DEF 14A 1 scty-def14a_20150602.htm DEF 14A

 

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

(Amendment No.     )

 

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 Definitive Proxy Statement

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 Definitive Additional Materials

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 Soliciting Material Pursuant to §240.14a-12

SolarCity Corporation

(Name of Registrant as Specified In Its Charter)

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SOLARCITY CORPORATION

3055 CLEARVIEW WAY

SAN MATEO, CALIFORNIA 94402

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held at 1:00 p.m. Pacific Daylight Time on Tuesday, June 2, 2015

TO THE HOLDERS OF COMMON STOCK

OF SOLARCITY CORPORATION:

The Annual Meeting of Stockholders (the “Annual Meeting”) of SolarCity Corporation, a Delaware corporation, will be held on Tuesday, June 2, 2015, at 1:00 p.m. Pacific Daylight Time, at the Crowne Plaza Hotel, located at 1221 Chess Drive, Foster City, California 94404, for the following purposes as more fully described in the accompanying Proxy Statement:

1.

To elect three Class III directors to serve until the 2018 annual meeting of stockholders or until their successors are duly elected and qualified;

2.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2015;

3.

To hold a non-binding advisory vote to approve the compensation of our named executive officers;

4.

To hold a non-binding advisory vote on the frequency of executive compensation votes; and

5.

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

The board of directors of SolarCity Corporation has fixed the close of business on April 10, 2015 as the record date for the Annual Meeting. Only stockholders of record of our common stock on April 10, 2015 are entitled to notice of and to vote at the meeting. Further information regarding voting rights and the matters to be voted upon is presented in our proxy statement.

SolarCity is pleased to take advantage of SEC rules that allow us to furnish proxy materials to our stockholders on the Internet. These rules enable us to reduce the environmental impact of our Annual Meeting while still providing you with the information that you need. This notice, the Notice of Internet Availability, the 2014 annual report and our proxy statement for our 2015 Annual Meeting and form of proxy are being made available to stockholders on or about April 23, 2015. This proxy statement and our 2014 annual report can also be accessed directly at the following Internet address: http://www.envisionreports.com/SolarCity. You simply need to enter the control number located on your notice and/or proxy card.

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual Meeting, we urge you to submit your vote via the Internet, telephone or mail.

We appreciate your continued support of SolarCity and look forward to either greeting you personally at the Annual Meeting or receiving your proxy.

 

By order of the Board of Directors,

 

Lyndon Rive

Co-Founder and Chief Executive Officer

San Mateo, California

April 21, 2015

 

 

 

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TABLE OF CONTENTS

 

PROXY STATEMENT FOR 2015 ANNUAL MEETING OF STOCKHOLDERS

 

1

PROPOSAL NO. 1 ELECTION OF DIRECTORS

 

6

PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

10

PROPOSAL NO. 3 ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

12

PROPOSAL NO. 4 ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

14

CORPORATE GOVERNANCE

 

15

EXECUTIVE OFFICERS

 

21

EXECUTIVE COMPENSATION

 

22

COMPENSATION RISK ASSESSMENT

 

35

2014 Summary Compensation Table

 

36

2014 Grants of Plan-Based Awards Table

 

37

2014 Outstanding Equity Awards at Fiscal Year-End Table

 

38

2014 Option Exercises

 

39

Securities Authorized for Issuance Under Equity Compensation Plans

 

39

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

41

RELATED PARTY TRANSACTIONS

 

43

REPORT OF THE AUDIT COMMITTEE

 

44

OTHER MATTERS

 

45

 

 

 

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SOLARCITY CORPORATION

3055 Clearview Way

San Mateo, California 94402

PROXY STATEMENT

FOR 2015 ANNUAL MEETING OF STOCKHOLDERS

to be held on Tuesday, June 2, 2015 at 1:00 p.m. PDT

This proxy statement and the enclosed form of proxy are furnished in connection with solicitation of proxies by our board of directors for use at the annual meeting of stockholders (the “Annual Meeting”) to be held on June 2, 2015, and any postponements, adjournments or continuations thereof. The Annual Meeting will be held at the Crowne Plaza Hotel, located at 1221 Chess Drive, Foster City, California 94404, on Tuesday, June 2, 2015 at 1:00 p.m. PDT. Stockholders may request directions to the Crowne Plaza Hotel in order to attend the Annual Meeting by sending a request to investors@solarcity.com or by visiting the Investor Relations section of our website at http://investors.solarcity.com.

SolarCity is pleased to take advantage of SEC rules that allow us to furnish proxy materials to our stockholders on the Internet. These rules enable us to reduce the environmental impact of our Annual Meeting while still providing you with the information that you need. The Notice of Internet Availability (the “Internet Notice”) was first mailed on or about April 23, 2015 to stockholders of record as of April 10, 2015 and these proxy solicitation materials combined with the annual report for the fiscal year ended December 31, 2014, including our Annual Report on Form 10-K for the year ended December 31, 2014 (the “Form 10-K”) were first made available to you on the Internet, on or about April 23, 2015.

The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully.

What matters am I voting on?

You will be voting on:

·

the election of three Class III directors to hold office until the 2018 annual meeting of stockholders or until their successors are duly elected and qualified;

·

a proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015;

·

a non-binding advisory vote to approve the compensation of the Company’s named executive officers;

·

a non-binding advisory vote on the frequency of executive compensation votes; and

·

any other business that may properly come before the meeting.

How does the board of directors recommend I vote on these proposals?

The board of directors recommends you vote:

·

FOR the nominees for election as Class III directors;

·

FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015;

·

FOR the approval of the compensation of the Named Executive Officers; and

·

Every THREE YEARS as the frequency of holding an advisory vote on executive compensation.

Who is entitled to vote?

Holders of our common stock as of the close of business on April 10, 2015, the record date, may vote at the Annual Meeting. As of the record date, 96,874,039 shares of our common stock were outstanding and held of record by approximately 199 stockholders, however, most stockholders hold their shares through a broker or other agent rather than directly in their own names. In deciding all matters at the Annual Meeting, each stockholder will be entitled to one vote for each share of common stock held on the record date. We do not have cumulative voting rights for the election of directors.

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Registered Stockholders. If your shares are registered directly in your name with Computershare Trust Company, N.A., our transfer agent, you are considered the stockholder of record with respect to those shares, and the proxy materials were provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote in person at the Annual Meeting.

 

Street Name Stockholders. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials were forwarded to you by your broker or nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since beneficial owners are not the stockholder of record, they may not vote their shares in person at the Annual Meeting without following their broker’s procedures for obtaining a legal proxy. If you request a printed copy of the proxy materials by mail, your broker or nominee will provide a voting instruction card for you to use.

How do I vote?

There are four ways to vote:

·

by Internet at http://www.envisionreports.com/SolarCity, 24 hours a day, seven days a week, until 11:59 p.m. on June 1, 2015 (have your proxy card in hand when you visit the website);

·

by toll-free telephone at 1-800-652-VOTE (8683) (have your proxy card in hand when you call);

·

by completing and mailing your proxy card; or

·

by completing a written ballot in person at the Annual Meeting.

Can I change my vote?

Yes. You can change your vote or revoke your proxy any time before the Annual Meeting by:

·

entering a new vote by Internet or by telephone;

·

returning a later-dated proxy card;

·

notifying the corporate secretary of SolarCity Corporation, in writing, at the address listed on the front page; or

·

completing a written ballot in person at the Annual Meeting.

What is the effect of giving a proxy?

Proxies are solicited by and on behalf of our board of directors. The persons named in this proxy statement have been designated as proxies by our board of directors. When a proxy card is properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instruction of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of our board of directors as described above. If any matters not described in the proxy statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have properly revoked your proxy instructions, as described above.

What is a quorum?

A quorum is the minimum number of shares required to be present at the Annual Meeting for the meeting to be properly held under our bylaws and Delaware law. The presence, in person or by proxy, of a majority of all issued and outstanding shares of common stock entitled to vote at the Annual Meeting will constitute a quorum. A proxy submitted by a stockholder may indicate that all or a portion of the shares represented by the proxy are not being voted (“stockholder withholding”) with respect to a particular matter. Similarly, a broker may not be permitted to vote shares held in street name on a particular matter (“broker non-vote”) in the absence of instructions from the beneficial owner of the shares. See “How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?” The shares subject to a proxy that are not being voted on a particular matter because of either stockholder withholding or a broker non-vote will count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of a quorum.

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How many votes are needed for approval of each matter?

·

Proposal No. 1: The election of directors requires a plurality vote of the shares of common stock voted at the meeting. “Plurality” means that the individuals who receive the largest number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted in any nominee’s favor and will have no effect on the outcome of the election. You may vote “for,” “against” or “abstain” on each of the nominations for election as a director.

·

Proposal No. 2: The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2015 must receive the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon to be approved. Abstentions are considered votes cast and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

·

Proposal No. 3: The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote are required to approve our executive compensation, on an advisory basis. Abstentions are considered votes cast and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

·

Proposal No. 4: The option of “ONE YEAR,” “TWO YEARS,” or “THREE YEARS” that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation recommended by stockholders. Abstentions and broker non-votes will not be included in the tabulation of the voting results on this proposal.

How are proxies solicited for the Annual Meeting?

The board of directors is soliciting proxies for use at the Annual Meeting. We will cover all expenses associated with this solicitation and the distribution of these proxy materials.

How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?

Brokerage firms and other intermediaries holding shares of common stock in street name for customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker will have discretion to vote your shares on our sole “routine” matter—the proposal to ratify the appointment of Ernst & Young LLP (Proposal No. 2). Your broker will not have discretion to vote on “non-routine” matters absent direction from you, such as the election of directors or advisory votes related to executive compensation.

Is my vote confidential?

Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be publicly disclosed, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote or to facilitate a successful proxy solicitation.

Where can I find the voting results of the Annual Meeting?

We will announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K within four business days, we will file a Form 8-K to publish preliminary results and will provide the final results in an amendment to the Form 8-K as soon as they become available.

Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials via the Internet. As a result, we are sending an Internet Notice to our stockholders of record entitled to vote at the Annual Meeting. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Internet Notice. In addition, the Internet Notice provides information on how stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

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We encourage all stockholders to access proxy materials over the Internet in order to assist us in reducing the environmental impact of our annual meetings. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. If you choose to receive future proxy materials by mail, you will receive a paper copy of those materials, including a form of proxy. Your election to receive proxy materials by mail or email will remain in effect until you notify us that you are changing or terminating your request.

I share an address with another stockholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?

We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the proxy materials to multiple stockholders who share the same address unless we received contrary instructions from one or more of the stockholders. This procedure reduces our environmental impact, printing and mailing costs and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. As requested, we will deliver promptly a separate copy of the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the proxy materials, stockholders may contact us as follows:

SolarCity Corporation

Attention: Investor Relations

3055 Clearview Way

San Mateo, California 94402

investors@solarcity.com

(650) 963-5920

Stockholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding. Alternatively, if you receive multiple printed copies of the proxy materials, you may request to enroll in householding by contacting us.

What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

Stockholder Proposals

Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to our corporate secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2016 annual meeting of stockholders, our corporate secretary must receive the written proposal at our principal executive offices not later than December 25, 2015. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:

SolarCity Corporation

Attention: Corporate Secretary

3055 Clearview Way

San Mateo, California 94402

ir@solarcity.com

Our bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders but do not intend for the proposal to be included in our proxy statement. Our bylaws provide that the only business that may be conducted at an annual meeting is business that is (i) specified in our proxy materials with respect to such meeting, (ii) otherwise properly brought before the meeting by or at the direction of our board of directors, or (iii) properly brought before the meeting by a stockholder of record entitled to vote at the annual meeting who has delivered timely written notice to our corporate secretary, which notice must contain the information specified in our bylaws. To be timely for our 2016 annual meeting of stockholders, our corporate secretary must receive the written notice at our principal executive offices:

·

no earlier than February 8, 2016; and

·

no later than the close of business on March 9, 2016.

 

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In the event that we hold our 2016 annual meeting of stockholders more than 30 days before or more than 60 days after the one-year anniversary date of the 2015 annual meeting, then notice of a stockholder proposal that is not intended to be included in our proxy statement must be received no earlier than the close of business on the 120th day before such annual meeting and no later than the close of business on the later of the following two dates:

·

the 90th day prior to such annual meeting; or

·

the 10th day following the day on which public announcement of the date of such meeting is first made.

If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.

Nomination of Director Candidates

You may propose director candidates for consideration by our nominating and corporate governance committee. Any such recommendations should include the nominee’s name and qualifications for membership on our board of directors and should be directed to the corporate secretary of SolarCity at the address set forth above. For additional information regarding stockholder recommendations for director candidates, see “Board of Directors and Corporate Governance—Stockholder Recommendations for Nominations to the Board of Directors.”

In addition, our bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, the stockholder must provide the information required by our bylaws. In addition, the stockholder must give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by our corporate secretary within the time period described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in our proxy statement.

Availability of Bylaws

A copy of our bylaws may be obtained by accessing SolarCity’s filings on the SEC’s website at www.sec.gov. You may also contact our corporate secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

 

 

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

General

Our business affairs are managed under the direction of our board of directors, which is currently composed of ten members. Seven of our directors are independent within the meaning of the listing rules of The NASDAQ Stock Market, LLC. Our board of directors is divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring.

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

Nominees for Class III Directors

Three candidates have been nominated for election as Class III directors at the Annual Meeting for a three-year term expiring in 2018. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Elon Musk, Donald R. Kendall, Jr. and Jeffrey B. Straubel for re-election as Class III directors. Biographical information about each of the nominees is contained in the following section. A discussion of the qualifications, attributes and skills of each nominee that led our board of directors and the Nominating and Corporate Governance Committee to the conclusion that such person should continue to serve as a director has been added following each of the director and nominee biographies.

If you are a record holder and you sign your proxy card or vote by telephone or the Internet but do not give instructions with respect to the voting of directors, your shares will be voted FOR the re-election of Messrs. Musk, Kendall and Straubel. We expect that Messrs. Musk, Kendall and Straubel will accept such nomination; however, in the event that a nominee 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 shall be designated by the board of directors to fill such vacancy. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy card or when you vote by telephone or the Internet. If you hold your shares in street name and you do not give voting instructions to your broker, your broker will leave your shares unvoted on this matter.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF EACH OF ELON MUSK,
DONALD R. KENDALL, JR. AND JEFFREY B. STRAUBEL.

 

 

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Information Regarding the Board of Directors and Director Nominees

The names of the proposed director nominees and each continuing member of the board of directors, their respective ages, their positions with SolarCity and other biographical information as of April 21, 2015, are set forth below. Mr. Shulkin, whose term in office will expire at this year’s Annual Meeting, has announced that he will not stand for re-election as a Class III director. Messrs. Lyndon R. Rive and Peter J. Rive are brothers and each is a cousin of Mr. Musk. Apart from these relationships, there are no family relationships among any of our directors or executive officers.

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

Director

 

Term

Nominees

 

Class

 

Age

 

 

Position with SolarCity

 

Since

 

Expires

Donald R. Kendall, Jr. (1)

 

III

 

 

62

 

 

Director

 

2012

 

2015

Elon Musk

 

III

 

 

43

 

 

Chairman of the Board

 

2006

 

2015

Jeffrey B. Straubel

 

III

 

 

39

 

 

Director

 

2006

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Directors

 

 

 

 

 

 

 

 

 

 

 

 

John H. N. Fisher (2)(3)(6)

 

I

 

 

56

 

 

Director

 

2007

 

2016

Lyndon R. Rive

 

I

 

 

38

 

 

Co-Founder, Chief Executive Officer and Director

 

2006

 

2016

Bennet Van de Bunt (4)

 

I

 

 

53

 

 

Director

 

2013

 

2016

Antonio J. Gracias

 

II

 

 

44

 

 

Director

 

2012

 

2017

Nancy E. Pfund (2)(4)(5)

 

II

 

 

59

 

 

Director

 

2007

 

2017

Peter J. Rive

 

II

 

 

41

 

 

Co-Founder, Chief Technology Officer and Director

 

2006

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Continuing Directors

 

 

 

 

 

 

 

 

 

 

 

 

Jonathan K. Shulkin (2)

 

III

 

39

 

 

Director

 

2014

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Chairperson of the audit committee

(2)

Member of the audit committee

(3)

Chairperson of the compensation committee

(4)

Member of the compensation committee

(5)

Chairperson of the nominating and corporate governance committee

(6)

Member of the nominating and corporate governance committee

Nominees for Director

Elon Musk has served as the chairman of our board of directors since July 2006. Mr. Musk has served as the chief executive officer of Tesla Motors, Inc., a high-performance electric vehicle developer and manufacturer, since October 2008, and as chairman of the board of directors of Tesla since April 2004. Mr. Musk has also served as chief executive officer, chief technology officer and chairman of Space Exploration Technologies Corporation, a company which is developing and launching advanced rockets for satellite and eventually human transportation, since May 2002. Mr. Musk co-founded PayPal, Inc., an electronic payment system, which was acquired by eBay Inc. in October 2002, and Zip2 Corporation, a provider of internet enterprise software and services, which was acquired by Compaq Computer Corporation in March 1999. Mr. Musk holds a bachelor’s degree in physics from the University of Pennsylvania and a bachelor’s degree in economics from the Wharton School of the University of Pennsylvania. We believe Mr. Musk possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience with technology companies and energy technology companies and the perspective and experience he brings as one of our largest stockholders.

Donald R. Kendall, Jr. has served as a member of our board of directors since September 2012. Mr. Kendall also serves as the chairperson of our audit committee. Mr. Kendall has served as chief executive officer, president and a member of the board of directors of Blue Earth Capital, Inc., a privately-held renewable energy and energy efficiency services company and a wholly-owned capital formation subsidiary of Blue Earth, Inc. Mr. Kendall has also served as managing director and chief executive officer of Kenmont Capital Partners, an alternative investment firm specializing in power and energy investments, since October 1998. Previously, Mr. Kendall served as president of Cogen Technologies Capital Company, a power generation firm, and concurrently as chairman and chief executive officer of Palmetto Partners, an investment management firm, from July 1993 to October 1998. Mr. Kendall also serves on the board of directors and the audit committee of American Midstream GP, LLC, which operates as the general partner of American Midstream Partners, LP, an energy company which gathers, processes, transports and stores natural gas. Mr. Kendall holds a bachelor’s degree in economics from Hamilton College and an M.B.A. from the Amos Tuck School of Business Administration at Dartmouth College. We believe Mr. Kendall possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience with power, energy and alternative energy companies, his experience in executive management positions, his experience as a member of several public and private boards of directors, and his extensive financial expertise and prior service as a member of audit committees.

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Jeffrey B. Straubel has served as a member of our board of directors since August 2006. Mr. Straubel has served as chief technology officer of Tesla Motors, Inc. since May 2004, and as principal engineer, drive systems, from March 2004 to May 2005. Mr. Straubel served as chief technical officer and co-founder of Volacom Inc., an aerospace firm which designed a specialized high-altitude electric aircraft platform, from January 2002 to May 2004. Mr. Straubel holds a bachelor’s degree in energy systems engineering from Stanford University and a master’s degree in engineering, with an emphasis on energy conversion, from Stanford University. We believe Mr. Straubel possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience with energy technology companies.

Non-Continuing Directors

Jonathan K. Shulkin has served as a member of our board of directors since March 2014. Mr. Shulkin has served as a managing director at Valor Equity Partners, a private equity firm and investor in the Company, since 2002, as its chief financial officer since 2004 and as its chief compliance officer since March 2012. Prior to joining Valor in 2002, Mr. Shulkin held positions with MG Capital, including operational positions with MG Capital’s portfolio companies, and Bain & Company, Inc. Mr. Shulkin holds a BBA in accounting from the University of Texas at Austin where he graduated with honors. Mr. Shulkin has informed our board of directors that he will not seek re-election to our board of directors at the Annual Meeting.

Continuing Directors

Antonio J. Gracias has served as a member of our board of directors since February 2012. Mr. Gracias has been chief executive officer of Valor Management Corp., a private equity firm, since 2003. Mr. Gracias holds a joint B.S. and M.S. degree in international finance and economics from the Georgetown University School of Foreign Service and a J.D. from the University of Chicago Law School. Mr. Gracias also serves as a member of the board of directors of Tesla Motors, Inc. and Space Exploration Technologies Corporation. We believe that Mr. Gracias possesses specific attributes that qualify him to serve as a member of our board of directors, including his management experience with a nationally recognized private equity firm and his operations management and supply chain optimization expertise.

John  H. N. Fisher has served as a member of our board of directors since August 2007. Mr. Fisher serves as the chairperson of our compensation committee and is also a member of our audit committee and our nominating and corporate governance committee. Mr. Fisher has served as a managing director of Draper Fisher Jurvetson, a venture capital firm, for over two decades. Mr. Fisher serves on the board of directors of DFJ ePlanet Ventures and on the Investment Committees of DFJ Growth Fund, DFJ New England, and DFJ Esprit Ventures. Mr. Fisher previously held positions at ABS Ventures, Alex. Brown & Sons Inc., and Bank of America Corporation. Mr. Fisher serves as a Trustee of the California Academy of Sciences and serves on the board of directors of Common Sense Media. Mr. Fisher holds an A.B. degree from Harvard College and a M.B.A. from Harvard Business School. We believe Mr. Fisher possesses specific attributes that qualify him to serve as a member of our board of directors, including his management experience with a nationally recognized venture capital firm and his extensive experience as a venture capital investor and as a board member.

Nancy E. Pfund has served as a member of our board of directors since August 2007. Ms. Pfund serves as the chairperson of our nominating and corporate governance committee is also a member of our audit committee and compensation committee. Ms. Pfund has served as a managing partner of DBL Investors, a venture capital firm, since January 2008. Ms. Pfund previously served as a managing director of JPMorgan & Co., an investment bank, from January 2002 to January 2008. Ms. Pfund also is Chair of the Advisory Council of the Bill Lane Center for the American West at Stanford University; a member of the Advisory Board of the U.C. Davis Center for Energy Efficiency; Lecturer in the Practice of Management at the Yale School of Management; a board member of the California STEM Learning Network; a C3E Ambassador to the U.S. Clean Energy Education and Empowerment Program, led by the U.S. Department of Energy; and is a founding officer and director of ABC2, a foundation aimed at accelerating a cure for brain cancer. Ms. Pfund holds a bachelor’s degree and a master’s degree in anthropology from Stanford University and an M.B.A. from the Yale School of Management. We believe Ms. Pfund possesses specific attributes that qualify her to serve as a member of our board of directors, including her extensive experience as a venture capital investor focusing on technology companies, and as a board member.

Lyndon R. Rive, one of our founders, has served as our Chief Executive Officer and a member of our board of directors since July 2006. Prior to co-founding SolarCity, from October 1999 to July 2006, Mr. Rive co-founded and served as vice president and a member of the board of directors of Everdream Corporation, a leading provider of distributed computer management software and services acquired by Dell Inc. in 2007. Prior to this, Mr. Rive founded LRS, a distributor of health products in South Africa. Mr. Rive is also a current member of the U.S. underwater hockey team. Mr. Rive was selected to serve on our board of directors due to his perspective and experience as one of our founders and as our Chief Executive Officer, as well as his extensive background in the solar industry.

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Peter J. Rive, one of our founders, has served as our Chief Technology Officer and a member of our board of directors since July 2006. Mr. Rive also served as our Chief Operations Officer from July 2006 until February 2014. Prior to co-founding SolarCity, from April 2001 to June 2006, Mr. Rive served as chief technology officer of Everdream Corporation, a leading provider of distributed computer management software and services acquired by Dell Inc. in 2007. Mr. Rive holds a bachelor’s degree in computer science from Queen’s University, Canada. Mr. Rive was selected to serve on our board of directors due to his perspective and experience as one of our founders and as our Chief Technology Officer, as well as his extensive background in the solar industry.

Bennet Van de Bunt has served as a member of our board of directors since November 2013. Mr. Van de Bunt has served as a principal of Guthy-Renker LLC, a direct marketing company, since 1993, and as a member of its board of directors since 1994. Mr. Van de Bunt has also served as the chief executive officer of Guthy-Renker Holdings, LLC, an affiliate of Guthy-Renker responsible for business affairs and new business development. Prior to joining Guthy-Renker, Mr. Van de Bunt was an attorney at Allen Matkins Leck Gamble Mallory & Natsis LLP. Mr. Van de Bunt previously served as a director of CyberDefender Corporation, a remote technical support service provider, from July 2009 through October 2010. Mr. Van de Bunt holds a JD from Harvard Law School, is a member of the California Bar Association, and holds a degree in history from UCLA where he graduated with honors. Mr. Van de Bunt previously served on the board of directors of the Electronic Retailing Association.

See “Corporate Governance” and “Executive Compensation—Compensation of Directors” below for additional information regarding the Board of Directors.

 

 

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PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General

The audit committee of the board of directors has appointed Ernst & Young LLP (“EY”), independent registered public accountants, to audit our financial statements for the year ending December 31, 2015. EY has served as our independent registered public accounting firm since November 2008.

Notwithstanding its selection and even if our stockholders ratify the selection, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the audit committee believes that such a change would be in the best interests of SolarCity and its stockholders. At the Annual Meeting, the stockholders are being asked to ratify the appointment of EY as our independent registered public accounting firm for the year ending December 31, 2015. Our audit committee is submitting the selection of EY to our stockholders because we value our stockholders views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of EY will be present at the Annual Meeting, and they will have an opportunity to make statements and will be available to respond to appropriate questions from stockholders.

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

Fees Paid to the Independent Registered Public Accounting Firm

The following table presents fees for professional audit services and other services rendered to our company by EY for the fiscal years ended December 31, 2013 and 2014.

 

 

 

2013

 

 

2014

 

Audit Fees (1)

 

$

5,293,412

 

 

$

4,262,340

 

Audit-Related Fees (2)

 

 

-

 

 

 

-

 

All Other Fees (3)

 

 

125,555

 

 

 

114,000

 

 

 

$

5,418,967

 

 

$

4,376,340

 

 

(1)

Audit Fees consist of professional services rendered in connection with the audit of our consolidated financial statements and review of our quarterly consolidated financial statements. Fees for 2013 include fees associated with our common stock and convertible notes offerings completed in October 2013, as well as delivery of comfort letters, consents and review of documents filed with the SEC. Fees for 2014 include fees associated with our convertible notes offerings completed in September and October 2014, Solar Bonds offerings, and delivery of comfort letters, consents and review of documents filed with the SEC.

(2)

Audit-Related Fees consist of professional services for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include accounting consultations concerning financial accounting and reporting standards.

(3)

Other Fees consisted of consultation fees and fees relating to services performed in connection with securitization transactions.

Auditor Independence

In 2014, there were no other professional services provided by EY that would have required the audit committee to consider their compatibility with maintaining the independence of EY.

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

Consistent with requirements of the SEC and the Public Company Oversight Board, or PCAOB, regarding auditor independence, our audit committee is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. In recognition of this responsibility, our audit committee has established a policy for the pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.

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Before engagement of the independent registered public accounting firm for the next year’s audit, the independent registered public accounting firm submits a detailed description of services expected to be rendered during that year for each of the following categories of services to the audit committee for approval:

·

Audit services. Audit services include work performed for the audit of our financial statements and the review of financial statements included in our quarterly reports, as well as work that is normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings.

·

Audit-related services. Audit-related services are for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not covered above under “audit services.”

·

Tax services. Tax services include all services performed by the independent registered public accounting firm’s tax personnel for tax compliance, tax advice and tax planning.

·

Other services. Other services are those services not described in the other categories, including services performed in connection with our securitization transactions.

The audit committee pre-approves particular services or categories of services on a case-by-case basis. The fees are budgeted, and the audit committee requires the independent registered public accounting firm and management to report actual fees versus budgeted fees periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the services must be pre-approved by the audit committee before the independent registered public accounting firm is engaged.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS SOLARCITY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015.

 

 

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PROPOSAL NO. 3

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

General

The Company, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the “Dodd-Frank Act,” is providing its stockholders with the opportunity to cast an advisory vote on executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies, practices and objectives described in this Proxy Statement. The advisory vote on executive compensation described in this Proposal 3 is referred to as a “say-on-pay vote.”

SolarCity believes that the skill, talent, judgment and dedication of its executive officers are critical factors affecting the long-term value of our company. Therefore, the goal for our executive compensation program is to fairly compensate our executives, attract and retain qualified executives who are able to contribute to our long-term success, induce performance consistent with clearly defined corporate goals, and align our executives’ long-term interests with those of our stockholders. The Company believes that its executive compensation program, which emphasizes long-term equity awards and performance vesting, satisfies this goal and is strongly aligned with the long-term interests of our stockholders.

The Compensation Discussion and Analysis in this Proxy Statement describes the Company’s executive compensation program and the decisions made by the Compensation Committee in both 2013 and 2014 in more detail. The Company annually reviews its executive compensation practices and programs, utilizing peer and survey group data. Highlights of the program include the following:

·

Compensation decisions are based, in part, upon an assessment of individual performance and potential to enhance long-term stockholder value.

·

The named executive officers typically receive long-term equity awards in the form of stock options and the majority of these shares are at-risk and earned only upon the achievement of specified performance goals related to both the individual officer’s area of responsibility and overall company objectives.  These awards constitute the majority of each officer’s total compensation opportunity. In addition, the Company believes these awards ensure that a significant portion of the officers’ compensation is tied to long-term stock price performance, and these awards provide significant retention value for the Company if the performance goals are met.

·

Most of our named executive officers are eligible to receive annual incentive cash bonus payments, intended to reward short-term strategic objectives in furtherance of our long-term goals.

·

Each of the named executive officers is employed at-will and is expected to demonstrate exceptional personal performance in order to continue serving as a member of the executive team.

The Company believes the compensation program for the named executive officers is instrumental in helping the Company achieve its strong financial and operational performance. In 2014:

·

our operating leases and solar energy systems incentives revenue grew to $173.6 million, an increase of 110% from fiscal 2013;

·

our total revenue grew to $255.0 million, an increase of 56% from fiscal 2013;

·

we ended the year with cash and cash equivalents of $642.7 million;

·

we deployed 502 MW of solar energy systems, an increase of 79% from fiscal 2013;

·

our Estimated Nominal Contracted Payments Remaining grew to $5.0 Billion, an increase of 149% over fiscal 2013;

·

we ended the year with 189,657 total customers, an increase of 104% from fiscal 2013;

·

we grew to over 9,000 employees;

·

we completed two additional securitized offerings of distributed solar asset portfolios, issuing an aggregate of $271.7 million of solar asset-backed notes;

·

we issued $566 million in aggregate principal of 1.625% convertible senior notes due 2019 in private placement transactions;

·

we acquired Silevo, a manufacturer of high-efficiency solar modules, and negotiated an expanded relationship with the State of New York to construct what would be the largest solar manufacturing facility in the Western Hemisphere;

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·

we began offering MyPower solar loans; and

·

we began issuing Solar Bonds directly to investors through our proprietary online platform.

We believe that our current executive compensation program has been effective at linking executive compensation to our performance and aligning the interests of our named executive officers with those of our stockholders. We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement by voting “FOR” the following resolution at the Annual Meeting:

“RESOLVED, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”

As an advisory vote, this say-on-pay proposal is not binding upon the Company, our Board of Directors or the Compensation Committee. However, the Company, our Board of Directors and the Compensation Committee, which is responsible for overseeing, reviewing and administering the Company’s executive compensation programs, value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.

The Board of Directors Recommends a Vote “FOR” Proposal 3.

 

 

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PROPOSAL NO. 4

ADVISORY VOTE ON THE FREQUENCY OF
THE ADVISORY VOTE ON EXECUTIVE COMPENSATION

General

As described in Proposal 3 above, the Company’s stockholders are being provided the opportunity to cast an advisory vote on the Company’s executive compensation program, or a “say-on-pay vote.”

This Proposal 4, in accordance with the Dodd-Frank Act, affords stockholders the opportunity to cast an advisory vote on how often the Company should include a say-on-pay vote in its proxy materials for future annual stockholder meetings (or special stockholder meetings for which the Company must include executive compensation information in the proxy statement for that meeting). Under this Proposal 4, stockholders may indicate whether they would prefer an advisory vote on executive compensation every year, every two years or every three years.

After careful consideration of this Proposal, our Board of Directors has determined that a triennial advisory vote on executive compensation is the most appropriate alternative for the Company, and therefore our Board of Directors recommends that you vote for a three-year interval for the advisory vote on executive compensation.

Our executive compensation programs are designed to be simple, and to promote long-term success.  Our compensation programs are regularly reviewed to ensure that they are optimally structured to achieve our goals. Because a substantial portion of our officers’ compensation is tied to long-term stock price performance, which itself is influenced by our overall long-term performance, we believe that the effectiveness of our executive compensation programs can most reliably be judged by reference to the long-term results effected by the efforts of our executives.

We believe that the success of our operations and executive compensation program are best viewed over a longer time period.  We operate in an intensely competitive and growing market and we have exhibited significant growth in our operations, as described in Proposal 3 and elsewhere in these proxy materials. The trading price of our common stock, and of many renewable energy companies, has been volatile and experienced wide fluctuations often unrelated to operating performance.  In managing our business, our board of directors and managements focuses on long-term, sustainable and efficiency growth.

For these reasons, we believe that a triennial say-on-pay vote will provide out stockholders with regular input in our executive compensation programs in relation to our long-term performance, and allow our Compensation Committee to thoughtfully consider the results of say-on-pay votes and implement appropriate changes.

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

“RESOLVED, that the option of once every year, two years, or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the Company is to hold an advisory vote by stockholders to approve the compensation of the Company’s named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure.”

As an advisory vote, this proposal is not binding upon the Company, our Board of Directors or the Compensation Committee. The Board of Directors may determine that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders. However, the Company, our Board of Directors and the Compensation Committee, which is responsible for overseeing, reviewing and administering the Company’s executive compensation programs, value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of holding an advisory vote on executive compensation.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF “THREE YEARS” ON PROPOSAL 4.

 

 

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CORPORATE GOVERNANCE

Code of Business Conduct and Ethics

Our board of directors sets high standards for our employees, officers and directors. We are committed to establishing an operating framework that exercises appropriate oversight of responsibilities at all levels throughout the company and managing its affairs consistent with high principles of business ethics. Accordingly, SolarCity has adopted a Code of Business Conduct and Ethics, which is applicable to SolarCity and its subsidiaries’ directors, officers and employees. The Code of Business Conduct and Ethics is available on the Investor Relations section of our website at http://investors.solarcity.com. We will disclose on our website any amendment to the Code of Business Conduct and Ethics, as well as any waivers of the Code of Business Conduct and Ethics, that are required to be disclosed by the rules of the SEC or The NASDAQ Stock Market LLC.

Director Independence

Our common stock is listed on The NASDAQ Stock Market. Under the listing requirements and rules of The NASDAQ Stock Market, subject to specified exceptions, independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of The NASDAQ Stock Market require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the rules of The NASDAQ Stock Market, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  In order to be considered to be independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.

Compensation committee members must satisfy the independence criteria of The NASDAQ Stock Market, which requires consideration of all factors specifically relevant to determining whether a director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member.

Our board of directors undertook a review of the independence of our directors and considered whether any director has a material relationship that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that each of Messrs. Fisher, Gracias, Kendall, Shulkin, Straubel and Van de Bunt and Ms. Pfund are “independent directors” as defined under the rules of The NASDAQ Stock Market, constituting a majority of our board of directors. In making this determination, our board of directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Leadership Structure

Mr. Musk currently serves as Chairman of our board of directors. Our board of directors believes that the current board leadership structure, coupled with a strong emphasis on board independence, allows our management to focus on our day-to-day business, while allowing the Chairman to lead our board of directors in its fundamental role of providing independent advice to and oversight of management. In addition, as described above, our board has three standing committees, each member of which is an independent director. Our board delegates substantial responsibility to each committee of the board, which reports their activities and actions back to the full board. We believe that the independent committees of our board are an important aspect of the leadership structure of our board. The board reviews its leadership structure at least annually to provide the most effective structure in fulfilling its fiduciary duties and maintaining its commitment to good corporate governance.

Board Meetings and Committees

Including regularly scheduled and special meetings, the full board of directors held eight meetings, the audit committee held seven meetings, the compensation committee held two meetings and the nominating and corporate governance committee held one meeting during our fiscal year ended December 31, 2014. Our board of directors and committees also regularly act by unanimous written consent, in particular, our compensation committees approves employee equity awards and confirms the vesting of existing performance criteria on a monthly basis. No director attended fewer than 75% of the total number of meetings of the board of directors and the committees of which he or she was a member.

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Although we do not have a formal policy regarding attendance by members of our board of directors at annual meetings of stockholders, we encourage directors to attend and 40% attended the 2014 Annual Meeting.

Our board of directors has an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which has the composition and responsibilities described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit Committee. Our audit committee oversees our corporate accounting and financial reporting processes. Our audit committee generally oversees:

·

our accounting and financial reporting processes as well as the audit and integrity of our financial statements;

·

the qualifications and independence of our independent registered public accounting firm;

·

the performance of our independent registered public accounting firm;

·

our compliance with disclosure controls and procedures and internal controls over financial reporting as well as the compliance of our employees, directors and consultants with ethical standards we adopted.

Our audit committee also has certain responsibilities, including without limitation, the following:

·

selecting and hiring the independent registered public accounting firm;

·

supervising and evaluating the independent registered public accounting firm;

·

evaluating the independence of the independent registered public accounting firm;

·

approving audit and non-audit services and fees;

·

preparing the audit committee report that the SEC requires to be included in our annual proxy statement;

·

reviewing financial statements and discussing with management and the independent registered public accounting firm our annual audited and quarterly financial statements, the results of the independent audit and the quarterly reviews, and the reports and certifications regarding internal controls over financial reporting and disclosure controls;

·

reviewing reports and communications from the independent registered public accounting firm; and

·

overseeing the performance of our director of Sarbanes-Oxley & internal audit function, who reports directly to our audit committee.

