(1) | Reflects base compensation paid in 2018 resulting from increase in annual base salary from $350,000 to $360,500 on May 7, 2018.
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Table of Contents | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation Elements and 2019 Pay Decisions |
Cash Incentive Opportunity
For 2019, the compensation committee approved an annual cash bonus planincentive opportunity for the NEOs in which 70% of the payout iswas tied to our financial performance (specifically, our revenue and Adjusted EBITDA) and 30% iswas tied to the achievement of objective strategic goals. The plan for 2018, described below, was implementedgoals established at the beginning of the year before receiving feedbackyear. | | | | | | | Executive |
| 2018
Target Incentive as
% of Base Salary |
| 2019
Target Incentive as
% of Base Salary |
| % Change | Michael D. Darrow(1) | | 50% | | 50% | | —% | Victor A. "Chip" Perry(2) | | 100% | | 100% | | —% | Noel B. Watson(3) | | N/A | | 50% | | N/A | Charles C. Thomas(4) | | 26% | | 26% | | —% | John E. Pierantoni(2) | | 40% | | 40% | | —% | Simon E. Smith(5) | | 40% | | 50% | | 25% | Jeffrey J. Swart | | 50% | | 50% | | —% | Robert T. "Tommy" McClung(2) | | 50% | | 50% | | —% | Neeraj Gunsagar(2) | | 50% | | 50% | | —% | | | | | | | | |
- (1)
- Mr. Darrow's target incentive applied only to his base salary and not to his monthly stipend for his service as Interim President and CEO.
- (2)
- Former executives were not eligible to receive any incentive payments due to their termination during the year.
- (3)
- Mr. Watson joined us in June 2019 and was eligible for a pro-rated cash incentive payment for the period of time that he was employed in 2019.
- (4)
- Mr. Thomas participated in our non-executive bonus program for all of 2019.
- (5)
- Mr. Smith was promoted in June 2019 and participated in the annual incentive program for the senior executive team for the second half of 2019 and our non-executive bonus program in the first half of 2019. The increase in his target incentive from
stockholders40% to 50% was effective upon his promotion.
For the annual incentive program for the senior executive team, at the beginning of 2019, the compensation committee selected the performance metrics, which were generally consistent with the metrics used in prior years. The financial component, weighted at 70% of the total opportunity, measured performance against Revenue and proxy advisors. In 2018, weAdjusted EBITDA, as defined below, and provided our NEOs the opportunity to earn a cash incentive each quarter. Actual quarterly NEO incentivesbetween 0% and 180% of target payout. The financial component would be set at 100% if the Revenue target of $389 million and the Adjusted EBITDA target of $39.3 million were determined in the sole discretionachieved. The strategic component, weighted at 30% of the compensation committee.total opportunity, included goals relating to the achievement of a variety of critical strategic objectives, and provided the opportunity to earn between 0% and 150% of target payout. The compensation committee considered various factors in determiningdesign of the incentive amount,program included a feature where no payout would be delivered on the strategic component if any,the financial results did not meet the threshold requirements. The illustration below summarizes the framework used to determine the final payouts as a NEO received, butpercent of each individual's target incentive.
- (1)
- Subject to the
primary goal was to reward for, and alignachievement of a portion of NEO pay opportunities with, our short-term quarterlygreater than 0% payout on the financial performance, which in turn motivated our executive team, including our NEOs.
The compensation committee establishes andeveloped a matrix reflected below to determine the payout mechanism for the financial component. The matrix design was selected to ensure that a cash incentive opportunity expressed as a percentagepayout would only be earned | | | 32 | | |
Table of base salary for each NEO atContents | | | 2020 ANNUAL
PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
if both the beginningthreshold Revenue growth and Adjusted EBITDA were achieved. The payout in the event of results falling between associated cells in the year. In 2018, this target opportunity was then split equally overmatrix would be determined by interpolation between the four quarters with payouts determined and delivered followingend point when determining the final payout. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 Revenue Growth |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Below
Threshold |
| | | Threshold |
| | | Between
Target and
Threshold |
| | | Target |
| | | Between
Target and
Maximum |
| | | Maximum |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 Adjusted EBITDA |
| | | <+4% |
| | | +6% |
| | | +8% |
| | | +10% |
| | | +12% |
| | | +14% |
| | | | | Below | | | | $36.8M | | | | 0% | | | | 0% | | | | 0% | | | | 0% | | | | 0% | | | | 0% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Threshold | | | | $37.5M | | | | 0% | | | | 35% | | | | 40% | | | | 45% | | | | 50% | | | | 55% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Between | | | | $38.2M | | | | 0% | | | | 40% | | | | 70% | | | | 75% | | | | 80% | | | | 85% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Target | | | | $39.3M | | | | 0% | | | | 45% | | | | 75% | | | | 100% | | | | 105% | | | | 110% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Between | | | | $41.0M | | | | 0% | | | | 50% | | | | 80% | | | | 105% | | | | 135% | | | | 140% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Max | | | | $43.3M | | | | 0% | | | | 55% | | | | 85% | | | | 110% | | | | 140% | | | | 180% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
After the end of each quarter. In February 2018,2019, the compensation committee reviewed financial performance against the target incentive opportunities for each NEOpre-determined goals and decided to maintain the same opportunities in place for 2017, including for the CEO, except for Mr. Skutta. The compensation committee determined that an increase in Mr. Skutta’s target incentive opportunity from 50% to 75% of his base salary was appropriate to more closely align his compensation with the market data. Each NEO’s 2018 annual target incentive opportunity is reflected below. | | | | | Executive | | Target Incentive as a %
of Base Salary 2018 | | Chip Perry
| | | 100 | % | Michael Guthrie
| | | 62.5 | % | John Pierantoni
| | | 40 | % | Michael Darrow
| | | 50 | % | Tommy McClung
| | | 50 | % | Brian Skutta
| | | 75 | % |
After the end of each quarter of 2018, the compensation committee established an incentive pool for employees, including NEOs, after taking into considerationneither our financial performance,2019 Revenue nor our achievement of strategic goals and overall employee performance for the just-ended quarter, as well as other considerations including management’s recommendations, retention needs and morale. In assessing our financial performance for a given quarter, management and the compensation committee consider a variety of qualitative and quantitative measures, such as:
| • | | Adjusted EBITDA(1) and Adjusted EBITDA margin(2) performance; |
Other strategic drivers (e.g., the number of units, strategic investment decisions, achievement of important strategic goals, etc.).
In 2018, our2019 Adjusted EBITDA met the threshold requirements and revenue performance were primary considerations when fundingthus no cash incentive would be delivered to the bonus pool because they measure core operational performance, ensure overall affordability and reflect a metric thatparticipants under the investment community, security analysts, ratings agencies and other key parties closely monitor. The sustainability of our results, our trending performance and the measurement of our other strategic drivers also served as value reference points for the compensation committee given their linkage to our ability to create long-term value for our stockholders. As a result, our holistic evaluation of performance, including the primary evaluation of our Adjusted EBITDA and revenue achievement, rewarded our NEOs for creating sustainable long-term value for our stockholders.
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| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
The table below summarizes each quarter’s performance and key considerations when determining the actual incentive payouts for the NEOs in 2018. The compensation committee considered financial performance relative to guidance but also strategic and operational performance that will support and drive future growth (e.g., progress in rolling out of the TrueCar Trade product in the third and fourth quarters and the completion of our replatforming project in the fourth quarter).
| | | | | | | | | | | Quarter | | CEO Payout | | NEO Payout(4) | | Committee Considerations | Q1 | | 0% of target | | 0% of target | | - Revenue of $81.1 million, at the midpoint of guidance ($81 million)
- Adjusted EBITDA of $6.0 million, at the bottom end of guidance ($6 million)
- Adjusted EBITDA margin of 7.4%, compared to 8.0% in the first quarter of 2017
- Units of 230,000, at the bottom end of guidance (230,000)
| Q2 | | 119% of target | | 123% of target | | - Revenue of $87.9 million, at the midpoint of guidance ($88 million)
- Adjusted EBITDA of $8.7 million, above the midpoint of guidance ($8.5 million)
- Adjusted EBITDA margin of 9.9%, compared to 9.0% in the second quarter of 2017
- Units of 250,000, above the top end of guidance (248,000)
- Continued progress adding new OEM programs and expanding existing OEM programs
- Re-accelerated growth in franchise and independent dealer count
| Q3 | | 0% of target | | 108% of target | | - Revenue of $93.6 million, below the midpoint of guidance ($94 million)
- Adjusted EBITDA of $10.0 million, at the bottom end of guidance ($10 million)
- Adjusted EBITDA margin of 10.7%, compared to 9.7% in the third quarter of 2017
- Units of 268,000, below the bottom end of guidance (274,000)
- Continued advancement toward key strategic objectives (e.g., progress inroll-out of TrueCar Trade product, substantial progress toward completion of technology replatforming initiative)
- Considered retention and motivation ahead of critical fourth quarter 2018 performance
| Q4 | | 0% of target | | 72% of target | | - Revenue of $91.1 million, below the bottom end of guidance ($95.5 million)
- Adjusted EBITDA of $8.1 million, below the bottom end of guidance ($10 million)
- Adjusted EBITDA margin of 8.9%, compared to 9.0% in the fourth quarter of 2017
- Units of 257,000, below the bottom end of guidance (262,000)
- Completed our replatforming initiative and acquired DealerScience while continuing the roll out of the TrueCar Trade product
|
(1) | The “Adjusted EBITDA” measure, which is a financial measure not prepared in accordance with U.S. GAAP, was calculated based on quarterly earnings as reflected in our audited consolidated financial statements, adjusted to exclude income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, certain litigation costs and lease exit costs. Refer to Annex A for a reconciliation of Adjusted EBITDA to net loss. We use Adjusted
|
| EBITDA as an operating performance measure because it is (i) an integral part of our reporting and planning processes; (ii) used by our management and Board to assess our operational performance; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA facilitates operating performance comparisons on aperiod-to-period basis because it excludes variations primarily caused by |
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| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
| changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA is widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt service capabilities. |
(2) | The “Adjusted EBITDA margin” measure, which is a financial measure not prepared in accordance with U.S. GAAP, was calculated as Adjusted EBITDA divided by total revenue.
|
(3) | The “Revenue” measure is prepared in accordance with U.S. GAAP and comprised of dealer revenue, consisting of fees paid by our dealer customers participating in our network of TrueCar Certified Dealers either on aper-vehicle basis for sales to our users or in the form of a subscription arrangement or purchasing our TrueCar Trade product or products and services provided by
|
| DealerScience or DealerSync; OEM incentives revenue, consisting of fees paid by OEMs to promote the sale of their vehicles through the offering of consumer incentives to members of our affinity group marketing partners; and forecasts, consulting and other revenue, primarily from the provision of services to the automotive and financial services industries by our ALG subsidiary. |
(4) | Excludes payouts for Messrs. Guthrie, who did not earn any cash incentive payments for 2018, and Pierantoni, who served as a Senior Vice President and Interim Chief Financial Officer. Mr. Pierantoni’s performance was assessed and payouts determined based on the same measures described above, but under standards applicable to Senior Vice Presidents, or SVPs. Mr. Pierantoni received payouts of 46%, 123%, 80% and 85% of his target incentive for the first through fourth quarters of 2018, respectively.
|
The table below provides an overview of the incentives earned each quarter and the total amount earned for the year:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Q1 | | | Q2 | | | Q3(2) | | | Q4(3) | | | Total
Actual | | | Total
Target | | | Actual as %
of Target | | Chip Perry | | $ | 0 | | | $ | 238,848 | | | $ | 0 | | | $ | 0 | | | $ | 238,848 | | | $ | 800,000 | | | | 29.9 | % | Michael Guthrie | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 250,000 | | | | N/A | (4) | John Pierantoni(1) | | $ | 16,099 | | | $ | 44,334 | | | $ | 28,788 | | | $ | 30,468 | | | $ | 119,689 | | | $ | 143,150 | | | | 83.6 | % | Michael Darrow | | $ | 0 | | | $ | 61,489 | | | $ | 60,482 | | | $ | 35,893 | | | $ | 157,864 | | | $ | 200,000 | | | | 78.9 | % | Tommy McClung | | $ | 0 | | | $ | 61,489 | | | $ | 60,482 | | | $ | 35,893 | | | $ | 157,864 | | | $ | 200,000 | | | | 78.9 | % | Brian Skutta | | $ | 0 | | | $ | 92,234 | | | $ | 60,482 | | | $ | 53,839 | | | $ | 206,555 | | | $ | 300,000 | | | | 68.9 | % |
(1) | Mr. Pierantoni’s total target incentive opportunity was based onone-quarter year at $35,000 and three-quarters of the year at $108,150 given the timing of his base salary increase. Mr. Pierantoni received a first quarter 2018 performance payout as an SVP while other NEOs (Executive Vice Presidents, or EVPs, and the CEO) did not receive a first quarter 2018 bonus. For first quarter 2018 performance, Mr. Pierantoni received a bonus of 1,506 RSUs valued at $16,099 and which fully vested on July 16, 2018.
|
(2) | For third quarter 2018 performance, the NEO EVPs, which excludes Messrs. Perry and Pierantoni, received an incentive payout of $60,482, paid 100% in RSUs that vest quarterly over aone-year period. As an SVP, Mr. Pierantoni received a third quarter 2018 bonus of $17,298 in cash and 1,087 RSUs valued at $11,490 that also vest quarterly over aone-year period.
|
(3) | For fourth quarter 2018 performance, Messrs. Darrow and McClung received an incentive payout equal to 72% of their target opportunity, with 26% paid in cash and 74% paid in RSUs that vest quarterly over aone-year period; Mr. Skutta received an incentive payout equal to 76% of his target opportunity, with 26% paid in cash and 74% paid in RSUs that vest quarterly over aone-year period; and Mr. Pierantoni received a bonus of $15,686 in cash and 2,133 RSUs valued at $14,782 that also vest quarterly over aone-year period. These grants will be
|
| disclosed in the Summary Compensation Table included in next year’s proxy statement since the awards were made in early 2019 for fourth quarter 2018 performance. |
(4) | Mr. Guthrie left the company in February 2018 and as a result did not earn any incentives for 2018.
|
Preview of Changes to 2019 Cash Incentive Program
Throughout 2018, the compensation committee worked with Semler Brossy to design a 2019 cashannual incentive program for the NEOssenior executive team (including Messrs. Darrow, Watson, Smith and other CEO direct reports to (a) extendSwart).
As noted earlier, Mr. Smith participated in our non-executive bonus program for the performance period from quarterly to an annualfirst two quarters of 2019, for which he was paid $73,785 under the program, and (b) limitMr. Thomas participated in that program for all of 2019, for which he was paid $57,218 under the useprogram. In the aggregate, these bonus payments to Messrs. Smith and Thomas were nearly 100% of discretiontheir target incentive for the time during which they participated in the non-executive bonus program. Their quarterly payments under that program were discretionary and were based on (x) our overall non-executive bonus pool, which was determined by introducing formula-driven payouts. Formanagement in consultation with the compensation committee, and (y) management's assessments of each participant's individual contributions. Mr. Thomas also received a discretionary "spot" bonus of $17,500 for critical assistance with an important transaction outside the scope of his traditional role. Neither Mr. Smith nor Mr. Thomas was an executive officer within the meaning of Section 16 of the Exchange Act at the time of earning a payout under the non-executive bonus program. Although our financial performance in 2019 70% ofdid not result in any cash bonuses being payable to our NEOs under the annual incentive program for the senior executive team, the compensation committee in January 2020 determined to recognize strong second half financial performance and several strategic accomplishments by providing a discretionary cash bonus to our leadership team at the end of the year. The amount of these discretionary bonuses was as follows: | | | | | Executive |
| | 2019 Cash Bonus | | Michael D. Darrow(1) | | $ | 300,000 | | Noel B. Watson(2) | | $ | 112,500 | | Simon E. Smith(2) | | $ | 100,000 | | Jeffrey J. Swart(2) | | $ | 100,000 | | | | | | | |
- (1)
- The bonus payout
will be based on achievementto Mr. Darrow was determined by estimating half of specifiedhis target bonus opportunity for 2019 with additional consideration for his role as Interim President and CEO in leading a strong second half operational performance.
- (2)
- The bonus payable to executives other than Mr. Darrow was half of their 2019 target bonus, reflecting approximately a full bonus for the time that they served following our management transition.
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Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
The decision to grant these cash bonuses despite our not having achieved the formula-based metrics underlying the annual executive plan was made in the exercise of the compensation committee's discretion, taking into account a number of relevant considerations, including the following: - •
- After four consecutive quarters under our earlier management team stretching from the third quarter of 2018 through the second quarter of 2019 in which we missed or lowered our financial guidance, the new management team stabilized the business and delivered two quarters in which we exceeded our external financial guidance. Specifically, in the third quarter of 2019, we recorded $90.6 million in revenue, compared to our guidance range of $87 million to $89 million, and $5.9 million in Adjusted EBITDA, compared to our guidance range of $1 million to $3 million. Then, after raising our guidance for the fourth quarter of 2019, we recorded $353.9 million in revenue for the full year, compared to our guidance range of $351 million to $353 million, and
revenue goals$18.9 million in Adjusted EBITDA, compared to our guidance range of $15 million to $17 million.
- •
- The new management team successfully accomplished a number of our critical strategic objectives that position us well heading into 2020, including implementing our new consumer experience, introducing a new, refreshed brand and
30%associated marketing campaign, increasing our organic traffic and improving our used-car offering.
- •
- None of our executives other than Mr. Swart, our General Counsel, were serving in their current positions when the financial guidance and business plan that the compensation committee relied upon in adopting the annual executive plan's performance metrics was prepared.
- •
- It is critical to us to retain and properly incentivize our senior management team with substantial knowledge of the
payout willbusiness through this critical, uncertain and difficult time for the business.
Given the new management team's accomplishments in the second half of the year following a significant leadership transition, the compensation committee believed that a below target cash bonus was appropriate and in the best interests of stockholders by stabilizing the business and our leadership team. Additionally, the compensation committee's decision was made at a time that USAA had given us a strong basis for believing that its partnership with USAA would be based on achievement of strategic objectives in 2019.renewed. The compensation committee reviewedwill consider the effect of USAA's change in position in its 2020 compensation decisions. "Adjusted EBITDA" is a financial measure not prepared in accordance with U.S. GAAP, was calculated based on earnings as reflected in our audited consolidated financial statements, adjusted to exclude interest income, interest expense, depreciation and established bothamortization, stock-based compensation, income (loss) from equity method investment, certain restructuring costs, certain executive departure costs, certain transaction expenses, certain litigation costs changes in the fair value of contingent consideration and income taxes. Refer to Annex A for a reconciliation of Adjusted EBITDA to net loss. We use Adjusted EBITDA as an operating performance measure because it is (i) an integral part of our reporting and planning processes; (ii) used by our management and Board to assess our operational performance, and together with operational objectives, as a measure in evaluating employee compensation and bonuses; and (iii) used by our management to make financial and strategic goalsplanning decisions regarding future operating investments. We believe that using Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis because it excludes variations primarily caused by changes in the first quarterexcluded items noted above. In addition, we believe that Adjusted EBITDA is widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of 2019. This design also took into considerationfinancial performance and debt service capabilities. "Revenue" is prepared in accordance with U.S. GAAP and is comprised of dealer revenue, consisting of fees paid by our dealer customers participating in our network of TrueCar Certified Dealers either on a per-vehicle basis for sales to our users or in the feedback that we received inform of a subscription arrangement or purchasing our other products and services, such as TrueCar Trade or our DealerScience products; OEM incentives revenue, consisting of fees paid by OEMs to promote the sale of their vehicles through the offering of consumer incentives to members of our affinity group marketing partners; and forecasts, consulting and other revenue, primarily from the provision of services to the automotive and financial services industries by our ALG subsidiary. | | | | | 34 | | 2019 Proxy Statement | | 39 |
Table of Contents | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation Elements and 2019 Pay Decisions |
discussions with our stockholders. The potential payouts under the plan range from 0% to 180% of an executive’s target incentive.
Long-Term Incentive Opportunities We use long-term incentive compensation in the form of equity awards to align the interests of our executive officers, including theour NEOs, with the interests of our stockholders. We believe that our executive officers will be strongly incentivized to act in a manner that cultivates opportunities for maximizing long-term value creation if they own significant amounts of our common stock. Since our initial public offering and prior tobefore 2019, we have relied on a combination of time-based stock options and RSUs as vehicles for delivering long-term incentive compensation opportunities to our executive officers. We believe that stock options, which are granted with exercise prices equal to the fair market value of our common stock on the date of grant, provide an appropriate long-term incentive for our executive officers, as the options provide value to the holder only to the extent that our stock price appreciates on a sustained basis following the date of grant. We believe that RSUs, which deliver increasing value with the appreciation of our stock price, serve as a valuable retention tool for our executive officers. In 2019, based on feedback from stockholders and an ongoing review of competitive market practices, we introduced performance units, which we refer to as PUs, to the senior executive team, and in 2020, following our experience in 2019, we extended PUs to our senior vice presidents as well. We believe that PUs strengthen alignment with stockholders, complement the options and RSUs by diversifying our management's equity portfolio and promote a longer-term view of performance by measuring performance over a three-year period. In determining the size of the equity awards to grant to our executive officers, the compensation committee takes into consideration individual and overall company performance, market data, internal pay equity, the timing of the last equity grant, unvested equity values, compensation expense to the Companyus and stockholder dilution, as well as our CEO’sCEO's recommendations (except as to his own equity awards). The compensation committee uses its subjective judgment considering all of the factors described above to arrive at the amounts it determines are appropriate for each individual NEO. In 2018, equity grants were awarded in May 2018, with 60% For Mr. Perry, who was CEO at the time of the grant-date fair value takingannual equity grant in March 2019, the formequity mix consisted of stock50% PUs, 25% options and 25% RSUs. For the other members of the leadership team in March 2019, including several NEOs, the equity mix consisted of 20% PUs, 40% options and 40% takingRSUs. For Messrs. Smith and Thomas, the formequity mix for the annual grant received in March 2019 was 70% RSUs and 30% options. In establishing these equity mixes, the compensation committee considered the various long-term incentive vehicles used by our peers and determined that the performance-weighting of RSUs (except for John Pierantoni, whothe awards should be progressively higher as an SVP was awarded an equity grantindividual's potential impact increases, with 30%the CEO having the highest performance weighting and the other members of the grant-date fair value takingsenior executive team having lesser (though still considerable) performance weighting. Equity awards were granted in March 2019 and the form of stock options and 70% taking the form of RSUs) to ensure that a majority of value of the equity grants took the form of options, which requires improvements to stockholder value before an executive realizes any value. The stock options granted in May 2018 to the NEOs have an exercise price of $9.59$6.93 per share and vest monthly over a four-year period. As of December 31, 2018,2019, all of the options granted in 2018the 2019 annual equity grant were “underwater”"underwater" (that is, had exercise prices higher than the fair market value of our common stock) and provided no direct value to our executives. The RSUs granted in 20182019 generally are scheduled to vest over a four-year period with quarterly vesting (see the “Outstanding Equity”"Outstanding Equity" table for vesting details), subject to the acceleration provisions of each NEO’sNEO's employment agreement and our 2014 Plan. The table below reflects For the equity grants awarded in May 2018 and excludes any RSUsPUs granted in lieu of cash incentive discussed under “Cash Incentive Opportunity” above. | | | | | | | | | | Executive(1) | | Options
Granted | | | RSUs
Granted(2) | | Chip Perry | | | 261,122 | | | | 81,818 | | John Pierantoni(3) | | | 23,211 | | | | 44,779 | | Michael Darrow | | | 90,087 | | | | 28,227 | | Tommy McClung | | | 116,054 | | | | 36,364 | | Brian Skutta | | | 116,054 | | | | 36,364 | |
(1) | Mr. Guthrie left the Company in February 2018 and did not receive any equity grants during 2018.
|
(2) | Values listed in this column exclude RSUs granted as part of first and third quarter 2018 incentive payouts as discussed above.
|
(3) | In addition to the annual grant noted here, Mr. Pierantoni received 19,324 RSUs in May 2018 to retain and
|
| incentivize him in his important role as Interim CFO. The compensation committee believed this was the appropriate amount and structure to retain Mr. Pierantoni given his increased responsibilities. These RSUs vest over an18-month period, with 50% vesting one year from the grant date (in May 2019) and 50% vesting after 18 months (in November 2019). |
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| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Preview of Changes2019, executives have the opportunity to the 2019 LTI Program
Throughout 2018, the compensation committee worked with Semler Brossy to design a performance-based LTI component to work alongside the optionsearn between 0% and RSUs as part150% of the 2019 annual LTI grant. The compensation committee considered atarget number of factors in making this decision, including the difficulty in forecasting long-term financial and operational goals, our historical price volatility since our initial public offering and additional feedback and perspectives from proxy advisors and stockholder discussions. For 2019, the CEO and his direct reports will receive performance units, or PSUs, that vest and deliver valueshares based on our annualized relative total stockholder return determined by reference to our compound annual growth rate as measured againstin stock price, or CAGR, compared to that of the Russell 2000 index, or the Index, over a three-year performance period from 2019 through 2021.period. The PSUsPUs will generally be eligible to vest atin early 2022, following the end of the three-year performance period, based on actualour relative CAGR compared to the Index. If our CAGR is equal to that of the Index, the target number of shares will vest. For every percentage point that our CAGR exceeds the Index, the payout is increased by two percentage points, and for every percentage point that our CAGR is below the Index, the payout is decreased by two percentage points.
