Conformis Inc (Form: 8-K, Received: 02/05/2020 07:51:34)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 4, 2020

Conformis, Inc.

(Exact Name of Company as Specified in Charter)



Delaware	001-37474	56-2463152
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

600 Technology Park Drive

Billerica, MA 01821

(Address of Principal Executive Offices) (Zip Code)

Company’s telephone number, including area code: (781) 345-9001

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):



¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	CFMS	The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



Emerging growth company	þ



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.	þ



Item 5.02	Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Robert Howe

On February 4, 2020, the Board of Directors (the “Board”) of Conformis, Inc. (the “Company”) appointed Robert Howe to the positions of Chief Financial Officer, Principal Financial Officer and Treasurer of the Company, effective as of February 17, 2020. Mr. Howe will succeed Frederick Driscoll, whose service as the Company’s interim Chief Financial Officer, Principal Financial Officer and Treasurer will end effective as of February 16, 2020.

Mr. Howe, age 50, previously served as the Vice President of Finance and Corporate Controller at NxStage Medical, Inc., from May 2015 to February 2020. Prior to joining NxStage Medical, Mr. Howe served as Vice President, Financial Planning and Analysis - Cardio & Vascular Division at Lake Region Medical Inc. from August 2014 to May 2015 and Senior Director of Financial Planning and Analysis for its Advanced Surgical Division from July 2013 to August 2014. Prior to that, he held various leadership positions at Boston Scientific Corporation. Mr. Howe received his M.B.A. degree from Boston University and his B.S. degree in Finance and Entrepreneurial Studies from Babson College.

In connection with his employment with the Company, the Company entered into an employment agreement with Mr. Howe, effective February 17, 2020 (the “Employment Agreement”). The Employment Agreement provides for an annual base salary of $340,000 and a one-time signing bonus of $90,000, subject in the case of the signing bonus to repayment by Mr. Howe to the Company if he leaves the Company due to a voluntary termination or is terminated for cause (each as defined in the Employment Agreement) within the first year of his employment. Mr. Howe is also eligible, in the sole discretion of the Compensation Committee of the Board (the “Committee”), to receive an annual bonus of at least forty percent (40%) of his annual base salary.

In addition, the Board granted Mr. Howe (i) an inducement restricted stock unit award of 125,000 shares of the Company’s common stock, which will vest in four equal annual installments on the anniversary of February 17, 2020, in each case subject to Mr. Howe’s continued employment with the Company; and (ii) an inducement option to purchase 125,000 shares of the Company’s common stock, of which 25% will vest on February 17, 2021, with the remainder vesting in equal monthly installments for three years thereafter, in each case subject to Mr. Howe’s continued employment with the Company. The option has an exercise price equal to the closing price per share on February 17, 2020.

Additionally, the Employment Agreement provides that Mr. Howe’s employment with the Company is at will and may be terminated by either party at any time for any or no reason or cause. In the event the Company terminates his employment other than for cause, or if Mr. Howe terminates his employment with us for good reason, the Company is obligated to continue to pay his base salary for a period of twelve months; to the extent allowed by applicable law and the terms of the applicable policies, continue to provide Mr. Howe and certain of his dependents with group health insurance for a period of twelve months; and pay to him any bonus earned by him and approved by the board for the year prior to such termination, unless already paid. In the event of a change in control of the Company, any outstanding equity awards held by Mr. Howe will become fully vested and exercisable or free from forfeiture or transfer restrictions.

There is no arrangement or understanding between Mr. Howe or any other person pursuant to which he was selected as an officer. Mr. Howe has no family relationship with any of the Company’s officers or directors and neither has any direct or indirect interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

The foregoing description of the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Employment Agreement, which the Company expects to file as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2019.

On February 5, 2020, the Company issued a press release announcing Mr. Howe’s appointment. A copy of such press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.

Departure of Frederick Driscoll

The foregoing appointment is being made in connection with the departure of Frederick Driscoll. In connection with his departure, Mr. Driscoll will cease to serve as an executive officer (as such term is defined in Rule 3b-7 of the Securities Exchange Act of 1934) of the Company, effective as of February 16, 2020. Mr. Driscoll will assist the Company in transitioning his responsibilities through the date of his departure and will serve as a consultant to the Company following his departure. In connection with Mr. Driscoll’s advisory services, the Company and Mr. Driscoll entered into a Consulting Agreement (the “Consulting Agreement”), effective on February 17, 2020. Under the terms of the Consulting Agreement, Mr. Driscoll has agreed to provide certain consulting services to the Company for a period commencing on February 17, 2020, and concluding on March 31, 2020. For his services, Mr. Driscoll will be compensated with a cash payment at a fixed rate of $450 per hour for the period starting February 17, 2020 through March 31, 2020. Mr. Driscoll will also be paid a one-time bonus of $20,000 upon the expiration of the Consulting Agreement and so long as certain conditions are satisfied.

