If you encounter any technical difficulties with accessing the virtual Meeting, please call the technical support number that will be posted on the Meeting website log-in page.
How
cando I
vote my shares without attending the Meeting?vote?
Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct your vote without attending the Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker, bank or nominee.
Please refer to the summary instructions below and those included on your proxy card
and in the Notice or, for shares held in street name, the voting instruction card included by your broker, bank or nominee.
Stockholder of Record
If you are a stockholder of record, the Notice instructs you as to how (i) you may access and review all of the proxy materials on the Internet, (ii) you may submit your proxy, and (iii) to receive paper copies of the proxy materials if you wish. No printed materials will be available unless you specifically request them by following the instructions in the “Notice Regarding the Availability of Proxy Materials.”
VOTE BY MAIL—You may vote by mail by marking, signing and dating your proxy card
or, for shares held in street name, the voting instruction card included by your broker, bank or nominee and mailing it in the
accompanying enclosed, pre-addressed envelope.
If the pre‑addressed envelope is missing, please mail your completed proxy card to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you provide specific voting instructions, your shares will be voted as you
instruct. If the pre-addressed envelope is missing, please mail your completed proxy card to American Stock Transfer & Trust Company, LLC at 6201 15th Avenue, Brooklyn, NY 11219, Attn: Operation Center. BY INTERNET OR TELEPHONE—If you hold shares through a broker or other nominee in "street name," you may be able to vote by the Internet or telephone as permitted by your broker or nominee. The availability of Internet and telephone voting for beneficial owners will depend on the voting process of your broker, bank or other holder of record. Therefore, we recommend that you follow the voting instructions you receive.
If you cast your vote in any of the ways set forth above, your shares will be voted in accordance with your voting instructions,instruct, unless you validly revoke your proxy. Broadridge must receive your proxy card no later than June 22, 2020, the day before the Meeting, for your proxy and your vote to be counted. If you are a stockholder of record and you sign and return your proxy card but you do not specify how you want to vote your shares, we will vote them "FOR"“FOR” the election of each of the four Class III directors listed in Proposal One, “FOR” Proposal Two and “FOR” Proposal Three and for "ONE YEAR" for the Company's frequency of non-binding "say on pay" advisory vote.Three. We do not currently anticipate that any other matters will be presented for action at the Meeting. If any other matters are properly presented for action, the persons named on your proxy will vote your shares on these other matters in their discretion, under the discretionary authority you have granted to them in your proxy.
VOTE BY INTERNET—To vote via the Internet before the Meeting, log on to: www.proxyvote.com and follow the instructions on the Notice or proxy card. We permit Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. You must submit your Internet proxy before 11:59 p.m. Eastern time on June 22, 2020, the day before the Meeting, for your proxy and your vote to be counted. Please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies. You may also vote during the Meeting at: www.virtualshareholdermeeting.com/TWOU2020 by using the 16-digit control number on your Notice or proxy card.
VOTE BY TELEPHONE – To vote via telephone call the toll-free number on your Notice or proxy card. Telephone voting is available 24 hours per day until 11:59 p.m. Eastern time on June 22, 2020, the day before the meeting.
Beneficial Owner
If you hold shares through a broker, bank or nominee in street name, you will need to follow the voting instructions provided by your broker, bank or nominee. Many brokers, banks or nominees offer the option to vote by the Internet or telephone. The availability of Internet and telephone voting for beneficial owners will depend on the voting process of your broker, bank or other holder of record. Therefore, we recommend that you follow the voting instructions you receive.
If you own shares in "street name"street name through a broker, bank or nominee and you do not provide instructions to your broker, bank or nominee on how to vote your shares, your broker, bank or nominee has discretion to vote these shares on certain "routine"“routine” matters, including the ratification of the appointment of KPMG LLP as our independent registered public accounting firm. However, on non-routinenon‑routine matters, such as the election of directors and the approval, on a non‑binding advisory basis, of the compensation of the Company’s Named Executive Officers, your broker must receive voting instructions from you because it does not have discretionary voting power for these proposals. So long as the broker has discretion to vote on at least one proposal, these "broker non-votes" are counted toward establishing a quorum. When voted on "routine" matters, broker non-votes are counted toward determining the outcome of that "routine" matter.Therefore, it is important that you provide voting instructions to your broker, bank or other nominee. So long as the broker has discretion to vote on at least one proposal, these “broker non‑votes” are counted toward establishing a quorum.
Can I change my vote after I submit my
proxy?proxy or voting instructions?
Yes. If you hold shares directly as the stockholder of record, even after you have submitted your proxy, you may change your vote at any time prior to the close of voting at the Meeting by:
filing with our Corporate Secretary at 8201 Corporate Drive, Suite 900, Landover,7900 Harkins Road, Lanham, Maryland 2078520706 a signed, original written notice of revocation dated later than the proxy you submitted,
•submitted;submitting a duly executed proxy card bearing a later date,date; or
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•attendingvoting again via the Meeting and voting in person.
In order to revoke your proxy, prior toInternet, including during the Meeting, we must receive an original notice of revocation of your proxy at the address above sent by U.S. mail or overnight courier. Meeting.
If you grant a proxy, you are not prevented from attending the Meeting
(virtually) and voting
in person.via Internet at the Meeting. However, your attendance at the Meeting will not by itself revoke a proxy that you have previously granted; you must vote
in personvia Internet at the Meeting to revoke your proxy.
If your shares are held in a stock brokerage account or by a bank or other nominee, you may revoke your
proxyvoting instructions by following the instructions provided by your broker, bank or nominee.
All shares that have been properly voted and not revoked will be voted at the Meeting.
Is there a list of stockholders entitled to vote at the Meeting?
A complete list of stockholders entitled to vote at the Meeting will be available for examination by the Company'sCompany’s stockholders for any purpose germane to the Meeting during regular business hours, for a period of ten days prior to the Meeting during regular business hours, at the Company'sCompany’s principal place of business at 7900 Harkins Road, Lanham, Maryland 20706. If our headquarters are closed for health and atsafety reasons related to the Meeting.coronavirus (COVID-19) pandemic during such period, the list of stockholders will be made available for inspection upon request via email to: investorinfo@2u.com subject to our satisfactory verification of stockholder status. During the Meeting, the list of stockholders will be made available at: www.virtualshareholdermeeting.com/TWOU2020.
What constitutes a quorum to transact business at the Meeting?
Before any business may be transacted at the Meeting, a quorum must be present. The presence at the Meeting, in person
(virtually) or by proxy, of the holders of a majority
in voting power of the
outstanding shares
outstanding andof stock entitled to vote
on the record date will constitute a quorum. At the close of business on the record date,
46,412,76163,958,768 shares were issued and outstanding. Proxies received but marked as abstentions and broker
non-votesnon‑votes will be included in the calculation of the number of shares considered to be present at the Meeting for purposes of a quorum.
What is the recommendation of the Board of Directors?
Our Board recommends a vote
"FOR"“FOR” the election of
three (3)each of the four Class
IIIII directors, nominated by the Board, to serve on the Board until the
Company's 2019Company’s 2023 annual meeting of stockholders and until their successors are duly elected and qualified or until their earlier death, resignation or removal;
"FOR"“FOR” the ratification of the appointment of KPMG LLP as the
Company'sCompany’s independent registered public accounting firm for the
20162020 fiscal
year; "FOR"year and “FOR” the approval, on a
non-bindingnon‑binding advisory basis, of the compensation of the
Company'sCompany’s Named Executive
Officers; and for "ONE YEAR" for the Company's frequency of non-binding "say on pay" advisory vote.Officers.
What vote is required to approve each item?
Directors named in Proposal One are elected by a plurality
For each of the
votes cast atproposals, the
Meeting,applicable voting recommendation, and
the director nominees who receive the greatest numbertreatment of
votes at the Meeting (up to the number of directors to be elected) will be elected. You may vote "FOR" or "WITHHELD" with respect to election of directors. Shares will be voted, if authority to do so is not withheld, for election of the Board's nominees named in Proposal One. Only votes "FOR" or "WITHHELD" are counted in determining whether a plurality has been cast in favor of a director. Broker non-votes, if any, will not affect the outcome of the vote on the election of directors. The affirmative vote of at least a majority in voting power of the shares present, in person or by proxy, at the Meeting and entitled to vote on Proposal Two will be required to ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the 2016 fiscal year. Abstentions will have the same effect as votes "AGAINST" Proposal Two.
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The affirmative vote of at least a majority in voting power of the shares present, in person or by proxy, at the Meeting and entitled to vote on Proposal Three will be required to approve the compensation of our Named Executive Officers. Abstentions will have the same effect as votes "AGAINST" Proposal Three.
The affirmative vote of at least a majority in voting power of the shares present, in person or by proxy, at the Meeting and entitled to vote on Proposal Four will be required to determine the frequency of every year, every two years or every three years for the advisory vote on compensation of our Named Executive Officers. Abstentions will have the same effect as votes "AGAINST" any frequency.
The affirmative vote of at least a majority in voting power of the shares present, in person or by proxy, at the Meeting and entitled to vote will be required to approve any stockholder proposal. Under applicable Delaware law, in determining whether any stockholder proposal has received the requisite number of affirmative votes, abstentions and broker non-votes will be counted and will have the same effectbroker-non votes are as a vote against any stockholder proposal.
As noted above, a "broker non-vote"follows:
|
| | | | |
| Voting Item | Voting Standard | Treatment of Abstentions | Treatment of Broker Non-Votes |
| 1 | Election of Directors | Plurality of votes cast, with director nominees who receive the greatest number of votes at the Meeting (up to the number of directors to be elected) being elected | N/A | No effect |
| 2 | Ratification of Appointment of KPMG LLP | Majority of votes present or represented by proxy at the Meeting | Same effect as votes “AGAINST” | Not applicable as brokers generally have discretion to vote uninstructed shares on this proposal |
| 3 | Advisory Vote to Approve Compensation of Named Executive Officers | Majority of votes present or represented by proxy at the Meeting | Same effect as votes “AGAINST” | No effect |
A “broker non‑vote” occurs when a broker, bank or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. If you are a beneficial owner, your broker, bank or other holder of record is permitted to vote your shares on
"routine"“routine” matters even if the record holder does not receive voting instructions from you. Absent instructions from you, the record holder may not vote on any
"non-routine"“non‑routine” matter, including the election of directors and
any stockholder proposal.the approval, on a non‑binding advisory basis, of the compensation of the Company’s Named Executive Officers. Without your voting instructions, a broker
non-votenon‑vote will occur.
An "abstention" occurs at the Meeting if your shares are deemed to be present at the Meeting, either because you attend the Meeting or because you have properly completed and returned a proxy, but you do not vote on any proposal or other matter which is required to be voted on by our stockholders at the Meeting, or, when applicable, if you specify that you wish to "abstain" from voting on an item. You should consult your broker if you have questions about this. What does it mean if I receive more than one proxy or voting instruction card?
It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.
Where can I find the voting results of the Meeting?
We will announce preliminary voting results at the Meeting and will publicly disclose results in a Current Report on Form
8-K8‑K within four business days after the date of the Meeting.
Who will count the votes?
A representative
of American Stock Transfer & Trust Company, our transfer agent,from Broadridge Financial Solutions will both tabulate the votes and serve as the inspector of election.
Who will pay for the cost of this proxy solicitation?
We will bear the costs of soliciting proxies. We are making this solicitationsoliciting proxies for the Meeting in the following ways:
Our directors, officers and willemployees may, without additional pay, the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation ofsolicit proxies or votes may be made in person, by telephone or by electronic communication bycommunication.
We have also retained a third-party proxy consultant, Innisfree M&A Incorporated, to solicit proxies on our directors, officers and employees, who will not receive any additional compensationbehalf for such solicitation activities. a fee of approximately $25,000.
We will request banks, brokers, nominees, custodians and other fiduciaries who
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hold shares in street name to forward these proxy solicitation materials to the beneficial owners of those shares, and we will reimburse them the reasonable out-of-pocketout‑of‑pocket expenses they incur in doing so.
How can I access the Company's proxy materials
When are stockholder proposals and
annual report electronically? A copy of our Annual Report on Form 10-Kdirector nominations due for the fiscal year ended December 31, 2015 as filed with the United States Securities and Exchange Commission ("SEC") on March 10, 2016 is being mailed concurrently with this proxy statement to all stockholders entitled to notice of and to vote at the Meeting. A copy of our Annual Report on Form 10-K and these proxy materials are available without charge athttp://investor.2u.com/. References to our website in this proxy statement are not intended to function as hyperlinks, and the information contained on our website is not intended to be incorporated into this proxy statement. These proxy materials are also available in print to stockholders without charge and upon request, addressed to 2U, Inc., 8201 Corporate Drive, Suite 900, Landover, Maryland 20785, Attention: Corporate Secretary. You are encouraged to access and review all of the important information contained in the proxy materials before voting.
May I propose actions for consideration at next year'syear’s annual meeting of stockholders?
Any proposals that our stockholders wish to have included in our proxy statement and form of proxy for the 20172021 annual meeting of stockholders pursuant to Rule 14a‑8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) must be received by us no earlier than the close of business on February 7, 2017 and no later than the close of business on March 9, 2017January 1, 2021 and must otherwise comply with the requirements of Rule 14a-8 under14a‑8.
For proposals or nominations outside of Rule 14a‑8, the Securities Exchange Act of 1934 (the "Exchange Act"). The Company'sCompany’s amended and restated bylaws (the "“Bylaws"”) provide that, in order for a stockholder to propose any matter for considerationnominate a director or bring a proposal before the stockholders at an annual meeting of the Company other than matters set forth in the Notice of Meeting, such stockholder must have delivered timely prior written notice to the Secretary of the Company at the principal executive offices of the Company not later than the close of business on the ninetieth (90th) dayMarch 25, 2021 nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year's annual meeting.February 23, 2021. In the event that the date of the annual meeting is advanced more than twenty-five (25)25 days prior to or delayed by more than twenty-five (25)25 days after the anniversary of the
preceding year'syear’s annual meeting, notice by the stockholder to be timely must be so received notno earlier than the close of business on the one hundred twentieth (120120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (9090th) day prior to such annual meeting or the tenth (10th) day following the day on which the public announcement of the date of such meeting is first made. In no event shall an adjournment or a postponement of an annual meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder'sstockholder’s notice as described above. Such Stockholders are also advised to review our Bylaws, which contain additional requirements about advance notice must contain certain information about such businessof stockholder proposals and the stockholder who proposes to bring the business before the meeting, including: (A) the name and address of each proponent of the proposal ("Proponent"), as it appears on the Company's books; (B) the class, series and number of shares of the Company that are owned beneficially and of record by each Proponent; (C) a description of any agreement, arrangement or understanding (whether oral or in writing) with respect to such nomination or proposal between or among any Proponent and any of its affiliates or associates, and any others (including their names) acting in concert, or otherwise under the agreement, arrangement or understanding, with any of the foregoing; (D) a representation that the Proponents are holders of record or beneficial owners, as the case may be, of shares of the Company entitled to vote at the meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice (with respect to a notice under Section 5(b)(1)director nominations. A copy of the Bylaws of the Company) or to propose the business that is specified in the notice (with respect to a notice under Section 5(b)(2) of the Bylaws of the Company); (E) a representation as to whether the Proponents intend to deliver a proxy statement and form of proxy to holders of a sufficient number of holders of
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the Company's voting shares to elect such nominee or nominees (with respect to a notice under Section 5(b)(1) of the Bylaws of the Company) or to carry such proposal (with respect to a notice under Section 5(b)(2) of the Bylaws of the Company); (F)can be obtained without charge by written request to the extent known by any Proponent, the nameCorporate Secretary, 7900 Harkins Road, Lanham, Maryland 20706 and address of any other stockholder supporting the proposalis available without charge on the date of such stockholder's notice; (G) a description of all Derivative Transactions (as defined in the Bylaws of the Company) by each Proponent during the previous twelve (12) month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, such Derivative Transactions; (H) a representation and agreement that such Proponent (1) is not and will not become a party to any agreement, arrangementCompany’s website at: http://investor.2u.com.
Any proposals or
understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Company, will act or vote on any issue or question, (2) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Company that has not been disclosed to the Company in such representation and agreement and (3) in such person's individual capacity, would be in compliance, if elected as a director of the Company, and will comply with, all applicable publicly disclosed confidentiality, corporate governance, conflict of interest, Regulation FD, code of conduct and ethics, and stock ownership and trading policies and guidelines of the Company; and (I) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder. Any proposalsnotices should be sent to:
2U, INC.
8201 CORPORATE DRIVE, SUITE 900
LANDOVER,
7900 HARKINS ROAD
LANHAM, MARYLAND 20785
20706
ATTENTION: CORPORATE SECRETARY
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED, ANDAUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL UNDER NO CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROXY STATEMENT.
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|
|
PROPOSAL ONE— ELECTION OF DIRECTORS |
Pursuant to the Company’s Amended and Restated Certificate of Incorporation, the Board is “classified,” which means that it is divided into three classes of directors based on the expiration of their terms. Under the classified board arrangement, directors are elected to terms that expire on the annual meeting date three years following the annual meeting at which they were elected, and the terms are “staggered” so that the terms of approximately one‑third of the directors expire each year. We believe having a staggered Board divided by classes is in the best interest of both the Company and its stockholders because it provides for greater stability and continuity on our Board. The Board, upon recommendation of the Nominating and Corporate Governance Committee, has nominated the following Class III directors to hold office until the 2023 Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified or until their earlier death, resignation or removal: • Sallie L. Krawcheck; • John M. Larson; • Edward S. Macias; and • Alexis Maybank. All nominees currently serve as Class III directors of the Company. Each nominee has consented to serve as a director if elected at the Meeting. Should a nominee become unavailable to accept election as a director, the persons named in the enclosed proxy will vote the shares that such proxy represents for the election of such other person as the Board may nominate. We have no reason to believe that any of the nominees will be unable to serve. |
| THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF THE FOUR CLASS III DIRECTOR NOMINEES. |
PROPOSAL ONE—
ELECTION OF DIRECTORS
There are currently ten members of our Board. Pursuant to the Company's Amended and Restated Certificate of Incorporation, the Board is "classified," which means that it is divided into three classes of directors based on the expiration of their terms. Under the classified board arrangement, directors are elected to terms that expire on the annual meeting date three years following the annual meeting at which they were elected, and the terms are "staggered" so that the terms of approximately one-third of the directors expire each year. At the Meeting, our stockholders will elect three directors to hold office until the 2019 annual meeting of stockholders and until their respective successors have been duly elected and qualified or until their earlier death, resignation or removal. Accordingly, this Proposal One seeks the election of three directors, Timothy M. Haley, Earl Lewis and Coretha M. Rushing, as Class II directors whose terms would expire in 2019.
Timothy M. Haley and Earl Lewis currently serve as Class II directors of the Company. The Board, upon recommendation of the Nominating and Corporate Governance Committee, has nominated Timothy M. Haley and Earl Lewis to serve again as Class II directors and has nominated Coretha M. Rushing to replace Michael T. Moe and serve as a Class II director until the 2019 annual meeting of stockholders and until their respective successors have been duly elected and qualified or until their earlier death, resignation or removal. Each nominee has consented to serve as a director if elected at the Meeting. Should a nominee become unavailable to accept election as a director, the persons named in the enclosed proxy will vote the shares that such proxy represents for the election of such other person as the Board may nominate. We have no reason to believe that any of the nominees will be unable to serve.
THE
OUR BOARD OF DIRECTORS
RECOMMENDS VOTING "FOR" THE ELECTION OF THETHREE CLASS II DIRECTOR NOMINEES. Our Board currently consists of 12 members. Set forth below is certain information concerning each nominee for election as a director at the Meeting and each director whose current termwith terms expiring at the 2021 or 2022 annual meetings of office will continue after the Meeting. stockholders. |
| | | |
| Director Name | Age | Class and Position | Term Expires |
| Paul A. Maeder | 66 | Class I Director and Chair of the Board | 2021 |
| Robert M. Stavis | 57 | Class I Director | 2021 |
| Christopher J. Paucek | 49 | Class I Director | 2021 |
| Gregory K. Peters | 49 | Class I Director | 2021 |
| Timothy M. Haley | 65 | Class II Director | 2022 |
| Valerie B. Jarrett | 63 | Class II Director | 2022 |
| Earl Lewis | 64 | Class II Director | 2022 |
| Coretha M. Rushing | 64 | Class II Director | 2022 |
| Sallie L. Krawcheck | 55 | Class III Director | 2020 |
| John M. Larson | 68 | Class III Director | 2020 |
| Edward S. Macias | 76 | Class III Director | 2020 |
| Alexis Maybank | 45 | Class III Director | 2020 |
Other than our Chief Executive Officer, our Board is comprised of all independent directors. We believe it is essential to have directors representing diversity in many areas, including but not limited to race, ethnicity, gender, background, and professional experience. Our board is 50% ethnic or gender diverse and we are proud to have been named a “Winning ‘W’” company by 2020 Women on Boards for having a Board comprised at least 20% of women.
Each of our directors brings to our Board a wealth of varied experience derived from service as executives, financial experts, subject experts and/or industry leaders. They also all bring extensive board experience. Specific individual qualificationsWe have worked hard to ensure diversity of backgrounds and skills of eachperspectives within the board room, which we believe enhances oversight of our directors that contribute to the Board's effectiveness asbusiness strategy and our corporate governance practices. The table below sets forth a whole are described in the following paragraphs. For more information on the criteria used in nominating directors, see "Board of Directors and Committees—Nomination of Directors" below. | | | | | |
Name
| | Age | | Class and Position |
|---|
Paul A. Maeder
| | | 61 | | Class I Director and Chairman of the Board |
Robert M. Stavis
| | | 52 | | Class I Director |
Christopher J. Paucek
| | | 44 | | Class I Director |
Timothy M. Haley
| | | 60 | | Class II Director |
Earl Lewis
| | | 59 | | Class II Director |
Coretha M. Rushing
| | | 60 | | Class II Director |
Sallie L. Krawcheck
| | | 50 | | Class III Director |
Mark J. Chernis
| | | 48 | | Class III Director |
John M. Larson
| | | 63 | | Class III Director |
Edward S. Macias
| | | 71 | | Class III Director |
Class II—Directors with Terms Expiring in 2016
Timothy M. Haley. Mr. Haley has served on our Board since February 2010. Mr. Haley is a founding partner of Redpoint Ventures, a venture capital firm, and has been a Managing Director of the firm since 1999. Mr. Haley was also the managing director of Institutional Venture Partners, a
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venture capital firm, from 1998 to 2010. From 1986 to 1998, Mr. Haley was the president of Haley Associates, an executive recruiting firm in the high technology industry. Mr. Haley currently serves on the board of directors of Netflix, Inc. and several private companies. Mr. Haley holds a B.A. from Santa Clara University. Our Board believes that Mr. Haley's broad experience investing in software, consumer Internet and digital media industries, and his experience serving as a board member for numerous companies, enable him to make valuable contributions to the Board.
Earl Lewis. Dr. Lewis was appointed to our Board at the time of the initial public offering of the Company's shares. Since March 2013, Dr. Lewis has been the President of The Andrew W. Mellon Foundation, a philanthropic organization committed to advancing higher education, the arts and civil society. From January 2013 to March 2013, he served as President-designate of the Mellon Foundation. Prior to joining the Mellon Foundation, Dr. Lewis served as Provost and Executive Vice President of Academic Affairs at Emory University from 2004 to December 2012. He also held a variety of faculty positions at the University of California at Berkeley and the University of Michigan from 1984 through 2004, and served as Vice Provost for Academic Affairs—Graduate Studies and dean of the Horace H. Rackham School of Graduate Studies at the University of Michigan from 1998 to 2004. Dr. Lewis holds a B.A. from Concordia College and a M.A. and Ph.D. from the University of Minnesota. Our Board believes that Dr. Lewis's broad experience in academia, both as a faculty member and as an administrator at leading universities, will allow him to make valuable contributions to the Board.
Coretha M. Rushing. Ms. Rushing was nominated by our Board for election at the Meeting. She has been Corporate Vice President and Chief Human Resources Officer of Equifax Inc. since 2006. Prior to joining Equifax, she served as an executive coach and HR Consultant with Atlanta-based Cameron Wesley LLC. Prior to joining Cameron Wesley, she was Senior Vice President of Human Resources of The Coca-Cola Company, where she was employed from 1996 until 2004. Prior to that, she worked in a number of senior level positions in Pizza Hut (a division of PepsiCo) and IBM. She is currently the Board chair designate for the Society of Human Resource Management, a 300,000 membership organization whose membership is comprised of global human resource professionals. For the years 2017 and 2018, she will be the Chairman of the Board. Ms. Rushing holds a B.A. in industrial psychology from East Carolina University and a master's degree in human resources from the Society of Human Resource Management. Our Board believes that Ms. Rushing's broad experience in human resources at leading Fortune 500 companies, will allow her to make valuable contributions to the Board.
CONTINUING DIRECTORS
Class I—Directors with Terms Expiring in 2018
Paul A. Maeder. Mr. Maeder has served on our Board since February 2010 and as chairmansummary of our Board since November 2012. Mr. Maeder is a General Partner of Highland Capital Partners, a venture capital firm he co-founded in 1988. He currently serves on the boards of several private companies. He holds a B.S.E. in Aerospacedirector’s skills and Mechanical Sciences from Princeton University, an M.S.E. in Mechanical Engineering from Stanford University and a M.B.A. from the Harvard Business School. Our Board believes that Mr. Maeder's broad experience investing in the online higher education and software industries and his experience serving as a board member for numerous companies enable him to make valuable contributions to the Board.experience.
Robert M. Stavis. Mr. Stavis has served on our Board since April 2011. Mr. Stavis has been a partner at Bessemer Venture Partners, a venture capital firm, since 2000. Prior to joining Bessemer, Mr. Stavis was an independent private equity investor. Prior to that, he served in various positions at Salomon Smith Barney, including as co-head of global arbitrage trading. Mr. Stavis holds a B.A.S. in Engineering from the University of Pennsylvania's School of Engineering and Applied Sciences and a B.S. in Economics from the University of Pennsylvania's Wharton School. Our Board believes that
BIOGRAPHIES OF OUR BOARD OF DIRECTORS
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Mr. Stavis's broad experience investing in the emerging software technology industry and his experience serving as a board member for numerous companies enable him to make valuable contributions to the Board.
Christopher J. Paucek. Mr. Paucek is a co-founder of the Company and has served as our Chief Executive Officer since January 2012 and as a member of our Board since March 2012. He previously served as our President and Chief Operating Officer from April 2008 through December 2011. Prior to 2U, Mr. Paucek served as the chief executive officer of Smarterville, Inc., the parent company of Hooked on Phonics, from 2007 until 2008. From 2004 to 2007, Mr. Paucek served as vice president of business development and president of Educate Products for Educate, Inc. In 2004, Mr. Paucek served as deputy campaign manager for the successful re-election campaign of United States Senator Barbara Mikulski. Mr. Paucek began his career in 1993 by co-founding Cerebellum Corporation, the media company behind the award-winning educational Standard Deviants television program and video series, and he led Cerebellum as co-chief executive officer until 2003. Mr. Paucek holds a B.A. from The George Washington University and is currently enrolled in our MBA@UNC program at the UNC Kenan-Flagler Business School of the University of North Carolina at Chapel Hill. Our Board believes that Mr. Paucek's knowledge of the Company as one of our co-founders, and his broad experience leading education companies, enable him to make valuable contributions to the Board.
Class III—Directors with Terms Expiring in
20172020
Sallie L. Krawcheck. Ms. Krawcheck was appointed to our Board as of the initial public offering of the Company's shares.Company’s shares in April 2014. Ms. Krawcheck has beenis the Chief Executive Officer and ownerco‑founder of Ellevate Asset Management,Ellevest, an investment firm focused on companies whereplatform for women make up a significant portion of officers and directors, since June 2014, and an owner of Ellevate Network (formerly 85 Broads), a professional women's networking organization, since May 2013.that was founded in 2016. Ms. Krawcheck was the President of Global Wealth & Investment Management for Bank of America from August 2009 to September 2011. Prior to joining Bank of America, Ms. Krawcheck held a variety of senior executive positions at Citigroup from 2002 to 2008, including Chief Executive Officer of its Smith Barney division, Chief Financial Officer of Citigroup and Chief Executive Officer and ChairmanChair of Citi Global Wealth Management. She served as a director of BlackRock Inc. from 2009 to 2011 and Dell Inc. from 2006 to 2009. Ms. Krawcheck holds a B.A. from the University of North Carolina at Chapel Hill and aan M.B.A. from Columbia University. Our Board believes that Ms. Krawcheck'sKrawcheck’s financial acumen and broad experience serving in leadership roles with financial and investment firms will allowenables her to make valuable contributions to the Board. Mark J. Chernis. Mr. Chernis has served on our Board since January 2009. Mr. Chernis joined Pearson in June 2011 following the acquisition of SchoolNet. He currently serves as the SVP of Strategic Partnerships and Investments and was previously the President and Chief Operating Officer of SchoolNet. Mr. Chernis has held various positions at The Princeton Review beginning in 1984, most recently serving as its President from 1995 to November 2007. Mr. Chernis holds a B.A. from Vassar College. Our Board believes that Mr. Chernis's deep knowledge of the higher education industry and his long-term experience serving as a member of the Board enables him to make valuable contributions to the Board.John M. Larson. Mr. Larson has served on our Board since June 2009. Mr. Larson has served as the Executive Chairman and Chief Executive OfficerChair of Triumph Higher Education Group, Inc., a culinary education company, since 2010. He also serveshas served as President of Triumph Group, Inc., a company that advises and invests in domestic and international education companies.companies, since 2008. Mr. Larson founded and served as President, Chief Executive Officer and director of Career Education Corporation, or CEC, a publicly held post-secondarypost‑secondary education company, from its inception in 1994 through his retirement from the company in 2006, including as ChairmanChair of the Board from 2000 to
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2006. He became ChairmanChair Emeritus of CEC in 2006 and continues to serve in that position. He holds a B.S. in Business Administration from the University of California at Berkeley. Our Board believes that Mr. Larson'sLarson’s deep knowledge of the higher education industry and his experience founding and leading a publicly held education company enable him to make valuable contributions to the Board.
Edward S. Macias. Dr. Macias has served on our Board since November 2014. Dr. Macias is currently the Provost Emeritus and Barbara and David Thomas Distinguished Professor Emeritus in Arts & Sciences at Washington University in St. Louis. Previously, Dr. Macias was the chief academic officer of Washington University in St. Louis for 25 years, before stepping down from his position as Provost and Executive Vice Chancellor in June 2013. During his tenure as Provost, Dr. Macias provided leadership in curriculum, budget and capital project development initiatives. Dr. Macias has broad experience and knowledge in higher education administration and innovation in academic settings. Following his tenure as Provost, Dr. Macias was nominated to lead the school'sschool’s effort to explore its approach to online education and to leverage advances in education technology to enhance its reach and impact. Dr. Macias currently serves on the boards of the Center for Research Libraries, theCasa de Salud, Shakespeare Festival of St. Louis Casa de Salud, Mary Institute and Saint Louis Country Day School, the St. Louis Immigration and Innovation Steering Committee and on the academic advisory board of the Schwarzman Scholars Program.Mosaic Project. He is an emeritus member of the boardboards of Colgate University.University and Mary Institute and St. Louis Country Day School. Dr. Macias holds a bachelor's degreeB.S. in Chemistry from Colgate University and a doctorate in Chemistry from Massachusetts Institute of Technology. Our Board believes that Dr. Macias'sMacias’s substantial knowledge of the higher education industry and his vast experience as Provost and Executive Vice Chancellor of Washington University in St. Louis enable him to make valuable contributions to the Board. Alexis Maybank. Ms. Maybank has served on our Board since December 2018. She is an internet entrepreneur and currently serves as a member of the Board of Girls Who Code. Ms. Maybank co‑founded Project September in 2016 and served as its Chief Executive Officer until December 2017. Prior to co‑founding Project September, she co‑founded Gilt Groupe and served as its founding Chief Executive Officer from 2007 to 2008 and in several other executive roles, including Chief Strategy Officer, Chief Marketing Officer and President of Gilt Home and Kids from 2008 to 2014. Prior to co‑founding Gilt Groupe in 2007, Ms. Maybank was General Manager of eCommerce for AOL Media Networks and served in various senior roles at eBay. Ms. Maybank holds a B.S. from Harvard University and an M.B.A. from Harvard Business School. Our Board believes that Ms. Maybank’s experience in e‑commerce and scaling rapidly growing technology companies enable her to make valuable contributions to the Board.
Class I—Directors with Terms Expiring at the 2021 Annual Meeting of Stockholders
Paul A. Maeder. Mr. Maeder has served on our Board since 2010 and as Chair of our Board since November 2012. Mr. Maeder is a General Partner of Highland Capital Partners, a venture capital firm he co‑founded in 1987. He currently serves on the boards of several private companies. Mr. Maeder served as a director of Imprivata, Inc. from February 2002 to July 2016 and of Carbon Black, Inc. from September 2015 to February 2019. He holds a B.S.E. in Aerospace and Mechanical Sciences from Princeton University, an M.S.E. in Mechanical Engineering from Stanford University and an M.B.A. from the Harvard Business School. Our Board believes that Mr. Maeder’s broad experience investing in the online higher education
and software industries and his experience serving as a board member for numerous companies enable him to make valuable contributions to the Board.
Robert M. Stavis. Mr. Stavis has served on our Board since 2011. Mr. Stavis has been a Partner at Bessemer Venture Partners, a venture capital firm, since 2000. He currently serves on the boards of several private companies. Prior to joining Bessemer, Mr. Stavis was an independent private equity investor. Prior to that, he served in various positions at Salomon Smith Barney, including as Co‑Head of Global Arbitrage Trading. Mr. Stavis holds a B.A.S. in Engineering from the University of Pennsylvania’s School of Engineering and Applied Sciences and a B.S. in Economics from the University of Pennsylvania’s Wharton School. Our Board believes that Mr. Stavis’s broad experience investing in the emerging software technology industry and his experience serving as a board member for numerous companies enable him to make valuable contributions to the Board.
Christopher J. Paucek. Mr. Paucek is a co‑founder of the Company and has served as our Chief Executive Officer and as a member of our Board since 2012. He previously served as our President and Chief Operating Officer from April 2008 through December 2011. Prior to 2U, Mr. Paucek served as the Chief Executive Officer of Smarterville, Inc., the parent company of Hooked on Phonics, from 2007 until 2008. From 2004 to 2007, Mr. Paucek served as Vice President of Business Development and President of Educate Products for Educate, Inc. In 2004, Mr. Paucek served as Deputy Campaign Manager for the successful reelection campaign of United States Senator Barbara Mikulski. Mr. Paucek began his career in 1993 by co‑founding Cerebellum Corporation, the media company behind the award‑winning educational Standard Deviants television program and video series, and he led Cerebellum as Co‑Chief Executive Officer until 2003. Mr. Paucek holds a B.A. from The George Washington University and an M.B.A. from the Kenan‑Flagler Business School of the University of North Carolina at Chapel Hill. Our Board believes that Mr. Paucek’s knowledge of the Company as one of our co‑founders, and his broad experience leading education companies, enable him to make valuable contributions to the Board.
Gregory K. Peters. Mr. Peters was appointed to our Board in March 2018. Mr. Peters joined Netflix, Inc. in 2008 and currently serves as the Chief Product Officer, responsible for designing, building and optimizing the customer experience. From 2015 to July 2017, Mr. Peters served as the International Development Officer of Netflix, responsible for global partnerships with consumer electronics companies, Internet service providers and multichannel video program distributors. From July 2013 to 2015, Mr. Peters served as the Chief Streaming and Partnerships Officer of Netflix. Prior to joining Netflix in 2008, Mr. Peters was Senior Vice President of Consumer Electronics Products for Macrovision Solutions Corp. (later renamed Rovi Corporation) and held positions at Mediabolic Inc., Red Hat Network and Wine.com. Mr. Peters holds a B.S. in Physics and Astrophysics from Yale University. Our Board believes that Mr. Peters’ technology and product expertise enable him to make valuable contributions to the Board.
Class II—Directors with Terms Expiring at the 2022 Annual Meeting of Stockholders
Timothy M. Haley. Mr. Haley has served on our Board since 2010. Mr. Haley is a founding partner of Redpoint Ventures, a venture capital firm, and has been a Managing Director of the firm since 1999. Mr. Haley was also the Managing Director of Institutional Venture Partners, a venture capital firm, from 1998 to 2010. From 1986 to 1998, Mr. Haley was the President of Haley Associates, an executive recruiting firm in the high technology industry. Mr. Haley currently serves on the board of directors of Netflix, Inc., Zuora Inc., and several private companies. Mr. Haley holds a B.A. from Santa Clara University. Our Board believes that Mr. Haley’s broad experience investing in software, consumer Internet and digital media industries, and his experience serving as a board member for numerous companies, enable him to make valuable contributions to the Board.
Earl Lewis. Dr. Lewis was appointed to our Board at the time of the initial public offering of the Company’s shares in April 2014. Dr. Lewis, a fellow of the American Academy of Arts and Sciences, is a Thomas C. Holt Distinguished Professor of History and AfroAmerican and African Studies and Public Policy at the University of Michigan and founding director of the Center for Social Solutions. From March 2013 to March 2018, Dr. Lewis served as President of The Andrew W. Mellon Foundation, a philanthropic organization committed to advancing higher education, the arts and civil society. From January 2013 to March 2013, he served as President‑designate of the Mellon Foundation. Prior to joining the Mellon Foundation, Dr. Lewis served as Provost and Executive Vice President for Academic Affairs at Emory University from 2004 to December 2012. He also held a variety of faculty positions at the University of California at Berkeley and the University of Michigan from 1984 through 2004, and served as Vice Provost for Academic Affairs—Graduate Studies and Dean of the Horace H. Rackham School of Graduate Studies at the University of Michigan from 1998 to 2004. Dr. Lewis holds a B.A. from Concordia College and an M.A. and Ph.D. from the University of Minnesota. Our Board believes that Dr. Lewis’s broad experience in academia, both as a faculty member and as an administrator at leading universities, allows him to make valuable contributions to the Board.
Coretha M. Rushing. Ms. Rushing has served on our Board since 2016. She has been the President of CR Consulting since June 2019. Prior to that, she served as Corporate Vice President and Chief Human Resources Officer of Equifax Inc. from May 2006 to December 2019. Prior to joining Equifax, she served as an Executive Coach and HR Consultant with Atlanta‑based Cameron Wesley LLC. Prior to joining Cameron Wesley, she was Senior Vice President, Chief Human Resources Officer of The Coca‑Cola Company, where she was employed from 1996 until 2004. Prior to that, she worked in a number of senior level positions in Pizza Hut (a division of PepsiCo) and IBM. She was Chair of the Board for the Society of Human Resource Management until January 2019, an organization of approximately 300,000 global human resource professionals and is currently serving as Chair Emeritus. Ms. Rushing holds a B.S. in Industrial Psychology from East Carolina University and an M.S. in Education from The George Washington University. Our Board believes that Ms. Rushing’s broad experience in human resources at leading Fortune 500 companies, enables her to make valuable contributions to the Board.
Valerie B. Jarrett. Ms. Jarrett has served on our Board since December 2017. She is an acclaimed civic leader, business executive and attorney. She currently serves as a Senior Advisor to the Obama Foundation and Attn: and is a Distinguished Senior Fellow at the University of Chicago Law School. She also serves as a director on the boards of Ariel Investments and Lyft. During the Obama administration, from January 2008 to January 2016, Ms. Jarrett served as Senior Advisor to the President of the United States, where she oversaw the Office of Public Engagement and Intergovernmental Affairs and chaired the White House Council on Women and Girls. Prior to joining the Obama administration, Ms. Jarret was co‑chair of the Obama‑Biden transition team. Ms. Jarrett began her career in politics in 1987, working as Deputy Corporation Counsel for Finance and Development in the administration of Mayor Harold Washington in Chicago. She subsequently was Deputy Chief of Staff for Mayor Richard M. Daley and later served as Commissioner of the Department of Planning and Development and chaired the Chicago Transit Board. From 1995 until she joined the Obama administration, Ms. Jarrett served in various senior positions, including Chief Executive Officer, of the Habitat Company, a Chicago real estate development and management firm. She has also served on numerous corporate and civic boards, including Chair of the Board of Trustees of the University of Chicago Medical Center, Chair of the Board of Trustees of the University of Chicago, Chair of the Board of the Chicago Stock Exchange and was a director of the Federal Reserve Bank of Chicago. Ms. Jarrett holds a B.A. from Stanford University and a J.D. from the University of Michigan Law School. Our Board believes that Ms. Jarrett’s broad experience in public policy enables her to make valuable contributions to the Board.
BOARD OF DIRECTORS AND COMMITTEES
Board Purpose and Structure
The mission of the Board is to provide strategic guidance to the
Company'sCompany’s management, to monitor the performance and ethical behavior of the
Company'sCompany’s management, and to maximize the
long-termlong‑term financial return to the
Company'sCompany’s stockholders, while considering and appropriately balancing the interests of other stakeholders and constituencies. The Board is
constitutedcomprised of
tentwelve directors. The authorized number of directors may be changed only by resolution approved by a majority of our Board. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of
one-thirdone‑third of the directors. The division of our Board into three classes with staggered
three-yearthree‑year terms may delay or prevent a change in our management or a change of control.
The Board has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The Board has adopted written charters for each of these committees.
In January 2019, the Board established a Transaction Committee to assist the Board in its review and consideration of the acquisition of Trilogy in addition to other potential strategic acquisition opportunities.
Our Board currently has an independent
chairman,Chair, Mr. Maeder, who has the authority, among other things, to call and preside over Board meetings, including meetings of the independent directors, and to set meeting agendas. Accordingly, the
Chair of the Board
chairman has substantial ability to shape the work of the Board. We believe that separation of the positions of
Chair of the Board
chairman and
chief executive officerChief Executive Officer reinforces the independence of the Board in its oversight of the business and affairs of the Company. In addition, we believe that having an independent
Chair of the Board
chairman creates an environment that is more conducive to objective evaluation and oversight of
management'smanagement’s performance, increasing management accountability and improving the ability of the Board to monitor whether
management's
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management’s actions are in the best interests of the Company and its
stockholders. As a result, we believe that having an independent
Chair of the Board
chairman enhances the effectiveness of the Board as a whole.
The Board oversees a
company-widecompany‑wide approach to risk management that is carried out by management. The Board determines the appropriate risk for us generally, assesses the specific risks faced by us and reviews the steps taken by management to manage those risks. While the Board maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas.
Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our Audit Committee oversees management of enterprise risks,
financial risks, and
financiallegal and compliance risks, as well as potential conflicts of interest. Our Nominating and Corporate Governance Committee is responsible for overseeing the management of risks associated with the independence of our
Board.Board and the Company’s corporate governance practices.
Management has responsibility for the direct management and oversight of legal, financial, cybersecurity, privacy and commercial compliance matters, which includes identifying areas of risk and implementing policies, procedures and practices to mitigate the identified risks. Management provides regular reports to the Audit Committee concerning financial, tax, legal and compliance related risks and the Company’s experts report to the Board on cybersecurity.
Our Nominating and Corporate Governance Committee and our Board have undertaken a review of the independence of our current directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Nominating and Corporate Governance Committee and our Board determined that Messrs. Chernis, Haley, Larson, Maeder, Moe, Stavis, Lewis, Macias, Maeder, Peters and Ms.Stavis, and Mses. Jarrett, Krawcheck, Maybank and Rushing, representing nineeleven of our tentwelve current directors, are "independent“independent directors,"” as defined under applicable NASDAQ rules. Additionally, our NominatingNasdaq listing standards and Corporate Governance Committeethe rules of the United States Securities and our Board have determined that director nominee Ms. Rushing would qualify as an "independent director," as defined under applicable NASDAQ rules.Exchange Commission (“
SEC”). The Nominating and Corporate Governance Committee and the Board apply standards in affirmatively determining whether a director is
"independent,"“independent,” in compliance with applicable
SEC rules and the rules andNasdaq listing standards
of NASDAQ.and SEC rules. As part of the process in making such determination, the Nominating and Corporate Governance Committee and the Board also determined that none of
current directors Messrs.
Chernis, Haley, Larson,
Maeder, Moe, Stavis, Lewis, Macias,
Maeder, Peters and
Ms.Stavis, and Mses. Jarrett, Krawcheck,
nor director nominee Ms.Maybank, and Rushing have any other
"material relationship"“material relationship” with the Company that could interfere with his or her ability to exercise independent judgment.
The Board includes one management director, Mr. Paucek, who is the
Company'sCompany’s Chief Executive Officer. The Nominating and Corporate Governance Committee and the Board
hashave determined that Mr. Paucek is not independent under
the rules andapplicable Nasdaq listing standards
of NASDAQ.and SEC rules.
As part of its annual evaluation of director independence, the Nominating and Corporate Governance Committee and the Board examinesexamine (among other things) whether any transactions or relationships exist currently (or existed during the past three years) between each independent director and the Company, its subsidiaries, affiliates, equity investors, or independent auditors and the nature of those relationships under the relevant NASDAQapplicable Nasdaq listing standards and SEC standards.rules. The Nominating and Corporate Governance Committee and the Board also examine whether there are (or have been within the past year) any transactions or relationships between each independent director and any executive officer of the Company or its affiliates. As a result of this evaluation, the Nominating and Corporate Governance Committee and the Board have affirmatively determined that each independent director is independent under those criteria.
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Board Meetings and Attendance
During 2015,2019, including both regularly scheduled and special meetings, our Board met a total of seveneight times, the Audit Committee met a total of eight times, the Compensation Committee met a total of sevensix times, and the Nominating and Corporate Governance Committee met a total of threefour times and the Transaction Committee met a total of two times. During 2015, all2019, each of the Company'sCompany’s directors attended at least 75% of the aggregate of the total number of meetings of the Board. Additionally, in 2015, 100%Board that occurred while he or she was serving as a director and the total number of meetings held by any of the memberscommittees of the Audit Committee attended all of the meetings of
Board on which such
committee, 100% of the members of the Compensation Committee attended all of the meetings of such committee and 100% of the members of the Nominating and Corporate Governance Committee attended all of the meetings of such committee.director served. During
threeseven meetings of the Audit Committee, the Audit Committee met privately with the
Company'sCompany’s independent registered public accounting firm.
|
| | |
| Members | Independent | |
| Robert M. Stavis (Chair) | ü | Meetings during 2019: 8 |
| Earl Lewis | ü | Report of the Audit Committee: Page 31 |
| Paul A. Maeder | ü | |
| Gregory K. Peters | ü | |
The current composition of our Audit Committee reviews our internal accounting procedures and consults with and reviews the services provided by our independent registered public accountants. Our Audit Committee consists of three directors, Ms. Krawcheck andis set forth above. Mr. Chernis and, through April 1, 2015, Mr. Haley. Effective as of April 1, 2015, Mr. Moe replaced Mr. Haley as a member ofMaeder joined the Audit Committee uponon April 25, 2019 to replace Ms. Maybank who served on the recommendation ofAudit Committee from January 19, 2019 to April 25, 2019 when she was appointed to the Nominating and Corporate Governance Committee and the Board. Ms. KrawcheckCompensation Committee. Mr. Stavis is the chairChair of the Audit Committee, and our Board has determined that shehe is an "audit“audit committee financial expert,"” as defined by SEC rules and regulations. Our Board has determined that the composition of our Audit Committee meets the criteria for independence under, and the functioning of our Audit Committee complies with, the applicable requirements of the Sarbanes-OxleySarbanes‑Oxley Act of 2002, the NASDAQNasdaq listing requirementsstandards and SEC rules and regulations. The Board has determined that all members of the Audit Committee are financially literate and possess "financial sophistication"“financial sophistication” within the meaning of the NASDAQNasdaq listing requirements. Mr. Haley is a Managing Director of Redpoint Ventures, affiliates of which beneficially owned, until March 10, 2016, more than 10% of our common stock. Therefore, we may not be able to rely upon the safe harbor position of Rule 10A-3 under the Exchange Act, which provides that a person will not be deemed to be an affiliate of a company if he or she is not the beneficial owner, directly or indirectly, of more than 10% of a class of voting equity securities of that company. However, prior to Mr. Haley's appointment to the Audit Committee, our Board made an affirmative determination that Mr. Haley is not an affiliate of our Company.standards. We intend to continue to evaluate the requirements applicable to us, and we intend to comply with the future requirements to the extent that they become applicable to our Audit Committee.
Our Audit Committee oversees the Company’s corporate accounting and financial reporting processes. The principal duties and responsibilities of our Audit Committee include:
appointing and retaining an independent registered public accounting firm to serve as independent auditor to audit our consolidated financial statements, overseeing and evaluating the independent auditor'sauditor’s work and determining the independent auditor'sauditor’s compensation;
•
approving in advance all audit services and non-auditnon‑audit services to be provided to us by our independent auditor;
•
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, auditing or compliance matters, as well as for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
•reviewing and discussing with management and our independent auditor the results of the annual audit and the independent auditor'sauditor’s review of our quarterly consolidated financial statements; and
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•- conferring with management and our independent auditor about the scope, adequacy and effectiveness of our internal accounting controls, the objectivity of our financial reporting and our accounting policies and practices.
The Audit Committee'sCommittee’s charter can be obtained without charge fromon the Company'sCompany’s website at at: http://investor.2u.com/investor.2u.com. As provided under the Audit Committee'sCommittee’s charter, the Audit Committee's pre-approvalCommittee’s pre‑approval policy and applicable law, the Audit Committee pre-approvespre‑approves all audit, review and attest services, as well as all permitted non-auditnon‑audit services (subject to ade minimis exception) to be provided by our independent registered public accounting firm. This pre-approvalpre‑approval applies to audit services, audit-relatedaudit‑related services, tax services and other services. Under this policy, the Audit Committee may provide pre-approvalpre‑approval for a particular defined task or scope of work, subject to a specific budget and for up to one year. The Audit Committee may also delegate pre-approvalpre‑approval authority to one or more of the Audit Committee'sCommittee’s members, and the Audit Committee has delegated to the chairChair of the Audit Committee the authority to pre-approvepre‑approve services (other than the annual engagement) up to a maximum of $50,000 per calendar year. The chairChair of the Audit Committee reports any pre-approvalpre‑approval decisions at the next scheduled meeting of the Audit Committee. To avoid potential conflicts of interest, applicable securities laws prohibit the Company as a publicly traded company from obtaining certain non-auditnon‑audit services from its independent audit firm. We obtain these services from other service providers as needed.
Compensation Committee
Our
|
| | |
| Members | Independent | |
| John M. Larson (Chair) | ü | Meetings during 2019: 6 |
| Alexis Maybank | ü | Report of the Compensation Committee: Page 51 |
| Coretha M. Rushing | ü | |
The current composition of our Compensation Committee
reviews and determinesis set forth above. Ms. Maybank joined the
compensation of all our executive officers. Our Compensation Committee
consists of three directors, Messrs. Larson, Stavis andon April 25, 2019 to replace Mr. Maeder
each of whom is a non-employee member of our Board, as defined in Rule 16b-3 underwho served on the
Exchange Act, and an "outside director," as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended.Compensation Committee until April 25, 2019. Mr. Larson is the
chairChair of the Compensation Committee. Our Board has determined that the composition of our Compensation Committee satisfies the applicable independence requirements under, and the functioning of our Compensation Committee complies with the applicable requirements of,
NASDAQNasdaq listing
rulesstandards and SEC rules and regulations.
Each of Mses. Maybank and Rushing is also a “non‑employee director,” as defined in Rule 16b‑3 under the Exchange Act. We intend to continue to evaluate and intend to comply with all future requirements applicable to our Compensation Committee.
Our Compensation Committee oversees the Company’s compensation policies, plans and programs. The principal duties and responsibilities of our Compensation Committee include:
establishing and approving, and making recommendations to the Board regarding, performance goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives and setting, or recommending to the full Board for approval, the chief executive officer'sofficer’s compensation, including incentive-basedincentive‑based and equity-basedequity‑based compensation, based on that evaluation;
•setting the compensation of our other executive officers, based in part on recommendations of the chief executive officer;
•Chief Executive Officer;exercising administrative authority under our stock plans and employee benefit plans;
•establishing policies and making recommendations to our Board regarding director compensation;
•reviewing and discussing with management the compensation discussion and analysis that we may be required from time to time to include in SEC filings; and
•preparing a Compensation Committee report on executive compensation as may be required from time to time to be included in our annual proxy statements or annual reports on Form
10-K10‑K filed with the SEC.
The scope of the Compensation Committee'sCommittee’s authority and responsibilities is set forth in its written charter, a copy of which is available without charge fromon the Company'sCompany’s website
at:
Table of Contentsat http://investor.2u.com/investor.2u.com. As provided under the Compensation Committee'sCommittee’s charter, the Compensation Committee may delegate its authority to special subcommittees as the Compensation Committee deems appropriate, consistent with applicable law and the NASDAQNasdaq listing rules.standards. In April 2019, our Compensation Committee formed a subcommittee comprised entirely of members of the Compensation Committee that meet the requirements of a “non‑employee director” as defined in Rule 16b‑3 of the Exchange Act. This subcommittee has the nonexclusive authority to grant equity and other awards under our compensation plans that comply with Section 16 of the Exchange Act. As part of its duties, the Compensation Committee establishes and approves (or refers to the full Board for approval) the compensation and performance of the Company'sCompany’s Chief Executive Officer in light of relevant corporate goals and objectives that are periodically established by the Compensation Committee or the Board. The Chief Executive Officer is not present during the voting and deliberations regarding his compensation. The Compensation Committee also reviews and approves (or refers to the full Board for review and approval) the compensation of the Company'sCompany’s executive officers other than the Chief Executive Officer in light of relevant corporate goals and objectives that are periodically established by the Compensation Committee or the Board. No executive officer is present during the voting and deliberations regarding his or her compensation. Under its charter, the Compensation Committee has the authority to retain, at the Company'sCompany’s expense, such counsel, consultants, experts and other professionals as it deems necessary.
For additional information regarding the role of executive officers and compensation consultants in setting director and executive compensation, see the section entitled “Compensation Discussion and Analysis.”
Compensation Committee Interlocks and Insider Participation
None of the members of
No director who served on the Compensation Committee
during 2019 is a former or current officer or employee of the Company or any of its
subsidiaries, nor did any of the members of the Compensation Committee have a relationship requiring disclosure under Item 404 of Regulation S-K promulgated under the Exchange Act.subsidiaries. In addition, during the last completed fiscal year, none of our executive officers has served as a member of the board of directors or compensation committee of any other entity that has or has had one or more of its executive officers serving as a member of our Board or Compensation Committee.
Nominating and Corporate Governance Committee
|
| | |
| Members | Independent | |
| Timothy M. Haley (Chair) | ü | Meetings during 2019: 4 |
| Edward S. Macias | ü | |
| Valerie Jarrett | ü | |
| Sallie L. Krawcheck | ü | |
The
current composition of our Nominating and Corporate Governance Committee
consists of three directors, Messrs. Haley and Lewis and, through April 1, 2015, Mr. Moe. Effective as of April 1, 2015, Dr. Macias replaced Mr. Moe as a member of the Nominating and Corporate Governance Committee, upon the recommendation of the Nominating and Corporate Governance Committee and the Board.is set forth above. Mr. Haley is the
chairChair of the Nominating and Corporate Governance Committee. Our Board has determined that the composition of our Nominating and Corporate Governance Committee satisfies the applicable independence requirements under, and the functioning of our Nominating and Corporate Governance Committee complies with the applicable requirements of,
NASDAQNasdaq listing standards and SEC rules and regulations. We
willintend to continue to evaluate and
willintend to comply with all future requirements applicable to our Nominating and Corporate Governance Committee.
TheOur Nominating and Corporate Governance
Committee'sCommittee oversees the Company’s corporate governance practices. The principal duties and responsibilities
of the Nominating and Corporate Governance Committee include:
assessing the need for new directors and identifying individuals qualified to become directors;
•recommending to the Board the persons to be nominated for election as directors and to each of the Board'sBoard’s committees;
•assessing individual director performance, participation and qualifications;
•developing and recommending to the Board corporate governance principles;
•monitoring the effectiveness of the Board and the quality of the relationship between management and the Board; and
•overseeing a periodic evaluation of the
Board'sBoard’s performance.
The Nominating and Corporate Governance Committee'sCommittee’s charter can be obtained without charge fromon the Company'sCompany’s website at at: http://investor.2u.com/investor.2u.com.
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Executive Sessions of
Non-ManagementNon‑Management Directors
In order to promote discussion among the non-managementnon‑management directors, the Board regularly scheduledholds executive sessions (i.e.(i.e., meetings of non-managementnon‑management directors without management present) are held to review such topics as the non-managementnon‑management directors determine. Mr. Maeder presides as Chairman at ourChair during the executive sessions.sessions of the Board. The non-managementnon‑management directors of the Board met in executive session five times during 2015.2019.
The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommending candidates to the Board for Board membership. When formulating its recommendations, the Nominating and Corporate Governance Committee also considers advice and recommendations from others as it deems appropriate. The Nominating and Corporate Governance Committee is responsible for assessing the appropriate balance of criteria required of Board members.
The Nominating and Corporate Governance Committee may apply several criteria in selecting nominees. At a minimum, it considers (a) whether each such nominee has demonstrated, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board'sBoard’s oversight of the business and affairs of the Company and (b) the nominee'snominee’s reputation for honesty and ethical conduct in his or her personal and professional activities. Additional factors which that
the Nominating and Corporate Governance Committee may consider include a
candidate'scandidate’s specific experiences and skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors as it considers appropriate in the context of the needs of the Board. Although the Company has no diversity policy, the Board believes that diversity is an important consideration in Board composition, with diversity being broadly construed to mean a variety of opinions, perspectives, experiences and backgrounds, including gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements of the Board at that point in time.
The Nominating and Corporate Governance Committee considers candidates recommended by stockholders pursuant to the Nominating and Corporate Governance Committee'sCommittee’s policy for considering stockholder recommendations of director nominees. The Nominating and Corporate Governance Committee'sCommittee’s policy is available free of charge on the Company'sCompany’s website atat: http://investor.2u.com/investor.2u.com. Pursuant to the policy, and at its next appropriate meeting following receipt of a recommendation, the Nominating and Corporate Governance Committee will consider all director candidates recommended by the Company'sCompany’s stockholders provided such recommendation is delivered in a timely manner and in the proper form, as specified in the policy. All director nominees so submitted by the Company'sCompany’s stockholders will be evaluated in the same manner as recommendations received from management or members of the Board. Process for Stockholder Nomination of Directors
For nominations of individuals for election to the Board to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of the Company's Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the Company on a timely basis and must update and supplement such written notice on a timely basis. Such stockholder's notice shall set forth: (A) as to each nominee such stockholder proposes to nominate at the meeting: (1) the name, age, business address and residence address of such nominee, (2) the principal occupation or employment of such nominee, (3) the class and number of shares of stock of the Company which are owned of record and beneficially by such nominee, (4) the date or dates on which such shares were acquired and the investment intent of such acquisition and (5) such other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an
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election contest is not involved), or that is otherwise required to be disclosed pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person's written consent to being named as a nominee and to serving as a director if elected); and (B) the information required by Section 5(b)(4) of the Company's Bylaws. The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such proposed nominee.
To be timely, the written notice required by the Bylaws must be received by the Secretary at the principal executive offices of the Company not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year's annual meeting;provided,however, that, in the event that the date of the annual meeting is advanced more than twenty-five (25) days prior to or delayed by more than twenty-five (25) days after the anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so received not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall an adjournment or a postponement of an annual meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder's notice, as described above.
Only individuals who are nominated in accordance with the procedures set forth in the Bylaws are eligible to stand for election as directors at a meeting of stockholders and to serve as directors. A copy of the Bylaws can be obtained without charge by written request to the Corporate Secretary, 8201 Corporate Drive, Suite 900, Landover, Maryland 20785 and is available without charge athttp://investor.2u.com/.
Communications with the Board of Directors
The Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board, any Board committee or any chair of any such committee by mail. To communicate with the Board, the
non-managementnon‑management directors, any individual directors or committee of directors, correspondence should be addressed to the Board or any such individual directors or committee of directors by either name or title. All such correspondence should be sent to the Company
c/oat 2U, Inc., 7900 Harkins Road, Lanham, Maryland 20706, Attn: Corporate
Secretary, 8201 Corporate Drive, Suite 900, Landover, Maryland 20785.Secretary.
All communications received as set forth above will be opened by the Corporate Secretary
forwho will determine whether the
communication should be presented to the Board. The purpose of
determining whetherthis screening is to avoid providing the
contents represent a message toBoard communications that are irrelevant or inappropriate (such as advertisements, solicitations and hostile communications). Following this review, if appropriate, the
directors, and depending onCorporate Secretary will distribute the
facts and circumstances outlined in the communication
will be distributed to the Board, the
non-managementnon‑management directors, an individual director or committee of directors, as appropriate.
The Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the Board or of the committee to which the envelope is addressed.Director Attendance at Annual Meeting
The Board encourages
Although we do not have a formal policy with respect to directors’ attendance at our annual meeting of the stockholders, all directors are encouraged to attend the annual meeting of stockholders. Three of the personsEight people who were directors of the Company as of such date attended our last annual meeting.
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Director Compensation
Non-employee directors are paid an annual retainer fee and equity awards for their service on the Board. Committee chairs are each paid additional retainer fees and equity awards for service in these capacities. Christopher J. Paucek, our Chief Executive Officer, is also a director, but does not receive any additional compensation for his service as a director. Compensia, the independent compensation consultant retained by the Company, conducts an annual review and assessment of our director compensation program relative to market compensation practices and provides market compensation data to the Compensation Committee. The Compensation Committee then, based in part upon Compensia's report, provides a recommendation to the full Board with respect to our director compensation program.
During 2015, our non-employee directors received the following annual compensation, as unanimously approved by the Board in accordance with the process outlined above:
| | | | | | | |
Position | | Cash or Equity
($)(1) | | Equity Grants
($)(2) | |
|---|
Board Chair | | | — | | | — | |
Board Member | | | 25,000 | | | 100,000 | |
Audit Committee Chair | | | 5,000 | | | 15,000 | |
Compensation Committee Chair | | | 5,000 | | | 5,000 | |
Nominating and Corporate Governance Committee Chair | | | 5,000 | | | 5,000 | |
Committee Members | | | — | | | — | |
(1)In 2015, our non-employee directors elected to receive quarterly cash retainers of $6,250 in the form of a restricted stock unit award. Directors who served as Chair of our Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee elected to receive an additional quarterly cash retainer of $1,250 in the form of a restricted stock unit award.
(2)In 2015, our non-employee directors received annual grants of restricted stock units and options, each with a grant date value of $50,000. These annual equity awards vest on the first, second and third anniversaries of the applicable vesting commencement date. The Chair of our Audit Committee received an additional grant of restricted stock units with a grant date value of $15,000, which vests on the first anniversary of the vesting commencement date. Directors who served as Chair of our Compensation Committee or Nominating and Corporate Governance Committee received an additional grant of restricted stock units with a grant date value of $5,000, which vests on the first anniversary of the vesting commencement date.
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2015 Director Compensation
The following table provides information about the compensation paid to each of our non-employee directors during 2015.
| | | | | | | | | | | | | |
Name | | Fees Earned or
Paid in Cash(1)
($) | | Stock
Awards(2)
($) | | Option
Awards(2)
($) | | Total
($) | |
|---|
Mark J. Chernis | | | 25,000 | | | 50,000 | | | 50,000 | | | 125,000 | |
Timothy M. Haley | | | 30,000 | | | 55,000 | | | 50,000 | | | 135,000 | |
Sallie L. Krawcheck | | | 30,000 | | | 65,000 | | | 50,000 | | | 145,000 | |
John M. Larson | | | 30,000 | | | 55,000 | | | 50,000 | | | 135,000 | |
Earl Lewis | | | 25,000 | | | 50,000 | | | 50,000 | | | 125,000 | |
Edward S. Macias(3) | | | 25,000 | | | 81,000 | | | 71,000 | | | 177,000 | |
Paul A. Maeder | | | 25,000 | | | 50,000 | | | 50,000 | | | 125,000 | |
Michael T. Moe | | | 25,000 | | | 50,000 | | | 50,000 | | | 125,000 | |
Robert M. Stavis | | | 25,000 | | | 50,000 | | | 50,000 | | | 125,000 | |
(1)In 2015, all directors elected to receive their cash retainers in restricted stock units.
(2)These columns reflect the full grant date fair value for options and restricted stock units, as applicable, granted during the year, as measured pursuant to ASC Topic 718 as stock-based compensation in our consolidated financial statements. Unlike the calculations contained in our financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting, but assumes that the director will perform the requisite service for the award to vest in full. The assumptions we used in valuing options are described in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K filed on March 10, 2016.
(3)The amounts reported include $31,000 worth of restricted stock units and $21,000 worth of stock options granted to Dr. Macias on January 1, 2015 for his service as a director in 2014.
The following table provides information about outstanding stock awards and stock options held by each of our non-employee directors as of December 31, 2015. Prior to 2014, the stock options were granted under our 2008 Stock Incentive Plan (the "2008 Plan") and, beginning in 2014, stock options and restricted stock units were granted under our 2014 Equity Incentive Plan (the "2014 Plan").
| | | | | | | |
Name | | Stock
Awards | | Option
Awards | |
|---|
Mark J. Chernis | | | 5,514 | | | 143,437 | |
Timothy M. Haley | | | 5,906 | | | 11,437 | |
Sallie L. Krawcheck | | | 8,057 | | | 29,048 | |
John M. Larson | | | 5,906 | | | 111,437 | |
Earl Lewis | | | 7,273 | | | 29,048 | |
Edward S. Macias | | | 3,621 | | | 6,172 | |
Paul A. Maeder | | | 5,514 | | | 11,437 | |
Michael T. Moe | | | 5,514 | | | 11,437 | |
Robert M. Stavis | | | 5,514 | | | 11,437 | |
No Material Proceedings
There are no material proceedings to which any of our directors, executive officers or affiliates, or any owner of record or of beneficially more than five percent of our stock (or their associates), is a party adverse to the Company or its subsidiaries or in which any of our directors, executive officers or affiliates, or any owner of record or of beneficially more than five percent of our stock (or their associates), has a material interest adverse to the Company or its subsidiaries.
DIRECTOR COMPENSATION
Overview of ContentsDirector Compensation Program
Our Board has approved a compensation program for non‑employee directors designed to attract, retain and reward qualified directors and align the financial interests of the non‑employee directors with those of our stockholders. The Compensation Committee reviews pay levels for non‑employee directors on an annual basis with assistance from Compensia, the independent compensation consultant retained by the Compensation Committee. Compensia conducts a comprehensive annual review and assessment of our director compensation program, including a comparative review of our current director compensation program against the same peer group used for executive compensation purposes, which is identified below under the section “Process for Setting Compensation—Compensation Peer Group”. The Compensation Committee then, based in part upon Compensia’s report, provides a recommendation to the full Board with respect to our director compensation program. The full Board approves any updates to the non‑employee director compensation program.
Pursuant to this compensation program, non‑employee directors are paid an annual retainer fee and granted equity awards for their service on the Board. Committee chairs are each paid additional retainer fees and granted additional equity awards for service in these capacities. Members of the Audit Committee are granted an additional equity award for service in this capacity. Upon initial appointment to our Board, each non‑employee director is granted restricted stock units and options, each with a grant date fair value of $25,000. These awards vest on the first, second and third anniversaries of the applicable vesting commencement date, which typically coincides with the grant date. We reimburse our non‑employee directors for their reasonable expenses incurred in attending meetings of our Board and committees thereof.
Christopher J. Paucek, our Chief Executive Officer, is also a director, but does not receive any additional compensation for his service as a director.
In April 2019, upon the recommendation of the Compensation Committee and based on the annual review and assessment of our director compensation program provided by Compensia, which indicated that our director compensation fell below the 25th percentile of director compensation paid by our compensation peer group, with value of annual equity grants to our directors being the component that was most significantly lower than our peers, our Board approved increasing the annual grant of restricted stock units and options for our non‑employee directors to $200,000 in total, such that our non-employee directors will receive annual grants of restricted stock units and options, each with a grant date value of $100,000. After giving effect to this increase, our target total compensation for directors fell at approximately the 50th percentile of the compensation peer group. Our peer group of companies is discussed and identified below under “Executive Compensation—Process for Setting Compensation—Compensation Peer Group.” For the compensation year starting on April 1, 2019, our non‑employee directors were entitled to receive the following annual compensation for their service on the Board:
|
| | | |
| Position | Cash or Equity Retainer ($)(1) |
| Equity Grants ($)(2) |
| Board Chair | 5,000 |
| 15,000 |
| Board Member | 25,000 |
| 200,000 |
| Audit Committee Chair | 5,000 |
| 15,000 |
| Compensation Committee Chair | 5,000 |
| 5,000 |
| Nominating and Corporate Governance Committee Chair | 5,000 |
| 5,000 |
| Non‑Chair Audit Committee Members | — |
| 5,000 |
| |
| (1) | In 2019, our non‑employee directors elected to receive their quarterly cash retainers of $6,250 in the form of a restricted stock unit award. Each director who served as Chair of our Board or Chair of our Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee elected to receive the additional quarterly cash retainer of $1,250 in the form of a restricted stock unit award. These restricted stock unit awards vested in a single installment on April 1, 2020. |
| |
| (2) | In 2019, our non‑employee directors received annual grants of restricted stock units and options, each with a grant date value of $100,000. These annual equity awards vest on the first, second and third anniversaries of the April 1, 2019 vesting commencement date. The Chair of our Board and the Chair of our Audit Committee received an additional grant of restricted stock units with a grant date value of $15,000, which vested on April 1, 2020. Each director who served as a member of our Audit Committee (other than the Chair) or Chair of our Compensation Committee or Nominating and |
Corporate Governance Committee received an additional grant of restricted stock units with a grant date value of $5,000, which vested on April 1, 2020.
2019 Director Compensation
MANAGEMENT
Executive Officers
The following table sets forthprovides information concerningabout the compensation earned for service on our executive officers, including their ages asBoard by each of April 22, 2016:
our non‑employee directors during 2019. |
| | | | |
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | Total ($) |
| Timothy M. Haley | 30,000 | 104,937 | 100,000 | 234,937 |
| Valerie B. Jarrett | 25,000 | 99,995 | 100,000 | 224,995 |
| Sallie L. Krawcheck | 25,000 | 99,995 | 100,000 | 224,995 |
| John M. Larson | 30,000 | 104,937 | 100,000 | 234,937 |
| Earl Lewis | 25,000 | 104,937 | 100,000 | 229,937 |
| Edward S. Macias | 25,000 | 99,995 | 100,000 | 224,995 |
| Paul A. Maeder | 30,000 | 119,885 | 100,000 | 249,885 |
| Alexis Maybank | 25,000 | 144,854(3) | 138,709(3) | 308,563 |
| Gregory K. Peters | 25,000 | 104,937 | 100,000 | 229,937 |
| Coretha M. Rushing | 25,000 | 99,995 | 100,000 | 224,995 |
| Robert M. Stavis | 30,000 | 114,943 | 100,000 | 244,943 |
| |
Name
| | Age | | Position | (1) | In 2019, all non‑employee directors elected to receive their cash retainers in the form of a restricted stock unit award. Each director received 409 restricted stock units, in lieu of the $25,000 cash retainer for service as a Board member, representing a grant date fair value of $24,953. Messrs. Haley, Larson, Maeder and Stavis received an additional 81 restricted stock units, in lieu of the $5,000 cash retainer for service as Chair of our Board or Chair of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, as applicable, having a grant date fair value of $4,942. All of such restricted stock units vest in a single installment on April 1, 2020. |
|---|
Executive Officers:
| | | | | |
Christopher J. Paucek
(2) | The amounts in these columns reflect the grant date fair value for option awards and stock awards, as applicable, in accordance with ASC Topic 718. The fair value of each option award is estimated using the Black‑Scholes option pricing model. The fair value of each stock award is measured based on the closing price of our common stock on the date of grant. For more information on the assumptions we used to calculate the grant date fair values for options awards, see Note 12 to our audited consolidated financial statements included in our Annual Report on Form 10‑K filed on February 28, 2020. |
| | 45 | | Chief Executive Officer and Director |
James H. Shelton
(3) | | | 48 | | PresidentMs. Maybank joined the Board in December 2018 and, Chief Impact Officer |
Catherine A. Graham
| | | 55 | | Chief Financial Officer |
Susan E. Cates
| | | 45 | | Chief Operating Officer |
Harsha Mokkarala
| | | 36 | | Chief Marketing Officer |
James Kenigsberg
| | | 40 | | Chief Technology Officerin January 2019, received a one‑time grant of restricted stock units and options, with grant date fair values of $24,969 and $24,982, respectively. These awards vest on the first, second and third anniversaries of the January 1, 2019 vesting commencement date. In January 2019, Ms. Maybank also received a pro‑rated portion of her annual grant of restricted stock units and options for our compensation year ended March 31, 2019, with grant date fair values of $13,701 and $13,733, respectively, which reflects her partial year of service from January 1, 2019 through March 31, 2019. These annual equity awards vest on the first, second and third anniversaries of the January 1, 2019 vesting commencement date. |
Current Executive Officer Biographies
See biographyThe following table provides information about outstanding stock awards and stock options held by each of Christopher J. Paucek in "CONTINUING DIRECTORS" above.
Mr. Shelton joined our company in June 2015non‑employee directors as Chief Impact Officer and was appointed as our President and Chief Impact Officer effective January 6, 2016. Mr. Shelton oversees day-to-day management responsibility for university program implementation, research, and university relations.of December 31, 2019. Prior to joining2014, the Company, Mr. Shelton served as Deputy Secretary of the U.S. Department of Education, which he joined as Assistant Secretary in 2009. His responsibilities included managing programmaticstock options were granted under our 2008 Stock Incentive Plan (the “2008 Plan”) and, policy operations of the U.S. Department of Education. He has over twenty-five years of professional experience in education, managementsince 2014, have been granted under our Amended and business. He holds a bachelor's degree in computer science from Atlanta's Morehouse College as well as a master's degree in Business Administration and Education from Stanford University.
Ms. Cates was appointed as our Chief Operating Officer effective March 31, 2016. Prior to joining the Company, Ms. Cates served as President of Executive Development, from 2008 through 2016, and Executive Director of MBA@UNC, from 2010 through 2016, at the University of North Carolina Kenan-Flagler Business School. Previously, she worked in private equity, investment banking and commercial banking with firms and banks in New York, Dallas, and Atlanta. She serves on the board of directors and as chair of the audit committee for Primo Water (NASDAQ: PRMW) and as a director for DigiLEARN, a non-profit organization. Ms. Cates holds a B.A. from Duke University where she was a B.N. Duke Scholar and an M.B.A. from UNC Kenan-Flagler Business School where she was a Dean's Scholar.
Ms. Graham has served as our Chief Financial Officer since April 2012. Prior to that, she served as chief financial officer for Online Resources Corporation, a financial technology company, from 2002 to April 2012. Prior to that, she served as chief financial officer for VIA NET.WORKS, Inc., an Internet services and web hosting provider, from 1998 to 2002. Previously, she served in senior financial positions with Yurie Systems, a telecommunications equipment manufacturer, and other public
|
| | |
| Name | Stock Awards | Option Awards |
| Timothy M. Haley | 3,138 | 12,659 |
| Valerie B. Jarrett | 2,914 | 6,410 |
| Sallie L. Krawcheck | 2,976 | 42,009 |
| John M. Larson | 3,138 | 24,398 |
| Earl Lewis | 3,057 | 42,009 |
| Edward S. Macias | 2,976 | 19,133 |
| Paul A. Maeder | 3,383 | 24,398 |
| Alexis Maybank | 2,952 | 5,284 |
| Gregory K. Peters | 2,807 | 5,788 |
| Coretha M. Rushing | 2,976 | 12,696 |
| Robert M. Stavis | 3,302 | 24,398 |
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companies, as well as with several commercial banks. Ms. Graham holds a B.A. from the University of Maryland and an M.B.A. from Loyola University Maryland.
Mr. Mokkarala was appointed as our Chief Marketing Officer effective January 6, 2016. Mr. Mokkarala joined the Company in September 2013 to lead our data driven marketing function. From 2004 to 2013, Mr. Mokkarala held various roles at Capital One in digital marketing and ultimately managed all facets of online marketing for Capital One's credit card acquisitions group. Mr. Mokkarala has over nine years of experience in data driven online marketing. He holds a master's degree in Computer Engineering from the University of Wisconsin, Madison.
Mr. Kenigsberg has served as our Chief Technology Officer since July 2010 and previously as Chief Information Officer from September 2008 to June 2010. From 2000 to 2008, Mr. Kenigsberg held various leadership positions at The Princeton Review, including from 2004 to 2008 as vice president of application development and product development. Prior to that, he served as technical project manager at Ogilvy & Mathers in 2000 and as project engineer at Thomson Reuters from 1998 to 2000. Mr. Kenigsberg attended Hunter College.
Resigning Executive Officer Biographies
Mr. Cohen served as our President from November 2013 until January 6, 2016. He served as our Chief Operating Officer from April 2012 to March 31, 2016. He served as our Chief Financial Officer from our inception in 2008 until April 2012. From 2001 to 2008, Mr. Cohen held a number of senior roles at The Princeton Review, including as executive vice president of strategic development and executive vice president and general manager of K12 Services. From 1985 to 2001, Mr. Cohen founded and operated a franchise of The Princeton Review, before selling the franchise back to that company. Mr. Cohen attended Princeton University.
Mr. Rinehart served as our Chief Marketing Officer from March 2011 to January 6, 2016. Prior to joining 2U, from 2000 to 2011, Mr. Rinehart worked for Capital One Financial Corporation, a financial services company, in a series of progressively more senior leadership roles in its Marketing and Analysis division, including most recently as vice president of marketing strategy for Capital One's consumer credit card division. Mr. Rinehart holds a B.S. and a master's degree in Economics from East Carolina University.
We are committed to conducting our business in a way that reflects best practices, as well as the highest standards of legal and ethical conduct. We want to be a company of integrity and to be perceived as such by everyone who comes in contact with us. To that end, the Board has approved a comprehensive system of corporate governance documents. These documents meet or exceed the requirements established by the NASDAQNasdaq listing standards and by SEC rules and are reviewed periodically and updated as necessary to reflect changes in regulatory requirements and evolving oversight practices. These policies embody the principles, policies, processes and practices followed by the Board, executive officers and employees in governing the Company, and serve as a flexible framework for sound corporate governance.
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Code of Business Conduct and Ethics for Employees, Executive Officers and Directors
We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors, in accordance with NASDAQNasdaq listing standards and applicable SEC rules. The Code of Conduct is available on our website atat: http://investor.2u.com/investor.2u.com. The Nominating and Corporate Governance Committee of our Board is responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. Any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed in accordance with NASDAQNasdaq listing standards byand applicable SEC rules. We intend to satisfy the disclosure requirements under the Exchange Act regarding an amendment to or waiver from a provision of the Code of Conduct by posting such information on our website.
Corporate Governance Guidelines
We have adopted Corporate Governance Guidelines that address the composition of the Board, criteria for Board membership and other Board governance matters. Our Corporate Governance Guidelines are available on our website at: http://investor.2u.com.
Stock Ownership Guidelines
In April 2020 we adopted stock ownership guidelines for our Named Executive Officers and non-employee directors. Within five years from becoming subject to the guidelines our Named Executive Officers and non-employee directors are required to own shares of our common stock with a value at least equal to the following: |
| | | |
| Non-Employee Director | Chief Executive Officer | Chief Financial Officer | Other Covered Executives (Including all other NEOs) |
| 3x annual cash retainer* | 3x annual base salary | 2x annual base salary | 1x annual base salary |
| * annual cash retainer excludes any fees for serving as Chair of the Board or serving as chair of a committee or member of the audit committee |
Shares counted towards meeting the ownership guidelines include (i) shares owned directly or indirectly, (ii) shares held by a qualifying trust, (iii) shares held by a 401(k) plan or other qualified pension or profit-sharing plan for the benefit of the Named Executive Officer or non-employee director and (iv) shares underlying vested restricted stock units where settlement of such shares has been deferred. Each executive or non-employee director, as applicable, remains subject to the stock ownership guidelines as long as they remain in their role. Exceptions to the guidelines may be made in the case of extraordinary circumstances, such as personal hardship, in the Compensation Committee’s sole discretion.
Anti‑Hedging and Anti‑Pledging Policies
Our insider trading policy provides that no one subject to the policy, which includes all Company officers, directors and employees, as well as consultants and contractors who may have access to inside information (each, an “Insider”) may engage in the purchase of
Contentsfinancial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company securities. Our insider trading policy further provides that no Insider may engage in hedging or monetization transactions involving our securities, pledge our securities as collateral for a loan, or hold our securities in a margin account.
Whistleblower Procedures
In accordance with the Sarbanes‑Oxley Act, we have established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters and for the confidential, anonymous submission of concerns regarding such matters. If an individual has a concern regarding questionable accounting, internal accounting controls or auditing matters or the reporting of fraudulent financial information, such individual may report his or her concern by sending a letter (which may be anonymous at the discretion of the reporting person) to us at our principal executive offices to the attention of the Compliance Officer (as defined in our Whistleblower Policy) or Chair of the Audit Committee. Individual employees may also report their concerns by telephone, email or online (which may be anonymous at the discretion of the reporting person) by using our ethics reporting system. The Audit Committee will be promptly notified of all complaints received that relate to accounting, internal accounting controls, or auditing matters.
Our Commitment to Corporate Responsibility and Environmental, Social and Governance Matters
We recognize the impact that a business can have on its surrounding community and environment and believe that an organization has the responsibility to be a good corporate citizen. We also value our employees and recognize the critical roles that they play in the achievement of our long-term goals and overall success. The following is intended as a summary of some of the steps we have taken to create a safe, inclusive and positive workplace for our employees and to provide meaningful relationships and a lasting impact in our local communities. Additional information can be found at: PROPOSAL TWO—http://investor.2u.com.
Societal Impact
We believe that higher education is a powerful driver of upward social mobility. 2U is increasing access to learning opportunities for people around the world by building, delivering and supporting more than 400 digital and in-person educational offerings, including graduate degrees, undergraduate degrees, professional certificates, boot camps and short courses. Together with our university clients, we have positively transformed the lives of more than 215,000 students and lifelong learners. With our offerings, students can pursue their education anytime, anywhere, without quitting their jobs or moving and university clients can provide broader access to their educational offerings, thereby improving outcomes, skills attainment, and career prospects for a greater number of students. Moreover, our offerings are helping university clients address the critical needs of society—2U-powered offerings in health care disciplines are helping to fill critical staffing shortages in nursing and other health care fields and our boot camps are helping companies bridge digital skills gaps by providing training in fields such as engineering, cybersecurity and artificial intelligence.
Our programs also create greater access to higher education. Compared to the national average, our graduate degree programs enroll a higher percentage of diverse students and the average actual cost and debt burden of attending a 2U-powered program is often less than on-campus programs due to ongoing income students can earn and room and board savings.
We believe our business contributes towards the achievement of several U.N. Sustainable Development Goals (SDGs), including Goal #3 – “Ensure healthy lives and promote well-being for all at all ages” and Goal #4 – “Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all”.
Human Capital
We believe that our employees are our greatest asset and that when people feel appreciated and included, they can be more creative, innovative and better serve our university clients and students. We are committed to having a workforce that will enable the long-term success of our business. The following is a summary of certain programs we have implemented to help us attract, retain and inspire key talent and highlights of workplace recognitions we received for 2019:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
We maintain Business Resource Networks (“BRNs”) which foster a diverse and inclusive workplace aligned with our mission and business goals and reflect our commitment to create and sustain a diverse workplace. We currently have BRNs representing the following groups and their allies: Black/African American, Women, LGBTQ+, Asian Pacific Islander and Latinx.
We take pay equity seriously and conduct regular internal assessments on pay disparities and make adjustments as necessary.
We offer a tuition reimbursement benefit for all of our employees. Eligible employees can receive a one‑time reimbursement of the cost of tuition to complete a 2U‑powered graduate program offered by our university clients, and reimbursement for the cost of one short course per rolling twelve-month period. In addition, we pay 50% of the tuition for one spouse or dependent of each eligible employee to complete one of our university clients’ eligible graduate programs.
We actively promote a number of benefits and programs to support the health and welfare of our employees including on-site gyms and access to other local health and wellness resources.
We participate in the Great Place to Work survey to measure and track employee engagement annually. In 2019, 85% of US employees reported feeling that 2U is a great place to work and the Company was certified as a Great Place to Work for the second consecutive year.
In 2019, the Company was named a top workplace by the Washington Post for the fifth consecutive year and by the Denver Post for the third consecutive year.
In 2019, the Company was one of 325 companies included on the Bloomberg 2020 Gender-Equality Index for its commitment to advancing women in the workplace through measurement and transparency.
Community Involvement
We promote corporate social responsibility by encouraging our employees to take part in social and community volunteering that leaves a lasting impact in our local communities. For example, in 2019:
Through the Company’s corporate social responsibility program, called 2U Engage, we support nine regional non-profits whose work aligns with our mission of providing access to education. Through these community partnerships, our employees are able to give back to their local communities through volunteering, fundraising, in-kind donations and pro-bono services.
We host Days of Service, a bi-annual event that allows 2U employees to give back to their communities through volunteering and donations.
Employees receive “Volunteer Paid Time Off” and are encouraged to use this time to make a difference in their communities.
We partnered with the International Rescue Committee to launch a 2U sponsored scholarship program for IRC employees.
Environmental Impact
Our digital offerings enable students to access educational offerings without moving or regularly commuting to a campus location. In addition, we are working to integrate sustainability initiatives into our general business practices. The following is a summary of some of the programs we have put in place to reduce the impact that our operations have on the environment:
PUBLIC ACCOUNTING FIRM
We have implemented a print management system to reduce paper and printing use.
We responsibly manage and dispose of our electronic waste by e-cycling or wiping and donating electronics to be repurposed at other organizations.
We limit our electrical and cooling needs by maintaining minimal IT equipment running on-premise, instead relying on cloud providers.
Our Denver office is LEED certified.
All of our major offices (Lanham, Denver, Brooklyn and Cape Town), are designed to reduce greenhouse emissions by energy conservation and energy efficiency efforts, including through setting lights at 75%, relying on sensors to turn off lights when not in use and using Energy Star-rated appliances and WaterSense plumbing fixtures.
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PROPOSAL TWO— RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The Audit Committee appointed KPMG LLP, independent registered public accounting firm, to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 2020. As a matter of good corporate governance, the Company’s stockholders will be requested to ratify the Audit Committee’s selection at the Meeting. KPMG LLP has audited the Company’s consolidated financial statements since 2013. Although there is no requirement that KPMG LLP’s appointment be terminated if the ratification fails, the Audit Committee will consider the appointment of other independent registered public accounting firms if the stockholders choose not to ratify the appointment of KPMG LLP. The Audit Committee may terminate the appointment of KPMG LLP as our independent registered public accounting firm without the approval of the stockholders whenever the Audit Committee deems such termination appropriate. KPMG LLP has affirmed that they are not aware of any relationships between KPMG LLP and the Company that may reasonably be thought to bear on their independence. A representative of KPMG LLP is expected to be present (virtually) at the Meeting. The representative will have the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate stockholder questions at the Meeting. |
THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. |
Pre‑Approval of Audit and Permissible Non‑Audit Services
The Audit Committee of our Board is responsible for the appointment, oversight and evaluation of our independent registered public accounting firm. The Audit Committee has the sole and direct authority to engage, appoint and replace our independent auditors. In addition, the Audit Committee has established in its charter a policy that every engagement of the Company’s independent registered public accounting firm to
perform audit
the consolidated financial statementsor permissible non‑audit services on behalf of the Company
for the 2016 fiscal year ending December 31, 2016. As a matteror any of
good corporate governance, the Company's stockholders will be requested to ratify the Audit Committee's selection at the Meeting. KPMG LLP has audited the Company's consolidated financial statements since 2011. Although there is no requirement that KPMG LLP's appointment be terminated if the ratification fails,its subsidiaries requires pre‑approval from the Audit Committee will consider the appointment of otheror its designee before such independent registered public accounting firms iffirm is engaged to provide those services. Our independent registered public accounting firm may not be retained to perform the stockholders choose notnon‑audit services specified in Section 10A(g) of the Exchange Act. Pursuant to ratifyits charter, the appointment of KPMG LLP. The Audit Committee may terminate the appointment of KPMG LLP asreviews and, in its sole discretion, approves in advance our independent registered public accounting firm’s annual engagement letter, including the proposed fees contained therein, as well as all audit and, as provided in the Sarbanes‑Oxley Act of 2002 and the SEC rules and regulations promulgated thereunder, all permitted non‑audit engagements and relationships between the Company and such independent registered public accounting firm without(which approval should be made after receiving input from the approval ofCompany’s management, if desired). All fees for fiscal 2019 were pre‑approved by the stockholders wheneverAudit Committee.
With respect to the audit for the years ended December 31, 2019 and 2018 the Audit Committee
deems such termination appropriate. Amounts paidapproved the audit services performed by us to KPMG LLP, for as well as certain categories and types of tax and permitted non‑audit and non-audit services rendered in 2014 and 2015 are disclosed in the section entitled "Independentservices.
Independent Registered Public Accounting Firm Fees."Fees
Aggregate fees for professional services rendered by KPMG LLP for the years ended December 31, 2019 and 2018, were:
|
| | | | | | |
| Type of Fee | 2019 | 2018 |
| Audit Fees(1) |
| $2,940,177 |
|
| $1,875,633 |
|
| Audit‑Related Fees | — |
| — |
|
| Tax Fees(2) | — |
| 20,000 |
|
| All Other Fees(3) | — |
| 1,780 |
|
| Total Fees |
| $2,940,177 |
|
| $1,897,413 |
|
| |
| (1) | Audit fees consisted of work performed in connection with the audit of our consolidated financial statements included in our registration statements on Form S‑3, our Annual Reports on Form 10‑K, the reviews of the unaudited quarterly financial statements included in our Quarterly Reports on Form 10‑Q and statutory audit fees in overseas jurisdictions. |
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| (2) | Tax fees consisted of services related to tax planning and advisory services, tax consultations and tax compliance services. |
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| (3) | All other fees consisted of products and services related to an online accounting research tool. |
AUDIT COMMITTEE REPORT*
The Board has
affirmed that they are not awareultimate authority and responsibility for effective corporate governance, including the role of
any relationships between KPMG LLPoversight of the management of 2U. The Audit Committee’s purpose is to assist the Board in fulfilling its responsibilities to the Company and its stockholders by overseeing the accounting and financial reporting processes of 2U, the audits of 2U’s consolidated financial statements and the
Company that may reasonably be thought to bear on their independence. A representativequalifications, selection and performance of KPMG LLP is expected to be present at the Meeting. The representative will have the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate stockholder questions at the Meeting.
Company’s independent registered public accounting firm.
The Audit Committee approves the annual audit feereviews our financial reporting process on behalf of the Company'sBoard. The Audit Committee relies on the expertise and knowledge of management and the independent auditors.auditor in carrying out its oversight responsibilities. Management has the primary responsibility for establishing and maintaining effective systems of internal and disclosure controls, for preparing financial statements, and for the public reporting process. KPMG LLP, 2U’s independent registered public accounting firm, is responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on our internal control over financial reporting.
With respect to the fiscal year ended December 31, 2019, the Audit Committee, among other things: oversaw the integrity of the Company’s financial statements and financial reporting processes, oversaw compliance with legal and regulatory requirements, reviewed the external auditors’ qualifications and independence (including auditor rotation), and evaluated the external auditors’ performance.
The Audit Committee has reviewed and discussed with management and KPMG LLP the audited consolidated financial statements for the year ended December 31, 2019. The Audit Committee also establishes pre-approved limits for whichdiscussed with KPMG LLP all matters required to be discussed by the Company's management may engage the Company's independent auditors for specific services. Any work which exceeds these pre-approved limits requires the advance approvalapplicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission. In addition, the Audit Committee. All feesCommittee has received from KPMG LLP the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence, and the Audit Committee has had discussions with KPMG LLP regarding its independence from the Company and its management.
Based on the reviews and discussions described above, the Audit Committee recommended to our Board, and the Board approved, inclusion of the audited consolidated financial statements for the fiscal year ended December 31, 2019 in our Annual Report on Form 10‑K for the year ended December 31, 2019 for filing with the SEC. The Audit Committee and the Board have selected KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2015 were pre-approved by the Audit Committee.THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE RATIFICATION OF
THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.year 2020.
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| Submitted by the Audit Committee |
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| Robert M. Stavis (Chair)
Earl Lewis
Paul A. Maeder
Gregory K. Peters |
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| * | The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing of 2U under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that 2U specifically incorporates the Audit Committee Report by reference therein. |
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PROPOSAL THREE—ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION |
The Dodd‑Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act require a separate, nonbinding “say‑on‑pay” stockholder vote to approve the compensation of Named Executive Officers. The Board currently intends to hold this vote annually, and the next such vote is expected to occur at the 2021 annual meeting of stockholders. The compensation paid to our Named Executive Officers and the Company’s overall executive compensation policies and procedures are described in the “Compensation Discussion and Analysis” and the tabular disclosure (together with the accompanying narrative disclosure) in this Proxy Statement. This proposal gives you, as a stockholder, the opportunity to endorse or not endorse the compensation paid to the Company’s Named Executive Officers through the following resolution: “RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the tabular disclosure regarding Named Executive Officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.” Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee will consider the outcome of the vote when evaluating the effectiveness of our compensation policies and procedures and in connection with its future executive compensation determinations. |
THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” THE APPROVAL OF THE
COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS
PROXY STATEMENT. |
MANAGEMENT
Executive Officers
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| Name | Age | Position |
| Christopher J. Paucek | 49 | Chief Executive Officer and Director |
| Paul S. Lalljie | 47 | Chief Financial Officer |
| Mark J. Chernis | 53 | Chief Operating Officer |
| James Kenigsberg | 44 | Chief Technology Officer |
| Matthew J. Norden | 38 | Chief Legal Officer |
| John B. Ellis | 52 | Chief Accounting Officer |
Current Executive Officer Biographies
Christopher J. Paucek.
See biography of Christopher J. Paucek in “Class I—Directors with Terms Expiring at the 2021 Annual Meeting of Stockholders” above.
Paul S. Lalljie.
Paul S. Lalljie has served as our Chief Financial Officer since October 2019. Prior to that, he served as Chief Financial Officer for Neustar, Inc. from June 2009 to February 2018. From February 2000 until his appointment as Chief Financial Officer, Mr. Lalljie held various leadership positions at Neustar, Inc., including Senior Vice President, Interim Chief Financial Officer and Treasurer, Vice President, Financial Planning & Analysis, and Vice President, Finance and Investor Relations.
Mark J. Chernis.
Mr. Chernis has served as our Chief Operating Officer since May 2018. Prior to that, he served on our Board since January 2009, including as Audit Committee chair from July 2016 to April 2018. From 2011 until May 2018, Mr. Chernis served in various senior roles at Pearson, including as the Senior Vice President of Strategic Partnerships and Investments from January 2014 to 2018 and President & Chief Operating Officer of the K‑12 Technology Division from June 2011 to January 2014. Previously, Mr. Chernis was the President and Chief Operating Officer of SchoolNet from March 2008 until its acquisition by Pearson in 2011. From 1984 to 2007, Mr. Chernis held various positions at The Princeton Review, most recently serving as its President from 1995 to November 2007. Mr. Chernis also currently serves on the boards of several private companies. Mr. Chernis holds a B.A. from Vassar College.
James Kenigsberg.
Mr. Kenigsberg has served as our Chief Technology Officer since July 2010 and previously as Chief Information Officer from September 2008 to June 2010. From 2000 to 2008, Mr. Kenigsberg held various leadership positions at The Princeton Review, including from 2004 to 2008 as Vice President of application development and product development. Prior to that, he served as technical project manager at Ogilvy & Mathers in 2000 and as project engineer at Thomson Reuters from 1998 to 2000. Mr. Kenigsberg attended Hunter College.
Matthew J. Norden.
Mr. Norden has served as our Chief Legal Officer since December 2019 and previously served as Co-General Counsel from August 2017 to December 2019, Deputy General Counsel from November 2014 to August 2017 and as Associate General Counsel from September 2013 to November 2014. From June 2010 to September 2013, Mr. Norden served as Vice President and General Counsel of TOMS Shoes. Prior to that, he was an associate at the law firm Skadden, Arps, Slate, Meagher and Flom, LLP. Mr. Norden holds a B.A. in Psychology from The George Washington University and a J.D. from Georgetown University Law Center.
