PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The audit committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. The Board of Directors recommends that stockholders vote for ratification of this appointment. If this proposal is not approved at the Annual Meeting, the audit committee will reconsider its appointment. Even if the appointment is ratified, the audit committee may, in its discretion, direct the appointment of a different independent registered accounting firm at any time during the year if the audit committee determines that such a change would be in our stockholders' best interests.
Ernst & Young LLP has audited our financial statements for the fiscal years ended December 31, 2016 and 2015. We expect representatives of Ernst & Young LLP to be present at the Annual Meeting and available to respond to appropriate questions. They will have the opportunity to make a statement if they desire to do so.
Ernst & Young LLP Fees
The following table sets forth fees billed for professional audit services and other services rendered to us by Ernst & Young LLP and its affiliates for the fiscal years ended December 31, 2016 and 2015.
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Fiscal 2016
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Fiscal 2015
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Audit Fees
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$
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943,000
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$
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535,000
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Audit-Related Fees
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—
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—
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Tax Fees
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42,500
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5,000
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All Other Fees
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2,000
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2,000
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Total
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$
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987,500
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$
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542,000
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Audit Fees.
Audit fees consist of fees billed for professional services performed by Ernst & Young LLP for the audit of our annual consolidated financial statements, the review of interim consolidated financial statements, and related services that are normally provided in connection with registration statements. Included in the fiscal 2015 audit fees is $62,000 of fees billed in connection with our shelf registration statement and secondary public offering.
Audit-Related Fees.
Audit related fees consist of fees billed by Ernst & Young LLP for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements. There were no such fees incurred in fiscal 2016 or 2015.
Tax Fees.
Tax fees consist of fees for professional services, including tax consulting and compliance performed by Ernst & Young LLP.
All Other Fees.
All other fees in fiscal 2016 and 2015 consist of the license of technical accounting software.
Pre-Approval of Audit and Non-Audit Services
It is the policy of our audit committee that all services to be provided by our independent registered public accounting firm, including audit services and permitted audit-related and non-audit services, must be approved in advance by our audit committee.
All Ernst & Young LLP services and fees in the fiscal years ended December 31, 2016 and December 31, 2015 were pre-approved by the audit committee. The fees for the year-end audit for the fiscal year ended December 31, 2016 were also approved by the audit committee.
Vote Required and Board of Directors' Recommendation
The approval of Proposal 2 requires that a majority of the votes properly cast vote FOR this proposal. Shares that are voted "abstain" will not affect the outcome of this proposal.
The Board of Directors recommends that stockholders vote FOR ratification of the appointment of
Ernst & Young LLP as our independent registered public accounting firm.
EXECUTIVE OFFICER
S
The following table identifies our executive officers and sets forth their current position(s) at T2 Biosystems and their ages as of April 7, 2017.
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Name
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Age
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Position
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John McDonough
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57
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President, Chief Executive Officer and Director
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Thomas J. Lowery, Ph.D.
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38
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Chief Scientific Officer
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Michael A. Pfaller, M.D.
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66
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Chief Medical Officer
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Rahul Dhanda
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44
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Senior Vice President, Corporate Development
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Michael Gibbs, Esq.
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46
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Vice President and General Counsel
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Joanne Spadoro
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58
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Chief Operations Officer
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You should refer to "
Proposal 1: Election of Directors
" above for information about our Chief Executive Officer, John McDonough. Biographical information for our other executive officers, as of April 7, 2017, is set forth below.
Thomas J. Lowery, Ph.D.
has served as our Chief Scientific Officer since September 2013. Since joining our company in 2007, Dr. Lowery has held various technical leadership roles in the assay, methods, reagents and detector development programs. Prior to joining our company, Dr. Lowery conducted research at the University of California Berkeley focused on developing innovative magnetic resonance based biosensors for molecular imaging. Dr. Lowery received his Ph.D. in chemistry from the University of California, Berkeley and his B.S. in biochemistry from Brigham Young University.
Michael A. Pfaller, M.D.
has served as our Chief Medical Officer since March 2014. From 2005 until he joined our company, Dr. Pfaller was a consultant to JMI Laboratories, managing the in vitro testing of fungal and bacterial isolates. From 1983 to 2005, he was Clinical Director of Clinical Microbiology Laboratory at the University of Iowa, as well as Interim Director of Clinical Laboratories from 1984 to 1985. He currently serves as Co-Editor in Chief of the American Society for Microbiology Manual of Clinical Microbiology, 11
th
edition and as co-editor of the 8
th
edition of Medical Microbiology. Dr. Pfaller received his M.D. from the Washington University School of Medicine and his B.A. in chemistry from Linfield College.
Rahul Dhanda
has served as our SVP of Corporate Development since February 2016. Since joining our company in 2008, Mr. Dhanda has held several leadership roles, including Vice President of Marketing since 2010. From June 2005 until he joined our company, Mr. Dhanda worked in marketing at Boston Scientific’s Urology division, where he led the team responsible for the Access, Visualization and Laser Lithotripsy franchises. From May 2001 to June 2004, Mr. Dhanda worked in business development at Interleukin Genetics. Mr. Dhanda is a former committee member of the AAAS Committee on Scientific Freedom and Responsibility. Mr. Dhanda received his M.B.A. from MIT’s Sloan School of Management and his B.A. in History from Wesleyan University.
Michael Gibbs, Esq.
has served as our Vice President and General Counsel since January 2016. Mr. Gibbs joined our company in December 2014 as Senior Corporate Counsel. From 2011 until he joined our company, Mr. Gibbs was General Counsel for Keystone Dental, Inc., a medical device company. From 2003 to 2011, Mr. Gibbs was a corporate attorney with the law firm Bingham McCutchen LLP (now Morgan Lewis & Bockius). Prior to joining Bingham McCutchen LLP, he was an officer in the United States Marine Corps, departing with the rank of Major. Mr. Gibbs received his J.D. from Boston College Law School and his B.S. in Political Science from Syracuse University
.
Joanne Spadoro, Ph.D.
has served as our Chief Operations Officer since September 2016. From 2010 until she joined our company, Dr. Spadoro held various senior positions at Immucor, including Chief Scientific Officer and Vice President of Worldwide Operations. From 2000 to 2009, Dr. Spadoro held various positions at Roche Molecular Systems, including Senior Vice President heading global development and operations functions. Dr. Spadoro received her Ph.D. in cell biology from the University of Connecticut and her B.A. in biological sciences from Douglass College.
RELATED PERSON TRANSACTION
S
Policies for Approval of Related Person Transactions
We have adopted a written policy that transactions with directors, officers and holders of 5% or more of our voting securities and their affiliates, or each, a related party, must be approved by our audit committee or another independent body of our Board of Directors. All related party transactions shall be disclosed in our applicable filings with the SEC as required under SEC rules.
Transactions with Related Persons
Based on a review of the transactions and arrangements between us and any related person or related person's affiliate, we describe below the transactions or arrangements during the year ended December 31, 2016 in which any related person or related person affiliate has a direct or indirect material interest and the amount involved exceeds $120,000.
Co-Development Agreement
.
