2021 ANNUAL MEETING
October 27, 2021
PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION
GENERAL INFORMATION
SELECTQUOTE, INC.
6800 West 115th Street, Suite 2511
Overland Park, Kansas 66211
FOR THE SPECIAL MEETING
To Be Held on March 2, 2023
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Important Information Regarding the Availability of Proxy Materials for the Special Meeting to Be Held on March 2, 2023:
The Proxy Statement and Notice of Special Meeting are available at www.proxyvote.com |
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We are providing these proxy materials in connection with the solicitation by the Board of Directors (the “Board”) of SelectQuote, Inc. of proxies to be voted at our 2021 AnnualSpecial Meeting and any adjournment or postponement thereof. The proxies will be used at our 2021 AnnualSpecial Meeting, to be held on October 27, 2021March 2, 2023 at 9:00 a.m., central time,Central Time, on the Internet via live virtual webcast. The proxy materials include our Notice of the 2021 AnnualSpecial Meeting (the “Notice”) and this proxy statement (the “Proxy Statement”). These materials also include the proxy card and postage-paid return envelope or voting instruction form for the 2021 AnnualSpecial Meeting.
This proxy statementProxy Statement contains important information regarding our 2021 AnnualSpecial Meeting. It identifies the proposals on which you are being asked to vote, provides information that you may find useful in determining how to vote, and describes voting procedures. Our proxy materials are first being distributedmade available on or about September 24, 2021January [●], 2023 to all holders of record of our common stock, par value $0.01 per share, entitled to vote at the close of business on September 17, 2021.Special Meeting.
In this Proxy Statement, the terms “SelectQuote,” “the Company,” “we,” “us” and “our” refer to SelectQuote, Inc., a Delaware corporation. The mailing address of our principal executive offices is: SelectQuote, Inc., 6800 West 115th115th Street, Suite 2511, Overland Park, Kansas 66211.
What matters are being voted on atPurpose of the Annual Meeting?Special Meeting
Stockholders are being askedThe purpose of the Special Meeting is to consider and vote on the following matters:
• The election of two Class II directors named in this proxy statement to serve until the 2024 annual meeting of stockholders or until their successors are duly elected and qualified;
• A proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2022;
• A proposal to approve, by non-binding advisory vote, the Company’s executive compensation program;
• A proposal to recommend, by non-binding advisory vote, the frequency of future non-binding advisory votes on executive compensation; and
• Any other business as may properly come before the Annual Meeting.
How does the Board recommend I vote on these proposals?
Our Board recommends a vote:
• “FOR” the election of Earl H. Devanny III and Raymond F. Weldon as Class II directors;
• “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2022;
• “FOR” the approval, on a non-binding advisory basis, of the Company’s executive compensation program; and
• To recommend that we hold a non-binding advisory vote on executive compensation “EVERY YEAR”.proposals:
Proposal No. 1:A proposal, which we refer to as the “reverse stock split proposal,” to adopt and approve an amendment to our Sixth Amended and Restated Certificate of Incorporation (our “Certificate of Incorporation”) to effect (a) a reverse stock split of our outstanding shares of common stock, at a reverse stock split ratio in the range of 1-for-10 to 1-for-20, as determined by our Board of Directors at a later date, and (b) a reduction in the number of authorized shares of our common stock by a corresponding ratio.
How many votes are needed for approval of each proposal?
Proposal One: The election of directors requires a plurality of the votes cast in person or by proxy at the Annual Meeting by the stockholders entitled to vote in the election. This means that each director nominee will be elected if the number of shares voted for the nominee exceeds the number of shares voted against that nominee. Shares of our common stock not voted (whether by abstention, broker non-vote, or otherwise) will not be counted as a vote cast for or against a nominee’s election.
Proposal Two: The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2022 requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote.
Proposal Three: The approval, on a non-binding advisory basis, of the Company’s executive compensation program requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote.
Proposal Four: The approval, on a non-binding advisory basis,No. 2:A proposal, which we refer to as the “adjournment proposal,” to approve, if necessary, the adjournment of the frequency for holding future non-binding advisory votes on executive compensation Special Meeting to solicit additional proxies in favor of the reverse stock split proposal.
If the reverse stock split proposal is approved by the Company’s stockholders at the Special Meeting, it will be determinedeffected, if at all, only upon a subsequent determination by the alternative receivingBoard of Directors that the most votes, which will be considered to beReverse Stock Split and Authorized Share Reduction are in the expressed preferencebest interests of the Company and our stockholders, even if those votes do not constitute a majority at the time the reverse stock split proposal is effected. The Board may make this determination as soon as immediately following the conclusion of the shares presentSpecial Meeting, and the Reverse Stock Split and Authorized Share Reduction could become effective as soon as the business day immediately following the Special Meeting.
Notwithstanding approval of the reverse stock split proposal by our stockholders, the Board of Directors reserves its right to elect not to proceed with implementing the reverse stock split proposal at any time prior to the date on which the amendment to our Certificate of Incorporation becomes effective pursuant to the DGCL, if it determines, in personits sole discretion, that the reverse stock split proposal is no longer in the best interests of the Company or by proxy andits stockholders.
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
Who is entitled to vote at the Annual Meeting.Special Meeting?
What is the quorum requirement?
A quorum is the minimum number of shares required to be represented at the Annual Meeting to properly hold an annual meeting of stockholders and conduct business under Delaware law and our amended and restated bylaws. The presence, in person or by proxy, of a majority of the outstanding shares of our common stock entitled to vote as of the Record Date will constitute a quorum at the Annual Meeting. Abstentions, withheld votes, and broker non-votes are counted as shares present and entitled to vote for purposes of determining a quorum.
What do I need to be able to attend the Annual Meeting online?
We will be hosting our Annual Meeting via live webcast only. Any stockholder can attend the Annual Meeting live online at www.virtualshareholdermeeting.com/SLQT2021. The webcast will be accessible beginning at 8:45 a.m., central time, on October 27, 2021. The meeting will begin 15 minutes later, at 9:00 a.m., central time. Stockholders may vote and ask questions while attending the Annual Meeting online. In order to be able to attend the Annual Meeting, you will need the 16-digit control number, which is located on your Notice or proxy card (if you received a printed copy of the proxy materials) or in the instructions that accompanied your proxy materials. Instructions on how to participate in the Annual Meeting are also posted online at www.proxyvote.com.
Who is entitled to vote?
Holders of ourSelectQuote common stock as of the close of business on September 17, 2021, the record date for the Annual Meeting (the “Record Date”), mayRecord Date, January 11, 2023, will receive notice of, and be eligible to vote at, the AnnualSpecial Meeting and any adjournment or postponement of the Special Meeting. AsAt the close of business on the Record Date, there were 163,834,166SelectQuote had outstanding and entitled to vote [●] shares of our common stock. No other shares of SelectQuote capital stock outstanding. Stockholders are not permittedentitled to cumulate votes with respectnotice of and to vote at the election of directors.Special Meeting. Each share of common stock is entitled to one vote on each proposal.
Registered Stockholders. If shares of our common stock are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares, and our proxy materials were provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote live at the AnnualSpecial Meeting through the online virtual meeting platform. Throughout this Proxy Statement, we refer to these registered stockholders as “stockholders of record.”
Street Name Stockholders. If shares of our common stock are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” and our proxy materials were forwarded to you by your broker, bank, or other nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other nominee as to how to vote your shares. Beneficial owners are also invited to attend the AnnualSpecial Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote your shares of our common stock live at the AnnualSpecial Meeting unless you follow your broker, bank, or other nominee’s procedures for obtaining a legal proxy. If you request a printed copy of our proxy materials by mail, your broker, bank, or other nominee will provide a voting instruction form for you to use. Throughout this Proxy Statement, we refer to stockholders who hold their shares through a broker, bank, or other nominee as “street name stockholders.”
What matters will be voted on at the Special Meeting?
The two proposals that are scheduled to be considered and voted on at the Special Meeting are the reverse stock split proposal and the adjournment proposal.
How does the board recommend I vote on these proposals?
The Board of Directors recommends that you vote “FOR” the reverse stock split proposal and “FOR” the adjournment proposal.
Why does SelectQuote need to hold this vote?
On October 20, 2022, we were notified in writing by the New York Stock Exchange, Inc. (the “NYSE”) that the average closing trading price of our common stock was below the criteria of the NYSE’s continued listing standards, as the average per share closing price of our common stock over a consecutive 30-trading-day period was less than $1.00. In the letter, the NYSE stated that we have a six-month cure period that started on October 20, 2022 to bring the price of our common stock and the 30-trading-day average closing price of our common stock above $1.00. In the letter, the NYSE further stated that in the event a $1.00 share price and a $1.00 average share price over the preceding 30 trading days are not attained at the expiration of the six-month cure period, the NYSE will commence suspension and delisting procedures. The NYSE has reserved the right to reevaluate its continued listing determinations relating to companies who are notified of non-compliance like SelectQuote with respect to the NYSE’s qualitative listing standards, including if our shares trade at sustained levels that are considered to be abnormally low. On December 1, 2022, we provided written notice to the NYSE of the Board of Directors’ approval to pursue a reverse stock split in order to bring our share price and average share price back above $1.00 within the six-month cure period, if necessary.
Our Board of Directors has determined that an amendment to our Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction may be necessary to promote the continued listing of our common stock on the NYSE and is in the best interests of our stockholders. If approved and implemented, the Board of Directors will select a reverse stock split ratio in the range 1-for-10 to 1-for-20, at a later date based on various factors, including the then-prevailing market conditions and the existing and expected per share trading prices of our common stock. Pursuant to the law of our state of incorporation, Delaware, our Board of Directors must adopt any amendment to our Certificate of Incorporation and submit the amendment to stockholders for approval. Accordingly, our Board of Directors is requesting your proxy to vote “FOR” the reverse stock split proposal and “FOR” the adjournment proposal.
In addition to bringing the per-share trading price of our common stock back above $1.00, we also believe that the Reverse Stock Split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current per share trading price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
What do I need to be able to attend the Special Meeting online?
We will be hosting our Special Meeting via live webcast only. Any stockholder as of the Record Date can attend the Special Meeting live online at www.virtualshareholdermeeting.com/SLQT2023SM. The webcast will be accessible beginning at 8:45 a.m., Central Time, on March 2, 2023. The meeting will begin 15 minutes later, at 9:00 a.m., Central Time. Stockholders may vote and ask questions while attending the Special Meeting online. In order to be able to attend the Special Meeting, you will need the 16-digit control number, which is located on your Notice or proxy card (if you received a printed copy of the proxy materials) or in the instructions that accompanied your proxy materials. Instructions on how to participate in the Special Meeting are also posted online at www.proxyvote.com.
How do I vote?
If you are a stockholder
You may vote in any of record, there are four ways to vote:the following ways:
(1)
•By Internet (Before the AnnualSpecial Meeting): You may vote over the Internet at www.proxyvote.com,, 24 hours a day, seven days a week, until 11:59 p.m., eastern time,Eastern Time, on October 26, 2021.March 1, 2023. You will need the 16-digit control number included on your Notice or proxy card (if you received a printed copy of the proxy materials) or in the instructions that accompanied your proxy materials;materials;
(2)
•By Telephone: You may vote by toll-free telephone at 1-800-690-6903, until 11:59 p.m., eastern time,Eastern Time, on October 26, 2021.March 1, 2023. You will need the 16-digit control number included on your Notice or proxy card (if you received a printed copy of the proxy materials) or in the instructions that accompanied your proxy materials;materials;
(3)
•By Mail: If you received printed proxy materials, you may submit your vote by completing, signing and dating each proxy card received and returning it promptly in the postage-paid envelope we have provided or returning it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Proxies submitted by U.S. mail must be received before the start of the Annual Meeting.Special Meeting;
(4)
•By Internet (During the AnnualSpecial Meeting): You may vote during the AnnualSpecial Meeting by going to www.virtualshareholdermeeting.com/SLQT2021.SLQT2023SM. You will need the 16-digit control number included on your Notice or proxy card (if you received a printed copy of the proxy materials) or in the instructions that accompanied your proxy materials. If you previously voted via the Internet (or by telephone or mail), you will not limit your right to vote online at the AnnualSpecial Meeting.
If you are a street name stockholder, please follow the instructions from your broker, bank, or other nominee to vote by Internet, telephone, or mail. Street name stockholders may not vote via the Internet at the AnnualSpecial Meeting unless they receive a legal proxy from their respective brokers, banks, or other nominees.
If I am the beneficial owner of shares held in “street name” by my broker, will my broker automatically vote my shares for me?
Under NYSE rules, the reverse stock split proposal and the adjournment proposal are considered “discretionary” items. Consequently, for both proposals, a broker will have discretion to vote your shares and, therefore, may vote your shares with respect to both proposals if you do not provide your broker with instructions on such proposal.
How will my shares be voted if I give my proxy but do not specify how my shares should be voted?
If you provide specific voting instructions, your shares will be voted at the Special Meeting in accordance with your instructions. If you hold shares in your name and sign and return a proxy card without giving specific voting instructions, your shares will be voted “FOR” the reverse stock split proposal and “FOR” the adjournment proposal.
Who may attend the Special Meeting?
All stockholders are invited to attend the Special Meeting. Persons who are not stockholders may attend only if invited by the Board of Directors. If you are the beneficial owner of shares held in the name of your broker, bank or other nominee, you must bring proof of ownership (e.g., a current broker’s statement) in order to be admitted to the meeting.
Can I change my vote?
Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time before the AnnualSpecial Meeting by:
•notifying our Secretary, in writing, at SelectQuote, Inc., 6800 West 115th Street, Suite 2511, Overland Park, Kansas 66211, before the vote is counted;counted;
•voting again using the telephone or Internet before 11:59 p.m., eastern time,Eastern Time, on October 26, 2021March 1, 2023 (your latest telephone or Internet proxy is the one that will be counted);; or
•attending the AnnualSpecial Meeting online and voting virtually during the meeting. Simply logging into the AnnualSpecial Meeting online will not, by itself, revoke your proxy.
If you are a street name stockholder, you may revoke any prior voting instructions by contacting your broker, bank, or nominee.
What are the quorum and voting requirements for the proposals?
In order to take action on the proposals, a quorum, consisting of the holders of [●] shares (a majority of the aggregate number of shares of SelectQuote common stock) issued and outstanding and entitled to vote as of the Record Date for the Special Meeting, must be present in person or by proxy. This is referred to as a “quorum.” Proxies marked “Abstain” and broker non-votes (as further discussed below) will be treated as shares that are present for purposes of determining the presence of a quorum.
The affirmative vote of the holders of a majority of the outstanding shares entitled to vote at the Special Meeting is required to adopt and approve the reverse stock split proposal.
The affirmative vote of a majority of the votes present in person or represented by proxy at the Special Meeting and entitled to vote on the matter is required to approve the adjournment proposal.
What happens if a quorum is not present at the Special Meeting?
If the shares present in person or represented by proxy at the Special Meeting are not sufficient to constitute a quorum, the stockholders by a vote of the holders of a majority of votes present in person or represented by proxy (which may be voted by the proxyholders) may, without further notice to any stockholder (unless a new record date is set), adjourn the meeting to a different time and place to permit further solicitations of proxies sufficient to constitute a quorum.
What is an “abstention” and how would it affect the effect of withheld votes, broker non-votes, and abstentions?vote?
Votes withheld from any
An “abstention” occurs when a stockholder sends in a proxy with explicit instructions to decline to vote regarding a particular matter. Abstentions are counted as present for purposes of determining a quorum. Abstentions with respect to the reverse stock split proposal and the adjournment proposal will have the same effect as a vote “Against” the proposals.
What is a broker “non-vote” and how would it affect the vote?
A broker non-vote occurs when a broker or other nominee abstentions,who holds shares for another person does not vote on a particular proposal because that holder does not have discretionary voting power for the proposal and “broker non-votes” (i.e., where a broker has not received voting instructions from the beneficial owner and for whichof the shares so the broker does notis unable to vote those uninstructed shares. Brokers will have discretionary voting power to vote on a particular matter)both proposals, so we do not anticipate any broker non-votes.
Could other matters be decided at the Special Meeting?
Other than the reverse stock split proposal and the adjournment proposal, no other matters will be presented for action by the stockholders at the Special Meeting.
Who will count the votes?
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspectors of election.
Who will conduct the proxy solicitation and how much will it cost?
We are counted as present for purposes of determining the presence of a quorum. Shares voting “withheld” have no effect on the election of directors. Abstentions will have the effect of a vote “against” the ratification and appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2022. Brokerage firms and other intermediaries holding shares of our common stock in street name for their customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker will have discretion to vote your shares only on “routine” matters, which includes only Proposal Two (ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2022). Absent directionsoliciting proxies from you, your broker will not have discretion to vote on Proposal One (election of directors), Proposal Three (say-on-pay), or Proposal 4 (say-on-frequency), which are “non-routine” matters, and, as a result, will constitute a “broker non-vote.” “Broker non-votes” will have no effect on the election of directors.
What is the effect of giving a proxy?
Proxies are solicited by andstockholders on behalf of our Board. Raffaele Sadun, Chief Financial Officer,Board and Daniel A. Boulware, General Counsel, have been designated as proxy holderswill pay for all costs incurred by our Board. When proxies are properly dated, executed, and returned, the shares represented by such proxies will be voted at the Annual Meetingit in accordanceconnection with the instructionssolicitation. In addition to solicitation by mail, the directors, officers and associates of the stockholder. If no specific instructions are given, however, the shares will be votedSelectQuote and its subsidiaries may solicit proxies from stockholders of SelectQuote in accordance with the recommendations of our Board as described above. If any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the proxy holders will useperson or by telephone, facsimile or email without additional compensation other than reimbursement for their own judgment to determine how to vote the shares. If the Annual Meeting is adjourned, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have properly revoked your proxy instructions, as described above.actual expenses.
How are proxies solicited for the Annual Meeting?
We have retained Georgeson LLC to assist in the solicitation of proxies. We expect to pay Georgeson $15,000,fifteen thousand dollars ($15,000), plus reimbursement of reasonable expenses. The solicitation may
Arrangements also will be made personally orwith brokerage firms and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by telephone, electronically, or by other meanssuch persons, and we will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection with the forwarding of communication. In addition,solicitation materials to the beneficial owners of our directors and employees, without additional compensation, may solicit proxies using any of these methods.stock.
I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
We have adopted a procedure called “householding,” which is permitted under the rules of the Securities and Exchange Commission (“SEC”). Under this procedure, we deliver a single copy of our proxy materials to multiple stockholders who share the same address, unless we have received contrary instructions from one or more of such stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will deliver promptly a separate copy of our proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these materials. To receive a separate copy, or, if a stockholder is receiving multiple copies, to request that we only send a single copy of our proxy materials, such stockholder may contact us at investorrelations@selectquote.com or:
SelectQuote, Inc.
Attention: Investor Relations
6800 West 115th Street, Suite 2511
Overland Park, Kansas 66211
Street name stockholders may contact their broker, bank, or other nominee to request information about householding.
Where can I find the voting results of the AnnualSpecial Meeting?
We will announce preliminary voting results at the AnnualSpecial Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the SEC within four business days after the AnnualSpecial Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the AnnualSpecial Meeting, we will provide preliminary voting results in the Current Report on Form 8-K and will provide the final results in an amendment to the Current Report on Form 8-K as soon as they become available.
Why is the Annual Meeting being held virtually?
The Annual Meeting will be held entirely online this year. We are excited to embrace the latest technology to provide ease of access, real-time communication, and cost savings for our stockholders and our Company. Hosting a virtual meeting provides easy access for our stockholders and facilitates participation because stockholders can participate fromIf you have any location around the world. This format also better enables us to respond to the public health impact of the COVID-19 pandemic and to support the health and well-being of our employees, stockholders, and community.
You will be able to participate in the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/SLQT2021. You will also be able to voteor need assistance voting your shares electronically prior to or during the Annual Meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
General
Our Board currently consists of seven directors. The names of and certain information about each of our directors and director nominees are set forth below. Our certificate of incorporation provides for a classified board of directors consisting of three classes of directors, each serving staggered three-year terms. As a result, one class of directors is elected each year at our annual meeting of stockholders to serve a three-year term.
Our Class II directors, whose term will expire at the Annual Meeting, are Earl H. Devanny III and Raymond F. Weldon. The Board has nominated Messrs. Devanny and Weldon for election as Class II directors at the Annual Meeting, and each of them has consented to (i) serve as a nominee, (ii) be named as a nominee in this Proxy Statement, and (iii) continue to serve as a director if elected. If elected, Messrs. Devanny and Weldon will serve as directors until the Annual Meeting of Stockholders in 2024 and until their respective successors are elected and qualified, subject to earlier resignation or removal.
Nominees for Class II Directors
The following paragraphs provide certain information as of the date of this Proxy Statement about each of our director nominees. The information presented includes information each nominee has given us about the nominee’s age, positions held with the Company, principal occupation and business experience for at least the past five years, and directorships of publicly-held companies during the past five years.
Earl H. Devanny III, 69, was appointed to serve as a director of the Company in February 2020. Mr. Devanny has served as the Chief Executive Officer of Tract Manager, a provider of healthcare strategic sourcing and compliance application suites, since 2016. Mr. Devanny previously served as the President of Nuance Communications’ healthcare business, a provider of voice and language solutions for businesses and consumers, from 2014 to 2016. Prior to that, Mr. Devanny served as the Chairman and Chief Executive Officer of Trizetto Corporation, a healthcare information technology provider, from 2010 to 2013. Prior to that, Mr. Devanny served as the President of Cerner Corporation, a supplier of health information technology solutions, services, devices, and hardware, from 1999 to 2010. Mr. Devanny has served as a director of Commerce Bancshares, Inc. (NASDAQ: CBSH), the publicly-traded bank holding company for Commerce Bank, since 2010 and currently serves as a director of Next Health Technologies and McNeil Trusts, both private companies. Mr. Devanny received his undergraduate degree from the University of the South (Sewanee). We believe Mr. Devanny’s extensive experience in the healthcare technology industry qualifies him to serve on our Board.