In developing the performance goals and continued service.vesting structure of the PUs, the compensation committee sought to be rigorous and to align the interests of management and our stockholders. Moreover, it chose a three-year measurement period to accentuate the long-term nature of the award and further align management with the | | | | | 35 |
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PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
interests of our long-term stockholders. The design requirescompensation committee chose relative CAGR as the performance goal to provide a relative performance metric against an appropriate comparator group of companies to incentivize and reward not only returns to our stockholders, but also returns in excess of those generally available. At the end of the three-year performance period, the compensation committee will determine the level of achievement of our relative CAGR for the three-year performance period and then apply the resulting vesting to the grant amount to determine the total amount that we beatwill vest. The table below reflects the Russell 2000 index forannual equity grants awarded to our NEOs in March 2019: | | | | | | | Executive(1) |
| Options
Granted |
| RSUs
Granted |
| PUs
Granted | Michael D. Darrow | | 68,598 | | 32,927 | | 14,952 | Victor A. "Chip" Perry(2) | | 113,444 | | 54,453 | | 99,006 | Charles C. Thomas | | 12,096 | | 13,548 | | — | Simon E. Smith | | 27,216 | | 30,482 | | — | Jeffrey J. Swart | | 54,432 | | 26,127 | | 11,864 | Robert T. "Tommy" McClung(3) | | 68,598 | | 32,927 | | 14,952 | Neeraj Gunsagar(3) | | 54,432 | | 26,127 | | 11,864 | | | | | | | | |
- (1)
- Messrs. Pierantoni and Watson did not receive annual equity grants in March 2019.
- (2)
- In connection with his retirement, Mr. Perry's option and RSU awards were accelerated, and he forfeited his PU award.
- (3)
- Of these grants, Messrs. McClung and Gunsagar forfeited options to
earn above-target payout. NEOs will havepurchase 68,598 and 54,432 shares, 22,638 and 17,963 RSUs and 13,628 and 10,814 PUs, respectively, in connection with their terminations.
On June 17, 2019, Mr. Watson joined us as our CFO and CAO. In connection with his hiring, the opportunity to earn anywhere between 0% and 150%Committee granted him an equity award with a grant-date fair value of their target incentive. The CEO will receive approximately 50% of his annual 2019 LTI grant in PSUs, 25%$2.5 million, comprising approximately $500,000 in options and 25%approximately $2 million in RSUs. Other NEOsThe compensation committee crafted this grant after consultation with Semler Brossy and consideration of competitive annualized opportunities for peer CFOs, as well as the need to compensate Mr. Watson for his outstanding and forfeited equity from his prior employer and to ensure that he is meaningfully and immediately aligned with stockholders. The compensation committee considered the size of the grant to be within the typical market practice for new-hire awards and also within the historical range used in the past for other non-CEO executives when joining us. Further, the grant included a mix of RSUs and options, with a heavier mix of RSUs to provide meaningful retention and immediate ownership with options providing stronger alignment with stockholders. The options were granted with a $5.34 exercise price and were "underwater" as of December 31, 2019. In addition to the annual grants identified above, the compensation committee also made grants in connection with the leadership transition that occurred in June 2019. Mr. Darrow received an award of RSUs worth approximately $515,000 to recognize his additional responsibilities while serving as Interim President and CEO. The compensation committee, in consultation with Semler Brossy, determined this award amount by reviewing the competitive market range for annualized total pay opportunities for full-time CEO positions among our peers and seeking to position 2019 annualized total pay for Mr. Darrow toward the lower end of that range, given the circumstances and context for the Interim President and CEO role for the second half of the year. These RSUs follow the same quarterly vesting schedule as the annual grants but will receivevest in full after a two-year period, which the compensation committee established to more closely align with the interim nature of the role and to provide a meaningful retention incentive during a period of uncertainty. At the same time, Mr. Smith was promoted to EVP of Dealer Sales & Service and received a promotional grant of RSUs and options with a grant-date fair value of approximately 20%$770,000. The compensation committee, in | | | 36 | | |
Table of their annual 2019 LTIContents | | | 2020 ANNUAL
PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
consultation with Semler Brossy, determined the amount of these awards by reviewing external market data for similar positions and considering Mr. Smith's internal equity positioning against our other executives and the prior incumbent. The compensation committee believed that this promotional grant in PSUs, 40% inwas appropriate to recognize Mr. Smith's increased responsibilities, strengthen his retention incentives and include a mix of options and 40%RSUs that is generally more consistent with the annual grant structure, with the same four-year vesting schedule as the annual grants. Finally, in RSUs. OurSeptember 2019, the compensation committee, believesafter reviewing information provided by Semler Brossy, granted Mr. Swart an award of RSUs with a grant-date fair value of approximately $450,000 to further its goal of internal pay equity, strengthen his retention incentives and recognize the critical importance of his role, and continuity in that these awards will further increaserole, during the alignment betweenperiod of uncertainty facing us.
The recent outbreak of the novel coronavirus and the measures taken by governments and societies in response thereto have precipitated a period of substantial uncertainty that poses unprecedented challenges to us. Shortly after the scale of the economic impact of the coronavirus outbreak became apparent, we temporarily reduced our executive officers’officers' base salaries and our stockholders’ interests overdirectors' cash retainers, as described in a contemporaneous Current Report on Form 8-K that we filed with the long term. WeSEC on March 26, 2020. Responding effectively to this crisis will require that we be as nimble and flexible as possible, and may require us to make additional adjustments to executive compensation to maintain the financial health of our business while simultaneously ensuring that we retain our key executives and provide more disclosurethem with appropriate incentives. These adjustments could include further changes in executives' base salary or ad hoc cash bonuses or equity awards to executives, in each case in the discretion of the compensation committee, as well as further adjustments to directors' compensation in the Board's discretion. Although the compensation committee expects to adopt an annual cash incentive program for the senior executive team for 2020 similar to the program that was in place for 2019, it expects to do so only after the coronavirus-related uncertainty has abated sufficiently to permit it to make an informed judgment as to the appropriate contours of the program, and details on this grant designit cannot rule out the need to make discretionary, ad hoc cash bonuses in next year’s proxy statement.lieu of or in addition to any bonuses payable under such an annual program in light of the ongoing uncertainty. We maintain atax-qualified retirement plan that provides eligible employees with an opportunity to save for retirement on atax-advantaged basis. All participants’participants' interests in their salary deferrals are 100% vested when contributed. In 2018,2019, we made discretionary matching contributions into the 401(k) plan of 100% of the first 3% of compensation contributed by the participant. Our matching contributions are fully vested after four years with 25% vesting annually. Employee and employer contributions are allocated to each participant’sparticipant's individual account and are then invested in selected investment alternatives according to the participants’participants' directions. The 401(k) plan is intended to qualify under Sections 401(a) and 501(a) of the Code. As atax-qualified retirement plan, employer contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all employer contributions are deductible by us when made. We provide perquisites to our NEOs only to the extent that we believe it is appropriate to assist an individual in the performance of his duties, to increase his effectiveness or for recruitment and retention purposes. For 2018,2019, these perquisites consisted ofincluded medical expense reimbursements to assist our NEOs with their health and well-being. In addition, due to the increased time commitment required of Mr. Pierantoni during the time he served as Interim CFO in addition to his continuing responsibilities as Chief Accounting Officer, during 2018CAO, he was reimbursed forin-town lodging and was paid a related tax gross up.up of approximately $4,000. Further, under his employment agreement we reimbursed Mr. Watson for approximately $80,000 of his expenses incurred in connection with his relocation to the Santa | | | | | 37 |
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PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
Monica area and provided him a $15,000 monthly housing allowance for the first six months of his employment. We did not pay Mr. Watson a tax gross up in connection with either of these perquisites. In the future, we may provide perquisites or other personal benefits not offered to our broader employee population to our executive officers. However, we do not anticipate that perquisites or other personal benefits will be a significant aspect of our executive compensation program. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the compensation committee. Other Governance Items OTHER GOVERNANCE ITEMS
We have entered into employment agreements with each of our NEOs, whichexcluding Mr. Thomas, that provide certain severance benefits if a termination of employment occurs under specified circumstances and certain change in control benefits, which are described in “Executive"Executive Employment Agreements”Agreements" below. Severance benefits under these agreements are conditioned on the | | | | | | | 2019 Proxy Statement | | 41 |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
executive’s executive's signing a release of claims in favor of the Company.Weus. We have provided our executives with severance in the event of certain qualifying terminations, and certain change in control benefits, because we understand that anxieties about future employment or transactions involving a change in control can result in the early departure or distraction of our executives to our detriment. We believe that providing these benefits helps to alleviate these uncertainties, and therefore provides our NEOs with incentives to forgo other employment opportunities to remain with us, and allows our executives to focus more fully on making decisions that are in the best interests of our stockholders. We believe that these arrangements serve as an important recruiting and retention tool to ensure that personal uncertainties do not dilute our executives' complete focus on building stockholder value and driving our success.
The compensation committee determined the terms of these agreements. The severance and change in control benefits provided by Mr. Perry’s employment agreement acted as an inducement to his joining us. The employment agreements for the other NEOs are generally similar, as in determining the appropriate severance and change in control benefit levels for executives in general, the compensation committee considered internal parity and length of service as well as the review ofand reviewed relevant market data provided by our outside compensation consultant for other companies with which we compete for executive talent. We believe that these agreements serve as an important retention tool to ensure that personal uncertainties do not dilute our executives’ complete focus on building stockholder value Mr. Guthrie received no severance upon his resignation, butIn 2019, we entered into a four-monthseparation agreement and release with Messrs. Perry, Pierantoni, Gunsagar and McClung. Under those agreements, Messrs. Perry, Gunsagar and McClung received the benefits to which they were entitled under their employment agreements in the case of a termination without cause, except that the compensation committee determined that it was appropriate to provide an additional cash payment not to exceed $25,000 in the case of Messrs. Gunsagar and McClung to expedite the completion of discussions and mitigate associated transaction costs for us. The separation agreement and release that we entered into with Mr. Pierantoni did not provide any benefits, as it was entered into in circumstances representing a resignation without good reason.
Concurrently with their terminations, we also entered into consulting services. Duringagreements with Messrs. Perry and Pierantoni to secure their post-termination assistance with the associated management transitions. The consulting agreement with Mr. Pierantoni, which had a one-year term, did not provide him with any consideration other than his continued status as a "service provider" under our 2014 Plan, which resulted in his equity awards continuing to vest, and his stock options remaining exercisable, during that term. The consulting agreement with Mr. Perry, which has a two-year term, similarly does not provide him with any consideration other than his continued status as a "service provider" under the 2014 Plan; because his stock options and RSUs were accelerated and his PUs were forfeited in connection with his termination, the sole compensatory effect of his consulting agreement Mr. Guthrie continuedis to vestextend the expiration date of his stock options. The compensation committee considered these arrangements and determined that they were appropriate in his equity awards.light of the consulting services that Messrs. Perry and Pierantoni would be providing following their termination. | | | 38 | | |
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PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
We have an insider trading policy that, among other things, prohibits insiders from engaging in short sales of our common stock, hedging of stock ownership positions and transactions in publicly-traded options (such as puts and calls) and other derivative securities relating to our common stock. In 2018, we adopted formal stock ownership guidelines for certain executives, including our NEOs. Under our stock ownership guidelines, our CEO is expected to accumulate and hold a number of shares of our common stock with a value equal to six times his annual base salary, and each of our other NEOs is expected to accumulate and hold a number of shares of our common stock with a value equal to two times his annual base salary. The NEOs are expected to satisfy the stock ownership guidelines within five years from the adoption of the guidelines (or the individual’sindividual's date of hire for individuals hired after the effective date). As of March 31, 2019, all2020, due to the recent downturn in the price of our stock, none of our NEOs, except for Mr. Pierantoni, wereWatson, would have been in compliance with the stock ownership guidelines even disregardingwere it not for thephase-in period required for such compliance. Recoupment of Incentive Compensation, or Clawback, Policy
In 2018, we adopted a clawback policy applicable to our executive officers. If our compensation committee determines that an officer’sofficer's misconduct caused us to materially restate all or a portion of our financial results, under certain circumstances our compensation committee has the authority and discretion to, within a period of time following the material restatement, require the officer to repay incentive compensation that would not have been payable absent the material restatement. Incentive compensation for purposes of this policy means an officer’sofficer's cash bonus and long-term equity-based compensation where the award size or vesting was contingent on our performance. Our compensation committee intends to revisit our clawback policy after the SEC adopts final rules implementing the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The fair value of equity awards is established in accordance with the applicable accounting standards and the related compensation expense is one of the factors taken into consideration by the compensation committee in determining NEO equity awards. | | | | | 42 | | | | 2019 Proxy Statement |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Under Section 162(m) of the Code, or Section 162(m), compensation paid to any publicly held corporation’s “covered employees”corporation's "covered employees" that exceeds $1 million per taxable year for any covered employee is generallynon-deductible. However, Section 162(m) provides a reliance period exception, pursuant to which the deduction limit under Section 162(m) does not apply to any compensation paid (or, in certain cases, granted) during a certain reliance period pursuant to a plan or agreement that existed before the corporation’s initial public offering, subject to certain requirements. Under Section 162(m), this reliance period ends upon the earliest of the following: (i) the expiration of the plan or agreement; (ii) the material modification of the plan or agreement; (iii) the issuance of all employer stock and other compensation that has been allocated under the plan; or (iv) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year after the calendar year in which the initial public offering occurs. However, the reliance period exception under Section 162(m) may be repealed or modified in the future as a result of certain changes that were made to Section 162(m) by the Tax Cuts and Jobs Act. In addition, beforeBefore the enactment of the Tax Cuts and Jobs Act, Section 162(m) provided a performance-based compensation exception, pursuant to which the deduction limit under Section 162(m) did not apply to any compensation that qualified as “performance-based compensation”"performance-based compensation" under Section 162(m). Under the Tax Cuts and Jobs Act, the performance-based compensation exception under Section 162(m) was repealed forwith respect to taxable years beginning after December 31, 2017, except that certain transition relief wasis provided for compensation paid pursuant to a written binding contract that was in effect on November 2, 2017 and which wasis not modified in any material respect on or after that date.
As a result, compensationCompensation paid to anyeach of our “covered employees”"covered employees" in excess of $1 million per taxable year generally will not be deductible unless it qualifies for (i) the reliance periodperformance-based compensation exception under Section 162(m) or (ii) the performance-based compensation exception
under Section 162(m) underpursuant to the transition relief provided by the Tax Cuts and Jobs Act.described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), as well as other factors beyond the control of the compensation committee, no assurance can be given that any compensation we pay will qualify for the reliance period exception under Section 162(m) orpaid by us will be eligible for such transition relief and qualify forbe deductible by us in the performance-based compensation exception under Section 162(m).
future. Although the compensation committee will continue to monitor the applicability of Section 162(m) to our ongoingconsider tax implications as one factor in determining executive compensation, arrangements, the compensation committee also intends to continuelooks at other factors in making its decisions and retains the flexibility to provide compensation for our named executive officersNEOs in a manner | | | | | 39 |
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PROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
consistent with the goals of our executive compensation program and the best interests of us and those of our stockholders, (whichwhich may include providing for compensation that isnon-deductible not deductible by us due to the deduction limit under Section 162(m)). The compensation committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with our business needs. We do not have a formal policy for the timing of equity award grants. Before 2018, we granted equity awards when our compensation committee determined appropriate to serve the incentive and retention purposes of the awards. Beginning in 2018, our compensation committee determined to initiate a practice of granting equity awards to our executive officers annually in the first half of the year, although grants may occur at other times during the year, including for new hires, for promotees, to address special retention needs or otherwise as determined appropriate by the compensation committee. We currently grant equity awards to the NEOs under the 2014 Plan, which was adopted in connection with our initial public offering in 2014. Accounting Treatment and Deductibility of Executive Compensation
The fair value of equity awards is established in accordance with the applicable accounting standards and the related compensation expense is one of the factors the compensation committee takes into consideration in determining NEO equity awards.
| | | | | | | 2019 Proxy Statement | | 43 |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Taxation of “Parachute”"Parachute" Payments Sections 280G and 4999 of the Code provide that executive officers, directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change of control that exceedsexceed certain prescribed limits, and that we (or our successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive, including any NEO, with a gross up or other reimbursement payment for any tax liability that the executive might owe as a result of the application of Sections 280G or 4999 of the Code during 20182019 and we have not agreed and are not otherwise obligated to provide any executive with such a gross up or other reimbursement. | | | 40 | | |
Compensation Committee Report
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PROXY STATEMENT | | |
Compensation Committee Report |
The compensation committee has reviewed and discussed with management the above Compensation Discussion and Analysis. Based on that review and discussion, the compensation committee has recommended to the Board that this Compensation Discussion and Analysis be included in this proxy statement. Respectfully submitted, Wesley Nichols (Chair)
Christopher Claus
John Mendel
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2018 Summary Compensation Table
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PROXY STATEMENT | | Compensation of Executive Officers |
2019 SUMMARY COMPENSATION TABLE
The following table shows compensation awarded to, paid to or earned by the persons named below for each of the years ended December 31, 2019, 2018 2017 and 2016,2017, except for Messrs. DarrowMcClung and Skutta,Pierantoni, for whom compensation is shown for the years ended December 31, 20182019 and 20172018 only (reflecting that they have beenwere named executive officers only during those years); and for two years), Mr. Pierantoni,Messrs. Watson Thomas, Smith and Swart, for whom compensation is shown for the year ended December 31, 20182019 only (reflecting that he wasthey were named executive officers only during that year). | | | | | | | | | | | | | | | | | | | | | | | Name and
Principal Position |
|
| Year |
|
| Salary
($) |
|
| Bonus
($) |
|
| Stock
Awards
($)(1) |
|
| Option
Awards
($)(1) |
|
| All Other
Compensation
($) |
|
| Total
($) | | | Michael D. Darrow | | | 2019 | | | 400,000 | | | 300,000(2) | | | 882,413 | | | 272,123 | | | 158,101(3) | | | 2,012,637 | | | President and CEO | | | 2018 | | | 400,000 | | | 70,868(2) | | | 331,178 | | | 407,713 | | | 9,479(4) | | | 1,219,238 | | | | | | 2017 | | | 333,333 | | | 101,922(2) | | | 1,656,702 | | | 2,948,302 | | | 9,247(4) | | | 5,049,506 | | | Victor A. "Chip" Perry | | | 2019 | | | 333,333 | | | — | | | 2,799,290(5) | | | 3,944,739(5) | | | 3,214,750(6) | | | 10,292,112 | | | Former President and CEO | | | 2018 | | | 800,000 | | | 238,848(2) | | | 784,635 | | | 1,181,778 | | | 14,878(4) | | | 3,020,139 | | | | | | 2017 | | | 800,000 | | | 195,488(2) | | | 789,615 | | | 2,818,285 | | | 482,876(7) | | | 5,086,264 | | | Noel B. Watson | | | 2019 | | | 243,750 | | | 112,500(2) | | | 1,975,752 | | | 455,750 | | | 376,820(8) | | | 3,164,572 | | | CFO and CAO | | | | | | | | | | | | | | | | | | | | | | | | Charles C. Thomas | | | 2019 | | | 237,500 | | | 74,718(2) | | | 100,215 | | | 47,984 | | | 8,757(9) | | | 469,174 | | | VP, Controller | | | | | | | | | | | | | | | | | | | | | | | | John E. Pierantoni | | | 2019 | | | 90,125 | | | — | | | 14,782 | | | — | | | 20,099(10) | | | 125,006 | | | Interim CFO; SVP and CAO | | | 2018 | | | 356,841 | | | 77,318(2) | | | 457,019 | | | 105,048 | | | 62,770(11) | | | 1,058,996 | | | Simon E. Smith | | | 2019 | | | 380,313 | | | 173,785(2) | | | 614,591 | | | 622,332 | | | 24,266(12) | | | 1,815,287 | | | EVP, Dealer Sales & Service | | | | | | | | | | | | | | | | | | | | | | | | Jeffrey J. Swart | | | 2019 | | | 400,000 | | | 100,000(2) | | | 744,496 | | | 215,928 | | | 14,880(12) | | | 1,475,304 | | | EVP, General Counsel and Secretary | | | | | | | | | | | | | | | | | | | | | | | | Robert T. "Tommy" McClung | | | 2019 | | | 191,667 | | | — | | | 369,230 | | | 272,123 | | | 434,168(13) | | | 1,267,188 | | | Former EVP and Chief | | | 2018 | | | 400,000 | | | 70,868(2) | | | 409,212 | | | 525,234 | | | 9,207(4) | | | 1,414,521 | | | Technology Officer | | | | | | | | | | | | | | | | | | | | | | | | Neeraj Gunsagar | | | 2019 | | | 191,667 | | | — | | | 298,452 | | | 215,928 | | | 450,352(14) | | | 1,156,399 | | | Former EVP and Chief | | | 2018 | | | 400,000 | | | 70,868(2) | | | 295,868 | | | 354,535 | | | 13,674(15) | | | 1,134,945 | | | Marketing Officer | | | 2017 | | | 400,000 | | | 134,699(2) | | | 699,876 | | | 1,735,936 | | | 23,803(16) | | | 2,994,314 | | | | | | | | | | | | | | | | | | | | | | | | | |
- (1)
- The amounts reported represent the aggregate grant-date fair value of the RSUs, options and PUs awarded to the named executive officer, calculated in accordance with FASB ASC Topic 718. Such grant-date fair value does not take into account any estimated forfeitures related to service-vesting conditions. The assumptions used in calculating the grant-date fair value reported in this column are set forth in Note 11 to our
principalaudited consolidated financial officer for one year), and Mr. McClung, for whom compensation is shownstatements included in our Annual Report on Form 10-K for the year ended December 31, 2018 only (reflecting that he has been named an executive officer2019. For PUs, the grant date fair value reported is based on the probable outcome of the performance condition as of the grant date. The aggregate grant date fair value of the PUs, assuming the highest level of achievement under the award, is as follows for one year). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(1) | | | Option Awards ($)(1) | | | All Other Compensation ($) | | | Total ($) | | Chip Perry | | | 2018 | | | | 800,000 | | | | 238,848 | (2) | | | 784,635 | | | | 1,181,778 | | | | 14,878 | (3) | | | 3,020,139 | | President and Chief | | | 2017 | | | | 800,000 | | | | 195,488 | (4) | | | 789,615 | | | | 2,818,285 | | | | 482,876 | (5) | | | 5,086,264 | | Executive Officer | | | 2016 | | | | 800,000 | | | | 825,000 | (6) | | | — | | | | — | | | | 522,755 | (7) | | | 2,147,755 | | Michael Guthrie | | | 2018 | | | | 36,364 | | | | — | | | | — | | | | — | | | | 36,956 | (8) | | | 73,320 | | Former Chief Financial Officer | | | 2017 | | | | 400,000 | | | | 105,873 | (9) | | | 1,084,935 | | | | 2,134,211 | | | | 371,527 | (10) | | | 4,096,546 | | | | | | 2016 | | | | 396,354 | | | | 292,000 | (11) | | | 1,845,776 | | | | 3,057,902 | | | | 613,936 | (12) | | | 6,205,968 | | John Pierantoni | | | 2018 | | | | 356,841 | | | | 77,318 | (13) | | | 457,019 | | | | 105,048 | | | | 62,770 | (14) | | | 1,058,996 | | Former Interim Chief Financial Officer and Chief Accounting Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tommy McClung | | | 2018 | | | | 400,000 | | | | 70,868 | (15) | | | 409,212 | | | | 525,234 | | | | 9,207 | (3) | | | 1,414,521 | | Executive Vice President and Chief Technology Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Michael Darrow | | | 2018 | | | | 400,000 | | | | 70,868 | (16) | | | 331,178 | | | | 407,713 | | | | 9,479 | (3) | | | 1,219,238 | | Executive Vice President of Partner and OEM Development | | | 2017 | | | | 333,333 | | | | 101,922 | (17) | | | 1,656,702 | | | | 2,948,302 | | | | 9,247 | (3) | | | 5,049,506 | | Brian Skutta | | | 2018 | | | | 400,000 | | | | 106,302 | (18) | | | 409,212 | | | | 525,234 | | | | 12,500 | (3) | | | 1,453,248 | | Executive Vice President of Dealer Sales and Services | | | 2017 | | | | 400,000 | | | | 134,699 | (17) | | | 794,426 | | | | 1,800,369 | | | | 9,487 | (3) | | | 3,138,981 | |
| | | | |
| | Maximum
Achievement Payout | |
|---|
Michael D. Darrow | | $ | 171,798 | | Victor A. "Chip" Perry | | $ | 1,137,579 | | Jeffrey J. Swart | | $ | 136,317 | | Robert T. "Tommy" McClung | | $ | 171,798 | | Neeraj Gunsagar | | $ | 136,317 | |
- (2)
- Amount represents discretionary bonus for performance during the applicable year.
