RIDENOW GROUP, INC.
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UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of
1934
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 Rule
14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material Pursuant to ss.240.14a-12
RumbleON, 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 Rules 14a-6(i)(4) 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 Rule 0-11 (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 Act
Rule 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:
RumbleON,
Inc.
4521 Sharon
Road
Suite
370
Charlotte, North Carolina,
28211
June 5,
2017
Dear
Fellow RumbleON Stockholder:
We are
pleased to invite you to join us at the 2017 Annual Meeting of
Stockholders of RumbleON, Inc. to be held at 10:00 a.m.
Eastern Time on Friday, June 30, 2017 at 4521 Sharon Road, Suite
370, Charlotte, North Carolina 28211.
The
accompanying Notice of Annual Meeting and Proxy Statement describes
the specific matters to be voted upon at the Annual Meeting. We
also will report on our business and provide an opportunity for you
to ask questions of general interest.
Whether
you own a few or many shares of RumbleON stock and whether or not
you plan to attend the Annual Meeting in person, it is important
that your shares be represented at the Annual Meeting. Your vote is
important and we ask that you please cast your vote as soon as
possible.
The
Board of Directors recommends that you vote
FOR
the election of all the director
nominees,
FOR
approval of
the RumbleON, Inc. 2017 Stock Incentive Plan and ratification of
awards previously granted under the plan,
FOR
the non-binding advisory approval of
the compensation of our named executive officers (“Say on
Pay”), and
ONE YEAR
in
the non-binding advisory vote regarding the frequency of future
“Say on Pay” votes. Please refer to the accompanying
Proxy Statement for detailed information on each of the proposals
and the Annual Meeting.
We look
forward to seeing you on June 30, 2017 in Charlotte.
Sincerely,
Marshall
Chesrown
Chairman
of the Board and
Chief
Executive Officer
RumbleON, Inc.
4521 Sharon Road
Suite 370
Charlotte, North Carolina 28211
NOTICE OF THE 2017 ANNUAL MEETING OF STOCKHOLDERS
To
Stockholders of RumbleON, Inc.:
The
2017 Annual Meeting of Stockholders of RumbleON, Inc. will be held
at 10:00 a.m. Eastern Time on Friday, June 30, 2017 at 4521 Sharon
Road, Suite 370, Charlotte, North Carolina 28211 for the following
purposes, as more fully described in the accompanying proxy
statement:
(1)
To elect six
directors, each for a term expiring at the next Annual Meeting or
until their successors are duly elected and qualified;
(2)
To approve the
RumbleON, Inc. 2017 Stock Incentive Plan (the “Plan”)
and ratify awards previously granted under the Plan;
(3)
To obtain
non-binding advisory approval of the compensation of our named
executive officers (“Say on Pay”);
(4)
To obtain
non-binding advisory approval of one year as the frequency of
future “Say on Pay” votes; and
(5)
To transact any
other business that is properly presented at the Annual Meeting or
any adjournments or postponements of the Annual
Meeting.
Only
stockholders of record as of 5:00 p.m. Eastern Time on May 24,
2017, the record date, are entitled to receive notice of the Annual
Meeting and to vote at the Annual Meeting or any adjournments or
postponements of the Annual Meeting.
We
cordially invite you to attend the Annual Meeting in person. Even
if you plan to attend the Annual Meeting, we ask that you please
cast your vote as soon as possible. As more fully described in the
accompanying proxy statement, you may revoke your proxy and reclaim
your right to vote at any time prior to its use.
Sincerely,
Steven
R. Berrard
Director,
Chief Financial Officer
and
Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE
ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 30, 2017
The
accompanying proxy statement and the 2016 Annual Report on Form
10-K are available at
http://www.rumbleon.com
.
PROXY STATEMENT
TABLE OF CONTENTS
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PROXY STATEMENT
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1
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QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
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1
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PROPOSAL 1: DIRECTOR ELECTION PROPOSAL
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4
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CORPORATE GOVERNANCE
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6
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CHANGE IN CONTROL
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8
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EXECUTIVE COMPENSATION
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9
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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10
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PROPOSAL 2: STOCK INCENTIVE PLAN PROPOSAL
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11
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PROPOSAL 3: SAY ON PAY PROPOSAL
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17
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PROPOSAL 4: FREQUENCY OF SAY ON PAY PROPOSAL
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18
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REPORT OF THE AUDIT COMMITTEE
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19
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CHANGES IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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19
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POLICY FOR APPROVAL OF AUDIT AND PERMITTED NON-AUDIT
SERVICES
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20
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AUDITOR FEES AND SERVICES
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20
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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20
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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22
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OTHER MATTERS
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22
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PROXY STATEMENT
This
Proxy Statement contains information relating to the solicitation
of proxies by the Board of Directors (the “Board”) of
RumbleON, Inc. (“RumbleON” or the
“Company”) for use at our 2017 Annual Meeting of
Stockholders (“Annual Meeting”). Our Annual Meeting
will be held at 10:00 a.m. Eastern Time on Friday, June 30, 2017 at
4521 Sharon Road, Suite 370, Charlotte, North Carolina 28211. If
you will need directions to the Annual Meeting, or if you require
special assistance at the Annual Meeting because of a disability,
please contact Kathy Cunningham at (704) 227-1001.
Only
stockholders of record as of 5:00 p.m. Eastern Time on May 24, 2017
(the “Record Date”) are entitled to receive notice of
the Annual Meeting and to vote at the Annual Meeting or any
adjournments or postponements of the Annual Meeting. As of the
Record Date, there were 1,000,000 shares of Class A common stock
and 9,018,541 shares of Class B common stock issued and outstanding
and entitled to vote at the Annual Meeting. This proxy statement
and form of proxy are first being mailed to stockholders on or
about June 5, 2017.
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
What is the purpose of our 2017 Annual Meeting?
Our
2017 Annual Meeting will be held for the following
purposes:
(1)
To elect six
directors, each for a term expiring at the next Annual Meeting or
until their successors are duly elected and qualified. We refer to
this as the “Director Election Proposal.”
(2)
To approve the
RumbleON, Inc. 2017 Stock Incentive Plan (the “Plan”)
and ratify awards previously granted under the Plan. We refer to
this as the “Stock Incentive Plan
Proposal.”
(3)
To obtain
non-binding advisory approval of the compensation of our named
executive officers. We refer to this as the “Say on Pay
Proposal.”
(4)
To obtain
non-binding advisory approval of one year as the frequency of
future “Say on Pay” votes. We refer to this as the
“Frequency of Say on Pay Proposal.”
(5)
To transact any
other business that is properly presented at the Annual Meeting or
any adjournments or postponements of the Annual
Meeting.
In
addition, senior management will report on our business and respond
to your questions of general interest regarding the
Company.
How can I attend the Annual Meeting?
You are
entitled to attend the Annual Meeting only if you were a RumbleON
stockholder as of the Record Date or you hold a valid proxy for the
Annual Meeting. You should be prepared to present photo
identification for admittance. If your shares are held by a
brokerage firm, bank, or a trustee, you should provide proof of
beneficial ownership as of the Record Date, such as a bank or
brokerage account statement or other similar evidence of ownership.
Even if you plan to attend the Annual Meeting, please cast your
vote as soon as possible.
What are the voting rights of RumbleON stockholders?
Each
stockholder of Class A common stock is entitled to ten votes on
each of the six director nominees and ten votes on each other
matter properly presented at the Annual Meeting for each share of
Class A common stock owned by that stockholder on the Record
Date.
Each
stockholder of Class B common stock is entitled to one vote on each
of the six director nominees and one vote on each other matter
properly presented at the Annual Meeting for each share of Class B
common stock owned by that stockholder on the Record
Date.
What constitutes a quorum?
The
presence in person or by proxy of the holders of one-third (33%) of
the shares issued and outstanding and entitled to vote at the
Annual Meeting constitutes a quorum with respect to all matters
presented. If you submit a properly executed proxy or voting
instruction card or properly cast your vote via the Internet, your
shares will be considered part of the quorum, even if you abstain
from voting or withhold authority to vote as to a particular
proposal. We also will consider as present for purposes of
determining whether a quorum exists any shares represented by
“broker non-votes.”
1
What are “broker non-votes?”
“Broker
non-votes” occur when shares held by a brokerage firm are not
voted with respect to a proposal because the firm has not received
voting instructions from the stockholder and the firm does not have
the authority to vote the shares in its discretion. Under New York
Stock Exchange rules, a broker does not have the discretion to vote
on the Director Election Proposal, Stock Incentive Plan Proposal,
Say on Pay Proposal and Frequency of Say on Pay Proposal. As a
result, any broker who is a member of the New York Stock Exchange
will not have the discretion to vote on such proposals, if such
broker has not received instructions from the beneficial owner of
the shares represented.
Will my shares be voted if I do not provide my proxy?
If your
shares are held by a brokerage firm and you do not provide the firm
specific voting instructions, such firm will
not
have the authority to vote
your shares, and your shares will not be voted, and will be
considered “broker non-votes,” with respect to the
Director Election Proposal, Stock Incentive Proposal, Say on Pay
Proposal and Frequency of Say on Pay Proposal. Therefore, we urge
you to provide voting instructions so that your shares will be
voted. If you hold your shares directly in your own name, your
shares will not be voted unless you provide a proxy or fill out a
written ballot in person at the Annual Meeting.
How do I vote?
You can
vote in any of the following ways. Please check your proxy card or
contact your broker for voting instructions.
To vote
by mail:
●
Mark, sign and date
your proxy card or voting instruction card; and
●
If you are a
registered holder, return the proxy card to West Coast Stock
Transfer, Inc., 721 N. Vulcan Ave. Ste 205, Encinitas, California
92024 by 11:59 p.m. Eastern Time on June 29, 2017; or
●
If you hold your
shares in street name, return the voting instruction card to the
address indicated thereon.
To vote
using the Internet:
●
Have your proxy
card or voting instruction card in hand; and
●
If you are a
registered holder, log on to the Internet and visit
www.westcoaststocktransfer.com/proxy-rmbl
by 11:59 p.m. Eastern Time on June 29, 2017 and follow the
instructions provided; or
●
If you hold your
shares in street name, log on to the website provided on the voting
instruction card and follow the instructions provided.
To vote
in person:
●
If you are a
registered holder, attend our Annual Meeting, bring valid photo
identification, and deliver your completed proxy card or ballot in
person; or
●
If you hold your
shares in “street name,” attend our Annual Meeting,
bring valid photo identification, and obtain a legal proxy from
your bank or broker to vote the shares that are held for your
benefit, attach it to your completed proxy card and deliver it in
person.
Can I change my vote after I have voted?
You may
revoke your proxy and change your vote at any time before the final
vote at the meeting. You may vote again on a later date via the
Internet, by signing and mailing a new proxy card with a later
date, or by attending the meeting and voting in person (only your
latest proxy submitted prior to the meeting will be counted).
However, your attendance at the Annual Meeting will not
automatically revoke your proxy unless you vote again at the
meeting or specifically request in writing that your prior proxy be
revoked.
2
What vote is required to approve each proposal at the Annual
Meeting?
Proposal 1 — Director Election Proposal.
The
vote required to elect our six directors, each for a term expiring
at the next Annual Meeting or until their successors are duly
elected and qualified, is a majority of the stock having voting
power present in person or represented by proxy at the Annual
Meeting. Withheld votes and broker non-votes will have same effect
as a vote against this proposal.
Proposal 2 — Stock Incentive Plan Proposal.
The
vote required to approve the Stock Incentive Plan Proposal and
ratify awards previously granted under the Plan is a majority of
the stock having voting power present in person or represented by
proxy at the Annual Meeting. Abstentions and broker non-votes will
have the same effect as a vote against this proposal.
Proposal 3 — Say on Pay Proposal.
The
vote required to approve the Say on Pay Proposal is a majority of
the stock having voting power present in person or represented by
proxy at the Annual Meeting. Abstentions and broker non-votes will
have the same effect as a vote against this proposal.
Proposal 4 — Frequency of Say on Pay Proposal.
Stockholders may
indicate whether they would prefer that we conduct future advisory
votes on executive compensation every one, two, or three years, and
the Board and the Compensation Committee will take into account the
outcome of the vote when considering how frequently to seek an
advisory vote on Say on Pay in future years. Stockholders may, if
they wish, abstain from casting a vote on this proposal. The option
receiving the highest number of votes will be deemed to be the
preferred frequency of our stockholders.
How does the Board recommend I vote on the proposals?
The
Board recommends that you vote:
●
FOR
Proposal 1: the Director Election
Proposal;
●
FOR
Proposal 2: the Stock Incentive Plan
Proposal;
●
FOR
Proposal 3: the Say on Pay Proposal;
and
●
ONE YEAR
on Proposal 4: the Frequency of
Say on Pay Proposal.
How will the persons named as proxies vote?
If you
complete and submit a proxy, the persons named as proxies will
follow your voting instructions. If you submit a proxy but do not
provide instructions or if your instructions are unclear, the
persons named as proxies will vote your shares in accordance with
the recommendations of the Board, as set forth above.
With
respect to any other proposal that properly comes before the Annual
Meeting, the persons named as proxies will vote as recommended by
our Board or, if no recommendation is given, in their own
discretion.
Who will pay for the cost of soliciting proxies?
We will
pay for the cost of soliciting proxies. Our directors, officers,
and other employees, without additional compensation, may also
solicit proxies personally or in writing, by telephone, e-mail, or
otherwise. As is customary, we will reimburse brokerage firms,
fiduciaries, voting trustees, and other nominees for forwarding our
proxy materials to each beneficial owner of common stock held of
record by them.
3
PROPOSAL 1: DIRECTOR ELECTION PROPOSAL
Our
Board currently consists of six members. Upon the recommendation of
our Nominating and Corporate Governance Committee, our Board has
nominated the six persons listed below to stand for election for a
new term expiring at the 2018 Annual Meeting of Stockholders or
until their successors are duly elected and qualified. Each nominee
listed below is currently serving as a director and is willing and
able to serve as a director of RumbleON.
Below
are the names of and certain information regarding our current
executive officers and directors:
|
Name
|
Age
|
Position
|
|
Marshall
Chesrown
|
59
|
Chief
Executive Officer and Chairman
|
|
Steven
R. Berrard
|
62
|
Chief
Financial Officer, Secretary and Director
|
|
Denmar
Dixon
|
55
|
Director
|
|
Kartik
Kakarala
|
39
|
Director
|
|
Mitch
Pierce
|
59
|
Director
|
|
Kevin
Westfall
|
61
|
Director
|
Marshall Chesrown
has served as our
Chief Executive Officer and Chairman since October 24, 2016. Mr.
Chesrown has over 35 years of leadership experience in the
automotive retail sector. From December 2014 to September 2016, Mr.
Chesrown served as Chief Operating Officer and as a director of
Vroom.com, an online direct car retailer ("Vroom"). Mr. Chesrown
served as Chief Operating Officer of AutoAmerica, an automotive
retail company, from May 2013 to November 2014. Previously, Mr.
Chesrown served as the President of Chesrown Automotive Group from
January 1985 to May 2013, which was acquired by AutoNation, Inc.
(“AutoNation”), a leading automotive retail company, in
1997. Mr. Chesrown served as Senior Vice President of Retail
Operations for AutoNation from 1997 to 1999. From 1999 to 2013, Mr.
Chesrown served as the Chairman and Chief Executive Officer of
Blackrock Development, a real estate development company widely
known for development of the nationally recognized Golf Club at
Black Rock.
We
believe that Mr. Chesrown possesses attributes that qualify him to
serve as a member of our board of directors, including his
extensive experience in the automotive retail sector.
Steven R. Berrard
has served as our
Chief Financial Officer since January 9, 2017 and served as Interim
Chief Financial Officer from July 13, 2016 through January 9, 2017
and as Chief Executive Officer from July 13, 2016 through October
24, 2016. Mr. Berrard has also served as Secretary and a director
of the Company since July 13, 2016. Mr. Berrard served as a
director of Walter Investment Management Corp. (“Walter
Investment”) from 2010 until May 2017. Mr. Berrard served on
the Board of Directors of Swisher Hygiene Inc., a publicly traded
industry leader in hygiene solutions and products, from 2004 until
May 2014. Mr. Berrard is the Managing Partner of New River Capital
Partners, a private equity fund he co-founded in 1997. Mr. Berrard
was the co-founder and Co-Chief Executive Officer of AutoNation
from 1996 to 1999. Prior to joining AutoNation, Mr. Berrard served
as President and Chief Executive Officer of the Blockbuster
Entertainment Group, at the time the world’s largest video
store operator. Mr. Berrard served as President of Huizenga
Holdings, Inc., a real estate management and development company,
and served in various positions with subsidiaries of Huizenga
Holdings, Inc. from 1981 to 1987. Mr. Berrard was employed by
Coopers & Lybrand (now PricewaterhouseCoopers LLP
(“PwC”)) from 1976 to 1981. Mr. Berrard currently
serves on the Board of Directors of Pivotal Fitness, Inc., a chain
of fitness centers operating in a number of markets in the United
States.
He has previously served on
the Boards of Directors of Jamba, Inc., (2005 – 2009),
Viacom, Inc., (1987 – 1996), Birmingham Steel
(1999 – 2002), HealthSouth (2004 – 2006), and
Boca Resorts, Inc. (1996 – 2004).
Mr. Berrard
earned his B.S. in Accounting from Florida Atlantic
University.
We
believe that Mr. Berrard’s management experience and
financial expertise is beneficial in guiding the Company’s
strategic direction. He has served in senior management and/or on
the Board of Directors of several prominent, publicly traded
companies. In several instances, he has led significant growth of
the businesses he has managed. In addition, Mr. Berrard has served
as the Chairman of the audit committee of several boards of
directors.
4
Denmar Dixon
has served on our board of
directors since January 9, 2017. Mr. Dixon served as a director of
Walter Investment from April 2009 (and for its predecessor since
December 2008) until June 2016. Effective October 2015, Mr. Dixon
was appointed Chief Executive Officer and President of Walter
Investment and served until his resignation effective June 2016.
Mr. Dixon previously served as Vice Chairman of the Board of
Directors and Executive Vice President of Walter Investment since
January 2010 and Chief Investment Officer of Walter Investment
since August 2013. Before becoming an executive officer of Walter
Investment, also served as a member of Walter Investment's Audit
Committee and Nominating and Corporate Governance Committee and as
Chairman of the Compensation and Human Resources Committee (Mr.
Dixon resigned from each of these committee positions immediately
before his appointment as the Vice Chairman of the Board of
Directors and Executive Vice President of the Company). Before
serving on the Board of Directors of Walter Investment, Mr. Dixon
was elected to the Board of Managers of JWH Holding Company, LLC
(“JWHHC”), a wholly-owned subsidiary of Walter
Industries, Inc., in anticipation of the spin-off of Walter
Investment Management, LLC (“WIM”) from Walter
Industries, Inc. (now known as Walter Energy, Inc.). In 2008, Mr.
Dixon founded Blue Flame Capital, LLC, a consulting, financial
advisory and investment firm. Before forming Blue Flame Capital,
LLC, Mr. Dixon spent 23 years with Banc of America Securities, LLC
(“Banc of America”) and its predecessors. At the time
of his retirement, Mr. Dixon was a Managing Director in the
Corporate and Investment Banking group and held the position of
Global Head of the Basic Industries group.
We
believe that Mr. Dixon possesses attributes that qualify him to
serve as a member of our board of directors, including his
extensive business development, mergers and acquisitions and
capital markets/investment banking experience within the financial
services industry. As a director, he provides significant input
into, and is actively involved in, leading the Company’s
business activities and strategic planning efforts. Mr. Dixon has
significant experience in the general industrial, consumer and
business services industries.
Kartik Kakarala
was appointed to our
board of directors immediately following our acquisition of NextGen
Dealer Solutions, LLC (“NextGen”) in
February 2017. Mr. Kakarala is the Chief Executive Officer of
Halcyon Technologies, a global software solutions company with over
280 employees worldwide. He is responsible for sales, business
development and innovation, as well as the creation of technology
assets. He has been responsible for the growth of a number of
strategic, horizontal competencies, and vertical business units
like automotive, utilities, finance and healthcare practices. Mr.
Kakarala has served as the Chief Executive Officer and President of
NextGen from January 2016 to February 2017, which was acquired by
the Company in February 2017, providing inventory management
solutions to the powersports, recreational vehicle and marine
sectors in North America. He served as Chief Executive Officer and
President of NextGenAuto from July 2013 to December 2015. Mr.
Kakarala served as Chief Executive Officer of ECarTag solutions
since 2014, which provides unique wireless pricing solutions to
automotive dealers. He served as Director/Co-Founder of Vehicle
Systems since 2013 which provides vehicle purchase program
solutions. Mr. Kakarala has served as Co-Founder and Managing
Partner of Red Bumper from July 2010 to August 2014, a company
which provided used car inventory management solutions used by
thousands of automotive dealers across North America and which was
later acquired by ADP in 2014. Mr. Kakarala served as
Director/Co-Founder of GridFirst solutions since 2012, a company
providing home automation solutions to energy customers. Mr.
Kakarala holds a Master's degree in Computer Science from
University of Houston.
We
believe that Mr. Kakarala possesses attributes that qualify him to
serve as a member of our board of directors, as he is regarded as a
pioneer in developing several systems in the automotive industry
including CRM, ERP, inventory management and financial
applications.
Mitch Pierce
has served on our board of
directors since January 9, 2017. Mr. Pierce has over 35 years of
leadership experience in the automotive retail sector. Mr. Pierce
served as the President of Tempe Toyota Group from January 1985 to
June 1997, which was acquired by AutoNation, Inc.
(“AutoNation”), a leading automotive retail company, in
1997. Mr. Pierce served as a Regional Vice President of Retail
Operations for AutoNation from 1997 to 2003. Mr. Pierce currently
owns one of the five largest Toyota stores in United States and is
a partner in six other major auto dealerships. Mr. Pierce is a
board member of the Southern California Toyota Dealers. He served
on the National Dealer Council for Toyota Dealers in 1996-97. He is
Past Chairman of the Arizona Automobile Dealer
Association.
We
believe that Mr. Pierce possesses attributes that qualify him to
serve as a member of our board of directors, including his more
than 30 years of executive experience in the automotive retail
sector and broad base of business knowledge and
experience.
Kevin Westfall
has served on our board
of directors since January 9, 2017.
Mr. Westfall was a
co-founder and served as Chief Executive Officer of Vroom from
January 2012 through November 2015. Previously, from March 1997
through November 2011,
Mr. Westfall served as Senior Vice
President of Sales and Senior Vice President of Automotive Finance
at AutoNation. Mr. Westfall was a founder of BMW Financial Services
in 1990 and served as its President until March 1997. Mr. Westfal
also served as Retail Lease Manager of Chrysler Credit Corporation
from 1987 until 1990 and as President of World Automotive Imports
and Leasing from 1980 until 1987.
We
believe that Mr. Westfall possesses attributes that qualify him to
serve as a member of our board of directors, including his more
than 30 years of executive experience in automotive retail and
finance operations.
Vote Required and Board Recommendation
The
vote required to elect our six directors, each for a term expiring
at the Annual Meeting or until their successors are duly elected
and qualified, is a majority of the stock having voting power
present in person or represented by proxy at the Annual Meeting.
The Board recommends that you vote “
FOR
” the election of each of the
director nominees.
5
CORPORATE GOVERNANCE
Corporate Governance Principles and Code of Ethics
The
Board is committed to sound corporate governance principles and
practices. The Board’s core principles of corporate
governance are set forth in the RumbleON Corporate Governance
Principles (the “Principles”), which were adopted by
the Board in May 2017. In order to clearly set forth our commitment
to conduct our operations in accordance with our high standards of
business ethics and applicable laws and regulations, the Board also
adopted a Code of Business Conduct and Ethics (“Code of
Ethics”), which is applicable to all directors, officers and
employees. A copy of the Code of Ethics and the Principles are
available on our corporate website at
www.rumbleon.com
. You also may
obtain a printed copy of the Code of Ethics and Principles by
sending a written request to: Investor Relations, RumbleON, Inc.,
4521 Sharon Road, Suite 370, Charlotte, North Carolina 28211
(“Investor Relations”).
Board of Directors
The
business and affairs of the Company are managed by or under the
direction of the Board. Pursuant to our bylaws, the Board may
establish one or more committees of the Board, however designated,
and delegate to any such committee the full power of the Board, to
the fullest extent permitted by law.
The
Board intends to have regularly scheduled meetings and at such
meetings our independent directors will meet in executive session.
The Board has not appointed a lead independent director; instead
the presiding director for each executive session is rotated among
the Chairs of our Board committees.
The
Board held one meeting and took three
actions by unanimous written
consent during the year ended December 31, 2016. In 2016, each
person serving as a director attended at least 75% of the total
number of meetings of our Board and any Board committee on which he
or she served.
Our
directors are expected to attend our Annual Meeting of
Stockholders. Any director who is unable to attend our Annual
Meeting is expected to notify the Chairman of the Board in advance
of the Annual Meeting. The Company did not hold an annual meeting
in 2016.
Board Committees
Pursuant to our
bylaws, the Board may establish one or more committees of the
Board, however designated, and delegate to any such committee the
full power of the Board, to the fullest extent permitted by
law.
Our
Board has established three separately designated standing
committees to assist the Board in discharging its responsibilities:
the Audit Committee, the Compensation Committee, and the Nominating
and Corporate Governance Committee. The charters for our Board
committees set forth the scope of the responsibilities of that
committee. The Board will assess the effectiveness and contribution
of each committee on an annual basis. The charters for our Board
committees were adopted by the Board in May 2017. These
charters are available at
www.rumbleon.com
, and you may
obtain a printed copy of any of these charters by sending a written
request to: Investor Relations.
Audit Committee
. The Board, by
unanimous consent, established an audit committee (the “Audit
Committee”) in January 2017. The initial members of this
committee are Messrs. Dixon (chair) and Westfall. The Board has
determined that Mr. Dixon is an “audit committee financial
expert,” as defined in Item 407 of Regulation S-K, and is the
Chairman of the Audit Committee.
The
primary function of the Audit Committee is to assist the Board in
fulfilling its responsibilities by overseeing our accounting and
financial processes and the audits of our financial statements. The
independent auditor is ultimately accountable to the Audit
Committee, as representatives of the stockholders. The Audit
Committee has the ultimate authority and direct responsibility for
the selection, appointment, compensation, retention and oversight
of the work of the Company’s independent auditor that is
engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company
(including the resolution of disagreements between management and
the independent auditors regarding financial reporting), and the
independent auditor must report directly to the Audit Committee.
The Audit Committee also is responsible for the review of proposed
transactions between the Company and related parties. For a
complete description of the Audit Committee’s
responsibilities, you should refer to the Audit Committee
Charter.
Compensation Committee
. In January
2017, the Board, by unanimous consent, also established a
compensation committee (the “Compensation Committee”).
The initial members of the Compensation Committee are Messrs.
Westfall (Chair) and Dixon. The Compensation Committee was
established to, among other things, administer and approve all
elements of compensation and awards for our executive officers. The
Compensation Committee has the responsibility to review and approve
the business goals and objectives relevant to each executive
officer’s compensation, evaluate individual performance of
each executive in light of those goals and objectives, and
determine and approve each executive’s compensation based on
this evaluation. For a complete description of the Compensation
Committee’s responsibilities, you should refer to the
Compensation Committee Charter.
6
Nominating and Corporate Governance
Committee
. In January 2017, the Board, by unanimous consent,
also established a nominating and corporate governance committee
(the “Nominating and Corporate Governance Committee”).
The initial members of the Nominating and Corporate Governance
Committee are Messrs. Chesrown (Chair), Berrard, Westfall and
Dixon. The Nominating Committee is responsible for identifying
individuals qualified to become members of the Board or any
committee thereof; recommending nominees for election as directors
at each annual stockholder meeting; recommending candidates to fill
any vacancies on the Board or any committee thereof; and overseeing
the evaluation of the Board. For a complete description of the
Nominating and Corporate Governance Committee’s
responsibilities, you should refer to the Nominating and Corporate
Governance Committee Charter.
The
Nominating and Corporate Governance Committee will consider all
qualified director candidates identified by various sources,
including members of the Board, management and stockholders.
Candidates for directors recommended by stockholders will be given
the same consideration as those identified from other sources. The
Nominating and Corporate Governance Committee is responsible for
reviewing each candidate’s biographical information, meeting
with each candidate and assessing each candidate’s
independence, skills and expertise based on a number of factors.
While we do not have a formal policy on diversity, when considering
the selection of director nominees, the Nominating and Corporate
Governance Committee considers individuals with diverse
backgrounds, viewpoints, accomplishments, cultural background and
professional expertise, among other factors.
Board Leadership
The
Board has no policy regarding the need to separate or combine the
offices of Chairman of the Board and Chief Executive Officer and
instead the Board remains free to make this determination from time
to time in a manner that seems most appropriate for the Company.
The positions of Chairman of the Board and Chief Executive Officer
are currently held by Marshall Chesrown. The Board believes the
Chief Executive Officer is in the best position to direct the
independent directors’ attention on the issues of greatest
importance to the Company and its stockholders. As a result, the
Company does not have a lead independent director. Our
overall corporate governance policies and practices combined with
the strength of our independent directors and our internal controls
minimize any potential conflicts that may result from combining the
roles of Chairman and Chief Executive Officer.
Board Oversight of Enterprise Risk
The
Board is actively involved in the oversight and management of risks
that could affect the Company. This oversight and management is
conducted primarily through the committees of the Board identified
above but the full Board has retained responsibility for general
oversight of risks. The Audit Committee is primarily responsible
for overseeing the risk management function, specifically with
respect to management’s assessment of risk exposures
(including risks related to liquidity, credit, operations and
regulatory compliance, among others), and the processes in place to
monitor and control such exposures. The other committees of the
Board consider the risks within their areas of responsibility. The
Board satisfies its oversight responsibility through full reports
by each committee chair regarding the committee’s
considerations and actions, as well as through regular reports
directly from officers responsible for oversight of particular
risks within the Company.
Director Independence
We are
not currently subject to listing requirements of any national
securities exchange that has requirements that a majority of the
board of directors be “independent.” Nevertheless, our
board of directors has determined that all of our directors, other
than Messrs. Chesrown, Berrard, and Kakarala, qualify as
“independent” directors in accordance with the listing
requirements of The NASDAQ Stock Market. The NASDAQ independence
definition includes a series of objective tests regarding a
director’s independence and requires that the Board make an
affirmative determination that a director has no relationship with
the Company that would interfere with such director’s
exercise of independent judgment in carrying out the
responsibilities of a director. There are no family relationships
among any of our directors or executive officers.
7
Stockholder Communications
Communications with the Company and the Board
Stockholders may
communicate with the Company through its Investor Relations
Department by writing to Investor Relations, RumbleON, Inc., 4521
Sharon Road, Suite 370, Charlotte, North Carolina
28211.
Stockholders
interested in communicating with our Board, any Board committee,
any individual director, or any group of directors (such as our
independent directors) should send written correspondence to
RumbleON, Inc. Board of Directors, Attn: Secretary, 4521 Sharon
Road, Suite 370, Charlotte, North Carolina 28211.
Stockholder Proposals for Next Year’s Annual
Meeting
Any
stockholder proposal to be considered at the 2018 Annual Meeting of
Stockholders, including nominations of persons for election to our
Board, must be properly submitted to us by February 5, 2018.
Detailed information for submitting stockholder proposals or
nominations of director candidates will be provided upon written
request to the Secretary of RumbleON, Inc., 4521 Sharon Road, Suite
370, Charlotte, North Carolina 28211.
Stockholder Director Nominations
The
Nominating and Corporate Governance Committee has established a
policy pursuant to which it considers director candidates
recommended by our stockholders. All director candidates
recommended by our stockholders are considered for selection to the
Board on the same basis as if such candidates were recommended by
one or more of our directors or other persons. To recommend a
director candidate for consideration by our Nominating and
Corporate Governance Committee, a stockholder must submit the
recommendation in writing to our Secretary not later than 120
calendar days prior to the anniversary date of our proxy statement
distributed to our stockholders in connection with our previous
year’s annual meeting of stockholders, and the recommendation
must provide the following information: (i) the name of the
stockholder making the recommendation; (ii) the name of the
candidate; (iii) the candidate’s resume or a listing of his
or her qualifications to be a director; (iv) the proposed
candidate’s written consent to being named as a nominee and
to serving as one of our directors if elected; and (v) a
description of all relationships, arrangements, or understandings,
if any, between the proposed candidate and the recommending
stockholder and between the proposed candidate and us so that the
candidate’s independence may be assessed. The stockholder or
the director candidate also must provide any additional information
requested by our Nominating and Corporate Governance Committee to
assist the Committee in appropriately evaluating the
candidate.
CHANGE IN CONTROL
On July
13, 2016, Berrard Holdings Limited Partnership (“Berrard
Holdings”) acquired 5,475,000 shares of common stock (the
“BHLP Shares”) of Smart Server, Inc. (n/k/a RumbleON,
Inc.) (“Smart Server”) from Pamela Elliott, pursuant to
an Amended and Restated Stock Purchase Agreement, dated July 13,
2016. The Shares acquired by Berrard Holdings represented 99.5% of
the Company’s issued and outstanding shares of common stock
as of June 13, 2016. Mr. Berrard, the Chief Financial Officer,
Secretary and a director of the Company, has voting and dispositive
control over Berrard Holdings. The aggregate purchase price for the
BHLP Shares was $148,141.75, which Berrard Holdings paid from cash
on hand. In addition, at the closing, Berrard Holdings loaned the
Company, and the Company executed a promissory note, in the
principal amount of $191,858.25 payable to Berrard Holdings.
Proceeds from the note were used to pay an aggregate of $191,858.25
in outstanding debt of the Company, consisting of $175,909.25 in
outstanding notes payable and $15,949.00 in outstanding accounts
payable. As described below in “Certain Relationships and
Related Transactions,” the Company issued 275,312 shares of
Class B common stock upon full conversion of the note on March 31,
2017
, including an
additional $5,500 loaned to the Company by Berrard Holdings, plus
accrued interest.
