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.
1350
Lakeshore Drive, Suite 160
Coppell,
Texas 75019
April
19, 2019
Dear
Fellow RumbleOn Stockholder:
We are
pleased to invite you to join us at the 2019 Annual Meeting of
Stockholders of RumbleOn, Inc. to be held at 9:00 a.m. Central Time
on Monday, May 20, 2019 at our offices in Texas at 1350 Lakeshore
Drive, Suite 160, Coppell, Texas 75019.
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 an
amendment to the RumbleOn, Inc. 2017 Stock Incentive Plan to
increase the number of shares of Class B Common Stock authorized
for issuance under the plan, and
FOR
the non-binding advisory approval of
the compensation of our named executive officers (Say on Pay).
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 May 20, 2019 in Texas.
Sincerely,
Marshall
Chesrown
Chairman
of the Board and
Chief
Executive Officer
RumbleOn, Inc.
1350
Lakeshore Drive, Suite 160
Coppell,
Texas 75019
NOTICE OF THE 2019 ANNUAL MEETING OF STOCKHOLDERS
To
Stockholders of RumbleOn, Inc.:
The
2019 Annual Meeting of Stockholders of RumbleOn, Inc. will be held
at 9:00 a.m. Central Time on Monday, May 20, 2019 at our offices in
Texas at 1350 Lakeshore Drive, Suite 160, Coppell, Texas 75019 for
the following purposes, as more fully described in the accompanying
proxy statement:
(1)
To elect seven
directors, each for a term expiring at the next Annual Meeting or
until their successors are duly elected and qualified;
(2)
To approve an
amendment to the RumbleOn, Inc. 2017 Stock Incentive Plan (the
“Plan”) to increase the number of shares of Class B
Common Stock authorized for issuance under the Plan;
(3)
To obtain
non-binding advisory approval of the compensation of our named
executive officers (“Say on Pay”); and
(4)
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 April 9,
2019, 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,
Thomas
Aucamp
Corporate
Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 2019
The accompanying proxy statement and the 2018 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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EXECUTIVE COMPENSATION
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8
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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11
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PROPOSAL 2: STOCK INCENTIVE PLAN AMENDMENT PROPOSAL
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13
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PROPOSAL 3: 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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AUDITORS FEES AND SERVICES
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20
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POLICY FOR APPROVAL OF AUDIT AND PERMITTED NON-AUDIT
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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23
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OTHER MATTERS
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23
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AMENDMENT TO THE RUMBLEON, INC. 2017 STOCK INCENTIVE
PLAN
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A-1
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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 2019 Annual Meeting of
Stockholders (“Annual Meeting”). Our Annual Meeting
will be held at 9:00 a.m. Central Time on Monday, May 20, 2019
at our offices in Texas at 1350 Lakeshore Drive, Suite 160,
Coppell, Texas 75019. 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 Anne Frost at (573)
206-9092.
Only
stockholders of record as of 5:00 p.m. Eastern Time on April 9,
2019 (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 20,087,120 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 April 19, 2019.
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
What is the purpose of our 2019 Annual Meeting?
Our
2019 Annual Meeting will be held for the following
purposes:
(1)
To elect seven
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 an
amendment to the RumbleOn, Inc. 2017 Stock Incentive Plan (the
“Plan”) to increase the number of shares of Class B
Common Stock authorized for issuance under the Plan. We refer to
this as the “Stock Incentive Plan Amendment
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 transact any
other business that is properly presented at the Annual Meeting or
any adjournments or postponements of the Annual
Meeting.
I
n
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 per
share on each of the six director nominees and ten votes per share
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 per
share on each of the seven director nominees and one vote per share
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. Under Nevada law, 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, all proposals to be presented at the Annual
Meeting are non-routine and as such a broker does not have the
discretion to vote on any of the Director Election Proposal, Stock
Incentive Plan Amendment Proposal, and Say on Pay Proposal, 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 all
proposals to be presented at the Annual Meeting. 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 May 19, 2019; 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 May 19, 2019 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 seven 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 the
same effect as a vote against a director.
Proposal 2 — Stock Incentive Plan Amendment
Proposal.
The
vote required to approve the Stock Incentive Plan Amendment
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 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.
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 Amendment Proposal; and
●
FOR Proposal 3: the
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 seven members. Except for Joseph Reece,
all of the nominees for directors listed below were elected by our
stockholders at our 2018 annual meeting of stockholders. Denmar
Dixon, a director of the Company, identified Mr. Reece as a
director nominee and presented such nomination to the Nominating
and Corporate Governance Committee as a highly qualified candidate
who brings relevant experience to our Board. Mr. Reece was
appointed to our Board on October 8, 2018. Upon the
recommendation of our Nominating and Corporate Governance
Committee, our Board has nominated the seven persons listed below
to stand for a term expiring at the next 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.
Directors and Executive Officers
Below
are the names of and certain information regarding our executive
officers and directors:
|
Name
|
Age
|
Position
|
|
Marshall
Chesrown
|
61
|
Chief
Executive Officer and Chairman
|
|
Steven
R. Berrard
|
64
|
Chief
Financial Officer and Director
|
|
Denmar
Dixon
|
57
|
Director
|
|
Kartik
Kakarala
|
41
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Director
|
|
Richard
A. Gray, Jr.
|
71
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Director
|
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Joseph
E. Reece
|
57
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Director
|
|
Kevin
Westfall
|
63
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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., 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.
Mr. Chesrown filed for personal bankruptcy in May 2013, which
petition was discharged in January 2017.
We
believe that Mr. Chesrown possesses attributes that qualify him to
serve as a member of our Board, 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 served as Secretary from July 13, 2016
through June 30, 2017 and has served on our Board 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 our strategic
direction. He has served in senior management and on the Board 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.
