Toast (TOST) DEF 14ADefinitive proxy

We are holding the Annual Meeting for stockholders to consider and vote on the following matters, which are more fully described in the accompanying proxy statement:

We have elected to provide access to our Annual Meeting materials, which include the proxy statement for our Annual Meeting (the “Proxy Statement”) accompanying this notice, in lieu of mailing printed copies.

On or about April 23, 2024, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access the Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”). The Notice provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of proxy materials by mail. This Proxy Statement and our 2023 Annual Report can

Only stockholders of record at the close of business on April 10, 2024 are entitled to notice of and to vote at the Annual Meeting as set forth in the Proxy Statement.

Thank you for your ongoing support of and continued interest in Toast.

In this Proxy Statement, the terms “Toast,” “the Company,” “we,” “us” and “our” refer to Toast, Inc. The mailing address of our principal executive offices is Toast, Inc., 333 Summer Street, Boston, MA 02210.

The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this Proxy Statement. You should read this entire Proxy Statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this Proxy Statement, and references to our website address in this Proxy Statement are inactive textual references only.

You will be voting on:

Our Board recommends a vote:

We are excited to embrace the latest technology to provide ease of access, real-time communication and cost savings for our stockholders and our company. Hosting a virtual meeting provides easy access for our stockholders and facilitates participation because stockholders can participate from any location around the world.

Holders of our Class A common stock and Class B common stock as of the close of business on April 10, 2024, the record date for the Annual Meeting (the “Record Date”), may vote at the Annual Meeting. As of the Record Date, there were 451,336,339 shares of our Class A common stock outstanding and 102,163,241 shares of our Class B common stock outstanding. Stockholders are not permitted to cumulate votes with respect to the election of directors. Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to 10 votes. Our Class A common stock and Class B common stock are collectively referred to in this Proxy Statement as our “common stock.”

A quorum is the minimum number of shares required to be present at the Annual Meeting to properly hold an annual meeting of stockholders and conduct business under our Third Amended and Restated Bylaws (our “Bylaws”) and Delaware law.

As of the Record Date, there were 451,336,339 shares of our Class A common stock outstanding and 102,163,241 shares of our Class B common stock outstanding. Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to 10 votes. The presence, in person or by remote communication, if applicable, or represented by proxy, of a majority of the voting power of all issued and outstanding shares of our common stock entitled to vote will constitute a quorum at the Annual Meeting. Shares present virtually during the Annual Meeting will be considered shares of common stock represented in person at the meeting. Abstentions, withheld votes and broker non-votes are counted as shares present and entitled to vote for purposes of determining a quorum.

If you are a stockholder of record, there are four ways to vote:

If you are a street name stockholder, please follow the instructions from your broker, bank or other nominee to vote by Internet, telephone or mail. Street name stockholders may not vote via the Internet at the Annual Meeting unless they receive a legal proxy from their respective brokers, banks or other nominees.

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time before the Annual Meeting by:

If you are a street name stockholder, your broker, bank or nominee can provide you with instructions on how to change your vote.

Proxies are solicited by and on behalf of our Board. Aman Narang, Elena Gomez and Brian Elworthy have been designated as proxy holders by our Board. When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of our Board as described above.

If any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote the shares. If the Annual Meeting is adjourned, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have properly revoked your proxy instructions, as described above.

Votes withheld from any nominee, abstentions and “broker non-votes” (as defined below) are counted as present for purposes of determining the presence of a quorum.

In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”), we have elected to furnish our proxy materials, including this Proxy Statement and our 2023 Annual Report, primarily via the Internet. On or about April 23, 2024, the proxy materials are being mailed to our stockholders. Stockholders may request to receive all future proxy materials in printed form by mail or electronically by e-mail by following the instructions contained in the Notice. We encourage stockholders to take advantage of the availability of our proxy materials on the Internet to help reduce the environmental impact and cost of our annual meetings of stockholders.

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

Our Board is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be borne by us. We will reimburse brokers or other nominees for reasonable expenses that they incur in sending our proxy materials to you if a broker, bank or other nominee holds shares of our common stock on your behalf. In addition, our directors and employees may also solicit proxies in person, by telephone or by other means of communication. Our directors and employees will not be paid any additional compensation for soliciting proxies.

Street name stockholders may contact their broker, bank or other nominee to request information about householding.

We pay the entire cost of preparing and distributing these proxy materials. In addition, we may reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners

Our Board is divided into three staggered classes of directors. One class is elected each year at the annual meeting of stockholders for a term of three years. The term of the Class III directors expires at the Annual Meeting. The term of the Class I directors expires at the 2025 annual meeting and the term of the Class II directors expires at the 2026 annual meeting. After the expiration of their terms, directors are expected to be elected to hold office for a three-year term or until the election and qualification of their successors in office.

Our Board has nominated Stephen Fredette, Aman Narang and Deval L. Patrick for re-election as Class III directors to hold office until the 2027 annual meeting of stockholders or until their successors are duly elected and qualified, subject to their earlier resignation or removal. Each of the nominees is a current Class III director and member of our Board.

The election of directors requires a plurality of the votes properly cast for the applicable nominee to be elected. Shares voting “withheld” and broker non-votes will have no effect on the election of directors.

The biographies of each of the nominees and continuing directors below contain information regarding each such person’s service as a director, business experience, other director positions held currently or at any time during the last five years and the experiences, qualifications, attributes or skills that caused our Board to determine that the person should serve as a director of our company. In addition to the information presented below regarding each nominee’s and continuing director’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that each of our directors has a reputation for integrity, honesty and adherence to high ethical standards. Each of our directors has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our company and our Board. Finally, we value our directors’ experience in relevant areas of business management and on other boards of directors and board committees.

Our business and affairs are managed under the direction of our Board, which is elected by our stockholders. Our Board currently consists of ten directors, all of whom, other than Mr. Comparato, Mr. Fredette, and Mr. Narang, qualify as “independent” under the listing standards of the New York Stock Exchange (the “NYSE”).

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

Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act, and the listing standards of the NYSE. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the listing standards of the NYSE.

Our corporate governance guidelines do not provide a formal policy on whether the roles of Chairperson of our Board and Chief Executive Officer of the Company should be separate or combined and, therefore, the Board has the flexibility to decide which structure is in the best interests of our stockholders and the Company.

The Board believes at this time that our stockholders are best served by separate Chairperson and Chief Executive Officer roles. Mr. Narang serves as the Chief Executive Officer and Mr. Hawkins currently serves as the Chairperson of the Board.

A number of factors support the separate leadership structure chosen by the Board. Separate Chairperson and Chief Executive Officer roles promotes balance between the Board’s independent authority to oversee the Company’s business and the Chief Executive Officer’s management team, which manages our operations on a day-to-day basis, allows Mr. Narang to focus on operating and managing the Company, in particular as he transitioned into the role in January 2024, leverages Mr. Hawkins' wealth of public company experience, and fosters accountability and effectiveness of the Board operation. Our Board believes that its independence and oversight of management is maintained effectively through this leadership structure, the composition of our Board, and sound corporate governance policies and practices.

Our Board recognizes that depending on future circumstances, other leadership models may become more suitable in addressing the interests of our Company and our stockholders. Accordingly, our Board may periodically review its leadership structure and adjust such structure from time to time.

Our Board may establish the authorized number of directors from time to time by resolution. Our Board currently consists of ten members.

During our fiscal year ended December 31, 2023, our Board held five meetings, and each director attended at least 75% of the aggregate of (i) the total number of meetings of our Board held during the period for which he or she had been a director and (ii) the total number of meetings held by all committees of our Board on which he or she served during the periods that he or she served. Under our Corporate Governance Guidelines, directors are expected to spend the time needed and meet as frequently as our Board deems necessary or appropriate to discharge their responsibilities. Directors are also expected to make efforts to attend all meetings of our Board and all meetings of the committees on which they serve.

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

Directors are responsible for attending the annual meeting of stockholders to the extent practicable. All members of our Board attended our 2023 annual meeting of stockholders.

Our audit committee held five meetings during the fiscal year ended December 31, 2023.

Our compensation committee held eight meetings during the fiscal year ended December 31, 2023.

Our nominating and corporate governance committee held four meetings during the fiscal year ended December 31, 2023.

None of the members of our compensation committee is or has been an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the board or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on our Board or our compensation committee. See the section titled “Certain Relationships and Related Party Transactions” for information about related party transactions involving members of our compensation committee or their affiliates.

The Board has delegated to the nominating and corporate governance committee the responsibility of identifying suitable candidates for nomination to the Board (including candidates to fill any vacancies that may occur) and assessing their qualifications in light of the policies and principles in these corporate governance guidelines and our compensation committee’s charter. The nominating and corporate

At Toast, we power restaurants of all sizes. The restaurant industry is one of the most diverse industries and we embrace that diversity by encouraging it within our company. Although our Board does not maintain a formal policy with respect to board diversity, our nominating and corporate governance committee considers a broad range of backgrounds and experiences, including, but not limited to, race, gender and national origin in making determinations regarding nominations of directors.

Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating director nominees and will consider all facts and circumstances that it deems appropriate or advisable. In its identification and evaluation of director candidates, our nominating and corporate governance committee will consider the current size and composition of our Board and the needs of our Board and the respective committees of our Board. Some of the factors that our nominating and corporate governance committee considers include, without limitation, character, integrity, judgment, independence, skills, education, expertise, business acumen, business experience, length of service, diversity of background and experience, understanding of our business and industry, potential conflicts of interest and other commitments.

Nominees must also have proven achievement and competence in their field, the ability to offer advice and guidance to our management team, the ability to make significant contributions to our success and an understanding of the fiduciary responsibilities that are required of a director. Director candidates must have sufficient time available in the judgment of our nominating and corporate governance committee to perform all Board and committee responsibilities. Members of our Board are expected to prepare for, attend and participate in all Board and applicable committee meetings. Other than the foregoing, there are no stated minimum criteria for director nominees, although our nominating and corporate governance committee may also consider such other factors as it may deem, from time to time, are in our and our stockholders’ best interests.

Our nominating and corporate governance committee also considers results from our annual board and committee evaluations and its periodic review of our Board and committee compositions. After completing its review and evaluation of director candidates, our nominating and corporate governance committee recommends the director nominees for selection to our full Board.

The nominating and corporate governance committee will consider director nominee candidates who are recommended by our stockholders. All recommendations for director candidates must be submitted in writing to our Corporate Secretary at 333 Summer Street, Boston, MA 02210, and must include, in addition to all information required by our Bylaws, the following:

The Board provides to every stockholder the ability to communicate with the Board, as a whole, and with individual directors on the Board through an established process for stockholder communication. For a stockholder communication directed to the Board as a whole, stockholders may send such communication to the Office of the General Counsel via U.S. Mail or Expedited Delivery Service to: Toast, Inc., 333 Summer Street, Boston, MA 02210, Attn: Board of Directors, c/o Office of the General Counsel.