As part of the Consulting Agreement, Mr. Driscoll has agreed to abide by the terms and conditions set forth in the Employee Confidential Information, Inventions, Non-Competition, and Non-Solicitation Agreement, dated as of October 23, 2019, by and between the Company and Mr. Driscoll. Mr. Driscoll and the Company have also agreed to customary covenants relating to confidential information and intellectual property of the Company.

The foregoing description of the Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Consulting Agreement, which the Company expects to file as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2019.

2020 Incentive Program

On February 4, 2020, as part of the Company’s annual compensation-setting process, the Committee recommended, and the Board approved, an employee incentive compensation program for the 2020 calendar year (the “2020 Incentive Program”). Under the 2020 Incentive Program, certain Company employees, including named executive officers, are eligible to earn a cash bonus. Each of the Company’s executive officers is eligible to receive an annual cash bonus based on a percentage of their annual base salary as follows: Mark Augusti, the Company’s President and Chief Executive Officer: up to 85%; Robert Howe, the Company’s Chief Financial Officer: up to 40%; and J. Brent Alldredge, the Company’s Chief Legal Officer and Corporate Secretary: up to 40%. The cash bonus is based on a combination of Company financial and individual performance in 2020, including achieving product revenue, gross margin and operating expense performance targets based on recommendations from the Committee, and, subject to performance under the 2020 Incentive Program, any cash bonus is to be paid on or before March 15, 2021, subject to each recipient’s continued employment through the payout date. It is anticipated that any cash bonus under the 2020 Incentive Program will be paid either in cash or restricted shares of the Company’s common stock, in lieu of cash, and will be consistent with the terms of the Company’s 2015 Stock Incentive Plan. The determination of whether

a bonus will be granted to any employee, and the amount of any such bonus, will also be determined by the Board in its sole discretion.

On February 4, 2020, the Company issued award letters under the 2020 Incentive Program to Mr. Augusti and Mr. Alldredge, consistent with the Form of 2020 Incentive Compensation Program Award Letter and providing for cash bonuses up to the maximum percentage of base salary allowed under the 2020 Incentive Program, subject to the Company’s and each recipient’s performance over the course of 2020. The Company will issue an award letter under the 2020 Incentive Program to Mr. Howe on February 17, 2020, provided Mr. Howe commences employment with Conformis on such date, consistent with the Form of 2020 Incentive Compensation Program Award Letter and providing for cash bonuses up to the maximum percentage of base salary allowed under the 2020 Incentive Program, subject to the Company’s and Mr. Howe’s performance over the course of 2020.

The foregoing description is qualified by reference to the Form of 2020 Incentive Compensation Program Award Letter, filed herewith as Exhibit 10.1, and incorporated herein by reference.



Item 9.01	Financial Statements and Exhibits.



(d)	Exhibits.



Exhibit No.		Description
10.1		Form of 2020 Incentive Compensation Program Award Letter
99.1*		Press Release of Conformis, Inc., dated February 5, 2020

*Furnished herewith

Cautionary Statement Regarding Forward-Looking Statements

Statements in this Current Report on Form 8-K about our future expectations, plans and prospects, including statements about the anticipated timing of our product launches, and our financial position and results, total revenue, product revenue, gross margin, operations and growth, as well as other statements containing the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," or "would" and similar expressions, constitute forward-looking statements within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. We may not actually achieve the forecasts disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual financial results could differ materially from the projections disclosed in the forward-looking statements we make as a result of a variety of risks and uncertainties, including risks related to our estimates and expectations regarding our revenue, gross margin, expenses, revenue growth and other results of operations, and the other risks and uncertainties described in the "Risk Factors" sections of our public filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements included in this Form 8-K represent our views as of the date hereof. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




	CONFORMIS, INC.

