Item 5.02. Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Employment Agreement with Andrew T. Berger
In connection with his appointment as Chief Executive
Officer, Mr. Berger and the Company entered into an Employment Agreement, dated as of November 6, 2022 (the “Berger Employment Agreement”).
The Berger Employment Agreement provides for an initial three-year term and will automatically renew for additional one-year periods unless
either party gives prior written notice of nonrenewal. The Berger Employment Agreement provides for an initial annual base salary of $1,000,000
and an annual target bonus opportunity of 100% of Mr. Berger’s base salary, with the amount actually earned based on performance
(up to a maximum of 200% of his base salary). With respect to fiscal year 2023, Mr. Berger will be entitled to a minimum annual bonus
of $1,000,000, up to 20% of which may be paid by the Company in common stock. The Berger Employment Agreement also provides for a $1,000,000
signing bonus, to be paid as soon as practicable following the effective date of the agreement. In the event Mr. Berger’s employment
is terminated by the Company for “cause” or by him without “good reason” (each as defined in the Berger Employment
Agreement) prior to the first anniversary of the effective date of the Berger Employment Agreement, he will be required to repay the after-tax
amount of the signing bonus. Under the Berger Employment Agreement, Mr. Berger is eligible to participate in the Company’s applicable
equity incentive plan with actual award amounts subject to approval of the board of directors. Mr. Berger will also be eligible to participate
in the Company’s benefit plans generally and is entitled to the payment of certain relocation expenses and legal fees in connection
with the negotiation and drafting of the Berger Employment Agreement.
The Berger Employment Agreement also provides for
a one-time grant of restricted stock units, including (i) an award of time-based restricted stock units having a target value of $250,000
(the “Berger RSUs”) and (ii) an award of performance-based restricted stock units having a target value of $250,000 (the “Berger
PRSUs”), in each case, to be granted on the second business day following completion by the Company of a reverse stock split, and
to be payable in combination of cash and/or shares of the Company’s common stock as determined by the board of directors. The Berger
RSUs will vest in equal installments on each of the first four anniversaries of the date of grant, so long as Mr. Berger remains employed
through each vesting date. The Berger PRSUs will vest over a period of three years from the date of grant (subject to Mr. Berger’s
continuous employment through each vesting date) based on the achievement of certain performance goals over the three-year period of July
1, 2023 through June 30, 2026.
Under the terms of the Berger Employment Agreement,
if Mr. Berger’s employment is terminated by the Company without cause or he resigns with good reason, he will be entitled to receive
severance benefits as follows: (a) any earned but unpaid bonus for the fiscal year preceding the year in which the termination of employment
occurs, and (b) cash severance in an amount equal to (i) 12 months of base salary, payable in a lump sum on the first payroll date following
the 30th date after the termination of employment; provided, that if such termination of employment occurs prior to the first
anniversary of the effective date of the agreement, such amount shall be prorated based the number of days of service in an amount not
less than $50,000, and (ii) a prorated annual bonus for the fiscal year of termination payable at the same time as bonuses would otherwise
be payable under the Company’s annual bonus plan, subject to the achievement of applicable performance goals for the performance
period; provided, that if no bonus plan is adopted for a fiscal year, the amount payable shall equal the target prorated annual bonus
opportunity for the fiscal year of termination payable in an amount of not less than $50,000. However, if Mr. Berger’s employment
is terminated by the Company without cause or if he resigns with good reason, in each case, within one year following a “change
in control” (as defined in the Berger Employment Agreement), the cash severance payable to Mr. Berger will include 18 months (rather
than 12 months) of base salary and all of Mr. Berger’s outstanding time-based restricted stock units will vest in full and all of
Mr. Berger’s performance-based restricted stock units will remain eligible for vesting upon achievement of the applicable performance
goals.
Mr. Berger’s receipt of the severance benefits
described in the previous paragraph is subject to Mr. Berger’s execution (and non-revocation) of a release of claims in favor of
the Company and his continued compliance with restrictive covenants, which include customary nonsolicitation and noncompetition covenants
that apply for the duration of Mr. Berger’s employment and for a period of one year thereafter and confidentiality, nondisclosure
and nondisparagement covenants.
The foregoing summary of the Berger Employment
Agreement is qualified in its entirety by reference to the full text of the Berger Employment Agreement, a copy of which is filed as Exhibit
10.1 to this report, and incorporated by reference herein.
Employment Agreement with William M. Baumann
As previously reported, on November 4, 2022, William
M. Baumann was appointed Chief Operating Officer and Interim Chief Merchant of the Company.
In connection with his appointment as Chief Operating
Officer and Interim Chief Merchant, Mr. Baumann and the Company entered into an Employment Agreement (the “Baumann Employment Agreement”).
The Baumann Employment Agreement provides for an initial three-year term and will automatically renew for additional one-year periods
unless either party gives prior written notice of nonrenewal. The Baumann Employment Agreement provides for an initial annual base salary
of $515,000 and an annual target bonus opportunity of 100% of Mr. Baumann’s base salary, with the amount actually earned based on
performance (up to a maximum of 200% of his base salary). Under the Baumann Employment Agreement, Mr. Baumann is eligible to participate
in the Company’s applicable equity incentive plan with actual award amounts subject to approval of the board of directors. Mr. Baumann
will also be eligible to participate in the Company’s benefit plans generally. In addition, the Company will pay Mr. Baumann an
additional amount of $20,000 for any month in which he is serving as Interim Chief Merchant (the “Stipend”).
The Baumann Employment Agreement also provides
for a one-time grant of restricted stock units, including (i) an award of time-based restricted stock units having a target value of $128,750
(the “Baumann RSUs”) and (ii) an award of performance-based restricted stock units having a target value of $128,750 (the
“Baumann PRSUs”), in each case, to be granted on the second business day following completion by the Company of a reverse
stock split, and to be payable in combination of cash and/or shares of the Company’s common stock as determined by the board of
directors. The Baumann RSUs will vest in equal installments on each of the first four anniversaries of the date of grant, so long as Mr.
Baumann remains employed through each vesting date. The Baumann PRSUs will vest over a period of three years from the date of grant (subject
to Mr. Baumann’s continuous employment through each vesting date) based on the achievement of certain performance goals over the
three-year period of July 1, 2023 through June 30, 2026.
Under the terms of the Baumann Employment Agreement,
if Mr. Baumann’s employment is terminated by the Company without cause or he resigns with good reason, he will be entitled to receive
severance benefits as follows: (a) any earned but unpaid bonus for the fiscal year preceding the year in which the termination of employment
occurs, and (b) cash severance in an amount equal to (i) 12 months of base salary (and, if he is serving as Interim Chief Merchant on
the termination date, 12 months of the Stipend), payable over the 12-month period following the termination of employment and (ii) a prorated
annual bonus for the fiscal year of termination payable at the same time as bonuses would otherwise be payable under the Company’s
annual bonus plan, subject to the achievement of applicable performance goals for the performance period; provided, that if no bonus plan
is adopted for a fiscal year, the amount payable shall equal the target prorated annual bonus opportunity for the fiscal year of termination.
However, if Mr. Baumann’s employment is terminated by the Company without cause or if he resigns with good reason, in each case,
within one year following a “change in control” (as defined in the Baumann Employment Agreement), the cash severance payable
to Mr. Baumann will include 18 months (rather than 12 months) of base salary and all of Mr. Baumann’s outstanding time-based restricted
stock units will vest in full and all of Mr. Baumann’s performance-based restricted stock units will remain eligible for vesting
upon achievement of the applicable performance goals.
Mr. Baumann’s receipt of the severance benefits
described in the previous paragraph is subject to Mr. Baumann’s execution (and non-revocation) of a release of claims in favor of
the Company and his continued compliance with restrictive covenants, which include customary nonsolicitation and noncompetition covenants
that apply for the duration of Mr. Baumann’s employment and for a period of one year thereafter and confidentiality, nondisclosure
and nondisparagement covenants.
The foregoing summary of the Baumann Employment
Agreement is qualified in its entirety by reference to the full text of the Baumann Employment Agreement, a copy of which is filed as
Exhibit 10.2 to this report, and incorporated by reference herein.