Item 5.02 Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 8, 2017, Rightscorp, Inc. (the
“Company”) entered into an employment agreement (the “Employment Agreement”) with Christopher Sabec, the
Company’s President. By unanimous written consent, the Board of Directors of the Company ratified the term and conditions
of the Employment Agreement on that same date. Under the Employment Agreement, Mr. Sabec will serve as the Company’s President
for a term of three years (the “Initial Term”) from Mr. Sabec’s appointment effective August 1, 2017 (the “Effective
Date”), which term will renew automatically for successive one-year terms (each, a “Renewal Term”) unless terminated
in accordance therewith. The Company will pay Mr. Sabec an annual base salary of $150,000, except that, (i) the base salary will
increase from $150,000 to $250,000, effective upon the Company’s achievement of $100,000 in gross monthly revenue for three
consecutive months, (ii) the base salary will increase to $350,000 upon the Company achieving $2,500,000 in gross revenue in any
one year period commencing on the Effective Date, and (iii) effective upon the Company’s receipt of an aggregate of $10,000,000
in cumulative gross revenue, the base salary will increase to $500,000. The Company also agreed to pay Mr. Sabec a bonus of $50,000
upon execution of the Employment Agreement, and Mr. Sabec shall be eligible to receive an annual bonus at the discretion of the
Board. Pursuant to the Employment Agreement, the Company issued to Mr. Sabec, on the Effective Date, options to purchase 5,000,000
shares of common stock (the “Options”) at a price of $0.05/per share, expiring 10 years from the Effective Date. 1,500,000
of the Options shall vest as of the Effective date, and the remaining 3,500,000 of the Options shall vest in 48 equal monthly installments
(each installment, 72,917 options) thereafter.
If the Company terminates the Employment
Agreement without Cause (as defined in the Employment Agreement), Mr. Sabec terminates the Employment Agreement for Good Reason
(as defined in the Employment Agreement), or the Company fails to renew the Employment Agreement, all unvested Options shall immediately
vest and Mr. Sabec will be entitled to receive a lump sum payment equal to the greater of (i) six months of Mr. Sabec’s base
salary, and (ii) (a) the base salary payable for the remainder of the Initial Term (in the event such termination occurs during
the Initial Term), or (b) the base salary payable for the remainder of the Renewal Term (in the event such termination occurs during
a Renewal Term). If the Company terminates the Employment Agreement with Cause, Mr. Sabec terminates the Employment Agreement without
Good Reason, or Mr. Sabec fails to renew the Employment Agreement, Mr. Sabec will receive those accrued but unpaid items, including
but not limited any accrued but unpaid base salary, as of the termination date. If the Company terminates the Employment Agreement
without Cause or Mr. Sabec terminates the Employment Agreement for Good Reason following a Change in Control of the Company (as
defined in the Employment Agreement), Mr. Sabec will be entitled to receive a lump sum payment equal to the sum of three years
of Mr. Sabec’s base salary on the date of termination.
The foregoing description of the Employment
Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Employment
Agreement, which is filed as Exhibit 10.1 hereto, and which is incorporated herein by reference.
In connection with the foregoing grant
of Options to Mr. Sabec, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities
Act of 1933, as amended, for transactions not involving a public offering.
