Item
5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
Election
of Directors
On
December 20, 2019, our Board appointed Judy Hammerschmidt and Nancy Heinen to serve on the Board, effective immediately. Mses.
Hammerschmidt and Heinen were appointed to fill the vacancies created by our Board to expand the size of our Board from four to
six directors. Mses. Hammerschmidt and Heinen will serve as directors until our annual stockholders’ meeting proposed to
be held in fiscal 2020, and until their successors are elected and qualified.
The
Board evaluated Mses. Hammerschmidt’s and Heinen’s independence in accordance with the independence standards for
directors set forth in Rule 5605(a)(2) of the Nasdaq Listing Rules, and affirmatively determined that each of Mses. Hammerschmidt
and Heinen qualifies as an independent director. Ms. Hammerschmidt has been appointed to serve on the Governance and Nominating
Committee and Compensation Committee. Ms. Heinen has been appointed to serve on the Governance and Nominating Committee and Compensation
Committee.
Ms.
Hammerschmidt, age 65, has spent the last 37 years as an international attorney. She began her career as a Special Assistant to
two Attorneys General of the United States, focusing on international matters of interest to the U.S. government, including negotiating
treaties and agreements with foreign governments. She then joined Dickstein, Shapiro & Morin, LLP, a Washington, D.C. firm,
where she represented companies around the world as they expanded internationally in high regulated environments. Her clients
included Guess? Inc., Pfizer Inc., Merck & Co., Inc., the Receiver for Bank of Credit and Commerce International of the United
Arab Emirates, Recycled Paper Products, Inc., and Herbalife Nutrition Ltd. (“Herbalife”). She provided structuring,
growth, and regulatory advice for these and other companies. She joined Herbalife as Vice President and General Counsel of Europe
in 1994, becoming Executive Vice President and International Chief Counsel in 1996. In 2002, she was part of the management group
that sold Herbalife. Since that time, she has served as outside counsel to a series of entrepreneurial companies looking to expand
internationally, primarily in the food and drug/nutritional supplements space. In addition, Ms. Hammerschmidt was a Principal
in JBT, LLC, a privately held company that owned “mindful dining” restaurants in the Washington, D.C. area. Those
properties were sold in 2010. She expects to continue to act as outside counsel for small companies while serving on our Board.
We believe that Ms. Hammerschmidt’s legal experience, generally, and her experience with certain of her previous or client
relationships, specifically, will provide a benefit to us, our stockholders, and our Board. She is also a director for Notis Global,
Inc. There is no arrangement or understanding between Ms. Hammerschmidt and any other person pursuant to which Ms. Hammerschmidt
was appointed as one of our directors. There are no transactions between Ms. Hammerschmidt, on the one hand, and the Company,
on the other, that would be required to be reported under Item 404(a) of Regulation S-K promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
Ms.
Heinen, age 63, is currently a board member, investor, strategy consultant, and startup advisor with more than 25 years of experience
in senior executive roles in Silicon Valley. In 1997, she was recruited by Steve Jobs to join the executive team of Apple Inc.
(“Apple”) and assisted in its turnaround. During Ms. Heinen’s tenure at Apple, her responsibilities included
all legal matters, including intellectual property litigation, acquisitions, corporate governance, and securities compliance,
as well as global government affairs and corporate security. Previously, she served as General Counsel of NeXT Software, Inc.,
and Associate General Counsel at Tandem Computers, Inc. Ms. Heinen currently acts as Board Chair of Teen Success and First Place
for Youth, is a board member and past board chair of SV2 – Silicon Valley Social Venture Fund, and serves on the advisory
boards of Illuminate Ventures, University of California, Berkeley Center for Law and Business, and the Northern California Innocence.
Ms. Heinen received her B.A. and J.D. from the University of California at Berkeley. We believe that Ms. Heinen’s legal
experience, coupled with her senior executive experience, will provide a benefit to us, our stockholders, and our Board. There
is no arrangement or understanding between Ms. Heinen and any other person pursuant to which Ms. Heinen was appointed as one of
our directors. There are no transactions between Ms. Heinen, on the one hand, and the Company, on the other, that would be required
to be reported under Item 404(a) of Regulation S-K promulgated under the Exchange Act.
