| | | Arlo Technologies, Inc. Notice of Taxation. Mr. Mattingly received a BSc in Economics2022 Annual Meeting and Accountancy from the University of Southampton. Brian Busse.Proxy Statement Brian Busse has served as our General Counsel since July 2018. Previously, Mr. Busse was NETGEAR’s Vice President Intellectual Property & Litigation where he was responsible for overseeing NETGEAR’s worldwide litigation, intellectual property, privacy and licensing matters. Before joining NETGEAR in September 2009, Mr. Busse served as Counsel in the Intellectual Property Litigation Department of O’Melveny & Myers LLP in Menlo Park, California beginning in December 2008 where he represented public and private technology companies in a wide range of intellectual property litigation matters, including all aspects of patent litigation, including trial, discovery, law and motion, and claim construction. Mr. Busse began practicing law with the New York firm of Skadden, Arps, Slate, Meagher & Flom LLP, advising clients on various areas of litigation. Mr. Busse holds a J.D. from The University of Texas at Austin School of Law, an M.S. and Ph.D. in Physics from Oregon State University, and a B.S. in Physics from Virginia Tech. Mr. Busse is admitted to practice law in California and New York.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2020, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.
| | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 2311
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TABLE OF CONTENTS | | | | | | INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | | | |
Arlo combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that is transforming the way people experience the connected lifestyle. Arlo’s deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. Our cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. To date, we have launched several categories of award-winning smart connected devices, including wired and wire-free smart Wi-Fi and LTE-enabled cameras, audio and video doorbells, and floodlight cameras. In addition, Arlo’s broad compatibility allows the platform to seamlessly integrate with third-party internet-of-things (“IoT”) products and protocols, such as Amazon Alexa, Apple HomeKit, Apple TV, Google Assistant, IFTTT, Stringify and Samsung SmartThings. Since the launch of our first product in December 2014, we have shipped over 22.9 million smart connected devices, and, as of December 31, 2021, our smart platform had approximately 6.1 million cumulative registered accounts across more than 100 countries around the world. Arlo was incorporated in Delaware on January 5, 2018, as a wholly owned subsidiary of NETGEAR. On February 6, 2018, NETGEAR announced the separation of its Arlo business from NETGEAR to be effected through an initial public offering (the “IPO”) of newly issued shares of the common stock of Arlo. On July 6, 2018, the Company filed a registration statement relating to the IPO of common stock of Arlo with the SEC. Following a series of restructuring steps prior to the completion of the IPO of Arlo common stock, the Arlo business was transferred from NETGEAR to Arlo. On November 29, 2018, NETGEAR announced that its board of directors had approved a special stock dividend (the “Distribution”) to NETGEAR stockholders of the 62,500,000 shares of Arlo common stock owned by NETGEAR. The Distribution was made on December 31, 2018 to all NETGEAR stockholders of record as of the close of business on December 17, 2018 (the “Distribution Record Date”). In the Distribution, each NETGEAR stockholder of record on the Distribution Record Date received 1.980295 shares of Arlo common stock for every share of NETGEAR common stock held on the Distribution Record Date. In connection with the Distribution, 62,500,000 shares of Arlo common stock held by NETGEAR were distributed to its stockholders and NETGEAR is no longer considered a related party to the Company. Independence of the Board of Directors As required under the NYSE listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of NYSE, as in effect from time to time. Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent auditors, the Board has affirmatively determined that the following six directors are independent directors under the applicable rules of the NYSE: Mses. Carter-Miller, Rothstein and Fallon and Messrs. Faison, Summers and Aggarwal. In making this determination, the Board found that none of our directors had a material or other disqualifying relationship with the Company. Mr. McRae is not considered independent because he is an executive officer of the Company. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | |
Board Leadership Structure The Board has an independent Chair, Mr. Faison, who has authority to call and preside over Board meetings, to set meeting agendas and to determine materials to be distributed to the Board, among other things. Accordingly, the Chair has substantial ability to shape the work of the Board. We believe that separation of the positions of Chair and Chief Executive Officer reinforces the independence of the Board in its oversight of our business and affairs. In addition, we have a separate chair for each committee of the Board. The chair of each committee is expected to report to the Board from time to time, or whenever so requested by the Board, on the activities of his or her committee in fulfilling that chair's responsibilities as detailed in its respective committee charter or specify any shortcomings should that be the case. In addition, we believe that having a separate Chair creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board to monitor whether or not management’s actions are in the best interests of us and our stockholders. As a result, we believe that having a separate Chair can enhance the effectiveness of the Board as a whole. Role of the Board in Risk Oversight One of the Board’s key functions is informed oversight of the Company’s risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for the Company. The Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. The Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct. The Compensation Committee of the Board (the “Compensation Committee”) assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. The Cybersecurity and Privacy Committee of the Board (the “Cybersecurity and Privacy Committee”) has the responsibility to oversee cybersecurity risk management. Typically, the applicable Board committees meet at least annually with the employees responsible for risk management in the committees’ respective areas of oversight. It is the responsibility of the committee chairs to report findings regarding material risk exposures to the Board as quickly as possible. As a result of the COVID-19 pandemic, we have and may in the future experience disruptions that could severely impact our business. Given the evolving nature of the pandemic, our senior management and our Board of Directors are communicating more frequently to monitor potential business impacts and further strategic planning. Meetings of the Board of Directors The Board met seven times (including regularly scheduled and special meetings) and acted by unanimous written consent five times during 2021. All directors attended at least 75% of the aggregate number of meetings of the Board and of the committees on which they served in 2021 during the period in which he or she served on our Board or the respective committees of our Board. In fiscal year 2021, the Company’s independent directors met four times in an executive session at which Mr. Faison presided and only independent directors were present. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 13 |
TABLE OF CONTENTS Information Regarding Committees of the Board of Directors The Board has an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, a Cybersecurity and Privacy Committee and a Strategic Committee. The following table provides membership and meeting information for fiscal year 2021 for each of the committees of the Board that existed in fiscal year 2021: | Ralph E. Faison * | | | | | | X | | | Chair | | | X | | | Chair | | | Matthew McRae | | | | | | | | | | | | | | | | | | Jocelyn E. Carter-Miller * | | | X | | | Chair | | | | | | | | | X | | | Grady K. Summers * | | | X | | | | | | | | | Chair | | | | | | Mike Pope * | | | Chair(1) | | | | | | | | | | | | | | | Prashant Aggarwal * | | | X | | | X | | | X | | | X | | | | | | Amy Rothstein * | | | X(2) | | | | | | X | | | | | | X | | | Catriona Fallon* | | | Chair(3) | | | | | | | | | | | | | | | Total meetings in 2021 | | | 8 | | | 6 | | | 4 | | | 4 | | | — | |
(1)
| Mr. Pope served as the Chairman of the Audit Committee and as a member of the Board of Directors until the expiration of his term in June 2021. Mr. Aggarwal served as interim Chairman of the Audit Committee from June 2021 to August 2021. |
(2)
| Ms. Rothstein was appointed as a member of the Audit Committee in June 2021. |
(3)
| Ms. Fallon was appointed to the Board and as Chair of the Audit Committee in August 2021. |
Below is a description of each committee of the Board. The Board has determined that each member of each committee meets the applicable NYSE rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company. The Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the Company’s corporate accounting and financial reporting processes, internal controls, independent auditor relationships, and audits of its financial statements. For this purpose, the Audit Committee performs several functions, including, among other things: overseeing management’s establishment and maintenance of adequate systems of internal controls over financial reporting; overseeing our legal and regulatory compliance programs; reviewing and assessing management's policies and processes for monitoring and controlling our financial risk exposures; overseeing our financial reporting process, including the filing of financial reports; and selecting independent auditors, evaluating their independence and performance and approving audit fees and terms. The Audit Committee is composed of five directors: Mses. Carter-Miller, Rothstein and Fallon and Messrs. Summers and Aggarwal. Ms. Rothstein was appointed as a member of the Audit Committee in June 2021. Ms. Fallon was appointed as the Chair of the Audit Committee in August 2021. The Board has adopted a written Audit Committee charter that is available to stockholders on the Company’s “Investor Relations” section of the Company’s website at www.arlo.com. The information on our website is not incorporated by reference into this Proxy Statement or our Annual Report. The Board reviews the NYSE listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Company’s Audit Committee are independent (as independence is currently defined in Section 303A.07(a) of the NYSE Listed Company Manual). TABLE OF CONTENTS | INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | |
The Board has also determined that Ms. Fallon and Mr. Aggarwal qualify as “audit committee financial experts,” as defined in applicable SEC rules. The Board made a qualitative assessment of Ms. Fallon's and Mr. Aggarwal’s level of knowledge and experience based on a number of factors, including their formal education and previous and current experience in financial roles. Report of the Audit Committee of the Board of Directors* The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2021 with management of the Company. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Catriona Fallon (Chair)
Grady K. Summers
Jocelyn E. Carter-Miller
Prashant Aggarwal
Amy Rothstein * The material in this report is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of the Company under the Exchange Act or the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 15 |
TABLE OF CONTENTS The Compensation Committee is composed of three directors: Messrs. Faison and Aggarwal and Ms. Carter-Miller. Ms. Carter-Miller is the Chair of the Compensation Committee. Our Board has determined that each of the members of our Compensation Committee are independent (as independence is currently defined in NYSE Listed Company Manual Section 303A.02 as applied to compensation committee members), and is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, and is an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Board has adopted a written Compensation Committee charter that is available to stockholders on the Company’s “Investor Relations” section of the Company’s website at www.arlo.com. The information on our website is not incorporated by reference into this Proxy Statement or our Annual Report. The Compensation Committee acts on behalf of the Board to review, adopt or recommend to the Board for adoption, and oversee the Company’s compensation strategy, policies, plans and programs. For this purpose, the Compensation Committee performs several functions, including, among other things: reviewing and recommending to the Board our executive compensation programs and arrangements; reviewing and approving (or, if it deems appropriate, making recommendations to the Board) the corporate goals and objectives relevant to the compensation of our executive officers, evaluating performance in light thereof and considering factors related to our performance and the accomplishment of our long-term business and financial goals; providing oversight of our overall compensation goals and guidelines for our employees; evaluating the competitiveness of the compensation of our executive officers and our overall compensation plans; and overseeing the administration of our compensation plans. Compensation Committee Processes and Procedures Typically, the Compensation Committee meets at least quarterly and with greater frequency, if necessary. The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with management. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer does not participate in, and is not present during, any deliberations or determinations of the Compensation Committee regarding his compensation or individual performance objectives. The charter of the Compensation Committee grants the Compensation Committee the authority to retain and obtain, at the expense of the Company, advice and assistance from a compensation consultant, legal counsel or other advisers that the Compensation Committee considers necessary to assist the Compensation Committee in the performance of its duties and responsibilities as set forth in the charter of the Compensation Committee. The Compensation Committee has direct responsibility for the oversight of the work of any advisers engaged for the purpose of advising the Compensation Committee. In particular, the Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. Under its charter, the Compensation Committee may form and delegate authority to subcommittees as appropriate, and, to the extent required by SEC and NYSE rules, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Compensation Committee, other than in-house legal counsel and certain other types of advisers, only after taking into consideration six factors, prescribed by the SEC and NYSE, that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent. The Compensation Committee engaged Compensia, Inc. (“Compensia”) as its compensation consultant. Compensia was retained to provide an assessment of the Company’s executive and director compensation programs in comparison to executive and director compensation programs at selected publicly-traded peer companies. As part of its engagement, Compensia was requested by the Compensation Committee to develop the peer group of comparative companies and to perform analyses of compensation levels for that group. Compensia developed peer TABLE OF CONTENTS | INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | |
group and related recommendations that were presented to the Compensation Committee for its consideration. During the period of January 2021 to December 2021, Compensia billed the Company approximately $51,893 for compensation consulting services. The Compensation Committee holds one or more meetings during the first quarter of the year to discuss and make recommendations to the Board for annual compensation adjustments, annual bonuses, annual equity awards, and new corporate performance objectives. However, the Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of the Company’s compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year. Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Compensation Committee by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the Compensation Committee, which determines recommendations to the Board regarding any adjustments to his compensation as well as awards to be granted. For all executives and directors as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current Company-wide compensation levels, compensation data from comparative companies, compensation surveys, and recommendations of any compensation consultant. Compensation Committee Interlocks and Insider Participation As stated above, the Compensation Committee currently consists of Messrs. Faison and Aggarwal and Ms. Carter-Miller. No member of the Compensation Committee has ever been an officer or employee of Arlo. None of our executive officers currently serves, or has served during the last completed fiscal year, on our Compensation Committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee is responsible for identifying, reviewing and evaluating candidates to serve as directors of the Company (consistent with criteria approved by the Board), reviewing and evaluating incumbent directors, selecting or recommending to the Board for selection candidates for election to the Board, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of the Board, and developing a set of corporate governance principles for the Company. The Nominating and Corporate Governance Committee is composed of three directors: Messrs. Faison and Aggarwal and Ms. Rothstein. Mr. Faison is the Chair of the Nominating and Corporate Governance Committee. Each of the members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in NYSE Listed Company Manual Section 303A.02). The Board has adopted a written Nominating and Corporate Governance Committee charter that is available to stockholders on the Company’s “Investor Relations” section of the Company’s website at www.arlo.com. The information on our website is not incorporated by reference into this Proxy Statement or our Annual Report. The functions of this committee include, among other things: recommending nominees for our Board and its committees; recommending the size and composition of our Board and its committees; reviewing and considering the Company’s position and practices on significant issues of corporate public responsibility such as workforce diversity, protection of the environment, and philanthropic and political contributions; reviewing our corporate governance guidelines, corporate charters and proposed amendments to our certificate of incorporation and bylaws; | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 17 |
TABLE OF CONTENTS annually reviewing the Company’s succession planning process for members of our executive management team, and working with our Board in evaluating potential successors for these roles; and reviewing and making recommendations to address stockholder proposals. The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of the Company’s stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee typically considers diversity (including with respect to age and gender), age, skills and such other factors as it deems appropriate, given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability. Although the Company does not have a formal policy on Board diversity, the Nominating and Corporate Governance Committee takes into account a broad range of diversity considerations when assessing director candidates, including individual backgrounds and skill sets, professional experience and other factors that contribute to our Board having an appropriate range of expertise, talents, experiences and viewpoints, and considers those diversity considerations, in view of the needs of the Board as a whole, when making decisions on director nominations. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors’ overall service to the Company during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for NYSE purposes, which determination is based upon applicable NYSE listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote. The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: c/o Arlo Technologies, Inc., 2200 Faraday Ave., Suite #150, Carlsbad, California 92008, Attn: Secretary, no later than the close of business on the 120th day nor earlier than the close of business on the 150th day prior to the first anniversary of the preceding year’s annual meeting. Submissions must include the name and address of the Company stockholder on whose behalf the submission is made; the number of Company shares that are owned beneficially by such stockholder as of the date of the submission; the full name of the proposed candidate; a description of the proposed candidate’s business experience for at least the previous five years; complete biographical information for the proposed candidate; and a description of the proposed candidate’s qualifications as a director. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. TABLE OF CONTENTS | INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | |
Cybersecurity and Privacy Committee The Cybersecurity and Privacy Committee is composed of three directors: Messrs. Faison, Summers and Aggarwal. Mr. Summers is the Chair of the Cybersecurity and Privacy Committee. Each of the members of the Cybersecurity and Privacy Committee are “independent” under the applicable rules of the NYSE. The functions of this committee include, among other things: overseeing the quality and effectiveness of the Company’s information security team, and policies and procedures with respect to its information technology systems, including but not limited to enterprise cybersecurity and privacy; reviewing and providing oversight on the policies and procedures of the Company in preparation for responding to any material incidents; reviewing periodically with management the Company’s disaster recovery capabilities; overseeing the Company’s information technology senior management team relating to budgetary priorities based, in part, on assessing risk associated with various perceived cyber-threats; annually evaluating the performance of the Cybersecurity and Privacy Committee, annually reviewing and assessing the adequacy of the charter, and recommending any proposed changes to the Board for approval; and annually reviewing the appropriateness and adequacy of the Company’s cyber-insurance coverage. The Board has adopted a written Cybersecurity and Privacy Committee charter that is available to stockholders on the Company’s “Investor Relations” section of the Company’s website at www.arlo.com. The information on our website is not incorporated by reference into this Proxy Statement or our Annual Report. The Strategic Committee is composed of three directors: Mr. Faison, Ms. Carter-Miller and Ms. Rothstein. Mr. Faison is the Chair of the Strategic Committee. Each of the members of the Strategic Committee are “independent” under the applicable rules of the NYSE. The Strategic Committee did not meet during the fiscal year. The functions of this committee include, among other things: evaluating and making recommendations to the Board with respect to the overall strategic transaction and financing strategy of the Company; and evaluating and working with management to negotiate the terms and conditions of any strategic transaction or of any financings and making recommendations to the Board with respect to such potential transactions and other alternative transactions. The Board has adopted a written Strategic Committee charter that is available to stockholders on the Company’s “Investor Relations” section of the Company’s website at www.arlo.com. The information on our website is not incorporated by reference into this Proxy Statement or our Annual Report. Communications With the Board of Directors Stockholders or interested parties who wish to communicate with the Board may do so by sending written communications addressed to the Secretary of Arlo Technologies, Inc., 2200 Faraday Ave., Suite #150, Carlsbad, California 92008. These communications will be reviewed by the Secretary of Arlo who will determine whether the communication is appropriate for presentation to the Board or the relevant director. The purpose of this screening is to allow the Board to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and hostile communications). | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 19 |
TABLE OF CONTENTS Code of Business Conduct and Ethics The Board has adopted a code of business conduct and ethics (“Code of Ethics”) which applies to all of the Company’s directors, officers and employees, including the principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The Code of Ethics is available upon written request to the Company’s General Counsel and is located on the “Investor Relations” section of Company’s website at www.arlo.com. If the Company amends or grants any waiver from a provision of its Code of Ethics that applies to its executive officers, the Company will publicly disclose such amendment or waiver on its website and as required by applicable law. The information on the Company’s website is not incorporated by reference into this Proxy Statement or the Company’s Annual Report. Corporate Governance Guidelines The Board documented the governance practices followed by the Company by adopting corporate governance guidelines to assure that the Board will have the necessary authority and practices in place to review and evaluate the Company’s business operations as needed and to make decisions that are independent of the Company’s management. The corporate governance guidelines are also intended to align the interests of directors and management with those of the Company’s stockholders. The corporate governance guidelines set forth the practices the Board intends to follow with respect to board composition and selection including diversity, board meetings and involvement of senior management, Chief Executive Officer performance evaluation and succession planning, and board committees and compensation. The corporate governance guidelines include a Majority Voting in Uncontested Elections Policy pursuant to which any nominee for director is required to submit an offer of resignation for consideration by the Nominating and Corporate Governance Committee if such nominee for director (in an uncontested election) receives a greater number of “Withhold” votes than votes “For” such election. In such case, the Nominating and Corporate Governance Committee will then consider all of the relevant facts and circumstances and recommend to the Board the action to be taken with respect to such offer of resignation. The Board will then act on the Nominating and Corporate Governance Committee’s recommendation. Promptly following the Board’s decision, we would disclose that decision and an explanation of such decision in a filing with the SEC or a press release. The corporate governance guidelines, as well as the charters for each committee of the Board, may be viewed on the “Investor Relations” section of the Company’s website at www.arlo.com. The information on the Company’s website is not incorporated by reference into this Proxy Statement or the Company’s Annual Report. Insider Trading Compliance Program and Prohibition on Hedging The Board has adopted an Insider Trading Compliance Program that prohibits the Company’s executive officers, all other employees and non-employee directors as well as their family members from engaging in transactions in publicly-traded options, such as puts and calls, and other derivative securities with respect to Company securities. In addition, this prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding Company securities, or pledging Company securities as collateral for loans or otherwise. The Company has appointed Brian Busse, the Company’s General Counsel and Corporate Secretary, as the Insider Trading Compliance Officer. In such capacity, Mr. Busse is generally responsible for the administration of our Insider Trading Compliance Program. The Insider Trading Compliance Program may be viewed on the “Investor Relations” section of the Company’s website at www.arlo.com. The information on the Company’s website is not incorporated by reference into this Proxy Statement or the Company’s Annual Report. TABLE OF CONTENTS | | The following table sets forth certain information regarding the ownership of the Company’s common stock as of March 5, 2021 by: (i) each director; (ii) each of our named executive officers; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than 5% of its common stock.The following table is based upon information supplied by officers, directors and principal stockholders and Schedules 13G or 13D filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 81,230,653 shares outstanding on March 5, 2021, adjusted as required by rules promulgated by the SEC. Unless otherwise indicated, the address for the following stockholders is: c/o Arlo Technologies, Inc., 3030 Orchard Parkway, San Jose, California 95134.
