PMTS 8-K
CPI Card Group Inc. (PMTS)
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
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
(State or other jurisdiction | (Commission | (I.R.S. Employer |
CPI Card Group Inc. (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Scott Scheirman
On May 31, 2023, Scott Scheirman, the Company’s President and Chief Executive Officer, notified the Company of his intent to retire from the Company in order to have more time for family. As described below, on June 2, 2023, the Company and Mr. Scheirman entered into a letter agreement (the “Letter Agreement”) supplementing and amending the terms of the Employment and Non-Competition Agreement by and between Mr. Scheirman and the Company, effective as of September 25, 2017 (the “Employment Agreement”), which provides that Mr. Scheirman would remain employed with the Company through February 28, 2024 (the “Retention Date”). Mr. Scheirman has served as the Company’s President and Chief Executive Officer since late 2017. The Board has commenced a search for a candidate to replace Mr. Scheirman, which will include internal and external candidates, and he intends to continue to serve as the Company’s President and Chief Executive Officer until a successor is named and to assist with the transition of his duties to the new Chief Executive Officer.
The Letter Agreement was structured to provide an incentive for Mr. Scheirman to remain employed with the Company through the Retention Date in order to allow for the orderly transition of his duties from the Company. Prior to the Retention Date, Mr. Scheirman will continue to serve as the Company’s President and Chief Executive Officer, including assisting the Board in the selection of a new Chief Executive Officer, and fully transitioning his duties to the new Chief Executive Officer.
The Letter Agreement provides that the aggregate target grant date fair value of equity awards granted to Mr. Scheirman in 2023 under the terms of the Employment Agreement will be $3,920,000, with the equity awards granted after the date of the Letter Agreement to be 75% in the form of restricted stock units and 25% in the form of nonqualified stock options. If Mr. Scheirman’s employment terminates for any reason other than a termination for Cause or a resignation without Good Reason (each as defined in the Employment Agreement and as modified by the Letter Agreement, as applicable) (a “Qualified Termination”), any such grant not made prior to the date of termination will be made on the final day of his employment (or will be made to the legal representative of his estate in the event of his death), with the grant to be delivered in the form of a cash-settled award if required by applicable law or the terms of the Company’s equity plan. The terms of such awards will provide that 50% of the shares subject to the award will vest on the first anniversary of the date of grant, and the remaining 50% of the shares subject to the award will vest on the second anniversary of the date of grant, and the options may be exercised at any time between the date of vesting and the third anniversary of the date of vesting.
In addition, the Letter Agreement provides that, subject to his continued employment through the Retention Date or his earlier Qualified Termination, in each case, subject to his execution and delivery of a release of claims and his continued compliance with the Letter Agreement and the Employment Agreement and in lieu of the payments and benefits he would otherwise receive upon such a termination of his employment under the Employment Agreement, (A) the Company will pay to Mr. Scheirman an amount equal to $5,000,000; (B) any outstanding and unvested equity awards granted to Mr. Scheirman (including, without limitation, the equity awards granted to him pursuant to the Letter Agreement) will generally continue to vest in accordance with their original vesting schedules as if he had remained employed with the Company through each applicable vesting date, and any options held by Mr. Scheirman may be exercised at any time between the date of vesting and the third anniversary of the date of vesting; (C) each outstanding and unexercised stock option granted to Mr. Scheirman will, to the extent vested, remain exercisable through the earlier of the original expiration date and February 28, 2027; provided that the options that were not vested on the date of the Letter Agreement will remain exercisable until the third anniversary of the date of vesting; (D) Mr. Scheirman will remain eligible to receive the full amount of his 2023 cash incentive compensation, including quarterly payments and the annual true-up payment, with Mr. Scheirman’s 2023 incentive compensation to be paid based upon actual performance results for 2023, but treating all individual performance goals as having been met at the target level; and (E) the Company will reimburse Mr. Scheirman, on a monthly basis, for the cost of continuing coverage under the Company’s group health and dental benefits plan, and in accordance with the Company’s policies applicable to similarly situated employees, until no later than August 31, 2025.
The foregoing summary description of the terms and conditions of the Letter Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Letter Agreement, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Bradley Seaman
On June 2, 2023, Bradley Seaman notified CPI Card Group Inc. (the “Company”) of his intent to resign and step down from the Board of Directors (the “Board”) and as its chairman, effective as of June 15, 2023. Mr. Seaman has been the Chair of the Board and member of the Board since 2007. Mr. Seaman’s decision to resign was not due to any disagreements with the Company on any matter relating to the Company’s operations, policies or practices.
Special Equity Awards
As part of an additional incentive compensation program, on May 30, 2023, the Compensation Committee of the Board (the “Committee”) approved certain equity awards to retain and incentivize executive officers and certain key employees, excluding the Chief Executive Officer. The Committee approved a plan to award restricted stock units totaling $801,000 in grant date value in the aggregate to John Lowe, the Company’s Executive Vice President, End-to-End Solutions and restricted stock units totaling $567,000 in grant date value in the aggregate to Lane Dubin, the Company’s Executive Vice President and Chief Development and Digital Officer. The restricted stock units are expected to be awarded in three separate tranches during the year, with the first tranche having a grant date of June 9, 2023 and the second and third tranches expected to be awarded on or about August 31, 2023 and November 30, 2023, subject to the executive’s continued employment on such dates and final approval by the Committee in advance of each award. Each tranche of awards will vest in equal installments over three years, beginning on the first anniversary of the grant date, subject to the employee’s continuous service to the Company.
Awards received by Mr. Dubin under the program will not be subject to the vesting terms for equity awards more fully described in that certain Employment Agreement dated December 13, 2022 by and between Mr. Dubin and the Company (the “Dubin Employment Agreement”). In the event that Mr. Dubin’s service to the Company terminates in certain circumstances after December 31, 2023, including due to a “Severance Termination Event” as defined in the Dubin Employment Agreement, any outstanding and unvested incentive awards granted to Mr. Dubin pursuant to this retention plan will not continue to vest as if he had remained employed with the Company during the severance period and shall instead be forfeited upon such termination of service. The terms of Mr. Dubin’s awards are set forth in the form of Restricted Stock Unit Agreement which is filed as Exhibit 10.2 hereto and incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
On June 5, 2023, the Company issued a press release announcing the retirement of Mr. Scheirman as President and Chief Executive Officer, a copy of which is filed with this Current Report on Form 8-K as Exhibit 99.1*.
*The information in the press release attached as Exhibit 99.1 hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) The following exhibits are included herewith:
Exhibit |
| Description |
10.1 | Letter Agreement between Scott Scheirman and the Company dated June 2, 2023 | |
10.2 | Form of Restricted Stock Unit Agreement between Lane Dubin and the Company | |
99.1* |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL) |
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.
| CPI CARD GROUP INC. | |
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Dated: June 5, 2023 | By: | /s/ Jessica Browne |
| Name: | Jessica Browne |
| Title: | Deputy General Counsel and Asst. Secretary |
| Exhibit 10.1 |
| 10368 West Centennial Road Littleton, CO 80127 |
EXECUTION VERSION
June 2, 2023
Mr. Scott Scheirman
c/o CPI Card Group Inc.
10368 W. Centennial Road
Littleton, CO 80127
Dear Scott:
On behalf of CPI Card Group Inc. (the “Company”) and its Board of Directors (the “Board”), I want to thank you for your many years of service to the Company, during which you have demonstrated remarkable leadership and have made immeasurable contributions to the Company. We appreciate your willingness to provide continued support and expertise to the Company as President and Chief Executive Officer (“CEO”) and are pleased to offer you the opportunity to receive a retention bonus and other compensation and payments, subject to the terms and conditions set forth in this letter agreement (this “Agreement”).
This Agreement supplements and amends the terms of the Employment and Non-Competition Agreement by and between you and the Company, effective as of September 25, 2017 (the “Employment Agreement”), as follows. Capitalized terms that are not defined herein shall have the meanings given to such terms in the Employment Agreement.
Retention Period. This Agreement is structured to serve as an incentive for you to remain employed with the Company through February 28, 2024 (the “Retention Date”) in order to allow for the orderly transition of your duties from the Company. Except as otherwise provided in this Agreement or as otherwise agreed to by the parties, you will retire from the Company, and the Term will terminate, on the Retention Date, without further notice or action by either party. During the period between the date of this Agreement and the Retention Date, you will continue to serve and perform your duties as President and CEO, including assisting the Board in the selection of a new CEO and transitioning your duties to the new CEO; provided that, for the avoidance of doubt, you may work from your home office, on an as-needed basis, as determined in your sole discretion, and consistent with current practice.
Your employment may be terminated prior to the Retention Date by either party pursuant to any of the provisions of Section 6.1 of Employment Agreement. For all
| 10368 West Centennial Road Littleton, CO 80127 |
purposes of this Agreement, a termination of your employment prior to the Retention Date pursuant to any provision of Section 6.1 other than a termination for Cause pursuant to Section 6.1(c) or a resignation without Good Reason (as modified herein) pursuant to Section 6.1(f) shall be referred to as a “Qualified Termination.” For purposes of determining whether a Qualified Termination has occurred, “Good Reason” shall have the meaning set forth in clauses (i), (ii), (iv) and (vi) of the Good Reason definition set forth in Section 6.1(e) of the Employment Agreement and, for the avoidance of doubt, clauses (iii) and (v) shall no longer be applicable. Notwithstanding the foregoing, you acknowledge that any change in your duties, responsibilities or authority upon the Board appointing a successor President (reporting to you) or Chief Executive Officer, or any actions consistent with your planned retirement and the transition of your duties to your successor, shall not be considered Good Reason under Section 6.1(e)(ii) of the Employment Agreement; provided that if the Board appoints a new Chief Executive Officer prior to the Retention Date, you will become Senior Advisor to the new Chief Executive Officer and shall no longer be considered an officer of the Company.