On February 3, 2015, we entered into a Co-Development Partnership Agreement with Canon U.S. Life Sciences, Inc. (“Canon US Life Sciences”) to develop a diagnostic test panel to rapidly detect Lyme disease. Canon US Life Sciences is an affiliate of Canon U.S.A., Inc., which acquired greater than 5% of our voting securities on September 21, 2016. Under the terms of the agreement, we received an upfront payment of $2.0 million from Canon US Life Sciences and the agreement includes an additional $6.5 million of consideration upon achieving certain development and regulatory milestones for total aggregate payments of up to $8.5 million. We recorded revenue of $1.8 million for the year ended December 31, 2016 under the agreement, and we expect to record revenue over the next two years, provided we achieve the aforementioned development and regulatory milestones.
Employment Agreements.
We have entered into employment agreements with certain of our executive officers. See the "
Executive Compensation
" section for further details.
Indemnification Agreements with Executive Officers and Directors.
We have entered into an indemnification agreement with each of our directors and executive officers. These indemnification agreements and our certificate of incorporation and our bylaws indemnify each of our directors and officers to the fullest extent permitted by the DGCL. See the "
Director Compensation—Limitation of Liability and Indemnification Agreements
" section for further details.
Limitation of Liability and Indemnification Agreements
We have adopted provisions in our certificate of incorporation and bylaws that limit or eliminate the personal liability of our directors to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended.
Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
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any breach of the director's duty of loyalty to us or our stockholders;
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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
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any unlawful payments related to dividends or unlawful stock purchases, redemptions or other distributions; or
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any transaction from which the director derived an improper personal benefit.
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These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.
In addition, our bylaws provide that:
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we will indemnify our directors, officers and, in the discretion of our Board of Directors, certain employees to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended; and
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·
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we will advance reasonable expenses, including attorneys' fees, to our directors and, in the discretion of our Board of Directors, to our officers and certain employees, in connection with legal proceedings relating to their service for or on behalf of us, subject to limited exceptions.
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We have entered into indemnification agreements with each of our directors and executive officers. These agreements provide that we will indemnify each of our directors, such executive officers and, at times, their affiliates to the fullest extent permitted by Delaware law. We will advance expenses, including attorneys' fees (but excluding judgments, fines and settlement amounts), to each indemnified director, executive officer or affiliate in connection with any proceeding in which indemnification is available and we will indemnify our directors and officers for any action or proceeding arising out of that person's services as a director or officer brought on behalf of us and/or in furtherance of our rights. Additionally, each of our directors may have certain rights to indemnification, advancement of expenses and/or insurance provided by their affiliates, which indemnification relates to and might apply to the same proceedings arising out of such director's services as a director referenced herein. Nonetheless, we have agreed in the indemnification agreements that our obligations to those same directors are primary and any obligation of the affiliates of those directors to advance expenses or to provide indemnification for the expenses or liabilities incurred by those directors are secondary.
We also maintain general liability insurance which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling the registrant under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIO
N
During 2016, Mr. Lapidus served as a member of our compensation committee. Mr. Cumming also served as a member following his appointment to the compensation committee on February 11, 2016 and Mr. Jones served following his appointment on July 28, 2016. Thomas J. Carella, who resigned from the Board on March 9, 2016, served as a member of our compensation committee until his resignation from the Board. None of these individuals was at any time during the fiscal year ended December 31, 2016 one of our officers or employees or had any relationship requiring disclosure under Item 404 of Regulation S-K, and none was a former officer of the Company. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or compensation committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANC
E
Section 16(a) of the Exchange Act requires our officers and directors and persons who beneficially own more than 10% of our outstanding common stock (collectively, "Reporting Persons") to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based on our records and other information, we believe that during the fiscal year ended December 31, 2016, all Reporting Persons complied with all Section 16(a) reporting requirements, except that one Form 4 for Stanley Lapidus was inadvertently filed late.
CORPORATE GOVERNANC
E
Board and Committee Matters
Board Leadership and Independence.
Our Board of Directors has determined that all members of the Board of Directors, except John McDonough and Seymour Liebman, are independent, as determined in accordance with the rules of the NASDAQ Stock Market (the “NASDAQ Rules”). In making such independence determination, the Board of Directors considered the relationships that each such non-employee director has with us and all other facts and circumstances that the Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. In considering the independence of the directors listed above, our Board of Directors considered the association of our directors with the holders of more than 5% of our common stock. There are no family relationships among any of our directors or executive officers.
The positions of our Chairman of the Board, or Lead Independent Director, and Chief Executive Officer are presently separated. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board, or Lead Independent Director, to lead the Board of Directors in its fundamental role of providing advice to and independent oversight of management. Our Board of Directors recognizes the time, effort and energy that the Chief Executive Officer must devote to his position in the current business environment, as well as the commitment required to serve as our Chairman or Lead Independent Director, particularly as the Board of Directors' oversight responsibilities continue to grow. Our Board of Directors also believes that this structure ensures a greater role for the non-management directors in the oversight of our company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our Board of Directors. Our Board of Directors believes its administration of its risk oversight function has not affected its leadership structure. Although our bylaws do not require our Chairman, or Lead Independent Director, and Chief Executive Officer positions to be separate, our Board of Directors believes that having separate positions is the appropriate leadership structure for us at this time.
Board Meetings and Committees.
Our Board of Directors held five meetings during 2016. The independent directors regularly hold executive sessions at meetings of the Board of Directors. During 2016, each of the directors then in office attended at least 75% of the aggregate of all meetings of the Board of Directors and all meetings of the committees of the Board of Directors on which such director then served. Continuing directors and nominees for election as directors in a given year are encouraged to attend the annual meeting of stockholders. All directors attended our annual meeting of stockholders in June 2016.
Stockholder Communications.
Any stockholder wishing to communicate with our Board of Directors, a particular director or the chair of any committee of the Board of Directors may do so by sending written correspondence to our principal executive offices, to the attention of the Chair, Nominating and Corporate Governance Committee. All such communications will be delivered to the Board of Directors or the applicable director or committee chair.
During 2016, our Board of Directors had four standing committees: audit committee, compensation committee, nominating and corporate governance committee and technology committee.
Audit Committee.
David Elsbree, Michael Cima and Stanley Lapidus currently serve on the audit committee, which is chaired by David Elsbree. Our Board of Directors has determined that each member of the audit committee is "independent" for audit committee purposes as that term is defined in the rules of the SEC and the applicable NASDAQ Rules. Our Board of Directors has designated David Elsbree as an "audit committee financial expert," as defined under the applicable rules of the SEC. The audit committee's responsibilities include:
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appointing, overseeing the independence of, and setting the compensation of our independent auditor;
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overseeing the work of the independent auditor, including through the receipt and consideration of reports from such firm;
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reviewing and discussing with management and our independent auditor our annual and quarterly financial statements and related disclosures;
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coordinating the Board's oversight of our internal control over financial reporting, disclosure controls and procedures;
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discussing our risk management and risk assessment policies;
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establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters;
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reviewing the company's policies and procedures for reviewing and approving or ratifying any related person transactions;
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meeting independently with our internal auditing staff, if any, independent auditors and management; and
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preparing the audit committee report included below.
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The audit committee held six meetings during 2016. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ. A copy of the audit committee charter is attached as Appendix A to this Proxy Statement.
