Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
As previously reported, on November 4, 2022, Tuesday Morning Corporation (the
"Company") and Fred Hand entered into a transition agreement pursuant to which
the Company and Mr. Hand agreed that his employment as Chief Executive Officer
of the Company would terminate on November 4, 2022. In connection therewith,
also as previously reported, the Company appointed Andrew T. Berger as Chief
Executive Officer of the Company.
Prior to his appointment as Chief Executive Officer, Mr. Berger served as an
independent member of the Board of Directors of the Company (the "Board") and as
a member of the Audit Committee of the Board. In connection with his appointment
as Chief Executive Officer, Mr. Berger resigned from his position on the Audit
Committee of the Board. As a result, the Audit Committee has been reduced to two
members, each of whom is an independent director pursuant to the listing rules
of the Nasdaq Stock Market, LLC ("Nasdaq"). Accordingly, the Company currently
is not compliant with Nasdaq Listing Rule 5605(c)(2), which requires that the
audit committee of a Nasdaq listed company consist of at least three members,
each of whom is an independent director pursuant to the Nasdaq Listing Rules. In
accordance with the Nasdaq Listing Rules, on November 7, 2022, the Company
notified Nasdaq of Mr. Berger's appointment as Chief Executive Officer and
resignation from the Audit Committee and the resulting non-compliance with
Nasdaq Listing Rule 5605(c)(2). The Company also received a letter from Nasdaq
indicating the Company was not in compliance with Nasdaq Listing Rule 5605 and
noting that the Company would, in accordance with Nasdaq Listing Rule
5605(c)(4)(B), have a cure period until the earlier of its next annual meeting
of shareholders or May 3, 2023 to regain compliance.
The Company intends to appoint an additional independent director to the Board
and the Audit Committee as soon as practicable and prior to the expiration of
the cure period under Nasdaq Listing Rule 5605(c)(4)(B).
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Employment Agreement with Andrew T. Berger
In connection with his appointment as Chief Executive Officer, Mr. Berger and
the Company entered into an Employment Agreement, dated as of November 6, 2022
(the "Berger Employment Agreement"). The Berger Employment Agreement provides
for an initial three-year term and will automatically renew for additional
one-year periods unless either party gives prior written notice of nonrenewal.
The Berger Employment Agreement provides for an initial annual base salary of
$1,000,000 and an annual target bonus opportunity of 100% of Mr. Berger's base
salary, with the amount actually earned based on performance (up to a maximum of
200% of his base salary). With respect to fiscal year 2023, Mr. Berger will be
entitled to a minimum annual bonus of $1,000,000, up to 20% of which may be paid
by the Company in common stock. The Berger Employment Agreement also provides
for a $1,000,000 signing bonus, to be paid as soon as practicable following the
effective date of the agreement. In the event Mr. Berger's employment is
terminated by the Company for "cause" or by him without "good reason" (each as
defined in the Berger Employment Agreement) prior to the first anniversary of
the effective date of the Berger Employment Agreement, he will be required to
repay the after-tax amount of the signing bonus. Under the Berger Employment
Agreement, Mr. Berger is eligible to participate in the Company's applicable
equity incentive plan with actual award amounts subject to approval of the board
of directors. Mr. Berger will also be eligible to participate in the Company's
benefit plans generally and is entitled to the payment of certain relocation
expenses and legal fees in connection with the negotiation and drafting of the
Berger Employment Agreement.
The Berger Employment Agreement also provides for a one-time grant of restricted
stock units, including (i) an award of time-based restricted stock units having
a target value of $250,000 (the "Berger RSUs") and (ii) an award of
performance-based restricted stock units having a target value of $250,000 (the
"Berger PRSUs"), in each case, to be granted on the second business day
following completion by the Company of a reverse stock split, and to be payable
in combination of cash and/or shares of the Company's common stock as determined
by the board of directors. The Berger RSUs will vest in equal installments on
each of the first four anniversaries of the date of grant, so long as Mr. Berger
remains employed through each vesting date. The Berger PRSUs will vest over a
period of three years from the date of grant (subject to Mr. Berger's continuous
employment through each vesting date) based on the achievement of certain
performance goals over the three-year period of July 1, 2023 through June 30,
2026.
Under the terms of the Berger Employment Agreement, if Mr. Berger's employment
is terminated by the Company without cause or he resigns with good reason, he
will be entitled to receive severance benefits as follows: (a) any earned but
unpaid bonus for the fiscal year preceding the year in which the termination of
employment occurs, and (b) cash severance in an amount equal to (i) 12 months of
base salary, payable in a lump sum on the first payroll date following the 30th
date after the termination of employment; provided, that if such termination of
employment occurs prior to the first anniversary of the effective date of the
agreement, such amount shall be prorated based the number of days of service in
an amount not less than $50,000, and (ii) a prorated annual bonus for the fiscal
year of termination payable at the same time as bonuses would otherwise be
payable under the Company's annual bonus plan, subject to the achievement of
applicable performance goals for the performance period; provided, that if no
bonus plan is adopted for a fiscal year, the amount payable shall equal the
target prorated annual bonus opportunity for the fiscal year of termination
payable in an amount of not less than $50,000. However, if Mr. Berger's
employment is terminated by the Company without cause or if he resigns with good
reason, in each case, within one year following a "change in control" (as
defined in the Berger Employment Agreement), the cash severance payable to Mr.
Berger will include 18 months (rather than 12 months) of base salary and all of
Mr. Berger's outstanding time-based restricted stock units will vest in full and
all of Mr. Berger's performance-based restricted stock units will remain
eligible for vesting upon achievement of the applicable performance goals.
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Mr. Berger's receipt of the severance benefits described in the previous
paragraph is subject to Mr. Berger's execution (and non-revocation) of a release
of claims in favor of the Company and his continued compliance with restrictive
covenants, which include customary nonsolicitation and noncompetition covenants
that apply for the duration of Mr. Berger's employment and for a period of one
year thereafter and confidentiality, nondisclosure and nondisparagement
covenants.
The foregoing summary of the Berger Employment Agreement is qualified in its
entirety by reference to the full text of the Berger Employment Agreement, a
copy of which is filed as Exhibit 10.1 to this report, and incorporated by
reference herein.
Employment Agreement with William M. Baumann
As previously reported, on November 4, 2022, William M. Baumann was appointed
Chief Operating Officer and Interim Chief Merchant of the Company.
In connection with his appointment as Chief Operating Officer and Interim Chief
Merchant, Mr. Baumann and the Company entered into an Employment Agreement (the
"Baumann Employment Agreement"). The Baumann Employment Agreement provides for
an initial three-year term and will automatically renew for additional one-year
periods unless either party gives prior written notice of nonrenewal. The
Baumann Employment Agreement provides for an initial annual base salary of
$515,000 and an annual target bonus opportunity of 100% of Mr. Baumann's base
salary, with the amount actually earned based on performance (up to a maximum of
200% of his base salary). Under the Baumann Employment Agreement, Mr. Baumann is
eligible to participate in the Company's applicable equity incentive plan with
actual award amounts subject to approval of the board of directors. Mr. Baumann
will also be eligible to participate in the Company's benefit plans generally.
In addition, the Company will pay Mr. Baumann an additional amount of $20,000
for any month in which he is serving as Interim Chief Merchant (the "Stipend").
The Baumann Employment Agreement also provides for a one-time grant of
restricted stock units, including (i) an award of time-based restricted stock
units having a target value of $128,750 (the "Baumann RSUs") and (ii) an award
of performance-based restricted stock units having a target value of $128,750
(the "Baumann PRSUs"), in each case, to be granted on the second business day
following completion by the Company of a reverse stock split, and to be payable
in combination of cash and/or shares of the Company's common stock as determined
by the board of directors. The Baumann RSUs will vest in equal installments on
each of the first four anniversaries of the date of grant, so long as Mr.
Baumann remains employed through each vesting date. The Baumann PRSUs will vest
over a period of three years from the date of grant (subject to Mr. Baumann's
continuous employment through each vesting date) based on the achievement of
certain performance goals over the three-year period of July 1, 2023 through
June 30, 2026.
Under the terms of the Baumann Employment Agreement, if Mr. Baumann's employment
is terminated by the Company without cause or he resigns with good reason, he
will be entitled to receive severance benefits as follows: (a) any earned but
unpaid bonus for the fiscal year preceding the year in which the termination of
employment occurs, and (b) cash severance in an amount equal to (i) 12 months of
base salary (and, if he is serving as Interim Chief Merchant on the termination
date, 12 months of the Stipend), payable over the 12-month period following the
termination of employment and (ii) a prorated annual bonus for the fiscal year
of termination payable at the same time as bonuses would otherwise be payable
under the Company's annual bonus plan, subject to the achievement of applicable
performance goals for the performance period; provided, that if no bonus plan is
adopted for a fiscal year, the amount payable shall equal the target prorated
annual bonus opportunity for the fiscal year of termination. However, if Mr.
Baumann's employment is terminated by the Company without cause or if he resigns
with good reason, in each case, within one year following a "change in control"
(as defined in the Baumann Employment Agreement), the cash severance payable to
Mr. Baumann will include 18 months (rather than 12 months) of base salary and
all of Mr. Baumann's outstanding time-based restricted stock units will vest in
full and all of Mr. Baumann's performance-based restricted stock units will
remain eligible for vesting upon achievement of the applicable performance
goals.
Mr. Baumann's receipt of the severance benefits described in the previous
paragraph is subject to Mr. Baumann's execution (and non-revocation) of a
release of claims in favor of the Company and his continued compliance with
restrictive covenants, which include customary nonsolicitation and
noncompetition covenants that apply for the duration of Mr. Baumann's employment
and for a period of one year thereafter and confidentiality, nondisclosure and
nondisparagement covenants.
The foregoing summary of the Baumann Employment Agreement is qualified in its
entirety by reference to the full text of the Baumann Employment Agreement, a
copy of which is filed as Exhibit 10.2 to this report, and incorporated by
reference herein.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
10.1 Employment Agreement, dated November 4, 2022, between the Company and
Andrew T. Berger
10.2 Employment Agreement, dated November 4, 2022, between the Company and
William Baumann
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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