ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
Increase in Size of Board; Board Appointments
On March 8, 2017, the Board increased the size of the Board to consist of six (6) persons and appointed the following persons to fill such created vacancies for a year until the annual stockholders meeting and their respective replacements are elected and qualified or their resignation or removal:
Ian T. Bothwell
Terrell Suddarth
Peter Taddeo
As previously disclosed by the Company on a Form 8-K filed on November 14, 2016, Mr. Bothwell has been serving as the Chief Financial Officer of the Company since November 4, 2016. As disclosed herein, Terrell Suddarth was appointed as the Chief Technology Officer of the Company on March 8, 2017; and Peter Taddeo invested in the Company in connection with the Participation Agreement, effective February 14, 2017, regarding the Company’s endeavor to obtain a license to dispense medical cannabis in the State of Florida.
Terrell Suddarth Employment Agreement
On March 8, 2017, the Company entered into an executive employment agreement, effective March 8, 2017 (the “Effective Date”), with Terrell Suddarth, pursuant to which the Company appointed Mr. Suddarth (55 years old) as the Chief Technology Officer of the Company. Pursuant to Mr. Suddarth’s employment agreement, the Company agreed appoint Mr. Suddarth appoint as a member of the Board of Directors of the Company within fourteen (14) days of the Effective Date of the Agreement and to take all proper and legal actions to have Mr. Suddarth remain a director Board during the Employment Term, subject to state and federal law and the bylaws of the Company.
With over 25 years of senior leadership experience in organizations ranging from medical device to biotechnology to the Department of Defense, Mr. Suddarth has successfully guided multiple product introductions to financial success. He has been an integral part of several successful start-ups as well as large multi-nationals and has extensive background in domestic and international manufacturing environments, quality systems implementation, new product design, development and commercialization. Mr. Suddarth has specialized skills and experience in evaluating, structuring and implementing solutions for companies experiencing rapid operational growth.
Below is a summary of the material terms of Mr. Suddarth’s employment agreement, a copy of which has been filed as an exhibit to this Form 8-K and is incorporated by reference herein.
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Term
. The term of Mr. Suddarth’s employment shall be effective as the Effective Date and shall continue until the third anniversary thereof, unless terminated earlier pursuant to the terms of the employment agreement; provided that, on such third anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a “
Renewal Date
”), the agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days' prior to the applicable Renewal Date. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “
Employment Term
.”
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Base Salary
. Mr. Suddarth’s base annual salary is $300,000, which shall accrue commencing as of the Effective Date and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing; and thereafter payable in periodic installments in accordance with the Company's customary payroll practices, but no less frequently than monthly. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the base salary during the Employment Term.
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Annual and Signing Bonus
. For each complete fiscal year of the Employment Term, Mr. Suddarth shall be eligible to earn an annual bonus (the “
Annual Bonus
”) equal to a percentage of Base Salary (the “
Target Bonus
”) established by the Board, as in effect at the beginning of the applicable fiscal year, based on achievement of target performance goals and benchmarks (i.e., products brought to market, production and revenue goals) mutually established by the Board and Mr. Suddarth. Notwithstanding the foregoing, the Company shall pay Mr. Suddarth the following bonuses on the achievement of the following milestones and subject to the Board’s determination that the Company has sufficient capital:
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(i)
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$35,000 upon the commercial availability of a sheet type human amnion product;
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(ii)
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$35,000 upon the third commercially available product; and
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(iii)
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$35,000 upon the fourth commercially available product.
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The Company shall pay Mr. Suddarth a lump sum cash signing bonus of $35,000 (the “
Signing Bonus
”) in which shall be accrued and paid by the Company upon the Company having sufficient cash flow.
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Warrant
. The Company agreed to issue Mr. Suddarth the Suddarth Warrant (as defined in Section 3.02 of this Form 8-K).
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Equity Plan
. Mr. Suddarth shall be eligible to receive annual equity awards under the Company’s equity plan, if any, which is no less favorable than is provided to other key executive management members of the Company.
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Fringe Benefits and Perquisites
. During the Employment Term, Mr. Suddarth shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company. Notwithstanding the foregoing, during the Employment Term, the Company shall provide Mr. Suddarth with the following benefits:
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(a)
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Health and dental insurance for the Executive and his spouse which is no less favorable than is provided to other similarly situated executives of the Company; Company shall also agree to reimburse the amount of family deductible required to be paid by insured under such plans or contribute the maximum allowable HSA contribution limits per year depending on which type of plans are obtained by the Company.
