Seer Inc

IV. Key Componentsof our Compensation Program

The talent and compensation committee has developed an executive compensation program that consists of three main components. The relative mix of these components is weighted more on incentives, particularly long-term incentives, rather than fixed compensation. The focus on incentive compensation ensures that the interests of our executives are aligned with those of our stockholders. Our compensation program is made up of the following three key compensation components:

We design and implement an executive compensation program that combines both base salary, and short-term and long-term incentive elements based on annual performance objectives and long-term equity interests. The annual cash incentives and long-term equity awards elements of our executive compensation program are intended to align the interests of our executives and our shareholders. The talent and compensation committee has not, however, adopted any formal or informal policies or guidelines for allocating compensation between short-term and long-term compensation, between base salary and non-cash compensation, or among different forms of non-cash compensation.

Base Salaries

Base salary represents the fixed portion of our executives’ compensation, which we view as an important element to attract, retain and motivate highly talented executives. Each named executive officer’s base salary is typically annually reviewed by our talent and compensation committee based on competitive market considerations and level of responsibilities, experience, and skill set. These considerations are supplemented by market data provided by the talent and compensation committee’s independent compensation consultant. In February 2023, our talent and compensation committee reviewed these annual base salary amounts and provided merit increases to our named executive officers, effective March 1, 2023.

Based on these considerations, our named executive officer’s annual base salaries for 2023 were as follows:

(1) Prior to the March 2023 merit increases, the annual base salaries for Dr. Farokhzad, Mr. Horn, and Ms. Kogan were $575,484, $430,830, and $398,250, respectively.

Subsequently, on November 17, 2023, our Chief Financial Officer, David Horn, was promoted to the additional role of President. Mr. Horn's salary increased from $460,000 to $510,000.

Annual Cash Incentives

In addition to base salaries, our named executive officers are eligible to receive annual performance-based cash bonuses under our Executive Incentive Compensation Plan, which bonuses are designed to provide appropriate incentives to our executives to achieve defined annual corporate goals and to reward our executives and other employees who significantly impact our corporate results.

Annual corporate goals are developed and recommended by management to the Board of Directors. The Board of Directors approves the annual corporate goals. Annual corporate goals are reviewed by the talent and compensation committee on a quarterly basis to track the Company’s progress toward achievement of the annual corporate goals and the continued appropriateness of such goals throughout the year. For each named executive officer, our talent and compensation committee sets the target bonus as a percentage of base salary, each of which is set forth below for 2023:

On November 17, 2023, the talent and compensation committee changed Mr. Horn’s bonus percentage from 50% to 55% in connection with his promotion to President.

Each year, our talent and compensation committee sets the goals that will apply to that year’s executive bonuses, and the weightings attributable to such goals. The actual performance-based bonus paid, if any, is calculated by multiplying the executive’s annual base salary and target bonus percentage times percentage achievement of the applicable goals. For 2023, named executive officer bonuses were 100% based on corporate objectives, in order to focus our named executive officers on our most critical and strategic goals for the year, and the corporate objectives were divided into four categories as specified below:

In general, corporate objectives are set at levels that were considered difficult to achieve, but achievable with significant effort, and if achieved at 100% would have exceeded the Company’s operational expectations for the measurement period.

At the close of the applicable fiscal year, the talent and compensation committee comes to a general, subjective conclusion as to whether the corporate goals were met, and whether there were any other factors that should be considered in determining the amount of bonus earned for the year. The talent and compensation committee may decide to pay bonuses to the named executive officers even if the specified performance goals are not met, in recognition of the Company’s performance throughout the year in meeting other objectives not contemplated at the beginning of the performance period, or alternatively may determine to decrease or eliminate bonuses even if goals are achieved after weighing factors such as those not specifically set at the beginning of the year. In making the final decision on the corporate goal achievement, the talent and compensation committee also considers the review of the year-end financial results. In sum, the amount of bonus compensation that is actually earned by our named executive officers may be influenced by subjective determinations by our talent and compensation committee. The talent and compensation committee believes that maintaining discretion to evaluate corporate performance at the close of the year based on the totality of the circumstances, and to award or fail to award bonus compensation without reliance on rote calculations under set formulas, is appropriate in responsibly discharging its duties, particularly for a Company at our growth stage. Our talent and compensation committee may award a bonus in an amount above or below the amount resulting from the calculation described above, based on other factors that our talent and compensation committee determines, in its sole discretion, are important to our corporate performance and provide appropriate incentives to our executives, for example based on events or circumstances that arise after the original goals are set. Payouts of earned bonuses, if any, are generally made in the year following the year of performance, and subject to the recipient’s continued employment with us through the payment date.

