UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

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VIVINT SOLAR, INC.

 

(Name of Registrant as Specified In Its Charter)

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VIVINT SOLAR, INC.

1800 West Ashton Blvd.

Lehi, Utah 84043

NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS

to be held June 10, 2020

TO STOCKHOLDERS OF VIVINT SOLAR, INC.:

The 2020 Annual Meeting of Stockholders of Vivint Solar, Inc., or Vivint Solar, a Delaware corporation, will be conducted solely online via live webcast at www.meetingcenter.io/229871641 on Wednesday, June 10, 2020, at 9:00 a.m. Mountain Time, for the following purposes as more fully described in the accompanying proxy statement for the 2020 Annual Meeting to:

 

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elect as Class III directors the three nominees named in the accompanying proxy statement;

 

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ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our current fiscal year ending December 31, 2020;

 

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hold an advisory vote on our executive compensation;

 

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hold an advisory vote on the frequency of future advisory votes on our executive compensation; and

 

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transact such other business as may properly come before the meeting or any adjournments or postponements thereof.

The record date for the 2020 Annual Meeting is April 16, 2020. If you held Vivint Solar common stock at the close of business on that date, you are entitled to vote at the meeting. Additional information regarding voting rights and the matters to be voted upon is presented in our proxy statement.

In light of the COVID-19 outbreak, for the safety and well-being of our stockholders and employees, and taking into account the protocols of local, state and federal governments, we have determined that the 2020 Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. If you plan to participate in the virtual meeting, please see the Q&A in “General Instructions.” Stockholders will be able to attend, vote and submit questions from any location via the Internet.

We are mailing to our stockholders a Notice of Internet Availability of Proxy Materials, or the Notice, containing instructions on how to access our proxy statement for our annual meeting and our annual report to stockholders over the Internet. The Notice provides instructions on how to vote and includes instructions on how to receive a copy of our proxy materials and annual report by mail or e-mail. The Notice, our proxy statement and our 2020 Annual Report to Stockholders can be accessed directly at the following Internet address: www.edocumentview.com/vslr, using the control number located on the Notice or, if you requested to receive a printed copy of the proxy materials, your accompanying proxy card.

We appreciate your continued support of Vivint Solar and look forward to either greeting you personally at the virtual meeting or receiving your proxy.

By order of the Board of Directors,

David Bywater

Chief Executive Officer

April 28, 2020

Lehi, Utah

 

PROXY STATEMENT

FOR 2020 ANNUAL MEETING OF STOCKHOLDERS

TABLE OF CONTENTS

 

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GENERAL INFORMATION			1
PROPOSAL NO. 1 ELECTION OF DIRECTORS			10
Nominees for Director			10

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE			12
Continuing Directors			12
Director Independence			13
Board Leadership Structure			14
Controlled Company Exemption			14
Board Meetings			14
Attendance of Directors at Annual Meetings of Stockholders			15
Board Committees			15
Considerations in Evaluating Director Nominees			17
Stockholder Recommendations for Nominations to the Board of Directors			17
Stockholder and Interested Party Communications with the Board of Directors			18
Corporate Governance Guidelines			18
Code of Business Conduct and Ethics			18
Risk Management			19
Non-Employee Director Compensation			19
Compensation Committee Interlocks and Insider Participation			21
PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			22
Fees Paid to the Independent Registered Public Accounting Firm			22
Auditor Independence			22
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm			23
PROPOSAL NO. 3 ADVISORY VOTE ON VIVINT SOLAR’S EXECUTIVE COMPENSATION			24
PROPOSAL NO. 4 ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES ON VIVINT SOLAR’S EXECUTIVE COMPENSATION			25
REPORT OF THE AUDIT COMMITTEE			26
EXECUTIVE OFFICERS			28
COMPENSATION DISCUSSION AND ANALYSIS			30

 

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TABLE OF CONTENTS

(continued)

 

		Page

Executive Summary			30
Impact of the Covid-19 Pandemic on Executive Compensation			32
Executive Compensation Philosophy and Program Design			33
Governance of Executive Compensation Program			33
Individual Compensation Elements			36
Other Compensation Policies and Practices			43
Tax and Accounting Considerations			43
Compensation Committee Report			44
Executive Employment Arrangements			45
Summary Compensation Table			47
2019 Grants of Plan-Based Awards			48
Outstanding Equity Awards at December 31, 2019			50
2019 Option Exercises and Stock Vested			51
Executive Change of Control and Severance Benefits			52
Potential Payments Upon Termination or Change of Control			53
Equity Compensation Plan Information			54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			55
RELATED PARTY TRANSACTIONS			58
Policies and Procedures for Related Party Transactions			58
Agreements with Our Sponsor			58
Tax Equity Funds			61
Agreements with Vivint Smart Home, Inc.			61
Employee Stockholders Agreement			62
Indemnification Agreements			63
Indebtedness of Directors and Officers			63
Other Transactions			63
OTHER MATTERS			64
Delinquent Section 16(a) Reports			64
2019 Annual Report and SEC Filings			64

 

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VIVINT SOLAR, INC.

1800 West Ashton Blvd.

Lehi, Utah 84043

PROXY STATEMENT

FOR 2020 ANNUAL MEETING OF STOCKHOLDERS

to be held on Wednesday, June 10, 2020 at 9:00 a.m. Mountain Time

This proxy statement and the accompanying proxy card are furnished in connection with solicitation of proxies by our board of directors for use at the 2020 Annual Meeting of Stockholders of Vivint Solar, or the 2020 Annual Meeting, to be conducted solely online via live webcast at www.meetingcenter.io/229871641 on Wednesday, June 10, 2020, at 9:00 a.m. Mountain Time, and for any postponements, adjournments or continuations thereof. On or about April 28, 2020, we first mailed to our stockholders a Notice of Internet Availability of Proxy Materials, or the Notice, containing instructions on how to access our proxy statement for our annual meeting and our annual report to stockholders and how to submit your proxy for the 2020 Annual Meeting.

GENERAL INFORMATION

The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.

 

 

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our business and affairs are managed under the direction of our board of directors, which is currently composed of eight members. Because we qualify as a “controlled company” under the corporate governance rules for New York Stock Exchange, or NYSE-listed companies, we are not required to comply with certain corporate governance standards including the requirement to have a majority of our board of directors be independent. See “Board of Directors and Corporate Governance — Controlled Company Exemption.” Our board of directors is divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring.

Each director’s term continues until his or her successor is duly elected and qualified or until his or her death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company.

The following table sets forth the names and certain other information for each of the nominees for election as a director and for each of the continuing members of the board of directors as of March 31, 2020. Directors elected at the 2020 Annual Meeting will serve until our 2023 annual meeting of stockholders, or until their successors are duly elected and qualified.

 

		Class				Age				Position		Director Since				Current Term Expires				Expiration of Term for Which Nominated
Nominees
David Bywater			III				50			Chief Executive Officer and Director			2017				2020				2023
Ellen S. Smith(1)			III				61			Director			2020				2020				2023
Peter F. Wallace(2)(3)			III				45			Chairman			2012				2020				2023
Continuing Directors
Todd R. Pedersen(3)			I				51			Director			2012				2021				—
Joseph S. Tibbetts, Jr.(1)			I				67			Director			2014				2021				—
David D’Alessandro(1)(2)(3)			II				69			Director			2013				2022				—
Bruce McEvoy(2)			II				42			Director			2012				2022				—
Jay D. Pauley			II				42			Director			2015				2022				—

 

(1)	Member of the audit committee

(2)	Member of the compensation committee

(3)	Member of the nominating and corporate governance committee

Nominees for Director

David Bywater has served as our chief executive officer since December 2016. Mr. Bywater also served as our interim president and chief executive officer from May 2016 until his appointment as our permanent chief executive officer in December of 2016. Prior to joining

 

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Vivint Solar, Mr. Bywater served as the chief operating officer of Vivint, Inc. since July 2013. Prior to that, Mr. Bywater served as executive vice president and corporate officer for Xerox Corporation, and was the chief operating officer of its State Government Services from 2010 to July 2013. Prior to that, from 2003 to 2010, Mr. Bywater worked at Affiliated Computer Services. From 1999 to 2003, Mr. Bywater was a senior manager at Bain & Company. Mr. Bywater holds a B.S. in economics from Brigham Young University and an MBA from Harvard Business School. Mr. Bywater has specific attributes that qualify him to serve as a member of our board of directors, including his role serving as our chief executive officer, his experience with the direct-to-home sales model and his experience with public companies.

Ellen S. Smith has served as a member of our board of directors since March 2020. Ms. Smith is a senior managing director, corporate finance, power and utilities at FTI Consulting, Inc., a global consultancy firm, which she joined in 2013. Prior to joining FTI Consulting, Inc., Ms. Smith was executive vice president and chief operations officer at National Grid, USA, a multinational power, gas and electricity generation company, from 2009 to 2013. Before that, she worked for Hess Corp, Pratt & Whitney and General Electric Power Systems. Ms. Smith currently serves on the board of trustees of Union College, and she previously served on the board of directors of National Grid USA from 2009 to 2013 and Granite Services from 1994 to 1996. Ms. Smith received a Bachelor of Science and a Master of Engineering from Union College. Ms. Smith has specific attributes that qualify her to serve as a member of our board of directors, including her extensive operations and leadership experience in the energy industry.

Peter F. Wallace has served as a member of our board of directors since November 2012 and chairman of the board since March 2014. Mr. Wallace is a senior managing director in Blackstone’s Private Equity Group, which he joined in 1997. Mr. Wallace serves on the board of directors of Vivint Smart Home (NYSE: VVNT), Alight Solutions, Inc., Outerstuff, Service King, Tradesmen International and The Weather Channel Companies. Mr. Wallace was formerly a director of AlliedBarton Security Services, Michaels Stores, Inc., GCA Services, New Skies Satellites Holdings Ltd. and SeaWorld Entertainment. Mr. Wallace holds a B.A in government from Harvard College. Mr. Wallace has specific attributes that qualify him to serve as a member of our board of directors, including his experience in private equity and his experience as a director of other public companies.

 

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Continuing Directors

Class I Directors continuing in Office until the 2021 Annual Meeting of Stockholders

Todd R. Pedersen is a co-founder of Vivint Solar and has served as a member of our board of directors since November 2012 and served as our chief executive officer from August 2011 through January 2013. Mr. Pedersen founded Vivint, Inc. in 1999, and currently serves as the chief executive officer and a director of Vivint Smart Home (NYSE: VVNT). Mr. Pedersen also serves on the board of directors of APX Group Holdings, Inc. Mr. Pedersen was named the Ernst & Young Entrepreneur of the Year 2010 in the services category for the Utah Region. Mr. Pedersen attended Brigham Young University. Mr. Pedersen has specific attributes that qualify him to serve as a member of our board of directors, including his historical knowledge of our company and his experience with the direct-to-home sales model.

Joseph S. Tibbetts, Jr. has served as a member of our board of directors since August 2014. From March 2017 to March 2018, Mr. Tibbetts served as the interim chief financial officer of Acquia Corporation, a private company that is a leading provider of cloud-based, digital experience management solutions. Prior to that Mr. Tibbetts served as the senior vice president and chief financial officer of Publicis Sapient, part of Publicis Group SA, from February 2015, when Publicis acquired Sapient Corporation, to September 2015. Prior to that Mr. Tibbetts served as senior vice president and global chief financial officer of Sapient Corporation from October 2006 to February 2015. He began serving as Sapient Corporation’s treasurer in December 2012 and was reappointed as Sapient Corporation’s chief accounting officer in June 2013, a role he previously held from 2009 to 2012. In addition to being Sapient Corporation’s chief financial officer, Mr. Tibbetts also served as Sapient Corporation’s managing director- SapientNitro Asia Pacific. Prior to joining Sapient Corporation, Mr. Tibbetts was the chief financial officer of Novell, Inc. from February 2003 to June 2006 and, prior to that, he held a variety of senior financial management positions at Charles River Ventures, Lightbridge, Inc., and SeaChange International, Inc. Mr. Tibbetts was also formerly a partner with Price Waterhouse LLP. Mr. Tibbetts currently serves on the board of directors of Vivint Smart Home (NYSE: VVNT). Mr. Tibbetts holds a B.S. in business administration from the University of New Hampshire. Mr. Tibbetts has specific attributes that qualify him to serve as a member of our board of directors, including his experience as an executive officer of several public companies and his experience as a director of both public and private companies.

Class II Directors continuing in Office until the 2022 Annual Meeting of Stockholders

David F. D’Alessandro has served as a member of our board of directors since August 2013. Mr. D’Alessandro serves on the boards of directors of Vivint Smart Home (NYSE: VVNT) and several private companies, including APX Group Holdings, Inc, the parent company of Vivint, Inc. Mr. D’Alessandro served as chairman of the board of directors of SeaWorld Entertainment, Inc. from 2010 until June 2017, and served as interim chief executive officer of SeaWorld from January 2015 until April 2015. He served as chairman, president and chief executive officer of John Hancock Financial Services, Inc. from 2000 to 2004, having served as president and chief operating officer of the same entity from 1996 to 2000, and guided it

 

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through a merger with ManuLife Financial Corporation in 2004. Mr. D’Alessandro served as president and chief operating officer of ManuLife in 2004. He is a former partner of the Boston Red Sox. A graduate of Syracuse University, he holds honorary doctorates from three colleges and serves as vice chairman of Boston University. Mr. D’Alessandro has specific attributes that qualify him to serve as a member of our board of directors, including his experience as a director of public companies.

Bruce McEvoy has served as a member of our board of directors since November 2012. Mr. McEvoy is a senior managing director in the private equity group at Blackstone. Before joining Blackstone in 2006, Mr. McEvoy worked at General Atlantic from 2002 to 2004 and was a consultant at McKinsey & Company from 1999 to 2002. Mr. McEvoy currently serves on the board of directors of Center for Autism and Related Disorders, MB Aerospace, RGIS Inventory Specialists, TeamHealth and Vivint Smart Home (NYSE: VVNT). Mr. McEvoy was formerly a director of Catalent, Performance Food Group, GCA Services, Inc., DJO Orthopedics, SeaWorld Entertainment, Inc., and Vistar Corporation. Mr. McEvoy graduated from Princeton University and Harvard Business School. Mr. McEvoy has specific attributes that qualify him to serve as a member of our board of directors, including his experience in private equity and his experience as a director of other public companies.

Jay D. Pauley has served as a member of our board of directors since September 2015. Mr. Pauley is a managing director at Summit Partners, which he joined in 2010. Prior to joining Summit Partners, Mr. Pauley was Vice President at GTCR, a private equity firm, and an associate at Apax Partners, a private equity and venture capital firm. Before that, he worked for GE Capital. Mr. Pauley currently serves on the boards of directors of Vivint Smart Home (NYSE: VVNT) and numerous private companies, including APX Group Holdings, Inc., Alert 360, DegreeOne, LLC (formerly MetroTech Super Holdings, LLC), FineLine Technologies, Inc., Harvey Performance Company, LLC and Parts Town, LLC. Mr. Pauley graduated from The Ohio State University and the Wharton School at the University of Pennsylvania. Mr. Pauley has specific attributes that qualify him to serve as a member of our board of directors, including his experience in private equity and his experience as a director of numerous private companies.

Director Independence

Our board of directors regularly reviews its composition, the composition of its committees and the independence of current directors and considers whether any such director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Because we qualify as a “controlled company” under the corporate governance rules for NYSE-listed companies, we are not required to comply with certain corporate governance standards including the requirement to have a majority of our board of directors be independent. See “Board of Directors and Corporate Governance — Controlled Company Exemption.” Based upon information requested from and provided by each current director concerning his or her background, employment and affiliations, including family relationships, the board of directors has determined that (1) none of Messrs. D’Alessandro, McEvoy, Pauley, Tibbets, Wallace nor Ms. Smith, representing six of our eight current directors, has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under the

 

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rules of the NYSE and (2) that Messrs. Tibbetts (chairperson) and D’Alessandro and Ms. Smith, who comprise our audit committee, satisfy the independence standards of the audit committee as established by the applicable rules of the SEC and NYSE.

Board Leadership Structure

Our board of directors is led by a non-executive chairman. Mr. Wallace serves as the chairman of the board of directors, and Mr. Bywater serves as the chief executive officer of our company. Our board of directors currently believes that the separation of the chairman and chief executive positions is appropriate corporate governance for us.

Controlled Company Exemption

Affiliates of our sponsor, The Blackstone Group, L.P., or Blackstone, beneficially own more than 50% of our common stock and voting power. As a result, (1) under the terms of a stockholders agreement with Blackstone, Blackstone is entitled to nominate at least a majority of the total number of directors comprising our board of directors (see “Related Party Transactions — Agreements with Our Sponsor — Stockholders Agreement”) and (2) we are a “controlled company” within the meaning of the NYSE corporate governance standards. Under the NYSE corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, (3) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (4) the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees. We are currently using certain of these exemptions and expect to continue to do so. If we cease to be a “controlled company,” we will be required to comply with these provisions within the transition periods specified in the NYSE corporate governance rules.

Board Meetings

During the fiscal year ended December 31, 2019, our board of directors held four meetings (including regularly scheduled and special meetings). No director attended fewer than 75% of the total number of meetings of the board of directors and the committees of which he or she was a member.

In order to promote open discussion among independent directors, our board of directors has a policy of holding regular executive sessions of non-management directors during each regularly scheduled board meeting and an executive session including only independent directors at least once each year (and at such other times as requested by an independent director). The chairman of the board presides at the executive sessions of non-management directors and the chair of the nominating and corporate governance committee presides at executive sessions of independent directors.

 

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Attendance of Directors at Annual Meetings of Stockholders

Although we do not have a formal policy regarding attendance by members of our board of directors at annual meetings of stockholders, we encourage, but do not require, directors to attend. Three members of our board of directors attended the 2019 annual meeting of stockholders.

Board Committees

Our board of directors has three standing committees — an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which has the composition and responsibilities described below. The nominating and corporate governance committee and the board of directors evaluate committee membership at least annually. Our board of directors may from time to time establish other committees. In accordance with the terms of a stockholders agreement with an affiliate of our sponsor Blackstone, for so long as we qualify as a “controlled company” under NYSE listing standards and subject to applicable law, Blackstone has the right to designate a majority of the members of any committee of our board of directors. If we do not qualify as a “controlled company” under the NYSE listing standards, Blackstone has the right, subject to applicable NYSE listing standards and applicable law, to designate one member to each of the committees of our board of directors or such greater number of members that is as nearly proportionate to Blackstone’s representation on our board of directors as possible. See “Related Party Transactions — Agreements with Our Sponsor — Stockholders Agreement.”

Audit Committee

The members of our audit committee are Messrs. Tibbetts and D’Alessandro and Ms. Smith. Our audit committee chairperson, Mr. Tibbetts, is our audit committee financial expert, as that term is defined under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act of 2002, and possesses financial sophistication, as defined under the rules of the NYSE. Our board of directors has determined that each of the members of our audit committee satisfies the requirements for independence and that each of the members of our audit committee satisfies the requirements for financial literacy under the rules and regulations of the NYSE and the SEC. The purpose of the audit committee is to prepare the audit committee report required by the SEC to be included in our proxy statement and to assist our board of directors in overseeing and monitoring:

 

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the quality and integrity of our consolidated financial statements;

 

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our compliance with legal and regulatory requirements;

 

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our independent registered public accounting firm’s qualifications and independence;

 

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the performance of our internal audit function; and

 

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the performance of our independent registered public accounting firm.

During 2019, our audit committee met six times. The audit committee also meets periodically with our outside auditors without management present, at such times as it deems appropriate.

 

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Our board of directors has adopted a written charter for the audit committee in compliance with the applicable rules of the SEC and the listing standards of the NYSE that is available on our website at http://investors.vivintsolar.com/company/investors/corporate-governance/governance-documents.

Compensation Committee

The members of our compensation committee are Messrs. Wallace, D’Alessandro and McEvoy. Mr. Wallace is the chairperson of our compensation committee. Our board of directors has determined that each of the members of our compensation committee satisfies the requirements for independence under the rules and regulations of the NYSE and the SEC. The compensation committee may delegate its authority to subcommittees or individuals as the committee deems appropriate, except to the extent such delegation would violate an applicable tax or securities law, regulation or rule of any exchange upon which our securities are then listed. The purpose of the compensation committee is to assist our board of directors in discharging its responsibilities relating to:

 

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setting our compensation program and compensation of our executive officers and directors;

 

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monitoring our incentive and equity-based compensation plans; and

 

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preparing the compensation committee report required to be included in our proxy statement under the rules and regulations of the SEC.

During 2019, our compensation committee met six times. Our board of directors has adopted a written charter for the compensation committee in compliance with the applicable rules of the SEC and the listing standards of the NYSE that is available on our website at http://investors.vivintsolar.com/company/investors/corporate-governance/governance-documents.

Nominating and Corporate Governance Committee

The members of our nominating and corporate governance committee are Messrs. D’Alessandro, Pedersen and Wallace. Mr. D’Alessandro is the chairperson of our nominating and corporate governance committee. Our board of directors has determined that a majority of the members of our nominating and corporate governance committee, including Messrs. D’Alessandro and Wallace, satisfy the requirements for independence under the rules and regulations of the NYSE and the SEC. The purpose of our nominating and corporate governance committee is to assist our board of directors in discharging its responsibilities relating to:

 

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identifying individuals qualified to become new directors, consistent with criteria approved by the board of directors, subject to the stockholders agreement with an affiliate of our sponsor Blackstone;

 

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reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the board of directors select, the director nominees for the next annual meeting of stockholders;

 

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identifying directors qualified to fill vacancies on any of our board committees and recommending that the board of directors appoint the identified member or members to the applicable committee, subject to the stockholders agreement with an affiliate of our sponsor Blackstone;

 

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reviewing and recommending to the board of directors corporate governance guidelines applicable to us;

 

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overseeing the evaluation of the board of directors and management; and

 

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handling such other matters that are specifically delegated to the committee by the board of directors from time to time.

During 2019, our nominating and corporate governance committee met twice. Our board of directors has adopted a written charter for the nominating and corporate governance committee in compliance with the applicable rules of the SEC and the listing standards of the NYSE that is available on our website at

http://investors.vivintsolar.com/company/investors/corporate-governance/governance-documents.

Considerations in Evaluating Director Nominees

Our board of directors and our nominating and corporate governance committee regularly review the composition of the board of directors and use a variety of methods for identifying and evaluating potential directors whose perspectives, skills, experiences and diversity will enable them to make meaningful contributions to shaping the future of our company. In their evaluation of director candidates, they will consider the current size and composition of the board of directors and the needs of the board of directors and the respective committees of the board of directors. Some of the qualifications and attributes that our nominating and corporate governance committee may consider include, without limitation, issues of character, integrity, judgment, diversity, age, independence, skills, education, expertise, business acumen, business experience, length of service, understanding of our business, other commitments and the like. Other than the foregoing, there are no stated minimum criteria for director nominees.

Although the board of directors does not maintain a specific policy with respect to board diversity, the board of directors believes that the board should be a diverse body, and the nominating and corporate governance committee considers a broad range of perspectives, backgrounds and experiences. In making determinations regarding nominations of directors, the nominating and corporate governance committee may take into account the benefits of diverse viewpoints. The nominating and corporate governance committee considers these and other factors as it oversees the annual board of director and committee evaluations.

Stockholder Recommendations for Nominations to the Board of Directors

The nominating and corporate governance committee will consider candidates for directors recommended by stockholders so long as such recommendations comply with the certificate of incorporation and bylaws of our company and applicable laws, rules and regulations, including those promulgated by the SEC. The committee will evaluate such recommendations

 

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in accordance with its charter, our bylaws and the regular nominee criteria described above. This process is designed to ensure that the board of directors includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business. Eligible stockholders wishing to recommend a candidate for nomination should contact our corporate secretary in writing. Such recommendations must include information about the candidate, a statement of support by the recommending stockholder, evidence of the recommending stockholder’s ownership of our stock and a signed letter from the candidate confirming willingness to serve on our board of directors. The committee has discretion to decide which individuals to recommend for nomination as directors.

A stockholder of record can nominate a candidate directly for election to the board of directors by complying with the requirements and procedures in Section 2.5(ii) of our bylaws. For additional information regarding stockholder nominations of director candidates, see “General Information — What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?”

Stockholder and Interested Party Communications with the Board of Directors

Stockholders and interested parties wishing to communicate with a non-management member of the board of directors may do so by writing to such director, and mailing the correspondence to: Vivint Solar, Inc., Attention: Corporate Secretary, 1800 West Ashton Blvd., Lehi, Utah 84043. All such communications will be forwarded to the appropriate committee of the board of directors or non-management director.

Corporate Governance Guidelines

Our board of directors has adopted a set of guidelines that establish the corporate governance policies pursuant to which our board of directors intends to conduct its oversight of the business and affairs of Vivint Solar in accordance with its fiduciary responsibilities. These guidelines address, among other items, the responsibilities of our directors, the structure and composition of our board of directors and corporate governance policies and standards applicable to us in general. Our corporate governance guidelines are posted on the Corporate Governance portion of our website at http://investors.vivintsolar.com/company/investors/corporate-governance/governance-documents.

Code of Business Conduct and Ethics

We are committed to the highest standards of integrity and ethics in the way we conduct our business. Our board of directors has adopted a Code of Business Conduct and Ethics, which applies to all of our employees, officers and directors, including our chief executive officer, chief financial officer, and other executive and senior financial officers. Our code of conduct establishes our policies and expectations with respect to a wide range of business conduct, including preparation and maintenance of financial and accounting information, compliance with laws and conflicts of interest. In accordance with our code of conduct, each of our employees, officers and directors is required to report suspected or actual violations to the extent permitted by law. In addition, our board of directors has adopted separate policies and procedures concerning the receipt and investigation of complaints relating to accounting, internal accounting controls or auditing matters, which are administered by our audit

 

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committee. Our Code of Business Conduct and Ethics is posted on the Corporate Governance portion of our website at http://investors.vivintsolar.com/company/investors/corporate-governance/governance-documents. We will post amendments to our Code of Business Conduct or waivers of our Code of Business Conduct for directors and executive officers on the same website.

Risk Management

Our board of directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by our board committees. Our audit committee represents the board of directors by periodically reviewing our accounting, reporting and financial practices, including the integrity of our consolidated financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal and internal audit functions, the audit committee reviews and discusses all significant areas of our business and summarizes for the board of directors all areas of risk and the appropriate mitigating factors. Our nominating and corporate governance committee assists our board of directors with its responsibility of overseeing the management of board organization, membership and structure, as well as corporate governance. Our compensation committee assists the board of directors by assessing risks created by incentives inherent in our compensation policies.

In addition, our chief executive officer and other executive officers regularly report to the non-executive directors and the audit, compensation and nominating and corporate governance committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. We believe that the policies, structure and leadership of our board of directors and our board committees provide appropriate risk oversight of our activities.

Non-Employee Director Compensation

Directors who are also our employees receive no additional compensation for their service as a director. Compensation for Mr. Bywater, who is our chief executive officer and also became a director in January 2017, is discussed under the caption “Compensation Discussion and Analysis.” We reimburse our directors for expenses associated with attending meetings of our board of directors and meetings of committees of our board.

 

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2019 Director Compensation Table

The following table provides information concerning compensation earned by our non-employee directors during 2019.

 

Name		Fees Earned or paid in Cash ($)				Stock Awards ($)(1)				Total ($)
Todd R. Pedersen(2)			60,000				—				60,000
Joseph S. Tibbetts, Jr.			85,000				130,000				215,000
David D’Alessandro			82,500				130,000				212,500
Bruce McEvoy(3)			—				—				—
Jay D. Pauley(3)			—				—				—
Alex J. Dunn(2)			55,000				—				55,000
Ellen S. Smith(4)			—				—				—
Peter Wallace(3)			—				—				—

 

(1)

Represents the aggregate grant date fair value of stock awards granted in 2019. These amounts have been computed in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718. As of December 31, 2019, our non-employee directors held outstanding restricted stock units as follows: Mr. D’Alessandro (17,808 restricted stock units) and Mr. Tibbetts (17,808 restricted stock units).

(2)	Messrs. Dunn and Pedersen waived their right to receive equity compensation under the director compensation policy described below in the section titled “Board of Directors and Corporate Governance — Director Compensation Program.” Mr. Dunn resigned from the board of directors on March 3, 2020.

(3)	Messrs. McEvoy, Pauley and Wallace have waived their right to receive any compensation under the director compensation policy described below in the section titled “Board of Directors and Corporate Governance — Director Compensation Program.”

(4)	Ms. Smith was appointed to the board of directors effective March 12, 2020 and thus did not receive any compensation under the director compensation policy during 2019.

Director Compensation Program

Based on the recommendation of Frederic W. Cook & Co., Inc., or FW Cook, a compensation advisory firm, on June 24, 2014, our compensation committee recommended, and our board of directors approved, an outside director compensation policy, which became applicable to all of our non-employee directors upon the effective date of our Registration Statement on Form S-1 related to our initial public offering. This policy was amended on September 15, 2014. The terms of the director compensation policy are described below.

Each non-employee director is eligible to receive the following annual cash retainer, which will be paid quarterly in arrears on a prorated basis. Messrs. McEvoy, Pauley and Wallace have waived their right to receive cash compensation under this policy.

 

Annual retainer		$	55,000
Annual retainer for audit committee chairperson			30,000
Annual retainer for audit committee member			10,000
Annual retainer for compensation committee chairperson			15,000
Annual retainer for compensation committee member			7,500
Annual retainer for nominating and corporate governance committee chairperson			10,000
Annual retainer for nominating and corporate governance committee member			5,000

 

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In addition, other than Messrs. McEvoy, Pauley, Pedersen and Wallace, who have waived their right to receive equity compensation under this policy, each non-employee director is eligible to be granted an annual restricted stock unit award with a fair value equal to $130,000 on the date of each of our annual stockholder meetings. Any person who becomes a non-employee director will receive a restricted stock unit award with a value equal to $130,000 multiplied by a fraction, the numerator of which is the number of months between the grant date and the anticipated month of our next annual stockholder meeting and the denominator of which is 12. The anticipated month of our annual stockholder meeting is deemed to be the anniversary month of our last annual stockholder meeting preceding the grant date. The number of shares subject to the restricted stock unit awards will be determined by the closing price of our shares on the grant date of such award. Each restricted stock unit award will vest as to 100% of the underlying shares on the earlier of the first anniversary of the date of grant and the date of our next annual stockholder meeting first occurring after the date of grant, subject to continued service as a board member through such date. In the event of a change of control, each non-employee director will fully vest in his or her restricted stock unit awards.

Compensation Committee Interlocks and Insider Participation

Currently, the members of our compensation committee are Messrs. McEvoy, D’Alessandro and Wallace. None of the foregoing members of our compensation committee currently serves, or in the past year has served, as an officer or employee of Vivint Solar. None of our executive officers, except for Mr. Bywater, currently serves, or in the past year has served, as a member of the board of directors, and none of our executive officers currently serves, or in the past year has served, as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers serving on our board of directors or compensation committee.

 

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PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The audit committee of the board of directors has appointed Ernst & Young LLP, or EY, independent registered public accountants, to audit our financial statements for the year ending December 31, 2020. During the year ended December 31, 2019, EY served as our independent registered public accounting firm.

Notwithstanding its selection and even if our stockholders ratify the selection, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the audit committee believes that such a change would be in the best interests of our company and stockholders. At the 2020 Annual Meeting, the stockholders are being asked to ratify the appointment of EY as our independent registered public accounting firm for the year ending December 31, 2020. Our audit committee is submitting the selection of EY to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of EY will be present at the 2020 Annual Meeting, and they will have an opportunity to make statements and will be available to respond to appropriate questions from stockholders.

If the stockholders do not ratify the appointment of EY, the board of directors may reconsider the appointment.

Fees Paid to the Independent Registered Public Accounting Firm

The following table presents fees for professional audit services and other services rendered to our company by EY for the years ended December 31, 2019 and 2018.

 

		Year Ended December 31,
Fee Category		2019								2018
Audit fees(1)		$	4,478,301							$	3,266,114
Audit-related fees			—								—
Tax fees			—								—
All other fees(2)			3,580								4,915
Total fees		$	4,481,881							$	3,271,029

 

(1)

Audit fees consist of fees for professional services provided in connection with the audit of our annual consolidated financial statements, review of our quarterly consolidated financial statements, procedures for comfort letters, consents and assistance with and review of documents filed with the SEC.

(2)	All other fees consists of fees for accessing EY’s online research database.

Auditor Independence

In 2019, there were no other professional services provided by EY that would have required the audit committee to consider their compatibility with maintaining the independence of EY.

 

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Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Pursuant to its charter, the audit committee must review and approve, in advance, the scope and plans for the audits and the audit fees and approve in advance (or, where permitted under the rules and regulations of the SEC, subsequently) all non-audit services to be performed by the independent auditor that are not otherwise prohibited by law and any associated fees. All fees paid to EY for our fiscal years ended December 31, 2019 and 2018 were pre-approved by our audit committee. The audit committee may delegate to one or more members of the committee the authority to pre-approve audit and permissible non-audit services, as long as this pre-approval is presented to the full committee at scheduled meetings.

 

 

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PROPOSAL NO. 3

ADVISORY VOTE ON VIVINT SOLAR’S

EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Exchange Act and in accordance with SEC rules, we are providing our stockholders with the opportunity to vote at the annual meeting of stockholders on this advisory or non-binding resolution regarding the compensation of our named executive officers (commonly referred to as “say-on-pay”). This say-on-pay proposal gives our stockholders the opportunity to express their views on the compensation of our named executive officers as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies and practices described in this proxy statement. Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to our named executive officers and will not be binding on us, the board of directors or the compensation committee. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our executive compensation philosophy, policies, and practices, which the compensation committee will be able to consider when determining executive compensation for the remainder of the current fiscal year and beyond.

For more information about the compensation that we paid to our named executive officers during 2019, as well as a description of our overall executive compensation philosophy and program, please refer to the “Compensation Discussion and Analysis” section of this Proxy Statement, which we believe demonstrates that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we ask our stockholders to vote “FOR” the following advisory resolution at the 2020 annual meeting of stockholders:

“RESOLVED, that the stockholders of Vivint Solar, Inc. approve, on a non-binding advisory basis, the compensation of the named executive officers, as disclosed in this Proxy Statement for the 2020 Annual Meeting of Stockholders, including the accompanying compensation tables and related narrative discussion, and other related disclosures.”

 

 

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PROPOSAL NO. 4

ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES

ON VIVINT SOLAR’S EXECUTIVE COMPENSATION

Stockholders have the opportunity to advise the board of directors, in a non-binding vote, whether we should conduct an advisory (non-binding) vote to approve named executive officer compensation (that is, votes similar to the non-binding vote in Proposal No. 3 above) every one, two or three years.

While our compensation strategies are related to both the short-term and longer-term business outcomes, we realize that compensation decisions are made annually. We also believe that an annual advisory vote on named executive officer compensation will allow stockholders to provide us with more frequent direct feedback on our compensation disclosures and named executive officer compensation program. The board of directors has determined that holding an advisory vote on named executive officer compensation every year is the most appropriate policy for us at this time, and recommends that stockholders vote for future advisory votes on named executive officer compensation to occur each year.

The frequency that receives the highest number of votes cast will be deemed to be the frequency selected by the stockholders. Because this vote is advisory, it will not be binding on the board of directors. However, the board of directors and the compensation committee will consider the outcome of the stockholder vote, along with other relevant factors, in recommending a voting frequency to our board of directors.

