|
Item 5.02
|
Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
|
Appointment
of New Director
Effective
September 26, 2019, Shea A. Smith joined our board of directors. The following is a brief description of the background and business
experience of Mr. Smith.
Shea
A. Smith, 44, has been a practicing certified public accountant for nearly twenty (20) years. Since 2003, he has been affiliated
with the South Florida-based accounting and advisory firm, Berkowitz Pollack Brant, where he currently Director of Audit and Attest
Services. Mr. Smith provides accounting, auditing and consulting services for businesses in a variety of industries and fields.
Mr. Smith holds bachelor’s and master’s degrees in accounting from the University of Florida. We believe that given
his extensive accounting and auditing experience, Mr. Shea will be a valuable addition to the Veritas Farms board of directors.
As
is the case with our other non-employee directors, Dr. Bao Tran Doan and Kellie Newton, we will compensate Mr. Smith with an annual
grant of stock options under our 2017 Incentive Stock Plan, in an amount and on terms to be determined by the board of directors.
The initial grant to Mr. Smith is for an option to purchase 25,000 shares at an exercise price of $3.88 per share. The options
vests in four (4) quarterly installments commencing ninety (90) days from the date of grant and is contingent upon his continued
service on the board. As is the case with our other nonemployee directors, we have also agreed to reimburse Mr. Smith for out-of-pocket
expenses incurred in connection with attending board and committee meetings and have entered into an indemnification agreement
with him.
Director
Independence
The
Company’s board of directors has determined that each of our three non-employee directors, Dr. Bao Tran Doan, Kellie Newton
and Shea A. Smith, is “independent” within the meaning of the applicable rules and regulations of the Securities
and Exchange Commission (the “SEC”) and the listing standards of the Nasdaq Stock Market and the NYSE American.
Moreover, our board of directors has determined that Mr. Smith qualifies as an “audit committee financial expert”
as the term is defined by the applicable rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market
and the NYSE American, based on his almost twenty (20) years of experience as a practicing certified public accountant.
Establishment
of Board Committees
General
As
our board of directors is now comprised of a majority of “independent” directors and Mr. Smith qualifies as
an “audit committee financial expert,” the Veritas Farms board of directors has established three standing
committees, an audit committee, a compensation committee and a nominating and corporate governance committee. Dr. Doan, Ms. Newton
and Mr. Smith will be members of each of the committees.
Copies
of the Charter for each of the audit committee, compensation committee and nominating and corporate governance committee are files
as Exhibits 99.1, 99.2 and 99.3 to this Current Report on Form 8-K.
Audit
Committee
The
audit committee assists the Veritas Farms board of directors in its oversight of the Company’s accounting and financial
reporting processes and the audits of the Company’s financial statements, including (a) the quality and integrity of the
Company’s financial statements; (b) the Company’s compliance with legal and regulatory requirements; (c) the independent
auditors’ qualifications and independence; and (iv) the performance of our Company’s internal audit functions and
independent auditors, as well as other matters which may come before it as directed by the board of directors. Further, the audit
committee, to the extent it deems necessary or appropriate, among its several other responsibilities, shall:
|
|
●
|
be
responsible for the appointment, compensation, retention, termination and oversight of the work of any independent auditor engaged
for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
|
|
|
●
|
discuss
the annual audited financial statements and the quarterly unaudited financial statements with management and the independent auditor
prior to their filing with the SEC in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q;
|
|
|
●
|
review
with the Company’s financial management on a period basis (a) issues regarding accounting principles and financial statement
presentations, including any significant changes in the Company’s selection or application of accounting principles; and
(b) the effect of any regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements
of the Company;
|
|
|
●
|
monitor
the Company’s policies for compliance with federal, state, local and foreign laws and regulations and the Company’s
policies on corporate conduct;
|
|
|
●
|
maintain
open, continuing and direct communication between the board of directors, the audit committee and our independent auditors; and
|
|
|
●
|
monitor
our compliance with legal and regulatory requirements and shall have the authority to initiate any special investigations of conflicts
of interest, and compliance with federal, state and local laws and regulations, including the Foreign Corrupt Practices Act, as
may be warranted.
|
Mr.
Smith will be the chairperson of the audit committee.
Compensation
Committee
The
compensation committee aids our board of directors in meeting its responsibilities relating to the compensation of the Company’s
executive officers and to administer all incentive compensation plans and equity-based plans of the Company, including the plans
under which Company securities may be acquired by directors, executive officers, employees and consultants. Further, the compensation
committee, to the extent it deems necessary or appropriate, among its several other responsibilities, shall:
|
|
●
|
review
periodically the Company’s philosophy regarding executive compensation to (a) ensure the attraction and retention of corporate
officers; (b) ensure the motivation of corporate officers to achieve the Company’s business objectives, and (c) align the
interests of key management with the long-term interests of our shareholders;
|
|
|
●
|
review
and approve corporate goals and objectives relating to Chief Executive Officer compensation and other executive officers of Veritas
Farms;
|
|
|
●
|
make
recommendations to the board of directors regarding compensation for non-employee directors, and review periodically non-employee
director compensation in relation to other comparable companies and in light of such factors as the compensation committee may
deem appropriate; and
|
|
|
●
|
review
periodically reports from management regarding funding the Company’s pension, retirement, long-term disability and other
management welfare and benefit plans.
|
Dr.
Doan will be the chairperson of our compensation committee.
Nominating
and Corporate Governance Committee
The
nominating and corporate governance committee recommends to the board of directors individuals qualified to serve as directors
and on committees of the board of directors to advise the board of directors with respect to the board of directors composition,
procedures and committees to develop and recommend to the board of directors a set of corporate governance principles applicable
to the Company; and to oversee the evaluation of our board of directors and management.
Further,
the nominating and corporate governance committee, to the extent it deems necessary or appropriate, among its several other responsibilities
shall:
|
|
●
|
recommend
to the board of directors and for approval by a majority of independent directors for election by shareholders or appointment
by the board of directors as the case may be, pursuant to our bylaws and consistent with the board of directors’ criteria
for selecting new directors;
|
|
|
●
|
review
the suitability for continued service as a director of each member of the board of directors when his or her term expires or when
he or she has a significant change in status;
|
|
|
●
|
review
annually the composition of the board of directors and to review periodically the size of the board of directors;
|
|
|
●
|
make
recommendations on the frequency and structure of board of directors’ meetings or any other aspect of procedures of the
board of directors;
|
|
|
●
|
make
recommendations regarding the chairmanship and composition of standing committees and monitor their functions;
|
|
|
●
|
review
annually committee assignments and chairmanships;
|
|
|
●
|
recommend
the establishment of special committees as may be necessary or desirable from time to time; and
|
|
|
●
|
develop
and review periodically corporate governance procedures and consider any other corporate governance issue.
|
Ms.
Newton will be the chairperson of the nominating and corporate governance committee.