Document Text Content
CARVANA CO.
FORM DEF 14A
(Proxy Statement (definitive))
Filed 03/14/19 for the Period Ending 04/23/19
Address 1930 W. RIO SALADO PARKWAY
TEMPE, AZ, 85281
Telephone (480) 719-8809
CIK 0001690820
Symbol CVNA
SIC Code 5500 - Retail-Auto Dealers and Gasoline Stations
Industry Auto Vehicles, Parts & Service Retailers
Sector Consumer Cyclicals
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2019, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to §240.14a-12
CARVANA CO.
(Name of registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it is determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
☐ Fee paid previously with preliminary materials.
☐
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Table of Contents
Dear Fellow Stockholders,
We are pleased to invite you to attend the Annual Meeting of Stockholders of Carvana Co.
Date : Tuesday, April 23, 2019
Time : 8 AM (PDT)
Address : 3419 East University Drive
Phoenix, AZ 85034
You can access our proxy materials online at www.proxydocs.com/CVNA. We will mail a notice containing instructions on how to access this proxy
statement and our annual report on or about Thursday, March 14, 2019, to all stockholders entitled to vote at the annual meeting. Stockholders who prefer a
paper copy of the proxy materials may request one on or before April 12, 2019, by following the instructions provided in the notice we will send.
Your vote is important. Whether or not you plan to attend the annual meeting, we urge you to vote. You may vote by proxy over the internet, by
telephone, or by mail by following the instructions on the proxy card. Voting by proxy will ensure your representation at the annual meeting regardless of
whether you attend.
Sincerely,
Ernest Garcia III
President, Chief Executive Officer and Chairman
Table of Contents
NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS
The 2019 Annual Meeting of Stockholders of CARVANA CO. (“Carvana”) will be held at 3419 East University Drive, Phoenix, AZ 85034, on
Tuesday, April 23, 2019, at 8:00 AM (PDT) for the following purposes:
1. to elect two nominees identified in the accompanying proxy statement to serve as directors, as recommended by the Compensation and
Nominating Committee of the Board of Directors of Carvana;
2. to ratify the appointment of Grant Thornton LLP as Carvana’s independent registered public accounting firm for the year ending December 31,
2019;
3. to consider the approval, by an advisory vote, of Carvana’s executive compensation (i.e., “say-on-pay” proposal);
4. to recommend, by an advisory vote, the frequency of future advisory votes on executive compensation (i.e., “say-on-pay frequency”); and
5. to transact other business as may properly come before the meeting or any adjournment of the meeting.
Our board of directors has set February 25, 2019, as our record date for this year’s meeting. Only stockholders that owned Carvana Co.’s
Class A common stock or Class B common stock at the close of business on that day are entitled to notice of our annual meeting and may vote at it or any
adjournment of the meeting. A list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose
relevant to the meeting during ordinary business hours for at least ten days prior to April 23, 2019, at 1930 W. Rio Salado Pkwy, Tempe, AZ 85281.
By Order of the Board of Directors
Paul Breaux
General Counsel and Secretary
Table of Contents
TABLE OF CONTENTS
Commonly Asked Questions and Answers About the Annual Meeting 1
Board of Directors and Corporate Governance 5
ITEM 1—ELECTION OF DIRECTORS 8
Director Nominees 8
Continuing Directors 9
Independence Status 10
Controlled Company Status 10
Board Meetings and Committees 11
Board Leadership Structure 13
Section 16(a) Beneficial Ownership Reporting Compliance. 14
Risk Oversight 14
Compensation Committee Interlocks and Insider Participation 15
Communications by Stockholders and Other Interested Parties with the Board of Directors 15
Director Compensation 15
Executive Officers 17
Compensation Discussion and Analysis 19
Executive Summary 19
Compensation Objectives and Principles 22
Compensation Setting Process 23
Competitiveness of Our Compensation Program 24
Compensation Components 24
Compensation-Related Policies 31
Compensation and Risk 31
Tax and Accounting Implications 32
Compensation and Nominating Committee Report 33
Compensation Tables 34
Summary Compensation Table 34
Grants of Plan-Based Awards 36
Outstanding Equity Awards at 2018 Fiscal Year End 37
Option Exercises and Stock Vested 38
Potential Payments upon a Change of Control 38
CEO Pay Ratio 39
Certain Relationships and Related Party Transactions 39
Table of Contents
Policies for Approval of Related Party Transactions 39
Amended and Restated Operating Agreement 39
Exchange Agreement 40
Registration Rights Agreement 40
Tax Receivable Agreement 41
Indemnification of Officers and Directors 41
Contribution Agreements 42
Relationship with DriveTime 42
Security Ownership of Certain Beneficial Owners and Management 49
ITEM 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 54
Fees and Services 54
Audit Committee Report 56
ITEM 3 – SAY ON PAY 57
ITEM 4 – SAY ON PAY FREQUENCY 57
Other Matters 58
Incorporation by Reference 58
Availability of SEC Filings, Code of Conduct, and Committee Charters 58
Where to Find Additional Information 58
Cost of Proxy Solicitation 59
Annex 60
100k Milestone gift 60
Non-GAAP Financial Measures 60
Table of Contents
Q: Why did I receive these materials?
COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
The Board of Directors of Carvana Co. is soliciting your proxy to vote at our 2019 Annual Meeting of Stockholders (or at any postponement or
adjournment of the meeting). Stockholders who own shares of our common stock (Class A or Class B) as of the record date, February 25, 2019, are entitled
to vote at the annual meeting. You should review these proxy materials carefully as they give important information about the items that will be voted on at
the annual meeting, as well as other important information about Carvana.
Q: Who will be entitled to vote?
Stockholders who own shares of our common stock as of the record date, February 25, 2019, are entitled to vote at the annual meeting. As of
the record date, Carvana had approximately 41,201,324 shares of Class A common stock outstanding and 104,336,303 shares of Class B common stock
outstanding. Holders of shares of Class A common stock are entitled to one vote per share of Class A common stock. Ernest Garcia II, Ernest Garcia III, and
entities controlled by one or both of them (collectively, the “Garcia Parties”) are entitled to ten votes per share of Class B common stock they beneficially
own, for so long as the Garcia Parties maintain, in the aggregate, direct or indirect beneficial ownership of at least 25% of the outstanding shares of Class A
common stock, determined on an as-exchanged basis assuming that all of the Class A common units (“Class A Units”) and Class B common units (“Class B
Units,” and together with Class A Units, “LLC Units”) of Carvana Group, LLC (“Carvana Group”) were exchanged for Class A common stock. The Garcia
Parties are currently entitled to ten votes per share of Class B common stock they beneficially own. All other holders of Class B common stock are entitled
to one vote per share. All holders of Class A common stock and Class B common stock will vote together as a single class except as otherwise required by
applicable law. Cumulative voting is not permitted with respect to the election of directors or any other matter to be considered at the annual meeting.
Q: What will I be voting on?
You will be voting on the following matters:
1. to elect two Class II directors to serve on Carvana’s board of directors until the 2022 Annual Meeting and until their successors are duly elected
and qualified;
2. to ratify the appointment of Grant Thornton LLP as Carvana’s independent registered public accounting firm for the year ending December 31,
2019;
3. to consider the approval, by an advisory vote, of Carvana’s executive compensation (i.e., “say-on-pay”);
- 1 -
Table of Contents
4. to recommend, by an advisory vote, the frequency of future advisory votes on executive compensation (i.e., “say-on-pay frequency”); and
5. to transact other business as may properly come before the meeting or any adjournment of the meeting.
Q: How does the board recommend I vote on these matters?
The board of directors recommends you vote for the following:
1. FOR the election of Gregory Sullivan and Dan Quayle as Class II directors;
2. FOR the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending
December 31, 2019;
3. FOR the approval, by an advisory vote, of Carvana’s executive compensation; and
4. FOR an advisory vote that future advisory votes on executive compensation occur annually.
Q: How do I cast my vote?
BeneficialStockholders. If you hold your shares through a broker, trustee, or other nominee, you are a beneficial stockholder. To vote your
shares, please refer to the materials forwarded to you by your broker, bank, or other nominee for instructions on how to vote the shares you hold as a
beneficial stockholder.
RegisteredStockholders. If you hold shares in your own name, you are a registered stockholder and may vote by written ballot at the annual
meeting or by proxy before the annual meeting in the following ways:
1. online at www.proxypush.com/CVNA;
2. by phone by calling (866) 509-2149; or
3. by signing and returning a proxy card.
Proxies submitted online or by telephone must be received before 8:00 AM (PDT) on April 23, 2019.
Q: Can I access the proxy materials electronically?
Yes. Your notice, proxy card, or voting instruction card will contain instructions on how to view our proxy materials for the annual meeting
online and how to instruct us to send our future proxy materials to you electronically by email. Our proxy materials are also available at
www.proxypush.com/CVNA and will be available during the voting period starting on March 14, 2019.
Instead of receiving future copies of our proxy statement and annual reports by mail, stockholders of record and most beneficial owners can
elect to receive an email that will provide an electronic link to these documents. Your election to receive future proxy materials by email will remain in
effect until you revoke it.
Please note that only one notice will be sent to stockholders who are listed at the same address.
- 2 -
Table of Contents
Q: How may I change or revoke my proxy?
vote.
BeneficialStockholders. Beneficial stockholders should contact their broker, trustee, or nominee for instructions on how to change their proxy
RegisteredStockholders. Registered stockholders may change a properly executed proxy at any time before its exercise by
1. delivering written notice of revocation to the general counsel and secretary at our principal executive offices at 1930 W. Rio Salado Pkwy,
Tempe, AZ 85281;
2. submitting another proxy that is dated later than the original proxy (including a proxy via telephone or internet); or
3. voting in person at the annual meeting.
Q: Who can attend the annual meeting?
Subject to space availability, all common stockholders as of the record date, or their duly appointed proxies, may attend the annual meeting.
Since seating is limited, admission to the annual meeting will be on a first-come, first-served basis. Registration will begin at 7:30 AM (PDT). If you attend,
please note that you may be asked to present valid photo identification, such as a driver’s license or passport.
Please also note that if you are a beneficial stockholder (that is, you hold your shares through a broker, bank or other nominee), you will need to
bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the annual meeting.
Cameras, recording devices and other electronic devices will not be permitted at the annual meeting.
Q: What is the voting requirement to approve each of the items, and how are the votes counted?
ITEM1–ELECTIONOFDIRECTORS. A plurality of the votes cast by the shares of common stock present in person or represented by proxy
at the meeting and entitled to vote thereon is required to elect each nominee. This means that the two nominees receiving the highest number of votes at the
annual meeting will be elected, even if those votes do not constitute a majority of the votes cast. Abstentions and broker non-votes will not impact the
election of the nominees.
ALLOTHERITEMS. The affirmative vote of a majority of the votes cast by the shares of common stock present in person or represented by
proxy at the meeting and entitled to vote thereon is required to approve all other items. Abstentions will be counted as present and entitled to vote on the
proposal and will therefore have the effect of a negative vote. We do not expect there to be any broker non-votes with respect to any of the proposals.
- 3 -
Table of Contents
Q: When will the results of the vote be announced?
The preliminary voting results will be announced at the annual meeting. The final voting results will be published in a current report on Form
8-K filed with the SEC within four business days of the annual meeting.
Q: What is the deadline for submitting a stockholder proposal or director nomination for the 2020 Annual Meeting?
Stockholder proposals pursuant to SEC Rule 14a-8 for inclusion in Carvana’s proxy statement and form of proxy for Carvana’s 2020 Annual
Meeting of Stockholders must be received by Carvana at our principal executive offices at 1930 W. Rio Salado Pkwy, Tempe, AZ, 85281, no later than the
close of business on November 15, 2019. Stockholders wishing to make a director nomination or bring a proposal, but not include it in Carvana’s proxy
materials, must provide written notice of their nomination or proposal to the general counsel and secretary at Carvana’s principal executive offices no later
than the close of business on January 24, 2020, and not earlier than the close of business on December 25, 2019, assuming Carvana does not change the date
of the 2020 Annual Meeting of Stockholders by more than 30 days before or after the anniversary of the 2019 Annual Meeting. If so, Carvana will release
an updated time frame for stockholder proposals. Any stockholder proposal or director nomination must comply with the other provisions of Carvana’s
amended and restated bylaws and be submitted in writing to the general counsel and secretary at Carvana’s principal executive offices.
- 4 -
Table of Contents
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our business and affairs are managed under the direction of our Board, which is composed of five directors. Our certificate of incorporation
provides that the authorized number of directors may be changed only by resolution of our Board. Our certificate also provides that our Board will be
divided into three classes of directors, with the classes as nearly equal in number as possible. At each annual meeting of stockholders, a class of directors
will be elected for a three-year term to succeed the class whose term is then expiring.
directors:
The following table sets forth the director class, name, age as of April 23, 2019, and other information for each member of our board of
CURRENT
TERM
EXPIRES
EXPIRATION
OF TERM
FOR WHICH
NOMINATED
NAME CLASS AGE POSITION
DIRECTOR
SINCE
Gregory Sullivan II 60 Director 2017 2019 2022
Dan Quayle II 72 Director 2017 2019 2022
Michael Maroone III 65 Lead Director 2017 2020
Ernest Garcia III I 36 President, CEO and Chairman 2017 2021
Ira Platt I 55 Director 2017 2021
We believe that in order for our Board to effectively guide us to long-term sustainable, dependable performance, it should be composed of
individuals with sophistication and experience in the many disciplines that impact our business. To best serve our stockholders, we seek to have a board
that, as a whole, is competent in key corporate disciplines, including accounting and financial acumen, business judgment, crisis management, governance,
leadership, people management, risk management, social responsibility and reputational issues, and strategy and strategic planning. Additionally, the Board
desires to have specific knowledge related to our industry, such as expertise in automotive retail and consumer finance.
The Compensation and Nominating Committee believes that all directors must, at a minimum, meet the criteria set forth in the Board’s code of
conduct and the corporate governance guidelines, which specify, among other things, that the Compensation and Nominating Committee will consider
criteria such as independence, diversity, age, skills, and experience in the context of the needs of the Board. In addressing issues of diversity in particular,
the Compensation and Nominating Committee considers a nominee’s differences in viewpoint, professional experience, background, education, skill, age,
race, gender, and national origin. The Compensation and Nominating Committee believes that diversity of backgrounds and viewpoints is a key attribute for
a director nominee. Accordingly, to improve director diversity and best serve our stockholders, the Compensation and Nominating Committee adopted a
policy in 2019 to request that any search firm that it engages include women and minority candidates in the initial list from which the committee selects
director candidates. The Compensation and Nominating Committee also will consider a combination of factors for each director, including whether the
nominee possesses:
- 5 -
Table of Contents
• the ability to represent all stockholders without a conflict of interest;
• the ability to work in and promote a productive environment;
• sufficient time and willingness to fulfill the substantial duties and responsibilities of a director;
• the high level of character and integrity that we expect;
• broad professional and leadership experience and skills necessary to effectively respond to the complex issues encountered by a national,
publicly traded company; and
• the ability to apply sound and independent business judgment.
The Compensation and Nominating Committee has determined that all of our directors meet the criteria and qualifications set forth in the code
of conduct for the Board of Directors, the corporate governance guidelines and the criteria set forth above for director nominees. Moreover, each director
possesses the following critical personal qualities and attributes that we believe are essential for the proper functioning of the Board to allow it to fulfill its
duties for our stockholders: accountability, ethical leadership, governance, integrity, risk management, and sound business judgment. In addition, our
directors have the mature confidence to assess and challenge the way things are done and recommend alternative solutions, a keen awareness of our
business and the social realities of the environment in which we operate, the independence and high-performance standards necessary to fulfill the Board’s
oversight function, and the humility, professional maturity, and style to interface openly and constructively with other directors. Finally, the director
biographies below include a non-exclusive list of other key experiences and qualifications that further qualify the individual to serve on the Board. These
collective qualities, skills, experiences, and attributes are essential to our Board’s ability to exercise its oversight function for Carvana and its stockholders
and to guide the long-term sustainable, dependable performance of our business.
Subject to any earlier resignation or removal in accordance with the terms of our certificate and bylaws, our Class II directors will serve until
this our second annual meeting of stockholders, our Class III directors will serve until the third annual meeting of stockholders, and our Class I directors
will serve until our fourth annual meeting of stockholders. In addition, our certificate provides that our directors may be removed with or without cause by
the affirmative vote of at least a majority of the voting power of our outstanding shares of stock entitled to vote thereon, voting together as a single class, for
so long as the Garcia Parties are entitled to ten votes for each share of Class B common stock they hold. If the Garcia Parties are no longer entitled to ten
votes for each share of Class B common stock they hold, then our directors may be removed only for cause upon the affirmative vote of at least 66 2 ⁄ 3 % of
the voting power of our outstanding shares of stock entitled to vote thereon.
- 6 -
Table of Contents
The Compensation and Nominating Committee will consider stockholder nominations for membership on the Board. For the 2020 Annual
Meeting, nominations may be submitted to Carvana Co., 1930 W. Rio Salado Pkwy, Tempe, AZ 85281, Attn: Secretary, who will forward them to the
Chairman of the Compensation and Nominating Committee. Recommendations must be in writing and we must receive the recommendation no later than
the close of business on January 24, 2020, and not earlier than the close of business on December 25, 2019. Recommendations must also include certain
other requirements specified in our bylaws. The committee will apply the same criteria to the evaluation of those candidates as it applies to other director
candidates.
When filling a vacancy on the Board, the Compensation and Nominating Committee identifies the desired skills and experience of a new
director and nominates individuals who it believes can strengthen the Board’s capabilities and further diversify the collective experience represented by the
then-current directors. The Compensation and Nominating Committee may engage third parties to assist in the search and provide recommendations.
Pursuant to a previously informal policy formally adopted in 2019, any search firm that the committee engages is requested to include women and minority
candidates in the initial list from which the committee selects director candidates. Also, directors are generally asked to recommend candidates for the
position. The candidates would be evaluated based on the process outlined in the Corporate Governance Guidelines and the Compensation and Nominating
Committee charter, and the same process would be used for all candidates, including candidates recommended by stockholders.
- 7 -
Table of Contents
ITEM 1—ELECTION OF DIRECTORS
Our Board recommends that the nominees below be elected as members of the Board at the annual meeting to serve for a three-year term
expiring at the 2022 Annual Meeting.
NAME AGE
DIRECTOR
SINCE POSITION
Gregory Sullivan 60 2017 Director
Dan Quayle 72 2017 Director
Each nominee was recommended for re-election by the Compensation and Nominating Committee for consideration by the Board and proposal
to our stockholders. If, before the annual meeting, any nominee becomes unable to serve, or chooses not to serve, the Board may (i) nominate a substitute
(ii) allow the vacancy to remain until the Board identifies an appropriate candidate or (iii) reduce the size of the board to eliminate the vacancy. If the Board
chooses to nominate a substitute nominee, the persons named as proxies on the proxy card will vote for that substitute nominee.
The Board of Directors recommends that you vote “FOR” each of the director nominees.
DIRECTOR NOMINEES
Dan Quayle has served on our Board since the completion of our initial public offering (“IPO”) in 2017. Mr. Quayle has served the United
States Federal Government in various capacities: congressman, senator, and as the 44th vice president of the United States of America from 1989 to 1993.
Since 1999, Mr. Quayle has been with Cerberus Capital, a New York private investment firm. He has served as chairman of Cerberus Global Investments
since 2001. Mr. Quayle earned a B.A. degree in political science from DePauw University and a J.D. from the Indiana University Robert H. McKinney
School of Law. We believe Mr. Quayle is qualified to continue to serve on our Board because of his experience as the chairman of Cerberus Global
Investments, LLC, as well as his extensive experience in the areas of government, foreign relations, and private investment.
Gregory Sullivan has served on our Board since the completion of our IPO. Mr. Sullivan is the co-founder and chief executive officer of
AFAR Media, a travel media company he co-founded in 2007. From 1995 to 2007, Mr. Sullivan served the DriveTime Automotive Group, Inc.
(“DriveTime”) in various capacities, including as president from 1995 to 2004, chief executive officer from 1999 to 2004, and vice chairman from 2004 to
2007. Mr. Sullivan earned a B.B.A. degree in finance from the University of Notre Dame and a J.D. from the University of Virginia School of Law. We
believe that Mr. Sullivan is qualified to continue to serve on our Board because of his senior management experience in the automotive and media
industries.
- 8 -
Table of Contents
CONTINUING DIRECTORS
Ernest Garcia III co-founded Carvana and has served as our president and chief executive officer since our inception in 2012. Mr. Garcia is
also Chairman of the Carvana Co. Board. Prior to founding Carvana, Mr. Garcia held various roles at DriveTime from January 2007 to January 2013. From
January 2007 to December 2008, he served as a financial strategist. He was a managing director of corporate finance from December 2008 to November
2009. From November 2009 until January 2013, he served as a vice president and treasurer and director of quantitative analytics. As director of quantitative
analytics, Mr. Garcia was responsible for the firm’s ongoing development of consumer credit scoring models, and its utilization of those tools in retailvehicle-sales
deal structuring and vehicle-price optimization. Prior to DriveTime, Mr. Garcia was an associate in the Principal Transactions Group at RBS
Greenwich Capital from 2005 to 2006, where he focused on consumer-credit-based investments. Mr. Garcia holds a B.S. in management science and
engineering from Stanford University. We believe that Mr. Garcia is qualified to continue to serve on our Board because of his extensive knowledge of our
business and strategy, as well as his experience in the automotive retail industry and leadership role with us.
Ira Platt has served on our Board since the completion of our IPO in 2017. Mr. Platt has been the president of Georgiana Ventures, LLC, a
firm that provides equity and debt capital to specialty finance companies, acquires portfolios of consumer finance receivables and offers consulting services
to the specialty finance industry, since its inception in 2009. From May 2009 to December 2013, Mr. Platt served as the president of 221 Capital Partners,
LLC, a firm that provides advisory services. From 2009 to 2011, Mr. Platt was the portfolio manager for the Rosemont TALF Opportunity Fund, a
partnership investing in asset-backed securities. In addition, Mr. Platt was a managing director and head of the Principal & Distressed Capital Business for
RBS Greenwich Capital, the domestic fixed-income banking unit of the Royal Bank of Scotland Group, from 1997 to 2009. Mr. Platt was an executive vice
president of the Aegis Consumer Funding Group, a publicly traded non-prime automotive finance company, from 1991 to 1997. Mr. Platt earned a B.A.
degree in 1985 from Emory University and an M.B.A. from The Fuqua School of Business at Duke University. Mr. Platt served on DriveTime’s board of
directors from February 2014 until April 2017. We believe that Mr. Platt will continue to be a valuable member of our Board because of his service on
DriveTime’s board and his extensive experience in consumer finance and the automotive retail industry.
Michael Maroone has served on our Board since the completion of our IPO. Mr. Maroone is currently the CEO of Maroone U.S.A. LLC. From
July 2005 to April 2015, Mr. Maroone served on the board of AutoNation, Inc., an automotive retailer and provider of new and used vehicles and related
services. From August 1999 until his retirement in February 2015, Mr. Maroone also served as president and chief operating officer of AutoNation, Inc.
Prior to joining AutoNation, Inc., Mr. Maroone was president and chief executive officer of the Maroone Automotive Group, a privately held automotive
retail group, from 1977 to 1997. Mr. Maroone currently serves on three other boards: as a member of the board of Cox Automotive, Inc., a privately held
combination of global automotive wholesale and services businesses including automotive auctions, financial services, media, and software; as chairman of
the
- 9 -
Table of Contents
board of Cleveland Clinic Florida, a non-profit, multispecialty academic hospital; and as a member of the board of the Cleveland Clinic. Mr. Maroone
previously served on the Cleveland Clinic Board of Trustees and was co-chairman of the Florida Leadership Board of the Cleveland Clinic. He holds a B.S.
degree in small business management from the University of Colorado Boulder. Mr. Maroone was selected to serve on our Board because of his advisory
experience and his extensive experience in the automotive retail industry
INDEPENDENCE STATUS
The listing standards of the New York Stock Exchange require that, subject to specified exceptions, each member of a listed company’s audit
committee, and compensation committee, and nominating committee be independent and that audit committee members also satisfy independence criteria
set forth in Rule 10A-3 under the Exchange Act.
Our Board has determined that each of our non-employee directors, including our director nominees Dan Quayle and Gregory Sullivan, meets
the requirements to be an independent director. In making this determination, our Board considered the relationships that each non-employee director has
with Carvana and all other facts and circumstances that our Board deemed relevant in determining their independence, including beneficial ownership of
our Class A common stock.
CONTROLLED COMPANY STATUS
For purposes of the corporate governance rules of the NYSE, we are a “controlled company.” Controlled companies under those rules are
companies of which more than 50% of the voting power for the election of directors is held by an individual, a group, or another company. The Garcia
Parties beneficially own more than 50% of the combined voting power of Carvana Co. Accordingly, we expect to be eligible for, but do not currently intend
to take advantage of, certain exemptions from the corporate governance requirements of the NYSE. Specifically, as a “controlled company,” we would not
be required to have:
• a majority of independent directors,
• a nominating and corporate governance committee composed entirely of independent directors with a written charter addressing the
committee’s purpose and responsibilities,
• a compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and
responsibilities, or
• an annual performance evaluation of the nominating and governance and compensation committees.
- 10 -
Table of Contents
In the event we choose to rely on some or all of these exemptions in the future, you would not have the same protections afforded to stockholders of
companies that are subject to all of the applicable corporate governance rules of the NYSE.
BOARD MEETINGS AND COMMITTEES
During the year ended December 31, 2018, our Board held five meetings, our Audit Committee held nine meetings, and our Compensation and
Nominating Committee held four meetings. Directors are expected to attend the annual meeting of stockholders and all or substantially all of the Board
meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary to properly discharge their
responsibilities. Each director attended last year’s annual meeting, 100% of the meetings of the Board during such director’s tenure, and 100% of the
meetings held by the committees of the Board on which the director served.
Our Board has an Audit Committee and a Compensation and Nominating Committee. The composition, duties and responsibilities of these
committees are as set forth below. In the future, our board may establish other committees, as it deems appropriate, to assist it with its responsibilities.
COMPENSATION
AND
BOARD MEMBER
AUDIT
COMMITTEE
NOMINATING
COMMITTEE
Ira Platt • •
Gregory Sullivan • •
Dan Quayle •
Michael Maroone •
AUDITCOMMITTEE
The Audit Committee is responsible for, among other matters,
• appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;
• discussing with our independent registered public accounting firm their independence from management;
• reviewing with our independent registered public accounting firm the scope and results of their audit;
• approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
• overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim
and annual financial statements that we file with the SEC;
- 11 -
Table of Contents
• reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and
regulatory requirements;
• establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls, or auditing
matters;
• reviewing and approving related party transactions; and
• overseeing our enterprise risk management program.
Our Board has affirmatively determined that Mr. Platt, Mr. Maroone, and Mr. Sullivan meet the definition of “independent director” for
purposes of serving on an Audit Committee under Rule 10A-3 of the Exchange Act and the NYSE rules. In addition, our Board has determined that
Mr. Platt qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. The written charter for our Audit
Committee is available at our corporate website at investors.carvana.com/corporate-governance/governance-documents.
COMPENSATIONANDNOMINATINGCOMMITTEE
The Compensation and Nominating Committee is responsible for, among other matters,
• reviewing key employee compensation goals, policies, plans, and programs;
• reviewing and providing recommendations to the Board regarding the compensation of our directors, chief executive officer, and other
executive officers;
• reviewing and approving employment agreements and other similar arrangements between us and our executive officers;
• administering stock plans and other incentive compensation plans;
• identifying individuals qualified to become members of our Board, consistent with criteria approved by our Board;
• overseeing the organization of our Board to discharge the Board’s duties and responsibilities properly and efficiently;
• identifying best practices and recommending corporate governance principles; and
• developing and recommending to our Board a set of corporate governance guidelines and principles applicable to us.
The Board has adopted a written charter for the Compensation and Nominating Committee, which is available on our corporate website at
investors.carvana.com/corporate-governance/governance-documents. Each member of our Compensation and Nominating Committee is an independent
director as defined by NYSE rules.
- 12 -
Table of Contents
BOARD LEADERSHIP STRUCTURE
The following section describes our board leadership structure, the reasons why the structure is in place at this time, the roles of various
positions, and related key governance practices. The mix of experienced independent and management directors that make up our Board, along with the
independent role of our lead director and our independent board-committee composition, benefits Carvana and its stockholders.
INDEPENDENCE;BOARDMIX
Our Board has an effective mix of independent and management directors. It is composed of four independent directors and our current
chairman and chief executive officer, Ernest Garcia III.
LEADDIRECTOR
The Board believes that it is beneficial to Carvana and its stockholders to designate one of the directors as a lead director who is elected by a
majority of the Board. The lead director serves a variety of roles, including reviewing and approving Board schedules to confirm the appropriate board and
committee topics are reviewed and sufficient time is allocated to each; liaising between our chairman and chief executive officer and non-management
directors when necessary and appropriate (that said, each director has direct and regular access to the chairman and chief executive officer) and calling an
executive session of independent directors at any time consistent with the bylaws and certificate of incorporation. Michael Maroone, an independent
director and member of our Audit Committee, is currently our lead director. Mr. Maroone is an effective lead director for Carvana due to, among other
things, his independence, his board leadership experience with AutoNation, Inc., his strong strategic and financial acumen, his commitment to ethics, his
extensive knowledge of the automotive retail environment, and his deep understanding of Carvana and its business.
CHAIRMAN/CEO
With respect to the roles of chairman and CEO, the corporate governance guidelines provide that the roles may be separated or combined, and
the Board will exercise its discretion in combining or separating these positions as it deems appropriate in light of prevailing circumstances. Mr. Garcia has
been our chairman and CEO since our IPO. The Board believes that combining the roles of chairman and CEO, together with the separate, independent role
of our lead director, is currently the most effective leadership structure because Mr. Garcia has extensive knowledge and experience in a variety of relevant
areas acquired through his professional and other experiences, including automotive retail, e-commerce, consumer finance and strategic planning. This
knowledge and experience give Mr. Garcia the insight necessary to combine the responsibilities of strategic development and execution along with
management of day-to-day operations.
- 13 -
Table of Contents
SELF-EVALUATION
Our Compensation and Nominating Committee conducts an annual performance evaluation to determine whether the Board, its committees,
and the directors are functioning effectively. This includes survey materials as well as conversations between each director and the lead director. The
evaluation focuses on the Board’s and the committees’ contributions to Carvana and has an enhanced focus on areas in which the Board or management
believes that the Board could improve.
As part of the annual Board self-evaluation, the Board evaluates whether the current leadership structure continues to be appropriate for
Carvana and its stockholders. Our corporate governance guidelines provide the flexibility for our Board to modify our leadership structure in the future as
appropriate.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Exchange Act requires our directors, executive officers and greater-than-ten-percent stockholders to file initial reports of
ownership and reports of changes in ownership of any of our securities with the SEC and us. We believe that during the 2018 fiscal year, all of our directors,
executive officers and greater-than-ten-percent stockholders complied with the requirements of Section 16(a).
RISK OVERSIGHT
The Board, as a whole and through the Audit Committee, oversees our risk management program, which is designed to identify, evaluate, and
respond to our high priority risks and opportunities. The risk management program facilitates constructive dialog at the senior management and board level
to proactively realize opportunities and manage risks. Our Audit Committee is primarily responsible for overseeing our risk management processes on
behalf of the full board. Our management, including our executive officers, is primarily responsible for managing the risks associated with the operation and