- (3)
- Amount includes a monthly stipend of $20,000 to reflect the assumed additional responsibilities as our Interim President and CEO beginning in June 2019, 401(k) employer matching contributions of $8,400 and the aggregate incremental costs of perquisites and other personal benefits.
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- (4)
- Amount includes 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits.
- (5)
- In connection with Mr. Perry's retirement and pursuant to his separation agreement, amounts include incremental value associated with the acceleration of RSUs and options of $1,663,545 and $1,111,190, respectively, and the extension of the exercise period for vested stock options of $2,383,524 as determined under FASB ASC Topic 718.
- (6)
- Amount includes a $3,200,000 severance payment associated with Mr. Perry's retirement in May 2019, 401(k) employer matching contributions of $8,400 and the aggregate incremental costs of perquisites and other personal benefits.
- (7)
- Amount includes 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including, among other things, the costs related to providing housing near our principal executive offices in Santa Monica, California for Mr. Perry and transportation costs in connection with his commuting to Santa Monica. Mr. Perry received $243,899 in tax gross-ups from the Company in 2017 related to expenses paid on his behalf by the Company, primarily the housing and commuting expenses.
- (8)
- Amount includes 401(k) employer matching contributions of $5,067 and the aggregate incremental costs of perquisites and other personal benefits, including, among other things, a $200,000 partial signing bonus paid to Mr. Watson pursuant to his employment agreement, a housing allowance of $90,000 for his first six months of employment and relocation benefits worth $80,173.
- (9)
- Amount includes 401(k) employer matching contributions of $8,270 and the aggregate incremental costs of perquisites and other personal benefits.
- (10)
- Amount includes 401(k) employer matching contributions of $3,174 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to providing housing near our principal executive offices in Santa Monica, California for Mr. Pierantoni and transportation costs in connection with his commuting to Santa Monica. Mr. Pierantoni received $4,059 in tax gross-ups from the Company in 2019 related to expenses paid on his behalf by the Company, primarily the housing and commuting expenses.
- (11)
- Amount includes 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to providing housing near our principal executive offices in Santa Monica, California for Mr. Pierantoni and transportation costs in connection with his commuting to Santa Monica. Mr. Pierantoni received $19,283 in tax gross-ups from the Company in 2018 related to expenses paid on his behalf by the Company, primarily the housing and commuting expenses.
- (12)
- Amount includes 401(k) employer matching contributions of $8,400 and the aggregate incremental costs of perquisites and other personal benefits.
- (13)
- Amount includes a $425,000 severance payment associated with Mr. McClung's termination in June 2019, 401(k) employer matching contributions of $8,400 and the aggregate incremental costs of perquisites and other personal benefits.
- (14)
- Amount includes $423,000 in aggregate severance-related payments associated with Mr. Gunsagar's termination in June 2019, 401(k) employer matching contributions of $8,400, medical reimbursements of $17,738 and the aggregate incremental costs of perquisites and other personal benefits.
- (15)
- Amount includes 401(k) employer matching contributions of $5,737 and the aggregate incremental costs of perquisites and other personal benefits.
- (16)
- Amount includes medical reimbursements of $16,645, 401(k) employer matching contributions of $5,621 and the aggregate incremental costs of perquisites and other personal benefits.
| | | | | 43 |
Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | Compensation of Executive Officers |
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Estimated Future Payouts
under Non-Equity Incentive
Plan Awards(1) |
|
| Estimated Future Payouts
under Equity Incentive
Plan Awards(2) |
|
| All other
stock
awards:
Number of
shares of
stock or |
|
| All other
option
awards:
Number of
securities
underlying |
|
| Exercise or
base price
of option |
|
| Grant
Date Fair
Value of
Stock and
Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date |
|
| Threshold
($) |
|
| Target
(#) |
|
| Maximum
($) |
|
| Threshold
(#) |
|
| Target
(#) |
|
| Maximum
(#) |
|
| units
(#) |
|
| options
(#) |
|
| awards
($/sh) |
|
| Awards
($)(3) | | Michael D. Darrow | | 3/15/2019 | | | | | | | | | | | | 299 | | | 14,952 | | | 22,428 | | | — | | | — | | | — | | | 114,532 | | | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 36,753(4) | | | 68,598(5) | | | 6.93 | | | 526,821 | | | | 6/8/2019 | | | | | | | | | | | | — | | | — | | | — | | | 94,162(6) | | | — | | | — | | | 513,183 | | | | | | | 30,000 | | | 200,000 | | | 342,000 | | | | | | | | | | | | | | | | | | | | | | | Victor A. "Chip" Perry | | 3/15/2019 | | | | | | | | | | | | 1,980 | | | 99,006 | | | 148,509 | | | — | | | — | | | — | | | 758,386 | | | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 54,453(7) | | | 113,444(5) | | | 6.93 | | | 827,383 | | | | | | | 60,000 | | | 400,000 | | | 684,000 | | | | | | | | | | | | | | | | | | | | | | | Noel B. Watson | | 6/17/2019 | | | | | | | | | | | | — | | | — | | | — | | | 369,991(8) | | | 148,991(9) | | | 5.34 | | | 2,431,502 | | | | | | | 18,308 | | | 122,055 | | | 208,714 | | | | | | | | | | | | | | | | | | | | | | | Charles C. Thomas | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 14,461(10) | | | 12,096(5) | | | 6.93 | | | 148,199 | | John E. Pierantoni | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 2,133(11) | | | — | | | — | | | 14,782 | | | | | | | 21,630 | | | 144,200 | | | 246,582 | | | | | | | | | | | | | | | | | | | | | | | Simon E. Smith | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 32,583(12) | | | 27,216(5) | | | 6.93 | | | 333,764 | | | | 4/8/2019 | | | | | | | | | | | | — | | | — | | | — | | | 20,000(13) | | | — | | | — | | | 132,200 | | | | 6/8/2019 | | | | | | | | | | | | — | | | — | | | — | | | 47,081(14) | | | 165,910(15) | | | 5.45 | | | 770,959 | | | | | | | 15,000 | | | 100,000 | | | 171,000 | | | | | | | | | | | | | | | | | | | | | | | Jeffrey J. Swart | | 3/15/2019 | | | | | | | | | | | | 237 | | | 11,864 | | | 17,796 | | | — | | | — | | | — | | | 90,878 | | | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 29,714(16) | | | 54,432(5) | | | 6.93 | | | 421,846 | | | | 9/16/2019 | | | | | | | | | | | | — | | | — | | | — | | | 110,000(8) | | | — | | | — | | | 447,700 | | | | | | | 30,000 | | | 200,000 | | | 342,000 | | | | | | | | | | | | | | | | | | | | | | | Robert T. "Tommy" | | 3/15/2019 | | | | | | | | | | | | 299 | | | 14,952 | | | 22,428 | | | — | | | — | | | — | | | 114,532 | | McClung | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 36,753(4) | | | 68,598(5) | | | 6.93 | | | 526,821 | | | | | | | 30,000 | | | 200,000 | | | 342,000 | | | | | | | | | | | | | | | | | | | | | | | Neeraj Gunsagar | | 3/15/2019 | | | | | | | | | | | | 237 | | | 11,864 | | | 17,796 | | | — | | | — | | | — | | | 90,878 | | | | 3/15/2019 | | | | | | | | | | | | — | | | — | | | — | | | 29,953(17) | | | 54,432(5) | | | 6.93 | | | 423,502 | | | | | | | 30,000 | | | 200,000 | | | 342,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- (1)
- The amounts reported reflect the threshold, target and maximum performance-based cash incentive compensation amounts that could have been paid for 2019 under the 2019 annual incentive program for the senior executive team. The types and weighing of the performance measures under that program are described in the CD&A section of this Proxy Statement.
- (2)
- Represents PUs tied to total stockholder return based on our CAGR measured against the CAGR performance of the Russell 2000 Total Return Index over a three-year performance period from March 15, 2019 through March 14, 2022. The PUs provide an opportunity to earn 0% to 150% of the target number of PUs granted. At the threshold level, 2% of the target number of PUs granted will be earned; at the target level, 100% of the target number of PUs granted will be earned; and at the maximum level, 150% of the target number of PUs granted will be earned.
- (3)
- Amounts reflect aggregate grant date fair value of the stock option awards, RSUs and PUs granted during 2019, computed in accordance with FASB ASC Topic 718. Assumptions used to calculate these amounts are described in Note 11, "Stock-Based Awards," to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. The grant date fair value of RSUs and option awards for Mr. Perry excludes the incremental value associated with the acceleration of RSUs and options of $1,663,545 and $1,111,190, respectively, and the extension of the exercise period for vested stock options of $2,383,524 as determined under FASB ASC Topic 718.
- (4)
- Consists of: (a) 3,826 RSUs that vest over one year, with 1/4th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/4th vesting quarterly thereafter; and (b) 32,927 RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (5)
- The stock option award vests over four years, with 1/48th of the total number of shares subject to the option vesting on April 15, 2019 and an additional 1/48th vesting each month thereafter.
- (6)
- Represents RSUs that vest over two years, with 1/8th of the total number of shares subject to the RSUs vesting on September 15, 2019 and an additional 1/8th vesting quarterly thereafter.
- (7)
- Represents RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (8)
- Represents RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on December 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (9)
- The stock option award vests over four years, with 1/48th of the total number of shares subject to the option vesting on October 15, 2019 and an additional 1/48th vesting each month thereafter.
| | | 44 | | | | 2019 Proxy Statement |
Table of Contents | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation of Executive Officers |
- (10)
- Consists of: (a) 913 RSUs that vest over one year, with 1/4th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/4th vesting quarterly thereafter and (b) 13,548 RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (11)
- Represents RSUs that vest over one year, with 1/4th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/4th vesting quarterly thereafter.
- (12)
- Consists of: (a) 2,101 RSUs that vest over one year, with 1/4th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/4th vesting quarterly thereafter; and (b) 30,482 RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (13)
- Represents RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on July 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (14)
- Represents RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on September 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (15)
- The stock option award vests over four years, with 1/48th of the total number of shares subject to the option vesting on July 8, 2019 and an additional 1/48th vesting each month thereafter.
- (16)
- Consists of: (a) 3,587 RSUs that vest over one year, with 1/4th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/4th vesting quarterly thereafter; and (b) 26,127 RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/16th vesting quarterly thereafter.
- (17)
- Consists of: (a) 3,826 RSUs that vest over one year, with 1/4th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/4th vesting quarterly thereafter; and (b) 26,127 RSUs that vest over four years, with 1/16th of the total number of shares subject to the RSUs vesting on May 15, 2019 and an additional 1/16th vesting quarterly thereafter.
(1) | The amounts reported represent the aggregate grant-date fair value of the RSUs and options awarded to the named executive officer, calculated in accordance with FASB ASC Topic 718. Such grant-date fair value does not take into account any estimated forfeitures related to service-vesting conditions. The assumptions used in calculating the grant-date fair value of the RSUs and options reported in this column are set forth in Note 10 to our audited consolidated financial statements included in our Annual Report on Form10-K, as filed with the SEC.
|
(2) | Amount represents discretionary bonus paid in August 2018 for performance during the second quarter of 2018.
|
(3) | Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits.
|
(4) | Amount represents discretionary bonus paid in March 2018 for performance during the fourth quarter of 2017.
|
(5) | Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including, among other things, the costs related to housing costs in Santa Monica, California utilized by Mr. Perry, and transportation costs in connection with Mr. Perry commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Perry received $243,899 in taxgross-ups from the Company in 2017 related to expenses paid on Mr. Perry’s behalf by the Company, primarily housing and commuting expenses.
|
(6) | Amount represents discretionary bonus paid in March 2017 for performance during 2016.
|
(7) | Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including, among other things, the costs related to housing costs in Santa Monica, California utilized by Mr. Perry, and transportation costs in connection with Mr. Perry commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Perry received $263,772 in taxgross-ups from the Company in 2016 related to expenses paid on Mr. Perry’s behalf by the Company, primarily housing and commuting expenses.
|
(8) | Amount reflects medical expense reimbursements of $5,397 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Guthrie, and transportation costs in connection with Mr. Guthrie commuting to our principal executive offices in Santa Monica, California.
|
| Tax reimbursements were paid related to certain expenses. Mr. Guthrie received $16,866 in taxgross-ups from the Company in 2018 related to expenses paid on Mr. Guthrie’s behalf by the Company, primarily housing and commuting expenses. |
(9) | Amount reflects discretionary bonuses paid in November 2017 and March 2018 for performance during the third and fourth quarters of 2017, respectively.
|
(10) | Amount reflects medical expense reimbursements of $52,716 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Guthrie, and transportation costs in connection with Mr. Guthrie commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Guthrie received $170,566 in taxgross-ups from the Company in 2017 related to expenses paid on Mr. Guthrie’s behalf by the Company, primarily housing and commuting expenses.
|
(11) | Amount reflects discretionary bonuses paid in June 2016, September 2016, November 2016, and March 2017 for performance during the first, second, third, and fourth quarters of 2016, respectively.
|
(12) | Amount reflects medical expense reimbursements of $42,505 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Guthrie, and transportation costs in connection with Mr. Guthrie commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Guthrie received $396,290 in taxgross-ups from the Company in 2016 related to expenses paid on Mr. Guthrie’s behalf by the Company, primarily housing and commuting expenses.
|
(13) | Amount reflects discretionary bonuses paid to Mr. Pierantoni in August 2018 and November 2018 for performance during the second and third quarters of 2018, respectively.
|
(14) | Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Pierantoni, and transportation costs in connection with Mr. Pierantoni commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Pierantoni received $19,283 in taxgross-ups from the Company in 2018 related to expenses paid on Mr. Pierantoni’s behalf by the Company, primarily housing and commuting expenses.
|
| | | | | | | 2019 Proxy Statement | | 45 |
Table of Contents | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation of Executive Officers |
(15) | Amount reflects discretionary bonuses paid to Mr. McClung in August 2018 for performance during the second quarter of 2018.
|
(16) | Amount reflects discretionary bonuses paid to Mr. Darrow in August 2018 for performance during the second quarter of 2018.
|
(17) | Amount reflects discretionary bonuses paid in May 2017, November 2017 and March 2018 for performance during the first, third and fourth quarters of 2017, respectively.
|
(18) | Amount reflects discretionary bonuses paid to Mr. Skutta in August 2018 for performance during the second quarter of 2018.
|
2018 Grants of Plan-Based Awards Table OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date | | | All Other Stock
Awards:
Number of
Shares of Stock
or Units (#) | | | All Other Option
Awards: Number
of Securities
Underlying
Options (#) | | | Exercise or
Base Price of
Option Awards
($/Sh) | | | Grant Date Fair
Value of Stock
and Option
Awards ($)(1) | | Chip Perry | | | 5/12/2018 | | | | 81,818 | (2) | | | 261,122 | (3) | | | 9.59 | | | | 1,966,413 | | John Pierantoni | | | 5/12/2018 | | | | 44,779 | (4) | | | 23,211 | (3) | | | 9.59 | | | | 534,478 | | | | | 6/13/2018 | | | | 1,506 | (5) | | | — | | | | — | | | | 16,099 | | | | | | 11/27/2018 | | | | 1,087 | (6) | | | — | | | | — | | | | 11,490 | | Tommy McClung | | | 5/12/2018 | | | | 36,364 | (2) | | | 116,054 | (3) | | | 9.59 | | | | 873,964 | | | | | | 11/27/2018 | | | | 5,722 | (6) | | | — | | | | — | | | | 60,482 | | Michael Darrow | | | 5/12/2018 | | | | 28,227 | (2) | | | 90,087 | (3) | | | 9.59 | | | | 678,410 | | | | | | 11/27/2018 | | | | 5,722 | (6) | | | — | | | | — | | | | 60,482 | | Brian Skutta | | | 5/12/2018 | | | | 36,364 | (2) | | | 116,054 | (3) | | | 9.59 | | | | 873,964 | | | | | | 11/27/2018 | | | | 5,722 | (6) | | | — | | | | — | | | | 60,482 | |
(1) | Amounts reflect aggregate grant date fair value of the stock option awards and restricted stock units granted during 2018, computed in accordance with FASB ASC Topic 718. Assumptions used to calculate these amounts are described in Note 10, “Stock-Based Awards,” to our financial statements included in our Annual Report on Form10-K for the year ended December 31, 2018.
|
(2) | Represents restricted stock units that vest over four years, with 1/16th of the total number of shares subject to the restricted stock units vesting on July 15, 2018 and an additional 1/16th vesting quarterly thereafter until the restricted stock units are fully vested. Vesting is subject to continued service.
|
(3) | The stock option award vests over four years, with 1/48th of the total number of shares subject to the option vesting on May 15, 2018 and an additional 1/48th vesting each month thereafter. Vesting is subject to continued service.
|
(4) | Consists of: (a) a 25,455 restricted stock unit award that vest over four years, with 1/16th of the total number of shares subject to the restricted stock units vesting on July 15, 2018 and an additional 1/16th vesting quarterly thereafter until the restricted stock units are fully vested; and, (b) a 19,324 restricted stock unit award that vest over eighteen months, with 50% of the total number of shares subject to the restricted stock units vesting on May 15, 2019 and the remaining 50% vesting on November 15, 2019. Vesting is subject to continued service.
|
(5) | Represents restricted stock units that fully vested on July 16, 2018.
|
(6) | Represents restricted stock units that vest over one year, with 1/4th of the total number of shares subject to the restricted stock units vesting on January 15, 2019 and an additional 1/4th vesting quarterly thereafter. Vesting is subject to continued service.
