◻ | Preliminary Proxy Statement | |||||||
◻ | Confidential for Use of the Commission Only (as permitted by Rule 14a-6(e) (2)) | |||||||
⌧ | Definitive Proxy Statement | |||||||
◻ | Definitive Additional Materials | |||||||
◻ | Soliciting Material Pursuant to § 240.14a-12 |
⌧ | No fee required. | ||||
◻ | Fee paid previously with preliminary materials. | ||||
◻ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
Page | |||||
1. | To elect the | ||||
2. | To ratify the selection by the Audit Committee of the Board of Directors of KPMG LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, | ||||
3. | To approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement. | ||||
4. | To conduct any other business properly brought before the Annual Meeting (including adjournments, continuations and postponements thereof). |
Whether or not you expect to attend the Annual Meeting, please vote by telephone or through the Internet, or, if you receive a paper proxy card by mail, by completing and returning the proxy card mailed to you, as promptly as possible in order to ensure your representation at the Annual Meeting. Voting instructions are provided in the Notice of Internet Availability of Proxy Materials, or, if you receive a paper proxy card by mail, the instructions are printed on your proxy card and included in the accompanying Proxy Statement. Even if you have voted by proxy, you may still vote during the live webcast if you attend the Annual Meeting. Please note, however, that if your shares are held of record by a brokerage firm, bank or other nominee, you may vote online or as is otherwise provided in the Notice you receive from your broker, bank, or other nominee. |
• | Proposal 1: Election of | ||||||||||
• | Proposal 2: Ratification of selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, | ||||||||||
• | Proposal 3: Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement in accordance with SEC rules. |
We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies. |
• | You may submit another properly completed proxy card with a later date (which automatically revokes the earlier proxy). | ||||||||||
• | You may grant a subsequent proxy by telephone or through the Internet. | ||||||||||
• | You may send a timely written notice that you are revoking your earlier-dated proxy to our Corporate Secretary c/o Rapid7, Inc., 120 Causeway Street, Suite 400, Boston, Massachusetts 02114. | ||||||||||
• | You may attend the Annual Meeting and vote as described above. Simply attending the Annual Meeting will not, by itself, revoke your proxy. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions or vote by telephone or through the Internet so that your vote will be counted if you later decide not to attend the Annual Meeting. |
Proposal Number | Proposal Description | Vote Required for Approval | Effect of Abstentions | Effect of Broker Non-Votes | ||||||||||||||||||||||
1 | Election of Directors | Directors will be elected by a plurality of the votes cast at the Annual Meeting by the holders of shares present in person or by remote communication, if applicable, or represented by proxy and entitled to vote on the election of directors. The nominees receiving the most “FOR” votes will be elected as directors; withheld votes will have no effect. | No effect | No effect | ||||||||||||||||||||||
2 | Ratification of the Selection of KPMG LLP as our Independent Registered Public Accounting Firm for the fiscal year ended December 31, 2024. | “FOR” votes from the holders of a majority of shares present in person or by remote communication, if applicable, or represented by proxy and entitled to vote on this proposal. | Against | Likely not applicable(1) | ||||||||||||||||||||||
3 | Advisory Approval of the Compensation of our Named Executive Officers | “FOR” votes from the holders of a majority of shares present in person or by remote communication, if applicable, or represented by proxy and entitled to vote on this proposal. | Against | No effect |
(1) | This proposal is considered to be a “routine” matter under NYSE rules. Accordingly, if you hold your shares in street name and do not provide voting instructions to your broker, bank or other agent that holds your shares, your broker, bank or other agent has discretionary authority under NYSE rules to vote your shares on this proposal. |
Name | Age | Director Since | Expiration of Term For Which Nominated | Committee Membership | ||||||||||||||||||||||||||||||||||||||||
AC | CC | NCGC | ||||||||||||||||||||||||||||||||||||||||||
Director Nominees | ||||||||||||||||||||||||||||||||||||||||||||
Michael Berry | 61 | 2012 | 2025 | C | ||||||||||||||||||||||||||||||||||||||||
Marc Brown | 59 | 2016 | 2025 | ● | ||||||||||||||||||||||||||||||||||||||||
Judy Bruner | 65 | 2016 | 2025 | ● | ||||||||||||||||||||||||||||||||||||||||
Benjamin Holzman | 49 | 2008 | 2025 | C | ||||||||||||||||||||||||||||||||||||||||
J. Benjamin Nye(1) | 58 | 2008 | 2025 | C | ||||||||||||||||||||||||||||||||||||||||
Tom Schodorf | 66 | 2016 | 2025 | ● | ||||||||||||||||||||||||||||||||||||||||
Reeny Sondhi | 51 | 2020 | 2025 | ● | ● | |||||||||||||||||||||||||||||||||||||||
Corey Thomas(2) | 48 | 2012 | 2025 | |||||||||||||||||||||||||||||||||||||||||
Non-Continuing Directors | ||||||||||||||||||||||||||||||||||||||||||||
Christina Kosmowski | 47 | 2019 | — | |||||||||||||||||||||||||||||||||||||||||
(1) Lead Independent Director | ● - Member | C - Chair | ||||||||||||||||||||||||||||||||||||||||||
(2) Chairman of the Board | ||||||||||||||||||||||||||||||||||||||||||||
AC - Audit Committee | ||||||||||||||||||||||||||||||||||||||||||||
CC - Compensation Committee | ||||||||||||||||||||||||||||||||||||||||||||
NCGC - Nominating and Corporate Governance Committee |
Name | Age | Director Since | Expiration of Term For Which Nominated | Committee Membership | ||||||||||||||||||||||||||||||||||||||||
AC | CC | NCGC | ||||||||||||||||||||||||||||||||||||||||||
Director Nominees | ||||||||||||||||||||||||||||||||||||||||||||
Michael Berry | 60 | 2012 | 2024 | C | ||||||||||||||||||||||||||||||||||||||||
Marc Brown | 58 | 2016 | 2024 | ● | ||||||||||||||||||||||||||||||||||||||||
Judy Bruner | 64 | 2016 | 2024 | ● | ||||||||||||||||||||||||||||||||||||||||
Benjamin Holzman | 48 | 2008 | 2024 | C | ||||||||||||||||||||||||||||||||||||||||
Christina Kosmowski | 46 | 2019 | 2024 | |||||||||||||||||||||||||||||||||||||||||
J. Benjamin Nye(1) | 57 | 2008 | 2024 | C | ● | |||||||||||||||||||||||||||||||||||||||
Tom Schodorf | 65 | 2016 | 2024 | ● | ||||||||||||||||||||||||||||||||||||||||
Reeny Sondhi | 50 | 2020 | 2024 | ● | ||||||||||||||||||||||||||||||||||||||||
Corey Thomas(2) | 47 | 2012 | 2024 | |||||||||||||||||||||||||||||||||||||||||
(1) Lead Independent Director | ● - Member | C - Chair | ||||||||||||||||||||||||||||||||||||||||||
(2) Chairman of the Board | ||||||||||||||||||||||||||||||||||||||||||||
AC - Audit Committee | ||||||||||||||||||||||||||||||||||||||||||||
CC - Compensation Committee | ||||||||||||||||||||||||||||||||||||||||||||
NCGC - Nominating and Corporate Governance Committee |
Board Diversity Matrix (as of April 20, 2023) | ||||||||||||||||||||||||||||
Board Diversity Matrix (as of April 19, 2024) | Board Diversity Matrix (as of April 19, 2024) | |||||||||||||||||||||||||||
Board Size: | Board Size: | |||||||||||||||||||||||||||
Total Number of Directors | ||||||||||||||||||||||||||||
Total Number of Directors | ||||||||||||||||||||||||||||
Total Number of Directors | Total Number of Directors | 9 | 9 | |||||||||||||||||||||||||
Gender Identity: | Gender Identity: | Female | Male | Non-Binary | Did Not Disclose Gender | Gender Identity: | Female | Male | Non-Binary | Did Not Disclose Gender | ||||||||||||||||||
Directors | Directors | 3 | 6 | — | Directors | 3 | 6 | — | ||||||||||||||||||||
Demographic Background: | Demographic Background: | |||||||||||||||||||||||||||
African American or Black | ||||||||||||||||||||||||||||
African American or Black | ||||||||||||||||||||||||||||
African American or Black | African American or Black | — | 2 | — | — | 2 | — | |||||||||||||||||||||
Alaskan Native or Native American | Alaskan Native or Native American | — | Alaskan Native or Native American | — | ||||||||||||||||||||||||
Asian | Asian | 1 | — | Asian | 1 | — | ||||||||||||||||||||||
Hispanic or Latinx | Hispanic or Latinx | — | Hispanic or Latinx | — | ||||||||||||||||||||||||
Native Hawaiian or Pacific Islander | Native Hawaiian or Pacific Islander | — | Native Hawaiian or Pacific Islander | — | ||||||||||||||||||||||||
White | White | 2 | 3 | — | White | 2 | 3 | — | ||||||||||||||||||||
Two or More Races or Ethnicities | Two or More Races or Ethnicities | — | 1 | — | Two or More Races or Ethnicities | — | 1 | — | ||||||||||||||||||||
LGBTQ+ | LGBTQ+ | — | LGBTQ+ | — | ||||||||||||||||||||||||
Did Not Disclose Demographic Background | Did Not Disclose Demographic Background | 3 (1) | Did Not Disclose Demographic Background | 3 (1) |
• | establish the agenda for meetings of the independent directors; | ||||||||||
• | preside over meetings of the independent directors; | ||||||||||
• | preside over any portions of meetings of the Board evaluating the performance of the Board; | ||||||||||
• | coordinate the activities of the other independent directors; and | ||||||||||
• | perform such other duties specified by the Board from time to time. |
• | reviewing and approving corporate performance goals and objectives relevant to the compensation of our executive officers and other senior management, as appropriate, which powers shall include the power to exercise discretion to adjust compensation based on such goals and objectives; | ||||||||||
• | reviewing and recommending to the Board the type and amount of compensation to be paid or awarded to non-employee members of the Board; | ||||||||||
• | evaluating and approving the compensation plans and programs advisable for us, as well as evaluating and approving the modification or termination of existing plans and programs; | ||||||||||
• | establishing policies with respect to equity compensation arrangements with the objective of appropriately balancing the perceived value of equity compensation and the dilutive and other costs of that compensation to us; | ||||||||||
• | reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements (including, without limitation, perquisites and any other form of compensation) for our executive officers and, as appropriate, other senior management; | ||||||||||
• | administration of our equity compensation plans, pension and profit-sharing plans, stock purchase plans, bonus plans, deferred compensation plans and other similar plan and programs; and | ||||||||||
• | reviewing our practices and policies of employee compensation as they relate to risk management and risk-taking incentives, to determine whether such compensation policies and practices are reasonably likely to have a material adverse effect on us. |
Year Ended December 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
Audit Fees(1) | $ | 1,706,000 | $ | 1,910,000 | |||||||||||||
Audit-Related Fees | $ | — | $ | — | |||||||||||||
Tax Fees(2) | $ | 79,154 | $ | 116,708 | |||||||||||||
All Other Fees(3) | $ | 2,500 | $ | 2,500 | |||||||||||||
Total Fees | $ | 1,787,654 | $ | 2,029,208 |
Year Ended December 31, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Audit Fees(1) | $ | 2,108,041 | $ | 1,756,000 | |||||||||||||
Audit-Related Fees(2) | 150,000 | — | |||||||||||||||
Tax Fees(3) | 109,158 | 79,154 | |||||||||||||||
All Other Fees(4) | 2,500 | 2,500 | |||||||||||||||
Total Fees | $ | 2,369,699 | $ | 1,837,654 |
(1) | Represents fees billed or billable for professional services provided to us in connection with (a) the audit of our annual consolidated financial statements, (b) the review of our quarterly consolidated financial statements and (c) other regulatory filings. The Audit Fees in the year-ended December 31, | |||||||
(2) | The Audit-Related Fees in the year-ended December 31, 2023 include fees related to the issuance of our | |||||||
Represents fees billed for professional services provided for tax compliance, advice and planning. | ||||||||
Represents fees billed for access to online accounting research software applications and data. |
• | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock; | ||||||||||
• | each of our named executive officers; | ||||||||||
• | each of our directors; and | ||||||||||
• | all of our current executive officers and directors as a group. |
Number of Shares Beneficially Owned (#) | Percent of Shares Beneficially Owned (%) | |||||||||||||
5% Stockholders: | ||||||||||||||
Entities affiliated with BlackRock, Inc.(1) | 6,462,375 | 10.7 | ||||||||||||
Entities affiliated with The Vanguard Group, Inc.(2) | 6,118,655 | 10.1 | ||||||||||||
Entities affiliated with Wellington Management Group LLP(3) | 2,668,858 | 4.4 | ||||||||||||
Named Executive Officers and Directors: | ||||||||||||||
Corey Thomas(4) | 1,075,396 | 1.4 | ||||||||||||
Tim Adams (5) | 36,947 | * | ||||||||||||
Andrew Burton(6) | 111,498 | * | ||||||||||||
Christina Luconi(7) | 47,718 | * | ||||||||||||
Michael Berry | 5,402 | * | ||||||||||||
Marc Brown(8) | 80,503 | * | ||||||||||||
Judy Bruner | 33,844 | * | ||||||||||||
Benjamin Holzman(9) | 45,337 | * | ||||||||||||
Christina Kosmowski | 11,172 | * | ||||||||||||
J. Benjamin Nye | 54,337 | * | ||||||||||||
Tom Schodorf(10) | 55,238 | * | ||||||||||||
Reeny Sondhi | 5,548 | * | ||||||||||||
Jeff Kalowski (11) | 68,073 | * | ||||||||||||
All current executive officers and directors as a group (12 persons)(12) | 1,594,464 | 2.6 |
Number of Shares Beneficially Owned (#) | Percent of Shares Beneficially Owned (%) | |||||||||||||
5% Stockholders: | ||||||||||||||
Entities affiliated with BlackRock Inc.(1) | 6,219,779 | 10.0 | ||||||||||||
Entities affiliated with First Trust Portfolios(2) | 3,612,746 | 5.8 | ||||||||||||
Entities affiliated with FMR LLC (3) | 4,597,738 | 7.4 | ||||||||||||
Entities affiliated with The Vanguard Group, Inc.(4) | 6,980,546 | 11.2 | ||||||||||||
Named Executive Officers and Directors: | ||||||||||||||
Corey Thomas(5) | 1,090,670 | 1.7 | ||||||||||||
Tim Adams (6) | 55,487 | * | ||||||||||||
Andrew Burton(7) | 82,536 | * | ||||||||||||
Christina Luconi(8) | 70,154 | * | ||||||||||||
Michael Berry | 8,279 | * | ||||||||||||
Marc Brown(9) | 72,554 | * | ||||||||||||
Judy Bruner | 36,721 | * | ||||||||||||
Benjamin Holzman(10) | 48,214 | * | ||||||||||||
Christina Kosmowski | 14,754 | * | ||||||||||||
J. Benjamin Nye | 57,214 | * | ||||||||||||
Tom Schodorf(11) | 58,115 | * | ||||||||||||
Reeny Sondhi | 10,353 | * | ||||||||||||
All current executive officers and directors as a group (12 persons)(12) | 1,605,051 | 2.6 |
* | Represents beneficial ownership of less than 1% of our outstanding common stock. |
(1) | The information shown is as of December 31, | |||||||
(2) | The information shown is as of December 31, | |||||||
(3) | The information shown is as of December 29, 2023 and is based upon disclosures filed on a Schedule 13G on February 9, 2024 by FMR LLC, which reported sole voting power over 4,593,592 shares and sole dispositive power over 4,597,738 shares. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02110. | |||||||
(4) | The information shown is as of December 29, 2023 and is based upon disclosures filed on a Schedule 13G/A on February 13, 2024 by The Vanguard Group - 23-1945930, which reported shared voting power over | |||||||
Includes (i) | ||||||||
Includes | ||||||||
Includes (i) 2,500 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, | ||||||||
Includes | ||||||||
Includes 45,063 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, | ||||||||
Includes | ||||||||
Includes 33,928 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, | ||||||||
(12) | Includes |
Name | Title | |||||||
Corey Thomas | Chief Executive Officer and Chairman of the Board | |||||||
Tim Adams | Chief Financial Officer | |||||||
Andrew Burton | President and Chief Operating Officer | |||||||
Christina Luconi | Chief People Officer |
Name | Title | ||||||||||||||||
Corey Thomas | Chief Executive Officer and Chairman of the Board | ||||||||||||||||
Tim Adams | Chief Financial Officer | ||||||||||||||||
Andrew Burton | President and Chief Operating Officer | ||||||||||||||||
Christina Luconi | Chief People Officer | ||||||||||||||||
• | Achieved annualized recurring revenue* of | |||||||||||||
• | Total revenue was | |||||||||||||
• | Ended | |||||||||||||
• | Full-year GAAP loss from operations was | |||||||||||||
• | Full-year net cash provided by operating activities of | |||||||||||||
______________ | ||||||||||||||
* Annualized recurring revenue (“ARR”) is a financial measure that we define as the annual value of all recurring revenue related to contracts in place at the end of the period. | ||||||||||||||
**ARR per | ||||||||||||||
***Non-GAAP income (loss) from operations (“Non-GAAP Operating Income”) is a non-GAAP financial measure, which represents the GAAP income (loss) from operations, excluding stock-based compensation expense, amortization of acquired intangible assets and certain other items, such as acquisition-related expenses, litigation-related expenses impairment of long-lived assets and |
****Free Cash Flow is a non-GAAP measure that we define as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. A reconciliation of net cash provided by operating activities to free cash flow is set forth on Appendix A to this Proxy Statement. | ||||||||||||||
WHAT WE DO | WHAT WE DON'T DO | ||||||||||
P | 100% Independent Directors on the Compensation Committee. | O | No Guaranteed “Single Trigger” Change in Control Payments; Change in Control Equity Vesting Benefits Are Structured to be “Double Trigger” or Limited to Acquiring Company Refusing to Assume or Continue Awards. | ||||||||
P | Retain an Independent Compensation Advisor. | O | |||||||||
P | Review and Reevaluate Executive Compensation Annually. | O | No Tax Reimbursements or Tax Gross Ups on Severance or Change in Control Payments. | ||||||||
P | Structure a Significant Portion of Executive Compensation to be Performance-Based. | O | No Special Executive Welfare or Health Benefits, or Retirement Plans That Are Not Available to Our Employees Generally. | ||||||||
P | Tie Performance Bonus Opportunities to Corporate Objectives. | O | No Guaranteed Salary Increases or Bonuses. | ||||||||
P | Emphasize Long-Term Equity Incentives. | O | No Short Sales or Hedging of Stock Ownership Positions and Transactions Involving Derivatives of Our Common Stock. | ||||||||
P | Maintain Stock Ownership Guidelines for CEO and Directors. | | |||||||||
P | Implement and Enforce a NASDAQ-compliant "Clawback" Policy. | ||||||||||
P | Establish Maximum Payout Amounts under the Bonus Plan and Require Threshold Level of Achievement for Payout with Respect to Each Performance Measure. | ||||||||||
P |
• | attract, retain and reward highly qualified executives; | ||||||||||
• | provide incentives that motivate and reward for achievement of our key performance goals that increase stockholder value over the long term; | ||||||||||
• | align our executives’ interests with those of our stockholders; and | ||||||||||
• | link pay to Company's performance. |
Compensation Element | Description | Purpose | ||||||
Base Salary (fixed cash) | •Fixed component of pay that generally falls around the median of the market. | •Provides compensation for executive to perform job functions. •Provides financial stability and security. | ||||||
Annual Performance Bonus (“at-risk” performance-based cash or equity)* | •Opportunity to earn annually. •Tied to achievement of key corporate goals. •Executives can earn 0-150% of their target award based on achievement of pre-established targets. •Includes a threshold level of performance necessary for any payout and a reasonable cap on payment. | •Motivates and rewards for achievement of key drivers of our annual operating plan. •Provides tangible, achievable goals and reinforces key priorities of the organization. | ||||||
Long-Term Incentives (“at-risk” performance-based equity)* | •RSU awards, typically granted annually, that vest over • annually with a one-year performance period that vest over three years, subject to continued employment on the vesting date. | •Vesting period assists with retention. •Aligns executives' interests with stockholder interests and changes in stockholder value over the long-term. •PSUs encourage achievement of key performance metrics. |
AppFolio (APPF) | Q2 Holdings (QTWO) | |||||||
BlackLine (BL) | Qualys (QLYS) | |||||||
Coupa Software* (COUP) | SailPoint Technologies (SAIL) | |||||||
Elastic N.V.* (ESTC) | Tenable Holdings (TENB) | |||||||
Everbridge (EVBG) | Varonis Systems (VRNS) | |||||||
Five9 (FIVN) | Workiva (WK) | |||||||
New Relic* (NEWR) | Zscaler (ZS) | |||||||
PagerDuty (PD) |
Alteryx * (AYX) | Q2 Holdings (QTWO) | |||||||
AppFolio (APPF) | Qualys (QLYS) | |||||||
BlackLine (BL) | SentinelOne * (S) | |||||||
Elastic N.V. (ESTC) | Tenable Holdings (TENB) | |||||||
Everbridge (EVBG) | Varonis Systems (VRNS) | |||||||
Five9 (FIVN) | Workiva (WK) | |||||||
New Relic (NEWR) | Zscaler (ZS) | |||||||
Pager Duty (PD) |
• | Company performance and existing business needs; | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Each executive officer’s individual performance, experience, skills, level of responsibility and the | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | The need to attract new talent to our executive team and | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | A range of market data reference points, as described above under | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | The total compensation cost and stockholder dilution from executive compensation actions; | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | A review of an executive officer’s total target and historical compensation and equity award holdings; | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Internal pay equity relative to similarly situated executives; | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Recommendations from an outside compensation consultant on compensation policy determinations for our executive officers; | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Stockholder feedback; | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Our Chief Executive | ||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Our Compensation Committee’s independent judgment. |
Name | 2023 Base Salary ($) | ||||||||||
Corey Thomas | 443,000 | ||||||||||
Tim Adams | 410,000 | ||||||||||
Andrew Burton | 430,000 | ||||||||||
Christina Luconi | 392,000 |
Target Bonus ($) | |||||
Corey Thomas | 637,350 | ||||
Tim Adams | 304,500 | ||||
Andrew Burton | 357,000 | ||||
Christina Luconi | 218,400 |
Corporate Performance Goal | Threshold, Target and Maximum Achievement Levels and Payout Formula(1) | Weight | Actual Achievement | Achievement Percentage of Target | Weighted Payout Percentage | ||||||||||||
Non-GAAP Operating Income Margin | Threshold achievement: 7.4% YOY Operating Margin Expansion results in 50% payout funding Target achievement: 8.4% YOY Operating Margin Expansion results in 100% payout funding | 70% | 13.1% (2) | 100% | 70% | ||||||||||||
Annualized Recurring Revenue | Threshold achievement: $820 million results in 50% payout funding Target achievement: $837 million results in 100% payout funding | 30% | $805.7 million(3) | 0% | 0% | ||||||||||||
Net Retention Rate ("NRR") (4) | Each percentage point improvement upon 2022 NRR equates to a 10% incremental bonus above target achievement of both ARR and Non-GAAP Operating Income Margin. This incremental percentage is up to 50% maximum. | +10% | 0% | 0% | 0% | ||||||||||||
Total | 70.0% |
Bonus Amount Earned ($) | Bonus Amount Earned as % of Target Bonus | |||||||
Corey Thomas | 446,145 | 70% | ||||||
Tim Adams | 213,150 | 70% | ||||||
Andrew Burton | 249,900 | 70% | ||||||
Christina Luconi | 152,880 | 70% |
Restricted Stock Unit Award in | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corey Thomas | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tim Adams | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew Burton |
Long-Term Incentive Compensation In early The Compensation Committee responsibilities and performance, including the criticality of the executive officer to the future success of the Company. The Compensation Committee also took into account the recommendations of our Chief Executive Officer (except with respect to his own equity award) and the other factors described above under “Factors Used in Determining Executive Compensation”. The RSU awards granted to our named executive officers in February Each of the annual RSU awards for Mr. Thomas, Mr. Adams, Mr. Burton and Ms. Luconi vest in 36
However, based on our financial performance in 2023,
(1) Payout funding is calculated linearly for achievement between the designated performance thresholds and maximums described for ARR. (2) Payout funding adjustments based on 37 Other Features of Our Executive Compensation Program Employment Arrangements The initial terms and conditions of employment for each of our named executive officers are set forth in employment offer letters and employment agreements, as applicable. The terms of these letters and agreements are described in greater detail in the section titled “—Employment Arrangements—Agreements with our Named Executive Officers.” Each of our named executive officers is an “at-will” employee. Severance and Change in Control Payments and Benefits In The Compensation Committee approved these severance payments and benefits, after a review of competitive market data provided by Compensia, to ensure that the payments and benefits remain appropriately structured and at reasonable levels. All change in control payments and benefits are structured to be payable only on a “double-trigger” basis, requiring a termination of employment without cause or a resignation by a named executive officer for “good reason” (each as defined in the applicable agreements), in each case, in connection with the change in control transaction, except that the vesting of equity awards for our named executive officers will be accelerated in connection with a change in control if they are not assumed by the acquirer. The Compensation Committee believes that these severance protections are necessary to provide stability among our executive officers, important from a retention perspective, serve to focus our executive officers on our business operations, and avoid distractions in connection with a potential change in control transaction or period of uncertainty. A more detailed description of our named executive officer severance and change in control payments and benefits is provided below under “Potential Payments upon Termination or Change in Control.” Each of our named executive officers holds stock options, RSU and Section 401(k) Plan, ESPP, Welfare and Health Benefits We maintain a defined contribution retirement plan that provides eligible U.S. employees, including our named executive officers, with an opportunity to save for retirement on a tax advantaged basis (the “401(k) Plan”). Our matching contribution is 50% of employee contributions up to 6% of base salary and up to a $3,000 annual maximum match. Eligible employees may defer eligible compensation on a pre-tax basis, up to the statutorily prescribed annual limits on contributions under the Internal Revenue Code of 1986, as amended (the “Code”). Contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions and any employer contributions after one year of service. The 401(k) Plan is intended to be qualified under Section 401(a) of the Code with the 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-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. We also offer eligible employees, including our executive officers, the opportunity to purchase shares of our common stock at a discount under our 2015 Employee Stock Purchase Plan (the “ESPP”), which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Pursuant to the ESPP, all eligible employees, including the eligible named executive officers, may allocate up to 15% of the participant’s gross earnings (as described in ESPP) for that year to purchase our stock at a 15% discount of the lesser of (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date, subject to specified limits. 38 In addition, we provide other health and welfare benefits to our executive officers, including the named executive officers, on the same basis as to all of our full-time employees. These benefits include, but are not limited to, medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans. We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. Perquisites and Other Personal Benefits Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not generally provide perquisites or other personal benefits to our executive officers, including the named executive officers, except in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes. We do, however, pay the premiums for term life insurance and disability insurance, subject to certain limitations, for all of our employees, including our named executive officers. No named executive officer received perquisites and other personal benefits with an aggregate value equal to or exceeding $10,000 during In the future, we may provide perquisites or other personal benefits in limited circumstances. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. Tax and Accounting Implications We follow Financial Accounting Standard Board Accounting Standards Codification Topic 718 (“ASC Topic 718”) for our stock-based compensation awards. ASC Topic 718 requires companies to estimate and record an expense for each award of equity compensation (including stock options and RSUs) over the vesting period of the award. Under Section 162(m) of the Code (“Section 162(m)”), compensation paid to each of the Company’s “covered employees” that exceeds $1 million per taxable year is generally non-deductible unless the compensation qualifies for certain grandfathered exceptions (including the “performance-based compensation” exception) for certain compensation paid pursuant to a written binding contract in effect on November 2, 2017 and not materially modified on or after such date. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s named executive officers in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company and its stockholders, which may include providing for compensation that is not deductible by the Company 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 the Company’s business needs. Other Compensation Policies and Practices Equity Awards Grant Delegation Policy The Compensation Committee has delegated authority to our Chief Executive Officer to grant equity awards to our employees (other than our executive officers), subject to the terms and conditions of an equity awards grant delegation policy. Such awards may be granted on scheduled grant dates to newly-hired employees or to existing employees in connection with a promotion or in recognition of their contributions to the Company. In each instance, the policy provides for a limitation on the maximum size of any such awards and the total number of shares to be granted under such policy. Prohibition on Hedging and Other Stock Trading Practices We maintain an Insider Trading Policy that, among other things, prohibits all of our directors and employees, including our named executive officers, from engaging in short sales, hedging of their stock ownership positions and transactions involving derivative securities relating to our capital stock. Our Insider Trading Policy also prohibits trading during certain quarterly and certain special blackout periods. Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit our directors and certain employees, including our named executive officers, to adopt the Exchange Act Rule 10b5-1 trading plans 39 (“10b5-1 plans”). Under our 10b5-1 Trading Plan Guidelines, 10b5-1 plans may only be adopted or modified during an open trading window under our Insider Trading Policy and only when such individual does not otherwise possess material nonpublic information about the Company. Stock Ownership Guidelines Under our stock ownership guidelines effective for As of October 19, 2023, the Board adopted and made effective the Rapid7, Inc. Compensation Recoupment Policy (the “Clawback Policy”), a copy of which was filed as Exhibit 97 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The Clawback Policy provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws in accordance with the terms and conditions set forth therein. The Clawback Policy is intended to comply with the requirements of Section 10D of the Exchange Act and Nasdaq Listing Rule 5608. The Clawback Policy applies to all current and former Section 16 officers of the Company who served during the three fiscal years completed immediately preceding the earlier of (i) the date the Board or a committee of the Board concludes, or reasonably should have concluded, that the Company is required to prepare a financial restatement, or (ii) the date a court or regulator causes the Company to prepare a financial restatement (the “Recoupment Trigger Date”). Recoverable compensation under the Clawback Policy covers incentive compensation (a) based on “financial reporting measures,” which includes (i) measures determined and presented in accordance with accounting principles used to prepare financial statements and measures derived wholly or in part from such measures, (ii) stock price and (iii) TSR, and (b) determined based on goals attained in any of the three completed fiscal years, beginning with fiscal year 2023, preceding the Recoupment Trigger Date. Recoverable amounts under the Clawback Policy are calculated on a pre-tax basis as the excess of what was paid and what would have been paid had such payout been calculated based on the restated financial information and for compensation based on TSR or stock price, the excess must be calculated based on a reasonable estimate of the impact of such restatement on TSR or stock price. Recovery under the Clawback Policy is mandatory and no employee misconduct is required. ANALYSIS OF RISKS PRESENTED BY OUR COMPENSATION POLICIES AND PROGRAMS The Compensation Committee has reviewed our compensation policies and practices, in consultation with Compensia, to assess whether they encourage employees to take excessive or inappropriate risks. After reviewing and assessing our compensation philosophy, policies and practices, including the mix of fixed and variable, short-term and long-term incentives and overall pay, incentive plan structures, and the checks and balances built into, and oversight of, each plan and practice, in February 40 Compensation Committee Report The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, Respectfully submitted, Marc Brown J. Benjamin Nye Thomas Schodorf The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Summary Compensation Table The following table sets forth information regarding the compensation of our named executive officers as of December 31, Summary Compensation Table
The initial terms and conditions of Severance and Change in Control Payments and Benefits In August 2023, after reviewing current market practices and upon the recommendation of Compensia, we entered into updated written agreements with each of our then named executive officers that superseded the terms of their severance and change in control terms set forth in their prior agreements with us, as applicable. Each of these severance agreements provides for severance payments and benefits (cash payments, payments for COBRA premiums and equity award acceleration) upon a termination of employment without cause or a resignation for good reason, in each case, either outside or inside the “Change in Control Period” (which is three months prior to or 12 months following a change in control transaction). We do not provide any tax payments or “gross ups” in connection with a severance or change in control transaction. The Compensation Committee approved these severance payments and benefits, after a review of competitive market data provided by Compensia, to ensure that the payments and benefits remain appropriately structured and at reasonable levels. All change in control payments and benefits are structured to be payable only on a “double-trigger” basis, requiring a termination of employment without cause or a resignation by a named executive officer for “good reason” (each as defined in the applicable agreements), in each case, in connection with the change in control transaction, except that the vesting of equity awards for our named executive officers will be accelerated in connection with a change in control if they are not assumed by the acquirer. The Compensation Committee believes that these severance protections are necessary to provide stability among our executive officers, important from a retention perspective, serve to focus our executive officers on our business operations, and avoid distractions in connection with a potential change in control transaction or period of uncertainty. A more detailed description of our named executive officer severance and change in control payments and benefits is provided below under “Potential Payments upon Termination or Change in Control.” Each of our named executive officers holds stock options, RSU and PSU awards under our equity incentive plans that were granted subject to our form of equity award agreements. A description of the termination and change of control provisions in such equity incentive plans and form of equity award agreements is provided below under “Potential Payments upon Termination or Change in Control.” Section 401(k) Plan, ESPP, Welfare and Health Benefits We maintain a defined contribution retirement plan that provides eligible U.S. employees, including our named executive officers, with an opportunity to save for retirement on a tax advantaged basis (the “401(k) Plan”). Our matching contribution is 50% of employee contributions up to 6% of base salary and up to a $3,000 annual maximum match. Eligible employees may defer eligible compensation on a pre-tax basis, up to the statutorily prescribed annual limits on contributions under the Internal Revenue Code of 1986, as amended (the “Code”). Contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions and any employer contributions after one year of service. The 401(k) Plan is intended to be qualified under Section 401(a) of the Code with the 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-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. We also offer eligible employees, including our executive officers, the opportunity to purchase shares of our common stock at a discount under our 2015 Employee Stock Purchase Plan (the “ESPP”), which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Pursuant to the ESPP, all eligible employees, including the eligible named executive officers, may allocate up to 15% of the participant’s gross earnings (as described in ESPP) for that year to purchase our stock at a 15% discount of the lesser of (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date, subject to specified limits. 38 In addition, we provide other health and welfare benefits to our executive officers, including the named executive officers, on the same basis as to all of our full-time employees. These benefits include, but are not limited to, medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans. We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. Perquisites and Other Personal Benefits Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not generally provide perquisites or other personal benefits to our executive officers, including the named executive officers, except in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes. We do, however, pay the premiums for term life insurance and disability insurance, subject to certain limitations, for all of our employees, including our named executive officers. No named executive officer received perquisites and other personal benefits with an aggregate value equal to or exceeding $10,000 during 2023. In the future, we may provide perquisites or other personal benefits in limited circumstances. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. Tax and Accounting Implications We follow Financial Accounting Standard Board Accounting Standards Codification Topic 718 (“ASC Topic 718”) for our stock-based compensation awards. ASC Topic 718 requires companies to estimate and record an expense for each award of equity compensation (including stock options and RSUs) over the vesting period of the award. Under Section 162(m) of the Code (“Section 162(m)”), compensation paid to each of the Company’s “covered employees” that exceeds $1 million per taxable year is generally non-deductible unless the compensation qualifies for certain grandfathered exceptions (including the “performance-based compensation” exception) for certain compensation paid pursuant to a written binding contract in effect on November 2, 2017 and not materially modified on or after such date. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s named executive officers in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company and its stockholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit under Section 162(m). The Other Compensation Policies and Practices Equity Awards Grant Delegation Policy The Compensation Committee has delegated authority to our Chief Executive Officer to grant equity awards to our employees (other than our executive officers), subject to the terms and conditions of an equity awards grant delegation policy. Such awards may be granted on scheduled grant dates to newly-hired employees or to existing employees in connection with a promotion or in recognition of their contributions to the Company. In each instance, the policy provides for a limitation on the maximum size of any such awards and the total number of shares to be granted under such policy. Prohibition on Hedging and Other Stock Trading Practices We maintain an Insider Trading Policy that, among other things, prohibits all of our directors and employees, including our named executive officers, from engaging in short sales, hedging of their stock ownership positions and transactions involving derivative securities relating to our capital stock. Our Insider Trading Policy also prohibits trading during certain quarterly and certain special blackout periods. Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit our directors and certain employees, including our named executive officers, to adopt the Exchange Act Rule 10b5-1 trading plans 39 (“10b5-1 plans”). Under our 10b5-1 Trading Plan Guidelines, 10b5-1 plans may only be adopted or modified during an open trading window under our Insider Trading Policy and only when such individual does not otherwise possess material nonpublic information Stock Ownership Guidelines Under our stock ownership guidelines effective for 2023, our non-employee members of Clawback Policy As of October 19, 2023, the Board adopted and made effective the Rapid7, Inc. Compensation Recoupment Policy (the “Clawback Policy”), a copy of which was filed as Exhibit 97 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, The Clawback Policy applies to all current and former Section 16 officers of the Company who served during the three fiscal years completed immediately preceding the earlier of (i) the date the Board or a committee of the Board concludes, or reasonably should have concluded, that the Company is required to prepare a financial restatement, or (ii) the date a court or regulator causes the Company to prepare a financial restatement (the “Recoupment Trigger Date”). Recoverable compensation under the Clawback Policy covers incentive compensation (a) based on “financial reporting measures,” which includes (i) measures determined and presented in accordance with accounting principles used to prepare financial statements and measures derived wholly or in part from such measures, (ii) stock price and (iii) TSR, and (b) determined based on goals attained in any of the three completed fiscal years, beginning with fiscal year 2023, preceding the Recoupment Trigger Date. Recoverable amounts under the Clawback Policy are calculated on a pre-tax basis as the excess of what was paid and what would have been paid had such payout been calculated based on the restated financial information and for compensation based on TSR or stock price, the excess must be calculated based on a reasonable estimate of the impact of such restatement on TSR or stock price. Recovery under the Clawback Policy is mandatory and no employee misconduct is required. ANALYSIS OF RISKS PRESENTED BY OUR COMPENSATION POLICIES AND PROGRAMS The Compensation Committee has reviewed our compensation policies and practices, in consultation with Compensia, to assess whether they encourage employees to take excessive or inappropriate risks. After reviewing and assessing our compensation philosophy, policies and practices, including the mix of fixed and variable, short-term and long-term incentives and overall pay, incentive plan structures, and the checks and balances built into, and oversight of, each plan and practice, in February 2023, the Compensation Committee determined that any risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on our Company as a whole. The Compensation Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks; rather, it believes the mix of short-term compensation (in the form of base salary and annual performance bonuses, if any, which is based on a variety of performance factors and includes a cap on payout) and long-term compensation (in the form of RSU and PSU awards) in our executive compensation program prevents undue focus on short-term results and helps align the interests of our executive officers with the interests of our stockholders. In addition, our insider trading policy protects against short-term decision making. The Compensation Committee conducts an annual review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us. 40 Compensation Committee Report The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Respectfully submitted, Marc Brown J. Benjamin Nye Thomas Schodorf The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 41 Summary Compensation Table The following table sets forth information regarding the compensation of our named executive
Employment Arrangements The initial terms and conditions of employment for each of our named executive officers are set forth in employment offer letters and employment agreements, as applicable. The terms of these letters and agreements are described in greater detail in the section titled “—Employment Arrangements—Agreements with our Named Executive Officers.” Each of our named executive officers is an “at-will” employee. Severance and Change in Control Payments and Benefits In August 2023, after reviewing current market practices and upon the recommendation of Compensia, we entered into updated written agreements with each of our then named executive officers that superseded the terms of their severance and change in control terms set forth in their prior agreements with us, as applicable. Each of these severance agreements provides for severance payments and benefits (cash payments, payments for COBRA premiums and equity award acceleration) upon a termination of employment without cause or a resignation for good reason, in each case, either outside or inside the “Change in Control Period” (which is three months prior to or 12 months following a change in control transaction). We do not provide any tax payments or “gross ups” in connection with a severance or change in control transaction. The Compensation Committee approved these severance payments and benefits, after a review of competitive market data provided by Compensia, to ensure that the payments and benefits remain appropriately structured and at reasonable levels. All change in control payments and benefits are structured to be payable only on a “double-trigger” basis, requiring a termination of employment without cause or a resignation by a named executive officer for “good reason” (each as defined in the applicable agreements), in each case, in connection with the change in control transaction, except that the vesting of equity awards for our named executive officers will be accelerated in connection with a change in control if they are not assumed by the acquirer. The Compensation Committee believes that these severance protections are necessary to provide stability among our executive officers, important from a retention perspective, serve to focus our executive officers on our business operations, and avoid distractions in connection with a potential change in control transaction or period of uncertainty. A more detailed description of our named executive officer severance and change in control payments and benefits is provided below under “Potential Payments upon Termination or Change in Control.” Each of our named executive officers holds stock options, RSU and PSU awards under our equity incentive plans that were granted subject to our form of equity award agreements. A description of the termination and change of control provisions in such equity incentive plans and form of equity award agreements is provided below under “Potential Payments upon Termination or Change in Control.” Section 401(k) Plan, ESPP, Welfare and Health Benefits We maintain a defined contribution retirement plan that provides eligible U.S. employees, including our named executive officers, with an opportunity to save for retirement on a tax advantaged basis (the “401(k) Plan”). Our matching contribution is 50% of employee contributions up to 6% of base salary and up to a $3,000 annual maximum match. Eligible employees may defer eligible compensation on a pre-tax basis, up to the statutorily prescribed annual limits on contributions under the Internal Revenue Code of 1986, as amended (the “Code”). Contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions and any employer contributions after one year of service. The 401(k) Plan is intended to be qualified under Section 401(a) of the Code with the 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-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. We also offer eligible employees, including our executive officers, the opportunity to purchase shares of our common stock at a discount under our 2015 Employee Stock Purchase Plan (the “ESPP”), which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Pursuant to the ESPP, all eligible employees, including the eligible named executive officers, may allocate up to 15% of the participant’s gross earnings (as described in ESPP) for that year to purchase our stock at a 15% discount of the lesser of (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date, subject to specified limits. 38 In addition, we provide other health and welfare benefits to our executive officers, including the named executive officers, on the same basis as to all of our full-time employees. These benefits include, but are not limited to, medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans. We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. Perquisites and Other Personal Benefits Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not generally provide perquisites or other personal benefits to our executive officers, including the named executive officers, except in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes. We do, however, pay the premiums for term life insurance and disability insurance, subject to certain limitations, for all of our employees, including our named executive officers. No named executive officer received perquisites and other personal benefits with an aggregate value equal to or exceeding $10,000 during 2023. In the future, we may provide perquisites or other personal benefits in limited circumstances. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. Tax and Accounting Implications We follow Financial Accounting Standard Board Accounting Standards Codification Topic 718 (“ASC Topic 718”) for our stock-based compensation awards. ASC Topic 718 requires companies to estimate and record an expense for each award of equity compensation (including stock options and RSUs) over the vesting period of the award. Under Section 162(m) of the Code (“Section 162(m)”), compensation paid to each of the Company’s “covered employees” that exceeds $1 million per taxable year is generally non-deductible unless the compensation qualifies for certain grandfathered exceptions (including the “performance-based compensation” exception) for certain compensation paid pursuant to a written binding contract in effect on November 2, 2017 and not materially modified on or after such date. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s named executive officers in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company and its stockholders, which may include providing for compensation that is not deductible by the Company 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 the Company’s business needs. Other Compensation Policies and Practices Equity Awards Grant Delegation Policy The Compensation Committee has delegated authority to our Chief Executive Officer to grant equity awards to our employees (other than our executive officers), subject to the terms and conditions of an equity awards grant delegation policy. Such awards may be granted on scheduled grant dates to newly-hired employees or to existing employees in connection with a promotion or in recognition of their contributions to the Company. In each instance, the policy provides for a limitation on the maximum size of any such awards and the total number of shares to be granted under such policy. Prohibition on Hedging and Other Stock Trading Practices We maintain an Insider Trading Policy that, among other things, prohibits all of our directors and employees, including our named executive officers, from engaging in short sales, hedging of their stock ownership positions and transactions involving derivative securities relating to our capital stock. Our Insider Trading Policy also prohibits trading during certain quarterly and certain special blackout periods. Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit our directors and certain employees, including our named executive officers, to adopt the Exchange Act Rule 10b5-1 trading plans 39 (“10b5-1 plans”). Under our 10b5-1 Trading Plan Guidelines, 10b5-1 plans may only be adopted or modified during an open trading window under our Insider Trading Policy and only when such individual does not otherwise possess material nonpublic information about the Company. Stock Ownership Guidelines Under our stock ownership guidelines effective for 2023, our non-employee members of our Board were each required to beneficially own shares of our common stock with a value equal to at least three times their annual cash retainer. Our Chief Executive Officer is required to beneficially own shares of our common stock with a value equal to at least six times his annual base salary. We do not require our other executive officers, including our other named executive officers, to satisfy a minimum stock ownership requirements. As of the end of 2023, our Chief Executive Officer and the non-employee members of our Board have met, exceeded, or are on track to meet, these guidelines based on their current rate of stock accumulations (excluding any outstanding stock options) in the time frames set out in the guidelines. Clawback Policy As of October 19, 2023, the Board adopted and made effective the Rapid7, Inc. Compensation Recoupment Policy (the “Clawback Policy”), a copy of which was filed as Exhibit 97 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The Clawback Policy provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws in accordance with the terms and conditions set forth therein. The Clawback Policy is intended to comply with the requirements of Section 10D of the Exchange Act and Nasdaq Listing Rule 5608. The Clawback Policy applies to all current and former Section 16 officers of the Company who served during the three fiscal years completed immediately preceding the earlier of (i) the date the Board or a committee of the Board concludes, or reasonably should have concluded, that the Company is required to prepare a financial restatement, or (ii) the date a court or regulator causes the Company to prepare a financial restatement (the “Recoupment Trigger Date”). Recoverable compensation under the Clawback Policy covers incentive compensation (a) based on “financial reporting measures,” which includes (i) measures determined and presented in accordance with accounting principles used to prepare financial statements and measures derived wholly or in part from such measures, (ii) stock price and (iii) TSR, and (b) determined based on goals attained in any of the three completed fiscal years, beginning with fiscal year 2023, preceding the Recoupment Trigger Date. Recoverable amounts under the Clawback Policy are calculated on a pre-tax basis as the excess of what was paid and what would have been paid had such payout been calculated based on the restated financial information and for compensation based on TSR or stock price, the excess must be calculated based on a reasonable estimate of the impact of such restatement on TSR or stock price. Recovery under the Clawback Policy is mandatory and no employee misconduct is required. ANALYSIS OF RISKS PRESENTED BY OUR COMPENSATION POLICIES AND PROGRAMS The Compensation Committee has reviewed our compensation policies and practices, in consultation with Compensia, to assess whether they encourage employees to take excessive or inappropriate risks. After reviewing and assessing our compensation philosophy, policies and practices, including the mix of fixed and variable, short-term and long-term incentives and overall pay, incentive plan structures, and the checks and balances built into, and oversight of, each plan and practice, in February 2023, the Compensation Committee determined that any risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on our Company as a whole. The Compensation Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks; rather, it believes the mix of short-term compensation (in the form of base salary and annual performance bonuses, if any, which is based on a variety of performance factors and includes a cap on payout) and long-term compensation (in the form of RSU and PSU awards) in our executive compensation program prevents undue focus on short-term results and helps align the interests of our executive officers with the interests of our stockholders. In addition, our insider trading policy protects against short-term decision making. The Compensation Committee conducts an annual review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us. 40 Compensation Committee Report The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Respectfully submitted, Marc Brown J. Benjamin Nye Thomas Schodorf The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 41 Summary Compensation Table The following table sets forth information regarding the compensation of our named executive officers as of December 31, 2023, in accordance with SEC rules. Summary Compensation Table
42 Grants of Plan-Based Awards The following table shows certain information regarding grants of plan-based awards during the fiscal year ended December 31, 2023 to our named executive officers.
43 Outstanding Equity Awards at Fiscal Year-End The following table sets forth certain information about outstanding equity awards granted to our named executive officers that were outstanding as of December 31, 2023.
44
45 Option Exercises and Stock Vested in Fiscal Year 2023 The following table shows the number of shares of our common stock acquired and the aggregate value realized upon the exercise of stock options for our named executive officers during the year ended December 31, 2023. In addition, the table also shows the number of shares of our common stock acquired on vesting of RSU awards granted to our named executive officers and the aggregate value realized upon such vesting during the year ended December 31, 2023.
