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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
September 20, 2019, Richard House Jr. was appointed to be the Company’s Chief Executive Officer, effective October 7, 2019.
Brad Bernstein, the Company’s continuing President, resigned such position in order to bring in Mr. House.
Mr.
House, age 56, has more than 30 years of experience in consumer lending across a multitude of disciplines and has led businesses
from inception to becoming stock exchange-listed public company. In 1997, he was a co-founder and then President of Atlanticus
Holdings (formerly Compucredit Corp.), which has been a significant lender in the prime and non-prime markets in both the United
States and the United Kingdom. Under his leadership, Compucredit Corp. became one of the nation’s largest sub-prime issuers
of consumer credit with revenues exceeding $700 million. After leaving Atlanticus Holdings in April 2014 and through September
2019, Mr. House has been the Chief Executive Officer of Veta Finance, Ltd., a provider of technology solutions to lenders in the
United States and the United Kingdom.
Prior
to Atlanticus Holdings, Mr. House was a Managing Director of the Quantitative Solutions and Consulting Division of Equifax. Mr.
House earned a B.S. degree in economics from Georgia Institute of Technology (Georgia Tech) and an M.A. degree in economics from
Southern Methodist University.
Mr.
House has not engaged in a related party transaction with the Company during the last two fiscal years, and there are no family
relationships between Mr. House and any of our other executive officers or directors.
With
Mr. House’s appointment on September 20, 2019, we entered into an employment agreement with him. Pursuant to the employment
agreement, Mr. House has agreed to devote his full time, attention and efforts to our business as our Chief Executive Officer.
The employment agreement extends for a term expiring on December 31, 2024, and is automatically renewable for three successive
one-year terms unless written notice of non-renewal is timely provided by either party. The employment agreement provides that
Mr. House will receive a base salary during the term of his employment at an annual rate of $330,000. In addition, he is entitled
to receive an annual cash bonus of $70,000, commencing with the calendar year beginning January 1, 2020, based on our company
meeting a minimum EBITDA (earnings before interest, taxes, depreciation and amortization) target each year.
As an inducement to enter
into his employment agreement, Mr. House was awarded initial time-based stock options to purchase 350,000 shares of our common
stock at an exercise price of $1.52 per share, vesting in five equal annual increments commencing December 31, 2020. We also agreed
to issue future performance-based stock options to Mr. House at the beginning of 2020, 2021, 2022, 2023 and 2024 to purchase 200,000,
225,000, 250,000, 275,000 and 300,000 shares of our common stock, respectively, at an exercise price equal to the closing share
price immediately preceding the respective award date, vesting only if our company meets minimum net income targets each year.
If there is a Change of Control (as defined in the employment agreement) of our company during his employment term, all of the
unvested initial options and all of the unvested performance options for that particular year will immediately vest.
The
employment agreement provides for termination by us upon death or disability of Mr. House (defined as 90 days or more of any medically
determinable physical or mental impairment during any 12-month period) or for Cause (as defined therein), which includes conviction
of a felony or any crime involving moral turpitude or a willful material breach by him of his obligations to us under the employment
agreement. In the event the employment agreement is terminated by us without Cause, he will be entitled to his base salary for
the balance of the initial term. The employment agreement with Mr. House does not include a provision permitting his termination
of the employment agreement in connection with a change of control of our company.
The
employment agreement contains covenants (a) restricting Mr. House from engaging in any activities competitive with our business
during the term of his employment agreement and two years thereafter, and from soliciting our company’s employees, customers
and other business relationships for two years after the termination of the agreement, (b) prohibiting him from disclosure of
confidential information regarding us at any time and (c) confirming that all intellectual property developed by him and relating
to our business constitutes our sole and exclusive property.