Item 5.02.
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Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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David B. Barcelo
On April 30, 2020, the Board of Directors of Aware, Inc. (“Aware”)
appointed David B. Barcelo to serve as Chief Financial Officer of Aware, effective May 4, 2020 (the “Effective Date”).
Mr. Barcelo, age 41, served as Vice President of Strategic Marketing of IDEMIA (OT-Morpho) from November 2017 to May 2020. Mr.
Barcelo previously served as Vice President of Business Operations for MorphoTrust USA LLC from 2011 to 2017, as Corporate Director
of Financial Planning and Strategic Operations of L-1 Identity Solutions from 2006 to 2011, and as Director of Operations for WorkOnCall.com
from 2005 to 2006. Mr. Barcelo received his MBA and MIS degrees from Boston University and his Bachelor of Science degree in Computer
Science from Yale University.
On
May 4, 2020, Aware and Mr. Barcelo entered into an Employment Agreement (the “Barcelo Employment Agreement”). Pursuant
to the Barcelo Employment Agreement, Mr. Barcelo will receive the following compensation: (a) an annual base salary of $250,000;
(b) annual cash incentive compensation as determined by the Board or the Compensation Committee with an initial target annual incentive
compensation up to 40% of his base salary and tied to Company performance targets as determined by the Compensation Committee;
(c) an unrestricted stock award of 20,000 shares of the Company’s common stock, which such shares shall be issued
to the Executive in two (2) equal installments on June 30, 2020 and December 31, 2020 provided the Executive is serving as a director,
officer or employee of the Company or any subsidiary of the Company on such date; (d) a stock option for 12,500 shares of Aware’s
common stock with an exercise price per share equal to the greater of (i) the fair market value of a share of Aware’s common
stock on the date of grant or (ii) $4.50 (such exercise price referred to as the “Base Exercise Price”) and vesting
over four years; (e) a stock option for 12,500 shares of Aware’s common stock with an exercise price per share equal to the
Base Exercise Price plus $1.00 and vesting over four years; (f) a stock option for 12,500 shares of Aware’s common stock
with an exercise price per share equal to the Base Exercise Price plus $2.00 and vesting over four years; and (g) a stock option
for 12,500 shares of Aware’s common stock with an exercise price per share equal to the Base Exercise Price plus $3.00 and
vesting over four years. All stock options must be exercised within 60 days of Mr. Barcelo ceasing to be an employee of, or paid
consultant to, Aware.
Subject
to Mr. Barcelo signing and delivering to Aware a noncompetition agreement and a release of claims, Mr. Barcelo will also be eligible
to receive compensation upon termination of Mr. Barcelo’s employment by Aware without “Cause” or by Mr. Barcelo
for ”Good Reason” as follows: (a) an amount equal to Mr. Barcelo’s base salary paid during the twelve
(12) months immediately preceding the termination of Mr. Barcelo’s employment with Aware, divided by the number of days employed
during the twelve (12) months immediately preceding the termination of Mr. Barcelo’s employment with Aware and multiplied
by 365, (b) all time-based stock options and other time-based stock-based awards held by Mr. Barcelo in which such stock option
or other stock-based award would have vested if Mr. Barcelo had remained employed for an additional twelve (12) months following
the date of termination shall vest and become exercisable or nonforfeitable as of the date of termination, and (c) Aware paying
the difference between the cost of COBRA continuation coverage, should Mr. Barcelo elect to receive it, for Mr. Barcelo and any
dependent who received health insurance coverage prior to termination of Mr. Barcelo’s employment with Aware, and any premium
contribution amount applicable to Mr. Barcelo as of such termination, for a period of twelve (12) months following the date of
termination of Mr. Barcelo’s employment with Aware.
Pursuant
to the change in control provisions in the Barcelo Employment Agreement, if Mr. Barcelo’s employment is terminated during
the eighteen (18) month period following a “Change of Control” (a) by Aware without “Cause” or (b) by Mr.
Barcelo for “Good Reason”, subject to Mr. Barcelo signing and delivering to Aware a noncompetition agreement
and a release of claims, Mr. Barcelo will receive from Aware: (i) a lump-sum amount equal to (A)
1.5 times (B) Mr. Barcelo’s base annual salary paid during the twelve (12) months immediately preceding the termination of
Mr. Barcelo’s employment with Aware, divided by the number of days employed during the twelve (12) months immediately preceding
the termination of Mr. Barcelo’s employment with Aware and multiplied by 365, (ii) all time-based stock options and
other time-based stock-based awards held by Mr. Barcelo as of the occurrence of such Change of Control shall immediately accelerate
and become fully exercisable or nonforfeitable as of the date of termination and
(iii) the difference between the cost of COBRA continuation coverage, should Mr. Barcelo elect to receive it, for Mr. Barcelo and
any dependent who received health insurance coverage prior to termination of Mr. Barcelo’s employment with Aware, and any
premium contribution amount applicable to Mr. Barcelo as of such termination, for a period of eighteen (18) months following the
date of termination of Mr. Barcelo’s employment with Aware.
A copy of the Barcelo
Employment Agreement is attached as Exhibit 10.1 to this Report. The foregoing summary of the Barcelo Employment Agreement is
qualified in its entirety by reference to the Barcelo Employment Agreement.
Kevin Russell and David Martin
In connection with Aware’s previous announcement that
Kevin Russell would be leaving Aware, Mr. Russell ended his employment with Aware effective May 1, 2020. Mr. Russell also resigned
as a member of the Board of Directors of Aware effective May 1, 2020.
In connection with Aware’s previous announcement that
David Martin would be leaving Aware, Mr. Barcelo replaced Mr. Martin as Aware’s Chief Financial Officer effective May 4,
2020. It is expected that Mr. Martin will remain employed by Aware through May 15, 2020 to assist Mr. Barcelo in his transition
as Aware’s new Chief Financial Officer.
Aware, Inc. 2020 Executive Bonus Plan
On April 30, 2020, the Compensation Committee of Aware, Inc.
(the “Company”) approved the Aware, Inc. 2020 Executive Bonus Plan (the “Plan”) and established performance
criteria and target bonuses thereunder.
Pursuant to the Plan, each of Robert A. Eckel, the Company’s
Chief Executive Officer and President, Robert M. Mungovan, the Company’s Chief Commercial Officer, Mohamed Lazzouni, the
Company’s Chief Technical Officer, and David B. Barcelo, the Company’s Chief Financial Officer (the “Participants”),
will be eligible to receive a bonus, based on the Company’s achievement in 2020 of certain Company 2020 booking, revenue,
operating cash flow targets (“2020 Financial Goals”) and the achievement of certain operational goals by each Participant,
in each case as determined by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”).
70% of the bonus will be paid for achieving
certain Company financial goals and 30% of the bonus will be paid for achieving certain operational goals.
The amount of the potential bonus that
could be earned by the Participants is as follows: Robert Eckel up to $150,000; Robert Mungovan up to $137,500; Mohamed Lazzouni
up to $137,500; and David Barcelo up to $100,000.
The amount of the bonus earned by a Participant
will depend upon the Company’s actual 2020 bookings, revenue and operating cash flow, as compared to the 2020 Financial Goals.
The following tables will be used to determine the applicable bonuses for the achievement of financial goals:
Robert
Eckel
Actual 2020 bookings, revenue and operating
cash flow as a % of 2020 Financial Goals
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Bonus Amount-2020
Bookings
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Bonus Amount-2020
Revenue
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Bonus Amount-2020
Operating Cash Flow
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Less than 85% of 2020 Financial Goals
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$0
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$0
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$0
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85% of 2020 Financial Goals
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$13,125.00
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$26,250.00
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$13,125.00
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95% of 2020 Financial Goals
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$22,312.50
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$44,625.00
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$22,312.50
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100% of 2020 Financial Goals
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$26,250.00
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$52,500.00
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$26,250.00
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Robert Mungovan
Actual 2020 bookings, revenue and operating
cash flow as a % of 2020 Financial Goals
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Bonus Amount-2020
Bookings
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Bonus Amount-2020
Revenue
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Bonus Amount-2020
Operating Cash Flow
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Less than 85% of 2020 Financial Goals
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$0
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$0
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$0
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85% of 2020 Financial Goals
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$24,062.50
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$16,843.75
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$7,218.75
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95% of 2020 Financial Goals
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$40,906.25
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$28,634.38
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$12,271.88
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100% of 2020 Financial Goals
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$48,125.00
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$33,687.50
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$14,437.50
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Mohamed Lazzouni
Actual 2020 bookings, revenue and operating
cash flow as a % of 2020 Financial Goals
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Bonus Amount-2020
Bookings
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Bonus Amount-2020
Revenue
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Bonus Amount-2020
Operating Cash Flow
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Less than 85% of 2020 Financial Goals
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$0
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$0
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$0
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85% of 2020 Financial Goals
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$12,031.25
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$24,062.50
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$12,031.25
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95% of 2020 Financial Goals
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$20,453.13
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$40,906.25
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$20,453.13
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100% of 2020 Financial Goals
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$24,062.50
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$48,125.00
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$24,062.50
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David Barcelo
Actual 2020 bookings, revenue and operating
cash flow as a % of 2020 Financial Goals
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Bonus Amount- 2020
Bookings
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Bonus Amount-2020
Revenue
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Bonus Amount-2020
Operating Cash Flow
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Less than 85% of 2020 Financial Goals
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$0
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$0
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$0
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85% of 2020 Financial Goals
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$8,750.00
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$17,500.00
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$8,750.00
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95% of 2020 Financial Goals
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$14,875.00
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$29,750.00
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$14,875.00
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100% of 2020 Financial Goals
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$17,500.00
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$35,000.00
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$17,500.00
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The amount of bonus payable with respect
to the bonus for achievement of the financial goals will be subject to linear interpolation to reflect actual 2020 bookings, revenue
and operating cash flow between the 2020 Financial Goals and 85% of 2020 Financial Goals or between 95% of 2020 Financial Goals
and 100% of 2020 Financial Goals.
Mr. Eckel, Mr. Mungovan , Mr. Lazzouni and Mr. Barcelo may earn
up to $45,000, $41,250, $41,250 and $30,000, respectively, upon full achievement, as determined by the Compensation Committee,
of their respective Operational Goals under the Plan, which are specific to each Participant.
In the event that Mr. Eckel’s, Mr.
Mungovan’s, Mr. Lazzouni’s or Mr. Barcelo’s employment by the Company terminates during 2020 by reason of total
and permanent disability, or death, the terminated person will receive a pro-rated bonus. If Mr. Eckel’s, Mr. Mungovan’s,
Mr. Lazzouni’s or Mr. Barcelo’s employment by the Company is terminated by the Company without cause, the Compensation
Committee may, in its discretion, award the terminated person a pro-rata bonus. In the event that Mr. Eckel’s, Mr. Mungovan’s,
Mr. Lazzouni’s or Mr. Barcelo’s employment terminates for any other reason, including resignation and discharge for
cause prior to the bonus payout date, all rights to a bonus will be forfeited. All payouts from this bonus plan are subject to
final approval by the Compensation Committee, which shall have the authority to change any amounts payable under the Plan.
A copy of the Plan is attached as Exhibit 10.2 to this Report.
The foregoing summary of the Plan is qualified in its entirety by reference to the Plan.
Press Release
On May 4, 2020, Aware issued a press release, attached to this
Form 8-K as Exhibit 99.1, announcing that Mr. Barcelo had become Chief Financial Officer of Aware.