Denmar Dixon
has served on our Board
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, Mr. Dixon 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. Before serving on the Board of Walter
Investment, Mr. Dixon was elected to the board of managers of JWH
Holding Company, LLC, a wholly-owned subsidiary of Walter
Industries, Inc., in anticipation of the spin-off of Walter
Investment Management, LLC 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, Mr. Dixon spent 23 years with Banc of
America Securities, LLC 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 of Banc of America
Securities.
4
We
believe that Mr. Dixon possesses attributes that qualify him to
serve as a member of our Board, 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 our 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 immediately following the completion of the Company’s
acquisition of substantially all of the assets of the NextGen
Dealer Solutions, LLC (“NextGen”) in February 2017. Mr.
Kakarala is the Chief Executive Officer of Halcyon Technologies, a
global software solutions company. 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 served as the Chief Executive Officer and President of
NextGen from January 2016 to February 2017, which was acquired by
us in February 2017, providing inventory management solutions to
the power sports, 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
Co-Founder and Managing Partner of Red Bumper from July 2010 to
August 2014, a company which provided pre-owned 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, as he is regarded as a pioneer in
developing several systems in the automotive industry including
CRM, ERP, inventory management and financial
applications.
Richard A. Gray, Jr
., has served on our
Board since October 1, 2017. Mr. Gray has served as President of
Gray & Co. Realtors, Inc., a licensed real estate service
provider he founded, since 1987. Gray & Co. Realtors has been
involved in the development, liquidation, the joint venture, and
management of commercial real estate, representing both U.S.
investors and foreign investors, and since 1998, has also been
involved in raising venture capital for startup and additional
round funding for public companies in the technology sector. Before
Gray & Co. Realtors, he served as a broker at Wiggins Gray
Interests, a company focused on development of retail and office
properties in Dallas Fort Worth Metroplex, as well as office,
industrial, land and retail brokerage from 1985 to 1987. Before
Wiggins Gray Interests, he served at Hudson & Hudson Realtors
from 1973 to 1985, Murray Investment Company from 1971 to 1973, and
Borden Chemical Company from 1969 to 1971. Mr. Gray has also served
as a director of the Cystic Fibrosis Foundation, Migra Tech, and
Equitable Bank. Mr. Gray received his BBA from Texas Tech
University.
We
believe that Mr. Gray possesses attributes that qualify him to
serve as a member of our Board, including his extensive experience
in funding technology sector public companies.
Joseph E.
Reece
, has served on our Board
since October 8, 2018. Mr. Reece has more than 30 years of
experience advising public and private corporations, boards,
financial sponsors and institutional investors on strategy,
financing, and mergers and acquisitions in the consumer and retail,
technology, media, financial services and industrial sectors. Mr.
Reece is the Chief Executive Officer of Helena Advisors, LLC, a
Merchant Bank based in New York. Prior to Helena, he was an
Executive Vice Chairman from February 2017 to September 2018 and
Head of the Investment Bank for the Americas for UBS Securities
from October 2017 to March 2018. Prior to that, he spent 18 years
with Credit Suisse where he held a number of senior management
positions across the Investment Bank, including the Global Head of
ECM, the Global Head of the Industrials Group and sat on both the
Global Equities Management Committee and the Investment Banking
Management Committee. Mr. Reece began his career at the United
States Securities and Exchange Commission as Staff Counsel
ultimately rising to become Special Counsel for the SEC’s
Division of Corporation Finance and subsequently practiced law with
Skadden Arps in the Corporate Practice Group. Mr. Reece is a
graduate of Georgetown University Law Center and the University of
Akron. Mr. Reece currently serves as a member of the board of
directors of Compass Minerals International, Inc., Boxwood Merger
Corp., Del Frisco’s Restaurant Group, Inc., Georgetown
University Law Center, the Foundation of the University of Akron
and Chair-ity. In addition to his previous service on the Board of
UBS Securities, LLC, Mr. Reece also served on the Boards of CST
Brands, Inc. and LSB Industries, Inc.
We believe that Mr. Reece possesses attributes
that qualify him to serve as a member of our Board, including his
extensive legal, mergers and acquisitions and capital
markets/investment banking experience within the financial services
industry.
Kevin Westfall
has served on our Board
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. Westfall 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, 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 seven 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. 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
Our
Board is committed to sound corporate governance principles and
practices. Our Board’s core principles of corporate
governance are set forth in our Corporate Governance Principles,
which were adopted by our 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, our Board also adopted a Code of Business Conduct and
Ethics, which is applicable to all directors, officers and
employees. A copy of the Code of Business Conduct and Ethics and
the Corporate Governance Principles are available on our corporate
website at www.rumbleon.com. You also may obtain without charge a
printed copy of the Code of Ethics and Corporate Governance
Principles by sending a written request to: Investor Relations,
RumbleOn, Inc., 1350 Lakeshore Drive, Suite 160, Coppell, Texas
75019. Amendments or waivers of the Code of Business Conduct and
Ethics will be provided on our website within four business days
following the date of the amendment or waiver.
Board of Directors
The
business and affairs of our company are managed by or under the
direction of the Board. The Board is currently composed of seven
members. The Board has not appointed a lead independent director;
instead the presiding director for each executive session is
rotated among the Chairs of the committees of our
Board.
The
Board held six meetings and took two actions by unanimous written
consent during the year ended December 31, 2018. In 2018, 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
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. All of our then directors attended the 2018
Annual Meeting of Stockholders.
Board Committees
Pursuant to our
bylaws, our 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, RumbleOn, Inc., 1350 Lakeshore Drive, Suite
160, Coppell, Texas 75019.
Audit Committee.
The Board, by
unanimous consent, established an Audit Committee in January 2017.
