Item 5.02. Departure of Directors or
Principal Officers; Election of Directors; Appointment of Principal Officers
On August 13, 2020:
(1) David
Moradi, 44, a director since 2019, was appointed Interim Chief Executive Officer and Chief Strategy Officer. Mr. Moradi will continue
to serve as a director. Mr. Moradi is an entrepreneur and an investor and advisor to technology companies. In September 2018,
Mr. Moradi founded and became Chief Executive Officer of Sero Capital LLC, a private investment firm that focuses on growth opportunities
in the technology sector. Mr. Moradi also co-founded and is Executive Chairman of First Contact Entertainment Inc., a virtual reality
video game development studio. Prior to founding Sero Capital, Mr. Moradi was Founder and CEO of Anthion Management, a technology-focused
fund which grew over $1B in assets under management. In 2013, Anthion was converted to a family office investing in various asset
classes including early stage technology companies, public equities, corporate debt and real estate. Prior to Anthion, Mr. Moradi
was a Portfolio Manager at Pequot Capital Management and an analyst and Portfolio Manager for Soros Fund Management. Mr. Moradi
started his career as a special situations analyst for Imperial Capital LLC in 2000. Mr. Moradi holds a B. A. in psychology
from the University of California, Los Angeles. He is also Founder and Chairman of the David Moradi Foundation, a charitable foundation
supporting education and veterans. A description of Mr. Moradi’s employment agreement with the Company and the performance
share awards grant to him in connection with becoming the Company’s Interim Chief Executive Officer and Chief Strategy Officer
is included below.
(2) Dominic
Varacalli, 32, was appointed President. From June 2020, Mr. Varacalli was Chief Technology Officer of the Company. From June 2019
to May 2020, he was Founding Partner of Kickstand LLC, a software agency in Portland, Oregon. From August 2015 until May 2019,
he was Director of Engineering at The Kroger Co. in Cincinnati, Ohio where he managed teams of software engineers. A description
of Mr. Varacalli’s employment agreement with the Company is included below.
(3) Heath
Thompson, 60, ceased to be Chief Executive Officer. Mr. Thompson entered into a separation agreement pursuant to which he will
receive six months of COBRA payments. He will also receive a separation payment of six months of salary, as provided for in his
employment agreement. The Company and Mr. Thompson are negotiating a consulting agreement.
On August 20, 2020,
Mr. Moradi and the Company entered into an Employment Agreement (the “Employment Agreement”). Pursuant to the Employment
Agreement, Mr. Moradi will receive an annual salary of $1. On the same date, Mr. Moradi received 260,000 performance share awards
(the “PSAs”) that were granted under the Company’s 2019 Equity Incentive Plan, as amended (the “Plan”).
Each PSA represents a contingent right to receive a share of the Company’s common stock upon vesting of the PSA. The PSAs
will vest based on the Company’s achievement of performance conditions relating to its monthly recurring revenue and stock
price as follows:
Performance Condition
|
|
Number of Performance Shares
Vesting if
Performance Condition
Achieved
|
|
|
|
Monthly recurring revenue greater than or equal to $3.0 million for two consecutive calendar months
|
|
55,000
|
|
|
|
Monthly recurring revenue greater than or equal to $5.0 million for two consecutive calendar months
|
|
50,000
|
|
|
|
Volume Weight Average Price (“VWAP”) greater than or equal to $25 on The Nasdaq Stock Market LLC (“NASDAQ”) over 20 consecutive trading days
|
|
55,000
|
|
|
|
VWAP greater than or equal to $50 on NASDAQ over 20 consecutive trading days
|
|
50,000
|
|
|
|
VWAP greater than or equal to $100 on NASDAQ over 20 consecutive trading days
|
|
50,000
|
Any PSAs that have
not vested on or prior to August 20, 2025 will be forfeited. Mr. Moradi must be serving as the Company’s Interim Chief Executive
Officer or its Chief Strategy Officer as of the date the applicable performance condition is achieved for the related PSAs to vest.
Any unvested PSAs will become fully vested if, on or prior to August 20, 2025, Mr. Moradi’s employment is terminated by the
Company without cause.
The Employment Agreement
also provides that the Company will pay Mr. Moradi a gross-up payment for any excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) and any interest or penalties with respect to such excise tax, plus the
amount necessary to put Mr. Moradi in the same after-tax position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code, in the event that any payments, rights, benefits, distributions, or entitlements provided or to
be provided by the Company or any of its affiliates to Mr. Moradi or for his benefit pursuant to the terms of the Employment Agreement,
the PSA agreement or otherwise would constitute parachute payments within the meaning of Section 280G of the Code.
The foregoing summary
of the Employment Agreement and grant of PSAs is qualified in its entirety by reference to the full text of the Employment Agreement
and the PSA agreement, copies of which were filed as Exhibit 10.1 and Exhibit 10.2, respectively, with Amendment No. 1 to the Original
Form 8-K.
The Company and Mr.
Varacalli entered into an employment agreement (the “Varacalli Employment Agreement”), which is effective as of August
13, 2020. The Varacalli Employment Agreement provides that the Company will pay Mr. Varacalli an annual base salary of $210,000
and that he will be eligible to receive an annual cash performance bonus with a target value of $20,000. The Company also will
award Mr. Varacalli 45,000 restricted stock units (“RSUs”) under the Company’s 2019 Equity Incentive Plan, as
amended.