For a stockholder or other interested party communication directed to an individual director in his or her capacity as a member of the Board, stockholders may send such communication to the attention of the individual director via U.S. Mail or Expedited Delivery Service to: Toast, Inc., 333 Summer Street, Boston, MA 02210, Attn: Name of Individual Director.

We will forward by U.S. Mail any such stockholder communication to each director to whom such communication is addressed and to the Chairperson of the Audit Committee of the Board, in his or her capacity as a representative of the Board, at the address specified by each such director and the Chairperson of the Audit Committee of the Board.

Our Board, through the nominating and corporate governance committee, has oversight of corporate social responsibility undertakings, including our strategy and initiatives around sustainability, ESG, Diversity, Equity and Inclusion (“DEI”), and climate, and through the audit committee, tracks rules and regulations on disclosure, including on ESG and climate-related matters. In 2023, our ESG leadership team continued to steer and oversee our ESG roadmap, while our cross functional ESG committee executed our ESG roadmap. Each year we update our multi-year ESG roadmap and share it with the nominating and corporate governance committee.

Highlights of our ESG work include:

We are committed to creating a culture that values differences as the foundation of our collective success—a workplace where every Toaster is empowered to contribute their skills, capabilities, and unique perspectives.

In November 2022, our Board approved the Toast, Inc. Non-Employee Director Compensation Policy (the “Director Compensation Policy”), which became effective on January 1, 2023. The Director Compensation Policy governs the administration of our non-employee director compensation program.

Under our Director Compensation Policy, our non-employee directors were compensated according to the director cash retainer table below. All cash retainers are paid quarterly in arrears and prorated for partial years of service.

In November 2022, our board approved the Toast, Inc. Non-Employee Director and Officer Stock Ownership Policy. Under this policy, Toast non-employee directors are required to own shares of Toast common stock equivalent in value to four (4) times the annual Board cash retainer then in effect. Non-employee directors will have until the later of 1) December 31, 2027, or 2) five (5) years from the date they joined the Board, to meet this requirement. Only shares directly owned by, or beneficially owned in a grantor trust or similar instrument for the benefit of the non-employee director and/or direct family members and for which the non-employee director has voting and disposal rights, will count towards share ownership under this policy.

In November 2023, our Board approved the Toast, Inc. Deferred Compensation Program (“the Deferred Compensation Program”). Under this nonqualified deferral program which went into effect on January 1, 2024, non-employee directors may elect to defer receipt of their annual cash retainers, their Director Annual Grant, or both. Deferral elections must be submitted in writing before the end of the calendar year preceding the calendar year in which the deferred compensation relates. The participant may direct the investment of deferred cash retainer amounts to select investment alternatives. Deferred restricted stock units will be converted to deferred stock units on a one-to-one basis upon vesting and will be credited to the participant’s account. The period of deferral shall cease upon the earliest of (a) the date a non-employee director ceases to serve as a member of our Board and incurs a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), (b) the consummation of a Sale Event (as defined in the 2021 Stock Plan), so long as such Sale Event constitutes a “change in control event” within the meaning of Section 409A , (c) the death of the non-employee director, or (d) the date the non-employee director experiences a disability as defined pursuant to the Deferred Compensation Program.

Our audit committee has engaged Ernst & Young LLP (“EY”) as our independent registered public accounting firm to perform the audit of our financial statements for the fiscal year ending December 31, 2024, and we are asking you and other stockholders to ratify this appointment. During the fiscal year ended December 31, 2023, EY served as our independent registered public accounting firm.

Although ratification of the appointment of EY is not required by our Bylaws or otherwise, our Board is submitting the appointment of EY to stockholders for ratification as a matter of good corporate governance. In the event that a majority of the votes properly cast on this proposal do not ratify this appointment of EY, our audit committee will reconsider whether or not to retain EY. Even if the appointment is ratified, our audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the stockholders.

We expect that a representative of EY will attend the Annual Meeting and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.

We have adopted a policy under which our audit committee must pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm. As part of its review, our audit committee also considers whether the categories of pre-approved services are consistent with the rules on accountant independence of the SEC and the Public Company Accounting Oversight Board. Our audit committee has pre-approved all services performed by the independent registered public accounting firm since the pre-approval policy was adopted prior to our initial public offering (“IPO”).

The following table sets forth the fees billed or to be billed by EY and its affiliates for professional services rendered with respect to the fiscal years ended December 31, 2023 and 2022. All of these services were approved by our audit committee.

The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting form for our fiscal year ending December 31, 2024 requires the affirmative vote of a majority of the votes properly cast on this proposal. Abstentions and broker non-votes, if any, will have no effect on the outcome of this proposal.

With respect to our financial reporting process, our management is responsible for (1) establishing and maintaining internal controls and (2) preparing our financial statements. Our independent registered public accounting firm, EY, is responsible for performing an independent audit of our financial statements. It is the responsibility of the audit committee to oversee these activities. It is not the responsibility of the audit committee to prepare our financial statements. These are the fundamental responsibilities of management. In the performance of its oversight function, the audit committee has:

Based on the audit committee’s review and discussions with management and EY, the audit committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for filing with the SEC.

