PHOENIX, May 25, 2023
/PRNewswire/ -- William Coulter and Mark Tkach, who together hold approximately
32.0% of the outstanding Class B shares of common stock of
RumbleOn, Inc. ("RumbleOn" or the "Company") (NASDAQ: RMBL), today
sent a letter to fellow RumbleOn stockholders, criticizing the
intransigence of several entrenched directors who are delaying
badly needed changes at the Company, for reasons that appear tied
to their personal interests.
Below is the full text of the letter:
Dear Fellow RumbleOn stockholders:
We have diligently sought to resolve our differences with
RumbleOn's Board of Directors. Indeed, despite the lack of a
settlement, we have made some progress - the appointment to the
Board of an experienced and truly independent director in
Steve Pully; the use of an
independent search firm to identify another director candidate in
Becca Polak, whom we believe is also
independent; the separation of the CEO and Chairmanship; the
removal of a second insider executive from the Board; and the
Company's announcement that two incumbent directors will not stand
for re-election.
But today, we wish to update all stockholders on how and why our
efforts to reach a settlement with the Company have failed.
In short, certain directors seem intent on delaying changes to the
Board that are necessary to restore and maximize stockholder value
as soon as practicable, for reasons that appear tied to their
personal interests. We cannot see how stockholders benefit
from these directors' foot-dragging, and we feel obligated on
behalf of all stockholders to insist that they focus as soon as
possible on what is in the best interest of the Company and its
stockholders.
An Example of Incumbent Directors' Ignorance of the Best
Interest of Stockholders: The Levy Severance
Although the Company announced "Corporate Governance
Enhancement" in a May 10, 2023 press
release, we have observed in the course of this process significant
lapses in the most basic of commitments to corporate
governance. The most obvious example is the approval (before
Steve Pully and Becca Polak joined the Board and at the very
same time it was touting "Corporate Governance Enhancements") of
the severance of former Chief Operating Officer and Board member
Peter Levy at a cost of $3,375,000 to the Company, as well as to provide
Mr. Levy with other unusual terms on his way out that were
unfavorable to the Company and its stockholders.
As discussed in our May 16, 2023
letter to the RumbleOn Board of Directors, we promptly expressed to
the Board our displeasure with this decision. The fact is that Mr.
Levy served as Chief Operating Officer for only 15 months, yet he
oversaw a loss of stockholder value of 80.6%, or $494.5 million. The day after the Company
disclosed the enhanced severance package for Mr. Levy, our advisors
reached out to the Board and asked them to reconsider the payment
of this severance to Mr. Levy, including the portion that is
shielded by the "Rabbi Trust." To our knowledge, our request was
ignored.
We take very seriously our responsibility as the Company's
largest stockholders to directly engage with the Board to make our
views known, particularly regarding activities that do not maximize
value for stockholders. The Levy Severance situation is a plain and
blatant example of RumbleOn management, as well as the Compensation
Committee of the Board, taking advantage of the stockholders. Yet,
stockholders are most certainly asking themselves, how could the
Company leadership approve such an action, particularly given the
Company's public disclosures the next day discussing the need for
greater financial prudence?
We begin with the members of the Board's Compensation Committee:
Adam Alexander (Chair), Michael Marchlik and Shin Lee. Those same three Board members also
comprise the Board's Nominating and Corporate Governance Committee,
with Ms. Lee serving as Chair of that committee.
Mr. Marchlik and Mr. Alexander have served on the RumbleOn Board
of Directors since May 6, 2020 and
July 15, 2020, respectively.
Shin Lee was appointed to the Board
on June 23, 2022. Prior to
joining the RumbleOn Board, none of those three directors had
ever served on the board of any other publicly traded company.
Moreover, both Mr. Alexander and Mr. Marchlik have material
business relationships with RumbleOn, which are disclosed, but
perhaps not well understood. We understand that Ms. Lee was a
schoolmate of Mr. Alexander, which is how we believe she came to be
nominated to the Board. It is critically important to
understand the details of these relationships, as they provide
important context as to why the Compensation Committee would
approve such payments to an executive officer who performed so
poorly and create concerns about what other decisions these
directors are willing to make.
The Problem with "Independent" Directors Who Are Not
Independent
As a Nasdaq listed company, RumbleOn is required to have a
majority of "independent" directors on the Board. Nasdaq has
specific language in its rules on factors that can make a director
per se non-independent, as well as some interpretive
guidance on other dynamics that can render a board member
non-independent. The purpose of these rules is to ensure that more
than half of board members, or in certain cases the family members
of board members, have no meaningful ties to the company, or to
management, that may cause them to be swayed by factors that favor
self-interest over the interests of the stockholders.
Logically, one factor that is the focus of Nasdaq's independence
rules deals with business relationships between the issuer and the
employer of a director. Understandably, under these rules, the
dollar thresholds above which a director is deemed non-independent
are modest.
In addition to serving as a Board member of RumbleOn,
Adam Alexander is also Chief
Executive Officer of BidPath, Inc. ("BidPath"), a privately-held
"leading global auction software solution."1
BidPath was hired by RumbleOn management to build its inventory
management platform, a key item for a company aspiring to make
technology one of its drivers for growth and innovation. According
to the Company's own public disclosures, "On January 19, 2022, the Audit Committee approved,
and the Company entered into two agreements with Bidpath
Incorporated, a company owned by Adam
Alexander, a director of the Company that provides the
Company with (i) a perpetual, non-exclusive license to the
then-current source code, as well as all future source code, of
foundational technology for our inventory management platform, and
(ii) support and maintenance services, all of which remain in
development as of March 31,
2023."2
According to a disclosure in the Company's Annual Report on Form
10-K/A for the fiscal year ended December
31, 2022, "The Company has made cash payments totaling
approximately $3,600,000 for the
license during the year ended December 31,
2022. The Company pays, on monthly basis since the agreement
was signed, $30,000 for the support
and maintenance services."
Mr. Alexander is the Chair of RumbleOn's Audit Committee. He is
also a member of the Compensation Committee and the Nominating and
Corporate Governance Committee. The Company did not make any
statements in its public disclosures to indicate that Mr. Alexander
had recused himself from the Audit Committee vote to approve the
BidPath agreement. The initial term of the agreement is for
36 months. It is unclear what percentage of BidPath's total
revenue the RumbleOn business comprises.
As for Michael Marchlik,
according to RumbleOn's website, he is "the Chief Executive Officer
of the Advisory & Valuations division of Great American
Group" though, according to the Company's Definitive Proxy
Statement dated May 2, 2022,
"Mr. Marchlik has served as the Co-Chief Executive
Officer of the Advisory Services division of B. Riley
Financial Inc., formally known as Great American Group ("GA"),
since April 2017 and is responsible for overseeing the
operations and client service efforts for lenders, sponsors, and
borrowers."[3] The additional piece of information that GA is
owned by B. Riley Financial Inc. is important. According to the
Company's Merger Proxy for the Special Meeting of Stockholders held
on July 30, 2021, we calculate that
RumbleOn paid fees to B. Riley entities of approximately
$17.1 million. We understand that B.
Riley entities continue to provide unspecified investment banking
services to RumbleOn.
Finally, Shin Lee was appointed
to the RumbleOn Board of Directors on June
23, 2022. Ms. Lee was appointed to the Board just nine
days after last year's Annual Meeting of Stockholders. Her name
is not referenced in last year's proxy materials. We recently
learned that Ms. Lee was appointed as a Class I director, meaning
the first opportunity that stockholders will be able to vote on her
appointment to the Board will be in 2025. Ms. Lee was
appointed to a Board seat previously held by Sam Dantzler, who resigned from the Board in
February 2022. We cannot fathom why
the Company elected not to include Ms. Lee in the 2022 proxy
materials or why the Company did not disclose that she would serve
as a Class I director until well after her appointment. We believe
that Ms. Lee came to the Board attention because she was a
classmate of Adam Alexander.
During the course of this proxy contest, we were told by the
Company that Ms. Lee had been appointed as Chair of the Board's
Nominating and Corporate Governance Committee. She is also a
member of the Compensation Committee. Ms. Lee has not directly
participated in any of the settlement negotiations we have
had. When our advisors requested a conversation on our behalf
with Ms. Lee and Becca Polak, Ms.
Polak willingly agreed to our request and made efforts to join us
for in-person meeting. Ms. Lee declined to speak with us or our
advisors at all at any point during this process.
Why is this important? We are deeply troubled that the current
Chair of the Company's Nominating and Corporate Governance
Committee, and a member of the Compensation Committee, was never
elected to the Board by the stockholders. Rather, she was appointed
to the Board less than a week and half after last year's Annual
Meeting for a Board seat that had been vacant for approximately
four months. It is clear that the Company made coy efforts to seat
Ms. Lee on the Board while deliberately circumventing the
stockholders. Only recently did we learn why in the context of our
settlement discussions. Just as Marshall Chesrown took steps to have
Peter Levy appointed to the Board
without being elected by the stockholders to gain an extra vote on
the Board, so too did Adam Alexander
with Shin Lee.
Ironically and incredibly, in the Company's Form 10-K/A for the
fiscal year ended December 31, 2022
filed with the SEC on April 28, 2023,
the Company states "We believe that Ms. Lee possesses attributes
that qualify her to serve as a member of our Board, including
her extensive understanding of corporate governance, risk
management and business operations."[Emphasis added]. Based
on our experience, we disagree.
Update on Settlement Discussions
Throughout the past several weeks, it appeared that we had been
making meaningful progress in our settlement discussions between
our advisors and Chair of the Board Kevin Westfall, and after his
appointment to the Board, Steve
Pully. These negotiations were active and quite
constructive. As we were nearing an agreement in principle in many
key terms, one of our advisors received a call on Sunday morning,
May 21, 2023, from a Board advisor
setting forth a completely different settlement construct, which
was substantially less favorable than the Company's previous offer
and included several terms we had previously rejected. We rejected
such terms because they further entrenched directors including
Messrs. Alexander and Marchlik, and prolonged the CEO tenure of
Marshall Chesrown, whom the Company
had previously offered to have resign (though we had never sought
such action). See Attachment A for a copy of our rejection
letter.
Yet, the new terms that were reintroduced Sunday morning were
clearly designed to keep Messrs. Chesrown, Alexander and Marchlik
in place as long as possible, and were specifically designed to
prevent both the newly seated directors, Becca Polak and Steve
Pully, as well as Bill
Coulter and Mel Flanigan,
once seated, from comprising a majority of the Board. It is clear
that this turn of events came at the hands of Messrs. Alexander and
Marchlik, who have shown themselves to be more motivated by their
personal business relationships with the Company than their
fiduciary duty to stockholders. Ms. Lee has consistently supported
Messrs. Alexander and Marchlik, to the point that there appear now
to be two factions of the Board.
The Path Forward
At the upcoming 2023 Annual Meeting of Stockholders, it seems
likely that Bill Coulter and
Mel Flanigan will run unopposed as
Class II directors. The Company has previously disclosed that
neither Mr. Alexander nor Mr. Marchlik will stand for re-election.
Yet, both Mr. Alexander and Mr. Marchlik remain steadfast about
remaining in their current Board seats as long as possible, rather
than step down and accelerate the Board transition to a majority of
truly independent directors who can make the decisions necessary to
move the RumbleOn business forward, absent any personal business
conflicts.
There is no possible way that delaying badly needed change at
the Board level can be in the best interests of stockholders. We
will not tolerate this, as we have told the Company, in our
settlement rejection letter, which we have attached. We urge
other stockholders to express their displeasure to the Board for
Mr. Alexander, Mr. Marchlik and Ms. Lee putting their own
self-interests ahead of their fiduciary duty to stockholders.
In the coming days weeks, stockholders can expect further
communications from us on our thoughts to take the Company forward
in order to maximize value for all stockholders. In the
interim, we will do everything within our power to expedite the
process to transform the direction of RumbleOn.
Sincerely,
Mark Tkach and
William Coulter
Contact information:
Bruce Goldfarb/Pat McHugh/Jeremy
Provost
Okapi Partners LLC
212-297-0720
Info@okapipartners.com
ATTACHMENT A
Mark
Tkach
William Coulter
May 23, 2023
Board of Directors
RumbleOn, Inc.
901 West Walnut Hill Lane, #110A
Irving, Texas 75038
Re:
Rejection of "Proposed Terms of Cooperation"
Dear Members of the RumbleOn Board of Directors:
We were disappointed to receive on Sunday the Board's Proposed
Terms of Cooperation (the "Terms"), which are anything but a good
faith effort to reach a cooperative resolution. That document
represents a significant step backwards in what we had hoped
were good faith discussions towards a settlement that would result
in swift change to improve Board independence and allow a
well-qualified independent Board to get to work on restoring
stockholder value. Far from the "framework for discussions of a
collaborative resolution" described in document, these Terms seek
to retract concessions the Board previously made, and disturbingly
appear designed to stymie the ability of RumbleOn's next Board and
its stockholders to enact meaningful change.
Your Terms acknowledge that Messrs. Coulter and Flanigan are
well-qualified to serve on the Board, and that their immediate
appointment to the Board would be in the best interest of the
Company. But rather than seating them now in place of Messrs.
Alexander and Marchlik, you propose to expand the Board to nine
seats through the July 14, 2023
Annual Meeting so that Messrs. Alexander and Marchlik can also
remain on the Board through that time. When the Board
announced on May 10 that Messrs.
Alexander and Marchlik will not stand for reelection, it told
investors this was part of the Board's "commitment" to
"meaningfully refreshing the Board" and "heighten the Board's
independence." There is no reason why that "meaningful refreshment"
and "heightened independence" should be delayed by nearly two
months, or why Messrs. Marchlik or Alexander should continue to
serve as lame ducks in these roles where they have overseen
considerable destruction of stockholder value.
By no later than the 2023 Annual Meeting, there will be
at least four new members of the Board—a majority—that have not
served throughout that destructive period. The only logical
reason to leave Messrs. Alexander and Marchlik on the Board for
another fifty days is to ensure that the existing regime can
continue to hold a majority of the seats until the 2023 Annual
Meeting. Given our previously stated concerns regarding certain
directors' lack of independence from Mr. Chesrown and their
inability to capably exercise their duties (concerns that were only
heightened with the Board's shocking recent approval of Mr. Levy's
severance agreement), extending the historical directors' grip on
the Board is not something that can possibly be in the
stockholders' best interests.
The Terms' goal of impeding change is also demonstrated by its
insistence that we enter into a standstill agreement through the
end of next year's annual meeting, prohibiting us from
calling any special meetings, making any nominations, or making any
other stockholder proposals through mid-2024. That is not the
request of a well-functioning independent Board, and it is a
condition that we have consistently said we would never accept, and
you previously withdrew.
There is no reason why we would ever accept these Terms.
You knew that when you asked your outside advisers to send them.
Which leads us to the conclusion that the Board does not want a
settlement. For nearly three months, we have been attempting
in good faith to engage with the Board to find a resolution that
will allow the Company to move forward with a qualified and
independent Board that can oversee the changes necessary to restore
stockholder value. What the Terms tell us is that a majority of the
current Board does not share that goal, and we are wasting our time
with these discussions.
We hereby reject the Board's Terms. Given the Board's
demonstrated unwillingness to make meaningful settlement offers, we
are directing our advisers to cease their considerable efforts to
reach a settlement and to instead focus all of their efforts on
driving change through the July 14,
2023 Annual Meeting.
Sincerely,
Mark Tkach and
William Coulter
William Coulter and Mark Tkach, together with the other participants
named herein (collectively, the "Participants"), have filed a
preliminary proxy statement and an accompanying WHITE universal
proxy card with the Securities and Exchange Commission
(the "SEC") with respect to the election of directors of
RumbleOn, Inc., a Nevada
corporation (the "Company"), and certain proposals for the
Company's 2023 annual meeting of stockholders (the "Annual
Meeting").
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
THE PARTICIPANTS MAY BE DEEMED TO BE PARTICIPANTS IN THE
SOLICITATION OF PROXIES WITH RESPECT TO THE ANNUAL MEETING. THE
PARTICIPANTS STRONGLY ADVISE ALL STOCKHOLDERS OF THE COMPANY TO
READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS RELATED TO THE
ANNUAL MEETING AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN
ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE
COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE
PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are William Coulter, Mark
Tkach, WJC Properties, L.L.C., WRC- 2009, L.L.C., The WRC-98
Trust, The WRC 2021 Irrevocable Trust, Ride Now Management, LLLP,
Kyle Beaird and Melvin Flanigan.
Information regarding the persons who may, under the rules of
the SEC, be deemed participants in the solicitation of
proxies in connection with the election of directors of the
Company and certain proposals, including a description of their
direct or indirect interests, by security holdings or otherwise,
will be set forth in the proxy statement and other proxy materials
as they are filed with the SEC.
As of the date hereof, the participants in the proxy
solicitation beneficially own in the aggregate 5,242,433 shares of
Class B Common Stock, par value $0.001 per share, of the Company ("Class B Common
Stock"). As of the date hereof, William
Coulter beneficially owns 2,621,405 shares of Class B Common
Stock, which includes 593,472 shares directly owned by The WRC 2021
Irrevocable Trust and 30,377 shares directly owned by WJC
Properties, L.L.C. WRC- 2009, L.L.C. is the controlling member of
WJC Properties, L.L.C., and The WRC-98 Trust is the sole member of
WRC- 2009, L.L.C., and accordingly WRC- 2009, L.L.C. and The WRC-98
Trust may be deemed to beneficially own the shares directly owned
by WJC Properties, L.L.C. Mr. Coulter serves as Manager or Trustee
for each of these entities. As of the date hereof, Mark Tkach beneficially owns 2,621,028 shares of
Class B Common Stock, and the remainder of the Participants do not
beneficially own any shares of Class B Common Stock.
1 https://bidpath.com/about-us
2 RumbleOn, Inc.'s Quarterly Report on Form 10-Q
for the period ended March 31, 2023,
page 16.
3 RumbleOn, Inc. Definite Proxy Statement, dated
May 2, 2022, page 5.
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SOURCE William Coulter and
Mark Tkach