The members of this committee are Messrs. Dixon (chair), Westfall,
and Gray. 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 our independent auditor that is engaged for the
purpose of preparing or issuing an audit report or performing other
audit, review or attest services for us (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 us and
related parties. For a complete description of the Audit
Committee’s responsibilities, you should refer to the Audit
Committee Charter. The Audit Committees held two meetings and took
two actions by unanimous written consent during the year ended
December 31, 2018.
Compensation Committee
. In January
2017, the Board, by unanimous consent, established a Compensation
Committee. The members of the Compensation Committee are Messrs.
Westfall (chair), Dixon, and Reece. Mr. Reece was appointed to the
Compensation Committee on October 8, 2018. Previously, Mr. Pierce
served on the Compensation Committee through June 25, 2018. 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. The Compensation Committee held two meetings and took
three actions by unanimous written consent during the year ended
December 31, 2018.
Nominating and Corporate Governance
Committee
. In January 2017, the Board, by unanimous consent,
established a Nominating and Corporate Governance Committee. The
current members of the Nominating and Corporate Governance
Committee are Messrs. Dixon (chair), Gray, and Reece. Mr. Reece was
appointed to the Nominating and Corporate Governance Committee on
October 8, 2018. Previously, Mr. Pierce served on and chaired the
Nominating and Corporate Governance Committee through
June 25, 2018. 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 Committees held one meeting and
took two actions by unanimous written consent during the year ended
December 31, 2018.
6
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
Our
Board 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
us 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.
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., 1350
Lakeshore Drive, Suite 160, Coppell, Texas 75019.
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, 1350 Lakeshore
Drive, Suite 160, Coppell, Texas 75019.
Stockholder Proposals for Next Year’s Annual
Meeting
Any
stockholder proposal to be considered at the 2020 Annual Meeting of
Stockholders, including nominations of persons for election to our
Board, must be properly submitted to us by December 21, 2019.
Detailed information for submitting stockholder proposals or
nominations of director candidates will be provided upon written
request to the Secretary of RumbleOn, Inc., 1350 Lakeshore Drive,
Suite 160, Coppell, Texas 75019.
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.
7
EXECUTIVE COMPENSATION
Executive and Director Compensation
Summary Compensation Table
The
following table provides the compensation paid to our principal
executive officer and other executive officers whose total
compensation exceeded $100,000 for the years ended December 31,
2018 and December 31, 2017.
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
|
Bonus
|
Total
|
|
Marshall
Chesrown
|
2018
|
$
240,000
|
150,000
(2)
|
$
390,000
|
|
Chief Executive
Officer
|
2017
|
215,385
(1)
|
-
|
$
215,385
|
|
Steven R.
Berrard
|
2018
|
$
240,000
|
150,000
(2)
|
$
390,000
|
|
Chief Financial
Officer
|
2017
|
215,385
(1)
|
-
|
$
215,385
|
__________________
(1)
This compensation
was paid in a single lump sum during the fourth quarter of
2017.
(2)
Represents a
discretionary bonus approved by the Company’s Compensation
Committee for service provided to the Company in connection with
the acquisitions of Wholesale, Inc. and Wholesale Express, LLC in
October 2018.
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 an
annual salary of $240,000, which is paid weekly, in accordance with
our standard payroll practice. Mr. Chesrown is eligible for equity
compensation under our equity compensation plans, as determined
from time to time by the Compensation Committee of the Board,
however through the date of this filing, no grants of equity awards
have been made to Mr. Chesrown.
In
January 2019, the Compensation Committee of the Board approved a
discretionary bonus of $100,000 to Mr. Chesrown in connection with
the launch of the Company’s consumer classified listing
site.
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 an annual
salary of $240,000, which is paid weekly, in accordance with our
standard payroll practice. Mr. Berrard is eligible for equity
compensation under our equity compensation plans, as determined
from time to time by the Compensation Committee of the Board,
however through the date of this filing, no grants of equity awards
have been made to Mr. Berrard.
In
January 2019, the Compensation Committee of the Board approved a
discretionary bonus of $100,000 to Mr. Berrard in connection with
the launch of the Company’s consumer classified listing
site.
Non-Employee Director Compensation
We have
not yet established a policy for non-employee director
compensation. During the year ended December 31, 2018, no
compensation was paid to our non-employee directors, except (i) an
award of 85,000 restricted stock units (“RSUs”) under
the RumbleOn, Inc. 2017 Stock Incentive Plan (the “Incentive
Plan”) to Mr. Dixon for his service as a director as well as
the Chair of the Audit Committee and (ii) an award of 35,000 RSUs
under the Incentive Plan to Messrs. Gray, Kakarala, and Westfall,
and 15,115 RSUs to Mr. Reece for their service to the
Board.
8
The
following table summarizes the compensation paid to our
non-employee directors for the year ended December 31,
2018.
|
Name
|
Stock Awards
(1)(2)
|
Total
|
|
Denmar
Dixon
|
$
515,100
|
$
515,100
|
|
Richard A. Gray,
Jr.
|
$
212,100
|
$
212,100
|
|
Kartik
Kakarala
|
$
212,100
|
$
212,100
|
|
Mitch
Pierce(3)
|
-
|
-
|
|
Kevin
Westfall
|
$
212,100
|
$
212,100
|
|
Joseph
Reece(4)
|
$
125,001
|
$
125,001
|
__________________
(1)
Represents RSUs
granted under the Incentive Plan. Represents the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718. In
determining the grant date fair value, we used $6.06 per share,
except for Mr. Reece, in which case we used $8.27. The RSUs vest
(1) 20% on the last day of the thirteenth month following the grant
date, (2) 2.5% monthly on the last day of each month beginning on
the last day of the fourteenth month following the grant date
through the last of the twenty-fifth month following the grant date
and (3) 4.17% monthly on the last day of each month beginning on
the last day of the twenty-sixth month following the grant date
through the last day of the thirty-seventh month following the
grant date. The shares underlying the vested RSUs will be delivered
to the director on an annual basis during the thirteenth months
following the grant date.
