ELEMENTS OF 2022 COMPENSATION IN DETAIL
ELEMENTS OF EXECUTIVE COMPENSATION OVERVIEW
Consistent with our compensation philosophy, the Committee adopted a program in 2022 emphasizing a pay-for-performance short term cash incentive program and equity-based compensation with long-term vesting requirements that is dependent on long-term company performance, as follows:
| | | | | | | | | | | | | | |
| Element | Primary Objectives | Compensation Philosophy | Compensation Component |
| | | | |
| Base Salary
| •Help attract and retain executive talent •Provide stable source of income •Recognize day-to-day role and scope of responsibility | •Attract and retain talent •Compensate Competitively | Evaluated annually. Increases are not automatic or guaranteed. |
| | | |
| | | |
Short Term Incentive Compensation
| •Reward annual performance on key financial measures, operational, workforce equity and inclusion, and other strategic objectives | •Pay for Performance •Align with Stockholder Interests | Short Term Incentive Plan |
| | | | |
| | | | |
Long Term Incentive Compensation •Stock Options •Restricted Stock Units
| •Incentivize return on invested capital •Retain talent through long term vesting schedule •Align the interests of executives with stockholders •Incentivize long term objectives for sustainable performance to deliver long term stockholder value | •Pay for Performance •Align with Stockholder Interests | Stock Price Appreciation |
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| | | | |
| Benefits •Employee Benefit Plans •Severance Benefits •Perquisites | •Provide competitive health and 401k benefits on the same terms available to all employees •Limit perquisites | •Attract and retain talent •Compensate Competitively | Evaluated Annually |
| | | |
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
BASE SALARIES
Each of our NEOs received an annual base salary. The amount of base salary for each executive was determined by assessing the role and competitive pay practices, individual performance, and other elements of the total compensation package for each executive, consistent with our compensation philosophy. The base salary payable to each NEO is intended to provide a stable source of income that is important to attract and retain our talent and that is reflective of the executive’s skill set, tenure, experience, position, responsibilities, contributions and performance.
| | | | | | | | |
Officer | Base Salary as of 2022 Fiscal Year End | |
Gareth T. Joyce, Chief Executive Officer and President | $ | 500,000 | | |
Karina F. Padilla, Chief Financial Officer | $ | 425,000 | | (1) |
Christopher L. Bailey, Chief Business Officer, formerly President of Proterra Powered & Energy | $ | 400,000 | | (2) |
Julian R. Soell, Chief Operations Officer, formerly President of Proterra Transit | $ | 400,000 | | |
JoAnn C. Covington, Former Chief Legal Officer, Head of Government Relations & Secretary | $ | 375,000 | | (3) |
(1) Ms. Padilla resigned from her position as Chief Financial Officer effective May 15, 2023.
(2) Mr. Bailey's base salary was adjusted in June 2022 from $375,000 to $400,000 to provide pay equity for the role of President of a business line.
(3) Ms. Covington resigned from her position as Chief Legal Officer, Head of Government Relations and Secretary effective March 27, 2023.
SHORT TERM INCENTIVE PLAN
We develop an annual cash incentive plan each year under the umbrella of our Key Employee Incentive Plan. Our Key Employee Incentive Plan was filed as an exhibit to our registration statement on Form S-1 on June 29, 2021. This annual cash incentive plan, which we call our Short Term Incentive Plan, provides for performance-based cash awards to participants based on achievement of criteria set by the Committee for the fiscal year.
2022 SHORT TERM INCENTIVE PROGRAM TARGET
AWARD PERCENTAGE
Each of our NEOs received a performance-based cash award target under the 2022 Short Term Incentive Plan that was expressed as a percentage of each NEOs base salary paid during the fiscal year. The Committee set the target award amount for each NEO in consultation with our independent compensation consultant and after review of market data. For 2022, the target award amounts for each participating NEO were:
| | | | | |
Officer | Target Bonus Percentage of Annual Base Salary |
Gareth T. Joyce | 125% |
Karina F. Padilla | 75% |
Christopher L. Bailey | 75% |
Julian R. Soell | 75% |
JoAnn C. Covington | 60% |
DESCRIPTION OF 2022 PERFORMANCE-BASED AWARD CRITERIA
Performance measures for fiscal year 2022 included annual financial performance measures, progress against strategic objectives for each of Proterra Transit and Proterra Powered & Energy, achievement of technology objectives on which the CEO was measured, and improvement in diversity, equity and inclusion (“DEI”) goals over the prior fiscal year. The table below describes the performance measures in the 2022 Short Term Incentive Plan. The actual payout of awards is discussed below under “Determination of the Actual 2022 Short Term Incentive Award Payout.”
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | |
| Criteria | Description |
| Revenue | GAAP Revenue reported in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") for the year ending December 31, 2022. |
Adjusted EBITDA | The Non-GAAP measure reported to investors in our Quarterly Letter for the quarter ending December 31, 2022. We define Adjusted EBITDA net income (loss), adjusted for the effects of financing, nonrecurring items, depreciation on capital expenditures, and other non-cash items such as stock-based compensation, (gain) loss on valuation of derivative and warrant liabilities, gain on debt extinguishment, and other items like start-up costs for new facilities. |
Business Unit Revenue | GAAP Revenue reported in the Company’s Annual Report on Form 10-K for the year ending December 31, 2022 that is attributed to the Proterra Transit and the Proterra Powered & Energy business units, respectively. |
Business Unit Operating Income Before Corporate Expenses | This metric is not operating income as determined by generally accepted accounting principles, because the Company only operates as one segment, and did not report operating income by business units. This metric is an estimate of operating performance attributed to each of the Proterra Transit and Proterra Powered & Energy business lines to provide an indication of profitability of each of the Company's commercial offerings even though the Company operated as one reportable segment. |
Cash Conversion Cycle | A measure of the Company's use of working capital and its ability to efficiently convert inventory to cash. |
| Diversity, Equity and Inclusion ("DEI") | A measure of the Company's improvement over the prior year on representation of women and people of color across hiring, retention of talent, representation at manager levels, and promotion rates. |
Business Objectives | Achievement levels across multiple business objectives specific to each business unit including new order targets, operational and product initiatives and capital projects. |
Technology Development | Achievement across battery technology development objectives including customer and market driven projects and next generation battery development. |
The Committee then grouped the above performance-based award criteria and provided weightings for each criterion within the grouping and created targeted incentives based on each executive officer's role.
| | | | | | | | |
Performance Criteria | Performance Weighting | Performance Measure |
Corporate | | |
Financial | 40% | Revenue |
Financial | 40% | Adjusted EBITDA |
Financial | 10% | Cash Conversion Cycle |
Strategic | 10% | DEI Criteria |
Transit Business | | |
Financial | 40% | Business Unit Revenue |
Financial | 40% | Business Unit Operating Income Before Corporate Expenses |
Strategic | 20% | Business Objectives for Transit |
Powered & Energy Business | | |
Financial | 40% | Business Unit Revenue |
Financial | 40% | Business Unit Operating Income Before Corporate Expenses |
Strategic | 20% | Business Objectives for Powered & Energy |
Technology Development | | |
Strategic | 100% | Technology Development |
A description of the weighting of each officer's performance-award criteria is included in the section "Determination of the Actual 2022 Short Term Incentive Award Payout" below.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
DETERMINATION OF THE ACTUAL 2022 SHORT TERM INCENTIVE AWARD PAYOUT
The 2022 Short Term Incentive Plan payouts were determined based on the Committee's assessment of the above described metrics which were carefully chosen to drive particular outcomes and align pay with performance.
FINANCIAL METRICS
The financial metrics described above were established in the first quarter of 2022 based on the Company’s financial plan for 2022. Three of the financial metrics were aimed at improving business operations: Cash Conversion Cycle, Business Unit Revenue, and Business Unit Operating Income Before Corporate Expenses. The Cash Conversion Cycle metric focused on improvements in management of the Company’s working capital by increasing conversion of accounts receivable to cash and reducing inventory. The Committee also sought to accelerate the development and maturation of the Proterra Powered & Energy and the Proterra Transit commercial offerings, respectively, by allocating a portion of the bonus potential to the financial performance of each of the Company’s two business lines. The Business Unit Operating Income Before Corporate Expenses metric sought to approximate an operating income measure to gauge progress toward profitability of each commercial offering. For each financial metric, the Committee provided a threshold, or a “cliff” below which no bonus would be earned. If the bonus threshold was met, the payout would be determined on a sliding scale from 50% to 150% of target based on performance against the Company’s financial plan.
DEI CRITERIA
Consistent with our core belief that a diverse workforce is central to the Company’s success, the Committee allocated a percentage of each NEOs award potential to achievement of DEI Criteria. Success was measured by achievement of specific objectives: Increasing representation of women and people of color in management roles, increasing the hiring rate of women and people of color, reducing the turnover rate of diverse employees, and ensuring promotion equity for women and people of color. The 2022 Short Term Incentive Plan provided that positive progress against one of the DEI Criteria objectives would result in a 50% payout, progress against 2 of the 4 objectives would earn a 75% payout, progress against 3 of the 4 objectives would receive a 100% payout, and positive progress against all 4 objectives in the DEI Criteria would achieve a 150% payout.
BUSINESS OBJECTIVES AND TECHNOLOGY DEVELOPMENT CRITERIA
To incentivize our executives to create sustainable long-term value for our stockholders and other stakeholders, a portion of each NEOs award potential under our 2022 Short Term Incentive Plan was allocated to strategic objectives. The strategic objectives were divided between business objectives and technology development. Four strategic business objectives were identified for each of Proterra Powered & Energy and Proterra Transit, and four objectives were developed for the technology development. The 2022 Short Term Incentive Plan provided that achievement against one of the strategic objectives in each applicable set of criteria (i.e. Proterra Transit Business Objectives, Proterra Powered & Energy Business Objectives, or Technology Development) could result in up to a 50% payout, performance against 2 of the 4 strategic objectives could earn up to a 75% payout, performance against 3 of the 4 objectives could receive up to a 100% payout, and the level of achievement against all 4 objectives in a set of strategic criteria could achieve up to a 150% payout.
2022 FINANCIAL PERFORMANCE GOAL WEIGHTING
Under the 2022 Short Term Incentive Plan, the Committee assigned weighting factors for each executive officer to ensure the appropriate focus for each function in the Company on performance against the above described Financial Metrics, DEI Criteria, and Strategic Criteria.
Mr. Joyce
As described in the chart below, the 2022 Short Term Incentive Plan for Mr. Joyce was most heavily weighted on annual financial performance. As President and Chief Executive Officer, Mr. Joyce’s bonus potential was weighted 69% to the Company’s financial metrics, including 45% weighting on the Corporate Criteria financial metrics and 24% on the business unit financial metrics, divided evenly between the assessed financial performance of Proterra Transit and Proterra Powered & Energy. The balance of Mr. Joyce’s bonus potential was dependent on performance on technology development and business objectives for Proterra Transit and Proterra Powered & Energy, and performance against DEI Criteria.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | |
Performance Measures and Weighting for the Chief Executive Officer, Gareth T. Joyce |
| | |
Performance Measure(1) | Weighting | Rationale |
| | |
Financial Metrics •Revenue •Adjusted EBITDA •Cash Conversion Cycle •Business Unit Revenue •Business Unit Income(2) | | Mr. Joyce’s target award percentage was weighted 69% to the Company’s financial metrics, including 45% weighting on the corporate financial metrics and 24% on the business line financial metrics, divided evenly between the performance of Proterra Transit and Proterra Powered & Energy. These financial metrics focus on annual performance and the establishment of successful lines of business and maturing of the cash conversion cycle and working capital management for the long term benefit of the Company. |
DEI Criteria | | 5% of Mr. Joyce’s target award was dependent on improvements in Diversity, Equity and Inclusion measures commensurate with the Company’s core belief that a diverse workforce is central to the Company’s success. |
Strategic Criteria | | 26% of Mr. Joyce’s target award was dependent on strategic criteria related to the Company’s technology development and business objectives in its two business lines for the fiscal year. These goals emphasize attention to milestones for longer term objectives within each annual business plan. |
(1)For a description of each of the award criteria, see the chart labelled "Description of 2022 Performance-Based Award Criteria" above.
(2)In this table, "Business Unit Income" is an abbreviation for the metric "Business Unit Operating Income Before Corporate Expenses" which is further described in the "Description OF 2022 Performance-Based Award Criteria" table above.,
Ms. Padilla
As Chief Financial Officer, Ms. Padilla’s bonus potential was weighted 60% to the achievement of Corporate Criteria and 40% to the achievement of the business unit financial metrics, divided evenly between the performance of Proterra Powered & Energy and Proterra Transit. Overall, 78% of Ms. Padilla’s bonus potential was weighted to achievement of financial metrics, 6% was weighted to achievement of DEI Criteria, and 6% was weighted to achievement of Strategic Criteria, divided evenly between the two business units, and 10% to strategic technology development criteria.
Mr. Bailey
As President of Proterra Powered and Energy in 2022, Mr. Bailey’s bonus potential was weighted 60% to the achievement of Proterra Powered & Energy objectives, and 40% weighted to the Corporate Criteria. The Corporate Criteria weighting resulted in a cash award incentive of 4% to DEI Criteria and 36% to corporate financial metrics. Overall, 84% of Mr. Bailey’s bonus potential was tied to achievement of financial metrics and 12% was weighted to strategic criteria for Proterra Powered & Energy. The Committee chose to make 40% of Mr. Bailey’s cash award potential dependent on Corporate Criteria to provide significant incentives to advance the overall financial and DEI objectives of the Company including, indirectly, the Proterra Transit business unit’s contributions to the Company’s overall success.
Mr. Soell
As President of Proterra Transit in 2022, Mr. Soell’s bonus potential was weighted 60% to the achievement of the Proterra Transit objectives, and 40% weighted to the Corporate Criteria. The Corporate Criteria weighting resulted in a cash award incentive of 4% to DEI Criteria and 36% to corporate financial metrics. Overall, 84% of Mr. Soell’s bonus potential was tied to achievement of financial metrics, and 12% was weighted to strategic criteria for Transit. The Committee chose to make 40% of Mr. Soell’s cash award potential dependent on Corporate Criteria to provide significant incentives to advance the overall financial and DEI objectives of the Company including, indirectly, the Proterra Powered & Energy business unit’s contributions to the Company’s overall success.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
Ms. Covington
As Chief Legal Officer, Head of Government Relations, and Secretary, Ms. Covington’s bonus potential was weighted 60% to the achievement of Corporate Criteria and 40% to the achievement of the business unit financial metrics, divided evenly between the performance of Proterra Powered & Energy and Proterra Transit. Overall, 78% of Ms. Covington’s bonus potential was weighted to achievement of financial metrics, 6% was weighted to achievement of DEI Criteria, and 6% was weighted to achievement of Strategic Criteria, divided evenly between the two business units, and 10% to the strategic technology development criteria.
GOAL RIGOR AND PROCESS USED FOR GOAL SETTING
The Committee developed the metrics, award potential allocation, and targets in consultation with the full Board, its compensation consultant, and management. In particular, the Committee considered the Company’s fiscal year 2022 business plan, and the Company’s long term business plan and strategy. The Committee set ambitious, but achievable, financial and strategic goals for the Company overall and each business, including achievement of specific milestones that would impact the Company’s success beyond the fiscal year. For Proterra Transit, the strategic business objectives included scaling manufacturing and sales objectives. For Proterra Powered & Energy, these business objectives included the development and launch of the next iteration of the Company’s fleet and energy management SaaS solution, construction of the Powered 1 facility in Greer, South Carolina, and sales objectives. Strategic technology development goals included progress on development of new battery technology and advanced manufacturing achievements for the Powered 1 battery manufacturing lines. The Committee also created the potential to overachieve on both financial and strategic metrics to receive a payout of up to 150% of target if financial performance was substantially over the business plan and if all strategic criteria were achieved.
The financial metrics included the following threshold, target and stretch goals. Potential awards are calculated linearly from the threshold award to the target award and from the target award to the stretch award.
| | | | | | | | | | | | | | |
Financial Performance Criteria | Performance Weighting | Performance Measure(1) |
| | Threshold | Target | Stretch |
| | | | |
Payout Potential | | 50% | 100% | 150% |
| | | | |
Corporate | | | | |
Revenue | 40% | $300M | $354M | $400M |
| | | | |
Adjusted EBITDA | 40% | ($150M) | ($100M) | ($90M) |
| | | | |
Cash Conversion Cycle | 10% | 177 days | 169 days | 160 days |
| | | | |
Transit Business | | | | |
BU Revenue | 40% | $210M | $239M | $265M |
BU Operating Income (2) | 40% | specific target | specific target | specific target |
| | | | |
Powered & Energy Business | | | | |
BU Revenue | 40% | $90M | $115M | $135M |
BU Operating Income (2) | 40% | specific target | specific target | specific target |
| | | | |
(1)See the section titled "Description of 2022 Performance-Based Award Criteria" above for a description of each of these performance measures. The initials "BU" in this table is an abbreviation for "Business Unit". The specific targets for the Business Unit Operating Income Before Corporate Expenses are competitively sensitive and hence the Company does not disclose them. The Company does not disclose margins by product line. |
(2)The name of this performance measure was shortened to fit into this table. The Performance Measure used is Business Unit Operating Income Before Corporate Expenses., and is described in the section referred to in Footnote 1 above. |
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
2022 PERFORMANCE RESULTS
A summary of the Committee’s determination of 2022 Short Term Incentive Plan achievement is illustrated below:
| | | | | | | | | | | |
Performance Criteria | Performance Weighting | Performance Measure(1) | Percent of Target Achieved |
Corporate | | | 34% |
Financial | 40% | Revenue | 59% |
Financial | 40% | Adjusted EBITDA | —% |
Financial | 10% | Cash Conversion Cycle | —% |
Strategic | 10% | DEI Criteria | 100% |
| | | |
Transit Business | | | 18% |
Financial | 40% | BU Revenue | —% |
Financial | 40% | BU Operating Income(2) | —% |
Strategic | 20% | BU Strategic Criteria | 90% |
| | | |
Powered & Energy Business | | | 95% |
Financial | 40% | BU Revenue | 114% |
Financial | 40% | BU Operating Income(2) | 52% |
Strategic | 20% | BU Strategic Criteria | 142% |
| | | |
Technology Development | | | 103% |
Strategic | 100% | Strategic Criteria | |
| | | |
(1)See the section titled "Description of 2022 Performance-Based Award Criteria" above for a description of each of these performance measures. The initials "BU" in this table is an abbreviation for "Business Unit". DEI is an abbreviation for Diversity, Equity and Inclusion.
(2)The name of this performance measure was shortened to fit into this table. The Performance Measure used is Business Unit Operating Income Before Corporate Expenses., and is described in the section referred to in Footnote 1 above.
Achievement of the rigorous performance targets set by the Committee in the 2022 Short Term Incentive Plan was impacted by global economic factors including the ongoing effects of the COVID 19 pandemic, macroeconomic conditions, supply chain disruptions, rising inflation, uncertain credit and global financial markets and geopolitical events, such as the conflict between Russia and Ukraine and the related sanctions which combined with other factors, affected both production volume and operating costs, and created significant inflation in raw materials cost which in turn impacted margins, and cash consumption.
In evaluating performance against the performance-based award criteria, all award payouts were determined based on the Company's actual performance pursuant to the strict terms of the plan, with one exception: the Committee exercised its discretion to consider the impact of rising inflation rates and resulting increases in material costs for lithium-ion cells in the fiscal year of approximately $5.38 million over expected costs. Management deemed the purchase of cells as strategically important for the Company in fiscal 2022. The Committee’s consideration of these inflation impacts on the Business Unit Income Before Corporate Expenses for Proterra Powered & Energy resulted in a change to the financial metric that slightly exceeded the threshold performance generating a cash award. As a result, the percentage achievement of target for Mr. Joyce increased by 3.2%, the percentage achievement for Ms. Covington and Ms. Padilla increased 3.1%. The percentage achievement for Mr. Bailey increased 12.6%, and the percentage achievement for Mr. Soell did not increase. The specific achievement levels under the 2022 Short Term Incentive Plan are discussed further below.
Achievement of Corporate Criteria
The Corporate achievement was 34% of the target payout, per the 2022 Short Term Incentive Plan design. The Company did not meet the thresholds set by the Committee to receive the portion of the cash award based on Adjusted EBITDA or Cash Conversion Cycle targets. As a result, the cash award payout based on these financial metrics was zero. The Company did achieve the threshold required to receive a cash award payout based on Revenue achievement but did not outperform expectations. The Company made significant progress against its DEI targets, improving against three of the four objectives, and earning 100% of the achievement against its goals.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
Achievement of Transit Business Criteria.
The Transit business achievement was 18% of the target payout, per the 2022 Short Term Incentive Plan design. The business did not achieve the financial targets for Business Unit Revenue or Business Unit Operating Income Before Corporate Expenses. Thus, the cash award payout based on these metrics was zero. The Transit business did make substantial progress against strategic criteria achieving a 90% payout against its strategic objectives, which accounted for 20% of the overall target. Notably, the Transit business executed on a location strategy for scaling manufacturing which resulted in the Company’s January 2023 actions to wind down all operations at the City of Industry location by the end of 2023. Though significant progress was made in Proterra Transit, including significant manufacturing efficiency gains and production improvements under Mr. Soell’s leadership from May 2022 through year end, these successes are not reflected in the 2022 cash award payouts, and the business performed below the goals that were set in the 2022 Short Term Incentive Plan.
Achievement of Proterra Powered & Energy Business Criteria.
The Proterra Powered & Energy business achievement was 95% of the target payout. The Proterra Powered & Energy business performed well against the Business Unit Revenue target, resulting in an award at 114% of target per the plan design. Proterra Powered & Energy also reached the threshold level of payout under Business Unit Operating Income Before Corporate Expenses metric, earning a 52% of target payout after the Committee took into account allowances for spikes in inflation and materials cost increases for battery cells discussed above. Proterra Powered & Energy also over performed against is strategic criteria in 2022, including the development and launch of Valence, the Company's fleet and energy management SaaS platform; meeting its construction targets for the Powered 1 facility; and achieving over 90% of its sales objectives, resulting in a payout of 142% of target per the plan design.
Achievement of Technology Development Criteria
The Company also performed well against its strategic objectives and investments in its battery technology, earning 103% of the target payout per the plan design. Notably the Company introduced its H4 battery pack designed for heavy duty vehicles at IAA Transportation in Hanover Germany, and installed two advanced manufacturing battery lines for module and pack production in the new Powered 1 facility.
PAYOUT AMOUNTS
The Committee’s decisions on achievement under the 2022 Plan resulted in a payout percentage for each NEO as shown below:
| | | | | | | | | | | | | | |
Officer | Target Award | | Actual Payout | Percent of Target |
Gareth T. Joyce | $ | 625,000 | | | $ | 339,375 | | 54.3 | % |
Karina F. Padilla | $ | 318,750 | | | $ | 151,088 | | 47.4 | % |
Christopher L. Bailey | $ | 292,188 | | | $ | 205,700 | | 70.4 | % |
Julian R. Soell(1) | $ | 300,000 | | | $ | 48,600 | | 24.3 | % |
JoAnn C. Covington | $ | 225,000 | | | $ | 106,650 | | 47.4 | % |
(1) Mr. Soell's cash award was pro-rated to reflect his time of employment with the Company for eight months in 2022.
ONE-TIME AWARDS
In 2022, in connection with leadership changes at the Company, the Committee approved the one time awards described below.
The Company entered into a special retention agreement with Ms. Covington, and certain other executives who are not NEOs in this proxy statement, in September 2021. The retention agreement provided that the Company would pay a cash incentive award of $250,000 provided that Ms. Covington was employed by the Company through September 13, 2022. The Committee determined that these incentive agreements were in the best interests of the Company and its stockholders because the Board executed on leadership succession plans in
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
2021 that resulted in new leadership for the Company in January 2022 and the Company wanted to ensure Ms. Covington continued to serve as part of the new leadership team. The cash incentive award was paid to Ms. Covington in September 2022.
In October 2022, the Company awarded Ms. Covington a recognition cash bonus of $40,000 in recognition of Ms. Covington's work serving, in addition to her other functions, as head of human resources from July to October 2022 while the Company was recruiting for a Chief People Officer
In connection with Mr. Soell's offer letter to join the Company as President of Proterra Transit, the Company paid a one time sign on bonus of $250,000, which was repayable in full to the Company if Mr. Soell left the company in less than a year.
In connection with Ms. Padilla's offer letter to join the Company as Chief Financial Officer, the Company paid a one time sign on bonus of $250,000, which was repayable in full to the Company if Ms. Padilla left the company in less than a year.
LONG TERM EQUITY GRANTS
Long Term Incentive Program
The Committee introduced a long term equity incentive program or “LTIP” grants into the executive compensation structure in the third quarter of 2021. The intent of this program is to ensure that a substantial part of executive compensation is tied to long term stockholder value creation. The Long Term Incentive Program grants are not a guaranteed component of annual compensation, and the Committee can choose to eliminate the LTIP, change the terms of the program, and vary the amounts of LTIP awards in its sole discretion as administrator of the Company's equity plans. The Committee views the LTIP program and equity awards as an important part of its 2022 compensation program and aligns with the Company's compensation philosophy.
The Committee reviewed the design of LTIP grants recommended by its independent compensation consultant in the fourth quarter of 2021 to create a compensation strategy for the Company and for the Company's CEO, Gareth T. Joyce, who was appointed CEO effective January 1, 2022. The target value for the CEO LTIP grant of $3,000,000 was recommended by the Committee and its independent compensation consultant and approved by the full Board in connection with Mr. Joyce's appointment as CEO. The award was granted and delivered to Mr. Joyce on February 17, 2022. Half of the value of this award was delivered in restricted stock units and the other half in time-based stock options. The number of stock options and restricted stock units awarded was valued on the effective date of Mr. Joyce’s appointment as CEO on January 1, 2022. The restricted stock units and stock options vest ratably over four years subject to Mr. Joyce’s continued status as a service provider under the 2021 Equity Incentive Plan and the other standard terms and conditions of the Company’s equity awards and form of RSU grant agreement.
The Committee considered target values for LTIP awards for executives other than the CEO in March 2022 and considered market practices, peer group uses of equity in compensation programs, each executive’s equity position, the vesting status of outstanding awards to each executive, and each executive’s role in the Company and performance in determining appropriate LTIP awards. Recognizing the competitive market for talent and the executive transitions of CEO, CFO and President of Transit in the first quarter 2022, and considering the potential holding power of long term equity grants, the Committee set a target value of the LTIP grants at the 50th percentile of equity awards for the Company's peer companies, and an equity vehicle mix of 25% stock options and 75% restricted stock units on the recommendation of the Company’s independent compensation consultant and considering the volatility of the Company’s stock price which could reduce the intended holding power incentive of stock options. Each award vested ratably over four years . The Committee also established stock holding guidelines for executives to drive continued alignment with long term stockholder interests.
The Committee awarded Mr. Joyce's LTIP grant, and on the Committee's recommendation, the Board awarded LTIP grants to our other NEOs in 2022 with the following values.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | |
Officer |
LTIP Award Value(1) |
Gareth T. Joyce | $3,000,000 |
Karina F. Padilla(3) | $900.000 |
Christopher L. Bailey | $900,000 |
Julian R. Soell (2) | $900,000 |
JoAnn C. Covington(4) | $800,000 |
(1)The target dollar values for equity grants in this table do not reflect valuations computed in accordance with the Accounting Standards Codification Topic 718 (“ASC 718”) which are reflected below in the Summary Compensation Table. Based on the target value and the allocation of LTIP awards between RSUs and Options, the actual number of RSUs was determined by taking half of the target value and dividing it by the dollar value of the 20 day average of the closing price of our common stock before the grant date. The actual number of stock options was determined using a Black Scholes computation. For additional details see the Summary Compensation Table and the Grants of Plan Based Awards During Fiscal Year-End 2022 tables. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.
(2) Mr. Soell's LTIP award was made in May 2022 and was prorated to $675,000 to reflect his service to the Company during three of the fiscal quarters. The value of the full year LTIP for Mr. Soell was $900,000.
(3) Ms. Padilla resigned from her position as Chief Financial Officer effective May 15, 2023.
(4) Ms. Covington resigned from her position as Chief Legal Officer, Head of Government Relations and Secretary effective March 27, 2023.
2022 ONE-TIME EQUITY GRANTS
In 2022, the full Board, on the recommendation of the Committee and the independent compensation consultant, also considered the value to the Company and Stockholders of one-time equity grants of Restricted Stock Units to executive talent including the NEOs listed below.. The purpose of these grants was to provide additional incentives for the NEOs to remain focused on the Company for the long term in a very competitive environment as many new companies were entering the electric transportation industry and the market for talent was increasingly competitive. The Committee designed these grants to vest at 18-month and three-year vesting events to provide a longer time to the initial vesting event and stagger vesting events from the LTIP awards.
The Committee set the following target values for these grants made in 2022.
| | | | | | | | |
Officer | Award Value(1) |
Gareth T. Joyce | $1,000.000 |
Karina F. Padilla(2) | $600,000 |
Christopher L. Bailey | $1,800,000 |
JoAnn C. Covington(3) | $300,000 |
(1)The target dollar values for equity grants in this table do not reflect valuations computed in accordance with the Accounting Standards Codification Topic 718 (“ASC 718”) which are reflected below in the Summary Compensation Table. Based on the target value the actual number of RSUs was determined by taking the target value and dividing it by the dollar value of the 20 day average of the closing price of our common stock before the grant date. For additional details see the Summary Compensation Table and the Grants of Plan Based Awards During Fiscal Year-End 2022 tables. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.
(2)Ms. Padilla resigned from her position as Chief Financial Officer effective May 15, 2023.
(3)Ms. Covington resigned from her position as Chief Legal Officer, Head of Government Relations and Secretary effective March 27, 2023.
OTHER COMPENSATION ELEMENTS
The Company does not have any defined contribution or pension benefit plans. The Company does offer the following additional compensation elements.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
PERQUISITES
The Company introduced one perquisite in 2022 for financial planning assistance, excluding tax preparation for executive officers including our NEOs in 2022. The financial planning program allowed eligible officers to submit for reimbursement expenses related to financial planning in the fiscal year in amounts up to $10,000. This benefit is reflected on the Summary Compensation Table for NEOs who chose to use it.
Our named executive officers are eligible to participate in our employee benefit plans and programs, including medical, dental and vision benefits, life insurance, and disability insurance, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans. In addition, the Company also provides life and accidental death and dismemberment ("AD&D") insurance benefits to executive officers of two times the officer's base salary capped at $700,000. For non-executive officers, company provided life and AD&D insurances are capped at $500,000. The full company paid premium for the life and AD&D insurance coverages to the NEOs are reflected in the Summary Compensation Table.
RETIREMENT PLANS
We sponsor a 401(k) defined contribution plan in which our NEOs may participate, subject to limits imposed by the Internal Revenue Code to the same extent as all of our other full-time employees. We currently match contributions our employees make to the 401(k) plan for the first 4% of the employee’s salary. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package to attract and retain talent. Under our matching program for 401K contributions, our NEOs received the following matching contributions, which are reflected in the Summary Compensation Table.
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Officer | 401K Matching Funds |
Gareth T. Joyce | $ | 13,804 | |
Karina F. Padilla | $ | 12,423 | |
Christopher L. Bailey | $ | 8,321 | |
Julian R. Soell | $ | 6,154 | |
JoAnn C. Covington | $ | 15,382 | |
SEVERANCE BENEFITS AND POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
We have entered into offer letters and change of control and severance agreements with each of our NEOs and a Separation Agreement with Ms. Covington in exchange for continued services as a non-officer employee following her resignation. For a description of the offer letters and the severance benefits and potential payments upon termination or change of control of the Company and the Separation Agreement, please see the Description of Compensation Arrangements following the Summary Compensation table and Grants of Plan Based Awards During Fiscal Year-End 2022 table" section of this proxy statement.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION GOVERNANCE POLICIES
OUR COMPENSATION GOVERNANCE PRACTICES
Our compensation governance principles are designed to reflect best practices and promote executive alignment with the interests of our stockholders and other stakeholders.
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WHAT WE DO | WHAT WE DON’T DO |
We emphasize pay-for-performance measures in our cash incentive programs that align with our annual business objectives and our progress on longer term strategic initiatives. We maintain stock ownership guidelines, including a multiple of five times the base salary for the CEO, and three times the base salary for other executive officers. We emphasize equity with lengthy vesting schedules in our compensation program. Our current long term equity awards vest over a four year period. We meet regularly with our independent compensation consultant to review our compensation practices and assess our programs for risk-taking incentives. Our health and 401k benefits programs are open to all employees in the Company and we limit executive perquisites. | Our executive severance agreements do not contain “single trigger” change of control benefits. We do not offer guaranteed annual increases in base salary or target bonuses. We prohibit hedging transactions by executive officers. We prohibit pledging of our common stock by executive officers without prior approval. We do not provide for tax gross ups. |
CLAWBACK POLICY
The Company does not yet have a clawback policy. The Company intends to adopt a clawback policy in compliance with Nasdaq listing rules following their effectiveness.
STOCK OWNERSHIP GUIDELINES
To create alignment between management and stockholder interests and discourage inappropriate risk-taking, the Board adopted a stock ownership policy for executive officers in 2022 that requires each of our executive officers to maintain a significant equity stake in our common stock within five years of the adoption of these guidelines. The guidelines require stock holdings that are a multiple of 5x the base salary of the Chief Executive Officer and 3x the base salary for all other executive officers. Compliance with guidelines is calculated by valuing common stock owned along with the value of half of vested options held and half of unvested RSUs.
The Committee reviews executive officer holdings annually. At the end of 2022, our Named Executive Officers had achieved the following progress against the stock ownership guidelines.
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Officer | Stock Ownership Guideline Achievement |
Gareth T. Joyce | 92% |
Karina F. Padilla | 51% |
Christopher Bailey | 76% |
Julian R. Soell | 49% |
JoAnn C. Covington | 182% |
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
HEDGING AND PLEDGING POLICY
Our Board has adopted an Insider Trading Policy that prohibits all employees, including our NEOs, from using or pledging Proterra securities as collateral in a margin account. No employee may use or pledge Proterra securities as collateral for a loan unless expressly approved in advance by the Company’s Compliance Officer. No loans using or pledging Proterra securities as collateral have been approved by the Compliance Officer.
Our Insider Trading Policy also prohibits our NEOs and other officers against engaging at any time in hedging or monetization transactions involving Proterra securities, such as zero-cost collars and forward sale contracts, or from contributing Proterra securities to exchange funds that could be interpreted as having the effect of hedging in Proterra securities. All other employees are strongly discouraged from engaging in hedging activities.
TAX AND ACCOUNTING CONSIDERATIONS
One of the factors the Committee considers when determining executive compensation is the anticipated tax treatment to the Company and to the executives of the various payments and benefits. Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally provides that a publicly held company may not deduct compensation paid to certain covered executive officers to the extent that such compensation exceeds $1,000,000 per executive officer in any year. While the Committee generally considers this limit when determining compensation, the Committee reserves the discretion to conclude that it is appropriate to exceed the limitation on deductibility under Section 162(m) to ensure that executive officers are compensated in a manner that it believes to be consistent with the Company’s best interests and those of its stockholders. The Committee also considers the accounting treatment of the cash and equity incentive programs that the Company maintains.
COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, Ms. Krakauer, Mr. Porter and Mr. Smith served as members of our Compensation and Leadership Development Committee. None of the members of our Compensation and Leadership Development Committee was an officer or employee of our company at the time of his or her service on the Compensation and Leadership Development Committee or prior to such service. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or Compensation and Leadership Development Committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on our Board or Compensation and Leadership Development Committee.
COMPENSATION RISK ASSESSMENT
The Compensation and Leadership Development Committee engaged Farient Advisors in 2021 and 2022 to review executive and non-executive compensation programs. The Committee determined, after considering the review by Farient Advisors, that none of the elements of our compensation programs encouraged or created excessive risk-taking or were likely to have a material adverse effect on the Company. In its review, the Committee considered a number of features including the variable pay features of the Short Term Incentive Plan, performance measures that balanced financial and strategic objectives, time horizon of cash incentive and equity incentive plans, and the Company's compensation guiding principles, and internal controls and policies.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
COMPENSATION DISCUSSION AND ANALYSIS
REPORT OF THE COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE OF THE BOARD
The Compensation and Leadership Development Committee has reviewed and discussed with management the Compensation Discussion and Analysis as set forth in this Proxy Statement. Based upon this review and discussion, the Compensation and Leadership Development Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated in the Amendment to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2022 and included in the Company’s 2023 Proxy Statement filed in connection with the Company’s 2023 Annual Meeting of Stockholders.
Respectfully submitted by the Compensation and Leadership Development Committee of the Board of Directors.
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Mary Louise Krakauer, Chair | Brook F. Porter | Michael D. Smith |
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
The following tables and accompanying narrative set forth information about compensation provided to our NEOs who are as follows:
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Gareth T. Joyce | President and Chief Executive Officer |
Karina F. Padilla | Chief Financial Officer |
Julian R. Soell | President, Proterra Transit |
Christopher L. Bailey | President, Proterra Powered & Energy |
JoAnn C. Covington | Former Chief Legal Officer, Head of Government Relations and Secretary |
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation awarded to, earned by or paid to each of our NEOs for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022, in each case with respect to each NEO who was an NEO in the applicable year.
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Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) |
Gareth T. Joyce(6) President and Chief Executive Officer | 2022 | 499,038 | | — | 2,520,544 | | 1,355,794 | | 339,375 | | 23,804 | | 4,738,555 | |
2021 | 372,926 | | — | 286,397 | | 258,433 | | 124,208 | | 13,346 | | 1,055,310 | |
2020 | 38,054 | | — | — | 3,371,867 | | 14,238 | | — | 3,424,159 | |
Karina F. Padilla(7) Chief Financial Officer | 2022 | 415,192 | | 250,000 | | 1,750,429 | | 259,207 | | 151,088 | | 12,423 | | 2,838,339 | |
Christopher L. Bailey(8) Chief Business Officer, Former President, Proterra Powered & Energy | 2022 | 389,231 | | — | 2,146,188 | | 259,207 | | 205,700 | | 8,321 | | 3,008,647 | |
2021 | 202,650 | | — | 360,804 | | 688,538 | | 49,359 | | 923 | | 1,302,274 | |
Julian R. Soell(9) Chief Operating Officer, Former President, Proterra Transit | 2022 | 261,538 | | 250,000 | | 1,238,176 | | 173,718 | | 48,600 | | 6,154 | | 1,978,186 | |
JoAnn C. Covington(10) Former Chief Legal Officer, Head of Government Relations and Secretary | 2022 | 375,000 | | 292,813 | | 737,070 | | 230,408 | | 106,650 | | 25,382 | | 1,767,323 | |
(1)Amounts represent: (a) for Ms. Padilla a one-time sign on cash bonus paid to Ms. Padilla in 2022 pursuant to her offer letter; (b) for Mr. Soell a one-time sign on cash bonus paid to Mr. Soell in 2022 pursuant to his offer letter; (c) for Ms. Covington, the sum of (i) a recognition cash bonus of $40,000 paid in October 2022 for Ms. Covington's work serving, in addition to her other functions, as head of human resources from July to October 2022 while the Company was recruiting for a Chief People Officer, (ii) a retention bonus of $250,000 paid in September 2022 as described above in the Compensation Discussion and Analysis section titled "One-Time Awards", and (iii) $2,813 paid to Ms. Covington in 2022 as part of her 2021 annual incentive cash award due to an error in calculation of her 2021 award.
(2)Amounts represent the aggregate grant date fair value of restricted stock units (“RSUs”) calculated in accordance with FASB ASC Topic 718, without regard to potential forfeiture. The assumptions used in calculating these amounts are set forth in Note 11 to our financial statements for the year ended December 31, 2022, in our 2022 Annual Report on Form 10-K. Note that the amounts reported in this column reflect the aggregate accounting cost for these awards and do not necessarily correspond to the actual economic value that may be received by our NEOs from the awards or the target value used by the Board of Directors in granting such awards.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
(3)Amounts represent the aggregate grant date fair value of the stock options calculated in accordance with FASB ASC Topic 718, without regard to potential forfeiture. The assumptions used in calculating this amount are set forth in Note 11 to our financial statements for the year ended December 31, 2022, in our 2022 Annual Report on Form 10-K. Note that the amounts reported in this column reflect the aggregate accounting cost for these awards and do not necessarily correspond to the actual economic value that may be received by our NEOs from the awards or the target value used by the Board of Directors in granting such awards.
(4)Amounts represent short term incentive plan awards earned pursuant to our Key Employee Incentive Plan. For additional information on how these awards were determined, see the section above titled "Short Term Incentive Plan" in our Compensation Discussion & Analysis.
(5)Amounts represent matching contributions made on behalf of our named executive officers under our 401(k) plan, company paid premiums for life insurance and accidental death and dismemberment ("AD&D") insurance, and reimbursement for financial planning services under a perquisite established by the Compensation and Leadership Development Committee in 2022 ,as follows:.
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Name | 401(k) Plan Matching Contributions ($) | Financial Planning Services ($) | Company Paid Premiums for Life and AD&D Insurance Coverage ($) | Total All Other Compensation ($) |
Gareth T. Joyce | 13,804 | 10,000 | 1,398 | 23,804 |
Karina F. Padilla | 12,423 | — | 1,354 | 12,423 |
Christopher L. Bailey | 8,321 | — | 1,398 | 8,321 |
Julian R. Soell | 6,154 | — | 685 | 6,154 |
JoAnn C. Covington | 15,382 | 10,000 | 1,407 | 25,382 |
(6)Mr. Joyce has been President, Chief Executive Officer and a director of the Company since January 2022. He served as President of the Company's wholly owned subsidiary, Proterra Operating Company, Inc. from September 2021 to December 2021 and as President of Proterra Powered & Energy for the Company and its subsidiary from November 2020 to September 2021.
(7)Ms. Padilla was appointed Chief Financial Officer effective January 1, 2022. Ms. Padilla resigned from her position as Chief Financial Officer effective May 15, 2023.
(8)Mr. Bailey served as our Senior Vice President, Proterra Energy from May 2021 to October 2021, and then as our President of Proterra Powered & Energy from October 2021 until March 1, 2023, when he was appointed Chief Business Officer for the Company and its subsidiary.1 The reported salary is less than the annual base salary disclosed in the Compensation Discussion and Analysis because Mr. Bailey's salary was increased from $375,000 to $400,000 in fiscal year 2022.
(9)Mr. Soell started employment with our Company and was appointed President of Proterra Transit effective May 1, 2022 and served in that capacity until he was appointed Chief Operating Officer effective March 1, 2023. The reported salary is less than the annual base salary disclosed in the Compensation Discussion and Analysis because Mr. Soell started employment in May 2022.
(10)Ms. Covington was appointed our Chief Legal Officer, Head of Government Relations and Secretary on June 14, 2021, but, was not a named executive officer before fiscal year 2022 and, as a result, no disclosure is made for fiscal years 2021 and 2020 in accordance with SEC rules. Ms. Covington resigned from her position as Chief Legal Officer, Head of Government Relations and Secretary effective March 27, 2023.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
GRANTS OF PLAN BASED AWARDS DURING FISCAL YEAR-END 2022
The table below summarizes information regarding the incentive awards granted to each of our NEOs in 2022.
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Name | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) |
Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | |
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Garth T. Joyce | Annual Cash Incentive | — | 312,500 | | 625,000 | | 937,500 | | | — | — | — | — |
Stock Options | 2/17/2022 | — | — | — | | — | 300,240 | | 8.73 | 1,355,794 | |
Time-based RSUs | 3/10/2022 | — | | — | | — | | | 120,772 | | — | | — | | 867,143 | |
2/17/2022 | | | | | 189,393 | | | | 1,653,401 | |
Karina F. Padilla(6) | Annual Cash Incentive | — | 159,375 | | 318,750 | | 478,125 | | | — | — | — | — | |
Stock Options | 3/10/2022 | — | — | — | | — | 65,425 | | 7.18 | 259,207 | |
Time-based RSUs | 2/17/2022 | — | | — | | — | | | 73,863 | | — | | — | | 644,824 | |
3/10/2022 | | | | | 153,984 | | | | 1,105,605 | |
Christopher L. Bailey | Annual Cash Incentive | — | 146,094 | | 292,188 | | 438,282 | | | — | — | — | — | |
Stock Options | 3/10/2022 | — | — | — | | — | 65,425 | | 7.18 | 259,207 | |
Time-based RSUs | 3/10/2022 | — | — | — | | 298,912 | | — | — | 2,146,188 | |
Julian R. Soell | Annual Cash Incentive(5) | — | 150,000 | | 300,000 | | 450,000 | | | — | — | — | — | |
Stock Options | 5/25/2022 | — | — | — | | — | 53,016 | | 5.82 | 173,718 | |
Time-based RSUs | 5/25/2022 | — | — | — | | 212,745 | | — | — | 1,238,176 | |
JoAnn C. (7) | Annual Cash Incentive | — | 112,500 | | 225,000 | | 337,500 | | | — | — | — | — | |
Stock Options | 3/10/2022 | — | | — | | — | | | — | 58,156 | | 7.18 | 230,408 | |
Time-based RSUs | 3/10/2022 | — | — | — | | 102,656 | | — | — | 737,070 | |
(1)These columns present information about the potential payouts under our Short Term Incentive Plan for fiscal year 2022 if the Company met the threshold, target and maximum performance targets for an award under each of the performance metrics specified in the Plan, The actual amount paid to each NEO is reflected above in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. For a more detailed description of the performance-based measures and actual payments under the Short Term Incentive Plan, see the discussion of the "Short Term Incentive Plan" above in the Compensation Discussion and Analysis.
(2)The amounts represent the number of restricted stock units ("RSUs") granted during fiscal year 2022. RSUs vest based on continued service through various vesting dates. The time-based RSU awards in connection with the new hire grants to Mr. Soell and Ms. Padilla vest in 4 equal annual installments on the anniversary of the vesting commencement date, which for Mr. Soell is May 25, 2022, and Ms. Padilla is January 25, 2022. The time-based RSU awards in connection with the Long Term Incentive Program grants to all of our NEO’s described in the Compensation Discussion and Analysis section above vest in 4 equal annual installments on the anniversary of the vesting commencement date, which for Mr. Joyce is January 1, 2022, and for the other NEO’s is March 25, 2022. The time-based RSU awards to Mr. Joyce, Ms. Padilla, Mr. Bailey, and Ms. Covington in connection with the One Time Equity awards described in the Compensation Discussion and Analysis section above vest in 2 equal installments eighteen months and three years from the vesting commencement date of March 25, 2022. As a general matter, time-based RSUs will cease vesting upon each employee’s last day of service. Time-based RSU awards are subject to potential vesting acceleration as described in the section titled “Potential Payments upon Termination or Change of Control”.
(3)The amounts represent the number of stock options granted during fiscal year 2022. Stock options vest based on continued service through various vesting dates. The time-based stock option awards in connection with Long Term Incentive Program grants to all of our NEO’s described in the Compensation Discussion and Analysis section above vest in 4 equal annual installments on the anniversary of the vesting commencement date, which for Mr. Joyce is January 1, 2022, and for the other NEO’s is March 25, 2022. As a general matter, time-based stock options will cease vesting upon each employee’s last day of service. Time-based stock option awards are subject to potential vesting acceleration as described in the section titled “Potential Payments upon Termination or Change of Control”.
(4)The amounts represent the aggregate grant date fair value of equity awards in accordance with FASB ASC Topic 718, without regard to potential forfeiture. The assumptions used in calculating these amounts are set forth in Note 11 to our financial statements for the year ended December 31, 2022, in our 2022 Annual Report.
(5)The amounts represent the potential full-year payouts that Mr. Soell could have received under our Short Term Incentive Plan for fiscal year 2022. Because Mr. Soell's start date with the Company was May 1, 2022, his actual 2022 annual bonus payout was pro-rated based on his start date.
(6)Ms. Padilla resigned from her position as Chief Financial Officer effective May 15, 2023.
(7)Ms. Covington resigned from her position as Chief Legal Officer, Head of Government Relations and Secretary effective March 27, 2023.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
DESCRIPTION OF COMPENSATION ARRANGEMENTS
OFFER LETTER AGREEMENTS WITH GARETH T. JOYCE
In connection with his appointment as President of the Company beginning September 13, 2021, Gareth T. Joyce entered into an executive offer letter agreement with the Company memorializing the terms of his employment. This agreement with Mr. Joyce provided for an increase in his base salary from $340,000 to $450,000, a target annual bonus opportunity of 75% of base salary and an equity award opportunity that is subject to approval by the Compensation and Leadership Development Committee. In connection with Mr. Joyce's transition to the role of both President and Chief Executive Officer effective January 1, 2022, Mr. Joyce entered into an executive offer letter agreement with the Company pursuant to which his salary was set at $500,000, his target annual bonus opportunity was increased to 125% of base salary, he received a new equity grant valued at $3,000,000 at the time of award,, and he became eligible to receive additional equity awards as part of the Company’s Long Term Incentive Program, subject to approval by the Compensation and Leadership Development Committee. Mr. Joyce was also entitled to the Company's standard form of severance agreement for chief executives described in this proxy statement..
OFFER LETTER AGREEMENT WITH KARINA F. PADILLA
In connection with her appointment as Chief Financial Officer on January 1, 2022, the Company entered into an executive offer letter agreement with Ms. Padilla, pursuant to which she was entitled to an annual base salary of $425,000, a bonus target under the Company’s Key Employee Incentive Plan of 75% of her base salary, and a signing bonus of $250,000. The offer letter also provided that Ms. Padilla would receive a Restricted Stock Unit award under the Company’s 2021 Equity Incentive Plan of $585,000 in value at the time of grant with four-year ratable vesting, and that she would be eligible to receive additional equity awards as part of the Company’s Long Term Incentive Program, subject to approval by the Compensation and Leadership Development Committee. Ms. Padilla was also entitled to the Company's standard form of severance agreement for executives described in this proxy statement.
OFFER LETTER AGREEMENTS WITH CHRISTOPHER L. BAILEY
On November 4, 2021, Mr. Bailey entered into an amended and restated offer letter that amended his offer letter dated April 30, 2021. The amended and restated offer letter entitled Mr. Bailey to an annual base salary and participation in the Company's short and long term incentive plans.
OFFER LETTER AGREEMENT WITH JULIAN R. SOELL
On August 1, 2022, Mr. Soell entered into an amended and restated offer letter that amended his offer letter dated April 1, 2022. The amended and restated offer letter entitled Mr. Soell to an annual base salary, participation in the Company's short and long term incentive plans, and the Company's standard form of severance agreement for executives described in this proxy statement.
OFFER LETTER AGREEMENT WITH JOANN C. COVINGTON
On April 13, 2022, Ms. Covington entered into an amended and restated offer letter that amended her offer letter dated March 1, 2017. The amended and restated offer letter entitled Ms. Covington to an annual base salary, participation in the Company's short and long term incentive plans, and the Company's standard form of severance agreement for executives described in this proxy statement.
SEPARATION AGREEMENT WITH JOANN C. COVINGTON
Ms. Covington tendered her resignation as Chief Legal Officer, Head of Government Relations and Secretary on March 20, 2023, effective March 27, 2023. On March 24, 2023, the Company and Ms. Covington executed a Separation Agreement (the “Separation Agreement”), pursuant to which Ms. Covington will remain at the
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
Company as a non-officer employee until June 30, 2023, to provide support during the transition to a new Chief Legal Officer, unless an earlier date is mutually agreed (such date, the “Separation Date”). During the transition period, Ms. Covington will receive the compensation and benefits provided under her existing terms of employment. Under the Separation Agreement, in exchange for providing transition support through the Separation Date and agreeing to a waiver and general release of all claims in favor of the Company and its affiliates, Ms. Covington will receive, among other benefits, a lump-sum payment equal to $187,500, which represents six months of Ms. Covington’s base compensation, and an additional lump-sum payment equal to $13,380, equivalent to six months of Ms. Covington’s monthly premium for the cost of benefit continuation for health benefits. The payments will be made to Ms. Covington within seven days following the Separation Date. Ms. Covington also remains eligible for change in control benefits. In addition, the Company agreed to take the steps necessary to extend the exercise period for Ms. Covington’s vested stock options under the Company’s 2010 Equity Incentive Plan to the earlier of (i) twelve months from the Separation Date or (ii) the expiration date of each such option.
OFFER LETTER AGREEMENT WITH DAVID S. BLACK
In connection with his appointment as Chief Financial Officer and Treasurer, the Company has entered into an offer letter (“Offer Letter”) with Mr. Black, which provides that his employment will commence on or about May 15, 2023 and outlines his duties and responsibilities and compensation terms. Pursuant to his Offer Letter, Mr. Black is entitled to receive an annual base salary of $450,000, and a bonus target under the Company’s Key Employee Incentive Plan of 75% of his base salary. In addition, the Company intends to grant Mr. Black an equity award with four-year ratable vesting under the Company’s 2021 Equity Incentive Plan comprised of 50% restricted stock units and 50% stock options and valued at $800,000 in accordance with the Company’s grant valuation procedures at the time of grant. The Offer Letter also provides that the Company will recommend to the Board or the compensation committee of the Board that Mr. Black be eligible in fiscal 2024 for an equity incentive award with four year ratable vesting under the Company’s 2021 Equity Incentive Plan of $900,000 in value in accordance with the Company’s grant valuation procedures at the time of grant. Mr. Black will also be entitled to enter into the Company’s standard form of severance agreement for executives described in this proxy statement.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The table below summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each NEO as of December 31, 2022.
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| | Option Awards(1) | | Stock Awards(1) |
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity incentive plan awards: number of securities underlying unexercised unearned options (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) |
Gareth T. Joyce | 3/10/2022(3) | — | | — | | — | | — | | — | | | 120,772 | | 455,310 | | — | | — | |
2/17/2022(4) | — | | 300,240 | | — | | 8.73 | | 2/16/2032 | | 189,393 | | 714,012 | | — | | — | |
10/21/2021(5) | 12,917 | | 38,749 | | — | | 9.83 | | 10/20/2031 | | 21,851 | | 82,378 | | — | | — | |
12/21/2020(6) | 366,416 | | 408,320 | | — | | 4.78 | | 12/20/2030 | | — | | — | | — | | — | |
Karina F. Padilla | 3/10/2022(7) | — | | 65,425 | | — | | 7.18 | | 3/9/2032 | | 81,521 | | 307,334 | | — | | — | |
3/10/2022(3) | — | | — | | — | | — | | — | | | 72,463 | | 273,186 | | — | | — | |
2/17/2022(8) | — | | — | | — | | — | | — | | | 73,863 | | 278,464 | | — | | — | |
Christopher L. Bailey | 3/10/2022(7) | — | | 65,425 | | — | | 7.18 | | 3/9/2032 | | 81,521 | | 307,334 | | — | | — | |
3/10/2022(3) | — | | — | | — | | — | | — | | | 217,391 | | 819,564 | | — | | — | |
9/2/2021(9) | — | | — | | — | | — | | — | | | 23,883 | | 90,039 | | — | | — | |
5/20/2021(10) | 33,468 | | 55,781 | | — | | 13.68 | | 5/19/2031 | | — | | — | | — | | — | |
Julian R. Soell | 5/25/2022(11)(12) | — | | 53,016 | | — | | 5.82 | | 5/24/2032 | | 76,588 | | 288,737 | | — | | — | |
5/25/2022(12) | — | | — | | — | | — | | — | | | 136,157 | | 513,312 | | — | | — | |
JoAnn C. Covington | 3/10/2022(7) | — | | 58,156 | | — | | 7.18 | | 3/9/2032 | | 72,463 | | 273,186 | | — | | — | |
3/10/2022(3) | — | | — | | — | — | | — | | | 30,193 | | 113,828 | | — | | — | |
9/2/2021(13) | 12,588 | | 37,762 | | — | | 11.33 | | 9/1/2031 | | 20,970 | | 79,057 | | — | | — | |
12/21/2020(14) | 13,388 | | 13,387 | | — | | 4.78 | | 12/20/2030 | | — | | — | | — | | — | |
8/20/2020(15) | 111,560 | | 66,939 | | — | | 4.62 | | 8/19/2030 | | — | | — | | — | | — | |
8/20/2020(16) | 37,652 | | 29,285 | | — | | 4.62 | | 8/19/2030 | | — | | — | | — | | — | |
12/13/2019(17) | 16,734 | | 5,578 | | — | | 6.00 | | 12/12/2029 | | — | | — | | — | | — | |
11/20/2019(18) | 16,734 | | 5,578 | | — | | 6.00 | | 11/19/2029 | | — | | — | | — | | — | |
12/29/2018(19) | 44,625 | | — | | — | | 5.41 | | 12/28/2028 | | — | | — | | — | | — | |
11/16/2018(20) | 66,937 | | — | | — | | 5.41 | | 11/15/2028 | | — | | — | | — | | — | |
5/30/2017(21) | 446,249 | | — | | — | | 2.18 | | 5/29/2027 | | — | | — | | — | | — | |
(1)Outstanding equity awards made (i) prior to June 14, 2021 were granted under our 2010 Equity Incentive Plan (the “2010 Plan”) and (ii) after June 14, 2021, equity awards were granted under our 2021 Equity Incentive Plan (the “2021 Plan”) which was approved by stockholders on June 11, 2021 in connection with the business combination discussed in our Annual Report on Form 10-K for the fiscal year ending December 31, 2021. Equity awards are subject to vesting acceleration under "double trigger" change-in-control provisions of our executive severance agreements as described in the section titled “Potential Payments upon Termination or Change of Control.”
(2)The market value of unvested RSUs reflected in the table have been calculated by multiplying the number of unvested RSUs by $3.77, Proterra's closing stock price on December 30, 2022, the last trading day of fiscal year 2022.
(3)RSUs vest 50% on September 25, 2023 and 50% on March 25, 2025.
(4)Options and RSUs vest 25% each year beginning on January 1, 2023.
(5)Options and RSUs vest 25% each year beginning on August 25, 2022.
(6)Options vest 25% on November 17, 2021 and then 6.25% quarterly thereafter.
(7)Options and RSUs vest 25% each year beginning on March 25, 2023.
(8)RSUs vest 25% each year beginning on January 25, 2023.
(9)RSUs vest 25% each year beginning on May 25, 2022.
(10)Options vest 25% on May 17, 2022 and then 6.25% quarterly thereafter.
(11)Options vest 25% each year beginning on May 2, 2023.
(12)RSUs vest 25% each year beginning on May 25, 2023.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
(13)Options and RSUs vest 25% each year beginning on September 1, 2022.
(14)Options vest 6.25% each quarter following the December 21, 2020 vesting commencement date.
(15)Options vest 6.25% each quarter following the June 1, 2020 vesting commencement date.
(16)Options vest 6.25% each quarter following the August 20, 2020 vesting commencement date.
(17)Options vest 6.25% each quarter following the December 13, 2019 vesting commencement date.
(18)Options vest 6.25% each quarter following the November 20, 2019 vesting commencement date.
(19)Options vest 6.25% each quarter following the December 28, 2018 vesting commencement date.
(20)Options vest 6.25% each quarter following the November 13, 2018 vesting commencement date.
(21)Options vest 25% on April 17, 2018 and then 6.25% quarterly thereafter.
OPTIONS EXERCISES AND STOCK VESTED DURING 2022
The table below summarizes information regarding the number of shares acquired upon the exercise of stock options (with the value realized based on the difference between the closing price per share on Nasdaq of our common stock and the exercise price on the date of exercise) and the vesting of RSUs in 2022 previously granted to each of our NEOs (with the value realized based on the closing price per share on Nasdaq of our common stock on the date of vesting).
| | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Gareth T. Joyce | 20,950 | | 39,386 | | | 7,284 | | 46,909 | |
Karina F. Padilla | — | | — | | | — | | — | |
Christopher L. Bailey | — | | — | | | 7,962 | | 46,339 | |
Julian R. Soell | — | | — | | | — | | — | |
JoAnn C. Covington | 52,446 | | 279,537 | | | 6,991 | | 42,226 | |
SEVERANCE BENEFITS AND POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
We have entered into change in control and severance agreements (“Severance Agreements”) with our Named Executive Officers.
An NEO (other than our President and Chief Executive Officer) who is terminated by us without cause outside of a change in control (as such term is defined below) will receive, in exchange for a customary release of claims: (i) a severance payment of six months (the “Severance Period") base salary in equal installments and (ii) payment of premiums for continued medical benefits for up to six months. If our President and Chief Executive Officer is terminated by us without cause or he resigns for good reason (as such term is defined below) outside of a change in control he will receive, in exchange for a customary release of claims: (i) a severance payment of twelve months (the “President and CEO Severance Period”) base salary in equal installments and (ii) payment of premiums for continued medical benefits for up to twelve months..
If an NEOs employment is terminated by us without cause or if the NEO resigns for good reason within the three months preceding a change in control (but after a legally binding and definitive agreement for a potential change in control has been executed) or within the twelve months following a change in control, the Severance Agreement provides the following benefits in exchange for a customary release of claims: (i) a severance payment of twelve months base salary in equal installments and then-current target bonus opportunity (at the rates in effect immediately prior to the actions that resulted in the termination) (18 months for our President and Chief Executive Officer), (ii) 100% acceleration of any then-unvested equity awards (including equity awards that vest, in whole or in part, upon satisfaction of performance criteria), and (iii) payment of premiums for continued medical benefits for up to twelve months (18 months for our President and Chief Executive Officer).
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
For purposes of all of the Severance Agreements:
“Cause” means (i) an unauthorized use or disclosure by the NEO of the Company’s or its subsidiaries’ confidential information or trade secrets, which use or disclosure causes or is reasonably likely to cause material harm to the Company or its subsidiaries, (ii) a material breach of any agreement between the NEO and the Company or its subsidiaries, (iii) a material failure to comply with the Company’s or its subsidiaries’ written policies or rules that has caused or is reasonably likely to cause material injury to the Company, its successor, or its affiliates, or any of their business, (iv) conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any state thereof, (v) willful misconduct that has caused or is reasonably likely to cause material injury to the Company, its successor, or its affiliates, or any of their business, (vi) embezzlement, (vii) failure to cooperate with the Company or its subsidiaries in any investigation or formal proceeding if the Company or its subsidiary, as applicable, has requested the NEOs reasonable cooperation, (viii) violation of any applicable federal, state or foreign statutes, laws or regulations or (ix) a continued failure to perform assigned duties after receiving written notification of such failure from the Company’s or its subsidiaries’, as applicable, Chief Executive Officer; provided that the NEO must be provided with written notice of their termination for “Cause” and the NEO must be provided with a thirty (30) day period following their receipt of such notice to cure the event(s) that trigger “Cause,” with the Company’s or its subsidiaries’, as applicable, Board of Directors making the final determination whether the NEO has cured any Cause.
“Good Reason” means, without the NEOs consent, (i) a material reduction in the NEOs level of responsibility and/or scope of authority, (ii) a reduction by more than 10% in NEOs base salary (other than a reduction generally applicable to executive officers of the Company or its subsidiary, as applicable, and in generally the same proportion as for the NEO), or (iii) relocation of the NEOs principal workplace by more than thirty-five (35) miles from the NEOs then current place of employment. For the purpose of clause (i), a change in responsibility shall not be deemed to occur (A) solely because the NEO is part of a larger organization or (B) solely because of a change in title. For the NEO to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (e), all of the following requirements must be satisfied: (1) the NEO must provide notice to the Company or its subsidiary, as applicable, of their intent to assert Good Reason within sixty (60) days of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii); (2) the Company or its subsidiary, as applicable, will have thirty (30) days (the “Company Cure Period”) from the date of such notice to remedy the condition and, if it does so, the NEO may withdraw their resignation or may resign with no benefits; and (3) any termination of employment under this provision must occur within ten (10) days of the earlier of expiration of the Company Cure Period or written notice from the Company or one of its subsidiaries, as applicable, that it will not undertake to cure the condition set forth in subclauses (i) through (iii). Should the Company or one of its subsidiaries, as applicable, remedy the condition as set forth above and then one or more of the conditions arises again within twelve months following the occurrence of a Change in Control, the NEO may assert Good Reason again subject to all of the conditions set forth herein.
“Change in Control” means the occurrence of any of the following events, provided that the transaction (including any series of transactions) also qualifies as a change in control under U.S. Treasury Regulation 1.409A-3(i)(5)(v) or 1.409A-3(i)(5)(vii):
(i) Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Change in Control; or
(ii) Change in Effective Control of the Company. A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EXECUTIVE COMPENSATION TABLES
Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
Each Severance Agreement is in effect until the earlier of (i) the termination of the executive officer’s employment other than in a situation described above and (ii) the date that we have met all our obligations under the Severance Agreement following the termination of the executive officer’s employment due to a situation described above.
The benefits under the Severance Agreements supersede all other cash severance and vesting acceleration arrangements (excluding equity awards that vest, in whole or in part, upon satisfaction of performance criteria, which will be governed by the terms of the applicable performance-based equity awards). All severance payments to our NEOs are subject to the execution and non-revocation of an effective release in the Company’s favor. In addition, the Severance Agreements include a non-competition covenant applicable during the NEOs employment and a cooperation and non-disparagement covenant pursuant to which the NEO shall use best efforts to assist with transition of their duties during the Severance Period or the President and CEO Severance Period (whichever is applicable) and shall not disparage the Company, its subsidiaries or the members of the Board or their officers and employees following their separation with the Company.
The table below quantifies the payments in the event of a qualifying termination or a change in control ("CIC") qualifying termination to our NEOs as of December 31, 2022 and assuming the price per share of the Company's securities is the closing market price as of that date. For additional information, see the above discussion of "Potential Payments Upon Termination or Change of Control" in our Compensation Discussion & Analysis section titled "Other Compensation Elements."
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| Qualifying Termination | | Qualifying Termination Upon Change in Control |
Name | Base Salary ($)(1) | COBRA Payments ($)(2) | Total ($) | | Base Salary and Target Bonus ($)(3) | COBRA Payments ($)(4) | Unvested Equity ($)(5) | Total ($) |
Gareth T. Joyce | 500,000 | | — | | 500,000 | | | 1,375,000 | | — | | 1,251,700 | | 2,626,700 | |
Karina F. Padilla | 212,500 | | 12,575 | | 225,075 | | | 743,750 | | 25,151 | | 858,983 | | 1,627,884 | |
Christopher L. Bailey | 200,000 | | 11,470 | | 211,470 | | | 700,000 | | 22,941 | | 1,216,937 | | 1,939,878 | |
Julian R. Soell | 200,000 | | 12,575 | | 212,575 | | | 700,000 | | 25,151 | | 802,049 | | 1,527,200 | |
JoAnn C. Covington | 187,500 | | 12,575 | | 200,075 | | | 600,000 | | 25,151 | | 466,070 | | 1,091,221 | |
(1)Represents twelve months of base salary for Mr. Joyce and six months of base salary for Ms. Padilla, Mr. Bailey, Mr. Soell, and Ms. Covington.
(2)Represents payment of premiums for continued medical benefits for up to six months for Ms. Padilla, Mr. Bailey, Mr. Soell, and Ms. Covington. Mr. Joyce did not elect medical coverage for fiscal year 2022 and therefore, would not receive premiums for continued medical benefits.
(3)Represents eighteen months of base salary for Mr. Joyce and twelve months of base salary for Ms. Padilla, Mr. Bailey, Mr. Soell, and Ms. Covington and each executive's target bonus in fiscal year 2022.
(4)Represents payment of premiums for continued medical benefits for up to twelve months for Ms. Padilla, Mr. Bailey, Mr. Soell, and Ms. Covington. Mr. Joyce did not elect medical coverage for fiscal year 2022 and therefore, would not receive premiums for continued medical benefits.
(5)The market value of unvested equity that would vest and payout due to a qualifying termination upon a change in control have been calculated by multiplying the number of unvested RSUs by $3.77, Proterra's closing stock price on December 30, 2022, the last trading day of fiscal year 2022. As of fiscal year end 2022, all unvested stock options held by our NEOs had no value.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
CEO PAY RATIO
As required by SEC rules, we are providing disclosure regarding the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee. The ratio is a reasonable estimate calculated in a manner consistent with SEC rules and is based on our payroll and employment records and the methodology described below.
Nearly all of our employees are located in the United States. Pursuant to the SEC rules, to identify our median employee, we excluded from the calculation seven employees based in Canada under the de minimis exemption. After applying the de minimis exemption, we selected our median employee from our employee population of 1,183 U.S. full time, part time, and temporary employees as of December 31, 2022.
To determine our median employee, we used full year 2022 gross compensation data from our payroll system. Compensation was annualized for all newly hired employees who did not work a full calendar year 2022. Compensation data included wages, overtime, non-performance based bonuses, and paid time off as this reflects the most comparable measure of compensation across our employee population. While many of our employees are compensated with equity awards, not all of our employees are, and many compensation structures in the Company rely on cash compensation exclusively. Thus, we excluded the fair value of stock awards granted in 2022 from the calculation used to identify the median employee. Similarly, because the majority of our employees do not participate in a variable performance-based compensation plan, we excluded performance-based bonuses from the calculation. Because the SEC rules allow companies to apply various methodologies to determine the median employee, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
After identifying the median employee, we calculated the total annual compensation for the median employee in the same manner used to determine the compensation shown for our CEO in the Summary Compensation Table.
Based upon the methodology described above, our CEO’s total annual compensation as reported above in the Summary Compensation Table above was $4,738,555, and the total annual compensation for our median employee, an hourly Field Service Technician located in Greenville, South Carolina, was $81,477. The ratio of these two amounts is 58:1.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PAY VERSUS PERFORMANCE
The following table and graphs below summarize the relationship between executive "compensation actually paid" (CAP) as defined under SEC rules to (i) each individual who has served as our principal executive officer (PEO) during each of the fiscal years shown below and (ii) our other non-PEO named executive officers (determined as an average, as set forth below) during each of the fiscal years shown below, and our financial performance, as required pursuant to SEC rules, Since the Company became a public reporting company in June 2021 through a business combination with a Special Purpose Acquisition Company, data from fiscal year 2020 is excluded from the disclosure. The Compensation and Leadership Development Committee does not necessarily use CAP as a basis for making compensation decisions. For a discussion on how our Compensation and Leadership Development Committee aligns pay with performance when making compensation decisions, please see the "Compensation Discussion and Analysis" section of this proxy statement.
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| | | | | Value of Initial Fixed $100 Investment Based On: | | |
Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(1) | Average Compensation Actually Paid to Non-PEO NEOs(2) | Total Shareholder Return(3) | Peer Group Total Shareholder Return(4) | Net Income (in $000s)(5) | Revenue (in $000s)(6) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) |
2022 | $4,738,555 | $582,946 | $2,398,124 | $1,335,408 | $34.03 | $35.09 | $(237,950) | $309,363 |
2021 | $1,057,101 | $(6,447,940) | $1,356,961 | $39,730 | $79.69 | $102.78 | $(250,006) | $242,860 |
(1)The named executive officers included in the above table were:
| | | | | | | | |
Year | PEO | Non-PEO NEOs |
2022 | Gareth T. Joyce | Karina F. Padilla, Christopher L. Bailey, Julian R. Soell, JoAnn C. Covington |
2021 | John J. Allen | Gareth T. Joyce, Amy E. Ard, Christopher L. Bailey, Joshua P. Ensign |
(2)Reflects adjustments to the value of Stock Awards, as calculated in accordance with the rules prescribed under Item 402(v) and in accordance with ASC Topic 718, which included the categories of adjustments for each year as set forth below. For additional information regarding the determination of fair value, see Note 11 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022:
| | | | | | | | | | | | | | |
| 2022 | 2021 |
Adjustments ($) | PEO | Non-PEO NEOs* | PEO | Non-PEO NEOs* |
SCT Total Compensation | $4,738,555 | $2,398,124 | $1,057,101 | $1,356,961 |
Grant Date Fair Value of Equity Included in "Stock Awards" and "Option Awards" column in SCT | $(3,876,338) | $(1,698,601) | $(206,310) | $(791,231) |
Year End Fair Value of Equity Awards | $1,695,225 | $912,627 | — | $402,181 |
Year-over-Year Change in Fair Value of Outstanding and Unvested Equity Awards | $(1,705,393) | $(216,868) | $(8,048,994) | $(737,235) |
Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | — | — | — | — |
Year-over-Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | $(269,103) | $(59,874) | $750,263 | $455,518 |
Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | — | — | — | $(646,464) |
Value of Dividends or Other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | — | — | — | — |
Compensation Actually Paid | $582,946 | $1,335,408 | $(6,447,940) | $39,730 |
* Amounts shown are averages for the entire group of Non-PEO NEOs for each respective year.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PAY VERSUS PERFORMANCE
(3)Cumulative total shareholder return (“TSR”) assumes an investment of $100 on December 31, 2020 and reinvestment of dividends. The Company has never declared or paid cash dividends on common stock nor does the Company anticipate paying any such cash dividends in the foreseeable future. Such returns are based on historical results and are not intended to suggest future performance.
(4)The peer group used for this purpose is Indxx US Electric and Autonomous Vehicles Index (IUEAV),which is one of the peer groups reflected in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2023 pursuant to Item 201(e) of Regulation S-K
(5)The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year.
(6)The dollar amounts reported represent the amount of revenue reflected in the Company’s audited financial statements for the applicable year.
Pay versus Performance Descriptive Disclosure
In accordance with the SEC rules, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance Table above.
Compensation Actually Paid, Cumulative TSR and Peer Group TSR.
The following graph sets forth the relationship between compensation actually paid to our PEO, the average of compensation actually paid to our Non-PEO NEOs, and the Company’s cumulative TSR over the two most recently completed fiscal years.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PAY VERSUS PERFORMANCE
Compensation Actually Paid and Net Income
The following graph sets forth the relationship between compensation actually paid to our PEO, the average of compensation actually paid to our Non-PEO NEOs, and the Company’s net income over the two most recently completed fiscal years.
Compensation Actually Paid and Revenue
The following graph sets forth the relationship between compensation actually paid to our PEO, the average of compensation actually paid to our Non-PEO NEOs, and the Company’s revenue over the two most recently completed fiscal years.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PAY VERSUS PERFORMANCE
Tabular List of Most Important Performance Measures
The following table presents financial performance measures that the Company considers to be the most important in linking CAP to our PEO and Non-PEO NEOs for 2022 to Company performance. For a discussion of these performance measures, please see the "Compensation Discussion and Analysis" section of this proxy statement.
| | |
2022 Most Important Performance Measures (Unranked) |
Revenue |
Adjusted EBITDA |
Business Unit Revenue |
Business Unit Operating Income Before Corporate Expenses |
Cash Conversion Cycle |
All information provided under the above "Pay Versus Performance" heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of December 31, 2022 with respect to compensation plans under which shares of our common stock may be issued.
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Plan Category | (a) Number of securities to be issued upon exercise of outstanding securities (#) | (b) Weighted average exercise price of outstanding options ($)(1) | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (#) |
Equity compensation plans approved by security holders(2) | 23,336,799 | | (3) | $ | 6.69 | | 19,244,782 | | (4) |
Equity compensation plans not approved by security holders | — | | | — | — | |
Total | 23,336,799 | | | $ | 6.69 | | 19,244,782 | | |
(1)As restricted stock unit awards have no exercise price, they are excluded from the weighted average exercise price calculation set forth in column. The weighted average exercise price of outstanding options is $3.87 if the 1,840,784 shares exercisable under equity awards granted to the former Chief Executive Officer in March 2020, which have a weighted average exercise price of $19.61 per share as of December 31, 2022, are excluded.
(2)Includes our (i) 2021 Plan, (ii) 2021 Employee Stock Purchase Plan (“2021 ESPP”) and (iii) 2010 Plan.
(3)Includes (i) 6,693,935 shares subject to outstanding awards granted under the 2021 Plan, of which 960,708 shares were subject to outstanding options and 5,733,227 shares were subject to outstanding RSU awards, (ii) 16,642,864 shares subject to outstanding options granted under the 2010 Plan. Under our 2021 ESPP, participants are permitted to purchase our common stock at a discount on certain dates through payroll deductions within a pre-determined purchase period. Accordingly, the number of shares to be issued upon exercise of outstanding rights under our 2021 ESPP as of December 31, 2022 is not determinable.
(4)As of December 31, 2022, there were 13,782,026 shares of common stock available for issuance under the 2021 Plan. The number of shares reserved for issuance under our 2021 Plan increased automatically by 9,050,606 shares on January 1, 2023 and will increase automatically on the first day of January of each of 2023 through 2031 by the number of shares equal to 4% of the total issued and outstanding shares of our common stock as of the immediately preceding December 31 or a lower number approved by our Board. As of December 31, 2022, there were 5,462,756 shares of common stock available for issuance under the 2021 ESPP. The number of shares reserved for issuance under our 2021 ESPP increased automatically by 2,262,651 shares on January 1, 2023 and will increase automatically on the first day of January of each of 2023 through 2031 by the number of shares equal to 1% of the total issued and outstanding shares of our common stock as of the immediately preceding December 31 or a lower number approved by our board of directors. As of December 31, 2022, no shares of common stock were available for issuance under the 2010 Plan. To the extent outstanding awards under the 2010 Plan are forfeited, lapse unexercised, or would otherwise have been returned to the share reserve under either plan, the shares of common stock subject to such awards instead will be available for future issuance as common stock under the 2021 Plan.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
RATIFICATION OF AUDITOR
PROPOSAL 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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| The Board unanimously recommends a vote FOR the ratification of the appointment of KPMG LLP as our Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2023. |
Our Board has appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. Our Board has directed that this appointment be submitted to our stockholders for ratification at the Annual Meeting. Although ratification of our appointment of KPMG LLP is not required, we value the opinions of our stockholders and believe that stockholder ratification of our appointment of our independent registered public accounting firm is good corporate governance.
On June 15, 2021, the Audit Committee of the Board approved the appointment of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ended December 31, 2021. KPMG LLP was also appointed as our independent registered public accounting firm for fiscal year 2022.
On June 14, 2021, we consummated the business combination transactions described in our Form 8-K filed with the Securities and Exchange Commission on June 17, 2021, by and among the special purpose acquisition company, ArcLight Clean Transition Corp. (now known as Proterra Inc), Phoenix Merger Sub, and legacy Proterra Inc, a Delaware corporation prior to the consummation of the business combination, now known as Proterra Operating Company, Inc. and a wholly owned subsidiary of Proterra Inc. KPMG also served as the independent registered public accounting firm of legacy Proterra Inc prior to the Business Combination described above. Marcum LLP (“Marcum”), the Company’s independent registered public accounting firm prior to the business combination, was informed that it would be replaced by KPMG as the Company’s independent registered public accounting firm.
Marcum’s report on the Company’s financial statements as of December 31, 2020 and the related statements of operations, changes in shareholders’ equity and cash flows for the period from July 28, 2020 (inception) through December 31, 2020 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles other than:
Marcum’s Report contained a separate paragraph stating that:
“As discussed in Note 2 to the financial statements, the accompanying financial statements as of December 31, 2020 and for the period from July 28, 2020 (inception) through December 31, 2020 have been restated.”
Marcum’s Report contained an explanatory paragraph stating that:
“The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company’s business plan is dependent on the completion of a business combination and the Company’s working capital as of December 31, 2020 is not sufficient to complete its planned activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.”
During the period from July 28, 2020 (inception) through December 31, 2020 and the subsequent period through June 15, 2021, there were no: (i) disagreements with Marcum on any matter of accounting principles or practices, financial statement disclosures or audited scope or procedures, which disagreements if not resolved to Marcum’s
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[RATIFICATION OF AUDITOR]
satisfaction would have caused Marcum to make reference to the subject matter of the disagreement in connection with its report or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the ”Exchange Act”). Marcum furnished the Company with a letter addressed to the SEC filed as Exhibit 16.1 to the Company's Report on Form 8-K filed on June 17, 2021 ("Super 8-K") stating whether it agrees with above statements made in the Super 8-K.
During the period from July 28, 2020 (inception) to December 31, 2020 and the subsequent period through June 15, 2021, the Company did not consult with KPMG with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and no written report or oral advice was provided to the Company by KPMG that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is described in Item 304(a)(1)(iv) of Regulation S-K under the Exchange Act, and the related instructions to Item 304 of Regulation S-K under the Exchange Act, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act.
Representatives of KPMG LLP are expected to attend the Annual Meeting and to have an opportunity to make a statement and be available to respond to appropriate questions from stockholders.
If the appointment of KPMG LLP is not ratified by our stockholders, the Audit Committee will consider that fact for the current year’s appointment and when it appoints the independent registered public accounting firm for the fiscal year ending December 31, 2024. Even if the appointment of KPMG LLP is ratified, the Audit Committee retains the discretion to appoint a different independent registered public accounting firm at any time during the year if it determines that such a change is in the best interests of our Company.
VOTE REQUIRED
This proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted “FOR” or “AGAINST” this proposal. Abstentions will have no effect on the outcome of the vote on this proposal. Because brokers have discretionary authority to vote on the ratification of the appointment of KPMG LLP, there will be no broker non-votes in connection with this proposal.
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AUDITOR INDEPENDENCE AND
PRE-APPROVAL POLICIES
Under its charter, the Audit Committee pre-approves audit and non-audit services rendered by our independent registered public accounting firm. The Audit Committee has determined that the rendering of certain non-audit services that are reasonably related to the performance of the audit services, audit-related services, tax services, and other services by KPMG LLP is compatible with maintaining their independence.
Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the Company’s independent registered public accounting firm, the scope of services provided by the independent registered public accounting firm and the fees for the services to be performed. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm and the fees for services performed to date.
KPMG did not render non-audit services to the Company for the years ended December 31, 2022 or 2021.
All of the services relating to the fees described in the table below were approved by our Audit Committee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND OTHER MATTERS
The following table summarizes the fees paid to KPMG LLP, our independent registered public accounting firm, for professional services rendered in each of the last two fiscal years.
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Fee Category | 2022 | 2021 |
Audit Fees(1) | $ | 2,685,000 | | $2,135,000 | |
Audit-Related Fees(2) | — | | — | |
Tax Fees(3) | — | | — | |
All Other Fees | — | | — | |
Total Fees | $2,685,000 | $2,135,000 | |
(1)Audit fees consist of fees for the annual audit of our financial statements, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or engagements, and $25,000 in approved expenses.
(2)Audit-related fees consist of other audit and attest services not required by statute or regulation.
(3)Tax fees consist of fees for tax-related services, including tax compliance and tax advice related to transactions.
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AUDIT COMMITTEE REPORT
The Audit Committee's primary purpose is to assist the Board in its oversight responsibilities pertaining to our accounting practices, internal controls over financial reporting, financial reporting processes, and the other matters assigned to it by the Board in the Audit Committee Charter. The Audit Committee is responsible for selecting, compensating, evaluating, and, when appropriate, replacing our independent audit firm.
Management is responsible for establishing and maintaining our internal financial controls, the preparation and presentation of our consolidated financial statements, and ensuring that the consolidated financial statements are complete and accurate and prepared in accordance with generally accepted accounting principles. The Audit Committee relies on the expertise and knowledge of management and the work of our independent audit firm in carrying out its oversight responsibilities. The Audit Committee meets regularly with our independent registered public accounting firm, with and without management present, to review the adequacy of our internal controls and financial reporting practices.
KPMG, LLP, ("KPMG") our independent registered public accounting firm, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those consolidated financial statements with generally accepted accounting principles ("US GAAP") and on management’s assessment of our internal control over financial reporting.
In fulfilling its oversight responsibilities, the Audit Committee has:
•reviewed and discussed with management and KPMG the audited consolidated financial statements for the year ended December 31, 2022 and management’s assessment of and report on the effectiveness of the Company’s internal control over financial reporting;
•discussed with management and KPMG the critical accounting policies and practices applied in our consolidated financial statements, the compliance of our disclosures in our consolidated financial statements with US GAAP, and critical audit matters that arose in the course of the audit;
•received the written disclosures and communications from KPMG required by the Public Company Accounting Oversight Board ("PCAOB") regarding KPMG's communications with the Audit Committee concerning independence, and concluded that KPMG's provision of audit services to the Company is compatible with KPMG’s independence;
•met regularly in executive sessions with each of management and KPMG to discuss the results of the audit procedures performed by KPMG, KPMG's evaluations of internal controls and the overall quality of the Company’s financial reporting, and other matters as appropriate; and
•discussed with KPMG matters that are required to be discussed with the Audit Committee under generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC.
Based on the above-mentioned reviews and discussions, the Audit Committee recommended to the Board that our audited consolidated financial statements be included in our 2022 Annual Report for the year ended December 31, 2022, as filed with the SEC.
THE AUDIT COMMITTEE
Constance E. Skidmore, Chair
Roger M. Nielsen
Michael D. Smith
Jan R. Hauser
The information in the Audit Committee Report shall not be considered “soliciting material” or “filed” with the SEC, nor shall this information be incorporated by reference into any previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we incorporated it by specific reference to the Audit Committee Report..
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BACKGROUND TO PROPOSALS 4 AND 5
We are seeking stockholder approval of (i) the issuance of shares of our Common Stock (or securities convertible into or exercisable for Common Stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes (as defined below) in accordance with applicable rules of the Nasdaq Stock Market (Proposal 4) and (ii) an amendment to our Certificate of Incorporation to increase the Company’s authorized number of shares of our Common Stock from 500,000,000 shares to 1,000,000,000 shares (Proposal 5).
THE CONVERTIBLE NOTES
In August 2020, Proterra Operating Company, Inc. (“Proterra OpCo”), a wholly owned subsidiary of the Company, issued $200.0 million aggregate principal amount of secured convertible promissory notes (as amended through the date hereof, the “Convertible Notes”) pursuant to the Note Purchase Agreement, dated as of August 4, 2020, by and among Proterra OpCo, the investors from time to time party thereto, the guarantors from time to time party thereto and CSI GP I LLC, as collateral agent (as amended through the date hereof, the “Note Purchase Agreement”). The Convertible Notes became convertible into shares of our Common Stock in connection with the consummation of the business combination with ArcLight Clean Transition Corporation in June 2021.
On March 19, 2023, Proterra OpCo entered into a binding letter of intent (the “Binding Letter of Intent”) with CSI I Prodigy Holdco LP, CSI Prodigy Co-Investment LP, CSI GP I LLC and CSI PRTA Co-Investment LP (collectively, the “Cowen Parties”) to amend certain provisions contained in the Note Purchase Agreement and the Convertible Notes. On March 31, 2023, we, Proterra OpCo and the Cowen Parties entered into Amendment No. 2 (“Amendment No. 2”) to Secured Convertible Promissory Notes and Note Purchase Agreement, providing for (i) the amendment of the Note Purchase Agreement, and (ii) the amendment and restatement of the Convertible Notes. The Note Purchase Agreement and the Convertible Notes, each as amended, are described in further detail below..
Additional information concerning Amendment No. 2, the Note Purchase Agreement, and the Convertible Notes is contained in our Current Report on Form 8-K filed with the SEC on April 3, 2023.
INTEREST RATE TERMS
As of April 30, 2023, the outstanding principal balance of the Convertible Notes was of $172.9 million (inclusive of PIK interest of $19.4 million), of which (i) $168.9 million (inclusive of PIK interest) was held by the Cowen Parties and (ii) $3.9 million (inclusive of PIK interest) was held by Generation IM Climate Solutions II, L.P (“Generation”).
The Convertible Notes accrue interest at (i) a cash interest rate of 5.0% per annum, payable quarterly on the last day of each quarter (the “Payment Date”), and (ii) a paid-in-kind interest rate (the “PIK Rate”) of 7.0% per annum, payable by increasing the principal balance of each Convertible Note on the Payment Date. Prior to March 17, 2023, the PIK Rate was 4.5% per annum. During the continuance of an Event of Default, the PIK Rate may be increased to 9% per annum.
MATURITY
The Convertible Notes will mature on August 4, 2028 (other than with respect to the Convertible Note held by Generation, which matures on August 4, 2025). Under the terms of the Convertible Notes, we can not make prepayments in respect of the Convertible Notes unless approved by the required holders of the Convertible Notes.
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BACKGROUND TO PROPOSALS 4 AND 5
PRIORITY
Each of the Convertible Notes ranks equally without preference or priority of any kind over one another, but senior in all rights, privileges, and preferences to all other shares of our capital stock and all other securities that are convertible into or exercisable for our capital stock directly or indirectly. The Convertible Notes are secured substantially by all our assets including intellectual property and other restricted property.
COVENANTS
Subject to certain exceptions, the Convertible Notes also restrict our ability to, among other things: dispose of or sell our assets; make material changes in our business or management, or accounting and reporting practices; acquire, consolidate, or merge with other entities; incur additional indebtedness; create liens on our assets; pay dividends; make investments; enter transactions with affiliates; pre-pay other indebtedness. The Note Purchase Agreement also contains a holding company covenant that limits the Company’s ability to engage in business, operations and activities other than as set forth therein.
In addition, the Note Purchase Agreement requires us to maintain Liquidity (as defined therein) at each quarter end of not less than the greater of (i) $75.0 million and (ii) four times of Cash Burn (as defined therein) for the three-month period then ended (the “Original Minimum Liquidity Covenant”). Amendment No. 2 provides for (i) a waiver of the Original Minimum Liquidity Covenant through May 31, 2024 and compliance with an interim requirement of minimum Liquidity of $125.0 million as of the last day of each quarter from March 31, 2023 through and including May 31, 2024 (such interim minimum Liquidity requirement and the Original Minimum Liquidity Covenant, each a “Minimum Liquidity Covenant”), and (ii) a waiver of the requirement that the Company’s financial statements be certified by the Company’s auditor without qualification (or similar notation) as to going concern for the Company’s consolidated financial statements for fiscal years 2022 and 2023.
In addition, the Note Purchase Agreement contains certain customary non-financial covenants. The Note Purchase Agreement also contains customary events of default, including, among others, the failure to make any payment of principal (or any other payment) when due under the Convertible Notes within five business days of the applicable due date, the breach of the Minimum Liquidity Covenant or any of the negative covenants, and the commencement of an insolvency proceeding. A default under our Convertible Notes would result in a cross-default under our senior credit facility.
CONVERSION TERMS
The Convertible Notes provide for the mandatory conversion only on or after March 31, 2024 if the daily volume weighted average price of our Common Stock equals or exceeds (a) $15.00 after March 31, 2024 to but not including March 31, 2025, or (b) $12.00 after March 31, 2025, in each case, over a period of 20 consecutive trading days and providing that if the mandatory conversion trigger is met, 1/3 of the aggregate principal amount of the Convertible Notes (plus interest accrued thereon) shall convert at $4.00 per share of our Common Stock, 1/3 of the aggregate principal amount of the Convertible Notes (plus interest accrued thereon) shall convert at $5.00 per share of our Common Stock, and 1/3 of the aggregate principal amount of the Convertible Notes (plus interest accrued thereon) shall convert at $6.00 per share of our Common Stock, resulting in the conversion of all principal and interest due.
Under the terms of the Convertible Notes, holders of Convertible Notes shall have the option, at any time on or after March 31, 2024 until maturity of the Convertible Notes, to convert 1/3 of the aggregate principal amount of the Convertible Notes (plus interest accrued thereon) at $4.00 per share of our Common Stock, 1/3 of the aggregate principal amount of the Convertible Notes (plus interest accrued thereon) at $5.00 per share of our Common Stock, and 1/3 of the aggregate principal amount of the Convertible Notes (plus interest accrued thereon) at $6.00 per share of our Common Stock, which conversion right shall be exercisable in whole or in part from time to time; provided, however, that if the Company consummates a bona fide equity financing on or after March 31, 2023, in which the Company or Proterra OpCo sells equity or equity-linked securities in a capital-raising transaction (which may include a public offering of the Company’s equity securities)(a “Qualified Financing”), the holder, at its option, at any time or from time to time on or after March 31, 2024, may convert into shares of the most senior series of the Company's securities sold in the applicable Qualified Financing on substantially the
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BACKGROUND TO PROPOSALS 4 AND 5
same terms as the securities issued or sold to investors in the applicable Qualified Financing ("Conversion Stock") at a conversion price equal to 75% of the lowest per share cash purchase price of our Common Stock or Preferred Stock sold by the Company in any Qualified Financing, subject to a $1.016 floor conversion price. Conversion Stock shall include full pro rata participation in any warrants, rights, or "equity kickers" (and if investors in the Qualified Financing receive different consideration or terms, on terms most favorable to any such investor that are provided to any such investor), excluding any rights related to particular commercial agreements or arrangements with any of the investors in the Qualified Financing (but only to the extent that such rights are on arms-length fair value market terms). References in Proposal 4 to the issuance of shares of our Common Stock upon conversions of the Convertible Notes shall also mean the issuance of Conversion Stock, unless otherwise indicated.
The Convertible Notes provide that no “person” or “group” (within the meaning of Section 13(d) of the Exchange Act) will be entitled to receive any Common Stock otherwise deliverable upon conversion of the Convertible Notes to the extent that such receipt would cause such person or group to become, directly or indirectly, a “beneficial owner” as defined in Rule 13d-3 under the Exchange Act of more than 40% of our Common Stock outstanding at such time (the “Beneficial Ownership Limitation”), and no conversion of the Convertible Notes shall take place to the extent (but only to the extent) that such receipt (or conversion) would cause any Noteholder or its affiliates to beneficially own shares of our Common Stock in excess of the Beneficial Ownership Limitation.
The Convertible Notes also provide for certain limitations on the Noteholders’ conversion rights, including a cap on the number of shares of our Common Stock deliverable upon conversion subject to obtaining stockholder approval, as described below. We have agreed to use our best efforts to obtain stockholder approval of (i) the issuance of more than 19.99% of our outstanding Common Stock in accordance with Nasdaq listing standards (Proposal 4) and (ii) an amendment to our certification of incorporation to increase the number of authorized shares of our Common Stock (Proposal 5).
OUR PROPOSALS
We are seeking stockholder approval of (i) the issuance of shares of our Common Stock (or securities convertible into or exercisable for Common Stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes in accordance with applicable rules of the Nasdaq Stock Market (Proposal 4) and (ii) an amendment to our Certificate of Incorporation to increase the Company’s authorized number of shares of our Common Stock from 500,000,000 shares to 1,000,,000,000 shares (Proposal 5).
If we do not receive stockholder approval for Proposal 4, the maximum number of shares of Common Stock that may be issued upon conversions of the Convertible Notes will be 45,257,360 (the “Nasdaq Cap”). If we receive stockholder approval of Proposal 4 and do not receive stockholder approval of Proposal 5, the Nasdaq Cap will no longer apply and the maximum number of shares of Common Stock that may be issued upon conversions of the Convertible Notes will be 177,782,000 (the “Authorized Share Cap”). If we receive stockholder approvals of both Proposal 4 and Proposal 5, the number of shares of our Common Stock that may be issued upon conversion of the Convertible Notes will be limited by our available authorized shares of Common Stock and the Beneficial Ownership Limitation described above. If we receive stockholder approval of Proposal 5 and do not receive stockholder approval of Proposal 4, the Nasdaq Cap will still apply.
Under the terms of the Convertible Notes, we are obligated to use best efforts to seek the above stockholder approvals as promptly as practicable and no later than the Annual Meeting; provided that if such stockholder approvals are not received at the Annual Meeting, we are obligated to call a special meeting of stockholders every six months until such stockholder approvals are received. Until such time that we receive such stockholder approvals, if at all, if a proposed conversion of the Convertible Notes cannot be completed in full due to the Nasdaq Cap or Authorized Share Cap, as applicable, the Noteholders shall have the right to elect either (x) to rescind the conversion with respect to (and only with respect to) the portion of the Balance (as defined below) of the Convertible Note that relates to the number of shares of our Common Stock exceeding the Nasdaq Cap or Authorized Share Cap (the “Excess Shares”) or (y) for us to pay in cash to such Noteholder an amount equal to the product of (A) the number of Excess Shares, multiplied by (B) the simple average of the daily volume weighted average price of our Common Stock for the 20 consecutive trading days ending on and including the trading day immediately preceding the applicable conversion date. “Balance” means, at the applicable time, the
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BACKGROUND TO PROPOSALS 4 AND 5
sum of all then outstanding principal of a Convertible Note, all then accrued but unpaid interest and all other amounts then accrued but unpaid under such Convertible Note.
Our Common Stock is listed on the Nasdaq Capital Market and, as such, we are subject to the Nasdaq Listing Rules. As noted above, the Convertible Notes contain restrictions on the conversion of the Convertible Notes and issuance of shares of Common Stock to Noteholders upon conversion. In addition, under the terms of the Convertible Notes, we are obligated to use best efforts to seek stockholder approval for the issuance of shares of our Common Stock (or securities convertible into or exercisable for Common Stock) in settlement of the potential future conversion in full of the Convertible Notes in accordance with the applicable rules of the Nasdaq Stock Market as promptly as practicable and no later than the Annual Meeting; provided that if stockholder approval is not received at the Annual Meeting, we must receive such stockholder approval as promptly as practicable by calling a special meeting of stockholders every six months thereafter until such stockholder approval is received. We are requesting stockholder approval for Proposals No. 4 and No. 5 to enable us to issue shares of Common Stock in connection with the potential future conversion in full of the Convertible Notes.
IMPORTANCE OF PROPOSALS 4 AND 5 TO OUR BUSINESS
As previously disclosed, based on our available cash resources, we determined that we may not have sufficient cash on hand to support our future financial obligations within the next 12 months from the date of filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2023. We have incurred net losses since inception, and we expect to incur net losses for the foreseeable future. We have historically funded operations primarily through a combination of equity and debt financing. We expect to make significant expenditures related to the development and expansion of our business, including: making investments to support our business growth, including new capital investments and continuing investments in our battery technology and high voltage systems; hiring and retaining qualified employees; adding additional production lines or production shifts in our manufacturing facilities; building new manufacturing facilities; expanding our software offerings; expanding our business into new markets and geographies; research and development in new product and service categories; and in connection with legal, accounting, and other administrative expenses related to operating as a public company. We will require additional funds to respond to business challenges, including the need to improve our operating infrastructure or acquire complementary businesses and technologies.
