UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K/A
(Amendment No. 1)
|
x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the fiscal year ended December 31, 2019
|
¨ |
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the Transition Period from to
Commission File Number: 001- 36788
EXELA TECHNOLOGIES, INC.
(Exact name of registrant specified in its charter)
|
Delaware |
|
47-1347291 |
|
(State of or other Jurisdiction
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
| |
|
|
|
2701 E. Grauwyler Rd.
Irving, TX
|
|
75061 |
|
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
Registrant's Telephone Number, Including Area Code: (844)
935-2832
Securities Registered Pursuant to Section 12(b) of the Act:
|
Title
of Each Class |
|
Trading
Symbol |
|
Name
of Each Exchange On Which Registered |
|
Common
Stock, Par Value $0.0001 per share |
|
XELA |
|
The
Nasdaq Stock Market LLC |
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. ¨ Yes x
No
Indicate
by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
¨ Yes x No
Indicate
by check mark whether the Registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. ¨
Yes
x No
Indicate
by check mark whether the Registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the Registrant
was required to submit such files). ¨ Yes
x No
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See definitions of “large
accelerated filer”, “accelerated filer”, “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer ¨ |
Accelerated
filer x |
Non-accelerated
filer ¨ |
Smaller
reporting company x |
| |
|
|
Emerging
growth company ¨ |
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Act). ¨ Yes x No
The aggregate market value of the Registrant’s voting common equity
held by non-affiliates of the Registrant, computed by reference to
the price at which such voting common equity was last sold as of
June 30, 2019, was approximately $92,130,068 (based on a closing
price of $2.18).
As of June 5, 2020, the Registrant had 147,511,430 shares of common
stock outstanding.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (the “Amendment”)
amends the Annual Report on Form 10-K of Exela Technologies, Inc.
(the “Company”) for the fiscal year ended December 31, 2019,
which was originally filed with the Securities and Exchange
Commission (the “SEC”) on June 9, 2020 (the “Original
Report”) to include the information omitted from the Original
Report in reliance on General Instruction G(3) to Form 10-K (the
“Part III Information”). This Amendment is being filed because the
Company has determined to delay the filing of its definitive proxy
statement for its 2020 annual meeting of stockholders (the
“Definitive Proxy Statement”) due to the continuing uncertainty
around COVID-19. The Company expects to hold its 2020 annual
meeting during the second half of the year. On April 20, 2020, the
Company filed a Current Report on Form 8-K (the “April Form 8-K”)
indicating its intention to delay the filing of the Part III
Information in accordance with the SEC’s Order Under Section 36 of
the Securities Exchange Act of 1934 Modifying Exemptions From the
Reporting Requirements For Public Companies, dated March 25, 2020
(Release No. 34-88465)
In addition, in accordance with
Rules 12b-15 and 13a-14 under
the Securities Exchange Act of 1934, as amended, the Company
is amending Part IV, Item 15 to include currently dated
certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 from the Company’s principal executive officer and principal
financial officer. Because no financial statements have been
included in this Amendment, and this Amendment does not contain or
amend any disclosure with respect to
Items 307 and 308 of Regulation S-K,
paragraphs 3, 4 and 5 of the certifications have been omitted.
Similarly, because no financial statements have been included in
this Amendment, certifications pursuant to Section 906 of Oxley Act
of 2002 have been omitted.
Except as described above, this Amendment does not amend, modify or
update the information in, or exhibits to, the Original Report in
any way, and we have not updated disclosures included therein to
reflect any subsequent developments or events. This Amendment
should be read in conjunction with the Original Report and with our
other filings made with the SEC subsequent to the filing of the
Original Report.
* * *
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
Directors
The Company has three classes of directors serving staggered
three-year terms, with Class A consisting of two directorships and
each of Class B and Class C consisting of three directorships. The
terms of the Class A, B and C directorships expire on the date of
the annual meeting in 2021, 2022, and 2020, respectively.
|
Name |
|
Age |
|
|
Class |
|
|
Positions and Offices
Held With the Company |
| Ronald C.
Cogburn |
|
|
64 |
|
|
|
A |
|
|
Director |
| J. Coley Clark |
|
|
74 |
|
|
|
A |
|
|
Director |
| James G.
Reynolds |
|
|
51 |
|
|
|
B |
|
|
Director |
| John H. Rexford |
|
|
63 |
|
|
|
B |
|
|
Director |
| Marc A.
Beilinson |
|
|
62 |
|
|
|
B |
|
|
Director |
| Par S. Chadha |
|
|
65 |
|
|
|
C |
|
|
Director |
| Martin P. Akins |
|
|
53 |
|
|
|
C |
|
|
Director |
| William L.
Transier |
|
|
65 |
|
|
|
C |
|
|
Director |
Class C Directorship—Term Expiring in 2020
Par Chadha
Director since July 2017
Business Experience: Mr. Chadha is our Executive Chairman and
is the founder, Chief Executive Officer and Chief Investment
Officer of HGM, a family office, formed in 2001, and was the
principal stockholder of SourceHOV immediately prior to the July
12, 2017 closing of the Novitex Business Combination Agreement,
which resulted in SourceHOV and Novitex becoming our wholly owned
subsidiaries. Mr. Chadha also served as Chairman of SourceHOV
from 2011 until the closing of the Novitex Business Combination and
as Chairman of our Board of Directors from the closing of the
Novitex Business Combination until March 27, 2020 when he became
our Executive Chairman. Mr. Chadha brings over 40 years
of experience in building businesses in the Americas, Europe and
Asia, including execution of mergers and acquisitions, integration
of businesses and public offerings. Mr. Chadha is a co-founder
of Rule 14, LLC, a leading big data mining and automation
company formed in 2011, and during his career, Mr. Chadha has
founded or co-founded other technology companies in the fields of
metro optical networks, systems-on-silicon and communications.
Through HGM, Mr. Chadha previously participated in director
and executive roles in joint ventures with major financial and
investment institutions, including Apollo, as well as other
portfolio companies of HGM, and currently holds and manages
investments in evolving financial technology, health technology and
communications industries. Since 2005, Mr. Chadha has served
as a Director of HOV Services Limited, a company listed on the
National Stock Exchange of India, acting as its Chairman from 2009
to 2011. Mr. Chadha holds a B.S. degree in Electrical Engineering
from the Punjab Engineering College, India, and completed
graduate-level coursework in computer science at the Illinois
Institute of Technology. We believe Mr. Chadha’s significant
experience in the public information technology and business
services industry and his experience with mergers and integration
of businesses make him well qualified to serve as a director of
Exela.
Martin Akins
Director since July 2019
Business Experience: Mr. Akins most recently served as Senior Vice
President, General Counsel and Corporate Secretary of Express
Scripts Holding Company, a publicly-traded, Fortune 25 company and
the largest independent pharmacy benefit management company in the
United States. In this role, Mr. Akins served as the company’s
chief legal advisor and was also a member of Express Scripts’
senior executive team where he advised the CEO, outlined strategy
to the Board of Directors and led the company through several,
significant strategic transactions. He worked with Express Scripts
from February 2001 through March 2019, serving as SVP and General
Counsel from October 2015 through the closing of the company’s
merger with Cigna, Inc. in December of 2018, and remaining with the
organization in a transitional role for brief period post-closing.
During his tenure with Express Scripts prior to October 2015, Mr.
Akins, served in a variety of legal capacities, including Vice
President and Deputy General Counsel, and Associate General
Counsel. Before joining Express Scripts, Mr. Akins was with the
Polsinelli law firm. Mr. Akins began his legal career with the firm
Thompson Coburn LLP. He received his Juris Doctorate from the
University of Illinois College of Law. We believe that
Mr. Akins’ significant, strategic, legal, regulatory and
governance experience, make him well-qualified to serve as a
director of Exela.
William Transier
Director since April 2020
Business Experience: Mr. Transier is Chief Executive Officer of
Transier Advisors, LLC, an independent advisory firm providing
services to companies facing stressed operational situations,
turnaround, restructuring or in need of interim executive
leadership. He was co-founder of Endeavour International
Corporation, an international oil and gas exploration and
production company. He served as non-executive Chairman of
Endeavour’s Board of Directors from December2014 until November
2015. He served from September 2006 until December 2014 as
Chairman, Chief Executive Officer and President of Endeavour and as
its Chairman and Co-Chief Executive Officer from its formation in
February 2004 through September 2006. Mr. Transier served as
Executive Vice President and Chief Financial Officer of Ocean
Energy, Inc. from March 1999 to April 2003 and prior to that, Mr.