2023 Equity Awards. The aggregate target grant date fair value of equity awards granted to you in 2023 pursuant to Section 2.3(c) of the Employment Agreement shall be $3,920,000 (including awards with a value of $610,000 through the date hereof), with such grants after the date hereof to be granted 75% in the form of restricted stock units and 25% in the form of nonqualified stock options and, except as otherwise set forth in this Agreement or the applicable award agreements, subject to the same terms and conditions as previously approved by the Compensation Committee of the Board with respect to 2023 equity awards, except as otherwise provided herein. One-third of the ungranted awards shall be granted on June 9, 2023, one-third shall be granted on August 31, 2023, and one-third shall be granted on November 30, 2023, and, in recognition of your entry into this Agreement and your agreement to provide services through the Retention Date, if your employment has been terminated in a Qualified Termination, any such grant not made prior to the date of termination will be made on the final day of your employment (or will be made to the legal representative of your estate in the event of your death); provided, however, if the Company is not permitted to make such grant under its equity plan or applicable law, you (or in the case of your death, the legal representative of your estate) shall receive a cash-settled award with a grant date value equal to $3,920,000, less the grant date value of equity awards granted to you in 2023. The terms of such awards shall provide that fifty percent (50%) of the shares subject to the award shall vest on the first anniversary of the date of grant, and the remaining fifty percent (50%) of the shares subject to the award shall vest on the second anniversary of the date of grant, and the options may be exercised at any time between the date of vesting and the third anniversary of the date of vesting.
Retention Bonus. Subject to (i) your continued employment through the Retention Date or (ii) the termination of your employment prior to the Retention Date in a Qualified Termination, in each case, subject to (x) your (or your legal representative’s) execution and delivery of the Release described in Section 6.2(e) of the Employment Agreement (as modified herein and with such Release provided to you at least twenty-one days prior to the Retention Date or, in the case of a Qualified Termination, not more than five
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days after the date of the Qualified Termination) and (y) your continued compliance with this Agreement and the Employment Agreement and in lieu of the payments and benefits described in Sections 6.2(b) and (c) of the Employment Agreement,
(A) | the Company will pay to you (or your designated beneficiary or estate, in the event of your death) an amount equal to $5,000,000, payable in a lump sum (the “Retention Bonus”), paid on the first payroll date after the Release becomes irrevocable (but in any event no later than 60 days following the Retention Date or the Qualified Termination, as applicable); provided, that, to the extent that the Retention Bonus payable hereunder is deemed to be a substitute for a payment provided under the Employment Agreement and such payment is subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then the Retention Bonus payable hereunder shall be paid at the same time and in the same form as such substituted payment to the extent required to comply with Section 409A of the Code; |
(B) | any outstanding and unvested equity awards granted to you under the Omnibus Plan (including, without limitation, the equity awards granted to you in accordance with this Agreement) will continue to vest in accordance with their original vesting schedules as if you had remained employed with the Company through each applicable vesting date or, to the extent required to comply with Section 409A of the Code with respect to any equity awards outstanding as of the date hereof, such other date as provided for in the underlying award agreement and any options may be exercised at any time between the date of vesting and the third anniversary of the date of vesting; |
(C) | each outstanding and unexercised stock option granted to you under the Omnibus Plan shall, to the extent vested, remain exercisable through the earlier of the original expiration date and February 28, 2027; provided that the options that are not vested on the date of this Agreement shall remain exercisable until the third anniversary of the date of vesting as set forth in (B) above, and provided further that, for the avoidance of doubt, the option granted to you on September 25, 2017, in the original amount of 1,400,000 shares (subsequently converted to 280,000 shares pursuant to a reverse stock split) which is acknowledged and agreed to be fully vested and exercisable, shall remain exercisable until February 28, 2027, and shall not become unexercisable or be forfeited pursuant to Section 6.1(c) of the Employment Agreement or Section 4(c) of the Nonqualified Stock Option Agreement pursuant to which such option was granted; |
(D) | you will remain eligible to receive the full amount of your 2023 cash incentive compensation, including quarterly payments and the annual true-up payment, notwithstanding the fact that you may not be employed on the date on which the 2023 incentive compensation is paid, with your 2023 incentive compensation paid based upon actual performance results for 2023, but treating all individual performance goals as having been met at the target |
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level and without any exercise of negative discretion and any amounts paid no later than March 15, 2024; and
(E) | the Company will reimburse you, on a monthly basis, for the cost of COBRA coverage in the manner described in Section 6.2(b), except that August 31, 2025, shall be substitute for “the end of the Severance Period” therein. |
Release. As a condition to receiving the payments and benefits described in this Agreement, including, but not limited to, the Retention Bonus and your continued vesting in your outstanding equity awards, you hereby agree to release any and all Claims (as defined below) against the Company, its affiliates and their respective directors, officers and employees (the “Released Parties”). “Claims” means claims, charges or complaints for, or related to, any breach of contract, violation of any statute or law, or tortious conduct occurring, or based on events occurring, on or before the date of this Agreement; provided that Claims do not include, and you are not releasing: (a) any claims that may not be released as a matter of law, (b) any claims or rights that arise after you sign this Agreement (including claims based on an event occurring after the date you sign this Agreement), (c) any claims or rights with respect to accrued compensation or benefits, (d) any claims or rights for indemnification, advancement of defense costs or other fees and expenses and related matters, arising as a matter of law or under the Employment Agreement, the organizational documents of the Company or its affiliates or under any applicable insurance policy with respect to your liability as an employee, director, manager or officer of the Company or its affiliates; and (e) any claims or rights under the directors and officers and other insurance policies of the Company and its affiliates. As additional consideration for your entry into this Agreement, the Company, on behalf of itself and each of the Released Parties, hereby releases any and all Claims that the Company or its subsidiaries may have against you that are known or should be known by any member of the Board reasonably exercising his or her fiduciary duty (other than you), excluding Claims described in clauses (a) and (b) above and Claims based on fraud or illegal conduct. The provision set forth in the preceding sentence shall be included in any Release that you are subsequently required to execute as a condition to the receipt of any of the benefits described in this Agreement.
Existing Employment Agreement. You and the Company hereby acknowledge and agree that, upon the termination of your employment, you shall not be eligible for the payments or benefits described in Sections 6.2(b) or (c) of the Employment Agreement. In addition, you acknowledge that you shall continue to be bound by the covenants set forth in Sections 3, 4, and 5 of the Employment Agreement including, without limitation, the non-competition, non-solicitation and confidentiality covenants set forth therein.
Notwithstanding anything in this Agreement or the Employment Agreement to the contrary, you understand that nothing contained in this Agreement or the Employment Agreement limits your ability to report possible violations of law or regulation to or file a charge or complaint with any federal, state or local governmental agency or commission or regulatory authority (collectively, “Government Agencies”). You further understand
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that neither this Agreement nor the Employment Agreement limits your ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. Furthermore (I) you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (II) if you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose a trade secret to your attorney and use the trade secret information in the court proceeding, if you file any document containing the trade secret under seal and do not disclose the trade secret except pursuant to court order.
Again, thank you for your many years of dedicated service to the Company and your agreement to assist the Company in its leadership transition.
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| Sincerely, | ||
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| CPI CARD GROUP INC. | ||
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| By: | /s/ Nicholas Peters | |
| | Name: Nicholas Peters | |
| | Title: Chair, Compensation Committee of the Board of Directors | |
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| By: | /s/ Valerie Soranno Keating | |
| | Name: Valerie Soranno Keating | |
| | Title: Chair, Nominating and Corporate Governance Committee of the Board of Directors | |
This letter agreement correctly reflects our understanding, and I hereby confirm my agreement to the same as of the date set forth above.
/s/ Scott Scheirman
SCOTT SCHEIRMAN
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Exhibit 10.2
CPI CARD GROUP INC.
AMENDED AND RESTATED OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
This RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made effective as of _________, 2023 (the “Grant Date”) by and between CPI Card Group Inc., a Delaware corporation (the “Company”), and Lane Dubin (the “Participant”), pursuant to the CPI Card Group Inc. Amended and Restated Omnibus Incentive Plan (the “Plan”). Capitalized terms that are not defined herein shall have the meanings given to such terms in the Plan.
WHEREAS, the Company desires from time to time to grant Awards with respect to Shares to certain key Employees, Directors and Consultants of the Company and its Subsidiaries or Affiliates;
WHEREAS, the Company has adopted the Plan in order to effect such Awards; and
WHEREAS, the Participant is an Eligible Recipient as contemplated by the Plan, and the Committee has determined that it is in the interest of the Company to grant this Award to the Participant.
NOW, THEREFORE, in consideration of the premises and subject to the terms and conditions set forth herein and in the Plan, the parties hereto agree as follows:
1. Grant and Vesting of Restricted Stock Units.
(a) As of the Grant Date, the Participant will be credited with ______ Restricted Stock Units. Each Restricted Stock Unit is a notional amount that represents the right to receive one Share, subject to the terms and conditions of the Plan and this Agreement, if and when the Restricted Stock Unit vests.
(b) The Restricted Stock Units shall vest in equal installments on the first, second and third anniversaries of the Grant Date, with 33.4% vesting on the first anniversary, 33.3% vesting on the second anniversary and 33.3% vesting on the third anniversary. Such vesting period is subject to the Participant’s continuous service with the Company or a Subsidiary or Affiliate thereof, as applicable, whether as an Employee, Director or Consultant (“Service”), from the Grant Date through such vesting date, except as may otherwise be provided in Sections 3 and 4 hereof.
2. Rights as a Stockholder.
Except as otherwise required by law, the Participant shall not have any rights as a stockholder with respect to any Shares covered by the Restricted Stock Units granted hereunder unless and until a Restricted Stock Unit has vested and the Share underlying it has been distributed to the Participant and the Participant is recorded as the holder of such Share on the records of the Company; provided, however, that if the Company declares a cash dividend on its Shares, then, on the payment date of the dividend, the Participant will be credited with dividend equivalents equal to the amount of the cash dividend per Share multiplied by the number of Restricted Stock Units credited to the Participant through the record date. The dollar amount credited to the
Participant under the preceding sentence will be credited to an account on the books of the Company (“Account”) established for the Participant for bookkeeping purposes only. The balance in the Account will be subject to the same terms regarding vesting and forfeiture as the Participant’s Restricted Stock Units awarded under this Agreement, and will be paid in cash in a single sum at the time that the Shares associated with the Participant’s Restricted Stock Units are delivered (or forfeited at the time that the Participant’s Restricted Stock Units are forfeited).
3. Termination of Service.
(a) Continuous Service Required. Except as may otherwise be provided in the Participant’s employment or other services agreement with the Company or any of its Affiliates and which is in effect on the Grant Date, the Participant shall forfeit the unvested Restricted Stock Units upon a termination of Service occurring for any reason prior to the vesting of the Restricted Stock Units as described in Section 1(b) (including for or without Cause or due to the Participant’s voluntary resignation) other than due to the Participant’s (i) termination due to death or Disability, (ii) Retirement, or (iii) Qualifying Termination (as defined below). For purposes of this Agreement, the terms “Cause”, “Disability”, and “Severance Termination Event” shall have the meanings set forth in that that certain Employment Agreement by and between the Participant and the Company, dated December 13, 2022 (the “Employment Agreement”).
(b) Termination due to Death or Disability. Notwithstanding the foregoing, in the event that the Participant’s Service terminates by reason of the Participant’s death or termination by the Company due to Disability prior to the vesting of the Restricted Stock Units as described in Section 1(b), the unvested Restricted Stock Units shall vest in full as of the date of such termination of Service.
(c)Termination due to Retirement. In the event that the Participant’s Service terminates by reason of the Participant’s Retirement, then any unvested Restricted Stock Units the Participant holds as of the date of such Retirement shall vest in full as of the date of such Retirement.
(d) Termination due to Severance Termination Event. Notwithstanding anything to the contrary in the Employment Agreement, Participant hereby acknowledges and agrees that the Restricted Stock Units granted herein shall not be subject to Section 4.2(c) of the Employment Agreement and that in the event that the Participant’s Service terminates on or after December 31, 2023 by reason of a Severance Termination Event as set forth in the Employment Agreement prior to the vesting of the Restricted Stock Units as described in Section 1(b), the unvested Restricted Stock Units shall be forfeited consistent with Section 3(a) above.
4.Qualifying Terminations Following a Change in Control.
(a) Qualifying Termination. Notwithstanding any language in the Plan or the Participant’s employment or other services agreement with the Company or any Affiliate to the contrary, the Restricted Stock Units will not vest solely upon a Change in Control unless the Restricted Stock Units are not assumed by the Company’s successor or converted to an equivalent value award upon substantially the same terms effective immediately following the Change in
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Control in which case the unvested Restricted Stock Units shall vest in full upon such Change in Control, provided that if the Restricted Stock Units constitute nonqualified deferred compensation within the meaning of Section 409A of the Code and the settlement of the Restricted Stock Units would not be permitted under Section 409A of the Code without subjecting the Restricted Stock Units to additional taxes under Section 409A, then the Restricted Stock Units shall vest upon such Change in Control but shall be settled in accordance with Section 1(b) or, if earlier, the Participant’s termination of Service. In the event the Restricted Stock Units are effectively assumed in a Change in Control, if the Participant experiences a Qualifying Termination, the unvested Restricted Stock Units will immediately vest in full upon such Qualifying Termination. A “Qualifying Termination” occurs if, within six (6) months prior to or two (2) years following a Change in Control, the Participant’s Service is terminated (i) by the Company without Cause or (ii) by the Participant for Good Reason.
(b) Good Reason. For purposes of this Agreement, “Good Reason” shall have the same meaning set forth in the Employment Agreement.
5. Timing and Form of Payment.
Once a Restricted Stock Unit vests, the Participant will be entitled to receive a Share in its place. Subject to Section 16(e), delivery of the Share will be made as soon as administratively feasible following the vesting of the associated Restricted Stock Unit (but in any event no later than the March 15th immediately following the year in which the substantial risk of forfeiture with respect to the Restricted Stock Units lapses). Shares will be credited to an account established for the benefit of the Participant with the Company’s administrative agent. The Participant will have full legal and beneficial ownership of the Shares at the time such Shares are credited to such account.
6. Tax Withholding.
As a condition precedent to the delivery to the Participant of any shares of Common Stock upon vesting of the Restricted Stock Units, the Participant shall, upon request by the Company, pay to the Company such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the “Required Tax Payments”) with respect to the Restricted Stock Units. If the Participant shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Participant or withhold shares of Common Stock. The Participant may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (i) a cash payment to the Company; (ii) authorizing the Company to withhold from the shares of Common Stock otherwise to be delivered to the Participant pursuant to this Agreement, a number of whole shares of Common Stock having an aggregate Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with this Agreement, equal to the Required Tax Payments; or (iii) any combination of (i) and (ii). Shares to be delivered or withheld may be withheld up to the maximum statutory tax rates in the applicable jurisdictions. Any fraction of a share of Common Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in
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cash by the Participant. No shares of Common Stock shall be issued or delivered until the Required Tax Payments have been satisfied in full.
7.Non-Competition, Non-Solicitation and Non-Disparagement.
(a) Restrictive Covenants. In exchange for good and valuable consideration, including the Restricted Stock Units granted herein, the sufficiency of which is acknowledged, the Participant agrees as follows (the “Restrictive Covenants”):
(i) Duties of Confidentiality. In recognition of the Confidential Information as outlined below, the Participant agrees that until the earlier of the date that the Confidential Information becomes publicly available (other than through a breach by the Participant or by anyone else who has a legal obligation to maintain confidentiality) or five years from the date hereof, the Participant shall: (i) hold and safeguard all Confidential Information in trust for the Company and its successors and assigns; (ii) not appropriate or disclose or make available to anyone for use outside of the Company’s organization at any time, either during the Participant’s Service with the Company or subsequent to the Participant’s termination of Service with the Company for any reason, any Confidential Information, whether or not developed by the Participant, except as required in the performance of the Participant’s duties to the Company; (iii) keep in strictest confidence any Confidential Information; and (iv) not disclose or divulge, or allow to be disclosed or divulged by any person within the Participant’s control, to any person, firm, or corporation, or use directly or indirectly, for the Participant’s own benefit or the benefit of others, any Confidential Information.
(ii) Non-Disclosure. At all times during the Participant’s Service and thereafter, the Participant shall not, without the Company’s prior written consent: (i) use or exploit for any purpose not related to the Participant’s duties as an employee of the Company, or (ii) disclose to any person or entity, other than an officer, director, or employee of the Company to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Participant of his or her duties for the Company, or
(A) which is under a duty of confidentiality to the Company to maintain the confidentiality of the Company’s information or
(B) to which the Company was instructed by a third party to disclose such third party’s Confidential information, any Confidential Information belonging to the Company or its clients or business partners or marketing partners; provided, however, that Confidential Information shall not include any information known or readily available to the public (other than as a result of an unauthorized disclosure by the Participant).
(iii) Trade Secrets; Whistleblower Protection.
(A) 18 U.S.C. § 1833(b) provides: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating
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a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b). Accordingly, the parties to this Agreement have the right to disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
(B) Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede the Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including, but not limited to, the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. The Participant does not need the prior authorization of the Company to make any such reports or disclosures and the Participant shall not be required to notify the Company that such reports or disclosures have been made.
(iv) Non-Competition and Non-Solicitation. During the period of the Participant’s Service and for two (2) years following the termination thereof (the “Restricted Period”), the Participant shall not commit any of the acts described in that certain Confidentiality, Trade Secret Protection, Unfair Competition, Non-Solicitation, and Invention Assignment Agreement, by and between the Participant and CPI Card Group-Colorado Inc., effective as of April 8, 2019, without the Company’s prior written consent.
(v) Participant’s Duties on Termination. In the event of termination of Service with the Company, regardless of the circumstances of the termination, the Participant agrees to deliver promptly to the Company all of its property and all Confidential Information, in whatsoever form, including, but not limited to equipment, software, data files, databases, notebooks, documents, memoranda, reports, files, samples, books, correspondence, lists, or other written or graphics records relating to the Company which are or have been in his/her possession or under his/her control.
(vi) Other Covenants. For the avoidance of doubt, the Restrictive Covenants are in addition to, and not in lieu of, any restrictive covenants to which the Participant may otherwise be subject, whether under the terms of his or her employment or services agreement or otherwise.
(vii) Acknowledgement. The Participant acknowledges that these Restrictive Covenants are reasonably necessary to protect the Company’s and its clients’ and business partners’ legitimate business interests. The Participant also acknowledges that by serving in the position of Executive Vice President and Chief Development and Digital Officer, he is in an executive/management level position and has been entrusted with access to trade secrets and confidential information that, if made available to non-Company employees, would cause the Company to suffer damages which will be difficult if not impossible to calculate because of the significant time, effort and expense the Company expended in developing such trade secrets and
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confidential information. The Participant shall confirm, in writing, that he/she is complying with the terms of this provision in response to any inquiry by the Company.
(b) Reasonableness of Restrictions. The Participant agrees that the scope and duration of the Restrictive Covenants are reasonable and necessary to protect the legitimate business interests of the Company. The Participant also agrees that these Restrictive Covenants will not preclude the Participant from obtaining other gainful employment in his or her profession.
(c) Remedies for Breach.
(i) Forfeiture of Award. In the event of the Participant’s material breach of any of the Restrictive Covenants, the Restricted Stock Units (whether vested or unvested) shall immediately be forfeited.
(ii) Recovery of Shares. In the event of the Participant’s material breach of any of the Restrictive Covenants, the Company shall be entitled to recover any Shares acquired upon the vesting of the Restricted Stock Units and, if the Participant has previously sold any Shares derived from the Restricted Stock Units, the Company shall also have the right to recover from the Participant the economic value thereof, determined as of the date of vesting.
(iii) Other Relief. In the event of the Participant’s actual or threatened breach of this Agreement, the Participant agrees that the Company will be entitled to seek provisional and injunctive relief in addition to any other available remedies at law or equity.
8. Nontransferability of Restricted Stock Units.
The Restricted Stock Units granted hereunder may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or, on such terms and conditions as the Committee shall establish, to a permitted transferee.
9. Beneficiary Designation.
The Participant may from time to time name any beneficiary or beneficiaries (who may be named contingently or successively) by whom any right under the Plan and this Agreement is to be exercised in case of his or her death. Each designation will revoke all prior designations by the Participant, shall be in a form reasonably prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his or her lifetime.
10. Transfer of Data.
The Participant consents to the Company or any Affiliate thereof processing data relating to the Participant for legal, personnel, administrative and management purposes and in particular to the processing of any sensitive personal data relating to the Participant. The Company may make such information available to any Affiliate thereof, those who provide products or services to the Company or any Affiliate thereof (such as advisers and payroll administrators), regulatory
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authorities, potential purchasers of the Company or the business in which the Participant works, and as may be required by law.