In
connection with their service as directors, Mses. Hammerschmidt and Heinen will each receive the following compensation: (i) an
annual board fee equal to $75,000; (ii) an annual restricted stock award with a grant value of $80,000 (the “Annual RSA”);
and (iii) an initial restricted stock award with a grant value of $100,000 (the “Initial RSA”). The Annual RSAs were
granted on December 23, 2019 and were based upon the volume weighted average price (“VWAP”) of our common stock, par
value $0.0001 per share (the “Common Stock”) for the 30-trading day period prior to the grant date, or $1.1337
per share. The Annual RSAs are subject to a one-year vesting period.
The
Initial RSAs were also granted on December 23, 2019, and were based upon the VWAP of our Common Stock for the 30-trading day period
prior to the grant date. The Initial RSAs are subject to a three-year vesting period, with one-third of the award vesting on the
first, second, and third anniversaries of the grant date.
On
December 16, 2019 and December 18, 2019, we issued press releases announcing our intention to appoint each of Mses. Hammerschmidt
and Heinen to the Board. Copies of our press releases regarding Mses. Hammerschmidt’s and Heinen’s appointments are
attached as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K.
Compensatory
Arrangements
On
December 20, 2019, our Board approved the elements of the 2019 compensation payable to our executive officers and directors upon
the recommendation of the Compensation Committee (the “Committee”). The key elements of our compensation program are
summarized below. For the development of the 2019 compensation program, the Committee retained Marsh & McLennan Agency (“MMA”). MMA provided the Committee with advisory services only with respect to executive and Board compensation.
MMA reviewed the 2018 compensation paid to our executive officers and Board and compared our compensation with certain companies
MMA identified as peer companies. The Committee’s recommendation and the Board’s approval of the 2019 compensation
program was based on various factors, including, among others, recommendations made by MMA. We intend to engage MMA in 2020 with
respect to executive and Board compensation for 2020.
The
Board approved the following compensation for our executive officers for 2019:
Base
Salaries: The base salaries to be paid to the Company’s executive officers are as follows: (i) Rory J. Cutaia –
$430,000 and (ii) Jeffrey Clayborne – $250,000.
Annual
Incentive Award: Mr. Cutaia is entitled to an annual incentive award equal to $430,000 and Mr. Clayborne is entitled to an
annual incentive award equal to $125,000. Of the annual incentive award for Mr. Cutaia, $215,000 constitutes deferred compensation
that is payable on January 10, 2021, and $215,000 constitutes deferred compensation that is payable on January 10, 2022. In addition,
the Board granted to Mr. Cutaia an option exercisable on January 10, 2021 for the purchase of up to 189,645 shares of our Common
Stock with a per-share exercise price of $1.1337 per share, and a second option exercisable on January 10, 2022 for the purchase
of up to 189,644 shares of our Common Stock with a per-share exercise price of $1.1337 per share. The exercise price of the
options is based upon the VWAP of our Common Stock for the 30-trading day period prior to the grant date of December 23, 2019.
Of the annual incentive award for Mr. Clayborne, $62,500 constitutes deferred compensation that is payable on January 10,
2021, and $62,500 constitutes deferred compensation that is payable on January 10, 2022. In addition, the Board granted to Mr.
Clayborne an option exercisable on January 10, 2021 for the purchase of up to 55,129 shares of our Common Stock with a per-share
exercise price of $1.1337 per share, and a second option exercisable on January 10, 2022 for the purchase of up to 55,129 shares
of our Common Stock with a per-share exercise price of $1.1337 per share. The exercise price of the options is based upon the
VWAP of our Common Stock for the 30-trading day period prior to the grant date of December 23, 2019. The above compensation
payment and option exercise dates may only be advanced upon the occurrence of one of the following events: (i) the individual
is no longer an employee or director of the Company, (ii) the “permanent disability” of the individual, or (iii) a
“change of control” of the Company. For purposes hereof, permanent disability shall mean the individual’s inability
to perform his duties due to a physical or mental condition for 120 consecutive days or an aggregate of 180 days in any 12-month
period. For purposes hereof, change in control means any transaction or series of related transactions, (i) the result of which
is that any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), or persons controlling,
controlled by or under common control with any equity holder or direct or indirect owners of any equity holder, becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the issued and outstanding voting equity of
the Company; (ii) that results in the sale of all or substantially all of the Company’s assets; or (iii) that results in
the consolidation or merger of the Company with or into another entity or entities and holders of more than fifty percent (50%)
of the issued and outstanding voting equity of the Company before such consolidation or merger no longer hold, directly or indirectly,
at least fifty percent (50%) of the issued and outstanding voting equity of the survivor.
Annual RSA: The Board granted Annual
RSAs equal to $400,000 and $300,000 for Mr. Cutaia and Mr. Clayborne, respectively. The Annual RSAs were granted on December 23,
2019 and were based upon the VWAP of our Common Stock for the 30-trading day period prior to the grant date, or $1.1337 per
share. Accordingly, we granted RSAs of 352,827 shares of our Common Stock to Mr. Cutaia and of 264,620 shares of our Common
Stock to Mr. Clayborne. The Annual RSAs are subject to a four-year vesting period, with one-quarter of the award vesting on the
first, second, third, and fourth anniversaries of the grant date.
Additional Awards: In connection with
our up-listing to The Nasdaq Capital Market, our underwritten public offering, and our acquisition of Verb Direct, LLC, Messrs.
Cutaia and Clayborne each earned additional awards during 2019. Mr. Cutaia was awarded a bonus equal to $324,431 and an additional
RSA equal to 200,000 shares of Common Stock (“Mr. Cutaia’s Additional RSA Award”). Mr. Clayborne was awarded
a bonus equal to $162,215 and an additional RSA equal to 100,000 shares of Common Stock (“Mr. Clayborne’s Additional
RSA Award”). Of the bonus for Mr. Cutaia, $162,216 constitutes deferred compensation that is payable on January 10, 2021,
and $162,215 constitutes deferred compensation that is payable on January 10, 2022. In addition, the Board granted to Mr. Cutaia
an option exercisable on January 10, 2021 for the purchase of up to 143,085 shares of our Common Stock with a per-share exercise
price of $1.1337 per share, and a second option exercisable on January 10, 2022 for the purchase of up to 143,085 shares of our
Common Stock with a per-share exercise price of $1.1337 per share. The exercise price of the option is based upon the VWAP
of our Common Stock for the 30-trading day period prior to the grant date of December 23, 2019. Of the bonus for Mr. Clayborne,
$81,108 constitutes deferred compensation that is payable on January 10, 2021, and $81,107 constitutes deferred compensation that
is payable on January 10, 2022. In addition, the Board granted to Mr. Clayborne an option exercisable on January 10, 2021 for
the purchase of up to 71,543 shares of our Common Stock with a per-share exercise price of $1.1337 per share, and a second option
exercisable on January 10, 2022 for the purchase of up to 71,542 shares of our Common Stock with a per-share exercise price of
$1.1337 per share. The exercise price of the option is based upon the VWAP of our Common Stock for the 30-trading day period
prior to the grant date of December 23, 2019. The above compensation payment and option exercise dates may only be advanced
upon the occurrence of one of the following events: (i) the individual is no longer an employee or director of the Company, (ii)
the “permanent disability” of the individual, or (iii) a “change of control” of the Company. For purposes
hereof, permanent disability shall mean the individual’s inability to perform his duties due to a physical or mental condition
for 120 consecutive days or an aggregate of 180 days in any 12-month period. For purposes hereof, change in control means any
transaction or series of related transactions, (i) the result of which is that any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), or persons controlling, controlled by or under common control with any equity
holder or direct or indirect owners of any equity holder, becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the issued and outstanding voting equity of the Company; (ii) that results in the
sale of all or substantially all of the Company’s assets; or (iii) that results in the consolidation or merger of the Company
with or into another entity or entities and holders of more than fifty percent (50%) of the issued and outstanding voting equity
of the Company before such consolidation or merger no longer hold, directly or indirectly, at least fifty percent (50%) of the
issued and outstanding voting equity of the survivor. Mr. Cutaia’s Additional RSA Award and Mr. Clayborne’s Additional
RSA Award are subject to a three-year vesting period, with one-fourth of the award vesting on the grant date and on each of the
first, second, and third anniversaries thereafter. The Board approved the following with respect to our directors (other than
the compensation payable to Mses. Hammerschmidt and Heinen, which is discussed above):
Annual
Board Fees: Our non-employee directors are entitled to the following annual board fees: (i) Mr. James Geiskopf (Lead Director)
– $150,000; (ii) Mr. Phillip Bond – $75,000; and (iii) Mr. Kenneth Cragun – $75,000. The annual board fees may
be payable in shares of our Common Stock or cash.
Annual
RSA: Our non-employee directors were granted Annual RSAs that were based upon the VWAP of our Common Stock for the 30-trading
day period prior to the grant date of December 23, 2019, or $1.1337 per share. The dollar value, and corresponding number
of shares of Common Stock, of the Annual RSAs for each non-employee director is as follows: (i) Mr. Geiskopf (Lead Director) –
$160,000 (or 141,130 shares of Common Stock); (ii) Mr. Bond – $80,000 (or 70,565 shares of Common Stock); and Mr. Cragun
– $80,000 (or 70,565 shares of Common Stock). The Annual RSAs for each of Messrs. Bond, Cragun, and Geiskopf will vest on
the first anniversary of the grant date.
Additional
Awards: In connection with our up-listing to The Nasdaq Capital Market, our underwriting public offering, and our acquisition
of Verb Direct, LLC, Mr. Geiskopf, as our Lead Director, earned an additional bonus equal to $150,000, payable in shares of our
Common Stock, and an additional RSA equal to $160,000. The bonus award shares and the additional RSA are each based upon the VWAP
of our Common Stock for the 30-trading day period prior to the grant date of December 23, 2019, or $1.1337 per share. Accordingly,
the RSA equals 141,130 shares of our Common Stock and the additional bonus equals 132,310 shares of our Common Stock. The bonus
shares and the RSA vest on the grant date.
Finally,
it is anticipated that each of our executive officers and directors will enter into our standard form of indemnification agreement,
as described in Item 1.01.
Approval
of Employment Agreement
On
December 20, 2019, we entered into an Executive Employment Agreement with Mr. Cutaia (the “Employment Agreement”),
which terminates and replaces his original employment agreement dated November 1, 2014, as subsequently amended by an amendment
dated October 30, 2019. The Employment Agreement sets forth the terms and conditions of Mr. Cutaia’s employment. The Employment
Agreement is for a four-year term, and can be extended for additional one-year periods. In addition to certain payments due to
Mr. Cutaia upon termination of employment, the Employment Agreement contains customary non-competition, non-solicitation, and
confidentiality provisions. Mr. Cutaia is entitled to an annual base salary of $430,000, which shall not be subject to reduction
during the initial term, but will be subject to annual reviews and increases, if and as approved in the sole discretion of our
Board, after it has received and reviewed advice from the Compensation Committee (who may or may not utilize the services of its
outside compensation consultants, as it shall determine under the circumstances). In addition, Mr. Cutaia is eligible to receive
performance-based cash and/or stock bonuses upon attainment of performance targets established by our Board in its sole discretion,
after it has received and reviewed advice from the Compensation Committee (who may or may not utilize the services of its outside
compensation consultants, as it shall determine under the circumstances). The Company shall make annual equity grants to Mr. Cutaia
as determined by our Board in its sole discretion, after it has received and reviewed advice from the Compensation Committee (who
may or may not utilize the services of its outside compensation consultants, as it shall determine under the circumstances). Finally,
Mr. Cutaia is eligible for certain other benefits, such as health, vision, and dental insurance, life insurance, and 401(k) matching.