Transier served in various positions of increasing responsibility
with Seagull Energy Corporation. Before his tenure with Seagull,
Mr. Transier served in various roles including partner in the audit
department and head of the Global Energy practice of KPMG LLP from
June 1986 to April 1996. In October 2019, Mr. Transier was elected
to the Board of Directors of Battalion Oil Corporation (which
changed its name from Halcón Resources Corporation) and as Chairman
of the Board and of its audit committee. In March 2019 Mr. Transier
was elected to the Board of Directors of Teekay Offshore GP L.L.C.
(the general partner of Teekay Offshore Partners L.P.) and as
chairman of its audit committee. Teekay was taken private in
January 2020. Since October 2018 Mr. Transier has served as a
member of the Board of Directors of Sears Holding Corporation
including the Board’s Restructuring Committee and Restructuring
Subcommittee. From August 2018 to February 2019, Mr. Transier
served as a member of the Board of Directors of Gastar Exploration,
Inc. From May 2016 to July 2017, Mr. Transier was a member of the
Board of Directors of CHC Group Ltd. From August 2014 to July 2017,
Mr. Transier was a member of the Board of Directors of Paragon
Offshore plc. Mr. Transier graduated from the University of Texas
with a B.B.A. in accounting, has an M.B.A. from Regis University
and has a Master of Arts in Theological Studies from Dallas Baptist
University. We believe that Mr. Transier’s extensive audit,
accounting and financial reporting experience and extensive
professional background provide valuable contributions to the
Company’s board and make him well-qualified to serve as a
director of Exela.
Class A Directors—Term Expiring in 2021
Ronald Cogburn
Director since July 2017
Business Experience: Mr. Cogburn is our Chief Executive
Officer and served as Chief Executive Officer of SourceHOV from
2013 until the closing of the Novitex Business Combination. Mr.
Cogburn has been part of companies that were predecessors to
SourceHOV since 1993, bringing over 30 years of diversified
experience in executive management, construction claims consulting,
litigation support, program management project management, cost
estimating, damages assessment and general building construction.
Mr. Cogburn has also been a principal of HGM since 2003. Prior to
his role as Chief Executive Officer of SourceHOV, Mr. Cogburn was
SourceHOV's President, KPO from March 2011 to July 2013. Prior to
this role, Mr. Cogburn was the President of HOV Services, LLC from
January 2005 to September 2007, providing executive leadership
during the company's growth to its IPO on the India Stock Exchange
in September 2006. Mr. Cogburn has a BSCE in Structural
Design/Construction Management from Texas A&M University and is
a registered Professional Engineer. We believe that
Mr. Cogburn’s significant, diversified business experience in
Exela’s industry make him well-qualified to serve as a director of
Exela.
J. Coley Clark
Director since December 2019
Business Experience: J. Coley Clark is the retired Chief Executive
Officer and Chairman of the Board of BancTec, Inc., a global
provider of document and payment processing solutions and currently
serves on the board of directors of Moneygram International, Inc.
At BancTec, Inc., Mr. Clark was Co-Chairman of the Board from 2014
to December 2016, and Chairman of the Board and Chief Executive
Officer from September 2004 to 2014. In 2004, Mr. Clark retired
from Electronic Data Systems Corporation, or EDS, an outsourcing
services company that was acquired by Hewlett-Packard in 2008, as
Senior Vice President and head of the Financial and Transportation
Industry Group. Mr. Clark joined EDS in 1971 in the Systems
Engineering Development Program and progressed through a variety of
technical, sales and management roles related to the financial and
insurance industries. Prior to his time at EDS, Mr. Clark served
three years in the U.S. Army, attaining the rank of Captain, and
served as a company commander in Europe and Southeast Asia. Mr.
Clark received a Bachelor of Arts in Sociology from the University
of Texas. We believe that Mr. Clark’s significant, diversified
business experience in Exela’s industry make him well-qualified to
serve as a director of Exela.
Class B Directors—Term Expiring in 2022
James G. Reynolds
Director since July 2017
Business Experience: Mr. Reynolds was our Chief Financial Officer
from the closing of the Novitex Business Combination until May
2020. Mr. Reynolds served as Co-Chairman of SourceHOV from 2014
until the closing of the Novitex Business Combination in 2017. Mr.
Reynolds is also the Chief Operating Officer and a Partner at HGM,
bringing over 25 years of industry experience to the team. Prior to
HGM Mr. Reynolds held numerous executive management or senior
advisory positions at SourceHOV and its related subsidiaries and
predecessor companies, including serving as Chief Financial Officer
for HOV Services, LLC from 2007 to 2011 and Vice President and
Corporate Controller for Lason from 2001 to 2006. Mr. Reynolds was
a Senior Manager in the Business Advisory Services Practice at
PricewaterhouseCoopers from 1990 to 2001. Mr. Reynolds is a C.P.A.
and holds a B.S. in Accounting from Michigan State University. We
believe that Mr. Reynold’s significant industry and management
experience make him well-qualified to serve as a director of the
Company.
John H. Rexford
Director since July 2017
Business Experience: Mr. Rexford is the Managing Director of
Ramona Park Consulting LLC, which he founded in 2016, and also
serves as a director of Verra Mobility. Mr. Rexford has over
36 years of finance experience that includes serving as Global
M&A Head from 2010 to 2015 at the Xerox Corporation and serving
in various positions at Affiliated Computer Services, Inc.
(which was acquired by the Xerox Corporation), including Chief
Financial Officer from 2006 to 2007, Executive Vice President from
2001 to 2009 and Senior Vice President of Mergers and Acquisitions
from 1996 to 2001. Mr. Rexford holds a B.S. and a MBA from Southern
Methodist University. We believe that Mr. Rexford’s prior
experiences give him an understanding of the business models,
structures and attributes of Exela, as well as the risks and
operating environment of Exela, which make him well-qualified to
serve as a director of Exela.
Marc A. Beilinson
Director since April 2020
Business Experience: Mr. Beilinson has served as a director of
Athene Annuity, a global annuity company, since 2013. Since August
2011, Mr. Beilinson has been the Managing Director of Beilinson
Advisory Group, a financial restructuring and hospitality advisory
group that specializes in assisting distressed companies. Most
recently, Mr. Beilinson served as Chief Restructuring Officer of
Newbury Common Associates LLC (and certain affiliates) from
December 2016 to June 2017. Mr. Beilinson previously served as
Chief Restructuring Officer of Fisker Automotive from November 2013
to August 2014 and as Chief Restructuring Officer and Chief
Executive Officer of Eagle Hospitality Properties Trust, Inc. from
August 2011 to December 2014 and Innkeepers USA Trust from November
2008 to March 2012. Mr. Beilinson oversaw the Chapter 11
reorganization of Innkeepers USA, Fisker Automotive and Newbury
Common Associates in his interim management roles as the Chief
Restructuring Officer of those companies. Mr. Beilinson currently
serves on the boards of directors of MFG Assurance Company Limited,
Dura Automotive Systems, Sigue Corporation, Acosta, Inc.,
Kingfisher Midstream LLC and KB US, Inc., as well as the audit
committee of MFG Assurance Company Limited. Mr. Beilinson has
previously served on the boards of directors and audit committees
of a number of public and privately held companies, including
Westinghouse Electric, Caesars Acquisition Company, Wyndham
International, Inc., Apollo Commercial Real Estate Finance, Inc.,
Innkeepers USA Trust, Gastar Inc., American Tire, UCI Holdings,
Haggen, Agrokor and Monitronics. Mr. Beilinson graduated from UCLA,
magna cum laude. We believe Mr. Beilinson extensive experience
resulting from over thirty years of service to the boards of both
public and private companies, and his extensive knowledge of legal
and compliance issues, including the Sarbanes-Oxley Act of
2002 make him well-qualified to serve as a director of
Exela.
Additional Information Concerning the Board of Directors of the
Company during 2019
On February 21, 2019, Gordon Coburn resigned from the Board.
On July 29, 2019, Martin P. Akins, was elected to the Company’s
Board and initially appointed to serve as a member of Exela’s Audit
Committee and Nominating and Corporate Governance Committee.
On October 25, 2019, Nathaniel Lipman, and on October 28, 2019,
Joshua Black and Matthew Nord, resigned from the Board of the
Company and all committees of the Board, effective immediately. The
Company notified Nasdaq that as a result of Nathaniel Lipman’s
resignation from the Company’s Board, the Company was no longer in
compliance with Nasdaq Listing Rule 5605(c)(2)(A), which
requires the Company’s Audit Committee to be composed of
at least three independent directors, and Nasdaq Listing Rule
5605(d)(2)(A), which requires the Company’s Compensation Committee
to be composed of at least two independent directors.
On December 2, 2019, J. Coley Clark was elected to the Board of the
Company and appointed as a member of the Audit Committee,
Nominating and Corporate Governance Committee and as chair of the
Compensation Committee. Accordingly, the Company returned to
compliance with Nasdaq Listing Rule 5605(c)(2)(A) and Nasdaq
Listing Rule 5605(d)(2)(A).
Audit Committee
Our board of directors has established an Audit Committee in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act
consisting of Messrs. Beilinson, Clark, Rexford (co-Chairman) and
Transier (co-Chairman). Messrs. Beilinson, Clark, Rexford and
Transier are each independent within the meaning of Section
5605(a)(2) of the NASDAQ Marketplace Rules and meet the additional
test for independence for audit committee members imposed by the
SEC, regulation and Section 5605(c)(2)(A) of the NASDAQ Marketplace
Rules. Our board of directors has determined that each of Messrs.
Transier and Mr. Rexford qualifies as a financial expert.
Executive Officers
The information set forth under the heading “Executive Officers” in
the Company’s Form 10-K for year ended December 31, 2019 amended by
this Amendment No. 1 is incorporated by reference.
Code of Ethics
We make available our code of ethics entitled "Global Code of
Ethics and Business Conduct" free of charge through our website. We
intend to post on our website all disclosures that are required by
law or Nasdaq listing standards concerning any amendments to, or
waivers from, any provision of our code of ethics.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires
our executive officers, directors and persons who own more than 10%
of our Common Stock to file reports with the SEC. Based on a review
of the copies of reports furnished to us, Exela believes that,
during 2019, HGM, Mr. Par Chadha, Mr. Ronald Cogburn, Mr. Shrikant
Sortur, Mr. Suresh Yannamani, Mr. Srini Murali and Mr. Mark
Fairchild were delinquent in their Section 16(a) reporting
obligations based upon shares in Ex-Sigma held by each of the above
persons.
HGM at all relevant times reported beneficial ownership of all of
the shares of Exela held by Ex-Sigma 2. In the third and fourth
quarter of 2019, HGM purchased additional preferred interests in
Ex-Sigma, but as it already reported beneficial ownership of the
underlying shares, HGM did not report the transactions on a Form 4
as its beneficial ownership did not increase. The report was
ultimately made on February 27, 2020.
Each of the foregoing persons had one delinquent transaction except
for Mr. Chadha and HGM, each of whom had two delinquent
transactions, each of which related to the above-described purchase
of additional preferred interests.
Item 11. Executive Compensation
EXECUTIVE COMPENSATION
This section discusses the material components of the executive
compensation program for Exela’s executive officers who are named
in the “Summary Compensation Table” below. As a “smaller reporting
company” as defined in Rule 12b-2 of the Exchange Act, Exela is not
required to include a Compensation Discussion and Analysis and has
elected to comply with the scaled disclosure requirements
applicable to smaller reporting companies. Exela’s named executive
officers for the fiscal year ended December 31, 2019 were as
follows:
|
· |
Ronald C. Cogburn, our
Chief Executive Officer; |
|
· |
Mark Fairchild, our
President, Exela SmartOffice; and |
|
· |
Suresh Yannamani, our
President. |
Summary Compensation Table
The following table sets forth compensation information for our
named executive officers for services performed for the Company and
its subsidiaries for the fiscal years ended December 31, 2019 and
December 31, 2018.
Name and principal
position |
|
Year |
|
|
Salary
($) |
|
|
Bonus
($)(1) |
|
|
Stock Awards
($) |
|
|
Option Awards
($)(2) |
|
|
All Other Compensation
($)(3) |
|
|
Total
($) |
|
Ronald
C. Cogburn
Chief Executive Officer |
|
|
2019 |
|
|
|
325,000 |
|
|
|
— |
|
|
|
— |
|
|
|
98,181 |
|
|
|
845,407 |
|
|
|
1,268,588 |
|
|
|
|
|
2018 |
|
|
|
325,000 |
|
|
|
350,000 |
|
|
|
442,520 |
|
|
|
298,146 |
|
|
|
— |
|
|
|
1,415,666 |
|
|
Mark Fairchild
President, Exela SmartOffice(4)
|
|
|
2019 |
|
|
|
400,000 |
|
|
|
250,000 |
|
|
|
— |
|
|
|
48,295 |
|
|
|
95,012 |
|
|
|
793,307 |
|
Suresh
Yannamani
President |
|
|
2019 |
|
|
|
325,000 |
|
|
|
— |
|
|
|
— |
|
|
|
98,181 |
|
|
|
535,524 |
|
|
|
958,705 |
|
|
|
|
|
2018 |
|
|
|
325,000 |
|
|
|
450,000 |
|
|
|
442,520 |
|
|
|
298,146 |
|
|
|
— |
|
|
|
1,515,666 |
|
|
(1) |
For Mr. Fairchild, the
amount reported in this column includes a one-time special
incentive bonus of $250,000, granted to Mr. Fairchild as
consideration for the termination of his employment agreement, and
paid in 26 equal installments during 2019, subject to his continued
employment through each payment date. For additional information,
please see the “—Narrative to Summary Compensation Table”
below. |
|
(2) |
The
amounts reported in this column represent the aggregate grant date
fair value of stock options granted to the named executive officers
during the applicable fiscal year, calculated in accordance with
FASB ASC Topic 718, disregarding for this purpose the estimate of
forfeitures related to service-based vesting conditions, and do not
necessarily correspond to the actual value that might be realized
by the named executive officers, which depends on the market value
of our Common Stock on a date in the future when the stock options
are exercised. Grants made during the fiscal year ended December
31, 2019, were stock options subject to time-based vesting
conditions. For such time-based vesting awards, the grant date fair
value was calculated by multiplying the Black-Scholes value by the
number of shares of our Common Stock subject to the stock options.
For additional information, including a discussion of the
assumptions used to calculate these values, please see the
“—Outstanding Equity Awards at Fiscal Year End Table” below and
please see note 16 Stock-Based Compensation of the Notes to
the Consolidated Financial Statements in this Annual
Report. |
|
(3) |
In
October 2019, the Company awarded bonuses to certain employees,
including the above named executive officers, who were also
indirect equity holders of Ex-Sigma 2 through their holdings of
Ex-Sigma that had been issued upon the vesting of RSUs granted
under the 2013 Plan. The Company remitted the net amount of
$929,844 toward the outstanding balance on the Margin Loan in order
to benefit such employees. |
|
(4) |
Mr. Fairchild was not
a named executive officer in 2018. |
Narrative to Summary Compensation Table
No Executive Employment Agreements
We have not entered into employment agreements with Messrs.
Cogburn, Fairchild or Yannamani. For a discussion of the severance
pay and other benefits to be provided to our named executive
officers in connection with a termination of employment and/or a
change in control, please see “— Potential Payments Upon
Termination or Change In Control” below.
Termination of Mr. Fairchild’s Agreement
On December 18, 2018, the Company and Mr. Fairchild
mutually agreed to terminate Mr. Fairchild’s employment
agreement with the Company’s subsidiary, BancTec, Inc. In
connection with the termination of the employment agreement, the
Company agreed (i) to pay Mr. Fairchild a special
incentive award in an aggregate amount equal to $250,000 payable in
26 equal bi-weekly payments, subject to his continued employment
through each payment date; however, if his employment was
terminated by the Company, except due to Mr. Fairchild’s gross
negligence or willful misconduct, any remaining amount would have
been payable in a lump sum on the day of termination; and
(ii) in the event Mr. Fairchild’s employment was
terminated without cause (other than due to his death or
disability) prior to August 31, 2019, Mr. Fairchild would have
been entitled to accelerated vesting of the 36,400 restricted stock
units to receive shares of Common Stock that were granted to
Mr. Fairchild on August 30, 2018 and that were scheduled
to vest on August 31, 2019.
The termination of Mr. Fairchild’s employment agreement is part of
the Company’s overall compensation plan to harmonize the employee
benefits of officers of the Company and to eliminate non-conforming
agreements.
Short and Long Term Incentives
With respect to our 2019 fiscal year, none of our named executive
officers received a performance based bonus.
The Compensation Committee approved grants of stock options to our
named executive officers in August 2019 pursuant to our 2018 Plan
(described below). Stock options granted to our named executive
officers vest over 4 years, subject to the executive’s continued
employment with us or one of subsidiaries through such date. For
additional information regarding such grants, please see
“—Outstanding Equity Awards at Fiscal Year End Table” below.
Stock Plans, Health and Welfare Plans, and Retirement
Plans
2018 Stock Incentive Plan
On December 19, 2017, our Board of Directors adopted our 2018 Stock
Incentive Plan, or the 2018 Plan, which was subsequently approved
on December 20, 2017 by the written consent of the holders of a
majority of the shares of our Common Stock, and became effective on
January 17, 2018. The 2018 Plan is administered by the Compensation
Committee of our Board of Directors. Under the 2018 Plan, the
Compensation Committee may grant an aggregate of 8,323,764 shares
of our Common Stock to eligible participants in the form of stock
options, restricted stock awards, restricted stock units, stock
appreciation rights, performance awards and other awards that may
be settled in or based on our Common Stock.
Health and Welfare Plans
Our named executive officers are eligible to participate in our
employee benefits plans, including our medical, dental, vision,
life, disability, health and dependent care flexible spending
accounts and accidental death and dismemberment benefit plans, in
each case on the same basis as all of our other employees.
Retirement Plan
We sponsor a retirement plan intended to qualify for favorable tax
treatment under Section 401(a) of the Internal Revenue Code of
1986, as amended, or the Code, containing a cash or deferred
feature that is intended to meet the requirements of Section 401(k)
of the Code. Employees who meet the eligibility requirements may
make pre-tax contributions to the plan from their eligible earnings
up to the statutorily prescribed annual limit on pre-tax
contributions under the Code. Participants who are 50 years of age
or older may contribute additional amounts based on the statutory
limits for catch-up contributions. All employee and employer
contributions are allocated to each participant’s individual
account and are then invested in selected investment alternatives
according to the participant’s directions. Pre-tax contributions by
participants and contributions that we may make to the plan and the
income earned on those contributions are generally not taxable to
participants until withdrawn, and all contributions are generally
deductible by us when made. Participant contributions are held in
trust as required by law. No minimum benefit is provided under the
plan. An employee is 100% vested in his or her pre-tax deferrals
when contributed and any employer contributions vest ratably over
four years. The plan provides for a discretionary employer matching
contribution, however, we currently do not make any matching
contributions to the plan and did not make any matching
contributions with respect to the 2019 plan year.
Other Compensation Policies and Practices
Insider Trading Policy
Our Insider Trading Policy provides that employees, including our
executive officers and the members of our Board of Directors, are
prohibited from engaging in transactions in our securities if such
employee possesses material, non-public information about the
Company. In addition, certain persons covered by our Insider
Trading Policy must advise our General Counsel before effectuating
any transaction in our securities.
Stock Ownership Guidelines
On December 19, 2017, our Board of Directors adopted Stock
Ownership Guidelines for our non-employee directors, Chief
Executive Officer, Chief Financial Officer and our other executive
officers who report directly to our Chief Executive Officer, which
we refer to here as covered persons. Our Stock Ownership Guidelines
provide that within five years after first becoming subject to the
guidelines, each covered person should own shares of our Common
Stock with a specified fair market value, which is three times the
annual retainer fee in the case of non-employee directors, six
times annual base salary in the case of our Chief Executive
Officer, three times annual base salary in the case of our Chief
Financial Officer and one and one-half times annual base salary in
the case of all other covered persons. Covered persons must retain
their equity until their required ownership amount is met;
provided, that each covered person is at all times permitted to
sell a portion of the shares of our Common Stock underlying his or
her equity based awards to the extent necessary to satisfy any
withholding taxes due in connection with such awards. Included in a
covered person’s ownership amount for purposes of the Stock
Ownership Guidelines are (i) one half of the fair market value
of the shares of our Common Stock underlying vested stock options
(to the extent the fair market value exceeds the applicable
exercise price); and (ii) one half of the shares of our Common
Stock subject to all vested and deferred restricted stock units.
Shares of our Common Stock underlying unvested equity awards are
not counted towards determining a covered person’s stock
ownership.
Outstanding Equity Awards at Fiscal Year End
The following table contains information regarding outstanding
equity awards of Exela held by our named executive officers as of
December 31, 2019.
|
|
|
|
Option Awards
|
|
Name |
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
|
|
Option
Exercise Price
($)
|
|
|
Option
Expiration
Date |
|
Ronald Cogburn |
|
|
— |
|
|
111,000 (1) |
|
|
5.98 |
|
|
8/31/28 |
| |
|
|
— |
|
|
111,000 (2) |
|
|
1.30 |
|
|
8/26/29 |
| Mark
Fairchild |
|
|
— |
|
|
54,600 (1) |
|
|
5.98 |
|
|
8/31/28 |
| |
|
|
— |
|
|
54,600 (2) |
|
|
1.30 |
|
|
8/26/29 |
| Suresh
Yannamani |
|
|
— |
|
|
111,000 (1) |
|
|
5.98 |
|
|
8/31/28 |
| |
|
|
— |
|
|
111,000 (2) |
|
|
1.30 |
|
|
8/26/29 |
|
(1) |
The stock
options are subject to the following vesting schedule: forty
percent of the options will vest and become exercisable on August
31, 2020 and the remainder will vest and become exercisable on
August 31, 2022, subject to continued employment with us through
each such date. |
|
(2) |
The stock
options are subject to the following vesting schedule: forty
percent of the options will vest and become exercisable on August
26, 2021 and the remainder will vest and become exercisable on
August 31, 2023, subject to continued employment with us through
each such date. |
Potential Payments Upon Termination or Change in Control
The following summaries describe the potential payments and
benefits that we would provide to our named executive officers in
connection with a termination of employment and/or a change in
control, assuming the applicable triggering event occurred on
December 31, 2019.
Severance Benefits
Although we have not entered into written agreements providing
Messrs. Cogburn, Fairchild or Yannamani severance benefits, upon a
termination of Messrs. Cogburn’s, Fairchild’s or Yannamani’s
employment by us without cause, each of Messrs. Cogburn, Fairchild
and Yannamani would be eligible for severance benefits pursuant to
our current severance policy equal to continued payment of his base
salary for a period of three weeks for each year of service, up to
a maximum of 16 weeks. Our severance policy may be amended or
terminated at any time in our sole discretion.
Vesting and Settlement of Outstanding Equity Awards
Our named executive officers hold unvested stock options granted
pursuant to our 2018 Plan. The 2018 Plan provides that in the event
of a significant “corporate event,” as defined therein, each
outstanding award will be treated as the administrator determines.
In addition, unless otherwise provided in an award agreement, with
respect to each outstanding equity award under the 2018 Plan that
is assumed or substituted in connection with a change in control,
the vesting, payment, purchase or distribution of such award may
not be accelerated by reason of the change in control for any award
holder unless the award holder experiences an involuntary
termination as a result of the change in control. For these
purposes, an award holder will be deemed to experience an
involuntary termination as a result of a change in control if the
award holder experiences a termination other than for cause, or
otherwise experiences a termination under circumstances which
entitle the award holder to mandatory severance payment(s) pursuant
to applicable law.
DIRECTOR COMPENSATION
The compensation of our non-employee directors for 2019 was, except
as described below, determined in accordance with the non-employee
director compensation policy that the Board approved on
December 19, 2017, as described in more detail below. Any
non-employee director who was a representative of Apollo Management
Holdings, L.P. or any of its affiliates (but excluding any
portfolio companies of funds or accounts managed or advised
thereby) was not eligible to receive any fees or equity awards in
2019.