11. Securities Law Requirements.
(a) The Restricted Stock Units are subject to the further requirement that, if at any time the Committee determines in its discretion that the listing or qualification of the Shares subject to the Restricted Stock Units under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the issuance of Shares under it, then Shares will not be issued under the Restricted Stock Units, unless the necessary listing, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
(b) No person who acquires Shares pursuant to the Restricted Stock Units reflected in this Agreement may, during any period of time that person is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the Securities Act of 1933 (the “1933 Act”)) sell the Shares, unless the offer and sale is made pursuant to (i) an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) an appropriate exemption from the registration requirements of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act. With respect to individuals subject to Section 16 of the Exchange Act, transactions under this Agreement are intended to comply with all applicable conditions of Rule 16b-3, or its successors under the Exchange Act. To the extent any provision of this Agreement or action by the Committee fails to so comply, the Committee may determine, to the extent permitted by law, that the provision or action will be null and void.
12. No Guarantee of Continued Service.
Nothing in the Plan or in this Agreement shall interfere with or limit in any way the right of the Company or an Affiliate thereof to terminate the Participant’s Service at any time or confer upon the Participant any right to continued Service.
13. No Rights as a Stockholder.
Except as provided in Section 2 above or as otherwise required by law, the Participant shall not have any rights as a stockholder with respect to any Shares covered by the Restricted Stock Units granted hereunder prior to the date on which he or she is recorded as the holder of those Shares on the records of the Company.
14. Interpretation; Construction.
Any determination or interpretation by the Committee under or pursuant to this Agreement shall be final and conclusive on all persons affected hereby; provided that any dispute over the reason for the Participant’s termination of employment, or whether the Participant has violated any provision of Section 7 of this Agreement, shall be resolved as if such dispute had arisen under the Employment Agreement. Except as otherwise expressly provided in this Agreement or the
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Plan, in the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control.
15. Amendments.
The Committee may, in its sole discretion, at any time and from time to time, alter or amend this Agreement and the terms and conditions of the unvested portion of the Restricted Stock Units (but not any portion of the Restricted Stock Units that has previously vested) in whole or in part, including without limitation, amending the criteria for vesting set forth in Section 1 hereof and substituting alternative vesting criteria; provided that such alteration, amendment, suspension or termination shall not materially impair the rights of the Participant under the Restricted Stock Units without the Participant’s consent. The Company shall give written notice to the Participant of any such alteration or amendment of this Agreement as promptly as practicable after the adoption thereof. This Agreement may also be amended by a writing signed by both the Company and the Participant.
16. Miscellaneous.
(a) Notices. All notices, requests, demands, letters, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (A) delivered personally, (B) mailed, certified or registered mail with postage prepaid, or (C) sent by next-day or overnight mail or delivery, as follows:
(i) If to the Company:
CPI Card Group Inc.
10368 West Centennial Road
Littleton, CO 80127
Attention: Chief Human Resources Officer
(ii) If to the Participant, to the Participant’s last known home address,
or to such other person or address as any party shall specify by notice in writing to the Company. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (x) if by personal delivery on the day after such delivery, (y) if by certified or registered mail, on the fifth business day after the mailing thereof, or (z) if by next-day or overnight mail or delivery, on the day delivered.
(b) Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(c) No Guarantee of Future Awards. This Agreement does not guarantee the Participant the right to or expectation of future Awards under the Plan or any future plan adopted by the Company.
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(d) Waiver. Subject to Section 409A of the Code, either party hereto may by written notice to the other (i) extend the time for the performance of any of the obligations or other actions of the other under this Agreement, (ii) waive compliance with any of the conditions or covenants of the other contained in this Agreement and (iii) waive or modify performance of any of the obligations of the other under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of either party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by either party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party’s rights or privileges hereunder or shall be deemed a waiver of such party’s rights to exercise the same at any subsequent time or times hereunder.
(e) Code Section 409A Compliance. The Restricted Stock Units are intended to be exempt from or comply with the requirements of Code Section 409A and this Agreement shall be interpreted accordingly, and each payment hereunder shall be considered a separate payment. Notwithstanding any provision of this Agreement, to the extent that the Committee determines that any portion of the Restricted Stock Units granted under this Agreement is subject to Code Section 409A and fails to comply with the requirements of Code Section 409A, notwithstanding anything to the contrary contained in the Plan or in this Agreement, the Committee reserves the right to amend, restructure, terminate or replace such portion of the Restricted Stock Units in order to cause such portion of the Restricted Stock Units to either not be subject to Code Section 409A or to comply with the applicable provisions of such section. To the extent this Agreement provides for the Award to become vested and be settled upon the Participant’s termination of employment, the applicable Shares shall be transferred to the Participant or his or her beneficiary upon the Participant’s “separation from service,” within the meaning of Section 409A of the Code; provided that if the Participant is a “specified employee,” within the meaning of Section 409A of the Code, then to the extent the Award constitutes nonqualified deferred compensation, within the meaning of Section 409A of the Code, such Shares shall be transferred to the Participant or his or her beneficiary upon the earlier to occur of (a) the six-month anniversary of such separation from service and (b) the date of the Participant’s death.
(f) Applicable Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, regardless of the law that might be applied under principles of conflict of laws. The Company and the Participant agree that the jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), this Agreement shall be exclusively in the courts in the State of Colorado, County of Arapahoe or Denver, including the Federal Courts located therein (should Federal jurisdiction exist), and the Company and the Participant hereby submit and consent to said jurisdiction and venue.
(g) Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
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(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.
