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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.
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In
connection with the findings of the Special Committee investigation and related discussions between Jason Luo and James Taylor and members
of the Company’s Board of Directors (the “Board”) described under Item 8.01 herein, on February 1, 2022, Mr. Luo resigned
from his positions as Executive Chairman and Chairman of the Board, and Mr. Taylor resigned from his positions as President and Chief
Executive Officer and as a member of the Board, both effective immediately. Each of Mr. Luo and Mr. Taylor have agreed to enter into
consulting arrangements with the Company, as further described below.
In connection with Mr. Taylor’s resignation, he and the
Company agreed to settlement terms, pursuant to which the Company and Mr. Taylor agreed to a mutual release of claims (including
payment by the Company of certain specified taxes that may result from Mr. Taylor’s equity purchase referred to above), as
well as non-competition and non-solicitation covenants for up to 18 months. As part of this arrangement, Mr. Taylor will serve as a
consultant to the Company for a period of two years, on terms to be commercially agreed upon, for an annual wage of $300,000. Mr.
Taylor will retain his 2021 cash bonus, 2021 performance RSUs and health benefits. The consulting agreement will be terminable at
the option of either the Company or Mr. Taylor with 60 days’ notice. Pursuant to the settlement, Mr. Taylor will surrender 1.8
million shares of the Company’s common stock to the Company and, no later than April 11, an additional number of shares of
Company common stock with a value of approximately $3.3 million based on a VWAP calculation. Mr. Taylor will be subject to a
standstill for 18 months, during which he is precluded from taking any action in connection with Company’s board or
shareholders. Mr. Taylor will retain his existing indemnification and advancement rights. Mr. Taylor has agreed to a six month
lockup from the date hereof and has surrendered his existing registration rights. The final settlement agreement, which the Company
and Mr. Taylor expect to enter into as soon as practicable, will contain customary restrictive covenants, social media restrictions,
mutual non-disparagement clauses, and standard representations and warranties.
In connection with Mr. Luo’s resignation, he and the Company
agreed to settlement terms, pursuant to which the Company and Mr. Luo agreed to a mutual release of claims, as well as non-competition
and non-solicitation covenants for at least 18 months. As part of this arrangement, Mr. Luo will serve as a consultant to the Company
for a period of two years for which he will receive no additional compensation. The consulting agreement will be terminable at the option
of either the Company or Mr. Luo with 60 days’ notice. Mr. Luo will also become a limited observer to the Company’s Board
of Directors for a period of two years. Pursuant to the settlement, Mr. Luo will promptly surrender 6.0 million shares of the Company’s
common stock to the Company. In addition, no later than 120 days after the date hereof, Mr. Luo will pay an additional amount of cash
and stock, at his option, totaling $10 million in value, with any stock value based on a VWAP calculation. Mr. Luo will retain his health
benefits. Mr. Luo will be subject to a standstill for eighteen months, during which he is precluded from taking any action in connection
with Company’s board or shareholders. Mr. Luo will retain his existing indemnification and advancement rights. Mr. Luo has agreed
to a six month lockup (with limited carveouts) from the date hereof and has surrendered his existing registration rights. The final settlement
agreement, which the Company and Mr. Luo expect to enter into as soon as practicable, will contain customary restrictive covenants,
social media restrictions, mutual non-disparagement clauses, and standard representations and warranties.
On
February 1, 2022, the Board appointed Shauna McIntyre as Interim Chief Executive Officer and principal executive officer, effective immediately.
On the same date, the Company entered into an employment agreement with Ms. McIntyre (the “Employment Agreement”), the material
terms and conditions of which are summarized below. The Company has commenced a search for a permanent President and Chief Executive
Officer.
Shauna
McIntyre, age 50, was the President, Automotive of Ouster, Inc. from October 2021 to January 2022. Prior to that, she served as the
Chief Executive Officer of Sense Photonics, an automated LiDAR, from April 2020 until October 2021. Ms. McIntyre served as
Program Lead and in other roles at Google Automotive Services from October 2016 to April 2020. Prior to that, she held integral
roles at Google Automotive Services, Egon Zehnder International, Achates Power, Inc., Honeywell International, Inc., and Ford Motor
Company. Ms. McIntyre serves on the Board of Directors for Lithia Motors, Inc. (NYSE: LAD), the Los Altos Educational Foundation and
was also a co-founding board member for the North American Council for Freight Efficiency. Ms. McIntyre holds a B.S. from the
University of California, Los Angeles, an M.S. from the University of California, Berkeley, and an M.B.A. from Harvard.