|
Non-Employee Director Compensation Policy - 2019 |
|
Annual Cash Retainer for Board Membership |
|
$ |
75,000 |
|
| Annual
Cash Retainer for Board Chairman |
|
$ |
185,000 |
|
| Annual
Cash Retainer for Audit Committee Member (other than the
Chair) |
|
$ |
20,000 |
|
| Annual
Cash Retainer for Audit Committee Chair |
|
$ |
30,000 |
|
| Annual
Cash Retainer for Compensation Committee Member (other than the
Chair) |
|
$ |
12,500 |
|
| Annual
Cash Retainer for Compensation Committee Chair |
|
$ |
20,000 |
|
| Annual
Cash Retainer for Nominating and Corporate Governance Committee
(other than Chair) |
|
$ |
12,500 |
|
| Annual
Cash Retainer for Nominating and Corporate Governance Committee
Chair |
|
$ |
20,000 |
|
|
Initial Equity Award (other than the Chair) (1) |
|
$ |
150,000 |
|
|
Initial Equity Award Chair (1) |
|
$ |
200,000 |
|
| Annual
Equity Award (Other than the Chair)(2) |
|
$ |
110,000 |
|
| Annual
Equity Award Chair(2) |
|
$ |
140,000 |
|
|
(1) |
Award delivered in the form of restricted stock units and vests
ratably over a three-year period immediately prior to the first,
second and third annual meetings subsequent to the date of
grant. |
| |
|
|
|
(2) |
Award delivered in the form of restricted stock units and vests
immediately prior to the first annual meeting subsequent to the
date of grant. |
In addition to the compensation described above, during 2019,
members of the Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee were eligible to
receive an additional fee of $2,000 for each meeting following the
first four meetings. Members of our Audit Committee formed a
subcommittee to monitor and facilitate the Company’s progress with
meeting its SOX compliance initiatives for which they receive a fee
of $2,500 per meeting. In addition, Messrs. Lipman and Rexford also
received additional compensation of $75,000 (plus monthly fees of
$6,000) for serving on a special committee of the Board of
Directors that had been formed to consider the potential take
private transaction that was first announced in May 2019 and
abandoned in October 2019. We also reimburse our directors for
reasonable and necessary out-of-pocket expenses incurred in
attending board and committee meetings or performing other services
for us in their capacities as directors.
Director Compensation Table
The following table sets forth information concerning director
compensation for services performed during the year ended
December 31, 2019.
|
Name |
|
Fees earned or paid in cash ($) |
|
|
Stock Awards ($)(1)(2)(3) |
|
|
Total
($)
|
|
|
Par Chadha |
|
$ |
197,500 |
|
|
$ |
139,999 |
|
|
$ |
337,499 |
|
|
Martin Akins(4) |
|
$ |
52,989 |
|
|
$ |
197,012 |
|
|
$ |
250,001 |
|
|
Joshua Black(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| J.
Coley Clark(4) |
|
$ |
6,318 |
|
|
|
— |
|
|
$ |
6,318 |
|
|
Gordon Coburn(5) |
|
$ |
18,063 |
|
|
|
— |
|
|
$ |
18,063 |
|
|
Nathaniel Lipman(5) |
|
$ |
224,563 |
|
|
$ |
109,999 |
|
|
$ |
334,562 |
|
|
Matthew Nord(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
John Rexford |
|
$ |
248,000 |
|
|
$ |
109,999 |
|
|
$ |
357,999 |
|
|
(1) |
The amounts reported in this column represent the aggregate
grant date fair value of the restricted stock units granted to the
non-employee directors during the applicable fiscal year,
calculated in accordance with FASB ASC Topic 718, disregarding for
this purpose the estimate of forfeitures related to service-based
vesting conditions, and do not necessarily correspond to the actual
value that might be realized by the non-employee directors, which
depends on the market value of our Common Stock on a date in the
future when the units are settled. Grants made during the fiscal
year ended December 31, 2019, were restricted stock units
subject to time-based vesting conditions. For such time-based
vesting awards, the grant date fair value was calculated by
multiplying the fair market value by the number of shares of our
Common Stock subject to the restricted stock units on the grant
date. For additional information, including a discussion of the
assumptions used to calculate these values, please see note 16
Stock-Based Compensation of the Notes to the Consolidated Financial
Statements in this Annual Report. |
|
(2) |
Each restricted stock unit represents the right to receive,
following vesting, one share of our Common Stock. |
|
(3) |
The non-employee members of our Board of Directors held the
following aggregate unvested restricted stock units as of
December 31, 2019. (A)(B) |
|
Name |
|
Aggregate Number of Restricted Stock Units
Outstanding as of December 31, 2019 |
|
|
Par Chadha |
|
|
71,898 |
|
|
Martin Akins |
|
|
156,359 |
|
|
John Rexford |
|
|
56,050 |
|
|
(A) |
As of December 31,
2019, other than with respect to Mr. Akins, all remaining unvested
restricted stock units held by our non-employee directors were
scheduled to vest in full immediately prior to our 2020 annual
meeting, subject to the director’s continued service on our Board
through such date. Mr. Akins received (i) a sign-on grant
of 119,047 restricted stock units that are scheduled to vest
in equal installments immediately prior to each of our annual
meetings in 2020, 2021 and 2022, and (ii) a pro-rated annual
grant of 37,312 restricted stock units that are scheduled to vest
in full immediately prior to our 2020 annual meeting. |
|
(B) |
All unvested
restricted stock units granted to Messrs. Coburn and Lipman were
forfeited upon their resignation from the Board. |
|
(4) |
Messrs. Akins and Clark became members of our Board effective
as of July 29, 2019 and December 2, 2019 respectively, and
each director’s reported compensation reflects his partial year of
service. |
|
(5) |
Mr. Coburn resigned from the Board, effective
February 21, 2019, Mr. Lipman resigned the Board, effective
October 25, 2019, and Messrs. Nord and Black each resigned
from the Board on October 28, 2019. Messrs. Nord and Black were the
Apollo Management Holdings, L.P. representatives and therefore
did not earn or receive any fees in respect of service on our Board
during the 2019 calendar year. |
Messrs. Cogburn and Reynolds each served as members of the
Board of the Company during 2019, however, as executive officers at
such time they did not receive additional compensation for such
service in 2019. Messrs. Transier and Beilinson have been members
of the Board since April 2020 and accordingly did not receive any
compensation for 2019.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters
Principal Shareholders
The following table
shows, based upon filings made with the Company, certain
information as of June 5, 2020 concerning persons who may be deemed
beneficial owners of 5% or more of the outstanding shares of Common
Stock because they possessed or shared voting or investment power
with respect to the shares of Common Stock.
|
Name and Address |
|
Amount and
Nature
of Beneficial
Ownership
|
|
|
Percent of
Class(1)
|
|
Various entities affiliated with Delos Investment Fund, L.P.
(2)
120 Fifth Ave, Third Floor,
New York, NY 10011 |
|
|
15,485,248 |
|
|
|
10.5 |
% |
Various entities affiliated with HGM(3)
8550 West Desert Inn Road,
Suite 102-452, Las Vegas, NV 89117 |
|
|
74,393,234 |
|
|
|
49.3 |
% |
Nantahala Capital Management, LLC (4)
19 Old Kings Highway S, Suite 200
Darien, Connecticut 06820 |
|
|
27,777,887 |
|
|
|
18.8 |
% |
|
Greenlight (5)
140 East 45th Street,
24th Floor, New York, New York 10017
|
|
|
8,022,928 |
|
|
|
5.4 |
% |
(1) Percent of class refers to percentage of class beneficially
owned as the term beneficial ownership is defined in
Rule 13d-3 under the Securities Exchange Act of 1934 and is
based upon the 147,511,430 shares of Common Stock outstanding.
(2) Information based on Schedule 13G (the “13G”), filed with
the SEC on March 2, 2020, relating to securities held of record by
Delos Investment Fund, LP, a Delaware limited partnership
(“Delos”). Delos Capital Management, LP, a Delaware limited
partnership (the "Advisor"), serves as the investment manager of
Delos. Matthew Constantino is the managing member of the general
partner of the Advisor.
(3) Information based on Amendment Number 11 to
Schedule 13D, filed with the SEC on March 26, 2020, by
Mr. Par Chadha, HandsOn Global Management, LLC, a Delaware
limited liability company, Ex-Sigma 2 LLC, a Delaware limited
liability company, Ex-Sigma LLC, a Delaware limited liability
company, HOVS LLC, a Delaware limited liability company, HandsOn
Fund 4 I, LLC, a Nevada limited liability company, HOV Capital III,
LLC, a Nevada limited liability company, HOV Services Ltd., an
Indian limited company, Adesi 234 LLC, a Nevada limited liability
company, HOF 2 LLC, a Nevada limited liability company, HandsOn 3,
LLC, a Nevada limited liability company, SoNino LLC, The Beigam
Trust, The Rifles Trust, SunRaj LLC, Pidgin Associates LLC, Andrej
Jonovic, Shadow Pond LLC, Ronald Cogburn, Kanwar Chadha, Surinder
Rametra, and Suresh Yannamani and the Voting Agreement parties
(collectively, the “HGM Reporting Persons”) and includes 509,964
shares of Common Stock held directly by HGM. According to the
Schedule 13D, Mr. Chadha may be deemed to be the
beneficial owner of, and he has shared power to vote, the aggregate
74,393,234 shares of Common Stock held by the HGM Reporting
Persons. Percent of class, in the case of HGM refers to 147,511,430
shares of Common Stock outstanding 3,216,051 shares of Common Stock
issuable upon conversion of the Series A Preferred Stock, as of
June 5, 2020, and 71,898 shares of Common Stock issuable upon
settlement of RSUs.
(4) Information based on Schedule 13G/A, filed with the SEC on
April 9, 2020 by Nantahala Capital Management, LLC, a Massachusetts
limited liability company, Wilmot B. Harkey and Daniel Mack.
(5) Information based on Schedule 13G/A, filed with the SEC on
February 14, 2020, by Greenlight Capital, Inc., a
Delaware corporation (“Greenlight Inc.”), DME
Advisors, LP, a Delaware limited partnership (“DME Advisors”),
DME Capital Management, LP, a Delaware limited partnership
(“DME CM”), DME Advisors GP, LLC, a Delaware limited
liability company (“DME GP” and together with
Greenlight Inc., DME Advisors and DME CM, “Greenlight”), and
Mr. David Einhorn, the principal of Greenlight (collectively
with Greenlight, the “Greenlight Reporting Persons”). Pursuant to
Rule 13d-4, each of the Greenlight Reporting Persons disclaims
all such beneficial ownership except to the extent of its pecuniary
interest in any shares of Common Stock, if applicable.
Common Stock Ownership by Directors and Executive
Officers
The following table presents the number of shares of Common Stock
beneficially owned by the directors, the named executive officers
and all directors and executive officers as a group as of June 5,
2020. Individuals have sole voting and dispositive power over the
stock unless otherwise indicated in the footnotes.
|
Name of Individual |
|
Amount and
Nature
of Beneficial
Ownership
|
|
|
Percent of
Class(1)
|
|
|
Par Chadha(2)(8) |
|
|
74,393,234 |
|
|
|
49.3 |
% |
| Ronald
Cogburn(3)(7)(8) |
|
|
372,124 |
|
|
|
* |
|
| James
G. Reynolds(4)(7)(8) |
|
|
3,387,782 |
|
|
|
* |
|
| Martin
Akins (5) |
|
|
76,994 |
|
|
|
* |
|
| J.
Coley Clark |
|
|
— |
|
|
|
* |
|
| John
H. Rexford (6) |
|
|
143,648 |
|
|
|
* |
|
|
William Transier |
|
|
— |
|
|
|
* |
|
| Marc
A. Beilinson |
|
|
— |
|
|
|
* |
|
| Suresh
Yannamani (7)(8) |
|
|
533,892 |
|
|
|
* |
|
| Mark
Fairchild (7) (8) |
|
|
48,323 |
|
|
|
* |
|
|
All directors and executive officers as a group (13 persons) |
|
|
74,613,876 |
|
|
|
49.4 |
% |
* Represents holdings of less than one percent.
(1) Percent of class refers to percentage of class beneficially
owned as the term beneficial ownership is defined in
Rule 13d-3 under the Securities Exchange Act of 1934 and is
based upon the 147,511,430 shares of Common Stock outstanding.
(2) The business address of Mr. Chadha is 8550 West Desert Inn
Road, Suite 102-452, Las Vegas, NV 89117.
Mr. Chadha is a member of HGM or its affiliates and may be
deemed to beneficially own the shares of Common Stock and
Series A Perpetual Convertible Preferred Stock beneficially
owned by HGM or its affiliates under Rule 13d-3.
Mr. Chadha disclaims beneficial ownership of any such shares
beneficially owned by HGM, except to the extent of his pecuniary
interest therein. Percent of class, in the case of Mr. Chadha
refers to 147,511,430 shares of Common Stock outstanding, 3,216,051
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, as of June 5, 2020, and 71,898 shares of Common
Stock issuable upon settlement of RSUs.
(3) Mr. Cogburn is affiliated with HGM or its affiliates.
Mr. Cogburn disclaims beneficial ownership of shares of Common
Stock that are owned by HGM or its affiliates.
(4) Mr. Reynolds is affiliated with HGM or its affiliates.
Mr. Reynolds disclaims beneficial ownership of shares of
Common Stock that are owned by HGM or its affiliates.
(5) Includes 76,994 RSUs that are scheduled to vest immediately
prior to our annual meeting.
(6) Includes 56,050 RSUs that are scheduled to vest immediately
prior to our annual meeting.
(7) Includes Series A Perpetual Convertible Preferred Stock held by
the applicable holder on an as-converted to Common Stock basis.
(8) The individual is party to a voting agreement with HGM, among
other persons. Mr. Chadha is a member of HGM and may be deemed to
be the beneficial owner of, and has shared power to vote such
shares.
Item 13. Certain Relationships and Related Transactions and
Director Independence
Related-Party Transactions
We have adopted a written policy requiring that any related person
transaction that would require disclosure under Item 404(a) of
Regulation S-K under the Exchange Act be reviewed and approved
by our audit committee or, if the audit committee is not able to
review the transaction for any reason, the chairman of the audit
committee. Compensation matters regarding our executive officers or
directors are reviewed and approved by our compensation committee.
All relevant factors with respect to a proposed related person
transaction will be considered, and such a transaction will only be
approved if it is in our and our stockholders’ best interests.
Related persons include our major stockholders and directors and
officers, as well as immediate family members of directors and
officers.
During 2019, the
Company engaged in the following transactions with related persons
that are required to be reported under the SEC’s rules:
The information set forth in Note 18 – Related-Party Transactions
of Notes to Consolidated Financial Statements included in the
Company’s Form 10-K for year ended December 31, 2019 amended by
this Amendment No. 1 is incorporated by reference.
We have also maintained the following related party employment
relationships: Matt Reynolds, the brother of our former chief
financial officer and current director, is employed as our Vice
President—Finance, and receives a base salary of $162,567 and may
be eligible for additional incentive compensation for 2020; and
Andrej Jonovic, the son-in-law of the Executive Chairman is
employed as our Executive Vice President, Business Strategy and
Corporate Affairs and receives a base salary of $300,000 and may be
eligible for additional incentive compensation for 2020.
In addition the Company had ongoing obligations under the following
agreements:
Registration Rights Agreement
The Company and
certain stockholders, including certain entities affiliated with
each of HGM and Apollo, have entered into an Amended and Restated
Registration Rights Agreement, which was subsequently amended on
April 10, 2018 (the “Registration Rights Agreement”). Under the
Registration Rights Agreement, certain stockholders, including
affiliates of HGM, and their permitted transferees are entitled to
certain registration rights described in the Registration Rights
Agreement. Among other things, pursuant to the Registration Rights
Agreement, affiliates of each of HGM and Apollo are each entitled
to participate in five demand registrations, and also have certain
“piggyback” registration rights with respect to registration
statements filed subsequent to the Novitex Business Combination. We
will bear the expenses incurred in connection with the filing of
any such registration statements, other than underwriting discounts
and selling commissions.
Messrs. Chadha,
Cogburn, and Reynolds are each affiliated with HGM.
Messrs. Cogburn and Reynolds received compensation from Exela
as executive officers of Exela.
Director Nomination Agreements
At the closing of
the Novitex Business Combination, the Company entered into a
Director Nomination Agreement (the “Director Nomination Agreement”)
with each of Novitex Holdings, an affiliate of Apollo, and certain
affiliates of HOVS LLC and HandsOn Fund 4 I, LLC,
affiliates of HGM (each a “Nominating Stockholder”), which will
remain in effect for so long as the applicable Nominating
Stockholder (or Nominating Stockholder’s affiliate) continues to
beneficially own at least 5% of the then outstanding shares of our
Common Stock (without giving effect to the exercise of any
outstanding warrants to purchase our Common Stock). The Director
Nomination Agreements require that the individuals nominated for
election as directors by our Board of Directors shall include a
number of individuals selected by each of the Nominating
Stockholders such that, upon the election of each such individual,
and each other individual nominated by or at the direction of our
Board of Directors or a duly-authorized committee of the Board, as
a director of our Company, the individuals selected by each
Nominating Stockholder (or Nominating Stockholder’s affiliate)
shall be: (i) solely with respect to the Director Nomination
Agreement with certain affiliates of HOVS LLC and HandsOn Fund
4 I, LLC, for so long as the applicable Nominating Stockholder
beneficially owns at least 35% of the then outstanding shares of
our Common Stock (without giving effect to the exercise of any
outstanding warrants to purchase our Common Stock), three
directors; (ii) for so long as the applicable Nominating
Stockholder beneficially owns at least 15%, but less than 35%, of
the then outstanding shares of Common Stock (without giving effect
to the exercise of any outstanding warrants to purchase our Common
Stock), two directors; and (iii) for so long as the applicable
Nominating Stockholder (or Nominating Stockholder’s affiliate)
beneficially owns at least 5%, but less than 15%, of the then
outstanding shares of our Common Stock (without giving effect to
the exercise of any outstanding warrants to purchase our Common
Stock), one director. In the case of a vacancy on our Board of
Directors created by the removal or resignation of an individual
selected for nomination by a Nominating Stockholder (or Nominating
Stockholder’s affiliate), the Director Nomination Agreements
require us to appoint another individual selected by the applicable
Nominating Stockholder. The Director Nomination Agreements also
provide for observation rights for each Nominating Stockholder (or
Nominating Stockholder’s Affiliate) to the extent that it has a
right of nomination that it does not utilize.
In addition, the
Director Nomination Agreements provide that for so long as a
Nominating Stockholder continues to beneficially own at least 15%
of the then outstanding shares of our Common Stock (without giving
effect to the exercise of any outstanding warrants to purchase our
Common Stock), we cannot, without the consent of such Nominating
Stockholder, engage in certain related-party transactions, adopt an
equity incentive plan or amend the same to increase the number of
securities that may be granted thereunder, issue certain equity
securities, including with a fair market value of more than
$100 million, amend our certificate of incorporation or bylaws
in a manner that adversely affects such Nominating Stockholder’s
rights under the applicable Director Nomination Agreement or has a
disproportionate impact on the interests of such Nominating
Stockholder, enter into certain new lines of business, or increase
or decrease the size of the Board of Directors or change the
classes on which the members of the Board of Directors serve.
Consent, Waiver and Amendment
Pursuant to the Consent, Waiver and Amendment the Company had
certain obligations to reimburse Ex-Sigma and Ex-Sigma 2 in
connection with the Margin Loan, all as disclosed in the
Consolidated Financial Statements included in the Original
Report.
Director Independence
The Company’s Common Stock is listed on Nasdaq, and the Company is
required to comply with the Nasdaq listing requirements regarding
independent directors. Under Nasdaq’s Marketplace Rules, the
definition of an “independent director” is a person other than an
executive officer or employee of the company or any other
individual having a relationship which, in the opinion of the
issuer’s board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. Our Board of Directors has reviewed such information as
the Board has deemed appropriate for purposes of determining
whether any of the directors has a relationship which, in the
opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director, including the beneficial ownership by our directors of
Common Stock and transactions between the Company, on the one hand,
and our directors and their affiliates, on the other hand. Based on
such review, the Board of Directors has determined that we have
five “independent directors” as defined in the Nasdaq listing
standards and applicable SEC rules, Messrs. Akins, Beilinson,
Clark, Rexford and Transier; independent directors, therefore,
constitute a majority of our Board. Non-management directors meet
periodically in executive session without members of the Company’s
management at the conclusion of regularly scheduled Board meetings.
In addition, Messrs. Akins, Beilinson, Clark, Rexford and
Transier qualify as independent directors for the purpose of
serving on the audit committee of the Company under SEC rules.
Item 14. Principal Accountant Fees and Services
KPMG has
been our principal accountant for the last three
fiscal
years.
Pursuant to its charter, the Audit Committee is directly
responsible for the appointment, retention, compensation and
oversight of the Company’s independent registered public accounting
firm. In addition to assuring the regular rotation of the lead
audit partner as required by law, the Audit Committee is involved
in the evaluation and selection of the lead audit partner and
considers whether there should be regular rotation of the
independent registered public accounting firm.
The Audit Committee is also required to review and pre-approve all
of the audit and non-audit services to be performed by the
Company’s independent registered public accounting firm, including
the firm’s engagement letter for the annual audit of the Company,
the proposed fees in connection with such audit services, and any
additional services that management chooses to hire the independent
auditors to perform. Additionally, the Audit Committee can
establish pre-approval policies and procedures with respect to the
engagement of the Company’s independent accountant’s for non-audit
services. In accordance with the Audit Committee Charter, all of
the foregoing audit and non-audit fees paid to, and the related
service provided by, KPMG were pre-approved by the Audit
Committee.
Services
KPMG and its affiliates provided services consisting of the audit
of the annual consolidated financial statements and internal
controls over financial reporting of the Company, review of the
quarterly financial statements of the Company, accounting
consultations and consents and other services related to SEC
filings by the Company and its subsidiaries and other pertinent
matters and other permitted services to the Company.
Audit Fees
The aggregate fees billed or expected to be billed by KPMG for
professional services rendered for the audit of the Company’s
annual consolidated financial statements and internal controls over
financial reporting for the fiscal years ended 2018 and 2019, for
the reviews of the condensed consolidated financial statements
included in the Company’s Quarterly Reports on Form 10-Q for
the 2018 and 2019 fiscal years and for accounting research and
consultation related to the audits and reviews totaled
approximately $6.8 million for 2018 and $7.7 million for
2019. These fees were pre-approved by the Audit Committee.
Audit -Related Fees
The aggregate fees billed by KPMG for audit-related services for
the fiscal years ended 2018 and 2019 were $0.2 million and
$0.5 million, respectively. These fees related to research and
consultation on various filings with the SEC and were pre-approved
by the Audit Committee.
Tax Fees
The aggregate fees billed by KPMG for tax services were less than
$0.1 million for each of the fiscal years ended 2018 and 2019.
These fees related to local tax compliance and consulting were
pre-approved by the Audit Committee.
All Other Fees
There were no fees billed by KPMG for services rendered to the
Company other than the services described above under “Audit Fees,”
“Audit-Related Fees” and “Tax Fees” for the fiscal years ended 2018
and 2019.
In its approval of these non-audit services, the Audit Committee
has considered whether the provision of non-audit services is
compatible with maintaining KPMG’s independence.
* * *
PART IV
Item 15. Exhibits
Exhibits. The following exhibits are included herein or
incorporated herein by reference:
Exhibit
No. |
|
Description |
|
Filed or
Furnished
Herewith |
|
2.1 |
|
Novitex
Business Combination Agreement, dated as of February 21, 2017, by
and among Quinpario Acquisition Corp. 2, Quinpario Merger Sub I,
Inc., Quinpario Merger Sub II, Inc., Novitex Holdings, Inc.,
SourceHOV Holdings, Inc., Novitex Parent, L.P, HOVS LLC and HandsOn
Fund 4 I, LLC (2) |
|
|
|
3.1 |
|
Restated
Certificate of Incorporation, dated July 12,
2017(4) |
|
|
|
3.2 |
|
Second
Amended and Restated Bylaws, dated November 6,
2019.(9) |
|
|
|
3.3 |
|
Certificate
of Designations, Preferences, Rights and Limitations of Series A
Perpetual Convertible Preferred Stock(4) |
|
|
|
3.4 |
|
Waiver
of Bylaws(5) |
|
|
|
4.1 |
|
Specimen
Common Stock Certificate(1) |
|
|
|
4.2 |
|
Specimen
Warrant Certificate(1) |
|
|
|
4.3 |
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant(1) |
|
|
|
4.4 |
|
Indenture,
dated July 12, 2017, by and among Exela Intermediate LLC and Exela
Finance Inc. as Issuers, the Subsidiary Guarantors set forth
therein and Wilmington Trust, National Association, as
Trustee(4) |
|
|
Exhibit
No. |
|
Description |
|
Filed or
Furnished
Herewith |
|
4.5 |
|
First
Supplemental Indenture, dated July 12, 2017, by and among Exela
Intermediate LLC and Exela Finance Inc., as Issuers, the Subsidiary
Guarantors set forth therein and Wilmington Trust, National
Association, as Trustee(4) |
|
|
|
4.6 |
|
Description
of Securities |
|
Filed |
|
10.1 |
|
Modification
Agreement, dated as of June 15, 2017(3) |
|
|
|
10.2 |
|
Amended
& Restated Registration Rights Agreement, dated July 12, 2017,
by and among the Company and the Holders(4) |
|
|
|
10.3 |
|
Exela
Technologies, Inc. Director Nomination Agreement, dated July 12,
2017, by and among the Company, the HGM Group and Ex-Sigma 2
LLC(4) |
|
|
|
10.4 |
|
First
Lien Credit Agreement, dated July 12, 2017, by and among Exela
Intermediate Holdings LLC, Exela Intermediate LLC, the Lenders
Party Thereto, Royal Bank of Canada, RBC Capital Markets, Credit
Suisse Securities (USA) LLC, Natixis, New York Branch and KKR
Capital Markets LLC(4) |
|
|
|
10.5 |
|
First
Amendment to First Lien Credit Agreement, dated July 13, 2018, by
and among Exela Intermediate Holdings LLC, Exela Intermediate LLC,
the Lenders Party Thereto, Royal Bank of Canada, RBC Capital
Markets, Credit Suisse Securities (USA) LLC, Natixis, New York
Branch and KKR Capital Markets LLC(6) |
|
|
|
10.6 |
|
Second
Amendment to First Lien Credit Agreement, dated as of April, 16,
2019, by and among Exela Intermediate Holdings LLC, Exela
Intermediate, LLC, each Subsidiary Loan Party listed on the
signature pages thereto, Royal Bank of Canada, as administrative
agent, and each of the lenders party thereto.(7) |
|
|
|
10.7 |
|
Exela
Technologies Inc. 2018 Stock Incentive Plan.(8) |
|
|
|
10.8 |
|
Form
of Option Grant Notice and Agreement under the Exela Technologies
Inc. 2018 Stock Incentive Plan.(8) |
|
|
|
10.9 |
|
Form
of Restricted Stock Unit Grant and Agreement under the Exela
Technologies Inc. 2018 Stock Incentive Plan.(8) |
|
|
|
10.10 |
|
Exela
Technologies, Inc. Executive Officer Annual Bonus
Plan.(9) |
|
|
|
10.11 |
|
Loan
and Security Agreement, dated as of January 10, 2020, by and among
Exela Receivables 1, LLC, as borrower, Exela Technologies, Inc., as
initial servicer, TPG Specialty Lending, Inc., as administrative
agent, PNC Bank, National Association, as LC Bank, and the lenders
from time to time party thereto.(10) |
|
|
|
10.12 |
|
First
Tier Purchase and Sale Agreement, dated as of January 10, 2020, by
and among Exela Receivables Holdco, LLC, as purchaser, Exela
Technologies, Inc., as initial servicer, and BancTec, Inc.,
Deliverex, LLC, Economic Research Services, Inc., Exela Enterprise
Solutions, Inc., SourceHOV Healthcare, Inc., United Information
Services, Inc., HOV Enterprise Services, Inc., HOV Services, Inc.,
HOV Services, LLC, J&B Software, Inc., Novitex Government
Solutions, LLC, Regulus Group II LLC, Regulus Group LLC, Regulus
Integrated Solutions LLC, SourceCorp BPS Inc. and Sourcecorp
Management, Inc., as originators.(10) |
|
|
|
10.13 |
|
Second
Tier Purchase and Sale Agreement, dated as of January 10, 2020, by
and among Exela Receivables 1, LLC, Exela Receivables Holdco, LLC,
and Exela Technologies, Inc.(10) |
|
|
|
10.14 |
|
Sub-Servicing
Agreement, dated as of January 10, 2020, by and among Exela
Technologies, Inc., as initial servicer, and BancTec, Inc.,
Deliverex, LLC, Economic Research Services, Inc., Exela Enterprise
Solutions, Inc., SourceHOV Healthcare, Inc., United Information
Services, Inc., HOV Enterprise Services, Inc., HOV Services, Inc.,
HOV Services, LLC, J&B Software, Inc., Novitex Government
Solutions, LLC, Regulus Group II LLC, Regulus Group LLC, Regulus
Integrated Solutions LLC, SourceCorp BPS Inc., Sourcecorp
Management, Inc., as sub-servicers.(10) |
|
|
Exhibit
No. |
|
Description |
|
Filed or
Furnished
Herewith |
|
10.15 |
|
Guaranty,
dated as of January 10, 2010, between Exela Receivables Holdco, LLC
and TPG Specialty Lending, Inc.(10) |
|
|
|
10.16 |
|
Performance
Guaranty, dated as of January 10, 2010, between Exela Technologies,
Inc. and TPG Specialty Lending, Inc.(10) |
|
|
|
10.17 |
|
Membership
Interest Purchase Agreement, dated as of March 16, 2020, by and
among SourceHOV Tax, LLC, Merco Holdings, LLC, Exela Technologies,
Inc., and Gainline Source Intermediate Holdings LLC
(11) |
|
|
|
10.18 |
|
First
Amendment to Loan and Security Agreement, First Tier Purchase and
Sale Agreement and Second Tier Purchase and Sale Agreement, dated
as of March 16, 2020, by and among Exela Receivables 1, LLC, Exela
Technologies, Inc., Exela Receivables Holdco, LLC, the Originators,
the Lenders, and TPG Specialty Lending, Inc. (11) |
|
|
|
21.1 |
|
Subsidiaries
of Exela Technologies Inc. |
|
Filed |
|
23.1 |
|
Consent
of KPMG LLP |
|
Filed |
|
31.1 |
|
Certification of the Principal Executive Officer required by Rule
13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes Oxley Act of 2002 |
|
Filed |
|
31.2 |
|
Certification of the Principal Financial and Accounting Officer
required by Rule 13a-14(a) and Rule 15d-14(a) under the Securities
Exchange Act of 1934, as amended, as adopted pursuant to Section
302 of the Sarbanes Oxley Act of 2002 |
|
Filed |
|
32.1 |
|
Certification
of the Principal Executive Officer required by 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act
of 2002 |
|
Furnished |
|
32.2 |
|
Certification
of the Principal Financial and Accounting Officer required by 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act of 2002 |
|
Furnished |
|
101.INS |
|
XBRL Instance Document |
|
Filed |
|
101.SCH |
|
XBRL Taxonomy Extension Schema |
|
Filed |
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
|
Filed |
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
|
Filed |
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
|
Filed |
| 101.PRE |
|
XBRL
Taxonomy Extension Presentation Linkbase |
|
Filed |
| 104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL
document and included in Exhibit 101) |
|
|
|
(1) |
Incorporated by reference to the Registrant’s Registration
Statement on Form S-1 (SEC File No. 333-198988). |
|
(2) |
Incorporated by reference to the Registrant’s Current Report on
Form 8-K filed on February 22, 2017. |
|
(3) |
Incorporated by reference to the Registrants’ Current Report on
Form 8-K, filed on June 21, 2017. |
|
(4) |
Incorporated by reference to the Registrants’ Current Report on
Form 8-K, filed on July 18, 2017. |
|
(5) |
Incorporated by reference to the Registrants’ Current Report on
Form 8-K, filed on December 21, 2017. |
|
(6) |
Incorporated
by reference to the Registrants’ Current Report on Form 8-K,
filed on July 17, 2018. |
|
(7) |
Incorporated
by reference to the Registrants’ Current Report on Form 8-K,
filed on April 17, 2019. |
|
(8) |
Incorporated
by reference to the Registrants’ Quarterly Report on
Form 10-Q, filed on May 10, 2019. |
|
(9) |
Incorporated
by reference to the Registrants’ Quarterly Report on
Form 10-Q, filed on November 12, 2019. |
|
(10) |
Incorporated
by reference to the Registrants’ Current Report on Form 8-K,
filed on January 15, 2020. |
|
(11) |
Incorporated
by reference to the Registrants’ Current Report on Form 8-K,
filed on March 17, 2020. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
| |
|
|
| Dated: |
By: |
/s/
RONALD COGBURN |
| June
12, 2020 |
|
Ronald
Cogburn, Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
| Dated: |
By: |
/s/
RONALD COGBURN |
| June
12, 2020 |
|
Ronald
Cogburn, Chief Executive Officer |
| |
|
(Principal
Executive Officer) and Director |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
SHRIKANT SORTUR |
| June
12, 2020 |
|
Shrikant
Sortur, Chief Financial Officer |
| |
|
(Principal
Financial Officer and Principal Accounting |
| |
|
Officer) |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
PAR CHADHA |
| June
12, 2020 |
|
Par
Chadha, Chairman of the Board of Directors |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
MARTIN P. AKINS |
| June
12, 2020 |
|
Martin
P. Akins, Director |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
MARC A. BEILINSON |
| June
12, 2020 |
|
Marc
A. Beilinson, Director |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
J. COLEY CLARK |
| June
12, 2020 |
|
J.
Coley Clark, Director |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
JOHN H. REXFORD |
| June
12, 2020 |
|
John
H. Rexford, Director |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
JAMES G. REYNOLDS |
| June
12, 2020 |
|
James
G. Reynolds, Director |
| |
|
|
| |
|
|
| Dated: |
By: |
/s/
WILLIAM L. TRANSIER |
| June
12, 2020 |
|
William
L. Transier, Director |
