Item 2.02. Results of Operations and Financial Condition.
On January 13, 2020, we issued a press release disclosing our preliminary
estimated revenue results for 2019 and for our most recently completed fiscal
quarter. A copy of the press release is attached hereto as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in this
Item 2.02, including Exhibit 99.1, shall not be deemed to be "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise
subject to the liability of that section, and shall not be incorporated by
reference into any registration statement or other document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall
be expressly set forth by specific reference in that filing.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On January 10, 2020, Gerald R. Mattys informed our Board of Directors of his
decision to retire as our Chief Executive Officer ("CEO"), effective no later
than December 31, 2020. Our Board of Directors has initiated a process to
identify a successor for Mr. Mattys and has engaged an executive search firm to
support the search.
In connection with the transition, we and Mr. Mattys entered into a Transition
and Consulting Agreement (the "Agreement"), dated as of January 10, 2020 (the
"Effective Date"), pursuant to which Mr. Mattys will remain employed with our
company for the period (the "Transition Term") until the earliest of (i) the
date on which Mr. Mattys determines to be his retirement date, which shall be no
later than December 31, 2020 and of which he will give us at least 30 days prior
written notice, (ii) the date of Mr. Mattys' death or disability, (iii) the date
on which Mr. Mattys voluntarily terminates his employment with us, or (iv) the
date on which Mr. Mattys' employment is earlier terminated by us in accordance
with the Agreement. The effective date of the termination of Mr. Mattys'
employment with us for any reason is referred to herein as the "Separation
Date."
The Agreement provides that during the Transition Term, we will pay Mr. Mattys a
base salary at his same base salary rate in effect on the Effective Date. In
addition, we will pay Mr. Mattys a pro-rata incentive bonus for fiscal 2020
based on our company's actual performance between January 1, 2020 and the end of
the Transition Term, equal to the product of (i) the incentive bonus for the
full fiscal year 2020 that Mr. Mattys would have earned had he remained employed
as our CEO through the end of 2020, multiplied by (ii) a fraction, the numerator
of which is the number of calendar days during 2020 included in the Transition
Term, and the denominator of which is 365, to be determined and paid between
January 1, 2021 and March 30, 2021. Other than such incentive bonus, Mr. Mattys
will not be eligible for any incentive or other cash-based compensation award or
any form of equity-based compensation award for fiscal 2020.
The equity awards held by Mr. Mattys as of the Effective Date will continue to
be governed by the terms and conditions set forth in the applicable award
agreements, and the equity awards will continue to vest, and the vested stock
options will continue to be exercisable, through the end of the Transition Term
and the end of the Consulting Period (as defined below), so long as Mr. Mattys
continues to provide services to our company as provided under the equity
awards.
Subject to certain conditions, including that Mr. Mattys sign and not rescind
certain releases, we will engage Mr. Mattys to provide services to our company
as a consultant, beginning on the Separation Date through the earlier of (i) (A)
the one year anniversary of the Separation Date, or (B) March 31, 2021,
whichever is later, or (ii) the date we terminate the consulting arrangement for
cause or because Mr. Mattys fails to satisfy any of the material conditions
identified in Section 5 of the Agreement (the "Consulting Period"). We will pay
Mr. Mattys a consulting fee in the amount of $35,175 per month during the
Consulting Period. We will also pay for premiums for COBRA continuation of
health insurance coverage for Mr. Mattys through the earliest of the 18-month
anniversary of the Separation Date, the date Mr. Mattys becomes eligible for
group health insurance coverage elsewhere or the date Mr. Mattys is no longer
eligible to continue under our group health insurance coverage.
The Agreement provides that if we enter into a definitive agreement for a change
in control (as defined in our 2016 Equity Incentive Plan) during the Transition
Term, we may not terminate Mr. Mattys' employment without cause prior to the
date such change in control is consummated (provided it is consummated within
the 12-month period following the date the definitive agreement is entered
into). If, during the Transition Term and while Mr. Mattys is serving as an
employee under the Agreement, a change in control of our company is consummated
or we enter into a definitive agreement for a change in control which is
consummated within the 12-month period following the date we enter into such
agreement, then we will pay Mr. Mattys, upon the closing of the change in
control, a lump sum payment equal to the sum of (a) two times his then-current
annual salary or annual consulting fee, plus (b) two times Mr. Mattys' last full
annual incentive bonus payment, and (c) provide to Mr. Mattys COBRA premium
payments. In addition, all unvested equity awards held by Mr. Mattys will be
treated as set forth in the Tactile Systems Technology, Inc. Executive Employee
Severance Plan (the "Severance Plan") as if Mr. Mattys was still subject to the
Severance Plan. The Agreement supersedes and replaces Mr. Mattys' eligibility
for any severance benefits under the Severance Plan, and the Compensation and
Organization Committee of our Board of Directors has designated that Mr. Mattys
is no longer a participant in the Severance Plan.
Mr. Mattys is party to a Confidentiality, Assignment of Intellectual Property
and Restrictive Covenants Agreement with us dated November 1, 2018 (the
"Restrictive Covenants Agreement"), the form of which was filed as Exhibit
10.3 to our Quarterly Report on Form 10-Q filed on November 5, 2018 and is
incorporated herein by reference as Exhibit 10.2. The Agreement provides that
the restricted period identified in the Restrictive Covenants Agreement is
extended to include the entire Transition Term, the entire Consulting Period and
through the period that is one year after the end of the Transition Term or the
Consulting Period, whichever is later.
The foregoing summary of the Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Agreement, a copy
of which is filed as Exhibit 10.1 to this report and is incorporated herein by
reference.
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