(2)
As of December 31,
2018, each of Messrs. Dixon, Gray, Kakarala, Pierce, Westfall and
Reece held RSUs as follows: Mr. Dixon – 113,000; Mr. Gray
– 70,000; Mr. Kakarala – 35,000; Mr. Pierce – 0;
Mr. Westfall – 63,000 and Mr. Reece –
15,115.
(3)
Mr. Pierce served
as a director of the Company through the Company’s Annual
Meeting of Stockholders held on June 25, 2018.
(4)
Mr. Reece was
appointed a director of the Company on October 8,
2018.
Consulting Agreement
In
connection with the acquisition of substantially all of the assets
of NextGen, on February 8, 2017, we entered into a Consulting
Agreement with Kartik Kakarala, who formerly served as the Chief
Executive Officer of NextGen and now serves as a director of the
Company. The Consulting Agreement was cancelled December 31,
2017.
Securities Authorized for Issuance Under Equity Compensation
Plans
On
January 9, 2017, our Board approved the adoption of the RumbleOn,
Inc. 2017 Stock Incentive Plan (“Incentive Plan”),
subject to stockholder approval at our 2017 Annual Meeting of
Stockholders. On June 30, 2017, the Incentive Plan was approved by
our stockholders at the 2017 Annual Meeting of Stockholders. The
purposes of the Incentive Plan are to attract, retain, reward and
motivate talented, motivated and loyal employees and other service
providers, or the Eligible Individuals, by providing them with an
opportunity to acquire or increase a proprietary interest in our
company and to incentivize them to expend maximum effort for the
growth and success of our company, so as to strengthen the
mutuality of the interests between such persons and our
stockholders. The Incentive Plan allows us to grant a variety of
stock-based and cash-based awards to Eligible Individuals. On May
10, 2018, the Board approved, subject to stockholder approval, an
amendment to the Incentive Plan to increase the number of shares of
Class B Common Stock authorized for issuance under the Incentive
Plan from twelve percent (12%) of all issued and outstanding Class
B Common Stock from time to time to 2,000,000 shares of Class B
Common Stock (the “Plan Increase”). On June 25, 2018,
the Plan Increase was approved by our stockholders at the 2018
Annual Meeting of Stockholders. We have not maintained any other
equity compensation plans since our inception.
9
The
following table provides information as of December 31, 2018, with
respect to all of our compensation plans under which equity
securities are authorized for issuance:
|
Plan
Category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Number of
securities remaining available for future issuance
|
|
Equity compensation
plans approved by stockholders
|
1,521,816
(1)
|
279,184
(2)
|
|
Equity compensation
plans not approved by stockholders
|
-
|
-
|
__________________
(1)
Represents
restricted stock units outstanding under the Incentive
Plan.
(2)
Represents
securities remaining available for future issuance under the
Incentive Plan.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Beneficial
ownership is determined in accordance with the rules of 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
April 9, 2019, 1,000,000 shares of Class A Common Stock and
20,087,120 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
April 9, 2019, 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 our
company.
Unless
otherwise noted below, the address of each person listed on the
table is c/o RumbleOn, Inc., 1350 Lakeshore Drive, Suite 160,
Coppell, Texas 75019.
|
Beneficial Owner Executive Officers and
Directors
|
Class A Common Stock Beneficially Owned after Closing of
Acquisitions and Conversion
|
Percentage of Class A Common
Stock Beneficially Owned (%)(1)
|
Class B Common Stock Beneficially Owned after Closing of
Acquisitions and Conversion
|
|
Percentage of Class B Common Stock Beneficially Owned
(%)(2)
|
|
Marshall
Chesrown(3)
|
875,000
|
87.5
%
|
1,743,156
|
|
8.7
%
|
|
Steven
Berrard(4)
|
125,000
|
12.5
%
|
1,970,000
|
|
9.8
%
|
|
Denmar
Dixon(5)
|
-
|
-
|
1,203,973
|
(8)
|
6.0
%
|
|
Kevin
Westfall
|
-
|
-
|
27,888
|
(9)
|
*
|
|
Kartik
Kakarala(6)
|
-
|
-
|
1,523,809
|
|
7.6
%
|
|
Richard
Gray
|
-
|
-
|
34,625
|
(10)
|
*
|
|
Joseph
Reece
|
-
|
-
|
30,000
|
|
*
|
|
All executive
officers and directors as a group (7 persons)(7)
|
-
|
-
|
6,533,451
|
|
32.5
%
|
|
5% Holders
|
|
|
|
|
|
|
Nantahala
Capital Management, LLC
|
-
|
-
|
1,634,350
|
(11)
|
8.1
%
|
|
Steven
and Janelle Brewster
|
-
|
-
|
1,317,329
|
(12)
|
6.6
%
|
|
Columbus
Capital Management, LLC
|
-
|
-
|
1,057,255
|
(13)
|
5.3
%
|
__________________
*Represents
beneficial ownership of less than 1%.
(1)
Based on 1,000,000
shares of Class A Common Stock issued and outstanding as of April
9, 2019. 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
(2)
Based on 20,087,120
shares of Class B Common Stock issued and outstanding as of April
9, 2019.
(3)
As of April 9, 2019
Mr. Chesrown will have voting power representing approximately
34.9% of our outstanding common stock.
(4)
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 April 9, 2019,
Mr. Berrard will have voting power representing approximately 10.7%
of our outstanding common stock.
11
(5)
1,052,829 shares
are owned directly through Blue Flame Capital, LLC, an entity
controlled by Mr. Dixon, 7,750 shares are held by Mr. Dixon’s
spouse, 705 shares are held by Mr. Dixon’s son, 50,000 shares
are held by Mr. Dixon in a joint account with his spouse, and
82,189 shares are directly held 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 April 9, 2019, Mr. Dixon will have voting power representing
approximately 4.0% of our outstanding common stock.
(6)
Shares are owned
indirectly through Halcyon Consulting, LLC, a limited liability
company owned by Kartik Kakarala and his brother, Srinivas
Kakarala. Kartik Kakarala has shared power to vote and shared power
to dispose of such shares of common stock with his brother. As of
April 9, 2019, Mr. Kakarala will have voting power representing
approximately 5.1% of our outstanding common stock.
(7)
As of April 9,
2019, all directors and executive officers as a group will have
voting power representing approximately 54.9% of our outstanding
common stock.
(8)
Includes 10,500
restricted stock units that have vested or will vest within 60
days.
(9)
Includes 10,500
restricted stock units that have vested or will vest within 60
days.
(10)
Includes 2,625
restricted stock units that have vested or will vest within 60
days.
(11)
Based on a Schedule
13G filed with the SEC on February 14, 2019 by Nantahala Capital
Management, LLC (“Nantahala”). Nantahala may be deemed
to be the beneficial owner of 1,634,350 shares of Class B Common
Stock held by funds and separately managed accounts under its
control, and as the managing members of Nantahala, each of Wilmot
B. Harkey and Daniel Mack may be deemed to be a beneficial owner of
those shares. The address for Nantahala is 19 Old Kings Highway S,
Suite 200, Darien, CT 06820
(12)
Based on a Schedule
13G filed with the SEC on November 9, 2018 by Steven and Janelle
Brewster. The address for Steven and Janelle Brewster is 250
Bluegrass Drive, Hendersonville, TN 37075
(13)
Based on a Schedule
13G filed with the SEC on February 14, 2019 by Columbus Capital
Management LLC (“CCM”). CCM is an investment advisor
that is registered under the Investment Advisors Act of 1940. CCM,
which serves as the general partner to Columbus Capital Partners
QP, L.P. and Columbus Capital Partners, L.P., (collectively
“the Funds”) and an investment advisor to Rovida West
Coast Investments Limited, may be deemed to be the beneficial owner
of all shares of common stock held by the Funds. Mr. Matthew D.
Ockner, as Managing Member of CCM, with the power to exercise
investment and voting discretion, may be deemed to be the
beneficial owner of all shares of Common Stock held by the Funds.
The address for CCM is 1 Embarcadero Center, Suite 1130, San
Francisco, CA 94111.
12
PROPOSAL 2: STOCK INCENTIVE PLAN AMENDMENT PROPOSAL
Overview
Upon
the recommendation of the Compensation Committee, the Board has
approved, subject to stockholder approval, an amendment to the Plan
to increase the number of shares of Class B Common Stock
(“Common Stock”) authorized for issuance under the Plan
from 2,000,000 shares of Common Stock to 4,000,000 shares of Common
Stock (the “Plan Increase”). Currently, 1,794,000
shares of Common Stock are available for issuance under the Plan,
of which 1,480,060 shares are subject to outstanding awards under
the Plan and 313,940 shares remain available for future issuance
under the Plan. Approval of this proposal will result in an
additional 2,000,000 shares of Common Stock available for issuance
under the Plan. The Board unanimously recommends that the
stockholders approve the Stock Incentive Plan Amendment Proposal.
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 (i) reference to the full text of the Plan,
which is available as Annex A to the Company’s 2017 Proxy
Statement for the 2017 Annual Meeting of Stockholders, (ii)
reference to the full text of the first amendment to the Plan,
previously approved by the Stockholders at the Company's 2018
Annual Meeting of Stockholders, which is available as Annex A to
the Company's 2018 Proxy Statement for the 2018 Annual Meeting of
Stockholders, and (iii) the amendment to the Plan to effect
the Plan Increase included as
Annex A
to this proxy
statement, each of which is incorporated herein by
reference.
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, after giving effect to the Plan Increase: (i) a
maximum of 4,000,000 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 shares
of Common Stock 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 titled
“Change in Control” and after giving effect to the Plan
Increase, a total of 4,000,000 shares of Common Stock may be issued
pursuant to Awards granted under the Plan. 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”).
13
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.
14
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.
15
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.
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).
16
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.
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).
In general,
Section 162(m) of the Code currently provides that if, in any year,
the compensation that is paid to any “covered employee”
(as defined under Section 162(m)) exceeds $1,000,000 per person,
any amounts that exceed the $1,000,000 threshold will not be
deductible by us for federal income tax purposes.
New Stock Incentive Plan Benefits
No
awards have been made with respect to the Plan Increase and as
such, we have not included a New Plan Benefits table called for by
Item 10 of Schedule 14A.
Vote Required and Board Recommendation
Approval of the
Stock Incentive Plan Amendment 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 Stock
Incentive Plan Amendment Proposal.
17
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 2019 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.
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, 2018, for filing with the SEC.
The
foregoing has been furnished by the Audit Committee:
Denmar
Dixon, Chairman
Kevin
Westfall
Richard
A. Gray, Jr.
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.
19
AUDITORS FEES AND SERVICES
Scharf
Pera & Co., PLLC (“Scharf Pera”) has served as the
Company’s independent registered public accounting firm since
December 2016, and audited the financial statements of the Company
for the years ended December 31, 2017 and 2018.
The
following table sets forth Scharf Pera’s fees for the years
ended December 31, 2017 and 2018.
|
|
2018
|
2017
|
|
Audit
Fees
(1)
|
$
80,294
|
$
63,635
|
|
Audit-Related
Fees
|
-
|
-
|
|
Tax
Fees
|
12,415
|
-
|
|
All Other
Fees
(2)
|
17,717
|
20,032
|
|
Total
|
$
110,426
|
$
83,667
|
__________________
(1)
Audit fees consist
of fees paid to Scharf Pera during 2018 for the (i) audit of the
Company’s year ended December 31, 2018 and 2017 and (ii)
review of the Company’s unaudited 2018 Quarterly financial
statements.
(2)
All other fees
consist of fees billed in 2018 and 2017 for review of Registration
Statements.
POLICY FOR APPROVAL OF AUDIT AND PERMITTED NON-AUDIT
SERVICES
The
Audit Committee has 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.
All
services provided by Scharf Pera during the fiscal years ended
December 31, 2018 and 2017 were approved by the Audit Committee.
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-approved
decisions made by the Chair at the next scheduled meeting of the
Audit Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have
been a party to the following transactions since January 1, 2017,
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.
2016 Financing
On July
13, 2016, Berrard Holdings acquired 5,475,000 shares of our common
stock from our former sole director and executive officer. The
shares acquired by Berrard Holdings represented 99.5% of our issued
and outstanding common stock. The aggregate purchase price for the
shares was $148,141.75, which Berrard Holdings paid from cash on
hand. In addition, at the closing, Berrard Holdings loaned us, and
we and issued to Berrard Holdings the BHLP Note, pursuant to which
we were required to repay $191,858 on or before July 13, 2026 plus
interest at 6% per annum. The BHLP Note was convertible into common
stock at any time before maturity at the greater of $0.06 per share
or 50% of the price per share of the next “qualified
financing,” which was defined as an offering resulting in net
proceeds to us of $500,000 or greater. Effective August 31, 2016,
the principal amount of the BHLP Note was amended to include an
additional $5,500 loaned to us. On November 28, 2016, we completed
a qualified financing at $1.50 per share, which established the
conversion price per share for the BHLP Note of $0.75 per share. On
March 31, 2017, we issued 275,312 shares of common stock upon
conversion of the BHLP Note, which on such date had an aggregate
principal amount, including accrued interest, of $206,484. In
connection with the conversion of the BHLP Note, the remaining debt
discount of $196,076 was charged to interest expense in the
Consolidated Statements of Operations and the related deferred tax
liability was credited to Additional paid in capital in the
Consolidated Balance Sheets.
20
November 2016 Private Placement
On
November 28, 2016, we completed the 2016 Private Placement of an
aggregate of 900,000 shares of common stock at a purchase price of
$1.50 per share for total consideration of $1,350,000. In
connection with the 2016 Private Placement, the Company also
entered into loan agreements with the investors pursuant to which
the investors would loan the Company their pro rata share of up to
$1,350,000 in the aggregate upon our request any time on or after
January 31, 2017 and before November 1, 2020, pursuant to the terms
of a convertible promissory note attached to the loan
agreements.
In
connection with the 2016 Private Placement, Blue Flame, an entity
controlled by Denmar Dixon, one of the Company’s directors,
paid $250,000 for 166,667 shares of the Company’s Class B
Common Stock.
On
March 31, 2017, we completed funding of the second tranche of the
2016 Private Placement, pursuant to which the investors each
received their pro rata share of (1) 1,161,920 shares of common
stock and (2) the Private Placement Notes, in consideration of
cancellation of loan agreements having an aggregate principal
amount committed by the purchasers of $1,350,000. The Private
Placement Note was not convertible. 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. As of December 31, 2018,
the amount outstanding on the promissory notes, including accrued
interest was $394,200. Interest expense on the promissory notes for
the year ended December 31, 2018 was $143,987, which included debt
discount amortization of $114,404. The interest was charged to
interest expense in the Consolidated Statements of Operations and
included in accrued interest under long-term liabilities in the
Consolidated Balance Sheets.
Test Dealer
In
connection with the development of the regional partner program,
the Company tested various aspects of the program by utilizing a
dealership to which Mr. Chesrown, the Company’s Chief
Executive Officer has provided financing in the form of a $400,000
convertible promissory note (the “Dealer”). 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 Dealer at
any time. This financing arrangement was terminated in April 2018.
Revenue recognized by the Company from the Dealer for the year
ended December 31, 2017 was $1,618,958 or 22.1% of 2017 total
revenue. Revenue recognized by the Company from the Dealer for the
year ended December 31, 2018 was $619,193 or .04% of 2018 total
revenue.
In
addition, the Company presently subleases warehouse space from the
Dealer that is separate and distinct from the location of the
dealership, on the same terms as paid by the Dealer. This subleased
facility serves as the northwestern regional distribution center
for the Company. The lease was terminated on June 30, 2018. For the
year ended December 31, 2017, the Company paid $30,000 in rent
under the sublease. For the year ended December 31, 2018, the
Company paid $90,000 in rent under the sublease. Included in
accounts receivable at December 31, 2018 was $40,176 owed to the
Company by the Dealer.
Note Payable-NextGen
On February
8, 2017, in connection with the acquisition of NextGen (the
"NextGen Acquisition"), the Company issued a subordinated secured
promissory note in favor of NextGen in the amount of $1,333,334
(the "NextGen Note"). Mr. Kakarala currently serves as the Manager
of NextGen. Interest accrues and will be paid semi-annually
(i) at a rate of 6.5% annually from the closing date through
the second anniversary of such date and (ii) at a rate of 8.5%
annually from the second anniversary of the closing date through
the Maturity Date. Upon the occurrence of any event of default, the
outstanding balance under the NextGen Note shall become immediately
due and payable upon election of the holder. The Company's
obligations under the NextGen Note are secured by substantially all
the assets of NextGen Pro, pursuant to an Unconditional Guaranty
Agreement (the "Guaranty Agreement"), by and among NextGen and
NextGen Pro, and a related Security Agreement between the parties,
each dated as of February 8, 2017. Under the terms of the Guaranty
Agreement, NextGen Pro has agreed to guarantee the performance of
all the Company's obligations under the NextGen Note. On Decmber
31, 2017, the NextGen Note was assigned to Halcyon
Consulting, LLC. Mr.