Compensation Committee.
Stanley Lapidus, John Cumming and Adrian Jones currently serve on the compensation committee, which is chaired by Stanley Lapidus. Under NASDAQ Rules, we are permitted to phase in our compliance with the independent compensation committee requirements set forth in NASDAQ Rule 5605(d). Our Board of Directors has determined that each of Stanley Lapidus, John Cumming and Adrian Jones is "independent" as that term is defined in the applicable NASDAQ Rules. The compensation committee's responsibilities include:
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reviewing and approving, or recommending for approval by our Board of Directors, our Chief Executive Officer's compensation;
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reviewing and approving, or recommending for approval by our Board of Directors with respect to, the compensation of our other executive officers;
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overseeing an evaluation of our senior executives;
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overseeing and administering our cash and equity incentive plans;
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reviewing and making recommendations to our Board of Directors with respect to director compensation;
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reviewing and discussing annually with management our "Compensation Discussion and Analysis," if applicable; and
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preparing the annual compensation committee report, if applicable.
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The compensation committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time as further described in its charter. The compensation committee may also delegate to an officer the authority to grant equity awards to certain employees, as further described in its charter and subject to the terms of our equity plans. The compensation committee has delegated to our Chief Executive Officer the authority to issue stock options and restricted stock units under our 2014 Incentive Award Plan to certain of our non-officer employees.
The compensation committee held three meetings during 2016. The Compensation Committee operates under a written charter adopted by the Board, which is available in the "Investors—Corporate Governance" section of our website at
www.t2biosystems.com
.
Nominating and Corporate Governance Committee.
John Cumming currently serves on the nominating and corporate governance committee. Our Board of Directors has determined that he is "independent" as that term is defined in the applicable NASDAQ Rules. The nominating and corporate governance committee's responsibilities include:
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recommending to our Board the persons to be nominated for election as directors and to each of the Board committees;
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reviewing and making recommendations to the Board with respect to management succession planning;
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developing and recommending to the Board corporate governance guidelines; and
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overseeing an annual evaluation of the Board of Directors.
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The nominating and corporate governance committee held one meeting during 2016. The nominating and corporate governance committee operates pursuant to a written charter, which is available in the "For Investors and Media—Corporate Governance" section of our website at
www.t2biosystems.com
, and held one meeting in 2016.
The nominating and corporate governance committee considers candidates for Board membership suggested by its members and the Chief Executive Officer. Additionally, in selecting nominees for directors, the nominating and corporate governance committee will review candidates
recommended by stockholders in the same manner and using the same general criteria as candidates recruited by the committee and/or recommended by the Board. Any stockholder who wishes to recommend a candidate for consideration by the committee as a nominee for director should follow the procedures described later in this proxy statement under the heading "Stockholder Matters—Stockholder Recommendations for Director Nominations." The Nominating Subcommittee will also consider whether to nominate any person proposed by a stockholder in accordance with the provisions of our bylaws relating to stockholder nominations as described later in this proxy statement under the heading "Stockholder Matters—Procedures for Submitting Stockholder Proposals."
Risk Oversight.
Our Board of Directors oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. Our Board of Directors performs this oversight role by using several different levels of review. In connection with its reviews of the operations and corporate functions of our company, our Board of Directors addresses the primary risks associated with those operations and corporate functions. In addition, our Board of Directors reviews the risks associated with our company's business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies.
Each of our Board committees also coordinates oversight of the management of our risk that falls within the committee's areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. Our Chief Financial Officer or Chief Executive Officer reports regularly to the audit committee and is responsible for identifying, evaluating and implementing risk management controls and methodologies to address any identified risks. In connection with its risk management role, our audit committee meets privately with representatives from our independent registered public accounting firm, and privately with our Chief Financial Officer or Chief Executive Officer.
Technology Committee
Michael Cima currently serves on the technology committee. The technology committee meets periodically to discuss scientific and technological developments that may affect our business.
The technology committee operates under a written charter adopted by the Board, which is available in the "For Investors and Media—Corporate Governance" section of our website at
www.t2biosystems.com
.
EXECUTIVE COMPENSATIO
N
This section discusses the material components of the executive compensation program offered to our named executive officers identified below. For 2016, our named executive officers were:
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John McDonough, President and Chief Executive Officer;
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Thomas J. Lowery, Ph.D., Chief Scientific Officer; and
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Shawn P. Lynch, former Chief Financial Officer, who resigned as our Chief Financial Officer effective March 2, 2017.
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Overview
Our compensation programs are designed to:
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attract and retain individuals with superior ability and managerial experience;
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align executive officers' incentives with our corporate strategies, business objectives and the long-term interests of our stockholders; and
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increase the incentive to achieve key strategic performance measures by linking incentive award opportunities to the achievement of performance objectives and by providing a portion of total compensation for executive officers in the form of ownership in the company.
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Our compensation committee is primarily responsible for establishing and approving, or recommending for approval by the Board of Directors, the compensation for all of our executive officers. The compensation committee oversees our compensation and benefit plans and policies, administers our equity incentive plans and reviews and approves, or recommends for approval by the Board of Directors, annually all compensation decisions relating to all of our executive officers, including our chief executive officer. The compensation committee typically considers, and during 2016 did consider, recommendations from our chief executive officer regarding the compensation of our executive officers other than himself. Our compensation committee has the authority under its charter to engage the services of a consulting firm or other outside advisor to assist it in designing our compensation programs and in making compensation decisions and has engaged Arnosti Consulting to provide these services. The compensation committee reviewed compensation assessments provided by Arnosti Consulting comparing our compensation to that of a group of peer companies within our industry and met with Arnosti Consulting to discuss compensation of our executive officers, including the chief executive officer, and to receive input and advice. The compensation committee has considered the adviser independence factors required under SEC rules as they relate to Arnosti Consulting and does not believe Arnosti Consulting’s work in 2016 raised a conflict of interest.
Executive Compensation Components
Our executive compensation consists of base salary, cash incentive bonuses, long-term incentive compensation in the form of stock options and restricted stock units, and a broad-based benefits program. We have not adopted any formal guidelines for allocating total compensation between long-term and short-term compensation, cash compensation and non-cash compensation, or among different forms of non-cash compensation. The compensation committee considers a number of factors in setting compensation for its executive officers, including company performance, as well as the executive's performance, experience, responsibilities and the compensation of executive officers in similar positions at comparable companies.
Base Salary
Our named executive officers receive base salary to compensate them for the satisfactory performance of duties to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive's skill set, experience, role and responsibilities. Base salaries for our named executive officers have generally been set at levels deemed necessary to attract and retain individuals with superior talent.
The 2016 annual base salary of Mr. Lynch was established at the time he commenced employment with us. The following table sets forth the 2016 and 2017 annual base salaries of our named executive officers:
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425,00
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Name
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2016 Annual Base Salary ($)
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2017 Annual Base Salary ($)
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John McDonough
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$425,000
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$425,000
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Thomas J. Lowery
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$335,000
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$350,000
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Shawn P. Lynch
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$300,000
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$ — (1)
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(1)
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Mr. Lynch resigned as our Chief Financial Officer, effective March 2, 2017.
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Cash Incentive Compensation
Each of our named executive officers is eligible to participate in an annual cash incentive compensation program which provides participants with an opportunity to earn variable cash incentive compensation based on individual and company performance. For 2016, Mr. McDonough’s target bonus was 75% of his base salary, Dr. Lowery’s target bonus was 45% of his base salary and Mr. Lynch’s target bonus was 40% of his base salary.
Objectives for the 2016 annual cash incentive compensation program were established in January 2016 by our compensation committee and generally related to attaining clinical, business development and financing milestones and publication, commercialization and operational goals. The determination of 2016 bonus amounts was based on a non-formulaic assessment of these factors, as well as our compensation committee’s subjective evaluation of our company’s overall performance and each named executive officer’s individual performance and contribution to our company. The compensation committee did not assign specific weights to any elements of our bonus program in determining 2016 bonuses.
After considering these factors, the Board of Directors, based upon the recommendation of our compensation committee, approved a bonus for Mr. McDonough and Dr. Lowery. Mr. Lynch did not receive a bonus for 2016. The annual variable cash incentive compensation earned by our named executive officers for 2016 is set forth in the "Non-Equity Incentive Plan Compensation" column of our 2016 Summary Compensation Table.
Equity-Based Compensation
We generally offer stock options and restricted stock unit awards to our employees, including our named executive officers, as the long-term incentive component of our compensation program. We typically grant stock options to employees when they commence employment with us and may thereafter grant additional options and restricted stock unit awards in the discretion of our Board of Directors. Our stock options granted upon commencement of employment typically vest as to 25% of the shares subject to the option on the first anniversary of the date of grant and in substantially equal monthly installments over the ensuing 36 months, subject to the holder's continued employment with us. Additional stock options granted after the commencement of employment typically vest in substantially equal monthly installments over 48 months. Our restricted stock unit awards typically vest in substantially equal annual installments over 36 months, subject to the holder's continued employment with us. Each restricted stock unit entitles the holder to receive one share of our common stock or its cash value upon vesting or a later settlement date. From time to time, our Board of Directors may also construct alternate vesting schedules as it determines are appropriate to motivate particular employees.
We awarded stock options and restricted stock unit awards to our named executive officers in 2016 in the following amounts:
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Named Executive Officer
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2016 Time-Based
Options Granted (#)(1)(2)
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2016 Performance-Based
Options Granted (#)(1)(3)
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2016 RSUs Granted (#)(4)
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John McDonough
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133,334
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66,666
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94,845
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Thomas J. Lowery
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58,800
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29,400
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30,000
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Shawn P. Lynch
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146,600
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—
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—
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(1)
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Stock options were granted with exercise prices equal to the fair market value of our common stock on the date of grant.
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(2)
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The time-based options granted to Mr. McDonough and Dr. Lowery vest in 48 substantially equal monthly installments following the date of grant. The options granted to Mr. Lynch vest as to 25% of the shares subject to the option on the first anniversary of the date of grant, and in equal monthly installments over the ensuing 36 months.
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(3)
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The performance-based options granted to Mr. McDonough and Dr. Lowery are eligible to vest based on our achievement of certain revenue targets and clinical milestones relating to our products in respect of fiscal year 2017.
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(4)
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The restricted stock units granted to Mr. McDonough and Dr. Lowery vest in two equal annual installments beginning on November 30, 2017 and will generally be settled on the earliest to occur of (i) the date that is 14 months after the date that the applicable restricted stock unit (or dividend equivalent) vests, (ii) the date of the occurrence of a change in control and (iii) the seventh month following Mr. McDonough or Dr. Lowery’s separation from service.
|
Retirement, Health, Welfare and Additional Benefits
Our named executive officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits, flexible spending accounts and 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 tax-qualified 401(k) defined contribution plan to the same extent as all of our other full-time employees. We did make company contributions for those participants in the 401(k) plan during the year ended December 31, 2016.
2016 Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
Salary
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
($)
|
|
|
John McDonough,
|
|
2016
|
|
425,466
|
|
552,946
|
|
1,010,482
|
|
159,375
|
|
2,148,269
|
|
|
President and Chief Executive Officer
|
|
2015
|
|
425,000
|
|
—
|
|
1,428,756
|
|
204,000
|
|
2,057,756
|
|
|
Thomas J. Lowery, Chief Scientific Officer
|
|
2016
|
|
334,633
|
|
174,900
|
|
445,623
|
|
60,000
|
|
1,015,156
|
|
|
Shawn P. Lynch, former Chief Financial Officer (1)
|
|
2016
|
|
187,791
|
|
—
|
|
727,458
|
|
—
|
|
915,249
|
|
|
|
(1)
|
|
The amounts shown for Mr. Lynch, who joined our company on May 16, 2016, represent base salary for the portion of the year during which he was employed.
|
|
|
(2)
|
|
Represents the aggregate grant date fair value of the restricted stock unit awards granted during the given year computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a description of the assumptions used in valuing these awards, see note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 15, 2017.
|
|
|
(3)
|
|
Represents the aggregate grant date fair value of the option awards granted during the given year computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a description of the assumptions used in valuing these awards, see note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 15, 2017. For performance-based options, the amounts shown reflect the grant date fair value, assuming the highest level of performance conditions will be achieved.
|
|
|
(4)
|
|
Represents awards earned under our annual cash incentive compensation program. For additional information regarding these amounts, see the section titled "Executive Compensation Components—Cash Incentive Compensation" above.
|
Outstanding Equity Awards at Fiscal Year-End Table—2016
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
Plan Awards.