|
| | | | | 46 | | | | 2019 Proxy Statement |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Outstanding Equity Awards at FiscalYear-End
The following table provides information regarding equity awards held by our named executive officers at December 31, 2018.2019. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | | | | | Number of Securities
Underlying Unexercised
Options | | | Option
Exercise
Price Per
Share | | | 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 | | | Name | | Grant Date | | | Exercisable | | | Unexercisable | | Chip Perry | | | 12/14/2015 | | | | (1 | ) | | | 1,303,333 | | | | 536,667 | | | $ | 8.02 | | | | 12/13/2025 | | | | | | | | | | | | | 12/14/2015 | | | | (2 | ) | | | | | | | | | | | | | | | | | | | 165,000 | | | $ | 1,494,900 | | | | | 6/10/2017 | | | | (3 | ) | | | 60,750 | | | | 101,250 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (4 | ) | | | 15,000 | | | | 135,000 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (5 | ) | | | | | | | | | | | | | | | | | | | 19,670 | | | $ | 178,210 | | | | | 7/28/2017 | | | | (6 | ) | | | | | | | | | | | | | | | | | | | 3,834 | | | $ | 34,736 | | | | | 5/12/2018 | | | | (7 | ) | | | 43,520 | | | | 217,602 | | | $ | 9.59 | | | | 5/12/2028 | | | | | | | | | | | | | | 5/12/2018 | | | | (8 | ) | | | | | | | | | | | | | | | | | | | 71,591 | | | $ | 648,614 | | John Pierantoni | | | 2/7/2014 | | | | (9 | ) | | | 68,448 | | | | — | | | $ | 9.255 | | | | 2/7/2024 | | | | | | | | | | | | | 5/15/2014 | | | | (10 | ) | | | 63,608 | | | | 2,766 | | | $ | 12.81 | | | | 5/15/2024 | | | | | | | | | | | | | 10/1/2015 | | | | (11 | ) | | | | | | | | | | | | | | | | | | | 4,283 | | | $ | 38,804 | | | | | 1/27/2016 | | | | (12 | ) | | | | | | | | | | | | | | | | | | | 2,665 | | | $ | 24,145 | | | | | 7/1/2016 | | | | (13 | ) | | | | | | | | | | | | | | | | | | | 11,895 | | | $ | 107,769 | | | | | 8/11/2016 | | | | (14 | ) | | | 45,174 | | | | 27,106 | | | $ | 10.85 | | | | 8/11/2026 | | | | | | | | | | | | | 6/10/2017 | | | | (3 | ) | | | 4,800 | | | | 43,200 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (4 | ) | | | 10,638 | | | | 17,730 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (5 | ) | | | | | | | | | | | | | | | | | | | 2,950 | | | $ | 26,727 | | | | | 5/12/2018 | | | | (7 | ) | | | 3,868 | | | | 19,343 | | | $ | 9.59 | | | | 5/12/2028 | | | | | | | | | | | | | 5/12/2018 | | | | (8 | ) | | | | | | | | | | | | | | | | | | | 22,274 | | | $ | 201,802 | | | | | 5/12/2018 | | | | (15 | ) | | | | | | | | | | | | | | | | | | | 19,324 | | | $ | 175,075 | | | | | | 11/27/2018 | | | | (16 | ) | | | | | | | | | | | | | | | | | | | 1,087 | | | $ | 9,848 | | Tommy McClung | | | 2/7/2014 | | | | (9 | ) | | | 35,000 | | | | — | | | $ | 9.255 | | | | 2/7/2024 | | | | | | | | | | | | | 2/7/2014 | | | | (9 | ) | | | 1,950 | | | | — | | | $ | 9.255 | | | | 2/7/2024 | | | | | | | | | | | | | 2/7/2014 | | | | (9 | ) | | | 11,950 | | | | — | | | $ | 9.255 | | | | 2/7/2024 | | | | | | | | | | | | | 5/15/2014 | | | | (10 | ) | | | 11,308 | | | | 491 | | | $ | 12.81 | | | | 5/15/2024 | | | | | | | | | | | | | 10/1/2015 | | | | (11 | ) | | | | | | | | | | | | | | | | | | | 17,131 | | | $ | 155,207 | | | | | 1/27/2016 | | | | (12 | ) | | | | | | | | | | | | | | | | | | | 10,660 | | | $ | 96,580 | | | | | 7/1/2016 | | | | (13 | ) | | | | | | | | | | | | | | | | | | | 28,125 | | | $ | 254,813 | | | | | 8/11/2016 | | | | (14 | ) | | | 187,499 | | | | 112,501 | | | $ | 10.85 | | | | 8/11/2026 | | | | | | | | | | | | | 6/10/2017 | | | | (3 | ) | | | 12,300 | | | | 110,700 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (4 | ) | | | 21,276 | | | | 35,460 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (5 | ) | | | | | | | | | | | | | | | | | | | 21,525 | | | $ | 195,017 | | | | | 7/28/2017 | | | | (6 | ) | | | | | | | | | | | | | | | | | | | 958 | | | $ | 8,679 | | | | | 8/16/2017 | | | | (4 | ) | | | 1,250 | | | | 11,250 | | | $ | 16.62 | | | | 8/16/2027 | | | | | | | | | | | | | 5/12/2018 | | | | (7 | ) | | | 19,342 | | | | 96,712 | | | $ | 9.59 | | | | 5/12/2028 | | | | | | | | | | | | | 5/12/2018 | | | | (8 | ) | | | | | | | | | | | | | | | | | | | 31,819 | | | $ | 288,280 | | | | | | 11/27/2018 | | | | (16 | ) | | | | | | | | | | | | | | | | | | | 5,722 | | | $ | 51,841 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards |
|
| Stock Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Securities
Underlying Unexercised
Options |
|
| Option
Exercise
Price Per |
|
| Option
Expiration |
|
| Number of
Shares or
Units of
Stock that
have Not |
|
| Market
Value of
Shares or
Units of
Stock that
have Not |
|
| Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
have Not |
|
| Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights that
have Not | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name |
| Grant Date |
|
| Exercisable |
|
| Unexercisable |
|
| Share |
|
| Date |
|
| Vested (#) |
|
| Vested ($) |
|
| Vested (#) |
| | Vested ($) | | Michael D. Darrow | | 3/1/2017(1) | | | 129,166 | | | 70,834 | | $ | 14.61 | | | 3/1/2027 | | | | | | | | | | | | | | | | 3/1/2017(2) | | | | | | | | | | | | | | | 37,500 | | | 178,125 | | | | | | | | | | 6/10/2017(3) | | | 27,000 | | | 63,000 | | $ | 18.91 | | | 6/10/2027 | | | | | | | | | | | | | | | | 8/16/2017(3) | | | 27,000 | | | 63,000 | | $ | 16.62 | | | 8/16/2027 | | | | | | | | | | | | | | | | 8/16/2017(4) | | | | | | | | | | | | | | | 3,319 | | | 15,765 | | | | | | | | | | 5/12/2018(5) | | | 37,536 | | | 52,551 | | $ | 9.59 | | | 5/12/2028 | | | | | | | | | | | | | | | | 5/12/2018(6) | | | | | | | | | | | | | | | 17,642 | | | 83,800 | | | | | | | | | | 3/15/2019(7) | | | 12,862 | | | 55,736 | | $ | 6.93 | | | 3/15/2029 | | | | | | | | | | | | | | | | 3/15/2019(8) | | | | | | | | | | | | | | | 27,711 | | | 131,627 | | | | | | | | | | 3/15/2019(9) | | | | | | | | | | | | | | | | | | | | | 299 | | | 1,420 | | | | 6/8/2019(4) | | | | | | | | | | | | | | | 70,622 | | | 335,455 | | | | | | | | Victor A. "Chip" Perry | | 12/14/2015(10) | | | 1,840,000 | | | — | | $ | 8.02 | | | 8/31/2021 | | | | | | | | | | | | | | | | 6/10/2017(10) | | | 312,000 | | | — | | $ | 18.91 | | | 8/31/2021 | | | | | | | | | | | | | | | | 5/12/2018(10) | | | 261,122 | | | — | | $ | 9.59 | | | 8/31/2021 | | | | | | | | | | | | | | | | 3/15/2019(10) | | | 113,444 | | | — | | $ | 6.93 | | | 8/31/2021 | | | | | | | | | | | | | | Noel B. Watson | | 6/17/2019(11) | | | 9,311 | | | 139,680 | | $ | 5.34 | | | 6/17/2029 | | | | | | | | | | | | | | | | 6/17/2019(12) | | | | | | | | | | | | | | | 346,867 | | | 1,647,618 | | | | | | | | Charles C. Thomas | | 5/15/2014(10) | | | 4,061 | | | — | | $ | 12.81 | | | 5/15/2024 | | | | | | | | | | | | | | | | 10/6/2014(10) | | | 2,000 | | | — | | $ | 20.85 | | | 10/6/2024 | | | | | | | | | | | | | | | | 2/3/2015(10) | | | 1,030 | | | — | | $ | 19.29 | | | 2/3/2025 | | | | | | | | | | | | | | | | 3/14/2016(13) | | | | | | | | | | | | | | | 250 | | | 1,188 | | | | | | | | | | 7/1/2016(14) | | | | | | | | | | | | | | | 458 | | | 2,176 | | | | | | | | | | 8/11/2016(15) | | | 7,297 | | | 1,043 | | $ | 10.85 | | | 8/11/2026 | | | | | | | | | | | | | | | | 6/10/2017(16) | | | 10,530 | | | 18,018 | | $ | 18.91 | | | 6/10/2027 | | | | | | | | | | | | | | | | 6/10/2017(4) | | | | | | | | | | | | | | | 1,116 | | | 5,301 | | | | | | | | | | 5/12/2018(6) | | | | | | | | | | | | | | | 8,313 | | | 39,487 | | | | | | | | | | 9/18/2018(17) | | | 3,547 | | | 7,092 | | $ | 13.49 | | | 9/18/2028 | | | | | | | | | | | | | | | | 3/15/2019(7) | | | 2,268 | | | 9,828 | | $ | 6.93 | | | 3/15/2029 | | | | | | | | | | | | | | | | 3/15/2019(18) | | | | | | | | | | | | | | �� | 11,237 | | | 53,376 | | | | | | | |
| | | | | 46 | | 2019 Proxy Statement |
Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | Compensation of Executive Officers |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards |
| | Stock Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Securities
Underlying Unexercised
Options |
|
| Option
Exercise
Price Per |
|
| Option
Expiration |
|
| Number of
Shares or
Units of
Stock that
have Not |
|
| Market
Value of
Shares or
Units of
Stock that
have Not |
|
| Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
have Not |
|
| Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights that
have Not | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name |
| Grant Date |
|
| Exercisable |
|
| Unexercisable |
|
| Share |
|
| Date |
|
| Vested (#) |
|
| Vested ($) |
|
| Vested (#) |
| | Vested ($) | | John E. Pierantoni | | 2/7/2014(10) | | | 68,448 | | | — | | $ | 9.26 | | | 6/30/2020 | | | | | | | | | | | | | | | | 5/15/2014(10) | | | 66,374 | | | — | | $ | 12.81 | | | 6/30/2020 | | | | | | | | | | | | | | | | 7/1/2016(14) | | | | | | | | | | | | | | | 3,965 | | | 18,834 | | | | | | | | | | 8/11/2016(15) | | | 63,244 | | | 9,036 | | $ | 10.85 | | | 6/30/2020 | | | | | | | | | | | | | | | | 6/10/2017(19) | | | 32,130 | | | 44,238 | | $ | 18.91 | | | 6/30/2020 | | | | | | | | | | | | | | | | 6/10/2017(4) | | | | | | | | | | | | | | | 1,770 | | | 8,408 | | | | | | | | | | 5/12/2018(5) | | | 9,671 | | | 13,540 | | $ | 9.59 | | | 6/30/2020 | | | | | | | | | | | | | | | | 5/12/2018(6) | | | | | | | | | | | | | | | 15,910 | | | 75,573 | | | | | | | | | | 3/15/2019(20) | | | | | | | | | | | | | | | 534 | | | 2,537 | | | | | | | | Simon E. Smith | | 2/22/2013(10) | | | 3,206 | | | — | | $ | 7.92 | | | 2/22/2023 | | | | | | | | | | | | | | | | 5/2/2013(10) | | | 1,069 | | | — | | $ | 7.92 | | | 5/2/2023 | | | | | | | | | | | | | | | | 10/22/2013(10) | | | 5,342 | | | — | | $ | 8.88 | | | 10/22/2023 | | | | | | | | | | | | | | | | 2/28/2014(10) | | | 3,549 | | | — | | $ | 9.26 | | | 2/28/2024 | | | | | | | | | | | | | | | | 5/15/2014(10) | | | 11,480 | | | — | | $ | 12.81 | | | 5/15/2024 | | | | | | | | | | | | | | | | 3/14/2016(21) | | | 6,927 | | | 1,094 | | $ | 6.03 | | | 3/14/2026 | | | | | | | | | | | | | | | | 3/14/2016(13) | | | | | | | | | | | | | | | 782 | | | 3,715 | | | | | | | | | | 7/1/2016(14) | | | | | | | | | | | | | | | 3,438 | | | 16,331 | | | | | | | | | | 8/11/2016(15) | | | 54,836 | | | 7,834 | | $ | 10.85 | | | 8/11/2026 | | | | | | | | | | | | | | | | 6/10/2017(22) | | | 31,438 | | | 42,626 | | $ | 18.91 | | | 6/10/2027 | | | | | | | | | | | | | | | | 6/10/2017(4) | | | | | | | | | | | | | | | 1,770 | | | 8,408 | | | | | | | | | | 5/12/2018(5) | | | 11,636 | | | 16,291 | | $ | 9.59 | | | 5/12/2028 | | | | | | | | | | | | | | | | 5/12/2018(6) | | | | | | | | | | | | | | | 19,142 | | | 90,925 | | | | | | | | | | 3/15/2019(7) | | | 5,103 | | | 22,113 | | $ | 6.93 | | | 3/15/2029 | | | | | | | | | | | | | | | | 3/15/2019(23) | | | | | | | | | | | | | | | 25,293 | | | 120,142 | | | | | | | | | | 4/8/2019(24) | | | | | | | | | | | | | | | 17,500 | | | 83,125 | | | | | | | | | | 6/8/2019(25) | | | 20,738 | | | 145,172 | | $ | 5.45 | | | 6/8/2029 | | | | | | | | | | | | | | | | 6/8/2019(26) | | | | | | | | | | | | | | | 41,196 | | | 195,681 | | | | | | | | Jeffrey J. Swart | | 5/2/2014(10) | | | 300,000 | | | — | | $ | 12.81 | | | 5/2/2024 | | | | | | | | | | | | | | | | 5/15/2014(10) | | | 11,227 | | | — | | $ | 12.81 | | | 5/15/2024 | | | | | | | | | | | | | | | | 7/1/2016(14) | | | | | | | | | | | | | | | 6,250 | | | 29,688 | | | | | | | | | | 8/11/2016(15) | | | 174,999 | | | 25,001 | | $ | 10.85 | | | 8/11/2026 | | | | | | | | | | | | | | | | 6/10/2017(27) | | | 62,460 | | | 84,276 | | $ | 18.91 | | | 6/10/2027 | | | | | | | | | | | | | | | | 6/10/2017(4) | | | | | | | | | | | | | | | 3,540 | | | 16,815 | | | | | | | | | | 5/12/2018(5) | | | 32,640 | | | 45,697 | | $ | 9.59 | | | 5/12/2028 | | | | | | | | | | | | | | | | 5/12/2018(6) | | | | | | | | | | | | | | | 15,341 | | | 72,870 | | | | | | | | | | 3/15/2019(7) | | | 10,206 | | | 44,226 | | $ | 6.93 | | | 3/15/2029 | | | | | | | | | | | | | | | | 3/15/2019(28) | | | | | | | | | | | | | | | 22,126 | | | 105,099 | | | | | | | | | | 3/15/2019(9) | | | | | | | | | | | | | | | | | | | | | 237 | | | 1,127 | | | | 9/16/2019(12) | | | | | | | | | | | | | | | 103,125 | | | 489,844 | | | | | | | | Robert T. "Tommy"
McClung |
| 3/15/2019(9) | | | | | | | | | | | | | | | | | | | | | 26 | | | 126 | | Neeraj Gunsagar | | 3/15/2019(9) | | | | | | | | | | | | | | | | | | | | | 21 | | | 100 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- (1)
- The remaining unvested options vest in 17 equal monthly installments beginning January 30, 2020, subject to continued service with us.
- (2)
- The award vests in six equal quarterly installments beginning on February 15, 2020, subject to continued service with us.
- (3)
- Consists of a stock option award for 90,000 shares, the unvested portion of which vests at 30% on June 15, 2020 and 40% on June 15, 2021, subject to continued service with us.
- (4)
- The award vests in six equal quarterly installments beginning on March 15, 2020, subject to continued service with us.
- (5)
- The remaining unvested options vest in 28 equal monthly installments beginning January 15, 2020, subject to continued service with us.
- (6)
- The award vests in 10 equal quarterly installments beginning on January 15, 2020, subject to continued service with us.
- (7)
- The remaining unvested options vest in 39 equal monthly installments beginning January 15, 2020, subject to continued service with us.
| | | | | 47 |
Table of Contents | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation of Executive Officers |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | | | | | Number of Securities
Underlying Unexercised
Options | | | Option
Exercise
Price Per
Share | | | 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 | | | Name | | Grant Date | | | Exercisable | | | Unexercisable | | Michael Darrow | | | 3/1/2017 | | | | (17 | ) | | | 79,166 | | | | 120,834 | | | $ | 14.61 | | | | 3/1/2027 | | | | | | | | | | | | | 3/1/2017 | | | | (18 | ) | | | | | | | | | | | | | | | | | | | 62,500 | | | $ | 566,250 | | | | | 6/10/2017 | | | | (4 | ) | | | 9,000 | | | | 81,000 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 7/28/2017 | | | | (6 | ) | | | | | | | | | | | | | | | | | | | 958 | | | $ | 8,679 | | | | | 8/16/2017 | | | | (4 | ) | | | 9,000 | | | | 81,000 | | | $ | 16.62 | | | | 8/16/2027 | | | | | | | | | | | | | 8/16/2017 | | | | (5 | ) | | | | | | | | | | | | | | | | | | | 5,532 | | | $ | 50,120 | | | | | 5/12/2018 | | | | (7 | ) | | | 15,014 | | | | 75,073 | | | $ | 9.59 | | | | 5/12/2028 | | | | | | | | | | | | | 5/12/2018 | | | | (8 | ) | | | | | | | | | | | | | | | | | | | 24,699 | | | $ | 223,773 | | | | | | 11/27/2018 | | | | (16 | ) | | | | | | | | | | | | | | | | | | | 5,722 | | | $ | 51,841 | | Brian Skutta | | | 3/14/2016 | | | | (19 | ) | | | 112,500 | | | | 119,532 | | | $ | 6.03 | | | | 3/14/2026 | | | | | | | | | | | | | 3/14/2016 | | | | (20 | ) | | | | | | | | | | | | | | | | | | | 42,188 | | | $ | 382,223 | | | | | 6/10/2017 | | | | (3 | ) | | | 21,276 | | | | 35,460 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (4 | ) | | | 13,000 | | | | 117,000 | | | $ | 18.91 | | | | 6/10/2027 | | | | | | | | | | | | | 6/10/2017 | | | | (5 | ) | | | | | | | | | | | | | | | | | | | 24,650 | | | $ | 223,329 | | | | | 7/28/2017 | | | | (6 | ) | | | | | | | | | | | | | | | | | | | 958 | | | $ | 8,679 | | | | | 8/16/2017 | | | | (4 | ) | | | 1,250 | | | | 11,250 | | | $ | 16.62 | | | | 8/16/2027 | | | | | | | | | | | | | 5/12/2018 | | | | (7 | ) | | | 19,342 | | | | 96,712 | | | $ | 9.59 | | | | 5/12/2028 | | | | | | | | | | | | | 5/12/2018 | | | | (8 | ) | | | | | | | | | | | | | | | | | | | 31,819 | | | $ | 288,280 | | | | | | 11/27/2018 | | | | (16 | ) | | | | | | | | | | | | | | | | | | | 5,722 | | | $ | 51,841 | |
- (8)
- Consists of two awards: (i) 957 RSUs that fully vest on February 15, 2020; and (ii) 26,754 RSUs that vest in 13 equal quarterly installments beginning on February 15, 2020, both subject to continued service with us.
- (9)
- The PUs and market value are calculated based on achieving threshold performance goals. The actual number of performance units that may vest will be determined by reference to our CAGR as measured against the CAGR performance of the Russell 2000 Total Return Index over a three-year performance period from March 15, 2019 through March 14, 2022.
- (10)
- The shares subject to the option are fully vested and immediately exercisable.
- (11)
- The remaining unvested options vest in 45 equal monthly installments beginning January 15, 2020, subject to continued service with us.
- (12)
- The award vests in 15 equal quarterly installments beginning on March 15, 2020, subject to continued service with us.
- (13)
- The award will fully vest on March 15, 2020, subject to continued service with us.
- (14)
- The award vests in two equal quarterly installments beginning on March 15, 2020, subject to continued service with us.
- (15)
- The remaining unvested options vest in six equal monthly installments beginning January 24, 2020, subject to continued service with us.
- (16)
- Consist of two awards: (i) 15,750 remaining unvested options, of which 6,750 and 9,000 options vest on June 15, 2020 and June 15, 2021, respectively; and (ii) 2,268 unvested options that vest in 18 equal monthly installments beginning January 15, 2020, both subject to continued service with us.
- (17)
- The remaining unvested options vest in 32 equal monthly installments beginning January 15, 2020, subject to continued service with us.
- (18)
- Consists of two awards: (i) 229 RSUs that fully vest on February 15, 2020; and (ii) 11,008 RSUs that vest in 13 equal quarterly installments beginning February 15, 2020, both subject to continued service with us.
- (19)
- Consists of two awards: (i) 33,600 remaining unvested options, of which 14,400 and 19,200 options vest on June 15, 2020 and June 15, 2021, respectively; and (ii) 10,638 unvested options that vest in 18 equal monthly installments beginning January 15, 2020, both subject to continued service with us.
- (20)
- The award will fully vest on February 15, 2020, subject to continued service with us.
- (21)
- The remaining unvested options vest in three equal monthly installments beginning January 15, 2020, subject to continued service with us.
- (22)
- The remaining unvested options consist of two awards: (i) 31,988 remaining unvested options, of which 13,709 and 18,279 options vest on June 15, 2020 and June 15, 2021, respectively; and (ii) 10,638 unvested options vest in eighteen equal monthly installments beginning January 15, 2020, both subject to continued service with us.
- (23)
- Consists of two awards: (i) 526 RSUs that fully vest on February 15, 2020; and (ii) 24,767 RSUs that vest in 13 equal quarterly installments beginning February 15, 2020, both subject to continued service with us.
- (24)
- The award vests in 14 equal quarterly installments beginning on January 15, 2020, subject to continued service with us.
- (25)
- The remaining unvested options vest in 42 equal monthly installments beginning January 8, 2020, subject to continued service with us.
- (26)
- The award vests in 14 equal quarterly installments beginning on March 15, 2020, subject to continued service with us.
- (27)
- The remaining unvested options consist of two awards: (i) 63,000 remaining unvested options, of which 27,000 and 36,000 options vest on June 15, 2020 and June 15, 2021, respectively; and (ii) 21,276 unvested options that vest in 18 equal monthly installments beginning January 15, 2020, both subject to continued service with us.
- (28)
- Consists of two awards: (i) 897 RSUs that fully vest on February 15, 2020; and (ii) 21,229 RSUs that vest in 13 equal quarterly installments beginning February 15, 2020, both subject to continued service with us.
(1) | The remaining unvested options vest in fourteen equal monthly installments beginning on January 1, 2019, subject to continued service with us.
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(2) | The award vests in four equal quarterly installments beginning on March 1, 2019, subject to continued service with us.
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(3) | The remaining unvested options vest in thirty equal monthly installments beginning on January 15, 2019, subject to continued service with us.
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(4) | The remaining unvested options vest 20% on June 15, 2019, 30% on June 15, 2020, and 40% on June 15, 2021, subject to continued service with us.
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(5) | The award vests in ten equal quarterly installments beginning on March 15, 2019, subject to continued service with us.
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(6) | The award vests in three equal quarterly installments beginning on February 15, 2019, subject to continued service with us.
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(7) | The remaining unvested options vest in forty equal monthly installments beginning on January 15, 2019, subject to continued service with us.
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(8) | The award vests in fourteen equal quarterly installments beginning on January 15, 2019, subject to continued service with us.
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(9) | Shares subject to the option are fully vested and immediately exercisable.
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(10) | The remaining unvested options vest in two equal monthly installments beginning on January 1, 2019, subject to continued service with us.
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(11) | The award vests in three equal quarterly installments beginning on March 15, 2019, subject to continued service with us.
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(12) | The award vests in four equal quarterly installments beginning on March 15, 2019, subject to continued service with us.
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(13) | The award vests in six equal quarterly installments beginning on March 15, 2019, subject to continued service with us.
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(14) | The remaining unvested options vest in eighteen equal monthly installments beginning on January 24, 2019, subject to continued service with us.
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(15) | The award vests in two equal installments on May 15, 2019 and November 15, 2019, subject to continued service with us.
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(16) | The award vests in four equal quarterly installments beginning on January 15, 2019, subject to continued service with us.
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(17) | The remaining unvested options vest in twenty-nine equal monthly installments beginning on January 30, 2019, subject to continued service with us.
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(18) | The award vests in ten equal quarterly installments beginning on February 15, 2019, subject to continued service with us.
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(19) | The remaining unvested options vest in seventeen equal monthly installments beginning on January 15, 2019, subject to continued service with us.
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(20) | The award vests in six equal quarterly installments beginning on February 15, 2019, subject to continued service with us.
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2018 Option Exercises and Stock Vested Table 2019 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information, on an aggregate basis, regarding (i) stock options exercised during 2018,2019, including the total number of shares acquired upon exercise and the aggregate value realized before payment of any applicable withholding tax and broker commissions, and (ii) restricted stock unitsRSUs that vested during 2018. | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | Name | | Number of Shares
Acquired on Exercise (#) | | | Value Realized on
Exercise ($)(1) | | | Number of Shares
Acquired on Vesting (#) | | | Value Realized on
Vesting ($)(2) | | Chip Perry | | | — | | | | — | | | | 188,207 | | | | 2,086,126 | | Michael Guthrie | | | 658,141 | | | | 971,783 | | | | 38,151 | | | | 408,329 | | John Pierantoni | | | — | | | | — | | | | 26,748 | | | | 299,786 | | Tommy McClung | | | — | | | | — | | | | 68,211 | | | | 765,678 | | Michael Darrow | | | — | | | | — | | | | 32,018 | | | | 352,751 | | Brian Skutta | | | — | | | | — | | | | 43,808 | | | | 484,471 | |
2019. (1) | The value realized on exercise is calculated as the difference between the actual sales price of the shares underlying the options exercised and the applicable exercise price of those options.
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(2) | The amount shown is the total gross dollar value realized upon the vesting of the restricted stock units, based on the closing price of our common stock on the day prior to the vest date.
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| | | | | | | | | | | | | | | |
| Option Awards |
|
| Stock Awards | | | | | | | | | | | | | | | | | Name |
|
| Number of
Shares
Acquired on
Exercise
(#) |
|
| Value
Realized on
Exercise
($) |
|
| Number of
Shares
Acquired on
Vesting
(#) |
|
| Value
Realized on
Vesting
($)(1) | | Michael D. Darrow | | | — | | | — | | | 73,532 | | | 409,247 | | Victor A. "Chip" Perry | | | — | | | — | | | 314,548 | | | 1,813,465 | | Noel B. Watson | | | — | | | — | | | 23,124 | | | 116,776 | | Charles C. Thomas | | | — | | | — | | | 10,322 | | | 57,053 | | John E. Pierantoni | | | — | | | — | | | 44,432 | | | 248,429 | | Simon E. Smith | | | — | | | — | | | 37,570 | | | 199,344 | | Jeffrey J. Swart | | | — | | | — | | | 55,571 | | | 305,369 | | Robert T. "Tommy" McClung | | | — | | | — | | | 103,263 | | | 596,458 | | Neeraj Gunsagar | | | — | | | — | | | 134,212 | | | 641,619 | | | | | | | | | | | | | | | | |
- (1)
- The amount shown is the total gross dollar value realized upon the vesting of the RSUs, based on the closing price of our common stock on the day prior to the vest date.
Executive Employment Arrangements EXECUTIVE EMPLOYMENT ARRANGEMENTS
We have employment agreements with Messrs. Perry, Darrow, McClungWatson, Smith and Skutta,Swart, and we previously had employment agreements with Messrs. GuthriePerry, Pierantoni, Gunsagar and Pierantoni whileMcClung before they served as our Chief Financial Officer and Interim Chief Financial Officer, respectively.left the Company. These agreements provide forat-will employment and generally include the named executive officer’sNEO's base salary, an indication of eligibility for an annual performance-based bonus opportunity, equity awards and certain severance and change in control benefits. These employment arrangements are described below and in “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below. For 2019, Mr. Darrow, then our EVP of Partner & OEM Development, the President of our ALG, Inc. subsidiary and, beginning May 31, 2019, our Interim President and CEO, had an annual base salary of $400,000 and was eligible for a performance-based bonus. In connection with his appointment as our Interim President and Chief Executive Officer, Mr. Darrow was granted 94,162 RSUs, and he was entitled to a monthly stipend of $20,000 during his service as our Interim President and CEO. We entered into an employment agreement with Mr. Darrow as of February 28, 2017 (the "Prior Darrow Employment Agreement"). Pursuant to the Prior Darrow Employment Agreement, Mr. Darrow was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs on the same terms and conditions as other similarly-situated employees. In connection with his appointment on March 9, 2020 as our permanent President and CEO, we entered into an employment agreement with Mr. Darrow as of March 9, 2020 (the "New Darrow Employment Agreement"), which superseded the Prior Darrow Employment Agreement. Pursuant to the New Darrow Employment Agreement, Mr. Darrow was granted an option to purchase 323,000 shares of our common stock, 488,000 RSUs and 326,000 PUs. The | | | | | 49 |
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terms of the New Darrow Employment Agreement are described in our Current Report on Form 8-K filed with the SEC on March 10, 2020 and will be further described in our proxy statement for our 2021 annual meeting. Please see "Potential Payments upon Termination, Change in Control or Certain Other Events" below for additional information on the Prior Darrow Employment Agreement. For 2018,2019, Mr. Perry, our President and Chief Executive Officer,CEO until his retirement on May 31, 2019, had an annual salary of $800,000 and an annual performance-based bonus opportunity targeted at 100% of his base salary. We entered into an employment agreement (the “Perry"Perry Employment Agreement”Agreement") on November 16, 2015 with Mr. Perry. Pursuant to the Perry Employment Agreement, Mr. Perry iswas eligible for an annual performance-based bonus opportunity of 100% of his base salary, a minimum annual bonus opportunity of 50% of his base salary for achievement of minimum performance levels and a maximum annual bonus opportunity of 200% of his base salary for achievement | | | | | | | 2019 Proxy Statement | | 49 |
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of maximum performance levels. During the first two years of his employment (Mr. Perry’sPerry's two-year anniversary with us occurred in December 2017), Mr. Perry was entitled to receive monthly payments of $20,000 as an allowance for personal housing and travel costs andgross-up payments to cover the related taxes on such amounts. Mr. Perry iswas also eligible to participate in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees. In addition, Mr. Perry is eligible to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time.
Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the Perry Employment Agreement. For 2018,2019, Mr. Guthrie,Watson, our Chief Financial Officer until his resignation on February 1, 2018,CFO and CAO from June 17, 2019, had an annual base salary of $400,000$450,000 and was eligible for an annuala performance-based bonus. We entered into an employment agreement on October 25, 2013 with Mr. GuthrieWatson as of May 24, 2019 (the “Guthrie"Watson Employment Agreement”Agreement"). Pursuant to the GuthrieWatson Employment Agreement, Mr. GuthrieWatson was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees. The GuthrieMr. Watson also received a $400,000 signing bonus, with $200,000 paid on June 28, 2019 and $200,000 payable on December 31, 2020, provided that Mr. Watson remains employed with us on such date (except in the case of a change of control), and if he does not, he will be required to repay a prorated portion of the first installment of the signing bonus. Under the Watson Employment Agreement, provided that allMr. Watson was entitled to up to $100,000 of relocation assistance benefits and a monthly housing allowance of $15,000 for the first six months of his currentemployment, neither of which were subject to a tax gross up. Pursuant to the Watson Employment Agreement, Mr. Watson was granted a stock option to purchase 148,991 shares of our common stock with an exercise price equal to the fair market value of the shares on the date of grant and future stock options would permit exercise via a net exercise feature and, with respect to stock options granted prior369,991 RSUs. Please see "Equity Grants to our initial public offering, early exercisable as to unvested shares, subject to our right to repurchase any unvested shares upon termination of employment.Named Executive Officers" below for additional information on these grants. Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the GuthrieWatson Employment Agreement. For 2019, Mr. Thomas, our Vice President and Controller and, from April 1, 2019 until June 17, 2019, our principal financial officer and principal accounting officer, had an annual base salary of $237,500 and was eligible for a performance-based bonus. We do not, and did not in 2019, have an employment agreement with Mr. Thomas. | | | 50 | | |
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For 2018,2019, Mr. Pierantoni, our Chief Accounting OfficerCAO from 2013 until his resignation on April 1, 2019, and our Interim Chief Financial OfficerCFO from February 1, 2018 until his resignation, had an annual base salary of $350,000 until May 7, 2018, when it was increased to $360,500, and was eligible for an annual performance-based bonus. We entered into an employment agreement with Mr. Pierantoni as of August 18, 2015 (the “Pierantoni"Pierantoni Employment Agreement”Agreement"). Pursuant to the Pierantoni Employment Agreement, Mr. Pierantoni was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees. Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the Pierantoni Employment Agreement. Michael Darrow,Simon Smith, Jeffrey Swart, Neeraj Gunsagar and Tommy McClung and Brian Skutta
For 2018, each2019, Mr. Smith, our Senior Vice President of Messrs. Darrow, McClung and SkuttaDealer Development from July 2015 until his promotion to EVP of Dealer Sales & Services on June 20, 2019, had an annual base salary of $355,000 before his promotion and $400,000 and was eligible for an annual performance-based bonus.after the promotion; Mr. Darrow isSwart, our Executive Vice President, PartnerGeneral Counsel and OEM Development and the PresidentSecretary, had an annual base salary of ALG, Inc.$400,000; Mr. McClung is our Chief Technology Officer and Executive Vice President. Mr. Skutta isGunsagar, our Executive Vice President Dealer Sales and Service.Chief Marketing Officer from April 2016 until his termination on June 20, 2019, had an annual base salary of $400,000; and Mr. McClung, our Executive Vice President and Chief Technology Officer from July 2017 until his termination on June 20, 2019, had an annual base salary of $400,000. We entered into an employment agreement with Mr. DarrowSmith as of February 28,July 15, 2019 (the "Smith Employment Agreement"), with Mr. Swart as of January 26, 2017 (the “Darrow"Swart Employment Agreement”Agreement"), with Mr. Gunsagar as of June 29, 2015 (the "Gunsagar Employment Agreement") and with Mr. McClung as of January 12, 2017 (the “McClung"McClung Employment | | | | | 50 | | | | 2019 Proxy Statement |
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Agreement”) and with Mr. Skutta as of February 16, 2016, which was amended as of March 18, 2016 (as amended, the “Skutta Employment Agreement” Agreement"). Pursuant to their employment agreements, each of Messrs. Darrow,Smith, Swart, Gunsagar and McClung and Skutta iswas eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate
in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees. Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the DarrowSmith Employment Agreement, the McClungSwart Employment Agreement, the Gunsagar Employment Agreement and the SkuttaMcClung Employment Agreement. Potential Payments upon Termination, Change in Control or Certain Other Events POTENTIAL PAYMENTS UPON TERMINATION, CHANGE IN CONTROL OR CERTAIN OTHER EVENTS
Chip Perry Effective May 31, 2019, Mr. Perry retired from his positions as our President and CEO and Mr. Darrow was appointed as our Interim President and CEO. Mr. Perry agreed to provide consulting services to us for a two-year period following his departure in support of the management transition, during which consulting arrangement his stock options remain exercisable. On May 31, 2019, we agreed with Mr. Perry to treat his retirement as a termination without cause or resignation for good reason pursuant to the terms of the Perry Employment Agreement and, accordingly, Mr. Perry was paid benefits thereunder. The description below describes the terms of the Perry Employment Agreement as it was in effect on the last day of Mr. Perry's employment. The following summary is qualified in its entirety by reference to the Perry Employment Agreement. PursuantAgreement, and references to the terms"equity awards" do not, for purposes of thethis summary, include PUs, whose treatment is discussed later in this section. The Perry Employment Agreement provided that, if we terminateterminated Mr. Perry’sPerry's employment for a reason other than cause (as such term is defined in the Perry Employment Agreement and summarized below), or he resignsresigned from his | | | | | 51 |
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employment for good reason (as such term is defined in the Perry Employment Agreement and summarized below), then, in addition to earned but unpaid amounts, and subject to Mr. PerryPerry's signing a release of claims agreement with the Companyus and his continued compliance with a confidential information agreement entered into with the Company, he will receivewould have received (i) a lump sum payment equal to 200% of the sum of his then-current base salary and target annual bonus opportunity; (ii) if suchthe termination occurs prior tooccurred before a change in control, of the Company, immediate vesting of 100% of each of his then-outstanding equity awards; and (iii) if suchthe termination occursoccurred upon or after a change in control, of the Company, immediate vesting of 100% of each of his then-outstanding equity awards. If Mr. Perry’sPerry's employment with the Company terminatesus had terminated due to his death or disability (as such term is defined in the Perry Employment Agreement and summarized below), regardless of whether before, on or after a change in control, then, in addition to earned but unpaid amounts, and subject to Mr. PerryPerry's (or his estate)estate's) signing a release of claims agreement with the Companyus and his continued compliance with a confidential information agreement entered into with the Company, us, he will receivewould have received immediate vesting of each of his then-outstanding equity awards.
In the event ofIf a change in control that occurshad occurred while Mr. Perry remainswas employed by us, and if he remainshad remained employed with us (or our successor) as of the first day immediately following the12-month anniversary of the closing of the change in control, then 100% of any of Mr. Perry’sPerry's equity awards that both are outstanding as of such date and were granted to him at least 90 days prior tobefore the change in control will vestwould have vested and, if applicable, become fully exercisable.
The Perry Employment Agreement providesprovided that any severance payments and benefits payable to Mr. Perry willwould be subject to a delay in payment if and to the extent required by Section 409A of the Internal Revenue Code (the “Code”"Code"). If the severance payments and other benefits payable to Mr. Perry constitute “parachute payments”constituted "parachute payments" under Section 280G of the Code and would behave been subject to the applicable excise tax, then Mr. Perry’sPerry's severance and other benefits will be either: (i)would have been either delivered in full;full or (ii) delivered to such lesser extent whichas would result in no portion of such benefits being subject to the excise tax, whichever resultsresulted in the receipt by Mr. Perry on anafter-tax basis of the greatest amount of benefits. Michael Guthrie, John Pierantoni, Noel Watson, Michael Darrow, Simon Smith, Jeff Swart, Neeraj Gunsagar and Tommy McClung and Brian Skutta
The severance and change in control-related terms of the Guthrie Employment Agreement, the Pierantoni Employment Agreement, the Watson Employment Agreement, the Prior Darrow Employment | | | | | | | 2019 Proxy Statement | | 51 |
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Agreement, the Smith Employment Agreement, the Swart Employment Agreement, the Gunsagar Employment Agreement and the McClung Employment Agreement and the Skutta Employment Agreement (collectively, the “Executive"Executive Employment Agreements”Agreements") related to potential payments upon termination, change in control and certain other events are generally the same, except as noted below. Except as noted, the description below applies to each Executive Employment Agreement, and refers to Messrs. Guthrie, Pierantoni, Watson, Darrow McClung(in relation to the Prior Darrow Employment Agreement), Smith, Swart, Gunsagar and Skutta,McClung, as applicable, as the “Executive.”"Executive." Effective FebruaryMarch 9, 2020, Mr. Darrow was appointed as our permanent President and CEO, in connection with which the Company entered into the New Darrow Employment Agreement. The description below relates to the Prior Darrow Employment Agreement as it was in effect during 2019. The terms of the New Darrow Employment Agreement are described in our Current Report on Form 8-K filed with the SEC on March 10, 2020 and will be further described in our proxy statement for our 2021 annual meeting. Effective April 1, 2018,2019, Mr. GuthriePierantoni resigned from his positionpositions as the Company’s Chief Financial Officerour Interim CFO and Mr. PierantoniCAO and Charles Thomas was appointed as the Company’s Interim Chief Financial Officer.our principal financial officer and principal accounting officer. We do not, and did not in 2019, have an employment agreement with Mr. GuthrieThomas. Mr. Pierantoni agreed to provide consulting services to the Companyus for a four-monthone-year period following his departure in support of the management transition, during which consulting arrangement he continued to vest in his equity awards, but he did not otherwise receive any severance benefits in connection with his resignation. The description below relates to the Guthrie Employment Agreement as it was in effect on the last day of Mr. Guthrie’s employment. Effective April 1, 2019, Mr. Pierantoni resigned from his positions as the Company’s Interim Chief Financial Officer and Chief Accounting Officer and Charles Thomas was appointed as the Company’s principal financial officer and principal accounting officer. The Company does not have an employment agreement with Mr. Thomas. Mr. Pierantoni has agreed to provide consulting services to the Company for aone-year period following his departure in support of the management transition, during which consulting arrangement he will continue to vest in his equity awards,but he did not otherwise receive any severance benefits in connection with his resignation. The description below relates to the Pierantoni Employment Agreement as it was in effect on the last day of Mr. Pierantoni’sPierantoni's employment.
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Effective June 20, 2019, Messrs. Gunsagar and McClung were terminated from their respective positions as our Executive Vice President and Chief Marketing Officer and Executive Vice President and Chief Technology Officer, and each of them received the benefits to which they were entitled in connection with a termination without cause under their respective employment agreements. The description below relates to the Gunsagar Employment Agreement and the McClung Employment Agreement as they were in effect on the last day of Messrs. Gunsagar's and McClung's employment. The following summary is qualified in its entirety by reference to the Executive Employment Agreements.Agreements, and references to "equity awards" do not, for purposes of this summary, include PUs, whose treatment is discussed later in this section. Under the Executive Employment Agreements, if we terminate the Executive’sExecutive's employment with us for a reason other than cause (as such term is defined in the Executive Employment Agreement and summarized below), or the Executive resigns from his employment for good reason (as such term is defined in the Executive Employment Agreement and summarized below), and in each case, suchthe termination occurs prior tobefore a change in control (as such term is defined in the Executive Employment Agreement and summarized below), then, subject to the Executive signing a release of claims agreement with us and his continued compliance with a confidential information agreement entered into with us, and for Messrs. Guthrie andMr. Darrow only, the continued compliance with thenon-solicitation provisions in his Executive Employment Agreement, he will receive: (i) continuing payments of his base salary for a period of time commencingbeginning immediately after his separation of service through the date that is six months followingafter the separation date, plus an additional two months for every fully completed year of service with us (measured from his original start date with us or any predecessor to us), but not to exceed a total of 12 months (the “Executive"Executive Severance Period”Period");, except in the case of Mr. Watson, in which case these payments will continue for 18 months after his separation date, if that date is before June 17, 2020, and for 12 months after his separation date otherwise, and the "Executive Severance Period" with respect to Mr. Watson will refer to this alternative period; (ii) the immediate vesting of each of his then-outstanding equity awards as to the number of shares that otherwise would have vested had he remained our employee through the12-month anniversary of the termination date; and (iii) reimbursement (the “COBRA Reimbursement”"COBRA Reimbursement") for the payments the Executive makes for medical, vision and dental coverage under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”("COBRA"), or, in the case of Messrs. GuthrieWatson, Darrow and Darrow,Smith, at our election, direct payment of the COBRA premiums to the insurance provider, up to the full Executive Severance Period (the “Direct"Direct COBRA Benefits”Benefits" and, collectively with the COBRA Reimbursements, the “COBRA Coverage”"COBRA Coverage")., except in the case of Mr. Watson, where the period in question is 12 months from his separation date. If we cannot provide the applicable COBRA Coverage to which the Executive becomes entitled without a violation of applicable laws, we may instead provide a monthly cash payment, plus agross-up amount to cover the taxes on suchthe payment, during the Executive Severance Period (which the Executive may, but does not have to, use toward his health care continuation costs). If we cannot provide these cash payments in | | | | | 52 | | | | 2019 Proxy Statement |
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lieu of COBRA Coverage without violating applicable law, then we will not provide the Executive with the COBRA Coverage or these cash payments. If the Executive’sExecutive's employment terminates due to his death or disability (as such term is defined in the Executive Employment Agreement and summarized below), regardless of whether before, on or after a change in control, then, subject to the Executive (or his estate) signing a release of claims agreement with us and his continued compliance with a confidential information agreement entered into with us, and for Messrs. Guthrie andMr. Darrow only, thehis continued compliance with thenon-solicitation provisions in his Executive Employment Agreement, the Executive will receive: (i) the immediate vesting as to 100% of his then-outstanding equity awards; and (ii) the COBRA Reimbursement (or, for Mr. Guthrie,Watson, at our election, the Direct COBRA Benefits) (ifup to the full Executive Severance Period (but if the applicable COBRA Coverage is in violation of applicable laws, the Executive will not receive the COBRA Coverage or any cash payments in lieu thereof). Under the terms of each Executive Employment Agreement, if we terminate the Executive’sExecutive's employment for a reason other than cause, or the Executive resigns from his employment for good reason, and in each case, suchthe termination occurs upon the closing of a change in control or later, then, subject to the Executive signing a release of claims agreement with us and his continued compliance with a confidential information agreement entered into with us, and for Messrs. Guthrie andMr. Darrow only, thehis continued compliance with thenon-solicitation provisions in his | | | | | 53 |
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PROXY STATEMENT | | Compensation of Executive Officers |
Executive Employment Agreement, he will receive: (i) continuing payments of his base salary during the Executive Severance Period; (ii) the immediate vesting as to 100% of his then-outstanding equity awards that are both outstanding as of his termination date and were granted to him at least 90 days prior tobefore the change in control; and (iii) the COBRA Reimbursement or, for Mr. Guthrie,Watson, at our election, the Direct COBRA Benefits (or the cash payments in lieu thereof, as described above, unless doing so would violate applicable laws). In up to the eventfull Executive Severance Period, except in the case of Mr. Watson, where the period in question is 12 months from his separation date; and (iv) with respect to Mr. Watson, he will receive any unpaid portion of his signing bonus and will be relieved of any obligation to repay any portion of the signing bonus and his relocation benefits.
If a change in control that occurs while the Executive remains employed with us and if he remains employed with us (or our successor) as of the first day immediately following the12-month anniversary of the closing of the change in control, then 100% of any of the Executive’sExecutive's then-outstanding equity awards that both are outstanding as of such date and were granted to him at least 90 days prior to suchbefore the change in control will vest and, if applicable, become fully exercisable. The Executive Employment Agreements each provide that any severance payments and benefits to the Executive will be subject to a delay in payment if and to the extent required by Section 409A of the Code. If the severance payments and other benefits payable to an Executive constitute “parachute payments”"parachute payments" under Section 280G of the Code and would be subject to the applicable excise tax, then the Executive’sExecutive's severance and other benefits will be either: (i)either delivered in full;full or (ii) delivered to such lesser extent whichas would result in no portion of such benefits being subject to the excise tax, whichever results in the receipt by the Executive on anafter-tax basis of the greatest amount of benefits. After the execution of the employment agreements described above, we established PUs, whose terms supersede any contrary terms of an Executive's employment agreement. The following summary of the treatment of PUs in connection with certain triggering events applies to each of our NEOs, regardless of the provisions of his individual employment agreement, and is qualified in its entirety by reference to the form of PU award agreement that we have previously filed. If a triggering event does not occur, the PUs will vest at the end of a three-year "performance period" beginning on March 15, 2019 and ending on March 14, 2022, with a number of shares of our common stock being issued in settlement of each PU between 0 and 1.5 shares. The number of shares issued in settlement is determined by comparing our compound annual growth rate, or CAGR, during the performance period to that of the Russell 2000 Total Return Index. The shares will be issued within 90 days of the end of the performance period, on a date referred to as the "determination date." If the Executive experiences a qualifying termination before a change in control, then a pro-rata portion of his PUs (determined by dividing the total number of days between the beginning of the performance period and his termination date by the total number of days in the performance period) will immediately vest but will not be settled until the determination date, at which time those vested PUs will be settled for common stock based on our comparative CAGR performance during the performance period. If a change of control occurs after the qualifying termination but before the last day of the performance period, then the pro-rata portion of the Executive's PUs that vested on his termination date will be settled based on our comparative CAGR performance during the portion of the performance period before and including the date of the change in control, with our ending stock price being the price of our stock in the change in control. We refer to this settlement exchange ratio as the CIC Achievement Level. If the acquiring entity assumes the PUs, they will be settled on the last day of the performance period; otherwise, they will be settled immediately before the change in control. If the Executive dies or becomes disabled, the PUs will immediately vest and each PU will be settled for one share of our common stock. | | | 54 | | |
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If a change in control occurs while the Executive remains employed with us, his PUs will settle at the CIC Achievement Level, subject to his continued employment through the end of the performance period, unless the acquiring entity does not assume the PUs, in which case they vest immediately before the change in control. If the Executive is terminated without cause or resigns for good reason after a change in control but before the end of the performance period, the PUs will vest immediately but will not be settled until the end of the performance period, at which time they will be settled at the CIC Achievement Level. If the Executive retires after a change in control but before the end of the performance period, a pro-rata portion of his PUs (determined by dividing the total number of days between the beginning of the performance period and his termination date by the total number of days in the performance period) will vest and be settled at the CIC Achievement Level. If the Executive dies or becomes disabled after a change in control but before the end of the performance period, his PUs will immediately vest and will be settled at the CIC Achievement Level. Except as noted, the definitions below apply to the Perry Employment Agreement, and each Executive Employment Agreement and the PU award agreement, and each agreement refers to Messrs. Perry, Guthrie,Watson, Pierantoni, Darrow McClung(in relation to the Prior Darrow Employment Agreement), Smith, Swart, Gunsagar and Skutta,McClung, as applicable, as the “Executive.”"Executive." The following are summaries of the definitions included in the Perry Employment Agreement, and the Executive Employment Agreements and the PU award agreement, and are qualified in their entirety by reference to the Perry Employment Agreement, and the Executive Employment Agreements and the PU award agreement, as applicable. As used in this section, “cause”"cause" means: (i) the Executive’sExecutive's failure (continued failure, with respect to Mr. Perry) to perform his assigned duties or responsibilities as an employee (as President and Chief Executive Officer,CEO, with respect to Mr. Perry) (other than a failure resulting from the Executive’sExecutive's disability) after written notice thereof from us describing (with | | | | | | | 2019 Proxy Statement | | 53 |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
specificity, with respect to Mr. Perry) his failure to perform such duties or responsibilities, andwhich notice has actually been received by the Executive, with respect to Mr. Perry; (ii) the Executive engaging in any act of dishonesty, fraud or misrepresentation with respect to us; (iii) the Executive’sExecutive's violation of any federal or state law or regulation applicable to our business or our affiliates; (iv) the Executive’sExecutive's breach (material breach, with respect to Mr. Perry) of any confidentiality agreement or invention assignment agreement; or (v) with respect to Messrs. Guthrie, Pierantoni, Darrow, McClung and Skutta, the Executive being convicted of, or entering a plea of nolo contendere to, any crime; withcrime (with respect to Mr. Perry, the Executive being convicted of, or entering a plea of nolo contendere to, a felony or any crime involving moral turpitude.turpitude). The Perry Employment Agreement and each Executive Employment Agreement note, for purposes of clarity, that the Executive’sExecutive's termination of employment due to death or disability is not, by itself, deemed to be a termination by the Companyus other than for cause or a resignation for good reason. As used in this section, “change"change in control”control" means: (i) a change in our ownership whichthat occurs on the date that any person, or persons acting as a group, acquires ownership of our stock that, together with the stock held by such person, constitutes more than 50% of the total voting power of our stock; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any one person who is considered to own more than 50% of the total voting power of theour stock of the Company will not be considered a change in controlcontrol; provided, further, in the case of the Perry Employment Agreement and provided, further,each Executive Employment Agreement, that our Board may, in its reasonable judgment, determine that any such change in the ownership of theour stock of the Company as a result of a financing of the Company or otherwise for fundraising purposes, and in each case that is approved by the Board prior to suchbefore the change in ownership, also will not be considered a change in control; (ii) in the case of the PU award agreement only, a change in our effective control which occurs on the date that a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or (ii)election is not endorsed by a majority of the members of the Board before the date of the appointment or election (but if any person is considered to be in effective control of us, the acquisition of additional control by the same person will not be a change in control); or (iii) subject to certain exclusions specified in the Perry Employment Agreement, and the Executive Employment Agreements and the PU award agreement, a change in the ownership of a substantial portion of our assets whichthat occurs on the date that any person, or persons acting as a group, acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by suchthe person or persons) assets from us that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of our assets immediately prior to such before the | | | | | 55 |
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PROXY STATEMENT | | Compensation of Executive Officers |
acquisition or acquisitions,acquisitions; provided, that our Board may determine in its reasonable judgment that certain asset transfers that should not in its reasonable judgment, be considered to be a change in control due to extenuating factors. However, a transaction will not constitute a change in control if: (i)if (x) its sole purpose is to change the state of the Company’sour incorporation or (ii)(y) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’sour securities immediately before suchthe transaction. In addition, a transaction will not be deemed a change in control unless the transactionit qualifies as a change in control event within the meaning of Section 409A of the Code. As used in this section, “disability”"disability" means the Executive:Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months;months or (ii) is, by reason of any medically determinable physical or mental impairment whichthat can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering our employees. As used in this section, “good reason”"good reason" means the Executive’sExecutive's resignation within 30 days following the expiration of a cure period (discussed below) following the occurrence of one or more of the following, without the Executive’sExecutive's consent: (i) with respect to the Executive Employment Agreements only, a material reduction in the Executive’sExecutive's base salary, which reduction is not applicable to a majority of the Company’sour senior management, excluding the substitution of substantially equivalent compensation and benefits; with respect to the Perry Employment | | | | | 54 | | | | 2019 Proxy Statement |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Agreement only, a reduction in the Executive’sExecutive's base salary, excluding the substitution of substantially equivalent compensation and benefits, which reduction, as a percentage of base salary, is of a greater percentage than the percentage of base salary reduction applicable to a majority of our senior management; (ii) with respect to the Executive Employment Agreements only, a material reduction of the Executive’sExecutive's authority, duties or responsibilities, unless the Executive is provided with a comparable position; provided, however, that a reduction in authority, duties or responsibilities primarily by virtue of our being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when our Chief Executive OfficerCEO remains as such following an acquisition where we become a wholly owned subsidiary of an acquirer, but is not made the Chief Executive OfficerCEO of the acquiring corporation)company), will not constitute “good reason”"good reason"; with respect to the Perry Employment Agreement only, a material reduction of the Executive’sExecutive's title, positions, authority, duties or responsibilities, or the assignment to the Executive of titles, positions, authority, duties or responsibilities that are inconsistent with his position as our President and Chief Executive Officer,CEO, in each case, whichthat results in a material diminution of Executive’shis authority, duties or responsibilities; provided, however, that a reduction in title, position, authority, duties or responsibilities by virtue of our being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when our Chief Executive Officer CEO remains as such following an acquisition where we become a wholly owned subsidiary of an acquirer, but is not made the Chief Executive OfficerCEO of the acquiring corporation)company), will not constitute “good reason”"good reason"; (iii) a material change (with respect to Mr. Perry only, any actual change) in the geographic location of the Executive’sExecutive's primary work facility or location; provided, that a relocation of 50 miles or less from the Executive’sExecutive's then-present location or to the Executive’sExecutive's home as his primary work location will not be considered a material change in geographic location; or, with respect to the Perry Employment Agreement only, the following subclausesclauses (iv) through (vi): (iv) the Executive being required to report to any person other than the Board or, if the Company iswe are acquired, either the Board or the board of directors of anthe acquiring company; (v) the failure by a successor entity of the Companyus to assume the Perry Employment Agreement; or (vi) any other material breach of the Perry Employment Agreement. In order forFor an event to qualify as good reason, the Executive must not terminate employment with us without first providing us with written notice of the acts or omissions constituting the grounds for “good reason”"good reason" within 90 days of the initial existence of the grounds for “good reason”"good reason" and a reasonable cure period of not less than 30 days following the date of such notice, and such grounds must not have been cured during such time and for Messrs. GuthrieWatson, Darrow and DarrowSmith only, any resignation for “good reason”"good reason" must occur within two years of the initial existence of the acts or omissions constituting the grounds for “good"good reason.”" As used in this section, "qualifying termination" means (i) the Executive's termination on or after May 15, 2021 due to retirement, (ii) the Executive's termination without cause or (iii) the Executive's resignation for good reason. As used in this section, "retirement" means the Executive's ceasing to be a service provider for any reason other than his disability, death or termination by us for cause if (i) he is then at least age 65, (ii) he has previously | | | | | 56 | | 2019 Proxy Statement | | 55 |
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PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation of Executive Officers |
served as a service provider for not less than five years and (iii) he has provided at least six months' advance written notice to us of his intention to terminate due to retirement. The following table provides information concerning the estimated payments and benefits that would be provided in the circumstances described above for each of the named executive officersNEOs serving as of the end of 20182019 pursuant to the employment agreements in effect at that time. Payments and benefits are estimated assuming that the triggering event took place on the last business day of 20182019 (December 31, 2018)2019), and the price per share of the Company’sour common stock is the closing price of the Company’sour common stock on that date of $9.06.$4.75. There can be no assurances that a triggering event would produce the same or similar results as those estimated below if such eventit occurs on any other date or at any other price, or if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments of benefits, any actual payments and benefits may be different. | | | | | | | | | | | | | | | | | | | | | | | | Potential Payments Upon | | | | | | | Termination other than for Cause
or a Termination for Good Reason | | | Change in
Control ($)(5) | | | Death or
Disability ($) | | | Name | | Benefit | | Prior to
Change in
Control ($) | | | Upon or
Following
Change in
Control ($) | | Chip Perry | | Cash Severance(1) | | | 3,200,000 | | | | 3,200,000 | | | | — | | | | — | | | | Vesting Acceleration of Equity Awards(2) | | | 929,141 | (3) | | | 1,458,797 | (4) | | | 609,390 | | | | 1,458,797 | (4) | | | Continued Coverage of Employee Benefits | | | — | | | | — | | | | — | | | | — | | | | | Total Benefits | | | 4,129,141 | | | | 4,658,797 | | | | 609,390 | | | | 1,458,797 | | John Pierantoni | | Cash Severance(6) | | | 360,500 | | | | 360,500 | | | | — | | | | — | | | | Vesting Acceleration of Equity Awards(2) | | | 898,969 | (7) | | | 1,296,531 | (8) | | | 397,562 | | | | 1,296,531 | (4) | | | Continued Coverage of Employee Benefits(9) | | | 28,218 | | | | 28,218 | | | | — | | | | 28,218 | | | | | Total Benefits | | | 1,287,687 | | | | 1,685,249 | | | | 397,562 | | | | 1,324,749 | | Tommy McClung | | Cash Severance(6) | | | 400,000 | | | | 400,000 | | | | — | | | | — | | | | Vesting Acceleration of Equity Awards(2) | | | 642,553 | (7) | | | 1,050,416 | (8) | | | 407,863 | | | | 1,050,416 | (4) | | | Continued Coverage of Employee Benefits(9) | | | 28,218 | | | | 28,218 | | | | — | | | | 28,218 | | | | | Total Benefits | | | 1,070,771 | | | | 1,478,634 | | | | 407,863 | | | | 1,078,634 | | Michael Darrow | | Cash Severance(6) | | | 266,667 | | | | 266,667 | | | | — | | | | — | | | | Vesting Acceleration of Equity Awards(2) | | | 2,356,461 | (7) | | | 2,356,461 | (8) | | | 570,227 | | | | 2,356,461 | (4) | | | Continued Coverage of Employee Benefits(9) | | | 18,812 | | | | 18,812 | | | | — | | | | 18,812 | | | | | Total Benefits | | | 2,641,939 | | | | 2,641,939 | | | | 570,227 | | | | 2,375,273 | |
| | | | | | | | | | | | | | | | | | | |
| Potential Payments Upon | | | | | | | | | | | | | | | | | | | | | | |
| Termination other than for Cause
or a Termination for Good Reason |
| | | | | | | | | | | | | | | | | | | | | | | | Name |
| Benefit |
|
| Prior to
Change in
Control
($) |
|
| Upon or
Following
Change in
Control
($) |
|
| Change in
Control
($)(1) |
|
| Death or
Disability
($) | | Michael D. Darrow | | Cash Severance(2) | | | 333,333 | | | 333,333 | | | — | | | — | | | | Vesting Acceleration of | | | | | | | | | | | | | | | | Equity Awards(3) | | | 448,977(4) | | | 744,772(5) | | | 314,716 | | | 815,794(6) | | | | Continued Coverage of | | | | | | | | | | | | | | | | Employee Benefits(7) | | | 23,515 | | | 23,515 | | | — | | | 23,515 | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 805,825 | | | 1,101,620 | | | 314,716 | | | 839,309 | | | | | | | | | | | | | | | | | | | Noel B. Watson | | Cash Severance(2) | | | 675,000 | | | 875,000(8) | | | — | | | — | | | | Vesting Acceleration of | | | | | | | | | | | | | | | | Equity Awards(3) | | | 439,366(4) | | | 1,647,618(5) | | | 1,208,253 | | | 1,647,618(6) | | | | Continued Coverage of | | | | | | | | | | | | | | | | Employee Benefits | | | 28,218(9) | | | 28,218(9) | | | — | | | 42,327(7) | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 1,142,584 | | | 2,550,836 | | | 1,208,253 | | | 1,689,945 | | | | | | | | | | | | | | | | | | | Simon E. Smith | | Cash Severance(2) | | | 400,000 | | | 400,000 | | | — | | | — | | | | Vesting Acceleration of | | | | | | | | | | | | | | | | Equity Awards(3) | | | 180,372(4) | | | 518,325(5) | | | 337,953 | | | 518,325(6) | | | | Continued Coverage of | | | | | | | | | | | | | | | | Employee Benefits(7) | | | 28,218 | | | 28,218 | | | — | | | 28,218 | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 608,590 | | | 946,543 | | | 337,953 | | | 546,543 | | | | | | | | | | | | | | | | | | | Jeffrey J. Swart | | Cash Severance(2) | | | 400,000 | | | 400,000 | | | — | | | — | | | | Vesting Acceleration of | | | | | | | | | | | | | | | | Equity Awards(3) | | | 250,970(4) | | | 714,315(5) | | | 478,358 | | | 770,669(6) | | | | Continued Coverage of | | | | | | | | | | | | | | | | Employee Benefits(7) | | | 19,728 | | | 19,728 | | | — | | | 19,728 | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 670,698 | | | 1,134,043 | | | 478,358 | | | 790,397 | | | | | | | | | | | | | | | | | | |
- (1)
- If a change in control occurs while the Executive remains employed by us and if he remains employed with us (or our successor) on the first day immediately following the 12-month anniversary of the closing of the change in control, then 100% of any of the Executive's equity awards other than PUs that both are outstanding as of such date and were granted to him at least 90 days before the change in control will vest and, if applicable, become fully exercisable. If the change of control occurs during the three-year performance period applicable to the Executive's PUs, then the number of PUs that vest in
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PROXY STATEMENT | | Compensation of Executive Officers |
connection with the change of control will be determined based upon the Company's CAGR performance measured against the Index companies' CAGR performance during the portion of the performance period the precedes the effective date of the change of control, but if the acquiring or surviving company assumes or substitutes the PUs with substantially similar equity awards, then the PUs will not vest until the last day of the performance period (but with the number of PUs vesting having been determined as of the closing of the change in control as described earlier).
- (2)
- Reflects the continuing payments of the Executive's base salary during the Executive's Severance Period. The Severance Period is defined as the period of time beginning immediately after the Executive's separation of service through the date that is six months after the separation, plus an additional two months for every fully completed year of service up to a maximum of 12 months, except for Mr. Watson, in whose case the payments will continue for 18 months after such separation.
- (3)
- Reflects the aggregate value of unvested option grants with an exercise price less than $4.75, the closing price of our common stock on the last business day of 2019 (December 31, 2019), and other equity awards. For unvested option grants with exercise prices less than $4.75, the aggregate value is determined by multiplying (i) the number of shares subject to such options as of December 31, 2019 by (ii) the difference between $4.75 and the exercise price of such options. The amounts do not reflect any dollar value associated with the acceleration of options with exercise prices in excess of $4.75. For unvested RSUs, the aggregate value is determined by multiplying (x) the number of shares subject to such awards as of December 31, 2019 by (y) $4.75. For unvested PUs, the aggregate value is determined by multiplying (A) the number of shares subject to such PUs that potentially vest (subject to other vesting conditions described further in these notes) as of December 31, 2019 by (B) $4.75.
- (4)
- Reflects the value of the immediate vesting of each then-outstanding equity award (other than PUs) as to the number of shares that otherwise would have vested had the Executive remained employed through the 12-month anniversary of the termination date. For PUs, the value is determined by multiplying the target payout by the quotient obtained by dividing the total number of days from the beginning of the performance period to December 31, 2019 by the total number of days during the performance period.
- (5)
- Reflects the value of the immediate vesting of 100% of each then-outstanding RSU and option award that is both outstanding as of the Executive's termination date and was granted to him at least 90 days before the change in control. Does not reflect any value for PUs, because no PUs would have vested had a change of control occurred on December 31, 2019 in light of the performance of the Company's CAGR as compared to the CAGR of the Index companies.
- (6)
- Reflects the value of the immediate vesting of 100% of each then-outstanding RSU and option award that is both outstanding as of the Executive's termination date and was granted to him at least 90 days before the change in control. For PUs, reflects the immediate vesting of the target number of PUs.
- (7)
- Reflects the estimated cost of COBRA or benefits continuation coverage, as applicable, during the Severance Period.
- (8)
- Pursuant to Mr. Watson's employment agreement, amount includes $200,000 in unpaid signing bonus.
- (9)
- Reflects the estimated cost of COBRA or benefits continuation coverage, as applicable, during the 12-month period following termination.
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PROXY STATEMENT | | Compensation of Executive Officers |
The table below reflects the actual severance payments made to each of the NEOs who was not serving as of the end of 2019 pursuant to their employment and separation agreements as a result of the applicable triggering event. | | | | | | | | | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS
| Payments Upon | |
| | | | | | | | | | | | | | | | | | | | | | | | Potential Payments Upon | | | | | | | Termination other than for Cause
or a Termination for Good Reason | | | Change in
Control ($)(5) | | | Death or
Disability ($) | | | Name | | Benefit | | Prior to
Change in
Control ($) | | | Upon or
Following
Change in
Control ($) | | Brian Skutta | | Cash Severance(6) | | | 333,333 | | | | 333,333 | | | | — | | | | — | | | | Vesting Acceleration of Equity Awards(2) | | | 643,723 | (7) | | | 946,353 | (8) | | | 302,629 | | | | 946,353 | (4) | | | Continued Coverage of Employee Benefits(9) | | | 23,515 | | | | 23,515 | | | | — | | | | 23,515 | | | | | Total Benefits | | | 1,000,571 | | | | 1,303,201 | | | | 302,629 | | | | 969,867 | |
(1) | | | | | | | | | | | | | | | | Reflects cash severance equal to 200% of the sum of Mr. Perry’s then-current base salary and target annual bonus opportunity.
|
(2) | Reflects the aggregate value of unvested option grants with an exercise price less than $9.06, the closing price of our common stock on the last business day of 2018 (December 31, 2018), and other equity awards. For unvested option grants with exercise prices less than $9.06, aggregate value is determined by multiplying (1) the number of shares subject to such options as of December 31, 2018, by (2) the difference between $9.06 and the exercise price of such options. The amounts do not reflect any dollar value associated with the acceleration of options with exercise prices in excess of $9.06. For unvested restricted stock units (“RSUs”), aggregate value is determined by multiplying (1) the number of shares subject to such awards as of December 31, 2018, by (2) $9.06.
|
(3) | Pursuant to the terms of the Perry Employment Agreement, if Mr. Perry is terminated for a reason
|
| Termination other than cause for Cause
or he resigns from his employmenta Termination for good reason, then, subjectGood Reason |
| | | | | | | | | | | | | | | | | | | | | | | | Name |
| Benefit |
|
| Prior to Mr.
Change in
Control
($) |
|
| Upon or
Following
Change in
Control
($) |
|
| Change in
Control
($) |
|
| Death or
Disability
($) | | Victor A. "Chip" Perry signing a release | | Cash Severance | | | 3,200,000(1) | | | — | | | — | | | — | | | | Vesting Acceleration of claims agreement with the Company and his continued compliance with a confidential information agreement entered into with the Company, and if such termination occurs prior to a change in control of the Company and on or after the third anniversary of his start date, he will receive immediate vesting of 100% of each of his then-outstanding equity awards. Mr. Perry’s start date with the Company was December 14, 2015 and for purposes of this table, we are assuming a termination date of December 31, 2018. | | | | | | | | | | | | | | |
(4) | Reflects the valueEquity Awards
| | | 1,376,286(2) | | | — | | | — | | | — | | | | Continued Coverage of the immediate vesting of 100% of each then-outstanding equity awards. | | | | | | | | | | | | | | |
(5) | In the eventEmployee Benefits
| | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 4,576,286 | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | Robert T. "Tommy" McClung | | Cash Severance | | | 425,000(3) | | | — | | | — | | | — | | | | Vesting Acceleration of a change in control that occurs while the Executive remains employed by us and if he remains employed with us (or our successor) as | | | | | | | | | | | | | | | | Equity Awards | | | 332,526(4) | | | — | | | — | | | — | | | | Continued Coverage of the first day immediately following the | | | | | | | | | | | | | | 12-month anniversary
| | Employee Benefits | | | 28,218(5) | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 785,744 | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | Neeraj Gunsagar | | Cash Severance | | | 423,346(6) | | | — | | | — | | | — | | | | Vesting Acceleration of the | | | | | | | | | | | | | | | | Equity Awards | | | 281,232(4) | | | — | | | — | | | — | | | | Continued Coverage of | | | | | | | | | | | | | | | | Employee Benefits | | | 28,218(5) | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Total Benefits | | | 732,796 | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
- (1)
- Reflects a lump sum payment of 200% of Mr. Perry's annual base salary and target bonus paid upon his termination.
- (2)
- Reflects the value of the immediate vesting of 100% of Mr. Perry's then-outstanding RSU and option awards at termination. The aggregate value of the RSUs was determined by multiplying (i) the number of accelerated RSUs by (ii) the closing price of our common stock on the day before the vest date. The amounts do not reflect any dollar value associated with the acceleration of options as the exercise prices were in excess of the value of our common stock at the time of termination.
- (3)
- Reflects a lump sum payment of 12 months of Mr. McClung's base salary of $400,000 and an additional payment of $25,000.
- (4)
- Reflects the value of the immediate vesting of each then-outstanding equity award (other than PUs) as to the number of shares that otherwise would have vested had the executive remained employed through the 12-month anniversary of his termination date. The aggregate value of the RSUs was determined by multiplying (i) the number of accelerated RSUs by (ii) the closing price of our common stock on the day before the vest date. The amounts do not reflect any dollar value associated with the acceleration of options as the exercise prices were in excess of the value of our common stock at the time of termination. For PUs, the value is determined by multiplying the target payout by the quotient obtained by dividing the total number of days from the beginning of the performance period to the termination date by the total number of days during the performance period.
- (5)
- Reflects the estimated cost of COBRA or benefits continuation coverage, as applicable, during the 12 month period following the termination date.
- (6)
- Reflects a lump sum payment of 12 months of Mr. Gunsagar's base salary of $400,000 and an additional payment of $23,346.
| closing of the change in control, then 100% of any of the Executive’s equity awards that both are outstanding as of such date and were granted to him at least 90 days prior to the change in control will vest and, if applicable, become fully exercisable. | | | | 59 |
Table of Contents (6) | Reflects the continuing payments
| | 2020 ANNUAL
PROXY STATEMENT | | Compensation of Executive’s base salary during the Executive’s Severance Period. Severance Period is defined as the period of time commencing immediately after Executive’s separation of service from the Company through the date that is six months following such separation, plus an additional two months for every fully completed year of service; provided, however, that in all cases, the Severance Period will end no later than on the twelve month anniversary of the date of Executive’s termination of employment.Executive Officers |
The 2015 Inducement Equity Incentive Plan, or the Inducement Plan, was adopted in 2015 without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market Rules.Rule 5635(c)(4). No shares remain available for grant under the Inducement Plan, and no grants were made under the Inducement Plan in 2018. | | | | | | | 2019 Proxy Statement | | 57 |
| | | | | | | | | | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
2019. The Inducement Plan provided for the grant of equity-based awards in the form of nonstatutory stock options and its terms are substantially similar to the Company’s 2014 Equity Incentive Plan, including with respect to treatment of equity awards in the event of a “merger”"merger" or “change"change in control”control" as defined under the Inducement Plan. Our 2014 Equity Incentive Plan, or theThe 2014 Plan provides that in the event of a “merger”"merger" or “change"change in control”control" as defined under the 2014 Plan, each outstanding award will be treated as the administrator determines, except that if a successor corporationcompany or its parent or subsidiary does not assume or substitute an equivalent award for any outstanding award, then suchthe award will fully vest, all restrictions on suchthe award will lapse, all performance goals or other vesting criteria applicable to suchthe award will be deemed achieved at 100% of target levels and suchthe award will become fully exercisable, if applicable, for a specified period prior to the transaction. The award will then terminate upon the expiration of the specified period of time. If the service of an outside director is terminated on or following a change in control, other than pursuant to a voluntary resignation, his or her options, restricted stock unitsRSUs and stock appreciation rights, if any, will vest fully and become immediately exercisable, all restrictions on his or her restricted stock will lapse and all performance goals or other vesting requirements for his or her performance shares
and unitsPUs will be deemed achieved at 100% of target levels, and all other terms and conditions met.
Our Amended and Restated 2005 Stock Plan, or the 2005 Stock Plan, and our 2008 Stock Plan, or the 2008 Stock Plan, provide that in the event of a “merger”"merger" or “change"change in control”control," as defined therein, each outstanding award will be treated as the administrator determines, and unless determined otherwise by the administrator, will be assumed or an equivalent award substituted by the successor corporationcompany or a parent or subsidiary of the successor corporation.company. If the successor corporation in a merger or change in control refuses to assume or substitute for the award, then the participant will fully vest in and have the right to exercise the award that is not assumed or substituted as to all of the award (including shares as to which it would not otherwise be vested or exercisable). If an award is not assumed or substituted for in connection with a merger or change in control, the administrator will notify the participant in writing or electronically that the award will be fully exercisable for a period of time as determined by the administrator in its sole discretion and the award will terminate upon the expiration of suchthat period for no consideration, unless otherwise determined by the administrator. No shares remain available for grant under the 2005 Stock Plan or the 2008 Stock Plan, and no grants were made under those plans in 2018. 2019. Equity Compensation Plan Information EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding our equity compensation plans as of December 31, 2018:2019: | | | | | | | | | | | Plan Category |
|
| Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants, and Rights |
|
| Weighted-average
Exercise Price of
Outstanding Options,
Warrants, and Rights |
|
| Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans | | Equity compensation plans approved by stockholders(1) | | | 14,676,972(2) | | $ | 11.89(3) | | | 10,521,842(4) | | Equity compensation plans not approved by stockholder(5) | | | 3,298,979 | | $ | 10.27 | | | — | | Total | | | 17,975,951 | | $ | 11.45(3) | | | 10,521,842(4) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | | | Weighted-average Exercise Price of Outstanding Options, Warrants, and Rights | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | Equity compensation plans approved by stockholders(1) | | | 17,650,614 | (2) | | $ | 12.96 | (3) | | | 4,944,880 | (4) | Equity compensation plans not approved by stockholders(5) | | | 3,298,979 | | | $ | 10.27 | | | | — | | Total | | | 20,949,593 | | | $ | 12.39 | (3) | | | 4,944,880 | (4) |
| | | | | 5860 | | | | 2019 Proxy Statement |
Table of Contents | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS Compensation of Executive Officers |
- (1)
- The 2014 Plan contains an evergreen provision, pursuant to which the number of shares of common stock available for issuance thereunder is increased on the first day of each fiscal year by an amount equal to the least of (a) 10,000,000 shares, (b) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year and (c) such other amount as our Board may determine.
- (2)
- Includes 890,992 shares of common stock subject to RSUs that entitle each holder to one share of common stock for each RSU that vests over the holder's period of continued service.
- (3)
- Weighted-average exercise price does not include shares issuable upon vesting of RSUs, which have no exercise price.
- (4)
- Does not include 5,343,291 shares that became available for issuance under the 2014 Plan on January 1, 2020 pursuant to the evergreen provision.
- (5)
- Includes 1,458,979 warrants to purchase common stock issued to various third-party service providers and 1,840,000 shares underlying an option issued pursuant to the Inducement Plan. Of the total outstanding warrants at December 31, 2019, warrants totaling 509,642 shares were exercisable. Of the total outstanding options issued pursuant to the Inducement Plan, there were 1,840,000 options exercisable at December 31, 2019. Refer to "2015 Inducement Equity Incentive Plan" under the heading "Potential Payments upon Termination" for a discussion of our Inducement Plan.
CEO PAY RATIO
Set forth below is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other employees for 2019. During 2019, we had two principal executive officers, Messrs. Perry and Darrow. Pursuant to Instruction 10 to Item 402(u) of Regulation S-K under the Exchange Act, we calculated the annual total compensation for our principal executive officer by annualizing the compensation reported in the Summary Compensation Table included in this proxy statement for Mr. Darrow, our principal executive officer as of December 31, 2019, as follows: (1) | The 2014 Plan contains an evergreen provision, pursuant to which the number of shares of common stock available for issuance under the 2014 Plan can be increased on the first day of each fiscal year, equal to the least of (a) 10,000,000 shares, (b) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year and (c) such other amount as our Board may determine.
|
| | | | | | | | | Compensation
Component |
|
| Value from Summary
Compensation Table |
|
| Annualized
Value |
| Explanation | | Salary | | $ | 400,000 | | $ | 400,000 | | Not annualized. Mr. Darrow's salary was paid throughout 2019 without change. | | Bonus | | $ | 300,000 | | $ | 300,000 | | Not annualized, as this represents the discretionary bonus received for performance in 2019. | | Stock Awards | | $ | 882,413 | | $ | 882,413 | | Not annualized. In addition to his regular, annual equity award as EVP, Mr. Darrow received a supplemental RSU grant upon his appointment as Interim President and CEO. | | Option Awards | | $ | 272,123 | | $ | 272,123 | | Not annualized, as this option represents an annual equity award as EVP. | | All Other Compensation | | $ | 158,101 | | $ | 258,101 | | Annualized the $20,000 monthly stipend for service as Interim President and CEO; the remaining amounts were not annualized in light of Mr. Darrow's full-year 2019 service. | | Total | | $ | 2,012,637 | | $ | 2,112,637 | | | | | | | | | | | | |
(2) | Includes 5,375,963 shares of common stock subject to restricted stock units that entitle each holder to one share of common stock for each such unit that vests over the holder’s period of continued service.
|
(3) | Weighted-average exercise price does not include shares issuable upon vesting of restricted stock units, which have no exercise price.
|
(4) | Does not include 5,216,875 shares that became available for issuance under the 2014 Plan on January 1, 2019 pursuant to the evergreen provision.
|
(5) | Includes 1,458,979 warrants to purchase common stock issued to various third-party service providers and 1,840,000 shares underlying an option issued pursuant to the 2015 Inducement Equity Incentive Plan. Of the total outstanding warrants at December 31, 2018, warrants totaling 509,642 shares were exercisable. Of the total outstanding options issued pursuant to the 2015 Inducement Equity Incentive Plan, there were 1,303,333 options exercisable at December 31, 2018. Refer to “2015 Inducement Equity Incentive Plan” under the heading “Potential Payments upon Termination” for a discussion of our 2015 Inducement Equity Incentive Plan.
|
CEO Pay Ratio
Based on these calculations, the 2019 annual total compensation of our principal executive officer was $2,112,637. The 20182019 annual total compensation of our median compensated employee other than Mr. Perry, our principal executive officer,Darrow was $169,023. Mr. Perry’s 2018 annual total compensation, as reported in the Summary Compensation Table included in this proxy statement, was $3,020,139.$130,939. Based on this information, for 2018,2019, the ratio of the annual total compensation of Mr. PerryDarrow to the median of the annual total compensation of all other employees was 1816 to 1. 1. | | | | | 61 |
Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | Compensation of Executive Officers |
To find the median compensated employee, we used wages from our payroll records as reported to the Internal Revenue Service on FormW-2 for 20182019 as our consistently-applied compensation measure and selected the median employee from that list. To determinelist (after excluding Mr. Darrow). As of December 31, 2019, we had 709 employees globally, including 708 employees based in the United States and one employee based outside of the United States, in Canada. In determining the identity of our median employee, as permitted by SEC rules, we chose to exclude from this population the one employee in Canada, representing approximately one-tenth of one percent of our total employees. As a result, our employee population of employeesused for findingdetermining the median compensated employee we included allconsisted of 708 full-time, part-time and temporary employees employedbased only in the United States as of December 31, 2018.2019. Since all of ourthese employees are located in the United States, as is Mr. Perry,Darrow, we did not make anycost-of-living adjustments or foreign currency conversions. After identifying the median employee, we calculated annual total compensation for the median employee according to the methodology used to report the annual compensation of our named executive officers in the Summary Compensation Table. The pay ratio disclosed above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’semployee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. | | | | | 62 | | 2019 Proxy Statement | | 59 |
Table of Contents
| | | | | | | | | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | CERTAIN RELATIONSHIPS AND RELATED PARTY AND
| |
OTHER TRANSACTIONS Certain Relationships and Related Party and other Transactions
|
Certain Relationships and Related Party and Other Transactions
In addition to the director and executive officer compensation arrangements and indemnification arrangements discussed above under “Executive"Executive Officers, Directors and Corporate Governance”Governance" and “Executive"Executive Compensation,”" the following is a description of each transaction since January 1, 20182019 and each currently proposed transaction in which: - •
- we have been or are to be a participant;
•the amount involved exceeded or exceeds $120,000; and
•any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals, had or will have a direct or indirect material interest.Transactions with Directors and Their Affiliates USAA USAA, a large stockholder and most significant affinity group marketing partner, beneficially owned 8.6%approximately 8.4% of our common stock at December 31, 2018. We have2019. In February 2020, days before the expiration of our then-current partnership agreement, which we refer to as the Former USAA Agreement, USAA informed us that it did not wish to extend our partnership, and we accordingly entered into a seriesTransition Services Agreement and an associated Order Addendum No. 1 (Transition of commercial serviceAuto-Buying Program Platform) with USAA Federal Savings Bank, a wholly-owned subsidiary of USAA to which we refer as USAA FSB, as of February 14, 2020. We refer to this Transition Services Agreement and maintenance arrangements (collectively, the “Service and Maintenance Agreement”) with USAA. associated Order Addendum collectively as the TSA. Pursuant to these arrangements,the TSA, and upon the terms and subject to the conditions thereof, among other things, we providewill, during a transitional period ending on September 30, 2020, continue to operate the white-labeled website through which USAA with certain services, including an Internet-accessible mobile-enabled platform for automobile shopping, purchasing, insuring, financing and personal vehicle sales as such program is developed, modified and delivered forFSB makes available to USAA members (the “USAA Auto Program”),a new and associated enablement, implementation, maintenance, project managementused automobile buying program, which we refer to as the Auto-Buying Program. Beginning on October 1, 2020, the TSA provides for a 120-day wind-down period during which the Auto-Buying Program will no longer be made available to USAA members, and customization services. the parties will cooperate to wind down the Auto-Buying Program and provide services to USAA members who had submitted leads through the Auto-Buying Program before that date. The entry into the TSA did not change the revenue sharing amounts payable by us in connection with transactions by USAA members through the Auto-Buying Program, and USAA FSB will pay us a $20 million transition services fee over the term of the TSA, which we refer to as the Transition Services Fee. The TSA requires USAA FSB, subject to wind-down negotiations and certain regulatory carveouts, to use commercially reasonable efforts to support the Auto-Buying Program in a manner materially consistent with the manner in which it operated the Auto-Buying Program on February 14, 2020. From time to time under the Former USAA Agreement and the TSA, we have provided marketing services to promote USAA membership, certain dealer incentive programs and loan subvention programs and have subsidized loan rate discount programs for USAA members who meet certain conditions. USAA markets the USAA Auto Program, related programs and our technology to its members and prospects, works with us to determine what USAA marketing and publicity is needed to further expand and grow the USAA Auto Program and promotes to its members certain dealer incentive programs. Under the Service and Maintenance Former USAA
| | | | | 63 |
Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | Certain Relationships and Related Party and other Transactions |
Agreement, for the year ended December 31, 2018,2019, we made cash payments to USAA of $21.6$22.3 million and received cash payments from USAA of $1.3$1.4 million. Under the Service and MaintenanceFormer USAA Agreement, for the year ended December 31, 2018, 271,8302019, 293,142 units, or 27%,approximately 29% of all units purchased from TrueCar Certified Dealers by TrueCar users, were matched to users of thecar-buying site we maintain for USAA. Auto-Buying Program. We believe that the ServiceFormer USAA Agreement was, and Maintenance Agreementthe TSA is, on terms no less favorable to us than we could have obtained from unaffiliated third parties. As a result of the wind-down of our partnership with USAA FSB under the TSA, we expect the Auto-Buying Program to represent a smaller share of our total units in 2020 than it did in 2019. We further expect to receive a net payment from USAA FSB during 2020 as a result of the Transition Services Fee being offset against the revenue share payments to USAA FSB. In connection with the transactions described in the Service and MaintenanceFormer USAA Agreement, we have issued to USAA warrants to purchase shares of our common stock. In May 2014, we issued to USAA a warrant to purchase up to 1,458,979 shares of our common stock consisting of 392,313 shares of common stock with an exercise price of $7.95 per share and 1,066,666 shares of common stock with an exercise price of $15.00 per share. The shares issuable upon exercise of suchthese warrants are subject to certain performance-based vesting conditions. The vesting conditions are based on the number of cars sold by TrueCar Certified Dealers to our users originating from the USAA Auto Program. The warrant includes a multiplier provision whereby the vesting accelerates faster based on achievement of higher sales milestones within a given month. At December 31, 2018,2019, there were 509,642 warrants that were earned and outstanding with an additional 949,337 warrants that are available for issuance upon achievement of minimum performance milestones. | | | | | 60 | | | | 2019 Proxy Statement |
| | | | | | | | | | | | | | | | | CERTAIN RELATIONSHIPS AND RELATED PARTY AND OTHER TRANSACTIONS |
Indemnification of Officers and Directors Our Charter and Bylaws provide that we will indemnify our directors and officers, and may indemnify our employees and other agents, to the fullest extent permitted by Delaware law. Delaware law prohibits our Charter from limiting the liability of our directors for the following: - •
- any breach of the
director’sdirector's duty of loyalty to us or to our stockholders;
•acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•unlawful payment of dividends or unlawful stock repurchases or redemptions; and
•any transaction from which the director derived an improper personal benefit.In addition to the indemnification required in our Charter and Bylaws, we have entered into an indemnification agreement with each member of our Board. These agreements provide for the indemnification of our directors, officers and some employees for certain expenses and liabilities incurred in connection with any action, suit, proceeding or alternative dispute resolution mechanism, or hearing, inquiry or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a director, officer, employee, agent or fiduciary of our company, or any of our subsidiaries, by reason of any action or inaction by them while serving as an officer, director, agent or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent or fiduciary of another entity. In the case of an action or proceeding by or in the right of our company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is prohibited from receiving indemnification. We believe that these Charter and Bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. Policies and Procedures for Related-Party Transactions Our audit committee has the primary responsibility for reviewing and approving or disapproving “related-party"related-party transactions,”" which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as a director, executive officer, nominee for director or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members. Our audit committee charter provides that the audit committee shall review, approve or disapprove and oversee any related-party transactions. | | | | | 64 | | 2019 Proxy Statement | | 61 |
Table of Contents
| | | | | | | | | 2020 ANNUAL
PROXY STATEMENT | | | | | | | | AUDIT COMMITTEE REPORT |
Audit Committee Report
This Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other TrueCar filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate it by reference therein. The following is the report of the audit committee of our Board of Directors. The audit committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 20182019 with our management. In addition, the audit committee has discussed with PricewaterhouseCoopers LLP, our independent accountants, the matters required to be discussed by standards promulgated by the American Instituteapplicable requirements of Certified Public Accountants (“AICPA”) andthe Public Company Accounting Oversight Board (the “PCAOB”"PCAOB"), including PCAOB Auditing Standard No. 1301 “Communications with Audit Committees.” and the SEC. The audit committee also has received the written disclosures and the letter from PricewaterhouseCoopers LLP as required by the applicable requirements of the PCAOB regarding the independent accountant’saccountant's communications with the audit committee concerning independence, and the audit committee has discussed with PricewaterhouseCoopers LLP the independence of PricewaterhouseCoopers LLP. Based on the audit committee’scommittee's review of the matters noted above and its discussions with our independent accountants and our management, the audit committee recommended to the Board of Directors that the financial statements be included in our Annual Report onForm 10-K for the fiscal year ended December 31, 2018.2019. Respectfully submitted by: Robert Buce (Chair)
Christopher Claus
Erin Lantz
| | | | | 65 |
Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | |
Proposal 1: Election of Directors |
| | | | | | | 62RECOMMENDATION OF THE BOARD | | | | | 2019 Proxy Statement | | |
| | | | | | |  | | The Board unanimously recommends that stockholders voteFOR the election of each of Christopher Claus, Philip McKoy and John Mendel as Class III directors to serve until the 2023 annual meeting of stockholders or until his successor is duly elected and qualified. | | | | | | | | | | PROPOSAL ONE: ELECTION OF DIRECTORS |
Proposal One: Election of Directors
Our Board consists of nineeight members. In accordance with our Charter, our Board is divided into three classes with staggered three-year terms. At the virtual Annual Meeting, three directors will be elected for three-year terms. Nominees
Our nominating committee recommended, and our Board approved, Robert Buce,Christopher Claus, Philip McKoy and John Krafcik and Wesley NicholsMendel as nominees for election to the Board at the Annual Meeting. Each of the nominees is currently a director of the Company. If elected, the nominees will serve as directors until our annual meeting in 2022,2023, and until a successor is qualified and elected or until his earlier resignation or removal. Please see “Executive"Executive Officers, Directors and Corporate Governance”Governance" in this proxy statement for information concerning the nominees. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR each of Robert Buce, Christopher Claus, Philip McKoy and John Krafcik and Wesley Nichols.Mendel. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for another nominee designated by the Board. We are not aware of any reason that a nominee would be unable or unwilling to serve as a director. Vote Required
Each director is elected by a plurality of the voting power of the shares present in person virtually or represented by proxy at the meeting and entitled to vote on the election of directors at the Annual Meeting. Abstentions and brokernon-votes will have no effect on the outcome of the vote. | | | 66 | | |
The Board unanimously recommends that stockholders vote “FOR” the election
Table of each of Robert Buce, John Krafcik and Wesley Nichols as Class II directors to serve until the 2022 annual meeting of stockholders or until his successor is duly elected and qualified.Contents | | | 2020 ANNUAL
PROXY STATEMENT | | |
Proposal 2: Ratification of Selection of Independent Registered Public Accountants |
| | | | | | | RECOMMENDATION OF THE BOARD | | | 2019 Proxy Statement | | 63 | | |
| | | | | | | | | The Board, at the audit committee's recommendation, recommends that stockholders voteFOR the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. | | | | | | | | | | PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
|
Proposal Two: Ratification of Selection of Independent Registered Public Accountants
The audit committee has appointed PricewaterhouseCoopers LLP, or PwC, as our independent registered public accounting firm for the fiscal year ending December 31, 20192020 and recommends that stockholders vote for ratification of that appointment. The audit committee, in its discretion, may appoint new independent registered public accountants at any time during the year, notwithstanding the results of any vote and despite the fact it has already appointed PwC, if the audit committee believes that a change in our independent registered public accountant would be in our best interests and those of our stockholders. If our stockholders do not ratify this appointment, the audit committee may consider whether it should appoint another independent registered public accounting firm. PwC served as our independent registered public accounting firm for the 20172018 and 20182019 fiscal years. We expect that representatives of PwC will be present at the virtual Annual Meeting to respond to appropriate questions and to make a statement if they so desire. Principal Accounting Fees and Services
The following table sets forth all fees accrued or paid to PwC for the years ended December 31, 20172018 and 2018: | | | | | | | | | | | | Fiscal Year | | | | | 2017 | | | 2018 | | Audit Fees | | $ | 2,384,750 | | | $ | 2,327,000 | | Audit-Related Fees | | | 133,004 | | | | 53,000 | | Tax Fees | | | 30,000 | | | | 42,303 | | All Other Fees | | | 5,400 | | | | 6,300 | | Total | | $ | 2,553,154 | | | $ | 2,428,603 | |
2019: | | | | | | | |
| | Fiscal Year | |
|---|
| | 2018 | | 2019 | |
|---|
Audit Fees | | $ | 2,327,000 | | $ | 2,356,309 | | Audit-Related Fees | | | 53,000 | | | 338,000 | | Tax Fees | | | 42,303 | | | 173,547 | | All Other Fees | | | 6,300 | | | 6,300 | | | | | | | | | | | Total | | $ | 2,428,603 | | $ | 2,874,156 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | Proposal 2: Ratification of Selection of Independent Registered Public Accountants |
Audit fees cover professional services provided by PwC in connection with the audit of our annual financial statements and an audit of the effectiveness of internal control over financial reporting, quarterly reviews of financial statements included in our annual reports on Form 10-K and quarterly reports onForm 10-Q and professional services rendered in connection with comfort letters, consents and reviews of other documents filed with the SEC. Audit-related fees coverare fees for assurance and related services provided by PwCthat are reasonably related to perform consultationthe performance of the audit or review of our financial statements, including due diligence activities relating to mergers and acquisitions and consultations concerning financial accounting and reporting standards. Audit-related fees also include attest services performed over our procedures around customer data purging. These services were not required to be performed in connection with the annual audit. Tax fees cover tax services provided by PwC including detailed tax studies (382(Section 382 studies), tax planning projects, consultation, tax advice related to mergers and acquisitions, and tax compliance services. All other fees cover license fees for accounting research and disclosure software. Pre-approval Policy. Under our audit committee’scommittee's charter, the audit committee is required topre-approve all audit services and to pre-approve (or approve subsequently, where permitted by law) all non-audit and tax services performed by our independent registered public accountants in order to ensure that the provision of those services does not impair the public accountants’accountants' independence. In fiscal years 20172018 and 2018,2019, all fees identified above under the captions “Audit"Audit Fees,” “Audit-Related" "Audit-Related Fees,” “Tax Fees” | | | | | 64 | | | | 2019 Proxy Statement |
| | | | | | | | | | | | | | | | | PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
|
" "Tax Fees" and “All"All Other Fees”Fees" that PwC billed were approved by the audit committee in accordance with SECthe audit committee's charter and other applicable legal requirements. The audit committee has determined that PwC’sPwC's rendering of other professional services for tax compliance and tax advice is compatible with maintaining PwC’sPwC's independence. Vote Required
The affirmative vote of the holders of a majority of the shares of our common stock present in person virtually or represented by proxy and entitled to vote on the matter is necessary to ratify the selection of PwC as our independent registered public accounting firm for fiscal year 2019.2020. A share that abstains on this proposal is treated as a share present in person virtually or represented by proxy and entitled to vote and, therefore, will have the effect of a vote “against”"against" ratifying PwC as our independent registered public accounting firm. Brokernon-votes will have no effect on the outcome of the vote. | | | 68 | | |
The Board, at the audit committee’s recommendation, recommends that stockholders vote “FOR” the ratification
Table of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.Contents | | | 2020 ANNUAL
PROXY STATEMENT | | |
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation |
| | | | | | | RECOMMENDATION OF THE BOARD | | | 2019 Proxy Statement | | 65 | | |
| | | | | | | | | The Board recommends a voteFOR the approval, on a non-binding advisory basis, of our executive compensation, as discussed in this proxy statement. | | | | | | | | | | PROPOSAL THREE: ADVISORY VOTE TO APPROVE
NAMED EXECUTIVE OFFICER COMPENSATION
|
Proposal Three: Advisory Vote to Approve Named Executive Officer Compensation
In accordance with SEC rules, we are providing our stockholders with the opportunity to approve, by advisory vote, the compensation of our named executive officers, as described in this proxy statement. This proposal, commonly referred to asa “say-on-pay”"say-on-pay" vote, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and our executive compensation philosophy, objectives and program, as described in this proxy statement. Accordingly, we ask our stockholders to approve the compensation of our named executive officers, as disclosed in the section entitled “Executive Compensation”"Executive Compensation" of this proxy statement, including the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosure, by castinga non-binding advisory vote “FOR”"FOR" the following resolution: “"RESOLVED, that the stockholders of TrueCar, Inc. approve, ona non-binding advisory basis, the compensation paid to the named executive officers, as disclosed in the proxy statement for the 20192020 Annual Meeting, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”"
As an advisory vote, the result will not be binding on the Board or the compensation committee. Thesay-on-pay vote will, however, provide us with important feedback from our stockholders about our executive compensation philosophy, objectives and program. The Board and the compensation committee value the opinions of our stockholders and expect to take into account the outcome of the vote when considering future executive compensation decisions and when evaluating our executive compensation program. | | | | | 69 |
The Board recommends a vote “FOR” the approval, on
a non-binding advisory basis,
Table of our executive compensation, as discussed in this proxy statement.Contents | | | 2020 ANNUAL
PROXY STATEMENT | | |
The Board does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented or otherwise allowed to be considered at the Annual Meeting, the persons named in the enclosed proxy will have discretion to vote shares they represent in accordance with their own judgment on such matters. It is important that your shares be represented at the meeting, regardless of the number of shares that you hold. You are, therefore, urged to submit your proxy or voting instructions at your earliest convenience. BY ORDER OF THE BOARD OF DIRECTORS
Santa Monica, California
April 3, 2019
| | | | | 66 | | BY ORDER OF THE BOARD OF DIRECTORS |
Santa Monica, California
April 8, 2020 |
| 2019 Proxy Statement
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Table of Contents | | | 2020 ANNUAL
PROXY STATEMENT | | General Information |
NON-GAAP FINANCIAL MEASURES General Information
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Q: Why am I receiving these materials? - A:
- The board of directors of TrueCar, Inc., which we refer to as the Board, is furnishing this Proxy Statement to you. It contains information related to our 2020 Annual Meeting of Stockholders, which we refer to as the Annual Meeting, to be held on Thursday, May 21, 2020 beginning at 8:30 a.m. Pacific Time and at any postponements or adjournments thereof. You can attend the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/True2020, where you will be able to participate, submit questions and vote online. References in this Proxy Statement to "we," "us," "our," "the Company" or "TrueCar" refer to TrueCar, Inc.
Q: What is included in these materials? - A:
- These materials include this Proxy Statement for our Annual Meeting of Stockholders and our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, or the SEC, on February 28, 2020, which we refer to as the Annual Report. We first made these materials available to you on the Internet on April 8, 2020. Our principal executive offices are located at 120 Broadway, Suite 200, Santa Monica, CA 90401, and our telephone number is (800) 200-2000. We maintain a website at www.TrueCar.com. The information on our website is not a part of this Proxy Statement.
Q: What matters will stockholders vote on at the Annual Meeting? - A:
- Stockholders will vote on the following matters at the Annual Meeting:
- •
- to elect Christopher Claus, Philip McKoy and John Mendel as Class III directors to serve until the 2023 annual meeting of stockholders or until their successors are duly elected and qualified;
- •
- to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020;
- •
- to approve, on an advisory basis, the fiscal year 2019 compensation of our named executive officers; and
- •
- to transact such other business that may properly come before the Annual Meeting or at any adjournment or postponement thereof.
Q: How does the Board recommend that I vote on these proposals? - A:
- The Board recommends a vote:
- •
- FOR the election of Christopher Claus, Philip McKoy and John Mendel as Class III directors;
- •
- FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; and
- •
- FOR the approval of the advisory resolution indicating approval of the fiscal 2019 compensation of the Company's named executive officers.
Q: Who is making this solicitation? - A:
- The proxy for the Annual Meeting is being solicited by and on behalf of TrueCar by the Board.
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PROXY STATEMENT | | General Information |
Q: Who pays for the proxy solicitation process? - A:
- TrueCar will pay the cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We may, on request, reimburse brokerage firms and other nominees for their expenses in forwarding proxy materials to beneficial owners. In addition to soliciting proxies by mail, we expect that our directors, officers and employees may solicit proxies in person or by telephone or electronic communications. None of these individuals will receive any additional or special compensation for doing this, although we may reimburse these individuals for their reasonable out-of-pocket expenses. Further, we may engage a proxy solicitor to assist in the solicitation of proxies and to provide related advice and support depending on a variety of factors, including preliminary voting results.
