Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Limitations on effectiveness of controls and procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023.
Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, using the criteria described in Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2023, we completed the process of incorporating the internal controls of Unitas Holdings Corp., including its wholly owned subsidiaries United PanAm Financial Corp. and United Auto Credit Corporation, into our internal control over financial reporting and extending our Section 404 compliance program under the Sarbanes-Oxley Act and the applicable rules and regulations under such law to include such entities. Except for the foregoing, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B . Other Information
a) Disclosure in lieu of reporting on a Current Report on Form 8-K.
On March 8, 2024 (the “Effective Date”), the Compensation Committee (the “Committee”) of the Board of Directors of Vroom, Inc. (the “Company”) approved retention letter agreements (each, a “Retention Agreement”) with each of Thomas Shortt, Robert Krakowiak and Patricia Moran providing for: (i) an amendment to each executive’s outstanding restricted stock units which are scheduled to vest in 2024, 2025 and 2026 to vest in full between March 17, 2025 and March 20, 2025, subject to the executive’s continued employment through such date (the “RSU Vesting Amendment”) or earlier acceleration on a termination without Cause or for Good Reason (each as defined in the Retention Agreement), (ii) in consideration of the executives’ agreement to the RSU Vesting Amendment, a grant of additional restricted stock units with respect to 2,250, 1,085, and 531 shares of common stock, respectively, with the same vesting terms, and (iii) an
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extension of the post-termination exercise period of any outstanding vested stock options held by such executive in the event of the executive’s termination without Cause or for Good Reason through the original expiration date of such options. In addition, Mr. Shortt’s Retention Agreement provides that he will be eligible to earn a retention bonus of $1,000,000, which will be payable in five equal installments on or shortly following each date of filing of the Company’s annual report on Form 10-K for fiscal year 2023, the quarterly reports on Form 10-Q for each of the first three fiscal quarters of fiscal year 2024, and the Company’s annual report on Form 10-K for fiscal year 2024, subject to his continued service with the Company on the applicable payment date or on an earlier termination without Cause or for Good Reason.
The Committee also determined to increase the base salaries of Mr. Krakowiak and Ms. Moran to $650,000 and $600,000, respectively, effective as of February 1, 2024. In addition, the Committee approved an amendment and restatement of the Company's Amended and Restated Executive Severance Plan (the "Executive Severance Plan") which: (i) clarifies that a Competing Business (as defined in the Executive Severance Plan) includes a business engaged in financing motor vehicles in order to reflect changes to the Company’s business activities since the effective date of the Executive Severance Plan, (ii) makes certain other clarifying changes, including to reflect the severance terms previously agreed to with the Company’s Chief Executive Officer Mr. Shortt in his employment letter with the Company dated May 9, 2022; and (iii) provides that the severance payments payable on a qualifying termination (outside of the Change in Control Period (as defined in the Executive Severance Plan)) will be paid in substantially equal installments over a period of four months (rather than the original eighteen- or twelve- month periods, as applicable).
The foregoing summary of the amendment and restatement to the Executive Severance Plan and Retention Agreements is not complete and is qualified in its entirety by reference to the full text of the amended and restated Executive Severance Plan, a copy of which is attached as Exhibit 10.15 and the Retention Agreements, a copy of which are attached as Exhibits 10.25, 10.26 and 10.27.
b) Insider Trading Arrangements and Policies.
During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C . Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Off icers, and Corporate Governance
We have adopted a written code of ethics, entitled “Code of Business Conduct and Ethics,” that applies to all of our directors, executive officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. We make available our code of ethics free of charge through our investor relations website which is located at ir.vroom.com . We intend to post on our website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision of our code of ethics.
The information concerning our executive offers and directors required by this Item 10 is contained under the caption “Information about our Executive Officers and Directors” at the end of Part I of this Annual Report on Form 10-K. The remaining information required by this item is incorporated by reference to Vroom’s Proxy Statement for its 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the headings "Our Board of Directors," "Our Executive Officers," "Corporate Governance," and, if applicable, "Delinquent Section 16(a) Reports".
Item 11. Executi ve Compensation
The information required by this item is incorporated by reference to Vroom’s Proxy Statement for its 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the headings "Executive Compensation" and "Compensation Committee Interlocks and Insider Participation".
Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to Vroom’s Proxy Statement for its 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the headings "Security Ownership of Certain Beneficial Owners and Management" and "Securities Authorized for Issuance under Equity Compensation Plans".
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to Vroom’s Proxy Statement for its 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the headings "Certain Relationships and Related Person Transactions" and "Corporate Governance".