| Greater than 5% stockholders | | | | | | | | | | | | | | | BlackRock, Inc.(1) | | | 11,886,016 | | | — | | | 11,886,016 | | | 14.6% | | | Vanguard Group, Inc.(2) | | | 5,151,121 | | | — | | | 5,151,121 | | | 6.3% | | | PRIMECAP Management Company(3) | | | 5,008,840 | | | — | | | 5,008,840 | | | 6.2% | | | Directors and Named Executive Officers | | | | | | | | | | | | | | | Matthew McRae | | | 244,468 | | | 325,106 | | | 569,574 | | | * | | | Jocelyn E. Carter-Miller | | | 41,417 | | | — | | | 41,417 | | | * | | | Ralph E. Faison | | | 176,401 | | | — | | | 176,401 | | | * | | | Grady K. Summers | | | 55,968 | | | — | | | 55,968 | | | * | | | Mike Pope | | | 18,927 | | | — | | | 18,927 | | | * | | | Prashant Aggarwal | | | 18,927 | | | — | | | 18,927 | | | * | | | Amy Rothstein | | | — | | | 3,333 | | | 3,333 | | | * | | | Gordon Mattingly | | | 10,271 | | | 254,535 | | | 264,806 | | | * | | | Brian Busse | | | 35,951 | | | 124,241 | | | 160,192 | | | * | | | All current executive officers and directors as a group (9 persons) | | | 602,330 | | | 707,215 | | | 1,309,545 | | | 1.6% | |
(1)
| Information regarding BlackRock, Inc. (“BlackRock”) is based solely on a Schedule 13G/A filed by BlackRock with the SEC on January 26, 2021. BlackRock’s address is 55 East 52nd Street, New York, NY 10055. The Schedule 13G/A indicates that BlackRock has sole voting power with respect to 11,802,850 shares of common stock and sole dispositive power with respect to all of its shares of common stock. |
(2)
| Information regarding Vanguard Group, Inc. (“Vanguard”) is based solely on a Schedule 13G/A filed by Vanguard with the SEC on February 8, 2021. Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. The Schedule 13G/A indicates that Vanguard has no sole voting power with respect to its shares of common stock and sole dispositive power with respect to 5,060,296 shares of common stock. |
TABLE OF CONTENTS
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT PROPOSAL TWO
| |
(3)
| Information regarding PRIMECAP Management Company (“PMC”) is based solely on a Schedule 13G/A filed by PMC with the SEC on February 12, 2021. PMC’s address is 177 E. Colorado Blvd., 11th Floor, Pasadena, California 91105. The Schedule 13G/A indicates that PMC has sole voting power with respect to 4,594,830 shares of common stock and sole dispositive power with respect to all of its shares of common stock. |
(4)
| The SEC deems a person to have beneficial ownership of all shares that he or she has the right to acquire within 60 days. The shares indicated represent shares underlying stock options exercisable and the restricted stock units (the “RSUs”) vesting within 60 days of March 5, 2021. |
| | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 25
|
TABLE OF CONTENTS
| | EXECUTIVE COMPENSATION
| | RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The Audit Committee has selected PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. PricewaterhouseCoopers LLP has audited the Company’s financial statements since 2018. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions. The charter of the Audit Committee requires the Audit Committee to submit its selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to the Company’s stockholders for their non-binding ratification. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders. The affirmative vote of the holders of a majority of the shares present or represented by proxy and entitled to vote on the matter at the Annual Meeting will be required to ratify the selection of PricewaterhouseCoopers LLP. The following table represents aggregate professional services fees billed by PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2021 and 2020: | Audit Fees | | | $1,701,958 | | | $1,801,477 | | | Tax Fees | | | 67,601 | | | 90,339 | | | All Other Fees | | | 900 | | | 2,700 | | | Total Fees | | | $1,770,459 | | | $1,894,516 | |
Audit Fees. Consist of fees billed for professional services by PricewaterhouseCoopers LLP for audit and quarterly review of our financial statements and related services that are normally provided in connection with statutory and regulatory filings or engagements. Tax Fees. Consists of fees billed for professional services including assistance regarding federal, state and international tax compliance and related services, as well as professional services for tax advice and tax planning. All Other Fees. Consists of fees billed for use of an online disclosure checklist and accounting research tool provided by PricewaterhouseCoopers LLP. All fees described above were pre-approved by our Audit Committee. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 21 |
TABLE OF CONTENTS Pre-Approval Policies and Procedures Our Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, PricewaterhouseCoopers LLP. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of our Audit Committee’s approval of the scope of the engagement of the independent auditor or on an individual, explicit, case-by-case basis before the independent auditor is engaged to provide each service. The pre-approval of services may be delegated to one or more of our Audit Committee members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. Our Audit Committee has determined that the rendering of services other than audit services by PricewaterhouseCoopers LLP is compatible with maintaining the principal accountant’s independence. | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL TWO. | |
TABLE OF CONTENTS | | | | | | INFORMATION ABOUT OUR EXECUTIVE OFFICERS | | | | | |
Each of our executive officers serves at the discretion of the Board. The determination as to which of our employees qualify as executive officers was made by the Board in accordance with the rules of the SEC. Biographical information for our executive officers as of the date of this Proxy Statement is set forth below. The following table identifies our current executive officers, their age, and their respective offices and positions. | Matthew McRae | | | 48 | | | Chief Executive Officer and Director | | | Gordon Mattingly | | | 51 | | | Chief Financial Officer | | | Brian Busse | | | 53 | | | General Counsel and Corporate Secretary | |
Matthew McRae. Matthew McRae has served as our Chief Executive Officer since February 2018 and as a member of our Board since August 2018. For additional information regarding Mr. McRae’s industry experience and education, see above under “Directors Continuing in Office Until the 2024 Annual Meeting.” Gordon Mattingly. Gordon Mattingly has served as our Chief Financial Officer since June 2020. From July 2018 to June 2020, Mr. Mattingly served as our Senior Vice President, Finance. From 2003 through June 2018, Mr. Mattingly held various financial roles with NETGEAR and its affiliates, most recently serving as Vice President, Financial Planning & Analysis from August 2011 through June 2018. Before joining NETGEAR, Mr. Mattingly held various European finance positions within U.S. technology companies such as RealNetworks, Inc., International Business Machines Corporation and Tivoli Systems Inc. Mr. Mattingly began his career in finance with the London audit firm of Mazars Group, where he specialized in audits at Lloyd’s of London and qualified as a member of the Institute of Chartered Accountants in England and Wales. Mr. Mattingly also qualified in 2013 as a member of the Chartered Institute of Taxation. Mr. Mattingly received a BSc in Economics and Accountancy from the University of Southampton. Brian Busse. Brian Busse has served as our General Counsel and Corporate Secretary since July 2018. Previously, Mr. Busse was NETGEAR’s Vice President Intellectual Property & Litigation where he was responsible for overseeing NETGEAR’s worldwide litigation, intellectual property, privacy and licensing matters. Before joining NETGEAR in September 2009, Mr. Busse served as Counsel in the Intellectual Property Litigation Department of O’Melveny & Myers LLP in Menlo Park, California beginning in December 2008 where he represented public and private technology companies in a wide range of intellectual property litigation matters, including all aspects of patent litigation, including trial, discovery, law and motion, and claim construction. Mr. Busse began practicing law with the New York firm of Skadden, Arps, Slate, Meagher & Flom LLP, advising clients on various areas of litigation. Mr. Busse holds a J.D. from The University of Texas at Austin School of Law, an M.S. and Ph.D. in Physics from Oregon State University, and a B.S. in Physics from Virginia Tech. Mr. Busse is admitted to practice law in California and New York. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 23 |
TABLE OF CONTENTS | | | | | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | | | | | |
The following table sets forth certain information regarding the ownership of the Company’s common stock as of March 4, 2022 by: (i) each director; (ii) each of our named executive officers; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than 5% of its common stock. The following table is based upon information supplied by officers, directors and principal stockholders and Schedules 13G or 13D filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 85,813,891 shares outstanding on March 4, 2022, adjusted as required by rules promulgated by the SEC. Unless otherwise indicated, the address for the following stockholders is: c/o Arlo Technologies, Inc., 2200 Faraday Ave., Suite #150, Carlsbad, California 92008. | Greater than 5% stockholders | | | | | | | | | | | | | | | BlackRock, Inc.(1) | | | 12,581,668 | | | — | | | 12,581,668 | | | 14.7% | | | Vanguard Group, Inc.(2) | | | 6,026,244 | | | — | | | 6,026,244 | | | 7.0% | | | PRIMECAP Management Company(3) | | | 5,279,310 | | | — | | | 5,279,310 | | | 6.2% | | | Directors and Named Executive Officers | | | | | | | | | | | | | | | Matthew B. McRae | | | 578,688 | | | 348,214 | | | 926,902 | | | 1.1% | | | Jocelyn E. Carter-Miller | | | 86,706 | | | — | | | 86,706 | | | * | | | Ralph E. Faison | | | 251,690 | | | — | | | 251,690 | | | * | | | Grady K. Summers | | | 134,736 | | | — | | | 134,736 | | | * | | | Prashant Aggarwal | | | 97,356 | | | — | | | 97,356 | | | * | | | Amy M. Rothstein | | | 68,965 | | | 6,666 | | | 75,631 | | | * | | | Gordon Mattingly | | | 133,907 | | | 264,096 | | | 398,003 | | | * | | | Brian Busse | | | 139,785 | | | 133,800 | | | 273,585 | | | * | | | Catriona M. Fallon | | | — | | | — | | | — | | | * | | | All current executive officers and directors as a group (9 persons) | | | 1,491,833 | | | 752,776 | | | 2,244,609 | | | 2.6% | |
(1)
| Information regarding BlackRock, Inc. (“BlackRock”) is based solely on a Schedule 13G/A filed by BlackRock with the SEC on January 27, 2022. BlackRock’s address is 55 East 52nd Street, New York, NY 10055. The Schedule 13G/A indicates that BlackRock has sole voting power with respect to 12,536,348 shares of common stock and sole dispositive power with respect to all of its shares of common stock. |
(2)
| Information regarding Vanguard Group, Inc. (“Vanguard”) is based solely on a Schedule 13G/A filed by Vanguard with the SEC on February 9, 2022. Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. The Schedule 13G/A indicates that Vanguard has no sole voting power with respect to its shares of common stock and sole dispositive power with respect to 5,847,763 shares of common stock. |
TABLE OF CONTENTS | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |
Our named executive officers(3)
| Information regarding PRIMECAP Management Company (“NEOs”PMC”) foris based solely on a Schedule 13G/A filed by PMC with the year ended December 31, 2020, which consistSEC on February 10, 2022. PMC’s address is 177 E. Colorado Blvd., 11th Floor, Pasadena, California 91105. The Schedule 13G/A indicates that PMC has sole voting power with respect to 4,767,600 shares of our principal executive officercommon stock and our two other most highly compensated executive officers assole dispositive power with respect to all of December 31, 2020its shares of common stock. |
(4)
| The SEC deems a person to have beneficial ownership of all shares that he or she has the right to acquire within 60 days. The shares indicated represent shares underlying stock options exercisable and the restricted stock units (the “RSUs”) vesting within 60 days of March 4, 2022. |
| | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 25 |
TABLE OF CONTENTS Our named executive officers (“NEOs”) for the year ended December 31, 2021, which consist of our principal executive officer and our two other most highly compensated executive officers as of December 31, 2021 are: Matthew McRae, our Chief Executive Officer; • | Gordon Mattingly, our Chief Financial Officer(1): andGordon Mattingly, our Chief Financial Officer; and Brian Busse, our General Counsel and Corporate Secretary. |
Brian Busse, our General Counsel.
(1)
| Mr. Mattingly was appointed as the Company's Chief Financial Officer, effective June 15, 2020, following the retirement of Christine Gorjanc. |
We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and have elected to comply with the reduced compensation disclosure requirements available to emerging growth companies under the JOBS Act. To assist our stockholders in understanding our executive compensation-related decisions, this section includes supplemental narratives to describe the material terms of our NEO’s 2021 compensation. Highlights of 2021 Compensation Actions We made no increases to base salary or target performance bonuses. We granted stock awards consisting of RSUs and performance-vesting RSUs; 79% of our CEO’s stock awards and 50% of our other named executive officer’s stock awards were delivered as performance-vesting RSUs, based on the grant date fair value as reported in the Summary Compensation Table. We granted two types of performance-vesting RSUs: RSUs that vest based on achievement of a financial metric (“PSUs”) and RSUs that vest based on a relative total stockholder return measure (“TSR MPSUs”); we granted a third type of performance-vesting RSU to our CEO that vests based on achievement of stock price performance targets (“CEO MPSUs”). 93% of our CEO’s total direct compensation was ‘at risk’ dependent on Company performance in the form of annual performance bonus earned and stock awards granted, as reported in the Summary Compensation Table. We paid annual performance bonuses in the form of fully-vested RSUs based on achievement of corporate goals. Summary Compensation Table The following table sets forth certain information regarding the compensation of our named executive officers for services rendered in all capacities to Arlo for the years indicated. | Matthew McRae
Chief Executive Officer | | | 2021 | | | $750,000 | | | $8,954,297 | | | $750,000 | | | $3,726 | | | $10,458,023 | | | 2020 | | | $778,846 | | | $3,343,921 | | | $378,546 | | | $4,338 | | | $4,505,651 | | | Gordon Mattingly
Chief Financial Officer | | | 2021 | | | $383,000 | | | $1,486,717 | | | $268,100 | | | $2,526 | | | $2,140,343 | | | 2020 | | | $379,462 | | | $1,695,723 | | | $113,436 | | | $3,138 | | | $2,191,759 | | | Brian Busse
General Counsel
and Corporate Secretary | | | 2021 | | | $350,000 | | | $715,821 | | | $175,000 | | | $2,452 | | | $1,243,273 | | | 2020 | | | $350,235 | | | $1,048,469 | | | $85,130 | | | $3,138 | | | $1,486,972 | |
(1)
| The amounts reported in this column represent the aggregate grant date fair value of the RSUs, PSUs and TSR MPSUs and the CEO MPSUs (each as defined below under “Equity-Based Incentives”) granted to our named executive officers for services renderedduring 2021, as determined in all capacitiesaccordance with the share-based payment accounting guidance under FASB ASC 718 (without regard to Arlo forestimates of forfeitures). The grant date fair value of the years indicated. | Matthew McRae
Chief Executive Officer | | | 2020 | | | $778,846(7) | | | $3,343,921 | | | $— | | | $378,546 | | | $4,338 | | | $4,505,651 | | | 2019 | | | $750,000(10) | | | $1,471,966 | | | $— | | | $187,500 | | | $5,200 | | | $2,414,666 | | | Gordon Mattingly
Chief Financial Officer | | | 2020 | | | $379,462(8) | | | $1,695,723 | | | $— | | | $113,436 | | | $3,138 | | | $2,191,759 | | | Brian Busse
General Counsel | | | 2020 | | | $350,235(9) | | | $1,048,469 | | | $— | | | $85,130 | | | $3,138 | | | $1,486,972 | | | 2019 | | | $331,000(10) | | | $574,469 | | | $— | | | $41,376 | | | $4,000 | | | $950,845 | |
(1)
| The amounts reported in this column represent the aggregate value of the RSUs, PSUs and MPSUs (each2021 PSUs reflected in the table above is based on the probable outcome of the applicable performance conditions, as defined below) granted to our named executive officers during 2020 and 2019, based on the closing fair market value of our common stock on the grant date, as determined in accordance with the share-based payment accounting guidance under FASB ASC 718 (without regard to estimates of forfeitures). The fair value of the PSUs on the grant date was $743,093, $376,827 and $232,993 for Messrs. McRae, Mattingly and Busse, respectively. The maximum number of shares that the NEOs has earned, as of December 31, 2020, is 120% of the target number of the PSUs. The corresponding fair value of the PSUs, calculated using the closing price of the Company's stock on December 31, 2020, is $2.5 million, $1.3 million and $794,898 for Messrs. McRae, Mattingly and Busse, respectively. The fair value of the MPSUs on the grant date was $1.1 million, $565,240 and $349,490 for Messrs, McRae, Mattingly and Busse, respectively. The maximum number of shares that the NEOs can earn is 200% of the target number of the MPSUs. The maximum potential value of the MPSUs, calculated using the closing price of the Company's stock on December 31, 2020, was $4.2 million, $2.1 million and $1.3 million for Messrs. McRae, Mattingly and Busse, respectively. Refer to Note 13 in the Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2020 for the assumptions used to estimate fair value at the grant date and the “Equity-Based Incentive” section below for details about the PSUs and MPSUs grants.
|
(2)
| The amounts set forth in these columns are also subject to a Clawback Policy adopted by us in August 2018 (the “Clawback Policy”) that applies to our executive officers and any other employees as designated by the Board. Pursuant to the Clawback Policy, if (i) we are required to restate our financial statements, (ii) in the reasonable judgment of the Board or Compensation Committee, the financial statements as so restated would have resulted in less compensation paid to the executive officer if such information had been known at the time the compensation had originally been calculated or determined, and (iii) the executive officer’s intentional misconduct, fraud and/or embezzlement led, in whole or in part, to the restatement of the financial statements, then the Board or Compensation Committee, in its sole discretion and to the extent permitted by law, may require such executive officer to reimburse us for any bonus or other incentive-based or equity-based compensation (or in the case of equity-based compensation, return equity to us) for the amount that such original compensation exceeds the compensation as recalculated for the restated financial statements. |
(3)
| The amount for 2020 represents bonus amounts earned under our 2020 executive bonus plan, as applicable, and paid in the form of fully-vested RSUs in February 2021. |
(4)
| The amount for 2019 represents bonus amounts earned under our 2019 executive bonus plan, as applicable, and paid in the form of fully-vested RSUs in February 2020. |
(5)
| Consists of matching contributions under Arlo's 401(k) plan that were earned in 2019 and 2020 and paid in January 2020 and 2021, respectively. Refer to the “401(k) Plan” section below for more details.
|
TABLE OF CONTENTS (6)
| Mr. McRae received a benefits waiver of $1,200 during 2019determined under FASB ASC 718, which was $1,129,132, $335,458 and $161,515 for Messrs. McRae, Mattingly and Busse, respectively. The maximum number of 2021 PSUs that the NEOs earned based on actual performance during 2021, as of December 31, 2021, is 120% of the target number of the PSUs. The corresponding grant date fair value of such PSUs, calculated assuming achievement of the maximum level of performance under the applicable performance conditions, would be $1,354,958, $402,550 and $193,818 for Messrs. McRae, Mattingly and Busse, respectively. The grant date fair value of the TSR MPSUs reflected in the table above is calculated using a Monte Carlo simulation model based on the probability of achieving the market-based performance goals, as determined under FASB ASC 718, which was $1,616,774, $480,334 and $231,269 for Messrs. McRae, Mattingly and Busse, respectively. The maximum number of TSR MPSUs that the NEOs can earn is 200% of the target number of the TSR MPSUs. The corresponding grant date fair value of the TSR MPSUs, calculating assuming achievement of the maximum level of performance under the applicable performance conditions would be $2,258,264, $670,916 and $323,030 for Messrs. McRae, Mattingly and Busse, respectively. Refer to Note 12 in the Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2021 for the assumptions used to estimate fair value at the grant date and the “Equity-Based Incentive” section below for details about the PSUs and TSR MPSUs grants. (2)
| In addition to the RSUs, PSUs and TSR MPSUs described in (i), in 2021 we also granted to our CEO restricted stock units that vest based on the Company's achievement of certain stock price performance targets and the CEO's continued employment through the vesting dates (“CEO MPSUs”). The CEO MPSUs will vest as described below under “Equity-Based Incentives”. Refer to “Outstanding Equity Awards at Fiscal Year-End” section below for more details. The grant date fair value of the CEO MPSU reflected in the table above is calculated using a Monte Carlo simulation model based on the probability of achieving the market-based performance goals, as determined under FASB ASC 718, which was $3,950,126, and the grant date fair value of the CEO MPSUs, calculated assuming achievement of the maximum level of performance was $4,757,728. On December 1, 2021 and December 29, 2021, the stock price performance targets for the first and second tranches were achieved, respectively. |
(3)
| The amount for 2021 represents amounts earned under our 2021 executive bonus plan, which were paid in the form of fully-vested RSUs in March 2022. Each of Messrs. McRae, Mattingly, and Busse have a target bonus equal to 100%, 70%, and 50% of their respective annual base salary. |
(4)
| Consists of matching contributions under Arlo's 401(k) plan that were earned in 2020 and 2021 and paid in January 2021 and 2022, respectively. Refer to the “401(k) Plan” section below for more details. |
(5)
| Mr. McRae received a benefits waiver of $1,200 during 2020 and 2021, respectively. Refer to the “Perquisites Health, Welfare and Retirement Benefits” section below for more details. |
(7)
| The amount for 2020 is calculated based on an annual base salary of $750,000 and 27 pay periods. |
(8)
| The amount for 2020 is calculated based on an annual base salary of $345,000 prior to June 15, 2020 and an annual base salary of $383,000 effective on and after June 15, 2020, and the calculation is based on 27 pay periods. |
(9)
| The amount for 2020 is calculated based on an annual base salary of $331,000 prior to September 1, 2020 and an annual base salary of $350,000 effective on and after September 1, 2020, and the calculation is based on 27 pay periods. |
(10)
| The amount for 2019 was calculated based on 26 pay periods. |
Compensation Program Overview Our compensation program for executive officers is designed to encourage our management team to continually achieve our short-term and long-term corporate objectives while effectively managing business risks and challenges. We provide what we believe is a competitive total compensation package to our management team through a combination of base salary, an annual performance-based bonus and long-term equity-based incentives. The compensation of our named executive officers, including our chief executive officer, is generally reviewed by our Compensation Committee and approved by the independent members of the Board. Our compensation program for executive officers is designed to encourage our management team to continually achieve our short-term and long-term corporate objectives while effectively managing business risks and challenges. We provide what we believe is a competitive total compensation package to our management team through a combination of base salary, an annual performance-based bonus and long-term equity-based incentives.
The compensation of our named executive officers, including our chief executive officer, is generally reviewed and approved by our Compensation Committee (or if it deems appropriate, our Compensation Committee will make recommendations to the full Board).
Annual Base Salary As of December 31, 2020, theThe 2021 annual base salaries for our named executive officers are provided below.below:
| Matthew McRae | | | $750,000 | | | Gordon Mattingly | | | $383,000 | | | Brian Busse | | | $350,000 | |
Performance Bonus Compensation In addition to base salaries, our named executive officers are eligible to receive annual performance-based equity bonuses, which are designed to provide appropriate incentives to our executives to achieve defined annual corporate and individual goals and to reward our executives for achievement towards these goals. The annual performance-based bonus that each named executive officer is eligible to receive is generally based on the extent to which we achieve the corporate goals the Board or our Compensation Committee establishes each year, and the extent to which the executive achieves related individual goals.year. Based on achieving the performance objectives,goals, Messrs. McRae, Mattingly and Busse have the opportunity to earn a target annual performance bonus equal to 100%, 70% and 50% of their annual base salary, respectively. For 2021, our named executive officer performance bonuses were dependent upon meeting a target operating income measure for 2021. If we overachieved our target measure, the maximum payout any named executive officer could receive was 120% of target bonus. The 2020independent members of the Board set the target measure at a level it felt was rigorous, but achievable with effort and represented a meaningful increase from our level of achievement in 2020. We are not disclosing the target goal information because we believe that disclosure would result in competitive harm as this information would provide competitors with insights into our business operations that would be harmful to us. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 27 |
TABLE OF CONTENTS During 2021 our team successfully navigated considerable global supply chain challenges to deliver strong results across our entire business in Q4, including crossing over to our non-GAAP operating profit for the first time in our history as a public company. After assessing our 2021 performance, the independent members of the Board determined that we had achieved our operating income target and accordingly, each of our named executive officers received a performance bonus equal to their target bonus. The 2021 amounts reflected as Non-Equity Incentive Plan Compensation in the Summary Compensation Table for our named executive officers reflect the value of the bonuses earned for 20202021 performance under Arlo’s 20202021 executive bonus plan. These bonuses were paid in the form of fully-vested restricted stock units issued in March 2022. Equity-Based IncentiveIncentives Our equity-based incentive awards are designed to align our interests and those of our stockholders with those of our employees and Board of Directors, including our named executive officers. The Compensation Committee is responsible for approving equity grants. In April 2020,During 2021, we granted each of our named executive officers RSUs and performance-vesting RSUs as reflected in the table below. Specifically, in February 2021, we granted to Messrs. McRae, Mattingly and Busse a total of 2.0 million549,456, 163,241, and 78,597 shares of stock awards, respectively, consisting of RSUs (50% of the grant), performance-based RSUs (“PSUs”) (25% of the grant) and market-based performance RSU (“TSR MPSUs”) (25% of the grant). In July 2021, to provide further retention and incentive opportunity that would deliver value only upon achievement of performance goals, we granted to Mr. McRae additional performance-vesting RSUs that vest based on the Company's achievement of sustained stock price performance targets and Mr. McRae’s continued employment over a four year performance period (“CEO MPSUs”).
| Matthew McRae | | | 274,728 | | | 137,364 | | | 137,364 | | | 757,600 | | | Gordon Mattingly | | | 81,621 | | | 40,810 | | | 40,810 | | | — | | | Brian Busse | | | 39,299 | | | 19,649 | | | 19,649 | | | — | |
The RSUs will vest in threefour equal annual installments during the period that begins on the RSU grant date. The PSUs willare eligible to vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a cash balance milestone is achieved as of December 31, 20202021. If such milestone is achieved.achieved, the PSUs will vest in four equal annual installments measured from the PSU grant date, subject to continued service. The maximum number of shares that NEOs can earn under the PSUs is 120% of the target number of the PSUs. If the minimum threshold (89% of target) is achieved, the minimum number of shares that NEOs can earn is 75% of the target number of the PSUs. In February 2021,January 2022, the Board certified that we had significantly achieved our cash balance milestone and accordingly, each of our NEOs became eligible to earn 120% of target PSUs if the 120%remaining four-year service vesting requirement is met. The independent members of the Board set the cash balance milestone at a target level was achieved. that it felt would be challenging based upon our historical performance, internal forecasts at the time and industry-wide conditions. We do not disclose our cash balance milestone because we believe that disclosure would result in competitive harm as this information would provide competitors with insights into our business operations that would be harmful to us. The TSR MPSUs willare eligible to vest only at the end of the three-yearfour-year period that begins on the TSR MPSU grant date, based on performance of the Company's common stocktotal shareholder return (“TSR”) relative to the Russell 2000 Index (“the Benchmark”(the “Benchmark”) during the | | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 27
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TABLE OF CONTENTS
three-year period from the grant date. A positive 3.3x or negative 2.5x multiplier will be appliedsuch four-year period. The target number of PSUs are eligible to vest upon TSR equal to the total shareholder returns (“TSR”), such that theBenchmark. The number of shares vestedPSUs eligible to vest will increase by 3.3% or decrease by 2.5% of the target numbers,PSUs for each 1% of positive or negative TSR relative to the Benchmark. In the event the Company's common stock performanceTSR is more than thirty percentage points below negative 30% relative to the Benchmark, no sharesPSUs will be vested.eligible to vest. In no event will the number of shares vestedPSUs eligible to vest exceed 200% of the target PSUs. Additionally, if the Company’s TSR is negative, the maximum number of PSUs eligible to vest may not exceed 100% of the target PSUs, irrespective of performance exceeding the Benchmark.