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Number of
|
|
|
|
|
|
Shares or Units
|
|
Market Value of
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Securities
|
|
Option
|
|
|
|
of Stock That
|
|
Shares of Units
|
|
|
|
|
Vesting
|
|
Options
|
|
Options
|
|
Underlying
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
of Stock That
|
|
|
|
|
Commencement
|
|
Exercisable
|
|
Unexercisable
|
|
Unexercised Unearned
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Have Not Vested
|
|
|
Name
|
|
Date
|
|
(#)
|
|
(#)(1)
|
|
Options (#)(2)
|
|
($)
|
|
Date
|
|
(#)
|
|
(#)(3)
|
|
|
John McDonough
|
|
01/20/2016
|
|
33,334
|
|
100,000
|
|
66,666
|
|
9.02
|
|
01/19/2026
|
|
|
|
|
|
|
|
|
02/13/2015
|
|
64,268
|
|
69,856
|
|
—
|
|
19.95
|
|
02/12/2025
|
|
|
|
|
|
|
|
|
07/02/2014
|
|
42,890
|
|
23,521
|
|
—
|
|
10.69
|
|
07/02/2024
|
|
|
|
|
|
|
|
|
01/22/2014
|
|
24,904
|
|
8,301
|
|
—
|
|
3.21
|
|
01/22/2024
|
|
|
|
|
|
|
|
|
09/25/2013
|
|
138,357
|
|
27,672
|
|
—
|
|
3.21
|
|
09/25/2023
|
|
|
|
|
|
|
|
|
01/17/2012
|
|
194,558
|
|
—
|
|
—
|
|
2.45
|
|
01/17/2022
|
|
|
|
|
|
|
|
|
—
|
|
141,552
|
|
—
|
|
—
|
|
1.96
|
|
09/14/2020
|
|
|
|
|
|
|
|
|
—
|
|
11,729
|
|
—
|
|
—
|
|
1.16
|
|
02/27/2019
|
|
|
|
|
|
|
|
|
—
|
|
16,806
|
|
—
|
|
—
|
|
1.16
|
|
01/16/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,845
|
|
498,885
|
|
|
Thomas J. Lowery
|
|
01/20/2016
|
|
14,000
|
|
44,800
|
|
29,400
|
|
9.02
|
|
01/19/2026
|
|
|
|
|
|
|
|
|
02/13/2015
|
|
21,304
|
|
23,156
|
|
—
|
|
19.95
|
|
02/12/2025
|
|
|
|
|
|
|
|
|
07/02/2014
|
|
17,154
|
|
9,410
|
|
—
|
|
10.69
|
|
07/02/2024
|
|
|
|
|
|
|
|
|
01/22/2014
|
|
12,451
|
|
4,151
|
|
—
|
|
3.21
|
|
01/22/2024
|
|
|
|
|
|
|
|
|
09/25/2013
|
|
49,251
|
|
9,851
|
|
—
|
|
3.21
|
|
09/25/2023
|
|
|
|
|
|
|
|
|
01/23/2013
|
|
11,764
|
|
—
|
|
—
|
|
2.24
|
|
01/23/2023
|
|
|
|
|
|
|
|
|
01/17/2012
|
|
36,235
|
|
—
|
|
—
|
|
2.45
|
|
01/17/2022
|
|
|
|
|
|
|
|
|
—
|
|
29,411
|
|
—
|
|
—
|
|
1.96
|
|
04/15/2021
|
|
|
|
|
|
|
|
|
—
|
|
18,588
|
|
—
|
|
—
|
|
1.31
|
|
02/05/2020
|
|
|
|
|
|
|
|
|
—
|
|
18,647
|
|
—
|
|
—
|
|
1.16
|
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
157,800
|
|
|
Shawn P. Lynch (4)
|
|
05/16/2016
|
|
—
|
|
146,600
|
|
—
|
|
8.88
|
|
05/16/2026
|
|
—
|
|
—
|
|
|
|
(1)
|
|
All unvested time-based options for Mr. McDonough and Dr. Lowery vest in substantially equal monthly installments over the 48 month vesting period, subject to the holder's continued employment with us through the applicable vesting date and potential accelerated vesting as described in the sections titled "Employment Letter Agreements with Our Named Executive Officers" and "Potential Payments upon a Change in Control" below.
|
|
|
(2)
|
|
The performance-based options for Mr. McDonough and Dr. Lowery are eligible to vest based on our achievement of certain revenue targets and clinical milestones relating to our products in respect of fiscal year 2017, subject to the holder's continued employment with us through the applicable vesting date.
|
|
|
(3)
|
|
Based on the closing price of our common stock on December 30, 2016 of $5.26. All unvested restricted stock units for Mr. McDonough and Dr. Lowery vest in two equal annual installments beginning on November 30, 2017, subject to the holder's continued employment with us through the applicable vesting date and potential accelerated vesting as described in the sections titled "Employment Letter Agreements with Our Named Executive Officers" and "Potential Payments upon a Change in Control" below.
|
|
|
(4)
|
|
All unvested options for Mr. Lynch vest as to 25% of the total shares subject to the option on the first anniversary of the vesting commencement date and in substantially equal monthly installments over the ensuing 36 months, subject to his continued employment with us through the applicable vesting date and potential accelerated vesting as described in the sections titled "Employment Letter Agreements with Our Named Executive Officers" and "Potential Payments upon a Change in Control" below.
|
Employment Letter Agreements with Our Named Executive Officers
We have entered into an employment letter agreement with each of the named executive officers. Certain key terms of these agreements are described below.
John McDonough.
We have entered into agreements with Mr. McDonough which provides that, if Mr. McDonough, is terminated by us without cause, he will be entitled to receive 6 months of base salary continuation and a lump-sum payment in an amount equal to 50% of the maximum amount of his annual variable cash incentive compensation for the year of termination. If Mr. McDonough's employment is terminated by us without cause within the three months preceding or the 12 months following a change in control, or if Mr. McDonough resigns his employment for good reason within the 12 months following a change in control, and he timely executes a release of claims in our favor, he will be entitled to receive 18 months of base salary continuation, a lump-sum payment in an amount equal to his target annual variable cash incentive compensation for the year of termination, accelerated vesting of all outstanding unvested equity awards and reimbursement for a portion (based on cost sharing for active employees) of health care continuation premiums for up to 18 months.
Mr. McDonough's employment letter agreement also contains restrictive covenants pursuant to which he has agreed to refrain from competing with us or soliciting our customers, prospective customers, employees or consultants for one year following his termination of employment.
Thomas J. Lowery, PhD.
We have entered into agreements with Dr. Lowery, which provides that, if Dr. Lowery's employment is terminated by us without cause within the three months preceding or the 12 months following a change in control, or if Dr. Lowery resigns his employment for good reason within the 12 months following a change in control, and he timely executes a release of claims in our favor, he will be entitled to receive 12 months of base salary continuation, accelerated vesting of all outstanding unvested equity awards and reimbursement for a portion (based on active employee cost sharing rates) of health care premiums for up to 12 months.
Dr. Lowery has also entered into a non-compete, non-disclosure and invention assignment agreement with us pursuant to which he has agreed to refrain from disclosing our confidential information indefinitely and from competing with us or soliciting our employees or consultants for 12 months following termination of his employment.
Shawn P. Lynch.
In April 2016, we entered into agreements with Mr. Lynch. This agreement entitled him to an initial annual base salary of $300,000, an initial grant of options to purchase a total of 146,600 shares of our common stock and a target annual variable cash incentive bonus equal to 40% of his annual base salary.
Mr. Lynch has also entered into a non-compete, non-disclosure and invention assignment agreement with us pursuant to which he has agreed to refrain from disclosing our confidential information indefinitely and from competing with us or soliciting our employees or consultants for 12 months following termination of his employment. Mr. Lynch resigned as our Chief Financial Officer, effective March 2, 2017 and received no severance.
Potential Payments Upon a Change in Control
As described above, under the terms of their employment letter agreements and change in control severance letter agreements, Mr. McDonough and Dr. Lowery may become entitled to payments or benefits in connection with certain terminations of employment that occur at specified times around a change in control.
The agreements governing Mr. McDonough and Dr. Lowery unvested stock options and restricted stock units provide for full accelerated vesting if their employment is terminated by us without cause within the three months preceding or the 12 months following a change of control or if they resign for good reason within 12 months following a change in control.
DIRECTOR COMPENSATIO
N
The following table presents the total compensation for each person who served as a member of our Board of Directors during 2016, other than Mr. McDonough. Mr. McDonough, who is also our Chief Executive Officer, receives no compensation for his service as a director. The compensation received by Mr. McDonough as our Chief Executive Officer during 2016 is presented in the 2016 Summary Compensation Table.