Pension Benefits None of our named executive officers participate, or have an account balance, in any qualified or non-qualified defined benefit plans sponsored by us. Nonqualified Deferred Compensation None of our named executive officers participate in any nonqualified deferred compensation plan sponsored by us. 46 Employment Arrangements Agreements with our Named Executive Officers Below are written descriptions of our employment agreements or offer letters, as applicable, with each of our named executive officers, each of which is an at-will employee. Corey Thomas. We entered into an employment agreement with Mr. Thomas in January 2013 setting forth the terms of his employment and subsequently modified certain of the provisions in his agreement related to accelerated vesting of equity awards in April 2016 and March 2017. Mr. Thomas receives an initial annual base salary, which was increased in January 2020 to $443,000. Mr. Thomas is also eligible to receive annual performance bonuses, pursuant to our Bonus Plan described above, with a target bonus of Tim Adams. In connection with his appointment as Chief Financial Officer, effective January 3, 2022, we entered into an offer letter with Mr. Adams (the “Adams Offer Letter”) and an agreement which Andrew Burton. We entered into an employment offer letter agreement with Mr. Burton in October 2016, which replaced and superseded the prior offer letter dated October 6, 2015 between us and Mr. Burton covering his role as Senior Vice President, IT Search, and subsequently modified certain of the provisions in his agreement related to severance and change in control arrangements in March Christina Luconi. We entered into an employment offer letter with Ms. Luconi in November 2011 setting forth the terms of her employment and subsequently modified certain of the provisions in her agreement related to accelerated vesting of equity awards in April 2016, March 2017 and Potential Payments Upon Termination or Change in Control We have entered into post-employment compensation arrangements with each of our named executive officers. Corey Thomas. Pursuant to his employment agreement, as amended in April 2016, Tim Adams. Andrew Burton. Pursuant to Christina Luconi. 48 successor in connection with a change in control, then all of the then unvested portion of such award(s) shall vest upon the closing of such change in control transaction. Ms. Luconi’s payments and benefits are conditioned, among other things, on her complying with her post-termination obligations set forth in her severance and equity award vesting acceleration letter agreement and signing a general release of claims in our favor. Equity Plan Terms. Each of our named executive officers hold equity awards under the terms of our 2015 Equity Incentive Plan and, for those awards granted prior to our initial public offering, our 2011 Stock Option and Grant Plan. The terms of such plans upon a termination or change in control transaction are summarized below; please refer to the plan documents filed as exhibits to our Annual Report on Form 10-K for the year ended December 31, Under the terms of the 2015 Equity Incentive Plan and the 2011 Stock Option and Grant Plan, stock awards generally cease vesting and terminate upon the holder’s termination of service with us and options generally remain exercisable for a short period of time following the holder’s termination of service with us (generally ranging from three months to eighteen months depending on the type of termination), but in no event beyond the expiration of its original term. In the event of certain specified significant corporate transactions, the Board (or its authorized committee) has the discretion to take any of the following actions with respect to stock awards granted under the 2015 Equity Incentive Plan:
We are not obligated to treat all stock awards under the 2015 Equity Incentive Plan, even those that are of the same type, in the same manner. Under the 2015 Equity Incentive Plan, a significant corporate transaction is generally the consummation of (1) a sale or other disposition of all or substantially all of our consolidated assets, (2) a sale or other disposition of at least 50% of our outstanding securities, (3) a merger, consolidation or similar transaction following which we are not the surviving corporation or (4) a merger, consolidation or similar transaction following which we are the surviving corporation but the shares of our common stock outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction. The Board (or its authorized committee) may provide, in an individual award agreement or in any other written agreement between a participant and us that the stock award will be subject to additional acceleration of vesting and exercisability or settlement in the event of a change in control. Under the 2015 Equity Incentive Plan, a change in control is generally (1) the acquisition by a person or entity of more than 50% of our combined voting power other than by merger, consolidation or similar transaction; (2) a consummated merger, consolidation or similar transaction immediately after which our stockholders cease to own more than 50% of the combined voting power of the surviving entity; or (3) a consummated sale, lease or exclusive license or other disposition of all or substantially all of our consolidated assets. Under the 2011 Stock Option and Grant Plan, in the event of a sale event, the Board (or its authorized committee) has the discretion to arrange for the assumption or continuation of a stock award by the surviving or acquiring entity or for the substitution of the shares subject to the stock award for new stock awards or other awards with an equitable or proportionate adjustment as to the number and kind of shares and if appropriate, the per share exercise price, as we and the successor entity agree. In the event that a successor entity does not assume, continue or substitute stock awards, the stock awards shall terminate upon, or be forfeited immediately prior to, the effective time of the sale event. In addition to or in lieu of the foregoing, with respect to outstanding options that are exercisable or will become exercisable as a result of the sale event, the 49 plan administrator may provide that the option must be exercised within a time period provided by the plan administrator otherwise such option shall either terminate outright at the time of the sale event or terminate in exchange for a cash payment equal to the excess of the value of the consideration payable per share of our common stock pursuant to the sale event times the number of shares subject to the stock options being cancelled over the aggregate exercise price of such vested options. If not assumed, continued or substituted, outstanding options that are not exercisable and will not become exercisable as a result of the sale event, and restricted shares and RSUs that will not become vested as a result of the sale event, will terminate or be forfeited upon the effective time of the sale event (in the event of forfeiture of restricted shares in connection with the sale event, we will repurchase such shares from the holder at a price equal to the lower of the original per share purchase price paid by the holder or the then current fair market value of the shares). If not assumed, continued or substituted, the plan administrator may make or provide for a cash payment to holders of restricted shares and RSU awards that will become vested as a result of the sale event in exchange for the cancellation of such stock awards in an amount equal to the value of the consideration payable per share of our common stock pursuant to the sale event times the number of shares subject to the stock awards that will vest. Under the 2011 Stock Option and Grant Plan, a sale event is generally (1) our dissolution or liquidation, (2) the sale of all or substantially all of our assets, (3) consummation of a merger or consolidation after which the outstanding voting securities held by our stockholders immediately prior to the transaction represent less than a majority of the combined voting power of the outstanding voting securities of the surviving or acquiring entity after the transaction, (4) the acquisition of all or a majority of our outstanding voting stock by a person or group of persons or capital stock or (5) any other acquisition of our business, as determined by the plan administrator. Incentive and Equity Compensation Plans For more information on our current cash and equity incentive compensation programs and decisions regarding the grants of equity awards in Summary of Estimated Amounts Payable upon a Termination or Change in Control The following table shows estimated payments that would be made to each named executive officer in the event of a termination of employment under various termination situations, including following a change in control of the Company, assuming the applicable termination event occurred on December 31,
CEO Pay Ratio Under SEC rules, we are required to provide a reasonable estimate of the ratio of the annual total compensation of Mr. Thomas, our Chief Executive Officer, to the median of the annual total compensation of our other employees. For our last completed fiscal year, which ended December 31,
This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Act of 1933, as amended and based upon our reasonable judgment and assumptions. The SEC rules do not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to our pay ratio as disclosed above. The methodology, including any material assumptions, adjustments and estimates, we used to calculate the pay ratio is described below.
Once we identified our median employee, we calculated the median employee’s annual total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, yielding the median annual total compensation disclosed above. With respect to Mr. Thomas' annual total compensation, we used the amount reported in the “Total” column of our Pay vs. Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. The following table sets forth information regarding compensation for our principal executive officer (“PEO”) and average compensation related to our other named executive officers (“NEOs”), both as reported in the Summary Compensation Table and with certain adjustments to reflect the “compensation actually paid” to such individuals, as defined under the SEC rules, for each of 2023, 2022, 2021 and 2020. The table also provides information on our cumulative total shareholder return (“TSR”), the cumulative TSR of our peer group, our Net Income (Loss) and Revenue over such years in accordance with the SEC rules. Although we selected Revenue as our “most important financial performance measure” used to link “compensation actually paid” to our PEO and other NEOs to our performance for
54
Relationship Between “Compensation Actually Paid” and Performance Measures We believe the “compensation actually paid” in each of the years reported above and over the Compensation Actually Paid versus Company TSR For the As reflected in the tables above, changes in the market price of our common stock from one measurement date to another can have a significant impact on the calculation of “compensation actually paid” to our NEOs, as determined pursuant to the SEC rule. As noted above, in the case of equity-based awards, “compensation actually paid” is calculated based on the fair value of such awards as of particular measurement dates and does not reflect compensation actually earned, realized or received by our NEOs. In particular, the price of our common stock was at a relative high point as of December 31, 2021 ($117.69) and at a relative low point as of December 30, 2022 ($33.98) resulting in a decline of almost $10 million in the fair value of stock options and RSUs held by our PEO that were outstanding and unvested on both dates, thereby resulting in a significant amount of negative “compensation actually paid” for 2022. For 2023, our stock price remained relatively constant, which is reflected in the amounts set forth in the above table. Compensation Actually Paid versus Peer Group TSR; Company TSR versus Peer Group TSR While there is no direct link between “compensation actually paid” to our PEO and Non-PEO NEOs and the TSR of our Peer Group, the two were generally aligned in respect of three years presented above due to the alignment between “compensation actually paid” and the Company’s TSR over the period. The Company’s TSR has generally moved in a manner consistent with the TSR of our Peer Group. However, Company TSR in 2021 exceeded that of the Nasdaq Computer Index and reflected our growth and Company performance during that period. Generally, our TSR and the TSR of our Peer Group has fluctuated over the period presented due to various factors, including but not limited to, economic instability caused by the COVID-19 pandemic and macroeconomic pressures. Compensation Actually Paid versus Net Income (Loss) We expect to continue to incur losses for the foreseeable future. Consequently, we did not use Net Income (Loss) as a performance measure in our executive compensation program. As shown in the Pay versus Performance table above, the Company’s Net Income (Loss) has varied over the three-year measurement period and the changes are not proportionally correlated with the “compensation actually paid” to our PEO or Non-PEO NEOs. As such, we do not believe there is any meaningful relationship between our Net Income (Loss) and compensation actually paid to our PEO or Non-PEO NEOs during the periods presented. Compensation Actually Paid versus Revenue As noted above, while ARR is the key performance measure that we use in determining the payout under our annual Bonus Plan we utilized Revenue for purposes of the table. For the periods presented, there is an inverse correlation between Revenue and “compensation actually paid” to our PEO or Non-PEO NEOs, largely due to the change in the value of the equity awards due to stock volatility described above and our levels of achievement against our performance goals. Financial Performance Measures As described in detail above under “Compensation Discussion and Analysis,” the Company’s executive compensation program consists of several compensation elements reflecting the Company’s compensation philosophy. 55 Listed below are the financial and non-financial performance measures which in our assessment represent the most important performance measures we use to link compensation actually paid to our NEOs, for
DIRECTOR COMPENSATION The following table sets forth information regarding the compensation earned for service on the Board during the year ended December 31,
57 Non-Employee Director Compensation Policy Overview Our directors play a critical role in guiding our strategic direction and overseeing management. The Compensation Committee reviews pay levels for our non-employee directors on an annual basis with assistance from its compensation consultant, Compensia, which prepares a comprehensive assessment of our non-employee director compensation program. Such assessment includes comparing our current director compensation against competitive market practices using the same compensation peer group used for executive compensation purposes and an update on recent trends in director compensation. Following such review, the Board, upon recommendation of the Compensation Committee, approves any updates to the non-employee director compensation policy. Non-Employee Director Compensation Policy The Board has adopted a director compensation policy for our non-employee directors, which was most recently amended by the Board in Cash Compensation Under the policy, each non-employee director receives an annual board service retainer of $35,000. The Chairman of the Board Reimbursement of Expenses We also reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending meetings of the Board or any committee of the Board in accordance with our policy. Equity Compensation In addition to cash compensation, each non-employee director is eligible to receive RSU awards as described below under our 2015 Equity Incentive Plan. Each non-employee director who is first elected or appointed to the Board is automatically granted an initial one-time RSU award having an aggregate grant date fair value of $400,000, which vests in three substantially equal annual installments on each of the first three anniversaries of the date of grant, provided that the applicable non-employee director is, as of such vesting date, then a director of our Company. In addition, each continuing non-employee director as of the date of the annual meeting is automatically, on the date of each Annual Meeting of Stockholders, granted a RSU award having an aggregate grant date fair value of $200,000, which vests in full on the earlier of the first anniversary of such grant date or the date of the next annual stockholders’ meeting, provided that the applicable non-employee director is, as of such vesting date, then a director of our Company. Any such annual award shall be pro-rated for a non-employee director who has served on the Board for less than one full year at the time of grant. 58 Any equity awards granted to a non-employee director pursuant to this policy that are subject to vesting will become fully vested upon a change in control of the Company as long as such director is providing continuous service as of the date of such change in control. Election to Receive Annual Cash Compensation in RSUs Effective as of October 27, 2022, a non-employee director may elect to receive the annual cash compensation that he or she would otherwise be entitled to under the director compensation policy in the form of additional RSUs by submitting to the Company an election on such form as specified by the Company from time to time. If the non-employee director makes such an election, on the date of the Annual Meeting of Stockholders, the non-employee director will automatically be granted an award of RSUs under our 2015 Equity Incentive Plan equal to an aggregate grant date fair market value of the non-employee director’s expected annual cash compensation pursuant to the non-employee director compensation policy for the upcoming year of service, without any further action by the Board. To be valid, the election shall be made in accordance with the practices and procedural requirements (including as to timing of elections) determined by the Compensation Committee from time to time, in its sole discretion. The RSUs issued in lieu of cash compensation will vest in equal quarterly installments and will vest in full on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next Annual Meeting of Stockholders, provided that the applicable non-employee director is providing continuous service as of such vesting date; provided, however, that if a non-employee director’s service terminates for any reason prior to the applicable vesting date, such non-employee director shall vest in the RSUs granted in lieu of annual cash compensation on a prorated basis for the quarter in which his or her service terminated. Director Compensation Limits Director compensation limits that are in place may not be increased without shareholder approval. Under the terms of the 2015 Equity Incentive Plan, non-employee directors may not receive in one calendar year more than (i) 55,000 shares of our common stock or (ii) such number of shares of our common stock that has a total value on the grant date equal to $750,000, whichever is greater. EQUITY COMPENSATION PLAN INFORMATION The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31,
TRANSACTIONS WITH RELATED PERSONS Related-Person Transactions Policy and Procedures We have a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. In addition, a transaction, arrangement or relationship in which a related person’s participation is solely due to the related person’s position as a director of an entity that is participating in such transaction, arrangement or relationship shall not be considered a related person transaction under our policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons. Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our Audit Committee, or, if Audit Committee approval would be inappropriate, to another independent body of our Board, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In considering related-person transactions, the Audit Committee, or other independent body of our Board, takes into account the relevant available facts and circumstances including, but not limited to (a) the risks, costs and benefits to us, (b) the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated, (c) the availability of other sources for comparable services or products and (d) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our Audit Committee, or other independent body of our Board, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our Audit Committee, or other independent body of our Board, determines in the good faith exercise of its discretion. Certain Related-Person Transactions Except as described below, there have been no transactions since January 1, Indemnification Agreements Our amended and restated certificate of incorporation contains provisions limiting the liability of directors, and our amended and restated bylaws provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws also provide our Board with discretion to indemnify our officers and employees when determined appropriate by the Board. In addition, we have entered into indemnification agreements with each of our directors and executive officers. These agreements provide for the indemnification of such persons for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were serving in such capacity. We have also obtained director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us. HOUSEHOLDING OF PROXY MATERIALS The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other annual meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other annual meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. This year, a number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, please notify us or your broker. Direct your written request to Rapid7, Inc., Attn: Corporate Secretary, 120 Causeway Street, Boston, Massachusetts 02114 or call us at 1-617-247-1717. Stockholders who currently receive multiple copies of the Notice of Internet Availability of Proxy Materials at their addresses and would like to request “householding” of their communications should contact their brokers. OTHER MATTERS The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment. By Order of the Board of Directors, Raisa Litmanovich General Counsel and Corporate Secretary April A copy of our Annual Report on Form 10-K for the year ended December 31, APPENDIX A Reconciliation of Non-GAAP Financial Measures In this Proxy Statement, we provide Non-GAAP Operating Income, which is a non-GAAP financial measure that represents GAAP loss from operations, excluding stock-based compensation expense, amortization of acquired intangible assets and certain other items, such as acquisition-related expenses, and litigation-related expenses. The following table reconciles GAAP loss from operations to Non-GAAP Operating Income for each of the periods indicated:
We also present Non-GAAP Operating Income Margin, which is a Non-GAAP financial measure that represents the proportion of
Free cash flow is a non-GAAP measure defined as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs. The following table reconciles cash provided by operating activities to Free Cash Flow for each of the periods indicated:
|