The CEO MPSUs are eligible to vest based on the Company's achievement of certain average daily closing prices per share of the Company's common stock, as reported on the NYSE, for any thirty consecutive trading days (the “Price Targets”) during a four year performance period. There are five Price Targets, each of which, if achieved, result in one-fifth the target CEO MPSUs becoming eligible to vest: $7.57 per share, $8.69 per share, $9.97 per share, TABLE OF CONTENTS $11.44 per share, $13.20 per share. To the extent that tranche. Based ona Price Target is not achieved during the four year performance through December 31, 2020,period, the corresponding portion of the CEO MPSUs will be forfeited. Upon achievement of a Price Target, the corresponding CEO MPSUs will become eligible to vest in accordance with a time-vesting period measured quarterly over the four years measured from the date of grant of the CEO MPSUs. The Price Targets were set at rigorous levels that the Board determined if achieved, would deliver significant appreciation to our shareholders. Specifically the targets represented premiums ranging from approximately 120% to more than 200% of stock price on the outstandingdate of grant and, importantly, required such prices to be sustained for a 30 trading day period. On December 1 and 29, 2021, the first and second Price Targets were achieved, respectively, and accordingly, 40% of the CEO MPSUs are expectedbecame eligible to vest.vest over the four year time-vesting period, subject to Mr. McRae’s continued services. In addition to the terms set forth above, each option has such terms as set forth in each individual award agreement and otherwise is covered by the applicable terms and conditionsClawback Policy
Each of our 2018 Equity Incentive Plan (the “2018 Plan”). In addition, as of December 31, 2020, Mr. McRae forfeited all options that had been grantednamed executive officer’s equity awards and performance-bonus awards are subject to a Clawback Policy adopted by us in August 2018 (the “Clawback Policy”). Pursuant to the Clawback Policy, if (i) we are required to restate our financial statements, (ii) in connection with our IPO, or the IPO Options. A substantial portionreasonable judgment of the IPO Options were granted subjectBoard or Compensation Committee, the financial statements as so restated would have resulted in less compensation paid to performance vesting conditions. A portion of eachthe executive officer if such information had been known at the time the compensation had originally been calculated or determined, and (iii) the executive officer’s intentional misconduct, fraud and/or embezzlement led, in whole or in part, to the restatement of the performance-vesting IPO Options were forfeitedfinancial statements, then the Board or Compensation Committee, in 2020its sole discretion and to the extent permitted by law, may require such executive officer to reimburse us for any bonus or other incentive-based or equity-based compensation (or in connection with the failurecase of certain performance conditionsequity-based compensation, return equity to occur. Specifically, in 2020 Mr. McRae forfeited options to purchase 1.4 million shares, representing 75.0% ofus) for the performance-vesting IPO Options.amount that such original compensation exceeds the compensation as recalculated for the restated financial statements.
Agreements with Our Named Executive Officers We have entered into confirmatory employment letters with each of Messrs. McRae, Mattingly and Busse. The employment letters generally memorialize the executive officer’s base salary, target annual bonus, and participation in our employee benefit plans and programs. In addition, the severance terms described below are set forth in change in control and severance agreements we entered into with each such executive officer. In April 2020, the Board approved entering into revisedmaintain change in control and severance agreements with each of our NEOs that provide for severance protections, as described below under “Potential Payments upon Termination or Change in Control.” Potential Payments Upon Termination or Change of Control Regardless of the manner in which a named executive officers other than our chiefofficer’s service terminates, the named executive officer is entitled to receive amounts earned during his or her term of service, including unpaid salary and the following description includes such revised terms. unused vacation, as applicable. Upon a termination without cause or resignation with good reason that does not occur during the one month prior to or 12 months following a change in control, Messrs. McRae, Mattingly and Busse would be entitled to (1) cash severance equal to the executive officer’s annual base salary and, for Mr. McRae, an additional amount equal to his target annual bonus, (2) 12 months of premiums for health benefits continuation and (3) accelerated vesting of any unvested equity awards that would have vested during the 12 months following the termination date for Mr. McRae and accelerated vesting of any unvested time-based equity awards that would have vested during the 12 months following the termination date for Messrs. Mattingly and Busse. Upon a termination without cause or resignation with good reason that occurs during the one month prior to or 12 months following a change in control, Messrs. McRae, Mattingly and Busse would be entitled to (1) cash severance equal to a multiple (2 times for Mr. McRae and 1 times for Messrs. Mattingly and Busse) of the sum of the executive officer’s annual base salary and target annual bonus, (2) a number of months (24 for Mr. McRae and 12 for Messrs. Mattingly and Busse) of premiums for health benefits continuation and (3) vesting of all outstanding, unvested equity awards for Mr. McRae (in the case of CEO MPSUs and TSR PSUs, only to the extent the performance goals for such awards are determined achieved as of such change in control) and vesting of all outstanding, unvested time-based equity awards, PSUs and TSR PSUs (only to the extent the performance goals are determined achieved as of such change in control) for Messrs. Mattingly and Busse. Severance will be conditioned upon the execution and non-revocation of a release of claims. The agreements do not provide for any excise tax gross ups. If the merger-related payments or benefits of Messrs. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 29 |
TABLE OF CONTENTS McRae, Mattingly and Busse are subject to the 20% excise tax under Section 4999 of the Code, then the executive officer will either receive all such payments and benefits subject to the excise tax or such payments and benefits will be reduced so that the excise tax does not apply, whichever approach yields the best after-tax outcome for the executive officer. Potential Payments Upon Termination or Change of Control
Regardless of the manner in which a named executive officer’s service terminates, the named executive officer is entitled to receive amounts earned during his or her term of service, including unpaid salary and unused vacation, as applicable. In addition, certain of our named executive officers are entitled to receive certain benefits upon our termination of their employment without cause or their resignation for good reason, as provided above under “Agreements with Our Named Executive Officers.”
Each of our named executive officers holds stock options and RSUsequity awards that were granted pursuant to the 2018 Plan. A description of the termination and change in control provisions in the 2018 Plan applicable to the stock options and RSUsequity awards granted to our named executive officers is provided below under “Equity Benefit Plans” and “Outstanding Equity Awards at Fiscal Year-End” and above under “Equity-Based Incentive Awards.” TABLE OF CONTENTS
Outstanding Equity Awards at Fiscal Year-End The following table sets forth certain information regarding equity awards granted to our named executive officers that were outstanding as of December 31, 2020.2021. Prior to our IPO, our employees participated in NETGEAR’s various stock-based plans and as a result outstanding equity awards for NETGEAR stock held by our named executive officers as of December 31, 20202021 are included in the table below. | | | | | | | | Option Awards | | Stock Awards | | | | | | | | | Option Awards | | Stock Awards | | | Name | | Issuer
(1) | | Grant
date | | Number of
securities
underlying
unexercised
options (#)
exercisable | | Number of
securities
underlying
unexercised
options (#)
unexercisable
(2) | | Equity
incentive
plan
awards:
number of
securities
underlying
unexercised
unearned
options (#) | | Option
exercise
price ($) | | Option
expiration
date | | Number
of shares
or units
of stock
that
have not
vested
(#) | | Market
value of
shares or
units of
stock that
have not
vested ($)
(3) | | Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not vested
(#) | | Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units or
other
rights
that have
not
vested
($) (3) | | Name | | Issuer
(1) | | Grant
date | | Number of
securities
underlying
unexercised
options
(#)
exercisable | | Number of
securities
underlying
unexercised
options (#)
unexercisable
(2) | | Equity
incentive
plan
awards:
number of
securities
underlying
unexercised
unearned
options (#) | | Option
exercise
price ($) | | Option
expiration
date | | Number
of shares
or units
of stock
that
have not
vested (#) | | Market
value of
shares or
units of
stock that
have not
vested
($) (3) | | Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not vested
(#) | | Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units or
other
rights
that have
not
vested
($) (3) | | | Matthew McRae | | | NTGR | | 10/19/2017(5) | | — | | 4,139 | | — | | td9.23 | | 10/19/2027 | | 2,500(4) | | $101,575 | | — | | — | | Matthew McRae | | | ARLO | | 8/8/2019(6) | | — | | — | | — | | — | | — | | 71,420(6) | | $749,196 | | 107,130(6) | | td,123,794 | | | ARLO | | 10/19/2017(5) | | 31,661 | | 8,332 | | — | | td0.09 | | 10/19/2027 | | 4,951(4) | | $38,568 | | — | | — | | | ARLO | | 4/30/2020(7) | | — | | — | | — | | — | | — | | 361,605(7) | | $3,793,236 | | 488,164(7) | | $5,120,836 | | | ARLO | | 8/8/2019(6) | | — | | — | | — | | — | | — | | 142,840(6) | | td,112,724 | | 107,130(6) | | $834,543 | | | ARLO | | 2/5/2021(8) | | — | | — | | — | | — | | — | | 274,728(8) | | td,881,897 | | 302,201(8) | | $3,170,086 | | | ARLO | | 4/30/2020(7) | | — | | — | | — | | — | | — | | 813,606(7) | | $6,337,991 | | 271,202(7) | | td,112,664 | | | ARLO | | 7/28/2021(9) | | — | | — | | — | | — | | — | | — | | — | | 738,660(9) | | $7,748,543 | | | Gordon Mattingly | | | ARLO | | 4/20/2017(5) | | — | | — | | — | | — | | — | | 693(4) | | $5,398 | | — | | — | | Gordon Mattingly | | | ARLO | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 693(4) | | $7,270 | | — | | — | | | NTGR | | 4/20/2017(5) | | — | | — | | — | | — | | — | | 350(4) | | $14,221 | | — | | — | | | NTGR | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 350(4) | | $10,224 | | — | | — | | | ARLO | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 1,386(4) | | $10,797 | | — | | — | | | ARLO | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 3,961(4) | | $41,551 | | — | | — | | | NTGR | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 700(4) | | $28,441 | | — | | — | | | NTGR | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 2,000(4) | | $58,420 | | — | | — | | | ARLO | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 7,921(4) | | $61,705 | | — | | — | | | ARLO | | 8/2/2018 | | — | | 6,834 | | — | | td6.00 | | 8/2/2028 | | — | | — | | — | | — | | | NTGR | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 4,000(4) | | $162,520 | | — | | — | | | ARLO | | 4/19/2019 | | — | | — | | — | | — | | — | | 150,000(4) | | td,573,500 | | — | | — | | | ARLO | | 8/2/2018 | | 23,916 | | 17,084 | | — | | td6.00 | | 8/2/2028 | | — | | — | | — | | — | | | ARLO | | 4/30/2020(7) | | — | | — | | — | | — | | — | | 183,372(7) | | td,923,572 | | 247,550(7) | | td,596,804 | | | ARLO | | 4/19/2019 | | — | | — | | — | | — | | — | | 225,000(4) | | td,752,750 | | — | | — | | | ARLO | | 2/5/2021(8) | | — | | — | | — | | — | | — | | 81,621(8) | | $856,204 | | 89,782(8) | | $941,813 | | | ARLO | | 4/30/2020(7) | | — | | — | | — | | — | | — | | 412,585(7) | | $3,214,037 | | 137,528(7) | | td,071,343 | | Brian Busse | | | ARLO | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 693(4) | | $7,270 | | — | | — | | | Brian Busse | | | ARLO | | 4/22/2014(5) | | 699 | | — | | — | | $6.90 | | 4/22/2024 | | — | | — | | — | | — | | | NTGR | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 350(4) | | $10,224 | | — | | — | | | ARLO | | 4/20/2017(5) | | — | | — | | — | | — | | — | | 693(4) | | $5,398 | | — | | — | | | ARLO | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 3,961(4) | | $41,551 | | — | | — | | | NTGR | | 4/20/2017(5) | | — | | — | | — | | — | | — | | 350(4) | | $14,221 | | — | | — | | | NTGR | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 2,000(4) | | $58,420 | | — | | — | | | ARLO | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 1,386(4) | | $10,797 | | — | | — | | | ARLO | | 8/2/2018 | | — | | 6,834 | | — | | td6.00 | | 8/2/2028 | | — | | — | | — | | — | | | NTGR | | 1/25/2018(5) | | — | | — | | — | | — | | — | | 700(4) | | $28,441 | | — | | — | | | ARLO | | 8/8/2019(6) | | — | | — | | — | | — | | — | | 27,874(6) | | $292,398 | | 41,810(6) | | $438,587 | | | ARLO | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 7,921(4) | | $61,705 | | — | | — | | | ARLO | | 4/30/2020(7) | | — | | — | | — | | — | | — | | 113,379(7) | | td,189,346 | | 153,061(7) | | td,605,612 | | | NTGR | | 4/20/2018(5) | | — | | — | | — | | — | | — | | 4,000(4) | | $162,520 | | — | | — | | | ARLO | | 2/5/2021(8) | | — | | — | | — | | — | | — | | 39,299(8) | | $412,247 | | 43,228(8) | | $453,460 | | | ARLO | | 8/2/2018 | | 23,916 | | 17,084 | | — | | td6.00 | | 8/2/2028 | | — | | — | | — | | — | | | | ARLO | | 8/8/2019(6) | | — | | — | | — | | — | | — | | 55,747(6) | | $434,269 | | 41,810(6) | | $325,700 | | | | ARLO | | 4/30/2020(7) | | — | | — | | — | | — | | — | | 255,102(7) | | td,987,245 | | 85,034(7) | | $662,415 | | |
(1)
| Information disclosed in the above table, reflects equity awards outstanding as of December 31, 20202021 and reflects the issuer of the equity awards. On December 31, 2018, in connection with the Distribution, per the terms of the employee matters agreement between Arlo and NETGEAR (the “Employee Matters Agreement”), certain outstanding awards granted to Arlo employees and NETGEAR employees under NETGEAR’s equity incentive plans were adjusted into Arlo awards under Arlo’s equity incentive plans. Following the Distribution, the NETGEAR and Arlo equity awards are subject to substantially the same terms and vesting conditions that applied to the original NETGEAR equity awards immediately prior to the Distribution. |
(2)
| 25% of the shares subject to these options vested or will vest twelve months after the grant date, and 1/48 of the shares subject to these options vested or will vest each month thereafter, subject to the optionee continuing to be a service provider through such dates. |
TABLE OF CONTENTS (3)
| The amounts for NETGEAR RSUs were calculated as the product of the closing price of NETGEAR’s common stock on the Nasdaq Stock Market on December 31, 20202021 (the last market trading day in 2020)2021), which was $40.63,$29.21, and the number of shares pursuant to the applicable NETGEAR RSU award. The amounts for our RSUs were calculated as the product of the closing price of our common stock on the NYSE on December 31, 20202021 (the last market trading day in 2020)2021), which was $7.79,$10.49, and the number of shares pursuant to the applicable Arlo RSU award. |
(4)
| These RSUs will vest in four equal annual installments with the first installment vesting on the last day of the grant month and the subsequent installments vesting on the annual anniversary of the first vesting date, subject to the individual continuing to be a service provider through such dates. |
(5)
| Our named executive officers who were serving at the time of the Distribution received the Arlo equity awards in connection with the Distribution on December 31, 2018 as consideration for the NETGEAR award listed directly above in the table. The “grant date” for the Arlo awards granted in the Distribution reflect the grant date of the NETGEAR equity award under which it was distributed. |
| | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 29
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TABLE OF CONTENTS
(6)
| InRepresents RSUs and TSR MPSUs granted in August 2019, we granted to Messrs. McRae and Busse a total 0.6 million shares of stock awards consisting of2019. The RSUs (50% ofwill vest in three equal annual installments during the grant), PSUs (25% ofperiod that begins on the grant) and MPSUs (25% of the grant).RSU grant date. The revenue milestone was not achieved for the year ended December 31, 2019, hence the PSUs were cancelled on January 31, 2020. TheTSR MPSUs will vest at the end of the three-year performance period that begins on the TSR MPSU grant date based on performance of the Company's common stock relative to the Russell 2000 Index (“the Benchmark”)Benchmark during the three-year period from the grant date.date; the amount of shares listed in the table above represents the target number of shares. As of December 31, 2020,2021, the unvested shares of RSUs and target TSR MPSUs granted in August 2019 were 142,84071,420 and 107,130,214,260, respectively, for Mr. McRae and 55,74727,874 and 41,810,83,620, respectively, for Mr. Busse. |
(7)
| InRepresents RSUs, PSUs and TSR MPSUs granted in April 2020, we granted to Messrs. McRae, Mattingly and Busse a total of 2.0 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant), and MPSUs (25% of the grant).2020. The RSUs will vest in three equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a cash balance milestone as of December 31, 2020 is achieved. Asachieved; as of December 31, 2020, 120% of the outstanding PSUs were expected to vest.vest based on achievement of such milestone. The TSR MPSUs will vest at the end of the three-year performance period that begins on the TSR MPSU grant date based on performance of the Company's common stock relative to the Benchmark during the three-year period from the grant date. The number reflected in the table above is the maximum number of shares that NEOs can earn under the PSUs. As of December 31, 2021, the unvested shares of RSUs, PSUs (at maximum) and TSR MPSUs (target) granted in April 2020 were 361,605, 260,354, and 542,404, respectively, for Mr. McRae, and 183,372, 132,027, and 275,056, respectively, for Mr. Mattingly and 113,379, 81,633, and 170,068, respectively, for Mr. Busse. |
(8)
| Represents RSUs, PSUs and TSR MPSUs granted in February 2021. The RSUs will vest in four equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in four equal annual installments during the period that begins on the PSU grant date based on the extent to which a cash balance milestone as of December 31, 2021 is achieved; as of December 31, 2021, 120% of the outstanding PSUs were expected to vest based on achievement of such milestone. The TSR MPSUs will vest at the end of the four-year period that begins on the TSR MPSU grant date based on performance of the Company's common stock relative to the Benchmark during the four-year period from the grant date. The number reflected in the table above is the target number of shares that NEOs can earn under the PSUs. As of December 31, 2021, the unvested shares of RSUs, PSUs and TSR MPSUs granted in April 2020February 2021 were 542,404, 271,202,274,728, 197,804, and 271,202,274,728, respectively, for Mr. McRae, and 275,057, 137,528,81,621, 58,766, and 137,528,81,620, respectively, for Mr. Mattingly and 170,068, 85,034,39,299, 28,295, and 85,034,39,298, respectively, for Mr. Busse. |
(9)
| Represents the CEO MPSUs granted to Mr. McRae in July 2021. The CEO MPSUs will be eligible to vest over four year service vesting schedule measured in substantially equal quarterly installments that began on the CEO MPSUs' grant date in five equal tranches based on the Company's achievement of certain average daily closing prices per share of the Company's common stock, as reported on the NYSE, for any 30 consecutive trading days on or prior to July 28, 2025 (the “Performance Period End Date”), with the first tranche target at $7.57 per share, with the second tranche target at $8.69 per share, with the third tranche target at $9.97 per share, with the fourth tranche target $11.44 per share and with the fifth tranche target at $13.20 per share. To the extent that the stock price of the tranche does not achieve its corresponding price target prior to the Performance Period End Date, the CEO MPSUs expire or cancel. On December 1 and 29, 2021, the stock price performance targets for the first and second tranches were achieved, respectively. As of December 31, 2021, the unvested shares of CEO MPSU granted in July 2021 was 738,660 shares. |
Option Repricings We did not engage in any repricings or other material modifications of our named executive officers’ outstanding equity awards during the fiscal year ended December 31, 2020.2021. Perquisites Health, Welfare and Retirement Benefits Our named executive officers are currently eligible to participate in our employee benefit plans, including our medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans, in each case on the same basis as our other employees. In addition, we provide a cash subsidy, which is $50 per pay period, to any employee, including a named executive officer, who does not elect coverage under our company-sponsored medical insurance plans. We also provide a 401(k) plan to our employees, including our named executive officers, as discussed in the section below entitled “401(k) Plan.” We do not provide any other perquisites or personal benefits to our named executive officers. We do, however, pay the premiums for term life insurance and disability insurance for all of our employees, including our current named executive officers. 401(k) Plan We currently maintain a defined contribution employee retirement plan (“401(k) plan”) for our employees. Our named executive officers are eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Code. The plan permits us to | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 31 |
TABLE OF CONTENTS make discretionary contributions, including matching contributions and discretionary profit sharing contributions. In fiscal year 2020,2021, we matched 50% of the contributions for employees that remain active with the Company through the end of the fiscal year, up to a maximum of $2,000. The 401(k) plan currently does not offer the ability to invest in our securities. Securities Authorized for Issuance Under Equity Compensation Plans The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2020.2021. | Plan Category | | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) | | Weighted average
exercise price of
outstanding
options, warrants
and rights
(b) | | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in (a))
(c) (1) | | Plan Category | | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) | | Weighted average
exercise price of
outstanding
options, warrants
and rights
(b) | | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in (a))
(c) (1) | | | Equity compensation plans approved by security holders | | 13,997,023(2) | | $9.72 | | 4,237,890 | | Equity compensation plans approved by security holders | | 14,760,021(2) | | $10.55 | | 3,326,505 | | | Equity compensation plans not approved by security holders | | — | | $— | | — | | Equity compensation plans not approved by security holders | | | | | | 497,889 | | | Total | | 13,997,023 | | $9.72 | | 4,237,890 | | Total | | 14,760,021 | | $10.55 | | 3,824,394 | |
(1)
| Includes 3,113,4142,509,314 shares available for future issuance under the 2018 Plan and 1,124,4761,315,080 shares available for future issuance under our 2018 Employee Stock Purchase Plan (the “2018 ESPP”). |
(2)
| Includes shares subject to outstanding restricted stock units, which restricted stock units do not carry an exercise price. Accordingly, the weighted average exercise price of outstanding options, warrants and rights (column (b)) excludes the grant of restricted stock units. |
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Compensation Plan Information 2018 Equity Incentive Plan Our Board adopted and our stockholders approved the 2018 Plan, which became effective on August 1, 2018 and has terms substantially as set forth below. Purposes
The purpose of the 2018 Plan is to attract and retain the best available personnel; to provide additional incentive to our employees, directors, and consultants and employees and consultants of our parent, subsidiaries, or affiliates; and to promote the success of our business.
Shares Subject to Our 2018 Plan2018.
The number of shares of our common stock initially available for issuance under our 2018 Plan was 7.5 million shares of our common stock. On December 31, 2018, 6,822,787 shares of our common stock were added to the 2018 Plan reserve as Adjusted Awards (as defined in the 2018 Plan). In addition, the number of shares of our common stock reserved under our 2018 Plan will also include an annual increase on the first day of each fiscal year beginning on January 1, 2019 equal to the lesser of (1) four percent (4%) of our outstanding shares of common stock as of the last day of the immediately preceding fiscal year and (2) such number of shares as our board of directors may determine; provided, however, that such determination under clause (2) will be made no later than the last day of the immediately preceding fiscal year. 2,969,890, 3,031,005, 3,173,178, and 3,173,1783,377,816 shares of our common stock were added to the 2018 Plan reserve on January 1, 2019, 2020, 2021 and 2021,2022, respectively. The shares of our common stock covered by any award that is forfeited, terminates, expires, lapses without being exercised or settles for cash will again become available for issuance under the 2018 Plan. With respect to any stock appreciation rights, the net shares issued will cease to be available under the 2018 Plan. With respect to any award, if the exercise price and/or tax withholding obligations are satisfied by delivering shares to us (by actual delivery or attestation), only the net shares delivered or attested to will cease to be available under the 2018 Plan. With respect to any award, if the exercise price and/or tax withholding obligations are satisfied by withholding shares otherwise issuable pursuant to the award, the shares that are withheld to satisfy those obligations will again become available for issuance under the 2018 Plan.
Limitations
The 2018 Plan contains certain annual award limits, and the maximum number of shares and/or cash that may be issued to any one individual (other than any non-employee director) under the 2018 Plan in any fiscal year is set forth below:year. | Stock Options
| | | 3,000,000 shares
| | | Stock Appreciation Rights
| | | 3,000,000 shares
| | | Restricted Stock
| | | 2,000,000 shares
| | | Restricted Stock Units
| | | 2,000,000 shares
| | | Performance Shares
| | | 2,000,000 shares
| | | Performance Units
| | | $30,000,000
| |
Under the 2018 Plan, no outside director may be granted, in any fiscal year, share-based awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) greater than $500,000, increased to $1,000,000 in the fiscal year of his or her initial service as an outside director, with each of the foregoing limits increased by $25,000 on January 1 of each year during the term of the 2018 Plan. | | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 31
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Administration
The 2018 Plan is administered by our Compensation Committee (or such other committee of our Board as our Board may from time to time designate). Among other things, our Compensation Committee has the authority to select individuals to whom awards may be granted, determine the types of awards (as well as the number of shares of common stock to be covered by each such award) granted, and determine and modify the terms and conditions of any such awards.
Eligibility
Awards may be granted to our directors, employees, and consultants or employees and consultants of any of our parents, subsidiaries, or affiliates. Incentive stock options may be granted only to persons who as of the time of grant are our employees or employees of any of our parents or subsidiaries, and, with respect to adjusted awards, in accordance with the terms of the Employee Matters Agreement, which is defined above.
Stock Options Each option granted under the 2018 Plan is evidenced by an award agreement specifying the number of shares subject to the option and the other terms and conditions of the option. The exercise price per share of each option may not be less than the fair market value of a share of our common stock on the date of grant (except if granted pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code). However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all of our classes of stock or any of our parent or subsidiary corporations must have an exercise price per share equal to at least 110% of the fair market value of a share on the date of grant. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000. TABLE OF CONTENTS Options are exercisable at such times and under such conditions as the administrator determines and as set forth in the award agreement. Unless otherwise provided in the award agreement, an option subject to only time-based vesting will become fully vested upon termination of a participant’s service for retirement, disability, or death. The 2018 Plan provides that the administrator will determine the acceptable form(s) of consideration for exercising an option. An option will be deemed exercised when we receive the notice of exercise and full payment for the shares to be exercised, together with applicable tax withholdings. The maximum term of an option is specified in the award agreement, provided that options will have a maximum term of no more than ten years, and provided further that an incentive stock option granted to a 10% stockholder must have a term not exceeding five years. The administrator determines and specifies in each award agreement, solely in its discretion, the post-termination exercise period applicable to an option following a participant’s terminating service with us or our applicable parent, subsidiary, or affiliate. In the absence of such a determination, a participant (or such other appropriate person) will be able to exercise the vested portion of an option for: (1) three months following the participant’s termination for reasons other than retirement, death, or disability, and (2) 12 months following the participant’s termination due to retirement, death, or disability. In no event, however, will an option be exercisable beyond its term. Restricted Stock Appreciation RightsUnits ARSUs, are stock appreciation right gives a participant the right to receive the appreciation in the fair market value of our common stock between the date of grant of the award and the date of its exercise. Each stock appreciation right grantedawards under the 2018 Plan is evidenced by an award agreement specifying the exercise price, the expiration date, the conditions of exercise, and other terms and conditions of the award. Unless otherwise provided in the award agreement, a stock appreciation right subject to only time-based vesting will become fully vested upon termination of a participant’s service for retirement, death or disability.
The exercise price per share of each stock appreciation right may not be less than the fair market value of a share on the date of grant. Upon exercise of a stock appreciation right, the holder of the award will be entitled to receive a payment determined by multiplying: (1) the difference between the fair market value of a share on the date of exercise and the exercise price by (2) the number of exercised stock appreciation rights. We may pay the
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appreciation in cash, in shares of equivalent value, or in some combination thereof. The term of a stock appreciation right will be no more than ten years from the date of grant. The terms and conditions relating to the period of post-termination exercise for options (described above) also apply to stock appreciation rights.
Restricted Stock Awards
Awards of restricted stock are rights to acquire or purchase shares of our common stock that generally are subject to transferability and forfeitability restrictions for a specified period. Each award of restricted stock is evidenced by an award agreement specifying the period during which the transfer of shares is subject to restriction (which, in the administrator’s sole discretion, may be based on the passage of time, the achievement of target levels of performance, the occurrence of other events the administrator determines, or a combination thereof), if any, the number of shares granted, and other terms and conditions of the award. Shares of restricted stock generally will be held in escrow until the end of the period of restriction applicable to such shares. Unless otherwise provided in the award agreement, a restricted stock award subject to only time-based vesting will become fully vested upon termination of a participant’s service for disability or death.
Unless otherwise provided by the administrator, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed as of the date set forth in the award agreement. Unless the administrator provides otherwise, participants holding shares of restricted stock have the right to vote the shares and to receive any dividends paid with respect to such shares. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed.
Restricted Stock Units
The administrator may grant RSUs, which represent a right to receive cash or shares of our common stock at a future date. Each RSU granted under the 2018 Plan is evidenced by an award agreement specifying the number of shares subject to the award, the form of payout, and other terms and conditions of the award.
RSUs result in a payment to a participant only if the vesting criteria the administrator establishes are achieved or the awards otherwise vest. Unless otherwise provided in the award agreement, RSUs subject to only time-based vesting will become fully vested upon termination of a participant’s service for retirement, disability or death. After the grant of RSUs, the administrator, in its sole discretion, may reduce or waive any restrictions (including vesting criteria) with respect to such RSUs. A participant will forfeit any unearned RSUs as of the date set forth in the award agreement. Payment of earned RSUs will be made as soon as practicable after the date set forth in the award agreement, and, in the administrator’s sole discretion, will be settled in cash, shares of our common stock, or in a combination of both (which will have an aggregate fair market value equal to the earned RSUs). Performance Units and Performance Shares Performance units and performance shares are awardsRSUs that result in a payment to a participant only if specified performance objectives or other vesting provisions are achieved during a specified performance period. Each award of performance units or shares is evidenced by an award agreement specifying the performance period during which achievement of applicable performance objectives or other vesting criteria will be measured and other terms and conditions of the award. Each performance unit has an initial value established by the administrator on or before the grant date. Each performance share has an initial value equal to the fair market value of a share on the grant date. The administrator sets performance objectives or other vesting provisions, which may be based upon achieving company-wide, divisional, business unit or individual goals (including continued employment or service), applicable federal or state securities laws, or any other basis the administrator determines in its discretion. After the applicable performance period has ended, the holder of performance units or shares will be entitled to receive a payout of the number of performance units or shares earned by the participant over the performance period. The administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or shares. Payment of earned performance units or shares will be made as soon as practicable after the end of the applicable performance period, and, in the administrator’s sole discretion, | | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 33
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will be made in cash, in shares of equivalent value, or any combination of both (which will have an aggregate fair market value equal to the earned performance units or shares at the close of the applicable performance period). A participant will forfeit all performance units or shares that are unearned or unvested as of the date set forth in the award agreement. Transferability of Awards
Unless otherwise determined by the administrator, awards generally are not transferable other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the participant, only by the participant.
Dissolution or Liquidation
In the event of our proposed dissolution or liquidation, the administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to the completion of such proposed action to the extent the award has not been previously exercised.
Change in Control The 2018 Plan provides that, in the event of a “change in control” (as defined in the 2018 Plan), each award will be treated as the administrator determines, including that: (1) awards may be assumed or substantially equivalent awards will be substituted by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments to the number and kind of shares and prices; (2) upon written notice to a participant, that the participant’s awards will terminate upon or immediately before the completion of such change in control; | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 33 |
TABLE OF CONTENTS (3) outstanding awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an award will lapse, in whole or in part, before or upon completion of such change in control, and, to the extent the administrator determines, terminate upon or immediately before the effectiveness of such merger or change in control; (4) (a) awards will be terminated in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date the transaction occurs, or (b) awards will be replaced with other rights or property the administrator selects in its sole discretion; or (5) any combination of the foregoing. The administrator will not be required to treat all awards similarly in the transaction. An award will not be considered assumed or substituted for unless: (1) the replacement award is the same type as the replaced award, (2) the replacement award has a value equal to the value of the replaced award as determined by the Compensation Committee in its discretion, (3) if the replaced award was equity-based, the replacement award relates to our publicly traded securities or the publicly traded securities of the surviving entity following the change in control, (4) the replacement award contains terms relating to vesting that are substantially identical to those of the replaced award and (5) if the terms and conditions of the replacement award are not less favorable to the participant than the terms and conditions of the replaced award as of the date of the change in control. If the successor corporation does not assume or substitute for the award, options and stock appreciation rights will become fully vested and exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, for awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all other terms and conditions will be deemed met. In addition, if an option or stock appreciation right is not assumed or substituted for, the administrator will notify the participant that the option or stock appreciation right will be exercisable for a period of time the administrator determines in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period. With respect to awards granted to our non-employee directors, in the event of a change in control, the participant will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and restricted stock units will lapse, and, for awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all other terms and conditions met. TABLE OF CONTENTS
Termination or Amendment The 2018 Plan will automatically terminate ten years from August 1, 2018, unless terminated earlier by our Board. The administrator may amend, alter, suspend or terminate the 2018 Plan at any time, provided that no amendment may be made without stockholder approval to the extent approval is necessary or desirable to comply with any applicable laws. In addition, no amendment, alteration, suspension or termination may materially impair the rights of any participant unless mutually agreed in writing otherwise between the participant and the administrator. Adjusted Awards With respect to any adjusted awards, to the extent that the terms of the 2018 Plan are inconsistent with the terms of the adjusted award, the terms of the adjusted award are governed by the applicable NETGEAR plan under which the adjusted award was granted and the award agreement pursuant to which the adjusted award was granted. 2018 Employee Stock Purchase Plan Our Board has adopted and our stockholders have approved the 2018 ESPP, which became effective upon the completion of our initial public offering in August 2018 and has terms substantially as set forth below. Purpose2018.
The purpose of our 2018 ESPP is to provideprovides our eligible employees with an opportunity to purchase shares of our common stock through accumulated payroll deductions. We believe that allowing our employees to participate in the 2018 ESPP provides them with a further incentive to ensure our success and accomplish our corporate goals. Shares Available for Issuance
On August 1, 2018, in connection with the IPO, we reserved a total of 1,500,000 shares of common stock for issuance under the 2018 ESPP. As of December 31, 2020, 1,124,4762021, 1,315,080 shares of common stock were available for issuance under the 2018 ESPP. The number of shares of our common stock available for issuance under our 2018 ESPP also includes an annual increase on the first day of each fiscal year beginning on January 1, 2019, in an amount equal to the least of: (1) 1,000,000 shares, (2) one percent (1%) of the outstanding shares of our common stock on the last day TABLE OF CONTENTS of the immediately preceding fiscal year and (3) such number of shares as our board of directors may determine; provided, however, that such determination under clause (3) will be made no later than the last day of the immediately preceding fiscal year. On January 1, 2021,2022, a total of 793,294844,454 shares of common stock were automatically added to our 2018 ESPP. Administration
Our Board or a committee designated by our Board (referred to herein as the “administrator”) administers the 2018 ESPP. All questions of interpretation or application of the 2018 ESPP are determined by the administrator and its decisions are final and binding upon all participants.
Eligibility Generally, each of our common law employees whose customary employment with us is at least twenty (20) hours per week and more than five (5) months in a calendar year is eligible to participate in the 2018 ESPP; except that no employee will be granted an option under the 2018 ESPP (1) to the extent that, immediately after the grant, such employee would own or have the right to purchase five percent (5%) or more of the total combined voting power or value of all classes of our capital stock or any of our parents or subsidiaries, or (2) to the extent that his or her rights to purchase stock under all of our 2018 ESPP accrues at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. Offering PeriodPeriods and Purchases Unless the administrator determines otherwise, each offering period during which an option granted pursuant to the 2018 ESPP may be exercised will have a duration of approximately six (6) months. No offering period will commence prior to the date of the distribution. | | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 35
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Purchase Price
Unless and until the administrator determines otherwise, the per share purchase price is eighty-five percent (85%) of the fair market value of a share of common stock on the offering date or the exercise date, whichever is lower; provided, however, that the purchase price may be adjusted by the administrator. Exercise and Payment of the Purchase Right; Payroll Deductions
The number of whole shares of common stock that a participant may purchase in each offering period is determined by dividing the total amount of payroll deductions withheld from the participant’s compensation during that offering period by the purchase price. Non-Transferability
Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares under the 2018 ESPP may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or by designation of a beneficiary) by the participant.
