Item
5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
Appointment
of Scott L. Kauffman as Interim Chief Executive Officer
On
January 23, 2020, the Company’s Board of Directors appointed Scott L. Kauffman as the Company’s Interim Chief Executive
Officer, effective immediately.
Mr. Kauffman, age 63, was
the Chairman and Chief Executive Officer of New York-based MDC Partners, a publicly traded global advertising agency holding company,
from 2015 to 2018 and served as a member of its board of directors from 2006 to 2019. Previously, Mr. Kauffman was recruited to
Silicon Valley by Kleiner Perkins, where he ran several early-stage venture-backed companies, including AdKnowledge, Coremetrics,
MusicNow, Zinio and BlueLithium. Mr. Kauffman was also Vice President & General Manager of online services for CompuServe,
and a presenting member on the road show for one of the Internet industry’s first successful IPOs, led by Goldman Sachs.
As early as 1992, Ad Age named Mr. Kauffman one of the top 100 marketers in the country, and in 1996 named him one of 20 “Digital
Media Masters.” More recently he was recognized among the Wall Street Journal’s “Advertising Industry Executives
to Watch” in 2016 and 2017, and one of Adweek’s 2017 “Power Players.”
There
are no arrangements or understandings between Mr. Kauffman and any other person pursuant to which he was appointed as an officer
and there are no family relationships between Mr. Kauffman and any director or executive officer of the Company. Mr. Kauffman
has not entered into or proposed to enter into any transactions required to be reported under Item 404(a) of Regulation
S-K.
On
January 22, 2020, the Company’s Compensation Committee approved an Employment Agreement between the Company and Mr. Kauffman
(the “Kauffman Employment Agreement”). The Kauffman Employment Agreement was executed on January 23, 2020.
The Kauffman Employment Agreement includes the following terms, among others:
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For
service as the Company’s Interim Chief Executive Officer, the Company will accrue
a cash balance on Mr. Kauffman’s behalf at the rate of $50,000 per month (the
“Accruals”). If the Company’s Board of Directors determines
in its sole discretion that the Company has achieved a Success Event (as defined in the
Kauffman Employment Agreement), Mr. Kauffman will receive payment of 50% of the Accruals
in cash and 50% of the Accruals by the issuance of shares of the Company’s common
stock (valued at the average closing price of the Company’s shares on the five
days immediately prior to the announcement of the Success Event). If a Success Event
does not occur, the entire amount of the Accruals will receive the same senior secured
status as the Company’s existing or future debt holders of the Company.
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The
Company will grant Mr. Kauffman a stock option (the “Stock Option”)
to purchase an aggregate of 770,000 shares of the Company’s common stock, subject
to adjustment for certain dilutive events. Fifty percent (50%) of the Stock Option shall
vest immediately on the date of the Kauffman Employment Agreement, and the remaining
fifty percent (50%) of the Stock Option will vest ratably (on a monthly basis in arrears)
over a period of 48 months from the date of the Kauffman Employment Agreement, subject
to Mr. Kauffman’s continued relationship with the Company pursuant to the Kauffman
Employment Agreement or a Subsequent Agreement (defined below).
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If
the Company becomes stabilized and sustainable under Mr. Kauffman’s leadership,
the parties to the Kauffman Employment Agreement contemplate that Mr. Kauffman will become
the Company’s Chief Executive Officer pursuant to a more formal, longer-term employment
agreement (a “Subsequent Agreement”).
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If
there is a change in control of the Company, unrelated to an event of insolvency, while
Mr. Kauffman is retained under the Kauffman Employment Agreement and no Subsequent
Agreement has been entered into, the Accruals shall be doubled, and fifty percent (50%)
of the Stock Option that has not vested as of such time shall vest immediately.
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The
Kauffman Employment Agreement contains customary provisions related to confidentiality,
non-solicitation and indemnification.
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The
foregoing summary of the Kauffman Employment Agreement does not purport to be complete and is qualified in its entirety by reference
to the Kauffman Employment Agreement which is filed as Exhibit 10.1 to this Form 8-K.
Resignation
of Thomas J. Pallack as Chief Executive Officer and Director
On
January 16, 2020, Thomas J. Pallack provided notice to the Company’s Board of Directors of his intent to resign as the Chief
Executive Officer and as a member of the Board of Directors for personal reasons. His resignation became effective on January 22,
2020. Mr. Pallack’s resignation did not relate to any disagreement with the Company on any matter relating to the Company’s
operations, policies or practices.
In
connection with Mr. Pallack’s resignation, the Company and Mr. Pallack entered into the Separation Agreement referred to
in Item 1.02 of this Form 8-K, pursuant to which the Company will pay Mr. Pallack, on certain dates set forth therein, an aggregate
of $69,873.82 in respect of unpaid salary, accrued but unused vacation, unreimbursed expenses and attorneys’ fees incurred
by Mr. Pallack in connection with the preparation of the Separation Agreement, and the parties agreed to a mutual general release
of claims. The Company also agreed to waive the applicable premium otherwise payable for continuation of health insurance coverage
for Mr. Pallack, his spouse and eligible dependents under The Consolidated Omnibus Budget Reconciliation Act, or COBRA,
until the earlier of (a) December 31, 2020 or (b) the date that Mr. Pallack obtains comparable health insurance coverage
from new employment. The Company and Mr. Pallack also entered into an indemnification agreement with respect to Mr. Pallack’s
prior service as an officer of the Company, which agreement was signed concurrently with the execution of the Separation Agreement.
The foregoing reflects all of the payments to be made to Mr. Pallack under the Separation Agreement, and the Company is not required
to, and will not, make any severance payments to Mr. Pallack in connection with his resignation from the Company.
The
foregoing summary of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference
to the Separation Agreement which is filed as Exhibit 10.2 to this Form 8-K.