What changed in this filing

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Item 9A. Controls and Procedures

2022-02-23 compared with 2021-03-04 · 128 added, 47 removed, 92 unchanged (66% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K.

Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as part of the end of the period covered in this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.

Management’s Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm as permitted in this transition period under the rules of the SEC for newly public companies.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2021, our internal control over financial reporting was effective.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the consolidated financial statements contained in this Annual Report on Form 10-K, and has issued an attestation report on its effectiveness of our internal controls over financial reporting, which is included below.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fiscal quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fiscal period ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

8 unchanged sentences

Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Root, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Root, Inc.

and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 23, 2022, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Columbus, Ohio

February 23, 2022

Other Information

On February 17, 2022, the Compensation Committee of the Board of Directors (the “Board”) of Root, Inc.

(the “Company”) approved a cash payment arrangement for Daniel Rosenthal, the Chief Revenue and Operating Officer and Chief Financial Officer of the Company, an amendment to Mr.

Rosenthal’s employment agreement and an amendment to the employment agreement of Alexander Timm, the Company’s Chief Executive Officer.

The Compensation Committee approved a cash payment to Mr.

Rosenthal in the amount of $4,981,250, in light of his promotion to Chief Revenue and Operating Officer, effective September 17, 2021, while simultaneously continuing as the Chief Financial Officer, and his successful closing of the Carvana transaction in October 2021 and the BlackRock term loan in January 2022.

Rosenthal will be required to repay the cash payment should he resign other than for good reason or be terminated for cause, as defined in the applicable agreement, on or prior to December 31, 2022.

In addition, as part of a retention program designed to retain the Company’s top talent, including members of senior management, Mr.

Rosenthal will be eligible to receive a cash payment of $500,000 if he continues to be employed by the Company as of December 2, 2022.

As part of the same program, he was awarded, as of February 23, 2022, an RSU grant valued at $1,420,000, based on a 30-day closing share price average, which will vest in full on June 15, 2023, subject to his Continuous Service, as defined in the Company’s 2020 Equity Incentive Plan.

The Compensation Committee believes these retention measures are appropriate considering Mr.

Rosenthal’s significant contributions to the Company and its future opportunities.

The agreements between the Company and Mr.

Rosenthal with respect to these matters are filed as Exhibits 10.30 and 10.3, respectively, to this Annual Report on Form 10-K, and incorporated by reference herein.

The Compensation Committee approved an amendment to Mr.

Rosenthal’s employment agreement to incorporate non-competition and non-solicitation terms and an amendment to Mr.

Timm’s employment agreement to incorporate non-competition and non-solicitation terms and severance in the event of Mr.

Timm’s departure other than for cause.

The foregoing summary is qualified in its entirety by references to the full text of the amendments to Messrs.

Timm’s and Rosenthal’s employment agreements, filed as Exhibits 10.26 and 10.27, respectively, to this Annual Report on Form 10-K, and incorporated by reference herein.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated by reference in the definitive proxy statement from our Annual Meeting of Stockholders to be held June 8, 2021.

The information required by this Item is incorporated by reference in the definitive proxy statement for our Annual Meeting of Stockholders to be held on or about June 7, 2022.

This proxy statement is referred to in this report as the “2022 Proxy Statement.”

3 unchanged sentences

The information required by this Item is incorporated by reference to the 2022 Proxy Statement.

Certain Relationships and Related Party Transactions

Certain Relationships and Related Party Transactions, and Director Independence

The information required by this Item is incorporated by reference to the 2022 Proxy Statement.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

The information required by this Item is incorporated by reference to the 2022 Proxy Statement.

5 unchanged sentences

3.2 Amended and Restated Bylaws of Root, Inc.

S-1/A 333-249332 3.4 October 20, 2020

10-Q 001-39658 3.2 August 12, 2021

3.3 Certificate of Designations of Series A Preferred Stock, filed with the Delaware Secretary of State on October 1, 2021

8-K 001-39658 3.1 October 1, 2021

4.1 Form of Class A common stock certificate.

1 unchanged sentence

4.2 Description of Securities .

4.3 Common Stock Purchase Warrants, dated as of October 1, 2021, by and between Root, Inc.

and Carvana Group, LLC

8-K 001-39658 4.1 October 1, 2021

4.4 Form of Common Stock Purchase Warrant (Tranche 1), dated January 26, 2022

8-K 001-39658 4.1 January 27, 2022

4.5 Form of Common Stock Purchase Warrant (Tranche 2).

8-K 001-39658 4.2 January 27, 2022

10.1* Term Loan Agreement, dated as of January 26, 2022, by and among the Company, Caret Holdings, Inc., as borrower, the loan parties party thereto and Acquiom Agency Services LLC, as the administrative agent for the lenders party thereto

8-K 001-39658 10.1 January 27, 2022

10.2# Executive Employment Agreement by and between Caret Holdings, Inc.

and Hemal Shah, dated December 16, 2021

10.3# Form of Executive Retention Award

10.4# Root Inc, Non-Employee Director Compensation Policy adopted February 17, 2022

10.5 Amendment to the Fifth Amended and Restated Investors’ Rights Agreement by and among Root, Inc.

and certain of its stockholders, dated October 28, 2020

10.6# Root, Inc.

Non-Employee Director Compensation Policy adopted February 12, 2021

10.7# Form of Root, Inc.

2020 Equity Incentive Plan RSU Award Grant Notice and Award Agreement

10-Q 001-39658 10.2 May 6, 2021

10.8# Form of Root, Inc.

2020 Equity Incentive Plan Stock Option Grant Notice and Option Agreement

10-Q 001-39658 10.1 August 12, 2021

10.9# Executive Employment Agreement by and between Caret Holdings, Inc.

and Anirban Kundu, dated June 21, 2021

10-Q 001-39658 10.2 August 12, 2021

10.10 Investment Agreement, dated as of August 11, 2021, by and between Root, Inc.

and Carvana Group, LLC

8-K 001-39658 10.1 August 12, 2021

10.11# Advisor Agreement with Daniel Manges, effective July 3, 2021

8-K 001-39658 10.1 July 2, 2021

10.12* Commercial Agreement, dated as of October 1, 2021

8-K 001-39658 10.1 October 1, 2021

10.13 First Amendment to Investment Agreement, dated as of September 29, 2021, by and between Root, Inc.

and Carvana Group, LLC

8-K 001-39658 10.3 October 1, 2021

10.14 Fifth Amended and Restated Investors’ Rights Agreement by and among Root, Inc.

1 unchanged sentence

S-1 333-249332 4.2 October 5, 2020

10.2 Warrant to Purchase Stock by and between Root, Inc.

and Silicon Valley Bank, dated July 7, 2016.

S-1 333-249332 4.3 October 5, 2020

10.3 Warrant to Purchase Stock by and between Root, Inc.

and Silicon Valley Bank, dated December 20, 2017, as amended.

S-1 333-249332 4.4 October 20, 2020

10.4 Form of Floating Rate Senior Secured Note Due 2024.

S-1 333-249332 4.5 October 5, 2020

10.15# Root, Inc.

1 unchanged sentence

S-1 333-249332 10.1 October 5, 2020

10.6 Form of Notice of Stock Option Exercise and Stock Option Exercise Agreement under the Amended and Restated 2015 Equity Incentive Plan.

10.16# Form of Stock Option Agreement under the Amended and Restated 2015 Equity Incentive Plan.

S-1 333-249332 10.2 October 5, 2020

10.17# Form of Notice of Stock Option Exercise and Stock Option Exercise Agreement under the Amended and Restated 2015 Equity Incentive Plan.

10-K 333-249332 10.7 March 4, 2021

10.18# Form of RSU Agreement under the Amended and Restated 2015 Equity Incentive Plan.

1 unchanged sentence

10.19# Root, Inc.

2020 Equity Incentive Plan, and forms of agreements thereunder.

2020 Equity Incentive Plan.

10-Q 001-39658 10.1 December 2, 2020

2 unchanged sentences

S-1/A 333-249332 10.14 October 20, 2020

10.11 Loan and Security Agreement by and between Root, Inc.

and Silicon Valley Bank, dated July 7, 2016, as amended., dated July 7, 2016, as amended.

S-1/A 333-249332 10.5 October 20, 2020

10.21 Office Lease Agreement by and between Root, Inc.

1 unchanged sentence

S-1 333-249332 10.6 October 5, 2020

10.13 Amended and Restated Term Loan Agreement by and among Root, Inc., Caret Holdings, Inc., SunTrust Bank, and the lenders from time to time party thereto, dated November 25, 2019, as amended.

10.14 Note Purchase Agreement by and among Root, Inc., Caret Holdings, Inc., Wilmington Trust, National Association, and the noteholders from time to time party thereto, dated November 25, 2019, as amended.

S-1 333-249332 10.8 October 5, 2020

10.15 Form of Indemnity Agreement entered into by and between Root, Inc.

and each director and executive officer.

S-1 333-249332 10.9 October 20, 2020

10.22 Form of Director and Officer Indemnity Agreement

10.23# Offer Letter by and between Root, Inc.

and Alexander Timm, dated January 4, 2021.

10-K 333-249332 10.16 March 4, 2021

10.24# Amended and Restated Offer Letter by and between Root, Inc.

and Daniel Rosenthal, dated February 24, 2021.

10-K 333-249332 10.17 March 4, 2021

10.25# Offer Letter by and between Root, Inc.

and Daniel Manges, dated February 24, 2021.

10.19 Common Stock Purchase Agreement by and between the Registrant and Dragoneer Investment Group, LLC, dated October 19, 2020.

S-1 333-249332 10.16 October 20, 2020

10.20 Common Stock Purchase Agreement by and between the Registrant and Silver Lake Partners VI, L.P., dated October 19, 2020.

S-1 333-249332 10.16 October 20, 2020

10-K 333-249332 10.18 March 4, 2021

10.26# F irst Amendment to Off er Letter by and between Root, Inc.

and Alexander Timm, dated February 22 , 2022

10.27# F irst Amendment to Amended and Restated Offer Letter by and be tween Root, Inc.

and Daniel Rosenthal, dated February 23 , 2022

10.28 Board Observation Side Letter, dated January 26, 2022, by and between the Company and GCO II Aggregator 2 L.P.

001-39658 10.2 January 27, 2022

10.29 Registration Rights Agreement, dated January 26, 2022, by and between the Company and the other parties thereto.

001-39658 10.3 January 27, 2022

10.30 Root, Inc.

Executive Compensation Agreement

21.1 List of subsidiaries of Root, Inc.

13 unchanged sentences

_______________

* Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(a)(5) and (b)(10).

The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

# Indicates management contract or compensatory plan.

1 unchanged sentence

Form 10-K Summary

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

March 4, 2021

February 23, 2022

/s/Alexander Timm

8 unchanged sentences

( Principal Executive Officer )

March 4, 2021

February 23, 2022

Alexander Timm

/s/ Daniel Rosenthal Chief Financial Officer

/s/ Daniel Rosenthal Chief Revenue and Operating Officer and Chief Financial Officer

( Principal Financial Officer )

March 4, 2021

February 23, 2022

Daniel Rosenthal

/s/ Megan Binkley Chief Accounting Officer ( Principal Accounting Officer )

March 4, 2021

February 23, 2022

Megan Binkley

/s/ Christopher Olsen Director March 4, 2021

Christopher Olsen

/s/ Doug Ulman Director March 4, 2021

/s/ Elliot Geidt Director March 4, 2021

/s/ Jerri DeVard Director March 4, 2021

/s/ Larry Hilsheimer Director March 4, 2021

/s/ Doug Ulman Director February 23, 2022

/s/ Elliot Geidt Director February 23, 2022

/s/ Jerri DeVard Director February 23, 2022

/s/ Larry Hilsheimer Director February 23, 2022

Larry Hilsheimer

/s/ Luis von Ahn Director March 4, 2021

/s/ Nancy Kramer Director March 4, 2021

/s/ Nick Shalek Director March 4, 2021

/s/ Scott Maw Director March 4, 2021

/s/ Luis von Ahn Director February 23, 2022

/s/ Nancy Kramer Director February 23, 2022

/s/ Nick Shalek Director February 23, 2022

/s/ Scott Maw Director February 23, 2022

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures