As filed with the Securities and Exchange Commission on April 27, 2017

Registration No. 001-37869

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 4

to

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of

the Securities Exchange Act of 1934

 

 

Cars.com Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware  

81-3693660

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

175 West Jackson Boulevard, Chicago, Illinois   60604
(Address of Principal Executive Offices)   (Zip Code)

(703) 873-6600

(Registrant’s telephone number, including area code)

 

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

to be so registered

 

Name of exchange on which

each class is to be registered

Common Stock, $0.01 par value   New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ☐    Accelerated filer   ☐
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company   ☐
Emerging growth company   ☒     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

 

 

 

CARS.COM INC.

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT

AND ITEMS OF FORM 10

Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1. None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

 

Item 1. Business.

The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Relationship with TEGNA Following the Separation and Distribution,” and “Where You Can Find More Information.” Those sections are incorporated herein by reference.

 

Item 1A. Risk Factors.

The information required by this item is contained under the section of the information statement entitled “Risk Factors.” That section is incorporated herein by reference.

 

Item 2. Financial Information.

The information required by this item is contained under the sections of the information statement entitled “Selected Historical Financial Data of Cars.com,” “Unaudited Pro Forma Financial Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Those sections are incorporated herein by reference.

 

Item 3. Properties.

The information required by this item is contained under the section of the information statement entitled “Business.” That section is incorporated herein by reference.

 

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained under the section of the information statement entitled “Security Ownership of Certain Beneficial Owners and Management.” That section is incorporated herein by reference.

 

Item 5. Directors and Executive Officers.

The information required by this item is contained under the sections of the information statement entitled “Management” and “Directors.” These sections are incorporated herein by reference.

 

Item 6. Executive Compensation.

The information required by this item is contained under the section of the information statement entitled “Executive Compensation.” That section is incorporated herein by reference.

 

Item 7. Certain Relationships and Related Transactions.

The information required by this item is contained under the sections of the information statement entitled “Management” and “Directors.” Those sections are incorporated herein by reference.

Item 8. Legal Proceedings.

The information required by this item is contained under the section of the information statement entitled “Business–Legal Proceedings.” That section is incorporated herein by reference.

 

Item 9. Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters.

The information required by this item is contained under the sections of the information statement entitled “The Separation and Distribution,” “Dividend Policy,” “Capitalization,” and “Description of Cars.com’s Capital Stock.” Those sections are incorporated herein by reference.

 

Item 10. Recent Sales of Unregistered Securities.

None.

 

Item 11. Description of Registrant’s Securities to be Registered.

The information required by this item is contained under the sections of the information statement entitled “The Separation and Distribution,” “Dividend Policy,” and “Description of Cars.com’s Capital Stock.” Those sections are incorporated herein by reference.

 

Item 12. Indemnification of Directors and Officers.

The information required by this item is contained under the section of the information statement entitled “Description of Cars.com’s Capital Stock—Limitations on Liability, Indemnification of Officers and Directors and Insurance.” That section is incorporated herein by reference.

 

Item 13. Financial Statements and Supplementary Data.

The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” and the financial statements referenced therein. That section is incorporated herein by reference.

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

 

Item 15. Financial Statements and Exhibits.

 

(a) Financial Statements

The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” and the financial statements referenced therein. That section is incorporated herein by reference.

 

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(b) Exhibits

See below.

The following documents are filed as exhibits hereto:

 

Exhibit
Number

  

Exhibit Description

  2.1    Form of Separation and Distribution Agreement*
  3.1    Form of Amended and Restated Certificate of Incorporation of Cars.com Inc.**
  3.2    Form of Amended and Restated By-Laws of Cars.com Inc.**
10.1    Form of Transition Services Agreement*
10.2    Form of Tax Matters Agreement*
10.3    Form of Employee Matters Agreement*
10.4    Form of Cars.com Omnibus Incentive Compensation Plan**
10.5    Form of Cars.com Inc. Deferred Compensation Plan**
10.6    Restricted Stock Unit Award Agreement, effective as of January 1, 2017, between Cars.com Inc. and Alex Vetter**
10.7    Cars.com, LLC Share Appreciation Rights Plan**
10.8    Share Appreciation Rights Award Agreement (2015 – 2017 Performance Period), dated as of January 1, 2016, between Cars.com, LLC and Alex Vetter**
10.9    Share Appreciation Rights Award Agreement (2015 – 2017 Performance Period), dated as of January 1, 2016, between Cars.com, LLC and John Clavadetscher**
10.10    Share Appreciation Rights Award Agreement (2016 – 2018 Performance Period), dated as of January 1, 2016, between Cars.com, LLC and Alex Vetter**
10.11    Share Appreciation Rights Award Agreement (2016 – 2018 Performance Period), dated as of January 1, 2016, between Cars.com, LLC and John Clavadetscher**
10.12    Cars.com, LLC Long Term Incentive Plan**
10.13    Employment Agreement, dated as of November 4, 2014, between Cars.com, LLC and Alex Vetter**
10.14    Letter Agreement, dated as of November 2, 2016, between Cars.com, LLC and Alex Vetter**
10.15    Letter Agreement, dated as of November 21, 2016, between Cars.com, LLC and Becky Sheehan**
10.16    Letter Agreement, dated as of June 1, 2016, between Cars.com, LLC and John Clavadetscher**
10.17    Letter Agreement, dated as of September 23, 2016, between Cars.com, LLC and Jim Rogers**
21.1    List of Subsidiaries*
99.1    Information Statement of Cars.com Inc., preliminary and subject to completion, dated April 27, 2017**

 

* Previously filed.
** Filed herewith.
† To be filed by amendment.

 

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Cars.com Inc.
By:    

/s/ A LEX V ETTER

  Name:    Alex Vetter
  Title:   President and Chief Executive Officer

Date: April 27, 2017

 

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Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

CARS.COM INC.

Cars.com Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, as it may be amended and supplemented (the “DGCL”), hereby certifies as follows:

 

  A. The name of the Corporation is Cars.com Inc.

 

  B. The original certificate of incorporation was filed with the Secretary of State of the State of Delaware on August 26, 2016 (the “original certificate of incorporation”).

 

  C. This Amended and Restated Certificate of Incorporation amends, restates and integrates the original certificate of incorporation and has been duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL by the written consent of the sole stockholder of the Corporation in accordance with Section 228 of the DGCL.

 

  D. The text of the original certificate of incorporation is hereby amended and restated to read herein as set forth in full.

 

  E. This Amended and Restated Certificate of Incorporation shall be effective at [●], Eastern Time, on [●].

ARTICLE I

NAME OF CORPORATION

The name of the Corporation is Cars.com Inc.

ARTICLE II

REGISTERED OFFICE; REGISTERED AGENT

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE IV

STOCK

Section 1. Authorized Stock . The total number of shares of capital stock that the Corporation shall have authority to issue is [●] shares, consisting of (a) [●] shares of common stock, par value $0.01 per share (the “Common Stock”), and (b) [●] shares of preferred stock, par value $0.01 per share (the “Preferred Stock”).

Section 2. Common Stock . Except as may otherwise be provided in this Amended and Restated Certificate of Incorporation, in a Preferred Stock Designation (as hereinafter defined), or as required by law, the holders of outstanding shares of Common Stock shall have the right to vote on all questions to the exclusion of all other stockholders, each holder of record of Common Stock being entitled to one vote for each share of Common Stock standing in the name of the stockholder on the books of the Corporation.

Section 3. Preferred Stock . Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board of Directors”) (or any committee to which it may duly delegate the authority granted in this Article IV) is hereby empowered to authorize the issuance from time to time of shares of Preferred Stock in one or more series, for such consideration and for such corporate purposes as the Board of Directors (or such committee thereof) may from time to time determine, and by filing a certificate (hereinafter referred to as a “Preferred Stock Designation”) pursuant to applicable law of the State of Delaware as it presently exists or may hereafter be amended to establish from time to time for each such series the number of shares to be included in each such series and to fix the designations, powers, rights and preferences of the shares of each such series, and the qualifications, limitations and restrictions thereof to the fullest extent now or hereafter permitted by this Amended and Restated Certificate of Incorporation and the laws of the State of Delaware, including, without limitation, voting rights (if any), dividend rights, dissolution rights, conversion rights, exchange rights and redemption rights thereof, as shall be stated and expressed in a resolution or resolutions adopted by the Board of Directors (or such committee thereof) providing for the issuance of such series of Preferred Stock. Each series of Preferred Stock shall be distinctly designated. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, determination of the following:

 

  (i) the designation of the series, which may be by distinguishing number, letter or title;

 

  (ii) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding);

 

  (iii) the amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative;

 

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  (iv) dates at which dividends, if any, shall be payable;

 

  (v) the redemption rights and price or prices, if any, for shares of the series;

 

  (vi) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;

 

  (vii) the amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;

 

  (viii) whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made;

 

  (ix) restrictions on the issuance of shares of the same series or of any other class or series; and

 

  (x) the voting rights, if any, of the holders of shares of the series.

ARTICLE V

TERM

The term of existence of the Corporation shall be perpetual.

ARTICLE VI

BOARD OF DIRECTORS

Section 1. Number of Directors . Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the total number of directors that the Corporation would have if there were no vacancies (the “Whole Board”). No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.

Section 2. Term of Office . Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the directors shall be elected at the annual meeting of the stockholders for a term expiring at the next succeeding annual meeting of the stockholders, with each director to hold office until such director’s successor shall have been duly elected and qualified or until his earlier death, resignation or removal.

 

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Section 3. Stockholder Nomination of Director Candidates . Advance notice of stockholder nominations for the election of directors and of any stockholder proposals to be considered at an annual stockholder meeting shall be given in the manner provided in the Amended and Restated Bylaws of the Corporation (the “Bylaws”).

Section 4. Newly-Created Directorships and Vacancies . Subject to applicable law and the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and in the event that there is only one director remaining in office, by such sole remaining director, and directors so elected shall hold office until the next succeeding annual meeting of stockholders following such director’s election and until such director’s successor shall have been elected and qualified.

Section 5. Removal . Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any director, or the entire Board of Directors, may be removed from office at any time with or without cause by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), voting together as a single class.

ARTICLE VII

STOCKHOLDER ACTION

Section 1. Stockholder Action by Written Consent . Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

Section 2. Special Meetings of Stockholders . Subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders may be called only by or at the direction of the Chairman of the Board of Directors or the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board, and any power of stockholders to call a special meeting is specifically denied.

ARTICLE VIII

AMENDMENTS TO BYLAWS

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the Corporation is expressly authorized to make, alter and repeal the Bylaws, subject to the power of the stockholders of the Corporation to alter or repeal the Bylaws under applicable law as it presently exists or may hereafter be amended.

 

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ARTICLE IX

DIRECTOR LIABILITY

To the fullest extent permitted by the DGCL, as the same exists or may hereafter be amended, a director of the Corporation shall not be personally liable either to the Corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director. Any amendment or modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal. If the DGCL hereafter is amended to further eliminate or limit the liability of a director, then a director of the Corporation, in addition to the circumstances in which a director is not personally liable as set forth in the preceding sentence, shall not be liable to the fullest extent permitted by the amended DCGL.

ARTICLE X

INDEMNIFICATION

Section 1. Indemnification . Each person who was or is made a party to or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was, at any time during which this Article X is in effect (whether or not such person continues to serve in such capacity at the time any indemnification or advancement of expenses pursuant hereto is sought or at the time any Proceeding relating thereto exists or is brought), a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation (a “Covered Person”), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, trustee, employee or agent or in any other capacity while serving as a director, officer, trustee, employee or agent, shall be (and shall be deemed to have a contractual right to be) indemnified and held harmless by the Corporation (and any successor of the Corporation by merger or otherwise) to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the Corporation to provide greater indemnification rights than said law permitted the Corporation to provide prior to such amendment or modification), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”), or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Covered Person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, trustee, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in Section 3 of this Article X, the Corporation shall indemnify any such Covered Person in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors.

 

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Section 2. Mandatory Advancement of Expenses . To the fullest extent authorized by the DGCL as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the Corporation to provide greater rights to advancement of expenses than said law permitted the Corporation to provide prior to such amendment or modification), each Covered Person shall have (and shall be deemed to have a contractual right to have) the right, without the need for any action by the Board of Directors, to be paid by the Corporation (and any successor of the Corporation by merger or otherwise) the expenses incurred in connection with any Proceeding in advance of its final disposition (an “Advance of Expenses”), such Advance of Expenses to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the claimant requesting such Advance of Expenses from time to time; provided, however, that if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not, except to the extent specifically required by applicable law, in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter, the “Undertaking”) by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal (a “final disposition”) that such director or officer is not entitled to be indemnified for such expenses under this Article X or otherwise.

Section 3. Right of Claimant to Bring Suit . (1) If a claim for indemnification under this Article XI is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, or (2) if a request for an Advance of Expenses under Section 2 of this Article X is not paid in full by the Corporation within 20 days after a statement pursuant to Section 2 of this Article X and the required Undertaking, if any, have been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim for indemnification or request Advance of Expenses and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action that, under the DGCL, the claimant has not met the standard of conduct which makes it permissible for the Corporation to indemnify the claimant for the amount claimed or that the claimant is not entitled to the requested Advance of Expenses, but (except where the required Undertaking, if any, has not been tendered to the Corporation) the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Counsel (as defined in the Bylaws of the Corporation) or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 4. Contract Rights; Amendment and Repeal; Non-Exclusivity of Rights .

(A) All of the rights conferred in this Article X, as to indemnification, any Advance of Expenses and otherwise, shall be contract rights between the Corporation and each

 

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Covered Person to whom such rights are extended that vest at (or, in the case of any Covered Person who was a director or officer of the Corporation immediately prior to the effectiveness of this Article X, deemed to have vested as of) the commencement of such Covered Person’s service to or at the request of the Corporation and (1) any amendment or modification of this Article X that in any way diminishes or adversely affects any such rights shall be prospective only and shall not in any way diminish or adversely affect any such rights with respect to such person, and (2) all of such rights shall continue as to any Covered Person who has ceased to be a director or officer of the Corporation or ceased to serve at the Corporation’s request as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, as described herein, and shall inure to the benefit of such Covered Person’s heirs, executors and administrators.

(B) All of the rights conferred in this Article X, as to indemnification, any Advance of Expenses and otherwise, (i) shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Amended and Restated Certificate of Incorporation, provision of the Bylaws, agreement, vote of stockholders or Disinterested Directors (as such term is defined in the Bylaws of the Corporation) or otherwise and (ii) cannot be terminated by the Corporation, the Board of Directors or the stockholders of the Corporation with respect to such person’s service prior to the date of such termination.

Section 5. Insurance; Other Indemnification and Advancement of Expenses .

(A) The Corporation may maintain insurance, at its expense, to protect itself and any current or former director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

(B) The Corporation may, to the extent authorized from time to time by the Board of Directors or the Chief Executive Officer, grant rights to indemnification and rights to advancement of expenses incurred in connection with any Proceeding in advance of its final disposition, to any current or former employee or agent of the Corporation to the fullest extent of the provisions of this Article X with respect to the indemnification and advancement of expenses of current or former directors and officers of the Corporation.

Section 6. Reliance . Any Covered Person who after the date of the adoption of this Amended and Restated Certificate of Incorporation becomes or remains a director or officer of the Corporation shall be conclusively presumed to have relied on the rights to indemnification, Advance of Expenses and any other rights contained in this Article X in entering into or continuing such service. The rights conferred in or pursuant to this Article X to indemnification, Advance of Expenses or otherwise shall apply to claims made against a Covered Person arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof.

Section 7. Severability . If this Article X or any portion hereof shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable for any reason whatsoever, then the Corporation shall nevertheless indemnify each person entitled to indemnification

 

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pursuant to Section 1 of this Article X as to all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, penalties, fines, ERISA excise taxes and penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person and for which indemnification is available to such person pursuant to this Article X to the fullest extent permitted by any applicable portion of this Article X that shall not have been invalidated and to the fullest extent permitted by applicable law. To the fullest extent possible, the provisions of this Article X (including, without limitation, each such portion of any paragraph of this Article X containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

ARTICLE XI

FORUM AND VENUE

Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer or other employee of the Corporation to the Corporation or to the Corporation’s stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, (c) any action asserting a claim against the Corporation or any current or former director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL, this Amended and Restated Certificate of Incorporation or the Bylaws (as they may be amended from time to time), (d) any action asserting a claim related to or involving the Corporation that is governed by the internal affairs doctrine, or (e) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL shall be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware). The existence of an Alternative Forum Consent as to one action or claim shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Article XI with respect to any other action or claim.

ARTICLE XII

AMENDMENTS

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware as they presently exist or may hereafter be amended, the Corporation may from time to time alter, amend, repeal or adopt, in whole or in part, any provisions of this Amended and Restated Certificate of Incorporation.

 

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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Incorporation this the [●] day of [●].

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Amended and Restated Certificate of Incorporation of Cars.com Inc].

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

CARS.COM INC.

Incorporated under the Laws of the State of Delaware

 

 

These Amended and Restated Bylaws (the “ Bylaws ”) of Cars.com Inc., a Delaware corporation (the “ Corporation ”), are effective as of [●], Eastern Time, on [●] and hereby amend and restate the previous bylaws of the Corporation which are hereby deleted in their entirety and replaced with the following:

ARTICLE I

OFFICES AND RECORDS

Section 1.1 Delaware Office . The registered office of the Corporation in the State of Delaware shall be located in the City of Wilmington, County of New Castle, and the name and address of its registered agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.

Section 1.2 Other Offices . The Corporation may have such other offices, either inside or outside the State of Delaware, as the Board of Directors of the Corporation (the “ Board of Directors ”) may designate or as the business of the Corporation may require from time to time.

Section 1.3 Books and Records . The books and records of the Corporation may be kept inside or outside the State of Delaware at such place or places as may be designated by the Board of Directors.

ARTICLE II

STOCKHOLDERS

Section 2.1 Annual Meeting . The annual meeting of the stockholders of the Corporation shall be held on such date and at such place and time as may be fixed by resolution of the Board of Directors.

Section 2.2 Special Meeting .

(A) Subject to the rights of the holders of any series of stock having a preference over the Common Stock of the Corporation as to dividends, voting or upon liquidation (“ Preferred Stock ”) with respect to such series of Preferred Stock, special meetings of the stockholders may be called only by or at the direction of (i) the Chairman of the Board of Directors or the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies (the “ Whole Board ”), and any power of stockholders to call a special meeting is specifically denied.

(B) The record date for, and the date and time of, any special meeting, shall be fixed by the Board of Directors.

Section 2.3 Place of Meeting . The Board of Directors or the Chairman of the Board, as the case may be, may designate the place of meeting for any annual or special meeting of the stockholders or may designate that the meeting shall be held, wholly or in part, by means of remote communication. If no designation is so made, the place of meeting shall be the principal office of the Corporation.

Section 2.4 Notice of Meeting . Written or printed notice, stating the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by the Corporation not less than 10 days nor more than 60 days before the date of the meeting, either personally, by electronic transmission in the manner provided in Section 232 of the General Corporation Law of the State of Delaware, as it may be amended and supplemented (the “DGCL”), (except to the extent prohibited by Section 232(e) of the DGCL) or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. If notice is given by electronic transmission, such notice shall be deemed to be given at the times provided in the DGCL. Such further notice shall be given as may be required by applicable law. Meetings may be held without notice if all stockholders entitled to vote are present, or if notice is waived by those not present in accordance with Section 7.4 of these Bylaws. Any previously scheduled meeting of the stockholders may be postponed, and (unless the certificate of incorporation of the Corporation then-in force and effect (the “ Certificate of Incorporation ”) otherwise provides) any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.

Section 2.5 Quorum and Adjournment . Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the “ Voting Stock ”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. The Chairman of the Board of Directors or the Chief Executive Officer may adjourn the meeting from time to time, whether or not there is a quorum. No notice of the time and place, if any, of adjourned meetings need be given except as required by applicable law. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

 

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Section 2.6 Organization . Meetings of stockholders shall be presided over by such person as the Board of Directors may designate as chairman of the meeting, or in the absence of such a person, the Chairman of the Board, or if none or in the Chairman of the Board’s absence or inability to act, the Chief Executive Officer, or if none or in the Chief Executive Officer’s absence or inability to act, the President, or if none or in the President’s absence or inability to act, a Vice President, or, if none of the foregoing is present or able to act, by a chairman to be chosen by the holders of a majority of the shares entitled to vote who are present in person or by proxy at the meeting. The Secretary, or in the Secretary’s absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot.

Section 2.7 Proxies . At all meetings of stockholders, a stockholder may vote by proxy executed in writing (or in such manner prescribed by the DGCL) by the stockholder, or by such stockholder’s duly authorized attorney-in-fact.

Section 2.8 Order of Business .

(A) Annual Meetings of Stockholders . At any annual meeting of the stockholders, only such nominations of individuals for election to the Board of Directors shall be made, and only such other business shall be conducted or considered, as shall have been properly brought before the meeting. For nominations to be properly made at an annual meeting, and proposals of other business to be properly brought before an annual meeting, nominations and proposals of other business must be: (a) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly made at the annual meeting, by or at the direction of the Board of Directors or (c) otherwise properly requested to be brought before the annual meeting by a stockholder of the Corporation in accordance with these Bylaws. For nominations of individuals for election to the Board of Directors or proposals of other business to be properly requested by a stockholder to be made at an annual meeting, a stockholder must (i) be a stockholder of record at the time of giving of notice of such annual meeting by or at the direction of the Board of Directors and at the time of the annual meeting, (ii) be entitled to vote at such annual meeting and (iii) comply with the procedures set forth in these Bylaws as to such business or nomination. The immediately preceding sentence shall be the exclusive means for a stockholder to make nominations or propose other business to be considered at an annual meeting of stockholders (other than matters

 

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that are (x) properly brought under Rule 14a-8 under the U.S. Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and (y) included in the Corporation’s notice of meeting) before an annual meeting of stockholders.

(B) Special Meetings of Stockholders . Only such business shall be conducted or considered at a special meeting of stockholders as shall have been properly brought before the meeting pursuant to the Corporation’s notice of meeting. To be properly brought before a special meeting, proposals of business must be (a) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or (b) otherwise properly brought before the special meeting, by or at the direction of the Board of Directors; provided, however, that nothing herein shall prohibit the Board of Directors from submitting additional matters to stockholders at any such special meeting.

Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who (i) is a stockholder of record at the time of giving of notice of such special meeting and at the time of the special meeting, (ii) is entitled to vote at the meeting (without giving effect to any proxy, voting agreement or other arrangement pursuant to which such stockholder may have been granted the right to act for another stockholder or vote in respect of stock at such special meeting), and (iii) complies with the procedures set forth in these Bylaws as to such nomination. This Section 2.8(B) shall be the exclusive means for a stockholder to make nominations at a special meeting of stockholders.

(C) General . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the chairman of any annual or special meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with these Bylaws and, if any proposed nomination or other business is not in compliance with these Bylaws, to declare that no action shall be taken on such nomination or other proposal and such nomination or other proposal shall be disregarded.

Section 2.9 Advance Notice of Stockholder Business and Nominations .

(A) Annual Meeting of Stockholders . Without qualification or limitation, subject to Section 2.9(C)(4) of these Bylaws, for any nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to Section 2.8(A) of these Bylaws, the stockholder must have given timely notice thereof (including, in the case of nominations, the completed and signed questionnaire, representation and agreement required by Section 2.10 of these Bylaws), and timely updates and supplements thereof, in each case in proper form, in writing to the Secretary, and such other business must otherwise be a proper matter for stockholder action.

To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90 th day prior to the first anniversary of the

 

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preceding year’s annual meeting. Notwithstanding the foregoing, (a) in the case of the first annual meeting held after the effectiveness of these Bylaws or (b) if the date of the annual meeting is more than 30 days before or more than 60 days after the first anniversary of the preceding year’s annual meeting, then, to be timely, notice by the stockholder must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90 th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting, or the public announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above.

Notwithstanding anything in the immediately preceding paragraph to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased by the Board of Directors, and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.9(A) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight business days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these Bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and or resolutions proposed to be brought before a meeting of the stockholders.

(B) Special Meetings of Stockholders . Subject to Section 2.9(C)(4) of these Bylaws, in the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any stockholder may nominate an individual or individuals (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, provided that the stockholder gives timely notice thereof (including the completed and signed questionnaire, representation and agreement required by Section 2.10 of these Bylaws), and timely updates and supplements thereof, in each case in proper form, in writing, to the Secretary.

 

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To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to the date of such special meeting and not later than the close of business on the later of the 90 th day prior to the date of such special meeting or, if the first public announcement of the date of such special meeting is less than 100 days prior to the date of such special meeting, the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting of stockholders, or the public announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above.

In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof.

(C) Disclosure Requirements .

(1) To be in proper form, a stockholder’s notice to the Secretary must include the following, as applicable:

(a) As to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made: (i) the name and address of such stockholder, as they appear on the Corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith, (ii) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder, such beneficial owner and/or their respective affiliates or associates or others acting in concert therewith, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such

 

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contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the Corporation, through the delivery of cash or other property, or otherwise, and without regard to whether the stockholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “ Derivative Instrument ”) directly or indirectly owned beneficially by such stockholder, the beneficial owner, if any, and/or any affiliates or associates or others acting in concert therewith, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith has any right to vote any class or series of shares of the Corporation, (D) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement (regardless of the purpose or effect of such repurchase or “stock borrowing” agreement or arrangement), involving such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith, directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares of the Corporation (any of the foregoing, a “ Short Interest ”), (E) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, (G) any performance-related fees (other than an asset-based fee) to which such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith is entitled based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, including without limitation any such interests held by members of the immediate family sharing the same household of such stockholder, such beneficial owner and/or any of their

 

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respective affiliates or associates or others acting in concert therewith, (H) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith and (I) any direct or indirect interest of such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (iii) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith, if any, and (iv) any other information relating to such stockholder, such beneficial owner and/or any of their respective affiliates or associates or others acting in concert therewith, if any, that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

(b) If the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, a stockholder’s notice must, in addition to the matters set forth in paragraph (a) above, also set forth: (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder, such beneficial owner and each of their respective affiliates or associates or others acting in concert therewith, if any, in such business, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such proposal or business includes a proposal to amend the Bylaws of the Corporation, the text of the proposed amendment), and (iii) a description of all agreements, arrangements and understandings between or among any of such stockholder, such beneficial owner and each of their respective affiliates or associates or others acting in concert therewith, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder;

(c) As to each individual, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors, a stockholder’s notice must, in addition to the matters set forth in paragraph (a) above, also set forth: (i) all information relating to such individual that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected)

 

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and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

(d) With respect to each individual, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors, a stockholder’s notice must, in addition to the matters set forth in paragraphs (a) and (c) above, also include a completed and signed questionnaire, representation and agreement required by Section 2.10 of these Bylaws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. Notwithstanding anything to the contrary, only persons who are nominated in accordance with the procedures set forth in these Bylaws, including without limitation Section 2.8, Section 2.9 and Section 2.10 hereof, shall be eligible for election as directors.

(2) For purposes of these Bylaws, “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Exchange Act; provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership.

(3) For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(4) Notwithstanding the provisions of these Bylaws, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.9; provided , however , that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the separate and additional requirements set forth in these Bylaws with respect to nominations or proposals as to any other business to be considered.

 

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(5) Nothing in these Bylaws shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock if and to the extent provided for under law, the Certificate of Incorporation or these Bylaws. Subject to Rule 14a-8 under the Exchange Act, nothing in these Bylaws shall be construed to permit any stockholder, or give any stockholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of director or directors or any other business proposal.

Section 2.10 Submission of Questionnaire, Representation and Agreement . To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.9 of these Bylaws) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such individual and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made (which questionnaire shall be provided by the Secretary upon written request), and a written representation and agreement (in the form provided by the Secretary upon written request) that such individual (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “ Voting Commitment ”) that has not been disclosed to the Corporation and (2) any Voting Commitment that could limit or interfere with such individual’s ability to comply, if elected as a director of the Corporation, with such individual’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, (C) in such individual’s personal capacity and on behalf of any person or entity on whose behalf, directly or indirectly, the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply, with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation publicly disclosed from time to time, (D) consents to being named as a nominee in the Corporation’s proxy statement pursuant to Rule 14a-4(d) under the Exchange Act and any associated proxy card of the Corporation and agrees to serve if elected as a director; and (E) will abide by the requirements of Section 2.11 of these Bylaws.

Section 2.11 Procedure for Election of Directors; Required Vote .

(A) Except as set forth below, election of directors at all meetings of the stockholders at which directors are to be elected shall (a) be by ballot, and, (b) except as otherwise provided by law, the Certificate of Incorporation, or these Bylaws and subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, a majority of the votes cast at any meeting for the election of directors at which a quorum is present shall elect directors. For purposes of this Article II, a majority of votes cast shall mean that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Votes cast shall include direction to

 

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withhold authority in each case and exclude abstentions with respect to that director’s election. Notwithstanding the foregoing, in the event of a “contested election” of directors, directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of directors at which a quorum is present. For purposes of this Article II, a “contested election” shall mean any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected, with the determination thereof being made by the Secretary as of the close of the applicable notice of nomination period set forth in Section 2.9 of these Bylaws or under applicable law, based on whether one or more notice(s) of nomination were timely filed in accordance with said Section 2.9; provided , however , that the determination that an election is a “contested election” shall be determinative only as to the timeliness of a notice of nomination and not otherwise as to its validity. If, prior to the time the Corporation mails its initial proxy statement in connection with such election of directors, one or more notices of nomination are withdrawn such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the election shall not be considered a contested election, but in all other cases, once an election is determined to be a contested election, directors shall be elected by the vote of a plurality of the votes cast.

(B) If a nominee for director who is an incumbent director is not elected and no successor has been elected at such meeting, the director shall promptly tender his or her resignation to the Board of Directors. The Nominating and Governance Committee shall make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board of Directors shall act on the tendered resignation, taking into account the Nominating and Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The Nominating and Governance Committee in making its recommendation, and the Board of Directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation shall not participate in the recommendation of the Nominating and Governance Committee or the decision of the Board of Directors with respect to his or her resignation. If such incumbent director’s resignation is not accepted by the Board of Directors, such director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board of Directors pursuant to these Bylaws, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 3.10 of these Bylaws or may decrease the size of the Board of Directors pursuant to the provisions of Section 3.2 of these Bylaws.

(C) Except as otherwise provided by law, the Certificate of Incorporation, or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders.

Section 2.12 Inspectors of Elections; Opening and Closing the Polls . The Board of Directors by resolution shall appoint one or more inspectors, which inspector or

 

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inspectors may, but does not need to, include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by law.

The chairman of the meeting shall be appointed by the inspector or inspectors to fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

Section 2.13 No Stockholder Action by Written Consent . Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

ARTICLE III

BOARD OF DIRECTORS

Section 3.1 General Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.

Section 3.2 Number, Tenure and Qualifications .

(A) Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the Whole Board. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.

(B) The directors shall be elected at the annual meetings of stockholders as specified in the Certificate of Incorporation except as otherwise provided in the Certificate of Incorporation and in these Bylaws, and each director of the Corporation shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

Section 3.3 Regular Meetings . A regular meeting of the Board of Directors shall be held without other notice than this Section 3.3 immediately after, and at the same place as, the

 

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Annual Meeting of Stockholders. The Board of Directors may, by resolution, provide the time and place, if any, for the holding of additional regular meetings without other notice than such resolution.

Section 3.4 Special Meetings . Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the Chief Executive Officer or a majority of the Board of Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place, if any, and time of the meetings.

Section 3.5 Notice of Meeting . Notice of any special meeting of directors shall be given to each director at such person’s business or residence in writing by hand delivery, first-class or overnight mail or courier service, email or facsimile transmission, or orally by telephone. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by overnight mail or courier service, such notice shall be deemed adequately delivered when delivered to the overnight mail or courier service company at least twenty-four (24) hours before such meeting. If by email, facsimile transmission, telephone or by hand, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 7.4 of these Bylaws.

Section 3.6 Chairman of the Board . The Chairman of the Board shall be chosen from among the directors and may be the Chief Executive Officer. The Chairman of the Board shall preside over all meetings of the Board of Directors and shall perform all duties incidental to the office which may be required by law and all such other duties as are properly required of the Chairman of the Board by the Board of Directors.

Section 3.7 Action by Consent of Board of Directors . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 3.8 Conference Telephone Meetings . Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 3.9 Quorum . Subject to Section 3.10 of these Bylaws, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time

 

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without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

Section 3.10 Vacancies . Subject to applicable law and the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, or by a sole remaining director, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders and until such director’s successor shall have been duly elected and qualified.

Section 3.11 Committees . The Board of Directors may, by resolution adopted by a majority of the Whole Board, designate one or more committees, which shall consist of one or more directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee may to the extent permitted by law exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board of Directors when requested.

A majority of any committee may determine its action and fix the time and place, if any, of its meetings, unless the Board of Directors shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.5 of these Bylaws. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, any such committee. Nothing herein shall be deemed to prevent the Board of Directors from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided , however , that no such committee shall have or may exercise any authority of the Board of Directors.

The term of office of a committee member shall be as provided in the resolution of the Board designating him or her but shall not exceed his or her term as a director. If prior to the end of his or her term, a committee member should cease to be a director, he or she shall cease to be a committee member. Any member of a committee may resign at any time by giving written notice to the Board of Directors, the Chairman, the President or the Secretary. Such resignation shall take effect as provided in Section 3.12 of these Bylaws in the case of resignations by directors. Any member of a committee may be removed from such committee, either with or without cause, at any time, by resolution adopted by a majority of the Whole Board. Any vacancy in a committee shall be filled by the Board of Directors in the manner prescribed by these By-laws for the original designation of the members of such committee.

Section 3.12 Resignations . Any director, whether elected or appointed, may resign at any time by giving written notice of his or her resignation to the Chairman, the Chief Executive Officer, the President, or the Secretary. Any such resignation shall be deemed to be effective as

 

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of the close of business on the date said notice is received by the Chairman, the Chief Executive Officer, the President, or the Secretary, or at such later time as is specified therein. Except to the extent specified in such notice, no formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

Section 3.13 Removal . Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any director, or the entire Board of Directors, may be removed from office at any time with or without cause by the affirmative vote of shares representing a majority of the voting power of the Voting Stock, voting together as a single class.

Section 3.14 Records . The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation.

ARTICLE IV

OFFICERS

Section 4.1 Officers Enumerated . The officers of the Corporation shall be a Chairman, a Chief Executive Officer, and a President (or any combination thereof), a Chief Financial Officer, a Chief Legal Officer, one or more Vice Presidents (one or more of whom may be designated Executive Vice President or Senior Vice President), a Secretary, a Treasurer, a Controller and such other officers as the Board may from time to time may elect or appoint. Any two or more offices may be held by the same person.

Section 4.2 Term of Office . Each officer shall hold office for the term for which he or she is elected or appointed and until his or her successor has been elected or appointed and qualified or until his or her death or until he or she shall resign or until he or she shall have been removed in the manner hereinafter provided.

Section 4.3 Powers and Duties . The officers of the Corporation shall each have such powers and authority and perform such duties in the management of the property and affairs of the Corporation as from time to time may be prescribed by the Board of Directors and, to the extent not so prescribed, they shall each have such powers and authority and perform such duties in the management of the property and affairs of the Corporation, subject to the control of the Board, as generally pertain to their respective offices.

Without limitation of the foregoing:

(A) Chairman of the Board: The Chairman of the Board shall be a director of the Corporation and shall preside at all meetings of the Board and of the Executive Committee of the Board and at all meetings of stockholders. The Chairman of the Board shall undertake such other duties or responsibilities as the Board may assign.

(B) Chief Executive Officer: The Chief Executive Officer shall be the chief executive officer of the Corporation and shall be a director of the Corporation. In the absence of the Chairman, the Chief Executive Officer shall preside at all meetings of the Board and of the Executive Committee of the Board and at all meetings of stockholders.

 

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(C) President: The President shall act in a general executive capacity and shall assist the Chief Executive Officer in the administration and operation of the Corporation’s business and general supervision of its policies and affairs.

(D) Chief Financial Officer: The Chief Financial Officer shall act in an executive financial capacity. The Chief Financial Officer shall assist the Chief Executive Officer and the President in the general supervision of the Corporation’s financial policies and affairs.

(E) Chief Legal Officer: The Chief Legal Officer shall have general control of all matters of legal import concerning the Corporation.

(F) Vice Presidents: The Board of Directors shall determine the powers and duties of the respective Vice Presidents and may, in its discretion, fix such order of seniority among the respective Vice Presidents as it may deem advisable.

(G) Secretary: The Secretary shall issue notices of all meetings of the stockholders and Directors where notices of such meetings are required by law or these Bylaws and shall keep the minutes of such meetings. He or she shall sign such instruments and attest such documents as require his or her signature of attestation and affix the corporate seal thereto where appropriate.

(H) Treasurer: The Treasurer shall have custody of all funds and securities of the Corporation and shall sign all instruments and documents as require his or her signature. He or she shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors.

(I) Controller: The Controller shall be in charge of the accounts of the Corporation and he or she shall have such powers and perform such duties as may be assigned to him or her by the Board of Directors.

Section 4.4 Temporary Absence . In case of the temporary absence or disability of any officer of the Corporation, except as otherwise provided in these Bylaws, the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer may perform any of the duties of any such other officer as the Board of Directors or Executive Committee may prescribe.

Section 4.5 Resignations . Any officer may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman, the Chief Executive Officer, the President, or the Secretary, or at such later time as is specified therein. Except to the extent specified in such notice, no formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

Section 4.6 Removal . Any officer may be removed, either with or without cause, at any time by action of the Board of Directors.

Section 4.7 Vacancy . A vacancy in any office because of death, resignation, removal or other cause may be filled by the Board of Directors.

 

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Section 4.8 Compensation . Nothing contained herein shall preclude any officer from serving the Corporation in any other capacity, including that of director, or from serving any of its stockholders, subsidiaries or affiliated corporations in any capacity and receiving a proper compensation therefor.

ARTICLE V

STOCK CERTIFICATES AND TRANSFERS

Section 5.1 Certificated and Uncertificated Stock; Transfers .

(A) The interest of each stockholder of the Corporation may be evidenced by certificates for shares of stock in such form as the appropriate officers of the Corporation may from time to time prescribe or be uncertificated. The Board of Directors may provide by resolution that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation.

(B) The shares of the stock of the Corporation shall be transferred on the books of the Corporation, in the case of certificated shares of stock, by the holder thereof in person or by such person’s attorney duly authorized in writing, upon surrender for cancellation of certificates for at least the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require; and, in the case of uncertificated shares of stock, upon receipt of proper transfer instructions from the registered holder of the shares or by such person’s attorney duly authorized in writing, and upon compliance with appropriate procedures for transferring shares in uncertificated form. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

The certificates of stock shall be signed, countersigned and registered in such manner as the Board of Directors may by resolution prescribe, which resolution may permit all or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

(C) Notwithstanding anything to the contrary in these Bylaws, at all times that the Corporation’s stock is listed on a stock exchange, the shares of the stock of the Corporation shall comply with all direct registration system eligibility requirements established by such exchange, including any requirement that shares of the Corporation’s stock be eligible for issue in book-entry form. All issuances and transfers of shares of the Corporation’s stock shall be entered on the books of the Corporation with all information necessary to comply with such direct registration system eligibility requirements, including the name and address of the person

 

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to whom the shares of stock are issued, the number of shares of stock issued and the date of issue. The Board of Directors shall have the power and authority to make such rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of shares of stock of the Corporation in both the certificated and uncertificated form.

Section 5.2 Lost, Stolen or Destroyed Certificates . No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors or any financial officer may in its or such person’s discretion require.

Section 5.3 Record Owners . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by applicable law.

Section 5.4 Transfer and Registry Agents . The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors or by the Chief Executive Officer or President.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnification .

(A) Each person who was or is made a party to or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was, at any time during which this Article VI is in effect (whether or not such person continues to serve in such capacity at the time any indemnification or advancement of expenses pursuant hereto is sought or at the time any Proceeding relating thereto exists or is brought), a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation (a “ Covered Person ”), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, trustee, employee or agent or in any other capacity while serving as a director, officer, trustee, employee or agent, shall be (and shall be deemed to have a contractual right to be) indemnified and held harmless by the Corporation (and any successor of the Corporation by merger or otherwise) to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or

 

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modification, only to the extent that such amendment or modification permits the Corporation to provide greater indemnification rights than said law permitted the Corporation to provide prior to such amendment or modification), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”), or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Covered Person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, trustee, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided , however , that except as provided in Section 6.3(A), the Corporation shall indemnify any such Covered Person in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors.

(B) To obtain indemnification under this Article VI, a claimant shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification, a determination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows: (1) by a majority of Disinterested Directors (as hereinafter defined) even though less than a quorum, or (2) by a committee of Disinterested Directors designated by majority vote of the Disinterested Directors, even though less than a quorum or (3) if there are no Disinterested Directors, or if a majority of the Disinterested Directors so direct, by Independent Counsel (as hereinafter defined), in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (4) if a majority of the Disinterested Directors so directs, by a majority vote of the stockholders of the Corporation. In the event the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected by a majority of the Disinterested Directors unless there shall have occurred within two years prior to the date of the commencement of the Proceeding for which indemnification is claimed a “ Change of Control ” as defined in the Corporation’s Omnibus Incentive Compensation Plan, in which case the Independent Counsel shall be selected by the claimant unless the claimant shall request that such selection be made by a majority of the Disinterested Directors. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 10 days after such determination.

Section 6.2 Mandatory Advancement of Expenses . To the fullest extent authorized by the DGCL as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the Corporation to provide greater rights to advancement of expenses than said law permitted the Corporation to provide prior to such amendment or modification), each Covered Person shall have (and shall be deemed to have a contractual right to have) the right, without the need for any action by the Board of Directors, to be paid by the Corporation (and any successor of the Corporation by merger or otherwise) the expenses incurred in connection with any Proceeding in advance of its final disposition (an “Advance of Expenses”), such Advance of Expenses to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the claimant requesting such Advance of Expenses from time to time; provided , however , that if the DGCL requires, the payment of such expenses incurred by a

 

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director or officer in his or her capacity as a director or officer (and not, except to the extent specifically required by applicable law, in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter, the “ Undertaking ”) by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal (a “ final disposition ”) that such director or officer is not entitled to be indemnified for such expenses under this Article VI or otherwise.

Section 6.3 Right of Claimant to Bring Suit .

(A) (1) If a claim for indemnification under this Article VI is not paid in full by the Corporation within 30 days after receipt of a written claim pursuant to Section 6.1(B) of these Bylaws by the Corporation, or (2) if a request for an Advance of Expenses under this Article VI is not paid in full by the Corporation within 20 days after a statement pursuant to Section 6.2 of these Bylaws and the required Undertaking, if any, have been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim for indemnification or request Advance of Expenses and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action that, under the DGCL, the claimant has not met the standard of conduct which makes it permissible for the Corporation to indemnify the claimant for the amount claimed or that the claimant is not entitled to the requested Advance of Expenses, but (except where the required Undertaking, if any, has not been tendered to the Corporation) the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(B) If a determination shall have been made pursuant to Section 6.1(B) of these Bylaws that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Section 6.3(A).

(C) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Section 6.3(A) that the procedures and presumptions of this Article VI are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this Article VI.

Section 6.4 Contract Rights; Amendment and Repeal; Non-exclusivity of Rights .

(A) All of the rights conferred in this Article VI, as to indemnification, any Advance of Expenses and otherwise, shall be contract rights between the Corporation and each Covered Person to whom such rights are extended that vest at (or, in the case of any Covered

 

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Person who was a director or officer of the Corporation immediately prior to the effectiveness of this Article VI, deemed to have vested as of) the commencement of such Covered Person’s service to or at the request of the Corporation and (1) any amendment or modification of this Article VI that in any way diminishes or adversely affects any such rights shall be prospective only and shall not in any way diminish or adversely affect any such rights with respect to such person, and (2) all of such rights shall continue as to any Covered Person who has ceased to be a director or officer of the Corporation or ceased to serve at the Corporation’s request as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, as described herein, and shall inure to the benefit of such Covered Person’s heirs, executors and administrators.

(B) All of the rights conferred in this Article VI, as to indemnification, any Advance of Expenses and otherwise, (i) shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise and (ii) cannot be terminated by the Corporation, the Board of Directors or the stockholders of the Corporation with respect to a person’s service prior to the date of such termination.

Section 6.5 Insurance; Other Indemnification and Advancement of Expenses .

(A) The Corporation may maintain insurance, at its expense, to protect itself and any current or former director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. To the extent that the Corporation maintains any policy or policies providing such insurance, each such current or former director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in Section 6.5(B), shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current or former director, officer, employee or agent.

(B) The Corporation may, to the extent authorized from time to time by the Board of Directors or the Chief Executive Officer, grant rights to indemnification and rights to advancement of expenses incurred in connection with any Proceeding in advance of its final disposition, to any current or former employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and advancement of expenses of current or former directors and officers of the Corporation.

Section 6.6 Definitions; Notice .

(A) For purposes of this Article VI:

(1) “ Disinterested Director ” means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.

(2) “ Independent Counse l” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall

 

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include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant’s rights under this Article VI.

(B) Any notice, request or other communication required or permitted to be given to the Corporation under this Article VI shall be in writing and either delivered in person or sent by telecopy, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.

Section 6.7 Service for Subsidiaries . Any person serving as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least 50% of whose equity interests are owned by the Corporation shall be conclusively presumed to be serving in such capacity at the request of the Corporation.

Section 6.8 Reliance . Any Covered Person who after the date of the adoption of this Article VI becomes or remains a director or officer of the Corporation, shall be conclusively presumed to have relied on the rights to indemnification, Advance of Expenses and any other rights contained in this Article VI in entering into or continuing such service. The rights conferred in or pursuant to this Article VI to indemnification, Advance of Expenses or otherwise shall apply to claims made against a Covered Person arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof.

Section 6.9 Severability . If this Article VI or any portion hereof shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable for any reason whatsoever, then the Corporation shall nevertheless indemnify each person entitled to indemnification pursuant to Section 6.1 of these Bylaws as to all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, penalties, fines, ERISA excise taxes and penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person and for which indemnification is available to such person pursuant to this Article VI to the fullest extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law. To the fullest extent possible, the provisions of this Article VI (including, without limitation, each such portion of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1 Fiscal Year . The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year. The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

 

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Section 7.2 Dividends . The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

Section 7.3 Seal . The corporate seal shall bear the name of the Corporation, the year in which the Corporation was incorporated (2016) and the words “Corporate Seal - Delaware” and such other words or figures as the Board of Directors may approve and adopt.

Section 7.4 Waiver of Notice . Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the DGCL, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting.

Section 7.5 Audits . The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant selected by the Board of Directors.

ARTICLE VIII

CONTRACTS, PROXIES, ETC.

Section 8.1 Contracts . All contracts and agreements authorized by the Board of Directors, and all checks, drafts, bills of exchange or other orders for the payment of money, notes or other evidences of indebtedness, issued in the name of the Corporation, shall be signed by such person or persons and in such manner as may from time to time be designated by the Board of Directors, which designation may be general or confined to specific instances.

Section 8.2 Proxies . Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President, a Vice President, or the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, or any one of them, may exercise or appoint an attorney or attorneys, or an agent or agents, to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation to vote or to consent in respect of such stock or other securities; and the Chairman of the Board, the Chief Executive Officer, the President, a Vice President, or the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer may instruct the person or persons so appointed as to the manner of exercising such powers and rights and the Chairman of the Board, the Chief Executive Officer, the President, a Vice President, or the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such ballots, consents, proxies, powers of attorney or other written instruments as they or either of them may deem necessary in order that the Corporation may exercise such powers and rights. Any stock or other securities in any other corporation which may from time to time be owned by or stand in

 

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the name of the Corporation may, without further action, be endorsed for sale or transfer or sold or transferred by the Chairman of the Board, the Chief Executive Officer, the President, or a Vice President, or the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation or any proxy appointed in writing by any of them.

ARTICLE IX

AMENDMENTS

Section 9.1 By the Stockholders . Subject to the provisions of the Certificate of Incorporation, these Bylaws may be altered, amended or repealed, or new Bylaws enacted, at any special meeting of the stockholders if duly called for that purpose (provided that in the notice of such special meeting, notice of such purpose shall be given), or at any annual meeting, by the affirmative vote of shares representing a majority of the voting power of all of the Voting Stock, voting together as a single class.

Section 9.2 By the Board of Directors . Subject to the laws of the State of Delaware, the Certificate of Incorporation and these Bylaws, these Bylaws may also be altered, amended or repealed, or new Bylaws enacted, by the Board of Directors.

 

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Exhibit 10.4

 

 

 

 

 

 

Cars.com Inc.

Omnibus Incentive Compensation Plan

Contents

 

Introduction

     1  

Article 1.

  

Establishment, Objectives, Duration and Service Credit

     1  

Article 2.

  

Definitions

     2  

Article 3.

  

Administration

     7  

Article 4.

  

Shares Subject to the Plan and Maximum Awards; Adjusted and Substituted Awards

     7  

Article 5.

  

Eligibility and Participation

     10  

Article 6.

  

Stock Options

     11  

Article 7.

  

Stock Appreciation Rights

     12  

Article 8.

  

Restricted Stock/Stock Awards

     14  

Article 9.

  

Restricted Stock Units, Performance Units, Performance Shares, and Cash-Based Awards

     15  

Article 10.

  

Performance Measures

     16  

Article 11.

  

Beneficiary Designation

     18  

Article 12.

  

Deferrals

     19  

Article 13.

  

Rights of Employees/Directors

     19  

Article 14.

  

Termination of Employment/Directorship

     19  

Article 15.

  

Change in Control

     19  

Article 16.

  

Amendment, Modification, Termination and Tax Compliance

     23  

Article 17.

  

Withholding

     24  

Article 18.

  

Successors

     25  

Article 19.

  

General Provisions

     25  

 

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Cars.com Inc.

Omnibus Incentive Compensation Plan

Introduction

In 2017, TEGNA Inc. (the “Predecessor Company”) separated its digital automotive marketplace business from its media and other digital businesses. The separation occurred when TEGNA Inc. contributed its digital automotive marketplace businesses to a newly formed subsidiary, Cars.com Inc. (the “Company”), and distributed the stock of Cars.com Inc. to its shareholders (the “Spin-off”).

Awards under this Plan include awards granted to employees and directors of the Predecessor Company or its Affiliates under the Predecessor Company’s 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended, that have been converted in connection with the Spin-off to awards under this Plan (the “Adjusted Awards”). The terms of such conversion are generally specified in that certain Employee Matters Agreement by and between the Company and Predecessor Company dated [                    ] (the “Employee Matters Agreement”). Notwithstanding any other provision of this Plan or the Predecessor Plan (as defined below), no Participant shall be entitled to duplicate benefits under both such Plans with respect to the same period of service or compensation.

 

Article 1. Establishment, Objectives, Duration and Service Credit

1.1 Establishment of the Plan . The Company, a Delaware corporation, hereby adopts this Cars.com Omnibus Incentive Compensation Plan (hereinafter referred to as the “Plan”), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, and Cash-Based Awards. The Plan shall become effective as of [            ] (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.

1.2 Objectives of the Plan . The objectives of the Plan are to optimize the profitability and growth of the Company through annual and long-term incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders, to provide Participants with an incentive for excellence in individual performance, and to promote teamwork among Participants. The Plan is further intended to provide flexibility to the Company and its Affiliates in their ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company’s success and to allow Participants to share in that success.

1.3 Duration of the Plan . The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Committee to amend or terminate the Plan at any time pursuant to Article 16 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions. However, in no event may an Award be granted under the Plan on or after the tenth (10th) anniversary of the Effective Date.

1.4 Service Credit . For each Employee who is employed immediately following the date of the Spin-off by the Company or an Affiliate of the Company and each “Former SpinCo Group Employee” (as defined in the Employee Matters Agreement), service shall be recognized with the Predecessor Company, Gannett Co., Inc. or any of their subsidiaries or predecessor entities at or before the Effective Date, to the same extent that such service was recognized by the Predecessor Company under the Predecessor Plan prior to the date of the Spin-off as if such service had been performed for the Company for purposes of eligibility, vesting and determination of level of benefits under this Plan.

 

Article 2. Definitions

Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:

2.1 “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.

2.2 “ Adjusted Award ” means Awards granted under the Predecessor Plan that are converted into Awards in respect of Shares pursuant to the Employee Matters Agreement.

2.3 “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, or Cash-Based Awards, and including Adjusted Awards and Substitute Awards.

2.4 “Award Agreement” means a written or electronic agreement entered into by the Company and each Participant or a written or electronic statement issued by the Company to a Participant, which in either case sets forth the terms and provisions applicable to Awards granted under this Plan.

2.5 “Beneficial Owner” or “ Beneficial Ownership ” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

2.6 “Board” or “ Board of Directors ” means the Board of Directors of the Company.

2.7 “Cash-Based Award” means an Award granted to a Participant whose value is denominated in cash as described in Article 9 hereof and including for service as a Director, cash-based amounts (including, without limitation, retainers) granted under the Plan.

2.8 “Change in Control” means the first to occur of the following:

(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of the

 

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Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or one of its Affiliates, or (D) any acquisition pursuant to a transaction that complies with (c)(i), (c)(ii) and (c)(iii) below;

(b) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(c) consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or entity resulting from such Business Combination (including, without limitation, a corporation or entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or any corporation or entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation or entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

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(d) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, in no event will the Spin-off be treated as a Change in Control. The Committee may specify that the definition of Change in Control shall also require the event to constitute an event that is a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A.

2.9 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.10 “Committee” means any committee appointed by the Board to administer Awards to Employees or Directors, as specified in Article 3 hereof.

2.11 “Company” means Cars.com Inc., a Delaware corporation and any successor thereto as provided in Article 18 hereof.

2.12 “Covered Employee” means a Participant who is one of the group of “covered employees,” as defined in the regulations promulgated under Code Section 162(m), or any successor statute, or a Participant who is designated by the Committee to be treated as a “covered employee”.

2.13 “Director” means any individual who is a member of the Board of Directors of the Company; provided, however, that any Director who is employed by the Company shall be considered an Employee under the Plan.

2.14 “Disability” shall have the meaning ascribed to such term in the Award Agreement. If no such definition is provided in the Award Agreement, “Disability” shall mean a medically determinable physical or mental impairment which can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than six months if such disabling condition renders the person unable to perform the material and substantial duties of his or her occupation. With respect to Section 409A Awards that become payable upon a disability, such disability must also qualify as a disability within the meaning of Treasury Regulation 1.409A-3(i)(4).

2.15 “Effective Date” shall have the meaning ascribed to such term in Section 1.1 hereof.

2.16 “Employee” means any employee of the Company or its Subsidiaries or Affiliates.

2.17 “ Employee Matters Agreement ” means the Employee Matters Agreement by and between the Company and Predecessor Company dated [                    ].

2.18 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

 

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2.19 “Fair Market Value” as of any date and in respect of any Share means the then most recent closing price of a Share, provided that, if Shares shall not have been traded on the New York Stock Exchange for more than 10 days immediately preceding such date or if deemed appropriate by the Committee for any other reason, the fair market value of Shares shall be as determined by the Committee in such other manner as it may deem appropriate, provided that such valuation is consistent with the requirements of Section 409A. In no event shall the fair market value of any Share be less than its par value.

2.20 “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article 7 hereof.

2.21 “Incentive Stock Option” or “ ISO ” means an option to purchase Shares granted under Article 6 hereof and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422. To the extent that an option is granted that is intended to meet the requirements of Code Section 422, but fails to meet such requirements, the option will be treated as a NQSO.

2.22 “Insider” shall mean an individual who is, on the relevant date, an executive officer, director or ten percent (10%) beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act.

2.23 “Nonqualified Stock Option” or “ NQSO ” means an option to purchase Shares granted under Article 6 hereof and that is not intended to be treated as an Incentive Stock Option, or that otherwise does not meet such requirements.

2.24 “Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 hereof.

2.25 “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

2.26 “Participant” means an Employee or Director who has been selected to receive an Award or who has outstanding an Award granted under the Plan.

2.27 “Performance-Based Exception” means the performance-based exception from the tax deductibility limitations of Code Section 162(m).

2.28 “ Performance Share ” means an Award granted to a Participant whose value is denominated in Shares and is earned by satisfaction of specified performance goals and such other terms and conditions that the Committee may specify, as described in Article 9 hereof.

2.29 “ Performance Unit ” means an Award granted to a Participant whose value is specified by the Committee and is earned by satisfaction of specified performance goals and such other terms and conditions that the Committee may specify, as described in Article 9 hereof.

 

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2.30 “ Period of Restriction ” means the period during which the transfer of Shares of Restricted Stock is not permitted (e.g., based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, pursuant to the Restricted Stock Award Agreement, as provided in Article 8 hereof.

2.31 “ Person ” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

2.32 “ Predecessor Company ” means TEGNA Inc.

2.33 “ Predecessor Plan ” means the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended, as maintained by the Predecessor Company prior to the Effective Date of this Plan.

2.34 “ Restricted Stock ” means an Award granted to a Participant pursuant to Article 8 hereof.

2.35 “Restricted Stock Units” means an Award granted to a Participant whose value is denominated in Shares and is earned by satisfaction of specified service requirements and such other terms and conditions that the Committee may specify, as described in Article 9 hereof.

2.36 “ Retirement ” means a termination of employment after attaining age 55 and completing 5 years of service, attaining age 65 or such other definition set forth in an Award Agreement.

2.37 “Section 409A” means Code Section 409A and the regulations and other guidance issued thereunder.

2.38 “Section 409A Award” means an Award that is subject to the requirements of Section 409A.

2.39 “ Shares ” means the Company’s common stock, par value $0.01 per share.

2.40 “ Stock Appreciation Right ” or “ SAR ” means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to the terms of Article 7 hereof.

2.41 “Stock Award” means an Award of Shares granted to a Participant pursuant to Section 8.7 hereof.

2.42 “ Subsidiary ” means any corporation, partnership, limited liability company, joint venture, or other entity in which the Company directly or indirectly has a majority voting interest.

 

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2.43 “Substitute Awards ” means Awards granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity (i) all or a portion of the assets or equity of which is acquired by the Company or (ii) with which the Company merges or otherwise combines.

2.44 “ Tandem SAR ” means an SAR that is granted in connection with a related Option pursuant to Article 7 hereof, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled).

 

Article 3. Administration

3.1 General . Subject to the terms and conditions of the Plan, the Plan shall be administered by the Committee. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. The Committee shall have the authority to delegate administrative duties to officers of the Company.

3.2 Authority of the Committee . Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions herein (including, with respect to Section 409A Awards, the requirements of Section 409A), the Committee shall have full power to select Employees and Directors who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and amend the terms and conditions of any outstanding Award as provided in the Plan. Further, the Committee shall make all other determinations that it deems necessary or advisable for the administration of the Plan. As permitted by law and the terms of the Plan, the Committee may delegate its authority herein. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award granted hereunder.

3.3 Decisions Binding . All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Directors, Employees, Participants, and their estates and beneficiaries, unless changed by the Board.

 

Article 4. Shares Subject to the Plan and Maximum Awards; Adjusted and Substituted Awards

4.1 Number of Shares Available for Grants; Share Counting and Reacquired Shares . Subject to Sections 4.2 and 4.4, the number of Shares reserved for issuance to Participants under this Plan is [to be determined] . Shares issued under the Plan may be authorized but unissued shares or treasury shares.

For purposes of counting the number of Shares available for Awards under the Plan, the full number of shares of the Company’s common stock covered by Freestanding SARs shall be counted against the number of Shares available for Awards (i.e., not the net Shares

 

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issued in satisfaction of a Freestanding SAR Award); provided, however, that Freestanding SARs that may be settled in cash only shall not be so counted. Additionally, if an Option may be settled by issuing net Shares (i.e., withholding a number of Shares equal to the exercise price), the full number of shares of the Company’s common stock covered by the Option shall be counted against the number of Shares available for Awards, not the net Shares issued in satisfaction of an Option. If any Award (a) expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part, or (b) results in any Shares not being issued (including as a result of any Award that was settleable either in cash or in stock actually being settled in cash), the unissued Shares covered by such Award shall again be available for the grant of Awards; provided, however, in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code. The following Shares shall not be added back to the number of Shares available for the future grant of Awards: (i) shares of the Company’s common stock tendered to the Company by a Participant to purchase shares of the Company’s common stock upon the exercise of an Award; and (ii) shares of the Company’s common stock repurchased by the Company on the open market using the proceeds from the exercise of an Award. Subject to the foregoing, the Committee shall determine the appropriate methodology for calculating the number of Shares issued pursuant to the Plan.

The maximum number of Shares which may be issued under Incentive Stock Options granted under the Plan is [to be determined].

The following rules shall apply to grants of Awards under the Plan:

 

  (a) Stock Options : The maximum aggregate number of Shares that may be granted in the form of Stock Options, pursuant to any Award granted in any one fiscal year to any one Participant shall be [to be determined] .

 

  (b) SARs : The maximum aggregate number of Shares that may be granted in the form of Stock Appreciation Rights, pursuant to any Award granted in any one fiscal year to any one Participant shall be [to be determined].

 

  (c) Restricted Stock/Stock Awards : The maximum aggregate grant of Shares with respect to Awards of Restricted Stock or Stock Awards granted in any one fiscal year to any one Participant shall be [to be determined].

 

  (d) Restricted Stock Units, Performance Shares, Performance Units and Cash-Based Awards : The maximum aggregate grant with respect to Awards of Performance Shares or Restricted Stock Units made in any one fiscal year to any one Participant shall be equal to [to be determined] Shares; and the maximum aggregate amount awarded with respect to Cash-Based Awards or Performance Units to any one Participant in any one fiscal year may not exceed [to be determined] dollars.

4.2 Adjustments in Authorized Shares . Upon a change in corporate capitalization, such as a stock split, stock dividend, or a corporate transaction, such as any merger, consolidation, combination, exchange of shares or the like, separation, including a spin-off,

 

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or other distribution of stock or property of the Company, extraordinary cash dividend, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, the Committee shall make an appropriate adjustment in the number and class of Shares that may be delivered under Section 4.1, in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, and in the Award limits set forth in Section 4.1, as may be determined to be equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.

4.3 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events . The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.2 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided that, with respect to Awards that are intended to comply with the requirements of the Performance-Based Exception, no such adjustment shall be authorized to the extent that such adjustment would be inconsistent with the Award’s satisfaction of the Performance-Based Exception.

4.4 Adjusted and Substitute Awards .

 

  (a) Notwithstanding any terms or conditions of the Plan to the contrary, (i) Substitute Awards may have substantially the same terms and conditions, including without limitation provisions relating to vesting, exercise periods, expiration, payment, forfeiture, and the consequences of termination of service, as the awards that they replace, as determined by the Committee in its sole discretion, and (ii) Adjusted Awards shall have terms consistent with those set forth in the Employee Matters Agreement, which generally provide the Adjusted Awards will have substantially the same terms and conditions, including without limitation provisions relating to vesting, exercise periods, expiration, payment, forfeiture, and the consequences of termination of Service, as the awards that they replace which were granted under the Predecessor Plan.

 

  (b) The recipient or holder of a Substitute Award or an Adjusted Award shall be an eligible Participant hereunder even if not an Employee or Director with respect to the Company or an Affiliate.

 

  (c) In the case of a Substitute Award, the date of grant may be treated as the effective date of the grant of such Award under the original plan under which the award was authorized, and in the case of an Adjusted Award, the date of grant shall be the effective date of the grant under the Predecessor Plan.

 

  (d)

The per share exercise price of an Option that is a Substitute Award or Adjusted Award may be less than 100% of the Fair Market Value of a Share on the date of grant, provided that such substitution or adjustment complies with applicable laws

 

9

  and regulations, including the listing requirements of the New York Stock Exchange and Section 409A or Section 424 of the Code, as applicable. The per share exercise price of a Freestanding SAR that is a Substitute Award or an Adjusted Award may be less than 100% of the Fair Market Value of a Share on the date of grant, provided that such substitution or adjustment complies with applicable laws and regulations, including the listing requirements of the New York Stock Exchange and Section 409A, as applicable.

 

  (e) Anything to the contrary in this Plan notwithstanding, any Shares underlying Substitute Awards or Adjusted Awards shall not be counted against the limits set forth in Section 4.1(a)-(d). Anything to the contrary in this Plan notwithstanding, any Shares underlying Substitute Awards shall not be counted against the number of Shares authorized for issuance or the maximum number of Shares which may be issued under Incentive Stock Options, and the lapse, expiration, termination, forfeiture or cancellation of any Substitute Award without the issuance of Shares or payment of cash thereunder shall not result in an increase the number of Shares available for issuance under the Plan. For the avoidance of doubt, Adjusted Awards shall be treated as Awards generally (and not as Substitute Awards) for purposes of the preceding sentence.

4.5 Limit on Compensation Paid to Directors. Except as indicated below, the cash value of all Awards (equity or cash-based) granted to a single Director, solely with respect to service as a Director, in one calendar year shall not exceed $700,000. Such annual limit shall be measured based on the value of an Award as of the date the Award is first granted (not the date of payment). Accordingly, the annual limit shall not include the value of an Award in the calendar year when it is paid or vests if such year is different from the year the Award is granted. Notwithstanding the foregoing, if the Director is the Chairman of the Board, such limit will be $900,000.

 

Article 5. Eligibility and Participation

5.1 Eligibility . Persons eligible to participate in this Plan include all Employees and Directors.

5.2 Actual Participation . Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees and Directors, those to whom Awards shall be granted and shall determine the nature and amount of each Award.

5.3 Newly Eligible Employees . The Committee shall be entitled to make such rules, regulations, determinations and awards as it deems appropriate in respect of any Employee who becomes eligible to participate in the Plan after the commencement of an award or incentive period.

5.4 Leaves of Absence . The Committee shall be entitled to make such rules, regulations, and determinations as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any award. Without limiting the generality of the foregoing, the Committee shall be entitled to determine: (a) whether or not any such leave

 

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of absence shall constitute a termination of employment within the meaning of the Plan; and (b) the impact, if any, of such leave of absence on awards under the Plan theretofore made to any recipient who takes such leave of absence. Notwithstanding the foregoing, with respect to any Section 409A Award, all leaves of absences and determinations of terminations of employment must be construed and interpreted consistent with the requirements of Section 409A and the definition of “separation from service” thereunder.

 

Article 6. Stock Options

6.1 Grant of Options . Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee. Notwithstanding the foregoing, Incentive Stock Options may only be granted to Employees of the Company or its Affiliates or Subsidiaries; provided that the Affiliate or Subsidiary is a type of entity whose employees can receive such options under Code Sections 422 and 424.

6.2 Award Agreement . Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan.

6.3 Option Price . The Option Price for each grant of an Option under this Plan shall be as determined by the Committee; provided, however, the per-share exercise price shall not be less than 100 percent of the Fair Market Value of the Shares on the date the Option is granted.

6.4 Duration of Options . Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided that the Option must expire on or before the date that is the tenth anniversary of the date of grant.

6.5 Exercise of Options . Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.

6.6 Payment . Options granted under this Article 6 shall be exercised by the delivery of a written, electronic or telephonic notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price; or (c) by a combination of (a) and (b); or (d) any other method approved by the Committee in its sole discretion. The tendering of previously acquired Shares may be done through attestation. No fractional Shares may be tendered or accepted in payment of the Option Price.

 

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Cashless exercises are permitted pursuant to Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law.

Subject to any governing rules or regulations, as soon as practicable after receipt of notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant’s name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.

6.7 Restrictions on Share Transferability . The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.

6.8 Nontransferability of Options.

 

  (a) Incentive Stock Options . No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.

 

  (b) Nonqualified Stock Options . Except as otherwise provided in a Participant’s Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant or such Participant’s legal representative.

6.9 Restriction on Cash Buyouts of Underwater Options . The Company may not purchase, cancel or buy out an underwater Option in exchange for cash without first obtaining Shareholder approval.

 

Article 7. Stock Appreciation Rights

7.1 Grant of SARs . Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.

Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.

 

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The grant price of a Freestanding SAR shall not be less than the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of the related Option.

7.2 SAR Agreement . Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.

7.3 Term of SARs . The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided that the SAR must expire on or before the date that is the tenth anniversary of the date of grant.

7.4 Exercise of Freestanding SARs . Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.

7.5 Exercise of Tandem SARs . Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.

7.6 Payment of SAR Amount . Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

 

  (a) The excess of the Fair Market Value of a Share on the date of exercise over the grant price; by

 

  (b) The number of Shares with respect to which the SAR is exercised.

In the sole discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, in some combination thereof, or in any other manner approved by the Committee. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.

7.7 Nontransferability of SARs . Except as otherwise provided in a Participant’s Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant or such Participant’s legal representative.

7.8 Restriction on Cash Buyouts of Underwater SARs . The Company may not purchase, cancel or buy out an underwater SAR in exchange for cash without first obtaining Shareholder approval.

 

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Article 8. Restricted Stock/Stock Awards

8.1 Grant of Restricted Stock . Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Participants in such amounts, as the Committee shall determine.

8.2 Restricted Stock Agreement . Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine.

8.3 Transferability . The Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Award Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant or such Participant’s legal representative.

8.4 Other Restrictions . The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable federal or state securities laws.

To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied.

Except as otherwise provided in the Award Agreement, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction.

8.5 Voting Rights . If the Committee so determines, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction.

8.6 Dividends . During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may, if the Committee so determines, be credited with dividends paid with respect to the underlying Shares while they are so held; provided that, any dividends with respect to the Restricted Stock shall not be paid to the Participant until the Shares of Restricted Stock to which the dividends relate vest. If any Shares of Restricted Stock are forfeited, the Participant shall have no right to the dividends related to the forfeited Shares.

 

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8.7 Stock Award . The Committee may grant and award Shares to a Participant that are not subject to Periods of Restrictions and which may be subject to such conditions or provisions as the Committee determines.

 

Article 9. Restricted Stock Units, Performance Units, Performance Shares, and Cash-Based Awards

9.1 Grant of Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards . Subject to the terms of the Plan, Restricted Stock Units, Performance Shares, Performance Units, and/or Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.

9.2 Award Agreement . At the Committee’s discretion, each grant of Restricted Stock Units, Performance Shares, Performance Units and Cash-Based Awards may be evidenced by an Award Agreement that shall specify the initial value, the duration of the Award, the performance measures and/or service requirements, if any, applicable to the Award, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan.

9.3 Value of Performance Units/Shares and Cash-Based Awards . Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Restricted Stock Unit and Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. Each Cash-Based Award shall have a value as may be determined by the Committee. The Committee shall set performance goals and/or service requirements in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards that will be paid out to the Participant. Generally, a Participant’s right to receive amounts under a Restricted Stock Unit award shall be based on the Participant’s satisfaction of a service requirement and such other terms and conditions that the Committee may specify. Generally, a Participant’s right to receive amounts under a Performance Unit, Performance Share or Cash-Based Award shall be based on the satisfaction of a performance requirement and such other terms and conditions that the Committee may specify. The Committee has full discretionary authority to establish performance goals and/or service requirements, and a performance goal may include a service requirement. For purposes of this Article 9, the time period during which the performance goals and/or service requirements must be met shall be called a “Performance Period.”

9.4 Earning of Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards . Subject to the terms of this Plan and the Award Agreement (if any), after the applicable Performance Period has ended, the holder of Restricted Stock Units, Performance Units, Performance Shares or Cash-Based Awards shall be entitled to receive payout on the number and value of Restricted Stock Units, Performance Units, Performance Shares or Cash-Based Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals and/or service requirements have been achieved. Unless otherwise

 

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determined by the Committee, notwithstanding any other provision of the Plan, payment of Cash-Based Awards shall only be made for those Participants who are Directors or in the employ of the Company at the end of the Performance Period or, if none has been specified, the end of the applicable award year.

9.5 Form and Timing of Payment of Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards . Payment of earned Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards shall be as determined by the Committee and, if applicable, as evidenced in the related Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) that have an aggregate Fair Market Value equal to the value of the earned Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. No fractional shares will be issued. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

Unless otherwise provided by the Committee, Participants holding Restricted Stock Units, Performance Units, or Performance Shares may be entitled to receive dividends or dividend units with respect to dividends declared on Shares underlying such Awards; provided that, any dividends or dividend units with respect to the Restricted Stock Units, Performance Units, or Performance Shares shall not be paid to the Participant until the Restricted Stock Units, Performance Units, or Performance Shares to which the dividends relate vest. If any Restricted Stock Units, Performance Units, or Performance Shares are forfeited, the Participant shall have no right to the dividends or dividend units related to the forfeited Awards.

9.6 Nontransferability . Except as otherwise provided in a Participant’s Award Agreement, Restricted Stock Units, Performance Units, Performance Shares and Cash-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, a Participant’s rights under such Awards shall be exercisable during the Participant’s lifetime only by such Participant or such Participant’s legal representative.

 

Article 10. Performance Measures

Unless and until the Committee proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Article 10, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Covered Employees that are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among:

 

  (a) Earnings per share (basic or diluted);

 

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  (b) Income before income taxes;

 

  (c) Income from continuing operations;

 

  (d) Net income or net income attributable to the Company;

 

  (e) Operating income;

 

  (f) Cash flow from operating activities, operating cash flow (defined as operating income plus non-cash charges for depreciation, amortization and impairment of operating assets) or free cash flow;

 

  (g) EBITDA, or net income attributable to the Company, before interest, taxes, depreciation/amortization;

 

  (h) Return measures (including, but not limited to, return on assets, equity, capital or investment);

 

  (i) Cash flow return on investments, which equals net cash flows divided by owner’s equity;

 

  (j) Internal rate of return or increase in net present value;

 

  (k) Dividend payments;

 

  (l) Gross revenues;

 

  (m) Gross margins;

 

  (n) Operating measures such as trends in digital metrics and advertising measures;

 

  (o) Internal measures such as achieving a diverse workforce;

 

  (p) Share price (including, but not limited to, growth measures and total shareholder return) and market value;

 

  (q) Debt (including, but not limited to, measures such as debt (book value or face value) outstanding and debt to earnings before interest, taxes, depreciation and amortization);

 

  (r) Market share;

 

  (s) Expense management; and

 

  (t) Any of the above measures compared to peer or other companies.

Performance measures may be set either at the consolidated level, segment level, division level, group level, or the business unit level. Additionally, performance measures may be measured either annually or cumulatively over a period of years or other periods, on an absolute basis or relative to pre-established targets, to a previous year’s results or to a designated comparison group, in each case as specified by the Committee.

 

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Unless the Committee specifies otherwise at the time the performance goals are established (and the Committee may at such time decide to limit the “ Adjustment Items” for which it will make adjustments, or decide to not make adjustments for any “Adjustment Items”), the Committee shall adjust a performance goal established under a performance measure set forth above to take into account the effects of “Adjustment Items.” “Adjustment Items” means (1) items presented as “unusual or infrequent items” (or other comparable terms) on the Company’s audited financial statements, (2) unusual, special or nonrecurring charges, costs, credits or items of gain or loss (including, without limitation, an unbudgeted material expense incurred by or at the direction of the Board of Directors or a committee of the Board or a material litigation, claim, judgment or settlement), (3) changes in tax or accounting laws or rules or changes in other laws or regulatory rules affecting reported results; (4) expenses related to the Spin-off; (5) reorganization and restructuring costs; (6) costs arising from or related to mergers, acquisitions, divestitures, dispositions, spin-offs or significant actual or potential transactions (including, without limitation, a corporate merger, consolidation, acquisition of property or stock, reorganization, restructuring charge, or joint venture), in each case regardless whether such transactions have been consummated, and related transition and integration costs, such as retention bonuses and acquisition-related milestone payments to acquired employees, in addition to consulting, compensation and other incremental costs associated with integration projects; (7) litigation and dispute settlement charges and expenses; (8) asset write-downs, including impairment of goodwill and intangible assets; (9) discontinued operations and other exit costs; (10) expenses or charges related to any equity offering, investment, indebtedness or restricted payment or any modification to any instrument of indebtedness, in each case regardless whether such transaction has been consummated; (11) deferred financing costs written off and premiums paid in connection with any early extinguishment of debt, including hedging obligations or other derivative instruments; (12) non-cash stock based compensation and revenue amortization; (13) cash proceeds of business interruption insurance and/or (14) cash expenses/charges to the extent fully indemnified by a third party or covered by insurance, each of which are identified in the quarterly and/or annual audited financial statements and notes thereto or in the “management’s discussion and analysis” of the financial statements in a period report filed with the Securities and Exchange Commission under the Exchange Act. The Committee shall make such adjustments to the performance goals as shall be equitable and appropriate in order to make the goal, as nearly as practicable, equivalent to the goal immediately prior to such transaction or event.

 

Article 11. Beneficiary Designation

The Committee may permit Participants under the Plan to name, from time to time, any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a beneficiary designation has not been made, or the beneficiary was not properly designated (in the sole discretion of the Committee), has died or cannot be found, all payments after death shall be paid to the Participant’s estate. In case of disputes over the proper beneficiary, the Company reserves the right to make any or all payments to the Participant’s estate.

 

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Article 12. Deferrals

Subject to the requirements of Section 409A, the Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the lapse or waiver of restrictions with respect to Restricted Stock, payment of a Stock Award or the satisfaction of any requirements or goals with respect to Restricted Stock Units, Performance Units/Shares and Cash-Based Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals provided that such rules must comply with the requirements of Section 409A.

 

Article 13. Rights of Employees/Directors

13.1 Employment . Nothing in the Plan shall confer upon any Participant any right to continue in the Company’s employ, or as a Director, or interfere with or limit in any way the right of the Company to terminate any Participant’s employment or directorship at any time.

13.2 Participation . No Employee or Director shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

13.3 Rights as a Stockholder . Except as provided in Sections 8.5, 8.6 and 9.5, a Participant shall have none of the rights of a shareholder with respect to shares of Common Stock covered by any Award until the Participant becomes the record holder of such shares.

 

Article 14. Termination of Employment/Directorship

Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to such Participant’s outstanding Award(s) following termination of the Participant’s employment or directorship with the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreements entered into with each Participant, need not be uniform among all Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

 

Article 15. Change in Control

15.1 Treatment of Outstanding Awards Other than Cash-Based Awards . In the event of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless the Committee specifies otherwise in the Award Agreement:

 

  (a)

Awards to Employees will fully vest if: (i) the Awards are not continued or assumed (e.g., the Awards are not equitably converted or substituted for awards of

 

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  a successor entity) in connection with the Change in Control; or (ii) the Employee has a qualifying termination of employment (as defined in the Award Agreement) within two years following the date of the Change in Control. Additionally, in the event that the Awards are not so continued or assumed in connection with the Change in Control or in the event of a qualifying termination of employment (as defined in the Award Agreement) within two years following the date of the Change in Control, then upon such Change in Control or such qualifying termination (as the case may be):

 

  (i) Any and all Options and SARs granted hereunder shall become fully exercisable during their remaining term; and

 

  (ii) Any restriction periods and restrictions imposed on Restricted Stock that are not performance-based shall lapse; and

 

  (iii) The target payout opportunities attainable under all outstanding Awards of performance-based Restricted Stock, Performance Units and Performance Shares shall be deemed to have been fully earned for the entire Performance Period (s) as of the effective date of the Change in Control or such qualifying termination. The vesting of all such Awards denominated in Shares shall be accelerated as of the effective date of the Change in Control or such qualifying termination and shall be paid out to Participants within thirty (30) days following the effective date of the Change in Control or such qualifying termination based upon an assumed achievement of all relevant target performance goals (such payment shall be in full satisfaction of the Award). Such Awards denominated in cash shall be paid to Participants in cash within thirty (30) days following the effective date of the Change in Control or such qualifying termination based on an assumed achievement of all relevant target performance goals (such payment shall be in full satisfaction of the Award). Restricted Stock Units shall be fully vested as of the effective date of the Change in Control or such qualifying termination, and the full value of such an Award shall be paid out to Participants within thirty (30) days following the effective date of the Change in Control or such qualifying termination. Notwithstanding the foregoing, in the event that the Award is not so continued or assumed in connection with a Change in Control, the payment of a Section 409A Award will only be accelerated if the Change in Control also constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A and will not result in additional taxes under Section 409A.

15.2 Treatment of Cash-Based Awards . In the event of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless the Committee shall provide otherwise in the Award Agreement or resolutions adopted by the Committee, Cash-Based Awards to Employees will fully vest if: (i) the Awards are not

 

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continued or assumed (e.g., the Awards are not equitably converted or substituted for awards of a successor entity) in connection with the Change in Control; or (ii) the Employee has a qualifying termination of employment (as defined in the Award Agreement) within two years following the date of the Change in Control. In the event that the Cash-Based Awards are not so continued or assumed or in the event of a qualifying termination of employment (as defined in the Award Agreement) within two years following the date of the Change in Control, the vesting of all outstanding Cash-Based Awards shall be accelerated as of the date of such event (and, in the case of performance-based Cash-Based Awards, based on an assumed achievement of all relevant target performance goals), and all Cash-Based Awards shall be paid to Participants in cash within thirty (30) days following the effective date of such event (such payment shall be in full satisfaction of the Award). Notwithstanding the foregoing, in the event that the Cash-Based Awards is not so continued or assumed in connection with a Change in Control, the payment of a Cash-Based Section 409A Award will only be accelerated if the Change in Control also constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A and will not result in additional taxes under Section 409A.

15.3 Limitation.

 

  (a) Intention of Section  15.3 : The acceleration or payment of Awards could, in certain circumstances, subject the Participant to the excise tax provided under Section 4999 of the Code. It is the object of this Section 15.3 to enable each Participant to retain in full the benefits of the Plan and to provide for the maximum after-tax value to each Participant. Accordingly, the Company will determine, before any payments are made on Awards governed by Section 15.1, which of two alternative forms of acceleration will maximize the Participant’s after-tax proceeds, and must notify the Participant in writing of its determination. The first alternative is the payment in full of all Awards governed by Section 15.1 and any other payments or benefits potentially subject to the excise tax under Section 4999. The second alternative is the payment of only a part of the Participant’s Awards (but taking into account any other payments or benefits potentially subject to the excise tax under Section 4999) so that the Participant receives the largest payment and benefits possible without causing an excise tax to be payable by the Participant under Section 4999 of the Code. This second alternative is referred to in this Section as “Limited Vesting”.

 

  (b) Limitation on Participant’s Rights : The Participant’s Awards shall be paid only to the extent permitted under the alternative determined by the Company to maximize the Participant’s after-tax proceeds, and the Participant shall have no rights to any greater payments on his or her Awards. For purposes of this determination, the Company shall take into account any rights or benefits the Participant has under another plan or agreement.

 

  (c)

Determination to be Conclusive : The determination of whether Limited Vesting is required and the application of the Limited Vesting rules shall initially be made by the Company in its sole discretion and any such determination shall be

 

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  conclusive and binding on the Participant unless the Participant proves that it is clearly erroneous. In the latter event, such determination shall be made by the Company in its sole discretion.

 

  (d) Limited Vesting: Notwithstanding Section 15.1, if Limited Vesting applies then the acceleration or payment of an Award shall not exceed the largest amount that can be paid without causing an excise tax to be payable by the Participant under Section 4999 of the Code. If Limited Vesting applies, awards shall not be accelerated or paid in a manner that maximizes the Participant’s economic position; provided that the reduction shall be made in a manner consistent with the requirements of Section 409A, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. With respect to Awards, generally this means that performance-based Awards are reduced before non-performance, service-based Awards are reduced.

15.4 Expenses . The Company shall pay all legal fees, court costs, fees of experts and other costs and expenses when incurred by a Participant in connection with any actual, threatened or contemplated litigation or legal, administrative or other proceeding involving the provisions of Section 15.3, whether or not initiated by the Participant.

The reimbursements of such expenses and costs shall comply with the requirements of Section 409A, which generally require (i) that the amount of expenses and costs eligible for reimbursement during a calendar year may not affect the expenses and costs eligible for reimbursement in any other taxable year; (ii) the reimbursement of an eligible expense or cost is made on or before the last day of the calendar year following the calendar year in which the expense or cost was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

15.5 Cancelation of Award . In the case of any Option or SAR with an exercise price that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option or SAR without the payment of consideration therefor.

15.6 Termination, Amendment, and Modifications of Change-in-Control Provisions . Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 15 may not be terminated, amended, or modified on or after the date of a Change in Control to affect adversely any Award theretofore granted under the Plan and any rights or benefits provided to a Participant this Article 15 without the prior written consent of the Participant with respect to said Participant’s outstanding Awards; provided, however, the Committee may terminate, amend, or modify this Article 15 at any time and from time to time prior to the date of a Change in Control.

 

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Article 16. Amendment, Modification, Termination and Tax Compliance.

16.1 Amendment, Modification, and Termination . Subject to the terms of the Plan, the Committee or the Board may at any time and from time to time, alter, amend, suspend, or terminate the Plan in whole or in part.

16.2 Awards Previously Granted . Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award; provided that no consent is required for any amendment the Committee deems necessary or appropriate to comply with applicable legal or tax requirements.

16.3 Shareholder Approval Required for Certain Amendments . Shareholder approval will be required for any amendment of the Plan that does any of the following: (a) permits the grant of any Option with an Option Price less than the Fair Market Value of the Shares on the date of grant; (b) reduces the Option Price of an outstanding Option, either by lowering the Option Price or by canceling an outstanding Option and granting a replacement Option with a lower exercise price; (c) permits the grant of any SAR with a grant price that is less than the Fair Market Value of the Shares on the date of grant; or (d) reduces the grant price of an outstanding SAR, either by lowering the grant price or by canceling an outstanding SAR and granting a replacement SAR with a lower exercise price.

16.4 Compliance with Code Section 162(m) . At all times when Code Section 162(m) is applicable, if and to the extent the Committee so determines, Awards granted under this Plan to Employees who are or could reasonably become Covered Employees as determined by the Committee shall comply with the requirements of the Performance-Based Exception. Generally, this requires that the amount paid under such an Award be determined based on the attainment of written, objective performance goals approved by the Committee for a performance period established by the Committee (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance goal relates or, if less, the number of days which is equal to 25 percent of the relevant performance period. The Committee shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given Participant and, if they have, shall so certify and ascertain the amount of the applicable Award. No amount will be paid for such performance period until such certification is made by the Committee. The amount actually paid to a given Participant may be less than (but not more than) the amount determined under the applicable performance formula, at the discretion of the Committee.

16.5 Compliance with Section 409A . It is intended that Awards under this Plan are either exempt from Section 409A or are structured to comply with the requirements of Section 409A. The Plan shall be administered and interpreted in accordance with that intent. By way of example, the following rules shall apply:

 

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  •   Any provision of the Plan that would conflict with the requirements of a Section 409A Award shall not apply to a Section 409A Award.

 

  •   Any adjustment or modification to an Award shall be made in compliance with Section 409A (e.g., any adjustment to an Option or SAR under Section 4.2 shall be made in accordance with the requirements of Section 409A).

 

  •   For Section 409A Awards, all rights to amend, terminate or modify the Plan or any Award are subject to the requirements and limitations of Section 409A.

 

  •   For Section 409A Awards, any payment or distribution that is triggered upon termination or cessation of employment or a comparable event shall be interpreted consistent with the definition of “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).

 

  •   With respect to amounts payable under a Section 409A Award, in the event that a Participant is a “specified employee” as defined in Section 409A, any amount that is payable in connection with the Participant’s separation from service shall not be paid prior to the date which is six months after the date the Participant separates from service (or, if earlier, the date the Participant dies). A Participant who is subject to the restriction described in the previous sentence shall be paid on the first day of the seventh month after the Participant’s separation from service an amount equal to the benefit that the Participant would have received during such six month period absent the restriction.

While the Company intends for Awards to either be exempt from or in compliance with Section 409A, neither the Company nor the Committee shall be liable to any person for the tax consequences of any failure to comply with the requirements of Section 409A or any other tax consequences relating to Awards under this Plan.

 

Article 17. Withholding

The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan; provided that the amount that is withheld, or may be withheld at the Participant’s discretion with the Company’s consent, cannot exceed the amount of the taxes owed by the Participant using the maximum statutory tax rate in the Participant’s applicable jurisdiction(s). The Participant may satisfy, totally or in part, his obligations pursuant to this Article by electing to have Shares withheld, to redeliver Shares acquired under an Award, or to deliver previously owned Shares, provided that the election is made in writing on or prior to (i) the date of exercise, in the case of Options and SAR’s (ii) the date of payment, in respect of Stock Awards, Restricted Stock Units, Performance Units, Performance Shares, or Cash-Based Awards, and (iii) the expiration of the Period of Restriction, in respect of Restricted Stock. Any election made under this Article shall be irrevocable by the Participant and may be disapproved by the Committee at any time in its sole discretion.

 

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Article 18. Successors

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business, stock and/or assets of the Company.

 

Article 19. General Provisions

19.1 Gender and Number . Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

19.2 Severability . If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

19.3 Requirements of Law . The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

19.4 Securities Law Compliance . With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act, unless determined otherwise by the Board. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board.

19.5 Listing . The Company may use reasonable endeavors to register Shares allotted pursuant to the exercise of an Option with the United States Securities and Exchange Commission or to effect compliance with the registration, qualification, and listing requirements of any national securities laws, stock exchange, or automated quotation system.

19.6 Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

19.7 No Additional Rights . Neither the Award nor any benefits arising under this Plan shall constitute part of an employment contract between the Participant and the Company or any Subsidiary or Affiliate, and accordingly, subject to Section 16.2, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company or any Affiliate for severance payments.

 

25

19.8 Employees Based Outside of the United States . Notwithstanding any provision of the Plan to the contrary, to comply with provisions of laws in other countries in which the Company, its Affiliates, and its Subsidiaries operate or have Employees, the Committee, in its sole discretion, shall have the power and authority to:

 

  (a) Determine which Affiliates and Subsidiaries will be covered by the Plan or relevant subplans;

 

  (b) Determine which Employees employed outside the United States are eligible to become Participants in the Plan;

 

  (c) Modify the terms and conditions of any Award granted to Participants who are employed outside the United States;

 

  (d) Establish subplans, modified exercise procedures, and other terms and procedures to the extent such actions may be necessary, advisable or convenient, or to the extent appropriate to provide maximum flexibility for the Participant’s financial planning. Any subplans and modifications to the Plan terms or procedures established under this Section 19.8 by the Committee shall be filed with the Plan document as Appendices; and

 

  (e) Take any action, before or after an Award is made, which the Committee deems advisable to obtain, comply with, or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals, as they may affect this Plan, any subplan, or any Participant.

19.9 Uncertificated Shares . To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.

19.10 Clawback . Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

19.11 Governing Law . The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts located in Chicago, Illinois, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.

 

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Dated: [                    ]

       CARS.COM INC.
  By:  

 

     Name:  
     Title:  

 

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Exhibit 10.5

CARS.COM

DEFERRED COMPENSATION PLAN

CARS.COM

DEFERRED COMPENSATION PLAN

T ABLE OF C ONTENTS

 

               P AGE  

1.0

   BACKGROUND      1  
   1.1.    Introduction      1  
   1.2.    Certain Definitions      1  

2.0

   EXPLANATION OF PLAN      2  
   2.1.    Effective Date      2  
   2.2.    Eligibility      2  
   2.3.    Interest in the Plan; Deferred Compensation Account      2  
   2.4.    Amount of Deferral      2  
   2.5.    Time of Election of Deferral      2  
   2.6.    Accounts and Investments      4  
   2.7.    Participant’s Option to Reallocate Amounts      5  
   2.8.    Reinvestment of Income      5  
   2.9.    Payment of Deferred Compensation      6  
   2.10.    Manner of Electing Deferral, Choosing Investments and Choosing Payment Options      9  
   2.11.    Deferrals of Restricted Stock or Restricted Stock Units      10  

3.0

   ADMINISTRATION OF THE PLAN      11  
   3.1.    Statement of Account      11  
   3.2.    Assignability      11  
   3.3.    Business Days      11  
   3.4.    Administration      11  
   3.5.    Amendment      12  
   3.6.    Liability      13  
   3.7.    Change in Control      13  
   3.8.    Claims      18  
   3.9.    Successors      19  
   3.10.    Governing Law      20  

 

TOC

CARS.COM

DEFERRED COMPENSATION PLAN

1.0      BACKGROUND

 

1.1. Introduction

In 2017, TEGNA Inc. (the “Predecessor Company”) spun off Cars.com Inc. (the “Company”) into a separate publicly traded company (the “Spin-off”). Certain participants in the TEGNA Inc. Deferred Compensation Plan (the “Predecessor Plan”) had their benefits under the Predecessor Plan assumed by this Plan (the “Transferred Participants”) as specified in that certain Employee Matters Agreement by and between the Company and the Predecessor Company dated May     , 2017 (the “Employee Matters Agreement”). The Company, and not the Predecessor Company, shall be solely responsible for paying such assumed benefits. The Employee Matters Agreement may be used as an aid in interpreting the terms of the benefits hereunder. Notwithstanding any other provision of this Plan or the Predecessor Plan, no Participant shall be entitled to duplicate benefits under both such Plans with respect to the same period of service or compensation.

The list of Transferred Participants is maintained by the Company. The benefits with respect to Transferred Participants derived from the Predecessor Plan shall not be amended in a manner so as to subject them to additional tax under Section 409A of the Internal Revenue Code, and any amendment which would have such an effect shall be deemed void and ineffective.

This Plan was adopted to provide the opportunity for directors of the Company who are not also employees (“Directors”) to defer certain compensation. Directors may defer to future years all or part of their fees. The Committee may also allow Directors to defer such other forms of taxable income derived from the performance of services for the Company as may be designated by the Committee and which may be deferred pursuant to such special terms and conditions as the Committee may establish (including, without limitation, awards under long-term incentive and stock-based plans). Amounts that may be deferred under this Plan are collectively referred to as “Compensation”.

 

1.2. Certain Definitions

The term “SIRs” (Stock Incentive Rights) used in this Plan includes restricted stock awards, restricted stock units and other equity-based awards issued under equity-based compensation plans of the Company or the Predecessor Company. The term “Committee” used in this Plan means the Benefit Plans Committee of the Company. The term “Company” means the Company as defined above in Section 1.1 and any successor to its business and/or assets which assumes the Plan by operation of law or otherwise. The term “Board” means the Board of Directors of the Company.

2.0      EXPLANATION OF PLAN

 

2.1. Effective Date

The Effective Date of this Plan is May     , 2017. The Predecessor Plan was initially effective July 1, 1987. The Company intends that the Plan satisfies the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to avoid the imposition of the taxes imposed under Section 409A. Accordingly, the requirements of Code Section 409A and the regulations and guidance issued thereunder (collectively, “Section 409A”) are incorporated by reference to the extent necessary to avoid any tax being imposed on a Participant under Section 409A. The terms of this Plan can apply to amounts that are subject to Section 409A.

For a Participant who is employed immediately following the Effective Date by the Company or an affiliate, such Participant’s service with the Predecessor Company or any of its subsidiaries or predecessor entities at or before the Effective Date shall be recognized to the same extent that such service was recognized by the Predecessor Company under the Predecessor Plan prior to the Effective Date.

 

2.2. Eligibility

In addition to Transferred Participants, the Plan is available to Directors of the Company who are designated as eligible by the Committee.

 

2.3. Interest in the Plan; Deferred Compensation Account

For each eligible person who elects to defer Compensation or on behalf of whom the Company makes an award (“Participant”), one or more Deferred Compensation Accounts shall be established in accordance with Section 2.6(a). A Participant’s interest in the Plan shall be the Participant’s right to receive payments under the terms of the Plan. A Participant’s payments from the Plan shall be based upon the value attributable to the Participant’s Deferred Compensation Accounts.

 

2.4. Amount of Deferral

A Participant may elect to defer receipt of all or a part of his or her Compensation provided that the minimum deferral for any type of Compensation that is expected to be deferred must be $5,000 for the year of deferral or, in the case of deferred SIRs, such minimum number of shares as the Committee may determine.

 

2.5. Time of Election of Deferral

 

  (a)

Deferral elections are subject to the requirements of Section 409A and must be made at such time and pursuant to such terms and conditions as are established by the Committee. This means that, other than for the special circumstances set forth below (each of which is subject to the requirements of Section 409A), all elections to defer Compensation must be made before the last day of the calendar

 

2

  year preceding the calendar year in which the services giving rise to the compensation are performed.

 

  (i) In the year that a Director first becomes eligible to make elective deferrals under the Plan (or any elective deferral plan aggregated with this Plan under Section 409A), the Director may be permitted to make a deferral election within 30 days of first becoming eligible. This initial deferral may relate only to Compensation attributable to services to be performed following the deferral election.

 

  (ii) If a Director has a legally binding right to a payment in a subsequent year that is subject to a condition requiring the Director to continue to provide services for a period of at least 12 months from the date the Director obtains the legally binding right, to avoid forfeiture of the payment, the Director may be permitted to elect to defer such Compensation on or before the 30th day after the Director obtains the legally binding right to the Compensation, provided that the election is made at least 12 months in advance of the earliest date at which the forfeiture condition could lapse.

 

  (iii) If a Director has a legally binding right to a payment of Compensation in a subsequent taxable year that, absent a deferral election, would be treated as a short-term deferral within the meaning of Section 409A, the Director may be permitted to elect to defer such Compensation in accordance with the requirements of Section 1.409A-2(b), applied as if the amount were a deferral of compensation and the scheduled payment date for the amount were the date the substantial risk of forfeiture lapses.

 

  (b) In the case of Director’s fees, whether payable in cash, Restricted Stock, or any other form permitted to be deferred under the Plan, deferral elections under the Plan shall relate to one-year terms (each, a “Term”) beginning with each annual meeting of shareholders of the Company (“Annual Meeting”) and ending immediately prior to the next Annual Meeting. Deferral elections shall be made no later than the date specified by the Committee that is on or prior to the last day of the calendar year preceding the commencement of the applicable Term. The foregoing election requirements shall be subject to the rules set forth in Section 2.5(a) above.

 

  (c) Once made, an election to defer for a particular time period is irrevocable. No acceleration in a Payment Commencement Date or a change in a Method of Payment may be made except as expressly permitted by the Plan and Section 409A.

 

  (d) Notwithstanding any other provision hereof, for purposes of the year 2017 only, elections by a Transferred Participant under the Predecessor Plan shall apply to determine deferrals hereunder.

 

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2.6. Accounts and Investments

 

  (a) All Participant records, reports and elections shall be maintained and administered on the basis of the Participant’s Deferred Compensation Accounts which are determined based on the Payment Commencement Dates (as defined in Section 2.9(b)) and Method of Payments (as defined in Section 2.9(c)) elected by the Participant, i.e., all amounts that have been elected to be paid on a designated Payment Commencement Date under a designated Method of Payment shall be aggregated into a single Deferred Compensation Account for a Participant for purposes of subsequent recordkeeping and for elections that may be available with respect to the deferred amounts, such as investment elections and payment method elections. The maximum number of Deferred Compensation Accounts a Participant may have at any time is five, subject to the Committee’s right to increase such limit. Deferred Compensation Accounts are hypothetical accounts only; no actual accounts are established for individual Participants. Except as provided in subsection 2.9(e), the payout rules for a Deferred Compensation Account may not be changed after the rules for that Account have been established.

 

  (b) The amount of Compensation deferred will be credited to the Participant’s Deferred Compensation Account or Accounts as soon as practicable after the Compensation would have been paid had there been no election to defer.

The amounts credited in a Deferred Compensation Account will be deemed invested in the fund or funds designated by the Participant from among funds selected by the Committee, which may include the following or any combination of the following:

 

  (i) money market funds;

 

  (ii) bond funds;

 

  (iii) equity funds; and

 

  (iv) the Company stock fund.

Although the Plan is not subject to section 404(c) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the funds available to Participants under the Plan shall, at all times, constitute a broad range of investment alternatives that would meet the standards pertaining to the range of investments set forth in regulations promulgated by the Department of Labor under section 404(c) of ERISA, or any successor provision, as if that provision were applicable to the Plan. In the discretion of the Committee, funds may be added, deleted or substituted from time to time, subject to the preceding sentence.

Information on the specific funds permitted under the Plan shall be made available by the Committee to the Participants. If the Committee adds, deletes or substitutes a particular fund, the Committee shall notify Participants in advance of

 

4

the change and provide Participants with the opportunity to change their allocations among funds in connection with such addition, deletion or substitution.

A Participant may allocate contributions to his or her Deferred Compensation Accounts among the available funds pursuant to such procedures and requirements as may be specified by the Committee from time to time. Participants shall have the opportunity to give investment directions with respect to their Accounts at least once in any three-month period.

With respect to the Company stock fund, the accounts of Transferred Participants only shall also have deemed investments in shares of Predecessor Company stock as a consequence of the Spin-off and a hypothetical fund will be established for such stock. Notwithstanding any provision to the contrary, Participants may elect in a manner prescribed by the Committee to allocate out of such Predecessor Company stock fund but shall not be able to allocate any additional amounts to the Predecessor Company stock fund.

 

  (c) Unless otherwise specified in an agreement memorializing a particular award or as otherwise specified under the Plan, all deferrals under this Plan and the earnings credited to them are fully vested at all times.

 

  (d) The right of any Participant to receive future payments under the provisions of the Plan shall be a contractual obligation of the Company but shall be subject to the claims of the creditors of the Company in the event of the Company’s insolvency or bankruptcy as provided in the trust agreement described below.

Plan assets may, in the Company’s discretion, be placed in a trust (the “Rabbi Trust”) (which Rabbi Trust may be a sub-trust maintained as a separate account within a larger trust that is also used to pay benefits under other Company- sponsored unfunded nonqualified plans) but will nevertheless continue to be subject to the claims of the Company’s creditors in the event of the Company’s insolvency or bankruptcy as provided in the trust agreement. In any event, the Plan is intended to be unfunded under Title I of ERISA.

 

2.7. Participant’s Option to Reallocate Amounts

A Participant may elect to reallocate amounts in his or her Deferred Compensation Accounts among the available funds pursuant to such procedures and requirements as may be specified by the Committee from time to time consistent with Section 2.6(b).

 

2.8. Reinvestment of Income

Income from a hypothetical fund investment in a Deferred Compensation Account shall be deemed to be reinvested in that fund as soon as practicable under the terms of that fund. Notwithstanding the foregoing, deemed dividends relating to hypothetical Predecessor Company stock in the hypothetical Predecessor Company stock fund will not be deemed reinvested in Predecessor Company stock. Instead, such deemed dividends

 

5

will be hypothetically invested proportionately in the investment funds selected by the Participant in his most recent investment direction, or, in the absence of an explicit investment direction, in the default investment fund.

 

2.9. Payment of Deferred Compensation

 

  (a) No withdrawal may be made from the Participant’s Deferred Compensation Accounts except as provided in this Section.

 

  (b) At the time a deferral election is made, the Participant shall choose the date on which payment of the amount credited to the Deferred Compensation Account is to commence, which date shall be either April 1 or October 1 of the year of the Participant’s retirement, the year next following the Participant’s retirement, or any other year specified by the Participant that is after the year for which the Participant is making the deferral (“Payment Commencement Date”). Notwithstanding the foregoing, the Payment Commencement Date shall be no later than October 1 of the year after the Participant retires from the Board.

 

  (c) At the time the election to defer is made, the Participant may choose to receive payments either (i) in a lump sum; or (ii) if the Payment Commencement Date is during a year in which a Participant has attained at least age 55 and has at least 5 years of service, in up to fifteen annual installments. The method of paying a Deferred Compensation Account is the “Method of Payment.” The amount of any payment under the Plan shall be the value attributable to the Deferred Compensation Account on the last day of the month preceding the month of the payment date, divided by the number of payments remaining to be made, including the payment for which the amount is being determined.

Under rules prescribed by the Committee, at the time the election to defer is made, a Participant may elect to allocate a portion of the Participant’s deferral elections to pre-existing Deferred Compensation Accounts and/or a new Deferred Compensation Account established for such deferral. Notwithstanding the foregoing, the maximum number of Deferred Compensation Accounts a Participant may have at any time is five, subject to the Committee’s right to increase such limit. Except as provided in subsection (e), the payout rules for a Deferred Compensation Account may not be changed after the rules for that Account have been established

 

  (d)

In the event of a Participant’s death or Disability before the Participant has received any payments from a Deferred Compensation Account, the value of the Account shall be paid to the Participant’s designated beneficiary in the case of death or to the Participant in the case of Disability, at such time and in such form of payment as is set forth on the applicable deferral form signed by the Participant. In the event of the Participant’s death or Disability after installment payments from a Deferred Compensation Account have commenced, the remaining balance of the Account shall be paid to the Participant or designated beneficiary, as applicable, over the installments remaining to be paid. For

 

6

  purposes of this Plan and consistent with such term’s definition under Section 409A, “Disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

Beneficiary designations shall be submitted on the form specified by the Company. A Participant may only have a single beneficiary designation that will apply to all of his/her Deferred Compensation Accounts, and the filing of a new beneficiary designation shall automatically revoke any previous beneficiary designation for all of the Participant’s Deferred Compensation Accounts. In the event a beneficiary designation has not been made, or the beneficiary was not properly designated (in the sole discretion of the Company), has died or cannot be found, all payments after death shall be paid to the Participant’s estate. In case of disputes over the proper beneficiary, the Company reserves the right to make any or all payments to the Participant’s estate.

 

  (e) A Participant may not change an initial Payment Commencement Date or Method of Payment for a Deferred Compensation Account after an election has been made except as provided in the following sentence. If an active Participant specifies a particular year as a Payment Commencement Date (rather than retirement) and such date is a date when the Participant is less than age 60, the Participant may elect to select a new Method of Payment or Payment Commencement Date by delivering a written election to the Committee (a “Subsequent Election”); provided that (i) such Subsequent Election may not take effect until at least 12 months after the date on which the Subsequent Election is made, (ii) the payment with respect to which such Subsequent Election is made must be deferred for a period of not less than 5 years from the date such payment would otherwise have been made; and (iii) the election must be made not less than 12 months before the date the payment is scheduled to be paid (or in the case of installment payments 12 months before the date the first amount was scheduled to be paid).

A technical note — if a Participant has elected the year of retirement as the Payment Commencement Date but retires on a date that is after the designated Payment Commencement Date, the payment (or the first annual installment) will begin on the first day of the month after the month in which the Participant retires.

Restrictions on changing Payment Commencement Dates and Methods of Payment shall not prevent the Participant from choosing a different Payment Commencement Date and/or Method of Payment for amounts to be deferred in subsequent years, subject to the limitation on the number of Deferred Compensation Accounts a Participant may have.

 

  (f) Notwithstanding any Payment Commencement Date or Method of Payment selected by a Participant, the following rule shall apply:

 

7

  (i) If a Participant’s directorship terminates for any reason other than (1) at or after reaching age 70 for outside Directors and age 65 for Directors who were former Company executives, (2) by reason of such Participant’s death, or (3) by reason of such Participant’s Disability, the Committee shall distribute such Director Participant’s benefits in the form of a lump sum, as soon as administratively practicable following the Participant’s termination of service (but not later than 60 days after such termination).

 

  (g) If, in the discretion of the Committee and subject to the requirements of Section 409A, the Participant has a need for funds due to an “unforeseeable emergency”, benefits may be paid prior to the Participant’s Payment Commencement Date. For this purpose, an “unforeseeable emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Distributions under this subsection may only be made if, consistent with Section 409A, the amounts distributed with respect to the emergency do not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). The Participant requesting a payment under this subsection must supply the Committee with a statement indicating the nature of the emergency that created the severe financial hardship, the fact that all other reasonably available resources are insufficient to meet the need, and any other information which the Committee decides is necessary to evaluate whether an unforeseeable emergency exists.

 

  (h) In the Company’s discretion, payments from the Plan may be made in cash or in the kind of property represented by the fund or funds selected by the Participant. Notwithstanding the foregoing or any other provision of this Plan, any portion of a Participant’s Deferred Compensation Account deemed invested in shares of Predecessor Company may only be settled in cash.

 

  (i) All contributions to the Plan and all payments from the Plan, whether made by the Company or the Trustee, shall be subject to all taxes required to be withheld under applicable laws and regulations of any governmental authorities.

 

  (j)

Notwithstanding any provision to the contrary, a distribution triggered by a specified employee’s separation from service (for any reason other than death) may not commence before the date which is 6 months after the date of the specified employee’s separation from service (or if, earlier, the employee’s death). For purposes of the Plan, a “specified employee” has the meaning set forth in Section 409A. If this provision is triggered, any amount that would otherwise have been paid during such 6 month period shall be paid on the date

 

8

  that is the first day of the seventh month after such employee’s separation from service (or if, earlier, the employee’s death). For purposes of this Plan, the date when a Participant is deemed to be separated from service, retired, or terminated shall be determined consistent with the requirements of Section 409A.

 

  (k) Notwithstanding the foregoing, the Committee, in its sole discretion, may accelerate the time or schedule of a payment, or a payment may be made under the Plan, to pay the Federal Insurance Contributions Act (“FICA”) tax imposed under Code sections 3101, 3121(a), and 3121(v)(2) on compensation deferred under the plan (the “FICA Amount”). Additionally, the Committee may provide for the acceleration of the time or schedule of a payment, or a payment may be made under the Plan, to pay the income tax at source on wages imposed under section 3401 or the corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of the FICA Amount, and to pay the additional income tax at source on wages attributable to the pyramiding section 3401 wages and taxes. However, the total payment under this acceleration provision must not exceed the aggregate of the FICA Amount, and the income tax withholding related to such FICA Amount.

 

2.10. Manner of Electing Deferral, Choosing Investments and Choosing Payment Options

 

  (a) In order to make any elections or choices permitted hereunder, the Participant must give written or electronic notice to the Committee. A notice electing to defer Compensation shall specify:

 

  (i) the percentage, specified dollar amount, and/or amount above a specified dollar amount that is to be deferred (provided that the deferral is expected to be an amount that is a least $5,000 for the year);

 

  (ii) the type of Compensation to be deferred;

 

  (iii) the funds chosen by the Participant; and

 

  (iv) the portion of the Participant’s deferral elections that will be made to pre-existing Deferred Compensation Accounts and/or a new Deferred Compensation Account established for such deferral.

In the event that a new Deferred Compensation Account is established for such deferral, the Participant must designate the payout rules that will apply to such Deferred Compensation Account, e.g., the Method of Payment and the Payment Commencement Date, including rules for payment in the event of the Participant’s Disability or death. Each Deferred Compensation Account shall have Section 409A compliant payout rules specifying the Method of Payment and the Payment Commencement Date, including rules for payment in the event of the Participant’s Disability or death. Once established, such payout rules may not be changed except as provided in Section 2.9(e).

 

9

  (b) Subject to the requirements of Section 409A, the Committee, in its sole discretion, may establish rules for the manner in which deferral elections may be made and will provide election forms to permit Participants to defer Compensation to be earned during a calendar year. An election by a Participant to defer Compensation shall apply only to Compensation deferred in the calendar year for which the election is effective.

 

  (c) The last form received by the Committee directing an allocation of amounts in a Deferred Compensation Account among the funds available shall govern until changed by the receipt by the Committee of a subsequent allocation form.

 

  (d) Notwithstanding any provision in the Plan to the contrary, the Committee may permit elections, designations and allocations to be made through electronic means, and Plan statements and communications may be provided through electronic means.

 

2.11. Deferrals of Restricted Stock or Restricted Stock Units

A Director whose fees for a Term may be paid in the form of Restricted Stock or Restricted Stock Units may elect to defer such Restricted Stock or Restricted Stock Units in accordance with such guidelines and restrictions as may be established by the Committee and in accordance with the general terms of this Plan and Section 409A, subject to the following, which shall supersede any provision in the Plan to the contrary with respect to such deferrals:

 

  (a) An election to defer Restricted Stock or Restricted Stock Units must be made in accordance with Section 2.5 of the Plan and Section 409A. The deferral election may be made for all or a portion of the Restricted Stock or Restricted Stock Units that would have otherwise been awarded.

 

  (b) An election to defer Restricted Stock or Restricted Stock Units shall constitute a direction by the Director to have the Company, in lieu of currently issuing shares of Restricted Stock or an award of Restricted Stock Units, defer under this Plan an amount equal to the value of the Restricted Stock or Restricted Stock Units, subject to the election as determined at the time of the award. The Restricted Stock or Restricted Stock Units deferred by a Director under this Plan for a Term shall be credited as units of stock to a separate sub-account within the Director’s Deferred Compensation Account. The vesting rules that would have applied to the Restricted Stock or Restricted Stock Unit award that was deferred under the Plan shall apply to the sub-account attributable to such award.

 

  (c) Subject to the rules applicable to Predecessor Company stock, Restricted Stock or Restricted Stock Units deferred under the Plan shall be deemed invested in the Company stock fund during the entire deferral period and the Director shall not have the right to reallocate such deemed investment to any of the other investment options otherwise available under the Plan.

 

  (d)

At the time an election to defer Restricted Stock or Restricted Stock Units is

 

10

  made, the Director shall elect the time and form of payment of such deferral and earnings thereon in accordance with Section 2.9 of the Plan. Subject to the rules applicable to Predecessor Company stock, payments shall be made in shares of Company common stock.

 

  (e) Any portion of a Director’s Deferred Compensation Account attributable to deferred Restricted Stock or Restricted Stock Units, whether or not vested, shall not be available for early withdrawal under Section 2.9(g) of the Plan.

3.0      ADMINISTRATION OF THE PLAN

 

3.1. Statement of Account

Statements setting forth the values of the funds deemed to be held in a Participant’s Deferred Compensation Accounts will be sent to each Participant quarterly or more often as the Committee may elect. A Participant shall have two years from the date a statement has been sent to question the accuracy of the statement. If no objection is made to the statement, it shall be deemed to be accurate and thereafter binding on the Participant for all purposes.

 

3.2. Assignability

The benefits payable under this Plan shall not revert to the Company or be subject to the Company’s creditors prior to the Company’s insolvency or bankruptcy, nor, except pursuant to will or the laws of descent and distribution, shall they be subject in any way to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind by the Participant, the Participant’s beneficiary or the creditors of either, including such liability as may arise from the Participant’s bankruptcy.

 

3.3. Business Days

In the event any date specified herein falls on a Saturday, Sunday, or legal holiday, such date shall be deemed to refer to the next business day thereafter or such other date as may be determined by the Committee in the reasonable exercise of its discretion.

 

3.4. Administration

This Plan shall be administered by the Committee. The Committee has sole discretion to interpret the Plan and to determine all questions arising in the administration, interpretation, and application of the Plan. The Committee’s powers include the power, in its sole discretion and consistent with the terms of the Plan, to determine who is eligible to participate in this Plan, to determine the eligibility for and the amount of benefits payable under the Plan, to determine when and how amounts are allocated to a Participant’s Deferred Compensation Account, to establish rules for determining when and how elections can be made, to adopt any rules relating to administering the Plan and to take any other action it deems appropriate to administer the Plan. The Committee may delegate its authority hereunder to one or more persons. Whenever the value of a

 

11

Deferred Compensation Account is to be determined under this Plan as of a particular date, the Committee may determine such value using any method that is reasonable, in its discretion. Whenever payments are to be made under this Plan, such payments shall begin on or within a reasonable period of time after the designated date, as determined by the Committee and subject to the limitations under Section 409A, and no interest shall be paid on such amounts for any reasonable delay in making the payments.

This Plan is intended to comply with the requirements of Section 409A, and shall be interpreted and administered in accordance with that intent. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended so as to avoid the conflict. Any reference in this Plan to “separation from service”, “retirement”, “cessation of employment”, “termination of employment”, “termination of employment with the Company”, “directorship termination”, “retirement from the Board”, “Director leaves the Board”, “cessation of employment with the Company or any Participating Affiliate” or similar term shall mean a “separation from service” within the meaning of Section 409A.

 

3.5. Amendment

 

  (a) Subject to the requirements of Section 409A, this Plan may at any time and from time to time be amended or terminated by the Board or the Compensation Committee of the Board. No amendment shall, without the consent of a Participant, adversely affect such Participant’s interest in the Plan, i.e., the Participant’s benefit accrued to the effective date of the amendment (hereinafter referred to as the “Protected Interest”), as determined by the Committee in its sole discretion.

 

  (b) An amendment shall be considered to adversely affect a Participant’s interest in the Plan if it has the effect of:

 

  (i) reducing the Participant’s Protected Interest in his or her Deferred Compensation Accounts;

 

  (ii) eliminating or restricting a Participant’s right to give investment directions with respect to the Participant’s Protected Interest in his or her Deferred Compensation Accounts under Sections 2.6 and 2.7 of the Plan, except that a change in the number or type of funds available shall not be considered an amendment of the Plan as long as the funds available to Participants following such change constitute a broad range of investment alternatives under the standards pertaining to the range of investments set forth in regulations promulgated by the Department of Labor under section 404(c) of ERISA or any successor provision;

 

  (iii) eliminating or restricting any timing or payment option available with respect to the Participant’s Protected Interest in his or her Deferred Compensation Accounts, or the Participant’s right to make and change payment elections with respect to such Protected Interest, under Section 2.9, 2.10 or any other provision of the Plan;

 

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  (iv) reducing or diminishing any of the change in control protections provided to the Participant under Section 3.7 or any other provision of the Plan; or

 

  (v) reducing or diminishing the rights of the Participant under this Section 3.5 with respect to any amendment or termination of the Plan.

 

  (c) Notwithstanding anything in the foregoing to the contrary, any amendment made for the purpose of protecting the favorable tax treatment of amounts deferred under the Plan following a change in applicable law, including for this purpose a change in statute, regulation or other agency guidance, shall not be considered to adversely affect a Participant’s interest in the Plan.

 

  (d) If the Plan is terminated and if permitted by Section 409A, compensation shall prospectively cease to be deferred as of the date of the termination. To the extent permitted by Section 409A, each Participant will be paid the value of his or her Deferred Compensation Accounts, including earnings credited through the payment date based on the Participant’s investment allocations, at the time and in the manner provided for in Sections 2.9 and 2.10.

 

3.6. Liability

 

  (a) Except in the case of willful misconduct, no Director or employee of the Company, or person acting as the independent fiduciary provided for in Section 3.7, shall be personally liable for any act done or omitted to be done by such person with respect to this Plan.

 

  (b) The Company shall indemnify, to the fullest extent permitted by law, members of the Committee, persons acting as the independent fiduciary and Directors and employees of the Company, both past and present, to whom are or were delegated duties, responsibilities and authority with respect to the Plan, against any and all claims, losses, liabilities, fines, penalties and expenses (including, but not limited to, all legal fees relating thereto), reasonably incurred by or imposed upon such persons, arising out of any act or omission in connection with the operation and administration of the Plan, other than willful misconduct.

 

3.7. Change in Control

 

  (a) Participation . If a change in control occurs, each eligible person who is participating in the Plan on the date of the change in control shall be entitled to continue participating in the Plan and to make additional deferrals under its terms following the change in control, until he or she ceases to meet the criteria for an “eligible person” specified in Section 2.2 hereof (without regard to designation by the Committee) or the Plan is terminated pursuant to Section 3.5. No new persons may be designated as eligible to participate in the Plan on or after a change in control.

 

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  (b) Legal Expense . If, with respect to any alleged failure by the Company to comply with any of the terms of this Plan subsequent to a change in control, other than any alleged failure relating to a matter within the control of the independent fiduciary and with respect to which the Company is acting pursuant to a determination or direction of the independent fiduciary, a Participant or beneficiary hires legal counsel or institutes any negotiations or institutes or responds to legal action to assert or defend the validity of, enforce his rights under, obtain benefits promised under or recover damages for breach of the terms of this Plan, then, regardless of the outcome, the Company shall pay, as they are incurred, a Participant’s or beneficiary’s actual expenses for attorneys’ fees and disbursements, together with such additional payments, if any, as may be necessary so that the net after-tax payments to the Participant or beneficiary equal such fees and disbursements. The Company agrees to pay such amounts within 10 days following the Company’s receipt of an invoice from the Participant, provided that the Participant shall have submitted an invoice for such amounts at least 30 days before the end of the calendar year next following the calendar year in which such fees and disbursements were incurred.

 

  (c) Mandatory Contributions to Rabbi Trust . If a change in control occurs, the Company shall make mandatory contributions to a Rabbi Trust established pursuant to Section 2.6(d), to the extent required by the provisions of such Rabbi Trust.

 

  (d) Powers of Independent Fiduciary . Following a change in control, the Plan shall be administered by the independent fiduciary. The independent fiduciary shall assume the following powers and responsibilities from the Committee and the Company:

 

  (i) The independent fiduciary shall assume all powers and responsibilities assigned to the Committee under Section 3.4 and all other provisions of the Plan, including, without limitation, the sole power and discretion to:

 

  (1) determine all questions arising in the administration and interpretation of the Plan, including factual questions and questions of eligibility to participate and eligibility for benefits;

 

  (2) adjudicate disputes and claims for benefits;

 

  (3) adopt rules relating to the administration of the Plan;

 

  (4) select the investment funds available to Participants under Section 2.6 of the Plan (subject to the requirement that, at all times, such funds constitute a broad range of investment alternatives under the standards pertaining to the range of investments set forth in regulations promulgated by the Department of Labor under section 404(c) of ERISA or any successor provision);

 

  (5) determine the amount, timing and form of benefit payments;

 

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  (6) direct the Company and the trustee of the Rabbi Trust on matters relating to benefit payments;

 

  (7) engage attorneys, accountants, actuaries and other professional advisors (whose fees shall be paid by the Company), to assist it in performing its responsibilities under the Plan; and

 

  (8) delegate to one or more persons selected by it, including outside vendors, responsibility for fulfilling some or all of its responsibilities under the Plan.

 

  (ii) The independent fiduciary shall have the sole power and discretion to (1) direct the investment of assets held in the Rabbi Trust, including the authority to appoint one or more investment managers to manage any such assets and (2) remove the trustee of the Rabbi Trust and appoint a successor trustee in accordance with the terms of the trust agreement.

 

  (e) Review of Decisions .

 

  (i) Notwithstanding any provision in the Plan to the contrary, following a change in control, any act, determination or decision of the Company (including its Board or any committee of its Board) with regard to the administration, interpretation and application of the Plan must be reasonable, as viewed from the perspective of an unrelated party and with no deference paid to the actual act, determination or decision of the Company. Furthermore, following a change in control, any decision by the Company shall not be final and binding on a Participant. Instead, following a change in control, if a Participant disputes a decision of the Company relating to the Plan and pursues legal action, the court shall review the decision under a “de novo” standard of review.

 

  (ii) Following a change in control, any act, determination or decision of the independent fiduciary with regard to the administration, interpretation and application of the Plan shall be final, binding, and conclusive on all parties.

 

  (f) Company’s Duty to Cooperate . Following a change in control, the Company shall cooperate with the independent fiduciary as may be necessary to enable the independent fiduciary to carry out its powers and responsibilities under the Plan and Rabbi Trust, including, without limitation, by promptly furnishing all information relating to Participants’ benefits as the independent fiduciary may reasonably request.

 

  (g) Appointment of Independent Fiduciary . The independent fiduciary responsible for the administration of the Plan following a change in control shall be a committee composed of the individuals who constituted the Company’s Benefit Plans Committee immediately prior to the change in control and the Company’s chief executive officer immediately prior to the change in control.

 

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If, following a change in control, any individual serving on such committee resigns, dies or becomes disabled, the remaining members of the committee shall continue to serve as the committee without interruption. A successor member shall be required only if there are less than three remaining members on the committee. If a successor member is required, the successor shall be an individual appointed by the remaining member or members of the committee who (i) is eligible to be paid benefits from the assets of the Rabbi Trust or the larger trust of which it is a part and (ii) agrees to serve on such committee.

If at any time there are no remaining members on the committee (including any successor members appointed to the committee following the change in control), the Trustee shall promptly submit the appointment of the successor members to an arbiter, the costs of which shall be borne fully by the Company, to be decided in accordance with the American Arbitration Association Commercial Arbitration Rules then in effect. The arbiter shall appoint three successor members to the committee who each meet the criteria for membership set forth above. Following such appointments by the arbiter, such successor members shall appoint any future successor members to the committee to the extent required above (i.e., if, at any time, there are less than three remaining members on the committee) and subject to the criteria set forth above.

If one or more successor members are required and there are no individuals remaining who satisfy the criteria for membership on the committee, the remaining committee members or, if none, the Trustee shall promptly submit the appointment of the successor member or members to an arbiter, and the Company shall bear the costs of arbitration as provided for in the preceding paragraph.

 

  (h) Change in Control Definition . As used in this Plan, a “change in control” means the first to occur of the following:

 

  (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section, the following acquisitions shall not constitute a change in control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or one of its affiliates or (D) any acquisition pursuant to a transaction that complies with clauses (1), (2) and (3) of Section 3.7(h)(iii) below;

 

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  (ii) Individuals who constitute the Board of Directors of the Company as of the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such date whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

  (iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then- outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or entity resulting from such Business Combination (including, without limitation, a corporation or entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or any corporation or entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation or entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or entity, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

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  (iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, in no event will the Spin-off be treated as a Change in Control.

 

  (i) Lump Sum Payment . Upon a change in control, the amounts credited in the Deferred Compensation Accounts of each Participant (including retired, active and inactive Participants), whether or not in pay status as of the date of the Change in Control, shall be paid within 45 days after the Change in Control.

For purposes of this Section 3.7(i), a change in control means a change in control that is also a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Code Section 409A(a)(2)(A)(v) and the Treasury regulations issued thereunder.

 

3.8. Claims

 

  (a) Claim Denials . The Committee shall maintain procedures with respect to the filing of claims for benefits under the Plan. Pursuant to such procedures, any Participant or beneficiary (hereinafter called “claimant”) whose claim for benefits under the Plan is denied shall receive written notice of such denial. The notice shall set forth:

 

  (i) the specific reasons for the denial of the claim;

 

  (ii) a reference to the specific provisions of the Plan on which the denial is based;

 

  (iii) any additional material or information necessary to perfect the claim and an explanation why such material or information is necessary; and

 

  (iv) a description of the procedures for review of the denial of the claim and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA following a denial on review.

Such notice shall be furnished to the claimant within a reasonable period of time, but no later than 90 days after receipt of the claim by the Plan unless the Committee determines that special circumstances require an extension of time for processing the claim. In no event shall such an extension exceed a period of 90 days from the end of the initial 90-day period. If such an extension is required, written notice thereof shall be furnished to the claimant before the end of the initial 90-day period, which shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision.

 

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  (b) Right to a Review of the Denial . Every claimant whose claim for benefits under the Plan is denied in whole or in part by the Committee shall have the right to request a review of the denial. Review shall be granted if it is requested in writing by the claimant no later than 60 days after the claimant receives written notice of the denial. The review shall be conducted by the Committee.

 

  (c) Decision of the Committee on Appeal . At any hearing of the Committee to review the denial of a claim, the claimant, in person or by duly authorized representative, shall have reasonable notice, shall have an opportunity to be present and be heard, may submit written comments, documents, records and other information relating to the claim, and may review documents, records and other information relevant to the claim under the applicable standards under ERISA. The Committee shall render its decision as soon as practicable. Ordinarily decisions shall be rendered within 60 days following receipt of the request for review. If the need to hold a hearing or other special circumstances requires additional processing time, the decision shall be rendered as soon as possible, but not later than 120 days following receipt of the request for review. If additional processing time is required, the Committee shall provide the claimant with written notice thereof, which shall indicate the special circumstances requiring the additional time and the date by which the Committee expects to render a decision. If the Committee denies the claim on review, it shall provide the claimant with written notice of its decision, which shall set forth (i) the specific reasons for the decision, (ii) reference to the specific provisions of the Plan on which the decision is based, (iii) a statement of the claimant’s right to reasonable access to, and copies of, all documents, records and other information relevant to the claim under the applicable standards under ERISA, and (iv) and a statement of the claimant’s right to bring a civil action under ERISA. The Committee’s decision shall be final and binding on the claimant, and the claimant’s heirs, assigns, administrator, executor, and any other person claiming through the claimant.

 

  (d) Notwithstanding the foregoing, following a change in control, the independent fiduciary shall be responsible for deciding claims and appeals pursuant to the procedures described above. Any decision on a claim by the independent fiduciary shall be final and binding on the claimant and the claimant’s heirs, assigns, administrator, executor and any other person claiming through the claimant.

 

3.9. Successors

The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

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3.10. Governing Law

To the extent not preempted by federal law, all questions pertaining to the construction, regulation, validity and effect of the provisions of the Plan shall be determined in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof.

 

Dated: [                    ]

 

    CARS.COM INC.

  By:    
     Name:  
     Title:  

 

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Exhibit 10.6

AWARD AGREEMENT

STOCK UNITS

The Executive Compensation Committee of the TEGNA Inc. Board of Directors has approved an award of Restricted Stock Units (referred to herein as “Stock Units”) to you under the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended, as set forth below.

This Award Agreement and the enclosed Terms and Conditions effective as of January 1, 2017, constitute the formal agreement governing this award.

Please sign both copies of this Award Agreement to evidence your agreement with the terms hereof. Keep one copy and return the other to the undersigned.

Please keep the enclosed Terms and Conditions for future reference.

 

 

 

Employee:            Alex Vetter

 

        Location:

  

Grant Date:          1/1/17

    

Stock Unit Commencement Date:        1/1/17

    

Stock Unit Expiration Date:       12/31/20

    

Stock Unit Vesting Schedule:

 

25% of the Stock Units shall vest on 12/31/17*

 

25% of the Stock Units shall vest on 12/31/18*

 

25% of the Stock Units shall vest on 12/31/19*

 

25% of the Stock Units shall vest on 12/31/20*

Payment Date:

 

25% of the Stock Units shall be paid on 1/2/18*

 

25% of the Stock Units shall be paid on 1/2/19*

 

25% of the Stock Units shall be paid on 1/2/20*

 

25% of the Stock Units shall be paid on 1/2/21*

 

* Provided the Employee is continuously employed until such vesting dates and has not terminated employment on or before such vesting dates. Such dates are hereinafter referred to as the “Vesting Date” or “Payment Date” for the Stock Units that vest or are paid on such dates.

Number of Stock Units:

 

 

    TEGNA Inc.

/s/ Alex Vetter

    By:  

/s/ Kevin E. Lord

          Employee’s Signature          Kevin E. Lord
         Senior Vice President/Human Resources

STOCK UNITS

TERMS AND CONDITIONS

Under the

TEGNA Inc.

2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010)

These Terms and Conditions, dated January 1, 2017, govern the grant of Restricted Stock Units (referred to herein as “Stock Units”) to the employee (the “Employee”) designated in the Award Agreement dated coincident with these Terms and Conditions. The Stock Units are granted under, and are subject to, the TEGNA Inc. (the “Company”) 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended (the “Plan”). Terms used herein that are defined in the Plan shall have the meanings ascribed to them in the Plan. If there is any inconsistency between these Terms and Conditions and the terms of the Plan, the Plan’s terms shall supersede and replace the conflicting terms herein.

1.     Grant of Stock Units . Pursuant to the provisions of (i) the Plan, (ii) the individual Award Agreement governing the grant, and (iii) these Terms and Conditions, the Company has granted to the Employee the number of Stock Units set forth on the applicable Award Agreement. Each vested Stock Unit shall entitle the Employee to receive from the Company one share of the Company’s common stock (“Common Stock”) upon the earliest of the Employee’s termination of employment, a Change in Control (but only to the extent provided in Section 14) or the Payment Date, as defined below. The Employee shall not be entitled to receive any shares of Common Stock with respect to unvested Stock Units, and the Employee shall have no further rights with regard to a Stock Unit once the underlying share of Common Stock has been delivered with respect to that Stock Unit.

2.     Payment Date . The Payment Date shall be the dates specified in the Award Agreement with respect to the Stock Units that are vested on such date under the schedule set forth in the Award Agreement.

 

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3.     Vesting Schedule . Subject to the special vesting rules set forth in Sections 7, 14 and 16, the Stock Units shall vest in accordance with the Vesting Schedule specified in the Award Agreement to the extent that the Employee is continuously employed by the Company or its Subsidiaries until the Vesting Dates specified in the Vesting Schedule and has not terminated employment on or before such dates. An Employee will not be treated as remaining in continuous employment if the Employee’s employer ceases to be a Subsidiary of the Company.

4.     No Dividend Equivalents . No dividend equivalents shall be paid to the Employee with regard to the Stock Units.

5.     Delivery of Shares . The Company shall deliver to the Employee a certificate or certificates, or at the election of the Company make an appropriate book-entry, for the number of shares of Common Stock equal to the number of vested Stock Units as soon as administratively practicable (but always by the 30th day) after the earliest of the Employee’s termination of employment, a Change in Control (but only to the extent provided in Section 14) or the Payment Date. The number of shares delivered shall be reduced by the value of all taxes withheld by reason of such delivery; provided that the amount that is withheld, or may be withheld at the Employee’s discretion, cannot exceed the amount of the taxes owed by the Employee using the maximum statutory tax rate in the Employee’s applicable jurisdiction(s). The Employee shall not be entitled to receive any shares of Common Stock with respect to unvested Stock Units, and the Employee shall have no further rights with regard to a Stock Unit once the underlying share of Common Stock has been delivered with respect to that Stock Unit.

6.     Cancellation of Stock Units .

(a)     Termination of Employment . Subject to Sections 7, 14 and 16, all Stock Units granted to the Employee that have not vested as of the date of the Employee’s termination of employment shall automatically be cancelled upon the Employee’s termination of employment. Unvested Stock Units shall also be cancelled in connection with an event that results in the Employee’s employer ceasing to be a Subsidiary of the Company.

 

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(b)     Forfeiture of Stock Units/Recovery of Common Stock . Pursuant to its recoupment policy, the Company may forfeit an Employee’s Stock Units or recover shares of Common Stock issued in connection with a Stock Unit. Generally, under the Company’s recoupment policy, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, and the Committee determines that:

(i)    the fraud or intentional misconduct of the Employee contributed (either directly or indirectly) to the noncompliance that resulted in the obligation to restate the Company’s financial statements; and

(ii)    a lower award of Stock Units would have been made to the Employee had it been based upon the restated financial results;

then the Company may, to the extent permitted by applicable law, and subject to the approval of the Committee, forfeit Stock Units awarded to the Employee or seek to recoup shares of Common Stock issued in connection with Stock Units in excess of the amount that would have been received under the accounting restatement. In each such instance, the Company may seek to forfeit the Employee’s relevant Stock Units or seek to recover the relevant Common Stock issued in connection with a Stock Unit granted or issued during the three-year period preceding the date the Company is required to prepare the accounting restatement, regardless of whether the Employee is then employed by the Company. In addition, the Company may assert any other remedies that may be available to the Company, including, without limitation, those available under Section 304 of the Sarbanes-Oxley Act of 2002.

 

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7.     Death, Disability, Retirement, Involuntary Termination without Cause . In lieu of the Vesting Schedule set forth in the Award Agreement, in the event that the Employee’s employment terminates on or prior to the Stock Unit Expiration Date by reason of death, permanent disability (as determined under the Company’s Long Term Disability Plan), termination of employment after attaining age 65, or termination of employment after both attaining age 55 and completing at least 5 years of service, the Employee (or in the case of the Employee’s death, the Employee’s estate or designated beneficiary) shall become vested in a number of Stock Units equal to the product of (i) the total number of Stock Units in which the Employee would have become vested upon the Stock Unit Expiration Date had the Employee’s employment not terminated, and (ii) a fraction, the numerator of which shall be the number of full calendar months between the Stock Unit Commencement Date and the date that employment terminated, and the denominator of which shall be the number of full calendar months from the Stock Unit Commencement Date to the Stock Unit Expiration Date; provided such number of Stock Units so vested shall be reduced by the number of Stock Units that had previously become vested.

In the event that the Employee is involuntarily terminated without cause prior to the Stock Unit Expiration Date under circumstances that constitute a “qualifying termination” under the Cars.com Inc. Executive Severance Plan that is attached to the Employee’s offer letter dated November 2, 2016 (assuming the Employee participated in such plan), the Employee will receive service credit and continue to vest in his Award for the eighteen (18) months period following the Employee’s termination of employment. To the extent that such service credit results in additional Stock Units vesting, the Company shall deliver to the Employee a certificate or certificates, or at the election of the Company make an appropriate book-entry, for the number of shares of Common Stock equal to the number of vested Stock Units as soon as administratively practicable (but always by the 30th day) after the Payment Date for such vested Stock Units, less applicable withholdings.

 

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8.     Non-Assignability . Stock Units may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may the Stock Units be made subject to execution, attachment or similar process.

9.     Rights as a Shareholder . The Employee shall have no rights as a shareholder by reason of the Stock Units.

10.     Discretionary Plan; Employment . The Plan is discretionary in nature and may be suspended or terminated by the Company at any time. With respect to the Plan, (a) each grant of Stock Units is a one-time benefit which does not create any contractual or other right to receive future grants of Stock Units, or benefits in lieu of Stock Units; (b) all determinations with respect to any such future grants, including, but not limited to, the times when the Stock Units shall be granted, the number of Stock Units, the Vesting Dates and the Payment Dates, will be at the sole discretion of the Company; (c) the Employee’s participation in the Plan shall not create a right to further employment with the Employee’s employer and shall not interfere with the ability of the Employee’s employer to terminate the Employee’s employment relationship at any time with or without cause; (d) the Employee’s participation in the Plan is voluntary; (e) the Stock Units are not part of normal and expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payment, bonuses, long-service awards, pension or retirement benefits, or similar payments; and (f) the future value of the Stock Units is unknown and cannot be predicted with certainty.

11.     Effect of Plan and these Terms and Conditions . The Plan is hereby incorporated by reference into these Terms and Conditions, and these Terms and Conditions are subject in all respects to the provisions of the Plan, including without limitation the authority of the Executive Compensation Committee of the Board of Directors of the Company (the “Committee”) in its sole discretion to adjust awards and to make interpretations and other determinations with respect to all

 

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matters relating to the applicable Award Agreements, these Terms and Conditions, the Plan and awards made pursuant thereto. These Terms and Conditions shall apply to the grant of Stock Units made to the Employee on the date hereof and shall not apply to any future grants of Stock Units made to the Employee.

12.     Notices . Notices hereunder shall be in writing and if to the Company shall be addressed to the Secretary of the Company at 7950 Jones Branch Drive, McLean, Virginia 22107, and, if to the Employee, shall be addressed to the Employee at his or her address as it appears on the Company’s records.

13.     Successors and Assigns . The applicable Award Agreement and these Terms and Conditions shall be binding upon and inure to the benefit of the successors and assigns of the Company and, to the extent provided in Section 7 hereof, to the estate or designated beneficiary of the Employee.

14.     Change in Control Provisions .

Notwithstanding anything to the contrary in these Terms and Conditions, the following provisions shall apply to all Stock Units granted under the attached Award Agreement.

(a)     Definitions .

As used in Article 15 of the Plan and in these Terms and Conditions, a “Change in Control” shall mean the first to occur of the following:

(i)    the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting

 

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Securities”); provided, however, that, for purposes of this Section, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or one of its affiliates or (iv) any acquisition pursuant to a transaction that complies with Sections 14(a)(iii)(A), 14(a)(iii)(B) and 14(a)(iii)(C);

(ii)    individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii)    consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or entity resulting

 

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from such Business Combination (including, without limitation, a corporation or entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or any corporation or entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation or entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv)    approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(b)     Acceleration Provisions . (i) In the event of the occurrence of a Change in Control in which the Stock Units are not continued or assumed (i.e., the Stock Units are not equitably converted into, or substituted for, a right to receive cash and/or equity of a successor entity or its affiliate), the Stock Units that have not been cancelled or paid out shall become fully vested. The vested Stock Units shall be paid out to the Employee as soon as administratively practicable on or following the effective date of the Change in Control (but in no event later than 30 days after such event); provided that the Change in Control also constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company

 

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within the meaning of Section 409A of the Internal Revenue Code of 1986 (the “Code”) and the regulations and guidance issued thereunder (“Section 409A”), and such payout will not result in additional taxes under Section 409A. Otherwise, the vested Stock Units shall be paid out as soon as administratively practicable after the earlier of the Employee’s termination of employment or the applicable Payment Date for such Stock Units (but in no event later than 30 days after such events).

(ii)    In the event of the occurrence of a Change in Control in which the Stock Units are continued or assumed (i.e., the Stock Units are equitably converted into, or substituted for, a right to receive cash and/or equity of a successor entity or its affiliate), the Stock Units shall not vest upon the Change in Control, provided that the Stock Units that are not subsequently vested and paid under the other provisions of this Award shall become fully vested in the event that the Employee has a “qualifying termination of employment” within two years following the date of the Change in Control. In the event of the occurrence of a Change in Control in which the Stock Units are continued or assumed, vested Stock Units shall be paid out as soon as administratively practicable after the earlier of the Employee’s termination of employment or the applicable Payment Date for such Stock Units (but in no event later than 30 days after such events).

A “qualifying termination of employment” shall occur if the Company involuntarily terminates the Employee without “Cause” or the Employee voluntarily terminates for “Good Reason”. For this purpose, “Cause” shall mean:

 

  •   any material misappropriation of funds or property of the Company or its affiliate by the Employee;

 

  •   unreasonable and persistent neglect or refusal by the Employee to perform his or her duties which is not remedied within thirty (30) days after receipt of written notice from the Company; or

 

  •   conviction, including a plea of guilty or of nolo contendere, of the Employee of a securities law violation or a felony.

 

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For this purpose, “Good Reason” means the occurrence after a Change in Control of any of the following circumstances without the Employee’s express written consent, unless such circumstances are fully corrected within 90 days of the Notice of Termination described below:

 

  •   the material diminution of the Employee’s duties, authorities or responsibilities from those in effect immediately prior to the Change in Control;

 

  •   a reduction in the Employee’s base salary or target bonus opportunity as in effect on the date immediately prior to the Change in Control;

 

  •   failure to provide the Employee with an annual long-term incentive opportunity the grant date value of which is equivalent to or greater in value than Employee’s regular annual long-term incentive opportunity in effect on the date of the Change of Control (counting only normal long-term incentive awards made as a part of the regular annual pay package, not special awards not made on a regular basis), calculated using widely recognized valuation methodologies by an experienced compensation consultant at a nationally recognized firm;

 

  •   the relocation of the Employee’s office from the location at which the Employee is principally employed immediately prior to the date of the Change in Control to a location 35 or more miles farther from the Employee’s residence immediately prior to the Change in Control, or the Company’s requiring the Employee to be based anywhere other than the Company’s offices at such location, except for required travel on the Company’s business to an extent substantially consistent with the Employee’s business travel obligations prior to the Change in Control; or

 

  •   the failure by the Company or its affiliate to pay any compensation or benefits due to the Employee.

Any termination by the Employee for Good Reason shall be communicated by a Notice of Termination that (x) indicates the specific termination provision in the Award Agreement relied upon, and (y) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated. Such notice must be provided to the Company within ninety (90) days after the event that created the “Good Reason”.

(iii)    If in connection with a Change in Control, the Stock Units are assumed (i.e., the Stock Units are equitably converted into, or substituted for, a right to receive cash and/or equity of a successor entity or its affiliate), the Stock Units shall refer to the right to receive such cash and/or equity. An assumption of this Stock Unit award must satisfy the following requirements:

 

  •   The converted or substituted award must be a right to receive an amount of cash and/or equity that has a value, measured at the time of such conversion or substitution, that is equal to the value of this Award as of the date of the Change in Control;

 

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  •   Any equity payable in connection with a converted or substituted award must be publicly traded equity securities of the Company, a successor company or their direct or indirect parent company, and such equity issuable with respect to a converted or substituted award must be covered by a registration statement filed with the Securities Exchange Commission that permits the immediate sale of such shares on a national exchange;

 

  •   The vesting terms of any converted or substituted award must be substantially identical to the terms of this Award; and

 

  •   The other terms and conditions of any converted or substituted award must be no less favorable to the Employee than the terms of this Award are as of the date of the Change in Control (including the provisions that would apply in the event of a subsequent Change in Control).

The determination of whether the conditions of this Section 14(b)(iii) are satisfied shall be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.

(c) Legal Fees. The Company shall pay all legal fees, court costs, fees of experts and other costs and expenses when incurred by Employee in connection with any actual, threatened or contemplated litigation or legal, administrative or other proceedings involving the provisions of this Section 14, whether or not initiated by the Employee. The Company agrees to pay such amounts within 10 days following the Company’s receipt of an invoice from the Employee, provided that the Employee shall have submitted an invoice for such amounts at least 30 days before the end of the calendar year next following the calendar year in which such fees and disbursements were incurred.

15.     Spin-Off. The Company has announced its intention to separate its digital automotive marketplace business from its media and other digital businesses by means of a spin-off (the “Spin-Off”) of a newly formed company named Cars.com Inc. (“SpinCo”) which will own the digital automotive marketplace business. Under the Spin-Off, the Company will distribute the stock of

 

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SpinCo to its existing shareholders. In the event of the Spin-Off, the Number of Stock Units granted under this Award Agreement shall be adjusted if the Employee remains employed with the Company, or its affiliates, in conjunction with the Spin-Off, as follows:

 

  •   The Number of Stock Units under this Award Agreement will be adjusted by multiplying such number by the “RemainCo Stock Conversion Ratio”. The RemainCo Stock Conversion Ratio is equal to (i) divided by (ii) where: (i) is the simple average of the volume weighted average per-share price of the Company’s Common Stock trading “regular way with due bills” on the New York Stock Exchange during each of the first five (5) full trading days immediately before the Spin-Off; and (ii) is the simple average of the volume weighted average per-share price of the Company’s Common Stock trading on the New York Stock Exchange during each of the first five (5) full trading days immediately after the Spin-Off. Such conversion shall be effected in a manner intended generally to prevent the dilution or enlargement of rights under this Award Agreement, provided that all determinations in connection therewith (including the methodology for determining the value of a share for the RemainCo Stock Conversion Ratio) shall be made by the Committee in its sole discretion.

 

  •   Except as set forth above, the terms of the Award Agreement shall remain in effect.

In the event of the Spin-Off, if the Employee becomes employed by SpinCo, or its affiliates, in conjunction with the Spin-Off:

 

  •   As of the date of the Spin-Off, this Award Agreement will be converted into an award agreement to receive stock units denominated in common shares of SpinCo. The number of stock units under the SpinCo award agreement will be calculated by multiplying the Number of Stock Units under this Award Agreement by the “SpinCo Stock Conversion Ratio”. The SpinCo Stock Conversion Ratio is equal to (i) divided by (ii) where: (i) is the simple average of the volume weighted average per-share price of the Company’s Common Stock trading “regular way with due bills” on the New York Stock Exchange during each of the first five (5) full trading days immediately before the Spin-Off; and (ii) is the simple average of the volume weighted average per-share price of SpinCo’s common stock trading on the public exchange on which SpinCo is listed during each of the first five (5) full trading days immediately after the Spin-Off. Such conversion shall be effected in a manner intended generally to prevent the dilution or enlargement of rights under this Award Agreement, provided that all determinations in connection therewith (including the methodology for determining the value of a share for the SpinCo Stock Conversion Ratio) shall be made by the Committee in its sole discretion.

 

  •   The Employee’s employment with SpinCo in conjunction with the Spin-Off shall not be treated as an event that cancels Employee’s rights under Section 6 or a termination of employment under Sections 1, 3, or 5.

 

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  •   Except as set forth above and for appropriate conforming changes (e.g., references to the Company shall instead refer to SpinCo, references to Common Shares shall refer to common stock of SpinCo, references to the Committee shall refer to the committee appointed by SpinCo, a Change in Control under Section 14 shall refer to a Change in Control of SpinCo, etc.), the SpinCo award agreement shall have terms and conditions that are substantially the same as the terms and conditions set forth herein.

16.     Employment or Similar Agreements. The provisions of Sections 1, 3, 5, 6, 7 and 14 of these Terms and Conditions shall not be applied to or interpreted in a manner which would decrease the rights held by, or the payments owing to, an Employee under an employment agreement, termination benefits agreement or similar agreement with the Company that pre-exists the Grant Date and contains specific provisions applying to Plan awards in the case of any change in control or similar event or termination of employment, and if there is any conflict between the terms of such employment agreement, termination benefits agreement or similar agreement and the terms of Sections 1, 3, 5, 6, 7 and 14, the employment agreement, termination benefits agreement or similar agreement shall control.

17.     Grant Subject to Applicable Regulatory Approvals . Any grant of Stock Units under the Plan is specifically conditioned on, and subject to, any regulatory approvals required in the Employee’s country. These approvals cannot be assured. If necessary approvals for grant or payment are not obtained, the Stock Units may be cancelled or rescinded, or they may expire, as determined by the Company in its sole and absolute discretion.

18.     Applicable Laws and Consent to Jurisdiction . The validity, construction, interpretation and enforceability of this Agreement shall be determined and governed by the laws of the State of Delaware without giving effect to the principles of conflicts of law. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in Virginia and agree that such litigation shall be conducted in the courts of Fairfax County, Virginia or the federal courts of the United States for the Eastern District of Virginia.

 

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19.     Compliance with Section 409A . This Award is intended to comply with the requirements of Section 409A so that no taxes under Section 409A are triggered, and shall be interpreted and administered in accordance with that intent (e.g., the definition of “termination of employment” (or similar term used herein) shall have the meaning ascribed to “separation from service” under Section 409A). If any provision of these Terms and Conditions would otherwise conflict with or frustrate this intent, the provision shall not apply. Notwithstanding any provision in this Award Agreement to the contrary and solely to the extent required by Section 409A, if the Employee is a “specified employee” within the meaning of Code Section 409A and if delivery of shares is being made in connection with the Employee’s separation from service other than by reason of the Employee’s death, delivery of the shares shall be delayed until six months and one day after the Employee’s separation from service with the Company (or, if earlier than the end of the six-month period, the date of the Employee’s death). The Company shall not be responsible or liable for the consequences of any failure of the Award to avoid taxation under Section 409A.

2017

US employees

 

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Exhibit 10.7

CARS.COM

SHARE APPRECIATION RIGHTS PLAN

(Effective as of January 1, 2015)

1. Purpose . The Cars.com Share Appreciation Rights Plan (the “ Plan ”) is intended to motivate certain key employees of Cars.com, LLC, a Delaware limited liability company or any successor thereto (the “ Company ”), to maximize their contributions to the long-term success of the Company and to encourage them to remain in the employ of the Company through awards of Share Appreciation Rights (“ SARs ”). The Plan is effective as of January 1, 2015 (the “ Effective Date ”).

2. Definitions . Where the context of the Plan permits, words in the masculine gender shall include the feminine gender, the plural form of a word shall include the singular form, and the singular form of a word shall include the plural form. Unless the context clearly indicates otherwise, the following terms shall have the following meanings:

 

  (a) “ Award ” means a grant of SARs to a Participant under this Plan.

 

  (b) “ Award Agreement ” means an agreement (in either paper or electronic form) that sets forth the terms, conditions and limitations of an Award made under the Plan.

 

  (c) “ Cause ” means (i) any intentional misappropriation of any funds or property from the Company or the receipt of personal profit from a transaction conducted on the Company’s behalf; (ii) failure to comply with Company policies (and, depending upon the materiality of the failure and the ability to cure such failure, after written warning thereof and opportunity to cure); (iii) usage of substances resulting in Participant’s inability to properly perform employment duties, and after written warning thereof and opportunity to cure, (iv) chronic poor work performance by Participant, after written warning thereof and opportunity to cure; or (v) conviction of a felony that would reflect adversely on the Company or adversely affect Participant’s ability to perform his or her employment duties.

 

  (d)

“ Change in Control ” means a transaction, or a series of related transactions, in which (i) an unrelated entity, person, or group acquires ownership of equity securities representing in excess of 50% of the Company’s outstanding voting power, or (ii) an unrelated entity, person, or group acquires all or substantially all of the Company’s assets; provided that in both cases the Change in Control must also constitute a “change in control event” within the meaning of Section 409A with respect to the Company. For avoidance of doubt, an initial public offering or spin-off of the Company or any Affiliate shall not be a Change in Control, and a change in control of TEGNA Inc. will not constitute a Change in Control. For this purpose, “Affiliate” shall mean means any person or entity that, directly or indirectly, controls, is controlled by or is under common control with the Company, and “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as used with respect to any person or entity, shall mean the possession, directly or indirectly, of the power to

  direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting securities or by contract or otherwise.

 

  (e) “ Code ” means the Internal Revenue Code of 1986, as amended.

 

  (f) “ Company ” means Cars.com, LLC.

 

  (g) “ Deferral Rules ” means those rules and procedures established by the Administrator in its discretion consistent with the requirements of Section 409A for the deferral of payment of vested SARs beyond the Performance Period, including, without limitation, any such deferral rules described in Section 6 below, which rules and procedures are incorporated by reference herein.

 

  (h) “ Disability ” means the Participant’s permanent and total disability as determined under the Company’s Long Term Disability Plan.

 

  (i) “ Fair Market Value ” means the value of a Share as of the applicable date selected by the Plan Administrator which shall typically occur as of the last day of each calendar year, and which may also occur on other dates as determined by the Plan Administrator in its discretion. The Plan Administrator, in its discretion, shall be responsible for determining Fair Market Value, provided that the Plan Administrator may consult with an independent third-party appraiser selected by the Plan Administrator in that process. The Plan Administrator may make such adjustments in determining the Fair Market Value of the Company to reflect such factors and transactions affecting the Company as the Plan Administrator determines to be appropriate in the Plan Administrator’s discretion. Once the Plan Administrator has determined Fair Market Value for an applicable date, it shall be binding on all Participants.

 

  (j) “ Good Reason ” means the occurrence after a Change in Control of any of the following circumstances without the Participant’s express written consent, unless such circumstances are fully corrected within 90 days of the notice of termination described below:

 

  •   the material diminution of the Participant’s duties, authorities or responsibilities from those in effect immediately prior to the Change in Control;

 

  •   a reduction in the Participant’s base salary or target bonus opportunity as in effect on the date immediately prior to the Change in Control;

 

  •  

failure to provide the Participant with an annual long-term incentive opportunity whose grant date value is equivalent to or greater in value than Participant’s regular annual long-term incentive opportunity in effect on the date of the Change of Control (counting only normal long-term incentive awards made as a part of the regular annual pay package, not special awards

 

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not made on a regular basis), calculated using widely recognized valuation methodologies by an experienced compensation consultant at a nationally recognized firm;

 

  •   the relocation of the Participant’s office from the location at which the Participant is principally employed immediately prior to the date of the Change in Control to a location 35 or more miles farther from the Participant’s residence immediately prior to the Change in Control, or the Company’s requiring the Participant to be based anywhere other than the Company’s offices at such location, except for required travel on the Company’s business to an extent substantially consistent with the Participant’s business travel obligations prior to the Change in Control; or

 

  •   the failure by the Company or its affiliate to pay any compensation or benefits due to the Participant.

Any termination by the Participant for Good Reason shall be communicated by a notice of termination that (A) indicates the specific termination provision in the Plan relied upon, and (B) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment under the provision so indicated. Such notice must be provided to the Company within ninety (90) days after the event that created the “Good Reason.”

 

  (k) “ Participant ” means an employee of the Company who has been designated as eligible to receive an Award under the Plan.

 

  (l) “ Performance Period ” means the measurement period designated by the Plan Administrator for an Award.

 

  (m) “ Plan Administrator ” means the Senior Vice President and Chief Human Resources Officer of TEGNA Inc. or such other executive(s) appointed by the Chief Executive Officer of TEGNA Inc. The Plan Administrator may from time-to-time delegate part or all of the powers and/or responsibilities of the Plan Administrator hereunder to such members of management of TEGNA Inc. or Cars.com, LLC as the Plan Administrator may determine.

 

  (n) “ Retirement ” means a termination of employment other than for Cause after attaining age 65 or after attaining age 55 and completing 5 years of service.

 

  (o) “ SAR ” means a share appreciation right granted under this Plan.

 

  (p) “ Section 409A ” means Code Section 409A and applicable regulations and other guidance issued under such Section.

 

  (q) “ Separation from Service ” means a separation from service as defined by Section 409A.

 

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  (r) “ Share ” means a Class A membership unit of the Company.

3. Participants . Participants shall consist of such key employees of the Company as the Plan Administrator determines in the Plan Administrator’s discretion. Designation of a Participant in any year shall not require such person to receive an Award in any other year or, once designated, to receive the same amount of Award as granted to the Participant or any other Participant in any year.

4. SARs . SARs shall consist of Awards that entitle the holder to receive the appreciation in the Fair Market Value of a Share from the date of grant (or such other date as the Plan Administrator may determine) up to a specified date or dates. Payment of such appreciation shall be made in cash, subject to the terms, conditions and limitations set forth in the applicable Award Agreement. Such terms may include, but are not limited to, the term of the Award, the provisions applicable in the event the Participant’s employment terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind any Award. An Award may also be subject to other provisions (whether or not applicable to similar Awards granted to other Participants) as the Plan Administrator determines appropriate, including forfeiture of Awards in the event of termination of employment shortly after vesting or in the event of a breach of any applicable restrictive covenants. Each SAR shall also be subject to the following rules:

 

  (a) Adjustment Provisions . The Plan Administrator may provide for equitable adjustments in the terms of any Awards granted hereunder to reflect changes in the Company’s structure, including any merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence upon such terms and conditions as it may, in its sole discretion, deem equitable and appropriate. The Plan Administrator may also provide for equitable adjustments to Awards upon such terms and conditions as the Plan Administrator may, in its sole discretion, deem equitable and appropriate to reflect changes in the Company’s pricing structure or other similar changes that may impact the Company’s value, but are not deemed by the Plan Administrator, in its sole discretion, to have resulted from Participants’ actions to enhance such value. Any adjustment pursuant to this Section 4(a) shall not be deemed an amendment to this Plan or to any underlying Award Agreement.

 

  (b) Shareholder Rights . The recipient of a SAR shall not be deemed for any purpose to be a holder of any Shares with respect to his SARs.

5. Vesting . Subject to the provisions of Section 7, a Participant’s SARs shall vest in accordance with provisions of the applicable Award Agreement.

6. Settlement . Vested SARs shall be paid in cash at the time and in the manner specified in the applicable Award Agreement; provided that, a Participant may elect to defer the receipt of all or a portion of the payment of vested SARs pursuant to the Deferral Rules. Under the Deferral Rules, such an election (a “Deferral Election”) must be made within the time period designated by the Plan Administrator. Generally, a Deferral Election may not take effect until at least 12 months after the date on which the Deferral Election is made; the

 

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payment with respect to which such Deferral Election is made must be deferred for a period of not less than 5 years from the date such payment would otherwise have been made; and the election must be made not less than 12 months before the date the payment is scheduled to be paid. Any Deferral Election filed with the Plan Administrator or its delegate is irrevocable on and after the deadline for filing the election. Amounts so deferred shall be held by the Company without interest earned. Any such deferral shall not entitle the Participant to any appreciation in the Fair Market Value of a Share following the end of the Performance Period to which the vested SARs relate. The Company shall not be required to fund or otherwise segregate assets to be used for payment of benefits under the Plan.

7. Forfeitures . In the event a Participant violates his Restrictive Covenant Agreement with the Company or any other applicable restrictive covenants, including but not limited to non-compete, non-solicitation, non-disclosure or non-disparagement covenants, as determined by the Plan Administrator in its sole discretion, all SARs held by a Participant (whether or not vested) shall automatically be cancelled without any consideration paid therefor and without further action on the part of the Company, and the Participant shall be required to repay to the Company any amounts paid to the Participant with respect to any SARs at any time during the 12-month period prior to such violation. In addition, the Plan Administrator may make retroactive adjustments to this Award, and the Participant shall reimburse to the Company any Award paid where such compensation was predicated upon achieving certain financial results that were substantially the subject of a financial restatement, and, as a result of the restatement, it is determined that the Participant otherwise would not have been paid such compensation (regardless of whether or not the restatement resulted from the Participant’s misconduct). In such instance, the Company may recover the amount by which the Participant’s payment for the relevant Performance Period exceeded the lower payment that would have been made based on the restated financial results. In addition, the Company may assert any other remedies that may be available to the Company, including, without limitation, those available under Section 304 of the Sarbanes-Oxley Act of 2002. To the extent permitted by applicable law, the Company may deduct from any amounts payable by the Company to the applicable Participant any amounts the Participant owes to the Company under this Section 7. This right of set-off is in addition to any other remedies the Company may have against the Participant.

8. Nontransferability . Benefits are not subject to alienation, anticipation or assignment by a Participant or beneficiary and are not subject to being attached or reached and applied by any creditor of the Participant or beneficiary. Benefits shall be paid from the general assets of the Company and shall not be funded, by trust or otherwise. No Participant or beneficiary shall have a right to a benefit hereunder greater than that of an unsecured general creditor of the Company. Nothing herein shall be deemed to create a trust of any kind or to create any fiduciary relationship whatsoever. In the event of a Participant’s death, payment with respect to any Award shall be made only: (a) to the beneficiary or beneficiaries of the deceased Participant pursuant to a valid beneficiary designation on a form approved by the Plan Administrator, or (b) in the absence of such a valid beneficiary designation, by or to the person or persons to whom the deceased Participant’s rights under the Award shall pass by will or the laws of descent and distribution.

9. Right to Continued Employment . Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s employment with

 

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the Company; nor interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without Cause, to the extent permitted by applicable laws and any enforceable agreement between the employee and the Company.

10. Claims . Any claim for benefits under the Plan shall be handled by the Plan Administrator. Benefits under the Plan shall be paid only if the Plan Administrator, in its discretion, determines that a claimant is entitled to them. No action at law or in equity shall be brought to recover benefits under the Plan until any applicable appeal rights have been exercised and until the Plan benefits requested in such appeal have been denied in whole or in part. If any judicial proceeding is undertaken to appeal the denial of a claim or bring any other, the evidence presented shall be strictly limited to the evidence timely presented to the Plan Administrator. In addition, any such judicial proceeding must be filed within 120 days after the Plan Administrator’s final decision.

11. Taxes . The Company shall be entitled to withhold the amount of any tax attributable to any amounts payable under the Plan, after giving notice to the person entitled to receive such payment or delivery, and the Company may defer making payment or delivery as to any Award, if any such tax is payable, until indemnified to its satisfaction.

12. Administration . The Plan Administrator shall administer the Plan. The Plan Administrator is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and, in its discretion, to make such determinations and interpretations and to take such action in connection with the Plan and any Awards granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Plan Administrator shall be binding and conclusive on all Participants and their legal representatives. The Plan Administrator and no employee of the Company (or any parent company) shall be liable for any act or failure to act hereunder, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving bad faith, gross negligence or fraud, for any act or failure to act by the Plan Administrator or the employee.

13. Severability . In the event any provision of the Plan or an Award Agreement shall be held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan or Award Agreement, and the Plan and Award Agreement shall be construed and enforced as if such illegal or invalid provisions had never been contained therein.

14. Amendment and Termination . The Plan Administrator may amend the Plan from time to time, or terminate the Plan at any time. However, no action authorized by this Section shall change the terms and conditions of any existing Award without the Participant’s consent; provided that the Plan Administrator may amend or terminate an Award to comply with changes in law without a Participant’s consent; provided, further, that the adjustments described in Section 4(a) shall not be treated as amendments subject to the restrictions of this sentence. Any amendment or termination of the Plan shall comply with the restrictions of Section 409A, and no amendment or termination of the Plan may accelerate a scheduled payment unless permitted by Treasury regulations section 1.409A-3(j)(4), nor may any amendment permit a subsequent deferral unless such amendment complies with the requirements of Treasury regulations section 1.409A-2(b).

 

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15. Compliance with Section 409A . This Plan is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and administered in accordance with that intent. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended so as to avoid the conflict. Any reference in the Plan to “termination of employment” or similar term shall mean an event that constitutes a “separation from service” within the meaning of Section 409A. Each payment of under this Plan shall be treated as a separate payment for purposes of applying the exclusion under Section 409A. Notwithstanding any Plan provision to the contrary, in the event that a Participant is a “specified employee” as defined in Section 409A, any amount that is subject to Section 409A that is payable in connection with Participant’s separation from service may not be paid prior to the date which is six months after the date the Participant terminates employment (or, if earlier, the Participant’s death). A Participant who is subject to the restriction described in the previous sentence shall be paid on the first day of the seventh month after his separation from service an amount equal to the benefit that he would have received during such six month period absent the restriction

16. Governing Law . This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Illinois (regardless of the law that might otherwise govern under applicable principles of conflict of laws). Any legal action related to this Plan shall be brought only in a federal or state court located in Chicago, Illinois, and by accepting an Award, a Participant agrees to submit to the jurisdiction of such courts, to bring all such actions or proceedings in such courts and to waive any defense of inconvenient forum to such actions or proceedings.

EXECUTED and APPROVED by:

 

  /s/ Alex Vetter

  

  /s/ Kevin E. Lord

  Alex Vetter

  President & Chief Executive Officer

  Cars.com, LLC

  

  Kevin E. Lord

  SVP and Chief Human Resources Officer

  TEGNA Inc.

 

-7-

Exhibit 10.8

CARS.COM

SHARE APPRECIATION RIGHTS AWARD AGREEMENT

To : Alex Vetter

Cars.com, LLC (the “ Company ” ) is pleased to award you this Share Appreciation Rights Award (this “ Award ”), effective as of January 1, 2016 (the “ Award Date ”). Although the Award Date is January 1, 2016, the Performance Period, as defined below, begins on January 1, 2015, and the Award’s vesting reflects your service since January 1, 2015. This Award is subject to the terms of this Share Appreciation Rights Award Agreement (this “ Agreement ”) and is made under, and is subject to, the Cars.com Share Appreciation Rights Plan (the “ Plan ”), which is incorporated into this Agreement by reference. This Award is intended to conform in all respects with, and is subject to, all applicable provisions of the Plan. Inconsistencies between this Agreement and the Plan will be resolved in accordance with the terms of the Plan. Any capitalized terms used herein that are otherwise undefined shall have the same meaning provided in the Plan.

1.     Award of SARs . The Company hereby awards to you 111,421 share appreciation rights (“ SARs ”).

2.     Performance Period . The SARs awarded hereunder relate to the Performance Period from January 1, 2015 through December 31, 2017. December 31, 2017 shall be the “Performance Period End Date” hereunder.

3.     Vesting . SARs awarded under this Award will vest in three equal portions, with one-third of the total Award being vested on the Award Date and an additional one-third of the total Award becoming vested on each of January 1, 2017 and January 1, 2018 (provided that you remain in continuous employment with the Company through those dates), except as follows:

 

  (a) In the event that you incur a Separation from Service prior to the Performance Period End Date by reason of death, permanent disability (as determined under the Company’s Long Term Disability Plan), Retirement, you (or in the case of your death, your estate or designated beneficiary) shall vest in a number of SARs equal to the product of (i) the total number of SARs you would have vested in upon the expiration of the Performance Period End Date had not incurred a Separation from Service, and (ii) a fraction, the numerator of which shall be the number of full calendar months between the first day of the Performance Period and the date of your Separation from Service, and the denominator of which shall be the number of full calendar months from the first day of the Performance Period to the Performance Period End Date.

 

  (b) In the event of a Change in Control in which your Award is not continued or your Award is not assumed by a successor entity (or its affiliate), then any unvested SARs shall vest. In the event of a Change in Control in which your Award is so continued or assumed, if you thereafter have a Separation from Service from the Company within 2 years following the date of the Change in Control as a result of your involuntary termination without Cause or your voluntary termination for Good Reason, any unvested SARs shall become vested.

  (c) In the event of your Separation from Service from the Company before the end of the Performance Period, any unvested SARs shall be forfeited.

 

  (d) In the event of a termination for Cause, both vested and unvested SARs will be immediately forfeited.

4.     Determination of Amount Payable . When settlement of your SARs is due under the terms of the Plan and this Agreement, your vested SARs will be converted to a single cash payment by multiplying:

 

  (i) the excess of the Fair Market Value of a Share as of the last day of the Performance Period (or, if occurring earlier, the date of a Change in Control) over the Fair Market Value of a Share as of January 1, 2015

by

 

  (ii) the number of vested SARs.

5.     Timing of Payment . The amount payable pursuant to paragraph 4 will be paid within the 60-day period following the end of the Performance Period End Date. Notwithstanding the foregoing, in the event of a Change in Control in which the Awards are not continued or assumed as provided in paragraph 3(b) above, the vested SARs shall be paid within the 60-day period following the Change in Control; and in the event of a Separation from Service before the Performance Period End Date and following a Change in Control in which the Awards were so continued or assumed, vested SARs shall be paid within the 60-day period following the date of your Separation from Service (subject to the delay applicable to specified employees under Section 15 of the Plan). You may elect to defer the distribution of all or a portion of the SARs awarded under this Award. Such election must be made in accordance with the Deferral Rules. Under the Deferral Rules, such an election (a “Deferral Election”) must be made within the time period designated by the Plan Administrator. Generally, a Deferral Election may not take effect until at least 12 months after the date on which the Deferral Election is made; the payment with respect to which such Deferral Election is made must be deferred for a period of not less than 5 years from the date such payment would otherwise have been made; and the election must be made not less than 12 months before the date the payment is scheduled to be paid. Any Deferral Election filed with the Plan Administrator or its delegate is irrevocable on and after the deadline for filing the election. Amounts so deferred shall be held by the Company without interest earned. For the avoidance of doubt, any such deferral shall not entitle the Participant to any appreciation in the Fair Market Value of a Share, and shall remain unfunded and subject to the claims of creditors of the Company as provided in Section 8 of the Plan.

6.     Forfeitures . If you violate any restrictive covenant agreement with the Company, including but not limited to non-compete, non-solicitation, non-disclosure or non-disparagement covenants, all SARs issued pursuant to this Award (whether or not vested) will

 

-2-

automatically be cancelled without any consideration paid therefor and without further action on the part of the Company; and you will be required to repay to the Company any amounts paid to you pursuant to this Award at any time during the 12-month period prior to such violation. In addition, the Plan Administrator may make retroactive adjustments to this Award, and you shall reimburse to the Company any amounts paid to you pursuant to this Award where such amount was predicated upon achieving certain financial results that were substantially the subject of a financial restatement and, as a result of the restatement, it is determined that you otherwise would not have been paid such amount (regardless of whether or not the restatement resulted from your misconduct). In such instance, the Company may recover the amount by which the amount paid to you exceeded the lower payment that would have been made based on the restated financial results. By accepting this Award, you consent to and authorize the Company to deduct from any amounts payable by the Company to you, any amounts you owe to the Company under this paragraph 6. This right of set-off is in addition to any other remedies the Company may have against you.

7.     Miscellaneous .

 

  (a) Successors and Assigns . Except as otherwise provided herein, this Award will bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not.

 

  (b) Confidentiality . You agree that you will not disclose the terms of this Award to any other employees of the Company or third parties with the exception of your accountants, attorneys, or spouse, and shall ensure that none of them discloses such terms to any other person, except as required to comply with legal process.

8.     Acceptance of Terms and Conditions . To be eligible to receive this Award, you must sign this Agreement and return it to the Vice President of Human Resources or Director of Human Resources within 30 days after the date it is provided to you. By signing this Agreement, you agree to be bound by the terms and conditions herein, the Plan and any and all conditions established by the Company in connection with Awards issued under the Plan and you hereby reaffirm your legally enforceable responsibilities and obligations under your Restrictive Covenant Agreement with the Company. By accepting this Award, you agree that the awarding of the Award is at the discretion of the Company and its delegates, and that acceptance of this Award is no guarantee that future Awards will be awarded under the Plan.

 

CARS.COM, LLC     PARTICIPANT

/s/ Kevin Lord

   

/s/ Alex Vetter

By: Kevin Lord     Participant Signature
Its: SVP and Chief Human Resources Officer    
Tegna Inc.    

 

-3-

Exhibit 10.9

CARS.COM

SHARE APPRECIATION RIGHTS AWARD AGREEMENT

To : John Clavadetscher

Cars.com, LLC (the “ Company ”) is pleased to award you this Share Appreciation Rights Award (this “ Award ”), effective as of January 1, 2016 (the “ Award Date ”). Although the Award Date is January 1, 2016, the Performance Period, as defined below, begins on January 1, 2015, and the Award’s vesting reflects your service since January 1, 2015. This Award is subject to the terms of this Share Appreciation Rights Award Agreement (this “ Agreement ”) and is made under, and is subject to, the Cars.com Share Appreciation Rights Plan (the “ Plan ”), which is incorporated into this Agreement by reference. This Award is intended to conform in all respects with, and is subject to, all applicable provisions of the Plan. Inconsistencies between this Agreement and the Plan will be resolved in accordance with the terms of the Plan. Any capitalized terms used herein that are otherwise undefined shall have the same meaning provided in the Plan.

1.     Award of SARs . The Company hereby awards to you 30,641 share appreciation rights (“ SARs ”).

2.     Performance Period . The SARs awarded hereunder relate to the Performance Period from January 1, 2015 through December 31, 2017. December 31, 2017 shall be the “Performance Period End Date” hereunder.

3.     Vesting . SARs awarded under this Award will vest in three equal portions, with one-third of the total Award being vested on the Award Date and an additional one-third of the total Award becoming vested on each of January 1, 2017 and January 1, 2018 (provided that you remain in continuous employment with the Company through those dates), except as follows:

 

  (a) In the event that you incur a Separation from Service prior to the Performance Period End Date by reason of death, permanent disability (as determined under the Company’s Long Term Disability Plan), Retirement, you (or in the case of your death, your estate or designated beneficiary) shall vest in a number of SARs equal to the product of (i) the total number of SARs you would have vested in upon the expiration of the Performance Period End Date had not incurred a Separation from Service, and (ii) a fraction, the numerator of which shall be the number of full calendar months between the first day of the Performance Period and the date of your Separation from Service, and the denominator of which shall be the number of full calendar months from the first day of the Performance Period to the Performance Period End Date.

  (b) In the event of a Change in Control in which your Award is not continued or your Award is not assumed by a successor entity (or its affiliate), then any unvested SARs shall vest. In the event of a Change in Control in which your Award is so continued or assumed, if you thereafter have a Separation from Service from the Company within 2 years following the date of the Change in Control as a result of your involuntary termination without Cause or your voluntary termination for Good Reason, any unvested SARs shall become vested.

 

  (c) In the event of your Separation from Service from the Company before the end of the Performance Period, any unvested SARs shall be forfeited.

 

  (d) In the event of a termination for Cause, both vested and unvested SARs will be immediately forfeited.

4.     Determination of Amount Payable . When settlement of your SARs is due under the terms of the Plan and this Agreement, your vested SARs will be converted to a single cash payment by multiplying:

 

  (i) the excess of the Fair Market Value of a Share as of the last day of the Performance Period (or, if occurring earlier, the date of a Change in Control) over the Fair Market Value of a Share as of January 1, 2015

by

 

  (ii) the number of vested SARs.

5.     Timing of Payment . The amount payable pursuant to paragraph 4 will be paid within the 60-day period following the end of the Performance Period End Date. Notwithstanding the foregoing, in the event of a Change in Control in which the Awards are not continued or assumed as provided in paragraph 3(b) above, the vested SARs shall be paid within the 60-day period following the Change in Control; and in the event of a Separation from Service before the Performance Period End Date and following a Change in Control in which the Awards were so continued or assumed, vested SARs shall be paid within the 60-day period following the date of your Separation from Service (subject to the delay applicable to specified employees under Section 15 of the Plan). You may elect to defer the distribution of all or a portion of the SARs awarded under this Award. Such election must be made in accordance with the Deferral Rules. Under the Deferral Rules, such an election (a “Deferral Election”) must be made within the time period designated by the Plan Administrator. Generally, a Deferral Election may not take effect until at least 12 months after the date on which the Deferral Election is made; the payment with respect to which such Deferral Election is made must be deferred for a period of not less than 5 years from the date such payment would otherwise have been made; and the election must be made not less than 12 months before the date the payment is scheduled to be paid. Any Deferral Election filed with the Plan Administrator or its

 

2

delegate is irrevocable on and after the deadline for filing the election. Amounts so deferred shall be held by the Company without interest earned. For the avoidance of doubt, any such deferral shall not entitle the Participant to any appreciation in the Fair Market Value of a Share, and shall remain unfunded and subject to the claims of creditors of the Company as provided in Section 8 of the Plan

6.     Forfeitures . If you violate any restrictive covenant agreement with the Company, including but not limited to non-compete, non-solicitation, non-disclosure or non-disparagement covenants, all SARs issued pursuant to this Award (whether or not vested) will automatically be cancelled without any consideration paid therefor and without further action on the part of the Company; and you will be required to repay to the Company any amounts paid to you pursuant to this Award at any time during the 12-month period prior to such violation. In addition, the Plan Administrator may make retroactive adjustments to this Award, and you shall reimburse to the Company any amounts paid to you pursuant to this Award where such amount was predicated upon achieving certain financial results that were substantially the subject of a financial restatement and, as a result of the restatement, it is determined that you otherwise would not have been paid such amount (regardless of whether or not the restatement resulted from your misconduct). In such instance, the Company may recover the amount by which the amount paid to you exceeded the lower payment that would have been made based on the restated financial results. By accepting this Award, you consent to and authorize the Company to deduct from any amounts payable by the Company to you, any amounts you owe to the Company under this paragraph 6. This right of set-off is in addition to any other remedies the Company may have against you.

7.     Miscellaneous .

 

  (a) Successors and Assigns . Except as otherwise provided herein, this Award will bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not.

 

  (b) Confidentiality . You agree that you will not disclose the terms of this Award to any other employees of the Company or third parties with the exception of your accountants, attorneys, or spouse, and shall ensure that none of them discloses such terms to any other person, except as required to comply with legal process.

8.     Acceptance of Terms and Conditions . To be eligible to receive this Award, you must sign this Agreement and return it to the Vice President of Human Resources or Director of Human Resources within 30 days after the date it is provided to you. By signing this Agreement, you agree to be bound by the terms and conditions herein, the Plan and any and all conditions established by the Company in connection with Awards issued under the Plan and you hereby reaffirm your legally enforceable responsibilities and obligations under your Restrictive Covenant Agreement with the

 

3

Company. By accepting this Award, you agree that the awarding of the Award is at the discretion of the Company and its delegates, and that acceptance of this Award is no guarantee that future Awards will be awarded under the Plan.

 

CARS.COM, LLC       PARTICIPANT

/s/ Alex Vetter

     

/s/ John Clavadetscher

By: Alex Vetter       Participant Signature
Its: President & Chief Executive Officer      

 

4

Exhibit 10.10

CARS.COM

SHARE APPRECIATION RIGHTS AWARD AGREEMENT

To: Alex Vetter

Cars.com, LLC (the “ Company ”) is pleased to award you this Share Appreciation Rights Award (this “ Award ”), effective as of January 1, 2016 (the “ Award Date ”). This Award is subject to the terms of this Share Appreciation Rights Award Agreement (this “ Agreement ”) and is made under, and is subject to, the Cars.com Share Appreciation Rights Plan (the “ Plan ”), which is incorporated into this Agreement by reference. This Award is intended to conform in all respects with, and is subject to, all applicable provisions of the Plan. Inconsistencies between this Agreement and the Plan will be resolved in accordance with the terms of the Plan. Any capitalized terms used herein that are otherwise undefined shall have the same meaning provided in the Plan.

1.     Award of SARs . The Company hereby awards to you 88,773 share appreciation rights ( “SARs” ) .

2.     Performance Period . The SARs awarded hereunder relate to the Performance Period from January 1, 2016 through December  31, 2018. December  31, 2018 shall be the “Performance Period End Date” hereunder.

3.     Vesting . SARs awarded under this Award will vest in three equal portions, with one-third of the total Award becoming vested on each of January 1, 2017, January  1, 2018 and January  1, 2019 (provided that you remain in continuous employment with the Company through those dates), except as follows:

 

  (a) In the event that you incur a Separation from Service prior to the Performance Period End Date by reason of death, permanent disability (as determined under the Company’s Long Term Disability Plan), Retirement, you (or in the case of your death, your estate or designated beneficiary) shall vest in a number of SARs equal to the product of (i) the total number of SARs you would have vested in upon the expiration of the Performance Period End Date had not incurred a Separation from Service, and (ii)  a fraction, the numerator of which shall be the number of full calendar months between the first day of the Performance Period and the date of your Separation from Service, and the denominator of which shall be the number of full calendar months from the first day of the Performance Period to the Performance Period End Date.

 

  (b) In the event of a Change in Control in which your Award is not continued or your `Award is not assumed by a successor entity (or its affiliate), then any unvested SARs shall vest. In the event of a Change in Control in which your Award is so continued or assumed, if you thereafter have a Separation from Service from the Company within 2 years following the date of the Change in Control as a result of your involuntary termination without Cause or your voluntary termination for Good Reason, any unvested SARs shall become vested.

  (c) In the event of your Separation from Service from the Company before the end of the Performance Period, any unvested SARs shall be forfeited.

 

  (d) In the event of a termination for Cause, both vested and unvested SARs will be immediately forfeited.

4.     Determination of Amount Payable . When settlement of your SARs is due under the terms of the Plan and this Agreement, your vested SARs will be converted to a single cash payment by multiplying:

 

  (i) the excess of the Fair Market Value of a Share as of the last day of the Performance Period (or, if occurring earlier, the date of a Change in Control) over the Fair Market Value of a Share as of January 1, 2016

by

 

  (ii) the number of vested SARs.

5.     Timing of Payment . The amount payable pursuant to paragraph 4 will be paid within the 60-day period following the end of the Performance Period End Date. Notwithstanding the foregoing, in the event of a Change in Control in which the Awards are not continued or assumed as provided in paragraph 3(b) above, the vested SARs shall be paid within the 60-day period following the Change in Control; and in the event of a Separation from Service before the Performance Period End Date and following a Change in Control in which the Awards were so continued or assumed, vested SARs shall be paid within the 60-day period following the date of your Separation from Service (subject to the delay applicable to specified employees under Section 15 of the Plan). You may elect to defer the distribution of all or a portion of the SARs awarded under this Award. Such election must be made in accordance with the Deferral Rules. Under the Deferral Rules, such an election (a “ Deferral Election ”) must be made within the time period designated by the Plan Administrator. Generally, a Deferral Election may not take effect until at least 12 months after the date on which the Deferral Election is made; the payment with respect to which such Deferral Election is made must be deferred for a period of not less than 5 years from the date such payment would otherwise have been made; and the election must be made not less than 12 months before the date the payment is scheduled to be paid. Any Deferral Election filed with the Plan Administrator or its delegate is irrevocable on and after the deadline for filing the election. Amounts so deferred shall be held by the Company without interest earned. For the avoidance of doubt, any such deferral shall not entitle the Participant to any appreciation in the Fair Market Value of a Share, and shall remain unfunded and subject to the claims of creditors of the Company as provided in Section  8 of the Plan.

6.     Forfeitures . If you violate any restrictive covenant agreement with the Company, including but not limited to non-compete, non-solicitation, non-disclosure or non-disparagement covenants, all SARs issued pursuant to this Award (whether or not vested) will automatically be cancelled without any consideration paid therefor and without further action on the part of the Company; and you will be required to repay to the Company any amounts paid to you pursuant to this Award at any time during the 12-month period prior to such violation. In

 

-2-

addition, the Plan Administrator may make retroactive adjustments to this Award, and you shall reimburse to the Company any amounts paid to you pursuant to this Award where such amount was predicated upon achieving certain financial results that were substantially the subject of a financial restatement and, as a result of the restatement, it is determined that you otherwise would not have been paid such amount (regardless of whether or not the restatement resulted from your misconduct). In such instance, the Company may recover the amount by which the amount paid to you exceeded the lower payment that would have been made based on the restated financial results. By accepting this Award, you consent to and authorize the Company to deduct from any amounts payable by the Company to you, any amounts you owe to the Company under this paragraph 6. This right of set-off is in addition to any other remedies the Company may have against you.

7.     Miscellaneous .

 

  (a) Successors and Assigns . Except as otherwise provided herein, this Award will bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not.

 

  (b) Confidentiality . You agree that you will not disclose the terms of this Award to any other employees of the Company or third parties with the exception of your accountants, attorneys, or spouse, and shall ensure that none of them discloses such terms to any other person, except as required to comply with legal process.

8.     Acceptance of Terms and Conditions . To be eligible to receive this Award, you must sign this Agreement and return it to the Vice President of Human Resources or Director of Human Resources within 30 days after the date it is provided to you. By signing this Agreement, you agree to be bound by the terms and conditions herein, the Plan and any and all conditions established by the Company in connection with Awards issued under the Plan and you hereby reaffirm your legally enforceable responsibilities and obligations under your Restrictive Covenant Agreement with the Company. By accepting this Award, you agree that the awarding of the Award is at the discretion of the Company and its delegates, and that acceptance of this Award is no guarantee that future Awards will be awarded under the Plan.

 

-3-

CARS.COM, LLC       PARTICIPANT

/s/ Kevin Lord

     

/s/ Alex Vetter

By: Kevin Lord       Participant Signature
Its: Senior Vice President, Chief Human      
Resources Officer, TEGNA      

Exhibit 10.11

CARS.COM

SHARE APPRECIATION RIGHTS AWARD AGREEMENT

To: John Clavadetscher

Cars.com, LLC (the “ Company ”) is pleased to award you this Share Appreciation Rights Award (this “ Award ”), effective as of January 1, 2016 (the “ Award Date ”). This Award is subject to the terms of this Share Appreciation Rights Award Agreement (this “ Agreement ”) and is made under, and is subject to, the Cars.com Share Appreciation Rights Plan (the “ Plan ”), which is incorporated into this Agreement by reference. This Award is intended to conform in all respects with, and is subject to, all applicable provisions of the Plan. Inconsistencies between this Agreement and the Plan will be resolved in accordance with the terms of the Plan. Any capitalized terms used herein that are otherwise undefined shall have the same meaning provided in the Plan.

1. Award of SARs . The Company hereby awards to you 24,413 share appreciation rights (“ SARs ”).

2. Performance Period . The SARs awarded hereunder relate to the Performance Period from January 1, 2016 through December 31, 2018. December 31, 2018 shall be the “Performance Period End Date” hereunder.

3. Vesting . SARs awarded under this Award will vest in three equal portions, with one-third of the total Award becoming vested on each of January 1, 2017, January 1, 2018 and January 1, 2019 (provided that you remain in continuous employment with the Company through those dates), except as follows:

 

  (a) In the event that you incur a Separation from Service prior to the Performance Period End Date by reason of death, permanent disability (as determined under the Company’s Long Term Disability Plan), Retirement, you (or in the case of your death, your estate or designated beneficiary) shall vest in a number of SARs equal to the product of (i) the total number of SARs you would have vested in upon the expiration of the Performance Period End Date had not incurred a Separation from Service, and (ii) a fraction, the numerator of which shall be the number of full calendar months between the first day of the Performance Period and the date of your Separation from Service, and the denominator of which shall be the number of full calendar months from the first day of the Performance Period to the Performance Period End Date.

 

  (b) In the event of a Change in Control in which your Award is not continued or your Award is not assumed by a successor entity (or its affiliate), then any unvested SARs shall vest. In the event of a Change in Control in which your Award is so continued or assumed, if you thereafter have a Separation from Service from the Company within 2 years following the date of the Change in Control as a result of your involuntary termination without Cause or your voluntary termination for Good Reason, any unvested SARs shall become vested.

  (c) In the event of your Separation from Service from the Company before the end of the Performance Period, any unvested SARs shall be forfeited.

 

  (d) In the event of a termination for Cause, both vested and unvested SARs will be immediately forfeited.

4. Determination of Amount Payable . When settlement of your SARs is due under the terms of the Plan and this Agreement, your vested SARs will be converted to a single cash payment by multiplying:

 

  (i) the excess of the Fair Market Value of a Share as of the last day of the Performance Period (or, if occurring earlier, the date of a Change in Control) over the Fair Market Value of a Share as of January 1, 2016

by

 

  (ii) the number of vested SARs.

5. Timing of Payment . The amount payable pursuant to paragraph 4 will be paid within the 60-day period following the end of the Performance Period End Date. Notwithstanding the foregoing, in the event of a Change in Control in which the Awards are not continued or assumed as provided in paragraph 3(b) above, the vested SARs shall be paid within the 60-day period following the Change in Control; and in the event of a Separation from Service before the Performance Period End Date and following a Change in Control in which the Awards were so continued or assumed, vested SARs shall be paid within the 60-day period following the date of your Separation from Service (subject to the delay applicable to specified employees under Section 15 of the Plan). You may elect to defer the distribution of all or a portion of the SARs awarded under this Award. Such election must be made in accordance with the Deferral Rules. Under the Deferral Rules, such an election (a “Deferral Election”) must be made within the time period designated by the Plan Administrator. Generally, a Deferral Election may not take effect until at least 12 months after the date on which the Deferral Election is made; the payment with respect to which such Deferral Election is made must be deferred for a period of not less than 5 years from the date such payment would otherwise have been made; and the election must be made not less than 12 months before the date the payment is scheduled to be paid. Any Deferral Election filed with the Plan Administrator or its delegate is irrevocable on and after the deadline for filing the election. Amounts so deferred shall be held by the Company without interest earned. For the avoidance of doubt, any such deferral shall not entitle the Participant to any appreciation in the Fair Market Value of a Share, and shall remain unfunded and subject to the claims of creditors of the Company as provided in Section 8 of the Plan

6. Forfeitures . If you violate any restrictive covenant agreement with the Company, including but not limited to non-compete, non-solicitation, non-disclosure or non-disparagement covenants, all SARs issued pursuant to this Award (whether or not vested) will automatically be cancelled without any consideration paid therefor and without further action on the part of the Company; and you will be required to repay to the Company any amounts paid to you pursuant to this Award at any time during the 12-month period prior to such violation. In

 

-2-

addition, the Plan Administrator may make retroactive adjustments to this Award, and you shall reimburse to the Company any amounts paid to you pursuant to this Award where such amount was predicated upon achieving certain financial results that were substantially the subject of a financial restatement and, as a result of the restatement, it is determined that you otherwise would not have been paid such amount (regardless of whether or not the restatement resulted from your misconduct). In such instance, the Company may recover the amount by which the amount paid to you exceeded the lower payment that would have been made based on the restated financial results. By accepting this Award, you consent to and authorize the Company to deduct from any amounts payable by the Company to you, any amounts you owe to the Company under this paragraph 6. This right of set-off is in addition to any other remedies the Company may have against you.

7. Miscellaneous .

 

  (a) Successors and Assigns . Except as otherwise provided herein, this Award will bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not.

 

  (b) Confidentiality . You agree that you will not disclose the terms of this Award to any other employees of the Company or third parties with the exception of your accountants, attorneys, or spouse, and shall ensure that none of them discloses such terms to any other person, except as required to comply with legal process.

8. Acceptance of Terms and Conditions . To be eligible to receive this Award, you must sign this Agreement and return it to the Vice President of Human Resources or Director of Human Resources within 30 days after the date it is provided to you. By signing this Agreement, you agree to be bound by the terms and conditions herein, the Plan and any and all conditions established by the Company in connection with Awards issued under the Plan and you hereby reaffirm your legally enforceable responsibilities and obligations under your Restrictive Covenant Agreement with the Company. By accepting this Award, you agree that the awarding of the Award is at the discretion of the Company and its delegates, and that acceptance of this Award is no guarantee that future Awards will be awarded under the Plan.

 

CARS.COM, LLC     PARTICIPANT
/s/ Alex Vetter     /s/ John Clavadetscher

By:   Alex Vetter

Its:   President & Chief Executive Officer

    Participant Signature

 

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Exhibit 10.12

CARS.COM, LLC

LONG TERM INCENTIVE PLAN

(as amended June 29, 2015)

Cars.com, LLC (formerly, Classified Ventures, LLC), an Illinois corporation with its principal place of business at 175 West Jackson, Suite 800, Chicago, Illinois (hereinafter referred to as the “Company”), hereby amends and restates this employee benefit plan as follows:

ARTICLE I

TITLE AND PURPOSE

1.01 Title . The plan hereby evidenced shall be known as the Cars.com, LLC 2001 Long Term Incentive Plan and shall be hereinafter referred to as the “Plan”.

1.02 Purpose . The Plan is intended to provide deferred compensation to designated management or highly compensated employees of the Employer, in order to encourage the continued service of such employees by making available benefits to them.

1.03 No Funding . The Plan constitutes a mere promise by the Employer to make benefit payments to Participants and Beneficiaries in the future, and Participants and Beneficiaries shall have the status of general unsecured creditors of the Employer. Any Accounts established pursuant to the Plan shall remain the property of the Employer until distributed, and nothing in the Plan will otherwise be construed to create a trust or to obligate the Employer or any other person to segregate a fund, purchase an insurance contract, or in any other way currently to fund the future payment of any benefits hereunder, nor will anything herein be construed to give any Participant, Employee, or other person rights to any specific assets of the Employer or of any other person. The Employer may, in its sole discretion, create a grantor trust to pay its obligations hereunder, but shall have no obligation to do so. In all events, it is the intent of the Company that the Plan be treated as unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

ARTICLE II

DEFINITIONS

Unless the context clearly indicates otherwise, the definitions of the words and terms set forth below shall control for purposes of applying the provisions of the Plan:

2.01 “ Account ” means the balance credited to a Participant’s Plan account, including contribution credits and deemed income, gains, and losses (to the extent realized as determined by the Employer, in its sole discretion) credited thereto.

2.02 “ Beneficiary ” shall mean the person, estate, trust or organization entitled to benefits on account of a Participant’s death.

2.03 “ Change in Control ” means one or more of the following:

A. the acquisition by any Person or Persons acting in concert, of ownership of stock held by such Person or Persons acting in concert, that constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Employer (calculated in accordance with Section 318(a) of the Code and subject to the limitations of Treas. Reg. 1.409A-3(i)(5)); or

B. a change in the ownership of a substantial portion of the assets (as defined for purposes of Section 409A of the Code) of Employer; or

C. a change in the effective control (as defined for purposes of Section 409A of the Code) of Employer.

2.04 “ Code ” means the Internal Revenue Code of 1986, as amended.

2.05 “ Designation Date ” means the date or dates as of which a designation of deemed investment directions by an individual pursuant to Section 5.03 or any change in a prior designation of deemed investment directions by an individual shall become effective. The Employer shall designate the Designation Date(s) in any Plan Year.

2.06 “ Effective Date ” shall mean the Plan’s original effective date of June 1, 2001, though certain Plan provisions as detailed herein are effective January 1, 2005 to comply with Section 409A of the Code.

2.07 “ Employee ” shall mean any individual who is employed by the Employer and is receiving remuneration for personal services rendered to the Employer.

2.08 “ Employer ” shall mean Cars.com, LLC (formerly, Classified Ventures, LLC) and any entity determined to be related to it pursuant to at least 50% common ownership or 50% common control, as set forth in Treasury Regulations 1.409A-1(h)(3).

2.09 “ Manager ” shall mean TEGNA Inc. or any other person elected to by the members of the Company to serve as successor Manager of the Company in accordance with Section 4.8 of the Company’s Amended and Restated Limited Liability Company Agreement, dated October 1, 2014.

2.10 “ Participant ” shall mean an individual who as an Employee has satisfied the eligibility requirements set forth in Section 3.01 and who is participating in the Plan in accordance with the provisions of Article III.

2.11 “ Participation Agreement ” shall mean an agreement executed by the Employer and an Employee to set forth the terms of, and to authorize and commence, the Employee’s participation in the Plan, in the form attached hereto as Exhibit A entitled “Cars.com, LLC 2001 Long Term Incentive Plan Participation Agreement.”

2.12 “ Plan Administrator ” shall mean Cars.com, LLC, or any committee, director, officer, or employee of the Company or any affiliated company appointed by the Company to serve as Plan Administrator.

 

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2.13 “ Plan Year ” shall mean June 1 to December 31, 2001, and thereafter January 1 to December 31 of each calendar year.

2.14 “ Termination of Employment ” shall mean an Employee’s separation from service from the Employer and any entity related to it as set forth in Section 2.08.

2.15 “ Trust ” means the trust fund established pursuant to the Plan.

2.16 “ Trustee ” means the trustee named in the agreement establishing the Trust and such successor and/or additional trustees as may be named pursuant to the terms of the agreement establishing the Trust.

2.17 “ Valuation Date ” means February 15 of each Plan Year and any other date that the Employer, in its sole discretion, designates as a Valuation Date.

2.18 “ Vested ” means that portion of the balance of a Participant’s Account which, due to lapse of time pursuant to Section 4.05 or the occurrence of any of the events specified in Section 4.06, shall be paid to Participant or Participant’s Beneficiary as and when required by Section 6.02.

ARTICLE III

ELIGIBILITY AND PARTICIPATION

3.01 Eligibility . The Manager shall designate either a committee or the Employer’s chief executive officer to determine, from time to time, which Employees, as defined in Section 2.06, will be eligible to participate in the Plan and thereby become Participants. After determination of eligibility, an Employee’s participation in the Plan shall commence upon execution of a Participation Agreement by the Employer and the Employee.

3.02 Designation of Beneficiaries . A Participant may designate any legal entity or natural person as his or her Beneficiary. Designations may include contingent, concurrent, or successive Beneficiaries, and shall be in such written form as the Plan Administrator shall require.

The Beneficiary or Beneficiaries designated by a Participant may be changed at any time and from time to time by the filing of a new designation with the Plan Administrator, which when executed will revoke all prior designations.

If a Beneficiary designation is not in effect, or if a designated Beneficiary has not survived a Participant, then any benefits payable under the Plan due to a Participant’s death shall be paid to the Participant’s spouse; provided that if a Participant has no surviving spouse, such benefits shall be paid to the court appointed representative of the Participant’s estate, or, if the Plan Administrator does not receive notice of the appointment of a representative within 6 months of the Participant’s death, then to Participant’s heirs at law. The Plan Administrator shall not be obligated to make any payments by reason of a Participant’s death unless the Plan Administrator has been furnished with such documentation relating to the death and heirship of the Participant as it may require in its sole discretion.

 

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3.03 Designation of Manner of Payment . With respect to payments made pursuant to Sections 4.06(a), a Participant may designate the manner (lump sum, or in 5 or 10 annual installments) in which payments will be made. The manner of payment of such amounts under section 4.06(a) must be elected within 30 days after the participant becomes eligible to participate in the Plan. A Participant may change the manner of payment of such amount under section 4.06(a) on or before December 31, 2007 on such forms as the Plan Administrator shall require. After December 31, 2007, the manner of payment may only be changed by the filing of a new designation with the Plan Administrator, and a subsequent change to the manner of payment is effective only if: (i) the change is not effective for at least twelve (12) months; (ii) the change is made at least twelve (12) months before the date of Participant’s 65th birthday; and (iii) the new payment date is five (5) years later than Participant’s retirement date.

3.04 Duty to Furnish Information . Participants and Beneficiaries shall be required to furnish to the Plan Administrator such other information, documents and evidence as the Plan Administrator may consider necessary or desirable for the administration of the Plan; and all rights of Participants and Beneficiaries under the Plan are conditioned upon the prompt furnishing of such information, documents and evidence in true and complete form.

Each Participant shall be responsible for notifying the Plan Administrator of his or her address, and the address of any Beneficiary or any change of any such addresses, for use in respect to the Plan. The Plan Administrator may direct any communication, notice or statement to the address most recently designated for any such person, or if no such address has been designated to the Plan Administrator, then to the last address of such person shown on the Employer’s records. The Plan Administrator shall not be required to search for or ascertain the whereabouts of any Participant or Beneficiary for whom no address has been designated or for whom the last address of record, if any, is no longer current.

3.05 Participation Statements and Information . At such times as the Plan Administrator may determine, the Plan Administrator shall provide each Participant with a statement reflecting the status of the Participant’s interest in the Plan. The Plan Administrator shall make copies of the Plan, all reports with respect thereto required by law, and such other documents as are specified by Section 104 of the Act available for inspection at reasonable times by Participants and Beneficiaries.

3.06 Receipt and Release . Any payment to any Participant, his or her legal representative, Beneficiary, or to any guardian or conservator appointed for such Participant or Beneficiary in accordance with the provisions of the Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Employer, which may require such Participant, legal representative, Beneficiary, guardian or conservator, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Employer.

3.07 Claims for Payment . In the event that a Participant or Beneficiary does not receive a benefit payment to which the Participant or Beneficiary believes he or she should be entitled, such Participant or Beneficiary may file a written claim for benefits with the Plan Administrator. In the event a claim for benefits is wholly or partially denied by the Plan Administrator, the Plan Administrator shall, within a reasonable period of time, but no later than

 

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ninety (90) days after receipt of the claim, notify the claimant in writing of the denial of the claim. If the claimant shall not be notified in writing of the denial of the claim within ninety (90) days after it is received by the Plan Administrator, the claim shall be deemed denied. A notice of denial shall be written in a manner calculated to be understood by the claimant, and shall contain (a) the specific reason or reasons for denial of the claim, (b) a specific reference to the pertinent Plan provisions upon which the denial is based, (c) a description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary, and (d) an explanation of the Plan’s review procedure.

Within sixty (60) days of the receipt by the claimant of the written notice of denial of the claim, or within sixty (60) days after the claim is deemed denied as set forth above, if applicable, the claimant may file a written request with the Plan Administrator that it conduct a full review of the denial of the claimant’s claim for benefits, including the conducting of a hearing if deemed necessary by the Plan Administrator. In connection with the claimant’s appeal of the denial of his or her benefit, the claimant may review pertinent documents and may submit issues and comments in writing. The Plan Administrator shall render a decision on the claim appeal promptly, but not later than sixty (60) days after the receipt of the claimant’s request for review, unless special circumstances (such as the need to hold a hearing, if necessary) require an extension of time for processing, in which case the sixty (60) day period may be extended to one hundred and twenty (120) days. The Plan Administrator shall notify the claimant in writing of any such extension. The decision upon review shall (i) include specific reasons for the decision, (ii) be written in a manner calculated to be understood by the claimant and (iii) contain specific references to the pertinent Plan provisions upon which the decision is based. Any such determination made by the Plan Administrator in good faith shall be conclusive on all persons, and the Plan Administrator shall not be liable to any person as a result of such determination.

3.08 Minor Beneficiary . In the event a distribution is to be made to a minor Beneficiary, then the Plan Administrator may, in the Plan Administrator’s sole discretion, make such distribution to the Beneficiary’s legal guardian, or if none, to a parent of such Beneficiary or a responsible adult with whom the Beneficiary maintains his residence, or to a custodian for such Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted by the laws of the state in which the Beneficiary resides. Any payment made in accordance with this Section shall fully discharge the Plan Administrator from all future liability with respect to such payment.

3.09 Incompetent Payee . Whenever any person to whom payments are directed to be made shall be mentally or physically incapable of receiving or acknowledging receipt of such payments, the Plan Administrator shall not be under any obligation to see that a legal representative is appointed for such person or to make such payments to such legal representative, but the Plan Administrator may make all or any portion of such payments in any one or more of the following ways, as the Plan Administrator determines: (a) directly to such person; (b) to his or her conservator; (c) to his or her spouse, child, or other relative by blood or marriage; (d) to the person with whom he or she resides; or (e) by expending the same directly for the benefit of said person. Any such determination made by the Plan Administrator in good faith shall be conclusive on all persons, and the Plan Administrator shall not be liable to any person as a result of such determination. Any payment made in accordance with this Section shall fully discharge the Plan Administrator from all future liability with respect to such payment.

 

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ARTICLE IV

CONTRIBUTIONS AND CREDITS

4.01 Creation of Trust . Employer shall establish a Trust to manage the assets of the Plan. All Employer contributions under the Plan shall be transferred to the Trustee of the Trust to be held and administered pursuant to the provisions of this Plan. All assets held in the Trust shall continue to be subject to the claims of Employer’s creditors and shall not be set aside in trust outside of the United States.

4.02 Participants’ Accounts . The Trustee of the Trust may establish either a single account for the benefit of all Participants or it may establish separate accounts for each Participant. If Trustee establishes a single account for the benefit of all Participants, Trustee shall maintain records in such a manner that it can adequately identify each Participant’s share of that account as if separate accounts were maintained for each participant.

4.03 Contributions . Employer may, as it shall determine from time to time in its sole discretion, make annual contributions to each Participant’s Account.

 

  (a) The amount of such annual contributions shall be determined according to the Participation Agreement executed by Employer with respect to each Participant.

 

  (b) Such contribution shall be credited to each Participant’s Account maintained under the Plan, and Employer shall give each Participant written notice, as of the date of each such contribution, of the amount contributed (“Contribution Notice”).

4.04 Maintenance of Accounts . Each Participant’s Account shall be credited or debited with:

 

  (a) The contributions made by Employer to the Participant’s Account (as discussed in Section 4.03),

 

  (b) Amounts equal to any deemed income, gains, or losses (to the extent realized, based upon deemed fair market value of the Account’s deemed assets, as determined by Employer, in its sole discretion, attributable or allocable to (a) (as discussed in Section 5.01), and

 

  (c) The Account’s share (prorated among all Accounts in such manner as the Plan Administrator may determine from time to time) of any costs, if any, incurred as a result of maintaining the Plan (including but not limited to pursuant to Section 8.01(g)).

The Employer shall have discretion to allocate such deemed income, gains, losses, and costs among plan accounts pursuant to such allocation rules as the Employer deems in its sole discretion to be reasonable and administratively practicable.

 

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4.05 Vesting Schedule . Participants shall become vested (subject to the claims of Employer’s creditors) in amounts contributed to their Account over a three-year period. For any amounts contributed to a Participant’s Account during any Plan Year, the Participant shall become vested in one-third of the amount of such contribution (and any increases or decreases in the Participant’s Account balance as a result of income, gains, losses or costs allocated to the Participant’s Account pursuant to Section 4.04) on February 15 of each succeeding Plan Year after the Plan Year in which such contribution was made.

4.06 Accelerated Vesting . Notwithstanding the provisions of Section 4.05, the entire balance held in a Participant’s account shall immediately become fully vested (subject to the claims of Employer’s creditors) as of the date of the first to occur of the following events:

 

  (a) Participant terminates employment with Employer after reaching age 65;

 

  (b) Participant’s employment is terminated by Employer other than for Cause (“Cause” meaning with respect to Participant as an Employee, any intentional misappropriation of any funds or property from Employer, or the receipt of personal profit from a transaction conducted on Employer’s behalf; repeated failure to comply with Employer’s policies or instructions from Participant’s supervisor, after written warning thereof and opportunity to cure; usage of substances resulting in Participant’s inability properly to perform employment duties, after written warning thereof and opportunity to cure; chronic poor work performance by Participant, after written warning thereof and opportunity to cure, or conviction of a felony which would reflect adversely on Employer or adversely affect Participant’s ability to perform employment duties);

 

  (c) Participant’s employment with Employer terminates by reason of Participant’s death; or

 

  (d) Participant’s employment with Employer terminates by reason of a permanent and total disability, as defined in Section 22(e)(3) of the Code (“Total Disability”). Notwithstanding the foregoing, effective January 1, 2005, a Participant shall be deemed disabled if, due to a medically determinable physical or mental impairment that is expected to result in death or is expected to last for a continuous period of at least twelve months, the Participant is unable to engage in any substantial activity or receives benefits under the Employer’s disability insurance plan for at least three months.

ARTICLE V

ALLOCATION OF FUNDS

5.01 Allocation of Deemed Earnings or Losses on Accounts . Pursuant to Section 5.03 hereof, each Participant shall have the right to direct how amounts in his or her Plan Account shall be deemed to be invested, which investment direction shall be conveyed to the Trustee with respect to Participant’s Account in such manner as the Plan Administrator shall determine from time to time. The Participant’s Account will be credited or debited with the increase or decrease

 

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in the realizable net asset value or credited interest, as applicable, of the designated deemed investments, as follows: As of each Valuation Date, an amount equal to the net increase or decrease in realizable net asset value or credited interest, as applicable (as determined by the Plan Administrator), of each deemed investment within the Trust since the preceding Valuation Date shall be allocated among all Participants’ Accounts deemed to be invested in that investment in accordance with the ratio which the portion of the Account of each Participant which is deemed to be invested within that investment, determined as provided herein, bears to the aggregate of all amounts deemed to be invested within that investment option.

5.02 Interim Valuations . If the Plan Administrator determines that the value of the Trust as of any date on which distributions are to be made differs materially from the value of the Trust on the prior Valuation Date upon which the distribution is to be based, the Plan Administrator, in its discretion, shall have the right to designate any date in the interim as a Valuation Date for the purpose of revaluing the Trust so that the Account from which the distribution is being made will, prior to the distribution, reflect its share of such material difference in value.

5.03 Deemed Investment Directions of Participants . Subject to such limitations as may from time to time be required by law, imposed by the Plan Administrator or the Trustee, or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Plan Administrator or the Trustee, each Participant may advise the Plan Administrator as to how his or her Account should be deemed to be invested among such investments as may be made available by the Company hereunder. Such direction shall designate the percentage (in any whole percent multiples) of each portion of the Participant’s Account which is requested to be deemed to be invested in each security, and shall be subject to the following rules:

 

  (a) The Plan Administrator will provide Participants with access to an interne web site on which they may, among other things, review their Accounts and change their deemed investment directions.

 

  (b) All amounts credited to the Participant’s Account shall be deemed to be invested in accordance with the then effective deemed investment direction, and as of the effective date of any new deemed investment direction, all or a portion of the Participant’s Account at that date shall be reallocated among the designated deemed investment funds according to the percentages specified in the new deemed investment direction unless and until a subsequent deemed investment direction shall be filed and become effective. An election concerning deemed investment choices shall continue indefinitely until Participant submits new deemed investment directions.

 

  (c) If an initial or revised deemed investment direction is incomplete, unclear, or improper, the Participant’s investment direction then in effect shall remain in effect (or, if there is no initial deemed investment direction, the Participant shall be deemed to have filed no deemed investment direction) until the next Designation Date, unless the Plan Administrator provides for, and permits the application of, corrective action prior thereto.

 

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  (d) Until a deemed investment direction is given, or if at any time directions are given as to the deemed investment of less than all of a Participant’s Account, the Participant shall be deemed to have directed that the undesignated portion of the Account be deemed to be invested in a money market, fixed income, or similar fund made available under the Plan as determined by the Plan Administrator in its discretion.

 

  (e) Each Participant hereunder, as a condition to his or her participation hereunder, agrees to indemnify and hold harmless the Plan Administrator and its agents and representatives from any losses or damages of any kind relating to the deemed investment of such Participant’s Account hereunder.

 

  (f) For vesting purposes under Section 4.05, the vested portion of Participant’s Account shall be prorated among all deemed investments in Participant’s Account.

 

  (g) Participant, by making any investment direction pursuant to the Plan, assumes all risk with respect to each such direction, including the risk that the deemed investments will not appreciate as rapidly as other investments, will not appreciate at all, or will lose some or all of their original principal value, and further acknowledges that the offering through the Plan of deemed investment opportunities in no way constitutes investment advice or a representation or determination by Plan Administrator or any of its agents with respect to the suitability, merit, or performance of any such deemed investment opportunity for any person, including Participant.

ARTICLE VI

ENTITLEMENT TO BENEFITS AND DISTRIBUTIONS

6.01 Termination of Employment . If a Participant’s employment with the Employer is terminated for any reason, the Participant’s Account at the date of termination shall be valued and the vested portion of such Account payable according to the provisions of Sections 4.06, 6.02 and 6.03. The non-vested portion of such Account will be forfeited as of the date of such termination of employment, will be distributed by the Trust to the Employer as of such date, and will not be subject to reinstatement or return to the Trust under any future conditions, including but not limited to the subsequent rehire of Participant as an Employee.

6.02 Amount . A Participant (or his or her Beneficiary) shall become entitled to receive, on February 15 of each Plan Year (“Payment Date”), or where Participant ceases to be an Employee, as soon after the date of the Participant’s termination of employment with the Employer as may be practicable, a distribution in an aggregate amount equal to the vested portion of the Participant’s Account, which amount, depending on (a) the performance of the deemed investments elected from time to time by the Participant, and (b) the extent to which gains or losses on the investments actually are realized by the Trust, may be less than, equal to, or greater than the aggregate amount of the Employer’s contributions to the Participant’s Account. Any payment due hereunder from the Trust which is not paid by the Trust will be paid by the Employer from its general assets.

 

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6.03 Method of Payment .

 

  (a) Cash Payments . All Payments under the Plan shall be made in cash.

 

  (b) Timing and Manner of Payment . An aggregate amount equal to the vested portion of the Participant’s Account will be paid by the Trust or the Employer, as provided by Section 6.01, in a lump sum, as soon as practicable, but not more than 60 days after the Payment Date or date Participant ceases to be an Employee, or, with respect to payments made pursuant to Section 4.06(a), beginning as of the Payment Date or the date Participant ceases to be an Employee. For payments made pursuant to vesting under Section 4.06(a), if a Participant fails to designate properly the manner of payment of the Participant’s benefit under the Plan pursuant to Section 3.03, such payment will be in a lump sum. If the whole or any part of a payment hereunder by the Trust is to be in installments, the total to be so paid shall continue to be deemed to be invested pursuant to Section 5.03 under such procedures as the Employer may establish, in which case any deemed income, gain, or loss attributable thereto (to the extent realized, as determined by the Employer, in its discretion) shall be reflected in the installment payments, in such equitable manner as the Employer shall determine. In the event a Participant dies while receiving installment payments pursuant to this Section 6.03 and 4.06(a), any remaining balance in the deceased Participant’s account shall be paid by the Trust or the Employer, as provided by Section 6.01, to the Participant’s Beneficiary in a lump sum, as soon as practicable, but not more than 60 days following the date Employer receives notification of the Participant’s death. If payment is made pursuant to a termination of the Participant’s employment without cause pursuant to Section 4.06(b), and the 60-day period, provided above begins in one calendar year and ends in the subsequent calendar year, the payment will be made in the subsequent calendar year.

 

  (c) Timing and Manner of Payment for Participants who retire on or after age 65 . Notwithstanding the provisions of subsection (b) above, if a Participant terminates employment on or after attaining age 65 and has made an election permitted by section 3.03, payment shall be made at the time and in the form provided in such election.

6.04 Deferral Elections for 2005 Plan Year and Beyond .

 

  (a) 2005 Plan Year . Effective for the Plan Year commencing January 1, 2005, a Participant who is a current Employee may elect to defer receipt of all or part of any amount earned during the 2005 Plan Year by making a Deferral Election no later than March 15, 2005.

 

  (b)

2006 Plan Year and Beyond . Effective for amounts earned on and after January 1, 2006, a Participant who is a current Employee may elect to defer receipt of all

 

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  or part of amounts that will be earned in the upcoming Plan Year by making a Deferral Election no later than December 31 of the Plan Year prior to the upcoming Plan Year in which such amounts will be earned. For example, a Deferral Election made not later than December 31, 2005 would defer payment of the amount earned during Plan Year 2006 until one year after the date the payment otherwise would have been payable to the Participant. Because amounts under this Plan vest in one-third increments over a period of three years, the foregoing Deferral Election would result in equal payments of one-third of the amount earned during the 2006 Plan Year (plus earnings thereon) on each of the following dates: (i) February 14, 2008; (ii) February 14, 2009; and (iii) February 14, 2010.

 

  (c) Period of Deferral for Initial Deferral Elections . Effective for Deferral Elections that apply to amounts earned on and after January 1, 2005, the period of deferral shall be one year beyond the date the Participant otherwise would have received payment, provided that the amounts subject to such deferral have not been subject to a prior Rolling Deferral Election or Deferral Election.

 

  (d) Period of Deferral for Subsequent Deferral Elections . Effective for Deferral Elections made on and after January 1, 2005 that have been subject to a prior Deferral Election or Rolling Deferral Election, the period of deferral shall be five years beyond the date the Participant otherwise would have received payment under his or her prior Deferral Election or Rolling Deferral Election. Notwithstanding the foregoing, Subsequent Deferral Elections shall only be effective if: (i) the Subsequent Deferral Election is not effective for at least twelve months, and (ii) the second election is made at least twelve months before the date payment was previously scheduled to be made. A Participant may make multiple Subsequent Deferral Elections, provided that each election complies with the requirements listed herein.

 

  (e) First Year of Eligibility . For the 2005 Plan Year and thereafter, in the case of the first year in which a Participant becomes eligible to participate in the Plan, Deferral Elections must be made with respect to services to be performed subsequent to the election within 30 days after the date that the Participant becomes eligible to participate in the Plan.

6.05 Hardship Distributions . In the event of Financial Hardship, as hereinafter defined, of the Participant the Participant may apply to the Plan Administrator for the distribution of all or any part of the vested portion of the Participant’s Account. The Plan Administrator shall consider the circumstances of each such case, and the best interests of the Participant and the Participant’s family, and shall have the right, in its sole discretion, to allow such distribution, to direct a distribution of part of the amount requested, or to refuse to allow any distribution. Upon a finding of Financial Hardship, the Plan Administrator shall instruct the Trustee to make the appropriate distribution to the Participant from the vested portion of the Participant’s Account. In no event shall the aggregate amount of the distribution exceed the lesser of the vested portion of the Participant’s Account or the amount determined by the Plan Administrator to be necessary to alleviate the Participant’s Financial Hardship (which Financial Hardship may be considered to

 

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include any taxes due because of the distribution occurring because of this Section), and which is not reasonably available from other resources of the Participant. For purposes of this Section, the value of the vested portion of the Participant’s Account shall be determined as of a Valuation Date which is the date of the distribution due to Financial Hardship.

“Financial Hardship” means (a) a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of Participant’s spouse or dependent (as defined in Code §152, without regard to section 152(b)(I), (b)(2), and (d)(1)(B)) of the Participant; (b) loss of the Participant’s property due to casualty; or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant; each as determined to exist by the Plan Administrator. A distribution may be made under this Section only with the consent of the Manager or any person(s) designated by resolution of the Manager.

Notwithstanding the foregoing, effective for amounts earned and contributed to a Participant’s Account on and after January 1, 2005, the foregoing definition of “Financial Hardship” shall also mean loss of property due to imminent foreclosure or eviction from primary residence or a need to pay medical expenses or funeral expenses, but shall not permit distributions: (a) in excess of the amount necessary to relieve the financial burden; (b) to purchase a home or pay for college expenses; or (c) when the emergency may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets (to the extent such liquidation would not cause severe financial hardship), or by cessation of the Participant’s deferral under this Plan.

ARTICLE VII

FUNDING

7.01 Payments from General Assets . Payments to a Participant or a Participant’s Beneficiary hereunder shall be made from assets which shall continue for all purposes to be part of the general assets of the Company; and no person or entity, other than the Company, shall have, by virtue of the provisions of the Plan, any interest in such assets. To the extent that a Participant or Beneficiary acquires a right to receive benefits from an Employer under the provisions of the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.

ARTICLE VIII

PLAN ADMINISTRATOR

8.01 Powers and Duties . The Plan Administrator shall be responsible for the management, operation and administration of the Plan. In addition to the powers, rights and duties set forth elsewhere herein, the Plan Administrator shall:

 

  (a) adopt such rules and regulations consistent with the provisions of the Plan as it deems necessary for the proper and efficient administration of the Plan;

 

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  (b) advise, counsel and assist any Participant regarding any rights, benefits or elections available under the Plan, and prepare and distribute, in such manner as it determines to be appropriate, information explaining the Plan;

 

  (c) enforce the Plan in accordance with its terms and any rules and regulations adopted hereunder;

 

  (d) maintain records concerning the Plan adequate to prepare reports, returns and other information required by the Plan or by law;

 

  (e) construe and interpret the Plan to resolve all questions arising regarding the existence or nonexistence of, entitlement to, and/or the nature and amount of the benefits, rights and interests of all persons under the Plan; and any and all such determinations shall be final;

 

  (f) direct the payment of benefits under the Plan and give such other directions and instructions as may be necessary for the proper administration of the Plan;

 

  (g) employ or retain agents, attorneys, actuaries, accountants or other persons, who also may be employed by or represent the Company, to render advice with regard to any of the responsibilities set forth in the Plan; and

 

  (h) do all other acts which it deems necessary or proper to accomplish and implement its responsibilities under the Plan.

8.02 Company Action . Any action by the Company as Plan Administrator hereunder shall be undertaken, and where appropriate evidenced in writing, by any officer of the Company or by any employee or employees of the Company designated by an officer of the Company as having the authority to act on behalf of the Plan Administrator in performing its duties under the Plan.

8.03 Indemnification of Officers and Employees . The Company agrees to indemnify and to defend to the fullest extent permitted by law any director, manager, member, officer, or employee of the Company or any affiliated company who serves as the Plan Administrator or as a member of a committee appointed to serve as Plan Administrator, or who assists the Plan Administrator, the Company, or the Manager in carrying out its duties as part of his or her employment (including any such individual who formerly served in any such capacity) against all liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission was in good faith.

ARTICLE IX

AMENDMENT AND TERMINATION

9.01 Amendment and Termination . The Company shall have the right, at any time and from time to time, to amend the Plan, including the form of Participation Agreement attached as Exhibit A to the Plan, in whole or in part, or to terminate the Plan at any time; provided that:

 

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  (a) any such amendment or termination shall be undertaken by written instrument executed by the Company;

 

  (b) any such amendment or termination by the Company shall not adversely affect the rights of any Participant, as set forth under the Plan prior to such action, to benefits vested under the Plan from the date of the Participant’s commencement of participation in the Plan to the date of such amendment or termination, without the written consent of the Participant; and

 

  (c) Termination of the Plan shall not result in an acceleration of any payments in a manner that would violate Section 409A of the Code.

9.02 Potential Termination upon a Change in Control . Notwithstanding any other provision in the Plan, upon a Change in Control, if the acquiring entity has executed a legally binding writing in which acquiring entity agrees to continue the Plan without amendment (other than amendment required by law), the Plan shall remain in full effect; otherwise, all outstanding account balances shall vest on the date of the Change in Control and, no later than the date that is 12 months following the Change in Control, all vested account balances shall be paid to Participants and the Plan shall terminate.

ARTICLE X

MISCELLANEOUS PROVISIONS

10.01 Non-Alienation of Benefits; No Loans . No benefit which shall be payable under the Plan to a Participant or Beneficiary shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge same shall be void; and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities or torts of any such person, nor shall it be subject to attachment or legal process for or against such person, and the same shall not be recognized by the Plan, except to such extent as may be required by law. Further, no Participant or Participant’s Beneficiary shall be permitted to borrow any portion of such Participant’s Account.

10.02 No Implied Rights . Neither the establishment of the Plan nor any modification thereof, nor the creation of any fund, trust or account thereunder, shall be construed as giving any Participant, Employee, Beneficiary or other person any legal or equitable right unless such right shall be specifically provided for in the Plan or conferred by affirmative action of the Employer in accordance with the terms and provisions of the Plan. Neither the creation of the Plan nor anything contained in this document shall be construed as giving any Participant hereunder or any other Employee of the Employer any equity or other interest in the assets, business or affairs of the Employer, or the right to object to any action taken by the Employer or to any policy adopted or pursued by the Employer.

10.03 Status of Employment Relations . The adoption and maintenance of the Plan shall not be deemed to constitute a contract between the Employer and its employees or to be consideration for, or an inducement or condition of, the employment of any person. Nothing

 

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contained herein shall be deemed to give to any employee the right to be retained in the employ of the Employer or affect the right of the Employer to discipline or discharge any employee at any time.

10.04 Form of Employer Action . Any action by the Employer pursuant to any of the provisions of this Agreement shall be evidenced by written instrument signed by an officer of the Employer.

10.05 Correction of Errors . Any mistake in any direction, certificate, notice, or other document furnished or issued by the Employer or the Plan Administrator in connection with the Plan may be corrected when the mistake becomes known, and the Employer or Plan Administrator may direct any adjustment or action which it deems practicable under the circumstances to remedy the mistake.

10.06 Parties Bound . This Plan shall be binding upon the Employer, all Participants and Beneficiaries hereunder, and, as the case may be, the heirs, executors, administrators, successors and assigns of each of them.

10.07 Controlling Law . This Plan shall be construed and enforced according to the laws of the State of Illinois and all provisions hereunder shall be administered according to the laws of said State, to the extent that such laws are not preempted by the laws of the United States of America. Should any provision of this Plan be determined to be in conflict with such laws, the parties hereto may immediately and, if in accordance with the applicable law retroactively, amend this Plan as is necessary to conform to the requirements of such laws.

10.08 Judicial Review . The Plan Administrator shall be vested with discretionary authority to determine eligibility for benefits and to construe the terms of the Plan. Pursuant to this provision, the Plan Administrator shall be authorized and empowered to exercise its discretion to construe and interpret the Plan to resolve all questions arising regarding the existence of, entitlement to, and the value and amount of the benefits, rights and interests of all persons in and under the Plan. Any and all such determinations by the Plan Administrator shall be final, binding and conclusive as regards such questions.

10.09 Invalidity of Provisions . If any provisions of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan, but shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted herein.

10.10 Number and Gender . Words of any gender wherever used herein shall include any other gender wherever necessary, and words used in the singular shall be taken to include the plural and vice versa where necessary.

10.11 Counterparts . This Plan may be executed in any number of counterparts, each of which shall be deemed an original and all such counterparts shall constitute but one and the same instrument.

10.12 Section 409A . The provisions of this Plan are intended and shall be interpreted and administered so as to not result in the imposition of additional tax or interest under Section

 

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409A of the Code. Without limiting the foregoing, any reference to “termination of employment” or similar term shall mean an event that constitutes a “separation from service” within the meaning of Section 409A of the Code, each payment or installment shall be treated as a separate payment under Section 409A of the Code, and if at separation from service the Participant is considered a “specified employee” within the meaning of said Section 409A of the Code, then any payments hereunder that are nonqualified deferred compensation within the meaning of said Section 409A of the Code that are to be made upon separation from service shall not commence earlier than six (6) months after the date of such separation from service, and any such amounts that would otherwise have been paid to the Participant within the first six months following the separation from service shall be accumulated and paid to the Participant in a lump sum on the first day of the seventh month following the separation from service (or if the Participant dies, as soon as practical following the date of death). In addition, to the extent that payments pursuant to this Plan are conditioned upon the execution and delivery by Participant of a release of claims pursuant to Section 3.06, Participant shall forfeit all rights to such payments and benefits unless such release is signed, delivered and any right to revoke has expired so as to make the release fully effective within sixty (60) days following the date of Participant’s separation from service. If such release is so signed, delivered and effective, then such payments or benefits shall be made or commence upon the business day next following the date the release is so signed, delivered and effective; provided, however, that if such sixty (60) day period would end in the calendar year following the date of Participant’s separation from service, then such payments shall be made or commence upon the later of the date the release is so signed, delivered and effective and the first business day of such following calendar year.

IN WITNESS WHEREOF, the Company has caused this amended document to be executed on its behalf by its Chief Executive Officer on this 29 th day of June, 2015.

 

CARS.COM, LLC

By:

 

/s/ Alex Vetter

  Name:     Alex Vetter
  Title:     Chief Executive Officer

 

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EXHIBIT 10.13

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is entered into as of November 4, 2014 by and between Cars.com, a Gannett company (“Employer”), and Alex Vetter, an individual residing at 1138 N. Hoyne, Chicago, IL 60622 (“Executive”).

RECITALS

WHEREAS Employer desires to employ Executive as President and Chief Executive Officer (CEO) of Cars.com, and

WHEREAS, Executive desires to accept such employment on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

 

  1. Employment; Duties .

Employer hereby agrees to employ Executive to serve in the role of President and CEO of Cars.com. Executive shall report to, and perform and discharge such duties and assignments as shall be designated from time to time by the President of Gannett Digital Ventures. Executive shall perform his duties diligently and faithfully and shall devote his full working time, attention and energies to such duties. Executive shall be subject to and shall comply with Employer’s policies for Executives; provided, however, that to the extent any of Employer’s policies conflict with any term of this Agreement, this Agreement shall control.

 

  2. Term .

(a) Unless sooner terminated in accordance with the provisions of this Agreement, the term of this Agreement shall begin on November 4, 2014 and shall continue until November 3, 2017 (“Term”).

(b) Employer shall have the right to terminate Executive’s employment for “good cause” upon written notice to Executive following the occurrence of any of the following events, each of which shall constitute a “good cause” for such termination: (i) embezzlement, fraud, misappropriation of funds, breach of fiduciary duty or other act of material dishonesty committed by Executive or at Executive’s direction; (ii) neglect or refusal by Executive to perform the duties of his position which he does not remedy within 30 days after receipt of written notice from Employer; (iii) violation by Executive of Employer’s employment policies that Executive does not remedy within 30 days after receipt of written notice thereof from Employer; (iv) conviction of, or guilty or nolo contendere plea by the Executive to a felony or any crime involving moral turpitude; or (v) material breach by Executive of this Agreement which he does not remedy within 30 days after receipt of written notice from Employer.

(c) Employer may also terminate Executive’s employment for convenience (i.e., for any reason other than good cause), subject to the applicable provisions of this Agreement that are intended to survive termination of employment.

(d) Executive shall have the right to terminate his employment with Employer for “good reason” upon 30 days’ written notice to Employer given within 90 days following the occurrence of any of the following events, each of which shall constitute a “good reason” for such termination: (i) Executive is not retained as CEO of Cars.com; (ii) a material reduction, without Executive’s prior written consent, in Executive’s duties and responsibilities; (iii) a material reduction, without Executive’s prior written consent, in Executive’s base salary, or (iv) a material breach of this Agreement by Employer which is not remedied within 30 days after receipt of written notice from Executive.

(e) Executive may also terminate his employment by resignation (i.e., for any reason other than “good reason” as identified above), subject to the applicable provisions of this Agreement that are intended to survive termination of employment.

(f) If Executive terminates his employment with Cars.com pursuant to Section 2(e) above for any reason other than good reason or Employer terminates his employment for good cause pursuant to Section 2(b), then Executive shall be paid in accordance with normal payroll practices all earned but unpaid compensation, accrued but unused vacation and incurred but unreimbursed expenses required to be reimbursed through the date his employment terminates (“Termination Date”). Executive shall have no further rights and Employer shall have no further obligations under this Agreement.

(g) If Executive terminates his employment pursuant to Section 2(d) for good reason or Employer terminates Executive’s employment for convenience pursuant to Section 2(c), then the following shall apply: (i) Executive shall be paid in accordance with normal payroll practices all earned but unpaid compensation, accrued vacation and accrued but unreimbursed expenses required to be reimbursed through the Termination Date; and (ii) conditioned upon and subject to Executive executing a valid release agreement in such form as Employer may reasonably require with respect to claims which Executive or his estate or beneficiaries may have arising out of Executive’s employment (“Release”), Employer shall pay to Executive on the 30 th day after the Termination Date, provided that the Release has become effective and non-revocable as of that date:

(1) a cash lump sum severance payment equal to his annual base salary in effect on the Termination Date, through the remainder of the term, provided that said payment shall not be less than one year’s base pay or more than two year’s base pay;

(2) a cash lump sum equal to Executive’s annual performance bonus target according to his bonus plan in effect on the Termination Date, provided that should such termination occur in the fourth quarter of any year, the executive shall receive a prorated award for the year of termination in addition to the one year payment; and

(3) all awards previously granted to the Executive (both vested and unvested) pursuant to his long-term incentive bonus plan in effect on the Termination Date,

 

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provided that this provision will be amended by mutual agreement as necessary to accommodate additional or changed components in a future LTIP plan and as necessary to accommodate regulatory demands around such a plan.

(h) Section (g)(ii) above shall not apply if the Release does not become effective and non-revocable within 30 days after Executive’s Termination Date, and Executive shall have no rights under such section if the Release does not become effective and non-revocable by the 30th day after Executive’s Termination Date.

 

  3. Compensation; Benefits .

Your annual base salary will be Three Hundred and Fifty Thousand dollars ($350,000.00) and paid in accordance with Cars.com payroll practices. This salary will be in effect and paid retroactive to October 1, 2014.

Your target annual bonus will be Three Hundred and Fifty Thousand dollars ($350,000.00) and will be based upon the achievement of agreed upon goals for you and Cars.com. This new target will be in effect for the 2014 plan year. Actual payment will vary up or down depending on achievement of these goals.

You will be eligible to participate in a Long Term Incentive Plan (LTIP) for the 2015 performance year. Your annual LTIP target will be Four Hundred Thousand dollars ($400,000.00). We are working to assess the optimal long term incentive program to ensure a strong linkage to performance and deliver a competitive compensation package.

We will make a special onetime contribution of Nine Hundred Thousand dollars ($900,000.00) into your LTIP account in January 2015 with vesting and other terms of the contribution in compliance with the terms of the cash LTIP plan currently in place at Cars.com.

 

  4. Restrictive Covenants .

(a) Executive agrees that during the period of his employment hereunder and for a period of twelve (12) months after his employment ends, he will not, without the written consent of the President of Gannett Digital Ventures, seek or accept a position in the United States with a Competitor (as defined below) in which Executive will use or is likely to use any confidential information or trade secrets of Cars.com, or in which Executive has duties for such Competitor within the United States that involve Competitive Services (as defined below) and that are the same or similar to those services actually performed by Executive for Cars.com. It is acknowledged and agreed that this restriction shall apply in the circumstance of any termination of employment, initiated by either party for any reason, except for a termination by Executive for “good reason” pursuant to Section 2(d) above, or a termination for convenience by Employer pursuant to Section 2(c) above.

(b) Executive understands and agrees that the relationship between Employer and each of its employees constitutes a valuable asset of Employer and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that during the period of his employment hereunder and for a period of twelve (12) months after his employment ends for any reason, Executive shall not directly or indirectly, on his own behalf or on behalf of another

 

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person, solicit or induce any employee to terminate his or her employment relationship with Employer or any affiliate of Employer or to enter into employment with another person. The foregoing shall not apply to employees who respond to solicitations of employment directed to the general public or who seek employment at their own initiative.

(c) For the purposes of this Section, “Competitive Services” means the business of selling or otherwise providing a national searchable online resource to individuals and businesses seeking to purchase, sell or lease (other than short-term rentals) passenger cars or light trucks through internet websites or digital platforms (including in conjunction with any competitive platform or business listed on Schedule A attached hereto ) or selling or otherwise providing to third parties through such websites or platforms products and services substantially equivalent to those included in the Customer Packages offered by Cars.com. The parties acknowledge that Cars.com may from time to time during the term of this Agreement change or increase the line of goods or services it provides, and Executive agrees to amend this Agreement from time to time to include such different or additional goods and services to the definition of “Competitive Services” for purposes of this Section.

Schedule A

RESTRICTED BUSINESS

The following is intended to constitute a nonexclusive list of National Restricted Businesses:

 

  •   ADP/Cobalt

 

  •   AOL Autos

 

  •   Autobytel/AutoUSA

 

  •   Autolist

 

  •   Autotrader.com

 

  •   CarFax/HIS

 

  •   CarGurus

 

  •   CarsDirect/Internet Brands

 

  •   CarsforSale.com

 

  •   CarSoup.com

 

  •   DealerTrack/Dealer.com

 

  •   eBay Motors

 

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  •   Edmunds.com

 

  •   KBB.com

 

  •   LotLinx

 

  •   MSN Autos

 

  •   TrueCar

 

  •   Yahoo! Autos

(d) Executive agrees that due to his position of trust and confidence the restrictions contained in this Section 4 are reasonable, and the benefits conferred on his in this Agreement, including his compensation, are adequate consideration, and since the nature of Cars.com business is national in scope, the geographic restriction herein is reasonable.

(e) Executive acknowledges that a breach of this Section 4 will cause irreparable injury and damage, which cannot be reasonably or adequately compensated by money damages. Accordingly, he acknowledges that the remedies of injunction and specific performance shall be available in the event of such a breach, and Employer shall be entitled to money damages, costs and attorneys’ fees, and other legal or equitable remedies, including an injunction pending trial, without the posting of bond or other security. Any period of restriction set forth in this Section 4 shall be extended for a period of time equal to the duration of any breach or violation thereof.

(f) In the event of Executive’s breach of this Section 4, in addition to the injunctive relief described above, Employer’s remedy shall include (i) the right to require Executive to account for and pay over to Employer all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the restrictive covenants in this Section 4, and (ii) in the case of a breach during the period described in Section 4 above, the forfeiture and return to Employer of any payment made under Section 2.

(g) In the event that any provision of this Section 4 is held to be in any respect an unreasonable restriction, then the court so holding may modify the terms thereof, including the period of time during which it operates or the geographic area to which it applies, or effect any other change to the extent necessary to render this Section 4 enforceable, it being acknowledged by the parties that the representations and covenants set forth herein are of the essence of this Agreement.

 

  5. Non-Disparagement .

Executive will not, at any time during or after his employment ends for any reason, make any statement or take any action that is, that is intended to be or that would reasonably be perceived as being slanderous, libelous, derogatory, harmful, damaging, detrimental or otherwise adverse to Cars.com or any of its Affiliates or their respective officers, directors, managers or executives, or their respective businesses, operations, prospects, affairs, or reputations among their respective customers, affiliated websites, advertisers, vendors, suppliers, shareholders,

 

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investors, analysts, competitors, executives, agents, Executives, contractors and representatives; provided, however, that the foregoing is not intended to limit any party’s ability to answer truthfully any questions of fact (as opposed to questions as to such party’s opinion or belief) that may be put to such party under oath in any litigation, arbitration or governmental investigative proceeding.

 

  6. Non-Disclosure .

Executive agrees that the terms and conditions of this Agreement (“Subject Terms and Conditions”) are highly confidential and secret to Employer and covenants to forever keep secret the Subject Terms and Conditions from, and not to disclose the Subject Terms and Conditions to, any non-party (including competitors and other managers and Executives of Employer) without the express written permission of Employer, except that Executive may disclose the Subject Terms and Conditions to his or her legal and financial advisors. If the parties or their attorneys receive a subpoena or other lawful governmental request or demand (“ Request ”) for information governed by this provision or the Executive Confidentiality and Assignment of Work Product Agreement, then the party receiving the Request shall provide notice to the non-receiving party within three (3) business days or less time so as to enable the parties to take all reasonable and lawful steps to prevent disclosure.