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(b)
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An automobile expense allowance of $650 per month.
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(c)
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Reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executive's duties hereunder in accordance with the Company's expense reimbursement policies and procedures; provided, however, any expenditure or budget for travel and entertainment shall be pre-approved by the Executive’s Supervisor.
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Termination
. The Company may terminate Mr. Suddarth’s employment agreement at any time with or without “Cause” (as defined in the agreement) and Mr. Suddarth may resign at any time with or without “Good Reason” (as defined in the Agreement).
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If Mr. Suddarth’s employment is terminated by him for Good Reason or by the Company without Cause or on account of the Company's failure to renew the Agreement in accordance with the Agreement, then Mr. Suddarth shall be entitled to receive the Accrued Amounts and the execution of a mutual release of claims to each party, their affiliates and their respective officers and directors in a form (to be reasonable and customary for this purpose) provided by the Company (the “Release”), the Mr. Suddarth shall be entitled to receive the following:
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(a)
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continued Base Salary for one year following the Termination Date or the remaining term of the Agreement at time of Termination, whichever is longer.
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(b)
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a payment equal to the product of (i) the Annual Bonus, if any, that Mr. Suddarth would have earned for the fiscal year in which the Termination Date occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days Mr. Suddarth was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “Pro-Rata Bonus”). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives;
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(c)
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The treatment of any outstanding equity awards shall be determined in accordance with the terms of the applicable award agreements.
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(d)
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Notwithstanding the terms of any applicable award agreements:
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(i)
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all outstanding unvested stock options or warrants granted to Mr. Suddarth during the Employment Term shall become fully vested and exercisable for the remainder of their full term;
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(ii)
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all outstanding equity-based compensation awards that are intended to constitute performance-based compensation under Section 162(m)(4)(C) of the Code shall remain outstanding and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals are satisfied.
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Change of Control
. If Mr. Suddarth's employment hereunder is terminated by Mr. Suddarth for Good Reason or by the Company on account of its failure to renew the Agreement or without Cause (other than on account of Mr. Suddarth's death or Disability), in each case within twelve (12) months following a Change in Control, Mr. Suddarth shall be entitled to receive the Accrued Amounts and Mr. Suddarth shall be entitled to receive the following:
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(i)
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a lump sum payment equal to three (3) times the sum of Mr. Suddarth's Base Salary and Target Bonus for the year in which the Termination Date occurs (or if greater, the year immediately preceding the year in which the Change in Control occurs), which shall be paid within 50 days following the Termination Date; and
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(ii)
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a lump sum payment equal to Mr. Suddarth's Target Bonus for the fiscal year in which the Termination Date occurs, which shall be paid within sixty (60) days following the Termination Date.
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Notwithstanding the terms of any equity incentive plan or award agreements, as applicable:
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(iii)
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all outstanding unvested stock options and warrants granted to Mr. Suddarth during the Employment Term shall become fully vested and exercisable for the remainder of their full term;
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(iv)
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all outstanding equity-based compensation awards that are intended to constitute performance-based compensation under Section 162(m)(4)(C) of the Code shall remain outstanding and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals are satisfied.
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“
Change in Control
” shall mean
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1.
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the sale of all or substantially all of the Company's assets.
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2.
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a Person (or more than one Person acting as a group) acquires ownership interests in the Company that, together with the Company interests held by such Person or group, constitutes more than 50% of the total voting power of the stock of the Company as the result of a transaction other than one in which the stockholders of the Company transfer a portion of the Company interests held by them to a third party as part of a financing and/or a transaction associated with the acquisition of additional assets by the Company or an Affiliate;
provided
, that a Change in Control shall not occur if any Person (or more than one Person acting as a group) owns more than 50% of the total voting power of the Company’s stock and acquires additional stock.
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A copy of the Mr. Suddarth’s employment agreement is filed as an Exhibit to this Form 8-K and incorporated by reference herein.
Transactions with Related Persons
.
As of the date of this Form 8-K, Mr. Bothwell is owed by the Company approximately $145,000 for advances and unreimbursed expenses in connection with the Company’s operations. Such indebtedness is unsecured and non-recourse and is not evidenced by a promissory note or other agreement.
As disclosed herein, on February 14, 2017, Mr. Taddeo invested $150,000 in the Company in connection with the Company’s endeavor, through Mint Organics, Inc., to obtain a license to dispense medical cannabis in Florida. In consideration for his investment, on February 28, 2017, Mr. Taddeo was issued 150 shares of Series A Preferred Stock of Mint Organics, Inc. and a warrant from BPSR to purchase up to 150,000 shares of common stock for $0.15 per share from the date of issuance of the warrant until the third anniversary date of the date of issuance. Mr. Taddeo was also appointed as the Chief Executive Officer and as a director of Mint Organics, Inc. and Mint Organics Florida, Inc.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.
Amendment to Series A Preferred Stock Certificate of Designation
On March 2, 2017, the Company filed an amendment to the Certificate of Designation of the Company’s Series A Preferred Stock (the “
Series A Certificate of Designation
”), therein increasing the authorized class from 100 shares to 400 shares.
As previously disclosed by the Company on Form 8-K filed on November 3, 2016, generally, the outstanding shares of Series A Non-Convertible Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Company as a single class and, regardless of the number of shares of Series A Non-Convertible Preferred Stock outstanding, and as long as at least one share of Series A Non-Convertible Preferred Stock is outstanding, such shares shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent of stockholders. Each outstanding share of the Series A Non-Convertible Preferred Stock shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Series A Non-Convertible Preferred Stock.
Other than the increase in the number of authorized shares of Class A Preferred Stock, no other terms of the Series A Certificate of Designation were amended.
A copy of the amendment to the Series A Non-Convertible Preferred Stock is filed as an exhibit to this Form 8-K and incorporated by reference herein.
Amended and Restated By-laws
On March 8, 2017, the Board amended and restated the by-laws of the Company (the “
Amended and Restated By-laws
”).
Pursuant to Section 4.08(c) of the Amended and Restated By-laws, the following actions may not be taken without the approval of a supermajority (as defined below) of the full Board of Directors:
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a change of the Company’s name;
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a change in the location of the Company’s headquarters from Miami, FL to another city;
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the entry or exit from a line of business of the Company;
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the hiring or termination of any C-level executives of the Company or any subsidiary of the Company;
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the entry, amendment or termination of any employment agreement with an executive officer of the Company;
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the removal of any member of the Board of Directors;
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the appointment of a person to fill a vacancy of the Board of Directors;
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the increase or decrease in the size of the Board of Directors;
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the designation of a class of Preferred Stock of the Company and/or the amendment of the rights, privileges and obligations of any designated Preferred Stock;
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the declaration and issuance of any dividend;
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the forward or reverse split of the securities of the Company or any reclassification or exchange thereof;
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the sale, exchange or other disposition of the Company’s assets with an aggregate value of at least $100,000 or all, or substantially all, of the Company’s assets, whichever is less, occurring as part of a single transaction or plan, or in multiple transactions over a six (6) month period, except in the orderly liquidation and winding up of the business of the Company upon its duly authorized dissolution;
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the acquisition of the stock or assets of another entity or the merger therewith, regardless of the nature or amount of consideration given therefor;
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the issuance or re-issuance of any equity securities; or any debt securities convertible into equity securities; or any rights, options, or warrants to acquire any equity securities;
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the registration of any class of securities of the Company with the Securities and Exchange Commission or the withdrawal of any registration of any class of securities of the Company;
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investing in any other entity or the establishment of a joint venture with another party;
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the entering into any financing transaction with a third party in excess of $100,000
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the making of any capital expenditure in excess of $100,000;
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the creation, assumption, issuance, or incurring any indebtedness in excess of $50,000 per obligation;
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the signing of checks in excess of $50,000 drawn upon the bank account or accounts of the Company in connection with a single transaction or series of related transactions;
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any act which would make it impossible to carry on the ordinary business of the Company;
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any transactions between the Company and any member of the Board of Directors or executive officers or any affiliates or family members of such persons;
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the confession of a judgment against the Company; and
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the amendment of these By-laws.
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For purposes of Section 4(a)(8), a “
supermajority
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All of the members if three (3) members or less are entitled to vote on the matter(s) presented;
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A minimum of three (3) members if four (4) members are entitled on the matter(s) presented;
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A minimum of four (4) members if five (5) members are entitled on the matter(s) presented;
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A majority of the members if six (6) or more members are entitled on the matter(s) presented.
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A copy of the Amended and Restated By-laws are filed as an exhibit to this Form 8-K and is incorporated by reference herein.