20182019 PROXY STATEMENT
AND
NOTICEOF ANNUAL MEETINGOF STOCKHOLDERS
THURSDAY, MAY 17, 201816, 2019
AT 8:30A.M. PACIFIC TIME
www.virtualshareholdermeeting.com/True2018True2019
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 No. )
Filed by the Registrant☒ | ||
Filed by a Party other than the Registrant☐ | ||
Check the appropriate box: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material under§240.14a-12 | |
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): | ||||||
| ☒ | No fee required. | |||||
| ☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(1)and 0-11. | |||||
| (1) | Title of each class of securities to which transaction applies:
| |||||
| (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:
| |||||
| ☐ | Fee paid previously with preliminary materials. | |||||
| ☐ | | 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. | ||||
| (1) | Amount Previously Paid:
| |||||
| (2) | Form, Schedule or Registration Statement No.:
| |||||
| (3) | Filing Party:
| |||||
| (4) | Date Filed:
| |||||
20182019 PROXY STATEMENT
AND
NOTICEOF ANNUAL MEETINGOF STOCKHOLDERS
THURSDAY, MAY 17, 201816, 2019
AT 8:30A.M. PACIFIC TIME
www.virtualshareholdermeeting.com/True2018True2019
Letter to Stockholders
April
| ||||||
Dear TrueCar Stockholders,
We are pleased to invite you to attend our
• To elect three Class
• To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31,
• To approve, on an advisory basis, the fiscal
• To transact such other business that may properly come before the Annual Meeting or any adjournment or postponement thereof.
Our board of directors has fixed the close of business on March
The Annual Meeting will be a completely virtual meeting of stockholders. All stockholders are cordially invited to attend the Annual Meeting
| ||||||
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
|  | |||||
Your vote is important. Whether or not you plan to attend the Annual Meeting
Sincerely,
Chip Perry President and Chief Executive Officer Santa Monica, California | ||||||
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 17, 201816, 2019: This proxy statement, along with the 20172018 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.
| GENERAL INFORMATION |
Q: Why am I receiving these materials?
A: This Proxy Statement is furnished to you by theThe board of directors of TrueCar, Inc. (the “Board of Directors”) and, which we refer to as the Board, is furnishing this Proxy Statement to you. It contains information related to theour 2019 Annual Meeting of Stockholders, which we refer to as the Annual Meeting, to be held on Thursday, May 17, 201816, 2019 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,True2019, 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 theour Annual Meeting of Stockholders and our Annual Report onForm 10-K for the fiscal year ended December 31, 2017,2018, as filed with the Securities and Exchange Commission, or the SEC, on March 1, 2018 (the “Annual Report”). These materials were2019, which we refer to as the Annual Report. We first made these materials available to you on the Internet on or about April 4, 2018.3, 2019. 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 websitesa website at www.TrueCar.com and www.true.com.www.TrueCar.com. The information on our websiteswebsite is not a part of this Proxy Statement.
Q: What itemsmatters will be votedstockholders vote on at the Annual Meeting?
A: Stockholders will vote on the following itemsmatters at the Annual Meeting:
Q: How does the Board of Directors recommend that 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 by and on behalf of TrueCar’s Board of Directors.TrueCar by its Board.
Q: Who pays for the proxy solicitation process?
A: TrueCar will pay the cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We may, on request, reimburse brokerage firms and other nominees for their expenses in forwarding proxy materials to beneficial owners. In addition to soliciting proxies by mail, we expect that our directors, officers and employees may solicit proxies in person or by telephone or electronic communications. None of these individuals will receive any additional or special compensation for doing this, although we may reimburse these individuals for their reasonableout-of-pocket expenses. Further, we have
 | | 1 |
| GENERAL INFORMATION |
our directors, officersengaged Alliance Advisors, LLC, or Alliance, to assist in the solicitation of proxies and employeesto provide related advice and support for a fee of approximately $25,000 and the reimbursement of customary expenses. We may solicit proxies in person or by telephone or facsimile. Noneengage Alliance for additional solicitation work and incur fees greater than $25,000 depending on a variety 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.factors, including preliminary voting results and recommendations from proxy advisors.
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”)21, 2019, which we refer to as the Record Date, are entitled to receive notice of, to attend online and to vote by live webcast at the Annual Meeting via live webcast.Meeting. Each share of TrueCar’sour common stock is entitled to one vote on each matter. As of the Record Date, there were 100,866,226105,119,046 shares of TrueCar’sour common stock issued and outstanding, held by 131114 holders of record. Each share of TrueCar’sour common stock is entitled to one vote on each matter.
Q: Why is TrueCar conducting the Annual Meeting as an exclusively virtual, online meeting?
A: This is the fourth year we have conducted an exclusively virtual annual meeting. Our virtual annual meetings afford all stockholders no fewer rights and opportunities to participate in our annual meetings than they would have at anin-person meeting; for example, the virtual format allows stockholders to communicate with us before and during the meeting so that they can ask questions of our Board or management. At the same time, we believe that holding the Annual Meeting solely on the Internet facilitates stockholder attendance and will increase stockholder participation and communication by enabling each stockholder to interact with us fully and equally, in real time, from any location around the world at no cost. A virtual annual meeting also makes it possible for more stockholders (regardless of the size of their holdings or their resources or physical location) to have direct access to information more quickly while offering us and our stockholders significant time and cost savings. We are aware of members of the investor community who believe that virtual annual meetings do not present sufficient opportunities for stockholders to interact with
directors and management. While our stockholders, on the whole, have not expressed concern about our virtual meetings, our Board intends to continue carefully reviewing and considering alternative meeting platforms for future annual meetings.
Q: What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
A:Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the stockholder of record with respect toof those shares, and we sent these proxy materials were sent directly to you by TrueCar.you.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the “beneficial owner” of shares held in “street name,” and that organization forwarded these proxy materials were forwarded to you by that organization.you. 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:
| • |
| • | By Telephone. You may vote by proxy by calling the toll free number |
| • | By Mail. You may vote by proxy by filling out the proxy card and returning it in the envelope provided. |
| • | During the Meeting. You may vote during the Annual Meeting live |
The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time on May 16, 2018.15, 2019.
| 2 | | 2019 Proxy Statement |
| GENERAL INFORMATION |
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:
| • |
| • | By Telephone. You may vote by proxy by calling the toll free number found on the vote instruction form |
| • | By Mail. You may vote by proxy by filling out the vote instruction form and returning it in the envelope |
 |
Q: If I submit a proxy, how will it be voted?
A: WhenIf you submit proxies that are properly dated, executed and returned, we will vote the shares represented by such proxies will be votedthem at the Annual Meeting in accordance with your instructions. If the instructions of the stockholder. If noproxies do not contain specific instructions, are given, the shares will be voted in accordance with the recommendations 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?”
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.they hold shares. Stockholders of record whose shares are registered in more than one name will receive more than one set of proxy materials. You should vote all of the proxy cards and in accordance with all of the 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 tobefore the taking of the vote is taken at the Annual Meeting.
If you are the stockholder of record, you may change your vote by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) providing
a written notice of revocation to TrueCar’sour Corporate Secretary at TrueCar, Inc., 120 Broadway, Suite 200, Santa Monica, California 90401 prior tobefore your shares beingare voted or (3) attending the virtual Annual Meeting and voting via theby live webcast. Attending the Annual Meeting via theby live webcast will not cause your previously granted proxy to be revoked unless you specifically so request or vote via theby 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: WeAs discussed above, we will be hosting the Annual Meeting exclusively by 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
| | 3 |
| GENERAL INFORMATION |
Q: How do I participate in the Annual Meeting on the Internet?
A: Any stockholder may listen to the Annual Meeting and participate by live webcast at www.virtualshareholdermeeting.com/True2019. The webcast will begin at 8:30 a.m. Pacific time on May 16, 2019, and stockholders may vote and submit questions during the Annual Meeting by live webcast. To enter the meeting, please have available your12-digit control number (which can be found on your Notice of Internet Availability or, if you received a printed copy of the proxy materials, your proxy card). If you do not have 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 to and participate in the Annual Meeting on the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/True2019.
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 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 viaby live webcast, your shares of Common Stock will be counted for the purpose ofin determining whether there is a quorum, even if you wish to abstain from voting on some or all of the matters atbefore 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’sour 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 III directors to serve until the 20212022 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’sour 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 suchthe 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?
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’sour independent registered public accounting firm. Your broker will not have discretion to vote on Proposals One Three and Four.or Three.
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 Stockholdersannual meeting or to nominate individuals to serve as directors?
A:Stockholder Proposals: Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at our next annual meeting of stockholders by submitting their proposals in writing to TrueCar’sour 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
| 4 | |
| GENERAL INFORMATION |
stockholder proposal to be considered for inclusion in our proxy statement for our 2020 annual meeting, our Corporate Secretary must receive the written proposal at our principal executive offices no later than December 5, 2019. If we hold our 2020 annual meeting more than 30 days before or after May 16, 2020 (theone-year anniversary date of the Annual Meeting), we will disclose the new deadline by which stockholder proposals must be received to be considered for inclusion in our proxy statement for that annual meeting under Item 5 of Part II of our earliest possible Quarterly Report 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”).or 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”)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 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 todescribed in our proxy materials with respect to suchfor the meeting, (2) brought 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(both when 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, andmeeting) 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 businessit must be a proper matter for stockholder action pursuant tounder our Bylaws and applicable law. To be timely for our 2019 Annual Meeting of Stockholders,2020 annual meeting, our Corporate Secretary must receive the written notice at our principal executive offices:
If we hold our 2019 Annual Meeting of Stockholders2020 annual meeting more than 30 days before or more than 60 days after May 17, 201916, 2020 (theone-year anniversary date of the Annual Meeting of Stockholders)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 shallmust 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 suchthe business at the annual meeting, (2) the name and address of the stockholder(s)stockholder and theirany associated person(s)person proposing suchthe business, (3) the class and number of shares of the Company’sour common stock which are held of record or are beneficially owned by the stockholder(s)stockholder and theirany associated person(s),person, (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 been entered into by ordone so on behalf of such stockholder(s) or their associated person(s)behalf with respect to any securities of the Company,our securities, and a description of any other similar agreement, arrangement or understanding, (5) any material interest of the stockholder(s)stockholder and theirany associated person(s)person in suchthe business and (6) a statement whether such stockholder(s)the stockholder or theirany associated person(s)person 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 followingafter 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
| | 5 |
| GENERAL INFORMATION |
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 our stock of the Company ownedstockholder owns 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)(C) any person controlling, controlled by or under common control with suchany person referred to in the preceding clauses (1)(A) and (2)(B).
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.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 determining stockholders entitled to vote atfor the annual meeting.
To be in proper written form, a stockholder’s notice to the Company’s Corporate Secretary of the Company shallmust 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 heldthe nominee holds of record or areowns beneficially owned by the nominee and any derivative positions heldhe or she holds of record or beneficially, held by the nominee, (4) whether and the extent to which the nominee has entered into any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee
with respect to any of our securities of the Company,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 are to bewere 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 suchthe 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)the stockholder giving notice of the director nomination, suchthe notice must also include the following information as toabout the stockholder and any stockholder associated person: (1) the name and addressperson described above in clauses (2) through (6) of the stockholder(s)last paragraph under “Stockholder Proposals” above, 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 in the manner referred to disclose the
| |
information contained in clauses (2) and (3) in this paragraph as of the record date.that paragraph. In addition, the stockholder must give timely notice to our Corporate Secretary in accordance withunder our Bylaws, which, in general, require that the notice be received by 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 governance committee of the Board requires the committee to consider nominations of director candidates validly made by our stockholder sin accordance with the provisions of our Bylaws.
Additionally, as described in more detail under “Executive Officers, Directors and Corporate Governance—Board Committees—Nominating and Corporate Governance Committee,” our nominating and corporate governance committee will consider certain nominations made by stockholders holding at least one percent of the fully diluted capitalization of TrueCar continuously for at least 12 months.
Q: I share an address with another stockholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
A: The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect tofor 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
| 6 | | 2019 Proxy Statement |
| GENERAL INFORMATION |
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.cominvestors@truecar.com or by phone at (800)1-800-200-2000,200-2000, extension 8771. Stockholders who currently receive multiple copies of the Proxy Statement or Annual
Report at their address and would like to request householding of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the annual report and proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered.
Q: What if I have questions about lost stock certificates or need to change my mailing address?
A: You may contact our transfer agent, Computershare Trust Company, N.A., by telephone at (877)1-877-373-6374373-6374 (U.S.)(in the United States) or (781)+1-781-575-2879575-2879 (outside the U.S.),United States) or by email at web.queries@computershare.com if you have lost your stock certificate or need to change your mailing address.
| | 7 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Executive Officers, Directors and Corporate Governance
The following table sets forth the names, ages and positions of our executive officers and directors as of March 31, 2018:2019:
| Name | Age | Position | ||||
Executive Officers | ||||||
| President and Chief Executive Officer, and | |||||
John | Former Interim Chief Financial Officer | |||||
Michael Darrow | Executive Vice President of Partner and OEM Development and President of ALG, Inc. | |||||
Neeraj Gunsagar | Executive Vice President and Chief Marketing Officer | |||||
Robert T. (“Tommy”) McClung | 40 | Executive Vice President and Chief Technology Officer | ||||
Brian Skutta | Executive Vice President of Dealer | |||||
Jeffrey J. Swart | Executive Vice President, General Counsel and Secretary | |||||
Non-Employee Directors | ||||||
Robert E. Buce | Director | |||||
Christopher W. Claus | 58 | Director and Chairman of the Board | ||||
John Krafcik | 57 | Director | ||||
| 39 | Director | ||||
Philip G.J. McKoy | 46 | Director | ||||
John W. Mendel | 64 | Director | ||||
Wesley A. Nichols | 54 | Director | ||||
| Director | |||||
| ||||||
| ||||||
| ||||||
|
| 8 | |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Executive Officers
 |
President and Chief Executive Officer, and
Age: |
ChipVictor A. “Chip” Perry has served as our President, Chief Executive Officer and a member of our Board of Directors since December 2015. Prior to joiningFrom August 2015 until he joined 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.applications. Mr. Perry was President and Chief Executive Officer of AutoTrader Group, Inc., an online automotive marketplace, from August 1997 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.directors of Auto Trader Group plc from April 2014 through March 2016. Mr. Perry holds aan 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 servingdeveloped over more than 20 years of service as a chief executive officer in the online automotive industry.industry, and his working relationships with many key customers, partners and industry participants.
 | John E. Pierantoni
Former Interim Chief Financial Officer
Age: |
John E. Pierantonihas served as our interimInterim Chief Financial Officer sincefrom February 2018 until April 2019 and as our Senior Vice President and Chief Accounting Officer sincefrom the time he joined us in December 2013. Prior to joining2013 until April 2019. From August 2010 until he joined 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.solutions. Mr. Pierantoni also served as Chief Accounting Officer of Ticketmaster Entertainment, Inc. and was the Controller, Motion Picture Group of Paramount Pictures.Pictures Corporation. In addition, Mr. Pierantoni has 1314 years of public accounting experience with PricewaterhouseCoopers LLP, including two years at PwC’sits London office. Mr. Pierantoni holds a B.S. in Accounting from the Carroll School of Management at Boston College.
 | Michael Darrow
Executive Vice President of Partner and OEM Development and President of ALG, Inc.
Age: |
MikeMichael Darrowhas 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.
 | Neeraj Gunsagar
Executive Vice President and Chief Marketing Officer
Age: |
Neeraj Gunsagarhas served as our Executive Vice President and Chief Marketing Officer since April 2016 and served as our Chief Revenue Officer from July 2014 until April 2016. Prior to joining us in January 2012, Mr. Gunsagar founded Saful Consulting in March 2008, where he advised public and private technology companies on strategic matters from March 2008 until December 2011.he joined us in 2012. Earlier in his career, Mr. Gunsagar was an investment banker at Donaldson, Lufkin & Jenrette Securities Corporation focused on advising communications companies. Mr. Gunsagar holds a B.S. in Business Administration from the Haas School of Business at the University of California, Berkeley.
| | 9 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
 | Robert T. (“Tommy”) McClung Executive Vice President and Chief Technology Officer Age: 40 |
Robert T. “Tommy” McClung has served as our Executive Vice President and Chief Technology Officer since July 2017. From October 2015 until June 2017, Mr. McClung served as our Senior Vice President and Chief Technology Officer, and from April 2015 until September 2015, he was our Senior Vice President of Technology and Development. From joining us in January 2014 until March 2015, Mr. McClung served as Vice President of Product Development. Before joining us, Mr. McClungco-founded CarWoo, Inc., an onlinecar-buying marketplace, in 2009, where he served as Chief Executive Officer and President, and before CarWoo, he worked in various software engineering and technical sales roles, including asco-founder and Vice President of Engineering for IMSafer, Inc., an online child-protection solution provider. Mr. McClung holds a B.S. in Computer Engineering from Oregon State University.
 | Brian Skutta
Executive Vice President of Dealer
Age: |
Brian Skutta has served as our Executive Vice President of Dealer Sales and Service since February 2016. Prior to joiningFrom September 2014 until he joined us, Mr. Skutta was chief executive officerthe Chief Executive Officer of AutoAlert, Inc., an automotive analytics company, from September 2014 until February 2016.company. Mr. Skutta worked in various roles for Cox AutomotiveEnterprises, Inc. from July 2002 until August 2014, including serving as the Vice President and General Manager of VinSolutions Inc. from May 2012 until August 2014 and as theco-founder and first general manager of AutoTrader.com’strade-in marketplace between September 2009 and April 2012. Mr. Skutta holds a B.S. in Finance from Auburn University.
 | Jeffrey J. Swart
Executive Vice President, General Counsel and Secretary
Age: |
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.
| 10 | |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Board of Directors
Robert E. Buce
Age:
|
Robert E. 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 toBefore 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 toBeforeBuild-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.
Skills and Qualifications:
We believe Mr. Buce is qualified to serve as a member of our Board of Directors because of his historical expertisethe experience he gained from serving as our Executive Vice President and Chief Financial Officer, and histhe substantial corporate governance, operational and financial expertise he gained from serving as Managing Partner at KPMG LLP, as 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 servinglongest-serving member of our Board, of Directors, we also value his deep understanding of our business as it has evolved over time.
Christopher W. Claus
Age:
|
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 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 theUSAA’s Vice President of Investment Sales and Service. Prior toBefore 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—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.industry, as well as his lengthy service at USAA, our largest affinity partner, which gives him unique insight into an important component of our business.
| | 11 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
|
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.
John Krafcik
Age:
|
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 LLC, Alphabet Inc.‘s’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 of Hyundai Motor America, the U.S. subsidiary of Hyundai Motor Company, a South Korean multinational automaker, from November 2008 to December 2013.2013, and as Vice President for Product Development and Strategic Planning from March 2004 to November 2008. Mr. Krafcik was responsible for the strategic direction and management of Hyundai Motor America’sHyundai’s operations in the United States. Prior toBefore joining Hyundai Motor America, Mr. Krafcik served in a variety of product development
Mr. Krafcik wasleadership positions at Ford Motor Company, where he held various product development leadership positions.a U.S. multinational automaker. Mr. Krafcik holds a B.S. in Mechanical Engineering from Stanford University and an M.S. in Management from the 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.industry, as well as the deep understanding of our business that he gained from his service as our President.
Erin N. Lantz Age: 39 |
Erin N. Lantz has served as a member of our Board since November 2016. Since March 2014, Ms. Lantz has served as the Vice President and General Manager of Mortgages at Zillow Group, Inc., an online real estate database company, where she has worked since July 2010. Before joining Zillow, Ms. Lantz served as a Senior Vice President at Bank of America Corporation, a U.S. multinational investment bank and financial services company, where she led theDirect-to-Consumer purchase home loan business. Before entering the mortgage industry, Ms. Lantz worked at the Boston Consulting Group as an Associate. From September
2016 until August 2018, Ms. Lantz served on the board of directors of Washington Federal, Inc., a bank holding company. Ms. Lantz holds a B.A. in Political Science, Philosophy and Economics 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 because of her extensive knowledge in finance, consumer behavior, online marketplaces and financial consumer technology.
| 12 | |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Age:
|
Erin LantzPhilip G.J. McKoyhas served as a member of our Board since October 2018. Since July 2016, Mr. McKoy has served as the Chief Information Officer of Directors since November 2016. Ms. Lantz is theUnited 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 General Manager of MortgagesChief Information Officer for Global Loyalty Solutions at Zillow Group where she has worked sinceAimia Inc., a data-driven marketing and loyalty analytics company, and from July 2010. Prior2014 to Zillow, Ms. Lantz wasDecember 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 BankTarget Corporation, a U.S. department store retailer,
including as Vice President of AmericaTarget.com from November 2011 through January 2014, where she ledhe was responsible for leading theDirect-to-Consumer purchase home loan business. Before entering the mortgage industry, she worked at the Boston Consulting Group as an Associate. Ms. Lantz customer-facing digital experience. Mr. McKoy has served on the Board of Directors of Washington Federal, Inc. since September 2016. Ms. Lantz holds 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 Pennsylvania and an M.B.A. from Harvard Business School.Denver.
Skills and Qualifications:
We believe Ms. LantzMr. McKoy is qualified to serve as a member of our Board of Directors because of herhis extensive knowledge in finance, consumer behavior, online marketplacesinformation security, technology strategy and financial consumer technology.digital business operations.
John W. Mendel
Age:
|
John W. Mendel has served as a member of our Board of Directors since May 2017. Mr. Mendel wasserved 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. Prior toBefore Honda, Mr. Mendel worked for Ford Motor Company, a U.S. multinational automaker, from July 1976 until November 2004 where hein various roles, serving most recently served as Chief Operating Officer of Mazda America.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 businessBusiness and economicsEconomics from Austin College and an M.B.A. from the Fuqua School of Business at 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.
| | 13 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Wesley A. Nichols
Age:
|
Wesley A. Nichols has served as a member of our Board of Directors since November 2016. Since April 2018, Mr. Nichols has served as a strategic advisor 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. 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 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. sincefrom December 2013 until June 2018, and on the board of directors of comScore, Inc. sincefrom October 2017. Mr. Nicholas has also served on the board of trustees of Randolph-Macon College since2017 until October 2012.2018. Mr. Nichols holds a B.A. in Psychology from Randolph-Macon College and an M.A. in Business Management 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
Age:
|
Ion A. 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 finance,
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.
| 14 | |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
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. Our Board of Directors currently consists of nine directors, seveneight of whom qualify as “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:
|
Ms. LantzMessrs. Buce, Krafcik and Messrs. Perry and YadigarogluNichols are standing for reelection at this annual meeting of stockholders.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 2017,2018, the Board of Directors held teneight meetings. With the exception of John Krafcik,Ion Yadigaroglu, who attended 70%46% 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 director served during 2017.the periods that such director served during 2018. Directors are also encouraged to attend annual meetings of the stockholders of the Company absent an unavoidable and irreconcilable conflict. Each member of our Board of Directors attended our 20172018 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’s 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.
Our Board of Directors is responsible for identifying and nominating members for election to our Board of Directors. The Board of Directors considers recommendations from directors, stockholders and others, as it deems appropriate. Our Board of Directors may review from time to time the appropriate skills, experience and characteristics for members of the 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 consider advice and recommendations from our President and Chief Executive Officer.
The Company has paid fees to a third party search firm to assist in identifying and evaluating potential candidates for nomination.
Our Board of Directors has undertaken a review of the independence of eachor an individual director. Based on information provided by each director concerning his background, employment and affiliations, our Board of Directors determined that none of Ms. Lantz or Messrs. Buce, Claus, Dietz, Mendel, Nichols and Yadigaroglu has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the NASDAQ Stock Market. 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, Mendel and Nichols is anon-employee director, as defined pursuant toRule 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”).
| |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Our Board is responsible for identifying and nominating candidates for election to the Board. The Board 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, and does not assign any particular
weighting or priority to any of these factors. Our Board considers these factors in light of the specific needs of the Board at that time and also considers advice and recommendations from our President and Chief Executive Officer.
We 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 reviewed the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our Board determined that none of Ms. Lantz or Messrs. Buce, Claus, Dietz, Krafcik, McKoy, Mendel, Nichols and 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” as that term is defined under the applicable rules and regulations of the SEC and
Nasdaq’s listing standards. In making these determinations, our Board considered the current and prior relationships that eachnon-employee director has with our Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by eachnon-employee director. The Board also determined that each of Messrs. Claus, Dietz, Mendel and Nichols is anon-employee director, as defined byRule 16b-3 promulgated under the Exchange Act.
Our Board of Directors has an audit committee, a compensation and workforce 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 is 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/corporate-governance.
Audit Committee
Our audit committee is comprised of Messrs. Buce and Claus and Ms. Lantz. Mr. Buce serves as our audit committee chairperson. The compositionEach 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, 2018,
| 16 | | 2019 Proxy Statement |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
the audit committee held sevensix meetings. The responsibilities of our audit committee include, among other things:
|
our guidelines and policies with respect to risk assessment and management; |
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. From January 1, 2018 until October 25, 2018, the compensation committee iswas comprised of Messrs. Dietz, Mendel and Nichols. On October 25, 2018, Mr. Dietz resigned from the compensation committee and was replaced by Mr. Claus. Mr. Nichols servesserved as our compensation committee chairperson.chairperson throughout 2018. 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 tobyRule 16b-3 under the Exchange 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 relating to the compensation of our executive officers. During fiscal year 2018, the compensation committee held nine meetings. The responsibilities of our compensation committee include, among other things:
| | 17 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Code. 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 compensation of our executive officers. During fiscal year 2017, the compensation committee held eight 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 standards of the NASDAQ Stock Market.standards.
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 as our nominating committee. From January 1, 2018 until June 14, 2018, the nominating committee was comprised of Messrs. Nichols and Yadigaroglu, with Mr. Yadigaroglu serving as chairperson. On June 14, 2018, Mr. Yadigaroglu resigned as chairperson of the nominating committee and Mr. Mendel was appointed to the nominating committee as its chairperson. On October 25, 2018,
Ms. Lantz and Mr. McKoy were appointed to the committee. 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 2017,2018, the nominating and governance committee held three meetings. The responsibilities of our nominating
and governance committee include, among other things:
| 18 | | 2019 Proxy Statement |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE 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. 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’ 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,Charles Thomas, our Interim Chief Financial Officerprincipal financial officer and Chief Accounting Officer;principal accounting officer; Chip Perry, our President and Chief Executive Officer; Jeffrey Swart, our General Counsel and Secretary, and other members of our management team. Messrs. PierantoniThomas and Swartco-chair our disclosure committee. During 2017,2018, the disclosure committee held four meetings, one prior tobefore the filing of each quarterly and annual report filed in 2017. The responsibilities of our disclosure committee include, among other things:
| | 19 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
2018. 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.
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee has ever been an executive officer or employee of ours. Messrs. Nichols and Mendel served on our compensation committee throughout 2018. Mr. Dietz served on our compensation committee until October 25, 2018, at which time he resigned from the Board and the compensation committee and was replaced on the compensation committee by Mr. Claus. 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. ASteven Dietz, a member of our Board of Directors and our compensation committee Steven Dietz, isuntil October 25, 2018, was a former partner at Upfront Ventures, and until February 27, 2018, Mr. Dietz was a member of Upfront’s investment committee andcommittee. At the time, Upfront owned (and therefore, Mr. Dietz beneficially ownedowned) more than 5% of our capital stock.
| 20 | | 2019 Proxy Statement |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
Code of Business Conduct and Ethics
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/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.
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, our President and Chief Executive Officer, is the director with the mostin-depth understanding of and experience in our industry. Consequently, Mr. Perry 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.
Board’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’s areas of responsibilities, discussed above). 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.
Information on Compensation Risk Assessment
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’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’ focus is on our long-term success. The incentive compensation structure was reviewed during 2017 by the compensation committee. 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.
| | 21 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
awards generally have long-term vesting requirements to ensure that recipients’ focus is on our long-term success. The incentive compensation structure was reviewed during 2018 by the compensation committee. 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.
2018Non-Employee Director Compensation
The following table presents compensation information for ournon-employee directors during the year ended December 31, 2017.2018. Directors who are also our employees receive no additional compensation for service as a director. Compensation paid to Mr. Perry is discussed in “Executive Compensation.”
| Name | Fees Earned ($) | Stock Awards | Option Awards | Total ($) | Fees Earned ($) | Stock Awards ($)(1) | Option Awards | Total ($) | ||||||||||||||||||||||||
Abhishek Agrawal(2) | — | — | — | — | ||||||||||||||||||||||||||||
Robert Buce | 75,000 | 75,001 | 74,968 | 224,969 | 75,000 | 74,996 | 74,983 | 224,979 | ||||||||||||||||||||||||
Christopher Claus | 90,000 | 75,001 | 74,968 | 239,969 | 91,397 | 74,996 | 74,983 | 241,376 | ||||||||||||||||||||||||
Steven Dietz | 36,458 | 75,001 | 74,968 | 186,427 | ||||||||||||||||||||||||||||
Steven Dietz(2) | 51,156 | 74,996 | 74,983 | 201,135 | ||||||||||||||||||||||||||||
John Krafcik | 55,000 | 75,001 | 74,968 | 204,969 | 55,000 | 74,996 | 74,983 | 204,979 | ||||||||||||||||||||||||
Erin Lantz | 65,000 | 75,001 | 74,968 | 214,969 | 65,932 | 74,996 | 74,983 | 215,911 | ||||||||||||||||||||||||
Philip McKoy(3) | 11,178 | 150,002 | 149,977 | 311,157 | ||||||||||||||||||||||||||||
John Mendel | 38,784 | 150,002 | 149,998 | 338,784 | 67,500 | 74,996 | 74,983 | 217,479 | ||||||||||||||||||||||||
Wesley Nichols | 67,149 | 75,001 | 74,968 | 217,118 | 72,500 | 74,996 | 74,983 | 222,479 | ||||||||||||||||||||||||
Ion Yadigaroglu | — | 75,001 | 74,968 | 149,969 | — | 74,996 | 74,983 | 149,979 | ||||||||||||||||||||||||
| (1) | This amount represents the aggregate grant date fair value of the restricted stock units and stock options awarded, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The assumptions used in calculating the grant date fair value of the restricted stock units and stock options reported in this column are set |
| forth in Note 10 to our audited consolidated financial statements included in our Annual Report on Form10-K, as filed with the SEC. |
| (2) | Mr. |
| (3) | Mr. |
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, 2017:2018:
| Name | Outstanding Stock Awards at December 31, 2017 | Outstanding Options at December 31, 2017 | Outstanding Stock Awards at December 31, 2018 | Outstanding Options at December 31, 2018 | ||||||||||||
Robert Buce | 4,276 | 137,212 | 8,296 | 155,865 | ||||||||||||
Christopher Claus | 4,276 | 79,323 | 8,296 | 97,976 | ||||||||||||
Steven Dietz | 4,276 | 65,159 | ||||||||||||||
John Krafcik | 23,719 | 643,471 | 9,952 | 662,124 | ||||||||||||
Erin Lantz | 14,780 | 44,232 | 13,548 | 62,885 | ||||||||||||
Philip McKoy | 13,393 | 28,753 | ||||||||||||||
John Mendel | 8,552 | 18,948 | 13,997 | 37,601 | ||||||||||||
Wesley Nichols | 14,780 | 44,232 | 13,548 | 62,885 | ||||||||||||
Ion Yadigaroglu | 4,276 | 65,159 | 8,296 | 83,812 | ||||||||||||
| 22 | |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
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 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. EachUnder the Outside Director Compensation Policy, each person who first becomes an Outside Director will beis granted an option to purchase shares of our common stock having a grant date fair value equal to $150,000, or the Initial Option, and a restricted stock unit with a grant date fair value equal to $150,000,of $300,000, or the Initial RSU.Award. The Initial Option and Initial RSU (collectively, the “Initial Award”) will beAward is automatically granted on the date the individual first becomes an Outside Director. If a director’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 the 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 vest 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 the 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 MendelPhilip McKoy became an outside director on May 18, 2017October 25, 2018 and was automatically granted an Initial Award.
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 unit with a grant date fair value equal to $75,000,of $150,000, or the Annual RSU (collectively, the “Annual Awards”).Award. Except as set forth below, the shares underlying the 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 the Annual Award that are scheduled to vest on or after the date of the following year’s Annual Meetingannual meeting will instead vest on the day prior tobefore the following year’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 his or her initial service, or cash-settled awards with a grant
| 2019 Proxy Statement | 23 |
| EXECUTIVE OFFICERS, DIRECTORS AND CORPORATE GOVERNANCE |
date fair value of more than $750,000, increased to $1,500,000 in connection with his or her initial service.
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 board or lead independent director, as applicable, will be entitled to an additional annual retainer of $25,000 in cash.
Non-Affiliated Directors serving as chairperson and members of the audit and compensation committees of our Board of Directors are entitled to the annual cash retainers set forth below. No cash retainers are paid for service on the Nominating and Corporate Governance Committee.
| Board Committee | Chairperson Fee ($) | Member Fee ($) | ||||||
Audit Committee | 20,000 | 10,000 | ||||||
Compensation Committee | 15,000 | 7,500 | ||||||
| Board Committee | Chairperson Fee ($) | Member Fee ($) | ||||||
Audit Committee | 20,000 | 10,000 | ||||||
Compensation and Workforce Committee | 15,000 | 7,500 | ||||||
Nominating and Corporate Governance Committee | 10,000 | 5,000 | ||||||
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 percent10% 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:2018.
| 24 | |
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, 20182019 by:
each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock;
each of our named executive officers;
each of our directors; and
all of our current executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the SEC, 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 units held by that person that are currently exercisable or exercisable within 60 days of February 28, 2018.2019. 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 100,565,321104,884,397 shares of our common stock outstanding as of February 28, 2018.2019. 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 | 17.8 | ||||||
UBS Group AG(2) | 11,665,236 | 11.1 | ||||||
United Services Automobile Association(3) | 9,042,990 | 8.6 | ||||||
Wellington Management Group LLP(4) | 8,767,462 | 8.4 | ||||||
Senvest Management, LLC(5) | 8,303,725 | 7.9 | ||||||
PAR Capital(6) | 8,275,395 | 7.9 | ||||||
Vanguard Group(7) | 7,050,558 | 6.7 | ||||||
Pacific Sequoia Holdings LLC(8) | 6,363,569 | 6.1 | ||||||
BlackRock, Inc.(9) | 6,318,080 | 6.0 | ||||||
Ontario Teachers’ Pension Plan Board(10) | 5,850,000 | 5.6 | ||||||
| | 25 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
| 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 | ||||||
| Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Shares Outstanding | ||||||
Named Executive Officers and Directors: | ||||||||
Chip Perry(11) | 2,142,497 | 2.0 | ||||||
John Pierantoni(12) | 231,035 | * | ||||||
Michael Darrow(13) | 163,794 | * | ||||||
Tommy McClung(14) | 361,313 | * | ||||||
Brian Skutta(15) | 255,659 | * | ||||||
Robert Buce(16) | 456,656 | * | ||||||
Christopher Claus(17) | 194,273 | * | ||||||
John Krafcik(18) | 701,023 | * | ||||||
Erin Lantz(19) | 64,227 | * | ||||||
Philip McKoy(20) | 4,793 | * | ||||||
John Mendel(21) | 32,906 | * | ||||||
Wesley Nichols(22) | 64,227 | * | ||||||
Ion Yadigaroglu(23) | 1,597,026 | 1.5 | ||||||
All current executive officers and directors as a group (13 persons)(24) | 7,707,664 | 7.0 | ||||||
| * | Represents beneficial ownership of less than 1%. |
| (1) | Based upon a Schedule |
| (2) | Based upon a Schedule 13G/A filed with the SEC on February 28, 2019, as of February 28, 2019, UBS Group AG (“UBS”) holds shared voting and dispositive power with respect to all 11,665,236 reported |
| (3) | Based upon a Schedule 13G/A filed with the SEC on February 13, 2018 and updated from Company records, |
Based upon a Schedule |
|
| 26 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
| (5) | Based upon a Schedule 13G/A filed with the SEC on February |
| (6) | Based upon a Schedule 13G/A filed with the SEC on February 14, 2019, as of December 31, 2018, PAR Investment Partners, L.P. (“PAR”) beneficially owns and holds sole voting and dispositive power with respect to all 8,275,395 reported shares. PAR Group II, L.P. (“PAR LP”), the general partner of PAR, and PAR Capital Management, Inc., the general partner of PAR LP, have sole voting and dispositive power with respect to the shares beneficially owned by PAR. The address for these entities is c/o PAR Capital Management, Inc., 200 Clarendon Street, Fl 48, Boston, Massachusetts 02116. |
| (7) | Based upon a Schedule 13G/A filed with the SEC on February 12, 2019, as of December 31, 2018, The Vanguard Group, Inc. (“Vanguard”) holds sole voting power of 190,559 shares, shared voting power of 7,279 shares, sole dispositive power of 6,862,290 shares and shared dispositive power of 188,268 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 180,989 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 16,849 shares as a result of its serving as investment manager of Australian investment offerings. The address for each of these entities is c/o The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
| (8) | Based upon a Schedule 13G filed with the SEC on January |
Based upon a Schedule |
| (10) | Based upon a Schedule 13G filed with the SEC on January 29, 2019, as of December 31, 2018, Ontario Teachers’ Pension Plan Board (“OTPP”) holds sole voting and dispositive power with respect to all |
| Consists of (i) |
Effective April 1, 2019, Mr. Pierantoni resigned from his positions at the Company. The shares represented in this line consist of (i) |
Consists of (i) |
Consists of (i) |
Consists of (i) |
Consists of (i) |
Consists of (i) |
2019.
| | 27 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
| (18) | Consists of (i) |
| (19) | Consists of (i) 9,528 shares held of record by Ms. Lantz and (ii) |
Consists of 4,793 shares exercisable within 60 days of February 28, 2019. |
| (21) | Consists of (i) |
Consists of (i) |
Consists of (i) |
| (“Capricorn SA”), (v) 26,674 shares held of record by Carthage, L.P. (“Carthage”), (vi) 5,870 shares held of record by Capricorn Investment Group LLC |
| and (vii) |
Consists of (i) |
| 28 | |
| COMPENSATION DISCUSSION AND ANALYSIS |
Compensation Discussion and Analysis
Our named executive officers, (NEOs)or NEOs, for 2017, which consist2018, consisting of our principal executive officer, our principal financial officer, and theour next three most highly compensated executive officers and our former Chief Financial Officer, or CFO, are:
Chip Perry, our President and Chief Executive Officer, (CEO)or CEO, and a member of our Board of Directors;Board;
John Pierantoni, our former Interim CFO and Senior Vice President and Chief Financial Officer (CFO);Accounting Officer;
Michael Darrow, our Executive Vice President of OEMPartner and PartnerOEM Development and President of ALG, Inc.;
Tommy McClung, our Executive Vice President and Chief MarketingTechnology Officer; and
Brian Skutta, our Executive Vice President of Dealer Sales and Services.Services; and
In
Michael Guthrie, our former CFO.
On February 2, 2018, the Companywe announced that MikeMichael Guthrie had resigned from his position as CFO effective February 1, 2018 and that on that date John Pierantoni, the Company’sour Chief Accounting Officer, was appointed Interim Chief Financial Officer.CFO. On March 21, 2019, we announced that Mr. Pierantoni had resigned from his positions at the Company effective April 1, 2019 and that Charles Thomas, our Vice President and Controller, was appointed our principal financial officer and principal accounting officer effective April 1, 2019.
Executive Summary
Business HighlightsDespite numerous important strategic achievements in 2018, our financial and operational results were below guidance.
2017 Financial Highlights2018 was an important year of transition for us, with significant focus on investments in our technology platform and product offerings. Over the course of 2018, we achieved a number of important strategic milestones that we believe have put us in a stronger place and position us for success in 2019 and beyond, including:
guaranteed price, which participating dealers can honor without assuming any risk. |
Unfortunately, our results fell short of our external guidance for the year as the result of a variety of operational challenges associated with scaling our business in a complex category. Below is a summary of our key results in 2018:
Total revenue of $323.1$353.6 million, up approximately 16%9% from revenue of $277.5$323.1 million in 2016.2017.
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
| | 29 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Units(4)(1) wereof 1,005,029, up from 952,834 in 2017, up from 806,9532017.
| • |
A reconciliation of GAAP tonon-GAAP financial measures is set forth in Annex A to this Proxy Statement.
| (1) | We define units as the number of automobiles purchased by our users from TrueCar Certified Dealers through TrueCar.com, our TrueCar branded mobile applications or the |
| (2) | Adjusted EBITDA is not a measure of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with GAAP. Refer to Annex A for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss. |
| (3) | Adjusted EBITDA margin is a |
2017 Compensation Highlightsdecisions are aligned with the below-guidance financial results and the stockholder experience.
In keepingOur executive compensation programs are designed to reward and incentivize our NEOs in a way that aligns with our emphasis on aligning NEO compensation with stockholder interests,strategy, the key value drivers of our business
and our stockholders, which we believe the following compensation decisions for 2017 were:actions and incentive outcomes taken in 2018 demonstrate:
Further, the realizable value of other senior executives ($400,000 andcompensation granted to our CEO over the prior three years is less than 50% of base salary, respectively).
Bonus incentive outcomes paid below target (approximately 50% for CEO and 85% for other NEOs) for the 2017 performance yeartarget/grant date value, which we believe demonstrates a strongpay-for-performance orientation.. 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,
Roughly 78% of the CEO’s annual target pay opportunity isat-risk and will depend on our financial and stock price performance. The table below shows the average annual target compensation for our CEO over the past three years, as well as his average annual realizable compensation during the same time period.
| 30 | |
| COMPENSATION DISCUSSION AND ANALYSIS |
|
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 drivers of our long-term success.
Preview of Changes Made for 2018
The compensation committee strives 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 the compensation program and made 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:
|
| Base Salary | Cash Incentive | RSUs | Stock Options | Total Equity (RSUs + Options) | Total Pay | |||||||||||||||||||
Average Annual Target Compensation from 2016 to 2018(1) | $ | 800,000 | $ | 800,000 | $ | 459,923 | $ | 1,333,354 | $ | 1,793,277 | $ | 3,393,277 | ||||||||||||
Average Realizable Value from 2016 to 2018(2) | $ | 800,000 | $ | 484,605 | $ | 342,136 | $ | 0 | $ | 342,136 | $ | 1,626,466 | ||||||||||||
Average Realizable Value as a Percent of Average Annual Target Compensation | 100% | 61% | 74% | 0% | 19% | 48% | ||||||||||||||||||
| (1) | Amounts shown in the Average Annual Target Compensation row reflect the CEO’s average annual target compensation value granted for 2016, 2017 and 2018. This includes: (1) base salary paid during the year, (2) cash incentive target for the year and (3) grant-date fair value of equity |
| (2) | Amounts shown in the Average Realizable Value row reflect the average annual realizable compensation for |
We conducted broad and extensive stockholder outreach and made a number of significant changes to our programs in response to the feedback we heard from stockholders.
We held our first advisory “say on pay” vote on executive compensation as a public company in 2018, covering our 2017 executive compensation program. Our advisory proposal passed with the support of approximately 52% of total votes cast. Our compensation committee was disappointed by this result and considered it essential to understand the reason for this level of support and engage in dialogue with our stockholders regarding our compensation program. The following details summarize our stockholder outreach efforts during 2018.
The primary focusmore than 20 of our compensation program is to align executive and stockholder interests such that long-term value creation is maximized. Accordingly, we provide short- and long-term pay opportunities tied directly to the driverslargest stockholders who collectively own approximately 78% of our operational successoutstanding shares as ofyear-end 2018 and met with each stockholder returns. We do not prescribe any particular mix of short- and long-term pay opportunitiesthat expressed an interest in order to retain our operational flexibility and capacity to motivate executives under an array of circumstances.
| | 31 |
| COMPENSATION DISCUSSION AND ANALYSIS |
The table below summarizes the feedback provided by both proxy advisors and stockholders and how we responded. Because 2018 compensation decisions had already been made by the time of oursay-on-pay vote in 2018 and our stockholder engagement, many of the changes the compensation committee implemented are reflected in our 2019 executive compensation program.
| What the Committee heard... | ...and how the Committee responded | |||
| Prefer annual over quarterly incentive program |  |
| ||
| Limit the use of discretion in incentive programs | |
| ||
| Increase transparency in incentive outcomes | |
| ||
| Introduce performance-based long-term incentive, or LTI, component | |
| ||
| Eliminate aspirational companies from peer group | |
| ||
| Enhance peer group selection disclosure | |
| ||
| Implement clawback policy | |
| ||
| Adopt stock ownership guidelines | |
|
| 32 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
Our compensation committee will monitor and continue to evaluate our executive compensation program going forward in light of our stockholders’ views and our transforming business needs. Our compensation committee expects to continue to
consider the outcome of oursay-on-pay votes and our stockholders’ views when making future compensation decisions for our executive officers.
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.
| What We Do | What We Don’t Do | |
| × No automatic “single trigger” cash or vesting acceleration upon a change in control | |
| × No option repricings or exchanges without stockholder approval | |
| × No hedging by executive officers or directors | |
| × No tax gross ups on severance or change in control benefits | |
| × No excessive executive perquisites | |
Compensation 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 2019), to both incentivize the creation of stockholder value and provide strong retention incentives; |
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
| 2019 Proxy Statement | 33 |
| COMPENSATION DISCUSSION AND ANALYSIS |
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
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 Board of Directors’ total remuneration.Board.
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’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’s compensation.
While the compensation committee considers our CEO’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’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.
| 34 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
The compensation committee engagedcontinued to engage Semler Brossy at the end of 2017in 2018 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 fiscalmaking 2018 compensation: base salary, targetexecutive compensation decisions. During 2018, Semler Brossy also assisted in the stockholder outreach efforts and the design of the annual incentive compensation and total cash compensation (base salary and annuallong-term incentive compensation), and equity awards, in order to assist the compensation committee in structuring executive officer compensation packagesprograms for fiscal 2018 that were consistent with our compensation goals and philosophy and competitive relative to market comparables. This analysis also factored 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, the2019. The compensation committee assessed the independence of Semler Brossy, most recently in March 2019, 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. practices that is provided by Semler Brossy. Our compensation committee reviews and considers this market data, but did not engage in any benchmarking or targeting of any specific levels of pay for 2018 compensation decisions.
In June 2016,early 2018, Semler Brossy worked with the Boardcompensation committee to develop a comparator group for a competitive assessment of Directors reviewed data providedthe pay programs. The companies included in the Radford Global Technology Survey includingcomparator group were selected based on a set of financial and industry/business parameters to best reflect a group of companies most similar to us.
We used initial quantitative screens primarily as guides to inform our decision-making process in reviewing
current or potential peers. The screens used in determining the 2018 peers maintained several of the same parameters as the 2017 screens (e.g., revenue ranges, technology industry) but included a filter on market cap (i.e., below $5 billion) that removed nine larger companies and a narrower list ofbusiness-fit parameters that further reduced the number of companies in the peer group.
Specifically, the screens used to develop the 2018 peer group were:
The resulting peer group for 2018 consisted of the following 17 companies. The compensation committee determined that selecting a narrower group of companies closer in size to us with a strong business and talent fit would be more appropriate than a broader selection of other companies from theadjacent technology industries (e.g., software).
Zillow CoStar ANGI Homeservices GrubHub Yelp LendingTree Cars.com Etsy Shutterstock | QuinStreet Redfin CarGurus The Trade Desk Quotient Technology Care.com XO Group BazaarVoice |
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
technology industry. The Boardcompensation 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, were in Radford’s “Software Products/Services” and“Internet/E-Commerce/Online Community” industries, had similar market valuation multiples (e.g., marketcap-to-revenue multiples withinone-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 2018, the compensation committee again reviewed data from two different representative samples of similar companies: (1) a custom sample of select companies between $150 millionthe peer group to help establish pay levels for 2019, taking into consideration our growth trajectory compared to the overall size 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:
|
|
|
These groups were developed withgrowth rates among the assistance of Compensia based on an evaluation of companiespeers. After that review, the compensation committee believed are comparable to us, taking into consideration the size of each company based on revenuesremoved two larger peers (Zillow, CoStar) and market capitalization.
In early 2018, Semler Brossy worked with the compensation committee to develop a comparator group for a competitive assessment of the pay programs. The peer group was updated to reflect the current realitiesadded three smaller peers (eHealth, Eventbrite and expectations for the business going forward (i.e., at the time of the development of the initial peer group TrueCar had experienced several years of rapid growth, while at the end of 2017 the Company experienced more modest growth)EverQuote). The new comparator group includes 17 public companies with annual revenues between $150 million and $1 billion, excludes several aspirational peers, and positions the Company around the median of annual revenues (i.e., between 40th percentile and 60th percentile). This group will be disclosed in next year’s proxy statement.
Compensation Elements and 2018 Pay Decisions
Our 20172018 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 emphasizedand 2017, emphasizing“at-risk” pay while providing competitive packages to retain and motivate our key talent.“At-risk” pay (both cash bonusincentives and equity incentives) comprised more than 65%78% of target pay for each of our CEO, and around 70% for our other NEOs including(excluding Mr. Perry.Guthrie).
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’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” 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 2018, the compensation committee reviewed the base salaries of our NEOs, taking into account the considerations described above and additional Radford market data. As a result, the compensation committee elected not to make any adjustments to base salaries at that time, determining that the base salaries continued to be market competitive and appropriately reflect our NEOs’ past and expected future contribution levels, subject tolevels. In May 2018, the compensation committee provided a planned3% merit increase to Mr. Skutta’s salaryPierantoni in 2017. In January 2017,consideration for his additional responsibilities as the compensation committee adjusted Mr. Skutta’s salary to an amount consistent with the othernon-CEO NEOs. Mr. Darrow joined the Company in March 2017 and had his base salary established at that time.interim CFO.
| Executive | 2016 Base Salary | 2017 Base Salary | % Change | 2017 Base Salary | 2018 Base Salary | % Change | ||||||||||||||||||
Chip Perry | $ | 800,000 | $ | 800,000 | 0 | % | $ | 800,000 | $ | 800,000 | 0 | % | ||||||||||||
Michael Guthrie | $ | 400,000 | $ | 400,000 | 0 | % | $ | 400,000 | $ | 400,000 | 0 | % | ||||||||||||
John Pierantoni(1) | $ | 350,000 | $ | 356,841 | 2 | % | ||||||||||||||||||
Michael Darrow | NA | $ | 400,000 | NA | $ | 400,000 | $ | 400,000 | 0 | % | ||||||||||||||
Neeraj Gunsagar | $ | 400,000 | $ | 400,000 | 0 | % | ||||||||||||||||||
Tommy McClung | $ | 400,000 | $ | 400,000 | 0 | % | ||||||||||||||||||
Brian Skutta | $ | 350,000 | $ | 400,000 | 14 | % | $ | 400,000 | $ | 400,000 | 0 | % | ||||||||||||
Quarterly Bonus Opportunity
We provide our NEOs the opportunity to earn a cash incentive each quarter. Actual quarterly NEO bonuses are determined at the sole discretion of the compensation committee. The compensation committee considers various factors in determining the bonus amount, if any, a NEO receives, but a primary goal is to reward for, 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 NEO at the beginning of the year. Per his employment agreement, Mr. Perry’s bonus opportunity is equal to 100% of base salary. Mr. Guthrie’s bonus opportunity was equal to 62.5% of base salary, and the remaining NEOs (Darrow, Gunsagar, Skutta) have bonus opportunities equal to 50% of base salary. This
opportunity is then split equally over the four quarters with payouts determined and delivered at the end of each quarter.
After the end of each quarter of 2017, the compensation committee established a bonus pool for employees, including NEOs, after taking into consideration the Company’s financial performance and overall employee performance for the just-ended quarter, as well as other considerations including management’s recommendations, retention needs, morale, and the continued strong efforts 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 and the compensation committee consider a variety of qualitative and quantitative measures, such as:
| (1) | Reflects base compensation paid in 2018 resulting from increase in annual base salary from $350,000 to $360,500 on May 7, 2018. |
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
Cash Incentive Opportunity
For 2019, the compensation committee approved an annual cash bonus plan for the NEOs in which 70% of the payout is tied to our financial performance relative(specifically, our revenue and Adjusted EBITDA) and 30% is tied to the fullachievement of objective strategic goals. The plan for 2018, described below, was implemented at the beginning of the year before receiving feedback from stockholders and other quarters;proxy advisors.
In 2018, we provided our NEOs the opportunity to earn a cash incentive each quarter. Actual quarterly NEO incentives were determined in the sole discretion of the compensation committee. The compensation committee considered various factors in determining the incentive amount, if any, a NEO received, but the primary goal was to reward for, and align a portion of NEO pay opportunities with, our short-term quarterly financial performance, which in turn motivated our executive team, including our NEOs.
The sustainabilitycompensation committee establishes an incentive opportunity expressed as a percentage of base salary for each NEO at the beginning of the quarter’s results (i.e., wereyear. In 2018, this target opportunity was then split equally over the results generatedfour quarters with payouts determined and delivered following the end of each quarter. In February 2018, the compensation committee reviewed the target incentive opportunities for each NEO and decided to maintain the same opportunities in place for 2017, including for the CEO, except for Mr. Skutta. The compensation committee determined that an increase in Mr. Skutta’s target incentive opportunity from 50% to 75% of his base salary was appropriate to more closely align his compensation with the market data. Each NEO’s 2018 annual target incentive opportunity is reflected below.
| Executive | Target Incentive as a % of Base Salary 2018 | |||
Chip Perry | 100 | % | ||
Michael Guthrie | 62.5 | % | ||
John Pierantoni | 40 | % | ||
Michael Darrow | 50 | % | ||
Tommy McClung | 50 | % | ||
Brian Skutta | 75 | % | ||
After the end of each quarter of 2018, the compensation committee established an incentive pool for employees, including NEOs, after taking into consideration our financial performance, our achievement of strategic goals and overall employee performance for the just-ended quarter, as well as other considerations including management’s recommendations, retention needs and morale. In assessing our financial performance for a way that is replicable);given quarter, management and
| • | Adjusted EBITDA(1) and Adjusted EBITDA margin(2) performance; |
| • | Revenue(3) growth; and |
We believe thatIn 2018, 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 arewere 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.closely monitor. The sustainability of our results, our trending performance and the measurement of our other strategic drivers also serveserved as value reference points for the Committeecompensation 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, rewardsrewarded 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. The compensation committee reviews these assessments and recommendations, and also assesses the CEO’s performance for the quarter. The compensation committee then determines individual NEO bonuses, if any, for the quarter.
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, which is a financial measure not prepared in accordance with U.S. GAAP, was calculated based on quarterly earnings as reflected in our audited consolidated financial statements, adjusted to exclude income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, certain litigation costs and lease exit costs.
The “Revenue” measure is prepared in accordance with U.S. GAAP and comprised of transaction revenues paid by our dealer customers either on a per vehicle basis for sales to our users or in the form of a subscription arrangement, and forecasts, consulting and other revenue, primarily from the provision of services to the automotive and financial services industries by our ALG subsidiary.
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
The table below summarizes each quarter’s performance and key considerations when determining the actual incentive payouts for the NEOs in 2018. The compensation committee considered financial performance relative to guidance but also strategic and operational performance that will support and drive future growth (e.g., progress in rolling out of the TrueCar Trade product in the third and fourth quarters and the completion of our replatforming project in the fourth quarter).
| Quarter | CEO Payout | NEO Payout(4) | Committee Considerations | |||
| Q1 | 0% of target | 0% of target | - Revenue of $81.1 million, at the midpoint of guidance ($81 million) - Adjusted EBITDA of $6.0 million, at the bottom end of guidance ($6 million) - Adjusted EBITDA margin of 7.4%, compared to 8.0% in the first quarter of 2017 - Units of 230,000, at the bottom end of guidance (230,000) | |||
| Q2 | 119% of target | 123% of target | - Revenue of $87.9 million, at the midpoint of guidance ($88 million) - Adjusted EBITDA of $8.7 million, above the midpoint of guidance ($8.5 million) - Adjusted EBITDA margin of 9.9%, compared to 9.0% in the second quarter of 2017 - Units of 250,000, above the top end of guidance (248,000) - Continued progress adding new OEM programs and expanding existing OEM programs - Re-accelerated growth in franchise and independent dealer count | |||
| Q3 | 0% of target | 108% of target | - Revenue of $93.6 million, below the midpoint of guidance ($94 million) - Adjusted EBITDA of $10.0 million, at the bottom end of guidance ($10 million) - Adjusted EBITDA margin of 10.7%, compared to 9.7% in the third quarter of 2017 - Units of 268,000, below the bottom end of guidance (274,000) - Continued advancement toward key strategic objectives (e.g., progress inroll-out of TrueCar Trade product, substantial progress toward completion of technology replatforming initiative) - Considered retention and motivation ahead of critical fourth quarter 2018 performance | |||
| Q4 | 0% of target | 72% of target | - Revenue of $91.1 million, below the bottom end of guidance ($95.5 million) - Adjusted EBITDA of $8.1 million, below the bottom end of guidance ($10 million) - Adjusted EBITDA margin of 8.9%, compared to 9.0% in the fourth quarter of 2017 - Units of 257,000, below the bottom end of guidance (262,000) - Completed our replatforming initiative and acquired DealerScience while continuing the roll out of the TrueCar Trade product | |||
| (1) | The “Adjusted EBITDA” measure, which is a financial measure not prepared in accordance with U.S. GAAP, was calculated based on quarterly earnings as reflected in our audited consolidated financial statements, adjusted to exclude income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, certain litigation costs and lease exit costs. Refer to Annex A for a reconciliation of Adjusted EBITDA to net loss. We use Adjusted |
| EBITDA as an operating performance measure because it is (i) an integral part of our reporting and planning processes; (ii) used by our management and Board to assess our operational performance; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA facilitates operating performance comparisons on aperiod-to-period basis because it excludes variations primarily caused by |
| 38 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
| changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA is widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt service capabilities. |
| (2) | The “Adjusted EBITDA margin” measure, which is a financial measure not prepared in accordance with U.S. GAAP, was calculated as Adjusted EBITDA divided by total revenue. |
| (3) | The “Revenue” measure is prepared in accordance with U.S. GAAP and comprised of dealer revenue, consisting of fees paid by our dealer customers participating in our network of TrueCar Certified Dealers either on aper-vehicle basis for sales to our users or in the form of a subscription arrangement or purchasing our TrueCar Trade product or products and services provided by |
| DealerScience or DealerSync; OEM incentives revenue, consisting of fees paid by OEMs to promote the sale of their vehicles through the offering of consumer incentives to members of our affinity group marketing partners; and forecasts, consulting and other revenue, primarily from the provision of services to the automotive and financial services industries by our ALG subsidiary. |
| (4) | Excludes payouts for Messrs. Guthrie, who did not earn any cash incentive payments for 2018, and Pierantoni, who served as a Senior Vice President and Interim Chief Financial Officer. Mr. Pierantoni’s performance was assessed and payouts determined based on the same measures described above, but under standards applicable to Senior Vice Presidents, or SVPs. Mr. Pierantoni received payouts of 46%, 123%, 80% and 85% of his target incentive for the first through fourth quarters of 2018, respectively. |
The table below provides an overview of the bonusesincentives 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 | Q1 | Q2 | Q3(2) | Q4(3) | Total Actual | Total Target | Actual as % of Target | ||||||||||||||||||||||||||||||||||||||||||
Chip Perry | $ | 0 | $ | 194,480 | $ | 0 | $ | 195,488 | $ | 389,968 | $ | 800,000 | 48.7 | % | $ | 0 | $ | 238,848 | $ | 0 | $ | 0 | $ | 238,848 | $ | 800,000 | 29.9 | % | ||||||||||||||||||||||||||||
Michael Guthrie | $ | 0 | $ | 60,769 | $ | 44,783 | $ | 61,090 | $ | 166,642 | $ | 250,000 | 66.7 | % | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 250,000 | N/A | (4) | ||||||||||||||||||||||||||||
John Pierantoni(1) | $ | 16,099 | $ | 44,334 | $ | 28,788 | $ | 30,468 | $ | 119,689 | $ | 143,150 | 83.6 | % | ||||||||||||||||||||||||||||||||||||||||||
Michael Darrow | $ | 17,223 | $ | 48,615 | $ | 35,827 | $ | 48,872 | $ | 150,537 | $ | 167,223 | 90.0 | % | $ | 0 | $ | 61,489 | $ | 60,482 | $ | 35,893 | $ | 157,864 | $ | 200,000 | 78.9 | % | ||||||||||||||||||||||||||||
Neeraj Gunsagar | $ | 50,000 | $ | 48,615 | $ | 35,827 | $ | 48,872 | $ | 183,314 | $ | 200,000 | 91.7 | % | ||||||||||||||||||||||||||||||||||||||||||
Tommy McClung | $ | 0 | $ | 61,489 | $ | 60,482 | $ | 35,893 | $ | 157,864 | $ | 200,000 | 78.9 | % | ||||||||||||||||||||||||||||||||||||||||||
Brian Skutta | $ | 50,000 | $ | 48,615 | $ | 35,827 | $ | 48,872 | $ | 183,314 | $ | 200,000 | 91.7 | % | $ | 0 | $ | 92,234 | $ | 60,482 | $ | 53,839 | $ | 206,555 | $ | 300,000 | 68.9 | % | ||||||||||||||||||||||||||||
| (1) | Mr. |
| (2) | For third quarter 2018 performance, the |
| (3) | For fourth quarter 2018 performance, Messrs. Darrow and McClung received an incentive payout equal to |
| disclosed in the |
| (4) | Mr. Guthrie left the |
Preview of Changes to 2019 Cash Incentive Program
Throughout 2018, the compensation committee worked with Semler Brossy to design a 2019 cash incentive program for the NEOs and other CEO direct reports to (a) extend the performance period from quarterly to an annual program and (b) limit the use of discretion by introducing formula-driven payouts. For 2019, 70% of the annual incentive payout will be based on achievement of specified Adjusted EBITDA and revenue goals and 30% of the payout will be based on achievement of strategic objectives in 2019. The compensation committee reviewed and established both the financial and strategic goals in the first quarter of 2019. This design also took into consideration the feedback that we received in our
| 2019 Proxy Statement | 39 |
| COMPENSATION DISCUSSION AND ANALYSIS |
discussions with our stockholders. The potential payouts under the plan range from 0% to 180% of an executive’s target incentive.
Long-Term Incentive Opportunities
We use long-term incentive compensation in the form of equity awards to align the interests of our executive officers, including the 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 prior to 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 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 and stockholder dilution, as well as our CEO’s recommendations of our CEO (except with respectas to his own equity awards). EquityThe compensation committee uses its subjective judgment considering all of the factors described above to arrive at the amounts it determines are appropriate for each individual NEO. In 2018, equity grants were awarded in JuneMay 2018, with 60% of the grant-date fair value taking the form of stock options and August 2017.40% taking the form of RSUs (except for John Pierantoni, who as an SVP was awarded an equity grant with 30% of the grant-date fair value taking the form of stock options and 70% taking the form of RSUs) to ensure that a majority of value of the equity grants took the form of options, which requires improvements to stockholder value before an executive realizes any value. The stock options granted in June 2017May 2018 to the NEOs hadhave an exercise price of $18.91$9.59 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, 2018, all of the options granted in 20172018 were “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 20172018 generally are scheduled to vest over a four-year period with quarterly vesting (see the “Outstanding Equity” table for vesting details), subject to the acceleration provisions of each NEO’s employment agreement and our 2014 Plan. The table below reflects the equity grants awarded in May 2018 and excludes any RSUs granted in lieu of cash incentive discussed under “Cash Incentive Opportunity” above.
| Executive(1) | Options Granted | RSUs Granted(2) | ||||||
Chip Perry | 261,122 | 81,818 | ||||||
John Pierantoni(3) | 23,211 | 44,779 | ||||||
Michael Darrow | 90,087 | 28,227 | ||||||
Tommy McClung | 116,054 | 36,364 | ||||||
Brian Skutta | 116,054 | 36,364 | ||||||
| (1) | Mr. Guthrie left the Company in February 2018 and did not receive any equity grants during 2018. |
| (2) | Values listed in this column exclude RSUs granted as part of first and third quarter 2018 incentive payouts as discussed above. |
| (3) | In addition to the annual grant noted here, Mr. Pierantoni received 19,324 RSUs in May 2018 to retain and |
| incentivize him in his important role as Interim CFO. The compensation committee believed this was the appropriate amount and structure to retain Mr. Pierantoni given his increased responsibilities. These RSUs vest over an18-month period, with 50% vesting one year from the grant date (in May 2019) and 50% vesting after 18 months (in November 2019). |
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
“Outstanding Equity” tablePreview of Changes to the 2019 LTI Program
Throughout 2018, the compensation committee worked with Semler Brossy to design a performance-based LTI component to work alongside the options and RSUs as part of the 2019 annual LTI grant. The compensation committee considered a number of factors in making this decision, including the difficulty in forecasting long-term financial and operational goals, our historical price volatility since our initial public offering and additional feedback and perspectives from proxy advisors and stockholder discussions. For 2019, the CEO and his direct reports will receive performance units, or PSUs, that vest and deliver value based on our annualized relative total stockholder return determined by reference to our compound annual growth rate as measured against the Russell 2000 index over a three-year performance period from 2019 through 2021. The PSUs will generally vest at the end of the period based on actual performance and continued service. The design requires that we beat the Russell 2000 index for NEOs to earn above-target payout. NEOs will have the opportunity to earn anywhere between 0% and 150% of their target incentive. The CEO will receive approximately 50% of his annual 2019 LTI grant in PSUs, 25% in options and 25% in RSUs. Other NEOs will receive approximately 20% of their annual 2019 LTI grant in PSUs, 40% in options and 40% in RSUs. Our compensation committee believes that these awards will further increase the alignment between our executive officers’ and our stockholders’ interests over the long term. We will provide more disclosure and details on vesting details), subject to the acceleration provisions of each NEO’s employment agreement and our 2014 Equity Incentive Plan. The table below reflects the equity grants awardedthis grant design in June and August 2017, as well as an additional equity grant to Mr. Darrow upon hire. The table below excludes RSUs granted in lieu of cash bonus discussed under “Annual Bonus Opportunity” above.next year’s proxy statement.
| 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’ interests in their salary deferrals are 100% vested when contributed. In 2017,2018, 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’s individual account and are then invested in selected investment alternatives according to the 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, such2018, these perquisites consisted of
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 as our CEO, also receivedInterim CFO in addition to his continuing responsibilities as Chief Accounting Officer, during 2018 he was reimbursed forin-town lodging and was paid a housing and commuting allowance in connection with his employment agreement as well as taxgross-ups related to certain expenses, primarily housing and commuting expenses, as further described below in the 2017 Summary Compensation Table, which provided the benefits for the first two years of employment. The housing and commuting allowance ended in December 2017. Additionally, Mr. Guthrie, who was then our CFO, also received similar benefits in 2017 as part 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. gross up.
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, which provide certain severance benefits if a termination of employment occurs under specified circumstances and certain change in control benefits, which are described in “Executive Employment Agreements” below. Severance benefits under these agreements are conditioned on the
| 2019 Proxy Statement | 41 |
| COMPENSATION DISCUSSION AND ANALYSIS |
executive’s signing a release of claims in favor of the Company.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. 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 hisagreements. The severance and change in control benefits provided by Mr. Perry’s employment agreement acted as an inducement to his joining the Company.us. The employment agreements for the other NEOs are generally similar, as in determining the appropriate severance and change in control benefit levels for executives in general, the compensation committee considered internal parity and length of service, as well as the review of relevant market data provided by Compensiaour outside compensation consultant for other companies with whomwhich we compete for executive talent. We believe that these agreements serve as an important retention tool to ensure that personal uncertainties do not dilute our executives’ complete focus on building stockholder value and driving Companyour success.
Mr. Guthrie received no severance upon his resignation, but entered into a four-month agreement to provide consulting services. During the term of his consulting agreement Mr. Guthrie continued to vest in his equity awards.
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-end 2017,Stock Ownership Guidelines
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 expects to consider adoptingguidelines (or the individual’s date of hire for individuals hired after the effective date). As of March 31, 2019, all of our NEOs, except for Mr. Pierantoni, were in compliance with the stock ownership guidelines, ineven disregarding 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.
| 42 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
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 generallynon-deductible. However, Section 162(m) provides a reliance period exception, pursuant to which the amount 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 for performance-based compensation meeting certain requirements was repealed beginning in 2018 (other than with respect to certain grandfathered arrangements).
In addition, the regulationsdeduction limit under Section 162(m) contain a transition rule that appliesdoes not apply to companiesany compensation paid (or, in certain cases, granted) during a limitedcertain reliance period followingpursuant to a plan or agreement that existed before the corporation’s initial public offering, subject to certain requirements. Under Section 162(m), this reliance period ends upon the earliest of the following: (i) the expiration of the plan or agreement; (ii) the material modification of the plan or agreement; (iii) the issuance of all employer stock and other compensation that has been allocated under the plan; or (iv) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year after the calendar year in which the initial public offering occurs. However, the reliance period exception under Section 162(m) may be repealed or modified in the future as a result of their stock. Pursuantcertain changes that were made to this rule, certain compensation grantedSection 162(m) by the Tax Cuts and Jobs Act.
In addition, before the end of a transition period (and, with respect to restricted stock units, that also are paid out before the endenactment of the transition period) currently is not counted towardTax Cuts and Jobs Act, Section 162(m) provided a performance-based compensation exception, pursuant to which the deduction limitations of Codelimit under Section 162(m) if certain requirements are met. While certain ofdid not apply to any compensation that qualified as “performance-based compensation” under Section 162(m). Under the equity awards granted in 2017 may be eligible to be excluded fromTax Cuts and Jobs Act, the performance-based compensation exception under Section 162(m) deduction limitswas repealed for taxable years beginning after December 31, 2017, except that certain transition relief was provided for compensation paid pursuant to this transition rule, our compensation committee hasa written binding contract in effect on November 2, 2017 and which was not adopted a policymodified in any 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, compensation paid to any of our NEOs“covered employees” in excess of $1 million per taxable year generally will generallynot be nondeductibledeductible unless it qualifies for (i) the reliance period exception under Section 162(m) or (ii) the performance-based compensation exception
unless it is excluded as a result ofunder Section 162(m) under the transition rule described above. Therelief provided by the Tax Cuts and Jobs Act. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), no assurance can be given that any compensation we pay will qualify for the reliance period exception under Section 162(m) or will be eligible for such transition relief and qualify for the performance-based compensation exception under Section 162(m).
Although the compensation committee will continue to maintain flexibilitymonitor the applicability of Section 162(m) to our ongoing compensation arrangements, the compensation committee also intends to continue to provide compensation for our named executive officers in a manner consistent with our best interests and those of our stockholders (which may include providing for compensation that isnon-deductible due to the deduction limit under Section 162(m)).
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.
Accounting Treatment and Deductibility of Executive Compensation
The fair value of equity awards is established in accordance with the applicable accounting standards and the ability to pay competitiverelated compensation by not requiring allexpense is one of the factors the compensation to be deductible.committee takes into consideration in determining NEO equity awards.
| 2019 Proxy Statement | 43 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Taxation of “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 exceeds 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 20172018 and we have not agreed and are not otherwise obligated to provide any executive with such a“gross-up” gross up or other reimbursement.
Compensation and Workforce 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 DietzChristopher Claus
John Mendel
2018 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, 2018, 2017 and 2016, except for Messrs. Darrow and Skutta, for whom compensation is shown for the years ended December 31, 2018 and 2017 only (reflecting that they have been named executive officers for two years), Mr. Pierantoni, for whom compensation is shown for the year ended December 31, 2018 only (reflecting that he was our principal financial officer for one year), and Mr. McClung, for whom compensation is shown for the year ended December 31, 2018 only (reflecting that he has been named an executive officer for one year).
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Chip Perry | 2018 | 800,000 | 238,848 | (2) | 784,635 | 1,181,778 | 14,878 | (3) | 3,020,139 | |||||||||||||||||||
President and Chief | 2017 | 800,000 | 195,488 | (4) | 789,615 | 2,818,285 | 482,876 | (5) | 5,086,264 | |||||||||||||||||||
Executive Officer | 2016 | 800,000 | 825,000 | (6) | — | — | 522,755 | (7) | 2,147,755 | |||||||||||||||||||
Michael Guthrie | 2018 | 36,364 | — | — | — | 36,956 | (8) | 73,320 | ||||||||||||||||||||
Former Chief Financial Officer | 2017 | 400,000 | 105,873 | (9) | 1,084,935 | 2,134,211 | 371,527 | (10) | 4,096,546 | |||||||||||||||||||
| 2016 | 396,354 | 292,000 | (11) | 1,845,776 | 3,057,902 | 613,936 | (12) | 6,205,968 | ||||||||||||||||||||
John Pierantoni | 2018 | 356,841 | 77,318 | (13) | 457,019 | 105,048 | 62,770 | (14) | 1,058,996 | |||||||||||||||||||
Former Interim Chief Financial Officer and Chief Accounting Officer | ||||||||||||||||||||||||||||
Tommy McClung | 2018 | 400,000 | 70,868 | (15) | 409,212 | 525,234 | 9,207 | (3) | 1,414,521 | |||||||||||||||||||
Executive Vice President and Chief Technology Officer | ||||||||||||||||||||||||||||
Michael Darrow | 2018 | 400,000 | 70,868 | (16) | 331,178 | 407,713 | 9,479 | (3) | 1,219,238 | |||||||||||||||||||
Executive Vice President of Partner and OEM Development | 2017 | 333,333 | 101,922 | (17) | 1,656,702 | 2,948,302 | 9,247 | (3) | 5,049,506 | |||||||||||||||||||
Brian Skutta | 2018 | 400,000 | 106,302 | (18) | 409,212 | 525,234 | 12,500 | (3) | 1,453,248 | |||||||||||||||||||
Executive Vice President of Dealer Sales and Services | 2017 | 400,000 | 134,699 | (17) | 794,426 | 1,800,369 | 9,487 | (3) | 3,138,981 | |||||||||||||||||||
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
2017 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, 2016 and 2015, except for Mr. Gunsagar, for whom compensation is shown for the years ended December 31, 2017 and 2016 only (reflecting that he has been named an executive officer for two years), and Messrs. Darrow and Skutta for whom compensation is shown for the year ended December 31, 2017 only (reflecting that they have been named executive officers for one 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 | ||||||||||||||||||||||||||||||||
| (1) | The amounts reported represent the aggregate grant-date fair value of the |
| (2) | Amount represents |
| (3) | Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits. |
| (4) | Amount represents discretionary bonus paid in March 2018 for performance during the fourth quarter of 2017. |
Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including, among |
| other things, the costs related to housing costs in Santa Monica, California utilized by Mr. Perry, and transportation costs in connection with Mr. Perry commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Perry received $243,899 in taxgross-ups from the Company in 2017 related to expenses paid on Mr. Perry’s behalf by the Company, primarily housing and commuting expenses. |
Amount represents discretionary bonus paid in March 2017 for performance during 2016. |
Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal benefits, including, among other things, the costs related to housing costs in Santa Monica, California utilized by Mr. Perry, and transportation costs in connection with Mr. Perry commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid |
|
| related to certain expenses. Mr. Perry received $263,772 in taxgross-ups from the Company in 2016 related to expenses paid on Mr. Perry’s behalf by the Company, primarily housing and commuting expenses. |
| (8) | Amount reflects medical expense reimbursements of $5,397 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Guthrie, and transportation costs in connection with Mr. Guthrie commuting to our principal executive offices in Santa Monica, California. |
| Tax reimbursements were paid related to certain expenses. Mr. Guthrie received $16,866 in taxgross-ups from the Company in 2018 related to expenses paid on Mr. Guthrie’s behalf by the Company, primarily housing and commuting expenses. |
| (9) | Amount reflects discretionary bonuses paid in November 2017 and March 2018 for performance during the third and fourth quarters of 2017, respectively. |
Amount reflects medical expense reimbursements of $52,716 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Guthrie, and transportation costs in connection with Mr. Guthrie commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Guthrie received $170,566 in taxgross-ups from the Company in 2017 related to expenses paid on Mr. Guthrie’s behalf by the Company, primarily housing and commuting expenses. |
Amount reflects discretionary bonuses paid in June 2016, September 2016, November 2016, and March 2017 for performance during the first, second, third, and fourth quarters of 2016, respectively. |
Amount reflects medical expense reimbursements of $42,505 and the aggregate incremental costs of perquisites and other personal benefits, including the costs related to housing costs in Santa Monica, California utilized by Mr. Guthrie, and transportation costs in connection with Mr. Guthrie commuting to our principal executive offices in Santa Monica, California. Tax reimbursements were paid related to certain expenses. Mr. Guthrie received $396,290 in tax |
| gross-ups from the Company in 2016 related to expenses paid on Mr. Guthrie’s behalf by the Company, primarily housing and commuting expenses. |
Amount reflects discretionary bonuses paid to Mr. |
| (14) |
| Amount reflects 401(k) employer matching contributions of $7,950 and the aggregate incremental costs of perquisites and other personal |
| |
2017 Grants of Plan-Based Awards Table
| Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/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 | |||||||||||||||
|
| |
Outstanding Equity Awards at FiscalYear-End
The following table provides information regarding equity awards held by our named executive officers at December 31, 2017.
| 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 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 | |||||||||||||||||||||||||
| 45 |
| COMPENSATION DISCUSSION AND ANALYSIS |
| (15) | Amount reflects discretionary bonuses paid to Mr. McClung in |
| (16) | Amount reflects discretionary bonuses paid to Mr. Darrow in |
| (17) | Amount reflects discretionary bonuses paid in |
| (18) | Amount reflects discretionary bonuses paid to Mr. Skutta in |
for performance during the second quarter of 2018.
2017 Option Exercises and Stock Vested2018 Grants of Plan-Based Awards Table
The following table provides information, on an aggregate basis, regarding (i) stock options exercised during 2017, 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 units 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) | 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 | — | — | 170,213 | 2,576,775 | 5/12/2018 | 81,818 | (2) | 261,122 | (3) | 9.59 | 1,966,413 | |||||||||||||||||||||||||
Michael Guthrie | 652,927 | 6,461,020 | 121,907 | 1,855,643 | ||||||||||||||||||||||||||||||||
John Pierantoni | 5/12/2018 | 44,779 | (4) | 23,211 | (3) | 9.59 | 534,478 | |||||||||||||||||||||||||||||
| 6/13/2018 | 1,506 | (5) | — | — | 16,099 | |||||||||||||||||||||||||||||||
| 11/27/2018 | 1,087 | (6) | — | — | 11,490 | |||||||||||||||||||||||||||||||
Tommy McClung | 5/12/2018 | 36,364 | (2) | 116,054 | (3) | 9.59 | 873,964 | |||||||||||||||||||||||||||||
| 11/27/2018 | 5,722 | (6) | — | — | 60,482 | |||||||||||||||||||||||||||||||
Michael Darrow | — | — | 13,926 | 188,878 | 5/12/2018 | 28,227 | (2) | 90,087 | (3) | 9.59 | 678,410 | |||||||||||||||||||||||||
Neeraj Gunsagar | 124,023 | 1,331,751 | 116,922 | 1,792,964 | ||||||||||||||||||||||||||||||||
| 11/27/2018 | 5,722 | (6) | — | — | 60,482 | |||||||||||||||||||||||||||||||
Brian Skutta | 105,468 | 1,156,725 | 33,375 | 478,394 | 5/12/2018 | 36,364 | (2) | 116,054 | (3) | 9.59 | 873,964 | |||||||||||||||||||||||||
| 11/27/2018 | 5,722 | (6) | — | — | 60,482 | |||||||||||||||||||||||||||||||
| (1) | Amounts reflect aggregate grant date fair value |
| (2) | Represents restricted stock units that vest over four years, with 1/16th of the total |
| (3) | The stock option award vests over four years, with 1/48th of |
| (4) | Consists of: (a) a 25,455 restricted stock unit award that vest |
| (5) | Represents restricted stock units that fully vested on July 16, 2018. |
| (6) | Represents restricted stock units that vest over one year, with 1/4th of the total number of shares subject to the restricted stock units vesting on January 15, 2019 and an additional 1/4th vesting quarterly thereafter. Vesting is subject to continued service. |
| 46 | |
| COMPENSATION DISCUSSION AND ANALYSIS |
Outstanding Equity Awards at FiscalYear-End
The following table provides information regarding equity awards held by our named executive officers at December 31, 2018.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price Per Share | Option Expiration Date | Number of Shares or Units of Stock that have Not Vested | Market Value of Shares or Units of Stock that have Not Vested | ||||||||||||||||||||||||||||
| Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||||||||||||||||
Chip Perry | 12/14/2015 | (1 | ) | 1,303,333 | 536,667 | $ | 8.02 | 12/13/2025 | ||||||||||||||||||||||||
| 12/14/2015 | (2 | ) | 165,000 | $ | 1,494,900 | |||||||||||||||||||||||||||
| 6/10/2017 | (3 | ) | 60,750 | 101,250 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (4 | ) | 15,000 | 135,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (5 | ) | 19,670 | $ | 178,210 | |||||||||||||||||||||||||||
| 7/28/2017 | (6 | ) | 3,834 | $ | 34,736 | |||||||||||||||||||||||||||
| 5/12/2018 | (7 | ) | 43,520 | 217,602 | $ | 9.59 | 5/12/2028 | |||||||||||||||||||||||||
| 5/12/2018 | (8 | ) | 71,591 | $ | 648,614 | |||||||||||||||||||||||||||
John Pierantoni | 2/7/2014 | (9 | ) | 68,448 | — | $ | 9.255 | 2/7/2024 | ||||||||||||||||||||||||
| 5/15/2014 | (10 | ) | 63,608 | 2,766 | $ | 12.81 | 5/15/2024 | |||||||||||||||||||||||||
| 10/1/2015 | (11 | ) | 4,283 | $ | 38,804 | |||||||||||||||||||||||||||
| 1/27/2016 | (12 | ) | 2,665 | $ | 24,145 | |||||||||||||||||||||||||||
| 7/1/2016 | (13 | ) | 11,895 | $ | 107,769 | |||||||||||||||||||||||||||
| 8/11/2016 | (14 | ) | 45,174 | 27,106 | $ | 10.85 | 8/11/2026 | |||||||||||||||||||||||||
| 6/10/2017 | (3 | ) | 4,800 | 43,200 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (4 | ) | 10,638 | 17,730 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (5 | ) | 2,950 | $ | 26,727 | |||||||||||||||||||||||||||
| 5/12/2018 | (7 | ) | 3,868 | 19,343 | $ | 9.59 | 5/12/2028 | |||||||||||||||||||||||||
| 5/12/2018 | (8 | ) | 22,274 | $ | 201,802 | |||||||||||||||||||||||||||
| 5/12/2018 | (15 | ) | 19,324 | $ | 175,075 | |||||||||||||||||||||||||||
| 11/27/2018 | (16 | ) | 1,087 | $ | 9,848 | |||||||||||||||||||||||||||
Tommy McClung | 2/7/2014 | (9 | ) | 35,000 | — | $ | 9.255 | 2/7/2024 | ||||||||||||||||||||||||
| 2/7/2014 | (9 | ) | 1,950 | — | $ | 9.255 | 2/7/2024 | |||||||||||||||||||||||||
| 2/7/2014 | (9 | ) | 11,950 | — | $ | 9.255 | 2/7/2024 | |||||||||||||||||||||||||
| 5/15/2014 | (10 | ) | 11,308 | 491 | $ | 12.81 | 5/15/2024 | |||||||||||||||||||||||||
| 10/1/2015 | (11 | ) | 17,131 | $ | 155,207 | |||||||||||||||||||||||||||
| 1/27/2016 | (12 | ) | 10,660 | $ | 96,580 | |||||||||||||||||||||||||||
| 7/1/2016 | (13 | ) | 28,125 | $ | 254,813 | |||||||||||||||||||||||||||
| 8/11/2016 | (14 | ) | 187,499 | 112,501 | $ | 10.85 | 8/11/2026 | |||||||||||||||||||||||||
| 6/10/2017 | (3 | ) | 12,300 | 110,700 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (4 | ) | 21,276 | 35,460 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (5 | ) | 21,525 | $ | 195,017 | |||||||||||||||||||||||||||
| 7/28/2017 | (6 | ) | 958 | $ | 8,679 | |||||||||||||||||||||||||||
| 8/16/2017 | (4 | ) | 1,250 | 11,250 | $ | 16.62 | 8/16/2027 | |||||||||||||||||||||||||
| 5/12/2018 | (7 | ) | 19,342 | 96,712 | $ | 9.59 | 5/12/2028 | |||||||||||||||||||||||||
| 5/12/2018 | (8 | ) | 31,819 | $ | 288,280 | |||||||||||||||||||||||||||
| 11/27/2018 | (16 | ) | 5,722 | $ | 51,841 | |||||||||||||||||||||||||||
| 2019 Proxy Statement | 47 |
| COMPENSATION DISCUSSION AND ANALYSIS |
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price Per Share | Option Expiration Date | Number of Shares or Units of Stock that have Not Vested | Market Value of Shares or Units of Stock that have Not Vested | ||||||||||||||||||||||||||||
| Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||||||||||||||||
Michael Darrow | 3/1/2017 | (17 | ) | 79,166 | 120,834 | $ | 14.61 | 3/1/2027 | ||||||||||||||||||||||||
| 3/1/2017 | (18 | ) | 62,500 | $ | 566,250 | |||||||||||||||||||||||||||
| 6/10/2017 | (4 | ) | 9,000 | 81,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 7/28/2017 | (6 | ) | 958 | $ | 8,679 | |||||||||||||||||||||||||||
| 8/16/2017 | (4 | ) | 9,000 | 81,000 | $ | 16.62 | 8/16/2027 | |||||||||||||||||||||||||
| 8/16/2017 | (5 | ) | 5,532 | $ | 50,120 | |||||||||||||||||||||||||||
| 5/12/2018 | (7 | ) | 15,014 | 75,073 | $ | 9.59 | 5/12/2028 | |||||||||||||||||||||||||
| 5/12/2018 | (8 | ) | 24,699 | $ | 223,773 | |||||||||||||||||||||||||||
| 11/27/2018 | (16 | ) | 5,722 | $ | 51,841 | |||||||||||||||||||||||||||
Brian Skutta | 3/14/2016 | (19 | ) | 112,500 | 119,532 | $ | 6.03 | 3/14/2026 | ||||||||||||||||||||||||
| 3/14/2016 | (20 | ) | 42,188 | $ | 382,223 | |||||||||||||||||||||||||||
| 6/10/2017 | (3 | ) | 21,276 | 35,460 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (4 | ) | 13,000 | 117,000 | $ | 18.91 | 6/10/2027 | |||||||||||||||||||||||||
| 6/10/2017 | (5 | ) | 24,650 | $ | 223,329 | |||||||||||||||||||||||||||
| 7/28/2017 | (6 | ) | 958 | $ | 8,679 | |||||||||||||||||||||||||||
| 8/16/2017 | (4 | ) | 1,250 | 11,250 | $ | 16.62 | 8/16/2027 | |||||||||||||||||||||||||
| 5/12/2018 | (7 | ) | 19,342 | 96,712 | $ | 9.59 | 5/12/2028 | |||||||||||||||||||||||||
| 5/12/2018 | (8 | ) | 31,819 | $ | 288,280 | |||||||||||||||||||||||||||
| 11/27/2018 | (16 | ) | 5,722 | $ | 51,841 | |||||||||||||||||||||||||||
| (1) | The remaining unvested options vest in fourteen equal monthly installments beginning on January 1, 2019, subject to continued service with us. |
| (2) | The award vests in four equal quarterly installments beginning on March 1, 2019, subject to continued service with us. |
| (3) | The remaining unvested options vest in thirty equal monthly installments beginning on January 15, 2019, subject to continued service with us. |
| (4) | The remaining unvested options vest 20% on June 15, 2019, 30% on June 15, 2020, and 40% on June 15, 2021, subject to continued service with us. |
| (5) | The award vests in ten equal quarterly installments beginning on March 15, 2019, subject to continued service with us. |
| (6) | The award vests in three equal quarterly installments beginning on February 15, 2019, subject to continued service with us. |
| (7) | The remaining unvested options vest in forty equal monthly installments beginning on January 15, 2019, subject to continued service with us. |
| (8) | The award vests in fourteen equal quarterly installments beginning on January 15, 2019, subject to continued service with us. |
| (9) | Shares subject to the option are fully vested and immediately exercisable. |
| (10) | The remaining unvested options vest in two equal monthly installments beginning on January 1, 2019, subject to continued service with us. |
| (11) | The award vests in three equal quarterly installments beginning on March 15, 2019, subject to continued service with us. |
| (12) | The award vests in four equal quarterly installments beginning on March 15, 2019, subject to continued service with us. |
| (13) | The award vests in six equal quarterly installments beginning on March 15, 2019, subject to continued service with us. |
| (14) | The remaining unvested options vest in eighteen equal monthly installments beginning on January 24, 2019, subject to continued service with us. |
| 48 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
| (15) | The award vests in two equal installments on May 15, 2019 and November 15, 2019, subject to continued service with us. |
| (16) | The award vests in four equal quarterly installments beginning on January 15, 2019, subject to continued service with us. |
| (17) | The remaining unvested options vest in twenty-nine equal monthly installments beginning on January 30, 2019, subject to continued service with us. |
| (18) | The award vests in ten equal quarterly installments beginning on February 15, 2019, subject to continued service with us. |
| (19) | The remaining unvested options vest in seventeen equal monthly installments beginning on January 15, 2019, subject to continued service with us. |
| (20) | The award vests in six equal quarterly installments beginning on February 15, 2019, subject to continued service with us. |
2018 Option Exercises and Stock Vested Table
The following table provides information, on an aggregate basis, regarding (i) stock options exercised during 2018, 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 units that vested during 2018.
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||
Chip Perry | — | — | 188,207 | 2,086,126 | ||||||||||||
Michael Guthrie | 658,141 | 971,783 | 38,151 | 408,329 | ||||||||||||
John Pierantoni | — | — | 26,748 | 299,786 | ||||||||||||
Tommy McClung | — | — | 68,211 | 765,678 | ||||||||||||
Michael Darrow | — | — | 32,018 | 352,751 | ||||||||||||
Brian Skutta | — | — | 43,808 | 484,471 | ||||||||||||
| (1) | The value realized on exercise is calculated as the difference between the actual sales price of the shares underlying the options exercised and the applicable exercise price of those options. |
| (2) | The amount shown is the total gross dollar value realized upon the vesting of the restricted stock units, based on the closing price of our common stock on the day prior to the vest date. |
Executive Employment Arrangements
We have employment agreements with Messrs. Perry, Darrow, GunsagarMcClung and Skutta, and we previously had an employment agreementagreements with Mr.Messrs. Guthrie and Pierantoni while he was CFO.they served as our Chief Financial Officer and Interim Chief Financial Officer, respectively. These agreements provide forat-will employment and generally include the named executive officer’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 Payments upon Termination, Change in Control or Certain Other Events” below.
Chip Perry
For 2017,2018, Mr. Perry, our President and Chief Executive Officer, 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 Employment Agreement”) on November 16, 2015 with Mr. Perry. Pursuant to the Perry Employment Agreement, beginning in 2016, Mr. Perry is eligible for an annual performance-based bonus opportunity of 100% of his base salary, a minimum annual bonus opportunity of 50% of his base salary for achievement of minimum performance levels and a maximum annual bonus opportunity of 200% of his base salary for achievement
| 2019 Proxy Statement | 49 |
| COMPENSATION DISCUSSION AND ANALYSIS |
of maximum performance levels. During the first two years of his employment (Mr. Perry’stwo-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 is also eligible to participate in 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 Payments upon Termination, Change in Control or Certain Other Events” below for additional information on the Perry Employment Agreement.
Michael Guthrie
For 2017,2018, Mr. Guthrie, our then Chief Financial Officer until his resignation on February 1, 2018, had an annual base salary of $400,000 and was eligible for an annual performance-based bonus.
We entered into an employment agreement on October 25, 2013 with Mr. Guthrie (the “Guthrie Employment Agreement”). Pursuant to the Guthrie Employment Agreement, Mr. Guthrie 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 executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees. The Guthrie Employment Agreement provided that all of his current and future stock options would permit exercise via a net exercise feature and, with respect to stock options granted prior to our initial public offering, early exercisable as to unvested shares, subject to our right to repurchase any unvested shares upon termination of employment.
Please see “Potential Payments upon Termination, Change in Control or Certain Other Events” below for additional information on the Guthrie Employment Agreement.
Michael Darrow, Neeraj Gunsagar and Brian SkuttaJohn Pierantoni
For 2017, each of Messrs. Darrow, Gunsagar2018, Mr. Pierantoni, our Chief Accounting Officer from 2013 until his resignation on April 1, 2019, and Skuttaour Interim Chief Financial Officer from February 1, 2018 until his resignation, had an annual base salary of $400,000$350,000 until May 7, 2018, when it was increased to $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 Employment Agreement”) and with Mr. Skutta as of February 16, 2016, which was amended as of March 18, 2016 (as amended, the “Skutta“Pierantoni Employment 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 executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees.
Please see “Potential Payments upon Termination, Change in Control or Certain Other Events” below for additional information on the Pierantoni Employment Agreement.
Michael Darrow, Tommy McClung and Brian Skutta
For 2018, each of Messrs. Darrow, McClung and Skutta had an annual base salary of $400,000 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. McClung is our Chief Technology Officer and Executive Vice President. Mr. Skutta is our Executive Vice President, Dealer Sales and Service.
We entered into an employment agreement with Mr. Darrow as of February 28, 2017 (the “Darrow Employment Agreement”), with Mr. McClung as of January 12, 2017 (the “McClung Employment
| 50 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
Agreement”) and with Mr. Skutta as of February 16, 2016, which was amended as of March 18, 2016 (as amended, the “Skutta Employment Agreement”). Pursuant to their employment agreements, each of Messrs. Darrow, McClung and Skutta is 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 executive benefit plans and programs of the Company on the same terms and conditions as other similarly-situated employees.
Please see “Potential Payments upon Termination, Change in Control or Certain Other Events” below for additional information on the Darrow Employment Agreement, the GunsagarMcClung Employment Agreement and the Skutta Employment Agreement.
Potential Payments upon Termination, Change in Control or Certain Other Events
Victor “Chip”Chip Perry
The following summary is qualified in its entirety by reference to the Perry Employment Agreement. Pursuant to the terms of the Perry Employment Agreement, if we terminate Mr. Perry’s employment for a reason other than cause (as such term is defined in the Perry Employment Agreement and summarized below), or he resigns from his 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. Perry signing a release of claims agreement with the Company and his continued compliance with a confidential information agreement entered into with the Company, he will receive (i) a lump sum payment equal to 200% of the sum of his then-current base salary and target annual bonus opportunity; (ii) if such termination occurs prior to 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 such termination occurs 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’s employment with the Company terminates 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. Perry (or his estate) signing a release of claims agreement with the Company and his continued compliance with a confidential information agreement entered into with
the Company, he will receive immediate vesting of each of his then-outstanding equity awards.
In the event of a change in control that occurs while Mr. Perry remains employed by 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 Mr. Perry’s equity awards that both are outstanding as of such date and were granted to him at least 90 days prior to the change in control will vest and, if applicable, become fully exercisable.
The Perry Employment Agreement provides that any severance payments and benefits payable to Mr. Perry will 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” under Section 280G of the U.S. tax codeCode and would be subject to the applicable excise tax, then Mr. Perry’s severance and other benefits will be either: (i) delivered in full; or (ii) delivered to such lesser extent which would result in no portion of such benefits being subject to the excise tax, whichever results in the receipt by Mr. Perry on anafter-tax basis of the greatest amount of benefits.
Michael Guthrie, John Pierantoni, Michael Darrow, Neeraj GunsagarTommy McClung and Brian Skutta
The severance and change in control-related terms of the Guthrie Employment Agreement, the DarrowPierantoni Employment Agreement, the GunsagarDarrow Employment
| 2019 Proxy Statement | 51 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Agreement, the McClung Employment Agreement and the Skutta Employment Agreement (collectively, the “Executive Employment 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, Darrow, GunsagarMcClung and Skutta, as applicable, as the “Executive”. “Executive.”
Effective February 1, 2018, Mr. Guthrie resigned from his position as the Company’s Chief Financial Officer and Mr. Pierantoni was appointed as the Company’s Interim Chief Financial Officer. Mr. Guthrie has agreed to provide consulting services to the Company for a four-month 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 Guthrie Employment Agreement as it was in effect on the last day of 2017.Mr. Guthrie’s employment.
Effective April 1, 2019, Mr. Pierantoni resigned from his positions as the Company’s Interim Chief Financial Officer and Chief Accounting Officer and Charles Thomas was appointed as the Company’s principal financial officer and principal accounting officer. The Company does not have an employment agreement with Mr. Thomas. Mr. Pierantoni has agreed to provide consulting services to the Company for aone-year period following his departure in support of the management transition, during which consulting arrangement he will continue to vest in his equity awards,but he did not otherwise receive any severance benefits in connection with his resignation. The description below relates to the Pierantoni Employment Agreement as it was in effect on the last day of Mr. Pierantoni’s employment. The following summary is qualified in its entirety by reference to the Executive Employment Agreements.
Under the Executive Employment Agreements, if we terminate the Executive’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, such termination occurs prior to 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 and 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 commencing immediately after his separation of service through the date that is six months following 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 Severance 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. Guthrie and Darrow, at our election, direct payment of the COBRA premiums to the insurance provider, up to the full Executive Severance Period (the “Direct COBRA Benefits” and, collectively with the COBRA Reimbursements, the “COBRA Coverage”). 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 such payment, during the Executive Severance Period (which the Executive may, but does not have to, use toward his health care continuation costs). If we cannot provide these cash payments in
| 52 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
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’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 and Darrow only, the 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, at our election, the Direct COBRA Benefits) (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’s employment for a reason other than cause, or the Executive resigns from his employment for good reason, and in each case, such 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 and Darrow only, the continued compliance with thenon-solicitation provisions in his 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 to the change in control; and (iii) the COBRA Reimbursement or, for Mr. Guthrie, at our election, the Direct COBRA Benefits (or the cash payments in lieu thereof, as described above, unless doing so would violate applicable laws).
In the event of 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’s equity awards that
both are outstanding as of such date and were granted to him at least 90 days prior to such 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” under Section 280G of the U.S. tax codeCode and would be subject to the applicable excise tax, then the Executive’s severance and other benefits will be either: (i) delivered in full; or (ii) delivered to such lesser extent which 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.
Definitions
Except as noted, the definitions below apply to the Perry Employment Agreement and each Executive Employment Agreement, and each agreement refers to Messrs. Perry, Guthrie, Pierantoni, Darrow, GunsagarMcClung and Skutta, 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 are qualified in their entirety by reference to the Perry Employment Agreement and the Executive Employment Agreements, as applicable.
As used in this section, “cause” means: (i) the Executive’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, with respect to Mr. Perry) (other than a failure resulting from the Executive’s disability) after written notice thereof from us describing (with
| 2019 Proxy Statement | 53 |
| COMPENSATION DISCUSSION AND ANALYSIS |
specificity, with respect to Mr. Perry) his failure to perform such duties or responsibilities and 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’s violation of any federal or state law or regulation applicable to our business or our affiliates; (iv) the Executive’s breach (material breach, with respect to Mr. Perry) of any confidentiality agreement or invention assignment agreement; or (v) with respect to Messrs. Guthrie, Pierantoni, Darrow, GunsagarMcClung and Skutta, the Executive being convicted of, or entering a plea of nolo contendere to, any crime; 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. The Perry Employment Agreement and each Executive Employment Agreement note, for purposes of clarity, that the Executive’s termination of employment due to death or disability is not, by itself, deemed to be a termination by the Company other than for cause or a resignation for good reason.
As used in this section, “change in control” means: (i) a change in our ownership which 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 the stock of the Company will not be considered a change in control and provided, further, that our Board of Directors may, in its reasonable judgment, determine that any such change in the ownership of the 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 such change in ownership also will not be considered a change in control; or (ii) subject to certain exclusions specified in the Perry Employment Agreement and the Executive Employment Agreements, a change in the ownership of a substantial portion of our assets which 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 such 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 acquisition or acquisitions, provided, that, our Board of Director may determine 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) its sole purpose is to change the state of the Company’s incorporation, or (ii) 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’s securities immediately before such transaction. In addition, a transaction will not be deemed a change in control unless the transaction qualifies as a change in control event within the meaning of Section 409A of the Code.
As used in this section, “disability” means the 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; or (ii) is, by reason of any medically determinable physical or mental impairment which 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” means the Executive’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’s consent: (i) with respect to the Executive Employment Agreements only, a material reduction in the Executive’s base salary which reduction is not applicable to a majority of the Company’s senior management, excluding the substitution of substantially equivalent compensation and benefits; with respect to the Perry Employment Agreement only, a reduction in the Executive’s base salary, excluding the substitution of substantially equivalent compensation and benefits, which reduction, as a percentage of base salary, is of a
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
Agreement only, a reduction in the Executive’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’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 Officer remains as such following an acquisition where we become a wholly owned subsidiary of an acquirer, but is not made the Chief Executive Officer of the acquiring corporation), will not constitute “good reason”; with respect to the Perry Employment Agreement only, a material reduction of the Executive’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, in each case, which results in a material diminution of Executive’s 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 Officer
remains as such following an acquisition where we become a wholly owned subsidiary of an acquirer, but
is not made the Chief Executive Officer of the acquiring corporation), will not constitute “good reason”,; (iii) a material change (with respect to Mr. Perry only, this is any actual change) in the geographic location of the Executive’s primary work facility or location; provided, that a relocation of 50 miles or less from the Executive’s then presentthen-present location or to the Executive’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 subclauses (iv) through (vi): (iv) the Executive reportingbeing required to anyonereport to any person other than the Board of Directors or, if the Company is acquired, either the Board of Directors or the board of directors of an acquiring company,company; (v) the failure by a successor entity of the Company to assume the Perry Employment Agreement,Agreement; or (vi) any other material breach of the Perry Employment Agreement. In order for 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” within 90 days of the initial existence of the grounds for “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. Guthrie and Darrow only, any resignation for “good reason” must occur within two years of the initial existence of the acts or omissions constituting the grounds for “good reason”.reason.”
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
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 officers serving as of the end of 20172018 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 20172018 (December 29, 2017)31, 2018), and the price per share of the Company’s common stock is the closing price of the Company’s common stock on that date of $11.20.$9.06. There can be no assurances that a triggering event would produce the same or similar results as those estimated below if such event occurs on any other date or at any other price, or if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments of benefits, any actual payments and benefits may be different.
| Potential Payments Upon | Potential Payments Upon | |||||||||||||||||||||||||||||||||||
| Termination other than for Cause or a Termination for Good Reason | Change in Control ($)(5) | Death or Disability ($) | Termination other than for Cause or a Termination for Good Reason | Change in Control ($)(5) | Death or Disability ($) | |||||||||||||||||||||||||||||||
| Name | Benefit | Prior to Change in Control ($) | Upon or Following Change in Control ($) | Benefit | Prior to Change in Control ($) | Upon or Following Change in Control ($) | ||||||||||||||||||||||||||||||
Chip Perry | Cash Severance(1) | 3,200,000 | 3,200,000 | — | — | 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) | Vesting Acceleration of Equity Awards(2) | 929,141 | (3) | 1,458,797 | (4) | 609,390 | 1,458,797 | (4) | |||||||||||||||||||||
| Continued Coverage of Employee Benefits | — | — | — | — | Continued Coverage of Employee Benefits | — | — | — | — | |||||||||||||||||||||||||||
| Total Benefits | 8,655,516 | 10,474,022 | 3,817,846 | 7,274,022 | Total Benefits | 4,129,141 | 4,658,797 | 609,390 | 1,458,797 | |||||||||||||||||||||||||||
Michael Guthrie | Cash Severance(6)(7) | 400,000 | 400,000 | — | — | |||||||||||||||||||||||||||||||
John Pierantoni | Cash Severance(6) | 360,500 | 360,500 | — | — | |||||||||||||||||||||||||||||||
| Vesting Acceleration of Equity Awards(2) | 898,969 | (7) | 1,296,531 | (8) | 397,562 | 1,296,531 | (4) | |||||||||||||||||||||||||||||
| Continued Coverage of Employee Benefits(9) | 28,218 | 28,218 | — | 28,218 | ||||||||||||||||||||||||||||||||
| Total Benefits | 1,287,687 | 1,685,249 | 397,562 | 1,324,749 | ||||||||||||||||||||||||||||||||
Tommy McClung | Cash Severance(6) | 400,000 | 400,000 | — | — | |||||||||||||||||||||||||||||||
| Vesting Acceleration of Equity Awards(2) | 1,507,111 | (8) | 3,188,895 | (9) | 1,681,795 | 3,188,895 | (4) | Vesting Acceleration of Equity Awards(2) | 642,553 | (7) | 1,050,416 | (8) | 407,863 | 1,050,416 | (4) | |||||||||||||||||||||
| Continued Coverage of Employee Benefits(10) | 27,164 | 27,164 | — | 27,164 | Continued Coverage of Employee Benefits(9) | 28,218 | 28,218 | — | 28,218 | |||||||||||||||||||||||||||
| Total Benefits | 1,934,264 | 3,616,059 | 1,681,795 | 3,216,059 | Total Benefits | 1,070,771 | 1,478,634 | 407,863 | 1,078,634 | |||||||||||||||||||||||||||
Michael Darrow | Cash Severance(6) | 200,000 | 200,000 | — | — | Cash Severance(6) | 266,667 | 266,667 | — | — | ||||||||||||||||||||||||||
| Vesting Acceleration of Equity Awards(2) | 319,088 | (8) | 1,091,776 | (9) | 772,688 | 1,091,776 | (4) | Vesting Acceleration of Equity Awards(2) | 2,356,461 | (7) | 2,356,461 | (8) | 570,227 | 2,356,461 | (4) | |||||||||||||||||||||
| Continued Coverage of Employee Benefits(10) | 13,582 | 13,582 | — | 13,582 | Continued Coverage of Employee Benefits(9) | 18,812 | 18,812 | — | 18,812 | |||||||||||||||||||||||||||
| Total Benefits | 532,670 | 1,305,358 | 772,688 | 1,105,358 | Total Benefits | 2,641,939 | 2,641,939 | 570,227 | 2,375,273 | |||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
| Potential Payments Upon | Potential Payments Upon | |||||||||||||||||||||||||||||||||||
| Termination other than for Cause or a Termination for Good Reason | Change in Control ($)(5) | Death or Disability ($) | Termination other than for Cause or a Termination for Good Reason | Change in Control ($)(5) | Death or Disability ($) | |||||||||||||||||||||||||||||||
| Name | Benefit | Prior to Change in Control ($) | Upon or Following Change in Control ($) | Benefit | Prior to Change in Control ($) | Upon or Following Change in Control ($) | ||||||||||||||||||||||||||||||
Brian Skutta | Cash Severance(6) | 266,667 | 266,667 | — | — | Cash Severance(6) | 333,333 | 333,333 | — | — | ||||||||||||||||||||||||||
| Vesting Acceleration of Equity Awards(2) | 875,964 | (8) | 2,253,260 | (9) | 1,377,296 | 2,253,260 | (4) | Vesting Acceleration of Equity Awards(2) | 643,723 | (7) | 946,353 | (8) | 302,629 | 946,353 | (4) | |||||||||||||||||||||
| Continued Coverage of Employee Benefits(10) | 18,109 | 18,109 | — | 18,109 | Continued Coverage of Employee Benefits(9) | 23,515 | 23,515 | — | 23,515 | |||||||||||||||||||||||||||
| Total Benefits | 1,160,740 | 2,538,036 | 1,377,296 | 2,271,369 | Total Benefits | 1,000,571 | 1,303,201 | 302,629 | 969,867 | |||||||||||||||||||||||||||
| (1) | Reflects cash severance equal to 200% of the sum of Mr. Perry’s then-current base salary and target annual bonus opportunity. |
| (2) | Reflects the aggregate value of unvested option grants with an exercise price less than |
| (3) | Pursuant to the terms of the Perry Employment Agreement, if Mr. Perry is terminated for a reason other than cause or he resigns from his employment for good reason, then, subject to Mr. Perry signing a release of claims agreement with the Company and his continued compliance with a confidential information agreement entered into with the Company, and if such termination occurs prior to a change in control of the Company and on or after the |
| (4) | Reflects the value of the immediate vesting of 100% of each then-outstanding equity awards. |
| (5) | In the event of a change in control that occurs while the Executive remains employed by us and if he remains |
| employed with us (or our successor) as of the first day immediately following the12-month anniversary of the |
| closing of the change in control, then 100% of any of the Executive’s equity awards that both are outstanding as of such date and were granted to him at least 90 days prior to the change in control will vest and, if applicable, become fully exercisable. |
| (6) | Reflects the continuing payments of Executive’s base salary during the Executive’s Severance Period. Severance Period is defined as the period of time commencing immediately after Executive’s separation of service from the Company through the date that is six months following such separation, plus an additional two months for every fully completed year of service; provided, however, that in all cases, the Severance Period will end no later than on the twelve month anniversary of the date of Executive’s termination of employment. |
| (7) |
| Reflects the value of the immediate vesting of each of then-outstanding equity awards as to the number of shares that otherwise would have vested had Executive remained our employee through the12-month anniversary of the termination date. |
Reflects the value of the immediate vesting as to 100% of each then-outstanding equity awards that are both outstanding as of Executive’s termination date and were granted to him at least 90 days prior to the change in control. |
| (9) | Reflects the estimated cost of COBRA or benefits continuation coverage, as applicable, during the Severance Period. |
2015 Inducement Equity Incentive Plan
The 2015 Inducement Equity Incentive Plan, or the Inducement Plan, was adopted in 2015 without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market Rules. No shares remain available for grant under the Inducement Plan, and no grants were made under the Inducement Plan in 2018.
| |
| COMPENSATION DISCUSSION AND ANALYSIS |
2015 Inducement Equity Incentive Plan
The 2015 Inducement Equity Incentive Plan, or the Inducement Plan, was adopted in 2015 without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. No shares remain available for grant under the Inducement Plan, and no grants were made under the Inducement Plan in 2017. 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” or “change in control” as defined under the Inducement Plan.
2014 Equity Incentive Plan
Our 2014 Equity Incentive Plan, or the 2014 Plan, provides that in the event of a “merger” or “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 corporation or its parent or subsidiary does not assume or substitute an equivalent award for any outstanding award, then such award will fully vest, all restrictions on such award will lapse, all performance goals or other vesting criteria applicable to such award will be deemed achieved at 100% of target levels and such 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 units 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 units 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 Stock Plan, or the 2008 Stock Plan, provide that in the event of a merger“merger” or change“change in control,control” as defined therein, each outstanding award will be treated as the administrator determines, and unless determined otherwise by the administrator, will be assumed or an equivalent award substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event thatIf 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 expiration of such period for no consideration, unless otherwise determined by the administrator. No shares remain available for grant under the 2005 Stock Plan or the 2008 Stock Plan, and no grants were made under those plans in 2018.
|
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, 2017:2018:
| 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 | 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) | 17,650,614 | (2) | $ | 12.96 | (3) | 4,944,880 | (4) | ||||||||||
Equity compensation plans not approved by stockholders(5) | 3,298,979 | $ | 10.27 | — | 3,298,979 | $ | 10.27 | — | ||||||||||||||||
Total | 22,457,633 | $ | 12.51 | (3) | 2,323,819 | (4) | 20,949,593 | $ | 12.39 | (3) | 4,944,880 | (4) | ||||||||||||
| 58 | | 2019 Proxy Statement |
| COMPENSATION DISCUSSION AND ANALYSIS |
| (1) | The 2014 Plan contains an evergreen provision, pursuant to which the number of shares of common stock available for issuance under the 2014 Plan can be increased on the first day of each fiscal year, equal to the least of (a) 10,000,000 shares, (b) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year and (c) such other amount as our Board |
| (2) | Includes |
| (3) | Weighted-average exercise price does not include shares issuable upon vesting of restricted stock units, which have no exercise price. |
| (4) | Does not include |
| (5) | Includes 1,458,979 warrants to purchase common stock issued to various third-party service providers and 1,840,000 shares underlying an option issued pursuant to the 2015 Inducement Equity Incentive Plan. Of the total outstanding warrants at December 31, |
The 2018 annual total compensation of our median compensated employee other than Mr. Perry, our principal executive officer, was $169,023. Mr. Perry’s 2018 annual total compensation, as reported in the Summary Compensation Table included in this proxy statement, was $3,020,139. Based on this information, for 2018, the ratio of the annual total compensation of
Mr. Perry to the median of the annual total compensation of all other employees was 18 to 1. To find the median compensated employee, we used wages from our payroll records as reported to the Internal Revenue Service on FormW-2 for 2018 and selected the median employee from that list. To determine our total population of employees for finding the median compensated employee, we included all full-time, part-time and temporary employees employed as of December 31, 2018. Since all of our employees are located in the United States, as is Mr. Perry, we did not make anycost-of-living adjustments or foreign currency conversions. After identifying the median employee, we calculated annual total compensation for the median employee according to the methodology used to report the annual compensation of our named executive officers in the Summary Compensation Table.
The pay ratio disclosed above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’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.
| |
CERTAIN RELATIONSHIPS AND RELATED PARTY AND OTHER TRANSACTIONS |
Certain Relationships and Related Party and Other Transactions
In addition to the director and executive officer compensation arrangements and indemnification arrangements discussed above under “Executive Officers, Directors and Corporate Governance” and “Executive Compensation,” the following is a description of each transaction since January 1, 20172018 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%8.6% of our common stock at December 31, 2017.2018. We have entered into a series of commercial service and maintenance arrangements (collectively, the “Service and Maintenance Agreement”) with USAA. Pursuant to these arrangements, we provide 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 for USAA members (the “USAA Auto Program”), and associated enablement, implementation, maintenance, project management and customization services. From time to time, 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 Agreement, for the year ended December 31, 2017,2018, we made cash payments to USAA of $18.5$21.6 million, and received cash payments from USAA of $1.6$1.3 million. Under the Service and Maintenance Agreement, for the year ended December 31, 2017, 261,3072018, 271,830 units, or 27%, of all units purchased from TrueCar Certified Dealers by TrueCar users were matched to users of thecar-buying site we maintain for USAA. We believe that the Service and Maintenance Agreement is on terms no less favorable to us than we could have obtained from unaffiliated third parties.
In connection with the transactions described in the Service and Maintenance 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 such 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, 2017,2018, there were 509,642 warrants that were earned and outstanding with an additional 949,337 warrants that are available for issuance upon achievement of minimum performance milestones.
| |
CERTAIN RELATIONSHIPS AND RELATED PARTY AND OTHER TRANSACTIONS |
are available for issuance upon achievement of minimum performance milestones.
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
| |
|
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.
| |
| AUDIT COMMITTEE REPORT |
This Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other TrueCar filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate it by reference therein.
The following is the report of the audit committee of our Board of Directors. The audit committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 20172018 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 Institute of Certified Public Accountants (“AICPA”) and Public Company Accounting Oversight Board (the “PCAOB”), including PCAOB Auditing Standard No. 1301 “Communications with Audit Committees.” 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’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’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, 2017.2018.
Respectfully submitted by:
Robert Buce (Chair)
Christopher Claus
Erin Lantz
| |
| PROPOSAL ONE: ELECTION OF DIRECTORS |
Proposal One: Election of Directors
Our Board of Directors consists of nine 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.
Nominees
Our nominating and corporate governance committee of the Board of Directors recommended, and our Board of Directors approved, Erin Lantz, Chip PerryRobert Buce, John Krafcik and Ion YadigarogluWesley Nichols 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 2021,2022, and until a successor is qualified and elected or until his or her earlier resignation or removal. Please see “Executive Officers, Directors and Corporate 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,Robert Buce,
Chip PerryJohn Krafcik and Ion Yadigaroglu.Wesley Nichols. 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.
Vote Required
Each director is elected by a plurality of the voting power of the shares present in person virtually or represented by proxy at the meeting and entitled to vote on the election of directors at the Annual Meeting. Abstentions and brokernon-votes will have no effect on the outcome of the vote.
The Board of Directors unanimously recommends that stockholders vote “FOR” the election of each of Erin Lantz, Chip PerryRobert Buce, John Krafcik and Ion YadigarogluWesley Nichols as Class III directors to serve until the 20212022 annual meeting of stockholders or until their successors arehis successor is duly elected and qualified.
| |
PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS |
Proposal Two: Ratification of Selection of Independent Registered Public Accountants
The audit committee has appointed PricewaterhouseCoopers LLP, (“PwC”)or PwC, as TrueCar’sour independent registered public accounting firm for the fiscal year ending December 31, 20182019 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 20162017 and 20172018 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, 20162017 and 2017:2018:
| Fiscal Year | Fiscal Year | |||||||||||||||
| 2016 | 2017 | 2017 | 2018 | |||||||||||||
Audit Fees | $ | 1,415,000 | $ | 2,384,750 | $ | 2,384,750 | $ | 2,327,000 | ||||||||
Audit-Related Fees | 205,053 | 133,004 | 133,004 | 53,000 | ||||||||||||
Tax Fees | 19,264 | 30,000 | 30,000 | 42,303 | ||||||||||||
All Other Fees | 5,400 | 5,400 | 5,400 | 6,300 | ||||||||||||
Total | $ | 1,644,717 | $ | 2,553,154 | $ | 2,553,154 | $ | 2,428,603 | ||||||||
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 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 cover services provided by PwC to perform an assessment and provide observations of the Company’s control environment and consultation 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 studies), tax planning projects 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 ofcharter, the services of our independent registered public accountants, the audit
| |
committee is required topre-approve all audit andnon-audit services performed by our independent registered public accountants in order to ensure that the provision of suchthose services does not impair the public accountants’ independence. In fiscal years 20162017 and 2017,2018, all fees identified above under the captions “Audit Fees,” “Audit-Related Fees,” “Tax Fees,” Fees”
| 64 | | 2019 Proxy Statement |
PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS |
and “All Other Fees” that werePwC billed by PwC were approved by the audit committee in accordance with SEC 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.
Vote Required
The affirmative vote of the holders of a majority of the shares of our common stock present in person virtually or
represented by proxy and entitled to vote on the matter is necessary to ratify the selection of PwC as our independent registered public accounting firm for
fiscal year 2018. Abstentions are2019. 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 ofratifying PwC as our independent registered public accounting firm. Brokernon-votes will have no effect on the outcome of the vote.
The Board, of Directors, as recommended byat the audit committee,committee’s recommendation, recommends that stockholders vote “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as TrueCar’sour independent registered public accounting firm for the fiscal year ending December 31, 2018.2019.
| |
PROPOSAL THREE: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION |
Proposal Three: Advisory Vote to Approve Named Executive Officer Compensation
In accordance with SEC rules, we are providing our stockholders with the opportunity to approve, by advisory vote, the compensation of our named executive officers, as described in this proxy statement.
This proposal, commonly referred to asthea “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” 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” 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 20182019 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. TheThe 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 our executive compensation, as discussed in this proxy statement.
| |
|
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, 20183, 2019
| |
ANNEX A - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
Annex A - Reconciliation of GAAP toNon-GAAP Financial Measures
This Proxy Statement contains information regarding Adjusted EBITDA,Non-GAAP net income (loss), andNon-GAAP net income (loss) per share, which are financial measures that are not calculated in accordance with generally accepted accounting principles in the United States, or GAAP. 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 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) measures 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.
We use Adjusted EBITDA andNon-GAAP net income (loss) as operating performance measures as each 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 exclude variations primarily caused by changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA andNon-GAAP net income are widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt-service capabilities.
The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods presented:
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2017 | 2016 | 2018 | 2017 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
Reconciliation of Net Loss to Adjusted EBITDA: | ||||||||||||||||
Net loss | $ | (32,849 | ) | $ | (41,708 | ) | $ | (32,849 | ) | $ | (28,321 | ) | ||||
Non-GAAP adjustments: | ||||||||||||||||
Interest income | (1,260 | ) | (376 | ) | (1,260 | ) | (3,314 | ) | ||||||||
Interest expense | 2,610 | 2,530 | 2,610 | 2,649 | ||||||||||||
Depreciation and amortization | 22,472 | 23,345 | 22,472 | 22,677 | ||||||||||||
Stock-based compensation | 32,241 | 24,739 | 32,241 | 37,219 | ||||||||||||
Warrant expense | — | 46 | ||||||||||||||
Certain litigation costs(1) | 7,967 | 960 | 7,967 | 2,157 | ||||||||||||
Severance charges(2) | — | 1,783 | ||||||||||||||
Lease exit costs(3) | (133 | ) | 3,065 | |||||||||||||
Lease exit costs(2) | (133 | ) | — | |||||||||||||
(Benefit from) / provision for income taxes | (2,164 | ) | 655 | (2,164 | ) | (177 | ) | |||||||||
Adjusted EBITDA | $ | 28,884 | $ | 15,039 | $ | 28,884 | $ | 32,890 | ||||||||
| | A-1 |
ANNEX A - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
| (1) | The excluded amounts relate to legal costs incurred in connection with a claim we filed against Sonic Automotive Holdings, Inc. (the “Sonic Litigation”), complaints filed bynon-TrueCar dealers and the California New Car Dealers Association against |
| excluded litigation matters, once these matters are resolved, we do not believe our operations are likely to entail defending against the types of claims raised by these matters. We expect the cost of defending these claims |
| (2) | The excluded amounts represent the initial estimate and |
The following table presents a reconciliation of net loss toNon-GAAP 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 | ) | |||
| Year Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Reconciliation of Net Loss toNon-GAAP Net Income: | ||||||||
Net loss | $ | (32,849 | ) | $ | (28,321 | ) | ||
Non-GAAP adjustments: | ||||||||
Stock-based compensation | 32,241 | 37,219 | ||||||
Certain litigation costs(1) | 7,967 | 2,157 | ||||||
Lease exit costs(2) | (133 | ) | — | |||||
Non-GAAP net income(3) | $ | 7,226 | $ | 11,055 | ||||
| (1) | The excluded amounts relate to legal costs incurred in connection with the Sonic Litigation, complaints filed bynon-TrueCar dealers and the California New Car Dealers Association against |
| matters. We expect the cost of defending these claims |
| (2) | The excluded amounts represent the initial estimate and |
There is no income tax impact related to the adjustments made to calculateNon-GAAP net income |
| A-2 | |
TRUECAR, INC. 120 BROADWAY SUITE 200 SANTA MONICA, CA 90401 | VOTE BY INTERNET Before The Meeting - Go towww.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go towww.virtualshareholdermeeting.com/TRUE2019You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E70322-P19467 KEEP THIS PORTION FOR YOUR RECORDS | ||||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY | |||
TRUECAR, INC. 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/TRUE2018 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. 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-P03940 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY TRUECAR, INC. For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors unanimously recommends you vote FOR the following:
TRUECAR, INC. The Board of Directors unanimously recommends you vote FOR the following: | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||||||||||||||||||
1. Election of Directors | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
| Nominees: | ||||||||||||||||||||||||||||||
01) Robert Buce 02) John Krafcik 03) Wesley Nichols | ||||||||||||||||||||||||||||||
The Board of Directors unanimously recommends you vote FOR the following proposals: | For | Against | Abstain | |||||||||||||||||||||||||||
2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accountants for the fiscal year ending December 31, 2019. | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
3. Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
NOTE:In their discretion, the proxies are authorized to vote upon such other business that may properly come before the meeting or at any adjournment or postponement thereof. | ||||||||||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] Date | Signature (Joint Owners) Date | |||||||||||||||||||||||||||||
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-P03940 www.proxyvote.com.
E70323-P19467
TRUECAR, INC.
Annual Meeting of Stockholders
May 17, 201816, 2019 8:30 AM
This proxy is solicited by the Board of Directors
The stockholder(s) hereby appoint(s) John Pierantoni and Jeffrey Swart or either of them, as proxies, eachproxy with the power to appoint his substitute, and hereby authorize(s) themhim 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, 2018,16, 2019, live via the Internet at www.virtualshareholdermeeting.com/TRUE2018TRUE2019 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
Implemented an annual incentive program for 2019