PROXY STATEMENT EXECUTIVE SUMMARY

The following is a summary which highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you are urged to read the entire proxy statement carefully before voting.

Information About Our 2022 Annual Meeting of Stockholders

 

DATE AND TIME:		Monday, May 16, 2022 at 1 p.m. Eastern Time
PLACE:		Visit https://www.cstproxy.com/canohealth/2022 and use your 12-digit control number
RECORD DATE:		Monday, March 28, 2022

Items of Business and Board of Directors Vote Recommendations

 

Proposal				Board Vote Recommendation		Page Number
Proposal 1:		To elect the three Class I director nominees named in the proxy statement, each to serve on our Board for a three-year term and until their respective successors are duly elected and qualified.		✓ FOR		Page 13
Proposal 2:		To hold an advisory vote regarding the compensation of our named executive officers for the 2022 fiscal year.		✓ FOR		Page 55
Proposal 3:		To hold an advisory vote on whether an advisory vote on executive compensation should be held every one, two or three years.		✓ EVERY          YEAR		Page 56
Proposal 4:		To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022.		✓ FOR		Page 57

Our Directors

 

Name		Class				Age				Committee Membership		Independent		Director Since				Current Term Expires
Dr. Lewis Gold			I				65			AC, CC		X			2021				2022
Barry S. Sternlicht			I				61			NCGC		X			2021				2022
Solomon D. Trujillo			I				70			NCGC		X			2021				2022
Elliot Cooperstone			II				60			—					2021				2023
Dr. Alan Muney			II				68			AC, CC(Chair)		X			2021				2023
Kim M. Rivera			II				53			AC, NCGC(Chair)		X			2021				2023
Dr. Marlow Hernandez			III				37			—					2021				2024
Jacqueline Guichelaar			III				49			AC, NCGC		X			2021				2024
Angel Morales			III				48			AC(Chair), CC		X			2021				2024

 

 

AC = Audit Committee    

CC = Compensation Committee

NCGC = Nominating and Corporate Governance Committee

 

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Information About Our Board and Committees (Pages 13-19)

 

		Number of Members					Independent					Number of Meetings During 2021(1)
Board of Directors				9					78	%				6
Audit Committee				5					100	%				5
Compensation Committee				3					100	%				4
Nominating and Corporate Governance Committee				4					100	%				3

(1)  Includes in-person and telephonic meetings.

Corporate Governance Highlights (Pages 10 to 12 and 15 to 19)

We are dedicated to high standards of corporate governance. Our Board of Directors (the “Board”) is committed to acting in the best interests of our stockholders and continually reviews our policies with those interests in mind, as well as in light of recent trends in corporate governance.

Below is a summary of our corporate governance highlights with respect to our Board.

 

✓		7 of 9 Directors are Independent		✓		Annual Board and Committee Self Evaluations
✓		5 of 9 Directors Self-Identify as Hispanic-Latinx		✓		Anti-Hedging and Anti-Pledging Policies
✓		2 of 9 Directors are Female		✓		Board and Committee Risk Oversight
✓		Lead Independent Director		✓		Code of Business Conduct and Ethics for Directors and Employees
✓		Executive Sessions without Management

Additional information about our corporate governance policies and practices can be found at pages 10-12 and pages 15-19 of this proxy statement.

 

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Compensation Highlights (Pages 22 to 48)

The following features of our ongoing executive compensation program are designed to align with stockholder interests and compensation governance best practices:

 

What We Do				What We Don’t Do
Pay for performance by providing a significant percentage of target annual compensation in the form of variable, at-risk compensation      Pre-established performance goals that are aligned with creation of stockholder value      Market comparison of executive compensation against a relevant peer group of companies      Use of an independent compensation consultant reporting to the Compensation Committee and providing no other services to the Company      Annual say-on-pay vote (starting with 2022 Annual Meeting)				No automatic or guaranteed annual salary increases or annual cash incentive payments    No “single-trigger” automatic acceleration of equity awards upon a change of control    No option repricing, backdating, or spring-loading    No excessive perquisites to our named executive officers    No supplemental executive retirement plans    No excise tax gross-ups

 

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QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING

A: What is the date, time and place of the Annual Meeting?

Our 2022 Annual Meeting of Stockholders (the “Annual Meeting”) will be held on Monday, May 16, 2022, beginning at 1 p.m. (Eastern Time). This year’s Annual Meeting will be a virtual meeting conducted virtually via live webcast and can be attended by visiting https://www.cstproxy.com/canohealth/2022. The online meeting will begin promptly at 1:00 p.m. (Eastern Time). We encourage you to access the Annual Meeting 15 minutes prior to the start time leaving ample time for the check in and to ensure that you can hear audio. Technicians will be available to assist you with any technical difficulties you may have accessing the virtual website of the Annual Meeting or during the Annual Meeting. For assistance, please call the technical support telephone number at (917) 262-2373. Technical support will be available 15 minutes prior to the start of the Annual Meeting.

Q: Why did I receive these materials?

On behalf of our Board of Directors, Mackenzie Partners, Inc. is soliciting your proxy to vote at our Annual Meeting. Stockholders who own shares of our Class A common stock or Class B common stock as of the record date, March 28, 2022 (the “Record Date”), are entitled to vote at the Annual Meeting. The proxy materials for our Annual Meeting include the Notice of Annual Meeting, this proxy statement, and the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”). If you received a paper copy of these materials, the proxy materials also include a proxy card or voting instruction form. You should review these proxy materials carefully as they give important information about the proposals that will be voted on at the Annual Meeting, as well as other important information about the Company.

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

As permitted by SEC rules, we are making this proxy statement and our Annual Report available to our stockholders electronically via the Internet instead of a paper copy of the proxy materials. The notice of Internet availability contains instructions on how to access this proxy statement and our Annual Report and vote online. The notice also instructs you on how you may submit your proxy over the Internet or by telephone. If you received a notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the notice.

Q: Can I access the proxy materials electronically?

Yes. Your notice, proxy card or voting instruction card will contain instructions on how to:

 

1.

view our proxy materials for the Annual Meeting on the Internet; and

 

2.

instruct us to send our future proxy materials to you electronically by e-mail.

Our proxy materials are also available at https://www.cstproxy.com/canohealth/2022 and our proxy materials will be available during the voting period starting on April 6, 2022.

Instead of receiving a notice or copies of our future annual reports, proxy statements, and proxy cards by mail, stockholders can elect to receive an email that will provide electronic links to our proxy materials and an electronic link to the proxy voting site. Choosing to receive your future proxy materials online will save us the cost of printing and mailing documents to you and help conserve natural resources. If you elect to receive these materials by electronic delivery, you may change your election at any time.

Q: Who will be entitled to vote?

Stockholders who own shares of our Class A common stock or Class B common stock (collectively, the “common stock”) as of the Record Date, March 28, 2022, are entitled to vote at the Annual Meeting. As of the Record Date, the Company had approximately 207,747,333 shares of Class A common stock outstanding and approximately 276,722,704 shares of Class B common stock outstanding. Holders of

 

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shares of common stock are entitled to one vote per share. Cumulative voting is not permitted with respect to the election of directors or any other matter to be considered at the Annual Meeting.

Q: What will I be voting on?

You will be voting on the following proposals:

 

1.

to elect the three Class I director nominees named in the proxy statement, each to serve on our Board for a three-year term and until their respective successors are duly elected and qualified;

 

2.

to hold an advisory vote regarding the compensation of our named executive officers for the 2022 fiscal year;

 

3.

to hold an advisory vote on whether an advisory vote on executive compensation should be held every one, two or three years;

 

4.

to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022; and

 

5.

to transact other business as may properly come before the meeting or any adjournment of the meeting.

Q: How does the Board recommend I vote on these matters?

The Board recommends you vote:

 

1.

FOR the election of Dr. Lewis Gold, Barry S. Sternlicht and Solomon D. Trujillo as Class I directors, each to serve on our Board for a three-year term and until their respective successors are duly elected and qualified;

 

2.

FOR the approval, on a non-binding advisory basis, of the compensation paid to our named executive officers, as described in this proxy statement;

 

3.

FOR EVERY YEAR (“1 YEAR” on the proxy card) in respect of the recommendation, on a non-binding advisory basis, of whether an advisory vote on executive compensation should be held every one, two or three years; and

 

4.

FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2022.

Q: How can I attend the virtual Annual Meeting?

The Annual Meeting is being held as a virtual only meeting this year. If you are a stockholder of record as of the Record Date, you may attend, vote and ask questions virtually at the meeting by logging in at https://www.cstproxy.com/canohealth/2022 and providing your control number. This number is included in the notice or on your proxy card.

If you hold your position through a bank, broker or other nominee and would like to join the meeting and vote or ask a question, you will need to supply Continental Stock Transfer & Trust Company (“Continental”) with a legal proxy at least 72 hours in advance of the Annual Meeting. Please reach out to Continental by telephone at (917) 262-2373 or via e-mail at proxy@continentalstock.com to obtain a control number that will permit you to attend, vote and ask questions virtually at the Annual Meeting. You may not vote your shares via the Internet at the Annual Meeting unless you receive a valid proxy from your brokerage firm, bank, broker-dealer or other nominee holder. If you were not a stockholder as of the Record Date, you may still listen to the Annual Meeting, but will not be able to ask questions or vote at the meeting.

Q: How can I submit a question during the Annual Meeting?

If you want to submit a question or make a comment during the Annual Meeting, log into the virtual meeting platform at https://www.cstproxy.com/canohealth/2022 with a valid control number, type your

 

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question into the “Ask a Question” field, and click “Submit”. Questions and comments submitted via the virtual meeting platform that are pertinent to Annual Meeting matters will be addressed during the meeting. Questions and comments that are not pertinent to Annual Meeting matters or that are not addressed during the meeting due to time constraints will be addressed after the meeting by our investor relations department. Questions or comments that are not related to the proposals under discussion, are about personal concerns not shared by stockholders generally, or use blatantly offensive language may be ruled out of order.

Q: Why is the Annual Meeting virtual only?

A virtual Annual Meeting enables stockholders to attend and participate from any location around the world and provides for cost savings to the Company and our stockholders.

Q: What constitutes a quorum?

On the record date of March 28, 2022, the Company had 207,747,333 shares of Class A common stock and 276,722,704 shares of Class B common stock outstanding and entitled to vote with respect to all matters to be acted upon at the meeting. Each holder of common stock is entitled to one vote for each share of stock held by such holder. The presence of holders representing a majority of all the votes entitled to be cast at the Annual Meeting will constitute a quorum at the Annual Meeting. In accordance with Delaware law, abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum for the transaction of business.

Q: How do I cast my vote?

Beneficial Stockholders. If you hold your shares through a broker, bank or other nominee, you are a beneficial stockholder. In order to vote your shares, please refer to the materials forwarded to you by your broker, bank or other nominee for instructions on how to vote the shares you hold as a beneficial stockholder. As indicated above, if you hold your position through a bank, broker or other nominee and would like to join the meeting and vote or ask a question, you will need to supply Continental with a legal proxy at least 72 hours in advance of the Annual Meeting. Please reach out to Continental by telephone at (917) 262-2373 or via e-mail at proxy@continentalstock.com to obtain a control number that will permit you to attend, vote and ask questions virtually at the Annual Meeting.

Registered Stockholders. If you are a stockholder of record, you may vote at the virtual Annual Meeting, vote by proxy over the telephone, vote by proxy through the Internet or vote by proxy card. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the virtual Annual Meeting and vote even if you have already voted by proxy.

 

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TO VOTE DURING THE ANNUAL MEETING: To vote during the live webcast of the Annual Meeting, you must first log into the meeting portal at http://www.cstproxy.com/canohealth/2022, enter your name, e-mail address and valid control number. Upon completing your registration, you will have access to the Annual Meeting portal where you can submit a question or vote during the meeting. Stockholders will be able to access the Annual Meeting platform beginning at 1:00 p.m. (Eastern Time) on May 16, 2022 at http://www.cstproxy.com/canohealth/2022.

 

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TO VOTE BY PHONE: To vote by telephone, dial toll-free (866) 894-0536 using any touch-tone telephone and follow the recorded instructions. Please have your proxy card available when you call.

 

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TO VOTE BY INTERNET: To vote through the Internet, please visit www.cstproxyvote.com or follow the instructions on your proxy card.

Proxies submitted via the Internet or by telephone must be received by 11:59 p.m. (Eastern Time) on May 15, 2022.

Q: How may I change or revoke my proxy?

Beneficial Stockholders. Beneficial stockholders should contact their broker, bank or other nominee for instructions on how to change their proxy vote.

 

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Registered Stockholders. Registered stockholders may change a properly executed proxy at any time before its exercise by:

 

1.

delivering written notice of revocation to the Secretary at our principal executive offices at 9725 NW 117th Avenue, Miami, FL 33178;

 

2.

submitting another proxy that is dated later than the original proxy (including a proxy via telephone or the Internet); or

 

3.

voting via the Internet at the Annual Meeting.

Q: What is a broker non-vote?

Broker non-votes occur when shares are held indirectly through a broker, bank or other intermediary on behalf of a beneficial owner (referred to as held in “street name”) and the broker submits a proxy but does not vote for a matter because the broker has not received voting instructions from the beneficial owner and the broker does not have discretionary voting authority on the matter or the broker chooses not to vote on a matter for which it has discretionary voting authority. Under the rules of the New York Stock Exchange (the “NYSE”) that govern how brokers may vote shares for which they have not received voting instructions from the beneficial owner, brokers are permitted to exercise discretionary voting authority only on “routine” matters when voting instructions have not been timely received from a beneficial owner. Proposal 4 is considered a “routine matter.” Therefore, if you do not provide voting instructions to your broker regarding such proposal, your broker will be permitted to exercise discretionary voting authority to vote your shares on such proposal. In the absence of specific instructions from you, your broker does not have discretionary authority to vote your shares with respect to Proposal 1, Proposal 2 or Proposal 3.

Q: What is the voting requirement to approve each of the proposals, and how are the votes counted?

Proposal 1–Election of Class I Directors. A plurality of the votes cast by the shares of common stock present or represented by proxy at the Annual Meeting is required to elect each of the Class I director nominees named herein. You may vote “FOR” or “WITHHOLD” with respect to each of the Class I director nominees. Withheld votes and broker non-votes will have no effect on the outcome of the election of the directors.

Proposal 2–Non-binding, Advisory Vote to Approve the Compensation of Our Named Executive Officers. The affirmative vote of a majority of the shares of common stock present or represented by proxy at the Annual Meeting is required to approve this proposal. You may vote “FOR,” “AGAINST” or “ABSTAIN” from voting on this proposal. Abstentions and broker non-votes will have no effect on the outcome of the non-binding, advisory vote to approve the compensation of our named executive officers.

Proposal 3–Non-binding, Advisory Vote on the Frequency of Future Non-binding, Advisory Votes to Approve the Compensation of Our Named Executive Officers. The frequency of “one year,” “two years,” or “three years” that receives the highest number of votes of the shares of common stock present or represented by proxy at the Annual Meeting will be deemed the preferred frequency with which we hold a non-binding, advisory vote on the compensation of our named executive officers. You may vote for “ONE YEAR,” “TWO YEARS,” “THREE YEARS” or “ABSTAIN” from voting on this proposal. Abstentions and broker non-votes will have no effect on the outcome of the non-binding, advisory vote on the frequency of future non-binding, advisory votes to approve the compensation of our named executive officers.

Proposal 4–Approval of the Ratification of Ernst & Young LLP as Independent Registered Public Accounting Firm. The affirmative vote of a majority of the shares of common stock present or represented by proxy at the Annual Meeting is required to approve this proposal. You may vote “FOR,” “AGAINST” or “ABSTAIN” from voting on this proposal. If you abstain from voting on this matter, your shares will not be counted as “votes cast” with respect to such matter, and the abstention will have no effect on the proposal. This proposal is considered to be a routine item, and your broker will be able to vote on this proposal even if it does not receive instructions from you. Accordingly, we do not anticipate that there will be any broker non-votes on this proposal; however, any broker non-votes will not be counted as “votes cast” and will therefore have no effect on the proposal.

 

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Q: When will the results of the vote be announced?

The final voting results will be published in a Current Report on Form 8-K filed with the SEC within four business days of the Annual Meeting.

Q: What is the deadline for submitting a stockholder proposal or director nomination for the 2023 annual meeting?

Stockholder proposals pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for inclusion in the Company’s proxy statement and form of proxy for the Company’s 2023 annual meeting of stockholders, to be held in 2023 (the “2023 Annual Meeting”), must be received by the Company at its principal executive offices at 9725 NW 117^th Avenue, Miami, Florida 33178 no later than the close of business on December 7, 2022. Stockholders wishing to make a director nomination or bring a proposal before the 2023 Annual Meeting (but not include it in the Company’s proxy materials) must provide written notice of such nomination or proposal to the Secretary at the Company’s principal executive offices no later than the close of business on February 15, 2023 and not earlier than the close of business on January 16, 2023, assuming the Company does not change the date of the 2023 Annual Meeting by more than 30 days before or more than 60 days after the anniversary of the 2022 Annual Meeting. If the 2023 Annual Meeting is held more than 30 days before or more than 60 days after the anniversary of the 2022 Annual Meeting, such notice must be provided no later than the close of business on the later of the ninetieth day prior to the scheduled date of the 2023 Annual Meeting or the tenth day following the Company’s public announcement of the date of the 2023 Annual Meeting and not earlier than the close of business on the one hundred twentieth day prior to the scheduled date of the 2023 Annual Meeting. Any stockholder proposal or director nomination must comply with the provisions of the Company’s bylaws and be submitted in writing to the Secretary at the Company’s principal executive offices. Additionally, under Rule 14a-4 promulgated under the Exchange Act, if a stockholder fails to notify the Company of a proposal at least 45 days prior to the month and day of mailing of the prior year’s proxy statement, then the Company will be allowed to use its discretionary voting authority when the proposal is raised at the annual meeting, without any discussion of the matter in the proxy statement. To comply with the SEC’s recently adopted universal proxy rules (which rules will be effective for the 2023 Annual Meeting), stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees for the 2023 Annual Meeting must provide notice that sets forth the information required by Rule 14a-19 promulgated under the Exchange Act no later than March 17, 2023.

Q: What if I hold my shares in street name?

If you hold your shares in street name and you do not submit voting instructions to your broker, your broker may exercise its discretion to vote your shares on this proposal. If your broker exercises this discretion, your shares will be counted as present for purposes of determining the presence of a quorum at our Annual Meeting and will be voted in the manner directed by your broker on the proposal to ratify Ernst & Young LLP as our independent registered public accounting firm, but your shares will constitute broker non-votes on each of the other proposals at our Annual Meeting. On all other proposals, your broker is not permitted to vote your shares without your instructions and uninstructed shares are considered broker non-votes. Accordingly, a broker non-vote will not be counted in determining the outcome of the vote on these matters. If your shares are held by a broker, the broker will ask you how you want to vote your shares. Therefore, it is important that you give instructions to your broker as to how to vote your shares.

Q: If I plan to attend the virtual Annual Meeting, should I still vote by proxy?

Yes. Voting in advance does not affect your right to attend the virtual Annual Meeting. If you submit the enclosed proxy card and also attend the virtual Annual Meeting, you do not need to vote again at the Annual Meeting unless you want to change your vote. If you hold your shares in street name, you may vote your shares in person only if you obtain a legal proxy from the broker, bank or other nominee that holds your shares giving you the right to vote the shares. You may also vote online by following the instructions provided on the proxy card. Even if you plan to attend the virtual Annual Meeting, we recommend that you

 

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also submit your proxy or voting instructions prior to the Annual Meeting as described above so that your vote will be counted if you later decide not to attend the virtual Annual Meeting.

Q: What is householding?

If you and other residents at your mailing address own shares of common stock in street name, your broker, bank or other nominee may have sent you a notice that your household will receive only one Annual Report, Notice of Annual Meeting and proxy statement. This procedure is known as “householding” and is intended to reduce the volume of duplicate information stockholders receive and also reduce our printing and postage costs. If you consented or were deemed to have consented to householding, your broker, bank or other nominee may send one copy of our Annual Report, Notice of Annual Meeting and proxy statement to your address for all residents that own shares of common stock in street name. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee. If you are receiving multiple copies of our Annual Report, Notice of Annual Meeting and proxy statement, you may be able to request householding by contacting your broker, bank or other nominee.

If you wish to request extra copies free of charge of our Annual Report on Form 10-K or proxy statement, please send your request in writing to 9725 NW 117^th Avenue, Miami, FL 33178, Attention: Investor Relations or by telephone at (855) 226-6633.

Q: Who is soliciting the proxies and who pays the costs?

Your proxy is being solicited by the Board. We have retained Mackenzie Partners, Inc. to assist in the solicitation of proxies for a fee of $17,500, plus reimbursement of certain expenses, and have agreed to customary indemnification provisions. We also will reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy materials to our stockholders but we will not pay any compensation for their services.

Proxies may be solicited on our behalf by telephone or through other means by our directors, officers and other employees who will receive no additional compensation therefor.

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Our business and affairs are managed under the direction of our Board, which is comprised of nine directors. Our certificate of incorporation provides that the authorized number of directors may be changed only by resolution of our Board. Our certificate of incorporation also provides that our Board will be divided into three classes of directors, with the classes as nearly equal in number as possible. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the class whose term is then expiring.

The following table sets forth the director class, name, age and other information for each member of our Board as of April 1, 2022:

 

Name		Class				Age		Position		Director Since				Current Term Expires
Dr. Lewis Gold			I			65		Director			2021				2022
Barry S. Sternlicht			I			61		Director			2021				2022
Solomon D. Trujillo			I			70		Director			2021				2022
Elliot Cooperstone			II			60		Director			2021				2023
Dr. Alan Muney			II			68		Director			2021				2023
Kim M. Rivera			II			53		Director			2021				2023
Dr. Marlow Hernandez			III			37		Chairman and Chief Executive Officer			2021				2024
Jacqueline Guichelaar			III			49		Director			2021				2024
Angel Morales			III			48		Director			2021				2024

We believe that in order for our Board to effectively guide us to long-term sustainable, dependable performance, it should be comprised of individuals with sophistication and experience in the many disciplines that impact our business. In order to best serve our stockholders, we seek to have a Board, as a whole, that is competent in key corporate disciplines, including accounting and financial acumen, business judgment, crisis management, governance, leadership, people management, risk management, social responsibility and reputational issues, strategy and strategic planning. Additionally, we desire that the Board include members that have specific knowledge related to our industry.

The Nominating and Corporate Governance Committee believes that all directors must, at a minimum, meet the criteria set forth in the Company’s Corporate Governance Guidelines, which specify, among other things, that the Nominating and Corporate Governance Committee will consider criteria such as independence, skills, and experience in the context of the needs of the Board. In addressing issues of diversity in particular, the Nominating and Corporate Governance Committee considers a nominee’s diversity of background and experience, inclusive of gender, race, ethnicity, age, gender identity, gender expression and sexual orientation. The Nominating and Corporate Governance Committee believes that diversity of backgrounds and viewpoints is a key attribute for a director nominee. While the Nominating and Corporate Governance Committee carefully considers diversity when determining Board composition, it has not established a separate formal policy regarding diversity. The Nominating and Corporate Governance Committee requires the following minimum qualifications to be satisfied by any nominee for a position on the Board: (a) high standards of personal and professional ethics and integrity, (b) proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment, (c) skills that are complementary to those of the existing directors on the Board, (d) the ability to assist and support management and make significant contributions to the Company’s success and (e) an understanding of the fiduciary responsibilities that are required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities.

The Nominating and Corporate Governance Committee has determined that all of our directors meet the criteria and qualifications for our Board set forth in the Company’s Nominating and Corporate Governance Committee charter and the Corporate Governance Guidelines and the criteria set forth above

 

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for director nominees. Moreover, each director possesses the following critical personal qualities and attributes that we believe are essential for the proper functioning of the Board to allow it to fulfill its duties for our stockholders: accountability, ethical leadership, governance experience, integrity, risk management experience, and sound business judgment. In addition, our directors have the confidence to assess and challenge the way things are done and recommend alternative solutions, a keen awareness of our business and social realities of the environment in which we operate, the independence and high-performance standards necessary to fulfill the Board’s oversight function, and the humility, professional maturity, and style to interface openly and constructively with other directors. Finally, the director biographies below include a non-exhaustive list of other key experiences and qualifications that further qualify the individual to serve on the Board. These collective qualities, skills, experiences and attributes are essential to our Board’s ability to exercise its oversight function for the Company and its stockholders, and guide the long-term sustainable, dependable performance of the Company.

Subject to any earlier resignation or removal in accordance with the terms of our certificate of incorporation and bylaws, our Class I directors will serve until our 2022 annual meeting of stockholders, our Class II directors will serve until our 2023 annual meeting of stockholders, and our Class III directors will serve until our 2024 annual meeting of stockholders. In addition, our certificate of incorporation provides that directors may be removed only with cause upon the affirmative vote of at least two-thirds of our outstanding shares of stock entitled to vote thereon.

When filling a vacancy on the Board, the Nominating and Corporate Governance Committee identifies the desired skills and experience of a new director and nominates individuals who it believes can strengthen the Board’s capabilities and further diversify the collective experience represented by the then-current directors. The Nominating and Corporate Governance Committee may engage third parties to assist in the search and provide recommendations. Also, directors are generally asked to recommend candidates for the position. The candidates are then evaluated based on the process outlined in our Corporate Governance Guidelines and the Nominating and Corporate Governance Committee charter, and the same process is used for all candidates, including candidates recommended by stockholders.

Stockholder Nominations for the Board of Directors

The Nominating and Corporate Governance Committee will consider stockholder nominations for membership on the Board. For the 2023 annual meeting, nominations may be submitted to Cano Health, Inc., 9725 NW 117^th Avenue, Miami, Florida 33178, Attn: Secretary, and such nominations will then be forwarded to the Chairperson of the Nominating and Corporate Governance Committee. Nominations must be in writing and comply with the advance notice provisions and other requirements specified in our bylaws, and we must receive such nominations not less than 90 days nor more than 120 days prior to May 16, 2023 (or no earlier than January 16, 2023 and no later than February 15, 2023). Nominations not received within this time frame will be considered untimely.

Corporate Governance Guidelines

We are committed to operating our business under strong and accountable corporate governance practices. The Board has adopted Corporate Governance Guidelines that address significant issues of corporate governance and set forth procedures by which the Board carries out its responsibilities. Among the areas addressed by the Corporate Governance Guidelines are director qualification standards, director responsibilities, Board structure, director access to management, director compensation, director orientation, succession planning, and periodic performance evaluation of the Board and committees. Our Nominating and Corporate Governance Committee is responsible for, among other things, assessing and periodically reviewing the adequacy of the Corporate Governance Guidelines and will recommend, as appropriate, proposed changes to the Board.

You are encouraged to visit the “Investors–Governance” section of our website at www.canohealth.com to view or to obtain copies of our committee charters, Code of Business Conduct and Ethics and Corporate Governance Guidelines. The information found on, or accessible through, our website is not incorporated

 

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into, and does not form a part of, this proxy statement or any other report or document we file with or furnish to the SEC.

Environmental, Social and Governance

We believe that our mantra – “together for a healthier, happier you” – uniquely situates us to have a positive impact on the communities we serve. We are committed to improving patient health by delivering superior primary care medical services, while forging a life-long bond with our members. We recognize that running a sustainable healthcare business requires a sense of shared responsibility and an unwavering commitment to the communities we serve. We are focused on transparency around our values and how we do business. We value human well-being that emphasizes safety, access, affordability, quality and privacy, and our corporate governance prioritizes ethics, integrity, and accountability. As we continue to execute on our build, buy, and manage strategy, we will seek potential partners whose values and mission align with our own. We believe that building an enterprise that considers all of our stakeholders is an integral part of creating sustainable value and a better world. We have delegated oversight of matters related to Environmental, Social and Governance to the Nominating and Corporate Governance Committee.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion & Analysis

On June 3, 2021, Cano Health completed its business combination with Jaws Acquisition Corp. and became a publicly traded company on the NYSE. This is our first Compensation Discussion & Analysis (“CD&A”), the purpose of which is to discuss the key compensation policies and determinations that applied to our named executive officers during 2021. When we refer to our “named executive officers” in the CD&A, we are referring to the following individuals:

 

Name		Position
Dr. Marlow Hernandez		Chief Executive Officer
Brian Koppy		Chief Financial Officer
Dr. Richard Aguilar		Chief Clinical Officer
David Armstrong		Chief Compliance Officer and General Counsel
Mark Novell		Chief Accounting Officer

The following discussion should be read together with the compensation tables and related disclosures set forth below.

Executive Summary

Cano Health is a primary care-centric, technology-powered healthcare delivery and population health management platform designed with a focus on clinical excellence. Our mission is simple: to improve patient health by delivering superior primary care medical services, while forging life-long bonds with our members. Our vision is clear: to become the national leader in primary care by improving the health, wellness and quality of life of the communities we serve, while reducing healthcare costs.

Overview of Executive Compensation Program

Executive Compensation Objectives

The Company requires top talent with a wide range of skills, experience, and leadership qualities to lead the organization in support of its mission and create long-term stockholder value. The Compensation Committee’s goal is to implement an executive compensation program that is built upon the following three core objectives:

 

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Attracting, Motivating and Retaining the Right Talent. Executive compensation should be market-competitive in order to attract and retain highly motivated talent with a performance-driven mindset.

 

•

Pay for Performance. A material portion of an executive’s target compensation should be at-risk and directly aligned with Company performance.

 

•

Alignment with Stockholder Interests. Our executives’ interests should be aligned with stockholder interests.

 

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2021 Executive Compensation Program Design

In connection with our business combination and Cano Health’s emergence as a newly public company, we implemented a new executive compensation program which was designed to balance our goal of attracting, motivating, and retaining high-performing senior executives with our goal of aligning their interests with those of our stockholders. The target total direct compensation (“TDC”) of our named executive officers in fiscal year 2021 consisted of the following elements: base salary, a target cash bonus opportunity under our Annual Incentive Plan, and a target equity incentive opportunity under our Long-Term Incentive Program (all as more fully described in this CD&A).

Our executive compensation philosophy is focused on pay-for-performance. In this regard, we link a significant portion of each named executive officer’s target total direct compensation to the achievement of specified performance goals or appreciation of our common stock. As illustrated by the charts below, the majority of 2021 target pay that may be earned by our named executive officers is variable, at-risk pay.

 

CEO 2021 Target Pay Mix		Other NEOs Average 2021 Target Pay Mix

The Compensation Committee will annually evaluate our executive compensation program to ensure that it is consistent with our short-term and long-term goals and the dynamic nature of our business.

Additionally, following our business combination and similar to initial public offering (“IPO”) practices at other newly public companies, the Compensation Committee granted our CEO and other key executives certain IPO related awards to specifically recognize the value creation generated by our business combination, drive performance to create long-term value, and serve as a critical retention incentive to secure our key executives in the aftermath of becoming a public company. These special awards consisted primarily of the restricted stock units (“RSUs”) described below as “recognition RSUs” and performance stock options with substantial price-vesting hurdles. See detailed discussion under “IPO Related Equity Awards Following Business Combination”.

Our CEO’s 2021 compensation inclusive of his target pay, realized pay, and IPO related awards is illustrated in the graph below. Notably, although the compensation reported in the Summary Compensation Table on page 36 of this proxy statement indicates total CEO pay of approximately $31.7 million, Dr. Hernandez’s actual realized pay for 2021 was approximately $353,000.

 

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2021 CEO Pay

IPO-related Awards, Target Total Direct Compensation (TDC),

Earned TDC and Realized Pay ($ ’000)

 

 

Compensation Governance

The following features of our ongoing executive compensation program are designed to align with stockholder interests and compensation governance best practices:

 

What We Do		What We Don’t Do
Pay for performance by providing a significant percentage of target annual compensation in the form of variable, at-risk compensation        Pre-established performance goals that are aligned with creation of stockholder value        Market comparison of executive compensation against a relevant peer group of companies        Use of an independent compensation consultant reporting to the Compensation Committee and providing no other services to the Company        Annual say-on-pay vote (starting with 2022 Annual Meeting)		No automatic or guaranteed annual salary increases or annual cash incentive payments      No “single-trigger” automatic acceleration of equity awards upon a change of control      No option repricing, backdating, or spring-loading      No excessive perquisites to our named executive officers      No supplemental executive retirement plans      No excise tax gross-ups

As we grow and mature as a public company, we will continually evaluate our compensation governance and strive to reflect market best practices. We are committed to sound compensation governance, which we believe promotes the long-term interests of our stockholders, fosters sustained business success, and strengthens Board and management accountability.

 

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How We Determine Executive Compensation

Role of our Compensation Committee and Board of Directors

The table below summarizes how we design and determine the compensation of our named executive officers, including our named executive officers.

 

Compensation Committee		•   Determines base salaries, annual cash incentive compensation and equity incentive compensation, considers compensation for comparable positions in the market, the historical compensation levels of our named executive officers, and individual performance as compared to our expectations and objectives •   Approves incentive compensation programs and performance goals for the Annual Incentive Plan (“AIP”) •   Approves all compensation actions for the named executive officers
Board of Directors		•   Reviews and ratifies compensation for the named executive officers
Independent Committee Consultant — FW Cook (December 2021 - present)		•   Provides independent advice, research, and analytical services with respect to executive compensation matters to the Compensation Committee •   Participates in Compensation Committee meetings as requested and communicates with the Chair of the Compensation Committee between meetings •   Reports to the Compensation Committee, does not perform any other services for the Company, and has no economic or other ties to the Company or the management team that could compromise its independence or objectivity •   Our Compensation Committee has assessed the independence of FW Cook consistent with NYSE listing standards and has concluded that the engagement of FW Cook does not raise any conflict of interest
CEO and Management		•   Management, including the CEO, develops preliminary recommendations regarding compensation matters with respect to named executive officers and other senior executives, and provides these recommendations to the Compensation Committee •   In contemplation of becoming a public company, the Company retained KPMG International Limited (“KPMG International”), a national compensation consulting firm, to assist in the structure and design of Cano Health’s go-forward workforce planning, executive compensation and equity compensation plans •   Responsible for the administration of the compensation programs once Compensation Committee decisions are finalized

 

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Use of Market Data

Initial Peer Group in Anticipation of Becoming Public

In November 2020, in anticipation of becoming a public company and based on the advice of the Company’s compensation consultant, KPMG International, we established a peer group of publicly traded companies to provide appropriate compensation data to compare our executive compensation against the competitive market. This compensation peer group consisted of healthcare providers and healthcare services companies that were similar to us in terms of business fit and were expected to be in the size range of our revenue and market capitalization once we became public. Our initial peer group was comprised of the following eleven (11) companies:

 

1Life Healthcare		Oak Street Health		Teladoc Health
Addus HomeCare		Sonida Senior Living		The Joint Corp.
Apollo Medical Holdings		Star Equity Holdings		U.S. Physical Therapy
CorVel		SunLink Health Systems

Our growth during 2021 substantially outpaced the initial peer group and, our revenue (based on the available trailing four quarters) and market capitalization as of December 31, 2021 relative to the initial peer group were at the 93^rd and 81^st percentiles, respectively.

Updated Peer Group

In order to position Cano Health within the range of median of the peer group, the Compensation Committee re-evaluated the comparator companies. Based on the advice and analysis of its independent compensation consultant, FW Cook, the Compensation Committee approved an updated peer group for 2022, composed of the following sixteen (16) companies:

 

1Life Healthcare (ONEM)		Encompass Health (EHC)		RadNet (RDNT)
Acadia Healthcare (ACHC)		LHC Group (LHCG)		Surgery Partners (SGRY)
Addus HomeCare (ADUS)		MEDNAX (MD)		Teladoc Health (TDOC)
Amedisys (AMED)		National HealthCare (NHC)		The Ensign Group (ENSG)
Apollo Medical Holdings (AMEH)		Oak Street Health (OSH)		U.S. Physical Therapy (USPH)
CorVel (CRVL)

The peer companies primarily consist of companies operating healthcare facilities and providing patient services. Based on data compiled by FW Cook at the time of the peer group review, our revenue (based on the available trailing four quarters) and market capitalization as of December 31, 2021 were at the 49^th and 53^rd percentiles, respectively, in relation to the updated peer group.

Due to the nature of our business, we also compete for executive talent with companies outside our peer group, including public companies that are larger and more established than we are or that possess greater resources than we do, and with smaller private companies that may be able to offer greater compensation potential. In setting compensation, the Compensation Committee considers each executive’s level and job performance, his or her duties and responsibilities at the Company compared to the duties and responsibilities of executive officers in similar positions at the peer group companies, as well as general industry survey data and other circumstances unique to the Company. The Compensation Committee then evaluates whether the compensation elements and levels provided to our named executive officers were generally appropriate relative to their responsibilities at the Company vis-à-vis compensation elements and levels provided to their counterparts in the peer group or within the market. The Compensation Committee considers both objective and subjective criteria to evaluate Company and individual performance, which allows it to exercise informed judgment and not rely solely on rigid benchmarks. Accordingly, the Compensation Committee does not formulaically tie compensation decisions to any particular range or percentile level of total compensation paid to executives at the peer group companies or general industry survey data.

 

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Our Compensation Committee will review our compensation peer group periodically and will make adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group.

Consideration of Say-On-Pay Advisory Vote

Our predecessor company, Jaws Acquisition Corp., was considered an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, and was not required to hold a non-binding advisory vote on the compensation of named executive officers (a “say-on-pay” vote”). We will hold our first say-on-pay vote at this year’s Annual Meeting. Because we value the opinion of our stockholders, the Board of Directors and the Compensation Committee will consider the outcome of the “Say-on-Frequency” vote described in Proposal 3 of this proxy statement and the related say-on-pay vote at this year’s Annual Meeting, as well as feedback received throughout the year, when making compensation decisions for our named executive officers in the future.

2021 Named Executive Officer Compensation

Annual Base Salary

Annual base salaries are a fixed amount paid to each executive for performing his normal duties and responsibilities. We determine the amount based on the executive’s overall performance, level of responsibility, and comparison to market data. Based on these criteria, our named executive officers’ 2021 annual base salaries were set at the following levels:

 

		2021 Base Salary
Dr. Marlow Hernandez			$	350,000
Brian Koppy			$	325,000
Dr. Richard Aguilar			$	300,000	*
David Armstrong			$	235,000
Mark Novell			$	245,000

 

*For the 2021 fiscal year, Dr. Aguilar’s annual base salary was initially equal to $275,000. However, in recognition of Dr. Aguilar’s role and contribution to the Company, Dr. Aguilar’s base salary was increased to $300,000 in September 2021.

Annual Incentive Plan

Our Annual Incentive Plan (“AIP”) is generally a cash-based program that rewards our named executive officers for achieving critical annual financial goals, which are key indicators of operational performance and builds the foundation for long-term stockholder value creation.

The Compensation Committee determined the 2021 annual cash incentive awards for the named executive officers using the following framework:

 

 

 

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The target annual incentive opportunity for each of our named executive officers in 2021 was as follows:

 

		2021 Target   Annual Incentive					2021 Target Annual Incentive as   Percent of Base   Salary
Dr. Marlow Hernandez		$175,000					50%
Brian Koppy		$195,000					60%
Dr. Richard Aguilar		$120,000					40%
David Armstrong		$70,500					30%
Mark Novell		$61,250					25%

Annual incentive payments can range from 0% to 200% of the target award opportunity, based on performance relative to goals as determined by the Compensation Committee.

Following completion of our business combination, the Compensation Committee established the following goals and payout levels under the 2021 AIP:

 

Metric		Weighting		Rationale for Metric		Payout Range
Revenue*		50%		Key top-line financial metric of our performance		0 - 200%
Adjusted EBITDA**		50%		Key measure to assess the financial performance of our business in order to make decisions on allocation of resources		0 - 200%

 

^*For 2021, Revenue was adjusted to include the projected payment of certain Medicare Risk Adjustments.

^**Adjusted EBITDA is Earnings before Interest, Income Taxes, Depreciation and Amortization (EBITDA) adjusted to add back the effect of certain expenses, such as stock based compensation expense, de novo losses (consisting of losses incurred in the twelve months after the opening of a new facility), acquisition transaction costs (consisting of transaction costs, fair value adjustments to contingent consideration, management fees and corporate development payroll costs), restructuring and other charges, loss on extinguishment of debt, and changes in fair value to an embedded derivative and to warrant liabilities. For 2021, Adjusted EBITDA was further adjusted to include the projected payment of certain Medicare Risk Adjustments and other non-cash items.

 

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The 2021 AIP performance levels were intended to be aggressive but realistic, such that achieving threshold levels would represent minimum acceptable performance and achieving maximum levels would represent outstanding performance. The threshold, target and maximum performance and payout opportunities under the 2021 AIP (subject to interpolation between points), along with the actual performance achieved and related payout percentage, are set forth below:

 

		Threshold ($ million)		Target ($ million)		Maximum ($ million)		Actual Performance ($ million)		Actual Performance (% of Target Achieved)		Payout %
Payout %		50%		100%		200%
Revenue*		$1,160		$1,450		$1,740		$1,720.5		118.7%		193.3%
Adjusted EBITDA*		$76		$99		$114		$123.5		124.7%		200%
Weighted Average Payout: 196.6%

 

*Please refer to the notes on page 28 for a description of certain adjustments to the metrics.

Based on the achievement of the 2021 performance goals, the annual incentive awards earned by our named executive officers for 2021 are reflected in the table below. Although our AIP awards will normally be paid entirely in cash, in order to conserve the Company’s cash, 100% of the earned AIP for our CEO and approximately 49% of the other named executive officers, was delivered in the form of RSUs subject to a further two-year vesting requirement.

 

		Earned AIP		Value of AIP Paid in Cash		Value of AIP Delivered in RSUs				Number of RSUs (#)
Dr. Marlow Hernandez		$344,116		$0		$344,116				61,079
Brian Koppy		$283,643*		$144,246		$139,397				24,742
Dr. Richard Aguilar		$235,966		$120,000		$115,966				20,583
David Armstrong		$138,630		$70,000		$68,630				12,181
Mark Novell		$76,884*		$39,099		$37,785				6,707

 

* Reflects proration based on start date.

The RSUs were granted on March 15, 2022, with the number of RSUs calculated by dividing the applicable value by $5.63, the average closing price of our Class A common stock during the 20-trading days prior to the grant date. (An average price was used to smooth single-day price volatility in our share price.)

Separate from the 2021 AIP, Mr. Koppy also received a sign-on bonus of $600,000 in connection with the commencement of his employment. However, Mr. Koppy will be required to repay a pro-rata portion of the sign-on bonus in the event his employment is terminated prior to April 5, 2023 by the Company for “cause” (as defined in his employment agreement) or by Mr. Koppy without “good reason” (as defined in his employment agreement).

 

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2021 Long-Term Incentive Program (LTIP)

Long-term equity incentive awards enable our named executive officers to acquire a meaningful ownership interest in our Company. We believe that equity awards provide our named executive officers with a direct interest in our long-term performance, create an ownership mindset, and help align the interests of our named executive officers and our stockholders.

For 2021, our named executive officers were eligible to receive annual equity incentive awards in the form of time-based stock options and performance-adjusted restricted stock units (“PARSUs”). The target value of each executive’s annual equity award opportunity was intended to be market competitive and reflective of such executive’s skill set, experience, role, and responsibilities.

 

		Target Value of 2021  LTIP
Dr. Marlow Hernandez		$2,700,000
Brian Koppy		$962,000
Dr. Richard Aguilar		$724,000
David Armstrong		$543,000
Mark Novell		$196,000

 

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The table below summarizes the key features of the 2021 equity awards:

 

Equity Award		Target LTIP Weight		Key Features
Performance-   Adjusted   RSU   (PARSU)		80%		•   PARSUs link granted equity compensation value to the achievement of critical financial objectives and align executives’ interests with those of our stockholders.   •   Grant of PARSUs was conditioned on the achievement of pre-established 2021 financial goals and a total stockholder return (TSR) modifier; failure to achieve the minimum performance would have resulted in no PARSU grants.   •   Financial goals consisted of Revenue (key top-line metric) and Adjusted EBITDA (key bottom-line metric). Please refer to page 28 for a description of certain adjustments to the metrics.   •   The achievement of the financial goals was further modified by absolute TSR performance, to align the earned value with stock price performance during the performance period.   •   Earned PARSUs were granted on March 15, 2022 (following completion of the 2021 performance period) and will vest annually over a two-year period commencing December 31, 2022, subject generally to continued employment on each vesting date.
Time-Based   Stock   Options		20%		•   Stock options align our executives’ interests with the interests of our stockholders because options only have financial value to the recipient if the price of our stock at the time of exercise exceeds the stock price on the date of grant.   •   Stock options were granted on March 15, 2022 (following completion of the 2021 performance period) and will vest annually over a four-year period commencing March 15, 2023, subject generally to continued employment on each vesting date.
Adjustment   RSUs		-		•   Incremental time-based RSU awards to reward the 47.5% share increase from $10/share (being the Jaws Acquisition Corp. deal signing price) to $14.75/share (which was the stock price at deal closing).   •   The adjustment RSUs were granted on March 15, 2022 and will vest annually over a two-year period commencing December 31, 2022, subject generally to continued employment on each vesting date.

 

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For 2021, the PARSUs were earned and granted based on achievement of the adjusted revenue and adjusted EBITDA goals set forth below (with performance between points interpolated), as adjusted by the TSR modifier:

 

Step 1: Measure Performance Against Financial Goals
		Threshold ($ million)				Target ($ million)				Maximum ($ million)				Actual Performance ($ million)				Actual Performance (% of Target Achieved)				Initial Earned Value (% of Target)
Initial Earned %			50%				100%				200%
Revenue* (50%)			$1,160				$1,450				$1,740				$1,720.5				118.7%				193.3%
Adjusted EBITDA* (50%)			$76				$99				$114				$123.5				124.7%				200%
Step 2: Calculate TSR Modifier
		Average Trading Price on first day of performance period   (A)				Average Trading Price on last day of performance period   (B)				Applicable TSR (calculated as (B/A) -1)				TSR Modifier (calculated as Applicable TSR + 100%, subject to 50% minimum and 500% maximum)
Stock Price			$14.63				$9.25				-36.8%				63.2%

Step 3: Calculate Final Earned LTI Percentage
		Initial Earned (% of Target)		TSR Multiplier		Adjusted Value (% of Target)				Final Earned LTI Percentage
Revenue* (50%)		193.3%		63.2%		122.2%				124.3%
Adjusted EBITDA* (50%)		200%		63.2%		126.4%

 

*Please refer to the notes on page 28 for description of certain adjustments to the metrics.

Based on the foregoing calculation, the following table shows the actual earned 2021 LTIP value and resulting grant of PARSUs and stock options, together with the adjustment RSUs (described above).

 

		PARSUs				Stock Options				Adjustment RSUs
		LTI Value ($)		Award (#)		LTI Value ($)		Award (#)		Value ($)		Award (#)
Dr. Marlow Hernandez		$2,683,984		476,390		$540,000		139,175		$524,302		86,949
Brian Koppy		$707,395*		125,558		$142,323*		36,681		$186,809		30,980
Dr. Richard Aguilar		$719,705		127,743		$144,800		37,320		$140,589		23,315
David Armstrong		$539,779		95,807		$108,600		27,990		$105,441		17,486
Mark Novell		$124,376*		22,076		$25,024*		6,449		-		-

 

* Reflects proration based on start date.

 

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Following completion of the 2021 performance period:

 

•

The PARSUs were granted on March 15, 2022, with the number of RSUs calculated by dividing the applicable earned value by $5.63 the average closing price of our Class A common stock during the 20-trading days prior to the grant date. (An average price was used to smooth single-day price volatility in our share price.)

 

•

The stock options were granted on March 15, 2022 with the number of options calculated based on the Black-Scholes value on the date of grant; the exercise price was $6.03, the closing price of our Class A common stock on the date of grant.

Notwithstanding that the foregoing LTI awards were granted with respect to 2021 performance, as required by applicable SEC rules, these LTI awards will be reported in the Summary Compensation Table and Grants of Plan Based Awards Table included in our 2023 proxy statement because they were formally granted in 2022.

IPO Related Equity Awards Following Business Combination

Following our business combination, the Compensation Committee granted our CEO and other key executives IPO related equity awards to specifically recognize the value creation generated by our IPO, drive performance to create long-term value, and serve as a critical retention incentive to secure our key executives in the aftermath of becoming a public company; these special awards consisted primarily of performance stock options and recognition RSUs.

 

		Time- Based RSUs (#)					Performance Stock Options (#)					Recognition RSUs (#)
Dr. Marlow Hernandez		-					2,820,000					1,339,500										As a result of the substantial price-vesting hurdles (as described below), none of the IPO Performance Stock Options are currently “in-the-money.”   IPO Recognition RSUs are subject to a four-year vesting period.
Brian Koppy		373,972					400,000					190,000
Dr. Richard Aguilar		200,000					600,700					285,333
David Armstrong		50,000					600,700					285,333
Mark Novell		-					61,100					29,023

The performance stock option award will vest in connection with the achievement of the stock price hurdles set forth below prior to the third anniversary of the closing of our business combination, so long as the closing price of our stock exceeds the applicable hurdle price for at least 20 consecutive trading days. The exercise price of each closing performance stock option was $14.75/share, which was the closing price of our stock on our business combination date.

 

Per Share Stock Price Hurdle		Price Appreciation Percentage*					Percentage of Options Earned
Below $20		-					0
$20		35.5%					25%
$25		69.5%					25%
$30		103.4%					25%
$40 or above		171.2%					25%

 

*From $14.75/share strike price.

 

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Once a stock price hurdle is satisfied, 50% of the earned portion of the performance stock options vests on the first anniversary of such date and the remaining 50% vests on the second anniversary of such date, subject generally to the named executive officer’s continued employment with us or our subsidiaries.

The recognition RSU awards will vest in four equal annual installments, commencing August 24, 2022, subject generally to continued employment with us or our subsidiaries.

The time-based RSU awards will vest in four equal annual installments, commencing on the first anniversary of the closing of our business combination (or, for Mr. Koppy, commencing on the first anniversary of April 5, 2021, the effective date of his employment agreement), subject generally to continued employment with us or our subsidiaries.

For reference, a comparison of our CEO’s IPO awards by grant date value, realizable value as of March 15, 2022 (representing the value of the award based on the closing share price and assuming the 4-year vesting conditions will be satisfied), and actual realized value is illustrated in the graph below.

CEO IPO Related Equity Awards

 

 

Other Compensation and Governance Matters

Employment Agreements

We have entered into employment agreements with each of our named executive officers which provide for “at will” employment. For additional information regarding the material terms of each named executive officer’s employment agreement, please see the section below entitled “Employment Agreements with Named Executive Officers”.

Each of our named executive officers is also subject to a non-competition, non-solicitation, confidentiality, and assignment agreement, which provides for a perpetual post-termination confidentiality covenant as well as non-competition and non-solicitation of customers, employees and consultants covenants that apply during employment and for one year following termination, subject to the type of termination in the case of the non-competition provision.

 

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Retirement, Health, Welfare, Perquisites and Personal Benefits

Our named executive officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits, flexible spending accounts, short and long-term disability, and life insurance, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans. Our named executive officers are also eligible to participate in a separate long-term disability plan and life insurance plan and are eligible to receive reimbursement of financial planning and tax preparation fees and an annual executive physical.

We sponsor a 401(k) defined contribution plan in which our U.S. based named executive officers may participate, subject to limits imposed by the Internal Revenue Code of 1986, as amended (the “Code”), to the same extent as our other U.S. based regular employees.

Employee Stock Purchase Plan

Pursuant to our employee stock purchase plan, employees, including our named executive officers, have an opportunity to purchase our Class A common stock at a discount through payroll deductions. The purpose of the employee stock purchase plan is to encourage our employees, including our named executive officers, to become our stockholders and better align their interests with those of our other stockholders.

Hedging Transactions

Pursuant to our Insider Trading Policy, we prohibit our directors, officers and certain designated employees from buying or selling puts, calls, other derivative securities of the Company or any derivative securities that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, direct or indirect, to profit from any change in the value of the Company’s securities or engage in any other hedging transaction with respect to the Company’s securities, at any time.

We also have an anti-pledging policy whereby no executive officer or director may pledge the Company’s securities as collateral for a loan (or modify an existing pledge) unless the pledge has been approved by the Audit Committee and the amount borrowed by such executive officer or director does not exceed more than 25% of the total value of such person’s holdings of the Company’s securities. As described earlier in this CD&A, we have a pay-for-performance compensation philosophy under which compensation is predominantly earned and delivered in the form of equity. Given that our executive compensation program is heavily weighted towards equity and as a newly public company, we believe permitting a limited amount of pledging is necessary and appropriate because it mitigates the need for executives to sell Company shares to address unanticipated or urgent personal and family liquidity needs. As part of its risk oversight function, the Audit Committee will regularly review any share pledges to assess whether such pledging poses an undue risk to the Company.

Tax Deductibility Policy

The Compensation Committee considered the deductibility of compensation for federal income tax purposes in the design of the Company’s compensation programs. While the Company generally seeks to maintain the deductibility of the incentive compensation paid to its executive officers, the Compensation Committee retains the flexibility necessary to provide cash and equity compensation in line with competitive practices, its compensation philosophy and the best interests of stockholders, even if these amounts are not fully tax deductible.

Compensation Risk Assessment

The Company has determined that any risks arising from its compensation programs and policies are not reasonably likely to have a material adverse effect on the Company. The Company’s compensation programs and policies mitigate risk by combining performance-based, long-term compensation elements with payouts that are highly correlated to the value delivered to stockholders. The combination of performance measures for annual bonuses and the equity compensation programs, as well as the multiyear vesting schedules for equity awards, encourage executives to maintain both a short and a long-term view with respect to Company performance.

 

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