Raymond F. Weldon, 62, has served as a director of the Company since 2014 and as the Chairman of our Audit Committee since 2016. He is a co-founder of Brookside Equity Partners LLC and has served as one of its Managing Directors since its formation in 2012. Mr. Weldon has been employed by Hillside Capital Incorporated, a private investment company and affiliate of Brookside Equity Partners LLC, since 1999 and currently serves as one of its Managing Directors. Mr. Weldon is a Certified Public Accountant (inactive) and is a director of several private companies, including TJ Acquisition LLC and Hillsdale Furniture LLC. Mr. Weldon received his undergraduate degree from the Honors Program of LaSalle University and his Masters in Taxation from Villanova University.
Mr. Weldon was appointed to the Board in 2014 in connection with the Company’s entry into the Series D Preferred Stock Investors’ Rights and Stockholders Agreement (as amended, the “Series D Agreement”) and, pursuant to the terms of the Series D Agreement, was appointed as a Class II director immediately prior to the consummation of our initial public offering (our “IPO”).
We believe Mr. Weldon’s extensive business experience, including as an investor in and advisor to several companies, qualifies him to serve on our Board.
In addition to the specific experience and qualifications identified in the biographies above, we believe that both Mr. Devanny and Mr. Weldon have a reputation for integrity, honesty, and adherence to high ethical standards. Each Class II director nominee has demonstrated ample business acumen, sound judgment, and a commitment to serving the Company and its stockholders.
The Board recommends that you vote “FOR” the election of each of the Class II director nominees.
CORPORATE GOVERNANCE
Our business and affairs are managed under the direction of our Board, which is elected by our stockholders. Our Board currently consists of seven directors, all of whom, other than Messrs. Danker and Grant, qualify as “independent” under the listing standards of the New York Stock Exchange (the “NYSE”).
Directors
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Committee Membership |
| Name | Position | Class | Expiration of Current Term | Expiration of Term for Which Nominated | Audit | Compensation | Nominating & Corporate Governance |
| Timothy R. Danker | Chief Executive Officer; Director | I | 2023 | – | | | |
| Dr. Kavita K. Patel | Director | I | 2023 | – | | | X |
| Earl H. Devanny III | Director | II | 2021 | 2024 | X | X | |
| Raymond F. Weldon | Director | II | 2021 | 2024 | Chair | | |
| Denise L. Devine | Director | III | 2022 | – | X | Chair | X |
| Donald L. Hawks III | Chairman; Director | III | 2022 | – | | X | Chair |
| William Grant II | Director | III | 2022 | – | | | |
Class I Directors
Timothy R. Danker, 48, has served as Chief Executive Officer of the Company and as a director since 2017. Mr. Danker served as the President of the Company’s Life Division from 2016 to 2019, as the Executive Vice President of the Company’s Life Division from 2015 to 2016 and as the President of the Company’s Auto & Home Division from 2012 to 2015. Prior to joining the Company, Mr. Danker co-founded and served as the Chief Executive Officer of Spring Venture Group, a senior healthcare insurance distribution platform, from 2007 to 2012. Mr. Danker received his undergraduate degree in business administration from the University of Missouri and his Master of Business Administration from the University of Kansas.
Dr. Kavita K. Patel, 47, was appointed to serve as a director of the Company in September 2020. Dr. Patel has served as a Nonresident Fellow in the Department of Economic Studies at the Brookings Institution since January 2011. Dr. Patel is also a practicing primary care physician at Mary’s Center in Washington, D.C. and has served as a Venture Partner at New Enterprise Associates since 2017. Previously, Dr. Patel served as Director of Policy for the Office of Intergovernmental Affairs and Public Engagement in the White House from 2009 to 2010, as Deputy Staff Director on Health on the late Senator Edward Kennedy’s staff from 2007 to 2009, and as a member of senior staff of the Senate Health, Education, Labor and Pensions (HELP) Committee. Dr. Patel has served as a director of Sigilon Therapeutics, Inc. (NASDAQ: SGTX) since 2020 and previously served as a director and member of the Governance and Nominating Committee of Tesaro, Inc. (NASDAQ: TSRO) from 2016 until its acquisition by GlaxoSmithKline in 2019. Dr. Patel received her undergraduate degree from the University of Texas at Austin, her Master of Public Health from the University of California at Los Angeles and her medical degree from the University of Texas Health Science Center.
Class II Directors
Please see “–Nominees for Class II Directors” above under the heading “Proposal One: Election of Directors” for the biographies of our Class II directors, Earl H. Devanny III and Raymond F. Weldon.
Class III Directors
Denise L. Devine, 66, has served as a director of the Company since February 2020 and was appointed to serve as Chair of the Compensation Committee in September 2020. Ms. Devine is the founder of FNB Holdings,
LLC, a company dedicated to initiatives in the health and wellness space, of which she has served as Chief Executive Officer since 2014. Ms. Devine is also the Co-Founder and Chief Financial Officer of RTM Vital Signs, LLC, a development stage medical device company. Ms. Devine also founded and served as the Chief Executive Officer from 1994 to 2006 of Nutripharm, Inc., a company that has generated a portfolio of composition and process patents to create innovative natural food, beverage, pharmaceutical, and nutraceutical products. Ms. Devine previously served as Chair of the Pennsylvania State Board of Accountancy and on the Board of the American Institute of CPAs. From 2005 to 2015, Ms. Devine was a member of the Board of Trustees of Villanova University and served as the Chair of the Audit and Risk Committee. Ms. Devine has served on the Board of Ben Franklin Technology Partners of Southeastern Pennsylvania since 2016. Ms. Devine has also served as a director of Fulton Financial Corporation (NASDAQ: FULT), of which she is also Chair of the Human Resources Committee, since 2012, and as a director of AgroFresh Solutions, Inc. (NASDAQ: AGFS), of which she is also Chair of the Compensation and Talent Committee, since 2018. Ms. Devine also served as a director of Cubic Corporation (NYSE: CUB) from 2019 until its sale in 2021. Ms. Devine is a Certified Public Accountant, and received her Masters in Business Administration from The Wharton School at the University of Pennsylvania, her Masters in Taxation from Villanova Law School, and her undergraduate degree in Accounting from Villanova University. Ms. Devine’s management, business, and finance experience qualifies her to serve on our Board.
William Grant II, 71, has served as a director of the Company since 2010 and as the Vice Chairman of the Board since 2017. Mr. Grant previously served as the Company’s President from 2015 to 2017, as the Senior Vice President of Health and Risk Management at Quest Diagnostics Incorporated from 2005 to 2007, and as the Chairman, President, and Chief Executive Officer of LabOne, Inc. from 1995 to 2005. Prior to that, Mr. Grant served as the Chairman of the Board and Chief Executive Officer from 1993 to 1995, and as the President and Chief Executive Officer from 1990 to 1993, of Seafield Capital Corporation. Mr. Grant also served as the President and Chief Executive Officer of Business Men’s Assurance Company of America from 1986 to 1990. Mr. Grant has served as a director of Commerce Bancshares, Inc. (NASDAQ: CBSH), the publicly-traded bank holding company for Commerce Bank, since 1983. Mr. Grant received his undergraduate degree from Kansas University and his Masters in Business Administration from The Wharton School at the University of Pennsylvania. Mr. Grant is the father of William Grant III, the Chief Operating Officer of the Company, and Robert Grant, the President of the Company’s Senior Division. Mr. Grant’s extensive experience in the healthcare industry and deep knowledge of our business qualifies him to serve on our Board.
Donald L. Hawks III, 46, has served as a director of the Company since 2014 and was appointed to serve as the Chairman of the Board in February 2020. He has served as a Managing Director and the President of Brookside Equity Partners LLC since its formation in 2012. He is a director of multiple private companies, including BEP AUL Holdings LLC, Cash Management Solutions Limited, Hillsdale Furniture Holdings LLC, and Ultra Aluminum Manufacturing Inc. He serves on the Investment Committee of the Rockefeller Family Fund and is a Board Member of the Fresh Air Fund. Mr. Hawks received his undergraduate degree from Georgetown University and his Masters in Business Administration from The Wharton School at the University of Pennsylvania.
Mr. Hawks was appointed to the Board in 2014 in connection with the Series D Agreement and, pursuant to the terms of the Series D Agreement, was appointed as a Class III director immediately prior to the consummation of our IPO.
We believe Mr. Hawks’ extensive business experience, including as an investor in and advisor to several companies, qualifies him to serve on our Board.
Board Leadership Structure
The positions of Chief Executive Officer and Chairman of our Board are separated. As the Chairman of the Board, Donald Hawks presides over meetings and holds such other powers and carries out such other duties as are customarily carried out by the Chairman of our Board. The Board believes the separation of these roles is the appropriate approach for the Company for several reasons, including:
•Allowing us to pursue strategic and operational objectives while maintaining effective oversight and objective evaluation of corporate performance;
•Enabling our Chief Executive Officer to focus on setting the overall strategic direction of the Company, expanding the organization to deliver on our strategy, and overseeing our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing strategic advice to and independent oversight of management;
•Facilitating our succession planning process; and
•Demonstrating our commitment to good corporate governance.
The Board reviews this structure from time to time and will evaluate the proper allocation of the duties and responsibilities of each of the Chief Executive Officer and the Chairperson of the Board whenever considering candidates for these positions in the future.
Board’s Role in Risk Oversight
Informed oversight of our risk management policies and procedures is among the key functions of our Board. Specifically, the Board is responsible for fulfilling its oversight responsibilities regarding the Company’s practices with respect to enterprise risk assessment and management, including exposure to any significant non-financial risks. While the Board has not established a separate risk management committee, the Board exercises its oversight of our risk management practices with the assistance of its existing standing committees, each of which addresses risks inherent in its respective area of oversight.
In conjunction with management and our independent auditor, the Audit Committee is responsible for reviewing our exposure to certain financial risks and assessing the policies and procedures, including investment policies, implemented by management to monitor and control our exposure to these risks. The Audit Committee is responsible for monitoring our compliance with legal and regulatory requirements and overseeing the performance of our external audit function.
The Compensation Committee is responsible for evaluating and discussing any risks associated with our compensation policies, plans, and practices that are reasonably likely to have a material adverse effect on the Company.
The Nominating and Corporate Governance Committee is responsible for monitoring the effectiveness of our corporate governance practices, including our Corporate Governance Guidelines, and evaluating the duties, functions, and composition of the various standing committees of the Board.
Director Independence
OurSelectQuote common stock, is listed on the NYSE. Under the NYSE’s listing standards, a listed company’s board of directors must be comprised of a majority of independent directors. Under the listing standards, a director will be considered independent if, in the opinion of the listed company’s board of directors, the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. The listing standards also require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent.
Members of the audit and compensation committees must also satisfy the additional independence criteria set forth in the both NYSE listing standards and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for directors serving on each of these committees.
Our Board undertakes a review of the independence of each director on at least an annual basis. Based on information requested from and providedplease contact Georgeson LLC, SelectQuote’s proxy solicitor, by each director concerning his or her background, employment, andcalling 1-866-278-8941.
affiliations, including family relationships, our Board has determined that each of Mr. Hawks, Mr. Devanny, Ms. Devine, Dr. Patel, and Mr. Weldon does not have a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director, and that each of these directors is “independent,” as defined under NYSE listing standards. The Board has also determined that each of Messrs. Weldon and Devanny and Ms. Devine, the members of our Audit Committee, and Ms. Devine and Messrs. Devanny and Hawks, the members of our Compensation Committee, satisfies the independence standards of both the SEC and NYSE with respect to membership on such committees. In evaluating each director’s independence with respect to service on the Board and any of its standing committees, the Board considered each director’s relationship with the Company and its affiliates and all other facts and circumstances the Board deemed relevant, including the beneficial ownership of our capital stock of each director and any institutional stockholder with which he or she is affiliated.
Board Meetings and Committees
The number of directors on our Board is fixed exclusively by the Board. Our Board currently consists of seven directors.
During the 2021 Fiscal Year, our Board held four (4) meetings (including regularly scheduled and special meetings), and each director attended at least 75% of the aggregate sum of all Board meetings and all applicable committee meetings held during the period of his or her service. Under our Corporate Governance Guidelines, directors are expected to devote such time and meet as frequently as the Board deems necessary or appropriate to discharge their responsibilities. Directors are also expected to attend all Board meetings, all meetings of the committees on which they serve, and our annual meeting of stockholders. All of our directors attended our 2020 annual meeting.
The Board has established standing committees in connection with the discharge of its responsibilities. These committees are the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. The Board may also establish such other committees as it deems appropriate, in accordance with applicable law and our corporate governance documents. A copy of each committee’s charter is posted on the corporate governance section of our website, www.selectquote.com. Directors serve on these committees until their resignation or such other time as determined by the Board.
Audit Committee
The members of our Audit Committee are Raymond F. Weldon (Chair), Earl H. Devanny III, and Denise L. Devine. Our Board has determined that Mr. Weldon and Ms. Devine are “audit committee financial experts” within the meaning of applicable SEC rules. Our Board has affirmatively determined that Ms. Devine’s simultaneous service on the audit committees of more than three public companies does not impair her ability to effectively serve on our Audit Committee. Our Audit Committee met seven (7) times during the 2021 Fiscal Year.
The Audit Committee’s primary responsibilities include, among other things:
•Overseeing management’s establishment and maintenance of adequate systems of internal accounting and financial controls;
•Reviewing the effectiveness of our legal and regulatory compliance programs;
•Overseeing our financial reporting process, including the filing of financial reports; and
•Selecting independent auditors, evaluating their independence and performance, and approving their services and fees.
Compensation Committee
The members of our Compensation Committee are Ms. Devine (Chair), Mr. Devanny, and Mr. Hawks, each of whom is a non-employee director who meets applicable NYSE independence standards. Our Compensation Committee met four (4) times during the 2021 Fiscal Year.
As set forth in its charter, the Compensation Committee’s responsibilities include:
•Ensuring our executive compensation programs support organizational objectives and stockholder interests and emphasize pay-for-performance;
•Evaluating, on a periodic basis, the competitiveness of (1) the Company’s overall compensation plans, and (2) the compensation, including cash retainers and equity compensation, of our non-employee directors;
•Evaluating, approving, and setting performance criteria for the compensation of our chief executive officer and other executive officers;
•Overseeing the implementation and administration of our equity compensation plans;
•Reviewing and assessing, on an annual basis, the adequacy of its charter and recommending any proposed changes for approval by the Board; and
•Annually reviewing its own performance.
See “Compensation Discussion and Analysis, –Role of the Compensation Committee” for additional information regarding the Compensation Committee’s responsibilities with respect to the compensation of our executive officers.
Pursuant to its charter, the Compensation Committee may delegate any of its authority or responsibilities to individual members of the committee or a subcommittee of the Compensation Committee. The Compensation Committee did not delegate any of its responsibilities during the fiscal year ended June 30, 2021.
The Compensation Committee also has the authority to retain outside compensation consultants for advice. The Compensation Committee is directly responsible for the appointment, compensation, and oversight of any such consultant, and the Company is responsible for providing appropriate funding for payment of reasonable compensation to any such consultant, as determined by the Compensation Committee. In retaining a consultant, the Compensation Committee evaluates its independence by considering the following six factors and any other factors the Compensation Committee deems relevant to the consultant’s independence from management:
•Provision of other services to the Company by the firm that employs the consultant;
•Amount of fees paid by the Company to the firm that employs the consultant, as a percentage of that firm’s total revenue;
•Policies and procedures of the firm that employs the consultant regarding prevention of conflicts of interest;
•Any business or personal relationship between the consultant and any member of the Compensation Committee;
•Ownership by the consultant of the Company’s common stock held in an actively-managed account; and
PROPOSAL ONE:
THE REVERSE STOCK SPLIT PROPOSAL
•
General
Any business or personal relationship between
SelectQuote is asking stockholders to adopt and approve a proposed amendment to our Certificate of Incorporation to effect the consultant, or any firmReverse Stock Split and the Authorized Share Reduction. Our Board of Directors has unanimously approved and declared advisable the proposed amendment, and recommends that employsour stockholders adopt and approve the consultant, and anyproposed amendment. The following description of the Company’s executive officers.proposed amendment is a summary and is subject to the full text of the proposed amendment, which is attached to this proxy statement as Annex A.
If stockholders approve this proposal, the Board of Directors will cause the Certificate of Amendment to be filed with the Delaware Secretary of State and effect the Reverse Stock Split and the Authorized Share Reduction only if the Board of Directors determines that the Reverse Stock Split and the Authorized Share Reduction would be in the best interests of SelectQuote and its stockholders. The Reverse Stock Split and Authorized Share Reduction could become effective as soon as the business day immediately following the Special Meeting. The Board of Directors also may determine in its discretion not to effect the Reverse Stock Split and the Authorized Share Reduction and not to file the Certificate of Amendment. SelectQuote will not effect the Reverse Stock Split without also effecting the Authorized Share Reduction, and vice versa. No further action on the part of stockholders will be required to either implement or abandon the Reverse Stock Split or the Authorized Share Reduction.
The Compensation Committee retained Semler Brossy Consulting Group LLC (“Semler Brossy”)proposed amendment, if effected, will effect a Reverse Stock Split of the outstanding shares of SelectQuote’s common stock at a reverse stock split ratio in the range of 1-for-10 to 1-for-20, as an independent consultantdetermined by our Board of Directors at a later date. As of the Record Date, [●] shares of our common stock were issued and outstanding. Based on such number of shares of our common stock issued and outstanding, immediately following the effectiveness of the Reverse Stock Split (and without giving any effect to advisethe payment of cash in lieu of fractional shares), we will have, depending on executivethe reverse stock split ratio selected by our Board of Directors, issued and non-employee director compensation mattersoutstanding shares of stock as illustrated in the table under the caption “—Effects of the Reverse Stock Split and the Authorized Share Reduction—Effect on Shares of Common Stock.” The proposed amendment will result in a reduction of the total number of shares of SelectQuote’s common stock that SelectQuote is authorized to issue by a corresponding ratio. See “—Effects of the Reverse Stock Split and the Authorized Share Reduction—Effect on Shares of Common Stock” for the 2021 Fiscal Year. Semler Brossy reports directly to our Compensation Committee and does no other worknumber of shares of common stock authorized but not outstanding or reserved that will remain available for issuance immediately following the Company. As requested, representatives of Semler Brossy attend Compensation Committee meetings, participate in executive sessions, and communicate with Compensation Committee members outside of meetings. The Compensation Committee considered the above six factors and determined that Semler Brossy qualifies as an independent compensation consultant in accordance with applicable SEC and NYSE rules. For further discussioneffectiveness of the Compensation Committee’s decision-making processes with respectReverse Stock Split and the Authorized Share Reduction. All holders of SelectQuote’s common stock will be affected proportionately by the Reverse Stock Split and the Authorized Share Reduction.
No fractional shares of common stock will be issued as a result of the Reverse Stock Split. Instead, any stockholder who would have been entitled to executive compensation,receive a fractional share as wella result of the Reverse Stock Split will receive cash payments in lieu of such fractional shares. Each common stockholder will hold the same percentage of the outstanding common stock immediately following the Reverse Stock Split as that stockholder did immediately prior to the advice provided by Semler Brossy, see “Executive Compensation –Compensation DiscussionReverse Stock Split, except to the extent that the Reverse Stock Split results in stockholders receiving cash in lieu of fractional shares. The par value of our common stock will continue to be $0.01 per share (see “—Effects of the Reverse Stock Split and Analysis”the Authorized Share Reduction—Reduction in Stated Capital”).
Nominating
Reasons for the Reverse Stock Split and Corporate Governance Committeethe Authorized Share Reduction
Reverse Stock Split
The membersOur Board of Directors has determined that it is in the best interests of SelectQuote and its stockholders to combine our shares of common stock within a range of 1-for-10 to 1-for-20, as determined by the Board of Directors at a later date, in order to reduce the number of shares of common stock outstanding. Our Board of Directors authorized the reverse split of our Nominatingcommon stock with the primary intent of increasing the per share trading price of our common stock in order to meet the NYSE’s price criteria for continued listing on that exchange. Our common stock is publicly traded and Corporate Governance Committee are Mr. Hawks (Chair), Ms. Devine,listed on the NYSE
under the symbol “SLQT.” Accordingly, for these and Dr. Patel. Our Nominatingother reasons discussed below, we believe that effecting the Reverse Stock Split is in SelectQuote’s and Corporate Governance Committee met three (3) times during the 2021 Fiscal Year.our stockholders’ best interests.
The responsibilitiesOn October 20, 2022, we were notified in writing by the NYSE that the average closing trading price of our common stock was below the criteria of the NominatingNYSE’s continued listing standards, as the average per share closing price of our common stock over a consecutive 30-trading-day period was less than $1.00. In the letter, the NYSE stated that we have a six-month cure period that started on October 20, 2022 to bring the price of our common stock and Corporate Governance Committee include:the 30-trading-day average closing price of our common stock above $1.00. In the letter, the NYSE further stated that in the event a $1.00 share price and a $1.00 average share price over the preceding 30 trading days are not attained at the expiration of the six-month cure period, the NYSE will commence suspension and delisting procedures. The NYSE has reserved the right to reevaluate its continued listing determinations relating to companies who are notified of non-compliance like SelectQuote with respect to the NYSE’s qualitative listing standards, including if our shares trade at sustained levels that are considered to be abnormally low. On December 1, 2022, we provided written notice to the NYSE of the Board of Directors’ approval to pursue a reverse stock split in order to bring our share price and average share price back above $1.00 within the six-month cure period, if necessary.
In addition to bringing the per-share trading price of our common stock back above $1.00, we also believe that the Reverse Stock Split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current per share trading price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
Reducing the number of outstanding shares of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the per share trading price of our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the per share trading price of our common stock. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, that the per share trading price of our common stock will increase following the Reverse Stock Split or that the per share trading price of our common stock will not decrease in the future.
Authorized Share Reduction
As a matter of Delaware law, the implementation of the Reverse Stock Split does not require a reduction in the total number of authorized shares of our common stock. However, if stockholders adopt and approve the amendment to the Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction and the Reverse Stock Split is implemented, the authorized number of shares of our common stock also would be reduced by a corresponding ratio.
Criteria to Be Used for Determining Whether to Implement the Reverse Stock Split
In determining whether to implement the Reverse Stock Split and which reverse stock split ratio to implement, if any, following receipt of stockholder approval of the amendment to our Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction, the Board of Directors may consider, among other things, various factors, such as:
•Recommending nominees forthe historical trading price and trading volume of our Board and its committees;common stock;
•the NYSE Continued Listing Standards requirements;
•Making recommendations to our Board regarding the sizethen-prevailing trading price and compositiontrading volume of our Boardcommon stock and its committees;
•Reviewingthe expected impact of the Reverse Stock Split on the trading market for our Corporate Governance Guidelinescommon stock in the short- and proposed amendments to our bylaws and certificate of incorporation;long-term; and
•Reviewingprevailing general market and making recommendations regarding stockholder proposals.economic conditions.
Certain Risks and Evaluating Director Nominees. The Board has delegated toPotential Disadvantages Associated with the NominatingReverse Stock Split and Corporate Governance Committee the responsibility of identifying, considering and selecting, and recommending for the selection of the Board, candidates who fit the criteria for membership to fill positions on the Board, including any vacancies. The Nominating and Corporate Governance Committee is also responsible for reviewing any candidates nominated by stockholders. The Committee may gather information about candidates through interviews, detailed questionnaires, comprehensive background checks, and any other means the Committee deems appropriate in the evaluation process. After gathering information, the Nominating and Corporate Governance Committee meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and in light of the overall composition and needs of the Board. Based on the results of the evaluation process, the Nominating and Corporate Governance Committee recommends candidates for director nominee for the approval of the Board.Authorized Share Reduction
Minimum Qualifications. The Nominating and Corporate Governance Committee identifies, evaluates, and recommends candidates for director nominee in accordance withWe cannot assure you that the provisions of its charter. While the Company has no minimum qualifications for director nominees, the charter sets forth certain criteria for the Nominating and Corporate Governance Committee to consider in assessing candidates, including the candidate’s character, integrity, judgment, independence, age, skills, education, expertise, corporate experience, understanding of the Company’s business, and, for current directors eligible for nomination for re-election, length of service to the Company.proposed Reverse Stock Split will increase our stock price.
AsWe expect that the Reverse Stock Split will increase the per share trading price of our common stock. However, the effect of the Reverse Stock Split on the per share trading price of our common stock cannot be predicted with any certainty, and the history of reverse stock splits for other companies is varied, particularly since some investors may view a reverse stock split negatively. It is possible that the per share trading price of our common stock after the Reverse Stock Split will not increase in the same proportion as the reduction in the number of our outstanding shares of common stock following the Reverse Stock Split, and the Reverse Stock Split may not result in a per share trading price that would attract investors who do not trade in lower priced stocks. In addition, although we believe the Reverse Stock Split may enhance the marketability of our common stock to certain potential investors, we cannot assure you that, if implemented, our common stock will be more attractive to investors. Even if we implement the Reverse Stock Split, the per share trading price of our common stock may decrease due to factors unrelated to the Reverse Stock Split, including our future performance. If the Reverse Stock Split is consummated and the per share trading price of the common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Stock Split.
The proposed Reverse Stock Split may decrease the liquidity of our common stock and result in higher transaction costs.
The liquidity of our common stock may be negatively impacted by the Reverse Stock Split, given the reduced number of shares that would be outstanding after the Reverse Stock Split, particularly if the per share trading price does not increase as a result of the Reverse Stock Split. In addition, if the Reverse Stock Split is implemented, it will increase the number of our stockholders who own “odd lots” of fewer than 100 shares of common stock. Brokerage commission and other costs of transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of common stock. Accordingly, the Reverse Stock Split may not achieve the desired results of increasing marketability of our common stock as described above.
Effective Time
The effective time of the Reverse Stock Split and the Authorized Share Reduction (the “Effective Time”), if approved by stockholders and implemented by SelectQuote, will be the date and time set forth in the charter,Certificate of Amendment that is filed with the Committee also considers each candidate’s potential contributionsDelaware Secretary of State. It is expected that such filing will take place promptly following the Special Meeting, assuming the stockholders approve the amendment. The Effective Time could occur as soon as the business day immediately following the Special Meeting. However, the exact timing of the filing of the amendment will be determined by our Board of Directors based on its evaluation as to when such action will be the most advantageous to the diversityCompany and our stockholders.
If, at any time prior to the filing of the Certificate of Amendment with the Delaware Secretary of State, notwithstanding stockholder approval, and without further action by the stockholders, the Board of Directors, in its sole discretion, determines that it is in SelectQuote’s best interests and the best interests of SelectQuote’s stockholders to delay the filing of the Certificate of Amendment or abandon the Reverse Stock Split and the Authorized Share Reduction, the Reverse Stock Split and the Authorized Share Reduction may be delayed or abandoned.
Fractional Shares
Stockholders will not receive fractional shares of common stock in connection with the Reverse Stock Split. Instead, the transfer agent will aggregate all fractional shares and sell them as soon as practicable after the Effective Time at the then-prevailing prices on the open market, on behalf of those stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split. We expect that the transfer agent will conduct the sale in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of our Board. Whilecommon stock. After the Company does not maintain a formal diversity policy, the Board and the Nominating and Corporate Governance Committee believe that considerationstransfer agent’s completion of diversity are, and will continue to be, an important factor in assessing the composition of our Board, as varied points of view contributesuch sale, stockholders who would have been entitled to a morefractional share will instead
effective decision-making process. Accordingly,receive a cash payment from the Nominating and Corporate Governance Committee considers diversitytransfer agent in an amount equal to their respective pro rata shares of race, ethnicity, gender, age, cultural background, expertise, and professional experience in making determinations regarding nominationsthe total proceeds of directors.that sale net of any brokerage costs incurred by the transfer agent to sell such stock.
ToStockholders will not be nominatedentitled to receive interest for the period of time between the Effective Time and the date payment is made for their fractional share interest. You should also be aware that, under the escheat laws of certain jurisdictions, sums due for fractional interests that are not timely claimed after the funds are made available may be required to be paid to the Board, candidates mustdesignated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds may have a proven history of achievement and competence in their fields,to obtain the abilityfunds directly from the state to offer advice and guidance to our management team and make significant contributions to our success, and an understanding of directors’ fiduciary responsibilities to the Company and its stockholders. Nominees must also have, in the judgment of the Committee, sufficient time available to perform all Board and committee responsibilities, including attending and participating in all meetings.which they were paid.
At its discretion,If you believe that you may not hold sufficient shares of SelectQuote’s common stock at the Committee may also consider any other facts and circumstances it deems necessary or advisable. Once the Committee has completed its review and evaluation of candidates for director nominee, the Committee recommends candidatesEffective Time to the full Board for selection and approval.
Stockholder Recommendations and Nominations to the Board. The Nominating and Corporate Governance Committee will consider director nominee candidates properly recommended by our stockholders. To be considered by the Nominating and Corporate Governance Committee, any such recommendation for nomination must be received by the Committee not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting. Nominee candidates recommended by stockholders are evaluatedreceive at least one share in the same manner as nominee candidates recommendedReverse Stock Split and you want to continue to hold SelectQuote’s common stock after the Reverse Stock Split, you may do so by other sources.
All recommendations for director candidates must be submitted in writing to our Secretary at 6800 West 115th Street, Suite 2511, Overland Park, Kansas 66211, and must include the following:either:
•Name and addresspurchasing a sufficient number of the stockholder making the recommendation;shares of SelectQuote’s common stock; or
•The class or series andif you have shares of SelectQuote’s common stock in more than one account, consolidating your accounts;
in each case, so that you hold a number of shares of our common stock in your account prior to the Company’Reverse Stock Split that would entitle you to receive at least one share of common stock in the Reverse Stock Split. Shares of our common stock held in registered form and shares of record by such stockholder;our common stock held in “street name” (that is, through a broker, bank or other holder of record) for the same stockholder will be considered held in separate accounts and will not be aggregated when effecting the Reverse Stock Split.
•All information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a);
Effects of the Reverse Stock Split and the Authorized Share Reduction
•A completed and signed questionnaire, representation and agreement required by Section 2.9 of our amended and restated bylaws;General
•A representation thatAfter the effective date of the Reverse Stock Split and the Authorized Share Reduction, if implemented by the Board of Directors, each stockholder iswill own a record holderreduced number of shares of common stock. The principal effect of the Reverse Stock Split and the Authorized Share Reduction will be to proportionately decrease the number of outstanding shares of our securities, or ifcommon stock based on the stockholder is not a record holder, evidencereverse stock split ratio selected by our Board of ownership;Directors.
•Name, age, businessVoting rights and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the precedent five full yearsother rights of the individual recommend for considerationholders of our common stock will not be affected by the Reverse Stock Split, other than as a director nominee;result of the treatment of fractional shares as described above. For example, a holder of 2% of the voting power of the outstanding shares of our common stock immediately prior to the effectiveness of the Reverse Stock Split will generally continue to hold 2% (assuming there is no impact as a result of the payment of cash in lieu of issuing fractional shares) of the voting power of the outstanding shares of our common stock after the Reverse Stock Split. The number of stockholders of record will not be affected by the Reverse Stock Split (except to the extent any are cashed out as a result of holding fractional shares). If approved and implemented, the Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of our common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. Our Board of Directors believes, however, that these potential effects are outweighed by the benefits of the Reverse Stock Split.
•A descriptionEffect on Shares of all arrangements or understandings between the stockholder and the proposed director nominee;Common Stock
•The consentfollowing table contains approximate information, based on share information as of [●], 2023, relating to our outstanding common stock based on reverse stock split ratios within the proposed director nominee (i) to be named in the proxy statement for the annual meetingrange and (ii) to serve as a director if elected at such annual meeting; and
•Any other information regarding such stockholderour authorized shares assuming that the proposal is approved and the proposed director nominee that is required to be included inReverse Stock Split and the proxy statement.
Authorized Share Reduction are implemented:
Executive Sessions
Pursuant to our Corporate Governance Guidelines, which were adopted by the Board in accordance with applicable NYSE listing rules, our non-employee directors meet regularly in scheduled executive sessions without management. Mr. Hawks, our non-employee Chairman of the Board, presides at these executive sessions. Our Corporate Governance Guidelines are described more fully below under “–Corporate Governance Guidelines.”
Stockholder Communications
The Board provides to every stockholder the ability to communicate with the Board and individual directors through an established process for stockholder communication. Stockholders and other interested persons may communicate with the Board or individual directors by submitting written correspondences to the Company’s headquarters at 6800 West 115th Street, Suite 2511, Overland Park, Kansas 66211, Attn: Secretary. The Secretary may facilitate or direct such communications with the Board or individual directors by reviewing, sorting, and summarizing such communications. All such communications will be referred to the Board or individual directors for consideration unless the Board instructs the Secretary otherwise.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines that address a number of topics, including:
•director independence and qualifications;
•director responsibilities, orientation, and continuing education;
•director compensation;
•director attendance;
•annual Board self-evaluations; and
•director communication and access to management and associates.
Our Nominating and Corporate Governance Committee reviews the Corporate Governance Guidelines on an annual basis, and the Board will review and act upon any proposed additions or amendments to the Corporate Governance Guidelines as appropriate. The Corporate Governance Guidelines are available online in the “Investor Relations” section of our website, www.selectquote.com. Copies of our Corporate Governance Guidelines may be obtained without charge upon written request to our Secretary at our corporate headquarters.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. The Code of Business Conduct and Ethics addresses several topics, including:
•compliance with laws, including those related to insider trading;
•conflicts of interest;
•confidentiality of Company information;
•gifts and entertainment;
•accuracy of financial reporting and recordkeeping;
•employee health and safety; and
•anti-harassment and anti-discrimination.
The Audit Committee reviews the Code of Business Conduct and Ethics on an annual basis, and the Board will review and act upon any proposed additions or amendments as appropriate. The Code of Business Conduct and Ethics is available online in the “Investor Relations” section of our website, www.selectquote.com, and copies of the code may be obtained without charge upon written request to our Secretary at our corporate headquarters. If we amend or grant any waiver from a provision of our Code of Business Conduct and Ethics that applies to any of our executive officers, we will publicly disclose such amendment or waiver on our website and as required by applicable law.
In addition to the Code of Business Conduct and Ethics, we also maintain other written policies on specific topics like harassment prevention, related-party transactions, and whistleblowers. Our whistleblower policy establishes procedures for reporting, receiving, and handling complaints related to our auditing, accounting, and financial reporting practices and known or suspected violations of our Code of Business Conduct and Ethics or applicable laws, including U.S. federal securities, anti-fraud, and anti-corruption laws. The policy enables employees to report concerns on a confidential, anonymous basis and protects whistleblowers from harassment, discrimination, and other forms of retaliation, including adverse employment action.
Non-Employee Director Compensation
Our non-employee director compensation program aims to provide fair and competitive compensation to our non-employee directors for their service to the Company.
In addition to the cash retainers and equity compensation described below, the Company also reimburses our directors for all reasonable out-of-pocket expenses incurred in attending any meeting of the Board or any committee thereof; however, we do not pay separate fees to our directors for attending individual meetings, which is an expected part of Board service.
Cash Retainers
Each of our non-employee directors receives an annual cash retainer from the Company for his or her service on the Board. Additional annual retainers are paid to our non-executive chairperson and committee chairs in recognition of their additional service to the Company. The amounts of the cash retainers, which are set by the Compensation Committee and approved by the Board, are set forth in the table below. Annual retainers are prorated for service constituting less than a full fiscal year.
| | | | | | | | |
Annual Retainer for Board Membership | | |
Annual service on the Board | | $ | 40,000 | |
Annual service as non-executive chairperson | | $ | 22,500 | |
| | |
Additional Annual Retainer for Committee Membership | | |
Annual service as chair of the Audit Committee | | $ | 17,500 | |
Annual service as chair of the Compensation Committee | | $ | 12,500 | |
Annual service as chair of the Nominating and Corporate Governance Committee | | $ | 7,500 | |
Equity Compensation
Initial Stock Option Grant.Upon his or her initial election to the Board, each non-employee director is awarded an initial, one-time grant of non-qualified stock options, each representing the right to purchase one share of our common stock, with a target value of $125,000 (an “Initial Option Grant”). Initial Option Grants vest ratably in three equal installments on each of the first three anniversaries of the grant date, subject to the award recipient's continued service as a director at the applicable vesting date.
RSU Retainers. At the discretion of the Compensation Committee, non-employee directors also receive an annual grant of restricted stock units on the date of our annual meeting of stockholders for the applicable fiscal year. The number of RSUs granted to each non-employee director is calculated by dividing the target grant amount, $100,000, by the closing price of our common stock on the grant date, rounded to the nearest whole share. The RSUs vest on the date of the annual meeting of stockholders for the following fiscal year, subject to the award recipient's continued service as a director. Each of our non-employee directors will receive an award of restricted stock units at the 2021 Annual Meeting.
Non-Employee Director Compensation Table
The following table provides information regarding the total compensation that was earned by or paid to each of our non-employee directors for the fiscal year ended June 30, 2021. Directors who are also employees of the Company receive no additional compensation for their service as directors. As our Chief Executive Officer and a member of our Board, Mr. Danker received no additional compensation for his services as a director. Please see “Executive Compensation” for details about Mr. Danker’s compensation for the fiscal year ended June 30, 2021.
| | | | | | | | | | | | | | | | | |
| Name | Fees Earned or Paid in Cash | Stock Awards(1) | Option Awards | All Other Compensation | Total |
| Donald L. Hawks III | $70,000(2) | $107,452 | – | – | $177,452 |
William Grant II(3) | $20,000(4) | $107,452 | – | $109,518(5) | $236,970 |
Donald Britton(6) | $11,984(7) | – | – | – | $11,984 |
| Earl H. Devanny III | $40,000(8) | $107,452 | – | – | $147,452 |
Denise L. Devine(9) | $49,647(10) | $107,452 | – | – | $157,099 |
Dr. Kavita K. Patel11) | $30,870(12) | $107,452 | $135,948(13) | – | $274,270 |
| Raymond F. Weldon | $57,500(14) | $107,452 | – | – | $164,952 |
(1) Amounts shown do not reflect compensation actually received. Amounts reflect the grant date fair value of the restricted stock units granted to our non-employee directors on December 9, 2020, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“FASB ASC Topic 718”). The grant date fair value is calculated pursuant to the Black-Scholes valuation methodology, using the closing market price of our common stock on the grant date.
(2) Amount includes a $40,000 cash retainer for Mr. Hawks’ service as a non-employee director, an additional $22,500 cash retainer for Mr. Hawks’ service as Chairman of the Board, and an additional $7,500 cash retainer for Mr. Hawks’ service as the Chair of our Nominating and Corporate Governance Committee.
(3) As the former President of the Company, Mr. Grant was party to an employment agreement with the Company until the agreement’s expiration on December 31, 2020. Accordingly, Mr. Grant did not receive compensation for his service as a director during the first half of the 2021 Fiscal Year.
(4) Amount includes a $20,000 cash retainer for Mr. Grant’s service as a non-employee director beginning on January 1, 2021.
(5) Amount includes salary and benefits paid to Mr. Grant for his service as an employee of the Company from July 1, 2020 through December 31, 2020.
(6) Mr. Britton resigned from the Board on September 23, 2020.
(7) Amount includes a $9,131 cash retainer for Mr. Britton’s service as a non-employee director, and an additional $2,853 cash retainer for Mr. Britton’s service as Chair of our Compensation Committee, from July 1, 2020 until his resignation from the Board on September 23, 2020.
(8) Amount includes a $40,000 annual retainer for Mr. Devanny’s service as a non-employee director.
(9) Ms. Devine was appointed Chair of our Compensation Committee upon Mr. Britton’s resignation from the Board on September 23, 2020.
(10) Amount includes a $40,000 cash retainer for Ms. Devine’s service as a non-employee director, in addition to a $9,647 cash retainer for her service as Chair of our Compensation Committee beginning on September 24, 2020.
(11) Dr. Patel was appointed to the Board on September 23, 2020.
(12) Amount includes a $30,870 cash retainer for Dr. Patel’s service as a non-employee director beginning on September 24, 2020.
(13) Amount shown does not reflect compensation actually received. Amount reflects the grant date fair value of the Initial Option Grant granted to Dr. Patel on December 9, 2020, computed in accordance with FASB ASC Topic 718. The grant date fair value is calculated pursuant to the Black-Scholes valuation methodology, using the closing market price of our common stock on the grant date.
(14) Amount includes a $40,000 cash retainer for Mr. Weldon’s service as a non-employee director and an additional $17,500 cash retainer for Mr. Weldon’s service as Chair of our Audit Committee.
Stock Ownership Guidelines for Non-Employee Directors
The Board has adopted stock ownership guidelines to further align the interests of our directors with that of our stockholders in creating long-term value for the Company. Under the guidelines, each of our non-employee directors is expected to own shares of our common stock having an aggregate value equal to at least five times the amount of the annual cash retainer paid to him or her for Board service (not including any additional retainers for service as Chairman of the Board or Chair of one of our standing committees). Mr. Danker, our Chief Executive Officer, is expected to hold shares of our common stock having an aggregate value equal to at least five times his annual base salary. While directors are not required to satisfy the ownership guidelines by a specific date, all directors must retain 100% of all vested shares, net of taxes, received under any Company equity compensation plan until he or she has attained the required level of stock ownership. Once the Board has determined that a director has met the required level of stock ownership, declines in the market value of the shares held by the director following the Board’s determination will not change its determination. As of the Record Date, the Board has determined that all directors have attained the requisite level of stock ownership.
Compensation Committee Interlocks and Insider Participation
During the most recent fiscal year, none of our executive officers served as a director or member of the compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our Board or a committee of our Board, and none of the Compensation Committee members served as on officer of employee of the Company or a subsidiary of the Company.
EXECUTIVE OFFICERS
The following table identifies certain information about our executive officers as of June 30, 2021. The ages shown are current as of September 24, 2021.
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Name | AgeNumber of Shares of Common Stock Authorized | Position(s)Number of Shares of Common Stock Issued and Outstanding | Number of Shares of Common Stock Reserved for Future Issuance | Number of Shares of Common Stock Authorized but Not Outstanding or Reserved |
Timothy R. DankerPre-Reverse Stock Split | 48700,000,000 | Chief Executive Officer and Director[●] | [●] | [●] |
Raffaele SadunPost-Reverse Stock Split (1:10) | 4570,000,000 | Chief Financial Officer[●] | [●] | [●] |
William Grant IIIPost-Reverse Stock Split (1:20) | 4635,000,000 | Chief Operating Officer |
Floyd O. May III[●] | 45[●] | Chief Information Officer |
Matthew S. Gunter | 48 | Chief Communications Officer |
Robert Grant | 37 | President, Senior Division |
Ryan Souan | 47 | Executive Vice President, Auto & Home Division |
Paul Gregory | 38 | Executive Vice President, Life Division |
Daniel A. Boulware | 45 | General Counsel and Secretary[●] |
Executive OfficersAfter the effective date of the Reverse Stock Split that our Board of Directors elects to implement, our common stock would have a new committee on uniform securities identification procedures, or CUSIP number, a number used to identify our common stock.
Please see “Corporate Governance, –Directors, –Class I Directors” above for Mr. Danker’s biography.Our common stock is currently registered under Section 12(b) of the Securities Exchange Act of 1934, or the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Stock Split will not affect the registration of our common stock under the Exchange Act or the listing of our common stock on the NYSE. Following the Reverse Stock Split, our common stock will continue to be listed on the NYSE under the symbol “SLQT,” although it will be considered a new listing with a new CUSIP number.
Raffaele Sadun, 45, has served as the Chief Financial Officer of the Company since 2017. Prior to joining the Company, Mr. Sadun served as the Chief Financial Officer of The Mutual Fund Store from 2014 until its sale in 2016 to Financial Engines, one of the largest independent registered investment advisors in the United States, where he served as Senior Vice President of Finance from 2016 to 2017. Mr. Sadun served as the Chief Financial Officer of Adknowledge, one of the largest digital advertising companies in the United States, from 2012 to 2014 and as the Chief Financial Officer of SeaWorld Parks & Entertainment from 2010 to 2011. Mr. Sadun is an honors graduate in Management of The London School of Economics.Effect on Par Value
William Grant III, 46, has served asThe proposed amendments to our Certificate of Incorporation will not affect the Company’s Chief Operating Officer since 2019. Mr. Grant previously served as the Company’s Chief Marketing Officer and Presidentpar value of the Company’s Senior Division from 2017 to 2019 and as the Senior Vice President of Marketing for the Company’s Senior Division from 2012 to 2017. Mr. Grant received his undergraduate degree from the University of Kansas. Mr. Grant is the son of William Grant II, a member of the Company’s Board and the former President of the Company, and the brother of Robert Grant, the President of the Company’s Senior Division.our common stock, which will remain at $0.01.
Floyd O. May III, 45, has served as the Company’s Chief Information Officer since 2019. Prior to joining the Company, Mr. May served as the Director of Operations for the United States Office of Public and Indian Housing from 2018 to 2019. From 2013 to 2018, Mr. May served as a Business Program Manager for the United States Department of Housing and Urban Development, where he servedReduction in a variety of other operational leadership roles from 2006 to 2013. Mr. May earned his undergraduate degree in Business Administration from the Howard University School of Business, from which he graduated with honors.Stated Capital
Matthew S. Gunter, 48, has served as the Company’s Chief Communications Officer since May 2020 and previously served as the PresidentAs a result of the Company’s Auto & Home Division beginningReverse Stock Split, upon the Effective Time, the stated capital on our balance sheet attributable to our common stock, which consists of the par value per share of our common stock multiplied by the aggregate number of shares of our common stock issued and outstanding, will be reduced in 2016. Priorproportion to joining the Company, Mr. Gunter served assize of the Vice PresidentReverse Stock Split, subject to a minor adjustment in respect of National Retail Channels for Sprint Corporation from 2013 to 2016the treatment of fractional shares, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. Our stockholders’ equity, in a variety of leadership roles within the Finance and Marketing organizations at Sprint Corporation from 2003 to 2013. Earlier in his career, Mr. Gunter worked as a management consultant at Bain & Company and Arthur Andersen LLP. Mr. Gunter earned his Bachelor of Business Administration from the University of Notre Dame and his Master of Business Administration from the Kellogg School of Management at Northwestern University.aggregate, will remain unchanged.
Effect on SelectQuote’s Stock Plans
As of [●], 2023, we had approximately [●] shares subject to stock options and [●] shares subject to unvested restricted stock units (including performance-based units) outstanding under our stock incentive plans. Under our 2003 Stock Incentive Plan, as amended (the “2003 Plan”), 2020 Omnibus Incentive Plan (the “2020 Plan”) and 2020 Employee Stock Purchase Plan, as amended (together with the 2003 Plan and the 2020 Plan, the “Stock Plans”), the Compensation Committee of our Board of Directors (the “Compensation Committee”) has sole discretion to determine the appropriate adjustment to the awards granted and reserved for issuance under our Stock Plans in the event of a reverse stock split. Accordingly, if the Reverse Stock Split is effected, the number of shares available for issuance under the Stock Plans, as well as the number of shares subject to any outstanding award under the Stock Plans, and the exercise price, grant price or purchase price relating to any such award under the Stock Plans, are expected to be proportionately adjusted by the Compensation Committee to reflect the Reverse Stock Split. The Compensation Committee will also determine the treatment of fractional shares subject to stock options and other outstanding awards under the Stock Plans. In addition, pursuant to the authority provided under the Stock Plans, the Compensation Committee is expected to authorize the Company to effect any other changes necessary, desirable or appropriate to give effect to the Reverse Stock Split, including any applicable technical, conforming changes to our Stock Plans.
Specifically, it is expected that the number of shares subject to awards under the Stock Plans will be adjusted in each case to equal the product of the number of shares subject to the applicable award immediately prior to the Reverse Stock Split multiplied by the reverse stock split ratio (rounded to the nearest whole share (in the case of stock options, down to the nearest whole share)), that the exercise price of any stock option will be adjusted to equal the quotient of the number of
Robert Grantshares subject to the applicable stock option immediately prior to the Reverse Stock Split divided by the reverse stock split ratio (rounded up to the nearest whole cent), 37, has served asand that the Presidentstock price goal of any price-vested restricted stock unit awards will be adjusted in each case to equal the product of the Company’s Senior Division since 2019. Mr. Grant previously served asapplicable price goal in effect immediately prior to the Company’s Chief Revenue Officer from 2017Reverse Stock Split multiplied by the reverse stock split ratio (rounded up to 2019; the Senior Vice President of Sales of the Company’s Life Division from 2016 to 2017; and as the Director of Sales and Operations for the Company’s Senior Division from 2013 to 2016. Mr. Grant received his undergraduate degree from the University of Kansas. Mr. Grant is the son of William Grant II, a member of the Company’s Board and the former President of the Company, and the brother of William Grant III, the Company’s Chief Operating Officer.nearest whole cent).
Ryan Souan, 47, has served as the Executive Vice President of the Company’s Auto and Home Division since January 2021. Prior to his current role, Mr. Souan served as the Company’s Executive Vice President of Marketing beginning in July 2020; the Senior Vice President of Marketing from April 2020 to July 2020; and the Vice President of Marketing from 2017 to April 2020. Prior to joining the Company, Mr. Souan held a variety of marketing roles, beginning in 2006, at Sprint Corporation, where he was most recently the Director of Customer Acquisition. Mr. Souan earned his Bachelor of Business Administration from Baylor University and his MBA from the Kellogg School of Management at Northwestern University.No Going Private Transaction
Paul Gregory, 38, has served as Executive Vice PresidentNotwithstanding the decrease in the number of outstanding shares following the proposed Reverse Stock Split, our Board of Directors does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Company’s Life Division since 2019. Mr. Gregory previously served as the Company’s Senior Vice President of IT, Data Science, and Recruiting in 2019; the Company’s Senior Vice President of IT and Data Science from 2016 to 2019; and the Vice President of Sales and Operations of the Company’s Senior Division in 2016. Prior to joining the Company, Mr. Gregory served as the Chief Revenue Officer of Corvisa, a provider of cloud-based communications solutions, from 2012 to 2016. Mr. Gregory serves on the board of directors of System Target, LLC, a private consulting company. Mr. Gregory earned his undergraduate degree and Master of Business Administration from the University of Kansas.Exchange Act.
Daniel A. Boulware, 45, has served as the Company’s General CounselShares Held in Book-Entry and Secretary since October 2019. Prior to joining the Company, Mr. Boulware was the Vice President and General Counsel for SS&C Health, the healthcare segmentThrough a Broker, Bank, or Other Holder of SS&C Technologies Holdings, Inc., a public company providing technology to the financial services industry and pharmacy benefit management, medical claims processing, data analytics, and associated technology to the healthcare industry. Mr. Boulware began his career in 2002 as an associate at Polsinelli PC, where he was made Shareholder in 2012. Mr. Boulware earned his undergraduate degree, Juris Doctor degree and Master of Business Administration from the University of Kansas.Record
If you hold registered shares of our common stock in a book-entry form, you do not need to take any action to receive your post-Reverse Stock Split shares of our common stock in registered book-entry form or your cash payment in lieu of fractional shares, if applicable. If you are entitled to post-Reverse Stock Split shares of our common stock, a transaction statement will automatically be sent to your address of record as soon as practicable after the Effective Time indicating the number of shares of our common stock you hold. In addition, if you are entitled to a payment of cash in lieu of fractional shares, a check will be mailed to you at your registered address as soon as practicable after the Effective Time. By signing and cashing this check, you will warrant that you owned the shares of SelectQuote’s common stock for which you received a cash payment.
At the Effective Time, we intend to treat stockholders holding shares of our common stock in “street name” (that is, through a broker, bank or other holder of record) in the same manner as registered stockholders whose shares of our common stock are registered in their names. Brokers, banks or other holders of record will be instructed to effect the Reverse Stock Split for their beneficial holders holding shares of our common stock in “street name”; however, these brokers, banks or other holders of record may apply their own specific procedures for processing the Reverse Stock Split. If you hold your shares of our common stock with a broker, bank or other holder of record, and you have any questions in this regard, we encourage you to contact your holder of record.
Shares Held in Certificated Form
If you hold any of your shares of our common stock in certificated form (the “Old Certificate(s)”), you will receive a transmittal letter from our transfer agent as soon as practicable after the Effective Time. The transmittal letter will be accompanied by instructions specifying how you can deliver your Old Certificate(s) so that you are in a position to freely trade your post-Reverse Stock Split shares of our common stock, which will be in a book-entry form, evidenced by a transaction statement that will be sent to your address of record as soon as practicable after your delivery of a letter of transmittal indicating the number of shares of our common stock you hold, together with any payment of cash in lieu of fractional shares to which you are entitled. Until surrendered as contemplated herein, a stockholder’s Old Certificate(s) shall be deemed at and after the Effective Time to represent the number of full shares of our common stock resulting from the Reverse Stock Split.
YOU SHOULD NOT SEND YOUR OLD CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY AFTER YOU RECEIVE THE LETTER OF TRANSMITTAL FROM OUR TRANSFER AGENT.
Vote Required
Under Delaware law, the affirmative vote of the holders of a majority of the outstanding shares entitled to vote at the Special Meeting is required to adopt and approve the amendment to our Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction. Because adoption and approval of the amendment to our Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction requires a majority of the outstanding shares, an abstention with respect to the reverse stock split proposal will have the same effect as a vote “Against” the proposal.
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM16
Our Audit Committee has engaged Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm to perform the audit of our financial statements for the fiscal year ended June 30, 2022, and we are asking you and other stockholders to ratify this appointment. Deloitte served as our independent registered public accounting firm during the fiscal year ended June 30, 2021.
Although ratification of the appointment of Deloitte is not required by our amended and restated bylaws or otherwise, our Board is submitting the appointment of Deloitte to stockholders for ratification as a matter of good corporate governance. A majority vote of the shares present in person or represented by proxy and entitled to vote is required in order to ratify the appointment of Deloitte. In the event that our stockholders do not ratify this appointment of Deloitte, our Audit Committee will reconsider whether to retain Deloitte. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if the Committee determines that such a change would be in the best interests of the Company and its stockholders.
We expect that a representative of Deloitte will attend the Annual Meeting, and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
We have adopted a policy under which our Audit Committee must pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm. As part of its review, the Audit Committee also considers whether the categories of pre-approved services are consistent with SEC and Public Company Accounting Oversight Board (“PCAOB”) rules on accountant independence. The Audit Committee has pre-approved all services performed by the independent registered public accounting firm since the pre-approval policy was adopted prior to our IPO.
Audit Fees
The following table sets forth the fees billed or to be billed by Deloitte and its affiliates for professional services rendered with respect to the fiscal years ended June 30, 2021 and 2020. All of these services were approved by the Audit Committee.
| | | | | | | | | | | | | | |
| Fee Category | Fiscal 2021 | Fiscal 2020 |
| Audit Fees (1) | | $ | 1,750,000 | | | $ | 3,008,245 | |
| Audit-Related Fees (2) | | 453,368 | | | 817,405 | |
| Tax Fees (3) | | 177,227 | | | 175,725 | |
| All Other Fees (4) | | — | | | 434,487 | |
| Total Fees | | $ | 2,380,595 | | | $ | 4,435,862 | |
(1) Audit Fees consist of fees for professional services rendered for the audits of the annual consolidated financial statements and reviews of the interim condensed consolidated financial statements included in quarterly reports. Audit fees also include services provided in connection with the audit report on the effectiveness of internal control over financial reporting and other attest services; services related to filings with the SEC, including the initial public offering, comfort letters, consents and assistance with and review of documents filed with the SEC; and accounting research in support of the audit.
(2) Audit-Related Fees consistThe SelectQuote Board of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of consolidated financial statements of the Company and are not reported under “Audit Fees.” These services include consultation concerning financial accounting and reporting standards; and acquisitions.
(3) Tax Fees consist of fees for professional services for tax compliance, tax advice and tax planning. These services include consultation on tax matters and assistance regarding federal, state and international tax compliance.
(4) All Other Fees consist of aggregate fees billed for products and services provided by the independent registered public accounting firm other than those disclosed above.
The BoardDirectors recommends that you vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ended June 30, 2022.
Audit Committee Report
The Audit Committee is a standing committee of the Board comprised solely of independent directors, as required under NYSE listing standards and applicable SEC rules and regulations. The Audit Committee operates under a written charter, which has been approved by our Board and is available in the Corporate Governance section of our website, www.selectquote.com. The Audit Committee’s composition and responsibilities and the qualifications of its members as reflected in its charter, are intended to comply with applicable corporate audit committee requirements. The Audit Committee reviews and assesses its performance and the adequacy of its charter on an annual basis.
It is not the Audit Committee’s responsibility to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete, accurate, and in accordance with U.S. generally accepted accounting principles and applicable laws, rules and regulations. Management is responsible for the Company’s financial statements, including the estimates and judgments on which they are based, and the Company’s internal controls, accounting policies, and the financial reporting process. The Audit Committee oversees the Company’s financial reporting process on behalf of the Board, in accordance with its charter. The independent registered public accounting firm, Deloitte, is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with applicable PCAOB standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.
In the performance of its oversight function, the Audit Committee has:
1.reviewed and discussed the audited financial statements with management and Deloitte;
2.discussed with Deloitte the matters required to be discussed by Auditing Standard No. 1301 (Communications with Audit Committees), as supplemented or amended, and as adopted by the PCAOB;
3.received from Deloitte the written disclosures and the letter required by the applicable rules of the PCAOB; and
4.discussed Deloitte’s independence with Deloitte.
Based on the Audit Committee’s review and discussions with management and Deloitte, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for filing with the SEC.
THE AUDIT COMMITTEE
Raymond F. Weldon, Chair
Earl H. Devanny III
Denise L. Devine
EXECUTIVE COMPENSATIONreverse stock split proposal.
Compensation Discussion & AnalysisNo Appraisal Rights
Under the DGCL, our stockholders are not entitled to dissenters’ rights or appraisal rights with respect to the reverse stock split described in this proposal, and we will not independently provide our stockholders with any such rights.
Interest of Certain Persons in Matters to Be Acted Upon
No officer or director has any substantial interest, direct or indirect, by security holdings or otherwise, in the Reverse Stock Split or the Authorized Share Reduction that is not shared by all of our other stockholders.
Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following discussion is a general summary of certain U.S. federal income tax consequences of the Reverse Stock Split that may be relevant to holders of our common stock that hold such stock as a capital asset for U.S. federal income tax purposes (generally, property held for investment). This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions as of the date hereof, all of which may change, possibly with retroactive effect, resulting in U.S. federal income tax consequences that may differ from those discussed below.
This Compensation Discussiondiscussion applies only to holders that are U.S. Holders (as defined below) and Analysis (“CD&A”) includesdoes not address all aspects of federal income taxation that may be relevant to such holders in light of their particular circumstances or to holders that may be subject to special tax rules, including: (i) holders subject to the alternative minimum tax; (ii) banks, insurance companies, or other financial institutions; (iii) tax-exempt organizations; (iv) dealers in securities or commodities; (v) regulated investment companies or real estate investment trusts; (vi) partnerships (or other flow-through entities for U.S. federal income tax purposes and their partners or members); (vii) traders in securities that elect to use a detailed discussionmark-to-market method of accounting for their securities holdings; (viii) U.S. Holders (as defined below) whose “functional currency” is not the U.S. dollar; (ix) persons holding our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; (x) persons who acquire shares of our executive compensation program, including the annual compensationcommon stock in connection with employment or other performance of services; or (xi) U.S. expatriates. If a partnership (including any entity or arrangement treated as a partnership for certainU.S. federal income tax purposes) holds shares of our executive officers, listedcommon stock, the tax treatment of a holder that is a partner in the tablepartnership generally will depend upon the status of the partner and the activities of the partnership.
We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service (“IRS”) regarding the U.S. federal income tax consequences of the Reverse Stock Split and there can be no assurance that the IRS will not challenge the statements and conclusions set forth below (our “named executive officers”), foror a court would not sustain any such challenge. The following summary does not address any U.S. state or local or any foreign tax consequences, any estate, gift or other non-U.S. federal income tax consequences, or the 2021 Fiscal Year.Medicare tax on net investment income.
| | | | | |
Name | Title |
Timothy R. Danker | Chief Executive Officer |
Raffaele Sadun | Chief Financial Officer |
William Grant III | Chief Operating Officer |
Robert Grant | President, Senior Division |
Daniel A. Boulware | General Counsel and Secretary |
EACH HOLDER OF COMMON STOCK SHOULD CONSULT SUCH HOLDER’S TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO SUCH HOLDER.
Executive SummaryFor purposes of the discussion below, a “U.S. Holder” is a beneficial owner of shares of our common stock that for U.S. federal income tax purposes is: (1) an individual citizen or resident of the United States; (2) a corporation (including any entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state or political subdivision thereof; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) the trust has a valid election in effect to be treated as a U.S. person.
Our Compensation CommitteeThe Reverse Stock Split is responsibleintended to be treated as a “recapitalization” for U.S. federal income tax purposes. As a result, a U.S. Holder generally should not recognize gain or loss upon the design, implementation, and approvalReverse Stock Split, except with respect to cash received in lieu of the compensationa fractional share of our executive officers. The goal of our executive compensation program is to compensate our executive officerscommon stock, as discussed below. A U.S. Holder’s aggregate tax basis in a manner that is driven by the financial performance of the Company, aligned with the interests of stockholders, and supports our business strategy. Accordingly, we seek to tie the incentive compensation of each executive officer to company financial performance and stockholder returns.
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In our first full fiscal year as a public company, we implemented executive compensation policies, including annual equity grants that were aligned with the long-term interests of our stockholders and consistent with the key indicators of our success. Under the leadership of our executive team, including our named executive officers, we delivered a record performance in the 2021 Fiscal Year, achieving strong financial results while continuing to grow rapidly and protecting the health and safety of our workforce throughout the COVID-19 pandemic. Highlights of our performance in the 2021 Fiscal Year include the following:
• We generated full-year consolidated revenues of $938 million, up 76% from the previous year.
• We generated *adjusted EBITDA* of approximately $228 million, up approximately 48% from the previous year.
• Our Senior Division grew both submitted and approved Medicare Advantage policies by over 100% from the previous year.
• We launched a new business, Population Health, which will allow us to deepen our relationships with our customers, help improve patient outcomes, and create meaningful new revenue streams at attractive customer acquisition economics.
• As one component of Population Health, we acquired a closed-door medication management pharmacy, recently branded SelectRx, aimed at educating seniors about their prescription medications and helping them improve their medication adherence.
• We amended our credit agreement, lowering our borrowing costs on term loan borrowings and increasing our operational flexibility.
• We grew our workforce to more than 3,300 employees while continuing to operate in a fully remote working environment due to the COVID-19 pandemic.
* Adjusted EBITDA is a non-GAAP financial metric. For a reconciliationshares of Adjusted EBITDAour common stock received pursuant to net income and discussionthe Reverse Stock Split should equal the aggregate tax basis of the Company’s useshares of Adjusted EBITDA, please referour common stock surrendered (excluding any portion of such basis that is allocated to “Management’s Discussionany fractional share of our common stock), and Analysissuch U.S. Holder’s holding period in the shares of Financial Conditionour common stock received should include the holding period in the shares of our common stock surrendered. Treasury regulations promulgated under the Code provide detailed rules for allocating the tax basis and Results of Operations—Non-GAAP Financial Measures” on page 54holding period of the Company’s Annual Reportshares of our common stock surrendered to the shares of our common stock received pursuant to the Reverse Stock Split. Holders of shares of our common stock acquired on Form 10-Kdifferent dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
A U.S. Holder that receives cash in lieu of a fractional share of our common stock pursuant to the Reverse Stock Split should generally recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the shares of our common stock surrendered that is allocated to such fractional share.
Such capital gain or loss should generally be long-term capital gain or loss if the U.S. Holder’s holding period for our common stock surrendered exceeded one year at the fiscal year ended June 30, 2021.Effective Time.
Compensation PhilosophyThe Board of Directors recommends that you vote “FOR” the reverse stock split proposal.
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Our compensation philosophy is based on our belief that the central purpose of our executive compensation program should be to aid the Company in creating sustained, long-term value for our stockholders by attracting and retaining qualified, high-performing executives to lead the pursuit of our corporate and business objectives. In service of this purpose, we strive to provide compensation packages that are market competitive, reward achievement of our business objectives, and align executive and stockholder interests through equity ownership in the Company.
