Item 5.02. Departure of Directors or
Principal Officers; Election of Directors; Appointment of Principal Officers
On August 13, 2020:
(1) David
Moradi, 44, a director since 2019, was appointed Interim Chief Executive Officer and Chief Strategy Officer. Mr. Moradi will
continue to serve as a director. Mr. Moradi is an entrepreneur and an investor and advisor to technology companies. In
September 2018, Mr. Moradi founded and became Chief Executive Officer of Sero Capital LLC, a private investment firm that
focuses on growth opportunities in the technology sector. Mr. Moradi also co-founded and is Executive Chairman of First
Contact Entertainment Inc., a virtual reality video game development studio. Prior to founding Sero Capital, Mr. Moradi was
Founder and CEO of Anthion Management, a technology-focused fund which grew over $1B in assets under management. In 2013,
Anthion was converted to a family office investing in various asset classes including early stage technology companies,
public equities, corporate debt and real estate. Prior to Anthion, Mr. Moradi was a Portfolio Manager at Pequot Capital
Management and an analyst and Portfolio Manager for Soros Fund Management. Mr. Moradi started his career as a special
situations analyst for Imperial Capital LLC in 2000. Mr. Moradi holds a B. A. in psychology from the University of
California, Los Angeles. He is also Founder and Chairman of the David Moradi Foundation, a charitable foundation supporting
education and veterans. A description of Mr. Moradi’s employment agreement with the Company and the performance
share awards grant to him in connection with becoming the Company’s Interim Chief Executive Officer and Chief Strategy
Officer is included below.
(2) Dominic Varacalli, 32, was appointed President. From June 2020, Mr. Varacalli was Chief Technology Officer of the Company. From
June 2019 to May 2020, he was Founding Partner of Kickstand LLC, a software agency in Portland, Oregon. From August 2015 until
May 2019, he was Director of Engineering at The Kroger Co. in Cincinnati, Ohio where he managed teams of software engineers. The
Company and Mr. Varacalli are in the process of negotiating a compensation arrangement.
(3) Heath Thompson, 60, ceased to be Chief Executive Officer. Mr. Thompson entered into a separation agreement pursuant to which he
will receive six months of COBRA payments. He will also receive a separation payment of six months of salary, as provided for in
his employment agreement. The Company and Mr. Thompson are negotiating a consulting agreement.
On August 20, 2020,
Mr. Moradi and the Company entered into an Employment Agreement (the “Employment Agreement”). Pursuant to the Employment
Agreement, Mr. Moradi will receive an annual salary of $1. On the same date, Mr. Moradi received 260,000 performance share awards
(the “PSAs”) that were granted under the Company’s 2019 Equity Incentive Plan, as amended (the “Plan”).
Each PSA represents a contingent right to receive a share of the Company’s common stock upon vesting of the PSA. The PSAs
will vest based on the Company’s achievement of performance conditions relating to its monthly recurring revenue and stock
price as follows:
Performance
Condition
|
|
Number
of Performance Shares
Vesting if
Performance Condition
Achieved
|
|
|
|
Monthly recurring revenue greater than or equal
to $3.0 million for two consecutive calendar months
|
|
55,000
|
|
|
|
Monthly recurring revenue greater than or equal
to $5.0 million for two consecutive calendar months
|
|
50,000
|
|
|
|
Volume Weight Average Price (“VWAP”)
greater than or equal to $25 on The Nasdaq Stock Market LLC (“NASDAQ”) over 20 consecutive trading days
|
|
55,000
|
|
|
|
VWAP greater than or equal to $50 on NASDAQ
over 20 consecutive trading days
|
|
50,000
|
|
|
|
VWAP greater than or equal to $100 on NASDAQ
over 20 consecutive trading days
|
|
50,000
|
Any PSAs that have
not vested on or prior to August 20, 2025 will be forfeited. Mr. Moradi must be serving as the Company’s Interim Chief Executive
Officer or its Chief Strategy Officer as of the date the applicable performance condition is achieved for the related PSAs to
vest. Any unvested PSAs will become fully vested if, on or prior to August 20, 2025, Mr. Moradi’s employment is terminated
by the Company without cause.
The Employment Agreement
also provides that the Company will pay Mr. Moradi a gross-up payment for any excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) and any interest or penalties with respect to such excise tax, plus
the amount necessary to put Mr. Moradi in the same after-tax position that he would have been in if he had not incurred any tax
liability under Section 4999 of the Code, in the event that any payments, rights, benefits, distributions, or entitlements provided
or to be provided by the Company or any of its affiliates to Mr. Moradi or for his benefit pursuant to the terms of the Employment
Agreement, the PSA agreement or otherwise would constitute parachute payments within the meaning of Section 280G of the Code.
The foregoing summary
of the Employment Agreement and grant of PSAs is qualified in its entirety by reference to the full text of the Employment Agreement
and the PSA agreement, copies of which are filed herewith as Exhibit 10.1 and Exhibit 10.2, respectively.