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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
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 | |
RealPage, Inc.
(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):
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| (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 was determined):
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| ☐ | 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. | |||
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REALPAGE, INC.
Notice of 2017 Annual Meeting of Stockholders
June 1, 2017
We are pleased to invite you to attend the 2017 Annual Meeting of Stockholders of RealPage, Inc.
When and Where: The meeting will be held on June 1, 2017, at 10:00 a.m., local time, at RealPage, Inc.’s principal executive offices located at 2201 Lakeside Blvd., Richardson, Texas 75082.
Items of Business: The meeting is being held to conduct the following items of business which are described in greater detail in the Proxy Statement accompanying this notice:
| 1. | To elect each of Alfred R. Berkeley, III, Peter Gyenes and Charles F. Kane to our board of directors for a term of three years. |
| 2. | To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. |
| 3. | To approve an advisory (non-binding) proposal concerning our executive compensation program. |
| 4. | To approve an advisory (non-binding) proposal concerning the frequency of stockholder votes on our executive compensation program. |
| 5. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
Record Date: Our board of directors set April 10, 2017 as the record date for the meeting. Our stockholders of record at the close of business on that date are entitled to receive this notice and to vote at the meeting.
Meeting Attendance and Voting: All stockholders are cordially invited to attend the meeting in person. Whether or not you plan to attend the annual meeting, we hope that you will vote as soon as possible. You may vote by completing, signing and dating your proxy card and mailing it in the postage-prepaid envelope enclosed for that purpose. Voting by written proxy will ensure your representation at the meeting if you do not attend in person. For specific instructions on how to vote your shares, please review the instructions on the proxy card. Stockholders who attend the meeting may vote in person even if they have submitted a proxy. However, if you have submitted a proxy and wish to vote in person at the meeting, you must notify the inspector of elections of your intention to revoke the proxy that you previously submitted and instead vote in person at the meeting. If your shares are held in the name of a broker, trustee, bank or other nominee, please bring a proxy card from the broker, trustee, bank or other nominee with you to confirm that you are entitled to vote the shares.
Additional Information: The 2017 Proxy Statement and 2016 Annual Report to Stockholders are included with this notice and are also available at http://investor.realpage.com.
| By Order of the Board of Directors |
| /s/ David G. Monk |
| David G. Monk |
| Executive Vice President, Chief Legal Officer and Secretary |
Richardson, Texas
April 24, 2017
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REALPAGE, INC.
Proxy Statement
For the
2017 Annual Meeting of Stockholders
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| • Incumbent Directors whose terms of office continue after the Annual Meeting |
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| • Hedging, Short Sale and Pledging Policy under our Insider Trading Policy |
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| • Determining Compensation for Non-Employee Directors in 2016 |
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| • Director Compensation Table for Year ended December 31, 2016 |
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| • Transactions With Related Persons, Promoters And Certain Control Persons |
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| • Amendment of Employment Agreement with Chief Executive Officer |
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| • Trading Controls and Hedging, Short Sale and Pledging Policies under our Insider Trading Policy |
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REALPAGE, INC.
2201 Lakeside Boulevard
Richardson, Texas 75082
(972) 820-3000
FOR THE
2017 ANNUAL MEETING OF STOCKHOLDERS
April 24, 2017
We are furnishing you this proxy statement and proxy card to solicit proxies on behalf of the board of directors (the “Board”) of RealPage, Inc. (“RealPage”, the “Company”, “we” or “us”) to be voted at our 2017 Annual Meeting of Stockholders (“Annual Meeting”). The Annual Meeting will be held at our principal executive offices located at 2201 Lakeside Boulevard, Richardson, Texas 75082 on June 1, 2017, at 10:00 a.m., local time. The proxies also may be voted at any adjournments or postponements of the Annual Meeting.
We are first mailing the proxy materials to stockholders on April 24, 2017. Please refer to “Information Concerning Solicitation and Voting” located on page 56 in this proxy statement for information relating to the distribution of our annual meeting materials to our stockholders.
All properly executed written proxies and all properly completed proxies submitted by telephone or Internet that are delivered pursuant to this solicitation will be voted at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the Annual Meeting.
Only owners of record of shares of our common stock as of the close of business on April 10, 2017 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements of the Annual Meeting. Each owner of record on the Record Date is entitled to one vote for each share of common stock held. On the Record Date, 82,679,778 shares of our common stock, $0.001 par value, were issued, outstanding and entitled to vote at the Annual Meeting.
The Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2016 are available at http://investor.realpage.com.
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PROPOSAL ONE: ELECTION OF DIRECTORS
What Am I Voting On?
Stockholders are being asked to elect three director nominees for three-year terms. This section includes information about our Board, each director nominee, and each incumbent director whose term continues after the Annual Meeting.
Voting Recommendation:
FOR the election of each director nominee. We believe the combination of the various qualifications, skills and experiences of the 2017 director nominees will contribute to an effective and well-functioning Board as the director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to our management.
Our Board is currently composed of seven members, divided into three classes with staggered three-year terms. There are currently three directors in Class I, two directors in Class II and two directors in Class III. The current terms of office of the Class I directors, Mr. Alfred R. Berkeley, III, Mr. Peter Gyenes and Mr. Charles F. Kane, will expire at this Annual Meeting and Mr. Berkeley, Mr. Gyenes and Mr. Kane will stand for re-election to our Board at the Annual Meeting.
The terms of office of the Class II directors, Mr. Scott S. Ingraham and Mr. Jeffrey T. Leeds, will expire at the 2018 annual meeting. The terms of office of the Class III directors, Mr. Stephen T. Winn and Mr. Jason A. Wright, will expire at the 2019 annual meeting. Our certificate of incorporation and our bylaws provide that the number of directors will be fixed from time to time by a resolution of the majority of our Board. Nine directors are currently authorized.
Directors are elected by a plurality of the votes cast. The three nominees who receive the greatest number of votes cast will be elected directors for three-year terms, in each case until their successors are duly elected and qualified. Withheld votes and broker non-votes, if any, will not be counted either for or against the election of a director nominee. Cumulative voting is not permitted by our certificate of incorporation.
Unless otherwise instructed, the proxy holders will vote the proxies received by them for our nominees named below. If any of our nominees is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the present Board to fill the vacancy. It is not expected that any nominee will be unable or will decline to serve as a director.
Recommendation of our Board for Proposal One
Our Board unanimously recommends that stockholders vote FOR the nominees listed below.
2017 DIRECTOR NOMINEES — CLASS I DIRECTORS
The nominating and governance committee of our Board (“Nominating and Governance Committee”) recommended the three individuals set forth in the table below for nomination by our Board. Based on such recommendations, our Board nominated such directors for election at the Annual Meeting as Class I directors to serve for a term expiring at the 2020 annual meeting of stockholders, or until their successors have been duly elected and qualified or until their earlier death, resignation or removal.
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Our Board and Nominating and Governance Committee believe that the combination of the various qualifications, skills and experiences of the director nominees will contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications to provide effective oversight of our business and quality advice and counsel to our management.
The following sets forth information concerning the nominees for election as directors at the Annual Meeting, including information as to each nominee’s age as of the Record Date, current principal occupation and business experience.
| Name of Nominee |
Age | Position and Offices Held with Company |
Director Since |
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| Alfred R. Berkeley, III (2) |
72 | Director | 2003 | |||||||
| Peter Gyenes (1)(2)(3) |
71 | Director | 2010 | |||||||
| Charles F. Kane (1)(2)(3) |
59 | Director | 2012 | |||||||
| (1) | Member of Audit Committee |
| (2) | Member of Compensation Committee |
| (3) | Member of Nominating and Governance Committee |
Alfred R. Berkeley, III has served as a member of our Board since December 2003 and as a member of our Compensation Committee (“Compensation Committee”) since January 2004. Mr. Berkeley also served as a member and as chairman of our Audit Committee (“Audit Committee”) from January 2004 to February 2012 and as our lead independent director from February 2011 to February 2012. Mr. Berkeley has served as Chairman of Princeton Capital Management, Inc., an investment adviser, since December 2012 and as Vice Chairman of Gentag, Inc., a developer of technology for near field communications, since November 2011. Mr. Berkeley served as the Chairman of Pipeline Financial Group, Inc., the parent of Pipeline Trading Systems LLC, a block trading brokerage service, from December 2003 until November 2011. From December 2003 to March 2010, Mr. Berkeley also served as the Chief Executive Officer of Pipeline Financial Group, Inc. He also served as Acting Chairman of the National Infrastructure Advisory Council for the President of the United States from 2001 until December 2011. Mr. Berkeley also served as a trustee of Johns Hopkins University and a member of the Johns Hopkins University Applied Physics Laboratory, LLC from 1999 until June 2011. He formerly served as Vice Chairman of the Nomination Evaluation Committee for the National Medal of Technology and Innovation, which makes candidate recommendations to the Secretary of Commerce. He was appointed Vice Chairman of the NASDAQ Stock Market, Inc. in July 2000, serving through July 2003, and served as President of NASDAQ from 1996 until 2000. From 1972 to 1996, Mr. Berkeley served in a number of capacities at Alex. Brown & Sons Incorporated, which was acquired by Bankers Trust New York Corporation and later by Deutsche Bank AG. Most recently, he was Managing Director in the corporate finance department where he financed computer software and electronic commerce companies. He joined Alex. Brown & Sons Incorporated as a Research Analyst in 1972 and became a general partner in 1983. From 1985 to 1987, he served as Head of Information Services for the firm. From 1988 to 1990, Mr. Berkeley took a leave of absence from Alex. Brown & Sons Incorporated to serve as President and Chief Executive Officer of Rabbit Software Inc., a public telecommunications software company. He served as a captain in the United States Air Force and a major in the United States Air Force Reserve.
Mr. Berkeley also served as a director of Kintera, Inc. until May 2008, when it was acquired by Blackbaud, Inc. (NASDAQ: BLKB). Mr. Berkeley also served on the board of Fortegra Financial Corporation (NYSE: FRF), an insurance services company that provides distribution and administration services and insurance-related products to insurance companies, insurance brokers and agents and other financial services companies in the United States from December 2010 to November 2011. Mr. Berkeley served on the boards of directors of ACI Worldwide, Inc. (NASDAQ: ACIW) from 2008 until June 2012 and Edgar Online, Inc. (NASDAQ: EDGR), which was sold to RR Donnelley, from November 2010 through August 2012. Mr. Berkeley also serves as a director of several private companies. Mr. Berkeley received his B.A. in English from the University of Virginia
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and his M.B.A. from The Wharton School of the University of Pennsylvania. On October 24, 2011, Mr. Berkeley entered into a consent decree with the Securities and Exchange Commission (“SEC”) relating to his role at Pipeline Trading Systems, LLC. We believe Mr. Berkeley’s qualifications to serve on our Board include his extensive experience in corporate finance and securities matters, including his experience as chief executive officer of various companies and his leadership positions with the NASDAQ Stock Market, Inc., and his knowledge gained from service on the boards of various publicly traded and private companies and federal committees.
Peter Gyenes has served as a member or our Board since January 2010, as chairman of our Compensation Committee since February 2010, as a member of our Audit Committee since February 2010, and as a member of our Nominating and Governance Committee since February 2010. Mr. Gyenes has served as the non-executive Chairman of the board of directors of Sophos Group plc (LSE: SOPH), a global security software company, since March 2006, lead independent director from September 2012 to July 2015, and again as chairman since July 2015. Mr. Gyenes served as Chairman and Chief Executive Officer of Ascential Software Corporation (NASDAQ: ASCL), a market leader in data integration software, and its predecessor companies VMark Software, Ardent Software and Informix from 1996 until it was acquired by International Business Machines Corporation in 2005. Mr. Gyenes also served on the board of Lawson Software, Inc. (NASDAQ: LWSN) from 2006 until it was acquired by Infor in July 2011, served on the board of EnerNoc (NASDAQ: ENOC) from 2013 until 2015, served on the board of Cimpress NV (NASDAQ: CMPR) from 2009 until 2015, and served on the board of IntraLinks Holdings, Inc. (NYSE:IL) from 2008 to January 2017. He currently serves on the boards of directors of Pegasystems Inc. (NASDAQ: PEGA), and Carbonite, Inc. (NASDAQ: CARB), a leading provider of online backup solutions for consumers and small and medium sized businesses, and serves as trustee emeritus of the Massachusetts Technology Leadership Council. Mr. Gyenes received his B.A. in mathematics and his M.B.A. in marketing from Columbia University. We believe Mr. Gyenes’ qualifications to serve on our Board include his experience as the Chief Executive Officer of a publicly traded company, his knowledge gained from service on the boards of various public and private companies and his more than 40 years of experience in technology, sales, marketing and general management positions within the computer systems and software industry.
Charles F. Kane has served as a member of our Board, as a member of our Compensation Committee and as a member of our Nominating and Governance Committee since June 2012. Mr. Kane has served as a member of our Audit Committee since June 2012 and as chairman of our Audit Committee since February 2013. Mr. Kane is an adjunct professor of international finance at the Massachusetts Institute of Technology Sloan Graduate Business School of Management. Mr. Kane is also a Director and Strategic Advisor of One Laptop Per Child, a non-profit organization founded at Massachusetts Institute of Technology that provides computing and internet access for students in the developing world, for whom he served as President and Chief Operating Officer from 2008 until 2009. Mr. Kane served as Executive Vice President and Chief Administrative Officer of Global BPO Services Corp., a special purpose acquisition corporation, from July 2007 until March 2008, and as Chief Financial Officer of Global BPO from August 2007 until March 2008. Prior to joining Global BPO, he served as Chief Financial Officer of RSA Security Inc., a provider of e-security solutions, from May 2006 until RSA was acquired by EMC Corporation in October 2006. From July 2003 until May 2006, he served as Chief Financial Officer of Aspen Technology, Inc., a provider of supply chain management software and professional services. Mr. Kane is currently a director of Carbonite, Inc. (NASDAQ: CARB), a leading provider of online backup solutions for consumers and small and medium sized businesses, Progress Software (NASDAQ: PRGS) is a global software company that simplifies the development, deployment and management of business applications on-premise or in the cloud, on any platform or device, to any data source, with enhanced performance, minimal IT complexity and low total cost of ownership. Mr. Kane was previously a director of Applix Inc., Borland Software Corporation, Demandware Inc. and Netezza Corporation. Mr. Kane is a Certified Public Accountant and holds a B.B.A. in accounting from the University of Notre Dame and an M.B.A. in international finance from Babson College. We believe Mr. Kane’s experience as a senior executive officer at a number of publicly traded companies, including as chief financial officer of several of those companies, and his experience serving on the boards of directors of other public and private companies, qualify him to serve on our Board.
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As an Audit Committee financial expert and chairman of our Audit Committee, Mr. Kane provides a high level of expertise and leadership experience in the areas of finance, accounting, audit oversight and risk analysis derived from his experience as the chief financial officer of publicly traded technology companies. Mr. Kane also offers substantial public company board experience to our Board.
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
The following sets forth information concerning our directors whose terms of office continue after the Annual Meeting, including information as to each director’s age as of the Record Date, current principal occupation and business experience.
| Name of Director |
Age | Position and Offices Held with Company |
Director Since |
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| Scott S. Ingraham (1)(3) |
63 | Director | 2012 | |||||||
| Jeffrey T. Leeds (3) |
61 | Director | 1999 | |||||||
| Stephen T. Winn |
70 | Chairman, CEO and President | 1998 | |||||||
| Jason A. Wright (1)(2)(3) |
45 | Director | 2003 | |||||||
| (1) | Member of Audit Committee |
| (2) | Member of Compensation Committee |
| (3) | Member of Nominating and Governance Committee |
Class II Directors (Terms Expire in 2018)
Scott S. Ingraham has served as a member of our Board since February 2012 and as a member of our Audit Committee and our Nominating and Governance Committee since February 2012. Mr. Ingraham is presently the co-founder and Principal of Zuma Capital, Inc., a private investment firm. He co-founded and served as the Chief Executive Officer and Chairman of Rent.com, an Internet residential real estate listing site, from 1999 until its acquisition by eBay in February 2005. Prior to founding Rent.com, Mr. Ingraham was the CEO, president and co-founder of Oasis Residential, a NYSE-traded apartment REIT which merged into Camden Property Trust in 1998. Mr. Ingraham is on the Board of Trust Managers of Camden Property Trust, a real estate investment trust focused on the development and ownership of apartment properties. Camden Property Trust is one our larger customers. Mr. Ingraham also serves as a director of Kilroy Realty Corporation, a publicly held real estate investment trust focused on the development and ownership of office and industrial properties. Mr. Ingraham served as a director of Loopnet, a wholly owned subsidiary of CoStar Group, Inc. (NASDAQ: CSGP), from August 2006 through April 2012. Mr. Ingraham graduated from the University of Texas at Austin with a BBA in Finance. We believe Mr. Ingraham’s qualifications to sit on our Board include his substantial financial and business expertise as the chief executive officer of several companies in the real estate industry and his significant experience serving on boards of other publicly traded companies.
Jeffrey T. Leeds has served as a member of our Board and a member of our Nominating and Governance Committee since December 1999. Mr. Leeds has served as chairman of our Nominating and Governance committee since February 2012. Mr. Leeds is President and Co-Founder of Leeds Equity Partners. Leeds Equity Partners, based in New York, is the oldest and largest private equity firm in the United States focused exclusively on investments in the Knowledge Industries — education, training, and business and information services. Prior to co-founding Leeds Equity Partners in 1993, Mr. Leeds spent seven years specializing in mergers and acquisitions and corporate finance at Lazard Freres & Co. LLC, a subsidiary of Lazard Group LLC. Prior to joining Lazard Freres & Co. LLC, Mr. Leeds served as a law clerk to the Hon. William J. Brennan, Jr. of the Supreme Court of the United States during the 1985 October Term. Mr. Leeds also worked in the corporate department of the law firm of Cravath, Swaine & Moore LLP in New York. Mr. Leeds currently serves on the board of directors of BARBRI, INTO University Partnerships, Knowledge Factor, Medley Management Inc. (NASDAQ: MDLY) and Simplify Compliance Holdings, LLC. Mr. Leeds served on the Board of Education
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Management Corporation (NASDAQ: EDMC) from June 2006 through July 2015. Mr. Leeds is a member of the Council on Foreign Relations and a member of the Board of Visitors at The Colin L. Powell School for Civic and Global Leadership at The City College of New York. Mr. Leeds received his B.A. in history summa cum laude from Yale University and his J.D. magna cum laude from Harvard Law School. He was also a Marshall Scholar at the University of Oxford. We believe Mr. Leeds’s qualifications to serve on our Board include his extensive business and legal experience in corporate finance and his knowledge gained from service on the boards of various publicly traded and private companies.
Class III Directors (Terms Expire in 2019)
Stephen T. Winn has served as our Chief Executive Officer and a member of our Board since November 1998, during which time he served as Chairman of our Board, and as our President since August 2012, a position that Mr. Winn previously held from November 1998 to December 2009. From January 1998 to March 1999, Mr. Winn served in various executive positions, including President of Research Institute of America, a provider of information services to the accounting industry and a wholly owned subsidiary of Thomson Reuters Corporation. From June 1969 to January 1998, Mr. Winn served as President and Chief Executive Officer of Computer Language Research Inc., a publicly traded company focused on tax compliance, tax research and accounting software, which was acquired by Thomson Reuters Corporation. Mr. Winn is a member of the board of directors of the National Multifamily Housing Council. In January 2002, he was one of 25 people recognized by the National Apartment Association as a leader in the multifamily industry. Mr. Winn received Ernst & Young LLP’s “Entrepreneur of the Year 2012 Southwest Area North Technology Sector.” Mr. Winn received his B.S. in electrical engineering from The University of Texas at Austin and his M.S. in management science from Stanford University. In addition to Mr. Winn’s role as our Chief Executive Officer, we believe Mr. Winn’s qualifications to serve on our Board include his previous service in executive positions at various public and private technology companies and his extensive experience in the multifamily rental housing industry.
Jason A. Wright has served as a member of our Board since December 2003 and as our lead independent director since February 2012. Mr. Wright has served as a member of our Audit Committee since January 2004 and served as chairman of our Audit Committee from February 2012 until February 2013. Mr. Wright has served as a member of our Compensation Committee since October 2006 and a member of our Nominating and Governance Committee since February 2010. Mr. Wright is a partner in the Tech & Telecom Group at Apax Partners LLC, where he focuses primarily on investments in enterprise software and technology-enabled services. Prior to joining Apax in 2000, Mr. Wright served in a variety of roles at General Electric Capital Corporation, a subsidiary of General Electric Corporation, including the evaluation and execution of investment opportunities for the Technology Ventures Group, and Mr. Wright was also a consultant at Andersen Consulting, now Accenture plc. Mr. Wright currently serves on the board of directors of various private companies. Mr. Wright received his B.A. in economics from Tufts University and his M.B.A. in finance from The Wharton School of the University of Pennsylvania. We believe Mr. Wright’s qualifications to serve on our Board include his extensive business and financial experience related to enterprise software and technology-enabled services companies.
BOARD AND COMMITTEE GOVERNANCE
Our governance framework provides our Board with flexibility to select the appropriate leadership structure for us. The current leadership structure is composed of a combined chairman of the board and chief executive officer, a lead independent director, Board committees led by independent directors and active engagement by all directors. Our Board believes this structure provides an effective balance between strong Company leadership and appropriate safeguards and oversight by independent directors.
Our Board believes that our Chief Executive Officer, Stephen T. Winn, is best situated to serve as Chairman because he is the director most familiar with our business and industry, and most capable of effectively
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identifying strategic priorities and leading the discussion and execution of strategy. Our independent directors have different perspectives and roles in strategic development. Our independent directors bring experience, oversight and expertise from outside our company and industry, while the Chief Executive Officer brings company-specific experience and expertise. Our Board believes that the combined role of Chairman and Chief Executive Officer promotes strategy development and execution, and facilitates information flow between management and our Board, which are essential to effective governance.
Mr. Jason A. Wright serves as our lead independent director. Our lead independent director is responsible for coordinating activities of our other independent directors, presiding at all meetings of our Board at which the Chairman is not present, including executive sessions of the independent directors, serving as liaison between the Chairman and the independent directors, having the authority to call meetings of the independent directors, and performing various other duties as directed by our Board. Under our Corporate Governance Guidelines, the lead independent director is charged with relaying the discussions of the executive sessions to the Chief Executive Officer, as appropriate, participating in the discussion of Chief Executive Officer performance with our Compensation Committee, and ensuring that our Board annually conducts a self-assessment.
Our Board believes that maintaining a Board with a range of skills and experience meeting our needs is important, as is maintaining a size that facilitates group discussion and collegiality.
Our Nominating and Governance Committee, consisting solely of independent directors as determined under applicable NASDAQ listing standards, is responsible for reviewing with our Board, on an annual basis, the requisite skills and characteristics of potential new Board members as well as the composition of our Board as a whole. This assessment includes members’ qualification as independent, as well as consideration of character, judgment, diversity, age, skills, including financial literacy, and experience in the context of the needs of our Board and our business. Nominees for directorship are selected by our Nominating and Governance Committee and approved by our Board in accordance with such policies and principles as our Board may promulgate after considering the recommendation of our Nominating and Governance Committee.
Our Corporate Governance Guidelines, which were adopted by our Board on January 20, 2015, provide that each director should be able and prepared to devote sufficient time and effort to his or her duties as a director. Directors are not permitted to sit on more than six publicly traded company boards or, if such director is a CEO of a public company, he or she is not permitted to sit on the board of more than two public companies besides the board of his or her own company.
Our Board does not have term limits. Directors who have served on our Board for an extended period of time are able to provide valuable insight into our operations and future based on their experience with and understanding of our industry, business operations, history, policy and objectives. Our Board believes that, as an alternative to term limits, it can ensure that the Board continues to evolve through the evaluation and nomination process required by our Corporate Governance Guidelines.
Our Corporate Governance Guidelines also provide that, as a general matter, a director should not stand for re-election as a non-employee director after his or her 75th birthday. Non-employee directors are required to tender their resignation no later than the expiration of their elected term following their 75th birthday. Retirement of a director who has reached the age of retirement may be postponed if our Board determines that it would be in the best interests of RealPage and its stockholders under the particular circumstances. In addition, our Board may nominate any person for election as a non-employee director regardless of his or her age if our Board determines that, due to his or her unique capabilities or special circumstances, the election of such person is in the best interest of RealPage.
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In accordance with the listing requirements of the NASDAQ Stock Market and our Corporate Governance Guidelines, a majority of our Board must be composed of independent directors. Our Board has determined that each of Mr. Berkeley, Mr. Gyenes, Mr. Ingraham, Mr. Kane, Mr. Leeds and Mr. Wright is independent under applicable NASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.”
Board and Committee Meetings and Attendance
Under our bylaws, regular meetings of our Board are held at such times as our Board may determine. Special meetings of our Board may be called by a majority of the authorized number of directors, the Chairman, the Chief Executive Officer, the President or the Secretary. Our Board held a total of six meetings during 2016. Each director attended 75% or more of the total number of meetings of our Board and the committees of our Board on which such director served during 2016.
The non-employee directors on our Board and Board committees generally meet quarterly in executive session. Executive sessions of our Board may include, among other things, a discussion of the performance of the Chairman and Chief Executive Officer, matters concerning the relationship of our Board with the management directors and other members of senior management, and such other matters as the non-employee directors deem appropriate. No formal action of our Board is taken during executive sessions of the non-employee directors, although the non-employee directors may subsequently recommend matters for consideration by the full Board. In addition, our Audit Committee holds an executive session at each of its meetings and our Compensation Committee holds an executive session at the meeting in which annual compensation is reviewed and determined. On occasion, our non-employee directors invite our Chief Legal Officer to attend executive sessions in the role as legal counsel, but members of management, including Mr. Winn, are otherwise not present at executive sessions of Board and committee meetings. Although all of our current non-employee directors are considered to be independent, if any non-employee directors were determined not to be independent, the independent directors would be required to meet alone in an executive session at least twice per year.
Our Board has three standing committees:
| • | the Audit Committee; |
| • | the Compensation Committee; and |
| • | the Nominating and Governance Committee. |
Committee members are appointed by our Board, which considers the recommendation of our Nominating and Governance Committee and the desires of the individual directors. The table below lists the current membership of each committee and the number of committee meetings held in 2016.
| Name of Director |
Audit Committee |
Compensation Committee |
Nominating and Governance Committee |
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| Alfred R. Berkeley, III |
Member | |||||||||||
| Peter Gyenes |
Member | Chairman | Member | |||||||||
| Scott Ingraham |
Member | Member | ||||||||||
| Charles F. Kane |
Chairman | Member | Member | |||||||||
| Jeffrey T. Leeds |
Chairman | |||||||||||
| Jason A. Wright |
Member | Member | Member | |||||||||
|
|
|
|
|
|
|
|||||||
| Number of meetings held in 2016 |
5 | 4 | 3 | |||||||||
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Our Board has determined that each member of each committee is independent under the applicable requirements of NASDAQ and SEC rules and regulations. Our Board has adopted a charter for each committee. Copies of such charters are available without charge, upon request in writing to RealPage, Inc., 2201 Lakeside Boulevard, Richardson, Texas 75082, Attn: Chief Legal Officer or on our website at http://investor.realpage.com/corporate-governance/governance-documents or www.realpage.com by clicking on “Company,” “Investor Relations” and then “Corporate Governance.” We believe that the composition, charter and functioning of each of our committees comply with the applicable requirements of NASDAQ and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
The primary responsibilities of each committee are described below.
Audit Committee
Our Audit Committee’s responsibilities are specifically set forth in the committee’s charter, which can be found at http://investor.realpage.com/corporate-governance/governance-documents or www.realpage.com by clicking on “Company,” “Investor Relations” and then “Corporate Governance.” Among other things, our Audit Committee is responsible for:
| • | approving the audit and non-audit services to be performed by our independent auditors; |
| • | evaluating the qualifications, performance and independence of our independent auditors; |
| • | monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; |
| • | reviewing the adequacy and effectiveness of our internal control policies and procedures; |
| • | discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors our interim and year-end operating results; |
| • | preparing the audit committee report required in our annual proxy statement; and |
| • | reviewing and evaluating, at least annually, its own performance and that of its members, including compliance with the committee charter. |
Our Board has determined that each member of our Audit Committee is independent under the applicable requirements of NASDAQ and SEC rules and regulations, meets the requirements for financial literacy and sophistication, and qualifies as an “audit committee financial expert” under the applicable requirements of NASDAQ and SEC rules and regulations.
Compensation Committee
Our Compensation Committee’s responsibilities are specifically set forth in the committee’s charter, which can be found at http://investor.realpage.com/corporate-governance/governance-documents or www.realpage.com by clicking on “Company,” “Investor Relations” and then “Corporate Governance.” Among other things, our Compensation Committee is responsible for:
| • | overseeing our overall compensation philosophy, compensation plans and benefits programs; |
| • | reviewing and recommending to the full Board, or approving, new executive compensation programs and revisions to existing programs; |
| • | periodically reviewing executive compensation programs and total compensation levels, including conducting comparative analyses of total compensation relative to market, quantifying maximum payouts to executives under performance-based incentive plans and total payments under a variety of termination conditions, including upon a change of control, and the impact of tax and accounting rules and changes; |
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| • | reviewing and recommending compensation programs for outside directors; |
| • | reviewing and approving corporate goals and objectives relevant to compensation of our Chief Executive Officer and evaluating his performance in light of such goals and objectives; |
| • | reviewing and approving the following for our Chief Executive Officer and our other executive officers identified by our Compensation Committee: annual base salaries, annual incentive bonuses, including the specific goals and amounts, equity compensation, employment agreements, severance arrangements and change in control arrangements, signing bonuses and payment of relocation costs, and any other benefits, compensation or arrangements; |
| • | reviewing and recommending to the full Board, or approving, any contracts or other transactions with our current or former executive officers; |
| • | reviewing the plans for officer development and corporate succession plans for our Chief Executive Officer and other senior executive officers; |
| • | in its discretion, retaining or obtaining advice of compensation consultants, outside legal counsel or other advisors to assist our Compensation Committee in the performance of its responsibilities, and appointing, compensating and overseeing the work of any such consultants, counsel and advisors; |
| • | establishing and administering annual and long-term incentive compensation plans for senior executive officers, including establishing performance objectives and certifying performance achievement, and reviewing and approving all equity-based compensation plans and granting awards of shares and stock options pursuant to such plans; |
| • | administering our equity incentive plans, including granting awards under such plans to eligible persons in accordance with procedures and guidelines established by the Board, and recommending to our Board any amendments to the plans and changes in the number of shares reserved for issuance under such plans; |
| • | reviewing and discussing with management the compensation discussion and analysis and related disclosures required by the SEC, and reviewing and recommending the final compensation discussion and analysis to our Board for inclusion in our annual report and proxy statement; |
| • | preparing the compensation committee report required by the SEC to be furnished with our annual report and proxy statement; |
| • | reviewing and reassessing the adequacy of the Compensation Committee charter and recommending changes to our Board for approval; and |
| • | reviewing and evaluating, at least annually, its own performance and that of its members, including compliance with our Compensation Committee charter. |
Our Board has determined that each member of our Compensation Committee is independent under the applicable requirements of NASDAQ and SEC rules and regulations, is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act, and is an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code.
Additional information regarding the processes and procedures that our Compensation Committee employs when considering and determining director and executive compensation, including the committee’s engagement of independent compensation consultants for advice in connection with the exercise of its responsibilities, is set forth below under “Governance — Director Compensation” and “Executive Compensation — Compensation Discussion and Analysis.”
Nominating and Governance Committee
Our Nominating and Governance Committee’s responsibilities are specifically set forth in the committee’s charter, which can be found at http://investor.realpage.com/corporate-governance/governance-documents or
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www.realpage.com by clicking on “Company,” “Investor Relations” and then “Corporate Governance.” Among other things, our Nominating and Governance Committee is responsible for:
| • | assisting our Board in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to our Board; |
| • | reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board; |
| • | overseeing the evaluation of our Board and management; |
| • | recommending members for each Board committee to our Board; |
| • | reviewing and monitoring our Code of Business Conduct and Ethics and actual and potential conflicts of interest of members of our Board and officers; and |
| • | reviewing and evaluating, at least annually, its own performance and that of its members, including compliance with the committee charter. |
Our Nominating and Governance Committee will consider nominees recommended by stockholders provided such recommendations are made in accordance with procedures described in this proxy statement under “Deadline for Receipt of Stockholder Proposals for 2018 Annual Meeting.” When considering a potential director candidate, our Nominating and Governance Committee looks for demonstrated character, judgment, relevant business, functional and industry experience, and a high degree of acumen. Our Nominating and Governance Committee also considers issues of diversity, such as education, professional experience and differences in viewpoints and skills. Our Nominating and Governance Committee does not have a formal policy with respect to diversity; however, our Board and Nominating and Governance Committee believe that it is important that the members of our Board represent diverse viewpoints. Our Nominating and Governance Committee’s process for identifying and evaluating nominees typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. From time to time, we have also engaged one or more executive search consulting firms to assist in the identification and recruitment of potential director candidates. There are no differences in the manner in which our Nominating and Governance Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder.
Our Board oversees risk management in a number of ways. Our Audit Committee oversees the management of financial and accounting related risks as an integral part of its duties. Similarly, our Compensation Committee considers risk management when setting the compensation policies and programs for our executive officers and other employees. Our full Board considers various risk-related items periodically, including risks related to intellectual property, taxes, products and employees. Our Board also considers our efforts to manage such risks through safety measures, insurance or self-insurance.
Stockholders may communicate with members of our Board by mail addressed to the Chairman, to any other individual member of our Board, to the full Board, or to a particular committee of our Board. In each case, such correspondence should be sent to the following address: 2201 Lakeside Boulevard, Richardson, Texas 75082, Attention: Corporate Secretary. Correspondence received that is addressed to the members of our Board will be reviewed by our Chief Legal Officer or our Chief Legal Officer’s designee, who will forward such correspondence to the appropriate members of our Board.
ADDITIONAL GOVERNANCE INFORMATION
We are committed to strong corporate governance, which we believe promotes the long-term interests of stockholders, strengthens Board and management accountability and helps build public trust in RealPage.
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Our certificate of incorporation and bylaws can be accessed through our filings located in the “Company Filings” portion of the SEC website at www.sec.gov, and were attached as Exhibit 3.2 and Exhibit 3.4, respectively, to our Registration Statement on Form S-1/A filed with the SEC on July 26, 2010. Our Code of Business Conduct and Ethics, Corporate Governance Guidelines, Board committee charters and other governance materials can be accessed on our website, www.realpage.com, by clicking on “Company,” “Investor Relations” and then “Corporate Governance.”
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics. The code applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), directors and consultants. A copy of our Code of Business Conduct and Ethics can be found on our website at http://investor.realpage.com/corporate-governance/governance-documents or www.realpage.com by clicking on “Company,” “Investor Relations” and then “Corporate Governance.” A copy also is available without charge upon request in writing to RealPage, Inc., 2201 Lakeside Boulevard, Richardson, Texas 75082, Attn: Chief Legal Officer. We intend to disclose future amendments to provisions of our Code of Business Conduct and Ethics, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, or our directors on our website to the extent and in the manner permitted by Item 5.05 of Form 8-K.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines that address matters pertaining to director qualifications, director responsibilities, lead independent director responsibilities, executive sessions of Board meetings, communications with stockholders, Board committee matters, director access to officers, employees and independent advisors, director compensation, director minimum stock ownership requirements, director orientation and continuing education, Chief Executive Officer evaluation, management and Board succession, indemnification and director and officer insurance, and annual Board performance evaluations. A copy of the Corporate Governance Guidelines can be found on our website at http://investor.realpage.com/corporate-governance/governance-documents or www.realpage.com by clicking on “Company,” “Investor Relations” and then “Corporate Governance.” A copy also is available without charge upon request in writing to RealPage, Inc., 2201 Lakeside Boulevard, Richardson, Texas 75082, Attn: Chief Legal Officer.
Director Minimum Stock Ownership Requirements
Our Board members are encouraged to make a substantial investment in Company stock. Accordingly, our Corporate Governance Guidelines require our directors to own a number of shares of our common stock with an aggregate value equal to at least three times their annual cash retainer within four years after joining our Board or as soon thereafter as is practicable. Our Board has also adopted a Stock Ownership Guidelines Policy for our Chief Executive Officer as described under “Executive Compensation — Other Executive Compensation Consideration — Executive Stock Ownership” below.
Hedging, Short Sale and Pledging Policy under our Insider Trading Policy
We have adopted an Insider Trading Policy. That policy prohibits all employees, including our executive officers, and all directors and agents from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our securities. All employees, including our executive officers, and all of our directors and agents are also prohibited from pledging our securities or engaging in short sales of our securities.
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Director Attendance at Annual Meetings of Stockholders
We encourage, but do not require, our directors to attend our annual stockholders meeting. Our 2016 annual stockholders meeting was attended by one of our directors, Stephen T. Winn, our Chairman, CEO and President.
Determining Compensation for Non-Employee Directors in 2016
Our Compensation Committee reviews and makes recommendations to our Board regarding the form and amount of compensation for non-employee directors. Directors who are employees of RealPage receive no compensation for service on our Board. Our director compensation program is designed to enable continued attraction and retention of highly qualified directors by ensuring that director compensation is in line with peer companies competing for director talent, and is designed to address the time, effort, expertise and accountability required of active board membership. Our Compensation Committee and our Board believe that annual compensation for non-employee directors should consist of both a cash component, designed to compensate members for their service on our Board and its committees, and an equity component, designed to align the interests of directors and stockholders and, by vesting over time, to create an incentive for continued service on our Board.
Discussion of Director Compensation
In 2016, the annual compensation for our non-employee directors was composed of cash compensation in the form of an annual retainer and meeting and committee fees and equity compensation in the form of restricted stock awards. Each of these components is described below.
Independent Director Compensation Plan
Our independent director compensation plan provided for the following compensation to our independent directors during 2016:
| Retainer |
$11,250 per quarter | |
| Lead Independent Director retainer |
$3,750 per quarter | |
| Audit Committee chair retainer |
$4,500 per quarter | |
| Audit Committee member (excluding chair) retainer |
$3,000 per quarter | |
| Other Board committee chair retainer |
$3,000 per quarter | |
| Other Board committee member (excluding chair) retainer |
$1,500 per quarter | |
| Annual restricted stock grant (each April 1) |
$160,000 restricted stock value (1) |
| (1) | The restrictions related to each annual restricted stock grant lapse with respect to 25% of the restricted shares subject to the grant each quarter commencing on the first day of the calendar quarter immediately following the grant date for four consecutive quarters, subject to the continuous service of the director through each applicable date. |
In February 2017, in connection with its regular review of independent director compensation and based in part on information and advice from its independent compensation consultants Pearl Meyer & Partners with respect to compensation elements, levels and trends in outside director compensation among our peer group of companies, our Compensation Committee amended our independent director compensation plan as follows. All other elements of director compensation described above and not amended remain the same in 2017 as in 2016.
| Audit Committee chair retainer |
$5,000 per quarter | |
| Compensation Committee chair retainer |
$3,750 per quarter | |
| Annual restricted stock grant (each April 1) |
$200,000 restricted stock value (1) |
| (1) | The restrictions related to each initial and annual restricted stock grant lapse with respect to 25% of the restricted shares subject to the grant each quarter commencing on the first day of the calendar quarter immediately following the grant date for four consecutive quarters, subject to the continuous service of the director through each applicable date. |
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The term “independent directors” for purposes of our independent director compensation plan means each of our non-employee directors. The annual equity grants occur automatically on April 1 of each year, pursuant to the terms of the RealPage, Inc. 2010 Equity Incentive Plan (as amended and restated June 4, 2014), as further amended (the “2010 Equity Incentive Plan”).
On April 1, 2016, pursuant to our amended independent director compensation plan and the automatic annual restricted stock grant provisions of our 2010 Equity Incentive Plan, we issued 7,969 shares of our restricted common stock to each of Alfred R. Berkeley, III, Peter Gyenes, Scott S. Ingraham, Charles F. Kane, Jeffrey T. Leeds, Jason A. Wright and former director, Kathryn V. Marinello.
On April 1, 2017, pursuant to our amended independent director compensation plan and the automatic annual restricted stock grant provisions of our 2010 Equity Incentive Plan, we issued 5,729 shares of our restricted common stock to each of Alfred R. Berkeley, III, Peter Gyenes, Scott S. Ingraham, Charles F. Kane, Jeffrey T. Leeds, and Jason A. Wright.
Director Compensation Table for Year Ended December 31, 2016
The following table sets forth the annual director compensation paid or accrued by us to individuals who were directors during any part of 2016. The table excludes Stephen T. Winn, who is our Chief Executive Officer and who did not receive any compensation from us in his role as director in 2016.
DIRECTOR COMPENSATION TABLE FOR YEAR ENDED DECEMBER 31, 2016
| Name |
Fees Earned or Paid in Cash |
Stock Awards (1) |
Total | |||||||||
| Alfred R. Berkley, III |
$ | 49,750 | $ | 160,000 | $ | 209,750 | ||||||
| Peter Gyenes |
73,750 | 160,000 | 233,750 | |||||||||
| Scott S. Ingraham |
61,750 | 160,000 | 221,750 | |||||||||
| Charles F. Kane |
73,750 | 160,000 | 233,750 | |||||||||
| Jeffrey T. Leeds |
55,750 | 160,000 | 215,750 | |||||||||
| Jason A. Wright |
63,000 | 160,000 | 223,000 | |||||||||
| Former Director |
||||||||||||
| Kathryn V. Marinello |
61,750 | 160,000 | 221,750 | |||||||||
| (1) | Equals 7,969 shares granted to each director in 2016. The number of shares granted was determined based upon the average of the closing market price of RealPage common stock on each of the 30 trading days immediately preceding the grant date. The value of each award as calculated pursuant to the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 is $165,516. See Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of assumptions made in determining the grant date fair value of our stock option awards and restricted stock awards. |
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS.
Since January 1, 2016, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described under “Governance — Director Compensation,” “Executive Compensation — Compensation Discussion and Analysis,” and the following transaction. Ms. Glover’s sister in law has been a non-executive
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employee of RealPage since May 2011, and in such capacity receives annual compensation in excess of $120,000. Such employment terms were established by RealPage directly with Ms. Glover’s sister in law and are based upon market terms and not based upon Ms. Glover’s relationship with us.
Stock Options and Restricted Stock
Certain restricted stock grants to our non-employee directors are described in “Director Compensation.”
Certain stock option and restricted stock grants to our named executive officers (“NEOs”) are described in “Executive Compensation — Grants of Plan-Based Awards,” “Executive Compensation — Compensation Tables — Outstanding Equity Awards at December 31, 2016” and “Executive Compensation — Compensation Tables — Supplemental Information Regarding Arrangements With Executive Officers — Employment Agreements.”
Employment Arrangements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers that include, among other things, compensation terms, provisions regarding payments upon termination in certain circumstances and confidentiality, non-competition and indemnification provisions. The employment agreements with our NEOs are described under “Executive Compensation — Compensation Tables — Supplemental Information Regarding Arrangements With Executive Officers — Employment Agreements.”
There are no family relationships among any of our directors or executive officers.
Policies and Procedures for Related Party Transactions
Our Audit Committee is responsible for reviewing and approving in advance any related party transaction. Our Audit Committee has not adopted specific policies or guidelines relating to the approval of related party transactions. Our directors who are members of our Audit Committee determine whether to approve related party transactions in the exercise of their fiduciary duties as directors and members of our Audit Committee.
Limitations on Liability and Indemnification Matters
Our amended and restated certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
| • | any breach of the director’s duty of loyalty to us or our stockholders; |
| • | any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| • | unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or |
| • | any transaction from which the director derived an improper personal benefit. |
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our amended and restated bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on
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behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered into agreements to indemnify our directors, executive officers and other employees as determined by our Board. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
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OWNERSHIP OF EQUITY SECURITIES OF REALPAGE
The following table sets forth information regarding ownership of our common stock by:
| • | each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our outstanding common stock; |
| • | each of our directors and nominees for director; |
| • | each of our NEOs; and |
| • | all directors and executive officers as a group. |
The amounts for our NEOs and executive officers and directors as a group and our significant stockholders are as of April 10, 2017, the Record Date, unless otherwise indicated in a footnote below. The amounts for our 5% owners are based upon SEC filings made on behalf of such owners. Beneficial ownership in this table is determined in accordance with the rules of the SEC, and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, the number of shares of common stock deemed outstanding includes all shares of restricted stock and those shares issuable upon exercise of options held by the respective person or group that may be exercised within 60 days after April 10, 2017. For purposes of calculating each person’s or group’s percentage ownership, unvested stock options exercisable within 60 days and all shares of restricted stock are included for that person or group, but not for any other person or group. Percentage of beneficial ownership is based on the shares of common stock outstanding as of April 10, 2017. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
| Name and Address of Beneficial Owner (1) |
Number of Shares Beneficially Held |
Approximate Percentage of Common Stock Outstanding |
||||||
| 5% Stockholders: |
||||||||
| Stephen T. Winn and entities affiliated with Stephen T. Winn (4) |
23,361,053 | 28.16 | % | |||||
| FMR LLC (2) |
9,626,576 | 11.96 | ||||||
| The Vanguard Group (3) |
4,240,006 | 5.26 | ||||||
| Named Executive Officers, Directors and Nominees: |
||||||||
| Stephen T. Winn (4) |
23,361,053 | 28.16 | ||||||
| W. Bryan Hill (5) |
412,545 | * | ||||||
| William P. Chaney (6) |
380,312 | * | ||||||
| Ashley Glover (7) |
151,983 | * | ||||||
| David G. Monk (8) |
280,011 | * | ||||||
| Daryl Rolley (9) |
— | * | ||||||
| Alfred R. Berkeley, III (10) |
111,269 | * | ||||||
| Peter Gyenes (11) |
108,538 | * | ||||||
| Scott S. Ingraham (12) |
48,365 | * | ||||||
| Charles F. Kane (13) |
27,739 | * | ||||||
| Jeffrey T. Leeds (14) |
174,661 | * | ||||||
| Jason A. Wright (16) |
86,990 | * | ||||||
| All executive officers and directors as a group (12 people) (17) |
25,389,146 | 30.31 | % | |||||
| (1) | Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over the shares listed, except for those jointly owned with that person’s spouse. Unless otherwise noted below, the address of each person listed on the table is c/o RealPage, Inc., 2201 Lakeside Boulevard, Richardson, Texas 75082. |
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| (2) | Pursuant to a Schedule 13G/A filed February 14, 2017, represents 9,626,576 shares beneficially owned by FMR LLC (“FMR”), 245 Summer Street, Boston, Massachusetts 02210. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. |
| (3) | Pursuant to a Schedule 13G filed February 14, 2017, represents 4,240,006 shares beneficially owned by The Vanguard Group (“Vanguard”), 100 Vanguard Blvd., Malvern, PA. 19355. Vanguard has sole power to vote or direct to vote and shared power to dispose or to direct the disposition of 107,048 shares; shared power to vote or direct the vote of 3,600 shares; and sole power to dispose of or to direct the disposition of 4,132,158 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 104,248 shares or 0.12% of the Common Stock outstanding of RealPage as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 6,400 shares or .00% of the Common Stock outstanding of RealPage as a result of its serving as investment manager of Australian investment offerings. |
| (4) | Represents 4,143,474 shares held by Stephen T. Winn, of which 868,798 are subject to forfeiture to us, 275,000 shares issuable upon the exercise of options to purchase shares of our common stock held by Mr. Winn that are exercisable within 60 days after April 10, 2017, 19,012,896 shares held by Seren Capital, Ltd., 8,665 shares held by Stephen T. Winn 1996 Family LP A, and 196,018 shares held by Melinda G. Winn and Stephen T. Winn, as trustees of the Melinda G. Winn 2010 QTIP Trust. Stephen T. Winn is the sole manager and president of Seren Capital Management, L.L.C., which is the general partner of Seren Capital, Ltd. or the Seren Partnership and, by virtue of this relationship, has sole voting and dispositive power over the shares held by the Seren Partnership. Mr. Winn is the sole manager and president of Stephen T. Winn Management, L.L.C., which is the general partner of Stephen T. Winn 1996 Family LPA and has voting and dispositive power over the shares held by Stephen T. Winn 1996 Family LPA. Stephen T. Winn and Melinda G. Winn are trustees of the Melinda G. Winn 2010 QTIP Trust and share voting and dispositive power over the shares held by the Melinda G. Winn 2010 QTIP Trust. |
| (5) | Includes 253,260 shares subject to forfeiture to us and 100,688 shares issuable upon the exercise of options to purchase shares of our common stock held by Mr. Hill that are exercisable within 60 days after April 10, 2017. |
| (6) | Includes 202,582 shares subject to forfeiture to us and 144,254 shares issuable upon the exercise of options to purchase shares of our common stock held by Mr. Chaney that are exercisable within 60 days after April 10, 2017. |
| (7) | Includes 142,791 shares subject to forfeiture to us held by Ms. Glover. |
| (8) | Includes 78,523 shares subject to forfeiture to us and 188,493 shares issuable upon the exercise of options to purchase shares of our common stock held by Mr. Monk that are exercisable within 60 days after April 10, 2017. |
| (9) | Mr. Rolley resigned from RealPage in July 2016. |
| (10) | Includes 5,729 shares subject to forfeiture to us, 26,431 shares held jointly by Alfred R. Berkeley III and Muriel Van Dusen Berkeley as tenants in entirety and 39,800 held by Muriel Van Dusen Berkeley and Richard M. Berkeley, as Trustees of the 2009 Berkeley Family Resource Trust dated December 11, 2009, or |
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| the Berkeley Family Trust. Muriel Van Dusen Berkeley and Richard M. Berkeley are the trustees of the Berkeley Family Trust and share voting and dispositive power over the shares held by the Berkeley Family Trust. By virtue of his relationship with his spouse, Muriel Van Dusen Berkeley, Alfred R. Berkeley may be deemed to share voting and dispositive power over the shares held by the Berkeley Family Trust. |
| (11) | Includes 5,729 shares subject to forfeiture to us and 60,000 shares issuable upon the exercise of options to purchase shares of our common stock held by Mr. Gyenes that are exercisable within 60 days after April 10, 2017. |
| (12) | Includes 5,729 shares subject to forfeiture to us. |
| (13) | Includes 5,729 shares subject to forfeiture to us. |
| (14) | Includes 5,729 shares subject to forfeiture to us. |
| (15) | Includes 5,729 shares subject to forfeiture to us. |
| (16) | Consists of 25,389,146 shares held of record by our directors and executive officers, which includes 1,580,328 shares subject to forfeiture to us, 805,935 shares issuable upon the exercise of options held by our directors and executive officers that are exercisable within 60 days after April 10, 2017 and 19,283,810 shares held by entities over which our directors and executive officers may be deemed to have voting or dispositive power. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors and 10% stockholders are also required by SEC rules to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us, we believe that, during the fiscal year ended December 31, 2016, all Section 16(a) filing requirements applicable to our officers, directors and 10% stockholders were satisfied.
The following table sets forth the name, age, and position of each of our executive officers as of the Record Date and one former executive officer.
| Name of Executive Officer |
Age | Position | ||||
| Stephen T. Winn |
70 | Chairman of the Board of Directors, Chief Executive Officer, President and Director | ||||
| W. Bryan Hill |
50 | Executive Vice President, Chief Financial Officer and Treasurer | ||||
| Andrew Blount |
43 | Executive Vice President, Consumer Solutions | ||||
| William P. Chaney |
46 | Executive Vice President, Enterprise Solutions | ||||
| Ashley Glover |
45 | Executive Vice President and Chief Revenue Officer | ||||
| David G. Monk |
50 | Executive Vice President, Chief Legal Officer and Secretary | ||||
| Daryl T. Rolley |
49 | Former Executive Vice President and Chief Revenue Officer | ||||
Executive Officers
Stephen T. Winn serves as our Chairman of the Board, Chief Executive Officer and President, and is a member of our Board. See “Governance — Incumbent Directors Whose Terms Of Office Continue After The Annual Meeting” for additional information with respect to Mr. Winn.
W. Bryan Hill has served as our Executive Vice President, Chief Financial Officer and Treasurer since May 2014. Mr. Hill previously served as our Senior Vice President-Finance from May 2007 to May 2014 with responsibilities including investor relations, credit facility management, financial planning and analysis, internal reporting, merger and acquisition support, product pricing control and billing. Mr. Hill previously served as
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Senior Vice President and Chief Accounting Officer of formerly publicly traded Dyncorp International, Inc. (acquired by Cerberus Capital Management in 2010), a provider of outsourced services to civilian and military government agencies, from August 2005 to April 2007. From April 2000 to August 2005, Mr. Hill held the position of Vice President and Chief Accounting Officer and various other financial management positions at SourceHov LLC, a document and information outsourcing solution provider. Mr. Hill received his B.B.A. from Texas Christian University and has been a Certified Public Accountant in the State of Texas since 1996.
Andrew Blount has served as our Executive Vice President, Consumer Solutions since March 2017, where he manages product development for all prospect and resident-facing solutions. Mr. Blount also served as our Group Vice President of Consumer Solutions from December 2015 until March 2017 and as a consultant to us from December 2004 through December 2015 to provide services for development and assessment of software and websites. Mr. Blount served as the founder and CEO of Realhound.com, a commercial real estate software company, from November 2004 until December 2015. Mr. Blount developed and launched several successful ventures and served as a consultant for many large companies, including CB Richard Ellis, Fannie Mae and AT&T. Mr. Blount developed an application named Portfolio designed to provide business intelligence for multifamily owners and managers, which RealPage purchased in June 2002. Mr. Blount also served as a city councilman from December 2012 until December 2016 and also as mayor from December 2013 until December 2016 of the City of Laguna Hills, California. Mr. Blount is a member of the National Multifamily Housing Council and National Apartment Association.
William P. Chaney has served as our Executive Vice President, Enterprise Solutions since August 2012. With his extensive experience in our enterprise solution offerings, Mr. Chaney leads the Resident Management, Property Management and Leasing & Marketing product divisions as well as shared services for Contact Center, RealPage Exchange, Product Development and Information Technology. Previously he served as President, OneSite and Velocity from 2009 to August 2012 and managed all aspects of RealPage’s property management, resident billing, invoicing, payments, and infrastructure businesses. Mr. Chaney also previously served as our Senior Vice President of product management, leading the payment services team responsible for RealPage’s integrated web-based payment processing solution. Prior to joining RealPage, Mr. Chaney served as group president of Jack Henry & Associates Enterprise Payment Solutions from October 2004 to June 2008 and CEO of Select Payment Processing from August 1999 to October 2004. Mr. Chaney received his B.S. in computer science from Texas Christian University.
Ashley Glover has served as our Executive Vice President and Chief Revenue Officer since August 2016. Ms. Glover served as a consultant in real estate investment, operations, and strategy in the US and Europe from January 2014 to July 2016. Ms. Glover served as our Executive Vice President, Chief Sales and Marketing Officer from February 2012 to December 2013 and previously served as our Executive Vice President, Multifamily Solutions from January 2010 to February 2012, as our Executive Vice President, Resident Solutions from April 2009 to January 2010 and as our Senior Vice President, Velocity Utility and Billing Services, from March 2005 until April 2009. From November 2004 through early March 2005, Ms. Glover served in a consulting capacity for us in conjunction with our acquisition of The Pleco Group, LLC. From August 1995 to July 1997 and again from August 1999 to July 2003, Ms. Glover handled both international and domestic assignments for McKinsey & Company. Ms. Glover received her B.S. in computer science from Southern Methodist University and her M.B.A. from Harvard University.
David G. Monk has served as our Executive Vice President, Chief Legal Officer and Secretary since January 2016. Mr. Monk is responsible for management of our legal department and compliance operations. Mr. Monk previously served as our Senior Vice President, Chief Legal Officer and Secretary from May 2015 through January 2016, and as Senior Vice President and Deputy General Counsel from June 2010 through April 2015. Prior to joining us, Mr. Monk was a partner in private practice with the international law firm Baker Botts L.L.P., where he practiced from October 1992 to June 2010 and represented clients on a variety of matters including mergers and acquisitions, securities offerings, SEC compliance, corporate governance, technology and outsourcing transactions, and general corporate matters. Mr. Monk received his B.B.A. in finance from Texas A&M University and his J.D. from Southern Methodist University’s Dedman School of Law.
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Daryl T. Rolley resigned from the Company in July 2016. He served as our Executive Vice President and Chief Revenue Officer from January 2016 until July 2016 and served as our Chief Customer Officer from February 2015 until January 2016. Mr. Rolley was responsible for the leadership and direction of our sales, marketing, customer success management, and global shared services operations. He also oversaw the Company’s contact center solutions. Prior to joining RealPage, Mr. Rolley served from January 2013 to December 2014 as Executive Vice President, Global Sales at Ventyx, Incorporated, where he was responsible for managing the global consulting and managed services business, and building a global sales team. Prior to that, Mr. Rolley spent 12 years at Ariba, Incorporated and FreeMarkets, Inc., which was acquired by Ariba in July 1, 2004. In his role at Ariba, he oversaw the company’s business management, strategy, sales, marketing, and professional services. From March 2000 to January 2001, he served as Vice President, Business Development for Ventro Corporation and Interim Chief Operating Officer for Amphire Solutions, where he was responsible for identifying, evaluating, building and developing new vertical marketplace operating businesses. From 1996 to 2000, Mr. Rolley was an executive with McKinsey & Company. Mr. Rolley received a B.S. degree in chemical engineering from Purdue University and an M.B.A. in finance from The Wharton School of The University of Pennsylvania.
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COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis, or “CD&A,” describes our executive compensation program for 2016. In particular, this CD&A explains how the Compensation Committee of our Board made 2016 compensation decisions for the following named executive officers, or “NEOs”, for the fiscal year ended December 31, 2016, who include our principal executive officer, principal financial officer, each of the three most highly compensated executive officers other than our principal executive officer and principal financial officer, and one former executive officer. This CD&A also describes decisions made by our Compensation Committee related to compensation that applies to the NEOs for 2017.
| Name |
Title |
Officer Role During 2016 | ||
| Stephen T. Winn |
Chairman, President and Chief Executive Officer | Principal executive officer; NEO | ||
| W. Bryan Hill |
Executive Vice President, Chief Financial Officer and Treasurer | Principal financial officer; NEO | ||
| William P. Chaney |
Executive Vice President, Enterprise Solutions | NEO | ||
| Ashley Glover |
Executive Vice President and Chief Revenue Officer | NEO | ||
| David G. Monk |
Executive Vice President, Chief Legal Officer and Secretary | NEO | ||
| Daryl T. Rolley |
Former Executive Vice President and Chief Revenue Officer | NEO |
This CD&A should be read together with the compensation tables and related disclosures that follow this discussion.
Compensation Philosophy and Objectives
Our philosophy is to provide compensation to each of our NEOs that is commensurate with his or her position and experience, provide challenging but reasonably attainable incentives for the NEO to meet and exceed short-term and long-term corporate objectives as determined by our Board and align the NEOs’ incentives with the long-term interests of our stockholders. Additionally, our executive compensation program is intended to provide significant motivation for each of our NEOs to remain employed by us unless and until we determine that retention of the NEO is no longer in accord with our corporate objectives. Our Compensation Committee has also reviewed with management the design and operation of our incentive compensation arrangements for all employees and concluded that our compensation plans, programs and policies, considered as a whole, including applicable risk-mitigation features, are appropriate and do not encourage inappropriate risk taking or risk taking that is likely to have a material adverse effect on us.
Based on this philosophy, the primary objectives of our Board and Compensation Committee with respect to executive compensation are to:
| • | attract, retain and motivate skilled and knowledgeable executive talent; |
| • | ensure that executive compensation is aligned with our corporate strategies and business objectives; and |
| • | align the incentives of the NEOs with the creation of value for our stockholders. |
To achieve these objectives, our Compensation Committee periodically evaluates our executive compensation program with the goal of establishing compensation at levels our Compensation Committee
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believes to be competitive with those of our designated peer group companies. Additionally, we design our executive compensation program to tie a portion of each NEO’s overall cash compensation to key strategic, financial and operational goals set by our Board.
Compensation Decision-Making Process
Our Compensation Committee is responsible for overseeing and approving our executive compensation program. Our Compensation Committee currently consists of Alfred R. Berkeley, III, Peter Gyenes, Charles F. Kane, and Jason A. Wright. Mr. Gyenes has been appointed to serve as the Chairman of our Compensation Committee. Our Board has determined that each member of our Compensation Committee is independent under the applicable requirements of NASDAQ and SEC rules and regulations, is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act, and is an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. For a discussion of the specific responsibilities of our Compensation Committee, see “Governance — Board and Committee Governance — Board Committees.”
Our Compensation Committee makes base salary, cash bonus and long-term incentive compensation recommendations for our Chief Executive Officer, based upon his performance and contributions to achieving overall corporate objectives. Our Chief Executive Officer is not present during deliberations or voting by the Compensation Committee regarding his performance goals, performance evaluation or compensation level, and he abstains from voting on matters where our Board acts on our Compensation Committee’s recommendations regarding his compensation.
For purposes of determining compensation levels for our Chief Executive Officer, our Compensation Committee considers our overall achievement of corporate objectives, Company performance, the performance and individual contributions of our Chief Executive Officer, public company proxy data, survey group market data, advice from an independent executive compensation consultant, our Chief Executive Officer’s equity ownership and our Compensation Committee members’ own experience in compensation-related matters.
With respect to our other NEOs, our Chief Executive Officer makes base salary, cash bonus and long-term incentive compensation recommendations to the Compensation Committee based on the NEO’s level of responsibility, performance and contribution to achieving our overall corporate objectives. Our Compensation Committee also considers Company performance, public company proxy data, survey group market data, advice from an independent executive compensation consultant, each NEO’s equity ownership and our Compensation Committee members’ own experience in compensation-related matters. Our Compensation Committee considers the Chief Executive Officer’s input but retains complete authority to approve all compensation related decisions for our NEOs.
Our Compensation Committee also considers the results of the advisory “say-on-pay” vote by our stockholders. Our last say-on-pay vote was at our 2014 annual stockholders meeting, where approximately 96% of the votes cast were voted to approve the executive compensation program described in our 2014 proxy statement. Our Compensation Committee will review the results of our say-on-pay vote at our 2017 annual stockholder meeting and will continue to consider the outcome of stockholder advisory votes on executive compensation when making future decisions relating to the compensation of our NEOs and our executive compensation programs and policies. Our Compensation Committee also continues to consider the alignment of NEO incentives with the long-term interests of our stockholders. In its compensation decisions in 2016 and 2017, our Compensation Committee continued to place emphasis on performance-based components, including market-based restricted stock and performance-based cash compensation, as described in this Proxy Statement. Our Compensation Committee structures performance-based cash and equity incentives to align directly with Company performance. Market-based long-term incentive awards do not vest if their share price targets are not achieved, and cash-based performance incentives are not earned if certain targets are not achieved. On an ongoing basis we also engage with our stockholders regarding various matters including executive compensation and corporate governance.
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For purposes of evaluating compensation levels for 2016 and 2017, our Compensation Committee also considered competitive market benchmarking data as described in “Executive Compensation — Compensation Discussion and Analysis — Competitive Positioning.”
Competitive market data is an important component in determining the amount of each element of compensation for each NEO. While actual compensation reflects our performance, our goal is for total target compensation, including each element of compensation, to be at or around the median target compensation for executives with similar positions in the 2016 Peer Group as described below. We incorporate flexibility into our compensation programs and into the assessment process to respond to changing business needs, and to take into consideration individual performance, including the relative complexity and strategic importance of specific roles.
Our Compensation Committee utilizes Pearl Meyer & Partners, or “PM”, an executive compensation consulting firm, to provide advice regarding the structure of executive compensation as well as competitive data on base salary, total cash compensation and long-term incentives. In addition, our Compensation Committee reviews the total compensation package for each NEO from the perspective of total direct compensation, which includes base salary, annual cash incentive plan and the value and structure of the long-term incentive award.
Pursuant to its charter, our Compensation Committee has the authority to select and retain independent advisors and counsel to assist it with carrying out its duties and responsibilities, and we have provided appropriate funding to our Compensation Committee to engage outside consultants from time to time, to conduct market reviews of our executive compensation program and philosophy in order to assess the competitiveness of our program.
Our Compensation Committee regularly reviews the services provided by its outside consultants and believes that PM is independent in providing executive compensation consulting services. Our Compensation Committee conducted a specific review of its relationship with PM in 2016 and determined that PM’s work for the committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (the “Dodd-Frank Act”), and by the SEC and NASDAQ. PM reports directly to our Compensation Committee Chair, takes direction from our Compensation Committee, and does not provide RealPage with any services other than the services provided at the request of our Compensation Committee. Our Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis.
In the first quarter of 2016, our Compensation Committee engaged PM to conduct an independent market review of our executive compensation program. PM used public company proxy data and survey market data references to compare our total compensation practices for our executives to those in our market:
| • | 2016 Peer Group. Publicly available data for a competitive peer group of 19 publicly traded companies similar to us with respect to industry, revenue size and business model, with median revenue and market capitalization size equal to $486 million and $3.0 billion, respectively, as of December 31, 2015, and |
| • | Survey Group. Technology industry companies similar to us in revenue size included in published surveys (Radford Global Technology Survey). |
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The 2016 Peer Group for this analysis was developed in consultation among our Compensation Committee, our management team and PM and consisted of the following organizations:
| athenahealth, Inc. |
LogMeIn, Inc. | |
| Blackbaud Inc. |
Medidata Solutions, Inc. | |
| Bottomline Technologies Inc. |
NetSuite Inc. | |
| Constant Contact, Inc. |
Qlik Technologies, Inc. | |
| CoStar Group Inc. |
SolarWinds Inc. | |
| Ebix Inc. |
SS&C Technologies Holding Inc. | |
| Epiq Systems, Inc. |
Synchronoss Technologies | |
| Guidewire Software, Inc. |
The Ultimate Software Group, Inc. | |
| HomeAway, Inc. |
Tyler Technologies, Inc. | |
| Interactive Intelligence Group Inc. |
We periodically review our peer group to confirm that the roster of companies remains appropriate for external benchmarking in light of external merger and acquisition activity and our own business evolution. In the first quarter of 2017, we removed Constant Contact, Inc., Epiq Systems, Inc., HomeAway, Inc., Qlik Technologies, Inc. and SolarWinds Inc. from our peer group in recognition that these companies were no longer independently traded companies following merger and acquisition activity. We removed Ebix Inc. as we determined it was no longer an appropriate peer with respect to revenue size. We added Aspen Technology, Inc., Manhattan Associates, Inc., Splunk Inc. and TiVo Corporation to the 2017 peer group.
PM benchmarked our executive compensation levels, including base salaries, performance-based cash bonuses and long-term equity incentive awards, to those of other executives in the 2016 Peer Group. The PM report indicated that pay levels on average for target cash compensation (base salary plus target bonus) and target total direct compensation (total cash plus long-term incentive value), were within a 15% range of the market median for such pay levels, which varied by executive role among the peer group. Based upon the peer group data and the competitive analysis performed by PM, we believe our long-term incentive compensation is generally more performance-based than that of our peers, in particular the long-term incentive compensation for our Chief Executive Officer, which is based solely upon our performance.
In February 2016, PM also performed a CEO pay-for-performance assessment. Our Compensation Committee reviewed the pay structure for our Chief Executive Officer and determined that Mr. Winn’s compensation is structured to promote alignment with our stock performance and in particular long-term incentives are predicated upon achievement of stock price targets associated with stock price appreciation. In performing this assessment, PM evaluated our Chief Executive Officer’s compensation targets against the 2016 Peer Group.
The Compensation Committee continues to asses our stock performance and CEO compensation against peer group data. The table below provides a comparison of (i) peer company CEO target compensation for the past three years, as derived from information disclosed in the proxy statements for such peer companies, and Mr. Winn’s total compensation, including base salary, bonus paid and the value of the in-the-money long-term incentives awarded during 2014 through 2016 using the December 30, 2016 closing price of our common stock on the NASDAQ at target amounts for such three-year period and (ii) stock price appreciation (assuming dividend reinvestment where applicable) for each peer company and RealPage over such three-year period. As indicated in the table, our total shareholder return for the period trailed the median peer result, but was aligned with the realizable pay awarded to our Chief Executive Officer during that period. Mr. Winn’s realizable pay was significantly adversely impacted by our not attaining in that period the price hurdles associated with market-based restricted stock grants awarded on August 7, 2014, March 3, 2015 and February 26, 2016.
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CEO Realizable Pay vs. 3-Year Total Shareholder Return
— Peers
— RealPage, Inc.
2016 Elements of Executive Compensation
During 2016, the compensation of our NEOs included the following components:
| • | Base Salaries |
| • | Performance-Based Cash Bonuses |
| • | Long-Term Equity Incentive Awards (Market-Based Restricted Stock for all NEOs, and Time-Based Restricted Stock for NEOs other than Mr. Winn) |
| • | Benefits and Other Compensation |
Base salaries are used to recognize the experience, skills, knowledge and responsibilities required of all our NEOs. Base salaries for our NEOs typically have been negotiated as a part of the employment agreements with our NEOs at the outset of employment. From time to time, consistent with our executive compensation program objectives, base salaries for our NEOs, together with other components of compensation, are evaluated for adjustment by our Compensation Committee based on an assessment of the overall achievement of corporate objectives, each NEO’s sustained performance and compensation trends in our industry. Each NEO’s employment agreement requires that his or her base salary be reviewed no less frequently than annually; however, none of our NEOs has an employment agreement that provides for automatic or scheduled increases in base salary.
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In addition to the factors described above, the base salary for our Chief Executive Officer takes into account Mr. Winn’s equity ownership in RealPage and his continuing contributions as the founder of RealPage.
In February 2016, our Compensation Committee conducted a review of our executive compensation program for purposes of evaluating compensation levels for our executives for 2016. Based on the considerations described above in “Executive Compensation — Compensation Discussion and Analysis — Compensation Decision-Making Process,” our Compensation Committee approved base salaries for Mr. Winn, Mr. Chaney, Mr. Hill, Mr. Monk and Mr. Rolley, each to be effective as of March 1, 2016, as outlined below.
| Name |
2015 Base Salary | 2016 Base Salary | % Change | Rationale | ||||||||||
| Stephen T. Winn |
$ | 500,000 | $ | 550,000 | 10.0 | % | Merit and market adjustment | |||||||
| William P. Chaney |
$ | 370,000 | $ | 385,000 | 4.1 | % | Merit | |||||||
| W. Bryan Hill |
$ | 370,000 | $ | 400,000 | 8.1 | % | Merit and expanded responsibilities | |||||||
| David G. Monk |
$ | 320,000 | $ | 330,000 | 3.1 | % | Merit | |||||||
| Daryl T. Rolley |
$ | 400,000 | $ | 400,000 | — | — | ||||||||
In August 2016, our Compensation Committee approved a base salary of $385,000 for Ms. Glover, who joined us at that time following Mr. Rolley’s departure.
Performance-Based Cash Bonuses
Our Chief Executive Officer’s performance-based cash bonus is provided under the terms of a separate plan approved by our stockholders that is designed to qualify payments as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code (the “162(m) Qualified MIP”). During 2016, Mr. Winn’s financial performance targets under the 162(m) Qualified MIP were based on our achievement of financial performance objectives, including non-GAAP total revenue and adjusted EBITDA targets, and an assessment of our Chief Executive Officer’s individual performance. The 162(m) Qualified MIP requires that the performance bonus, up to the maximum potential, is funded only if we achieve minimum target non-GAAP total revenue and adjusted EBITDA levels. The actual bonus for Mr. Winn is determined based on Compensation Committee evaluation of performance against the 162(m) Qualified MIP performance criteria. In February 2016, our Compensation Committee approved the continued participation by Mr. Winn in our 162(m) Qualified MIP for 2016, and Performance Goals (as defined in the 162(m) Qualified MIP) related to such plan for 2016. The target bonus for Mr. Winn for 2016 under the 162(m) Qualified MIP was 100% of Mr. Winn’s base salary with a maximum bonus potential of 200% of Mr. Winn’s target bonus for achieving financial and individual performance objectives in excess of the targets and a minimum bonus potential of 0% of Mr. Winn’s target bonus.
In 2016, our NEOs other than Mr. Winn participated in our annual non-equity management incentive plans, which also apply to our other senior managers. Our annual management incentive plans are intended to provide cash compensation to our other NEOs and senior managers for their contribution to the achievement of our strategic, operational and financial objectives. Our other NEOs earn amounts under our management incentive plans based on our achievement of financial performance objectives, including non-GAAP total revenue and adjusted EBITDA targets and an assessment of the NEO’s individual performance. In February 2016, our Compensation Committee approved the 2016 Management Incentive Plan (the “2016 MIP”), which outlines overall corporate objectives for the fiscal year in addition to establishing guidelines for calculating management incentive plan bonuses in the event that performance objectives are partially achieved or exceeded. The financial performance objectives for the 2016 MIP were identical to those under the 162(m) Qualified Plan. In assessing an executive’s individual performance, we consider the executive’s level of job responsibilities, the prior performance of the executive, the executive’s experience and tenure, the compensation of the other RealPage executive officers and the expected future contributions of the executive.
Participants in the 2016 MIP may receive a quarterly payout on a proportional basis based on progression towards the annual achievement of performance objectives for the 2016 MIP. The full-year annual cash bonuses paid to participants under our 2016 MIP with respect to a particular fiscal year are adjusted at year end based on actual achievement of both financial and individual performance objectives.
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The 2016 MIP target bonus for each of Mr. Hill, Mr. Chaney, Ms. Glover and Mr. Monk was 50% of such NEO’s base salary with a maximum bonus potential of 200% of such NEO’s target bonus for achieving financial and individual performance objectives in excess of the targets and a minimum bonus potential of 0% of such NEO’s target bonus. The 2016 MIP target bonus for Mr. Rolley was 75% of his base salary with a maximum bonus potential of 200% of his target bonus for achieving financial and individual performance objectives in excess of the targets and a minimum bonus potential of 0% of his target bonus.
For each of Mr. Winn, Mr. Hill, Mr. Chaney and Mr. Monk, the 2016 performance targets for non-GAAP total revenue, adjusted EBITDA and individual performance ratings were weighted 30%, 45% and 25%, respectively. For Ms. Glover and Mr. Rolley, the achievement of 2016 bonus targets for non-GAAP total revenue, adjusted EBITDA, and individual performance ratings were weighted 45%, 30% and 25%, respectively.
The minimum targets for non-GAAP total revenue and adjusted EBITDA for 2016 were increased significantly from the actual results achieved on such measures in 2015, to reflect our growth strategy. The table below summarizes the minimum, target and maximum performance level and the actual results for each performance measure for 2016.
| Measure |
Minimum | Target | Maximum | Achievement | ||||||||||||
| (in millions) | ||||||||||||||||
| Non-GAAP Total Revenue |
$ | 562.7 | $ | 577.3 | $ | 591.8 | $ | 565.6 | ||||||||
| Adjusted EBITDA |
$ | 118.4 | $ | 123.0 | $ | 127.6 | $ | 126.9 | ||||||||
Based upon these factors, the payouts under the 162(m) Qualified MIP and 2016 MIP for Mr. Winn and all other NEOs, except Ms. Glover, were calculated as follows:
| Weighting | Achievement | Payout Calculation | ||||||||||
| Revenue |
30 | % | 60 | % | 18 | % | ||||||
| Adjusted EBITDA |
45 | % | 183 | % | 82 | % | ||||||
| Individual performance |
25 | % | 150 | % | 38 | % | ||||||
| Total |
100 | % | 138 | % | ||||||||
The Compensation Committee determined the individual performance for each NEO in accordance with the calculation above based upon our strong performance in 2016, especially with respect to achievement of the Adjusted EBITDA performance objective. With respect to Ms. Glover, revenue and Adjusted EBITDA were weighted 45% and 30%, respectively, as described above, resulting in a payout calculation at 119%.
The performance metrics employed in the 162(m) Qualified MIP and 2016 MIP are adjusted from total revenue and EBITDA metrics calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) as follows:
Non-GAAP Total Revenue. We define this metric as total GAAP revenue plus acquisition-related and other deferred revenue adjustment.
Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), plus (1) acquisition-related and other deferred revenue adjustments, (2) depreciation, asset impairment, and the loss on disposal of assets, (3) amortization of intangible assets, (4) acquisition-related expense (income), (5) interest expense, net, (6) income tax expense (benefit), (7) litigation-related expense, (8) headquarters relocation costs, and (9) stock-based expense. We believe that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing our financial and operational performance, comparing this performance to our peers and competitors, and understanding our ability to generate income from ongoing business operations.
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As a result of the calculations described above, our Compensation Committee determined that 2016 performance objectives were achieved and directed payments of the following bonuses to our NEOs pursuant to the 162(m) Qualified Plan or the 2016 MIP. Ms. Glover’s bonus represented a partial year prorated amount.
| Executive |
Target Bonus |
Actual Bonus |
Actual Bonus as a Percent of Target Bonus |
|||||||||
| Stephen T. Winn |
100 | % | $ | 746,197 | 138 | % | ||||||
| W. Bryan Hill |
50 | % | 272,075 | 138 | % | |||||||
| William P. Chaney |
50 | % | 263,465 | 138 | % | |||||||
| Ashley Glover |
50 | % | 87,050 | 119 | % | |||||||
| David G. Monk |
50 | % | 226,155 | 138 | % | |||||||
| Daryl T. Rolley |
75 | % | — | — | ||||||||
Long-Term Equity Incentive Awards
Our equity award program is the primary vehicle for offering long-term incentives to our NEOs. Historically, our equity awards to our NEOs consisted of a combination of restricted stock awards and stock options. In 2016, the equity awards to our NEOs included only restricted stock awards. The Compensation Committee based this determination on an analysis of market compensation trends, a desire to reduce the number of shares of stock required to fund awards granted, and research and advice provided by PM.
We believe that equity-based compensation provides our NEOs with a direct interest in our long-term performance, creates an ownership culture and aligns the interests of our NEOs and our stockholders.
In providing long-term incentives for our Chief Executive Officer, our Compensation Committee granted to Mr. Winn 100% performance-based equity incentives in the form of market-based restricted stock awards that become eligible to vest only if the trading price of our common stock rises to specified levels and exceeds those levels for a sustained period of time. The stock price targets require significant stock price increases in order to vest, and thus are tied directly to Company market performance. In 2016, Mr. Winn’s restricted stock award required market-based performance as follows: 50% of the shares became eligible to vest if the stock achieved a 38% increase to $27.28 per share averaged over a period of 20 consecutive trading days, and 50% of the shares became eligible to vest if the stock achieved a 62% increase to $32.15 per share averaged over a period of 20 consecutive trading days. We believe that a period of 20 consecutive trading days is appropriate because it is a significant and sustained period of time. Once shares become eligible to vest under such award, they also contain an additional retentive time-based component, whereby such shares vest in quarterly increments over a one-year period thereafter (subject to acceleration of vesting on July 1, 2019 for any then-unvested shares that became eligible to vest prior to that date). Our Compensation Committee views these market-based restricted stock awards as directly linking achievement of Company performance and stock price to our Chief Executive Officer’s long-term incentive compensation, and thus they are “pay for performance” compensation having value only if the stock price increases to the target.
In February 2016, our Compensation Committee granted to the NEOs other than Mr. Winn a combination of market-based and time-based restricted stock awards. The market-based restricted stock awards had the same performance criteria as those for Mr. Winn described above, except that Ms. Glover’s awards were based upon a different valuation price because they were granted upon her employment in August 2016. Ms. Glover’s restricted stock award required market-based performance as follows: 50% of the shares became eligible to vest if the stock achieved a 26.78% increase to $31.48 per share averaged over a period of 20 consecutive trading days, and 50% of the shares become eligible to vest if the stock achieves a 46.31% increase to $36.33 per share averaged over a period of 20 consecutive trading days. Once shares become eligible to vest under such award, they also contain a retentive time-based component, whereby such shares vest in quarterly increments over a one-year period thereafter (subject to earlier vesting if the shares became eligible to vest prior to July 1, 2020).
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The time-based awards of restricted stock granted to our NEOs other than Mr. Winn in 2016 have a three-year vesting period. We believe that the three-year vesting period furthers our objective of executive retention as it provides an incentive to our executives to remain in our employ during the vesting period, and is consistent with competitive practice among our peers.
Our Compensation Committee typically grants equity awards to Mr. Winn and our other NEOs annually during the first quarter of the year, in connection with its annual review of our executive and employee compensation program, generally, and its assessment of achievement of prior-year performance targets for payments of cash bonuses under our management incentive plans as described under “Executive Compensation — Compensation Discussion and Analysis — 2016 Elements of Executive Compensation — Performance-Based Cash Bonuses.”
In determining the value of the equity grants for our Chief Executive Officer in 2016, our Compensation Committee considered comparative data for both the size of annual equity awards and total equity ownership of Chief Executive Officers employed by companies in our 2016 Peer Group, our overall achievement of corporate objectives, the Chief Executive Officer’s individual performance objectives, the achievement of certain strategic initiatives, the amount of equity previously awarded to the Chief Executive Officer, and the vesting of previous awards. In determining the value of equity grants to our NEOs other than our Chief Executive Officer in 2016, our Compensation Committee considered comparative data for both the size of annual equity awards and total equity ownership of executives employed by companies in our Select Peer Group, our overall achievement of corporate objectives, the applicable NEO’s achievement of individual performance objectives, the achievement of certain strategic initiatives, the amount of equity previously awarded to the NEO, the vesting of previous awards, and the recommendations of our Chief Executive Officer.
The amount and terms of the stock options and restricted stock we granted to our NEOs in 2016 are more fully described under “Executive Compensation — Compensation Tables — Grants of Plan-Based Awards.”
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Compensation Realized by our Chief Executive Officer in 2016
The table below shows 2016 target versus realized compensation for Mr. Winn in 2016. Target total direct compensation represents Mr. Winn’s target compensation including salary, payout at 100% for the 162(m) Qualified Plan and his equity grants made by us in 2016. Realized compensation shows Mr. Winn’s salary, actual payout under the 162(m) Qualified Plan and the value of equity grants for Mr. Winn that vested in 2016 (which included grants awarded in prior years), based upon our closing stock price on the date of vesting.
Mr. Winn’s realized compensation significantly trailed target compensation in 2016, reflecting the rigorous goals set for the market-based restricted stock awards.
Amendment of Employment Agreement for Chief Executive Officer
On October 26, 2016, we entered into an amended and restated employment agreement with Mr. Winn to remove the ability for Mr. Winn to terminate his employment for any or no reason following a change in control (as defined in the agreement) and receive the benefits of having terminated his employment for “Good Reason” (as defined in such employment agreement). We believe this amendment reflects current market and peer group practices with respect to executive agreements for Chairman and CEO-level executives. See “Executive Compensation — Compensation Tables — Supplemental Information Regarding Arrangements with Executive Officers — Employment Agreements — Stephen T. Winn.”
Benefits and Other Compensation
Our NEOs are eligible to participate in broad-based employee benefit plans, which are provided to all eligible U.S.-based employees. These plans include a group medical program, a group dental program, life insurance, disability insurance, flexible spending accounts and a 401(k) retirement savings plan. Additional benefit programs offered to our NEOs and all full-time U.S.-based employees include programs for job-related educational assistance, group term life insurance equivalent to 1.5 times an employee’s annual base salary up to a $600,000 maximum, and an employee assistance program. Our NEOs are also entitled to receive reimbursement
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for up to $3,500 per year for medical benefits to be used toward preventative medical expenses, including annual physical examinations.
We believe these benefits are consistent with the benefits offered by companies with which we compete for employees, including executive officers, and are necessary to attract and retain qualified individuals for those roles.
We believe that cash and equity compensation are the two key components in attracting and retaining management talent and therefore do not provide any additional perquisites to our NEOs.
2017 Compensation Determinations
In February 2017, our Compensation Committee performed a competitive assessment and evaluated the elements of our executive compensation program and the performance of RealPage and each of the NEOs in 2016. Our Compensation Committee also reviewed a revised 2017 Peer Group of 17 companies, updated from the prior year in light of merger and acquisition activity within our sector. As in 2016, the peer group for 2017 compensation was used in combination with other survey data to analyze compensation trends. See “Executive Compensation — Compensation Discussion and Analysis — Competitive Positioning.” In February 2017, our Compensation Committee approved the following elements of compensation for each of the NEOs for 2017.
In February 2017, our Compensation Committee conducted a review of our executive compensation program for purposes of evaluating compensation levels for our executives for 2017. Based on the considerations described above in “Executive Compensation — Compensation Discussion and Analysis — Compensation Decision-Making Process,” our Compensation Committee approved base salaries to be effective as of March 1, 2017. Based on our Compensation Committee’s assessment of the various consideration described above, including competitive and peer group considerations, our Compensation Committee determined the following base salary levels for 2017:
| Name |
2017 Salary | |||
| Stephen T. Winn |
$ | 625,000 | ||
| W. Bryan Hill |
$ | 425,000 | ||
| William P. Chaney |
$ | 400,000 | ||
| Ashley Glover |
$ | 400,000 | ||
| David G. Monk |
$ | 340,000 | ||
Performance-Based Cash Bonuses
In February 2017, our Compensation Committee approved the continued participation of Mr. Winn in the 162(m) Qualified MIP and approved the management incentive plan for 2017 (the “2017 MIP”), and participation by the other NEOs in the 2017 MIP. The 2017 target bonus under the 162(m) Qualified MIP for Mr. Winn is 100% of his base salary with a maximum bonus potential of 200% of target bonus for achieving financial and individual performance objectives in excess of the targets, and a minimum bonus potential of 0% of Mr. Winn’s target bonus. The 2017 MIP target bonus for each of Mr. Hill, Mr. Chaney, Ms. Glover and Mr. Monk is 50% of such NEO’s base salary with a maximum bonus potential of 200% of such NEO’s target bonus for achieving financial and individual performance objectives in excess of the targets, and a minimum bonus potential of 0% of such NEO’s target bonus.
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The performance metrics for our NEOs under the 162(m) Qualified MIP and 2017 MIP will be the same as the performance metrics for 2016, and consist of the following:
| • | Non-GAAP total revenue; |
| • | Adjusted EBITDA; and |
| • | Individual performance ratings. |
Long-Term Equity Incentive Awards
In February 2017, our Compensation Committee approved grants to Mr. Winn consisting of 100% performance-based equity incentives in the form of market-based restricted stock awards that become eligible to vest only if the trading price of our common stock rises to specified levels and exceeds those levels for a sustained period of time. Similar to the 2016 awards, the stock price targets require significant price increases in order to become eligible to vest, and thus are tied directly to our performance. The market-based awards have eligibility and vesting terms based upon a target performance level, with lower vesting possible at a threshold level, and maximum vesting possible at a higher performance level. Once the applicable performance levels are achieved, the associated portion of the award becomes eligible to vest in quarterly installments over a one-year period. The amounts reflected below are the maximum payout amounts that would be achieved upon reaching the maximum market achievement level. The target payout amounts are 66.7% of the maximum amounts set forth in the table, and the threshold, target and maximum achievement levels, require a 25%, 35% and 50% increase, respectively, in our stock price in order to achieve at each such performance level. In February 2017, our Compensation Committee also approved grants of a combination of market-based and time-based restricted stock awards to each of the NEOs other than Mr. Winn. The market-based awards granted to the other NEOs had the same three tier achievement requirements as those awarded to Mr. Winn. The time-based awards of restricted stock granted to our NEOs other than Mr. Winn in 2017 have a three-year vesting period. The total awards (based on maximum payout percentages with respect to the market-based awards) were as follows:
2017 GRANTS FOR PLAN BASED AWARDS
| Name |
Shares of Restricted Stock (Market Based) |
Shares of Restricted Stock (Time Based) |
||||||
| Stephen T. Winn |
275,955 | — | ||||||
| W. Bryan Hill |
54,203 | 36,135 | ||||||
| William P. Chaney |
44,348 | 29,565 | ||||||
| Ashley Glover |
22,178 | 14,785 | ||||||
| David G. Monk |
17,250 | 11,500 | ||||||
Other Executive Compensation Considerations
Trading Controls and Hedging, Short Sale and Pledging Policies under our Insider Trading Policy
All employees, including our NEOs, directors and agents of RealPage are required to receive permission from us and certify they are not in possession of any non-public material inside information prior to entering into any transactions in our securities, including, but not limited to, gifts, grants and transactions involving derivatives. Generally, trading is permitted only during announced trading periods. Employees who are subject to trading restrictions, including our NEOs, may enter into trading plans under Rule 10b5-1 of the Exchange Act. These trading plans may be entered into only during an open trading period and must be approved by us. Any employee, including any executive officer or affiliate bears full responsibility if he or she violates our policy by permitting shares to be bought or sold without preapproval or when trading is restricted. All of our employees, including our executive officers, directors and agents are prohibited from pledging our securities or from entering into hedging and short sale transactions with respect to our securities pursuant to our Insider Trading Policy.
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Our equity awards granted to our NEOs under our 2010 Equity Incentive Plan contain provisions under which the executives may be required to forfeit equity awards or profits from equity awards if they engage in certain conduct including, but not limited to, violations of Company policies. Awards granted under the 2010 Equity Incentive Plan will be subject to recoupment in accordance with any clawback policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the plan administrator may impose other clawback, recovery or recoupment provisions in an award agreement as the plan administrator determines necessary or appropriate, including a reacquisition right in respect of previously acquired shares of our common stock or other cash or property upon the occurrence of cause.
We intend to implement a Dodd-Frank Wall Street Reform and Consumer Protection Act compliant clawback policy as soon as the SEC adopts rules that set forth the requirements for such clawback policies and as such rules become effective for us.
Our Chief Executive Officer held approximately 28.16% of our outstanding shares of common stock as of the Record Date. All other directors and executive officers also held shares as of the Record Date. See “Security Ownership.” Effective October 23, 2014, our Board adopted a Stock Ownership Guidelines Policy that suggests minimum stock ownership guidelines for our Chief Executive Officer. The minimum stock ownership target suggested by the guidelines is based on a multiple of five times the Chief Executive Officer’s annual base salary. This policy also suggests that our Chief Executive Officer achieve the suggested minimum stock ownership target within three years of the adoption of such guidelines with respect to our current Chief Executive Officer or three years following appointment with respect to any successor. Our Chief Executive Officer’s stock ownership exceeds the suggested minimum stock ownership threshold.
Severance and Change in Control Benefits
Our employment agreements with our NEOs provide for payments and other benefits in the event of termination of employment in certain circumstances. For a description of these payments and other benefits, see “Executive Compensation — Potential Payments on Termination or Change in Control” and “Executive Compensation — Compensation Discussion and Analysis — 2016 Elements of Executive Compensation — Amendment of Employment Agreement for Chief Executive Officer.”
We believe that these severance arrangements help us to attract and retain key management talent in an industry where there is significant competition for management talent. We believe that entering into these agreements helps the NEOs maintain continued focus and dedication to their assigned duties and helps maximize stockholder value. The terms of these agreements were determined after review by our Compensation Committee of our retention goals for each NEO, as well as analysis of market data, similar agreements established by our Select Peer Group and applicable law.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction for certain compensation in excess of $1.0 million per year paid by a publicly held company to its chief executive officer or any of its three other most highly paid executive officers (other than the company’s chief financial officer). Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We generally intend to structure the performance-based portion of our executive compensation, when feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. We believe that it is important to preserve flexibility in administering our compensation programs and have not adopted a policy that all compensation must qualify as deductible under Section 162(m). Amounts paid under our
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compensation programs may be determined not to so qualify. We have adopted the 162(m) Qualified MIP, which was approved by our stockholders at the 2014 annual meeting, to attempt to qualify payments made in future years under that plan as deductible “performance-based compensation” for purposes of Section 162(m). We also structured the performance-based restricted stock awards with market based vesting to our NEOs in 2016 to qualify as deductible “performance-based compensation” for purposes of Section 162(m). We do not guarantee that any executive compensation intended to qualify as deductible performance-based compensation under Section 162(m) so qualifies.
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COMPENSATION COMMITTEE REPORT*
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Regulation S-K Item 402(b) (the “CD&A”) with management and based upon such review and discussion, our Compensation Committee recommended to our Board that the CD&A be included in our Proxy Statement.
| Respectfully Submitted, |
| Peter Gyenes, Chairman |
| Alfred R. Berkeley, III |
| Charles F. Kane |
| Jason A. Wright |
| * | The foregoing Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporates this Compensation Committee Report by express reference therein. |
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee are set forth in “Governance — Board and Committee Governance — Board Committees.” None of the members of our Compensation Committee is an officer or employee of RealPage, was an officer or employee of RealPage during 2016, or was formerly an officer of RealPage. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.
The following table provides information regarding the compensation of our NEOs during the years ended December 31, 2016, December 31, 2015 and December 31, 2014. Additional information relevant to this table is set forth below at “Executive Compensation — Supplemental Information Regarding Arrangements with Executive Officers.”
| SUMMARY COMPENSATION TABLE |
||||||||||||||||||||||||||||||||
| Name and Principal Position |
Year | Salary | Bonus (1) | Stock Awards (2) |
Option Awards (2) |
Non-Equity Incentive Plan Compensation (3) |
All Other Compensation |
Total | ||||||||||||||||||||||||
| Stephen T. Winn Chairman, Chief Executive Officer and President |
2016 | $ | 541,667 | — | $ | 4,916,459 | $ | — | 746,197 | $ | 18,366 | (4) | $ | 6,222,689 | ||||||||||||||||||
| 2015 | 500,000 | — | 3,953,250 | — | 521,076 | 7,838 | (5) | 4,982,164 | ||||||||||||||||||||||||
| 2014 | 500,000 | — | 2,986,000 | — | — | 6,780 | (5) | 3,492,780 | ||||||||||||||||||||||||
| W. Bryan Hill Executive Vice President, Chief Financial Officer and Treasurer |
2016 | 395,000 | — | 1,899,902 | — | 272,075 | 6,267 | (4) | 2,573,244 | |||||||||||||||||||||||
| 2015 | 365,000 | 158,698 | 655,087 | 601,712 | 190,193 | 4,338 | (5) | 1,975,028 | ||||||||||||||||||||||||
| 2014 | 317,396 | — | 987,700 | 394,056 | — | 7,023 | (6) | 1,706,174 | ||||||||||||||||||||||||
| William P. Chaney Executive Vice President, Enterprise Solutions |
2016 | 382,500 | — | 1,899,902 | — | 263,465 | 5,713 | (4) | 2,551,579 | |||||||||||||||||||||||
| 2015 | 366,667 | 146,598 | 655,087 | 601,712 | 187,354 | 4,338 | (5) | 1,961,755 | ||||||||||||||||||||||||
| 2014 | 350,000 | — | 581,125 | 96,947 | — | 3,523 | (6) | 1,031,595 | ||||||||||||||||||||||||
| Ashley Glover (7) Executive Vice President, Chief Revenue Officer |
2016 | 145,856 | — | 2,078,489 | — | 87,050 | 2,554 | (4) | 2,313,949 | |||||||||||||||||||||||
| David G. Monk (7) Executive Vice President, Chief Legal Officer and Secretary |
2016 | 328,333 | — | 738,818 | — | 226,155 | 5,567 | (4) | 1,298,872 | |||||||||||||||||||||||
| 2015 | 314,639 | — | 268,979 | 185,316 | 163,951 | 4,338 | (5) | 937,222 | ||||||||||||||||||||||||
| Daryl T. Rolley (7) Former Executive Vice President, Chief Revenue Officer |
2016 | 233,333 | — | 916,608 | — | — | 260,578 | (4) | 1,410,519 | |||||||||||||||||||||||
| 2015 | 358,334 | 93,680 | 2,451,600 | 757,356 | 257,976 | 12,706 | (5) | 3,931,653 | ||||||||||||||||||||||||
| (1) | Represents special bonuses for Mr. Hill and Mr. Chaney in recognition of their individual performance and achievement in 2015, and a signing bonus for Mr. Rolley. |
| (2) | Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note 8 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of assumptions made in determining the grant date fair value of our stock option awards and restricted stock awards. |
| (3) | Represents cash awards under our 162(m) Qualified MIP, 2016 MIP, 2015 Management Incentive Plan, and our 2014 Management Incentive Plan (as applicable). The 162(m) Qualified MIP was adopted in 2014. |
| (4) | For a breakdown of the components that comprise All Other Compensation for NEOs for 2016, refer to the table entitled “2016 All Other Compensation Detail” immediately below. |
| (5) | For 2015, represents (i) Company matching contributions under our 401(k) retirement savings plan in the amount of $4,338 for each NEO; (ii) $3,500 for annual medical benefits to be used toward preventative medical expenses, including annual physical examinations, an available benefit to each NEO, except Mr. Hill, Mr. Chaney, Mr. Monk and Mr. Rolley did not elect to use this benefit in 2015; and (iii) includes a relocation expense reimbursement for Mr. Rolley of $8,368 in connection with his employment with us. |
| (6) | For 2014, consists of (i) $3,500 for annual medical benefits to be used toward preventative medical expenses, including annual physical examinations, an available benefit to each NEO, except Mr. Chaney as he did not elect to use this benefit in 2014; and (ii) Company matching contributions under our 401(k) retirement savings plan to each of Mr. Winn, Mr. Chaney and Mr. Hill in the amount of $3,523. |
| (7) | Ms. Glover was not an NEO for the fiscal years 2014 or 2015. Mr. Monk was not an NEO for the fiscal year 2014. Mr. Rolley joined RealPage in February 2015 and resigned from RealPage in July 2016. |
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2016 ALL OTHER COMPENSATION DETAIL
| Name |
Year | Registrant Contributions to Defined Contribution Plans (1) |
Insurance Premiums (2) |
Severance (3) | Consultant Services (4) |
Total | ||||||||||||||||||
| Stephen T. Winn |
2016 | $ | 4,770 | $ | 13,596 | $ | — | $ | — | $ | 18,366 | |||||||||||||
| W. Bryan Hill |
2016 | 4,770 | 1,497 | — | — | 6,267 | ||||||||||||||||||
| William P. Chaney |
2016 | 4,770 | 943 | — | — | 5,713 | ||||||||||||||||||
| Ashley Glover |
2016 | 2,369 | 185 | — | — | 2,554 | ||||||||||||||||||
| David G. Monk |
2016 | 4,770 | 797 | — | — | 5,567 | ||||||||||||||||||
| Daryl T. Rolley |
2016 | — | 578 | 160,000 | 100,000 | 260,578 | ||||||||||||||||||
| (1) | Represents Company matching contributions under our 401(k) retirement savings plan. |
| (2) | Represents group term life insurance premiums paid by us on behalf of each of our NEOs. |
| (3) | Represents a severance payment to Mr. Rolley pursuant to the terms of the general release and separation agreement that modified Mr. Rolley’s employment agreement with us to provide that Mr. Rolley receive a severance payment of $160,000. |
| (4) | Represents a retainer fee of $20,000 per month paid to Mr. Rolley for consulting services provided during the 12-month term of the consulting agreement between us and Mr. Rolley dated August 1, 2016. |
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The following table sets forth information regarding grants of compensation in the form of plan-based awards made during 2016 to our NEOs. Additional information relevant to this table is set forth below at “Executive Compensation — Compensation Tables — Supplemental Information Regarding Arrangements with Executive Officers.”
| GRANTS OF PLAN-BASED AWARDS | ||||||||||||||||||||||||||||||||||||||||||||
| Name |
Grant Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or Units (#) (2) |
All Other Option Awards: Number of Securities Underlying Options |
Exercise or Base Price of Option Awards |
Grant Date Fair Value of Stock and Option Awards (3) ($) |
|||||||||||||||||||||||||||||||||||||
| Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||||||||||
| (a) |
(b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||||||||||||||||||||||||
| Stephen T. Winn |
02/17/16 | — | 541,667 | 1,083,334 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | 368,550 | 368,550 | (4) | — | — | — | 4,916,459 | |||||||||||||||||||||||||||||||||
| W. Bryan Hill |
02/17/16 | — | 197,500 | 395,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | 73,710 | 73,710 | (4) | — | — | — | 983,294 | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | — | — | 46,200 | — | — | 916,608 | ||||||||||||||||||||||||||||||||||
| William P. Chaney |
02/17/16 | — | 190,510 | 381,019 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | 73,710 | 73,710 | (4) | — | — | — | 983,294 | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | — | — | 46,200 | — | — | 916,608 | ||||||||||||||||||||||||||||||||||
| Ashley Glover |
08/17/16 | — | 103,839 | 138,452 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 08/17/16 | — | — | — | — | 64,725 | 64,725 | (5) | — | — | — | 1,053,721 | |||||||||||||||||||||||||||||||||
| 08/17/16 | — | — | — | — | — | — | 41,288 | — | — | 1,024,768 | ||||||||||||||||||||||||||||||||||
| David G. Monk |
02/17/16 | — | 154,647 | 309,294 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | 28,665 | 28,665 | (4) | — | — | — | 382,392 | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | — | — | 17,965 | — | — | 356,426 | ||||||||||||||||||||||||||||||||||
| Former Officer |
||||||||||||||||||||||||||||||||||||||||||||
| Daryl T. Rolley |
02/17/16 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | 73,710 | 73,710 | (4) | — | — | — | 983,294 | |||||||||||||||||||||||||||||||||
| 02/26/16 | — | — | — | — | — | — | 46,200 | — | — | 916,608 | ||||||||||||||||||||||||||||||||||
| (1) | Represents potential cash incentive awards at minimum, target and maximum levels, which are governed by our 162(m) Qualified MIP for Mr. Winn and 2016 MIP for all other NEOs. The material terms of these annual incentive awards are discussed in this section under “Compensation Discussion and Analysis — 2016 Elements of Executive Compensation — Performance-Based Cash Bonuses.” |
| (2) | Represents grants of restricted stock. Each restricted stock award vests as to one-twelfth (1/12) of the shares subject to such restricted stock award on the first day of each calendar quarter, beginning on the first day of the second calendar quarter following the date of grant, for 12 consecutive quarters. The unvested shares of restricted common stock subject to each restricted stock award are subject to forfeiture to us upon certain events. Vesting of restricted stock awards is contingent upon the recipient’s continued status as our service provider or as a service provider of one of our subsidiaries as of each applicable vesting date. |
| (3) | Reflects the aggregate grant date fair value determined in accordance with FASB ASC Topic 718. See Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of assumptions made in determining the grant date fair value of our stock option awards and restricted stock awards. |
| (4) | Fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2019, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the target price of $27.28 per share, and an additional fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2019, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the maximum price of $32.15 per share (shares that become eligible to vest, if any, are referred to as “2019 Eligible Shares”). 2019 Eligible Shares shall vest 25% per quarter over the year following the date they satisfy the initial market price vesting condition beginning on the first day of the next calendar quarter, subject to continued status as a service provider (as defined in the 2010 Equity Incentive Plan) through each vesting date, provided that the shares that have become 2019 Eligible Shares shall be fully vested on July 1, 2019, or upon a Change in Control, Death or Disability (as defined in the 2010 Equity Incentive Plan). The restricted stock shall accelerate and shall be fully vested immediately prior to a Change in Control of RealPage (as defined in the 2010 Equity Incentive Plan) that results in consideration per share of our common stock equal to or in excess of $27.28 per share with respect to the first tranche of shares and $32.15 per share with respect to the second tranche of shares, respectively. |
| (5) | Fifty percent (50%) of the shares shall become eligible to vest if, prior to January 1, 2020, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the target price of $31.48 per share, and an additional fifty percent (50%) of the shares shall become eligible to vest if, prior to January 1, 2020, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the maximum price of $36.33 per share (shares that become eligible to vest, if any, are referred to as “2020 Eligible Shares”). 2020 Eligible Shares shall vest 25% per quarter over the year following the date they satisfy the initial market price vesting condition beginning on the first day of the next calendar quarter, subject to continued status as a service provider (as defined in the 2010 Equity Incentive Plan) through each vesting date, provided that the shares that have become 2020 Eligible Shares shall be fully vested on January 1, 2020, or upon a Change in Control, Death or Disability (as defined in the 2010 Equity Incentive Plan). The restricted stock shall accelerate and shall be fully vested immediately prior to a Change in Control of RealPage (as defined in the 2010 Equity Incentive Plan) that results in consideration per share of our common stock equal to or in excess of $31.48 per share with respect to the first tranche of shares and $36.33 per share with respect to the second tranche of shares, respectively. |
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SUPPLEMENTAL INFORMATION REGARDING ARRANGEMENTS WITH EXECUTIVE OFFICERS
The following information supplements the information provided in the Summary Compensation Table and the Grants of Plan-Based Awards Table set forth above.
Each of our NEOs was party to an employment agreement with us during 2016. We entered into amended and restated employment agreements (“Amended Employment Agreements”) with Mr. Winn, Mr. Hill and Mr. Chaney effective March 1, 2015. We also entered into employment agreements with Mr. Rolley effective February 9, 2015, Mr. Monk effective May 1, 2015, and Ms. Glover effective August 3, 2016. On October 26, 2016, we entered into an amendment to an employment agreement with Mr. Winn. The following descriptions of the terms of the employment agreements with our NEOs are intended as a summary only and are qualified in their entirety by reference to the employment agreements filed as exhibits to our Current Reports on Form 8-K which were filed with the SEC on February 9, 2015 and October 26, 2016, and as exhibits to our Quarterly Reports on Form 10-Q which were filed with the SEC on May 8, 2015, August 7, 2015, and November 8, 2016.
Stephen T. Winn
On February 27, 2015, we entered into an Amended Employment Agreement with Mr. Winn (the “Amended CEO Employment Agreement”), which became effective as of March 1, 2015, and replaced and superseded his prior employment agreement described below. The Amended CEO Employment Agreement sets a minimum base salary for Mr. Winn at $500,000 with a target annual bonus of 100% of his annual base salary as determined under the management incentive plan with performance criteria to be established by our Compensation Committee, and Mr. Winn is entitled to equity grants pursuant to the 2010 Equity Incentive Plan. Mr. Winn is entitled to four weeks paid vacation per year, is eligible to participate in all employee welfare benefits plans and other benefit programs made available generally to our employees or senior executives and is reimbursed for all reasonable business expenses, including travel by private aircraft for business purposes of up to $300,000 per year. Additionally, we make available to Mr. Winn all fringe benefits and perquisites that are made available to other senior executives. The Amended CEO Employment Agreement also provides for $3,500 per year in medical benefits to be used toward preventative medical expenses, including annual physical examinations, and certain benefits upon termination of employment as a result of death, Disability, or without Cause or for Good Reason (each as defined in the Amended CEO Agreement) or in connection with a “Change in Control” of RealPage each of which is disclosed below under “Executive Compensation — Potential Payments Upon Termination or Change in Control.” For a period of two years following the termination of Mr. Winn’s employment for any reason, Mr. Winn will be restricted from competing with RealPage and its affiliates and soliciting RealPage and its affiliates’ respective customers, licensees or employees. Our employment agreement with Mr. Winn also includes confidentiality provisions, non-interference and non-disparagement obligations during his employment and following termination.
The Amended CEO Employment Agreement provides that payments and benefits payable pursuant to such agreement will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, if such reduction would result in Mr. Winn receiving greater compensation and benefits on an after-tax basis. Mr. Winn’s employment agreement provides that, to the fullest extent permitted by law, we will indemnify Mr. Winn (and advance certain legal and other expenses) in connection with the defense of any lawsuit or other claim to which Mr. Winn is made a party by reason of performing his responsibilities as an officer or executive officer of RealPage or any of its subsidiaries, other than claims brought against Mr. Winn by any of his former employers.
On October 26, 2016, we entered into an amended and restated employment agreement with Mr. Winn to remove the ability for Mr. Winn to terminate his employment for any or no reason following a change in control
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(as defined in the agreement) and receive the benefits of having terminated his employment for “Good Reason” (as defined in such employment agreement). We believe this amendment reflects current market and peer group practices with respect to executive agreements for Chairman and CEO-level executives.
W. Bryan Hill
On February 27, 2015, we entered into an amended employment agreement (the “Amended Hill Employment Agreement”) with Mr. Hill, which became effective as of March 1, 2015 and replaced and superseded his prior employment agreement described below. The Amended Hill Employment Agreement sets a minimum annual base salary for Mr. Hill at $370,000 with a target annual bonus of 50% of his annual base salary as determined under the management incentive plan with performance criteria to be established by the Compensation Committee, and Mr. Hill is entitled to equity grants pursuant to the 2010 Equity Incentive Plan. Mr. Hill is entitled to four weeks paid vacation per year, is eligible to participate in all employee welfare benefits plans and other benefit programs made available generally to our employees or senior executives and is reimbursed for all reasonable business expenses. Additionally, we make available to Mr. Hill all fringe benefits and perquisites that are made available to other senior executives. The Amended Hill Employment Agreement also provides for $3,500 per year in medical benefits to be used toward preventative medical expenses, including annual physical examinations, and certain benefits upon termination of employment as a result of death, Disability, or without Cause or for Good Reason (each as defined in the Amended Hill Employment Agreement) or in connection with a Change in Control of RealPage each of which is disclosed below under “Executive Compensation — Potential Payments Upon Termination or Change in Control.” For a period of two years following the termination of Mr. Hill’s employment for any reason, Mr. Hill will be restricted from competing with RealPage and its affiliates and soliciting RealPage and its affiliates’ respective customers, licensees or employees. The Amended Hill Employment Agreement also includes confidentiality provisions, non-interference and non-disparagement obligations during his employment and following termination.
The Amended Hill Employment Agreement provides for payments and benefits payable pursuant to such agreement will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, if such reduction would result in Mr. Hill receiving greater compensation and benefits on an after-tax basis. Mr. Hill’s employment agreement provides that, to the fullest extent permitted by law, we will indemnify Mr. Hill (and advance certain legal and other expenses) in connection with the defense of any lawsuit or other claim to which Mr. Hill is made a party by reason of performing his responsibility as an officer or executive officer of RealPage or any if its subsidiaries, other than claims brought against Mr. Hill by any of his former employers.
William P. Chaney
On March 5, 2015, we entered into an Amended Employment Agreement with Mr. Chaney (the “Amended Chaney Employment Agreement”), which became effective as of March 1, 2015, which replaced and superseded his prior employment agreement described below. Mr. Chaney’s Amended Employment Agreement sets a minimum annual base salary for Mr. Chaney at $370,000 with a target annual bonus of 50% of his base annual salary as determined under the management incentive plan with performance criteria to be established by our Compensation Committee, and Mr. Chaney is entitled to equity grants pursuant to the 2010 Equity Incentive Plan. Mr. Chaney is entitled to four weeks paid vacation per year, is eligible to participate in all employee welfare benefits plans and other benefit programs made available generally to our employees or senior executives and is reimbursed for all reasonable business expenses. Additionally, we make available to Mr. Chaney all fringe benefits and perquisites that mare made available to other senior executives. The Amended Chaney Employment Agreement also provides for $3,500 per year in medical benefits to be used toward preventative medical expenses, including annual physical examinations, and certain benefits upon termination of employment as a result of death, Disability, or without Cause or for Good Reason (each as defined in the Amended Chaney Employment Agreement) or in connection with a Change in Control of RealPage each of which is disclosed below under “Executive Compensation — Potential Payments Upon Termination or Change in Control.” For a
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period of two years following the termination of Mr. Chaney’s employment for any reason, Mr. Chaney will be restricted from competing with RealPage and its affiliates and soliciting RealPage and its affiliates’ respective customers, licensees or employees. The Amended Chaney Employment Agreement also includes confidentiality provisions, non-interference and non-disparagement obligations during his employment and following termination.
The Amended Chaney Employment Agreement provides for payments and benefits payable pursuant to such agreement will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, if such reduction would result in Mr. Chaney receiving greater compensation and benefits on an after-tax basis. Mr. Chaney’s employment agreement provides that, to the fullest extent permitted by law, we will indemnify Mr. Chaney (and advance certain legal and other expenses) in connection with the defense of any lawsuit or other claim to which Mr. Chaney is made a party by reason of performing his responsibility as an officer or executive officer of RealPage or any if its subsidiaries, other than claims brought against Mr. Chaney by any of his former employers.
Ashley C. Glover
On August 3, 2016, we entered into an Employment Agreement with Ashley C. Glover (the “Glover Employment Agreement”). The Glover Employment Agreement sets a minimum base salary for Ms. Glover at $385,000 with a target annual bonus of 50% of her annual base salary as determined under the management incentive plan with performance criteria to be established by our Compensation Committee. Ms. Glover was granted shares of restricted stock valued at $1,000,000 and additional shares of restricted stock valued at $1,000,000, subject to performance criteria tied to the market price of our common stock. Ms. Glover is entitled to three weeks’ paid vacation per year, is eligible to participate in all employee welfare benefits plans and other benefit programs made available generally to our employees or senior executives and is reimbursed for all reasonable business expenses. Additionally, we make available to Ms. Glover all fringe benefits and perquisites that are made available to other senior executives. The Glover Employment Agreement also provides for $3,500 per year in medical benefits to be used toward preventative medical expenses, including annual physical examinations, and certain benefits upon termination of employment as a result of death, Disability, or without Cause or for Good Reason (each as defined in the Glover Employment Agreement) or in connection with a Change in Control of RealPage each of which is disclosed below under “Executive Compensation — Potential Payments Upon Termination or Change in Control.” For a period of two years following the termination of Ms. Glover’s employment for any reason, Ms. Glover will be restricted from competing with RealPage and its affiliates and soliciting RealPage and its affiliates’ respective customers, licensees or employees. The Glover Employment Agreement also includes confidentiality provisions, non-interference and non-disparagement obligations during her employment and following termination.
The Glover Employment Agreement also provides that payments and benefits payable pursuant to such agreement will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, if such reduction would result in Ms. Glover receiving greater compensation and benefits on an after-tax basis. Ms. Glover’s employment agreement also provides that, to the fullest extent permitted by law, we will indemnify Ms. Glover (and advance certain legal and other expenses) in connection with the defense of any lawsuit or other claim to which Ms. Glover is made a party by reason of performing her responsibilities as an officer or executive officer of RealPage or any of its subsidiaries, other than claims brought against Ms. Glover by any of her former employers.
David G. Monk
On May 1, 2015, we entered into an Employment Agreement with David G. Monk (the “Monk Employment Agreement”). The Monk Employment Agreement sets a minimum base salary for Mr. Monk at $320,000 with a
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target annual bonus of 50% of his annual base salary as determined under the management incentive plan with performance criteria to be established by our Compensation Committee. Mr. Monk is eligible to receive equity grants under the 2010 Equity Incentive Plan. Mr. Monk is entitled to four weeks’ paid vacation per year, is eligible to participate in all employee welfare benefits plans and other benefit programs made available generally to our employees or senior executives and is reimbursed for all reasonable business expenses. Additionally, we make available to Mr. Monk all fringe benefits and perquisites that are made available to other senior executives. The Monk Employment Agreement also provides for $3,500 per year in medical benefits to be used toward preventative medical expenses, including annual physical examinations, and certain benefits upon termination of employment as a result of death, Disability, or without Cause or for Good Reason (each as defined in the Monk Employment Agreement) or in connection with a Change in Control of RealPage each of which is disclosed below under “Executive Compensation — Potential Payments Upon Termination or Change in Control.” For a period of two years following the termination of Mr. Monk’s employment for any reason, Mr. Monk will be restricted from competing with RealPage and its affiliates and soliciting RealPage and its affiliates’ respective customers, licensees or employees. The Monk Employment Agreement also includes confidentiality provisions, non-interference and non-disparagement obligations during his employment and following termination.
Mr. Monk’s employment agreement also provides that payments and benefits payable pursuant to such agreement will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, if such reduction would restrict Mr. Monk from receiving greater compensation and benefits on an after-tax basis. Mr. Monk’s employment agreement also provides that, to the fullest extent permitted by law, we will indemnify Mr. Monk (and advance certain legal and other expense) in connection with the defense of any lawsuit or other claim to which Mr. Monk is made a party by reason of performing his responsibilities as an officer or executive officer of RealPage or any of its subsidiaries, other than claims brought against Mr. Monk by any of his former employers.
Separation Agreements and Consulting Agreements
Daryl T. Rolley
On July 31, 2016, Daryl T. Rolley resigned his position as Executive Vice President and Chief Revenue Officer of RealPage. Mr. Rolley has entered into a consulting agreement with us effective as of August 1, 2016 pursuant to which Mr. Rolley has agreed to provide services to RealPage as requested by us with respect to his transition, through July 31, 2017. In consideration for his performance of such services, we agreed to pay Mr. Rolley a retainer of $20,000 per month during the 12-month term of the consulting agreement. Mr. Rolley also entered into a general release and separation agreement with us effective July 31, 2016. The terms of the general release and separation agreement modified Mr. Rolley’s prior employment agreement with us, described below, to provide that Mr. Rolley received a severance payment of $160,000 and all of his unvested awards granted pursuant to our 2010 Equity Compensation Plan terminated as of July 31, 2016.
We previously entered into an employment agreement with Mr. Rolley on February 9, 2015. Under Mr. Rolley’s prior employment agreement, he was entitled to a minimum base salary of $400,000 with a target annual bonus of 75% of his annual base salary as determined under the management incentive plan with performance criteria established by our Compensation Committee. Mr. Rolley was granted options to purchase 100,000 shares of RealPage common stock, 60,000 shares of restricted stock and an additional 120,000 shares of common stock pursuant to a stock bonus agreement upon his employment with us. Mr. Rolley’s prior employment agreement also provided for a $100,000 relocation and signing bonus. Under his prior employment agreement, Mr. Rolley was entitled to three weeks’ paid vacation per year, was eligible to participate in all employee welfare benefits plans and other benefit programs made available generally to our employees or senior executives and was reimbursed for all reasonable business expenses. Additionally, we made available to Mr. Rolley all fringe benefits and perquisites that were made available to other senior executives. Mr. Rolley’s prior employment agreement also provided for $3,500 per year in medical benefits to be used toward preventative medical expenses, including annual physical examinations.
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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2016
The following table sets forth information regarding equity awards held by our NEOs as of December 31, 2016:
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2016
| Name |
Grant Date |
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (Exercisable) (1) |
Number of Securities Underlying Unexercised Options (Unexercisable) |
Option Exercise Price |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested |
Market Value of Shares or Units of Stock That Have Not Vested ($) (3) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or other Rights That Have Not Vested |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or other Rights That Have Not Vested ($) (3) |
|||||||||||||||||||||||||||||
| Stephen T. Winn |
3/1/2011 | 75,000 | — | $ | 24.03 | 3/1/2021 | — | — | — | — | ||||||||||||||||||||||||||
| 2/22/2012 | 100,000 | — | $ | 20.01 | 2/22/2022 | — | — | — | — | |||||||||||||||||||||||||||
| 2/25/2013 | 75,000 | 25,000 | $ | 21.60 | 2/25/2023 | — | — | — | — | |||||||||||||||||||||||||||
| 2/25/2013 | — | — | — | — | 3,125 | (2) | 93,750 | — | — | |||||||||||||||||||||||||||
| 8/7/2014 | — | — | — | — | — | — | 175,000 | (6) | 5,250,000 | |||||||||||||||||||||||||||
| 3/3/2015 | — | — | — | — | — | — | 350,000 | (7) | 10,500,000 | |||||||||||||||||||||||||||
| 2/26/2016 | 368,550 | (8) | 11,056,500 | |||||||||||||||||||||||||||||||||
| W. Bryan Hill |
3/1/2011 | 18,000 | — | $ | 24.03 | 3/1/2021 | — | — | — | — | ||||||||||||||||||||||||||
| 2/22/2012 | 7,500 | — | $ | 20.01 | 2/22/2022 | — | — | — | — | |||||||||||||||||||||||||||
| 2/25/2013 | 4,000 | 5,000 | $ | 21.60 | 2/25/2023 | — | — | — | — | |||||||||||||||||||||||||||
| 2/27/2014 | 15,000 | 3,750 | $ | 17.75 | 2/27/2024 | — | — | — | — | |||||||||||||||||||||||||||
| 5/9/2014 | 5,000 | 2,500 | $ | 18.71 | 5/9/2024 | — | — | — | — | |||||||||||||||||||||||||||
| 3/3/2015 | 21,674 | 26,911 | $ | 19.76 | 3/3/2025 | — | — | — | — | |||||||||||||||||||||||||||
| 5/8/2015 | 5,000 | 7,500 | $ | 19.84 | 5/8/2025 | — | — | — | — | |||||||||||||||||||||||||||
| 2/25/2013 | — | — | — | — | 625 | (2) | 18,750 | — | — | |||||||||||||||||||||||||||
| 2/27/2014 | — | — | — | — | 1,875 | (4) | 56,250 | — | — | |||||||||||||||||||||||||||
| 5/9/2014 | — | — | — | — | 1,250 | (4) | 37,500 | — | — | |||||||||||||||||||||||||||
| 3/3/2015 | — | — | — | — | 6,325 | (4) | 189,750 | — | — | |||||||||||||||||||||||||||
| 5/8/2015 | — | — | — | — | 1,252 | (4) | 37,560 | — | — | |||||||||||||||||||||||||||
| 2/26/2016 | 38,500 | (5) | 1,155,000 | |||||||||||||||||||||||||||||||||
| 8/7/2014 | — | — | — | — | — | — | 43,750 | (6) | 1,312,500 | |||||||||||||||||||||||||||
| 3/3/2015 | — | — | — | — | — | — | 27,050 | (7) | 811,500 | |||||||||||||||||||||||||||
| 2/26/2016 | 73,710 | (8) | 2,211,300 | |||||||||||||||||||||||||||||||||
| William Chaney |
11/8/2010 | 7,500 | — | $ | 27.18 | 11/8/2020 | — | — | — | — | ||||||||||||||||||||||||||
| 11/4/2011 | 15,000 | — | $ | 25.24 | 4/11/2021 | — | — | — | — | |||||||||||||||||||||||||||
| 8/7/2012 | 40,000 | — | $ | 24.64 | 8/7/2022 | — | — | — | — | |||||||||||||||||||||||||||
| 2/25/2013 | 11,025 | 3,687 | $ | 21.60 | 2/25/2023 | — | — | — | — | |||||||||||||||||||||||||||
| 11/12/2013 | 18,000 | 12,000 | $ | 25.70 | 11/12/2023 | — | — | — | — | |||||||||||||||||||||||||||
| 2/27/2014 | 5,000 | 1,250 | $ | 17.75 | 2/27/2024 | — | — | — | — | |||||||||||||||||||||||||||
| 3/3/2015 | 21,528 | 26,911 | $ | 19.76 | 3/3/2025 | — | — | — | — | |||||||||||||||||||||||||||
| 5/8/2015 | 5,000 | 7,500 | $ | 19.84 | 5/8/2025 | — | — | — | — | |||||||||||||||||||||||||||
| 2/25/2013 | — | — | — | — | 471 | (2) | 14,130 | — | — | |||||||||||||||||||||||||||
| 11/12/2013 | — | — | — | — | 3,756 | (2) | 112,680 | — | — | |||||||||||||||||||||||||||
| 2/27/2014 | — | — | — | — | 625 | (4) | 18,750 | — | — | |||||||||||||||||||||||||||
| 3/3/2015 | — | — | — | — | 6,325 | (4) | 189,750 | — | — | |||||||||||||||||||||||||||
| 5/8/2015 | — | — | — | — | 1,252 | (4) | 37,560 | — | — | |||||||||||||||||||||||||||
| 2/26/2016 | — | 38,500 | (5) | 1,155,000 | ||||||||||||||||||||||||||||||||
| 8/7/2014 | — | — | — | — | — | — | 43,750 | (6) | 1,312,500 | |||||||||||||||||||||||||||
| 3/3/2015 | — | — | — | — | — | — | 27,050 | (7) | 811,500 | |||||||||||||||||||||||||||
| 2/26/2016 | 73,710 | (8) | 2,211,300 | |||||||||||||||||||||||||||||||||
| Ashley Glover |
8/17/2016 | — | — | — | — | 41,288 | (5) | 1,238,640 | ||||||||||||||||||||||||||||
| 8/17/2016 | — | — | — | — | — | — | 64,725 | (9) | 1,941,750 | |||||||||||||||||||||||||||
| David Monk |
6/3/2010 | 137,000 | — | $ | 8.00 | 6/3/2020 | — | — | — | — | ||||||||||||||||||||||||||
| 8/9/2011 | 15,000 | — | $ | 24.03 | 8/9/2021 | — | — | — | — | |||||||||||||||||||||||||||
| 8/7/2012 | 15,000 | — | $ | 24.64 | 8/7/2022 | — | — | — | — | |||||||||||||||||||||||||||
| 8/6/2013 | 6,500 | 3,500 | $ | 21.11 | 8/6/2023 | — | — | — | — | |||||||||||||||||||||||||||
| 2/27/2014 | 3,663 | 337 | $ | 17.75 | 2/27/2024 | — | — | — | — | |||||||||||||||||||||||||||
| 8/7/2014 | 1,872 | 628 | $ | 15.19 | 8/7/2024 | — | — | — | — | |||||||||||||||||||||||||||
| 3/3/2015 | 9,415 | 6,730 | $ | 19.76 | 3/3/2025 | — | — | — | — | |||||||||||||||||||||||||||
| 5/8/2015 | 4,200 | 4,200 | $ | 19.84 | 5/8/2025 | — | — | — | — | |||||||||||||||||||||||||||
| 8/6/2013 | — | — | — | — | 944 | (2) | 28,320 | — | — | |||||||||||||||||||||||||||
| 2/27/2014 | — | — | — | — | 174 | (4) | 5,220 | — | — | |||||||||||||||||||||||||||
| 8/7/2014 | — | — | — | — | 314 | (4) | 9,420 | — | — | |||||||||||||||||||||||||||
| 3/3/2015 | — | — | — | — | 1,583 | (4) | 47,490 | — | — | |||||||||||||||||||||||||||
| 5/8/2015 | — | — | — | — | 991 | (4) | 29,730 | — | — | |||||||||||||||||||||||||||
| 2/26/2016 | — | — | — | — | 14,971 | (5) | 449,130 | — | ||||||||||||||||||||||||||||
| 5/8/2015 | — | — | — | — | — | — | 8,455 | (7) | 253,650 | |||||||||||||||||||||||||||
| 2/26/2016 | — | — | — | — | — | — | 28,665 | (8) | 859,950 | |||||||||||||||||||||||||||
| Daryl Rolley |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| (1) | Stock option awards with an expiration date during the years 2020 through 2023 vest as to 5% of the shares subject to such award on the first day of each calendar quarter, beginning on the first day of the calendar quarter following the date of grant, for 15 consecutive calendar quarters and as to the remaining 25% of the shares subject to such option on the first day of the calendar quarter following such fifteenth consecutive calendar quarter. Stock option awards with an expiration date during the year 2024 or later vest as to one-twelfth (1/12) of the shares subject to such award on the first day of each calendar quarter, beginning on the first day of the calendar quarter following the date of grant, for 12 consecutive quarters. Vesting of stock option awards is contingent on the recipient’s continued status as a service provider as of each applicable vesting date. |
| (2) | Restricted stock awards vest as to 6.25% of the shares subject to such award on the first day of each calendar quarter, beginning on the first day of the calendar quarter following the date of grant, for 16 consecutive quarters. Vesting of restricted stock awards is contingent upon the recipient’s continued status as a service provider as of each applicable vesting date |
| (3) | Value based on $30.00, which was the closing market price of our common stock on December 30, 2016. See notes (6) through (9) below for market price thresholds required to be achieved for eligibility and vesting. |
| (4) | Restricted stock awards vest as to one-twelfth (1/12) of the shares subject to such award on the first day of each calendar quarter, beginning on the first day of the calendar quarter following the date of grant, for 12 consecutive quarters. Vesting of restricted stock awards is contingent upon the recipient’s continued status as a service provider as of each applicable vesting date. |
| (5) | Each restricted stock award vests as to one-twelfth (1/12) of the shares subject to such restricted stock award on the first day of each calendar quarter, beginning on the first day of the second calendar quarter following the date of grant, for 12 consecutive quarters. Vesting of restricted stock awards is contingent upon the recipient’s continued status as a service provider as of each applicable vesting date. |
| (6) | Fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2017, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the minimum stock price of $25.00 per share, and an additional fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2017, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the maximum stock price of $30.00 per share (shares that become eligible to vest, if any, are referred to as “2017 Eligible Shares”). 2017 Eligible Shares shall vest 25% per quarter over the year following the date they satisfy the initial market price vesting condition beginning on the first day of the next calendar quarter, subject to continued status as a service provider (as defined in the 2010 Equity Incentive Plan) through each vesting date, provided that the shares that have become 2017 Eligible Shares shall be fully vested on July 1, 2017, or upon a Change in Control, Death or Disability (as defined in the 2010 Equity Incentive Plan). The restricted stock shall accelerate and shall be fully vested immediately prior to a Change in Control of RealPage (as defined in the 2010 Equity Incentive Plan) that results in consideration per share of our common stock equal to or in excess of $25.00 per share with respect to the first tranche of shares and $30.00 per share with respect to the second tranche of shares, respectively. |
| (7) | Fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2018, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the minimum stock price of $30.00 per share, and an additional fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2018, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the maximum stock price of $35.00 per share (shares that become eligible to vest, if any, are referred to as “2018 Eligible Shares”). 2018 Eligible Shares shall vest 25% per quarter over the year following the date they satisfy the initial market price vesting condition beginning on the first day of the next calendar quarter, subject to continued status as a service provider (as defined in the 2010 Equity Incentive Plan) through each vesting date, provided that the shares that have become 2018 Eligible Shares shall be fully vested on July 1, 2018, or upon a Change in Control, Death or Disability (as defined in the 2010 Equity Incentive Plan). The restricted stock shall accelerate and shall be fully vested immediately prior to a Change in Control of RealPage (as defined in the 2010 Equity Incentive Plan) that results in consideration per share of our common stock equal to or in excess of $30.00 per share with respect to the first tranche of shares and $35.00 per share with respect to the second tranche of shares, respectively. |
| (8) | Fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2019, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the minimum stock price of $27.28 per share, and an additional fifty percent (50%) of the shares shall become eligible to vest if, prior to July 1, 2019, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the maximum stock price of $32.15 per share (shares that become eligible to vest, if any, are referred to as “2019 Eligible Shares”). 2019 Eligible Shares shall vest 25% per quarter over the year following the date they satisfy the initial market price vesting condition beginning on the first day of the next calendar quarter, subject to continued status as a service provider (as defined in the 2010 Equity Incentive Plan) through each vesting date, provided that the shares that have become 2019 Eligible Shares shall be fully vested on July 1, 2019, or upon a Change in Control, Death or Disability (as defined in the 2010 Equity Incentive Plan). The restricted stock shall accelerate and shall be fully vested immediately prior to a Change in Control of RealPage (as defined in the 2010 Equity Incentive Plan) that results in consideration per share of our common stock equal to or in excess of $27.28 per share with respect to the first tranche of shares and $32.15 per share with respect to the second tranche of shares, respectively. |
| (9) | Fifty percent (50%) of the shares shall become eligible to vest if, prior to January 1, 2020, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the minimum stock price of $31.48 per share, and an additional fifty percent (50%) of the shares shall become eligible to vest if, prior to January 1, 2020, the average closing price per share of our common stock for 20 consecutive trading days equals or exceeds the maximum stock price of $36.33 per share (shares that become eligible to vest, if any, are referred to as “2020 Eligible Shares”). 2020 Eligible Shares shall vest 25% per quarter over the year following the date they satisfy the initial market price vesting condition beginning on the first day of the next calendar quarter, subject to continued status as a service provider (as defined in the 2010 Equity Incentive Plan) through each vesting date, provided that the shares that have become 2020 Eligible Shares shall be fully vested on January 1, 2020, or upon a Change in Control, Death or Disability (as defined in the 2010 Equity Incentive Plan). The restricted stock shall accelerate and shall be fully vested immediately prior to a Change in Control of RealPage (as defined in the 2010 Equity Incentive Plan) that results in consideration per share of our common stock equal to or in excess of $31.48 per share with respect to the first tranche of shares and $36.33 per share with respect to the second tranche of shares, respectively. |
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Option Exercises and Stock Vested
The following table sets forth information regarding stock option exercises and the value realized upon exercise, as well as all stock awards vested and the value realized upon vesting by our NEOs during the year ended December 31, 2016.
OPTION EXERCISES AND STOCK VESTED
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||
| Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) (1) |
||||||||||||
| (a) |
(b) | (c) | (d) | (e) | ||||||||||||
| Stephen T. Winn |
— | — | 40,625 | $ | 997,438 | |||||||||||
| W. Bryan Hill |
— | — | 33,287 | 785,309 | ||||||||||||
| William Chaney |
— | — | 31,996 | 752,458 | ||||||||||||
| Ashley Glover |
— | — | — | — | ||||||||||||
| David Monk |
— | — | 8,658 | 199,389 | ||||||||||||
| Former Officer |
||||||||||||||||
| Daryl Rolley |
— | — | 18,850 | 412,659 | ||||||||||||
| (1) | The value realized upon vesting is equal to the number of shares vesting multiplied by the closing market price of our common stock on the vesting date. |
Pension Benefits and Nonqualified Deferred Compensation
We do not provide a pension plan for our employees and none of our NEOs participated in a nonqualified deferred compensation plan during the year ended December 31, 2016.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Agreement and Plan Terms regarding Termination or Change in Control Payments
As of December 31, 2016, we were parties to agreements with each of our NEOs that provide for certain payments and benefits upon termination in the event of death or disability, termination without cause or with good reason, termination without cause or with good reason in connection with a change in control, or under other circumstances in the event of a change in control. The following table describes the payments and benefits that we would owe to each of our NEOs pursuant to the applicable employment and equity award agreements with our NEOs and our 2010 Equity Incentive Plan. The following assumes a termination on December 30, 2016 and the value of our common stock is equal to $30.00 (the closing market price on such date). Certain payments and benefits set forth in the following table are conditioned upon the NEO signing and not revoking a release agreement with us.
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
||||||||||||||||||
| Named Executive Officer |
Compensation |
Termination on Death or Disability |
Termination without Cause or for Good Reason |
Termination Without Cause or for Good Reason Following a Change in Control |
Change In Control |
|||||||||||||
| Stephen T. Winn |
Severance Payment (1) | $ | 500,000 | $ | 1,500,000 | $ | 2,000,000 | $ | — | |||||||||
| Bonus (2) | — | — | — | — | ||||||||||||||
| Option Acceleration (3) | 210,000 | — | — | 210,000 | ||||||||||||||
| Restricted Stock Acceleration (4) | 26,900,250 | — | — | 26,900,250 | ||||||||||||||
| Employee Benefits (5) | 27,421 | 13,710 | 13,710 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total | $ | 27,637,671 | $ | 1,513,710 | $ | 2,013,710 | $ | 27,110,250 | ||||||||||
| W. Bryan Hill |
Severance Payment (1) | $ | 185,000 | $ | 370,000 | $ | 740,000 | — | ||||||||||
| Bonus (2) | — | — | — | — | ||||||||||||||
| Option Acceleration (3) | 192,363 | — | 192,363 | 76,200 | ||||||||||||||
| Restricted Stock Acceleration (4) | 5,640,360 | — | 1,267,500 | 5,527,860 | ||||||||||||||
| Employee Benefits (5) | 33,687 | 16,843 | 16,843 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total | $ | 6,014,590 | $ | 386,843 | $ | 2,216,706 | $ | 5,604,060 | ||||||||||
| William Chaney |
Severance Payment (1) | $ | 185,000 | $ | 370,000 | $ | 740,000 | — | ||||||||||
| Bonus (2) | — | — | — | — | ||||||||||||||
| Option Acceleration (3) | 122,483 | — | 76,200 | 76,200 | ||||||||||||||
| Restricted Stock Acceleration (4) | 5,673,420 | — | 1,192,560 | 5,527,860 | ||||||||||||||
| Employee Benefits (5) | 33,687 | 16,843 | 16,843 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total | $ | 6,014,590 | $ | 386,843 | $ | 2,025,603 | $ | 5,604,060 | ||||||||||
| Ashley Glover |
Severance Payment (1) | $ | 192,500 | $ | 385,000 | $ | 770,000 | — | ||||||||||
| Bonus (2) | — | — | — | — | ||||||||||||||
| Option Acceleration (3) | — | — | — | — | ||||||||||||||
| Restricted Stock Acceleration (4) | 3,180,390 | 1,238,640 | 3,180,390 | |||||||||||||||
| Employee Benefits (5) | 33,687 | 16,843 | 16,843 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total | $ | 3,406,577 | $ | 401,843 | $ | 2,025,483 | $ | 3,180,390 | ||||||||||
| David Monk |
Severance Payment (1) | $ | 160,000 | $ | 320,000 | $ | 640,000 | — | ||||||||||
| Bonus (2) | — | — | — | — | ||||||||||||||
| Option Acceleration (3) | 156,131 | — | 156,131 | 42,672 | ||||||||||||||
| Restricted Stock Acceleration (4) | 1,682,910 | — | 569,310 | 1,592,460 | ||||||||||||||
| Employee Benefits (5) | 33,687 | 16,843 | 16,843 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total | $ | 2,032,728 | $ | 336,843 | $ | 1,382,284 | $ | 1,635,132 | ||||||||||
| Daryl Rolley |
Severance Payment (6) | $ | — | $ | 400,000 | $ | — | $ | — | |||||||||
| Bonus (2) | — | — | — | — | ||||||||||||||
| Option Acceleration (3) | — | — | — | — | ||||||||||||||
| Restricted Stock Acceleration (4) | — | — | — | — | ||||||||||||||
| Employee Benefits (5) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total | $ | — | $ | 400,000 | $ | — | $ | — | ||||||||||
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| (1) | Pursuant to the employment agreements with each of our NEOs, in the case of termination as a result of death or disability, the applicable NEO is entitled to receive 6 months of annual base salary (12 months in the case of Mr. Winn). In the case of termination without cause or for good reason during the 24-month period following a change in control (or before a change in control if such termination is proximate to or following our entering into an agreement to enter into a transaction that would constitute a change in control) and such termination or the event giving rise to the good reason claim is made at the direction of the third party effectuating such change in control (the “protected period”), the applicable NEO is entitled to 200% of his annual base salary. In the case of a termination without cause or for good reason outside the protected period, the applicable NEO is entitled to receive 100% of his annual base salary (150% in the case of Mr. Winn). The foregoing payments are conditional on the NEO executing a release of claims agreement with us. |
| (2) | Pursuant to each NEO’s employment agreement, in the case of termination without cause or for good reason or as a result of death or disability, each NEO is entitled to receive a lump sum cash payment equal to any earned but unpaid bonus. For the purposes of this table, we assume the bonus is unearned as of December 31, 2016. |
| (3) | The value represents the aggregate value the applicable NEO would receive from the unvested shares subject to the NEO’s options that would fully accelerate vesting in the event of (as applicable) (i) the NEO’s death or disability or (ii) a change in control of RealPage (assuming satisfaction of any other applicable vesting conditions upon a change in control, including achievement of market-based performance criteria and/or the applicable option not being assumed or replaced with an equivalent award in the change in control) or (iii) a change in control of RealPage followed by a termination of the NEO’s employment without cause or for good reason within 24 months following the change in control (or anytime following the change in control in the case of Mr. Hill and Mr. Monk). The value of such vesting acceleration for each applicable option is calculated as the product of the positive difference between our stock price on December 31, 2016, and the per share exercise price of the applicable option multiplied by the number of unvested shares of the applicable option that are subject to the vesting acceleration described immediately above (as applicable). |
| (4) | The value represents the aggregate gain the applicable NEO would receive from the unvested shares of restricted stock that would fully accelerate vesting in the event of (as applicable) (i) the NEO’s death or disability or (ii) a change in control of RealPage (assuming satisfaction of any other applicable vesting conditions upon a change in control, including achievement of market-based performance criteria and/or the applicable restricted stock award not being assumed or replaced with an equivalent award in the change in control) or (iii) a change in control of RealPage followed by a termination of the NEO’s employment without cause or for good reason within 24 months following the change in control (or anytime following the change in control in the case of Mr. Hill and Mr. Monk). The value of such vesting acceleration for each applicable restricted stock award is calculated as the product of our stock price on December 31, 2016, multiplied by the number of unvested shares subject to the applicable restricted stock award that are subject to the vesting acceleration described immediately above (as applicable). |
| (5) | Pursuant to the employment agreements with each of our NEOs, in case of termination without cause or for good reason during the protected period, the applicable NEO is entitled to payment equal to the product of the excess of the monthly Consolidated Omnibus Budget Reconciliation Act premium over the monthly premium the NEO would be required to pay for such coverage if still employed by us multiplied by 24, and in case of termination without cause or for good reason outside of the protected period or as a result of death or disability at any time, the applicable NEO is entitled to a payment equal to 50% of the payment described immediately above (as applicable). |
| (6) | On July 31, 2016, Daryl Rolley resigned his position as our Executive Vice President and Chief Revenue Officer of RealPage . Mr. Rolley entered into a consulting agreement with us effective as of August 1, 2016 pursuant to which he agreed to provide services to us as requested by us with respect to his transition, through July 31, 2017. In consideration for his performance of such services, we will pay Mr. Rolley a retainer of $20,000 per month during the 12-month term of the consulting agreement. During the 2016 fiscal year, Mr. Rolley received $100,000 in retainer fees. Pursuant to the general release and separation agreement dated July 31, 2016 with Mr. Rolley, he was paid a severance payment of $160,000. |
The benefits described in the preceding table are subject to conditions set forth in employment agreements and the applicable equity award agreements between us and each NEO. The terms “cause,” “change in control,” “disability,” and “good reason” are defined in those agreements as follows:
“Cause” means the occurrence of any of the following events which (with respect to clauses (iv) through (vii) below) are not cured by the NEO within ten days (30 days in the case of Mr. Winn) after receipt of written notice of such alleged cause from us or, except in the case of Mr. Winn, if such event cannot be corrected within such ten-day period, if the NEO does not commence correction such default within said ten-day period and does not complete such correction within a reasonable time, up to 30 days: (i) the NEO’s conviction for any acts of fraud or breach of trust or any felony criminal acts; (ii) the NEO’s knowingly making a materially false written statement to RealPage’s auditors or legal counsel; (iii) the NEO’s willful and material falsification of any corporate document or form; (iv) any material breach by the NEO of any published policy of RealPage received and acknowledged by the NEO in writing; (v) any material breach by the NEO of a material provision of the employment agreement between RealPage and the NEO; (vi) the NEO’s making a material misrepresentation of fact or omission to disclose material facts in relation to transactions occurring in the business and financial
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matters of RealPage; or (vii) the NEO’s repeated and material failure substantially to perform the NEO’s duties. A termination of Mr. Winn for Cause shall require a finding by the Board that an event or events have occurred constituting Cause under Mr. Winn’s employment agreement. Notwithstanding the foregoing and, in the case of Mr. Winn, in addition to the finding by the Board described in the previous sentence, during the two-year period following a Change in Control (as defined below), a termination for Cause (other than pursuant to clause (i)) shall require a showing by RealPage that the actions giving rise to such termination resulted in material and demonstrable harm to RealPage.
“Change in Control” has the meaning set forth in our 2010 Equity Incentive Plan. The definition covers the occurrence of any of the following events: (i) any one person, or more than one person acting as a group, acquires ownership of our stock that, together with the stock held by such person, constitutes more than fifty percent (50%) of the total voting power of our stock; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any one person who is considered to own more than fifty percent (50%) of the total voting power of our stock will not be considered a Change in Control; or (ii) a majority of members of our Board is replaced during any 12 month period by Directors whose appointment or election is not endorsed by a majority of the members of our Board prior to the date of the appointment or election (excluding a situation where a person was already in effective control of RealPage and is merely acquiring additional control); or (iii) any person acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) assets from us that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of our assets immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of our assets: (A) a transfer to an entity that is controlled by our stockholders immediately after the transfer, or (B) a transfer of assets by us to: (1) a stockholder of RealPage (immediately before the asset transfer) in exchange for or with respect to our stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by us, (3) a person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all our outstanding stock of , or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in this subsection. Gross fair market value means the value of our assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. Persons will be considered to be acting as a group for purposes of the definition of a “Change in Control” if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with us.
“Disability” means an NEO’s incapacity due to physical or mental condition and, if reasonable accommodation is required by law, after providing such reasonable accommodation, the NEO shall have been absent from such NEO’s duties on a full-time basis (i) for a period of six consecutive months or (ii) for shorter periods aggregating six months during any 12-month period, and in either case within 30 days after written notice of termination by Company is given the NEO shall not have returned to the performance of such NEO’s duties on a full-time basis.
“Good Reason” means, without the NEO’s written consent: (i) a material reduction in NEO’s base salary or incentive compensation opportunity, (ii) a material reduction in the NEO’s responsibilities or authority; (iii) a material breach by us of a material provision of the NEO’s employment agreement with us, or (iv) a material change in the geographic location at which the NEO must perform their services; provided, that in no instance will the relocation of the NEO to a facility or a location that is either 25 miles or less from the NEO’s then-current office or 25 miles or less from the NEO’s then-current primary residence be deemed material for purposes of the NEO’s employment agreement. Each NEO must provide us with written notice of the acts or omissions constituting the grounds for Good Reason within 90 days of the initial existence of the grounds for Good Reason and a reasonable opportunity for us to cure the conditions giving rise to such Good Reason, which shall not be less than 30 days following the date of notice from us. If we cure the conditions giving rise to such Good Reason within 30 days of the date of such notice, the NEO will not be entitled to severance payments and/or benefits contemplated by the NEO’s employment agreement in connection with a termination of employment by the NEO for Good Reason if the NEO thereafter resigns from us based on such grounds. Any termination for Good Reason must be effectuated within 90 days of the expiration of such cure period.
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EQUITY COMPENSATION PLANS INFORMATION
The number of shares to be issued upon exercise of outstanding options and the number of shares issued pursuant to restricted stock awards granted to employees and non-employee directors, as well as the number of shares remaining available for future issuance, under our equity compensation plans as of December 31, 2016 are summarized in the following table:
| EQUITY COMPENSATION PLANS INFORMATION |
||||||||||||
| Plan category |
Number of shares issued pursuant to restricted stock awards or to be issued upon exercise of outstanding options |
Weighted- average exercise price of outstanding options |
Number of shares remaining for future issuance under equity compensation plans |
|||||||||
| Equity compensation plans approved by stockholders |
6,738,345 | (1) | $ | 19.58 | 6,563,595 | (2)(3) | ||||||
| Equity compensation plans not approved by stockholders |
66,405 | (4) | 19.58 | — | ||||||||
| Total |
6,804,750 | $ | 19.58 | 6,563,595 | ||||||||
| (1) | Includes 3,540,684 shares to be issued upon exercise of outstanding options and 3,197,661 shares issued as restricted stock awards, which includes 1,633,501 shares of time-based restricted stock and 1,564,160 shares of market-based restricted stock. |
| (2) | Represents 6,563,595 shares available for future issuance under our 2010 Equity Incentive Plan. |
| (3) | Our 2010 Equity Incentive Plan includes an “evergreen” provision that provides for automatic increases to the number of shares of our common stock reserved for issuance thereunder on January 1 of each year in an amount equal to the lesser of (i) 10,000,000 shares, (ii) 5.0% of our outstanding shares on the last day of the immediately preceding fiscal year, on a fully-diluted basis, or (iii) such amount as our Board may determine. In 2016, our board approved an increase of 2,000,000 shares of common stock reserved for issuance under our 2010 Plan. |
| (4) | Represents (i) 6,405 shares to be issued upon exercise of outstanding options originally issued under the Multifamily Technology Solutions, Inc. 2005 Equity Incentive Plan and assumed by us in connection with our acquisition of Multifamily Technology Solutions, Inc. and (ii) 60,000 shares to be issued upon exercise of outstanding options granted to one of our directors as disclosed in the Form S-1 Registration Statement filed on April 29, 2010 and Form S-8 Registration Statement filed on August 17, 2010. |
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PROPOSAL TWO: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
What Am I Voting On?
Stockholders are being asked to ratify the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2017. Although our Audit Committee has the sole authority to appoint the independent registered public accounting firm, as a matter of good corporate governance, our Board submits its selection to our stockholders for ratification. If the stockholders should not ratify the appointment of Ernst & Young LLP, our Audit Committee will reconsider the appointment.
Voting Recommendation:
FOR the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ended December 31, 2017.
Our Audit Committee has the sole authority and responsibility to hire, evaluate and, where appropriate, replace our independent registered public accounting firm and, in its capacity as a committee of the Board, is directly responsible for the appointment, compensation and general oversight of the work of the independent registered public accounting firm. Our Audit Committee appointed the firm of Ernst & Young LLP (“E&Y”) as our independent registered public accounting firm for the fiscal year ending December 31, 2017. Our Audit Committee is asking the stockholders to ratify this appointment. E&Y has served as our independent registered public accounting firm since December 2004.
The ratification of the appointment of our independent registered public accounting firm requires the favorable vote of a majority of our shares of common stock present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions from voting will have the same effect as voting against the ratification, and broker non-votes, if any, will be disregarded and have no effect on the outcome of the vote.
In the event the stockholders fail to ratify the appointment, our Audit Committee will reconsider its selection. Even if the selection is ratified, our Audit Committee in its discretion may direct the appointment of a different 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 us and our stockholders.
Audit Fees
The aggregate fees billed for professional services rendered for the audits of our annual consolidated financial statements for the fiscal years ended December 31, 2016 and 2015, for the reviews of the consolidated financial statements for those fiscal years, fees associated with SEC registration statements, assistance in responding to SEC comment letters, accounting consultations related to audit services and other services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings were approximately $2,084,642 and $1,989,715, respectively.
Audit-Related Fees
The aggregate fees billed for assurance and other related services, such as consultations concerning financial accounting and reporting matters and due diligence related to acquisitions were $2,160 and $2,820 in 2016 and 2015, respectively.
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Tax Fees
The aggregate fees billed for professional tax services were $329,575 and $8,573 in 2016 and 2015, respectively.
All Other Fees
Miscellaneous fees billed for other services were $0 and $154 in 2016 and 2015, respectively.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Our Audit Committee’s policy is to pre-approve all services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Our Audit Committee may also pre-approve particular services on a case-by-case basis. The independent registered public accounting firm is required to periodically report to our Audit Committee regarding the extent of services provided by such firm in accordance with such pre-approval. Our Audit Committee has delegate pre-approval authority to one of its members. Such member(s) must report any decisions to our Audit Committee at the next scheduled meeting.
E&Y has not received approval to perform nor performed any “prohibited activities” as such term is defined in Section 201 of the Sarbanes Oxley Act of 2002. During 2016, our Audit Committee approved in advance all audit, audit-related, and tax services to be provided by E&Y.
A representative of E&Y is expected to be available at the Annual Meeting to make a statement if such representative desires to do so and to respond to appropriate questions.
Recommendation of our Board for Proposal Two
Our Board unanimously recommends a vote “FOR” the ratification of the appointment of E&Y as our independent registered public accounting firm.
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REPORT OF OUR AUDIT COMMITTEE*
Our Audit Committee is composed of four independent directors and operates under a written charter adopted by the Board. The members of our Audit Committee are Charles F. Kane, Chairman, Peter Gyenes, Scott S. Ingraham, and Jason A. Wright. All members of our Audit Committee meet the independence standards of Rule 5605(a)(2) of the NASDAQ listing standards.
Management is responsible for our internal controls and the financial reporting process. Our independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) and for issuing opinions on the conformity of those audited financial statements with U.S. generally accepted accounting principles, the effectiveness of our internal control over financial reporting and managements’ assessment of internal control over financial reporting. Our Audit Committee’s responsibility is to monitor and oversee these processes.
Our Audit Committee schedules its meetings and conference calls with a view to ensuring it devotes appropriate attention to all of its tasks. Our Audit Committee met five times during fiscal 2016 to carry out its responsibilities. Our Audit Committee regularly meets privately with our independent registered public accounting firm, internal audit personnel, and management, each of whom has unrestricted access to our Audit Committee. Our Audit Committee evaluated the performance of the items enumerated in our Audit Committee Charter.
As part of its oversight of our financial statements, our Audit Committee reviewed and discussed with both management and the independent registered public accounting firm our quarterly and audited fiscal year financial statements, including a review of our Annual Report on Form 10-K. Our Audit Committee also reviewed and approved the independent registered public accounting firm’s work plan, audit fees, and all non-audit services performed by our independent registered public accounting firm. Our Audit Committee also discussed with the independent registered public accounting firm any matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T.
Our Audit Committee has also received the written disclosures from Ernst & Young LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and our Audit Committee has discussed the independence of Ernst & Young LLP with that firm. Our Audit Committee has implemented a procedure to monitor the independence of our independent registered public accounting firm.
Based upon our Audit Committee’s discussion with management and Ernst & Young LLP and the report of Ernst & Young LLP to our Audit Committee, our Audit Committee recommended that our Board include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC.
| AUDIT COMMITTEE |
| Charles F. Kane, Chairman |
| Peter Gyenes |
| Scott S. Ingraham |
| Jason A. Wright |
| * | The foregoing Report of our Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate this Report of our Audit Committee by express reference therein. |
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PROPOSAL THREE: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
What Am I Voting On?
We are asking our stockholders to vote to approve, on an advisory (non-binding) basis, our executive compensation program.
Voting Recommendation:
FOR the approval of the RealPage executive compensation program, as described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement.
Section 14A of the Exchange Act enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC’s rules (commonly referred to as a “Say-on-Pay”).
As described under the heading “Executive Compensation — Compensation Discussion and Analysis,” our executive compensation programs are designed to attract, retain and motivate our NEOs, who are critical to our success. We believe that the various elements of our executive compensation program work together to promote our goal of ensuring that total compensation should be related to both our performance and individual performance.
Stockholders are urged to read the “Compensation Discussion and Analysis” section of this proxy statement, which discusses how our executive compensation policies implement our compensation philosophy, and the “Executive Compensation” section of this proxy statement, which contains tabular information and narrative discussion about the compensation of our NEOs, for additional details about our executive compensation programs, including information about fiscal 2016 compensation of our NEOs. Our Compensation Committee and our Board believe that these policies are effective in implementing our compensation philosophy and in achieving its goals.
We are asking our stockholders to indicate their support for our executive compensation as described in this proxy statement. This Say-on-Pay proposal gives our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this proxy statement. Accordingly, we are asking our stockholders to approve, on an advisory basis, the compensation of our NEOs, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.
The Say-on-Pay vote is advisory, and therefore not binding on us, our Compensation Committee or our Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against our NEO compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and our Compensation Committee will evaluate whether any actions are necessary to address those concerns.
Recommendation of our Board of Directors for Proposal Three
Our Board unanimously recommends voting “FOR” the approval of the RealPage executive compensation program, as described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement.
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PROPOSAL FOUR: APPROVAL OF FREQUENCY OF
STOCKHOLDER VOTE ON EXECUTIVE COMPENSATION
What Am I Voting On?
We are asking our stockholders to vote, on an advisory (non-binding) basis, on how frequently we should seek a Say-on-Pay vote on our executive compensation program.
Voting Recommendation:
Our Board unanimously recommends that our stockholders vote to hold Say-on-Pay votes EVERY THREE YEARS (as opposed to every year or every two years).
In connection with Proposal Three, Section 14A of the Exchange Act also requires that we include in this proxy statement a separate advisory (non-binding) stockholder vote to advise on how frequently we should seek a Say-on-Pay vote. By voting on this Proposal Four, stockholders may indicate whether they would prefer an advisory vote on NEO compensation once every one, two, or three years.
The Board has determined that an advisory vote to approve executive compensation held every three years would be the best approach for us based on a number of considerations, including, among other things, the following:
| • | a significant portion of the compensation of our NEOs is correlated with our long-term performance and stockholder returns; |
| • | we believe that a vote every three years will give our stockholders a better opportunity to assess the success or lack of success of our long-term compensation strategies and the related business outcomes with the hindsight of three years of corporate performance; and |
| • | a triennial vote allows time for our Board and its committees to review and respond to stockholders’ views on executive compensation and to change, if necessary, our executive compensation program. |
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting. Under SEC rules, we will be required to permit our stockholders to vote on the frequency of the Say-on-Pay vote at least once every six years.
Recommendation of our Board of Directors for Proposal Four
Our Board unanimously recommends that our stockholders vote to hold Say-on-Pay votes EVERY THREE YEARS (as opposed to every year or every two years).
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INFORMATION CONCERNING SOLICITATION AND VOTING
Our Board has delivered printed versions of proxy materials to you by mail, in connection with our Board’s solicitation of proxies for use at the Annual Meeting to be held on June 1, 2017, at 10:00 a.m. local time or at any adjournments or postponements thereof, for the purposes set forth in this proxy statement and in the accompanying Notice of Annual Meeting of Stockholders. Proxy materials are also available to you on the Internet at http://investor.realpage.com. The Annual Meeting will be held at our principal executive offices located at 2201 Lakeside Boulevard, Richardson, Texas 75082. Our telephone number is (972) 820-3000.
Householding of Annual Meeting Materials
Some brokers and other nominee record holders may be participating in the practice of “householding” proxy materials, proxy statements and annual reports. This means that only one copy of the proxy materials may have been sent to multiple stockholders in a stockholder’s household. We will promptly deliver a separate copy of any of these documents to any stockholder who contacts our investor relations department at 2201 Lakeside Boulevard, Richardson, Texas 75082, (972) 820-3773, requesting such copies. If a stockholder is receiving multiple copies of the proxy materials or the printed versions of such other accounts at the stockholder’s household and would like to receive a single copy of these documents for a stockholder’s household in the future, stockholders should contact their broker, other nominee record holder, or our investor relations department to request mailing of a single copy of any of these documents.
Record Date; Outstanding Shares
Stockholders of record at the close of business on April 10, 2017, the Record Date, are entitled to receive notice of and vote at the Annual Meeting. On the Record Date, 82,679,778 shares of our common stock, $0.001 par value, were issued, outstanding and entitled to vote at the Annual Meeting.
Every stockholder of record on the Record Date is entitled, for each share held, to one vote on each proposal that comes before the Annual Meeting. In the election of directors, each stockholder will be entitled to vote for three nominees and the three nominees with the greatest number of votes will be elected.
Whether you hold shares directly as the stockholder of record or beneficially in street name (as defined below), you may vote by completing, signing and mailing the proxy card enclosed herewith in the postage-prepaid envelope provided for that purpose. Voting by written proxy will ensure your representation at the Annual Meeting if you do not attend in person. For specific instructions on how to vote your shares, please review the instructions on the proxy card.
The cost of this solicitation will be borne by us. We have retained D.F. King & Co., Inc. (“D.F. King”) to aid in the solicitation of proxies and to verify records relating to the solicitation. D.F. King will receive a fee for its services of $10,000, including fees per call to stockholders and expense reimbursement. We may reimburse expenses incurred by brokerage firms and other persons representing beneficial owners of shares in forwarding solicitation materials to beneficial owners. Proxies may be solicited by certain of our directors, officers and other employees, without additional compensation, personally, by telephone or by email.
Treatment of Abstentions and Broker Non-Votes
Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. A “non-vote” occurs when a nominee holding shares for a beneficial owner votes on one proposal but does not vote on another proposal because, with respect to such other proposal, the nominee does not have discretionary voting power and has not received instructions from the beneficial owner.
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If your shares are held by your broker, bank or other agent as your nominee (that is, in “street name”), your nominee will provide you with appropriate voting materials (such as a voting instruction form). Please follow the instructions included on those materials regarding how to instruct your broker, bank or other agent to vote your shares. If you do not give instructions to your broker, bank or other agent, they can vote your shares with respect to “discretionary” items but not with respect to “non-discretionary” items. Discretionary items are proposals that are considered routine under the rules of the New York Stock Exchange and on which your broker, bank or other agent may vote shares held in street name in the absence of your voting instructions. On non-discretionary items for which you do not give instructions to your broker, bank or other agent, the shares will be treated as broker non-votes. At the Annual Meeting, Proposal Two, the ratification of the appointment of our independent registered public accounting firm, will be a discretionary item. Proposal One, the election of directors, Proposal Three, the advisory (nonbinding) vote to approve the frequency of which our stockholders vote on named executive compensation, and Proposal Four, the advisory (nonbinding) vote to approve named executive compensation, will be non-discretionary items.
A majority of our common stock issued and outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at the Annual Meeting.
The vote requirement for each matter is:
| • | Proposal One (Election of Directors) — Directors are elected by a plurality of the votes cast. The three nominees who receive the greatest number of votes cast will be elected directors for three-year terms, in each case until their successors are duly elected and qualified. Withheld votes and broker non-votes, if any, will not be counted either for or against the election of a director nominee. |
| • | Proposal Two (Ratification of Independent Registered Accounting Firm) — The ratification of the appointment of our independent registered accounting firm requires the favorable vote of a majority of our shares of common stock present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions from voting will have the same effect as voting against the ratification, and broker non-votes, if any, will be disregarded and have no effect on the outcome of the vote. |
| • | Proposal Three (Advisory (Non-binding) Vote to Approve Named Executive Compensation) — The approval, on an advisory (non-binding) basis, of the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC rules (commonly referred to as a “Say-on-Pay”) requires the favorable vote of a majority of our shares of common stock present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Withheld votes and broker non-votes, if any, will not be counted either for or against this proposal. |
| • | Proposal Four (Advisory (Non-binding) Vote to Approve the Frequency of Stockholder Votes on Named Executive Compensation) — The approval, on an advisory (non-binding) basis, of the frequency of Stockholder votes on compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC rules (commonly referred to as a “Say-on-Frequency”) requires the favorable vote of a majority of our shares of common stock present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Withheld votes and broker non-votes, if any, will not be counted either for or against this proposal. |
Proxies given pursuant to this solicitation may be revoked at any time before they have been used. You may change or revoke your proxy by delivering a written notice of revocation to our Secretary or by completing a new proxy card bearing a later date (which automatically revokes the earlier proxy instructions). Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request by notifying the inspector of elections of your intention to revoke your proxy and voting in person at the Annual Meeting.
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DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING
Our stockholders may submit proper proposals for inclusion in our proxy statement and for consideration at the annual meeting of stockholders to be held in 2018 (the “2018 annual meeting”) by submitting their proposals in writing to our Secretary in a timely manner. In order to be considered for inclusion in our proxy materials for the 2018 annual meeting, stockholder proposals must be received by our Secretary no later than December 25, 2017, and must otherwise comply with the requirements of Rule 14a-8 of the Exchange Act.
In addition, our bylaws establish an advance notice procedure with regard to business to be brought before an annual meeting, including stockholder proposals not included in our proxy statement. For director nominations or other business to be properly brought before our 2018 annual meeting by a stockholder, such stockholder must deliver written notice to our Secretary at our principal executive offices no later than March 10, 2018, and no earlier than February 8, 2018. If the date of our 2018 annual meeting is advanced by more than 30 calendar days or delayed by more than 60 calendar days from the anniversary date of the 2017 Annual Meeting, your notice of a proposal will be timely if it is received by the Secretary of the Company at our principal executive offices no earlier than the close of business on the 120th day prior to the 2018 annual meeting and not later than later of the close of business on the 90th day before the 2018 annual meeting or the tenth day following the day we first publicly announce the date of the 2018 annual meeting.
The proxy grants the proxy holders discretionary authority to vote on any matter raised at the Annual Meeting. If a stockholder fails to comply with the foregoing notice provisions, proxy holders will be allowed to use their discretionary voting authority on such matter should the stockholder proposal come before the 2018 annual meeting.
A copy of the full text of the bylaw provisions governing the notice requirements set forth above may be obtained by writing to our Secretary. All notices of proposals and director nominations by stockholders should be sent to RealPage, Inc., 2201 Lakeside Boulevard, Richardson, Texas 75082, Attention: Corporate Secretary.
We know of no other matters to be submitted at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the shares they represent as our Board may recommend.
| BY ORDER OF THE BOARD OF DIRECTORS |
| /s/ David G. Monk |
| David G. Monk |
| Executive Vice President, Chief Legal Officer and Secretary |
Richardson, Texas
April 24, 2017
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REALPAGE Outperform Admission Ticket C123456789 IMPORTANT ANNUAL MEETING INFORMATION 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINESACKPACK 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext MR A SAMPLE Electronic Voting Instructions DESIGNATION (IF ANY) Available 24 hours a day, 7 days a week! ADD 1 Instead of mailing your proxy, you may choose one of the voting ADD 2 methods outlined below to vote your proxy. ADD 3 VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. ADD 4 ADD 5 Proxies 1:00 a.m submitted ., Central Time, by the on Internet June 1, or 2017 telephone .* must be received by ADD 6 Vote by Internet Go to www.investorvote.com/RP Or scan the QR code with your smartphone Follow the steps outlined on the secure website Vote by telephone Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone Follow the instructions provided by the recorded message * intend Employees to vote and their other shares service received providers under of the RealPage, RealPage, Inc Inc . who . 2010 Using a black ink pen, mark your votes with an X as shown in X Equity Incentive Plan, as amended, must vote their shares not later this example. Please do not write outside the designated areas. than 1:00 a.m., Central Time, on May 29, 2017. Annual Meeting Proxy Card 1234 5678 9012 345 IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals — The Board recommends a vote FOR all nominees and FOR Proposals 2 and 3. 1. Election of Directors: For Withhold For Withhold For Withhold + 01—Alfred R. Berkeley, III 02—Peter Gyenes 03—Charles F. Kane For Against Abstain For Against Abstain 2. Proposal to ratify independent public accounting firm for 2017. 3. Say on Pay—An advisory (non-binding) vote on the approval of executive compensation. Proposal 4—The Board recommends a vote for EVERY 3 YEARS. 3 Yr 2 Yr 1 Yr Abstain 4. Say on Frequency —An advisory (non-binding) vote on the approval of the frequency of shareholder votes on executive compensation. B Non-Voting Items Change of Address — Please print your new address below. Comments — Please print your comments below. Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMM 1 U P X 3 2 7 9 4 5 1 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 02KRND
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2017 Annual Meeting Admission Ticket 2017 Annual Meeting of RealPage, Inc. Stockholders Thursday, June 1, 2017 at 10:00 a.m. Local Time 2201 Lakeside Blvd. Richardson, Texas 75082 Upon arrival, please present this admission ticket and photo identification at the registration desk. IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — RealPage, Inc. Notice of 2017 Annual Meeting of Stockholders 2201 Lakeside Blvd., Richardson, Texas 75082 Proxy Solicited by Board of Directors for Annual Meeting – June 1, 2017 Stephen T. Winn, W. Bryan Hill, or either of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of RealPage, Inc. to be held on June 1, 2017 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted in accordance with the directions indicated by the stockholder herein. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees and FOR Proposals 2 and 3 and Every 3 Years for Proposal 4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.)