We are currently executing on various strategies designed to improve liquidity and cash generated from operations. While we are undertaking expense reduction and cash savings initiatives that include streamlining facilities, initiating working capital initiatives, and reducing overall selling, general and administrative expenses that include a workforce reduction announced in January 2023, and our planned closure of our City of Industry facility by December 31, 2023, to improve operational efficiency, we will require additional funds to finance our future operations. We are exploring potential options for raising additional funds through potential alternatives, which may include the issuance of equity, equity-linked, and/or debt securities, debt financings or other capital sources and/or strategic transactions. However, we have not yet secured additional financing and may not be successful in securing additional financing or executing any transaction on a timely basis, on acceptable terms or at all.
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PROPOSAL 4:
APPROVAL OF THE ISSUANCE OF SHARES OF OUR COMMON STOCK (OR SECURITIES CONVERTIBLE INTO OR EXERCISABLE FOR COMMON STOCK), IN SETTLEMENT OF THE CONVERSION IN FULL OF THE AGGREGATE PRINCIPAL AMOUNT OF, PLUS ACCRUED AND UNPAID INTEREST ON, OUR CONVERTIBLE NOTES IN ACCORDANCE WITH THE APPLICABLE RULES OF THE NASDAQ STOCK MARKET
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| The Board unanimously recommends a vote FOR the issuance by us of shares of our Common Stock (or the securities convertible into or exercisable for common stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes, in accordance with applicable rules of the Nasdaq Stock Market. |
We seek your vote for this proposal in accordance with applicable rules of the Nasdaq Stock Market, to approve the issuance by us of shares of our Common Stock (or securities convertible into or exercisable for common stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes. Please refer to the Background for Proposals 4 and 5 above for a description of the Convertible Notes and background information relating to this Proposal 4.
WHY WE ARE SEEKING STOCKHOLDER APPROVAL
Under Nasdaq Listing Rule 5635(d), stockholder approval is required prior to the issuance of securities in connection with a transaction (or a series of related transactions) other than a public offering involving the sale, issuance or potential issuance of a company’s common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the shares of common stock or 20% or more of the voting power outstanding before the issuance at a price that is less than the lower of (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement (the “Minimum Price”). On March 17, 2023, the last closing date of our Common Stock immediately preceding the signing of the Binding Letter of Intent on March 19, 2023, the closing price of our Common Stock was $1.27 and the average closing price of our Common Stock for the five trading days immediately preceding March 19, 2023 was $2.07. Although the initial conversion prices of $4.00, $5.00 and $6.00 set forth in the Convertible Notes exceed the Minimum Price, upon the occurrence of certain triggering events, the conversion price of the Convertible Notes may be lowered as low as the $1.016 floor price, which could result in the issuance of our Common Stock equal to 20% or more of the outstanding shares of our Common Stock at less than the Minimum Price.
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PROPOSAL 4
Under Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of a company. This rule does not specifically define when a change in control of a company may be deemed to occur for this purpose; however, Nasdaq suggests in its guidance that a change of control would occur, subject to certain limited exceptions, if after a transaction an investor (or a group of investors) would hold 20% or more of a company’s then-outstanding capital stock and such ownership or voting power would be the Company’s largest ownership position. The maximum potential issuance of shares of common stock upon conversion of the Convertible Notes may result in a holder (or a group of holders) holding 20% or more of our then outstanding capital stock and such ownership or voting power could be the Company’s largest ownership position. Accordingly, we are also seeking stockholder approval pursuant to Nasdaq Listing Rule 5635(b). Stockholders should note that a "change of control" as described under Rule 5635(b) applies only with respect to the application of such rule, and does not necessarily constitute a "change of control" for purposes of Delaware law or our organizational documents.
Stockholder approval of this Proposal 4 will constitute stockholder approval for purposes of Nasdaq Listing Rules 5635(d) and 5635(b). Our Board has determined that the Convertible Notes and our ability to issue shares of our Common Stock (or securities convertible into or exercisable for Common Stock) thereunder in settlement of conversion of the Convertible Notes in excess of the Nasdaq Cap are in the best interests of the Company and its stockholders because it would increase our ability to issue shares of our Common Stock upon conversions of Convertible Notes and reduce the potential election by Noteholders for us to make cash payments to them for any Excess Shares, which will allow us to conserve cash. Therefore, we are seeking stockholder approval under this Proposal 4. The failure of our stockholders to approve this Proposal 4 will prevent us from issuing shares of our Common Stock to the Noteholders in excess of the Nasdaq Cap, and Noteholders could elect to receive a cash payment for Excess Shares as described above in “Background to Proposals 4 and 5.”
In addition, under the terms of the Convertible Notes, we are obligated to use best efforts to seek stockholder approval for the issuance of our Common Stock in accordance with Nasdaq listing standards as promptly as practicable and no later than the Annual Meeting; provided that if stockholder approval is not received at the Annual Meeting, we must receive such stockholder approval as promptly as practicable by calling a special meeting of stockholders every six months thereafter until such stockholder approval is received.
EFFECT ON CURRENT STOCKHOLDERS
If we do not receive stockholder approval for this Proposal 4, the maximum number of shares of Common Stock that may be issued upon conversions of the Convertible Notes will be the Nasdaq Cap. If we receive stockholder approval of this Proposal 4 and do not receive stockholder approval of Proposal 5, the Nasdaq Cap will no longer apply and the maximum number of shares of Common Stock that may be issued upon conversions of the Convertible Notes will be the Authorized Share Cap. If we receive stockholder approvals of both Proposal 4 and Proposal 5, the number of shares of our Common Stock that may be issued upon conversion of the Convertible Notes will be limited by our available authorized shares of Common Stock and the Beneficial Ownership Limitation. If we receive stockholder approval of Proposal 5 and do not receive stockholder approval of this Proposal 4, the Nasdaq Cap will still apply. For a description of the Nasdaq Cap, the Authorized Share Cap and the Beneficial Ownership Limitation, see “Background to Proposals 4 and 5 ” above.
Any issuance of shares would dilute, and thereby reduce, each existing stockholder’s proportionate ownership in our Common Stock. Any sales in the public market of the Common Stock issuable upon such conversion could also adversely affect prevailing market prices of our Common Stock. Because the number of shares of our Common Stock that may be issued to the Noteholders pursuant to the Convertible Notes is determined based on the price of our Common Stock, provided, however, that conversions may occur at any time or from time to time on or after March 31, 2024 at a conversion price equal to 75% of the lowest per share cash purchase price of our Common Stock or Preferred Stock sold by the Company in any Qualified Financing from March 31, 2023 to the date of conversion subject to a $1.016 floor conversion price, the exact magnitude of the dilutive effect cannot be conclusively determined at this time. However, the dilutive effect may be material to our existing stockholders. Pursuant to the terms of the Convertible Notes, we will be obligated to reserve such number of shares of our Common Stock that shall be sufficient to effect the conversion of the Convertible Notes. We cannot predict the price of our Common Stock at any future date, and therefore cannot predict the number of shares of our Common Stock to be issued under the Convertible Notes. In addition, if this Proposal 4 and Proposal 5 are approved, the number of shares of our Common Stock that may be issuable to Noteholders upon conversion of the Convertible Notes may represent a relatively high percentage of our outstanding shares of common stock, up
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PROPOSAL 4
to the Beneficial Ownership Limitation (40% of our then outstanding shares of Common Stock.) In this regard, it should be noted that the Cowen Parties held substantially all of the $172.9 million in aggregate principal (including PIK interest) of the Convertible Notes as of April 30, 2023. If any stockholder (and its affiliates) of our Common Stock beneficially owns a relatively high percentage of our Common Stock, it would be able to exercise a significant level of influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.
While we believe that having the ability to settle conversions of the Convertible Notes in shares of our Common Stock offers benefits to us and our stockholders, including conservation of cash, any conversions of the Convertible Notes in shares of our Common Stock may cause substantial dilution to the equity interest of our stockholders at the time of any such issuance and would decrease our ability to utilize shares of our Common Stock in connection with other transactions.
For illustrative purposes only, the table below shows the number of shares of our Common Stock that would be issuable upon conversion of the Convertible Notes at the applicable hypothetical conversion prices (including the conversion floor price of $1.016). These illustrations assume the conversion in full on August 4, 2028 of the outstanding aggregate principal amount of $246M (inclusive of PIK and unpaid interest of $2.8M) for the Cowen Parties, and conversion in full as of August 4, 2025 of the outstanding aggregate principal amount of $4.7M (inclusive of PIK and unpaid interest of $53K) for Generation, and assume that our Common Stock (not Conversion Stock as defined above) is issued upon settlement of the Convertible Notes.
| | | | | |
Assumed Conversion Price | Common Stock Issuable Upon Conversion of Convertible Notes |
$6.00 | 13,928,960 |
$5.00 | 16,714,752 |
$4.00 | 20,893,440 |
$1.016 | 246,772,909 |
Stockholders should note that the above illustrations do not consider the application of the Beneficial Ownership Limitation (40% of our then outstanding shares of Common Stock). See the Background on Proposals 4 and 5 above for an explanation of the Beneficial Ownership Limitation.
CONSEQUENCES OF FAILURE TO OBTAIN STOCKHOLDER APPROVAL
The failure of our stockholders to approve this Proposal 4 will impair our ability to issue shares of our Common Stock upon conversion of the Convertible Notes, and Noteholders could elect to receive a cash payment for any Excess Shares upon conversion of the Convertible Notes as described above. Based on the stock price of the Company's Common Stock as of May 10, 2023, the holders of Convertible Notes could potentially have the right to elect cash payment of any Excess Shares upon conversion of the Convertible Notes as early as March 31, 2024 if the Company were to complete a Qualified Financing. The obligation to pay cash for Excess Shares upon conversion of the Convertible Notes would impair our ability to conserve cash, impair our ability to maintain compliance with the covenants under the Convertible Notes and our senior credit facility, impair our working capital and our ability to fund capital expenditures, operating expenses and the pursuit of business development opportunities, including continued product or technology investment, impair our ability to seek additional funds through potential securities financings, debt financings or other capital sources or strategic transactions and impair our ability to operate our equity compensation plans. In addition, we may not have the resources to satisfy the cash settlement of any Excess Shares of Convertible Notes upon conversions, or our satisfaction of such cash settlements may materially impair our working capital. The inability to discharge our indebtedness may also materially adversely affect our ability to raise capital from third parties on attractive terms, if at all. All of the foregoing could severely harm our business and our prospects.
If this Proposal 4 is not approved by our stockholders at the Annual Meeting, under the terms of the Convertible Notes, we are obligated to use best efforts to seek stockholder approval as promptly as practicable by calling a special meeting of stockholders every six months thereafter until such approval is received.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PROPOSAL 4
VOTE REQUIRED
The affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on the proposal that are present in person or represented by proxy at the meeting and are voted “For” or “Against” the proposal is required to approve this proposal. Broker non-votes and abstentions will have no effect.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PROPOSAL 5:
AMENDMENT OF OUR CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
| | | | | | | | |
| The Board unanimously recommends a vote FOR the amendment of our Certificate of Incorporation to increase the authorized number of shares of Common Stock from 500,000,000 to 1,000,000,000 |
Our Board believes that it is advisable and in the Company’s and our stockholders' best interests to amend our Certificate of Incorporation, as amended, to increase the total number of authorized shares of our Common Stock from 500,000,000 shares to 1,000,000,000 shares. Our Board has adopted resolutions approving the proposed certificate of amendment (the “Certificate of Amendment”) to our Certificate of Incorporation, in substantially the form attached as Appendix A hereto, declaring such amendment advisable and in the best interests of the Company and its stockholders and recommending such amendment to the stockholders for adoption thereby. Accordingly, we are seeking approval of this Proposal 5 by our stockholders.
If stockholders approve this Proposal 5, we expect to file the Certificate of Amendment with the Secretary of State of the State of Delaware to increase the number of authorized shares of our Common Stock as soon as practicable following stockholder approval. In this regard, upon filing and effectiveness of the Certificate of Amendment with the Secretary of State of the State of Delaware, Article IV of the Certificate of Incorporation would be amended as stated on Appendix A on page 88 of this proxy statement.
We are proposing to increase the number of shares of Common Stock that we are authorized to issue from 500,000,000 shares of Common Stock to 1,000,000,000 shares of Common Stock, representing an increase of 500,000,000 shares of authorized Common Stock, with a corresponding increase in the total authorized capital stock, which includes Common Stock and Preferred Stock (none of which are currently outstanding), from 510,000,000 shares to 1,010,000,000 shares. We are not proposing to increase the number of authorized shares of Preferred Stock.
The additional shares of Common Stock to be authorized by adoption of the proposed Certificate of Amendment would have terms identical to those of currently outstanding shares of Common Stock. Adoption of the proposed Certificate of Amendment and issuance of our Common Stock would not affect the rights of the holders of currently outstanding Common Stock, except for effects incidental to increasing the number of shares of our Common Stock outstanding, such as dilution of the earnings per share and voting powers of current holders of our Common Stock. If the proposed Certificate of Amendment is adopted, it will become effective upon the effective date of the Certificate of Amendment as filed with the Secretary of State of the State of Delaware.
As of May 9, 2023, there are 226,891,552 shares of our Common Stock outstanding, and our Board has reserved an aggregate of (i) 16,316,165 shares of our Common Stock for future issuance under the Proterra Inc 2010 Equity Incentive Plan, (ii) 29,226,875 shares of our Common Stock for future issuance under the Proterra Inc 2021 Equity Incentive Plan;
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PROPOSAL 5
(iii) 5,462,756 shares of our Common Stock for future issuance under the Proterra Inc 2021 Employee Stock Purchase Plan, (iv) 45,257,360 shares of our Common Stock for issuance upon conversion of our outstanding Convertible Notes, (v) 892 shares of our Common Stock for issuance upon exercise of outstanding warrants; and (vi) 18,008,937 shares of our Common Stock for issuance of Earnout Stock (see page 90 of this proxy statement under the Certain Relationships and Related Party Transactions heading for a description of Earnout Stock). As of May 9, 2023, there were 158,835,463 shares of Common Stock unreserved and remaining available for issuance. In addition, we are seeking stockholder approval under Proposal 4 to increase the number of shares of Common Stock we may issue upon conversion of our outstanding Convertible Notes, which would increase the number of shares of Common Stock required to be reserved for the Convertible Notes. Accordingly, we currently do not have sufficient available unissued and unreserved authorized shares of our Common Stock to meet the anticipated needs of our business described below.
WHY WE ARE SEEKING STOCKHOLDER APPROVAL AND EFFECT ON CURRENT STOCKHOLDERS
Our Board has determined that an amendment to our Certification of Incorporation to increase the number of authorized shares of our Common Stock is in the best interests of the Company and its stockholders because it would increase our ability to issue shares of our Common Stock to the Noteholders upon conversion of the Convertible Notes and reduce the potential election by Noteholders for us to make cash payments for any Excess Shares upon conversion of the Convertible Notes, which will allow us to conserve cash. In addition, our Board believes it is appropriate to increase our authorized shares of our Common Stock so that we have shares of our Common Stock available to provide additional flexibility to promptly and appropriately use for other business and financial purposes.
As previously disclosed, based on our available cash resources, we determined that we may not have sufficient cash on hand to support our future financial obligations within the next 12 months from the date of filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2023. We have incurred net losses and negative cash flows from operations since inception, and we expect to incur net losses for the foreseeable future. We have historically funded operations primarily through a combination of equity and debt financing. We expect to make significant expenditures related to the development and expansion of our business, including: new capital investments and continuing investments in our battery technology and high voltage systems; hiring and retaining qualified employees, including through continued operation of our equity plans; adding additional production lines or production shifts in our manufacturing facilities; building new manufacturing facilities; expanding our software offerings; expanding our business into new markets and geographies; research and development in new product and service categories; and in connection with legal, accounting, and other administrative expenses related to operating as a public company. We will require additional funds to respond to business challenges, including the need to improve our operating infrastructure or acquire complementary businesses and technologies. In addition, we need to service our indebtedness and to comply with the requirements of the terms governing the Convertible Notes.
We are currently executing on various strategies designed to improve liquidity and cash generated from operations. While we are undertaking expense reduction and cash savings initiatives that include streamlining facilities, initiating working capital initiatives, and reducing overall selling, general and administrative expenses that include a workforce reduction announced in January 2023, and our planned closure of our City of Industry facility by December 31, 2023, to improve operational efficiency, we will require additional funds to finance our future operations. We are exploring potential options for raising additional funds through potential alternatives, which may include the issuance of equity, equity-linked, and/or debt securities, debt financings or other capital sources and/or strategic transactions. However, we have not yet secured additional financing and may not be successful in securing additional financing or executing any transaction on a timely basis, on acceptable terms or at all.
In addition, as described above, under the Convertible Notes, we are obligated to use best efforts to seek stockholder approval for an amendment to our Certification of Incorporation to increase the number of authorized shares of our Common Stock as promptly as practicable and no later than the Annual Meeting; provided that if stockholder approval is not received at the Annual Meeting, we must receive such stockholder approval as promptly as practicable by calling a special meeting of stockholders every six months thereafter until such stockholder approval is received.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PROPOSAL 5
Accordingly, we are seeking stockholder approval under Proposal 5.
Proposal 5 is fundamental to our business and capital management because we need to maintain a greater reserve of authorized but unissued shares of our Common Stock in order to (i) satisfy the number of shares of our Common Stock that may be issuable upon conversion of the Convertible Notes; (ii) seek additional funds through potential securities financings, debt financings or other capital sources or strategic transactions, which will affect our working capital and our ability to fund capital expenditures, operating expenses, the pursuit of business development opportunities and our ability to satisfy our obligations under our Convertible Notes and senior credit facility, (iii) operate our equity compensation plans and (iv) for general corporate purposes. The additional shares of our Common Stock may be used for such various purposes without further stockholder approval. Although this Proposal 5 has been prompted by business and financial considerations and not by the threat of any hostile takeover attempt (nor is our Board currently aware of any such attempts directed at us), stockholders should be aware that approval of this Proposal 5 could facilitate future efforts by us to deter or prevent changes in control, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices.
While we believe that having the ability to issue additional shares of our Common Stock, including in connection with potential conversions of the Convertible Notes or in connection with a potential financing to raise additional funds offers benefits to us and our stockholders, including conservation of cash and flexibility to raise additional funds or enter into transactions, the issuance of shares of our Common Stock upon conversion of the Convertible Notes or in any future financing or other transaction may cause substantial dilution to the equity interest of our stockholders at the time of any such issuance. Any sales in the public market of the Common Stock issuable upon such conversion of the Convertible Notes or other financing or transaction could also adversely affect prevailing market prices of our Common Stock.
CONSEQUENCES OF FAILURE TO OBTAIN STOCKHOLDER APPROVAL
If we do not receive stockholder approval for Proposal 4 and this Proposal 5, the maximum number of shares of Common Stock that may be issued upon conversions of the Convertible Notes will be the Nasdaq Cap. If we receive stockholder approval of Proposal 4 and do not receive stockholder approval of this Proposal 5, the maximum number of shares of Common Stock that may be issued upon conversions of the Convertible Notes will be the Authorized Share Cap. If we receive stockholder approval of both Proposal 4 and this Proposal 5, the Authorized Share Cap will no longer apply and the number of shares of our Common Stock that may be issued upon conversion of the Convertible Notes will be limited by our available authorized shares of Common Stock and the Beneficial Ownership Limitation.
The failure of our stockholders to approve this Proposal 5 will (i) impair our ability to issue shares of our Common Stock to Noteholders, and Noteholders could elect to receive cash payments for any Excess Shares as described above, and will (ii) prevent us from issuing shares of our Common Stock in general beyond the number of existing authorized shares of our Common Stock, each of which will impair our ability to conserve cash, impair our ability to maintain compliance with the covenants under the Convertible Notes and our senior credit facility, impair our working capital and our ability to fund capital expenditures, operating expenses and the pursuit of business development opportunities, including continued product or technology investment, impair our ability to seek additional funds through potential securities financings, debt financings or other capital sources or strategic transactions and impair our ability to operate our equity compensation plans. In addition, we may not have the resources to satisfy the cash settlement of any Excess Shares under the Convertible Notes upon conversions, or our satisfaction of such cash settlements may materially impair our working capital. The inability to discharge our indebtedness may also materially adversely affect our ability to raise capital from third parties on attractive terms, if at all. All of the foregoing could severely harm our business and our prospects.
In addition, if Proposal 4 is not approved by our stockholders at the Annual Meeting, under the terms of the Convertible Notes, we are obligated to use best efforts to seek stockholder approval as promptly as practicable by calling a special meeting of stockholders every six months thereafter until such approval is received.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
PROPOSAL 5
VOTE REQUIRED
This proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of our Common Stock. Abstentions and broker non-votes will have the effect of a vote “Against” this proposal.
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
APPENDIX A: PROPOSED CERTIFICATE OF AMENDMENT
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF PROTERRA INC
Proterra Inc (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that:
FIRST: The name of this corporation is Proterra Inc, and the date on which the Certificate of Incorporation of this corporation (as amended, the "Certificate of Incorporation") was originally filed with the Secretary of State of the State of Delaware was June 11, 2021, under the original name ArcLight Clean Transition Corp., which was amended on June 14, 2021
SECOND: Article IV, Paragraph 1 of the Certificate of Incorporation is amended and restated to as follows:
“1. Total Authorized. The total number of shares of all classes of stock that the Corporation has authority to issue is 1,010,000,000 shares, consisting of two classes: 1,000,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and 10,000,000 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).”
THIRD: The foregoing amendment to the Certificate of Incorporation was duly approved by the Board of Directors of the Corporation.
FOURTH: Thereafter, pursuant to a resolution of the Board of Directors of the Corporation, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and was duly adopted and approved in accordance with the provisions of Section 242 of the DGCL.
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IN WITNESS WHEREOF, Proterra Inc has caused this Certificate of Amendment to be executed by its President and Chief Executive Officer as of [•], 2023.
By:
Name: Gareth Joyce
Title: President and Chief Executive Officer
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
OTHER MATTERS
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers, and any persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the forms filed with the SEC and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in the fiscal year ended December 31, 2022.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2022 to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than transactions that are described under the section “Executive and Director Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with each of our respective directors and executive officers, and certain other employees of the Company. The indemnification agreements and our Restated Bylaws adopted June 11, 2021, require us to indemnify our directors and officers to the fullest extent not prohibited by Delaware General Corporation Law. Subject to very limited exceptions, our Restated Bylaws also require us to advance expenses incurred by our directors and officers.
ARCLIGHT AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
On June 14, 2021, we consummated the business combination transactions described in our Form 8-K filed with the Securities and Exchange Commission on June 17, 2021, by and among the special purpose acquisition company, ArcLight Clean Transition Corp. (now known as Proterra Inc), Phoenix Merger Sub, and legacy Proterra Inc, a Delaware corporation prior to the consummation of the business combination, now known as Proterra Operating Company, Inc. and a wholly owned subsidiary of Proterra Inc.
Before the business combination transactions, ArcLight Clean Transition Corp had entered into a registration and shareholder rights agreement pursuant to which its initial shareholders and their permitted transferees, if any, were entitled to certain registration rights with respect to certain private placement warrants, securities issuable upon conversion of working capital loans (if any) and ArcLight Class A ordinary shares issuable upon exercise of the foregoing and upon conversion of founder shares. At the closing of the business combination, the Company, ArcLight CTC Holdings, L.P. (the sponsor of ArcLight Clean Transition Corp.) and certain other holders of common stock entered into the Amended and Restated Registration Rights Agreement, which superseded the registration and shareholder rights agreement, and pursuant to which, among other things, the ArcLight CTC Holdings, L.P. and such holders were granted certain customary registration rights, demand rights and piggyback rights with respect to their respective shares of the Company's common stock.
In particular, the Amended and Restated Registration Rights Agreement provides for the following registration rights:
•Demand registration rights. At any time after June 14, 2021, the Company will be required, upon the written request of (i) the Sponsor and certain other holders who previously held Class B ordinary shares of ArcLight (the “Sponsor Holders”) and (ii) the other parties thereto who hold common stock (the “New Holders”), to file a
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
OTHER MATTERS
registration statement and use reasonable best efforts to effect the registration of all or part of their registrable securities. The Company is not obligated to effect any demand registration during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Company-initiated registration.
•Shelf registration rights. Within sixty (60) calendar days after June 14, 2021, the Company was required to file a shelf registration statement pursuant to Rule 415 of the Securities Act and use reasonable best efforts to cause such registration statement to be declared effective as promptly as reasonably practicable after the initial filing thereof, but in no event later than one hundred and twenty (120) days after June 14, 2021; provided, that the such deadline shall be extended to one hundred and eighty (180) days after June 14, 2021 if the registration statement was reviewed by, and received comments from, the SEC. At any time the Company has an effective shelf registration statement with respect to Sponsor Holders’ or New Holders’ registrable securities, a holder may make a written request to effect a public offering, including pursuant to an underwritten shelf takedown, provided that such holder (a) reasonably expects the aggregate gross proceeds in excess of $35,000,000 from such underwritten shelf takedown or (b) reasonably expects to sell all of the registrable securities held by such holder in such underwritten shelf takedown but in no event less than $10,000,000 in aggregate gross proceeds (the “Shelf Threshold”).
•Piggyback registration rights. At any time after June 14, 2021, if the Company proposes to file a registration statement to register any of its equity securities under the Securities Act or to conduct a public offering, either for its own account or for the account of any other person, subject to certain exceptions, the Sponsor Holders, the New Holders, and certain other holders of piggyback registration rights are entitled to include their registrable securities in such registration statement.
•Expenses and indemnification. All fees, costs and expenses of underwritten registrations will be borne by the Company and underwriting discounts and selling commissions will be borne by the holders of the shares being registered. The Amended and Restated Registration Rights Agreement contains customary cross-indemnification provisions, under which the Company is obligated to indemnify holders of registrable securities in the event of material misstatements or omissions in the registration statement attributable to the Company, and holders of registrable securities are obligated to indemnify the Company for material misstatements or omissions attributable to them.
•Registrable securities. Securities of the Company shall cease to be registrable securities when a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, such securities shall have been transferred pursuant to Rule 144 or, with respect to a holder, when all such securities held by such holder could be sold without restriction on volume or manner of sale in any three-month period without registration under Rule 144 or such securities shall have ceased to be outstanding.
Earnout Stock
On June 14, 2021, we consummated the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement"), dated January 11, 2021, by and among our Company (formerly known as ArcLight Clean Transition Corp., a Cayman Islands exempted company ("ArcLight"), Legacy Proterra, and Phoenix Merger Sub, Inc., a Delaware corporation.
In connection with the Business Combination, the Merger Agreement provided that certain individuals, including some of our named executive officers and directors, who held vested Legacy Proterra stock options immediately prior to the closing of the Business Combination would receive shares of our common stock if and when certain price points were met in the future. These shares are referred to as Earnout Stock (as defined below). The period during which the issuance of Earnout Stock may occur lasts five years beginning on the date of the closing of the Business Combination (the "Earnout Period").
Specifically, the earnout provisions of the Merger Agreement provide that certain holders of Legacy Proterra common stock immediately prior to June 14, 2021, including these named executive officers and directors, are entitled to additional consideration of up to an aggregate of 22,809,500 shares of our common stock (the “Earnout Stock”), on a pro rata basis together with certain other holders, upon the occurrence of any of the following events during the Earnout Period:
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OTHER MATTERS
(i) 21.0526% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the volume-weighted average price of our common stock is greater than or equal to $15.00 per share or there occurs any transaction resulting in a change in control with a valuation of our common stock that is greater than or equal to $15.00 per share;
(ii) an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the volume-weighted average price of our common stock is greater than or equal to $20.00 per share or there occurs any transaction resulting in a change in control with a valuation of our common stock that is greater than or equal to $20.00 per share;
(iii) an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the volume-weighted average price of our common stock is greater than or equal to $25.00 per share or there occurs any transaction resulting in a change in control with a valuation of our common stock that is greater than or equal to $25.00 per share; and
(iv) an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the volume-weighted average price of our common stock is greater than or equal to $30.00 per share or there occurs any transaction resulting in a change in control with a valuation of our common stock that is greater than or equal to $30.00 per share.
The first Earnout Stock milestone point of $15.00 per share was met on July 20, 2021, and certain of our named executive officers and directors received Earnout Stock on July 21, 2021. Those same individuals will receive additional Earnout Stock if and when any one of the other Earnout Stock milestones is met. Under applicable SEC rules, shares of Earnout Stock received by the prior holders of vested options held by these individuals represent compensation to our named executive officers and directors for income tax purposes.
POLICIES AND PROCEDURES FOR RELATED-PERSON TRANSACTIONS
Our Board has adopted a written related-party transactions policy that conforms with the requirements for issuers having securities listed on the Nasdaq stock exchange. Under the policy, our audit committee will serve as the approval authority for related party transactions, provided that, if the related party is, or is associated with, a member of the audit committee, our Nominating and ESG committee will serve as the approval authority for such transaction. Our legal department will compile and maintain a master list of related parties, disseminate the master list to function and department leaders, the Chief Financial Officer and individuals responsible for accounts payable and accounts receivable, and contracting personnel in the legal department. Any transaction that we intend to undertake with a related party will be submitted to the compliance officer for determination of what approvals are required under the related party transactions policy, and the compliance officer will refer to the approval authority any related party transaction he or she determines should be considered for evaluation by the approval authority consistent with the policy. If the compliance officer becomes aware of a transaction with a related party that has not been previously approved or previously ratified under the policy that required such approval, the transaction will be submitted promptly to the approval authority for review.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our common stock, as of April 24, 2023 by:
•each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting
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OTHER MATTERS
power or investment power. Applicable percentage ownership is based on 226,852,590 shares of common stock outstanding as of April 24, 2023. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of April 24 2023 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless noted otherwise, the address of all listed stockholders is c/o Proterra Inc, 1815 Rollins Road, Burlingame, CA 94010. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise in the footnotes below, subject to community property laws where applicable.
| | | | | | | | | | | |
Name of Beneficial Owner | Shares Beneficially Owned |
Number of Shares of Common Stock Beneficially Owned | Percentage Ownership of Outstanding Common Stock |
5% or Greater Stockholders | | | |
Tao Pro LLC(1) | 11,517,917 | | 5.1 | % |
BlackRock, Inc.(2) | 15,159,893 | | 6.7 | % |
KPCB Green Growth Fund, LLC(3) | 15,563,577 | | 6.9 | % |
The Vanguard Group(4) | 18,794,569 | | 8.3 | % |
Franklin Resources, Inc.(5) | 30,690,894 | | 13.5 | % |
Named Executive Officers and Directors | | | |
Gareth T. Joyce(6) | 627,077 | | * | |
Karina F. Padilla(7) | 38,938 | | * | |
Christopher L. Bailey(8) | 84,004 | | * | |
Julian R. Soell(9) | 66,441 | | * | |
JoAnn C. Covington(10) | 780,668 | | * | |
John J. Allen(11) | 4,351,801 | | 1.9 | % |
Mary Louise Krakauer(12) | 18,215 | | * | |
Roger M. Nielsen(13) | 15,899 | | * | |
Brook F. Porter(14) | 2,865,773 | | 1.3 | % |
Jeannine P. Sargent(15) | 285,118 | | * | |
Constance E. Skidmore(16) | 284,765 | | * | |
Michael D. Smith(17) | 276,480 | | * | |
Jan R. Hauser(18) | 20,390 | | * | |
All current executive officers and directors as a group (12 persons)(19) | 8,934,901 | | 3.8 | | % |
*less than 1%
(1)As reported in the Schedule 13G filed with the SEC on February 10, 2023, Tao Pro LLC is the record holder of the securities reported herein for Tao Pro LLC. Isaac E. Pritzker, Lori D. Mills and James Schwaba are the managers of Tao Pro LLC and hold shared voting power of securities held by Tao Pro LLC. The address for each holder is 1 Letterman Drive, Suite C4–420, San Francisco, CA 94129.
(2)As reported in the Schedule 13G filed with the SEC on February 2, 2023, BlackRock Inc. is the beneficial owner of 15,159,893 shares of which BlackRock, Inc. has sole voting power over 14,827,289 shares and sole dispositive power over 15,159,893 shares. The address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. The foregoing information is based solely on the Schedule 13G filed on February 2, 2023, which we have no reason to believe is inaccurate.
(3)As reported in the Schedule 13G filed by KPCB Green Growth Fund, LLC ("KPCB GGF"), a Delaware limited liability company, and KPCB GGF Associates, LLC ("Associates"), a Delaware limited liability company, on February 11, 2022. The shares are directly held by KPCB GGF Associates, the managing member of KPCB GGF, may be deemed to have sole power to vote and dispose of these shares. The address for each entity is c/o Kleiner Perkins Caufield & Byers, LLC, 2750 Sand Hill Road, Menlo Park, CA 94025.
(4)As reported in the Schedule 13G filed with the SEC on February 9, 2023, The Vanguard Group is the beneficial owner of 18,794,569 shares of which the Vanguard Group has shared voting power over 243,860 shares, sole dispositive power over 18,399,976 shares, and shared dispositive power over 394,593 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. The foregoing information is based solely on the Schedule 13G filed on February 9, 2023, which we have no reason to believe is inaccurate.
(5)As reported in the Schedule 13G filed with the SEC on February 1, 2023, Franklin Resources, Inc. (“FRI”) is the record holder for securities that are beneficially owned by one or more open or closed end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries (each, an “Investment Management Subsidiary” and, collectively, the “Investment Management Subsidiaries”) of FRI including the Investment Management Subsidiaries listed on the Schedule 13G. Investment Management Subsidiary Franklin Advisors, Inc. holds sole power to vote or direct the vote and sole power to dispose or direct the
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disposition of 30,541,415 shares; Franklin Templeton Investments (Asia) Ltd holds soles voting and dispositive power over 41,478 shares; Fiduciary Trust International LLC holds sole voting and dispositive power over 5,301 shares; and Fiduciary Trust Company International holds sole voting and dispositive power over 102,700 shares. Charles B. Johnson and Rupert H. Johnson, Jr. (the “Principal Shareholders”) each own in excess of 10% of the outstanding common stock of FRI and are the principal stockholders of FRI. FRI and the Principal Shareholders may be deemed to be the beneficial owners of securities held by persons and entities for whom or for which FRI subsidiaries provide investment management services. FRI, the Principal Shareholders and each of the Investment Management Subsidiaries disclaim any pecuniary interest in any of such securities. The Principal Shareholders, FRI and FRI Aggregated Affiliates, as applicable, disclaim that they are beneficial owners, as defined in Rule 13d-3 of the securities reported in the Schedule 13G. The address for FRI is One Franklin Parkway, San Mateo, CA 94403–1906. The foregoing information is based solely on the Schedule 13G filed on February 1, 2023, which we have no reason to believe is inaccurate.
(6)Represents (i) 70,605 shares of common stock held by Mr. Joyce and (ii) 556,472 shares subject to options held by Mr. Joyce to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023.
(7)Represents (i) 22,581 shares of common stock held by Ms. Padilla and (ii) 16,357 shares subject to options held by Ms. Padilla to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023. Ms. Padilla resigned her position as Chief Financial Officer effective on May 15, 2023, and her last day as an employee will be June 2, 2023.
(8)Represents (i) 15,062 shares of common stock held by Mr. Bailey, (ii) 7,961 shares underlying restricted stock units held by Mr. Bailey that may vest and settle within 60 days of April 24, 2023, and (iii) 60,981 shares subject to options held by Mr. Bailey to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023.
(9)Represents (i) 53,187 shares underlying restricted stock units held by Mr. Soell that may vest and settle within 60 days of April 24, 2023, and (iii) 13,254 shares subject to options held by Mr. Soell to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023.
(10)Represents (i) 12,503 shares of common stock held by Ms. Covington and (ii) 768,165 shares subject to options held by Ms. Covington to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023. As reported on the Current Report on Form 8-K on March 24, 2023, effective March 27, 2023, Ms. Covington resigned as Chief Legal Office & Head of Government Relations and Secretary. As such, all equity beneficially owned by Ms. Covington is not included in the total of shares beneficially owned by current officers and directors as a group.
(11)Represents (i) 42,354 shares of common stock held by Mr. Allen and (ii) 4,309,447 shares subject to options held by Mr. Allen to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023.
(12)Represents 18,215 shares of common stock held by Ms. Krakauer.
(13)Represents 15,899 shares of common stock held by Mr. Nielsen.
(14)Represents (i) 42,351 shares of common stock held by Mr. Porter, (ii) 2,571,012 shares held by G2VP I, LLC, for itself and as nominee for G2VP Founders Fund I, LLC (“G2VP”), and (iii) 252,410 shares underlying options held by Mr. Porter to purchase common stock that are immediately exercisable or may be exercisable within 60 days of April 24, 2023. Mr. Porter, together with Ben Kortlang, David Mount and Daniel Oros, is a managing member of G2VP I Associates, LLC, which is the managing member of G2VP, and may be deemed to share voting and dispositive control over the shares held by G2VP. G2VP I Associates, LLC and each of its managing members disclaim beneficial ownership of these shares held by G2VP except to the extent of any pecuniary interest therein.
(15)Represents (i) 32,708 shares of common stock held by Ms. Sargent and (ii) 252,410 shares subject to options held by Ms. Sargent that are immediately exercisable or may become exercisable within 60 days of April 24, 2023.
(16)Represents (i) 32,355 shares of common stock held by Ms. Skidmore and (ii) 252,410 shares subject to options held by Ms. Skidmore that are immediately exercisable or may become exercisable within 60 days of April 24, 2023.
(17)Represents (i) 24,070 shares of common stock held by Mr. Smith and (ii) 252,410 shares subject to options held by Mr. Smith to purchase common stock that are immediately exercisable or may become exercisable within 60 days of April 24, 2023.
(18)Represents 20,390 shares of common stock held by Ms. Hauser.
(19)Represents (i) 2,907,602 shares of common stock beneficially owned by our current executive officers and directors, (ii) 61,148 shares underlying restricted stock units held by our current executive officers and directors that may vest and settle within 60 days of April 24, 2023, and (iii) 5,966,151 shares subject to options held by our current executive officers and directors that are immediately exercisable or exercisable within 60 days of April 24, 2023. For clarity, these totals exclude all shares of common stock and shares subject to options held by Ms. Covington as described in Footnote 10.
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DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers, and any persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the forms filed with the SEC and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in the fiscal year ended December 31, 2022.
FREQUENTLY ASKED QUESTIONS/FAQS
Why have I received these proxy materials?
This proxy statement is being furnished in connection with the solicitation by the Board of Directors of Proterra Inc of proxies to be voted at our Annual Meeting of Stockholders on Friday, June 23, 2023 (the “Annual Meeting”), at 8:00 a.m. Eastern Time, and at any continuation, postponement or adjournment of the Annual Meeting. The Annual Meeting will be a completely virtual meeting conducted via live audio webcast. You can attend the Annual Meeting online and submit your questions during the meeting by visiting https://meetnow.global/MSAKVQJ and entering your 15-digit control number printed on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials.
You have received these proxy materials because the Board is soliciting your proxy to vote your shares at the Annual Meeting. This proxy statement includes information we are required to provide to you under the rules of the Securities and Exchange Commission (the “SEC”). It has been designed to assist you in voting your shares. We intend to mail the proxy materials on or about May [ ], 2023 to all stockholders entitled to vote at the Annual Meeting.
Who can vote at the Annual Meeting?
Holders of record of shares of our common stock as of the close of business on April 24, 2023 (the “Record Date”) will be entitled to notice of and to vote at the Annual Meeting and any continuation, postponement or adjournment of the Annual Meeting. As of the Record Date, there were 226,852, 590 shares of common stock outstanding and entitled to vote at the Annual Meeting. Each share of common stock is entitled to one vote per share on any matter presented to stockholders at the Annual Meeting. We do not have cumulative voting rights for the election of directors.
What matters are being voted on at the Annual Meeting?
At the Annual Meeting, our stockholders will be asked:
1.To elect Jan R. Hauser, Gareth T. Joyce and Michael D. Smith as Class II directors to serve until the 2026 Annual Meeting of Stockholders;
2.To approve, on an advisory basis, the compensation of our named executive officers;
3.To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023;
4.To approve the issuance of shares of our Common Stock (or securities convertible into or exercisable for Common Stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes in accordance with applicable rules of the Nasdaq Stock Market; and
5.To approve an amendment to our Certificate of Incorporation to increase the authorized number of shares of our Common Stock from 500,000,000 shares to 1,000,000,000 shares.
What are the voting recommendations of the Board of Directors?
The Board of Directors (the “Board”) recommends that you vote your shares as indicated below. If you return a properly completed proxy card, or vote your shares by telephone or over the Internet, your shares of common stock will be voted on your behalf as you direct. If not otherwise specified, the shares of common stock represented by the proxies will be voted in accordance with the Board’s recommendations as follows:
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1.FOR the election of Jan R. Hauser, Gareth T. Joyce and Michael D. Smith as Class II directors to serve until the 2026 Annual Meeting of Stockholders;
2.FOR the approval, on an advisory basis, of the compensation of our named executive officers;
3.FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023;
4.FOR the approval of the issuance of shares of our Common Stock (or securities convertible into or exercisable for common stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes in accordance with the applicable rules of the Nasdaq Stock Market; and
5.FOR approval of an amendment to our Certificate of Incorporation to increase the authorized number of shares of our Common Stock from 500,000,000 shares to 1,000,000,000 shares.
If you return a properly completed proxy card, or vote your shares by telephone or internet, your shares of common stock will be voted on your behalf as you direct. If not otherwise specified, the shares of common stock represented by the proxies will be voted in accordance with the recommendations of the Board of Directors.
Will any other business be conducted at the Annual Meeting?
We know of no other business that will be presented at the Annual Meeting. If any other matter properly comes before the stockholders for a vote at the Annual Meeting, however, it is the intention of the proxy holders named on our proxy card to vote your the shares covered by your proxy on these matters in accordance with their best judgment. This discretionary authority is granted by the execution of the form of proxy.
Who can attend the Annual Meeting?
You are invited to attend the Annual Meeting if you are a registered stockholder or a beneficial owner as of April 24, 2023, the Record Date, or if you hold a valid proxy for the Annual Meeting. The Annual Meeting will be virtual only via live audio webcast. There will be no physical meeting held.
The meeting webcast will begin promptly at 8:00 a.m. Eastern Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 7:45 a.m. Eastern Time, and you should allow ample time for the check-in procedures. Please follow the registration instructions outlined in this proxy statement.
What is the difference between being a “registered stockholder” and a “beneficial owner”?
Registered Stockholder. If your shares are registered directly in your name with our transfer agent, Computershare, you are considered the “registered stockholder” with respect to those shares, and the proxy materials were sent directly to you by us. As a registered stockholder, you may vote your shares at the Annual Meeting or by proxy as described below.
Beneficial Owner. If your shares are held through an intermediary, such as a bank, a broker or other nominee, you are considered the “beneficial owner” with respect to those shares. These shares are sometimes referred to as being held “in street name.” The proxy materials, along with a voting instruction card, were forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the registered stockholder. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote your shares by following their instructions for voting.
What procedures must I follow to attend the Annual Meeting?
The procedures you must follow to attend the Annual Meeting are different depending on whether you are a registered stockholder or a beneficial owner.
Registered Stockholders. If you are a registered stockholder, then you do not need to register to attend the Annual Meeting. You may attend the virtual Annual Meeting and fully participate (i.e., vote your shares, ask questions and access the list of stockholders as of the Record Date) by logging on at https://meetnow.global/MSAKVQJ on the meeting date. You will need the 15-digit control number printed on your proxy card. If you lose your 15-digit control number, you may join the Annual Meeting as a “guest” but you will not be able to vote or participate, you will only be able to listen. Please follow the instructions on the proxy card that you received.
Beneficial Owners. If you are a beneficial owner and you want to attend the virtual Annual Meeting, vote your shares and participate, you must register in advance with Computershare, the host of our virtual meeting. If you
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want to attend the virtual Annual Meeting but do not wish to vote or participate, you do not need to register in advance and may join as a “guest.”
To register in advance, you must submit proof of your proxy power (legal proxy) reflecting your Proterra Inc holdings along with your name and email address to Computershare. You can obtain your legal proxy by contacting your account representative at the bank, broker or other nominee that holds your shares. Requests for advance registration sent to Computershare must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on June 22, 2023. You will receive a confirmation of your registration and instructions on how to attend the meeting by email from Computershare after they receive your registration materials. If you register in advance as directed, you will then be able to vote at and participate in the Annual Meeting.
Requests for registration should be directed to Computershare as follows:
By email: Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com.
By mail: to Computershare, Proterra Inc Legal Proxy, P.O. Box 43001, Providence, RI 02940–3001.
How do I vote?
You may either vote “For” all the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify, and “For” or “Against” or abstain from voting on all other proposals.
The procedures for voting are fairly simple:
Registered Stockholders. If you are a registered stockholder, you may vote:
1.By Internet — You can vote over the Internet at http://www.envisionreports.com/PTRA by following the instructions on the proxy card;
2.By Telephone — You can vote by telephone by calling 1-800-652-8683 and following the instructions on the proxy card;
3.By Mail — You can vote by mail by signing, dating and mailing the proxy card, which you may have received by mail; or
4.Electronically at the Meeting — If you attend the meeting online and want to vote electronically during the meeting, you will need the 15-digit control number printed on your proxy card.
Internet and telephone voting facilities for registered stockholders are available 24 hours a day. To participate in the Annual Meeting, including to vote via the Internet or telephone, you will need the 15-digit control number printed on your proxy card.
Beneficial Owners. If you are a beneficial owner and your shares are held in “street name” through a bank, broker, or other nominee, you will receive instructions from them on how to vote. You must follow their instructions in order for your shares to be voted. Internet and telephone voting may also be offered to stockholders owning shares through certain banks and brokers. As the beneficial owner, you have the right to direct your bank or brokerage firm how to vote your shares, and the bank or brokerage firm is required to vote your shares in accordance with your instructions. If your shares are not registered in your name and you would like to vote your shares online at the Annual Meeting, you should follow the instructions above regarding how to register in advance to attend the Annual Meeting. Otherwise, you will need to vote through your bank or broker or other
nominee as instructed by them. You may attend the Annual Meeting as a “guest” but you will not be able to vote, ask questions or access the list of stockholders as of the Record Date.
If you return a properly completed proxy card, or vote your shares by telephone or internet, your shares of common stock will be voted on your behalf as you direct. If not otherwise specified, the shares of common stock represented by the proxies will be voted in accordance with the recommendations of the Board of Directors as described above.
Even if you plan to attend the live webcast of the Annual Meeting, we encourage you to vote in advance by Internet, telephone, or mail so that your vote will be counted even if you later decide not to attend the Annual Meeting.
Can I change or revoke my vote after I submit my proxy?
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Yes. Voting over the Internet or by telephone or execution of a proxy will not in any way affect a stockholder’s right to attend the Annual Meeting and vote electronically. A proxy may be revoked before it is used to cast a vote at the Annual Meeting. If you are a registered stockholder, you can revoke a proxy by doing one of the following:
1.by submitting a duly executed proxy bearing a later date;
2.by granting a subsequent proxy through the Internet or telephone;
3.by giving written notice of revocation to the Secretary of the Company prior to or at the Annual Meeting; or
4.by voting online at the Annual Meeting.
Your most recent proxy card or Internet or telephone proxy is the one that is counted. Your attendance at the Annual Meeting by itself will not revoke your proxy unless you give written notice of revocation to the Secretary before your proxy is voted or you vote online at the Annual Meeting.
If your shares are held in street name, you may change or revoke your voting instructions by following the specific directions provided to you by your broker, bank or other nominee, or you may vote online at the Annual Meeting provided you have registered in advance to attend the Annual Meeting in accordance with the instructions above.
Who will count the votes?
A representative of Computershare Inc., our inspector of election, will tabulate and certify the votes.
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If I am a registered stockholder and I do not vote, or if I return a proxy card or otherwise vote without giving specific voting instructions, what happens?
If you are a registered stockholder and do not vote by completing your proxy card, by telephone, through the Internet or online at the Annual Meeting, your shares will not be voted.
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, in accordance with the recommendations of the Board as described above If any other matter is properly presented at the meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares in accordance with the recommendations of the Board, as described above.
If I am a beneficial owner of shares held in street name and I do not provide my broker or bank with voting instructions, what happens?
If you are a beneficial owner of shares held in street name and you do not instruct your broker, bank or other nominee how to vote your shares, your broker, bank or other nominee may still be able to vote your shares in its discretion. Under the rules of the New York Stock Exchange (“NYSE”), brokers, banks and other securities intermediaries that are subject to NYSE rules may use their discretion to vote your “uninstructed” shares with respect to matters considered to be “routine” under NYSE rules, but not with respect to “non-routine” matters. Under applicable rules and interpretations, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation, and certain corporate governance proposals, even if supported by management. All of our proposals other than the ratification of our independent accounting firm are “non-routine” matters, meaning that your broker or bank may not vote your shares on these proposals in the absence of your voting instructions. However, the ratification of the selection of our independent registered public accounting firm (Proposal 3) is considered to be a “routine” matter, meaning that if you do not return voting instructions to your broker by its deadline, your shares may be voted by your broker or bank in its discretion on Proposal 3. We encourage you to provide voting instructions to your bank, broker or other agent. This ensures that your shares will be voted at the Annual Meeting according to your instructions.
If you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker, bank or other agent.
What are “broker non-votes”?
As discussed above, broker non-votes occur when your broker submits a proxy for the meeting with respect to “routine” matters but does not vote on “non-routine” matters because you did not provide voting instructions on those matters. Proposals 1, 2, 4 and 5 are considered to be “non-routine” under NYSE rules and we therefore expect broker non-votes to exist only in connection with these proposals.
As a reminder, if you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker, bank or other agent.
Why hold a virtual meeting?
A virtual meeting enables increased stockholder attendance and participation because stockholders can participate from any location around the world. You will be able to attend the Annual Meeting online and submit your questions by visiting https://meetnow.global/MSAKVQJ. You also will be able to vote your shares electronically at the Annual Meeting by following the instructions above.
What if during the check-in time or during the Annual Meeting I have technical difficulties or trouble accessing the virtual meeting website?
The virtual meeting platform is fully supported across the most widely used browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Note: Internet Explorer is not a supported browser. Participants should ensure that they have a strong Wi-Fi connection from wherever they plan to participate in the meeting. We encourage you to access the meeting prior to the start time. Should you need further assistance, you may call 1-888-724-2416. We strongly encourage you to vote your shares in advance in case you have trouble accessing the Annual Meeting.
Will there be a question and answer session during the Annual Meeting?
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As part of the Annual Meeting, we will hold a live Q&A session, during which we intend to answer questions submitted online during or immediately prior to the meeting that are pertinent to us and the meeting matters, as time permits. Only stockholders that have accessed the Annual Meeting as a stockholder (rather than a “guest”) by following the procedures outlined above in “What procedures must I follow to attend the Annual Meeting?” will be permitted to submit questions during the Annual Meeting. Each stockholder is limited to no more than two questions. Questions should be succinct and only cover a single topic. We will not address questions that are, among other things:
1.irrelevant to our business or to the business of the Annual Meeting;
2.related to material non-public information of us, including the status or results of our business since our last Quarterly Report on Form 10-Q;
3.related to any pending, threatened or ongoing litigation;
4.related to personal grievances;
5.derogatory references to individuals or that are otherwise in bad taste;
6.substantially repetitive of questions already asked by another stockholder;
7.in excess of the two-question limit;
8.in furtherance of the stockholder’s personal or business interests; or
9.out of order or not otherwise suitable for the conduct of the Annual Meeting as determined by the Chairperson of the Annual Meeting or Secretary in their reasonable judgment.
Additional information regarding the Q&A session will be available in the “Rules of Conduct” available on the Annual Meeting webpage for stockholders who have accessed the Annual Meeting as a stockholder (rather than a “guest”) by following the procedures outlined above in “What procedures must I follow to attend the Annual Meeting?”.
How many shares must be present to hold the Annual Meeting?
A quorum must be present at the Annual Meeting for any business to be conducted. The presence at the Annual Meeting of the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote at the Annual Meeting, present in person or represented by proxy, will constitute a quorum.
Your shares are counted as present at the Annual Meeting if you are present by remote communication at the Annual Meeting or if you have properly submitted a proxy. Abstentions and broker non-votes are included in the shares present or represented at the Annual Meeting for purposes of determining whether a quorum is present. If a quorum is not present, the chair of the Annual Meeting may adjourn the meeting until a quorum is obtained.
What does it mean if I receive more than one set of proxy materials?
It means that your shares are held in more than one account at Computershare Inc., our transfer agent, and/or with banks or brokers. Please vote all of your shares. To ensure that all of your shares are voted, for each set of proxy materials, please submit your proxy by phone, via the Internet, or by signing, dating and returning the enclosed proxy card in the enclosed envelope.
How many votes are required for the approval of the proposals to be voted upon and how will abstentions and broker non-votes be treated?
| | | | | | | | | | | |
Proposal | Votes Required | Effect of Abstentions or Withhold Votes, As Applicable | Effect of Broker Non-Votes |
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| | | | | | | | | | | |
Proposal 1: Election of Directors | The plurality of the votes cast by the holders of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. This means that the nominees receiving the highest number of affirmative “FOR” votes will be elected as Class II directors. Any director who does not receive a majority of votes cast “FOR” his or her re-election in an uncontested election is expected to offer his or her resignation for the Board’s consideration | No effect | No effect |
Proposal 2: Advisory Vote on the Compensation of our Named Executive Officers | The affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter | No effect | No effect |
Proposal 3: Ratification of our Independent Registered Public Accounting Firm | The affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter | No effect | Not applicable |
Proposal 4: Approval, of the potential issuance of shares of our Common Stock (or securities convertible into or exercisable for common stock) in settlement of the potential future conversion in full of the aggregate principal amount of, plus accrued and unpaid interest on, our Convertible Notes, in accordance with the applicable rules of the Nasdaq Stock Market | The affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter | No effect | No effect |
Proposal 5: Approval of an Amendment to our Certificate of Incorporation to Increase the Company’s Authorized Number of Shares of our Common Stock from 500,000,000 Shares to 1,000,000,000 Shares | The affirmative vote of the holders of at least a majority of the outstanding shares of our Common Stock. | Vote "Against" | Vote "Against" |
Where can I find the voting results of the Annual Meeting?
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We plan to announce preliminary voting results at the Annual Meeting and we will report the final results in a Current Report on Form 8-K, which we intend to file with the SEC after the Annual Meeting.
When are stockholder proposals and director nominations due for next year’s annual meeting?
Pursuant to Rule 14a-8 under the Exchange Act, stockholder proposals meeting certain requirements may be eligible for inclusion in the Company’s proxy statement for the Company’s 2024 Annual Meeting of Stockholders. To be eligible for inclusion in the Company’s 2024 proxy statement, any such stockholder proposals must be submitted no later than January [•], 2024, in addition to complying with certain rules and regulations promulgated by the SEC. The submission of a stockholder proposal does not guarantee that it will be included in the Company’s proxy statement.
Alternatively, in accordance with the “advance notice” provisions of our bylaws, stockholders seeking to present a stockholder proposal or nomination at the Company’s 2024 Annual Meeting of Stockholders, without having it included in the Company’s proxy statement, must timely submit notice of such proposal or nomination. To be timely, a stockholder’s notice must be delivered not later than 5:00 p.m., Pacific Time, on the 90th day nor earlier than 5:00 p.m., Pacific Time, on the 120th day prior to the first anniversary of the preceding year’s annual meeting. For the Company’s 2024 Annual Meeting of Stockholders, this means that any such proposal or nomination must be submitted no earlier than February 24, 2024 and no later than March 25, 2024. If the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date or if no annual meeting was held in the preceding year, notice must be delivered (A) no earlier than the Close of Business on the 120th day prior to such annual meeting and (B) no later than the Close of Business on the later of the 90th day prior to such annual meeting or the Close of Business on the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Company.
In addition to satisfying the foregoing requirements under our bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide in their notice any additional information required by Rule 14a-19(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To be timeline, such notice must be delivered not later than 5:00 p.m., Pacific Time, on the 60th day prior to the first anniversary of the preceding year’s annual meeting. For the Company’s 2023 Annual Meeting of the Stockholders, this means that any such provision must be submitted by April 24, 2024. If the date of the annual meeting is more than 30 days before or after such anniversary date, then notice must be provided no later than 50 days prior to the date of the annual meeting.
Notices of any proposals or nominations for the Company’s 2024 Annual Meeting of Stockholders must be sent, in writing, to our Secretary c/o Proterra Inc., 815 Rollins Road, Burlingame, CA 94010.
Who is paying for this proxy solicitation?
The entire cost of our solicitation will be borne by us. In addition to the use of mail, proxies may be solicited by personal interview, telephone, e-mail and facsimile by our directors, officers and other employees who will not be specially compensated for these services. We have also engaged Georgeson LLC to assist in the solicitation of proxies for a fee of approximately $35,000.00 plus reasonable out-of-pocket expenses. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by the brokers, nominees, custodians and other fiduciaries. We will reimburse these persons for their reasonable expenses in connection with these activities.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ONLINE, WE URGE YOU TO VOTE YOUR SHARES VIA THE TOLL-FREE TELEPHONE NUMBER OR OVER THE INTERNET, AS DESCRIBED IN THIS PROXY STATEMENT. IF YOU RECEIVED A COPY OF THE PROXY CARD BY MAIL, YOU MAY SIGN, DATE AND MAIL THE PROXY CARD IN THE ENCLOSED RETURN ENVELOPE. PROMPTLY VOTING YOUR SHARES WILL ENSURE THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING AND WILL SAVE US THE EXPENSE OF FURTHER SOLICITATION.
HOUSEHOLDING OF PROXIES
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements with respect to two or more stockholders sharing the same address by delivering a single annual report and proxy statement or a single notice of internet availability of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding”, can reduce the volume of duplicate information received at households. While the Company does not household, a number of brokerage firms with account holders have instituted householding. Once a stockholder has consented or receives notice from his or her broker that the broker will be householding materials to the stockholder’s address, householding will continue until the stockholder is notified
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
OTHER MATTERS
otherwise or until one or more of the stockholders revokes his or her consent. If your Notice of Internet Availability of Proxy Materials or your Annual Report and Proxy Statement, as applicable, have been househeld and you wish to receive separate copies of these documents now and/or in the future, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, you may notify your broker. You can also request and we will promptly deliver a separate copy of the Notice of Internet Availability or the Proxy Materials by sending an email to ir@proterra.com, writing to the Company address appearing in this proxy statement.
ADDITIONAL FILINGS
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available without charge through the Company’s website, www.proterra.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The content of our website, however, is not part of this proxy statement.
You may request a copy of our SEC filings, as well as the foregoing corporate documents, at no cost to you, by sending an email to ir@proterra.com, or writing to the Company address appearing in this proxy statement.
By Order of the Board of Directors
/s/ Jeffery E. Mitchell
Jeffery E. Mitchell
Interim General Counsel and Secretary
Burlingame, California
May [ ] 2023
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023
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PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION, DATED MAY [ ], 2023