EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is made effective November 9, 2020 (“Effective Date”), by and between Q2 Software, Inc., a Delaware corporation (“Company”), and David Mehok (“Executive”).
The parties agree as follows:
1.Employment. Company agrees to continue to employ Executive, and Executive agrees to accept such continuing employment on the terms and conditions set forth herein.
2.Duties.
a.Position. Executive is employed as Company’s Chief Financial Officer and shall have the duties and responsibilities assigned by Company’s President and Chief Executive Officer. Executive shall perform faithfully and diligently all duties assigned to Executive. Company reserves the right to modify Executive’s position and duties at any time in its sole and absolute discretion.
b.Best Efforts/Full-time. During this Agreement, Executive will (A) expend Executive’s best efforts on behalf of Company, and will abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances; (B) act in the best interest of Company at all times; and (C) devote Executive’s full business time and efforts to the performance of Executive’s assigned duties for Company.
3.Compensation.
a.Base Salary. As compensation for Executive’s performance of Executive’s duties hereunder, Company shall pay to Executive an initial Base Salary of $30,000.00 per month (which equates to $360,000.00 over a full year), to be paid in accordance with Company’s regular payroll cycle, less required deductions for federal withholding tax, social security and all other employment taxes and payroll deductions. In the event Executive’s employment under this Agreement is terminated by either party, for any reason, Executive will earn the Base Salary prorated to the date of termination.
b.Incentive Compensation. Executive may be eligible to receive an annual cash incentive bonus of 50% of his annual salary at target, on such terms and subject to such conditions as may be decided from time to time by the Company, less required deductions for federal withholding tax, social security and all other employment taxes and payroll deductions. Executive must be employed by the Company at the time any annual cash incentive bonus is paid in order to be eligible such bonus, subject to Section 7.1 hereof. The Company reserves the right to vary or terminate any bonus scheme in place from time to time, on a prospective basis. Company shall pay out the cash incentive bonus, if any, within 60 days following the end of the year in which the bonus is earned.
c.Equity Compensation. Subject to the approval of Company’s Board of Directors (the “Board”) or the Compensation Committee thereof, Executive shall receive restricted stock units valued at $1,125,000.00 and market stock units valued at $1,125,000.00, in each case with the underlying number of shares of Common Stock determined using a 90-day average closing price prior to the date of grant, consistent with the Company’s standard practice. The restricted stock units shall vest annually over a four (4) year period on the anniversary of the grant date, with the first vesting date occurring one year immediately following the grant date. The market stock units will vest over a three (3) year period
subject to the Company’s performance against a benchmark index with 1/3 of the units eligible for vesting annually, with potential overachievement in year three. All equity awards described herein and the terms and conditions thereof shall be subject to the approval of the Board or the Compensation Committee, the terms and conditions of Company’s 2014 Equity Incentive Plan (the “Stock Plan”) and the forms of award agreements approved by the Board thereunder, which Executive shall be required to execute as a condition to receiving such awards.
d.Customary Fringe Benefits. Executive will be eligible for all customary and usual fringe benefits generally available to Executives of Company, subject to the terms and conditions of Company’s benefit plan documents. Executive shall be entitled to Paid Time Off benefits (“PTO”) subject to the terms and conditions of the Company’s PTO policy.
4.At-Will Employment. Executive’s employment with Company is at-will and not for any specified period and may be terminated at any time, with or without Cause (as defined below) or advance notice, by either Executive or Company, although subject to the provisions of Sections 5 through 7 below. No representative of Company, other than the Company’s Board of Directors, has the authority to alter the at-will employment relationship. Any change to the at-will employment relationship must be by specific, written agreement signed by Executive and the Company’s Board of Directors. Nothing in this Agreement is intended to or should be construed to contradict, modify or alter this at-will relationship.
5.Termination. The termination provisions of this Agreement regarding the parties' respective obligations in the event Executive's engagement is terminated are intended to be exclusive and in lieu of any other rights to which Executive may otherwise be entitled by law, in equity, or otherwise. This Agreement, and Executive's engagement hereunder, may be terminated at any time after the Effective Date, as follows:
a.Termination by Mutual Consent. This Agreement may be terminated at any time by the written mutual consent of Company and Executive.
b.Termination by Company For Cause. This Agreement may be terminated by Company at any time for Cause. For purposes of this Agreement, “Cause” is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to Executive’s obligations or otherwise relating to the business of Company; (b) Executive’s material breach of this Agreement or Company’s Employee Innovations and Proprietary Rights Assignment Agreement (the “PRIA”); (c) Executive’s conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Executive’s willful neglect of duties as determined in the sole and exclusive discretion of the Company; (e) Executive is cited by the Company’s Chief Executive Officer, in writing, at least two (2) times during any 12-month period for unsatisfactory performance; (f) Executive’s failure to perform the essential functions of Executive’s position, with or without reasonable accommodation, due to a mental or physical disability; or (g) Executive’s death.
c.Termination by Company Without Cause. This Agreement may be terminated by Company, without Cause, with or without notice, by the delivery to Executive of written notice of termination.
d.Resignation by Executive. Executive shall have the right to terminate his or her employment hereunder by providing the Company with a notice of termination at least thirty (30) days prior to such termination.
6.Payments Upon Termination. Upon termination of employment for any reason, Executive shall receive payment of his or her then unpaid Base Salary, pro-rated to the date of termination, as well as any other accrued, but unpaid benefits (collectively the “Accrued Compensation”). Accrued Compensation will be paid in a lump sum on the date required under applicable law. Except as expressly stated in this Agreement, all other employment related obligations of Company to Executive shall be automatically terminated and completely extinguished with the termination of Executive’s employment.
7.Severance.
a.Severance Payment. In the event Company terminates Executive’s employment without Cause, Company shall provide Executive with a “Severance Payment,” equivalent to twelve (12) months of Executive’s then Base Salary. Such Severance Payment shall be payable in equal installments over a twelve (12) month period, with the first installment payment made on the first payday occurring 30 days after the termination date and the remaining installments made on the following Company paydays. The Company’s obligation to pay and Executive’s right to receive the Severance Payment shall cease in the event of Executive’s breach of any of his or her obligations under this Agreement or the PRIA. The Company’s obligation to provide Executive with the Severance Payment is conditioned precedent upon Executive’s execution of a full general release in a form acceptable to the Company and such release has become effective in accordance with its terms prior to the 30th day following the termination date. For the sake of clarity, Executive shall not be eligible to receive severance in connection with any other form of termination, other than a termination without Cause.
b.Application of Section 409A.
(i)Notwithstanding anything set forth in this Agreement to the contrary, no amount payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A (the “Section 409A Regulations”) of the Internal Revenue Code of 1986, as amended (the “Code”), and which is payable upon termination of employment, shall be paid unless and until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified Executive” within the meaning of the Section 409A Regulations as of the date of Executive’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of Executive’s separation from service shall be paid to Executive before the date (the “Delayed Payment Date”) which is the first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
(ii)The Company intends that income provided to Executive pursuant to this Agreement will not be subject to taxation under Section 409A of the Code. The provisions of this Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.
(iii)Notwithstanding anything herein to the contrary, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement shall be subject to the following conditions: (1) the expenses eligible for reimbursement or in-kind benefits in one taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year; (2) the reimbursement of eligible expenses or in-kind benefits shall be made promptly, subject to the Company’s applicable policies, but in no event later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
(iv)For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
8.Business Expenses. Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of Executive’s duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company’s policies.
9.No Conflict of Interest. During Executive’s employment with Company and at all times Executive is receiving Severance Payments pursuant to this Agreement, Executive must not engage in any work, paid or unpaid, that creates an actual conflict of interest with Company. Such work shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, Executive, consultant, stockholder, volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during Executive’s employment with Company, as may be determined by the Company in its sole discretion. If Company believes such a conflict exists during the term of this Agreement, Company may ask Executive to choose to discontinue the other work or resign employment with Company. In addition, Executive agrees not to refer any client or potential client of Company to competitors of Company, without obtaining Company’s prior written consent, during Executive’s employment and any period of time Executive is receiving Severance Payments pursuant to this Agreement.
10.Confidentiality and Proprietary Rights. Executive agrees to continue to abide by the PRIA and any nondisclosure or other policies or obligations of Executive to Company or other affiliated entities, each which PRIA and other policies and obligations is incorporated herein by reference.
11.Injunctive Relief. Executive acknowledges that Executive’s breach of the covenants contained in Sections 9-10 (collectively “Covenants”) would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security.
12.No Violation of Rights of Third Parties. During Executive’s employment with Company, Executive will not (a) breach any agreement to keep in confidence any confidential or proprietary information, knowledge or data acquired by Executive prior to Executive’s employment with Company or (b) disclose to Company, or use or induce Company to use, any confidential or proprietary information or material belonging to any previous employer or any other third party. Executive is not currently a party, and will not become a party, to any other agreement that is in conflict, or will prevent Executive from complying, with this Agreement.
13.General Provisions.
a.Successors and Assigns. The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement.
b.Waiver. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.
c.Severability. In the event any provision of this Agreement is found to be unenforceable by a court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
d.Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
e.Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of Texas. Each party consents to the jurisdiction and venue of the state or federal courts in Travis County, Texas, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement.
f.Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy, facsimile, or e-mail transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing
g.Third Party Beneficiary. The parties agree that Q2 Holdings, Inc. (“Q2H”) shall be a third party beneficiary to this Agreement, but Q2H shall have no duties or obligations under this Agreement..
h.Survival. Sections 9 (“No Conflict of Interest”), 10 (“Confidentiality and Proprietary Rights”), 11 (“Injunctive Relief”), 12 (“No Violation of Rights of Third Parties”), 13 (“General Provisions”) and 14 (“Entire Agreement”) of this Agreement shall survive Executive’s employment by Company.
14.Entire Agreement. This Agreement and the PRIA constitute the entire among the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral, including the offer letter between Company and Executive dated November 2, 2020. This agreement may be amended or modified only with the written consent of Executive and Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever and any such oral waiver, amendment or modification will be null and void.
[Signature page follows.]
THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.
Dated:11/3/2020 /s/ David Mehok
David Mehok
Q2 Software, Inc.
Dated: 11/3/2020 By: /s/ Kim Rutledge
Name: Kim Rutledge
Title: Executive Vice President, People
Exhibit 99.1
Q2 Appoints New Chief Financial Officer
Jennifer Harris announces retirement; seasoned financial executive David Mehok named CFO
Austin, Texas, November 4, 2020 – Q2 (NYSE: QTWO), a leading provider of digital transformation solutions for banking and lending, announced today that David Mehok will be joining the company as its new chief financial officer, effective November 9, 2020. Mehok will succeed Jennifer Harris, who has announced her intention to retire. Harris will stay on through March 2021, to assist with Mehok’s orientation and ensure an orderly transition.
Mehok has more than 20 years of financial management experience and brings an extensive background in global corporate finance, financial planning and analysis, investor relations, strategic planning, mergers and acquisitions, financial accounting and operations. Mehok joins Q2 from Epicor Software Corporation, where he was chief financial officer from January 2018 until its purchase by a private equity firm in the past month. Mehok led Epicor’s global finance, accounting, IT, operations and legal organizations.
Prior to his time at Epicor, from January 2015 until January 2018, Mehok served as Chief Financial Officer of CLEAResult Consulting, Inc., the largest provider of energy efficiency programs and services in North America, where he helped drive strong growth and integrated multiple acquisitions. Prior to that, Mehok served in a variety of increasingly significant finance roles over 18 years with Dell, Inc., including from April 2014 until January 2015 as Divisional Chief Financial Officer/Controller, U.S. Preferred Accounts/Dell Canada, one of Dell’s largest customer segments, from February 2011 until April 2014 as Investor Relations Officer and from January 2009 until February 2011 in Dell’s Consumer Business Unit, leading financial planning and analysis, including an interim role as Chief Financial Officer, Dell Consumer. Mehok holds a B.S. in Accounting from Villanova University and an M.B.A. in Finance from the University of Texas at Austin.
"David is a seasoned leader who has a proven track record of improving business results, leading large and small teams and formulating and driving critical business strategies," said Matt Flake, CEO of Q2. "He’s a natural fit for Q2’s culture, and we are thrilled to welcome him to our leadership team as we continue to scale our financial and strategic planning operations to meet the exciting market opportunity ahead of us."
"On behalf of our board of directors and all of Q2, I thank Jennifer for her extraordinary contributions throughout her impressive tenure at Q2," said Flake. "She has been a great leader, mentor and colleague, and she has created tremendous value for our company, our stockholders and our employees. In her seven years as CFO, Jennifer’s steady hand has helped guide Q2 through its phenomenal growth, creating a world-class finance and accounting organization that is poised to take on the next exciting stages of Q2’s journey. I wish Jennifer all the best in this well-deserved next chapter of her life. "
"I am thrilled to join Q2 and have admired for some time Q2’s success and commitment to its mission to build strong and diverse communities by strengthening their financial institutions,” said Mehok. "Q2 has a culture of respect, dedication and service, a proven business model, and a compelling market opportunity. I look forward to working with the team to further advance the digital transformation occurring within financial services. "
As CFO, Mehok will lead Q2’s global finance and accounting organization and be responsible for accounting, treasury, financial planning and analysis, tax, investor relations and legal. He will report directly to Flake.
About Q2 Holdings, Inc.
Q2 is a financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices throughout the world and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com.
Forward-looking Statements
This press release contains forward-looking statements, including statements about: Mehok’s ability and fit; Q2’s intent and readiness to scale its financial and strategic planning operations; Q2’s market opportunity; Q2’s proven business model; and, the digital transformation occurring within financial services. The forward-looking statements contained in this press release are based upon Q2’s historical performance and its current plans, estimates, and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include the adverse impacts of the COVID-19 pandemic on Q2’s business operations and on global economic and financial markets, including on Q2’s customers, partners and suppliers and employees and business, as well as risks related to: (a) the risk of increased competition in its existing markets and as it enters new sections of the market with Tier 1 customers, new markets with Alt-FIs and fintechs and new products and services; (b) the risk that COVID-19, the elections or other factors continue to negatively impact or disrupt the markets for Q2’s solutions and that the markets for Q2’s solutions do not return to normal or grow as anticipated, in particular with respect to Tier 1 customers and Alt-FI and fintech customers; (c) the risk that Q2’s increased focus on selling to larger Tier 1 customers may result in greater uncertainty and variability in Q2’s business and sales results; (d) the risk that changes in Q2’s market, business or sales organization negatively impacts its ability to sell its products and services; (e) the challenges and costs associated with selling, implementing and supporting Q2’s solutions, particularly for larger customers with more complex requirements and longer implementation processes, including risks related to the timing and predictability of sales of Q2’s solutions and the impact that the timing of bookings may have on Q2’s revenue and financial performance in a period; (f) the risk that errors, interruptions or delays in Q2’s products or services or Web hosting negatively impacts Q2’s business and sales; (g) risks associated with data breaches and breaches of security measures within Q2’s products, systems and infrastructure and the resultant harm to Q2’s business and its ability to sell its products and services; (h) the impact that a slowdown in the economy, financial markets and credit markets may have on Q2’s customers and Q2’s business sales cycles, prospects and customers’ spending decisions and timing of implementation decisions, particularly in regions where a significant number of Q2’s customers are concentrated; (i) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by customers and governmental authorities; (j) the risks inherent in technology and implementation partnerships that could cause harm to Q2’s business; (k) the difficulties and costs Q2 may encounter with complex implementations of its solutions and the resulting impact on reputation and the timing of its revenue from any delayed implementations; (l) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (m) the risks associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth; (n) the risk that modifications or negotiations of contractual arrangements will be necessary during Q2’s implementations of its solutions or the general risks associated with the complexity of Q2’s customer arrangements; (o) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (p) the risks associated with anticipated higher operating expenses in 2020 and beyond; (q) litigation related to
intellectual property and other matters and any related claims, negotiations and settlements; (r) the risks associated with further consolidation in the financial services industry; (s) risks associated with selling Q2 solutions internationally; and (t) the risk that Q2 debt repayment obligations may adversely affect its financial condition and cash flows from operations in the future and that Q2 may not be able to obtain capital when desired or needed on favorable terms.
MEDIA CONTACT
Beth Williams
Q2 Holdings, Inc.
1-512-293 -6013
beth.williams@Q2.com
INVESTOR CONTACT
Josh Yankovich
Q2 Holdings, Inc.
1-512-682-4463
josh.yankovich@Q2.com