Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Michael Darrow as President and Chief Executive Officer
On March 10, 2020 the Company announced that the Board of Directors of the
Company (the "Board") appointed Michael Darrow as the Company's President and
Chief Executive Officer on March 9, 2020.
Mr. Darrow, age 62, has served as the Company's Interim President and Chief
Executive Officer since May 2019, as its Executive Vice President of Partner and
OEM Development since November 2017 and as the President of its subsidiary, ALG,
Inc., since January 2018. Mr. Darrow served as the Company's Executive Vice
President of OEM Development from March 2017 to November 2017, and from June
2016 until he joined the Company, Mr. Darrow was an Automotive Industry
Consultant for Inventory Command Center LLC, before which he served in numerous
roles at Edmunds.com Inc. from July 2000 to August 2014, including as Chief
Executive Officer of Edmunds Data Services, Executive Vice President of Sales
and Chief Sales Officer. Mr. Darrow holds a B.S. in Economics from Allegheny
University.
A copy of the press release announcing Mr. Darrow's appointment is attached
hereto as Exhibit 99.1. The information in Item 9.01 of this Current Report on
Form 8-K and Exhibit 99.1 attached hereto shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act"), or otherwise subject to the liabilities of that section, nor shall they
be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
Appointment of Mr. Darrow to the Board
Also effective March 9, 2020, the Board appointed Mr. Darrow to the Board,
filling a vacancy caused by the resignation of Chip Perry in July 2019. As an
employee of the Company, Mr. Darrow will not be entitled to additional
compensation for his service as a member of the Board. Mr. Darrow is not
expected to be named to any committee of the Board.
Other than the Employment Agreement (as defined below), there are no
arrangements or understandings between Mr. Darrow and any other person pursuant
to which he was selected for the positions to which he was appointed. There are
no family relationships between Mr. Darrow and any director or executive officer
of the Company and Mr. Darrow has no direct or indirect material interest in any
transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K
under the Securities Exchange Act of 1934, as amended.
Employment Agreement with Mr. Darrow
In connection with Mr. Darrow's appointment as President and Chief Executive
Officer, the Company entered into an amended and restated employment agreement
(the "Employment Agreement") with Mr. Darrow on March 9, 2020. Under the terms
of the Employment Agreement, Mr. Darrow's employment is on an at-will basis, he
will be paid a base salary of $590,000, less applicable tax withholdings and
subject to review and adjustment based upon the Company's normal performance
review practices, and he will be eligible for an annual bonus targeted at 100%
of his base salary. Additionally, the Company may, in its discretion, grant
additional discretionary bonus amounts to Mr. Darrow from time to time. The
Employment Agreement provides that Mr. Darrow is eligible to participate in the
benefits programs generally available to employees of the Company on the same
terms as other similarly-situated employees.
Pursuant to the Employment Agreement, the Compensation and Workforce Committee
of the Board (the "Committee") granted Mr. Darrow (i) a stock option (the "2020
Option") to purchase 323,000 shares of the Company's common stock ("Shares") at
an exercise price per Share equal to the fair market value of the Shares on the
date of the grant for 2020; (ii) an award of 188,000 restricted stock units of
the Company ("RSUs") for 2020 (the "2020 RSUs"); and (iii) an award of 300,000
RSUs in connection with his promotion (the "Promotion RSUs"), in the case of
each of clauses (i) through (iii) pursuant to a Company equity incentive plan
and an option agreement or RSU agreement, as applicable. Further, subject to the
vesting acceleration provisions of the Employment Agreement, (x) the 2020 Option
vests in approximately equal monthly installments over 48 months from the
effective date of the Employment Agreement; (y) the 2020 RSUs vest in
approximately equal quarterly installments over 16 quarters from March 15, 2020;
and (z) the Promotion RSUs vest in approximately equal quarterly installments
over eight quarters from March 15, 2020. Additionally, the Employment Agreement
requires the Company to recommend that the Committee grant 326,000
performance-based RSUs ("PSUs") to Mr. Darrow (the "2020
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PSUs") at the same time that the Company grants 2020 equity awards to its other
executives with terms substantially similar to those of the PSUs granted to
other executives of the Company. Vesting of the 2020 Option, the 2020 RSUs, the
Promotion RSUs and the 2020 PSUs is subject to Mr. Darrow's continued service
with the Company through each vesting date, subject to the vesting acceleration
provisions of the Employment Agreement or, with respect to the 2020 PSUs, the
PSU award agreement to which the award is subject. Additionally, Mr. Darrow will
be eligible to receive additional equity awards pursuant to plans or
arrangements the Company may have in effect from time to time determined in the
discretion of the Board or the Committee.