Item 14. Principal Accou nting Fees and Services
The information required by this item is incorporated by reference to Vroom’s Proxy Statement for its 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the subheading "Principal Accountant Fees and Services".
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PART IV
Item 15. Exhibits and Financial Statement Schedules
1. Financial Statements: The Consolidated Financial Statements of Vroom are set forth in Part II, Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules: All financial statement schedules have been omitted because they are not applicable, not material or the required information is shown in Part II, Item 8 of this Annual Report on Form 10-K.
3. Exhibits: The exhibits listed in the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K.
INDEX TO EXHIBITS
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing
Date
Filed Herewith
Furnished
Herewith
2.1
Agreement and Plan of Merger, dated as of October 11, 2021, by and among Vroom, Inc., Vroom Finance Corporation, Unitas Holdings Corp. and Fortis Advisors LLC, solely in its capacity as the equityholders' representative
8-K
001-39315
2.1
October 12, 2021
3.1
Amended and Restated Certificate of Incorporation of Vroom, Inc.
10-Q
001-39315
3.1
August 13, 2020
3.2
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Vroom, Inc., dated February 13, 2024.
8-K
001-39315
3.1
February 14, 2024
3.3
Amended and Restated Bylaws of Vroom, Inc.
10-Q
001-39315
3.2
August 13, 2020
4.1
Specimen Stock Certificate evidencing the shares of common stock
S-1/A
333-238482
4.1
June 1, 2020
4.2
Indenture, dated as of June 18, 2021, between Vroom, Inc. and U.S. Bank National Association, as trustee
8-K
001-39315
4.1
June 21, 2021
4.3
Form of Global Note representing the 0.750% Convertible Senior Notes due 2026 (included in Exhibit 4.2)
8-K
001-39315
4.2
June 21, 2021
4.4
Eighth Amended and Restated Investors’ Rights Agreement, dated as of November 21, 2019, by and among Vroom, Inc. and certain holders of its capital stock
S-1/A
333-238482
4.2
May 18, 2020
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4.5
Description of Registrant’s Securities
10-K
001-39315
4.3
March 3, 2021
10.1
Second Amended & Restated 2014 Equity Incentive Plan, as amended
S-1/A
333-238482
10.1
May 18, 2020
10.2
First Amendment to the Second Amended and Restated Vroom, Inc. 2014 Equity Incentive Award Plan
10-Q
001-39315
10.3
August 13, 2020
10.3
Second Amendment to the Second Amended and Restated Vroom, Inc. 2014 Equity Incentive Award Plan
10-Q
001-39315
10.4
August 13, 2020
10.4
Form of Stock Option Agreement pursuant to the Second Amended and Restated 2014 Equity Incentive Award Plan
10-K
001-39315
10.4
March 3, 2021
10.5
Form of Restricted Stock Unit Agreement pursuant to the Second Amended and Restated 2014 Equity Incentive Award Plan
10-K
001-39315
10.5
March 3, 2021
10.6
2019 Short Term Incentive Plan
S-1/A
333-238482
10.2
May 18, 2020
10.7
2020 Incentive Award Plan
S-1/A
333-238482
10.3
June 1, 2020
10.8
Form of Restricted Stock Unit Agreement pursuant to the 2020 Incentive Award Plan
10-Q
001-39315
10.2
August 13, 2020
10.9
Form of Stock Option Grant Notice and Stock Option Agreement pursuant to the 2020 Incentive Award Plan
10-Q
001-39315
10.4
August 8, 2022
10.10
2022 Inducement Award Plan
S-8
333-265233
99.1
May 26, 2022
10.11
Form of Restricted Stock Unit Agreement pursuant to the 2022 Inducement Award Plan
S-8
333-265233
99.2
May 26, 2022
10.12
Form of Stock Option Agreement pursuant to the 2022 Inducement Award Plan
S-8
333-265233
99.3
May 26, 2022
10.13
Amended and Restated Non-Employee Director Compensation Policy
10-Q
001-39315
10.9
August 8, 2022
10.14
Form of Indemnification Agreement
S-1/A
333-238482
10.5
June 1, 2020
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10.15
Amended and Restated Executive Severance Plan, as amended and restated
X
10.16#
Amended and Restated Inventory Financing and Security Agreement, dated November 4, 2022 by and among Ally Bank, Ally Financial Inc., Vroom Automotive, LLC and Vroom, Inc.
10-Q
001-39315
10.1
November 7, 2022
10.17
First Amendment to Amended and Restated Inventory Financing and Security Agreement, dated August 1, 2023, by and among Ally Bank, Ally Financial Inc., Vroom Automotive, LLC and Vroom, Inc.