Specifically, our executive compensation program is designed to:
•Attract, motivate, and retain critical and high-performing executives;
•Deliver target compensation to all executives that is informed by market competitive pay;
•Align executives’ incentives with both the short-term and long-term interests of our stockholders;
•Ensure a substantial portion of each executive’s total compensation is “at-risk” and dependent on the Company’s performance;
•Ensure actual payouts are reflective of our financial performance and align with strategic business goals that enhance stockholder value; and
•Consider aggregate pay levels in total for our named executive officers, with an emphasis on internal equity and consistency.
In support of these goals, our executive compensation program incorporates corporate governance best practices, including the following principles:
• A significant portion of the total compensation of our executive officers is provided in the form of performance-based incentives, tied to defined performance goals, with both short-term and long-term components, that are established and reviewed annually.
•Aggregate total compensation paid to our executives is competitive with market pay levels for similar positions.
• Our executive employment agreements do not provide for automatic salary increases or guaranteed incentive payments. The Compensation Committee reviews the terms of the employment agreements periodically to determine whether the terms of the agreements continue to further our goals.
• The Compensation Committee has full discretion to retain an outside compensation consultant to perform services that assist the committee in making its compensation decisions, and the committee assesses the independence of potential consultants before making retention decisions.
• The cash severance arrangements and accelerated vesting of equity provided to our executives are “double trigger,” requiring a termination event following a change in control before any cash severance payments or accelerated vesting are triggered;
• We do not provide excise tax “gross-up” payments in connection with a future change in control.
PROPOSAL TWO:
THE ADJOURNMENT PROPOSAL
• The Compensation Committee considers, in making its compensation decisions, whether our compensation arrangements, or components of them, create risks that are reasonably likely to have a material adverse effect on the Company.
General
• Executive officersSelectQuote is asking stockholders to approve, if necessary, adjournment of the Special Meeting to solicit additional proxies in favor of the reverse stock split proposal. Any adjournment of the Special Meeting for the purpose of soliciting additional proxies will allow stockholders who have already sent in their proxies to revoke them at any time prior to the time that the proxies are subject to robust stock ownership requirements of 5x base salary for our Chief Executive Officer and 3x base salary for each other named executive officer.used.
• All employees and directors are generally prohibited from purchasing shares of our common stock on margin; short selling our common stock; pledging, whether directly or indirectly, shares of our common stock as collateral for a loan; and engaging in transactions designed to hedge our common stock, subject to certain exceptions. See “ –Anti-Hedging, Anti-Short Selling, and Anti-Pledging Policy” below.
Vote Required
While we believeUnder Delaware law, the goals and principles underlying our compensation philosophy are critical to any successful executive compensation program and will continue to inform our process and decision-making regarding the compensationaffirmative vote of our executives, we will continue to evaluate our compensation philosophy on an ongoing basis to ensure our compensation programs evolve according to market conditions and the goalsa majority of the Company.
Role ofvotes present in person or represented by proxy at the Compensation Committee
Our Compensation Committee, which consists solely of directors meetingSpecial Meeting and entitled to vote on the NYSE standards for independence andmatter is required to approve the SEC’s requirements for compensation committee member independence, dischargesadjournment proposal. Abstentions with respect the Board’s responsibilities relating toadjournment proposal will have the compensation of our directors and executive officers. Specifically,same effect as a vote “Against” the Compensation Committee is responsible for:
•Overseeing all aspects of our executive compensation programs, including annual base salary; annual incentive bonus (including the specific goals and amounts); equity compensation; employment agreements, severance arrangements, and change in control agreements/provisions; signing bonuses and payment of relocation costs; and any other forms of compensation and benefits for the chief executive officer and other executive officers of the Company;
•Reviewing and approving corporate goals and objectives relevant to the compensation of the chief executive officer and the other executive officers of the Company;
•Acting as administrator of the Company’s equity compensation plans pursuant to which the equity and annual cash incentive awards that form the majority of our executive compensation program are made;
•Approving the grant of restricted stock units, options to purchase the Company’s common stock, and other equity grants pursuant to the Company’s equity compensation plans, and amending such restricted stock units, options, and other equity grants as needed;
•Making recommendations to the Board regarding amendments to the equity compensation plans, and changes in the number of shares reserved for issuance thereunder;
•Evaluating, on a periodic basis, the competitiveness of the compensation of the chief executive officer and other executive officers of the Company;
•Reviewing market trends and changes in competitive compensation practices and, based on this assessment, adjusting our executive compensation program and recommending changes to the remuneration of members of our Board;
•Retaining any outside executive compensation advisors, including compensation consultants, legal counsel, accounting and other advisors, to assist in the creation of our compensation plans and arrangements and related policies and practices; and
•Evaluating the independence of any such compensation consultant in accordance with Item 407(e)(3)(iv) of Regulation S-K.
Our Compensation-Setting Process
In preparation for our IPO in May 2020, the Compensation Committee, with the assistance of its outside compensation consultant, Semler Brossy, initiated changes to the Company’s executive compensation practices to better align them with the needs and expectations of a public company. As part of this effort, the Compensation Committee approved increased cash compensation levels and the new design of our annual incentive and long-term incentive programs. In addition, the Compensation Committee implemented an annual compensation-setting process designed to assist the Committee in aligning our compensation practices with the philosophy and objectives stated above. This process is described below:
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Q1 (July 1 – September 30)
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Prior-Year Performance & Incentive Payouts: Calculate and approve incentive payouts to executive officers in light of company-wide performance for the prior fiscal year.
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Current-Year Compensation & Performance Goals: Approve executive pay changes (salary, target bonus and equity grants), equity grants for named executive officers and in aggregate for broader employee populations, and incentive goals for the upcoming year (including CEO objectives).
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Committee Diligence: Review and approve proxy materials. Review the performance and independence of outside compensation consultant and evaluate Compensation Committee performance of assess Compensation Committee charter, and evaluate Committee performance, including compliance with charter.
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Q2 (October 1 – December 31)
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HR and Compensation Risk: Review retirement and benefit plans, human capital management items, and compensation risk assessment, including any proxy advisor and shareholder feedback.
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Q3 (January 1 – March 31)
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Trends and Peer Group: Review and evaluate peer group, review and discuss regulatory updates and trends that relate to governance and compensation, and assess the appropriateness of incentive plans.
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Q4 (April 1 – June 30)
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Year-End Pay Review:
•Review market data, proposed executive pay changes, equity grant practices and set equity grant budgets for coming year.
•Review CEO objectives, proposed annual and long-term incentive designs for upcoming year, estimate of annual incentive payout for current year, and executive performance.
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Role of the Compensation Consultantproposal.
The Compensation Committee continued to engage Semler Brossy duringBoard of Directors recommends that you vote “FOR” the 2021 Fiscal Year to assess the competitiveness of our executive compensation programs and practices to assist the Compensation Committee in making compensation decisions for our named executive officers for the 2021 Fiscal Year. Throughout the 2021 Fiscal Year, Semler Brossy provided the following services as requested by the Compensation Committee:adjournment proposal.
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•assisted in the development of the compensation peer group used to understand market competitive compensation practices;
•reviewed and assessed our compensation practices and the cash and equity compensation levels of our non-employee directors and executive officers, including our named executive officers;
•reviewed and assessed our current compensation programs to determine any changes that may need to be implemented to remain competitive with the market and conducted an equity burn rate and overhang analysis;
•reviewed and assessed our current severance and change in control benefits against peer practices; and
•advised on trends and regulatory developments relating to executive compensation and collaborated on the risk assessment relating to incentive compensation.
As discussed above, the Compensation Committee assessed the independence of our advisers at Semler Brossy and determined them to be independent under applicable SEC and NYSE rules.
Role of Management
The Compensation Committee and its outside advisors also work closely with Mr. Danker, our Chief Executive Officer, to determine the compensation of our named executive officers, each of whom reports directly to the Chief Executive Officer. Our Chief Executive Officer does not participate in our Compensation Committee’s deliberations or decisions about his own compensation.
Our Chief Executive Officer reviews the performance of the other named executive officers for the prior year and shares those evaluations with, and makes recommendations to, the Compensation Committee. These recommendations concern each pay element for each of our named executive officers, other than himself, based on the Company’s performance, market pay levels for comparable roles, the individual’s contribution to Company performance, and the individual’s performance against various goals and responsibilities.
The Compensation Committee considers our Chief Executive Officer’s recommendations and consults our independent advisors when making decisions on the compensation of the other named executive officers. In all cases, the final decisions on compensation of our named executive officers are determined on an aggregate basis and made by the Compensation Committee. None of our named executive officers participates in the determination of the amounts or elements of his own compensation.
The Compensation Committee, in consultation with our independent advisors, determines and approves changes in the Chief Executive Officer’s compensation based on its review of his individual performance and our performance as a whole.
The Compensation Committee ultimately determined the compensation of the named executive officers on an aggregate basis based on consideration of internal equity across the named executive officers given their parity in criticality and subsequently set the compensation of our named executive officers to reflect the aggregate approach.
Use of Comparative Market Data
We aim to compensate our executive officers at levels that are commensurate, both on an individual and aggregate basis, with competitive levels of compensation for executives in similar positions at peer companies with whom we compete to hire and retain executive talent. Accordingly, we evaluate and consider the compensation practices of peer companies in making compensation-related decisions; however, we do not engage in any benchmarking or targeting of any specific levels or percentiles of market for pay and generally consider pay in aggregate across the executive team, taking into account the pay levels of each of our named executive officers relative to each other.
Compensation Peer Group
In 2020, the Compensation Committee, with recommendation from Semler Brossy, reviewed and approved a peer group for use in developing recommendations for compensation levels for the 2021 Fiscal Year. We used initial quantitative screens primarily as guides to inform our decision-making process in reviewing current or potential peers. The screening process for the 2021 Fiscal Year focused specifically on companies within a reasonable range of our revenue, market capitalization and industry. The peer group for the 2021 Fiscal Year included the following companies:
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•Benefitfocus, Inc.
| •HealthEquity, Inc.
| •Stamps.com Inc.
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•CarGurus, Inc.
| •HMS Holdings Corp.
| •The Simply Good Foods Co.
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•eHealth, Inc.
| •Morningstar, Inc.
| •Trupanion, Inc.
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•Etsy, Inc.
| •Omnicell, Inc.
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•Guidewire Software, Inc.
| •Shutterstock, Inc.
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To ensure a robust sample of data was used in developing compensation recommendations for the 2021 Fiscal Year, we also referenced general industry compensation data for the position held by each named executive officer in our decision-making process.
Elements of Executive Compensation for the 2021 Fiscal Year
Compensation for our named executive officers in the 2021 Fiscal Year was comprised of three primary elements: 1) base salary; 2) a cash-based annual incentive opportunity; and 3) equity-based long-term incentives. This program emphasized “at-risk” pay while providing competitive packages to retain and motivate our key talent.
Base salary. We provide a base salary to each of our named executive officers to compensate them in cash at a fixed amount for services provided on a day-to-day basis during the fiscal year. We strive to set base salaries at levels that are competitive based on our review of market data and commensurate with each executive’s role. Base salaries are reviewed annually and adjusted from time to time to reflect individual roles, performance, and market conditions.
After considering market data and the factors outlined above, the Compensation Committee determined to increase the base salaries of our named executive officers for the 2021 Fiscal Year from their prior year amounts to reflect the increased responsibilities and compensation expectations associated with being a public company. The table below identifies the specific base salary amounts for the 2021 Fiscal Year for each of our named executive officers.
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| Named Executive Officer | Annualized FY 2021 Salary | Percentage Increase From FY 2020(1) |
| Timothy R. Danker | $500,000 | 64% |
| Raffaele Sadun | $400,000 | 33% |
| William Grant III | $400,000 | 60% |
| Robert Grant | $400,000 | 91% |
| Daniel A. Boulware | $310,000 | 13% |
(1) Percentages calculated based on each named executive officer’s base salary as of July 1, 2019, the first day of the 2020 fiscal year. Each named executive officer began receiving his increased salary, as reported in the column to the left, upon the completion of our IPO on May 22, 2020.
Annual cash bonus. Annual cash bonuses for our named executive officers and other executives are determined under our annual incentive plan. The annual incentive plan is an “at-risk” bonus compensation program designed to reinforce a performance-oriented culture that aligns individual performance with our financial and business objectives. The annual incentive plan provides guidelines for the calculation of annual non-equity, incentive-based compensation that is subject to the Compensation Committee’s oversight and modification.
In connection with the market-based review of our executive compensation program performed during the 2020 fiscal year, the Compensation Committee approved the increase of target bonus amounts for each of our named executive officers, effective upon the completion of our IPO. For the 2021 Fiscal Year, target incentive compensation amounts were increased from 35% of annual base salary to the values set forth in the following table:
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| Named Executive Officer | Target Incentive Compensation ($) | Percentage of Base Salary (%) |
| Timothy R. Danker | $375,000 | 75% |
| Raffaele Sadun | $300,000 | 75% |
| William Grant III | $300,000 | 75% |
| Robert Grant | $300,000 | 75% |
| Daniel A. Boulware | $155,000 | 50% |
Specific metrics used to determine the amount of cash bonuses payable to our named executive officers at the end of each fiscal year are reviewed and established annually by the Compensation Committee. For the 2021 Fiscal Year, our annual incentive plan was designed to reward both Company and individual performance, with Company performance accounting for 75% of each named executive officer’s cash bonus and individual performance representing the remaining 25%.
Company performance (weighted 75%). The Company performance component of the cash bonus opportunities for our named executive officers was structured to measure performance against pre-determined targets for revenue and adjusted EBITDA, each weighted 50%. For Messrs. Danker, Sadun, William Grant III, and Boulware, performance was measured based on revenue and adjusted EBITDA targets for the Company on a consolidated basis. For Mr. Robert Grant, performance was measured based on a combination of revenue and adjusted EBITDA targets for the Senior Division, weighted 75%, and for the Company on a consolidated basis, weighted 25%.
Under this structure, payout levels were determined according to the following scale, with payouts increasing by 2.5% for every additional percentage of performance metric achieved, up to 120%:
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| Percentage of Performance Metric Achieved (%) | Payout Percentage (%) |
| Below Threshold | <80% | 0% |
| Threshold | 80% | 50% |
| Target | 100% | 100% |
| Maximum | 120% | 150% |
The revenue and adjusted EBITDA targets for the Company on a consolidated basis and our performance relative to those targets are set forth in the following table:
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| Revenue | Adjusted EBITDA | Combined (% of Target)(2) | Payout (% of Target Bonus)(2) |
| Target(1) | Performance (% of Target)(2) | Target(1) | Performance (% of Target)(2) |
| Consolidated Results | $790,041 | 119% | $200,410 | 114% | 117% | 141% |
(1) Numbers shown are in thousands.
(2) Percentages are rounded to the nearest whole number.
Individual performance (weighted 25%). Amounts awarded pursuant to the individual performance component of our 2021 annual incentive plan were determined by evaluating each named executive officer’s performance against certain individual performance goals throughout the fiscal year. The percentage of target bonus awarded to each of Messrs. Sadun, William Grant III, Robert Grant, and Boulware based on their achievement of individual objectives was determined by our Chief Executive Officer, to whom each of them reports directly. The percentage awarded to Mr. Danker based on his achievement of individual objectives was determined by the Board. Based on their achievements in the 2021 Fiscal Year, our named executive officers were each awarded 100% of their target bonus amounts under the individual performance component.
Cash efficiency modifier. In its discretion, the Compensation Committee was also enabled to adjust the formulaic payouts by +/- 20% based on the Compensation Committee’s assessment of the efficiency of cash usage during the fiscal year (the “cash efficiency modifier”). For the 2021 Fiscal Year, the Compensation Committee elected not to adjust cash bonus amounts based on the cash efficiency modifier.
2021 Fiscal Year Payouts. Based on the fiscal year performance of the Company and of each individual executive, cash bonuses in the amounts set forth in the below table were earned by each of our named executive officers for the 2021 Fiscal Year. All dollar amounts and percentages are rounded to the nearest whole number.
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| Named Executive Officer | Company Performance
(75%) | | Individual Performance
(25%) | | Aggregate
(100%) |
Payout
(% of Target Bonus) | Payout
($) | | Payout
(% of Target Bonus) | Payout
($) | | FY 2021 Annual Incentive Payout
(% of Target) | FY 2021 Annual Incentive Payout
($) |
| Timothy R. Danker | 141% | $395,438 | | 100% | $93,750 | | 130% | $489,188 |
| Raffaele Sadun | 141% | $316,350 | | 100% | $75,000 | | 130% | $391,350 |
| William Grant III | 141% | $316,350 | | 100% | $75,000 | | 130% | $391,350 |
| Robert Grant | 148% | $332,213 | | 100% | $75,000 | | 136% | $407,213 |
| Daniel A. Boulware | 141% | $163,448 | | 100% | $38,750 | | 130% | $202,198 |
Equity awards. Equity compensation makes up the largest portion of pay for our named executive officers. We believe that, at this stage in our growth, the use of both time-based and performance-based equity awards aligns the interests of our named executive officers with the long-term interests of our stockholders and incentivizes our named executive officers to continue to build and grow the Company and enhance stockholder value. We believe this structure also assists the Company in retaining our current named executive officers and attracting new executive officers as needed. We believe this approach also incentivizes our named executive officers to manage the Company as an owner of the business and encourages them to adopt a long-term outlook by offering them the opportunity to benefit from the Company’s future successes through the appreciation of their equity awards.
Our named executive officers receive annual equity awards in the form of stock options, time-based restricted stock units (RSUs), and performance-based restricted stock units (PSUs), which are equally weighted at one-third of total equity value granted. All equity awards are granted pursuant to the 2020 Plan.
In determining target annual equity compensation amounts for named executive officers, the Compensation Committee may consider a variety of factors, including, without limitation, each executive’s role and responsibilities, unique skills, future potential with the Company, internal pay equity, and equity compensation amounts paid to executives by peer companies. The Compensation Committee seeks to remain market competitive when determining the size of a grant but does not target a specific percentile of the market.
Stock options. Each named executive officer receives an award of non-statutory stock options as part of his annual equity compensation. The exercise price of the stock options is set at the closing price of our common stock on the grant date. The total number of options awarded to each executive is calculated by dividing the target value of the option award by the average closing price of the Company’s common stock for the thirty (30) day period ending on the date immediately prior to the grant date, rounded to the nearest whole number of options. Stock option grants to our executive officers, including our named executive officers, are structured to vest in four equal installments on each of the first four anniversaries of the grant date, subject the executive officer’s continued employment with the Company at the time of vesting.
Restricted stock units. The annual equity compensation of our named executive officers also includes awards of time-based restrictive stock units (RSUs). Each RSU represents the right to receive one share of our common stock at a future date. The number of RSUs granted to each of our named executive officers is determined by dividing the target value of the RSU award by the average closing price of the Company’s common stock for the thirty (30) day period ending on the date immediately prior to the grant date.
The primary purposes of the RSU awards to our executive officers, including our named executive officers, are to award individual performance and serve as a retention mechanism. To balance retention with incentivizing executive officers to achieve important short-term financial objectives and promote the long-term stability of the Company, RSU grants made to our named executive officers are structured to vest in four equal installments on each of the first four anniversaries of the grant date, subject to the continued employment of the named executive officer on the vesting date.
Performance stock units. The PSUs awarded to our named executive officers during the 2021 Fiscal Year were structured to focus our executive officers on accomplishing key long-term financial objectives over a three-year period. The payouts of our PSUs, which are intended to align with the key metrics that we use to measure the success of our business and drive long-term stockholder returns, are based on the compound annual growth rate (CAGR) of both revenue and adjusted EBITDA. The number of PSUs granted to each of our named executive officers is determined by dividing the target value of the PSU grant by the average of the closing price per share of the Company’s common stock on each day during the thirty (30) day period ending on the date immediately prior to the grant date. The payout range for PSUs granted during the 2021 Fiscal Year is 50% at threshold and 150% at maximum, subject to performance against our 3-year financial goals, which are tied to stretch levels of performance consistent with our long-term plan.
The table below summarizes the long-term incentive grants made to our named executive officers for the 2021 Fiscal Year:
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| Named Executive Officer | Target Dollar Value of FY 2021 Equity Grant | Number of Shares/Options |
FY 2021 Options
~33% of Total | FY 2021 RSUs
~33% of Total | FY 2021 PSUs
~33% of Total |
| Timothy R. Danker | $1,975,000 | 118,308 | 29,577 | 29,577 |
| Raffaele Sadun | $1,175,000 | 70,384 | 17,596 | 17,596 |
| William Grant III | $1,975,000 | 118,308 | 29,577 | 29,577 |
| Robert Grant | $1,975,000 | 118,308 | 29,577 | 29,577 |
| Daniel A. Boulware | $418,500 | 25,068 | 6,267 | 6,267 |
Other Forms of Compensation. In addition to the three primary elements of our executive compensation program identified above, our named executive officers also receive compensation from the Company in the following forms:
Retirement plan and other employee benefits. We maintain a 401(k) retirement savings plan for the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements. Each of our named executive officers is eligible to participate in the 401(k) plan on the same terms as other full-time employees and receive matching contributions from the Company equal to 100% of the first 2% of their individual contributions. Additionally, under the terms of the 401(k) plan, participating employees, including our named executive officers, are also eligible to receive a potential additional 1% profit sharing contribution from the Company based on the Company’s achievement of certain annual performance targets.
We provide a competitive benefits package to all full-time employees, which package includes health and welfare benefits, such as medical, dental, disability insurance, and life insurance benefits. The plans under which these benefits are offered do not discriminate in scope, terms, or operation in favor of executive officers and are available to all full-time employees.
Our named executive officers are eligible to participate in our 2020 Employee Stock Purchase Plan (the “ESPP”) on the same terms as all other U.S. employees who meet the eligibility criteria.
Post-termination pay. According to the terms of their respective employment agreements, which are discussed in further detail below, our named executive officers are also entitled to receive certain additional compensation from the Company in the event of their departure from the Company under certain circumstances. Such additional compensation may consist of lump sum cash severance payments, prorated cash bonuses, accelerated vesting of equity awards, and reimbursement of certain medical and dental costs. Please see “Executive Compensation, –Employment Agreements” and “–Potential Payments to Executive Officers Upon Termination” below for more information regarding post-termination amounts due to each named executive officer in the event of his departure from the Company.
Accounting and Tax Treatment
The fair value of equity awards is established in accordance with the applicable accounting standards. Compensation-related expenses are taken into consideration by the Compensation Committee in determining the amounts of equity awards to our named executive officers.
Under Section 162(m) of the Code (“Section 162(m)”), compensation paid to any publicly-held corporation’s “covered employees” in excess of $1 million per taxable year for any covered employee generally may not be deducted by the company as a business expense. Although the Compensation Committee will 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 to our named executive officers that is not deductible under Section 162(m) if such compensation is consistent with the goals of our executive compensation program and in the best interests of the Company and its stockholders.
Taxation of Parachute Payments and Deferred Compensation
We do not provide, and have no obligation to provide, any executive officer, including any named executive officer, with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Section 280G, 4999, or 409A of the Code. If any payments or benefits provided pursuant to a change of control or severance agreement, or otherwise payable to a named executive officer, would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code (and could, therefore, be subject to the related excise tax), he or she would be entitled to receive from the Company either 1) full payment of such payments and benefits, or 2) such lesser amount that would result in no portion of the payments and
benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the named executive officer.
Compensation and Risk
Our Compensation Committee assesses and considers potential risks when it reviews and approves our compensation policies and practices for executive officers and employees. We designed our compensation programs to address potential risks while rewarding employees for achieving our financial objectives through appropriate business judgment and risk taking. Based upon its annual assessment for the 2021 Fiscal Year, the Compensation Committee believes our compensation programs are not excessive, do not create disproportionate incentives for employees, including our named executive officers, to take risks that could have a material adverse effect on us in the future, and are generally aligned with the practices of our peers.
Anti-Hedging, Anti-Short Selling, and Anti-Pledging Policy
Under our Insider Trading and Information Policy, our directors, executive officers, including our named executive officers, and certain other employees are prohibited from: (i) purchasing financial instruments that are designed to hedge the Company’s securities or offset any fluctuations in the market value of the Company’s common stock; (ii) purchasing shares of the Company’s common stock on margin; (iii) short-selling shares of the Company’s common stock; and (iv) pledging, whether directly or indirectly, shares of the Company’s common stock as collateral for a loan, subject to certain narrow exceptions for specific transactions under Company benefit plans or pursuant to a pre-arranged trading plan that has been pre-cleared by our General Counsel. Individual exceptions to the prohibition on pledging of shares of the Company’s common stock as collateral for a loan may be made under certain circumstances on a case-by-case basis upon pre-approval from our General Counsel.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the CD&A provided above. Based on its review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement and SelectQuote’s Annual Report on Form 10-K for the year ended June 30, 2021.
THE COMPENSATION COMMITTEE
Denise L. Devine, Chair
Donald L. Hawks III
Earl H. Devanny III
Summary Compensation Table
The information below sets forth the “total compensation” earned by our named executive officers for the years ended June 30, 2021, 2020, and 2019, respectively. Compensation amounts for Mr. Robert Grant and Mr. Boulware, who were not considered named executive officers under SEC rules until the end of the 2021 Fiscal Year on June 30, 2021, are shown only for the fiscal year ended June 30, 2021.
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| Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Option Awards(3) | Non-Equity Incentive Plan Compensation(4) | All Other Compensation(5) | Total |
| Timothy R. Danker | 2021 | $ | 500,000 | | $ | 256 | | $ | 1,058,266 | | $ | 535,394 | | $ | 489,188 | | $ | 10,481 | | $ | 2,593,585 | |
| Chief Executive Officer | 2020 | $ | 326,125 | | $ | 256 | | – | – | $ | 137,327 | | $ | 3,850,731 | | $ | 4,314,439 | |
| 2019 | $ | 305,000 | | $ | 256 | | – | – | $ | 126,767 | | $ | 12,859 | | $ | 444,882 | |
| | | | | | | | |
| Raffaele Sadun | 2021 | $ | 400,000 | | $ | 154 | | $ | 629,584 | | $ | 318,518 | | $ | 391,350 | | $ | 11,313 | | $ | 1,750,919 | |
| Chief Financial Officer | 2020 | $ | 310,833 | | $ | 50,154 | | – | – | $ | 127,500 | | $ | 2,362,228 | | $ | 2,850,715 | |
| 2019 | $ | 300,000 | | $ | 128 | | – | – | $ | 124,688 | | $ | 12,123 | | $ | 436,939 | |
| | | | | | | | |
| William Grant III | 2021 | $ | 400,000 | | $ | 259 | | $ | 1,058,266 | | $ | 535,394 | | $ | 391,350 | | $ | 9,325 | | $ | 2,394,594 | |
| Chief Operating Officer | 2020 | $ | 266,250 | | $ | 259 | | $ | 2,000,000 | | – | $ | 111,751 | | $ | 1,889,641 | | $ | 4,267,901 | |
| 2019 | $ | 250,000 | | $ | 256 | | – | – | $ | 103,907 | | $ | 7,910 | | $ | 362,073 | |
| | | | | | | | |
Robert Grant President, Senior Division | 2021 | $ | 400,000 | | $ | 256 | | $ | 1,058,266 | | $ | 535,394 | | $ | 407,213 | | $ | 10,301 | | $ | 2,411,430 | |
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Daniel A. Boulware General Counsel & Secretary | 2021 | $ | 310,000 | | $ | 128 | | $ | 224,234 | | $ | 113,443 | | $ | 202,198 | | $ | 11,381 | | $ | 861,384 | |
(1) Represents annual holiday bonus paid to all employees based solely on the length of their employment with the Company. The amount shown in this column for Mr. Sadun’s bonus in 2020 also includes a one-time cash bonus related to the execution of certain significant transactions.
(2) Represents the grant-date fair value, computed in accordance with FASB ASC Topic 718, of awards of time-based and performance-based restricted stock units made pursuant to the 2020 Plan. Our accounting policies regarding share-based compensation plans and the assumptions used to compute the fair value of our equity awards are set forth in Notes 1 and 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2021. The grant-date fair value of the PSU awards was calculated assuming the applicable performance goals are achieved at target levels. The maximum grant-date fair value of the PSU award made to the executive in the 2021 Fiscal Year, assuming achievement of the applicable performance goals at the highest level, is $793,699 for Messrs. Danker, William Grant III, and Robert Grant, $472,189 for Mr. Sadun, and $168,175 for Mr. Boulware.
(3) Represents the grant-date fair value, computed in accordance with FASB ASC Topic 718, of option awards made pursuant to the 2020 Plan. Our accounting policies regarding share-based compensation plans and the assumptions used to compute the fair value of our equity awards are set forth in Notes 1 and 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2021.
(4) Represents cash incentive compensation amounts earned by each of our named executive officers pursuant to our annual incentive plan. For information on how amounts were determined, see “Compensation Discussion and Analysis, –Elements of Executive Compensation for the 2021 Fiscal Year” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table.”
(5) Amounts shown in this column include group term life insurance imputed interest, 401(k) Company match and profit-sharing contributions, Company contributions to HSA plan, mobile phone service stipends, spousal airfare for Company trips, and, for the 2021 Fiscal Year only, a remote-work stipend paid to all employees in connection with the COVID-19 pandemic. Also includes a November 2019 dividend distribution to stockholders and option holders in the amounts of $3,838,122 for Mr. Danker, $2,379,871 for Mr. Sadun, and $1,879,897 for Mr. William Grant III.
Grants of Plan-Based Awards
The following table sets forth the awards of stock options and restricted stock units (both time-based and performance-based) granted to each of our named executive officers during the 2021 Fiscal Year pursuant to the 2020 Plan. The table also sets forth the cash bonuses payable to each of our named executive officers under the 2021 annual incentive plan during the 2021 Fiscal Year.
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| Name | Grant Date | Estimated future payouts
under non-equity incentive plan
awards (1) | Estimated future payouts under equity incentive plan awards (5) | All other stock awards: Number of shares of stock or units (7) | All other option awards: Number of securities underlying options
(8) | Exercise or base price of option awards (9) | Grant date fair value of stock and option awards (10) |
Threshold
(2) | Target
(3) | Maximum
(4) | Threshold | Target | Maximum
(6) |
| Timothy R. Danker | 8/1/2020
8/1/2020
8/1/2020
8/1/2020 | $250,000
| $375,000
| $500,000
| 14,789
| 29,577
| 44,366
|
29,577
| 118,308 | | $17.89 | $529,133
$529,133
$535,394 |
| Raffaele Sadun | 8/1/2020
8/1/2020
8/1/2020
8/1/2020 | $200,000
| $300,000
| $400,000
| 8,798
| 17,596
| 26,394
| 17,596
| 70,384 | | $17.89 | $314,792
$314,792
$318,518 |
| William Grant III | 8/1/2020
8/1/2020
8/1/2020
8/1/2020 | $200,000
| $300,000
| $400,000
| 14,789
| 29,577
| 44,366
| 29,577
| 118,308 | | $17.89 | $529,133
$529,133
$535,394 |
| Robert Grant | 8/1/2020
8/1/2020
8/1/2020
8/1/2020 | $200,000
| $300,000
| $400,000
| 14,789
| 29,577
| 44,366
| 29,577
| 118,308 | | $17.89 | $529,133
$529,133
$535,394 |
| Daniel A. Boulware | 8/1/2020
8/1/2020
8/1/2020
8/1/2020 | $77,500
| $155,000
| $310,000
| 3,134
| 6,267
| 9,401
| 6,267
| 25,068 | | $17.89 | $112,117
$112,117
$113,443 |
(1) Represents amounts payable under our 2021 annual incentive plan. For actual amounts paid to each named executive officer under the 2021 annual incentive plan, see “Compensation Discussion and Analysis, –Elements of Executive Compensation for the 2021 Fiscal Year, –Annual cash bonus” and “Summary Compensation Table.”
(2) Represents amounts payable under the 2021 annual incentive plan if the threshold level had been achieved for all metrics.
(3) Represents amounts payable under the 2021 annual incentive plan if the target level had been achieved for all metrics.
(4) Represents amounts payable under the 2021 annual incentive plan if the maximum level had been achieved for all metrics.
(5) Represents performance-based restricted stock units (PSUs) that will vest upon our achievement of specified performance metrics. See “Compensation Discussion and Analysis, –Elements of Executive Compensation for the 2021 Fiscal Year, –Equity awards” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table, –Equity Compensation.”
(6) The maximum amount of performance-based restricted stock units eligible to vest on August 1, 2023 is further limited in accordance with the terms set forth below under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table –Equity Awards.” The maximum value that may be earned under the PSU awards granted during the 2021 Fiscal Year is equal to the opening market price of our common stock on the vesting date multiplied by the maximum number of shares granted to each executive.
(7) Represents time-based restricted stock units, each of which will vest as to one fourth of the award per year on each of the first four anniversaries of the grant date.
(8) Represents non-statutory stock options, each of which will vest as to one fourth of the award per year on each of the first four anniversaries of the grant date.
(9) The exercise price of the options reported in this row is equal to the closing market price of our common stock on July 31, 2020.
(10) Represents the grant-date fair value of the equity award, computed in accordance with FASB ASC Topic 718. Our accounting policies regarding share-based compensation plans and the assumptions used to compute the fair value of our equity awards are set forth in Notes 1 and 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2021.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Equity Compensation
As described above, the Company’s long-term equity incentive compensation program is comprised of annual awards of non-statutory stock options, time-based restricted stock units, and performance-based restricted stock units, each awarded pursuant to our 2020 Plan. Stock options and RSUs granted to our named executive officers vest ratably over a multi-year period. PSUs granted to our named executive officers vest, if at all, based on the Company’s achievement of certain performance metrics measured on the three-year anniversary of the grant date. For the 2021 Fiscal Year, stock options, RSUs, and PSUs each accounted for one-third of the total incentive compensation awarded to each named executive officer.
The stock options and time-based restricted stock units granted to our named executive officers during the 2021 Fiscal Year vest in four equal installments on each of the first four anniversaries of the grant date. Pursuant to the terms of our employment agreement with Mr. Sadun, in the event of Mr. Sadun’s termination without cause or resignation for good reason, any unvested stock options and RSUs granted to Mr. Sadun in the 2021 Fiscal Year that would vest on or prior to the one-year anniversary of the date of his termination will vest on the date of his termination. None of our other named executive officers is entitled to accelerated vesting of stock options or RSUs granted in the 2021 Fiscal Year in the event of his termination, unless in connection with a change in control. See “Potential Payments to Executive Officers Upon Termination or Change in Control” below.
The performance-based restricted stock units granted to our named executive officers in the 2021 Fiscal Year will vest, if at all, at the end of the three-year performance period on August 1, 2023. The actual number of PSUs that vest as of this date will be determined by comparing the compound annual growth rate of both revenue and adjusted EBITDA over the three-year performance period, each weighted 50%, against our internal goals for each metric. The following table shows the number of PSUs, as a percentage of the target number of PSUs granted under each award at the time of grant, that will vest upon the achievement of various percentages of our performance goals at the end of the three-year period.
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| Payout as Percentage of Target | Performance as Percentage of Goal |
| Threshold | 50% | 70% |
| Target | 100% | 100% |
| Maximum | 150% | 108% |
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding outstanding equity compensation awards held by our named executive officers as of June 30, 2021. Market values have been determined based on the closing price of our common stock on June 30, 2021 of $19.26 per share.
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| | Option Awards | | Stock Awards |
| Name | Grant date | Number of securities underlying unexercised options exercisable | Number of securities underlying unexercised options unexercisable | Option exercise price | Option expiration date | | Number of shares or units of stock that have not vested | Market value of shares or units of stock or that have not vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested |
| Timothy R. Danker | 8/1/2020
8/1/2020
8/1/2020 | | 118,308(1)
| $17.89
| 8/1/2030
| | 29,577(2)
| $569,653
|
29,577(3) | $569,653 |
| Raffaele Sadun | 8/1/2020
8/1/2020
8/1/2020 | | 70,384(1)
| $17.89
| 8/1/2030
| | 17,596(2)
| $338,899
| 17,596(3) | $338,899 |
| William Grant III | 5/20/2020
8/1/2020
8/1/2020
8/1/2020 | | 118,308(1)
| $17.89
| 8/1/2030
| | 66,667(4)
29,577(2)
| $1,284,006
$569,653
| 29,577(3) | $569,653 |
| Robert Grant | 8/22/2018
5/20/2020
5/20/2020
8/1/2020
8/1/2020
8/1/2020 | 2,224(5) 66,666(7)
| 2,224(6) 133,334(8)
118,308(1)
| $1.88
$20.00
$17.89
| 8/22/2028
5/20/2030
8/1/2030
| | 33,334(4)
29,577(2)
| $642,013
$569,653
| 29,577(3) | $569,653 |
| Daniel A. Boulware | 5/20/2020
8/1/2020
8/1/2020
8/1/2020 | 15,500(7)
| 46,500(8) 25,068(1)
| $20.00
$17.89
| 5/20/2030
8/1/2030
| | 6,267(2)
| $120,702
| 6,267(3) | $120,702 |
(1) Represents non-statutory stock options awarded pursuant to the 2020 Plan that had not vested as of June 30, 2021. The options vest in four equal installments on each of the first four anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.
(2) Represents time-based restricted stock units awarded pursuant to the 2020 Plan that had not vested as of June 30, 2021. The RSUs vest in four equal installments on each of the first four anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.
(3) Represents the number of performance-based restricted shares granted pursuant to the 2020 Plan that had not vested as of June 30, 2021, assuming achievement of the target level of performance. These shares will be eligible for vesting on August 1, 2023, in accordance with the terms set forth under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table, –Equity Awards.”
(4) Represents time-based restricted stock units awarded pursuant to the 2020 Plan in connection with our IPO that had not vested as of June 30, 2021. The RSUs vest in three equal installments on each of the first three anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.
(5) Represents incentive stock options awarded pursuant to the 2003 Plan that had vested but had not been exercised as of June 30, 2021.
(6) Represents incentive stock options awarded pursuant to the 2003 Plan that had not vested as of June 30, 2021. The ISOs vest in three equal installments on each of the first three anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.
(7) Represents non-statutory stock options awarded pursuant to the 2020 Plan in connection with our IPO that had vested but had not been exercised by June 30, 2021.
(8) Represents non-statutory stock options awarded pursuant to the 2020 Plan in connection with our IPO that had not vested as of June 30, 2021. The options vest in three equal installments on each of the first three anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.
Options Exercised and Shares Vested
The table below sets forth information for the 2021 fiscal year regarding the exercise of stock options and the vesting of time-based restricted stock units previously granted to the Company’s named executive officers.
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| Name | Option Awards | Stock Awards |
| Number of Shares Acquired on Exercise | Value Realized on Exercise(1) | Number of Shares Acquired on Vesting | Value Realized on Vesting(2) |
| Timothy R. Danker | – | – | – | – |
| Raffaele Sadun | – | – | – | – |
| William Grant III | – | – | 33,333 | $697,326 |
| Robert Grant | 35,552 | $676,910 | 16,666 | $348,653 |
| Daniel A. Boulware | – | – | – | – |
(1) Represents the aggregate dollar amount realized by the named executive officer upon exercise of the options, computed by multiplying the number of options exercised by the difference between the exercise price of the options and the closing market price of our common stock as of the date of exercise.
(2) Represents the aggregate dollar amount realized by the named executive officer upon the vesting of the restricted stock units, computed by multiplying the number of RSUs vested by the closing market price of our common stock as of the vesting date.
Equity Plan Information
The following table provides information as of June 30, 2021, with respect to the shares of our common stock that may be issued under our existing equity compensation plans.
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| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
Equity compensation plans approved by stockholders(1) | 3,893,007 | $7.52 | 9,011,819(2) |
| Equity compensation plans not approved by stockholders | – | – | – |
(1) Includes our 2020 Omnibus Stock Incentive Plan, our 2003 Stock Incentive Plan, and our 2020 Employee Stock Purchase Plan.
(2) The total number of shares of our common stock reserved for issuance under the 2020 Plan is subject to an annual increase on the first day of each fiscal year beginning on or after July 1, 2021 equal to 3% of the total number of shares of our common stock outstanding as of the last day of the immediately preceding fiscal year.
2020 Omnibus Incentive Plan
The 2020 Plan was adopted by the Board in connection with our IPO to promote the success of our business by giving us a competitive advantage in attracting and retaining key personnel and enabling us to provide additional incentives to our employees, directors, and consultants. The 2020 Plan, which is administered by the Board, was approved by the Company’s stockholders in February 2020. The 2020 Plan provides for the grant of nonstatutory stock options (NSOs), stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of equity compensation, as well as performance-based cash awards, to employees, non-employee
directors, and consultants of the Company and its subsidiaries and affiliates. The 2020 Plan also provides for the grant of incentive stock options (ISOs) to employees. Each of our named executive officers has received equity awards under the 2020 Plan.
The total number of shares of our common stock available for issuance pursuant to awards under the 2020 Plan is 9,600,000, with a maximum of 4,000,000 shares reserved for awards of ISOs. The total number of shares of our common stock reserved for issuance under the 2020 Plan is subject to an annual increase, on the first day of each fiscal year beginning on or after July 1, 2021, equal to 3% of the total number of shares of our common stock outstanding as of the last day of the immediately preceding fiscal year. As of June 30, 2021, the total number of shares of common stock available for issuance under the 2020 Plan was 7,668,259. As of August 31, 2021, there were outstanding awards under the 2020 Plan to obtain an aggregate amount of 3,557,095 shares of our common stock, with an aggregate weighted-average exercise price of $13.39.
2003 Stock Incentive Plan
The 2003 Plan was adopted in 2003 to support the Company’s executive compensation goals and aid the Company in attracting and retaining qualified personnel. As of the effective date of the 2020 Plan, no further awards will be made under the 2003 Plan. The 2003 Plan is administered by the Board. As of August 31, 2021, there were outstanding stock options under the 2003 Plan to purchase an aggregate amount of 1,786,869 shares of our common stock with an aggregate weighted-average exercise price of $0.99. The stock options granted under the 2003 Plan vest as to one-third after the vesting commencement date and as to 1/24 of the remaining shares subject to the stock option monthly thereafter, subject to the award recipient’s continued employment through the applicable vesting date. Outstanding stock options generally vest upon a change in control (as defined in the 2003 Plan). Upon a termination of employment for any reason other than for cause (as defined in the 2003 Plan), any unvested and outstanding stock options are forfeited, and any vested and outstanding stock options are exercisable within 90 days following the date of termination (and, in the case of a termination of employment due to death or disability, for 12 months following the date of termination). Each of Messrs. Danker, Sadun, and William Grant III have been granted stock options under the 2003 Plan and has previously exercised all such options. Mr. Boulware was not granted any equity awards pursuant to the 2003 Plan. Mr. Robert Grant holds certain vested but unexercised stock options granted under the 2003 Plan, as described above in “Outstanding Equity Awards at Fiscal Year End.”
2020 Employee Stock Purchase Plan
We adopted the ESPP in connection with our IPO in May 2020 to provide our eligible employees with an opportunity to purchase shares of our common stock through accumulated payroll deductions. In general, employees whose customary employment with us is at least 20 hours per week and more than five months in a calendar year are eligible to participate in the ESPP. Once enrolled in the ESPP, employees may purchase shares of our common stock at a price equal to 95% of the fair market value of the shares as of the exercise date. The Board, which administers the ESPP, may, in its discretion, further reduce the purchase price of shares under the ESPP to a price not less than the lesser of: (1) 85% of the fair market value of the shares on the date the offering period commences, or (2) 85% of the fair market value of the shares as of the exercise date. Upon termination of a participant’s employment for any reason, including death or disability, the participant is deemed to have withdrawn from the ESPP, and any payroll deductions credited to the participant’s account (to the extent not yet used to purchase shares of our common stock) are returned to the participant. Necessary adjustments to the terms of the ESPP and any options granted thereunder will generally be made in the event of certain corporate actions, including any stock split, reverse stock split, combination or reclassification of our common stock, proposed liquidation or dissolution, or change in control (as defined in the ESPP). The ESPP will automatically terminate ten years from the date of its adoption, unless terminated earlier by the Board.
The total number of shares of common stock reserved for issuance pursuant to the ESPP is 1,400,000. To date, the Company has issued a total of 56,440 shares of common stock to employees pursuant to the ESPP, leaving an additional 1,343,560 shares available for future issuance. The Company anticipates issuing a currently unknown amount of additional shares to employees under the ESPP following the close of the ongoing offering period on September 30, 2021. Mr. Robert Grant has participated in the ESPP since April 1, 2021.
Employment Agreements
On May 21, 2019, we entered into an employment agreement with each of Messrs. Danker, Sadun, William Grant III, and Robert Grant. As used in this section, the term “named executive officer” refers to Messrs. Danker, Sadun, Robert Grant, and William Grant III. Mr. Boulware has no employment agreement or arrangement with the Company other than our standard employment agreement entered into by all salaried employees at the time of their hiring.
The employment agreement with each of our named executive officers provides for a three-year initial employment period, with automatic annual renewal for additional one-year periods unless either party provides notice of non-renewal at least 90 days before the expiration of the then-current term. Each employment agreement sets forth the applicable executive’s annual minimum base salary and annual bonus opportunity, as well as eligibility to participate in the Company’s employee benefit arrangements generally available to other senior executives of the Company.
Each named executive officer is entitled to receive benefits under the agreements if (a) we terminate the executive’s employment without cause, or (b) the executive resigns for good reason. The term “cause” includes termination due to the executive’s willful refusal to perform the executive’s duties and responsibilities or comply with material policies and procedures; conviction of a crime other than a vehicular misdemeanor; fraud or other illegal conduct in the performance of the executive’s duties to the Company; and breach of any material term of the employment agreement. The term “good reason” includes termination due to a substantial diminution of duties, relocation beyond fifty (50) miles from the executive’s principal place of employment, material reduction in annual base salary or target bonus, and breach of any material term of the employment agreement by the Company.
In the event of the executive’s termination without cause or resignation for good reason, the executive is, subject to the execution and non-revocation of a release of claims, entitled to receive: (i) a prorated bonus for the fiscal year during which the termination occurs; (ii) a lump sum cash severance payment in an amount equal to the sum of the executive’s annual base salary and target annual bonus; (iii) COBRA reimbursement for the excess of the monthly cost of premiums associated with medical and dental coverage over the monthly premiums for such coverage payable by a similarly situated active employee during the applicable severance period; and (iv) in the case of Mr. Sadun only, accelerated vesting of any unvested equity compensation awards that would have, by their terms, vested on or prior to the one-year anniversary of the date of termination.
In the event an executive is terminated (i) within 90 days prior to a change in control (as defined in the executive’s employment agreement), (ii) within two years following the date of a change in control, or (iii) in the case of Mr. Danker only, within two years following the completion of our IPO, the lump sum cash severance payment payable to the executive under his employment agreement shall be determined by multiplying the sum of the executive’s annual base salary and target annual bonus by two (2), in the case of Mr. Danker, or by 1.5, in the case of any other named executive officer (such multiple, the “Severance Multiple”). Lump sum cash severance payments payable to executives in the event of a change in control pursuant to the terms of their employment agreements are “double-trigger,” meaning that any named executive officer who continues as an employee of the Company or any successor entity for more than two years following the date of a change in control is not entitled to receive any cash severance payment.
The employment agreements contain various standard restrictive covenants, including those related to assignment of inventions, confidentiality of Company information, and non-competition and non-solicitation following the termination of the executive’s employment agreement. The non-competition and non-solicitation restrictions are generally effective for a period of two years following the date of termination, except that, in the event of a severance-qualifying termination of a named executive officer other than Mr. Danker during the two-year period following a change in control, the effective period will be reduced to 18 months, unless the Company elects to increase the amount of the lump sum cash severance payment due to the executive by increasing the Severance Multiple to two.
Potential Payments to Executive Officers Upon Termination or Change in Control
The following table indicates the cash amounts, accelerated vesting and other payments and benefits that each named executive officer would be entitled to receive upon termination under various circumstances pursuant to the terms of our equity compensation plans, any applicable award agreements related to individual equity awards made under our equity compensation plans, and his employment agreement. The table assumes that termination of the named executive officer from the Company under the scenario shown occurred on June 30, 2021, and that, in the event of a change in control, the executive did not continue his employment with the Company or any successor entity. The table also does not give effect to any reduction in payments to any executive that might occur under his employment agreement in the event that such reduction would put the executive in a better after-tax position than if his payments were not reduced and as a result he would become subject to additional taxes under Section 4999 of the Internal Revenue Code for receipt of excess parachute payments in the event of a termination or resignation following a change in control.
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| Pro-Rated Bonus(2) | Cash Severance Payment(3) | Health Insurance Benefits(4) | Acceleration of Equity Awards(5) | Total Termination Benefits |
Timothy R. Danker(1) | | | | | |
| Involuntary termination without cause or voluntary termination for good reason | $375,000 | $875,000 | $12,867 | – | $1,262,867 |
| Involuntary termination with cause or voluntary termination not for good reason | – | – | – | – | – |
| Involuntary or good reason termination in connection with change in control | $375,000 | $1,750,000 | – | $1,301,388 | $3,426,388 |
| Death or disability | – | – | – | – | – |
Raffaele Sadun(1) | | | | | |
| Involuntary termination without cause or voluntary termination for good reason | $300,000 | $700,000 | $12,835 | $108,479 | $1,121,314 |
| Involuntary termination with cause or voluntary termination not for good reason | – | – | – | – | – |
| Involuntary or good reason termination in connection with change in control | $300,000 | $1,050,000 | – | $774,224(6) | $2,124,224 |
| Death or disability | – | – | – | – | – |
William Grant III(1) | | | | | |
| Involuntary termination without cause or voluntary termination for good reason | $300,000 | $700,000 | $7,388 | – | $1,007,388 |
| Involuntary termination with cause or voluntary termination not for good reason | – | – | – | – | – |
| Involuntary or good reason termination in connection with change in control | $300,000 | $1,050,000 | – | $2,585,394 | $3,935,394 |
| Death or disability | – | – | – | – | – |
Robert Grant(1) | | | | | |
| Involuntary termination without cause or voluntary termination for good reason | $300,000 | $700,000 | $12,867 | – | $1,012,867 |
| Involuntary termination with cause or voluntary termination not for good reason | – | – | – | – | – |
| Involuntary or good reason termination in connection with change in control | $300,000 | $1,050,000 | – | $1,943,401 | $3,293,401 |
| Death or disability | – | – | – | – | – |
Daniel A. Boulware(7) | | | | | |
| Involuntary termination without cause or voluntary termination for good reason | – | – | – | – | – |
| Involuntary termination with cause or voluntary termination not for good reason | – | – | – | – | – |
| Involuntary or good reason termination in connection with change in control | – | – | – | $275,747 | $275,747 |
| Death or disability | – | – | – | – | – |
(1) Amounts shown in this table do not include accrued salary, unpaid bonuses earned for any fiscal year concluded prior to the date of termination, or reimbursement of business expenses, each of which the executive is entitled to receive in the event of his termination under any of the above scenarios.
(2) Amounts shown in this column represent the pro-rated cash bonus for the year in which the termination occurs. These amounts are calculated by multiplying the executive’s target annual cash bonus, as identified in the annual incentive plan, by the quotient of the number of days elapsed during the current fiscal year through the termination date divided by 365 (366 if the termination occurs during a leap year).
(3) Amounts shown in this column represent the lump sum cash severance payment owed to the executive officer pursuant to his employment agreement under each of the above scenarios. Please see “Employment Agreements” above for information on how these amounts are calculated.
(4) Amounts shown in this column represented the estimated cost of reimbursement of monthly medical and dental coverage premiums in excess of the premium amounts that would be payable by the executive if still employed by the Company. The
amounts reported in this column assume the executive will be reimbursed for these costs until the 12-month anniversary of the date of his termination.
(5) Unless otherwise indicated, amounts shown in this column represent the total value of the applicable executive’s outstanding stock options, RSUs, and PSUs granted under the 2020 Plan, which, pursuant to the terms of the 2020 Plan, vest in full as of the date of a change in control as long as the executive’s employment is terminated. For the purposes of this column, the value of PSUs is determined assuming achievement of applicable performance conditions at target levels. Pursuant to the terms of the 2003 Plan, awards granted under the 2003 Plan are not subject to accelerated vesting in the event of a change in control.
(6) In accordance with the terms of Mr. Sadun’s employment agreement, this amount represents the value of all outstanding unvested equity awards that would, by their terms, vest on or before June 30, 2022.
(7) Under our standard employment agreement executed by all salaried employees, in the event of an employee’s termination, regardless of reason, the employee is entitled to receive accrued salary, unpaid bonuses earned for any fiscal year concluded prior to the date of termination, and reimbursement of reasonable business expenses. Severance, bonuses, and reimbursement for certain medical and dental coverage costs may be considered on a case-by-case basis but are not guaranteed.
Stock Ownership Guidelines for Named Executive Officers
Our named executive officers are also subject to stock ownership guidelines adopted by the Board to further align the interests of our executives with those of our stockholders. Pursuant to the guidelines, each of our named executive officers is required to own shares having an aggregate value equal to or greater than the multiple of his base salary as shown in the following table:
| | | | | |
Named Executive Officer | Multiple of Annual Base Salary |
Timothy R. Danker
Chief Executive Officer
| 5x |
Raffaele Sadun
Chief Financial Officer
| 3x |
William Grant III
Chief Operating Officer
| 3x |
Robert Grant
President, Senior Division
| 3x |
Daniel A. Boulware
General Counsel and Secretary
| 3x |
While our named executive officers are not required to satisfy the ownership guidelines by a specific date, all named executive officers must retain 100% of all vested shares, net taxes, received under any Company equity compensation plan until he has attained the required level of stock ownership. Once the Board has determined that a named executive officer has met the required level of stock ownership, declines in the market value of the shares held by the executive following the Board’s determination will not change its determination. As of the Record Date, the Board has determined that all of our named executive officers are in compliance with our stock ownership guidelines.
PROPOSAL THREE:
NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) requires us to submit to stockholders at least once every three years a proposal to vote, on a non-binding advisory basis, to approve the compensation of our named executive officers as disclosed in our annual proxy statement pursuant to Section 14A of the Exchange Act. This proposal, commonly known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on how we compensate our named executive officers. This vote is not intended to address any specific item of compensation or any specific named executive officer; rather, the vote is intended to address the compensation of our named executive officers as a group and our compensation philosophy, policies, and practices as described in this Proxy Statement.
As discussed above in the CD&A, our executive compensation program is designed to enable the Company to attract and retain key executives, to align the interests of our named executive officers with those of our stockholders, and to ensure actual payouts to our named executive officer are reflective of our financial performance and align with strategic business goals.
In accordance with these objectives, and based on our performance in the 2021 Fiscal Year, the Board has concluded that our executive compensation program should be approved by stockholders, and asks them to approve the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the rules of the Securities and Exchange Commission in the Compensation Discussion and Analysis section, compensation tables, and accompanying narrative discussion of our proxy statement in connection with our annual meeting of stockholders for the fiscal year ended June 30, 2021, is hereby APPROVED.”
The vote to approve our executive compensation program is advisory and non-binding on the Company; however, the Compensation Committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by the Company’s stockholders and will consider the outcome of the vote when making future compensation decisions.
The Board recommends that you vote “FOR” the resolution to approve our executive compensation program as described in this Proxy Statement.
PROPOSAL FOUR:
NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION
Section 14A of the Exchange Act requires us to submit to stockholders at least once every six years a non-binding, advisory proposal (commonly known as “Say-On-Frequency”) to determine whether a non-binding, advisory vote to approve the compensation of our named executive officers (a “Say-On-Pay” vote, as in Proposal Three above), should be held every one, two, or three years. This Annual Meeting will be the first time we present our stockholders with a Say-On-Frequency proposal. Under this proposal, you may vote on whether you prefer to have a Say-On-Pay vote every year, every two years, or every three years.
Our Board recommends that a Say-On-Pay vote occur every year. The Board believes that an annual Say-On-Pay Vote is in line with best corporate governance practices and will allow our stockholders to provide annual input on our executive compensation policies and practices.
When voting to recommend the frequency of our Say-On-Pay vote, stockholders should be aware that they are not voting “for” or “against” the Board’s recommendation to vote to hold a Say-on-Pay vote every year; rather, stockholders will be casting votes to recommend a Say-On-Pay vote occur every year, every two years, or every three years.
The Say-On-Frequency vote is advisory, and therefore non-binding on the Company; however, the Board values the opinions expressed by the Company’s stockholders and, to the extent there is strong preference among stockholders to hold a non-binding Say-On-Pay vote more or less frequently than every year, will take into account the outcome of this vote when making future decisions regarding the frequency of holding future Say-On-Pay votes.
The Board recommends you vote to hold a non-binding advisory vote to approve executive compensation “EVERY YEAR.”
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of September 16, 2021,December 30, 2022, regarding the ownership of our common stock by:
•each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding common stock;
•each of our directors;
•each of our named executive officers; and
•all of our executive officers and directors as a group.
In accordance with SEC rules, each listed stockholder’s beneficial ownership includes:
•all shares of our common stock the stockholder actually owns beneficially or of record;
•all shares of our common stock over which the stockholder has or shares voting or dispositive power (such as in the capacity as a general partner of an investment fund); and
•all shares of our common stock the stockholder has the right to acquire within 60 days of September 16, 2021December 30, 2022 (such as restricted stock units that are scheduled to vest within 60 days of the aforementioned date.)
Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
Unless otherwise indicated, the address of all listed stockholders is: c/o SelectQuote, Inc., 6800 West 115th Street, Suite 2511, Overland Park, Kansas 66211.
| | | | | | | | | | | |
| Shares Beneficially Owned(1) |
| Name of Beneficial Owner | Number | Percentage |
| 5% Stockholders | | |
| Entities associated with Brookside Equity Partners LLC | 17,678,757(2) | 10.6% |
| The Vanguard Group | 12,957,297(3) | 7.8% |
| BlackRock, Inc. | 9,721,883(4) | 5.8% |
| Directors and Executive Officers | | |
| Daniel A. Boulware | 61,121(5) | * |
| Ryan M. Clement | — | * |
| Timothy R. Danker | 1,648,454(6) | 1.0% |
| Earl H. Devanny III | 67,734(7) | * |
| Denise L. Devine | 33,234(8) | * |
| Robert Grant | 3,888,792(9) | 2.3% |
| William Grant II | 3,705,254(10) | 2.2% |
| William Grant III | 3,966,007(11) | 2.4% |
| Donald L. Hawks | 62,568 | * |
| Dr. Kavita K. Patel | 28,298(12) | * |
| Raymond F. Weldon | 746,886(13) | * |
| All directors and executive officers as a group (15 persons) | 13,847,975 | 9.0% |
| | | |
| * Represents less than 1% of the total shares of common stock outstanding as of the date of filing. |
| |
| | | | | | | | |
| Shares Beneficially Owned |
| Name of Beneficial Owner | Number | Percentage(1) |
| 5% Stockholders | | |
| Entities Associated with Brookside Equity Partners LLC | 18,363,075(2) | 11.2 | % |
| Charan Singh | 8,678,655(3) | 5.3 | % |
| The Vanguard Group | 8,572,266(4) | 5.2 | % |
| Directors and Executive Officers | | |
| Daniel A. Boulware | 23,987(5) | * |
| Timothy R. Danker | 1,555,112(6) | * |
| Earl Devanny III | 46,833(7) | * |
| Denise L. Devine | 12,333(8) | * |
| Robert Grant | 2,985,988(9) | 1.8 | % |
| William Grant II | 3,692,686(10) | 2.2 | % |
| William Grant III | 3,122,997(11) | 1.9 | % |
| Donald L. Hawks III | 50,000(12) | * |
| Dr. Kavita K. Patel | — | | * |
| Raffaele Sadun | 927,418 | | * |
| Raymond F. Weldon | 50,000(13) | * |
| All executive officers and directors as a group (15 persons) | 13,318,758 | | 8.1 | % |
| | | | | | | | | | | |
| (1) | Shares are held directly unless otherwise indicated by footnote. Percentages are based on 166,510,622 total shares of common stock outstanding as of December 30, 2022. |
| (2) | Includes 8,877,872 shares of common stock held by BEP III LLC; 6,911,960 shares of common stock held by BEP III Co-Invest LLC; and 1,889,285 shares of common stock held by SQ Co-Investors LLC. Brookside Equity Partners LLC, the manager of each of these three entities, may be deemed to have sole voting and dispositive power with respect to all shares reported on this line. The address of each of these stockholders is 201 Tresser Boulevard, Suite 320, Stamford, Connecticut 06901. |
| (3) | On February 9, 2022, The Vanguard Group filed a Schedule 13G to report beneficial ownership of an aggregate of 12,957,297 shares of our common stock, of which it has shared voting power with respect to 239,034 shares, sole dispositive power with respect to 12,636,185 shares, and shared dispositive power with respect to 321,112 shares. According to the Schedule 13G, The Vanguard Group does not have sole voting power with respect to any of the shares reported on this line. The address of this stockholder is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. |
| (4) | On November 9, 2022, BlackRock, Inc. filed a Schedule 13G to report beneficial ownership of an aggregate of 9,721,883 shares of our common stock, of which it has sole dispositive power with respect to all shares and sole voting power with respect to 9,429,654 shares. According to the Schedule 13G, BlackRock, Inc. does not have shared voting power or shared dispositive power with respect to any of the shares reported on this line. The address of this stockholder is 55 East 52nd Street, New York, New York 10055. |
| (5) | Includes 4,367 shares of common stock held directly by Mr. Boulware, 1,100 shares of common stock beneficially owned through Mr. Boulware's spouse, Sasha Boulware, and 55,654 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. |
| (6) | Includes 1,564,383 shares of common stock held directly by Mr. Danker; 9,398 shares of common stock beneficially owned by Mr. Danker through his Mainstar Trust IRA; and 74,673 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. |
| (7) | Includes 12,568 shares of common stock held directly by Mr. Devanny; 38,500 shares of common stock beneficially owned through Devanny LLC, an investment entity in which Mr. Devanny holds a 2% ownership interest; and 16,666 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. Mr. Devanny disclaims beneficial ownership of the shares held by Devanny LLC, except to the extent of his pecuniary interest therein. |
| (8) | Includes 16,568 shares of common stock held directly by Ms. Devine and 16,666 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. |
| (9) | Includes 1,317,272 shares of common stock held directly by Mr. Grant; 1,242,000 shares of common stock beneficially owned by Mr. Grant in his capacity as the trustee of the Robert Clay Grant Irrevocable Trust; and 240,151 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. Also includes 1,089,369 shares of common stock beneficially owned by Mr. Grant through Haakon Capital LLC, an investment entity in which he and William Grant III, our Chief Operating Officer, each own a one-third ownership stake. The shares of common stock held by Haakon Capital LLC are also included in the beneficial ownership number reported in this table for Mr. William Grant III but were counted only once for purposes of computing the aggregate number of shares owned by our directors and officers as a group. Mr. Grant disclaims beneficial ownership of the shares held by Haakon Capital LLC, except to the extent of his pecuniary interest therein. |
| (10) | Includes 1,968,469 shares of common stock held directly by Mr. Grant; 391,361 shares of common stock beneficially owned by Mr. Grant through his Mainstar Trust IRA; and 1,345,424 shares of common stock beneficially owned by Mr. Grant in his capacity as trustee of the W. Thomas Grant II Family Irrevocable Trust. |
| (11) | Includes 1,619,223 shares of common stock held directly by Mr. Grant; 10,681 shares of common stock beneficially owned by Mr. Grant through his Mainstar Trust IRA; 1,150,000 shares of common stock beneficially owned by Mr. Grant in his capacity as trustee of the W. Thomas Grant III Irrevocable Trust; and 96,734 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. Also includes 1,089,369 shares of common stock beneficially owned by Mr. Grant through Haakon Capital LLC, an investment entity in which he and Robert Grant, the President of the Company, each own a one-third ownership stake. The shares of common stock held by Haakon Capital LLC are also included in the beneficial ownership number reported in this table for Mr. Robert Grant but were counted only once for purposes of computing the aggregate number of shares owned by our directors and officers as a group. Mr. Grant disclaims beneficial ownership of the shares held by Haakon Capital LLC, except to the extent of his pecuniary interest therein. |
| (12) | Includes 12,568 shares of common stock held directly by Dr. Patel and 15,730 shares of common stock subject to stock awards exercisable within 60 days of December 30, 2022. |
| (13) | Includes 62,568 shares of common stock held directly by Mr. Weldon and his spouse, Lea Weldon, and 684,318 shares of common stock held by Mr. Weldon in his capacity as a director of Park AQ Pension Management, Inc., the investment adviser to the Ampex Retirement Master Trust. Mr. Weldon disclaims beneficial ownership of the shares held by the Ampex Retirement Master Trust, with respect to which shares he has shared voting and dispositive power. |
* Represents less than 1% of the total shares of common stock outstanding as of the date of filing.21
(1) Percentages are based on 163,834,166 total shares of common stock outstanding as of September 16, 2021.
(2) Includes 8,877,872 shares of common stock held by BEP III LLC; 6,911,600 shares of common stock held by BEP III Co-Invest LLC; 1,889,285 shares of common stock held by SQ Co-Investors LLC; and 684,318 shares of common stock held by The Ampex Retirement Master Trust. The business address for each of these entities is 201 Tresser Boulevard, Suite 320, Stamford, Connecticut 06901.
(3) Includes 7,892,079 shares of common stock held by Mr. Singh and 786,576 shares of common stock held by held by Mr. Singh’s spouse, Sylvia Singh. Mr. Singh’s address is 3300 Paradise Drive, Tiburon, CA 94920.
(4) On February 10, 2021, The Vanguard Group filed a Schedule 13G to report beneficial ownership of an aggregate of 8,572,266 shares of common stock, of which it has shared voting power for 42,878 shares, sole dispositive power for 8,505,441 shares, and shared dispositive power for 66,825 shares. According to the Schedule 13G, The Vanguard Group does not have sole voting power for any shares of our common stock. The address for this stockholder is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
(5) Includes 1,120 shares of common stock held directly by Mr. Boulware, 1,100 shares of common stock beneficially owned through Mr. Boulware's spouse, Sasha Boulware, and 21,767 shares of common stock subject to stock awards exercisable within 60 days of September 16, 2021.
(6) Includes 1,545,714 shares of common stock held directly by Mr. Danker and 9,398 shares of common stock beneficially owned by Mr. Danker through his Mainstar Trust IRA.
(7) Includes 13,500 shares of common stock held by Mr. Devanny in his capacity as trustee of the Earl H. Devanny III Revocable Trust, 25,000 shares of common stock beneficially owned through Devanny LLC, an investment entity in which Mr. Devanny holds a 2% ownership interest, and 8,333 shares of common stock subject to stock awards exercisable within 60 days of September 16, 2021. Mr. Devanny disclaims beneficial ownership of the shares held by Devanny LLC, except to the extent of his pecuniary interest therein.
(8) Includes 4,000 shares of common stock held directly by Ms. Devine and 8,333 shares of common stock subject to stock awards exercisable within 60 days of September 16, 2021.
(9) Includes 1,279,658 shares of common stock held directly by Mr. Grant; 1,242,000 shares of common stock beneficially owned by Mr. Grant in his capacity as the trustee of the Robert Clay Grant Irrevocable Trust; 363,639 shares of common stock beneficially owned by Mr. Grant through Haakon Capital LLC, an investment entity in which Mr. Grant holds a 33.3% ownership interest; and 100,691 shares of common stock subject to stock awards exercisable within 60 days of September
16, 2021. Mr. Grant disclaims beneficial ownership of the shares held by Haakon Capital LLC, except to the extent of his pecuniary interest therein.
(10) Includes 839,277 shares of common stock held directly by Mr. Grant; 391,361 shares of common stock beneficially owned by Mr. Grant through his Mainstar Trust IRA; 1,345,424 shares of common stock beneficially owned by Mr. Grant in his capacity as trustee of the W. Thomas Grant II Family Irrevocable Trust; and 1,116,624 shares of common stock subject to stock awards exercisable within 60 days of September 16, 2021.
(11) Includes 1,569,100 shares of common stock held directly by Mr. Grant; 10,681 shares of common stock beneficially owned by Mr. Grant through his Mainstar Trust IRA; 1,150,000 shares of common stock beneficially owned by Mr. Grant in his capacity as trustee of the W. Thomas Grant III Irrevocable Trust; 363,639 shares of common stock beneficially owned by Mr. Grant through Haakon Capital LLC, an investment entity in which Mr. Grant holds a 33.3% ownership interest; and 29,577 shares of common stock subject to stock awards exercisable within 60 days of September 16, 2021. Mr. Grant disclaims beneficial ownership of the shares held by Haakon Capital LLC, except to the extent of his pecuniary interest therein.
(12) Includes 50,000 shares of common stock held directly by Mr. Hawks. Does not include 8,877,872 shares of common stock held by BEP III LLC; 6,911,600 shares of common stock held by BEP III Co-Invest LLC; and 1,889,285 shares of common stock held by SQ Co-Investors LLC. In his capacity as a Managing Director of Brookside Equity Partners LLC, the manager of BEP III LLC, BEP III Co-Invest LLC and SQ Co-Investors LLC, Mr. Hawks has shared voting and dispositive power over the above-listed securities. Mr. Hawks disclaims beneficial ownership of the shares held by these entities, except to the extent of his pecuniary interest therein.
(13) Includes 50,000 shares of common stock held directly by Mr. Weldon and his spouse, Lea Weldon. Does not include 8,877,872 shares of common stock held by BEP III LLC; 6,911,600 shares of common stock held by BEP III Co-Invest LLC; 1,889,285 shares of common stock held by SQ Co-Investors LLC; and 684,318 shares of common stock held by The Ampex Retirement Master Trust. In his capacity as a Managing Director of Brookside Equity Partners LLC, the manager of BEP III LLC, BEP III Co-Invest LLC and SQ Co-Investors LLC, Mr. Weldon exercises shared voting and investment control over the above-listed securities. In his capacity as a member of the board of directors of Park AQ Pension Management, Inc., the investment adviser to The Ampex Retirement Master Trust, Mr. Weldon also has shared voting and dispositive power over the securities held by that entity. Mr. Weldon disclaims beneficial ownership of the shares held by these entities, except to the extent of his pecuniary interest therein.CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSStatements in this proxy statement that are not historical are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding SelectQuote’s intent to solicit approval of the proposal to effect a reverse stock split and an authorized share reduction, the timing of the reverse stock split, the potential benefits of a reverse stock split, including but not limited to increased investor interest, continued listing on the New York Stock Exchange, the potential for a higher stock price, the timing and effects of the proposed amendments to our Certificate of Incorporation, and any assumptions underlying any of the foregoing. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
ThisOur actual results may differ materially from those indicated in these forward-looking statements due to a number of important factors, including, but not limited to, the following: the ultimate duration and impact of the ongoing COVID-19 pandemic; our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; existing and future laws and regulations affecting the health insurance market; changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; insurance carriers offering products and services directly to consumers; changes to commissions paid by insurance carriers and underwriting practices; competition with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; competition from government-run health insurance exchanges; developments in the U.S. health insurance system; our dependence on revenue from carriers in our senior segment and downturns in the senior health as well as life, automotive and home insurance industries; our ability to develop new offerings and penetrate new vertical markets; risks from third-party products; failure to enroll individuals during the Medicare annual enrollment period; our ability to attract, integrate and retain qualified personnel; our dependence on lead providers and ability to compete for leads; failure to obtain and/or convert sales leads to actual sales of insurance policies; access to data from consumers and insurance carriers; accuracy of information provided from and to consumers during the insurance shopping process; cost-effective advertisement through internet search engines; ability to contact consumers and market products by telephone; global economic conditions, including inflation; disruption to operations as a result of future acquisitions; significant estimates and assumptions in the preparation of our financial statements; impairment of goodwill; potential litigation and claims, including IP litigation; our existing and future indebtedness; access to additional capital; failure to protect our intellectual property and our brand; fluctuations in our financial results caused by seasonality; accuracy and timeliness of commissions reports from insurance carriers; timing of insurance carriers’ approval and payment practices; factors that impact our estimate of the constrained lifetime value of commissions per policyholder; changes in accounting rules, tax legislation and other legislation; disruptions or failures of our technological infrastructure and platform; failure to maintain relationships with third-party service providers; cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; our ability to protect consumer information and other data; and failure to market and sell Medicare plans effectively or in compliance with laws. For a further discussion of these and other risk factors that could impact our future results and performance, see the section contains information regarding transactionsentitled “Risk Factors” in our most recent Annual Report on Form 10-K that we have entered intofiled with certain related parties. Specifically, this section describes transactions since July 1, 2019, other than compensation arrangementsthe Securities and Exchange Commission, and our subsequent filings with our executive officersthe Securities and non-employee directors,Exchange Commission. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which are described above under “Executive Compensation”it is made, and, “Corporate Governance, –Non-Employee Director Compensation,” respectively,except as otherwise required by law, we do not undertake any obligation to which we werepublicly update or will bereview any forward-looking statement, whether as a participant and in which:result of new information, future developments or otherwise.
22
1.The amounts involved exceeded or will exceed $120,000; and
2.Any of our directors, executive officers, or holders of more than 5% of our outstanding voting securities, or any member of the immediate family of, or person sharing a household with, the foregoing persons, had or will have a direct or indirect material interest.
Paid Leads and InsideResponse Acquisition
InsideResponse
The Company has historically purchased leads from InsideResponse LLC (“InsideResponse”), an online marketing consulting firm previously owned in part by Timothy R. Danker, our Chief Executive Officer, William Grant III, our Chief Operating Officer, and Robert Grant, the President of the Company’s Senior Division. On May 1, 2020, we acquired 100% of the outstanding membership units of InsideResponse for an aggregate purchase price of up to $65.0 million (subject to customary adjustments), as set forth in the Agreement and Plan of Merger, dated February 12, 2020, by and among the Company, SQ-IR Merger Sub LLC, a wholly owned subsidiary of the Company, InsideResponse and the other parties thereto, as amended on May 1, 2020 (the “Merger Agreement”). The purchase price included $32.7 million in cash consideration, which was paid at the closing of the transaction, and the opportunity to earn up to an additional $32.3 million, to be paid in cash, pursuant to an earn-out. As set forth in the Merger Agreement, the earn-out was contingent upon InsideResponse’s achievement of certain gross profit targets in the 2020 calendar year. As of June 30, 2021, the Company had paid to InsideResponse an aggregate dollar amount of $32.3 million under the earn-out. The approximate dollar values of the interests of Mr. Danker, Mr. William Grant III, and Mr. Robert Grant in this transaction were $1.2 million, $8.5 million, and $8.5 million, respectively.
Prior to its acquisition of InsideResponse, the Company incurred $16.1 million in lead costs, which were recorded in marketing and advertising expense in the consolidated statements of operations, from InsideResponse for the year ended June 30, 2020. The Company did not have any outstanding payables to InsideResponse as of June 30, 2020.
The approximate dollar value of the respective interests in the Company’s pre-acquisition transactions with InsideResponse for the year ended June 30, 2020 was $0.3 million for Mr. Danker and $2.1 million for each of Messrs. William Grant III and Robert Grant.
Spring Venture Group
The Company also purchases leads from Spring Venture Group (“SVG”), a senior healthcare insurance distribution platform owned in part by Timothy R. Danker, our Chief Executive Officer; William Grant III, our Chief Operating Officer; William Grant II, a member of the Company’s Board; Robert Grant, the President of the Company’s Senior Division; and Paul Gregory, the Executive Vice President of the Company’s Life Division. The Company incurred less than $0.01 million and $0.5 million in lead costs with SVG for the years ended June 30, 2021 and 2020, respectively, which costs were recorded as marketing and advertising expense in the consolidated statements of operations. The Company did not have any outstanding payables due to SVG as of June 30, 2021 and owed SVG less than $0.1 million as of June 30, 2020, which was recorded in accounts payable and accrued expenses in the consolidated balance sheet.
The Company has also acted as a field marketing organization for SVG. The net financial impact of this relationship to the Company was not material for each of the years ended June 30, 2021 and 2020.
SVG also purchases leads from InsideResponse. As a result of this relationship, the Company earned $1.9 million in lead sales revenue, which is recorded in production bonus and other in the consolidated statement of comprehensive income, for the year ended June 30, 2021, and had $0.1 million of outstanding accounts receivable as of June 30, 2021.
The approximate dollar value of Mr. Danker’s interest in the transactions described above was $0.2 million and $0.1 million for the years ended June 30, 2021 and 2020, respectively. The approximate dollar value of Mr. William Grant III’s interest in the transactions described above was $0.1 million and $0.03 million for the years ended June 30, 2021 and 2020, respectively. The approximate dollar value of Mr. William Grant II’s interest in the transactions described above was $0.04 million and $0.01 million for the years ended June 30, 2021 and 2020, respectively. The approximate dollar value of Mr. Robert Grant’s interest in the transactions described above was $0.1 million and $0.03 million for the years ended June 30, 2021 and 2020, respectively. The approximate dollar value of Mr. Gregory’s interest in the transactions described above was less than $0.01 million for each of the years ended June 30, 2021 and 2020.
Related Party Receivable
As of June 30, 2021, we did not have any related party receivables.
Indemnification Agreements
In connection with our IPO, we entered into an indemnification agreement with each of our non-executive directors and executive officers. The indemnification agreements provide that the Company will indemnify directors and officers for all liabilities arising from their service to the Company, and advance expenses incurred as a result of any proceeding against them as to which they could be indemnified, to the fullest extent permitted under Delaware law.
Amended and Restated Series D Preferred Stock Investors’ Rights and Stockholders Agreement
In 2014, in connection with the sale of shares of our Series D preferred stock, we entered into the Series D Agreement with the Series D Holders (as defined in the Series D Agreement), which agreement grants the Series D Holders certain rights, including but not limited to certain preemptive rights, rights to put their shares of Series D preferred stock, director appointment rights, information rights, and registration rights. The Series D Agreement was amended and restated on November 4, 2019 to provide for, among other things, the classification of our Board and the right of the Series D Holders to appoint two directors to the Board upon the consummation of a qualified initial public offering. On April 17, 2020, the amended and restated Series D Agreement was further amended to extend the maturity date of the Series D Holders’ put rights from January 31, 2025 to March 30, 2025.
Other than certain information and registration rights, the rights of the Series D Holders pursuant to the Series D Agreement were terminated upon the consummation of our IPO in May 2020.
Policies and Procedures for Related Party Transactions
We have a policy that all material transactions with a related party, as well as all material transactions in which there is an actual, or in some cases, perceived, conflict of interest, will be subject to prior review and approval by our Audit Committee, who will determine whether such transactions or proposals are fair and reasonable to SelectQuote and its stockholders. In general, potential related-party transactions will be identified by our management and discussed with our Audit Committee at its meetings. Detailed proposals, including, where applicable, financial and legal analyses, alternatives and management recommendations, will be provided to our Audit Committee with respect to each issue under consideration, and decisions will be made by our Audit Committee with respect to the foregoing related-party transactions after opportunity for discussion and review of
materials. When applicable, our Audit Committee will request further information and, from time to time, will request guidance or confirmation from internal or external counsel or auditors.
All related party transactions described in this section were entered into prior to adoption of this policy and as such, these transactions were not subject to the approval and review procedures set forth in the policy.
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of our common stock to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership. Officers, directors, and stockholders owning more than 10% of our common stock are required by SEC regulations to furnish us with copies of all such reports.
To our knowledge, based solely on our review of the copies of such reports furnished to the Company and written representations that no other reports were required, all reports required to be filed by our directors, officers, and greater than 10% stockholders under Section 16(a) of the Exchange Act during the 2021 Fiscal Year were timely filed, except as follows:
Forms 4 reporting the award of stock options and restricted stock units to each of Messrs. Danker, Sadun, William Grant III, Robert Grant, Boulware, Gregory, Gunter, and May on August 1, 2020 were filed late due to inadvertent administrative error. The Form 4 reporting the award of stock options and restricted stock units to Mr. Gunter on August 1, 2020, which was filed on August 10, 2020, also included Mr. Gunter's acquisition, in two separate transactions occurring on July 29 and August 10, respectively, of shares of our common stock through the vesting of certain previously-granted stock options.
Each of Messrs. Hawk and Weldon inadvertently failed to file a Form 4 to report the sale, in three separate transactions each occurring on March 8, 2020, of shares of our common stock held indirectly through certain investment vehicles of which Messrs. Hawks and Weldon are managing directors. Forms 5 reporting these transactions were timely filed on behalf of Messrs. Hawks and Weldon following the end of the 2021 Fiscal Year.
The acquisition of shares of our common stock by Mr. Robert Grant on May 20, 2021 through the vesting of certain previously-granted restricted stock units was inadvertently excluded from a Form 4 timely filed on Mr. Grant’s behalf on May 20, 2021. Upon realization of this error, a Form 4 reporting the transaction was promptly filed on Mr. Grant’s behalf on June 28, 2021.
ANNUAL REPORT ON FORM 10-K
Our financial statements for the year ended June 30, 2021 are included in our 2021 Annual Report on Form 10-K, or Annual Report, which we will make available to stockholders at the same time as this Proxy Statement. Our 2021 Annual Report and this Proxy Statement are posted on our website at www.selectquote.com and are available through the SEC at its website at www.sec.gov. You may also obtain a copy of our Annual Report without charge by sending a written request to Investor Relations, SelectQuote, Inc., 6800 West 115th Street, Suite 2511, Overland Park, Kansas 66211.
DEADLINES FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR CONSIDERATION AT OUR 20222023 ANNUAL MEETING
Whether or not the amendments to our Certificate of Incorporation are approved, we will hold our regular annual meeting of stockholders in 2023 (the “2023 Annual Meeting”). Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at next year’s annual meeting of stockholdersthe 2023 Annual Meeting by submitting their proposals in writing to our Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for the 2022 annual meeting of stockholders,2023 Annual Meeting, our Secretary must receive the written proposal at our principal executive offices no later than May 27, 2022.June 7, 2023. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 of the Exchange Act. Stockholder proposals should be addressed to:
SelectQuote, Inc.
Attention: Corporate Secretary
6800 West 115th Street, Suite 2511
Overland Park, Kansas 66211
Our amended and restated bylaws establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders. Our amended and restated bylaws provide that the only business that may be conducted at an annual meeting of stockholders is business that is (i) specified in the Company’s notice of meeting (or any supplement thereto) given by or at the discretion of our Board, (ii) otherwise properly made at such annual meeting by or at the direction of our Board, or (iii) otherwise properly requested to be brought before such annual meeting by a stockholder of the Company who is entitled to vote at such annual meeting who has delivered timely written notice to our Secretary, which notice must contain the information specified in our amended and restated bylaws. To be timely for the 2022 annual meeting of stockholders,2023 Annual Meeting, our Secretary must receive the written notice at our principal executive offices at 6800 West 115th Street, Suite 2511, Overland Park, Kansas 66211:
•not earlier than the close of business on June 29, 2022 ;July 18, 2023; and
•not later than the close of business on July 29, 2022.August 17, 2023.
In the event we hold the 2022 annual meeting of stockholders2023 Annual Meeting more than 30 days before or more than 60 days after the one-year anniversary of the Annual Meeting,2022 annual meeting of stockholder, then, for notice by the stockholder to be timely, it must be received by our Secretary not earlier than the close of business on the 120th day prior to the scheduled date of such annual meetingthe 2023 Annual Meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meetingthe 2023 Annual Meeting or, if the first public announcement of the date of such annual meetingthe 2023 Annual Meeting is less than 100 days prior to the date of such annual meeting, the tenth day following the day on which public announcement of the date of such meetingthe 2023 Annual Meeting is first made. If a stockholder who has notified us of his, her or its intention to present a proposal at an annual meeting of stockholders does not appear to present his, her or its proposal at such annual meeting, we are not required to present the proposal for a vote at such annual meeting.
A copy of our amended and restated bylaws is available via the SEC’s website at www.sec.gov. You may also contact our Secretary at the address set forth above for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.
* * *
OTHER MATTERS
Our Board does not know of anyNo matters, other matters tothan the reverse stock split proposal and the adjournment proposal, will be presented for action at the AnnualSpecial Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the shares of our common stock they represent in accordance with their own judgment on such matters.
THE BOARD OF DIRECTORS
Overland Park, Kansas
September 24, 2021
ANNEX A
CERTIFICATE OF AMENDMENT
TO THE
SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SELECTQUOTE, INC.
SELECTQUOTE, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify as follows:
FIRST: Upon the filing and effectiveness (the “Effective Time”) pursuant to the DGCL of this Certificate of Amendment to the Sixth Amended and Restated Certificate of Incorporation of the Corporation, each [●]1 shares of the Corporation’s Common Stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time shall automatically be combined into one (1) validly issued, fully paid and non-assessable share of Common Stock without any further action by the Corporation or the holder thereof, subject to the treatment of fractional share interests as described below (the “Reverse Stock Split”). No fractional shares shall be issued at the Effective Time and, in lieu thereof, the Corporation’s transfer agent shall aggregate all fractional shares and sell them as soon as practicable after the Effective Time at the then-prevailing prices on the open market, on behalf of those stockholders who would otherwise be entitled to receive a fractional share, and after the transfer agent’s completion of such sale, stockholders shall receive a cash payment (without interest or deduction) from the transfer agent in an amount equal to their respective pro rata shares of the total net proceeds of that sale and, where shares are held in certificated form, upon the surrender of the stockholder’s Old Certificates (as defined below). Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined, subject to the elimination of fractional share interests as described above.
SECOND: Upon the Effective Time, the first paragraph of Article IV of the Corporation’s Sixth Amended and Restated Certificate of Incorporation, relating to the capital structure of the Corporation, is hereby amended to read in its entirety as set forth below:
A. Authorized Capital Stock. The Corporation shall be authorized to issue [●] ([●])2 shares of capital stock, of which (i) [●] ([●])3 shares shall be shares of Common Stock, $0.01 par value per share (“Common Stock”) and (ii) Seventy Million (70,000,000) shares shall be shares of Preferred Stock, $0.01 par value per share.
THIRD: This Certificate of Amendment shall become effective as of [●], 2023 at [●] [a.m./p.m.].
FOURTH: This Certificate of Amendment was duly adopted in accordance with Section 242 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be duly executed in its corporate name as of the [●] day of [●], 2023.
1 To be based on a reverse stock split ratio of between 1:10 and 1:20, as determined by the Board of Directors.
2 To be equal to the sum of the number of shares of capital stock referred to in clauses (i) and (ii).
3 To be based on a reverse stock split ratio of between 1:10 and 1:20, as determined by the Board of Directors.
PRELIMINARY—SUBJECT TO COMPLETION
PRELIMINARY—SUBJECT TO COMPLETION