Date: February 5, 2020	By:	/s/ Frederick W. Driscoll
		Frederick W. Driscoll
		Interim Chief Financial Officer

Conformis Appoints Bob Howe as Chief Financial Officer

Also Announces Gary Maingot as SVP, Operations; New Executive Leadership Team Members Contribute Deep Functional Expertise and Technical Knowledge; Inducement Grants Reported

BILLERICA, Mass., February 5, 2020 (GLOBE NEWSWIRE) -- Conformis, Inc. (NASDAQ:CFMS), a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture, and sell patient-specific knee and hip joint replacement implants designed to fit each patient's unique anatomy, announced today that the Company has appointed Bob Howe as its new Chief Financial Officer, and Gary Maingot as SVP, Operations.

“We are very pleased to announce the addition of Bob Howe to our team as Chief Financial Officer and Treasurer. Bob’s track record of successfully leading complex financial organizations combined with his leadership capabilities will make him an excellent fit for Conformis,” said Mark Augusti, President and Chief Executive Officer. “We are also pleased to announce Gary Maingot as our new Senior Vice President of Operations. Gary’s operational experience and track record of driving operational excellence will help us continue to expand our success in driving gross margin improvement. I look forward to the contributions both Bob and Gary will make as members of Conformis’ executive leadership team.”

Bob Howe

Bob Howe is a senior finance professional with more than 20 years of progressive experience at public medical device companies in roles that encompass financial planning and analysis (FP&A), financial reporting, and business strategy. Most recently, he spent nearly five years at NxStage Medical, Inc., as VP of Finance and Corporate Controller, responsible for corporate FP&A, external financial reporting, manufacturing finance, shared service functions, Tax, and Treasury. He also led all aspects of financial controls and external audit activities, and drove operational improvements through shared service implementation and systems automation.

Immediately prior to this, Mr. Howe served at Lake Region Medical as VP, FP&A – Cardio & Vascular Division, where he progressed from Senior Director of FP&A for its Advanced Surgical Division. Before this, he served for 17 years at Boston Scientific where he held financial leadership roles in three of the company’s operating divisions as well as senior roles in manufacturing and corporate finance.

Mr. Howe earned an MBA degree at Boston University and a BS degree in Finance and Entrepreneurial Studies at Babson College.

Gary Maingot

Gary Maingot is a senior executive with more than 25 years of progressive experience within the medical device industry and has a track record of solving complex problems in the interdependent functions of quality, engineering, operations, and supply chain.

Immediately prior to joining Conformis, Mr. Maingot served at Spinal Elements, Inc. for three years as EVP, Operations, responsible for manufacturing, supply chain, distribution, and customer service. By

eliminating bottlenecks there, he achieved a significant increase in production output within six months. He also implemented a sales and operations planning process that drove backorders down and improved line fill rates.

Prior to Spinal Elements, Mr. Maingot served at Oscor, Inc. as VP of Global Operations & Supply Chain, responsible for all operations and supply chain functions. Before this, he served at Biomet, progressing to Group Vice President Operations & Supply Chain at Biomet Spine, Bone Healing, and Microfixation. With Biomet, he led the supply chain teams for three multi-site business units with more than $400 million in revenue, and developed a supply chain strategy, structure, and culture to partner with commercial functions. Mr. Maingot was also involved in ensuring the success of significant business integrations. Beginning his career at Johnson & Johnson as Quality Engineer, he also served as Manufacturing Engineering Manager, Operations Manager, and Engineer at Boston Scientific and Medtronic.

Mr. Maingot earned an MBA degree at Babson College, an MS degree in Industrial Engineering at the University of South Florida, and a BS degree in Statistics at the University of Western Ontario. He is also a Certified Six Sigma Black Belt.

Inducement Grants Under Nasdaq Listing Rule 5635(c)(4)

In connection with the hiring of Mr. Howe, the Compensation Committee of Conformis' Board of Directors granted a stock option to purchase 125,000 shares of Conformis' common stock and a restricted stock unit award of 125,000 shares of Conformis' common stock to Mr. Howe. The option and the restricted stock unit award are expected to be granted on February 17, 2020 as inducements material to Mr. Howe’s acceptance of employment with Conformis in accordance with Nasdaq Listing Rule 5635(c)(4). The option has an exercise price equal to the closing price per share on February 17, 2020. The option vests over three years, with 25% of the total number of shares underlying the option vesting on the first anniversary of the grant date and an additional 1/48th of the total number of shares underlying the stock option vesting monthly thereafter, subject to Mr. Howe’s continued service as an employee of Conformis through the applicable vesting dates. The restricted stock unit vests over four years, with 25% of the total number of shares underlying the restricted stock unit award vesting on each one-year anniversary of the grant date, subject to Mr. Howe’s continued service as an employee of Conformis through the applicable vesting dates. In addition, the option and the restricted stock unit award will become fully vested and exercisable if, on or prior to the first anniversary of the consummation of a “change in control,” Mr. Howe’s employment is terminated for “good reason” by Mr. Howe or terminated without “cause” by Conformis (as such terms are defined in the applicable stock option or restricted stock unit agreement).

In connection with the hiring of Mr. Maingot, the Compensation Committee of Conformis' Board of Directors granted a stock option to purchase 66,667 shares of Conformis' common stock and a restricted stock unit award of 61,350 shares of Conformis' common stock to Mr. Maingot. The option and the restricted stock unit award were granted on February 4, 2020 as inducements material to Mr. Maingot’s acceptance of employment with Conformis in accordance with Nasdaq Listing Rule 5635(c)(4). The option has an exercise price of $0.9827 per share. The option vests over three years, with 25% of the total number of shares underlying the option vesting on the first anniversary of the vesting start date and an additional 1/48th of the total number of shares underlying the stock option vesting monthly thereafter, subject to Mr. Maingot’s continued service as an employee of Conformis through the

applicable vesting dates. The restricted stock unit vests over four years, with 25% of the total number of shares underlying the restricted stock unit award vesting on each one-year anniversary of the vesting start date, subject to Mr. Maingot’s continued service as an employee of Conformis through the applicable vesting dates. In addition, the option and the restricted stock unit award will become fully vested and exercisable if, on or prior to the first anniversary of the consummation of a “change in control,” Mr. Maingot’s employment is terminated for “good reason” by Mr. Maingot or terminated without “cause” by Conformis (as such terms are defined in the applicable stock option or restricted stock unit agreement).

About Conformis, Inc.

Conformis is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture, and sell patient-specific joint replacement implants (individually sized and shaped, or customized, to fit each patient's unique anatomy). Conformis offers a broad line of sterile, customized knee and hip implants and single-use instruments delivered to the hospital. In clinical studies, the Conformis iTotal CR knee replacement system demonstrated superior clinical outcomes, including better function and greater patient satisfaction, compared to traditional, off-the-shelf implants. Conformis owns or exclusively in-licenses issued patents and pending patent applications that cover customized implants and customized patient-specific instrumentation for all major joints.

For more information, visit www.conformis.com. To receive future releases in e-mail alerts, sign up at ir.conformis.com.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this press release about our future expectations, plans and prospects, including statements about the anticipated timing of our product launches, and our financial position and results, total revenue, product revenue, gross margin, operations and growth, as well as other statements containing the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," or "would" and similar expressions, constitute forward-looking statements within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. We may not actually achieve the forecasts disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual financial results could differ materially from the projections disclosed in the forward-looking statements we make as a result of a variety of risks and uncertainties, including risks related to our estimates and expectations regarding our revenue, gross margin, expenses, revenue growth and other results of operations, and the other risks and uncertainties described in the "Risk Factors" sections of our public filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent our views as of the date hereof. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.

CONTACT:
Investor contact

ir@conformis.com
(781) 374-5598


•	Bonus award of up to ___% of base salary if Conformis achieves the Target Bonus Level as described below, prorated based on your start date


◦	Achieve 100% of the 2020 product revenue target of $_______ million (50% of the bonus award)


◦	Achieve 100% of the 2020 product gross margin target of ____% (25% of the bonus award)


◦	Achieve 100% of the 2020 non-variable operating expenses target of $______ million (25% of bonus award)


•	Apply straight line progression sliding scale to performance targets


◦	Threshold payouts are 0% of target payouts if Company reaches 90% of target (“Threshold”)


◦	Maximum payouts are 160% of target payouts if Company reaches 110% or more of target


◦	If any of the performance targets are not achieved, the other performance payouts shall not exceed target payouts for the corresponding targets


1.	The 2020 incentive compensation will be provided by March 15, 2021, unless otherwise determined by the Compensation Committee of the BOD, (“Payout Date”).


2.	No incentive compensation will accrue to the benefit of any participant unless they remain employed by Conformis through the Payout Date, unless otherwise determined by the Compensation Committee of the BOD.


3.	Where necessary the Compensation Committee of the BOD may adjust financial results to exclude unusual transactions not deemed to be part of normal current operations.


4.	This Incentive Compensation Program may be modified in part or in its entirety, including a decision to not provide any payout even if the Threshold is met, for any reason without notice to the participant by the Compensation Committee of the BOD.


5.	Continuance of this particular Incentive Compensation Program beyond December 31, 2020 is not guaranteed.