Our audit committee is comprised of Messrs. Fisher, Kendall and Shulkin and Ms. Pfund. Mr. Kendall serves as our audit committee chairperson. Our board of directors has determined that each of the directors serving on our audit committee meets the requirements for financial literacy under applicable rules and regulations of the SEC and The NASDAQ Stock Market. In addition, our board of directors has determined that Messrs. Kendall and Shulkin meet the requirements of a financial expert as defined under the applicable rules and regulations of the SEC and each of whom has the requisite financial sophistication as defined under the applicable rules and regulations of The NASDAQ Stock Market. Our board of directors has considered the independence and other characteristics of each member of our audit committee, and our board of directors believes that each member meets the independence and other requirements of The NASDAQ Stock Market and the SEC.

The audit committee operates under a written charter that was adopted by our board of directors and satisfies the applicable standards of the SEC and The NASDAQ Stock Market. A copy of the Audit Committee Charter is available on the Investor Relations section of our website at http://investors.solarcity.com.

Compensation Committee. Our compensation committee oversees our corporate compensation policies, plans and benefit programs and is responsible for evaluating, approving and reviewing the compensation arrangements, plans, policies and programs for our executive officers and directors, and overseeing our cash-based and equity-based compensation plans.

The functions of our compensation committee include, among other things:

·

overseeing our compensation policies, plans and benefit programs;

·

reviewing and approving for our executive officers: the annual base salary, annual incentive bonus, including the specific goals and dollar amount, equity compensation, employment agreements, severance agreements and change in control arrangements, and any other benefits, compensation or arrangements;

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·

preparing the compensation committee report that the SEC requires to be included in our annual proxy statement; and

·

administering our equity compensation plans.

Our compensation committee also has certain authority and responsibilities over compensation consultants and advisors, including without limitation, the following:

·

selecting and engaging consultants, legal counsel and other advisers relating to compensation matters;

·

overseeing the appointment and compensation of such compensation advisers; and

·

evaluating the independence of the such compensation advisers.

Our compensation committee is comprised of Messrs. Fisher and Van de Bunt and Ms. Pfund. Mr. Fisher serves as our compensation committee chairperson. Our board of directors has considered the independence and other characteristics of each member of our compensation committee. Our board of directors believes that each member of our compensation committee meets the requirements for independence under the current requirements of The NASDAQ Stock Market, 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 Code.

The compensation committee operates under a written charter that was adopted by our board of directors and satisfies the applicable standards of the SEC and The NASDAQ Stock Market. A copy of the Compensation Committee Charter is available on the Investor Relations section of our website at http://investors.solarcity.com.

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee is or was formerly an officer or employee of SolarCity or any of its subsidiaries. No interlocking relationship exists between any member of our compensation committee and the compensation committee of any other company, nor has any such interlocking relationship existed in the past.

 

Nominating and Corporate Governance Committee. The functions of our nominating and corporate governance committee include, among other things:

·

assisting our board of directors in identifying prospective director nominees and recommending nominees to the board of directors for each annual meeting of stockholders;

·

reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our board of directors;

·

reviewing the succession planning for each of our executive officers;

·

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

·

recommending members for each board committee to our board of directors.

Our nominating and corporate governance committee is comprised of Ms. Pfund and Mr. Fisher. Ms. Pfund serves as our nominating and corporate governance committee chairperson. Our board of directors has considered the independence and other characteristics of each member of our nominating and corporate governance committee. Our board of directors believes that each member of our nominating and corporate governance committee meets the requirements for independence under the current requirements of The NASDAQ Stock Market.

The nominating and corporate governance committee operates under a written charter that was adopted by our board of directors and satisfies the applicable standards of the SEC and The NASDAQ Stock Market. A copy of the Nominating and Corporate Governance Committee Charter is available on the Investor Relations section of our website at http://investors.solarcity.com.

Considerations in Evaluating Director Nominees

The nominating and corporate governance committee uses a variety of methods for identifying and evaluating director nominees. In its evaluation of director candidates, the nominating and corporate governance committee will consider the current size and composition of the board of directors and the needs of the board of directors and the respective committees of the board of directors. Some of the qualifications that the nominating and corporate governance committee considers include, without limitation, issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and other commitments. Nominees must also have the ability to offer advice and guidance to our chief executive officer based on past experience in positions with a high degree of responsibility and be leaders in the companies or

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institutions with which they are affiliated. Director candidates must have sufficient time available in the judgment of the nominating and corporate governance committee to perform all board of director and committee responsibilities. Members of the board of directors are expected to prepare for, attend, and participate in all board of director and applicable committee meetings. The nominating and corporate governance committee will also seek appropriate input from the chief executive officer from time to time in assessing the needs of the board of directors for relevant background, experience, diversity and skills of its members.  Other than the foregoing, there are no stated minimum criteria for director nominees.

The nominating and corporate governance committee considers these and such other factors as it may deem are in our company and stockholders’ best interests as the committee oversees the composition of our board of directors. Although our board of directors does not maintain a specific policy with respect to board diversity requirements or goals, we believe that our board of directors should consist of a diverse body representing the interests of our stockholders. In making determinations regarding nominations of directors, the nominating and corporate governance committee considers a broad range of backgrounds and experiences, and takes into account the benefits of diverse viewpoints and experiences.

Stockholder Recommendations for Nominations to the Board of Directors

The nominating and corporate governance committee will consider candidates for director recommended by stockholders so long as such recommendations comply with the certificate of incorporation and bylaws of our company and applicable laws, rules and regulations, including those promulgated by the SEC. The committee will evaluate such recommendations in accordance with its charter, our bylaws, our policies and procedures for director candidates, as well as the regular nominee criteria described above. This process is designed to ensure that the board of directors includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business. Eligible stockholders wishing to recommend a candidate for nomination should contact our corporate secretary in writing. Such recommendations must include the information required by our bylaws, including information about the candidate, a statement of support by the recommending stockholder, evidence of the recommending stockholders ownership of our stock and a signed letter from the candidate confirming willingness to serve on our board of directors. The nominating and corporate governance committee has discretion to decide which individuals to recommend for nomination as directors.

A stockholder of record can nominate a candidate directly for election to the board of directors by complying with the procedures in Section 2.4(ii) of our bylaws. Any eligible stockholder who wishes to submit a nomination should review the requirements in the bylaws on nominations by stockholders. Any nomination should be sent in writing to the Corporate Secretary, SolarCity Corporation, 3055 Clearview Way, San Mateo, California 94402. Notice must be received by us no earlier than February 8, 2016 and no later than March 9, 2016. The notice must state the information required by Section 2.4(ii)(b) of our bylaws and otherwise must comply with applicable federal and state law.

Risk Management

Risk is inherent with every business, and we face a number of risks, including strategic, financial, business and operational, legal and compliance, and reputational. We have designed and implemented processes to manage risk in our operations. Management is responsible for the day-to-day management of risks the company faces, while our board of directors, as a whole and assisted by its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are appropriate and functioning as designed.

Our board of directors believes that open communication between management and the board of directors is essential for effective risk management and oversight. Our board meets with our chief executive officer and other members of the senior management team at each board meeting and at other times, where, among other topics, they discuss strategy and risks facing the company.

While our board of directors is ultimately responsible for risk oversight, our board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. The audit committee assists our board in fulfilling its oversight responsibilities with respect to risk management in the areas of internal control over financial reporting and disclosure controls and procedures, legal and regulatory compliance, and discusses with management and the independent auditor guidelines and policies with respect to risk assessment and risk management. The audit committee also reviews management’s assessment of the key risks facing us, including the key controls it relies on to mitigate those risks. The audit committee also monitors certain key risks at each of its regularly scheduled meetings, such as risk associated with internal control over financial reporting and liquidity risk. The nominating and corporate governance committee assists our board in fulfilling its oversight responsibilities with respect to the management of risk associated with board organization, membership and structure, and corporate governance. The compensation committee assesses risks created by the incentives inherent in our compensation policies. Finally, the full board of directors reviews strategic and operational risk in the context of reports from the management team, receives reports on all significant committee activities at each regular meeting, and evaluates the risks inherent in significant transactions.

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Non-Employee Director Compensation

In September 2012, we implemented a director compensation plan, pursuant to which our non-employee directors were eligible to receive equity awards and annual cash retainers as compensation for service on our board of directors and committees of our board of directors. Under the director compensation plan, each individual who joined our board of directors as a non-employee director received an initial stock option grant to purchase 30,000 shares at the time of initial election or appointment and additional triennial option grants for the purchase of 15,000 shares, as well as an annual cash retainer of $15,000, subject to continued service on our board of directors. Such non-employee directors who serve on committees of our board of directors may receive additional equity awards and cash retainers.

We have adopted a revised director compensation plan to be effective as of the date of the Annual Meeting, pursuant to which our non-employee directors will receive equity awards and annual cash retainers as follows:

·

Non-Statutory Stock Option Awards:

o

Initial award (upon initial election or appointment): 33,333 shares, vesting monthly over four years, with a one-year cliff

o

Other initial/recurring awards: vesting monthly over three years, refreshed by additional awards on the same terms after an earlier award is fully vested

§

Board service: 30,000 shares

§

Audit Committee chair/member: 10,000 / 3,500 shares

§

Compensation Committee chair/member: 5,000 / 3,000 shares

§

Nominating and Corporate Governance Committee chair/member: 3,000 / 1,000 shares

o

The vesting of each option shall fully accelerate if a director is terminated in connection with a “change in control” of the Company (as defined in the applicable equity incentive plan)

·

Annual Cash Retainers: all amounts paid quarterly

§

Board Membership: $20,000

§

Audit Committee chair/member: $15,000/ $5,000

§

Compensation Committee chair/member: $5,000 / $3,000

§

Nominating and Corporate Governance Committee chair/member: $3,000 / $1,000

In connection with the terms of Mr. Kendall’s service as a director, Mr. Kendall receives an annual cash retainer of $15,000 for his service as a director and an annual cash retainer of $15,000 for his service as chairperson of the audit committee, subject to his continued service as chairperson of our audit committee. In addition, because the exercise price of the stock option granted to Mr. Kendall in 2012 was greater than the fair market value of our common stock following our initial public offering, in February 2013, we granted an additional stock option to Mr. Kendall to purchase 7,500 shares of our common stock with an exercise price equal to the then current fair market value of our common stock, which was $15.30 per share. 1/4th of the shares subject to this stock option vested on September 17, 2013 and 1/48th of the total shares subject to the stock option vest and become exercisable each month thereafter, subject Mr. Kendall’s continued service as a director.

Following his appointment to the board of directors in March 2014, Mr. Shulkin was granted a non-statutory stock option to purchase 30,000 shares of our common stock with an exercise price equal to the then current fair market value of our common stock, which was $52.90 per share. 1/4th of the shares subject to this stock option vested on March 20, 2015 and 1/48th of the total shares subject to the stock option vest and become exercisable each month thereafter, subject Mr. Shulkin’s continued service as a director.

In the future, each of our non-employee directors will participate in our revised non-employee director compensation plan.

 

 

 

Fees Earned or

 

 

Option

 

 

 

 

 

 

 

 

Paid in Cash

 

 

Awards

 

 

 

Total

 

Name

 

($) (1)

 

 

($) (2)

 

 

 

($)

 

Donald R. Kendall, Jr. (4)

 

$

30,000

 

 

$

-

 

 

 

$

30,000

 

Jonathan K. Shulkin (5)

 

$

11,250

 

 

$

1,140,414

 

(3)

 

$

1,151,664

 

Bennet Van de Bunt (6)

 

$

15,000

 

 

$

-

 

 

 

$

15,000

 

 

(1)

The amount reported in this column represents the annual cash retainer fees paid to our directors in connection with service on our board of directors in 2014.

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(2)

The amount reported in this column represents the grant date fair value of the stock options as computed in accordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or ASC 718. The assumptions used in calculating the grant date fair value reported in this column are set forth in the notes to our audited consolidated financial statements included in our annual report on Form 10-K. Note that the amounts reported in this column reflect the accounting cost for these equity awards, and do not correspond to the actual economic value that our directors may receive from the awards.

(3)

Subject to continued service as a member of our board of directors, the stock option granted to Mr. Shulkin will vest as to 1/4th of the shares on March 20, 2015 and 1/48th of the total shares subject to the stock option will vest and become exercisable each month thereafter until the stock option is fully vested on March 20, 2018. As a result of Mr. Shulkin’s decision not to stand for reelection to our board of directors, as of the day following the annual meeting, 21,250 shares subject to the stock option will be cancelled and returned to our equity incentive plan, and 8,750 shares subject to the stock option will remain available for exercise.

(4)

As of December 31, 2014, Mr. Kendall held outstanding stock options and stock awards to acquire up to an aggregate of 64,934 shares of our common stock.

(5)

As of December 31, 2014, Mr. Shulkin held outstanding stock options to acquire up to an aggregate of 30,000 shares of our common stock.

(6)

As of December 31, 2014, Mr. Van de Bunt held outstanding stock options to acquire up to an aggregate of 30,000 shares of our common stock.

