CPI CARD GROUP INC. (NASDAQ:PMTS) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

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CPI CARD GROUP INC. (NASDAQ:PMTS) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 5.02 Departure of Directors or Certain Officers; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Scott Scheirman as President and Chief Executive Officer

On September25, 2017, the Board of Directors (the “Board”) of CPI Card Group Inc. (the “Company”) appointed Scott Scheirman, a current director of the Company, as President and Chief Executive Officer of the Company, effective October5, 2017. Mr.Scheirman will continue to serve on the Board. Mr.Scheirman will succeed Steve Montross, who will be ending his service as Chief Executive Officer on October4, 2017 in connection with his previously announced retirement.

Mr.Scheirman, 54, has served as a member of the Company’s Board since October2016. Mr.Scheirman has served as the Chief Executive Officer and a co-founder of JKL Ventures LLC, a private investment and strategic advisory firm since February2014. Prior to JKL Ventures LLC, Mr.Scheirman served as the Executive Vice President and Chief Financial Officer of Western Union (NYSE:WU) from September2006 to December2013. Prior to joining Western Union, Mr.Scheirman held a variety of executive leadership and financial officer roles at First Data Corporation (NYSE:FDC), and began his career at Ernst& Young LLP. Mr.Scheirman holds a Bachelor of Science degree in Business Administration with an emphasis in Accounting from the University of Northern Colorado.

Mr.Scheirmandoes not have any family relationship with any director or executive officer, or any person nominated to be a director or executive officer of the Company. There is no transaction between Mr.Scheirmanand the Company that would require disclosure under Item 404(a)of Regulation S-K.

In connection with Mr.Scheirman’s appointment, on and effective September25, 2017, the Company entered into an employment and non-competition agreement with Mr.Scheirman (the “Employment Agreement”). to the Employment Agreement, Mr.Scheirman will receive an initial annual base salary of $575,000 and will be eligible for a target annual bonus equal to 50% of his base salary, based on the achievement of both Company and individual performance metrics. For the period from September25, 2017 through December31, 2017, Mr.Scheirman will receive an annual bonus equal to 50% of his base salary for that period, and for calendar year 2018, he will receive an annual bonus of no less than 80% of his base salary. Mr.Scheirman also received the Option Award (as defined and described in additional detail below) and will be eligible to receive, starting in 2019, long-term incentive awards either with a value not less than two times Mr.Scheirman’s annual base salary or with respect to not less than 500,000 shares of the Company’s common stock, depending on the assessment by the Compensation Committee of the Board (the “Committee”) of the Company’s stock performance and valuation at the time that such awards are being made. to the Employment Agreement, the Company will reimburse Mr.Scheirman for (a)his out-of-pocket living expenses for hotels and meals in the Littleton, Colorado area for the period from September25, 2017 through December31, 2017 and (b)up to $15,000 in reasonable attorneys’ fees incurred by him in connection with the negotiation thereof.

As provided in the Employment Agreement and concurrently with the commencement of his employment with the Company, Mr.Scheirman received an option to purchase 1,400,000 shares of the Company’s common stock, with an exercise price equal to $1.05 per share (the “Option Award”), to the CPI Card Group Inc. Omnibus Incentive Plan (the “Plan”) and an option award agreement thereunder (the “Option Agreement”). The Option Award generally will vest in approximately equal annual installments on each of the first three anniversaries of the grant date. The portion of the Option Award with respect to 619,467 shares is contingent upon the receipt of approval of the Company’s stockholders of an amendment and restatement of the Plan to, among other things, increase the number of shares available for issuance thereunder, as described in further detail below.

In the event of a termination of his employment with the Company due to his death or disability, by the Company without cause or by Mr.Scheirman for good reason, subject to his execution and delivery of a release of claims, Mr.Scheirman will receive (i)severance payments equal to 1.5 times the sum of Mr.Scheirman’s annual

base salary and target bonus for the year of the termination, (ii)a bonus payment for the year of the termination, based on the Company’s actual performance, (iii)reimbursement for the cost of continuation coverage under the Company’s health and welfare plans and (iv)six months of outplacement services. In addition, Mr.Scheirman will receive vesting of any equity awards that would have vested in the year following Mr.Scheirman’s termination of employment, and in the event his employment terminates for any reason other than death, disability, his retirement or for cause, he will be able to exercise any then-vested portion of the Option Award for up to three years after his termination. If Mr.Scheirman’s termination occurs within 24 months following a change in control of the Company, then Mr.Scheirman will instead receive severance payments equal to two times the sum of Mr.Scheirman’s annual base salary and target bonus for the year of the termination, and his outstanding equity awards will vest in full.

Mr.Scheirman will be subject to certain non-competition and non-solicitation covenants for 18 months following the termination of his employment with the Company for any reason.

The foregoing summaries of the Employment Agreement and the Option Agreement are qualified in their entirety by reference to, respectively, the Employment Agreement, a copy of which is filed as Exhibit10.1 to this Current Report on Form8-K, and the Option Agreement, a copy of which is filed as Exhibit10.2 to this Current Report on Form8-K, each of which is incorporated herein by reference.

On September27, 2017, the Company issued a press release announcing Mr.Scheirman’s appointment, a copy of which is attached hereto as Exhibit99.1 and incorporated herein by reference.

Adoption of CPI Card Group. Inc. Omnibus Incentive Plan, as Amended and Restated

On September25, 2017, the Board approved, subject to stockholder approval, an amendment and restatement of the Plan. The amendment and restatement of the Plan provides for, among other things, (i)an increase in the number of shares of the Company’s common stock authorized for issuance thereunder of 2,000,000 shares, (ii)an extension of the term of the Plan for 10 years from the date of the Board’s approval, through September25, 2027, (iii)an increased annual per-participant limit of 1,500,000 shares for awards under the Plan subject to options and stock appreciation rights, and (iv)a reiteration of the performance criteria that may be used for performance-based awards under the Plan, so that such criteria can be approved by stockholders for purposes of Section162(m)of the Internal Revenue Code of 1986, as amended. On September25, 2017, the Company’s stockholders approved the Plan, as amended and restated, by written consent (the “Stockholder Approval”), and the Plan will become effective on the 20thcalendar day after the Company files with the Securities and Exchange Commission and furnishes to the Company’s stockholders a definitive Schedule 14C Information Statement.

The foregoing summary of the Plan is qualified in its entirety by reference to the Plan, a copy of which is filed as Exhibit10.3 to this Current Report on Form8-K, and which is incorporated herein by reference.

Retention Options and Retention Cash Bonuses

On September25, 2017, in connection with the Company’s appointment of Mr.Scheirman as its new President and Chief Executive Officer, the Committee approved retention stock option awards under the Plan (the “Retention Option Awards”) and certain cash retention bonuses (the “Retention Bonuses”) to the Company’s executive officers and other employees, including Retention Bonuses and Retention Option Awards to the Company’s principal financial officer and named executive officer as follows:

Name

RetentionOptionAwards(#)

RetentionBonuses($)

Lillian Etzkorn

125,000

$

122,385

Jason Bohrer

125,000

$

91,043

The Retention Option Awards are being made in lieu of the regular cycle of Plan awards that the

Company would otherwise have made in the first quarter of 2018 in order to enhance employee retention efforts. The Retention Bonuses and Retention Option Awards generally are intended to help align more closely the interests of the Company’s leadership team with the interests of the Company’s stockholders.

The Retention Option Awards have an exercise price equal to $1.05 per share and generally vest in approximately equal annual installments on each of the first three anniversaries of the grant date. The Retention Bonuses will be paid 50% on or about December1, 2017 and 50% on or about March31, 2018; provided, that if a recipient gives notice to the Company of a resignation prior to March31, 2018, all Retention Bonus amounts will be forfeited.

A portion of the Retention Option Awards made to Ms.Etzkorn and Mr.Bohrer, with respect to 55,310 shares each, is contingent upon the receipt of the Stockholder Approval.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

ExhibitNo.

Description

10.1

Employment and Non-Competition Agreement, dated September25, 2017, by and between CPI Card Group Inc. and Scott Scheirman.

10.2

Nonqualified Stock Option Agreement under the CPI Card Group Inc. Omnibus Incentive Plan, dated September25, 2017, by and between CPI Card Group Inc. and Scott Scheirman.

10.3

CPI Card Group Inc. Omnibus Incentive Plan, as amended and restated effective September25, 2017.

99.1

Press Release, dated September27, 2017.


CPI Card Group Inc. Exhibit
EX-10.1 2 a17-22618_1ex10d1.htm EX-10.1 Exhibit 10.1   Execution Copy   EMPLOYMENT AND NON-COMPETITION AGREEMENT   THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement”),…
To view the full exhibit click here

About CPI CARD GROUP INC. (NASDAQ:PMTS)

CPI Card Group Inc., formerly CPI Holdings I, Inc., provides Financial Payment Card solutions in North America. The Company is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards, which it defines as credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands in the United States, Europe and Canada. It is also engaged in the design, production, data personalization, packaging and fulfillment of retail gift and loyalty cards. Its segments include U.S. Debit and Credit, which produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States; U.S. Prepaid Debit, which provides integrated card services to Prepaid Debit Card issuers in the United States; U.K. Limited, which produces retail cards for customers in the United Kingdom and continental Europe, and Other, which has operations in Ontario, Canada and Petersfield, United Kingdom.