Item 5.02Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
On September 30, 2020, PTC Inc. ("PTC" or the "Company") entered into a new
retention and performance-based compensation arrangement with James Heppelmann,
President and Chief Executive Officer of PTC. This arrangement, which was
developed and approved by the Compensation Committee of the Board of Directors,
includes a new Executive Agreement and a performance-based equity grant designed
to further motivate and retain Mr. Heppelmann.
The Executive Agreement has a three-year term that expires on September 30, 2023
and provides certain compensation and employment protections to Mr. Heppelmann.
The Executive Agreement replaces a similar one-year agreement that the Company
had with Mr. Heppelmann. In addition to the compensation and protections that
were included in the prior agreement, the new Executive Agreement provides that,
upon termination of Mr. Heppelmann's employment (i) by the Company without
cause, (ii) by Mr. Heppelmann due to the failure of the Company to maintain him
in the position of Chief Executive Officer of the Company, or (iii) as a result
of his resignation upon the request of the Board, all service-based equity held
by him will vest and the performance measures applicable to any
performance-based equity held by him will be deemed to have been met at the
target level and vest. To receive the payments and benefits under the Executive
Agreement, Mr. Heppelmann must execute a release of claims in favor of the
Company and continue to comply with the terms of his Non-Disclosure,
Non-Competition and Invention Agreement with the Company. The preceding
description of the Executive Agreement is qualified by reference to the full
text of such agreement, a copy of which is filed as Exhibit 10.1 to this
Form 8-K.
The performance-based equity grant to Mr. Heppelmann (the "2020 Grant") includes
400,040 performance-based RSUs, which are eligible to vest in three equal
tranches in 2021, 2022 and 2023 if and to the extent that the applicable ARR and
adjusted free cash flow performance measures are achieved at target, with no
portion of the RSUs eligible to be earned for performance below threshold
performance. The 2020 Grant also includes an upside feature capped at 10%
(40,004 RSUs) to incentivize performance beyond the performance targets. RSUs
not earned for a period are forfeited and the award does not include a
"catch-up" feature. At the request of the Compensation Committee, Mr. Heppelmann
forfeited his long-term performance-based grant of 400,040 RSUs granted in June
2018.
Separately, for outstanding performance-based equity awards granted in November
2018 and November 2019 held by executives, including Mr. Heppelmann, the
Compensation Committee has reset the adjusted free cash flow performance
measures for 2021 and the ARR performance measures for 2021 and 2022,
respectively. These changes were made in recognition of the impacts to the
awards of the COVID-19 pandemic and other factors and to re-align the
performance targets with the Company's business strategy to pursue a balance of
free cash flow and ARR growth. In addition, the Compensation Committee
determined to remove the catch-up provisions for these awards given the
adjustment to the performance measures and in response to feedback previously
received from shareholders.
Item 9.01Financial Statements and Exhibits.
(d)Exhibits.
10.1 Executive Agreement, dated September 30, 2020, by and between PTC Inc.
and James Heppelmann
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