You may cast your vote by choosing the option of one year, two years, three years, or abstain from voting in response to the resolution set forth below:

“RESOLVED, that the option of once every year, two years, or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which Vivint Solar, Inc. is to hold an advisory vote by stockholders to approve the compensation of named executive officers as set forth in the proxy statement relating to Vivint Solar’s Annual Meeting of Stockholders under the section captioned “Compensation Discussion and Analysis,” the tabular disclosure regarding executive compensation, and the accompanying narrative disclosure.”

 

 

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REPORT OF THE AUDIT COMMITTEE

The audit committee of the board of directors is currently comprised of three directors and operates under a written charter originally adopted by the board of directors in May 2014, as amended on March 14, 2019, which charter is reviewed on an annual basis and amended as necessary by the board of directors upon recommendation by the audit committee.

The current members of the audit committee are Joseph S. Tibbetts, Jr., David F. D’Alessandro and Ellen S. Smith. Mr. Tibbetts serves as the chairperson of the audit committee. Each of Messrs. D’Alessandro and Tibbetts and Ms. Smith is an “independent director” as currently defined in 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 of the Exchange Act of 1934. The board of directors has also determined that Mr. Tibbetts is an “audit committee financial expert” as described in applicable rules and regulations of the U.S. Securities and Exchange Commission, or SEC.

The audit committee appoints an accounting firm as our independent registered public accounting firm. The independent registered public accounting firm is responsible for performing an independent audit of our financial statements in accordance with generally accepted auditing standards and issuing a report thereon. Management is responsible for our internal controls and the financial reporting process. The audit committee is responsible for monitoring and overseeing these processes.

The audit committee held six meetings during 2019. The meetings were designed to provide information to the audit committee necessary for it to conduct its oversight function of the external financial reporting activities and audit process of our company, and to facilitate and encourage communication between the audit committee, management and our independent registered public accounting firm, Ernst & Young LLP. Management represented to the audit committee that our financial statements were prepared in accordance with generally accepted accounting principles. The audit committee reviewed and discussed the audited financial statements for fiscal year 2019 with management and the independent registered public accounting firm. The audit committee also instructed the independent registered public accounting firm that the audit committee expects to be advised if there are any subjects that require special attention.

The audit committee discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board, or PCAOB, and the SEC.

The audit committee has also received the written disclosures and the letter from the independent registered public accounting firm, Ernst & Young LLP, required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and has discussed with Ernst & Young LLP that firm’s independence.

Based on its review of the audited financial statements and the various discussions noted above, the audit committee recommended to the board of directors that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended December 31, 2019 for filing with the SEC.

 

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Respectfully submitted,

THE AUDIT COMMITTEE OF

THE BOARD OF DIRECTORS OF

VIVINT SOLAR, INC.*

Joseph S. Tibbetts, Jr., Chairperson

David F. D’Alessandro

* Ellen S. Smith was appointed to the audit committee effective March 12, 2020 and did not participate in the review, meetings, discussions and communications described above.

The material in this report is not “soliciting material,” is not be deemed “filed” with the SEC, and is not to be incorporated by reference into any filing made by Vivint Solar, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

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EXECUTIVE OFFICERS

The names of our executive officers, their ages, their positions with Vivint Solar, and other biographical information as of March 31, 2020, are set forth below. Executive officers are elected by our board of directors to hold office until their successors are elected and qualified. There are no family relationships among our directors or executive officers.

 

Name		Age		Position
David Bywater		50		Chief Executive Officer and Director
Dana C. Russell		58		Chief Financial Officer, Executive Vice President and Assistant Secretary
L. Chance Allred		42		Chief Sales Officer
Bryan Christiansen		46		Chief Operating Officer
Paul S. Dickson		34		Chief Revenue Officer
Thomas G. Plagemann		57		Chief Commercial Officer; Executive Vice President, Capital Markets

Mr. Bywater’s biography can be found under “Board of Directors and Corporate Governance — Nominees for Director.”

Dana C. Russell has served as our chief financial officer and executive vice president since November 2013. From January 2013 to November 2013, Mr. Russell was the chief financial officer of Allegiance, Inc. a software company. Mr. Russell was an independent contractor, providing financial services and business consulting to a number of privately held organizations and individuals from May 2011 to December 2012. From June 2006 through April 2011, Mr. Russell was the senior vice president and chief financial officer of Novell, Inc., a publicly traded software and services company, which was acquired by The Attachmate Group, Inc. From July 1994 to June 2006, Mr. Russell held positions at Novell including, interim chief financial officer, vice president of finance, treasurer and corporate controller. He had broad responsibility overseeing financial and accounting functions as well as investor relations, tax, information services and technology, risk management, corporate development and facilities. Prior to 1994, Mr. Russell held other high-level accounting and finance positions at high tech companies and also worked as an auditor at PricewaterhouseCoopers LLP, a multinational professional services firm. Mr. Russell holds a master’s degree in accounting from Weber State University and holds a CPA license in the State of Utah.

L. Chance Allred has served as our chief sales officer since September 2016, and prior to that, as our senior vice president of sales from June 2015 to September 2016 and as our vice president of sales from March 2012 to June 2015. From September 2006 to March 2012, Mr. Allred served as a founding partner and vice president of sales for Platinum Protection, LLC, a home security solutions company. From March 2000 to October 2006, Mr. Allred served in various positions for Vivint, Inc. Mr. Allred holds a B.A. in marketing from Southern Utah University.

Bryan Christiansen has served as our chief operating officer since September 2016, and prior to that, as our chief strategy and innovation officer beginning in June 2016. Mr. Christiansen worked for Vivint, Inc. as vice president, internet operations from January 2015 to May 2016, and prior to that, as vice president, operations improvement from September 2014 to January 2015. From January 2012 to September 2013, Mr. Christiansen served as a senior vice president and managing director of Xerox Corporation, Inc., and as senior vice president from

 

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January 2011 to January 2012. Mr. Christiansen holds a B.S. in Business Management / International Finance from Brigham Young University and an MBA from Duke University.

Paul S. Dickson, a member of our founding management team, has served as our chief revenue officer since September 2016, and prior to that, as our senior vice president of operations from June 2015 to September 2016 and as our vice president of operations from November 2013 to June 2015. From May 2011 to November 2013, Mr. Dickson served as our vice president of financing. Prior to joining our founding team, Mr. Dickson served as the director of smart grid and energy management for Vivint, Inc. from December 2010 to May 2011. From May 2007 to December 2010, Mr. Dickson co-founded and served as the president and chief executive officer of Meter Solutions Pros, LLC, an energy management and smart-grid business acquired by Vivint, Inc. Mr. Dickson holds a B.A. in communications from Brigham Young University.

Thomas G. Plagemann has served as our executive vice president, capital markets since October 2013, and also as our chief commercial officer since September 2016. Mr. Plagemann previously served as the head of energy, U.S. corporate & investment banking for Santander Global Banking & Markets from May 2012 to October 2013, and the global head of project finance and transaction execution at First Solar, Inc., a solar company from March 2011 to May 2012. Mr. Plagemann formed and served as the president of Grand Avenue Capital LLC from September 2010 through February 2011. From September 2009 to July 2010, Mr. Plagemann served as the head of mergers and acquisitions for the wind division of Infigen Energy Limited, a wind energy company. From September 2004 to September 2009, Mr. Plagemann served as the managing director of tax equity and energy investment at AIG Financial Products, Inc., a financial services company. Mr. Plagemann also has held positions at General Electric Capital Corporation and Deutsche Bank, and has served as a member of the board of directors of Solar Energy Industries Association, or SEIA, since 2013 and the chair of SEIA’s state policy committee since January 2017. Mr. Plagemann holds a B.A. from the University of Minnesota and a master’s degree in international affairs from Columbia University.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the material elements of our executive compensation program during 2019. It also provides an overview of our executive compensation philosophy, including our principal compensation policies and practices, and analyzes how and why we arrived at the specific compensation decisions for our executive officers, including our named executive officers, in 2019. During 2019, our named executive officers were:

 

•

David Bywater, our chief executive officer;

 

•

Dana C. Russell, our chief financial officer, executive vice president and assistant secretary;

 

•

L. Chance Allred, our chief sales officer;

 

•

Paul S. Dickson, our chief revenue officer; and

 

•

Thomas G. Plagemann, our chief commercial officer; executive vice president, capital markets.

Executive Summary

Overview of the Executive Compensation Program

Our executive compensation program is designed to be competitive and appropriately balance our goals of attracting, motivating, rewarding, and retaining our executive officers. To align our executive officers’ interests with those of our stockholders and to motivate and reward individual initiative and effort, a substantial portion of each executive officer’s target annual total direct compensation opportunity is “at-risk,” meaning the amounts paid to each executive officer will vary based on our company performance and their contributions to that performance.

We emphasize performance-based compensation that appropriately rewards our executive officers for delivering financial, operational, and strategic results relative to pre-established annual goals through our cash bonus plan. To deliver long-term incentive compensation, we grant our executive officers equity awards to acquire our common stock via stock option and restricted stock unit, or RSU.

In 2019, a meaningful portion of each named executive officer’s total target annual direct compensation was at-risk and performance-based, which was comprised of annual cash bonus opportunities and at-risk equity in the form of stock options and RSUs. In 2019, at-risk pay made up approximately 50% of the total target annual direct compensation opportunity for each of our named executive officers.

The percentages above were calculated using base salary, annual cash bonus opportunities (rather than the amounts for 2019), and the grant date fair value of stock option and RSU awards (rather than the value realized in 2019 from previously granted equity awards) as reported in the Summary Compensation Table.

 

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2019 Business Highlights

We believe our executive compensation program was instrumental in helping us achieve strong financial performance in 2019. For 2019, we achieved:

 

•

Revenue of $341 million, up 17% year-over-year;

 

•

Megawatts Installed of 233, up 19% year-over-year and the largest annual installation figure in our history;

 

•

Adjusted net present value per watt of $0.97, or $226 million in estimated margin created for the year; and

 

•

Estimated net retained value of $1.2 billion, up $123 million from 2018, representing $9.99 per share outstanding.

2019 Executive Compensation Highlights

To continue to provide compensation that is competitive and offers incentives for growth in our business, we took these key executive compensation actions for 2019:

 

•

Base Salaries — We did not increase the base salaries in 2019 for any of our named executive officers, except with respect to Mr. Plagemann, which increase was accompanied by an equivalent reduction in his annual incentive compensation opportunity as described in “Individual Compensation Elements” below.

 

•

Annual Cash Bonus — We designed our 2019 executive annual cash bonus plan, or the 2019 Bonus Plan, to focus on two key corporate performance measures — Cost per Watt and Megawatts Installed — as well as individualized key performance indicator targets, or KPIs, setting rigorous targets for each that were achievable only through focused leadership efforts by our executive team. Achievement against the targets for the 2019 Bonus Plan performance measures resulted in an aggregate calculated payment percentage of 100% of target levels.

 

•

Long-Term Equity Incentive Compensation — We granted annual long-term incentive compensation opportunities in the form of stock option and RSU awards consistent with market practices and our equity compensation philosophy, to align the economic interests of our executive officers with our stockholder interests. These awards generally vest over four years. We also made one-time retention equity awards in the form of stock option and RSU awards to our named executive officers, as described in “— Individual Compensation Elements” below.

Executive Compensation Policies and Practices

We maintain sound governance standards consistent with our executive compensation policies and practices. The compensation committee evaluates our executive compensation program regularly to ensure that it is consistent with our short-term and long-term goals given

 

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the dynamic nature of our business and the market in which we compete for executive talent. These policies and practices were in effect during 2019:

 

What We Do		What We Don’t Do
✓   Compensation At-Risk. Our executive compensation program is designed so a significant portion of compensation is “at risk” based on our performance through our short-term cash incentive compensation opportunities.		×   No Tax Reimbursements on Severance or Change in Control Payments. We do not provide any tax reimbursement payments (including “gross-ups”) on any severance or change-in-control payments or other related benefits.
✓   Independent Compensation Committee Advisor. The compensation committee engaged its own compensation consultant to assist with its 2019 compensation reviews. This consultant performed no other consulting or other services for us.		×   No Special Retirement Plans. We do not offer, nor do we have plans to provide, pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements exclusively to our executive officers.
✓   Annual Executive Compensation Review. The compensation committee conducts an annual review and approval of our compensation strategy.		×   No Special Health or Welfare Benefits. Our executive officers participate in the same company-sponsored health and welfare benefits programs as our other full-time, salaried employees.
✓   Multi-Year Vesting/Performance Requirements. The equity awards granted to our executive officers vest or are earned over multi-year periods, consistent with current market practice and our retention objectives.		×   No “Single Trigger” Change-in-Control Arrangements. No change-in-control payments or benefits are triggered simply by the occurrence of a change in control. All change-in-control payments and benefits are based on a “double-trigger” arrangement (that is, they require both a change in control of our company plus a qualifying termination of employment before payments and benefits are paid).
		×   No Hedging and Pledging. We prohibit our employees, including our executive officers, and directors from pledging our securities or engaging in hedging transactions with respect to our securities.

Impact of the COVID-19 Pandemic on Executive Compensation

COVID-19 infections were first reported in Wuhan, China in December 2019, and in March 2020 the World Health Organization declared the global COVID-19 outbreak a pandemic. In response to the COVID-19 pandemic, government authorities in the geographies in which we operate have ordered businesses to close and people to remain at home while imposing significant restrictions on traveling and social gatherings, impacting our ability to conduct direct home sales and, in some jurisdictions, install systems. There continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak, further actions that may be taken by governmental authorities to contain the virus or to treat its impact, and the scope and length of the resulting economic downturn.

 

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As a result of the business and market volatility caused by the COVID-19 pandemic, our board of directors approved the following temporary actions related to executive compensation beginning in April 2020 and lasting until June 15, 2020:

 

•

a reduction in the base pay rate of 30% for Mr. Bywater, our chief executive officer, and 20% for each of our other named executive officers; and

 

•

the suspension of the employer match in our 401(k) profit-sharing plan.

Our board of directors and compensation committee will continue to evaluate further executive compensation measures as the full impact of the COVID-19 pandemic on our operating results, growth prospects and financial condition becomes more certain.

Executive Compensation Philosophy and Program Design

Our executive compensation program is guided by our overarching philosophy of only paying for performance. Consistent with this philosophy, we designed our executive compensation program to:

 

•

Provide compensation and benefit levels that will attract, retain, motivate, and reward a highly-talented team of executive officers within the context of responsible and balanced cost management;

 

•

Establish a direct link between our financial and operational results and strategic objectives and the compensation of our executive officers; and

 

•

Align the interests and objectives of our executive officers with those of our stockholders by linking the long-term incentive compensation opportunities to stockholder value creation and cash incentives to our annual performance.

We structure the annual compensation of our executive officers, including the named executive officers, using three principal elements: base salary, annual incentive compensation opportunities in the form of cash bonuses and long-term incentive compensation opportunities in the form of stock options and RSU awards. The design of our executive compensation program is influenced by many factors, but the primary goals are always to align the interests of our executive officers and stockholders by linking pay with performance.

Governance of Executive Compensation Program

Compensation-Setting Process

We do not set a benchmark when setting the target total direct compensation opportunity of our executive officers, including our named executive officers. When setting each compensation element, the compensation committee considers these factors:

 

•

our performance against the financial and operational objectives established by our board of directors;

 

•

each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;

 

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•

each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;

 

•

the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and success in working as part of a team, all of which reflect our core values;

 

•

the recommendations of our chief executive officer for each executive officer other than with respect to his own compensation;

 

•

compensation parity among our executive officers;

 

•

our financial performance relative to our peers; and

 

•

the compensation practices of our compensation peer group and the positioning of each executive officer’s compensation in a ranking of peer company compensation levels.

These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer.

Role of the Compensation Committee

The compensation committee reviews and makes decisions relating to the compensation of our executive officers. These responsibilities include determining with respect to our executive officers: their annual base salaries; annual cash bonus opportunities; long-term incentive compensation; employment offers (including post-employment compensation arrangements); and other compensation, perquisites, and other personal benefits, if any. The compensation committee’s review of the base salary levels, annual cash bonus opportunities, and long-term incentive compensation opportunities of our executive officers generally occurs in our third fiscal quarter, or more frequently as warranted.

Role of Executive Officers

Our chief executive officer and other members of our management team assist the compensation committee in making decisions regarding compensation for our executive officers, including our named executive officers, by providing information on corporate and individual performance, market data, and their perspective on compensation matters. The compensation committee solicits and reviews our chief executive officer’s recommendations and proposals regarding adjustments to annual cash bonus opportunities, long-term incentive compensation opportunities, program structures, and other compensation-related matters for our executive officers (other than with respect to his own compensation). The compensation committee reviews and discusses these recommendations and proposals with our chief executive officer and uses them as one factor in determining the compensation for our executive officers. No member of the management team participates in any discussions or makes any recommendations regarding his or her own compensation.

 

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Role of Compensation Consultant

The compensation committee engages an external compensation consultant to assist it in formulating recommendations regarding compensation to the board of directors by providing information, analysis, and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review. For 2019, the compensation committee retained FW Cook, a national compensation consulting firm, to serve as its compensation advisor. FW Cook serves at the discretion of the compensation committee.

During 2019, FW Cook provided these services:

 

•

provided competitive market data based on the compensation peer group and broader compensation surveys for our executive officer positions and evaluated how the compensation we pay our executive officers compares both to our performance and to how the companies in our compensation peer group compensate their executives;

 

•

assessed executive compensation trends within our industry, and provided updates on corporate governance and regulatory issues and developments;

 

•

reviewed market equity compensation practices, including “burn rate” and “overhang”; and

 

•

consulted with the compensation committee chairperson and other members between compensation committee meetings.

In 2019, FW Cook provided no services to us other than the consulting services to the compensation committee. The compensation committee regularly reviews the objectivity and independence of the advice provided by its compensation consultant on executive compensation. In 2019, the compensation committee considered the six specific independence factors adopted by the SEC and reflected in the listing standards of the NYSE and determined that the work of FW Cook raised no conflicts of interest.

Competitive Positioning

To compare our executive compensation against the competitive market, the compensation committee reviews and considers the compensation levels and practices of a group of comparable technology companies. The companies in this compensation peer group were selected on the basis of their similarity to us in characteristics such as revenue, market capitalization, size and industry focus.

In September 2017, with the assistance of FW Cook, the compensation committee developed a compensation peer group to reflect our key financial attributes and recognize our business focus. For 2019, the executive compensation peer group consisted of the companies identified below (which largely remain the same as in the previous years), as recommended by the compensation committee’s independent compensation consultant and approved by the compensation committee. The companies in this executive compensation peer group were

 

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selected because they met criteria based on similarity of their business and pay models, market capitalization, annual revenues and also compete with Vivint Solar for talent or capital.

 

Advanced Energy		Generac Holdings		Regal Beloit
Clean Energy Fuels		Hubbell		Silver Spring Networks
EnerSys		Ormat Technologies		SunPower
First Solar		Pattern Energy		Sunrun
FutureFuel		Power Integrations		TerraVia

To analyze the compensation practices of the companies in our compensation peer group, FW Cook gathered data from the public filings of the peer group companies informed by three representative, size-adjusted general industry surveys and one size-adjusted technology industry specific survey. This market data was then used as a reference point for the compensation committee to assess our current compensation levels in its deliberations on compensation forms and amounts.

The compensation committee reviews our compensation peer group annually and may make adjustments to its composition, considering changes in both our business and the businesses of the companies in the peer group.

Individual Compensation Elements

In 2019, the primary elements of our executive compensation program were base salary, annual cash incentive compensation opportunities, and long-term equity incentive compensation in the form of stock option and RSU awards.

Base Salary

The FW Cook report used a “proxy and survey blend” to assess competitiveness of compensation in its September 2019 and September 2018 reports.

Base salary represents the fixed portion of the compensation of our executive officers and is an important element of compensation intended to attract and retain highly-talented individuals. We establish the initial base salaries of our executive officers through arm’s-length negotiation when we hire the individual executive officer, considering the relevant position, qualifications, experience, and the base salaries of our other executive officers. The compensation committee reviews the base salaries of our executive officers annually and makes adjustments as it determines necessary or appropriate.

In September 2018, the compensation committee reviewed the base salaries of our executive officers considering a competitive market analysis prepared by FW Cook, the recommendations of our management team, and the other factors described above. While the compensation committee does not benchmark base salary to any specific percentile, it does position base salaries within a competitive range of the market median. Following this review, and except for Mr. Plagemann as described below, the compensation committee determined the base salaries of our named executive officers were appropriate and did not make any adjustments to their base salaries.

 

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For Mr. Plagemann, the compensation committee, with input from management and FW Cook, increased Mr. Plagemann’s base salary effective in January 2019. This increase was made in order to provide a greater percentage of Mr. Plagemann’s total target annual cash compensation opportunity in the form of fixed cash compensation, which percentage is consistent with market practices of similarly situated executives and those of our executive team. Mr. Plagemann’s base salary increase was paired with an equivalent reduction in his target annual incentive compensation, as discussed below, resulting in no change to Mr. Plagemann’s total target annual cash compensation opportunities from 2018.

The base salaries of the named executive officers for 2019 were:

 

Named Executive Officer		2018 Base Salary				2019 Base Salary				Percentage Adjustment
David Bywater		$	660,000			$	660,000				0	%
Dana C. Russell		$	450,000			$	450,000				0	%
L. Chance Allred		$	350,000			$	350,000				0	%
Paul S. Dickson		$	350,000			$	350,000				0	%
Thomas G. Plagemann(1)		$	350,000			$	500,000				42.9	%

 

(1)	Mr. Plagemann’s 2019 base salary increase was effective January 1, 2019.

Annual Cash Bonuses

All of our named executive officers participated in our 2019 Bonus Plan. The amount that each participating named executive officer could earn under the 2019 Bonus Plan was based on our achievement of two key corporate performance measures as well as individual KPIs.

The 2019 Bonus Plan was designed to motivate our participating named executive officers to drive execution of our annual operating plan by emphasizing Cost per Watt and Megawatts Installed and individualized KPIs. Payment under the 2019 Bonus Plan was tied to our actual achievement against the pre-established target levels for each of the corporate performance measures as well as the compensation committee’s determination of achievement of the individual KPIs.

Target Annual Cash Incentive Compensation Opportunities

Each named executive officer was assigned a target annual cash incentive compensation opportunity under our 2019 Bonus Plan, which was calculated as a percentage of his annual base salary for 2019. In September 2018, the compensation committee reviewed the target annual cash incentive compensation opportunities of our executive officers, considering a competitive market analysis prepared by FW Cook. The compensation committee generally references the 75th percentile within our peer group when assessing and making determinations of target annual cash opportunities (base salary plus target bonus) for our executive officers. Following this review, and except for Mr. Plagemann as described below, the compensation committee determined the target annual cash incentive compensation opportunities of our named executive officers were appropriate and did not make any adjustments to these opportunities.

The target annual cash bonus opportunity for Mr. Plagemann was reduced from 186% to 100% of his base salary resulting in a 23% reduction in target annual bonus value from 2018

 

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to 2019 from $650,000 to $500,000, as described in greater detail in the “Base Salary” section above.

The target annual corporate cash bonus opportunities of the named executive officers for 2019 were:

 

Named Executive Officer		Target 2019 Bonus Plan Opportunity (as a percentage of base salary)				Target 2019 Bonus Plan Opportunity
David Bywater			99	%		$	650,100
Dana C. Russell			50	%		$	225,000
L. Chance Allred			50	%(1)		$	175,000
Paul S. Dickson			50	%(1)		$	175,000
Thomas G. Plagemann			100	%		$	500,000

 

(1)	Does not include target payment opportunities under the 2019 sales bonus plan.

2019 Bonus Plan Design

In January 2019, the compensation committee approved the 2019 Bonus Plan performance measures, the related target levels and the payment percentages for each of the performance measures. The performance measures for our 2019 Bonus Plan were based on our corporate achievement against two key corporate performance measures for our business: Cost per Watt (25% weighting) and Megawatts Installed (25% weighting) as well as individual KPIs (50% weighting). These performance measures (and their relative weighting) are designed to balance profitability with growth, thus enhancing stockholder value. We believed this balance would drive and focus our executive officers toward propelling growth without detracting from our ultimate performance.

The target levels for each of these performance measures were reviewed and approved by our compensation committee, with input from our management. These target levels were set to be achievable through diligent effort, and to reward strong management performance in light of our strategic objectives and the industry and economic conditions and trends at the time the target levels were set. Cost per Watt was defined the unit costs of installed solar energy systems on customers’ premises. Megawatts Installed was defined as aggregate megawatt nameplate capacity of solar energy systems for which panels, inverters, and mounting and racking hardware have been installed on customer premises in the period.

For the corporate performance measures under our 2019 Bonus Plan, if we achieved Cost per Watt in 2019 of $3.51 and Megawatts Installed in 2019 of 160, then the payout percentage with respect to those measures would be 75% increasing proportionally based on the relative achievement of Cost per Watt to Megawatts Installed in 2019 up to a maximum payout percentage with respect to those measures of 120% for Cost per Watt in 2019 of $3.16 or less and Megawatts Installed in 2019 of 230 or more.

KPI performance is based on a qualitative assessment of each executive officer’s individual performance for 2019 by considering criteria such as professional effectiveness, leadership, and strategic and operational execution. Mr. Bywater recommended the KPI goal achievement levels for the executive officers (except himself) to the compensation committee. The achievement of Mr. Bywater’s KPI goal was determined by the compensation committee.

 

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2019 Bonus Plan Payments

In January 2020, the compensation committee determined the achievement of Cost per Watt was $3.52, our Megawatts Installed achievement was 233 and the individualized KPIs for the named executive officers were determined to be achieved at 100% of target. After considering our achievement for these metrics, the overall success of our business, and each named executive officer’s contributions to those achievement, the compensation committee exercised the discretion it reserved under the 2019 Bonus Plan to set the funding level at 100%. Payment of all earned bonuses to our named executive officers participating in the 2019 Bonus Plan was made in a lump sum payment in January 2020.

The amount of payments made to each named executive officer under the 2019 Bonus Plan is set forth in the “Non-Equity Incentive Compensation” column in the Summary Compensation Table below.

2019 Sales Bonus Plan Design and 2019 Sales Bonus Plan Payments

In addition to our 2019 Bonus Plan, Messrs. Allred and Dickson participate in our 2019 Sales Bonus Plan. Pursuant to each of their Executive Employment Agreements, each of Messrs. Allred and Dickson are eligible to receive (1) a monthly override of two tenths of a cent ($0.002) for every watt that we install during each calendar month and (2) a quarterly override of $10 per account for every smart home account generated by our company that is installed by Vivint Smart Home pursuant to the Amended and Restated Sales Dealer Agreement between us and Vivint Smart Home. This commission structure may be revised as determined by the board of directors or the compensation committee with a view toward consideration of merit increases, market rates of pay for similarly situated executives and such other factors that the board of directors or the compensation committee determines to be appropriate.

The 2019 Sales Bonus Plan payments to the named executive officers for 2019 were:

 

Named Executive Officer		2019 Sales Bonus Plan Payment
L. Chance Allred		$	453,021.16
Paul S. Dickson		$	453,021.16

The amount of payments made to each participating named executive officer under the 2019 Sales Bonus Plan is set forth in the “Non-Equity Incentive Compensation” column in the Summary Compensation Table below.

Long-Term Incentive Compensation

Annual Grants

The compensation committee believes long-term incentive compensation in the form of equity awards is an effective means for focusing our executive officers, including the named executive officers, on driving increased stockholder value over a multi-year period, provides a meaningful reward for appreciation in our stock price and long-term value creation, and motivates them to remain employed with us. In 2019, the compensation committee continued its multi-year practice of granting an equal valued blend of stock option and RSU awards to our executive

 

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officers to deliver these annual long-term incentive compensation opportunities to our executive officers. We make annual grants to smooth the effects of the potential fluctuation in share price and to replace the incentive and retention power decreases as outstanding awards vest. Our annual grants are typically made in second half of our fiscal year.

As with our other elements of compensation, the compensation committee assesses and determines the amount of long-term incentive compensation for our executive officers as part of its annual compensation review and after considering a competitive market analysis prepared by FW Cook, the recommendations of our chief executive officer (except with respect to his own long-term incentive compensation), the outstanding equity holdings of each executive officer, the projected impact of the proposed awards on our earnings, the proportion of our total shares outstanding used for annual employee long-term incentive compensation awards (our “burn rate”) in relation to the companies in our compensation peer group, the potential voting power dilution to our stockholders (our “overhang”) in relation to the companies in our compensation peer group, and the other factors described above.

The compensation committee granted to our executive officers, including our named executive officers, equity compensation awards with the grant date value of those awards split evenly split between time-based stock option and RSU awards, or the 2019 Annual Equity Program. In determining the size of the awards under the 2019 Annual Equity Program, the compensation committee did not target a specified percentile of our peer group, but remained consistent with the grant date value of awards made in past years as part of our budgeted annual grant practice. Our compensation committee approved the equity awards to our chief executive officer in December 2019 and to our other named executive officers in September 2019. All awards granted under the 2019 Annual Equity Program vest 25% after one year and then in equal quarterly increments over the following three years. The equity awards granted to the named executive officers under the 2019 Annual Equity Program were:

 

Named Executive Officer		Stock Option Awards (shares)				RSU Awards (shares)				Equity Awards (Aggregate Grant Date Fair Value)(1)
David Bywater			277,161				161,290			$	2,500,000
Dana C. Russell			44,444				27,063			$	400,000
L. Chance Allred			33,333				20,297			$	300,000
Paul S. Dickson			33,333				20,297			$	300,000
Thomas G. Plagemann			33,333				20,297			$	300,000

 

(1)	Awards divided evenly in value between stock options and RSU awards based on the Black-Scholes value of the stock options and the fair value of RSU awards on the date of grant.

One-time Retention Grants

In January 2019, our compensation committee made a one-time grant of equal grant date value of stock option and RSU awards to our chief executive officer. The compensation committee commissioned FW Cook to perform an analysis of whether Mr. Bywater’s unvested equity position had sufficient retentive power. It was determined that the retentive power was insufficient, and FW Cook suggested that this insufficiency be rectified through the one-time grant. These awards vest 25% after one year and quarterly thereafter for the next three years.

In February 2019, our compensation committee made a one-time grant of equal grant date fair value of stock option and RSU awards to select members of our executive leadership

 

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team, including our named executive officers (other than our chief executive officer) sized at approximately 150% of the annual grant value to certain members of our executive leadership team, including our executive officers. These awards will vest 100% upon the earlier of three years from the date of grant or a change in control subject to the recipient’s continued service with us. The compensation committee determined that the retention grants were desirable in order to retain our key contributors over the long-term, focus them on the successful growth of the business, and promote ownership of our common stock by our executive leadership team, all of which serve to enhance the alignment between their interests and the interests of our stockholders.

The one-time equity awards granted to the named executive officers in 2019 were:

 

Named Executive Officer		Stock Option Awards (shares)				RSU Awards (shares)				Equity Awards (Aggregate Grant Date Fair Value)(1)
David Bywater			929,368				599,520			$	5,000,000
Dana C. Russell			88,235				57,361			$	600,000
L. Chance Allred			66,176				43,021			$	450,000
Paul S. Dickson			66,176				43,021			$	450,000
Thomas G. Plagemann			66,176				43,021			$	450,000

 

(1)	Awards divided evenly in value between stock options and RSU awards based on the Black-Scholes value of the stock options and the fair value of RSU awards on the date of grant.

Retirement, Welfare and Health Benefits

Our named executive officers are eligible to participate in our employee benefit programs on the same basis as our other full-time, salaried employees. We sponsor a 401(k) profit-sharing plan, which is intended to qualify for favorable tax treatment under Section 401(a) of the Internal Revenue Code of 1986, as amended, or the Code. This plan provides our eligible employees with an opportunity to save for retirement on a tax advantaged basis, and participants are able to defer a portion of their eligible compensation. All participants’ interests in their deferrals are 100% vested when contributed. The 401(k) plan permits us to make discretionary matching and profit-sharing contributions to eligible participants. In 2019, we matched 0.33% of each participant’s eligible compensation for every 1% such participant contributed to the 401(k) plan each pay period, up to a maximum 2% matching contribution.

Our health and welfare benefits include medical, dental and vision benefits, disability insurance, basic life insurance coverage, health savings accounts, and accidental death and dismemberment insurance. We design our employee benefits programs to be affordable and competitive in relation to the market, and compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon changes in applicable laws and market practices.

Perquisites and Other Personal Benefits

We do not provide perquisites or other personal benefits to our executive officers, including the named executive officers, except in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes. In 2019, we continued to

 

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provide perquisites to certain executive officers in furtherance of these goals, including the use of a leased company vehicle, a tax gross-up payment for vehicle-related expense, and incentive trips.

We may continue to provide perquisites or other personal benefits in limited circumstances, such as those currently offered to certain of our executive officers, as described below in the Summary Compensation Table. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the compensation committee.

Employment Offer Letters and Agreements

We have entered into written employment arrangements with each of our executive officers, including the named executive officers. Each of these agreements was approved on our behalf by the compensation committee or, in certain instances, by our board of directors.

In filling each of our executive positions, our board of directors or the compensation committee recognized that it would need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. Our board of directors and the compensation committee were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations.

For information on the specific terms and conditions of the employment arrangements of the named executive officers, see the discussion of “Executive Employment Arrangements” below.

Post-Employment Compensation

We have entered into written arrangements with each of our executive officers, including the named executive officers, providing for post-employment compensation. These arrangements are set forth in each officer’s employment agreement or in some cases, in a separate letter agreement. Having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified executive officers. Our post-employment compensation arrangements are designed to provide reasonable compensation to executive officers who leave us under certain circumstances to facilitate their transition to new employment. Further, we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.

We do not consider specific amounts payable under these post-employment compensation arrangements when establishing annual compensation. We believe, however, these arrangements are necessary to offer compensation packages that are competitive.

These arrangements align the interests of management and stockholders when considering our long-term future. The primary purpose of these arrangements is to keep our most senior executive officers focused on pursuing corporate transaction activity in the best interests of stockholders regardless of whether those transactions may cause their own job loss.

 

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All payments and benefits if a change of control occurs are payable only if there is a subsequent loss of employment by an executive officer (a so-called “double-trigger” arrangement). With the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against losing retention power following a change in control and to avoid windfalls, both of which could occur if vesting accelerated automatically because of the transaction. We also provide severance payments under these arrangements for certain qualifying terminations of employment occurring outside the change of control context.

For information on the change of control and severance arrangements for the named executive officers, and an estimate of the potential payments and benefits payable under these agreements as of the end of 2019, see “Potential Payments Upon Termination or Change in Control” below.

Other Compensation Policies and Practices

Policy Prohibiting Hedging or Pledging of Our Equity Securities

Our insider trading compliance policy prohibits all our employees, including our executive officers, and the members of our board of directors from engaging in derivative securities transactions, including hedging, regarding our ordinary shares and from pledging company securities as collateral or holding company securities in a margin account.

Tax and Accounting Considerations     

Deductibility of Executive Compensation

Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our CEO and certain other current and former executive officers who are “covered employees” within the meaning of Section 162(m) of the Code to $1 million per individual per year, subject to certain limited exceptions. In approving the amount and form of compensation for our named executive officers in the future, we generally consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m) of the Code, as well as our need to maintain flexibility in compensating executive officers in a manner designed to promote our goals. We may, in our judgment, authorize compensation payments that will or may not be deductible when we believe such payments are appropriate to attract, retain or motivate executive talent.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718, or FASB ASC Topic 718, for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and members of our board of directors, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may realize no value from their awards.

 

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Compensation Committee Report

The compensation committee has reviewed and discussed with management the “Compensation Discussion and Analysis” section included in this proxy statement, and based on such review and discussion, the compensation committee recommended to our board of directors that this “Compensation Discussion and Analysis” section be included in this proxy statement.

Respectfully submitted,

THE COMPENSATION COMMITTEE OF

THE BOARD OF DIRECTORS OF

VIVINT SOLAR, INC.

Peter F. Wallace, Chairperson

Bruce McEvoy

David F. D’Alessandro

The material in this report is not “soliciting material,” is not be deemed “filed” with the SEC, and is not to be incorporated by reference into any filing made by Vivint Solar, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

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Executive Officer Employment Arrangements

David Bywater

We entered into a confirmatory employment letter with Mr. Bywater in December 2016 in connection with his appointment as our permanent chief executive officer. This confirmatory letter does not have a specific term and provides that Mr. Bywater is an at-will employee. Mr. Bywater’s current annual base salary is $660,000 with annual target incentive payments equal to $650,100. The letter also indicated that, beginning with our annual grant cycle in 2018 and each year thereafter, we expect, but are not obligated, to grant Mr. Bywater long-term incentive awards under the 2014 Equity Incentive Plan with an aggregate grant date fair value equal to or greater than $2,000,000, subject to approval of the board of directors or an authorized committee at such time. Mr. Bywater is also provided with the use of a leased company vehicle, a gas card paid by us, a tax gross-up payment for car-related expenses, and an individual excess employee liability insurance policy.

Dana C. Russell

We have entered into an executive employment agreement with Dana C. Russell, our chief financial officer and executive vice president. This executive employment agreement does not have a specific term and provides that Mr. Russell is an at-will employee. Mr. Russell’s current annual base salary is $450,000, and he is eligible for annual target incentive payments pursuant to our annual bonus plan equal to 50% of his base salary. Mr. Russell is also provided with the use of a leased company vehicle, a gas card paid by us and tax gross-up payments for car-related expenses.

 

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L. Chance Allred

We have entered into an executive employment agreement with L. Chance Allred, our chief sales officer. This executive employment agreement does not have a specific term and provides that Mr. Allred is an at-will employee. Mr. Allred’s current annual base salary is $350,000, and he is eligible for annual target incentive payments pursuant to our annual bonus plan equal to 50% of his base salary. Mr. Allred is also eligible to participate in our Sales Bonus Plan, as described in “2019 Sales Bonus Plan Design” above.

Paul S. Dickson

We have entered into an executive employment agreement with Paul S. Dickson, our chief revenue officer. This executive employment agreement does not have a specific term and provides that Mr. Dickson is an at-will employee. Mr. Dickson’s current annual base salary is $350,000, and he is eligible for annual target incentive payments pursuant to our annual bonus plan equal to 50% of his base salary. Mr. Dickson is also eligible to participate in our Sales Bonus Plan, as described in “2019 Sales Bonus Plan Design” above.

Thomas G. Plagemann

Effective January 2019, we entered into a new executive employment agreement with Mr. Plagemann that amended and restated his previous employment letter. This executive employment agreement does not have a specific term and provides that Mr. Plagemann is an at-will employee. Mr. Plagemann’s annual base salary under the executive employment agreement is $500,000, and he is eligible for annual target incentive payments pursuant to our annual bonus plan equal to 100% of his base salary.

 

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Summary Compensation Table

The following table summarizes the compensation that we paid during 2019, 2018 and 2017 to the individuals serving as our principal executive officer, our principal financial officer and each of our three other most highly compensated executive officers as of December 31, 2019. We refer to these officers as our named executive officers.

 

Name and Principal Position		Year				Salary ($)				Bonus ($)				Stock Awards ($)(1)				Option Awards ($)(1)				Non-equity Incentive Plan Compensation ($)(2)				All Other Compensation ($)				Total ($)
David Bywater			2019				660,000				—				3,750,000				3,750,000				650,100				178,201	(3)			8,988,301
Chief Executive Officer			2018				660,000				—				1,000,000				1,000,000				650,100				55,545	(3)			3,365,645
			2017				660,000				300	(5)			—				—				598,092				72,619	(3)			1,331,011
Dana C. Russell			2019				450,000				300	(5)			500,000				500,000				225,000				131,456	(4)			1,806,756
Chief Financial Officer and Executive Vice President			2018				450,000				1,000,000				1,200,000				200,000				225,000				58,408	(4)			3,133,408
			2017				450,000				—				499,998				299,999				207,000				76,048	(4)			1,533,045
L. Chance Allred			2019				350,000				—				375,000				375,000				637,256				11,548	(8)			1,748,804
Chief Sales Officer			2018				350,000				—				150,000				150,000				568,279				384	(8)			1,218,663
			2017				350,000				300	(5)			549,999				150,000				257,488				2,609	(8)			1,310,396
Paul S. Dickson			2019				350,000								375,000				375,000				649,256				10,615	(9)			1,759,871
Chief Revenue Officer			2018				350,000				300	(5)			150,000				150,000				568,279				288	(9)			1,218,867
			2017				350,000				200,600	(7)			549,999				150,000				257,488				2,498	(9)			1,510,585
Thomas G. Plagemann			2019				496,538				—				375,000				375,000				500,000				2,394	(6)			1,748,932
Chief Commercial Officer; Executive Vice President, Capital Markets			2018				350,000				—				150,000				150,000				1,575,500				1,632	(6)			2,227,132
			2017				350,000				—				200,000				150,000				653,750				972	(6)			1,354,722

 

(1)

Amounts shown in this column do not reflect dollar amounts actually received by our named executive officers. Instead, these amounts reflect the aggregate grant date fair value of the restricted stock units or stock options granted, computed in accordance with the provisions of FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 16 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 10, 2020. Each award was determined and approved by our board of directors in its discretion.

(2)	Consists of bonus payments and, for each of Messrs. Allred and Dickson, commissions of $453,021.16 received under our non-equity incentive compensation plans. See “Executive Compensation — Non-Equity Incentive Compensation Plan.”

(3)

Includes $56,764 in gain relating to the purchase of a vehicle in 2019 and $45,145 as a tax-gross-up relating to the vehicle, as well as $31,302, $30,135 and $30,135 for the use of the company vehicle in 2019, 2018 and 2017, respectively, and $24,950, $24,480 and $34,865 as a tax gross-up relating to the vehicle in 2019, 2018 and 2017, respectively, as well as amounts related to fuel and insurance in 2019, 2018 and 2017. 2019 and 2017 figures also include $12,390 and $2,434, respectively, for performance incentive trips paid for by us.

(4)

Includes $33,521 in gain relating to the purchase of a vehicle in 2019 and $26,660 as a tax-gross-up relating to the vehicle, as well as $35,373, $31,943 and $31,943 for the use of a company vehicle in 2019, 2018 and 2017, respectively and $28,148, $24,017 and $35,137 as a tax gross-up relating to the vehicle in 2019, 2018 and 2017, respectively, as well as insurance and fuel in 2019, 2018 and 2017.

(5)	Reflects employee referral bonus.

(6)	Reflects insurance payments.

(7)	Reflects employee referral bonuses totaling $600 and a $200,000 retention bonus paid to Mr. Dickson based on his continued employment with us.

(8)	Reflects insurance payments. 2019 and 2017 figures also include $11,188 and $2,210, respectively, for performance incentive trips paid for by us.

(9)	Reflects insurance payments. 2019 and 2017 figures also include $10,315 and $2,210, respectively, for performance incentive trips paid for by us.

 

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2019 Grants of Plan-Based Awards

The following table provides information with respect to grants of plan-based awards to the named executive officers for the year ended December 31, 2019:

 

Name		Grant Date				Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1)												All Other Stock Awards: Number of Shares of Stock or Units (#)				All Other Option Awards: Number of Securities Underlying Options (#)				Exercise Price or Base Price of Option Awards ($/Sh)(2)				Grant Date Fair Value of Awards ($)
						Threshold($)				Target($)				Maximum($)
David Bywater			1/17/2019																599,520	(4)			929,368	(3)			4.17				5,000,000
			12/12/2019																161,290	(6)			277,161	(5)			7.75				2,500,000
							487,575				650,100				780,120
Dana C. Russell			2/28/2019																57,361	(8)			88,235	(7)			5.23				600,000
			9/12/2019																27,063	(10)			44,444	(9)			7.39				400,000
							168,750				225,000				270,000
L. Chance Allred			2/28/2019																43,021	(8)			66,176	(7)			5.23				450,000
			9/12/2019																20,297	(10)			33,333	(9)			7.39				300,000
							131,250				175,000				210,000
Paul S. Dickson			2/28/2019																43,021	(8)			66,176	(7)			5.23				450,000
			9/12/2019																20,297	(10)			33,333	(9)			7.39				300,000
							131,250				175,000				210,000
Thomas G. Plagemann			2/28/2019																43,021	(8)			66,176	(7)			5.23				450,000
			9/12/2019																20,297	(10)			33,333	(9)			7.39				300,000
							375,000				500,000				600,000

 

(1)

The amounts represent cash bonus amounts for 2019 assuming the achievement of the corporate and KPI components at the target level. These amounts are subject to a minimum payment limitation of 75.0% based on achieving the minimum of the target performance objectives, and a maximum payout limitation of 120.0%, and if minimum targets are not achieved, payments may be decreased down to $0. The material terms of the awards are discussed in “— Components of Executive Compensation Program — Target Annual Cash Incentive Compensation Opportunities.”

(2)	The exercise price of stock options is the closing price of Common Stock on the grant date.

(3)

The award represents stock options granted in January 2019. These options have a term of ten years from the grant date and a four year vesting period. 25% of the options subject to this award will vest on the first quarterly vesting date that is on or after the one year anniversary of the grant date, and on each of the next 12 option quarterly vesting dates, 1/16 of the options subject to this award will vest.

(4)

The award represents restricted stock units granted in January 2019. These shares have a four year vesting period. 25% of the shares subject to this award will vest on the first quarterly vesting date that is on or after the one year anniversary of the grant date, and on each of the next 12 restricted stock units quarterly vesting dates, 1/16 of the shares subject to this award will vest.

(5)

The award represents stock options granted in December 2019. These options have a term of ten years from the grant date and a four year vesting period. 25% of the options subject to this award will vest on the first quarterly vesting date that is on or after the one year anniversary of the grant date, and on each of the next 12 option quarterly vesting dates, 1/16 of the options subject to this award will vest.

(6)

The award represents restricted stock units granted in December 2019. These shares have a four year vesting period. 25% of the shares subject to this award will vest on the first quarterly vesting date that is on or after the one year anniversary of the grant date, and on each of the next 12 restricted stock units quarterly vesting dates, 1/16 of the shares subject to this award will vest.

(7)	The award represents stock options granted in February 2019. These options have a term of ten years from the grant date and a three year cliff vesting period. 100% of the options subject to this award will vest upon the earlier to

 

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occur of (a) the first option quarterly vesting date that is on or after the third anniversary of the grant date and (b) a Change of Control (as such term is defined in our 2014 Equity Incentive Plan), in each case subject to participant continuing to be a service provider through such date.

(8)

The award represents restricted stock units granted in February 2019. These shares have a three year cliff vesting period. 100% of the restricted stock units subject to this award will vest upon the earlier to occur of (a) the first restricted stock units quarterly vesting date that is on or after the third anniversary of the grant date and (b) a Change of Control (as such term is defined in our 2014 Equity Incentive Plan), in each case subject to participant continuing to be a service provider through such date.

(9)

The award represents stock options granted in September 2019. These options have a term of ten years from the grant date and a four year vesting period. 25% of the options subject to this award will vest on the first quarterly vesting date that is on or after the one year anniversary of the grant date, and on each of the next 12 option quarterly vesting dates, 1/16 of the options subject to this award will vest.

(10)

The award represents restricted stock units granted in September 2019. These shares have a four year vesting period. 25% of the shares subject to this award will vest on the first quarterly vesting date that is on or after the one year anniversary of the grant date, and on each of the next 12 restricted stock units quarterly vesting dates, 1/16 of the shares subject to this award will vest.

 

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Outstanding Equity Awards at December 31, 2019

The following table provides information regarding the equity awards outstanding at December 31, 2019 held by each of our named executive officers.

 

						Option Awards																Stock Awards
Name		Grant Date				Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)				Option Expiration Date				Number of Unearned Units That Have Not Vested (#)				Market Value of Unearned Units That Have Not Vested ($)(1)
David Bywater			12/14/2016	(2)			284,376				128,124				2.85				12/14/2026				—				—
			3/15/2018	(3)			242,719				242,717				3.15				3/15/2028				—				—
			1/17/2019	(4)			—				929,368				4.17				1/17/2029				—				—
			12/12/2019	(5)			—				277,161				7.75				12/12/2029				—				—
			12/14/2016	(2)			—				—				—				—				89,912				652,761
			3/15/2018	(3)			—				—				—				—				158,728				1,152,365
			1/17/2019	(4)			—				—				—				—				599,520				4,352,515
			12/12/2019	(5)			—				—				—				—				161,290				1,170,965
Dana C. Russell			1/24/2014	(6)			507,353				—				1.30				1/23/2024				—				—
			10/2/2017	(7)			72,738				56,572				3.45				10/2/2027				—				—
			9/26/2018	(8)			18,547				40,800				5.20				9/26/2028				—				—
			2/28/2019	(9)			—				88,235				5.23				2/28/2029				—				—
			9/12/2019	(10)			—				44,444				7.39				9/12/2029				—				—
			10/2/2017	(7)			—				—				—				—				63,405				460,320
			9/26/2018	(8)			—				—				—				—				26,442				191,969
			2/28/2019	(9)			—				—				—				—				57,361				416,441
			9/12/2019	(10)			—				—				—				—				27,063				196,477
L. Chance Allred			7/12/2013	(6)			68,627				—				1.00				7/11/2023				—				—
			10/2/2017	(7)			36,369				28,286				3.45				10/2/2027				—				—
			9/26/2018	(8)			13,910				30,600				5.20				9/26/2028				—				—
			2/28/2019	(9)			—				66,176				5.23				2/28/2029				—				—
			9/12/2019	(10)			—				33,333				7.39				9/12/2029				—				—
			10/2/2017	(7)			—				—				—				—				69,745				506,349
			9/26/2018	(8)			—				—				—				—				19,831				143,973
			2/28/2019	(9)			—				—				—				—				43,021				312,332
			9/12/2019	(10)			—				—				—				—				20,297				147,356
Paul S. Dickson			7/12/2013	(6)			49,019				—				1.00				7/11/2023				—				—
			1/24/2014	(6)			5,555				—				1.30				1/23/2024				—				—
			10/2/2017	(7)			20,205				28,286				3.45				10/2/2027				—				—
			9/26/2018	(8)			13,910				30,600				5.20				9/26/2028				—				—
			2/28/2019	(9)			—				66,176				5.23				2/28/2029				—				—
			9/12/2019	(10)			—				33,333				7.39				9/12/2029				—				—
			10/2/2017	(7)			—				—				—				—				69,745				506,349
			9/26/2018	(8)			—				—				—				—				19,831				143,973
			2/28/2019	(9)			—				—				—				—				43,021				312,332
			9/12/2019	(10)			—				—				—				—				20,297				147,356
Thomas G. Plagemann			9/25/2013	(6)			176,470				—				1.00				10/14/2023				—				—
			9/6/2016	(11)			54,824				—				3.25				9/6/2026				—				—
			10/2/2017	(7)			36,369				28,286				3.45				10/2/2027				—				—
			9/26/2018	(8)			13,910				30,600				5.20				9/26/2028				—				—
			2/28/2019	(9)			—				66,176				5.23				2/28/2029				—				—
			9/12/2019	(10)			—				33,333				7.39				9/12/2029				—				—
			10/2/2017	(7)			—				—				—				—				25,361				184,121
			9/26/2018	(8)			—				—				—				—				19,831				143,973
			2/28/2019	(9)			—				—				—				—				43,021				312,332
			9/12/2019	(10)			—				—				—				—				20,297				147,356

 

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(1)	The market value is calculated using the closing price of our common stock of $7.26 on December 31, 2019 (the last trading day of 2019), as reported on the New York Stock Exchange, multiplied by the number of units that have not vested.

(2)	The shares subject to this award vested at the rate of 25% of the total number of shares on December 6, 2017, and thereafter, will vest in equal quarterly installments beginning March 6, 2018, subject to the holder maintaining his status as our employee through each vesting date.

(3)	The shares subject to this award vested at the rate of 25% of the total number of shares on January 1, 2019, and thereafter, will vest in equal quarterly installments beginning March 6, 2019, subject to the holder maintaining his status as our employee through each vesting date.

(4)	The shares subject to this award vested at the rate of 25% of the total number of shares on January 1, 2020, and thereafter, will vest in equal quarterly installments beginning March 6, 2020, subject to the holder maintaining his status as our employee through each vesting date.

(5)	The shares subject to this award vested at the rate of 25% of the total number of shares on December 6, 2020, and thereafter, will vest in equal quarterly installments beginning March 6, 2021, subject to the holder maintaining his status as our employee through each vesting date.

(6)

The vesting schedule for the unvested shares subject to this award was modified in May 2016 such that they vest on May 15, 2019, or, if earlier, when 313 Acquisition LLC receives cash proceeds with respect to its holdings of our common stock in an amount that equals $500 million more than its cumulative investment in our common stock, subject to the holder maintaining his status as our employee through each vesting date.

(7)	The shares subject to this award vest at the rate of 25% of the total number of shares on September 6, 2018, and thereafter, in equal quarterly installments beginning December 6, 2018, subject to the holder maintaining his status as our employee through each vesting date.

(8)	The shares subject to this award vest at the rate of 25% of the total number of shares on September 6, 2019, and thereafter, in equal quarterly installments beginning December 6, 2019, subject to the holder maintaining his status as our employee through each vesting date.

(9)	The shares subject to this award vest at the rate of 100% of the total number of shares on March 6, 2022, and thereafter, subject to the holder maintaining his status as our employee through each vesting date.

(10)	The shares subject to this award vest at the rate of 25% of the total number of shares on September 6, 2020, and thereafter, in equal quarterly installments beginning December 6, 2020, subject to the holder maintaining his status as our employee through each vesting date.

(11)	The shares subject to this award vest in equal installments on July 16, 2017, 2018, and 2019, subject to the holder maintaining his status as our employee through each vesting date.

2019 Option Exercises and Stock Vested

The following table provides information with respect to the Vivint Solar stock options exercised by and Vivint Solar RSU awards vested to the named executive officers for the year ended December 31, 2019:

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($)(1)				Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($)(2)
David Bywater			100,000				467,773				248,644				1,474,637
Dana C. Russell			250,000				1,555,942				110,751				677,227
L. Chance Allred			—				—				48,871				348,718
Paul S. Dickson			—				—				48,871				348,718
Thomas G. Plagemann			88,236				576,018				36,584				275,985

 

(1)	Based on the difference between the fair market value of our common stock at the time of exercise and the applicable exercise price of the stock option.

(2)	Based on the closing price of our common stock on the applicable vesting dates.

 

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Executive Change of Control and Severance Benefits

We have entered into agreements with certain key executives, including our named executive officers, to provide assurances of specified severance benefits to such executives whose employment is subject to involuntary termination. We believe that it is imperative to provide such individuals with severance benefits upon their involuntary termination of employment to secure their continued dedication to their work, without the distraction of the negative economic consequences of potential termination.

If a named executive officer’s employment is terminated either by us without “cause” (other than by reason of death, or “disability”) or by such officer for “good reason” (as such terms are defined in his agreement), and in each case the termination occurs outside of the period beginning 6 months prior to and 18 months following our change of control, or the change of control period, the officer will receive the following severance benefits:

 

•

an amount equal to 1.5x (1.0x for Messrs. Allred, Dickson, and Plagemann) the sum of (1) the executive officer’s base salary rate as then in effect, (less $10,000 for Mr. Bywater), plus (2) the average of performance bonuses paid to the executive officer for each year was employed by us during the three-year period immediately preceding the date of the executive officer’s termination, which will be paid to the executive officer in equal installments over a period of 12 months (18 months for Mr. Bywater) following the date of termination;

 

•

an amount equal to the pro-rata portion of the annual bonus paid to the executive officer in respect of the fiscal year ending immediately prior to the fiscal year in which the executive officer’s employment is terminated, which will be paid to the executive officer in equal installments over a period of 12 months (18 months for Mr. Bywater) following the date of termination; and

 

•

continuing payments to reimburse the executive officer for the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or COBRA, continuation coverage for a period of up to 12 months (18 months for Mr. Bywater and Mr. Russell), or if such reimbursements would result in an excise tax, a lump sum payment of $24,000 ($36,000 for Mr. Bywater and Mr. Russell) in lieu of such reimbursements.

If the executive officer’s employment is terminated either by us without cause (other than by reason of death, or disability) or by the executive officer for good reason, and in each case the termination occurs during the change of control period, the executive officer will receive the following severance benefits:

 

•

a lump sum payment of an amount equal to 2.0x (1.5x for Messrs. Allred, Dickson, and Plagemann) the sum of (1) the executive officer’s base salary rate as then in effect, (less $10,000 for Mr. Bywater), plus (2) the average of performance bonuses paid to the executive officer for each year he was employed by us during the three-year period immediately preceding the date of his termination;

 

•

a lump sum payment equal to the pro-rata portion of the annual performance bonus that would have been paid to the executive officer had he been employed by us for the entire fiscal year in which the executive officer’s employment was terminated, based on actual performance for such fiscal year and assuming that

 

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any performance objectives that are based on individual performance are achieved at target levels;

 

•

100% of the executive officer’s then-outstanding equity awards (including any awards transferred to the executive’s officer’s estate planning vehicles) will immediately vest and become exercisable and, with respect to equity awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at target levels; and

 

•

continuing payments to reimburse the executive officer for COBRA continuation coverage for a period of up to 12 months (18 months for Mr. Bywater and Mr. Russell), or if such reimbursements would result in an excise tax, a lump sum payment of $24,000 ($36,000 for Mr. Bywater and Mr. Russell) in lieu of such reimbursements.

In order to receive the severance benefits, the executive officer must sign and not revoke a release of claims in our favor and comply with certain restrictive covenants relating to noncompetition, nonsolicitation, and nondisparagement for a period of 12 months following the date of his termination.

If any of the payments provided for under his employment arrangements or otherwise payable to the executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax under Section 4999 of the Code, he would be entitled to receive either full payment of benefits or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to him. We are not required to provide any tax gross-up payments to the executive officer.

Potential Payments Upon Termination or Change of Control

The following table shows the value of the payments and benefits a named executive officer could receive upon an involuntary termination as of December 31, 2019, pursuant to the agreement described above.

 

Name and Circumstance		Salary Continuation				Lump Sum Cash				Accel. Vesting(5)				Continuation of Healthcare(6)				Total
David Bywater
Severance Termination(1)		$	1,612,764			$	—			$	—			$	15,823			$	1,628,587
Involuntary Termination if Change-in-Control(2)		$	1,942,764			$	—			$	11,762,948			$	15,823			$	13,721,535
Dana C. Russell
Severance Termination(3)		$	669,000			$	—			$	—			$	14,224			$	683,224
Involuntary Termination if Change-in-Control(4)		$	894,000			$	—			$	1,743,912			$	14,224			$	2,652,136
L. Chance Allred
Severance Termination(3)		$	520,333			$	—			$	—			$	15,823			$	536,156
Involuntary Termination if Change-in-Control(4)		$	695,333			$	—			$	1,415,153			$	15,823			$	2,126,309
Paul S. Dickson
Severance Termination(3)		$	524,333			$	—			$	—			$	14,224			$	538,557
Involuntary Termination if Change-in-Control(4)		$	699,333			$	—			$	1,415,153			$	14,224			$	2,128,710

 

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