In August 2019, we granted to Messrs. McRae and Busse and Ms. Gorjanc a total of 0.8 million shares of stock awards consisting of RSUs (50% of the grant), performance-based RSUs (“PSUs”) (25% of the grant) and market-based performance RSU (“MPSUs”) (25% of the grant). The Tranche 3 Performance Option vestsRSUs will vest in three equal annual installments during the period that begins on the later of (1)RSU grant date. The PSUs will vest in three equal annual installments during the date (prior to the four-year anniversary of the option grant date) of satisfaction of a paid recurring revenue milestone, and (2) if the milestone has been satisfied prior to the applicable date or dates set forth in the immediately following clauses (a), (b) and (c), then (a) with respect to 25% of the Tranche 3 Performance Option,period that begins on the first anniversary of the option grant date, (b) with respect to 25% of the Tranche 3 Performance Option, on the second anniversary of the option grant date, and (c) with respect to the remaining 50% of the Tranche 3 Performance Option, in equal monthly installments on the first day of each month beginning on September 1, 2020.
The Tranche 4 Performance Option vests on the one-year anniversary of the optionPSU grant date based on the extent to which a revenue and gross profit milestonesmilestone for the second halffiscal year ended December 31, 2019 is achieved. As of fiscal 2018 are achieved.
December 31, 2019, the revenue milestone was not achieved, and the PSUs were cancelled on January 31, 2020. The Tranche 5 Performance Option vestsMPSUs will vest at the end of the three-year period that begins on the two-year anniversary of the optionMPSU grant date based on the extent to which revenue and gross profit milestones for fiscal 2019 are achieved.
Upon a termination without cause or resignation with good reason that occurs outsideperformance of the “change in control protection period” (as defined below), Messrs. McRae and Collins and Ms. Gorjanc would be entitled to accelerated vesting of each of his or her IPO OptionsCompany's common stock relative to the extent that such option would have vestedRussell 2000 Index (“the Benchmark”) during the 12 months followingthree-year period from the termination date, but onlygrant date. A positive 3.3x or negative 2.5x multiplier will be applied to the extent that the performance goals with respect to such option have been satisfied prior to the employment termination.
Upon a change in control, (1) each milestone shall be deemed satisfied with respect to the maximum number of shares covered by the applicable IPO Option tranche, (2) any unvested portion of the IPO Option scheduled to vest on a date on or prior to the date of the change in control immediately shall vest, and (3) except as described in the next two paragraphs, the vesting of any portion of the IPO Option scheduled to vest on a date following the change in control will remain subject to the applicable executive’s continued service through the applicable vesting dates.
Upon a termination without cause or resignation with good reason that occurs (1) during the one month prior to or the twelve months following a change in control (the “change in control protection period”total shareholder returns (“TSR”), and (2) during the two-year period immediately following completion of the IPO, Messrs. McRae and Collins and Ms. Gorjanc would be entitled to vesting of a portion of each of his or her IPO Options equal to (x) the maximum number of shares covered by the option multiplied by a fraction, the numerator of which is the number of full and partial monthssuch that have elapsed from the option grant date through the employment termination date and the denominator of which is forty-eight, minus (y) the number of shares with respect to which such IPO Option previously vested.
Upon a termination without causevested will increase by 3.3% or resignation with good reason that occurs (1) during the change in control protection period, and (2) after the two-year period immediately following completiondecrease by 2.5% of the offering, Messrs. McRae and Collins and Ms. Gorjanc wouldtarget numbers, for each 1% of positive or negative TSR relative to the Benchmark. In the event the Company's common stock performance is below negative 30% relative to the Benchmark, no shares will be entitled to vestingvested. In no event will the number of any then unvested portionshares vested exceed 200% of his or her IPO Options.
the target for that tranche.
In addition to the terms set forth above, each option has such terms as set forth in each individual award agreement and otherwise is covered by the applicable terms and conditions of our 2018 Equity Incentive Plan (the “2018 Plan”).
In addition, in 2019 Messrs. McRae and Collins and Ms. Gorjanc forfeited certain options that had been granted in August 2018 in connection with our IPO, or the IPO Options. A substantial portion of the IPO Options were granted subject to performance vesting conditions. A portion of each of the performance-vesting IPO Options were forfeited in 2019 connection with the failure of certain performance conditions to occur and, with respect to Mr. Collins, as a result of his separation. Specifically, in 2019 Mr. McRae, Ms. Gorjanc and Mr. Collins forfeited options to purchase 234 thousand, 59 thousand, and 438 thousand shares, representing 25.0%, 12.5% and 100.0% of the performance-vesting IPO Options.
Agreements with our Named Executive Officers
In connection with the IPO, we have entered into confirmatory employment letters with each of Messrs. McRae and
CollinsBusse and Ms. Gorjanc. The employment letters generally memorialize the executive officer’s base salary, target annual bonus, IPO Options
(except for Mr. Busse), and participation in our employee benefit plans and programs.
In addition, the severance terms described below are set forth in change in control and severance agreements we entered into with each such executive officer.
In April 2020, the Board approved entering into revised change in control and severance agreements with our executive officers other than our chief executive officers, and the following description includes such revised terms.
Upon a termination without cause or resignation with good reason
that does not occur during the one month prior to or 12 months following a change in control, Messrs. McRae and
CollinsBusse and Ms. Gorjanc would be entitled to (1) cash severance equal to the executive officer’s annual base salary and, for Mr. McRae and Ms. Gorjanc, an additional amount equal to his or her target annual bonus, (2) 12 months of health benefits continuation and (3) accelerated vesting of any unvested equity awards that would have vested during the 12 months following the termination date. Upon a termination without cause or resignation with good reason that occurs during the one month prior to or 12 months following a change in control, Messrs. McRae and
CollinsBusse and Ms. Gorjanc would be entitled to (1) cash severance equal to a multiple (2 times for Mr. McRae,
and 1.5 times for Ms. Gorjanc and
1 times for Mr.
Collins)Busse) of the sum of the executive officer’s annual base salary and target annual bonus, (2) a number of months (24 for Mr. McRae,
and 18 for Ms. Gorjanc and
12 for Mr.
Collins)Busse) of health benefits continuation and (3) vesting of all
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outstanding, unvested equity awards.awards for Mr. McRae and Ms. Gorjanc and vesting of all outstanding, unvested time-based equity awards for Mr. Busse. Severance will be conditioned upon the execution and non-revocation of a release of claims. The agreements do not provide for any excise tax gross ups. If the merger-related payments or benefits of Messrs. McRae and CollinsBusse or Ms. Gorjanc are subject to the 20% excise tax under Section 4999 of the Code, then the executive officer will either receive all such payments and benefits subject to the excise tax or such payments and benefits will be reduced so that the excise tax does not apply, whichever approach yields the best after-tax outcome for the executive officer.
In May 2019, the Company entered into a Separation and Release Agreement with Mr. Collins. Pursuant to that agreement, Mr. Collins received (1) cash severance equal to his annual base salary, (2) 12 months of health benefits continuation and (3) accelerated vesting of any unvested equity awards that would have vested during the 12 months following his separation. All of Mr. Collins’ performance-vesting equity awards were cancelled upon his separation.