Director Compensation Table—2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
Option
|
|
All Other
|
|
|
|
|
|
|
in Cash
|
|
Awards
|
|
Compensation
|
|
Total
|
|
|
|
|
($)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
|
Joshua Bilenker, M.D.
|
|
42,500
|
|
81,140
|
|
—
|
|
123,640
|
|
|
Thomas J. Carella (2)
|
|
17,582
|
|
—
|
|
—
|
|
17,582
|
|
|
Michael J. Cima, Ph.D.
|
|
57,500
|
|
81,140
|
|
—
|
|
138,640
|
|
|
John W. Cumming
|
|
41,673
|
|
81,140
|
|
—
|
|
122,813
|
|
|
David B. Elsbree
|
|
50,000
|
|
81,140
|
|
—
|
|
131,140
|
|
|
Adrian Jones (3)
|
|
19,615
|
|
330,469
|
|
—
|
|
350,085
|
|
|
Stanley N. Lapidus
|
|
75,062
|
|
81,140
|
|
—
|
|
156,202
|
|
|
Seymour Liebman (4)
|
|
769
|
|
239,635
|
|
—
|
|
240,404
|
|
|
Harry W. Wilcox (5)
|
|
38,997
|
|
81,140
|
|
—
|
|
120,137
|
|
|
|
(1)
|
|
Represents the aggregate grant date fair value of the option awards granted during 2016 computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a description of the assumptions used in valuing these awards, see note 9 to our consolidated financial statements for 2016 in our Annual Report on Form 10-K filed with the SEC on March 15, 2017. As of December 31, 2016, none of our non-employee directors held unvested stock awards, Dr. Bilenker held options to purchase a total of 27,941 shares of our common stock, Dr. Cima held options to purchase a total of 152,940 shares of our common stock, Mr. Cumming and Mr. Elsbree each held options to purchase a total of 101,470 shares of our common stock, Mr. Lapidus held options to purchase 138,231 shares of our common stock, Mr. Jones and Mr. Liebman each held options to purchase a total of 66,176 shares of our common stock and Dr. Wilcox and Mr. Carella each held no options to purchase shares of our common stock.
|
|
|
(2)
|
|
Mr. Carella resigned from our Board of Directors effective as of March 9, 2016.
|
|
|
(3)
|
|
Mr. Jones was elected to our Board of Directors effective as of March 9, 2016.
|
|
|
(4)
|
|
Mr. Liebman was elected to our Board of Directors effective as of September 21, 2016.
|
|
|
(5)
|
|
Mr. Wilcox resigned from our Board of Directors effective as of August 31, 2016.
|
We maintain a non-employee director compensation policy pursuant to which all non-employee directors are paid cash compensation as set forth below:
|
|
|
|
|
|
|
|
Annual Retainer ($)
|
|
|
Board of Directors:
|
|
|
|
|
All non-employee members
|
|
40,000
|
|
|
Additional retainer for Lead Independent Director
|
|
25,000
|
|
|
Audit Committee:
|
|
|
|
|
Chairperson
|
|
18,000
|
|
|
Membership
|
|
7,500
|
|
|
Compensation Committee:
|
|
|
|
|
Chairperson
|
|
14,000
|
|
|
Membership
|
|
5,000
|
|
|
Nominating and Corporate Governance Committee:
|
|
|
|
|
Chairperson
|
|
10,000
|
|
|
Membership
|
|
3,500
|
|
|
Technology Committee:
|
|
|
|
|
Chairperson
|
|
15,000
|
|
|
Membership
|
|
3,500
|
|
Annual retainers are earned on a quarterly basis and paid in arrears following the end of each calendar quarter. Retainers are prorated for partial quarters of service.
Under the non-employee director compensation policy for 2016, each person who is initially appointed or elected to the Board of Directors was granted an option to purchase 66,176 shares of our common stock on the date he or she first becomes a non-employee director. The option vests and becomes exercisable in substantially equal installments on each of the first three anniversaries of the date of grant, subject to the director's continued service on the Board of Directors. In addition, on the date of the 2016 annual meeting of stockholders, each continuing non-employee director was granted an option to purchase 17,647 shares of our common stock. The option vests and becomes exercisable in 12 substantially equal monthly installments following the date of grant. All of the foregoing options are granted with an exercise price equal to the fair market value per share of our common stock on the date of grant and will vest in full immediately prior to the occurrence of a change in control. In 2017, the Board revised the non-employee director compensation policy to eliminate the annual grant of options to purchase shares and included a grant of 18,000 restricted stock units to each continuing non-employee director on the date of each future annual meeting of stockholders. The restricted stock units entitle the holder to receive one share of our common stock or its cash value upon vesting or a later settlement date and vest in one installment on the twelve month anniversary of the grant date.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information on our equity compensation plans as of December 31, 2016.
|
|
|
|
|
|
|
|
|
Plan Category
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
|
|
Weighted Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
|
|
Number of Securities
Available for Future
Issuance Under Equity
Compensation Plans
|
|
|
Equity compensation plans approved by security holders (1)
|
4,042,627
|
(2)
|
$8.20
|
(3)
|
357,798
|
(4)
|
|
Equity compensation plans not approved by security holders
|
—
|
|
—
|
|
—
|
|
|
Total
|
4,042,627
|
|
$
8.20
|
|
357,798
|
|
|
|
(1)
|
|
Consists of the 2006 Employee, Director and Consultant Stock Plan, or the 2006 Plan, the 2014 Incentive Award Plan, as amended and restated, or the 2014 Plan, and the Employee Stock Purchase Plan, or ESPP. We ceased issuing new awards under the 2006 Plan when the 2014 Plan became effective.
|
|
|
(2)
|
|
Consists of 1,842,987 outstanding options to purchase shares of our common stock under the 2006 Plan, 1,927,445 outstanding options to purchase shares of our common stock under the 2014 Plan, and 272,195 outstanding restricted stock units under the 2014 Plan.
|
|
|
(3)
|
|
Represents the weighted-average exercise price of options under the 2014 Plan and 2006 Plan as of December 31, 2016. Amounts shown do not take into account any restricted stock units awarded under the 2014 Plan, which do not have an exercise price.
|
|
|
(4)
|
|
Pursuant to the terms of the 2014 Plan, the number of shares of common stock available for issuance under the 2014 Plan automatically increases by an amount equal to the lesser of on January 1 of each year during the current ten year term of the 2014 Plan, beginning on January 1, 2017. The annual increase in the number of shares is currently equal to the lesser of: (a) 4% of our shares of common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year; and (b) such smaller number of shares of common stock determined by the Board of Directors. Pursuant to the terms of the ESPP, the number of shares of common stock available for issuance under the ESPP automatically increases on the first day of each calendar year beginning January 1, 2015 and ending on January 1, 2024. The annual increase in the number of shares is currently equal to the least of: (1) 220,588 shares, (2) 1% of the common shares outstanding on the final day of the immediately preceding calendar year and (3) such smaller number of common shares as determined by the Board of Directors. As of December 31, 2016, a total of
223,397
shares of stock were available for issuance and 134,401 purchase rights were outstanding under the ESPP.
|
HOUSEHOLDING OF PROXY MATERIAL
S
Some banks, brokers, and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of the Notice of Internet Availability of Proxy Materials, Proxy Statement, and Annual Report on Form 10-K for the year ended December 31, 2016, as applicable, is being delivered multiple stockholders sharing an address unless we have received contrary instructions. We will promptly deliver a separate copy of any of these documents to you if you write to us at 101 Hartwell Ave., Lexington, MA 02421, Attention: Secretary or call us at (781) 761-4646. If you want to receive separate copies of the Notice of Internet Availability of Proxy Materials, Proxy Statement, or Annual Report on Form 10-K in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address or telephone number.