In connection with her appointment, the Company entered into a
binding employment term sheet setting forth the principal terms of an employment agreement (the “Employment Agreement”)
with Ms. McIntyre. The initial term of Ms. McIntyre’s employment is 90 days. Ms. McIntyre’s employment will
be terminable at will by the Company or her at any time (for any reason or no reason). Except with respect to a termination by
the Company for “cause”, as that term will be defined in the Employment Agreement, the Company or Ms. McIntyre shall
give the other party at least 30 days’ written notice to terminate her employment. Ms. McIntyre will receive an annual
base salary of $550,000, pro-rated for any partial year of employment. She will be entitled to participate in any annual
incentive program maintained by the Company from time to time in which its similarly-situated executives participate, with a target
bonus opportunity equal to 100% of her salary paid with respect to the applicable performance year. The payment of any bonus
pursuant to such program will be subject to Ms. McIntyre’s continued employment through the bonus payment date. Ms.
McIntyre will be entitled to receive an amount equal to $300,000, payable in cash and/or common stock of the Company (determined by
the Board in its sole discretion) upon expiration of the initial term (including in connection with Ms. McIntrye’s appointment
as the Company’s President and Chief Executive Officer, but excluding in connection with a termination of employment by the
Company for “cause” or by Ms. McIntyre without “good reason”, as those terms will be defined in the
Employment Agreement). In addition, if she is appointed as the Company’s President and Chief Executive Officer, she will receive a
restricted stock unit award with an aggregate value of $12,000,000.
If the Company terminates Ms. McIntyre’s employment without “cause”
or terminates her employment for “good reason”, then Ms. McIntyre shall receive: (i) an amount equal to her annual base
salary, payable in substantially equal installments over the 12-month period following the termination date; (ii) 12 months’ Company-subsidized
COBRA; (iii) pro-rated target annual bonus (based on time employed for the year of termination), payable in a lump sum within 60 days
following the termination date; and (iv) any earned, but not yet paid, annual bonus with respect to a prior performance year, payable
when bonuses are paid to the Company’s executives (but no later than March 15 of the year following the year in which the termination
date occurs). If either such termination occurs within three months prior to, on or within 12 months following a “change in control”
(as defined in the Company’s 2020 Incentive Plan), then Ms. McIntyre instead shall receive: (i) an amount equal to 1.5 times the
sum of her annual base salary and target annual bonus, payable in substantially equal installments over the 18-month period following
the termination date or, to the extent permitted in accordance with Internal Revenue Code Section 409A, in a lump sum within 60 days following
the termination date; (ii) 18 months’ Company-subsidized COBRA; (iii) pro-rated target annual bonus (based on time employed for
the year of termination), payable in a lump sum within 60 days following the termination date; and (iv) any earned, but not yet paid,
annual bonus with respect to a prior performance year, payable when bonuses are paid to the Company’s executives (but no later than
March 15 of the year following the year in which the termination date occurs). Receipt of severance subject to Ms. McIntyre’s
execution within 21 days (or 45 days, if required by law) following the termination date, and non-revocation, of a general release of
claims against the Company, and ongoing compliance with applicable restrictive covenants. The Employment Agreement will contain
customary restrictive covenants related to confidentiality, intellectual property assignment, non-competition, employee non-solicitation,
and mutual non-disparagement.
Ms.
McIntyre has entered into the Company’s standard form indemnification agreement.
On
February 1, 2022, the Board appointed Brian Krzanich as Chair of the Board, effective immediately. On February 1. the Board appointed
Richard Peretz as chair of the Compensation Committee of the Board (the “Compensation Committee”), replacing Brian Krzanich,
such that the Compensation Committee consists of Richard Peretz, as chair, and Neil Goldberg.
