Item 1.01 Entry into a Material Definitive Agreement.
On January 23, 2020, SITO Mobile Ltd. (the "Company") entered into an Employment
Agreement (the "Employment Agreement") with Scott L. Kauffman, as more
particularly described in Item 5.02 to this Current Report on Form 8-K (this
"Form 8-K").
Item 1.02 Termination of a Material Definitive Agreement.
On January 22, 2020, Thomas J. Pallack, the Company's Chief Executive Officer
and a member of the Company's Board of Directors, voluntarily resigned as Chief
Executive Officer and as a Director of the Company. In connection with such
resignation, the Company entered into a Separation Agreement and Mutual Release
(the "Separation Agreement") with Mr. Pallack, and the parties terminated that
certain Employment Agreement, dated July 24, 2017, by and between the Company
and Mr. Pallack, except with respect to certain restrictive covenants and
indemnification provisions. Mr. Pallack's Employment Agreement was filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on
July 24, 2017.
Please refer to Item 5.02 to this Form 8-K, under the heading "Resignation of
Thomas J. Pallack as Chief Executive Officer and Director," for a description of
the material terms of the Separation Agreement.
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:
? 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.
? 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").
? 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.
? The Kauffman Employment Agreement contains customary provisions related to
confidentiality, non-solicitation and indemnification.
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.
Item 7.01 Regulation FD Disclosure.
On January 23, 2020, the Company issued a press release announcing the
appointment of Mr. Kauffman and the resignation of Mr. Pallack, the text of
which is furnished as Exhibit 99.1 hereto.
The information in this Item 7.01 and Exhibit 99.1 attached hereto is furnished
pursuant to the rules and regulation of the SEC and shall not be deemed "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act") or otherwise subject to the liabilities of that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of 1933,
as amended, or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is furnished as an exhibit to this
Current Report on Form 8-K:
Exhibit Number Description
10.1 Employment Agreement, dated January 22, 2020, by and between SITO
Mobile Ltd. and Scott L. Kauffman
10.2 Separation Agreement, dated January 22, 2020, by and between SITO
Mobile Ltd. and Thomas J. Pallack
99.1 Press Release of SITO Mobile Ltd. dated January 23, 2020
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