On
October 24, 2016, Berrard Holdings sold an aggregate of 3,312,500
shares of common stock of Smart Server to Mr. Chesrown and
certain other purchasers (together with Mr. Chesrown, the
“Purchasers”), pursuant to a letter agreement (each, a
“Purchase Agreement”), dated October 24, 2016. The
2,412,500 Shares acquired by Mr. Chesrown represented 43.9% of the
Company’s issued and outstanding shares of common stock at
the time of the purchase. The remaining shares owned by Berrard
Holdings after giving effect to the transaction represented 39.3%
of the Company’s issued and outstanding shares of common
stock. The aggregate purchase price for the shares was $139,125.00,
which the Purchasers paid from cash on hand.
8
EXECUTIVE COMPENSATION
Summary Compensation
Pamela
Elliott, who served as the Company's President, Chief Executive
Officer, Secretary, Treasurer, and sole director from January 1,
2014 through July 13, 2016, did not received any compensation for
her service to the Company, except for $1,500 and $1,200 paid in
the fiscal years ended November 30, 2015 and 2014,
respectively.
No
other compensation was earned or paid to the Company’s
executive officers or directors during the two years ended December
31, 2016.
Executive Employment Arrangements
Marshall Chesrown
We have
not entered into an employment agreement or arrangement with Mr.
Chesrown. Accordingly, he is employed as our Chief Executive
Officer on an at-will basis. Mr. Chesrown currently receives no
annual base salary and to date has not been granted any equity
awards.
Mr.
Chesrown is eligible for equity compensation under our equity
compensation plans, as determined from time to time by the
Compensation Committee.
Steven Berrard
We have
not entered into an employment agreement or arrangement with Mr.
Berrard. Accordingly, he is employed as our Chief Financial Officer
on an at-will basis. Mr. Berrard currently receives no annual base
salary and to date has not been granted any equity
awards.
Mr.
Berrard is eligible for equity compensation under our equity
compensation plans, as determined from time to time by the
Compensation Committee.
Non-Employee Director Compensation
We have
not yet established a policy for non-employee director
compensation. We intend to establish a non-employee director
compensation policy at our next Board meeting following the Annual
Meeting. In March 2017, we issued each of our non-employee
directors 35,000
RSUs.
The RSUs vest over three years beginning on the first anniversary
of the grant date, with 20% vesting in the first year, an
additional 30% vesting in the second year, and the final 50%
vesting in the third year.
Employee Benefit Plans
On
January 9, 2017, the Board approved the adoption of the Plan,
subject to stockholder approval at the Company's 2017 Annual
Meeting of Stockholders. The purposes of the Plan are to attract,
retain, reward and motivate talented, motivated and loyal employees
and other service providers ("Eligible Individuals") by providing
them with an opportunity to acquire or increase a proprietary
interest in the Company and to incentivize them to expend maximum
effort for the growth and success of the Company, so as to
strengthen the mutuality of the interests between such persons and
the stockholders of the Company. The Plan will allow the Company to
grant a variety of stock-based and cash-based awards to Eligible
Individuals. Twelve percent (12%) of the Company's issued and
outstanding shares of common stock from time to time are reserved
for issuance under the Plan. For a summary of the Plan, see
Proposal 2 – Stock Incentive Plan Proposal and a copy of the
Plan attached as
Annex
A.
We have
not maintained any other equity compensation plans since our
inception.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the “SEC”) and
generally includes voting or investment power with respect to
securities. In accordance with the SEC rules, shares of our common
stock that may be acquired upon exercise or vesting of equity
awards within 60 days of the date of the table below are deemed
beneficially owned by the holders of such options and are deemed
outstanding for the purpose of computing the percentage of
ownership of such person, but are not treated as outstanding for
the purpose of computing the percentage of ownership of any other
person.
As of
the Record Date, 1,000,000 shares of Class A common stock and
9,018,541 shares of Class B common stock were issued and
outstanding. The following table sets forth information with
respect to the beneficial ownership of our common stock as of the
Record Date, by (i) each of our directors and executive officers,
(ii) all of our directors and executive officers as a group, and
(iii) each stockholder known by us to be the beneficial owner of
more than 5% of our common stock. To the best of our knowledge,
except as otherwise indicated, each of the persons named in the
table has sole voting and investment power with respect to the
shares of common stock beneficially owned by such person, except to
the extent such power may be shared with a spouse. To our
knowledge, none of the shares listed below are held under a voting
trust or similar agreement, except as noted. To our knowledge,
there is no arrangement, including any pledge by any person of our
securities or any of our parents, the operation of which may at a
subsequent date result in a change in control of the
Company.
Unless
otherwise noted below, the address of each person listed on the
table is c/o RumbleON, Inc., 4521 Sharon Road, Suite 370,
Charlotte, NC 28211.
|
Name
and Address of Beneficial Owner
|
No.
of Shares of Class A Common Stock Owned
|
Percentage
of Class A Ownership
(1)(2)
|
No.
of Shares of Class B Common Stock Owned
|
Percentage of Class B Ownership
(1)(3)
|
|
Named
Executive Officers and Directors:
|
|
|
|
|
|
Marshall
Chesrown
(4)
|
875,000
|
87.5
%
|
1,600,000
|
17.7
%
|
|
Steven R.
Berrard
(5)
|
125,000
|
12.5
%
|
2,375,312
|
26.3
%
|
|
Denmar
Dixon
(6)
|
-
|
*
|
962,179
|
10.7
%
|
|
Kartik
Kakarala
(7)
|
-
|
*
|
1,523,809
|
16.9
%
|
|
Mitch
Pierce(8)
|
-
|
*
|
37,500
|
0.4
%
|
|
Kevin
Westfall
|
-
|
*
|
12,500
|
0.1
%
|
|
All directors and
executive officers
as a group (6
persons)
(9)
|
1,000,000
|
100.0
%
|
6,511,300
|
72.2
%
|
|
5%
Stockholders:
|
|
|
|
|
|
Ralph
Wegis
(10)
|
-
|
*
|
891,537
|
9.9
%
|
|
NextGen Dealer
Solutions, LLC
(7)
|
-
|
*
|
1,523,809
|
16.9
%
|
____________
*
Represents
beneficial ownership of less than 1%.
(1)
Calculated in
accordance with applicable rules of the SEC.
(2)
Based on 1,000,000
shares of Class A common stock issued and outstanding as of the
Record Date. The Class A common stock has ten votes for each share
outstanding compared to one vote for each share of Class B Common
Stock outstanding. As of the Record Date, the holders of the Class
A common stock will have in aggregate voting power representing
52.6% of the Company's outstanding common stock on a fully diluted
basis.
(3)
Based on 9,018,541
shares of Class B Common Stock issued and outstanding as of the
Record Date.
(4)
As of the Record
Date, Mr. Chesrown will have voting power representing
approximately 54.4% of the Company's outstanding common stock on a
fully diluted basis.
(5)
Shares are owned
directly through Berrard Holdings, a limited partnership controlled
by Steven R. Berrard. Mr. Berrard has the sole power to vote and
the sole power to dispose of each of the shares of common stock
which he may be deemed to beneficially own. As of the Record Date,
Mr. Berrard will have voting power representing approximately 19.1%
of the Company's outstanding common stock on a fully diluted
basis.
(6)
Shares are owned
directly through Blue Flame Capital, LLC, an entity controlled by
Mr. Dixon. Mr. Dixon has the sole power to vote and the sole power
to dispose of each of the shares of common stock which he may be
deemed to beneficially own. As of the Record Date, Mr. Dixon will
have voting power representing approximately 5.1% of the Company's
outstanding common stock on a fully diluted basis.
(7)
Shares are owned
indirectly by Mr. Kakarala through NextGen Dealer Solutions, LLC, a
limited liability company of which Mr. Kakarala is the Manager. Mr.
Kakarala has the sole power to vote and the sole power to dispose
of each of the shares of common stock he may be deemed to
beneficially own. As of the Record Date, Mr. Kakarala will have
voting power representing approximately 8.0% of the Company's
outstanding common stock on a fully diluted basis.
(8)
Held through
Pierce Family Trust.
(9)
As of the Record
Date, all directors and executive officers as a group will have
voting power representing approximately 86.8% of the Company's
outstanding common stock on a fully diluted basis.
(10)
As of the Record
Date, Mr. Wegis will have voting power representing approximately
4.7% of the Company's outstanding common stock on a fully diluted
basis.
10
PROPOSAL 2: STOCK INCENTIVE PLAN PROPOSAL
RumbleON, INC.
2017 STOCK INCENTIVE PLAN
Overview
The Board has approved and unanimously recommends
that the stockholders approve the RumbleON, Inc. 2017 Stock
Incentive Plan (the “Plan”), covering the issuance
of
twelve percent (12%) of all issued and outstanding Class
B common stock, par value $0.001 per share, of the Company
(“Common Stock”) from time to time
.
The primary purpose of the Plan is to
attract, retain, reward and motivate certain individuals by
providing them with an opportunity to acquire or increase a
proprietary interest in the Company and to incentivize them to
expend maximum effort for the growth and success of the Company, so
as to strengthen the mutuality of the interests between such
individuals and the stockholders of the Company.
The
following discussion summarizes the material terms of the Plan.
This discussion is not intended to be complete and is qualified in
its entirety by reference to the full text of the Plan,
a copy of which is attached to this
proxy statement as
Annex
A
.
Administration
The
Plan is administered by the Compensation Committee of the Board
(for purpose of this description of the Plan, the
“Committee”). If no Committee exists, the independent
Board members will exercise the functions of the
Committee.
All
grants under the Plan will be evidenced by a grant agreement (an
“Award Agreement”) that will incorporate the terms and
conditions as the Committee deems necessary or
appropriate.
Coverage Eligibility and Annual Grant Limits
The
Plan provides for the issuance of awards (each, an
“Award”) consisting of stock options
(“Options”), stock appreciation rights
(“SARs”), restricted stock (“Restricted
Stock”), restricted stock units (“RSUs”),
performance shares (“Performance Shares”) and
performance units (“Performance Units”). Incentive
stock options (“ISOs”) may be granted under the Plan
only to our employees. Our employees, consultants, directors,
independent contractors and certain prospective employees who have
committed to become an employee are eligible to receive all other
types of awards under the Plan (each an “Eligible
Individual”).
The
granting of Awards under the Plan shall be subject to the following
limitations: (i) a maximum of 768,000 shares of common stock
may be subject to grants of ISOs; (ii) a maximum of 768,000
of shares may be subject to grants of Options or SARs to any one
Eligible Individual during any one fiscal year; (iii) a
maximum of 768,000 of such shares may be subject to grants of
Performance Shares, Restricted Stock, RSUs, and Awards of common
stock to any one Eligible Individual during any one fiscal year;
and (iv) the maximum value on the date of grant of Performance
Units which may be granted to any one Eligible Individual during
any one fiscal year shall be $1,000,000.
Shares Reserved for Issuance Under the Plan
Subject to adjustment as described below and under
the section entitled “Change in Control”, the
total number of shares of Common Stock that may be issued pursuant
to Awards granted under the Plan shall be twelve percent (12%) of
all issued and outstanding Common Stock from time to time.
Notwithstanding the foregoing, if any Award is cancelled, forfeited
or terminated for any reason prior to exercise, delivery or
becoming vested in full, the shares of Common Stock that were
subject to such Award shall, to the extent cancelled, forfeited or
terminated, immediately become available for future Awards granted
under this Plan; provided, however, that any shares of Common Stock
subject to an Award which is cancelled, forfeited or terminated in
order to pay the exercise price of a stock option, purchase price
or any taxes or tax withholdings on an award shall not be available
for future Awards granted under this Plan.
If the
outstanding shares of common stock are increased or decreased or
changed into or exchanged for a different number or kind of shares
or other securities by reason of any recapitalization,
reclassification, reorganization, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock of the Company or other
increase or decrease in such shares effected without receipt of
consideration by the Company, an appropriate and proportionate
adjustment shall be made by the Committee to: (i) the
aggregate number and kind of shares of common stock available under
the Plan, (ii) the calculation of the reduction of shares of
common stock available under the Plan, (iii) the number and
kind of shares of common stock issuable pursuant to outstanding
Awards granted under the Plan and/or (iv) the exercise price
of outstanding Options or SARs granted under the Plan. No
fractional shares of common stock or units of other securities
shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share or unit. Any
adjustments made to any ISO shall be made in accordance with
Section 424 of the Internal Revenue Code of 1986, as amended
(the “Code”).
11
Stock Options
The
Committee acting in its absolute discretion has the right to grant
Options to Eligible Individuals to purchase shares of common stock.
Each grant shall be evidenced by an option certificate setting
forth whether the Option is an ISO, which is intended to qualify
for special tax treatment under Section 422 of the Code, or a
non-qualified incentive stock option (“Non-ISO”). Each
Option granted under the Plan entitles the holder thereof to
purchase the number of shares of common stock specified in the
grant at the exercise price specified in the related option
certificate. At the discretion of the Committee, the option
certificate can provide for payment of the exercise price either in
cash, by check, bank draft, money order, in common stock and by any
other method which the Committee, in its sole and absolute
discretion and to the extent permitted by applicable law, may
permit.
The
terms and conditions of each Option granted under the Plan will be
determined by the Committee, but no Option will be granted at an
exercise price which is less than the fair market value of the
common stock on the grant date (generally, the closing price for
the common stock on the principal securities exchange on which the
common stock is traded or listed on the date the Option is granted
or, if there was no closing price on that date, on the last
preceding date on which a closing price was reported). In addition,
if the Option is an ISO that is granted to a 10% stockholder of the
Company, the Option exercise price will be no less than 110% of the
fair market value of the shares of common stock on the grant date.
Except for adjustments as described under “Shares Reserved
for Issuance Under the Plan” above and “Change in
Control” below, without the approval of the Company’s
stockholders, the option price shall not be reduced after the
Option is granted, an Option may not be cancelled in exchange for
cash or another Award, and no other action may be made with respect
to an Option that would be treated as a repricing under the rules
and regulations of the principal securities exchange on which the
common stock is traded.
No
Options may be exercised prior to the satisfaction of the
conditions and vesting schedule provided for in the Plan and in the
Award Agreement relating thereto. No Option may be exercisable more
than 10 years from the grant date, or, if the Option is an ISO
granted to a 10% stockholder of the Company, it may not be
exercisable more than 10 years from the grant date. Moreover, no
Option will be treated as an ISO to the extent that the aggregate
fair market value of the common stock subject to the Option
(determined as of the date the ISO was granted) which would first
become exercisable in any calendar year exceeds $100,000. The
Committee may not, as part of an Option grant, provide for an
Option reload feature whereby an additional Option is automatically
granted to pay all or a part of the Option exercise price or a part
of any related tax withholding requirement.
Restricted Stock and Restricted Stock Units
The
Committee may grant to such Eligible Individuals as the Committee
may determine, Restricted Stock and RSUs, in such amounts and on
such terms and conditions as the Committee shall determine in its
sole and absolute discretion. The Committee shall impose such
restrictions on any Restricted Stock and RSUs granted pursuant to
the Plan as it may deem advisable including, without limitation,
time-based vesting restrictions or the attainment of performance
goals (“Performance Goals”). With respect to a grant of
Restricted Stock, the Company may issue a certificate evidencing
such Restricted Stock to the Eligible Individual or issue and hold
such shares of Restricted Stock for the benefit of the Eligible
Individual until the applicable restrictions expire. The Company
may legend the certificate representing Restricted Stock to give
appropriate notice of such restrictions. Unless otherwise provided
in an Award Agreement, until the expiration of all applicable
restrictions, (i) the Restricted Stock shall be treated as
outstanding, (ii) the Eligible Individual holding shares of
Restricted Stock may exercise full voting rights with respect to
such shares, and (iii) the Eligible Individual holding shares
of Restricted Stock shall be entitled to receive all dividends and
other distributions paid with respect to such shares while they are
so held. If any such dividends or distributions are paid in shares
of common stock, such shares shall be subject to the same
restrictions on transferability and forfeitability as the shares of
Restricted Stock with respect to which they were paid.
Notwithstanding anything to the contrary, at the discretion of the
Committee, all such dividends and distributions may be held in
escrow by the Company (subject to the same restrictions on
forfeitability) until all restrictions on the respective Restricted
Stock have lapsed. Holders of the RSUs shall not have any of the
rights of a stockholder, including the right to vote or receive
dividends and other distributions, until common stock shall have
been issued in the Eligible Individual’s name pursuant to the
RSUs; provided, however the Committee, in its sole and absolute
discretion, may provide for dividend equivalents on vested
RSUs.
Unless
otherwise provided in the Plan or Award Agreement, common stock
will be issued with respect to RSUs no later than March 15 of
the year immediately following the year in which the RSUs are first
no longer subject to a substantial risk of forfeiture as such term
is defined in Section 409A of the Code and the regulations
issued thereunder (“RSU Payment Date”). In the event
that the Eligible Individual has elected to defer the receipt of
common stock pursuant to an Award Agreement beyond the RSU Payment
Date, then the common stock will be issued at the time specified in
the Award Agreement or related deferral election form. In addition,
unless otherwise provided in the Award Agreement, if the receipt of
common stock is deferred past the RSU Payment Date, dividend
equivalents on the common stock covered by the RSUs shall be
deferred until the RSU Payment Date.