On February 6, 2024, the talent and compensation committee evaluated our achievement of the 2023 corporate objectives. The talent and compensation committee considered whether we had achieved specific goals in each category of our corporate objectives, including any over achievement in each category, the weighting established for each category, and our overall corporate performance in 2023. After taking into consideration performance against corporate objectives as well as successes on other key Company’s projects, the talent and compensation committee approved an 83% achievement level of our 2023 corporate objectives.

Bonus payments made for 2023 performance were as follows:

(1) Mr. Horn's target bonus was prorated based on his promotion in November 2023 using his pre-promotion salary and bonus opportunity for ten months and new salary and bonus opportunity for two months.

Long-Term Incentives

Our focus on long-term value creation results in our executive compensation program having a strong weighting toward equity compensation. We rely heavily on equity compensation that vests over a multi-year period to ensure that a significant portion of a named executive officer’s compensation opportunity is related to factors that directly and indirectly influence stockholder value. Our talent and compensation committee believes this serves as a reward for appreciation in our stock price, and long-term value creation and enables us to achieve our retention objectives. Further, equity participation establishes a sense of ownership and more closely aligns executives’ interests with those of our other stockholders.

2023 Annual Equity Grants

In 2023, our annual equity awards to our executives were in the form of stock options with market performance conditions and restricted stock units with time-based vesting. Stock options with a market performance condition provide value only if the average of our closing price over a consecutive 20-day trading period increases to 150% of the stock price on the date of grant, thereby further aligning company performance with stockholder interests. Furthermore, we believe that RSU awards provide tangible value to our executive officers and serve as an incentive and retention tool during a difficult operating or volatile business environment, while still being tied to stockholder value. Additionally, RSU awards enable our executive officers to accumulate stock ownership in the Company.

We grant equity awards to our named executive officers as part of the talent and compensation committee’s annual review of executive compensation. The talent and compensation committee has not applied a rigid formula in determining the size of these equity awards or mix between options and RSUs. In February 2023, the talent and compensation committee reviewed and approved the option and RSU grants for the named executive officers, basing its decision on a market assessment of peer companies, as well as by utilizing a blend of factors that included value of equity compensation and Company ownership. The talent and compensation committee determined that the annual equity grants would be split approximately equally in terms of value between stock options with a market performance condition and RSUs as follows:

(1) The dollar amounts in this column represent the aggregate full grant date fair value of the equity awards calculated in accordance with FASB ASC Topic 718. Please see the Summary Compensation Table for more details regarding how this value is calculated.

(2)To maximize the alignment of our named executive officers' interests with those of our stockholders, the talent and compensation committee added a market performance condition to the options granted to our executive team in 2023. These stock options will begin to vest only if the average closing price of our stock over a consecutive 20-trading day period increases to 150% (an average closing price of $6.89 over a consecutive 20-trading day period) of the price on the date of grant ($4.59). These options have a seven-year performance period. If the market conditions are not met by February 15, 2030, all options will be forfeited.

We believe that the multi-year vesting requirements applicable to both stock options and RSUs encourage employee retention. The 2023 RSUs grants to our named executive officers are scheduled to vest annually over a four-year period. In order for our 2023 option grants to be eligible to vest, the average closing price of our stock over a consecutive 20-trading day period is required to grow to 150% of the fair market value on the date of grant (that is, to an average closing price of $6.89 for 20 consecutive trading days from the exercise price of $4.59 per share). Upon the achievement of that stock price goal, one quarter of the 2023 option grants immediately vest and then the remainder vest in equal annual installments over a subsequent three-year period. Both types of equity awards are subject to the executive’s continuing service on each vesting date and to the vesting acceleration provisions of the company’s key executive change in control and severance plan (the Severance Plan) or, with respect to our CEO, his change in control and severance agreement (the Severance Agreement), as discussed further above. In order to encourage a successful change in control that is in the best interests of our stockholders and avoid causing the named executive officers distraction based on the possibility of their termination in connection with a change in control, the performance-based options provide that if we undergo a change in control, the achievement of this stock price target is determined based on the change in control price. If the stock price target is achieved in the change in control, the time-based vesting requirements otherwise applicable to these options are waived, and the options vest in full, as long as the named executive remains in service to us as of immediately prior to the completion of the change in control. For our CEO only, if, during the three months prior to a change in control, his employment with us is involuntarily terminated (within the meaning of his Severance Agreement), then his performance-based stock option will remain outstanding and eligible to achieve the stock price goal based on the change in control price and, if it is achieved, the option will be considered to be a time-based award for purposes of his Severance Agreement and will vest in full. This is consistent with the change in control-related acceleration of vesting provisions that apply to our CEO’s time-based equity awards under his Severance Agreement.