(i) Erroneously Awarded Compensation. Notwithstanding any provision in the Plan or in this Agreement to the contrary, this Award shall be subject to any compensation recovery and/or recoupment policy adopted and amended from time to time by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governance practices.
(j)Award Subject to the Plan. By electronically accepting this Agreement in accordance with the administrative procedures established by the Company, the Participant acknowledges that the Plan has been made available to the Participant and the Participant has had the opportunity to review such Plan.
— Signature page follows —
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Notwithstanding anything in this Agreement or in the Plan to the contrary, the Committee hereby reserves the right, in its sole discretion, to terminate and cancel this Award if the Participant fails to accept this Agreement on or prior to [_______].
IN WITNESS WHEREOF, the Company and the Participant have duly executed this Agreement as of the date first above written.
\
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| CPI CARD GROUP INC. | ||
| | | ||
| | By: | Jeffrey Hochstadt, Chief Financial Officer | |
| | | ||
| | Signature: | | |
| | | | |
| | PARTICIPANT | ||
| | | ||
| | Name: | Lane Dubin | |
| | | ||
| | Signature: | | |
Note to Participant: Any conflicts of interest or other disclosures to be made by Participant at the time of signing this Agreement shall be set forth on a Conflicts of Interest Disclosure Statement attached to this Agreement. Participant has not made any disclosures if there is no such statement attached.
There is ☐ is not ☐ a Conflicts of Interest Disclosure Statement attached to this Agreement.
Participant’s Initials:___________
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Exhibit 99.1
CPI Card Group Announces President and CEO Scott Scheirman Intends to Retire in 2024
Board to Implement CEO Succession Plan
Littleton, CO – June 5, 2023 -- CPI Card Group Inc. (Nasdaq: PMTS) (“CPI” or the “Company”), a payment technology company and leading provider of credit, debit and prepaid solutions, today announced that Scott Scheirman has informed the Board of Directors of his intention to retire as President and Chief Executive Officer.
Scheirman will continue to serve as President and Chief Executive Officer until a successor is named and intends to retire from the Company effective February 28, 2024, providing ample time for the selection of a successor and a smooth transition of leadership. CPI’s Board of Directors has a succession plan in place to identify and evaluate candidates and expects to name a new CEO in late 2023 or early 2024. In retirement, Scheirman plans to spend more time with his family and return to volunteer work with community organizations focused on helping kids.
Scheirman, 60, joined CPI’s Board in October 2016 and was named President and CEO in October 2017. Since that time, Scheirman and the leadership team have led the development and execution of a customer-centric strategy that delivered significant growth and market share gains and a substantial increase in shareholder value. Customer relationships were strengthened and expanded by delivering market-leading quality; developing and launching innovative products, including eco-focused payment cards made with a recovered ocean-bound plastic core; expanding services such as SaaS-based instant issuance; and providing robust debit, credit and prepaid debit payment and personalization solutions.
“On behalf of the Board of Directors, I would like to express our extreme gratitude to Scott for his strategic thinking, leadership and significant contributions in transforming the Company and establishing CPI as a market leader in the U.S. payments space,” said Valerie Soranno Keating, Chair of the Nominating and Corporate Governance Committee. “During Scott’s tenure the Company has delivered shareholder returns which have significantly outpaced the market and he leaves CPI in a strong competitive position, with an outstanding leadership team that is well prepared to build on the success achieved over the last several years.”
“I am very proud of what our extremely talented team has accomplished at CPI,” said Scheirman. “Together we have become one of the most trusted partners for our customers by providing innovative products, end-to-end solutions, and market-leading quality and customer service that I believe positions the Company well to continue to gain share.”
Scheirman added, “I am grateful to our Board of Directors for giving me the opportunity to lead the Company and for providing insightful guidance over the years. I am fully committed to working closely with our Board, my colleagues and my eventual successor to help ensure a smooth leadership transition.”
About CPI Card Group Inc.
CPI Card Group is a payment technology company providing a comprehensive range of credit, debit, and prepaid card solutions, complementary digital solutions, and Software-as-a-Service (SaaS) instant issuance. With a focus on building personal relationships and earning trust, we help our customers navigate the constantly evolving world of payments, while delivering innovative solutions that spark connections and support their brands. We serve clients across industry, size, and scale through our team of experienced, dedicated employees and our network of high-security production and card services facilities—located in the United States. CPI is committed to exceeding our customers’ expectations, transforming our industry, and enhancing the way people pay every day. Learn more at www.CPIcardgroup.com.
Forward-Looking Statements
Certain statements and information in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on the Company’s current expectations and beliefs concerning future developments and other information currently available. Such forward-looking statements, because they relate to future events, are by their very nature subject to many important risks and uncertainties that could cause actual results or other events to differ materially from those contemplated, including, but not limited to, the risks that are described in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on March 8, 2023, in Part II, Item 1A – Risk Factors in our Quarterly Report on Form 10-Q and our other reports filed from time to time with the SEC. The Company cautions and advises readers not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by applicable law.
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For more information:
CPI encourages investors to use its investor relations website as a way of easily finding information about the Company. CPI promptly makes available on this website the reports that the Company files or furnishes with the SEC, corporate governance information and press releases.
CPI Card Group Inc. Investor Relations:
(877) 369-9016
CPI Card Group Inc. Media Relations: