We provide limited perquisites or other personal benefits to our Named Executive Officers.
▪No Tax Reimbursements on Perquisites. We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than related to standard relocation and corporate housing benefits.
▪No Special Welfare or Health Benefits. Our Named Executive Officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our employees generally.
▪No Post-Employment Tax Payment Reimbursement. We do not provide any tax reimbursement payments (including “gross-ups”) on any severance or change-in-control payments or benefits.
•No Hedging of Our Equity Securities. We prohibit our employees, including our executive officers, and the members of our Board of Directors from engaging in certain derivative transactions and from hedging our securities.
▪No Pledging of Our Equity Securities. We prohibit our employees, including our executive officers, and the members of our Board of Directors from holding our securities in a margin account or pledging our securities as collateral for a loan.
▪No “single trigger” Change-in-Control Arrangements. We do not provide cash severance or automatic vesting of equity awards based solely upon a change in control of the company.
|
| | |
Stockholder Advisory Vote on Named Executive Compensation |
At our 2020 Annual Meeting of Stockholders, we conducted a non-binding stockholder advisory vote on the compensation of our Named Executive Officers (commonly known as a “Say-on-Pay” vote). Approximately 82.3% of the votes cast approved our executive compensation program for 2019. Our Board of Directors and the Compensation Committee consider the result of the Say-on-Pay vote in determining the compensation of our executive officers, including our Named Executive Officers. Based on the strong level of support for our executive compensation program demonstrated by the result of last year’s Say-on-Pay vote, among other factors, our Board of Directors and the Compensation Committee determined not to implement significant changes to our executive compensation program for 2020.
We value the opinion of our stockholders. Our Board of Directors and the Compensation Committee will continue to consider the result of the Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our executive officers.
In addition, consistent with the recommendation of our Board of Directors and the preference of our stockholders as reflected in the non-binding stockholder advisory vote on the frequency of future Say-on-Pay votes held at our 2019 Annual Meeting of Stockholders, we intend to hold future Say-on-Pay votes on an annual basis. Accordingly, following the Annual Meeting of Stockholders to which this Proxy Statement relates, our next Say-on-Pay vote will be conducted at our 2022 Annual Meeting of Stockholders.
Executive Compensation Philosophy
Our overarching compensation philosophy is highly focused on rewarding individual performance while ensuring alignment of top performers to current market practices. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:
•enable the attraction and retention of high-caliber executive talent;
•directly link rewards to the achievement of key financial, operational and strategic results that build long-term stockholder value; and
•recognize individual performance by linking rewards to individual achievements in addition to measurable corporate results.
Executive Compensation Program Design
Consistent withTo achieve our compensation philosophy objective, our current practice is to combine a mixture of compensation elements that balance achievement of our short-term goals with our long-term performance. We provide short-term incentive compensation opportunities in the form of an annual cash bonus plan, which focuses on our yearly operating results, and long-term incentive compensation opportunities are provided in the form of equity awards, including:
•PRSU awards that may be earned over a multi-year performance period based on our actual results as measured against the target level for revenue growth established for such period; and
•RSU awards that derive additional value from increases in our stock price over time and that are subject to multi-year vesting requirements.
awards.
We do not have a specific policy on the percentage allocation between short-term and long-term compensation elements. While the pay mix may vary from year to year, the ultimate goal is to achieve our compensation objectives as described above.and ensure a meaningful percentage of total compensation is tied to long term performance.
Executive Compensation Arrangements for Mr. CoylePolicies and Practices
In connectionWe endeavor to maintain and operate under sound corporate governance standards to best serve our stockholders and be aligned with his appointment asexternal industry expectations, while also incorporating certain “best practices” in executive compensation. The Committee evaluates our Presidentexecutive compensation program on a regular basis to ensure that it is consistent with our short-term and Chief Executive Officer, we entered into an employment offer letter dated December 10, 2020 (the “Coyle Employment Letter”) with Mr. Coyle, which provided forlong-term goals given the following initial compensation arrangements:
•an initial annual base salary of $660,000;
•a target annual cash bonus opportunity equal to 100% of his annual base salary, subject to achievement of mutually agreed performance goals;
•a one-time relocation bonus in the amount of $850,000 to use for his relocation to the San Francisco Bay Area on or prior to October 1, 2021, subject to reimbursement of the Company for a portion of the full amount of the relocation bonus as determined pursuant to a formula set forth in the Coyle Employment Letter in the event his employment is terminated within 24 months of his date of hire due to his resignation without “good reason” or termination for “cause,” each as defined in our Executive Change in Control and Severance Policy;
•access to a corporate apartment near our headquarters from January 12, 2021 through September 30, 2021, subject to arrangements as set forth in the Coyle Employment Letter to make the apartment benefit tax neutral to him;
•a recommendation by the Compensation Committee to our Board of Directors in February 2021 that he be granted an RSU award covering that number of sharesdynamic nature of our common stock with an aggregate grant date fair value of $6 million that will vest annually over four years atbusiness and the rate of 25% per year, subject to his continuing employment through each vesting date;market in which we compete for executive talent. The following summarizes our executive compensation related policies and practices:
•a recommendation by the Compensation Committee to our Board of Directors in February 2021 that he be granted a PRSU award covering that number of shares of our common stock with an aggregate grant date fair value of $5 million that will vest pursuant to performance-based metrics applicable to our management team generally to be set forth in our 2021 PRSU incentive program, as determined by the Compensation Committee in its sole discretion, subject to his continuing employment through the vesting date; and
•participation in the benefit plans and programs generally available from time to time to our employees, subject to the terms of such plans and programs.
In addition, upon his employment Mr. Coyle will become a participant in our Executive Change in Control and Severance Policy as a “Tier 1” eligible employee.
| | | | | | | | |
GovernanceWhat We Do | | What We Don’t Do |
▪Maintain an Independent Committee. The Committee consists solely of independent directors. ▪Retain an Independent Compensation Adviser. The Committee engaged its own compensation adviser to provide information and analysis needed for the 2022 compensation review, and other advice on executive compensation independent of management. ▪Compensation At-Risk. Our executive compensation program is designed so that a significant portion of our NEOs’ compensation is “at risk” and directly linked to our corporate and stock performance, as well as equity-based to align with the interests of our stockholders. ▪“Double-Trigger” Change-in-Control Arrangements. Our post-employment compensation arrangements in the event of a change in control of the company are “double-trigger” arrangements that require both a change in control of the company plus a qualifying termination of employment before payments and benefits are paid. ▪Succession Planning. We review the risks associated with our key executive officer positions to ensure adequate succession plans are in development. ▪Compensation Recovery (“Clawback”) Policy. We have adopted a robust compensation recovery policy which covers misconduct and accounting restatement clauses for compensation recovery from current and former executive officers. The company will comply with the exchange’s listing rule proposal when it becomes final. ▪Stock Ownership Guidelines. We have adopted a robust stock ownership policy for our NEOs and the non-employee members of our board of directors. | | ▪No Executive Employment Agreements: We do not maintain term employment agreements with its executives including the NEOs. ▪No Executive Retirement Plans. We do not offer supplemental pension or retirement plans or arrangements to our NEOs. ▪Limited Executive Perquisites. We do not provide perquisites or other personal benefits with an aggregate incremental amount of more than $10,000 to any our NEOs. ▪No Tax Gross-Ups on Perquisites: We do not provide any tax gross-ups on perquisites, other than related to standard relocation and corporate housing benefits. ▪No Special Welfare or Health Benefits. Our NEOs participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our employees generally. ▪No Post-Employment Tax Payment Reimbursement. We do not provide any tax reimbursement payments including “gross-ups” on any severance or change-in-control payments or benefits. ▪No Hedging or Pledging of Our Equity Securities. We prohibit our employees, including our executive officers, and the members of our board of directors from engaging in certain derivative transactions and from hedging our securities, and from holding our securities in a margin account or pledging our securities as collateral for a loan.
|
Governance and Executive Compensation Program
Role of the Compensation and Human Capital Management Committee
The Compensation Committee discharges many of the responsibilities of our Board of Directors relating to the compensation of our executive officers, including our Named Executive Officers. The Compensation Committee has overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans,benefit policies and practices applicableprograms, our overall compensation philosophy, and strategies related to the management of human capital. The Committee is responsible for the executive compensation program for our executive officers and reports to our board of directors on its discussions, decisions and other actions. As it relates to our CEO, the Committee reviews and other executive officers.
The Compensation Committee has authorityapproves corporate goals and objectives relating to make decisions regarding thehis compensation, evaluates his performance in light of our Named Executive Officers (other than our CEO),those goals and objectives and makes recommendations to the independent members of our board of directors on changes to his compensation. As it relates to our other NEOs, the full Board of Directors regardingCommittee, in consultation with our CEO, reviews and approves all compensation decisions. Our CEO, CFO and Chief Human Resources Officer provide initial recommendations to the compensation ofCommittee on the corporate and departmental performance objectives under our CEO. Executive Incentive Compensation Plan.
The Compensation Committee also reviews and provides specific compensation recommendations to our Boardboard of Directorsdirectors relating to the non-employee independent members of our Boardboard of Directors.directors.
The Compensation Committee retains a compensation consultant that specializes in executive compensation standards and practices (as described below) to provide support in its review and assessment of our executive compensation program.
Compensation-Setting Process
The Compensation Committee developsreviews the base salary, annual cash bonus and long-term incentive compensation of our CEO and other NEOs at the beginning of the calendar year, or more frequently as warranted to develop recommendations for the target total direct compensation opportunities, as well as each element of these opportunities, of our CEO and other Named Executive Officers.opportunities. The Compensation Committee does not use a single method or measure in formulating its recommendations, nor does it establish specific targets for the total direct compensation of our Named Executive Officers.
NEOs. The Compensation Committee reviews the base salary levels, annual cash bonus opportunities and long-term incentive compensation opportunities of our Named Executive Officers at the beginning of the calendar year, or more frequently as warranted. When formulating its recommendations for the value of each compensation element and the target total direct compensation of our Named Executive Officers and determining the compensation of our Named Executive Officers, the Compensation Committee and our Boardboard of Directors, respectively,directors consider the following factors:factors to determine the recommendations:
•our performance against the financial and operational objectives established by the Compensation Committee and our Boardboard of Directors;directors;
•each individual Named Executive Officer’sNEO’s skills, experience, qualifications and qualificationsscope of role relative to other similarly-situated executives at the companies in our compensation peer group;
•the scope of each Named Executive Officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;
•the performance of each individual Named Executive Officer,NEO, based on a subjective assessment of histhe NEO’s contributions to our overall performance, ability to lead histhe NEO’s business unit or function and work as part of a team, all of which reflect our core values;
•compensation parity among our Named Executive Officers;NEOs;
•our financial performance relative to our peers;
•the compensation practices of our compensation peer group and the positioning of each Named Executive Officer’sNEO’s compensation in a ranking of peer company compensation levels; and
•the recommendations provided by our CEO with respect to the compensation of our other Named Executive Officers.
NEOs.
These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each Named Executive Officer.NEO. Neither the Compensation Committee, nor our Boardboard of Directors,directors, assigns relative weights or rankings to such factors. No single factor is determinative in setting pay levels, nor wasis the impact of any factor on the determination of pay levels quantifiable. The Compensation Committee’s or our Boardboard of Directors’directors’ consideration of any particular factor may range from inapplicable to significant, depending upon the individual and period under consideration. Rather, the Compensation Committeeconsideration and our Board of Directors rely uponis rather guided by their members’ knowledge, experience and judgment in assessing the various qualitative and quantitative inputs they receive as to each individual and makesmake compensation decisions accordingly.decisions.
Role of Management
In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO and Chief PeopleHuman Resources Officer, who attend all committee meetings. Our management assists the Compensation Committee and our Boardboard of Directorsdirectors by providing information on corporate and individual performance, market compensation data and management’s perspective on compensation matters. The Compensation Committee solicits and reviews our CEO’s recommendations and proposals with respect to program structures, as well as recommendations for adjustments to annual cash compensation, long-term incentive compensation opportunities and other compensation-related matters for our Named Executive OfficersNEOs (other than himself) based on his evaluation of performance for the prior year.
Each year, our CEO reviews the performance of our other Named Executive OfficersNEOs based on such individual’s level of success in accomplishing the business objectives established for him for the prior year and histhe overall performance during that year, and then shares these evaluations with, and makes recommendations to, the Compensation Committee for each element of compensation as described above.compensation. The annual business objectives for each such Named Executive OfficerNEO are developed through mutual discussion and agreement between our CEO and the Named Executive OfficersNEOs and are reviewed with our Boardboard of Directors.directors.
The Compensation Committee reviews and discusses management proposals and recommendations with our CEO and Chief PeopleHuman Resource Officer and considers them as one factor in formulating the recommendations for the compensation of our CEO and our other Named Executive Officers.NEOs. Our CEO recuses himself from discussions and recommendations regarding his own compensation.
Role of Compensation Consultant
The Compensation Committee engages an independent external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review. For 2020,2022, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm (“Compensia”), as its compensation consultant from January 2022 to September 2022 and then hired the Human Capital Solutions practice of Aon Plc. in October 2022 to serve as its independent consultant to advise it on executive compensation matters. ServicesThe typical services included competitive market pay practices for senior executives and data analysis and selection of the compensation peer group. Compensia’sThe market analysis and advice are key components of the Compensation Committee’s determination of appropriate and competitive compensation for our Named Executive Officers.
NEOs.
For 2020, Compensia2022, our independent consultants regularly attended meetings of the Compensation Committee and the scope of its engagement included:consulted on:
•the reviewassessing competitive market practices and analysis of the compensation levels for our executive officers, including our NamedNEOs;
•assessing the design of our 2022 Executive Officers;Bonus Plan, as well as a review of short-term incentive compensation plan design practices of the competitive market;
•assessing executive compensation trends within our industry, and updating on corporate governance and regulatory developments;
•reviewing and providing input on the Compensation Discussion and Analysis section of our proxy statement for our 2020 Annual Meeting of Stockholders;statement;
•the reviewreviewing and analysisanalyzing of the compensation for the non-employee members of our Boardboard of Directors;directors;
•assessing compensation levels for the Chief Financial Officer position;
•assessing compensation levels for the Chief Executive Officer position;
•reviewing competitive market practices for stock ownership guidelines;
•reviewing competitive market practices for post-employment compensation arrangements;
•providing an analysis for adjustingassessing the PRSUdesign of our 2022 PSU awards, granted to our executive officers in 2019;as well as a review of PSU awards design and grant practices of the competitive market;
•reviewing competitive market practices for equity compensation, including burn rate and overhang, and advising on the mix of equity award types; and
•the review, research, development and review of our compensation peer group; and
•support on other ad hoc matters throughout the year.
group.
The terms of Compensia’s and Aon’s engagement includeincluded reporting directly to the Compensation Committee and to the Compensation Committee chairman. Compensia also coordinatesThe outside consultants coordinate with our management for data collection and job matching for our executive officers. In 2020, they2022, Compensia and Aon did not provide any other services to us. The Compensation Committee has evaluated Compensia’s and Aon’s independence pursuant to the listing standards of The NASDAQNasdaq Stock Market and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed.
Market Comparators
For purposes of comparing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a group of peer companies. The Committee reviews our peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group. This compensation peer group consists of life sciences companies that are similar to us in terms of industry sector, revenue, market capitalization, stage of development, geographical location and number of employees.
In August 2019,2021, the Compensation Committee with the assistance of Compensia,reviewed and updated our compensation peer group for use in 2022 compensation planning to reflect changes in our market capitalization,financial profile to recognize our evolving business focus and to account for merger and acquisition activity. In evaluatingDuring this annual review, the Committee evaluated the companies comprising the compensation peer group Compensia consideredbased on the following criteria:
•publicly-traded companies headquartered in the United States;
•companies in various healthcare equipment, healthcare services and healthcare supplies sectors and pharmaceutical/biotechnology sectorscompanies with a medical device product focus;focus, including companies in the healthcare equipment, healthcare services, healthcare supplies, health care technology and life sciences tools and services sectors;
•companies within a similar revenue range, approximately one-third to approximately three times our estimated revenue for 2019;the previous four fiscal quarters; and
•companies within a similar market capitalization range, approximately one-third to approximately three times our then-estimated market capitalization.
Based on a review of the analysis prepared by Compensia, the Compensation Committee approved a revised peer group in August 2019 that was used by the Compensation Committee during much of 2020 as a reference for understanding the competitive market for executive positions in our industry sector. The peer group consisted of the following companies:
| | | | | |
AtriCure | Invitae |
Atrion | Natera |
AxoGen | NeoGenomics |
BioTelemetry | Nevro |
Cardiovascular Systems | Penumbra |
CareDx | Quidel |
Glaukos | Tactile System Technology |
Inogen | Tandem Diabetes Care |
Intersect ENT | Teladoc Health |
Based on the assessment, the Compensation Committee made several changes to our peer group for use in the remainder of 2021and 2022, removing fivesix companies and adding six new. Cerus, LaMaitre Vascular, OraSure Technologiesnine new companies. 10x Genomics, Inc., Guardant Health, Inc., Natera Inc. and SurmodicsPenumbra Inc. were removed from our peer group as their market capitalizationscapitalization were outside our range. Foundation Medicinerange, Quidel Corporation was removed from our peer group due to the fact thatas its revenue was outside our range and BioTelemetry, Inc. was removed from our peer group as it had been acquiredacquired. AngioDynamics, Inc., Fulgent Genetics, Inc., Health Catalyst, Inc., Heska Corporation, Lantheus Holdings, Inc., Myriad Genetics, Inc., Natus Medical, Inc. and was no longer a stand-alone public company. CareDx, Invitae, Natera, NeoGenomics, Tandem Diabetes Care and Teladoc HealthTabula Rasa Healthcare, Inc. were all added to the peer group for 2020 on the basis ofdue to their similarity to us in terms of revenue size, market capitalization and industry sector.
In July 2020, the Compensation Committee, with the assistance of Compensia, reviewed and updated our compensation peer group for use in 2021 compensation planning. In evaluating the companies comprising the peer group at that time, Compensia considered similar criteria as noted above.
Based on a review of the analysis, the Compensation The Committee approved a revised compensation peer group for use induring the remainder of 2021 compensation planning,and into 2022, consisting of the following companies:
| | | | | | | | |
10x GenomicsAngioDynamics, Inc. | Health Catalyst, Inc. | NeoGenomics Laboratories, Inc. |
| AtriCure, Inc. | Heska Corp. | Nevro Corp. |
| Atrion Corp. | Inspire Medical Systems, |
AtriCure Inc. | Invitae |
Atrion | Natera |
BioTelemetry | NeoGenomicsTabula Rasa HealthCare |
| Cardiovascular Systems, Inc. | NevroInvitae Corp. | Tactile Systems Technology, Inc. |
| CareDx, Inc. | Penumbra |
Glaukos | Quidel |
Guardant HealthLantheus Holdings, Inc. | Tandem Diabetes Care |
| Fulgent Genetics, Inc. | Myriad Genetics, Inc. | |
| Glaukos Corp. | Natus Medical Inc. | |
The Compensation Committee made several changes to our peer group in July 2020, removing four companies and adding three new. AxoGen, Inogen, Intersect ENT and Teladoc Health were removed from our peer group, as their market capitalizations were outside our range. 10x Genomics, Guardant Health and Inspire Medical Systems were all added to the peer group on the basis of their similarity to us in size, market capitalization and industry sector.
