OSS 8-K
One Stop Systems, Inc. (OSS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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| Item 1.01 | Entry into a Material Definitive Agreement. |
The information set forth in Item 5.02 of this Current Report on Form 8-K (this “Current Report”) regarding the Knowles Employment Agreement (as defined in Item 5.02, below) is incorporated by reference into this Item 1.01.
| 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:
| • | an annual base salary of $460,000 per annum (subject to annual review and adjustment); |
| • | 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; |
| • | a prorated bonus in 2023, with an effective date of June 5, 2023; and |
| • | 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:
25% on the one-year anniversary of the date of the grant, and the remaining 75% will vest in six equal installments, commencing six months after the one-year anniversary of the date of grant and every six months thereafter until fully vested, subject to Mr. Knowles continued employment by the Company. The Inducement Grants will be granted outside of the Company’s 2017 Equity Incentive Plan, as amended, and in reliance on the employment inducement exemption provided under the Nasdaq Listing Rule 5635(c)(4).
Furthermore, pursuant to the Knowles Agreement, in the event that the Knowles Agreement is terminated for a reason other than “good cause” or for “good reason,” Mr. Knowles, upon signing and returning an effective waiver and release of claims, shall be entitled to receive: (i) separation payments in an aggregate amount of twelve months of his then-current base salary; (ii) continuation of group health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”) at the Company’s expense for a period of twelve months following the termination date; and (iii) unvested RSUs held by Mr. Knowles shall accelerate so that an additional twelve months of RSUs shall vest from the termination date.
There is no arrangement or understanding between Mr. Knowles and any other person pursuant to which Mr. Knowles was appointed as Chief Executive Officer and President of the Company. There are no family relationships between Mr. Knowles and any of the Company’s directors, executive officers or persons nominated or chosen by the Company to become a director or executive officer. Mr. Knowles has not engaged in any related-person transactions required to be disclosed by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The foregoing summary of the terms of the Knowles Agreement does not purport to be complete, and is qualified in its entirety by reference to the complete text of the Knowles Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report and incorporated herein by reference.
Consistent with prior disclosures and the terms of that amended and restated employment agreement entered into by the Company and Mr. Raun on April 3, 2023, Mr. Raun will step down from his roles as Chief Executive Officer and President of the Company on June 5, 2023, the effective date of Mr. Knowles’ appointment as his successor.
| Item 7.01 | Regulation FD Disclosure |
On May 22, 2023, the Company issued a press release announcing Mr. Knowles’ appointment as Chief Executive Officer and President of the Company, effective June 5, 2023, among other things. A copy of that press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
Exhibit 99.1 contains forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed in these forward-looking statements.
The information set forth under Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such a filing. This Current Report will not be deemed an admission as to the materiality of any information in this Current Report that is required to be disclosed solely by Regulation FD.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
The following exhibits are filed herewith:
| 10.1 | Executive Employment Agreement between One Stop Systems, Inc. and Michael Knowles, executed May 16, 2023. | |
| 99.1 | Press Release dated May 22, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
SIGNATURES
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.
| ONE STOP SYSTEMS, INC. | ||||||
| Dated: May 22, 2023 | By: | /s/ David Raun | ||||
| David Raun | ||||||
| President and Chief Executive Officer | ||||||
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter this “Agreement”) is entered into as of the last date set forth on the signature page hereto and becomes effective as of June 5, 2023 (hereinafter the “Effective Date”) by and between One Stop Systems, Inc., a Delaware corporation (hereinafter, “OSS” or “Employer” or the “Company”), and Michael Knowles (hereinafter “Executive”).
RECITALS
A. OSS is a corporation headquartered and doing business in the State of California.
B. Both OSS and Executive desire that Executive be hired as its President and Chief Executive Officer (hereinafter “CEO”) on a full-time basis for Employer pursuant to the terms of this written Agreement.
IN CONSIDERATION of the promises and of the mutual covenants contained herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
AGREEMENT
1. Employment. OSS hereby engages Executive to serve as its President and CEO, and Executive hereby accepts such an engagement upon the terms and conditions set forth herein.
2. Term. The term of this Agreement shall begin on the Effective Date stated above and shall remain in effect for three (3) years, unless terminated pursuant to Section 10. If the Agreement is not terminated pursuant to Section 11, the Agreement shall continue from year to year, unless either party to the Agreement gives written notice to the other of a desire to change, amend, modify or terminate the Agreement, at least sixty (60) days prior to the end of the then existing term of the Agreement. If mutually agreed upon in writing, the sixty (60) day notice period may be waived by OSS and Executive.
3. Duties. Executive is employed to serve as the President and CEO and shall perform such duties as are customarily performed by a President and CEO, and such other duties as the Board of Directors assigns from time to time. Executive acknowledges that he is accountable to—and reports to—the Board of Directors (hereinafter the “Board”), who will be Executive’s supervisor, generally communicating through its Chairperson. As part of Executive’s duties, Executive acknowledges and understands that: (a) Executive will devote his utmost knowledge and best skill to the performance of his duties; (b) Executive shall devote his full business time to the rendition of such services, subject to absences for customary vacations and for temporary illness; and (c) Executive will not engage in any other gainful occupation which requires his personal attention without prior consent of OSS, with the exception that Executive may personally trade in stock, bonds, securities, commodities or real estate investments for his own benefit, provided that
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Executive complies with Company policies and applicable law, including the rules and regulations of the Securities and Exchange Commission (the “SEC”). Executive is permitted to remain on any outside boards of directors he sat on as of the Effective Date, and may join other outside board(s) of directors with prior consent of OSS, which consent will not unreasonably be withheld. In performing his duties hereunder, Executive shall support and implement the business, operational and strategic plans approved from time to time by the Board and shall support and cooperate with the Company’s efforts to operate in conformity with the business and strategic plans approved by the Board.
4. Personnel Policies and Procedures. OSS shall have the authority to establish from time to time personnel policies and procedures to be followed by its employees. Executive agrees to comply with the policies and procedures of OSS.
5. Compensation.
a. Salary. During the term of this Agreement, Executive shall be paid a salary that is equivalent to Four Hundred Sixty Thousand Dollars ($460,000) per year, less any required withholdings and deductions (hereinafter “Base Salary”). Such Base Salary shall be prorated for any partial year of employment on the basis of a 365-day fiscal year. Executive will receive Executive’s Base Salary incrementally in semi-monthly payments on the Company’s regular payroll dates. Executive’s Base Salary (and Annual Bonus) are subject to annual review by the Board and may be changed from time to time in the Company’s discretion.
b. Annual Bonus. In addition to the Base Salary, Executive will also be eligible to receive a bonus (paid out annually if targets are met) with a target amount equivalent to seventy five percent (75%) of his then-current annual Base Salary (the “Target Bonus”) if he meets the applicable bonus criteria, pursuant to the OSS Variable Compensation Plan approved by the Board (hereinafter “VCP”). Executive shall earn and be paid the “Target Bonus” on an annual basis, pursuant to the VCP, based on Executive’s performance, as determined by the Board in its sole discretion, against fundamental corporate and/or individual objectives to be determined by the Board at the beginning of the applicable calendar year. The Board shall have the sole discretion to determine the amount of the bonus paid, if any, for a given year, based on the terms of the VCP. Consistent with the VCP, the bonus is not earned until the year is completed. For avoidance of doubt, no annual component or above target portion of the bonus is earned until the full year is completed. Executive must be employed on the last day of the applicable calendar year to be eligible for a bonus for that year. Executive shall be eligible to receive a prorated bonus for the 2023 calendar year, based on the Effective Date of June 5, 2023.
c. Equity Incentives. In consideration of Executive entering into this Agreement, and as an inducement that is material to Executive’s employment with the Company, Executive shall be granted the equity grants set forth in this Section (each an “Inducement Grant” and collectively the “Inducement Grants”). The Inducement Grants will be granted pursuant to the inducement grant exception under Nasdaq Rule 5635(c)(4) and not pursuant to the Company’s Equity Incentive Plan or any other equity incentive plan of the Company, as an inducement that is material to Executive’s employment with the Company. The Inducement Grants shall be subject to approval by the Board and, if so approved, issued to Executive on the Effective Date (or the date of Board approval, if later).
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i. RSUs. Subject to the approval of the Board, Executive shall receive up to Four Hundred Thousand (400,000) Restricted Stock Units (“RSUs”). The RSUs shall vest over four (4) years, with one fourth of the RSUs vesting on the one-year anniversary of the date of grant, and the remaining RSUs vesting in six (6) equal installments, commencing six (6) months after the one-year anniversary of the date of grant date and every six (6) months thereafter until fully vested, provided that Executive is still employed by the Company on each vesting date. Notwithstanding the foregoing, any unvested RSUs shall automatically vest immediately prior to the consummation of a Change in Control.
ii. Non-Qualified Stock Options (“NSOs”). Subject to the approval of the Board, Executive shall receive an option grant of Four Hundred Thousand (400,000) Non-Qualified Stock Options (“NSOs”), which shall vest over four (4) years, with one fourth of the NSOs vesting on the one-year anniversary of the date of grant, and the remaining NSOs vesting in six (6) equal installments, commencing six (6) months after the one-year anniversary of the date of grant and every six (6) months thereafter until fully vested, provided that Executive is still employed by the Company on each vesting date.
For purposes of this Agreement, the following terms shall have the meanings given:
“Equity Incentive Plan” means that certain 2017 Equity Incentive Plan, as may be amended from time to time, established by the Company for the benefit of employees, officers, directors and consultants of the Company.
“Change in Control” shall have the same meaning ascribed to it in Section 2(e) of the Equity Incentive Plan; provided, however, that a merger or other transaction effected solely for the purpose of changing the domicile of the Company shall not constitute a “Change in Control” for purposes of this Agreement.
6. Clawback of Incentive Compensation. Notwithstanding the foregoing, all incentive compensation payable to Executive during the term of this Agreement shall be subject to clawback in accordance with Company policies, as may be adopted and/or amended from time to time, in accordance with applicable law, including, without limitation, SEC rules and regulations and/or rules of the exchange on which the Company’s equity securities may be listed from time to time.
7. Fringe Benefits.
a. Vacation. Executive shall not accrue any vacation, but shall be entitled to take unlimited vacation during the term of this Agreement, pursuant to the terms of Employer’s unlimited vacation policy, so long as the vacation time does not interfere with the Executive’s ability to complete his corporate obligations, and only for time off for vacation and personal days, and not for other purposes covered by leave of absence and paid sick leave policies.
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b. Medical and Dental Insurance and Paid Sick Leave . Executive shall receive medical and dental insurance benefits and paid sick leave, as set forth in the Employee Handbook for full-time employees. Executive shall be responsible for paying for any premiums for medical and dental insurance for any beneficiaries that he desires to be covered. Executive will be deemed to receive income attributable to the benefits provided pursuant to this Section in accordance with, and to the extent required by, applicable law and Internal Revenue Service regulations, and shall be responsible for any and all applicable tax liability arising from such benefits. The Company reserves the right, in its sole discretion, to alter, suspend, amend, or discontinue any and all of its Executive benefits, and Executive policies and procedures, in whole or in part, at any time with or without notice.
c. Retirement Benefits. Executive shall receive retirement benefits (defined benefit contribution (401K) and pension plan), as set forth in the Employee Handbook.
8. Business Expenses. OSS shall reimburse Executive for reasonable and necessary expenses incurred by Executive in the ordinary course of business for OSS, in accordance with OSS’ policies and procedures.
9. Location. Executive’s principal place of employment shall be the Company’s facility in Escondido, California, provided that Executive will be required to travel from time to time to other locations in connection with the Company’s business.
10. Travel Expense. When traveling on Company business, Executive will be permitted to fly Business Class for international travel and Coach Class airfare for domestic travel.
11. Termination. This Agreement and the employment of Executive shall terminate prior to its expiration date under any of the following conditions:
a. The death of Executive.
b. The complete disability of Executive (“Complete Disability”), which means Executive’s inability to perform Executive’s duties under this Agreement, whether with or without reasonable accommodation, by reason of any incapacity, physical or mental, which the Board, based upon medical advice or an opinion provided by a licensed physician acceptable to the Board, determines to have incapacitated Executive from satisfactorily performing all of Executive’s usual services for the Company, with or without reasonable accommodation, for a period of at least one hundred eighty (180) days during any twelve (12) month period (whether or not consecutive). Based upon such medical advice or opinion, the determination of the Board shall be final and binding and the date such determination is made shall be the date of such Complete Disability for purposes of this Agreement.
c. Upon receipt by Executive of written notice from OSS that Executive’s employment is being terminated for “good cause.” OSS has “good cause” to terminate Executive’s employment if:
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i. Executive fails or refuses to faithfully and diligently perform the usual and customary duties of his employment, which failure or refusal is not cured within thirty (30) days after written notice thereof is given to Executive; or
ii. Executive fails or refuses to comply with the material policies, standards and/or rules of Employer, which from time to time may be established; or
iii. Executive fails or refuses to act in accordance with any lawful direction or order of Employer; or
iv. It is determined that Executive has conducted himself in an unprofessional, unethical, illegal or fraudulent manner, or has acted in a manner detrimental to the reputation, character or standing of Employer; including, but not limited to, theft or misappropriation of Employer’s assets, engaging in unlawful discriminatory or harassing conduct, working while under the influence of alcohol or illegal drugs, the filing of false expense or related reports, or being convicted of a felony; or
v. Executive violates any term or condition of this Agreement.
d. Upon receipt by Executive of written notice from OSS that Executive’s employment is being terminated for “other than good cause”.
e. Upon sixty (60) days’ written notice by Executive that he is resigning his employment from OSS.
f. Upon sixty (60) days’ written notice by Executive that he is resigning his employment for “Good Reason”, as defined in Section 12 below.
g. Upon the term of the Agreement expiring pursuant to Section 2 above.
12. Good Reason. “Good Reason” for Executive to terminate Executive’s employment hereunder shall mean the occurrence of any of the following events without Executive’s consent: (i) a material adverse change in Executive’s duties, authority or responsibilities relative to the duties, authority or responsibilities in effect immediately prior to such reduction, the removal of Executive as President and CEO of the Company; provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when Executive retains a similar position with a subsidiary of the acquiring entity following a Change of Control, but Executive does not hold the same position in the acquiring entity) shall not constitute “Good Reason;” and, provided further, that Executive’s removal from the Board (if applicable) shall not constitute “Good Reason;” (ii) a material diminution in Executive’s base compensation; or (iii) a material breach by the Company of its obligations under this Agreement; provided, however, that such termination by Executive shall only be deemed for “Good Reason” pursuant to the foregoing definition if: (A) Executive gives the Company written notice of Executive’s intent to terminate for Good Reason within sixty (60) days following the first occurrence of the condition(s) that Executive believes constitute(s) Good Reason, which notice shall describe such condition(s); (B) the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice (the “Cure Period”); and (C) Executive voluntarily terminates Executive’s employment within sixty (60) days following the end of the Cure Period pursuant to Section 11(f) above.
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13. Compensation Upon Termination.
a. For Good Cause. In the event Executive is terminated for good cause, as defined in Section 11(c) above, he shall receive notice that his employment is terminated and shall receive regular, unpaid wages, expenses and other money due to Executive through the termination date. Executive is entitled to no other severance compensation when he is terminated for good cause, as defined in Section 11(c) above.
b. For Other Than Good Cause. In the event Executive’s employment is terminated for other than good cause, as defined in Section 11(d) above, or he resigns for Good Reason, as set forth in Sections 11(f) and 12 above, Employer shall pay Executive all Base Salary earned through the date of termination, less standard deductions and withholdings, and any unreimbursed expenses incurred in accordance with Company policy. In addition, upon Executive signing and returning an effective waiver and release of claims on a release form provided by the Company to Executive at or after his termination (hereinafter “Release and Waiver”) within the time frame set forth therein, but in no event later than forty-five (45) days following Executive’s termination date, Executive shall be entitled to: (i) separation payments in an aggregate amount of twelve (12) months of Executive’s then-current Base Salary, paid to Executive on the Company’s regular paydays, subject to standard payroll deductions and withholdings, with the first such payment being made, subject to Section 14(b) below, on the first payday following the date the Release and Waiver becomes effective (it being understood that such first payment shall include any amounts otherwise payable hereunder on paydays that occur prior to the date the Release and Waiver becomes effective); (ii) provided that Executive timely elects such coverage, the continuation of Executive’s group health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”) at the Company’s expense for a period of twelve (12) months following the termination date; provided, however, that in the event Executive becomes eligible for comparable group insurance coverage in connection with new employment, such COBRA premium payments by the Company shall terminate immediately; and (iii) unvested RSUs held by Executive shall accelerate so that an additional twelve (12) months of RSUs shall vest from the termination date. For avoidance of doubt, a Release and Waiver shall not be deemed to be effective for purpose of this Section unless and until the period for revocation, as provided by applicable law, shall have expired. In the event Executive pursues a claim for breach of contract, Executive agrees that the maximum damage that Executive may recover for breach of contract is (i) twelve (12) months’ of Executive’s then-current Base Salary, (ii) twelve (12) months’ COBRA premiums, and (iii) the value of twelve (12) months of accelerated vesting of RSUs held by Executive as of the termination date, as that is the maximum Executive may recover pursuant to the provisions of this Section. The payments described in this Section 13(b) are collectively referred to as “Severance Benefits.”
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c. Death or Permanent Disability. In the event Executive dies or becomes Completely Disabled, as defined in this Agreement, OSS’ obligations hereunder shall terminate after paying Executive any compensation owed through the last day he worked, including any bonus that has been earned but not yet paid to Executive.
d. Resignation. Executive may resign by providing sixty (60) days’ advance notice of the termination of the Agreement, in accordance with Section 11(e), and shall be paid for the remainder of the time he continues to be employed at OSS, up to a maximum of sixty (60) days from the notice date, plus any unpaid expenses and other money due to Executive.
e. Expiration of Term. If Executive’s employment terminates due to the expiration of the then current term of the Agreement, OSS’ obligations hereunder shall terminate after paying Executive regular, unpaid wages through the termination date, plus any unpaid expenses and any other money due to Executive. In addition, upon Executive signing and returning an effective Release and Waiver within the time frame set forth therein, but in no event later than forty-five (45) days following Executive’s termination date, Executive shall be entitled to separation payments in an aggregate amount of three (3) months of Executive’s then-current Base Salary, paid to Executive on the Company’s regular paydays, subject to standard payroll deductions and withholdings, with the first such payment being made, subject to Section 14(b) below, on the first payday following the date the Release and Waiver becomes effective (it being understood that such first payment shall include any amounts otherwise payable hereunder on paydays that occur prior to the date the Release and Waiver becomes effective). For avoidance of doubt, a Release and Waiver shall not be deemed to be effective for purpose of this Section unless and until the period for revocation, as provided by applicable law, shall have expired.
14. Application of Internal Revenue Code Section 409A.
a. Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). To the extent required by Section 409A, Severance Benefits shall not commence until Executive has a “separation from service” for purposes of Section 409A. Each installment of Severance Benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the Severance Benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and Executive is, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the Severance Benefits payments shall be delayed until the earlier of (i) twelve (12) months and one day after Executive’s separation from service, or (ii) Executive’s death.
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b. Executive shall receive Severance Benefits only if Executive executes and return to the Company the Release and Waiver no later than forty-five (45) days following Executive’s termination date, and permits the Release and Waiver to become effective in accordance with its terms (such latest permitted date, the “Release and Waiver Deadline”). If the Severance Benefits are not covered by one or more exemptions from the application of Section 409A and the Release and Waiver could become effective in the calendar year following the calendar year in which Executive separates from service, the Release and Waiver will not be deemed effective any earlier than the Release and Waiver Deadline. None of the Severance Benefits will be paid or otherwise delivered prior to the effective date of the Release and Waiver. Except to the minimum extent that payments must be delayed because Executive is a “specified employee” or until the effectiveness of the Release and Waiver, all amounts will be paid in accordance with Sections 13(b) and 13(e) above.
c. The Severance Benefits are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.
15. Limitation on Payments.
a. If any payment or benefit Executive will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).
b. Notwithstanding any provision of paragraph (a) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Code that would not otherwise be subject to taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A of the Code as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A of the Code shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A of the Code.
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c. Unless Executive and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the Company within fifteen (15) calendar days after the date on which Executive’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Executive or the Company) or such other time as requested by Executive or the Company.
d. If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 15(a) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive shall promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 15(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) Section 15(a), Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
16. Arbitration/Sole Remedy for Breach of Agreement. In the event of any dispute between OSS and Executive concerning any aspect of the employment relationship, including any disputes relating to termination, all such disputes shall be resolved by binding arbitration before a single neutral arbitrator pursuant to the Federal Arbitration Act (“FAA”), as follows. This provision shall supersede any prior arbitration agreement, policy or understanding between the parties. The parties intend to revoke any prior arbitration agreement.
a. Claims Covered by the Agreement.
i. Executive and OSS both agree to exclusively and finally resolve by binding arbitration any and all claims or controversies (“claims”) that OSS may have against Executive or that Executive may have against OSS or against its past, present, or future predecessors, successors, assigns, affiliates, parent and subsidiary companies, joint ventures, alleged joint employers, pension or benefit plans, administrators, vendors, contractors, and their respective past, present, or future officers, directors, employees, stockholders, representatives, managers, members, partners, partnerships, agents, clients, suppliers, vendors, business advisors, financial advisors, attorneys, and accountants,
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insurers, and indemnitees (collectively, “Employer”), relating to, resulting from, or in any way arising out of this Agreement or the enforcement, interpretation or validity of this Agreement and/or the agreement to arbitrate, including the determination of the scope or applicability of this agreement to arbitrate, any aspect of Executive’s employment relationship with Employer (pre-hire through post-termination), and/or the termination of Executive’s employment relationship with Employer, and/or any act or omission between Executive and Employer to the extent permitted by law. Any claims that are expressly precluded from arbitration by a governing federal law or by a state law that is not preempted by the FAA or other federal law are not covered by this Agreement.
ii. The scope of this Agreement is intended to be broad and comprehensive and includes, without limitation, claims for wages or other compensation due; claims for penalties or premiums; claims for violations of the California Labor Code; claims for breach of any contract or covenant (express or implied); tort claims (including, but not limited to, those relating to performance or reputation); claims for discrimination, harassment, and/or retaliation (including, but not limited to, race, religious creed (which includes religious dress and grooming practices), color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex (which includes pregnancy, childbirth, breastfeeding, and related medical conditions), gender, gender identity, gender expression, age, sexual orientation, military or veteran status, or any other consideration made unlawful by federal, state or local laws, ordinances, or regulations); claims for violation of any leaves of absence or accommodations laws; claims for wrongful termination or whistleblowing; claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration procedure different from this one); claims for violation of trade secret, proprietary, or confidential information laws; claims for unfair business practices; claims for invasion of privacy; conversion, claims for breach of fiduciary duty or breach of contract, defamation, claims for tortious interference with contract or economic advantage, and claims for violation of any public policy, federal, state, or other governmental law, statute, regulation, or ordinance.
b. Claims Not Covered by the Agreement.
i. The Agreement does not include any disputes involving sexual assault and/or sexual harassment as defined by title 9 of the United States Code arising on or after March 3, 2022.
ii. Nothing in this agreement precludes Executive from pursuing any administrative agency claims, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the Division of Labor Standards Enforcement, the Department of Labor and the National Labor Relations Board. However, if any federal, state or local administrative agency does not finally and completely resolve the claims covered by this Agreement, Executive must submit the claim to arbitration under this Agreement.
iii. Any dispute or claim that is not covered by this Agreement may be filed in court but the parties agree that the court action will be immediately stayed pending full and final resolution of the Arbitration of the covered claims, unless prohibited by law.
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c. Arbitration Procedures.
i. Required Notice of Claims and Statute of Limitations. Executive may initiate arbitration by serving or mailing a written notice to the CEO of Employer at Employer’s principal place of business. Employer may initiate arbitration by serving or mailing a written notice to Executive at the last address recorded in Executive’s personnel file. The written notice must specify with reasonable particularity the claims asserted against the other party. Notice of any claim sought to be arbitrated must be served within the limitations period established by applicable federal or state law. After demand for arbitration has been made by serving written notice, the party demanding arbitration shall file a demand for arbitration with the Office of JAMS located in San Diego. The location of the arbitration is determined in accordance with Section 16(c)(viii). Applicable law is determined in accordance with Section 16(c)(vi).
ii. Selection of Arbitrator and Applicable Rules. The arbitrator shall be selected within sixty (60) days of the party initiating arbitration under Section 16(c)(i) from the panel of JAMS and the arbitration shall be conducted pursuant to JAMS policies and procedures. Except as provided herein, all rules governing the arbitration shall be the then-applicable rules set forth by JAMS. If the dispute is employment-related, the dispute shall be governed by JAMS’ then-current version of the national rules for the resolution of employment disputes, with the exception that discovery and motions for summary judgment will be governed by Sections 16(c)(iii) and 16(c)(iv) of this Agreement. JAMS’ then-applicable rules governing the arbitration may be obtained from JAMS’ website, which currently is www.jamsadr.com.
iii. Discovery and Motions. The parties shall be entitled to engage in all types of discovery (e.g., depositions, interrogatories, request for production of documents, etc.) regarding and relevant to the subject matter of the dispute submitted to arbitration pursuant to the Federal Rules of Civil Procedure (“FRCP”), including but not limited to, FRCP 26. A copy of the FRCP may be obtained from the website of the United States Courts, which is currently http://www.uscourts.gov/rules-policies/current-rules-practice-procedure/federal-rules-civil-procedure. The arbitrator is authorized to rule on discovery motions brought under the FRCP. All discovery must be completed no later than twenty (20) days prior to the date set for the arbitration hearing; provided, however, that no discovery may be initiated until after the dispute has been formally submitted to arbitration and an arbitrator has been mutually agreed-upon.
iv. Dispositive Motions. Either party may file a motion for summary judgment with the arbitrator in accordance with Rule 56 of the FRCP.
v. Offers Of Judgement. Either party may serve an offer of judgment consistent with the FRCP.
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vi. Applicable Law and Arbitrator Authority. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state in which the claim arose, or federal law, or both, as applicable to the claim(s) asserted. The arbitrator shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement including, but not limited to the agreement to arbitrate and any claim that all or any part of this Agreement is void or voidable any claim that any party breached the agreement to arbitrate, except for any disputes involving sexual assault and/or sexual harassment as defined by Title 9 of the United States Code arising on or after March 3, 2022.
/s/ MK (Executive’s Initial Acknowledging Arbitrator’s Exclusive Authority)
vii. Arbitration Decision. The arbitrator’s decision will be final and binding. The arbitrator shall issue a written arbitration decision revealing the essential findings and conclusions upon which the decision and/or award is based within thirty (30) calendar days after the hearing’s completion. A party’s right to appeal the decision is limited to grounds provided under applicable federal or state law.
viii. Place of Arbitration. The arbitration shall take place at a mutually convenient location (preference shall be provided to a JAMS office) that must be within fifty (50) miles of Executive’s last known address with Employer. If the parties cannot agree upon a location, or if a JAMS office is not within fifty (50) miles of Executive’s last known address with Employer, then the arbitration shall be held at the JAMS closest to the last Employer worksite with which Executive most regularly communicated. If Executive worked remotely, then the arbitration shall be held at the JAMS office closest to Employer’s worksite where Executive was “assigned,” even though Executive did not physically work at the worksite.
d. Application for Emergency Injunctive and/or Other Equitable Relief. Claims by Employer or Executive for emergency injunctive and/or other equitable relief relating to unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information shall be submitted to JAMS for emergency treatment. The parties agree that the JAMS administrator may select a neutral hearing officer (subject to conflicts) to hear the emergency request only. The hearing officer should be experienced in considering requests for emergency injunctive and/or other equitable relief. The hearing officer shall conform his/her consideration and ruling with the applicable legal standards as if this matter were heard in a court of law in the applicable jurisdiction for such a dispute.
e. Severability. Should any portion of this agreement to arbitrate be found unenforceable, such portion will be severed from this Agreement, and the remaining portions shall continue to be enforceable.
f. Effective Date. This agreement to arbitrate is retroactively effective to the date that Executive’s employment with Employer initially began. This agreement to arbitrate shall survive the termination of Executive’s employment.
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g. Construction. This agreement to arbitrate shall be construed and enforced pursuant to the FAA and not the California Arbitration Act, California Civil Procedure Section 1280 et seq. Executive acknowledges and agrees that the Employer’s business affects interstate commerce. The Arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this agreement to arbitrate, including, but not limited to, any claim that all or any part of this agreement to arbitrate is void or voidable. Any disputes regarding the enforceability or validity of this agreement to arbitrate or any of its provisions shall be resolved as if the arbitrator or other decision-maker, if any, is acting as a federal district court judge applying the FAA and its precedent.
/s/ MK (Executive’s Initials Acknowledging the FAA)
h. Consideration. Employer’s offer to make Executive eligible for promotions, raises, bonuses, gifts and prizes in the future, and the promises by Employer and Executive to arbitrate differences, rather than litigate them before courts or other bodies, provide consideration for each other to enter into this Agreement.
i. Representation, Fees, and Costs. Each party may be represented by an attorney or other representative selected by the party. Each party shall be responsible for its own attorneys’ or representative’s fees. However, if any party prevails on a statutory claim that affords the prevailing party’s attorneys’ fees, or if there is a written agreement providing for fees, the arbitrator may award reasonable fees to the prevailing party subject to written evidence of such fees and applicable law. Employer shall be responsible for the arbitrator’s fees and costs to the extent they exceed any fee or cost that Executive would be required to bear if the action were brought in court. Executive and Employer shall pay any required fees or costs to initiate or continue the arbitration proceeding within sixty (60) days of receiving an invoice from JAMS. Executive and Employer agree that this provision preempts and supersedes any contrary provision in the California Arbitration Act or it the arbitration provider’s rules or in the terms of the invoices for the required fees or costs.
j. Waiver of Jury Trial/Exclusive Remedy. Executive and Employer knowingly and voluntarily waive any constitutional right to have any dispute between them decided by a court of law and/or by a jury in court.
/s/ MK (Executive’s Initials Acknowledging Waiver of Jury Trial)
k. Waiver of Representative, Class and Collective Action Proceedings. To the maximum extent permitted by law, Executive and Employer knowingly and voluntarily agree to bring any claims governed by this Agreement in his/her/its individual capacity and not as a plaintiff, class member or representative in any purported class, collective or representative action. They further agree to waive any right to participate in any representative, collective or class action proceeding related to any claims governed by this agreement to arbitrate. Employer and Executive also agree that the arbitrator may not consolidate more than one individual’s claims unless the Parties agree in writing, and may not otherwise preside over any form of representative, collective or class action proceeding, including, but not limited to, any representative action under California Business and Professions Code sections 17200 et seq. If any representative, class or collective action is filed in contravention of this Section, the Parties to the action shall immediately seek dismissal of the action or, in the alternative, seek an immediate stay of the action pending full and final resolution of the arbitration unless prohibited by law.
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/s/ MK (Executive’s Initials Acknowledging Waiver of Representative, Class or Collective Actions)
l. Indirect Beneficiaries Covered by the Agreement to Arbitration. In addition to Employer, this agreement to arbitrate applies and insures to the benefit of the parties that are alleged or otherwise deemed to manage, supervise or allegedly inure or damage (financially or otherwise) Employer’s employees, or operate as joint employers or co-employers of Employer’s employees (collectively “Indirect Beneficiaries”) with respect to any Covered Claim.
17. Certain Covenants.
a. Noncompetition. Except as may otherwise be approved by the Board, during the term of Executive’s employment, Executive shall not have any ownership interest (of record or beneficial) in, or have any interest as an Executive, salesman, consultant, officer or director in, or otherwise aid or assist in any manner, any firm, corporation, partnership, proprietorship or other business that engages in any county, city or part thereof in the United States and/or any foreign country in a business which competes directly or indirectly (as determined by the Board) with the business of the Company in such county, city or part thereof, so long as the Company or any successors in interest to the business and goodwill of the Company, remains engaged in such business in such county, city or part thereof or continues to solicit customers or potential customers therein; provided, however, that Executive may own, directly or indirectly, solely as an investment, securities of any entity which are traded on any national securities exchange if Executive (x) is not a controlling person of, or a member of a group which controls, such entity; or (y) does not, directly or indirectly, own one percent (1%) or more of any class of securities of any such entity.
b. Confidential Information. Executive and the Company have entered into the Company’s standard Executive Proprietary Information and Invention Assignment Agreement, or such similar document as commonly used by the Company (the “Proprietary Information and Inventions Agreement”). Executive agrees to perform each and every obligation of Executive therein contained.
c. Solicitation of Executives. Executive shall not during the term of Executive’s employment, and for the applicable severance period for which Executive receives severance benefits following any termination hereof pursuant to Section 13 above (regardless of whether Executive receives such severance benefits in a lump sum payment) (the “Restricted Period”), directly or indirectly, solicit or encourage to leave the employment of the Company, any Executive of the Company.
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d. Rights and Remedies Upon Breach. If Executive breaches or threatens to commit a breach of any of the provisions of this Section 17 (collectively the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity:
i. Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, all without the need to post a bond or any other security or to prove any amount of actual damage or that money damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide adequate remedy to the Company; and
ii. Accounting and Indemnification. The right and remedy to require Executive (i) to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants; and (ii) to indemnify the Company against any other losses, damages (including special and consequential damages), costs and expenses, including actual attorneys’ fees and court costs, which may be incurred by them and which result from or arise out of any such breach or threatened breach of the Restrictive Covenants.
e. Severability of Covenants/Blue Penciling. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. If any court determines that any of the Restrictive Covenants, or any part thereof, are unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Executive hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their geographic scope or the length of their term.
f. Enforceability in Jurisdictions. The Company and Executive intend to and do hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of such covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and Executive that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.
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18. Restriction on Use of Confidential Information.
a. Nondisclosure. Executive will not publish or disclose or allow to be published or disclosed, confidential information to any person who is not an employee of OSS unless such disclosure is necessary to the performance of Executive’s obligations under this Agreement.
b. Surrender Upon Termination of Agreement. Upon termination of this Agreement for any reason, Executive will surrender to OSS all documents and materials in his possession and/or control which contain confidential information. Executive further agrees to return any and all other documents, materials, computer disks, or other items or property provided to Executive by OSS during the term of this Agreement upon the termination of this Agreement for any reason.
c. Prohibition Against Unfair Competition. Executive will not use any confidential information to engage in competition with OSS at any time during the term of this Agreement or after the termination of this Agreement for any reason.
19. Solicitation of Employees.
a. Information About Other Employees. Executive may be called upon to work closely with employees of OSS in performing services under this Agreement. All information about such employees which becomes known to Executive during the course of this Agreement, and which is not otherwise known to the public, including compensation or commission structure, is confidential information of OSS and shall not be used by Executive in soliciting employees of OSS at any time during or after termination the termination of this Agreement.
b. Solicitation of Employees Prohibited. During the term of this Agreement, Executive shall not, directly or indirectly ask or encourage any employee(s) of OSS to leave their employment with OSS, or solicit any employee(s) of OSS for employment elsewhere.
20. Representation Concerning Prior Agreements. Executive represents to OSS that he is not bound by any non-competition and/or non-solicitation agreement that would preclude, limit or in any manner affect this Agreement. Executive further represents that he can fully perform the duties under this Agreement without violating any obligations Executive may have to any other company or person, including but not limited to, misappropriating any confidential information acquired from a company or person and agrees that he has not and will not misappropriate any confidential information acquired from a company or person. Executive agrees that he will indemnify and hold OSS harmless from any and all liability and damage, including attorneys’ fees and costs, resulting from any breach of this provision.
21. Violations of Confidential Information, Solicitation and Written Material Clauses. Executive agrees and acknowledges that the violation of any of the provisions contained in Sections 17 through 20 hereof would cause irreparable injury to OSS, that the remedy at law for any violation or threatened violation thereof would be inadequate, and that OSS shall be entitled to temporary and permanent injunctive relief or other equitable relief without the necessity of proving actual damages. Such relief may be obtained based on the procedure set forth in Section 16(d) above.
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22. Successors and Assigns. The rights and obligations of OSS under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of OSS. Executive shall not be entitled to assign any of his rights or obligations under this Agreement.
23. Governing Law. This Agreement shall be interpreted, construed, governed and enforced in accordance to the laws of the State of California.
24. Amendments. No amendment or modification of the terms or conditions of this Agreement shall be valid unless in writing and signed by the parties hereto.
25. Separate Terms. Each term, condition, covenant or provision of this Agreement shall be reviewed as separate and distinct, and in the event that any such term, covenant or provision shall be held by an arbitrator or a court of competent jurisdiction, as applicable, to be invalid, the remaining provisions shall continue in full force and effect.
26. Waiver. A waiver by either party of a breach of provision or provisions of this Agreement shall not constitute a general waiver, or prejudice the other party’s right otherwise to demand strict compliance with that provision or any other provisions in this Agreement.
27. Notices. Any notices required or permitted to be given under this Agreement shall be sufficient, if in writing, sent by mail to his residence in the case of Executive, or hand delivered to Executive, or to its principal office in the case of OSS.
28. Entire Agreement. Executive acknowledges receipt of this Agreement and agrees that this Agreement represents the entire Agreement with OSS concerning the subject matter hereof, and supersedes any previous oral or written communications, representations, understandings or Agreements with OSS or any agent thereof. Executive understands that no representative of OSS has been authorized to enter into any Agreement or commitment with Executive, which is inconsistent in any way with the terms of this Agreement.
[Signatures Follow]
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IN WITNESS HEREOF, the parties have executed this Agreement as of the dates set forth below.
| Dated: May 16, 2023 | /s/ Michael Knowles Michael Knowles | |
| Dated: May 16, 2023 | /s/ Ken Potashner Ken Potashner Title: Chairman, Board of Directors One Stop Systems, Inc. | |
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Exhibit 99.1
One Stop Systems Announces Appointment of Aerospace and Defense
Veteran Michael Knowles as President and Chief Executive Officer
ESCONDIDO, California—May 22, 2023 – One Stop Systems, Inc. (Nasdaq: OSS), a leader in AI Transportable compute and storage solutions at the edge, today announced that Michael Knowles has been appointed as its new President and CEO, effective June 5, 2023.
Knowles has held executive leadership positions at several defense contractors, including Cubic Corporation, Rockwell Collins, Lockheed Martin, and Curtiss Wright Defense Solutions. Over his career he has effectively developed and launched market-changing technologies and products in both defense and commercial markets. As President and GM of Cubic Corporation’s Mission and Performance Solutions business, Knowles led a $700 million global business unit with 2,000 employees. He directed the development and implementation of strategies and organizational transformations that drove significant increases in sales and margin percentage, and achieved year-over-year growth in bookings, sales, and EBITDA. 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 SWAP (size, weight, and power) RF components for electronic warfare, space, 5G applications, and LVC (live, virtual, and constructive) multi-domain training systems.
Knowles has more than 30 years of leadership experience in global aerospace and defense markets, having led successful business captures resulting in billion-dollar program and product portfolios. Leveraging 20 years of military experience and 20+ years as a senior executive in business operations, program management, business capture, and product development, Knowles is a recognized and inspiring leader whose teams have exceeded financial and customer expectations, resulting in successful global businesses with enviable consistent growth and shareholder value.
“Management and the Board of OSS have been working on a refined defense-focused strategic plan to spur growth, enhance margins, and deliver greater shareholder value,” remarked Ken Potashner, OSS Board Chairman. “Bringing on Michael to lead the team is the culmination of this planning, which we believe will enable us to accelerate and scale our defense sector opportunities. We believe that Michael’s extensive defense experience and proven leadership will enable us to realize significant gains from the opportunities before us, in both the defense and commercial sectors.”
“OSS is at a unique and promising inflection point with superior AI Transportable technology that has the ability to make a dramatic impact for warfighters globally, ensuring that it is ‘Never a Fair Fight,” Knowles replied. “I’m excited to build on the inspiring AI product suite, driving growth in both defense and commercial markets and creating a powerful business model. OSS has the foundations for a team, products, and innovation mindset to succeed in the global marketplace and accelerate greater pipeline and business growth.”
Michael Knowles was most recently the VP/GM of C5ISR Systems at Curtiss Wright. Prior to his role at Curtiss Wright, he served as President of Cubic’s Mission and Performance Solutions, where he oversaw a broad and diverse C4ISR product and defense training business. Knowles is a retired Navy officer and Naval Test Pilot School graduate. He has an MBA from George Mason University, an MS in Aerospace Engineering from the Naval Postgraduate School, and a BS in Aerospace Engineering from the US Naval Academy. Knowles is also a member of the National Defense Industrial Association and the National Training & Simulation Association, and he has strong connections in the DOD, commercial, and international markets.
Consistent with previous announcements, David Raun’s last day as the company’s President and CEO will be June 5, 2023, the same day on which Knowles will begin serving in such roles.
“We thank David Raun for his leadership in spearheading our AI Transportable vision and associated cutting-edge products, enabling us to establish footholds in new markets and preparing for our strategic initiatives in defense and AI,” said Potashner. “We are grateful for his many contributions.”
Inducement Grants under Nasdaq Listing Rule 5635(c)(4)
In connection with, and as a material inducement to, the hiring and appointment of Knowles as President and CEO of the company, the company agreed to grant Knowles (i) 400,000 restricted stock units (RSUs), which shall vest over four years, with one fourth vesting on the one-year anniversary of the date of grant and the remaining RSUs vesting in six equal installments, commencing six months after the one-year anniversary of the grant date and every six months thereafter until fully vested; and (ii) non-qualified stock options to purchase 400,000 shares of company common stock, which shall vest over four years, with one fourth vesting on the one-year anniversary of the date of grant and the remaining stock options vesting in six equal installments, commencing six months after the one-year anniversary of the grant date and every six months thereafter until fully vested. The stock options will have an exercise price equal to the closing price of the company’s common stock on June 5, 2023 (the grant date). The vesting of shares of common stock underlying the RSUs and non-qualified stock options will be subject to Knowles’ continuous service with the company through each applicable vesting date.
The foregoing equity grants were unanimously approved by the company’s board of directors, and such grants were inducements material to Knowles entering into employment with the company, in accordance with Nasdaq Listing Rule 5635(c)(4). The foregoing equity grants will be made outside of the company’s 2017 Equity Incentive Plan, as amended, or any other equity incentive plan of the company.
About One Stop Systems
One Stop Systems, Inc. (Nasdaq: OSS) is a global leader in AI Transportable solutions for the demanding ‘Edge.’ It designs and manufactures the highest performance compute and storage products that enable rugged autonomous and AI capabilities without compromise. These hardware and software platforms bring the latest data center performance to the harsh and challenging applications, whether they are on land, sea or in the air.
OSS products include ruggedized servers, compute accelerators, flash storage arrays, and storage acceleration software. These specialized compact products are used across multiple industries and applications, including autonomous trucking and farming, as well as aircraft, drones, ships and vehicles within the defense industry.
OSS solutions address the entire AI workflow, from high-speed data acquisition to deep learning, training and large-scale inference, and have delivered many industry firsts for industrial OEM and government customers.
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As the fastest growing segment of the multi-billion-dollar edge computing market, AI Transportables require—and OSS delivers—the highest level of performance in the most challenging environments without compromise.
OSS products are available directly or through global distributors. For more information, go to www.onestopsystems.com. You can also follow OSS on Twitter, YouTube, and LinkedIn.
Forward-Looking Statements
One Stop Systems cautions you that statements in this press release that are not a description of historical facts are forward-looking statements. These statements are based on the company’s current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by One Stop Systems or its partners that any of our plans or expectations will be achieved, including but not limited to, the successful transition of the CEO and President roles to Knowles and the effectiveness and/or success of the company’s business strategy. Actual results may differ from those set forth in this press release due to the risk and uncertainties inherent in our business, including risks described in our prior press releases and in our filings with the Securities and Exchange Commission (SEC), including under the heading “Risk Factors” in our Annual Report on Form 10-K and any subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to revise or update this press release to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Media Contacts:
Katie Rivera
One Stop Systems, Inc.
Tel (760) 745-9883
Email contact
Tim Randall
CMA Media Relations
Tel (949) 432-7572
Email Contact
Investor Relations:
Ronald Both or Grant Stude
CMA Investor Relations
Tel (949) 432-7557
Email contact
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