Kakarala
currently serves as Chief Executive Officer of Halcyon Consulting.
Interest expense on the NextGen Note for the years ended December
31, 2018 and 2017 was $87,617 and $54,849,
respectively.
Consulting Agreement
In
connection with the NextGen Acquisition, on February 8, 2017, we
entered into a Consulting Agreement with Kartik Kakarala, who
formerly served as the Chief Executive Officer of NextGen and now
serves as a director on our Board. The Consulting Agreement was
terminated on December 31, 2017.
Services Agreement
In
connection with the NextGen Acquisition, on February 8, 2017, we
entered into a Services Agreement with Halcyon, to provide
development and support services to us. Mr. Kakarala currently
serves as the Chief Executive Officer of Halcyon. Pursuant to the
Services Agreement, we 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.
We reimburse Halcyon for any reasonable travel and pre-approved
out-of-pocket expenses incurred in connection with its services to
us. During the year ended December 31, 2017, we paid a total of
$914,099 under the Services Agreement. During the year ended
December 31, 2018, we paid a total of $54,159 under the Services
Agreement.
21
March 2017 Private Placement
On
March 31, 2017, we completed the 2017 Private Placement of 620,000
shares of our Class B Common Stock at a price of $4.00 per share
for aggregate proceeds of $2.48 million. We sold an additional
37,500 shares in connection with the 2017 Private Placement on
April 30, 2017. Our officers and directors acquired 175,000 shares
of Class B Common Stock in the 2017 Private Placement as follows:
Mr. Chesrown – 62,500 shares, Mr. Berrard (through Berrard
Holdings) – 62,500 shares, Mr. Pierce (through Pierce Family
Trust) – 37,500 shares, and Mr. Westfall – 12,500
shares.
2017 Bridge Note Financing
On
September 5, 2017, the Company executed $1,650,000
(“Principal Amount”) of Senior Secured Promissory Notes
(the “Notes”) in favor of several investors, including
certain executive officers and directors of the Company. The Notes
included an aggregate of $150,000 in original issue discount.
Officers and directors held $1,214,144 of the Notes. On October 23,
2017, the Company completed a public offering and used $1,661,075
of the net proceeds of the offering for the repayment of the Notes
in the aggregate principal amount of $1,650,000, plus accrued
interest, which resulted in the termination of the Notes. Officers
and directors received in the aggregate principal amount of
$1,218,122, plus accrued interest of $4,144. For the year ended
December 31, 2017, interest on the officer and director Notes was
$118,121, including $110,000 of debt discount amortization and is
included in interest expense in the Consolidated Statements of
Operations.
The
following executive officers and directors participated in the
Bridge Note financing in the principal amounts set forth
below:
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Name
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Position
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Principal Amount
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Original Issue Discount
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Steven R.
Berrard
(1)
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CFO
and Director
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$
275,000
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$
25,000
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Denmar
Dixon
(2)
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Director
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$
275,000
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$
25,000
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Kartik
Kakarla
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Director
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$
137,500
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$
12,500
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Mitch
Pierce
(3)
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Former
Director
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$
275,000
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$
25,000
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__________________
(1)
Through Berrard
Holdings and through his spouse.
(2)
Through Blue Flame
Capital, LLC.
(3)
Through Pierce
Family Trust.
October 2018 PIPE Transaction
On
October 25, 2018, the Company entered into a Securities Purchase
Agreement with certain accredited investors (the
“Investors”) pursuant to which the Company agreed to
sell in a private placement (the “PIPE Transaction”) an
aggregate of 3,030,000 shares of its Class B Common Stock, at a
purchase price of $7.10 per share for non-affiliates of the
Company.
Mr.
Dixon, who invested through Blue Flame, purchased 30,000 shares of
Class B Common Stock in the PIPE Transaction at a price of $8.10
per share (the per share price to affiliates of the Company) for an
aggregate purchase price of $243,000. Also, Mr. Reece, a Director,
individually purchased 10,000 shares of Class B Common Stock for an
aggregate purchase price of $81,000. The Board of Directors
approved these purchases in accordance with Rule 16b-3(d)(1) of the
Exchange Act. Messrs. Dixon and Reece abstained from the Board of
Directors’ vote approving the PIPE Transaction.
Nashville Leases
In
connection with the acquisition of Wholesale, we entered into
leases for two facilities in the greater Nashville area owned by
Mr. Brewster, a holder of 6.6% of our Class B Common Stock. Each
location has a lease term expiring on October 30, 2021, and for
each property we have two (2) renewal options, each of which
provides for five (5) additional years with a ten percent (10%)
increase in the base rent. The aggregate rent for the two locations
is approximately $55,000 per month.
22
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 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. Except for the Bridge
Note financing, the related party transactions described above were
entered into prior to 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, 2018, our directors, executive officers and
greater than 10% beneficial owners complied with all such
applicable filing requirements, except (i) each of Mr. Reece
untimely filed a Form 3, (ii) Messrs. Kakarala, Gray and Reece
untimely filed a Form 4 reporting one transaction, and (iii) each
of Messrs. Dixon and Westfall untimely filed two Form 4s reporting
two transactions.
OTHER MATTERS
A copy
of our Form 10-K for the year ended December 31, 2018, 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, 2018 may be
obtained without charge by writing to Investor Relations, RumbleOn,
Inc., 1350 Lakeshore Drive, Suite 160, Coppell, Texas 75019.
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
.
23
Annex
A
AMENDMENT TO THE
RUMBLEON, INC.