The Compensation Committee uses data drawn from our peer group, as well as data drawn from custom cuts of the Radford Global Technology Survey and Global Life Sciences Survey, to evaluate the competitive market when determining the total direct compensation packages for our Named Executive Officers,NEOs, including base salary, target annual cash incentive awardbonus opportunities and long-term incentive compensation opportunities.compensation. Given our objective of attracting, retaining, motivating and rewarding a superior team of executive officers and employees, we aim to provide a total compensation package that is at or above the median as compared to our peers, and we emphasize equity incentive compensation to more effectively tie our Named Executive Officers’NEOs’ and employees’ interests to those of our stockholders. In light of this, when undertaking its competitive analysis, the Compensation Committee reviews competitive market data for base salary, total cash compensation (base salary plus annual bonus) and long-term incentive compensation. This competitive analysis is one key factor among others taken into account by the Compensation Committee in assessing compensation levels and recommending or making changes to compensation or additional awards.
Individual Compensation Elements
The Compensation Committee reviewsconducts an annual review and approval of our compensation strategy, including a review and determination of our compensation peer group at least annuallyused for comparative purposes, and makes adjustmentsa review of our compensation-related risk profile to its composition if warranted, taking into account changes in bothensure that our businesscompensation programs do not encourage excessive or inappropriate risk-taking, and that the businesseslevel of the companies in the peer group.risk that they do encourage is not reasonably likely to have a material adverse impact.
| | |
Individual Compensation Elements |
In 2020,2022, the principal elements of our executive compensation program, and the purposes for each element, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Element |
| Type of Element |
| Form of Element |
| Primary Objective |
| Reward Realized on Achievement of |
| Base Salary |
Fixed – Cash | Fixed |
| Cash |
| Attract and retain highly talented executives by providing amounts that are competitive in the market and reward performance |
| Continued service |
| Annual Cash Bonuses |
Variable – Cash | Variable |
| Cash |
| Motivate our executives to achieve annual business objectives and provide financial incentives to meet or exceed these objectives |
| Pre-established performance metrics based on our annual operating plan |
Long Term Incentive Compensation |
Restricted Stock Units | Variable - Equity |
| –Performance-based restricted stock awards earned based on achievement of objectives over a multi-year performance period
–Restricted stock awards thatRetain our executives as units vest over a period4 years while also aligning their interests with those of time
our stockholders |
Continued service and they deliver value even when there is no stock price appreciation |
| Performance-based Restricted Stock Units | Variable - Equity | Motivate our executives to achieve long-term stockholder value creation and align their interests with those of our stockholders by providing performance-based equity with upside opportunity to earn above target level through upside leverage linked to superior performance |
| Pre-established performance metrics tied to unit volume growth (with the TSR modifier for the CEO) |
We also provide certain post-employment compensation paymentsseverance and benefitschange in control provisions, and other benefits, such asvarious health and welfare programs,benefits, including a Section 401(k) retirement savings plan with a company match of a modest portion of the amount contributed by the employee.plan. In general, executive officers participate in the standard employee benefit programs available to our employees generally.
Base Salary
Base salary represents the fixed portion of the compensation of our Named Executive OfficersNEOs and is an important element of compensation intended to attract and retain highly talented individuals.
Using the competitive market data provided by its compensation consultant, Compensia, the Compensation The Committee reviews and develops recommendations using the competitive market data for appropriate adjustments to the base salary of our CEO and determines the base salaries of our other Named Executive OfficersNEOs as part of its annual executive compensation review. In addition, the base salaries of our Named Executive OfficersNEOs may be adjusted in the event of a promotion or significant change in responsibilities.
In February 2020,2022, the Compensation Committee revieweddid not formulate a recommendation for the base salaries of our Named Executive Officers. The Compensation Committee recommended to, and received approval from, the independent members of our Board of Directors (with our CEO recusing himself from the approval discussion) to adjust the base salary of our CEOthen-incumbent NEOs as their salaries were determined in the amountlast quarter of 4.0%2021 due to their recent hiring (Messrs. Blackford and Murphy) or role adjustment (Mr. Devine) and therefore were not increased in 2022. In addition, the Compensation CommitteeThe other NEOs were hired during 2022 and their base salaries were determined that our other Named Executive Officers receive base salary adjustments for 2020 ranging from 4.0% to 6.0%. In making its recommendation and these determinations, the Compensation Committee considered the current retention risks and challenges facing us, the performanceas part of our Named Executive Officers and a competitive market analysis prepared by Compensia, as well as the other factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above.
their new employment offers. The annual base salaries of our Named Executive OfficersNEOs for 20202022 were as follows: | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer |
| 2019 Annual Base Salary |
| 2020 Annual Base Salary (1) |
| Percentage Adjustment |
| Kevin M. King | | $ | 609,000 | | | $ | 633,360 | |
| 4.0 | % |
| Douglas J. Devine | | $ | — | | | $ | 450,000 | | | 0.0 | % |
| Matthew C. Garrett | | $ | 386,950 | | | $ | 402,428 | |
| 4.0 | % |
| Daniel G. Wilson | | $ | 340,000 | | | $ | 353,600 | |
| 4.0 | % |
| David A. Vort | | $ | 375,000 | | | $ | 393,750 | |
| 5.0 | % |
| Mark J. Day | | $ | 348,400 | | | $ | 369,304 | |
| 6.0 | % |
| | | | | | | | |
| NEO | | 2022 Annual Base Salary |
Quentin Blackford (1) | | $ | 650,000 | |
Brice Bobzien (2) | | $ | 400,000 | |
Douglas Devine (3) | | $ | 500,000 | |
Patrick Murphy (4) | | $ | 440,000 | |
Chad Patterson (5) | | $ | 450,000 | |
Minang Turakhia (6) | | $ | 425,000 | |
(1)These annual base Mr. Blackford joined the company on October 4, 2021.
(2) Mr. Bobzien joined the company on August 8, 2022.
(3) Mr. Devine’s salary adjustments were effective as of February 24, 2020.was adjusted on December 1, 2021.
(4) Mr. Murphy joined the company on November 29, 2021.
In response to(5) Mr. Patterson joined the onset of the COVID-19 pandemic, the Compensation Committee reduced the base salary of our CEO by 40% and the base salaries of our Executive Vice Presidents by 20% for the period commencing on May 1, 2020 and endingcompany on July 31, 2020.25, 2022.
(6) Dr. Turakhia joined the company on June 6, 2022.
The actual base salaries paid to our Named Executive OfficersNEOs in 20202022 are set forth in the “Fiscal 2020“2022 Summary Compensation Table” below.
Annual Cash BonusesBonus
We use an annual cash bonus plan to motivate our Named Executive Officers (other than Mr. Vort, our Executive Vice President of Sales, who participates in a separate sales bonus plan)NEOs to achieve our annual business goals. In February 2020,2022, the Compensation Committee approved the 20202022 Annual Bonus Plan to provide financial incentives to meet or exceed the principal financial objectives set forth in our 20202022 annual operating plan. The 20202022 Annual Bonus Plan provided for bonus payments to be funded in early 20212023 based on our level of achievement with respect to corporate performance goals and may be adjusted by the Compensation Committee based on individual performance.
Target Annual Cash Bonus Opportunities
For purposes of the 20202022 Annual Bonus Plan, cash bonuses were based upon a specific percentage of each participant’s annual base salary. In February 2020, the Compensation Committee reviewed the target annual cash bonus opportunities of our Named Executive Officers. At that time, the Compensation Committee determined to maintain the target annual cash bonus opportunities for each of our Named Executive Officers who was a participant in the plan at their current level.
In addition, the Compensation Committee allowed forhas the authority to further review of corporate goal achievement and individual performance to determine and modify the specificfinal annual cash bonus payment using a guidance of 0% to 115% for each executive officer including each Named Executive Officer. The Compensation Committee recommended to the independent members of our Board of Directors that the target annual cash bonus opportunity of our CEO be maintained at its current level. This recommendation was approved by the independent members of our Board of Directors (with our CEO recusing himself from the approval discussion).
NEO. In making its recommendation and these determinations, the Compensation Committee also considered current retention risks, andexternal market challenges, facing us, the performance of our Named Executive Officers and a competitive market analysis prepared by Compensia, as well as the other factors described in “Governance“Governance of Executive Compensation Program – Compensation-Setting Process” above.
The target annual cash bonus opportunities of our Named Executive Officers (other than Mr. Vort)incumbent NEOs for 20202022 as determined in February 2022, and for our newly hired NEOs as determined in connection with their commencement of employment, and expressed as a percentage of base salary, were as follows: | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer |
| 2019 Target Annual Cash Bonus Award Opportunity (as a percentage of base salary) |
| 2020 Target Annual Cash Bonus Award Opportunity (as a percentage of base salary) |
| Target Award Amount ($) |
| Kevin M. King |
| 100 | % |
| 100 | % | | $ | 633,360 | |
| Douglas J. Devine | | — | % | | 60 | % | | $ | 270,000 | |
| Matthew C. Garrett |
| 60 | % |
| 60 | % | | $ | 241,457 | |
| Daniel G. Wilson |
| 90 | % |
| 40 | % | | $ | 141,440 | |
| Mark J. Day |
| 40 % |
| 40 | % | | $ | 147,722 | |
| | | | | | | | | | | | | | |
| NEO | | 2022 Target Bonus % | | 2022 Target Bonus |
| Quentin Blackford | | 100% | | $650,000 |
| Brice Bobzien | | 60% | | $240,000 |
Douglas J. Devine | | 60% | | $300,000 |
| Patrick Murphy | | 60% | | $264,000 |
| Chad Patterson | | 60% | | $270,000 |
Minang Turakhia | | 50% | | $212,500 |
Corporate Performance Measures
Participants in the 2020 Annual Bonus Plan were eligible to receive a bonus payment based upon the attainment of one or more corporate performance measures that were established by the Compensation Committee and which related to financial metrics that were important to us. The 2020 Annual Bonus Plan was funded based on our actual results for the year as evaluated against these performance measures.
In February 2020,2022, the Compensation Committee selected threetwo financial performance measures for the 20202022 Annual Bonus Plan, including targets for revenuePlan—Revenue (weighted 70%75%), gross margin and Adjusted EBITDA (weighted 15%), and operating expense (weighted 15%25%). The Compensation Committee believed these performance measures were appropriate because they provided a strong emphasis on growth while managingalso considering the management of expenses, which it believed would most directly influence long-term stockholder value.
For purposes of the 2022 Annual Bonus Plan:
•“Revenue” meant GAAP revenue as reported in our audited financial statements; and
•“Adjusted EBITDA” meant standard EBITDA excluding stock compensation expense.
For each of these performance measures, the Compensation Committee established a target achievement level. Each performance measure was weighted according to the Committee’s assessment of its relative significance related to the successful execution of our annual operating plan.
The Committee set the following performance levels, weighting and payout percentages for the two corporate performance measures as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate Performance Measure | | Weighting | | Min. Payout % | | Target Payout % | | Max. Payout % |
| Revenue | | 75% | | 50% | | 100% | | 200% |
| Adjusted EBITDA | | 25% | | 50% | | 100% | | 200% |
Unless threshold performance is achieved on at least one of the Company metrics, there is no payout regardless of individual performance.
The performance target levels for our 2022 Annual Bonus Plan are not disclosed because we believe to do so would be competitively harmful, as it would give competitors insight into our strategic and financial planning processes. These target levels were intended to require significant effort on the part of our Named Executive Officers and, therefore, were set at levels ordinarily difficult to achieve and for which average, or below-average performance would not warrant a bonus payment. Each performance measure was weighted according to the Compensation Committee’s assessment of its relative significance related to the successful execution of our annual operating plan.
With the onset of the COVID-19 pandemic and limited insight into its eventual scope and duration, our Board of Directors determined that our best path to recovery for the year was through a continuing emphasis on revenue growth. At the same time, the Compensation Committee was concerned about employee retention and motivation and began evaluating ways to restore the incentive aspects of our 2020 Annual Bonus Plan in view of the uncertainty anticipated through the remainder of the year. With the information available and impact of COVID at the time, we anticipated we would not qualify to earn any of the bonus under the original performance metrics set in February 2020. In April, the Compensation Committee approved revisions to the threshold, target, and maximum performance levels, as appropriate, under our 2020 Annual Bonus Plan tied to the revenue, gross margin, and operating expense performance measures originally set. The revisions reflect the adjustments that our Board of Directors approved to our 2020 Annual Operating Plan. Specifically, the target performance level for revenue was reduced by approximately 40%, the target performance level for gross margin was reduced by approximately 21% and the target performance level for operating expense was reduced by approximately 17%. The minimum and maximum performance levels for revenue growth and gross margin were also adjusted at approximately the same rates noted above. The Compensation Committee believed that these adjustments would restore the incentive value of the 2020 Annual Bonus Plan to meaningful levels, while, at the same time, bolstering our ability to retain our executives and other employees in an increasingly volatile market.
The Compensation Committee also changed the weighting of the growth performance measure from 70% to 75% and reduced the weighting of the operating expense performance measure from 15% to 10% to reinforce its emphasis on growth as the best path to recovery for the year. At the same time, the Compensation Committee capped the maximum payouts under the revenue and gross margin performance measures at 125%, down from 225% under the plan as originally approved. Finally, the Compensation Committee determined that any bonuses paid under our 2020 Annual Bonus Plan could be paid in the form of fully-vested RSU awards or cash.
For purposes of the 2020 Annual Bonus Plan, each performance measure was to be evaluated independently, in accordance with the following conditions:
•For actual performance between the threshold and targetmaximum performance levels for the revenueRevenue and gross marginAdjusted EBITDA measures, the actual bonus payment with respect to each measure was to be calculated by linear interpolation from minimum to target payout;
•For actual performance aboveinterpolation.Our Committee believed the target level for the revenue2022 Revenue and gross margin measures, subject to a payout cap of 125%, the bonus payment was to accelerate by linear interpolation from target to maximum payout; and
•For any bonusAdjusted EBITDA targets to be made for the operating expensechallenging but achievable, requiring strong performance measure, a fixed target had to be achieved.from each of our executive officers.
Annual Cash Bonus Plan Decisions
The 2022 Annual Bonus Plan was funded based on our actual results for the year as evaluated against the two performance measures. The individual cash bonus payments for our CEO and other NEOs were then determined based on a combination of corporate and individual performance. The following general formula was used in 2020 to calculate the actual annual cash bonus pool funding for the 2020 Incentive2022 Annual Bonus Plan:
Individual cash bonus payments for our CEO and other Named Executive Officers were then determined based
Unless threshold performance is achieved on a combinationat least one of corporate andthe Company metrics, there is no payout regardless of individual performance.
Annual Cash Bonus Payments
Employing a variety of innovative protocols which minimized interruptions of patient care, as well as experiencing greater than anticipated use of our platform as the year progressed, we were able to minimize the impact on our revenue during the second half of 2020. As we gained experience operating in the new environment, we were able to increase market penetration in both existing and new accounts, continue to grow our ZIO AT business, and use our home enrollment service to sustain patient registration volumes in telemedicine settings, with the daily average of monitor prescriptions approaching pre-COVID-19 levels late in the second quarter. As a result, we were able to exceed our revised targets for the year in revenue and gross margin growth. Because we set narrow ranges of minimum performance for each metric, we would not have earned any of the 2020 Annual Bonus under the original metrics, despite 24% year over year revenue growth. We believe the revision of the performance metrics in April 2020 supported the collective focus needed to achieve growth despite the impact of the COVID-19 pandemic.
In February 2021,2023, the Compensation Committee determined the achievement, and corresponding payment levels, with respect to the corporate performance measures under the 20202022 Annual Bonus Plan were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Corporate Performance Measure |
| Weighting |
| Percentage Achievement versus Target |
| Payout Level |
| Revenue growth |
| 75% |
| 152% |
| 93.8% |
| Gross margin growth |
| 15% |
| 122% |
| 18.8% |
| Operating expense |
| 10% |
| 100% |
| 10.0% |
| Total |
|
|
|
|
| 122.5% |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate Performance Measure | | Weighting | | Percentage Achievement versus Target | | Payout Level | | Final Weighted Payout % |
| Revenue | | 75% | | 99% | | 97% | | 73% |
| Adjusted EBITDA | | 25% | | 166% | | 200% | | 50% |
| Final Corporate Factor | | | | | | | | 123% |
Based on these determinations,The Committee approved the Compensation Committee determined that our Named Executive Officers (other than Mr. Vort) were to receive annual cash bonus paymentsfinal corporate factor score equal to 122.5% of their target annual cash123% to determine the final bonus opportunities. Subsequently, the Compensation Committee recommended to the independent members ofpayout for our Board of Directors that our former CEO, Kevin King, receive an annual cash bonus payment equal to 122.5% of his target annual cash bonus opportunity and the payment was included in the terms of his Transition Agreement.2022 Annual Bonus Plan.
The following table sets forth the target annual cash bonus opportunities and the actual cash bonus payments made to our Named Executive Officers, with the exception of Mr. Vort,NEOs for 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Annual Base Salary |
| Target Annual Cash Bonus Opportunity |
| Actual Annual Cash Bonus Earned |
| Actual Annual Cash Bonus Earned (as a percentage of target annual cash bonus opportunity) |
| Kevin M. King | | $ | 633,360 | | | $ | 633,360 | | | $ | 775,866 | |
| 122.5% |
Matthew C. Garrett (1) | | $ | 402,428 | | | $ | 241,457 | | | $ | — | |
| —% |
Douglas J. Devine (2) | | $ | 450,000 | | | $ | 270,000 | | | $ | 173,984 | |
| 64.4% |
| Mark J. Day | | $ | 369,304 | | | $ | 147,722 | | | $ | 180,959 | |
| 122.5% |
| Daniel G. Wilson | | $ | 353,600 | | | $ | 141,440 | | | $ | 173,264 | | | 122.5% |
(1) Mr. Garrett did not receive an annual cash bonus because he left the Company in June 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NEO | | 2022 Target Bonus | | 2022 Actual Bonus | | Individual Modifier | | Actual Bonus as % of Target |
| Quentin Blackford | | $ | 650,000 | | | $ | 829,000 | | | 3.7 | % | | 128 | % |
| Brice Bobzien | | $ | 240,000 | | | $ | 295,200 | | | — | % | | 123 | % |
| Douglas Devine | | $ | 300,000 | | | $ | 300,000 | | | (18.7) | % | | 123 | % |
| Patrick Murphy | | $ | 264,000 | | | $ | 357,192 | | | 10.0 | % | | 135 | % |
| Chad Patterson | | $ | 270,000 | | | $ | 332,100 | | | — | % | | 123 | % |
| Minang Turakhia | | $ | 212,500 | | | $ | 261,375 | | | — | % | | 123 | % |
(2) Mr. Devine’s annual cash bonus was pro-rated for his partial year of employment.
Sales Plan for Mr. Vort
As our Executive Vice President of Sales, Mr. Vort’s annual cash incentive for 2020 was based on his ability to drive annual sales volume. In 2020, Mr. Vort was eligible to earn a cash bonus of up to $295,313 (75% of his 2020 annual base salary). This bonus was to be measured and paid in quarterly installments based on actual performance against his quarterly and annual targets. The performance target levels for our sales executive are not disclosed because we believe to do so would be competitively harmful, as it would give competitors insight into our strategic and financial planning processes.
Mr. Vort’s bonus payments were determined on a quarterly basis using volume targets for both our XT and AT services, as well as for international volume in the United Kingdom. Each target had a weighting and was paid similarly on a pay curve up to 100% of the target. For every one percentage point from 1% up to 100% to target, the payout increased on a sliding scale, ranging from 0.25% to 2.5%. The payment curve declined sharply below plan, where for example, Mr. Vort would earn 60% of his target bonus payment for achievement of 80% of his target. For volume over 100% of his target, Mr. Vort received an accelerating per-unit payment and was uncapped. In addition, Mr. Vort was eligible to earn additional compensation during the year for the successful achievement of several commercial priorities related to retention of key talent and driving growth of target business and new products.
In 2020, Mr. Vort earned a cash bonus under the sales plan in the amount of $413,493, based on achievement of his 2020 targets.
The annual cash bonus payments made to our Named Executive OfficersNEOs for 20202022 are set forth in the “2020“2022 Summary Compensation Table” below.Table.
Long-Term Incentive Compensation
We view long-term incentive compensation in the form of equity awards as a critical component of our executive compensation program. The realized value of these equity awards bears a direct relationshipis directly correlated to our stock price and therefore, these awards are an incentive for our Named Executive OfficersNEOs to create value for stockholders. Equitystockholders while helping us to attract and retain qualified executives in a competitive market.
We grant equity awards also help us retain qualifiedto our executive officers in a competitive market.
Beginning in 2019, after a review of competitive market data and an evaluation of our total rewards program, the Compensation Committee approved a change to our mix of long-term incentive compensation in the form of equity awards for our executive officers to grant a combination of performance-based restricted stock unit (“PRSU”)PSU awards that may be earned and settled
for shares of our common stock, and time-based restricted stock unit (“RSU”)RSU awards which the Compensation Committee believes provide additional alignment. We believe that these two types of awards align the interests of our executive officers with the interests of our stockholders, place greater emphasis onemphasize our long-term financial performance and help satisfy our retention objectives. At
The Committee believes that time,a portfolio of PSU awards and RSU awards appropriately balances the Compensation Committee also decidedincentive benefits of a performance-based equity award vehicle with executive retention and stockholder dilution (as compared to stop granting equity awards instock options) benefits, thereby aligning the forminterests of stock options.
With respect to PRSU awards, we believe that such awards serve as an effective source of motivation to our executive officers and stockholders and enabling us to driveuse our financial performance. In addition, PRSUequity compensation resources efficiently. We believe that PSU awards provide a direct link between compensation and stockholder return, thereby effectively motivating our executive officers to focus on and strive to achieve both our annual and long-term financial and strategic objectives. With respect to RSU awards we believe that because such awards represent the right to receive shares of our common stock upon settlement and havehold value even in the absence of stock price appreciation we are ableand therefore allow us to incentincentivize and retain our executive officers using fewer shares of our common stock. Since their value increases with any increase in the value of the underlying shares, RSU awards also serve as an incentive which aligns with the long-term interests of our executive officers and stockholders. The Compensation Committee believes that a portfolio of PRSU awards and RSU awards appropriately balances the incentive benefits of a performance-based equity award vehicle with the executive retention and stockholder dilution benefits of RSUs, thereby aligning the interests of our executive officers and stockholders and enabling us to use our equity compensation resources efficiently.
Generally, long-term incentive compensation opportunities in the form of equity awards are granted to our CEO by the independent members of our Boardboard of Directors,directors, based on the recommendations of the Compensation Committee, and to our other executive officers, including our other Named Executive Officers,NEOs, by the Compensation Committee. The amount andamounts, form of such equity awards are determined by the Compensation Committee after considering the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above. The amountsaward and relative weighting of the equity awards are intended to provide competitively-sized awards and resulting target total direct compensation opportunities that the Compensation Committee believes are reasonable and appropriate, taking into consideration the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above.
New Hire Awards
In late 2021 and during 2022, we hired key executive officers (including NEOs) and granted new hire equity awards in order to attract these highly talented executives to join our company and advance our strategic business missions. The amounts, form of equity award and relative weighting of the new hire equity awards to our NEOs were intended to provide competitive awards and to compensate for the value the executive forfeited at their former organization.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | RSU (1) | | PSU (2) | | Total |
| NEO | | 2022 Offer Value (3) | | 2022 RSU Aggregate Grant Date Fair Value (4) | | 2022 Offer Value (3) | | 2022 RSU Aggregate Grant Date Fair Value (4) | | 2022 Offer Value (3) | | 2022 RSU Aggregate Grant Date Fair Value (4) |
Brice Bobzien (5) | | $ | 1,500,000 | | | $ | 1,515,501 | | | $ | 1,500,000 | | | $ | 1,515,501 | | | $ | 3,000,000 | | | $ | 3,031,002 | |
Patrick Murphy (6) | | $ | — | | | $ | — | | | $ | 2,000,000 | | | $ | 2,504,342 | | | $ | 2,000,000 | | | $ | 2,504,342 | |
Chad Patterson (7) | | $ | 2,750,000 | | | $ | 3,107,612 | | | $ | 2,750,000 | | | $ | 3,107,612 | | | $ | 5,500,000 | | | $ | 6,215,224 | |
Minang Turakhia (8) | | $ | 1,500,000 | | | $ | 1,637,044 | | | $ | 1,500,000 | | | $ | 1,637,044 | | | $ | 3,000,000 | | | $ | 3,274,088 | |
(1) RSU vest schedule 25% for each of the four years.
(2) PSU vest schedule pursuant to the 2022-2024 PSU goal.
(3) For purposes of this table, the “Offer Value” was determined by the Committee. The total number of units subject to a PSU award (at target) and a RSU award was equal to the Offer Value divided by the 20-day average closing price of our common stock in effect around the time of approval. The use of a 20-day average closing price of our common stock is to minimize the variability between the award value approved and the actual number of units granted.
(4) The values of the stock awards reflect the grant date fair value of stock awards granted during 2022 and are based on the Company’s closing price on the grant date in accordance with FASB ASC Topic 718. For a discussion of our valuation assumptions, see Note 1 and Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023.
(5) Mr. Bobzien was awarded both the RSU grant and PSU grant on August 8, 2022.
(6) Mr. Murphy was awarded his new hire RSU grant on November 30, 2021 and his new hire PSU grant on February 15, 2022.
(7) Mr. Patterson was awarded both the RSU grant and PSU grant on July 25, 2022.
(8) Dr. Turakia was awarded both the RSU grant and PSU grant on June 6, 2022.
Annual Long Term Incentive (LTI) Awards
In February 2020,2022, as part of its annual review of our executive compensation program, the Compensation Committee determined consistent with its decision in 2019, that long-term incentive compensation in the form of PRSUPSU awards and time-based RSU awards should be granted to our executive officers, including our Named Executive Officers.then-incumbent NEOs. The Committee did not formulate a recommendation with respect to an equity award for our CEO as that had been determined as part of the negotiations of the Blackford Employment Letter (as defined below) in September 2021. Further, the Compensation Committee also determined that, for each executive officer’s 2020officer (other than the CEO) the 2022 equity award 50% of the dollar value of the award would be converted togranted 50% in a PRSUPSU award and 50% of the dollar value of the award would be converted to anin a RSU award.
Thereupon, the Compensation Committee recommended to the independent members of our Board of Directors the aggregate target value of the equity award for each executive officer, including the aggregate target value of the equity award for our CEO, and the design and performance metrics for the PRSU awards. The Compensation Committee also approved the time-based RSU awards for our executive officers, including the other Named Executive Officers. In making its recommendations and determinations, the Compensation Committee considered the current retention risks and challenges facing us, the performance of our Named Executive Officers and a competitive market analysis prepared by Compensia, as well as the other factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above.
Subsequently, the independent members of our Board of Directors (with our CEO recusing himself from the approval discussion) approved the weighting of the long-term incentive compensation of our executive officers between PRSU awards and RSU awards, the aggregate target value of each executive officer’s equity award, including the equity award to be granted to our CEO and the design and performance metrics for the PRSUPSU awards. The Committee differentiates the award value of our incumbent NEOs based on the review of the competitive market data for their respective positions and the size of any previously granted equity awards.
The annual equity awards granted to our Named Executive Officers for 2020incumbent NEOs in February 2022 which, in the case of the PRSUPSU awards, represent the maximumtarget number of units eligible to be earned based on maximumtarget performance, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | RSU (1) | | PSU | | Total |
| NEO | | RSU Target Value (2) | | RSU Aggregate Grant Date Fair Value (3) | | RSU # of Units | | PSU Target Value (2) | | PSU Aggregate Grant Date Fair Value (3) | | PSU # of Units | | Performance Metrics | | Total Target Value (2) | | Total Aggregate Grant Date Fair Value (3) |
| Quentin Blackford | | $ | — | | | $ | — | | | | | $ | 5,000,000 | | | 5,787,285 | | | 40,159 | | | Unit Volume CAGR and Relative TSR Modifier | | $ | 5,000,000 | | | $ | 5,787,285 | |
| Douglas Devine | | $ | 925,000 | | | $ | 957,512 | | | 7,422 | | | $ | 925,000 | | | $ | 957,512 | | | 7,422 | | | Unit Volume CAGR | | $ | 1,850,000 | | | $ | 1,915,024 | |
| Patrick Murphy | | $ | 750,000 | | | $ | 776,382 | | | 6,018 | | | $ | 750,000 | | | $ | 776,382 | | | 6,018 | | | Unit Volume CAGR | | $ | 1,500,000 | | | $ | 1,552,764 | |
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer |
| Performance-Based Restricted Stock Unit Awards for Shares of Common Stock (number of shares) |
| Restricted Stock Unit Awards for Shares of Common Stock (number of shares) |
| Aggregate Grant Date Fair Value |
| Kevin M. King |
| 43,124 |
| 21,562 | | $ | 3,500,000 | |
| Matthew C. Garrett |
| 12,696 |
| 6,348 | | $ | 1,000,000 | |
| Douglas J. Devine |
| 18,246 |
| 9,123 | | $ | 3,000,000 | |
| David A. Vort |
| 12,696 |
| 6,348 | | $ | 1,000,000 | |
| Mark J. Day |
| 9,232 |
| 4,616 | | $ | 800,000 | |
| Daniel G. Wilson | | 8,310 | | 4,155 | | $ | 700,000 | |
For purposes of this table, the “Aggregate Grant Date Fair Value” of each award(2) Target Value was determined by the Compensation Committee. The total number of sharesunits subject to ana PSU award isand a RSU award was equal to the Aggregate Grant Date FairTarget Value divided by the 30-day20-day average closing price of our common stock in effect around the time of approval. The use of a 20-day average closing price of our common stock is to minimize the variability between the award value approved and the actual number of units granted.
Our CEO received(3) The values of the largest equity award based on his overall responsibility for our performancestock awards reflect the grant date fair value of stock awards granted during 2022 and success. In addition, further differentiation was made among our other Named Executive Officersare based on the Compensation Committee’s reviewCompany’s closing price on the grant date in accordance with FASB ASC Topic 718. For a discussion of our valuation assumptions, see Note 1 and Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the competitive market datayear ended December 31, 2022, filed with the SEC on February 23, 2023.
PSU Awards: 2022-2024 Cycle
The actual number of PSUs that will be eligible to vest will be determined based on the company’s Unit Volume CAGR results measured for their respective positionsthe performance period commencing on January 1, 2022 and ending on December 31, 2024, subject to the sizeNEO’s continued employment through March 15, 2025. In addition, for the CEO’s PSU award, the eligible PSUs earned will be further adjusted based on achievement of the equity awards previously granted to them.TSR versus S&P Healthcare Equipment Select Industry Index.
PRSU Awards
Unit Volume CAGR
The units subject to the PRSUPSU awards are to be earned to the extent that we achieve pre-established threshold, target and maximum performance levels for the cumulative three-year compound annual growth rate (“CAGR”)CAGR in our unit volume (Worldwide, XT, AT, Silent AF) over a performance period beginning on January 1, 20202022, and ending on December 31, 2022,2024, as follows:
| | | | | | | | |
| Percentage of Target Performance Level Achieved | | Percent of Target Units to be Earned |
| 72% of target CAGR level | | 50% of Target |
| 100% of target CAGR level | | 100% of Target |
| 128% of target CAGR level | | 200% of Target |
| | | | | |
| Percentage of Target Performance Level Achieved | Units Subject to the Award Earned |
| 75% | 50% |
| 100% | 100% |
| 125% | 200% |
The unit performance measure for this PSU award is not disclosed because we believe to do so would be competitively harmful, as it would give competitors insight into our strategic and financial planning processes. Our performance measures were set to ensure they were stretch targets for participants that would not pay out below a minimum growth target and would drive positive shareholder return. For the three-year period from 2022 through 2024, we have maintained the same growth rate minimum, target and max thresholds as in prior plan years, despite starting at a higher volume than in prior years.
The exact number of earned units will be determined using linear interpolation based on our actual unit volume CAGR asif it falls between the threshold and maximum performance achievement levels set forth in the table above. Each unit granted pursuant to the PRSUPSU awards represents a contingent right to receive one share of our common stock for each unit earned forduring the performance period.
TSR Modifier – CEO PSU
For the CEO’s PSU award, the number of units earned based on the CAGR Unit Volume actual results will be further adjusted for certain levels of achievement of TSR by the Company as compared to the TSR achieved by the companies comprising the S&P Healthcare Equipment Select Industry Index as in effect on the last day of the performance period. The adjustment will be based on the percentage derived from the table below, which percentage depends on the percentile ranking of the Company’s TSR within the Index.
| | | | | | | | |
| Company TSR Percentile Rank within the Index | | Percentage by which Earned PSUs are Adjusted +/- |
| At or below 25% | | Decrease by 25% |
| At 50% | | No Change |
| At or above 75% | | Increase by 25% |
To the extent that the company’s TSR results for the performance period fall between any levels set forth in the table above, the percentage adjustment to the number of units will be determined based on linear interpolation using the company TSR percentile rank amount in the table that is greater than but closest to the company’s results and the amount in the table that is less than but closest to the company’s results, and their corresponding percentages by which the units are decreased or increased.
PSU Awards: 2020-2022 Cycle Payout
In February 2023, the Committee certified the achievement of the Company’s CAGR Unit Volume for the performance period commencing on January 1, 2020 and ending on December 31, 2022 and approved a payout of 75.14% of target.
RSU Awards
With the exception of the award granted to our CEO, theThe time-based RSU awards vest over a four-year period, with one-half25% of the units subject to the awards vesting on the secondfirst anniversary of the vesting commencement date of February 25, 2020,March 1, 2022, and 25% of the units subject to the awards vesting on each of the second, third and fourth anniversaries of the vesting commencement date, contingent upon the Named Executive OfficerNEO remaining continuously employed by us through each applicable vesting date. The RSU award granted to our CEO vests over a four-year period, with 25% of the units subject to the award vesting on the anniversary of the date of grant. Each unit granted pursuant to the RSU awards represents a contingent right to receive one share of our common stock for each unit that vests pursuant to the awards.
Equity Awards for Mr. Devine
On August 4, 2020, consistent with the terms of his employment offer letter, the Compensation Committee granted Mr. Devine a RSU award covering 9,123 units and a PRSU award covering 18,246 units. The RSU award vests over a four-year period, with 25% of the units subject to the award vesting on each anniversary of the vesting commencement date of July 1, 2020, contingent
upon Mr. Devine remaining continuously employed by us through each applicable vesting date. Each unit granted pursuant to the RSU award represents a contingent right to receive one share of our common stock for each unit that vests pursuant to the award.
The units subject to the PRSU award are to be earned to the extent that we achieve pre-established threshold, target and maximum performance levels for the cumulative three-year compound annual growth rate (“CAGR”) in our unit volume over a performance period beginning on January 1, 2020 and ending on December 31, 2022, as follows:
| | | | | |
| Percentage of Target Performance Level Achieved | Units Subject to the Award Earned |
| 75% | 50% |
| 100% | 100% |
| 125% | 200% |
The exact number of earned units will be determined using linear interpolation based on our actual unit volume CAGR as it falls between the threshold and maximum performance achievement levels set forth in the table above. The number of shares granted, as noted above, reflect the maximum number of units eligible to be earned based on maximum performance. Each unit granted pursuant to the PRSU awards represents a contingent right to receive one share of our common stock for each unit earned for the performance period. Upon achievement of performance during the performance period, the applicable portion of the award will vest subject to Mr. Devine’s continued employment with us through the date that performance is certified.
Modification of 2019 PRSU Awards
In February 2019, the Compensation Committee (and in the case of our CEO, the independent members of our Board of Directors) granted PRSU awards to our executive officers to be earned to the extent we achieved pre-established threshold, target, and maximum performance levels for the revenue CAGR over a performance period beginning on January 1, 2019 and ending on December 31, 2020. The exact number of earned units was to be determined using linear interpolation based on our actual CAGR if it fell between the threshold and maximum performance achievement levels. Each unit granted pursuant to the PRSU awards represents a contingent right to receive one share of our common stock for each unit earned for the performance period.
As a result of the onset of the COVID-19 pandemic in March 2020, we experienced a disruption in our business that significantly impacted our near-term revenues. Based on the uncertainty of our business for the foreseeable future as a result of the pandemic, we estimated that the 2019 PRSU awards would result in a 0% payout notwithstanding the fact that we were tracking for a potential payout of 150% of target through the first quarter of 2020. Noting that we had generated significant revenue growth prior to the onset of the COVID-19 pandemic, and noting that we had delivered significant stockholder return during the performance period, the Compensation Committee believed that it would not be fair to penalize our executive officers by either adopting a new program or waiting until the end of the performance period to exercise its discretion to decide what, if any, payouts were appropriate for our executive officers. Instead, the Compensation Committee, with the assistance of its compensation consultant, determined to modify the program by dividing into two separate, but interrelated parts.
First, the Compensation Committee determined to give our executive officers credit for the success that they had achieved under the PRSU awards to that point by multiplying 150% (the payout amount they were on track for) by five-eighths (the five fiscal quarters that the program had been in operation) producing a baseline achievement percentage of 93.75 which was then “banked” but subject to adjustment based on our stock price performance for the rest of the original performance period. With the adjustment to metrics and the baseline achievement percentage, the Compensation Committee also reduced the maximum payout potential from the original 200% to 150%.
The Compensation Committee then developed a matrix comprised of a series of multipliers based on our stock price growth for the rest of the year which, when applied to our “banked” performance, would produce a maximum potential payout of 150% (based on a stock price of $135 per share constituting an assumed return to our stockholders of 71%). This percentage return to stockholders was determined using a “baseline” price of $78.85 per share, our closing stock price for the 60 trading days preceding February 27, 2019, the original date of grant of the PRSU awards. The actual stock price multiplier to be used for making this calculation was our ending stock price reflecting the average closing market price for our common stock for the last 60 trading days of 2020. In this way, the Compensation Committee sought to align the potential payout to our executive officers with the return delivered
to stockholders. As revised, our executive officers would earn the target number of shares subject to their PRSU awards only if we produced an approximate 20% return to our stockholders and any above-target payout would be earned only if our executive officers had delivered a sizable return above that level to our stockholders.
The stock price multiplier for the second through fourth quarters of 2020 was 169% (based on an average closing stock price of $227.81 per share). When multiplied by the 93.75% “banked” achievement level, this produced a max payout of 150% of the PRSU award targets. Consequently, the number of units earned by (and shares of our common stock delivered to) our named executive officers under the 2019 PRSUs was as follows:
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer |
| 2019 PRSU (target number of units)
|
| Payout Percentage (%)
|
| Actual Number of Shares of Stock Earned |
| Kevin M. King |
| 25,020 |
| 150% | | 37,530 |
| David A. Vort |
| 8,627 |
| 150% | | 12,940 |
| Mark J. Day |
| 6,902 |
| 150% | | 12,940 |
| Daniel G. Wilson | | 4,600 | | 150% | | 6,901 |
The equity awards granted to our Named Executive Officersincumbent NEOs in 20202022 are set forth in the “2020“2022 Summary Compensation Table” and the “2020“2022 Grants of Plan-Based Awards Table” below.