Under the Employment Agreement, if the Company terminates Mr. Darrow's
employment for a reason other than Cause (as defined in the Employment
Agreement), or he resigns from his employment for Good Reason (as defined in the
Employment Agreement), then, in addition to earned but unpaid amounts, subject
to Mr. Darrow's signing a separation and release of claims agreement with the
Company and his continued compliance with the terms of the Employment Agreement
and a confidential information agreement entered into with the Company (other
than the non-solicitation provisions thereof), he will receive as severance: (i)
continuing payments of his base salary as in effect on the date of the
termination during the period beginning with his termination through the
12-month anniversary of his termination (the "Severance Period"); (ii) payment
of his full target bonus for the year in which the termination occurs; (iii) the
immediate vesting of (x) if such termination occurs before a Change in Control
(as defined in the Employment Agreement), each of his then-outstanding and
unvested equity awards as to the number of Shares subject to each equity award
that otherwise would have vested had he remained an employee of the Company
through the 12-month anniversary of his termination date (except with respect to
PSUs, which will be treated as provided in the applicable award agreement); or
(y) if such termination occurs upon or after a Change in Control, 100% of each
of his outstanding equity awards that both are outstanding as of the employment
termination date and were granted at least 60 days before the applicable Change
in Control (except with respect to PSUs, which will be treated as provided in
the applicable award agreement); and (iii) reimbursement or direct payment, as
determined by the Company, of certain continuing health care benefits for up to
12 months following his termination (or if, in the Company's determination, such
reimbursement or direct payments would violate applicable law, monthly taxable
cash payments in lieu thereof, as well as amounts necessary to pay the taxes on
such payments).
If Mr. Darrow's employment with the Company terminates due to his death or
Disability (as defined in the Employment Agreement), then, subject to Mr.
Darrow's (or his estate's) signing a separation and release of claims agreement
with the Company and his continued compliance with the Employment Agreement and
a confidential information agreement entered into with the Company (other than
the non-solicitation provisions thereof), each of his then-outstanding equity
awards will immediately vest (except with respect to PSUs, which will be treated
as provided in the applicable award agreement) and the Company will reimburse or
directly pay, as determined by the Company, certain continuing health care
benefits during the Severance Period, unless such reimbursements or direct
payments would, in the Company's determination, violate applicable law.
If a Change in Control occurs while Mr. Darrow remains an employee of the
Company, if he remains employed with the Company (or any successor or subsidiary
thereof) as of the first day following the 12-month anniversary of the Change in
Control, then 100% of any of Mr. Darrow's equity awards that are both
outstanding as of such date and were granted to him at least 60 days before the
Change in Control will vest at such time (except with respect to PSUs, which
will be treated as provided in the applicable award agreement).
The Employment Agreement further provides that, if the severance payments and
other benefits payable to Mr. Darrow constitute "parachute payments" under
Section 280G of the Internal Revenue Code of 1986, as amended, and would be
subject to the applicable excise tax, then his severance and other benefits will
either be delivered in full or delivered to such lesser extent that would result
in no portion of such benefits being subject to the excise tax, whichever
results in the receipt by Mr. Darrow on an after-tax basis of the greatest
amount of benefits.
The foregoing description of the Employment Agreement is a summary only and is
qualified in its entirety by the full text of the Employment Agreement, which is
filed as Exhibit 10.1 hereto and incorporated herein by reference
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
10.1 Employment Agreement, dated as of March 9, 2020, by and between TrueCar,
Inc. and Michael Darrow.
99.1 Press Release issued by TrueCar, Inc., dated March 10, 2020.
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