John B. Ellis.
Mr. Ellis has served as our Chief Accounting Officer since May 2018. Prior to that, he served in various roles at Newell Brands, a global consumer products company, including as Vice President Finance, Transformation from February 2017 to December 2017, Vice President Treasurer & Finance Operations from December 2014 to February 2017, Vice President, Corporate Controller & Chief Accounting Officer from December 2007 to December 2014 and Vice President, Mergers and Acquisitions from June 2003 to December 2007. Mr. Ellis started his career at Ernst & Young where during his ten years at the firm, he served in various accounting advisory and assurance roles. Mr. Ellis is a CPA and holds a B.B.A. in Accounting from Loyola University Maryland and an M.B.A. from Johns Hopkins University.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides an overview of the material components of our executive compensation program during fiscal year
20152019 for:
Christopher J. Paucek, our Chief Executive Officer and Director;
•James H. Shelton,
Paul S. Lalljie, our Chief ImpactFinancial Officer;
•Robert L. Cohen, our President and Chief Operating Officer during fiscal year 2015;
•
Catherine A. Graham, our former Chief Financial Officer;
•Jeff C. Rinehart,Mark J. Chernis, our Chief Marketing Officer during fiscal year 2015; and
•Operating Officer;Harsha Mokkarala, our Chief Revenue Officer;
James Kenigsberg, our Chief Technology Officer; and
Matthew J. Norden, our Chief Legal Officer.
In October 2019, Mr. Mokkarala transitioned from focusing on Company-wide marketing and sales to focusing on marketing, sales and product development for our boot camp business. Mr. Mokkarala remains our Chief Revenue Officer but was not an executive officer at fiscal year-end.
We refer to these
executive officersindividuals collectively in this Compensation Discussion and Analysis and the accompanying compensation tables as our Named Executive
Officers (NEOs).Officers. The compensation provided to our
NEOsNamed Executive Officers for fiscal year
20152019 is set forth in detail in the Summary Compensation Table and other tables that follow this section, as well as the accompanying footnotes and narratives relating to those tables. This section also discusses our executive compensation philosophy, objectives and design; how and why the Compensation Committee of our Board
of Directors arrived at the specific compensation policies and decisions involving our
the NEOs,Named Executive Officers, during fiscal year
2015;2019; the role of Compensia, our outside compensation consultant; and the peer group used in evaluating executive officer compensation.
This Compensation Discussion and Analysis contains forward‑looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation plans and arrangements. The actual compensation plans and arrangements that we adopt may differ materially from currently anticipated plans and arrangements as summarized in this Compensation Discussion and Analysis.
Executive Summary
2015 Financial
Significant 2019 Business Highlights
2019 was a year of tremendous progress in positioning the Company for the future of higher education and
Business Highlights Wethe future of society. In 2019, the Company:
Delivered full-year revenue growth of 40%.
Made significant investments in new product launches and product lines, which resulted in a short-term increase in losses in order to drive future growth and solidify its leadership position long-term.
Added the boot camp product line and doubled its partner base through the acquisition of Trilogy, creating a new entry point on the Career Curriculum Continuum and radically expanding its capabilities to meet demand in STEM disciplines.
Launched 17 new graduate programs, enhancing its leadership position in the market by adding offerings across more universities and academic disciplines.
Continued to bolster the senior leadership team to prepare for increased scale, adding decades of experience across our finance, marketing, and product teams.
University demand is increasing and more students are taking blended or fully digital courses than ever before.
The Company is a leading provider of cloud-based software-as-a-service, or SaaS, technology fused with technology-enabled services, which we refer to as our Platform. Our Platform enables leadingmarket leader in helping nonprofit colleges and universities succeed in the digital age and is a trusted partner and brand steward to deliver their73 leading institutions. Our shared success model allows our university clients to launch online offerings without significant financial risk and to focus resources on other core academic or institutional priorities.
The Company builds, delivers, and supports a portfolio of more than 400 digital and in-person educational offerings, including graduate degrees, undergraduate degrees, professional certificates, boot camps, and short courses, across the Career Curriculum Continuum.
Together with its university clients, the Company has positively transformed the lives of more than 215,000 students.
Higher education is a powerful driver of upward social mobility. The Company increases access to high-quality educational offerings.
Our degree offerings in licensure-based disciplines help train the next generation of health care workers across fields including nurses, social workers, pharmacists, and others.
Our boot camps are re-skilling and up-skilling workers to fill the tech-driven jobs of today and tomorrow. These offerings provide access to high quality,
educationin-demand training to
qualified students anywhere. In 2015, we achieved significant financialunderserved populations.
Evolving our Executive Compensation Program and business results:•- Consideration of “Say‑on‑Pay” Voting Results
At the Company’s 2019 annual meeting of stockholders, the Company’s say-on-pay vote garnered stockholder support of 34% of the shares present or represented by proxy. We increasedwere disappointed in this outcome and, in response, have implemented meaningful changes to our revenue from $110.2 million in 2014 to $150.2 million in 2015.
•We improved our Adjusted EBITDA loss from $14.8 million in fiscal year 2014 to $6.6 million in 2015.
•Full course equivalent enrollments in our clients' programs grew from 41,034 in 2014 to 57,019 in 2015.
•In September 2015, we received net proceeds of $117.1 millionexecutive compensation practices based on feedback from our follow-on offering of common stock.
•From inception through December 31, 2015, more than 17,500 unique individuals have enrolled as students instockholders on potential improvements to our clients'executive compensation programs and 84%the Compensation Committee’s consideration of students who have entered these programs have either graduated or remain enrolled.
•Threebest practices in corporate governance. The Compensation Committee established base salaries and the structure and amount of equity awards for our 14 clients who have launched programs with us extendedNamed Executive Officers prior to the initial termssay-on-pay vote regarding 2018 executive compensation, which took place in June 2019. Consequently, some changes that the Compensation Committee implemented in response to the say-on-pay vote at the 2019 Annual Meeting of four program agreements to 2027-2032.Stockholders did not take effect until 2020.•We were named a "Top Workplace" in the Washington, D.C. region in one publication.
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| What we heard | | How we responded |
The special one-time equity grant to our CEO in April 2018 and resulting magnitude of his overall 2018 compensation was not adequately aligned with our pay for performance philosophy.
| | The Compensation Committee did not make any special or off-cycle equity awards to Mr. Paucek in 2019. Mr. Paucek’s total annual compensation in 2019 (as reported in the Summary Compensation Table) increased less than 0.5% over his total annual compensation for 2018 (as reported in the Summary Compensation Table not including the special one-time equity grant made in April 2018).
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Named Executive Officer compensation structure should have performance-based components to incentivize Company performance and align the interests of our top executives with those of our stockholders.
| | The Compensation Committee introduced a relative total stockholder return metric to our long-term equity compensation program for our Named Executive Officers. As a result of this increased focus on performance-based metrics, in 2019 approximately 88% of total target compensation was variable, or “at-risk”, on average, for our Named Executive Officers and in 2020, we expect that approximately 90% of total target compensation will be at-risk.
We adhered to our pre-established metrics under our bonus program and did not make any payouts to our Named Executive Officers under our 2019 bonus plan, which was based on achievement of revenue and adjusted EBITDA targets, when Company performance fell below threshold performance levels. |
The Company does not have stock ownership guidelines or a clawback policy that would serve to further mitigate risk and align executive interests with those of our stockholders.
| | The Company adopted:
• stock ownership guidelines for all of our Named Executive Officers and non-employee directors; and • a clawback policy that applies to all executive officers and allows the Company to recoup cash and equity incentive compensation in the event of a financial restatement due to material non-compliance with any financial reporting requirement. |
Executive Compensation Highlights
Consistent with our general compensation philosophy, we strive to provide a compensation package to each executive officer, including our Named Executive Officers, that is competitive, rewards
Table of Contents
achievement of our business objectives, drives the development of a successful and growing business, and aligns the interests of our Named Executive Officers'Officers with our stockholders through equity ownership in the Company. Our 20152019 compensation actions and decisions reflect our financial results and business performance and our executive officers'Named Executive Officers’ accomplishments that helped achieve these results and performance.
The Compensation Committee took the following actions with regard to its review and analysis of
20152019 compensation for our Named Executive Officers:
•Reviewed, assessed and updated the prior peer group of comparable public companies, selected with the assistance of an independent compensation consultant, to inform our decision making process and assist in ensuring that our executive compensation program is positioned to be competitive and aligned with our business objectives at the current stage of the Company's growth;
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| ▪ | September 2018: Reviewed and assessed the peer group of comparable public companies, selected with the assistance of Compensia, our independent compensation consultant, to inform our decision‑making process and assist in ensuring that our executive compensation program is positioned to be competitive and aligned with our business objectives at the current stage of the Company’s growth; |
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| ▪ | January 2019: Consistent with the Company’s pay for performance philosophy, the Compensation Committee approved a bonus plan with payout tied to achievement of revenue and adjusted EBITDA targets; |
•As a result of its overall review, including comparisons against our peer group, increased the base salary and target cash incentive compensation opportunities for all of our Named Executive Officers; and
•Approved equity awards to our Named Executive Officers, at levels consistent with our philosophy of more heavily weighting equity ownership, to address our retention objectives and reward individual performance. | |
| ▪ | April 2019: Approved annual equity awards to our Named Executive Officers, at levels consistent with our philosophy of more heavily weighting equity ownership, to address our retention objectives, reward individual performance and align the long‑term interests of Named Executive Officers with those of our stockholders; |
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| ▪ | April 2019: As a result of its overall review, including comparisons against our peer group, increased the base salary for all of our Named Executive Officers; |
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| ▪ | October 2019: Granted PRSUs, other than to the CEO, that are eligible to vest based on the Company’s total stockholder return (“TSR”) relative to the TSR of the companies in the Russell 3000 Index, in order to encourage retention of our executives and increase the alignment of our executive compensation structure with Company performance and stockholder value; and |
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| ▪ | February 2020: Consistent with the Company’s pay for performance philosophy, the Compensation Committee determined not to make any payouts to Named Executive Officers under the 2019 Bonus Plan because the Company’s performance fell below threshold performance levels for revenue and adjusted EBITDA. |
We endeavor to maintain good governance standards in our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program annually to ensure that it is consistent with our
short-termshort‑term and
long-termlong‑term goals given the dynamic nature of our business and the market in which we compete for executive talent.
The following policies and practices were in effect during 2015:•Independent Compensation Committee. The Compensation Committee consists solelyBelow is a summary of independent directors and is responsible for making allthe executive compensation decisions.
•Annual Executive Compensation Review. The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation peer group.
•No "Single Trigger" Change in Control Payments for Executive Officers. Wepractices we have implemented to help drive executive performance, as well as practices we have chosen not to implement because we believe such practices do not provide change in control payments tosupport our Named Executive Officers. Further, equity awards to our Named Executive Officers provide for vesting acceleration of unvested awards only on a "double trigger" basis—that is, each Named Executive Officer is eligible to receive vesting acceleration of a portion or all of their unvested awards in connection with a change in control of the Company only if the employment of such Named Executive Officer terminates without cause or for good reason on or within 12 months after the change in control.
•Compensation At-Risk. Our executive compensation program is designed so that a significant portion of total compensation is "at-risk," including performance-based annual bonuses, which are based largely on corporate performance, and equity-basedstockholders’ long-term incentives to align the interests of our Named Executive Officers and stockholders. Equity awards granted to our Named Executive Officers typically vest or are earned over four-year periods, consistent with current market practice and our retention objectives.
•No Post-Termination Benefits. Except in the case of our Chief Executive Officer and President and Chief Operating Officer, we have not provided or promised post-termination retirement or pension-type non-cash benefits for our executive officers.
•Restrictions on Transactions in Our Securities. Our insider trading policy prohibits our employees, including our Named Executive Officers, from conducting, among other things, short sales,
interests.
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| What we do | What we don’t do |
üEmphasize Pay-for-Performance – Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on Company performance, to align the interests of our executives and stockholders. | X No Hedging or Pledging – We prohibit our executive officers from engaging in margin, hedging, pledging or other similar transactions in our securities.
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üAnnual “Say-on-Pay” Vote – We conduct our “say-on-pay” vote annually to allow our stockholders to provide us with their direct input on our executive compensation program, policies and practices.
| X No Excise Tax Gross-Ups – We do not provide our executive officers with excise tax gross-ups. |
üCompensation Recovery (“Clawback”) Policy – The incentive-based compensation paid to our executive officers is subject to an executive compensation recovery, or “clawback” policy, in the event of a financial restatement due to material non-compliance with any financial reporting requirement. | X Limited Perquisites – We provide limited perquisites or other personal benefits to our Named Executive Officers. |
üIndependent Compensation Consultant – Our Compensation Committee has retained a compensation consultant to serve as its independent advisor. The compensation consultant reports directly to our Compensation Committee and provides the Compensation Committee with competitive market data and additional information needed to make informed compensation decisions.
| X No Special Welfare or Health Benefits – Our Named Executive Officers participate in broad-based company-sponsored health and welfare benefit programs on the same basis as our other full-time, salaried employees.
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üUse Double-Trigger Change in Control Provisions – Our time-based equity awards contain a “double-trigger” payment provision in connection with a change in control, that is, accelerated vesting in connection with a change in control generally requires both a change-in-control of the Company and an involuntary termination of employment.
| X No Guaranteed Compensation Increases – We do not provide automatic or pre-scheduled increases in base salary for Named Executive Officers.
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üAnnual Executive Compensation Review – The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review and determination of our compensation peer group used for comparative purposes.
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üAvoid Undue Risk-Taking – Our compensation policies and practices are designed to discourage our executive officers from taking on or creating risks that are reasonably likely to have a material adverse effect.
| |
üStock Ownership Guidelines – All of our Named Executive Officers and non-employee directors are required to, within 5 years from becoming subject to the guidelines, own shares of our common stock having an aggregate value at least equal to (i) 3 times annual base salary for our CEO, (ii) 2 times annual base salary for our CFO, (iii) 1 times annual base salary for our other Named Executive Officers and (iv) 3 times the annual cash retainer for our non-employee directors. | |
Executive Compensation Philosophy, Objectives and Design
We operate in a highly fragmented, rapidly evolving and competitive market, and we believe that our ability to compete and succeed in this environment is directly correlated to our ability to recruit, incentivize and retain skilled teams in technology, content development, marketing and other business professionals.areas. The market for skilled personnel in the technology industry is veryhighly competitive. Further, because of our small number of clients and the significant nature of each new university client relationship, our senior management team is heavily involved in the client identification and sales process for each university client, and their expertise is
critical in navigating the complex approval processes of large nonprofit colleges and universities. Our compensation
philosophyprogram is designed to
establishattract and
maintain a compensation program that attracts and retainsretain talented individuals who possess the skills necessary to create
long-termlong‑term value for our stockholders, grow our business while maintaining our dedicated focus on quality, and assist in the achievement of our strategic goals.
The key elements of our total compensation philosophy include the following:
Company Ownership.Align Interests with Stockholders. We believe that equity ownership by employees, including our Named Executive Officers, is a critical retention tool and emphasizes long-termlong‑term results and aligns the interests of our employees, Named Executive Officers and stockholders. Focus on results.Pay for Performance. Our executive compensation program is weighted towards at-risk, performance-basedat‑risk, performance‑based compensation. A significant portion of our Named Executive Officers'Officers’ compensation is at-riskat‑risk and dependent upon our performance. Fair, FlexibleAttract, Motivate and Results-Oriented.Retain Top Talent. We design our compensation structure to provide market-competitive base salaries and employee benefits that allow us to hire and retain high-caliber individuals at all levels. We believe our compensation programs reward results and to drive excellence and consistency across the Company, while recognizing inherent differences between functions.
Our executive compensation program is designed to reflect our compensation philosophy and typically consists of three components: base salary, annual cash bonus opportunity and long‑term incentive bonus plan provides that employees who focus on a particular clientawards. In 2019, 50% of the total target value of each Named Executive Officer’s annual long-term incentive awards was delivered in the form of options to purchase shares of our common stock and 50% was delivered in the form of time-based RSUs. Starting in 2020, 75% of the total target value of each Named Executive Officer’s annual long-term incentive awards is expected to be delivered in the form of performance-based RSUs (“PRSUs”) and 25% is expected to be delivered in the form of time-based RSUs.
The table below summarizes how the various components of our executive compensation program
would have their bonus payout weighted more heavily towardare designed to achieve our compensation objectives and highlights the
applicable client program's performance and corporate employees would have their bonus payout weighted more heavily toward overall corporate performance.changes made to our executive compensation program from 2019 to 2020:
Our executive compensation program has been heavily weighted towards
equity. Our Compensation Committee determined thatat-risk compensation in the form of
long‑term equity
incentive awards. Our Compensation Committee believes that equity‑based compensation helps to align our
executivesexecutives’ interests with the
long-termlong‑term interests of our stockholders by driving achievement of our strategic and financial goals.
Prior toIn 2019, our
becoming a public company in April 2014, ourNamed Executive Officers received 50% of their annual equity
compensation program was largelyaward in the form of
stock option grants. Following our initial public offering, we shifted to a mix of RSUs settled in shares of common stock and stock options as our primary equity vehicles for all equity-eligible employees, including our Named Executive Officers. Our Named Executive Officers typically receive 50% of their equity awards in the form oftime-based RSUs and 50% in the form of stock options. We
believe thatgrant options
which we grant with exercise prices equal to the fair market value of our common stock on the date of grant
provide an appropriate long-term incentive forso that recipients
since the options reward our NEOsare only
rewarded to the extent that our stock price appreciates
onfollowing the grant date. Although we believe that options can provide an appropriate long‑term incentive for recipients and align the interests of recipients and stockholders, starting in 2020, the Compensation Committee replaced options with PRSUs in response to shareholder feedback that a
sustained basis following their grant date.larger portion of our equity awards be tied to performance metrics. Time-based RSUs, while also providing an appropriate
long-termlong‑term incentive to recipients, due to their
long-termlong‑term vesting schedules, effectively manage dilution to existing investors and provide greater transparency and predictability to recipients in the value of their compensation.
To maintainsecure the services of key employees in a competitive compensation program, we have also provided cash compensationperiod of uncertainty caused in part by issues facing certain of our university clients in our Graduate Program Segment, in October 2019, our Compensation Committee granted performance-based equity incentive awards in the form of base salariesPRSUs to certain employees, including our Named Executive Officers (other than our CEO). Our Compensation Committee believed that to succeed in a highly competitive market, additional retention incentives were required to drive leadership stability and encourage executive continuity. The Compensation Committee granted PRSUs instead of additional time-based awards in response to feedback from stockholders regarding introducing a performance-based annual cash bonuses. Allcomponent to our equity compensation program.
The target total direct compensation pay mix of our CEO and other Named Executive Officers for 2019 and expected for 2020 is set out below. As noted, for 2019 our CEO’s target total direct compensation was over 90% variable, or
“at-risk” and the average target total direct compensation for our other Named Executive Officers was over 85% at-risk. In 2020, we expect that the target total direct compensation for our CEO will be approximately 95% at-risk and the average target total direct compensation for our other Named Executive Officers will be approximately 90% at-risk. In addition, in 2020, we expect that approximately 72% of our CEO’s and 70%, on average, of our other Named Executive Officers’ target total direct compensation will be based on achievement of performance targets:
In general, all eligible employees, including our Named Executive Officers, participate in the same annual performance-basedperformance‑based bonus plan. OurFor 2019, the Compensation Committee elected to provide annual incentives to our Named Executive Officers, arein the form of PRSUs rather than cash. The PRSUs were eligible to receive a target cash bonus under our annual performance-based bonus plan equal to a percentage of their base salaryvest based on achievement of the corporate financial goals set forth in the 2019 Bonus Plan.
TableWe do not target a specific competitive position or a specific mix of Contents
goals. Wecompensation among base salary, bonus or long‑term incentives, although we typically target base salaries for our Named Executive Officers to be at or aroundconsider the 50th percentilecompensation practices of companies in our peer group and seek to set total compensation totargets for our Named Executive Officers to be at or around the 75th75
th percentile of companiesour peers, but also may consider unique skills sets, specialized industry knowledge and other factors in our peer group.making those determinations. In mid-2018 and again in early 2015,2019, our Compensation Committee, with the assistance of the Company's compensation consultant,Compensia, reviewed our executive compensation program, including base salaries, bonuses, equity awards, and benefit programs, to ensure that our compensation program promotes stockholder interests and provides appropriate rewards and incentives for our Named Executive Officers.
Process for Setting Compensation
Compensation decisions for our Named Executive Officers are determined by our Compensation Committee, with input from management (including our Chief Executive Officer and compensation consultant retained by management, when appropriate). Our Compensation Committee reviews the compensation of our executive officers, including our Named Executive Officers, on an annual basis, or more frequently in certain situations, to ensure the executives are properly incentivized, and makes adjustments as necessary.
In determining base salaries, bonus targets and equity incentive awards for our Named Executive Officers, our Compensation Committee considers their historical compensation levels, compensation for comparable positions in the market, individual performance as compared to our expectations and objectives, and our desire to drive short- and long-term results that are in the best interests of our stockholders. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives, although we typically target base salaries for our Named Executive Officers to be at or around the 50th percentile of companies in our peer group, and total compensation to our Named Executive Officers to be at or around the 75th percentile of companies in our peer group.
Our Board, excluding our Chief Executive Officer, determines the compensation of our Chief Executive Officer, after considering the recommendation of the Compensation Committee. The Compensation Committee has historically determined the compensation of our Named Executive Officers, other than our Chief Executive Officer, after considering the recommendation of our Chief Executive Officer, which may include input from our compensation consultant.
For 2015, we engaged a compensation consultant, Compensia, to advise in matters relating to the compensation of our executives. For additional information about Compensia's role in our process for setting compensation, see the section entitled "—Role of Compensation Consultant."
At the beginning of 2015, following discussions with management and a review of Compensia's findings, the Compensation Committee ultimately made adjustments to total compensation for our Named Executive Officers to promote executive retention and align ourselves with our peer companies in a competitive technology employment market.
Role of Compensation Committee
Pursuant to its charter, the
The Compensation Committee is primarily responsible for establishing, approving and adjusting compensation arrangements for our Named Executive Officers, including our Chief Executive Officer, and for reviewing and approving corporate goals and objectives relevant to these compensation arrangements, evaluating executive performance and considering factors related to the performance of the company,Company, including accomplishment of our long-termlong‑term business and financial goals. For additional information aboutThe Compensation Committee reviews the compensation of our executive officers, including our Named Executive Officers, on an annual basis, or more frequently in certain situations, to ensure the executives are properly incentivized, and makes adjustments as necessary. In determining base salaries, bonus targets and equity incentive awards for our Named Executive Officers, our Compensation Committee seeconsiders the section entitled "—following factors:
our performance in the previous year, based on financial and non-financial metrics;
the Named Executive Officers’ historical compensation levels;
the Named Executive Officers’ role, responsibilities and skills;
the proposed compensation packages for other Named Executive Officers (internal pay equity);
compensation trends and the market compensation for comparable positions;
individual performance as compared to our expectations and objectives;
our desire to drive short‑ and long‑term results that are in the best interests of our stockholders; and
our outlook and operating plan for the upcoming year.
As part of this review, the Compensation Committee."Committee is provided with relevant information, such as the competitive market data described further below, to use as a reference when setting each individual compensation element and target total direct compensation levels.
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Role of Management
In carrying out its responsibilities, our Compensation Committee works with members of our management, including our Chief Executive Officer, and Chief Financial Officer, Chief People Officer, Chief Legal Officer, and ourother human resources, finance, and legal professionals. Typically, our management assists the Compensation Committee by providing information on corporate and individual performance and management'smanagement’s perspective and recommendations on compensation matters. Our Chief Executive Officer, Chief Financial Officer, Chief People Officer, Chief Legal Officer and other members of our human resources, finance and legal departmentdepartments may attend meetings of the Compensation Committee to present information and answer questions. Our Chief Executive Officer may also make recommendations to the Compensation Committee regarding compensation for our Named Executive Officers, other than for himself because of his daily involvement with our Named Executive Officers. Our Compensation Committee solicits and reviews our Chief Executive Officer'sOfficer’s recommendations as one of several factors in making compensation decisions, along with recommendations and market data obtained by our compensation consultant, and the Compensation Committee'sCommittee’s own independent judgment. No
Named Executive Officer participates directly in the final deliberations or determinations regarding his or her own compensation package.
At the request of the Compensation Committee, in late 2014 management retained Compensia to assist it in providing the Compensation Committee the data necessary to enable it to carry out its responsibilities. Management has previously retained Compensia to review and assess our executive employee compensation practices relative to market compensation practices and to provide market compensation data. For additional information on these engagements, see the section entitled "—Role of Compensation Consultant" below.
Role of Compensation Consultant
The Compensation Committee is authorized to retain the services of one or more executive compensation advisors, as it sees fit, in connection with oversight of our executive compensation program. In
late 2014, wemid-2018, the Compensation Committee retained Compensia to advise on our executive compensation programs and practices and our executive compensation decisions for
20152019 given its expertise in the technology industry and its knowledge of our peer companies. During
late 2014mid-2018 and early
2015,2019, Compensia provided the following services as requested by
management:•- the Compensation Committee:
evaluated the efficacy of our existing compensation strategy and practices in supporting and reinforcing our long-termlong‑term strategic goals relative to market norms;
•reviewed and assessed our peer group of companies to understand competitive market compensation practices;
•reviewed and assessed our current Named Executive Officer compensation practices and equity profile relative to our peers;
reviewed and
• assessed the competitiveness of our proposed employment offer for our new Chief Financial Officer;reviewed and assessed internal pay equity, including the compensation package of our current Chief Operating Officer as compared to our peer group and other technology companies with similar revenue over the last four quarters;
provided information regarding executive retention strategies;
provided data regarding market practices for severance and change in control plans; and
reviewed and assessed whether our Board of
Directors'Directors’ compensation policy is appropriate for a publicly traded company.
In
late 2015, wemid‑2019, the Compensation Committee again engaged Compensia to assist with our compensation planning for
2016,2020, including providing data for our overall equity and incentive plan targets and total cash compensation for our Named Executive Officers.
During 2015,2019, Compensia did not perform work for the Company other than the services detailed above, and for the purposes of assisting with our compensation planning for 2016.2020. The Compensation Committee has assessed each of the independence of Compensiafactors established by the SEC and Nasdaq and has concluded that the engagement of Compensia does not raise any conflict of interest with the Company or any of its directors or executive officers. Compensia attends certain Compensation Committee meetings and preparatory meetings with certain executive officers, as requested by the Compensation Committee or management.
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Compensation Peer Group
In January 2015,September 2018, our Compensation Committee approved the use of the followingreviewed comparative executive compensation data provided by Compensia and identified our compensation peer group for 2019 compensation decisions based on the selection criteria described below.
|
| |
| Selection Criteria | Criteria Range |
| Revenue (last four quarters) | .5x – 3x the Company’s last four quarters of revenue as of September 2018
|
| Market Capitalization | .25x – 4x the Company’s 30-day average market cap |
| Revenue Growth | High
|
In addition to the selection criteria noted above, the Compensation Committee sought to include U.S. headquartered companies that operate in the cloud basedcloud-based SaaS or adjacent Internet software and services markets, withmarket and have a similar revenues, revenue growth, business stage and market capitalization, to inform itsnumber of employees as the Company.
Potential peer group companies were evaluated based on the most recent data available as of September 2018. With the assistance of Compensia, the Compensation Committee ultimately identified our peer group for 2019 compensation decisions, related to 2015 executive compensation:consisting of the following 17 companies. | |
| | |
Angie's ListAppFolio | Instructure | DemandwarePaylocity Holding |
| Coupa Software | LogMeIn |
Bazaarvoice | | Diligent Board | | Marin SoftwareQ2 Holdings |
Benefitfocus | | Member Services | | Marketo |
ChannelAdvisor | | Ellie Mae | MINDBODY | OpowerRingCentral |
Constant ContactGrubHub | New Relic | Financial Engines | | SPS CommerceTwilio |
CornerstoneGuidewire Software | Okta | Zendesk |
| HubSpot | | Textura |
OnDemand | | JivePaycom Software | | |
Cvent | | LivePerson | | |
This compensation peer group was the same as our compensation peer group approved by the Compensation Committee in 2018 except that Mulesoft was removed as it was acquired in mid-2018. The table below sets forth how the Company compares to the peer group selected based on the selection criteria described above: |
| | |
| Selection Criteria | 50th Percentile of Peer Group | 2U |
| Revenue (last four quarters) | $463 | 25th percentile |
| Revenue Growth | 34% | 80th percentile |
| Market Capitalization | $5.2 billion | 41st percentile |
We believe that peer group comparisons are useful guidelines to measure the competitiveness of our compensation practices. However, the Compensation Committee has not adopted any formal benchmarking guidelines and maintains discretion to set levels of executive compensation above or below peer levels based upon distinguishing factors such as our internal pay equity and compensation budget, individual performance and contribution to the Company, an
executive'sexecutive’s level of experience and responsibilities, and comparability of roles within other peer companies.
The compensation program for our Named Executive Officers consists of:
base salary;
•performance-basedperformance‑based cash compensation;
•long-termbonus;long‑term equity compensation; and
•employee
benefits and perquisites.benefits.
Each Named Executive
Officer'sOfficer’s compensation has been designed to provide a combination of compensation that is tied to achievement of our
short-short‑ and
long-termlong‑term objectives. As our needs evolve, we intend to continue to evaluate our philosophy and compensation programs as circumstances require, and at a minimum, we expect to review our executive compensation program annually.
We provide base salaries to our Named Executive Officers and other employees to compensate them for services rendered
day-to-dayday‑to‑day during the year and provide a level of stable fixed compensation. Each Named Executive
Officer'sOfficer’s initial base salary was established as the result of an
arm's-lengtharm’s‑length negotiation with the individual at the time of hiring, and
later pursuant tois reviewed annually, as well as at the
Company's annual review processes.time of a promotion or other change in responsibilities. We generally do not apply specific formulas to determine changes in base salary. Rather, our Compensation Committee oversees the review of base salaries of our Named Executive Officers on an annual basis
following the completion of the fiscal year and makes adjustments as it determines to be reasonable and necessary to reflect the scope of a Named Executive
Officer'sOfficer’s responsibilities, experience and performance, prior salary level, position (in the case of a promotion), market conditions and overall Company
performance.performance and other factors set forth in “Process for Setting Compensation—Role of Compensation Committee”.
In March 2015,April 2019, in connection with its annual review of our executive compensation program, our Compensation Committee approved adjustments to the base salaries of our Named Executive Officers
TableOfficers. Our Compensation Committee based these adjustments on various factors, including, peer group comparisons, distinguishing factors such as our internal pay equity and compensation budget, individual performance and contribution to the Company, level of Contents
that were generally belowexperience and responsibilities, uniqueness of roles as compared to peer companies and the 50th percentilerecommendation of the CEO (other than with respect to his own base salary). In addition, in October 2019, in connection with Mr. Lalljie’s appointment as Chief Financial Officer and approval of his compensation arrangements, the Compensation Committee again reviewed the base salaries of our Named Executive Officers to consider whether adjustments were necessary to maintain internal pay equity and in response to shifting responsibilities following completion of the Trilogy acquisition and other organizational changes. The Compensation Committee also reviewed a report provided by Compensia on base salary, target bonus percentage and equity compensation peer group, effectivefor Chief Operating Officer roles at our peers as part of April 1, 2015, as set forthits review. As a result of this review and in consideration of Mr. Chernis’ expanded responsibilities following the acquisition of Trilogy, in particular, the fact that the Chief Marketing Officer and all three product line managing directors would be reporting to Mr. Chernis, the Compensation Committee made an additional increase to Mr. Chernis’ base salary, which is reflected in the table below.
| | | | | | | | | | |
Named Executive Officer | | 2014 Base
Salary ($) | | 2015 Base
Salary ($) | | Percentage
Increase | |
|---|
Christopher J. Paucek | | | 400,000 | | | 430,000 | | | 8 | % |
James H. Shelton | | | — | | | 375,000 | | | — | |
Robert L. Cohen | | | 315,000 | | | 375,000 | (1) | | 19 | % |
Catherine A. Graham | | | 300,000 | | | 315,000 | | | 5 | % |
Jeff C. Rinehart | | | 300,000 | | | 315,000 | | | 5 | % |
James Kenigsberg | | | 300,000 | | | 315,000 | | | 5 | % |
|
| | | | | | |
| Named Executive Officer | | 2019 Base Salary
($)(1) |
2018 Base Salary
($)(1) |
| Percentage
Increase |
|
| Christopher J. Paucek | 561,000 | 550,000 |
| 2 | % |
| Paul S. Lalljie | 515,000 | — |
| — |
|
| Catherine A. Graham(2) | 410,000 | 390,000 |
| 5 | % |
| Mark J. Chernis | 515,000(3) | 425,000 |
| 21 | % |
| Harsha Mokkarala | 382,500 | 375,000 |
| 2 | % |
| James Kenigsberg | 410,000 | 390,000 |
| 5 | % |
| Matthew J. Norden | 360,000(4) | 322,000 |
| 12 | % |
(1)In March 2015, the Compensation Committee approved an increase of Mr. Cohen's base salary from $315,000 to $330,000, and then to $375,000 in May 2015. The Compensation Committee approved the second adjustment to ensure that the company's compensation structure remained consistent as additional senior executives were hired.
Performance-Based
| |
| (1) | Salary changes were effective in April of the applicable year. In 2019 and 2018, for purposes of our executive compensation program, our year runs from April 1st through March 31st. Therefore, 2019 and 2018 base salaries set forth in the Summary Compensation Table below are less than the amounts stated in these columns because our Named Executive Officers received their prior year base salaries from January 1st through March 31st of the applicable year. |
| |
| (2) | Ms. Graham retired from the position of Chief Financial Officer of the Company effective October 14, 2019; however, she continues to provide advisory services to the Company as a part-time employee and receives a salary of $200,000 per year. |
| |
| (3) | Mr. Chernis’ base salary was $433,000 from April 1, 2019 through October 16, 2019. On October 16, 2019 the Compensation Committee approved an increase to Mr. Chernis’ base salary to $515,000 in consideration of Mr. Chernis’ additional responsibilities following the Trilogy acquisition and in an effort to maintain internal pay equity following Mr. Lalljie’s hiring as Chief Financial Officer. |
| |
| (4) | Mr. Norden’s base salary was $328,000 from April 1, 2019 through November 16, 2019. On November 16, 2019, Mr. Norden’s base salary was increased to $360,000 in connection with his promotion to Chief Legal Officer. |
Performance‑Based Annual Bonuses
We
typically use
performance-basedperformance‑based annual cash bonuses
(expressed as a percentage of base salary) to motivate our employees, including our Named Executive Officers, to achieve our
short-termshort‑term financial and operational objectives while making progress towards our
longer-termlonger‑term growth and other goals.
Each Named Executive Officer’s initial target bonus percentage was established as the result of an arm’s length negotiation with the individual at the time of hiring, and is reviewed annually, as well as at the time of a promotion or other change in responsibilities. At the end of each year, our Board
of Directors approves our operating plan for the next fiscal year, which includes corporate performance objectives. At the beginning of each year, the Compensation Committee uses these performance objectives to structure the annual cash bonus plan for the year.
In March 2015,January 2019, the Compensation Committee approved the 20152019 Bonus Plan for our employees, including our Named Executive Officers, taking into consideration a competitive market analysis performed by Compensia, the
recommendations of our CEOChief Executive Officer (except with respect to his own target annual cash bonus opportunity) and the other factors described above. TheIn connection with this review in January 2019, the Compensation Committee determined not to make any change in the target bonus percentages that towere in effect for 2018. In making this determination, the Compensation Committee considered the fact that total target bonus payouts would still increase as a result of higher eligible base compensation, which the Compensation Committee believed would maintain the competitiveness of our Named Executive Officers'Officers’ target total cash compensation opportunities, adjustments to their 2014opportunities. In October 2019, in connection with Mr. Lalljie’s appointment as Chief Financial Officer and approval of his compensation arrangements, the Compensation Committee again reviewed the target annual cash bonus opportunities of our Named Executive Officers to consider whether adjustments were necessary. necessary to maintain internal pay equity and in response to shifting responsibilities following completion of the Trilogy acquisition and other organizational changes. The Compensation Committee also reviewed a report provided by Compensia on base salary, target bonus percentage and equity compensation for Chief Operating Officer roles at our peer group companies and other technology companies with similar revenue over the last four quarters as part of its review. As a result of this review and in consideration of Mr. Chernis’ expanded responsibilities following the acquisition of Trilogy, in particular, the fact that the Chief Marketing Officer and all three product line managing directors would be reporting to Mr. Chernis, the Compensation Committee increased Mr. Chernis’ target bonus percentage to 100% of his annual base salary.
Under the 20152019 Bonus Plan, the target annual cash bonus opportunities of the Named Executive Officers for 20152019 were as follows: | | | | | | | | | | |
Named Executive Officer | | 2015 Eligible
Base
Compensation ($) | | Target Bonus
Percentage | | Target Bonus
Payout ($) | |
|---|
Christopher J. Paucek | | | 421,250 | | | 85 | % | | 358,063 | |
James H. Shelton | | | 375,000 | (1) | | 75 | % | | 281,250 | |
Robert L. Cohen | | | 350,001 | | | 75 | % | | 262,500 | |
Catherine A. Graham | | | 310,625 | | | 65 | % | | 201,906 | |
Jeff C. Rinehart | | | 310,625 | | | 65 | % | | 201,906 | |
James Kenigsberg | | | 310,625 | | | 65 | % | | 201,906 | |
|
| | | | |
| Named Executive Officer | 2019 Eligible Base
Compensation ($) | Target Bonus
Percentage |
| Target Bonus
Payout ($) |
| Christopher J. Paucek | 561,000 | 100 | % | 561,000 |
| Paul S. Lalljie | 515,000 | 100 | % | 515,000 |
| Catherine A. Graham | 410,000 | 75 | % | 307,500 |
| Mark J. Chernis(1) | 515,000 | 100 | % | 515,000 |
| Harsha Mokkarala | 382,500 | 60 | % | 229,500 |
| James Kenigsberg | 410,000 | 70 | % | 287,000 |
| Matthew J. Norden(2) | 360,000 | 60 | % | 216,000 |
(1)Mr. Shelton's 2015 base salary was $375,000 but his earned base compensation in 2015 was $203,125 because he commenced employment on June 1, 2015. Mr. Shelton's 2015
| |
| (1) | On October 16, 2019 the Compensation Committee approved an increase to Mr. Chernis’ target bonus percentage from 75% to 100% of his base salary in consideration of Mr. Chernis’ additional responsibilities following the Trilogy acquisition and in an effort to maintain internal pay equity following Mr. Lalljie’s hiring as Chief Financial Officer. |
| |
| (2) | On November 16, 2019, in connection with his promotion to Chief Legal Officer, Mr. Norden’s annual base salary was increased from $328,000 to $360,000. The 2019 Bonus Plan contemplated that certain executives (other than executive officers at the time the 2019 Bonus Plan was adopted) would receive 125% of their eligible target bonus amount. Mr. Norden was not an executive officer at the time the 2019 Bonus Plan was adopted, therefore he was eligible to receive 125% of his target bonus amount. |
At the beginning of each fiscal year, the Compensation Committee determines which key performance measures should be used for the Company’s annual bonus target of 75%, however, was based upon his full base salary of $375,000, which was determined as part of the arm's-length negotiation of the terms of Mr. Shelton's employment.
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Payouts for our Named Executive Officers under our 2015plan. The 2019 Bonus Plan werewas based on the achievement of two performance measures for our Company in 2015—measures: revenue and adjusted EBITDA, which is described in more detail below.each calculated on a consolidated basis but excluding the financial impact of any mergers and acquisitions activity. Revenue was given a weighting of 60% and adjusted EBITDA was given a weighting of 40%. These corporatemeasures were selected as performance measures under our annual bonus plan because the Compensation Committee believes they support our financial objectives and promote the creation of long-term stockholder value. The target level for our revenue and adjusted EBITDA measures were based on stretch goals over our 20152019 corporate budget, as approved by the Board,Board. Adjusted EBITDA, a non-GAAP measure, is defined as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and were selectedamortization expense, foreign currency gains or losses, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, shareholder activism costs, impairment charges, and stock-based compensation expense.
In contrast to the 2018 bonus plan, the Compensation Committee determined not to include the number of new graduate programs signed with university clients as a performance measure for 2019 because they support our objectivesbelieved it was not necessary due to the strength of achievingthe Company’s program pipeline. In addition, the Compensation Committee believed it was appropriate to consider consolidated revenue and adjusted EBITDA in 2019, rather than only considering metrics related to the Graduate Program Segment because the integration of the short course business, which comprised the entire Alternative Credential Segment at the time the 2019 bonus plan was adopted, was largely complete. Threshold achievement levels for
each metric were set at levels necessary to provide a competitive overall compensation package and to motivate employees to achieve aggressive growth
while remaining on a path to profitability.targets. We believe these performance measures align our Named Executive Officer
incentivesincentive opportunities with stockholder interests through the creation of sustainable
long-termlong‑term value.
Payment of
In order to earn any portion of the bonus opportunity for fiscal year 20152019 related to a specificthe corporate performance measure was contingent on ourmeasures described above, achievement of a minimum threshold percentage of the target level for each such measure was required, and the payment levelmaximum amount earned was capped at our achievement of a maximum percentage of the target level. The minimum achievement levels for revenueeach performance measure necessary to receive the minimum, maximum or 100% bonus payout and Adjusted EBITDAthe corresponding payout percentages were 96% and 65%as follows (and performance between any of the targetfollowing levels respectively, whileis interpolated on a straight‑line basis): |
| | | | | | | | | | |
| | Revenue(2) | Adjusted EBITDA(2) |
| | Achievement
Percentage | Payout
Percentage | Amount ($MM) | Achievement
Percentage | Payout
Percentage | Amount ($MM) |
| Threshold(1) | 95 | % | 52 | % | 527 | 54 | % | 80 | % | 9 |
| Target | 100 | % | 100 | % | 553 | 100 | % | 100 | % | 16 |
| Maximum | >101% |
| 115 | % | 561 | >123% |
| 110 | % | 19 |
(1) The Company’s revenue expectations were impacted in part due to issues facing certain of our university clients in the Graduate Program Segment and other externalities facing the business, as disclosed by the Company on May 7, 2019. Therefore, in June 2019, the Compensation Committee adjusted the threshold performance level for the revenue metric from $536.9 million to $526.9 million. The Compensation Committee made this adjustment in order to secure the services of key employees in a highly competitive market and in order to continue to motivate and retain employees through the remainder of 2019.
(2) Under the terms of the 2019 Bonus Plan, the financial impact of any mergers and acquisition activity is excluded when calculating the achievement levels requiredlevel of any metric.
In order to achievefurther align the interests of our Named Executive Officers with those of our stockholders, the Compensation Committee determined that all Named Executive Officers would be paid in shares of our common stock rather than cash. In February 2019, each Named Executive Officer received a number of PRSUs equal to the number of shares that would vest upon maximum bonusachievement of the performance metrics under the plan were greater than 103% and 152%2019 Bonus Plan. The PRSUs, to the extent earned, would then be eligible to vest as to 50% on the date that the Compensation Committee determines achievement of the target levels, respectively. Payout percentages forperformance criteria (the “Determination Date”) and 50% on the various achievement levels were as follows:first anniversary of the Determination Date. | | | | | | |
| Revenue | | Adjusted EBITDA |
|---|
Achievement
Percentage | | Payout
Percentage | | Achievement
Percentage | | Payout
Percentage |
|---|
| 96% | | 50% | | 65% | | 50% |
| 100% | | 100% | | 100% | | 100% |
| >103% | | 120% | | >152% | | 120% |
Adjusted EBITDA represents our earnings before net interest (income) expense, income taxes, depreciation and amortization, adjusted to eliminate stock- based compensation expense, which is a non-cash item. Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP.
In general, we consider ourAt the time the Compensation Committee set the corporate performance targets for fiscal year 2015 to have been2019, we believed they were challenging but achievable. For fiscal year 2015 our2019, excluding the impact of the acquisition of Trilogy, revenue was 150.2$500.3 million 101% of our target level, and adjusted EBITDA loss was $(6.6) million, 126%$2.4 million. These results were below the threshold levels of achievement for both performance measures under our target level. In March 2016, the Board determined that we had achieved the revenue and adjusted EBITDA goals at an overall weighted level of 105%,2019 Bonus Plan and therefore, the Compensation Committee approved the following payouts under the 2015 Bonus Plan to our Named Executive Officers:
Officers did not receive any bonus and the PRSUs granted were forfeited. Notwithstanding the foregoing, pursuant to the separation agreement entered into with Ms. Graham upon her resignation, the Company agreed to pay her an annual bonus for 2019 of no less than $113,750 if she remained employed through December 31, 2019. | | | | |
Named Executive Officer
| | Bonus
Payout ($) | |
|---|
Christopher J. Paucek
| | | 375,966 | |
James H. Shelton
| | | 295,313 | |
Robert L. Cohen
| | | 260,422 | |
Catherine A. Graham
| | | 212,002 | |
Jeff C. Rinehart
| | | 212,002 | |
James Kenigsberg
| | | 212,002 | |
These bonus amounts for the Named Executive Officers' performance during 2015 are reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table for 2015.
Long-TermLong‑Term Incentive Compensation
We use
long-termlong‑term incentive compensation in the form of equity awards to align the interests of our employees, including the Named Executive Officers, with the interest of our stockholders. We believe that if our employees own shares of our common stock in amounts that are significant to them, they will have a strong incentive to act to maximize
long-termlong‑term stockholder value. For
2015,2019, we relied on
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options to purchase shares of our common stock, time-based RSUs and restricted stock units (RSUs)PRSUs as the principal vehicles for delivering long-termlong‑term incentive compensation opportunities to our Named Executive Officers. We believe that options, which we grant with exercise prices equal to the fair market value of our common stock on the date of grant, provide an appropriate long-termlong‑term incentive for recipients and align the interests of recipients and stockholders, since the options reward themrecipients only to the extent that our stock price appreciates on a sustained basis following their grant date. RSUs while also providing an appropriate long-term incentive to recipients, due to their long-term vesting schedules, effectively manage dilution to existing investors and provide greater transparency and predictability to recipients in the value of their compensation.
In 2019, we continued to grant time-based RSUs which provide an appropriate long-term incentive to recipients due to their long-term vesting schedules, and also introduced PRSUs to our long-term incentive compensation program in order to increase alignment between the interests of our Named Executive Officers and our
stockholders. In determining the size of the equity awards granted to our Named Executive Officers, the Compensation Committee takes into consideration the recommendations of our
CEOChief Executive Officer (except with respect to his own equity award), the existing equity holdings of each Named Executive Officer (including the current economic value of his or her unvested equity awards), and the other factors described above. The Compensation Committee also considers the dilutive effect of our
long-termlong‑term incentive compensation practices, and the overall impact that these equity awards, as well as awards to other employees, will have on stockholder value.
Ultimately, theThe Compensation Committee
also applies its subjective judgment to determine the appropriate size of each Named Executive
Officer'sOfficer’s equity award.
In mid-2014, our Compensation Committee approved a framework for granting equity awards. Under this framework, we
We typically grant equity awards at the start of employment and upon promotion to each
equity-eligibleequity‑eligible employee, including our Named Executive
Officers. Our framework for granting equity awards sets per positionOfficers, at a pre‑established dollar
amountsvalue for each type of
award.award based on a participant’s position. The exact number of stock options granted to each participant is calculated by dividing the appropriate dollar
amountvalue by the
Black-ScholesBlack‑Scholes value of an option to purchase a share of our common stock on the grant date. The exact number of
time and performance-based restricted stock units granted to each participant is calculated by dividing the appropriate dollar
amountvalue by the value of a share of our common stock on the grant date.
The Compensation Committee approves individual equity awards for new hires and promoted employees on a quarterly basis, and the grant dates of each award are typically the first business day of the quarter after the Compensation Committee has approved the grants. We typically set the exercise prices for stock options at the fair market value of a share of our common stock on the date of grant. Our time-vestedtime‑vested stock option grants to our Named Executive Officers typically vest as follows: 25% on the first anniversary of the date of grant or, if earlier, the vesting commencement date, and 1/36th per month thereafter, until fully vested at the end of four years. These stock option grants generally have a term of 10 years from the grant date. Our time-based restricted stock unit awardsunits granted in 2019 and earlier typically vest in equal annual installments over a four-yearfour‑year period. Performance-based restricted stock unit awards vest over a three-year period and are subject to the performance metrics described below. 2019 Equity Awards
In March 2015, in accordance with the previously established equity award framework,
Effective April 2019, the Compensation Committee granted
annual equity awards to certain of our employees, including
our Named Executive Officers, in the form of options to purchase shares of our common stock and
time-based restricted stock units.
In determining the amount of each Named Executive Officer'sOfficer’s equity award, the Compensation Committee took into consideration the factors described above, including peer group comparisons and the recommendations of our CEOChief Executive Officer (except with respect to his own equity award).
TableIn October 2019, the Compensation Committee granted PRSUs to certain employees, including our Named Executive Officers (other than our Chief Executive Officer) outside of Contents
our annual equity award program. The annualshares of our common stock subject to the performance-based restricted stock units are eligible to vest, if at all, based on the Company’s relative TSR as compared to the total stockholder return of the companies that comprise the Russell 3000 Index, as measured over one, two and three year performance periods each commencing on October 1, 2019. At the end of a performance period, the number of PRSUs that vest will be determined based on the Company’s relative TSR as set forth in the table below, with performance between any of the following levels interpolated on a straight‑line basis:
|
| |
| 2U TSR Compared to Index | Award Multiplier |
| <25th percentile | 0% |
| 25th percentile | 50% |
| 50th percentile | 100% |
| > 75th percentile | 200% |
Our Compensation Committee granted these PRSUs to secure the services of key employees in a period of uncertainty caused in part by issues facing certain of our university clients in our Graduate Program Segment. Our Compensation Committee believed that to succeed in a highly competitive market, additional retention incentives were required to drive leadership stability and encourage executive continuity. The Compensation Committee granted PRSUs instead of additional time-based awards in response to feedback from stockholders regarding introducing a performance-based component to our equity compensation program.
The equity awards granted to the Named Executive Officers in
20152019 were as follows:
| | | | | | | | | | | | | |
Named Executive Officer | | Stock Options
Granted
(number of
shares)
(#) | | Stock Options
Granted (grant
date fair value)
($) | | RSUs
Granted
(number of
shares)
(#) | | RSUs
Granted
(grant date
fair value)
($) | |
|---|
Christopher J. Paucek | | | 80,515 | | | 999,996 | | | 39,184 | | | 999,976 | |
James H. Shelton(1) | | | 37,139 | | | 517,485 | | | 18,266 | | | 517,486 | |
Robert L. Cohen | | | 39,452 | | | 489,994 | | | 19,200 | | | 489,984 | |
Catherine A. Graham | | | 28,180 | | | 349,996 | | | 13,714 | | | 349,981 | |
Jeff C. Rinehart | | | 28,180 | | | 349,996 | | | 13,714 | | | 349,981 | |
James Kenigsberg | | | 28,180 | | | 349,996 | | | 13,714 | | | 349,981 | |
(1)The amounts reported for Mr. Shelton include Mr. Shelton's annual equity awards only, and do not include a one-time award of 26,567 shares of our common stock, which immediately vested on the grant date. This award was granted to Mr. Shelton in connection with the arm's-length negotiation of the terms of his employment. See "—Equity Award for Mr. Shelton" below for additional details regarding Mr. Shelton's equity awards.
With the exception of Mr. Shelton's stock options, the stock options in the table above have an exercise price of $25.52 per share, the fair market value of our common stock on the date of grant. In addition, 25% of each option vests on the one-year anniversary of the grant date, and the remaining 75% vests in equal monthly installments over a thirty-six month period, subject to the NEO's continued employment as of each vesting date. The RSUs vest in four equal annual installments commencing on the first anniversary of the date of grant, subject to the NEO's continued employment as of each vesting date.
Mr. Shelton joined us as our Chief Impact Officer on June 1, 2015. In connection with his employment, the Compensation Committee granted him (i) 26,567 shares of our common stock, which vested immediately on the grant date; (ii) 18,266 RSUs, which vest in four equal annual installments commencing on the first anniversary of the date of grant, subject to Mr. Shelton's continued employment as of each vesting date; (iii) 26,510 stock options, with an exercise price of $28.23 per share, the fair market value of our common stock on the date of grant, 25% of which vest on the one year anniversary of the grant date, and the remaining 75% vest in equal monthly installments over a thirty-six month period, subject to Mr. Shelton's continued employment as of each vesting date; and (iv) 10,629 stock options, with an exercise price of $28.58 per share, the fair market value of our common stock on the date of grant, 25% of which vest on the one year anniversary of the grant date, and the remaining 75% vest in equal monthly installments over a thirty-six month period, subject to Mr. Shelton's continued employment as of each vesting date. The size of his equity award was determined as part of the arm's-length negotiation of the terms of Mr. Shelton's employment, taking into consideration his then-current target total direct compensation, a review of competitive market data, and the equity awards granted to our other executive officers.
|
| | | | | | | | | | |
| Named Executive Officer | Stock Options
Granted
(number of
shares)
(#) | Stock Options
Granted (grant
date fair value)
($) | Time-Based RSUs
Granted
(number of
shares)
(#) | Time-Based RSUs
Granted
(grant date
fair value)
($) |
PRSUs Granted
(number of shares) (#)(1) | PRSUs Granted
(grant date fair value)
($)(1) |
| Christopher J. Paucek | 83,031 |
| 2,749,987 |
| 38,183 | 2,749,940 | — |
| — |
|
| Catherine A. Graham | 43,780 |
| 1,449,994 |
| 40,133(2) | 1,791,779(2) | — |
| — |
|
| Paul S. Lalljie | — |
| — |
| 235,432(3) | 3,999,990(3) | 58,858 |
| 999,997 |
|
| Mark J. Chernis | 43,780 |
| 1,449,994 |
| 20,133 | 1,449,979 | 89,175 |
| 1,449,986 |
|
| Harsha Mokkarala | 22,644 |
| 749,970 |
| 10,413 | 749,944 | 46,125 |
| 749,993 |
|
| James Kenigsberg | 26,418 |
| 874,965 |
| 12,149 | 874,971 | 46,125 |
| 749,993 |
|
| Matthew J. Norden | 11,322 |
| 374,985 |
| 7,664(4) | 474,903(4) | 23,062 |
| 374,988 |
|
| |
| (1) | These columns reflect PRSUs granted in October 2019 at their target level. Refer to “Performance Based Annual Bonuses—2019 Bonus Plan” above for information regarding PRSUs granted in lieu of the opportunity to earn 2019 cash bonuses. |
| |
| (2) | Includes 20,000 RSUs granted to Ms. Graham in connection with her retirement and transition to an advisory role with the Company. These RSUs will vest on April 1, 2022. |
| |
| (3) | For his 2019 annual equity award, Mr. Lalljie was granted time-based RSUs covering a number of shares equal to $1,000,000 divided by the closing price of the Company’s common stock on the date of grant. In addition, Mr. Lalljie was granted an additional one-time award of time-based RSUs covering a number of shares equal to $3,000,000 divided by the closing price of the Company’s common stock on the date of grant. |
| |
| (4) | Mr. Norden was granted an additional one-time award of 2,458 time-based RSUs with a grant date fair value of $99,967 in connection with the closing of the Company’s acquisition of Trilogy. These RSUs will vest 50% on May 22, 2020 and 50% on May 22, 2021. |
We offer a tuition reimbursement benefit for all of our employees, including our Named Executive Officers. Under this program, we
pay 100%offer our eligible employees a one‑time reimbursement of the cost of tuition
forto complete a 2U‑powered graduate program offered by our university clients, and we reimburse our eligible employees
and their spouses and dependents enrolled infor the cost of one short course per rolling twelve-month period. In addition, we pay 50% of the tuition for one spouse or dependent of each eligible employee to complete one of our
clients'university clients’ eligible graduate programs.
As set forth
Our executive officers, including our Named Executive Officers, are eligible to participate in the "All Other Compensation" columnsame group insurance and employee benefit plans generally available to our other salaried employees in the Summary Compensation Table, theU.S. These benefits include medical, dental, vision and disability benefits and other plans and programs made available to other eligible employees. The Company also has a 401(k) plan covering eligible employees, including our Named Executive Officers. All participants in the plan, including each Named Executive Officer, are eligible to make pre‑tax contributions. The Company makes matching contributions to the 401(k) plan and pays premiums for term life insurance policies on behalf of the officers,our Named Executive Officers, consistent with those provided to all of our employees. We do not view perquisites or other personal benefits as a significant component of our executive compensation program. Therefore, we generally do not provide perquisites or other personal benefits to our executive officers except in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes.
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Please see
"—“—Potential Payments Upon Termination of Employment and in Connection with Change of Control
Arrangements"Arrangements” for information regarding the severance provisions for
Messrs. Paucek and Cohen, who are the onlyour Named Executive
Officers who currently have such arrangements.Officers.
Other Compensation Policies
The Compensation Committee has reviewed the
Company'sCompany’s compensation programs for employees, including Named Executive Officers, and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee believes that the design of the
Company'sCompany’s annual
performance-basedperformance‑based bonus plan and
long-termlong‑term equity incentives provide an effective and appropriate mix of incentives to help ensure that the
Company'sCompany’s performance is focused on
long-termlong‑term stockholder value creation and does not encourage the taking of
short-termshort‑term risks at the expense of
long-termlong‑term results.
Derivatives Trading and Hedging Policy
Our Insider Trading and Window Period Policy prohibits the trading of derivatives or the hedging of our equity securities by our employees, including our executive officers and members of our Board of Directors.
Policy regarding
10b5-110b5‑1 Plans for Directors and Executive Officers
We typically encourage our executive officers and members of our Board
of Directors to adopt plans in accordance with Exchange Act Rule
10b5-110b5‑1 for sales of securities which they beneficially own, and our Insider Trading
and Window Period Policy expressly provides that such individuals may not trade in our equity securities during
"blackout"“blackout” periods.
Compensation Recovery Policy
Our Board of Directors has adopted a compensation recovery (“clawback”) policy providing that, in the event of a restatement of financial results due to the material non-compliance by the Company with any financial reporting requirement under the federal securities laws, the Company may recover from any executive officer any incentive compensation erroneously paid or awarded in excess of what would have been paid under the accounting restatement. This policy covers any bonus, incentive payment or other cash compensation or equity-based award granted, earned, vested and/or received by an executive officer on or after the effective date of the policy and during the three year period preceding the date on which we are required to prepare the accounting restatement.
COMPENSATION COMMITTEE REPORT*
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, we recommended to the Board, and the Board approved that the Compensation Discussion and Analysis be included in this Proxy Statement.
Submitted by the Compensation Committee
John M. Larson (Chairperson)
Robert(Chair)
Alexis Maybank
Coretha M.
StavisPaul A. MaederRushing
| |
| * | The Compensation Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing of 2U under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that 2U specifically incorporates the Compensation Committee Report by reference therein. |
2019 Summary Compensation Table
The following table sets forth summary information regarding compensation earned during the years ended December 31, 2015, 20142019, 2018 and 20132017 by our Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, Chief Marketing Officer, Chief Technology Officer and Chief Impact Officer, which we refer to as our Named Executive Officers. The following table includes
*The Compensation Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing of 2U under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that 2U specifically incorporates the Compensation Committee Report by reference therein.
Table of Contents
all compensation earned by our Named Executive Officers for the respective periods, regardless of whether such amounts were actually paid during that period.
| | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary
($) | | Bonus
($) | | Stock
Awards
($)(1) | | Option
Awards
($)(1) | | Non-Equity
Incentive
Plan
Compensation
($)(2) | | All Other
Compensation
($) | | Total
($) | |
|---|
Christopher J. Paucek | | | 2015 | | | 421,250 | | | — | | | 999,976 | | | 999,996 | | | 375,966 | | | 20,799 | (3) | | 2,817,987 | |
Chief Executive Officer | | | 2014 | | | 391,667 | | | — | | | 909,997 | | | 910,270 | | | 317,250 | | | 14,778 | | | 2,543,962 | |
| | | 2013 | | | 300,000 | | | 450,000 | | | — | | | 4,026,718 | | | 121,406 | | | 59,888 | | | 4,958,012 | |
James H. Shelton | | |
2015 | | |
203,125 |
(9) | |
250,000 |
(10) | |
1,267,486 |
(11) | |
517,485 |
(12) | |
295,313 | | |
710 |
(4) | |
2,534,119 | |
Chief Impact Officer | | | 2014 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | 2013 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Catherine A. Graham | | |
2015 | | |
310,625 | | |
— | | |
349,981 | | |
349,996 | | |
212,002 | | |
6,519 |
(5) | |
1,229,123 | |
Chief Financial Officer | | | 2014 | | | 294,724 | | | — | | | 300,003 | | | 300,085 | | | 190,981 | | | 5,248 | | | 1,091,041 | |
| | | 2013 | | | 255,519 | | | — | | | — | | | — | | | 103,405 | | | 5,432 | | | 364,356 | |
Robert L. Cohen | | |
2015 | | |
350,001 | | |
— | | |
489,984 | | |
489,994 | | |
260,422 | | |
6,623 |
(6) | |
1,597,024 | |
President and Chief | | | 2014 | | | 311,169 | | | — | | | 440,000 | | | 440,129 | | | 201,637 | | | 5,248 | | | 1,398,183 | |
Operating Officer | | | 2013 | | | 281,623 | | | — | | | — | | | — | | | 113,969 | | | 5,432 | | | 401,024 | |
Jeff C. Rinehart | | |
2015 | | |
310,625 | | |
— | | |
349,981 | | |
349,996 | | |
212,002 | | |
5,674 |
(7) | |
1,228,278 | |
Chief Marketing Officer | | | 2014 | | | 298,044 | | | — | | | 300,003 | | | 300,085 | | | 193,132 | | | 4,557 | | | 1,095,821 | |
| | | 2013 | | | 281,623 | | | — | | | — | | | — | | | 113,969 | | | 4,108 | | | 399,700 | |
James Kenigsberg | | |
2015 | | |
310,625 | | |
— | | |
349,981 | | |
349,996 | | |
212,002 | | |
6,529 |
(8) | |
1,229,133 | |
Chief Technology Officer | | | 2014 | | | 296,250 | | | — | | | 300,003 | | | 300,085 | | | 191,970 | | | 5,248 | | | 1,093,556 | |
| | | 2013 | | | 258,333 | | | — | | | — | | | 197,709 | | | 83,635 | | | 5,432 | | | 545,109 | |
|
| | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | Salary
($) |
Bonus ($) | Stock
Awards
($)(1) | Option
Awards
($)(1) | Non‑Equity
Incentive Plan
Compensation
($)(2) | All Other
Compensation
($)(3) | Total
($) |
| Christopher J. Paucek | 2019 | 557,042 |
| — |
| 3,299,879 |
| 2,749,987 |
| — |
| 5,600 |
| 6,612,508 |
|
| Chief Executive Officer | 2018 | 541,250 |
| — |
| 5,374,895 |
| 10,624,956 |
| 378,875 |
| 3,667 |
| 16,923,643 |
|
| | 2017 | 514,167 |
| — |
| 1,199,993 |
| 1,199,991 |
| 471,748 |
| 3,600 |
| 3,389,499 |
|
| Paul S. Lalljie(4) | 2019 | 89,735 |
| 250,000 |
| 4,999,986 |
| — |
| — |
| — |
| 5,339,721 |
|
| Chief Financial Officer | 2018 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | 2017 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Catherine A. Graham(5) | 2019 | 368,335 |
| 113,750 |
| 2,088,645 |
| 1,449,994 |
| — |
| 5,600 |
| 4,026,324 |
|
| Former Chief Financial Officer | 2018 | 385,625 |
| — |
| 1,449,938 |
| 1,449,962 |
| 199,125 |
| 5,500 |
| 3,490,150 |
|
| | 2017 | 367,644 |
| — |
| 749,971 |
| 749,992 |
| 236,160 |
| 3,313 |
| 2,107,080 |
|
| Mark J. Chernis | 2019 | 444,604 |
| — |
| 3,223,477 |
| 1,449,994 |
| — |
| 5,600 |
| 5,123,675 |
|
| Chief Operating Officer | 2018 | 249,883 |
| — |
| 1,674,904 |
| 1,674,964 |
| 223,125 |
| 354 |
| 3,823,230 |
|
| | 2017 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Harsha Mokkarala | 2019 | 380,313 |
| — |
| 1,728,215 |
| 749,970 |
| — |
| 5,600 |
| 2,864,098 |
|
| Chief Revenue Officer | 2018 | 361,292 |
| — |
| 749,968 |
| 749,962 |
| 151,743 |
| 5,500 |
| 2,018,465 |
|
| (former executive officer) | 2017 | 324,208 |
| — |
| 599,976 |
| 599,986 |
| 178,477 |
| 5,400 |
| 1,708,047 |
|
| James Kenigsberg | 2019 | 403,335 |
| — |
| 1,902,031 |
| 874,965 |
| — |
| 5,600 |
| 3,185,931 |
|
| Chief Technology Officer | 2018 | 385,625 |
| — |
| 749,968 |
| 749,962 |
| 188,956 |
| 5,500 |
| 2,080,011 |
|
| | 2017 | 370,963 |
| — |
| 599,976 |
| 599,986 |
| 238,034 |
| 2,113 |
| 1,811,072 |
|
| Matthew J. Norden | 2019 | 327,877 |
| — |
| 1,094,946 |
| 374,985 |
| — |
| 74,804 |
| 1,872,612 |
|
| Chief Legal Officer | 2018 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | 2017 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
(1)These columns reflects the full grant date fair value, calculated in accordance with ASC Topic 718, of stock options and restricted stock units issued to each Named Executive Officer during 2015, 2014 and 2013 that are subject to time-based vesting. Unlike the calculations contained in our financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting, but assumes that the executive will perform the requisite service for the award to vest in full. The fair value of each option grant is estimated based on the fair market value on the date of grant using the Black-Scholes option pricing model. The fair value of each RSU is measured based on the closing price of our common stock on the date of grant. The assumptions we used in valuing options are described in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K filed on March 10, 2016.
(2)Amounts shown in this column for 2015 represent the cash amounts paid in March 2016 under our 2015 Bonus Plan. Amounts shown in this column for 2014 and 2013 represent the cash amounts paid in under our 2014 and 2013 Bonus Plans, respectively. See "—Compensation Discussion and Analysis—Elements of Compensation—Performance-Based Annual Bonuses—2015 Bonus Plan" for a description of the formula used to determine these amounts for 2015.
(3)Represents (i) $16,815 in tuition reimbursement payments, (ii) $3,480 in 401(k) matching contributions and (iii) $504 in basic life insurance premiums paid by us.
(4)Represents (i) $416 in 401(k) matching contributions and (ii) $294 in basic life insurance premiums paid by us.
(5)Represents (i) $6,015 in 401(k) matching contributions and (ii) $504 in basic life insurance premiums paid by us.
(6)Represents (i) $6,119 in 401(k) matching contributions and (ii) $504 in basic life insurance premiums paid by us.
(7)Represents (i) $5,170 in 401(k) matching contributions and (ii) $504 in basic life insurance premiums paid by us.
(8)Represents (i) $6,025 in 401(k) matching contributions and (ii) $504 in basic life insurance premiums paid by us.
(9)Mr. Shelton joined the company on June 1, 2015. The amount reported in the table represents Mr. Shelton's 2015 actual base salary earned during 2015.
(10)Represents a cash signing bonus awarded to Mr. Shelton as part of his overall compensation package.
(11)Represents $750,000 worth of our common stock granted to Mr. Shelton as a signing bonus and $517,500 worth of restricted stock units. See "—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentive Compensation—Equity Award for Mr. Shelton" for additional details regarding the terms of these equity awards.
(12)See "—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentive Compensation—Equity Award for Mr. Shelton" for additional details regarding the terms of the option awards.
| |
| (1) | The amounts shown in these columns reflect the grant date fair value for stock option, PRSU, and restricted stock unit awards, as applicable, in accordance with ASC Topic 718. Refer to the 2019 Grants of Plan-Based Awards Table below for information regarding the assumptions used to value these awards. The amounts reported for the PRSUs granted in 2019 are based on the probable outcome of the applicable performance conditions at the grant date. The Company uses a Monte Carlo model to estimate the fair value of PRSUs containing market-based vesting conditions. The maximum potential values of the PRSUs, based on the closing price per share of our common stock on the date of grant were: Mr. Paucek, $621,488 for the PRSUs granted in respect of our 2019 Bonus Plan; Mr. Lalljie, $1,999,995 for the PRSUs granted in October 2019; Ms. Graham, $335,478 for the PRSUs granted in respect of our 2019 Bonus Plan; Mr. Chernis, $2,899,971 for the PRSUs granted in October 2019 and $365,577 for the PRSUs granted in respect of our 2019 Bonus Plan; Mr. Mokkarala, $1,499,985 for the PRSUs granted in October 2019 and $258,007 for the PRSUs granted in respect of our 2019 Bonus Plan; Mr. Kenigsberg, $1,499,985 for the PRSUs granted in October 2019 and $313,088 for the PRSUs granted in respect of our 2019 Bonus Plan; and Mr. Norden, $749,976 for the PRSUs granted in October 2019 and $276,943 for the PRSUs granted in respect of our 2019 Bonus Plan. |
| |
| (2) | Amounts shown in this column for 2018 and 2017 represent the cash amounts paid under our 2018 and 2017 Bonus Plans. No cash awards were granted under the 2019 Bonus Plan. See “Compensation Discussion and Analysis—Elements of Compensation—Performance‑Based Annual Bonuses—2019 Bonus Plan” for additional information. |
| |
| (3) | Amounts shown for 2019 represent 401(k) matching contributions paid by us and, for Mr. Norden, also represent tuition reimbursement payments. |
| |
| (4) | Mr. Lalljie commenced employment on October 14, 2019. The amount shown in the “Bonus” column for Mr. Lalljie represents a one-time signing bonus paid to Mr. Lalljie in connection with his commencement of employment. |
| |
| (5) | Ms. Graham ceased serving as our Chief Financial Officer and became a part-time employee on October 14, 2019. The amount shown in the “Bonus” column for Ms. Graham represents her guaranteed annual bonus payment for 2019. |
Table of Contents
2019 Grants of
Plan-BasedPlan‑Based Awards Table
The following table sets forth certain information with respect to all plan-basedplan‑based awards granted to our Named Executive Officers during the 2019 fiscal 2015. | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| |
| | All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(2) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2) | |
| |
| |
|---|
| |
| | Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1) | |
| | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(4) | |
|---|
| |
| | Closing
Price on
Date of
Grant
($/Sh)(3) | |
|---|
Name | | Grant Date | | Threshold
($) | | Target
($) | | Maximum
($) | |
|---|
Christopher J. Paucek | | N/A | | | 179,031 | | | 358,063 | | | 429,675 | | | — | | | — | | | — | | | — | |
| | 04/01/2015 | | | — | | | — | | | | | | 39,184 | | | 80,515 | | | 25.52 | | | 1,999,972 | |
James H. Shelton | |
N/A | | |
140,625 | | |
281,250 | | |
337,500 | | |
— | | |
— | | |
— | | |
— | |
| | 06/01/2015 | | | — | | | — | | | | | | 39,585 | (5) | | 26,510 | | | 28.23 | | | 1,484,988 | |
| | 06/03/2015 | | | — | | | — | | | | | | 5,248 | | | 10,629 | | | 28.58 | | | 299,983 | |
Catherine A. Graham | |
N/A | | |
100,953 | | |
201,906 | | |
242,287 | | |
— | | |
— | | |
— | | |
— | |
| | 04/01/2015 | | | — | | | — | | | | | | 13,714 | | | 28,180 | | | 25.52 | | | 699,977 | |
Robert L. Cohen | |
N/A | | |
131,250 | | |
262,500 | | |
315,001 | | |
— | | |
— | | |
— | | |
— | |
| | 04/01/2015 | | | — | | | — | | | | | | 19,200 | | | 39,452 | | | 25.52 | | | 979,978 | |
Jeff C. Rinehart | |
N/A | | |
100,953 | | |
201,906 | | |
242,287 | | |
— | | |
— | | |
— | | |
— | |
| | 04/01/2015 | | | — | | | — | | | | | | 13,714 | | | 28,180 | | | 25.52 | | | 699,977 | |
James Kenigsberg | |
N/A | | |
100,953 | | |
201,906 | | |
242,287 | | |
— | | |
— | | |
— | | |
— | |
| | 04/01/2015 | | | — | | | — | | | | | | 13,714 | | | 28,180 | | | 25.52 | | | 699,977 | |
(1)Amounts shown represent the minimum (50%), target (100%) and maximum (120%) amounts that could be paidyear. All awards were issued under our 2015 Bonus Plan, as discussed under "Compensation Discussion and Analysis—Compensation Elements—2015 Bonus2014 Plan."
(2)All restricted stock units, awards of common stock, and stock options were granted pursuant to our 2014 Equity Incentive Plan.
(3)The exercise price of the option awards is equal to the closing market price of our common stock on the date of grant.
(4)The amounts reported reflect the full grant date fair value, calculated in accordance with ASC Topic 718, of restricted stock units, awards of common stock and stock options issued to the Named Executive Officers. |
| | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts
Under Equity
Incentive Plan Awards(1) | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options
(#)(2) | Exercise Price of Option Awards ($/Sh)(3) | Grant Date Fair Value of Stock and Option Awards
($)(4) |
| Name | | Grant Date | Date of
Compensation Committee
Action | Threshold
(#) | Target
(#) | Maximum
(#) |
| Christopher J. Paucek | 02/11/2019 | 02/11/2019 | 2,776 |
| 8,916 |
| 10,076 |
| — |
| — |
| — |
| 549,939 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| 38,183 |
| — |
| — |
| 2,749,940 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| — |
| 83,031 |
| 72.02 |
| 2,749,987 |
| Paul S. Lalljie | 10/14/2019 | 10/01/2019 | — |
| — |
| — |
| 58,858 |
| — |
| — |
| 999,997 |
| | 10/14/2019 | 10/01/2019 | — |
| — |
| — |
| 176,574 |
| — |
| — |
| 2,999,992 |
| | 10/14/2019 | 10/01/2019 | 29,429 |
| 58,858 |
| 117,716 |
| — |
| — |
| — |
| 999,997 |
| Catherine A. Graham | 02/11/2019 | 02/11/2019 | 1,498 |
| 4,813 |
| 5,439 |
| — |
| — |
| — |
| 296,866 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| 20,133 |
| — |
| — |
| 1,449,979 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| — |
| 43,780 |
| 72.02 |
| 1,449,994 |
| | 10/17/2019 | 10/16/2019 | — |
| — |
| — |
| 20,000 |
| — |
| — |
| 341,800 |
| Mark J. Chernis | 02/11/2019 | 02/11/2019 | 1,633 |
| 5,245 |
| 5,927 |
| — |
| — |
| — |
| 323,512 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| 20,133 |
| — |
| — |
| 1,449,979 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| — |
| 43,780 |
| 72.02 |
| 1,449,994 |
| | 10/01/2019 | 10/01/2019 | 44,587 |
| 89,175 |
| 178,350 |
| — |
| — |
| — |
| 1,449,986 |
| Harsha Mokkarala | 02/11/2019 | 02/11/2019 | 1,152 |
| 3,701 |
| 4,183 |
| — |
| — |
| — |
| 228,278 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| 10,413 |
| — |
| — |
| 749,944 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| — |
| 22,644 |
| 72.02 |
| 749,970 |
| | 10/01/2019 | 10/01/2019 | 23,062 |
| 46,125 |
| 92,250 |
| — |
| — |
| — |
| 749,993 |
| James Kenigsberg | 02/11/2019 | 02/11/2019 | 1,398 |
| 4,492 |
| 5,076 |
| — |
| — |
| — |
| 277,067 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| 12,149 |
| — |
| — |
| 874,971 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| — |
| 26,418 |
| 72.02 |
| 874,965 |
| | 10/01/2019 | 10/01/2019 | 23,062 |
| 46,125 |
| 92,250 |
| — |
| — |
| — |
| 749,993 |
| Matthew J. Norden | 02/11/2019 | 02/11/2019 | 1,237 |
| 3,973 |
| 4,490 |
| — |
| — |
| — |
| 245,055 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| 5,206 |
| — |
| — |
| 374,936 |
| | 04/01/2019 | 04/01/2019 | — |
| — |
| — |
| — |
| 11,322 |
| 72.02 |
| 374,985 |
| | 05/22/2019 | 04/01/2019 | — |
| — |
| — |
| 2,458 |
| — |
| — |
| 99,967 |
| | 10/01/2019 | 10/01/2019 | 11,531 |
| 23,062 |
| 46,124 |
| — |
| — |
| — |
| 374,988 |
| |
| (1) | Represents PRSUs granted to the Named Executive Officers during 2019. The columns show the number of shares of common stock eligible to vest at threshold, target and maximum levels of performance. PRSUs granted in February 2019 were issued in respect of our 2019 Bonus Plan and were forfeited following the Compensation Committee’s determination that the performance metrics were not met. |
| |
| (2) | Represents time-based RSUs and stock options granted to the Named Executive Officers during 2019. |
| |
| (3) | The exercise price of each option award is equal to the closing market price of our common stock on the date of grant. |
| |
| (4) | The amounts reported reflect the grant date fair value for stock option, PRSU and restricted stock unit awards, as applicable, calculated in accordance with ASC Topic 718. The fair value of each stock option grant is estimated based on the fair market value on the date of grant using the Black‑Scholes option pricing model. For more information on the assumptions we used to calculate the grant date fair values for stock options, see Note 11 to our audited consolidated financial statements included in our Annual Report on Form 10 K filed on February 28, 2020. The fair value of each RSU is measured based on the closing price of our common stock on the date of grant. The amounts reported for PRSUs are based on the probable outcome of the applicable performance conditions at the grant date. The Company uses a Monte Carlo model to estimate the fair value of PRSUs containing market-based vesting conditions. The PRSUs granted in October 2019 are subject to market-based vesting conditions and the grant |
date fair values of such awards were determined using a Monte Carlo model that utilizes stock volatility, dividend yield and the Company’s TSR relative to the TSR of the companies in the Russell 3000 Index. For the PRSUs granted in October 2019, such inputs consisted of: (i) an expected term of three years; (ii) risk-free interest rates of 1.73%, 1.56% and 1.51% for the PRSUs granted on October 1, 2019 and 1.67%, 1.63% and 1.60% for the PRSUs granted on October 14, 2019, in each case, applicable to the respective first, second and third tranches of the awards that were derived from the yields on U.S. government bonds from the U.S. Department of the Treasury; (iii) a dividend yield of 0% because the Company does not pay dividends; (iv) stock price volatility of 74.1% for the PRSUs granted on October 1, 2019 and 74.3% for the PRSUs granted on October 14, 2019, in each case, based on an analysis of the historical stock price volatility of the Company and each company in the Russell 3000 Index over the three years prior to the date of grant usingto conform to the Black-Scholes option pricing model. The fair valueterm of the awards; and (v) an initial TSR performance of (9.0)% for the PRSUs granted on October 1, 2019 and (4.9)% for the PRSUs granted on October 14, 2019, in each RSU is measuredcase, based on the closing price of our common stock on the date of grant.
(5)The amount reported includes 26,567 shares of common stock and 13,018 restricted stock units. The 13,018 restricted stock units will vest as to one-fourthactual historical TSR performance of the underlying shares onCompany and each of June 1, 2016, 2017, 2018 and 2019, subject to Mr. Shelton's continued service withcompany in the company as of the applicable vesting date.Russell 3000 Index.
Table of Contents
Outstanding Equity Awards at
2019 Fiscal Year End
The following table provides information about outstanding stock options and stock awards held by each of our Named Executive Officers atas of December 31, 2015.2019. These stock option awardsoptions were granted under our 2008 Plan and our 2014 Plan and these stock awards were granted under our 2014 Plan. | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Option Awards | | Stock Awards | |
|---|
| |
| |
| |
| |
| |
| |
| | Market
Value of
Units That
Have Not
Vested
($)(2) | |
|---|
| |
| | Number of Securities
Underlying Unexercised
Options | |
| |
| |
| |
|---|
| |
| | Option
Exercise
Price
($) | |
| | Number of
Units That
Have Not
Vested(1) | |
|---|
| |
| | Option
Expiration
Date | |
|---|
Name | | Grant Date | | Exercisable | | Unexercisable(1) | |
|---|
Christopher J. Paucek | | | 01/23/2009 | | | 384,000 | | | — | | | 0.60 | | | 01/23/2019 | | | | | | | |
| | | 02/23/2011 | | | 35,639 | | | — | | | 1.82 | | | 06/08/2020 | | | | | | | |
| | | 02/15/2012 | | | 154,173 | | | 8,334 | | | 3.08 | | | 02/15/2022 | | | | | | | |
| | | 05/08/2013 | | | 261,201 | | | 135,417 | | | 5.75 | | | 05/08/2023 | | | | | | | |
| | | 11/26/2013 | | | 94,791 | | | 80,209 | | | 8.45 | | | 10/04/2023 | | | | | | | |
| | | 12/19/2013 | | | 94,791 | | | 80,209 | | | 8.45 | | | 10/04/2023 | | | | | | | |
| | | 03/06/2014 | | | 75,397 | | | 81,953 | | | 11.00 | | | 03/06/2024 | | | 62,046 | | | 1,736,047 | |
| | | 04/01/2015 | | | — | | | 80,515 | | | 25.52 | | | 04/01/2025 | | | 39,184 | | | 1,096,368 | |
James H. Shelton | | |
06/01/2015 | | |
— | | |
26,510 | | |
28.23 | | |
06/01/2025 | | |
13,018 | | |
364,244 | |
| | | 06/03/2015 | | | — | | | 10,629 | | | 28.58 | | | 06/03/2025 | | | 5,248 | | | 146,839 | |
Catherine A. Graham | | |
04/30/2012 | | |
183,333 | | |
16,667 | | |
3.08 | | |
04/30/2022 | | | | | | | |
| | | 03/06/2014 | | | 24,856 | | | 27,017 | | | 11.00 | | | 03/06/2024 | | | 20,455 | | | 572,331 | |
| | | 04/01/2015 | | | — | | | 28,180 | | | 25.52 | | | 04/01/2025 | | | 13,714 | | | 383,718 | |
Robert L. Cohen | | |
02/23/2011 | | |
12,657 | | |
— | | |
1.82 | | |
06/08/2020 | | | | | | | |
| | | 02/13/2012 | | | 131,143 | | | 4,166 | | | 3.08 | | | 02/13/2022 | | | | | | | |
| | | 02/28/2012 | | | 6,406 | (3) | | — | | | 3.08 | | | 02/28/2022 | | | | | | | |
| | | 03/06/2014 | | | 36,455 | | | 39,626 | | | 11.00 | | | 03/06/2024 | | | 30,000 | | | 839,400 | |
| | | 04/01/2015 | | | — | | | 39,452 | | | 25.52 | | | 04/01/2025 | | | 19,200 | | | 537,216 | |
Jeff C. Rinehart | | |
05/18/2011 | | |
120,200 |
(4) | |
— | | |
2.86 | | |
02/23/2021 | | | | | | | |
| | | 02/13/2012 | | | 97,916 | (5) | | 2,084 | (4)(5) | | 3.08 | | | 02/13/2022 | | | | | | | |
| | | 02/28/2012 | | | 6,406 | (3) | | — | | | 3.08 | | | 02/28/2022 | | | | | | | |
| | | 03/06/2014 | | | 24,853 | | | 27,020 | | | 11.00 | | | 03/06/2024 | | | 20,455 | | | 572,331 | |
| | | 04/01/2015 | | | — | | | 28,180 | | | 25.52 | | | 04/01/2025 | | | 13,714 | | | 383,718 | |
James Kenigsberg | | |
01/23/2009 | | |
99,900 | | |
— | | |
0.60 | | |
01/23/2019 | | | | | | | |
| | | 02/23/2011 | | | 20,000 | | | — | | | 1.82 | | | 06/08/2020 | | | | | | | |
| | | 07/14/2011 | | | 10,000 | | | — | | | 3.08 | | | 06/27/2021 | | | | | | | |
| | | 02/13/2012 | | | 48,958 | | | 1,042 | | | 3.08 | | | 02/13/2022 | | | | | | | |
| | | 02/28/2012 | | | 5,124 | (3) | | — | | | 3.08 | | | 02/28/2022 | | | | | | | |
| | | 02/25/2013 | | | 3,134 | | | 14,587 | | | 5.75 | | | 02/25/2023 | | | | | | | |
| | | 03/06/2014 | | | 7,107 | | | 27,017 | | | 11.00 | | | 03/06/2024 | | | 20,455 | | | 572,331 | |
| | | 04/01/2015 | | | — | | | 28,180 | | | 25.52 | | | 04/01/2025 | | | 13,714 | | | 383,718 | |
(1)Except as otherwise noted, all options shown vest 25% on the first anniversary of their grant date, and the remaining 75% vest thereafter in 36 equal monthly installments; in each case, the expiration date is 10 years after the grant date. Each restricted stock unit award granted on March 6, 2014 will vest as to 25% of the underlying shares on each of January 31, 2015, 2016, 2017 and 2018. Each restricted stock unit award granted on April 1, 2015 will vest as to 25% of the underlying shares on each of April 1, 2016, 2017, 2018 and 2019.
|
| | | | | | | | | | | | |
| | | Option Awards | Stock Awards |
| | | Number of Securities
Underlying Unexercised
Options | Option
Exercise |
Option | Number of
Units That
Have Not | Market
Value of
Units That
Have Not |
Equity Incentive Plan Awards: Number of Unearned Units That Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units That Have Not |
| Name | | Grant Date | Exercisable | Unexercisable (1) | Price ($) | Expiration Date | Vested (#)(1) | Vested ($)(2) | Vested (#)(3) | Vested ($)(2) |
| Christopher J. Paucek | 02/23/2011 | 35,639 |
| — |
| 1.82 | 06/08/2020 | | | | |
| | 02/15/2012 | 11,662 |
| — |
| 3.08 | 02/15/2022 | | | | |
| | 05/08/2013 | 131,618 |
| — |
| 5.75 | 05/08/2023 | | | | |
| | 11/26/2013 | 175,000 |
| — |
| 8.45 | 10/04/2023 | | | | |
| | 12/19/2013 | 175,000 |
| — |
| 8.45 | 10/04/2023 | | | | |
| | 03/06/2014 | 157,350 |
| — |
| 11.00 | 03/06/2024 | | | | |
| | 04/01/2015 | 80,515 |
| — |
| 25.52 | 04/01/2025 | | | | |
| | 04/01/2016 | 83,290 |
| 7,572 |
| 22.67 | 04/01/2026 | 11,028 | 264,562 | | |
| | 04/01/2017 | 41,790 |
| 20,895 |
| 39.66 | 04/01/2027 | 15,129 | 362,945 | | |
| | 04/01/2018 | 29,332 |
| 41,067 |
| 84.03 | 04/01/2028 | 24,545 | 588,835 | | |
| | 04/01/2018 | 45,562 |
| 145,800(4) |
| 84.03 | 04/01/2028 | 26,776(5) | 642,356 | | |
| | 02/11/2019 | | | | | | | 2,776 | 66,596 |
| | 04/01/2019 | — |
| 83,031 |
| 72.02 | 04/01/2029 | 38,183 | 916,010 | | |
| Paul S. Lalljie | 10/14/2019 | | | | | 58,858(6) | 1,412,003 | 117,716 | 2,824,007 |
| | 10/14/2019 | | | | | 176,574(6) | 4,236,010 | | |
| Catherine A. Graham | 04/30/2012 | 200,000 |
| — |
| 3.08 | 04/30/2022 | | | | |
| | 03/06/2014 | 51,873 |
| — |
| 11.00 | 03/06/2024 | | | | |
| | 04/01/2015 | 28,180 |
| — |
| 25.52 | 04/01/2025 | | | | |
| | 04/01/2016 | 31,234 |
| 2,839 |
| 22.67 | 04/01/2026 | 4,136 | 99,223 | | |
| | 04/01/2017 | 26,118 |
| 13,060 |
| 39.66 | 04/01/2027 | 9,456 | 226,849 | | |
| | 04/01/2018 | 15,466 |
| 21,653 |
| 84.03 | 04/01/2028 | 12,942 | 310,479 | | |
| | 02/11/2019 | | | | | | | 1,498 | 35,937 |
| | 04/01/2019 | — |
| 43,780 |
| 72.02 | 04/01/2029 | 20,133 | 482,991 | | |
| | 10/17/2019 | | | | | 20,000(7) | 479,800 | | |
|
| | | | | | | | | | | | |
| | | Option Awards | Stock Awards |
| | | Number of Securities
Underlying Unexercised
Options | Option
Exercise |
Option | Number of
Units That
Have Not | Market
Value of
Units That
Have Not |
Equity Incentive Plan Awards: Number of Unearned Units That Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units That Have Not |
| Name | | Grant Date | Exercisable | Unexercisable (1) | Price ($) | Expiration Date | Vested (#)(1) | Vested ($)(2) | Vested (#)(3) | Vested ($)(2) |
| Mark J. Chernis | 01/17/2013 | 50,000 |
| — |
| 5.75 | 01/17/2023 | | | | |
| | 04/11/2014 | 7,389 |
| — |
| 12.94 | 04/01/2024 | | | | |
| | 04/01/2015 | 4,048 |
| — |
| 25.52 | 04/01/2025 | | | | |
| | 04/05/2016 | 4,957 |
| — |
| 23.07 | 04/05/2026 | | | | |
| | 04/04/2017 | 1,932 |
| 967 |
| 39.69 | 04/04/2027 | 462 | 11,083 | | |
| | 05/22/2018 | 14,135 |
| 19,790 |
| 91.64 | 05/22/2028 | 11,867 | 284,689 | | |
| | 05/22/2018 | 2,193 |
| 3,071 |
| 91.64 | 05/22/2028 | 1,842 | 44,190 | | |
| | 02/11/2019 | | | | | | | 1,633 | 39,176 |
| | 04/01/2019 | — |
| 43,780 |
| 72.02 | 04/01/2029 | 20,133 | 482,991 | | |
| | 10/01/2019 | | | | | | | 178,350 | 4,278,617 |
| Harsha Mokkarala | 11/26/2013 | 22,939 |
| — |
| 8.45 | 10/01/2023 | | | | |
| | 03/06/2014 | 7,567 |
| — |
| 11.00 | 03/06/2024 | | | | |
| | 04/01/2015 | 7,648 |
| — |
| 25.52 | 04/01/2025 | | | | |
| | 07/01/2015 | 9,602 |
| — |
| 30.83 | 07/01/2025 | | | | |
| | 04/01/2016 | 16,468 |
| 2,272 |
| 22.67 | 04/01/2026 | 3,309 | 79,383 | | |
| | 04/01/2017 | 20,894 |
| 10,448 |
| 39.66 | 04/01/2027 | 7,564 | 181,460 | | |
| | 04/01/2018 | 7,999 |
| 11,200 |
| 84.03 | 04/01/2028 | 6,694 | 160,589 | | |
| | 02/11/2019 | | | | | | | 1,152 | 27,636 |
| | 04/01/2019 | — |
| 22,644 |
| 72.02 | 04/01/2029 | 10,413 | 249,808 | | |
| | 10/01/2019 | | | | | | | 92,250 | 2,213,078 |
| James Kenigsberg | 02/23/2011 | 20,000 |
| — |
| 1.82 | 06/08/2020 | | | | |
| | 07/14/2011 | 10,000 |
| — |
| 3.08 | 06/27/2021 | | | | |
| | 02/13/2012 | 50,000 |
| — |
| 3.08 | 02/13/2022 | | | | |
| | 02/28/2012 | 5,124 |
| — |
| 3.08 | 02/28/2022 | | | | |
| | 02/25/2013 | 14,589 |
| — |
| 5.75 | 02/25/2023 | | | | |
| | 03/06/2014 | 13,421 |
| — |
| 11.00 | 03/06/2024 | | | | |
| | 04/01/2015 | 13,503 |
| — |
| 25.52 | 04/01/2025 | | | | |
| | 04/01/2016 | 31,234 |
| 2,839 |
| 22.67 | 04/01/2026 | 4,136 | 99,223 | | |
| | 04/01/2016 | 11,666 |
| — |
| 22.67 | 04/01/2026 | | | | |
| | 04/01/2017 | 20,894 |
| 10,448 |
| 39.66 | 04/01/2027 | 7,564 | 181,460 | | |
| | 04/01/2018 | 7,999 |
| 11,200 |
| 84.03 | 04/01/2028 | 6,694 | 160,589 | | |
| | 02/11/2019 | | | | | | | 1,398 | 33,538 |
| | 04/01/2019 | — |
| 26,418 |
| 72.02 | 04/01/2029 | 12,149 | 291,455 | | |
| | 10/01/2019 | | | | | | | 92,250 | 2,213,078 |
| Matthew J. Norden | 11/26/2013 | 2,084 |
| — |
| 8.45 | 10/01/2023 | | | | |
| | 03/06/2014 | 2,743 |
| — |
| 11.00 | 03/06/2024 | | | | |
| | 01/02/2015 | 914 |
| — |
| 19.48 | 01/02/2025 | | | | |
| | 04/01/2015 | 1,752 |
| — |
| 25.52 | 04/01/2025 | | | | |
| | 04/01/2016 | 4,266 |
| 719 |
| 22.67 | 04/01/2026 | 1,048 | 25,142 | | |
| | 04/01/2017 | 5,170 |
| 4,353 |
| 39.66 | 04/01/2027 | 3,152 | 75,616 | | |
|
| | | | | | | | | | | | |
| | | Option Awards | Stock Awards |
| | | Number of Securities
Underlying Unexercised
Options | Option
Exercise |
Option | Number of
Units That
Have Not | Market
Value of
Units That
Have Not |
Equity Incentive Plan Awards: Number of Unearned Units That Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units That Have Not |
| Name | | Grant Date | Exercisable | Unexercisable (1) | Price ($) | Expiration Date | Vested (#)(1) | Vested ($)(2) | Vested (#)(3) | Vested ($)(2) |
| | 10/01/2017 | 781 |
| 661 |
| 56.04 | 10/01/2027 | 335 | 8,037 | | |
| | 04/01/2018 | 3,999 |
| 5,600 |
| 84.03 | 04/01/2028 | 3,347 | 80,295 | | |
| | 02/11/2019 | | | | | | | 1,237 | 29,676 |
| | 04/01/2019 | — |
| 11,322 |
| 72.02 | 04/01/2029 | 5,206 | 124,892 | | |
| | 05/22/2019 | | | | | 2,458(8) | 58,967 | | |
| | 10/01/2019 | | | | | | | 46,124 | 1,106,515 |
| |
| (1) | Except as otherwise noted, all stock options shown vest 25% on the first anniversary of their grant date, and the remaining 75% vest thereafter in 36 equal monthly installments; in each case, the expiration date is 10 years after the grant date. Except as otherwise noted, each restricted stock unit award vests as to 25% on the first, second, third and fourth anniversaries of its grant date. |
| |
| (2) | The amounts listed in these columns are determined by multiplying the number of units that have not vested by $23.99 (the closing price of our common stock on the last trading day of fiscal year 2019). |
| |
| (3) | Consists of PRSUs granted pursuant to our 2014 Plan. The PRSUs granted in October 2019 are reported assuming the achievement of the maximum performance level for each of the applicable TSR performance periods. The shares underlying the PRSUs are eligible to vest based on the Company’s relative TSR as compared to the TSR of the companies that comprise the Russell 3000 Index, as measured over one, two and three year performance periods each commencing on October 1, 2019. See the “Long-Term Incentive Compensation - Performance-Based Restricted Stock Award” section for additional information about these awards. The PRSUs granted in February 2019 are reported assuming achievement of the threshold performance level. These PRSUs were eligible to vest based on the Company’s achievement against the performance goals under the 2019 Bonus Plan. In early 2020, the Compensation Committee determined that we did not achieve threshold performance under the 2019 Bonus Plan and these awards were forfeited. |
| |
| (4) | The award vests in equal monthly installments over a seven‑year period. |
| |
| (5) | The award vests in equal annual installments over a seven‑year period. |
| |
| (6) | The award vests in equal annual installments on October 1, 2020, 2021 and 2022. |
| |
| (7) | The award vests on April 1, 2022. |
| |
| (8) | The award vests 50% on May 22, 2021 and 50% on May 22, 2022. |
(2)The amounts listed in this column are determined by multiplying the number of units that have not vested by $27.98 (the closing price of our common stock on the last trading day of fiscal year 2015).
(3)The officer elected to forego a portion of his target cash bonus opportunity under the 2012 Bonus Plan and received this option in lieu of such portion. Each such option vested in June 2013 upon the satisfaction of performance conditions.
(4)This option vests as follows: 25% of the shares underlying the option vested on February 23, 2012 and the remaining 75% of the shares underlying the option vest thereafter in 36 equal monthly installments.
(5)This option vests as follows: 25% of the shares underlying the option vested on January 1, 2013 and the remaining 75% of the shares underlying the option vest thereafter in 36 equal monthly installments.
2019 Option Exercises and Stock Vested
The following table provides information about the exercise of stock options and vesting of stock awards for each of our Named Executive Officers during the year ended December 31, 2019.
|
| | | | | | | | | |
| | Option Awards | Stock Awards |
| Name | | Number of
Shares Acquired
on Exercise
(#) | Value Realized
on Exercise
($)(1) | Number of
Shares Acquired
on Vesting
(#) | Value Realized
on Vesting
($)(2) |
| Christopher J. Paucek | — |
| — |
| 41,031 |
| 2,955,053 |
|
| Paul S. Lalljie | — |
| — |
| — |
| — |
|
| Catherine A. Graham | — |
| — |
| 16,604 |
| 1,195,820 |
|
| Mark J. Chernis | 20,500 |
| 1,076,455 |
| 5,825 |
| 419,517 |
|
| Harsha Mokkarala | — |
| — |
| 11,438 |
| 784,176 |
|
| James Kenigsberg | 92,700 |
| 4,461,651 |
| 13,577 |
| 977,816 |
|
| Matthew J. Norden | — |
| — |
| 4,950 |
| 205,456 |
|
| |
| (1) | Amounts shown reflect the value realized upon exercise of stock options calculated based on the difference between the closing price of our common stock on the date of exercise and the exercise price of the option award. |
| |
| (2) | Amounts shown represent the value realized upon vesting of restricted stock unit awards calculated by multiplying the number of shares that vested by the closing price of our common stock on the date of vesting. |
| | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
|---|
Name | | Number of
Shares Acquired
on Exercise
(#) | | Value Realized
on Exercise
($) | | Number of
Shares Acquired
on Vesting
(#) | | Value Realized
on Vesting
($) | |
|---|
Christopher J. Paucek | | | 283,233 | | | 6,884,574 | | | 20,681 | | | 374,533 | |
James H. Shelton | | | — | | | — | | | 26,567 | | | 750,000 | |
Catherine A. Graham | | | — | | | — | | | 6,818 | | | 123,474 | |
Robert L. Cohen | | | 51,060 | | | 822,751 | | | 10,000 | | | 181,100 | |
Jeff C. Rinehart | | | 67,600 | | | 1,647,408 | | | 6,818 | | | 123,474 | |
James Kenigsberg | | | 50,028 | | | 1,111,839 | | | 6,818 | | | 123,474 | |
Our executive officers,
including our Named Executive Officers, did not participate in, or otherwise receive any benefits under, any
defined benefit pension plan sponsored by us during the year ended December 31,
2015.2019.
Nonqualified Deferred Compensation
Our executive officers,
including our Named Executive Officers, did not earn any nonqualified deferred compensation benefits from us during the year ended December 31,
2015.2019.
Potential Payments Upon Termination of Employment and in Connection with Change of Control Arrangements
We have entered into agreements with our Named Executive Officers that may provide for benefits under the circumstances described below if the
officer'sofficer’s employment is terminated or we experience a change in control (such as a change in the beneficial ownership of our Company by more than 50% or a sale of substantially all of our assets).
Severance Agreement – Mr. Paucek
SeveranceWe have entered into a confidential information, invention assignment, work for hire, non-competenon‑compete and no solicit/no hire agreementsagreement with each of Messrs.Mr. Paucek and Cohen,(the “Paucek Agreement”), which provide,provides, among other things, that during the six-monthsix‑month period after the executive officer'shis termination of employment with the company,Company, he may not engage, in any capacity, in the business of developing or administering degree-grantingdegree‑granting distance learning higher education services without the advance written consent of our Board. In exchange for these agreements not to compete, we have agreed to pay Mr. Paucek or Mr. Cohen, as applicable, during the six-monthsix‑month period after the executive officer'shis termination of employment with the company,Company, an amount equal to six months of the highest salary earned during his employment with us.
Separation Agreement – Ms. Graham
In connection with Ms. Graham’s retirement from the position of Chief Financial Officer effective as of October 14, 2019, the Company entered into a separation and transition agreement with Ms. Graham. Pursuant to the separation and transition agreement, Ms. Graham agreed to provide advisory services to the Company as a part-time employee until April 1, 2022. While providing advisory services, Ms. Graham will be entitled to receive (i) an annual base salary of $200,000; (ii) continued medical, dental and vision coverage pursuant to COBRA; and (iii) continued vesting of her outstanding Company equity awards. In connection with executing the separation and transition agreement, Ms. Graham was granted 20,000 restricted stock units. The restricted stock units will vest on April 1, 2022, subject to Ms. Graham’s continued employment with the Company through such date. In addition, subject to her continued compliance with the separation and transition agreement and a separate restrictive covenant agreement, Ms. Graham was entitled to an annual bonus for 2019 of no less
Tablethan $113,750 (the “2019 Bonus”) if she remained employed through December 31, 2019, and will receive a one-time bonus of Contents$257,800 (the “One-Time Bonus”) if she remains employed through April 1, 2022.
If the Company terminates Ms. Graham’s employment prior to April 1, 2022 for reasons other than “cause” or due to Ms. Graham’s death or disability, then, subject to Ms. Graham’s continued compliance with the restrictive covenant agreement and execution of a general release of claims, Ms. Graham will be entitled to receive (i) a lump sum payment equal to the sum of (A) any unpaid portion of the base salary that she would have received had she remained employed through April 1, 2022, (B) the One-Time Bonus, and (C) if such termination occurred prior to December 31, 2019, the 2019 Bonus; (ii) continued medical, dental and vision coverage until April 1, 2022; and (iii) immediate vesting of her outstanding unvested Company equity awards that would have vested based solely on her continued service if she had continued providing services to the Company through April 1, 2022.
For purposes of Ms. Graham’s separation agreement, “cause” generally means Ms. Graham’s (i) commission of an act of fraud, embezzlement or theft against the Company or its subsidiaries; (ii) conviction of, or plea of no contest to, a felony or crime involving moral turpitude; (iii) refusal to perform material duties as an employee of the Company, which to the extent curable, remains uncured for 30 days following receipt of written notice thereof; (iv) material breach of any material Company policy or any material agreement with the Company or any of its subsidiaries, including her restrictive covenant agreement; (v) gross negligence, willful misconduct or any other act of willful disregard for the Company’s or any of its subsidiaries’ best interests; or (vi) refusal to cooperate with a governmental or internal investigation of the Company or its directors, officers or employees
Severance Agreement – Mr. Lalljie
In connection with his commencement of employment in October 2019, we entered into an offer letter and Employee, Intellectual Property, Non-Competition and Non-Solicitation Agreement with Mr. Lalljie (together, the “Lalljie Agreements”), which provide, among other things, that if Mr. Lalljie’s employment is terminated without “cause” or he resigns for “good reason”, he will be entitled to receive (i) continued base salary payments for a period of 12 months following his termination, or if such termination occurs within the three months preceding or 12 months following a change in control, a lump sum payment equal to the sum of (x) 12 months of his annual base salary and (y) his target annual bonus for the year of termination, (ii) a pro-rated portion of his annual bonus for the year of termination, based on actual performance, (iii) direct payment of, or reimbursement for, continued healthcare coverage pursuant to COBRA for up to 12 months and (iv) accelerated vesting of any unvested portion of the one-time award of time-based restricted stock units covering 176,574 shares granted in October 2019 (the “Severance Payments”).
Receipt of the Severance Payments is subject to Mr. Lalljie’s continued compliance with the restrictive covenants contained in the Lalljie Agreements and timely execution of a release of claims in favor of the Company. The restrictive covenants include prohibitions on Mr. Lalljie engaging in competition with the Company or soliciting customers, employees or contractors of the Company, in each case, while employed and for a period of 12 months following his termination for any reason.
For purposes of the Lalljie Agreements:
“Cause” generally means Mr. Lalljie’s (i) indictment for, or conviction or plea of guilty or nolo contendere to, any felony or any crime involving moral turpitude under the laws of the United States or any state thereof; (ii) commission of, or participation in, a fraud or act of willful dishonesty against the Company, or any intentional and unlawful harassment or discrimination in the course of Mr. Lalljie’s employment with the Company; (iii) intentional, material violation of any contract or agreement between Mr. Lalljie and the Company; (iv) unauthorized use or disclosure of the Company’s confidential information; or (v) gross misconduct in connection with the performance of his duties.
“Good Reason” generally means, without Mr. Lalljie’s consent: (i) the continual assignment of duties that are not commensurate in any material respect with Mr. Lalljie’s position, or a material diminution in Mr. Lalljie’s position, authority, reporting lines or responsibilities; (ii) a material reduction in Mr. Lalljie’s annual base salary and/or annual target incentive opportunity; (iii) a relocation of Mr. Lalljie’s principal work location to a location that is 35 miles or more from Washington, DC and results in a material increase in Mr. Lalljie’s commute from his primary residence; (iv) the Company’s material violation of any written contract or agreement between Mr. Lalljie and the Company; or (v) Mr. Lalljie no longer serving as the principal financial officer of the Company (or Company’s successor in interest, if applicable), or the ultimate parent resulting from a change in control (as defined therein). In addition, in the event Mr. Lalljie terminates his employment for any reason during the thirty (30) day period following the six (6)-month anniversary of the date Mr. Paucek ceases to serve as
Chief Executive Officer of the Company, and provided Mr. Lalljie has provided the Company with at least thirty (30) days’ prior written notice of such termination, such termination will be considered a Termination for Good Reason.
Change in Control Equity Acceleration
The terms of option award agreements for options granted to our Named Executive Officers under our 2008 Plan on or before June 19, 2009, provided accelerated vesting if their employment is terminated as a result of a change in control. Options granted to our Named Executive Officers under our 2008 Plan after June 19, 2009 provided accelerated vesting upon a change in control equal to the amount of the award that would have vested on the one-year anniversary of the change in control.
The terms of option and
time-based RSU award agreements under our 2014
planPlan provide that options and
time-based RSUs, respectively, granted to our Named Executive Officers will vest and become exercisable if their employment is terminated without cause or for good reason on or within 12 months after
a change in control control or if the awards are not assumed or substituted in the change in
control.control on terms that preserve their intrinsic value. With respect to the PRSUs granted to our Named Executive Officers in October 2019, in the event of a change in control during the-three year performance period, a pro-rata number of PRSUs will be earned based on the Company’s TSR prior to the change in control using the Company’s stock price at such time, and the earned PRSUs will vest immediately. The remaining PRSUs will convert to time-based units that vest on the last day of the original performance period, subject to accelerated vesting upon termination without cause or for good reason on or within 12 months following the change in control or if the awards are not assumed or substituted in the change in control on terms that preserve their intrinsic value.
The table below provides an estimate of the value of the compensation due to each of our Named Executive Officers in the events described below, assuming that the change in control or termination of employment was effective on December 31, 2015,2019, under the arrangementsconditions described above.above and assuming a per‑share stock price of $23.99 the price of our common stock on that date. The actual amounts to be paid can only be determined at the time of the termination of employment or change in control, as applicable. | | | | | | | | | | | | | |
| | Involuntary
Termination | | Change in Control Followed by
Involuntary Termination | |
|---|
Name | | Cash
($) | | Cash
($) | | Equity
($)(1) | | Total
($) | |
|---|
Christopher J. Paucek | | | 215,000 | | | — | | | 9,117,186 | | | 9,117,186 | |
James H. Shelton | | | — | | | — | | | 511,083 | | | 511,083 | |
Robert L. Cohen | | | 187,500 | | | — | | | 2,250,251 | | | 2,250,251 | |
Catherine A. Graham | | | — | | | — | | | 1,899,128 | | | 1,899,128 | |
Jeff C. Rinehart | | | — | | | — | | | 1,536,063 | | | 1,536,063 | |
James Kenigsberg | | | — | | | — | | | 1,788,008 | | | 1,788,008 | |
|
| | | | | | | | | | | | | |
| | Involuntary
Termination | Change in Control Followed by
Involuntary Termination |
| Name | | Cash
($) | Equity ($) | Total ($) | Cash
($) | Equity
($)(1) | Total
($) |
| Christopher J. Paucek | 280,500(2) |
| — |
| 280,500 |
| — |
| 14,054,026 |
| 14,054,026 |
|
| Paul S. Lalljie | 533,729(3) |
| 4,236,010 |
| 4,769,739 |
| 1,048,729(4) |
| 6,118,673 |
| 7,167,402 |
|
| Catherine A. Graham | 708,408(5) |
| 6,509,864 |
| 7,218,272 |
| — |
| 6,630,630 |
| 6,630,630 |
|
| Mark J. Chernis | — |
| — |
| — |
| — |
| 2,676,453 |
| 2,676,453 |
|
| Harsha Mokkarala | — |
| — |
| — |
| — |
| 1,619,941 |
| 1,619,941 |
|
| James Kenigsberg | — |
| — |
| — |
| — |
| 3,529,307 |
| 3,529,307 |
|
| Matthew J. Norden | — |
| — |
| — |
| — |
| 743,794 |
| 743,794 |
|
| |
| (1) | The value of accelerated vesting of stock options, RSUs and PRSUs is based on the market price at December 31, 2019 of $23.99 per share less, in the case of options, the per share exercise prices of the stock options outstanding. The PRSUs granted in February 2019 are reported assuming vesting of the total number of PRSUs granted under the 2019 Bonus Plan to each executive. |
| |
| (2) | Represents six‑months of Mr. Paucek’s annual base salary. |
| |
| (3) | Represents (i) 12 months of Mr. Lalljie’s annual base salary and (ii) continued healthcare coverage pursuant to COBRA for 12 months. |
| |
| (4) | Represents (i) 12 months of Mr. Lalljie’s annual base salary, (ii) his target annual bonus for 2019, and (iii) continued healthcare coverage pursuant to COBRA for 12 months. |
| |
| (5) | Represents (i) the unpaid portion of Ms. Graham’s base salary that she would have received had she remained employed through April 1, 2022, (ii) the One Time Bonus and (iii) continued healthcare coverage pursuant to COBRA until May 30, 2021, the date that she ceases to be eligible for COBRA coverage. |
Severance Pay and Change in Control Plan
On February 14, 2020, the Compensation Committee adopted a Severance Pay and Change in Control Plan (the “Severance Plan”). We expect that each of our Named Executive Officers will participate in the Severance Plan, subject to each Named Executive Officer signing a participation letter with the Company. The valueSeverance Plan was adopted to provide standardized severance benefits to current and future participants in the event of accelerated vesting of stock optionsa participant’s termination without cause or resignation for good reason and RSUs iswill supersede any pre-existing severance benefits, including the Paucek Agreement and the
Lalljie Agreements. Benefits under the Severance Plan are determined based on whether a participant is designated as a Tier I Participant, Tier II Participant or Tier III Participant. Mr. Paucek is designated as a Tier I Participant and each of Mr. Lalljie, Mr. Chernis, Mr. Mokkarala, Mr. Norden, and Mr. Kenigsberg is a Tier II Participant.
Under the difference betweenSeverance Plan, in the market price at December 31, 2015event of $27.98 per share lesstermination of a Named Executive Officer’s employment by the per share exercise pricesCompany without “Cause” or, a resignation by the Named Executive Officer for “Good Reason”, the Named Executive Officer will receive, in addition to a prorated bonus for the year of termination (based on actual performance for the full-year):
| |
| (i) | An amount equal to one times (or 1.5 times for Mr. Paucek) the sum of the Named Executive Officer’s annual base salary plus target bonus; and |
| |
| (ii) | Payment or reimbursement of the full monthly cost for continued coverage for the Named Executive Officer and the Named Executive Officer’s eligible dependents under the Company’s group health plans pursuant to COBRA for up to 12 months following termination (or 18 months for Mr. Paucek). |
If, however, a Named Executive Officer’s employment is terminated by the Company without Cause or by the Named Executive Officer for Good Reason during the three month period prior to a Change in Control or the 12 month period following a Change in Control, the Named Executive Officer will receive, in lieu of the stock options outstanding. Mr. Shelton held options that were notpayments and benefits describe above, a prorated bonus for the year of termination (based on actual performance for the full year) and:
| |
| (i) | An amount equal to 1.5 times (or 2 times for Mr. Paucek) the sum of the Named Executive Officer’s annual base salary plus target annual bonus, generally payable in a lump sum; and |
| |
| (ii) | An amount equal to the product of 1.02, multiplied by 12 (or 18 for Mr. Paucek), multiplied by the monthly premium for the cost of insuring the Named Executive Officer and the Named Executive Officer’s eligible dependents under the Company’s group health plans in which the Named Executive Officer participated immediately prior to the date of the such termination, generally payable in a lump sum. |
For purposes of the Severance Plan as applied to the Named Executive Officers:
“Cause” generally means the occurrence of any of the following events: (i) such participant’s indictment for, or conviction or plea of guilty or nolo contendere to, any felony or any crime involving moral turpitude under the laws of the United States or any state thereof; (ii) such participant’s commission of, or participation in, a fraud or act of willful dishonesty against the Company, or any intentional and unlawful harassment or discrimination in the money ascourse of December 31, 2015,such participant’s employment with the Company; (iii) such participant’s intentional, material violation of any contract or agreement between such participant and the corresponding value uponCompany which (if curable) is not cured within fifteen (15) days of written notice by the Company to such participant; (iv) such participant’s intentional and unauthorized use or disclosure of confidential information, which results, or would reasonably be expected to result, in material harm to the Company or its affiliates; or (v) such participant’s gross misconduct in connection with the performance of his duties.
“Good Reason” generally means the occurrence of any of the following events without the participant’s express written consent: (i) the continual assignment of duties that are not commensurate in any material respect with such participant’s position, or a material diminution in such participant’s position, authority, reporting lines or responsibilities, including, without limitation, such participant ceasing to have the same status, offices, titles and seniority with the Company (or the Company’s successor in interest or its ultimate parent resulting from a change in controlcontrol) or to be in charge of a principal business unit, division or function (such as sales, administration or finance) of the Company (or such successor or ultimate parent) in which such participant had been in charge immediately prior to such diminution; (ii) a material reduction in such participant’s annual base salary and/or annual target incentive opportunity; (iii) a relocation of such participant’s principal work location to a location that is $0 forthirty five (35) miles or more from Washington, DC and results in a material increase in such participant’s commute from his primary residence; or (iv) the purposesCompany’s material violation of this disclosure.any written contract or agreement between such participant and the Company, including the Severance Plan.
The payments pursuant to the Severance Plan are in addition to, and not in lieu of, any accrued but unpaid salary, bonuses and/or employee welfare and other benefits to which a Named Executive Officer is entitled.
Any outstanding awards under any equity-based or other long-term performance incentive compensation plan or program of the Company will generally be subject to and treated in accordance with the terms and conditions of the applicable plan, program, and/or award agreement.
Severance Plan benefits are generally subject to the Named Executive Officer’s timely execution, delivery, and non-revocation of a general release of claims and compliance with applicable restrictive covenants.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides certain information as of December 31, 2015,2019, with respect to our equity compensation plans (after giving effect to shares issued and/or vesting on such date): | | | | | | | | | | |
| | Equity Compensation Plan Information | |
|---|
Plan Category | | Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights(1) | | 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))(2) | |
|---|
Equity compensation plans approved by security holders(3) | | | 5,298,510 | | $ | 8.07 | | | 1,904,743 | |
Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| | | | | | | | | | | |
Total | | | 5,298,510 | | $ | 8.07 | | | 1,904,743 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | |
| | Equity Compensation Plan Information |
| Plan Category | | Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights(1) | 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))(2) |
| Equity compensation plans approved by security holders(3) | 4,373,895 |
|
| $34.24 |
| 6,109,297 |
|
| Equity compensation plans not approved by security holders | — |
| — |
| — |
|
| Total | 4,373,895 |
|
|
| 6,109,297 |
|
(1)In addition to options, warrants and rights, our 2014 Plan allows awards to be made in the form of shares of restricted stock units or other forms of equity-based compensation. As of December 31,
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2015, 1,220,008 shares of restricted stock units and common stock issued under our 2014 Plan were outstanding. Such restricted stock units are not reflected in the table above.
(2)This number reflects the remaining | |
| (1) | In addition to options, warrants and rights, our 2014 Plan allows awards to be made in the form of shares of restricted stock units or other forms of equity‑based compensation. As of December 31, 2019, 3,694,915 shares of the Company’s common stock were subject to outstanding time-based restricted stock units and performance-based restricted stock units (at the target level of performance for the PRSUs issued in October 2019 and at 113% of the target level of performance for the PRSUs issued in February 2019) issued under our 2014 Plan. Restricted stock units are not taken into account for purposes of determining the weighted average exercise price in the table above. |
| |
| (2) | This number reflects 5,296,333 shares available for future issuance under our 2014 Plan and 812,964 shares available for issuance under our 2017 Employee Stock Purchase Plan (the “ESPP”) as of December 31, 2019. No shares remain available for future issuance under our 2008 Plan. As of December 31, 2019, no shares were subject to outstanding purchase rights under the ESPP. |
| |
| (3) | Under the terms of our 2014 Plan, the number of shares of the Company’s common stock that may be issued under the 2014 Plan will automatically increase on January 1st of each year, for a period of ten years, from January 1, 2015 continuing through January 1, 2024, by 5% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, or a lesser number of shares as may be determined by the Board. |
CEO Pay Ratio Disclosure
As required by Section 953(b) of Dodd Frank and Item 402(u) of Regulation S‑K, we are providing the following information about the relationship of the annual total compensation of our “median employee” and the annual total compensation of Christopher J. Paucek, our Chief Executive Officer, during 2019. We consider the pay ratio specified to be a reasonable estimate, calculated in a manner intended to be consistent with Item 402(u) of Regulation S‑K.
For 2019, our last completed fiscal year:
The estimated median of the annual total compensation of all employees of the Company (excluding the CEO) was $59,272;
The annual total compensation of our CEO, as reported in the Summary Compensation Table of this proxy statement was $6,612,508; and
The ratio of the annual total compensation of our CEO to the median employee’s annual total compensation is 112:1.
To determine the median of the annual total compensation of all employees of the Company (other than the CEO), the methodology and the material assumptions, adjustments and estimates that we used were as follows:
We selected December 31, 2019 as the date upon which we would identify our employee population and median employee.
Using our tax and payroll records, we determined that, as of December 31, 2015. No shares remain available for future issuance under2019, our 2008 Plan.
(3)Under the termsemployee population consisted of approximately 5,848 employees globally, including active full‑time, part‑time, seasonal and temporary employees.As permitted by SEC rules, we determined to exclude all of our 2014 Plan,employees located in Hong Kong and the numberUnited Kingdom, which constituted approximately 0.3% of sharesour total employee population and approximately 2,413 employees who joined the Company through our acquisition of Trilogy in May 2019.
We used taxable compensation, as determined in each applicable employing jurisdiction, during the 2019 fiscal year as a consistently applied compensation measure to identify our median employee. In making this determination, we annualized the compensation of all newly hired permanent employees during this period. For South African employees, we converted taxable compensation to U.S. dollars using the rand to dollar exchange rate in effect on December 31, 2019.
Once our median employee was identified in the manner described above, we calculated the annual total compensation of the Company's common stockmedian employee using the same methodology that may be issued underwe used to determine the 2014 Plan will automatically increase on January 1st of each year, for a period of ten years, from January 1, 2015 continuing through January 1, 2024, by 5%annual total compensation of the total numberCEO, as reported in the Summary Compensation Table of sharesthis proxy statement.
It should be noted that the SEC pay ratio disclosure rules allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the Company's common stock outstanding on December 31st ofpay ratio reported by other companies may not be comparable to the preceding calendar year, or a lesser number of sharespay ratio reported above, as other companies may be determined by the Board.have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Limitations on Liability and Indemnification
Our Bylaws and amended and restated certificate of incorporation (the "Charter"“Charter”) contain provisions that limit the liability of our current and former directors for monetary damages to the fullest extent permitted by the Delaware General Corporation Law, which provides that directors of a corporation will not be personally liable to us or to our stockholders for monetary damages for any breach of fiduciary duties as a director. However, these provisions do not eliminate or limit the liability of our directors for: any breach of the director'sdirector’s duty of loyalty to the Company or its stockholders;
•
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided in Section 174 of the Delaware General Corporation Law; or
•any transaction from which the director derived an improper personal benefit.
This limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.
Our Bylaws and Charter provide that we are required to indemnify our directors to the fullest extent permitted by the Delaware General Corporation Law. Our Bylaws and Charter also provide that, upon satisfaction of certain conditions, we are required to advance expenses incurred by a director in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. Our Bylaws and Charter also provide our Board with discretion to indemnify our officers and employees when determined appropriate by the Board. We have entered and expect to continue to enter into agreements to indemnify our directors as determined by the Board. With certain exceptions, these agreements provide for indemnification for related expenses, including, among other things,
attorneys'attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these provisions and indemnification agreements are necessary to attract and retain qualified persons as directors. We also maintain customary
directors'directors’ and
officers'officers’ liability insurance.
The limitation of liability and indemnification provisions in our Bylaws and Charter may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other
stockholders. Further, a stockholder'sstockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers, as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought and we are not aware of any threatened litigation that may result in claims for indemnification.
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PROPOSAL THREE—ADVISORY VOTE TO APPROVE THE COMPANY'S
EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act require a separate, nonbinding "say on pay" stockholder vote to approve the compensation of Named Executive Officers. The compensation paid to our Named Executive Officers and the Company's overall executive compensation policies and procedures are described in the "Compensation Discussion and Analysis" and the tabular disclosure (together with the accompanying narrative disclosure) in this Proxy Statement.
This proposal gives you as a stockholder the opportunity to endorse or not endorse the compensation paid to the Company's Named Executive Officers through the following resolution:
"RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the tabular disclosure regarding Named Executive Officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement."
Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee will consider the outcome of the vote when evaluating the effectiveness of our compensation policies and procedures and in connection with its future executive compensation determinations.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE APPROVAL OF THE
COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS
PROXY STATEMENT.
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PROPOSAL FOUR—ADVISORY VOTE OF THE SAY ON PAY FREQUENCY PROPOSAL
The Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act require a separate, nonbinding stockholder vote to approve the frequency with which stockholders would have an opportunity to provide an advisory approval of our executive compensation program. We are providing stockholders with the option of selecting a frequency of one, two or three years, or abstaining. For the reasons described below, we recommend that our stockholders select a frequency of one year, or an annual vote.
Our executive compensation program is designed to support long-term value creation, and an annual vote will allow shareowners to better judge our executive compensation program in relation to our long-term performance. An annual vote will provide us with the time to thoughtfully respond to stockholders' sentiments and implement any necessary changes. We therefore request that our stockholders select "One Year" when voting on the frequency of advisory votes on executive compensation.
By voting on this proposal, stockholders are not approving or disapproving our board's recommendation, but rather are indicating whether they prefer an advisory vote on Named Executive Officer compensation be held every year, every two years or every three years. Stockholders may also abstain from voting.
Because your vote is advisory, it will not be binding on the Board and may not be construed as overruling any decision by the Board. Our Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on our Named Executive Officer compensation less frequently than the option selected by our stockholders.
We will provide our stockholders with the opportunity to vote on the frequency of advisory votes on our Named Executive Officers' compensation at our annual meetings at least once every six calendar years.
OUR BOARD OF DIRECTORS RECOMMENDS VOTING ONE YEAR ON THE PROPOSAL
RECOMMENDING THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock as of April
22, 201615, 2020 by:
each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock;
•
each of our Named Executive Officers;
•
each of our directors; and
•
all of our current executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable on or before June
21, 2016,14, 2020, which is 60 days after April
22, 2016.15, 2020. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. For certain stockholders, the percentage ownership assumes the exercise of options. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for persons listed in the table is c/o 2U, Inc.,
8201 Corporate Drive, Suite 900, Landover,7900 Harkins Road, Lanham, Maryland
20785. | | | | | | | |
Name of Beneficial Owner | | Shares | | Percentage | |
|---|
Principal Stockholders: | | | | | | | |
FMR LLC(1) | | | 6,836,447 | | | 14.7 | % |
Franklin Resources, Inc.(2) | | | 4,579,883 | | | 9.9 | % |
Gilder, Gagnon, Howe & Co. LLC(3) | | | 4,432,767 | | | 9.6 | % |
Entities affiliated with Redpoint Ventures(4) | | | 4,377,763 | | | 9.4 | % |
Executive Officers and Directors: | | | | | | | |
Christopher J. Paucek(5) | | | 1,361,199 | | | 2.9 | % |
Robert L. Cohen(6) | | | 619,798 | | | 1.3 | % |
James H. Shelton(7) | | | 21,343 | | | * | |
Catherine A. Graham(8) | | | 247,694 | | | * | |
Jeff C. Rinehart(9) | | | 78,229 | | | * | |
James Kenigsberg(10) | | | 222,468 | | | * | |
Michael T. Moe(11) | | | 13,240 | | | * | |
John M. Larson(12) | | | 506,468 | | | 1.1 | % |
Mark J. Chernis(13) | | | 137,983 | | | * | |
Edward S. Macias(14) | | | 11,742 | | | * | |
Paul A. Maeder(15) | | | 1,305,580 | | | 2.8 | % |
Robert M. Stavis(16) | | | 1,101,386 | | | 2.4 | % |
Timothy M. Haley(17) | | | 4,513,173 | | | 9.7 | % |
Sallie L. Krawcheck(18) | | | 28,244 | | | * | |
Earl Lewis(19) | | | 25,914 | | | * | |
All current directors and executive officers as a group (15 persons) | | | 10,194,461 | | | 20.9 | % |
*Represents beneficial ownership of less than 1%.
20706.
Table |
| | | | | |
| Name of Beneficial Owner | | Shares | Percentage |
| Principal Stockholders: | | |
| ArrowMark Colorado Holdings, LLC(1) | 5,697,184 |
| 8.9 | % |
| The Vanguard Group(2) | 5,610,098 |
| 8.8 | % |
| ARK Investment Management LLC(3) | 5,220,253 |
| 8.2 | % |
| Nomura Global Financial Products, Inc.(4) | 5,266,173 |
| 8.2 | % |
| Sumitomo Mitsui Trust Holdings, Inc. / Nikko Asset Management Americas, Inc.(5) | 4,181,193 |
| 6.5 | % |
| Executive Officers and Directors | | |
| Christopher J. Paucek(6) | 1,455,070 |
| 2.2 | % |
| Paul S. Lalljie | — |
| * |
|
| Catherine A. Graham(7) | 417,182 |
| * |
|
| Mark J. Chernis(8) | 180,165 |
| * |
|
| Harsha Mokkarala(9) | 139,525 |
| * |
|
| James Kenigsberg(10) | 311,335 |
| * |
|
| Matthew J. Norden(11) | 38,933 |
| * |
|
| John M. Larson(12) | 227,496 |
| * |
|
| Edward S. Macias(13) | 40,218 |
| * |
|
| Paul A. Maeder(14) | 113,436 |
| * |
|
| Robert M. Stavis(15) | 212,858 |
| * |
|
| Timothy M. Haley(16) | 75,646 |
| * |
|
| Sallie L. Krawcheck(17) | 60,894 |
| * |
|
| Earl Lewis(18) | 47,789 |
| * |
|
| Coretha M. Rushing(19) | 16,421 |
| * |
|
| Valerie B. Jarrett(20) | 5,304 |
| * |
|
| Gregory K. Peters(21) | 99,327 |
| * |
|
| Alexis Maybank(22) | 3,100 |
| * |
|
| All current directors and executive officers as a group (17 persons) | 2,888,083 |
| 4.5 | % |
| |
| * | Represents beneficial ownership of less than 1%. |
| |
| (1) | Beneficial ownership information is based on a Schedule 13G filed with the SEC on February 14, 2020 by ArrowMark Colorado Holdings, LLC (“ArrowMark”). According to its Schedule 13G filing, ArrowMark has sole dispositive power with respect to 5,697,184 shares of our common stock, shared dispositive power with respect to 0 shares of our common stock, sole voting power with respect to 5,697,184 shares of our common stock and shared voting power with respect 0 shares of our common stock. The principal business address of ArrowMark is 100 Fillmore Street, Suite 325, Denver, CO 80206. |
| |
| (2) | Beneficial ownership information is based on a Schedule 13G/A filed with the SEC on February 12, 2020 by The Vanguard Group (“Vanguard”). According to its Schedule 13G filing, Vanguard has sole dispositive power with respect to 5,574,146 shares of our common stock, shared dispositive power with respect to 35,952 shares of our common stock, sole voting power with respect to 34,090 shares of our common stock and shared voting power with respect to 11,004 shares of our common stock. The principal business address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
| |
| (3) | Beneficial ownership information is based on a Schedule 13G filed with the SEC on February 14, 2020 by ARK Investment Management LLC (“ARK”). According to its Schedule 13G filing, ARK has sole dispositive power with respect to 5,220,253 shares of our common stock, shared dispositive power with respect to 0 shares of our common stock, sole voting power with respect to 4,017,808 shares of our common stock and shared voting power with respect 334,322 shares of our common stock. The principal business address of ARK is 3 East 28th Street, 7th Floor, New York, NY 10016. |
| |
| (4) | Beneficial ownership information is based on a Schedule 13G filed with the SEC on February 14, 2020 by Nomura Holdings, Inc. (“Nomura”). According to its Schedule 13G filing, Nomura has sole dispositive power with respect |
to 0 shares of
Contents(1)Beneficial ownership information is based on a Schedule 13G/A filed with the SEC on February 12, 2016 by FMR LLC ("FMR"). According to its Schedule 13G filing, FMR has soleour common stock, shared dispositive power with respect to 6,836,4475,266,173 shares of our common stock, sole voting power with respect to 0 shares of our common stock and soleshared voting power with respect to 864,3785,266,173 shares of our common stock. The principal business address of FMRNomura is 245 Summer Street, Boston, MA 02210.
(2)Beneficial ownership information is based on a Schedule 13G/A filed with the SEC on March 10, 2016 by Franklin Resources, Inc. ("Franklin Resources"), Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisers, Inc. ("Franklin Advisers") to the effect that (a) each (directly or indirectly) has dispositive and voting power over these shares to the extent disclosed therein and (b) these shares are held by investment companies or other managed accounts which are advised by subsidiaries of Franklin Resources pursuant to investment management contracts which grant to such subsidiaries all investment and voting power over these shares. The business address for Franklin Resources, Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisers is One Franklin Parkway, San Mateo, CA 94403.
(3)Beneficial ownership information is based on a Schedule 13G filed with the SEC on February 12, 2016 by Gilder, Gagnon, Howe & Co. LLC ("Gilder"). According to its Schedule 13G filing, Gilder has sole dispositive power with respect to 57,197 shares of our common stock and sole voting power with respect to 57,197 shares of our common stock. The principal business address of Gilder is 3 Columbus Circle, 26th Floor New York, NY 10019.
(4)Beneficial ownership information is based on a Schedule 13G filed with the SEC on February 9, 2016 by Redpoint Ventures III, L.P. ("Redpoint Ventures LP"), Redpoint Associates III, LLC ("Redpoint Associates") and Redpoint Ventures III, LLC ("Redpoint Ventures LLC"), and a Form 4 filed with the SEC on March 14, 2016 by Redpoint Ventures LLC, and consists of (a) 4,213,598 shares of common stock held by Redpoint Ventures LP and (b) 164,165 shares of common stock held by Redpoint Associates. The shares held by Redpoint Ventures LP are indirectly held by Redpoint Ventures LLC, the general partner of Redpoint Ventures LP. Timothy M. Haley, one of our directors, along with Allen Beasley, Jeffrey D. Brody, R. Thomas Dyal, G. Bradford Jones, John L. Walecka and Geoffrey Y. Yang (the "Redpoint Managers") are the managers of Redpoint Ventures LLC and hold the voting and dispositive rights with respect to the shares held by Redpoint Ventures LP. The Redpoint Managers also have voting and dispositive rights with respect to the shares held by Redpoint Associates. The principal business address of Redpoint Ventures and Redpoint Associates is 3000 Sand Hill Road, Building 2, Suite 290, Menlo Park, CA 94025.
(5)Shares beneficially owned consist of (a) 127,814 shares of common stock held by Mr. Paucek directly and (b) 1,233,3851-9-1 Nihonbashi, Chuo-ku, Tokyo 103-8645, Japan.
| |
| (5) | Beneficial ownership information is based on a Schedule 13G filed with the SEC on February 12, 2020 by Sumitomo Mitsui Trust Holdings, Inc. (“SMTH”) and Nikko Asset Management Co. Ltd (“NAM”). According to its Schedule 13G filing, SMTH and NAM have sole dispositive power with respect to 0 shares of our common stock, shared dispositive power with respect to 4,181,193 shares of our common stock, sole voting power with respect to 0 shares of our common stock and shared voting power with respect 4,181,193 shares of our common stock. The principal business address of SMTH is 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan and the principal business address of NAM is Midtown Tower, 9-7-1 Akasaka, Minato-ku, Tokyo 107-6242, Japan. |
| |
| (6) | Shares beneficially owned consist of (a) 461,857 shares of common stock held by Mr. Paucek directly and (b) 993,213 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
| |
| (7) | Shares beneficially owned consist of (a) 39,165 shares of common stock held by Ms. Graham directly and (b) 378,017 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
| |
| (8) | Shares beneficially owned consist of (a) 76,876 shares of common stock held by Mr. Chernis directly and (b) 103,289 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
| |
| (9) | Shares beneficially owned consist of (a) 31,213 shares of common stock held by Mr. Mokkarala directly and (b) 108,312 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2019. |
| |
| (10) | Shares beneficially owned consist of (a) 116,043 shares of common stock held by Mr. Kenigsberg directly and (b) 195,292 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
| |
| (11) | Shares beneficially owned consist of (a) 8,962 shares of common stock held by Mr. Norden directly and (b) 28,742 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
| |
| (12) | Shares beneficially owned consist of (a) 68,090 shares of common stock held by Mr. Larson directly, (b) 21,495 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020, and (c) 137,911 shares of common stock held by Triumph Capital, LLC (“Triumph”). Mr. Larson is the sole member of Triumph and may be deemed to have beneficial ownership of the shares held by Triumph. |
| |
| (13) | Shares beneficially owned consist of (a) 23,988 shares of common stock held by Mr. Macias directly and (b) 16,230 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
| |
| (14) | Shares beneficially owned consist of (a) 51,995 shares of common stock held by Mr. Maeder directly, (b) 21,495 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020, and (c) 39,946 shares of common stock held by Altaheide LLC (“Altaheide”). Mr. Maeder may be deemed to have beneficial ownership of the shares held by Altaheide. |
| |
| (15) | Shares beneficially owned consist of (a) 119,916 shares of common stock held by Mr. Stavis directly, (b) 35,707 shares of common stock held by Stavis Ventures II, LLC (“Stavis Ventures”), (c) 35,740 shares of common stock held by Stavco Venture Holdings LLC (“Stavco Venture Holdings”), and (d) 21,495 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. Stavis Ventures and Stavco Venture Holdings are controlled by Mr. Stavis, and Mr. Stavis disclaims beneficial ownership of the shares held by these entities, except to the extent of his pecuniary interest therein. |
| |
| (16) | Shares beneficially owned consist of (a) 6,533 shares of common stock held by Mr. Haley directly, (b) 52,530 shares of common stock held by the Haley‑McGourty Family Trust U/D/T 9/27/96 (the “Haley Trust”), (c) 6,827 shares of common stock held by Haley‑McGourty Partners (“Haley Partners”), and (d) 9,756 shares of common stock |
underlying options that are vested andcurrently exercisable or will be exercisable within 60 days of April 22, 2016.
(6)Shares beneficially owned consist of (a) 318,182 shares of common stock held by Mr. Cohen directly, (b) 93,000 shares of common stock held by a family trust of which Mr. Cohen's spouse is one of the trustees and (c) 208,616 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(7)Shares beneficially owned consist of (a) 7,493 shares of common stock held by Mr. Shelton directly, (b) 4,566 shares of common stock underlying restricted stock units that are scheduled to vest within 60 days of April 22, 2016 and (c) 9,284 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(8)Shares beneficially owned consist of (a) 10,390 shares of common stock held by Ms. Graham directly and (b) 237,304 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(9)Shares beneficially owned consist of (a) 11,702 shares of common stock held by Mr. Rinehart directly and (b) 66,527 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
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(10)Shares beneficially owned consist of (a) 9,545 shares of common stock held by Mr. Kenigsberg directly and (b) 212,923 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(11)Shares beneficially owned consist of (a) 6,140 shares of common stock held by Mr. Moe directly, (b) 6,275 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016 and (c) 825 shares of common stock held by GSV X Fund, LP ("GSV X"). Mr. Moe has a limited partnership interest in GSV X and is the Chief Executive Officer and Chief Investment Officer of GSV Asset Management, LLC ("GSV Asset Management"), which is the general partner of GSV X. Mr. Moe may be deemed to have beneficial ownership of the shares held by GSV X.
(12)Shares beneficially owned consist of (a) 7,305 shares of common stock held by Mr. Larson directly, (b) 106,275 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016 and (c) 392,888 shares of common stock held by Triumph Capital, LLC ("Triumph"). Mr. Larson is the sole member of Triumph and may be deemed to have beneficial ownership of the shares held by Triumph.
(13)Shares beneficially owned consist of (a) 4,208 shares of common stock held by Mr. Chernis directly and (b) 133,775 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(14)Shares beneficially owned consist of (a) 9,685 shares of common stock held by Dr. Macias directly and (b) 2,057 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(15)Shares beneficially owned consist of (a) 6,140 shares of common stock held by Mr. Maeder directly, (b) 6,275 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016 and (c) 1,293,165 shares of common stock held as follows: (i) 795,038 shares of common stock held by Highland Capital Partners VII, Limited Partnership ("Highland VII"), (ii) 192,652 shares of common stock held by Highland Capital Partners VII-B, Limited Partnership ("Highland VII-B"), (iii) 280,563 shares of common stock held by Highland Capital Partners VII-C, Limited Partnership ("Highland VII-C") and (iv) 24,912 shares of common stock held by Highland Entrepreneurs' Fund VII, Limited Partnership ("Highland Entrepreneurs" and, together with Highland VII, Highland VII-B and Highland VII-C, the "Highland Entities"). Highland Management Partners VII, Limited Partnership ("HMP LP") is the general partner of each of the Highland Entities. Highland Management Partners VII, LLC ("HMP LLC") is the general partner of HMP LP. Mr. Maeder and Peter W. Bell, Sean M. Dalton, Robert J. Davis, Daniel J. Nova and Corey M. Mulloy are the managing members of HMP LLC and share voting and investment power over the shares held by the Highland Entities. The principal business address for the Highland Entities is One Broadway, 16th Floor, Cambridge, MA 02142.
(16)Shares beneficially owned consist of (a) 14,685 shares of common stock held by Mr. Stavis directly, (b) 10,847 shares of common stock held by Stavis Ventures II, LLC ("Stavis Ventures"); (c) 11,522 shares of common stock held by Stavco Venture Holdings LLC ("Stavco Venture Holdings"); (d) 6,275 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016 and (e) 1,058,057 shares of common stock held as follows: (i) 338,578 shares of common stock held by Bessemer Venture Partners VII L.P. ("Bessemer VII"), (ii) 148,127 shares of common stock held by Bessemer Venture Partners VII Institutional L.P. ("Bessemer Institutional") and (iii) 571,352 shares of common stock held by BVP Special Opportunity Fund L.P. ("Bessemer SOF" and, together with Bessemer VII and Bessemer Institutional, the "Bessemer Entities"). Mr. Stavis may be deemed to have beneficial ownership of the shares held by Stavis Ventures and Stavco Venture Holdings. Deer VII & Co. L.P. is the general partner of each of the Bessemer Entities, and Deer VII & Co. Ltd. is the general partner of Deer VII & Co. L.P. Each of Deer VII & Co. L.P. and Deer VII & Co. Ltd. may be deemed to have voting and dispositive power over the shares held by the Bessemer Entities. Mr. Stavis, J. Edmund Colloton, David J. Cowan, Byron B. Deeter, Robert P. Goodman and Jeremy S. Levine are the directors of Deer VII & Co. Ltd. and voting decisions with respect to shares held by the Bessemer Entities are
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made by the directors of Deer VII & Co. Ltd. acting as an investment committee. No stockholder, partner, director, officer, manager, member or employee of Deer VII & Co. L.P. or Deer VII & Co. Ltd. has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of any shares held by the Bessemer Entities. The principal business address for the Bessemer Entities is 1865 Palmer Avenue, Suite 104, Larchmont, NY 10538.
(17)Shares beneficially owned consist of (a) 7,305 shares of common stock held by Mr. Haley directly, (b) 97,593 shares of common stock held by the Haley-McGourty Trust U/D/T 9/27/96 (the "Haley Trust"), (c) 24,237 shares of common stock held by Haley-McGourty Partners ("Haley Partners"), (d) 6,275 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016, and (e) 4,377,763 shares of common stock held as follows: (i) 4,213,598 shares of common stock held by Redpoint Ventures and (ii) 164,165 shares of common stock held by Redpoint Associates.15, 2020. Mr. Haley may be deemed to have beneficial ownership of the shares held by the Haley Trust and Haley Ventures. Mr. Haley, along with the Redpoint Managers, are the managers of Redpoint Ventures III, LLC and hold the voting and dispositive rights with respect to the shares held by Redpoint Ventures. The Redpoint Managers also have voting and dispositive rights with respect to the shares held by Redpoint Associates.
(18)Shares beneficially owned consist of (a) 10,228 shares of common stock held by Ms. Krawcheck directly and (b) 18,016 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
(19)Shares beneficially owned consist of (a) 7,898 shares of common stock held by Dr. Lewis directly, and (b) 18,016 shares of common stock underlying options that are vested and exercisable within 60 days of April 22, 2016.
Partners. | |
| (17) | Shares beneficially owned consist of (a) 21,788 shares of common stock held by Ms. Krawcheck directly and (b) 39,106 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
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| (18) | Shares beneficially owned consist of (a) 8,683 shares of common stock held by Mr. Lewis directly and (b) 39,106 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
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| (19) | Shares beneficially owned consist of (a) 6,628 shares of common stock held by Ms. Rushing directly and (b) 9,793 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
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| (20) | Shares beneficially owned consist of (a) 2,233 shares of common stock held by Ms. Jarrett directly and (b) 3,071 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
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| (21) | Shares beneficially owned consist of (a) 96,670 shares of common stock held by Mr. Peters directly and (b) 2,657 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
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| (22) | Shares beneficially owned consist of (a) 1,339 shares of common stock held by Ms. Maybank directly and (b) 1,761 shares of common stock underlying options that are currently exercisable or will be exercisable within 60 days of April 15, 2020. |
We know of no arrangements, the operation of which may at a subsequent date result in the change of control of the Company.
Delinquent Section 16(a)
Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC reports of ownership and changes in ownership of the Company'sCompany’s equity securities. Executive officers, and beneficial owners of greater than 10% of our outstanding securities are required by SEC regulations to provide us with copies of all Section 16(a) forms that they file. Based solely on review of the copies of such forms furnished to us and written representations from our executive officers and directors that no other reports were required, we believe that through December 31, 2015,2019, all of our executive officers, directors and greater than 10% beneficial owners complied with all Section 16(a) filing requirements applicable to them, exceptwith the exception of one Form 4 that was not filed on a timely basis by John Larson. On May 22, 2019, Triumph Capital, LLC received 41,689 shares of Company common stock as follows: (a) One latepart of its pro rata consideration in respect of the Company’s acquisition of Trilogy. Mr. Larson is the sole member of Triumph Capital, LLC. A Form 4 was filed for Mr. Moe with respect to an indirect interest in a purchase of shares of common stock made by GSV X Fund, LP ("GSV X"). Mr. Moe holds a limited partnership interest in GSV X and isreport the Chief Executive Officer and Chief Investment Officer of GSV Asset Management, which is the general partner of GSV X; (b) Six Forms 4transaction by Mr. Paucek may be deemed to have been filed late as they initially reported the exercise of options other than those actually exercised. Those errors arose from an amendment to Mr. Paucek's Rule 10b5-1 trading plan to change the option award being exercised for sales made from time to time pursuant to the plan. While the number of options exercised, shares of common stock sold pursuant to the plan, and the price at which the common stock was sold, were correctly reported in each case, the original Forms 4 incorrectly identified the option award being exercised. Each of the six Forms 4 reflecting that error has been amended to correctly identify the option award exercised in each case.Larson on August 12, 2019.
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REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PARTIES
All related party transactions are reviewed and, as appropriate, may be approved or ratified by the Audit Committee. If a director is involved in the transaction, he may not participate in any review, approval or ratification of such transaction. Related party transactions are approved by the Audit Committee only if, based on all of the facts and circumstances, they are in, or not inconsistent with, the best interests of the Company and the best interests of our stockholders, as the Audit Committee determines in good faith. The Audit Committee takes into account, among other factors it deems appropriate, whether the transaction is on terms generally available to an unaffiliated
third-partythird‑party under the same or similar circumstances and the extent of the related
party'sparty’s interest in the transaction.
TRANSACTIONS WITH RELATED PARTIES
The following is a summary of transactions since the beginning of the Company's 2015 fiscal year to which we have been a participant in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than five percent of our capital stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are described under "Executive Compensation." For a description of severance arrangements that we have entered into with some of our executive officers, please see "Potential Payments Upon Termination of Employment and in Connection with Change of Control Arrangements."
Marketing and Event Planning Services
From time to time, we engage the services of a marketing and event planning company. Robert L. Cohen, our President and Chief Operating Officer in 2015, owns an equity interest of approximately 12% of this company. We do not have a written agreement with this company and may terminate this arrangement at any time. We are invoiced for services as they are performed, including out-of-pocket expenses incurred on our behalf and for which we reimburse this company at cost. We paid this company a total of $1.7 million during the year ended December 31, 2015.
Investor Rights Agreement
On March 27, 2012, we entered into an amended and restated investors' rights agreement (the "Investors' Rights Agreement") with Mr. Cohen and entities affiliated with Redpoint Ventures, Highland Capital Partners, Bessemer Venture Partners and other stockholders. Most of the provisions of the Investors' Rights Agreement terminated upon completion of the Company's initial public offering, except that the parties maintain specified registration rights with respect to shares of our common stock. Subject to the conditions specified in the Investors' Rights Agreement, if holders of at least of a majority of the Registrable Securities (as defined therein) request that that Company file a registration statement covering the registration of at least such number of the Registrable Securities having an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $15,000,000, then the Company shall use its best efforts to file such registration statement.
Indemnification Agreements
Our Charter contains provisions limiting the liability of directors, and our Bylaws provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our Bylaws and Charter also provide our Board with discretion to indemnify our officers and employees when determined appropriate by the Board.
In addition, we have entered into an indemnification agreement with each of our directors and some of our executive officers.
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Related Person Transaction Policy
The Company has adopted a written related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions,
arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our Audit Committee, or, if Audit Committee approval would be inappropriate, to another independent body of our Board, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related person transactions and to effectuate the terms of the policy. In addition, under our Code of Business Conduct and Ethics, our employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our Audit Committee, or other independent body of our Board, will take into account the relevant available facts and circumstances, including, but not limited to:
the risks, costs and benefits to us;
•the impact on a director'sdirector’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
•the availability of other sources for comparable services or products; and
•the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our Audit Committee, or other independent body of our Board, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our Audit Committee, or other independent body of our Board, determines in the good faith exercise of its discretion.
TableCertain Related Person Transactions
Other than as set forth below, there have been no transactions since January 1, 2019 to which we have been a participant in which the amount involved exceeded or will exceed $120,000, and in which any of
Contentsour directors, executive officers or holders of more than five percent of our capital stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are described under “Executive Compensation.” For a description of severance arrangements that we have entered into with some of our executive officers, please see “Potential Payments Upon Termination of Employment and in Connection with Change of Control Arrangements.”
Merger Agreement
On April 7, 2019, we entered into a definitive agreement (the “AUDIT COMMITTEE REPORTMerger Agreement*
The Board has ultimate authority”) to acquire Trilogy for total consideration of $750 million payable in a combination of cash and responsibility for effective corporate governance, includingstock, subject to certain customary purchase price adjustments (the “Transaction”). Certain equity holders of Trilogy have affiliations with two of our directors. Mr. Larson is the rolesole member of oversightTriumph Capital LLC (“Triumph”), which owns approximately 1% of the managementissued and outstanding capital stock of 2U. The Audit Committee's purposeTrilogy on a fully‑diluted basis. Mr. Maeder is one of six managing members of Highland Management Partners 9 LLC, and Highland Management Partners 9 (SPV) LLC, each of which is the general partner of certain other entities, which are the general partners of certain funds managed or advised by Highland Capital Partners (the “Highland Investing Entities”), which Highland Investing Entities collectively own approximately 20% of the issued and outstanding shares of Trilogy on a fully‑diluted basis. Mr. Maeder has advised the Company that his indirect financial interest in Trilogy through the Highland Investing Entities is expected to assistbe less than 1% of the Board in fulfilling its responsibilitiesissued and outstanding capital stock of Trilogy.
Prior to the Company
submitting its initial indication of interest regarding the acquisition of Trilogy, Messrs. Larson and
its stockholders by overseeingMaeder advised the
accounting and financial reporting processes of 2U, the audits of 2U's consolidated financial statements and the qualifications, selection and performance of the Company's independent registered public accounting firm. The Audit Committee reviews our financial reporting process on behalf of the Board. The Audit Committee relies on the expertise and knowledge of management and the independent auditor in carrying out its oversight responsibilities. Management has the primary responsibility for establishing and maintaining effective systems of internal and disclosure controls, for preparing financial statements, and for the public reporting process. KPMG LLP, 2U's independent registered public accounting firm for 2015, is responsible for expressing opinions on the conformity of the Company's audited financial statements with generally accepted accounting principles and on our internal controls over financial reporting.
With respect to the fiscal year ended December 31, 2015, the Audit Committee, among other things: oversaw the integrity of the Company's financial statements and financial reporting processes, oversaw compliance with legal and regulatory requirements, reviewed the external auditors' qualifications and independence (including auditor rotation), and evaluated the external auditors' performance.
The Audit Committee has reviewed and discussed with management and KPMG LLP the audited consolidated financial statements for the year ended December 31, 2015. The Audit Committee also discussed with KPMG LLP all matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board. In addition, the Audit Committee has received from KPMG LLP the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP's communications with the Audit Committee concerning independence, and the Audit Committee has had discussions with KPMG LLP regarding its independence from the Company and its management.
Based on the reviews and discussions described above, the Audit Committee recommended to our Board and the Board approved, inclusionmanagement of the audited consolidatedtheir respective indirect financial statements for the fiscal year ended December 31, 2015interests in our Annual Report on Form 10-K for 2015 for filing with the SEC. The Audit Committee and the Board have selected KPMG LLP as the Company's independent accountant for fiscal year 2016.
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| | Submitted by the Audit Committee
Sallie L. Krawcheck (Chairperson)
Mark J. Chernis
Michael T. Moe
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*The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing of 2U under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that 2U specifically incorporates the Audit Committee Report by reference therein.
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Principal Accountant Fees and Services
The Audit Committee of our Board is responsible for the appointment, oversight and evaluation of our independent registered public accounting firm. The Audit Committee has the sole and direct authority to engage, appoint and replace our independent auditors. In addition, the Audit Committee has established in its charter a policy that every engagement of the Company's independent registered public accounting firm to perform audit or permissible non-audit services on behalf of the Company or any of its subsidiaries requires pre-approval from the Audit Committee or its designee before such independent registered public accounting firm is engaged to provide those services. Our independent registered public accounting firm may not be retained to perform the non-audit services specified in Section 10A(g) of the Exchange Act. Pursuant to the Audit Committee Charter, the Audit Committee reviews and, in its sole discretion, approves in advance the Company's independent registered public accounting firm's annual engagement letter, including the proposed fees contained therein,Trilogy, as well as the fact that neither Mr. Larson, Mr. Maeder nor Triumph has any governance rights over Trilogy or control over the board of
directors of Trilogy and does not hold any director, officer, employee, consulting or similar role with Trilogy. In addition, Mr. Maeder confirmed that he does not hold dispositive or voting control over the Trilogy shares held by the Highland Investing Entities. Although the Highland Investing Entities do hold two out of seven board seats at Trilogy, approval of the potential transaction between Trilogy and the Company required the approval of a majority of the directors and the approval of various classes of Trilogy stock, including classes of Trilogy stock which are not controlled by the Highland Investing Entities, and therefore, neither the board seats nor the shares of Trilogy held by the Highland Investing Entities were sufficient to control Trilogy’s decision to enter into the proposed transaction. In January 2019, upon the recommendation of the Nominating and Corporate Governance Committee, the Board formed a transaction committee (the “Transaction Committee”) for the purpose of reviewing and considering the potential transaction with Trilogy. The Transaction Committee consists of four directors—Messrs. Haley, Macias, and Stavis and Ms. Maybank—all auditof whom are “independent directors,” as defined under applicable Nasdaq listing standards and as providedthe rules of the SEC, and none of whom have any interest in the Sarbanes-Oxley ActTransaction.
On April 5, 2019, after a thorough review and due consideration of
2002the Transaction, including full disclosure of Mr. Maeder’s and Mr. Larson’s interests therein, the Transaction Committee unanimously recommended to the Board that it approve the Merger Agreement and the
SEC rulesTransaction. The Transaction Committee reviewed and
regulations promulgated thereunder, all permitted non-audit engagementsapproved the Transaction under our related person transaction policy. On April 6, 2019, the full Board met to consider the Merger Agreement and
relationships between the
CompanyTransactions. Following a thorough review and
such independent registered public accounting firm (which approval should be made after receiving inputdue consideration of the Transaction, including full disclosure of Mr. Maeder’s and Mr. Larson’s interests therein, the full Board (other than Mr. Maeder and Mr. Larson who recused themselves from the
Company's management, if desired). With respect to the audit for the years ended December 31, 2015 and 2014, the Audit Committeevote) unanimously approved the audit services performed by KPMG LLP, as well as certain categories and types of tax and permitted non-audit services.
Independent Registered Public Accounting Firm Fees
Aggregate fees for professional services rendered by KPMG LLP for the years ended December 31, 2015 and December 31, 2014, were:
| | | | | | | |
Type of Fee | | 2015 | | 2014 | |
|---|
Audit Fees(1) | | $ | 1,369,000 | | $ | 581,000 | |
Audit-Related Fees(2) | | | — | | | — | |
Tax Fees(3) | | | 40,000 | | | 127,000 | |
All Other Fees(4) | | | — | | | — | |
| | | | | | | | |
Total Fees | | $ | 1,409,000 | | $ | 708,000 | |
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(1)Audit fees consisted of work performed in connection with the audit of our consolidated financial statements included in our registration statements on Form S-1 and Form S-3 and our Annual Reports on Form 10-K,Merger Agreement and the reviews of the unaudited quarterly financial statements included in our Quarterly Reports on Form 10-Q.
(2)There were no audit-related fees for the years ended December 31, 2015 or 2014.
(3)Tax fees consisted of services related to tax planning and advisory services.
(4)There were no other fees for the years ended December 31, 2015 or 2014.
Transactions.
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INCORPORATION BY REFERENCE
In accordance with SEC rules, notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act, that might incorporate this proxy statement or future filings made by 2U
under those statutes,into such filings, and those portions of the information included under the caption
"Audit“Audit Committee
Report"Report” required by the
SEC'sSEC’s rules to be included therein, shall not be deemed to be
"soliciting material"“soliciting material” or
"filed"“filed” with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by 2U under those statutes, except to the extent we specifically incorporate these items by reference.
We have not incorporated by reference into this proxy statement the information included on or linked from our website, and you should not consider it to be part of this proxy statement.
OTHER MATTERS
The Board knows of no other matters that have been submitted for consideration at the Meeting other than those referred to in this proxy statement. By submitting the proxy, the stockholder authorizes the persons named on the proxy to use their discretion in voting on any matter brought before the Meeting.
IMPORTANT NOTICE REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy proxy material delivery requirements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is referred to as
"householding,"“householding,” potentially provides extra convenience for stockholders and reduces printing and postage costs for companies.
Some brokers utilize the householding process for proxy materials, in which case, only one copy of this proxy statement
or our Annual Report to Stockholders may be sent to two or more stockholders sharing the same address. Stockholders who participate in householding will continue to receive separate proxy cards. If you hold your 2U stock in
"street“street name,
"” additional information regarding householding of proxy materials should be forwarded to you by your broker.
If you wish to receive a separate copy of this proxy statement or our Annual Report to Stockholders, we will promptly deliver one to you upon request. You can notify us by sending a written request to 2U, Inc., 8201 Corporate Drive, Suite 900, Landover,7900 Harkins Road, Lanham, Maryland 20785,20706, Attention: Corporate Secretary, or by calling the Corporate Secretary at (301) 892-4350.892‑4350. In addition, if you would like to receive separate proxy statements and annual reports of 2U in the future, or if you are receiving multiple copies of annual reports and proxy statements at an address shared with another stockholder and would like to participate in householding, please notify your broker if your shares are held in a brokerage account or us at the above address and telephone number if you hold registered shares.
TableOTHER MATTERS
The Board knows of
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ANNUAL REPORT
A copy of 2U's Annual Report on Form 10-Kno other matters that have been submitted for fiscal year 2015 is being mailed together withconsideration at the Meeting other than those referred to in this proxy statementstatement. By submitting the proxy, the stockholder authorizes the persons named on the proxy to all stockholders entitled to notice of and to vote atuse their discretion in voting on any matter brought before the Meeting.A copy of our Annual Report, including the financial statements included therein, is also available without charge by visiting the Company's website or upon written request to 2U, Inc., 8201 Corporate Drive, Suite 900, Landover, Maryland 20785, Attention: Corporate Secretary.
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| | By Order of the Board of Directors, |
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| | Christopher J.“Chip” Paucek
Co‑Founder & Chief Executive Officer
April 26, 201630, 2020 |
ANNUAL MEETING OF STOCKHOLDERS OF 2U, INC. June 7, 2016 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at http://investor.2u.com/annuals-proxies.cfm Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20333040000000000000 2 060716 registered public accounting firm for the 2016 fiscal year: disclosed in the 2016 Proxy Statement: changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 AND 3. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “1 YEAR” ON PROPOSAL 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 1. Election of 3 Class II directors nominated by the Board of Directors of the Company, to serve on the Board of Directors until the Company’s 2019 annual meeting of stockholders and until their successors are duly elected and qualified or until their earlier death, resignation or removal: NOMINEES: FOR ALL NOMINEESO Timothy M. Haley O Earl Lewis WITHHOLD AUTHORITYO Coretha M. Rushing FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. Ratification of the appointment of KPMG LLP as the Company’s independent 3. Advisory vote to approve the compensation of our named executive officers as 1 year 2 years 3 years ABSTAIN 4. Advisory vote to recommend the frequency of future stockholder advisory votes on the compensation of our named executive officers: NOTE: At their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournments or postponements thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
- 0 2U, INC. Proxy for Annual Meeting of Stockholders June 7, 2016 at 3:30 p.m. This proxy is solicited by the Board of Directors The undersigned stockholder hereby appoints Christopher J. Paucek, Chief Executive Officer and Todd Glassman, Corporate Secretary, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of common stock of 2U, Inc. (the “Company”) that the undersigned stockholder is entitled to vote at the Annual Meeting of Stockholders to be held at 8201 Corporate Drive, Suite 900, Landover, Maryland 20785 on June 7, 2016, beginning at 3:30 p.m. (local time), and any adjournment or postponement thereof. (Continued and to be signed on the reverse side.) 14475 1.1