STOCKHOLDER MATTERS
Stockholder Recommendations for Director Nominations
Any stockholder wishing to recommend a director candidate for consideration by the nominating and corporate governance committee should provide the following information to the Chair of the nominating and corporate governance committee, T2 Biosystems, Inc., 101 Hartwell Ave., Lexington, Massachusetts 02421: (a) a brief statement outlining the reasons the nominee would be an effective director for T2 Biosystems; (b) (i) the name, age, and business and residence addresses of the candidate, (ii) the principal occupation or employment of the candidate for the past five years, as well as information about any other Board of Directors and board committees on which the candidate has served during that period, (iii) the number of shares of T2 Biosystems stock, if any, beneficially owned by the candidate and (iv) details of any business or other significant relationship the candidate has ever had with T2 Biosystems; (c) (i) the stockholder’s name and record address and the name and address of the beneficial owner of T2 Biosystems shares, if any, on whose behalf the proposal is made and (ii) the number of shares of T2 Biosystems stock that the stockholder and any such other beneficial owner beneficially own; and (d) the other information specified in T2 Biosystems’ Bylaws as then in effect. The nominating and corporate governance committee may seek further information from or about the stockholder making the recommendation, the candidate, or any such other beneficial owner, including information about all business and other relationships between the candidate and the stockholder and between the candidate and any such other beneficial owner.
Other Stockholder Proposals
Any stockholder proposing to bring any business other than a director candidate before an annual meeting of stockholders, which business must relate to a proper matter under Delaware law for stockholder action, must provide the following information to the Chair of the nominating and
corporate governance committee: (a) a brief description of the business desired to be brought before the annual meeting; (b) the text of the proposal (including the exact text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the bylaws, the exact text of the proposed amendment); (c) the reasons for conducting such business at the annual meeting; (d) the proposing stockholder’s name and record address and the name and address of the beneficial owner of T2 Biosystems shares, if any, on whose behalf the proposal is made; and (e) the other information specified in T2 Biosystems’ Bylaws as then in effect.
Procedure for Submitting Stockholder Proposals
Stockholder proposals, including proposed director nominations, intended to be presented at the next annual meeting of our stockholders must satisfy the requirements set forth in the advance notice provision under our By-laws. To be timely for our next annual meeting of stockholders, any such proposal must be delivered in writing to our Secretary at our principal executive offices between the close of business on February 2, 2018, and March 4, 2018. If the date of the next annual meeting of the stockholders is scheduled to take place before May 3, 2018, or after August 31, 2018, notice by the stockholder must be delivered no earlier than the 120
th
day prior to such annual meeting and no later than the close of business on the later of (1) the 90
th
day prior to such annual meeting or (2) the 10
th
day following the day on which public announcement of the date of such meeting is first made.
In addition, any stockholder proposal, including proposed director nominations, intended to be included in the proxy statement for the next annual meeting of our stockholders must also satisfy the SEC regulations under Rule 14a-8 of the Exchange Act, and be received not later than December 21, 2017. If the date of the annual meeting is moved by more than 30 days from the date contemplated at the time of the previous year's proxy statement, then notice must be received within a reasonable time before we begin to print and send proxy materials. If that happens, we will publicly announce the deadline for submitting a proposal in a press release or in a document filed with the SEC.
Appendix A
T2 BIOSYSTEMS, INC.
AUDIT COMMITTEE CHARTER
(amended and restated, effective as of April 28, 2016)
A. Purpose
The purpose of the Audit Committee of the Board of Directors (the "Board") of T2 Biosystems, Inc. (the "Company") is to assist the Board's oversight of the Company's accounting and financial reporting processes and the audits of the Company's financial statements.
B. Structure and Membership
1.
Number.
Except as otherwise permitted by the applicable NASDAQ rules, the Audit Committee shall consist of at least three members of the Board.
2.
Independence.
Except as otherwise permitted by the applicable NASDAQ rules, each member of the Audit Committee shall be an "independent director" as defined by NASDAQ Rule 5605(a)(2), meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (subject to the exemptions provided in Rule 10A-3(c)), and not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years.
3.
Financial Literacy.
Each member of the Audit Committee must be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement and cash flow statement, at the time of his or her appointment to the Audit Committee. In addition, at least one member must have past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. Unless otherwise determined by the Board (in which case disclosure of such determination shall be made in the Company's annual report filed with the SEC), at least one member of the Audit Committee shall be an "audit committee financial expert" (as defined by applicable SEC rules).
4.
Chair.
Unless the Board elects a Chair of the Audit Committee, the Audit Committee shall elect a Chair by majority vote.
5.
Compensation.
The compensation of Audit Committee members shall be as determined by the Board. No member of the Audit Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than fees paid in his or her capacity as a member of the Board or of a committee of the Board.
6.
Selection and Removal.
Members of the Audit Committee shall be appointed by the Board. The Board may remove members of the Audit Committee from such committee, with or without cause.
C. Authority and Responsibilities
General
The Audit Committee shall discharge its responsibilities, and shall assess the information provided by the Company's management and the Company's registered public accounting firm (the "independent auditor"), in accordance with its business judgment. Management is responsible for the preparation, presentation and integrity of the Company's financial statements, for the appropriateness of the accounting principles and reporting policies that are used by the Company and for establishing and maintaining adequate internal control over financial reporting. The independent auditor is responsible for auditing the Company's financial statements and the Company's internal control over financial reporting and for reviewing the Company's unaudited interim financial statements. The authority and responsibilities set forth in this Charter do not reflect or create any duty or obligation of the Audit Committee to plan or conduct any audit, to determine or certify that the Company's financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles or applicable law, or to guarantee the independent auditor's reports.
Oversight of Independent Auditor
1.
Selection.
The Audit Committee shall be solely and directly responsible for appointing, evaluating, retaining and, when necessary, terminating the engagement of the independent auditor. The Audit Committee may, in its discretion, seek stockholder ratification of the independent auditor it appoints.
2.
Independence.
The Audit Committee shall take, or recommend that the full Board take, appropriate action to oversee the independence of the independent auditor. In connection with this responsibility, the Audit Committee shall obtain and review the written disclosures and the letter from the independent auditor required by applicable requirements of the Public Company Accounting Oversight Board (the "PCAOB") regarding the independent auditor's communications with the Audit Committee concerning independence. The Audit Committee shall actively engage in dialogue with the independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the auditor.
3.
Compensation.
The Audit Committee shall have sole and direct responsibility for setting the compensation of the independent auditor. The Audit Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of the independent auditor established by the Audit Committee.
4.
Pre-approval of Services.
The Audit Committee shall pre-approve all audit services to be provided to the Company, whether provided by the principal auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by the independent auditor; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules.
5.
Oversight.