Health
Benefits and Welfare BenefitsPrerequisites
Our Named Executive OfficersNEOs are eligible to receive the same employee benefits that are generally available to all employees generally, subject to the satisfaction of certainspecific eligibility requirements. These benefits include flexible spending accounts, medical, dental, and vision benefits, business travel insurance, employee assistance program, basic life insurance, benefits, accidental death and dismemberment insurance, policies, short-termshort- and long-term disability insurance, and commuter benefits and reimbursement for mobile phone coverage.benefits. In structuring these programs, we seek to provide an aggregate level of benefits that arebenefit offerings comparable to those provided by similar companies, compliant with applicable laws, and affordable to employees.
We continue to maintain a tax-qualified Section 401(k) retirement savings plan (the “401(k) Plan”) that provides eligible employees, including our Named Executive Officers,NEOs, with an opportunity to save for retirement on a tax-advantaged basis. In 2020,2022, we offered eligible participants a discretionary matching contribution to the 401(k) Plan, and wePlan. We may make a discretionaryan employer contribution to each eligible employee each year. Allyear—all participants’ interests in the matching contributions vest immediately from the time of contribution. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) Plan is intended to qualify under Sections 401(a) and 501(a) of the Internal Revenue Code (the “Code”). As a tax-qualified retirement plan, contributions to the 401(k) Plan and earnings on those contributions are not taxable to employees until distributed from the 401(k) Plan, and allPlan. All contributions are deductible by us when made.
Perquisites and Other Personal Benefits
Currently, weWe do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personalunique benefits to our Named Executive Officers,NEOs, except as made available to our employees generally or in situations where we believe it is appropriate to assist an individual in the performance of his duties, to make him more efficient and effective and for recruitment and retention purposes. During 2020,2022, our Named Executive OfficersNEOs did not receive perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual, except use from time-to-time by our CEO and CFO each, of an apartment leased by the company, in connection with working at our corporate headquarters in San Francisco, California. The Compensation Committee believes that this commuting-related benefit is reasonable and necessary to retain the services of these individuals, and is intended to reduce obstacles in their ability to perform services for the Company.more.
We have entered into written employment offer letters with our CEO and each of the other Named Executive Officers. Each of these letters providesour NEOs that provide for “at will” employment, meaning that either we or the Named Executive OfficerNEO may terminate the employment relationship at any time without cause. In addition, each of these letters required the Named Executive Officerexecutive to execute our standard At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement.
Each of these employment offer letters also provided for certain initial payments and benefits in the event of certain qualifying terminations of employment, including a qualifying termination of employment in connection with a change in control of the Company. These post-employment compensation arrangements have been superseded by the Change of Control and Severance Agreements and, ultimately, the Executive Change in Control and Severance Policy discussed in “Post-Employment Compensation Arrangements” below.
For detailed descriptions of the employment offer letters of our Named Executive Officers,NEOs, see “Potential Payments upon Termination or Change in Control” below.
| | |
Post-Employment Compensation Arrangements |
Executive Officer Employment Agreements
In AugustQuentin Blackford
We entered into an employment offer letter in October 2021 with Quentin Blackford, our President and Chief Executive Officer. The letter has no specific term and provides for at-will employment. Mr. Blackford’scurrent annual base salary is $650,000 and he is eligible to receive an annual performance bonus for fiscal year 2022 with the target amount determined as 100% of Mr. Blackford’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the company’s Executive Incentive Compensation Plan discussed above. Mr. Blackford also received a $675,000 signing bonus.
Brice Bobzien
We entered into an employment offer letter in July 2022, our Chief Financial Officer. The letter has no specific term and provides for at-will employment. Mr. Day’s current annual base salary is $400,000 and he is eligible to receive an annual performance bonus for fiscal year 2022 with the target amount determined as 60% of Mr. Bobzien’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed above.
Douglas Devine
We entered into an employment offer letter in June 2020 with Douglas J. Devine, our Chief Financial Officer. The letter has no specific term and provides for at-will employment. Mr. Devine’s current annual base salary is $450,000 and he is eligible to receive an annual performance bonus for fiscal year 2021 with the target amount determined as 60% of Mr. Devine’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of Company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Committee (and,Plan as discussed above. Mr. Devine also received a $150,000 signing bonus.
Patrick Murphy
We entered into an employment offer letter in November 2021 with respectPatrick Murphy, our Chief Business Officer and Chief Legal Officer. The letter has no specific term and provides for at-will employment. Mr. Murphy’s current annual base salary is $440,000 and he is eligible to receive an annual performance bonus for fiscal year 2022 with the target amount determined as 60% of Mr. Murphy’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed above. Mr. Murphy also received a $478,500 signing bonus.
Chad Patterson
We entered into an employment offer letter in July 2022 with Chad Patterson our CEO,Chief Commercial Officer. The letter has no specific term and provides for at-will employment. Mr. Patterson’s current annual base salary is $450,000 and he is eligible to receive an annual performance bonus for fiscal year 2022 with the independent memberstarget amount determined as 60% of Mr. Patterson’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed above.
Minang Turakhia
We entered into an employment offer letter in April 2022 with Minang Turakhia, our BoardChief Science Officer and Chief Medical Officer. The letter has no specific term and provides for at-will employment. Dr.Turakhia’s current annual base salary is $425,000 and he is eligible to receive an annual performance bonus for fiscal year 2022 with the target amount determined as 60% of Directors) approved ourDr.Turakhia’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed above. Dr. Turakhia also received a $500,000 signing bonus.
Post-Employment Compensation Arrangements
We have adopted the Executive Change in Control and Severance Policy (the “Policy”“Executive CIC Policy”) (effective as of September 1, 2019), which provides a standardized approach for the receipt of severance and change in control payments and benefits by employees at the level of vice presidentto all Vice Presidents and above, including our NamedNEOs. Under the Executive Officers. Under this approach,CIC Policy, the rights of our executives with respect to the receipt of payments and benefits upon an involuntary termination of employment, including an involuntary termination of employment in connection with a change in control of the Company,company, were established on a uniform basis.
We believe that reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly qualified executives. The Committee does not consider the specific amounts payable under these post-employment compensation arrangements, however, when determining the annual compensation of our executive officers, including our NEOs.
The Executive CIC Policy serves several objectives. Itobjectives as it eliminates the need to negotiate post-employment compensation arrangements on a case-by-case basis. It also helps to assure our executives that their post-employment compensation payments and benefits are comparable to those of other executives with similar levels of responsibility and tenure. Further, it acts as an incentive for our executives to remain employed with us and stay focused on their responsibilities during the potential or negotiation of a change-in-control transaction, which preserves our value and the potential benefits to be received by our stockholders from the transaction. Finally, this approach supports administrative efficiency because it requires less time and expense to administer than individual agreements.
Generally, the Policy replaced the Change of Control and Severance Agreements which we had previously entered into with our Named Executive Officers which had expired at the completion of their two-year term in September 2019 and upon one executive officer’s termination of employment with us.
Our post-employment compensation arrangements are designed to provide reasonable compensation to our executives if their employment is terminated under certain circumstances to facilitate their transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.
These post-employment compensation arrangements also contain certain specified payments and benefits in the event of an involuntary termination of employment in connection with a change in control of the Company.company. We believe these arrangements align the interests of our Named Executive OfficersNEOs and our stockholders when considering our long-term future. The primary purpose of these arrangements in the case of a change in control of the Companycompany is to keep our most senior executive officers focused on pursuing all corporate transaction activity that is in the best interests of our stockholders regardless of whether those transactions may result in their own job loss. Reasonable post-acquisition payments and benefits should serve the interests of both the executive officer and our stockholders.
In determining payment and benefit levels under the various circumstances covered by the post-employment compensation arrangements with our executives, the Compensation Committee has drawn a distinction between voluntary terminations of employment without good reason, terminations of employment for cause and involuntary terminations of employment without cause or voluntary terminations of employment for good reason, both in connection with and not involving a change in control of the Company. Payment in the latter circumstances has been deemed appropriate in light of the benefits to us described above, as well as the likelihood that the executive officer's departure is due, at least in part, to circumstances not within his or her control. In contrast, we believe that payments are not appropriate in the event of a termination of employment for cause or a voluntary termination of employment without good reason because such events often reflect either performance challenges or an affirmative decision by the executive officer to end his or her relationship with us without fault by the Company.company.
Under the Policy, allAll payments and benefits in the event of a change in control of the Companycompany are payable only if there is a subsequent loss of employment by a Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention power following a change in control of the Companycompany and to avoid windfalls, both of which could occur if vesting accelerated automatically as a result of the transaction.
Under the Policy, inIn the event of a change in control of the Company,company, to the extent Section 280G or 4999 of the Code is applicable to an executive officer, including a Named Executive Officer,NEO, such individual is entitled to receive either payment of the full amounts specified in the Executive CIC Policy to which he or she is entitled or payment of such lesser amount that does not trigger the excise tax imposed by Section 4999, whichever results in him or her receiving a higher amount after taking into account all federal, state and local income, excise and employment taxes.
We do not provide excise tax payments (or “gross-ups”) relating to a change in control of the Companycompany and have no such obligations in place with respect to any of our executive officers, including our Named Executive Officers.
We believe that reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly qualified executives. We further believe that when recruiting executive talent these arrangements are necessary to offer compensation packages that are competitive. The Compensation Committee does not consider the specific amounts payable under these post-employment compensation arrangements, however, when determining the annual compensation of our executive officers, including our Named Executive Officers.
incumbent NEOs. For detailed descriptions of the post-employment compensation arrangements maintained with our Named Executive Officers,incumbent NEOs, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Potential Payments upon Termination or Change in Control” below.
Potential Payments Upon Termination or Change in Control
In August 2019, the Committee (and, with respect to our CEO, the independent members of our board of directors) approved a new Severance and Change in Control Policy (the “Severance Policy”) effective September 2019, which provides a standardized approach for the receipt of severance and change in control payments and benefits by certain employees, including our NEOs. Under this approach, the rights of our executives with respect to the receipt of payments and benefits upon an involuntary termination of employment, including an involuntary termination of employment in connection with a change in control of the company, were established on a uniform basis. Generally, the Severance Policy replaced the individual Change of Control and Severance Agreements which we had previously entered into with our NEOs, which had expired at the completion of their two-year term in September 2019.
Under the Severance Policy, if, within the period commencing three months prior to and ending 12 months following a “change of control” (such period, the “Change in Control Period”), we terminate the employment of the applicable employee other than for “cause,” death or “disability,” or the employee resigns for “good reason” (as such terms are defined in the Severance Policy) and, within 60 days following the employee’s termination, the employee executes an irrevocable separation agreement and release of claims, the employee is entitled to receive (i) a lump sum severance payment equal to the payment of employee’s base salary, at the highest rate in effect during the term of the agreement, for 24 months for Mr. Blackford, and 15 months for Messrs. Bobzien, Devine, Murphy, Patterson and Turakhia, (ii) payment of premiums to maintain group health insurance continuation benefits pursuant to “COBRA” for the employee and the employee’s dependents for up to 24 months for Mr. Blackford, and 15 months for Messrs. Bobzien, Devine, Murphy, Patterson and Turakhia, (iii) a lump sum payment equal to 150% of target bonus in effect for the fiscal year in which termination occurs for Mr. Blackford, and 100% of target bonus for Messrs. Bobzien, Devine, Murphy, Patterson and Turakhia, and (iv) accelerated vesting as to 100% of the employee’s outstanding unvested equity awards (if vesting depends on achievement of performance criteria, then assuming performance criteria has been achieved at target levels).
The following table provides information concerning the estimated payments and benefits that would be provided in the circumstances described above for each of our eligible named executive officers in accordance with the Severance Policy, with no change in control and with change in control in effect on December 31, 2022. Except where otherwise noted, payments and benefits are estimated assuming that the triggering event took place on December 31, 2022, and the price per share of our common stock is the closing price on the Nasdaq Global Select Market as of December 30, 2022, the last trading day in fiscal year 2022 ($93.67). There can be no assurance that a triggering event would produce the same or similar results as those estimated below if such event occurs on any other date or at any other price, of if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments or benefits, any actual payments and benefits may be different.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Termination of Employment No Change-of-Control | | Termination of Employment Change-of-Control |
| Severance Payment ($) | | Medical Benefits Continuation ($) | | Total ($) | | Severance Payment ($) | | Medical Benefits Continuation ($) | | Accelerated Vesting of Equity Awards ($) | | Total ($) |
| Quentin S. Blackford | | $ | 975,000 | | | $ | 50,834 | | | $ | 1,025,834 | | | $ | 1,300,000 | | | $ | 67,780 | | | $ | 17,863,323 | | | $ | 19,231,103 | |
| Brice Bobzien | | $ | 400,000 | | | $ | 38,981 | | | $ | 438,981 | | | $ | 500,000 | | | $ | 48,726 | | | $ | 2,638,946 | | | $ | 3,187,672 | |
| Douglas J. Devine | | $ | 500,000 | | | $ | 35,828 | | | $ | 535,828 | | | $ | 625,000 | | | $ | 44,785 | | | $ | 3,649,631 | | | $ | 4,319,416 | |
| Patrick M. Murphy | | $ | 440,000 | | | $ | 38,981 | | | $ | 478,981 | | | $ | 550,000 | | | $ | 48,726 | | | $ | 6,109,179 | | | $ | 6,707,905 | |
| Chad Patterson | | $ | 450,000 | | | $ | 33,890 | | | $ | 483,890 | | | $ | 562,500 | | | $ | 42,362 | | | $ | 5,484,235 | | | $ | 6,089,097 | |
| Minang Turakhia, M.D., M.S. | | $ | 425,000 | | | $ | 37,224 | | | $ | 462,224 | | | $ | 531,250 | | | $ | 46,530 | | | $ | 2,898,438 | | | $ | 3,476,218 | |
Transition Agreementand Consulting Agreements with Mr. KingDevine
In connection with his retirement asa Resignation and Release Agreement, Mr. Devine, our President andformer Chief ExecutiveOperating Officer, and separation fromseparated employment with us on January 12, 2021,March 10, 2023, and we entered into a transition and consulting agreement (the “Consulting Agreement”) with Mr. KingDevine, whereby, we retained him as an independent contractor to perform services for a certain period following the Separation Date,March 10, 2023, and he agreed to perform such services pursuant to the terms of athe Consulting Agreement. In consideration for his fulfillment of the terms and conditions of the transition agreement,Consulting Agreement, we agreed to the following:
•Mr. King will remainDevine is eligible to receive an award in either cash or fully vested restricted stock units (the “2020 Bonus”)(12 months base salary and a one-time bonus of $69,000) in 20212023 pursuant to the terms and conditions of the Change of Control and Severance Agreement and our 2020 annual bonus plan established by our Board of Directors (the “Board”),Executive CIC Policy, subject to his remaining a “service provider” (as such term is defined in our 2016 Equity Incentive Plan, as amended) through the date of payment of such cash or grant of the 2020 Bonus;payment;
•ProvidedWe agreed to reimburse Mr. King timely elects for continuation coverage pursuant to COBRA for himself and his eligible dependents within the time period prescribed pursuant to COBRA, we will reimburse himDevine for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to his termination) until the earlier of: (i) the date upon which he and/or his eligible dependents becomesbecome covered under similar plans, or (ii) August 31, 2021;April 30, 2024; and
•7,187 shares of our common stock subject to the PRSU award granted to him on February 26, 2020 (the “2020 PRSU Award”) will accelerate and fully vest on January 12, 2021, while the remaining unvested portion of the 2020 PRSU Award will terminate on such date and be of no further force or effect.
•While Mr. King continues to provide services to the Company pursuant to the Consulting Agreement or as a member of the Board, heDevine will continue to be eligible to vest in each outstanding equity award held by him to purchase or receive shares of the Equity Awardscompany's common stock in accordance with the terms and conditions of the applicable Stock Agreements (including, but not limited to, the performance stock unit Equity Award granted to Executive on February 27, 2019). The post-termination exercise period of any of Executive’s stock options will not begin to run until the later of the date that the Executive ceases to provide services to the Company pursuant to the Consulting Agreement or ceases to be a member of the Board, provided, however, that in no event will any stock option be exercisable after the expiration of such Equity Award’s maximum term.award agreements.
Finally, in consideration for his ongoing services as a consultant, we agreed to pay Mr. King $250 per hour, provided that he will not be paid for more than 20 hours per month without the prior written approval of his Company contact,Other Compensation Policies and reimburse him, in accordance with Company policy, for all reasonable expenses incurred by him in performing the services pursuant to the consulting agreement.Practices
Consulting agreement with Mr. Garrett
In connection with his resignation as our Chief Financial Officer, we entered into a consulting agreement with Mr. Garrett pursuant to which he would assist with the transition of his role to Mr. Devine and consult with us for a period of up to one year following his resignation. Under the consulting agreement, Mr. Garrett was to be paid a retainer of $10,000 per month and his outstanding equity awards were to continue to vest.
| | |
Other Compensation Policies and Practices |
Equity Award Grant Policy
We maintain an Equity Award Grant Policy that governs the grant of equity awards under our equity incentive and compensation plan. Among other things, this policy authorizes a committee consisting of our CEO, our CFO and our Chief People Officer to grant certain equity awards up to a maximum amount of 700,000 shares of common stock in the aggregate to employees and consultants. The policy does not allow approval of grants to members of this committee, our CEO and executive officers who are direct reports to our CEO or the non-employee members of our Board of Directors.
In addition, the Equity Award Grant Policy:
•has clear requirements regarding the dates to approve grants each month, official effective date of grants post-approval and other measures to ensure unbiased and consistent practice is in place;
•provides that the committee has authority to approve grants that are within an approved equity grant framework, which is itself reviewed and approved by the Compensation Committee at the beginning of each calendar year based on market and competitive review;
•provides that the committee has authority to approve grants as noted above that are for new hire or annual equity awards only; any other awards must be presented to the Compensation Committee and/or our Board of Directors for review and approval; and
•provides that the exercise price of all options to purchase shares of common stock and stock appreciation rights covering shares of common stock will not be less than 100% of the fair market value of a share of our common stock on the grant date of the award.
•It is also our policy not to time the grant of equity awards in relation to the release of material non-public information, and it is the intent of the Equity Award Grant Policy to specify the timing of effectiveness of the grant of equity awards under the policy to avoid such timing.
Stock Ownership Guidelines
We have adopted stock ownership guidelines forto help ensure that our CEOexecutive officers, including our NEOs, and the non-employee members of our Boardboard of Directors to help ensure that they eachdirectors maintain ana meaningful equity stake in the Companycompany. We believe that these guidelines encourage the executive officers and by doing so, appropriately linkdirectors to act as owners, thereby better aligning their interests with those of the interestscompany’s stockholders.All executives (and directors) are in compliance with the stock ownership guidelines.
Each non-employee director is expected to accumulate and hold a number of our stockholders. The guideline for our CEO requires him to hold shares of our common stock with an aggregate value equal of at least three times his annual base salary for service as Chief Executive Officer (not including incentive compensation). The guideline for the non-employee members of our Board of Directors requires each director to hold shares of ourcompany’s common stock with an aggregate value equal to at least three times the value of his or herthe annual cash retainer fees for service on our Boardthe board of Directors. Ourdirectors and maintain this minimum amount of stock ownership throughout the tenure on the board of directors. The value of the annual base retainer does not include the value of any retainers for committee service, chair fees, travel expenses, reimbursements or per meeting fees.
The CEO is expected to accumulate and hold a number of shares of the non-employee memberscompany’s common stock with an aggregate value at least equal to three times the value of our Boardhis annual base salary and to maintain this minimum amount of Directorsstock ownership throughout his tenure as the CEO.
Each officer subject to Section 16 of the Exchange Act (a “Section 16 Officer”) is expected to accumulate and hold a number of shares of the company’s common stock with an aggregate value at least equal to two times the value of such Section 16 Officer’s annual base salary and to maintain this minimum amount of stock ownership throughout his or her tenure as an executive officer.
Non-employee directors and Section 16 Officers are expected to achieve thesethe applicable level of ownership levels by the later of (i) December 31, 2023 and (ii)within five years from the date the applicable individual becomes Chief Executivea non-employee director or Section 16 Officer of the company (whether through being newly appointed, hired or promoted) or a non-employee director.
promoted, as applicable).
Compensation Recovery (“Clawback”) Policy
In February 2020, our Board of DirectorsWe have adopted a compensation recovery (“clawback”) policy (the “Clawback Policy”) effective as of February 1, 2020, that applies to any current or former executive officer who is (or was) subject to Section 16 of the Exchange Act (an “Executive”)Officer at any time during the Clawback Period (as defined below). This policyThe Clawback Policy provides that, in the event of the restatement of any financial reporting required under the securities laws or other similar laws or regulations, our Boardboard of Directorsdirectors (or applicable Board committee)committee thereof) will take such remedial and recovery actions as it deems appropriate, which may include requiring the forfeiture or reimbursement of the portion of any cash-based or equity-based compensation received by the ExecutiveSection 16 Officer that was in excess of the amount that he or she would have received had our financial results been calculated under the restated financial statements, provided that such compensation was paid to, awarded to, or vested in (or became eligible to vest in) the ExecutiveSection 16 Officer during the fiscal year of the restatement or during one of the three prior full fiscal years (the “Clawback Period”).
In addition, the policyClawback Policy provides that, in the event of a violation of any material Companycompany policy or code of conduct or fraud, in either instance resulting in demonstrable material injury, damage or reputational harm to us, our Boardboard of Directorsdirectors (or applicable Board committee)committee thereof) will take such remedial and recovery actions as it deems appropriate with respect to any cash-based compensation or equity-based compensation paid to, awarded to, or vested in (or became eligible to vest in) an Executivea Section 16 Officer during the Clawback Period including, but not limited to, the forfeiture or reimbursement of an amount as reasonably determined by our Boardboard of Directorsdirectors equal to the amount of demonstrable financial loss, reputational damage or similar adverse impact suffered by us as a result of the misconduct.
On October 26, 2022, the SEC adopted final rules implementing the incentive-based compensation recovery provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).The final rules direct the stock exchanges to establish listing standards requiring listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to satisfy related disclosure obligations. We intend to timely amend and restate our Clawback Policy, or adopt a new policy, to reflect these new requirements.
Policy Prohibiting Hedging and Pledging of Equity Securities
Under our Insider Trading Policy, all employees including Named Executive Officers,our NEOs, and the non-employee members of our Boardboard of Directors,directors, are prohibited from engaging in “short sales” and from engaging in transactions in publicly-tradedpublicly traded options, such as puts and calls, and other derivative securities with respect to our securities. This latter prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding Companycompany securities. In addition, all employees including Named Executive Officers,our NEOs, and the non-employee members of the Boardboard of Directorsdirectors are prohibited from pledging Companycompany securities as collateral for a loan or holding such securities in a margin account.
| | |
Processes and Procedures for Compensation Decisions |
CEO Pay Ratio
In August 2015, the SEC issued final rules implementing the provision of the Dodd-Frank Act that requires U.S. publicly traded companies to disclose the ratio of their Principal Executive Officer’s compensation to that of their median employee. For this required disclosure, Quentin S. Blackford, our President and Chief Executive Officer is considered to be our Principal Executive Officer (“PEO”).
For fiscal year 2022:
•the annual total compensation of Quentin Blackford was $7,289,360; and
•the estimated median of the annual total compensation of all employees of our company, other than Mr. Blackford, was $75,416.
Based on this information, for 2022 the ratio of the annual total compensation of Mr. Blackford, our President and PEO, to the median of the annual compensation of all employees was 96.7 to 1.
The SEC rules for identifying the median employee and calculating the pay ratio permit companies to use various methodologies and assumptions, to apply certain exclusions and to make reasonable estimates that reflect their employee population and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio that we have reported.
To identify the median employee, we used the base salary for all of our employees, excluding our PEO, who were employed by us on December 31, 2022. We included full-time, part-time, and temporary employees. Since the time at which we selected our median employee, there has been no significant change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure.
After identifying the median employee, we calculated annual total compensation for the median employee using the same methodology we used for determining total compensation for our NEOs as shown in the “2022 Summary Compensation Table” below.
Stockholder Advisory Vote on Named Executive Compensation
At our 2022 Annual Meeting of Stockholders, we conducted a non-binding stockholder advisory vote on the compensation of our NEOs (commonly known as a “Say-on-Pay” vote). Approximately 84.3% of the votes cast approved our executive compensation program for 2021. The Committee evaluated the results of the 2022 Say-on-Pay vote and believes the strong stockholder support signals approval of the current pay programs. The Committee also considers many other factors in evaluating the company’s executive compensation programs as discussed in this Compensation Discussion and Analysis, including the assessment of the alignment of the executive compensation programs with the company’s corporate business objectives, evaluations of the programs by the Committee’s independent compensation adviser, and review of peer group data, each of which is responsible forevaluated in the context of the board of director’s fiduciary duty to act in stockholders’ best interests. While each of these factors bore on the Committee’s decisions regarding the NEOs’ compensation, the Committee determined not to implement significant changes to the executive compensation program for 2022.
We value the opinion of our stockholders and will continue to hold annual Say-on-Pay votes like we have since 2019. Our board of directors and the Committee will continue to consider the results of the Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our executive officersofficers.
Compensation and reports to our Board of Directors on its discussions, decisions and other actions. As it relates to our Chief Executive Officer, the CompensationHuman Capital Management Committee reviews and approves corporate goals and objectives relating to his compensation, evaluates his performance in light of those goals and objectives and makes recommendations to the independent members of our Board of Directors
on changes to his compensation. As it relates to our other Named Executive Officers, the Compensation Committee, in consultation with our Chief Executive Officer, reviews and approves all compensation decisions. Our Chief Executive Officer, Chief Financial Officer and Chief People Officer provide initial recommendations to the Compensation Committee on the corporate and departmental performance objectives under our Executive Incentive Compensation Plan.
Report
The Compensation and Human Capital Management Committee is authorized to retain(the “Compensation Committee”) has reviewed and discussed the services of one or more executive compensationsection titled “Compensation Discussion and benefits consultants or other outside experts or advisors as it sees fit,Analysis” included in connectionthis Proxy Statement with the establishment of our executive compensation programmanagement. Based on such review and related policies. For 2020, the Compensation Committee engaged Compensia, to advise us on compensation philosophy, selection of a group of peer companies to use for compensation benchmarking purposes and cash and equity compensation levels for our directors, executives and other employees based on current market practices.
| | |
Tax and Accounting Considerations |
Deductibility of Executive Compensation
Generally, Section 162(m) of the Code disallows a federal income tax deduction for public corporations of remuneration in excess of one million dollars paid in any fiscal year to certain specified executive officers, which include their chief executive officer, chief financial officer, any other executive officer whose total compensation is required to be reported to stockholders under the Exchange Act by reason of such individual being among the three highest compensated executive officers for the tax year, and any executive officer who was subject to the deduction limit in any tax year beginning after December 31, 2016.
As a result of the Tax Cuts and Jobs Act of 2017, compensation paid to our Named Executive Officers in excess of one million dollars will not be deductible for federal income tax purposes unless it qualifies for transition relief applicable to certain “performance-based compensation” payable pursuant to a binding written agreement in effect on November 2, 2017 and which has not been subsequently modified in any material respect. In other words, performance-based incentive awards outstanding on November 2, 2017 or awarded thereafter pursuant to a binding written agreement that was in effect on that date may be exempt from the deduction limit if the applicable conditions of the former exemption for “performance-based compensation” are satisfied.
In designing our executive compensation program and determining compensation of our executive officers, including our Named Executive Officers, the Compensation Committee considers a variety of factors, including the potential impact of the Section 162(m) deduction limit. However,discussion, the Compensation Committee has notrecommended to the Board of Directors that the section titled “Compensation Discussion and will not necessarily limit executive compensation to that which is or mayAnalysis” be deductible under Section 162(m).included in this Proxy Statement.
To maintain flexibility to compensate our executive officers in a manner designed to promote short-term and long-term corporate goals and objectives,Respectfully submitted by the members of the Compensation Committee has not adopted a policy that all compensation must be deductible. The Compensation Committee believes that our stockholders’ interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expense. Thus, the Compensation Committee may approve compensation for our Named Executive Officers that may not be fully deductible because of the deduction limit of Section 162(m) when it believes that such compensation is consistent with the goals of our executive compensation program and is in the best interests of the Company and our stockholders.
Accounting for Stock-Based Compensation
We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for stock-based compensation awards. FASB ASC Topic 718 requires the measurement of compensation expense for all share-based payment awards made to employees and the non-employee members of our Board of Directors, including options to purchase shares of common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.Directors:
Karen Ling (Chair)
Abhijit Y. Talwalkar
Cathleen Noel Bairey Merz, M.D.
Fiscal 20202022 Summary Compensation Table
The following table presents summaryprovides information regarding the total compensation for services rendered in all capacities that was awarded to, earned by, or paid to our Chief Executive Officer, our Chief Financial Officer, our former Chief Financial Officer and our three other most highly compensatednamed executive officers in our fiscal yearfor the years ended December 31, 2020. The individuals listed in the table below are our Named Executive Officers for our fiscal year ended December 31,2022, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position |
| Year |
| Salary ($) |
| Bonus ($) |
| Stock Awards ($)(1) |
| Option Awards ($)(1) |
| Non-Equity Incentive Plan Compensation ($)(2) |
| All Other Compensation ($) |
| Total ($) |
Kevin M. King; Former President and Chief Executive Officer | | 2020 | | 576,208 | | | — | | | 3,494,769 | | | — | | | 775,866 | | | 38,219 | | | 4,885,062 | |
| 2019 | | 602,492 | | | — | | | 3,202,894 | | — | | — | | | 846,511 | | | 122,239 | | | 4,774,136 | |
| 2018 |
| 550,000 | |
| — | |
| 1,479,170 | |
| 1,532,217 | |
| 1,457,500 | |
| 120,185 | |
| 5,139,072 | |
| | | | | | | | | | | | | | | |
Matthew C. Garrett; Former Chief Financial Officer | | 2020 | | 189,665 | | | — | | | 1,049,451 | | | — | | | — | | | 8,067 | | | 1,247,183 | |
| 2019 | | 383,646 | | | — | | | 1,104,307 | | | — | | | 322,717 | | | 119,671 | | | 1,930,341 | |
| 2018 |
| 350,235 | |
| — | |
| 447,650 | |
| 454,820 | |
| 470,375 | |
| 122,603 | |
| 1,845,683 | |
| | | | | | | | | | | | | | | |
Douglas J. Devine; Chief Financial Officer |
| 2020 | | 231,923 | | | — | | | 3,084,486 | | | — | | | 173,984 | | | 1,658 | | | 3,492,051 | |
David A. Vort; Executive Vice President, Sales | | 2020 | | 375,865 | | | — | | | 1,049,451 | | | — | | | 168,163 | | | 8,067 | | | 1,601,546 | |
| 2019 | | 368,192 | | | — | | | 1,104,307 | | | — | | | 312,800 | | | 13,307 | | | 1,798,606 | |
| 2018 |
| 311,923 | | | — | |
| 447,650 | |
| 454,820 | |
| 480,000 | |
| 10,261 | |
| 1,704,654 | |
| | | | | | | | | | | | | | | |
Mark J. Day; Executive Vice President, Research & Development | | 2020 | | 352,045 | | | — | | | 763,117 | | | — | | | 180,959 | | | 5,422 | | | 1,301,543 | |
| 2019 | | 347,730 | | | — | | | 883,484 | | | — | | | 193,711 | | | 11,454 | | | 1,436,379 | |
| 2018 |
| 330,000 | |
| — | |
| 313,355 | |
| 322,289 | |
| 310,713 | |
| 15,402 | |
| 1,291,759 | |
Daniel G. Wilson; Executive Vice President of Strategy, Corporate Development and Investor Relations | | 2020 | | 338,012 | | | — | | | 686,905 | | | — | | | 173,264 | | | 6,377 | | | 1,204,558 | |
(1)The amounts reported represent the aggregate grant-date fair value of the stock awards and stock options granted to the Named Executive Officer, calculated in accordance with ASC Topic 718. The grant-date fair value does not take into account any estimated forfeitures related to service-vesting conditions. The assumptions used in calculating the grant-date fair value of the stock awards and options reported in these columns are set forth in the section in our Annual Report on Form 10-K for the year ended December 31, 2020 titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation.”
(2)The amounts in the Non-Equity Incentive Plan Compensation column for 2020, 2019, and 2018 for all Named Executive Officers except for Mr. Vort were paid in March 2021, March 2020 and March 2019, respectively, pursuant to our 2020, 2019, and 2018 Bonus Plans, respectively, as described in the section below titled “Executive Compensation—Non-Equity Incentive Plan Compensation”. Mr. Vort’s bonus amount was paid quarterly pursuant to the performance bonus arrangement set forth in the section above titled “Sales Plan for Mr. Vort.”
Fiscal 2020 Grants of Plan-Based Awards
The following table presents information regarding the amount of plan-based awards granted to our Named Executive Officers during our fiscal year ended December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
| Estimated Future Payouts Under Equity Incentive Plan Awards |
|
|
|
|
|
|
|
|
| Named Executive Officer |
| Grant Date |
| Threshold ($) |
| Target ($) |
| Maximum ($) |
| All Other Stock Awards: Number of Shares of Stock or Units (#)(1) |
| All Other Option Awards: Number of Shares Underlying Options (#) |
| Exercise Price of Option Awards ($) |
| Grant Date Fair Value of Stock and Option Awards ($)(2) |
| Kevin M. King | | — | | | 475,020 | | | 633,360 | | | 1,425,060 | | | — | | | — | | | — | | | — | |
|
| 2/26/2020 |
| — | |
| 21,562 | | | 43,124 | |
| — | |
| — | |
| — | |
| 1,747,384 | |
|
| 2/26/2020 |
| — | |
| — | |
| — | |
| 21,562 | |
| — | |
| — | |
| 1,747,384 | |
| Matthew C. Garrett | | — | | | 174,128 | | | 232,170 | | | 522,383 | | | — | | | — | | | — | | | — | |
|
| 2/25/2020 |
| — | | | 6,348 | | | 12,696 | | | — | |
| — | |
| — | |
| 524,726 | |
|
| 2/25/2020 |
| — | | | — | | | — | | | 6,348 | |
| — | |
| — | |
| 524,726 | |
| Douglas J. Devine | | — | | | 202,500 | | | 270,000 | | | 607,500 | | | — | | | — | | | — | | | — | |
|
| 8/4/2020 |
| — | | | 9,123 | | | 18,246 | | | — | | | — | | | — | | | 1,542,243 | |
|
| 8/4/2020 |
| — | | | — | | | — | | | 9,123 | |
| — | |
| — | |
| 1,542,243 | |
| David A. Vort | | — | | | 221,485 | | | 295,313 | | | 664,454 | | | — | | | — | | | — | | | — | |
|
| 2/25/2020 | | — | | | 6,348 | | | 12,696 | | | — | | | — | | | — | | | 524,726 | |
|
| 2/25/2020 | | — | | | — | | | — | | | 6,348 | | | — | | | — | | | 524,726 | |
| Mark J. Day | | — | | | 110,792 | | | 147,722 | | | 332,375 | | | — | | | — | | | — | | | |
|
| 2/25/2020 | | — | | | 4,616 | | | 9,232 | | | — | | | — | | | — | | | 381,559 | |
|
| 2/25/2020 | | — | | | — | | | — | | | 4,616 | | | — | | | — | | | 381,559 | |
| Daniel G. Wilson | | — | | | 106,080 | | | 141,440 | | | 318,240 | | | — | | | — | | | — | | | — | |
| | 2/25/2020 | | — | | | 4,155 | | | 8,310 | | | — | | | — | | | — | | | 343,452 | |
| | 2/25/2020 | | — | | | — | | | — | | | 4,155 | | | — | | | — | | | 343,452 | |
__________________________
(1)The restricted stock unit awards were made under the 2016 Equity Incentive Plan.
(2)The amounts reported in the Grant Date Fair Value of Stock and Option Awards column represent the grant date fair value of stock options and restricted stock awards granted in fiscal 2020, calculated in accordance with ASC Topic 718.
Fiscal 2020 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and the vesting of stock awards by our Named Executive Officers during our fiscal year ended December 31, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Option Awards |
| Stock Awards |
|
| Number of Shares Acquired on Exercise |
| Value Realized on Exercise (1) |
| Number of Shares Acquired on Vesting |
| Value Realized on Vesting (2) |
| Kevin M. King |
| 319,622 | | | 39,155,332 | | | 18,535 | | | 1,631,451 | |
| Matthew C. Garrett |
| 81,549 | | | 10,452,227 | | | 5,969 | | | 525,391 | |
| David A. Vort | | 199,719 | | | 28,845,522 | | | 6,044 | | | 531,993 | |
| Mark J. Day |
| 3,798 | | | 856,626 | | | 5,075 | | | 446,701 | |
| Daniel G. Wilson |
| — | | | — | | | 3,841 | | | 440,447 | |
| Douglas J. Devine | | — | | | — | | | — | | | — | |
__________________________
(1)Based on the market price of our common stock on the date of exercise less the option exercise price paid for those shares, multiplied by the number of shares for which the option was exercised.
(2)Based on the market price of our common stock on the vesting date or last trading date, multiplied by the number of shares vested.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position |
| Year |
| Salary ($) |
| Bonus (1) ($) |
| Stock Awards ($)(2)(3) |
| Non-Equity Incentive Plan Compensation We provide each of our Named Executive Officers an opportunity to receive formula-based incentive payments. The payments are based on a target incentive amount for each Named Executive Officer.($)(4)
| Non-Equity Incentive Payments for Messrs. King, Garrett, Devine, Day and Wilson
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Named Executive Officer |
| 2019 Target Annual Cash Bonus Award Opportunity (as a percentage of base salary) |
| 2020 Target Annual Cash Bonus Award Opportunity (as a percentage of base salary) |
| Target Award Amount ($) |
| Actual Award Amount ($) | | Kevin M. King |
| 100 | % |
| 100 | % | | $ | 633,360 | | | $ | 775,866 | | | Matthew C. Garrett |
| 60 | % |
| 60 | % | | $ | 241,457 | | | $ | — | | | Douglas J. Devine | | — | % | | 60 | % | | $ | 270,000 | | | $ | 173,984 | | | Mark J. Day |
| 40 | % |
| 40 | % | | $ | 139,360 | | | $ | 180,959 | | | Daniel G. Wilson | | 40 | % | | 40 | % | | $ | 141,440 | | | $ | 173,264 | |
The 2020 Bonus Plan provided for non-equity incentive compensation based upon our achievement of performance goals for 2020. The actual target incentive payments were weighted toward achievement of revenue growth, improving gross margin, and achievement of operating expense targets.
