| Item 5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
As previously disclosed in those Current Reports on Form 8-K filed by One Stop System, Inc. (the “Company”) with the Securities and Exchange Commission on February 9, 2023 and April 7, 2023 (together, the “Prior 8-Ks”), David Raun, the Company’s current Chief Executive Officer and President, will be stepping down, effective upon the appointment of his successor. As further disclosed in the Prior 8-Ks, the Company engaged an internationally recognized search firm to aid in the effort to identify a successor.
On May 16, 2023, the Company entered into an employment agreement with Michael Knowles (the “Knowles Agreement”), pursuant to which, effective June 5, 2023 (the “Effective Date”), Mr. Knowles will begin serving as Chief Executive Officer and President of the Company.
Mr. Knowles, 56 years of age, has more than three decades of leadership experience in global aerospace and defense markets, having led successful business captures resulting in billion-dollar program and product portfolios. Mr. Knowles has served as Vice President and General Manager of C5ISR Systems at Curtiss Wright Defense Solutions since October 2022. Prior to that, from May 2014 to October 2022, Mr. Knowles worked at Cubic Corporation (“Cubic”), where he served in various roles, culminating in his roles as a Senior Vice President of Cubic and President of Cubic’s Mission and Performance Solutions business, in which role he led a $700 million global business unit with 2,000 employees. While at Cubic, his hardware, software and solutions portfolios included rugged networking/computing at the edge, secure and expeditionary communications, intelligence processing, assessment distribution from enterprise-to-edge, high frequency/low size, weight, and power RF components for electronic warfare, space, 5G applications, and live, virtual, and constructive multi-domain training systems. Before Cubic, Mr. Knowles worked at Rockwell Collins from 2004 to 2014 and at Lockheed Martin from 1998 to 2003, both of which are well recognized defense contractors. Prior to that, Mr. Knowles served in the United States Navy for eight years, where he retired as a Commander. He received a BS in Aerospace Engineering from the United States Naval Academy, an MS in Aerospace Engineering from the Naval Postgraduate School, and an MBA from George Mason University.
The initial term of the Knowles Agreement is three years from the Effective Date, after which it will automatically renew on an annual basis, subject to earlier termination in accordance with the terms of the agreement. Pursuant to the terms of the Knowles Agreement, Mr. Knowles will be entitled to receive:
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an annual base salary of $460,000 per annum (subject to annual review and adjustment); |
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an annual bonus (paid out annually if targets are met), with a target amount equivalent to seventy-five percent of his then-current annual base salary if certain applicable bonus criteria are met, subject to approval by the Company’s board of directors; |
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a prorated bonus in 2023, with an effective date of June 5, 2023; and |
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eligibility to participate in a number of Company-sponsored benefits, including its medical, dental and 401(k) plans, under the terms and conditions of the benefit plans that may be in effect from time to time. |
In addition to the foregoing compensation, as an inducement material to his entering into his employment with the Company, as of the Effective Date, Mr. Knowles will be granted (i) non-qualified stock options to purchase 400,000 shares of Company common stock (the “Inducement Options”), which Inducement Options will have an exercise price equal to the fair market value of the Company’s common stock on the date of the grant (June 5, 2023) and will expire ten years from the date of the grant; and (ii) 400,000 restricted stock units (the “Inducement RSUs,” and together with the Inducement Options, the “Inducement Grants”). Both the Inducement Options and the Inducement Grants shall vest over a four-year period as follows: