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Item 5.02.
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
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(b)
On May 11, 2017, Excel
Corporation (the “Company”) appointed an independent committee (the “Special Committee”) of the Board of
Directors (the “Board”) to conduct an investigation into certain of the Company’s past business practices encompassing
each of (a) Thomas A. Hyde, Jr., the Company’s President and Chief Executive Officer, and (b) Robert L. Winspear, the Company’s
Chief Financial Officer, Vice President and Secretary (together with Mr. Hyde, the “Officers”) and certain matters
relating to the Company’s obligations under an existing credit facility. The investigation was performed by the Special Committee
at the direction of the Board, and the Special Committee engaged outside legal counsel to assist it in performing its duties. On
May 15, 2017, following the completion of their investigation, the Special Committee resolved to terminate the Officers, effective
immediately, and on May 17, 2017, the Company delivered to each of the Officers a letter terminating their employment (the “Termination
Letters”). The Officers informed the Company that they disputed the Special Committee’s authority to terminate the
Officers, alleging that the termination was not a valid action taken by the Company and refusing to recognize the Termination Letters.
On June 4, 2017,
the Officers were formally terminated from the Company at a meeting of the Board. At the meeting, the Board voted to terminate
the employment of each of the Officers for cause, effective as of May 16, 2017, in accordance with the terms of their respective
employment agreements. The Officers are not eligible for, and will not be paid, any severance or other separation payment in connection
with each of their respective terminations. Mr. Hyde remains a member of the Board.
Following the meeting
of the Board and the subsequent receipt of notice by the Officers from the Company of their respective terminations, the Officers
ignored such notice and continued to report to work at the Company’s offices and to act as executive management, including
holding themselves out as such to the Company’s lenders, employees and third parties. The Company disagreed with the Officers’
position and took the position that the actions taken by the Special Committee and the Board to terminate the Officers were valid
and enforceable. On June 4, 2017, the Company filed an Application for Temporary Restraining Order (the “TRO”) against
the Officers in the 134
th
Judicial District in the District Court of Dallas County, Texas (the “District Court”),
which the District Court entered to, among other things, preserve the status quo between the parties pending a temporary injunction
hearing (the “Injunction Hearing”). At that preliminary hearing, the District Court ordered that the Officers continue
to act as officers of the Company until the Injunction Hearing, and that until the Injunction Hearing they continue to carry out
their responsibilities in their roles, subject to certain restrictions set forth in the TRO.
On June 19, 2017, the
District Court held the Injunction Hearing. On June 20, 2017, the District Court (a) granted the Company’s application for
a temporary injunction against the Officers (the “Injunction”), and (b) found that the Board terminated both Officers’
employment agreements and removed both Officers from their positions as officers of the Company. The Injunction also enjoins the
Officers from, among other things: (a) coming within 100 feet of any property owned, leased or occupied by the Company; (b) accessing
any Company computer systems equipment, bank accounts or other assets; and (c) holding themselves out as employees or officers
of the Company to any regulators, investors, shareholders, employees, customers, suppliers, lenders or vendors of the Company.
The District Court found, among other things, that prior actions of the Officers in connection with an existing credit facility
violated the Officers’ fiduciary duties (including the duty of loyalty) and that the actions taken by the Board terminating
the Officers and removing their officer titles were lawful actions under the Company’s bylaws. The District Court set the
date for a full trial on the merits of the Company’s claims against the Officers for March 2018.
The Company plans
to shortly commence an executive search to locate and vet potential candidates to fill the positions of Chief Executive Officer
and Chief Financial Officer. In the interim, Ruben Azrak, the Company’s Chairman of the Board, will perform certain management
oversight functions of the Company. Mr. Azrak will also be actively involved in the Company’s accelerated executive search
process.
(c)
On June 4, 2017, the
Board also appointed current director Karl Power to serve as the Company’s interim Chief Executive Officer and Secretary.
Mr. Power, 56, has served as a director of the Company since November 2015, and was appointed as a director of the Company in connection
with the acquisition by the Company of the U.S. assets of Calpian Inc. Mr. Power currently works as a consultant to a number of
start-up entities. From August 2011 until its sale in November 2016, Mr. Power was Chairman, CEO and CFO of Active In Home Therapy,
a health care services provider. Prior to that, Mr. Power was a partner at Robertson Stephens LLC, an investment bank, where he
was co-founder of the London office and helped oversee the bank’s growth to over $100 million in revenues in a span of five
years. Mr. Power currently serves on the board of directors of MoneyOnMobile, Inc. (OTCQX:MOMT).
In connection with
his appointment as interim Chief Executive Officer and Secretary, the Company and Mr. Power entered into an employment agreement
(the “Employment Agreement”). The Employment Agreement has an initial term of 60 days, and automatically renews for
successive 30-day terms unless either party gives notice of non-renewal within 30 days of expiration of the then current term,
subject to earlier termination in accordance with the terms of the Employment Agreement. Under the terms of the Employment Agreement,
Mr. Power will receive a base salary at a rate of $29,166.67 per month.
The Company or Mr.
Power may terminate the Employment Agreement upon 30 days’ prior written notice for any reason, and the Chairman of the
Board may terminate Mr. Power’s employment with the Company at any time upon written notice, and such termination shall
be effective as of the date of termination provided in such notice (the “At-Will Termination”). Upon the At-Will Termination,
Mr. Power is entitled to his accrued but unpaid salary, any pre-approved and reasonable travel and entertainment business expenses
accrued but unpaid and any accrued but unused vacation. In the event of Mr. Power’s death, Mr. Power’s family shall
continue to be covered by all of the Company’s medical, health and dental plans in effect at such time, at the Company’s
expense, for a period of at least six months following Mr. Power’s death in accordance with the terms of such plans. The
Employment Agreement also contains non-competition and similar covenants which are in effect during Mr. Power’s employment
with the Company and for a period of 12 months following the termination of his employment under the Employment Agreement.
Mr.
Power is entitled to be reimbursed for all pre-approved and reasonable travel and entertainment expenses incurred by him in connection
with the performance of his duties under the Employment Agreement, including reimbursement for attending out-of-town meetings
of the Board of Directors in accordance with such procedures as the Company may from time to time establish for senior officers.
Mr. Power shall also be entitled to participate in such employee benefit plans or programs of the Company established and amended
from time to time, and is eligible to receive all medical, dental and other benefits to the same extent as provided to other senior
management employees.
If
the Company combines, consolidates or merges into, transfers all or substantially all of its assets to, or enters into a partnership
or joint venture with, another corporation or other entity, or effects any other kind of corporate combination (each, a “Change
in Control”), the Employment Agreement requires any entity resulting from such Change in Control, or to which such assets
are transferred, to assume the Employment Agreement.
There
are no other arrangements or understandings pursuant to which Mr. Power was selected as the Company’s interim Chief Executive
Officer and Secretary. There are no family relationships among any of the Company’s directors, executive officers, and Mr.
Power, and there are no related party transactions between the Company and Mr. Power reportable under Item 404(a) of Regulation
S-K.
The
foregoing summary of the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to
such agreement. A copy of the Employment Agreement is filed herewith as Exhibit 10.1 and is incorporated by reference into this
Item 5.02.