Non-Equity Incentive Payments for Mr. Vort
Mr. Vort is eligible to receive formula-based incentive payments through his employment offer letter agreement, as described below in the section titled “Executive Compensation—Executive Officer Employment Arrangements—David A. Vort.” For 2020, Mr. Vort had a target incentive amount of $295,313, and received an actual award amount of $413,493 in quarterly payments.
Executive Officer Employment Agreements
Michael J. Coyle
We entered into an employment offer letter in December 2020 with Michael J. Coyle, our President and Chief Executive Officer. The letter has no specific term and provides for at-will employment. Mr. Coyle’s current annual base salary is $660,000 and he is eligible to receive an annual performance bonus for fiscal year 2021 with the target amount determined as 100% of Mr. Coyle’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of Company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan discussed below. Mr. Coyle also received a $850,000 relocation bonus which is repayable to the Company under certain circumstances.
Douglas J. Devine
We entered into an employment offer letter in June 2020 with Douglas J. Devine, our Chief Financial Officer. The letter has no specific term and provides for at-will employment. Mr. Devine’s current annual base salary is $450,000 and he is eligible to receive an annual performance bonus for fiscal year 2021 with the target amount determined as 60% of Mr. Devine’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of Company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed below. Mr. Devine also received a $150,000 signing bonus, which is repayable to the Company under certain circumstances.
David A. Vort
We entered into an employment offer letter in November 2013 with David A. Vort, our Executive Vice President, Sales. The letter has no specific term and provides for at-will employment. Mr. Vort’s current annual base salary is $ 393,750 and he is eligible to receive an annual performance bonus for fiscal year 2021 with the target amount determined as 75% of Mr. Vort’s annual base salary based upon the achievement of our revenue plan and other employment objectives set by us. Mr. Vort will be eligible to receive this bonus each calendar quarter based upon achievement of target sales goals. In addition to the bonus noted above, Mr. Vort will receive an annual bonus of 0.5% of every dollar of revenue earned above our yearly revenue plan.
Mark J. Day
We entered into an employment offer letter in June 2007 with Mark J. Day, our Executive Vice President, Research & Development. The letter has no specific term and provides for at-will employment. Mr. Day’s current annual base salary is $369,304 and he is eligible to receive an annual performance bonus for fiscal year 2021 with the target amount determined as 40% of Mr. Day’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed below.
Daniel G. Wilson
We entered into an employment offer letter in June 2019 with Daniel G. Wilson, our Executive Vice President of Strategy, Corporate Development and Investor Relations. The letter has no specific term and provides for at-will employment. Mr. Wilson’s current annual base salary is $353,600 and he is eligible to receive an annual performance bonus for fiscal year 2021 with the target amount determined as 40% of Mr. Wilson’s annual base salary and the actual bonus amount to be determined based upon achievement of a mix of company and individual performance objectives pursuant to the Company’s Executive Incentive Compensation Plan as discussed below.
Pension Benefits and Nonqualified DeferredAll Other Compensation
We do not provide a defined benefit pension plan for our employees, and none of our Named Executive Officers participated in a nonqualified deferred compensation plan in 2020.($)(5)
|
| Total ($) |
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding equity awards held by our Named Executive Officers at December 31, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Option Awards | | RSU and performance share awards | | Name |
| Grant Date(1) |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
| Option Exercise Price ($)(2) |
| Option Expiration Date | | Grant Date(1) | | Number of
Shares or
Units of Stock
That Have Not
Vested
(#) | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
(#) | | Equity
Incentive Plan
Awards:
Market or
Payout Value
or Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
($)(1) | | Kevin M. King |
| 2/16/2017 | (12) | 81,958 | | | 6,250 | | | 35.25 | | 2/16/2027 | | 2/16/2017 | | 21,000 | | (15) | 1,480,500 | | | — | | | — | |
| 2/28/2018 | (11) | 35,543 | | | 16,157 | | | 62.15 | | 2/29/2028 | | 2/28/2018 | | 17,850 | | (16) | 1,479,170 | | | — | | | — | | |
| — | | | — | | | — | | | — | | | — | | | 2/27/2019 | | 8,340 | | (17) | 800,723 | | | — | | | — | | |
| — | | | — | | | — | | | — | | | — | | | 2/26/2020 | | 21,562 | | | 1,747,384 | | | 43,124 | | | 3,494,769 | | |
| — | | | — | | | — | | | — | | | — | | | 6/19/2020 | | — | | | — | | | 37,530 | | | 6,397,364 | | | Matthew C. Garrett |
| 2/16/2017 | (12) | 520 | | | 1,557 | | | 35.25 |
| 2/16/2027 | | 2/16/2017 | | 3,500 | | (15) | 123,375 | | | — | | | — | |
| 2/27/2018 | (11) | 315 | | | 4,719 | | | 63.95 |
| 2/27/2028 | | 2/27/2018 | | 3,500 | | (16) | 223,825 | | | — | | | — | |
| — | | | — | | | — | | | — | | | — | | | 2/27/2019 | | 2,156 | | (17) | 206,998 | | | — | | | — | |
| — | | | — | | | — | | | — | | | — | | | 43,886 | | | 6,348 | | | 524,726 | | | 12,696 | | | 1,049,451 | |
| — | | | — | | | — | | | — | | | — | | | 44,001 | | | — | | | — | | | 12,940 | | | 2,205,752 | | | David A. Vort |
| 2/16/2017 | (12) | 11,589 | | | 1,588 | | | 35.25 | | 2/16/2027 | | 2/16/2017 | | 3,575 | | (15) | 126,019 | | | — | | | — | |
| 2/27/2018 | (11) | 10,381 | | | 4,719 | | | 63.95 | | 2/27/2028 | | 2/27/2018 | | 3,500 | | (16) | 223,825 | | | — | | | — | |
| — | | | — | | | — | | | — | | | — | | | 2/27/2019 | | 2,156 | | (17) | 206,998 | | | — | | | — | |
| — | | | — | | | — | | | — | | | — | | | 2/25/2020 | | 6,348 | | | 524,726 | | | 12,696 | | | 1,049,451 | |
| — | | | — | | | — | | | — | | | — | | | 6/19/2020 | | — | | | — | | | 12,940 | | | 2,205,752 | | | Mark J. Day |
| 10/20/2016 | (9) | 15,785 | | | — | | | 17.00 | | 10/20/2026 | | 2/8/2017 | | 3,275 | | (15) | 118,621 | | | — | | | — | |
| 2/8/2017 | (12) | 13,591 | | | 1,457 | | | 36.22 | | 2/8/2027 | | 2/27/2018 | | 2,450 | | (16) | 156,678 | | | — | | | — | |
| 2/27/2018 | (11) | 7,356 | | | 3,344 | | | 63.95 | | 2/27/2028 | | 2/27/2019 | | 1,725 | | (17) | 165,617 | | | 13,804 | | (14) | 1,325,322 | |
| — | | | — | | | — | | | — | | | — | | | 2/25/2020 | | 4,616 | | | 381,559 | | | 9,232 | | | 763,117 | | | — | | | — | | | — | | | — | | | — | | | 6/19/2020 | | — | | | — | | | 10,353 | | | 1,764,772 | | | Daniel G. Wilson | | — | | | — | | | — | | | — | | | — | | | 8/1/2019 | | 8,379 | | | 680,961 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8/1/2019 | | 1,047 | | | 85,090 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2/25/2020 | | 4,155 | | | 343,452 | | | 8,310 | | | 686,905 | | | — | | | — | | | — | | | — | | | — | | | 6/19/2020 | | — | | | — | | | 6,901 | | | 1,176,344 | | | Douglas J. Devine | | — | | | — | | | — | | | — | | | — | | | 8/4/2020 | | 9,123 | | | 1,542,243 | | | 18,246 | | | 3,084,486 | |
__________________________
(1)Each of the outstanding equity awards was granted pursuant to our 2006 Stock Plan or our 2016 Stock Plan.
(2)This column represents the fair value of our common stock on the date of grant, as determined by our Board of Directors.
(3)25% of the shares of our common stock subject to this option vested on June 13, 2014, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(4)25% of the shares of our common stock subject to this option vested on June 10, 2015, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(5)25% of the shares of our common stock subject to this option vested on February 10, 2016, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(6)100% of the shares of our common stock subject to this option were vested as of January 1, 2015.
(7)25% of the shares of our common stock subject to this option vested on July 21, 2016, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(8)25% of the shares of our common stock subject to this option vested on December 15, 2016, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(9)25% of the shares of our common stock subject to this option vested on September 21, 2017, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(10)25% of the shares of our common stock subject to this option vested on January 1, 2015, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(11)25% of the shares of our common stock subject to this option vested on March 1, 2019, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(12)25% of the shares of our common stock subject to this option vested on March 1, 2018, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(13)25% of the shares of our common stock subject to this option vested on August 1, 2019, and the balance vests in 36 successive equal monthly installments, subject to continued service through each such vesting date.
(14)100% of the shares of our common stock subject to this performance share award will vest on or around March 15, 2021.
(15)25% of the shares of our common stock subject to this award vested on March 1, 2018 and will vest each one-year anniversary thereafter.
(16)25% of the shares of our common stock subject to this award vested on March 1, 2019 and will vest each one-year anniversary thereafter.
(17)25% of the shares of our common stock subject to this award vested on March 1, 2020 and will vest each one-year anniversary thereafter.
(18)25% of the shares of our common stock subject to this award vested on August 1, 2019 and will vest each one-year anniversary thereafter.
(19)50% of the shares of our common stock subject to this award vested on March 1, 2021 and 50% on March 1, 2023.
Potential Payments upon Termination or Change of Control
In August 2020, the Compensation Committee (and, with respect to our CEO, the independent members of our Board of Directors) approved a new Severance and Change in Control Policy (the “Policy”) effective September 2019, which provides a standardized approach for the receipt of severance and change in control payments and benefits by certain employees, including our Named Executive Officers. Under this approach, the rights of our executives with respect to the receipt of payments and benefits upon an involuntary termination of employment, including an involuntary termination of employment in connection with a change in control of the Company, were established on a uniform basis. Generally, the Policy replaced the individual Change of Control and Severance Agreements which we had previously entered into with our Named Executive Officers which had expired at the completion of their two-year term in September 2019.
Under the Policy, if, within the period 3 months prior to and 12 months following a “change of control” (such period, the “Change in Control Period”), we terminate the employment of the applicable employee other than for “cause,” death or “disability,” or the employee resigns for “good reason” (as such terms are defined in the employee’s change of control and severance agreement) and, within 60 days following the employee’s termination, the employee executes an irrevocable separation agreement and release of claims, the employee is entitled to receive from the Company (i) a lump sum severance payment equal to the payment of employee’s base salary, at the highest rate in effect during the term of the agreement, for 24 months for Mr. Coyle, and 15 months for Messrs. Devine, Wilson, Vort and Day, (ii) payment of premiums to maintain group health insurance continuation benefits pursuant to “COBRA” for the employee and the employee’s dependents for up to 24 months for Mr. Coyle, and 15 months for Messrs. Devine, Wilson, Vort and Day, (iii) a sum payment equal to 150% of target bonus in effect for the fiscal year in which termination occurs for Mr. Coyle, and 100% of target bonus for Messrs. Devine, Wilson, Vort and Day, and (iv) accelerated vesting as to 100% of the
employee’s outstanding unvested equity awards (if vesting depends on achievement of performance criteria, then assuming performance criteria has been achieved at target levels).
In addition, under the Policy, if, outside of a Change in Control Period, we terminate the employment of the applicable employee other than for cause, death or disability, or the employee resigns for good reason and, within 60 days following the employee’s termination, the employee executes an irrevocable separation agreement and release of claims, the employee is entitled to receive (i) continuing payments of severance pay at a rate equal to the aggregate amount of the employee’s base salary, at the highest rate in effect during the term of the agreement, for up to 18 months for Mr. Coyle, and 12 months for Messrs. Devine, Wilson, Vort and Day, and (ii) payment of premiums to maintain group health insurance continuation benefits pursuant to “COBRA” for the employee and the employee’s dependents for 18 months for Mr. Coyle, and 12 months for Messrs. Devine, Wilson, Vort and Day.
Under the Policy, in the event any payment to the applicable Named Executive Officer pursuant to his change of control and severance agreement would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, as amended, or the Code (as a result of a payment being classified as a parachute payment under Section 280G of the Code), the officer will receive such payment as would entitle him to receive the greatest after-tax benefit, even if it means that we pay him a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code.
Executive Incentive Compensation Plan
Our Board of Directors has adopted an Executive Incentive Compensation Plan, or the Bonus Plan. The Bonus Plan is administered by our Compensation Committee. The Bonus Plan allows our Compensation Committee to provide cash incentive awards to selected employees, including our Named Executive Officers, based upon performance goals established by our Compensation Committee.
Under the Bonus Plan, our Compensation Committee determines the performance goals applicable to any award, which goals may include, without limitation: attainment of research and development milestones, sales bookings, business divestitures and acquisitions, cash flow, cash position, earnings (which may include any calculation of earnings, including but not limited to earnings before interest and taxes, earnings before taxes, earnings before interest, taxes, depreciation and amortization and net earnings), earnings per share, net income, net sales, operating cash flow, operating expenses, operating income, operating margin, overhead or other expense reduction, product defect measures, product release timelines, productivity, profit, return on assets, return on capital, return on equity, return on investment, return on sales, revenue, revenue growth, sales results, sales growth, stock price, time to market, total stockholder return, working capital, and individual objectives such as peer reviews or other subjective or objective criteria. Performance goals that include our financial results may be determined in accordance with GAAP or such financial results may consist of non-GAAP financial measures and any actual results may be adjusted by the Compensation Committee for one-time items or unbudgeted or unexpected items when performance goals that include our financial results may be determined in accordance with GAAP, or such financial results may consist of non-GAAP financial measures, and any actual results may be adjusted by the Compensation Committee for one-time items or unbudgeted or unexpected items when determining whether the performance goals have been met. The goals may be on the basis of any factors the Compensation Committee determines relevant, and may be adjusted on an individual, divisional, business unit or company-wide basis. The performance goals may differ from participant to participant and from award to award.
Our Compensation Committee may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award, and/or increase, reduce or eliminate the amount allocated to the bonus pool for a particular performance period. The actual award may be below, at or above a participant’s target award, in the Compensation Committee’s discretion. Our Compensation Committee may determine the amount of any reduction on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers.
Actual awards are paid in cash only after they are earned, which usually requires continued employment through the date a bonus is paid. Our Compensation Committee has the authority to amend, alter, suspend or terminate the Bonus Plan provided such action does not impair the existing rights of any participant with respect to any earned bonus.
Pay Ratio Disclosure
In August 2015, the SEC issued final rules implementing the provision of the Dodd-Frank Act that requires U.S. publicly traded companies to disclose the ratio of their Principal Executive Officer’s compensation to that of their median employee. For this required disclosure, Kevin M. King, our formerQuentin S. Blackford; President and Chief Executive Officer is considered to be our Principal Executive(6)
| | 2022 | | 650,000 | | | 675,000 | | | 5,787,285 | | | 829,000 | | | — | | | 7,941,285 | |
| 2021 | | 162,500 | | | — | | | 9,078,651 | | | — | | | 195 | | | 9,241,346 | |
Brice Bobzien, Chief Financial Officer (“PEO”).(7) For fiscal year 2020:
•the annual total compensation of Kevin M. King was $4,885,062; and
•the estimated median of the annual total compensation of all employees of our company, other than Mr. King, was $105,321.
Based on this information, for 2020 the ratio of the annual total compensation of Mr. King, our President
| | 2022 | | 153,846 | | | — | | | 3,031,002 | | | 295,200 | | | 385 | | | 3,480,433 | |
Douglas Devine; former Chief Operating Officer and PEO, to the median of the annual compensation of all employees was 46.4 to 1.former Chief Financial Officer. | | 2022 | | 500,000 | | | — | | | 1,915,024 | | | 300,000 | | | — | | | 2,715,024 | |
| 2021 | | 512,952 | | | — | | | 4,558,007 | | | 605,248 | | | 3,500 | | | 5,679,707 | |
| 2020 | | 231,923 | | | — | | | 3,084,486 | | | 173,984 | | | — | | | 3,490,393 | |
The SEC rules for identifying the median employeePatrick Murphy; Chief Business Officer and calculating the pay ratio permit companies to use various methodologiesChief Legal Officer (8)
| | 2022 | | 440,000 | | | 478,500 | | | 4,057,106 | | | 357,200 | | | 5,000 | | | 5,337,806 | |
| 2021 | | 375,865 | | | — | | | 1,049,451 | | | 168,163 | | | — | | | 1,593,479 | |
Chad Patterson; Chief Commercial Officer (9) | | 2022 | | 190,385 | | | — | | | 6,215,223 | | | 332,100 | | | — | | | 6,737,708 | |
Minang Turakhia; Chief Medical Officer, Chief Scientific Officer and assumptions, to apply certain exclusions and to make reasonable estimates that reflect their employee population and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio that we have reported.EVP, Product Innovation (10) To identify the median employee, we used the base salary for all of our U.S. employees, excluding our PEO, who were employed by us on December 31, 2020. We included full-time, part-time, and temporary employees. Since the time at which we selected our median employee, there has been no significant change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure.
After identifying the median employee, we calculated annual total compensation for the median employee using the same methodology we used for determining total compensation for our Named Executive Officers as shown
| | 2022 | | 237,019 | | | 500,000 | | | 3,274,088 | | | 261,400 | | | 5,000 | | | 4,277,507 | |
(1)Represents sign on bonuses paid pursuant to the offer letters for Mr. Blackford, Mr. Murphy and Dr. Turakhia.
(2)The values of the stock awards reflect the grant date fair value of stock awards granted computed in accordance with FASB ASC Topic 718. For a discussion of our valuation assumptions, see Note 1 and Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023. Mr. Blackford’s 2022 PSU award includes a TSR component, and the fair value was based on the Monte Carlo simulation valuation method to reflect the likelihood of achievement of the performance conditions.
(3)The grant date fair value of stock awards assuming the maximum potential value of performance-based awards granted in 2022 is as follows: $14.5 million for Mr. Blackford; $3.0 million for Mr. Bobzien, $1.9 million for Mr. Devine; $5.0 million for Mr. Murphy, $6.2 million for Mr. Patterson and $3.3 million for Dr. Turakhia.
(4)The amounts in the Non-Equity Incentive Plan Compensation column for 2022, 2021, and 2020 for all NEOs were paid in March 2023, March 2022, and March 2021, respectively, pursuant to our 2022, 2021, and 2020 Annual Bonus Plans, respectively, as described in the section below titled “Executive Compensation—Non-Equity Incentive Plan Compensation.”
(5)All other compensation includes company paid portion of the health plan, group term life, wellness plan , 401K matching of up to $5,000 per year.
(6)Mr. Blackford started in October 2021; amounts reflect the pro rata portion of salary paid based on his period of service for 2021. Mr. Blackford was not eligible for an annual bonus in 2021.
(7)Mr. Bobzien started in August 2022; amounts reflect the pro rata portion of his paid based on his period of service for 2022. Pursuant to his offer letter, Mr. Bobzien was eligible to receive a full-year bonus (not pro-rated based on his period of service) for 2022.
(8)Mr. Murphy started in November 2021; amounts reflect the pro rata portion of his salary and bonus paid based on his period of service for 2021.
(9)Mr. Patterson started in July 2022; amounts reflect the pro rata portion of his salary paid based on his period of service for 2022. Pursuant to his offer letter, Mr. Patterson was eligible to receive a full-year bonus (not pro-rated for his period of service) for 2022.
(10)Dr. Turakhia started in June 2022; amounts reflect the pro rata portion of his salary and bonus paid based on his period of service for 2022.
2022 Grants of Plan-Based Awards Table
The following table provides information concerning each grant of an award made for the year ended December 31, 2022, for each of our NEOs under any compensation plan. This information supplements the information about these awards set forth in the “2022 Summary Compensation Table.”
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
| Estimated Possible Payouts Under 2022 Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | |
|
| Named Executive Officer |
| Grant Date |
| Threshold ($) | | Target ($) |
| Maximum ($) | | Threshold (#) |
| Target (#) |
| Maximum (#) | | All Other Stock Awards: Number of RSUs Granted | | Grant Date Fair Value of Stock Awards ($)(3) |
| Quentin Blackford | | | | | | | | | | | | | | | | | | |
| 2022 Annual Bonus Plan Award | | | | — | | | 650,000 | | | 968,500 | | | — | | | — | | | — | | | — | | | — | |
| 2022 PSU’s | | 2/16/2022 | | — | | | — | | | — | | | 20,079 | | | 40,159 | | | 100,398 | | | 40,159 | | | — | |
| Brice Bobzien | | | | | | | | | | | | | | | | | | |
| 2022 Annual Bonus Plan Award | | | | — | | | 240,000 | | | 295,200 | | | — | | | — | | | — | | | — | | | — | |
| 2022 PSUs | | 8/8/2022 | | — | | | — | | | — | | | 5,064 | | | 10,129 | | | 20,258 | | | — | | | — | |
| 2022 RSUs | | 8/8/2022 | | — | | | — | | | — | | | — | | | — | | | — | | | 10,129 | | | 1,515,501 | |
| Douglas Devine | | | | | | | | | | | | | | | | | | |
| 2022 Annual Bonus Plan Award | | | | — | | | 300,000 | | | 447,000 | | | — | | | — | | | — | | | — | | | — | |
| 2022 PSUs | | 2/15/2022 | | — | | | — | | | — | | | 3,711 | | | 7,422 | | | 14,844 | | | — | | | — | |
| 2022 RSUs | | 2/15/2022 | | — | | | — | | | — | | | — | | | — | | | — | | | 7,422 | | | 957,512 | |
| Patrick Murphy |
| | | | | | | | | | | | | | | | | |
| 2022 Annual Bonus Plan Award | | | | — | | | 264,000 | | | 393,360 | | | — | | | — | | | — | | | — | | | — | |
| 2022 PSUs | | 2/15/2022 | | — | | | — | | | — | | | 3,009 | | | 6,018 | | | 12,036 | | | — | | | — | |
| 2022 RSUs | | 2/15/2022 | | — | | | — | | | — | | | — | | | — | | | — | | | 6,018 | | | 776,382 | |
| Chad Patterson | | | | | | | | | | | | | | | | | | |
| 2022 Annual Bonus Plan Award |
| | | — | | | 270,000 | | | 402,300 | | | — | | | — | | | — | | | — | | | — | |
| 2022 PSUs | | 7/25/2022 | | — | | | — | | | — | | | 10,525 | | | 21,050 | | | 42,100 | | | — | | | — | |
| 2022 RSUs | | 7/25/2022 | | — | | | — | | | — | | | — | | | — | | | — | | | 21,050 | | | 3,107,612 | |
| Minang Turakhia | | | | | | | | | | | | | | | | | | |
| 2022 Annual Bonus Plan Award | | | | — | | | 212,500 | | | 316,625 | | | — | | | — | | | — | | | — | | | — | |
| 2022 PSUs | | 6/6/2022 | | — | | | — | | | — | | | 5,562 | | | 11,125 | | | 22,250 | | | — | | | — | |
| 2022 RSUs | | 6/6/2022 | | — | | | — | | | — | | | — | | | — | | | — | | | 11,125 | | | 1,637,044 | |
__________________________
(1)Amounts in the “Estimated Payouts Under Non-Equity Incentive Plan Awards” columns relate to cash incentive opportunities under our 2022 Annual Bonus Plan based upon the combined achievement of corporate and individual performance goals over fiscal year 2022. The actual amounts paid to our named executive officers are set forth in the “2022 Summary Compensation Table” above, and the calculation of the actual amounts paid is discussed more fully in the section titled “Compensation Discussion and Analysis – Target Annual Cash Bonus Opportunities.” Because the individual performance multipliers can range from 0-115%, the 2022 Annual Bonus Plan does not have a threshold level of performance.
(2)Represents the hypothetical payments possible under our NEOs’ respective 2022 PSUs as described in the section entitled “Compensation Discussion and Analysis—Individual Compensation Elements—Annual Long-Term (LTI) Awards." The 2022 PSUs are earned upon achievement of the Corporate Performance Measure. In addition, Mr. Blackford’s 2022 PSU will be further adjusted based on achievement of TSR versus S&P Healthcare Equipment Select Industry Index. For the NEOs other than Mr. Blackford, the threshold, target and maximum column under the header "Estimated Future Payouts Under Equity Incentive Plan Awards" represent achievement at of the Corporate Performance Measure at 72%, 100% and 128%, respectively. For Mr.Blackford’s award, the threshold, target and maximum represent achievement of the Corporate Performance Measure at 72% and the TSR percentile rank at or below 25%; Corporate Performance Measure at 100% and TSR percentile rank at 50%; and Corporate Performance Measure at 128% and TSR percentile rank at or above 75%.
(3)The values of the stock awards reflect the grant date fair value of stock awards granted under our 2016 Equity Incentive Plan during 2022 and are based on the Company’s closing price on the grant date in accordance with FASB ASC Topic 718. For a discussion of our valuation assumptions, see Note 1 and Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023.
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table presents, for each of our named executive officers, information regarding restricted stock units as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Grant Date (1) | | Vesting Commencement Date | | Stock Awards |
| | | Number of Shares That Have Not Vested (#) | | Market Value of Shares That Have Not Vested ($) (2) | | Equity Incentive Plan Awards: Number of Unearned Number of Shares That Have Not Vested (#) | | Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested ($) (2) |
| | | | |
| Quentin Blackford | | | | | | | | | | | | |
| | 2/16/2022 (3) | | 3/15/2025 | | — | | | — | | | 40,159 | | | 3,761,694 | |
| | 10/5/2021(4) | | 3/15/2024 | | | | — | | | 50,989 | | | 4,776,140 | |
| | 10/5/2021 (5) | | 10/5/2021 | | 76,484 | | | 7,164,256 | | | — | | | — | |
| Brice Bobzien | | | | | | | | | | | | |
| | 8/8/2022 (7) | | 3/15/2025 | | | | | | 10,129 | | | 948,783 | |
| | 8/8/2022 (5) | | 8/8/2022 | | 10,129 | | | 948,783 | | | — | | | — | |
| Douglas Devine | | | | | | | | | | | | |
| | 2/15/2022 (7) | | 3/15/2025 | | — | | | — | | | 7,422 | | | 695,219 | |
| | 2/15/2022 (5) | | 2/15/2022 | | 7,422 | | | 695,219 | | | — | | | — | |
| | 3/1/2021 (4) | | 3/15/2024 | | — | | | — | | | 4,430 | | | 414,958 | |
| | 3/1/2021 (5) | | 3/1/2021 | | 3,322 | | | 311,172 | | | — | | | — | |
| | 8/4/2020 (6) | | 3/15/2023 | | | | — | | | 9,123 | | | 854,551 | |
| | 8/4/2020 (5) | | 8/4/2020 | | 4,561 | | | 427,229 | | | — | | | — | |
| Patrick Murphy | | | | | | | | | | | | |
| | 2/15/2022 (7) | | 3/15/2025 | | — | | | — | | | 14,559 | | | 1,363,742 | |
| | 2/15/2022 (5) | | 2/15/2022 | | 6,018 | | | 563,706 | | | — | | | — | |
| | 2/15/2022 (4) | | 3/15/2024 | | — | | | — | | | 6,018 | | | 563,706 | |
| | 11/30/2021 (5) | | 11/30/2021 | | 14,559 | | | 1,363,742 | | | — | | | — | |
| Chad Patterson | | | | | | | | | | | | |
| | 7/25/2022 (7) | | 3/15/2025 | | — | | | — | | | 21,050 | | | 1,971,754 | |
| | 7/25/2022 (5) | | 7/25/2022 | | 21,050 | | | 1,971,754 | | | — | | | — | |
| Minang Turakhia | | | | | | | | | | | | |
| | 6/6/2022 (7) | | 3/15/2025 | | — | | | — | | | 11,125 | | | 1,042,079 | |
| | 6/6/2022 (5) | | 6/06/2022 | | 11,125 | | | 1,042,079 | | | — | | | — | |
________________________(1)Each of the outstanding equity awards was granted pursuant to our 2016 Equity Incentive Plan.
(2)The market value of unvested equity awards as of December 31, 2022 is calculated by multiplying the number of shares subject to such awards by the closing price of our common stock on December 30, 2022, which was $93.67.
(3)Represents the target number of shares that remain eligible to be earned as of December 31, 2022. Up to 250% of the performance shares of our common stock subject to this award are eligible to vest by March 15, 2025.
(4)Represents the target number of shares that remain eligible to be earned as of December 31, 2022. Up to 200% of the performance shares of our common stock subject to this award are eligible to vest by March 15, 2024.
(5)25% to vest one year from the grant date and 25% at each of the next three years.
(6)Represents the target number of shares that remain eligible to be earned as of December 31, 2022. Up to 200% of the performance shares of our common stock were eligible to vest by March 15, 2023.
(7)Represents the target number of shares that remain eligible to be earned as of December 31, 2022. Up to 200% of the performance shares of our common stock are eligible to vest by March 15, 2025.
2022 Stock Vested Table
The following table summarizes the vesting of stock awards for each our NEOs during the year ended December 31, 2022.
| | | | | | | | | | | | | | |
|
| Stock Awards |
|
| Number of Shares Acquired on Vesting # |
| Value Realized on Vesting $ (1) |
| Quentin Blackford |
| 25,495 | |
| 3,232,001 | |
| Brice Bobzien |
| — | |
| — | |
| Douglas Devine |
| 29,341 | |
| 3,530,306 | |
| Patrick Murphy |
| 4,853 | |
| 525,920 | |
| Chad Patterson |
| — | |
| — | |
| Minang Turakhia |
| — | |
| — | |
__________________________
(1)Based on the market price of our common stock on the vesting date or last trading date, multiplied by the number of shares vested.
Pension Benefits and Nonqualified Deferred Compensation
We do not provide a defined benefit pension plan for our employees, and none of our Named Executive Officers participated in a nonqualified deferred compensation plan in 2022.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the amount that we may deduct from our federal income taxes for remuneration paid to certain executives to $1 million per executive officer per year. To maintain flexibility to compensate our executive officers in a manner designed to promote short-term and long-term corporate goals and objectives, the Committee has not adopted a policy that all compensation must be deductible. The Committee believes that our stockholders’ interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expense. Thus, the Committee may approve compensation for our NEOs that may not be fully deductible because of the deduction limit of Section 162(m) when it believes that such compensation is consistent with the goals of our executive compensation program and is in the best interests of the company and our stockholders.
Accounting for Stock-Based Compensation
We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for stock-based compensation awards. FASB ASC Topic 718 requires the measurement of compensation expense for all share-based payment awards made to employees and the non-employee members of our board of directors, including options to purchase shares of common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.
Limitations on Liability and Indemnification Matters
Our amended and restated certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the General Corporation Law of the State of Delaware (“DGCL”). Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
•any breach of the director’s duty of loyalty to us or our stockholders;
•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
•any transaction from which the director derived an improper personal benefit.
Our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL. Subject to certain limitations, our amended and restated bylaws also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted, subject to very limited exceptions.
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, officers, and certain of our other employees, in addition to the indemnification provided for in our amended and restated certificate of incorporation and restated bylaws. These agreements, among other things, require us to indemnify our directors, officers and key employees for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts actually and reasonably incurred by such director, officer or key employee in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers, and key employees for the defense of any action for which indemnification is required or permitted.
We believe that these provisions of our amended and restated certificate of incorporation and indemnification agreements are necessary to attract and retain qualified persons such as directors, officers, and key employees. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and restated bylaws or in these indemnification agreements may discourage stockholders from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
PAY VERSUS PERFORMANCE
In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEOs”) and Non-PEO NEOs and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown. The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs; these amounts reflect the Summary Compensation Table total with certain adjustments as described in the following table and footnotes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for Kevin King1 ($) | Summary Compensation Table Total for Michael Coyle2 ($) | Summary Compensation Table Total for Douglas Devine3,5 ($) | Summary Compensation Table Total for Quentin Blackford4 ($) | Compensation Actually Paid to Kevin King1,6 ($) | Compensation Actually Paid to Michael Coyle2,6 ($) | Compensation Actually Paid to Douglas Devine3,5,6 ($) | Compensation Actually Paid to Quentin Blackford4,6 ($) | Average Summary Compensation Table Total for Non-PEO NEOs5 ($) | Average Compensation Actually Paid to Non-PEO NEOs5,6 ($) |
| (a) | (b) | (b) | (b) | (b) | (c) | (c) | (c) | (c) | (d) | (e) |
| 2022 | — | | — | | — | | 7,259,859 | | — | | — | | — | | 4,565,129 | | 4,422,956 | | 4,044,855 | |
| 2021 | 30,709 | | 461,422 | | 5,699,043 | | 9,241,346 | | (9,810,498) | | 461,422 | | 2,902,001 | | 18,165,499 | | 3,360,713 | | 136,903 | |
| 2020 | 4,885,062 | | — | | — | | — | | 24,257,924 | | — | | — | | — | | 1,769,376 | | 6,988,690 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Value of Initial Fixed $100 Investment based on:7 | | Net Income ($ Millions) | | Revenue8 ($ Millions) |
| TSR ($) | | Peer Group TSR ($) | | |
| (a) | | (f) | | (g) | | (h) | | (i) |
| 2022 | | 137.57 | | 113.65 | | (116) | | 411 |
| 2021 | | 172.84 | | 126.45 | | (101) | | 323 |
| 2020 | | 348.38 | | 126.42 | | (44) | | 265 |
(1) Kevin King was our President and Chief Executive Officer from July 2012 through January 11, 2021.
(2) Michael Coyle was our President and Chief Executive Officer from January 12, 2021, through June 1, 2021.
(3) Douglas Devine was our Interim Chief Executive Officer from June 1, 2021, through October 3, 2021. Mr. Devine also served as our Chief Financial Officer from June 2020 until August 2022. In accordance with Item 402(v) of Regulation S-K, this table and the accompanying narrative present Mr. Devine as a PEO for 2021 and a Non-PEO NEO for 2020 and 2022.
(4) Quentin Blackford has been our President and Chief Executive Officer since October 4, 2021.
(5) The individuals comprising the Non-PEO NEOs for each year are listed below. As described above, this table and the accompanying narrative present Mr. Devine as a PEO for 2021 and a Non-PEO NEO for 2020 and 2022.
| | | | | | | | | | | | | | |
| 2020 | | 2021 | | 2022 |
| Douglas Devine | | Mark Day | | Douglas Devine |
| Mark Day | | Daniel Wilson | | Brice Bobzien |
| Matthew Garrett | | David Vort | | Patrick Murphy |
| Daniel Wilson | | | | Chad Patterson |
| David Vort | | | | Minang Turakhia |
(6) Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEOs and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards column are the totals from the Stock Awards column set forth in the Summary Compensation Table. With respect to Mr. Coyle’s 2021 compensation, no adjustments from the Summary Compensation Table total were needed to calculate his Compensation Actually Paid.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Summary Compensation Table Total for Kevin King
($) | | Exclusion of Stock Awards for Kevin King
($) | | Inclusion of Equity Values for Kevin King
($) | | Compensation Actually Paid to Kevin King
($) |
| 2021 | | 30,709 | | — | | (9,841,207) | | (9,810,498) | |
| 2020 | | 4,885,062 | | (3,494,769) | | 22,867,631 | | 24,257,924 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Summary Compensation Table Total for Douglas Devine
($) | | Exclusion of Stock Awards for Douglas Devine
($) | | Inclusion of Equity Values for Douglas Devine
($) | | Compensation Actually Paid to Douglas Devine
($) |
| 2021 | | 5,699,043 | | | (4,558,057) | | | 1,761,015 | | | 2,902,001 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Summary Compensation Table Total for Quentin Blackford
($) | | Exclusion of Stock Awards for Quentin Blackford
($) | | Inclusion of Equity Values for Quentin Blackford
($) | | Compensation Actually Paid to Quentin Blackford
($) |
| 2022 | | 7,259,859 | | | (5,787,285) | | | 3,092,554 | | | 4,565,129 | |
| 2021 | | 9,241,346 | | | (9,078,651) | | | 18,002,804 | | | 18,165,499 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Average Summary Compensation Table Total for Non-PEO NEOs
($) | | Average Exclusion of Stock Awards for Non-PEO NEOs
($) | | Average Inclusion of Equity Values for Non-PEO NEOs
($) | | Average Compensation Actually Paid to Non-PEO NEOs
($) |
| 2022 | | 4,422,956 | | (3,698,489) | | 3,320,388 | | 4,044,855 |
| 2021 | | 3,360,713 | | (2,663,369) | | (560,441) | | 136,903 |
| 2020 | | 1,769,376 | | (1,326,682) | | 6,545,996 | | 6,988,690 |
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Kevin King
($) | | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Kevin King
($) | | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Kevin King
($) | | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Kevin King
($) | | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Kevin King
($) | | Total - Inclusion of Equity Values for Kevin King
($) |
| 2021 | | 111,923 | | (3,142,539) | | — | | (2,200,824) | | (4,609,767) | | (9,841,207) |
| 2020 | | 12,029,686 | | 10,488,005 | | — | | 349,940 | | — | | 22,867,631 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Douglas Devine
($) | | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Douglas Devine
($) | | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Douglas Devine
($) | | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Douglas Devine
($) | | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Douglas Devine
($) | | Total - Inclusion of Equity Values for Douglas Devine
($) |
| 2021 | | 4,097,025 | | (1,940,348) | | — | | (395,662) | | — | | 1,761,015 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Quentin Blackford
($) | | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Quentin Blackford
($) | | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Quentin Blackford
($) | | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Quentin Blackford
($) | | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Quentin Blackford
($) | | Total - Inclusion of Equity Values for Quentin Blackford
($) |
| 2022 | | 6,700,517 | | (3,839,457) | | — | | 231,494 | | — | | 3,092,554 |
| 2021 | | 18,002,804 | | — | | — | | — | | — | | 18,002,804 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs
($) | | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs
($) | | Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs
($) | | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs
($) | | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs
($) | | Total - Average Inclusion of Equity Values for Non-PEO NEOs
($) |
| 2022 | | 3,538,871 | | (224,870) | | — | | 6,387 | | — | | 3,320,388 |
| 2021 | | 1,886,257 | | (1,718,016) | | — | | (728,682) | | — | | (560,441) |
| 2020 | | 2,902,502 | | 2,998,304 | | — | | 645,190 | | — | | 6,545,996 |
(7) The Peer Group TSR set forth in this table utilizes the NASDAQ Biotechnology Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 31, 2022. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the NASDAQ Biotechnology Index, respectively. Historical stock performance is not necessarily indicative of future stock performance.
(8) We determined revenue to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and Non-PEO NEOs in 2022. This performance measure may not have been the most important financial performance measure for years 2021 and 2020 and we may determine a different financial performance measure to be the most important financial performance measure in future years.
Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Shareholder Return (“TSR”)
The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and the Company’s cumulative TSR over the three most recently completed fiscal years.
Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income
The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our net income during the three most recently completed fiscal years.
Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Revenue
The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and our revenue during the three most recently completed fiscal years.
Description of Relationship Between Company TSR and Peer Group TSR
The following chart compares our cumulative TSR over the three most recently completed fiscal years to that of the NASDAQ Biotechnology Index over the same period.
Tabular List of Most Important Financial and Non-Financial Performance Measures
The following table presents the financial and non-financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our PEO and non-PEO NEOs for 2022 to Company performance. The measures in this table are not ranked.
| | |
| Revenue |
| Adjusted EBITDA |
| Unit volume growth |
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of December 31, 2022 with respect to compensation plans under which shares of our common stock may be issued. | | | | | | | | | | | | | | | | | | | | | | | |
| Plan Category |
| Number of securities to be issued upon exercise or release of outstanding securities (#) |
| Weighted-average exercise price of outstanding options ($)(1)
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))(#) | |
| | (a) | | (b) | | (c) | |
Equity compensation plans approved by stockholders (2) | | 2,475,995 | | | $ | 43.00 | | | 7,552,957 | | (4) |
| Equity compensation plans not approved by stockholders | | — | | | — | | | — | | |
| Total | | 2,475,995 | | | $ | 43.00 | | | 7,552,957 | | |
(1) The weighted-average exercise price does not reflect the shares that will be issued in connection with the settlement of restricted stock units, since restricted stock units have no exercise price.
(2) Includes our (i) 2016 Equity Incentive Plan (the “2016 EIP”), (ii) 2016 Employee Stock Purchase Plan (the “2016 ESPP”) and (iii) 2006 Stock Plan.
(3) Includes (i) 2,299,247 shares subject to outstanding awards granted under the 2016 EIP, of which 273,528 shares were subject to outstanding options and 2,025,719 shares were subject to outstanding restricted stock unit awards and (ii) 54,665 shares subject to outstanding awards granted under the 2006 Stock Plan, of which 54,665 shares were subject to outstanding options and no shares were subject to outstanding restricted stock unit awards.
(4) As of December 31, 2022, there were 5,281,791 shares of common stock available for issuance under the 2016 EIP. The number of shares reserved for issuance under our 2016 EIP were not increased automatically on January 1, 2023 and would have increased automatically on the first day of January of each of 2017 through 2026 by the number of shares equal to the lesser of (i) 3,865,000 shares, (ii) 5% of the total issued and outstanding shares of our common stock as of the immediately preceding December 31 or (iii) a lower number approved by our board of directors. As of December 31, 2022, there were 2,084,196 shares of common stock available for issuance under the 2016 ESPP. The number of shares reserved for issuance under our 2016 ESPP were not increased automatically on January 1, 2023 and would have increased automatically on the first day of January of each of 2017 through 2036 by the number of shares equal to the less of (i) 966,062 shares, (ii) 1.5% of the total issued and outstanding shares of our common stock as of the immediately preceding December 31 or (iii) a lower number approved by our board of directors. As of December 31, 2022, there were 186,970 shares of common stock available for issuance under the 2006 Stock Plan. To the extent outstanding awards under the 2006 Stock Plan are forfeited, lapse unexercised, or would otherwise have been returned to the share reserve under either plan, the shares of common stock subject to such awards instead will be available for future issuance under the 2016 EIP.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
From January 1, 2022 to the present, there have been no transactions, and there are currently no proposed transactions, to which we were or will be a party in which the amount involved exceeds $120,000 and in which any director, nominee for director, executive officer, beneficial holder of more than 5% of our capital stock or any member of their immediate family or any entity affiliated with any of the foregoing persons had or will have a direct or indirect material interest, except the executive officer and director compensation arrangements discussed above under “Executive Compensation” and “Proposal No. 1—Election of Directors—Non-Employee Director Compensation,” respectively.
Policies and Procedures for Related Person Transactions
Our board of directors has adopted a written related person transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related person transactions. A “related person transaction” is a transaction, arrangement or relationship in which the post-combination company or any of its subsidiaries was, is or will be a participant and in which any related person had, has or will have a direct or indirect material interest. A “related person” means executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock or any member of the immediate family of any of the foregoing persons.
We have policies and procedures designed to minimize potential conflicts of interest arising from any dealings it may have with its affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to its audit committee charter, the audit committee has the responsibility to review related party transactions.
ADDITIONAL INFORMATION
Stockholder Proposals to be Presented at Next Annual Meeting
Our amended and restated bylaws provide that, for stockholder nominations to our board of directors or other proposals to be considered at an annual meeting, the stockholder must give timely notice thereof in writing to the Secretary at iRhythm Technologies, Inc., 699 8th Street, Suite 600, San Francisco, California 94103, Attn: Secretary.
To be timely for our 2024 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by our Secretary at our principal executive offices not earlier than 2:00 p.m. Pacific Time on January 28, 2024 and not later than 2:00 p.m. Pacific Time on February 27, 2024. A stockholder’s notice to the Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting the information required by our restated bylaws.
Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2024 annual meeting of stockholders must be received by us not later than December 14, 2023 in order to be considered for inclusion in our proxy materials for that meeting.
Available Information
We will mail, without charge, upon written request, a copy of our Annual Report for the fiscal year ended December 31, 2022, including the financial statements and list of exhibits, and any exhibit specifically requested. Requests should be sent to:
iRhythm Technologies, Inc.
699 8th Street, Suite 600
San Francisco, California 94103
Attn: Secretary
The Annual Report is also available at https://investors.irhythmtech.com under “SEC Filings” in the “Financials” section of our website.
Electronic Delivery of Stockholder Communications
We encourage you to help us conserve natural resources, as well as significantly reduce printing and mailing costs, by signing up to receive your stockholder communications electronically via e-mail. With electronic delivery, you will be notified via e-mail as soon as future annual reports and proxy statements are available on the Internet, and you can submit your stockholder votes online. Electronic delivery can also eliminate duplicate mailings and reduce the amount of bulky paper documents you maintain in your personal files. To sign up for electronic delivery:
Registered Owner you hold our common stock in your own name through our transfer agent, Equiniti Trust Company, or you are in possession of stock certificates: visit www.shareowneronline.com and log into your account to enroll.
Beneficial Owner (your shares are held by a brokerage firm, a bank, a trustee or a nominee): If you hold shares beneficially, please follow the instructions provided to you by your broker, bank, trustee or nominee.
Your electronic delivery enrollment will be effective until you cancel it. Stockholders who are record owners of shares of our common stock may call Equiniti Trust Company, our transfer agent, by phone at (800) 468-9716, or visit www.shareowneronline.com with questions about electronic delivery.
“Householding”—Stockholders Sharing the Same Last Name and Address
The SEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our Annual Report and proxy materials, including the Notice of Internet Availability, unless the affected stockholder has provided contrary instructions. This procedure reduces printing costs and postage fees and helps protect the environment as well.
This year, a number of brokers with account holders who are our stockholders will be “householding” our Annual Report and proxy materials, including the Notice of Internet Availability. A single Notice of Internet Availability and, if applicable, a single set of Annual Report and other proxy materials will be delivered 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 it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Stockholders may revoke their consent at any time by calling Broadridge at (866) 540-7095 or writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717.
Upon written or oral request, we will promptly deliver a separate copy of the Notice of Internet Availability and, if applicable, our Annual Report and other proxy materials to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice of Internet Availability and, if applicable, Annual Report and other proxy materials, you may write our Secretary at 699 8th Street, Suite 600, San Francisco, California 94103, Attn: Secretary, telephone number (415) 632-5700.
Any stockholders who share the same address and receive multiple copies of our Notice of Internet Availability or Annual Report and other proxy materials who wish to receive only one copy in the future can contact their bank, broker or other holder of record to request information about householding or our Secretary at the address or telephone number listed above.
NON-GAAP FINANCIAL MEASURES
We refer to certain financial measures that are not recognized under U.S. generally accepted accounting principles (GAAP) in this press release, including adjusted EBITDA, adjusted net loss, adjusted net loss per share and adjusted operating expenses. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. See the schedules attached to this press release for additional information and reconciliations of such non-GAAP financial measures. We have not reconciled our adjusted operating expenses and adjusted EBITDA estimates for full year 2023 because certain items that impact these figures are uncertain or out of our control and cannot be reasonably predicted. Accordingly, a reconciliation of adjusted operating expenses and adjusted EBITDA estimates is not available without unreasonable effort.
Adjusted EBITDA excludes non-cash operating charges for stock-based compensation, depreciation and amortization as well as non-operating items such as interest income, interest expense, impairment and restructuring charges, and transformation costs.
We exclude the following items from non-GAAP financial measures for adjusted net loss, adjusted net loss per share and adjusted operating expenses:
•impairment and restructuring charges, and
•transformation costs to scale the organization.
401(k) Plan
We maintain a tax-qualified retirement plan that provides eligible employees with an opportunity to save for retirement on a tax advantaged basis. We may make a discretionary matching contribution to the 401(k) plan, and may make a discretionary employer contribution to each eligible employee each year. All participants’ interests in our matching contributions vest immediately from the time of contribution. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) plan is intended to qualify under Sections 401(a) and 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all contributions are deductible by us when made.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the section titled “Compensation Discussion and Analysis” included in this Proxy Statement with management. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the section titled “Compensation Discussion and Analysis” be included in this Proxy Statement.
Respectfully submitted by the members of the Compensation Committee of the Board of Directors:
Bruce G. Bodaken (Chair)
Abhijit Y. Talwalkar
Cathleen Noel Bairey Merz, M.D
Equity Compensation Plan Information
The following table summarizes our equity compensation plan information as of December 31, 2020. Information is included for equity compensation plans approved by our stockholders. We do not have any equity compensation plans not approved by our stockholders. | | | | | | | | | | | | | | | | | | | | |
| Plan Category |
| (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
| (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights |
| (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
Equity compensation plans approved by stockholders (1) |
| 1,724,040 | | (2) | 34.36 | | (3) | 8,016,517 | |
| Equity compensation plans not approved by stockholders |
| — | |
| — | |
| — | |
| Total |
| 1,724,040 | |
| 34.36 | |
| 8,016,517 | |
__________________________
(1)Includes the following plans: 2006 Stock Plan, 2016 Equity Incentive Plan (“2016 Plan”), and 2016 Employee Stock Purchase Plan (“2016 ESPP”). Our 2016 Plan provides that on January 1st of each fiscal year commencing in 2017 and ending on (and including) January 1, 2026, the number of shares authorized for issuance under the 2016 Plan is automatically increased by a number equal to the lesser of (i) 3,865,000 shares; (ii) 5% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year, or; (iii) such other amount as our Board of Directors may determine. Our 2016 ESPP provides that on January 1st of each fiscal year commencing in 2017 and ending on (and including) January 1, 2036, the number of shares authorized for issuance under the 2016 ESPP is automatically increased by a number equal to the lesser of (i) 966,062 shares; (ii) 1.5% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as our Board of Directors may determine.
(2)This number includes 886,030 shares subject to restricted stock units.
(3)The weighted average exercise price relates solely to outstanding stock option shares since shares subject to the restricted stock units have no exercise price.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 31, 2021 for:
•each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock;
•each of our Named Executive Officers;
•each of our directors and nominees for director; and
•all of our current executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of our capital stock that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is based on 29,287,749 shares of our common stock outstanding as of March 31, 2021. In computing the number of shares of capital stock beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares of our capital stock subject to options held by the person that are currently exercisable or exercisable within 60 days of March 31, 2021. However, we did not deem such shares of our capital stock outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o iRhythm Technologies, Inc., 699 8th Street, Suite 600, San Francisco, California 94103. The information provided in the table is based on our records and information filed with the SEC.
| | | | | | | | | | | | | | |
| Name of Beneficial Owner |
| Number of Shares Beneficially Owned |
| Percentage of Shares Beneficially Owned |
| 5% and Greater Stockholders |
|
|
|
|
The Vanguard Group, Inc. (1) |
| 2,751,468 | |
| 10.18% |
Brown Capital Management, LLC (2) |
| 2,722,288 | |
| 10.07% |
BlackRock Fund Advisors (3) | | 2,278,895 | | | 8.43% |
T. Rowe Price Associates, Inc. (4) | | 1,812,756 | | | 6.71% |
The Brown Capital Management Small Company Fund (5) | | 1,446,065 | | | 5.35% |
| Named Executive Officers and Directors |
| |
|
|
Kevin King (6) |
| 356,321 | |
| 1.21% |
Matthew Garrett (7) |
| 19,260 | |
| * |
| Douglas J. Devine |
| — | |
| — | |
David Vort (8) |
| 14,723 | |
| * |
Mark J. Day (9) |
| 60,209 | |
| * |
Daniel G. Wilson(10) | | 6,765 | | | * |
Abhijit Talwalkar (11) |
| 28,833 | |
| * |
Bruce Bodaken (12) |
| 3,834 | |
| * |
Mark Rubash (13) |
| 28,657 | |
| * |
Ralph Snyderman, M.D. (14) |
| 8,095 | |
| * |
Raymond Scott (15) |
| 1,764 | |
| * |
| Cathleen Noel Bairey-Merz, M.D. |
| — | |
| — | |
Renee Budig(16) | | 583 | | | * |
All executive officers and directors as a group (13 persons)(17) |
| 529,044 | |
| 1.79% |
_____________________
•Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock.
(1)As reported on Schedule 13G/A filed with the SEC on February 10, 2021. The report states that The Vanguard Group has sole voting power over zero shares, shared voting power over 66,538 shares, sole dispositive power over 2,661,430 shares and shared dispositive power over 90,038 shares. The address of The Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355.
(2)As reported on Schedule 13G/A filed with the SEC on February 12, 2021. The report states that Brown Capital Management, LLC has sole voting power over 1,665,344 shares and sole dispositive power over 2,722,288 shares. The address of Brown Capital Management, LLC is 1201 N. Calvert Street, Baltimore, MD 21202.
(3)As reported on Schedule 13G/A filed with the SEC on January 29, 2021. The report states that BlackRock Inc. has the sole voting power over 2,232,087 shares and sole dispositive power over 2,278,895 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055
(4)As reported on Schedule 13G filed with the SEC on February 16, 2021. The report states that T. Rowe Price Associates has sole voting power over 381,485 shares and sole dispositive power over 1,812,756 shares. The address of T. Rowe Price Associates is 100 E. Pratt Street, Baltimore, MD 21202.
(5)As reported on Schedule 13G/A filed with the SEC on February 12, 2021. The report states that The Brown Capital Management Small Company Fund has sole voting power over 1,446,065 shares and sole dispositive power over 1,446,065 shares. The address of The Brown Capital Management Small Company Fund is 1201 N. Calvert Street, Baltimore, MD 21202.
(6)Consists of (i) 227,185 shares of common stock, and (ii) 129,136 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(7)Consists of (i) 15,296 shares of common stock; and (ii) 3,964 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(8)Consists of (i) 9,593 shares of common stock; and (ii) 5,130 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(9)Consists of (i) 30,300 shares of common stock; and (ii) 29,909 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(10)Consists of 6,765 shares of common stock.
(11)Consists of (i) 4,603 shares of common stock; and (ii) 24,230 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(12)Consists of (i) 3,606 shares of common stock, and (ii) 228 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(13)Consists of (i) 4,756 shares of common stock; and (ii) 23,901 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(14)Consists of (i) 4,256 shares of common stock; and (ii) 3,839 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
(15)Consists of 1,764 shares of common stock.
(16)Consists of 583 Restricted Stock Units vesting within 60 days of March 31, 2021.
(17)Consists of (i) 308,124 shares of common stock, (ii) 583 Restricted Stock Units vesting within 60 days of March 31, 2021, and (iii) 220,337 shares issuable upon the exercise of options exercisable within 60 days of March 31, 2021.
RELATED PERSON TRANSACTIONS
We describe below transactions and series of similar transactions, since the beginning of our last fiscal year, to which we were a party or will be a party, in which:
•the amounts involved exceeded or will exceed $120,000; and
•any of our directors, nominees for director, executive officers or beneficial holders of more than 5% of our outstanding common stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities (each, a related person), had or will have a direct or indirect material interest.
Certain Transactions with Related Persons
During 2020, the son of Raymond W. Scott, a member of our Board of Directors and Chairman of our Nominating and Corporate Governance Committee, was employed by the Company as a director of software engineering. Mr. Scott’s son earned total compensation of approximately $308,587. Total compensation includes salary, bonus, and stock awards. The compensation of Mr. Scott’s son is consistent with that of other employees with equivalent qualifications and responsibilities and holding similar positions, and Mr. Scott recused himself from any decision regarding the hiring of, or compensation related to his son.
Executive Officer Employment Letters
We have entered into employment arrangements with certain current executive officers. See “Executive Compensation—Executive Officer Employment Arrangements.”
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers. The indemnification agreements and our certificate of incorporation and amended and restated bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
Policies and Procedures for Related Party Transactions
Our Board of Directors has adopted a written policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the prior consent of our Audit Committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock or any member of the immediate family of any of the foregoing persons in which the amount involved exceeds $120,000, and such person would have a direct or indirect interest must first be presented to our Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, our Audit Committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. We did not have a formal review and approval policy for related party transactions at the time of any of the transactions described above. However, all of the transactions described above were entered into after presentation, consideration and approval by our Board of Directors and/or our Audit Committee.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)Our board of the Exchange Act requires that our executive officers, directors and 10% stockholders file reports of ownership and changes of ownership with the SEC. Such directors, executive officers and 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
SEC regulations require us to identify in this Proxy Statement anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received and written representations of our executive officers, directors and 10% stockholders, we believe that during our fiscal year ended December 31, 2020, all Section 16(a) filing requirements were satisfied on a timely basis, with the exception of the following reports:
| | | | | | | | | | | | | | |
Name |
| Transaction Date |
| Filing Date |
Karim Karti | | 8/1/2019 | | 4/27/2020 |
Fiscal Year 2020 Annual Report and SEC Filings
Our consolidated financial statements for our fiscal year ended December 31, 2020 are included in our Annual Report on Form 10-K, which we will make available to stockholders at the same time as this Proxy Statement. This Proxy Statement and our annual report are posted on our website at www.irhythmtech.com under “Investors—SEC Filings.” and are available from the SEC at its website at www.sec.gov. Stockholders may also obtain a copy of our annual report without charge by sending a written request to iRhythm Technologies, Inc., Attention: Investor Relations, 699 8th Street, Suite 600, San Francisco, California 94103.
* * *
The Board of Directors does not know ofpresently intend to bring any other matters to be presented at the Annual Meeting. If any additional matters are properly presented atbusiness before the Annual Meeting and, so far as is known to our board of directors, no matters are to be brought before the persons namedAnnual Meeting except as specified in the Notice of Annual Meeting of Stockholders. As to any business that may arise and properly come before the Annual Meeting, however, it is intended that proxies, in the form enclosed, proxy card will have discretion to vote the shares of our common stock they representbe voted in respect thereof in accordance with their ownthe judgment on such matters.
It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.
| | | | | |
| By Order of the Board of Directors |
| |
| /s/Michael J. Coyle |
| Michael J. Coyle |
| President and Chief Executive Officer |
San Francisco, California | |
April 30, 2021 | |
persons voting such proxies.