Respectfully submitted by the members of the audit committee of the Board:

We are providing our stockholders the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules. This proposal, which is commonly referred to as “say-on-pay,” is required by the Dodd-Frank Act, which added Section 14A to the Exchange Act .

The section of this proxy statement titled “Executive Compensation” beginning on page 33, including “Compensation Discussion and Analysis,” describes in detail our executive compensation program and the decisions made by our compensation committee. Our executive compensation program is designed to reward value creation for stockholders and to attract, motivate, and retain our executive officers, who are critical to our success. Under this program, our named executive officers are rewarded for the achievement of our short- and long-term strategic and financial goals, which we believe serves to enhance short- and long-term value creation for our stockholders. Our compensation program contains elements of cash and equity-based compensation and is designed to align the interests of our executives with those of our stockholders and pay for performance. We have adopted best practices to ensure our executive compensation programs are appropriately managed and well-governed. Accordingly, we ask our stockholders to approve, on a non-binding, advisory basis, the following resolution at the Annual Meeting:

The approval, on an advisory basis, of the compensation of our named executive officers requires the affirmative vote of a majority of the votes properly cast on this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal.

As an advisory vote, this proposal will not be binding on the Company, our Board or our compensation committee in any way. As such, the results of the vote will not be construed to create or imply any change to the fiduciary duties of our Board. Notwithstanding the advisory (non-binding) nature of this vote, our Board values the opinions of our stockholders, and will consider the outcome of the vote when making future compensation decisions for our named executive officers.

Our compensation philosophy, executive compensation programs and context for executive compensation actions taken during the fiscal year ended December 31, 2023 are described further in this Compensation Discussion and Analysis (“CD&A”). The following discussion contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding existing and future compensation programs. The actual amount and form of compensation and the compensation policies and practices that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.

Our compensation committee seeks to develop and maintain executive compensation programs that attract, retain and motivate the leadership we need to meet our strategic goals and manage our business. The following highlights provide context for executive compensation decisions during the fiscal year ended December 31, 2023.

We held our first non-binding, advisory vote on the compensation of our named executive officers (a “Say-on-Pay vote”) at our 2023 Annual Meeting. As reported in our current report on Form 8-K, filed with the SEC on June 12, 2023, approximately 98% of the votes cast on the “Say-on-Pay” proposal expressed support for the compensation program offered to our named executive officers as disclosed in last year’s proxy statement. Our compensation committee appreciates our stockholders’ support and viewpoint expressed by the voting results on our current executive compensation structure and policies. As such, our compensation committee did not introduce any changes to our 2023 executive compensation arrangements as a result of the Say-on-Pay vote.

Consistent with the recommendation of our Board and the preference of our stockholders as reflected in the non-binding, advisory vote on the frequency of future Say-on-Pay votes held at our 2022 Annual Meeting, we intend to hold an annual Say-on-Pay vote. Our next Say-on-Pay vote will be held at the 2024 Annual Meeting, as described in Proposal No. 3 of this proxy statement. Because we value the opinions of our stockholders, the Board and our compensation committee will consider the outcome of the Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our named executive officers in the future.

Our compensation committee selected a group of peer companies in August 2022 which it used as a reference group in making executive compensation decisions in 2023. Criteria considered to determine the peer company group included industry, revenue, market cap, employee count, price to sales ratio, gross margin, annualized total shareholder return and duration of time in operation as a public company.

Our compensation committee reevaluated the peer company group in August 2023 in order to ensure all companies in the group continued to be appropriate comparators based on the same criteria used in the August 2022 evaluation. Based on the reevaluation, the compensation committee removed the companies indicated below with an asterisk from the peer group and added Affirm Holdings, Inc, BILL Holdings, Inc., MongoDB Inc., Paylocity Holding Corporation, Procore Technologies, Inc., Shift4 Payments, Inc. and Smartsheet Inc. The peer company group approved by our compensation committee in August 2023 was not used as a reference in the evaluation of executive compensation decisions for 2023 and was used for evaluating executive compensation decisions for 2024.

The compensation of our named executive officers comprises a combination of base salary, short-term incentive payments, and long-term incentive compensation in the form of stock options and restricted stock units. Our named executive officers, like all full-time employees, are eligible to participate in our 401(k), health, and welfare benefit plans. The following describes our executive compensation programs and payments for the fiscal year ended December 31, 2023.

Our compensation committee reviewed compensation for our executives, including our named executive officers, during 2023 and approved changes to cash compensation based on its review of market compensation information presented by the compensation consultant and informed by our compensation philosophy. Individual job responsibilities, including the scope and impact of each role, were also considered.

Based on their evaluation, our compensation committee approved changes to the base salary and/or target short-term bonus for Ms. Gomez and Mr. Elworthy. Ms. Gomez’s annual base salary was changed from $420,000 to $438,000. Mr. Elworthy’s annual base salary was changed from $365,000 to $380,500 and his target annual bonus was changed from 40% of annual base salary to 50% of annual base salary. The base salary changes were effective on April 1, 2023 and the target bonus change for Mr. Elworthy was effective for the entire year, starting on January 1, 2023. These changes were approved to align cash compensation within a reasonable range of the market median for similar jobs performed at our peer companies and with consideration of internal pay parity.

Cash compensation for Messrs. Comparato, Narang and Fredette did not change during 2023. Annual base salaries for Messrs. Comparato, Narang and Fredette remained at $20,000 which was intended to cover employee payroll benefit plan contributions and payroll taxes with minimal resulting net pay after applicable withholding. This cash compensation arrangement was implemented in 2021 at the request of Messrs. Comparato, Narang and Fredette and was consistent with our compensation committee’s view that the majority of the compensation received by our CEO and Co-Founders should be at-risk. While Messrs. Comparato, Narang and Fredette did not have an annual bonus target as a percentage of their base salary, during 2023 they had an opportunity to earn a special dining award equivalent to $10,000 in value under the bonus plan, which is described in more details below in the section titled “Short-Term Incentive Bonus Plan”. Our compensation committee retained the ability to approve cash or other awards to Messrs. Comparato, Fredette, Narang, in the event actual company performance exceeded performance goals, but did not do so during 2023.

In February 2024, following the annual review of our executive compensation, including a review of competitive compensation conducted by the compensation consultant, upon recommendation by our compensation committee, our Board approved changes to cash compensation for Mr. Narang, increasing his annual base salary to $400,000 and setting his target annual bonus as 100% of annual base salary, both effective as of January 1, 2024, the date Mr. Narang started the Chief Executive Officer role. In February 2024, our compensation committee approved changes to cash compensation for Ms. Gomez and Mr. Elworthy following their annual review of our executive compensation program. Ms. Gomez’s annual base salary was increased to $454,425 and her target annual bonus remained at 75% of annual base salary. Mr. Elworthy’s annual base salary and target annual bonus were increased to $394,769 and 60% of annual base salary, respectively. Changes to base salary for Ms. Gomez and Mr. Elworthy went into effect on April 1, 2024 and approved target annual bonus percentages were effective as of January 1, 2024. Mr. Fredette’s cash compensation arrangement did not change for 2024. Cash compensation for our named executive officers for 2024 and the basis for changes will be described in full in our proxy statement for the 2025 annual meeting of stockholders.

Our short-term incentive bonus plan is designed to incentivize and reward the attainment of company financial goals and individual performance against business objectives. During 2023, our named executive officers were eligible for and received an annual bonus award based upon company performance and the achievement of business objectives, as approved by our compensation committee and further described below. Our bonus period is on an annual basis, which aligns the bonus performance period with our annual financial and operating plans.

Our short-term incentive bonus plan is administered under the Toast, Inc. Senior Executive Cash Incentive Bonus Plan (the “Incentive Plan”), which is our executive short-term incentive plan governing bonus payments to eligible executives, including our named executive officers. Our compensation committee has the sole discretion and authority to determine, approve and administer bonus payments to eligible executives under the Incentive Plan. Our compensation committee will establish a target annual bonus opportunity for each eligible executive for each performance period. Each executive’s target annual bonus for the period is also adjusted based on changes to annual base salary within the period as well as employment changes, such as hire date, that impact program eligibility within the period. Eligible executives may receive a bonus payment based upon the attainment of one or more performance objectives established by our compensation committee which may include goals which are financial or strategic. Incentive goals will have a target and our compensation committee may also set minimum and maximum goals. Individual executive bonus payments may also vary based upon individual performance.

The Incentive Plan is funded based on Company performance against its bonus funding goals. This positions the achievement of the company financial goals as the dominant driver of bonus attainment, and ensures we meet certain financial goals before paying any bonus. Performance against individual business objectives is included in the Incentive Plan as a modifier, creating an incentive and reward for the achievement of strategic, financial and operational goals important to the growth, development and operation of our business.

Our compensation committee selected these metrics because they were key measures of our top line growth and the profitability and efficiency of our business. The ARR goal was weighted 70% due to our focus on recurring revenue growth. Adjusted EBITDA was weighted 30%, and selected because it measures total revenue growth and profitability. Performance against each goal was measured independently. Achievement against the goals for each applicable metric govern the funding for the portion of the bonus associated with that metric. When approving the goals, our compensation committee determined that financial results from acquisitions during the bonus period would be removed from results for the determination of performance against bonus funding goals for such period because those results were not included in the approved bonus funding goals.

Our compensation committee set the Incentive Plan target ARR and Adjusted EBITDA goals to align with our 2023 financial plan. In order for the portion of bonus associated with each applicable metric to be funded at 100%, the target financial goal for that metric must be met. For each metric, our compensation committee also approved threshold goals below target which, if met, would result in 50% bonus funding for the ARR metric and 80% funding for the Adjusted EBITDA metric. Performance below the threshold goal would result in no funding for the portion of bonus associated with that metric. Our compensation committee also approved above-target stretch goals, which if met or exceeded would result in maximum funding of 150% for the portion of bonus associated with that metric. Funding for performance falling between the threshold and target or target and maximum goals would be interpolated in a straight line fashion to determine funding for the portion of bonus associated with that metric.

In February 2023, our compensation committee also approved an opportunity for each of Messrs. Comparato, Narang and Fredette to earn a special dining award equivalent to $10,000 in value under the Incentive Plan if Company performance against the 2023 bonus financial goals exceeded target. This opportunity was created as a unique award for Messrs. Comparato, Narang and Fredette because they did not have a target annual bonus as a percentage of their base salary as part of their annual cash compensation arrangement.

Each executive officer, including our named executive officers, also had established individual business objectives (“MBOs”) for the first half of the year (“H1”) and the second half of the year (“H2”). Some of the MBOs were shared objectives, either across the entire executive team or shared by certain functions, and some were individual objectives. Performance against the H1 and H2 MBOs were evaluated at the end of each applicable period, resulting in an MBO achievement percentage (“MBO %”) for the period. The average of the H1 and H2 MBO % was then calculated to determine each executive’s blended MBO % for 2023. The blended MBO % for 2023 was applied as a modifier to the funded bonus amount to determine the executive’s final approved bonus payment for the applicable bonus period.

Actual 2023 ARR results fell between the threshold and target goals. Actual 2023 Adjusted EBITDA results exceeded the maximum goal. Based upon the combination of performance between the two metrics, our compensation committee approved 85% funding for executive bonuses for the 2023 bonus period.

Our compensation committee also evaluated the performance of each executive against their individual MBOs for H1 and H2 and approved the blended 2023 MBO % for each executive. The MBOs for our named executive officers included challenging goals related to customer satisfaction, the growth and expansion of our business, continued evolution of our public company operating processes, product development and diversity, equity and inclusion. Most of the individual MBOs were met, resulting in a blended MBO % of 87% for both Ms. Gomez and Mr. Elworthy.

For each eligible executive, the annual funded bonus was multiplied by the executive’s blended 2023 MBO % to determine the executive’s 2023 bonus payment as shown below.

Company performance against the 2023 bonus financial goals did not exceed target and as a result, our compensation committee did not approve a 2023 special dining award for Messrs. Comparato, Narang and Fredette.

Although we do not have a formal policy with respect to the grant of equity incentive awards specifically to our executive officers, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture, and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants promote executive retention because they incentivize our executive officers to remain in our employment during the vesting period. Accordingly, our Board or the compensation committee periodically review the equity incentive compensation of our named executive officers and may grant equity incentive awards to them from time to time.

For 2023, our compensation committee approved equity awards to each of our executive officers which were granted on March 10, 2023. Our compensation committee approved a grant value for each executive officer which was determined based on a review of market-competitive equity grant values for similar roles at peer companies, the relative scope and impact of the executive officer’s role at Toast, and the executive officer’s contribution, performance and future growth potential. The approved equity grant value was granted as a mix of stock options and RSUs. Our compensation committee chose to issue 60% of the grant value in the form of stock options because options deliver value to the executive only if the price of our stock rises higher than the option exercise price, which aligns the interests of our executives with that of our shareholders. Our compensation committee chose to issue 40% of the grant value in the form of RSUs because RSUs also provide an incentive to increase enterprise value over the long-term while also supporting retention in volatile stock market conditions and reduces dilution.

Stock options granted to our executive officers provide an option to purchase shares of our common stock subject to vesting and have a ten-year term. The exercise price per share is equal to the fair market value of our common stock on the date of grant. Each RSU provides the holder with the right to receive one share of Toast common stock when the RSU vests. The stock options and RSUs granted to our executive officers in 2023 vest in equal quarterly increments over a four-year period, subject to continuous service with us through each applicable vesting date.

The numbers of stock options and RSUs granted to our executive offers in 2023 was determined on the grant date as governed by our Equity Award Grant Policy. The number of stock options granted was determined by dividing the portion of the approved grant value allocated to stock options by the fair value of the award on the date of grant calculated under ASC Topic 718. The number of RSUs granted was determined by dividing the portion of the approved grant value allocated to RSUs by the average closing market price of one share of our common stock over the trailing 90 trading days ending on the last trading day immediately prior to the grant date.

Our compensation committee approved grants to our named executive officers during 2023 as summarized below. These grants were issued from our 2021 Plan.

In February 2024, our compensation committee approved equity grants to our named executive officers which were granted on March 11, 2024. The equity grant values were determined based on a review of factors similar to those considered for the 2023 grants. Equity-based compensation for our named executive officers for 2024 will be described in full in our proxy statement for the 2025 annual meeting of stockholders.

In June 2021, we adopted the Toast, Inc. Severance and Change in Control Policy (the “Severance Policy”), which provides certain severance benefits and accelerated vesting of equity awards to certain executives, including the named executive officers, each a “covered employee,” in the event of a qualified termination, including a qualified termination in connection with a change in control. We believe the Severance Policy supports the attraction and retention of senior leaders in a competitive market. We also believe that appropriately structured change in control benefits serve to minimize potential distraction caused by a transaction and reduce the risk that leaders will leave the organization before the transaction closes. The severance payments and benefits under the Severance Policy (and Severance Letter, as applicable and as defined below) superseded any severance payments and benefits for which the covered employees were eligible under existing employment agreements or other agreements, plans, policies, or arrangements.

For Messrs. Narang and Fredette in light of the significant reduction to their base salaries and elimination of their bonus opportunity following our IPO, for the purposes of calculating the cash compensation payable under the Severance Policy upon any termination event, the base salary input shall be an amount equal to the greater of their base salary immediately prior to the termination event and $250,000, and the target bonus input shall be an amount equal to the greater of their then current target bonus and $150,000.

The payments and benefits provided under the Severance Policy in connection with a change in control may not be eligible for a federal income tax deduction by us pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). These payments and benefits may also subject a covered employee, including the named executive officers, to an excise tax under Section 4999 of the Code. If the payments or benefits payable to an eligible participant in connection with a change in control would be subject to the excise tax imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a greater net after-tax benefit to the applicable participant.

In conjunction with his promotion to Chief Executive Officer, we entered into a letter agreement with Mr. Narang on September 1, 2023 (the “Narang CEO Severance Letter”), effective as of January 1, 2024 pursuant to which certain provisions of the Severance Policy were superseded solely with respect to Mr. Narang. The Narang CEO Severance Letter provides for the same arrangements as set forth in the CEO Severance Letter, as described above.

In November 2023, the Board approved a Compensation Recovery Policy (the “Clawback Policy”), effective October 2, 2023. The Clawback Policy complies with the SEC’s newly adopted clawback rules as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”), and provides that in the event we are required to prepare a “financial restatement” (as defined in the Clawback Policy), we shall, subject to certain limited exceptions as described in the Clawback Policy, recover certain incentive based compensation from “covered persons” (i.e., “executive officers”, defined to include (i) the president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice president in charge of a principal business unit, division or function, or any officer or person who performs a policy making functions and (ii) who served during the performance period applicable to “incentive based compensation” and received “incentive based compensation” after beginning service in any such role). Compensation that shall be recovered under the Clawback Policy generally includes “incentive based compensation” received during the three-year period prior to the “restatement date” (as defined in the Clawback Policy) that exceeds the amount that otherwise would have been received by the “covered person” had such compensation been determined based on the restated amounts in the financial restatement. Under the Clawback Policy, “incentive based compensation” includes any cash or equity compensation that is granted, earned, or vested based, in whole or in part, upon the attainment of a financial reporting measure.

We maintain a tax-qualified retirement plan that provides all regular U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to applicable annual limits under the Code. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employee elective deferrals are 100% vested at all times. As a U.S. tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan and all contributions are deductible by us when made. Under our 401(k) plan we will match 50% of the participant’s voluntary contribution up to a maximum of 6% of eligible compensation.

Pursuant to our employee stock purchase plan, employees have an opportunity to purchase our Class A common stock at a discount on a tax-qualified basis through payroll deductions. The employee stock purchase plan is designed to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. The purpose of the employee stock purchase plan is to encourage our employees to become our stockholders and better align their interests with those of our other stockholders.

Our named executive officers are eligible to participate in our employee benefit plans on the same basis as our other employees, including our health and welfare plans.

Perquisites or other personal benefits are not a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our executive officers, including our named executive officers.

Our named executive officers did not participate in, or earn any benefits under, a nonqualified deferred compensation plan sponsored by us during the fiscal year ended December 31, 2023.

We adopted our Equity Award Grant Policy in December 2021. The Equity Award Grant Policy establishes the process we follow when granting equity-based awards to an officer, employee, or other service provider (other than a non-employee director) of the Company. All equity grants must be approved in advance by our Board or our compensation committee. Our Board or the compensation committee may delegate to a committee comprised of one or more officer(s) of the Company all or part of the authority with respect to the granting of equity awards to employees or eligible service providers who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. Our compensation committee has delegated authority to our Chief Executive Officer to grant options and restricted stock units to certain non-executive officers under specified guidelines.

We believe our non-employee directors and executive officers should have a meaningful and direct ownership stake in the Company that will align their interests with those of the Company’s stockholders and promote a long-term perspective in managing the Company. In support of this objective, in November 2022, our Board approved the Toast, Inc. Non-Employee Director and Executive Stock Ownership Policy (“the Policy”) which established stock ownership requirements for Toast non-employee directors and executive officers. The Policy provides a five-year ramp period to enable covered executive officers to build their ownership of Toast shares to meet policy requirements. Starting on December 31, 2027, executive officers other than our CEO and founders, will be required to hold the lesser of 15,000 shares, or an amount of shares equivalent to two (2) times their annual base salary then in effect. For Messrs. Fredette and Narang, the ownership requirement will be the lesser of 50,000 shares, or an amount of shares equivalent in value to $2,500,000. Only shares directly owned by, or beneficially owned in a grantor trust or similar instrument for the benefit of the executive officer and/or direct family members and for which the executive officer has voting and disposal rights, will count towards share ownership under this policy. See “Non-Employee Director Compensation”, above, for information about stock ownership requirements under this policy for our non-employee directors.

We did not maintain any nonqualified deferred compensation plans for our NEOs during 2023.

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the total annual compensation of our employees and the total annual compensation of Christopher Comparato, our chief executive officer during 2023. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. The pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

For 2023, our last completed fiscal year:

Based on this information, for 2023, the ratio of the total annual compensation of Mr. Comparato, who served as our chief executive officer during 2023, to the total annual compensation of our median employee was approximately 59 to 1.

To identify the median employee, as well as to determine the total annual compensation of our median employee and our chief executive officer, we took the following steps:

As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning the Company’s variable pay-for-performance compensation programs and how the Company aligns executive compensation with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and Analysis.”

As described in greater detail in “Executive Compensation – Compensation Discussion and Analysis,” our executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for our short-term incentive bonus plan are selected based on an objective of incentivizing our eligible named executive officers to increase the value of our enterprise for our shareholders. The most important performance measures we used to link executive compensation actually paid to our executive officers, for the most recently completed fiscal year, to the Company’s performance include:

In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table.

As demonstrated by the following graph, the amount of compensation actually paid to Mr. Comparato and the average amount of compensation actually paid to our named executive officers as a group (excluding Mr. Comparato) is generally aligned with our cumulative TSR over the three years presented in the table. The general alignment of compensation actually paid with our cumulative TSR over the period presented is because a significant portion of the compensation actually paid to Mr. Comparato and to the other named executive officers is comprised of equity awards, the value of which is tied directly to our stock price. Please refer to “Executive Compensation - Compensation Discussion and Analysis,” for information about our executive compensation programs.

As demonstrated by the following graph, the amount of compensation actually paid to Mr. Comparato and the average amount of compensation actually paid to our named executive officers as a group (excluding Mr. Comparato) is not aligned with our net income results over the three years presented in the table. Our net income performance improved over the three year period reported in the table while the compensation actually paid to Mr. Comparato and the other named executive officers declined over the first two years of the same period. The lack of alignment of compensation actually paid with our net income over the period presented is because a significant portion of the compensation actually paid to Mr. Comparato and to the other named executive officers is comprised of equity awards, the value of which is tied directly to our stock price, and net income is not used as a metric in the Company’s compensation arrangements. Please refer to “Executive Compensation - Compensation Discussion and Analysis,” for information about our executive compensation programs.

As demonstrated by the following graph, the amount of compensation actually paid to Mr. Comparato and the average amount of compensation actually paid to our named executive officers as a group (excluding Mr. Comparato) is aligned with our Adjusted EBITDA results over the three years presented in the table. Our 2022 short-term incentive bonus plan included Adjusted EBITDA %, which is derived from Adjusted EBITDA, as a bonus financial funding metric. Our 2023 short-term incentive bonus plan also includes Adjusted EBITDA as a bonus financial funding metric. Although the graph below shows alignment between compensation actually paid and our Adjusted EBITDA results over the period presented, the primary reason for the decline in compensation actually paid to Mr. Comparato and to the other named executive officers between the first and second years of the three year period is because a significant portion of the compensation actually paid to Mr. Comparato and to the other named executive officers is comprised of equity awards, the value of which is tied directly to our stock price. Please refer to “Executive Compensation - Compensation Discussion and Analysis,” for information about our executive compensation programs.

As demonstrated by the following graph, the Company’s cumulative TSR over the period presented in the table was (29%), while the cumulative TSR of the peer group presented for this purpose, the S&P 500 IT Index, was 25% over the same period. Our stock price performance was below that of the S&P 500 IT Index. Following our initial public offering in September 2021, we believe our stock price was subject to greater market volatility than the stock prices for technology companies in the S&P 500 IT Index since companies in the index had been in operation and trading publicly for longer periods of time.

The following table summarizes our equity compensation plan information as of December 31, 2023. Information is included for equity compensation plans approved by our stockholders. We do not have any equity compensation plans not approved by our stockholders.

The following table sets forth certain information available to us with respect to the beneficial ownership of our capital stock as of March 31, 2024, for:

We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our capital stock subject to stock options that are currently exercisable or exercisable within 60 days of March 31, 2024 to be outstanding and to be beneficially owned by the person holding the stock option for the purpose of computing the percentage ownership of that person. We have deemed shares of our capital stock subject to restricted stock units (“RSUs”) for which the service condition has been satisfied or would be satisfied within 60 days of March 31, 2024 to be outstanding and to be beneficially owned by the person holding the RSUs for the purpose of computing the percentage ownership of that person. However, we did not deem these shares subject to stock options or RSUs outstanding for the purpose of computing the percentage ownership of any other person.

We have based our calculation of the percentage of beneficial ownership on 449,707,560 shares of our Class A common stock and 102,163,085 shares of our Class B common stock outstanding on March 31, 2024. Percentage of voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as a single class. Each holder of our Class A common stock is entitled to one vote per share and each holder of our Class B common stock is entitled to ten votes per share on all matters submitted to a vote of the stockholders. The holders of our voting stock, consisting of Class A and Class B common stock, generally vote together as a single class on all matters submitted to a vote of our stockholders, unless otherwise required by Delaware law or our amended and restated certificate of incorporation. Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Toast, Inc., 333 Summer Street, Boston, MA 02210.

In addition to the compensation arrangements, including employment, termination of employment and our severance and change in control policy, discussed in the section titled “Compensation Discussion and Analysis”, specifically the compensation of our executives discussed in the section titled “Compensation Discussion and Analysis—Our Executive Compensation Programs,” the following is a description of each transaction since the beginning of our last fiscal year and each currently proposed transaction in which:

Timothy Fredette, brother of Stephen Fredette, our Co-Founder, President and a Director of the Company, is a non-executive employee of the Company. In 2023, Timothy Fredette received cash compensation of $301,663 and an equity award for RSUs, scheduled to vest quarterly over four years in accordance with the Company’s standard equity grant vesting schedule, with a grant date fair value of $157,963. Timothy Fredette is also eligible to participate in our employee benefit plans on the same basis as our other employees, including our 401(k) plan, employee stock purchase plan and our health and welfare plans and is paid compensation commensurate with other employees in similar positions.

See the sections titled “Executive Compensation” and “Non-Employee Director Compensation” for information regarding compensation of our directors and named executive officers.

We have entered into indemnification agreements with each of our current directors and officers. Our amended and restated certificate of incorporation and our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by applicable law.

Our audit committee charter provides that our audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and any of their immediate family members.

Certain of the transactions described above were entered into prior to the adoption of this policy. Accordingly, such transactions were approved by disinterested members of our Board after making a determination that the transaction was executed on terms no less favorable than those that could have been obtained from an unrelated third party. Any related party transactions entered into after we adopted this policy were approved after making a determination that the transaction was executed on terms no less favorable than those that could have been obtained from an unrelated third party.

Our Board does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the shares of our common stock they represent in accordance with their own judgment on such matters.