Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On October 6, 2021, upon the recommendation of the compensation committee (the
"Compensation Committee") of the board of directors (the "Board") of The Trade
Desk, Inc. (the "Company"), the Board approved the grant of a performance-based
stock option (the "Performance Option") to Jeff Green, the Company's Chief
Executive Officer and a member of the Board. Mr. Green recused himself from the
vote. Under the Performance Option, if specified target goals for the per share
price of the Company's Class A Common Stock (the "Class A Common Stock") are
achieved (the goals range from $90.00 per share to $340.00 per share, as
discussed below) and certain other vesting conditions are satisfied, Mr. Green
may purchase up to 16,000,000 shares of Class A Common Stock, subject to
adjustment as discussed below. The exercise price for the option is $68.29 per
share, which was the closing price of the Class A Common Stock on October 6,
2021, the grant date of the Performance Option. Assuming achievement of the
share price goals, the number of shares otherwise purchasable under the
Performance Option may be decreased or increased by up to 20% based on the
relative total shareholder return ("TSR") of the Class A Common Stock as
compared to the TSR of the Nasdaq-100 Index.
In considering the Performance Option, the Board recognized the pivotal role Mr.
Green has played in the Company's success since its initial public offering,
which has translated into best-in-class stockholder returns, and wanted to
create a long-term, stockholder-aligned incentive to further align his interests
with stockholder interests. As a result, the Performance Option has absolute
stock price goals and also a TSR modifier to measure the Company performance
against the Nasdaq-100 Index. The Performance Option only vests if the Company's
stock reaches the price goals, while the number of shares that will vest at each
tranche will be impacted by the stock's performance relative to the Nasdaq-100
Index.
The Performance Option was granted under the Company's 2016 Incentive Award Plan
(the "Plan"). Shares subject to the Performance Option become exercisable and
vested (the "Eligible Option Shares") in eight tranches over a ten-year term to
the extent that the average closing price per share of the Class A Common Stock
on the Nasdaq Global Select Market measured over any 30-consecutive-trading-day
period equals or exceeds the applicable per-share stock price following
certification by the Board, as set forth in the following table, subject to
adjustment for dividends, stock splits, combinations, reorganizations,
reclassifications, or similar events (the "Stock Price Achievements"):
Stock Price Number of Shares Subject to Option
Achievement
Vesting Tranche Vesting <50th Percentile >75th Percentile
Condition against Target Shares* against
Nasdaq100 Index Nasdaq100 Index
1 $90.00 1,600,000 2,000,000 2,400,000
2 $115.00 1,600,000 2,000,000 2,400,000
3 $145.00 1,600,000 2,000,000 2,400,000
4 $185.00 1,600,000 2,000,000 2,400,000
5 $225.00 1,600,000 2,000,000 2,400,000
6 $260.00 1,600,000 2,000,000 2,400,000
7 $300.00 1,600,000 2,000,000 2,400,000
8 $340.00 1,600,000 2,000,000 2,400,000
* - subject to adjustment in accordance with the following paragraph.
The number of Target Shares shown in the table above may be increased or
decreased, based on the greatest result of three tests tied to the Company's
stock price performance relative to performance of the companies comprising the
Nasdaq100 Index as of the grant date. The Target Shares that will vest at each
Vesting Tranche if the applicable Stock Price Achievement is met will be
2,000,000 shares, with the possibility of upward or downward adjustment of up to
400,000 shares for each respective Vesting Tranche. If the applicable Stock
Price Achievement falls above the 75th percentile, the number of Target Shares
earned will be adjusted upward by 400,000 shares. If the applicable Stock Price
Achievement falls below the 50th percentile, the number of Target Shares earned
will be adjusted downward by 400,000 shares. If the applicable Stock Price
Achievement falls between the 50th and 75th percentile, the number of shares
earned will be linearly interpolated between 0% and +20% from the number of
Target Shares.
For the first four years following the date of the Performance Option grant, the
Eligible Option Shares vest at each Vesting Tranche subject to Mr. Green's
continued service as the Company's Chief Executive Officer as of the applicable
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vesting date; thereafter, the Eligible Option Shares vest at each Vesting
Tranche subject to Mr. Green's continued service as of the applicable vesting
date as the Company's Chief Executive Officer or in another role to be
determined by the Board. In the event of a Change in Control (as defined in the
Plan) that occurs prior to the full vesting of the Performance Option, that
number of Eligible Option Shares shall vest based on the per-share consideration
for Class A Common Stock received in such Change in Control determined as set
forth in the table above, as determined by the Compensation Committee and with
linear interpolation in the event such per-share consideration is between the
levels in the table above, and any remaining unvested Eligible Option Shares
shall be forfeited as of immediately prior to such Change in Control. In the
event of a Qualifying Termination (as defined in the Performance Stock Option
Award Agreement for the Performance Option (the "Award Agreement")) that occurs
prior to the full vesting of the Performance Option, the applicable vesting
period shall continue for nine months from the date of the Qualifying
Termination, with the Eligible Option Shares being eligible to vest in the event
the applicable Stock Price goal is achieved during such extended vesting period,
and any remaining unvested Eligible Option Shares shall be forfeited as of nine
months following the Qualifying Termination. In the event of a material
restatement of the Company's financial statements during the Performance Option
period, Eligible Option Shares shall be subject to a clawback at the Board's
discretion if then applicable law or the rules of the applicable listing
exchange have clawback provisions and Mr. Green knowingly and intentionally
engaged in gross misconduct that led to such restatement and if, as a result of
such restatement, one or more Stock Price Achievements was achieved that
otherwise would not have been achieved. All shares acquired upon exercise of the
Eligible Option Shares are subject to a one-year holding period that begins on
the date that the underlying options vested (the "Holding Period"), subject to
exceptions for dispositions of shares in connection with an exercise of the
Eligible Option Shares solely to cover withholding tax obligations in connection
with such exercise and transfers to Mr. Green's immediate family (as defined in
the Award Agreement), for estate planning purposes, or in connection with
charitable or philanthropic activities. The term of the applicable Holding
Period shall continue to apply following such permitted transfers.
The Board currently anticipates that the Performance Option will be the
exclusive equity award granted to Mr. Green through the performance period for
the grant, but the Board has discretion (but not the obligation) to make
additional grants if the Board determines such action to be appropriate.
In connection with the Performance Option, on October 6, 2021, the Company and
Mr. Green entered into an Amendment No. 1 to Employment Agreement (the
"Amendment"), which amended the Employment Agreement dated May 11, 2017 (the
"Employment Agreement"). The Amendment amends the Employment Agreement to, among
other things, modify the terms "Cause" and "Good Reason" to have the respective
meaning as set forth in the Award Agreement.
The foregoing descriptions of the Performance Option and Amendment are only
summaries and are qualified in their entirety by reference to the full text of
the Award Agreement and the Amendment, which are filed as Exhibit 10.1 and
Exhibit 10.2, respectively, to this Current Report on Form 8K.
Forward-looking Statements and Incorporation by Reference
This Current Report on Form 8-K contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, including
statements relating to the Company's executive compensation strategies,
expectations, and intentions, the Company's future performance, and general
business conditions. Any forward-looking statements contained in this Current
Report on Form 8-K are based upon the Company's historical performance and its
current plans, estimates, and expectations, and are not a representation that
such plans, estimates, or expectations will be achieved. These forward-looking
statements represent the Company's expectations as of the date of this Current
Report on Form 8-K, and involve risks, uncertainties, and assumptions. The
actual results may differ materially from those anticipated in the
forward-looking statements as a result of numerous factors, many of which are
beyond the control of the Company, including risks that the Company's executive
compensation strategies, expectations, and intentions may not have the expected
results, risks regarding the Company's future operating results and results of
operations, and the risks and uncertainties disclosed in the Company's reports
filed from time to time with the Securities and Exchange Commission, including
its most recent Form 10K and any subsequent filings on Forms 10-Q or 8-K,
available at www.sec.gov. The Company does not intend to update any
forward-looking statement contained in this Current Report on Form 8-K to
reflect events or circumstances arising after the date hereof.
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Item 9.01Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Performance Stock Option Award Agreement under The Trade Desk, Inc.
2016 Incentive Award Plan, dated as of October 6, 2021, between The
Trade Desk, Inc. and Jeff T. Green.
10.2 Amendment No. 1 to Employment Agreement, dated as of October 6, 2021,
between The Trade Desk, Inc. and Jeff T. Green.
104 Cover Page Interactive Data File (formatted as Inline XBRL).
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