EXECUTIVE COMPENSATION
Processes and Procedures for Compensation Decisions
Our Compensation Committee is responsible for the executive compensation programs for our executive officers and reports to our Board on its discussions, decisions and other actions. Our Compensation Committee reviews and approves corporate goals and objectives relating to the compensation of our Chief Executive Officer, evaluates the performance of our Chief Executive Officer in light of those goals and objectives and determines and approves the compensation of our Chief Executive Officer based on such evaluation. Our Compensation Committee reviews and makes recommendations to the Board regarding our Chief Executive Officer’s compensation and the compensation of our directors. In addition, our Compensation Committee, in consultation with our Chief Executive Officer, reviews and approves all compensation for other officers. Our Chief Executive Officer and Chief Financial OfficerHead of Human Resources also make compensation recommendations for our other executive officers and initially propose the corporate and departmental performance objectives under our Executive Incentive Compensation Plan to the Compensation Committee.
The Compensation Committee is authorized to retain the services of one or more executive compensation and benefits consultants or other outside experts or advisors as it sees fit, in connection with the establishment of our compensation programs and related policies. During 2021, we used Frederic W. Cook & Co., Inc. ("FW Cook") to advise us on our compensation practices. FW Cook did not perform any other services to the Company and, as such, no conflicts of interest were raised.
Summary Compensation Table for Fiscal Year 20182021
The following table provides information regarding the total compensation for services rendered in all capacities that was or paid tofor our NEOsnamed executive officers ("NEOs") for the years ended December 31, 20182021 and 2017.2020, as applicable.
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Name and Principal Position | | Year | | Salary | | Non-equity Incentive Plan(1) | | All Other Compensation(2) | | Total |
Juan Jose Chacon Quiros | | 2018 | | $ | 343,984 |
| | $ | 111,600 |
| | $ | 27,932 |
| | $ | 483,516 |
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Chief Executive Officer | | 2017 | | $ | 295,773 |
| | $ | — |
| | $ | 27,688 |
| | $ | 323,461 |
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Eddie De Oliveira | | 2018 | | $ | 179,168 |
| | $ | 156,750 |
| | $ | 93,411 |
| | $ | 429,329 |
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Vice President of Sales, Brazil | | 2017 | | $ | 212,580 |
| | $ | 82,781 |
| | $ | 74,198 |
| | $ | 369,559 |
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Renee M. Gaeta | | 2018 | | $ | 286,875 |
| | $ | 42,525 |
| | $ | 44,810 |
| | $ | 374,210 |
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Chief Financial Officer | | 2017 | | $ | 135,000 |
| | $ | — |
| | $ | 22,405 |
| | $ | 157,405 |
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Name and Principal Position | | Year | | Salary | | Option Awards ($) (1) | | Non-equity Incentive Plan(2) | | All Other Compensation(3) | | Total |
Juan José Chacón Quirós | | 2021 | | $ | 435,000 | | $ | 1,441,771 | | | $ | 362,250 | | | $ | 44,070 | | | $ | 2,283,091 | |
Chief Executive Officer | | 2020 | | $ | 337,238 | | $ | — | | | $ | 218,920 | | | $ | 42,000 | | | $ | 598,158 | |
Rajbir S. Denhoy | | 2021 | | $ | 253,462 | | $ | 3,871,150 | | | $ | 127,397 | | | $ | 17,500 | | | $ | 4,269,509 | |
Chief Financial Officer | | | | | | | | | | | | |
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Pratip Dastidar | | 2021 | | $ | 212,200 | | $ | 2,168,030 | | | $ | 106,192 | | | $ | — | | | $ | 2,486,422 | |
Head of Global Operations | | | | | | | | | | | | |
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(1) | Consists solely of sales commissions paid upon the achievement of certain personal and Company performance objectives. |
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(2) | The components of the column entitled “All Other Compensation” is set forth in the following table: |
(1)Amounts reported represent the aggregate grant date fair value of the stock option awards granted to the NEOs in 2021. The aggregate grant date fair value of these awards was computed in accordance with FASB ASC Topic 718 and excludes the effects of estimated forfeitures. The reported award values have been determined using the assumptions described in Note 10 to the Consolidated Financial Statements included in our 2021 Annual Report. The options granted vest in four substantially equal annual installments, subject to the NEOs’ continued employment through the vesting date. |
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Name and Principal Position | | Year | | Vehicle Allowance | | Life Insurance Premiums | | Housing Allowance | | Vacation Payout | | Total |
Juan Jose Chacon Quiros | | 2018 | | $ | 17,079 |
| | $ | 10,853 |
| | $ | — |
| | $ | — |
| | $ | 27,932 |
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Chief Executive Officer | | 2017 | | $ | 16,835 |
| | $ | 10,853 |
| | $ | — |
| | $ | — |
| | $ | 27,688 |
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Eddie De Oliveira | | 2018 | | $ | 16,628 |
| | $ | 792 |
| | $ | 52,955 |
| | $ | 23,036 |
| | $ | 93,411 |
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Vice President of Sales, Brazil | | 2017 | | $ | 12,392 |
| | $ | 292 |
| | $ | 54,274 |
| | $ | 7,240 |
| | $ | 74,198 |
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Renee M. Gaeta | | 2018 | | $ | 20,810 |
| | $ | — |
| | $ | 24,000 |
| | $ | — |
| | $ | 44,810 |
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Chief Financial Officer | | 2017 | | $ | 10,405 |
| | $ | — |
| | $ | 12,000 |
| | $ | — |
| | $ | 22,405 |
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(2)Consists solely of bonus paid upon the achievement of Company performance objectives. Please see the discussion of our 2021 incentive program below.
(3)The components of the column entitled “All Other Compensation” are set forth in the following table:
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Name and Principal Position | | Year | | Vehicle Allowance | | Life Insurance Premiums | | Housing Allowance | | Vacation Payout | | Other | | Total |
Juan José Chacón Quirós | | 2021 | | $ | 24,000 | | $ | 11,070 | | | $ | — | | | $ | — | | | $ | 9,000 | | | $ | 44,070 | |
Chief Executive Officer | | 2020 | | $ | 24,000 | | $ | 9,000 | | | $ | — | | | $ | — | | | $ | 9,000 | | | $ | 42,000 | |
Rajbir S. Denhoy | | 2021 | | $ | 17,500 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 17,500 | |
Chief Financial Officer | | | | | | | | | | | | | | |
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Pratip Dastidar | | 2021 | | $ | — | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Head of Global Operations | | | | | | | | | | | | | | |
Non-Equity Incentive Plan Compensation
Executive Incentive Compensation Plan
In December 2016,2021, our Board adopted an Executive Incentive Compensation Plan,Committee approved a performance-based incentive plan in which we referall of the NEOs were eligible to as our Bonus Plan. Our Bonus Plan will allow its administrator to provide cash incentive awards to selected employees, including our NEOs, based upon performance goals established by the administrator. Pursuant to the Bonus Plan, the administrator, in its sole discretion, will establishparticipate.Each NEO had a target awardbonus opportunity for 2021 as follows:Mr. Chacón Quirós’ target bonus was equal to 75% of his base salary, Mr. Denhoy’s target bonus was equal to 50% of his base salary and Mr. Dastidar’s target bonus was equal to 50% of his base salary.
For 2021, the Compensation Committee established four separate performance metrics for our NEOs’ incentive compensation opportunity, each participant and a bonus pool, with actual awards payable from such bonus pool, with respect to the applicable performance period.
Under the Bonus Plan, the administrator, in its sole discretion, will determine the performance goals applicable to awards, which goals may include, without limitation, attainment of research and development milestones, bookings, business divestitures and acquisitions, cash flow, cash position, contract awards or backlog, customer renewals, customer retention rates from an acquired company, subsidiary, business unit or division, earnings (which may include earnings before interest and taxes, earnings before taxes, and net taxes), earnings per share, expenses, gross margin, growth in shareholder value relative to the moving average of the S&P 500 Index or another index, installs, internal rate of return, market share, net income, net profit, net sales, new product development, new product invention or innovation, number of customers, operating cash flow, operating expenses, operating income, operating margin, overhead or other expense reduction, product defect measures, product release timelines, productivity, profit, retained earnings, return on assets, return on capital, return on equity, return on investment, return on sales, revenue, revenue growth, sales results, sales growth, share price, time to market, total shareholder return, working capital, unadjusted or adjusted actual contract value, unadjusted or adjusted total contractual value, and individual objectives such as peer reviews or other subjective or objective criteria. As determined by the administrator, 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 administrator for one-time items or unbudgeted or unexpected items and/or payments when determining whether the performance goals have been met. separate weightings.The goals may be on the basis of any factors the administrator determines relevant, and may be on an individual, divisional, business unit, segment, or company-wide basis. The performance goals may differ from participant to participant and from award to award.
The administrator may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award, 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 administrator’s discretion. The administrator 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 in a single lump sum as soon as practicable after the endfollowing chart describes each of the performance period during which they aremetrics, the applicable weightings and our actual performance results achieved for each metric.
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Performance Metric | | Weighting | | Achievement |
Grow New and Existing Products •NEOs were required to generate total revenues between $114 million and $120 million •NEOs were also required to commence market development initiatives | | 45.5% | | 46.55% Total achieved revenues were $126.7 million and our market development initiatives were achieved in full |
Optimize Organizational Capabilities •Implement digital operating model and organizational success model •Complete cold shell phase of new manufacturing facility | | 20% | | 19.5% We successfully implemented our models and substantially completed our new manufacturing facility objectives |
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Performance Metric | | Weighting | | Achievement |
Expand Geographic Footprint •Prepare for US market entry •Achieve certain clinical objectives | | 18.5% | | 18.1% We made substantial progress on each of these objectives in 2021 |
Maintain Core Business •Achieve business expense and cash burn-rate objectives •Maintain global regulatory compliance | | 16% | | 16.1% We achieved our expense and cash-flow objectives and achieved our regulatory compliance goals |
Based on our performance in 2021 against the performance metrics described above, each NEO earned and after they are approvedan incentive payment for 2021 equal to approximately 100% of his target bonus.The incentive payments earned by the administrator, but in no event later than the later of March 15 of the following calendar year or the 15th day of the third month of the following fiscal year. Unless otherwise determined by the administrator, to earn an actual award, a participant must be employed by us (or an affiliate of ours) through the date the award is paid.NEOs were as follows:Mr. Chacón Quirós ($362,250), Mr. Denhoy ($127,397) and Mr. Dastidar ($106,192).
Our board of directors or the administrator, in their sole discretion, may alter, suspend, or terminate the Bonus Plan, provided such action does not, without the consent of the participant, alter or impair the rights or obligations under any award already earned by such participant.
Executive Officer Employment Agreements
Employment Agreements with Establishment Labs Holdings Inc.
On December 23, 2018, Establishment Labs Holdings Inc. entered into an employment agreement that became effective on December 26, 2018 with each of Juan Jose Chacon Quiros,José Chacón Quirós, our Chief Executive Officer, and Salvador Dada Santos, our Chief Operating Officer. On August 10, 2018,February 8, 2021, Establishment Labs Holdings Inc. entered into an employment agreement that became effective on August 10, 2018February 24, 2021 with Renee M. Gaeta,Rajbir S. Denhoy, our Chief Financial Officer.Officer, for his former role as Head of Strategy and Investor Relations. On December 30, 2018, Establishment Labs Holdings Inc.May 17, 2021, we entered into an employment agreement that became effective on December 26, 2018 with Roberto de Mezerville,Pratip Dastidar, our Chief Technology Officer.Head of Global Operations.
Each employment agreement has no specific term and provides that the executive officer is an at-will employee. Each employment agreement provides for an annual base salary ($123,812 for Mr. Chacon Quiros, $81,964 for Mr. Dada, $61,193 for Mr. de Mezerville and $315,000 for Ms. Gaeta), a target annual bonus ($260,000 for Mr. Chacon Quiros, $157,500 for Mr. Dada, $110,000 for Mr. de Mezerville and up to 50% of base salary for Ms. Gaeta upon verification of achievement of certain targets and milestones), and a one-time salary true-up payment upon the date the employment agreement becomes effective ($42,000 for Mr. Chacon Quiros, $40,271 for Mr. Dada and $25,271 for Mr. de Mezerville).
If a Change in Control (as defined in the 2018 Equity Incentive Plan) occurs before the termination of executive officer's employment, 100% accelerated vesting of executive officer's outstanding equity awards and, in the case of an equity award with performance-based vesting, all performance goals and other vesting criteria generally will be deemed achieved at 100% of target levels and all other terms and conditions met.
If an executive officer’s employment is terminated outside the period beginning on the date of a Change in Control and ending 12 months following that Change in Control (the “Change in Control Period”) either (1) by Establishment Labs or any of its parents and subsidiaries (the “ESTA Group”) without Cause (excluding by reason of death or disability) or (2) by the executive officer for Good Reason (as such terms are defined in the executive officer’s employment agreement), the executive officer will receive the following benefits if he timely signs and does not revoke a release of claims in our favor and continues to comply with the executive officer’s employee confidentiality agreement and noncompetition, nondisclosure and inventions agreement with Establishment Labs’ (collectively, the “Related Agreements”) and the employment agreement:
•a lump-sum payment equal to a specified number of months (12 months for Mr. Chacon QuirosChacón Quirós and 9 months for Mr. Dada,Dastidar, and Mr. de Mezerville and Ms. Gaeta)Denhoy) of the executive officer’s annual base salary as in effect immediately prior to such termination (or if such termination is due to a resignation for Good Reason based on a material reduction in base salary, then as in effect immediately prior to the reduction); and
•a lump-sum payment equal to a pro-rated amount (based on the period of time the executive officer had been employed during the year of termination) of the annual bonus the executive officer would have received for the year of termination had the executive officer remained employed with Establishment Labs through the date the executive officer was required to continue employment to receive the bonus.
If, within the Change in Control Period, the executive officer’s employment is terminated either (1) by any ESTA Group member without Cause (excluding by reason of death or disability) or (2) by the executive officer for Good Reason, the executive officer will receive the following benefits if the executive officer timely signs and does not revoke a release of claims in our favor and continues to comply with his Related Agreements and the employment agreement:
•a lump-sum payment equal to a specified number of months (18 months for Mr. Chacon QuirosChacón Quirós and 12 months for Mr. Dada,Dastidar and Mr. de Mezerville and Ms. Gaeta)Denhoy) of the executive officer’s annual base salary as in effect immediately prior to such termination (or if such termination is due to a resignation for Good Reason based on a material reduction in base salary, then as in effect immediately prior to the reduction) or if greater, at the level in effect immediately prior to the Change in Control;
•a lump-sum payment equal to 100% of the executive officer’s target annual bonus as in effect for the fiscal year in which such termination occurs; an
•100% accelerated vesting of the executive officer’s outstanding equity awards.
The severance payments and benefits each executive officer would otherwise be entitled under his employment agreement will be reduced by any liability Establishment Labs may have to him for any severance payments or benefits required under any applicable statute, law, or regulation to the extent permitted by applicable law.
If any of the payments and benefits provided for under these employment agreements or otherwise payable to the executive officersofficer would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the related excise tax, the executive officer would be entitled to receive either full payment of the payments and benefits under his employment agreement or such lesser amount which would result in no portion of the payments and benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the executive officer. The employment agreements do not require us to provide any tax gross-up payments.
In addition, each employment agreement includes a non-competition covenant during the 12-month period following termination of the executive officer’s employment and a non-solicitation covenant during the 2-year period following termination of the executive officer’s employment.
Employment Agreements with Establishment Labs Holdings S.A.
In addition to the employment agreements with Establishment Labs, on December 23, 2018, Establishment Labs S.A. (“ELSA”), a Costa Rican corporation and wholly-owned subsidiary of Establishment Labs, entered into an employment agreement that became effective on December 26, 2018 with each of Mr. Chacon Quiros,Chacón Quirós, ELSA’s General Manager, and Mr. Dada, ELSA’s Operations Manager. On December 30, 2018, Establishment Labs entered into an employment agreement that became effective on December 26, 2018 with Roberto de Mezerville, our Chief Technology Officer.
EachThe employment agreement has no specific term and provides that the executive officer is an at-will employee. Each employment agreement provides for base salary ($15,194 per month for Mr. Chacon Quiros, $14,042 per month for Mr. Dada and $12,812 per month for Mr. de Mezerville), expense allowances of $750 per month, company car allowances ($2,000 per month for Mr. Chacon Quiros and $1,750 for Mr. Dada and Mr. de Mezerville), advance severance payments ($2,501 per month for Mr. Chacon Quiros, $2,274 per month for Mr. Dada and $1,750 per month for Mr. de Mezerville), an annual Christmas bonus ($15,188 for Mr. Chacon Quiros, $14,036 for Mr. Dada and $12,807 for Mr. de Mezerville), and an additional Christmas bonus ($15,660 for Mr. Chacon Quiros, $14,208 for Mr. Dada and $13,054 for Mr. de Mezerville).
If an executive officer’s employment is terminated outside the Change in Control Period either (1) by ELSA or any of its parents and subsidiaries (the “ELSA Group”) without Cause (excluding by reason of death or disability) or (2) by the executive officer for Good Reason (as such terms are defined in the executive officer’s employment agreement), the executive officer will receive the following benefits if he timely signs and does not revoke a release of claims in our favor:
•a lump-sum payment equal to a specified number of12 months (12 months for Mr. Chacon Quiros and 9 months for Mr. Dada and Mr. de Mezerville) of the executive officer’s annual base salary as in effect immediately prior to such termination (or if such termination is due to a resignation for Good Reason based on a material reduction in base salary, then as in effect immediately prior to the reduction); and
•payment of premiums for the executive officer and his eligible dependents to continue healthcare coverage at the rates then in effect for active employees, subject to any subsequent changes in rates that are generally applicable to ELSA’s active employees, for up to a specified number of months (12 months for Mr. Chacon Quiros and 9 months for Mr. Dada and Mr. de Mezerville).12 months.
If, within the Change in Control Period, the executive officer’s employment is terminated either (1) by any ELSA Group member without Cause (excluding by reason of death or disability) or (2) by the executive officer for Good Reason, the executive officer will receive the following benefits if the executive officer timely signs and does not revoke a release of claims in our favor:
•a lump-sum payment equal to a specified number of18 months (18 months for Mr. Chacon Quiros and 12 months for Mr. Dada and Mr. de Mezerville) of the executive officer’s annual base salary as in effect immediately prior to such termination (or if such termination is due to a resignation for Good Reason based on a material reduction in base salary, then as in effect immediately prior to the reduction) or if greater, at the level in effect immediately prior to the Change in Control); and
•payment of premiums for the executive officer and his eligible dependents to continue healthcare coverage at the rates then in effect for active employees, subject to any subsequent changes in rates that are generally applicable to ELSA’s active employees, for up to a specified number of months (18 months for Mr. Chacon Quiros and 12 months for Mr. Dada and Mr. de Mezerville).18 months.
The severance payments and benefits each executive officer would otherwise be entitled under his employment agreement will be reduced by any liability ELSA may have to him for any severance payments or benefits required under any applicable statute, law, or regulation to the extent permitted by applicable law.
If any of the payments and benefits provided for under thesethe employment agreementsagreement or otherwise payable to the executive officers would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the related excise tax, the executive officer would be entitled to receive either full payment of the payments and benefits under his employment agreement or such lesser amount which would result in no portion of the payments and benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the executive officer. The employment agreements doagreement does not require us to provide any tax gross-up payments.
In addition, each employment agreement includes a non-competition covenant during the 12-month period following termination of the executive officer’s employment and a non-solicitation covenant during the 2-year period following termination of the executive officer’s employment.
Employment Agreements with Establishment Labs Produtos par Saude Ltda
In January 2016, Establishment Labs Produtos par Saude Ltda, our wholly-owned Brazil subsidiary, entered into an employment agreement with Mr. De Oliveira, our Vice President of Sales Brazil. This employment agreement has no specific term and provides for a base salary equivalent to Brazilian Real R$47,750 per month, or approximately US$13,370 per month. Pursuant to this employment agreement, Mr. De Oliveira is eligible for annual incentive compensation upon achievement by Mr. De Oliveira and us of certain performance objectives. In the event of termination without cause, Mr. De Oliveira is entitled to a dismissal indemnification, in addition to mandatory severance by law, in a gross amount equivalent to twelve monthly fix salaries at the time of termination. In addition, upon termination of Mr. De Oliveira’s employment for any reason, we will have the right to require him not to compete with us pursuant to the non-competition provision in the employment agreement for up to twelve months after his termination by paying him an amount equal to his last base salary for each month of non-competition.
In August 2016, we granted Mr. De Oliveira an option to purchase 36,780 Class A common shares, of which 25% vested in January 2017, and the remainder of which vests in equal monthly installments over the following 36 months.
Our employment agreements with our executive officers may require us to pay severance benefits to any of those persons who are terminated in connection with a change in control of us, which could harm our financial condition or results.
Certain of our executive officers are parties to employment agreements that contain change in control and severance provisions providing for aggregate cash payments of up to approximately $2.2 million for severance and other benefits and acceleration of vesting of share options in the event of a termination of employment in connection with a change in control of our company. The accelerated vesting of options could result in dilution to our existing shareholders and harm the market price of our common shares. The payment of these severance benefits could harm our financial condition and results. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with our company.
Pension Benefits and Nonqualified Deferred Compensation
Aside from our 401(k) Plan, we do not maintain any pension plan or arrangement under which our named executive officers are entitled to participate or receive post-retirement benefits.
We do not maintain any non-qualified deferred compensation plans or arrangements under which our named executive officers participate.
Outstanding Equity Awards at 20182021 Year-End
The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2018:2021:
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Named Executive Officer | | Grant Date | | Option Awards - Number of Securities Underlying Unexercised Options Exercisable | | Option Awards - Number of Securities Underlying Unexercised Options Unexercisable | | Option Awards - Option Exercise Price | | Option Awards - Option Expiration Date | | Stock Awards - Number of Shares That Have Not Vested | | Stock Awards - Market Value of Shares or Units of Stock That Have Not Vested |
Juan José Chacón Quirós | | 4/25/2019 | | 20,000 | | | 60,000 | | | $ | 25.25 | | | 4/25/2029 | | — | | | $ | — | |
| 2/15/2021 | | — | | | 37,257 | | | $ | 69.49 | | | 2/15/2031 | | — | | | $ | — | |
Rajbir S. Denhoy | | 2/28/2021 | | — | | | 100,000 | | | $ | 69.03 | | | 2/28/2031 | | — | | | $ | — | |
Pratip Dastidar | | 5/24/2021 | | — | | | 50,000 | | | $ | 77.11 | | | 5/24/2021 | | — | | | $ | — | |
| 12/14/2020 | | 11,000 | | | — | | | $ | 31.50 | | | 12/14/2030 | | — | | | $ | — | |
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Named Executive Officer | | Grant Date | | Option Awards - Number of Securities Underlying Unexercised Options Exercisable | | Option Awards - Number of Securities Underlying Unexercised Options Unexercisable | | Option Awards - Option Exercise Price | | Option Awards - Option Expiration Date | | Stock Awards - Number of Shares That Have Not Vested | | Stock Awards - Market Value of Shares or Units of Stock That Have Not Vested (1) |
Juan Jose Chacon Quiros | | 8/12/2016 | | — |
| | — |
| | $ | — |
| | — |
| | 36,780 |
| | $ | 1,008,508 |
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Eddie De Oliveira | | 8/31/2016 | | 26,818 |
| | 9,962 |
| | $ | 4.11 |
| | 8/31/2026 |
| | — |
| | $ | — |
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Renee M. Gaeta | | 3/13/2018 | | 36,780 |
| | 110,340 |
| | $ | 10.19 |
| | 3/13/2028 |
| | — |
| | $ | — |
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The options granted vest in four substantially equal annual installments, subject to the NEOs’ continued employment through the vesting date. | |
(1) | Stock award market value of shares or units of stock that have not vested is based on the estimated share value of $27.42 per share, as of December 31, 2018. The option agreement includes a provision providing that the Company will cover the exercise price and all applicable taxes due upon the option exercise. |
Employee Benefit Plans
Our NEOs are eligible to participate in our employee benefit plans, including our medical, dental, vision, group life, and accidental death and dismemberment insurance plans, in each case, on the same basis as all of our other employees. We maintain a 401(k) plan for the benefit of our eligible employees, including our NEOs, as discussed in the section below.
401(k) Plan
We maintain a tax-qualified retirement plan, or our 401(k) plan, that provides eligible employees with an opportunity to save for retirement on a tax-advantaged basis. Participants are able to defer up their eligible compensation subject to applicable annual Internal Revenue Service limits. All participants’ interests in their deferrals are 100% vested when contributed. Our 401(k) plan permits us to make matching contributions and discretionary contributions to eligible participants.
COMPENSATION COMMITTEE REPORTRisks Related to Compensation Policies and Practices
The Compensation Committee has reviewedregularly monitors and discussed the foregoingconsiders whether our overall compensation programs, including our executive compensation section with management. Based on the review and discussions,program, create incentives for employees to take excessive or unreasonable risks that could materially harm our Company. Although risk-taking is a necessary part of any business, the Compensation Committee recommendedfocuses on aligning the Company’s compensation policies with the long-term interests of the Company and its stockholders and avoiding short-term rewards for management decisions that could pose long-term risks to the BoardCompany. We believe our 2021 compensation programs do not create risks that such executive compensation section be included in this Proxy Statement.are reasonably likely to have a material adverse effect on our Company.
Compensation Committee37
Dennis Condon (Chair)
Edward Schutter
Nicholas Lewin
The information contained in the above Compensation Committee Report shall not be deemed “soliciting material” or “filed”PROPOSAL 3: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with the SEC, or subject to the liabilities of Section 1814A of the Exchange Act, exceptwhich was amended pursuant to the extentDodd-Frank Wall Street Reform and Consumer Protection Act, we are asking shareholders to approve a non-binding advisory resolution approving our executive compensation as reported in this proxy statement.
As described above in this proxy statement, our executive compensation program is designed to motivate the Company’s NEOs to create long-term value for our shareholders and is weighted towards both short-and long-term performance-based compensation.
We urge shareholders to read the “Executive Compensation” section, which describes in more detail our executive compensation objectives and the key elements of our executive compensation program. The Compensation Committee and the Board believe that our executive compensation program is appropriately designed to achieve the objectives of our executive compensation philosophy.
We are asking shareholders to approve the following advisory resolution at the Annual Meeting:
RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of our named executive officers as set forth under “Executive Compensation” and the related compensation tables and narratives in the proxy statement for the 2022 annual meeting of shareholders.
This proposal to approve the compensation paid to our NEOs is advisory only and will not be binding on the Company, the Board or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Company, the Board or the Compensation Committee. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
We have included in this proxy statement a proposal to approve the frequency of future non-binding advisory votes on the compensation of our NEOs. Our Board of Directors recommends that we specifically incorporate it by reference intohold such filings.a vote every year. Accordingly, if shareholders approve 1 YEAR as the preferred frequency option in Proposal 4, we expect the next non-binding advisory vote on the compensation of our NEOs will occur at the 2023 annual meeting of shareholders.
Vote Required and Board Recommendation
Approval of this proposal requires the affirmative vote of a simple majority of the votes of the common shares entitled to vote and voting on this Proposal 3. Abstentions and broker non-votes will have no effect on voting for this proposal.
OUR BOARD RECOMMENDS A VOTE FOR THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL 4: ADVISORY APPROVAL OF THE FREQUENCY OF EXECUTIVE COMPENSATION ADVISORY VOTES
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are asking shareholders to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our NEOs. Under SEC rules, we are required to hold a new say-on-frequency vote at least every six years.
By voting with respect to this Proposal 4, shareholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every 1, 2 or 3 years. Shareholders also may, if they wish, abstain from voting on this proposal.
Our Board believes that advisory votes on executive compensation should be conducted every year so that our shareholders may annually express their views on our executive compensation program.
This vote is advisory and not binding on us or the Board. However, the Board will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation. The Board may decide that it is in the best interests of shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by shareholders.
Shareholders will have with the opportunity to choose among four options (holding the vote every 1, 2 or 3 years, or abstaining) and, therefore, shareholders will not be voting to approve or disapprove the recommendation of the Board.
Vote Required and Board Recommendation
Approval of this proposal requires the affirmative vote of a simple majority of the votes of the common shares entitled to vote and voting on this Proposal 4. Abstentions and broker non-votes will have no effect on voting for this proposal. If no frequency option receives the affirmative vote of a simple majority of the votes cast at the Annual Meeting, our Board will consider the option receiving the highest number of votes cast as the preferred frequency option of our shareholders.
OUR BOARD RECOMMENDS A VOTE 1 YEAR FOR THE FREQUENCY OF FUTURE OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes our equity compensation plan information as of December 31, 2018.2021. Information is included for equity compensation plans approved by our shareholders. We do not have any equity compensation plans not approved by our shareholders. | | Plan Category | | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (2) | | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (3) | | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (4) | Plan Category | | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (2) | | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (3) | | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (4) |
Equity compensation plans approved by stockholders(1) | | 1,800,486 |
| | $ | 11.43 |
| | 1,115,148 |
| |
Equity compensation plans not approved by stockholders | | — |
| | $ | — |
| | — |
| |
Equity compensation plans approved by shareholders(1) | | Equity compensation plans approved by shareholders(1) | | 2,102,069 | | | $ | 37.49 | | | 2,441,687 | |
Equity compensation plans not approved by shareholders | | Equity compensation plans not approved by shareholders | | — | | | $ | — | | | — | |
Total | | 1,800,486 |
| | $ | 11.43 |
| | 1,115,148 |
| Total | | 2,102,069 | | | $ | 37.49 | | | 2,441,687 | |
| |
(1) | Includes the following plans: 2015 Equity Incentive Plan (“2015 Plan”), 2018 Equity Incentive Plan (“2018 Plan”) and 2018 Employee Stock Purchase Plan (“2018 ESPP”). |
(1)Includes the following plans: 2015 Equity Incentive Plan (“2015 Plan”), 2018 Equity Incentive Plan (“2018 Plan”) and 2018 Employee Stock Purchase Plan (“2018 ESPP”).
Concurrent with the closing of the IPO, the Board of Directors terminated the 2015 Plan and approved the 2018 Plan, with an initial reserve of 1,500,000 shares of the Company’s common shares for issuance under the 2018 Plan.
Pursuant to the “evergreen” provision contained in the 2018 Plan, the number of common shares reserved for issuance under the 2018 Plan automatically increases on first day of each fiscal year, commencing on January 1, 2019, in an amount equal to the least of (1) 750,000 shares, (2) 4% of the total number of the Company’s common shares outstanding on the last day of the preceding fiscal year, or by(3) a lesser number of common shares as may be determined by the Company’s Board of Directors prior to any such increase date. On January 1, 2019, 2020 and 2021, the number of common shares authorized for issuance increased automatically by 750,000 shares in accordance with the evergreen provision, of the 2018 Plan increasing the number of common shares reserved under the 2018 Plan to 2,250,000.3,750,000.
Similarly, effective January 1, 2019, 2020 and 2021, given no action by the Board of Directors, the number of common shares reserved for issuance under the ESPP automatically increased by 1% of the total number of the Company’s common shares outstanding on the last day of the preceding fiscal year, increasing the number of common shares authorized for issuance under ESPP to 287,000.
| |
(2) | This number includes 314,123 shares subject to restricted stock units and 1,486,363 options outstanding. |
| |
(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. |
| |
(4) | This number includes 1,015,148 common shares available for grant under the 2018 Plan and 100,000 common shares available under the 2018 ESPP. |
661,000.
(2)This number includes 3,982 shares subject to restricted stock units and 2,098,087 options outstanding.
(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.
(4)This number includes 1,780,687 common shares available for grant under the 2018 Plan and 661,000 common shares available under the 2018 ESPP.
OTHER MATTERS
Transaction of Other Business
The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons appointed in the accompanyingas proxy holders intend to vote the shares represented thereby in accordance with their best judgment on such matters, under applicable laws.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that our executive officers, directors and 10% shareholders file reports of ownership and changes of ownership with the SEC. Such directors, executive officers and 10% shareholders 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% shareholders and except as previously disclosed, we believe that during our fiscal year ended December 31, 2021 or prior fiscal years, all Section 16(a) filing requirements were satisfied on a timely basis except for a Form 4 filing for Mr. Lewin to report two purchase transactions of our common shares by his spouse.
Fiscal Year 20182021 Annual Report and SEC Filings
Our financial statements for our fiscal year ended December 31, 20182021 are included in our Annual Report on Form 10-K, which we will make available to shareholders at the same time as this proxy statement. This proxy statement and our annual report are posted on our website at https://investors.establishmentlabs.com/financial-information and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual report without charge by sending a written request to address below:
Establishment Labs Holdings Inc.
Attention: Investor Relations
Building B25
Coyol Free Zone
Garita, Alajuela 20113, Costa Rica
* * *
The Board does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the common shares they represent in accordance with their own judgment on such matters.
It is important that your shares 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 executevoting instruction form or, if you received a printed copy of the proxy materials, by mail by executing and return,returning the enclosed proxy card or voting instruction, at your earliest convenience, the enclosed proxy card in the preaddressed, prepaid envelope that has also been provided.
THE BOARD OF DIRECTORS
Alajuela, Costa Rica
April 18, 201929, 2022