10-Q
001-39315
10.1
August 8, 2023
10.18
Second Amendment to Amended and Restated Inventory Financing and Security Agreement, dated January 19, 2024, by and among Ally Bank, Ally Financial Inc., Vroom Automotive, LLC and Vroom, Inc.
X
10.19
Agreement of Termination of Amended and Restated Inventory Financing and Security Agreement and Credit Balance Agreement, dated March 12, 2024 by and among Ally Bank, Ally Financial Inc., Vroom Automotive, LLC and Vroom, Inc.
X
10.20
Employment Offer Letter, dated December 29, 2018, by and between Vroom, Inc. and Patricia Moran
S-1/A
333-248655
10.18
September 8, 2020
10.21
Employment Offer Letter, dated November 3, 2016, by and between Vroom, Inc. and Carol Denise Stott
S-1/A
333-248655
10.19
September 8, 2020
10.22
Letter Agreement, dated as of September 13, 2021, by and between Robert Krakowiak and Vroom, Inc.
8-K
001-39315
10.1
September 13, 2021
10.23
Amended Offer Letter, dated as of May 20, 2022, by and between Robert R. Krakowiak and Vroom, Inc.
8-K
001-39315
10.2
May 26, 2022
10.24
Letter Agreement, dated as of December 15, 2021, by and between Thomas Shortt and Vroom, Inc.
8-K
001-39315
10.1
December 17, 2021
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10.25
Letter Agreement dated as of March 11, 2024, by and between Thomas Shortt and Vroom, Inc.
X
10.26
Letter Agreement dated as of March 11, 2024, by and between Robert Ronald Krakowiak and Vroom, Inc.
X
10.27
Letter Agreement dated as of March 11, 2024, by and between Patricia Moran and Vroom, Inc.
X
10.28
Employment Letter, dated as of May 9, 2022, by and between Thomas Shortt and Vroom, Inc.
8-K
001-39315
10.1
May 9, 2022
10.29
Nominee and Indemnity Agreement, dated September 1, 2020, by and among Catterton Management Company, L.L.C. as investment manager of CGP2 Lone Star, L.P., Michael Farello and Vroom, Inc.
S-1/A
333-248655
10.21
September 8, 2020
10.30
Assignment of Contracts, dated July 29, 2021, by and between CGP2 Lone Star, LP as assignor and Catterton Growth Partners II, L.P., Catterton Growth Partners II Offshore, L.P., L Catterton Growth Partners III, L.P. and L Catterton Growth Partners Offshore III, L.P. as assignees, of the Nominee and Indemnity Agreements, dated September 1, 2020, of Scott Dahnke and Michael Farello
10-Q
001-39315
10.1
August 11, 2021
21.1
Subsidiaries of the Registrant
X
23.1
Consent of PricewaterhouseCoopers LLP
X
31.1
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
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32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
97.1
Policy for Recovery of Erroneously Awarded Compensation
X
101.INS
Inline XBRL Instance Document
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
X
Indicates a management contract or compensatory plan or arrangement.
# Certain portions of this exhibit (indicated by "[***]") have been omitted pursuant to Regulation S-K, Item (601)(b)(10).
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Vroom, Inc.
Date: March 13, 2024
By:
/s/ Thomas H. Shortt
Thomas H. Shortt
Chief Executive Officer
(principal executive officer)
Date: March 13, 2024
By:
/s/ Robert R. Krakowiak
Robert R. Krakowiak
Chief Financial Officer
(principal financial officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Thomas H. Shortt
Thomas H. Shortt
Chief Executive Officer (Principal Executive Officer) and Director
March 13, 2024
/s/ Robert R. Krakowiak
Robert R. Krakowiak
Chief Financial Officer (Principal Financial Officer)
March 13, 2024
/s/ Agnieszka Zakowicz
Agnieszka Zakowicz
Senior Vice President and Principal Accounting Officer
March 13, 2024
/s/ Robert J. Mylod, Jr.
Robert J. Mylod, Jr.
Director
March 13, 2024
/s/ Timothy M. Crow
Timothy M. Crow
Director
March 13, 2024
/s/ Michael J. Farello
Michael J. Farello
Director
March 13, 2024
/s/ Laura W. Lang
Laura W. Lang
Director
March 13, 2024
/s/ Laura G. O’Shaughnessy
Laura G. O’Shaughnessy
Director
March 13, 2024
/s/ Paula B. Pretlow
Paula B. Pretlow
Director
March 13, 2024
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