 

  7. Work Product .

(a) All work product produced by Executive in the performance of the services as President and CEO of Cars.com, alone or in conjunction with any other officer, agent or other employee of Cars.com, or Gannett Co., Inc., during the Term will be owned solely and exclusively by Cars.com, and Executive agrees he will not make any claims with respect thereto. This includes, but is not limited to, any ideas, concepts, treatments, proposals, budgets, business contacts, and business relationships that Executive develops or contributes to in furtherance of performing his services, as well as all patent, copyright, trademark, know-how and other proprietary rights that may be secured in any place under laws now or hereafter in effect.

(b) The Work Product will remain the property of Cars.com, its affiliated and associated companies within Gannett Co., Inc. in perpetuity after the Term and after the ending of Executive’s employment.

(c) Executive acknowledges and agrees that, for purposes of ownership pursuant to Section 201 of the U.S. Copyright Act (but not for tax or any other purpose), all the results and proceeds of Executive’s services hereunder, including the copyrights in all works of authorship created pursuant to this employment, shall be deemed works made for hire for Cars.com, and that Cars.com or any of its assigns shall be deemed the author of such works made for hire.

(d) In the event the results and proceeds identified in the preceding paragraph are found not to be works made for hire, then Executive agrees to assign and transfer all right, title and interest, including any “Moral Rights,” he may have in those results and proceeds throughout the world, including the copyrights in all works of authorship, patent, trademark, knowhow and other proprietary rights to Cars.com for good and valuable consideration, receipt of which Executive hereby acknowledges, and to effectuate such assignment Executive hereby grants Gannet Co. Inc., an irrevocable power of attorney.

 

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(e) Executive represents and warrants that the work product produced under and pursuant to this Agreement will not infringe the patent, trademark, copyright or other intellectual property rights that exist as of the date hereof of any third party.

 

  8. Applicable Law; Severability; Waiver .

This Agreement shall be construed in accordance with the laws of the State of Illinois, regardless of the principles relating to conflicts of law. Each covenant of this Agreement shall be deemed and shall be construed as a separate and independent covenant and, should any part or provision of any such covenant be declared unlawful, void or unenforceable by any court of competent jurisdiction, such illegality, voidness or unenforceability shall in no way render unlawful, void or unenforceable any other part or provision of this Agreement or any other separate covenant not declared unlawful, void or unenforceable. If any court of competent jurisdiction determines that all or any portion of any such covenant is against the policy of the laws of the State of Georgia, Executive hereby requests that any reviewing court modify any such covenant to comport with the reasonable intent and expectations of the parties and in favor of providing reasonable protection to Employer’s legitimate business interests, and grant only the relief reasonably necessary to protect such interests and to achieve the original intent of the parties to the extent possible, as long as the modification does not render the covenant more restrictive with regard to Executive than as originally drafted by the parties. Executive acknowledges that such modification may include, but is not limited to, severing or removing that part of a covenant that would otherwise make the entire covenant unenforceable, or enforcing the provisions of a covenant to the extent that the provisions are reasonable. Any covenants so modified, any partially unenforceable provisions and all remaining provisions of the Agreement shall remain in full force and effect. The waiver by any party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision.

 

  9. Survival .

Any termination of Executive’s employment or of this Agreement shall not affect the provisions of Sections 4, 5, 6, 7, 9 and 10 hereof, which shall each survive such termination in accordance with its terms.

 

  10. Miscellaneous .

(a) Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes any prior understandings or agreements between the parties, written or oral, to the extent they relate in any way to the subject matter hereof.

(b) Assignment; Assumption; Third Party Beneficiary . This Agreement is personal to Executive and will not be assignable by Executive. This Agreement will inure to the benefit of and be binding upon any successor to the business or securities of Employer which assumes this Agreement, whether expressly or by operation of law.

 

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(c) Headings . The section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.

(d) Notices . All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder will be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below:

 

If to Employer:       Cars.com, LLC
  c/o Gannett Co., Inc.
  7950 Jones Branch Drive
  McLean, VA 22107
  Attn: General Counsel
  Fax: (703) 854-2031
If to Executive:   Alex Vetter
  1138 N. Hoyne
  Chicago, IL 60622

Either party may send any notice, request, demand, claim or the other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, facsimile or ordinary mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Either party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.

(e) Amendment . This Agreement may be amended or otherwise modified only in a writing signed by both Executive and Employer.

(f) Waiver of Jury Trial . Executive and Employer specifically waive any right to trial by jury in any court with respect to any contractual, tortious or statutory claim, counterclaim or crossclaim against the other arising out of or connected in any way to this Agreement.

(g) Section 409A . For purposes of this Agreement, “ Section 409A ” means Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations and other authoritative guidance issued thereunder. To the extent that payments under this Agreement are subject to Section 409A, this Agreement shall be governed by and subject to the requirements of Section 409A and shall be interpreted and administered in accordance with that intent. Any reference to “termination of employment” or similar term shall mean “separation from service” as defined under Section 409A, and each payment under this Agreement will be treated as a separate payment for purposes of Section 409A. In the event that Executive is a “specified Executive” (as defined in Section 409A), any benefit or amount described in this Agreement that is nonqualified deferred compensation within the meaning of said Section 409A and that is to be made upon separation from service shall be delayed until the date which is the first day of the seventh month after the date Executive separates from service (or, if earlier, the date of

 

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Executive’s death), if necessary to avoid any excise taxes that would otherwise be imposed by IRC Section 409A. To the extent permitted under Section 409A or any Internal Revenue Service or Treasury rules or other guidance issued thereunder, Employer may, in consultation with Executive, modify this Agreement in order to cause the provisions of this Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the imposition of taxes and penalties on Executive pursuant to Section 409A of the Code.

(h) Counterparts . This Agreement may be executed in one or more counterparts (including by facsimile or .pdf), each of which will constitute an original but all of which together constitute a single document.

{Signature page follows}

 

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IN WITNESS WHEREOF, Employer and Executive have signed this Agreement as of the date first noted above.

 

Cars.com, LLC

By:  

 

/s/ John A. Williams

Name:    John A. Williams

Title:      Vice President

EXECUTIVE

/s/ T. Alex Vetter

Name:    T. Alex Vetter

 

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Exhibit 10.14

OFFER OF EMPLOYMENT

November 2, 2016

Alex Vetter

Cars.com

175 West Jackson Blvd

8th Floor

Chicago, IL 60604

Dear Alex,

Subject to the approval of the Board of Directors of TEGNA Inc., I am pleased to extend you an offer to continue your position as the President and Chief Executive Officer of Cars.com (the “Company”) following the date the Company is spun off from TEGNA (the “Spinoff”). The terms of your employment after the Spinoff are set forth below.

Reporting Relationship and Location . While serving as President and Chief Executive Officer of the Company after the Spinoff you will report directly to the Board of Directors of the Company, and your primary office location will be at the Company’s headquarters in Chicago, IL. This is a full-time exempt position.

Total Target Compensation . The initial total compensation opportunity is detailed below.

 

Component of Pay

  

Amount

  

Comments

Annual Base Salary    $550,000    Effective the day after the Spinoff
Annual Performance Bonus Target    110% of base salary   

•       Effective the day after the Spinoff

     

•       Bonus for full-year 2017 will be based on a combination of applicable target awards and KPIs pre- and post-Spinoff and is subject to the Code Section 162(m) limitations on such bonus established by Parent

     

•       Payment of the full-year 2017 bonus will occur in Q1 2018

Long-Term Incentive Target Value    $3.0M Annualized   

•       Effective after the Spinoff

     

•       In January 2017, you will be granted a long term incentive award in the form of TEGNA restricted stock units with the same design as other TEGNA senior leadership participants. The value of such award will be consistent with your current target level value

     

•       Upon the Spinoff, the January 2017 award shall be converted into an award of Cars.com restricted stock units under the concentration method

     

•       After the Spinoff, it is expected that the new Executive Compensation Committee of the Cars.com Board of Directors will grant you an additional award reflecting your role as CEO and whose value when added to the value of your pre-Spinoff 2017 award will be approximately $3.0 million

Total Target Compensation    $4.155M    Shown on a full-year basis

Annual Performance Bonus . You will be eligible to participate in the Company’s annual bonus plan as in effect from time to time.

Long-Term Incentive . For your January 2017 grant, you will be eligible to participate in the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan, as amended (the “LTI Plan”) and be granted a restricted stock unit award as determined by the Executive Compensation Committee of the TEGNA Board of Directors (the “ECC”). Such award will be subject to approval of the ECC and the terms of the LTI Plan and the award agreement. Upon the Spinoff, the 2017 award shall be converted into an award of restricted stock units in Cars.com stock under the concentration method. For awards granted after January 2017, it is anticipated that the Company will adopt its own Omnibus Incentive Compensation Plan, and the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) will grant you stock-based awards under that Plan from time to time.

For stock-based awards granted on or after the date of this letter, in the event the Company involuntarily terminates you without cause under circumstances that constitute a “qualifying termination” under the Cars.com Inc. Executive Severance Plan or a successor severance plan, you will receive service credit and continue to vest in such awards for no less than the 18 month period following your termination of employment.

The initial stock-based awards granted to you on or after the date of the Spinoff will include change in control vesting and payment provisions that are substantially similar to the change in control vesting and payment provisions generally provided in the stock-based award agreements under the LTI Plan as of the date of this letter.

Benefits . You will be eligible for the retirement and welfare benefits programs generally offered by the Company in accordance with the terms of such plans as in effect from time to time, which may be amended.

Stock Ownership Guidelines . The Company will establish stock ownership guidelines that will be communicated to you after the Spinoff.

Severance Benefits and Restrictive Covenants . In lieu of your severance rights under your Employment Agreement dated November 4, 2014, (the “Employment Agreement”) you will become a participant in the following severance programs:

 

•   The Company will adopt a change in control severance plan, in substantially the form attached hereto as Exhibit A (the “Change in Control Severance Plan”). Subject to the terms of the Change in Control Severance Plan, you will have the opportunity to receive a severance benefit in the event of a change in control of the Company in an amount that is not less than 2.0X base + bonus (bonus defined as the average bonus you were paid in the three preceding years). While the Change in Control Severance Plan may be amended or terminated, the Company agrees at all times to provide you the opportunity to receive a change in control severance benefit in the amount of 2.0X base + bonus under such plan or a successor plan, subject to the terms of the plan or successor plan.

 

•  

The Company will adopt an executive severance plan, in substantially the form attached hereto as Exhibit B (the “Executive Severance Plan”). Subject to the terms of the Executive Severance Plan, you will have the opportunity to receive a benefit in an amount that is not less than 1.5X base + bonus (bonus defined as the average bonus you were paid in the three preceding years). While the Executive Severance Plan may be amended or terminated, the Company agrees at all times to provide you the opportunity to receive a severance

 

-2-

 

benefit in the amount of 1.5X base + bonus under such plan or a successor plan, subject to the terms of the plan or successor plan. In the event a severance benefit is also payable under the Change in Control Severance Plan, or a successor plan, no benefit will be payable under the Executive Severance Plan, or successor plan.

Impact to Your Current Employment Contract . In consideration for the compensation offered under this letter, you hereby agree to forever waive and relinquish your rights under your Employment Agreement with the sole exception that you will continue to have the severance rights set forth under the Employment Agreement with respect to the long-term incentive awards that have been granted to you as of the date of this letter, but not for any long-term incentive awards granted after the date of this letter, including, without limitation, the long-term incentive awards contemplated by this letter.

Vacation . You will be eligible for 5 weeks’ annual vacation.

Effectiveness . The effectiveness of this letter is contingent upon the occurrence of the Spinoff, and, if for any reason, the Spinoff is not consummated, this letter will be void ab initio. Effective as of the Spinoff, this letter will be assumed by the Company without further action, and TEGNA will have no obligations with respect thereto.

You are free to resign at any time, with or without cause. Similarly, your employment with the Company is “at will”, and the Company may terminate your employment at any time, with or without cause, so long as there is no violation of applicable federal or state law. Your right to participate in and receive benefits under the Company’s various benefits and compensation plans are subject to the terms of the plans. The Company reserves the right to amend or terminate its benefits and compensation plans at any time, and all compensation paid to you is subject to applicable taxes and withholding requirements.

We are delighted at the prospect of your leading the Company following the Spinoff, in what we expect will be a mutually rewarding relationship and productive experience. Should the terms of this letter be acceptable, we would appreciate you confirming agreement with your signature below by close of business on November 2, 2016. If you have questions, please feel free to contact me.

Best regards,

 

/s/ Howard Elias

Howard Elias
Chairman of the Executive Compensation Committee, TEGNA Board of Directors

Acceptance

 

Signature:  

/s/ Alex Vetter

    Date: 11/2/16

CC: Marjorie Magner

 

-3-

Exhibit 10.15

 

LOGO

November 21 2016

Becky Sheehan

Dear Becky:

We are delighted to extend to you the following offer to join Cars.com (the “Company”) as our new Chief Financial Officer. We are confident that your contributions to our team will help us accomplish great things as we continue to grow our position as a premier company in the Internet advertising industry. It is expected that the Company will be spun off from TEGNA and become a separate publicly traded company in 2017 (the “Spinoff”).

In your position as Chief Financial Officer you will report to me and be a member of the senior leadership team, Team One.

In your role as Chief Financial Officer your annual base salary will be $500,000, and you will be eligible for a 2017 annual performance bonus targeted at $500,000 (~ 100% of base) under our Short Term Incentive Plan (STIP). You are eligible to receive the full targeted award for 2017 based on both the company and individual performance metrics, as well as your continued employment with the Company through the time of payment, typically in the first quarter of the following year.

Cars.com will issue to you a one-time payment in the gross amount of $250,000 (“Special Bonus”) as soon as practical after your first day worked. In the event that you either voluntarily terminate employment with Cars.com or you are terminated for cause within 12 months of your employment beginning, you will be required to repay the Special Bonus amount to Cars.com within 20 days of your termination date. Notwithstanding the foregoing, you will not be required to repay the Special Bonus if your voluntary termination is because (i) the Spinoff is not consummated prior to September 30, 2017, or (ii) there is a public announcement by TEGNA of its intention not to consummate the Spinoff. You agree to provide thirty days’ written notice to the Company if you choose to voluntarily terminate your employment under the preceding sentence.

You will participate in a long-term incentive plan with an overall annual award with a target value of $1,000,000. Following your start date in January 2017, the 2017 award will be made in TEGNA Restricted Stock Units (RSUs) which vest over four years and are subject to the terms of the award agreement and the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended. This award will be converted at Spinoff to Cars.com RSUs using the concentration method. After the Spinoff, the Cars.com Board of Directors will approve the design of its long-term incentive plan.

In addition, you will receive an initial one-time award with a target value of $1,100,000 following your start date in January 2017 made in TEGNA Restricted Stock Units (RSUs) (the “Special Award”) which vest over four years and are subject to the terms of the award agreement and the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended. This award will be converted at Spinoff to Cars.com RSUs using the concentration method.

These long-term incentive awards are generally granted effective the first day of each year. Accordingly, your initial awards are to be granted effective January 1, 2017, or, if later, your first day of employment. Your initial awards are subject to the approval of the Executive Compensation Committee of the Board of TEGNA. Assuming the Spinoff is completed in 2017, subsequent awards will be subject to the approval of the Executive Compensation Committee of the Board of Cars.com.

Please note that the Company reserves the right to amend, alter or eliminate these incentive plans at any time and for any reason. The final value of your award is based on your performance and the guidelines in place at the time of the award, and your awards are always subject to change at the Company’s discretion. Jeff Newman, VP Total Rewards (703-854-6088) is available to discuss details of these plans.

The Company will establish stock ownership guidelines that will be communicated to you after the Spinoff.

On or subsequent to the Spinoff, the Company will adopt a change in control severance plan in substantially the form attached hereto as Exhibit A (the “Change in Control Severance Plan”). Subject to the terms of the Change in Control Severance Plan, you will have the opportunity to receive a severance benefit in the event of a change in control of the Company in an amount that is 1.0X base salary + bonus (bonus is defined as the average bonus you earned in the three preceding fiscal years). In the event a Change in Control occurs prior to the end of the 2017 fiscal year, your bonus for purposes of determining the applicable severance benefit will not be less than your target bonus for 2017.

On or subsequent to the Spinoff, the Company will adopt an executive severance plan in substantially the form attached hereto as Exhibit B (the “Executive Severance Plan”). Subject to the terms of the Executive Severance Plan, you will have the opportunity to receive a benefit in an amount that is 1.0X base salary.

In the event of a “Qualifying Termination” as defined in the Executive Severance Plan occurring prior to the Spinoff, the Company agrees to provide you with a severance benefit in an amount that is 1.0X base salary subject to the terms and conditions of the Executive Severance Plan which would apply if you were a participant in that Plan. Additionally, in the event of a “Qualifying Termination” as defined in the Executive Severance Plan occurring prior to the Spinoff, your Special Award shall vest upon your termination of employment in an amount such that you shall receive at least 75% of your Special Award.

 

-2-

You will also be eligible for four weeks of vacation and are able to participate in other benefit programs as a full-time employee once eligibility requirements are met. These include the Company’s 401(k) and health plans.

We anticipate a start date to be determined. Once that date is finalized, you will receive an email from Cars.com Onboarding containing a link with credentials to a website called SilkRoad Onboarding (Red Carpet). The site will welcome you further and guide you through the process of completing most of your new hire paperwork prior to your first day, including a requirement that you execute a Restrictive Covenant Agreement. Upon receipt of your log-in credentials, please access the site and begin working on your task list which can be found in the site’s left margin. That list will include instructions to upload your signed Acceptance Letter and Restrictive Covenant Agreement (both attached). Please do so at your earliest opportunity.

You are free to resign at any time, with or without cause. Similarly, your employment with the Company is “at will”, and the Company may terminate your employment at any time, with or without cause, so long as there is no violation of applicable federal or state law. Your right to participate in and receive benefits under the Company’s various benefits and compensation plans are subject to the terms of the plans. The Company reserves the right to amend or terminate its benefits and compensation plans at any time, and all compensation paid to you is subject to applicable taxes and withholding requirements.

We are confident that you will find your work here to be professionally rewarding and that you will play a vital role in contributing to our future success.

Regards,

 

/s/ Alex Vetter

Alex Vetter

Chief Executive Officer

Cars.com, LLC Enclosures

Acceptance

 

Signature:

 

/s/ Becky Sheehan

   

Date: 11/29/16

 

-3-

ACCEPTANCE LETTER

November 21, 2016

Dear Becky:

Welcome to Cars.com! This letter confirms your acceptance of employment with Cars.com as our new Chief Financial Officer, as described in your offer letter with a start date to be confirmed.

Please note that your employment with Cars.com is contingent upon the following:

 

•   Finalizing your start date.

 

•   Signing and uploading this Acceptance Letter and the attached Restrictive Covenant Agreement to the Red Carpet onboarding site (watch for an email with details) within three business days of the date in which your start date is finalized.

 

•   Completing Form I-9 in Red Carpet before your first day of employment and presenting appropriate I-9 documentation on your first day of employment.

 

•   Completed and acceptable background check and reference check results prior to your start date.

Employment with Cars.com is voluntarily entered into, and you are free to resign at will at any time, with or without cause. Similarly, Cars.com may terminate the employment relationship at will at any time, with or without cause, so long as there is no violation of applicable federal or state law.

We are incredibly excited to have you join our team. Please return your signed Acceptance Letter and signed Restrictive Covenant Agreement within three business days.

Regards,

 

/s/ Alex Vetter

Alex Vetter
Chief Executive Officer
Cars.com, LLC
Acknowledged and accepted:
  Becky Sheehan
  Signature   

/s/ Becky Sheelan

  Date    11/29/16

 

-4-

Exhibit 10.16

 

LOGO

June 1, 2016

John Clavadetscher

Dear John:

Congratulations on your new position!

We believe that you’ve provided key contributions as a member of our team and will continue to help us achieve significant growth and momentum as the premier provider of automotive digital advertising.

This letter confirms your promotion to the role of Chief Revenue Officer at cars.com effective 6/1/16. In this new role, your target compensation will be:

 

Annual Base Pay:

   $ 290,000  

Annual Commission Target:

   $ 165,000  

Annual SARs/RSUs:

   $ 150,000  
  

 

 

 

Total Compensation:

   $ 605,000  

The new base pay will be reflected within your earnings received in your June 15, 2016 paycheck.

Again, congratulations on your promotion!

Sincerely,

/s/ Alex Vetter

Alex Vetter

President and CEO

Cars.com, LLC

Exhibit 10.17

 

LOGO

September 23, 2016

Jim Rogers

55 East Erie Street

Apartment 3250

Chicago, IL 60611

Dear Jim:

We are delighted to extend to you the following offer to join Cars.com as our new Chief Legal Officer. We are confident that your contributions to our team will help us accomplish great things as we continue to grow our position as a premier company in the Internet advertising industry.

In your position as Chief Legal Officer you will report to me and be a member of the senior leadership team, Team One.

In your role as Chief Legal Officer your annual base salary will be $350,000 and you will be eligible for an annual performance bonus targeted at $175,000 (50% of base) under our Short Term Incentive Plan (STIP). You are eligible to receive the full targeted award for 2017; although the amount actually paid will be based on the company’s and your individual performance.

You will also be eligible to participate in TEGNA’s long-term incentive plan with an overall annual target award value of $750,000. The 2017 award will be made in TEGNA Restricted Stock Units (RSUs) which vest 25% annually over four years. This award will be converted at spin to Cars.com RSUs using the concentration method. Going forward, the Cars.com Board of Directors will approve the design of the long-term incentive plan which will apply post-spin.

TEGNA’s long-term incentive awards are generally granted effective the first day of each year so your initial award will be granted effective Jan 1, 2017, subject to approval of the Executive Compensation Committee (ECC) of TEGNA’s Board of Directors and the terms of the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan, as amended, and the award agreement.

Please note that the incentive plans may be amended or terminated at any time and for any reason. Also, your final award values are based on the company’s and your performance and the applicable guidelines, which may be changed at any time. Jeff Newman, VP Total Rewards (703-854-6088) is available to discuss details of these plans.

You will also be eligible for four weeks of vacation and will be able to participate in many other benefit programs as a full-time employee once eligibility requirements are met. These include Car.com’s 401(k) and health plans. Your right to participate in and receive benefits under Cars.com’s various benefits and compensation plans are subject to the terms of the plans, and the company reserves the right to amend or terminate the plans at any time.

We anticipate a start date of October 24, 2016. Once that date is finalized, you will receive an email from Cars.com Onboarding containing a link with credentials to a website called SilkRoad Onboarding (Red Carpet). The site will welcome you further and guide you through the process of completing most of your new hire paperwork prior to your first day. Upon receipt of your log-in credentials, please access the site and begin working on your task list which can be found in the site’s left margin. That list will include instructions to upload your signed Acceptance Letter and Restrictive Covenant Agreement (both attached). Please do so at your earliest opportunity.

We are confident that you will find your work here to be professionally rewarding and that you will play a vital role in contributing to our future success.

Regards,

 

LOGO

Alex Vetter

Chief Executive Officer

Cars.com, LLC

Enclosures

ACCEPTANCE LETTER

September 23, 2016

Dear Jim:

Welcome to Cars.com! This letter confirms your acceptance of employment with Cars.com as our new Chief Legal Officer, as described in your offer letter with a start date to be confirmed.

Please note that your employment with Cars.com is contingent upon the following:

 

•   Finalizing your start date.

 

•   Signing and uploading this Acceptance Letter and the attached Restrictive Covenant Agreement to the Red Carpet onboarding site (watch for an email with details) within three business days of the date that your start date is finalized.

 

•   Completing Form I-9 in Red Carpet before your first day of employment and presenting appropriate I-9 documentation on your first day of employment.

 

•   Completed and acceptable background check and reference check results prior to your start date.

Employment with Cars.com is voluntarily entered into, and you are free to resign at will at any time, with or without cause. Similarly, Cars.com may terminate the employment relationship at will at any time, with or without cause, so long as there is no violation of applicable federal or state law.

We are incredibly excited to have you join our team. Please return your signed Acceptance Letter and signed Restrictive Covenant Agreement within three business days.

Sincerely,

 

LOGO

Alex Vetter

Chief Executive Officer

Cars.com, LLC

 

Acknowledged and accepted:
  Jim Rogers  
  Signature  

/s/ Jim Rogers

  Date   September 23, 2016
Table of Contents

Exhibit 99.1

 

LOGO

[    ], 2017

Dear TEGNA Inc. Stockholder:

We previously announced plans to separate our digital automotive marketplace business from our media and other digital businesses. The separation will occur by means of a spin-off of a newly formed company named Cars.com Inc., which will own the digital automotive marketplace business (“Cars.com”). TEGNA Inc. (“TEGNA”), the existing publicly traded company in which you currently own common stock, will continue to own and operate the media and other digital businesses. The separation will create two stand-alone companies positioned to take advantage of differentiated opportunities in the rapidly evolving broadcast and digital landscapes.

TEGNA will continue to be a leader in the broadcasting industry and will be well positioned to manage and benefit from dedicated focus on opportunities specific to broadcasting and adjacent businesses. With a portfolio of 46 owned or serviced television stations covering approximately one-third of all television households nationwide (approximately 36 million households), TEGNA is the largest independent owner of “Big Four” affiliated stations in the top 25 markets. TEGNA is also in the process of optimizing its digital portfolio, as it evaluates strategic alternatives for its controlling stake in Careerbuilder.com, a global leader in human capital solutions. TEGNA also owns G/O Digital, a one-stop shop for localized digital marketing services.

Cars.com will operate its flagship digital automotive marketplace—an industry-leading, household brand—as well as its existing specialty automotive sites. Innovative from inception in 1998, Cars.com will also retain its recent suite of new services and products directed at entering complementary markets to better serve consumers and advertisers. Most recently, Cars.com launched Sell & Trade and Lot Insights and partnered with RepairPal Inc. Also, TEGNA acquired DealerRater, which will be contributed to Cars.com Inc. Sell & Trade is an innovative solution that provides consumers with quick and easy access to the resale market through Cars.com’s Quick Offer online tool and mobile app. Car sellers upload vehicle information and receive real-time online cash offers from local dealers. RepairPal Certified is an innovative solution that allows consumers to obtain and compare repair estimates and offers easy-to-understand resources related to mechanical issues commonly faced by car owners. DealerRater is the industry’s largest automotive consumer review website, with nearly 3.1 million consumer reviews of local dealers. Consistent with the strategy that has made Cars.com a household name, Sell & Trade, RepairPal Certified and DealerRater empower consumers to make educated automotive sales and service decisions. To better serve its dealer customers, Lot Insights is a marketing analytics tool that shows dealer customers the true value of their advertising spend by using geo-fencing technology to measure the influence that Cars.com has in connecting dealers with online shoppers.

The separation will provide current TEGNA stockholders with equity ownership in both TEGNA and Cars.com Inc. We expect that the separation will be tax-free for U.S. federal income tax purposes to TEGNA stockholders.

The separation will be effected by means of a pro rata distribution of all of the outstanding shares of Cars.com Inc. common stock to holders of TEGNA common stock. Following the distribution, Cars.com Inc. will be a separate public company. Each TEGNA stockholder will receive one share of Cars.com Inc. common stock for every three shares of TEGNA common stock held at the close of business on [    ], the record date for the distribution. No vote of TEGNA stockholders is required for the distribution. You do not need to take any action to receive the shares of Cars.com common stock to which you are entitled as a TEGNA stockholder. You will not be required to make any payments or to surrender or exchange your shares of TEGNA common stock.

Cars.com intends to apply to have its common stock authorized for listing on the New York Stock Exchange under the symbol “CARS.” Following the distribution, TEGNA will continue to trade on the New York Stock Exchange under the symbol “TGNA.”

I encourage you to read the attached information statement that is being provided to all TEGNA stockholders who held shares on the record date for the distribution. The information statement describes the separation in detail and contains important business and financial information about Cars.com Inc.

Sincerely,

Gracia C. Martore

President and Chief Executive Officer

TEGNA Inc.

Table of Contents

LOGO

[    ], 2017

Dear Future Cars.com Inc. Stockholder:

I am pleased to welcome you as a future stockholder of Cars.com Inc. We intend to list our common stock on the New York Stock Exchange under the symbol “CARS.” Although we will be newly public, we have been an innovator at the forefront of a rapidly growing industry since our launch in 1998. With an average of more than 35 million visits each month, approximately 52% of which are mobile, Cars.com is the leader in the digital automotive marketplace and a brand that consumers trust. Cars.com continues to expand its editorial presence, most recently through TEGNA’s August 2016 acquisition of DealerRater, the industry’s largest automotive consumer review website with nearly 3.1 million consumer reviews of local dealers, which will be contributed to Cars.com Inc. We believe DealerRater will solidify our position as a leader in automotive reviews and an authority for car shoppers on what to buy, where to buy and who to buy from.

As a public company, we plan to continue to focus on effectively connecting our car buying and car selling customers and to better cater to their specific needs. We strive to stay fresh and develop new products, move into complementary markets and drive traffic to attract more advertising partners. We aim to grow our share of a growing market.

As a result of recent product launches, our business includes four distinct websites and a host of advertising and marketing services. Our online automotive marketplace and service sites coupled with our cutting-edge marketing solutions create a powerful combination that allows us to offer our car dealers and advertising clients efficient marketing solutions. In 2016, we generated $633 million in revenues, $177 million in operating income, $176 million in Net income and $260 million in Adjusted EBITDA. We intend to accelerate organic growth opportunities by leveraging our national brand recognition to broaden our customer base. We will also pursue strategic opportunities when appropriate. By capitalizing on these organic and strategic growth opportunities, we intend to continue to increase our reach among car buyers and car owners to better provide integrated digital marketing services to our advertising partners.

Our stockholder value proposition is simple: provide outstanding returns to Cars.com Inc. stockholders by maintaining our position as a leader in the digital automotive marketplace, investing in the growth of our company and generating strong cash flow. I invite you to learn more about Cars.com Inc. and our strategic initiatives by reading the attached information statement. I thank you in advance for your support as a future stockholder of Cars.com Inc.

Sincerely,

Alex Vetter

President and Chief Executive Officer

Cars.com Inc.

Table of Contents

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended.

 

PRELIMINARY AND SUBJECT TO COMPLETION, DATED APRIL 27, 2017

INFORMATION STATEMENT

Cars.com Inc.

 

 

This information statement is being furnished in connection with the distribution by TEGNA Inc. (“TEGNA”) to its stockholders of all of the outstanding shares of common stock of Cars.com Inc., a Delaware corporation (“Cars.com” or “SpinCo”), currently a wholly owned subsidiary of TEGNA, that will hold directly or indirectly the assets and liabilities associated with TEGNA’s digital automotive marketplace business. To implement the distribution, TEGNA will distribute all of the shares of Cars.com common stock on a pro rata basis to TEGNA stockholders in a manner that is intended to be tax-free for U.S. federal income tax purposes. Following the distribution, Cars.com will be a separate public company.

For every three shares of TEGNA common stock held of record by you as of the close of business on [    ], the record date for the distribution, you will receive one share of Cars.com common stock. You will receive cash in lieu of any fractional shares of Cars.com common stock that you would have received after application of the above ratio. As discussed in the section entitled “The Separation and Distribution—Trading Between the Record Date and Distribution Date,” if you sell your shares of TEGNA common stock in the “regular-way” market after the record date and before the distribution, you also will be selling your right to receive shares of Cars.com common stock in the distribution. Cars.com expects the shares of Cars.com common stock to be distributed by TEGNA to you at [    ], Eastern Time, on [    ]. Cars.com refers to the date of the distribution of the shares of Cars.com common stock as the “distribution date.”

No vote of TEGNA stockholders is required for the distribution. Therefore, you are not being asked for a proxy, and you are requested not to send TEGNA a proxy, in connection with the distribution. You do not need to pay any consideration or exchange or surrender your existing shares of TEGNA common stock or take any other action to receive your shares of Cars.com common stock.

There is no current trading market for Cars.com common stock, although Cars.com expects that a limited market, commonly known as a “when-issued” trading market, will develop on or about the record date for the distribution, and Cars.com expects “regular-way” trading of Cars.com common stock to begin on the first trading day following the completion of the distribution. Cars.com intends to apply to have its common stock authorized for listing on the New York Stock Exchange under the symbol “CARS.” Following the distribution, TEGNA will continue to trade on the New York Stock Exchange under the symbol “TGNA.”

Cars.com is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, as such, is allowed to provide in this information statement more limited disclosures than a registrant that would not so qualify. In addition, for so long as Cars.com remains an emerging growth company, it may also take advantage of certain limited exceptions from investor protection laws such as the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and the Investor Protection and Securities Reform Act of 2010, for limited periods. See the section entitled “Information Statement Summary—Emerging Growth Company Status.”

 

 

In reviewing this information statement, you should carefully consider the matters described in the section entitled “ Risk Factors ,” beginning on page 23.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is [    ].

This information statement was first made available to TEGNA stockholders on or about [    ].

Table of Contents

TABLE OF CONTENTS

 

     Page  

Questions and Answers About the Separation and Distribution

     1  

Information Statement Summary

     8  

Summary Historical and Pro Forma Financial Data

     21  

Risk Factors

     23  

Cautionary Statement Concerning Forward-Looking Statements

     41  

The Separation and Distribution

     43  

Dividend Policy

     52  

Capitalization

     53  

Selected Historical Financial Data

     54  

Unaudited Pro Forma Financial Statements

     55  

Business

     59  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     69  

Management

     83  

Directors

     84  

Executive Compensation

     88  

Director Compensation

     101  

Relationship with TEGNA Following the Separation and Distribution

     103  

Material U.S. Federal Income Tax Consequences

     109  

Description of Material Indebtedness

     112  

Security Ownership of Certain Beneficial Owners and Management

     113  

Description of Cars.com’s Capital Stock

     114  

Where You Can Find More Information

     118  

Index to Financial Statements

     F-1  

Presentation of Information

Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about Cars.com assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires and except in the historical financial statements included herein, references in this information statement to “Cars.com” or “SpinCo” refer to Cars.com Inc., a Delaware corporation, and its consolidated subsidiaries after the distribution. References to “Cars.com” in the historical financial statements included herein refer to Cars.com, LLC, a Delaware limited liability company, and the principal entity through which TEGNA’s digital automotive marketplace business has historically been operated. Unless the context otherwise requires, references in this information statement to “TEGNA” or “Parent” refer to TEGNA Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the distribution, Cars.com and its consolidated subsidiaries). References to Cars.com’s historical business and operations refer to the business and operations of TEGNA’s digital automotive marketplace business that will be transferred to SpinCo in connection with the separation and distribution. References in this information statement to the “separation” refer to the separation of the digital automotive marketplace business from TEGNA’s other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Cars.com, to hold the assets and liabilities associated with the digital automotive marketplace business after the distribution. References in this information statement to the “distribution” refer to the distribution of all of the shares of Cars.com common stock to TEGNA’s stockholders on a pro rata basis.

Table of Contents

QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

 

What is Cars.com and why is TEGNA separating Cars.com’s business and distributing Cars.com stock?

Cars.com, which is currently a wholly owned subsidiary of TEGNA, was formed to own and operate TEGNA’s digital automotive marketplace business. The separation of Cars.com from TEGNA and the distribution of Cars.com common stock are intended to provide you with equity ownership in two separate publicly traded companies that will be able to focus exclusively on each of their respective businesses. TEGNA and Cars.com expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the section entitled “The Separation and Distribution—Reasons for the Separation.”

 

Why am I receiving this document?

TEGNA is delivering this document to you because you are a holder of TEGNA common stock. If you are a holder of TEGNA common stock as of the close of business on [    ], the record date of the distribution, you will be entitled to receive one share of Cars.com common stock for every three shares of TEGNA common stock that you held at the close of business on such date. This document will help you understand how the separation and distribution will affect your post-separation ownership in TEGNA and Cars.com, respectively.

 

How will the separation of Cars.com from TEGNA work?

To accomplish the separation, TEGNA will distribute all of the outstanding shares of Cars.com common stock to TEGNA stockholders on a pro rata basis in a distribution intended to be tax-free for U.S. federal income tax purposes. As a result of the distribution, Cars.com will become an independent public company.

 

Why is the separation of Cars.com structured as a distribution?

TEGNA believes that a distribution that is tax-free for U.S. federal income tax purposes of shares of Cars.com common stock to TEGNA stockholders is an efficient way to separate its digital automotive marketplace business in a manner that will create long-term value for TEGNA, Cars.com and their respective stockholders.

 

What is the record date for the distribution?

The record date for the distribution will be [    ].                                                 

 

When will the distribution occur?

It is expected that all of the shares of Cars.com common stock will be distributed by TEGNA at [    ] Eastern Time, on [    ] to holders of record of TEGNA common stock at the close of business on [    ], the record date for the distribution.

 

What do stockholders need to do to participate in the distribution?

Stockholders of TEGNA as of the record date for the distribution will not be required to take any action to receive shares of Cars.com common stock in the distribution, but you are urged to read this entire information statement carefully. No stockholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing shares of TEGNA common stock or take any other action to receive your shares of Cars.com common stock. Please do not send in

 



 

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your TEGNA stock certificates. The distribution will not affect the number of outstanding shares of TEGNA common stock or any rights of TEGNA stockholders, although it will affect the market value of each outstanding share of TEGNA common stock.

 

How will shares of Cars.com common stock be issued?

You will receive shares of Cars.com common stock through the same channels that you currently use to hold or trade TEGNA common stock, whether through a brokerage account, 401(k) plan or other channel. Receipt of Cars.com shares will be documented for you in the same manner that you typically receive stockholder updates, such as monthly broker statements and 401(k) statements.

 

  If you own TEGNA common stock as of the close of business on [    ], the record date for the distribution, including shares owned in certificate form, TEGNA, with the assistance of Wells Fargo Shareowner Services, the distribution agent for the distribution, will electronically distribute shares of Cars.com common stock to you or to your brokerage firm on your behalf in book-entry form. Wells Fargo Shareowner Services will mail you a book-entry account statement that reflects your shares of Cars.com common stock, or your bank or brokerage firm will credit your account for the shares.

 

How many shares of Cars.com common stock will I receive in the distribution?

TEGNA will distribute to you one share of Cars.com common stock for every three shares of TEGNA common stock held by you as of close of business on the record date for the distribution. Based on approximately 214.8 million shares of TEGNA common stock outstanding as of April 25, 2017, a total of approximately 71.6 million shares of Cars.com common stock will be distributed. For additional information on the distribution, see the section entitled “The Separation and Distribution.”

 

Will fractional shares of Cars.com common stock be issued in the distribution?

No. Cars.com will not issue fractional shares of its common stock in the distribution. Fractional shares that TEGNA stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise have been entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

 

What are the conditions to the distribution?

The distribution is subject to final approval by the TEGNA board of directors, as well as to the satisfaction (or waiver by TEGNA in its sole discretion) of the following conditions:

 

  •   the transfer of assets and liabilities from TEGNA to Cars.com shall be completed in accordance with the separation and distribution agreement that TEGNA and Cars.com will enter into prior to the distribution;

 

  •  

the continued validity of the private letter ruling received by TEGNA from the Internal Revenue Service (the “IRS”) with

 



 

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respect to certain requirements for qualification for tax-free treatment under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”);

 

  •   the receipt by TEGNA of an opinion from TEGNA’s outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code will be satisfied;

 

  •   an independent appraisal firm acceptable to TEGNA shall have delivered one or more opinions to the board of directors of TEGNA at the time or times requested by the board of directors of TEGNA confirming the solvency and financial viability of TEGNA before the consummation of the distribution and each of TEGNA and Cars.com after consummation of the distribution, and such opinions shall have been acceptable to TEGNA in form and substance in TEGNA’s sole discretion and such opinions shall not have been withdrawn or rescinded;

 

  •   the U.S. Securities and Exchange Commission (the “SEC”) shall have declared effective the registration statement of which this information statement forms a part, and this information statement shall have been made available to TEGNA stockholders;

 

  •   all actions or filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws shall have been taken and, where applicable, shall have become effective or been accepted by the applicable governmental entity;

 

  •   the transaction agreements relating to the separation shall have been duly executed and delivered by the parties;

 

  •   no order, injunction or decree issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions, shall be in effect;

 

  •   the shares of Cars.com common stock to be distributed shall have been approved for listing on the New York Stock Exchange, subject to official notice of distribution;

 

  •   TEGNA shall have received the proceeds from the cash transfer from Cars.com described in the section entitled “Relationship with TEGNA Following the Distribution—Separation Agreement—Cash Transfer from Cars.com” and TEGNA shall be satisfied in its sole and absolute discretion that as of the effective time of the distribution, it shall have no further liability under any of the Cars.com financing arrangements described in the section entitled “Description of Material Indebtedness”; and

 

  •   no other event or development shall exist or have occurred that, in the judgment of TEGNA’s board of directors, in its sole discretion, makes it inadvisable to effect the separation, distribution and other related transactions.

 

 

TEGNA and Cars.com cannot assure you that any or all of these conditions will be met and TEGNA may also waive any of the conditions

 



 

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to the distribution. In addition, TEGNA can decline at any time to go forward with the separation and distribution. For a complete discussion of all of the conditions to the distribution, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”

 

What is the expected date of completion of the distribution?

The completion and timing of the distribution are dependent upon a number of conditions. It is expected that the shares of Cars.com common stock will be distributed by TEGNA at [    ], Eastern Time, on [    ], to the holders of record of TEGNA common stock at the close of business on [    ], the record date for the distribution. However, no assurance can be provided as to the timing of the distribution or that all conditions to the distribution will be met.

 

Can TEGNA decide to cancel the distribution of Cars.com common stock even if all of the conditions have been met?

Yes. The distribution is subject to the satisfaction or waiver of certain conditions. See the section entitled “The Separation and Distribution—Conditions to the Distribution.” Until the distribution has occurred, TEGNA has the right to terminate the distribution, even if all of the conditions have been satisfied.

 

What if I want to sell my TEGNA common stock or my Cars.com common stock?

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor.                                                      

 

What is “regular-way” and “ex-distribution” trading of TEGNA common stock?

Beginning on or shortly before the record date for the distribution and continuing up to and through the distribution date, it is expected that there will be two markets in TEGNA common stock: a “regular-way” market and an “ex-distribution” market. TEGNA common stock that trades in the “regular-way” market will trade with an entitlement to shares of Cars.com common stock distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to shares of Cars.com common stock distributed pursuant to the distribution. If you hold shares of TEGNA common stock on the record date and then decide to sell any TEGNA common stock before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your TEGNA common stock with or without your entitlement to Cars.com common stock pursuant to the distribution.

 

Where will I be able to trade shares of Cars.com common stock?

Cars.com intends to apply to list its common stock on the New York Stock Exchange under the symbol “CARS.” Cars.com anticipates that trading in shares of its common stock will begin on a “when-issued” basis on or about [    ], the record date for the distribution, and will continue up to and through the distribution date and that “regular-way” trading in Cars.com common stock will begin on the first trading day following the completion of the distribution. If trading begins on a “when-issued” basis, you may purchase or sell shares of Cars.com common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. Cars.com cannot predict the trading prices for its common stock before, on or after the distribution date.

 



 

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What will happen to the listing of TEGNA common stock?

TEGNA common stock will continue to trade on the New York Stock Exchange after the distribution under the symbol “TGNA.”

 

Will the number of shares of TEGNA common stock that I own change as a result of the distribution?

No. The number of shares of TEGNA common stock that you own will not change as a result of the distribution.

 

Will the distribution affect the market price of my shares of TEGNA common stock?

Yes. As a result of the distribution, TEGNA expects the trading price of TEGNA common stock immediately following the distribution to be lower than the “regular-way” trading price of such stock immediately prior to the distribution because the trading price will no longer reflect the value of the digital automotive marketplace business. There can be no assurance that the aggregate market value of the TEGNA common stock and Cars.com common stock following the distribution will be higher or lower than the market value of TEGNA common stock if the separation and distribution did not occur. This means, for example, that the combined trading prices of three shares of TEGNA common stock and one share of Cars.com common stock after the distribution may be equal to, greater than or less than the trading price of three shares of TEGNA common stock before the distribution.

 

What are the material U.S. federal income tax consequences of the contribution and the distribution?

It is a condition to the completion of the distribution that TEGNA receive an opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code will be satisfied. Accordingly, it is expected that no gain or loss will be recognized by TEGNA in connection with the contribution of TEGNA’s digital automotive marketplace business (and other assets) to Cars.com and the distribution and, except with respect to cash received in lieu of a fractional share of Cars.com common stock, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of Cars.com common stock in the distribution for U.S. federal income tax purposes. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of Cars.com common stock. For more information regarding the potential U.S. federal income tax consequences to Cars.com and to you of the contribution and the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”

 

How will I determine my tax basis in the Cars.com shares I receive in the distribution?

For U.S. federal income tax purposes, your aggregate basis in the common stock that you hold in TEGNA and the new Cars.com common stock received in the distribution (including any fractional share interest in Cars.com common stock for which you receive cash) will equal the aggregate basis in TEGNA common stock held by you immediately before the distribution, allocated between the shares of TEGNA common stock and Cars.com common stock (including any fractional share interest in Cars.com common stock for which you receive cash) you receive in the distribution in proportion to the relative fair market value of each on the distribution date. You should

 



 

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consult your tax advisor about the particular consequences of the distribution to you, including the application of the tax basis allocation rules and the application of state, local and non-U.S. tax laws.

 

What will Cars.com’s relationship be with TEGNA following the separation?

After the distribution, TEGNA and Cars.com will be separate companies with separate management teams and separate boards of directors. Prior to the distribution, Cars.com will enter into a separation and distribution agreement with TEGNA to effect the separation and distribution and to provide a framework for Cars.com’s relationship with TEGNA after the separation. Cars.com and TEGNA will also enter into certain other agreements, such as a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the allocation between Cars.com and TEGNA of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of TEGNA and its subsidiaries attributable to periods prior to, at and after Cars.com’s separation from TEGNA, and will govern the relationship between Cars.com and TEGNA subsequent to the completion of the separation. For additional information regarding the separation and distribution agreement, other transaction agreements and certain other commercial agreements between TEGNA and Cars.com, see the sections entitled “Risk Factors—Risks Related to the Separation and Distribution” and “Relationship with TEGNA Following the Separation and Distribution.”

 

Who will manage Cars.com after the separation?

Cars.com will benefit from a management team with an extensive background in the digital automotive marketplace business. For more information regarding Cars.com’s management, see the section entitled “Management.”

 

Are there risks associated with owning Cars.com common stock?

Yes. Ownership of Cars.com common stock is subject to both general and specific risks relating to Cars.com’s business, the industry in which it operates, its ongoing contractual relationships with TEGNA and its status as a separate, publicly traded company. Ownership of Cars.com common stock is also subject to risks relating to the separation and distribution. These risks are described in the section entitled “Risk Factors.” You are encouraged to read that section carefully.

 

Does Cars.com plan to pay dividends?

Cars.com has no current plans to pay dividends on its common stock. However, the declaration and payment of any dividends in the future by Cars.com will be subject to the sole discretion of its board of directors and will depend upon many factors. See the section entitled “Dividend Policy.”

 

Will Cars.com incur any indebtedness prior to, or at the time of, the distribution?

Cars.com intends to enter into certain financing arrangements prior to, or concurrently with, the separation and distribution. A description of such financing arrangements will be included in an amendment to this

 



 

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information statement. See the sections entitled “Description of Material Indebtedness” and “Risk Factors—Risks Related to the Separation and Distribution.”

 

Who will be the distribution agent, transfer agent and registrar for Cars.com common stock?

The distribution agent, transfer agent and registrar for Cars.com common stock will be Wells Fargo Shareowner Services. For questions relating to the transfer or mechanics of the stock distribution, you should contact Wells Fargo Shareowner Services toll free at (800) 250-2944 or non-toll free at (651) 450-4064.

 

Where can I find more information about TEGNA and Cars.com?

Before the distribution, if you have any questions relating to TEGNA’s business performance, you should contact:

 

  TEGNA Inc.

7950 Jones Branch Drive

McLean, Virginia 22107

Attention:     Investor Relations

 

  After the distribution, Cars.com stockholders who have any questions relating to Cars.com’s business performance should contact Cars.com at:

 

  Cars.com Inc.

 

  175 West Jackson Boulevard

 

  Chicago, IL 60604

 

  Attention:     Investor Relations

 



 

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INFORMATION STATEMENT SUMMARY

Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about Cars.com assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires and except in the historical financial statements included herein, references in this information statement to “Cars.com” or “SpinCo” refer to Cars.com Inc., a Delaware corporation, and its consolidated subsidiaries after the distribution. References to “Cars.com” in the historical financial statements included herein refer to Cars.com, LLC, a Delaware limited liability company, and the principal entity through which TEGNA’s digital automotive marketplace business has historically been operated. References in this information statement to “TEGNA” or “Parent” refer to TEGNA Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the distribution, Cars.com and its consolidated subsidiaries), unless the context otherwise requires. References in this information statement to Cars.com’s historical business and operations refer to the business and operations of TEGNA’s digital automotive marketplace business that will be transferred to SpinCo in connection with the separation and distribution. References in this information statement to the “separation” refer to the separation of the digital automotive marketplace business from TEGNA’s other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Cars.com, to hold the assets and liabilities associated with the digital automotive marketplace business after the distribution. References in this information statement to the “distribution” refer to the distribution of all shares of Cars.com common stock to TEGNA’s stockholders on a pro rata basis.

Cars.com Inc.

Overview

With an average of more than 35 million visits each month during 2016, approximately 52% of which are mobile, and according to comScore, an average of approximately 11.8 million unique monthly visitors over the same time period, Cars.com is a leading online research destination for car shoppers. March 2016 research by DATALOGIX that was commissioned by Cars.com shows that approximately one-third of all vehicles sold in the U.S. in 2015 were researched on Cars.com. Today, nearly all consumers visit a third-party site such as Cars.com to gather vehicle and dealership information and to build consumer confidence prior to buying a vehicle. Cars.com offers credible and easy-to-understand information from consumers and experts that help car buyers to price and find new and used vehicles and car owners to find qualified service and repair providers. Cars.com aims to help consumers by providing objective, independent and trusted advice at every stage of the car ownership journey. Additionally, Cars.com operates Auto.com, DealerRater.com, NewCars.com and PickupTrucks.com, specialized websites directed towards different consumer segments. Leveraging its market-leading position and growing audience, Cars.com also informs digital marketing strategies through consumer insights and innovative products, helping automotive dealers and manufacturers to reach in-market car shoppers more effectively. For the years ended December 31, 2016, 2015, and supplemental pro forma 2014, Cars.com had revenues of $633 million, $597 million, and $515 million respectively. Throughout this Information Statement, 2014 financial information is presented on a supplemental pro forma basis to account for TEGNA’s October 2014 acquisition of the 73% of Classified Ventures, LLC that it did not already own, as more fully described in section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation.”

Cars.com generates revenues through the sale of online subscription advertising products targeting car dealerships by its own direct sales force as well as its affiliate sales channels. It hosts approximately 4.7 million vehicle listings at any given time and serves approximately 20,000 franchise and independent car dealers throughout all 50 states. Cars.com also generates revenue through the sale of display advertising to national advertisers.

Reflecting trends in consumer behavior, the digital automotive advertising market has grown rapidly, with U.S. automotive industry digital advertising spending reaching approximately $7.4 billion in 2015 after having

 



 

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increased at a compound annual growth rate of 20.6% from 2010 to 2015 according to a June 8, 2016 eMarketer report and analysis based on eMarketer data. As car shoppers increasingly turn to digital resources to research vehicles before making a purchase, Cars.com is well-positioned to take advantage of these shifting consumer and dealer trends due to its industry-leading automotive advertising solutions and user-friendly and innovative vehicle search platform.

The Cars.com business was founded in 1998 as a division of Classified Ventures, LLC, a joint venture formed by eight leading media companies, including TEGNA, to provide nationally branded online services for the classified advertising marketplace. On October 1, 2014, TEGNA purchased the 73% of equity interests in Classified Ventures, LLC that it did not previously own for $1.8 billion in cash. Since it was launched as one of the first digital automotive marketplaces in 1998, Cars.com has continuously pioneered new products to build upon its long-established brand strength and capture a growing share of a growing market. Its most recent initiatives to better serve and expand upon its existing buyer and seller customer bases include the introduction of a suite of new services and products. In March 2015, Cars.com moved into the market for vehicle service research with the launch of its partnership with RepairPal Inc., an innovative solution that provides information about reputable certified repair shops and allows consumers to receive estimates on potential vehicle repairs. In March 2016, Cars.com launched its Sell and Trade product, which captures the attention of car shoppers who want to transact quickly and easily by promoting dealerships interested in buying used cars for cash. The product also helps dealerships build their car-buying programs, as it provides car owners with multiple avenues to sell their vehicles, including through Cars.com’s Quick Offer online tool and mobile application. Further, in May 2015, Cars.com launched Event Positions—an ad position that promotes dealership events to an in-market audience during a specific time frame—to provide even more targeted and event-specific advertising opportunities to its seller customers. Cars.com is also innovating through its mobile platforms. The recently launched Lot Insights reporting tool is the first-of-its-kind in the industry. Lot Insights uses geo-fencing to measure the influence that Cars.com has on mobile shoppers by tracking those consumers on or near a dealer’s lot and delivering valuable insights to dealer advertisers. Most recently, Cars.com has deepened its editorial presence through TEGNA’s acquisition of DMR Holdings, Inc. (“DealerRater”) the industry’s largest automotive consumer review website with nearly 3.1 million consumer reviews of local dealers, which will be contributed to Cars.com. The acquisition provides Cars.com with new solutions to help dealers and original equipment manufacturers (“OEMs”) manage, measure and harness the power of social media.

As evidenced by these recent successful product launches, a combination of dealer and consumer information and feedback has positioned Cars.com to successfully develop new, complementary products and services .   In the coming years, Cars.com intends to launch additional products that will continue to enhance the car buying experience, drive traffic to the Cars.com sites and mobile applications and better serve Cars.com’s buyer and seller customers.

Products and Services

Cars.com offers a suite of unique products and services targeting the automotive needs of its buyer and seller customers. Cars.com’s flagship service is its digital automotive marketplace search engine that empowers car buyers to make informed purchasing decisions and helps sellers to engage with a substantial portion of their target customer base. This online automotive marketplace service connects buyers and sellers across five distinct websites: Cars.com, Auto.com, DealerRater.com, NewCars.com and PickupTrucks.com. Cars.com’s automotive marketplace products also include credible user and expert automotive and dealer reviews, which further empower consumer decision-making.

Cars.com primarily generates revenues through the sale of online subscription advertising products to car dealerships by Cars.com’s own direct sales force (retail revenue), as well as through affiliate sales channels (wholesale revenue). Additionally, Cars.com generates revenue through the sale of display advertising to national advertisers. Finally, Cars.com helps consumers sell vehicles via a private party channel.

 



 

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Consumer Products and Services

Car buyers and car owners interface with Cars.com primarily through the Cars.com sites and mobile applications. The four key elements of Cars.com’s consumer experience—shop, sell, service and research and expert advice—were designed to empower consumers to make convenient, informed decisions at every stage of the car ownership life cycle and therefore continually drive traffic to the Cars.com sites and mobile applications for the benefit of Cars.com’s advertising partners.

Shop .     Through the Cars.com sites and mobile applications, consumers can access Cars.com’s automotive marketplace products which enable consumers to search for new or used vehicles on automotive dealership lots across the country by make, model, price and location. The Cars.com sites and mobile applications also connect consumers with dealers through email, text, telephone, chat, direct traffic referral, or a viewable map of the dealer’s location, providing convenience to consumers and concrete results to Cars.com dealership advertising partners.

Sell .    To supplement the features of its flagship automotive marketplace products, in March 2016, Cars.com launched Sell & Trade, a solution that allows consumers to quickly and easily sell a vehicle through its new Quick Offer online tool and mobile application. Car sellers upload vehicle information and receive real-time online cash offers from local dealers with no obligation to buy a replacement vehicle. Further, car sellers can list personal vehicles on the Cars.com sites, enabling consumer-to-consumer sales.

Service.     Cars.com partners with RepairPal, an innovative solution that connects consumers with reputable certified repair facilities, enabling consumers to obtain and compare vehicle repair estimates. RepairPal is both an integrated part of the Cars.com sites and a stand-alone, one-stop resource catering to car owners’ service and maintenance needs. RepairPal certifies automobile repair facilities nationwide based on training, reputation, warranty and fair pricing. In addition to connecting owners and repair service providers, RepairPal researches service data to determine the range of average repair prices based on labor rates and parts prices across a wide breadth of makes, models and model years, providing consumers with confidence in their selection of repair facilities and reducing consumers’ fear of overpaying. By enabling consumers to use self-education to better evaluate the service estimates that they receive, this solution aligns with Cars.com’s strategy of building brand value through empowering consumer decision-making. RepairPal also provides relevant content to answer service related questions and aggregates automotive safety and recall notices in one convenient location.

Research and Expert Advice .     The Cars.com editorial team tests, reviews and photographs more than 200 different car makes and models every year and creates independent and unbiased coverage of the automotive landscape focusing on consumer advice, trends and analysis. Cars.com provides expert advice on a wide array of car buying topics such as incentive information, financing options and fuel economy, thereby allowing consumers to choose their future vehicles based on the automobile characteristics that matter most to them.

Dealer Reviews .     In August 2016, TEGNA acquired DealerRater, the industry’s largest automotive consumer review website, which will be contributed to Cars.com. With nearly 3.1 million consumer reviews of local dealers, DealerRater harnesses the power of social media to help consumers decide where to buy a car. Beginning in 2017, Cars.com expects to deliver DealerRater’s product suite to local dealers to help them connect in-market shoppers with the right person in their dealership, helping dealers to better engage, monitor and promote their online presence to bring qualified consumers into their showrooms.

 



 

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Advertiser Products and Services

Cars.com’s network of approximately 20,000 dealers lists approximately 4.7 million vehicles across the Cars.com sites and mobile applications that can be viewed by consumers at any given time whether they are at home or on the go. Cars.com’s brand and products afford dealerships access to more than 35 million monthly visits from consumers looking to buy, sell or service a vehicle. Due to the integrated consumer product and service offerings on the Cars.com sites and mobile applications that target not only car buyers, but also car sellers and car owners, dealers can advertise both their inventory of new and used cars and their service departments, while gaining access to an audience of motivated consumers looking for a convenient way to sell a car.

Online advertising packages .      Cars.com offers dealers a monthly online subscription enabling dealers to showcase their new and used car inventory to motivated car buyers on the platforms that are responsible for helping consumers find approximately one-third of the automobiles purchased in the U.S. in 2015, according to March 2016 research by DATALOGIX that was commissioned by Cars.com. Vehicles for sale are highlighted with multiple photos, videos and vehicle specifications, and consumers are, at all times, but a few clicks away from contacting the listing dealer and moving further into the car buying process. To enhance their vehicle listings, dealers can purchase premium advertising services that can be uniquely tailored to an individual dealer’s current needs. For example, Cars.com’s Event Positions ad position promotes dealership events to in-market audiences during a specific time frame. Cars.com’s recently developed Lot Insights tool uses innovative geo-fencing to measure the influence that Cars.com has in connecting local in-market car shoppers to local dealers by tracking Cars.com mobile users on or near a dealer’s lot. These innovative products and tools have positioned Cars.com to take advantage of the growing online automotive advertising spend despite increasing competition in the digital automotive marketplace industry.

Sell & Trade .    The Sell & Trade service of Cars.com’s innovative new Quick Offer online tool and mobile application leverages consumers’ desire for a convenient, simple car sales process to benefit its listing dealers by permitting these dealers to access a new audience of motivated consumers looking to sell a car and by giving dealers increasing control over the bidding process. Sell & Trade provides dealers with a new solution to building their used car inventories, which is critical to dealer profitability.

RepairPal Certified .    RepairPal Certified works by connecting consumers with sellers of automobile repair services. In addition, Cars.com’s listing dealers can also advertise their service repair centers through Cars.com’s partnership with RepairPal. By leveraging consumer’s trust in the Cars.com brand, the RepairPal Certified product offers advertising dealers effective content delivery regarding their automotive service centers in an effort to facilitate growth of alternate, service-based revenue streams.

Pay-per-Lead .     Cars.com operates NewLeadsPlus, a separate pay-per-lead product line that acquires consumer leads through Internet search engines and automotive destination websites, including its own, and sells these leads to members of its dealer network. These consumer leads feature the contact information for ready-to-buy new car shoppers and are sold primarily to dealers on a pay-per-lead basis. Consumer leads not purchased by dealers are sold to OEMs or lead reseller companies.

Manufacturers .     With approximately 80% of the audience across the Cars.com sites and mobile applications currently in the market for a new or used vehicle, OEMs that operate on a national basis are offered valuable access to a targeted audience of in-market car shoppers when they purchase display advertising. Cars.com’s wide consumer reach allows it to successfully compete for and realize a market-leading share of the digital marketing spend of these OEMs. Beyond display advertising, Cars.com provides OEMs with consumer insights, data driven solutions and certified pre-owned marketing programs, which Cars.com believes are critical components of OEM digital marketing strategies.

 



 

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Strategies

Cars.com’s strategy is to be a leader in share of audience and remain the trusted platform of choice for digital automotive media spend. Cars.com works to empower consumers and enable retailers by offering an innovative mix of complementary products and services that create seamless and enjoyable car buying and ownership experiences for consumers and efficient marketing solutions for advertisers. Cars.com aims to build brand recognition and drive car shopper and car owner visits to the Cars.com sites by empowering consumer decision-making and engaging consumers at every stage of the car ownership life cycle. Cars.com’s goal is to combine this growing consumer traffic with Cars.com’s technological and marketing capabilities to increase demand for its advertising solutions. Key elements of Cars.com’s strategy to achieve these objectives are as follows:

Leverage competitive strengths to provide targeted, integrated solutions to advertisers .     Dealers and advertisers are seeking to reach their audience in an increasingly competitive market landscape and are struggling to influence attitudes and behavior at each step of the car purchasing process. These dealers and advertisers operate on a hyper-local level that Cars.com believes has not been a priority for other technology companies, and Cars.com believes that this environment presents an attractive opportunity to use its key capabilities to provide critical solutions to the most pressing challenges these dealers and advertisers face. Cars.com intends to leverage its many competitive advantages—including its innovative digital advertising services products and brand recognition as a trusted, unbiased third-party research platform—to create tailored media and marketing plans that efficiently target in-market consumers, drive dealership car buyer traffic and reinforce advertisers’ message and digital presence. Cars.com is a highly attractive advertising and marketing resource due to its offering of thoughtfully-crafted digital strategies that meet the unique needs of automobile industry marketers and advertisers. These unique product offerings allow seller customers and advertising partners of varying size and geographic reach to optimize the benefits of their marketing spend, which enables Cars.com to access a large universe of potential automotive advertising and marketing partners. Cars.com’s localized advertising capabilities, longstanding customer relationships, highly talented on-the-ground team of more than 600 digital marketing consultants and comprehensive promotional capabilities are all competitive advantages that Cars.com expects to use to sell integrated advertising and marketing solutions that meet the changing needs of its seller customers. Cars.com believes that creating new digital solutions for advertisers across the automobile industry on both a local and national basis will continue to put Cars.com in an excellent position to take advantage of the many opportunities resulting from the rapid pace of technological change in the industry.

Advertising Effectiveness and Delivering Value to Dealers .    Cars.com believes that the digital automotive marketplace will continue to evolve as consumer shopping and buying behaviors change. Currently, many dealer-advertisers measure Cars.com’s value through “traditional leads,” connections from consumers to dealers that come in the form of phone calls and emails (and, more recently, text messages). Cars.com believes, and its research supports, that other interactions—particularly by consumers on mobile devices—also deliver willing buyers to dealer lots and influence purchases. These mobile interactions, such as vehicle and dealer research and discovery, deliver substantial additional value to dealers and advertisers but are not captured in “traditional lead” measurement. Cars.com’s innovation in the development and launch of Lot Insights and geo-fencing technology has demonstrated that consumers interact with dealers and make vehicle purchases based on their use of the Cars.com product and service suite. Cars.com believes that over time, dealers and advertisers will recognize the changes in consumer behavior and will also evolve in the way that they measure the value that Cars.com delivers. As the measurement of the effectiveness of automotive digital marketing spend evolves, and as Cars.com continues to introduce new products that can incrementally influence buyers of vehicles to proceed directly to dealers’ lots without ever generating a “traditional lead,” Cars.com believes that dealer-advertisers will continue to increase their digital marketing spend.

 



 

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Expand into new markets and continue to offer new complementary products and services .     Cars.com believes that there are significant opportunities to expand into adjacent markets in the automotive industry and potentially enter into new industry verticals. As indicated by Cars.com’s successful launches of Sell & Trade and Event Positions, its partnership with RepairPal Inc. and TEGNA’s recent acquisition of DealerRater, which will be contributed to Cars.com, Cars.com believes its expertise in dealer operations and the retail automotive industry, along with its ability to manage data and develop technological solutions, can be leveraged to provide solutions to the challenges that consumers, retailers, manufacturers and advertisers face in other aspects of the automotive and ancillary industries. Cars.com’s expansion strategy includes exploring acquisitions, partnerships, strategic investments and joint ventures, as well as a commitment to innovative in-house product development. Cars.com believes that its scale and current leadership position enhance its ability to evaluate such opportunities on an ongoing basis.

Increase mobile solutions to further drive car buyer traffic .     Cars.com believes that on-the-go mobile device car buying research and comparison applications have been playing and will continue to play an increasingly important role in the digital automotive marketplace industry. Cars.com has seized on the opportunities presented by this trend. Approximately 52% of total Cars.com shoppers visited the Cars.com sites from mobile devices in 2016. Cars.com’s user-friendly mobile applications provide in-market car shoppers with real-time, credible research and price comparison tools while they are on the lot and actively engaged in the car buying process. Cars.com’s ability to reach this highly targeted audience benefits its seller customers and advertising partners by providing targeted, localized access to highly motivated potential customers. Currently, Cars.com provides its mobile applications to dealers as part of its core digital advertising package .   Cars.com does not currently charge for these applications separately but rather provides them as a way to enhance its core advertising package.

Advertiser growth through market penetration and premium service offerings .    Despite a trend toward consolidation among car dealers, Cars.com believes it has opportunities to expand the number of dealers it partners with and to grow their advertising spend with additional products that strengthen connections between consumers and dealers and further capture OEMs’ advertising spend as they shift advertising dollars online. Cars.com aims to increase and enhance connections between buyers and sellers by continuing to improve its user experience and providing consumers with additional information about specific dealers through DealerRater. Further, Cars.com believes that dealer consolidation will result in major dealer chains having more resources to focus on measuring marketing effectiveness. Cars.com intends to take advantage of this trend by continuing to introduce new products, such as Lot Insights, that improve dealers’ ability to measure the impact of their advertising spend on the Cars.com sites. By increasing connections that improve the return on advertising spend and demonstrating this value to advertisers, Cars.com believes it can increase the number of dealers in its network and capture additional revenue from its existing dealers through product enhancements and premium service offerings.

Supplement organic growth with selective acquisitions .      Cars.com believes it will be well-positioned to pursue value-enhancing investments and acquisitions in the increasingly competitive digital automotive marketplace industry. Cars.com will be both opportunistic and disciplined in its acquisition strategy. Cars.com is a strong operator, and it expects that its strengths in market reach and efficient advertising solutions, coupled with its proven track record for developing innovative and complementary products and services, will help drive innovative approaches to revenue generation as well as efficiency gains in acquired businesses.

Strengths

Cars.com believes it enjoys the benefits of a number of unique talents and assets, many of which have helped it to develop into an established industry leader. The following strengths support its business strategies:

Broad footprint in consumer markets .     Cars.com is one of the largest and best-known online automotive classified sales and research services, connecting car buyers and car owners with car sellers and repair service

 



 

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providers across multiple digital platforms in all 50 states. Cars.com hosts approximately 4.7 million vehicle listings at any given time and serves approximately 20,000 car dealers in all 50 states. Cars.com’s vast footprint also increases the available reach for advertisers and makes Cars.com’s services very attractive to manufacturers and dealership networks seeking digital-platforms for broad, impactful campaigns, as well as for local dealers and repair service providers seeking smaller-scale, targeted solutions.

Recognizable national brand .      With an average of more than 35 million visits each month during 2016, approximately 52% of which are mobile, an average of approximately 11.8 million unique monthly visitors over the same time period according to comScore, and a strong reputation for providing credible, unbiased third-party reviews and service information, Cars.com has achieved a leading market position in a rapidly growing industry. Cars.com’s recognizable brand and the quality and reliability of its user interface have spurred consistent long-term growth in the number of car buyers, car sellers and advertisers using its platform. With approximately 4.7 million vehicle listings at any given time, the network effects of this brand-based growth are significant and create a positive feedback loop, as more listings lead to better informed consumers and a higher share of online automotive transactions, which in turn drives additional advertising revenue and enhances brand awareness. According to data provided by Millward Brown in April 2017, as of December 31, 2016 Cars.com had held a brand awareness leadership position in its industry for each of the previous eight consecutive quarters.

Significant organic revenue growth creating operating leverage .     As a longstanding leader in the industry, Cars.com has enjoyed consistent and rapid organic revenue growth as changes in car buyer behavior have led to increased digital advertising spending. Cars.com’s operating expenses have grown at a lower rate than its revenues, as it is able to leverage its operations, sales and marketing and technology over a broader revenue base. This operating leverage has helped drive growth in Adjusted EBITDA margins as revenues have scaled. Cars.com’s Net income margin and Adjusted EBITDA margin in 2016 were 28% and 41%, up from 26% and 40%, respectively in 2015 and 7% and 23%, respectively in supplemental pro forma 2014.

Integrated and innovative digital platform aimed at a growing demographic .      Through the Cars.com sites, Cars.com not only connects car buyers with car sellers in their relevant markets, but also empowers car buyers to make informed purchasing and service decisions by providing understandable, unbiased, credible expert and consumer reviews, as well as expert service advice. Further, Cars.com’s mobile site, which J.D. Power and Associates named number one in overall satisfaction among third-party websites in its 2016 Automotive Mobile Site Study SM , enables it to continue to grow market share among younger car buyers and consumers engaging in on-site research at dealerships. Cars.com’s research shows that consumers aged 18 to 34 (“millennials”) are more likely to use mobile devices than the general car shopper. According to a January 2014 study by Placed, Inc., 65% of millennials use a smartphone to research car buying opportunities prior to visiting a dealership, compared to just 54% of car shoppers 35 and older. Cars.com continues to focus on this younger age demographic, and according to an analysis based on data for December 2016 provided by comScore, 33% of the audience on the Cars.com sites was made up of millennials, which was more than the average of competitive sites. In September 2016, more than 41% of Cars.com’s total mobile shoppers were millennials. Cars.com believes that its innovative platforms meet this demographic’s needs. According to an analysis based on December 2015 and June 2016 data provided by comScore, the Cars.com site averaged more minutes per millennial visitor than most competing sites.

Cars.com has implemented a responsive design approach across all of its platforms. Cars.com’s responsive design is aimed at improving the consumer experience by crafting sites to provide an optimal viewing and interaction experience—such as easy reading and navigation with a minimum of resizing, panning and scrolling—across a wide range of devices, from desktop computers to mobile devices. Cars.com believes that its commitment to innovative digital products and marketing solutions across all digital platforms has solidified it as a leader in third-party automotive sales and service research, positioning it to take advantage of the rapid pace of technological change in an increasingly multi-platform industry.

 



 

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Operational excellence .      Cars.com believes that its efficient operations are a source of competitive strength, and an area of ongoing focus. Cars.com has historically achieved strong operating margins. Its marketing expenditures have produced what Cars.com believes are excellent returns on investment, including category-leading audience awareness and traffic to the Cars.com sites that have consistently scaled over time. Cars.com believes that through a culture that focuses on operational excellence, it is able to leverage the strengths of its employees to deliver robust results while maintaining a low headcount relative to the size of its operations.

Talented and creative management team .      The strategy and content of Cars.com’s digital automotive marketplace is guided by strong leadership at every level of the organization. The Cars.com management team, led by President and Chief Executive Officer Alex Vetter, has instilled a culture of creativity and entrepreneurship that Cars.com believes leads to strong results. Recent successful innovations such as Lot Insights, Sell & Trade, and the partnership with RepairPal Inc. are examples of the creativity and business innovation that drive growth at Cars.com. Management plans to continue crafting new ways to leverage Cars.com’s strong brand recognition and leading market position to yield new and expanded revenue streams.

Experienced sales force and cost effective sales and service infrastructure .     Cars.com’s sales force is responsible for managing its network of dealer and manufacturer advertisers across geographies and for providing onboarding and dealer support. Through its multi-channel approach to sales of subscription advertising products, supplemented by its major accounts sales team and national advertising sales organization, Cars.com has an efficient and synergistic sales infrastructure that enables its sales force to help dealers grow their businesses by regularly providing data-driven insights on marketing and advertising strategies. Cars.com’s ability to understand the needs of, actively listen to, collaborate with, and develop solutions for its customers has been, and continues to be, a crucial element of its success.

Editorial Strength and Credibility .    Cars.com believes that its more than 30-person in-house editorial research staff is a distinct competitive advantage. This team provides over 200 expert reviews on new model releases each year. These award-winning journalists are regularly featured in leading industry publications, trade journals and daily newspapers, as well as on television. Cars.com believes that through videos, vehicle demonstrations and written insights, the staff’s unique editorial voice speaks to the needs of mainstream car shoppers, attracting additional traffic to and enhanced engagement with the Cars.com sites.

Summary of Risk Factors

An investment in Cars.com common stock is subject to a number of risks, including risks relating to Cars.com’s business, the separation and distribution and Cars.com common stock. Set forth below are some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.

Risks Related to Cars.com’s Business

 

  •   Cars.com’s business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

 

  •   Cars.com participates in a highly competitive market, and pressure from existing and new companies may materially and adversely affect its business, results of operations and financial condition.

 

  •   Cars.com relies on third-party service providers for many aspects of its business, including automobile pricing and other data, and any failure to maintain these relationships could harm its business.

 

  •  

Cars.com relies, in part, on Internet search engines and mobile application download stores to drive traffic to Cars.com, Auto.com, DealerRater.com, Newcars.com, PickupTrucks.com and its other

 



 

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websites (collectively, the “Cars.com sites”) and to its mobile applications. If the Cars.com sites and mobile applications fail to appear prominently in these search results, traffic to the Cars.com sites and mobile applications would decline and Cars.com’s business would be materially and adversely affected.

 

  •   The value of Cars.com’s assets or operations may be diminished if its information technology systems fail to perform adequately.

 

  •   If Cars.com’s security measures are compromised, or if its platform is subject to attacks that degrade or deny the ability of consumers to access the Cars.com’s sites, mobile applications or digital marketing services, consumers may curtail, or even stop, their use of Cars.com’s platform.

 

  •   Cars.com’s business depends on a strong Cars.com brand, and any failure to maintain, protect or enhance the Cars.com brand could hurt Cars.com’s ability to retain or expand its base of consumers, dealers and advertisers, and its ability to increase the frequency with which such consumers, dealers and advertisers use Cars.com’s services.

 

  •   Cars.com cannot assure you that it will be able to continue to successfully develop and launch new products or grow its complementary product offerings.

 

  •   Cars.com’s business is dependent on keeping pace with advances in technology. If Cars.com is unable to keep pace with advances in technology, consumers may stop using its services and its revenues will decrease. If Cars.com is required to invest substantial amounts in technology, its financial performance may be materially and adversely affected.

 

  •   If growth in the online and mobile automotive advertising market stagnates or declines, Cars.com’s business, results of operations and financial condition could be materially and adversely affected.

 

  •   If Cars.com’s mobile applications do not continue to meet consumer demands or Cars.com is unable to successfully monetize its mobile application advertising solutions, its business, results of operations, financial condition and growth prospects may be materially and adversely affected.

 

  •   Cars.com’s ability to generate wholesale advertising revenues depends, at least in part, on the performance of third parties who sell Cars.com’s solutions pursuant to affiliation agreements.

 

  •   Uncertainty exists in the application of various laws and regulations to Cars.com’s business. New laws or regulations applicable to Cars.com’s business, or the expansion or interpretation of existing laws and regulations to apply to Cars.com’s business, could subject it to licensing requirements, claims, judgments and remedies, including monetary liabilities and limitations on its business practices, and could increase administrative costs or materially and adversely affect its financial performance.

 

  •   Misappropriation or infringement of Cars.com’s intellectual property and proprietary rights, enforcement actions to protect its intellectual property and claims from third parties relating to intellectual property could materially and adversely affect Cars.com’s business, results of operations and financial performance.

Risks Related to the Separation and Distribution

 

  •   Cars.com has no history of operating as a separate, publicly traded company, and Cars.com’s historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results.

 

  •   Although TEGNA will receive an opinion from outside tax counsel to the effect that the requirement for tax-free treatment under Section 355 of the Code will be satisfied, such opinion is not binding on the IRS, and if the IRS determines the distribution to be taxable for U.S. federal income tax purposes, TEGNA and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities, and Cars.com could incur significant tax liabilities.

 



 

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  •   Cars.com may not achieve some or all of the expected benefits of the separation, and the separation may materially and adversely affect Cars.com’s business.

 

  •   In connection with the separation, Cars.com will incur debt obligations that could adversely affect Cars.com’s business, profitability and ability to meet its obligations.

Risks Related to Cars.com Common Stock

 

  •   Cars.com cannot be certain that an active trading market for its common stock will develop or be sustained after the distribution, and following the distribution, Cars.com’s stock price may fluctuate significantly.

 

  •   There may be substantial changes in Cars.com’s stockholder base.

 

  •   Cars.com does not expect to pay any cash dividends for the foreseeable future.

 

  •   Cars.com is an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, its common stock may be less attractive to investors.

The Separation and Distribution

On September 7, 2016, TEGNA announced that it intends to separate its digital automotive marketplace business from its media and other digital businesses. The separation will occur by means of the pro rata distribution to TEGNA stockholders of all of the shares of common stock of Cars.com, which was formed to hold TEGNA’s digital automotive marketplace business.

On [    ], the TEGNA board of directors approved the distribution of all of Cars.com’s issued and outstanding shares of common stock on the basis of one share of Cars.com common stock for every three shares of TEGNA common stock held as of the close of business on [    ], the record date for the distribution, subject to the satisfaction or waiver of the conditions to the distribution as described in this information statement. For a more detailed description of these conditions, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”

Cars.com’s Post-Separation Relationship with TEGNA

After the distribution, TEGNA and Cars.com will be separate companies with separate management teams and separate boards of directors. Prior to the distribution, Cars.com will enter into a separation and distribution agreement with TEGNA, which is referred to in this information statement as the “separation agreement” or the “separation and distribution agreement.” In connection with the separation, Cars.com will also enter into various other agreements to effect the separation and provide a framework for its relationship with TEGNA after the separation, such as a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the allocation between Cars.com and TEGNA of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of TEGNA and its subsidiaries attributable to periods prior to, at and after Cars.com’s separation from TEGNA and will govern the relationship between Cars.com and TEGNA subsequent to the completion of the separation.

For additional information regarding the separation agreement and other transaction agreements and the transactions contemplated thereby, see the sections entitled “Risk Factors—Risks Related to the Separation and Distribution,” “The Separation and Distribution” and “Relationship with TEGNA Following the Separation and Distribution.”

 



 

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Reasons for the Separation

The TEGNA board of directors believes that separating the digital automotive marketplace business from the remaining businesses of TEGNA is in the best interests of TEGNA and its stockholders for a number of reasons, including:

 

  •   The separation will allow investors to separately value TEGNA and Cars.com based on their unique investment identities, including the merits, strategy, performance and future prospects of their respective businesses. The separation will also provide investors with two distinct and targeted investment opportunities.

 

  •   The separation will allow each company to more effectively pursue and implement its own distinct operating priorities and strategies and will improve management “fit and focus” at both companies, enabling the management of both companies to pursue unique opportunities for long-term growth and profitability.

 

  •   Following the separation, the equity of each company will be able to be used as a focused “acquisition currency,” and as such, the separation will provide each company with greater opportunities to pursue value-enhancing acquisitions in industries with active M&A markets. Independent equity structures will afford each company direct access to capital markets, facilitating each company’s ability to pursue its specific growth objectives. Each company will also have the flexibility to develop a growth strategy that capitalizes on its distinct strengths and consequently each company will be well-positioned to capitalize on the available opportunity set in its specific market.

 

  •   The separation will permit each company to concentrate its financial resources solely on its own operations, providing each company with greater flexibility to invest capital in its business at a time and in a manner appropriate for its distinct strategy and business needs. This will facilitate a more efficient allocation of capital based on each company’s profitability, cash flow and growth opportunities and allow each company to pursue an optimal mix of return of capital to stockholders, reinvestment in leading-edge technology and value-enhancing investments and M&A opportunities in related digital businesses.

 

  •   The separation will facilitate incentive compensation arrangements with respect to equity of each of Cars.com and TEGNA, which will permit Cars.com and TEGNA employees to more narrowly focus on each respective business and further align employee incentives with those of the shareholders of each respective company.

Neither Cars.com nor TEGNA can assure you that, following the separation, any of the benefits described above or any other benefits will be realized to the extent anticipated, or at all.

The TEGNA board of directors also considered a number of potentially negative factors in evaluating the separation, including:

 

  •   The separation may result in increased costs related to operating as a public company, such as compensating an independent board of directors, compliance with regulatory and stock exchange requirements, increased auditing and insurance fees and development of internal infrastructure and support functions, which costs were preliminarily estimated to be approximately $10 million to $15 million on an annual basis. The separation also will result in one-time separation costs, such as costs of legal counsel, financial advisors, debt issuance costs, the audit of Cars.com’s historical combined consolidated financial statements and accounting and valuation advisory work related to the separation, which costs were preliminarily estimated to be approximately $35 million to $40 million.

 

  •  

Many investors holding TEGNA common stock may hold such stock because of a decision to invest in a company with TEGNA’s profile. Following the distribution, the shares of Cars.com common stock

 



 

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held by those investors will represent an investment in a digital automotive marketplace company with a different profile from TEGNA. This profile may not align with such investors’ investment strategies and may cause such holders to sell their shares. As a result, Cars.com’s stock price may decline or experience volatility as Cars.com’s stockholder base changes.

 

  •   Prior to the completion of the separation, it is expected that the separation will require significant time and effort from TEGNA’s and Cars.com’s respective management teams and consequently may result in the diversion of management attention away from operation of their respective businesses and potentially negative effects on TEGNA’s and Cars.com’s existing business relationships.

 

  •   The tax matters agreement that TEGNA and Cars.com will enter into prior to the distribution will include restrictions that may limit Cars.com’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business. Under the tax matters agreement, for the two-year period following the distribution, Cars.com will be prohibited, except in certain circumstances, from: entering into any transaction resulting in the acquisition of all or a portion of its stock or assets, whether by merger or otherwise; merging, consolidating or liquidating; issuing equity securities beyond certain thresholds; repurchasing its capital stock beyond certain thresholds; and ceasing to actively conduct its business.

 

  •   Cars.com may be unable to achieve the full strategic and financial benefits expected to result from the separation as described above in this section for a variety of reasons, including, among others: (i) following the separation, Cars.com may be more susceptible to market fluctuations and other adverse events than if it were still a part of TEGNA; (ii) following the separation, Cars.com’s business will be less diversified than TEGNA’s business prior to the separation; and (iii) the other actions required to separate TEGNA’s and Cars.com’s respective businesses could disrupt Cars.com’s operations.

The TEGNA board of directors concluded that the potential benefits of the separation outweighed these negative factors. For more information, see the section entitled “Risk Factors.”

In view of the wide variety of factors considered in connection with its evaluation of the separation, and the complexity of these matters, the TEGNA board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the separation. Rather, the TEGNA board of directors viewed its decisions as being based on the totality of the factors it considered. In addition, individual members of the TEGNA board of directors may have given differing weights to different factors. The TEGNA board of directors conducted an overall review of the factors described above.

For additional information, see the section entitled “The Separation and Distribution—Reasons for the Separation” included elsewhere in this information statement.

Emerging Growth Company Status

Cars.com is an “emerging growth company,” as defined in the JOBS Act. As such, it is eligible to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies, including, but not limited to, scaled disclosure provisions with respect to financial information and executive compensation, compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the requirements to hold a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. Cars.com may take advantage of these exemptions until it is no longer an emerging growth company. Cars.com cannot predict if investors will find its common stock less attractive because it intends to rely on some or all of these exemptions. If some investors find Cars.com common stock less attractive as a result, there may be a less active trading market for Cars.com common stock and its stock price may become more volatile.

 



 

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In addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Cars.com has elected not to take advantage of the benefits of this extended transition period and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. This election is irrevocable.

Cars.com could remain an emerging growth company until the earliest of (a) the last day of the first fiscal year in which its annual gross revenues exceed $1 billion, (b) the last day of the fiscal year following the fifth anniversary of the date of the first sale of its common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), (c) the date that Cars.com becomes a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of its common stock that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter, or (d) the date on which Cars.com has issued more than $1 billion in non-convertible debt during the preceding three-year period.

Corporate Information

SpinCo was incorporated in Delaware on August 26, 2016 for the purpose of effecting the separation of TEGNA’s digital automotive marketplace business from its remaining businesses. Prior to the distribution, TEGNA will contribute its digital automotive marketplace business, which primarily comprises Cars.com, LLC and DMR Holdings, Inc., to SpinCo. Until this contribution occurs, SpinCo will not carry on any substantial business or conduct any operations other than those necessary to effect the contribution of TEGNA’s digital automotive marketplace business and the eventual separation of SpinCo from TEGNA by means of the pro rata distribution of all of SpinCo’s outstanding common stock to holders of TEGNA common stock. At the time of the distribution, SpinCo will hold TEGNA’s digital automotive marketplace business .

The address of SpinCo’s principal executive offices is 175 West Jackson Boulevard, Chicago, Illinois 60604. SpinCo’s telephone number after the distribution will be (312) 601-5000. SpinCo maintains an Internet site at www.cars.com. SpinCo’s corporate website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making any investment decision.

Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to stockholders of TEGNA who will receive shares of Cars.com common stock in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Cars.com’s securities. The information contained in this information statement is believed by Cars.com to be accurate as of the date set forth on the cover of this information statement. Changes may occur after that date, and neither TEGNA nor Cars.com will update the information except in the normal course of their respective disclosure obligations and practices, or as required by applicable law.

 



 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary financial data reflects the operations of Cars.com. Cars.com derived the summary income statement data for each of the years ended December 31, 2016, December 31, 2015 and December 31, 2014, as set forth below, from Cars.com, LLC’s audited Annual Financial Statements, which are included in the “Index to Financial Statements” section of this information statement and from Cars.com’s unaudited condensed pro forma financial statements included in the “Unaudited Pro Forma Financial Statements” section of this information statement. Cars.com’s underlying financial data was derived from the financial records of TEGNA as of December 31, 2016 and December 31, 2015 and for the years ended December 31, 2016 and December 31, 2015, and for the period October 1, 2014 to December 31, 2014. Financial data for the period January 1, 2014 to October 1, 2014 were derived from the historical accounts of Cars.com under the previous ownership of Classified Ventures, LLC. As a result, the historical results may not necessarily reflect Cars.com’s results of operations, financial position and cash flows for future periods or what they would have been had Cars.com been a separate, stand-alone company during the periods presented. To ensure a full understanding of this summary financial data, the information presented below should be reviewed in combination with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes thereto included elsewhere in this information statement.

The summary unaudited pro forma financial data presented has been prepared to reflect the separation. The unaudited pro forma condensed income statement data presented reflects the financial results as if the separation occurred on January 1, 2016, which was the first day of fiscal 2016. The unaudited pro forma balance sheet data reflects the financial position as if the separation occurred on December 31, 2016. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information.

The unaudited pro forma condensed financial statements are not necessarily indicative of Cars.com’s results of operations or financial condition had the distribution and its anticipated post-separation capital structure been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have resulted had Cars.com been operating as an independent, publicly traded company during such periods. In addition, they are not necessarily indicative of its future results of operations, financial position or cash flows.

 



 

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This summary historical and pro forma financial data should be reviewed in combination with the sections entitled “Unaudited Pro Forma Financial Statements,” “Capitalization,” “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes included in this information statement.

 

     For the Year Ended December 31,                        

(In thousands of dollars, except

for per share amounts)

   2016
Pro Forma
(unaudited) 		     2016
Successor 		     2015
Successor 		     For the period
Oct. 1,
2014 to
Dec. 31, 2014
Successor 		             For the period
Jan. 1, 2014 to
Oct. 1,
2014
Predecessor 		 
Selected Statement of Income Information                    

Revenues

                   

Retail

   $     462,776      $     462,776      $     424,632      $     101,011           $     280,283  

Wholesale

     170,330        170,330        171,878        44,928             69,732  

Total revenues

     633,106        633,106        596,510        145,939             350,015  

Income from continuing operations

     98,183        176,370        157,838        16,218             6,377  

Net income

     98,183        176,370        157,838        16,218             575,378  

Net income per share

                   

Basic

   $ 1.37                   

Diluted

   $ 1.37                   

 

     For the Year Ended December 31,  
(In thousands of dollars)    2016
Successor 		     2015
Successor 		 

Non-GAAP Financial Measures

     

Adjusted EBITDA (1)

   $     259,756      $     238,551  

 

(1) For a reconciliation of the above non-GAAP metrics to the most directly comparable financial measures calculated and presented in accordance with GAAP, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The 2016 unaudited pro forma adjustments did not change 2016 adjusted EBITDA.

 



 

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RISK FACTORS

You should carefully consider the following risks and other information in this information statement in evaluating Cars.com and Cars.com common stock. Any of the following risks could materially and adversely affect Cars.com’s business, results of operations and financial condition. The risk factors have been separated into three general groups: risks related to Cars.com’s business, risks related to the separation and risks related to Cars.com common stock.

Risks Related to Cars.com’s Business

Cars.com’s business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

Decreases in consumer demand could adversely affect the market for automobile purchases and, as a result, reduce the number of consumers using Cars.com’s platform. Consumer purchases of new and used automobiles generally decline during recessionary periods and other periods in which disposable income is adversely affected. Purchases of new and used automobiles are typically discretionary for consumers and have been, and may continue to be, affected by negative trends in the economy, including increases in the cost of energy and gasoline, the availability and cost of credit, reductions in business and consumer confidence, stock market volatility and increased unemployment. A reduction in the number of automobiles purchased by consumers could adversely affect automobile dealers and car manufacturers and lead to a reduction in other spending by these constituents, including targeted incentive programs. Though Cars.com’s current customer bases, revenue sources and operations are substantially limited to the U.S., Cars.com’s business may be negatively affected by challenges to the larger automotive ecosystem and other macroeconomic issues. Each of the foregoing could materially and adversely affect Cars.com’s business, results of operations and financial condition.

Cars.com participates in a highly competitive market, and pressure from existing and new companies may materially and adversely affect its business, results of operations and financial condition.

Cars.com faces significant competition from companies that provide listings, information, lead generation, and car-buying services designed to reach consumers and enable dealers to reach these consumers.

Cars.com’s competitors offer various products and services that compete with Cars.com. Some of these products include:

 

  •   Internet search engines and online automotive sites such as Google, AutoTrader.com, eBay Motors, Edmunds.com, KBB.com, Autobytel.com, CarGurus.com, Carfax.com, NADAGuides.com and TrueCar.com.

 

  •   sites operated by automobile manufacturers such as General Motors and Ford.

 

  •   providers of offline, membership-based car-buying services such as the Costco Auto Program.

 

  •   offline automotive classified listings, such as trade periodicals and local newspapers.

Cars.com competes with many of the above-mentioned companies and other companies for a share of car dealers’ overall marketing budget. To the extent that car dealers view alternative marketing and media strategies to be superior, Cars.com may not be able to maintain or grow the number of dealers in its network and such dealers may sell fewer cars to users of Cars.com’s platform and Cars.com’s business, results of operations and financial condition may be materially and adversely affected.

New competitors may enter the online automotive retail industry with competing products and services, which could have a material and adverse effect on Cars.com’s business, results of operations and financial condition.

 

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Cars.com’s competitors could significantly impede Cars.com’s ability to expand its network of dealers and to reach consumers. Its competitors may also develop and market new technologies that render Cars.com’s existing or future products and services less competitive, unmarketable or obsolete. In addition, if competitors develop products or services with similar or superior functionality to Cars.com’s solutions, Cars.com may need to decrease the prices for its solutions to remain competitive. If Cars.com is unable to maintain its current pricing structure due to competitive pressures, its revenue may be reduced and its operating results may be negatively affected.

Some of Cars.com’s larger competitors may be better able to respond more quickly with new technologies and to undertake more extensive marketing or promotional campaigns. In addition, to the extent that any of Cars.com’s competitors have existing relationships with dealers or automobile manufacturers for marketing or data analytics solutions, those dealers and automobile manufacturers may be unwilling to continue to partner with Cars.com. If Cars.com is unable to compete with these companies, the demand for its products and services could substantially decline.

In addition, if any of Cars.com’s competitors were to merge or partner with another of Cars.com’s competitors, the change in the competitive landscape could materially and adversely affect Cars.com’s ability to compete effectively. Cars.com’s competitors may also establish or strengthen cooperative relationships with Cars.com’s current or future third-party data providers, technology partners or other parties with whom Cars.com has relationships, thereby limiting Cars.com’s ability to develop, improve and promote its solutions. Cars.com may not be able to compete successfully against current or future competitors, and competitive pressures may materially and adversely affect Cars.com’s business, results of operations and financial condition.

Cars.com relies on third-party service providers for many aspects of its business, including automobile pricing and other data, and any failure to maintain these relationships could harm its business.

Cars.com’s business relies on the collection, use and analysis of third-party data for the benefit of its car buying customers, dealer customers and advertisers. Cars.com uses information about automobiles, ownership history and pricing from third parties, including OEMs, dealers and others, in various aspects of its business. In addition, Cars.com’s ability to grow its user base depends, in part, on the availability and quality of data relating to potential users of the Cars.com platform. If the third parties on which Cars.com depends are unable to provide data, experience difficulty meeting Cars.com’s requirements or standards, or revoke or fail to renew Cars.com’s licenses for such data, Cars.com could have difficulty operating key aspects of its business, which could damage its business and reputation. In addition, if such third-party service providers were to cease operations, temporarily or permanently, face financial distress or other business disruption or increase their fees, or if Cars.com’s relationships with these providers were to deteriorate, Cars.com could suffer increased costs and delays in its ability to provide its products to consumers and customers until an equivalent provider could be found or until Cars.com develops replacement technology or operations. Cars.com attempts to mitigate this risk by signing long-term contracts with its data vendors, but such contracts do not guarantee that Cars.com will continue to receive the high quality data on which its business relies. If any of the foregoing occurs or if Cars.com is unsuccessful in choosing or finding high-quality partners, fails to negotiate cost-effective relationships with such partners or ineffectively manages these relationships, it could materially and adversely affect Cars.com’s business, results of operations and financial condition.

Cars.com relies on in-house content creation and development to drive traffic to the Cars.com sites and mobile applications.

Cars.com relies on its in-house editorial content team to continually develop content of use and interest to consumers in order to drive traffic to the Cars.com sites and mobile applications. The Cars.com editorial content team tests, reviews and photographs more than 200 different car makes and models every year to facilitate its creation of independent and unbiased coverage of the automotive landscape. Cars.com’s internally developed content focuses primarily on consumer purchasing and ownership advice and analysis of consumer automotive

 

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purchasing and ownership trends. If Cars.com is unable to continue to develop such content, it may be required to rely on third-party content providers, which would lead to less distinctive content on the Cars.com sites and increased operating costs. Additionally, if Cars.com is unable to continue providing the same level of high-quality, unique consumer content as it does currently, consumer traffic across the Cars.com sites and mobile applications could decrease. Such a decrease would lead to dealers receiving fewer indications of consumer interest through leads generated by the Cars.com sites and mobile applications, and recognizing less value for their digital advertising spend. As a result, dealers may not continue to list their vehicles on the Cars.com sites and mobile applications. Similarly, decreased traffic due to a failure to continue developing unique content in-house may cause national advertisers such as OEMs to shift their digital advertising spend to sites with higher traffic. Any of the foregoing could materially and adversely affect Cars.com’s business, results of operations and financial condition.

Cars.com relies in part on Internet search engines and “mobile application download stores” to drive traffic to the Cars.com sites and mobile applications. If the Cars.com sites and mobile applications fail to appear prominently in these search results, traffic to the Cars.com sites and mobile applications would decline and Cars.com’s business would be materially and adversely affected.

Cars.com depends, in part, on Internet search engines such as Google, Bing, and Yahoo! to drive traffic to the Cars.com sites. For example, when a user types the make and model of a specific automobile or a generic phrase, such as “automobile prices,” into an Internet search engine, Cars.com relies on a high organic search ranking of the Cars.com sites in these search results to drive user traffic. However, Cars.com’s ability to maintain these high, nonpaid search result rankings is not fully within its control. For example, its competitors’ search engine optimization efforts may result in their websites receiving a higher search result page ranking than that of Cars.com, or Internet search engines could revise their methodologies in a way that would adversely affect Cars.com’s search result rankings. In addition, Internet search engines could provide automobile dealer and pricing information directly in search results or choose to align with Cars.com’s competitors or develop competing services. The Cars.com sites have experienced fluctuations in search result rankings in the past, and it is anticipated that similar fluctuations will occur in the future.

Additionally, Cars.com depends in part on mobile application download stores such as the Apple App Store and Google Play to direct traffic towards Cars.com’s mobile applications. When a mobile device user searches in a mobile application download store for “car buying app” or a similar phrase, Cars.com relies on both a high search ranking and consumer brand awareness to drive consumers to select and download the Cars.com mobile applications instead of those of its competitors. However, Cars.com’s ability to maintain high, nonpaid search result rankings in mobile application download stores is not fully within its control. Cars.com’s competitors’ mobile application download store search optimization efforts may result in their mobile applications receiving a higher result ranking than that of Cars.com, or mobile application download stores could revise their methodologies in a way that would adversely affect Cars.com’s search result rankings.

If Internet search engines or mobile application download stores modify their search algorithms in ways that negatively impact traffic to the Cars.com sites or Cars.com mobiles applications, or if the search engine or mobile application download store optimization efforts of Cars.com’s competitors are more successful than Cars.com’s own efforts, overall growth in Cars.com’s user base could slow or the user base could decline. Any reduction in the number of users directed to the Cars.com sites or Cars.com mobile applications through Internet search engines and/or mobile application download stores could materially and adversely affect Cars.com’s business, operating results and financial condition.

The value of Cars.com’s assets or operations may be diminished if its information technology systems fail to perform adequately.

Cars.com’s information technology systems are critically important to operating its business efficiently and effectively. Cars.com’s brand, reputation and ability to attract consumers and advertisers depend on the reliability

 

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of Cars.com’s technology platforms and the ability to continuously deliver content. Interruptions in Cars.com’s information technology systems, whether due to system failures, computer viruses, physical or electronic break-ins, capacity constraints, power outages, local or widespread internet outages, telecommunications breakdowns or other uncontrollable events, could affect the security or availability of products on the Cars.com sites or Cars.com’s mobile applications or prevent or inhibit the ability of consumers to access Cars.com’s products. The failure of Cars.com’s information technology systems to perform as anticipated could disrupt Cars.com’s business and result in transaction errors, processing inefficiencies, decreased use of the Cars.com sites or mobile applications and loss of sales and customers, which could materially and adversely affect Cars.com’s business, results of operations and financial condition.

If Cars.com’s security measures are compromised, or if its platform is subject to attacks that degrade or deny consumers’ ability to access its sites, mobile applications or digital marketing services, consumers may curtail, or even stop, their use of Cars.com’s platform.

Like other technology-based businesses, Cars.com’s solutions are vulnerable to computer viruses, break-ins, phishing attacks, attempts to overload servers with denial-of-service or other attacks, as well as similar disruptions from unauthorized use of Cars.com’s computer systems, any of which could lead to interruptions, delays or website or software shutdowns, potentially causing loss of critical data or the unauthorized disclosure or use of confidential information. If Cars.com experiences such a disruption to its security that results in performance or availability problems, the complete shutdown of the Cars.com sites or mobile applications or the loss or unauthorized disclosure of confidential information, consumers, dealers or advertisers may lose trust and confidence in Cars.com, decrease their use of its solutions or stop using its solutions entirely. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, Cars.com may be unable to proactively address these techniques or to implement adequate preventative measures. In addition, dealer and advertiser accounts and content could be hacked, hijacked, altered or otherwise claimed or controlled by unauthorized persons. Although Cars.com believes that its security measures adequately protect against unauthorized use of Cars.com’s technology systems, there is no guarantee that these controls will adequately protect against such risks. Cars.com maintains cyber risk insurance, but this insurance may not be sufficient to cover all losses from any future breach of Cars.com’s systems. Any such breach, attack or disruption could negatively impact Cars.com’s ability to attract new consumers, dealers or advertisers and could deter current consumers, dealers or advertisers from using Cars.com’s solutions, or subject Cars.com to lawsuits, regulatory fines or other action or liability, thereby having a material and adverse effect on Cars.com’s business, results of operations and financial condition.

Cars.com’s business depends on a strong Cars.com brand, and any failure to maintain, protect and enhance the Cars.com brand could hurt Cars.com’s ability to retain or expand its base of consumers, dealers and advertisers, and its ability to increase the frequency with which such consumers, dealers and advertisers use Cars.com’s services.

Cars.com believes that maintaining and increasing the strong recognition of the Cars.com brand is critical to the company’s future success. Cars.com is known for attracting a large base of in-market car shoppers by offering credible and easy-to-understand information from consumers and experts and an unrivaled set of new and used car listings for consumers to view. In addition, OEMs, dealers and other advertisers rely on Cars.com’s innovative digital marketing services to drive results in their businesses. To grow its business, Cars.com must maintain, protect and enhance its brand. Otherwise, it may be unable to expand its base of consumers, dealers and advertisers, or to increase the frequency with which such constituents use or purchase Cars.com’s services. Expanding the business will depend, in part, on Cars.com’s ability to maintain the trust that consumers, dealers and advertisers place in Cars.com’s services and the quality and integrity of the listings and other content found on the Cars.com sites and mobile applications. In addition, any negative publicity about Cars.com, including about its solutions, technologies, sales practices, personnel or customer service, could diminish confidence in and the use of its services. If Cars.com experiences persistent negative publicity, or if consumers

 

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otherwise perceive that content on the Cars.com sites or mobile applications is not reliable, Cars.com’s reputation, the value of its brands and traffic to the Cars.com sites and mobile applications could decline, and its business, results of operations and financial condition could be materially and adversely affected.

If Cars.com fails to maintain or increase its base of subscribing dealers that purchase listings on its sites or to increase its revenue from subscribing dealers, Cars.com’s business, results of operations and financial condition would be materially and adversely affected.

In supplemental pro forma 2014, 2015 and 2016, approximately 80% of Cars.com’s revenue was generated by the sale of paid listings to dealers on the Cars.com sites. Cars.com’s dealer listing revenue model employs a base package subscription fee with the opportunity for providers to purchase product enhancements or short-term premium services. The higher-priced product enhancements and short-term premium services offer more prominent placements and more features than the listings included in the standard packages, such as geographically targeted advertising to promote special events or sales. Cars.com’s ability to increase its revenue from currently subscribing dealers depends, in part, on the ability of its sales force to demonstrate the value and benefits of the additional features of its product enhancements and short-term premium services to its subscribing dealers and to persuade them to purchase the higher-priced enhancements and services. Subscribing dealers do not have long-term obligations to purchase or renew listing subscriptions on the Cars.com sites or mobile applications or product enhancements and premium services. Consequently, if subscribing dealers do not renew their subscriptions, continue to list their vehicles or continue to purchase product enhancements and premium services, or if Cars.com experiences significant attrition of subscribing dealers or is unable to attract new dealers in numbers greater than the number of subscribing dealers that it loses, Cars.com’s revenue will decrease and its business, results of operations and financial condition would be materially and adversely affected.

Cars.com competes with other consumer automotive websites and mobile applications and other digital content providers for share of automotive-related digital advertising spending and may be unable to maintain or grow its base of third-party advertising customers or increase its revenue from existing third-party advertisers, in which case its business, results of operations and financial condition may be materially and adversely affected.

In addition to revenue from dealer listing subscriptions, Cars.com generates significant revenue from third-party national advertising. In supplemental pro forma 2014, 2015 and 2016, 17%, 17% and 18%, respectively, of Cars.com’s revenue was generated by the sale of national advertising. Although the shift in advertising spending away from traditional advertising methods to digital advertising methods provides greater opportunity for Cars.com, competition to capture share of the total digital automotive advertising spend has and may continue to increase due to the attractive projected growth of digital automotive advertising spend and low barriers to entry in the online automotive classifieds and related digital automotive advertising markets.

Cars.com may face significant challenges in convincing its advertising customers, including brand advertisers and OEMs, to expand their advertising on the Cars.com sites and mobile applications in the face of growing competition, which could hurt Cars.com’s ability to grow its third-party advertising revenue. For example, there are a limited number of OEMs, most of which already advertise on the Cars.com sites. To grow its advertising revenue from these OEMs, Cars.com may need to increase the portion of OEMs’ digital advertising budgets that it currently receives. If the rate of renewal for Cars.com advertising customers decreases, Cars.com experiences a significant decrease in advertising spending, the number of advertising impressions on the Cars.com sites or mobile applications declines for any reason, Cars.com is unable to attract new advertisers in numbers greater than the number of advertisers it loses, or Cars.com is not able to raise rates or to increase its share of advertising revenue from dealers and other advertisers, its revenue will decrease and its business, results of operations and financial condition may be materially and adversely affected.

 

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Cars.com cannot assure you that it will be able to continue to successfully develop and launch new products or grow its complementary product offerings.

Cars.com’s future success will depend, in part, upon its ability to continue to enhance and improve the value of its products and services through the development of new products and services and new value-add features for existing products and services, as well as its ability to leverage its brand recognition and existing operations to enter into new complementary markets successfully. Historically, Cars.com has been successful in increasing revenue through the launch of new products, services and value-add features, such as Event Positions, launched in May 2015, Sell & Trade and Lot Insights, both of which launched in March 2016, and in entering complementary markets through the launch of new products and services, such as the partnership with RepairPal Certified in March 2015. However, such historical success does not assure that Cars.com will continue to be successful in developing or introducing new products, services and value-add features, or that these new products, services and features will achieve market acceptance, enhance the value of the Cars.com brand or permit Cars.com to enter new, complementary markets successfully. Further, the development of new products and services in response to evolving customer demands and competitive pressures requires significant time and resources and there can be no assurance that Cars.com’s development efforts will be effective in permitting Cars.com to maintain or grow its market share or to enter new markets in a cost-effective manner, or at all.

If Cars.com fails to continue to successfully launch new value-add products and services or to enter new, complementary markets successfully, or to do either of the foregoing in a cost-effective manner, its business, results of operations and financial condition may be materially and adversely affected.

Cars.com’s business is dependent on keeping pace with advances in technology. If Cars.com is unable to keep pace with advances in technology, consumers may stop using its services and its revenues will decrease. If Cars.com is required to invest substantial amounts in technology, its business, results of operations and financial condition may be materially and adversely affected.

The Internet and electronic commerce markets are characterized by rapid technological change, changes in user and customer requirements, frequent new service and product introductions embodying new technologies, including mobile Internet applications, and the emergence of new industry standards and practices that could render the existing Cars.com sites, mobile applications and technology obsolete. These market characteristics are intensified by the emerging nature of the market and the fact that many companies are expected to introduce new Internet products and services in the near future. If Cars.com is unable to adapt to changing technologies, its business, results of operations and financial condition may be materially and adversely affected.

If Cars.com’s mobile applications do not continue to meet consumer demands or Cars.com is unable to successfully monetize its mobile advertising solutions, its business, results of operations and financial condition may be materially and adversely affected.

Cars.com’s future success will depend, in part, on its ability to keep pace with consumer technology trends and to ensure it grows its share of the mobile application market so that total advertising impressions across the Cars.com sites and mobile applications continue to increase. Among other things, Cars.com may not be able to successfully introduce new products and services on its mobile application platforms, consumers and dealers may believe that the mobile applications and product features of Cars.com’s competitors are superior, and the Cars.com mobile applications could become incompatible with future operating systems for mobile devices or new mobile device technology. Additionally, in the event that consumer trends lead to market demand for separate digital advertising pricing models as between the Cars.com sites and mobile applications, the monetization of mobile advertising could present challenges to Cars.com’s business due to, among other things, lower rates, decreased consumer attention and display advertising design constraints on mobile applications. If use of Cars.com’s mobile applications stagnates or declines, Cars.com is not able to successfully monetize mobile application advertising or Cars.com cannot adapt its products and services to another form of data

 

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viewing, whether on new mobile devices or otherwise, in a timely and cost-effective manner or at all, its business, results of operations and financial condition could be materially and adversely affected. In addition, its growth prospects could be materially and adversely affected.

Dealer closures or consolidation among dealers or OEMs could reduce demand for, and the pricing of, Cars.com’s marketing solutions and advertising on the Cars.com sites and mobile applications, thereby leading to decreased earnings.

When dealers consolidate, the services they previously purchased separately are often purchased by the combined entity in a lesser quantity than before, leading to volume compression and loss of revenue across the automotive marketplace sector. In the past, dealers have been more likely to close or consolidate when general economic conditions and/or conditions in the automotive industry are poor. Despite Cars.com’s market position, consolidation or closures of automobile dealers could reduce the aggregate demand for Cars.com’s services in the future and limit the amounts Cars.com earns for its solutions. In addition, advertising purchased by OEMs accounts for a meaningful portion of Cars.com’s revenues. There are a limited number of OEMs, and financial difficulties or consolidation among OEMs could similarly lead to volume compression and loss of revenue. Dealer closures or consolidation among dealers or OEMs could materially and adversely affect Cars.com’s business, results of operations and financial condition.

If growth in the online and mobile automotive advertising market stagnates or declines, Cars.com’s business, results of operations and financial condition could be materially and adversely affected.

Cars.com believes that future growth in the online and mobile automotive advertising market will be driven, in part, by dealers and brand advertisers increasingly shifting their advertising spending away from traditional media such as newspapers, radio and television, and towards online and mobile advertising. To the extent that overall automotive related advertising does not continue to shift online or to mobile applications, Cars.com’s business, results of operations and financial condition could be materially and adversely affected.

Cars.com’s ability to generate wholesale advertising revenues depends, in part, on the performance of third parties who sell Cars.com’s solutions pursuant to affiliation agreements.

In connection with TEGNA’s October 2014 acquisition of the 73% of Classified Ventures, LLC that it did not already own, Cars.com entered into new affiliation agreements with a group of media organizations that formerly owned Classified Ventures, LLC. In addition, in connection with TEGNA’s June 2015 spin-off of its publishing business as a standalone public company, now operating under the name Gannett Co., Inc., Cars.com entered into a new affiliation agreement with Gannett Co., Inc. and its newspaper subsidiaries. Pursuant to these affiliation agreements, all of which expire in either 2019 or 2020, Cars.com sells advertising packages and dealer solutions at wholesale rates to these counterparties, who have the exclusive right to market these products in their relevant territories. Cars.com does not have control over these counterparties, and any deterioration of the business prospects of or underperformance by these counterparties may reduce the revenues that Cars.com earns through wholesale channels. Though the affiliation agreements provide Cars.com with certain rights to terminate an exclusivity arrangement in a specific market upon a counterparty’s failure to meet minimum performance standards, these rights are only available after prolonged cure periods. As a result, underperforming counterparties may limit Cars.com’s ability to generate revenue in the covered territories for extended periods of time, or, if such underperformance is not sufficient to permit termination of the applicable affiliation agreement, until such agreement’s expiry in 2019 or 2020. The underperformance of Cars.com’s counterparties under the affiliation agreements could therefore have a material and adverse effect on Cars.com’s business, results of operations and financial condition, regardless of whether such underperformance is sufficient to permit termination of any of the affiliation agreements.

 

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Uncertainty exists in the application of various laws and regulations to Cars.com’s business, including tax laws. New laws or regulations applicable to Cars.com’s business, or the expansion or interpretation of existing laws and regulations to apply to Cars.com’s business, could subject it to licensing requirements, claims, judgments and remedies, including sales and use taxes, other monetary liabilities and limitations on its business practices, and could increase administrative costs or materially and adversely affect its business, results of operations and financial condition.

Cars.com operates in a regulatory climate in which there is uncertainty as to the applicability of various laws and regulations to its business. Cars.com’s business could be significantly affected by different interpretations or applications of existing laws or regulations, future laws or regulations or actions or rulings by judicial or regulatory authorities. Cars.com’s operations may be subjected to adoption, expansion or interpretation of various laws and regulations, and compliance with these laws and regulations may require Cars.com to obtain licenses at an undeterminable and possibly significant initial and annual expense. Similarly, state tax authorities could take aggressive positions as to whether certain of Cars.com’s products are subject to sales and use taxes, leading to increased tax expense. These additional expenditures may materially and adversely affect Cars.com’s future results of operations, whether directly through increasing future overhead or indirectly by forcing Cars.com to pass on these additional costs to its customers, making Cars.com’s solutions less competitive. There can be no assurances that future laws or regulations or interpretations or expansions of existing laws or regulations will not impose requirements on Internet commerce that could substantially impair the growth of e-commerce and adversely affect Cars.com’s business, results of operations and financial condition. The adoption of additional laws or regulations may decrease the popularity or impede the expansion of e-commerce and Internet marketing, restrict Cars.com’s present business practices, require it to implement costly compliance procedures or expose Cars.com and/or its customers to potential liability.

Cars.com may be considered to “operate” or “do business” in states where its customers conduct their businesses, resulting in possible regulatory action. If any state licensing laws were determined to be applicable to Cars.com, and if it is required to be licensed and is unable to do so, or is otherwise unable to comply with laws or regulations, Cars.com could be subject to fines or other penalties or be compelled to discontinue operations in those states. If any state’s regulatory requirements impose state-specific requirements on Cars.com or include Cars.com within an industry-specific regulatory scheme, Cars.com may be required to modify its marketing programs in that state in a manner that may undermine such program’s attractiveness to consumers or dealers. Alternatively, if Cars.com determines that the licensing and related requirements are overly burdensome, it may elect to terminate operations in that state. In each case, Cars.com’s financial performance could be materially and adversely affected.

All states comprehensively regulate vehicle sales and lease transactions, including strict licensure requirements for dealers (and, in some states, brokers) and vehicle advertising. Cars.com believes that most of these laws and regulations specifically apply only to traditional vehicle purchase and lease transactions, not Internet-based lead referral programs like Cars.com’s. If Cars.com determines that the licensing or other regulatory requirements in a given state are applicable to it or to a particular marketing services program, it may elect to obtain the required licenses and comply with applicable regulatory requirements. However, if licensing or other regulatory requirements are overly burdensome, Cars.com may elect to terminate operations or particular marketing services programs in that state or elect to not introduce particular marketing services programs in that state. As Cars.com introduces new services, it may need to incur additional costs associated with additional licensing regulations and regulatory requirements.

Cars.com collects, processes, stores, shares, discloses and uses limited personal information and other data, and its actual or perceived failure to protect such information or data could damage its reputation and brand and materially and adversely affect its business, results of operations and financial condition.

Cars.com collects, processes, stores, shares, discloses and uses limited personal information and other data provided by consumers and dealers, sometimes including names, addresses and, in connection with Lot Insights, certain location information used in geo-fencing. Cars.com does not collect or store consumer financial data,

 

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including credit and debit card information. To effect secure transmission of such information, Cars.com relies on, among other security measures, firewalls, web content filtering, encryption and authentication technology licensed from third parties. Cars.com also depends on the security of its networks and, in part, on the security of its third-party service providers. Unauthorized use of, or inappropriate access to, Cars.com’s networks, computer systems or services, or to those of its third-party service providers, could potentially jeopardize the security of Cars.com’s confidential information. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, Cars.com or its third-party service providers may be unable to anticipate these techniques or to implement adequate preventative measures. Nontechnical means, such as actions (or inactions) by an employee, can also result in a data breach. There can be no assurance that any security measures taken by Cars.com or its third-party service providers will be effective in preventing these activities. Cars.com may need to expend significant resources to protect against security breaches or to address problems caused by such breaches. If an actual or perceived breach of Cars.com’s security occurs, the perception of the effectiveness of its security measures could be harmed, which, in turn, could damage Cars.com’s relationships with dealers and reduce consumer traffic to the Cars.com sites and mobile applications. A party that is able to circumvent Cars.com’s security measures could misappropriate its proprietary information or the information of dealers and consumers who use its services, cause interruption in its operations or damage the computers or other hardware of such dealers or consumers. As a result of any such breaches, Cars.com’s dealers or consumers may assert claims of liability against Cars.com for its failure to prevent these activities. These activities may subject Cars.com to legal claims, adversely impact its reputation and interfere with its ability to provide its products and services, all of which may have a material and adverse effect on Cars.com’s business, results of operations and financial condition.

Failure to protect customer data, or to provide customers with appropriate notice of Cars.com’s privacy practices, could also subject Cars.com to liabilities imposed by U.S. federal and state regulatory agencies or courts. Cars.com could also be subject to evolving state laws and self-regulatory standards that impose data use obligations, data breach notification requirements, specific data security obligations, restrictions on solicitation or other consumer privacy-related requirements. Cars.com’s failure to comply with any of these laws, regulations or standards may have a material and adverse effect on its business, results of operations and financial condition.

Cars.com’s future strategic acquisitions, investments and partnerships could pose various risks, increase Cars.com’s leverage, dilute existing stockholders and significantly impact Cars.com’s ability to expand its overall profitability.

Acquisitions involve inherent risks, such as potentially increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material and adverse effect on Cars.com’s results of operations and/or cash flow and could strain Cars.com’s human resources. Cars.com may be unable to successfully implement effective cost controls or achieve expected synergies as a result of a future acquisition. Acquisitions may result in Cars.com’s assumption of unexpected liabilities and the diversion of management’s attention from the operation of Cars.com’s business. Acquisitions may also result in Cars.com having greater exposure to the industry risks of the businesses underlying the acquisition. Strategic investments and partnerships with other companies expose Cars.com to the risk that it may not be able to control the operations of its investee or partnership, which could decrease the amount of benefits Cars.com realizes from a particular relationship. Cars.com is also exposed to the risk that its partners in strategic investments and infrastructure may encounter financial difficulties that could lead to disruption of investee or partnership activities, or impairment of assets acquired, which could adversely affect future reported results of operations and stockholders’ equity. Acquisitions may subject Cars.com to new or different regulations or tax consequences which could have an adverse effect on Cars.com’s operations.

In addition, Cars.com may be unable to obtain the financing necessary to complete acquisitions on attractive terms or at all. If Cars.com raises additional funds through future issuances of equity or convertible debt securities, its existing stockholders could suffer significant dilution, and any new equity securities it issues could have rights, preferences and privileges superior to those of holders of its common stock. Future equity financings

 

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would also decrease Cars.com’s earnings per share and the benefits derived by Cars.com from such new ventures or acquisitions might not outweigh or exceed their dilutive effect. Any additional debt financing Cars.com secures could involve restrictive covenants relating to its capital raising activities and other financial and operational matters, which may make it more difficult for Cars.com to obtain additional capital or to pursue business opportunities.

Realization of any of the foregoing risks associated with future strategic acquisitions, investments and partnerships could materially and adversely affect Cars.com’s business, results of operations and financial condition.

The value of Cars.com’s existing intangible assets may become impaired, depending upon future operating results.

Cars.com’s goodwill and other intangible assets were approximately $2.4 billion as of December 31, 2016, representing approximately 94% of Cars.com’s total assets. Cars.com periodically evaluates its goodwill and other intangible assets to determine whether all or a portion of their carrying values may no longer be recoverable, in which case a charge to earnings may be necessary. Any future evaluations requiring an asset impairment charge for goodwill or other intangible assets would adversely affect future reported results of operations and stockholders’ equity, although such charges would not affect Cars.com’s cash flow.

Adverse results from litigation or governmental investigations could impact Cars.com’s business practices and operating results.

Cars.com faces potential liability and expense for legal claims relating to the information that it publishes on the Cars.com sites and mobile applications, including claims for defamation, libel, negligence and copyright or trademark infringement, among others. Cars.com may be subject to claims based on its advertising of its own business. Although Cars.com has not historically been the subject of any such claims that were material, any such claims that Cars.com faces in the future could divert management time and attention away from Cars.com’s business and result in significant costs to investigate and defend, regardless of the merits of the claims. In some instances, Cars.com may elect or be compelled to remove content or may be forced to pay substantial damages if it is unsuccessful in its efforts to defend against these claims. If Cars.com elects or is compelled to remove valuable content from the Cars.com sites or mobile applications, its platforms may become less useful to consumers and its traffic may decline, which could have a material and adverse effect on its business, results of operations and financial condition.

Misappropriation or infringement of Cars.com’s intellectual property and proprietary rights, enforcement actions to protect its intellectual property and claims from third parties relating to intellectual property could materially and adversely affect Cars.com’s business, results of operations and financial condition.

Litigation regarding intellectual property rights is common in the Internet and technology industries. Cars.com expects that Internet technologies and software products and services may be increasingly subject to third-party infringement claims as the number of competitors in its industry segment grows and the functionality of products in different industry segments overlaps. Cars.com’s ability to compete depends upon its proprietary systems and technology. While it relies on intellectual property laws, confidentiality agreements and technical measures to protect its proprietary rights, Cars.com believes that the technical and creative skills of its personnel, continued development of its proprietary systems and technology, brand name recognition and reliable website maintenance are essential in establishing and maintaining a leadership position and strengthening its brands. Despite Cars.com’s efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of Cars.com’s services or to obtain and use information that Cars.com regards as proprietary. Policing unauthorized use of its proprietary rights is difficult and may be expensive. Cars.com can provide no assurance that the steps it takes will prevent misappropriation of technology or that the agreements entered into for that purpose will be enforceable. Effective trademark, service mark, patent, copyright and trade secret protection may

 

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not be available when Cars.com’s products and services are made available online. In addition, if litigation becomes necessary to enforce or protect its intellectual property rights or to defend against claims of infringement or invalidity, such litigation, even if successful, could result in substantial costs and diversion of resources and management attention. Cars.com also cannot provide any assurance that its products and services do not infringe on the intellectual property rights of third parties. Claims of infringement, even if unsuccessful, could result in substantial costs and diversion of resources and management attention. If unsuccessful, Cars.com may be subject to preliminary and permanent injunctive relief and monetary damages, which may be trebled in the case of willful infringements.

If Cars.com expands into new geographic markets, it may be prevented from using the Cars.com brands in such markets.

If Cars.com expands its business into foreign geographic markets, it may not have the ability to adopt trademarks or domain names that are identical or similar to the trademarks and domain names that it uses in the United States. Currently, Cars.com’s trademark property rights are limited to the United States. Cars.com may face opposition from third parties over the use of its trademarks and applications to register key trademarks in foreign jurisdictions in which it may expand its presence. Third parties may have already adopted identical or similar trademarks to the ones that Cars.com uses for its services. If Cars.com is unsuccessful in defending against these oppositions, its trademark applications may be denied. Cars.com could be forced to pay significant settlement costs or cease the use of its trademarks and associated elements of its brands in those or other jurisdictions. Consequently, international expansion may require Cars.com to adopt and promote new trademarks, which may be expensive and place it at a competitive disadvantage.

Cars.com’s ability to operate effectively could be impaired if it fails to attract and retain its key employees.

Cars.com’s success depends, in part, upon the continuing contributions of key employees and Cars.com’s continuing ability to attract, develop, motivate and retain highly qualified and skilled personnel. The loss of the services of any of Cars.com’s key employees or the failure to attract or replace qualified personnel may have a material and adverse effect on Cars.com’s business.

Seasonality may cause fluctuations in Cars.com’s revenue and operating results.

Cars.com’s revenue trends are a reflection of growth in the Cars.com dealer base throughout the year as new customers purchase subscription advertising packages and existing customers purchase additional product enhancements. Rate increases for retail customers occur throughout the year, whereas in the wholesale channel, rates generally only change annually, on the first day of the calendar year. The Cars.com display advertising business, targeted to auto manufacturers, experiences some seasonality as a result of consumers’ car buying patterns and the introduction of new vehicle models from OEMs. Cars.com’s revenues and operating results have historically been lowest in the first quarter of the calendar year, and Cars.com expects this trend to continue. In addition to these seasonal effects, Cars.com’s revenues and operations may be affected by macroeconomic conditions in the automotive sector.

Risks Related to the Separation and Distribution

Cars.com has no history of operating as an independent company, and Cars.com’s historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results.

The historical information about Cars.com included in this information statement refers to Cars.com’s business as operated by and integrated with TEGNA. Cars.com’s historical and pro forma financial information included in this information statement is derived from the consolidated financial statements and accounting records of TEGNA and Cars.com, LLC (formerly Classified Ventures, LLC and now a wholly owned subsidiary of TEGNA). Accordingly, the historical and pro forma financial information included in this information

 

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statement does not necessarily reflect the financial condition, results of operations and cash flows that Cars.com would have achieved as a separate, publicly traded company during the periods presented, or those that Cars.com will achieve in the future, primarily as a result of the factors described below:

 

  •   Prior to the separation, and since TEGNA’s acquisition of Cars.com in October 2014, Cars.com has primarily operated as a stand-alone entity within TEGNA’s broader corporate organization. Cars.com’s historical financial statements include allocations of certain TEGNA corporate expenses that have historically been provided to Cars.com by TEGNA. Such expenses primarily include insurance, severance costs, and other general corporate overhead expenses, and allocations were based on either the actual costs incurred, or Cars.com’s headcount relative to TEGNA’s consolidated headcount. The historical allocated corporate costs were approximately $2.4 million, $1.4 million and $2.2 million during the three months ended December 31, 2014, and the years ended December 31, 2015 and 2016, respectively. The presentation in the historical and pro forma financial statements may not be indicative of the actual level of expense that would have been incurred had Cars.com historically operated as an independent, publicly-traded company, and accordingly, the financial statements may not necessarily reflect Cars.com’s financial position, results of operations and cash flows had it operated as a publicly-traded company during the periods presented.

 

  •   Generally, Cars.com’s working capital requirements and capital for its general corporate purposes, including acquisitions and capital expenditures, have in the past been satisfied as part of TEGNA’s corporate-wide cash management policies. Following the completion of the distribution, Cars.com expects that it will need to obtain financing from banks or through other arrangements, which may or may not be available and may be more costly.

 

  •   After the completion of the distribution, the cost of capital for Cars.com’s business may be higher than TEGNA’s cost of capital prior to the distribution.

 

  •   Cars.com’s historical financial information does not reflect the debt that it expects to incur in connection with the separation.

 

  •   As a result of the distribution, Cars.com will become a stand-alone public company that will be required to prepare its financial statements according to the rules and regulations promulgated by the SEC. Cars.com will also for the first time be subject to the Sarbanes-Oxley Act, the Dodd-Frank Act, and the reporting requirements of the Exchange Act, in each case, as applied to an emerging growth company. Complying with these laws, rules and regulations could result in significant costs to Cars.com and require it to divert substantial resources, including management time, from other activities.

Other significant changes may occur in Cars.com’s cost structure, management, financing and business operations as a result of operating as a separate company from TEGNA. For additional information about the past financial performance of Cars.com’s business and the basis of presentation of the historical financial statements and the unaudited pro forma financial statements of Cars.com’s business, see the sections entitled “Unaudited Pro Forma Financial Statements,” “Selected Historical Financial Data of Cars.com” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the historical financial statements and accompanying notes included elsewhere in this information statement.

There could be significant liability if the distribution is determined to be a taxable transaction.

It is a condition to the distribution that TEGNA receives an opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code will be satisfied. The opinion relies on certain facts, assumptions, representations and undertakings from TEGNA and Cars.com regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings is incorrect or not satisfied, TEGNA and its stockholders may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities.

 

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Notwithstanding the opinion of tax counsel, the IRS could determine on audit that the separation is a taxable transaction if it determines that any of these facts, assumptions, representations or undertakings are incorrect or have been violated or if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the share ownership of TEGNA or Cars.com after the separation. If the separation is determined to be taxable for U.S. federal income tax purposes, TEGNA and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities, and Cars.com could incur significant liabilities. For a description of the sharing of such liabilities between TEGNA and Cars.com, see the section entitled “Relationship with TEGNA Following the Separation and Distribution—Tax Matters Agreement.”

Cars.com may be unable to engage in certain corporate transactions after the separation because such transactions could jeopardize the intended tax-free status of the distribution.

To preserve the tax-free treatment to TEGNA of the separation and distribution, under the tax matters agreement that Cars.com will enter into with TEGNA, Cars.com will be restricted from taking any action that prevents the distribution and related transactions from being tax-free for U.S. federal income tax purposes. Under the tax matters agreement that TEGNA and Cars.com will enter into prior to the distribution, for the two-year period following the distribution, Cars.com will be prohibited, except in certain circumstances, from:

 

  •   entering into any transaction resulting in the acquisition of all or a portion of its stock or assets, whether by merger or otherwise;

 

  •   merging, consolidating or liquidating;

 

  •   issuing equity securities beyond certain thresholds;

 

  •   repurchasing its capital stock beyond certain thresholds; and

 

  •   ceasing to actively conduct its business.

These restrictions may limit Cars.com’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business. In addition, under the tax matters agreement, Cars.com will be required to indemnify TEGNA against any such tax liabilities as a result of the acquisition of Cars.com’s stock or assets, even if Cars.com did not participate in or otherwise facilitate the acquisition.

Until the separation and distribution occur, TEGNA has sole discretion to change the terms of the separation and distribution in ways that may be unfavorable to Cars.com.

Until the separation and distribution occur, Cars.com will be a wholly owned subsidiary of TEGNA. Accordingly, TEGNA will effectively have the sole and absolute discretion to determine and change the terms of the separation and distribution, including the establishment of the record date for the distribution and the distribution date. These changes could be unfavorable to Cars.com. In addition, TEGNA may decide at any time not to proceed with the separation and distribution.

Cars.com may not achieve some or all of the expected benefits of the separation, and the separation may materially and adversely affect Cars.com’s business.

Cars.com may be unable to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all. The separation and distribution are expected to provide the following benefits, among others:

 

  •   a distinct investment identity allowing investors to evaluate the merits, strategy, performance and future prospects of Cars.com separately from TEGNA;

 

  •   improved management “fit and focus” at both TEGNA and Cars.com;

 

  •   ability to pursue value-enhancing acquisitions and other growth opportunities;

 

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  •   more efficient allocation of capital for both TEGNA and Cars.com; and

 

  •   facilitating incentive compensation arrangements for employees that are more directly tied to the performance of the relevant company’s business, and enhancing employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives, while at the same time creating an independent equity structure that will facilitate Cars.com’s ability to effect future acquisitions utilizing Cars.com common stock.

Cars.com may not achieve these or other anticipated benefits for a variety of reasons, including, among others: (a) the separation will require significant amounts of management time and effort, which may divert management attention from operating and growing Cars.com’s business; (b) following the separation, Cars.com may be more susceptible to market fluctuations and other adverse events than if it were still a part of TEGNA; (c) following the separation, Cars.com’s business will be less diversified than TEGNA’s business prior to the separation; and (d) the other actions required to separate TEGNA’s and Cars.com’s respective businesses could disrupt Cars.com’s operations. If Cars.com fails to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, Cars.com’s business, results of operations and financial condition could be materially and adversely affected.

TEGNA or Cars.com may fail to perform under various transaction agreements that will be executed as part of the separation.

In connection with the separation, and prior to the distribution, Cars.com and TEGNA will enter into a separation agreement as well as various other agreements, including a transition services agreement, a tax matters agreement and an employee matters agreement. The separation agreement, the tax matters agreement and the employee matters agreement will determine the allocation of assets and liabilities between the companies following the separation for those respective areas and will include any necessary indemnifications related to liabilities and obligations. The transition services agreement will provide for the performance of select services by TEGNA for the benefit of Cars.com for a limited period of time after the separation. Cars.com will rely on TEGNA to satisfy its performance obligations under these agreements. If TEGNA is unable to satisfy its obligations under these agreements, including its indemnification obligations, Cars.com’s business, results of operations and financial condition could be materially and adversely affected.

After the distribution, certain members of management and directors may hold stock in both TEGNA and Cars.com, and as a result may face actual or potential conflicts of interest.

After the distribution, the management and directors of each of TEGNA and Cars.com may own both TEGNA common stock and Cars.com common stock. This ownership overlap could create, or appear to create, potential conflicts of interest when Cars.com management and directors and TEGNA’s management and directors face decisions that could have different implications for Cars.com and TEGNA. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between Cars.com and TEGNA regarding the terms of the agreements governing the distribution and Cars.com’s relationship with TEGNA following the distribution. These agreements include the separation and distribution agreement, the tax matters agreement, the employee matters agreement, the transition services agreement and any commercial agreements between the parties or their affiliates. Potential conflicts of interest may also arise out of any commercial arrangements that Cars.com or TEGNA may enter into in the future.

No vote of TEGNA stockholders is required in connection with the separation and distribution.

No vote of the TEGNA stockholders is required in connection with the separation and distribution. Accordingly, if this transaction occurs and you do not want to receive Cars.com common stock in the distribution, your only recourse will be to divest yourself of your TEGNA common stock prior to the record date for the distribution.

 

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Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect Cars.com.

As a public company, Cars.com will become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and will be required to prepare its financial statements according to the rules and regulations required by the SEC. In addition, the Exchange Act requires that Cars.com file annual, quarterly and current reports. Cars.com’s failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject it to penalties under federal securities laws, expose it to lawsuits and restrict its ability to access financing.

In addition, the Sarbanes-Oxley Act requires that, among other things, Cars.com establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in Cars.com’s business or changes in applicable accounting rules. Cars.com cannot assure you that its internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which it had previously believed that internal controls were effective. If Cars.com is not able to maintain or document effective internal control over financial reporting, its independent registered public accounting firm will not be able to certify as to the effectiveness of Cars.com’s internal control over financial reporting.

Matters affecting Cars.com’s internal controls may cause it to be unable to report its financial information on a timely basis, or may cause it to restate previously issued financial information, and thereby subject Cars.com to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in the company and the reliability of its financial statements. Confidence in the reliability of Cars.com’s financial statements is also likely to suffer if Cars.com or its independent registered public accounting firm reports a material weakness in Cars.com’s internal control over financial reporting. This could have a material and adverse effect on Cars.com by, for example, leading to a decline in Cars.com’s share price or impairing its ability to raise additional capital.

For as long as Cars.com is an emerging growth company under the recently enacted JOBS Act, its independent registered public accounting firm will not be required to attest to the effectiveness of its internal control over financial reporting pursuant to Section 404(b). An independent assessment of the effectiveness of Cars.com’s internal controls could detect problems that management’s assessment might not. Undetected material weaknesses in Cars.com’s internal controls could lead to restatements of Cars.com’s financial statements and require Cars.com to incur the expense of remediation.

In connection with the separation, Cars.com will incur debt obligations that could adversely affect Cars.com’s business, profitability and ability to meet its obligations.

As of December 31, 2016, on a pro forma basis after giving effect to the new financing arrangements that Cars.com expects to enter into in connection with the separation and after giving effect to the application of the net proceeds of such financing, Cars.com’s total combined indebtedness would have been $655 million.

This debt could potentially have important consequences to Cars.com and its debt and equity investors, including:

 

  •   requiring that a portion of Cars.com’s cash flow from operations be used to service this debt following the separation, which would reduce cash flow available for other corporate purposes, including capital expenditures and acquisitions;

 

  •   increasing Cars.com’s vulnerability to shifts in interest rates and to general adverse economic and industry conditions;

 

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  •   limiting Cars.com’s flexibility in planning for, or reacting to, changes in its business and the industry; and

 

  •   limiting Cars.com’s ability to borrow additional funds as needed, or increasing the costs of any such borrowing, including as a result of a future credit ratings downgrade.

To the extent that Cars.com incurs additional indebtedness, the foregoing risks could increase. In addition, Cars.com’s actual cash requirements in the future may be greater than expected. Cars.com’s cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and Cars.com may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance Cars.com’s debt.

Increases in interest rates could increase interest payable under Cars.com’s variable rate indebtedness.

It is expected that a significant portion of Cars.com’s outstanding indebtedness immediately following the separation and distribution will include variable rate indebtedness under certain financing arrangements that Cars.com enters into on or about the distribution date. As a result of this indebtedness, Cars.com will be subject to interest rate risk. It is expected that interest rates under these financing arrangements will be based on a floating rate index, and changes in interest rates could increase the amount of Cars.com’s interest payments and thus negatively impact its future earnings and cash flows. If Cars.com does not have sufficient cash flow to make interest payments, it may be required to refinance all or part of its outstanding debt, sell assets, borrow additional money or sell securities, none of which Cars.com can guarantee it would be able to complete on acceptable terms or at all.

Risks Related to Cars.com Common Stock

Cars.com cannot be certain that an active trading market for its common stock will develop or be sustained after the distribution, and following the distribution, Cars.com’s stock price may fluctuate significantly.

A public market for Cars.com common stock does not currently exist. Cars.com anticipates that on or about the record date for the distribution, trading of shares of its common stock will begin on a “when-issued” basis, which will continue through the distribution date. However, Cars.com cannot guarantee that an active trading market for its common stock will develop or be sustained after the distribution, nor can Cars.com predict the prices at which shares of its common stock may trade after the distribution. Similarly, Cars.com cannot predict whether the combined market value of the shares of Cars.com common stock and TEGNA common stock will be less than, equal to or greater than the market value of TEGNA common stock prior to the distribution.

The market price of Cars.com common stock may decline or fluctuate significantly due to a number of factors, some of which may be beyond Cars.com’s control, including:

 

  •   actual or anticipated fluctuations in Cars.com’s operating results;

 

  •   flat or slow growth in online or mobile advertising spending;

 

  •   declining operating revenues derived from Cars.com’s core business;

 

  •   the gain or loss of significant advertisers or other customers;

 

  •   the operating and stock price performance of comparable companies;

 

  •   changes in the regulatory and legal environment under which Cars.com operates; and

 

  •   market conditions in the automotive industry, e-commerce industry, and domestic and worldwide economy as a whole.

There may be substantial changes in Cars.com’s stockholder base.

Many investors holding TEGNA common stock may hold such stock because of a decision to invest in a company with TEGNA’s profile. Following the distribution, the shares of Cars.com common stock held by those

 

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investors will represent an investment in a digital automotive marketplace company with a different profile from TEGNA. This profile may not align with such investors’ investment strategies and may cause such holders to sell their shares. As a result, Cars.com’s stock price may decline or experience volatility as Cars.com’s stockholder base changes.

Cars.com does not expect to pay any cash dividends for the foreseeable future.

Cars.com currently intends to retain future earnings to finance and grow its business. As a result, Cars.com does not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by Cars.com will be made in the sole discretion of its board of directors from time to time in accordance with applicable law. There can be no assurance that Cars.com will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future. This may result from extraordinary cash expenses, actual costs exceeding contemplated costs, funding of capital expenditures or increases in reserves. If Cars.com does not pay dividends, the price of Cars.com common stock that you receive in the distribution must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of Cars.com common stock in order to generate cash flow from your investment.

Your percentage of ownership in Cars.com may be diluted in the future.

In the future, your percentage ownership in Cars.com may be diluted because of equity awards that Cars.com will be granting to Cars.com’s directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions. Cars.com’s employees will receive shares of its common stock after the distribution as a result of conversion of their TEGNA restricted stock units (in whole or in part) to Cars.com restricted stock units. Cars.com anticipates that its executive compensation committee will grant additional stock-based awards to its employees after the distribution. Such awards will have a dilutive effect on Cars.com’s earnings per share, which could adversely affect the market price of Cars.com common stock. From time to time, Cars.com will issue additional stock-based awards to its employees under Cars.com’s employee benefits plans.

In addition, Cars.com’s amended and restated certificate of incorporation will authorize Cars.com to issue, without the approval of Cars.com’s stockholders, one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Cars.com common stock respecting dividends and distributions, as Cars.com’s board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of Cars.com common stock. Similarly, the repurchase or redemption rights or liquidation preferences Cars.com could assign to holders of preferred stock could affect the residual value of the common stock. For additional information, see the section entitled “Description of Cars.com’s Capital Stock.”

Cars.com is an “emerging growth company,” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, its common stock may be less attractive to investors.

Cars.com is an “emerging growth company,” as defined in the JOBS Act, and Cars.com intends to take advantage of some of the exemptions from reporting requirements that are afforded to emerging growth companies including, but not limited to, exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Cars.com cannot predict if investors will find its common stock less attractive because it intends to rely on these exemptions. If some investors find Cars.com’s common stock less attractive as a result, there may be a less active trading market for Cars.com common stock and its stock price may become more volatile. Cars.com may take advantage of these exemptions until it is no longer an emerging growth company.

 

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Cars.com’s amended and restated certificate of incorporation will designate the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Cars.com’s stockholders, which could discourage lawsuits against Cars.com and Cars.com’s directors and officers.

Cars.com’s amended and restated certificate of incorporation will provide that, unless the board of directors otherwise determines, the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Cars.com, any action asserting a claim for or based on breach of a fiduciary duty owed by any current or former director or officer of Cars.com to Cars.com or to Cars.com’s stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty; any action asserting a claim against Cars.com or any current or former director or officer of Cars.com arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or Cars.com’s amended and restated certificate of incorporation or bylaws; any action asserting a claim relating to or involving Cars.com that is governed by the internal affairs doctrine; or any action asserting an “internal corporate claim” as such term is defined in the DGCL. This exclusive forum provision may limit the ability of Cars.com’s stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Cars.com or Cars.com’s current or former directors or officers, which may discourage such lawsuits against Cars.com and Cars.com’s current or former directors and officers. Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Cars.com may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect Cars.com’s business, results of operations and financial condition.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This information statement and other materials that TEGNA and Cars.com have filed or will file with the SEC contain, or will contain, certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. In particular, information included under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “The Separation and Distribution” and other sections of this information statement contain forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Cars.com management and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond Cars.com’s control. Except as may be required by law, Cars.com undertakes no obligation to modify or revise any forward-looking statement to reflect new information, events or circumstances occurring after the date of this information statement. Factors, risks, trends and uncertainties that could cause actual results or events to differ materially from those anticipated include the matters described under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in addition to the following other factors, risks, trends and uncertainties:

 

  •   competitive pressures in the markets in which Cars.com operates and innovation by Cars.com’s competitors;

 

  •   increased closures or consolidation among automobile dealers or other events which may adversely affect business operations of major customers and/or depress their level of advertising;

 

  •   macroeconomic trends and conditions;

 

  •   economic downturns leading to a weak automotive market or a decrease in online and mobile advertising or consumer demand for new and used cars;

 

  •   the ability of Cars.com to anticipate market needs and develop new and enhanced products and services to meet those needs, and its ability to successfully monetize them;

 

  •   potential disruption or interruption of Cars.com’s operations due to accidents, extraordinary weather events, civil unrest, political events, terrorism or cyber security attacks;

 

  •   an inability to realize benefits or synergies from acquisitions of new businesses or dispositions of existing businesses or to operate businesses effectively following acquisitions or divestitures;

 

  •   the ability to attract and retain employees;

 

  •   the ability to adequately protect intellectual property;

 

  •   reliance on third-party service providers;

 

  •   rapid technological changes and frequent new product introductions prevalent in the markets in which Cars.com competes;

 

  •   volatility in financial and credit markets which could affect Cars.com’s ability to raise funds through debt or equity issuances and otherwise affect Cars.com’s ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;

 

  •   reliance on the performance of counterparties to affiliation agreements to generate wholesale advertising revenues, and the potential underperformance of these counterparties;

 

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  •   the ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to Cars.com’s business;

 

  •   adverse outcomes in proceedings with governmental authorities or administrative agencies;

 

  •   an other than temporary decline in operating results and enterprise value that could lead to non-cash goodwill, other intangible asset, investment or property, plant and equipment impairment charges;

 

  •   Cars.com’s expectations regarding the time during which it will be an “emerging growth company” under the JOBS Act;

 

  •   Cars.com’s inability to engage in certain corporate transactions following the separation;

 

  •   any failure to realize expected benefits from the separation; and

 

  •   other uncertainties relating to general economic, political, business, industry, regulatory and market conditions.

 

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THE SEPARATION AND DISTRIBUTION

Overview

The TEGNA board of directors, together with TEGNA management and advisors, continually reviews its businesses for ways to improve TEGNA’s performance. As part of these reviews, the TEGNA board of directors considers many factors, such as current and prospective economic and industry conditions and the composition of TEGNA’s businesses. As a result of these reviews, TEGNA has taken various actions over the past several years. For example, in 2014, TEGNA announced that it intended to separate its publishing business at the same time as it announced entering into an agreement to purchase the 73% of equity interests in Classified Ventures, LLC that it did not previously own.

Since TEGNA acquired the remaining interest in Classified Ventures, LLC (subsequently renamed Cars.com, LLC), the Cars.com digital automotive marketplace business accelerated its product pipeline and took other strategic actions to improve its performance. The TEGNA board of directors believed that, now that the digital automotive marketplace business had taken these actions, it was an appropriate time to consider whether to retain that business or to pursue the separation. As described in more detail below under “—Reasons for the Separation”, the TEGNA board of directors considered a variety of factors, including the distinct investment identities of Cars.com and TEGNA’s other businesses; the enhanced strategic and management focus that would result from the separation and distribution; the ability of each company to use its own equity as “acquisition currency” for growth opportunities; more efficient allocation of capital to each company; and alignment of incentives with performance objectives. Based on the totality of the factors it considered, the TEGNA board of directors concluded that, at this time, separating TEGNA’s digital automotive marketplace business from its media and other digital businesses is preferable to retaining this business and is in the best interests of TEGNA and its stockholders.

On September 7, 2016, TEGNA announced that it intends to separate its digital automotive marketplace business from its media and other digital businesses. TEGNA intends to effect the separation through a pro rata distribution of all of the common stock of a new entity, Cars.com Inc., which was formed to hold the assets and liabilities associated with TEGNA’s digital automotive marketplace business.

On [    ], the TEGNA board of directors approved the distribution of all of the issued and outstanding shares of Cars.com common stock on the basis of one share of Cars.com common stock for every three shares of TEGNA common stock held as of the close of business on [    ], the record date for the distribution, subject to the satisfaction or waiver of the conditions to the distribution as described in this information statement.

At [    ], Eastern Time, on [    ], the distribution date, each TEGNA stockholder will receive one share of Cars.com common stock for every three shares of TEGNA common stock held at the close of business on [    ], the record date for the distribution, as described below. TEGNA stockholders will receive cash in lieu of any fractional shares of Cars.com common stock that they would have received after application of this ratio. TEGNA’s stockholders will not be required to make any payment, surrender or exchange their shares of TEGNA common stock or take any other action to receive their shares of Cars.com common stock in the distribution. The distribution of Cars.com common stock, as described in this information statement, is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”

 

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Reasons for the Separation

The TEGNA board of directors determined that the separation of TEGNA’s digital automotive marketplace business from its media and other digital businesses would be in the best interests of TEGNA and its stockholders and approved the separation. A wide variety of factors were considered by the TEGNA board of directors in evaluating the separation. Among other things, the TEGNA board of directors considered the following potential benefits of the separation:

 

  •   Distinct investment identity .    The separation will allow investors to separately value TEGNA and Cars.com based on each company’s distinct investment identities. Cars.com’s digital automotive marketplace business differs from TEGNA’s media and other digital businesses in several respects, such as sources of revenue, creation and procurement of content, sales channels and technology needs. The separation will enable investors to evaluate the merits, strategy, performance and future prospects of each company’s respective business and to invest in each company separately based on these distinct characteristics. The separation may attract new investors who may not have properly assessed the value of Cars.com’s digital automotive marketplace business relative to the value it is currently accorded as part of TEGNA.

 

  •   Enhanced strategic and management focus .    The separation will allow Cars.com and TEGNA to more effectively pursue and implement their distinct operating priorities and strategies and will improve management “fit and focus” at both companies, enabling the management of both companies to pursue their respective unique opportunities for long-term growth and profitability. Cars.com’s management will be able to focus exclusively on its digital automotive marketplace business, while the management of TEGNA will be dedicated to growing its media and digital businesses.

 

  •   Growth opportunities .    Following the separation, the equity of each company will be able to be used as a focused “acquisition currency,” and as such the separation will provide each company with greater opportunities to pursue value-enhancing acquisitions in industries with active M&A markets. Independent equity structures will afford each company direct access to capital markets, facilitating each company’s ability to pursue its specific growth objectives. Each company will also have the flexibility to develop a growth strategy that capitalizes on its distinct strengths and consequently each company will be well-positioned to capitalize on the available opportunity set in its specific market.

 

  •   More efficient allocation of capital .    The separation will permit each company to concentrate its financial resources solely on its own operations, providing each company with greater flexibility to invest capital in its business at a time and in a manner appropriate for its distinct strategy and business needs without having to compete with each other for investment capital. This will facilitate a more efficient allocation of capital based on each company’s profitability, cash flow and growth opportunities, and allow each company to pursue an optimal mix of return of capital to stockholders, reinvestment in leading-edge technology and value-enhancing investment and M&A opportunities in related digital businesses.

 

  •   Alignment of incentives with performance objectives .    The separation will facilitate incentive compensation arrangements with respect to equity of each of Cars.com and TEGNA, which will permit Cars.com and TEGNA employees to more narrowly focus on each respective business and further align employee incentives with those of the shareholders of each respective company.

Neither Cars.com nor TEGNA can assure you that, following the separation, any of the benefits described above or any other benefits will be realized to the extent anticipated, or at all.

 

  •  

Increased costs.     The separation may result in increased costs related to operating as a public company, such as compensating an independent board of directors, compliance with regulatory and stock exchange requirements, increased auditing and insurance fees and development of internal infrastructure and support functions, which costs were preliminarily estimated to be approximately $10 million to $15 million on an annual basis. The separation will also result in one-time separation costs,

 

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such as costs of legal counsel, financial advisors, debt issuance costs, the audit of Cars.com’s historical combined consolidated financial statements and accounting and valuation advisory work related to the separation, which costs were preliminarily estimated to be approximately $35 million to $40 million.

 

  •   Potential post-separation volatility in the price for Cars.com common stock.     Many investors holding TEGNA common stock may hold such stock because of a decision to invest in a company with TEGNA’s profile. Following the distribution, the shares of Cars.com common stock held by those investors will represent an investment in a digital automotive marketplace company with a different profile from TEGNA. This profile may not align with such investors’ investment strategies and may cause such holders to sell their shares. As a result, Cars.com’s stock price may decline or experience volatility as Cars.com’s stockholder base changes.

 

  •   Management focus and attention.     Prior to the completion of the separation, it is expected that the separation will require significant time and effort from TEGNA’s and Cars.com’s respective management teams and consequently may result in the diversion of management attention away from operation of their respective businesses and potentially negative effects on TEGNA’s and Cars.com’s existing business relationships.

 

  •   Future limitations on Cars.com’s operations to preserve the tax-free nature of the separation.     The tax matters agreement that TEGNA and Cars.com will enter into prior to the distribution will include restrictions that may limit Cars.com’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business. Under the tax matters agreement, for the two-year period following the distribution, Cars.com will be prohibited, except in certain circumstances, from: entering into any transaction resulting in the acquisition of all or a portion of its stock or assets, whether by merger or otherwise; merging, consolidating or liquidating; issuing equity securities beyond certain thresholds; repurchasing its capital stock beyond certain thresholds; and ceasing to actively conduct its business.

 

  •   Failure to achieve the anticipated benefits of the separation .     Cars.com may be unable to achieve the full strategic and financial benefits expected to result from the separation as described above in this section for a variety of reasons, including, among others: (i) following the separation, Cars.com may be more susceptible to market fluctuations and other adverse events than if it were still a part of TEGNA; (ii) following the separation, Cars.com’s business will be less diversified than TEGNA’s business prior to the separation; and (iii) the other actions required to separate TEGNA’s and Cars.com’s respective businesses could disrupt Cars.com’s operations.

The TEGNA board of directors concluded that the potential benefits of the separation outweighed these negative factors. For more information, see the section entitled “Risk Factors.”

In view of the wide variety of factors considered in connection with its evaluation of the separation, and the complexity of these matters, the TEGNA board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the separation. Rather, the TEGNA board of directors viewed its decisions as being based on the totality of the factors it considered. In addition, individual members of the TEGNA board of directors may have given differing weights to different factors. The TEGNA board of directors conducted an overall review of the factors described above.

Formation of Cars.com Inc. and Internal Reorganization

Cars.com Inc. was formed as a Delaware corporation on August 26, 2016 for the purpose of holding TEGNA’s digital automotive marketplace business. As part of the plan to separate the digital automotive marketplace business from the remainder of its businesses, pursuant to the separation and distribution agreement that TEGNA and Cars.com will enter into prior to the distribution, TEGNA plans to transfer the equity interests

 

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of certain entities that operate the digital automotive marketplace business, including Cars.com, LLC, DMR Holdings, Inc., and the assets and liabilities of the digital automotive marketplace business to Cars.com prior to the distribution. The distribution will not affect TEGNA’s continued ownership of its media and other digital businesses.

When and How You Will Receive the Distribution

With the assistance of Wells Fargo Shareowner Services, TEGNA expects to distribute all of Cars.com common stock at [    ], Eastern Time, on [    ], the distribution date, to all holders of outstanding shares of TEGNA common stock as of the close of business on [    ], the record date for the distribution. Wells Fargo Shareowner Services, which currently serves as the transfer agent and registrar for TEGNA’s common stock, will serve as the settlement and distribution agent in connection with the distribution and the transfer agent and registrar for Cars.com common stock.

If you own TEGNA common stock as of the close of business on the record date for the distribution, Cars.com common stock that you are entitled to receive in the distribution will be issued to you electronically, as of the distribution date, in direct registration form or to your bank or brokerage firm on your behalf. If you are a registered holder, Wells Fargo Shareowner Services will then mail you a direct registration account statement that reflects your shares of Cars.com common stock. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares. Direct registration form refers to a method of recording share ownership whereby no physical share certificates are issued to stockholders, as is the case in this distribution. If you own TEGNA common stock through the TEGNA dividend reinvestment plan, Cars.com shares you receive will be distributed to a new Cars.com dividend reinvestment plan account that will be created for you. If you sell TEGNA common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive shares of Cars.com common stock in the distribution.

Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your shares of TEGNA common stock and you are the registered holder of the shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of shares of Cars.com common stock that have been registered in book-entry form in your name.

Most TEGNA stockholders hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your TEGNA common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for Cars.com common stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.

Transferability of Shares You Receive

Shares of Cars.com common stock distributed to holders in connection with the distribution will be transferable without registration under the Securities Act, except for shares received by persons who may be deemed to be Cars.com affiliates. Persons who may be deemed to be Cars.com affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with Cars.com, which may include certain Cars.com executive officers, directors or principal stockholders. Securities held by Cars.com affiliates will be subject to resale restrictions under the Securities Act. Cars.com affiliates will be permitted to sell shares of Cars.com common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Number of Shares of Cars.com Common Stock You Will Receive

For every three shares of TEGNA common stock that you own at the close of business on [    ], the record date for the distribution, you will receive one share of Cars.com common stock on the distribution date. TEGNA

 

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will not distribute any fractional shares of Cars.com common stock to its stockholders. Instead, if you are a registered holder, Wells Fargo Shareowner Services (which is sometimes referred to herein as the distribution agent) will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. The distribution agent, in its sole discretion, without any influence by TEGNA or Cars.com, will determine when, how and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either TEGNA or Cars.com. Wells Fargo Shareowner Services is not an affiliate of either TEGNA or Cars.com. Neither Cars.com nor TEGNA will be able to guarantee any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

The aggregate net cash proceeds of these sales of fractional shares will be taxable for U.S. federal income tax purposes. For an explanation of the material U.S. federal income tax consequences of the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.” If you hold physical certificates for TEGNA common stock and are the registered holder, you will receive a check from the distribution agent in an amount equal to your pro rata share of the aggregate net cash proceeds of the sales. Cars.com estimates that it will take approximately two weeks from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your TEGNA common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will electronically credit your account for your share of such proceeds.

Treatment of Equity Based Compensation

Restricted Stock Unit Awards Held by Employees

Awards Granted Prior to 2016.     As of the distribution date, each outstanding time-vesting TEGNA restricted stock unit award granted prior to 2016 will be converted into an award in respect of both shares of TEGNA common stock and shares of Cars.com common stock. The number of shares of TEGNA common stock subject to each award will be the same as the number subject to the award prior to the separation, while the number of shares of Cars.com common stock subject to the award will be determined based on the number of Cars.com shares distributed per TEGNA share in the separation. The adjusted restricted stock unit awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA restricted stock unit awards immediately before the separation.

Awards Granted in 2016 or Later Held by TEGNA Employees.     As of the distribution date, each outstanding and unvested time-vesting TEGNA restricted stock unit award granted in 2016 or later held by an employee who will remain employed by TEGNA following the separation or a former employee of TEGNA will remain denominated in shares of TEGNA common stock, provided that the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA restricted stock unit award as measured immediately before and immediately after the separation, subject to rounding. The adjusted restricted stock unit awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA restricted stock unit awards immediately before the separation.

Awards Granted in 2016 or Later Held by Cars.com Employees.     As of the distribution date, each outstanding and unvested time-vesting TEGNA restricted stock unit award granted in 2016 or later held by an employee who will be employed by Cars.com following the separation or a former employee of the Cars.com business will be converted into an award denominated in shares of Cars.com common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA restricted stock unit award as measured immediately before and immediately after the

 

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separation, subject to rounding. The adjusted restricted stock unit awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA restricted stock unit award immediately before the separation.

Performance Share Awards

Awards Other than Those Granted to TEGNA Employees in 2017.     As of the distribution date, each outstanding TEGNA performance share award other than those granted to TEGNA employees in 2017 will be converted into an award in respect of both shares of TEGNA common stock and shares of Cars.com common stock. The number of shares of TEGNA common stock subject to each award will be the same as the number subject to the award prior to the separation, while the number of shares of Cars.com common stock subject to the award will be determined based on the number of Cars.com shares distributed per TEGNA share in the separation. The adjusted performance share awards otherwise will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA performance share awards immediately before the separation, except that performance goals will be measured following the separation by aggregating both TEGNA performance and Cars.com performance.

Awards Granted to TEGNA Employees in 2017.     As of the distribution date, each outstanding TEGNA performance share award granted in 2017 held by an employee who will remain employed by TEGNA following the separation will remain denominated in shares of TEGNA common stock, provided that the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA performance share award as measured immediately before and immediately after the separation, subject to rounding. The adjusted performance share awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA performance share awards immediately before the separation.

Stock Option Awards

As of the distribution date, each outstanding TEGNA stock option award will remain an award of options to purchase shares of TEGNA common stock, provided that the number of shares subject to the award and the exercise price thereof will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA stock option award as measured immediately before and immediately after the separation, subject to rounding. The adjusted stock option awards will be subject to substantially the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original TEGNA stock option awards immediately before the separation.

Restricted Stock and Restricted Stock Unit Awards Held by Non-Employee Directors

Awards Granted Prior to 2017 . As of the distribution date, each outstanding TEGNA restricted stock award and restricted stock unit award granted prior to 2017 held by a non-employee director of TEGNA will be converted into an equivalent award in respect of both shares of TEGNA common stock and shares of Cars.com common stock. The number of shares of TEGNA common stock subject to each award will be the same as the number subject to the award prior to the separation, while the number of shares of Cars.com common stock subject to the award will be determined based on the number of Cars.com shares distributed per TEGNA share in the separation. The adjusted restricted stock awards and restricted stock unit awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA restricted stock awards and restricted stock unit awards immediately before the separation.

Awards Granted in 2017 Held by Non-Employee Directors not Transferring to Cars.com . As of the distribution date, each outstanding TEGNA restricted stock unit award granted in 2017 held by a non-employee director of TEGNA who is not becoming a non-employee director of Cars.com following the separation will remain denominated in shares of TEGNA common stock, provided that the number of shares subject to the award

 

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will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA restricted stock unit award as measured immediately before and immediately after the separation, subject to rounding. The adjusted restricted stock unit awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA restricted stock unit awards immediately before the separation.

Awards Granted in 2017 Held by Non-Employee Directors Transferring to Cars.com . As of the distribution date, each outstanding TEGNA restricted stock unit award granted in 2017 held by a non-employee director of TEGNA who will become a non-employee director of Cars.com following the separation will be converted into an award denominated in shares of Cars.com common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA restricted stock unit award as measured immediately before and immediately after the separation, subject to rounding. The adjusted restricted stock unit awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original TEGNA restricted stock unit award immediately before the separation.

Treatment of 401(k) Shares

TEGNA common stock held in TEGNA’s 401(k) plans will be treated in the same manner in the distribution as outstanding shares of TEGNA common stock.

Results of the Distribution

After the distribution, Cars.com will be an independent, publicly traded company. The actual number of shares to be distributed will be determined at the close of business on [    ], the record date for the distribution, and will reflect any settlement of TEGNA stock based awards between the date the TEGNA board of directors declares the distribution and the record date for the distribution. The distribution will not affect the number of outstanding TEGNA common stock or any rights of TEGNA stockholders. TEGNA will not distribute any fractional shares of Cars.com common stock.

Cars.com will enter into a separation agreement and other related agreements with TEGNA before the distribution to effect the separation and provide a framework for Cars.com’s relationship with TEGNA after the separation. These agreements will provide for the allocation between TEGNA and Cars.com of TEGNA’s assets, liabilities and obligations (including its investments, property, employee benefits and tax-related assets and liabilities) attributable to periods prior to Cars.com’s separation from TEGNA and will govern the relationship between TEGNA and Cars.com after the separation. For a more detailed description of these agreements, see the section entitled “Relationship with TEGNA Following the Separation and Distribution.”

Market for Cars.com Common Stock

There is currently no public trading market for Cars.com common stock. Cars.com expects to have its common stock approved to be listed on the New York Stock Exchange under the symbol “CARS.” Cars.com has not and will not set the initial price of its common stock. The initial price will be established by the public markets.

Cars.com cannot predict the price at which its common stock will trade after the distribution. In fact, the combined trading prices, after the distribution, of the shares of Cars.com common stock that each TEGNA stockholder will receive in the distribution and TEGNA common stock held at the record date for the distribution may not equal the “regular-way” trading price of TEGNA common stock immediately prior to the distribution. The price at which Cars.com common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for Cars.com common stock will be determined in the public markets and may be influenced by many factors. See the section entitled “Risk Factors—Risks Related to Cars.com Common Stock.”

 

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Trading Between the Record Date and Distribution Date

Beginning on or about the record date for the distribution and continuing up to and including the distribution date, TEGNA expects that there will be two markets in TEGNA common stock: a “regular-way” market and an “ex-distribution” market. TEGNA common stock that trades on the “regular-way” market will trade with an entitlement to Cars.com common stock distributed pursuant to the separation. TEGNA common stock that trades on the “ex-distribution” market will trade without an entitlement to Cars.com common stock distributed pursuant to the distribution. Therefore, if you sell TEGNA common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive Cars.com common stock in the distribution. If you own TEGNA common stock at the close of business on the record date and sell that stock on the “ex-distribution” market up to and including the distribution date, you will receive the shares of Cars.com common stock that you are entitled to receive pursuant to your ownership as of the record date of TEGNA common stock.

Furthermore, beginning on or about the record date for the distribution and continuing up to and including the distribution date, Cars.com expects that there will be a “when-issued” market in its common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for Cars.com common stock that will be distributed to holders of TEGNA common stock on the distribution date. If you owned TEGNA common stock at the close of business on the record date for the distribution, you would be entitled to Cars.com common stock distributed pursuant to the distribution. You may trade this entitlement to shares of Cars.com common stock, without TEGNA common stock you own, on the “when-issued” market, but your transaction will not settle until after the distribution date. On the first trading day following the distribution date, “when-issued” trading with respect to Cars.com common stock will end, and “regular-way” trading will begin.

Conditions to the Distribution

Cars.com has announced that the distribution will be effective at [    ], Eastern Time, on [    ], which is the distribution date, provided that the following conditions shall have been satisfied (or waived by TEGNA in its sole discretion):

 

  •   the transfer of assets and liabilities from TEGNA to Cars.com shall have been completed in accordance with the separation agreement that TEGNA and Cars.com will enter into prior to the distribution;

 

  •   the continued validity of the private letter ruling received by TEGNA from the IRS with respect to certain requirements for qualification for tax-free treatment under Section 355 of the Code;

 

  •   the receipt by TEGNA of an opinion from TEGNA’s outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code will be satisfied;

 

  •   an independent appraisal firm acceptable to TEGNA shall have delivered one or more opinions to the board of directors of TEGNA at the time or times requested by the board of directors of TEGNA confirming the solvency and financial viability of TEGNA before the consummation of the distribution and each of TEGNA and Cars.com after consummation of the distribution, and such opinions shall be acceptable to TEGNA in form and substance in TEGNA’s sole discretion and such opinions shall not have been withdrawn or rescinded;

 

  •   the SEC shall have declared effective Cars.com’s registration statement on Form 10, of which this information statement forms a part, and this information statement shall have been made available to TEGNA stockholders;

 

  •   all actions and filings necessary or appropriate under applicable U.S. federal, state or other securities laws shall have been taken and, where applicable, shall have become effective or been accepted by the applicable governmental authority;

 

  •   the transaction agreements relating to the separation that TEGNA and Cars.com will enter into prior to the distribution shall have been duly executed and delivered by the parties;

 

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  •   no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions shall be in effect;

 

  •   the shares of Cars.com common stock to be distributed shall have been approved for listing on the New York Stock Exchange, subject to official notice of distribution;

 

  •   TEGNA shall have received the proceeds from the cash transfer from Cars.com described in the section entitled “Relationship with TEGNA Following the Separation and Distribution—Separation Agreement—Cash Transfer from Cars.com” and TEGNA shall be satisfied in its sole and absolute discretion that, as of the effective time of the distribution, it shall have no further liability under any of the Cars.com financing arrangements described under “Description of Material Indebtedness”; and

 

  •   no event or development shall have occurred or exist that, in the judgment of TEGNA’s board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and other related transactions.

TEGNA cannot assure you that any or all of these conditions will be met and will have sole discretion to waive any of the conditions to the distribution. In addition, TEGNA will have the sole and absolute discretion to determine and change the terms of, and whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the record date for the distribution, the distribution date and the distribution ratio. TEGNA may rescind or delay its declaration of the distribution even after the record date for the distribution regardless of whether the conditions to the distribution have been satisfied. TEGNA does not intend to notify its stockholders of any modifications to the terms of the separation and distribution that, in the judgment of its board of directors, are not material. For example, the TEGNA board of directors might consider material such matters as significant changes to the distribution ratio, the assets to be contributed or the liabilities to be assumed in the separation or if TEGNA decides to abandon the distribution. To the extent that the TEGNA board of directors determines that any modifications by TEGNA materially change the material terms of the separation and distribution or if TEGNA decides to abandon the distribution, TEGNA will notify TEGNA stockholders in a manner reasonably calculated to inform them about the modification or abandonment as may be required by law, by, for example, publishing a press release, filing a current report on Form 8-K or making available a supplement to this information statement.

Regulatory Approval

Apart from the registration under U.S. federal securities laws of Cars.com common stock to be distributed in the distribution and related stock exchange listing requirements, Cars.com does not believe that any other material governmental or regulatory filings or approvals will be necessary to consummate the distribution. The distribution will not affect the ownership or control of TEGNA’s television stations or its television licensee subsidiaries; consequently, FCC approval will not be required in connection with the distribution with respect to any of the television station licenses.

No Appraisal Rights

Under the DGCL, TEGNA stockholders will not have appraisal rights in connection with the distribution.

 

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DIVIDEND POLICY

Cars.com currently intends to retain future earnings to finance and grow its business. As a result, Cars.com does not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by Cars.com will be made by its board of directors from time to time in accordance with applicable law.

 

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CAPITALIZATION

The following table sets forth Cars.com’s capitalization as of December 31, 2016, on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in Cars.com’s unaudited pro forma financial information. The information below is not necessarily indicative of what Cars.com’s capitalization would have been had the separation, distribution and related transactions been completed as of December 31, 2016. In addition, it is not indicative of Cars.com’s future capitalization. This table should be read in conjunction with the sections entitled “Unaudited Pro Forma Financial Statements,” “Selected Historical Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as with Cars.com’s financial statements and notes thereto included in the section entitled “Index to Financial Statements.”

 

     As of December 31, 2016  
     Historical      Pro Forma  

In thousands of dollars, except share data

     

Cash and cash equivalents

   $ 8,896      $ 8,896  

Capitalization:

     

Debt:

     

Floating rate debt (1)

        650,000  
     

 

 

 

Total debt

        650,000  
     

 

 

 

Equity:

     

Common stock ($0.01 par value per share); [    ] shares authorized, 71,597,565 shares issued and outstanding, pro forma

        716  

Additional paid-in capital

        1,513,622  

Parent’s investment, net (2)

   $     2,417,285        —  
  

 

 

    

 

 

 

Total equity

   $ 2,417,285        1,514,338  
  

 

 

    

 

 

 

Total capitalization

   $ 2,417,285      $ 1,514,338  
  

 

 

    

 

 

 

 

(1) On or about the distribution date, Cars.com expects to enter into certain financing arrangements to fund a $650 million cash transfer to TEGNA, as well as to fund working capital and other liquidity needs and to provide letters of credit as necessary. Floating rate debt and total debt above reflect an anticipated term loan due quarterly through May 2022 of $650 million, net of an anticipated $5 million of debt issuance costs, plus a draw of $5 million on an anticipated revolving credit facility.
(2) Reflects the net Parent investment impact as a result of the anticipated post-distribution capital structure. As of the distribution date, Parent’s investment, net, in Cars.com will be exchanged to reflect the distribution of Cars.com’s common stock to Parent stockholders and to reflect the aggregate par value of Cars.com shares of common stock being distributed in the distribution.

Cars.com anticipates that, as a result of TEGNA’s centralized cash management program, Cars.com’s cash balance at the time of the distribution will be approximately $200 thousand, plus any cash from incremental borrowings that may be made under Cars.com’s revolving credit facility in addition to the approximately $5 million of cash from such borrowings that is anticipated to be included in the $650 million cash transfer to TEGNA.

 

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SELECTED HISTORICAL FINANCIAL DATA

Set forth below are selected historical financial data for Cars.com for the years ended December 31, 2016 and December 31, 2015, the period from October 1, 2014 to December 31, 2014 and the period from January 1, 2014 to October 1, 2014. Operating results for any prior period are not necessarily indicative of results to be expected in any future period. We derived the statement of income data for each of the years ended December 31, 2016 and December 31, 2015 and the period from October 1, 2014 to December 31, 2014 and the balance sheet data as of December 31, 2016 and December 31, 2015 from the historical financial records of TEGNA. Statement of income data for the period January 1, 2014 to October 1, 2014 was derived from the historical accounts of Cars.com under the previous ownership of Classified Ventures, LLC.

The selected historical financial data set forth below should be read in conjunction with the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Financial Statements,” as well as with the historical financial statements and the notes thereto included in this information statement. The selected historical financial data reflects Cars.com’s results as historically operated as a part of TEGNA subsequent to TEGNA’s acquisition of Cars.com on October 1, 2014 and as historically operated under the previous ownership of Classified Ventures, LLC prior to the acquisition. These results may not be indicative of Cars.com’s future performance as a stand-alone company following the distribution.

 

    For the year ended
December 31, 		    For the period
Oct. 1,
2014 to
Dec. 31,
2014
Successor 		    For the period
Jan. 1,
2014 to
Oct. 1,
2014
Predecessor 		 
(In thousands of dollars)   2016
Successor 		    2015
Successor 		     

Selected Statement of Income Information

         

Revenues

         

Retail

  $     462,776     $     424,632     $     101,011     $     280,283  

Wholesale

    170,330       171,878       44,928       69,732  

Total revenues

    633,106       596,510       145,939       350,015  

Income from continuing operations

    176,370       157,838       16,218       6,377  

Net income

    176,370       157,838       16,218       575,378  

 

     As of December 31,  
(In thousands of dollars)    2016 Successor      2015 Successor  

Selected Balance Sheet Information

     

Cash and cash equivalents

   $ 8,896      $ 100  

Total assets

         2,547,266            2,473,667  

Total borrowings

     —        —  

Parent’s investment, net

     2,417,285        2,304,519  

 

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UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements consist of the unaudited pro forma statement of income for the year ended December 31, 2016 and an unaudited pro forma balance sheet as of December 31, 2016. These unaudited pro forma financial statements were derived from the historical combined financial statements of Cars.com, LLC, which include DMR Holdings, Inc. (“DealerRater”) following its acquisition by TEGNA. These combined financial statements are included elsewhere in this information statement. The pro forma adjustments give effect to the distribution and the related transactions, as described in the notes to the unaudited pro forma financial statements. The unaudited pro forma financial statement of income for the year ended December 31, 2016 give effect to the distribution as if it had occurred on January 1, 2016, the first day of fiscal 2016. The unaudited pro forma combined balance sheet gives effect to the distribution as if it had occurred on December 31, 2016, Cars.com’s latest balance sheet date.

The unaudited pro forma financial statements include certain adjustments that are necessary to present fairly Cars.com unaudited pro forma statement of income and unaudited pro forma balance sheet as of and for the period indicated. The pro forma adjustments give effect to events that are (i) directly attributable to the distribution transactions, (ii) factually supportable, and (iii) with respect to the unaudited pro forma statement of income, expected to have a continuing impact on Cars.com and are based on assumptions that management believes are reasonable given the information currently available.

The unaudited pro forma financial statements give effect to the following:

 

  •   The impact of federal and certain state and local income taxes to which Cars.com Inc. will be subject following the reorganization and distribution;

 

  •   The anticipated post-distribution capital structure, including the incurrence of indebtedness pursuant to the financing arrangements expected to be entered into on or around the distribution date, and the payment of a cash transfer to TEGNA.

The unaudited pro forma statement of income does not include adjustments for increased costs of operating as a stand-alone company, such as compensating an independent board of directors, compliance with regulatory and stock exchange requirements, increased auditing and insurance fees and development of internal infrastructure and support functions, which costs were preliminarily estimated to be approximately $10 million to $15 million on an annual basis. Such increased costs are not included in the unaudited pro forma financial statements as their impact is not factually supportable.

The unaudited pro forma financial statements are subject to the assumptions and adjustments described in the accompanying notes. These unaudited pro forma financial statements are subject to change as TEGNA and Cars.com finalize the terms of the separation and distribution agreement and other agreements and transactions related to the distribution.

The unaudited pro forma financial statements are for illustrative purposes only and do not reflect what Cars.com’s financial position and results of operations would have been had the spin-off occurred on the dates indicated and are not necessarily indicative of Cars.com’s future financial position and future results of operations.

 

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CARS.COM INC.

UNAUDITED PRO FORMA STATEMENT OF INCOME

For the Year Ended December 31, 2016

In thousands of dollars, except per share amounts

 

Fiscal year ended

   Historical      Pro Forma
Adjustments 		          Pro Forma  

Revenues

         

Revenue—Retail

   $     462,776        —       $ 462,776  

Revenue—Wholesale

     170,330        —         170,330  
  

 

 

    

 

 

     

 

 

 

Total

     633,106        —         633,106  
  

 

 

    

 

 

     

 

 

 

Operating expenses

         

Product support, technology and operations

     129,864        —         129,864  

Marketing and sales

     211,032        —         211,032  

General and administrative

     32,202        —         32,202  

Affiliate revenue share

     8,529        —         8,529  

Amortization of intangible assets

     74,829        —         74,829  
  

 

 

    

 

 

     

 

 

 

Total

     456,456        —         456,456  
  

 

 

    

 

 

     

 

 

 

Operating income

     176,650            176,650  
  

 

 

    

 

 

     

 

 

 

Interest expense

     —        (18,810 )      (b )      (18,810 ) 

Other income, net

     308        —         308  
  

 

 

    

 

 

     

 

 

 

Income before income taxes

     176,958        (18,810 )        (158,148 ) 
  

 

 

    

 

 

     

 

 

 

Provision for income taxes

     588        59,377       (a )      59,965  
  

 

 

    

 

 

     

 

 

 

Net income

   $ 176,370      $ (78,187 )      $ 98,183  
  

 

 

    

 

 

     

 

 

 

Net income per share—basic

     n/a          $ 1.37  

Net income per share—diluted

     n/a          $ 1.37  

Weighted—average shares outstanding—basic

     n/a          (e )      71,598  

Weighted—average shares outstanding—diluted

     n/a          (e )      71,598  

See notes to unaudited pro forma financial statements.

 

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CARS.COM INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of December 31, 2016

In thousands of dollars

 

     Historical      Pro Forma
Adjustments 		          Pro Forma  

Assets

         

Current assets

         

Cash and cash equivalents

   $ 8,896        —       $ 8,896  

Accounts receivable, less allowance

     98,303        —         98,303  

Prepaid expenses and other current assets

     12,342        —         12,342  
  

 

 

    

 

 

     

 

 

 

Total current assets

     119,541        —         119,541  
  

 

 

    

 

 

     

 

 

 

Property and equipment

         

Total cost

     37,190        —         37,190  

Less accumulated depreciation

     (16,729)        —         (16,729 ) 
  

 

 

    

 

 

     

 

 

 

Net property and equipment

     20,461        —         20,461  
  

 

 

    

 

 

     

 

 

 

Intangible and other assets

         

Goodwill

     788,107        —         788,107  

Intangible assets, less accumulated amortization

     1,607,369        —         1,607,369  

Investments and other assets

     11,788        —         11,788  
  

 

 

    

 

 

     

 

 

 

Total assets

   $ 2,547,266      $ —       $ 2,547,266  
  

 

 

    

 

 

     

 

 

 

Liabilities and equity

         

Current liabilities

         

Accounts payable

   $ 7,844        —       $ 7,844  

Accrued liabilities

     63,253        (1,001 )      (d)       62,252  

Deferred revenue

     887        —         887  
  

 

 

    

 

 

     

 

 

 

Total current liabilities

     71,984        (1,001 )        70,983  
  

 

 

    

 

 

     

 

 

 

Deferred incentive plans

     3,913        —         3,913  

Unfavorable contracts liability

     44,085        —         44,085  

Deferred tax liability

     8,325        253,948       (d)       262,273  

Long-term debt

     —        650,000       (c)       650,000  

Other noncurrent liabilities

     1,674        —         1,674  
  

 

 

    

 

 

     

 

 

 

Total noncurrent liabilities

     57,997        903,948         961,945  
  

 

 

    

 

 

     

 

 

 

Total liabilities

     129,981        902,947         1,032,928  
  

 

 

    

 

 

     

 

 

 

Equity

         

Common stock

     —        716       (f)       716  

Additional paid-in capital

     —        1,513,622       (f)       1,513,622  

Parent investment, net

     2,417,285        (2,417,285 )      (f),(c)       —  
  

 

 

    

 

 

     

 

 

 

Total equity

     2,417,285        (902,947 )        1,514,338  
  

 

 

    

 

 

     

 

 

 

Total liabilities and equity

   $ 2,547,266      $ —       $ 2,547,266  
  

 

 

    

 

 

     

 

 

 

 

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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

For further information regarding the combined historical financial statements of Cars.com, LLC and DMR Holdings, Inc., refer to the financial statements and the notes thereto in this information statement. The unaudited pro forma combined balance sheet as of December 31, 2016 and unaudited pro forma statement of income for the year ended December 31, 2016, include adjustments related to the following:

 

  (a) The determination of whether taxes should be presented in the financial statements of a limited liability company (“LLC”) is dependent on whether tax law considers the entity to be a flow-through entity. Cars.com, LLC is a multi-member LLC that was considered to be a partnership for U.S. income tax purposes. Such multi-member LLCs generally are not subject to federal, state or local income taxes and are therefore considered flow-through entities. Accordingly, no income taxes have been recorded in the historical financial statements related to Cars.com, LLC. DealerRater is a corporation subject to federal, state, and local income taxes, and as such, income taxes incurred by DealerRater since its acquisition on August 1, 2016 have been recognized in the historical financial statements. Cars.com, LLC will continue to be considered a partnership for U.S. federal, state and local income tax purposes, and Cars.com Inc. will be subject to applicable federal and certain state and local income taxes with respect to the taxable income of Cars.com, LLC. This adjustment reflects Cars.com Inc. corporate income taxes based on a blended statutory tax rate of 37.5%, which represents a provision for U.S. federal, state and local income taxes.

 

  (b) Reflects interest expense of $18.8 million for the year ended December 31, 2016, related to anticipated borrowings of $655 million comprised of a $650 million term loan and a $5 million borrowing under the revolving credit facility arrangements that Cars.com expects to enter into in connection with the distribution. Interest expense is based on an interest rate equal to the London Interbank Offered Rate plus 1.75%. A 0.125% change to the annual interest rate would change interest expense by approximately $0.8 million on an annual basis. The annual interest rate is subject to change depending on the final amount of debt to be incurred and final terms of the term loan and revolving credit facility agreements.

 

  (c) Reflects anticipated borrowings in the amount of $655 million that Cars.com expects to enter into in connection with the distribution, net of $5 million of anticipated debt issuance costs associated with the borrowings on the term loan (which will be amortized as interest expense over the term of the borrowings). The $650 million cash transfer Cars.com intends to make to TEGNA in connection with the distribution will be made using the net borrowing proceeds of $650 million.

 

  (d) Represents adjustments to income taxes payable and a deferred tax liability for the difference between the book basis and tax basis of Cars.com Inc.’s investment in the Cars.com, LLC partnership.

 

  (e) The number of Cars.com shares used to compute pro forma basic and diluted earnings per share is based on the weighted average number of Parent common shares outstanding for the year ended December 31, 2016, adjusted for a distribution ratio of 1 share of Cars.com common stock for every 3 TEGNA common shares outstanding.

 

  (f) Reflects the reclassification of equity as a result of the anticipated post-distribution capital structure. As of the distribution date, the net parent investment in Cars.com will be exchanged to reflect the distribution of Cars.com common stock to TEGNA stockholders and to reflect the $0.01 par value of 71.6 million outstanding shares of common stock.

 

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BUSINESS

Overview

With an average of more than 35 million visits each month during 2016, approximately 52% of which are mobile, and according to comScore an average of approximately 11.8 million unique monthly visitors over the same time period, Cars.com is a leading online research destination for car shoppers. March 2016 research by DATALOGIX commissioned by Cars.com shows that approximately one-third of all vehicles sold in the U.S. in 2015 were researched on Cars.com. Today, nearly all consumers visit a third-party site such as Cars.com to gather vehicle and dealership information and to build consumer confidence prior to buying a vehicle. Cars.com offers credible and easy-to-understand information from consumers and experts that help car buyers to price and find new and used vehicles and car owners to find qualified service and repair providers. Cars.com aims to help consumers by providing objective, independent and trusted advice at every stage of the car ownership journey. Additionally, Cars.com operates Auto.com, DealerRater.com, NewCars.com and PickupTrucks.com, specialized websites directed towards different consumer segments. Leveraging its market-leading position and growing audience, Cars.com also informs digital marketing strategies through consumer insights and innovative products, helping automotive dealers and manufacturers to reach in-market car shoppers more effectively. For the years ended December 31, 2016, 2015 and supplemental pro forma 2014, Cars.com had revenues of $633 million, $597 million and $515 million, respectively.

Cars.com generates revenues through the sale of online subscription advertising products targeting car dealerships by its own direct sales force as well as its affiliate sales channels. It hosts approximately 4.7 million vehicle listings at any given time and serves approximately 20,000 franchise and independent car dealers throughout all 50 states. Cars.com also generates revenue through the sale of display advertising to national advertisers.

Reflecting trends in consumer behavior, the digital automotive advertising market has grown rapidly, with U.S. automotive industry digital advertising spend reaching approximately $7.4 billion in 2015 after having increased at a compound annual growth rate of 20.6% from 2010 to 2015 according to a June 8, 2016 eMarketer report and analysis based on eMarketer data. As car shoppers increasingly turn to digital resources to research vehicles before making a purchase, Cars.com is well-positioned to take advantage of these shifting consumer and dealer trends due to its industry-leading automotive advertising solutions and user-friendly and innovative vehicle search platform.

The Cars.com business was founded in 1998 as a division of Classified Ventures, LLC, a joint venture formed by eight leading media companies, including TEGNA, to provide nationally branded online services for the classified advertising marketplace. On October 1, 2014, TEGNA purchased the 73% of equity interests in Classified Ventures, LLC that it did not previously own for $1.8 billion in cash. Since it was launched as one of the first digital automotive marketplaces in 1998, Cars.com has continuously pioneered new products to build upon its long-established brand strength and capture a growing share of a growing market. Its most recent initiatives to better serve and expand upon its existing buyer and seller customer bases include the introduction of a suite of new services and products. In March 2015, Cars.com moved into the market for vehicle service research with the launch of its partnership with RepairPal, Inc., an innovative solution that provides information about reputable certified repair shops and allows consumers to receive estimates on potential vehicle repairs. In March 2016, Cars.com launched its Sell and Trade product, which captures the attention of car shoppers who want to transact quickly and easily by promoting dealerships interested in buying used cars for cash. The product also helps dealerships build their car-buying programs, as it provides car owners with multiple avenues to sell their vehicles, including through Cars.com’s Quick Offer online tool and mobile application. Further, in May 2015, Cars.com launched Event Positions—an ad position that promotes dealership events to an in-market audience during a specific time frame—to provide even more targeted and event-specific advertising opportunities to its seller customers. Cars.com is also innovating through its mobile platforms. The recently launched Lot Insights reporting tool is the first-of-its-kind in the industry. Lot Insights uses geo-fencing to measure the influence that Cars.com has on mobile shoppers by tracking those consumers on or near a dealer’s lot and delivering valuable insights to dealer advertisers. Most recently, Cars.com has deepened its editorial presence through TEGNA’s acquisition of DMR Holdings, Inc. (“DealerRater”) the industry’s largest automotive

 

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consumer review website with nearly 3.1 million consumer reviews of local dealers, which will be contributed to Cars.com. The acquisition provides Cars.com with new solutions to help dealers and original equipment manufacturers (“OEMs”) manage, measure and harness the power of social media.

As evidenced by these recent successful product launches, a combination of dealer and consumer information and feedback has positioned Cars.com to successfully develop new, complementary products and services .   In the coming years, Cars.com intends to launch additional products that will continue to enhance the car buying experience, drive traffic to the Cars.com sites and mobile applications and better serve Cars.com’s buyer and seller customers.

Products and Services

Cars.com offers a suite of unique products and services targeting the automotive needs of its buyer and seller customers. Cars.com’s flagship service is its digital automotive marketplace search engine that empowers car buyers to make informed purchasing decisions and helps sellers to engage with a substantial portion of their target customer base. This online automotive marketplace service connects buyers and sellers across five distinct websites: Cars.com, Auto.com, DealerRater.com, NewCars.com and PickupTrucks.com. Cars.com’s automotive marketplace products also include credible user and expert automotive and dealer reviews, which further empower consumer decision-making.

Cars.com primarily generates revenues through the sale of online subscription advertising products to car dealerships by Cars.com’s own direct sales force, as well as through affiliate sales channels. Additionally, Cars.com generates revenue through the sale of display advertising to national advertisers. Finally, Cars.com helps consumers sell vehicles via a private party channel.

Consumer Products and Services

Car buyers and car owners interface with Cars.com primarily through the Cars.com sites and mobile applications. The four key elements of Cars.com’s consumer experience–shop, sell, service and research and expert advice—were designed to empower consumers to make convenient, informed decisions at every stage of the car ownership life cycle and therefore continually drive traffic to the Cars.com sites and mobile applications for the benefit of Cars.com’s advertising partners.

Shop .     Through the Cars.com sites and mobile applications, consumers can access Cars.com’s automotive marketplace products which enable consumers to search for new or used vehicles on automotive dealership lots across the country by make, model, price and location. The Cars.com sites and mobile applications also connect consumers with dealers through email, text, telephone, chat, direct traffic referral, or a viewable map of the dealer’s location, providing convenience to consumers and concrete results to Cars.com dealership advertising partners.

Sell .    To supplement the features of its flagship automotive marketplace products, in March 2016, Cars.com launched Sell & Trade, a solution that allows consumers to quickly and easily sell a vehicle through its new Quick Offer online tool and mobile application. Car sellers upload vehicle information and receive real-time online cash offers from local dealers with no obligation to buy a replacement vehicle. Further, car sellers can list personal vehicles on the Cars.com sites, enabling consumer-to-consumer sales.

Service .    Cars.com partners with RepairPal, an innovative solution that connects consumers with reputable certified repair facilities, enabling consumers to obtain and compare vehicle repair estimates. RepairPal is both an integrated part of the Cars.com sites and a stand-alone, one-stop resource catering to car owners’ service and maintenance needs. RepairPal certifies automobile repair facilities nationwide based on training, reputation, warranty and fair pricing. In addition to connecting owners and repair service providers, RepairPal researches service data to determine the range of average repair prices based on labor rates and parts prices across a wide breadth of makes, models and model years, providing consumers with confidence in their selection of repair

 

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facilities and reducing consumers’ fear of overpaying. By enabling consumers to use self-education to better evaluate the service estimates that they receive, this solution aligns with Cars.com’s strategy of building brand value through empowering consumer decision-making. RepairPal also provides relevant content to answer service related questions and aggregates automotive safety and recall notices in one convenient location.

Research and Expert Advice .     The Cars.com editorial team tests, reviews and photographs more than 200 different car makes and models every year and creates independent and unbiased coverage of the automotive landscape focusing on consumer advice, trends and analysis. Cars.com provides expert advice on a wide array of car buying topics such as incentive information, financing options and fuel economy, thereby allowing consumers to choose their future vehicles based on the automobile characteristics that matter most to them.

Dealer Reviews .     In August 2016, TEGNA acquired DealerRater, the industry’s largest automotive consumer review website, which will be contributed to Cars.com. With nearly 3.1 million consumer reviews of local dealers, DealerRater harnesses the power of social media to help consumers decide where to buy a car. Beginning in 2017, Cars.com expects to deliver DealerRater’s product suite to local dealers to help them connect in-market shoppers with the right person in their dealership, helping dealers to better engage, monitor and promote their online presence to bring qualified consumers into their showrooms.

Advertiser Products and Services

Cars.com’s network of approximately 20,000 dealers lists approximately 4.7 million vehicles across the Cars.com sites and mobile applications that can be viewed by consumers at any given time whether they are at home or on the go. Cars.com’s brand and products afford dealerships access to more than 35 million monthly visits from consumers looking to buy, sell or service a vehicle. Due to the integrated consumer product and service offerings on the Cars.com sites and mobile applications that target not only car buyers, but also car sellers and car owners, dealers can advertise both their inventory of new and used cars and their service departments, while gaining access to an audience of motivated consumers looking for a convenient way to sell a car.

Online advertising packages .      Cars.com offers dealers a monthly online subscription enabling dealers to showcase their new and used car inventory to motivated car buyers on the platforms that are responsible for helping consumers find approximately one-third of the automobiles purchased in the U.S. in 2015, according to March 2016 research by DATALOGIX that was commissioned by Cars.com. Vehicles for sale are highlighted with multiple photos, videos and vehicle specifications, and consumers are, at all times, but a few clicks away from contacting the listing dealer and moving further into the car buying process. To enhance their vehicle listings, dealers can purchase premium advertising services that can be uniquely tailored to an individual dealer’s current needs. For example, Cars.com’s Event Positions ad position promotes dealership events to in-market audiences during a specific time frame. Cars.com’s recently developed Lot Insights tool uses innovative geo-fencing to measure the influence that Cars.com has in connecting local in-market car shoppers to local dealers by tracking Cars.com mobile users on or near a dealer’s lot. These innovative products and tools have positioned Cars.com to take advantage of the growing online automotive advertising spending despite increasing competition in the digital automotive marketplace industry.

Sell & Trade .    The Sell & Trade service of Cars.com’s innovative new Quick Offer online tool and mobile application leverages consumers’ desire for a convenient, simple car sales process to benefit its listing dealers by permitting these dealers to access a new audience of motivated consumers looking to sell a car and by giving dealers increasing control over the bidding process. Sell & Trade provides dealers with a new solution to building their used car inventories, which is critical to dealer profitability.

RepairPal Certified .    RepairPal Certified works by connecting consumers with sellers of automobile repair services. In addition, Cars.com’s listing dealers can also advertise their service repair centers through Cars.com’s partnership with RepairPal. By leveraging consumer’s trust in the Cars.com brand, the RepairPal Certified product offers advertising dealers effective content delivery regarding their automotive service centers in an effort to facilitate growth of alternate, service-based revenue streams.

 

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Pay-per-Lead .     Cars.com operates NewLeadsPlus, a separate pay-per-lead product line that acquires consumer leads through Internet search engines and automotive destination websites, including its own, and sells these leads to members of its dealer network. These consumer leads feature the contact information for ready-to-buy new car shoppers and are sold primarily to dealers on a pay-per-lead basis. Consumer leads not purchased by dealers are sold to OEMs or lead reseller companies.

Manufacturers .     With approximately 80% of the audience across the Cars.com sites and mobile applications currently in the market for a new or used vehicle, OEMs that operate on a national basis are offered valuable access to a targeted audience of in-market car shoppers when they purchase display advertising. Cars.com’s wide consumer reach allows it to successfully compete for and realize a market-leading share of the digital marketing spending of these OEMs. Beyond display advertising, Cars.com provides OEMs with consumer insights, data driven solutions and certified pre-owned marketing programs, which Cars.com believes are critical components of OEM digital marketing strategies.

Strategies

Cars.com’s strategy is to be a leader in share of audience and remain the trusted platform of choice for digital automotive media spend. Cars.com works to empower consumers and enable retailers by offering an innovative mix of complementary products and services that create seamless and enjoyable car buying and ownership experiences for consumers and efficient marketing solutions for advertisers. Cars.com aims to build brand recognition and drive car shopper and car owner visits to the Cars.com sites by empowering consumer decision-making and engaging consumers at every stage of the car ownership life cycle. Cars.com’s goal is to combine this growing consumer traffic with Cars.com’s technological and marketing capabilities to increase demand for its advertising solutions. Key elements of Cars.com’s strategy to achieve these objectives are as follows:

Leverage competitive strengths to provide targeted, integrated solutions to advertisers .     Dealers and advertisers are seeking to reach their audience in an increasingly competitive market landscape and are struggling to influence attitudes and behavior at each step of the car purchasing process. These dealers and advertisers operate on a hyper-local level that Cars.com believes has not been a priority for other technology companies, and Cars.com believes that this environment presents an attractive opportunity to use its key capabilities to provide critical solutions to the most pressing challenges these dealers and advertisers face. Cars.com intends to leverage its many competitive advantages—including its innovative digital advertising services products and brand recognition as a trusted, unbiased third-party research platform—to create tailored media and marketing plans that efficiently target in-market consumers, drive dealership car buyer traffic and reinforce advertisers’ message and digital presence. Cars.com is a highly attractive advertising and marketing resource due to its offering of thoughtfully-crafted digital strategies that meet the unique needs of automobile industry marketers and advertisers. These unique product offerings allow seller customers and advertising partners of varying size and geographic reach to optimize the benefits of their marketing spend, which enables Cars.com to access a large universe of potential automotive advertising and marketing partners. Cars.com’s localized advertising capabilities, longstanding customer relationships, highly talented on-the-ground team of more than 600 digital marketing consultants and comprehensive promotional capabilities are all competitive advantages that Cars.com expects to use to sell integrated advertising and marketing solutions that meet the changing needs of its seller customers. Cars.com believes that creating new digital solutions for advertisers across the automobile industry on both a local and national basis will continue to put Cars.com in an excellent position to take advantage of the many opportunities resulting from the rapid pace of technological change in the industry.

Advertising Effectiveness and Delivering Value to Dealers .    Cars.com believes that the digital automotive marketplace will continue to evolve as consumer shopping and buying behaviors change. Currently, many dealer-advertisers measure Cars.com’s value through “traditional leads,” connections from consumers to dealers that come in the form of phone calls and emails (and, more recently, text messages). Cars.com believes, and its research supports, that other interactions—particularly by consumers on mobile devices—also deliver willing

 

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buyers to dealer lots and influence purchases. These mobile interactions, such as vehicle and dealer research and discovery, deliver substantial additional value to dealers and advertisers but are not captured in “traditional lead” measurement. Cars.com’s innovation in the development and launch of Lot Insights and geo-fencing technology has demonstrated that consumers interact with dealers and make vehicle purchases based on their use of the Cars.com product and service suite. Cars.com believes that over time, dealers and advertisers will recognize the changes in consumer behavior and will also evolve in the way that they measure the value that Cars.com delivers. As the measurement of the effectiveness of automotive digital marketing spend evolves, and as Cars.com continues to introduce new products that can incrementally influence buyers of vehicles to proceed directly to dealers’ lots without ever generating a “traditional lead,” Cars.com believes that dealer-advertisers will continue to increase their digital marketing spend.

Expand into new markets and continue to offer new complementary products and services .     Cars.com believes that there are significant opportunities to expand into adjacent markets in the automotive industry and potentially enter into new industry verticals. As indicated by Cars.com’s successful launches of Sell & Trade and Event Positions, its partnership with RepairPal Inc. and TEGNA’s recent acquisition of DealerRater, which will be contributed to Cars.com, Cars.com believes its expertise in dealer operations and the retail automotive industry, along with its ability to manage data and develop technological solutions, can be leveraged to provide solutions to the challenges that consumers, retailers, manufacturers and advertisers face in other aspects of the automotive and ancillary industries. Cars.com’s expansion strategy includes exploring acquisitions, partnerships, strategic investments and joint ventures, as well as a commitment to innovative in-house product development. Cars.com believes that its scale and current leadership position enhance its ability to evaluate such opportunities on an ongoing basis.

Increase mobile solutions to further drive car buyer traffic .     Cars.com believes that on-the-go mobile device car buying research and comparison applications have been playing and will continue to play an increasingly important role in the digital automotive marketplace industry. Cars.com has seized on the opportunities presented by this trend. Approximately 52% of total Cars.com shoppers visited the Cars.com sites from mobile devices in 2016. Cars.com’s user-friendly mobile applications provide in-market car shoppers with real-time, credible research and price comparison tools while they are on the lot and actively engaged in the car buying process. Cars.com’s ability to reach this highly targeted audience benefits its seller customers and advertising partners by providing targeted, localized access to highly motivated potential customers. Currently, Cars.com provides its mobile applications to dealers as part of its core digital advertising package .   Cars.com does not currently charge for these applications separately but rather provides them as a way to enhance its core advertising package.

Advertiser growth through market penetration and premium service offerings .    Despite a trend toward consolidation among car dealers, Cars.com believes it has opportunities to expand the number of dealers it partners with and to grow their advertising spend with additional products that strengthen connections between consumers and dealers and further capture OEMs’ advertising spend as they shift advertising dollars online. Cars.com aims to increase and enhance connections between buyers and sellers by continuing to improve its user experience and providing consumers with additional information about specific dealers through DealerRater. Further, Cars.com believes that dealer consolidation will result in major dealer chains having more resources to focus on measuring marketing effectiveness. Cars.com intends to take advantage of this trend by continuing to introduce new products, such as Lot Insights, that improve dealers’ ability to measure the impact of their advertising spend on the Cars.com sites. By increasing connections that improve the return on advertising spend and demonstrating this value to advertisers, Cars.com believes it can increase the number of dealers in its network and capture additional revenue from its existing dealers through product enhancements and premium service offerings.

Supplement organic growth with selective acquisitions .      Cars.com believes it will be well-positioned to pursue value-enhancing investments and acquisitions in the increasingly competitive digital automotive marketplace industry. Cars.com will be both opportunistic and disciplined in its acquisition strategy. Cars.com is

 

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a strong operator, and it expects that its strengths in market reach and efficient advertising solutions, coupled with its proven track record for developing innovative and complementary products and services, will help drive innovative approaches to revenue generation as well as efficiency gains in acquired businesses.

Strengths

Cars.com believes it enjoys the benefits of a number of unique talents and assets, many of which have helped it to develop into an established industry leader. The following strengths support its business strategies:

Broad footprint in consumer markets .     Cars.com is one of the largest and best-known online automotive classified sales and research services, connecting car buyers and car owners with car sellers and repair service providers across multiple digital platforms in all 50 states. Cars.com hosts approximately 4.7 million vehicle listings at any given time and serves approximately 20,000 car dealers in all 50 states. Cars.com’s vast footprint also increases the available reach for advertisers and makes Cars.com’s services very attractive to manufacturers and dealership networks seeking digital-platforms for broad, impactful campaigns, as well as for local dealers and repair service providers seeking smaller-scale, targeted solutions.

Recognizable national brand .      With an average of more than 35 million visits each month during 2016, approximately 52% of which are mobile, an average of approximately 11.8 million unique monthly visitors over the same time period according to comScore, and a strong reputation for providing credible, unbiased third-party reviews and service information, Cars.com has achieved a leading market position in a rapidly growing industry. Cars.com’s recognizable brand and the quality and reliability of its user interface have spurred consistent long-term growth in the number of car buyers, car sellers and advertisers using its platform. With approximately 4.7 million vehicle listings at any given time, the network effects of this brand-based growth are significant and create a positive feedback loop, as more listings lead to better informed consumers and a higher share of online automotive transactions, which in turn drives additional advertising revenue and enhances brand awareness. According to data provided by Millward Brown in April 2017, as of December 31, 2016, Cars.com had held a brand awareness leadership position in its industry for each of the previous eight consecutive quarters.

Significant organic revenue growth creating operating leverage .     As a longstanding leader in the industry, Cars.com has enjoyed consistent and rapid organic revenue growth as changes in car buyer behavior have led to increased digital advertising spending. Cars.com’s operating expenses have grown at a lower rate than its revenues, as it is able to leverage its operations, sales and marketing and technology over a broader revenue base. This operating leverage has helped drive growth in Adjusted EBITDA margins as revenues have scaled. Cars.com’s Net income margin and Adjusted EBITDA margin in 2016 were 28% and 41%, up from 26% and 40% respectively in 2015 and 7% and 23%, respectively in 2014.

Integrated and innovative digital platform aimed at a growing demographic .      Through the Cars.com sites, Cars.com not only connects car buyers with car sellers in their relevant markets, but also empowers car buyers to make informed purchasing and service decisions by providing understandable, unbiased, credible expert and consumer reviews, as well as expert service advice. Further, Cars.com’s mobile site, which J.D. Power and Associates named number one in overall satisfaction among third-party websites in its 2016 Automotive Mobile Site Study SM , enables it to continue to grow market share among younger car buyers and consumers engaging in on-site research at dealerships. Cars.com’s research shows that consumers aged 18 to 34 (“millennials”) are more likely to use mobile devices than the general car shopper. According to a January 2014 study by Placed, Inc., 65% of millennials use a smartphone to research car buying opportunities prior to visiting a dealership, compared to just 54% of car shoppers 35 and older. Cars.com continues to focus on this younger age demographic, and according to an analysis based on data for December 2016 provided by comScore, 33% of the audience on the Cars.com sites was made up of millennials, which was more than the average of competitive sites. In September 2016, more than 41% of Cars.com’s total mobile shoppers were millennials. Cars.com believes that its innovative platforms meet this demographic’s needs. According to an analysis based on December 2015 and June 2016 data provided by comScore, the Cars.com site averaged more minutes per millennial visitor than most competing sites.

 

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Cars.com has implemented a responsive design approach across all of its platforms. Cars.com’s responsive design is aimed at improving the consumer experience by crafting sites to provide an optimal viewing and interaction experience—such as easy reading and navigation with a minimum of resizing, panning and scrolling—across a wide range of devices, from desktop computers to mobile devices. Cars.com believes that its commitment to innovative digital products and marketing solutions across all digital platforms has solidified it as a leader in third-party automotive sales and service research, positioning it to take advantage of the rapid pace of technological change in an increasingly multi-platform industry.

Operational excellence .      Cars.com believes that its efficient operations are a source of competitive strength, and an area of ongoing focus. Cars.com has historically achieved strong operating margins. Its marketing expenditures have produced what Cars.com believes are excellent returns on investment, including category-leading audience awareness and traffic to the Cars.com sites that have consistently scaled over time. Cars.com believes that through a culture that focuses on operational excellence, it is able to leverage the strengths of its employees to deliver robust results while maintaining a low headcount relative to the size of its operations.

Talented and creative management team .      The strategy and content of Cars.com’s digital automotive marketplace is guided by strong leadership at every level of the organization. The Cars.com management team, led by President and Chief Executive Officer Alex Vetter, has instilled a culture of creativity and entrepreneurship that Cars.com believes leads to strong results. Recent successful innovations such as Lot Insights, Sell & Trade, and the partnership with RepairPal Inc. are examples of the creativity and business innovation that drive growth at Cars.com. Management plans to continue crafting new ways to leverage Cars.com’s strong brand recognition and leading market position to yield new and expanded revenue streams.

Experienced sales force and cost effective sales and service infrastructure .     Cars.com’s sales force is responsible for managing its network of dealer and manufacturer advertisers across geographies and for providing onboarding and dealer support. Through its multi-channel approach to sales of subscription advertising products, supplemented by its major accounts sales team and national advertising sales organization, Cars.com has an efficient and synergistic sales infrastructure that enables its sales force to help dealers grow their businesses by regularly providing data-driven insights on marketing and advertising strategies. Cars.com’s ability to understand the needs of, actively listen to, collaborate with, and develop solutions for its customers has been, and continues to be, a crucial element of its success.

Editorial Strength and Credibility .    Cars.com believes that its more than 30-person in-house editorial research staff is a distinct competitive advantage. This team provides over 200 expert reviews on new model releases each year. These award-winning journalists are regularly featured in leading industry publications, trade journals and daily newspapers, as well as on television. Cars.com believes that through videos, vehicle demonstrations and written insights, the staff’s unique editorial voice speaks to the needs of mainstream car shoppers, attracting additional traffic to and enhanced engagement with the Cars.com sites.

Technology

Cars.com has designed its technology platform, sites and products to reliably provide its customers with the information required to make informed car buying and repair decisions. This platform is accessed by consumers through the Cars.com sites and mobile applications and by dealers through a software tool made available through apps and a portal. Supporting each of these user interfaces are advanced systems for displaying, processing and analyzing automotive data, including features such as advance search capabilities for vehicle inventory, vehicle configurators, filters for similar or recommended vehicles, vehicle pricing transparency tools and service and repair recommendations. Cars.com uses a combination of licensed and open source software running on optimized hardware.

Cars.com data is housed in co-location facilities in Chicago and Elk Grove Village, Illinois. Through its technology operations and quality assurance group, Cars.com has adopted a centralized approach to quality assurance and testing for its platform and all products aimed at enhancing consumer and dealer experiences while seeking to optimize availability, scalability, security and performance.

 

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Advertising

Cars.com has experienced advertising sales professionals that sell local and national advertising across its multiple website platforms and services. Cars.com has a large Internet sales staff focused on meeting the specific needs of dealerships, OEMs and service providers in both niche local markets and larger geographic areas. Cars.com markets its innovative advertising products, services and solutions through two sales forces: a Cars.com-owned and operated sales team (the “direct sales force”) and an affiliate-owned and operated sales team (the “affiliate sales force”), with each sales team selling to customers in pre-defined sales territories. However, to assure that each person marketing Cars.com’s products and services possess the deep knowledge and meet the professional standards that Cars.com’s subscribing dealers and national advertising partners have come to expect, all new sales people, direct and affiliate, undergo a rigorous multi-week training program at Cars.com’s headquarters in Chicago, Illinois and engage in frequent continuing education programs to stay current on Cars.com’s products, sales strategies and industry trends.

Direct Sales Force .    Cars.com’s direct sales force consists of over 500 dedicated and knowledgeable employees nationwide whose efforts are responsible for 62% of the current dealers subscribing to Cars.com’s products and services across the country, representing approximately 53% of Cars.com’s revenue in 2016. Cars.com’s direct sales team is supplemented by specialized customer support and sales teams in order to better meet the needs of Cars.com’s subscribing dealers and national advertising partners. For example, Cars.com’s major accounts sales team serves some of the nation’s largest dealer groups and Cars.com’s national sales organization of nearly 50 employees manages the needs of OEMs and other national display advertising customers. Cars.com’s national sales organization generated approximately 18% of Cars.com’s revenue in 2016.

Affiliate Sales Force .      Cars.com’s affiliate sales force, consisting of publishing and broadcasting organizations, currently have preferred relationships with Cars.com, under which they hold the exclusive right to market Cars.com advertising products and services to dealers within their local markets. Leveraging local know-how, Cars.com’s affiliates use their own standing sales teams to market Cars.com advertising solutions to dealers in a manner tailored to the unique customs, preferences and needs of dealers within these local geographies. After consummation of a sale by one of Cars.com’s affiliates, Cars.com’s in-house team delivers products and services and manages ongoing customer service relationships, which permits local dealers to benefit from Cars.com’s extensive digital automotive advertising experience and award-winning customer service record.

In exchange for the exclusive right to market Cars.com’s products and services in their local territories, affiliates pay Cars.com wholesale fees for each Cars.com product sold. Wholesale fees paid by affiliates vary year-to-year and are derived from the retail rates that Cars.com charges for its products when sold by its direct sales team. In 2016, wholesale fees comprised 27% of Cars.com’s total revenue.

The affiliation agreements pursuant to which these sales are made expire in 2019 and 2020, but may be extended under certain circumstances. The exclusivity rights in these agreements are terminable by Cars.com with respect to individual affiliates if such affiliates continuously fail to meet certain minimum performance standards. The affiliate sales force is comprised of approximately 280 sales representatives, and does not market national display advertising products and services.

Marketing

Cars.com reaches consumers mainly through the Cars.com sites and mobile applications. A significant majority of Cars.com’s marketing is focused on building the Cars.com brand. The key elements of the brand are providing consumers the preferred and trusted platform that brings transparency and efficiency to car shopping and ownership decisions. Cars.com divides its marketing spend between digital media and traditional media sources. Additionally, various media outlets from time to time quote Cars.com branded resources or refer to Cars.com as a recognized industry authority on car reviews and automatic retail and online data forecasting, which aids consumer brand awareness efforts.

 

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Competition

Cars.com faces competition from other websites offering integrated Internet automotive classified products and services, e-commerce websites, websites operated by automobile manufacturers, offline membership-based car-buying services and traditional offline automotive classified listings, such as trade periodicals and local newspapers and television stations. Several competitors offer online and offline services and content in a manner similar to Cars.com and thereby compete for the attention of advertisers and users of Cars.com’s offerings. Specifically, Cars.com competes for a share of total digital advertising spend in the U.S. automotive market. The digital automotive industry is constantly evolving. Low barriers to entry allow new competitors to enter the market with new products, possibly putting pressure on Cars.com’s pricing structure. In recent years, dealers have shifted an increasing portion of their advertising budgets to new entrants with niche advertising products. Dealers also continue to invest in search engine marketing to drive traffic directly to their own websites, bypassing third-party sites while still investing in traditional media such as television, radio and newspapers. Cars.com has maintained its leadership position through its award-winning site and by delivering innovative new products for its advertisers, and it believes that as the competitive climate evolves, the need to innovate and to connect an advertiser’s investment to eventual sales at a local level will be of increasing importance.

Intellectual Property

Cars.com protects its intellectual property through a combination of copyrights, trademarks, service marks, domain names, trade secret laws, confidentiality procedures and contractual restrictions. Cars.com’s registered trademarks in the U.S. include, among others, “All Drive. No Drama.” and “Confidence Comes Standard.” Cars.com has also filed trademark applications in the U.S. for certain of its marks, including an application for “Research. Price. Find.” Cars.com expects to pursue additional trademark registrations to the extent that Cars.com believes it would be beneficial to its competitive position.

In addition to the protection provided by Cars.com’s intellectual property rights, Cars.com also enters into confidentiality and proprietary rights agreements with its employees, consultants, contractors and business partners. Cars.com’s employees and contractors are also subject to invention assignment agreements. Cars.com further controls the use of its proprietary technology and intellectual property through provisions in both Cars.com’s general and product-specific terms of use on its website.

Regulatory Matters

Various aspects of Cars.com’s business are or may be subject to U.S. federal and state regulation. In particular, the advertising and sale of new or used motor vehicles is highly regulated by the states in which Cars.com does business. Although Cars.com does not sell motor vehicles, the dealers from which it derives a significant portion of its revenues do sell them. Moreover, state regulatory authorities or other third parties could take and, on some occasions, have taken the position that some of the regulations applicable to dealers or to the manner in which motor vehicles are advertised and sold generally are directly applicable to Cars.com’s business model.

To operate in this highly regulated environment, Cars.com has developed its products and services with a view toward appropriately managing the risk that its regulatory compliance or the regulatory compliance of its dealer customers could be challenged. If, and to the extent that, its products and services fail to satisfy relevant regulatory requirements, Cars.com could be subject to significant civil and criminal penalties, including fines, or the award of significant damages in class action or other civil litigation, as well as orders interfering with its ability to continue providing its products and services in certain states.

Employees

Cars.com expects to employ approximately 1,275 persons as of the distribution date, none of whom are represented by labor unions.

 

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Legal Proceedings

Cars.com is from time to time subject to a variety of litigation and other legal and regulatory proceedings and claims incidental to its business. Cars.com does not believe that any material liability will be imposed as a result of these matters.

Real Property

Cars.com’s corporate headquarters is located in Chicago, Illinois, in a facility that it leases.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain Factors Affecting Forward-looking Statements

The following discussion and analysis should be read in conjunction with the other sections of this information statement, including “Risk Factors,” “Cautionary Statement Concerning Forward-Looking Statements,” “Unaudited Pro Forma Financial Statements,” “Business,” “Selected Historical Financial Data,” and the financial statements and the notes thereto included in this information statement. Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and other factors described throughout this information statement and particularly in the sections entitled “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.”

The accompanying financial statements include the accounts of Cars.com, LLC and DMR Holdings, Inc. (“DealerRater”), which represented the principal digital automotive businesses of TEGNA Inc. DealerRater was acquired by TEGNA on August 1, 2016 and will be part of the spun-off business. Accordingly, the financial statements from August 1, 2016 and forward are presented on a combined basis. We believe that the assumptions underlying the financial statements included in the information statement are reasonable. However, the financial statements may not necessarily reflect our results of operations, financial position and cash flows for future periods or what they would have been had we been a separate, stand-alone company during the periods presented.

Business Overview

We are a leading online destination for automotive consumers offering credible, objective information about car shopping, selling and servicing. We leverage our consumer audience to help automotive dealers and marketers more effectively reach car buyers and sellers, as well as those looking for trusted service providers. We have approximately 35 million monthly visits to our web properties. Cars.com generates revenue through online subscription advertising products targeting car dealerships through our direct sales force as well as our affiliate sales channels. We also generate revenue through the sale of display advertising to national advertisers. Our website hosts approximately 4.7 million vehicle listings at any given time and serves approximately 20,000 franchise and independent car dealers in all 50 states.

During the year ended December 31, 2016, we generated revenues of $633.1 million and recorded net income of $176.4 million and Adjusted EBITDA of $259.8 million (see definition and reconciliation of Adjusted EBITDA, which is a non-GAAP term, below). Of the $633.1 million in revenues, 73% consisted of retail revenue with the remaining 27% derived from wholesale revenues.

In evaluating our financial condition and operating performance, our management team reviews a wide variety of factors and metrics. We are particularly focused on the following themes and performance metrics, which our management team views as instructive:

 

  •   Traffic .    Our traffic and our ability to continue generating traffic are key to our business, and the tracking of our traffic performance is a critical measure. We have recently made changes to our technology to expand our platform beyond the desktop and into mobile and social platforms. In 2015 and 2016, we undertook a re-platforming initiative to develop a responsive design platform, which provides a seamless experience for consumers across desktop, mobile and tablets. This new platform also allows us to move faster in introducing new content and features to the Cars.com sites. In addition, DealerRater, which TEGNA acquired in August 2016, will be contributed to us in connection with the separation, and we also have invested in developing or acquiring several adjacent offerings, including in the repair and trade-in space. The tracking of our traffic performance is critical to measuring the return on the investments described above, and traffic performance is highly correlated with our ability to provide value to our advertisers.

 

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  •   Connections .    We are compensated by our advertisers for providing the direct and indirect connections we facilitate between consumers and dealers or Original Equipment Manufacturers (“OEMs”). Whether through a direct connection such as an email or phone call from a consumer to a dealer, an indirect connection such as a transfer from one of the Cars.com sites to a dealer’s website or by pushing walk-in traffic into a dealership, the ability to connect consumers and advertisers is the heart of our business. Our platform, with its captive audience of in-market car shoppers, also serves as an excellent branding platform for local dealerships and OEMs alike. Major auto manufacturers regularly include advertising on the Cars.com sites when rolling out new makes and models each year. Shifting trends in consumer behavior are changing the ways consumers interact with automotive dealers and manufacturers. The shift to mobile, a preference for texting, and the increasing use of social media are but three trends that are disrupting the way consumers have historically interfaced with dealers through online shopping sites. Management measures the various ways in which consumers are interfacing with dealers and OEMs and reports these various metrics with regularity to its customers. Cars.com also is expanding its capabilities of reporting on its consumer influence through innovations like Lot Insights, which uses geo-fencing technology to capture consumer searches on our platform that are performed on a dealer’s physical premises. Though we have had success with many of our customers in proving that our value goes well beyond direct connections and includes a strong influence on walk-in traffic and ultimately vehicle sales, dealers who are focused on more traditional methods of tracking consumer intent such as phone leads may not understand the value that Cars.com is delivering to them. An ongoing area of focus will be educating more dealers on these shifting consumer trends and demonstrating the value of our products.

 

  •   Customers .    Our value to consumers tracks to our ability to showcase the inventory of our dealer and OEM customers. The larger the advertiser base, the more inventory and options that are available for consumers to review. Management is focused not only on expanding our network of franchise and independent dealers, but also on developing new approaches to consumer engagement to increase the value of our platform to existing customers. In 2016, we have experienced a higher-than-usual migration of customers away from product enhancement packages or from our solutions more generally. We continue to highlight the value of our connections to dealers while at the same time introducing new advertising opportunities such as our Sell and Trade product and the ability to generate and syndicate reviews through DealerRater.

Our continued success will depend in part on our ability to address and successfully manage challenges, both specific to our business and in the digital advertising marketplace generally. In the near term, we may experience compressed margins as a result of the transition from a wholly owned subsidiary of TEGNA to an independent publicly traded company. In particular, the transition will require us to build out our internal infrastructure and support functions, through recruiting and hiring managers and employees to strengthen our legal, treasury, accounting, tax, investor relations and other similar functions. Similarly, we will face ongoing public company costs, including those related to an independent board of directors, compliance with regulatory and stock exchange requirements, and increased auditing and insurance fees. Further, the indebtedness we incur in connection with the separation will reduce our free cash flow and may limit our ability to make strategic acquisitions. We expect to manage these incremental costs and the associated increased risk by focusing on operating efficiency and continued growth in our business to drive profit margins and generate cash flow.

More generally, we anticipate challenges in the broader digital advertising marketplace, including the following specific challenges:

 

  •   Increasing competition in the online automotive space .    We compete in a crowded marketplace for a share of overall dealer and OEM marketing spend. In the face of increasing competition and the development of new technologies, we will need to continue to enhance our existing products and develop innovative new ones, while leveraging our excellent brand and strong consumer following;

 

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  •   Flattening growth in new car sales and other macro risks .    Growth in new car sales has flattened in 2016, and we do not expect significant growth in new car sales in 2017. A more dramatic slowdown in car sales or other negative macroeconomic changes could reduce our customers’ aggregate digital advertising spend. Our ability to leverage our sales force to continue to expand our dealer network and access a greater percentage of our existing dealers’ advertising spend will be instrumental to our success in weathering any such economic headwinds.

 

  •   Shifting consumer trends .    Consumers continue to shift to mobile devices and to social media, which can have a downstream impact on many aspects of our business, including desktop display advertising revenues and the ability to continue to generate traditional phone and email leads. As of December 31, 2016, mobile traffic to Cars.com sites accounted for more than half of visits, with 52% coming from mobile devices compared to 48% a year earlier. To meet this challenge, we will need to continue to adjust our existing platforms and develop new platforms so that we are engaging consumers through their preferred medium.

Separation from Parent

On September 7, 2016, TEGNA announced plans to separate its digital automotive marketplace business from its media and other digital businesses. The separation will occur by means of a spin-off of Cars.com, a newly formed company, which will own the digital automotive marketplace business. TEGNA, the existing publicly traded company in which you currently own common stock, will continue to own and operate the media and other related digital businesses. The separation will create two stand-alone companies positioned to take advantage of differentiated opportunities in the rapidly evolving broadcast and digital landscapes.

Presentation of Financial Statements

Historically, TEGNA has not disclosed separate financial statements for Cars.com. The accompanying financial statements are derived from the historical accounting records of TEGNA since its acquisition of Cars.com, LLC on October 1, 2014 (that date and thereafter referred to as the “successor” periods), and present our financial position, results of operations and cash flows as of and for the successor periods presented as if we were a separate entity. Periods prior to TEGNA’s acquisition of Cars.com, LLC are referred to as the “predecessor” periods. Calendar year 2014 includes both a successor and predecessor period. These predecessor and successor financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Throughout this Management Discussion and Analysis of Financial Condition and Results of Operations, we also present 2014 on a supplemental pro forma basis by combining results for these two periods and making certain adjustments related to acquisition accounting as we believe this provides a more meaningful comparison of results across years. In addition, on August 1, 2016, TEGNA acquired 100% of DMR Holdings, Inc. (“DealerRater”), a leading automotive dealer review website. The financial results of DealerRater have been included in our combined financial statements (from the date of acquisition) as it will be part of the spun-off business.

Since TEGNA’s acquisition of Cars.com, LLC in 2014 we have primarily operated as a standalone entity within TEGNA’s broader corporate organization. The historical financial statements include allocations of certain TEGNA corporate expenses. Such costs primarily include insurance, severance costs, and other general corporate overhead expenses and were allocated based on either the actual costs incurred, or Cars.com headcount relative to Parent’s consolidated headcount. Since we operated primarily as a standalone entity, the historical allocated corporate costs were minimal and were approximately $2.2 million, $1.4 million and $2.4 million during the twelve months ended December 31, 2016 and 2015 and three months ended December 31, 2014, respectively. These allocated expenses relate to the various services that have historically been provided to Cars.com by Parent. However, such expenses may not be indicative of the actual level of expense that would have been incurred by Cars.com if we had operated as an independent, publicly-traded company or of the costs expected to be incurred in the future.

 

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We manage and operate our business as one segment. All of our internal intercompany accounts have been eliminated. All significant intercompany transactions between either (i) us and Parent or (ii) us and Parent affiliates have been included within the financial statements and are considered to be effectively settled through equity contributions or distributions at the time the transactions were recorded. The accumulated net effect of intercompany transactions between either (i) us and Parent or (ii) us and Parent affiliates are included in “Parent’s investment, net.” The total net effect of these intercompany transactions is reflected in the Statements of Cash Flows as financing activities.

With regards to income taxes, the determination of whether taxes should be presented in the financial statements of a limited liability company (“LLC”) is dependent on whether tax law considers the entity to be a flow-through entity. Cars.com, LLC and Classified Ventures, LLC are both multi-member LLCs that are considered to be partnerships for U.S. income tax purposes. Such multi-member LLCs generally are not subject to federal, state or local income taxes and are therefore considered flow-through entities. Accordingly, no income taxes have been recognized in Cars.com, LLC historical financial statements. DealerRater is a corporation subject to federal, state, and local income taxes. Accordingly, income taxes incurred by DealerRater since its acquisition on August 1, 2016 have been recognized in the historical financial statements.

Key Metrics

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions. The following table presents certain of these key metrics.

 

Dollar values in thousands of dollars    Year ended Dec. 31,  
             2016                      2015              2014
(Supplemental
Pro Forma) 		 

Traffic-Visits

     412,333,000        433,741,000        422,566,000  

Dealer Customers

     20,038        20,409        19,866  

Net income from continuing operations

   $ 176,370      $ 157,838      $ 36,925  

Adjusted EBITDA

   $     259,756      $     238,551      $     118,784  

Traffic-Visits.     We utilize traffic-visit numbers to evaluate the performance of the Cars.com websites. This internally generated metric includes data for multi-platform reporting pulls from desktop and mobile (web browser and application access). Visits refers to the number of times a site is visited, no matter how many visitors make up those visits. Traffic-visit numbers provide an indication of our consumer reach. Although our consumer reach does not correlate directly to revenue, we believe our ability to reach diverse demographic audiences is attractive to our dealers and national advertisers. In 2016, we experienced a decrease in traffic primarily due to our re-platforming efforts which temporarily impacted our ability to generate traffic through search engine optimization. In 2016, total visits were down 4.9% year over year. In October 2016, we completed the re-platforming project which provides us with a more flexible and robust technology infrastructure. We expect to see an improvement in traffic including search engine optimization in 2017 compared to 2016.

Dealer Customers .    Dealer customers represents the average number of car dealers using our products over the course of the applicable periods. The number includes both retail and affiliate sales channels. Dealer customers declined 1.8% in 2016 compared to the prior year. The overall softness in the local dealer customers is primarily attributable to two factors: traffic and connection declines during the re-platforming work described above and the shift in consumer traffic to mobile. With the technology re-platform, the responsive design of our site allows consumers to experience our site regardless of the device they are using. Our much improved site speed has contributed to our growth in mobile. And we believe that mobile users are more likely to be repeat visitors which our site data supports. While mobile users typically send fewer connections to dealers, that mobile user is typically much closer to a sale.

 

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Adjusted EBITDA .    We use Adjusted EBITDA as a non-GAAP financial performance measure to supplement the financial information presented on a GAAP basis. This non-GAAP financial measure should not be considered in isolation from or as a substitute for the related GAAP measure, nor should it be considered superior to the related GAAP measure, and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measure may not be comparable to similarly titled measures of other companies. We define adjusted EBITDA as net income from continuing operations before (1) interest expense, (2) income taxes, (3) non-operating items (which are primarily comprised of gains on marketable securities held in trust and interest income), (4) depreciation and (5) amortization. When Adjusted EBITDA is discussed in reference to performance, the most directly comparable GAAP financial measure is net income from continuing operations. We use Adjusted EBITDA, a non-GAAP financial performance measure, for purposes of evaluating our performance. Therefore, we believe that this measure provides useful information to investors by allowing them to view our businesses through the eyes of our management and Parent’s board of directors, facilitating comparison of results across historical periods, and providing a focus on the underlying ongoing operating performance of our businesses. Investors should consider the limitations of using Adjusted EBITDA, including the fact that such measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to be an alternative to net income from continuing operations as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use, as Adjusted EBITDA does not consider certain cash requirements, such as working capital needs, capital expenditures, and contractual commitments.

Reconciliations of Adjusted EBITDA to net income from continuing operations presented in accordance with GAAP on our Statements of Income are presented below:

 

     Year ended Dec. 31,  

In thousands of dollars

         2016                  2015            2014
(Supplemental
Pro Forma) 		 

Net income from continuing operations

   $ 176,370     $ 157,838     $ 36,925 

Interest expense

     —       —       — 

Income taxes

     588       —       — 

Non-operating items

     (308)        (105)        (281)  
  

 

 

    

 

 

    

 

 

 

Operating income

     176,650       157,733       36,644 
  

 

 

    

 

 

    

 

 

 

Depreciation

     8,277       8,160       9,482 

Amortization

     74,829       72,658       72,658 
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA (non-GAAP)

   $     259,756     $     238,551     $     118,784 
  

 

 

    

 

 

    

 

 

 

Factors Affecting Our Performance

Spending on Online Marketing .    Our revenue is dependent on the amount dealers spend on our online subscription products. We also generate a significant amount of revenue from the sale of display advertising on our websites. In order to increase our revenues, dealers and other advertisers such as OEMs or other auto related companies (e.g. insurance, financing) will likely have to increase the amount they spend on online marketing in absolute dollars or as a percentage of their total marketing expenditures.

Dealer Customers .    Our future growth will depend, in part, on our ability to successfully increase the amount that each of our dealer customers spends on our digital solutions. We have made a substantial investment in our sales organization, and we are dependent on the success of that organization, combined with the effectiveness of our products, to help our subscribing dealers see the value and the return on investment of our premium listings and our enhancement services.

 

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Automotive Industry and Consumer Trends .    Our current customer base, revenue sources and operations are substantially limited to the U.S. Accordingly, our results can be impacted by prevailing economic and market conditions in the U.S. that impact the retail automotive industry in general and car dealers, in particular. Improving economic conditions since 2009 have improved new and used car sales, which we believe has had a positive impact on dealer revenues and, in turn, has had a positive impact on our revenues. In contrast, adverse market conditions such as those that prevailed in 2008 and 2009 reduced the number of dealers that were in business and adversely impacted surviving dealers. We believe these conditions adversely affected the amount that dealers, OEMs and other advertisers were willing to spend on advertising in general, including digital media advertising, which impacted our revenues and our rate of growth during that period. General economic conditions can also impact the number of in-market car shoppers on our websites and the availability of used car inventory.

Launch of New Products and Services .    We believe there are significant opportunities to expand into adjacent markets in the automotive industry. Recently, we launched DealerRater connections, Sell & Trade and Event Positions. Our revenue growth in the future will be dependent, in part, on our ability to successfully innovate, develop, launch, and gain market acceptance of new services that dealers will purchase for an additional monthly subscription fee. Also, our future results of operations will be affected by the timing of the launch of new services.

Supplemental Pro Forma Results

The following table provides unaudited supplemental pro forma results of operations for the year ended December 31, 2014 as if Parent’s acquisition of Cars.com, LLC had occurred on January 1, 2014:

 

     Successor                                    

In thousands of dollars

   for the period
from Oct. 1,
2014
to Dec. 31,
2014 		     Period from
Jan. 1,
2014 to
Oct. 1,
2014 		     Subtotal
year ended
Dec. 31,
2014 		     Adjustments      Notes     Supplemental
Pro Forma
year ended
Dec. 31,
2014 		 

Revenues

                

Retail

   $     101,011      $     280,283      $     381,294        —       $     381,294  

Wholesale

     44,928        69,732        114,660        18,900         (1 )       133,560  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Total

     145,939        350,015        495,954        18,900         514,854  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Operating expenses

                

Product support, technology and operations

     29,151        86,374        115,525        —         115,525  

Marketing and sales

     54,809        155,945        210,754        —         210,754  

General and administrative

     25,881        68,299        94,180        (29,982)        (2 )       64,198  

Affiliate revenue share

     1,971        13,104        15,075        —         15,075  

Amortization of intangible assets

     18,164        —        18,164        54,494         (3 )       72,658  

Professional fees related to sale

     —        19,942        19,942        (19,942)        (4 )       —  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Total

     129,976        343,664        473,640        4,570         478,210  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Operating income

     15,963        6,351        22,314        14,330         36,644  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Other non-operating income

     255        26        281        —         281  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Income from continuing operations

   $ 16,218      $ 6,377      $ 22,595      $ 14,330         $ 36,925  
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

 

(1) Adjustment to wholesale revenue reflects the amortization of the unfavorable contracts liability which was established during acquisition accounting.

 

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(2) Adjustment to general and administrative expenses relates to the exclusion of a portion of the 2014 share appreciation right (“SAR”) expense that was recognized due to the acceleration of vesting of SAR awards as a result of the sale transaction in 2014.
(3) Adjustment relates to the amortization of intangible assets which were established during acquisition accounting.
(4) Adjustment removes professional fees related to the sale to our Parent.

Results of Operations

The following table sets forth our selected statement of operations for each of the periods indicated:

 

     Year ended Dec. 31,  
In thousands of dollars    2016
(Successor) 		     Change      2015
(Successor) 		     Change      2014
(Supplemental
Pro Forma) 		 

Revenues

              

Direct revenue

   $     333,424        7 %      $     311,265        11 %      $     279,505  

National advertising revenue

     114,335        13 %        100,918        15 %        87,927  

Other revenue

     15,017        21 %        12,449        (10)%        13,862  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail revenue

     462,776        9 %        424,632        11 %        381,294  

Wholesale revenue

     170,330        (1)%        171,878        29 %        133,560  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     633,106        6 %        596,510        16 %        514,854  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

              

Product support, technology and operations

     129,864        11 %        116,690        1 %        115,525  

Marketing and sales

     211,032        — %        211,779        — %        210,754  

General and administrative

     32,202        4 %        30,924        (52)%        64,198  

Affiliate revenue share

     8,529        27 %        6,726        (55)%        15,075  

Amortization of intangible assets

     74,829        3 %        72,658        — %        72,658  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     456,456        4 %        438,777        (8)%        478,210  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     176,650        12 %        157,733        ***%        36,644  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-operating (expense) income

              

Other non-operating income

     308        ***%        105        (63)%        281  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     176,958        12 %        157,838        ***%        36,925  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Provision for income taxes

     588        ***%        —        — %        —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations

   $ 176,370        12 %      $ 157,838        ***%      $ 36,925  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*** Not meaningful

Full year 2016 Compared to Full Year 2015

Revenues

Retail Revenues—Direct .    Direct revenues represent online subscription products sold to automotive dealer customers. Automotive dealer customers purchase advertising packages to market their vehicle inventory and other aspects of the dealership, such as the service department. In addition to subscription packages, dealers may also purchase leads on a pay-per-lead basis. Direct revenue is our largest revenue stream, representing approximately 53% of total revenue for 2016. Direct revenue for 2016 was up 7% from the prior year reflecting a 3% increase in subscriptions, a 3% increase due to the DealerRater acquisition, and a 1% increase in the subscription rates. The subscription and rate increases were driven by higher dealer market penetration and new product sales.

 

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Retail Revenues—National Advertising .    National advertising revenues consists of display advertising sold to advertising agencies and OEMs. National advertising revenue represented approximately 18% of total revenue for 2016. National revenue for 2016 rose 13% from the prior year mainly due to increased sponsorships and targeted display advertising. The customers who purchase our national advertising services have larger resources and apply a more sophisticated approach to measuring marketing effectiveness. Further, they are already focused on the value delivered by Cars.com beyond digital generation of traditional leads to other areas such as the offline leads that are attributable to mobile.

Retail Revenues—Other .    Other includes revenues from (1) leads sold to reseller companies, (2) data sold to third-parties and (3) products such as Sell it Yourself/For Sale By Owner. Other revenue represented approximately 2% of total revenue for 2016. Other revenue for 2016 was up 21% due to higher reseller lead volume.

Wholesale Revenues .    Wholesale revenues represents the wholesale fees paid to Cars.com for online subscription products sold by Affiliate newspapers and broadcasters. Wholesale revenue represented approximately 27% of total revenue for 2016. Wholesale revenues for 2016 were down 1%, reflecting a 3% decline in subscriptions sold partially offset by a 2% increase in subscription rates. The decline in subscriptions sold was driven by subscription cancellations due to increased competition and an increase in subscription rates.

Expenses

Product Support, Technology and Operations .    Our product support, technology and operations expenses primarily consist of the costs to support revenue including the personnel related costs for our product development, technology and operations teams. Expenses to support revenue include traffic acquisition costs, third party inventory processing costs, photo/video maintenance, service provider expenses, and content licenses. The product development team creates and develops Cars.com products along with providing editorial content on the site. The technology team develops and supports the Cars.com website. Expenses include outside consulting, hardware/software maintenance, software licenses, data center and other infrastructure costs. The operations team is responsible for product fulfillment, customer service, and account management. Product support, technology and operations expenses increased 11% in 2016 due to higher lead acquisition costs, the addition of DealerRater in 2016, increased compensation costs related to product and technology employee resources, and higher costs to support our service product.

Marketing and sales .    Our marketing and sales expenses primarily consist of personnel related costs for our marketing and sales teams, travel expenses, sales training and events expenses, advertising expenses for TV and online (includes production, agency, and distribution costs), search engine marketing and partner lead costs, market research, and marketing events. Marketing and sales 2016 expenses were comparable to last year.

General and Administrative .    Our general and administrative expenses primarily consist of personnel related costs for our executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expenses include depreciation, office space rent, outside consulting, legal and accounting services. General and Administrative expenses increased 4% in 2016 mainly due to increased compensation expenses from deferred compensation and increased headcount.

Affiliate Revenue Share .    Affiliate revenue share primarily represents payments made to affiliates for major account customers we service directly that are located in the affiliates’ market territory. Revenue recognized for these sales is recorded as retail revenues. Affiliate revenue share costs increased 27% in 2016 due to increased sales for major account customers in affiliates markets.

Amortization of Intangibles .    As a result of Parent’s acquisition of Cars.com, LLC in October 2014 and the acquisition of DealerRater in August 2016, we recorded amortizable intangible assets for customer relationships, developed technology, trade-names and non-compete agreements. This expense category reflects the amortization of these assets. Amortization expense increased 3% in 2016 due to the acquisition of DealerRater.

 

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Full Year 2015 Compared to Full Year 2014 Supplemental Pro Forma

Revenues

Retail Revenues—Direct .    Direct revenue for 2015 was up 11% from the prior year reflecting a 9% increase in subscriptions sold and a 2% increase in the subscription rates. These increases were driven by higher dealer market penetration and new product sales.

Retail Revenues—National Advertising .    National advertising revenue for 2015 rose 15% from the prior year mainly due to increased sponsorships and targeted display advertising.

Retail Revenues—Other .    Other revenues for 2015 were down 10% due to the absence of transitional service revenue in 2015 related to the Apartments.com divestiture that occurred in early 2014.