12
Stock Appreciation Rights
The
Committee has the right to grant SARs to Eligible Individuals in
such amounts and on such terms and conditions as the Committee
shall determine in its sole and absolute discretion. Unless
otherwise provided in an Award Agreement, the terms and conditions
(including, without limitation, the limitations on the exercise
price, exercise period, repricing and termination) of the SAR shall
be substantially identical to the terms and conditions that would
have been applicable were the grant of the SAR a grant of an
Option. Unless otherwise provided in an Award Agreement, upon
exercise of a SAR the Eligible Individual shall be entitled to
receive payment, in cash, in shares of common stock, or in a
combination thereof, as determined by the Committee in its sole and
absolute discretion. The amount of such payment shall be determined
by multiplying the excess, if any, of the fair market value of a
share of common stock on the date of exercise over the fair market
value of a share of common stock on the grant date, by the number
of shares of common stock with respect to which the SAR are then
being exercised. Notwithstanding the foregoing, the Committee may
limit in any manner the amount payable with respect to a SAR by
including such limitation in the Award Agreement.
Performance Shares and Performance Units
Performance Shares
and Performance Units may be granted to Eligible Individuals under
the Plan. The applicable Award Agreement shall set forth
(i) the number of Performance Shares or the dollar value of
Performance Units granted to the participant; (ii) the
performance period and Performance Goals with respect to each such
Award; (iii) the threshold, target and maximum shares of
common stock or dollar values of each Performance Share or
Performance Unit and corresponding Performance Goals; and
(iv) any other terms and conditions as the Committee
determines in its sole and absolute discretion. Unless otherwise
provided in an Award Agreement, the Committee shall determine in
its sole and absolute discretion whether payment with respect to
the Performance Share or Performance Unit shall be made in cash, in
shares of common stock, or in a combination thereof.
Performance Goals
Performance Goals
will be based on one or more of the following criteria:
(i) the Company’s enterprise value or value creation
targets; (ii) the Company’s after-tax or pre-tax profits
including, without limitation, that attributable to Company’s
continuing and/or other operations; (iii) the Company’s
operational cash flow or working capital, or a component thereof;
(iv) the Company’s operational costs, or a component
thereof; (v) limiting the level of increase in all or a
portion of bank debt or other of the Company’s long-term or
short-term public or private debt or other similar financial
obligations of the Company, which may be calculated net of cash
balances and/or other offsets and adjustments as may be established
by the Committee; (vi) earnings per share or earnings per
share from the Company’s continuing operations;
(vii) the Company’s net sales, revenues, net income or
earnings before income tax or other exclusions; (viii) the
Company’s return on capital employed or return on invested
capital; (ix) the Company’s after-tax or pre-tax return
on stockholder equity; (x) the attainment of certain target
levels in the fair market value of the Company’s common
stock; (xi) the growth in the value of an investment in the
common stock assuming the reinvestment of dividends; and/or
(xii) EBITDA (earnings before income tax, depreciation and
amortization). In addition, Performance Goals may be based upon the
attainment by a subsidiary, division or other operational unit of
the Company of specified levels of performance under one or more of
the measures described above. Further, the Performance Goals may be
based upon the attainment by the Company (or a subsidiary,
division, facility or other operational unit) of specified levels
of performance under one or more of the foregoing measures relative
to the performance of other corporations. To the extent permitted
under Section 162(m) of the Code (including, without
limitation, compliance with any requirements for stockholder
approval), the Committee may, in its sole and absolute discretion:
(i) designate additional business criteria upon which the
Performance Goals may be based; (ii) modify, amend or adjust
the business criteria described herein; or (iii) incorporate
in the Performance Goals provisions regarding changes in accounting
methods, corporate transactions (including, without limitation,
dispositions or acquisitions) and similar events or circumstances.
Performance Goals may include a threshold level of performance
below which no Award will be earned, levels of performance at which
an Award will become partially earned and a level at which an Award
will be fully earned.
Other Awards
Awards
of shares of Common Stock, phantom stock and other Awards that are
valued in whole or in part by reference to, or otherwise based on,
Common Stock, may also be made, from time to time, to Eligible
Individuals as may be selected by the Committee. Each such Award
shall be evidenced by an Award Agreement between the Eligible
Individual and the Company which shall specify the number of shares
of Common Stock subject to the Award, any consideration therefore,
any vesting or performance requirements, and such other terms and
conditions as the Committee shall determine in its sole and
absolute discretion.
Non-Transferability
No
Award will be transferable by an Eligible Individual other than by
will or the laws of descent and distribution, and any Option or SAR
will (absent the Committee’s consent) be exercisable during
an Eligible Individual’s lifetime only by the Eligible
Individual, except that the Committee may provide in an Award
Agreement that an Eligible Individual’s may transfer an award
to a “family member”, as such term is defined in the
Form S-8 Registration Statement under the Securities Act of 1933,
as amended, under such terms and conditions as specified by the
Committee.
13
Amendments to the Plan
The
Plan may be amended by the Board to the extent that it deems
necessary or appropriate provided, however, that the approval of
the stockholders shall be required for any amendment: (i) that
changes the class of individuals eligible to receive Awards under
the Plan; (ii) that increases the maximum number of shares of
common stock in the aggregate that may be subject to Awards that
are granted under the Plan (except as otherwise permitted under the
Plan); (iii) the approval of which is necessary to comply with
federal or state law or with the rules of any stock exchange or
automated quotation system on which the common stock may be listed
or traded; or (iv) that proposed to eliminate a requirement
provided herein that the stockholders of the Company must approve
an action to be undertaken under the Plan. Except as expressly
provided in the Plan, no amendment, suspension or termination of
the Plan shall, without the consent of the holder of an Award,
alter or impair rights or obligations under any Award theretofore
granted under the Plan. Awards granted prior to the termination of
the Plan may extend beyond the date the Plan is terminated and
shall continue subject to the terms of the Plan as in effect on the
date the Plan is terminated.
Change in Control
Upon
the occurrence of a Change in Control (as defined in the Plan), the
Committee may, in its sole and absolute discretion, provide on a
case by case basis that (i) all Awards shall terminate,
provided that participants shall have the right, immediately prior
to the occurrence of such Change in Control and during such
reasonable period as the Committee in its sole discretion shall
determine and designate, to exercise any Award, (ii) all
Awards shall terminate, provided that participants shall be
entitled to a cash payment equal to the price per share of common
stock paid in the Change in Control transaction, with respect to
shares subject to the vested portion of the Award, net of the
exercise price thereof, if applicable, (iii) in connection
with a liquidation or dissolution of the Company, the Awards, to
the extent vested, shall convert into the right to receive
liquidation proceeds net of the exercise price (if applicable),
(iv) accelerate the vesting of Awards and (v) any
combination of the foregoing. In the event that the Committee does
not terminate or convert an Award upon a Change in Control of the
Company, then the Award shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring, or
succeeding corporation (or an affiliate thereof).
Federal Income Tax Consequences
The
rules concerning the federal income tax consequences of Awards
under the Plan are technical, and reasonable persons may differ on
their proper interpretation. Moreover, the applicable statutory and
regulatory provisions are subject to change, as are their
interpretations and applications, which may vary in individual
circumstances. Therefore, the following discussion is designed to
provide only a brief, general summary description of the federal
income tax consequences associated with such grants, based on a
good faith interpretation of the current federal income tax laws,
regulations (including certain proposed regulations) and judicial
and administrative interpretations. The following discussion does
not set forth (1) any federal tax consequences other than
income tax consequences or (2) any state, local or foreign tax
consequences that may apply.
ISOs
. In general, an employee will not
recognize taxable income upon the grant or the exercise of an ISO.
For purposes of the alternative minimum tax, however, the employee
will be required to treat an amount equal to the difference between
the fair market value of the common stock on the date of exercise
over the option exercise price as an item of adjustment in
computing the employee’s alternative minimum taxable income.
If the employee does not dispose of the common stock received
pursuant to the exercise of the ISO within either (1) two
years after the date of the grant of the ISO or (2) one year
after the date of the exercise of the ISO, a subsequent disposition
of the common stock generally will result in long-term capital gain
or loss to such individual with respect to the difference between
the amount realized on the disposition and exercise price. The
Company will not be entitled to any federal income tax deduction as
a result of such disposition. In addition, the Company normally
will not be entitled to take a federal income tax deduction on
either the grant date or upon the exercise of an ISO.
If the
employee disposes of the common stock acquired upon exercise of the
ISO within either of the above-mentioned time periods, then in the
year of such disposition, the employee generally will recognize
ordinary income, and the Company will be entitled to a federal
income tax deduction (provided the Company satisfies applicable
federal income tax reporting requirements), in an amount equal to
the lesser of (1) the excess of the fair market value of the
common stock on the date of exercise over the option exercise price
or (2) the amount realized upon disposition of the common
stock over the exercise price. Any gain in excess of such amount
recognized by the employee as ordinary income would be taxed to
such individual as short-term or long-term capital gain (depending
on the applicable holding period).
Non-ISOs.
An Eligible Individual will
not recognize any taxable income upon the grant of a Non-ISO, and
the Company will not be entitled to take an income tax deduction at
the time of such grant. Upon the exercise of a Non-ISO, the
Eligible Individual generally will recognize ordinary income and
the Company will be entitled to a federal income tax deduction
(provided the Company satisfies applicable federal income tax
reporting requirements) in an amount equal to the excess of the
fair market value of the common stock on the date of exercise over
the option exercise price. Upon a subsequent sale of the common
stock by the Eligible Individual, such individual will recognize
short-term or long-term capital gain or loss (depending on the
applicable holding period).
SARs.
An Eligible Individual will not
recognize any taxable income upon the grant of a SAR, and the
Company will not be entitled to take an income tax deduction at the
time of such grant. An Eligible Individual will recognize ordinary
income for federal income tax purposes upon the exercise of a SAR
under the Plan for cash, common stock or a combination of cash and
common stock, and the amount of income that the Eligible Individual
will recognize will depend on the amount of cash, if any, and the
fair market value of the common stock, if any, that the Eligible
Individual receives as a result of such exercise. The Company
generally will be entitled to a federal income tax deduction in an
amount equal to the ordinary income recognized by the Eligible
Individual in the same taxable year in which the Eligible
Individual recognizes such income, if the Company satisfies
applicable federal income tax reporting requirements.
14
Restricted Stock.
The Eligible
Individual who receives Restricted Stock generally will not be
subject to tax until the shares are no longer subject to forfeiture
or restrictions on transfer for purposes of Section 83 of the
Code (the “Restrictions”). At such time the Eligible
Individual will be subject to tax at ordinary income rates on the
fair market value of the Restricted Stock (reduced by any amount
paid by the participant for such Restricted Stock). However, an
Eligible Individual who makes an election under Section 83(b)
of the Code within 30 days of the date of transfer of the shares
will have taxable ordinary income on the date of transfer of the
shares equal to the excess of the fair market value of such shares
(determined without regard to the Restrictions) over the purchase
price, if any, of such restricted shares. Any appreciation (or
depreciation) realized upon a later disposition of such shares will
be treated as long-term or short-term capital gain (or loss)
depending upon how long the shares have been held. If a
Section 83(b) election has not been made, any dividends
received with respect to restricted shares that are subject to the
Restrictions generally will be treated as compensation that is
taxable as ordinary income to the participant and not eligible for
the reduced tax rate applicable to dividends. The Company generally
will be entitled to a federal income tax deduction in an amount
equal to the ordinary income recognized by the Eligible Individual
in the same taxable year in which the Eligible Individual
recognizes such income, if the Company satisfies applicable federal
income tax reporting requirements.
Restricted Stock Units.
Generally, no
income will be recognized upon the award of RSUs. An Eligible
Individual who receives RSUs generally will be subject to tax at
ordinary income rates on any cash received and the fair market
value of any shares of common stock or other property on the date
that such amounts are transferred to the Eligible Individual under
the award (reduced by any amount paid by the Eligible Individual
for such RSU). The Company generally will be entitled to a federal
income tax deduction in an amount equal to the ordinary income
recognized by the Eligible Individual in the same taxable year in
which the Eligible Individual recognizes such income.
Performance Units and Performance
Shares.
No income generally will be recognized upon the
grant of a Performance Unit or Performance Share. Upon payment in
respect of a Performance Unit or Performance Share, the Eligible
Individual generally will be required to include as taxable
ordinary income in the year of receipt an amount equal to the
amount of cash received and the fair market value of any
nonrestricted shares of common stock or other property received.
The Company generally will be entitled to a federal income tax
deduction in an amount equal to the ordinary income recognized by
the Eligible Individual in the same taxable year in which the
Eligible Individual recognizes such income.
Code Section 162(m).
Code
Section 162(m) imposes a $1 million deduction limitation on
the compensation paid to a public company’s most senior
executives unless the compensation meets one of the exceptions to
this limitation. One exception is for option grants made at fair
market value. Another exception is for grants which are made
subject to the satisfaction of one or more Performance Goals which
are set in accordance with Code Section 162(m) and which are
forfeited if there is a failure to satisfy those Performance Goals.
The Plan has been designed so that the Committee can make grants
which can satisfy the requirements for these
exceptions.
15
New Stock Incentive Plan Benefits
The
following table sets forth information regarding awards that have
been made pursuant to the Plan from January 9, 2017 thru May 31,
2017 to the individuals and groups listed. All of these awards are
subject to stockholder approval of the Plan and ratification of the
awards. If stockholder approval is not obtained then the recipients
will not receive the awards granted at this time.
|
Name
|
|
Position
|
Grant
Date Fair Value of RSUs
|
Number
of RSUs
|
|
|
|
|
|
|
|
Marshall
Chesrown
|
|
Chairman and Chief
Executive Officer
|
--
|
--
|
|
Steven R.
Berrard
|
|
Director, Chief
Financial Officer and Secretary
|
--
|
--
|
|
Denmar
Dixon
|
|
Director
|
$
122,500
|
35,000
|
|
Kartik
Kakarala
|
|
Director
|
--
|
--
|
|
Mitch
Pierce
|
|
Director
|
$
122,500
|
35,000
|
|
Kevin
Westfall
|
|
Director
|
$
122,500
|
35,000
|
|
Executive Officer
Group
|
|
|
--
|
--
|
|
Non-Executive
Director Group
|
|
|
$
367,500
|
105,000
|
|
Non-Executive
Employee Group
|
|
|
$
1,431,000
|
410,000
|
Vote Required and Board Recommendation
Approval of the Plan and ratification of the
awards thereunder requires the affirmative vote of the holders of a
majority of the shares of Common Stock represented in person or by
proxy at the Annual Meeting. The Board unanimously recommends a
vote
“FOR”
the approval of the RumbleON, Inc. 2017 Stock
Incentive Plan
and ratification of the awards
thereunder
.
16
PROPOSAL 3: SAY ON PAY PROPOSAL
Background of the Proposal
The
Dodd−Frank Act requires all public companies to hold a
separate non−binding advisory shareholder vote to approve the
compensation of executive officers as described in the executive
compensation tables and any related information in each such
company’s proxy statement (commonly known as a “Say on
Pay” proposal). Pursuant to Section 14A of the
Securities Exchange Act of 1934, as amended, we are holding a
separate non-binding advisory vote on Say on Pay at the Annual
Meeting.
Say on Pay Resolution
This
Say on Pay proposal is set forth in the following
resolution:
RESOLVED, that the
stockholders of RumbleON, Inc. approve, on an advisory basis, the
compensation of its named executive officers, as disclosed in the
RumbleON, Inc.'s Proxy Statement for the 2017 Annual Meeting of
Stockholders, pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the compensation
tables, and any related information found in the proxy statement of
RumbleON, Inc.
Because
your vote on this proposal is advisory, it will not be binding on
the Board, the Compensation Committee or the Company. However, the
Compensation Committee will take into account the outcome of the
vote when considering future executive compensation
arrangements.
Vote Required and Board Recommendation
The
vote required for the Say on Pay Proposal is a majority of the
stock having voting power present in person or represented by proxy
at the Annual Meeting. The Board recommends a vote
“FOR”
the Say on Pay
proposal.
17
PROPOSAL 4: FREQUENCY OF SAY ON PAY PROPOSAL
Background of the Proposal
The
Dodd−Frank Act also requires all public companies to
hold a separate non−binding advisory shareholder vote with
respect to the frequency of the vote on the Say on Pay proposal
thereafter. Companies must give stockholders the choice of whether
to cast an advisory vote on the Say on Pay proposal every year,
every two years, or every three years (commonly known as the
“Frequency Vote on Say on Pay”). Shareholders may also
abstain from making a choice. After such initial votes are held,
the Dodd−Frank Act requires all public companies to submit to
their shareholders no less often than every six years thereafter
the Frequency Vote on Say on Pay. Pursuant to Section
14A of the Securities Exchange Act of 1934, as amended, we are
holding a separate non-binding advisory vote on the frequency of
Say on Pay in future years at the Annual Meeting.
Frequency Vote on Say on Pay
The
Board believes that giving our stockholders the right to cast an
advisory vote every year on their approval of the compensation
arrangements of our named executive officers provides the Board
sufficient time to thoughtfully evaluate and respond to stockholder
input and effectively implement changes, as needed, to our
executive compensation program.
Although the Board
recommends that the Say on Pay proposal be voted on every year, our
stockholders will be able to specify one of four choices for the
frequency of the vote on the Say on Pay proposal as follows: (i)
one year, (ii) two years, (iii) three years, or (iv)
abstain. This is an advisory vote and will not be
binding on the Board or the Company, the Board may determine that
it is in the best interests of our stockholders and the Company to
hold an advisory vote on executive compensation more or less
frequently than may be indicated by this advisory vote of our
stockholders. Nevertheless, the Compensation Committee
will take into account the outcome this advisory vote when
considering how frequently to seek an advisory vote on Say on Pay
in future years.