Insider Trading Policy and Rule 10b5-1 Trading Plans

SolarCity has an insider trading policy that, among other things, prohibits short sales, hedging of stock ownership positions, and transactions involving derivative securities and imposes limitations on the ability to pledge shares of SolarCity’s common stock. In addition, as of December 31, 2014, three of SolarCity’s executive officers had entered into Rule 10b5-1 trading plans.

Contacting the Board of Directors

Any stockholder who desires to contact our non-employee directors may do so electronically at the following website: http://investors.solarcity.com. Such stockholders who desire to contact our non-employee directors by mail may do so by writing SolarCity’s corporate secretary at SolarCity Corporation, 3055 Clearview Way, San Mateo, CA 94402. Our General Counsel receives these communications unfiltered by SolarCity, forwards communications to the appropriate committee of the Board of Directors or non-employee director, and facilitates an appropriate response. Please note that requests for investor relations materials should be sent to ir@solarcity.com.

 

 

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EXECUTIVE OFFICERS

The following table identifies certain information about our executive officers as of April 21, 2015. Officers are elected by the board of directors to hold office until their successors are elected and qualified.

 

Name

 

Age

 

 

Position(s)

Lyndon R. Rive

 

 

38

 

 

Co-Founder, Chief Executive Officer and Director

Peter J. Rive

 

 

41

 

 

Co-Founder, Chief Technology Officer and Director

Brad W. Buss

 

 

51

 

 

Chief Financial Officer

Tanguy V. Serra

 

 

37

 

 

Chief Operations Officer

Hayden D. Barnard

 

 

43

 

 

Chief Revenue Officer

Seth R. Weissman

 

 

46

 

 

Executive Vice President, General Counsel and Secretary

 

For a brief biography of Messrs. Lyndon and Peter Rive, please see “Proposal One—Election of Directors—Information Regarding the Board of Directors and Director Nominees.”

Brad W. Buss has served as our Chief Financial Officer since August 2014. Prior to joining SolarCity, Mr. Buss served as Chief Financial Officer and Executive Vice President, Finance and Administration of Cypress Semiconductor Corp., a semiconductor design and manufacturing company, from August 2005 until June 2014. Mr. Buss also served as Vice President of Finance at Altera Corp., a semiconductor design and manufacturing company, from March 2000 to March 2001 and from October 2001 to August 2005. Mr. Buss has served as a member of the board of directors of Tesla Motors, Inc. since November 2009 and CafePress.com since October 2007. Mr. Buss holds a B.A. in economics from McMaster University and an honors business administration degree, majoring in finance and accounting, from the University of Windsor.

Tanguy V. Serra has served as our Chief Operations Officer since February 2014, and prior to that served as our Executive Vice President, Operations from May 2013 to February 2014. Prior to joining SolarCity, Mr. Serra served as chief executive officer and president of Vivint Solar, Inc., a solar energy system installer, from April 2011 to April 2013. From April 2004 to September 2011, Mr. Serra served as vice president at TPG Capital, L.P., a leading global private investment firm. Mr. Serra holds a bachelor’s degree in accounting from ESCP Europe in Paris.

Hayden D. Barnard has served as our Chief Revenue Officer since September 2013. Prior to joining SolarCity, Mr. Barnard served as founder and CEO of Paramount Equity, LLC, a consumer finance company specializing in mortgage, insurance, and residential solar, from September 2003 until September 2013. Prior to Paramount Equity, Mr. Barnard served as an account manager of Oracle Corporation from 1995 to 2003. Mr. Barnard holds a bachelor’s degree in business management and marketing from the University of Missouri.

 

Seth R. Weissman has served as our Executive Vice President since May 2013, as our Vice President from September 2008 to May 2013, as our General Counsel since September 2008 and as our Secretary since June 2009. Prior to joining SolarCity, Mr. Weissman served as vice president, general counsel, and chief privacy officer of Coremetrics, Inc., a leading digital marketing company, from June 2004 to August 2008. Mr. Weissman also practiced employment and corporate law at Wilson Sonsini Goodrich & Rosati, Professional Corporation, at Stoneman, Chandler and Miller LLP, and at Hutchins, Wheeler, Dittmar, Professional Corporation. Mr. Weissman holds a bachelor’s degree in political science from The Pennsylvania State University and a J.D. from Boston University School of Law.

 

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis of compensation arrangements of our named executive officers for 2014 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations, expectations, and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from current or planned programs as summarized in this discussion.

This Compensation Discussion and Analysis provides information regarding the fiscal 2014 compensation program for our Chief Executive Officer, Chief Financial Officer, former Chief Financial Officer and the three other executive officers who were serving as the most highly-compensated executive officers of our company at the end of the fiscal year ended December 31, 2014. During fiscal 2014, these individuals were:

·

Lyndon R. Rive, our Co-Founder and Chief Executive Officer;

·

Brad W. Buss, our Chief Financial Officer;

·

Robert D. Kelly, our former Chief Financial Officer;

·

Tanguy V. Serra, our Chief Operations Officer;

·

Hayden D. Barnard, our Chief Revenue Officer; and

·

Seth R. Weissman, our Executive Vice President, General Counsel and Secretary.

We refer to these executive officers collectively in this Compensation Discussion and Analysis and the related compensation tables as the “Named Executive Officers.” We refer to Lyndon Rive, our Chief Executive Officer, and Peter Rive, our Chief Technology Officer, collectively as our “Founders.” In February 2014, Mr. Serra was promoted to Chief Operations Officer. In August 2014, Mr. Kelly resigned as our Chief Financial Officer, and Mr. Buss was appointed as our Chief Financial Officer.

Specifically, this Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each material component of compensation that we provide to the Named Executive Officers. In addition, we explain how and why the compensation committee of our board of directors (our “Compensation Committee”) arrived at the specific compensation policies and decisions involving the Named Executive Officers during fiscal 2014.

Executive Summary

SolarCity’s founding vision is to accelerate mass adoption of sustainable energy. We make clean energy available to homeowners, businesses, schools, non-profits, and government organizations at a lower cost than they pay for energy generated by burning fossil fuels, such as coal, oil, and natural gas. Our approach is to install systems to the highest engineering standards while making the switch simple for our customers. We are revolutionizing the way energy is delivered by giving customers a cleaner, more affordable alternative to their monthly utility bill.

Fiscal 2014 Operating and Financial Highlights

Our operating activities include acquiring new customers, operating and maintaining solar energy systems, collecting energy contract payments and additional activities that enable us to sell and service energy to customers.

Our fiscal 2014 operating activity and financial highlights were as follows:

·

Megawatts Deployed – We deployed 502 MW in fiscal 2014, an increase of 79% from fiscal 2013, and installed more solar energy systems than any other company in the United States in 2014.

·

Strong Balance Sheet – We had cash and cash equivalents of $642.7 million as of December 31, 2014.

·

Estimated Nominal Contracted Payments Remaining – Our Estimated Nominal Contracted Payments Remaining was $5.0 billion as of December 31, 2014, an increase of 149% over fiscal 2013.

·

Total Customers – We had 189,657 total customers as of December 31, 2014, an increase of 104% from fiscal 2013.

·

Total Employees – We grew to 9,051 total employees as of December 31, 2014, an increase of 110% from fiscal 2013.

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·

Cumulative Energy Contracts – We had 177,455 energy contracts as of December 31, 2014, an increase of 113% from fiscal 2013.

·

Securitization – In 2013, we securitized the first portfolio of distributed solar assets in the world, raising $54.4 million through the issuance of solar asset-backed notes. In 2014, we completed two additional securitized offerings of distributed solar asset portfolios, raising an aggregate of $271,700,000 through the issuance of solar asset-backed notes.

·

Convertible Note Offerings – We issued $566 million in aggregate principal of 1.625% convertible senior notes due 2019 in private placement transactions.

·

Silevo Acquisition – In 2014, we completed our acquisition of Silevo, a manufacturer of high-efficiency solar modules, and negotiated an expanded relationship with the State of New York to construct what would be the largest solar manufacturing facility in the Western Hemisphere.

·

MyPower Solar Loan – In 2014, we began offering customers the choice to purchase a solar energy system from us through a solar loan financed by a subsidiary. MyPower accounted for nearly 30% of our residential bookings in the fourth quarter of 2014, and in the months following its launch made us one of the nation’s leading solar loan providers.

·

Solar Bonds – In 2014, we began issuing registered senior unsecured debt securities directly to investors through our proprietary online platform, another first for our industry.

·

Revenue – In 2014, our operating leases and solar energy systems incentives revenue was $173.6 million, an increase of 110% from fiscal 2013, and our total revenue was $255.0 million, an increase of 56% from fiscal 2013.

·

Gross Profit – In 2014, our gross profit was $78.6 million, an increase of 100% from fiscal 2013.

Fiscal 2014 Executive Compensation Highlights

Consistent with our performance and compensation objectives, our Compensation Committee approved the following compensation for our executive officers, including the Named Executive Officers, for fiscal 2014:

·

Maintained base salaries at fiscal 2013 levels for the continuing Named Executive Officers.

·

Granted no new equity awards to the Named Executive Officers continuing in their positions.

·

Hired Mr. Buss as our Chief Financial Officer and entered into compensation arrangements with Mr. Buss consistent with our executive compensation strategy and philosophy.

·

Promoted Mr. Serra to Chief Operations Officer and granted long-term equity incentive compensation awards to Mr. Serra in the form of stock option awards, which awards vest predominantly upon the achievement of specified performance criteria.

·

Amended performance stock option awards previously granted to Mr. Serra and Barnard as a result of adjustments to internal financial reporting to better align achievement of vesting criteria to achievement of corporate cost-related objectives consistent with our current operating plan (no compensation charges were recognized as a result of these amendments).

 

Executive Compensation Policies and Practices

We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. Our Compensation Committee evaluates our executive compensation program on an ongoing basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following policies and practices were in effect during fiscal 2014:

·

Independent Compensation Committee. Our Compensation Committee is comprised solely of independent directors.

·

Independent Compensation Committee Advisor. Our Compensation Committee engaged Compensia, Inc., an independent compensation consultant (“Compensia”), to assist with its fiscal 2014 compensation review. This consultant performed no other consulting or additional services for us.

·

Annual Executive Compensation Review. Our Compensation Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation peer group used for comparative purposes.

·

Executive Compensation Policies and Practices. Our compensation philosophy and related corporate governance policies and practices are complemented by several specific compensation practices that are designed to align our executive compensation with long-term stockholder interests, including the following:

-23-


 

·

No Employment Agreements. We do not have employment agreements with any of our executive officers. All executive officers are employed on an “at will” basis.

·

Compensation At-Risk. Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on corporate performance, as well as equity-based to align the interests of our executive officers and stockholders.

·

Multi-Year Vesting Requirements for Time-Based Awards. The time-based equity awards granted to our executive officers vest over multi-year periods, consistent with current market practice and our retention objectives.

·

Significant Corporate Objectives for Performance-Based Awards. The performance-based equity awards granted to certain of our executive officers vest upon the achievement of significant corporate objectives or progress towards significant corporate objectives intended to benefit our stockholders.

·

No Retirement Plans. We do not currently offer pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements to our executive officers, other than a 401(k) plan offered to all employees with no company match.

·

Limited Perquisites. We offer only limited perquisites or other personal benefits to certain of our executive officers, such as access to company-leased automobiles.

·

No Special Health or Welfare Benefits. Our executive officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.

·

No Post-Employment Compensation Arrangements. We do not provide any post-employment compensation payments or other benefits, including in connection with a change in control, to our executive officers that are not otherwise available on the same basis to our other full-time employees.

·

Hedging Prohibited. We prohibit our employees from hedging any SolarCity securities.

·

Pledging Limited. We limit the ability of our employees to pledge SolarCity securities.

·

Succession Planning. We review the risks associated with key executive officer positions to ensure adequate succession plans are in place.

Compensation Philosophy and Objectives

To successfully grow our business in a dynamic and competitive environment, we need a highly talented and seasoned team of engineering, operations, technical, sales, marketing, and other business professionals. We compete with many other companies to attract and retain a skilled management team. To meet this challenge, we embrace a compensation philosophy of offering our executive officers a competitive total compensation program that recognizes and rewards both individual performance and contributions to our overall success. This allows us to attract, retain and motivate talented executives with the knowledge, skills, and abilities needed to drive our business results.

Our executive compensation program is designed to:

·

reward the achievement of our operational objectives;

·

develop a business strategy that will be successful over the long-term;

·

attract, motivate, reward, and retain the highly-qualified executive officers important to our success; and

·

recognize strong performers by offering compensation that rewards individual achievement as well as contributions to our overall success.

In addition, we seek to implement an overarching “pay-for-performance” philosophy by designing our executive compensation program to link a substantial component of our executive officers’ target total direct compensation to the achievement of performance objectives that directly correlate to the creation of stockholder value. To achieve this objective, we believe that the compensation paid to our executive officers should be closely aligned with our corporate performance on both a short-term and long-term basis, linked to specific, measurable results and assist us in motivating and retaining the key executive officers critical to our long-term success.

Compensation Program Design

The compensation of our executive officers, including the Named Executive Officers, consists primarily of base salary, an annual cash bonus and/or commission opportunity, long-term incentive compensation in the form of equity awards, and certain employee welfare benefits.

-24-


 

The key component of our executive compensation program has been equity awards, typically in the form of options to purchase shares of our common stock. Since our incorporation, we have emphasized the use of equity awards to provide incentives for our executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create value for all of our stockholders. We have used and continue to use stock options as our primary equity award vehicle for all of our executive officers. We believe that stock options offer our executive officers a valuable long-term incentive that aligns their interests with the long-term interests of our stockholders. The choice to grant stock options to our executive officers also reflects our belief that they are in a direct position to influence the market price of our common stock. Furthermore, the majority of stock option grants to our executive officers vest only upon achievement of significant corporate objectives or progress towards significant corporate objectives intended to benefit our stockholders.

We also grant restricted stock unit awards to our Named Executive Officers and employees as the Compensation Committee determines appropriate. We believe, consistent with competitive market practices, that restricted stock unit awards can appropriately align the interests of our executive officers with those of our stockholders and provide appropriate retention incentives to our executive officers.

We also offer cash compensation in the form of base salaries, annual cash bonus opportunities for most of our employees, and commissions for our sales personnel. Typically, we have structured our annual cash bonus opportunities to focus on the achievement of specific short-term financial and strategic objectives that we believe will further our longer-term growth objectives.

Historically, we have used standard industry surveys to assist our board of directors and Compensation Committee in establishing cash compensation levels for our executive officers, with an emphasis on alternative energy and technology companies similar in size, stage of development, and growth potential. Since fiscal 2012, we have also used competitive market data developed from a review of the executive compensation practices of a group of peer companies to inform our executive compensation decisions. Using this information as a guideline, our board of directors and, more recently, our Compensation Committee, has emphasized remaining competitive in our market. Equity awards have been delivered periodically on a discretionary basis with the goal to retain and motivate top talent and align the interests of our executive officers with the long-term interests of our stockholders.

We have not adopted any formal policies or guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. Instead, our board of directors and our Compensation Committee, as applicable, has reviewed each element of executive compensation separately and considered the value of each executive officer’s compensation package as a whole and its relative size in comparison to our other executive officers.

As we continue to mature as a publicly-traded company, our Compensation Committee will continue to regularly evaluate our executive compensation program design as circumstances require. At a minimum, our Compensation Committee will continue to review our executive compensation program annually. As part of this review, we expect that our Compensation Committee will apply our values and the objectives outlined above, while considering the compensation levels necessary to ensure our executive compensation program remains competitive and effective. Our Compensation Committee will also review the program to ensure we are meeting our retention objectives and the potential cost of replacing a key employee.

Compensation-Setting Process

Role of Compensation Committee

Our Compensation Committee is responsible for evaluating, approving, and reviewing the compensation arrangements, plans, policies, and programs for our executive officers and the non-employee members of our board of directors, and overseeing our cash-based and equity-based compensation plans. For fiscal 2014, our Compensation Committee was comprised of Messrs. Fisher, Straubel (January – August 2014), and Van de Bunt (August – December 2014) and Ms. Pfund, who each qualify as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code (the “Code”), as “non-employee directors” for purposes of Exchange Act Rule 16b-3 and as “independent directors” under the requirements of The NASDAQ Global Market.

At the beginning of each fiscal year, our Compensation Committee reviews our executive compensation program, including any incentive compensation plans to determine whether they are appropriate, properly coordinated, and achieve their intended purposes. Our Compensation Committee also conducts an annual review of our executive compensation strategy to ensure that it is appropriately aligned with our business strategy and achieving our desired objectives. Further, our Compensation Committee reviews market trends and changes in competitive compensation practices, as further described below. Based on its review and assessment, our Compensation Committee, from time to time, makes any modifications to existing plans and arrangements or adopts new plans or arrangements as determined necessary.

-25-


 

Except as noted in the following paragraph, in each fiscal year, our Compensation Committee takes the following actions with respect to the compensation of our executive officers:

·

establishes our corporate performance objectives and makes decisions with respect to any base salary adjustments;

·

consults with management and then determines target bonus and commission opportunities; and

·

makes decisions with respect to equity awards, if any, for the upcoming fiscal year.

 

Our Compensation Committee consults with our Founders and other members of management, as appropriate, when making compensation decisions, although our Founders are not present during voting or deliberations by our Compensation Committee regarding their compensation.

Our Compensation Committee’s authority, duties, and responsibilities are described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available on the Investor Relations section of our website at http://investors.solarcity.com. For additional information on our Compensation Committee, including the scope of its authority, see “Corporate Governance—Board Meetings and Committees—Compensation Committee” elsewhere in this Proxy Statement.

Role of Executive Officers

In carrying out its responsibilities, our Compensation Committee works with members of our management, including our Founders and Senior Vice President of Human Resources. Typically, our management assists our Compensation Committee by providing information on corporate and individual performance, market data, and management’s perspective and recommendations on compensation matters.

Our Founders make recommendations to our Compensation Committee regarding executive compensation matters, including providing to our Compensation Committee their assessments of the performance of other executive officers. They also attend Compensation Committee meetings, and engage in discussions with our Compensation Committee regarding their own compensation, although our Founders are not permitted to be present during any voting or deliberations by our Compensation Committee regarding their compensation.

While our Compensation Committee solicits and considers the recommendations and proposals of our Founders and other members of our board of directors on compensation-related matters, our Compensation Committee only uses these recommendations and proposals as one factor in making its compensation decisions.

Role of Compensation Consultant

Pursuant to its charter, our Compensation Committee has the authority to retain the services of external advisors, including compensation consultants, legal counsel, accounting, and other advisors, to assist it in carrying out its duties and responsibilities. During fiscal 2014, our Compensation Committee engaged Compensia as its adviser for certain compensation matters, including the compensation of our executive officers, our broader employee equity program and certain disclosure matters.

Compensia was engaged directly by our Compensation Committee to provide an independent review of our executive compensation program, including an analysis of both the competitive market and the design of the various elements of the program. More specifically, Compensia furnished our Compensation Committee with reports on competitive market practices relating to the following matters:

·

annual incentive compensation plan design;

·

executive compensation; and

·

general executive compensation policies and practices.

As part of its engagement with our Compensation Committee, Compensia evaluated and recommended changes to our compensation peer group, and using this compensation peer group provided competitive market data and analysis relating to the compensation of our executive officers, including the Named Executive Officers.

Compensia provided no additional consulting services to us or to our board of directors apart from the matters discussed above in fiscal 2014. Our Compensation Committee has considered the independence of Compensia in light of the NASDAQ listing standards on compensation committee independence and the rules of the Securities and Exchange Commission. Based on these standards and rules, our Compensation Committee has concluded that the services performed by Compensia did not raise any conflict of interest.

-26-


 

Competitive Positioning

In arriving at its decisions on the amounts and elements of compensation for our executive officers for fiscal 2014, our Compensation Committee considered, among other factors, competitive market data and analyses prepared by Compensia based on our compensation peer group. In selecting companies for the compensation peer group, our Compensation Committee identified companies that it believed were similar to us from a size, business model and growth perspective (as described more fully below) or which our Compensation Committee believed compete with us for executive talent. In particular, the compensation peer group for fiscal 2014 was determined based on the following criteria:

·

Initially, we considered all publicly traded U.S.-based companies and narrowed the potential peers through a rules based system:

·

Revenue target range of approximately 50-200% relative to our fiscal 2012 projected pro-forma revenue (or approximately $650 million) and

·

Market capitalization range of 10-220% relative to our estimated valuation at the time of our initial public offering (or approximately $3 billion).

·

We then narrowed the peer list with the following selection criteria:

·

Consumer facing companies that provide residential related products/services;

·

Recently public consumer facing technology companies; and

·

Category defining companies (due to the limited number of specific industry peers that are publicly-traded and fit our revenue and/or market cap criteria).

·

We also considered peer company revenue growth, operating margin and free cash flow.

Based on the foregoing process, Compensia recommended, and our Compensation Committee approved, the compensation peer group set forth below, which was used during fiscal 2014:

Similar Business Model/Industry Companies:

 

·

Aruba Networks

·

Mobile Mini

·

Calix

·

Neustar

·

Cardtronics

·

Ntelos Holdings

·

EarthLink

·

SBA Communications

·

Fortinet

·

Vonage Holdings

·

Infinera

 

 

Category Defining Companies:

 

·

Air Lease

·

Pandora Media

·

Groupon

·

Rackspace Hosting

·

GATX

·

Tesla Motors

·

LinkedIn

·

Zipcar

Compensia also recommended, and our Compensation Committee approved, the use of the Radford Global Technology Survey data for other executive positions where there was no disclosure of similar positions in the peer group. Due to our rapid growth and increased market capitalization, our Compensation Committee will be reviewing and adjusting the peer group companies during fiscal 2015.

 

2015 Compensation Policy and Program Review

The Compensation Committee will be reviewing all our compensation policies and programs during fiscal 2015, as part of its periodic review. Items anticipated to be reviewed include the following:

·

implementing an investor outreach program;

·

composition of our compensation peer group;

·

targets for short-term cash bonus payments;

·

adoption of a clawback policy; and

-27-


 

·

implementing stock ownership guidelines for members of our board of directors and executive officers.

As decisions are made and implemented we will update our disclosures as appropriate in our SEC filings.

Compensation Elements

As noted above, during fiscal 2014, the compensation of our executive officers, including the Named Executive Officers, consisted of base salary, an annual cash bonus opportunity, and long-term incentive compensation in the form of equity awards.

Base Salary

Base salary is the primary fixed cash component of our executive compensation program. We use base salary to provide a consistent level of cash compensation to our executive officers for services rendered during the year, and to ensure that we remain competitive in attracting and retaining executive talent.

Generally, we establish the initial base salaries of our executive officers through arm’s-length negotiations at the time we hire the individual executive officer, taking into account his or her position, qualifications, experience, prior salary level, and the base salaries of our other executive officers.

Thereafter, our board of directors and, more recently, our Compensation Committee reviews the base salary level of each executive officer annually. Our Compensation Committee makes adjustments to base salary as it determines to be reasonable and necessary to reflect the scope of an executive officer’s performance, individual contributions, responsibilities, experience, prior salary level, position (in the case of a promotion), and market conditions.

In May 2014, our Compensation Committee reviewed the base salaries of our executive officers, taking into consideration a compensation analysis performed by Compensia and the recommendations of our Founders, the total compensation package and opportunities of these Named Executive Officers, as well as the other factors described above. Our Compensation Committee determined that no adjustments to the base salaries of our continuing Named Executive Officers were necessary to maintain the competitiveness of their compensation packages.

The annual base salary for Mr. Buss was established through arm’s-length negotiations when he joined us in August 2014.

The annual base salaries of the Named Executive Officers for fiscal 2014 were as follows:

 

 

 

Fiscal 2013

 

 

Fiscal 2014

 

 

 

Base Salary

 

 

Base Salary

 

Named Executive Officer

 

($)

 

 

($)

 

Lyndon R. Rive

 

 

275,000

 

 

 

275,000

 

Brad W. Buss

 

N/A

 

 

 

270,000

 

Robert D. Kelly

 

 

270,000

 

 

 

270,000

 

Tanguy V. Serra

 

 

250,000

 

 

 

250,000

 

Hayden D. Barnard

 

 

250,000

 

 

 

250,000

 

Seth R. Weissman

 

 

270,400

 

 

 

270,400

 

The annual base salaries actually paid to the Named Executive Officers during fiscal 2014 are set forth in the “2014 Summary Compensation Table” below.  The annual base salaries payable to the Named Executive Officers in fiscal 2015 remain the same as those approved for fiscal 2014.

Annual Cash Bonuses

We use cash bonuses to motivate our executive officers to achieve our annual operating plan while also making progress towards our longer-term strategic and growth goals. Generally, our Compensation Committee meets in the first quarter of each year to determine the amount of target bonus opportunities for our executive officers, including the Named Executive Officers, based on the recommendations of our Founders with respect to the individual performance and contributions to our financial and operating results of our other executive officers during the preceding year. Typically, the amount of the target bonus opportunity is based on an assessment of our Compensation Committee, including consideration of comparative market information, and the arm’s-length negotiations relating to target bonus opportunity agreed upon at the time we hire the individual executive officer. The performance criteria used to determine the achievement of target bonus opportunity for our executive officers is recommended by our Founders,

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and determined by our Compensation Committee, with an emphasis on our growth, efficiency, and cost reductions for the year and their evaluation of each individual executive officer’s performance and contributions to our financial and operational performance.

Target Bonus Opportunities

The terms of the compensation packages for Messrs. Kelly, Serra, Barnard, and Buss, including the target annual cash bonus opportunities and manner of determining performance criteria, were established when they joined us through arm’s-length negotiations and were approved in consultation with members of our board of directors. The amounts of these target bonus opportunities are set forth in the table below.

In each case, achievement of the target bonus opportunity is subject to achievement of performance criteria mutually established by the Named Executive Officer and his supervisor. For fiscal 2014, the performance criteria for the Named Executive Officers were as follows:

·

Mr. Buss’ performance criteria was based upon improving the control environment and the successful completion of our convertible note offering and certain tax equity funds.

·

Mr. Kelly’s performance criteria was based upon the amount of capital we raised during the fiscal year.

·

Mr. Serra’s performance criteria was based upon the number of megawatts deployed by us each month.

·

Mr. Barnard’s performance criteria was based upon our customer acquisition, sales performance and efficient growth during the fiscal year.

·

Mr. Weissman’s performance criteria was based upon the operational functioning and efficiency of our legal and related functions.

Achievement by our Named Executive Officers of the maximum target bonus opportunities was challenging and required meaningful growth achieved with efficiency. We believe that disclosure of the specific levels of performance criteria would cause competitive harm to us.

Fiscal 2014 Bonus Decisions

Following the end of the 2014 fiscal year, our Founders evaluated our financial and operating performance for the prior year, confirmed the achievement by each executive officer of his or her performance criteria, and made subjective assessments of each individual’s other achievements and contributions during the year. Our Founders also took into consideration each executive officer’s responsibilities, experience, skills, equity holdings, and current market practice. Based upon the foregoing and the target bonus opportunities approved in consultation with members of our board of directors, our Founders determined the bonus amounts to be paid to our executive officers, including Messrs. Buss, Kelly, Serra, Barnard and Weissman.

The decisions relating to the payment of bonuses and actual bonus amounts paid to our Named Executive Officers in fiscal 2014 were as follows:

·

Following the end of the 2014 fiscal year, our Founders confirmed that Mr. Buss had fully achieved his performance criteria for fiscal 2014, and determined to pay Mr. Buss 100% of his target annual cash bonus opportunity, pro-rated based upon the length of his service during the fiscal year.

·

Prior to his resignation in August 2014, our Founders confirmed that Mr. Kelly had fully achieved the relevant performance criteria for the payment of an additional bonus. As a result, Mr. Kelly was paid 109% of his target annual cash bonus opportunity through the time of his departure.

·

On a monthly basis, our Founders reviewed Mr. Serra’s achievement of performance criteria, and determined the bonus amounts payable to Mr. Serra. Based upon this review, Mr. Serra was paid $753,145.

·

Following the end of the 2014 fiscal year, our Founders confirmed that Mr. Barnard had fully achieved his performance criteria for fiscal 2014, and determined to pay Mr. Barnard 100% of his target annual cash bonus opportunity.

·

Following the end of the 2014 fiscal year, our Founders confirmed that Mr. Weissman had fully achieved his performance criteria for fiscal 2014, and determined to pay Mr. Weissman 100% of his target annual cash bonus opportunity.

Mr. Rive declined to be paid any annual cash bonus.

-29-


 

The annual cash bonuses paid to the Named Executive Officers for fiscal 2014 were as follows:

 

 

 

Target

 

 

 

 

 

 

Actual Annual Bonus (as

 

 

 

Annual

 

 

Actual

 

 

a percentage of Target

 

 

 

Bonus

 

 

Annual

 

 

Annual Bonus

 

 

 

Opportunity

 

 

Bonus

 

 

Opportunity (prorated,

 

Named Executive Officer

 

($)

 

 

($)

 

 

as applicable))

 

Lyndon R. Rive

 

N/A

 

 

N/A

 

 

N/A

 

Brad W. Buss

 

 

230,000

 

 

 

90,110

 

 

 

100%

 

Robert D. Kelly

 

 

230,000

 

 

 

250,000

 

 

 

109%

 

Tanguy V. Serra

 

*

 

 

 

753,145

 

 

N/A

 

Hayden D. Barnard

 

 

250,000

 

 

 

250,000

 

 

 

100%

 

Seth R. Weissman

 

 

120,000

 

 

 

120,000

 

 

 

100%

 

*

Bonus opportunity is based upon achievement of significant performance criteria related to corporate operational metrics, without a specified target, threshold or maximum amount.

The annual cash bonus amounts actually paid to the Named Executive Officers for fiscal 2014 are set forth in the “2014 Summary Compensation Table” below. No substantial changes to the fiscal 2015 bonus targets are currently contemplated other than an expected reduction in the bonus opportunity for Mr. Serra.

Long-Term Incentive Compensation

We believe that continued successful execution of our business strategy will lead to sustained growth in the market price of our common stock over time. Accordingly, we provide long-term incentive compensation to our executive officers, primarily in the form of options to purchase shares of our common stock. Because stock options granted under our equity incentive plan provide for an economic benefit only in the event that our stock price increases over the exercise price of the option (which exercise price is equal to the fair market value of our common stock as of the date of grant), we believe that these equity awards effectively align the interests of our executive officers with those of our stockholders and provide our executive officers with a significant incentive to manage our company from the perspective of an owner with an equity stake in the business. The choice to grant stock options to our executive officers also reflects our belief that they are in a direct position to influence the market price of our common stock over the long term by creating value for our shareholders. Furthermore, the majority of stock option grants to our executive officers vest only upon achievement of significant corporate objectives or progress towards significant corporate objectives intended to benefit our stockholders. We also believe that these equity awards serve as an important retention tool for our executive officers, as unvested awards are generally forfeited if an officer voluntarily leaves us, and vested awards must be exercised within a short time period following an executive’s departure (generally, thirty days).

We also grant restricted stock unit awards to our Named Executive Officers and employees as the Compensation Committee determines appropriate. We believe, consistent with competitive market practices, that restricted stock unit awards can appropriately align the interests of our executive officers with those of our stockholders and provide appropriate retention incentives to our executive officers. Going forward, as we consider appropriate, we may introduce other forms of stock-based compensation awards into our executive compensation program to offer our executive officers additional types of long-term equity incentives that further this objective.

Historically, the size and form of the initial equity awards for our executive officers have been established through arm’s-length negotiations at the time we hire the individual executive officer. In making these awards, we consider, among other things, the prospective role and responsibility of the individual executive officer, competitive factors, the amount of equity-based compensation held by the executive officer at his or her former employer, the cash compensation received by the executive officer, and the need to create a meaningful opportunity for reward based on the creation of long-term, sustained stockholder value.

In addition, we grant equity awards to our executive officers when our board of directors or, more recently, our Compensation Committee has determined that these awards were necessary or appropriate to recognize corporate and individual performance, to recognize a promotion or to achieve our retention objectives. To date, we have not applied a rigid formula in determining the size of these equity awards. Instead, our board of directors or our Compensation Committee, as applicable, has exercised its judgment to determine the size of such equity awards for an individual executive officer after taking into consideration the recommendations of our Founders, the scope of the executive officer’s performance, contributions, responsibilities and experience, the amount of equity compensation held by the executive officer (including the current economic value of his or her unvested equity and the ability of these unvested holdings to satisfy our retention objectives), available benchmark data and other compensation analyses provided by our Human Resources Department, market conditions, and other criteria.

-30-


 

Further, our Compensation Committee considers competitive market data drawn from the compensation peer group, and determines the amount of each award consistent with our objective of setting long-term incentive compensation at a competitive level in relation to the competitive markets in which we operate, subject to individual variations. In making its equity award determinations, our board of directors or our Compensation Committee, as applicable, also considers annual share usage and overall stockholder dilution.

During fiscal 2014, Messrs. Rive, Barnard and Weissman, the Named Executive Officers continuing in their positions, received no new equity awards.  In light of the total compensation packages and opportunities of these Named Executive Officers, including outstanding shares and equity awards held by these officers, our Compensation Committee determined that the issuance of additional equity awards was not necessary to meet our motivational goals and retention objectives for these officers.

During fiscal 2014, we promoted Mr. Serra to Chief Operations Officer and we hired Mr. Buss as our Chief Financial Officer. In connection with these executive appointments, our Compensation Committee granted (i) options to purchase an aggregate of 650,000 shares of our common stock and (ii) a restricted stock unit award covering 100,000 shares of our common stock. Of these stock options, approximately 92.3% vest upon the achievement of performance-based objectives and approximately 7.7% vest over four years. The performance objectives related to performance-based stock option awards were determined by our Compensation Committee, and represent aggressive growth and efficiency goals that are intended to motivate these officers to achieve financial and operational results beneficial to all of our stockholders. Each of these stock options was granted with an exercise price equal to the fair market value of our common stock on the date of grant. The restricted stock unit award granted to Mr. Buss vests in equal annual amounts over a period of four years from the date of grant. The size and vesting terms of the equity awards granted to Mr. Buss were determined through arm’s-length negotiations when he joined us. The size and vesting terms of the equity awards granted to Mr. Serra were determined through deliberation of the Compensation Committee, including the recommendations of our Founders.

The equity awards granted to the Named Executive Officers in fiscal 2014 were as follows:

 

 

 

Time-Based

 

 

 

 

 

 

Performance-

 

 

 

 

Aggregate Fair

 

 

 

Restricted Stock

 

 

Time-Based

 

 

Based Stock

 

 

 

 

Value of Equity

 

 

 

Unit Awards

 

 

Stock Options

 

 

Options

 

 

Company Performance

 

Award

 

Named Executive Officer

 

(#)

 

 

(#)

 

 

(#)

 

 

Objective

 

($)(1)

 

Lyndon R. Rive

 

-

 

 

-

 

 

-

 

 

N/A

 

N/A

 

Brad W. Buss

 

 

100,000

 

 

-

 

 

-

 

 

N/A

 

$

7,181,000

 

Brad W. Buss

 

-

 

 

-

 

 

 

200,000

 

 

Megawatts Deployed

 

$

10,752,000

 

Brad W. Buss

 

-

 

 

-

 

 

 

200,000

 

 

Cost Per Watt

 

$

10,722,000

 

Brad W. Buss

 

-

 

 

-

 

 

 

30,000

 

 

Financial Operations Efficiency

 

$

1,494,300

 

Brad W. Buss

 

-

 

 

-

 

 

 

20,000

 

 

Financial Operations Efficiency

 

$

912,000

 

Robert D. Kelly

 

-

 

 

-

 

 

-

 

 

N/A

 

N/A

 

Tanguy V. Serra

 

-

 

 

 

50,000

 

 

-

 

 

N/A

 

$

2,714,000

 

Tanguy V. Serra

 

-

 

 

-

 

 

 

75,000

 

 

Cost Per Watt

 

$

4,287,750

 

Tanguy V. Serra

 

-

 

 

-

 

 

 

75,000

 

 

Customer Growth

 

$

4,287,750

 

Hayden D. Barnard

 

-

 

 

-

 

 

-

 

 

N/A

 

N/A

 

Seth R. Weissman

 

-

 

 

-

 

 

-

 

 

N/A

 

N/A

 

 

None of the Named Executive Officers realized any cash compensation related to these awards during fiscal 2014 or through the date of this proxy filing. In addition, all performance based stock option awards were granted at prices substantially above the current market price, which was $56.55 as of April 15, 2015, and are not anticipated to be exercised unless the trading price of our common stock exceeds the exercise price of such awards, even if the related performance criteria were to be achieved.

(1)

The amount reported in this column represents the grant date fair value of the stock options as computed in accordance with ASC 718. The assumptions used in calculating the grant date fair value reported in this column are set forth in the notes to our audited consolidated financial statements included in our annual report on Form 10-K. Note that the amounts reported in this column reflect the accounting cost for these equity awards, and do not correspond to the actual economic value that our Named Executive Officers may receive from the awards.

For the above table, “Megawatts Deployed” refers to a vesting schedule in which a fixed number of shares subject to such option shall vest upon our deployment of each Megawatt of energy capable of being produced by a new solar energy system. The number of Megawatts deployed by us and related number of shares vested pursuant to each such option are determined monthly by us.

For the above table, “Cost per Watt” refers to a vesting schedule in which a fixed number of shares subject to such option shall vest upon our achievement of specified cost and efficiency targets. Our costs are determined for each quarter relative to the

-31-


 

number of watts capable of being produced by a new solar energy system, and the related number of shares vested pursuant to each such option are determined quarterly by us.

For the above table, “Financial Operations Efficiency” refers to a vesting schedule in which the shares subject to such option vest upon achievement of specified financial operations targets related to efficiency and accuracy of our financial and control environment, as determined by us.

For the above table, “Customer Growth” refers to a vesting schedule in which a fixed number of shares subject to such option shall vest upon achievement of our customer acquisition goals. The number of customers us and related number of shares vested pursuant to each such option are determined monthly by us.

Additional details of the equity awards granted to the Named Executive Officers in fiscal 2014 are set forth in the “2014 Grants of Plan-Based Awards Table” and “2014 Outstanding Equity Awards at Fiscal Year-End Table” below.

Welfare and Other Employee Benefits

We have established a tax-qualified Section 401(k) retirement plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. Currently, we do not match any contributions made to the plan by our employees, including executive officers, although we maintain the discretion to do so. We intend the plan to qualify under Section 401(a) of the Code so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan.

In addition, we provide other benefits to our executive officers on the same basis as all of our full-time employees in the country where they reside. These benefits include health, dental, and vision benefits, health and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage.

We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices, the competitive market, and our employees’ needs.

Perquisites and Other Personal Benefits

Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide perquisites to our executive officers, except in limited situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment and retention purposes. For example, we have provided a company-leased automobile to Messrs. Serra, Barnard, Weissman and limited other members of our management, and paid certain housing and relocation expenses for Mr. Barnard in connection with his relocation to the San Francisco Bay Area. The amounts of these perquisites and other personal benefits are set forth in the “Other Compensation” column of and the footnotes to the “2014 Summary Compensation Table” below.

We may provide additional perquisites and other personal benefits to our executive officers in the future, as we determine appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation, retention or other purposes. All future practices with respect to perquisites and other personal benefits will be approved and subject to periodic review by our Compensation Committee.

Employment Offer Letters

While we have not entered into employment agreements with any of our executive officers, the initial terms and conditions of employment for each of the Named Executive Officers, other than our Founders, are set forth in written employment offer letters. Each of these arrangements was approved on our behalf by our board of directors or our Compensation Committee. We believe that these employment offer letters were necessary to induce these individuals to forego other employment opportunities for the uncertainty of a demanding position in a new and unfamiliar organization.

In filling these executive positions, our board of directors and Compensation Committee was aware that it would be necessary to recruit candidates with the requisite experience and skills to manage a growing business in a unique market niche. Accordingly, our board of directors and Compensation Committee recognize that competitive compensation packages were necessary to attract qualified candidates in a dynamic and competitive labor market. At the same time, our board of directors and Compensation Committee was sensitive to the need to integrate new executive officers into our executive compensation structure, balancing both competitive and internal equity considerations.

-32-


 

Each of these employment offer letters provided for “at will” employment and sets forth the initial compensation arrangements for the executive officer, including an initial base salary, an annual cash bonus opportunity, and a recommendation for equity awards to acquire shares of our common stock.

For a summary of the material terms and conditions of the employment offer letters with the Named Executive Officers, see “Employment Arrangements” below.

 

Post-Employment Compensation

None of our executive officers are eligible to receive any payments or benefits when their employment terminates, including in connection with or following a change in control, except as provided in our equity plans (and described below) applicable to all holders of equity awards.

Our executive officers, including the Named Executive Officers, are eligible to receive any benefits accrued under our broad-based benefit plans and as required by law, in accordance with those plans and policies.

The post-employment payments and benefits which the Named Executive Officers are eligible to receive are described in more detail in “Potential Payments upon Termination or Change in Control” below.

Other Compensation Related Policies

Derivatives Trading and Hedging Policy

Our board of directors has adopted a policy prohibiting the trading of derivatives or the hedging of our equity securities by our employees, including our executive officers, and the non-employee members of our board of directors, and limiting the ability of our directors and employees to pledge our common stock as collateral for loans.

Compensation Recovery Policy

Currently, we have not implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to our executive officers and other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement. We intend to adopt a general compensation recovery, or clawback, policy covering our annual and long-term incentive award plans and arrangements once the SEC adopts final rules implementing the requirement of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Section 162(m) of the Code generally disallows a deduction for federal income tax purposes to any publicly-traded corporation for any remuneration in excess of $1 million paid in any taxable year to its chief executive officer and each of the three other most highly-compensated executive officers (other than its chief financial officer). Generally, remuneration in excess of $1 million may be deducted if, among other things, it qualifies as “performance-based compensation” within the meaning of the Code. In this regard, the compensation income realized upon the exercise of options to purchase shares of the granting company’s securities granted under a stockholder-approved stock option plan generally will be deductible so long as the options are granted by a committee whose members are outside directors and certain other conditions are satisfied.

Our Compensation Committee generally seeks to qualify the variable compensation paid to the covered executive officers for the “performance-based compensation” exemption from the deduction limit under Section 162(m) when it believes such action is in the best interests of SolarCity. In approving the amount and form of compensation for our executive officers, our Compensation Committee considers all elements of the cost to us of providing such compensation, including the potential impact of the Section 162(m) deduction limit. However, our Compensation Committee reserves its discretion to authorize compensation payments that do not comply with an exemption from the deduction limit when it believes that such payments are appropriate to achieve other goals of our executive compensation program.

Taxation of Nonqualified Deferred Compensation

Section 409A of the Code requires that amounts that qualify as “nonqualified deferred compensation” satisfy requirements with respect to the timing of deferral elections, timing of payments, and certain other matters. Our Compensation Committee intends to administer our executive compensation program and design individual compensation components, as well as the compensation plans

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and arrangements for our employees generally, so that they are either exempt from, or satisfy the requirements of, Section 409A. From time to time, we may be required to amend some of our compensation plans and arrangements to ensure that they are either exempt from, or compliant with, Section 409A.

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of the company that exceeds certain prescribed limits, and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We are not obligated to provide any Named Executive Officer with a “gross-up” or other reimbursement payment for any tax liability that he may owe as a result of the application of Sections 280G or 4999 in the event of a change in control of the company.

Accounting for Stock-Based Compensation

Our Compensation Committee takes accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees, among other issues and matters of concern. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of stock-based compensation awards.

ASC Topic 718 requires us to recognize in our consolidated statement of operations all share-based payments to employees, including grants of options to purchase shares of our common stock to our executive officers, based on their fair values. The application of ASC Topic 718 involves significant amounts of judgment in the determination of inputs into the Black-Scholes valuation model that we use to determine the fair value of stock options. These inputs are based upon assumptions as to the volatility of the underlying stock, risk-free interest rates, and the expected life of the options. As required under GAAP, we review our valuation assumptions at each grant date, and, as a result, our valuation assumptions used to value stock options granted in future periods may vary from the valuation assumptions we have used previously. For performance-based stock awards, we also must apply judgment in determining the periods when, and if, the related performance targets become probable of being met. The assumptions used in calculating the grant date fair value pursuant to ASC Topic 718 are set forth in the notes to our audited consolidated financial statements included in our annual report on Form 10-K.

ASC Topic 718 also requires companies to recognize the compensation cost of their share-based payment awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award (which, generally, will correspond to the award’s vesting schedule).

 

 

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COMPENSATION RISK ASSESSMENT

As part of its oversight of our compensation practices, our Compensation Committee has considered our executive officer and non-executive employee compensation programs as they relate to corporate risk management. Our compensation programs are currently consistent with practices of other companies in our industry, and our Compensation Committee has concluded that our compensation policies and practices are not likely to have a material adverse effect on us, including for the following reasons:

·

our Founders’ and our board of directors’ retention of a high degree of discretion with respect to the payment of annual cash bonuses, as well as our consideration of our operating performance and assessments of individual performance during the prior fiscal year to determine the amount of such bonuses, help minimize the risk that the short-term variable component of our executive compensation program might pose; and

·

the long-term component of our compensation program, which to date has consisted primarily of stock options, keeps our executive officers and employees appropriately focused on sustained long-term enterprise-level growth through multi-year vesting schedules and by providing value only if we succeed in growing our business in a way that results in appreciation of the value of our common stock over time.

Compensation Committee Report

In 2014, the Compensation Committee of the Board of Directors was comprised of the following non-employee members of the Board of Directors: Messrs. Fisher, Straubel (January – August 2014), Van de Bunt (August – December 2014) and Ms. Pfund. Each member was determined to be an “outside director” for purposes of Section 162(m) of the Internal Revenue Code and a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act.

The Compensation Committee’s primary responsibility is to review the performance of SolarCity’s management in achieving corporate goals and objectives and to ensure that SolarCity’s management is compensated effectively in a manner consistent with SolarCity’s strategy and competitive practices. Toward that end, the Compensation Committee oversees, reviews and administers all of SolarCity’s compensation, equity and employee benefit plans and programs applicable to executive officers.

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

Respectfully submitted by the members of the compensation committee of the board of directors:

John H. N. Fisher - Chairman

Nancy E. Pfund

Bennet Van de Bunt

 

 

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2014 Summary Compensation Table

The following table presents summary information regarding the total compensation awarded to, earned by, and paid to our Named Executive Officers for 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

 

Option

 

 

Incentive Plan

 

 

All Other

 

 

 

 

 

Name and Principal Position of Named

 

 

 

Salary

 

 

Bonus

 

 

Awards (1)

 

 

Awards (1)

 

 

Compensation

 

 

Compensation (2)

 

 

Total

 

Executive Officers

 

Year

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

Lyndon R. Rive,

 

2014

 

 

275,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18

 

 

 

275,018

 

Chief Executive Officer

 

2013

 

 

276,058

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10

 

 

 

276,068

 

 

 

2012

 

 

275,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23

 

 

 

275,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brad W. Buss,

 

2014

 

 

103,846

 

 

 

90,110

 

 

 

7,181,000

 

 

 

23,880,300

 

 

 

-

 

 

 

5

 

 

 

31,255,261

 

Chief Financial Officer (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert D. Kelly,

 

2014

 

 

178,615

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

31,081

 

 

 

459,697

 

former Chief Financial Officer (4)

 

2013

 

 

271,039

 

 

 

20,000

 

 

 

-

 

 

 

-

 

 

 

230,000

 

 

 

29

 

 

 

521,068

 

 

 

2012

 

 

270,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

150,000

 

 

 

23

 

 

 

420,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tanguy V. Serra,

 

2014

 

 

250,000

 

 

 

-

 

 

 

-

 

 

 

11,289,500

 

 

 

753,145

 

 

 

28,247

 

 

 

12,320,892

 

Chief Operations Officer (5)(6)

 

2013

 

 

160,577

 

 

 

14,425

 

 

 

-

 

 

 

14,071,060

 

 

 

222,925

 

 

 

21,035

 

 

 

14,490,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hayden D. Barnard,

 

2014

 

 

250,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

44,545

 

 

 

544,545

 

Chief Revenue Officer (7)

 

2013

 

 

83,654

 

 

 

-

 

 

 

-

 

 

 

10,742,268

 

 

 

72,500

 

 

 

14,505

 

 

 

10,912,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Seth Weissman

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President, General Counsel and Secretary (8)

 

2014

 

 

270,400

 

 

 

120,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

34,109

 

 

 

424,509

 

 

 

2013

 

 

264,000

 

 

 

120,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18

 

 

 

384,018

 

 

 

2012

 

 

254,231

 

 

 

70,000

 

 

 

-

 

 

 

156,505

 

 

 

-

 

 

 

23

 

 

 

480,759

 

 

None of the Named Executive Officers realized any cash compensation related to these awards during fiscal 2014 or through the date of this proxy filing. In addition, all stock option awards were granted at prices substantially above the current market price, which was $56.55 as of April 15, 2015, and are not anticipated to be exercised unless the trading price of our common stock exceeds the exercise price of such awards, even if the vesting conditions were to be achieved.

(1)

The amounts reported in the Option Awards column represent the grant date fair value of the stock options granted to our Named Executive Officers as computed in accordance with ASC 718. The assumptions used in calculating the grant date fair value of the stock options reported in this column are set forth in the audited consolidated financial statements included in our annual report on Form 10-K. Note that the amounts reported in this column reflect the accounting cost for these stock options, and do not correspond to the actual economic value that our Named Executive Officers may receive from the options.

(2)

Unless otherwise noted, amounts reported in the All Other Compensation column include group term life insurance premiums paid by us.

(3)

The amounts reported in the Option Awards column do not correspond to actual economic value.  The Option Awards granted to Mr. Buss in fiscal 2014 were out-of-the money by 25.5% of the exercise price of such awards, as of December 31, 2014.

(4)

Amounts reported in the All Other Compensation column also include $31,069 of accrued vacation.

(5)

The amounts reported in the Option Awards column do not correspond to actual economic value.  The Option Awards granted to Mr. Serra in fiscal 2014 were out-of-the money by 29.5% of the exercise price of such awards, as of December 31, 2014.

(6)

Amounts reported in the All Other Compensation column also include $28,228 for 2014 and $21,035 for 2013 related to use of a company-leased automobile.

(7)

Amounts reported in the All Other Compensation column also include $38,774 for 2014 and $3,876 for 2013 related to use of a company-leased automobile; and $5,753 for 2014 and $10,627 for 2013 related to reimbursement of relocation expenses and housing allowances.

(8)

Amounts reported in the All Other Compensation column also include $34,091 for 2014 and $1,061 for 2013 related to use of a company-leased automobile.

 

 

-36-


 

2014 Grants of Plan-Based Awards Table

The following table presents information concerning each grant of an award made to a Named Executive Officer in fiscal 2014 under any plan.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option