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Table of Contents
Compensation Discussion and Analysis
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment
(Amendment No. )
Filed by the Registrant | ||
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| Preliminary Proxy Statement | |
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| Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
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| Definitive Proxy Statement | |
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TrueCar, Inc. | ||||||||
(Name of Registrant as Specified In Its Charter) | ||||||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||||||
Payment of Filing Fee (Check the appropriate box): | ||||||||
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No fee required. | ||||||||
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Fee computed on table below per Exchange Act Rules14a-6(i)(1)and 0-11. | ||||||||
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(2) | Aggregate number of securities to which transaction applies: | |||||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||||||
(4) | Proposed maximum aggregate value of transaction: | |||||||
(5) | Total fee paid: | |||||||
o | Fee paid previously with preliminary materials. | |||||||
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Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||||||
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Notice of 2020 Annual Meeting of Stockholders |
YOU CAN VOTE IN ONE OF THREE WAYS | ||||||
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TELEPHONE Use the toll-free telephone number on your proxy card to vote by telephone. | ||||
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Sign, date, and return your proxy card in the enclosed envelope to vote by mail. | ||||
We are pleased to invite you to attend our 2020 Annual Meeting of Stockholders. Our board of directors has fixed the close of business on March 26, 2020 as the record date for the Annual Meeting. Only stockholders of record as of March 26, 2020 are entitled to notice of and to vote at the Annual Meeting or any postponements or adjournments thereof. Further information regarding voting rights and the matters to be voted upon is presented in the accompanying proxy statement.
Sincerely,
Michael Darrow
President and Chief Executive Officer
Santa Monica, California
April 8, 2020
Your vote is important. Whether or not you plan to attend the Annual Meeting by live webcast, we urge you to submit your vote on the Internet or by telephone or mail to ensure your shares are represented. For specific instructions on how to vote your shares, please refer to the section entitled "General Information" and the instructions on the Notice of Internet Availability. For additional instructions on voting by telephone or the Internet, please refer to your proxy card. Returning the proxy does not deprive you of your right to attend the virtual meeting and to vote your shares at the virtual meeting. Please vote as soon as possible.
The Annual Meeting will be a completely virtual meeting of stockholders. All stockholders are cordially invited to attend the Annual Meeting by live webcast.You will not be able to attend the Annual Meeting in person. As described in more detail in the accompanying proxy statement, our board of directors believes that holding a virtual stockholder meeting facilitates attendance, increases participation and communication and offers significant time and cost savings to us and our stockholders and therefore has chosen this over an in-person meeting. To participate, vote or submit questions during the Annual Meeting by live webcast, please visit www.virtualshareholdermeeting.com/True2020.
In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission, we are once again pleased to provide our stockholders access to our proxy materials on the Internet at http://materials.proxyvote.com/89785L rather than in paper form. The Notice of Internet Availability, which contains instructions on how to access the proxy materials and our 2019 Annual Report to Stockholders, is first being given or sent on or about April 8, 2020 to our stockholders entitled to vote at the Annual Meeting. Our stockholders will also have the ability to request that a printed set of the proxy materials be sent to them by following the instructions in the Notice of Internet Availability.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 17, 2018 21, 2020: This proxy statement, along with the 20172019 Annual Report to Stockholders, is available at the following website: http://materials.proxyvote.com/89785L.
By furnishing a Notice of Internet Availability and access to our proxy materials by the Internet, we are lowering the costs and reducing the environmental impact of our Annual Meeting.
The Notice of Internet Availability will also provide instructions on how you may request electronic or paper delivery of future proxy materials. If you choose to receive electronic delivery of future proxy materials, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by electronic or paper delivery will remain in effect until you terminate it. We encourage you to choose to receive future proxy materials by electronic delivery, which will (i) allow us to provide you with the information you need in a more timely manner, (ii) reduce printing and mailing documents to you and (iii) conserve natural resources.
Table of Contents |
Proxy Statement Summary | 1 | |
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Executive Officers, Directors and Corporate Governance | 4 | |
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Executive Officers and Directors | 4 | |
Board Composition | 10 | |
Board Meetings and Director Communications | 10 | |
Policy Regarding Nominations | 10 | |
Director Independence | 11 | |
Board Committees | 11 | |
Compensation Committee Interlocks and Insider Participation | 15 | |
Code of Business Conduct and Ethics | 15 | |
Board Leadership Structure | 16 | |
Board's Role in Risk Oversight | 16 | |
Information on Compensation Risk Assessment | 16 | |
Non-Employee Director Compensation | 17 | |
Outside Director Compensation Policy | 17 | |
Security Ownership of Certain Beneficial Owners and Management | 19 | |
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Compensation Discussion and Analysis | 23 | |
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Summary Compensation Table | 42 | |
Grants of Plan Based Awards | 44 | |
Outstanding Equity Awards at Fiscal Year-End | 46 | |
Option Exercises and Stock Vested | 49 | |
Executive Employment Arrangements | 49 | |
Potential Payments Upon Termination, Change in Control or Certain Other Events | 51 | |
Equity Compensation Plan Information | 60 | |
CEO Pay Ratio Disclosure | 61 | |
Certain Relationships and Related Party and Other Transactions | 63 | |
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Audit Committee Report | 65 | |
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Proposal One: Election of Directors | 66 | |
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Proposal Two: Ratification of Selection of Independent Registered Public Accountants | 67 | |
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Proposal Three: Advisory Vote to Approve Named Executive Officer Compensation | 69 | |
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General Information | 71 | |
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ANNEX A — Reconciliation of Adjusted EBIDTA to GAAP Net Loss | 78 | |
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2020 ANNUALPROXY STATEMENT | | |
Proxy Statement Summary |
This summary highlights selected information in this Proxy Statement. Please review the entire document before voting.
ANNUAL MEETING OF STOCKHOLDERS
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Q: Why am I receiving these materials?
A: This Proxy Statement is furnished to you by the board of directors of TrueCar, Inc. (the “Board of Directors”) and contains information related to the Annual Meeting of Stockholders to be held on Thursday, May 17, 2018 beginning at 8:30 a.m. Pacific Time and at any postponements or adjournments thereof. You can attend the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/True2018, where you will be able to participate, submit questions and vote online. References in this Proxy Statement to “we,” “us,” “our,” “the Company” or “TrueCar” refer to TrueCar, Inc.
Q: What is included in these materials?
A: These materials include this Proxy Statement for the Annual Meeting of Stockholders and our Annual Report onForm 10-KDATE for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission, or the SEC, on March 1, 2018 (the “Annual Report”). These materials were first made available to you on the Internet on or about April 4, 2018. Our principal executive offices are located at 120 Broadway, Suite 200, Santa Monica, CA 90401, and our telephone number is(800) 200-2000. We maintain websites at www.TrueCar.com and www.true.com. The information on our websites is not a part of this Proxy Statement.
Q: What items will be voted on at the Annual Meeting?
A: Stockholders will vote on the following items at the Annual Meeting:
Q: How does the Board of Directors recommend I vote on these proposals?
A: The Board recommends a vote:
Q: Who is making this solicitation?
A: The proxy for the Annual Meeting is being solicited on behalf of TrueCar’s Board of Directors.
Q: Who pays for the proxy solicitation process?
A: TrueCar will pay the cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We may, on request, reimburse brokerage firms and other nominees for their expenses in forwarding proxy materials to beneficial owners. In addition to soliciting proxies by mail, we expect that
PLACE | RECORD DATE | |||||||
| May 21, 2020 | 8:30 a.m. Pacific Time | www.virtualshareholder meeting.com/True2020 | March 26, 2020 | ||||
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PROPOSALS AND BOARD RECOMMENDATIONS
Proposals | Board Recommendation | Page Reference | ||||
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1 | Election of Directors | FOR | 66 | |||
2 | Ratification of independent registered public accounting firm | FOR | 67 | |||
3 | Advisory vote on executive compensation | FOR | 69 |
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INTERNET Visit the website noted on your proxycard to vote online. | Sign, date, and return your proxy card in the enclosed envelope to vote by mail. | |||||||||
our directors, officers and employees may solicit proxies in person or by telephone or facsimile. None of these individuals will receive any additional or special compensation for doing this, although we may reimburse these individuals for their reasonableout-of-pocket expenses.
Q: Who may vote at the Annual Meeting?
A: Stockholders of record as of the close of business on March 22, 2018 (the “Record Date”) are entitled to receive notice of, to attend online and to vote at the Annual Meeting via live webcast. Each share of TrueCar’s common stock is entitled to one vote on each matter. As of the Record Date, there were 100,866,226 shares of TrueCar’s common stock issued and outstanding, held by 131 holders of record. Each share of TrueCar’s common stock is entitled to one vote on each matter.
Q: What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
A:Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the stockholder of record with respect to those shares, and these proxy materials were sent directly to you by TrueCar.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the “beneficial owner” of shares held in “street name,” and these proxy materials were forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account.
Q: If I am a stockholder of record of TrueCar shares, how do I vote?
A: If you are a stockholder of record, there are four ways to vote:
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TELEPHONE Use the |
telephone.
IN PERSON You |
The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time on May 16, 2018.
Q: If I am a beneficial owner of shares held in street name, how do I vote?
A: If you are a beneficial owner of shares held in street name, you should have received from your broker, bank or other nominee instructions on how to vote or instruct the broker to vote your shares, which are generally contained in a “vote instruction form” sent by the broker, bank or other nominee. Please follow their instructions carefully. Street name stockholders may generally vote by one of the following methods:
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2020 ANNUALPROXY STATEMENT | | Proxy Summary |
SNAPSHOT OF BOARD OF DIRECTORS
TrueCar Committees | ||||||||||||||||||||||
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Age | Director Since | Independent | Audit Committee | Compensation & Workforce Committee | Executive Committee | Nominating and Corporate Governance Committee | ||||||||||||||||
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Michael D. Darrow Director and President & CEO | 62 | 2020 | NO | | | | | | | | ||||||||||||
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Robert E. Buce Director | 71 | 2005 | YES | o | | | | · | | | ||||||||||||
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Christopher W. Claus* Director and Chairman of the Board | 59 | 2014 | YES | · | | · | | o | | | ||||||||||||
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John Krafcik(1) Director | 58 | 2014 | YES | | | | | | | | ||||||||||||
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Erin N. Lantz Director | 40 | 2016 | YES | · | | | | | | · | ||||||||||||
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Philip G.J. McKoy Director | 47 | 2018 | YES | | | | | | | · | ||||||||||||
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John W. Mendel Director | 65 | 2017 | YES | | | · | | · | | o | ||||||||||||
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Wesley A. Nichols Director | 55 | 2016 | YES | | | o | | · | | · | ||||||||||||
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Ion A. Yadigaroglu Director | 50 | 2007 | YES | | | | | | | | ||||||||||||
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o Chairperson · Member * Chairman of the Board |
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2020 ANNUALPROXY STATEMENT | | |
Q: If I submit a proxy, how will it be voted?
A: When proxiesBelow are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, the shares will be voted in accordance with the recommendationsprimary components of our Board of Directors as described above. If any matters not described in the Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have revoked your proxy instructions, as described below under “Can I change my vote or revoke my proxy?”2019 executive compensation program:
Q: What should I do if I get more than one proxy or voting instruction card?
A: Stockholders may receive more than one set of voting materials, including multiple copies of these proxy materials and multiple proxy cards or voting instruction cards. For example, stockholders who hold shares in more than one brokerage account may receive separate sets of proxy materials for each brokerage account in which shares are held. Stockholders of record whose shares are registered in more than one name will receive more than one set of proxy materials. You should vote in accordance with all of the proxy cards and voting instruction cards you receive relating to our Annual Meeting to ensure that all of your shares are counted.
Q: Can I change my vote or revoke my proxy?
A: You may change your vote or revoke your proxy at any time prior to the taking of the vote at the Annual Meeting.
If you are the stockholder of record, you may change your vote by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) providing
a written notice of revocation to TrueCar’s Corporate Secretary at TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401 prior to your shares being voted, or (3) attending the virtual Annual Meeting and voting via the live webcast. Attending the Annual Meeting via the live webcast will not cause your previously granted proxy to be revoked unless you specifically so request or vote via the live webcast during the Annual Meeting.
For shares you hold beneficially in street name, you may generally change your vote by submitting new voting instructions to your broker, bank, trustee or nominee following the instructions they provided.
Q: Can I attend the meeting in person?
A: We will be hosting the Annual Meeting live via Internet webcast. You will not be able to attend the Annual Meeting in person.
Q: How do I participate in the Annual Meeting via the Internet?
A: Any stockholder may listen to the Annual Meeting and participate live via webcast at www.virtualshareholdermeeting.com/True2018. The webcast will begin at 8:30 a.m. Pacific time on May 17, 2018, and stockholders may vote and submit questions during the Annual Meeting via live webcast. To enter the meeting, please have your12-digit control number which is available on the Notice or, if you received a printed copy of the proxy materials, your proxy card. If you do not have your12-digit control number, you will be able to listen to the meeting only. You will not be able to vote or submit questions during the meeting. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/True2018.
Q: How many shares must be present or represented to conduct business at the Annual Meeting?
A: At the Annual Meeting, the presence in person virtually or by proxy of a majority of the aggregate
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voting power of the stock issued and outstanding and entitled to vote at the Annual Meeting is required for the Annual Meeting to proceed. If you have returned valid proxy instructions or attend the Annual Meeting via live webcast, your shares of Common Stock will be counted for the purpose of determining whether there is a quorum, even if you wish to abstain from voting on some or all matters at the meeting.
Q: What is the voting requirement to approve each of the proposals?
A: With respect to Proposal One, the election of the Company’s directors, each director is elected by a plurality of the voting power of the shares present in person virtually or represented by proxy at the meeting and entitled to vote on the election of directors at the Annual Meeting. Accordingly, the three nominees receiving the highest number of affirmative votes will be elected as Class I directors to serve until the 2021 annual meeting of stockholders or until their successors are duly elected and qualified. Abstentions and brokernon-votes will have no effect on the outcome of the vote.
For Proposal Two, the ratification of the appointment of the Company’s independent registered public accounting firm, and Proposal Three, the advisory vote to approve named executive officer compensation, the affirmative vote of a majority of shares present in person virtually or represented by proxy and entitled to vote on such proposal is required to approve the proposal. Abstentions are treated as shares present and entitled to vote for purposes of such proposals and, therefore, will have the same effect as a vote “against” the proposal. Brokernon-votes will have no effect on the outcome of the vote.
With respect to Proposal Four, the advisory vote on the frequency of advisory votes on named executive officer compensation, the frequency of future advisory votes on the compensation of our named executive officers, we will consider the alternative receiving the greatest number of votes – one year, two years, or three years – to be the frequency that stockholders approve. Because this vote is advisory and
non-binding on us or our Board of Directors, however, our board may decide that it is in our and our stockholders’ interests to hold an advisory vote on the compensation of our named executive officers more or less frequently than the alternative approved by our stockholders.
Q: What are brokernon-votes?
PROXY STATEMENT
A: Brokernon-votes are shares held by brokers that do not have discretionary authority to vote on the matter and have not received voting instructions from their clients. If your broker holds your shares in its name and you do not instruct your broker how to vote, your broker will nevertheless have discretion to vote your shares on our sole “routine” matter—Proposal Two, the ratification of the appointment of the Company’s independent registered public accounting firm. Your broker will not have discretion to vote on Proposals One, Three and Four.
Q: Who will tabulate the votes?
A: A representative of Carl Hagberg and Associates will serve as the Inspector of Election and will tabulate the votes at the Annual Meeting.
Q: What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?
A:Stockholder Proposals: Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at our next annual meeting of stockholders by submitting their proposals in writing to TrueCar’s Corporate Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2019 Annual Meeting of Stockholders, the Corporate Secretary of TrueCar must receive the written proposal at our principal executive offices no later than December 6, 2018. If we hold our 2019 Annual Meeting of Stockholders more than 30 days before or after May 17, 2019 (theone-year anniversary date of the Annual Meeting of Stockholders), we will disclose the new deadline by which stockholders proposals must be received under
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Item 5 of Part II of our earliest possible Quarterly Report onForm 10-Q or, if impracticable, by any means reasonably determined to inform stockholders. In addition, stockholder proposals must otherwise comply with the requirements ofRule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Stockholder proposals should be addressed to:
TrueCar, Inc.
Attn: Corporate Secretary
120 Broadway, Suite 200
Santa Monica, California 90401
Our amended and restated bylaws (our “Bylaws”) also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders but do not intend for the proposal to be included in our proxy statement. Our Bylaws provide that the only business that may be conducted at an annual meeting is business that is (1) pursuant to our proxy materials with respect to such meeting, (2) by or at the direction of our Board of Directors, or (3) by a stockholder who is a stockholder of record both at the time the stockholder provides proper written notice of the proposal that the stockholder seeks to present at our annual meeting and on the record date for the determination of stockholders entitled to vote at the annual meeting, and who has timely complied in proper written form with the notice procedures set forth in our Bylaws. In addition, for business to be properly brought before an annual meeting by a stockholder, such business must be a proper matter for stockholder action pursuant to our Bylaws and applicable law. To be timely for our 2019 Annual Meeting of Stockholders, our Corporate Secretary must receive the written notice at our principal executive offices:
If we hold our 2019 Annual Meeting of Stockholders more than 30 days before or more than 60 days after May 17, 2019 (theone-year anniversary date of the Annual Meeting of Stockholders), then notice of a stockholder proposal that is not intended to be included in our proxy statement must be received by our Corporate Secretary at our principal executive offices:
To be in proper written form, a stockholder’s notice to the Corporate Secretary shall set forth as to each matter of business the stockholder intends to bring before the annual meeting (1) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address of the stockholder(s) and their associated person(s) proposing such business, (3) the class and number of shares of the Company’s common stock which are held of record or are beneficially owned by the stockholder(s) and their associated person(s), (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder(s) or their associated person(s) with respect to any securities of the Company, and a description of any other similar agreement, arrangement or understanding, (5) any material interest of the stockholder(s) and their associated person(s) in such business, and (6) a statement whether such stockholder(s) or their associated person(s) will deliver a proxy statement and form of proxy to the Company’s stockholders. In addition, to be in proper written form, a stockholder’s notice to the Corporate Secretary must be supplemented not later than five days following the record date to disclose the information contained in clauses (3) and (4) in this paragraph as of the record
date. A stockholder’s “associated person” is defined as (1) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (2) any beneficial owner of shares of stock of the Company owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (3) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (1) and (2).
Nomination of Director Candidates: As set forth in our Policies and Procedures for Director Candidates, as described below, stockholders holding at least one percent (1%) of the fully diluted capitalization of TrueCar continuously for at least 12 months may propose director candidates for consideration by our nominating and corporate governance committee. Any such recommendations should include the nominee’s name, contact information, biography, qualifications, a consent signed by the nominee, and a statement from the recommending stockholder in support of the nominee, and should be directed to the Secretary of the Company at our principal executive offices.
In addition, our Bylaws permit certain stockholders to nominate directors for election at an annual meeting of stockholders. To be eligible, a stockholder must be a stockholder of record as of the date notice of the annual meeting is given and as of the record date determining stockholders entitled to vote at the annual meeting.
To be in proper written form, a stockholder’s notice to the Secretary of the Company shall set forth, as to each nominee whom the stockholder proposes to nominate for election orre-election as a director: (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the class and number of shares of the Company that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee
with respect to any securities of the Company, and a description of any other similar agreement, arrangement or understanding, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (5) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons pursuant to which the nominations are to be made by the stockholder, (6) a written statement executed by the nominee acknowledging that as a director of the Company, the nominee will owe a fiduciary duty under Delaware law with respect to the Company and its stockholders, and (7) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected). As to such stockholder(s) giving notice of the director nomination, such notice must also include the following information as to the stockholder and any stockholder associated person: (1) the name and address of the stockholder(s) and their associated person(s) proposing such business, (2) the class and number of shares of the Company which are held of record or are beneficially owned by the stockholder(s) and their associated person(s), (3) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder(s) or their associated person(s) with respect to any securities or the Company, and a description of any other similar agreement, arrangement or understanding, (4) any material interest of the stockholder(s) and their associated person(s) in such business, and (5) a statement whether such stockholder(s) or their associated person(s) will deliver a proxy statement and form of proxy to the Company’s stockholders. In addition, to be in proper written form, a stockholder’s notice to the Secretary of the Company must be supplemented not later than five days following the record date to disclose the
information contained in clauses (2) and (3) in this paragraph as of the record date. In addition, the stockholder must give timely notice to our Corporate Secretary in accordance with our Bylaws, which, in general, require that the notice be received by our Corporate Secretary within the time period described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in our proxy statement.
Q: I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
A: The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process is commonly referred to as “householding.”
Brokers with account holders who are TrueCar stockholders may be householding our proxy materials. A single set of proxy materials may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you
notify your broker or TrueCar that you no longer wish to participate in householding.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, you may (1) notify your broker, (2) direct your written request to: Investor Relations, TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401, or (3) contact our Investor Relations department by email at investors@true.com or by phone at1-800-200-2000, extension 8771. Stockholders who currently receive multiple copies of the Proxy Statement or Annual Report at their address and would like to request householding of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the annual report and proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered.
Q: What if I have questions about lost stock certificates or need to change my mailing address?
A: You may contact our transfer agent, Computershare Trust Company, N.A., by telephone at1-877-373-6374 (U.S.) or+1-781-575-2879 (outside the U.S.), or by email at web.queries@computershare.com, if you have lost your stock certificate or need to change your mailing address.
The following table sets forth the names, ages and positions of our executive officers and directors as of March 31, 2018:2020:
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Executive Officers | |
Michael D. Darrow | 62 |
Executive Officers
President and Chief Executive Officer, and a Director | ||||
Noel B. Watson | 44 | Chief Financial Officer and Chief Accounting Officer | ||
Simon E. Smith | 50 | Executive Vice President of Dealer Sales & Service | ||
| 52 | Executive Vice President, General Counsel and Secretary | ||
Non-Employee Directors | ||||
Robert E. Buce | 71 | Director | ||
Christopher W. Claus | 59 | Director and Chairman of the Board | ||
John Krafcik(1) | 58 | Director | ||
Erin N. Lantz | 40 | Director | ||
Philip G.J. McKoy | 47 | Director | ||
John W. Mendel | 65 | Director | ||
Wesley A. Nichols | 55 | Director | ||
Ion A. Yadigaroglu | 50 | Director | ||
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Chip PerryExecutive Officers
Michael D. Darrow has served as our President, Chief Executive Officer and a member of our Board of Directors since December 2015. Prior to joining us, Mr. Perry was the President and Chief Executive Officer of RentPath LLC, an operator of online real estate rental websites and mobile applications, since August 2015. Mr. Perry was President and Chief Executive Officer of AutoTrader Group, Inc., an online automotive marketplace, from August 1997March 2020. From November 2017 until March 2013, and served as a member of its board of directors between August 1999 and March 2013. Mr. Perry has served as a member of the board of MXC Solutions India Private Ltd. since June 2014. Mr. Perry holds a M.S. in Civil Engineering from the University of Virginia and an M.B.A. from Harvard Business School.
Skills and Qualifications:
We believe Mr. Perry is qualified to serve as a member of our Board of Directors because of his substantial industry, operational and business strategy expertise gained from serving as a chief executive officer in the online automotive industry.
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John Pierantonihas served as our interim Chief Financial Officer since February 2018 and as our Chief Accounting Officer since December 2013. Prior to joining us, Mr. Pierantoni was Vice President of Finance at Cornerstone OnDemand, Inc., a provider of cloud-based talent management software solutions, from August 2010 until December 2013. Mr. Pierantoni also served as Chief Accounting Officer of Ticketmaster Entertainment and was the Controller, Motion Picture Group of Paramount Pictures. In addition, Mr. Pierantoni has 13 years of public accounting experience with PricewaterhouseCoopers, including two years at PwC’s London office. Mr. Pierantoni holds a B.S. in Accounting from the Carroll School of Management at Boston College.
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Mike Darrowhas2020, he served as our Executive Vice President of Partner and OEM Development since November 2017 and served as our Executive Vice President of OEM Development from March 2017 to November 2017. Mr. Darrow has also served as the President of our subsidiary, ALG, Inc., since January 2018. Prior to joiningFrom June 2016 until he joined us, Mr. Darrow was an Automotive Industry Consultant for Inventory Command Center from June 2016 to February 2017. Prior to joining Inventory Command Center,LLC, before which Mr. Darrow served in numerous roles at Edmunds.com Inc. from July 2000 to August 2014, including as Chief Executive Officer of Edmunds Data Services, Executive Vice President of Sales and Chief Sales Officer. Mr. Darrow holds a B.S. in Economics from Allegheny University.
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Neeraj Gunsagar
We believe that Mr. Darrow is qualified to serve as a member of our Board because of his substantial industry, operational and business strategy expertise, developed over more than 20 years of service in the online automotive industry, and his working relationships with many key customers, partners and industry participants.
Noel B. Watsonhas served as our Chief MarketingFinancial Officer and Chief Accounting Officer since AprilJune 2019. From February 2016 until he joined us, Mr. Watson was the Chief Accounting Officer and Vice President of Finance and Accounting of TripAdvisor, Inc., an online travel company that assists travelers by providing user-generated content, price comparison tools and online reservation and related services for accommodations, travel activities and restaurants around the world, and from February 2013 to February 2016, he served as our Chief Revenue Officer from July 2014 until April 2016. Prior to joining usTripAdvisor's Vice President of Accounting and Controller. Before that, Mr. Watson worked in January 2012,various other accounting roles for TripAdvisor and Expedia, Inc., a travel booking website. Mr. Gunsagar founded Saful Consulting, where he advised public and private technology companies on strategic matters from March 2008 until December 2011. Earlier in his career, Mr. Gunsagar was an investment banker at Donaldson, Lufkin & Jenrette focused on advising communications companies. Mr. GunsagarWatson holds a B.S.B.A. in Business AdministrationAccounting from the Haas School of Business at the University of California, Berkeley.
Simon E. Smith
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Brian Skutta has served as our Executive Vice President of Dealer Sales and& Service since February 2016. Prior toJune 2019. From July 2015 until June 2019, he served as our Senior Vice President of Dealer Development, and as our Vice President of Trade Operations from July 2012 until July 2015. Before joining us, Mr. SkuttaSmith was chief executive officer of AutoAlert,the National Sales Director for AutoNation, Inc., the largest automotive retailer in the United States, and before that he spent eight years at CarsDirect.com, Inc. (now known as Internet Brands, Inc.), an online automotive analytics company, from September 2014 until February 2016. Mr. Skutta worked in various roles for Cox Automotive from July 2002 until August 2014, including servingresearch portal and car-buying service as the Vice President of Sales and General ManagerOperations, after beginning his career at Mercedes-Benz UK Ltd., the UK subsidiary of VinSolutions Inc. from May 2012 until August 2014 and asDaimler AG, a German multinational automobile manufacturer. Mr. Smith attended theco-founder and first general manager University of AutoTrader.com’strade-in marketplace between September 2009 and April 2012. Mr. Skutta holds a B.S.Canterbury in Finance from Auburn University.New Zealand.
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Jeffrey J. Swart has served as our Executive Vice President, General Counsel and Secretary since July 2017. From January 2016 to July 2017, Mr. Swart served as our Senior Vice President, General Counsel and Secretary and he served as our Senior Vice President & Deputy General Counsel from April 2014 until December 2015. Prior to joiningFrom May 1998 until he joined us, Mr. Swart was a litigation partnerpracticed law at the law firm of Alston & Bird LLP, where he practiced law from May 1998 until April 2014. Prior towas a litigation partner. Before joining Alston & Bird, Mr. Swart served for two years as a law clerk to Judge EdEdward Carnes of the United States Court of Appeals for the Eleventh Circuit. Mr. Swart has substantial experience in complex commercial litigation. Mr. Swart holds a J.D. from the Emory University School of Law and a B.B.A. from the Emory University’s Goizueta Business School.School at Emory University.
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Board of Directors
Age: 71 Independent Current Committee Memberships: • Audit Committee • Executive Committee | ROBERT E. BUCE Recent Business Experience: Robert E. Buce has served as a member of our Board since April 2005. Mr. Buce served as our Executive Vice President and Chief Financial Officer from September 2005 to September 2008. Before joining us, Mr. Buce founded and served as Chief Financial Officer and a senior member of the management team of Build-To-Order, Inc., an automotive company focused on modularized outsourced manufacturing of vehicles. Before Build-To-Order, Mr. Buce held a variety of senior management positions, including Managing Partner, at KPMG LLP, an accounting and advisory firm, and served as Managing Director at BearingPoint, Inc., a related consulting firm. Mr. Buce also served on the board of directors of KPMG LLP from March 1991 to November 1995. Since July 2000, Mr. Buce has served as Chairman of PalisadesHoldings, a sole proprietorship providing independent advisory assistance to a variety of technology services and consumer products and services commercial enterprises. From 2011 to 2013, Mr. Buce served on the board of directors of Intersection Technologies, Inc., the parent company of F&I Express, a provider of software and services to the automotive industry. Mr. Buce is a Certified Public Accountant (inactive) in the State of California and a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Mr. Buce holds a B.S. in Mechanical Engineering from Lehigh University and an M.B.A. from the Anderson School of Management at the University of California, Los Angeles. Reasons for Nomination: We believe that Mr. Buce is qualified to serve as a member of our Board because of the experience he gained from serving as our Chief Financial Officer, the substantial corporate governance, operational and financial expertise he gained from serving as Managing Partner at KPMG LLP, as Managing Director at BearingPoint and on the boards of directors and boards of advisors of several private companies. As the longest-serving member of our Board, we also value his deep understanding of our business as it has evolved over time. | |||
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Board of Directors
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Robert Buce has served as a member of our Board of Directors since April 2005. Mr. Buce served as our Executive Vice President and Chief Financial Officer from September 2005 to September 2008. Prior to joining us, Mr. Buce founded and served as Chief Financial Officer and a senior member of the management team ofBuild-To-Order, Inc., an automotive company focused on modularized outsourced manufacturing of vehicles. Prior toBuild-To-Order, Mr. Buce held a variety of senior management positions, including Managing Partner, at KPMG LLP, an accounting and advisory firm, and Managing Director at BearingPoint, Inc., a related consulting firm. Mr. Buce also served on the board of directors of KPMG LLP from March 1991 to November 1995. Since July 2000 Mr. Buce has served as Chairman of PalisadesHoldings, a sole proprietorship providing independent advisory assistance to a variety of technology services and consumer products and services commercial enterprises. Mr. Buce served on the board of Intersection Technologies, Inc., parent company of F&I Express, a provider of software and services to the automotive industry.
Mr. Buce is a Certified Public Accountant (inactive) in the State of California and a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Mr. Buce holds a B.S. in Mechanical Engineering from Lehigh University and an M.B.A. from the Anderson School of Management at the University of California, Los Angeles.
Skills and Qualifications:
We believe Mr. Buce is qualified to serve as a member of our Board of Directors because of his historical expertise gained from serving as our Executive Vice President and Chief Financial Officer and his substantial corporate governance, operational and financial expertise gained as Managing Partner at KPMG LLP, Managing Director at BearingPoint and from his experience serving on the boards of directors and boards of advisors of several private companies. As the longest serving member of our Board of Directors, we also value his deep understanding of our business as it has evolved over time.
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Christopher Claus has served as a member of our Board of Directors since April 2014 and as Chairman of the Board since February 2016. From December 1994 to March 2014, Mr. Claus served in various senior executive roles at USAA, a Fortune 150 diversified financial services company, most recently as Executive Vice President of USAA Enterprise Advice Group and President of USAA Financial Services Group. Previously, he served as the Senior Vice President and then President of USAA Investment Management Company. Mr. Claus also served as the Vice President of Investment Sales and Service. Prior to USAA, Mr. Claus was Vice President of Equity Trading and Retirement Plans at Norwest
Investment Services, Inc. In June 2017, Mr. Claus joined the board of directors of Citizens, Inc., a provider of insurance and reinsurance services. Mr. Claus holds a B.A. in Business Administration from the University of Minnesota—Duluth and an M.B.A. from the University of St. Thomas.
Skills and Qualifications:
We believe Mr. Claus is qualified to serve as a member of our Board of Directors because of his substantial business strategy and corporate development and governance expertise gained as an executive and counselor at several companies in the finance industry.
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Board Since: |
Age: 59
Current Committee Memberships: • Compensation and Workforce Committee • Executive Committee • Audit Committee | CHRISTOPHER W. CLAUS Recent Business Experience: Christopher Claus has served as a member of our Board since April 2014 and as Chairman of the Board since February 2016. From December 1994 to March 2014, Mr. Claus served in various senior executive roles at the United Services Automobile Association, or USAA, a Fortune 150 diversified financial services company, most recently as Executive Vice President of USAA Enterprise Advice Group and President of USAA Financial Services Group. Previously, he served as the Senior Vice President and then President of USAA Investment Management Company. Mr. Claus also served as USAA's Vice President of Investment Sales and Service. Before USAA, Mr. Claus was Vice President of Equity Trading and Retirement Plans at Norwest Investment Services, Inc, a venture and growth equity investment firm. In June 2017, Mr. Claus joined the board of directors of Citizens, Inc., a provider of insurance and reinsurance services. Mr. Claus holds a B.A. in Business Administration from the University of Minnesota Duluth and an M.B.A. from the University of St. Thomas. Reasons for Nomination: We believe that Mr. Claus is qualified to serve as a member of our Board because of his substantial business strategy and corporate development and governance expertise gained as an executive and counselor at several companies in the finance industry. | |||
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Steven Dietz has served as a member of our Board of Directors since February 2006. Mr. Dietz has been a Managing Partner at Level 4 Collaborative Investors, a venture capital firm, since December 2016 and was a Partner at Upfront Ventures, also a venture capital firm, from its founding in 1996 until July 2016. During his career, Mr. Dietz has overseen numerous investments in the automotive industry. Mr. Dietz holds a B.S. in Finance from the University of Colorado.
Skills and Qualifications:
We believe Mr. Dietz is qualified to serve as a member of our Board of Directors because of his substantial corporate finance, business strategy and corporate development expertise gained from his significant experience in the venture capital industry, analyzing, investing in and serving on the boards of directors of various private technology companies.
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John Krafcik has served as a member of our Board of Directors since February 2014. Mr. Krafcik served as our President from April 2014 until September 2015. Since September 2015, Mr. Krafcik has been the Chief Executive Officer of Waymo, Alphabet Inc.‘s self-driving car unit. Mr. Krafcik was with Hyundai Motor America, a South Korean multinational automaker, from March 2004 to December 2013, during which time he served as President and Chief Executive Officer from November 2008 to December 2013. Mr. Krafcik was responsible for the strategic direction and management of Hyundai Motor America’s operations in the United States. Prior to joining Hyundai Motor America,
Mr. Krafcik was at Ford Motor Company, where he held various product development leadership positions. Mr. Krafcik holds a B.S. in Mechanical Engineering from Stanford University and an M.S. in Management from Sloan School of Management at the Massachusetts Institute of Technology.
Skills and Qualifications:
We believe Mr. Krafcik is qualified to serve as a member of our Board of Directors because of his substantial corporate development, business strategy and automotive expertise gained as an executive in the automotive industry.
Age: 40 Independent Current Committee Memberships: • Audit Committee • Nominating and Corporate Governance Committee | ERIN N. LANTZ Recent Business Experience: Erin N. Lantz has served as a member of our Board since November 2016. Ms. Lantz is a technology executive and strategic general manager. Most recently she was the Vice President and General Manager of Mortgages at Zillow Group, Inc., an online real estate database company, where she worked from 2010 through October 2019. Just before joining Zillow, Ms. Lantz was Senior Vice President at Bank of America Corporation, a U.S. multinational investment bank and financial services company, where she led the Direct-to-Consumer purchase home loan business. Before entering the mortgage industry, Ms. Lantz worked at the Boston Consulting Group, a global management consulting firm, as an Associate. From September 2016 until August 2018, Reasons for Nomination: We believe that Ms. Lantz is qualified to serve as a member of our Board because of her extensive knowledge in finance, consumer behavior, online marketplaces and financial consumer technology. | |||
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
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Erin Lantz has served as a member of our Board of Directors since November 2016. Ms. Lantz is the Vice President and General Manager of Mortgages at Zillow Group where she has worked since July 2010. Prior to Zillow, Ms. Lantz was Senior Vice President at Bank of America where she led theDirect-to-Consumer purchase home loan business. Before entering the mortgage industry, she worked at the Boston Consulting Group as an Associate. Ms. Lantz has served on the Board of Directors of Washington Federal, Inc. since September 2016. Ms. Lantz holds a B.A. from the University of Pennsylvania and an M.B.A. from Harvard Business School.
Skills and Qualifications:
We believe Ms. Lantz is qualified to serve as a member of our Board of Directors because of her extensive knowledge in finance, consumer behavior, online marketplaces and financial consumer technology.
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John Mendel has served as a member of our Board of Directors since May 2017. Mr. Mendel was the Executive Vice President, Automobile Division, of American Honda Motor Company from November 2004 until April 2017. Prior to Honda, Mr. Mendel worked for Ford Motor Company from July 1976 until November 2004 where he most recently served as Chief Operating Officer of Mazda America. Mr. Mendel has a B.A. in business and economics from Austin College and an M.B.A. from Duke University.
Skills and Qualifications:
We believe Mr. Mendel is qualified to serve as a member of our Board of Directors because of his substantial corporate development, business strategy and automotive expertise gained as an executive in the automotive industry.
Age: 47 Independent Current Committee Memberships: • Nominating and Corporate Governance Committee |
Recent Business Experience: Philip G.J. McKoy has served as a member of our Board since October 2018. Since July 2016, Mr. McKoy has served as the Chief Information Officer of United Healthcare Services, Inc., a business of UnitedHealth Group, a diversified health and well-being company. From January 2016 to June 2016, Mr. McKoy served as Senior Vice President and Chief Information Officer for Global Loyalty Solutions at Aimia Inc., a data-driven marketing and loyalty analytics company, and from July 2014 to December 2015, Mr. McKoy served as Aimia's Senior Vice President and Chief Information Officer of the U.S. Region. Before joining Aimia, Mr. McKoy served in various roles at Target Corporation, a U.S. department store retailer, including as Vice President of Target.com from November 2011 through January 2014, where he was responsible for leading the customer-facing digital experience. Mr. McKoy has a B.A. in Political Science from Washington and Lee University and an M.A. in International Affairs from the Josef Korbel School of International Studies at the University of Denver. Reasons for Nomination: We believe that Mr. McKoy is qualified to serve as a member of our Board because of his extensive knowledge in information security, technology strategy and digital business operations. | |||
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Age: 65 Independent Current Committee Memberships: • Compensation and Workforce Committee • Nominating and Corporate Governance Committee • Executive Committee | JOHN W. MENDEL Recent Business Experience: John W. Mendel has served as a member of our Board since May 2017. Mr. Mendel served as the Executive Vice President, Automobile Division, of American Honda Motor Company, the U.S. subsidiary of Honda Motor Company, Ltd., a Japanese multinational automaker, from November 2004 until April 2017. Before Honda, Mr. Mendel worked for Ford Motor Company, a U.S. multinational automaker, from July 1976 until November 2004 in various roles, serving most recently as Chief Operating Officer of Mazda Motor of America, Inc., the U.S. subsidiary of Mazda Motor Corporation, a Japanese multinational automaker and, at the time, a business partner of Ford. Since August 2018, Mr. Mendel has served on the board of directors of LKQ Corporation, a global distributor of vehicle products. Mr. Mendel has a B.A. in Business and Economics from Austin College and an M.B.A. from the Fuqua School of Business at Duke University. Reasons for Nomination: We believe that Mr. Mendel is qualified to serve as a member of our Board because of his substantial corporate development, business strategy and automotive expertise gained as an executive in the automotive industry. | |||
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Age: 55 Independent Current Committee Memberships: • Compensation and Workforce Committee • Nominating and Corporate Governance Committee • Executive Committee | WESLEY A. NICHOLS Recent Business Experience: Wesley A. Nichols has served as a member of our Board since November 2016. Since April 2018, Mr. Nichols has served as a strategic adviser to Snap Inc., a camera application company, and since January 2017, Mr. Nichols has been advising select portfolio companies of Upfront Ventures as a Board Partner and select multinational companies as a strategic adviser through Incrementum LLC, a strategic advisory and investment firm he co-founded in 2017. Mr. Nichols was the Chief Strategy Officer of Neustar, Inc., a global provider of real-time information services and analytics, from December 2015 until February 2017. Mr. Nichols co-founded MarketShare, LLC, a provider of advanced analytic solutions and software, in 2005 and served as its Chief Executive Officer from January 2005 until its acquisition by Neustar in December 2015. Mr. Nichols served on the board of directors of BJ's Restaurants, Inc. from December 2013 until June 2018, and on the board of directors of comScore, Inc. from October 2017 until October 2018. Mr. Nichols holds a B.A. in Psychology from Randolph-Macon College and an M.A. in Business Management from Johns Hopkins University. Reasons for Nomination: We believe that Mr. Nichols is qualified to serve as a member of our Board because of his extensive knowledge in analytics, marketing optimization and digital technology. | |||
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Independent
| ION A. YADIGAROGLU | |
Wesley Nichols has served as a member of our Board of Directors since November 2016. Since January 2017, Mr. Nichols has been advising select portfolio companies of Upfront Ventures as a Board Partner. Mr. Nichols was the Chief Strategy Officer of Neustar, Inc., a global provider of real-time information services and analytics from December 2015 until February 2017. Mr. Nicholsco-founded
Recent Business Experience: MarketShare, LLC, a provider of advanced analytic solutions and software in 2005 and served as its Chief Executive Officer from January 2005 until its acquisition by Neustar in December 2015. Mr. Nichols has served on the board of
directors of BJ’s Restaurants, Inc. since December 2013 and the board of directors of comScore, Inc. since October 2017. Mr. Nicholas has also served on the board of trustees of Randolph-Macon College since October 2012. Mr. Nichols holds a B.A. from Randolph-Macon College and an M.A. from Johns Hopkins University.
Skills and Qualifications:
We believe Mr. Nichols is qualified to serve as a member of our Board of Directors because of his extensive knowledge in analytics, marketing optimization and digital technology.
Ion A. Yadigaroglu has served as a member of our Board since August 2007. Since July 2004, Mr. Yadigaroglu has served as a Managing Principal at Capricorn Investment Group LLC, an investment firm. Mr. Yadigaroglu holds a Masters in Physics from Eidgenössische Technische Hochschule Zürich in Switzerland and a Ph.D. in Astrophysics from Stanford University. Reasons for Nomination:
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Ion Yadigaroglu has served as a member of our Board of Directors since August 2007. Since July 2004, Mr. Yadigaroglu has served as a Managing Principal at Capricorn Investment Group LLC, an investment firm. Mr. Yadigaroglu holds a Masters in Physics from Eidgenössische Technische Hochschule Zürich in Switzerland and a Ph.D. in Astrophysics from Stanford University.
Skills and Qualifications:
We believe Mr. Yadigaroglu is qualified to serve as a member of our Board of Directors because of his substantial corporate
We believe that Mr. Yadigaroglu is qualified to serve as a member of our Board because of his substantial corporate finance, business strategy and corporate development expertise gained from his holding various executive positions and from his significant experience in the capital industry, analyzing, investing in and serving on the boards of directors of various private technology companies. We also value his perspective as a representative of one of our significant stockholders.
Our executive officers are appointed by, and serve at the discretion of, our Board of Directors.Board. There are no family relationships among any of our directors or executive officers.
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2020 ANNUALPROXY STATEMENT | | Corporate Governance |
Board Composition
Our business and affairs are managed under the direction of our Board of Directors.Board. The number of directors is fixed by our Board, of Directors, subject to the terms of our amendedAmended and restated certificateRestated Certificate of incorporationIncorporation, or Charter, and our Amended and Restated Bylaws, or Bylaws, that became effective immediately prior toat the completion of our initial public offering. OurAs of April 1, 2020, our Board of Directors currently consists of nineeight directors, seven of whom qualify as “independent”"independent" under the NASDAQlisting standards of the Nasdaq Stock Market, listing standards.which we refer to as Nasdaq.
In accordance with our amendedCharter and restated certificate of incorporation and our Bylaws, our Board of Directors is divided into three classes with staggered three-year terms. Only one class of directors is elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors are divided among the three classes as follows:
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Ms. Lantz2022; and
Messrs. PerryClaus, McKoy and YadigarogluMendel are standing for reelectionelection at this annual meeting of stockholders.the Annual Meeting.
The division of our Board of Directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change ofin control. Under Delaware law, our directors may only be removed for cause by the affirmative vote of the holders of a majority of our outstanding voting stock. DirectorsOur directors may not be removed by our stockholders without cause.
Any increase or decrease in the number of directors willmust be distributed among the three classes so that, as nearly as possible, each class will consist ofone-third of the directors.
Board Meetings and Director Communications
During 2017,2019, the Board of Directors held tennine meetings. With the exception of John Krafcik,Mr. Yadigaroglu, who attended 70%27% of the aggregate of the total number of meetings of the Board and the total number of Directors,meetings of the nominating and corporate governance committee of the Board, each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors during such director’s tenure and the total number of meetings held by any of theall committees of the Board of Directors on which such directorhe or she served during 2017.the periods that he or she served in 2019. Directors are also encouraged to attend our annual stockholder meetings of the stockholders of the Company absent an unavoidable and irreconcilable conflict. Each member of our Board of Directors attended our 20172019 annual meeting of stockholders.
Stockholders and other interested parties may communicate with thenon-management members of the Board of Directors by mail to the Company’sour principal executive offices addressed to the intended recipient and care of our Corporate Secretary. Our Corporate Secretary will review all incoming stockholder communications (except for mass mailings, product complaints or inquiries, job inquiries, business solicitations and patently offensive or otherwise inappropriate material) and route such communications as appropriate to member(s) of the Board of Directors.or an individual director.
Our Board of Directors is responsible for identifying and nominating memberscandidates for election to our Board of Directors.the Board. The Board of Directors considers recommendations from directors, stockholders and others, as it deems appropriate. In evaluating director candidates, our Board considers factors such as character, integrity, judgment, diversity, including diversity in terms of gender, race, ethnicity and experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and other commitments. Our Board evaluates these factors, among others,
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Table of Directors may review from timeContents
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
and does not assign any particular weighting or priority to time the appropriate skills, experience and characteristics for membersany of thethese factors. Our Board of Directors, including the appropriate role of diversity. In evaluating potential candidates for
nomination, our Board of Directors considers these factors in the light of the specific needs of the Board of Directors at that time and shall also considerconsiders advice and recommendations from our President and Chief Executive Officer.
The Company hasWe have paid fees to a third party search firm to assist the Board in identifying and evaluating potential candidates for nomination. Search firms retained to assist our Board in seeking candidates for the Board are instructed to seek to include diverse candidates in terms of race and gender.
Our Board of Directors has undertaken a review ofreviewed the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our Board of Directors determined that none of Ms. Lantz or Messrs. Buce, Claus, Dietz,Krafcik, McKoy, Mendel, Nichols andor Yadigaroglu has a relationship that would interfere with the exercise of his or her independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent”"independent" as that term is defined under the applicable rules and regulations of the SEC and theNasdaq's listing requirements and rules of the NASDAQ Stock Market.standards. In making these determinations, our Board of
Directors considered the current and prior relationships that eachnon-employee director has with our Company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by eachnon-employee director. The Board of Directors also determined that each of Messrs. Dietz,Claus, Mendel and Nichols is anon-employee director, as defined pursuant toby Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code, as amended (the “Code”).Act.
Our Board of Directors has an audit committee, a compensation and workforce committee, an executive committee and a nominating and corporate governance committee. The Company also has a standing disclosure committee. The composition and responsibilities of each of the committees of our Board of Directors isare described below. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors.Board. Each of these committees operates under a written charter adopted by our Board of Directors, which charters arethat is available on the Investor Relations section of our website at http://ir.true.com/ir.truecar.com/corporate-governance.
Audit Committee
Our audit committee is comprised of Messrs. Buce and Claus and Ms. Lantz. Mr. Buce serves as ourthe chairperson of the audit committee chairperson. The compositioncommittee. Each member of our audit committee meets the requirements for independence of audit committee members under current NASDAQ Stock MarketNasdaq listing standards and SEC rules and regulations. Each member of our audit committee meets the financial literacy requirements of the current Nasdaq listing standards. In addition, our Board of Directors has determined that Mr. Buce qualifies as an audit committee financial expert within the meaning of Item 407(d) ofRegulation S-K under the Securities Act of 1933, as amended (the “Securities Act”).Exchange Act. During fiscal year 2017,2019, the audit committee held seveneight meetings. The responsibilities of our audit committee include, among other things:
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Our audit committee operates under a written charter that satisfies the applicable rules of the SEC and theNasdaq's listing standards of the NASDAQ Stock Market.standards.
Compensation and Workforce Committee
OurWe refer to our compensation and workforce committee referred to as the compensation committee. Our compensation committee is comprised of Messrs. Dietz, MendelNichols, Claus and Nichols.Mendel. Mr. Nichols serves as ourthe chairperson of the compensation committee chairperson.committee. The composition of our compensation committee meets the requirements for independence under current NASDAQ Stock MarketNasdaq listing standards and SEC rules and regulations. Each member of the compensation committee is also anon-employee director, as defined pursuant toby Rule 16b-3
promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Code.Act. The purpose of our compensation committee is to oversee our compensation policies, plans and benefit programs, significant matters related to our workforce and to discharge the responsibilities of our Board of Directors relating to the compensation of our executive officers. During fiscal year 2017,2019, the compensation committee held eightsix meetings. The responsibilities of our compensation committee include, among other things:
Our compensation committee operates under a written charter that satisfies the applicable rules of the SEC and theNasdaq's listing standardsstandards.
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Executive Committee
Our executive committee is comprised of the NASDAQ Stock Market.chairperson of the Board and the chairpersons of each of the committees of the Board. Mr. Claus serves as the chairperson of the executive committee. The executive committee was established in February 2020, and so did not hold any meetings during 2019. The purpose of the executive committee is to assist with coordinating the Board's activities and to be in a position to act expeditiously with the full authority of the Board in the intervals between meetings of the Board, but the executive committee may not:
The executive committee operates under a written charter.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee is comprised of Messrs. Nichols and Yadigaroglu. Mr. Yadigaroglu serves asWe refer to our nominating and corporate governance committee chairperson.as our nominating committee. From January 1, 2019 until March 20, 2019, the nominating committee was comprised of Messrs. Mendel, McKoy, Nichols and Yadigaroglu and Ms. Lantz. On March 20, 2019, Mr. Yadigaroglu was removed from the nominating committee. Mr. Mendel served as the chairperson of the nominating committee throughout 2019. The composition of our nominating and corporate governance committee meets the requirements for independence under current NASDAQ Stock MarketNasdaq listing standards and SEC rules and regulations. During 2017,2019, the nominating and corporate governance committee held threetwo meetings. The responsibilities of our nominating
and governance committee include, among other things:
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Our nominating and corporate governance committee believes that candidates for director should have certain minimum qualifications, including the highest professional and personal ethics and values, consistent with our Code of Business Conduct and Ethics, which is posted in the corporate governance section of our investor relations website at www.true.com.www.ir.truecar.com. Candidates should have broad experience and demonstrated excellence in his or her field.their fields. In addition, candidates for director should:should have:
Each director must represent the interests of all stockholders. Their service on otherthe boards of directors of other public companies should be limited to a number that permits
them, given their individual circumstances, to perform responsibly all director duties. However, theThe nominating and corporate governance committee retains the right to modify these qualifications from time to time.
CandidatesThe nominating committee reviews candidates for director are reviewed in the context of the current composition of our Board, of Directors, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the nominating and corporate governance committee considers the appropriate skills, experience and characteristics for members of the Board, of Directors, including the appropriate role of diversity and such other factors as it deems appropriate given theour current needs and those of our Board, of Directors and the Company, to maintain a balance of knowledge, experience and capability. In the case of incumbent directors, the nominating and corporate governance committee reviews such directors’a director's overall service to the Company during theirhis or her term, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair such directors’his or her independence. The nominating and corporate governance committee also determines whether the Board can determine that the nominee can be consideredis independent by the Board of Directors for purposes of meeting the NASDAQunder Nasdaq's listing standards.
The nominating and corporate governance committee utilizesuses a variety of methods for identifying and evaluating nominees for director. The committee periodically assesses the appropriate size of our Board of Directors, and whether any vacancies on our Board of Directors are expected due to retirement or otherwise. Candidates may come to the attention of the nominating and corporate governance committee through current members of our Board, of Directors, professional search firms, stockholders or other persons. The nominating and corporate governance committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of our Board of Directors.Board. The nominating and corporate governance committee meets to discuss
and consider the candidates’candidates' qualifications and then selects a nominee for recommendation to our Board of Directors by majority vote. TheseThe nominating committee evaluates these candidates are evaluated at its meetings, of the nominating and corporate governance committee, andwhich may be consideredtake place at any point during the year.
The nominating and corporate governance committee will consider properly submitted stockholder recommendations for candidates for our Board of Directors who meet the minimum qualifications as described above. The requirementsabove if properly recommended by stockholders holding at least one percent of the fully-diluted capitalization of the Company continuously for proper submission are described under “General Information—What isat least 12 months before the deadlineproposal. Proper recommendations will include the nominee's name, contact information, biography and qualifications as well as a consent signed by the nominee and a statement from the recommending stockholder in support of the nominee and should be directed to propose actions for considerationour Corporate Secretary at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?—A. Nomination of Director Candidates.”our principal executive offices.
Our nominating and corporate governance committee operates under a written charter that satisfies the applicable rules of the SEC and theNasdaq's listing standards of the NASDAQ Stock Market.standards.
Disclosure Committee
Our disclosure committee is comprised of John Pierantoni,Mr. Watson, our Interim Chief Financial Officer and Chief Accounting Officer; Chip Perry,Mr. Darrow, our President and Chief Executive Officer; JeffreyMr. Swart, our General Counsel and Secretary, and other members of our management team. Messrs. PierantoniWatson and Swartco-chair our disclosure committee. During 2017, 2019,
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
the disclosure committee held four meetings, one prior tobefore the filing of each quarterly and annual report filed in 2017.2019. The responsibilities of our disclosure committee include, among other things:
|
Our disclosure committee operates under a written charter that has been adopted by our Chief Executive Officer and Chief Financial Officer.
No member of our compensation committee has ever been an executive officer or employee of ours. Messrs. Nichols, Claus and Mendel served on our compensation committee throughout 2019. None of our executive officers currently serve,serves, or havehas served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or compensation committee.
committee. A member of our Board of Directors and our compensation committee, Steven Dietz, is a former partner at Upfront Ventures, and until February 27, 2018, Mr. Dietz was a member of Upfront’s investment committee and therefore beneficially owned more than 5% of our capital stock.
We have adopted a Code of Business Conduct and Ethics that is applicable to all of our employees, officers and directors, including our President and Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The Code
of Business Conduct and Ethics is available on our website at http://ir.true.com/ir.truecar.com/corporate-governance. We expect thatintend to disclose on our website any amendments to the code, or any waivers of its requirements, will be disclosed on our website.requirements.
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
Our Board of Directors currently believes that our Company iswe are best served by separating the roles of a Chairman of the Board and Chief Executive Officer. Chip Perry,Mr. Darrow, our President and Chief Executive Officer, is the director with the mostin-depth understanding of and experience in our industry. Consequently, Mr. PerryDarrow is most capable of effectively identifying
strategic priorities and leading the discussion and execution of strategy. Christopher Claus serves as the Chairman of the Board of Directors.Board. Independent directors and management have different perspectives and roles in strategy development. Our independent directors bring experience, oversight and expertise from both within and outside the automotive industry,
while our President and Chief Executive Officer brings company-specific perspective and industry expertise. Our Board of Directors believes that separating the roles of Chairman of the Board of Directors and Chief Executive Officer is the best leadership structure for us
at the current time because it promotes the efficient and effective development and execution of our strategy and facilitates information flow between management and our Board, of Directors, which are essential to effective governance. Additionally, we established an executive committee of the Board in February 2020 to allow the independent Board leadership a forum to meet, communicate and act more expeditiously.
Board’sBoard's Role in Risk Oversight
Management, which is responsible forday-to-day risk management, continually monitors the material enterprise risks facing the Company,we face, including strategic risks, operational risks, financial risks, credit risks, liquidity risks as well asand legal and compliance risks.
The Board of Directors is responsible for exercising oversight of the Company’soverseeing our identification and management of, as well as planning for, those risks. The Board of Directors has delegated to certain committees oversight responsibility for those risks that are directly related to their area of focus (see
descriptions of our audit committee’s, compensation committee’s and nominating and corporate governance committee’sBoard committees' areas of responsibilities discussed above). to identify, assess and mitigate risks facing the Company. The Board of Directors and its committees exercise their risk oversight function by receiving and evaluating reports from management and by making inquiries of management, as appropriate. In addition, the Board of Directors and its committees receive reports from our auditors and other consultants, and meet in executive sessions with these outside consultants. Board oversightEach of risk is enhanced by the fact that committeeour committees provides reports are provided to the full Board, which enhances the Board's oversight of Directors.risk.
Management periodically reviews our incentive compensation programs at all levels within the organization. Employee cash bonuses are based on company-wide and individual performance, and management (with respect to ournon-executive employees) and our compensation committee (with respect to our executive officers) have discretion to adjust bonus payouts. Equity awards for new hires are based on the employee’semployee's position, prior experience, qualifications and the market for particular types of talent; and any additional grants are based on
employee performance and retention objectives. Equity awards generally have long-term vesting requirements to ensure that recipients’recipients' focus is on our long-term success. The compensation committee reviewed our incentive compensation structure was reviewed during 2017 by the compensation committee.2019. Based on this review, the compensation committee does not believe that our compensation policies and practices, taken as a whole, create risks that are reasonably likely to have a material adverse impact on our Company.us.
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The following table presents compensation information for ournon-employee directors during the year ended December 31, 2017.2019. Directors who are also our employees receive no additional compensation for service as a director. Compensation paid to Mr. PerryDarrow is discussed in “Executive"Executive Compensation.”
Name | Fees Earned ($) | Stock Awards | Option Awards | Total ($) | ||||||||||||
Abhishek Agrawal(2) | — | — | — | — | ||||||||||||
Robert Buce | 75,000 | 75,001 | 74,968 | 224,969 | ||||||||||||
Christopher Claus | 90,000 | 75,001 | 74,968 | 239,969 | ||||||||||||
Steven Dietz | 36,458 | 75,001 | 74,968 | 186,427 | ||||||||||||
John Krafcik | 55,000 | 75,001 | 74,968 | 204,969 | ||||||||||||
Erin Lantz | 65,000 | 75,001 | 74,968 | 214,969 | ||||||||||||
John Mendel(3) | 38,784 | 150,002 | 149,998 | 338,784 | ||||||||||||
Wesley Nichols | 67,149 | 75,001 | 74,968 | 217,118 | ||||||||||||
Ion Yadigaroglu | — | 75,001 | 74,968 | 149,969 |
"
Name | Fees Earned ($) | Stock Awards ($)(1) | Total ($) | |||
Robert E. Buce | 75,000 | 149,995 | 224,995 | |||
Christopher W. Claus | 97,500 | 149,995 | 247,495 | |||
John Krafcik | 55,000 | 149,995 | 204,995 | |||
Erin N. Lantz | 70,000 | 149,995 | 219,995 | |||
Philip G.J. McKoy | 60,000 | 149,995 | 209,995 | |||
John W. Mendel | 72,500 | 149,995 | 222,495 | |||
Wesley A. Nichols | 75,000 | 149,995 | 224,995 | |||
Ion A. Yadigaroglu | — | 149,995 | 149,995 | |||
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The following table presents the aggregate number of stock awards and the aggregate number of option awards outstanding for eachnon-employee director as of December 31, 2017:2019:
Name | Outstanding Stock Awards at December 31, 2017 | Outstanding Options at December 31, 2017 | ||||||
Robert Buce | 4,276 | 137,212 | ||||||
Christopher Claus | 4,276 | 79,323 | ||||||
Steven Dietz | 4,276 | 65,159 | ||||||
John Krafcik | 23,719 | 643,471 | ||||||
Erin Lantz | 14,780 | 44,232 | ||||||
John Mendel | 8,552 | 18,948 | ||||||
Wesley Nichols | 14,780 | 44,232 | ||||||
Ion Yadigaroglu | 4,276 | 65,159 |
Name | Outstanding Stock Awards at December 31, 2019(1) | Outstanding Options at December 31, 2019(2) | ||
Robert E. Buce | 23,219 | 155,865 | ||
Christopher W. Claus | 23,219 | 97,976 | ||
John Krafcik | 23,219 | 662,124 | ||
Erin N. Lantz | 23,219 | 62,885 | ||
Philip G.J. McKoy | 32,147 | 28,753 | ||
John W. Mendel | 26,069 | 37,601 | ||
Wesley A. Nichols | 23,219 | 62,885 | ||
Ion A. Yadigaroglu | 23,219 | 83,812 | ||
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Outside Director Compensation Policy
In March 2016, theOur Board of Directors, upon the recommendation of our compensation committee, amended and restated ourhas adopted a policy for the compensation ofnon-employee directors, (“or Outside Directors”), effective as of January 1, 2016,Directors, which we refer to as our Outside Director Compensation Policy. Under this policy,the Outside Director Compensation Policy, our Outside Directors receive compensation in the form of equity under the terms of theour 2014 Equity Incentive Plan, (“which we refer to as the 2014 Plan”),Plan, as described below, and Outside Directors who are not affiliated with a
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venture capital investor in the Company,(“ or Non-Affiliated Directors”) Directors, also receive cash compensation infor their service.
Our compensation committee regularly reviews and evaluates the form of cash. The 2016 restatement of our Outside Director Compensation Policy was crafted in consultation with Compensia, Inc. (“Compensia”),Semler Brossy Consulting Group, LLC, or Semler Brossy, an independent compensation consulting firm. Compensia provided usfirm it has retained as described elsewhere in this proxy statement. Semler Brossy provides the compensation committee with competitive data and analysis regardingnon-employee director compensation. After careful consideration of this information andcompensation that the scope of the duties and responsibilities ofcompensation committee considers in reviewing our Outside Directors,Director Compensation Policy. The compensation committee endeavors to update the Board of Directors approved our current Outside Director Compensation Policy to providesuch that it provides reasonable compensation to our Outside Directors that is appropriately aligned with our peers and is commensurate with the services and contributions of our Outside Directors.
Initial Award. Each Under the Outside Director Compensation Policy, each person who first becomes an Outside Director will beis granted an option to purchase sharesaward of our common stock having a grant date fair value equal to $150,000, or the Initial Option, and a restricted stock unitRSUs with a grant date fair value equalof $300,000, which we refer to $150,000, or theas an Initial RSU. TheAward. Each Initial Option and Initial RSU (collectively, the “Initial Award”) will beAward is automatically granted on the date the individualrecipient first becomes an Outside Director. If a director’sdirector's status changes from an employee director to an Outside Director, he or she will not receive an Initial Award.
Except as set forth below, the shares underlying thean Initial Award vest as follows: shares underlying the Initial Option will vest and become exercisable in 36 approximately equal monthly installments over three
years from the commencement of the individual’s service as an Outside Director, subject to continued service as a director through the applicable vesting dates and the shares underlying the Initial RSU will vestvests in three approximately equal annual installments over three years from the 15th day of the month during which the individual commenced service as an Outside Director, subject to continued service as a director through the applicable vesting dates.
Any shares underlying theRSUs under an Initial Award that are scheduled to vest on or after the date of theEnd-of-Term Annual Meeting (as defined below) will instead vest on third annual meeting following the day prior toannual meeting at which theEnd-of-Term Annual Meeting.End-of-Term Annual Meeting means:
John Mendel became an outside directorAward, in the case of other Initial Awards, will instead vest on May 18, 2017 and was automatically granted an Initial Award.the day before that date.
Annual Award. On the date of each Annual Meeting,annual meeting, each Outside Director who has served on our Board of Directors for at least the preceding six months will be automatically granted an option to purchase shares having a grant date fair value equal to $75,000, or the Annual Option, and a restricted stock unitaward of RSUs with a grant date fair value equalof $150,000, which we refer to $75,000, or theas an Annual RSU (collectively, the “Annual Awards”).Award. Except as set forth below, the shares underlying theRSUs under an Annual Award vest as follows: the shares underlying the Annual Option will vest and become exercisable in 12 approximately equal monthly installments over one year from the grant date, subject to continued service as a director through the applicable vesting dates and the shares underlying the Annual RSU will vest on the last day of
the month that includes the12-month anniversary of the date of grant of the Annual RSU,Award, subject to continued service as a director through the vesting date.
Any shares underlying theRSUs under an Annual Award that are scheduled to vest on or after the date of the following year’s Annual Meetingyear's annual meeting will instead vest on the day prior tobefore the following year’syear's annual meeting of stockholders.meeting.
The exercise price per share of each stock option granted under the Outside Director Compensation Policy will be the fair market value of a share of our common stock, as determined in accordance with our 2014 Plan, on the date of the option grant. With respect to the Initial Option and Annual Option, the grant date fair value is computed in accordance with the Black-Scholes option valuation methodology or such other methodology our Board of Directors or compensation committee may determine. Under the terms of the 2014 Plan, if the service of an Outside Director is terminated on or followingafter a change in control, other than pursuant toby a voluntary resignation, his or her options and restricted stock units will vest fully and, if applicable, become immediately exercisable.fully. Awards granted under our Outside Director Compensation Policy are granted under, and
subject to the other terms and conditions of, our 2014 Plan. Our 2014 Plan provides that no Outside Director may be granted, in any fiscal year, stock-settled equity awards with a grant date fair value (determined in accordance with GAAP) of more than $750,000, with this limit increased to $1,500,000 in connection with grants awarded upon his or her initial service,appointment or election, or cash-settled awards with a grant date fair value of more than $750,000, increased to $1,500,000 in connection with grants awarded upon his or her initial service.appointment or election.
Cash Compensation. EachNon-Affiliated Director receives an annual retainer of $55,000 in cash for serving on our Board, of Directors, or the Annual Fee. In addition to the Annual Fee, aNon-Affiliated Director who serves as chairman of the boardBoard or lead independent director, as applicable, will be entitled to an additional annual retainer of $25,000 in cash.
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Non-Affiliated Directors serving as chairperson and members of the audit and compensation committees of our Board of Directors are entitled to the annual cash retainers set forth below. No cash retainers are paid for service on the Nominating and Corporate Governance Committee.
Board Committee | Chairperson Fee ($) | Member Fee ($) | ||
Audit Committee | 20,000 | 10,000 | ||
Compensation and Workforce Committee | 15,000 | 7,500 | ||
Executive Committee | — | — | ||
Nominating and Corporate Governance Committee | 10,000 | 5,000 | ||
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Board Committee | Chairperson Fee ($) | Member Fee ($) | ||||||
Audit Committee | 20,000 | 10,000 | ||||||
Compensation Committee | 15,000 | 7,500 |
All cash retainers under the policyOutside Director Compensation Policy will be paid in quarterly installments to eachNon-Affiliated Director that served in the relevant capacity at any point during
the immediately preceding fiscal quarter no later than 30 days following the end of such preceding fiscal quarter.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors and ten percent stockholders to file reports of ownership and changes in ownership with the SEC. Based on a review of filings with the SEC and/or written representations that no other reports were required, we believe that all reports for the Company’s executive officers and directors that were required to be filed under Section 16 of the
Exchange Act were timely filed during 2017, except as disclosed below:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding beneficial ownership of our common stock as of February 28, 201829, 2020 by:
We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially own, subject to community property laws where applicable. In computing the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of our common stock subject to options or restricted stock unitsRSUs held by that person that are currently exercisable or exercisable within 60 days of February 28, 2018.29, 2020. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. We have based percentage ownership of our common stock on 100,565,321107,083,724 shares of our common stock outstanding as
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
of February 28, 2018.29, 2020. Unless otherwise indicated, the address of each beneficial owner listed on the table below is c/o TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401.
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Shares Outstanding | ||||||
5% Stockholders: | ||||||||
Caledonia (Private) Investments Pty Limited(1) | 16,474,191 | 16.4 | ||||||
United Services Automobile Association(2) | 9,042,990 | 8.9 | ||||||
Entities affiliated with Upfront Ventures(3) | 7,860,332 | 7.8 | ||||||
Vanguard Group(4) | 6,943,388 | 6.9 | ||||||
Senvest Management, LLC(5) | 6,859,792 | 6.8 | ||||||
Pacific Sequoia Holdings LLC(6) | 6,363,569 | 6.3 | ||||||
PAR Capital(7) | 5,813,320 | 5.8 | ||||||
UBS Group AG(8) | 5,147,504 | 5.1 |
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Shares Outstanding | ||
5% Stockholders: | ||||
Caledonia (Private) Investments Pty Limited(1) | 18,626,859 | 17.4 | ||
PAR Capital(2) | 10,299,504 | 9.6 | ||
United Services Automobile Association(3) | 9,042,992 | 8.4 | ||
Vanguard Group(4) | 8,984,300 | 8.4 | ||
BlackRock, Inc.(5) | 8,125,927 | 7.6 | ||
Pacific Sequoia Holdings LLC(6) | 6,363,569 | 5.9 | ||
Named Executive Officers and Directors: | ||||
Michael D. Darrow(7) | 338,245 | * | ||
Victor A. "Chip" Perry(8) | 3,164,908 | 2.9 | ||
Noel B. Watson(9) | 56,510 | * | ||
Charles C. Thomas(10) | 52,645 | * | ||
John E. Pierantoni(11) | 289,527 | * | ||
Simon E. Smith(12) | 212,767 | * | ||
Jeffrey J. Swart(13) | 704,550 | * | ||
Robert T. "Tommy" McClung | — | — | ||
Neeraj Gunsagar(14) | 50,000 | * | ||
Robert E. Buce(15) | 466,506 | * | ||
Christopher W. Claus(16) | 204,123 | * | ||
John Krafcik(17) | 711,851 | * | ||
Erin N. Lantz(18) | 91,213 | * | ||
Philip G.J. McKoy(19) | 18,842 | * | ||
John W. Mendel(20) | 51,923 | * | ||
Wesley A. Nichols(21) | 91,213 | * | ||
Ion A. Yadigaroglu(22) | 1,606,876 | 1.5 | ||
All current executive officers and directors as a group (12 persons)(23) | 4,554,619 | 4.2 | ||
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2020 ANNUALPROXY STATEMENT | | Executive Officers, Directors andCorporate Governance |
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2020 ANNUALPROXY STATEMENT | | |
Compensation Discussion and Analysis |
|
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Shares Outstanding | ||||||
Named Executive Officers and Directors: | ||||||||
Chip Perry(9) | 1,459,409 | 1.4 | ||||||
John Pierantoni(10) | 174,219 | * | ||||||
Michael Darrow(11) | 52,830 | * | ||||||
Neeraj Gunsagar(12) | 602,135 | * | ||||||
Brian Skutta(13) | 81,748 | * | ||||||
Robert Buce(14) | 434,438 | * | ||||||
Christopher Claus(15) | 172,055 | * | ||||||
Steven Dietz(16) | 123,064 | * | ||||||
John Krafcik(17) | 672,474 | * | ||||||
Erin Lantz(18) | 30,640 | * | ||||||
John Mendel(19) | 6,640 | * | ||||||
Wesley Nichols(20) | 30,640 | * | ||||||
Ion Yadigaroglu(21) | 1,574,808 | 1.6 | ||||||
All current executive officers and directors as a group (14 persons)(22) | 5,850,304 | 5.6 |
|
Introduction | 23 | | ||||
| Named Executive Officers (NEOs) | 23 | | |||
| Executive Summary | 24 | | |||
| Compensation Philosophy and Design Strategies | 27 | | |||
| Establishing Compensation Levels | 27 | | |||
| Role of the Compensation Committee | 27 | | |||
| Role of Management | 28 | | |||
| Role of the Compensation Consultant | 28 | | |||
| Use of Competitive Market Data | 28 | | |||
| Compensation Elements and 2019 Pay Decisions | 30 | | |||
| Base Salary | 30 | | |||
| Annual Cash Incentive Program | 31 | | |||
| Long-Term Incentive Opportunities | 35 | | |||
| Coronavirus Response Preview | 37 | | |||
| Other Governance Items | 38 | | |||
| Employment Agreements and Severance and Changes in Control Protections | 38 | | |||
| Separation and Consulting Agreements | 38 | | |||
| Hedging Policies | 39 | | |||
| Stock Ownership Guidelines | 39 | | |||
| Recoupment of Incentive Compensation, or | 39 | | |||
| Accounting Treatment and Deductibility of | 39 | | |||
| Equity Grant Timing and Equity Plan | 40 | | |||
| Taxation of "Parachute" Payments | 40 | | |||
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Our named executive officers, or NEOs, for 2019 consist of our current and former principal officers, our current and former principal financial officers, our next two most highly compensated executive officers and two former executive officers who would have been among our three most highly compensated executive officers had they remained executive officers as of December 31, 2019.
The NEOs among our currently serving executives are:
The NEOs among our former executives are:
We experienced considerable change in our leadership during 2019. In May 2019, Mr. Perry, then our President and CEO, retired from his positions with us, and Mr. Darrow, who was then serving as our EVP of Partner and OEM Development, became our Interim President and CEO. In March 2020, the Board appointed Mr. Darrow as
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2020 ANNUALPROXY STATEMENT | | Compensation Discussion and Analysis |
our permanent President and CEO and a member of the Board. References in this Compensation Discussion and Analysis to our CEO refer to Mr. Perry before May 31, 2019 and to Mr. Darrow on and after May 31, 2019.
Mr. Pierantoni, our Interim CFO and CAO, resigned from his positions with us in April 2019 and Mr. Thomas, our Vice President and Controller, served as principal financial officer and principal accounting officer following Mr. Pierantoni's departure until Mr. Watson joined us in June 2019. Mr. Thomas continues to serve in a non-executive officer capacity as our Vice President and Controller. Also in June 2019, Mr. Smith was promoted from SVP of Dealer Development to our EVP of Dealer Sales & Service, and each of Mr. Gunsagar and Mr. McClung ceased service with us.
EXECUTIVE SUMMARY
Our full-year financial and market performance outcomes were below expectations; however, after a mid-year leadership transition, we executed several key strategic initiatives in the second half of the year and in early 2020.
Additionally, although USAA's sudden and unexpected decision in February 2020 to terminate our partnership substantially complicates our efforts to return us to growth, we were able to negotiate a transition services agreement with USAA that gives us time to capitalize on these successful initiatives and chart a course of financial independence from USAA. Nevertheless, despite these achievements, a variety of operational challenges prevented us from achieving the external financial guidance we provided at the beginning of 2019, and USAA's decision to terminate our partnership is likely to weigh on our performance in 2020 and beyond. Below is a summary of our key results in 2019:
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2020 ANNUALPROXY STATEMENT | | Compensation Discussion and Analysis |
Annual target compensation decisions made in early 2019 align with our pay for performance philosophy after mixed company performance in 2018 and reflect feedback from our stockholder outreach efforts in late 2018 and early 2019.
In mid-2019, we underwent a substantial leadership transition and the compensation committee took the following actions relating to the second half of the year that we believe were in the best interests of us and our stockholders:
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2020 ANNUALPROXY STATEMENT | | Compensation Discussion and Analysis |
We are committed to responsible executive compensation and governance practices.
The following table summarizes what we do and what we don't do in our executive compensation practices to highlight both the responsible practices we have implemented and the practices we have avoided to best serve our stockholders' long-term interests:
|
Pay-for-performance (75% of former CEO target pay was tied to performance through equity and cash incentives) | ||||||||
Include multi-year performance-vesting equity awards | ||||||||
Maintain robust stock ownership guidelines and a clawback policy for performance-based compensation | ||||||||
Retain an independent compensation consultant who reports directly to the compensation committee | ||||||||
Solicit advisory votes on our executive compensation program annually and engage in stockholder outreach | ||||||||
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Compensation Discussion and Analysis
Our named executive officers (NEOs) for 2017, which consist of our principal executive officer, principal financial officer and the next three most highly compensated executive officers, are:
In February 2018, the Company announced that Mike Guthrie resigned from his position as CFO and that John Pierantoni, the Company’s Chief Accounting Officer, was appointed Interim Chief Financial Officer.
Executive Summary
Business Highlights
2017 Financial Highlights
Total revenue of $323.1 million, up approximately 16% from revenue of $277.5 million in 2016.
Adjusted EBITDA(2) of $28.9 million, representing an Adjusted EBITDA margin of 8.9%, compared to Adjusted EBITDA of $15.0 million, representing an Adjusted EBITDA margin of 5.4%, in 2016.
A reconciliation of GAAP tonon-GAAP financial measures is set forth in Annex A to this Proxy Statement.
2017 Key Operating Metrics
Units(4) were 952,834 in 2017, up from 806,953 in 2016.
2017 Compensation Highlights
In keeping with our emphasis on aligning NEO compensation with stockholder interests, the key compensation decisions for 2017 were:
Bonus incentive outcomes paid below target (approximately 50% for CEO and 85% for other NEOs) for the 2017 performance year. Financial performance was strong and met or exceeded Company expectations for the year; however, the compensation committee decided to reduce incentive payouts for NEOs, including the CEO, to balance internal considerations and recognize the stockholder experience throughout the year. Additionally, the CEO’s annual incentive outcome for the year was 48.7% of target after the compensation committee elected to not
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No automatic "single trigger" cash or vesting acceleration upon a | ||||||
No option repricings or exchanges without stockholder approval | ||||||
No hedging or pledging by executive officers or directors | ||||||
No tax gross ups on severance or change in | ||||||
No excessive executive perquisites | ||||||
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Say-on-Pay Vote and Stockholder Engagement
In late 2018 and early 2019, we reached out to NEOs varied in size and were mostly delivered in options to align with stockholders. The compensation committee determined the size and mix of the award by reviewing competitive market levels, historical grant practices, internal pay equity, and the potential value of unvested equity. Options comprised roughly 70% of the value provided to the NEOs in 2017. All of the options grants made in 2017 are, as ofyear-end 2017,“underwater,” meaning that they have exercise prices per share that are highermore than the fair market value20 of our common stock on that date.
The decisions above align with the objective to hold the executive team accountable for achieving core financial results, including driving revenue and Adjusted EBITDA, both of which are key driverslargest stockholders who collectively owned more than 93% of our long-term success.
Previewoutstanding shares as of Changes Made foryear-end 2018
The compensation committee strives and met with each stockholder that expressed an interest in speaking with us. We made several changes to structure and implement thoughtful executive compensation packages that further the Company’s goals and values. As part of this effort, the compensation committee frequently revisits and recalibrates its executive compensation structures and programs as we grow and evolve as a company. In late 2017 and early 2018, the compensation committee assessed theour compensation program and madein response to stockholder feedback on the following changes for 2018, which we believe further advance our already strong efforts and commitment to a NEO program that links compensation to the creation of stockholder value, helps retain our key talent, rewards performance and aligns with market practices:
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The primary focusdesign of our compensation program, is to align executiveincluding introducing performance-vesting equity awards, eliminating aspirational companies from our peer group and stockholder interests such that long-term value creation is maximized. Accordingly, we provide short-expanding our peer group disclosure, implementing a clawback policy and long-term pay opportunities tied directly to the driversadopting stock ownership guidelines, revising our cash incentive program and providing more transparency in our disclosure of our operational successperformance goals.
In 2019, our say-on-pay proposal was supported by approximately 99% of the total votes cast, an approximate 47% increase over our 2018 say-on-pay vote. We believe this increase in support was, in part, the result of the stockholder outreach and changes we made to our executive compensation program and related disclosures. We value the views of our stockholders and have continued our stockholder returns. We do not prescribe any particular mixoutreach. Our compensation committee will monitor and continue to evaluate our executive compensation program going forward in light of short-our stockholders' views and long-term pay opportunities in orderour transforming business needs. Our compensation committee expects to retaincontinue to consider the outcome of our operational flexibilitysay-on-pay votes and capacity to motivate executives under an array of circumstances.our stockholders' views when making future compensation decisions for our executive officers.
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2020 ANNUALPROXY STATEMENT | | |
Compensation Philosophy and Design StrategiesCOMPENSATION PHILOSOPHY AND DESIGN STRATEGIES
The compensation committee of the Board of Directors of the Company works to design a compensation program for our NEOs to facilitate the attraction and retention of key executive talent in a highly competitive technology job market, align employeesemployees' interests with the intereststhose of stockholders and motivate the creation of sustainable growth in enterprise value. We recognize that our employees are our greatest asset and drive our operational results and the creation of sustainable growth. As such, we strive to provide NEO total pay packages that:
In designing theour NEO compensation packages, the compensation committee reviews the competitive market data, without targeting any specific market percentile, and also takes into consideration the factors described above, as well as retention concerns with respect to key talent, the motivational impact of pay levels and mix in driving toward company goals
and the creation of stockholder value, the input of our CEO (with respect(as to NEOs other than himself) and the overall cost of the compensation package.
Establishing Compensation Levels ESTABLISHING COMPENSATION LEVELS
Role of the Compensation and Workforce Committee
The compensation committee oversees our executive compensation and other compensation and benefit programs, serves as the administrator of our equity compensation plans and reviews, formulates and determines the design and amount of compensation for our executive officers, including the NEOs. Compensation decisions for our CEO are made by the compensation committee in executive session without the presence of our CEO.CEO present.
At the beginning of each year, the compensation committee reviews our executive compensation program, including incentive compensation plans and arrangements, assesses the quality, appropriateness and effectiveness of the program for its intended purposes and makes modifications to existing plans and arrangements or adopts new plans or arrangements as deemedit deems necessary. The compensation committee also conducts an annual review ofannually reviews our executive compensation strategy to ensure it is appropriately aligned with our business strategy and achieving our desired objectives. Further, the compensation committee reviews market trends and changes in competitive compensation practices, as further described below. Based on its review and assessment, the compensation committee, from time to time, makes changes in our executive compensation program and also recommends changes to the remuneration of members of our BoardBoard.
During 2019, as detailed above, we underwent numerous changes in our executive team, with the separation of Directors’ total remuneration.four executive officers, including our former President and CEO and our former Interim CFO, the hiring of our current CFO and the promotion of two additional executives, including our current President and CEO. In each of
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2020 ANNUALPROXY STATEMENT | | Compensation Discussion and Analysis |
these cases, the compensation committee reviewed and reassessed elements of our executive compensation program and took actions designed to fit the needs of our business.
Role of Management
Our CEO works closely with the compensation committee in determining the compensation of our NEOs, and makes recommendations to the compensation committee as described below.
At the beginning of each year, our CEO reviews the performance of our other NEOs for the previous year
and then shares these evaluations with, and makes recommendations to, the compensation committee for each element of compensation. These recommendations concern the base salary, quarterly performance-based cash bonusesincentives and long-term incentive compensation for each of our NEOs, other than himself, based on our results, the individual’sindividual's contribution to these results and his or her individual performance. The compensation committee then reviews these recommendations and considers the other factors described hereinin this proxy statement and makes decisions as to the target total direct compensation of each NEO, as well as the mixture of elements that will comprise each NEO’sNEO's compensation.
While the compensation committee considers our CEO’sCEO's recommendations, it only uses these recommendations as one of several factors in making its decisions regardingon the compensation of our NEOs. In all cases, the final decisions on NEO compensation matters are made by the compensation committee. Moreover, no NEO participates in the determination of the amounts or elements of his or her own compensation.
At the request of the compensation committee, our CEO typically attends a portion of each compensation committee meeting in which executive compensation is discussed, including meetings at which the compensation committee’scommittee's compensation consultant is present.
Role of the Compensation Consultant
Pursuant toUnder its charter, the compensation committee has the authority to retain the services of one or more executive compensation advisers, including compensation consultants, legal counsel, accounting and other advisers, to assist in the creation of our compensation plans and arrangements and related policies and practices, as it determines necessary in its sole discretion. The compensation committee makes all determinations regarding the engagement, fees and services of these external advisers, and any such external adviser reports directly to the compensation committee.
Compensia was previously engaged to assist with the development of a competitive peer group for benchmarking purposes. Management used this peer group during 2016 to assess the overall competitiveness of pay levels and develop a 2017 pay structure for the NEOs and other executives. During 2017, the compensation committee assessed the independence of Compensia and concluded that it was independent of management.
The compensation committee engagedcontinued to engage Semler Brossy at the end of 2017in 2019 to assess the competitiveness of the executive compensation program ahead of 2018 pay decisions, including an update to the peer group against which we assess such competitiveness. The compensation committee instructed Semler Brossy to evaluate the followingpay-related componentsprograms and practices to assist the compensation committee in establishing fiscal 2018 compensation: base salary, targetmaking 2019 executive compensation decisions. During 2019, Semler Brossy also assisted in the stockholder outreach efforts, the design of the annual incentive and long-term incentive programs for 2020 and the structuring of our new-hire and promotion compensation and total cash compensation (base salary and annual incentive compensation), and equity awards, in order to assist the compensation committee in structuring executive officer compensation packages for fiscal 2018 that were consistentdecisions associated with our compensation goals and philosophy and competitive relative to market comparables. This analysis also factoredexecutive transition in other considerations, such as past and expected 2017 actual compensation and the applicable executive officer’s beneficial ownership of our common stock. In December 2017, themid-2019. The compensation committee assessed the independence of Semler Brossy, most recently in March 2020, and concluded that it was independent of management. In March 2018, the compensation committee again assessed the independence of Semler Brossy and concluded it was independent of management and that its work had not raised any conflict of interest.
Use of Competitive Market Data
As part of its deliberations, the compensation committee considers competitive market data and related analysis on executive compensation levels and practices. In June 2016, the Board of Directors reviewed datapractices that is provided in the Radford Global Technology Survey including companies from the
technology industry. The Board and theby Semler Brossy. Our compensation committee reviewedreviews and considers this market data, from two different representative samplesbut did not engage in any benchmarking or targeting of similar companies: (1) a custom sampleany specific levels of select companies between $150 million and $1 billion in revenues (consisting only
of public companies, see below) and (2) a broader sample of all technology companies between $200 million and $500 million (consisting of both public and private companies).
Custom Sample of Select Peer Companies in Technology Survey:
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These groups were developed with the assistance of Compensia based on an evaluation of companies thepay for 2019 compensation committee believed are comparable to us, taking into consideration the size of each company based on revenues and market capitalization.decisions.
In earlylate 2018, Semler Brossy worked with the compensation committee to develop a comparator group of "peer" companies for a competitive assessment of the pay programs. The companies included in the peer group was updatedwere selected based on a set of financial and industry/business parameters to best reflect a group of companies most similar to us.
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2020 ANNUALPROXY STATEMENT | | Compensation Discussion and Analysis |
We used initial quantitative screens primarily as guides to inform our decision-making process in reviewing current or potential peers. The screening process for 2019 used the current realitiessame parameters as 2018, focusing specifically on companies within defined ranges for revenue and expectations formarket capitalization, the business going forward (i.e.,technology industry and additional qualitative parameters (see more below).
Specifically, the criteria the compensation committee used to assess our 2019 peer group are summarized below.
In late 2018, in preparation for 2019 pay decisions, we removed two companies from our 2018 peer group whose revenue and market capitalization had grown to be much larger than ours by October 2018 (Zillow had approximately $1.2 billion in revenues and $8.1 billion market capitalization and CoStar Group had approximately $1.2 billion in revenues and $13.2 billion market capitalization at the time of our assessment) and removed another company which had been acquired and therefore was no longer public (Bazaarvoice). We added three companies to our peer group (Eventbrite, eHealth and EverQuote) that had under $300 million in revenues, less than $2.5 billion in market value and also met the additional industry and qualitative criteria above at the time of our assessment. The compensation committee made these changes to reduce the overall size of our peer group by revenue and market value to bring it more in line with TrueCar. The resulting peer group for 2019 consisted of the initialfollowing 17 companies:
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GrubHub | CarGurus | |
Yelp | Quotient Technology | |
LendingTree | Eventbrite | |
Cars.com | Care.com | |
Shutterstock | eHealth | |
Etsy | XO Group | |
Redfin | EverQuote | |
QuinStreet | ||
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The compensation committee also reviewed market data from the Radford Technology survey for companies that met the same size and scale parameters described above for our peer group, TrueCarwere in Radford's "Software Products/Services" and "Internet/E-Commerce/Online Community" industries, had experienced several years of rapid growth, while at the end of 2017 the Company experienced more modest growth)similar market valuation multiples (e.g., market cap-to-revenue multiples within one-third to three times ours) and excluded companies with materially different business models (e.g., semi-conductors, IT services, communications equipment, telecommunication services). The compensation committee used the survey data to complement the available information from the peer companies described above. Our compensation committee primarily used data from our peer group and used the data from the Radford survey only when there was a lack of sufficient comparative data available from our peer group. The data from our peer group and the data from the refined Radford Technology survey are collectively referred to in this proxy statement as market data.
In late 2019, the compensation committee again reviewed our peer group for purposes of assisting with pay decisions for 2020, taking into consideration our revised growth trajectory compared to the overall size and growth rates among our peers. After that review, the compensation committee again removed three larger peers by revenue or market value (ANGI Homeservices, GrubHub, and Trade Desk), removed one acquired peer (XO Group) and added five smaller peers (The RealReal, Cardlytics, The Rubicon Project, Leaf Group, and TechTarget). The resulting changes positioned TrueCar at median on company revenues for the new comparatorpeer group includes 17 public companies with annual revenues between $150 million and $1 billion, excludes several aspirational peers, and positions the Company around the mediangoing forward.
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2020 ANNUALPROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
COMPENSATION ELEMENTS AND 2019 PAY DECISIONS
Our 20172019 NEO compensation program was comprised primarily of a base salary, a quarterlycash incentive opportunity, and long-term incentives. This program remained largely the same as in 2016 as the simplified structure emphasized“at-risk” "at-risk" pay (both cash incentives and equity incentives) while providing competitive packages to retain and motivate our key talent.
“At-risk” pay (both cash bonus and equity incentives) comprised more than 65% of target pay for each of our NEOs, including Mr. Perry.
Base Salary
A base salary is a critical part of our NEO compensation program and establishes financial security for each NEO. We provide base salaries that are market-calibrated, equitable and a relatively small portion of our total compensation opportunities.
Generally, we establish base salaries after taking into account a NEO’san NEO's position, qualifications, experience, market practice and the base salaries of our other executives. Internal base salary parity is an important consideration with respect tofor NEOs other than our CEO, as it creates a team-first culture. This philosophy emboldenspromotes a team approach in problem solving and
encourages focus on driving stockholder value in ways that will be rewarded through “at risk”"at risk" pay. Thereafter, the compensation committee reviews the base salaries of our NEOs from time to time, as well as at the time of a promotion or other significant change in responsibility, and makes adjustments to base salaries as determined necessary or appropriate.
In August 2016,February 2019, the compensation committee reviewed the base salaries of our then-serving NEOs, taking into account the considerations described above and Radford market data. As a result, the compensation committee elected not to make any adjustmentsincreases to base salaries at that time, determining that the base salaries continued to be market competitive and appropriately reflect our NEOs’NEOs' past and expected future contribution levels, subject to a planned increase to Mr. Skutta’s salary in 2017.levels. In late 2018, effective on January 2017,1, 2019, the compensation committee adjustedincreased the base salary of Mr. Skutta’sSwart, who at that time was not an NEO, from $375,000 to $400,000 to reflect his contributions during the year and the further the compensation committee's goal of internal pay equity. Additionally, the compensation committee approved an increase in Mr. Smith's pay from $355,000 to $400,000 in connection with his promotion to EVP of Dealer Sales & Service.
In May 2019, we hired Mr. Watson as our new CFO and CAO and the compensation committee approved a base salary to an amount consistent with the othernon-CEO NEOs.of $450,000. Also in May 2019, following our former CEO's retirement, Mr. Darrow joinedwas promoted to Interim President and CEO. His annual base salary remained unchanged at $400,000, but the Companycompensation committee approved a monthly stipend of $20,000 in March 2017 and hadaddition to his base salary established atto recognize the fact that time.
Executive | 2016 Base Salary | 2017 Base Salary | % Change | |||||||||
Chip Perry | $ | 800,000 | $ | 800,000 | 0 | % | ||||||
Michael Guthrie | $ | 400,000 | $ | 400,000 | 0 | % | ||||||
Michael Darrow | NA | $ | 400,000 | NA | ||||||||
Neeraj Gunsagar | $ | 400,000 | $ | 400,000 | 0 | % | ||||||
Brian Skutta | $ | 350,000 | $ | 400,000 | 14 | % |
Quarterly Bonus Opportunity
We provide our NEOs the opportunity to earnhe assumed additional responsibilities while still maintaining his original responsibilities as EVP of OEM and Partner Development for TrueCar and President of ALG. Mr. Darrow's aggregate salary and stipend resulted in annualized non-bonus cash compensation of $640,000, representing a cash incentive each quarter. Actual quarterly NEO bonuses are determined at the sole discretion of the compensation committee.20% decrease from Mr. Perry's base salary. The compensation committee, considers various factorsafter consulting Semler Brossy and market data, determined that these amounts were appropriate compensation for Messrs. Darrow and Watson for their positions.
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2020 ANNUALPROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
The table below illustrates the annual base salaries of our executives as of year end 2018 and 2019. In several cases, the executive did not receive the full amount due to termination of his employment, promotion or new hire. (See the "2019 Summary Compensation Table" for the actual salary paid to each NEO in determining the bonus amount, if any, a2019.)
Executive | 2018 Base Salary | 2019 Base Salary | % Change | |||
Michael D. Darrow(1) | $400,000 | $400,000 | —% | |||
Victor A. "Chip" Perry(2) | $800,000 | $800,000 | —% | |||
Noel B. Watson(3) | N/A | $450,000 | N/A | |||
Charles C. Thomas(4) | $237,500 | $237,500 | —% | |||
John E. Pierantoni(5) | $360,500 | $360,500 | —% | |||
Simon E. Smith(6) | $355,000 | $400,000 | 13% | |||
Jeffrey J. Swart(7) | $375,000 | $400,000 | 7% | |||
Robert T. "Tommy" McClung(8) | $400,000 | $400,000 | —% | |||
Neeraj Gunsagar(8) | $400,000 | $400,000 | —% | |||
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Annual Cash Incentive Program
The objective of our annual cash incentive program is to reward executives for achievement against pre-determined short-term financial and align a portion of NEO pay opportunities with, our short-term quarterly financial performance, which in turn motivates our executive team, including our NEOs. We believe that rewarding short-term performance paves the way for us to maximize our long-term value creation.
The compensation committee establishes a bonus opportunity expressed as a percentage of base salary for each NEOoperational objectives established at the beginning of the year. PerBased on stockholder feedback, the compensation committee moved to a formula-based, annual incentive program for the senior executive team in 2019; below the senior executive team, we maintained a broad-based quarterly incentive program consistent with historical practice, in which some of the NEOs reported in this proxy statement participated at some point during the year based on their role at the time. Messrs. Perry, Darrow, Pierantoni, Watson, Swart, Gunsagar and McClung all participated in the annual incentive program for the senior executive team during the portion of 2019 that they were employed by us. Mr. Smith participated in the quarterly incentive program until his employment agreement,promotion from SVP to EVP in June 2019, at which point he transitioned to the annual incentive program for the senior executive team on a pro-rata basis for the remainder of the year. Mr. Perry’s bonusThomas participated in the quarterly incentive program for the entirety of 2019.
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2020 ANNUALPROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
For 2019, the compensation committee approved an annual cash incentive opportunity is equalfor the NEOs in which 70% of the payout was tied to 100%financial performance and 30% was tied to the achievement of base salary. objective strategic goals established at the beginning of the year.
Executive | 2018 Target Incentive as % of Base Salary | 2019 Target Incentive as % of Base Salary | % Change | |||
Michael D. Darrow(1) | 50% | 50% | —% | |||
Victor A. "Chip" Perry(2) | 100% | 100% | —% | |||
Noel B. Watson(3) | N/A | 50% | N/A | |||
Charles C. Thomas(4) | 26% | 26% | —% | |||
John E. Pierantoni(2) | 40% | 40% | —% | |||
Simon E. Smith(5) | 40% | 50% | 25% | |||
Jeffrey J. Swart | 50% | 50% | —% | |||
Robert T. "Tommy" McClung(2) | 50% | 50% | —% | |||
Neeraj Gunsagar(2) | 50% | 50% | —% | |||
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For the annual incentive program for the senior executive team, at the beginning of base salary. This2019, the compensation committee selected the performance metrics, which were generally consistent with the metrics used in prior years. The financial component, weighted at 70% of the total opportunity, measured performance against Revenue and Adjusted EBITDA, as defined below, and provided the opportunity to earn between 0% and 180% of target payout. The financial component would be set at 100% if the Revenue target of $389 million and the Adjusted EBITDA target of $39.3 million were achieved. The strategic component, weighted at 30% of the total opportunity, included goals relating to the achievement of a variety of critical strategic objectives, and provided the opportunity to earn between 0% and 150% of target payout. The design of the program included a feature where no payout would be delivered on the strategic component if the financial results did not meet the threshold requirements. The illustration below summarizes the framework used to determine the final payouts as a percent of each individual's target incentive.
The compensation committee developed a matrix reflected below to determine the payout mechanism for the financial component. The matrix design was selected to ensure that a cash incentive payout would only be earned
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opportunity is then split equally over
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2020 ANNUALPROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
if both the fourthreshold Revenue growth and Adjusted EBITDA were achieved. The payout in the event of results falling between associated cells in the matrix would be determined by interpolation between the end point when determining the final payout.
| | 2019 Revenue Growth | | |||||||||||||||||||||||||||||
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| | | | Below Threshold | | Threshold | | Between Target and Threshold | | Target | | Between Target and Maximum | | Maximum | | |||||||||||||||||
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2019 Adjusted EBITDA | | <+4% | | +6% | | +8% | | +10% | | +12% | | +14% | | |||||||||||||||||||
Below | $36.8M | 0% | 0% | 0% | | 0% | | 0% | 0% | |||||||||||||||||||||||
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Threshold | $37.5M | 0% | 35% | 40% | | 45% | | 50% | 55% | |||||||||||||||||||||||
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Between | $38.2M | 0% | 40% | 70% | | 75% | | 80% | 85% | |||||||||||||||||||||||
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| Target | | $39.3M | | 0% | | 45% | | 75% | | 100% | | 105% | | 110% | | ||||||||||||||||
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Between | $41.0M | 0% | 50% | 80% | | 105% | | 135% | 140% | |||||||||||||||||||||||
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Max | $43.3M | 0% | 55% | 85% | | 110% | | 140% | 180% | |||||||||||||||||||||||
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After the end of 2019, the compensation committee reviewed financial performance against the pre-determined goals and determined that neither our 2019 Revenue nor our 2019 Adjusted EBITDA met the threshold requirements and thus no cash incentive would be delivered to the participants under the annual incentive program for the senior executive team (including Messrs. Darrow, Watson, Smith and Swart).
As noted earlier, Mr. Smith participated in our non-executive bonus program for the first two quarters of 2019, for which he was paid $73,785 under the program, and Mr. Thomas participated in that program for all of 2019, for which he was paid $57,218 under the program. In the aggregate, these bonus payments to Messrs. Smith and Thomas were nearly 100% of their target incentive for the time during which they participated in the non-executive bonus program. Their quarterly payments under that program were discretionary and were based on (x) our overall non-executive bonus pool, which was determined by management in consultation with payoutsthe compensation committee, and (y) management's assessments of each participant's individual contributions. Mr. Thomas also received a discretionary "spot" bonus of $17,500 for critical assistance with an important transaction outside the scope of his traditional role. Neither Mr. Smith nor Mr. Thomas was an executive officer within the meaning of Section 16 of the Exchange Act at the time of earning a payout under the non-executive bonus program.
Although our financial performance in 2019 did not result in any cash bonuses being payable to our NEOs under the annual incentive program for the senior executive team, the compensation committee in January 2020 determined to recognize strong second half financial performance and deliveredseveral strategic accomplishments by providing a discretionary cash bonus to our leadership team at the end of each quarter.the year. The amount of these discretionary bonuses was as follows:
Executive | | 2019 Cash Bonus | ||
Michael D. Darrow(1) | $ | 300,000 | ||
Noel B. Watson(2) | $ | 112,500 | ||
Simon E. Smith(2) | $ | 100,000 | ||
Jeffrey J. Swart(2) | $ | 100,000 | ||
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2020 ANNUALPROXY STATEMENT | | Compensation Elements and 2019 Pay Decisions |
The decision to grant these cash bonuses despite our not having achieved the formula-based metrics underlying the annual executive plan was made in the exercise of the compensation committee's discretion, taking into account a number of relevant considerations, including the following:
Given the continued strong effortsnew management team's accomplishments in the second half of its employee base during periods that employees may have perceived as turbulent for the Company in light of recent strategic changes. In assessing the Company’s financial performance for the applicable quarter, management andyear following a significant leadership transition, the compensation committee considerbelieved that a varietybelow target cash bonus was appropriate and in the best interests of qualitativestockholders by stabilizing the business and quantitative measures, such as:
We believe that our quarterly bonus program appropriately balances the measurement of our primary financial drivers with that of our strategic decision-making and operational sustainability. Adjusted EBITDA and revenue performance are primary considerations when funding the bonus pool because they measure core operational performance, ensure overall affordability and reflect a metric that analysts, the investment community, security analysts, ratings agencies, and other key parties look at closely. The sustainability of our results, our trending performance, and the measurement of our other strategic drivers also serve as value reference points for the Committee given their linkage to our ability to create long-term value for our stockholders. As a result, our holistic evaluation of performance, including the primary evaluation of our Adjusted EBITDA and revenue achievement, rewards our NEOs for creating sustainable long-term value for our stockholders. Once these and the other factors described above are assessed, management recommends the overall bonus funding level for the organization. The CEO, other than for himself,also recommends bonus amounts for the executive team, based on the overall bonus funding and the assessment of each executive’s individual performance.USAA would be renewed. The compensation committee reviews these assessments and recommendations, and also assesseswill consider the CEO’s performance for the quarter. Theeffect of USAA's change in position in its 2020 compensation committee then determines individual NEO bonuses, if any, for the quarter.decisions.
Although Company performance for 2017 generally exceeded quarterly and annual expectations (the Company missed quarterly revenue expectations in Q3 2017), and individual NEO performance was strong, the compensation committee decided to reduce incentive payouts for NEOs, including the CEO, to
below target levels to balance internal considerations and recognize the stockholder experience throughout the year.
After the completion of Q1 in 2017, the compensation committee reviewed performance and considered an equitable bonus payout for Q1 performance to all NEOs. To that end, the compensation committee and management assessed several factors including our revenue and "Adjusted EBITDA performance, the potential key strategic investments during Q2 involving the Company’sTrade-In initiative, and the desire to keep the entire organization engaged in the strategic effort. As a result, and after discussions between the compensation committee, the CEO, and the CFO, the compensation committee decided not to deliver a bonus amount to the CEO or CFO with respect to Q1. For Q3 of 2017, the compensation committee initially determined that a bonus of $143,307 would be appropriate for our CEO, in light of the factors described above, and Mr. Perry’s leadership and strong performance during the quarter. However, the Company missed Q3 revenue expectations, and in furtherance of his belief that increasing thenon-executive bonus pool would boost morale, retention and future performance, Mr. Perry declined the bonus amount, and the compensation committee instead added that amount to thenon-executive bonus pool for the quarter.
The “Adjusted EBITDA” measure, whichEBITDA" is a financial measure not prepared in accordance with U.S. GAAP, was calculated based on quarterly earnings as reflected in our audited consolidated financial statements, adjusted to exclude interest income, tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation, expense,income (loss) from equity method investment, certain restructuring costs, certain executive departure costs, certain transaction expenses, certain litigation costs changes in the fair value of contingent consideration and lease exit costs.income taxes. Refer to Annex A for a reconciliation of Adjusted EBITDA to net loss. We use Adjusted EBITDA as an operating performance measure because it is (i) an integral part of our reporting and planning processes; (ii) used by our management and Board to assess our operational performance, and together with operational objectives, as a measure in evaluating employee compensation and bonuses; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis because it excludes variations primarily caused by changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA is widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt service capabilities.
The “Revenue” measure"Revenue" is prepared in accordance with U.S. GAAP and is comprised of transaction revenuesdealer revenue, consisting of fees paid by our dealer customers participating in our network of TrueCar Certified Dealers either on a per vehicleper-vehicle basis for sales to our users or in the form of a subscription arrangement or purchasing our other products and services, such as TrueCar Trade or our DealerScience products; OEM incentives revenue, consisting of fees paid by OEMs to promote the sale of their vehicles through the offering of consumer incentives to members of our affinity group marketing partners; and forecasts, consulting and other revenue, primarily from the provision of services to the automotive and financial services industries by our ALG subsidiary.
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The table below provides an overview of the bonuses earned each quarter and the total amount earned for the year:
Executive | Q1(1) | Q2(2) | Q3 | Q4 | Total Actual | Total Target | Actual as % of Target | |||||||||||||||||||||
Chip Perry | $ | 0 | $ | 194,480 | $ | 0 | $ | 195,488 | $ | 389,968 | $ | 800,000 | 48.7 | % | ||||||||||||||
Michael Guthrie | $ | 0 | $ | 60,769 | $ | 44,783 | $ | 61,090 | $ | 166,642 | $ | 250,000 | 66.7 | % | ||||||||||||||
Michael Darrow | $ | 17,223 | $ | 48,615 | $ | 35,827 | $ | 48,872 | $ | 150,537 | $ | 167,223 | 90.0 | % | ||||||||||||||
Neeraj Gunsagar | $ | 50,000 | $ | 48,615 | $ | 35,827 | $ | 48,872 | $ | 183,314 | $ | 200,000 | 91.7 | % | ||||||||||||||
Brian Skutta | $ | 50,000 | $ | 48,615 | $ | 35,827 | $ | 48,872 | $ | 183,314 | $ | 200,000 | 91.7 | % |
Long-Term Incentive Opportunities
We use long-term incentive compensation in the form of equity awards to align the interests of our executive officers, including theour NEOs, with the interests of our stockholders. We believe that our executive officers will be strongly incentivized to act in a manner that cultivates opportunities for maximizing long-term value creation if they own significant amounts of our common stock. To date,Since our initial public offering and before 2019, we have relied on a combination of time-based stock options and RSUs as vehicles for delivering long-term incentive compensation opportunities to our executive officers. We believe that stock options, which are granted with exercise prices equal to the fair market value of our common stock on the date of grant, provide an appropriate long-term incentive for our executive officers, as the options provide value to the holder only to the extent that our stock price appreciates on a
sustained basis following the date of grant. We believe that RSUs, which deliver increasing value in connection with the appreciation of our stock price, serve as a valuable retention tool for our executive officers. In 2019, based on feedback from stockholders and an ongoing review of competitive market practices, we introduced performance units, which we refer to as PUs, to the senior executive team, and in 2020, following our experience in 2019, we extended PUs to our senior vice presidents as well. We believe that PUs strengthen alignment with stockholders, complement the options and RSUs by diversifying our management's equity portfolio and promote a longer-term view of performance by measuring performance over a three-year period.
In determining the size of the equity awards to grant to our executive officers, the compensation committee takes into consideration individual and overall company performance, market data, internal pay equity, the timing of the last equity grant, unvested equity values, compensation expense to the Company,us and stockholder dilution, as well as our CEO's recommendations of our CEO (except with respectas to his own equity awards). The compensation committee uses its subjective judgment considering all of the factors described above to arrive at the amounts it determines are appropriate for each individual NEO.
For Mr. Perry, who was CEO at the time of the annual equity grant in March 2019, the equity mix consisted of 50% PUs, 25% options and 25% RSUs. For the other members of the leadership team in March 2019, including several NEOs, the equity mix consisted of 20% PUs, 40% options and 40% RSUs. For Messrs. Smith and Thomas, the equity mix for the annual grant received in March 2019 was 70% RSUs and 30% options. In establishing these equity mixes, the compensation committee considered the various long-term incentive vehicles used by our peers and determined that the performance-weighting of the awards should be progressively higher as an individual's potential impact increases, with the CEO having the highest performance weighting and the other members of the senior executive team having lesser (though still considerable) performance weighting.
Equity grantsawards were awardedgranted in JuneMarch 2019 and August 2017. Thethe stock options granted in June 2017 to the NEOs hadhave an exercise price of $18.91$6.93 per share the market priceand vest monthly over a four-year period. As of our common stock on the date of grant. These grants consisted of two awards, an annual grant with four year monthly vesting and a performance grant with back-loaded vesting (10% after one year, 20% after two years, 30% after three years and 40% after four years). The compensation committee viewed this grant as performance-based given: (i) the high exercise price (near the Company’s highest share price as a public company); and, (ii) the requirement of continued share price growth above historical levels for a sustained period of time to realize the award’s value, which is particularly important in the context of the back-loaded vesting feature of the grant. The August 2017 grants (provided only to Messrs. Darrow, Gunsagar and Skutta and not the CEO or CFO) had an exercise price of $16.62. As ofyear-end,December 31, 2019, all of the options granted in 2017the 2019 annual equity grant were “underwater”"underwater" (that is, had exercise prices higher than the fair market value of our common stock) and provided no direct value to our executives. The RSUs granted in 20172019 generally are scheduled to vest over a four-year period with quarterly vesting (see
“Outstanding Equity” the "Outstanding Equity" table for more details on vesting details), subject to the acceleration provisions of each NEO’sNEO's employment agreement and our 2014 Equity Incentive Plan.
For the PUs granted in 2019, executives have the opportunity to earn between 0% and 150% of the target number of shares based on our annualized total stockholder return determined by reference to our compound annual growth in stock price, or CAGR, compared to that of the Russell 2000 index, or the Index, over a three-year period. The PUs will generally be eligible to vest in early 2022, following the end of the three-year performance period, based on our relative CAGR compared to the Index. If our CAGR is equal to that of the Index, the target number of shares will vest. For every percentage point that our CAGR exceeds the Index, the payout is increased by two percentage points, and for every percentage point that our CAGR is below the Index, the payout is decreased by two percentage points.
In developing the performance goals and vesting structure of the PUs, the compensation committee sought to be rigorous and to align the interests of management and our stockholders. Moreover, it chose a three-year measurement period to accentuate the long-term nature of the award and further align management with the
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interests of our long-term stockholders. The compensation committee chose relative CAGR as the performance goal to provide a relative performance metric against an appropriate comparator group of companies to incentivize and reward not only returns to our stockholders, but also returns in excess of those generally available. At the end of the three-year performance period, the compensation committee will determine the level of achievement of our relative CAGR for the three-year performance period and then apply the resulting vesting to the grant amount to determine the total amount that will vest.
The table below reflects the annual equity grants awarded to our NEOs in March 2019:
Executive(1) | Options Granted | RSUs Granted | PUs Granted | |||
Michael D. Darrow | 68,598 | 32,927 | 14,952 | |||
Victor A. "Chip" Perry(2) | 113,444 | 54,453 | 99,006 | |||
Charles C. Thomas | 12,096 | 13,548 | — | |||
Simon E. Smith | 27,216 | 30,482 | — | |||
Jeffrey J. Swart | 54,432 | 26,127 | 11,864 | |||
Robert T. "Tommy" McClung(3) | 68,598 | 32,927 | 14,952 | |||
Neeraj Gunsagar(3) | 54,432 | 26,127 | 11,864 | |||
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On June 17, 2019, Mr. Watson joined us as our CFO and August 2017,CAO. In connection with his hiring, the Committee granted him an equity award with a grant-date fair value of approximately $2.5 million, comprising approximately $500,000 in options and approximately $2 million in RSUs. The compensation committee crafted this grant after consultation with Semler Brossy and consideration of competitive annualized opportunities for peer CFOs, as well as an additionalthe need to compensate Mr. Watson for his outstanding and forfeited equity from his prior employer and to ensure that he is meaningfully and immediately aligned with stockholders. The compensation committee considered the size of the grant to be within the typical market practice for new-hire awards and also within the historical range used in the past for other non-CEO executives when joining us. Further, the grant included a mix of RSUs and options, with a heavier mix of RSUs to provide meaningful retention and immediate ownership with options providing stronger alignment with stockholders. The options were granted with a $5.34 exercise price and were "underwater" as of December 31, 2019.
In addition to the annual grants identified above, the compensation committee also made grants in connection with the leadership transition that occurred in June 2019. Mr. Darrow upon hire.received an award of RSUs worth approximately $515,000 to recognize his additional responsibilities while serving as Interim President and CEO. The table below excludescompensation committee, in consultation with Semler Brossy, determined this award amount by reviewing the competitive market range for annualized total pay opportunities for full-time CEO positions among our peers and seeking to position 2019 annualized total pay for Mr. Darrow toward the lower end of that range, given the circumstances and context for the Interim President and CEO role for the second half of the year. These RSUs follow the same quarterly vesting schedule as the annual grants but will vest in full after a two-year period, which the compensation committee established to more closely align with the interim nature of the role and to provide a meaningful retention incentive during a period of uncertainty.
At the same time, Mr. Smith was promoted to EVP of Dealer Sales & Service and received a promotional grant of RSUs and options with a grant-date fair value of approximately $770,000. The compensation committee, in
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consultation with Semler Brossy, determined the amount of these awards by reviewing external market data for similar positions and considering Mr. Smith's internal equity positioning against our other executives and the prior incumbent. The compensation committee believed that this promotional grant was appropriate to recognize Mr. Smith's increased responsibilities, strengthen his retention incentives and include a mix of options and RSUs that is generally more consistent with the annual grant structure, with the same four-year vesting schedule as the annual grants.
Finally, in September 2019, the compensation committee, after reviewing information provided by Semler Brossy, granted Mr. Swart an award of RSUs with a grant-date fair value of approximately $450,000 to further its goal of internal pay equity, strengthen his retention incentives and recognize the critical importance of his role, and continuity in that role, during the period of uncertainty facing us.
Preview of 2020 Compensation Decisions Occasioned by the Coronavirus Outbreak
The recent outbreak of the novel coronavirus and the measures taken by governments and societies in response thereto have precipitated a period of substantial uncertainty that poses unprecedented challenges to us. Shortly after the scale of the economic impact of the coronavirus outbreak became apparent, we temporarily reduced our executive officers' base salaries and our directors' cash retainers, as described in a contemporaneous Current Report on Form 8-K that we filed with the SEC on March 26, 2020. Responding effectively to this crisis will require that we be as nimble and flexible as possible, and may require us to make additional adjustments to executive compensation to maintain the financial health of our business while simultaneously ensuring that we retain our key executives and provide them with appropriate incentives.
These adjustments could include further changes in executives' base salary or ad hoc cash bonuses or equity awards to executives, in each case in the discretion of the compensation committee, as well as further adjustments to directors' compensation in the Board's discretion. Although the compensation committee expects to adopt an annual cash incentive program for the senior executive team for 2020 similar to the program that was in place for 2019, it expects to do so only after the coronavirus-related uncertainty has abated sufficiently to permit it to make an informed judgment as to the appropriate contours of the program, and it cannot rule out the need to make discretionary, ad hoc cash bonuses in lieu of cash bonus discussedor in addition to any bonuses payable under “Annual Bonus Opportunity” above.such an annual program in light of the ongoing uncertainty.
Executive | Options Granted | RSUs Granted(1) | ||||||
Chip Perry | 312,000 | 31,472 | ||||||
Michael Guthrie | 234,912 | 54,160 | ||||||
Michael Darrow(2) | 380,000 | 108,850 | ||||||
Neeraj Gunsagar | 192,236 | 34,440 | ||||||
Brian Skutta | 199,236 | 39,440 |
401(k) Plan
We maintain atax-qualified retirement plan that provides eligible employees with an opportunity to save for retirement on a tax advantagedtax-advantaged basis. All participants’participants' interests in their salary deferrals are 100% vested when contributed. In 2017,2019, we made discretionary matching contributions into the 401(k) plan of 100% of the first 3% of compensation contributed by the participant. Our matching contributions are fully vested after four years with 25% vesting annually. Employee and employer contributions are allocated to each participant’sparticipant's individual account and are then invested in selected investment alternatives according to the participants’participants' directions. The 401(k) plan is intended to qualify under Sections 401(a) and 501(a) of the Code. As atax-qualified retirement plan, employer contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all employer contributions are deductible by us when made.
Perquisites and Other Benefits
We provide perquisites to our NEOs only to the extent that we believe it is appropriate to assist an individual in the performance of his or her duties, to increase his or her effectiveness or for recruitment and retention purposes. For 2017, such2019, these perquisites consisted of
included medical expense reimbursements to assist our NEOs with their health and well-being.
In 2017,addition, due to the increased time commitment required of Mr. Perry,Pierantoni during the time he served as our CEO, also receivedInterim CFO in addition to his continuing responsibilities as CAO, he was reimbursed for in-town lodging and was paid a housing and commuting allowancerelated tax gross up of approximately $4,000. Further, under his employment agreement we reimbursed Mr. Watson for approximately $80,000 of his expenses incurred in connection with his employment agreement as well as taxgross-ups relatedrelocation to certain expenses, primarilythe Santa
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Monica area and provided him a $15,000 monthly housing and commuting expenses, as further described below in the 2017 Summary Compensation Table, which provided the benefitsallowance for the first two yearssix months of his employment. The housing and commuting allowance endedWe did not pay Mr. Watson a tax gross up in December 2017. Additionally, Mr. Guthrie, who was then our CFO, also received similar benefits in 2017 as partconnection with either of a longstandingpre-IPO informal policy, which was applicable to certain executives and which has since been discontinued. This housing and commuting benefit, and the related taxgross-ups, allowed for the recruitment and retention of key executives from a broader talent pool who have families located outside of the Los Angeles metropolitan area. However, Mr. Guthrie resigned as CFO in February 2018 and the policy was then discontinued.these perquisites.
In the future, we may provide perquisites or other personal benefits not offered to our broader employee population to our executive officers. However, we do not anticipate that perquisites or other personal benefits will be a significant aspect of our executive compensation program. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the compensation committee.
Other Governance Items
Employment Agreements and Severance and Change in Control Protections
We have entered into employment agreements with each of our NEOs, whichexcluding Mr. Thomas, that provide certain severance benefits if a termination of employment occurs under specified circumstances and certain change in control benefits, which are described in “Executive"Executive Employment Agreements”Agreements" below. Severance benefits under these agreements are conditioned on the executive’sexecutive's signing a release of claims in favor of the Company.Weus. We have provided our executives with severance in the event of certain qualifying terminations, and certain change in control benefits, because we understand that anxieties about future employment or transactions involving a change in control of the Company can result in the early departure or distraction of our executives to our detriment. We believe that providing these benefits helps to alleviate these uncertainties, and therefortherefore provides our NEOs with incentives to foregoforgo other employment opportunities to remain with us, and allows our executives to focus more fully on making decisions that are in the best interests of our stockholders. We believe that these arrangements serve as an important recruiting and retention tool to ensure that personal uncertainties do not dilute our executives' complete focus on building stockholder value and driving our success.
The compensation committee determined the terms of these agreements were determined by our compensation committee, Mr. Perry’s employment agreement was negotiated with him, and his severance and change in control benefits acted as an inducement to his joining the Company.agreements. The employment agreements for the other NEOs are generally similar, as in determining the appropriate severance and change in control benefit levels for executives in general, the compensation committee considered internal parity and length of service as well as the review ofand reviewed relevant market data provided by Compensiaour outside compensation consultant for other companies with whomwhich we compete for executive talent. We believe
Separation and Consulting Agreements
In 2019, we entered into a separation agreement and release with Messrs. Perry, Pierantoni, Gunsagar and McClung. Under those agreements, Messrs. Perry, Gunsagar and McClung received the benefits to which they were entitled under their employment agreements in the case of a termination without cause, except that the compensation committee determined that it was appropriate to provide an additional cash payment not to exceed $25,000 in the case of Messrs. Gunsagar and McClung to expedite the completion of discussions and mitigate associated transaction costs for us. The separation agreement and release that we entered into with Mr. Pierantoni did not provide any benefits, as it was entered into in circumstances representing a resignation without good reason.
Concurrently with their terminations, we also entered into consulting agreements with Messrs. Perry and Pierantoni to secure their post-termination assistance with the associated management transitions. The consulting agreement with Mr. Pierantoni, which had a one-year term, did not provide him with any consideration other than his continued status as a "service provider" under our 2014 Plan, which resulted in his equity awards continuing to vest, and his stock options remaining exercisable, during that term. The consulting agreement with Mr. Perry, which has a two-year term, similarly does not provide him with any consideration other than his continued status as a "service provider" under the 2014 Plan; because his stock options and RSUs were accelerated and his PUs were forfeited in connection with his termination, the sole compensatory effect of his consulting agreement is to extend the expiration date of his stock options. The compensation committee considered these agreements serve as an important retention tool to ensurearrangements and determined that personal uncertainties do not dilute our executives’ complete focus on building stockholder valuethey were appropriate in light of the consulting services that Messrs. Perry and driving Company success.Pierantoni would be providing following their termination.
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Hedging Policies and Executive Ownership
The Company hasWe have an insider trading policy which,that, among other things, prohibits insiders from engaging in short sales of our common stock, hedging of stock ownership positions and transactions in publicly-traded options (such as puts and calls) and other derivative securities relating to our common stock.
As ofyear-endStock Ownership Guidelines 2017,
In 2018, we adopted formal stock ownership guidelines for certain executives, including our executives had significantNEOs. Under our stock holdings (e.g., asownership guidelines, our CEO is expected to accumulate and hold a number of December 31, 2017, the CEO held more than 5.0xshares of our common stock with a value equal to six times his annual base salary, inand each of our other NEOs is expected to accumulate and hold a number of shares owned outright and unvested RSUs).of our common stock with a value equal to two times his annual base salary. The NEOs’ equity holdings also primarily consist of option grants which create strong alignment with stockholders. The Company does not maintain formalNEOs are expected to satisfy the stock ownership guidelines at this time givenwithin five years from the NEOs’ meaningful equity ownership, thoughadoption of the Company expectsguidelines (or the individual's date of hire for individuals hired after the effective date). As of March 31, 2020, due to consider adoptingthe recent downturn in the price of our stock, none of our NEOs, except for Mr. Watson, would have been in compliance with the stock ownership guidelines inwere it not for the future.phase-in period required for such compliance.
Recoupment of Incentive Compensation, Recovery (“Clawback”)or Clawback, Policy
At thisIn 2018, we adopted a clawback policy applicable to our executive officers. If our compensation committee determines that an officer's misconduct caused us to materially restate all or a portion of our financial results, under certain circumstances our compensation committee has the authority and discretion to, within a period of time we have not implemented a policy regarding retroactive adjustmentsfollowing the material restatement, require the officer to any cash or equity-basedrepay incentive compensation paid to our NEOsthat would not have been payable absent the material restatement. Incentive compensation for purposes of this policy means an officer's cash bonus and other employeeslong-term equity-based compensation where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement.award size or vesting was contingent on our performance. Our compensation committee intends to adopt a general compensation recovery (“clawback”)revisit our clawback policy covering our annual and long-term incentive award plans and arrangements onceafter the SEC adopts final rules implementing the requirementrequirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, although it may decide to do so before such final rules are adopted. In addition, if the Company is required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our CEO and CFO may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive pursuant to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002.Act.
Accounting Treatment and Deductibility of Executive Compensation
The fair value of equity awards is established in accordance with the applicable accounting standards and the related compensation expense is one of the factors taken into consideration by the compensation committee in determining NEO equity awards.
Under Section 162(m) of the Internal Revenue Code, places a limit ofor Section 162(m), compensation paid to any publicly held corporation's "covered employees" that exceeds $1 million per taxable year onfor any covered employee is generally non-deductible. Before the amountenactment of compensation paid to certain of our executive officers that the Company may deduct for federal income tax purposes. An exception to the $1 million limitation forTax Cuts and Jobs Act, Section 162(m) provided a performance-based compensation meeting certain requirementsexception, pursuant to which the deduction limit under Section 162(m) did not apply to any compensation that qualified as "performance-based compensation" under Section 162(m). Under the Tax Cuts and Jobs Act, the performance-based compensation exception under Section 162(m) was repealed beginning in 2018 (other than with respect to taxable years beginning after December 31, 2017, except that certain grandfathered arrangements).
In addition, the regulations under Section 162(m) containtransition relief is provided for compensation paid pursuant to a transition rulewritten binding contract that applies to companies during a limited period following the initial public offering of their stock. Pursuant to this rule, certain compensation granted before the end of a transition period (and, with respect to restricted stock units, that also are paid out before the end of the transition period) currentlywas in effect on November 2, 2017 and which is not counted toward the deduction limitations of Code Section 162(m) if certain requirements are met. While certain of the equity awards grantedmodified in 2017 may be eligible to be excluded from the Section 162(m) deduction limits pursuant to this transition rule, our compensation committee has not adopted a policyany material respect on or after that all equity or other compensation must be deductible.date.
We currently expect our transition period to expire at our annual meeting of stockholders to be held this year in 2018, although it could expire earlier in certain circumstances. As a result, beginning not later than this annual meeting, compensationCompensation paid to each of our NEOs"covered employees" in excess of $1 million per taxable year generally will generallynot be nondeductible
deductible unless it is excludedqualifies for the performance-based compensation exception under Section 162(m) pursuant to the transition relief described above. Because of certain ambiguities and uncertainties as a resultto the application and interpretation of Section 162(m), as well as other factors beyond the control of the compensation committee, no assurance can be given that any compensation paid by us will be eligible for such transition rule described above. Therelief and be deductible by us in the future. Although the compensation committee will continue to maintainconsider tax implications as one factor in determining executive compensation, the compensation committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for our NEOs in a manner
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consistent with the goals of our executive compensation program and the abilitybest interests of us and our stockholders, which may include providing for compensation that is not deductible by us due to pay competitivethe deduction limit under Section 162(m). The compensation by not requiring allcommittee also retains the flexibility to modify compensation that was initially intended to be deductible.exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with our business needs.
Equity Grant Timing and Equity Plan Information
We do not have a formal policy for the timing of equity award grants. Before 2018, we granted equity awards when our compensation committee determined appropriate to serve the incentive and retention purposes of the awards. Beginning in 2018, our compensation committee determined to initiate a practice of granting equity awards to our executive officers annually in the first half of the year, although grants may occur at other times during the year, including for new hires, for promotees, to address special retention needs or otherwise as determined appropriate by the compensation committee. We currently grant equity awards to the NEOs under the 2014 Plan, which was adopted in connection with our initial public offering in 2014.
Taxation of “Parachute”"Parachute" Payments
Sections 280G and 4999 of the Internal Revenue Code provide that executive officers, directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change of control of the Company that exceedsexceed certain prescribed limits, and that we (or our successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive, including any NEO, with a“gross-up” gross up or other reimbursement payment for any tax liability that the executive might owe as a result of the application of Sections 280G or 4999 of the Code during fiscal 20172019 and we have not agreed and are not otherwise obligated to provide any executive with such a“gross-up” gross up or other reimbursement.
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Compensation and Workforce Committee Report
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Compensation Committee Report |
The compensation and workforce committee of the Board of Directors has reviewed and discussed with management the above Compensation Discussion and Analysis. Based on that review and discussion, the compensation committee has recommended to the Board that this Compensation Discussion and Analysis be included in this proxy statement.
Respectfully submitted,
Wesley Nichols (Chair)
Steven Dietz
Christopher Claus
John Mendel
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2017 Summary Compensation Table 2019 SUMMARY COMPENSATION TABLE
The following table shows compensation awarded to, paid to or earned by the persons named below for each of the years ended December 31, 2017, 20162019, 2018 and 2015,2017, except for Mr. Gunsagar,Messrs. McClung and Pierantoni, for whom compensation is shown for the years ended December 31, 20172019 and 20162018 only (reflecting that he has beenthey were named an executive officerofficers only during those years); and for two years),Messrs. Watson Thomas, Smith and Messrs. Darrow and SkuttaSwart, for whom compensation is shown for the year ended December 31, 20172019 only (reflecting that they have beenwere named executive officers for oneonly during that year).
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Chip Perry | 2017 | 800,000 | 195,488 | (3) | 789,615 | 2,818,285 | 482,876 | (4) | 5,086,264 | |||||||||||||||||||||||
President and Chief | 2016 | 800,000 | 825,000 | (5) | — | — | 522,755 | (6) | 2,147,755 | |||||||||||||||||||||||
Executive Officer | 2015 | 39,487 | 100,000 | (7) | 5,293,200 | 7,025,961 | 250 | 12,458,898 | ||||||||||||||||||||||||
Michael Guthrie | 2017 | 400,000 | 105,873 | (8) | 1,084,935 | 2,134,211 | 371,527 | (9) | 4,096,546 | |||||||||||||||||||||||
Chief Financial Officer | 2016 | 396,354 | 292,000 | (10) | 1,845,776 | 3,057,902 | 613,936 | (11) | 6,205,968 | |||||||||||||||||||||||
2015 | 389,063 | 80,372 | (12) | 1,704,266 | 743,291 | 89,000 | 253,805 | (13) | 3,259,797 | |||||||||||||||||||||||
Michael Darrow | 2017 | 333,333 | 101,922 | (14) | 1,656,702 | 2,948,302 | 9,247 | (15) | 5,049,506 | |||||||||||||||||||||||
Executive Vice President of Partner and OEM Development | ||||||||||||||||||||||||||||||||
Neeraj Gunsagar | 2017 | 400,000 | 134,699 | (14) | 699,876 | 1,735,936 | 23,803 | (16) | 2,994,314 | |||||||||||||||||||||||
Chief Marketing Officer | 2016 | 405,833 | 226,000 | (10) | 1,395,276 | 2,548,252 | 19,460 | (17) | 4,594,821 | |||||||||||||||||||||||
and Executive Vice President | ||||||||||||||||||||||||||||||||
Brian Skutta | 2017 | 400,000 | 134,699 | (14) | 794,426 | 1,800,369 | 9,487 | (18) | 3,138,981 | |||||||||||||||||||||||
Executive Vice President of Dealer Sales and Services |
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($)(1) | | Option Awards ($)(1) | | All Other Compensation ($) | | Total ($) | ||||||||
Michael D. Darrow | 2019 | 400,000 | 300,000(2) | 882,413 | 272,123 | 158,101(3) | 2,012,637 | |||||||||||||||
President and CEO | 2018 | 400,000 | 70,868(2) | 331,178 | 407,713 | 9,479(4) | 1,219,238 | |||||||||||||||
2017 | 333,333 | 101,922(2) | 1,656,702 | 2,948,302 | 9,247(4) | 5,049,506 | ||||||||||||||||
Victor A. "Chip" Perry | | 2019 | | 333,333 | | — | | 2,799,290(5) | | 3,944,739(5) | | 3,214,750(6) | | 10,292,112 | ||||||||
Former President and CEO | | 2018 | | 800,000 | | 238,848(2) | | 784,635 | | 1,181,778 | | 14,878(4) | | 3,020,139 | ||||||||
| | 2017 | | 800,000 | | 195,488(2) | | 789,615 | | 2,818,285 | | 482,876(7) | | 5,086,264 | ||||||||
Noel B. Watson | 2019 | 243,750 | 112,500(2) | 1,975,752 | 455,750 | 376,820(8) | 3,164,572 | |||||||||||||||
CFO and CAO | ||||||||||||||||||||||
Charles C. Thomas | | 2019 | | 237,500 | | 74,718(2) | | 100,215 | | 47,984 | | 8,757(9) | | 469,174 | ||||||||
VP, Controller | | | | | | | | |||||||||||||||
John E. Pierantoni | 2019 | 90,125 | — | 14,782 | — | 20,099(10) | 125,006 | |||||||||||||||
Interim CFO; SVP and CAO | 2018 | 356,841 | 77,318(2) | 457,019 | 105,048 | 62,770(11) | 1,058,996 | |||||||||||||||
Simon E. Smith | | 2019 | | 380,313 | | 173,785(2) | | 614,591 | | 622,332 | | 24,266(12) | | 1,815,287 | ||||||||
EVP, Dealer Sales & Service | | | | | | | | |||||||||||||||
Jeffrey J. Swart | 2019 | 400,000 | 100,000(2) | 744,496 | 215,928 | 14,880(12) | 1,475,304 | |||||||||||||||
EVP, General Counsel and Secretary | ||||||||||||||||||||||
Robert T. "Tommy" McClung | | 2019 | | 191,667 | | — | | 369,230 | | 272,123 | | 434,168(13) | | 1,267,188 | ||||||||
Former EVP and Chief | | 2018 | | 400,000 | | 70,868(2) | | 409,212 | | 525,234 | | 9,207(4) | | 1,414,521 | ||||||||
Technology Officer | | | | | | | | |||||||||||||||
Neeraj Gunsagar | 2019 | 191,667 | — | 298,452 | 215,928 | 450,352(14) | 1,156,399 | |||||||||||||||
Former EVP and Chief | 2018 | 400,000 | 70,868(2) | 295,868 | 354,535 | 13,674(15) | 1,134,945 | |||||||||||||||
Marketing Officer | 2017 | 400,000 | 134,699(2) | 699,876 | 1,735,936 | 23,803(16) | 2,994,314 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| Maximum Achievement Payout | |||
---|---|---|---|---|
Michael D. Darrow | $ | 171,798 | ||
Victor A. "Chip" Perry | $ | 1,137,579 | ||
Jeffrey J. Swart | $ | 136,317 | ||
Robert T. "Tommy" McClung | $ | 171,798 | ||
Neeraj Gunsagar | $ | 136,317 |
|
42 | | |
| | | ||||||
2020 ANNUALPROXY STATEMENT | | |
|
|
2017 Grants of Plan-Based Awards Table
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1) | |||||||||||||||
Chip Perry | 6/10/2017 | 31,472 | (2) | 312,000 | (3) | 18.91 | 3,413,421 | |||||||||||||
7/28/2017 | 10,225 | (4) | — | — | 194,480 | |||||||||||||||
Michael Guthrie | 6/10/2017 | 54,160 | (2) | 234,912 | (5) | 18.91 | 3,158,376 | |||||||||||||
7/28/2017 | 3,195 | (4) | — | — | 60,769 | |||||||||||||||
Michael Darrow | 3/1/2017 | 100,000 | (6) | 200,000 | (7) | 14.61 | 2,858,825 | |||||||||||||
6/10/2017 | — | 90,000 | (8) | 18.91 | 828,424 | |||||||||||||||
7/28/2017 | 2,556 | (4) | — | — | 48,615 | |||||||||||||||
8/16/2017 | 8,850 | (2) | 90,000 | (8) | 16.62 | 869,140 | ||||||||||||||
Neeraj Gunsagar | 6/10/2017 | 34,440 | (2) | 179,736 | (9) | 18.91 | 2,286,912 | |||||||||||||
7/28/2017 | 2,556 | (4) | — | — | 48,615 | |||||||||||||||
8/16/2017 | — | 12,500 | (8) | 16.62 | 100,285 | |||||||||||||||
Brian Skutta | 6/10/2017 | 39,440 | (2) | 186,736 | (10) | 18.91 | 2,445,895 | |||||||||||||
7/28/2017 | 2,556 | (4) | — | — | 48,615 | |||||||||||||||
8/16/2017 | — | 12,500 | (8) | 16.62 | 100,285 |
|
43 |
| | | ||||||
2020 ANNUALPROXY STATEMENT | | |
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | All other stock awards: Number of shares of stock or | | All other option awards: Number of securities underlying | | Exercise or base price of option | | Grant Date Fair Value of Stock and Option | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Grant Date | | Threshold ($) | | Target (#) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | units (#) | | options (#) | | awards ($/sh) | | Awards ($)(3) | ||||||||||||
Michael D. Darrow | 3/15/2019 | 299 | 14,952 | 22,428 | — | — | — | 114,532 | |||||||||||||||||||||||||
3/15/2019 | — | — | — | 36,753(4) | 68,598(5) | 6.93 | 526,821 | ||||||||||||||||||||||||||
6/8/2019 | — | — | — | 94,162(6) | — | — | 513,183 | ||||||||||||||||||||||||||
30,000 | 200,000 | 342,000 | |||||||||||||||||||||||||||||||
Victor A. "Chip" Perry | 3/15/2019 | | | | | | | | 1,980 | | 99,006 | | 148,509 | | — | | — | | — | | 758,386 | ||||||||||||
| 3/15/2019 | | | | | | | | — | | — | | — | | 54,453(7) | | 113,444(5) | | 6.93 | | 827,383 | ||||||||||||
| | | 60,000 | | 400,000 | | 684,000 | | | | | | | | | | | | | | | ||||||||||||
Noel B. Watson | 6/17/2019 | — | — | — | 369,991(8) | 148,991(9) | 5.34 | 2,431,502 | |||||||||||||||||||||||||
18,308 | 122,055 | 208,714 | |||||||||||||||||||||||||||||||
Charles C. Thomas | 3/15/2019 | | | | | | | | — | | — | | — | | 14,461(10) | | 12,096(5) | | 6.93 | | 148,199 | ||||||||||||
John E. Pierantoni | 3/15/2019 | — | — | — | 2,133(11) | — | — | 14,782 | |||||||||||||||||||||||||
21,630 | 144,200 | 246,582 | |||||||||||||||||||||||||||||||
Simon E. Smith | 3/15/2019 | | | | | | | | — | | — | | — | | 32,583(12) | | 27,216(5) | | 6.93 | | 333,764 | ||||||||||||
| 4/8/2019 | | | | | | | | — | | — | | — | | 20,000(13) | | — | | — | | 132,200 | ||||||||||||
| 6/8/2019 | | | | | | | | — | | — | | — | | 47,081(14) | | 165,910(15) | | 5.45 | | 770,959 | ||||||||||||
| | | 15,000 | | 100,000 | | 171,000 | | | | | | | | | | | | | | | ||||||||||||
Jeffrey J. Swart | 3/15/2019 | 237 | 11,864 | 17,796 | — | — | — | 90,878 | |||||||||||||||||||||||||
3/15/2019 | — | — | — | 29,714(16) | 54,432(5) | 6.93 | 421,846 | ||||||||||||||||||||||||||
9/16/2019 | — | — | — | 110,000(8) | — | — | 447,700 | ||||||||||||||||||||||||||
30,000 | 200,000 | 342,000 | |||||||||||||||||||||||||||||||
Robert T. "Tommy" | 3/15/2019 | | | | | | | | 299 | | 14,952 | | 22,428 | | — | | — | | — | | 114,532 | ||||||||||||
McClung | 3/15/2019 | | | | | | | | — | | — | | — | | 36,753(4) | | 68,598(5) | | 6.93 | | 526,821 | ||||||||||||
| | | 30,000 | | 200,000 | | 342,000 | | | | | | | | | | | | | | | ||||||||||||
Neeraj Gunsagar | 3/15/2019 | 237 | 11,864 | 17,796 | — | — | — | 90,878 | |||||||||||||||||||||||||
3/15/2019 | — | — | — | 29,953(17) | 54,432(5) | 6.93 | 423,502 | ||||||||||||||||||||||||||
30,000 | 200,000 | 342,000 | |||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
44 | | |
| | |
2020 ANNUALPROXY STATEMENT | | Compensation of |
| | |
| | 45 |
Outstanding Equity Awards at FiscalYear-End
| | |
2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information regarding equity awards held by our named executive officers at December 31, 2017.2019.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options | Option Exercise Price Per Share | Option Expiration Date | Number of Shares or Units of Stock that have Not Vested | Market Value of Shares or Units of Stock that have Not Vested | ||||||||||||||||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||||||||||||||||
Chip Perry | 12/14/2015 | (1 | ) | 843,333 | 996,667 | $ | 8.02 | 12/13/2025 | ||||||||||||||||||||||||
12/14/2015 | (2 | ) | 330,000 | $ | 3,696,000 | |||||||||||||||||||||||||||
6/10/2017 | (3 | ) | 20,250 | 141,750 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (4 | ) | — | 150,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (5 | ) | 27,538 | $ | 308,426 | |||||||||||||||||||||||||||
7/28/2017 | (6 | ) | 8,946 | $ | 100,195 | |||||||||||||||||||||||||||
Michael Guthrie | 2/14/2012 | (7 | ) | 299,999 | — | $ | 11.505 | 2/14/2022 | ||||||||||||||||||||||||
5/2/2013 | (7 | ) | 695 | — | $ | 7.92 | 5/2/2023 | |||||||||||||||||||||||||
6/26/2013 | (7 | ) | 11,304 | — | $ | 7.92 | 6/26/2023 | |||||||||||||||||||||||||
10/22/2013 | (8 | )(9) | 21,874 | — | $ | 8.88 | 10/22/2023 | |||||||||||||||||||||||||
2/7/2014 | (8 | )(10) | 12,500 | — | $ | 9.255 | 2/7/2024 | |||||||||||||||||||||||||
5/2/2014 | (8 | )(11) | 206,500 | — | $ | 12.81 | 5/2/2024 | |||||||||||||||||||||||||
5/21/2014 | (12 | ) | 7,376 | $ | 82,611 | |||||||||||||||||||||||||||
4/23/2015 | (13 | ) | 72,916 | 27,084 | $ | 15.71 | 4/23/2025 | |||||||||||||||||||||||||
4/23/2015 | (12 | ) | 13,750 | $ | 154,000 | |||||||||||||||||||||||||||
10/1/2015 | (14 | ) | 66,953 | $ | 749,874 | |||||||||||||||||||||||||||
1/27/2016 | (15 | ) | 35,708 | $ | 399,930 | |||||||||||||||||||||||||||
7/27/2016 | (16 | ) | 93,750 | $ | 1,050,000 | |||||||||||||||||||||||||||
8/11/2016 | (17 | ) | 100,000 | 375,001 | $ | 10.85 | 8/11/2026 | |||||||||||||||||||||||||
6/10/2017 | (3 | ) | 10,614 | 74,298 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (4 | ) | — | 150,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (5 | ) | 47,390 | $ | 530,768 | |||||||||||||||||||||||||||
7/28/2017 | (6 | ) | 2,795 | $ | 31,304 |
| Option Awards | | Stock Awards | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Securities Underlying Unexercised Options | | Option Exercise Price Per | | Option Expiration | | Number of Shares or Units of Stock that have Not | | Market Value of Shares or Units of Stock that have Not | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Grant Date | | Exercisable | | Unexercisable | | Share | | Date | | Vested (#) | | Vested ($) | | Vested (#) | | Vested ($) | ||||||||||
Michael D. Darrow | 3/1/2017(1) | 129,166 | 70,834 | $ | 14.61 | 3/1/2027 | |||||||||||||||||||||
3/1/2017(2) | 37,500 | 178,125 | |||||||||||||||||||||||||
6/10/2017(3) | 27,000 | 63,000 | $ | 18.91 | 6/10/2027 | ||||||||||||||||||||||
8/16/2017(3) | 27,000 | 63,000 | $ | 16.62 | 8/16/2027 | ||||||||||||||||||||||
8/16/2017(4) | 3,319 | 15,765 | |||||||||||||||||||||||||
5/12/2018(5) | 37,536 | 52,551 | $ | 9.59 | 5/12/2028 | ||||||||||||||||||||||
5/12/2018(6) | 17,642 | 83,800 | |||||||||||||||||||||||||
3/15/2019(7) | 12,862 | 55,736 | $ | 6.93 | 3/15/2029 | ||||||||||||||||||||||
3/15/2019(8) | 27,711 | 131,627 | |||||||||||||||||||||||||
3/15/2019(9) | 299 | 1,420 | |||||||||||||||||||||||||
6/8/2019(4) | 70,622 | 335,455 | |||||||||||||||||||||||||
Victor A. "Chip" Perry | 12/14/2015(10) | | 1,840,000 | | — | $ | 8.02 | | 8/31/2021 | | | | | | | | | ||||||||||
| 6/10/2017(10) | | 312,000 | | — | $ | 18.91 | | 8/31/2021 | | | | | | | | | ||||||||||
| 5/12/2018(10) | | 261,122 | | — | $ | 9.59 | | 8/31/2021 | | | | | | | | | ||||||||||
| 3/15/2019(10) | | 113,444 | | — | $ | 6.93 | | 8/31/2021 | | | | | | | | | ||||||||||
Noel B. Watson | 6/17/2019(11) | 9,311 | 139,680 | $ | 5.34 | 6/17/2029 | |||||||||||||||||||||
6/17/2019(12) | 346,867 | 1,647,618 | |||||||||||||||||||||||||
Charles C. Thomas | 5/15/2014(10) | | 4,061 | | — | $ | 12.81 | | 5/15/2024 | | | | | | | | | ||||||||||
| 10/6/2014(10) | | 2,000 | | — | $ | 20.85 | | 10/6/2024 | | | | | | | | | ||||||||||
| 2/3/2015(10) | | 1,030 | | — | $ | 19.29 | | 2/3/2025 | | | | | | | | | ||||||||||
| 3/14/2016(13) | | | | | | | | | | 250 | | 1,188 | | | | | ||||||||||
| 7/1/2016(14) | | | | | | | | | | 458 | | 2,176 | | | | | ||||||||||
| 8/11/2016(15) | | 7,297 | | 1,043 | $ | 10.85 | | 8/11/2026 | | | | | | | | | ||||||||||
| 6/10/2017(16) | | 10,530 | | 18,018 | $ | 18.91 | | 6/10/2027 | | | | | | | | | ||||||||||
| 6/10/2017(4) | | | | | | | | | | 1,116 | | 5,301 | | | | | ||||||||||
| 5/12/2018(6) | | | | | | | | | | 8,313 | | 39,487 | | | | | ||||||||||
| 9/18/2018(17) | | 3,547 | | 7,092 | $ | 13.49 | | 9/18/2028 | | | | | | | | | ||||||||||
| 3/15/2019(7) | | 2,268 | | 9,828 | $ | 6.93 | | 3/15/2029 | | | | | | | | | ||||||||||
| 3/15/2019(18) | | | | | | | | | �� | 11,237 | | 53,376 | | | | |
| | | ||
| |
|
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options | Option Exercise Price Per Share | Option Expiration Date | Number of Shares or Units of Stock that have Not Vested | Market Value of Shares or Units of Stock that have Not Vested | ||||||||||||||||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||||||||||||||||
Michael Darrow | 3/1/2017 | (18 | ) | 29,166 | 170,834 | $ | 14.61 | 3/1/2027 | ||||||||||||||||||||||||
3/1/2017 | (19 | ) | 87,500 | $ | 980,000 | |||||||||||||||||||||||||||
6/10/2017 | (4 | ) | — | 90,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
7/28/2017 | (6 | ) | 2,236 | $ | 25,043 | |||||||||||||||||||||||||||
8/16/2017 | (4 | ) | — | 90,000 | $ | 16.62 | 8/16/2027 | |||||||||||||||||||||||||
8/16/2017 | (5 | ) | 7,744 | $ | 86,733 | |||||||||||||||||||||||||||
Neeraj Gunsagar | 2/14/2012 | (7 | ) | 16,667 | — | $ | 11.505 | 2/14/2022 | ||||||||||||||||||||||||
5/2/2013 | (7 | ) | 58 | — | $ | 7.92 | 5/2/2023 | |||||||||||||||||||||||||
11/21/2013 | (7 | ) | 54,690 | — | $ | 8.895 | 11/21/2023 | |||||||||||||||||||||||||
2/28/2014 | (20 | ) | 76 | 25 | $ | 9.255 | 2/28/2024 | |||||||||||||||||||||||||
5/15/2014 | (21 | ) | 55,378 | 22,804 | $ | 12.81 | 5/15/2024 | |||||||||||||||||||||||||
5/21/2014 | (12 | ) | 2,935 | $ | 32,872 | |||||||||||||||||||||||||||
10/6/2014 | (22 | ) | 121,875 | 28,125 | $ | 20.85 | 10/6/2024 | |||||||||||||||||||||||||
10/6/2014 | (23 | ) | 15,751 | $ | 176,411 | |||||||||||||||||||||||||||
4/23/2015 | (13 | ) | 54,687 | 20,313 | $ | 15.71 | 4/23/2025 | |||||||||||||||||||||||||
4/23/2015 | (12 | ) | 6,250 | $ | 70,000 | |||||||||||||||||||||||||||
10/1/2015 | (14 | ) | 66,953 | $ | 749,874 | |||||||||||||||||||||||||||
1/27/2016 | (15 | ) | 35,708 | $ | 399,930 | |||||||||||||||||||||||||||
7/1/2016 | (16 | ) | 78,125 | $ | 875,000 | |||||||||||||||||||||||||||
8/11/2016 | (17 | ) | 187,499 | 312,501 | $ | 10.85 | 8/11/2026 | |||||||||||||||||||||||||
6/10/2017 | (3 | ) | 7,092 | 49,644 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (4 | ) | — | 123,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (5 | ) | 30,135 | $ | 337,512 | |||||||||||||||||||||||||||
7/28/2017 | (6 | ) | 2,236 | $ | 25,043 | |||||||||||||||||||||||||||
8/16/2017 | (4 | ) | — | 12,500 | $ | 16.62 | 8/16/2027 | |||||||||||||||||||||||||
Brian Skutta | 3/14/2016 | (24 | ) | 28,125 | 203,907 | $ | 6.03 | 3/14/2026 | ||||||||||||||||||||||||
3/14/2016 | (25 | ) | 70,313 | $ | 787,506 | |||||||||||||||||||||||||||
6/10/2017 | (3 | ) | 7,092 | 49,644 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (4 | ) | — | 130,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
6/10/2017 | (5 | ) | 34,510 | $ | 386,512 | |||||||||||||||||||||||||||
7/28/2017 | (6 | ) | 2,236 | $ | 25,043 | |||||||||||||||||||||||||||
8/16/2017 | (4 | ) | — | 12,500 | $ | 16.62 | 8/16/2027 |
| | | ||||||
2020 ANNUALPROXY STATEMENT | | |
| Option Awards | | Stock Awards | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Securities Underlying Unexercised Options | | Option Exercise Price Per | | Option Expiration | | Number of Shares or Units of Stock that have Not | | Market Value of Shares or Units of Stock that have Not | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Grant Date | | Exercisable | | Unexercisable | | Share | | Date | | Vested (#) | | Vested ($) | | Vested (#) | | Vested ($) | ||||||||||
John E. Pierantoni | 2/7/2014(10) | 68,448 | — | $ | 9.26 | 6/30/2020 | |||||||||||||||||||||
5/15/2014(10) | 66,374 | — | $ | 12.81 | 6/30/2020 | ||||||||||||||||||||||
7/1/2016(14) | 3,965 | 18,834 | |||||||||||||||||||||||||
8/11/2016(15) | 63,244 | 9,036 | $ | 10.85 | 6/30/2020 | ||||||||||||||||||||||
6/10/2017(19) | 32,130 | 44,238 | $ | 18.91 | 6/30/2020 | ||||||||||||||||||||||
6/10/2017(4) | 1,770 | 8,408 | |||||||||||||||||||||||||
5/12/2018(5) | 9,671 | 13,540 | $ | 9.59 | 6/30/2020 | ||||||||||||||||||||||
5/12/2018(6) | 15,910 | 75,573 | |||||||||||||||||||||||||
3/15/2019(20) | 534 | 2,537 | |||||||||||||||||||||||||
Simon E. Smith | 2/22/2013(10) | | 3,206 | | — | $ | 7.92 | | 2/22/2023 | | | | | | | | | ||||||||||
| 5/2/2013(10) | | 1,069 | | — | $ | 7.92 | | 5/2/2023 | | | | | | | | | ||||||||||
| 10/22/2013(10) | | 5,342 | | — | $ | 8.88 | | 10/22/2023 | | | | | | | | | ||||||||||
| 2/28/2014(10) | | 3,549 | | — | $ | 9.26 | | 2/28/2024 | | | | | | | | | ||||||||||
| 5/15/2014(10) | | 11,480 | | — | $ | 12.81 | | 5/15/2024 | | | | | | | | | ||||||||||
| 3/14/2016(21) | | 6,927 | | 1,094 | $ | 6.03 | | 3/14/2026 | | | | | | | | | ||||||||||
| 3/14/2016(13) | | | | | | | | | | 782 | | 3,715 | | | | | ||||||||||
| 7/1/2016(14) | | | | | | | | | | 3,438 | | 16,331 | | | | | ||||||||||
| 8/11/2016(15) | | 54,836 | | 7,834 | $ | 10.85 | | 8/11/2026 | | | | | | | | | ||||||||||
| 6/10/2017(22) | | 31,438 | | 42,626 | $ | 18.91 | | 6/10/2027 | | | | | | | | | ||||||||||
| 6/10/2017(4) | | | | | | | | | | 1,770 | | 8,408 | | | | | ||||||||||
| 5/12/2018(5) | | 11,636 | | 16,291 | $ | 9.59 | | 5/12/2028 | | | | | | | | | ||||||||||
| 5/12/2018(6) | | | | | | | | | | 19,142 | | 90,925 | | | | | ||||||||||
| 3/15/2019(7) | | 5,103 | | 22,113 | $ | 6.93 | | 3/15/2029 | | | | | | | | | ||||||||||
| 3/15/2019(23) | | | | | | | | | | 25,293 | | 120,142 | | | | | ||||||||||
| 4/8/2019(24) | | | | | | | | | | 17,500 | | 83,125 | | | | | ||||||||||
| 6/8/2019(25) | | 20,738 | | 145,172 | $ | 5.45 | | 6/8/2029 | | | | | | | | | ||||||||||
| 6/8/2019(26) | | | | | | | | | | 41,196 | | 195,681 | | | | | ||||||||||
Jeffrey J. Swart | 5/2/2014(10) | 300,000 | — | $ | 12.81 | 5/2/2024 | |||||||||||||||||||||
5/15/2014(10) | 11,227 | — | $ | 12.81 | 5/15/2024 | ||||||||||||||||||||||
7/1/2016(14) | 6,250 | 29,688 | |||||||||||||||||||||||||
8/11/2016(15) | 174,999 | 25,001 | $ | 10.85 | 8/11/2026 | ||||||||||||||||||||||
6/10/2017(27) | 62,460 | 84,276 | $ | 18.91 | 6/10/2027 | ||||||||||||||||||||||
6/10/2017(4) | 3,540 | 16,815 | |||||||||||||||||||||||||
5/12/2018(5) | 32,640 | 45,697 | $ | 9.59 | 5/12/2028 | ||||||||||||||||||||||
5/12/2018(6) | 15,341 | 72,870 | |||||||||||||||||||||||||
3/15/2019(7) | 10,206 | 44,226 | $ | 6.93 | 3/15/2029 | ||||||||||||||||||||||
3/15/2019(28) | 22,126 | 105,099 | |||||||||||||||||||||||||
3/15/2019(9) | 237 | 1,127 | |||||||||||||||||||||||||
9/16/2019(12) | 103,125 | 489,844 | |||||||||||||||||||||||||
Robert T. "Tommy" | 3/15/2019(9) | | | | | | | | | | | | | | 26 | | 126 | ||||||||||
Neeraj Gunsagar | 3/15/2019(9) | 21 | 100 | ||||||||||||||||||||||||
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2020 ANNUALPROXY STATEMENT |
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2017 Option Exercises and Stock Vested Table
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
2019 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information, on an aggregate basis, regarding (i) stock options exercised during 2017,2019, including the total number of shares acquired upon exercise and the aggregate value realized before payment of any applicable withholding tax and broker commissions, and (ii) restricted stock unitsRSUs that vested during 2017.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||
Chip Perry | — | — | 170,213 | 2,576,775 | ||||||||||||
Michael Guthrie | 652,927 | 6,461,020 | 121,907 | 1,855,643 | ||||||||||||
Michael Darrow | — | — | 13,926 | 188,878 | ||||||||||||
Neeraj Gunsagar | 124,023 | 1,331,751 | 116,922 | 1,792,964 | ||||||||||||
Brian Skutta | 105,468 | 1,156,725 | 33,375 | 478,394 |
2019.
| Option Awards | | Stock Awards | ||||||||||
| | | | | | | | | | | | | |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)(1) | |||||
Michael D. Darrow | — | — | 73,532 | 409,247 | |||||||||
Victor A. "Chip" Perry | | — | | — | | 314,548 | | 1,813,465 | |||||
Noel B. Watson | — | — | 23,124 | 116,776 | |||||||||
Charles C. Thomas | | — | | — | | 10,322 | | 57,053 | |||||
John E. Pierantoni | — | — | 44,432 | 248,429 | |||||||||
Simon E. Smith | | — | | — | | 37,570 | | 199,344 | |||||
Jeffrey J. Swart | — | — | 55,571 | 305,369 | |||||||||
Robert T. "Tommy" McClung | | — | | — | | 103,263 | | 596,458 | |||||
Neeraj Gunsagar | — | — | 134,212 | 641,619 | |||||||||
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Executive Employment Arrangements EXECUTIVE EMPLOYMENT ARRANGEMENTS
We have employment agreements with Messrs. Perry, Darrow, GunsagarWatson, Smith and Skutta,Swart, and we previously had an employment agreementagreements with Mr. Guthrie while he was CFO.Messrs. Perry, Pierantoni, Gunsagar and McClung before they left the Company. These agreements provide forat-will employment and generally include the named executive officer’sNEO's base salary, an indication of eligibility for an annual performance-based bonus opportunity, equity awards and certain severance and change in control benefits. These employment arrangements are described below and in “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below.
Michael Darrow
For 2019, Mr. Darrow, then our EVP of Partner & OEM Development, the President of our ALG, Inc. subsidiary and, beginning May 31, 2019, our Interim President and CEO, had an annual base salary of $400,000 and was eligible for a performance-based bonus. In connection with his appointment as our Interim President and Chief Executive Officer, Mr. Darrow was granted 94,162 RSUs, and he was entitled to a monthly stipend of $20,000 during his service as our Interim President and CEO.
We entered into an employment agreement with Mr. Darrow as of February 28, 2017 (the "Prior Darrow Employment Agreement"). Pursuant to the Prior Darrow Employment Agreement, Mr. Darrow was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs on the same terms and conditions as other similarly-situated employees. In connection with his appointment on March 9, 2020 as our permanent President and CEO, we entered into an employment agreement with Mr. Darrow as of March 9, 2020 (the "New Darrow Employment Agreement"), which superseded the Prior Darrow Employment Agreement. Pursuant to the New Darrow Employment Agreement, Mr. Darrow was granted an option to purchase 323,000 shares of our common stock, 488,000 RSUs and 326,000 PUs. The
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
terms of the New Darrow Employment Agreement are described in our Current Report on Form 8-K filed with the SEC on March 10, 2020 and will be further described in our proxy statement for our 2021 annual meeting.
Please see "Potential Payments upon Termination, Change in Control or Certain Other Events" below for additional information on the Prior Darrow Employment Agreement.
Chip Perry
For 2017,2019, Mr. Perry, our President and Chief Executive Officer,CEO until his retirement on May 31, 2019, had an annual salary of $800,000 and an annual performance-based bonus opportunity targeted at 100% of his base salary.
We entered into an employment agreement (the “Perry"Perry Employment Agreement”Agreement") on November 16, 2015 with Mr. Perry. Pursuant to the Perry Employment Agreement, beginning in 2016, Mr. Perry iswas eligible for an annual performance-based bonus opportunity of 100% of his base salary, a minimum annual bonus opportunity of 50% of his base salary for achievement of minimum performance levels and a maximum annual bonus opportunity of 200% of his base salary for achievement of maximum performance levels. During the first two years of his employment (Mr. Perry’sPerry's two-year anniversary with us occurred in December 2017), Mr. Perry was entitled to receive monthly payments of $20,000 as an allowance for personal housing and travel costs andgross-up payments to cover the related taxes on such amounts. Mr. Perry iswas also eligible to participate in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees.
In addition, Mr. Perry is eligible to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time.
Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the Perry Employment Agreement.
Michael GuthrieNoel Watson
For 2017,2019, Mr. Guthrie,Watson, our then Chief Financial Officer,CFO and CAO from June 17, 2019, had an annual base salary of $400,000$450,000 and was eligible for an annuala performance-based bonus.
We entered into an employment agreement on October 25, 2013 with Mr. GuthrieWatson as of May 24, 2019 (the “Guthrie"Watson Employment Agreement”Agreement"). Pursuant to the GuthrieWatson Employment Agreement, Mr. GuthrieWatson was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees. The GuthrieMr. Watson also received a $400,000 signing bonus, with $200,000 paid on June 28, 2019 and $200,000 payable on December 31, 2020, provided that Mr. Watson remains employed with us on such date (except in the case of a change of control), and if he does not, he will be required to repay a prorated portion of the first installment of the signing bonus. Under the Watson Employment Agreement, provided that allMr. Watson was entitled to up to $100,000 of relocation assistance benefits and a monthly housing allowance of $15,000 for the first six months of his currentemployment, neither of which were subject to a tax gross up.
Pursuant to the Watson Employment Agreement, Mr. Watson was granted a stock option to purchase 148,991 shares of our common stock with an exercise price equal to the fair market value of the shares on the date of grant and future stock options would permit exercise via a net exercise feature and, with respect to stock options granted prior369,991 RSUs. Please see "Equity Grants to our initial public offering, early exercisable as to unvested shares, subject to our right to repurchase any unvested shares upon termination of employment.Named Executive Officers" below for additional information on these grants.
Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the GuthrieWatson Employment Agreement.
Michael Darrow, Neeraj GunsagarCharlie Thomas
For 2019, Mr. Thomas, our Vice President and Brian Skutta
For 2017, each of Messrs. Darrow, GunsagarController and, Skuttafrom April 1, 2019 until June 17, 2019, our principal financial officer and principal accounting officer, had an annual base salary of $400,000$237,500 and was eligible for a performance-based bonus. We do not, and did not in 2019, have an employment agreement with Mr. Thomas.
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
John Pierantoni
For 2019, Mr. Pierantoni, our CAO from 2013 until his resignation on April 1, 2019, and our Interim CFO from February 1, 2018 until his resignation, had an annual base salary of $360,500, and was eligible for an annual performance-based bonus. Mr. Darrow is our Executive Vice President, Partner and OEM Development and the President of ALG, Inc. Mr. Gunsagar is our Chief Marketing Officer and Executive Vice President. Mr. Skutta is our Executive Vice President, Dealer Sales and Service.
We entered into an employment agreement with Mr. DarrowPierantoni as of February 28, 2017 (the “Darrow Employment Agreement”), with Mr. Gunsagar as of June 29,August 18, 2015 (the “Gunsagar"Pierantoni Employment Agreement”) and with Mr. Skutta as of February 16, 2016, which was amended as of March 18, 2016 (as amended, the “Skutta Employment Agreement”Agreement"). Pursuant to their employment agreements, each of Messrs. Darrow, Gunsagar and Skutta isthe Pierantoni Employment Agreement, Mr. Pierantoni was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity
awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees.
Please see “Potential"Potential Payments upon Termination, Change in Control or Certain Other Events”Events" below for additional information on the Darrow Employment Agreement, the Gunsagar Employment Agreement and the SkuttaPierantoni Employment Agreement.
Simon Smith, Jeffrey Swart, Neeraj Gunsagar and Tommy McClung
For 2019, Mr. Smith, our Senior Vice President of Dealer Development from July 2015 until his promotion to EVP of Dealer Sales & Services on June 20, 2019, had an annual base salary of $355,000 before his promotion and $400,000 after the promotion; Mr. Swart, our Executive Vice President, General Counsel and Secretary, had an annual base salary of $400,000; Mr. Gunsagar, our Executive Vice President and Chief Marketing Officer from April 2016 until his termination on June 20, 2019, had an annual base salary of $400,000; and Mr. McClung, our Executive Vice President and Chief Technology Officer from July 2017 until his termination on June 20, 2019, had an annual base salary of $400,000.
PotentialWe entered into an employment agreement with Mr. Smith as of July 15, 2019 (the "Smith Employment Agreement"), with Mr. Swart as of January 26, 2017 (the "Swart Employment Agreement"), with Mr. Gunsagar as of June 29, 2015 (the "Gunsagar Employment Agreement") and with Mr. McClung as of January 12, 2017 (the "McClung Employment Agreement"). Pursuant to their employment agreements, each of Messrs. Smith, Swart, Gunsagar and McClung was eligible for an annual performance-based bonus, to receive awards of stock options, restricted stock or other equity awards pursuant to any plans or arrangements we may have in effect from time to time and to participate in our executive benefit plans and programs on the same terms and conditions as other similarly-situated employees.
Please see "Potential Payments upon Termination, Change in Control or Certain Other EventsEvents" below for additional information on the Smith Employment Agreement, the Swart Employment Agreement, the Gunsagar Employment Agreement and the McClung Employment Agreement.
POTENTIAL PAYMENTS UPON TERMINATION, CHANGE IN CONTROL OR CERTAIN OTHER EVENTS
Chip Perry
Effective May 31, 2019, Mr. Perry retired from his positions as our President and CEO and Mr. Darrow was appointed as our Interim President and CEO. Mr. Perry agreed to provide consulting services to us for a two-year period following his departure in support of the management transition, during which consulting arrangement his stock options remain exercisable. On May 31, 2019, we agreed with Mr. Perry to treat his retirement as a termination without cause or resignation for good reason pursuant to the terms of the Perry Employment Agreement and, accordingly, Mr. Perry was paid benefits thereunder. The description below describes the terms of the Perry Employment Agreement as it was in effect on the last day of Mr. Perry's employment.
Victor “Chip” Perry
The following summary is qualified in its entirety by reference to the Perry Employment Agreement. PursuantAgreement, and references to the terms"equity awards" do not, for purposes of thethis summary, include PUs, whose treatment is discussed later in this section. The Perry Employment Agreement provided that, if we terminateterminated Mr. Perry’sPerry's employment for a reason other than cause (as such term is defined in the Perry Employment Agreement and summarized below), or he resignsresigned from his
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
employment for good reason (as such term is defined in the Perry Employment Agreement and summarized below), then, in addition to earned but unpaid amounts, and subject to Mr. PerryPerry's signing a release of claims agreement with the Companyus and his continued compliance with a confidential information agreement entered into with the Company, he will receivewould have received (i) a lump sum payment equal to 200% of the sum of his then-current base salary and target annual bonus opportunity; (ii) if suchthe termination occurs prior tooccurred before a change in control, (as such term is defined in the Perry Employment Agreement and summarized below) of the Company and on or after the first anniversary of his start date but before the second anniversary of his start date, immediate vesting of 50% of each of his then-outstanding equity awards; (iii) if such termination occurs prior to a change in control of the Company and on or after the second anniversary of his start date but before the third anniversary of his start date, immediate vesting of 75% of each of his then-outstanding equity awards; (iv) if such termination occurs prior to a change in control of the Company and on or after the third anniversary of his start date, immediate vesting of 100% of each of his then-
outstandingthen-outstanding equity awards; and (v)(iii) if suchthe termination occursoccurred upon or after a change in control, of the Company, immediate vesting of 100% of each of his then-outstanding equity awards.
If Mr. Perry’sPerry's employment with the Company terminatesus had terminated due to his death or disability (as such term is defined in the Perry Employment Agreement and summarized below), regardless of whether before, on or after a change in control, then, in addition to earned but unpaid amounts, and subject to Mr. PerryPerry's (or his estate)estate's) signing a release of claims agreement with the Companyus and his continued compliance with a confidential information agreement entered into with the Company,us, he will receivewould have received immediate vesting of each of his then-outstanding equity awards.
In the event ofIf a change in control that occurshad occurred while Mr. Perry remainswas employed by us, and if he remainshad remained employed with us (or our successor) as of the first day immediately following the12-month anniversary of the closing of the change in control, then 100% of any of Mr. Perry’sPerry's equity awards that both are outstanding as of such date and were granted to him at least 90 days prior tobefore the change in control will vestwould have vested and, if applicable, become fully exercisable.
The Perry Employment Agreement providesprovided that any severance payments and benefits payable to Mr. Perry willwould be subject to a delay in payment if and to the extent required by Section 409A. In409A of the event thatInternal Revenue Code (the "Code"). If the
severance payments and other benefits payable to Mr. Perry constitute “parachute payments”constituted "parachute payments" under Section 280G of the U.S. tax codeCode and would behave been subject to the applicable excise tax, then Mr. Perry’sPerry's severance and other benefits will be either: (i)would have been either delivered in full;full or (ii) delivered to such lesser extent whichas would result in no portion of such benefits being subject to the excise tax, whichever resultsresulted in the receipt by Mr. Perry on anafter-tax basis of the greatest amount of benefits.
Michael Guthrie,John Pierantoni, Noel Watson, Michael Darrow, Simon Smith, Jeff Swart, Neeraj Gunsagar and Brian SkuttaTommy McClung
The severance and change in control-related terms of the GuthriePierantoni Employment Agreement, the Watson Employment Agreement, the Prior Darrow Employment Agreement, the Smith Employment Agreement, the Swart Employment Agreement, the Gunsagar Employment Agreement and the SkuttaMcClung Employment Agreement (collectively, the “Executive"Executive Employment Agreements”Agreements") related to potential payments upon termination, change in control and certain other events are generally the same, except as noted below. Except as noted, the description below applies to each Executive Employment Agreement, and refers to Messrs. Guthrie,Pierantoni, Watson, Darrow (in relation to the Prior Darrow Employment Agreement), Smith, Swart, Gunsagar and Skutta,McClung, as applicable, as the “Executive”. "Executive."
Effective FebruaryMarch 9, 2020, Mr. Darrow was appointed as our permanent President and CEO, in connection with which the Company entered into the New Darrow Employment Agreement. The description below relates to the Prior Darrow Employment Agreement as it was in effect during 2019. The terms of the New Darrow Employment Agreement are described in our Current Report on Form 8-K filed with the SEC on March 10, 2020 and will be further described in our proxy statement for our 2021 annual meeting.
Effective April 1, 2018,2019, Mr. GuthriePierantoni resigned from his positionpositions as the Company’s Chief Financial Officer.our Interim CFO and CAO and Charles Thomas was appointed as our principal financial officer and principal accounting officer. We do not, and did not in 2019, have an employment agreement with Mr. Guthrie hasThomas. Mr. Pierantoni agreed to provide consulting services to the Companyus for a four-monthone-year period following his departure in support of thisthe management transition, during which consulting arrangement he will continuecontinued to vest in his equity awards, but he did not otherwise receive any severance benefits in connection with his resignation. The description below relates to the GuthriePierantoni Employment Agreement as it was in effect on the last day of 2017. Mr. Pierantoni's employment.
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
Effective June 20, 2019, Messrs. Gunsagar and McClung were terminated from their respective positions as our Executive Vice President and Chief Marketing Officer and Executive Vice President and Chief Technology Officer, and each of them received the benefits to which they were entitled in connection with a termination without cause under their respective employment agreements. The description below relates to the Gunsagar Employment Agreement and the McClung Employment Agreement as they were in effect on the last day of Messrs. Gunsagar's and McClung's employment.
The following summary is qualified in its entirety by reference to the Executive Employment Agreements.Agreements, and references to "equity awards" do not, for purposes of this summary, include PUs, whose treatment is discussed later in this section.
Under the Executive Employment Agreements, if we terminate the Executive’sExecutive's employment with us for a reason other than cause (as such term is defined in the Executive Employment Agreement and summarized below), or the Executive resigns from his employment for good reason (as such term is defined in the Executive Employment Agreement and summarized
below), and in each case, suchthe termination occurs prior tobefore a change in control (as such term is defined in the Executive Employment Agreement and summarized below), then, subject to the Executive signing a release of claims agreement with us and his continued compliance with a confidential information agreement entered into with us, and for Messrs. Guthrie andMr. Darrow only, the continued compliance with thenon-solicitation provisions in his Executive Employment Agreement, he will receive: (i) continuing payments of his base salary for a period of time commencingbeginning immediately after his separation of service through the date that is six months followingafter the separation date, plus an additional two months for every fully completed year of service with us (measured from his original start date with us or any predecessor to us), but not to exceed a total of 12 months (the “Executive"Executive Severance Period”Period");, except in the case of Mr. Watson, in which case these payments will continue for 18 months after his separation date, if that date is before June 17, 2020, and for 12 months after his separation date otherwise, and the "Executive Severance Period" with respect to Mr. Watson will refer to this alternative period; (ii) the immediate vesting of each of his then-outstanding equity awards as to the number of shares that otherwise would have vested had he remained our employee through the12-month anniversary of the termination date; and (iii) reimbursement (the "COBRA Reimbursement") for the payments the Executive makes for medical, vision and dental coverage under COBRA (the “COBRA Reimbursement”Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or, in the case of Messrs. GuthrieWatson, Darrow and Darrow,Smith, at our election, direct payment of the COBRA premiums to the insurance provider, up to the full Executive Severance Period (the “Direct"Direct COBRA Benefits”Benefits" and, collectively with the COBRA Reimbursements, the “COBRA Coverage”"COBRA Coverage")., except in the case of Mr. Watson, where the period in question is 12 months from his separation date. If we cannot provide the applicable COBRA Coverage to which the Executive becomes entitled without a violation of applicable laws, we may instead provide a monthly cash payment, plus agross-up amount to cover the taxes on suchthe payment, during the Executive Severance Period (which the Executive may, but does not have to, use toward his health care continuation costs). If we cannot provide these cash payments in lieu of COBRA Coverage without violating applicable law, then we will not provide the Executive with the COBRA Coverage or these cash payments.
If the Executive’sExecutive's employment terminates due to his death or disability (as such term is defined in the Executive Employment Agreement and summarized
below), regardless of whether before, on or after a change in control, then, subject to the Executive (or his estate) signing a release of claims agreement with us and his continued compliance with a confidential information agreement entered into with us, and for Messrs. Guthrie andMr. Darrow only, thehis continued compliance with thenon-solicitation provisions in his Executive Employment Agreement, the Executive will receive: (i) the immediate vesting as to 100% of his then-outstanding equity awards; and (ii) the COBRA Reimbursement (or, for Mr. Guthrie,Watson, at our election, the Direct COBRA Benefits) (ifup to the full Executive Severance Period (but if the applicable COBRA Coverage is in violation of applicable laws, the Executive will not receive the COBRA Coverage or any cash payments in lieu thereof).
Under the terms of each Executive Employment Agreement, if we terminate the Executive’sExecutive's employment for a reason other than cause, or the Executive resigns from his employment for good reason, and in each case, suchthe termination occurs upon the closing of a change in control or later, then, subject to the Executive signing a release of claims agreement with us and his continued compliance with a confidential information agreement entered into with us, and for Messrs. Guthrie andMr. Darrow only, thehis continued compliance with thenon-solicitation provisions in his
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
Executive Employment Agreement, he will receive: (i) continuing payments of his base salary during the Executive Severance Period; (ii) the immediate vesting as to 100% of his then-outstanding equity awards that are both outstanding as of his termination date and were granted to him at least 90 days prior tobefore the change in control; and (iii) the COBRA Reimbursement or, for Mr. Guthrie,Watson, at our election, the Direct COBRA Benefits (or the cash payments in lieu thereof, as described above, unless doing so would violate applicable laws). up to the full Executive Severance Period, except in the case of Mr. Watson, where the period in question is 12 months from his separation date; and (iv) with respect to Mr. Watson, he will receive any unpaid portion of his signing bonus and will be relieved of any obligation to repay any portion of the signing bonus and his relocation benefits.
In the event ofIf a change in control that occurs while the Executive remains employed with us and if he remains employed with us (or our successor) as of the first day immediately following the12-month anniversary of the closing of the change in control, then 100% of any of the Executive’sExecutive's then-outstanding equity awards that
both are outstanding as of such date and were granted to him at least 90 days prior to suchbefore the change in control will vest and, if applicable, become fully exercisable.
The Executive Employment Agreements each provide that any severance payments and benefits to the Executive will be subject to a delay in payment if and to the extent required by Section 409A. In409A of the event thatCode. If the severance payments and other benefits payable to an Executive constitute “parachute payments”"parachute payments" under Section 280G of the U.S. tax codeCode and would be subject to the applicable excise tax, then the Executive’sExecutive's severance and other benefits will be either: (i)either delivered in full;full or (ii) delivered to such lesser extent whichas would result in no portion of such benefits being subject to the excise tax, whichever results in the receipt by the Executive on anafter-tax basis of the greatest amount of benefits.
Treatment of Performance Units
After the execution of the employment agreements described above, we established PUs, whose terms supersede any contrary terms of an Executive's employment agreement. The following summary of the treatment of PUs in connection with certain triggering events applies to each of our NEOs, regardless of the provisions of his individual employment agreement, and is qualified in its entirety by reference to the form of PU award agreement that we have previously filed.
If a triggering event does not occur, the PUs will vest at the end of a three-year "performance period" beginning on March 15, 2019 and ending on March 14, 2022, with a number of shares of our common stock being issued in settlement of each PU between 0 and 1.5 shares. The number of shares issued in settlement is determined by comparing our compound annual growth rate, or CAGR, during the performance period to that of the Russell 2000 Total Return Index. The shares will be issued within 90 days of the end of the performance period, on a date referred to as the "determination date."
If the Executive experiences a qualifying termination before a change in control, then a pro-rata portion of his PUs (determined by dividing the total number of days between the beginning of the performance period and his termination date by the total number of days in the performance period) will immediately vest but will not be settled until the determination date, at which time those vested PUs will be settled for common stock based on our comparative CAGR performance during the performance period.
If a change of control occurs after the qualifying termination but before the last day of the performance period, then the pro-rata portion of the Executive's PUs that vested on his termination date will be settled based on our comparative CAGR performance during the portion of the performance period before and including the date of the change in control, with our ending stock price being the price of our stock in the change in control. We refer to this settlement exchange ratio as the CIC Achievement Level. If the acquiring entity assumes the PUs, they will be settled on the last day of the performance period; otherwise, they will be settled immediately before the change in control.
If the Executive dies or becomes disabled, the PUs will immediately vest and each PU will be settled for one share of our common stock.
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
If a change in control occurs while the Executive remains employed with us, his PUs will settle at the CIC Achievement Level, subject to his continued employment through the end of the performance period, unless the acquiring entity does not assume the PUs, in which case they vest immediately before the change in control. If the Executive is terminated without cause or resigns for good reason after a change in control but before the end of the performance period, the PUs will vest immediately but will not be settled until the end of the performance period, at which time they will be settled at the CIC Achievement Level. If the Executive retires after a change in control but before the end of the performance period, a pro-rata portion of his PUs (determined by dividing the total number of days between the beginning of the performance period and his termination date by the total number of days in the performance period) will vest and be settled at the CIC Achievement Level. If the Executive dies or becomes disabled after a change in control but before the end of the performance period, his PUs will immediately vest and will be settled at the CIC Achievement Level.
Definitions
Except as noted, the definitions below apply to the Perry Employment Agreement, and each Executive Employment Agreement and the PU award agreement, and each agreement refers to Messrs. Perry, Guthrie,Watson, Pierantoni, Darrow (in relation to the Prior Darrow Employment Agreement), Smith, Swart, Gunsagar and Skutta,McClung, as applicable, as the “Executive”."Executive." The following are summaries of the definitions included in the Perry Employment Agreement, and the Executive Employment Agreements and the PU award agreement, and are qualified in their entirety by reference to the Perry Employment Agreement, and the Executive Employment Agreements and the PU award agreement, as applicable.
As used in this section, “cause”"cause" means: (i) the Executive’sExecutive's failure (continued failure, with respect to Mr. Perry) to perform his assigned duties or responsibilities as an employee (as President and Chief Executive Officer,CEO, with respect to Mr. Perry) (other than a failure resulting from the Executive’sExecutive's disability) after written notice thereof from us describing (with specificity, with respect to Mr. Perry) his failure to perform such duties or responsibilities, andwhich notice has actually been received by the Executive, with respect to Mr. Perry; (ii) the Executive engaging in any act of dishonesty, fraud or misrepresentation with respect to
us; (iii) the Executive’sExecutive's violation of any federal or state law or regulation applicable to our business or our affiliates; (iv) the Executive’sExecutive's breach (material breach, with respect to Mr. Perry) of any confidentiality agreement or invention assignment agreement; or (v) with respect to Messrs. Guthrie, Darrow, Gunsagar and Skutta, the Executive being convicted of, or entering a plea of nolo contendere to, any crime; withcrime (with respect to Mr. Perry, the Executive being convicted of, or entering a plea of nolo contendere to, a felony or any crime involving moral turpitude.turpitude). The Perry Employment Agreement and each Executive Employment Agreement note, for purposes of clarity, that the Executive’sExecutive's termination of employment due to death or disability is not, by itself, deemed to be a termination by the Companyus other than for cause or a resignation for good reason.
As used in this section, “change"change in control”control" means: (i) a change in our ownership whichthat occurs on the date that any person, or persons acting as a group, acquires ownership of our stock that, together with the stock held by such person, constitutes more than 50% of the total voting power of our stock,stock; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any one person who is considered to own more than 50% of the total voting power of theour stock of the Company will not be considered a change in control andcontrol; provided, further, in the case of the Perry Employment Agreement and each Executive Employment Agreement, that our Board of Directors may, in its reasonable judgment, determine that any such change in the ownership of theour stock of the Company as a result of a financing of the Company or otherwise for fundraising purposes, and in each case that is approved by the Board of Directors prior to suchbefore the change in ownership, also will not be considered a change in control; (ii) in the case of the PU award agreement only, a change in our effective control which occurs on the date that a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or (ii)election is not endorsed by a majority of the members of the Board before the date of the appointment or election (but if any person is considered to be in effective control of us, the acquisition of additional control by the same person will not be a change in control); or (iii) subject to certain exclusions specified in the Perry Employment Agreement, and the Executive Employment Agreements and the PU award agreement, a change in the ownership of a substantial portion of our assets whichthat occurs on the date that any person, or persons acting as a group, acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by suchthe person or persons) assets from us that have a total gross fair market value equal to or
more than 50% of the total gross fair market value of all of our assets immediately prior to such before the
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
acquisition or acquisitions,acquisitions; provided, that our Board of Director may determine in its reasonable judgment that certain asset transfers that should not in its reasonable judgment, be considered to be a change in control due to extenuating factors. However, a transaction will not constitute a change in control if: (i)if (x) its sole purpose is to change the state of the Company’sour incorporation or (ii)(y) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’sour securities immediately before suchthe transaction. In addition, a transaction will not be deemed a change in control unless the transactionit qualifies as a change in control event within the meaning of Section 409A of the Code.
As used in this section, “disability”"disability" means the Executive:Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment whichthat can be expected to result in death or can be expected to last for a continuous period of not less than 12 months;months or (ii) is, by reason of any medically determinable physical or mental impairment whichthat can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering our employees.
As used in this section, “good reason”"good reason" means the Executive’sExecutive's resignation within 30 days following the expiration of a cure period (discussed below) following the occurrence of one or more of the following, without the Executive’sExecutive's consent: (i) with respect to the Executive Employment Agreements only, a material reduction in the Executive’sExecutive's base salary, which reduction is not applicable to a majority of the Company’sour senior management, excluding the substitution of substantially equivalent compensation and benefits; with respect to the Perry Employment Agreement only, a reduction in the Executive’sExecutive's base salary, excluding the substitution of substantially equivalent compensation and benefits, which reduction, as a percentage of base salary, is of a
greater percentage than the percentage of base salary reduction applicable to a majority of our senior management,management; (ii) with respect to the Executive Employment Agreements only, a material reduction of the Executive’sExecutive's authority, duties or responsibilities, unless the Executive is provided with a comparable position; provided, however, that a reduction in authority, duties or responsibilities primarily by virtue of usour being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when our Chief Executive OfficerCEO remains as such following an acquisition where we become a wholly owned subsidiary of an acquirer, but is not made the Chief Executive OfficerCEO of the acquiring corporation)company), will not constitute “good reason”"good reason"; with respect to the Perry Employment Agreement only, a material reduction of the Executive’sExecutive's title, positions, authority, duties or responsibilities, or the assignment to the Executive of titles, positions, authority, duties or responsibilities that are inconsistent with his position as our President and Chief Executive Officer,CEO, in each case, whichthat results in a material diminution of Executive’shis authority, duties or responsibilities; provided, however, that a reduction in title, position, authority, duties or responsibilities by virtue of usour being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when our Chief Executive OfficerCEO remains as such following an acquisition where we become a wholly owned subsidiary of an acquirer, but
is not made the Chief Executive OfficerCEO of the acquiring corporation)company), will not constitute “good reason”,"good reason"; (iii) a material change (with respect to Mr. Perry only, this is any actual change) in the geographic location of the Executive’sExecutive's primary work facility or location; provided, that a relocation of 50 miles or less from the Executive’s then presentExecutive's then-present location or to the Executive’sExecutive's home as his primary work location will not be considered a material change in geographic location; or, with respect to the Perry Employment Agreement only, the following subclausesclauses (iv) through (vi): (iv) the Executive reportingbeing required to anyonereport to any person other than the Board of Directors or, if the Company iswe are acquired, either the Board of Directors or the board of directors of anthe acquiring company,company; (v) the failure by a successor entity of us to assume the Perry Employment Agreement,Agreement; or (vi) any other material breach of the Perry Employment Agreement. In order forFor an event to qualify as good reason, the Executive must not terminate employment with us without first providing us with written notice of the acts or omissions constituting the grounds for “good reason”"good reason" within 90 days of the initial existence of the grounds for “good reason”"good reason" and a reasonable cure period of not less than 30 days following the date of such notice, and such grounds must not have been cured during such time and for Messrs. GuthrieWatson, Darrow and DarrowSmith only, any resignation for “good reason”"good reason" must occur within two years of the initial existence of the acts or omissions constituting the grounds for “good reason”."good reason."
As used in this section, "qualifying termination" means (i) the Executive's termination on or after May 15, 2021 due to retirement, (ii) the Executive's termination without cause or (iii) the Executive's resignation for good reason.
As used in this section, "retirement" means the Executive's ceasing to be a service provider for any reason other than his disability, death or termination by us for cause if (i) he is then at least age 65, (ii) he has previously
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2020 ANNUALPROXY STATEMENT | | |
served as a service provider for not less than five years and (iii) he has provided at least six months' advance written notice to us of his intention to terminate due to retirement.
Estimated Payments Upon Termination of Employment and/or a Change in Control
The following table provides information concerning the estimated payments and benefits that would be provided in the circumstances described above for each of the named executive officersNEOs serving as of the end of 20172019 pursuant to the employment agreements in effect at that time. Payments and benefits are estimated assuming that the triggering event took place on the last business day of 20172019 (December 29, 2017)31, 2019), and the price per share of the Company’sour common stock is the closing price of the Company’sour common stock on that date of $11.20.$4.75. There can be no assurances that a triggering event would produce the same or similar results as those estimated below if such eventit occurs on any other date or at any other price, or if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments of benefits, any actual payments and benefits may be different.
Potential Payments Upon | ||||||||||||||||||
Termination other than for Cause or a Termination for Good Reason | Change in Control ($)(5) | Death or Disability ($) | ||||||||||||||||
Name | Benefit | Prior to Change in Control ($) | Upon or Following Change in Control ($) | |||||||||||||||
Chip Perry | Cash Severance(1) | 3,200,000 | 3,200,000 | — | — | |||||||||||||
Vesting Acceleration of Equity Awards(2) | 5,455,516 | (3) | 7,274,022 | (4) | 3,817,846 | 7,274,022 | (4) | |||||||||||
Continued Coverage of Employee Benefits | — | — | — | — | ||||||||||||||
Total Benefits | 8,655,516 | 10,474,022 | 3,817,846 | 7,274,022 | ||||||||||||||
Michael Guthrie | Cash Severance(6)(7) | 400,000 | 400,000 | — | — | |||||||||||||
Vesting Acceleration of Equity Awards(2) | 1,507,111 | (8) | 3,188,895 | (9) | 1,681,795 | 3,188,895 | (4) | |||||||||||
Continued Coverage of Employee Benefits(10) | 27,164 | 27,164 | — | 27,164 | ||||||||||||||
Total Benefits | 1,934,264 | 3,616,059 | 1,681,795 | 3,216,059 | ||||||||||||||
Michael Darrow | Cash Severance(6) | 200,000 | 200,000 | — | — | |||||||||||||
Vesting Acceleration of Equity Awards(2) | 319,088 | (8) | 1,091,776 | (9) | 772,688 | 1,091,776 | (4) | |||||||||||
Continued Coverage of Employee Benefits(10) | 13,582 | 13,582 | — | 13,582 | ||||||||||||||
Total Benefits | 532,670 | 1,305,358 | 772,688 | 1,105,358 | ||||||||||||||
Neeraj Gunsagar | Cash Severance(6) | 400,000 | 400,000 | — | — | |||||||||||||
Vesting Acceleration of Equity Awards(2) | 1,412,293 | (8) | 2,801,792 | (9) | 1,389,499 | 2,801,792 | (4) | |||||||||||
Continued Coverage of Employee Benefits(10) | 27,164 | 27,164 | — | 27,164 | ||||||||||||||
Total Benefits | 1,839,457 | 3,228,956 | 1,389,499 | 2,828,956 |
| Potential Payments Upon | ||||||||||||||
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| Termination other than for Cause or a Termination for Good Reason | | | ||||||||||||
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Name | Benefit | | Prior to Change in Control ($) | | Upon or Following Change in Control ($) | | Change in Control ($)(1) | | Death or Disability ($) | ||||||
Michael D. Darrow | Cash Severance(2) | 333,333 | 333,333 | — | — | ||||||||||
Vesting Acceleration of | |||||||||||||||
Equity Awards(3) | 448,977(4) | 744,772(5) | 314,716 | 815,794(6) | |||||||||||
Continued Coverage of | |||||||||||||||
Employee Benefits(7) | 23,515 | 23,515 | — | 23,515 | |||||||||||
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Total Benefits | 805,825 | 1,101,620 | 314,716 | 839,309 | |||||||||||
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Noel B. Watson | Cash Severance(2) | | 675,000 | | 875,000(8) | | — | | — | ||||||
| Vesting Acceleration of | | | | | | | | | ||||||
| Equity Awards(3) | | 439,366(4) | | 1,647,618(5) | | 1,208,253 | | 1,647,618(6) | ||||||
| Continued Coverage of | | | | | | | | | ||||||
| Employee Benefits | | 28,218(9) | | 28,218(9) | | — | | 42,327(7) | ||||||
| | | | | | | | | | | | | | | |
| Total Benefits | | 1,142,584 | | 2,550,836 | | 1,208,253 | | 1,689,945 | ||||||
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Simon E. Smith | Cash Severance(2) | 400,000 | 400,000 | — | — | ||||||||||
Vesting Acceleration of | |||||||||||||||
Equity Awards(3) | 180,372(4) | 518,325(5) | 337,953 | 518,325(6) | |||||||||||
Continued Coverage of | |||||||||||||||
Employee Benefits(7) | 28,218 | 28,218 | — | 28,218 | |||||||||||
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Total Benefits | 608,590 | 946,543 | 337,953 | 546,543 | |||||||||||
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Jeffrey J. Swart | Cash Severance(2) | | 400,000 | | 400,000 | | — | | — | ||||||
| Vesting Acceleration of | | | | | | | | | ||||||
| Equity Awards(3) | | 250,970(4) | | 714,315(5) | | 478,358 | | 770,669(6) | ||||||
| Continued Coverage of | | | | | | | | | ||||||
| Employee Benefits(7) | | 19,728 | | 19,728 | | — | | 19,728 | ||||||
| | | | | | | | | | | | | | | |
| Total Benefits | | 670,698 | | 1,134,043 | | 478,358 | | 790,397 | ||||||
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
connection with the change of control will be determined based upon the Company's CAGR performance measured against the Index companies' CAGR performance during the portion of the performance period the precedes the effective date of the change of control, but if the acquiring or surviving company assumes or substitutes the PUs with substantially similar equity awards, then the PUs will not vest until the last day of the performance period (but with the number of PUs vesting having been determined as of the closing of the change in control as described earlier).
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
The table below reflects the actual severance payments made to each of the NEOs who was not serving as of the end of 2019 pursuant to their employment and separation agreements as a result of the applicable triggering event.
Potential Payments Upon | ||||||||||||||||||
Termination other than for Cause or a Termination for Good Reason | Change in Control ($)(5) | Death or Disability ($) | ||||||||||||||||
Name | Benefit | Prior to Change in Control ($) | Upon or Following Change in Control ($) | |||||||||||||||
Brian Skutta | Cash Severance(6) | 266,667 | 266,667 | — | — | |||||||||||||
Vesting Acceleration of Equity Awards(2) | 875,964 | (8) | 2,253,260 | (9) | 1,377,296 | 2,253,260 | (4) | |||||||||||
Continued Coverage of Employee Benefits(10) | 18,109 | 18,109 | — | 18,109 | ||||||||||||||
Total Benefits | 1,160,740 | 2,538,036 | 1,377,296 | 2,271,369 |
Payments Upon | |||||||||||||||||||
| | | | | | | | | | | | | | | | ||||
| Termination other than for Cause or a Termination for Good Reason | | | ||||||||||||||||
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Name | Benefit | | Prior to Change in Control ($) | | Upon or Following Change in Control ($) | | Change in Control ($) | | Death or Disability ($) | ||||||||||
Victor A. "Chip" Perry | Cash Severance | 3,200,000(1) | — | — | — | ||||||||||||||
Vesting Acceleration of | |||||||||||||||||||
Equity Awards | 1,376,286(2) | — | — | — | |||||||||||||||
Continued Coverage of | |||||||||||||||||||
Employee Benefits | — | — | — | — | |||||||||||||||
| | | | | | | | | | | | | | | | ||||
Total Benefits | 4,576,286 | — | — | — | |||||||||||||||
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Robert T. "Tommy" McClung | Cash Severance | | 425,000(3) | | — | | — | | — | ||||||||||
| Vesting Acceleration of | | | | | | | | | ||||||||||
| Equity Awards | | 332,526(4) | | — | | — | | — | ||||||||||
| Continued Coverage of | | | | | | | | | ||||||||||
| Employee Benefits | | 28,218(5) | | — | | — | | — | ||||||||||
| | | | | | | | | | | | | | | | ||||
| Total Benefits | | 785,744 | | — | | — | | — | ||||||||||
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Neeraj Gunsagar | Cash Severance | 423,346(6) | — | — | — | ||||||||||||||
Vesting Acceleration of | |||||||||||||||||||
Equity Awards | 281,232(4) | — | — | — | |||||||||||||||
Continued Coverage of | |||||||||||||||||||
Employee Benefits | 28,218(5) | — | — | — | |||||||||||||||
| | | | | | | | | | | | | | | | ||||
Total Benefits | 732,796 | — | — | — | |||||||||||||||
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2020 ANNUALPROXY STATEMENT | | Compensation of |
2015 Inducement Equity Incentive Plan
The 2015 Inducement Equity Incentive Plan, or the Inducement Plan, was adopted in 2015 without stockholder approval pursuant to Nasdaq Stock Market Rule 5635(c)(4) of the Nasdaq Listing Rules.. No shares remain available for grant under the Inducement Plan, and no grants were made under the Inducement Plan in 2017.2019. The Inducement Plan provided for the grant of equity-based awards in the form of nonstatutory stock options and its terms are substantially similar to the Company’s 2014 Equity Incentive Plan, including with respect to treatment of equity awards in the event of a “merger”"merger" or “change"change in control”control" as defined under the Inducement Plan.
2014 Equity Incentive Plan
Our 2014 Equity Incentive Plan, or theThe 2014 Plan provides that in the event of a “merger”"merger" or “change"change in control,”control" as defined under the 2014 Plan, each outstanding award will be treated as the administrator determines, except that if a successor corporationcompany or its parent or subsidiary does not assume or substitute an equivalent award for any outstanding award, then suchthe award will fully vest, all restrictions on suchthe award will lapse, all performance goals or other vesting criteria applicable to suchthe award will be deemed achieved at 100% of target levels and suchthe award will become fully exercisable, if applicable, for a specified period prior to the transaction. The award will then terminate upon the expiration of the specified period of time. If the service of an outside director is terminated
on or following a change in control, other than pursuant to a voluntary resignation, his or her options, restricted stock unitsRSUs and stock appreciation rights, if any, will vest fully and become immediately exercisable, all restrictions on his or her restricted stock will lapse and all performance goals or other vesting requirements for his or her performance shares and unitsPUs will be deemed achieved at 100% of target levels, and all other terms and conditions met.
Amended and Restated 2005 Stock Plan and 2008 Stock Plan
Our Amended and Restated 2005 Stock Plan, or the 2005 Stock Plan, and our 2008 StockPlan, or the 2008 Plan, provide that in the event of a merger"merger" or change"change in control," as defined therein, each outstanding award will be treated as the administrator determines, and unless determined otherwise by the administrator, will be assumed or an equivalent award substituted by the successor corporationcompany or a parent or subsidiary of the successor corporation. In the event thatcompany. If the successor corporation in a merger or change in control refuses to assume or substitute for the award, then the participant will fully vest in and have the right to exercise the award that is not assumed or substituted as to all of the award (including shares as to which it would not otherwise be vested or exercisable). If an award is not assumed or substituted for in connection with a merger or change in control, the administrator will notify the participant in writing or electronically that the award will be fully exercisable for a period of time as determined by the administrator in its sole discretion and the award will terminate upon the expiration of suchthat period for no consideration, unless otherwise determined by the administrator.
No shares remain available for grant under the 2005 Plan or the 2008 Plan, and no grants were made under those plans in 2019.
Equity Compensation Plan Information EQUITY COMPENSATION PLAN INFORMATION
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information regarding our equity compensation plans as of December 31, 2017:2019:
Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | | Weighted-average Exercise Price of Outstanding Options, Warrants, and Rights | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | ||||
Equity compensation plans approved by stockholders(1) | 14,676,972(2) | $ | 11.89(3) | 10,521,842(4) | ||||||
Equity compensation plans not approved by stockholder(5) | | 3,298,979 | $ | 10.27 | | — | ||||
Total | 17,975,951 | $ | 11.45(3) | 10,521,842(4) | ||||||
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Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | Weighted-average Exercise Price of Outstanding Options, Warrants, and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity compensation plans approved by stockholders(1) | 19,158,654 | (2) | $ | 13.01 | (3) | 2,323,819 | (4) | |||||
Equity compensation plans not approved by stockholders(5) | 3,298,979 | $ | 10.27 | — | ||||||||
Total | 22,457,633 | $ | 12.51 | (3) | 2,323,819 | (4) |
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2020 ANNUALPROXY STATEMENT | | Compensation of |
Set forth below is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other employees for 2019.
During 2019, we had two principal executive officers, Messrs. Perry and Darrow. Pursuant to Instruction 10 to Item 402(u) of Regulation S-K under the Exchange Act, we calculated the annual total compensation for our principal executive officer by annualizing the compensation reported in the Summary Compensation Table included in this proxy statement for Mr. Darrow, our principal executive officer as of December 31, 2019, as follows:
Compensation Component | | Value from Summary Compensation Table | | Annualized Value | Explanation | |||
Salary | $ | 400,000 | $ | 400,000 | Not annualized. Mr. Darrow's salary was paid throughout 2019 without change. | |||
Bonus | $ | 300,000 | $ | 300,000 | Not annualized, as this represents the discretionary bonus received for performance in 2019. | |||
Stock Awards | $ | 882,413 | $ | 882,413 | Not annualized. In addition to his regular, annual equity award as EVP, Mr. Darrow received a supplemental RSU grant upon his appointment as Interim President and CEO. | |||
Option Awards | $ | 272,123 | $ | 272,123 | Not annualized, as this option represents an annual equity award as EVP. | |||
All Other Compensation | $ | 158,101 | $ | 258,101 | Annualized the $20,000 monthly stipend for service as Interim President and CEO; the remaining amounts were not annualized in light of Mr. Darrow's full-year 2019 service. | |||
Total | $ | 2,012,637 | $ | 2,112,637 | ||||
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Based on these calculations, the 2019 annual total compensation of our principal executive officer was $2,112,637. The 2019 annual total compensation of our median compensated employee other than Mr. Darrow was $130,939. Based on this information, for 2019, the ratio of the annual total compensation of Mr. Darrow to the median of the annual total compensation of all other employees was16 to 1.
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2020 ANNUALPROXY STATEMENT | | Compensation of Executive Officers |
To find the median compensated employee, we used wages from our payroll records as reported to the Internal Revenue Service on Form W-2 for 2019 as our consistently-applied compensation measure and selected the median employee from that list (after excluding Mr. Darrow). As of December 31, 2019, we had 709 employees globally, including 708 employees based in the United States and one employee based outside of the United States, in Canada. In determining the identity of our median employee, as permitted by SEC rules, we chose to exclude from this population the one employee in Canada, representing approximately one-tenth of one percent of our total employees. As a result, our employee population used for determining the median employee consisted of 708 full-time, part-time and temporary employees based only in the United States as of December 31, 2019. Since all of these employees are located in the United States, as is Mr. Darrow, we did not make any cost-of-living adjustments or foreign currency conversions. After identifying the median employee, we calculated annual total compensation for the median employee according to the methodology used to report the annual compensation of our named executive officers in the Summary Compensation Table.
The pay ratio disclosed above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.
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Certain Relationships and |
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Certain Relationships and Related Party and Other Transactions
In addition to the director and executive officer compensation arrangements and indemnification arrangements discussed above under “Executive"Executive Officers, Directors and Corporate Governance”Governance" and “Executive"Executive Compensation,”" the following is a description of each transaction since January 1, 20172019 and each currently proposed transaction in which:
Transactions with Directors and Their Affiliates
USAA
USAA, a large stockholder and most significant affinity group marketing partner, beneficially owned 9.0%approximately 8.4% of our common stock at December 31, 2017. We have2019. In February 2020, days before the expiration of our then-current partnership agreement, which we refer to as the Former USAA Agreement, USAA informed us that it did not wish to extend our partnership, and we accordingly entered into a seriesTransition Services Agreement and an associated Order Addendum No. 1 (Transition of commercial serviceAuto-Buying Program Platform) with USAA Federal Savings Bank, a wholly-owned subsidiary of USAA to which we refer as USAA FSB, as of February 14, 2020. We refer to this Transition Services Agreement and maintenance arrangements (collectively, the “Service and Maintenance Agreement”) with USAA. associated Order Addendum collectively as the TSA.
Pursuant to these arrangements,the TSA, and upon the terms and subject to the conditions thereof, among other things, we providewill, during a transitional period ending on September 30, 2020, continue to operate the white-labeled website through which USAA with certain services, including an Internet-accessible mobile-enabled platform for automobile shopping, purchasing, insuring, financing and personal vehicle sales as such program is developed, modified and delivered forFSB makes available to USAA members (the “USAA Auto Program”),a new and associated enablement, implementation, maintenance, project managementused automobile buying program, which we refer to as the Auto-Buying Program. Beginning on October 1, 2020, the TSA provides for a 120-day wind-down period during which the Auto-Buying Program will no longer be made available to USAA members, and customization services. the parties will cooperate to wind down the Auto-Buying Program and provide services to USAA members who had submitted leads through the Auto-Buying Program before that date. The entry into the TSA did not change the revenue sharing amounts payable by us in connection with transactions by USAA members through the Auto-Buying Program, and USAA FSB will pay us a $20 million transition services fee over the term of the TSA, which we refer to as the Transition Services Fee. The TSA requires USAA FSB, subject to wind-down negotiations and certain regulatory carveouts, to use commercially reasonable efforts to support the Auto-Buying Program in a manner materially consistent with the manner in which it operated the Auto-Buying Program on February 14, 2020.
From time to time under the Former USAA Agreement and the TSA, we have provided marketing services to promote USAA membership, certain dealer incentive programs and loan subvention programs and have subsidized loan rate discount programs for USAA members who meet certain conditions. USAA markets the USAA Auto Program, related programs and our
technology to its members and prospects, works with us to determine what USAA marketing and publicity is needed to further expand and grow the USAA Auto Program and promotes to its members certain dealer incentive programs. Under the Service and Maintenance Former USAA
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2020 ANNUALPROXY STATEMENT | | Certain Relationships and Related Party and other Transactions |
Agreement, for the year ended December 31, 2017,2019, we made cash payments to USAA of $18.5$22.3 million and received cash payments from USAA of $1.6$1.4 million. Under the Service and MaintenanceFormer USAA Agreement, for the year ended December 31, 2017, 261,3072019, 293,142 units, or 27%,approximately 29% of all units purchased from TrueCar Certified Dealers by TrueCar users, were matched to users of thecar-buying site we maintain for USAA. Auto-Buying Program. We believe that the ServiceFormer USAA Agreement was, and Maintenance Agreementthe TSA is, on terms no less favorable to us than we could have obtained from unaffiliated third parties. As a result of the wind-down of our partnership with USAA FSB under the TSA, we expect the Auto-Buying Program to represent a smaller share of our total units in 2020 than it did in 2019. We further expect to receive a net payment from USAA FSB during 2020 as a result of the Transition Services Fee being offset against the revenue share payments to USAA FSB.
In connection with the transactions described in the Service and MaintenanceFormer USAA Agreement, we have issued to USAA warrants to purchase shares of our common stock. In January 2012, we issued to USAA a warrant to purchase up to 1,042,666 shares of our common stock with an exercise price of $7.95 per share which was exercised in full on May 12, 2014. In May 2014, we issued to USAA a warrant to purchase up to 1,458,979 shares of our common stock consisting of 392,313 shares of common stock with an exercise price of $7.95 per share and 1,066,666 shares of common stock with an exercise price of $15.00 per share. The shares issuable upon exercise of suchthese warrants are subject to certain performance-based vesting conditions. The vesting conditions are based on the number of cars sold by TrueCar Certified Dealers to our users originating from the USAA Auto Program. The warrant includes a multiplier provision whereby the vesting accelerates faster based on achievement of higher sales milestones within a given month. At December 31, 2017,2019, there were 509,642 warrants that were earned and outstanding with an additional 949,337 warrants that
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are available for issuance upon achievement of minimum performance milestones. As a result of the wind-down of the Auto-Buying Program, we expect the warrants to expire on October 1, 2021.
Indemnification of Officers and Directors
Our amended and restated certificate of incorporationCharter and Bylaws provide that we will indemnify our directors and officers, and may indemnify our employees and other agents, to the fullest extent permitted by Delaware law. Delaware law prohibits our amended and restated certificate of incorporationCharter from limiting the liability of our directors for the following:
In addition to the indemnification required in our amended and restated certificate of incorporationCharter and Bylaws, we have entered into an indemnification agreement with each member of our Board of Directors.Board. These agreements provide for the indemnification of our directors, officers and some employees for certain expenses and liabilities incurred in connection with any action, suit, proceeding or alternative dispute resolution mechanism, or hearing, inquiry or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a director, officer, employee, agent or fiduciary of our company, or any of our subsidiaries, by reason of any action or inaction by them while serving as an officer, director, agent or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent or fiduciary of another entity. In the case of an action or proceeding by or in the right of our company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is
prohibited from receiving indemnification. We believe that these charterCharter and bylawBylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Policies and Procedures for Related PartyRelated-Party Transactions
Our audit committee has the primary responsibility for reviewing and approving or disapproving “related party"related-party transactions,”" which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as a director, executive officer, nominee for director or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members. Our audit committee charter provides that the audit committee shall review, and approve or disapprove and oversee any related partyrelated-party transactions.
Investors Rights Agreement
In November 2013, in connection with our Series A Preferred Stock financing, we entered into an amended and restated investors’ rights agreement with Vulcan Capital Growth Equity LLC and certain holders of our common stock, including entities affiliated with Anthem Ventures, United Services Automobile Association, Capricorn Investment Group and Upfront Ventures, which each hold 5% or more of our capital stock and of which certain of our directors are affiliated. That agreement remained in effect during part of 2017. Such agreement provided, among other things, for certain rights relating to the registration of their shares, including the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we were otherwise filing.
Registration Rights
For a portion of 2017, certain holders of our common stock were entitled to rights, subject to some conditions, to require us to file registration statements
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covering their shares or to include their shares in registration statements that we filed for ourselves or our stockholders. We referred to these shares as “registrable securities.” These registration rights were contained in our Seventh Amended and Restated Investors’ Rights Agreement, (“IRA”), dated as of November 22, 2013. We and certain holders of our common stock, including investors in our Series A Preferred Stock, were parties to the IRA. The registration rights set forth in the IRA expired three years following the completion of our initial public offering, or, with respect to any particular stockholder, when such stockholder was able to sell all of its shares pursuant to Rule 144 of the Securities Act during any90-day period. We would have paid the registration expenses of the holders of the shares registered pursuant to the registrations described below. In an underwritten offering, the managing underwriter, if any, had the right, subject to specified conditions, to limit the number of shares such holders may include.
Demand Registration Rights
The holders of 25% or more of the then outstanding registrable securities were entitled during a portion of 2017 to certain demand registration rights so long as the request covered at least that number of shares with an anticipated offering price, net of underwriting discounts and commissions, of at least $7.5 million. We would not have been required to effect more than two demand registrations. If we had determined that it would have been detrimental to us to effect such a demand registration, we had the right to defer such registration, not more than once in any12-month period, for a period of up to 90 days.
Piggyback Registration Rights
If we had proposed to register the offer and sale of our common stock under the Securities Act, in connection with the public offering of such common stock, during
a portion of 2017 the holders of our registrable securities would have been entitled to certain “piggyback” registration rights allowing these holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, had we proposed to file a registration statement under the Securities Act, other than with respect to: (1) a demand registration orS-3 registration; (2) a registration relating to a company stock plan; (3) a registration relating to the offer and sale of debt securities; (4) a registration relating to a corporate reorganization or other transaction pursuant to Rule 145 of the Securities Act; and (5) a registration on any form that does not permit secondary sales, the holders of these shares would have been entitled to notice of the registration and would have had the right, subject to certain limitations, to include their shares in the registration.
Form S-3 Registration Rights
Until such rights expired, the holders of our registrable securities may have made a written request that we register the offer and sale of their shares on a registration statement onForm S-3 if we were eligible to file a registration statement onForm S-3, so long as the request covered at least that number of shares with an anticipated offering price, net of underwriting discounts and commissions, of at least $1.0 million. These stockholders could have made an unlimited number of requests for registration onForm S-3; however, we would not have been required to effect a registration onForm S-3 if we had effected two such registrations within the12-month period preceding the date of the request. Additionally, if we had determined that it would be detrimental to us to effect such a registration, we had the right to defer such registration, not more than once in any12-month period, for a period of up to 90 days.
This Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other TrueCar filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate it by reference therein.
The following is the report of the audit committee of our Board of Directors. The audit committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 20172019 with our management. In addition, the audit committee has discussed with PricewaterhouseCoopers LLP, our independent accountants, the matters required to be discussed by standards promulgated by the American Instituteapplicable requirements of Certified Public Accountants (“AICPA”) andthe Public Company Accounting Oversight Board (the “PCAOB”"PCAOB"), including PCAOB Auditing Standard No. 1301 “Communications with Audit Committees.” and the SEC. The audit committee also has received the written disclosures
and the letter from PricewaterhouseCoopers LLP as required by the applicable requirements of the PCAOB regarding the independent accountant’saccountant's communications with the audit committee concerning independence, and the audit committee has discussed with PricewaterhouseCoopers LLP the independence of PricewaterhouseCoopers LLP.
Based on the audit committee’scommittee's review of the matters noted above and its discussions with our independent accountants and our management, the audit committee recommended to the Board of Directors that the financial statements be included in our Annual Report onForm 10-K for the fiscal year ended December 31, 2017.2019.
Respectfully submitted by:
Robert Buce (Chair)
Christopher Claus
Erin Lantz
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Proposal 1: Election of Directors |
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| | The Board unanimously recommends that stockholders voteFOR the election of each of Christopher Claus, Philip McKoy and John Mendel as Class III directors to serve until the 2023 annual meeting of stockholders or until his successor is duly elected and qualified. | ||||||
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Proposal One: Election of Directors
Our Board of Directors consists of nineeight members. In accordance with our amended and restated certificate of incorporation,Charter, our Board of Directors is divided into three classes with staggered three-year terms. At the virtual Annual Meeting, three directors will be elected for three-year terms.
Our nominating and corporate governance committee of the Board of Directors recommended, and our Board of Directors approved, Erin Lantz, Chip PerryChristopher Claus, Philip McKoy and Ion YadigarogluJohn Mendel as nominees for election to the Board of Directors at the Annual Meeting. Each of the nominees is currently a director of the Company. If elected, the nominees will serve as directors until our annual meeting in 2021,2023, and until a successor is qualified and elected or until his or her earlier resignation or removal. Please see “Executive"Executive Officers, Directors and Corporate Governance”Governance" in this Proxy Statementproxy statement for information concerning the nominees.
Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR each of Erin Lantz,
Chip PerryChristopher Claus, Philip McKoy and Ion Yadigaroglu.John Mendel. If the nominees areany nominee is unable or declinedeclines to serve as a director at the time of the Annual Meeting, the proxies will be voted for another nominee designated by the Board of Directors.Board. We are not aware of any reason that a nominee would be unable or unwilling to serve as a director.
Each director is elected by a plurality of the voting power of the shares present in person virtually or represented by proxy at the meeting and entitled to vote on the election of directors at the Annual Meeting. Abstentions and brokernon-votes will have no effect on the outcome of the vote.
The Board of Directors unanimously recommends that stockholders vote “FOR” the election of each of Erin Lantz, Chip Perry and Ion Yadigaroglu as Class I directors to serve until the 2021 annual meeting of stockholders or until their successors are duly elected and qualified.
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Proposal 2: Ratification of Selection of Independent Registered Public Accountants |
| RECOMMENDATION OF THE BOARD | | ||
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| | The Board, at the audit committee's recommendation, recommends that stockholders voteFOR | ||
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Proposal Two: Ratification of Selection of Independent Registered Public Accountants
The audit committee has appointed PricewaterhouseCoopers LLP, (“PwC”)or PwC, as TrueCar’sour independent registered public accounting firm for the fiscal year ending December 31, 20182020 and recommends that stockholders vote for ratification of suchthat appointment. Notwithstanding its selection or voting results, theThe audit committee, in its discretion, may appoint new independent registered public accountants at any time during the year, notwithstanding the results of any vote and despite the fact it has already appointed PwC, if the audit committee believes that such a change in our independent registered public accountant would be in theour best interests and those of TrueCar and itsour stockholders. If our
stockholders do not ratify thethis appointment, the audit committee may reconsiderconsider whether it should appoint another independent registered public accounting firm.
PwC served as TrueCar’sour independent registered public accounting firm for the 20162018 and 20172019 fiscal years. We expect that representatives of PwC will be present at the virtual Annual Meeting to respond to appropriate questions and to make a statement if they so desire.
Principal Accounting Fees and Services
The following table sets forth all fees accrued or paid to PwC for the years ended December 31, 20162018 and 2017:
Fiscal Year | ||||||||
2016 | 2017 | |||||||
Audit Fees | $ | 1,415,000 | $ | 2,384,750 | ||||
Audit-Related Fees | 205,053 | 133,004 | ||||||
Tax Fees | 19,264 | 30,000 | ||||||
All Other Fees | 5,400 | 5,400 | ||||||
Total | $ | 1,644,717 | $ | 2,553,154 |
2019:
| Fiscal Year | ||||||
---|---|---|---|---|---|---|---|
| 2018 | 2019 | |||||
Audit Fees | $ | 2,327,000 | $ | 2,356,309 | |||
Audit-Related Fees | 53,000 | 338,000 | |||||
Tax Fees | 42,303 | 173,547 | |||||
All Other Fees | 6,300 | 6,300 | |||||
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Total | $ | 2,428,603 | $ | 2,874,156 | |||
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2020 ANNUALPROXY STATEMENT | | Proposal 2: Ratification of Selection of Independent Registered Public Accountants |
Audit Feesfees cover professional services provided by PwC in connection with the audit of the Company’sour annual financial statements and for 2017 an audit of the effectiveness of internal control over financial reporting, quarterly reviews of financial statements included in the Company’sour annual reports on Form 10-K and quarterly reports onForm 10-Q and professional services rendered in connection with comfort letters, consents and reviews of other documents filed with the SEC.
Audit-related fees coverare fees for assurance and related services provided by PwCthat are reasonably related to perform an assessment and provide observationsthe performance of the Company’s control environmentaudit or review of our financial statements, including due diligence activities relating to mergers and consultationacquisitions and consultations concerning financial accounting and reporting standards. Audit-related fees also include attest
services performed over our procedures around customer data purging. These services were not required to be performed in connection with the annual audit.
Tax Feesfees cover tax services provided by PwC including detailed tax studies (382(Section 382 studies), tax planning projects, consultation, tax advice related to mergers and acquisitions, and tax compliance services.
All Other Feesother fees cover license fees for accounting research and disclosure software.
Pre-approval Policy. Under our audit committee’s policy governing our use ofcommittee's charter, the services of our independent registered public accountants, the audit
committee is required topre-approve all audit services and to pre-approve (or approve subsequently, where permitted by law) all non-audit and tax services performed by our independent registered public accountants in order to ensure that the provision of suchthose services does not impair the public accountants’accountants' independence. In fiscal years 20162018 and 2017,2019, all fees identified above under the captions “Audit"Audit Fees,” “Audit-Related" "Audit-Related Fees,” “Tax Fees,”" "Tax Fees" and “All"All Other Fees”Fees" that werePwC billed by PwC were approved by the audit committee in accordance with SECthe audit committee's charter and other applicable legal requirements.
The audit committee has determined that thePwC's rendering of other professional services for tax compliance and tax advice by PwC is compatible with maintaining theirPwC's independence.
The affirmative vote of the holders of a majority of the shares of our common stock present in person virtually or
represented by proxy and entitled to vote on the matter is necessary to ratify the selection of PwC as our independent registered public accounting firm for fiscal year 2018. Abstentions are2020. A share that abstains on this proposal is treated as shares of common stocka share present in person virtually or represented by proxy and entitled to vote and, therefore, will have the effect of a vote “against” the ratification of"against" ratifying PwC as our independent registered public accounting firm. Brokernon-votes will have no effect on the outcome of the vote.
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The Board
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Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation |
| RECOMMENDATION OF THE BOARD | | ||
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| | The Board recommends a voteFOR the approval, on a non-binding advisory basis, of our executive compensation, as discussed in this proxy statement. | ||||||
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Proposal Three: Advisory Vote to Approve Named Executive Officer Compensation
In accordance with SEC rules, we are providing our stockholders with the opportunity to approve, by advisory vote, the compensation of our named executive officers, as described in this proxy statement.
This proposal, commonly referred to asthe “say-on-pay” a "say-on-pay" vote, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and our executive compensation philosophy, objectives and program, as described in this proxy statement. Accordingly, we ask our stockholders to approve the compensation of our named executive officers, as disclosed in the section entitled “Executive Compensation”"Executive Compensation" of this proxy statement, including the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosure, by castinga non-binding advisory vote “FOR”"FOR" the following resolution:
“"RESOLVED, that the stockholders of TrueCar, Inc. approve, ona non-binding advisory basis, the compensation paid to the named executive officers, as disclosed in the proxy statement for the 20182020 Annual Meeting, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”"
As an advisory vote, the result will not be binding on the Board of Directors or the compensation committee.The say-on-pay vote will, however, provide us with important feedback from our stockholders about our executive compensation philosophy, objectives and program. The Board of Directors orand the compensation committee value the opinions of our stockholders and expect to take into account the outcome of the vote when considering future executive compensation decisions and when evaluating our executive compensation program.
The Board of Directors recommends a vote “FOR” the approval, ona non-binding advisory basis, of executive compensation, as discussed in this proxy statement.
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Proposal Four: Advisory Vote on the Frequency of Advisory Votes on Named Executive Officer Compensation
In accordance with SEC rules, we are seeking an advisory vote from our stockholders on how often we should hold an advisory vote to approve named executive officer compensation similar to Proposal Three. You may vote for every one, two, or three years, or you may abstain from voting.
After careful consideration, our Board of Directors recommends that you vote to hold anadvisory say-on-pay vote annually. Our Board of Directors believes that holdinga say-on-pay vote annually is the most appropriate option because it will give us more frequent feedback from our stockholders on our executive compensation philosophy, objectives and program, as well as the compensation paid to our named executive officers. We recognize that some of our stockholders may have different views and we look forward to dialogue on this advisory vote.
The option of one, two or three years that receives the highest number of votes cast will be deemed to be the frequency offuture say-on-pay votes recommended by our stockholders. Although this advisory voteis non-binding, the Board of Directors and compensation committee will review and consider the voting results. Notwithstanding the Board’s present recommendation and the voting results, the Board of Directors may in the future decide to conduct
advisory say-on-pay votes on a more or less frequent basis and may vary its practice based on the future discussions with stockholders and/or changes to our executive compensation practices and programs.
The Board of Directors recommends a vote to hold future advisory votes on executive compensation every “1 YEAR.”
The Board of Directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented or otherwise allowed to be considered at the Annual Meeting, the persons named in the enclosed proxy will have discretion to vote shares they represent in accordance with their own judgment on such matters.
It is important that your shares be represented at the meeting, regardless of the number of shares that you hold. You are, therefore, urged to submit your proxy or voting instructions at your earliest convenience.
BY ORDER OF THE BOARD OF DIRECTORS
Santa Monica, California
April 4, 2018
BY ORDER OF THE BOARD OF DIRECTORS | ||
Santa Monica, California April 8, 2020 |
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Q: Why am I receiving these materials?
Q: What is included in these materials?
Q: What matters will stockholders vote on at the Annual Meeting?
Q: How does the Board recommend that I vote on these proposals?
Q: Who is making this solicitation?
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Q: Who pays for the proxy solicitation process?
Q: Who may vote at the Annual Meeting?
Q: Why is TrueCar conducting the Annual Meeting as an exclusively virtual, online meeting?
Q: What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the "beneficial owner" of shares held in "street name," and that organization forwarded these proxy materials to you. The organization holding your account is the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account.
Q: If I am a stockholder of record of TrueCar shares, how do I vote?
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The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time on May 20, 2020.
Q: If I am a beneficial owner of shares held in street name, how do I vote?
Q: If I submit a proxy, how will it be voted?
Q: What should I do if I get more than one proxy or voting instruction card?
Q: Can I change my vote or revoke my proxy?
If you are the stockholder of record, you may change your vote by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) providing a written notice of revocation to our Corporate Secretary at TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401 before your shares are voted or (3) attending the virtual Annual Meeting and voting by live webcast. Attending the Annual Meeting by live webcast will not cause your previously granted proxy to be revoked unless you specifically so request or vote by live webcast during the Annual Meeting.
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For shares you hold beneficially in street name, you may generally change your vote by submitting new voting instructions to your broker, bank, trustee or nominee following the instructions they provided.
Q: Can I attend the meeting in person?
Q: How do I participate in the Annual Meeting on the Internet?
Q: How many shares must be present or represented to conduct business at the Annual Meeting?
Q: What is the voting requirement to approve each of the proposals?
For Proposal Two, the ratification of the appointment of our independent registered public accounting firm, and Proposal Three, the advisory vote to approve named executive officer compensation, the affirmative vote of a majority of shares present virtually or represented by proxy and entitled to vote on the proposal is required to approve the proposal. Abstentions are treated as shares present and entitled to vote for purposes of such proposals and, therefore, will have the same effect as a vote "against" the proposal. Broker non-votes will have no effect on the outcome of the vote.
Q: What are broker non-votes?
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Q: Who will tabulate the votes?
Q: What is the deadline to propose actions for consideration at next year's annual meeting or to nominate individuals to serve as directors?
Stockholder proposals should be addressed to:
TrueCar, Inc.
Attn: Corporate Secretary
120 Broadway, Suite 200
Santa Monica, California 90401
Our amended and restated bylaws, which we refer to as our Bylaws, also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting but do not intend for the proposal to be included in our proxy statement. Our Bylaws provide that the only business that may be conducted at an annual meeting is business that is (1) described in our proxy materials for the meeting, (2) brought by or at the direction of our Board or (3) brought by a stockholder of record (both when the stockholder provides proper written notice of the proposal and on the record date for the annual meeting) who has timely complied with the notice procedures set forth in our Bylaws. In addition, for business to be properly brought before an annual meeting by a stockholder, it must be a proper matter for stockholder action under our Bylaws and applicable law. To be timely for our 2021 annual meeting, our Corporate Secretary must receive the written notice at our principal executive offices:
If we hold our 2021 annual meeting more than 30 days before or more than 60 days after May 21, 2021 (the one-year anniversary date of the Annual Meeting), then notice of a stockholder proposal that is not intended to be included in our proxy statement must be received by our Corporate Secretary at our principal executive offices:
To be in proper written form, a stockholder's notice to the Corporate Secretary must set forth as to each matter of business the stockholder intends to bring before the annual meeting (1) a brief description of the business and the reasons for conducting the business at the annual meeting, (2) the name and address of the stockholder and any associated person proposing the business, (3) the class and number of shares of our common stock held of record or beneficially owned by the stockholder and any associated person,
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2020 ANNUALPROXY STATEMENT | | General Information |
(4) whether and the extent to which the stockholder and any associated persons have entered into any hedging or other transaction or series of transactions or any person has done so on their behalf with respect to any of our securities, and a description of any other similar agreement, arrangement or understanding, (5) any material interest of the stockholder and any associated person in the business and (6) a statement whether the stockholder or any associated person will deliver a proxy statement and form of proxy to stockholders. In addition, to be in proper written form, a stockholder's notice to the Corporate Secretary must be supplemented not later than five days after the record date to disclose the information contained in clauses (3) and (4) in this paragraph as of the record date. A stockholder's "associated person" is (A) any person controlling, directly or indirectly, or acting in concert with, the stockholder, (B) any beneficial owner of shares of our stock the stockholder owns of record or beneficially and on whose behalf the proposal or nomination, as the case may be, is being made or (C) any person controlling, controlled by or under common control with any person referred to in the preceding clauses (A) and (B).
Nomination of Director Candidates: In addition, our Bylaws permit certain stockholders to nominate directors for election at an annual meeting. To be eligible, a stockholder must be a stockholder of record as of the date notice of the annual meeting is given and as of the record date for the annual meeting.
To be in proper written form, a stockholder's notice to the Company's Corporate Secretary must set forth, as to each nominee whom the stockholder proposes to nominate for election or re-election as a director: (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the class and number of shares of the Company the nominee holds of record or owns beneficially and any derivative positions he or she holds of record or beneficially, (4) whether and the extent to which the nominee has entered into any hedging or other transaction or series of transactions with respect to any of our securities or any person has done so on his or her behalf, and a description of any other similar agreement, arrangement or understanding, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of, the nominee, (5) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons pursuant to which the nominations were made, (6) a written statement executed by the nominee acknowledging that as a director of the Company, the nominee will owe a fiduciary duty under Delaware law to the Company and its stockholders and (7) any other information relating to the nominee that would be required to be disclosed about the nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required (including without limitation the nominee's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected). As to the stockholder giving notice of the director nomination, the notice must also include the information about the stockholder and any associated person described above in clauses (2) through (6) of the last paragraph under "Stockholder Proposals" above, and supplemented following the record date in the manner referred to in that paragraph. In addition, the stockholder must give timely notice to our Corporate Secretary under our Bylaws, which, in general, require that our Corporate Secretary receive the notice within the time period described above under "Stockholder Proposals" for stockholder proposals that are not intended to be included in our proxy statement. The charter of the nominating and corporate governance committee of the Board requires the committee to consider nominations of director candidates validly made by our stockholders in accordance with the provisions of our Bylaws.
Additionally, as described in more detail under "Executive Officers, Directors and Corporate Governance—Board Committees—Nominating and Corporate Governance Committee," our nominating and corporate governance committee will consider certain nominations made by stockholders holding at least one percent of the fully diluted capitalization of TrueCar continuously for at least 12 months.
Q: I share an address with another stockholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
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by delivering a single proxy statement addressed to those stockholders. This process is commonly referred to as "householding."
Brokers with account holders who are TrueCar stockholders may be householding our proxy materials. A - Reconciliationsingle set of GAAPproxy materials may be delivered toNon-GAAP Financial Measures multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be householding communications to your address, householding will continue until you are notified otherwise or you notify your broker or TrueCar that you no longer wish to participate in householding.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, you may (1) notify your broker, (2) direct your written request to: Investor Relations, TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401 or (3) contact our Investor Relations department by email at investors@truecar.com or by phone at (800) 200-2000, extension 8771. Stockholders who currently receive multiple copies of the Proxy Statement or Annual Report at their address and would like to request householding of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the annual report and proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered.
Q: What if I have questions about lost stock certificates or need to change my mailing address?
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2020 ANNUALPROXY STATEMENT | | |
Annex A — Reconciliation of Adjusted EBITDA to GAAP Net Loss |
This Proxy Statement contains information regarding Adjusted EBITDA,Non-GAAP net income (loss), andNon-GAAP net income (loss) per share, which areis a financial measuresmeasure that areis not calculated in accordance with generally accepted accounting principles in the United States, or GAAP. We define Adjusted EBITDA as net loss adjusted to exclude interest income, interest expense, depreciation and amortization, stock-based compensation, income (loss) from equity method investment, certain restructuring costs, certain executive departure costs, certain transaction expenses, certain litigation costs, changes in the fair value of contingent consideration and income taxes.
We have provided below a reconciliation of each of Adjusted EBITDA andNon-GAAP net income (loss) to net loss, the most directly comparable GAAP financial measure. Neither Adjusted EBITDA norNon-GAAP net income (loss) should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. In addition, our Adjusted EBITDA andNon-GAAP net income (loss) measuresmeasure may not be comparable to similarly titled measures of other organizations as they may not calculate Adjusted EBITDA orNon-GAAP net
income (loss) in the same manner as we calculate these measures.do.
We use Adjusted EBITDA andNon-GAAP net income (loss) as an operating performance measuresmeasure as eachit is (i) an integral part of our reporting and planning processes; (ii) used by our management and Board of Directors to assess our operational performance, and together with operational objectives, as a measure in evaluating employee compensation and bonuses; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA andNon-GAAP net income (loss) facilitates operating performance comparisons on aperiod-to-period basis because these measures excludeit excludes variations primarily caused by changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA is widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt-service capabilities.
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2020 ANNUALPROXY STATEMENT | | Annex A — Reconciliation of Adjusted EBITDA to GAAP Net Loss |
The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods presented:
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Reconciliation of Net Loss to Adjusted EBITDA: | ||||||||
Net loss | $ | (32,849 | ) | $ | (41,708 | ) | ||
Non-GAAP adjustments: | ||||||||
Interest income | (1,260 | ) | (376 | ) | ||||
Interest expense | 2,610 | 2,530 | ||||||
Depreciation and amortization | 22,472 | 23,345 | ||||||
Stock-based compensation | 32,241 | 24,739 | ||||||
Warrant expense | — | 46 | ||||||
Certain litigation costs(1) | 7,967 | 960 | ||||||
Severance charges(2) | — | 1,783 | ||||||
Lease exit costs(3) | (133 | ) | 3,065 | |||||
(Benefit from) / provision for income taxes | (2,164 | ) | 655 | |||||
Adjusted EBITDA | $ | 28,884 | $ | 15,039 |
| Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| (in thousands) | ||||||
Reconciliation of Net Loss to Adjusted EBITDA: | |||||||
Net loss | $ | (54,890 | ) | $ | (28,321 | ) | |
Non-GAAP adjustments: | |||||||
Interest income | (3,495 | ) | (3,314 | ) | |||
Interest expense | — | 2,649 | |||||
Depreciation and amortization | 25,591 | 22,677 | |||||
Stock-based compensation(1) | 37,974 | 37,219 | |||||
Share of net loss of equity method investment | 1,280 | — | |||||
Certain litigation costs(2) | 1,575 | 2,157 | |||||
Executive departure costs(3) | 5,089 | — | |||||
Restructuring charges(4) | 3,280 | — | |||||
Transaction costs(5) | 1,926 | 620 | |||||
Change in fair value of contingent consideration | 300 | — | |||||
Provision for (benefit from) income taxes | 289 | (177 | ) | ||||
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Adjusted EBITDA | $ | 18,919 | $ | 33,510 | |||
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Table of Contents
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The following table presents a reconciliation
Table of net loss toNon-GAAPContents net income (loss) for each of the periods presented:
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Reconciliation of Net Loss toNon-GAAP Net Income (Loss): | ||||||||
Net loss | $ | (32,849 | ) | $ | (41,708 | ) | ||
Non-GAAP adjustments: | ||||||||
Stock-based compensation | 32,241 | 24,739 | ||||||
Warrant expense | — | 46 | ||||||
Certain litigation costs(1) | 7,967 | 960 | ||||||
Severance charges(2) | — | 1,783 | ||||||
Lease exit costs(3) | (133 | ) | 3,065 | |||||
Non-GAAP net income (loss)(4) | $ | 7,226 | $ | (11,115 | ) |
TRUECAR, INC. 120 BROADWAY SUITE 200 SANTA MONICA, CA 90401
VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/TRUE2018TRUE2020 You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. TRUECAR, INC. 120 BROADWAY SUITE 200 SANTA MONICA, CA 90401 VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E40243-P03940E92451-P33046 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY TRUECAR, INC. The Board of Directors unanimously recommends you vote FOR the following: 1.Election of Directors Nominees: For Withhold For All Withhold All For All ExceptAllAllExcept To withhold authority to vote for any individual nominee(s), mark “For"For All Except”Except" and write the number(s) of the nominee(s) on the line below. The Board of Directors unanimously recommends you vote FOR the following: 1. Election of Directors Nominees:! ! ! 01) Erin Lantz 02) Chip Perry 03) Ion YadigarogluChristopher Claus Philip McKoy John Mendel The Board of Directors unanimously recommends you vote FOR the following proposals: For Against Abstain 2. To2.To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accountants for the fiscal year ending December 31, 2018. 3. Advisory2020. 3.Advisory vote to approve named executive officer compensation. The Board of Directors recommends you vote 1 YEAR on the following proposal: 1 Year 2 Years 3 Years Abstain 4. Advisory vote to recommend the frequency of future advisory votes on named executive officer compensation.! ! ! ! ! ! NOTE: In their discretion, the proxies are authorized to vote upon such other business that may properly come before the meeting or at any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature Date [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E40244-P03940E92452-P33046 TRUECAR, INC. Annual Meeting of Stockholders May 17, 201821, 2020 8:30 AM This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) John PierantoniNoel Watson and Jeffrey Swart, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s)authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of TRUECAR, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 8:30 AM, PDT on May 17, 2018,21, 2020, live via the Internet at www.virtualshareholdermeeting.com/TRUE2018TRUE2020 and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’Directors' recommendations. Continued and to be signed on reverse side