Vote Required and Board Recommendation
The
option receiving the highest number of votes will be deemed to be
the preferred frequency of our stockholders. The Board recommends
the selection of
“ONE
YEAR”
as your preference for the frequency with which
stockholders are provided an advisory vote on Say on
Pay.
18
REPORT OF THE AUDIT COMMITTEE
The
Audit Committee reviews the Company's financial reporting process
on behalf of the Board. Management has the primary responsibility
for establishing and maintaining adequate internal control over
financial reporting for preparing the financial statements and for
the report process. The Audit Committee members do not serve as
professional accountants or auditors, and their functions are not
intended to duplicate or to certify the activities of management or
the independent public accounting firm. We have engaged Scharf Pera
& Co., PLLC (“Scharf Pera”) as our independent
public accountants to report on the conformity of the Company's
financial statements to accounting principles generally accepted in
the United States. In this context, the Audit Committee hereby
reports as follows:
1.
The Audit Committee
has reviewed and discussed the audited financial statements with
management of the Company.
2.
The Audit Committee
has discussed with Scharf Pera the matters required to be discussed
under Public Company Accounting Oversight Board ("PCAOB") Auditing
Standards No. 1301, Communications with Audit
Committees.
3.
The Audit Committee
has also received the written disclosures and the letter from
Scharf Pera required by applicable requirements of the PCAOB
regarding the independent accountant's communications with the
Audit Committee concerning independence and the Audit Committee has
discussed the independence of Scharf Pera with that
firm.
4.
Based on the review
and discussion referred to in paragraphs (1) through (3) above, the
Audit Committee recommended to the Board and the Board approved the
inclusion of the audited financial statements in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
2016, for filing with the SEC.
The
foregoing has been furnished by the Audit Committee:
Denmar
Dixon, Chairman
Kevin
Westfall
This "Audit Committee Report" is not "Soliciting Material," is not
deemed filed with the SEC and it not to be incorporated by
reference in any filing of the Company under the Securities Act of
1933, as amended or the Securities Exchange Act of 1934, whether
made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
CHANGES IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
On
December 16, 2016, the Board approved the dismissal of Seale &
Beers, CPAs (“Seale & Beers”) as the
Company’s independent registered public accounting firm,
effective December 16, 2016.
Seale
& Beers audited the Company’s financial statements for
the years ended November 30, 2015 and November 30, 2014. Seale
& Beers’ reports on the Company’s financial
statements for the years ended November 30, 2015 and November 30,
2014 did not contain any adverse opinion or disclaimer of opinion,
nor were the reports qualified or modified as to uncertainty, audit
scope or accounting principles. However, the Seale &
Beers’ reports on the Company’s financial statements
for the years ended November 30, 2015 and November 30, 2014 each
contained an explanatory paragraph noting there was substantial
doubt as to the Company’s ability to continue as a going
concern.
In
connection with Seale & Beers' audit of the Company’s
financial statements for the fiscal years ended November 30, 2015
and November 30, 2014 and through the subsequent interim period
ended December 16, 2016, the Company has had no disagreement with
Seale & Beers on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction
of Seale & Beers, would have caused Seale & Beers to make a
reference to the subject matter of the disagreements in connection
with its reports on the financial statements for the fiscal year
ended November 30, 2015 and November 30, 2014.
On
December 20, 2016, the Board also approved the engagement of Scharf
Pera as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2016. The
engagement of Scharf Pera was effective December 20, 2016. During
the fiscal years ended November 30, 2014 and November 30, 2015, and
the subsequent interim period through December 20, 2016, neither
the Company nor anyone on its behalf consulted with Scharf Pera
regarding either (i) the application of accounting principles to a
specific completed or proposed transaction or the type of audit
opinion that might be rendered on the Company’s financial
statements, and Scharf Pera did not provide written reports or oral
advice that was an important factor considered by the Company in
reaching a decision as to any accounting, auditing or financial
reporting issue during such periods or (ii) any matter that was
either the subject of a disagreement (as defined in Item
304(a)(i)(iv) of Regulation S-K and related instructions to such
item) or a reportable event (as described in Item 304(a)(i)(v) of
Regulation S-K).
19
POLICY FOR APPROVAL OF AUDIT AND PERMITTED NON-AUDIT
SERVICES
In May
2017, the Audit Committee adopted a policy and related procedures
requiring its pre-approval of all audit and non-audit services to
be rendered by its independent registered public accounting firm.
These policies and procedures are intended to ensure that the
provision of such services do not impair the independent registered
public accounting firm’s independence. These services may
include audit services, audit-related services, tax services and
other services. The policy provides for the annual establishment of
fee limits for various types of audit services, audit-related
services, tax services and other services, within which the
services are deemed to be pre-approved by the Audit Committee. The
independent registered public accounting firm is required to
provide to the Audit Committee back-up information with respect to
the performance of such services.
The
Audit Committee has delegated to its Chair the authority to
pre-approve services, up to a specified fee limit, to be rendered
by the independent registered public accounting firm and requires
that the Chair report to the Audit Committee any pre-approval
decisions made by the Chair at the next scheduled meeting of the
Audit Committee.
As
described above, the Board established the Audit Committee in
January 2017. All services provided by Scharf Pera and Seale &
Beers during the fiscal years ended December 31, 2016 and December
31, 2015 were approved by the Board.
AUDITOR FEES AND SERVICES
|
Description of services:
|
Year
Ended
December
31, 2016
|
Year
Ended
December
31, 2015
|
|
Audit Fees
(1)
|
$
41,233
|
(3
)
|
|
Audit-Related
Fees
|
--
|
(3
)
|
|
Tax
Fees
|
--
|
(3
)
|
|
All Other Fees
(2)
|
$
17,117
|
--
|
|
Total
Fees
|
58,350
|
(3
)
|
|
|
|
|
(1)
Audit fees consist
of fees billed by Scharf Pera during 2017 for (1) audit of the
Company’s fiscal year ended November 30, 2015, (2)
the audit of the Company’s one month ended December 31, 2015,
(3) the audit of the Company’s year ended December 31, 2016
and (4) review of the Company’s unaudited financial
statements for the three months ended March 30, 2017. Scharf Pera
billed no fees during the year ended December 31,
2016.
(2)
All other fees
consists of fees billed during 2017 by Scharf Pera for the audit of
the acquisition of NextGen.
(3)
During the year
ended December 31, 2016, Seale & Beers billed the Company an
aggregate of $12,273 in audit fees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have
been a party to the following transactions since December 1, 2015,
in which the amount involved exceeds $120,000 and in which any
director, executive officer, or holder of more than 5% of any class
of our voting stock, or any member of the immediate family of or
entities affiliated with any of them, had or will have a material
interest.
Related Party Loans Before Change in Control
As
of December 31, 2015, the Company had loans of $141,000 and accrued
interest of $13,002 due to an entity that is owned and controlled
by a family member of Pamela Elliot, a former officer and director
of the Company. All convertible notes and related party notes
outstanding, including interests, of $175,909 as of July 13, 2016
were paid in full in July 2016 in connection with the change in
control. For a description of the change in control, see the
section, Change in Control, above.
Select Dealer
A
key component of the Company’s business model is to use
partner dealers in the acquisition of motorcycles as well as
utilize these dealer partners to provide inspection, reconditioning
and distribution services. Correspondingly, the Company will earn
fees and transaction income, and the dealer partner will earn
incremental revenue and enhance profitability through increased
sales, leads, and fees from inspection, reconditioning and
distribution programs. These dealer partners will be designated by
the Company as Select Dealers. In connection with the development
of the Select Dealer program the Company has already been testing
various aspects of the program by utilizing a dealership
(“the Test Dealer”) to which Mr. Chesrown has provided
financing in the form of a $400,000 convertible promissory note.
The note matures on May 1, 2019, interest is payable monthly at 5%
per annum and can be converted into a 25% ownership interest in the
Test Dealer at any time. The test dealer is expected to be named a
Select Dealer by an agreement with the same material terms as the
Company’s other Select Dealer agreements.
20
In
addition, the Company presently intends to sublease warehouse space
from the test dealer that is separate and distinct from the
location of the test dealer, on the same terms as paid by the test
dealer. This subleased facility would then serve as the
northwestern regional distribution center for the
Company.
2016 Financing
In July
2016, Berrard Holdings loaned the Company, and the Company executed
a promissory note, in the principal amount of $191,858 payable to
Berrard Holdings (the “Note”). Pursuant to the Note,
the Company is obligated to repay $191,858 with interest thereon at
the rate of 6% per annum. The maturity date of the Note is July 13,
2026 (the "Maturity Date"). Further, the Note provided that from
the date of an equity financing of at least $500,000 through the
Maturity Date, Berrard Holdings has the right to convert the
outstanding balance under the Note into shares of capital stock of
the Company being issued in such qualified financing
(“Qualified Financing Securities”) at a conversion
price equal to the greater of (i) $0.06 and (ii) fifty percent
(50%) of the price per share at which the Qualified Financing
Securities are sold by the Company in the qualified financing (the
“Conversion Price”). The November 2016 Private
Placement (as described below) was completed on November 28, 2016
and is considered a qualified financing; as such, the Conversion
Price of the Note has been established at $0.75.
Effective August
31, 2016, the principal amount of the Note was amended to include
an additional $5,500 loaned to the Company, on the same terms as
the original Note. As of December 31, 2016, the total amount owed
was $197,358 plus accrued interest of $5,580.
On
March 31, 2017, we issued 275,312 shares of Class B common stock
upon full conversion of the Note, having an aggregate principal
amount, including accrued interest, of $206,484 and a conversion
price of $0.75 per share.
November 2016 Private Placement
On
November 28, 2016, the Company completed a private placement with
certain purchasers, with respect to the sale of an aggregate of
900,000 shares of Class B common stock of the Company at a purchase
price of $1.50 per share for total consideration of $1,350,000. In
connection with the private placement, the Company also entered
into the loan agreements, pursuant to which the purchasers will
loan to the Company their pro rata share of up to $1,350,000 in the
aggregate upon the request of the Company at any time on or after
January 31, 2017 and before November 1, 2020.
In
connection with the private placement, Blue Flame Capital, LLC, an
entity controlled by Denmar Dixon (“Blue Flame”), one
of the Company's directors, paid $250,000 for 166,667 shares of the
Company's Class B common stock. Also, in connection with the
private placement, Ralph Wegis, a holder of more than 5% of our
Class B common stock, paid $799,999.50 for 533,333 shares of the
Company's Class B common stock.
On
March 31, 2017, the Company completed funding of the second tranche
of the private placement pursuant to which, the purchasers each
received their pro rata share of (1) 1,161,920 shares of Class B
common stock and (2) a promissory note in the aggregate principal
amount of $667,000, in consideration of cancellation of loan
agreements having an aggregate principal amount committed by the
purchasers of $1,350,000. As a result, Blue Flame received 645,512
shares of Class B common stock and a promissory note in the
principal amount of $370,556, and Mr. Wegis received 258,204 shares
of Class B common stock, and a promissory note in the principal
amount of $148,222.
Consulting Agreement
In connection with the acquisition of NextGen
Dealer Solutions, LLC (“NextGen”), on February 8, 2017,
the Company entered into a Consulting Agreement (the
“Consulting Agreement”) with Kartik Kakarala, who
formerly served as the Chief Executive Officer of NextGen and now
serves as a director of the Company.
Pursuant to the Consulting Agreement, Mr. Kakarala
will serve as a consultant to the Company. The Consulting Agreement
may be cancelled by either party, effective upon delivery of a
written notice to the other party. Mr. Kakarala’s
compensation pursuant to the Consulting Agreement will be $5,000
per month. During the first quarter of 2017, the Company paid
a total of $5,000 under the Consulting
Agreement.
21
Services Agreement
In
connection with the NextGen acquisition, on February 8, 2017, the
Company entered into a Services Agreement (the “Services
Agreement”) with Halcyon Consulting, LLC
(“Halcyon”), to provide development and support
services to the Company. Mr. Kakarala currently serves as the Chief
Executive Officer of Halcyon. Pursuant to the Services Agreement,
the Company will pay Halcyon hourly fees for specific services, set
forth in the Services Agreement, and such fees may increase on an
annual basis, provided that the rates may not be higher than 110%
of the immediately preceding year’s rates. The Company will
reimburse Halcyon for any reasonable travel and pre-approved
out-of-pocket expenses in connection with its services to the
Company. During the first quarter of 2017, the Company paid a total
of $184,470 under the Services Agreement.
March 2017 Private Placement
On
March 31, 2017, the Company completed the sale of 620,000 shares of
Class B common stock in a private placement at a price of $4.00 per
share. Officers and directors of the Company acquired 175,000
shares of Class B common stock in the private placement as follows:
Mr. Chesrown – 62,500 shares, Mr. Berrard (through Berrard
Holdings) – 62,500 shares, Mr. Pierce – 37,500 shares
and Mr. Westfall – 12,500 shares.
Related Party Transaction Policy
In May
2017, our Board adopted a formal policy that our executive
officers, directors, holders of more than 5% of any class of our
voting securities, and any member of the immediate family of and
any entity affiliated with any of the foregoing persons, are not
permitted to enter into a related party transaction with us without
the prior consent of the Audit Committee, or other independent
members of our board of directors if it is inappropriate for the
Audit Committee to review such transaction due to a conflict of
interest. Any request for us to enter into a transaction with an
executive officer, director, principal stockholder, or any of their
immediate family members or affiliates, in which the amount
involved exceeds $120,000 must first be presented to the Audit
Committee for review, consideration and approval. In approving or
rejecting any such proposal, the Audit Committee is to consider the
relevant facts and circumstances available and deemed relevant to
the audit committee, including, whether the transaction is on terms
no less favorable than terms generally available to an unaffiliated
third party under the same or similar circumstances and the extent
of the related party’s interest in the transaction. The
related party transactions described above were entered into before
the adoption of this policy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Exchange Act requires that our directors, executive
officers, and persons who beneficially own 10% or more of our stock
file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of our stock and our
other equity securities. To our knowledge, based solely on a review
of the copies of such reports furnished to us and written
representations that no other reports were required, during the
year ended December 31, 2016, our directors, executive officers,
and greater than 10% beneficial owners complied with all such
applicable filing requirements, except each of
Berrard Holdings and Marshall Chesrown untimely filed a Form 3
and a Form 4 reporting one transaction.
OTHER MATTERS
A copy
of our Form 10-K for the year ended December 31, 2016, without
exhibits, is being mailed with this proxy statement. Stockholders
are referred to the Form 10-K for financial and other information
about the Company.
Additional copies
of our Form 10-K for the year ended December 31, 2016 may be
obtained without charge by writing to Investor Relations, RumbleON,
Inc., 4521 Sharon Road, Suite 370, Charlotte, North Carolina 28211.
Exhibits will be furnished upon request. The SEC maintains a web
site that contains reports, proxy and information statements and
other information regarding registrants that file electronically
with the SEC. The address of such site is
http://www.sec.gov
.
22
Annex
A
RUMBLEON, INC.
2017 STOCK INCENTIVE PLAN
1.
ESTABLISHMENT, EFFECTIVE DATE AND TERM
RumbleON, Inc., a
Nevada corporation, hereby establishes the RumbleON, Inc. 2017
Stock Incentive Plan. The Effective Date of the Plan shall be the
later of: (i) the date the Plan was approved by the Board, and (ii)
the date the Plan was approved by stockholders of Company in
accordance with the laws of the State of Nevada. Unless earlier
terminated pursuant to Section 14(k) hereof, the Plan shall
terminate on the tenth anniversary of the Effective Date.
Capitalized terms used herein are defined in Annex A attached
hereto.
2.
PURPOSE
The
purpose of the Plan is to enable the Company to attract, retain,
reward, and motivate Eligible Individuals by providing them with an
opportunity to acquire or increase a proprietary interest in the
Company and to incentivize them to expend maximum effort for the
growth and success of the Company, so as to strengthen the
mutuality of the interests between the Eligible Individuals and the
stockholders of the Company.
3.
ELIGIBILITY
Awards
may be granted under the Plan to any Eligible Individual, as
determined by the Committee from time to time, on the basis of
their importance to the business of the Company, pursuant to the
terms of the Plan.
4.
ADMINISTRATION
(a)
Committee
.
The Plan shall be administered by the Committee, which shall have
the full power and authority to take all actions, and to make all
determinations not inconsistent with the specific terms and
provisions of the Plan and deemed by the Committee to be necessary
or appropriate to the administration of the Plan, any Award granted
or any Award Agreement entered into hereunder. The Committee may
correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Agreement in the manner
and to the extent it shall deem expedient to carry the Plan into
effect as it may determine in its sole discretion. The decisions by
the Committee shall be final, conclusive, and binding with respect
to the interpretation and administration of the Plan, any Award, or
any Award Agreement entered into under the Plan.
(b)
Delegation
to Officers or Employees
.
The Committee may designate officers
or employees of the Company to assist the Committee in the
administration of the Plan. The Committee may delegate authority to
officers or employees of the Company to grant Awards and execute
Award Agreements or other documents on behalf of the Committee in
connection with the administration of the Plan, subject to whatever
limitations or restrictions the Committee may impose and in
accordance with applicable law.
(c)
Designation
of Advisors
.
The
Committee may designate professional advisors to assist the
Committee in the administration of the Plan. The Committee may
employ such legal counsel, consultants, and agents as it may deem
desirable for the administration of the Plan and may rely upon any
advice and any computation received from any such counsel,
consultant, or agent. The Company shall pay all expenses and costs
incurred by the Committee for the engagement of any such counsel,
consultant, or agent.
(d)
Participants
Outside the U.S
.
In
order to conform with the provisions of local laws and regulations
of foreign countries which may affect the Awards or the
Participants, the Committee shall have the sole discretion to (i)
modify the terms and conditions of the Awards granted under the
Plan to Eligible Individuals located outside the United States;
(ii) establish subplans with such modifications as may be necessary
or advisable under the circumstances present by local laws and
regulations; and (iii) take any action which it deems advisable to
comply with or otherwise reflect any necessary governmental
regulatory procedures, or to obtain any exemptions or approvals
necessary with respect to the Plan or any subplan established
hereunder.
(e)
Liability
and Indemnification
.
No Covered Individual shall be liable for any action or
determination made in good faith with respect to the Plan, any
Award granted hereunder or any Award Agreement entered into
hereunder. The Company shall, to the maximum extent permitted by
applicable law and the Articles of Incorporation and Bylaws of the
Company, indemnify and hold harmless each Covered Individual
against any cost or expense (including reasonable attorney fees
reasonably acceptable to the Company) or liability (including any
amount paid in settlement of a claim with the approval of the
Company), and amounts advanced to such Covered Individual necessary
to pay the foregoing at the earliest time and to the fullest extent
permitted, arising out of any act or omission to act in connection
with the Plan, any Award granted hereunder or any Award Agreement
entered into hereunder. Such indemnification shall be in addition
to any rights of indemnification such individuals may have under
other agreements, applicable law or under the Articles of
Incorporation or Bylaws of the Company. Notwithstanding anything
else herein, this indemnification will not apply to the actions or
determinations made by a Covered Individual with regard to Awards
granted to such Covered Individual under the Plan or arising out of
such Covered Individual’s own fraud or bad
faith.
A-1
5.
SHARES OF COMMON STOCK SUBJECT TO PLAN
(a)
Shares
Available for Awards
.
The Common Stock that may be issued
pursuant to Awards granted under the Plan shall be treasury shares
or authorized but unissued shares of the Common Stock. The maximum
number of shares of Common Stock that may be issued pursuant to
Awards granted under the Plan shall be twelve percent (12%) of all
issued and outstanding Common Stock from time to time.
(b)
Certain
Limitations on Specific Types of Awards
.
The granting of Awards under this
Plan shall be subject to the following limitations:
(i)
With
respect to the shares of Common Stock issuable pursuant to this
Section, a maximum of 768,000 of such shares may be subject to
grants of Incentive Stock Options;
(ii)
With
respect to the shares of Common Stock issuable pursuant to this
Section, a maximum of 768,000 of such shares may be subject to
grants of Options or Stock Appreciation Rights to any one Covered
Employee during any one fiscal year;
(iii)
With respect to the shares of Common Stock issuable pursuant to
this Section, a maximum of 768,000 of such shares may be subject to
grants of Performance Shares, Restricted Stock, Restricted Stock
Units and Awards of Common Stock to any one Covered Employee during
any one fiscal year; and
(iv)
The
maximum value at Grant Date of grants of Performance Units which
may be granted to any one Covered Employee during any one fiscal
year shall be One Million Dollars ($1,000,000).
(c)
Reduction
of Shares Available for Awards
.
Upon the granting of an Award, the
number of shares of Common Stock available for issuance under this
Section for the granting of further Awards shall be reduced as
follows:
(i)
In
connection with the granting of an Option or Stock Appreciation
Right, the number of shares of Common Stock shall be reduced by the
number of shares of Common Stock subject to the Option or Stock
Appreciation Right;
(ii)
In connection with the granting of an Award that is settled
in Common Stock, other than the granting of an Option or Stock
Appreciation Right, the number of shares of Common Stock shall be
reduced by the number of shares of Common Stock subject to the
Award; and
(iii)
Awards settled in cash or property other than Common Stock shall
not count against the total number of shares of Common Stock
available to be granted pursuant to the Plan.
(d)
Cancelled,
Forfeited, or Surrendered Awards
.
Notwithstanding anything to the
contrary in this Plan, if any award under this Plan is cancelled,
forfeited or terminated for any reason prior to exercise, delivery
or becoming vested in full, the shares of Common Stock that were
subject to such Award shall, to the extent cancelled, forfeited or
terminated, immediately become available for future Awards granted
under this Plan; provided, however, that any shares of Common Stock
subject to an Award which is cancelled, forfeited or terminated in
order to pay the exercise price of a stock option, purchase price
or any taxes or tax withholdings on an award shall not be available
for future Awards granted under this Plan.
(e)
Recapitalization
.
If the outstanding shares of Common Stock are increased or
decreased or changed into or exchanged for a different number or
kind of shares or other securities by reason of any
recapitalization, reclassification, reorganization, stock split,
reverse split, combination of shares, exchange of shares, stock
dividend or other distribution payable in capital stock of the
Company or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the
Effective Date, an appropriate and proportionate adjustment shall
be made by the Committee to: (i) the aggregate number and kind of
shares of Common Stock available under the Plan (including, but not
limited to, the limits of the number of shares of Common Stock
described in Section 5(b)), (ii) the calculation of the reduction
of shares of Common Stock available under the Plan, (iii) the
number and kind of shares of Common Stock issuable pursuant to
outstanding Awards granted under the Plan and/or (iv) the Exercise
Price of outstanding Options or Stock Appreciation Rights granted
under the Plan. No fractional shares of Common Stock or units of
other securities shall be issued pursuant to any such adjustment
under this Section 5(e), and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to
the nearest whole share or unit. Any adjustments made under this
Section 5(e) with respect to any Incentive Stock Options must be
made in accordance with Code Section 424.
A-2
6.
RESTRICTED STOCK AND RESTRICTED STOCK
UNITS
(a)
Grant
of Restricted Stock and Restricted Stock Units
.
Subject to the terms and conditions
of the Plan, the Committee may grant to such Eligible Individuals
as the Committee may determine, Restricted Stock or Restricted
Stock Units, in such amounts and on such terms and conditions as
the Committee shall determine in its sole and absolute discretion.
Each grant of Restricted Stock and Restricted Stock Units shall
satisfy the requirements as set forth in this Section.
(b)
Restrictions
.
The Committee shall impose such restrictions on any Restricted
Stock or Restricted Stock Unit granted pursuant to the Plan as it
may deem advisable including, without limitation, time-based
vesting restrictions or the attainment of Performance Goals. The
determination with respect to achievement of Performance Goals
shall be made pursuant to Section 9 hereof.
(c)
Certificates
and Certificate Legend
.
With respect to a grant of Restricted
Stock, the Company may issue a certificate evidencing such
Restricted Stock to the Participant or issue and hold such shares
of Restricted Stock for the benefit of the Participant until the
applicable restrictions expire. The Company may legend the
certificate representing Restricted Stock to give appropriate
notice of such restrictions. In addition to any such legends, each
certificate representing shares of Restricted Stock granted
pursuant to the Plan shall bear the following legend:
“Shares of
stock represented by this certificate are subject to certain terms,
conditions, and restrictions on transfer as set forth in the
RumbleON, Inc. 2017 Stock Incentive Plan (the “Plan”),
and in an agreement entered into by and between the registered
owner of such shares and RumbleON, Inc. (the
“Company”), dated ___, 20__ (the “Award
Agreement”). A copy of the Plan and the Award Agreement may
be obtained from the Secretary of the Company.”
(d)
Removal
of Restrictions
.
Except as otherwise provided in the Plan, shares of Restricted
Stock shall become freely transferable by the Participant upon the
lapse of the applicable restrictions. Once the shares of Restricted
Stock are released from the restrictions, the Participant shall be
entitled to have the legend required by paragraph (c) above removed
from the share certificate evidencing such Restricted Stock and the
Company shall pay or distribute to the Participant all dividends
and distributions held in escrow by the Company with respect to
such Restricted Stock, if any.
(e)
Stockholder
Rights
.
Unless
otherwise provided in an Award Agreement, until the expiration of
all applicable restrictions, (i) the Restricted Stock shall be
treated as outstanding, (ii) the Participant holding shares of
Restricted Stock may exercise full voting rights with respect to
such shares, and (iii) the Participant holding shares of Restricted
Stock shall be entitled to receive all dividends and other
distributions paid with respect to such shares while they are so
held. If any such dividends or distributions are paid in shares of
Common Stock, such shares shall be subject to the same restrictions
on transferability and forfeitability as the shares of Restricted
Stock with respect to which they were paid. Notwithstanding
anything to the contrary, at the discretion of the Committee, all
such dividends and distributions may be held in escrow by the
Company (subject to the same restrictions on forfeitability) until
all restrictions on the respective Restricted Stock have lapsed.
Holders of the Restricted Stock Units shall not have any of the
rights of a stockholder, including the right to vote or receive
dividends and other distributions, until Common Stock shall have
been issued in the Participant’s name pursuant to the
Restricted Stock Units.
(f)
Termination
of Service
.
Unless
otherwise provided in an Award Agreement, if a Participant’s
employment or other service with the Company terminates for any
reason, all unvested shares of Restricted Stock and Restricted
Stock Units held by the Participant and any dividends or
distributions held in escrow by the Company with respect to
Restricted Stock shall be forfeited immediately and returned to the
Company. Notwithstanding this paragraph, to the extent applicable,
all grants of Restricted Stock and Restricted Stock Units that vest
solely upon the attainment of Performance Goals shall be treated
pursuant to the terms and conditions that would have been
applicable under Section
9
as if such grants were Awards of Performance Shares.
Notwithstanding anything in this Plan to the contrary, the
Committee may provide, in its sole and absolute discretion, that
following the termination of employment or other service of a
Participant with the Company for any reason, any unvested shares of
Restricted Stock or Restricted Stock Units held by the Participant
that vest solely upon a future service requirement shall vest in
whole or in part, at any time subsequent to such termination of
employment or other service.
(g)
Payment
of Common Stock with respect to Restricted Stock Units
.
Notwithstanding anything to the contrary herein, unless otherwise
provided in the Award agreement, Common Stock will be issued with
respect to Restricted Stock Units no later than March 15 of the
year immediately following the year in which the Restricted Stock
Units are first no longer subject to a substantial risk of
forfeiture as such term is defined in Section 409A of the Code and
the regulations issued thereunder (“RSU Payment Date”).
In the event that Participant has elected to defer the receipt of
Common Stock pursuant to an Award Agreement beyond the RSU Payment
Date, then the Common Stock will be issued at the time specified in
the Award Agreement or related deferral election form. In addition,
unless otherwise provided in the Award Agreement, if the receipt of
Common Stock is deferred past the RSU Payment Date, Dividend
Equivalents on the Common Stock covered by Restricted Stock Units
shall be deferred until the RSU Payment Date.
A-3
7.
OPTIONS
(a)
Grant
of Options
.
Subject
to the terms and conditions of the Plan, the Committee may grant to
such Eligible Individuals as the Committee may determine, Options
to purchase such number of shares of Common Stock and on such terms
and conditions as the Committee shall determine in its sole and
absolute discretion. Each grant of an Option shall satisfy the
requirements set forth in this Section.
(b)
Type
of Options
.
Each
Option granted under the Plan may be designated by the Committee,
in its sole discretion, as either (i) an Incentive Stock Option, or
(ii) a Non-Qualified Stock Option. Options designated as Incentive
Stock Options that fail to continue to meet the requirements of
Code Section 422 shall be re-designated as Non-Qualified Stock
Options automatically on the date of such failure to continue to
meet such requirements without further action by the Committee. In
the absence of any designation, Options granted under the Plan will
be deemed to be Non-Qualified Stock Options.
(c)
Exercise
Price
.
Subject to
the limitations set forth in the Plan relating to Incentive Stock
Options, the Exercise Price of an Option shall be fixed by the
Committee and stated in the respective Award Agreement, provided
that the Exercise Price of the shares of Common Stock subject to
such Option may not be less than Fair Market Value of such Common
Stock on the Grant Date, or if greater, the par value of the Common
Stock.
(d)
Limitation
on Repricing
.
Unless
such action is approved by the Company’s stockholders in
accordance with applicable law: (i) no outstanding Option granted
under the Plan may be amended to provide an Exercise Price that is
lower than the then-current Exercise Price of such outstanding
Option (other than adjustments to the Exercise Price pursuant to
Sections 5(e) and 11); (ii) the Committee may not cancel any
outstanding Option and grant in substitution therefore new Awards
under the Plan covering the same or a different number of shares of
Common Stock and having an Exercise Price lower than the
then-current Exercise Price of the cancelled Option (other than
adjustments to the Exercise Price pursuant to Sections 5(e) and
11); and (iii) the Committee may not authorize the repurchase of an
outstanding Option which has an Exercise Price that is higher than
the then-current fair market value of the Common Stock (other than
adjustments to the Exercise Price pursuant to Sections 5(e) and
11).
(e)
Limitation
on Option Period
.
Subject to the limitations set forth in the Plan relating to
Incentive Stock Options, Options granted under the Plan and all
rights to purchase Common Stock thereunder shall terminate no later
than the tenth anniversary of the Grant Date of such Options, or on
such earlier date as may be stated in the Award Agreement relating
to such Option. In the case of Options expiring prior to the tenth
anniversary of the Grant Date, the Committee may in its discretion,
at any time prior to the expiration or termination of said Options,
extend the term of any such Options for such additional period as
it may determine, but in no event beyond the tenth anniversary of
the Grant Date thereof.
(f)
Limitations
on Incentive Stock Options
.
Notwithstanding any other provisions
of the Plan, the following provisions shall apply with respect to
Incentive Stock Options granted pursuant to the Plan.
(i)
Limitation
on Grants
. Incentive Stock Options may only be granted to
Section 424 Employees. The aggregate Fair Market Value (determined
at the time such Incentive Stock Option is granted) of the shares
of Common Stock for which any individual may have Incentive Stock
Options which first become vested and exercisable in any calendar
year (under all incentive stock option plans of the Company) shall
not exceed $100,000. Options granted to such individual in excess
of the $100,000 limitation, and any Options issued subsequently
which first become vested and exercisable in the same calendar
year, shall automatically be treated as Non-Qualified Stock
Options.
(ii)
Minimum Exercise
Price
. In no event may the Exercise Price of a share of
Common Stock subject an Incentive Stock Option be less than 100% of
the Fair Market Value of such share of Common Stock on the Grant
Date.
(iii)
Ten Percent
Stockholder
. Notwithstanding any other provision of the Plan
to the contrary, in the case of Incentive Stock Options granted to
a Section 424 Employee who, at the time the Option is granted, owns
(after application of the rules set forth in Code Section 424(d))
stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company, such Incentive Stock
Options (i) must have an Exercise Price per share of Common Stock
that is at least 110% of the Fair Market Value as of the Grant Date
of a share of Common Stock, and (ii) must not be exercisable after
the fifth anniversary of the Grant Date.
(g)
Vesting
Schedule and Conditions
.
No Options may be exercised prior to
the satisfaction of the conditions and vesting schedule provided
for in the Plan and in the Award Agreement relating
thereto.
A-4
(h)
Exercise
.
When the conditions to the exercise of an Option have been
satisfied, the Participant may exercise the Option only in
accordance with the following provisions. The Participant shall
deliver to the Company a written notice stating that the
Participant is exercising the Option and specifying the number of
shares of Common Stock which are to be purchased pursuant to the
Option, and such notice shall be accompanied by payment in full of
the Exercise Price of the shares for which the Option is being
exercised, by one or more of the methods provided for in the Plan.
An attempt to exercise any Option granted hereunder other than as
set forth in the Plan shall be invalid and of no force and
effect.
(ij)
Payment
.
Payment of the Exercise Price for the shares of Common Stock
purchased pursuant to the exercise of an Option shall be made by
one of the following methods:
(i)
by
cash, certified or cashier’s check, bank draft or money
order;
(ii)
through
the delivery to the Company of shares of Common Stock which have
been previously owned by the Participant for the requisite period
necessary to avoid a charge to the Company’s earnings for
financial reporting purposes; such shares shall be valued, for
purposes of determining the extent to which the Exercise Price has
been paid thereby, at their Fair Market Value on the date of
exercise; without limiting the foregoing, the Committee may require
the Participant to furnish an opinion of counsel acceptable to the
Committee to the effect that such delivery would not result in the
Company incurring any liability under Section 16(b) of the Exchange
Act; or
(iii)
by
any other method which the Committee, in its sole and absolute
discretion and to the extent permitted by applicable law, may
permit, including, but not limited to through a “cashless
exercise sale and remittance procedure” pursuant to which the
Participant shall concurrently provide irrevocable instructions (1)
to a brokerage firm approved by the Committee to effect the
immediate sale of the purchased shares and remit to the Company,
out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for
the purchased shares plus all applicable federal, state and local
income, employment, excise, foreign and other taxes required to be
withheld by the Company by reason of such exercise and (2) to the
Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the
sale.
(j)
Termination
of Employment
.
Unless otherwise provided in an Award Agreement, upon the
termination of the employment or other service of a Participant
with Company for any reason, all of the Participant’s
outstanding Options (whether vested or unvested) shall be subject
to the rules of this paragraph. Upon such termination, the
Participant’s unvested Options shall expire. Notwithstanding
anything in this Plan to the contrary, the Committee may provide,
in its sole and absolute discretion, that following the termination
of employment or other service of a Participant with the Company
for any reason (i) any unvested Options held by the Participant
shall vest in whole or in part, at any time subsequent to such
termination of employment or other service, and/or (ii) a
Participant or the Participant’s estate, devisee or heir at
law (whichever is applicable), may exercise an Option, in whole or
in part, at any time subsequent to such termination of employment
or other service and prior to the termination of the Option
pursuant to its terms that are unrelated to termination of service.
Unless otherwise determined by the Committee, temporary absence
from employment or other service because of illness, vacation,
approved leaves of absence or military service shall not constitute
a termination of employment or other service.
(i)
Termination
for Reason Other Than Cause, Disability or Death
. If a
Participant’s termination of employment or other service is
for any reason other than death, Disability, Cause or a voluntary
termination within ninety (90) days after occurrence of an event
which would be grounds for termination of employment or other
service by the Company for Cause, any Option held by such
Participant may be exercised, to the extent exercisable at
termination, by the Participant at any time within a period not to
exceed ninety (90) days from the date of such termination, but in
no event after the termination of the Option pursuant to its terms
that are unrelated to termination of service.
(ii)
Disability
.
If a Participant’s termination of employment or other service
with the Company is by reason of a Disability of such Participant,
any Option held by such Participant may be exercised, to the extent
exercisable at termination, by the Participant at any time within a
period not to exceed one (1) year after such termination, but in no
event after the termination of the Option pursuant to its terms
that are unrelated to termination of service; provided, however,
that if the Participant dies within such period, any vested Option
held by such Participant upon death shall be exercisable by the
Participant’s estate, devisee or heir at law (whichever is
applicable) for a period not to exceed one (1) year after the
Participant’s death, but in no event after the termination of
the Option pursuant to its terms that are unrelated to termination
of service.
(iii)
Death
.
If a Participant dies while in the employment or other service of
the Company, any Option held by such Participant may be exercised,
to the extent exercisable at termination, by the
Participant’s estate or the devisee named in the
Participant’s valid last will and testament or the
Participant’s heir at law who inherits the Option, at any
time within a period not to exceed one (1) year after the date of
such Participant’s death, but in no event after the
termination of the Option pursuant to its terms that are unrelated
to termination of service.
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(iv)
Termination
for Cause
. In the event the termination is for Cause or is a
voluntary termination within ninety (90) days after occurrence of
an event which would be grounds for termination of employment or
other service by the Company for Cause (without regard to any
notice or cure period requirement), any Option held by the
Participant at the time of such termination shall be deemed to have
terminated and expired upon the date of such
termination.
8.
STOCK APPRECIATION RIGHTS
(a)
Grant
of Stock Appreciation Rights
.
Subject to the terms and conditions
of the Plan, the Committee may grant to such Eligible Individuals
as the Committee may determine, Stock Appreciation Rights, in such
amounts and on such terms and conditions as the Committee shall
determine in its sole and absolute discretion. Each grant of a
Stock Appreciation Right shall satisfy the requirements as set
forth in this Section.
(b)
Terms
and Conditions of Stock Appreciation Rights
.
Unless otherwise provided in an Award
Agreement, the terms and conditions (including, without limitation,
the limitations on the Exercise Price, exercise period, repricing
and termination) of the Stock Appreciation Right shall be
substantially identical (to the extent possible taking into account
the differences related to the character of the Stock Appreciation
Right) to the terms and conditions that would have been applicable
under Section 7 above were the grant of the Stock Appreciation
Rights a grant of an Option.
(c)
Exercise
of Stock Appreciation Rights
.
Stock Appreciation Rights shall be
exercised by a Participant only by written notice delivered to the
Company, specifying the number of shares of Common Stock with
respect to which the Stock Appreciation Right is being
exercised.
(d)
Payment
of Stock Appreciation Right
.
Unless otherwise provided in an Award
Agreement, upon exercise of a Stock Appreciation Right, the
Participant or Participant’s estate, devisee or heir at law
(whichever is applicable) shall be entitled to receive payment, in
cash, in shares of Common Stock, or in a combination thereof, as
determined by the Committee in its sole and absolute discretion.
The amount of such payment shall be determined by multiplying the
excess, if any, of the Fair Market Value of a share of Common Stock
on the date of exercise over the Fair Market Value of a share of
Common Stock on the Grant Date, by the number of shares of Common
Stock with respect to which the Stock Appreciation Rights are then
being exercised. Notwithstanding the foregoing, the Committee may
limit in any manner the amount payable with respect to a Stock
Appreciation Right by including such limitation in the Award
Agreement.
9.
PERFORMANCE SHARES AND PERFORMANCE
UNITS
(a)
Grant
of Performance Shares and Performance Units
.
Subject to the terms and conditions
of the Plan, the Committee may grant to such Eligible Individuals
as the Committee may determine, Performance Shares and Performance
Units, in such amounts and on such terms and conditions as the
Committee shall determine in its sole and absolute discretion. Each
grant of a Performance Share or a Performance Unit shall satisfy
the requirements as set forth in this Section.
(b)
Performance
Goals
.
Performance
Goals will be based on one or more of the following criteria, as
determined by the Committee in its absolute and sole discretion:
(i) the attainment of certain target levels of, or a specified
increase in, the Company’s enterprise value or value creation
targets; (ii) the attainment of certain target levels of, or a
percentage increase in, the Company’s after-tax or pre-tax
profits including, without limitation, that attributable to the
Company’s continuing and/or other operations; (iii) the
attainment of certain target levels of, or a specified increase
relating to, the Company’s operational cash flow or working
capital, or a component thereof; (iv) the attainment of certain
target levels of, or a specified decrease relating to, the
Company’s operational costs, or a component thereof; (v) the
attainment of a certain level of reduction of, or other specified
objectives with regard to limiting the level of increase in all or
a portion of bank debt or other of the Company’s long-term or
short-term public or private debt or other similar financial
obligations of the Company, which may be calculated net of cash
balances and/or other offsets and adjustments as may be established
by the Committee; (vi) the attainment of a specified percentage
increase in earnings per share or earnings per share from the
Company’s continuing operations; (vii) the attainment of
certain target levels of, or a specified percentage increase in,
the Company’s net sales, revenues, net income or earnings
before income tax or other exclusions; (viii) the attainment of
certain target levels of, or a specified increase in, the
Company’s return on capital employed or return on invested
capital; (ix) the attainment of certain target levels of, or a
percentage increase in, the Company’s after-tax or pre-tax
return on stockholder equity; (x) the attainment of certain target
levels in the fair market value of the Company’s Common
Stock; (xi) the growth in the value of an investment in the Common
Stock assuming the reinvestment of dividends; and/or (xii) the
attainment of certain target levels of, or a specified increase in,
EBITDA (earnings before income tax, depreciation and amortization).
In addition, Performance Goals may be based upon the attainment by
a subsidiary, division or other operational unit of the Company of
specified levels of performance under one or more of the measures
described above. Further, the Performance Goals may be based upon
the attainment by the Company (or a subsidiary, division, facility
or other operational unit of the Company) of specified levels of
performance under one or more of the foregoing measures relative to
the performance of other corporations. To the extent permitted
under Code Section 162(m) of the Code (including, without
limitation, compliance with any requirements for stockholder
approval), the Committee may, in its sole and absolute discretion:
(i) designate additional business criteria upon which the
Performance Goals may be based; (ii) modify, amend or adjust the
business criteria described herein; or (iii) incorporate in the
Performance Goals provisions regarding changes in accounting
methods, corporate transactions (including, without limitation,
dispositions or acquisitions) and similar events or circumstances.
Performance Goals may include a threshold level of performance
below which no Award will be earned, levels of performance at which
an Award will become partially earned and a level at which an Award
will be fully earned.
A-6
(c)
Terms
and Conditions of Performance Shares and Performance
Units
.
The
applicable Award Agreement shall set forth (i) the number of
Performance Shares or the dollar value of Performance Units granted
to the Participant; (ii) the Performance Period and Performance
Goals with respect to each such Award; (iii) the threshold, target
and maximum shares of Common Stock or dollar values of each
Performance Share or Performance Unit and corresponding Performance
Goals; and (iv) any other terms and conditions as the Committee
determines in its sole and absolute discretion. The Committee shall
establish, in its sole and absolute discretion, the Performance
Goals for the applicable Performance Period for each Performance
Share or Performance Unit granted hereunder. Performance Goals for
different Participants and for different grants of Performance
Shares and Performance Units need not be identical. Unless
otherwise provided in an Award Agreement, a holder of Performance
Units or Performance Shares is not entitled to the rights of a
holder of Common Stock.
(d)
Determination
and Payment of Performance Units or Performance Shares
Earned
.
Following
the end of a Performance Period, the Committee shall determine the
extent to which Performance Shares or Performance Units have been
earned on the basis of the Company’s actual performance in
relation to the established Performance Goals as set forth in the
applicable Award Agreement and shall certify these results in
writing. Unless otherwise provided in an Award Agreement, the
Committee shall determine in its sole and absolute discretion
whether payment with respect to the Performance Share or
Performance Unit shall be made in cash, in shares of Common Stock,
or in a combination thereof.
(e)
Termination
of Employment
.
Unless otherwise provided in an Award Agreement, if a
Participant’s employment or other service with the Company
terminates for any reason, all of the Participant’s
outstanding Performance Shares and Performance Units shall be
subject to the rules of this Section.
(i)
Termination
for Reason Other Than Death or Disability
. If a
Participant’s employment or other service with the Company
terminates prior to the expiration of a Performance Period with
respect to any Performance Units or Performance Shares held by such
Participant for any reason other than death or Disability, the
outstanding Performance Units or Performance Shares held by such
Participant for which the Performance Period has not yet expired
shall terminate upon such termination of employment or other
service with the Company and the Participant shall have no further
rights pursuant to such Performance Units or Performance
Shares.
(ii)
Termination
of Employment for Death or Disability
. If a
Participant’s employment or other service with the Company
terminates by reason of the Participant’s death or Disability
prior to the end of a Performance Period, the Participant, or the
Participant’s estate, devisee or heir at law (whichever is
applicable) shall be entitled to a payment of the
Participant’s outstanding Performance Units and Performance
Shares, pursuant to the terms of the Plan and the
Participant’s Award Agreement; provided, however, that the
Participant shall be deemed to have earned only that proportion (to
the nearest whole unit or share) of the Performance Units or
Performance Shares granted to the Participant under such Award as
the number of full months of the Performance Period which have
elapsed since the first day of the Performance Period for which the
Award was granted to the end of the month in which the
Participant’s termination of employment or other service,
bears to the total number of months in the Performance Period,
subject to the attainment of the Performance Goals associated with
the Award as certified by the Committee. The remaining Performance
Units or Performance Shares and any rights with respect thereto
shall be canceled and forfeited.
10.
OTHER AWARDS
Awards
of shares of Common Stock, phantom stock and other Awards that are
valued in whole or in part by reference to, or otherwise based on,
Common Stock, may also be made, from time to time, to Eligible
Individuals as may be selected by the Committee. Such Common Stock
may be issued in satisfaction of Awards granted under any other
plan sponsored by the Company or compensation payable to an
Eligible Individual. In addition, such Awards may be made alone or
in addition to or in connection with any other Award granted
hereunder. The Committee may determine the terms and conditions of
any such Award. Each such Award shall be evidenced by an Award
Agreement between the Eligible Individual and the Company which
shall specify the number of shares of Common Stock subject to the
Award, any consideration therefore, any vesting or performance
requirements, and such other terms and conditions as the Committee
shall determine in its sole and absolute discretion.
A-7
11.
CHANGE IN CONTROL
Upon
the occurrence of a Change in Control, the Committee may, in its
sole and absolute discretion, provide on a case by case basis that
(i) all Awards shall terminate, provided that Participants shall
have the right, immediately prior to the occurrence of such Change
in Control and during such reasonable period as the Committee in
its sole discretion shall determine and designate, to exercise any
Award, (ii) all Awards shall terminate, provided that Participants
shall be entitled to a cash payment equal to the Change in Control
Price with respect to shares subject to the vested portion of the
Award net of the Exercise Price thereof, if applicable, (iii) in
connection with a liquidation or dissolution of the Company, the
Awards, to the extent vested, shall convert into the right to
receive liquidation proceeds net of the Exercise Price (if
applicable), (iv) accelerate the vesting of Awards and (v) any
combination of the foregoing. In the event that the Committee does
not terminate or convert an Award upon a Change in Control of the
Company, then the Award shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring, or
succeeding corporation (or an affiliate thereof).
12.
CHANGE IN STATUS OF PARENT OR
SUBSIDIARY
Unless
otherwise provided in an Award Agreement or otherwise determined by
the Committee, in the event that an entity or business unit which
was previously a part of the Company is no longer a part of the
Company, as determined by the Committee in its sole discretion, the
Committee may, in its sole and absolute discretion: (i) provide on
a case by case basis that some or all outstanding Awards held by a
Participant employed by or performing service for such entity or
business unit may become immediately exercisable or vested, without
regard to any limitation imposed pursuant to this Plan; (ii)
provide on a case by case basis that some or all outstanding Awards
held by a Participant employed by or performing service for such
entity or business unit may remain outstanding, may continue to
vest, and/or may remain exercisable for a period not exceeding one
(1) year, subject to the terms of the Award Agreement and this
Plan; and/or (iii) treat the employment or other services of a
Participant performing services for such entity or business unit as
terminated, if such Participant is not employed by the Company or
any entity that is a part of the Company, immediately after such
event.
13.
REQUIREMENTS OF LAW
(a)
Violations
of Law
.
The Company
shall not be required to make any payments, sell or issue any
shares of Common Stock under any Award if the sale or issuance of
such shares would constitute a violation by the individual
exercising the Award, the Participant or the Company of any
provisions of any law or regulation of any governmental authority,
including without limitation any provisions of the Sarbanes-Oxley
Act, and any other federal or state securities laws or regulations.
Any determination in this connection by the Committee shall be
final, binding, and conclusive. The Company shall not be obligated
to take any affirmative action in order to cause the exercise of an
Award, the issuance of shares pursuant thereto or the grant of an
Award to comply with any law or regulation of any governmental
authority.
(b)
Registration
.
At the time of any exercise or receipt of any Award, the Company
may, if it shall determine it necessary or desirable for any
reason, require the Participant (or Participant’s heirs,
legatees or legal representative, as the case may be), as a
condition to the exercise or grant thereof, to deliver to the
Company a written representation of present intention to hold the
shares for their own account as an investment and not with a view
to, or for sale in connection with, the distribution of such
shares, except in compliance with applicable federal and state
securities laws with respect thereto. In the event such
representation is required to be delivered, an appropriate legend
may be placed upon each certificate delivered to the Participant
(or Participant’s heirs, legatees or legal representative, as
the case may be) upon the Participant’s exercise of part or
all of the Award or receipt of an Award and a stop transfer order
may be placed with the transfer agent. Each Award shall also be
subject to the requirement that, if at any time the Company
determines, in its discretion, that the listing, registration or
qualification of the shares subject to the Award upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of or in connection with, the
issuance or purchase of the shares thereunder, the Award may not be
exercised in whole or in part and the restrictions on an Award may
not be removed unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company in its sole
discretion. The Participant shall provide the Company with any
certificates, representations and information that the Company
requests and shall otherwise cooperate with the Company in
obtaining any listing, registration, qualification, consent or
approval that the Company deems necessary or appropriate. The
Company shall not be obligated to take any affirmative action in
order to cause the exercisability or vesting of an Award, to cause
the exercise of an Award or the issuance of shares pursuant
thereto, or to cause the grant of Award to comply with any law or
regulation of any governmental authority.
(c)
Withholding
.
The Committee may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic
or foreign, to withhold in connection with the grant or exercise of
an Award, or the removal of restrictions on an Award including, but
not limited to: (i) the withholding of delivery of shares of Common
Stock until the holder reimburses the Company for the amount the
Company is required to withhold with respect to such taxes; (ii)
the canceling of any number of shares of Common Stock issuable in
an amount sufficient to reimburse the Company for the amount it is
required to so withhold; (iii) withholding the amount due from any
such person’s wages or compensation due to such person; or
(iv) requiring the Participant to pay the Company cash in the
amount the Company is required to withhold with respect to such
taxes.
(d)
Governing
Law
.
The Plan shall
be governed by, and construed and enforced in accordance with, the
laws of the State of Nevada.
A-8
14.
GENERAL PROVISIONS
(a)
Award
Agreements
.
All
Awards granted pursuant to the Plan shall be evidenced by an Award
Agreement. Each Award Agreement shall specify the terms and
conditions of the Award granted and shall contain any additional
provisions as the Committee shall deem appropriate, in its sole and
absolute discretion (including, to the extent that the Committee
deems appropriate, provisions relating to confidentiality,
non-competition, non-solicitation and similar matters). The terms
of each Award Agreement need not be identical for Eligible
Individuals provided that each Award Agreement shall comply with
the terms of the Plan.
(b)
Purchase
Price
.
To the extent
the purchase price of any Award granted hereunder is less than par
value of a share of Common Stock and such purchase price is not
permitted by applicable law, the per share purchase price shall be
deemed to be equal to the par value of a share of Common
Stock.