Withdrawal
Generally, a participant may withdraw all but not less than all of his or her payroll deductions credited to his or her account and not yet used to exercise his or her option under the 2018 ESPP for an offering period at any time by written notice prior to the last trading day of the offering period without affecting his or her eligibility to participate in future offering periods. Once a participant withdraws from an offering period, however, that participant may not participate again in the same offering period. To participate in a subsequent offering period, the participant must deliver a new subscription agreement to us.
Termination of EmploymentEmployment/Change in Control Upon termination of a participant’s employment for any reason, including death or disability, he or she shall be deemed to have elected to withdraw from the 2018 ESPP and any payroll deductions credited to the participant’s account (to the extent not yet used to purchase shares of our common stock) shall be returned to the participant or, in the case of death, to the person or persons entitled thereto as provided in the 2018 ESPP, and such participant’s option will automatically be terminated. Adjustments upon Changes in Capitalization, Dissolution or Liquidation, or Change in Control
Changes in Capitalization. Subject to any required action by our stockholders, in the event of any stock split, reverse stock split, stock dividend, combination or reclassification of our common stock, or any other change in the number of shares of our common stock effected without receipt of consideration by us (provided, however, that conversion of any of our convertible securities shall not be deemed to have been “effected without receipt of consideration”), proportionate adjustments will be made to the purchase price per share and the number and kind of shares of common stock covered by each option under the 2018 ESPP (which has not yet been exercised), as well as to the number and kind of the shares available for purchase under the 2018 ESPP and the per-person numerical limits on the number of shares that may be purchased under the 2018 ESPP.
Dissolution or Liquidation. In the event of our proposed dissolution or liquidation, the offering period then in progress will be shortened by setting a new exercise date on which such offering period will end, unless provided otherwise by the administrator. The new exercise date will be prior to the dissolution or liquidation. If the administrator shortens any offering period then in progress, the administrator will notify each participant in writing, at least ten (10) business days prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the participant’s option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period.
Change in Control. In the event of a “change in control,” as defined in the 2018 ESPP, each option under the 2018 ESPP will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of such successor corporation. In the event the successor corporation refuses to assume or substitute for the options, any offering periods then in progress will be shortened by setting a new exercise date on which such offering period will end. The new exercise date will occur prior to the change of control. Further, the administrator
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will notify each participant in writing, at least ten (10) business days prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the participant’s option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period. Amendment or Termination of the 2018 ESPP. Our 2018 ESPP will automatically terminate ten years from August 1, 2018, unless terminated earlier by the administrator. The administrator may, at any time and for any reason, terminate, amend or suspend the 2018 ESPP, including the term of any offering period then in progress. Generally, no such termination or amendment can adversely affect options previously granted and stockholder approval will be sought for certain changes as required by applicable law.
Participation in 2018 ESPP
Participation in Arlo’s 2018 ESPP is voluntary and dependent on each eligible employee’s election to participate and his or her determination as to the level of payroll deductions. An eligible employee can participate in the 2018 ESPP by completing a subscription agreement authorizing payroll deductions and filing it with our payroll office prior to the applicable offering date.
Director Compensation Under our non-employee director compensation policy (the “Director Compensation Policy”), our non-employee directors are entitled to receive the following compensation components. Cash Retainer. Our non-employee directors are entitled to receive a $32,000 annual retainer (which was reduced from $40,000 in April 2020).retainer. The Chair of the Board and members and Chairs of each committee of the Board also receive the additional annual retainers described below: Chair. The Chair of the Board will receive an additional annual retainer of $50,000. Audit Committee. Each member (including the Chair) of the Audit Committee will receive an annual retainer of $10,000, and the Chair will receive an additional annual retainer of $12,000. | | | Arlo Technologies, Inc. Notice of 2022 Annual Meeting and Proxy Statement 35 |
TABLE OF CONTENTS Compensation Committee. Each member (including the Chair) of the Compensation Committee will receive an annual retainer of $7,500, and the Chair will receive an additional annual retainer of $7,500. Nominating and Corporate Governance Committee. Each member (including the Chair) of the Nominating and Corporate Governance Committee will receive an annual retainer of $5,000, and the Chair will receive an additional annual retainer of $5,000. Cybersecurity Committee. Each member (including the Chair) of the Cybersecurity Committee will receive an annual retainer of $10,000, and the Chair will receive an additional annual retainer of $10,000. All retainers are paid on a quarterly basis following the end of each quarter and are prorated, as needed, for partial service during such period. Annual Grant. In addition, on an annual basis, each non-employee director who continues to serve as a non-employee director following each annual meeting of stockholders of the Company will receive an annual grant of a number of RSUs equal to $180,000 divided by the NYSE closing price of our common stock on the date of such annual stockholder meeting (rounded down to the nearest whole share), which will become fully vested on the date of the following year’s annual stockholder meeting. Initial RSU Grant. Upon joining the Board, each non-employee director will be eligible to receive an initial grant of RSUs (the “Initial Grant”) equal to $180,000, (which was reduced from $360,000 in April 2020), with such dollar amount pro-rated for the date of such initial election or appointment in relation to the date of the previous annual meeting of stockholders, divided by the NYSE closing price of our common stock on the date of grant (rounded down to the nearest whole share), which will become fully vested on the date of the next annual stockholder meeting. Continuing Education. In order to encourage continuing director education, we will also establish a budget for externalreimburse certain director education of $7,000 over a two-year period for each director. Directors serving on multiple boards | | | Arlo Technologies, Inc. Notice of 2021 Annual Meeting and Proxy Statement 37
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will be encouraged to obtain pro rata reimbursement of their director education expenses from each corporation that they serve. Biennially, we will arrange aprovide continuing education session for the Board, as a whole, to attend in connection with one of its regularly scheduled meetings.
Travel Expenses. Our non-employee directors will beare entitled to reimbursement for travel and other related expenses incurred in connection with their attendance at meetings of our Board and the committees thereof. The following table details the compensation of our non-employee directors for the 20202021 fiscal year. | Name | | Fees Earned or
Paid in Cash ($)(1) | | Stock Awards
($)(2) | | Option Awards
($) | | Total ($) | | Name | | Fees Earned or
Paid in Cash ($) (1) | | Stock Awards
($) (2) | | Option Awards
($) | | Total ($) | | | Ralph E. Faison(3) | | $107,259 | | $180,000 | | — | | $287,259 | | Ralph E. Faison(3) | | $109,500 | | $179,994 | | — | | $289,494 | | | Jocelyn E. Carter-Miller(3) | | $56,262 | | $180,000 | | — | | $236,262 | | Jocelyn E. Carter-Miller(3) | | $57,000 | | $179,994 | | — | | $236,994 | | | Grady K. Summers(3) | | $61,119 | | $180,000 | | — | | $241,119 | | Grady K. Summers(3) | | $62,000 | | $179,994 | | — | | $241,994 | | | Mike Pope(3) | | $53,688 | | $180,000 | | — | | $233,688 | | Michael W. Pope(4) | | $27,000 | | $— | | — | | $27,000 | | | Prashant Aggarwal(3) | | $60,724 | | $180,000 | | — | | $240,724 | | Prashant Aggarwal(3) | | $66,099 | | $179,994 | | — | | $246,093 | | | Amy M. Rothstein(3) | | $36,495 | | $180,000 | | — | | $216,495 | | Amy M. Rothstein(3) | | $42,082 | | $179,994 | | — | | $222,076 | | | | Catriona M. Fallon(3)(5) | | $20,250 | | $154,846 | | — | | $175,096 | |
(1)
| The fees earned by our non-employee directors in 20202021 represent the annual cash retainers discussed above, a portion of which were paid in 2021.2022. |
(2)
| The amounts included in the “Stock Awards” column represent the full grant date value of awards granted in 20202021 calculated utilizing the provisions of the authoritative guidance for stock compensation FASB ASC718ASC 718 (without regards to estimates for forfeitures). 68,965 shares subject to RSUs were granted toIn June 2021, each of our then-serving non-employee directors received an annual RSU grant to be issued 25,280 shares. In August 2021, Ms. Fallon received an initial RSU grant to be issued 26,790 shares in July 2020.connection with her appointment to the Board. Refer to Note 1312 in the Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 20202021 for the assumptions used to estimate fair value at the grant date. |
(3)
| As of December 31, 2020, 78,429 shares subject to RSUs that were granted to Messrs. Aggarwal and Pope, respectively, were outstanding, 75,289 shares subject to RSUs that were granted to Ms. Cater-Miller and2021, each of Messrs. Faison, Aggarwal, Summers, and Summers, respectively, wereMs. Carter-Miller held outstanding andRSUs to be issued 25,280 shares. Ms. Rothstein held outstanding stock options to purchase 10,000 shares subjectand outstanding RSUs to a stock optionbe issued 25,280 shares, and 68,965 shares subjectMs. Fallon held outstanding RSUs to be issued 26,790 shares. |
(4)
| Mr. Pope’s term expired in June 2021 and he held no outstanding RSUs that were grantedor other equity awards as of December 31, 2021. |
(5)
| Ms. Fallon was appointed to Ms. Rothstein were outstanding.the Board on August 16, 2021. |
TABLE OF CONTENTS | | | | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | | | | | |
Below we describe transactions since January 1, 20192020 to which we were or will be a participant and in which the amounts involved exceeded or will exceed $120,000, and any of our directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties. Employment Arrangements We currently have written confirmatory employment letters with our executive officers. For information about our employment agreements with our named executive officers, refer to “Executive Compensation - Agreements with our Named Executive Officers.” Equity Awards Granted to Executive Officers and Directors We have granted stock options and RSUs to our executive officers and directors. For information about our stock option and RSU awards to our named executive officers and our directors, refer to “Executive Compensation-Outstanding Equity Awards at Fiscal Year-End” and “Executive Compensation-Non-Employee Director Compensation.” Indemnification Agreements We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated certificate of incorporation and amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. We believe that these provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Policies and Procedures for Related Person Transactions We have a general policy that all material transactions with a related party, as well as all material transactions in which there is an actual, or in some cases, perceived, conflict of interest, will be subject to prior review and approval by our Audit Committee and its independent members, who will determine whether such transactions or proposals are fair and reasonable to our companyus and our stockholders. In general, potential related-party transactions will be identified by our management and discussed with our Audit Committee at its meetings. Detailed proposals, including, where applicable, financial and legal analyses, alternatives and management recommendations, will be provided to our Audit Committee with respect to each issue under consideration, and decisions will be made by our Audit Committee with respect to the foregoing related-party transactions after opportunity for discussion and review of materials. When applicable, our Audit Committee will request further information and, from time to time, will request guidance or confirmation from internal or external counsel or auditors. | | | Arlo Technologies, Inc. Notice of 20212022 Annual Meeting and Proxy Statement 3937 |
TABLE OF CONTENTS | | | | | | HOUSEHOLDING OF PROXY MATERIALS | | | | | |
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. This year, a number of brokers with account holders who are Arlo stockholders will be “householding” the Company’s proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, please notify your broker or Arlo. Direct your written request to Arlo Technologies, Inc., Attn: Secretary, 3030 Orchard Parkway, San Jose,2200 Faraday Ave., Suite #150, Carlsbad, California 9513492008 or call us at (408) 890-3900 and we will promptly deliver the requested documents or notice. Stockholders who currently receive multiple copies of the Notice of Internet Availability of Proxy Materials at their addresses and would like to request “householding” of their communications should contact their brokers. TABLE OF CONTENTS The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment. | | | | By Order of the Board of Directors, | | | | | | | | /s/ Matthew McRae | | | | Matthew McRae | | | | Chief Executive Officer and Director | | | |
April 29, 202128, 2022 A copy of the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 20202021 is available without charge upon written request to: Arlo Technologies, Inc., Attn: Secretary, 3030 Orchard Parkway, San Jose,2200 Faraday Ave., Suite #150, Carlsbad, California 95134.92008. | | | Arlo Technologies, Inc. Notice of 20212022 Annual Meeting and Proxy Statement 4139 |
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