Item 1.01 Entry into a Material Definitive Agreement.
On July 26, 2021, the Company and Mr. Justin Frere entered into
an Executive Services Consulting Agreement (the “ESCA”).
Mr. Frere was appointed Chief Financial Officer, Treasurer and Secretary
on April 12, 2021. Mr. Frere has over 20 years of experience as a hands-on CFO/Controller level finance and administration professional
with extensive operational and analytical experience as a consultant, CFO and controller for numerous public entities. From 2001
through present, Mr. Frere has been principal of Frontline Accounting performing CFO/controller, and financial analyst services
for various public and private domestic and international clients. Mr. Frere has been the primary party responsible for accounting,
drafting and filing SEC Forms and interacting with auditors and the SEC in support of public company reporting. Mr. Frere started
his career at KPMG in their assurance practice. Mr. Frere earned a Bachelor of Science in accounting and finance from California
Polytechnic State University in San Luis Obispo and MBA from San Diego State University.
Pursuant to the ESCA, Mr. Frere will provide executive consulting
services to the Company.
Mr. Frere’s
engagement pursuant to the ESCA is an “at-will” engagement. As such it may be terminated by either Party, at any time,
upon written notice, for any reason or no reason, with or without Cause. It is acknowledged that Mr. Frere’s engagement
is on a part-time basis; however, he has agreed to devote as much of his time, efforts, professional attention, knowledge, and
experience as may be necessary to carry on fully his duties and responsibilities under the ESCA, including, without limitation,
his performance of the Services.
The ESCA also
contains provisions regarding Mr. Frere’s obligations, during the Consulting Term and for a specified period thereafter,
to (i) protect the Company’s Confidential Information and intellectual property, (ii) refrain from the solicitation of the
Company officers, directors or employees, and (iii) refrain from engaging in activities that are competitive to the business being
conducted by the Company and its subsidiaries.
In consideration for the Services and other obligations of Mr. Frere
pursuant to the ESCA, Mr. Frere:
(a) Shall
receive a base monthly fee as follows (the “Base Monthly Fee”) of US$10,000 per month payable on the first day
of each calendar month in arrears. The Base Monthly Fee shall be prorated for any portion of the Consulting Term that is not a
full calendar month.
(b) Shall
be reimbursed for all pre-approved, legitimate business expenses reasonably incurred by Consultant in carrying out the responsibilities
and obligations under the ESCA and promoting the Company’s business will be reimbursed, including mileage and travel expenses
in accordance with IRS guidelines. Mr. Frere shall be reimbursed for all such legitimate business expenses upon submission to
the Company of appropriate documentation of such expenses and a description of the purpose of such expenses.
(c) Has
been granted, on July 26 (the “Grant Date”) a non-statutory stock option (the “Option”)
pursuant to the Company’s 2013 Long-Term Incentive Plan to purchase up to 50,000 shares (the “Shares”)
of the Company’s common stock (the “Stock”) in accordance with and subject to the terms and conditions
of the Stock Option Agreement dated July 26, 2021 between Mr. Frere and the Company (the “SOA”),
The Option shall vest and be exercisable at initial exercise prices,
as follows:
|
Vesting Date
|
Number of Shares Vesting
|
Initial Exercise Price
|
|
Effective Date
|
25,000
|
$1.72
|
|
Six Month Anniversary of the Effective Date
|
25,000
|
$1.72
|
The term of the Option commenced on the Grant Date and shall expire,
and all rights to purchase the Shares pursuant to the Option shall terminate, on the ten-year anniversary date of the Grant Date
(the “Option Expiration Date”).
To the extent that all or a portion of the Option has vested, it
may be exercised as to such vested amount, in whole or in part and from time to time, during the term, by delivery to the Company
of a written or electronic notice, stating the number of whole Shares to be purchased; the Exercise Notice shall be accompanied
by payment of the Aggregate Exercise Price of the Shares to be purchased. The term “Aggregate Exercise Price”
shall mean the dollar amount obtained by multiplying (i) the Per Share Exercise Price by (ii) the number of Shares
being purchased.
Subject to the provisions of the SOA, The Aggregate Exercise Price of the Options shall
be paid:
(i) in cash or by certified check
or bank draft payable to the order of the Company; or
(ii) to the extent permitted by applicable
law, through a broker-assisted cashless exercise by delivering, along with a properly executed exercise notice to the Company,
a copy of irrevocable instructions to a broker to deliver promptly to the Company the aggregate exercise price and, if requested
by the Participant, the amount of any applicable federal, state, local or foreign withholding taxes required to be withheld by
the Company, provided, however, that such exercise may be implemented solely under a program or arrangement established and approved
by the Company with a brokerage firm selected by the Company;
(iii) at any time prior to the Company’s
listing of any of its securities for trading on a “national stock exchange,” pursuant to “a net issue”
or “cashless” exercise;
(iv) by any other method approved by the
Board or its Compensation Committee, if any, or
(v) by a combination of the foregoing.
The SOA contains such other provisions as are typically included
in such agreements including but not limited to, vesting acceleration (in the event of a change of control or otherwise in the
discretion of the Company’s Board of Directors) and option forfeiture provisions (in the event of the termination of the
ESCA).
THE FOREGOING DESCRIPTIONS,
OF THE OF EACH OF THE ESCA AND THE SOA, DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE COMPLETE
TEXT OF EACH OF THE ESCA AND THE SOA, COPIES OF WHICH ARE FILED, RESPECTIVELY, AS EXHIBITS 10.1 AND 10.2 TO
THIS CURRENT REPORT ON FORM 8-K, AND EACH SUCH EXHIBIT IS INCORPORATED HEREIN BY REFERENCE.