Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
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On
August 26, 2021, the Compensation Committee of the Board of Directors (the “Compensation Committee”) of VirTra, Inc. (the
“Company”), relying upon third-party studies and recommendations, took several actions to bring the compensation of the Company’s
Chief Executive Officer (CEO) and Chief Operating Officer (COO) up to industry standards and provide meaningful incentive for future
performance. The Committee (1) approved grants of 224,133 and 168,090 performance-based restricted stock units pursuant to the Company’s
2017 Equity Incentive Plan (the “Plan”) to the Company’s CEO and COO, respectively; (2) approved grants of 14,057 and
10,543 restricted shares to the CEO and COO, respectively, based on the Company’s performance for the twelve months ended June
30, 2021; and (3) increased the annual base salaries effective August 15, 2021 to $349,860 and $251,140 for the CEO and COO, respectively.
While their salaries have been annually increased with Company-wide cost-of-living adjustments, this was the first comprehensive review
and adjustment undertaken since 2012.
General.
Pursuant to the Plan, the Company may award restricted stock units, which represent the right to receive shares of our Common Stock at
a future date without payment of a purchase price, subject to meeting performance targets, vesting or other conditions specified by the
Compensation Committee. Holders of restricted stock units have no voting rights or rights to receive cash dividends unless and until
shares of Common Stock are issued in settlement of such awards.
Vesting.
Beginning on the last business day of August 2022, a tranche of restricted stock units, having approximate values of $40,000 and $30,000
for the CEO and COO, respectively, based on current prices, may vest if the Company has achieved net profit for the twelve months ending
June 30, 2022 of at least $2,500,000. For every $500,000 earned in excess of $2,500,000 another tranche will vest. If the maximum net
profit of $7,000,000 is achieved, ten tranches would vest. Similarly, on the last business day of August 2023, a tranche of restricted
stock units may vest if the Company has achieved a net profit of at least $3,000,000, with the potential to have additional tranches
vest up to a maximum of $9,000,000 in net profit. This vesting arrangement continues with the last business day of August 2024, with
the minimum net profit threshold being $3,500,000 and the maximum net profit being $11,000,000.
The
vesting schedule notwithstanding, the Compensation Committee shall have the discretion to declare the vesting of any number of restricted
stock units should the Company experience unusual results of operations, such as falling below the net profit threshold one year and
exceeding the maximum net profit the following year, so long as the total number of restricted stock units declared to be vested does
not exceed the amount awarded. Additionally, while a maximum net profit per year
has been set for allocation of the available shares at this time, it is very possible that the Company will exceed these levels during
the next 3 years and if such performance occurs, the Compensation Committee will meet to determine if additional compensation is in the
best interests of the Company at that time.
Certain
Terminations of Employment. If the applicable executive’s employment terminates for Cause (as defined in the executive’s
employment agreement with the Company) or as a result of death or disability, at any time before all of his restricted stock units have
vested, the executive’s unvested restricted stock units shall be automatically forfeited upon such termination of service with
the Company. Any Restricted Stock Units that have been earned as a result of the Company’s operating results, but not vested because
of death or disability occurring prior to the vesting date, shall still be deemed to be vested and inure to the benefit of the grantee
or the grantee’s estate, as the case may be.
Change
of Control. In the event of a change of control of the Company, all then-unvested restricted stock units will vest in full as of
the date of the change in control.
The
foregoing summary is qualified in its entirety by reference to the full text of the Restricted Stock Unit Agreements, copies of which
are attached hereto as Exhibits 10.1 and 10.2 and incorporated by reference herein.