| Item
5.02 |
Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Appointment
of Chief Financial Officer
On
August 22, 2022, the Board appointed David E. Hollingsworth as Chief Financial Officer of the Company, effective as of August 22, 2022,
to serve until a successor is chosen and qualified, or until his earlier resignation or removal. Mr. Hollingsworth will also serve as
the Company’s principal accounting officer and principal financial officer. Mr. Hollingsworth had previously served as the Company’s
Interim Chief Financial Officer since January 14, 2022.
Mr.
Hollingsworth, age 42, is a senior level accounting professional with extensive experience in financial reporting, analysis, regulation,
and supervision. From March 2021 until his appointment as the Company’s Interim Chief Financial Officer in January 2022, Mr. Hollingsworth
served as a consultant with Bridgepoint Consulting, a provider of financial, technology, and management consulting services, and served
as the Company’s Controller under a consulting agreement between the Company and Bridgepoint Consulting. From January 2020 until
March 2021, he served as Controller at Wondercide LLC, a pest control manufacturer. Before that, he worked as a Controller Consultant
at Bridgepoint Consulting from October to December 2019. From September 2018 to September 2019, Mr. Hollingsworth served as Financial
Controller of CPI Products, a manufacturer of plastic products, where he oversaw accounting and financial functions, directed human resources
for corporate staff at three manufacturing locations, and designed and implemented department performance criteria and tracking. From
May 2015 until August 2018, Mr. Hollingsworth served as Corporate Controller of Sunworks Inc, a provider of solar power systems. Mr.
Hollingsworth holds a Master of Business Administration from Weber State University and a Bachelor of Science degree in Accounting from
Brigham Young University – Idaho.
There
is no family relationship between Mr. Hollingsworth and any director or executive officer of the Company. There are no transactions between
Mr. Hollingsworth and the Company that would be required to be reported under Item 404(a) of Regulation S-K of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
Executive
Employment Agreement
In
connection with Mr. Hollingsworth’s appointment, on August 23, 2022, the Company entered into an executive employment agreement
(the “Employment Agreement”) with Mr. Hollingsworth setting forth the terms and conditions of Mr. Hollingsworth’s employment
as the Company’s Chief Financial Officer, effective August 23, 2022. Pursuant to the Employment Agreement, Mr. Hollingsworth will
serve as the Chief Financial Officer of the Company for a two-year initial term commencing on August 23, 2022, which term may be renewed
for up to two successive one-year terms, unless earlier terminated by either party in accordance with the terms of the Employment Agreement.
The
Employment Agreement provides that Mr. Hollingsworth will be entitled to receive an annual base salary of two hundred-thirty thousand
dollars ($230,000), payable in equal installments semi-monthly pursuant to the Company’s normal payroll practices. For each fiscal
year during the employment period, Mr. Hollingsworth is eligible to receive periodic bonuses of up to 40% of his annual base salary upon
achievement of target objectives and performance criteria, payable on or before March 15 of the fiscal year following the fiscal year
to which the bonus relates. Targets and performance criteria shall be established by the Board after consultation with Mr. Hollingsworth
and the Company’s Chief Executive Officer, but the evaluation of Mr. Hollingsworth’s performance shall be at the Board’s
sole discretion. The Employment Agreement also entitles Mr. Hollingsworth to receive customary benefits and reimbursement for ordinary
business expenses.
In
connection with Hollingsworth’s appointment and as an inducement to enter into the Employment Agreement, the Company granted Mr.
Hollingsworth 100,000 shares of the Company’s restricted common stock, which shares shall vest in tranches of 25,000 shares upon
the achievement of certain stock price, market capitalization and business milestones.
The
Company may terminate Mr. Hollingsworth’s employment due to death or disability, for cause (as defined in the Employment Agreement)
at any time after providing written notice to Mr. Hollingsworth, and without cause at any time upon thirty days’ written notice.
Mr. Hollingsworth may terminate his employment without good reason (as defined in the Employment Agreement) at any time upon thirty days’
written notice or with good reason, which requires delivery of a notice of termination within ninety days after Mr. Hollingsworth first
learns of the existence of the circumstances giving rise to good reason, and failure of the Company to cure the circumstances giving
rise to the good reason within thirty days following delivery of such notice.
If
Mr. Hollingsworth’s employment is terminated by the Company for cause, as a result of Mr. Hollingsworth’s resignation or
as a result of the expiration of the term of the Employment Agreement, Mr. Hollingsworth shall receive, within thirty days of such termination,
any accrued but unpaid base salary and expenses required to be reimbursed pursuant to the Employment Agreement. If Mr. Hollingsworth’s
employment is terminated due to his death or disability, Mr. Hollingsworth or his estate will receive the accrued obligations Mr. Hollingsworth
would have received upon termination by the Company for cause or by Mr. Hollingsworth by resignation, and any earned, but unpaid, bonus
for services rendered during the year preceding the date of termination.
If
Mr. Hollingsworth’s employment is terminated by the Company without cause (as defined in the Employment Agreement) or by Mr. Hollingsworth
for good reason, Mr. Hollingsworth is entitled to receive the accrued obligations he would have received upon termination by the Company
for cause or by Mr. Hollingsworth by resignation, and any earned, but unpaid, bonus for services rendered during the year preceding the
date of termination. In addition, subject to compliance with the restrictive covenants set forth in the Employment Agreement and the
execution of a release of claims in favor of the Company, the Company will pay the following severance payments and benefits: (i) an
amount equal to twelve months’ base salary, payable in equal monthly installments over a twelve-month severance period; (ii) an
amount equal to the greater of (x) the most recent annual bonus earned by Mr. Hollingsworth, (y) the average of the immediately preceding
two year’s annual bonuses earned by Mr. Hollingsworth, or (z) if Mr. Hollingsworth’s termination of employment occurs during
the first calendar year of the initial employment term before any annual bonus for a full twelve-month period of service has been paid,
then the target bonus Mr. Hollingsworth is eligible for under the Employment Agreement; provided that no bonus amount shall be payable
if the bonuses for the year of termination are subject to achievement of performance goals and such performance goals are not achieved
by the Company for such year; and (iii) an amount intended to assist Mr. Hollingsworth with his post-termination health coverage, provided
however, he is under no obligation to use such amounts to pay for continuation of coverage under the Company’s group health plan
pursuant to COBRA.
The
Employment Agreement also contains customary provisions relating to, among other things, confidentiality, non-competition, non-solicitation,
non-disparagement, and assignment of inventions requirements.
The
description of the Employment Agreement contained in this Item 5.02 is qualified in its entirety by reference to the full text of the
Employment Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.