2017 STOCK INCENTIVE PLAN
WHEREAS,
RumbleOn, Inc., a Nevada
corporation (the “Company”) currently maintains and
sponsors the RumbleOn, Inc. 2017 Stock Incentive Plan (the
“Plan”); and
WHEREAS
, Section 14(k) of the Plan
provides that the Board of the Directors of the Company
(“Board”) may amend the Plan from time to time;
and
WHEREAS
, the Board has determined it to
be in its best interests to amend the Plan as set forth herein;
and
NOW, THEREFORE
, effective upon the
Company’s Stockholders’ approval as set forth in
Section 14(k) of the Plan, the following amendment to the Plan is
hereby adopted:
1. The
last sentence of Section 5(a) of the Plan shall be amended and
restated to read as follows:
“The
maximum number of shares of Common Stock that may be issued
pursuant to Awards granted under the Plan shall be
4,000,000.”
2. Section
5(b)(i) of the Plan shall be amended and restated to read as
follows:
“(i) With
respect to the shares of Common Stock issuable pursuant to this
Section, a maximum of 4,000,000 of such shares may be subject to
grants of Incentive Stock Options;”
3. Except
as modified by this Amendment, all of the terms and conditions of
the Plan shall remain valid and in full force and
effect.
IN WITNESS WHEREOF
, the undersigned, a
duly authorized officer of the Company, has executed this
instrument as of the _____ day of ________2019, on behalf of the
Company.
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RUMBLEON,
INC.
By:_______________________________
Name:_____________________________
Title:______________________________
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PROXY
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
UMBLE
O
N
, I
NC.
ANNUAL
MEETING OF STOCKHOLDERS – MAY 20, 2019 AT 9:00 AM CENTRAL
TIME
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The undersigned appoints Marshall Chesrown and
Steven Berrard as proxies, with the power to appoint their
substitutes, and hereby authorizes them to represent and to vote,
as designated on the reverse side hereof, all of the shares of
common stock of RumbleOn, Inc., held of record by the undersigned
at the close of business on April 9, 2019 at the Annual Meeting of
Stockholders of RumbleOn, Inc. to be held on Monday, May 20, 2019
at 9:00
a.m.,
Central Time, at 1350 Lakeshore Drive, Suite 160, Coppell, Texas
75019, or at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED AS INDICATED. IF NO INDICATION IS MADE, THE PROXY WILL BE
VOTED IN FAVOR OF ELECTING ALL THE NOMINEES TO THE BOARD OF
DIRECTORS LISTED IN PROPOSAL 1, IN FAVOR OF PROPOSAL 2 AND PROPOSAL
3, AND IN ACCORDANCE WITH THE JUDGMENT OFTHE PERSONS NAMED AS
PROXIES HEREIN ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE ANNUAL MEETING. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF R
UMBLE
ON, INC.
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(CONTINUED AND TO BE MARKED, DATED AND SIGNED ON REVERSE
SIDE.)
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CONTROL NUMBER:
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VOTING
INSTRUCTIONS
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If
you vote by phone, fax or internet, please DO NOT mail your proxy
card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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INTERNET:
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Please log on to the internet and
visit
www.westcoaststocktransfer.com/proxy-rmbl
,
by 11:59 p.m. Eastern Tine on May 19, 2019 and follow the
instructions provided. mark, sign, date, and return this Proxy Card
promptly using the enclosed envelope.
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IN PERSON:
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If you are a registered holder, please attend our Annual Meeting,
bring valid photo identification, and delivery your completed proxy
card or ballot in person.
If you hold your shares in "street name", please 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.
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ANNUAL MEETING OF THE STOCKHOLDERS OFRUMBLEON,
INC.
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ANNUAL MEETING OF THE STOCKHOLDERS OFRUMBLEON,
INC.
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THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED, OR IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED “FOR” ALL THE
NOMINEES LISTED IN PROPOSAL 1, IN FAVOR OF PROPOSAL 2 AND PROPOSAL
3, AND IN THE PROXIES' DISCRETION ON ANY OTHER MATTER COMING BEFORE
THE MEETING. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
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CONTROL NUMBER:
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK
INK AS SHOWN HERE:
☒
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Proposal 1
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DIRECTOR ELECTION PROPOSAL
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FOR ALL
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AGAINST
ALL
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FOR
ALL EXCEPT
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Proposal 1
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Election
of the following director nominees to serve for a term expiring at
the next Annual Meeting or until their successors are duly elected
and qualified:
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☐
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☐
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MARSHALL
CHESROWN
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☐
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STEVEN
R. BERRARD
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☐
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DENMAR
DIXON
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☐
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KARTIK
KAKARALA
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☐
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RICHARD
A. GRAY, JR.
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☐
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JOSEPH
E. REECE
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☐
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KEVIN
WESTFALL
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☐
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Proposal 2
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STOCK INCENTIVE PLAN AMENDMENT PROPOSAL
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FOR
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AGAINST
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ABSTAIN
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Proposal 2
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To
approve an amendment to the RumbleOn, Inc. 2017 Stock Incentive
Plan (the “Plan”) to increase the number of shares of
Class B Common Stock authorized for issuance under the
Plan.
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☐
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☐
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☐
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Proposal 3
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SAY ON PAY PROPOSAL
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FOR
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AGAINST
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ABSTAIN
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Proposal 3
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Non-binding
advisory approval of the compensation of our named executive
officers.
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☐
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☐
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☐
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MARK “X” HERE IF YOU PLAN
TO ATTEND THE MEETING:
☐
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Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be held May 20,
2019
The proxy statement and our 2018
Annual Report to Stockholders are available at
www.rumbleon.com
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MARK HERE FOR ADDRESS CHANGE
☐
New
Address (if applicable):
___________________________________________
___________________________________________
___________________________________________
IMPORTANT:
Please sign exactly
as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated: ________________________, 2019
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(Print
Name of Stockholder and/or Joint Tenant)
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(Signature
of Stockholder)
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(Second
Signature if held jointly)
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TABLE OF CONTENTS