(c)
Dividends
and Dividend Equivalents
.
Except as set forth in the Plan, an
Award Agreement or provided by the Committee in its sole and
absolute discretion, a Participant shall not be entitled to
receive, currently or on a deferred basis, cash or stock dividends,
Dividend Equivalents, or cash payments in amounts equivalent to
cash or stock dividends on shares of Common Stock covered by an
Award. The Committee in its absolute and sole discretion may credit
a Participant’s Award with Dividend Equivalents with respect
to any Awards. To the extent that dividends and distributions
relating to an Award are held in escrow by the Company, or Dividend
Equivalents are credited to an Award, a Participant shall not be
entitled to any interest on any such amounts. The Committee may not
grant Dividend Equivalents to an Award subject to performance-based
vesting to the extent that the grant of such Dividend Equivalents
would limit the Company’s deduction of the compensation
payable under such Award for federal tax purposes pursuant to Code
Section 162(m).
(d)
Deferral
of Awards
.
The
Committee may from time to time establish procedures pursuant to
which a Participant may elect to defer, until a time or times later
than the vesting of an Award, receipt of all or a portion of the
shares of Common Stock or cash subject to such Award and to receive
Common Stock or cash at such later time or times, all on such terms
and conditions as the Committee shall determine. The Committee
shall not permit the deferral of an Award unless counsel for the
Company determines that such action will not result in adverse tax
consequences to a Participant under Section 409A of the Code. If
any such deferrals are permitted, then notwithstanding anything to
the contrary herein, a Participant who elects to defer receipt of
Common Stock shall not have any rights as a stockholder with
respect to deferred shares of Common Stock unless and until shares
of Common Stock are actually delivered to the Participant with
respect thereto, except to the extent otherwise determined by the
Committee.
(e)
Prospective
Employees
.
Notwithstanding anything to the contrary, any Award granted to a
Prospective Employee shall not become vested prior to the date the
Prospective Employee first becomes an employee of the
Company.
(f)
Stockholder
Rights
.
Except as
expressly provided in the Plan
or an Award Agreement, a
Participant shall not have any of the rights of a stockholder with
respect to Common Stock subject to the Awards prior to satisfaction
of all conditions relating to the issuance of such Common Stock,
and no adjustment shall be made for dividends, distributions or
other rights of any kind for which the record date is prior to the
date on which all such conditions have been satisfied.
(g)
Transferability
of Awards
.
A
Participant may not Transfer an Award other than by will or the
laws of descent and distribution. Awards may be exercised during
the Participant’s lifetime only by the Participant. No Award
shall be liable for or subject to the debts, contracts, or
liabilities of any Participant, nor shall any Award be subject to
legal process or attachment for or against such person. Any
purported Transfer of an Award in contravention of the provisions
of the Plan shall have no force or effect and shall be null and
void, and the purported transferee of such Award shall not acquire
any rights with respect to such Award. Notwithstanding anything to
the contrary, the Committee may in its sole and absolute discretion
permit the Transfer of an Award to a Participant’s
“family member” as such term is defined in the Form S-8
Registration Statement under the Securities Act of 1933, as
amended, under such terms and conditions as specified by the
Committee. In such case, such Award shall be exercisable only by
the transferee approved of by the Committee. To the extent that the
Committee permits the Transfer of an Incentive Stock Option to a
“family member”, so that such Option fails to continue
to satisfy the requirements of an incentive stock option under the
Code such Option shall automatically be re-designated as a
Non-Qualified Stock Option.
(h)
Buyout
and Settlement Provisions
.
Except as prohibited in Section 7(d)
of the Plan, the Committee may at any time on behalf of the Company
offer to buy out any Awards previously granted based on such terms
and conditions as the Committee shall determine which shall be
communicated to the Participants at the time such offer is
made.
(i)
Use
of Proceeds
.
The
proceeds received by the Company from the sale of Common Stock
pursuant to Awards granted under the Plan shall constitute general
funds of the Company.
(j)
Modification
or Substitution of an Award
.
Subject to the terms and conditions
of the Plan, the Committee may modify outstanding Awards, provided
that, except as expressly provided in the Plan, no modification of
an Award shall adversely affect any rights or obligations of the
Participant under the applicable Award Agreement without the
Participant’s consent. Nothing in the Plan shall limit the
right of the Company to pay compensation of any kind outside the
terms of the Plan.
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(k)
Amendment
and Termination of Plan
.
The Board may, at any time and from
time to time, amend, suspend or terminate the Plan as to any shares
of Common Stock as to which Awards have not been granted;
provided, however,
that the
approval of the stockholders of the Company in accordance with
applicable law and the Articles of Incorporation and Bylaws of the
Company shall be required for any amendment: (i) that changes the
class of individuals eligible to receive Awards under the Plan;
(ii) that increases the maximum number of shares of Common Stock in
the aggregate that may be subject to Awards that are granted under
the Plan (except as permitted under Section 5 or Section 11
hereof); (iii) the approval of which is necessary to comply with
federal or state law (including without limitation Section 162(m)
of the Code and Rule 16b-3 under the Exchange Act) or with the
rules of any stock exchange or automated quotation system on which
the Common Stock may be listed or traded; or (iv) that proposed to
eliminate a requirement provided herein that the stockholders of
the Company must approve an action to be undertaken under the Plan.
Except as expressly provided in the Plan, no amendment, suspension
or termination of the Plan shall, without the consent of the holder
of an Award, alter or impair rights or obligations under any Award
theretofore granted under the Plan. Awards granted prior to the
termination of the Plan may extend beyond the date the Plan is
terminated and shall continue subject to the terms of the Plan as
in effect on the date the Plan is terminated.
(l)
Section
409A and 162(m) of the Code
.
With respect to Awards subject to
Section 409A or 162(m) of the Code, this Plan is intended to comply
with the requirements of such Sections, and the provisions hereof
shall be interpreted in a manner that satisfies the requirements of
such Sections and the related regulations, and the Plan shall be
operated accordingly. If any provision of this Plan or any term or
condition of any Award would otherwise frustrate or conflict with
this intent, the provision, term or condition will be interpreted
and deemed amended so as to avoid this conflict.
(m)
Notification
of 83(b) Election
.
If in connection with the grant of any Award, any Participant makes
an election permitted under Code Section 83(b), such Participant
must notify the Company in writing of such election within ten (10)
days of filing such election with the Internal Revenue
Service.
(n)
Disclaimer
of Rights
.
No
provision in the Plan, any Award granted hereunder, or any Award
Agreement entered into pursuant to the Plan shall be construed to
confer upon any individual the right to remain in the employ of or
other service with the Company or to interfere in any way with the
right and authority of the Company either to increase or decrease
the compensation of any individual, including any holder of an
Award, at any time, or to terminate any employment or other
relationship between any individual and the Company. The grant of
an Award pursuant to the Plan shall not affect or limit in any way
the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate,
or to sell or transfer all or any part of its business or
assets.
(o)
Unfunded
Status of Plan
.
The
Plan is intended to constitute an “unfunded” plan for
incentive and deferred compensation. With respect to any payments
as to which a Participant has a fixed and vested interest but which
are not yet made to such Participant by the Company, nothing
contained herein shall give any such Participant any rights that
are greater than those of a general creditor of the
Company.
(p)
Nonexclusivity
of Plan
.
The
adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may
be applicable either generally to a class or classes of individuals
or specifically to a particular individual or individuals) as the
Board in its sole and absolute discretion determines
desirable.
(q)
Other
Benefits
.
No Award
payment under the Plan shall be deemed compensation for purposes of
computing benefits under any retirement plan of the Company or any
agreement between a Participant and the Company, nor affect any
benefits under any other benefit plan of the Company now or
subsequently in effect under which benefits are based upon a
Participant’s level of compensation.
(r)
Headings
.
The section headings in the Plan are for convenience only; they
form no part of this Agreement and shall not affect its
interpretation.
(s)
Pronouns
.
The use of any gender in the Plan shall be deemed to include all
genders, and the use of the singular shall be deemed to include the
plural and vice versa, wherever it appears appropriate from the
context.
(t)
Successors
and Assigns
.
The
Plan shall be binding on all successors of the Company and all
successors and permitted assigns of a Participant, including, but
not limited to, a Participant’s estate, devisee, or heir at
law.
(u)
Severability
.
If any provision of the Plan or any Award Agreement shall be
determined to be illegal or unenforceable by any court of law in
any jurisdiction, the remaining provisions hereof and thereof shall
be severable and enforceable in accordance with their terms, and
all provisions shall remain enforceable in any other
jurisdiction.
(v)
Notices
.
Any communication or notice required or permitted to be given under
the Plan shall be in writing, and mailed by registered or certified
mail or delivered by hand, to the Company, to its principal place
of business, Attention: Human Resources, and if to the holder of an
Award, to the address as appearing on the records of the
Company.
A-10
ANNEX A
DEFINITIONS
“Award”
means any Restricted Stock Unit, Common Stock, Option, Performance
Share, Performance Unit, Restricted Stock, Stock Appreciation Right
or any other award granted pursuant to the Plan.
“Award
Agreement” means a written agreement entered into by the
Company and a Participant setting forth the terms and conditions of
the grant of an Award to such Participant.
“Board”
means the board of directors of the Company.
“Cause”
means, with respect to a termination of employment or other service
with the Company, a termination of employment or other service due
to a Participant’s dishonesty, fraud, or willful misconduct;
provided, however,
that if
the Participant and the Company have entered into an employment
agreement or consulting agreement which defines the term Cause, the
term Cause shall be defined in accordance with such agreement with
respect to any Award granted to the Participant on or after the
effective date of the respective employment or consulting
agreement. The Committee shall determine in its sole and absolute
discretion whether Cause exists for purposes of the
Plan.
“Change in
Control” means: (i) any Person (other than the Company,
any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned,
directly or indirectly, by stockholders of the Company in
substantially the same proportions as their ownership of Company
Common Stock) becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than
fifty percent (50%) or more of the value of the Company’s
then outstanding securities (the “Majority Owner”);
provided, however, that no Change in Control shall occur under this
paragraph (i) unless a person who was not a Majority Owner at some
time after the Effective Date becomes a Majority Owner after the
Effective Date; (ii) a merger, consolidation, reorganization, or
other business combination of the Company with any other entity,
other than a merger or consolidation which would result in the
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than fifty percent (50%) by value of the securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation; or (iii)the consummation of the sale or
disposition by the Company of all or substantially all of its
assets other than (x) the sale or disposition of all or
substantially all of the assets of the Company to a Person or
Persons who beneficially own, directly or indirectly, at least
fifty percent (50%) or more of the securities of the Company by
value at the time of the sale or (y) pursuant to a spin-off type
transaction, directly or indirectly, of such assets to the
stockholders of the Company.
However, to the
extent that Section 409A of the Code would cause an adverse tax
consequence to a Participant using the above definition, the term
“Change in Control” shall have the meaning ascribed to
the phrase “Change in the Ownership or Effective Control of a
Corporation or in the Ownership of a Substantial Portion of the
Assets of a Corporation” under Treasury Department Regulation
1.409A-3(i)(5), as revised from time to time in either subsequent
regulations or other guidance, and in the event that such
regulations are withdrawn or such phrase (or a substantially
similar phrase) ceases to be defined, as determined by the
Committee.
“Change in
Control Price” means the price per share of Common Stock paid
in any transaction related to a Change in Control of the
Company.
“Code”
means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
“Committee”
means a committee or sub-committee of the Board consisting of two
or more members of the Board, none of whom shall be an officer or
other salaried employee of the Company, and each of whom shall
qualify in all respects as a “non-employee director” as
defined in Rule 16b-3 under the Exchange Act, and as an
“outside director” for purposes of Code Section 162(m).
If no Committee exists, the functions of the Committee will be
exercised by the Board;
provided,
however,
that a Committee shall be created prior to the
grant of Awards to a Covered Employee and that grants of Awards to
a Covered Employee shall be made only by such Committee.
Notwithstanding the foregoing, with respect to the grant of Awards
to non-employee directors, the Committee shall be the
Board.
“Common
Stock” means the Class B common stock, par value $0.001 per
share, of the Company or any other security into which such common
stock shall be changed as contemplated by the adjustment provisions
of Section 5 of the Plan.
“Company”
means RumbleON, the subsidiaries of RumbleON and all other entities
whose financial statements are required to be consolidated with the
financial statements of RumbleON pursuant to United States
generally accepted accounting principles, and any other entity
determined to be an affiliate of RumbleON as determined by the
Committee in its sole and absolute discretion.
A-11
“Covered
Employee” means “covered employee” as defined in
Code Section 162(m)(3).
“Covered
Individual” means any current or former member of the
Committee, any current or former officer or director of the
Company, or, if so determined by the Committee in its sole
discretion, any individual designated pursuant to Section
4(c).
“Disability”
means a “permanent and total disability” within the
meaning of Code Section 22(e)(3);
provided, however,
that if a
Participant and the Company have entered into an employment or
consulting agreement which defines the term Disability for purposes
of such agreement, Disability shall be defined pursuant to the
definition in such agreement with respect to any Award granted to
the Participant on or after the effective date of the respective
employment or consulting agreement. The Committee shall determine
in its sole and absolute discretion whether a Disability exists for
purposes of the Plan.
“Dividend
Equivalents” means an amount equal to the cash dividends paid
by the Company upon one share of Common Stock subject to an Award
granted to a Participant under the Plan.
“Eligible
Individual” means any employee, consultant, officer, director
(employee or non-employee director) or independent contractor of
the Company and any Prospective Employee to whom Awards are granted
in connection with an offer of future employment with the
Company.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended.
“Exercise
Price” means the purchase price per share of each share of
Common Stock subject to an Award.
“Fair Market
Value” means, unless otherwise required by the Code, as of
any date, the last sales price reported for the Common Stock on the
day immediately prior to such date (i) as reported by the national
securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities
exchange, as quoted on an automated quotation system sponsored by
the Financial Industry Regulatory Authority, Inc., or if the Common
Stock shall not have been reported or quoted on such date, on the
first day prior thereto on which the Common Stock was reported or
quoted;
provided, however,
that the Committee may modify the definition of Fair Market Value
to reflect any changes in the trading practices of any exchange or
automated system sponsored by the Financial Industry Regulatory
Authority, Inc. on which the Common Stock is listed or traded. If
the Common Stock is not readily traded on a national securities
exchange or any system sponsored by the Financial Industry
Regulatory Authority, Inc., the Fair Market Value shall be
determined in good faith by the Committee.
“Grant
Date” means, unless otherwise provided by applicable law, the
date on which the Committee approves the grant of an Award or such
later date as is specified by the Committee and set forth in the
applicable Award Agreement.
“Incentive
Stock Option” means an “incentive stock option”
within the meaning of Code Section 422.
“Non-Qualified
Stock Option” means an Option which is not an Incentive Stock
Option.
“Option”
means an option to purchase Common Stock granted pursuant to
Sections 6 of the Plan.
“Participant”
means any Eligible Individual who holds an Award under the Plan and
any of such individual’s successors or permitted
assigns.
“Performance
Goals” means the specified performance goals which have been
established by the Committee in connection with an
Award.
“Performance
Period” means the period during which Performance Goals must
be achieved in connection with an Award granted under the
Plan.
“Performance
Share” means a right to receive a fixed number of shares of
Common Stock, or the cash equivalent, which is contingent on the
achievement of certain Performance Goals during a Performance
Period.
“Performance
Unit” means a right to receive a designated dollar value, or
shares of Common Stock of the equivalent value, which is contingent
on the achievement of Performance Goals during a Performance
Period.
“Person”
shall mean any person, corporation, partnership, limited liability
company, joint venture or other entity or any group (as such term
is defined for purposes of Section 13(d) of the Exchange Act),
other than a Parent or subsidiary of the Company.
A-12
“Plan”
means this RumbleON, Inc. 2016 Stock Incentive Plan.
“Prospective
Employee” means any individual who has committed to become an
employee or independent contractor of the Company within sixty (60)
days from the date an Award is granted to such
individual.
“Restricted
Stock” means Common Stock subject to certain restrictions, as
determined by the Committee, and granted pursuant to Section 8
hereunder.
“Restricted
Stock Unit” means a right, granted under this Plan, to
receive Common Stock upon the satisfaction of certain conditions,
or if later, at the end of a specified deferral period following
the satisfaction of such conditions.
“Section 424
Employee” means an employee of the Company or any
“subsidiary corporation” or “parent
corporation” as such terms are defined in and in accordance
with Code Section 424. The term “Section 424 Employee”
also includes employees of a corporation issuing or assuming any
Options in a transaction to which Code Section 424(a)
applies.
“Stock
Appreciation Right” means the right to receive all or some
portion of the increase in value of a fixed number of shares of
Common Stock granted pursuant to Section 7 hereunder.
“RumbleON”
means RumbleON, Inc., a Nevada corporation.
“Transfer”
means, as a noun, any direct or indirect, voluntary or involuntary,
exchange, sale, bequeath, pledge, mortgage, hypothecation,
encumbrance, distribution, transfer, gift, assignment or other
disposition or attempted disposition of, and, as a verb, directly
or indirectly, voluntarily or involuntarily, to exchange, sell,
bequeath, pledge, mortgage, hypothecate, encumber, distribute,
transfer, give, assign or in any other manner whatsoever dispose or
attempt to dispose of.
A-13
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