The
Employment Agreement provides that Mr. Cutaia is entitled to the following severance package in the event he is “terminated
without cause,” “terminated for good reason,” or “terminated upon permanent disability”: (i) monthly
payments of $35,833 or such sum equal to his monthly base compensation at the time of the termination, whichever is higher, for
a period of 36 months from the date of such termination and (ii) reimbursement for COBRA health insurance costs for 18 months
from the date of such termination and, thereafter, reimbursement for health insurance costs for Mr. Cutaia and his family
during the immediately subsequent 18-month period. In addition, all of Mr. Cutaia’s then-unvested RSAs or other awards
will immediately vest, without restriction, and any unearned and unpaid bonus compensation, expense reimbursement, and all accrued
vacation, personal, and sick days, and related items shall be deemed earned, vested, and paid immediately. For purposes of the
Employment Agreement, “terminated without cause” means if Mr. Cutaia were to be terminated for any reason other than
a discharge for cause or due to Mr. Cutaia’s death or permanent disability. For purposes of the Employment Agreement, “terminated
for good reason” means the voluntary termination of the Employment Agreement by Mr. Cutaia if any of the following were
to occur without his prior written consent, which consent cannot be unreasonably withheld considering our then-current financial
condition, and, in each case, which continues uncured for 30 days following receipt by us of Mr. Cutaia’s written notice:
(i) there is a material reduction by us in (A) Mr. Cutaia’s annual base salary then in effect or (B) the annual target bonus,
as set forth in the Employment Agreement, or the maximum additional amount up to which Mr. Cutaia is eligible pursuant to the
Employment Agreement; (ii) we reduce Mr. Cutaia’s job title and position such that Mr. Cutaia (A) is no longer our Chief
Executive Officer; (B) is no longer our Chairman of the Board; or (C) is involuntarily removed from our Board; or (iii) Mr. Cutaia
is required to relocate to an office location outside of Orange County, California, or outside of a 30-mile radius of Newport
Beach, California. For purposes of the Employment Agreement, “terminated upon permanent disability” means if Mr. Cutaia
were to be terminated because he is then unable to perform his duties due to a physical or mental condition for (i) a period of
120 consecutive days or (ii) an aggregate of 180 days in any 12-month period.
Approval
of 2019 Omnibus Incentive Plan
On
December 20, 2019, we held the 2019 Annual Meeting of Stockholders (the “Meeting”), at which our stockholders approved
and adopted the Verb Technology Company, Inc. 2019 Omnibus Incentive Plan (the “Plan”), as discussed further under
Item 5.07 of this Current Report on Form 8-K. Our Board had approved the Plan on November 11, 2019.
The
Plan is described in more detail in our Definitive Proxy Statement for the Meeting, which was filed with the Securities and Exchange
Commission on November 12, 2019 (the “Proxy Statement”) under the heading “Proposal 2 – Approval of the
2019 Omnibus Incentive Plan.” The descriptions and summaries contained in the Proxy Statement are incorporated herein by
reference, do not purport to be complete, and are qualified in their entirety by reference to the full text of the Plan, which
was filed as Exhibit 4.13 to our Registration Statement on Form S-8 filed with the Securities and Exchange Commission on December
23, 2019, and is referenced in Item 9.01 as Exhibit 10.58.
Item
5.07 Submission of Matters to a Vote of Security Holders.
A
total of 23,524,753 shares of our Common Stock were issued and outstanding as of the record date of the Meeting, November 12,
2019, and a total of 15,581,842 shares of our Common Stock were present or represented by proxy and voted at the Meeting, constituting
a quorum. The following proposals were voted on at the Meeting, as described in greater detail in the Proxy Statement:
Proposal
1 – Election of Directors. Our stockholders duly elected Rory J. Cutaia, James P. Geiskopf, Phillip J. Bond, and Kenneth
S. Cragun by at least a plurality of the votes cast, to serve until their successors are elected and qualified or until their
earlier resignation or removal. The results of the voting are as follows:
|
|
For
|
|
|
Withheld
|
|
|
Broker
Non-Votes
|
|
Rory J. Cutaia
|
|
|
7,825,532
|
|
|
|
121,914
|
|
|
|
7,634,396
|
|
James P. Geiskopf
|
|
|
7,804,734
|
|
|
|
142,712
|
|
|
|
7,634,396
|
|
Phillip J. Bond
|
|
|
7,829,922
|
|
|
|
117,524
|
|
|
|
7,634,396
|
|
Kenneth S. Cragun
|
|
|
7,837,804
|
|
|
|
109,642
|
|
|
|
7,634,396
|
|
Proposal
2 – To approve the Verb Technology Company, Inc. 2019 Omnibus Incentive Plan. Our stockholders approved the Plan. The
results of the voting are as follows:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Broker
Non-Votes
|
|
|
|
|
7,277,959
|
|
|
|
660,252
|
|
|
|
9,235
|
|
|
|
7,634.396
|
|
Proposal
3 – To approve for purposes of Nasdaq Listing Rules 5635(b) and (d), the issuance by us of up to 3,245,162 shares of our
Common Stock upon conversion of 5,030 shares of the Company’s Series A convertible preferred stock and up to 3,245,162 shares
of our Common Stock upon exercise of warrants. Our stockholders approved, for purposes of Nasdaq Listing Rules 5635(b) and
(d), the issuance by us of up to 3,245,162 shares of our Common Stock upon conversion of 5,030 shares of the Company’s Series
A convertible preferred stock and up to 3,245,162 shares of our Common Stock upon exercise of warrants. The results of the voting
are as follows:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Broker
Non-Votes
|
|
|
|
|
7,620,506
|
|
|
|
308,597
|
|
|
|
18,343
|
|
|
|
7,634.396
|
|
Proposal
4 – To approve, on an advisory, non-binding basis, the compensation of named executive officers described in the Proxy Statement
under the section titled “Executive Compensation,” including the compensation tables and other narrative executive
compensation disclosures therein, required by Item 402 of Regulation S-K (the “Say-on-Pay Proposal”). Our stockholders
approved, on a non-binding, advisory basis, the Say-on-Pay Proposal. The results of the voting are as follows:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Broker
Non-Votes
|
|
|
|
|
7,708,377
|
|
|
|
229,036
|
|
|
|
10,033
|
|
|
|
7,634.396
|
|
Proposal
5 – To approve, on an advisory, non-binding basis, the frequency that stockholder advisory votes to approve the compensation
of the named executive officers will be taken (the “Say-on-Pay Frequency”). Our stockholders voted, on a non-binding,
advisory basis, for a three-year interval for the Say-on-Frequency Proposal. The results of the voting are as follows:
|
|
1 Year
|
|
|
2 Year
|
|
|
3 Year
|
|
|
Abstain
|
|
|
|
|
2,738,833
|
|
|
|
63,526
|
|
|
|
5,129,870
|
|
|
|
15,217
|
|
In
light of the results for the Say-on-Frequency Proposal, and consistent with the recommendation of our Board to stockholders in
the Proxy Statement, our Board has determined that we will hold a non-binding advisory vote on the compensation of our named executive
officers every three years until the next required vote by stockholders on the frequency that their advisory vote to approve the
compensation of our named executive officers is taken.
Proposal
6 – To ratify the appointment of Weinberg & Company, P.A. as our independent registered public accounting firm.
Our stockholders ratified the appointment of Weinberg & Company, P.A., as our independent registered public accounting firm.
The results of the voting are as follows:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Broker
Non-Votes
|
|
|
|
|
15,281,692
|
|
|
|
124,737
|
|
|
|
175,413
|
|
|
|
0
|
|
Proposal
7 – To approve the postponing or adjourning of the Meeting, if necessary or appropriate. Our stockholders approved the
postponing or adjourning of the Meeting, if necessary or appropriate. The voting results are as follows:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Broker
Non-Votes
|
|
|
|
|
13,892,923
|
|
|
|
1,549,946
|
|
|
|
138,973
|
|
|
|
0
|
|