Wholesale Revenues .    Wholesale revenues for 2015 increased 29% reflecting a 41% increase in subscription rates, partially offset by a 5% decrease in subscriptions sold. The increase in rates was mainly due to amendments to the terms of affiliation agreements with Cars.com, LLC’s former owners to reflect market terms in connection with Parent’s acquisition of Cars.com, LLC on October 1, 2014. This increase in rate also resulted in a decrease in subscriptions sold. In addition, both 2015 and 2014 wholesale revenues include revenue amortization of $25.2 million related to the acquisition accounting for unfavorable contracts. Our supplemental pro forma 2014 financial statements reflect amortization as if the acquisition occurred on January 1, 2014.

Expenses

Product support, technology and operations .    Product support, technology and operations expenses for 2015 were up by 1% compared to prior year due to increased investment in product and technology resources offset by decreased third-party product related expenses due to improved contract terms.

Marketing and sales .    Marketing and sales expenses for 2015 were consistent with the prior year as increases in personnel related costs attributable to increases in our sales force headcount to better serve our customer base which were offset by decreases in television advertising expenses.

General and Administrative .    General and Administrative expenses for 2015 were lower by 52% from the prior year due to a reduction in headcount along with a decrease in professional fees following the acquisition by Parent. In addition, share appreciation right (“SAR”) expense was approximately $27 million higher in 2014 as a result of increases in the awards’ fair value during 2014. Excluding SAR expenses from 2015 and supplemental pro forma 2014, General and Administrative expenses for 2015 were lower by 16% from the prior year, and net operating margin was 26% for 2015 and 12%, for supplemental pro forma 2014.

Affiliate Revenue Share .    Affiliate revenue share expense for 2015 was down 55% from the prior year reflecting new favorable terms with the affiliates that became effective following Parent’s acquisition of Cars.com, LLC on October 1, 2014.

Amortization of Intangibles .    As a result Parent’s acquisition of Cars.com, LLC on October 1, 2014, we recorded recognized amortizable intangible assets for customer relationships, developed software and non-compete agreements. Our supplemental pro forma 2014 financial statements reflect amortization as if the acquisition occurred on January 1, 2014.

 

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Liquidity and Capital Resources

The table below sets forth a summary of our cash flow for the respective periods:

 

     Successor      Predecessor  
In thousands of dollars    Year ended
Dec. 31,
2016 		     Year ended
Dec. 31,
2015 		     Period from
Oct. 1,
2014 to
Dec. 31,
2014 		     Period from
Jan. 1,
2014 to
Oct. 1, 2014 		 

Net cash provided by operating activities

   $      199,153     $      190,055     $      33,741     $ 63,388 

Net cash provided by (used for) investing activities

     (126,753)        (1,146)        (1,929)             539,295 

Net cash used in financing activities

     (63,604)        (188,996)        (75,392)        (598,321)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

   $ 8,796     $ (87)      $ (43,580)      $ 4,362 
  

 

 

    

 

 

    

 

 

    

 

 

 

Full Year 2016 Compared to Full Year 2015

Cash flow generated by operating activities is our primary source of liquidity. Net cash flow from operating activities was $199.2 million in 2016, as compared with $190.1 million in 2015. This increase was primarily due to the $18.5 million increase in 2016 net income, which was primarily driven by higher retail and national advertising revenues. This increase was partially offset by a net decrease associated with changes in working capital, primarily due to the timing of collection of accounts receivable and settlement of accrued expenses.

Net cash used for investing activities was $126.8 million in 2016, as compared with $1.1 million in 2015. This increase was primarily due to the 2016 acquisition of DealerRater for approximately $114.9 million. Also contributing to the fluctuation was the absence in 2016 of $7.9 million of cash proceeds received in 2015 from the sale of Apartments.com.

Net cash used for financing activities was $63.6 million in 2016, as compared with $189.0 million in 2015. Cash used for financing activities is primarily due to transactions with Parent, which in 2016 included the Parent’s acquisition of DealerRater for $114.9 million in cash. Parent utilizes a centralized approach to cash management and the financing of its operations. Under this centralized cash management program, the Parent sweeps our cash balances daily and the Parent provides cash to the company to fund accounts payable, payroll and other needs. Accordingly, the net cash flow between us and Parent is presented as a financing activity.

Full Year 2015, Period from October 1, 2014 to December 31, 2014, and Period from January 1, 2014 to October 1, 2014

Net Cash Provided by Operating Activities

Net cash provided by operating activities of the Successor was $190.1 million in 2015 and $33.7 million for the period from October 1, 2014 to December 31, 2014. Net cash provided by operating activities under the Predecessor was $63.4 million for the period from January 1, 2014 to October 1, 2014. Our strong operating cash flows over these periods were primarily due to revenue growth and sustained profitability. In particular, wholesale rate increases implemented on October 1, 2014, bolstered revenue and profitability. Operating cash flow in 2014 was impacted by professional fees related to the sale transaction to our Parent.

Net Cash Provided by (Used for) Investing Activities

Net cash used in investing activities of the Successor was $1.1 million in 2015 and $1.9 million for the period from October 1, 2014 to December 31, 2014. Net cash provided by investing activities under the

 

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Predecessor was $539.3 million for the period from January 1, 2014 to October 1, 2014. Proceeds from the sale of Apartments.com resulted in cash provided by investing activities in 2015 and during the period from January 1, 2014 to October 1, 2014 of $7.9 million and $555.0 million, respectively. The 2015 proceeds were offset by $9.1 million of capital expenditures, resulting in a net use of cash for investing activities for the year. Cash used in investing activities in the three months ended December 31, 2014 was primarily due to capital expenditures.

Net Cash Used in Financing Activities

Net cash used in financing activities of the Successor was $189.0 million in 2015 and $75.4 million for the period from October 1, 2014 to December 31, 2014. Net cash used in financing activities under the Predecessor was $598.3 million for the period from January 1, 2014 to October 1, 2014. Cash used in financing activities during the Successor period is primarily due to transactions with Parent. Cash used in financing activities during the Predecessor period was related to a dividend paid to investors during the period from January 1, 2014 to October 1, 2014 of $598.3 million related to the distribution of the Apartments.com sale proceeds to our investors.

Additional Information

Prior to the separation, we have access to our Parent’s program of maintaining bank revolving credit availability as a component of our liquidity. Concurrent with the separation from our Parent, Cars.com expects to enter into a term loan of $650 million the proceeds of which it will use to fund a portion of the cash transfer to TEGNA. Additionally, we expect to enter into a $250 million revolving credit facility which will be utilized to fund a portion of the cash transfer to TEGNA, as well as for working capital requirements and capital for general corporate purposes, including strategic acquisitions, capital expenditures, and other liquidity needs, such as to provide letters of credit. Our operations have historically generated strong positive cash flow which, along with the new financing arrangements, are expected to provide adequate liquidity to meet our requirements, including those for investments, strategic acquisitions, and the one-time cash transfer to Parent. However, the tax matters agreement that TEGNA and Cars.com will enter into prior to the distribution will include restrictions that may limit Cars.com’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business. Under the tax matters agreement, for the two year period following the distribution, Cars.com will be prohibited, except in certain circumstances, from: entering into any transaction resulting in the acquisition of all or a portion of its stock or assets, whether by merger or otherwise; merging, consolidating or liquidating; issuing equity securities beyond certain thresholds; repurchasing its capital stock beyond certain thresholds; and ceasing to actively conduct its business. See the section entitled “Risk Factors—Cars.com may be unable to engage in certain corporate transactions after the separation because such transactions could jeopardize the intended tax-free status of the distribution.”

Contractual Obligations

The following table provides aggregated information about our outstanding contractual obligations as of December 31, 2016:

 

Contractual obligations

          Payments due by period  
In thousands of dollars    Total      2017      2018-2019      2020-2021      Thereafter  

Operating leases (a)

   $ 67,012      $ 8,133      $ 9,851      $ 6,798      $ 42,230  

Purchase obligations (b)

     4,614        2,708        1,906        —        —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $     71,626      $     10,841      $     11,757      $     6,798      $     42,230  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) See Note 12 to the annual financial statements included elsewhere in this information statement.

 

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(b) Primarily includes purchase obligations related to software enterprise agreements, and other legally binding commitments. Amounts which we are liable for under purchase orders outstanding at December 31, 2016, are reflected in the combined balance sheets as trade accounts payable and accrued liabilities and are excluded from the table above.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements.

Effects of inflation and changing prices and other matters

Our results of operations and financial condition have not been significantly affected by inflation.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe the following discussion addresses our most critical accounting policies, which are those that are important to the presentation of our financial condition and results of operations and require management’s most subjective and complex judgments. This commentary should be read in conjunction with our financial statements, selected financial data and the remainder of this information statement.

Revenue Recognition .    Revenue is recognized when persuasive evidence of an arrangement exists, performance under the contract has begun, the contract price is fixed or determinable and collectability of the related fee is reasonably assured. Revenue is generated through our direct sales force (“retail revenue”) or affiliate sales channels (“wholesale revenue”).

Our primary source of retail and wholesale revenue is through the sale of online subscription advertising products to car dealerships. Our base subscription package provides the car dealership’s available inventory on our Cars.com website. The base subscription contract is generally a fixed price arrangement with a one-year term and is automatically renewed unless cancelled by the customer. We also offer customers several add-on products to the base subscription package. These add-on products are not sold separately from the base subscription package and, therefore, are not separate units of accounting as they do not have value on a standalone basis. Accordingly, the base subscription package and any purchased add-on products are combined as a single unit of accounting and revenues are recognized on a straight-line basis over the contract term as the service is provided to our customers.

Wholesale revenue is earned through affiliation agreements with the Predecessor owners that sell our subscription advertising products to car dealerships. Predecessor owners are assigned certain sales territories to sell our products, and we charge our Predecessor owners a wholesale fee. In situations where our direct sales force sells our products to car dealerships in an affiliate’s territory, we pay our Predecessor owners a revenue share which is classified as ‘Affiliate revenue share’ on our statements of income.

In addition, we also earn retail revenue though the sale of display advertising on our websites to national advertisers, pursuant to fixed fee or transaction based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. Revenue is recognized evenly over the contract term (generally three to six months) for fixed fee contracts where a minimum number of impressions or click-throughs is not guaranteed. Revenue is recognized as the impressions or click-throughs are delivered for transaction based contracts. If the impressions or click-throughs delivered are less than the amount billed, the difference is recorded as deferred revenue and recognized as earned.

 

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Goodwill .    Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. At December 31, 2016 we had $788 million of goodwill, which resulted from Parent’s acquisitions of Cars.com, LLC and DealerRater. This asset represented 31% of our total assets at December 31, 2016.

Goodwill is tested for impairment on an annual basis or between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill is tested for impairment at a level referred to as the reporting unit. The level at which we test goodwill for impairment requires us to determine whether the operations below the business segment level constitute a business for which discrete financial information is available and segment management regularly reviews the operating results. We have determined that Cars.com operates as a single reporting unit.

Before performing the annual two-step goodwill impairment test, we first have the option to perform a qualitative assessment to determine if the two-step quantitative test must be completed. The qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after performing this assessment, we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we are required to perform the two-step quantitative test. Otherwise, the two-step quantitative test is not required. We elected to not perform the optional qualitative assessment of goodwill; instead, we performed the quantitative impairment test.

When performing the first step of the quantitative test, we determine the fair value of the reporting unit and compare it to the carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, we perform the second step of the impairment test, as this is an indication that the reporting unit goodwill may be impaired. In the second step of the impairment test, we determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and we must recognize an impairment loss for the difference between the carrying amount and the implied fair value of goodwill.

We estimate reporting unit fair value using a combination of an income approach using the discounted cash flow (“DCF”) analysis and a market-based valuation methodology using comparable public company trading values. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, the discount rate and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of our reporting unit. The result of the test indicated that the estimated fair value of our reporting unit exceeded the carrying value by more than 20% and thus no impairment existed.

Impairment assessment inherently involves management judgments regarding a number of assumptions described above. The reporting unit fair value also depends on the future strength of the U.S. economy. New and developing competition as well as technological change could also adversely affect future fair value estimates. Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions could have a material effect on the estimated fair values. For example, a 50 basis point increase in the discount rate used to compute the discounted cash flow valuation would have caused the current head room in step one of the test to narrow to 15%. Similarly, a five percent decline in the valuation multiples (revenue and EBITDA) used in the market-based valuation would have caused the current head room to narrow to 19%.

 

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Indefinite Lived Intangible .    In connection with our acquisition by Parent, we have an intangible asset with an indefinite life associated with the Cars.com trade name. This asset represented 34% of our total assets at December 31, 2016. The indefinite lived intangible asset is tested annually, or more often if circumstances dictate, for impairment and is written down to fair value as required. The estimate of fair value is determined using the “relief from royalty” methodology, which is a variation of the income approach. The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset. The results of our 2016 annual impairment test of the indefinite lived intangible asset indicated the fair value exceeded its carrying value by more than 10%, and therefore, no impairment existed. Although the trade name asset is not currently impaired, changes in future market rates or decreases in future cash flows and growth rates could result in an impairment charge in a future period.

Definite Lived Amortizable Intangibles .    Our amortizable intangible assets consist mainly of customer relationships and acquired technologies. These assets represented 29% of our total assets at December 31, 2016. These asset values are amortized systematically over their estimated useful lives. An impairment test of these assets would be triggered if the undiscounted cash flows from the related asset group (business unit) were to be less than the asset carrying value. Changes in circumstances, such as technological advances or changes to our business model or capital strategy, could result in actual useful lives differing from our estimates. If an impairment indicator is present, we review our amortizable intangible assets for potential impairment at the asset group level by comparing the carrying value of such assets with the expected undiscounted cash flows to be generated by the asset group. Due to expected continued cash flow in excess of carrying value from our business, no amortizable intangible assets were considered impaired.

Quantitative and Qualitative Disclosures About Market Risk

We believe that our market risk from financial instruments, such as accounts receivable and accounts payable, is not material. Because we did not have any long-term debt outstanding during any period presented, we are also not significantly impacted by changes in interest rates.

 

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MANAGEMENT

Executive Officers Following the Distribution

The following table sets forth the individuals who are expected to serve as executive officers of Cars.com following the completion of the distribution.

 

Name

 

  

Age

 

    

Position

 

T. Alex Vetter

     46      President and Chief Executive Officer

Becky A. Sheehan

     50      Chief Financial Officer

James F. Rogers

     64      Chief Legal Officer

John Clavadetscher

     43      Chief Revenue Officer

Alex Vetter

T. Alex Vetter, 46, is expected to serve as the President and Chief Executive Officer of Cars.com. Alex has served as President and Chief Executive Officer of Cars.com, LLC since 2014 and previously held a variety of roles spanning product development, customer service, training, operations and sales, since the launch of Cars.com in 1998. From 2006 until his elevation to President and Chief Executive Officer in 2014, Alex served in a variety of senior management roles for Cars.com LLC, from Senior Vice President, Sales to Executive Vice President and Chief Operating Officer.

Becky Sheehan

Becky A. Sheehan, 50, is expected to serve as the Chief Financial Officer of Cars.com. Becky has served as Chief Financial Officer of Cars.com, LLC since January 2017. Previously, she served as executive vice president and chief financial officer of FTD Companies, Inc. from November 2013, when it was spun out of United Online, Inc. as an independent public company, through December 2016. From July 2006 through November 2013, Becky served as executive vice president and chief financial officer of FTD Group, Inc. Prior to joining FTD Group, Inc., she was an Audit Partner with Deloitte & Touche LLP and had 19 years of experience in public accounting with both Deloitte and Arthur Andersen LLP.

Jim Rogers

James F. Rogers, 64, is expected to serve as the Chief Legal Officer of Cars.com. Jim has served as Chief Legal Officer of Cars.com, LLC since October 2016. Before that, Jim had served as senior vice present and general counsel for Orbitz Worldwide, Inc. from August 2012 until November 2015, when Orbitz was sold to Expedia, Inc. Prior to Orbitz, Jim was senior vice president and general counsel for TLC Vision Corporation, a private equity-backed vision care company, from 2010 until 2012. Before joining TLC Vision Corporation, he was a partner with Latham & Watkins LLP. Jim currently serves as a board member for The Appleseed Foundation and the Active Transportation Alliance.

John Clavadetscher

John Clavadetscher, 43, is expected to serve as the Chief Revenue Officer of Cars.com. John has served as Chief Revenue Officer of Cars.com, LLC since May 2016. Before that, John was senior vice president of sales of Cars.com, LLC from January 2016 to May 2016, and vice president of sales from 2004 through 2016.

 

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DIRECTORS

Board of Directors Following the Distribution

Cars.com is in the process of identifying the persons who are expected to serve on its board of directors following the completion of the distribution and will include information concerning those persons in an amendment to this information statement. Cars.com expects that, at the time of the distribution, the chairman of the board of directors will be a different person from Cars.com’s chief executive officer and, if the chairman is not an “independent” director, that the board of directors will have a lead director empowered with robust authority and duties to facilitate the board of directors’ exercise of independent oversight.

Commencing with the first annual meeting of stockholders following the separation, directors will be elected at the annual meeting of stockholders and, thereafter, each director will serve until the next annual election and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, with directors not receiving a majority of the votes cast required to tender their resignations for consideration by the board of directors, except that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election.

Director Independence

A majority of Cars.com’s board of directors will be composed of directors who are “independent,” as defined by the rules of the New York Stock Exchange and the Principles of Corporate Governance to be adopted by Cars.com’s board of directors. Cars.com’s board of directors is expected to establish categorical standards to assist it in making its determination of director independence. Cars.com expects that these standards will provide that no director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with Cars.com or its subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with Cars.com or any of its subsidiaries). In making this determination, the board of directors will consider all relevant facts and circumstances, including adopting standards that the following categories of relationships between a director and Cars.com are not material:

 

  •   employment of a director or a director’s immediate family member by a company or organization that made payments to, or received payments from, Cars.com or any of its subsidiaries for property or services in an amount which, in each of the last three fiscal years, did not exceed the greater of $1 million or 2% of such other company’s consolidated gross revenues;

 

  •   a director’s position as a director with, or direct or indirect ownership by a director or a director’s immediate family member of a 10% or greater equity interest in, a company or organization that made payments to, or received payments from, Cars.com or any of its subsidiaries for property or services in an amount which, in each of the last three fiscal years, did not exceed the permitted thresholds above; and

 

  •   a relationship of a director or a director’s immediate family member with a charitable organization, as an executive officer, board member, trustee or otherwise, to which Cars.com or any of its subsidiaries has made, in any of the last three fiscal years, charitable contributions of not more than the greater of $100,000 or 2% of such charitable organization’s consolidated gross revenues.

Cars.com’s board of directors will assess, on a regular basis, and at least annually, the independence of directors and, based on the recommendation of the Nominating and Governance Committee, will make a determination as to which members are independent. References to “Cars.com” above include any subsidiary in a consolidated group with Cars.com. The terms “immediate family member” and “executive officer” above are expected to have the same meanings specified for such terms in the New York Stock Exchange listing standards.

 

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Committees of the Board of Directors

Effective upon the completion of the distribution, Cars.com’s board of directors will have the following standing committees: an Audit Committee, an Executive Compensation Committee and a Nominating and Governance Committee.

Audit Committee.      [    ] are expected to be the members of the Audit Committee. Cars.com’s board of directors is expected to determine that [    ] is an “audit committee financial expert” for purposes of the rules of the SEC, and that each member of the Audit Committee is financially literate as required by the rules of the New York Stock Exchange. In addition, Cars.com expects that the board of directors will determine that each of the members of the Audit Committee will be independent, as defined by the rules of the New York Stock Exchange, Section 10A(m)(3) of the Exchange Act and in accordance with Cars.com’s Principles of Corporate Governance. The Audit Committee will assist the board of directors in its oversight of financial reporting practices and the quality and integrity of the financial reports of Cars.com, including compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence and the performance of Cars.com’s internal audit function. The Audit Committee will also appoint Cars.com’s independent registered public accounting firm, provide oversight of Cars.com’s internal audit function, oversee the adequacy and effectiveness of Cars.com’s accounting and financial controls and the guidelines and policies that govern the process by which Cars.com undertakes financial, accounting and audit risk assessment and risk management.

Executive Compensation Committee.      [    ] are expected to serve as members of the Executive Compensation Committee. Cars.com’s board of directors is expected to determine that each member of the Executive Compensation Committee will be independent, as defined by the rules of the New York Stock Exchange and in accordance with Cars.com’s Principles of Corporate Governance. In addition, Cars.com expects that the members of the Executive Compensation Committee will qualify as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act and as “outside directors” for purposes of Section 162(m) of the Code. The Executive Compensation Committee will discharge the board of directors’ responsibilities relating to compensation of Cars.com’s directors and executives and will have overall responsibility for Cars.com’s compensation plans, principles and programs. The Executive Compensation Committee’s duties and responsibilities will include reviewing and approving on an annual basis corporate goals and objectives relevant to compensation of Cars.com’s CEO and other senior executives. The Executive Compensation Committee will also be responsible for reviewing and discussing with management the Compensation Discussion and Analysis disclosures contained in Cars.com’s proxy statements. The Executive Compensation Committee will have primary responsibility for administering Cars.com’s equity incentive plans and in that role will be responsible for approving equity grants to Cars.com’s senior executives. The Executive Compensation Committee will have the sole discretion, under its charter, to retain or obtain advice of a compensation consultant, independent legal counsel or other adviser, and will be responsible for the appointment, compensation and oversight of any such consultant, counsel or adviser.

Nominating and Governance Committee.      [    ] are expected to serve as members of the Nominating and Governance Committee. Cars.com’s board of directors is expected to determine that each of the members of the Nominating and Governance Committee will be independent, as defined by the rules of the New York Stock Exchange and in accordance with the company’s Principles of Corporate Governance. The Nominating and Governance Committee will be charged with identifying individuals qualified to become board members, recommending to the board of directors candidates for election or re-election to the board of directors and considering from time to time the board of directors committee structure and makeup. The Nominating and Governance Committee will also monitor Cars.com’s human resources practices, including its performance in diversity and equal employment opportunity, monitor Cars.com’s performance in meeting its obligation of fairness in internal and external matters and take a leadership role with respect to Cars.com’s corporate governance practices.

Cars.com’s board of directors is expected to adopt a written charter for each of the Audit Committee, Executive Compensation Committee and Nominating and Governance Committee. These charters will be posted on Cars.com’s investor relations website in connection with the distribution.

 

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Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2016, Cars.com was not an independent company, and did not have a compensation committee or any other committee serving a similar function. Decisions as to the compensation of those individuals who will serve as Cars.com’s executive officers following the distribution were made by TEGNA.

Corporate Governance

Stockholder Recommendations for Director Nominees

Cars.com’s amended and restated bylaws will contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the board of directors. Cars.com expects that its board of directors will adopt a policy concerning the evaluation of stockholder recommendations of director candidates by the Nominating and Governance Committee.

Principles of Corporate Governance

The board of directors is expected to adopt a set of Principles of Corporate Governance in connection with the separation to assist it in guiding Cars.com’s governance practices. These practices will be regularly re-evaluated by the Nominating and Governance Committee in light of changing circumstances in an effort to continue serving the company’s best interests and the best interests of its stockholders.

Communicating with the Board of Directors

Cars.com’s Principles of Corporate Governance will include procedures by which stockholders and other interested parties who would like to communicate directly and confidentially with Cars.com’s full board of directors, the chairman or the non-management directors as a group may do so by writing to any such party at Cars.com Inc., 175 West Jackson Boulevard, Chicago, Illinois 60604, Attn: Secretary. The Secretary will forward such communications to the intended recipient and will retain copies for Cars.com’s records.

Director Qualification Standards

The Nominating and Governance Committee charter will set forth certain criteria for the committee to consider in evaluating potential director nominees. In addition to evaluating a potential director’s independence, the committee will consider whether director candidates have relevant experience and diversity in business and industry, government, education and other areas, and will monitor the mix of skills and experience of directors in order to assure that Cars.com’s board of directors will have the necessary breadth and depth to perform its oversight function effectively. The committee may re-evaluate the relevant criteria for board of directors membership from time to time in response to changing business factors or regulatory requirements. The full board of directors will be responsible for selecting candidates for election as directors based on the recommendation of the Nominating and Governance Committee.

Executive Sessions

Cars.com’s Principles of Corporate Governance will provide that the independent directors should, as they deem appropriate, meet in regularly scheduled executive sessions without management.

Policies on Business Ethics

In connection with the distribution, Cars.com will adopt an Ethics Policy that requires all of its business activities to be conducted in compliance with laws, regulations and ethical principles and values. All directors, officers and employees of Cars.com will be required to read, understand and abide by the requirements of the

 

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Ethics Policy. The Ethics Policy will be accessible on the company’s investor relations website. Only Cars.com’s board of directors or a committee thereof will be able to waive the Ethics Policy as it applies to directors or executive officers. Any waiver of the Ethics Policy for executive officers or directors will be promptly disclosed to stockholders in any practicable manner as may be required by law or stock exchange regulation. Any additions or amendments to the Ethics Policy, and any waivers of the Ethics Policy for executive officers or directors, will be posted on the corporate governance page of Cars.com’s investor relations website, and will be similarly provided without charge upon written request.

Procedures for Treatment of Complaints Regarding Accounting, Internal Accounting Controls, and Auditing Matters

In accordance with the Sarbanes-Oxley Act of 2002, Cars.com expects that its Audit Committee will adopt procedures for the receipt, retention and treatment of complaints regarding accounting controls or auditing matters and to allow for the confidential, anonymous submission by employees and others of concerns regarding questionable accounting or auditing matters.

Procedures for Approval of Related Person Transactions

Cars.com’s board of directors is expected to adopt a written policy on related person transactions. The policy will cover transactions involving Cars.com in excess of $120,000 in any year in which any director, director nominee, executive officer or greater than 5% beneficial owner of Cars.com, or any of their respective immediate family members, has or had a direct or indirect interest, other than as a director or less than 10% owner, of an entity involved in the transaction. This policy will be posted on the corporate governance page of Cars.com’s investor relations website (www.cars.com) as of the distribution date.

Under this policy, the Chief Legal Officer must advise the Audit Committee of any related person transaction of which he or she becomes aware. The Audit Committee must then either approve or reject the transaction in accordance with the terms of the policy. In the course of making this determination, the Audit Committee will consider all relevant information available to it and, as appropriate, take into consideration the size of the transaction and the amount payable to the related person, the nature of the interest of the related person in the transaction, whether the transaction may involve a conflict of interest, the purpose, and the potential benefits to Cars.com, of the transaction, whether the transaction was undertaken in the ordinary course of business and whether the transaction involved the provision of goods or services to Cars.com that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to Cars.com as would be available in comparable transactions with or involving unaffiliated third parties.

 

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EXECUTIVE COMPENSATION

Cars.com is an “emerging growth company,” as defined in the JOBS Act. As such, it is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These include, but are not limited to, exemptions from certain narrative and tabular disclosure obligations regarding executive compensation in Cars.com’s proxy statements, including the requirement to include a Compensation Discussion and Analysis, scaled financial reporting, as well as exemptions from the requirement to hold a non-binding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

Summary Compensation Table

The information included in the Summary Compensation Table below reflects compensation earned from Cars.com, LLC during fiscal years 2016 and 2015 by individuals who are expected to serve as Cars.com’s named executive officers (“NEOs”) upon the separation. They are Cars.com’s President and Chief Executive Officer Alex Vetter and Cars.com’s other two most highly compensated executive officers (Chief Revenue Officer John Clavadetscher and Chief Legal Officer James (“Jim”) Rogers), based on fiscal year 2016 compensation from Cars.com, LLC. It is anticipated that, following the separation, Cars.com’s NEOs will have the titles shown in this disclosure; however, such determination is subject to approval by the Cars.com board of directors.

Each of the individuals expected to serve as Cars.com’s NEOs was employed by Cars.com, LLC prior to the separation; therefore, the information provided below reflects compensation earned at Cars.com, LLC and the design and objectives of the Cars.com, LLC executive compensation programs in place prior to the separation. All references in the following tables to restricted stock units (“RSUs”) are to RSUs granted by TEGNA in respect of TEGNA common stock (“TEGNA RSUs”), and all references to share appreciation rights (“SARs”) are to SARs granted by Cars.com, LLC in respect of Cars.com, LLC common units (“Cars SARs”).

The historical compensation shown below was determined by TEGNA and Cars.com, LLC. Future compensation levels at Cars.com will be determined based on the compensation policies, programs and procedures to be established by the Cars.com Executive Compensation Committee. Accordingly, the amounts and forms of compensation reported below are not necessarily indicative of the compensation that Cars.com’s NEOs will receive following the separation, which could be higher or lower than the amounts shown below.

 

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NAME AND

PRINCIPAL POSITION

  YEAR     SALARY
($) 		    BONUS
($)(1) 		    STOCK
AWARDS
($)(2) 		    STOCK
OPTIONS
($)(3) 		    ALL OTHER
COMPENSATION
($)(4) 		    TOTAL
($) 		 

Alex Vetter

    2016       412,500       600,000       159,996       340,001       10,200       1,522,697  

President and CEO

    2015       350,000       737,500         400,001       10,200       1,497,701  

John Clavadetscher

    2016       276,667       174,050       43,996       93,502       10,206       598,421  

Chief Revenue Officer

    2015       252,000       165,958         110,001       10,200       538,159  

James (“Jim”) Rogers

    2016       66,410       23,094           0       89,504  

Chief Legal Officer

             

 

(1) Amounts in this column reflect payments under the Cars.com Annual Incentive Plan, payments under the Cars.com Sales Commission Plan, and awards granted under the Cars.com Long Term Incentive Plan (the “LTIP”) that vested during the applicable year. Payments under the Cars.com Annual Incentive Plan for Alex were $300,000 and $437,500 in 2016 and 2015, respectively. Payments under the Cars.com Sales Commission Plan for John were $149,050 and $140,958 in 2016 and 2015, respectively. Awards granted under the Cars.com LTIP that vested during the applicable year for Alex and John were $300,000 and $25,000, respectively for both 2016 and 2015. These plans are described below.
(2) Amounts in this column for 2016 represent the grant date fair value of TEGNA RSUs computed in accordance with Accounting Standards Codification 718, Compensation—Stock Compensation (“ASC 718”) based on the assumptions set forth in note 10 to TEGNA’s 2016 audited financial statements. There can be no assurance that the ASC 718 amounts shown in this column will ever be realized by an executive officer.
(3) Amounts in this column represent the grant date fair value of Cars SARs, which was determined using the Black-Scholes pricing model. Significant assumptions used in the Black-Scholes pricing model are set forth in the table below.

Black-Scholes Pricing Assumptions

 

Name

   Performance
Period Start
Date 		     Expected term
(years) 		     Risk-free
interest
rate 		    Expected
volatility 		    Assumed annual
dividend
yield 		 

Alex

     1/1/15        3.0        1.09 %      42.5 %      0 % 

Alex

     1/1/16        3.0        1.30 %      41.0 %      0 % 

John

     1/1/15        3.0        1.09 %      42.5 %      0 % 

John

     1/1/16        3.0        1.30 %      41.0 %      0 % 

 

(4) Amounts reported in this column represents matching contributions to 401(k) accounts.

 

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Outstanding Equity Awards at Fiscal Year End

The following table summarizes the outstanding equity awards held by the NEOs at December 31, 2016.

 

    OPTION AWARDS     STOCK AWARDS  

NAME

  NUMBER OF
SECURITIES
UNDERLYING
UNEXER-
CISED
OPTIONS
(#) EXERCI-
SABLE (1) 		    NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
UNEXER-
CISABLE 		    OPTION
EXER-
CISE
PRICE
($) 		    OPTION
EXPIRATION
DATE 		    NUMBER
OF
SHARES
OR
UNITS
OF
STOCK
THAT
HAVE
NOT
VESTED
(#) 		    MARKET
VALUE
OF
SHARES
OR
UNITS
OF
STOCK
THAT
HAVE
NOT
VESTED
($) 		 

Alex

    0       111,421 (1)      12.00       12/31/2017      
    0       88,773 (2)      13.12       12/31/2018      
            5,141 (3)      109,966  

John

    0       30,641 (1)      12.00       12/31/2017      
    0       24,413 (2)      13.12       12/31/2018      
            1,414 (3)      30,245  

 

(1) These amounts represent Cars SARs, which vest in three equal installments on December 31, 2015, 2016 and 2017, subject to continued employment.
(2) These amounts represent Cars SARs, which vest in three equal installments on December 31, 2016, 2017 and 2018, subject to continued employment.
(3) These amounts represent TEGNA RSUs, which will vest in three equal annual installments on December 31, 2017, 2018 and 2019. In addition, on December 31, 2016, TEGNA RSUs in respect of 1,714 and 471 shares held by Alex and John, respectively, vested and are not reflected in the table. The value of the TEGNA RSUs reflected in the table is based on the product of the number of TEGNA RSUs multiplied by $21.39, the closing price of a share of TEGNA stock on December 30, 2016. There can be no assurance that the amounts shown in the table will ever be realized by an executive officer. Upon the separation and distribution, these grants will be converted into RSUs in respect of common stock of Cars.com, as described above under the heading “The Separation and Distribution—Treatment of Equity Based Compensation.”

 

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Components of the Executive Compensation Program

Set forth on the table below are the key components of the Cars.com, LLC executive compensation program as in effect in 2015 and 2016.

 

    

COMPONENT

  

DESCRIPTION

  

PERFORMANCE

CONSIDERATIONS

  

PAY OBJECTIVE

Short Term
Cash Compensation 		   BASE SALARY    Pay for service in executive role.    Based on the nature and responsibility of the position, achievement of key performance indicators, internal pay equity among positions and competitive market data.    Attraction and retention. Base salary adjustments also reflect an individual’s performance or changed responsibilities.
   ANNUAL INCENTIVE PLAN    Short-term cash incentive focused on one year company and individual performance.    Cars.com, LLC revenue and net income and individual performance contributions.    Reward performance in attaining individual and Cars.com performance goals.
   SALES COMMISSION PLAN    Short-term program providing sales executives with a monthly cash bonus payment.    The executive’s net billed revenue.    Reward performance in attaining individual and Cars.com sales performance goals.

Long-Term

Equity Incentives

   SHARE APPRECIATION RIGHTS (SARS)    Cash payment based on three year increase in value of a stated number of shares.    Increase in the fair market value of Cars.com, LLC during a three year performance period.    Drive shareholder returns, align the interests of executives with those of shareholders, and promote retention.
   RESTRICTED STOCK UNITS (RSUS)    Delivery of shares of common stock upon continued employment.    Continued employment and change in shareholder value.    Retain executives, foster stock ownership and align the interests of executives with those of TEGNA’s (and, after the separation and distribution, Cars.com’s) shareholders.

Employment Agreements and Other Similar Arrangements

Cars.com, LLC has an employment agreement with Alex, which is expected to be replaced and superseded by a new letter agreement with Cars.com in connection with the separation and distribution. Cars.com, LLC also has letter agreements with John and Jim, each of which is expected to be continued by Cars.com following the separation and distribution. In addition to the agreements with its NEOs, Cars.com has a letter agreement with its Chief Financial Officer, Becky Sheehan. The terms of the foregoing agreements are summarized below, which summaries are qualified in their entireties by reference to the full text of the applicable agreements, which will be filed as exhibits with, and incorporated by reference into, a subsequent amendment to the registration statement on Form 10 of which this information statement is a part.

 

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Employment Agreement and Offer Letter with Alex Vetter

Cars.com LLC entered into an employment agreement with Alex Vetter dated November 4, 2014. Alex’s annual base salary for January 1, 2016 through February 29, 2016 was $350,000, and in March 2016 his base salary was increased to $425,000. He also received an annual bonus for 2016 in the amount of $300,000. The terms of his November 4, 2014 employment agreement also provide for certain severance benefits.

On November 2, 2016, Alex entered into an offer letter, which is subject to the consummation of the distribution and generally supersedes his employment agreement dated November 4, 2014. Under the terms of the offer letter, effective as of the date of the distribution, Alex’s annual base salary will be increased to $550,000 and his target annual bonus will be 110% of his base salary. After the distribution, it is expected that Cars.com will make a long-term award that is in addition to his 2017 TEGNA RSU award so that the total target value of his long-term awards for 2017 will be $3 million. His letter agreement also provides that in the event that he is involuntarily terminated from employment without cause, he will continue to vest for 18 months in his long term incentive awards granted after November 2, 2016. His pre-November 2, 2016 long term incentive awards remain subject to the terms of his November 4, 2014 employment agreement which provide for 100% vesting and payment in the event of certain types of severances.

After the distribution date, Alex is entitled to participate in an executive severance plan that provides certain severance benefits, including a benefit that is not less than 1.5 times the sum of his base compensation and average bonus paid for the preceding three years. Also, after the distribution date, Alex is entitled to participate in a change in control severance plan that provides certain severance benefits in the event of a change in control, including a benefit that is not less than two times the sum of his base compensation and average bonus paid for the preceding three years.

Letter Agreement with John Clavadetscher

Cars.com, LLC entered into a letter agreement with John setting forth the terms of his employment in connection with his position as Chief Revenue Officer of Cars.com, LLC. The letter agreement entitles John to an annual base salary of $290,000, a target annual commission of $165,000 and an annual long-term incentive compensation opportunity equal to $150,000.

Letter Agreement with Jim Rogers

Cars.com, LLC entered into a letter agreement with Jim setting forth the terms of his employment in connection with his position as Chief Legal Officer of Cars.com, LLC. The letter agreement entitles Jim to an annual base salary of $350,000, a target annual bonus of 50% of his annual base salary and a 2017 annual long-term incentive compensation opportunity equal to $750,000. In connection with the execution of his offer letter, Jim also entered into standard form of restrictive covenant agreement.

Letter Agreement with Becky Sheehan

Cars.com, LLC entered into a letter agreement with Becky setting forth the terms of her employment in connection with her position as Chief Financial Officer of Cars.com, LLC. The letter agreement entitles Becky to an annual base salary of $500,000, a target annual bonus of 100% of her annual base salary and a 2017 annual long-term incentive compensation opportunity equal to $1,000,000. In addition, in connection with commencing employment with Cars.com, LLC, Becky received a cash payment of $250,000, which is subject to repayment upon her termination of employment for cause or her voluntary termination of employment, in each case, within 12 months of commencing employment. In January 2017, Becky also received an initial one-time award of TEGNA RSUs, which vest over four years and, upon the separation and distribution will be converted into RSUs in respect of common stock of Cars.com, as described above under the heading “The Separation and Distribution—Treatment of Equity Based Compensation.”

 

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Incentive Arrangements

During 2016, the NEOs participated in the incentive compensation plans described below. Such descriptions are qualified in their entireties by reference to the full texts of the applicable plans, which will be filed as exhibits with, and incorporated by reference into, a subsequent amendment to the registration statement on Form 10 of which this information statement is a part.

Cars.com Annual Incentive Plan

During 2016, certain executives of Cars.com, LLC, including Alex and Jim, participated in the Cars.com Annual Incentive Plan. The plan offers incentive opportunities linked to the attainment of (1) Cars.com’s annual revenue and net income goals and (2) each participant’s key performance indicators developed at the beginning of the year (or, if later, upon commencing participation in the plan). Annual incentive bonuses are designed to reflect individual and company performance during the past year and therefore can vary significantly in amount from year to year.

If a participant’s employment is terminated involuntarily during a performance year due to death, total disability or approved leave of absence, such participant will be eligible for a prorated portion of his or her bonus, as determined based on actual performance and the number of days completed in the performance year. If a participant’s employment is terminated for any other reason during a performance year, no award shall be payable to such participant in respect of such year.

Cars.com Sales Commission Plan

During 2016, certain executives of Cars.com, LLC who are responsible for sales, including John, participated in a sales commission plan. The key objectives of the plan are to promote significant growth in profitable revenue and market share. The plan provides sales executives with commission-based payments based on the executive’s net billed revenue (“NBR”) for specific segments of the business. NBR is determined based upon an executive’s approved sales billed to customers. The plan has two types of commissions based on the type of customer: major accounts, which are weighted at 20%, and other customers, which are weighted at 80%. The commission payments are earned and paid monthly.

Cars.com Share Appreciation Rights Plan

During 2016, certain executives of Cars.com, LLC, including Alex and John, received awards under the Cars.com Share Appreciation Rights Plan (the “SARs Plan”) in the amounts described in the Summary Compensation Table. The purpose of the SARs Plan is to motivate certain key employees of Cars.com, LLC to maximize their contributions to the long-term success of Cars.com, LLC, and to encourage them to remain in the employment of Cars.com, LLC through the award of Cars SARs. Cars SARs link the compensation of participating executives with Cars.com, LLC’s annual financial results and value by providing the executive with a cash payment based on the increase in the value of a specified number of shares of Cars.com, LLC over a specified performance period.

The fair market value of a share of Cars.com, LLC is determined by the plan administrator. The plan administrator may make such adjustments in determining the fair market value of the Cars.com, LLC to reflect such factors and transactions affecting Cars.com, LLC as the plan administrator determines to be appropriate in the plan administrator’s discretion.

Cars SARs (including those granted to Alex and John in 2016) have a three-year performance period. Awards vest in three equal tranches, with one-third of the total award becoming vested on each anniversary of the beginning of the performance period. Upon a termination of employment due to death, disability or retirement, a prorated portion of the SAR award shall vest based on the number of full months completed in the performance period. Upon a termination of employment for cause, both vested and unvested Cars SARs are forfeited. Generally, no portion of a SAR award is paid until after the applicable performance period has concluded.

 

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In addition, Alex and John held Cars SARs that were granted prior to the acquisition of Cars.com, LLC by TEGNA in October 1, 2014. In connection with the acquisition, those Cars SARs converted into a fixed cash amount that was paid in January of 2015, 2016 and 2017. As of the date of this registration statement, Cars.com has no remaining obligations in respect of such former Cars SARs.

Cars.com Long Term Incentive Plan

The Cars.com LTIP is a deferred incentive compensation plan that provides for employer contributions on behalf of certain employees of Cars.com, LLC, including Alex and John. A three-year vesting schedule applies to all employer contributions. Employer contributions vest in three equal annual installments on each February 15th following the date of the deposit.

TEGNA Inc. Omnibus Incentive Compensation Plan

During 2016, certain executives of Cars.com, LLC, including Alex and John, participated in the TEGNA Inc. 2001 Omnibus Incentive Compensation Plan (Amended and Restated as of May 4, 2010), as amended (the “TEGNA Inc. Omnibus Incentive Compensation Plan”), pursuant to which TEGNA grants equity incentive awards to its key employees. Alex and John were granted TEGNA RSUs on January 1, 2016, which vest in four equal annual installments on December 31, 2016, 2017, 2018 and 2019. Upon the separation and distribution, these grants will be converted into RSUs in respect of common stock of Cars.com, as described above under the heading “The Separation and Distribution—Treatment of Equity Based Compensation.”

The TEGNA Inc. Omnibus Incentive Compensation Plan and amendments 1 through 4 thereto are filed as exhibits 10-7, 10-7-1, 10-7-2, 10-7-3 and 10-7-4 to TEGNA’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Pension, Retirement or Similar Benefits

Cars.com, LLC maintains a 401(k) plan for the benefit of its employees, including the NEOs. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, pre-tax contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. Each participant may defer eligible compensation subject to the statutory limit and participants that are 50 years or older can also make additional “catch-up” contributions above the statutory limit. Employees’ pre-tax and Roth contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately fully vested in both their contributions and Cars.com’s matching contributions. For 2017, Cars.com intends to match 100% of each participant’s contributions up to 3% of such participant’s related eligible compensation, and then 50% of each participant’s contributions up to the next 2% of such participant’s related eligible compensation.

Post-Spin-Off Cars.com Executive Compensation Arrangements

Generally

Cars.com’s Executive Compensation Committee has not yet been established and therefore has not established a specific set of objectives or principles for Cars.com’s executive compensation program. Until the separation and distribution, TEGNA’s Executive Compensation Committee will continue to make certain compensation decisions and take actions regarding the compensation of the NEOs. Following the separation and distribution, such decisions will be made, and related actions taken, by Cars.com’s Executive Compensation Committee.

 

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The executive compensation arrangements that Cars.com is expected to adopt in connection with the separation and distribution are described below. These arrangements are similar in a number of respects to those in place at TEGNA immediately prior to the separation and distribution. However, after the separation and distribution, Cars.com’s Executive Compensation Committee and senior management will evaluate such arrangements and may make adjustments as necessary to meet prevailing business needs.

Omnibus Incentive Compensation Plan

Introduction .    Prior to the separation and distribution, Cars.com will adopt the Cars.com Inc. Omnibus Incentive Compensation Plan (the “Cars.com Omnibus Plan”). TEGNA, as Cars.com’s sole stockholder, will approve the Cars.com Omnibus Plan prior to the distribution date, and the Cars.com Omnibus Plan will become effective on the distribution date. The following description is a summary of certain terms of the Cars.com Omnibus Plan. This summary is qualified in its entirety by reference to the full text of the Cars.com Omnibus Plan, which will be filed as an exhibit with, and incorporated by reference into, a subsequent amendment to the registration statement on Form 10 of which this information statement is a part. The terms of the Cars.com Omnibus Plan that will be in effect following the separation and distribution have not yet been finalized; changes to the Cars.com Omnibus Plan, some of which may be material, may be made prior to the separation and distribution.

Purpose .    The purpose of the Cars.com Omnibus Plan is to benefit and advance the interests of Cars.com and its subsidiaries and affiliates by making annual and long-term incentive compensation awards to certain employees and directors of Cars.com and its subsidiaries and affiliates as an additional incentive for them to make contributions to Cars.com’s financial success.

Administration .    The Cars.com Omnibus Plan will be administered by a committee appointed by the Cars.com Board (the “Committee), which is expected to be the Cars.com Executive Compensation Committee. Subject to the terms of the Cars.com Omnibus Plan, the Committee may grant awards under the Cars.com Omnibus Plan; establish the terms and conditions of those awards; construe and interpret the Cars.com Omnibus Plan and any agreement or instrument entered into under the Cars.com Omnibus Plan; establish, amend or waive rules and regulations for the Cars.com Omnibus Plan’s administration; amend the terms and conditions of any outstanding award as provided in the Cars.com Omnibus Plan; and take all other actions it deems necessary for the proper operation or administration of the Cars.com Omnibus Plan. The Committee may delegate its authority under the Cars.com Omnibus Plan, subject to certain limitations.

Eligibility .    Awards may be granted to employees of Cars.com, its subsidiaries and affiliates, and directors of Cars.com. The Committee decides who should receive awards and what kind of awards they should receive. The Cars.com Omnibus Plan does not limit the number of employees and affiliates who may receive awards.

Authorized Number of Shares .    The Cars.com Omnibus Plan initially reserves [●] shares of Cars.com common stock for issuance.

Share Counting/Reacquired Shares .    For purposes of counting the number of shares available for the grant of awards under the Cars.com Omnibus Plan, shares of Cars.com common stock delivered (whether by actual delivery, attestation, or net exercise) to Cars.com by a participant to purchase shares of Cars.com common stock upon the exercise of an award shall not be added back to the number of shares available for future awards. In addition, shares of Cars.com common stock repurchased by Cars.com in the open market using the proceeds from the exercise of an award will not be added back to the number of shares available for future awards. If any award under the Cars.com Omnibus Plan is terminated, surrendered, canceled or forfeited, or if an award is settled in cash, the unused shares of Cars.com common stock covered by such award will again be available for grant under the Cars.com Omnibus Plan, subject, however, in the case of incentive stock options, to any limitations under the Internal Revenue Code.

 

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Types of Awards.     The Committee may grant the following types of awards under the Cars.com Omnibus Plan: stock options, stock appreciation rights, restricted stock, stock awards, RSUs, performance shares, performance units and other equity-based and cash-based awards. Each type of award is subject to a maximum limit on the grant that may be made to any one participant in a fiscal year.

Stock Options .    A stock option is the right to purchase one or more shares of Cars.com common stock at a specified price, as determined by the Committee. The Committee may grant non-qualified stock options and incentive stock options. A stock option is exercisable at such times and subject to such terms and conditions as the Committee determines. No more than [●] shares of Cars.com common stock subject to stock options may be granted to any participant in a fiscal year. The exercise price of a stock option will not be less than 100% of the fair market value of a share of Cars.com common stock on the date that the option is granted. No option will remain exercisable beyond 10 years after its grant date. Incentive stock options may be granted only to employees of Cars.com or its affiliates or subsidiaries (provided that the affiliate or subsidiary is a type of entity whose employees can receive such options under the tax rules that apply to such awards), and the maximum number of shares that may be issued under incentive stock options cannot exceed [●].

Stock Appreciation Rights (SARs) .    A SAR is a right to receive an amount in any combination of cash or Cars.com common stock (as determined by the Committee) equal in value to the excess of the fair market value of the shares covered by such SAR on the date of exercise over the aggregate exercise price of the SAR for such shares. SARs may be granted freestanding or in tandem with related options. The exercise price of a SAR granted in tandem with an option will be equal to the exercise price of the related option, and may be exercised for all or part of the shares covered by such option upon surrender of the right to exercise the equivalent portion of the related option. The exercise price of a freestanding SAR will be not less than the fair market value of a share of Cars.com common stock on the date the SAR is granted. No SAR will remain exercisable beyond 10 years after its grant date. No more than [●] shares of Cars.com common stock may be granted in the form of SARs to any participant in a fiscal year.

Restricted Stock/Stock Awards.     Restricted stock is an award of Cars.com common stock that is subject to a substantial risk of forfeiture for a period of time and such other terms and conditions as the Committee determines. A stock award is an award of Cars.com common stock that is not subject to such a risk of forfeiture, but which may be subject to such other terms and conditions as the Committee determines. No more than [●] shares of Cars.com common stock may be granted to any participant in a fiscal year pursuant to stock awards or awards of restricted stock.

Restricted Stock Units (RSUs) .    A RSU is an award whose value is based on the fair market value of Cars.com common stock and whose payment is conditioned on the completion of specified service requirements and such other terms and conditions as the Committee may determine. Payment of earned RSUs may be made in a combination of cash or shares of Cars.com common stock (as determined by the Committee). The maximum aggregate grant of RSUs or performance shares that may be awarded to any participant in any fiscal year shall not exceed [●] shares of Cars.com common stock.

Performance Units/Shares and Cash-Based Awards .    Performance Units/Shares and Cash Based Awards are other equity-type or cash-based awards that may be granted to participants. These awards may be valued in whole or in part by reference to, or are otherwise based on, the fair market value of Cars.com common stock or other criteria established by the Committee and the achievement of performance goals. These awards are subject to such terms and conditions as the Committee determines. Performance goals may include a service requirement. Payment of earned performance units/shares and cash-based awards may be made in any combination of cash or shares of Cars.com common stock (as determined by the Committee) that have an aggregate fair market value equal to the value of the earned awards at the close of the applicable performance period. The maximum aggregate grant of performance shares or RSUs that may be awarded to any participant in any fiscal year shall not exceed [●] shares of Cars.com common stock. The maximum aggregate amount of performance units or cash-based awards that may be awarded to any participant in any fiscal year shall not exceed $[●].

 

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Director Limit.     The cash value of all equity awards granted to a single non-employee director of Cars.com in one calendar year shall not exceed $700,000 (or, in the case of a non-employee director serving as chair of the Cars.com Board, $900,000). Such annual limit will be measured based on the value of an award as of the date the award is granted (not the date of payment). Accordingly, the annual limit will not include the value of an award in the calendar year when it is paid or vests if such year is different from the year the award is granted.

Adjustments.     In the event of a change in the outstanding shares of Cars.com common stock due to a stock split, stock dividend, extraordinary cash dividend, recapitalization, merger, consolidation, spin-off, reorganization, repurchase or exchange of Cars.com common stock or other securities, or other corporate transaction or event, the Committee shall take certain actions to prevent the dilution or enlargement of benefits under the Cars.com Omnibus Plan. These actions include adjusting (1) the number of shares of Cars.com common stock that may be issued under the Cars.com Omnibus Plan (including the authorized share limitations); (2) the number of shares or price of shares subject to outstanding awards; and (3) the consideration to be paid upon the grant or exercise of any award.

Change in Control.     Generally, in the event of a change in control of Cars.com, as defined in the Cars.com Omnibus Plan, unless otherwise specified in the award agreement, outstanding awards will not be subject to accelerated vesting unless (a) they are not continued or assumed in connection with the change in control or (b) the holder has a qualifying termination of employment, as defined in the applicable award agreement, within two years following the change in control. If either condition described in (a) or (b) is satisfied, (1) all outstanding options and SARs will become immediately exercisable in full during their remaining term; (2) all restriction periods and restrictions imposed on non-performance based restricted stock awards will lapse; (3) all outstanding awards of performance-based restricted stock, performance units and performance shares will vest and be paid assuming achievement of all relevant target performance goals; (4) all RSUs will vest and be paid; and (5) all outstanding cash-based awards will vest and be paid (and, in the case of performance-based cash-based awards, based on an assumed achievement of all relevant target performance goals).

Performance Measures/Section 162(m).     The Cars.com Omnibus Plan permits the Committee to make awards that are intended to be exempt from the deduction limitations under Section 162(m) because they satisfy the requirements of performance-based compensation. The Cars.com Omnibus Plan lists the performance measures the Committee may use to make performance-based awards under Section 162(m). These performance measures include: (1) earnings per share (basic or diluted); (2) income before income taxes; (3) income from continuing operations; (4) net income or net income attributable to Cars.com; (5) operating income; (6) cash flow from operating activities, operating cash flow (defined as operating income plus non-cash charges for depreciation, amortization and impairment of operating assets) or free cash flow; (7) EBITDA, or net income attributable to Cars.com, before interest, taxes, depreciation/amortization; (8) return measures (including, but not limited to, return on assets, equity, capital or investment); (9) cash flow return on investments, which equals net cash flows divided by owner’s equity; (10) internal rate of return or increase in net present value; (11) dividend payments; (12) gross revenues; (13) gross margins; (14) operating measures such as trends in digital metrics and advertising measures; (15) internal measures such as achieving a diverse workforce; (16) share price (including, but not limited to, growth measures and total shareholder return) and market value; (17) debt (including, but not limited to, measures such as debt (book value or face value) outstanding and debt to earnings before interest, taxes, depreciation and amortization); (18) market share; and (19) expense management. This wide range of potential performance goals ensures that Cars.com can readily adapt to changing business needs. The performance goals the Committee establishes for the performance measures described above which are based on operating results shall be adjusted to take into account the effects of “Adjustment Items” (as defined in the plan document), unless the Committee determines otherwise at the time the performance goals are established.

Any of the above measures may be compared to peer or other companies. Additionally, performance measures may be set either at the consolidated level, segment level, division level, group level, or the business unit level and performance measures may be measured either annually or cumulatively over a period of years, on an absolute basis or relative to pre-established targets, to a previous year’s results or to a designated comparison group, in each case as specified by the Committee.

 

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Corporate Governance Provisions.     The Cars.com Omnibus Plan contains several other provisions intended to make sure that awards under the Cars.com Omnibus Plan comply with established principles of corporate governance. These provisions include:

 

  •   No Discounted Stock Options or Stock Appreciation Rights.     Absent shareholder approval, stock options and stock appreciation rights may not be granted with an exercise price of less than the fair market value of the Cars.com common stock on the date the stock option or stock appreciation right is granted.

 

  •   No Stock Option or Stock Appreciation Rights Repricings.     Stock options and stock appreciation rights may not be repriced absent shareholder approval. This provision applies to both direct repricings—lowering the exercise price of an outstanding stock option or stock appreciation right—and indirect repricings—canceling an outstanding stock option or stock appreciation right and granting a replacement stock option or stock appreciation right with a lower exercise price.

 

  •   No Evergreen Provision.     The Cars.com Omnibus Plan does not contain an “evergreen provision”—there is no automatic provision to replenish the shares of Cars.com common stock authorized for issuance under the Cars.com Omnibus Plan.

 

  •   No Cash Buyouts of Underwater Stock Options.     The Cars.com Omnibus Plan does not permit cash buyouts of underwater stock options without shareholder approval.

Substitute Awards and Adjusted Awards.     Substitute awards or adjusted awards may be granted under the Cars.com Omnibus Plan under certain circumstances (for example, awards originally granted under the TEGNA Inc. Omnibus Incentive Compensation Plan that were converted into awards in respect of Cars.com common stock in connection with the separation and distribution or a subsequent spin-off, merger, or acquisition) in which case certain of the limits and rules discussed above may not apply to such substitute or adjusted awards.

Transferability of Awards.     Except as otherwise provided in an award agreement, awards may not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution. Except as otherwise provided in an award agreement, during the life of the participant, awards are exercisable only by the participant or such participant’s legal representative.

Provisions for Foreign Participants.     The Committee may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Cars.com Omnibus Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefits or other matters.

Clawback.     The Cars.com Omnibus Plan provides that awards granted thereunder will be subject to such deductions and clawback as may be required to be made pursuant to law, government regulation or stock exchange listing requirement.

Amendment and Termination.     The Committee or the Board may amend or terminate the Cars.com Omnibus Plan at any time, but no such amendment or termination may adversely affect in any material way the rights of a participant with respect to an outstanding award without that participant’s consent. No awards may be granted on or after 10 years from the date the Cars.com Omnibus Plan was adopted. Shareholder approval is required for certain amendments to the Cars.com Omnibus Plan.

Federal Income Tax Aspects of the Cars.com Omnibus Plan

This is a brief summary of the U.S. federal income tax aspects of awards that may be made under the Cars.com Omnibus Plan based on existing U.S. federal income tax laws as of the date of this registration statement. This summary provides only the basic tax rules and is not intended as, and should not be relied upon,

 

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as tax guidance for participants in the Cars.com Omnibus Plan. It does not describe the implications, if any, of a number of special tax rules, including, without limitation, the alternative minimum tax, the golden parachute tax rules under Sections 280G and 4999 of the Internal Revenue Code, and foreign, state and local tax laws. In addition, this summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Internal Revenue Code regarding nonqualified deferred compensation. Changes to the tax laws could alter the tax consequences described below.

Incentive Stock Options.     The grant of an incentive stock option will not be a taxable event for the participant or for Cars.com. A participant will not recognize taxable income upon exercise of an incentive stock option (except that the alternative minimum tax may apply), and any gain realized upon a disposition of common stock received pursuant to the exercise of an incentive stock option will be taxed as long-term capital gain if the participant holds the shares of common stock for at least two years after the date of grant and for one year after the date of exercise (the “holding period requirement”). Cars.com will not be entitled to any business expense deduction with respect to the exercise of an incentive stock option, except as discussed below. For the exercise of an option to qualify for the foregoing tax treatment, the participant generally must exercise the option while the participant is our employee or an employee of our subsidiary or, if the participant has terminated employment, no later than three months after the participant terminated employment.

If all of the foregoing requirements are met except the holding period requirement mentioned above, the participant will recognize ordinary income upon the disposition of the common stock in an amount generally equal to the excess of the fair market value of the common stock at the time the option was exercised over the option exercise price (but not in excess of the gain realized on the sale).

The balance of the realized gain, if any, will be capital gain. Cars.com will generally be allowed a business expense deduction when and to the extent the participant recognizes ordinary income, subject to the restrictions of Section 162(m) of the Internal Revenue Code.

Non-Qualified Options.     The grant of a non-qualified stock option will not be a taxable event for the participant or Cars.com. Upon exercising a non-qualified option, a participant will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the common stock on the date of exercise. Upon a subsequent sale or exchange of shares acquired pursuant to the exercise of a non-qualified option, the participant will have a taxable capital gain or loss, measured by the difference between the amount realized on the disposition and the tax basis of the shares of common stock (generally, the amount paid for the shares plus the amount treated as ordinary income at the time the option was exercised). Subject to the restrictions of Section 162(m) of the Internal Revenue Code, Cars.com will be entitled to a business expense deduction in the same amount and generally at the same time as the participant recognizes ordinary income.

Stock Appreciation Rights.     There are no immediate tax consequences of receiving an award of stock appreciation rights under the Cars.com Omnibus Plan. Upon exercising a stock appreciation right, a participant will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the common stock on the date of exercise. Subject to the restrictions of Section 162(m) of the Internal Revenue Code, Cars.com will be entitled to a business expense deduction in the same amount and generally at the same time as the participant recognizes ordinary income.

Restricted Stock/Stock Awards.     A participant who is awarded restricted stock will not recognize any taxable income for federal income tax purposes at the time of grant, provided that the shares of common stock are subject to restrictions (that is, the restricted stock is nontransferable and subject to a substantial risk of forfeiture). However, the participant may elect under Section 83(b) of the Internal Revenue Code to recognize ordinary income in the year of the award in an amount equal to the fair market value of the common stock on the date of the award (less the purchase price, if any), determined without regard to the restrictions. If the participant does not make such a Section 83(b) election, the fair market value of the common stock on the date the restrictions lapse (less the purchase price, if any) will be treated as ordinary income to the participant and will be

 

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taxable in the year the restrictions lapse. A participant who is awarded shares that are not subject to a substantial risk of forfeiture will recognize ordinary income equal to the fair market value of the shares on the date of the award. Subject to the restrictions of Section 162(m) of the Internal Revenue Code, Cars.com will be entitled to a business expense deduction in the same amount and generally at the same time as the participant recognizes ordinary income.

Restricted Stock Units, Performance Units/Shares and Cash-Based Awards.     The taxation of these awards will depend on the specific terms of the award. Generally, the award of RSUs, Performance Units/Shares and Cash-Based Awards will have no federal income tax consequences for Cars.com or for the participant. Generally, the payment of the award is taxable to a participant as ordinary income. Subject to the restrictions of Section 162(m) of the Internal Revenue Code, Cars.com will be entitled to a business expense deduction in the same amount and generally at the same time as the participant recognizes ordinary income.

Severance Arrangements

It is expected that Cars.com will adopt a severance plan and change-in-control severance plan shortly following the separation and distribution, the terms of which have not yet been finalized. If such plans are adopted following the separation and distribution, Cars.com will disclose the adoption of the plans and their material terms in a current report on Form 8-K.

 

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DIRECTOR COMPENSATION

Treatment of Director Compensation in the Separation and Distribution

Prior to the separation and distribution, Cars.com will establish the Cars.com outside director compensation program (the “Cars.com Outside Director Compensation Program”). Each Cars.com non-employee director who served on the TEGNA board of directors immediately prior to the separation and distribution and held a deferred compensation balance under the TEGNA Deferred Compensation Plan will be credited, as of the separation and distribution, with such deferred compensation balance under the Cars.com Deferred Compensation Plan and will cease participation in the TEGNA Deferred Compensation Plan. The Cars.com director’s deferred compensation balance under the Cars.com Deferred Compensation Plan will be subject to substantially the same terms and conditions as such amounts were subject to under the TEGNA Deferred Compensation Plan (except that references to TEGNA will instead refer to Cars.com). The equity awards held by the Cars.com non-employee directors who served on the TEGNA board of directors immediately prior to the separation and distribution will be treated as described above under the heading “The Separation and Distribution—Treatment of Equity Based Compensation.”

Director Compensation Following the Separation and Distribution

At the effective time of the separation and distribution, the Cars.com Outside Director Compensation Program will have the terms described below. Following the distribution, the Cars.com board of directors will have the authority to change the Cars.com Outside Director Compensation Program. In setting compensation for the members of the Cars.com board of directors, it is expected that the Cars.com board of directors will consider the significant time commitment and the skills and experience level necessary for directors to fulfill their duties.

Under the Cars.com Outside Director Compensation Program in effect at the time of the separation and distribution, each non-employee director will receive the following for the applicable director compensation year (subject to the special rules described below that apply to the first director compensation year following the distribution):

 

  •   an annual cash retainer of $75,000, payable quarterly during the director compensation year;

 

  •   an annual equity award in the form of RSUs with a grant date value equal to $150,000, granted on the first day of the director compensation year, which award will vest and be eligible for dividend equivalents on the terms described below;

 

  •   an additional annual cash retainer fee of $20,000 to committee chairs and an additional annual equity award in the form of RSUs with a grant date value equal to $75,000 to the independent chair of the board, which award will vest and be eligible for dividend equivalents on the terms described below; and

 

  •   travel accident insurance of $1,000,000.

In addition, in connection with the separation and distribution, the independent chair of the board will receive an annual equity award in the form of RSUs with a grant date value equal to $300,000 for additional duties supporting the executive team of Cars.com. The RSUs will vest in equal installments on the first three anniversaries of the grant date.

A director compensation year generally will commence on the date of Cars.com’s annual meeting of stockholders and end on the date of Cars.com’s following annual meeting of stockholders; however, the 2017-2018 director compensation year following the distribution will commence on the date of the distribution. The amounts described above will be prorated for a partial year of service and, as described below, for the 2017-2018 director compensation year.

 

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Subject to the terms and conditions of the award agreement, each RSU granted to a Cars.com director will represent the right to receive a share of Cars.com common stock to the extent they become vested. RSUs will vest in four equal installments in each of the first four quarters of the director compensation year following the grant date (except in the case of the special grant to the independent chair, which will vest in equal installments on the first three anniversaries of the grant date) and will receive dividend equivalents, which will be deemed to be reinvested in shares of Cars.com common stock. Once vested, these RSUs and dividend equivalents will be paid to the director on the first anniversary of the grant date (unless the director has elected to defer his or her restricted stock units under the Cars.com Deferred Compensation Plan), subject to the director share ownership guidelines described below. RSUs will fully vest if a non-employee director leaves the Cars.com board of directors due to death, disability or the age of service limitations set forth in the Cars.com By-laws. RSUs will also fully vest and be paid out upon a change of control of Cars.com. RSUs that are not vested on the date the director leaves the Cars.com board of directors will be forfeited.

Cars.com directors who did not serve on the TEGNA board of directors immediately prior to the effective time of the distribution will receive a RSU award in respect of their service on the Cars.com board of directors on the date of the distribution or, if later, the date they join the Cars.com board of directors, having a grant date value equal to the prorated portion of the $150,000 annual equity award amount, based on the number of days that such directors will serve on the Cars.com board of directors from the distribution or grant date through the expected annual stockholders meeting date in 2018. Cars.com directors who served on the TEGNA board of directors immediately prior to the effective time of the distribution will not receive a new RSU award in respect of the 2017-2018 director compensation year at the effective time of the distribution. Instead, the RSU award they received as a TEGNA board member with respect to the 2017-2018 director compensation year will be treated as described above under the heading “The Separation and Distribution—Treatment of Equity Based Compensation.” Additionally, Cars.com directors who served on the TEGNA board of directors immediately prior to the effective time of the distribution will not receive cash retainer fees from Cars.com if such fees would be duplicative of the fees received for service with TEGNA prior to the effective time of the distribution.

Deferred Compensation Plan

Upon the separation and distribution, Cars.com will adopt the Cars.com Deferred Compensation Plan (“DCP”), and Cars.com and the DCP will assume liabilities of TEGNA under its deferred compensation plan relating to certain TEGNA directors who become directors of Cars.com. Under the DCP, non-employee directors of Cars.com may be given the opportunity to defer all or a portion of their compensation (including cash compensation and equity awards). The amounts deferred by each director will be deemed invested in the investment options specified under the plan as designated by the director; provided that deferrals of RSUs payable in Cars.com stock are required to be invested in Cars.com stock and will be paid in shares of Cars.com stock. Amounts that a director elects to defer into the DCP are generally paid at the time and in the form elected by the director, provided that if the director terminates employment before attaining the mandatory retirement age, vested amounts are generally paid in a lump sum upon such termination.

This summary is qualified in its entirety by reference to the full text of the DCP, which will be filed as an exhibit with, and incorporated by reference into, subsequent amendment to the registration statement on Form 10 of which this information statement is a part.

Director Share Ownership Guidelines Following the Distribution

Cars.com’s non-employee directors will also be subject to minimum share ownership and share retention requirements, which are initially expected to be consistent with those in place at TEGNA immediately prior to the distribution. Under these requirements, Cars.com’s non-employee directors are expected to hold Cars.com common stock with a value of three times the annual cash retainer (or $225,000). Shares relating to awards of restricted stock or stock units or deemed held in the DCP shall count towards achievement of the minimum guideline amount. Directors are expected to hold all shares received from Cars.com as compensation until the stock ownership guideline is met.

 

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RELATIONSHIP WITH TEGNA FOLLOWING THE SEPARATION AND DISTRIBUTION

Agreements with TEGNA

Following the separation and distribution, Cars.com and TEGNA will operate separately, with each as an independent public company. Prior to the distribution, Cars.com will enter into a separation and distribution agreement with TEGNA, which is referred to in this information statement as the “separation agreement” or the “separation and distribution agreement.” In connection with the separation and prior to the distribution, Cars.com will also enter into various other agreements to effect the separation and provide a framework for its relationship with TEGNA after the separation and distribution, such as a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the allocation between Cars.com and TEGNA of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of TEGNA and its subsidiaries attributable to periods prior to, at and after Cars.com’s separation from TEGNA and will govern the relationship between Cars.com and TEGNA subsequent to the completion of the separation. “Forms of” the separation agreement, the transition services agreement, the tax matters agreement and the employee matters agreement are filed as Exhibits 2.1, 10.1, 10.2 and 10.3 to the registration statement on Form 10, of which this information statement forms a part. You are urged to read these agreements carefully and in their entirety.

When used in this section, “distribution date” refers to the date on which TEGNA distributes shares of Cars.com common stock to the holders of TEGNA common stock.

In addition to the above agreements, Cars.com will continue to be party to an affiliation agreement with four local television stations owned by TEGNA that has substantially similar terms to those affiliation agreements Cars.com has in place with the group of media organizations that formerly owned Classified Ventures, LLC. We do not believe that the agreement with the TEGNA stations is material to Cars.com’s business.

Separation Agreement

Transfer of Assets and Assumption of Liabilities

The separation agreement will identify the assets to be transferred, the liabilities to be assumed and the contracts to be assigned to each of Cars.com and TEGNA as part of the separation of TEGNA into two companies, and will provide for when and how these transfers, assumptions and assignments will occur. In particular, the separation agreement will provide, among other things, that, subject to the terms and conditions contained therein:

 

  •   certain assets (whether tangible or intangible) related to the Cars.com business, which are referred to as the “Cars.com Assets,” will be transferred to Cars.com, including:

 

  •   equity interests in certain TEGNA subsidiaries that hold assets used exclusively in the Cars.com business;

 

  •   customer, distribution, supply and vendor contracts or agreements with third parties (or portions thereof), to the extent that they exclusively relate to the Cars.com business;

 

  •   rights to technology, software and intellectual property exclusively used in the Cars.com business;

 

  •   exclusive rights to information exclusively related to the Cars.com business and nonexclusive rights to information related to the Cars.com business;

 

  •   rights and assets expressly allocated to Cars.com pursuant to the terms of the separation agreement or certain other agreements entered into in connection with the separation;

 

  •   permits exclusively used in the Cars.com business; and

 

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  •   other assets that are included in the Cars.com pro forma balance sheet;

 

  •   certain liabilities related to the Cars.com business or the Cars.com Assets, which are referred to as the “Cars.com Liabilities,” will be retained by or transferred to Cars.com; and

 

  •   all of the assets and liabilities (including whether accrued, contingent or otherwise) other than the Cars.com Assets and Cars.com Liabilities (such assets and liabilities, other that the Cars.com Assets and the Cars.com Liabilities, referred to as the “TEGNA Assets” and “TEGNA Liabilities,” respectively) will be retained by or transferred to TEGNA.

Except as expressly set forth in the separation agreement or any ancillary agreement, neither Cars.com nor TEGNA will make any representation or warranty as to (1) the assets, business or liabilities transferred or assumed as part of the separation, (2) any approvals or notifications required in connection with the transfers, (3) the value of or the freedom from any security interests of any of the assets transferred, (4) the absence or presence of any defenses or right of set-off or freedom from counterclaim with respect to any claim or other asset of either Cars.com or TEGNA or (5) the legal sufficiency of any assignment, document or instrument delivered to convey title to any asset or thing of value to be transferred in connection with the separation. All assets will be transferred on an “as is,” “where is” basis, and the respective transferees will bear the economic and legal risks that any conveyance will prove to be insufficient to vest in the transferee good and marketable title, free and clear of all security interests, and that any necessary consents or governmental approvals are not obtained or that any requirements of laws, agreements, security interests or judgments are not complied with.

Information in this information statement with respect to the assets and liabilities of the parties following the distribution is presented based on the allocation of such assets and liabilities pursuant to the separation agreement, unless the context otherwise requires. The separation agreement will provide that, in the event that the transfer or assignment of certain assets and liabilities to Cars.com or TEGNA, as applicable, does not occur prior to the separation, then, until such assets or liabilities are able to be transferred or assigned, Cars.com or TEGNA, as applicable, will hold such assets on behalf and for the benefit of the other party and will pay, perform and discharge such liabilities, for which the other party will reimburse Cars.com or TEGNA, as applicable, for all commercially reasonable payments made in connection with the performance and discharge of such liabilities.

Cash Transfer from Cars.com

The separation agreement will provide that, in connection with the transfer of assets and assumption of liabilities described above, and prior to the distribution, Cars.com will make a cash transfer of $650 million to TEGNA or one or more of its wholly owned subsidiaries.

The Distribution

The separation agreement will also govern the rights and obligations of the parties regarding the distribution following the completion of the separation. On the distribution date, TEGNA will distribute to its stockholders that hold TEGNA common stock as of the record date for the distribution all of the issued and outstanding shares of Cars.com common stock on a pro rata basis. Stockholders will receive cash in lieu of any fractional shares.

Conditions to the Distribution

The separation agreement will provide that the distribution is subject to satisfaction (or waiver by TEGNA) of certain conditions. These conditions are described in the section entitled “The Separation and Distribution—Conditions to the Distribution.” TEGNA has the sole and absolute discretion to determine (and change) the terms of, and to determine whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the record date for the distribution, the distribution date and the distribution ratio.

 

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Financing

The separation agreement will govern certain obligations of TEGNA and Cars.com with respect to Cars.com’s entrance into financing arrangements prior to or concurrently with the separation and distribution, including that Cars.com and/or its subsidiaries will enter into financing arrangements to borrow a principal amount of not less than $655 million and transfer to TEGNA $650 million. The separation agreement will provide that TEGNA and Cars.com will take all necessary actions to assure the full release and discharge of TEGNA (and its subsidiaries following the distribution) from all obligations pursuant to such financing arrangements as of no later than the distribution. Cars.com and/or its subsidiaries will be responsible for all costs and expenses incurred in connection with such financing arrangements.

Claims

In general, each party to the separation agreement will assume liability for all pending, threatened and unasserted legal matters related to its own business or its assumed or retained liabilities and will indemnify the other party for any liability to the extent arising out of or resulting from such assumed or retained legal matters.

Releases

The separation agreement will provide that Cars.com and its affiliates will release and discharge TEGNA and its affiliates from all liabilities assumed by Cars.com as part of the separation, from all acts and events occurring or failing to occur, from all conditions existing, on or before the distribution date, relating to Cars.com’s business, and from all liabilities existing or arising in connection with the implementation of the separation, except as expressly set forth in the separation agreement. TEGNA and its affiliates will release and discharge Cars.com and its affiliates from all liabilities retained by TEGNA and its affiliates as part of the separation and from all liabilities existing or arising in connection with the implementation of the separation, except as expressly set forth in the separation agreement.

These releases will not extend to obligations or liabilities under any agreements between the parties that remain in effect following the separation, which agreements include, but are not limited to, the separation agreement, the transition services agreement, the tax matters agreement, the employee matters agreement, and certain other agreements, including the transfer documents in connection with the separation.

Indemnification

In the separation agreement, Cars.com will agree to indemnify, defend and hold harmless TEGNA, each of its affiliates and each of their respective directors, officers and employees, from and against all liabilities relating to, arising out of or resulting from:

 

  •   the Cars.com Liabilities;

 

  •   the failure of Cars.com or any other person to pay, perform or otherwise promptly discharge any of the Cars.com Liabilities, in accordance with their respective terms, whether prior to, at or after the distribution;

 

  •   except to the extent relating to a TEGNA Liability, any guarantee, indemnification or contribution obligation for the benefit of Cars.com by TEGNA that survives the distribution;

 

  •   any breach by Cars.com of the separation agreement or any of the ancillary agreements; and

 

  •   any untrue statement or alleged untrue statement or omission or alleged omission of material fact in the registration statement of which this information statement forms a part, in this information statement (as amended or supplemented) or in certain disclosure documents that describe Cars.com or that describe or primarily relate to the separation, in each case other than any such statements or omissions directly relating to information regarding TEGNA, provided to Cars.com by TEGNA, for inclusion therein.

 

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In the separation agreement, TEGNA will agree to indemnify, defend and hold harmless Cars.com, each of its affiliates and each of its respective directors, officers and employees from and against all liabilities relating to, arising out of or resulting from:

 

  •   the TEGNA Liabilities;

 

  •   the failure of TEGNA or any other person to pay, perform or otherwise promptly discharge any of the TEGNA Liabilities, in accordance with their respective terms, whether prior to, at or after the distribution;

 

  •   except to the extent relating to a Cars.com Liability, any guarantee, indemnification or contribution obligation for the benefit of TEGNA by Cars.com that survives the distribution;

 

  •   any breach by TEGNA of the separation agreement or any of the ancillary agreements; and

 

  •   any untrue statement or alleged untrue statement or omission or alleged omission of material fact for certain statements made explicitly in TEGNA’s name in the registration statement of which this information statement forms a part, in this information statement (as amended or supplemented), or in certain disclosure documents that describe Cars.com or that describe or primarily relate to the separation.

The separation agreement will also establish procedures with respect to claims subject to indemnification and related matters.

Insurance

The separation agreement will provide for the allocation between the parties of rights and obligations under existing insurance policies with respect to occurrences prior to the distribution date and will set forth procedures for the administration of insured claims and certain other insurance matters.

Further Assurances

In addition to the actions specifically provided for in the separation agreement, except as otherwise set forth therein or in any ancillary agreement, both Cars.com and TEGNA will agree in the separation agreement to use reasonable best efforts, prior to, on and after the distribution date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by the separation agreement and the ancillary agreements.

Dispute Resolution

The separation agreement will contain provisions that govern, except as otherwise provided in any ancillary agreement, the resolution of disputes, controversies or claims that may arise between Cars.com and TEGNA related to the separation or distribution. These provisions will contemplate that efforts will be made to resolve disputes, controversies and claims by elevation of the matter to executives of Cars.com and TEGNA. If such efforts are not successful, either Cars.com or TEGNA may submit the dispute, controversy or claim to binding arbitration, subject to the provisions of the separation agreement.

Expenses

Except as expressly set forth in the separation agreement or in any ancillary agreement, all costs and expenses incurred in connection with the separation and distribution, including costs and expenses relating to legal and tax counsel, financial advisors and accounting advisory work related to the separation and distribution, will be paid by the party incurring such cost and expense.

Other Matters

Other matters governed by the separation agreement will include access to financial and other information, confidentiality, access to and provision of records and treatment of outstanding guarantees and similar credit support.

 

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Termination

The separation agreement will provide that it may be terminated, and the separation and distribution may be modified or abandoned, at any time prior to the distribution date in the sole discretion of TEGNA without the approval of any person, including stockholders of Cars.com or TEGNA. In the event of a termination of the separation agreement, no party, nor any of its directors, officers or employees, will have any liability of any kind to the other party or any other person. After the distribution date, the separation agreement may not be terminated, except by an agreement in writing signed by both TEGNA and Cars.com.

