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
January 22, 2020, the Company entered into an employment agreement with Carleton M. Miller in connection with his appointment
as Chief Executive Officer of the Company, as previously announced on January 16, 2020 (the “Miller Employment Agreement”).
Pursuant to the Miller Employment Agreement, Mr. Miller will receive an annual base salary of $330,000 per year, and an annual
cash bonus in accordance with the terms of any annual cash bonus incentive plan maintained for the Company’s key executive
officers.
As
Mr. Miller’s employment is on an “at-will” basis, the Company or Mr. Miller may terminate the employment relationship
at any time, with or without Cause (as defined in the Miller Employment Agreement). Upon Mr. Miller’s termination of employment
for any reason, Mr. Miller will be entitled to receive a lump sum payment equal to the sum of his earned but unpaid base salary
through his termination date plus his accrued but unused vacation days through his termination date, and any other benefits or
rights Mr. Miller has accrued or earned through his termination date in accordance with the terms of the applicable fringe or
employee benefit plans and programs of the Company (the “Accrued Obligations”).
In
addition, if Mr. Miller’s employment with the Company is terminated by the Company without Cause (as defined in the Miller
Employment Agreement), or by Mr. Miller for Good Reason (as defined in the Miller Employment Agreement), then in addition to the
Accrued Obligations, Mr. Miller will receive the following, subject to his execution of a release of the Company: (i) the annual
bonus, if any, Mr. Miller earned (based on actual performance) for the fiscal year ended prior to his termination date; (ii) the
annual bonus, if any, that Mr. Miller would have earned (based on actual performance) for the fiscal year that includes his termination
date, pro-rated to reflect services performed for the portion of the fiscal year that precedes his termination date; (iii) base
salary continuation (determined without regard to any reduction in base salary that constitutes Good Reason) in accordance with
the Company’s payroll practices for a period of 18 months following Mr. Miller’s termination date, provided that if
Mr. Miller’s employment is terminated by the Company without Cause or he resigns for Good Reason within 13 months after
a Change in Control of the Company (as defined in the Miller Employment Agreement) Mr. Miller will receive 1.5 times the sum of
his base salary and target annual bonus, payable in installments over 18 months in accordance with the Company’s payment
practices; and (iv) reimbursement for COBRA premiums, if any, paid by Mr. Miller for such continuation coverage for himself, his
spouse and dependents under the Company’s group health, dental and vision plans for 18 months or until such COBRA continuation
coverage otherwise expires.
The
foregoing description of the Miller Employment Agreement is not complete and is qualified in its entirety by reference to the
full text of the Miller Employment Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
The
Miller Employment Agreement also provides that Mr. Miller will receive an inducement award of a time-based option to purchase
2,155,481 shares of the Company’s common stock under NASDAQ Listing Rule 5653(c)(4) outside of the Company’s existing
equity compensation plans (the “Time-Based Option”), 25% of which will vest on January 22, 2021 and the remaining
75% of which will vest in substantially equal monthly installments over the 36-month period following such date, subject to Mr.
Miller’s continued employment by the Company on the applicable vesting date. Pursuant to the Miller Employment Agreement,
Mr. Miller will also receive an inducement award of a performance-based option to purchase 1,500,000 shares of the Company’s
common stock under NASDAQ Listing Rule 5653(c)(4) outside of the Company’s existing equity compensation plans (the “Performance-Based
Option”). The Performance-Based Option will vest in three equal tranches of 500,000 shares upon the Company’s attainment,
on or before the fifth anniversary of January 22, 2020, of specified cumulative EBITDA performance conditions, subject in each
case to Mr. Miller’s continued employment by the Company on the applicable vesting date.
The
foregoing descriptions of the Time-Based Option and Performance-Based Option are not complete and are qualified in their entirety
by reference to the full text of the Form of Notice of Grant of Stock Option for Time-Vested Options and Stock Option Agreement
by and between the Company and Carleton Miller, dated as of January 22, 2020, and the Form of Notice of Grant of Stock Option
for Performance-Vested Options and Stock Option Agreement by and between the Company and Carleton Miller, dated as of January
22, 2020, which are attached hereto as Exhibits 10.2 and 10.3 and are incorporated herein by reference.
Mr.
Miller’s Time-Based Option and Performance-Based Option have an exercise price per share equal to $0.285, the closing price
of the Company’s common stock on the Nasdaq Stock Market on the date on which the Board approved the Time-Based Option and
Performance-Based Option. The issuance of the Time-Based Option and the Performance-Based Option to Mr. Miller will be exempt
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder.