Funko, Inc 8-K, filed Jul 18, 2023
Funko, Inc. (FNKO)
About this 8-K
Funko, Inc filed this 8-K on July 18, 2023, reporting on events of July 13, 2023.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On July 13, 2023 (the “Effective Date”), Funko, Inc. (the “Company”) announced that Brian Mariotti has agreed to take a six month leave of absence from the Company and cease serving as Chief Executive Officer, effective immediately. On the Effective Date, the Company’s Board of Directors (the “Board”) removed Mr. Mariotti from the office of Chief Executive Officer and appointed Michael Lunsford as the Company’s Interim Chief Executive Officer. The Company is undertaking a search process to identify a permanent Chief Executive Officer.
Mr. Mariotti and Mr. Lunsford remain directors of the Company. While he is serving as Interim Chief Executive Officer, Mr. Lunsford will no longer serve on the Board’s Audit Committee and Compensation Committee. The Board has appointed Charles Denson to serve on the Audit Committee and Sarah Kirshbaum Levy to serve as Chair of the Compensation Committee.
Biographical information for Michael Lunsford can be found on page 11 of the Company’s definitive proxy statement filed with the Securities and Exchange Commission on May 1, 2023 and is incorporated herein by reference.
In connection with Mr. Lunsford’s appointment as Interim Chief Executive Officer, the Company has entered into a Letter Agreement with Mr. Lunsford, dated July 13, 2023 (the “Lunsford Letter”). The Lunsford Letter provides, among other things, that (i) Mr. Lunsford’s term of employment commenced on July 13, 2023 and will continue through the earlier of (a) July 13, 2024 and (b) the date the Company hires a replacement Chief Executive Officer, (ii) Mr. Lunsford will be paid a monthly salary of $30,000 for a minimum of 9 months, even if his employment is terminated sooner, other than for “cause” (as defined in the Lunsford Letter), and (iii) Mr. Lunsford will receive a grant of 120,000 restricted stock units under the Company’s 2019 Incentive Award Plan that will vest on July 13, 2024, subject to his continued employment through such date and subject to certain acceleration provisions in the event Mr. Lunsford is terminated other than for cause prior to July 13, 2024. Mr. Lunsford will also be eligible to participate in the Company’s employee benefit plans during his employment. The foregoing description of the Lunsford Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Lunsford Letter, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
In addition, the Company has entered into a letter with Mr. Mariotti, dated July 13, 2023 (the “Mariotti Letter”) providing for the terms of his leave of absence, or sabbatical, for a period of six months (the “Sabbatical”). Pursuant to the Mariotti Letter, Mr. Mariotti will remain an employee and a member of the Board of Directors during the Sabbatical, and will continue to receive compensation and benefits consistent with his Employment Agreement with the Company, dated as of January 3, 2022 and as amended as of December 5, 2022. Mr. Mariotti will remain eligible to receive an annual bonus for the 2023 fiscal year to be determined based on actual achievement of the applicable performance objectives and to be payable on that same date as bonuses are payable to other senior executives. During the Sabbatical. Mr. Mariotti’s equity awards will remain outstanding and continue to vest in accordance with their terms. The foregoing description of the Mariotti Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Mariotti Letter, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits: |
| Exhibit No. |
Description | |
| 10.1 | Letter between the Company and Michael Lunsford, dated July 13, 2023 | |
| 10.2 | Letter between the Company and Brian Mariotti, dated July 13, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 18, 2023 | FUNKO, INC. | |||||
| By: | /s/ Tracy D. Daw | |||||
| Tracy D. Daw | ||||||
| Chief Legal Officer and Secretary | ||||||
Exhibit 10.1
Funko, Inc.
2802 Wetmore Avenue
Everett, WA 98201
July 13, 2023
Mike Lunsford
Sent Via Email
Dear Mike:
Funko, Inc. (the “Company”) is pleased to offer you the position of Interim Chief Executive Officer reporting directly to the Board of Directors (the “Board”) of the Company beginning on July 13, 2023 (the “Start Date”).
The following delineates your compensation and benefits package offer:
| • | Term: Commencing as of the Start Date through the earlier of (i) the 12-month anniversary of the Start Date and (ii) the date the Company hires a replacement Chief Executive Officer. |
| • | Salary: |
| • | $30,000 per month, less applicable deductions and withholdings, payable in accordance with the Company’s regular payroll practices. |
| • | In the event of a termination of your employment as Interim Chief Executive Officer prior to the 9-month anniversary of your Start Date other than by the Company for “Cause” (as defined on Exhibit A), you will continue to receive base salary payments through such 9-month anniversary of the Start Date. |
| • | Equity Grant: |
| • | Subject to approval by the Board or the Compensation Committee thereof, you will be granted an award of 120,000 restricted stock units under the Company’s 2019 Incentive Award Plan and customary form of award agreement thereunder, which shall vest on the first anniversary of your Start Date subject to your continued employment through such date. |
| • | Notwithstanding the foregoing, (a) in the event of your termination of employment as Interim Chief Executive Officer on or prior to the 9-month anniversary of your Start Date other than by the Company for Cause, 90,000 restricted stock units will accelerate and vest; and (b) in the event of your termination of employment as Interim Chief Executive Officer other than by the Company for Cause following the 9-month anniversary of your Start Date but prior to the 12-month anniversary of your Start Date, a number of restricted stock units will vest upon the date of your termination of employment equal to the product of (i) 120,000 and (ii) the ratio of (A) the number of days elapsed following your Start Date to (B) 365. |
| • | Benefits: You will be eligible to participate in all employee benefit plans or programs of the Company consistent with such plans and programs of the Company. |
| • | Expenses: During the term of your employment as Interim Chief Executive Officer, the Company agrees to reimburse all reasonable business expenses incurred by you consistent with the Company’s policies regarding reimbursement in the performance of your duties as Interim Chief Executive Officer. |
Your employment with the Company will be “at will”, and either you or the Company may terminate your employment at any time for any reason, with or without cause. As an employee of the Company, you will be required to comply with all Company policies and procedures. In connection with your employment you will also be expected to sign a restrictive covenant agreement including, among other things, the Company’s standard non-compete, non-solicit and confidentiality covenants.
This letter is your formal offer of employment and supersedes any and all prior or contemporaneous agreements, discussions and understandings, whether written or oral, relating to the subject matter of this letter or your employment with the Company. The resolution of any disputes under this letter will be governed by the laws of the State of Washington.
Please confirm your acceptance of this offer by signing below and returning to me.
Sincerely Yours,
| /s/ Tracy D. Daw |
| Tracy D. Daw |
| Chief Legal Officer |
| /s/ Michael Lunsford | July 13, 2023 | |||||
| ACCEPTED BY: MIKE LUNSFORD | DATE |
EXHIBIT A
Termination of your employment by the Company for any of the following reasons shall be deemed termination for “Cause”: (a) gross neglect or willful misconduct by you of your duties or your willful failure to carry out, or comply with, in any material respect any lawful and reasonable directive of the Board not inconsistent with the terms of this letter; (b) your conviction of, or your plea of no contest, plea of nolo contendere or imposition of adjudicated probation with respect to, any felony or crime involving moral turpitude or your indictment for any felony or crime involving moral turpitude; provided if you are terminated following such indictment but are found not guilty or the indictment is dismissed, the termination shall be deemed to be a termination without Cause; (c) your habitual unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing your duties and responsibilities under this letter; (d) your commission at any time of any act of fraud, embezzlement, misappropriation, material misconduct, or breach of fiduciary duty against the Company (or any predecessor thereto or successor thereof); or (e) your material breach of any confidentiality, non-compete or non-solicitation covenant; provided that the Company shall provide you with fifteen (15) days prior written notice before any such termination in (a) or (e) (other than to the extent that (a) relates to any fraud or intentional misconduct) with an opportunity to meet with the Board and discuss or cure any such alleged violation.
Exhibit 10.2
Funko, Inc
2802 Wetmore Avenue
Everett, WA 98201
July 13, 2023
Brian Mariotti
via Email
| Re: | Your Sabbatical |
Dear Brian:
This letter (this “Agreement”) memorializes our agreement regarding your sabbatical with Funko, Inc. (the “Company”).
Your sabbatical will begin on July 13 2023, and will continue through and including January 13, 2024 or such later date as may be agreed in writing by you and the Company (such period, your “Sabbatical”). You will cease to serve as Chief Executive Officer of the Company and from all other officerships of the Company and its subsidiaries effective as of July 13, 2023; provided, that, during your Sabbatical you will remain an at-will employee of the Company and member of the Board of Directors (the “Board”) of the Company.
Except as otherwise expressly set forth herein, that certain Employment Agreement by and between the Company and you, dated as of January 3, 2022, as subsequently amended December 5, 2022 (the “Employment Agreement”) will continue to control with respect to your salary, benefits and other matters with respect to your employment with the Company during the Sabbatical (including without limitation your restrictive covenant obligations), and nothing herein is intended to waive or amend any of your rights under the Employment Agreement. Notwithstanding the foregoing, nothing herein shall limit the Company’s ability to terminate your employment with or without Cause (as defined in the Employment Agreement) or your right to terminate your employment for Good Reason prior to the end of the Sabbatical, and for this purpose the changes to your position as Chief Executive Officer described herein shall be deemed to constitute a material adverse change in your title or reporting line or material duties, authorities or responsibilities. You will remain eligible to receive an annual bonus for the 2023 fiscal year determined based on actual achievement of the applicable performance objectives, which shall be payable on the date in fiscal year 2024 that annual bonuses are payable to senior executives of the Company notwithstanding any requirement for continued employment through such payment date.
During the Sabbatical, you will remain a member of the Board.
For the avoidance of doubt, your Sabbatical will not constitute a “Termination of Service” for purposes of the Funko, Inc. 2017 Incentive Award Plan or the Funko, Inc. 2019 Incentive Award Plan, respectively, and any unvested equity awards held by you as of the first day of the Sabbatical will continue to vest in accordance with their terms during the Sabbatical (which awards shall be deemed amended to the extent necessary to effect such intent), subject to the terms of the applicable award agreements and the Employment Agreement.
During your Sabbatical, you will continue to have access to your Company e-mail account, certain Company facilities and certain information systems of the Company, in each case, as determined necessary or appropriate by the Company. You will also retain any Company-issued laptops or other hardware devices. You agree to promptly notify the Board in writing if you decide that you wish to terminate your employment and/or your directorship at the end of your Sabbatical. Nothing in this Agreement changes the nature of your at-will employment with the Company.
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This Agreement and the Employment Agreement constitutes the entire and exclusive agreement between the Company and you with respect to the subject matter hereof. This Agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company. This Agreement will be governed by Washington law, regardless of the laws that might otherwise govern under applicable principles of conflict of law.
We wish you well during your Sabbatical. Please indicate your agreement to the terms of this Agreement by returning a signed copy of this Agreement at your earliest convenience. If you have any questions, please contact me.
| Very truly yours, | ||
| FUNKO, INC. | ||
| By: |
/s/ Tracy D. Daw | |
| Tracy D. Daw | ||
| Chief Legal Officer | ||
| ACCEPTED AND AGREED: | ||||||
| /s/ Brian Mariotti | July 13, 2023 | |||||
| Brian Mariotti | Date | |||||
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