Transition Services Agreement

Cars.com and TEGNA will enter into a transition services agreement prior to the distribution pursuant to which TEGNA and its subsidiaries will provide certain services to Cars.com, on an interim, transitional basis. The services to be provided include certain tax, human resource and risk management consulting services. The agreed upon charges for such services are generally intended to allow TEGNA to recover all costs and expenses of providing such services, and such charges are not expected to be material to either TEGNA or Cars.com.

The transition services agreement will terminate on the expiration of the term of the last service provided under it, with a minimum service period of 60 days and a maximum service period of 24 months, with most services expected to last for less than the maximum service period following the distribution date. Cars.com generally can terminate a particular service prior to the scheduled expiration date, subject generally to the minimum service period and a minimum notice period of 45 days.

Except in cases of breaches of confidentiality, willful misconduct or fraud, the liability of TEGNA under the transition services agreement for the services it and its subsidiaries will provide, and the liability of Cars.com under the transition services agreement (other than for failure to pay for services), will be limited to $5 million. The transition services agreement will also provide that the parties are not liable to each other for any indirect, exemplary, incidental, consequential, remote, speculative, punitive or similar damages, other than with respect to any third party claim.

Tax Matters Agreement

Cars.com and TEGNA will enter into a tax matters agreement prior to the distribution that will govern the parties’ respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters. If a failure of the distribution to qualify as a tax-free transaction for U.S. federal income tax purposes is attributable to Cars.com’s action or inaction or TEGNA’s action or inaction, as the case may be, or any event (or series of events) involving the assets or stock of Cars.com or the assets or stock of TEGNA, as the case may be, the resulting liability will be borne in full by Cars.com or TEGNA, respectively.

Cars.com’s obligations under the tax matters agreement are not limited in amount or subject to any cap. Further, even if Cars.com is not responsible for tax liabilities of TEGNA and its subsidiaries under the tax matters agreement, Cars.com nonetheless could be liable under applicable tax law for such liabilities if TEGNA were to fail to pay them. If Cars.com is required to pay any liabilities under the circumstances set forth in the tax matters agreement or pursuant to applicable tax law, the amounts may be significant.

The tax matters agreement will also contain restrictions on Cars.com’s ability (and the ability of any member of Cars.com’s group) to take actions that could cause the distribution and related transactions to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, including entering into, approving or

 

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allowing any transaction that results in a sale or other disposition of a substantial portion of Cars.com’s assets or stock and the liquidation or dissolution of Cars.com and certain of its subsidiaries. For the two-year period after the distribution, unless Cars.com obtains a private letter ruling from the IRS or an unqualified opinion of a nationally recognized law firm that such action will not cause the distribution or certain related transactions to fail to qualify as tax-free transactions for U.S. federal income tax purposes and such letter ruling or opinion, as the case may be, is acceptable to TEGNA or TEGNA waives Cars.com’s obligation to obtain such ruling or opinion. Cars.com will be prohibited from:

 

  •   entering into any transaction resulting in the acquisition of all or a portion of its stock or assets, whether by merger or otherwise;

 

  •   merging, consolidating or liquidating;

 

  •   issuing equity securities beyond certain thresholds;

 

  •   repurchasing its capital stock beyond certain thresholds; and

 

  •   ceasing to actively conduct its business.

Notwithstanding receipt of a ruling or opinion described above, in the event that such action causes the distribution or certain related transactions to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, Cars.com will continue to remain responsible for taxes arising therefrom.

Employee Matters Agreement

Cars.com and TEGNA will enter into an employee matters agreement prior to the distribution to allocate liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The employee matters agreement will govern certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company.

The employee matters agreement will provide that, unless otherwise specified, Cars.com will be responsible for liabilities associated with employees who will be employed by Cars.com following the separation and former employees whose last employment was with the Cars.com businesses, and TEGNA will be responsible for all other current and former TEGNA employees. Following the separation, Cars.com will retain sponsorship of 401(k) retirement plans, deferred compensation plans and other incentive plans maintained for the exclusive benefit of Cars.com employees as well as various welfare plans applicable to the Cars.com employees.

The employee matters agreement will provide for the conversion of the outstanding awards granted under TEGNA’s equity compensation programs into adjusted awards relating to shares of TEGNA and/or Cars.com common stock, as described in the section entitled “The Separation and Distribution—Treatment of Equity Based Compensation.” The adjusted awards generally will be subject to substantially the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original TEGNA award immediately before the separation.

In addition, under the employee matters agreement, Cars.com will agree to recognize the service of each employee who will be employed by Cars.com following the separation and each former employee whose last employment was with the Cars.com businesses to the same extent as recognized by TEGNA prior to the separation.

Further, the employee matters agreement will provide generally that, for one year following the separation, TEGNA will not solicit current or certain former Cars.com employees and Cars.com will not solicit current or certain former TEGNA employees, subject to customary exceptions.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of material U.S. federal income tax consequences of the contribution by TEGNA of the digital automotive marketplace business (and other assets) to Cars.com (the “contribution”) and the distribution by TEGNA of all of Cars.com’s outstanding common stock to its stockholders. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations promulgated thereunder and judicial and administrative interpretations thereof, all as in effect on the date of this information statement, and is subject to changes in these or other governing authorities, any of which may have a retroactive effect.

The separation and distribution are conditioned upon the receipt of an opinion of outside counsel to TEGNA to the effect that, subject to the accuracy of and compliance with certain representations, assumptions and covenants, the contribution, the separation and the distribution will qualify as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Code.

This summary assumes that the separation and distribution will be consummated in accordance with the separation and distribution agreement that TEGNA and Cars.com will enter into prior to the distribution and as described in this information statement and that the IRS takes no position inconsistent with the opinion described above. This summary does not purport to be a complete description of all U.S. federal income tax consequences of the separation and distribution nor does it address the effects of any state, local or foreign tax laws or U.S. federal tax laws other than those relating to income taxes on the separation and distribution. The tax treatment of a TEGNA stockholder may vary depending upon that stockholder’s particular situation, and certain stockholders (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, partners in partnerships that hold common shares in TEGNA, pass-through entities, traders in securities who elect to apply a mark-to-market method of accounting, stockholders who hold their TEGNA common shares as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated investment” or “constructive sale transaction,” individuals who received TEGNA common shares upon the exercise of employee stock options or otherwise as compensation, and stockholders who are subject to alternative minimum tax) may be subject to special rules not discussed below. In addition, this summary addresses the U.S. federal income tax consequences to a TEGNA stockholder who, for U.S. federal income tax purposes, is a U.S. person and not to a TEGNA stockholder who is a non-resident alien individual, a foreign corporation, a foreign partnership, or a foreign trust or estate. Finally, this summary does not address the U.S. federal income tax consequences to those TEGNA stockholders who do not hold their TEGNA common shares as capital assets within the meaning of Section 1221 of the Code nor does it address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010.

THIS SUMMARY IS FOR GENERAL INFORMATION PURPOSES ONLY, AND IT IS NOT INTENDED TO BE, AND IT SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR STOCKHOLDER.

YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE DISTRIBUTION, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS, IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF POSSIBLE CHANGES IN LAW THAT MIGHT AFFECT THE TAX CONSEQUENCES DESCRIBED IN THIS INFORMATION STATEMENT.

Subject to the discussion below regarding Section 355(e) of the Code, neither Cars.com nor TEGNA will recognize any gain or loss upon the separation and distribution of Cars.com common stock, and no amount will be includable in the income of TEGNA or Cars.com as a result of the separation and distribution other than taxable income or gain possibly arising out of internal reorganizations undertaken in connection with the

 

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separation and distribution and with respect to any items required to be taken into account under U.S. Treasury regulations relating to consolidated federal income tax returns:

 

  •   a TEGNA stockholder will not recognize any gain or loss, and no amount will be includable in income, as a result of the receipt of Cars.com common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares of Cars.com common stock (as described below);

 

  •   a TEGNA stockholder’s aggregate tax basis in such stockholder’s TEGNA common shares following the distribution and in Cars.com common stock received in the distribution (including any fractional share interest in Cars.com common stock for which cash is received) will equal such stockholder’s tax basis in its TEGNA common shares immediately before the distribution, allocated between TEGNA common shares and Cars.com common stock (including any fractional share interest in Cars.com common stock for which cash is received) in proportion to their fair market values on the distribution date;

 

  •   a TEGNA stockholder’s holding period for Cars.com common stock received in the distribution (including any fractional share interest in Cars.com common stock for which cash is received) will include the holding period for that stockholder’s TEGNA common shares; and

 

  •   a TEGNA stockholder who receives cash in lieu of a fractional share of Cars.com common stock in the distribution will be treated as having sold such fractional share for cash, and will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the TEGNA stockholder’s adjusted tax basis in the fractional share. That gain or loss will be long-term capital gain or loss if the stockholder’s holding period for its TEGNA common shares exceeds one year at the time of the distribution.

U.S. Treasury regulations provide that if a TEGNA stockholder holds different blocks of TEGNA common shares (generally TEGNA common shares purchased or acquired on different dates or at different prices), the aggregate basis for each block of TEGNA common shares purchased or acquired on the same date and at the same price will be allocated, to the greatest extent possible, between the shares of Cars.com common stock received in the distribution in respect of such block of TEGNA common shares and such block of TEGNA common shares, in proportion to their respective fair market values on the distribution date. The holding period of the shares of Cars.com common stock received in the distribution in respect of such block of TEGNA common shares will include the holding period of such block of TEGNA common shares. If a TEGNA stockholder is not able to identify which particular shares of Cars.com common stock are received in the distribution with respect to a particular block of TEGNA common shares, for purposes of applying the rules described above, the stockholder may designate which shares of Cars.com common stock are received in the distribution in respect of a particular block of TEGNA common shares, provided that such designation is consistent with the terms of the distribution. TEGNA stockholders are urged to consult their own tax advisors regarding the application of these rules to their particular circumstances.

U.S. Treasury regulations also require certain TEGNA stockholders who receive Cars.com common stock in the distribution to attach to the stockholder’s U.S. federal income tax return for the year in which the stock is received a detailed statement setting forth certain information relating to the tax-free nature of the distribution.

Even if the distribution otherwise qualifies as tax-free for U.S. federal income tax purposes under Section 355 of the Code, it could be taxable to TEGNA (but not TEGNA’s stockholders) under Section 355(e) of the Code if the distribution were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest by vote or value, in TEGNA or Cars.com. For this purpose, any acquisitions of TEGNA common shares or Cars.com common stock within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although TEGNA or Cars.com may be able to rebut such presumption.

 

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Payments of cash to holders of TEGNA common shares in lieu of fractional shares may be subject to information reporting and backup withholding (currently at a rate of 28%), unless a stockholder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding does not constitute an additional tax. Amounts withheld as backup withholding may be refunded or credited against a stockholder’s U.S. federal income tax liability, provided that the required information is timely supplied to the IRS.

In connection with and prior to the distribution, Cars.com and TEGNA will enter into a tax matters agreement pursuant to which Cars.com will agree to be responsible for certain tax liabilities and obligations following the distribution. For a description of the tax matters agreement, see the section entitled “Relationship with TEGNA Following the Separation and Distribution—Tax Matters Agreement.”

The foregoing is a summary of material U.S. federal income tax consequences of the separation and distribution under current law and particular circumstances. The foregoing does not purport to address all U.S. federal income tax consequences or tax consequences that may arise under the tax laws of other jurisdictions or that may apply to particular categories of stockholders.

 

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DESCRIPTION OF MATERIAL INDEBTEDNESS

Cars.com expects to enter into certain financing arrangements in connection with the distribution. In addition to such arrangements, prior to the distribution, Cars.com will make a cash transfer of $650 million to TEGNA or one or more of its wholly owned subsidiaries. It is anticipated that TEGNA will segregate such cash and use it to pay down historic debt currently outstanding. Upon completion of the distribution, Cars.com expects to have approximately $655 million of total combined indebtedness. Cars.com’s financing arrangements will be described in a subsequent amendment to this information statement.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Before the distribution, all of the outstanding shares of Cars.com common stock will be owned beneficially and of record by TEGNA. Following the distribution, Cars.com expects to have outstanding an aggregate of approximately 71.6 million shares of common stock based upon approximately 214.8 million shares of TEGNA common stock outstanding on April 25, 2017, excluding treasury shares and assuming no vesting of TEGNA stock based awards, and applying the distribution ratio.

Security Ownership of Certain Beneficial Owners

The following table reports the number of shares of Cars.com common stock that Cars.com expects will be beneficially owned, immediately following the completion of the distribution by each person who will beneficially own more than 5% of Cars.com common stock. The table is based upon information available as of April 25, 2017 as to those persons who beneficially own more than 5% of TEGNA’s common stock and an assumption that, for every three shares of TEGNA common stock held by such persons, they will receive one share of Cars.com common stock.

 

Name and Address of
Beneficial Owner

   Amount and Nature of
Beneficial Ownership 		     Percent of
Class 		 

The Vanguard Group, Inc. (1)

100 Vanguard Blvd.

Malvern, PA 19355

     6,941,746        9.7 % 

BlackRock, Inc. (2)

55 East 52 nd St.

New York, NY 10055

     4,336,087        6.1 % 

 

(1) Based upon information as of December 31, 2016, contained in a Schedule 13G/A filed with the SEC on February 10, 2017 by The Vanguard Group, Inc., reporting, in the aggregate, sole voting power over 333,865 shares of TEGNA common stock, sole dispositive power over 20,442,039 shares of TEGNA common stock and shared dispositive power over 383,199 shares of TEGNA common stock.
(2) Based upon information as of December 31, 2016, contained in a Schedule 13G/A filed with the SEC on January 27, 2017 by BlackRock, Inc., reporting, in the aggregate, sole voting power over 11,146,456 shares of TEGNA common stock and sole dispositive power over 13,008,263 shares of TEGNA common stock.

Share Ownership of Executive Officers and Directors

The following table sets forth information, immediately following the completion of the distribution, calculated as of April 25, 2017, based upon the distribution of one share of Cars.com common stock for every three shares of TEGNA common stock, regarding (1) each expected director and executive officer of Cars.com and (2) all of Cars.com’s expected directors and executive officers as a group. The address of each director, director nominee and executive officer shown in the table below is c/o Cars.com, Inc., 175 West Jackson Boulevard, Chicago, Illinois 60604, Attention: Secretary.

 

Name of Beneficial Owner

   Shares Beneficially
Owned (1) 		     Percent of Class  

T. Alex Vetter

     

Becky A. Sheehan

     

James F. Rogers

     

John Clavadetscher

     
     
     
     
     
     

 

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DESCRIPTION OF CARS.COM’S CAPITAL STOCK

Cars.com’s certificate of incorporation and bylaws will be amended and restated prior to the completion of the distribution. The following is a summary of the material terms of Cars.com’s capital stock that will be contained in the amended and restated certificate of incorporation and bylaws. The summaries and descriptions below do not purport to be complete statements of the relevant provisions of the certificate of incorporation or of the bylaws to be in effect at the time of the distribution, which you must read for complete information on Cars.com’s capital stock as of the time of the distribution. Cars.com has not yet finalized the terms of its certificate of incorporation and bylaws. Forms of the certificate of incorporation and bylaws as they are expected to be in effect at the time of the distribution will be included as exhibits to a subsequent amendment to Cars.com’s registration statement on Form 10, of which this information statement forms a part. The summaries and descriptions below do not purport to be complete statements of the Delaware General Corporation Law.

General

Cars.com’s authorized capital stock consists of [    ] million shares of common stock, par value $0.01 per share, and [    ] million shares of preferred stock, par value $0.01 per share, all of which shares of preferred stock are undesignated. Cars.com’s board of directors may establish the rights and preferences of the preferred stock from time to time. Immediately following the distribution, Cars.com expects that approximately 71.6 million shares of its common stock will be issued and outstanding, based on approximately 214.8 million shares of TEGNA common stock issued and outstanding on April 25, 2017, and that no shares of preferred stock will be issued and outstanding.

Common Stock

Each holder of Cars.com common stock will be entitled to one vote for each share on all matters to be voted upon by the common stockholders, and there will be no cumulative voting rights. Subject to any preferential rights of any outstanding preferred stock, holders of Cars.com common stock will be entitled to receive ratably the dividends, if any, as may be declared from time to time by its board of directors out of funds legally available for that purpose. If there is a liquidation, dissolution or winding up of Cars.com, holders of its common stock would be entitled to a ratable distribution of its assets remaining after the payment in full of liabilities and any preferential rights of any then-outstanding preferred stock.

Holders of Cars.com common stock will have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. After the distribution, all outstanding shares of Cars.com common stock will be fully paid and non-assessable. The rights, preferences and privileges of the holders of Cars.com common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that Cars.com may designate and issue in the future.

Preferred Stock

Under the terms of Cars.com’s amended and restated certificate of incorporation, its board of directors will be authorized, subject to limitations prescribed by the Delaware General Corporation Law (the “DGCL”), and by its certificate of incorporation, to issue up to [    ] million shares of preferred stock in one or more series without further action by the holders of its common stock. Cars.com’s board of directors will have the discretion, subject to limitations prescribed by the DGCL and by Cars.com’s certificate of incorporation, to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

 

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Corporate Governance

Consistent with TEGNA’s historical practice, Cars.com will institute stockholder-friendly corporate governance practices, as described below and elsewhere in this information statement. Responsible and appropriate corporate governance will ensure that Cars.com’s management always keeps stockholder interests top of mind when crafting value-creating strategies at all levels of the organization.

Single Class Capital Structure.      Cars.com will have a single class share capital structure with all stockholders entitled to vote for director nominees and each holder of common stock will have one vote per share.

Annual Director Elections by Majority Vote.     Commencing with the first annual meeting of stockholders following the separation, directors will be elected at the annual meeting of stockholders and thereafter each director will serve until the next annual election and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, with directors not receiving a majority of the votes cast required to tender their resignations for consideration by the board of directors, except that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election.

No Additional Vote Requirements for Mergers or Other Business Combinations.     Cars.com’s amended and restated certificate of incorporation and bylaws do not specify any voting requirements in connection with any merger or other business combination in addition to those provided for by law.

Other Expected Corporate Governance Features.      Governance features related to Cars.com’s board of directors are set forth in the section of this information statement entitled “Directors.” In addition to the foregoing, it is expected that Cars.com will implement stock ownership guidelines for directors and senior executive officers, annual board of directors performance evaluations, clawback and anti-hedging policies, prohibitions on option repricing in equity plans without stockholder approval, risk oversight procedures and other practices and protocols.

Anti-Takeover Effects of Various Provisions of Delaware Law and Cars.com’s Certificate of Incorporation and Bylaws

Provisions of the DGCL and Cars.com’s amended and restated certificate of incorporation and bylaws could make it more difficult to acquire Cars.com by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, may discourage certain types of coercive takeover practices and takeover bids that Cars.com’s board of directors may consider inadequate and are intended to encourage persons seeking to acquire control of Cars.com to first negotiate with Cars.com’s board of directors. Cars.com believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure it outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

Delaware Anti -Takeover Statute.      Cars.com will be subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or, within three years prior to the determination of interested stockholder status, did own) 15%

 

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or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by Cars.com’s board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by Cars.com’s stockholders.

Size of Board and Vacancies.      Cars.com’s amended and restated certificate of incorporation and bylaws will provide that the number of directors on its board of directors will be fixed exclusively by its board of directors. Any vacancies created in its board of directors resulting from any increase in the authorized number of directors or the death, resignation, retirement, disqualification, removal from office or other cause will be filled by a resolution passed by a majority of the board of directors then in office, even if less than a quorum is present, or by a sole remaining director. Any director appointed to fill a vacancy on Cars.com’s board of directors will be appointed for a term expiring at the next annual meeting of stockholders, and until his or her successor has been elected and qualified.

Stockholder Action by Written Consent.      Cars.com’s amended and restated certificate of incorporation will expressly eliminate the right of its stockholders to act by written consent. Stockholder action may only be taken at an annual meeting or a special meeting of Cars.com stockholders.

Special Stockholder Meetings .    Cars.com’s amended and restated certificate of incorporation will provide that only the chairman of its board of directors, or its board of directors pursuant to resolutions adopted by a majority of the entire board of directors, may call special meetings of Cars.com stockholders. Stockholders may not call special stockholder meetings.

Requirements for Advance Notification of Stockholder Nominations and Proposals.      Cars.com’s amended and restated bylaws will establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of its board of directors or a committee of its board of directors.

No Cumulative Voting.      The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless the company’s certificate of incorporation provides otherwise. Cars.com’s amended and restated certificate of incorporation will not provide for cumulative voting.

Undesignated Preferred Stock.      The authority that Cars.com’s board of directors will possess to issue preferred stock could potentially be used to discourage attempts by third parties to obtain control of Cars.com’s company through a merger, tender offer, proxy contest or otherwise by making such attempts more difficult or more costly. Cars.com’s board of directors may be able to issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock.

Limitations on Liability, Indemnification of Officers and Directors and Insurance

The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors, and Cars.com’s amended and restated certificate of incorporation will include such an exculpation provision. Cars.com’s amended and restated certificate of incorporation and bylaws will include provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as a director or officer of Cars.com, or for serving at Cars.com’s request as a director or officer or another position at another corporation or enterprise, as the case may be. Cars.com’s amended and restated certificate of incorporation and bylaws will also provide that Cars.com must indemnify and advance reasonable expenses to its directors and officers, subject to its receipt of an undertaking from the indemnified party as may be required under the DGCL. Cars.com’s amended and restated certificate of incorporation will expressly authorize Cars.com to carry directors’ and officers’ insurance to protect Cars.com, its directors, officers and certain employees against some liabilities.

 

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The limitation of liability and indemnification provisions that will be in Cars.com’s amended and restated certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation being brought against Cars.com’s directors and officers, even though such an action, if successful, might otherwise benefit Cars.com and its stockholders. However, these provisions will not limit or eliminate Cars.com’s rights, or those of any stockholder, to seek non-monetary relief such as an injunction or rescission in the event of a breach of a director’s duty of care. The provisions will not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, Cars.com pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding against any Cars.com directors, officers or employees for which indemnification is sought.

Exclusive Forum

Cars.com’s amended and restated certificate of incorporation will provide that, unless the board of directors otherwise determines, the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Cars.com, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer of Cars.com to Cars.com or to Cars.com’s stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty; any action asserting a claim against Cars.com or any current or former director or officer of Cars.com arising pursuant to any provision of the DGCL or Cars.com’s amended and restated certificate of incorporation or bylaws; any action related to or involving Cars.com that is governed by the internal affairs doctrine; or any action asserting an “internal corporate claim” as defined in the DGCL.

Authorized but Unissued Shares

Cars.com’s authorized but unissued shares of common stock and preferred stock will be available for future issuance without your approval. Cars.com may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of Cars.com by means of a proxy contest, tender offer, merger or otherwise.

Listing

Cars.com intends to apply to list its shares of common stock on the New York Stock Exchange under the symbol “CARS.”

Sale of Unregistered Securities

On August 26, 2016, Cars.com issued 100 shares of its common stock to TEGNA for total consideration of $100.00. Pursuant to Section 4(a)(2) of the Securities Act, Cars.com did not register the issuance of the shares under the Securities Act because such issuance did not constitute a public offering.

Transfer Agent and Registrar

After the distribution, the transfer agent and registrar for Cars.com common stock will be Wells Fargo Shareowner Services.

Wells Fargo Shareowner Services

1110 Centre Point Curve, Suite 101

Mendota Heights, MN 55210

Toll Free: (800) 250-2944

Toll: (651) 450-4064

 

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WHERE YOU CAN FIND MORE INFORMATION

Cars.com has filed a registration statement on Form 10 with the SEC with respect to the shares of Cars.com common stock being distributed, as contemplated by this information statement. This information statement is a part of, and does not contain all of the information set forth in, the registration statement and the exhibits and schedules to the registration statement. For further information with respect to Cars.com and its common stock, please refer to the registration statement, including its exhibits and schedules. Statements made in this information statement relating to any contract or other document filed as an exhibit to the registration statement include the material terms of such contract or other document. However, such statements are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may review a copy of the registration statement, including its exhibits and schedules, at the SEC’s public reference room, located at 100 F Street, NE, Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330 as well as on the Internet website maintained by the SEC at www.sec.gov. Information contained on any website referenced in this information statement is not incorporated by reference in this information statement.

As a result of the distribution, Cars.com will become subject to the information and reporting requirements of the Exchange Act and, in accordance with the Exchange Act, will file periodic reports, proxy statements and other information with the SEC.

Cars.com intends to furnish holders of its common stock with annual reports containing consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles and audited and reported on, with an opinion expressed, by an independent registered public accounting firm.

You should rely only on the information contained in this information statement or to which this information statement has referred you. Cars.com has not authorized any person to provide you with different information or to make any representation not contained in this information statement.

 

 

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INDEX TO FINANCIAL STATEMENTS

 

     Page  

Audited Annual Financial Statements:

  

Reports of Independent Registered Public Accounting Firms

     F-2  

(Successor) Balance Sheets

     F-4  

(Successor) Statements of Income/(Predecessor) Consolidated Statements of Income

     F-5  

(Successor) Statements of Cash Flows/(Predecessor) Consolidated Statements of Cash Flows

     F-6  

(Successor) Statements of Equity/(Predecessor) Consolidated Statements of Changes in Members’ Equity

     F-7  

Notes to Financial Statements

     F-8  

 

F-1

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders of TEGNA Inc.:

We have audited the accompanying combined balance sheets of Cars.com, LLC (the Company) as of December 31, 2016 and 2015, and the related combined statements of income, cash flows and equity for the years ended December 31, 2016 and 2015, and for the period from October 1, 2014 to December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our December 31, 2016 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. We conducted our December 31, 2015 and the period from October 1, 2014 to December 31, 2014 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Cars.com, LLC at December 31, 2016 and 2015, and the results of its combined operations and its cash flows for the years ended December 31, 2016 and 2015 and for the period from October 1 to December 31, 2014, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois

March 22, 2017

 

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Cars.com, LLC:

In our opinion, the accompanying consolidated statements of operations, of changes in members’ equity and cash flows present fairly, in all material respects, the results of Cars.com, LLC’s and its subsidiaries operations and their cash flows for the period from January 1 to October 1, 2014 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Chicago, IL

January 9, 2015

 

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Cars.com, LLC

(SUCCESSOR) COMBINED BALANCE SHEETS

In thousands of dollars

 

     Dec. 31, 2016      Dec. 31, 2015  

Assets

     

Current assets

     

Cash and cash equivalents

   $ 8,896     $ 100 

Accounts receivables, less allowance of $3,527 and $2,310, respectively

     98,303       86,493 

Prepaid expenses and other current assets

     12,342       11,924 
  

 

 

    

 

 

 

Total current assets

     119,541         98,517   
  

 

 

    

 

 

 

Property and equipment

     

Leasehold improvements

     2,260       2,059 

Computer software and hardware

     33,653       25,488 

Furniture and fixtures

     1,277       1,238 
  

 

 

    

 

 

 

Total

     37,190       28,785 
  

 

 

    

 

 

 

Less accumulated depreciation

     (16,729)        (9,888)  
  

 

 

    

 

 

 

Net property and equipment

     20,461       18,897 
  

 

 

    

 

 

 

Intangible and other assets

     

Goodwill

     788,107       703,228   

Intangible assets, less accumulated amortization of $165,651 and $90,822, respectively

     1,607,369       1,643,398 

Investments and other assets

     11,788       9,627 
  

 

 

    

 

 

 

Total assets

   $ 2,547,266     $ 2,473,667 
  

 

 

    

 

 

 
     

Liabilities and equity

     

Current liabilities

     

Accounts payable

   $ 7,844     $ 8,529 

Accrued compensation

     12,015       15,268 

Accrued share appreciation rights plan

     9,116       16,688 

Other liabilities (Note 8)

     42,122       47,182 

Deferred revenue

     887       703 
  

 

 

    

 

 

 

Total current liabilities

     71,984       88,370 
  

 

 

    

 

 

 

Noncurrent liabilities

     

Deferred incentive plans

     3,913       11,158 

Unfavorable contracts liability

     44,085       69,285 

Deferred tax liability

     8,325       — 

Other noncurrent liabilities

     1,674       335 
  

 

 

    

 

 

 

Total noncurrent liabilities

     57,997       80,778 
  

 

 

    

 

 

 

Total liabilities

     129,981       169,148 
  

 

 

    

 

 

 
     

Commitments and contingent liabilities (Note 12)

     
     

Equity

     

Parent’s investment, net

     2,417,285         2,304,519 
     
  

 

 

    

 

 

 

Total liabilities and equity

   $     2,547,266     $     2,473,667 
  

 

 

    

 

 

 

The accompanying notes are an integral part of these financial statements.

 

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Cars.com, LLC

(SUCCESSOR) COMBINED STATEMENTS OF INCOME / (PREDECESSOR) CONSOLIDATED STATEMENTS OF INCOME

In thousands of dollars

 

     Successor      Predecessor  
     Year ended
Dec. 31,
2016 		     Year ended
Dec. 31,
2015 		     Oct. 1 -
Dec. 31,
2014 		     Jan. 1 -
Oct. 1,
2014 		 

Revenues:

     

Revenue—Retail

   $ 462,776      $ 424,632      $     101,011      $     280,283  

Revenue—Wholesale (a)

     170,330        171,878        44,928        69,732  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     633,106        596,510        145,939        350,015  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses:

     

Product support, technology and operations

     129,864        116,690        29,151        86,374  

Marketing and sales

     211,032        211,779        54,809        155,945  

General and administrative

     32,202        30,924        25,881        68,299  

Affiliate revenue share

     8,529        6,726        1,971        13,104  

Amortization of intangible assets

     74,829        72,658        18,164        —  

Professional fees related to sale to Parent

     —        —        —        19,942  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     456,456        438,777        129,976        343,664  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     176,650        157,733        15,963        6,351  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income, net

     308        105        255        26  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     176,958        157,838        16,218        6,377  
  

 

 

    

 

 

    

 

 

    

 

 

 

Provision for income taxes

     588        —        —        —  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations

     176,370        157,838        16,218        6,377  

Discontinued operations—Apartments.com

     —        —        —        569,001  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $     176,370      $     157,838      $ 16,218      $ 575,378  
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of these combined financial statements.

 

(a) Wholesale revenue includes revenues generated from our Parent of $8.5 million, $7.7 million and $1.9 million during successor periods year-ended December 31, 2016, year-ended December 31, 2015 and the three months ended December 31, 2014, respectively. In addition, wholesale revenue for the predecessor period also includes revenue generated from our previous owners of $69.7 million during the nine months ended October 1, 2014 (See Note 13).

 

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Cars.com, LLC

(SUCCESSOR) COMBINED STATEMENTS OF CASH FLOWS / (PREDECESSOR) CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands of dollars

 

     Successor      Predecessor  
     Year
Ended
Dec. 31,
2016 		     Year
Ended
Dec. 31,
2015 		     Oct. 1 -
Dec. 31,
2014 		     Jan. 1 -
Oct. 1,
2014 		 

Cash flows from operating activities:

           

Net income

   $     176,370     $     157,838     $     16,218     $     575,378 

Adjustments to reconcile net income to operating cash flows:

           

Depreciation and amortization

     83,106       80,818       20,249       7,398 

Amortization of unfavorable contract liability

     (25,200)        (25,200)        (6,300)        — 

Loss (gain) on sale of assets

     128       61       7       (24)  

Gain on trading securities related to deferred compensation

     (214)        (117)        (250)        (5)  

Gain on sale of Apartments.com

     —       —       —       (563,388)  

Provision for doubtful accounts receivable

     3,030       2,515       940       1,976 

Change in operating assets and liabilities, net of acquisition:

           

Decrease (increase) in accounts receivables

     (13,579)        (5,535)        (16,528)        (4,358)  

Decrease (increase) in prepaid expenses and other current assets

     (146)        (57)        (716)        (1,947)  

Increase (decrease) in accounts payable

     (1,548)        (3,395)        6,512       (697)  

Increase (decrease) in accrued expenses

     (10,032)        (354)        2,950       13,645 

Increase (decrease) in deferred compensation

     (13,810)        (17,046)        15,408       38,165 

Increase (decrease) in deferred revenue

     (638)      390       (142)        (1,138)  

Increase (decrease) in deferred rent

     1,392       248       (3,478)        (1,181)  

Purchase of trading securities related to deferred compensation plan

     (647)        (235)        (1,650)        (436)  

Other, net

     941         124       521       — 
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash flow provided by operating activities

     199,153       190,055       33,741       63,388 
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows from investing activities:

           

Purchase of property and equipment

     (9,701)        (9,108)        (1,951)        (6,625)  

Proceeds from sale of property and equipment

     64       62       22       45 

Purchase of investment in RepairPal

     (2,216)        —       —       (2,000)  

Payments for DealerRater acquisition, net of cash acquired

     (114,900)        —       —       — 

Proceeds from sale of Apartments.com

     —       7,900       —       554,968 

Fees associated with sale of Apartments.com

     —       —       —       (7,093)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used in) investing activities

     (126,753)        (1,146)        (1,929)        539,295 
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows from financing activities:

           

Dividends paid to predecessor investors

     —       —       —       (598,321)  

Transactions with Parent, net

     (63,604)        (188,996)        (75,392)        — 
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash used for financing activities

     (63,604)        (188,996)        (75,392)        (598,321)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Increase (decrease) in cash and cash equivalents

     8,796         (87)        (43,580)        4,362 
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents at beginning of year

     100       187       43,767       39,405 
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents at end of year

   $ 8,896     $ 100     $ 187     $ 43,767 
  

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental non-cash information:

           

Purchases of property, plant and equipment in accrued liabilities and accounts payables

   $ 880     $ 961     $ 1,241     $ 125 

Proceeds from sale of Apartments.com paid by escrow agent directly to Predecessor owners

   $ —     $ 21,400     $ —     $ — 

The accompanying notes are an integral part of these combined financial statements.

 

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Cars.com, LLC

(SUCCESSOR) COMBINED STATEMENTS OF EQUITY/(PREDECESSOR) CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

In thousands of dollars

 

    Common Units     Treasury Units     Additional
Paid-In
Capital 		    Accumulated
Deficit 		    Total  
    Class A     Class B     Class A     Class B        
Predecessor   Units     Amount     Units     Amount     Units     Amount     Units     Amount        

Balance at Dec. 31, 2013

    184,873     $ 1,848       1,579     $ 16       (5,710 )    $ —       (1,579 )    $ (2,416 )    $ 141,960   $ (35,382 )    $ 106,026
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                     

Net income

                    —       575,378     575,378

Dividends paid to investors

                    (44,753 )      (553,568 )      (598,321 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                     

Balance at Oct. 1, 2014

    184,873     $ 1,848       1,579     $ 16       (5,710 )    $ —       (1,579 )    $ (2,416 )    $ 97,207   $ (13,572 )    $ 83,083
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

Successor    Parent’s Investment, net  

Balance at Oct. 1, 2014

   $     2,394,851 

Net income

     16,218 

Transactions with Parent, net

     (75,392)  
  

 

 

 

Balance at Dec. 31, 2014

     2,335,677 
  

 

 

 

Net income

     157,838 

Transactions with Parent, net

     (188,996)  
  

 

 

 

Balance at Dec. 31, 2015

     2,304,519 
  

 

 

 

Net income

     176,370 

Transactions with Parent, net

     (63,604)  
  

 

 

 

Balance at Dec. 31, 2016

   $ 2,417,285 
  

 

 

 

The accompanying notes are an integral part of these combined financial statements.

 

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NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1

Description of Business and Planned Separation

On September 7, 2016, TEGNA Inc. (“TEGNA” or the “Parent”) announced that its Board of Directors had approved a preliminary plan to separate Cars.com, LLC (“Cars.com”, “our”, “us”, “we”), which is part of the Digital Segment of TEGNA, into its own publicly traded company. The planned separation will be implemented through a distribution of shares to TEGNA shareholders in a new entity formed to hold the assets of Cars.com. The distribution is subject to a number of conditions, including final approval of transaction specifics by the Board of Directors of TEGNA, the continued validity of the private letter ruling received by TEGNA from the Internal Revenue Service with respect to certain requirements for qualification for tax-free treatment, receipt of an opinion from TEGNA’s outside tax counsel to the effect that the requirements for tax-free treatment will be satisfied for U.S. income tax purposes, the filing and effectiveness of a registration statement with the Securities and Exchange Commission, and other customary matters. TEGNA expects to complete the transaction in the first half of 2017 although there can be no assurance regarding the ultimate timing of the proposed transaction or that it will be completed.

Cars.com, LLC is a Delaware limited liability company and wholly owned subsidiary of TEGNA Inc. (“TEGNA” or the “Parent”). On October 1, 2014, TEGNA acquired the remaining 73% of equity interests in Classified Ventures, LLC (subsequently renamed Cars.com, LLC) that it did not previously own for $1.8 billion in cash. The accompanying financial statements contain activity for the acquired business (the “Successor”) and reflect the application of push down accounting. Successor financial statements are as of December 31, 2016 and December 31, 2015 and for the year ended December 31, 2016, December 31, 2015 and for the period October 1, 2014 to December 31, 2014. The consolidated financial statements for the period January 1, 2014 to October 1, 2014 includes the historic accounts of Cars.com under the previous ownership of Classified Ventures, LLC (the “Predecessor”).

On August 1, 2016, TEGNA purchased 100% of DMR Holdings, Inc. (“DealerRater”), a leading automotive dealer review website. The accompanying financial statements combine the activity for the acquired business from the date of acquisition (hereafter “Cars.com”) and reflect the application of push down accounting.

Cars.com is a leading online destination that helps car shoppers and owners navigate every turn of car ownership. A pioneer in automotive classifieds, the company has evolved into one of the largest digital automotive platforms, connecting consumers with local dealers across the country anytime, anywhere. Through trusted expert content, on-the-lot mobile app features, millions of new and used vehicle listings, a comprehensive set of research tools and the largest database of consumer reviews in the industry, Cars.com helps shoppers buy, sell and service their vehicles. We have approximately 35 million monthly visits to our web properties. Cars.com generates revenue through online subscription advertising products targeting car dealerships through our direct sales force as well as our affiliate sales channels. We also generate revenue through the sale of display advertising to national advertisers. Our website hosts approximately 4.7 million vehicle listings at any given time and serves approximately 20,000 franchise and independent car dealers in all 50 states. Cars.com properties include DealerRater, Auto.com, PickupTrucks.com™ and NewCars.com © . The company was founded in 1998 and is headquartered in Chicago.

Basis of Presentation—Successor .    Historically, TEGNA has not disclosed separate combined financial statements for Cars.com. The accompanying financial statements are derived from the historical accounting records of TEGNA and present our financial position, results of operations and cash flows as of and for the successor periods presented as if we were a separate entity. These financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

 

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Since the Parent’s acquisition of Cars.com in 2014, we have primarily operated as a standalone entity within TEGNA’s broader corporate organization. The historical financial statements include allocations of certain TEGNA corporate expenses. Such costs primarily include insurance, severance costs, and other general corporate overhead expenses and were allocated based on either the actual costs incurred, or Cars.com headcount relative to our Parent’s consolidated headcount. Since we operated primarily as a standalone entity, the historical allocated corporate costs were approximately $2.4 million, $1.4 million and $2.2 million during the three months ended December 31, 2014, and years ended December 31, 2015 and 2016, respectively. Our management believes that such allocations are reasonable. These allocated expenses relate to the various services that have historically been provided to Cars.com by our Parent. However, such expenses may not be indicative of the actual level of expense that would have been incurred by Cars.com if we had operated as an independent, publicly-traded company or the costs expected to be incurred in the future.

All of our internal intercompany accounts have been eliminated. All significant intercompany transactions between either (i) us and Parent or (ii) us and Parent affiliates have been included within the financial statements and are considered to be effectively settled through equity contributions or distributions at the time the transactions were recorded. The accumulated net effect of intercompany transactions between either (i) us and Parent or (ii) us and Parent affiliates are included in “Parent’s investment, net.” The total net effect of these intercompany transactions is reflected in the Statements of Cash Flows as financing activities. Our financial statements reflect the acquisition of the predecessor that occurred on October 1, 2014, which was accounted for as a business combination.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the October 1, 2014 acquisition date (in thousands):

 

Cash and cash equivalents

   $ 43,767  

Receivables and other current assets

     108,577  

Property and equipment

     17,399  

Indefinite-lived intangible assets

     872,320  

Definite-lived intangible assets:

  

Customer relationships

     789,540  

Internally developed technology

     69,500  

Other

     2,860  

Investments and other noncurrent assets

     13,747  

Goodwill (1)

     703,228  
  

 

 

 

Total assets acquired

     2,620,938  
  

 

 

 

Current liabilities

     106,924  

Other noncurrent liabilities (2)

     119,163  
  

 

 

 

Total liabilities assumed

     226,087  
  

 

 

 

Net assets acquired

     2,394,851  
  

 

 

 

Less: acquisition date fair value of Parent’s previous 26.9% equity interest (3)

     563,757  
  

 

 

 

Parent acquisition purchase price

   $     1,831,094  
  

 

 

 

 

  (1) Goodwill recognized is attributable primarily to future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships.
  (2) Other noncurrent liabilities primarily consist of the unfavorable contract liability established during purchase accounting. This liability is being amortized into revenue on a straight line basis over five years.
  (3) Of our Parent’s previous 26.9% equity interest in Classified Ventures, LLC, 3.3% was acquired as part of our Parent’s acquisition of Belo Corp. in 2013.

 

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Basis of Presentation—Predecessor .    The accompanying consolidated financial statements for the Predecessor have been prepared in accordance with U.S. GAAP. The Predecessor financial statements represent the historical results of operations and historical cost basis of the assets and liabilities of Classified Ventures, LLC that comprise the business acquired. These Predecessor financial statements have been prepared to demonstrate the historical results of operations, financial position, and cash flows for the indicated periods under Classified Ventures, LLC’s management that were acquired by TEGNA. All intercompany balances and transactions have been eliminated. Black lines have been drawn to separate the Successor’s financial information from that of the Predecessor.

NOTE 2

Summary of significant accounting policies

Revenue Recognition .    Revenue is recognized when persuasive evidence of an arrangement exists, performance under the contract has begun, the contract price is fixed or determinable and collectability of the related fee is reasonably assured. Revenue is generated through our direct sales force (retail revenue) or affiliate sales channels (wholesale revenue).

Our primary source of retail and wholesale revenue is through the sale of online subscription advertising products to car dealerships. Our base subscription package provides the car dealership’s available inventory on our Cars.com website. The base subscription contract is generally a fixed price arrangement with a one year term and is automatically renewed unless cancelled by the dealership. We also offer customers several add-on products to the base subscription package. These add-on products are not sold separately from the base subscription package and, therefore, are not separate units of accounting as they do not have value on a standalone basis. Accordingly, the base subscription package and any purchased add-on products are combined as a single unit of accounting and revenues are recognized on a straight-line basis over the contract term as the service is provided to our customers.

Wholesale revenue is earned through affiliation agreements with the Predecessor owners that sell our subscription advertising products to car dealerships. Predecessor owners are assigned certain sales territories to sell our products, and we charge our Predecessor owners a wholesale fee. In situations where our direct sales force sells our products to car dealerships in an affiliate’s territory, we pay our Predecessor owners a revenue share which is classified as “Affiliate revenue share” on our statements of income.

In addition, we also earn retail revenue though the sale of banner advertising on our websites to national advertisers, pursuant to fixed fee or transaction based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. Revenue is recognized evenly over the contract term (generally three to six months) for fixed fee contracts where a minimum number of impressions or click-throughs is not guaranteed. Revenue is recognized as the impressions or click-throughs are delivered for transaction based contracts. If the impressions or click-throughs delivered are less than the amount billed, the difference is recorded as deferred revenue and recognized as earned.

Reportable Segments .    We operate one reportable segment that generates revenue through two categories: (i) Retail and (ii) Wholesale. Revenues for each of those major categories of services are presented on the face of the statements of income. We did not have any one customer that generated greater than 10% of total revenues in 2016, 2015 or 2014. Substantially all revenues were generated within the U.S. and all long-lived assets are also located in the U.S.

Use of Estimates .    The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual results could differ

 

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from these estimates and assumptions. The most significant areas of the consolidated financial statements that require management judgment include revenue recognition, goodwill and indefinite-lived intangible assets, amortizable intangible assets and other long-lived assets, the allowance for doubtful accounts receivable and commitments and contingencies. The accounting policies for these areas are discussed elsewhere in these combined financial statements.

Accounts receivables and allowance for doubtful accounts .    Accounts receivable are primarily derived from the sales to local automotive dealers and manufacturers. The allowance for doubtful accounts reflects our estimate of credit exposure, determined principally on the basis of our collection experience, aging of our receivables and any specific reserves needed for certain customers based on their credit risk. Successor bad debt expense, which was included in marketing and sales in our statements of income, in 2016, 2015 and the three months ended December 31, 2014 was $4.6 million, $2.5 million and $0.9 million, respectively, and approximated write-offs of trade receivables during each respective period. Predecessor bad debt expense, which was included in marketing and sales expense, for the nine months ended October 1, 2014 was $1.7 million and approximated write-offs of trade receivables during that period.

Marketable Securities Held in Trust .    Our marketable securities held in trust relate to the long-term incentive plan (see Note 6) and are classified as trading securities, with unrealized gains and losses included in the statements of income. At December 31, 2016 and December 31, 2015, such marketable securities totaled approximately $3.3 million and $3.4 million, respectively. Marketable securities that are expected to be sold within the next twelve months are recorded in prepaid and other current assets, with the remainder recorded in investments and other assets on the combined balance sheets. Successor gains on trading securities in 2016, 2015 and the three months ended December 31, 2014 were $0.2 million, $0.1 million and $0.3 million, respectively. There were no predecessor gains/losses for the nine months ended October 1, 2014.

Equity and Cost Method Investments .    Investments where we have the ability to exercise significant influence but do not control are accounted for under the equity method of accounting. Significant influence typically exists when we own between 20% and 50% of the voting interests in a corporation, own more than a minimal investment in a limited liability company, or hold substantial management rights in the investee. Investments in non-marketable equity securities are recorded using the cost method or the equity method of accounting, depending on the facts and circumstances of each investment. Non-marketable investments in preferred shares that do not meet criteria of in-substance common stock are accounted for at cost. Our non-marketable investments recorded within investments and other assets on the combined balance sheets as of December 31, 2016 and December 31, 2015 were $9.3 million and $7.0 million, respectively.

On at least an annual basis we assess our investments to determine whether any events have occurred, or circumstances have changed, which might have a significant adverse effect on their fair value and which may be indicative of impairment. There were no impairments recorded for the periods presented in the statements of income.

Property and Equipment .    Property and equipment is recorded at cost and depreciated on a straight-line basis over the estimated useful lives as follows:

 

Computer software and hardware   3-7 years
Furniture and fixtures   4-10 years
Leasehold improvements   shorter of lease term or estimated useful life

Successor depreciation expense in 2016, 2015 and for the three months ended December 31, 2014 was $8.3 million, $8.2 million and $2.1 million, respectively. Predecessor depreciation expense for the nine months ended October 1, 2014 was $7.0 million.

 

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Normal repairs and maintenance are expensed as incurred. The costs and related accumulated depreciation of assets sold or disposed of are removed from the combined balance sheets and any resulting gain or loss is included in the statements of income.

Goodwill and Other Intangible Assets .    Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. At December 31, 2016 and 2015, we had $788 million and $703 million of goodwill, respectively, which resulted from our Parent’s acquisition of Cars.com in 2014 and the acquisition of DealerRater.com in 2016.

For purposes of evaluating goodwill, we are required to determine how many reporting units exist. We have identified that the company operates as one reporting unit. A reporting unit constitutes a business or group of businesses for which discrete financial information is available and is regularly reviewed by our management. The goodwill related to the acquired businesses is specific to each reporting unit and the goodwill amounts are assigned as such.

Goodwill and indefinite lived intangibles are tested for impairment on an annual basis during the fourth quarter of the fiscal year and whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or circumstances which could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key management or other personnel, significant changes in the manner of our use of the acquired assets or the strategy for the acquired business or our overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

The process of estimating the fair value of goodwill is subjective and requires the Company to make estimates that may significantly impact the outcome of the analyses. Before performing the annual two-step goodwill impairment test, we first have the option to perform a qualitative assessment to determine if the two-step quantitative test must be completed. The qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after performing this assessment, we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we are required to perform the two-step quantitative test. Otherwise, the two-step quantitative test is not required. We elected to not perform the optional qualitative assessment of goodwill; instead, we performed the quantitative impairment test.

When performing the first step of the quantitative test, we determine the fair value of the reporting unit and compare it to the carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, we perform the second step of the impairment test, as this is an indication that the reporting unit goodwill may be impaired. In the second step of the impairment test, we determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and we must recognize an impairment loss for the difference between the carrying amount and the implied fair value of goodwill.

We estimate reporting unit fair value using a combination of the income approach using the discounted cash flow (“DCF”) analysis and the market approach. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, discount rates and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rates utilized in the DCF analysis are based on the reporting unit’s weighted average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of our reporting unit. The results of the tests indicated that the estimated fair values of our reporting unit exceeded the carrying value and thus no impairment existed for all periods presented.

 

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In connection with our acquisition by our Parent, we have an intangible asset with an indefinite life associated with our Cars.com trade name. Intangible assets with indefinite lives are tested annually, or more often if circumstances dictate, for impairment and written down to fair value as required. The estimates of fair value are determined using the “relief from royalty” methodology, which is a variation of the income approach. The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset. The results of our 2016 annual impairment test of the indefinite lived intangible asset indicated the fair value exceeded its carrying value, and therefore, no impairment charge was recorded.

Amortizing intangible assets are amortized on a straight-line basis over the estimated useful lives as follows:

 

Customer relationships    5-14 years
Acquired software    2-7 years
Trade name—DealerRater.com    12 years
Non-compete agreements    5 years
Content library    2 years

Valuation of Long-Lived Assets .    We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Once an indicator of potential impairment has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of projected undiscounted future cash flows against the carrying amount of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset group would be deemed to be potentially impaired. The impairment, if any, would be measured based on the amount by which the carrying amount exceeds the fair value. Fair value is determined primarily using the projected future cash flows, discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. No impairment losses were recognized for the periods presented in the statements of income.

Internally Developed Technology .    The Company capitalizes costs associated with customized internal-use software systems that have reached the application development stage. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees who are directly associated with the applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and ready for its intended purpose. Successor capitalized software costs in 2016, 2015 and the three months ended December 31, 2014 were $5.2 million, $1.3 million, and $0.5 million, respectively. There were no Predecessor software costs capitalized during the nine months ended October 1, 2014. Capitalized costs are included in property and equipment on the combined balance sheets. Research and development costs are charged to expense as incurred.

Advertising Costs .    We expense all advertising costs as they are incurred. Successor advertising expense in 2016, 2015 and the three months ended December 31, 2014 was $97.1 million, $96.0 million, and $27.4 million, respectively. Predecessor advertising expense for the nine months ended October 1, 2014 was $70.0 million. Advertising costs are included in marketing and sales in the accompanying statements of income.

Income Taxes .    The determination of whether taxes should be presented in a limited liability company’s (“LLC”) financial statements is dependent on whether tax law considers the entity to be a flow-through entity. Cars.com, LLC and Classified Ventures, LLC are both multi-member LLCs that are considered to be partnerships for U.S. income tax purposes, are generally not subject to federal, state or local income taxes and are therefore considered flow-through entities. Accordingly, no income taxes have been recognized in the financial statements for these entities. Our Parent acquired 100% of DealerRater on August 1, 2016. DealerRater is a corporate entity which is subject to income taxes. Income taxes are presented on the combined financial

 

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statements using the asset and liability method, under which deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying amount of assets and liabilities and their respective tax basis, as well as from operating loss and tax credit carry-forwards. Deferred income taxes reflect expected future tax benefits (i.e., assets) and future tax costs (i.e., liabilities). The tax effect of net operating loss, capital loss and general business credit carryovers result in deferred tax assets. We measure deferred tax assets and liabilities using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. We recognize the effect on deferred taxes of a change in tax rates in income in the period that includes the enactment date. Valuation allowances are established if, based upon the weight of available evidence, management determines it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.

Fair Value of Financial Instruments .    Our financial instruments include marketable securities held at fair value. Financial instruments also include accounts receivable, accounts payable and accrued liabilities. The carrying values of these instruments approximate their fair value.

New Accounting Pronouncements Not Yet Adopted .    In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The required adoption date of the standard is January 1, 2018. The two permitted transition methods are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown; and the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We currently anticipate adopting the standard using the modified retrospective method. Our primary source of revenue is through the sale of online subscription advertising products to car dealerships. We currently do not expect the standard to have a material impact on this revenue stream, which will continue to be recognized on a straight-line basis over the contract term as the service is provided to our customers.

In January 2016, the FASB issued new guidance that amended several elements surrounding the recognition and measurement of financial instruments. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation) to be measured at fair value with changes in fair value recognized in Net income. We are currently evaluating the effect this new guidance will have on our financial statements and related disclosures.

In February 2016, the FASB issued new guidance related to leases which will require lessees to recognize assets and liabilities on the combined balance sheets for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP—which requires only capital leases to be recognized on the combined balance sheets—the new guidance will require both types of leases to be recognized on the combined balance sheets. The new guidance is effective for us beginning in the first quarter of 2019 and will be adopted using a modified retrospective approach. We are currently evaluating the effect it is expected to have on our financial statements and related disclosures.

In June 2016, the FASB issued new guidance related to the measurement of credit losses on financial instruments. The new guidance changes the way credit losses on accounts receivable are estimated. Under current U.S. GAAP, credit losses on trade accounts receivable are recognized once it is probable that such losses will occur. Under the new guidance, we will be required to estimate credit losses based on the expected amount of future collections which may result in earlier recognition of allowance for doubtful accounts. The new guidance is effective for public companies beginning in the first quarter of 2020 and will be adopted using a modified

 

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retrospective approach. We are currently evaluating the effect this new guidance will have on our financial statements and related disclosures.

In January 2017, the FASB issued guidance that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, companies will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the impairment test). The standard has tiered effective dates, starting in 2020. Early adoption is permitted for interim and annual goodwill impairment testing dates after January 1, 2017.

NOTE 3

Acquisition

On August 1, 2016, our Parent acquired 100% of DealerRater for $114.9 million, net of cash acquired. DealerRater is a leading automotive dealer review website. The acquisition of DealerRater was pushed down to the combined balance sheets through the Parent’s investment and financial results have been included in the combined statements of income. We expect that the addition of DealerRater will further strengthen our position as a leader in online automotive reviews.

The purchase price was allocated to the tangible assets and identified intangible assets acquired based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. At the acquisition date, the purchase price assigned to the acquired assets and assumed liabilities is summarized as follows (in thousands of dollars):

 

Cash

   $ 2,559  

Trade receivables

     1,260  

Prepaid expenses and other current assets

     272  

Property and equipment

     411  

Goodwill

     84,879  

Amortizable intangible assets

     38,800  
  

 

 

 

Total assets acquired

     128,181
  

 

 

 

Total liabilities assumed

     10,722
  

 

 

 

Acquisition purchase price

   $     117,459  
  

 

 

 

The impact to our Combined Statements of Income from August 1, 2016, the acquisition date, to December 31, 2016 was $8.0 million of revenue and $0.9 million of operating income. The impact to our Combined Statements of Income on a pro forma basis, assuming the acquisition occurred as of the beginning of 2015, is immaterial.

 

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NOTE 4

Goodwill and other intangible assets

Goodwill and amortizable intangible assets at December 31, 2016 and December 31, 2015 is as follows (in thousands):

 

     Gross      Accumulated
Amortization 		     Net  

Dec. 31, 2016

        

Goodwill

   $ 788,107      $ —     $ 788,107  

Indefinite-lived intangibles:

        

Trade name

     872,320        —       872,320  

Amortizable intangible assets:

        

Customer relationships

     814,240        (140,788)        673,452  

Acquired software

     71,700        (22,798)        48,902  

Trade name

     9,800        (340)        9,460  

Non-compete agreements

     2,860        (1,287)        1,573  

Content library

     2,100        (438)        1,662  
  

 

 

    

 

 

    

 

 

 

Total amortizable intangible assets

     900,700        (165,651)        735,049  
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,561,127      $ (165,651)      $ 2,395,476  
  

 

 

    

 

 

    

 

 

 

Dec. 31, 2015

        

Goodwill

   $ 703,228      $ —     $ 703,228  

Indefinite-lived intangibles:

        

Trade name

     872,320        —       872,320  

Amortizable intangible assets:

        

Customer relationships

     789,540        (77,696)        711,844  

Acquired software

     69,500        (12,411)        57,089  

Non-compete agreements

     2,860        (715)        2,145  
  

 

 

    

 

 

    

 

 

 

Total amortizable intangible assets

     861,900        (90,822)        771,078  
  

 

 

    

 

 

    

 

 

 

Total

   $     2,437,448      $ (90,822)      $     2,346,626  
  

 

 

    

 

 

    

 

 

 

Successor amortization expense was $74.8 million, $72.7 million and $18.2 million in 2016, 2015 and the three months ended December 31, 2014. No intangible asset amortization expense was incurred during the Predecessor period presented.

Customer relationships, acquired software and non-compete agreements are amortized on a straight-line basis over their useful lives. In connection with the acquisition of DealerRater we recorded customer relationships of $24.7 million and other intangible assets of $14.1 million, related to trade name, acquired software and content library which will be amortized over a weighted average period of 10 years.

 

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The following table summarizes the changes in our net goodwill balance during 2016 (in thousands):

 

Balance at Dec. 31, 2015:

  

Goodwill

   $ 703,228  
  

 

 

 

Net balance at Dec. 31, 2015

     703,228  
  

 

 

 

Activity during the period:

  

Acquisition

     84,879  
  

 

 

 

Total

     788,107  
  

 

 

 

Balance at Dec. 31, 2016:

  

Goodwill

     788,107  
  

 

 

 

Net balance at Dec. 31, 2016

   $     788,107  
  

 

 

 

No goodwill impairment has been recorded in the Successor or Predecessor period presented.

The following table shows the projected annual amortization expense, as of December 31, 2016, related to our existing amortizable intangible assets (in thousands):

 

2017

   $ 77,870  

2018

     76,974  

2019

     76,377  

2020

     78,347  

2021 and thereafter

     425,481  
  

 

 

 

Total

   $     735,049  
  

 

 

 

NOTE 5

Investments

We have recorded a $9.3 million investment in RepairPal, Inc. (“RepairPal”), an online marketplace offering consumers a price estimator for car repairs and an ability to research repair shop reviews. This investment is comprised of a $5.0 million investment made in 2012 for preferred stock, initially convertible into an equal number of shares of common stock. Each share of preferred stock carries a number of votes equal to the number of shares of common stock, has a substantive liquidation preference and is not actively traded. In March 2014, we invested an additional $2.0 million in RepairPal. In May 2016, we purchased $2.2 million of convertible debt issued by RepairPal. The debt accrues interest at an annual rate of seven percent and matures in May 2018, at which time the debt converts into shares of preferred stock. Our ownership interest in RepairPal was 22% as of December 31, 2016.

We account for our investment in RepairPal under the cost method. While we believe that we have the ability to exercise significant influence, it has been determined that our investment is not substantially similar to common stock on the acquisition date because it has a substantive liquidation preference over RepairPal’s common stock. This factor precludes us from accounting for the investment under the equity method.

The aggregate carrying amount of the investment in preferred stock as of December 31, 2016 and December 31, 2015 was $7.0 million. No events or circumstances occurred that required us to estimate the fair value of the investment.

 

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NOTE 6

Long-term incentive plan

In June 2001, we established a long-term incentive plan (“LTIP”). Under the plan, at our discretion, we may designate employees to participate and may make annual cash contributions to the participants’ account. The contributions are invested at the participant’s direction among investment options including mutual funds and fixed income funds. In 2016, 2015 and the three months ended December 31, 2014, the Successor contributed $0.6 million, $0.2 million and $1.7 million, respectively. In the nine months ended October 1, 2014, the Predecessor contributed $0.6 million. The total amount contributed by us is marked to market quarterly and any unrealized gains (losses) are recognized through the statements of income.

The amounts contributed to participants’ accounts vest over a three-year period. One-third of the amount contributed in a plan year (and any increases or decreases in the account as a result of income, gains, losses or costs allocated to the account) vests and is payable on February 15 of each of the three succeeding plan years after the plan year in which the contribution was made. Once a portion of an award vests, it is either deferred for one year or paid to the participant. This initial deferral election is made by the participant prior to the plan year for which the award was issued. One year following the vesting date, that same portion of the deferred award is either deferred for five years or paid to the participant. This subsequent deferral election is made no later than December 31 of the plan year prior to the plan year for which the award was issued. If a participant is involuntarily terminated other than for cause as defined by the plan, the participant’s account becomes 100% vested and distributed. If a participant resigns, the vested portion of the participant’s account is distributed and the unvested portion is forfeited. The forfeited funds are retained within the LTIP investment account and used to offset future contributions. The amount of funds forfeited under the Successor in each of 2016, 2015 and the three months ended December 31, 2014 was $0.1 million. The amount of funds forfeited under the Predecessor in the nine months ended October 1, 2014 was also $0.1 million.

Under this plan, deferred Successor compensation expense for 2016, 2015 and the three months ended December 31, 2014 was $0.9 million, $1.3 million and $0.1 million, respectively. Predecessor compensation expense for the nine months ended October 1, 2014 was $0.6 million. The deferred compensation liability as of December 31, 2016 and 2015 was $3.1 million and $2.7 million, respectively. Deferred compensation liabilities that will be settled within the next twelve months are recorded in accrued compensation, with the remainder recorded in deferred incentive plans, less current portion, on the combined balance sheets.

NOTE 7

Fair value measurement

We measure and record certain assets at fair value in the accompanying financial statements. U.S. GAAP establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:

 

Level 1—

  Quoted market prices in active markets for identical assets or liabilities;

Level 2—

  Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3—

  Unobservable inputs developed using our own estimates and assumptions, which reflect those that a market participant would use.

 

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Financial assets that are carried at fair value on a recurring basis in the combined balance sheets consist of marketable securities held as LTIP investments.

The following table presents the LTIP investments carried at fair value as of December 31, 2016 and December 31, 2015, by category on the combined balance sheets in accordance with the valuation hierarchy defined above (in thousands):

 

Fair value measurement as of Dec. 31, 2016  
     Level 1      Level 2      Level 3      Total  

Assets:

           

Mutual funds

   $ 2,228      $ —      $ —      $ 2,228  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $     2,228      $     —      $     —      $ 2,228  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investments valued using the net asset value as practical expedient:

           

Fixed income fund

            $     1,031  
           

 

 

 

Total investments at fair value

            $ 3,259  
           

 

 

 

 

Fair value measurement as of Dec. 31, 2015  
     Level 1      Level 2      Level 3      Total  

Assets:

           

Mutual funds

   $ 2,620      $ —      $ —      $ 2,620  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $     2,620      $     —      $     —      $     2,620  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investments valued using the net asset value as practical expedient:

           

Fixed income fund

            $ 812  
           

 

 

 

Total investments at fair value

            $ 3,432  
           

 

 

 

Fair value for mutual funds is measured using Level 1 inputs and quoted market prices at the reporting date multiplied by the quantity held. Our fixed income fund investment consists of a commingled fund for which quoted market prices are not available. The fair value of the investment represents the net asset value as provided by the trustee.

In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables and accounts payable. The carrying amounts for these balances approximated their fair values for the years ended December 31, 2016 and 2015.

Certain assets and liabilities are measured at fair value on a nonrecurring basis, and therefore, not included in the tables above. These assets include goodwill and intangible assets and result as acquisitions occur. The amounts assigned to intangible assets and goodwill as they relate to the Company’s acquisitions are based on the Company’s best estimate of the fair value. The Company uses an independent valuation specialist to assist in determining the fair value of the identified intangible assets at acquisition. The fair value of the significant identified intangible assets is generally estimated using a combination of an income approach using the discounted cash flow (“DCF”) analysis and market approach using the guideline public company analysis, which represents a Level 3 fair value measurement. The income approach includes a forecast of direct revenues and costs associated with the respective intangible assets and charges for economic returns on tangible and intangible assets utilized in cash flow generation. The market approach also uses forecasted revenue and earnings, as well as comparable public company trading values. Net cash flows attributable to the identified intangible assets are discounted to their present value at a rate commensurate with the perceived risk

 

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NOTE 8

Other accrued liabilities

Our other accrued liabilities consisted of the following as of December 31, 2016 and December 31, 2015 (in thousands):

 

     Dec. 31, 2016      Dec. 31, 2015  

Unfavorable contracts liability, current portion

   $ 25,200      $ 25,200  

Marketing expenses

     9,269        11,673  

Other

     7,653        10,309  
  

 

 

    

 

 

 

Total other accrued liabilities

   $     42,122      $     47,182  
  

 

 

    

 

 

 

NOTE 9

Share appreciation rights plan

Effective as of January 1, 2012, we established a Share Appreciation Rights Plan (the “Plan”). The Plan is intended to motivate certain key employees to maximize their contributions to our long-term success and to encourage them to remain in our employment through awards of stock appreciation rights. We may, at our discretion, designate key employees to participate in the plan. Eligible participants will receive a number of stock appreciation rights annually that entitle the employee to receive the appreciation in the fair market value of a share from the date of grant up to a specified date or dates plus an amount equal to the distributions per share. Awards granted in a given year vest to the participant over a three-year period. Benefits paid under the Plan are made in cash, not common stock, at the end of the three-year vesting period from the original grant date. Expenses related to the Plan have been recorded in accordance with the accounting standards for share based payments. Due to the cash settlement at the end of the performance period, the awards are classified as a liability and are remeasured each reporting period at fair value.

Upon the settlement of vested rights, the participant receives a lump sum cash payment in an amount equal to (i) the value of a common unit as of the date of settlement, plus any dividend distributions per unit less (ii) the grant price value of a common unit on the grant date.

Successor Period Activity .    In each of 2016 and 2015, the Successor granted 0.4 million of stock appreciation rights to eligible participants with a base price of $13.12 and $12.00, respectively. The base price was determined with the assistance of a third party valuation analysis which based the company value on the combination of income and market approaches. No stock appreciation rights were awarded in the successor period for the three months ended December 31, 2014.

A summary of Successor stock appreciation rights activity is presented below (amounts in thousands except for average price and remaining term):

 

2016 Successor Activity

   Rights/
Units 		     Weighted
Avg.
Grant Price 		     Remaining
Avg.
Contract
Terms 		     Aggregate
Intrinsic
Value 		 

Rights outstanding as of December 31, 2015

     3,792     $ 5.74        

Granted 1

     406           13.12        

Settled

     (2,019)        4.47        

Canceled

     (60)      12.84        
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights outstanding as of December 31, 2016

     2,119     $ 8.16                0.5      $     11,718  
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights vested as of December 31, 2016

     1,755     $ 7.21        0.3      $     10,427  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1) The grant date fair value of stock appreciation rights granted in 2016 was $3.83.

 

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2015 Successor Activity

   Rights/
Units 		     Weighted
Avg.
Grant Price 		     Remaining
Avg.
Contract
Terms 		     Aggregate
Intrinsic
Value 		 

Rights outstanding as of December 31, 2014

     5,522     $ 4.71        

Granted 1

     386           12.00        

Settled

     (2,116)        4.19        

Canceled

     —      —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights outstanding as of December 31, 2015

     3,792     $ 5.74                0.2      $     25,868  
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights vested as of December 31, 2015

     3,534     $ 5.28        0.1      $ 25,580  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1) The grant date fair value of stock appreciation rights granted in 2015 was $3.59.

 

2014 Successor Activity

   Rights/
Units 		     Weighted
Avg.
Grant Price 		     Remaining
Avg.
Contract
Terms 		     Aggregate
Intrinsic
Value 		 

Rights outstanding as of October 1, 2014

     5,522      $     4.71        

Granted

     —        —        

Settled

     —        —        

Canceled

     —        —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights outstanding as of December 31, 2014

     5,522      $ 4.71        —      $ 43,795  
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights vested as of December 31, 2014

       5,522      $ 4.71        —      $     43,795  
  

 

 

    

 

 

    

 

 

    

 

 

 

We measure the fair value of awards issued under the Plan by the Successor using the Black-Scholes pricing model. Significant estimates used in the Black-Scholes pricing model include the: risk free interest rate, dividend yield, volatility, and expected life. Each assumption is discussed below.

Risk-free interest rate —We base the risk-free interest rate on the yield to maturity at the time of the award on corresponding U.S. government bonds having a remaining life that approximate the award’s expected life.

Expected dividend —The dividend assumption is based on our expectations about our dividend policy on the date of grant.

Expected volatility —The fair value of stock-based awards reflects volatility factors calculated using historical market data of comparable companies.

Expected life —The expected term represents the period that our stock-based awards are expected to be outstanding.

The following assumptions were used to estimate the fair value of the 2016 and 2015 stock appreciation right awards:

 

     Values  

Assumption

   2016      2015  

Risk-free interest rate

     1.30 %       1.09 % 

Expected dividend

     — %       — % 

Expected volatility

     41.0 %       42.5 % 

Expected life

     3        3  

Successor stock appreciation rights expense in 2016 and 2015 was $1.5 million and $0.1 million, respectively. As part of the business combination by our Parent described in Note 1, we recorded $15 million of share appreciation rights expense due to the acceleration of the vesting of stock appreciation rights during the

 

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three months ended December 31, 2014. Stock appreciation rights expense is recorded within general and administrative expenses on the Combined Statements of Income. No stock appreciation rights expense was capitalized as part of an asset. Deferred compensation liability related to the Plan as of December 31, 2016 and December 31, 2015 was $10.8 million and $25.9 million, respectively, including $9.1 million and $16.7 million in accrued liabilities.

The aggregate intrinsic value, which includes a dividend component, related to stock appreciation rights settled through cash payments in 2016 and 2015 was $16.7 million and $18.6 million, respectively. The aggregate fair value of stock appreciation rights vested during 2016 and 2015 was $1.2 million and $0.5 million, respectively.

Total unrecognized compensation cost related to nonvested rights as of December 31, 2016 was $2.0 million and will be recognized in 2017 and 2018. The remaining stock appreciation rights obligation of $10.8 million, inclusive of a tax component of $0.2 million, will be paid in 2017, 2018, and 2019 in the amounts of $9.1 million, $1.1 million, and $0.6 million, respectively.

Predecessor Period Activity .    In the nine months ended October 1, 2014, the Predecessor awarded 1.4 million of stock appreciation rights to eligible participants with a base price of $5.84. The price was determined by considering the price obtained for the sale of Apartments.com and the sale of the remaining interest of Cars.com to the Parent.

In April 2014, as a result of the Apartments.com sale, the vesting of the rights was accelerated per a board of directors’ resolution and they were immediately settled. The stock appreciation rights settlement was made in April 2014 to active Apartments.com participants.

On October 1, 2014, as a result of the sale of Cars.com to TEGNA, the vesting of the non-vested rights was accelerated and became immediately vested. The cash settlement of these stock appreciation rights was fixed as of October 1, 2014 at an amount equal to $25.8 million and will be paid in January of each year following the initial three year vesting period following the sale.

A summary of Predecessor stock appreciation rights activity is presented below (amounts in thousands except for average price and remaining term):

 

2014 Predecessor Activity

   Rights/
Units 		     Weighted
Avg.
Grant Price 		     Remaining
Avg.
Contract
Terms 		     Aggregate
Intrinsic
Value 		 

Rights outstanding as of December 31, 2013

     5,102     $ 4.33        

Granted

     1,388       5.84        

Settled

     (961)        4.32        

Canceled

     (7)        4.48        
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights outstanding as of October 1, 2014

     5,522     $ 4.71        —      $ 43,795  
  

 

 

    

 

 

    

 

 

    

 

 

 

Rights vested as of October 1, 2014

     5,522     $     4.71                 —      $     43,795  
  

 

 

    

 

 

    

 

 

    

 

 

 

During the Predecessor period we measured the cost associated with awards issued under the Plan using a graded vesting intrinsic value method, which includes a price increase in market value and a dividend component. Under this method, the cost of services related to the Plan reflects changes in the common unit price and the relative vesting period of rights.

Predecessor stock appreciation rights expense for the nine months ended October 1, 2014 was $42.3 million as a result of adjusting the rights to fair value and the acceleration of the vesting of stock appreciation rights due to the sale transactions. Stock appreciation rights expense is recorded within general and administrative expenses on the Consolidated Statements of Income. No stock appreciation rights expense was capitalized as part of an asset.

 

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The aggregate intrinsic value, which includes a dividend component, related to stock appreciation rights settled through cash payment during the nine months ended October 1, 2014 was $3.8 million.

NOTE 10

Income taxes

The provision (benefit) for income taxes of DealerRater, a corporate entity that is subject to income tax, consists of the following (in thousands):

 

2016

   Current      Deferred      Total  

Federal

   $ 1,001      $ (538 )     $     463  

State and other

     —             125        125  
  

 

 

    

 

 

    

 

 

 

Total provision (benefit) for income taxes

   $     1,001    $ (413 )     $ 588  
  

 

 

    

 

 

    

 

 

 

The provision for income taxes varies from the U.S. federal statutory tax rate as a result of the following differences:

 

     2016  

U.S. statutory tax rate

     34.0 % 

Increase (decrease) in taxes resulting from:

  

State taxes (net of federal income tax benefit)

     5.7  

Nondeductible meals and entertainment

     0.4  
  

 

 

 

Effective Tax Rate of DealerRater

     40.1 % 
  

 

 

 

Deferred tax liabilities and assets were composed of the following at the end of December 31, 2016 (in thousands):

 

     Dec. 31, 2016  

Liabilities

  

Accelerated depreciation

   $ 98  

Accelerated amortization of deductible intangibles

     8,621  
  

 

 

 

Total deferred tax liabilities

   $ 8,719  
  

 

 

 

Assets

  

Accrued compensation

   $ 336  

Other

     40  

Loss carryforward

     18  
  

 

 

 

Total deferred tax assets

   $ 394  
  

 

 

 

Total net deferred tax liabilities of DealerRater

   $     8,325  
  

 

 

 

We file income tax returns in the U.S. and various state jurisdictions. The 2012 through 2016 tax years remain subject to examination by the Internal Revenue Service and state authorities.

For uncertain income tax positions, the Company uses a more likely than not recognition threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more likely than not recognition threshold are measured in order to determine the tax benefit recognized in the financial statements. As of December 31, 2016, the Company’s management has determined that it does not have any material uncertain tax positions.

 

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The Company recognizes accrued interest related to unrecognized tax benefits as part of income tax expense. Penalties, if incurred, are also recognized as a component of income tax expense. During the year ended December 31, 2016, the Company did not incur any interest or penalties, and accordingly no such amounts are recorded in the consolidated financial statements.

NOTE 11

Retirement plans

All our employees are eligible to participate in our principal defined contribution plan. Participants are eligible on the first day of the quarter following the date of hire after one month of service and are allowed to make tax-deferred contributions up to 100% of annual compensation, subject to limitations specified by the Internal Revenue Code.

Our company match is 100% of the employee’s contribution up to 3% of the employee’s salary, and thereafter 50% of the employee’s contribution, until the employee’s contributions reach 5% of the employee’s salary. All contributions are immediately fully vested. Successor compensation expense related to the 401(k) in 2016, 2015 and for the three months ended December 31, 2014 was $4.0 million, $3.8 million and $0.8 million, respectively. Predecessor 401(k) compensation expense for the nine months ended October 1, 2014 was $2.7 million.

NOTE 12

Commitments, contingent liabilities and other matters

Litigation .    We are defendants from time to time in judicial and administrative proceedings involving matters incidental to our business. We do not believe that any material liability will be imposed as a result of these matters.

Operating leases .    We are obligated as lessee under certain non-cancelable operating leases for office space, and are also obligated to pay insurance, maintenance and other executory costs associated with the leases. Successor rental expense in 2016, 2015 and the three months ended December 31, 2014 was $6.8 million, $6.4 million and $1.5 million, respectively. Predecessor rental expense for the nine months ended October 1, 2014 was $5.3 million.

Future minimum operating lease payments as of December 31, 2016 are as follows (in thousands):

 

2017

   $ 8,133  

2018

     5,833  

2019

     4,018  

2020

     3,357  

2021 and thereafter

     45,671  
  

 

 

 

Total

   $     67,012  
  

 

 

 

NOTE 13

Related party transactions

The following is a discussion of our relationship with our Parent, the services provided by both parties and how transactions with our Parent and our Parent’s affiliates have been accounted for in the combined financial statements. In addition, we summarize commercial transactions during the Predecessor periods with the former owners of Classified Ventures, LLC.

 

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Revenue .    Revenue earned from a commercial agreement with our Parent for the years ended December 31, 2016 and December 31, 2015 and the three months ended December 31, 2014 was $8.5 million, $7.7 million and $1.9 million, respectively.

Predecessor net revenue generated from our previous owners is presented within wholesale revenue on our consolidated statements of income during the nine months ended October 1, 2014 was $69.7 million.

Equity .    Equity in the Successor Combined Balance Sheets represents the accumulated balance of transactions between us and our Parent, our paid-in-capital, and our Parent’s interest in our cumulative retained earnings, and are presented within “Parent’s investment, net”. The amounts comprising the accumulated balance of transactions between us and our Parent and our Parent’s affiliates include (i) the cumulative net assets attributed to us by our Parent and our Parent’s affiliates and (ii) the cumulative net advances to our Parent representing our cumulative funds swept (net of funding provided by our Parent and our Parent’s affiliates to us) as part of the centralized cash management program described further below.

Centralized cash management .    Our Parent utilizes a centralized approach to cash management and the financing of its operations, providing funds to its entities as needed. These transactions are recorded in “Parent’s investment, net” when advanced. Accordingly, none of our Parent cash and cash equivalents have been assigned to us in the Combined Financial Statements. Cash and cash equivalents in our Combined Balance Sheets represent cash held locally by us.

NOTE 14

Discontinued operations

In April 2014, the net assets of Apartments.com, a wholly owned subsidiary of the Predecessor, were sold to a third party for a purchase price of $585.0 million. This consisted of a $555.7 million immediate payment and a $29.3 million escrow payment was paid by the buyer in April 2015. The escrow amount was included within other receivables on the combined balance sheets prior to its settlement in 2015. The other previous owners of the Predecessor were entitled to approximately $21.4 million of the escrow amount. A liability for this amount was included in accrued liabilities—other prior to its settlement in 2015. Subsequent to the sale, the Predecessor had no significant involvement in the Apartments.com business other than a limited transition services agreement for the remainder of 2014. Under this agreement, the Predecessor provided legal, facilities, technology, office space and accounting to the buyer. As a result of the sale, the financial results for Apartments.com are included in discontinued operations. Results of the Apartments.com discontinued operations for the nine months ended October 1, 2014 is summarized as follows (in thousands):

 

     Jan. 1 – Oct. 1,
2014 		 

Net revenue

   $ 20,835  

Net revenue Affiliate Investor

     1,570  

Total operating expenses

     16,792  

Gain on sale of Apartments.com

     563,388  
  

 

 

 

Income from Discontinued Operations

   $     569,001  
  

 

 

 

NOTE 15

Subsequent events

There were no known events occurring after the combined balance sheets date and up until the date of the issuance of these financial statements that would materially affect the information presented herein. We evaluated subsequent events through March 22, 2017, the date of the issuance of these financial statements.

 

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