Q: Who may vote at the Annual Meeting? - A:
- Stockholders of record as of the close of business on March 26, 2020, which we refer to as the Record Date, are entitled to receive notice of, attend online and vote by live webcast at the Annual Meeting. Each share of our common stock is entitled to one vote on each matter. As of the Record Date, there were 107,183,532 shares of our common stock issued and outstanding, held by 112 holders of record. Each share of our common stock is entitled to one vote on each matter.
Q: Why is TrueCar conducting the Annual Meeting as an exclusively virtual, online meeting? - A:
- This is the fifth year we have conducted an exclusively virtual annual meeting. Our virtual annual meetings afford each stockholder equivalent or greater rights and opportunities to participate in our annual meetings than they would have at an in-person meeting; for example, the virtual format allows stockholders to communicate with us before and during the meeting so that they can ask questions of our Board or management. At the same time, we believe that holding the Annual Meeting solely on the Internet facilitates stockholder attendance and will increase stockholder participation and communication by enabling each stockholder to interact with us fully and equally, in real time, from any location around the world at no cost. A virtual annual meeting also makes it possible for more stockholders (regardless of the size of their holdings or their resources or physical location) to have direct access to information more quickly while offering us and our stockholders significant time and cost savings. We are aware of members of the investor community who believe that virtual annual meetings do not present sufficient opportunities for stockholders to interact with directors and management. While our stockholders, on the whole, have not expressed concern about our virtual meetings, our Board intends to continue carefully reviewing and considering alternative meeting platforms for future annual meetings.
Q: What is the difference between a stockholder of record and a beneficial owner of shares held in street name? - A:
- Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the stockholder of record of those shares, and we sent these proxy materials directly to you.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the "beneficial owner" of shares held in "street name," and that organization forwarded these proxy materials to you. The organization holding your account is the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account.
Q: If I am a stockholder of record of TrueCar shares, how do I vote? - A:
- If you are a stockholder of record, there are four ways to vote:
- •
- On the Internet. You may vote by proxy on the Internet by following the instructions found on the proxy card.
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PROXY STATEMENT | | General Information |
- •
- By Telephone. You may vote by proxy by calling the toll free number on the proxy card.
- •
- By Mail. You may vote by proxy by filling out the proxy card and returning it in the envelope provided.
- •
- During the Meeting. You may vote during the Annual Meeting live on the Internet by following the instructions posted at www.virtualshareholdermeeting.com/True2020.
The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time on May 20, 2020.
Q: If I am a beneficial owner of shares held in street name, how do I vote? - A:
- If you are a beneficial owner of shares held in street name, you should have received from your broker, bank or other nominee instructions on how to vote or instruct the broker to vote your shares, which are generally contained in a "vote instruction form" sent by the broker, bank or other nominee. Please follow their instructions carefully. Street name stockholders may generally vote by one of the following methods:
- •
- On the Internet. You may vote by proxy on the Internet by following the instructions found on the vote instruction form your broker, bank, trustee or nominee provides you. Additional Instructions can be found at www.virtualshareholdermeeting.com/True2020.
- •
- By Telephone. You may vote by proxy by calling the toll free number found on the vote instruction form your broker, bank, trustee or nominee provides you.
- •
- By Mail. You may vote by proxy by filling out the vote instruction form and returning it in the envelope your broker, bank, trustee or nominee provides you.
Q: If I submit a proxy, how will it be voted? - A:
- If you submit proxies that are properly dated, executed and returned, we will vote the shares represented by them at the Annual Meeting in accordance with your instructions. If the proxies do not contain specific instructions, the shares will be voted in accordance with the recommendations of our Board as described above. If any matters not described in the Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have revoked your proxy instructions, as described below under "Can I change my vote or revoke my proxy?"
Q: What should I do if I get more than one proxy or voting instruction card? - A:
- Stockholders may receive more than one set of voting materials, including multiple copies of these proxy materials and multiple proxy cards or voting instruction cards. For example, stockholders who hold shares in more than one brokerage account may receive separate sets of proxy materials for each brokerage account in which they hold shares. Stockholders of record whose shares are registered in more than one name will receive more than one set of proxy materials. You should vote all of the proxy cards and in accordance with all of the voting instruction cards you receive relating to our Annual Meeting to ensure that all of your shares are counted.
Q: Can I change my vote or revoke my proxy? - A:
- You may change your vote or revoke your proxy at any time before the vote is taken at the Annual Meeting.
If you are the stockholder of record, you may change your vote by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) providing a written notice of revocation to our Corporate Secretary at TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401 before your shares are voted or (3) attending the virtual Annual Meeting and voting by live webcast. Attending the Annual Meeting by live webcast will not cause your previously granted proxy to be revoked unless you specifically so request or vote by live webcast during the Annual Meeting.
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PROXY STATEMENT | | General Information |
For shares you hold beneficially in street name, you may generally change your vote by submitting new voting instructions to your broker, bank, trustee or nominee following the instructions they provided.
Q: Can I attend the meeting in person? - A:
- As discussed above, we will be hosting the Annual Meeting exclusively by live webcast.You will not be able to attend the Annual Meeting in person.
Q: How do I participate in the Annual Meeting on the Internet? - A:
- Any stockholder may listen to the Annual Meeting and participate by live webcast at www.virtualshareholdermeeting.com/True2020. The webcast will begin at 8:30 a.m. Pacific time on May 21, 2020, and stockholders may vote and submit questions during the Annual Meeting by live webcast. To enter the meeting, please have available your 12-digit control number (which can be found on your Notice of Internet Availability or, if you received a printed copy of the proxy materials, your proxy card). If you do not have your 12-digit control number, you will be able to listen to the meeting only. You will not be able to vote or submit questions during the meeting. Instructions on how to connect to and participate in the Annual Meeting on the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/True2020.
Q: How many shares must be present or represented to conduct business at the Annual Meeting? - A:
- At the Annual Meeting, the presence virtually or by proxy of a majority of the aggregate voting power of the stock issued, outstanding and entitled to vote at the Annual Meeting is required for the Annual Meeting to proceed. If you have returned valid proxy instructions or attend the Annual Meeting by live webcast, your shares will be counted in determining whether there is a quorum, even if you wish to abstain from voting on some or all of the matters before the meeting.
Q: What is the voting requirement to approve each of the proposals? - A:
- With respect to Proposal One, the election of our directors, each director is elected by a plurality of the voting power of the shares present virtually or represented by proxy at the meeting and entitled to vote on the election of directors at the Annual Meeting. Accordingly, the three nominees receiving the highest number of affirmative votes will be elected as Class III directors to serve until the 2023 annual meeting of stockholders or until their successors are duly elected and qualified. Abstentions and broker non-votes will have no effect on the outcome of the vote.
For Proposal Two, the ratification of the appointment of our independent registered public accounting firm, and Proposal Three, the advisory vote to approve named executive officer compensation, the affirmative vote of a majority of shares present virtually or represented by proxy and entitled to vote on the proposal is required to approve the proposal. Abstentions are treated as shares present and entitled to vote for purposes of such proposals and, therefore, will have the same effect as a vote "against" the proposal. Broker non-votes will have no effect on the outcome of the vote.
Q: What are broker non-votes? - A:
- Broker non-votes are shares held by brokers that do not have discretionary authority to vote on the matter and have not received voting instructions from their clients. If your broker holds your shares in its name and you do not instruct your broker how to vote, your broker will nevertheless have discretion to vote your shares on our sole "routine" matter—Proposal Two, the ratification of the appointment of our independent registered public accounting firm. Your broker will not have discretion to vote on Proposals One or Three.
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PROXY STATEMENT | | General Information |
Q: Who will tabulate the votes? - A:
- A representative of Carl Hagberg and Associates will serve as the Inspector of Election and will tabulate the votes at the Annual Meeting.
Q: What is the deadline to propose actions for consideration at next year's annual meeting or to nominate individuals to serve as directors? - A:
- Stockholder Proposals: Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at our next annual meeting of stockholders by submitting their proposals in writing to our Corporate Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2021 annual meeting, our Corporate Secretary must receive the written proposal at our principal executive offices no later than December 9, 2020. If we hold our 2021 annual meeting more than 30 days before or after May 21, 2021 (the one-year anniversary date of the Annual Meeting), we will disclose the new deadline by which stockholder proposals must be received to be considered for inclusion in our proxy statement for that annual meeting under Item 5 of Part II of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
TrueCar, Inc.
Attn: Corporate Secretary
120 Broadway, Suite 200
Santa Monica, California 90401 Our amended and restated bylaws, which we refer to as our Bylaws, also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting but do not intend for the proposal to be included in our proxy statement. Our Bylaws provide that the only business that may be conducted at an annual meeting is business that is (1) described in our proxy materials for the meeting, (2) brought by or at the direction of our Board or (3) brought by a stockholder of record (both when the stockholder provides proper written notice of the proposal and on the record date for the annual meeting) who has timely complied with the notice procedures set forth in our Bylaws. In addition, for business to be properly brought before an annual meeting by a stockholder, it must be a proper matter for stockholder action under our Bylaws and applicable law. To be timely for our 2021 annual meeting, our Corporate Secretary must receive the written notice at our principal executive offices: - •
- not earlier than the close of business on January 23, 2021, and
- •
- not later than the close of business on February 22, 2021.
If we hold our 2021 annual meeting more than 30 days before or more than 60 days after May 21, 2021 (the one-year anniversary date of the Annual Meeting), then notice of a stockholder proposal that is not intended to be included in our proxy statement must be received by our Corporate Secretary at our principal executive offices: - •
- not earlier than the close of business on the 120th day before the annual meeting, and
- •
- not later than the close of business on the later of (i) the 90th day before the annual meeting and (ii) the tenth day after the first public announcement of the date of the annual meeting.
To be in proper written form, a stockholder's notice to the Corporate Secretary must set forth as to each matter of business the stockholder intends to bring before the annual meeting (1) a brief description of the business and the reasons for conducting the business at the annual meeting, (2) the name and address of the stockholder and any associated person proposing the business, (3) the class and number of shares of our common stock held of record or beneficially owned by the stockholder and any associated person,
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(4) whether and the extent to which the stockholder and any associated persons have entered into any hedging or other transaction or series of transactions or any person has done so on their behalf with respect to any of our securities, and a description of any other similar agreement, arrangement or understanding, (5) any material interest of the stockholder and any associated person in the business and (6) a statement whether the stockholder or any associated person will deliver a proxy statement and form of proxy to stockholders. In addition, to be in proper written form, a stockholder's notice to the Corporate Secretary must be supplemented not later than five days after the record date to disclose the information contained in clauses (3) and (4) in this paragraph as of the record date. A stockholder's "associated person" is (A) any person controlling, directly or indirectly, or acting in concert with, the stockholder, (B) any beneficial owner of shares of our stock the stockholder owns of record or beneficially and on whose behalf the proposal or nomination, as the case may be, is being made or (C) any person controlling, controlled by or under common control with any person referred to in the preceding clauses (A) and (B). Nomination of Director Candidates: In addition, our Bylaws permit certain stockholders to nominate directors for election at an annual meeting. To be eligible, a stockholder must be a stockholder of record as of the date notice of the annual meeting is given and as of the record date for the annual meeting. To be in proper written form, a stockholder's notice to the Company's Corporate Secretary must set forth, as to each nominee whom the stockholder proposes to nominate for election or re-election as a director: (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the class and number of shares of the Company the nominee holds of record or owns beneficially and any derivative positions he or she holds of record or beneficially, (4) whether and the extent to which the nominee has entered into any hedging or other transaction or series of transactions with respect to any of our securities or any person has done so on his or her behalf, and a description of any other similar agreement, arrangement or understanding, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of, the nominee, (5) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons pursuant to which the nominations were made, (6) a written statement executed by the nominee acknowledging that as a director of the Company, the nominee will owe a fiduciary duty under Delaware law to the Company and its stockholders and (7) any other information relating to the nominee that would be required to be disclosed about the nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required (including without limitation the nominee's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected). As to the stockholder giving notice of the director nomination, the notice must also include the information about the stockholder and any associated person described above in clauses (2) through (6) of the last paragraph under "Stockholder Proposals" above, and supplemented following the record date in the manner referred to in that paragraph. In addition, the stockholder must give timely notice to our Corporate Secretary under our Bylaws, which, in general, require that our Corporate Secretary receive the notice within the time period described above under "Stockholder Proposals" for stockholder proposals that are not intended to be included in our proxy statement. The charter of the nominating and corporate governance committee of the Board requires the committee to consider nominations of director candidates validly made by our stockholders in accordance with the provisions of our Bylaws. Additionally, as described in more detail under "Executive Officers, Directors and Corporate Governance—Board Committees—Nominating and Corporate Governance Committee," our nominating and corporate governance committee will consider certain nominations made by stockholders holding at least one percent of the fully diluted capitalization of TrueCar continuously for at least 12 months.
Q: I share an address with another stockholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials? - A:
- The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports for two or more stockholders sharing the same address
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PROXY STATEMENT | | General Information |
by delivering a single proxy statement addressed to those stockholders. This process is commonly referred to as "householding." Brokers with account holders who are TrueCar stockholders may be householding our proxy materials. A - Reconciliationsingle set of GAAPproxy materials may be delivered toNon-GAAP Financial Measures multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be householding communications to your address, householding will continue until you are notified otherwise or you notify your broker or TrueCar that you no longer wish to participate in householding. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, you may (1) notify your broker, (2) direct your written request to: Investor Relations, TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401 or (3) contact our Investor Relations department by email at investors@truecar.com or by phone at (800) 200-2000, extension 8771. Stockholders who currently receive multiple copies of the Proxy Statement or Annual Report at their address and would like to request householding of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the annual report and proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered.
Q: What if I have questions about lost stock certificates or need to change my mailing address? - A:
- You may contact our transfer agent, Computershare Trust Company, N.A., by telephone at (877) 373-6374 (in the United States) or (781) 575-2879 (outside the United States) or by email at web.queries@computershare.com if you have lost your stock certificate or need to change your mailing address.
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Annex A — Reconciliation of Adjusted EBITDA to GAAP Net Loss |
This Proxy Statement contains information regarding Adjusted EBITDA,Non-GAAP net income andNon-GAAP net income per share, which areis a financial measuresmeasure that areis not calculated in accordance with generally accepted accounting principles in the United States, or GAAP. We define Adjusted EBITDA as net loss adjusted to exclude interest income, interest expense, depreciation and amortization, stock-based compensation, income (loss) from equity method investment, certain restructuring costs, certain executive departure costs, certain transaction expenses, certain litigation costs, changes in the fair value of contingent consideration and income taxes. We have provided below a reconciliation of each of Adjusted EBITDA andNon-GAAP net income to net loss, the most directly comparable GAAP financial measure. Neither Adjusted EBITDA norNon-GAAP net income should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. In addition, our Adjusted EBITDA andNon-GAAP net income measuresmeasure may not be comparable to similarly titled measures of other organizations as they may not calculate Adjusted EBITDA orNon-GAAP net income in the same manner as we calculate these measures.do. We use Adjusted EBITDA andNon-GAAP net income as an operating performance measuresmeasure as eachit is (i) an integral part of our reporting and planning processes; (ii) used by our management and Board to assess our operational performance, and together with operational objectives, as a measure in evaluating employee compensation and bonuses; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA andNon-GAAP net income facilitates operating performance comparisons on aperiod-to-period basis because these measures excludeit excludes variations primarily caused by changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA andNon-GAAP net income areis widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt-service capabilities. | | | 78 | | |
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PROXY STATEMENT | | Annex A — Reconciliation of Adjusted EBITDA to GAAP Net Loss |
The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods presented: | | | | | | | | | | | | Year Ended
December 31, | | | | | 2018 | | | 2017 | | | | | (in thousands) | | Reconciliation of Net Loss to Adjusted EBITDA: | | | | | | | | | Net loss | | $ | (32,849 | ) | | $ | (28,321 | ) | Non-GAAP adjustments: | | | | | | | | | Interest income | | | (1,260 | ) | | | (3,314 | ) | Interest expense | | | 2,610 | | | | 2,649 | | Depreciation and amortization | | | 22,472 | | | | 22,677 | | Stock-based compensation | | | 32,241 | | | | 37,219 | | Certain litigation costs(1) | | | 7,967 | | | | 2,157 | | Lease exit costs(2) | | | (133 | ) | | | — | | (Benefit from) / provision for income taxes | | | (2,164 | ) | | | (177 | ) | Adjusted EBITDA | | $ | 28,884 | | | $ | 32,890 | |
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| | Year Ended December 31, | |
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| | 2019 | | 2018 | |
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| | (in thousands)
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Reconciliation of Net Loss to Adjusted EBITDA: | | | | | | | | Net loss | | $ | (54,890 | ) | $ | (28,321 | ) | Non-GAAP adjustments: | | | | | | | | Interest income | | | (3,495 | ) | | (3,314 | ) | Interest expense | | | — | | | 2,649 | | Depreciation and amortization | | | 25,591 | | | 22,677 | | Stock-based compensation(1) | | | 37,974 | | | 37,219 | | Share of net loss of equity method investment | | | 1,280 | | | — | | Certain litigation costs(2) | | | 1,575 | | | 2,157 | | Executive departure costs(3) | | | 5,089 | | | — | | Restructuring charges(4) | | | 3,280 | | | — | | Transaction costs(5) | | | 1,926 | | | 620 | | Change in fair value of contingent consideration | | | 300 | | | — | | Provision for (benefit from) income taxes | | | 289 | | | (177 | ) | | | | | | | | | | Adjusted EBITDA | | $ | 18,919 | | $ | 33,510 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- (1)
- The excluded amounts include stock-based compensation of $7.2 million incurred in the second quarter of 2019 associated with the acceleration of certain equity awards and the extension of the exercise period for certain vested stock options related to the departures of certain executives, including our former chief executive officer.
- (2)
- The excluded amounts relate to legal costs incurred in connection with complaints filed by non-TrueCar dealers and the California New Car Dealers Association against TrueCar and consumer class action lawsuits. We believe the exclusion of these costs is appropriate to facilitate comparisons of our core operating performance on a period-to-period basis. Based on the nature of the specific claims underlying the excluded litigation matters, once these matters are resolved, we do not believe our operations are likely to entail defending against the types of claims raised by these matters. We expect the cost of defending these claims to continue to be significant pending that resolution.
- (3)
- The excluded amounts include $4.6 million in executive severance costs, as well as related recruiting fees of $0.5 million, associated with the separation of our former chief executive officer and the termination of executive-level employees in connection with the change in chief executive officer in 2019. We believe excluding the impact of these terminations and the associated chief executive officer recruiting fees is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results.
- (4)
- The excluded amounts include $3.3 million in charges associated with a restructuring plan undertaken in 2019 to improve efficiency and reduce expenses We believe excluding the impact of these charges is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results.
- (5)
- The excluded amounts represent external legal, accounting, consulting and other third-party fees and costs we incurred in connection with the evaluation and negotiation of potential acquisition transactions. These expenses are included in general and administrative expenses in our consolidated statements of comprehensive loss. We consider these fees and costs, which are associated with potential merger and acquisition transactions outside the normal course of our operations, to be unrelated to our underlying results of operations and believe that their exclusion provides investors with a more complete understanding of the factors and trends affecting our business operations.
| | | | | | | 2019 Proxy Statement | | A-179 |
Table of Contents 
(1) | The excluded amounts relate to legal costs incurred in connection with a claim we filed against Sonic Automotive Holdings, Inc. (the “Sonic Litigation”), complaints filed bynon-TrueCar dealers and the California New Car Dealers Association against us and certain securities and consumer class action lawsuits. We believe the exclusion of these costs is appropriate to facilitate comparisons of our core operating performance on aperiod-to-period basis. We do not believe significant trademark litigation like the Sonic Litigation is reflective of a trend in our underlying operations, and based on the nature of the specific claims underlying the other
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| excluded litigation matters, once these matters are resolved, we do not believe our operations are likely to entail defending against the types of claims raised by these matters. We expect the cost of defending these claims may be significant pending resolution. |
(2) | The excluded amounts represent the initial estimate and updates to that estimate of lease termination costs associated with the consolidation of the Company’s office locations in Santa Monica, California in December 2015. We believe that their exclusion is appropriate to facilitateperiod-to-periodVOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/TRUE2020 You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. TRUECAR, INC. 120 BROADWAY SUITE 200 SANTA MONICA, CA 90401 VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E92451-P33046 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. TRUECAR, INC. The Board of Directors unanimously recommends you vote FOR the following: 1.Election of Directors Nominees: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ! ! ! 01) 02) 03) Christopher Claus Philip McKoy John Mendel The Board of Directors unanimously recommends you vote FOR the following proposals: For Against Abstain 2.To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accountants for the fiscal year ending December 31, 2020. 3.Advisory vote to approve named executive officer compensation. ! ! ! ! ! ! NOTE: In their discretion, the proxies are authorized to vote upon such other business that may properly come before the meeting or at any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date  operating performance comparisons.
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The following table presents a reconciliation of net loss toNon-GAAP net income for each of the periods presented:
| | | | | | | | | | | | Year Ended
December 31, | | | | | 2018 | | | 2017 | | | | | (in thousands) | | Reconciliation of Net Loss toNon-GAAP Net Income: | | | | | | | | | Net loss | | $ | (32,849 | ) | | $ | (28,321 | ) | Non-GAAP adjustments: | | | | | | | | | Stock-based compensation | | | 32,241 | | | | 37,219 | | Certain litigation costs(1) | | | 7,967 | | | | 2,157 | | Lease exit costs(2) | | | (133 | ) | | | — | | Non-GAAP net income(3) | | $ | 7,226 | | | $ | 11,055 | |
(1) | The excluded amounts relate to legal costs incurred in connection with the Sonic Litigation, complaints filed bynon-TrueCar dealers and the California New Car Dealers Association against us and securities and consumer class action lawsuits alleging that our business model violates applicable law. We believe the exclusion of these costs is appropriate to facilitate comparisons of our core operating performance on aperiod-to-period basis. We do not believe significant trademark litigation like the Sonic Litigation is reflective of a trend in our underlying operations, and based on the nature of the specific claims underlying the other excluded litigation matters, once these matters are resolved, we do not believe our operations are likely to entail defending against the types of claims raised by these
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| matters. We expect the cost of defending these claims may be significant pending resolution. |
(2) | The excluded amounts represent the initial estimate and updates to that estimate of lease termination costs associated with the consolidation of the Company’s office locations in Santa Monica, California in December 2015. We believe that their exclusion is appropriate to facilitateperiod-to-period operating performance comparisons.
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(3) | There is no income tax impact related to the adjustments made to calculateNon-GAAP net income because of our available net operating loss carryforwards and the full valuation allowance recorded against our net deferred tax assets at December 31, 2018 and December 31, 2017.
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| | | | | A-2 | | | | 2019 Proxy Statement |
| | | | | TRUECAR, INC.
120 BROADWAY
SUITE 200
SANTA MONICA, CA 90401
| | VOTE BY INTERNET
Before The Meeting - Go towww.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go towww.virtualshareholdermeeting.com/TRUE2019You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
| | |
| | | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E70322-P19467 KEEP THIS PORTION FOR YOUR RECORDS
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TRUECAR, INC.
The Board of Directors unanimously recommends you vote FOR the following:
| | For
All
| | Withhold
All
| | For All
Except
| | | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
| | | | | | | | | 1. Election of Directors
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees: | | | | | | | | | | | | | | | | | | | | | | | | | 01) Robert Buce
02) John Krafcik
03) Wesley Nichols
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors unanimously recommends you vote FOR the following proposals:
| | For | | Against | | Abstain | | | | | | | | | | | | | | 2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accountants for the fiscal year ending December 31, 2019.
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | 3. Advisory vote to approve named executive officer compensation.
| | ☐ | | ☐ | | ☐ | | | | | | | | | | NOTE:In their discretion, the proxies are authorized to vote upon such other business that may properly come before the meeting or at any adjournment or postponement thereof.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] Date | | | | | | | | | | Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available atwww.proxyvote.com. E70323-P19467
www.proxyvote.com. E92452-P33046 TRUECAR, INC. Annual Meeting of Stockholders May 16, 201921, 2020 8:30 AM This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Noel Watson and Jeffrey Swart, or either of them, as proxyproxies, each with the power to appoint his substitute, and hereby authorize(s) himauthorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of TRUECAR, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 8:30 AM, PDT on May 16, 2019,21, 2020, live via the Internet at www.virtualshareholdermeeting.com/TRUE2019TRUE2020 and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side 
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Implemented an annual incentive program for 2019
