| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
(e)
On August 13, 2018, the Board of Directors (the “Board”) of Shutterfly, Inc. (the “Company”), on the approval and recommendation of the Compensation and Leadership Development Committee (the “Committee”) of the Board, approved a grant of equity awards, with a grant date of August 13, 2018 (the “Grant Date”), to further incentivize Christopher North, the President and Chief Executive Officer of the Company, pursuant to the Company’s 2015 Equity Incentive Plan, as amended (the “Equity Plan”).
The Board, on the Committee’s recommendation, approved the grant of a restricted stock unit award to Mr. North covering 15,897 shares of the Company’s common stock (the “Time-Based RSUs”), which shall be eligible to vest with respect to 25% of the total underlying shares of the Company’s common stock (“Common Stock”) on each of the first, second, third and fourth anniversaries of the Grant Date, in each case subject to Mr. North’s continued service with the Company on the applicable vesting date. The Board, on the Committee’s recommendation, also approved the grant of a performance-based restricted stock unit award to Mr. North covering 31,806 shares of Common Stock. These performance-based restricted stock units are designed to pay out at 100% of target, based on a target Adjusted EBITDA in the fiscal year ending December 31, 2020 (the “Performance Period”) of $475M, and have the potential to convert to a larger or smaller number of shares depending on the actual performance versus that target, as summarized in the table below.
| | | | | | | | | | |
| Level of Achievement | | Adjusted EBITDA | | Performance Multiplier (1) |
| Maximum | | | $ | ³ 525 million | | | | | 200% | |
| Target | | | $ | 475 million | | | | | 100% | |
| Threshold | | | $ | 425 million | | | | | 50% | |
| Below Threshold | | | $ | < 425 million | | | | | 0% | |
| | (1) | The “Performance Multiplier” for any level of achievement falling between “Threshold,” Target” and “Maximum” levels will be measured based on linear interpolation. |
The performance-based restricted stock units shall be eligible to vest based on (A) the Company’s achievement of an adjusted EBITDA of at least $425M (“the EBITDA Threshold”) during the Performance Period, and (B) Mr. North’s continued service with the Company through the third anniversary of the Grant Date (the “Performance-Based RSUs” and together with the Time-Based RSUs, the “Interim Equity Awards”).
Each of the Interim Equity Awards shall be subject to acceleration as follows (in each case subject to the condition that Mr. North deliver a general release of claims in favor of the Company in the form attached to Mr. North’s offer letter dated March 15, 2016 and filed with the Securities and Exchange Commission (the “SEC”) on Form8-K on March 17, 2016 as Exhibit 99.1 (the “Offer Letter”) and satisfy all conditions to make such the release is effective within sixty (60) days following termination of his employment):
(A) with respect to the Time-Based RSUs, (i) in the event of a termination without Cause (as defined in the Offer Letter) or Constructive Termination (as defined in the Offer Letter) not in connection with a Change in Control (as defined in the Offer Letter), acceleration of 12 months of the then-unvested shares subject to the Time-Based RSUs and (ii) in the event of termination without Cause or Constructive Termination within 12 months following a Change in Control, acceleration of all then-unvested shares subject to the Time-Based RSUs; and
