| Item 5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Adoption of Executive Severance Plan
Effective December 5, 2022, following a review
of our existing severance and change in control practices, and based on the recommendation of the Compensation Committee of the Board
of Directors following its review of current market practices in consultation with its independent compensation consultant, the Board
of Directors approved and adopted an Executive Severance Plan (“Plan”) applicable to all of our executive officers (collectively,
“Executives”).
Executives covered by the Plan will generally
be eligible to receive severance benefits in the event of a termination by us without Cause or by the Executive for Good Reason. Good
Reason is a defined term under the Plan and generally includes a material reduction in the executive’s annual base salary; a relocation
of the Executive’s principal workplace by more than 50 miles that increases the Executive’s one way commute based on his or
her residence as of immediately prior to the time that the relocation is announced by at least 50 miles; or a material reduction in the
Executive’s duties, authority or responsibilities. Cause is a defined term under the Plan and generally includes Executive’s
breach in any material respect or failure to fulfill in any material respect the fiduciary duty owed to us; breach in any material respect
the terms of Executive’s employment agreement with us, if any, or any other confidentiality or non-solicitation, non-competition
agreement between us and Executive; pleads guilty to or is convicted of a felony; is found to have engaged in any reckless, fraudulent,
dishonest or grossly negligent misconduct; or violates any material rule, regulation or policy of ours that may be established and made
known to our employees from time to time, including without limitation, our employee handbook. Change in Control is also a defined term
under the Plan and generally includes the acquisition of stock representing more than 50% of our voting power; a merger, consolidation
or similar transaction; or the sale or other disposition of all or substantially all of our assets.
Under the Plan, in the event of a termination
by us without Cause or by the Executive for Good Reason three (3) or more months prior to a Change in Control or more than twelve (12)
months following a Change in Control, the severance benefits for the Executive shall generally consist of continued payment of base salary
following the date of such Executive’s termination of employment, plus reimbursement for the cost of continued group health insurance
coverage, for the applicable severance period, which is twelve (12) months for C-level Executives and six (6) months for Executives who
are vice presidents.
Under the Plan, in the event of a termination
by the Company without Cause or by the Executive for Good Reason, in each case within three (3) months prior to a Change in Control or
within twelve (12) months following a Change in Control, the severance benefits for the Executive shall consist of the following:
·
payment of a lump sum amount equal to the Executive’s base salary and target bonus, plus reimbursement for the cost of continued
group health insurance coverage, for the number of months in the applicable severance period, which is twenty-four (24) months for C-level
Executives and twelve (12) months for Executives who are vice presidents; and
·
immediate vesting in full of all of the Executive’s outstanding equity awards; provided, however, if vesting is otherwise based
on satisfaction of performance objectives, such objectives shall be deemed satisfied at 100% of target for each performance period.
To the extent an Executive is currently a party
to an existing agreement with us providing for severance benefits, such Executive has the ability, following the occurrence of an event
entitling such Executive to receive severance benefits, to elect whether to receive the benefits under the existing agreement or the Plan.
Receipt of severance benefits under the Plan is
conditioned upon the Executive’s execution of a separation agreement containing, among other provisions, a general release of all claims
in favor of us.
Payments are designed to comply with Section 409A
of the Internal Revenue Code (the “Code”). In addition, if any payment under the Plan would constitute an excess parachute
payment within the meaning of Section 280G of the Code, the payments will be reduced to the minimum extent necessary so that no portion
of any payment or benefit will constitute an excess parachute payment, provided however, that the reduction will be made only if and to
the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided, determined on an after
tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision, or any other tax).
We have the right, in our sole discretion, to
amend the Plan or to terminate it prospectively, provided that the Plan may not be amended in any manner which is materially adverse to
any Executive without that Executive’s written consent.
The foregoing summary is qualified in its entirety
by reference to the Plan filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.