Item 5.02 Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Departure of Chief Executive Officer
On May 5, 2016, Diane (Vogt) Fargo was
elected by the Board of Directors (the “Board”) of JetPay Corporation (the “Company”) to replace Bipin
C. Shah as Chief Executive Officer of the Company, effective immediately. Mr. Shah has agreed to continue to serve as the Chairman
of, and as a director on, the Board. Mr. Shah’s replacement as Chief Executive Officer is not the result of any disagreement
with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Shah shall continue to receive
his current salary and benefits for his service to the Company as Chairman for one year.
Appointment of Chief Executive Officer
On May 5, 2016, the Board elected Diane (Vogt) Faro, age 64,
as the Company’s Chief Executive Officer, effective immediately. Other than the employment agreement described herein, there
is no understanding or arrangement between Ms. Faro and any other person pursuant to which Ms. Faro was selected as Chief Executive
Officer. Ms. Faro does not have a family relationship with any director, executive officer or person nominated or chosen by the
Company to become a director or executive officer. Below is a description of Ms. Faro’s professional experience.
Ms. Faro has been a member of the Board since 2014. In addition,
since December 2011, Ms. Faro has been President of National Benefit Programs, LLC, a provider of brand loyalty and discount programs
to small to mid-size businesses. Prior to joining National Benefit Programs, from 2009 to December 2011, Ms. Faro was a consultant
for the electronic payments industry focused on assisting companies in growing revenues. From 2005 to 2009, Ms. Faro was President
of Global Merchant Services at First Data Corporation, a payment processing company where she was responsible for over $1 billion
in annualized revenues. Ms. Faro also served as President of First Data’s Alliance Group. Prior to these roles at First Data,
Ms. Faro was Chief Executive Officer of Chase Merchant Services LLC, which processed over $170 billion in payment volume annually
during her tenure. Ms. Faro is a former President of the Electronic Transactions Association, and a board member of Merchant Link
and Front Stream Payments, all of which are private companies in the payment processing industry. Ms. Faro is one of the founding
members of the Women’s Networking in Electronic Transactions (W.net), which offers women in the payments industry a place
to network and find mentors.
Compensatory Arrangements
On May 5, 2016, the Company and Ms. Faro entered into an executive
employment agreement (the “Agreement”), commencing on May 5, 2016 (the “Commencement Date”). Pursuant to
the Agreement, Ms. Faro shall serve as Chief Executive Officer for an initial term of two years (the “Term”).
Compensation
.
|
·
|
Base Salary
. Ms. Faro shall receive a base salary of $400,000 beginning on the Commencement Date and ending on the first
anniversary thereof, and thereafter a base salary of $450,000 through the end of the Term.
|
|
·
|
Annual Incentive
. In addition to her base salary, Ms. Faro shall be eligible to receive an annual cash bonus of up to
50% of her base salary as of the end of the calendar year to which such bonus relates, as determined in the sole discretion of
the Board. For calendar year 2016, any annual bonus payable to Ms. Faro shall be pro-rated based on the Commencement Date.
|
|
·
|
Long-Term Incentive
. In addition, under the Agreement, Ms. Faro was granted 250,000 options to purchase shares of the
Company’s common stock, par value $0.001 per share, which options shall have an exercise price of $2.48 and vest ratably
on a daily basis over the Term. The rights and obligations with respect to such options shall be governed by the terms of the Company’s
2013 Stock Incentive Plan.
|
|
·
|
Employee Benefits and Perquisites
. Ms. Faro shall be eligible to participate in all Company employee benefit plans,
as may be maintained by the Company from time to time, on the same terms as similarly situated employees of the Company. During
the Term, the Company shall reimburse Ms. Faro for the reasonable costs of the rental of an apartment in or around Dallas, Texas,
up to a maximum of $3,500 per month, and the reasonable costs for Ms. Faro to fly to and from Dallas, Texas from Fort Lauderdale,
Florida.
|
Termination and Severance
. The Agreement may be terminated
at any time by the Company with or without Cause (as defined in the Agreement) or by Ms. Faro with or without Good Reason (as defined
in the Agreement), in either case in accordance with the Agreement.
|
·
|
Termination by the Company Other Than For Cause or Death or Disability; Termination by Executive for Good Reason.
In
the event that Ms. Faro is terminated by the Company other than for Cause, disability or death or Ms. Faro terminates her employment
for Good Reason, then, in addition to the payment to Ms. Faro of any base salary earned but unpaid through the date of termination
and any accrued but unused vacation time as of the date of termination (“Accrued Obligations”), the Company shall continue
to pay to Ms. Faro her base salary during the Continuation Period and accelerate the vesting of those options granted to Ms. Faro
in connection with the Agreement that would have vested during the Continuation Period in the event that Ms. Faro’s employment
had not been terminated, such that those options shall be fully vested as of the date of Ms. Faro’s termination. “Continuation
Period” is defined in the Agreement to mean a period of twelve months following the date of the termination of Ms. Faro’s
employment. The Company’s obligations to make payments to Ms. Faro during the Continuation Period (other than with respect
to the Accrued Obligations) shall be conditioned upon Ms. Faro’s compliance with certain covenants set forth in the Agreement,
including but not limited to the execution, delivery and non-revocation of a valid and enforceable general release of claims.
|
|
·
|
Terminations for Cause
. In the event that Ms. Faro is terminated by the Company for Cause,
the Company shall pay to Ms. Faro any Accrued Obligations.
|
|
·
|
Terminations for Other than Good Reason
. Upon Ms. Faro’s termination of employment
other than for Good Reason with 30 days’ notice to the Company, the Company shall provide to Ms. Faro her regular pay and
benefits through the end of the notice period and, thereafter, any Accrued Obligations.
|
|
·
|
Terminations of Employment by the Company for Disability or Death
. Upon Ms. Faro’s
termination with the Company for disability or death as described in the Agreement, the Company shall pay to Ms. Faro any Accrued
Obligations.
|
Restrictive Covenants
. Following the termination of her
employment, Ms. Faro shall have certain continuing obligations under the Agreement, including but not limited to those relating
to the non-disclosure of confidential information, non-competition, non-solicitation and proprietary rights.
The above summary of the Agreement does
not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is filed as Exhibit
10.1 to this Current Report on Form 8-K and incorporated into this Item 5.02 by reference.