Business Context and Reporting Period
This Form 8-K was filed by Establishment Labs Holdings Inc. (ESTA), a British Virgin Islands corporation and emerging growth company, on December 28, 2018. The report covers events occurring on December 23, 2018, regarding the execution of new employment agreements with key executive officers.
Key Financial Metrics
This filing does not contain revenue, profit, cash flow, margin, debt, or liquidity metrics. It focuses exclusively on executive compensation arrangements.
Executive Compensation Details
- CEO (Juan José Chacón Quirós):
- Annual Base Salary (ESTA): $123,812
- Target Annual Bonus (ESTA): $260,000
- One-time Salary True-up: $42,000
- Monthly Base Salary (ELSA Subsidiary): $15,194
- Monthly Allowances (ELSA): $2,750 (Expense + Car)
- COO (Salvador Dada):
- Annual Base Salary (ESTA): $81,964
- Target Annual Bonus (ESTA): $157,500
- One-time Salary True-up: $40,271
- Monthly Base Salary (ELSA Subsidiary): $14,042
- Monthly Allowances (ELSA): $2,500 (Expense + Car)
Material Changes
On December 23, 2018, ESTA and its wholly-owned Costa Rican subsidiary, Establishment Labs Holdings S.A. (ELSA), entered into new employment agreements with the CEO and COO, effective December 26, 2018. These agreements formalize at-will employment terms, specific compensation packages, and severance provisions that were not previously detailed in this specific filing format.
Guidance, Outlook, and Risks
Severance and Change in Control Provisions:
- Standard Termination (No Cause/Good Reason): Entitles executives to 12 months (CEO) or 9 months (COO) of base salary plus a pro-rated bonus. ELSA agreements also include healthcare continuation for the same duration.
- Change in Control Termination: Entitles executives to 18 months (CEO) or 12 months (COO) of base salary, 100% of the target annual bonus, and 100% accelerated vesting of outstanding equity awards.
- Equity Acceleration: In the event of a Change in Control prior to termination, 100% of outstanding equity awards vest immediately, with performance goals deemed achieved at 100% of target levels.
Risks and Covenants:
- Executives are subject to a 12-month non-competition covenant and a 2-year non-solicitation covenant following termination.
- Payments are subject to "golden parachute" rules under Section 280G of the Internal Revenue Code; executives will receive the greater of the full amount or a reduced amount that avoids excise tax (no tax gross-up provided).
- Severance payments may be reduced by statutory liabilities required under applicable laws.
Investor Verification Checklist
- Verify the total outstanding equity awards held by the CEO and COO to assess the potential cost of the 100% acceleration clause in a Change in Control scenario.
- Confirm the company's current cash position to ensure liquidity is sufficient to cover the potential lump-sum severance payments (up to 18 months of salary plus bonuses) if triggered.
- Review the definition of "Change in Control" within the referenced Plan to understand the specific triggers for accelerated vesting.
- Assess the impact of the one-time salary true-up payments ($82,271 total) on the company's immediate cash flow for the period ending December 2018.