The independent auditor shall report directly to the Audit Committee, and the Audit Committee shall have sole and direct responsibility for overseeing the work of the independent auditor, including resolution of disagreements between Company management and the independent auditor regarding financial reporting. In connection with its oversight role, the Audit Committee shall, from time to time as appropriate, receive and consider the reports and other communications required to be made by the independent auditor regarding:
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critical accounting policies and practices;
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alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with Company management, including ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor;
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other material written communications between the independent auditor and Company management; and
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the other matters addressed in PCAOB Auditing Standard No. 16, Communications with Audit Committees ("AS 16").
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6.
PCAOB Inspections.
The Audit Committee shall request the independent auditor to provide relevant information about inspections of the firm by the PCAOB, including the following:
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whether any audit overseen by the Audit Committee is selected by the PCAOB for an inspection and, if so, the findings of the inspection;
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whether the PCAOB's inspection of other audits performed by the firm raised auditing or accounting issues similar to those presented in the Company's audit;
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the firm's response to PCAOB findings; and
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the firm's remedial efforts in light of any quality control deficiencies that may have been identified by the PCAOB.
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Audited Financial Statements
7.
Review and Discussion.
The Audit Committee shall review and discuss with the Company's management and independent auditor the Company's audited financial statements, including the matters required to be discussed by AS 16.
8.
Recommendation to Board Regarding Financial Statements.
The Audit Committee shall consider whether it will recommend to the Board that the Company's audited financial statements be included in the Company's Annual Report on Form 10-K.
9.
Audit Committee Report.
The Audit Committee shall prepare an annual committee report for inclusion where necessary in the proxy statement of the Company relating to its annual meeting of security holders.
Review of Other Financial Disclosures
10.
Independent Auditor Review of Interim Financial Statements.
The Audit Committee shall direct the independent auditor to use its best efforts to perform all reviews of interim financial information prior to disclosure by the Company of such information and to discuss promptly with the Audit Committee and the Chief Financial Officer any matters identified in connection with the auditor's review of interim financial information which are required to be discussed by applicable auditing standards. The Audit Committee shall direct management to advise the Audit Committee in the event that the Company proposes to disclose interim financial information prior to completion of the independent auditor's review of interim financial information.
Controls and Procedures
11.
Oversight.
The Audit Committee shall coordinate the Board's oversight of the Company's internal control over financial reporting and disclosure controls and procedures.
12.
Risk Management.
The Audit Committee shall discuss the Company's policies with respect to risk assessment and risk management, including guidelines and policies to govern the process by which the Company's exposure to risk is handled.
13.
Procedures for Complaints.
The Audit Committee shall establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
14.
Oversight of Related Person Transactions.
The Audit Committee shall review the Company's policies and procedures for reviewing and approving or ratifying "related person transactions" (defined as transactions required to be disclosed pursuant to Item 404 of Regulation S-K), including the Company's Related Person Transaction Policy, and recommend any changes to the Board. In accordance with the Company's Related
Person Transaction Policy and NASDAQ rules, the Audit Committee shall conduct appropriate review and oversight of all related person transactions for potential conflict of interest situations on an ongoing basis.
15.
Additional Duties.
The Audit Committee shall have such other duties as may be delegated from time to time by the Board.
D. Procedures and Administration
1.
Meetings.
The Audit Committee shall meet as often as it deems necessary in order to perform its responsibilities. The Audit Committee may also act by unanimous written consent in lieu of a meeting. The Audit Committee shall periodically meet separately with: (i) the independent auditor, (ii) Company management and (iii) the Company's internal auditors, if any. The Audit Committee shall keep such records of its meetings as it shall deem appropriate.
2.
Subcommittees.
The Audit Committee may form and delegate authority to one or more subcommittees, as it deems appropriate from time to time under the circumstances (including a subcommittee consisting of a single member). Any decision of a subcommittee to pre-approve audit, review, attest or non-audit services shall be presented to the full Audit Committee at its next scheduled meeting.
3.
Reports to Board.
The Audit Committee shall report regularly to the Board.
4.
Charter.
At least annually, the Audit Committee shall review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.
5.
Independent Advisors.
The Audit Committee is authorized, without further action by the Board, to engage such independent legal, accounting and other advisors as it deems necessary or appropriate to carry out its responsibilities. Such independent advisors may be the regular advisors to the Company. The Audit Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of such advisors as established by the Audit Committee.
6.
Investigations.
The Audit Committee shall have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities as it shall deem appropriate, including the authority to request any officer, employee or advisor of the Company to meet with the Audit Committee or any advisors engaged by the Audit Committee.
7.
Funding.
The Audit Committee is empowered, without further action by the Board, to cause the Company to pay the ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
8.
Self-Evaluation.
The Audit Committee shall periodically evaluate its own performance and report to the Board on that self-evaluation.
* * * * *
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. T2 BIOSYSTEMS, INC. 91 HARTWELL AVENUE LEXINGTON, MA 02421 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees For 0 0 0 For 0 Against 0 0 0 Against 0 Abstain 0 0 0 Abstain 0 01 Stanley Lapidus 02 John W. Cumming 03 David Elsbree The Board of Directors recommends you vote FOR the following proposal: 2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 NOTE: To transact such other business as may properly come before the meeting or at any and all adjournments or postponements thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000331416_1 R1.0.1.15
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K is/are available at www.proxyvote.com T2 BIOSYSTEMS, INC. Annual Meeting of Stockholders June 2, 2017 9:00 AM This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) John McDonough, Michael Gibbs and Christine Emma, or any one of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this proxy, all of the shares of common stock of T2 BIOSYSTEMS, INC. that the stockholder(s) is entitled to vote at the Annual Meeting of stockholders to be held at 9:00 AM, ET on June 2, 2017, at 91 Hartwell Ave., Lexington, Massachusetts 02421, and any adjournments or postponements thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations Continued and to be signed on reverse side 0000331416_2 R1.0.1.15
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*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on June 02, 2017 T2 BIOSYSTEMS, INC. You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. T2 BIOSYSTEMS, INC. 91 HARTWELL AVENUE LEXINGTON, MA 02421 0000331415_1 R1.0.1.15 See the reverse side of this notice to obtain proxy materials and voting instructions. Meeting Information Meeting Type: Annual Meeting For holders as of: April 07, 2017 Date: June 02, 2017Time: 9:00 AM EST Location: 91 Hartwell Ave. Lexington, Massachusetts 02421
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Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Have the information that is printed in the box marked by the arrow (located on the by the arrow (located on the following page) in the subject line. How To Vote Please Choose One of the Following Voting Methods marked by the arrow available and follow the instructions. 0000331415_2 R1.0.1.15 Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. 1. Notice & Proxy Statement2. Form 10-K How to View Online: following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET:www.proxyvote.com 2) BY TELEPHONE:1-800-579-1639 3) BY E-MAIL*:sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before May 21, 2017 to facilitate timely delivery.
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The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees Stanley Lapidus 01 02 John W. Cumming 03 David Elsbree The Board of Directors recommends you vote FOR the following proposal: 2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 NOTE: To transact such other business as may properly come before the meeting or at any and all adjournments or postponements thereof. 0000331415_3 R1.0.1.15 Voting items
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0000331415_4 R1.0.1.15
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