8-K: D-Wave Quantum Inc. Enhances Executive Severance Policy and Amends Employment Agreements

D-Wave Quantum Inc. formalizes its executive severance policy and amends employment agreements to align with the new policy, ensuring consistent benefits for key executives upon qualifying terminations.

Summary

• D-Wave Quantum Inc. has adopted a formal severance policy for its executive officers, including Alan Baratz, John Markovich, and Diane Nguyen.
• The policy provides severance benefits in the event of qualifying terminations of employment.
• Participation in the Severance Policy is conditioned on the execution of a participation agreement.
• The participation agreement specifies an executive's length or multiple of potential severance benefits and contains other terms and conditions related to participation in the Severance Policy.
• Each executive has agreed to accept the terms of the Severance Policy and such Participation Agreement in lieu of any severance benefits set forth in their respective employment agreements and offer letters.
• The severance benefits vary depending on whether the termination is a Qualifying Non-CIC Termination or a Qualifying CIC Termination.
• In the event of a Qualifying Non-CIC Termination, each executive will receive a lump sum cash severance equal to the sum of the executives accrued but unpaid annual base salary, annual incentive earned and any unreimbursed business expenses.
• They will also receive a lump sum cash payment equal to the executive's prorated Target Annual Bonus, continuation of executive's annual base salary for 12 months, reimbursement of COBRA coverage for 6 months (or, for the CEO, 12 months), and any other amounts or benefits required to be paid or provided or which the executive is eligible to receive under any plan, program, policy, or practice or contract or agreement of the Company and the Affiliated Entities.
• In the event of a Qualifying CIC Termination, such severance benefits instead include a lump sum cash severance equal to the sum of the Accrued Obligations, a lump sum cash payment equal to a product of 1.0x (or, for the CEO, 1.5x) the sum of the executive's annual base salary and the executive's Target Annual Bonus, reimbursement of COBRA coverage for 12 months (or, for the CEO, 18 months), any time-based equity awards will be 100% vested and any performance-based vesting equity awards will vest in accordance with the performance-based vesting conditions in the applicable award agreement (notwithstanding any continued employment requirements), and the Other Benefits.
• The company also entered into amendments to the employment agreements with Alan Baratz, John Markovich, and Diane Nguyen to provide for severance benefits in compliance with the terms of the Severance Policy.
• John M. Markovich's employment agreement was amended to specify his principal place of work as his home in Florida and to clarify travel requirements.
• The amended agreements stipulate that employment is at will and can be terminated by either party at any time, with the Board of Directors of D-Wave Quantum Inc. holding the sole authority to alter this status in writing.

Sentiment

Score: 7

Explanation: The document is neutral to positive. It outlines standard corporate governance practices related to executive compensation and severance, which are generally viewed favorably as they provide clarity and security for key personnel. The formalization of these policies can be seen as a positive step towards attracting and retaining talent.

Positives

• Formalizing the severance policy provides clarity and consistency for executive compensation.
• The policy aims to attract and retain qualified executives.
• The severance policy ensures executives are taken care of in the event of a change in control.
• The policy provides financial assistance to select executives upon certain terminations of employment.
• The policy is designed to avoid loss and distraction of executives of the Company to the detriment of the Company and its shareholders.

Negatives

• The 'at will' employment status allows the company to terminate employment at any time, which could create uncertainty for employees.
• The Severance Policy is subject to termination and amendment in the sole discretion of D-Wave; provided, however that the Severance Policy cannot be terminated by D-Wave or otherwise amended by D-Wave in any manner that would result in a reduction of the severance benefits available to you without your consent.

Risks

• The company has sole discretion to modify the terms and conditions of employment.
• The severance policy is subject to amendment or termination by the Committee, although amendments reducing benefits require the Participant's consent.
• The 'at will' employment status allows the company to terminate employment at any time, which could create uncertainty for employees.

Future Outlook

The company aims to retain qualified executives and ensure disinterested service from executives regarding the best interests of the Company and its shareholders without concern that employees might be distracted or concerned by the personal uncertainties and risks created by the perception of an imminent or occurring Change in Control.

Management Comments

• The Board considers the avoidance of such loss and distraction to be essential to protecting and enhancing the best interests of the Company and its shareholders.
• The Board also believes that when a Change in Control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested service from executives regarding the best interests of the Company and its shareholders without concern that employees might be distracted or concerned by the personal uncertainties and risks created by the perception of an imminent or occurring Change in Control.

Industry Context

Formalizing executive severance policies is a common practice in publicly traded companies to attract and retain talent, especially in competitive industries like quantum computing. These policies provide a safety net for executives in the event of a change in control or other qualifying terminations, ensuring stability and alignment of interests.

Comparison to Industry Standards

• Executive severance packages typically include a multiple of base salary and bonus, continuation of benefits, and accelerated vesting of equity awards.
• The specific terms of D-Wave's policy, such as the multiple used and the duration of benefit continuation, should be compared to those offered by similar-sized companies in the technology sector.
• Companies like Rigetti Computing and IonQ, which are also involved in quantum computing, may have similar policies in place.
• Comparing D-Wave's severance policy to those of its competitors can provide insights into its competitiveness in attracting and retaining top talent.

Corporate Governance

Stakeholder Impact

• Shareholders: The policy aims to protect shareholder interests by retaining key executives and ensuring smooth transitions during changes in control.
• Employees: The policy provides clarity and security for executive officers regarding their compensation and benefits in the event of termination.
• Executives: The policy provides financial assistance to select executives upon certain terminations of employment.

Next Steps

• Executives must execute participation agreements to be eligible for the severance benefits.
• The company will administer the Severance Policy according to its terms and applicable laws.
• The company will monitor the effectiveness of the Severance Policy in attracting and retaining qualified executives.

Key Dates

Keywords

severance policy, employment agreement, executive compensation, termination, change in control, D-Wave Quantum Inc., Alan Baratz, John Markovich, Diane Nguyen