Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
OnMarch 2, 2023 , the Compensation Committee (the "Committee") of the Board of Directors ofQ2 Holdings, Inc. (the "Company") approved a new form of Performance Stock Units Agreement (the "PSU Agreement") for use under the Company's 2014 Equity Incentive Plan (the "Plan"). The PSU Agreement provides that shares of the Company's common stock (the "Common Stock") subject to the award may be earned based upon the Company's attainment relative to one or more performance measures for a specified period, with the ultimate number of shares that may be earned ranging from zero to 200% of a target number of shares specified in the PSU Agreement on the date of grant. The description of the PSU Agreement contained herein is qualified in its entirety by reference to the form of PSU Agreement which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
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For each named executive officer, 50% of theMarch 2023 Performance Stock Units (the "TSR PSUs") provide for shares of Common Stock to be earned based on the Company's total stockholder return ("TSR") performance relative to the TSR performance of theS&P Software & Service Select Index (the "Index") (over a three-year performance period commencing onMarch 2, 2023 and ending onMarch 2, 2026 . Subject to the continued employment of the applicable officer, between zero and up to 200% of the full target number of shares subject to each award are eligible to be earned upon the determination by the Committee of the level of attainment of such TSR performance goals after the completion of the three-year performance period.
Shares of Common Stock may be earned pursuant to the TSR PSUs as follows:
•100% of the target shares will be earned if the Company's TSR is equal to the 50th percentile of the Index;
•A maximum of 200% of the target shares may be earned if the Company's TSR equals or exceeds the 90th percentile of the Index;
•A minimum of 50% of the target shares will be earned if the Company's TSR equals at least the 25th percentile of the Index;
•No shares will be earned if the Company's TSR is less than the 25th percentile of the Index; and
•Linear scaling will be used to determine the number of shares earned for performance between the target and the maximum and between the minimum and the target payout levels.
For each named executive officer, 50% of theMarch 2023 Performance Stock Units (the "EBITDA PSUs") provide for shares of Common Stock to be earned based on the Company's attainment relative to a target financial measure specified in the PSU Agreement consisting of Adjusted EBITDA as a percentage of non-GAAP Revenue for the twelve months endingDecember 31, 2024 (the "Target EBITDA"), with the Committee's determination of the level attainment of such financial measure occurring within 90 days following the completion of the performance period ending onDecember 31, 2024 . Subject to the continued employment of the applicable officer, between zero and up to 200% of the target number of shares subject to each award of EBITDA PSUs are eligible to be earned, as follows:
•100% of the target shares will be earned if the Company attains 100% of Target EBITDA;
•A maximum of 200% of the target shares may be earned if the Company attains 120% or more of Target EBITDA, subject to an additional vesting requirement of required continued services throughMarch 2, 2026 for shares in excess of the target shares;
•A minimum of 50% of the target shares will be earned if the Company attains at least 80% of Target EBITDA;
•No shares will be earned if the Company's attainment is below 80% of Target EBITDA; and
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•Linear scaling will be used to determine the number of shares earned for performance between the target and the maximum and between the minimum and the target payout levels.
Up to 100% of the target shares may be earned upon the date of the Committee's determination of the level of attainment of the performance goals for the performance period ending onDecember 31, 2024 . To the extent the Company achieves attainment in excess of Target EBITDA, subject to the continued services of the applicable officer through the third anniversary of the date of grant, any above-target shares may be earned on the third anniversary of the date of grant.
The following named executive officers received the following amounts of Performance Stock Units:
Named Executive Officer TSR PSUs EBITDA PSUs Matthew P. Flake 71,058 71,059 President and Chief Executive Officer John E. Breeden 26,696 26,696 Chief Operation Officer Michael A. Volanoski 25,518 25,518 Chief Revenue Officer David J. Mehok 23,555 23,556 Chief Financial Officer Jonathan A. Price 23,555 23,556
Executive Vice President, Emerging Businesses, Corporate & Business Development
The awards of Performance Stock Units are subject to the terms and conditions of the Plan and the form of PSU Award Agreement, the form of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. Item 9.01. Financial Statements and Exhibits.
(d) Exhibits Exhibit No. Description 10.1 Form of Performance Stock Units Agreement 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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