UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 2019
KUSHCO HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 000-55418 | 46-5268202 |
|
(State or other jurisdiction
of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 11958 Monarch Street, Garden Grove, CA | 92841 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (714) 243-4311
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Appointment of Interim Chief Operating Officer
As previously disclosed, effective as of March 1, 2019 (the “Effective Date”), KushCo Holdings, Inc. (the “Company”) appointed Rodrigo de Oliveira as its Interim Chief Operating Officer.
Prior to his appointment as Interim Chief Operating Officer, Mr. de Oliveira served as the Company’s Vice President of Operations since April 2018. From August 2017 through April 2018, Mr. de Oliveira served as Senior Director of Supply Chain Transformation at Nike Accessories, a leader in sports equipment and accessories. From October 2013 to August 2017, Mr. de Oliveira served as Supply Chain Business Lead at Brighstar Corp., a U.S.-based company manufacturing, servicing and distributing wireless devices to carriers, retailers and enterprises worldwide. Prior to that, he served in positions of increasing responsibility at Oakley, Inc. and General Electric. Mr. de Oliveira received his Bachelor’s degree in Business at Universidade Makenzie in Brazil.
Pursuant to an Offer Letter entered into between the Company and Mr. de Oliveira on February 27, 2019 (the “de Oliveira Offer Letter”), Mr. de Oliveira will receive an initial annual base salary of $225,000. Mr. de Oliveira will have the opportunity to earn an annual bonus of up to $112,500, based on achievement of certain performance goals. In addition, Mr. de Oliveira was granted an option to purchase 100,000 shares of the Company’s common stock as of the Effective Date, which will vest over three years, with one-third vesting on the one-year anniversary of the Effective Date and the remaining two-thirds vesting ratably in equal monthly installments over the remaining two years.
The foregoing description of the de Oliveira Offer Letter is a summary and does not purport to be complete. Such description is qualified in its entirety by reference to the text of the de Oliveira Offer Letter, which is filed as Exhibit 10.1 to this Current Report on Form 8-K, and is incorporated herein by reference.
There are no related party transactions between the Company and Mr. de Oliveira , and Mr. de Oliveira is neither related to, nor does he have any relationship with, any existing member of the Board or any executive officer of the Company.
Compensation Adjustments
On February 27, 2019, in connection with the promotion of Jason Vegotsky to the Company’s Chief Revenue Officer, the Company entered into a new offer letter with Mr. Vegotsky (the “Vegotsky Offer Letter”) pursuant to which Mr. Vegotsky’s annual base salary was increased from $225,000 to $250,000. Mr. Vegotsky will have the opportunity to earn an annual bonus of up to $125,000 based on the achievement of annual target performance goals, as established by the Board, in their sole and absolute discretion. In addition, Mr. Vegotsky was granted an option to purchase 250,000 shares of the Company’s common stock as of the Effective Date, which will vest over three years, with one-third vesting on the one-year anniversary of the Effective Date and the remaining two-thirds vesting ratably in equal monthly installments over the remaining two years.
Also on February 27, 2019, and effective as of the Effective Date, the Company entered into an amendment to the Offer Letter between Christopher Tedford and the Company (such amendment, the “Tedford Offer Letter Amendment”), pursuant to which Mr. Tedford will have the opportunity to earn an annual bonus of up to $125,000 based on the achievement of annual target performance goals, as established by the Board, in their sole and absolute discretion. In addition, Mr. Tedford was granted an option to purchase 100,000 shares of the Company’s common stock as of the Effective Date, which will vest over three years, with one-third vesting on the one-year anniversary of the Effective Date and the remaining two-thirds vesting ratably in equal monthly installments over the remaining two years.
The foregoing descriptions of the Vegotsky Offer Letter and the Tedford Offer Letter Amendment are summaries and do not purport to be complete. Such descriptions are qualified in their entirety by reference to the text of the Vegotsky Offer Letter and the Tedford Offer Letter Amendment, which are filed as Exhibits 10.2 and 10.3, respectively, to this Current Report on Form 8-K, and are incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KUSHCO HOLDINGS, INC. | ||
| (Registrant) | ||
| March 5, 2019 | /s/ Nicholas Kovacevich | |
| (Date) |
Nicholas Kovacevich
Chairman and Chief Executive Officer |
INDEX TO EXHIBITS
Exhibit 10.1
February 27 th , 2019
Rodrigo De Oliveira
Dear Mr. Oliveira,
Congratulations! We are very pleased to offer you a new position with KUSHCO HOLDINGS, INC., a Nevada corporation (the "Company") as an Interim Chief Operations Officer. Your new position is subject to the terms and conditions set forth in this letter.
This letter is to confirm our understanding with respect to your future employment by KushCo Holdings or any present or future parent, subsidiary, affiliate or successor thereof (collectively, the "Company"). The terms and conditions agreed to in this letter are hereinafter referred to as the "Offer". In consideration of the mutual promises and covenants contained in this Offer, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, we have agreed as follows:
Employment
Subject to the terms and conditions of this Offer, you will be employed by the Company as a full-time Interim Chief Operations Officer reporting to Nicholas Kovacevich, Chief Executive Officer. You will have the responsibilities, duties and authority commensurate with the position of Interim Chief Operations Officer as determined by the Officers and/or the Board of Directors of the Company from time to time. You agree to devote your full business time attention and best efforts to the performance of your duties and to the furtherance of the Company's interests during your employment.
Subject to the terms hereof, your promotion hereunder will commence on February 25th, 2019 (the "Commencement Date"). Your employment with the Company is deemed to be "at will" and can be terminated by the Company or you at any time without prior notice or without reason.
The principal location at which you will perform such services will be our facility in Garden Grove, CA.
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Compensation
Effective February 25 th , 2019 you will be increased to a base salary at the annual rate of $225,000.00 (the "Base Salary"). The Base Salary will be payable bi-weekly installments in accordance with the Company's payroll practices as in effect, as may be amended from time to time. The Company will deduct from each such installment any amounts required to be deducted or withheld under applicable law or under any employee benefit plan in which you participate.
Bonus
You will be eligible to earn up to 50% of your base salary and any other discretionary incentives as approved by the Board and the KushCo Holdings' Leadership Team. For Fiscal Year 2019 you will be eligible to earn $40,000.00 in guaranteed Bonus Compensation which will be paid out in equal quarterly installments of $10,000.00 beginning September 2018.
Equity Compensation
Subject to the approval of the Company's Board of Directors and any other necessary approvals, you will be granted options to purchase 100,000 shares of the Company's common stock at a per share price equal to the closing price of the common stock on the date of grant, as determined by the Company's Board of Directors (the "Grant Date").
The options granted to you shall vest or accrue, as applicable, over a three-year period as follows: (i) 33% shall be deemed vested or accrued, as applicable, on the date which is twelve (12) months following the Grant Date and none before such date; and (ii) the balance of the Option Shares will be vested in a series of twenty-four (24) successive equal monthly installments. Should your employment terminate before the date which is twelve (12) months following the Grant Date, the options granted to you shall not be deemed vested, accrued, or exercisable. No right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continue vesting or employment.
Notwithstanding anything to the contrary, all terms and conditions of any stock options granted to you shall be governed by the terms and conditions of the applicable option agreement (as may be amended from time to time), which you will be required to sign.
This letter sets forth the entire agreement between us and supersedes any prior agreements or understandings between us pertaining to the subject matter of this letter. You acknowledge you have not signed this letter based on any representation that is not expressly stated in this letter.
| 2 |
All of us at the Company are excited at the prospect of you contributing to the team in your new role. If you have any questions about the above details, please call me immediately. If you wish to accept this position, please sign below and return this letter agreement to me within three business days. This offer is open for you to accept until March 4 th , 2019 at which time it will be deemed to be withdrawn.
I look forward to hearing from you.
Yours sincerely,
/s/ Nicholas Kovacevich
Nicholas Kovacevich
Chief Executive Officer
I accept the Company's offer of full-time employment pursuant to the terms and conditions described above and acknowledge receipt of the pay rate and pay day information.
| By: | /s/ Rodrigo de Oliveira | |
| Name: | Rodrigo de Oliveira | |
| Date: | 2/27/2019 |
Exhibit 10.2
February 27 th , 2019
RE: Promotion
Jason Vegotsky
Congratulations! We are very pleased to offer you a new position with KUSHCO HOLDINGS, INC., a Nevada corporation (the "Company") as a Chief Revenue Officer/President of Kush Supply Co. Your new position is subject to the terms and conditions set forth in this letter.
This letter is to confirm our understanding with respect to your future employment by KushCo Holdings or any present or future parent, subsidiary, affiliate or successor thereof (collectively, the "Company"). The terms and conditions agreed to in this letter are hereinafter referred to as the "Offer". In consideration of the mutual promises and covenants contained in this Offer, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, we have agreed as follows:
Employment
Subject to the terms and conditions of this Offer, you will be employed by the Company as a full-time Chief Revenue Officer/President of Kush Supply Co., reporting to Nicholas Kovacevich, Chief Executive Officer. You will have the responsibilities, duties and authority commensurate with the position of Chief Revenue Officer/President of Kush Supply Co., as determined by the Officers and/or the Board of Directors of the Company from time to time. You agree to devote your full business time attention and best efforts to the performance of your duties and to the furtherance of the Company's interests during your employment.
Subject to the terms hereof, your promotion hereunder will commence on February 25th, 2019 (the "Commencement Date"). Your employment with the Company is deemed to be "at will" and can be terminated by the Company or you at any time without prior notice or without reason.
The principal location at which you will perform such services will be our facility in Garden Grove, CA.
| 1 |
Compensation
Effective February 25 th , 2019 you will be increased to a base salary at the annual rate of $250,000.00 (the "Base Salary"). The Base Salary will be payable bi-weekly installments in accordance with the Company's payroll practices as in effect, as may be amended from time to time. The Company will deduct from each such installment any amounts required to be deducted or withheld under applicable law or under any employee benefit plan in which you participate.
Bonus
You will be eligible to earn up to 50% of your base salary and any other discretionary incentives as approved by the Board and the KushCo Holdings' Leadership Team. Additionally, for Fiscal Year 2019 you will be eligible to earn $40,000.00 in guaranteed Bonus Compensation which will be paid out in equal quarterly installments of $10,000.00 beginning September 2018.
Equity Compensation
Subject to the approval of the Company's Board of Directors and any other necessary approvals, you will be granted options to purchase 250,000 shares of the Company's common stock at a per share price equal to the closing price of the common stock on the date of grant, as determined by the Company's Board of Directors (the "Grant Date").
The options granted to you shall vest or accrue, as applicable, over a three-year period as follows: (i) 33% shall be deemed vested or accrued, as applicable, on the date which is twelve (12) months following the Grant Date and none before such date; and (ii) the balance of the Option Shares will be vested in a series of twenty-four (24) successive equal monthly installments. Should your employment terminate before the date which is twelve (12) months following the Grant Date, the options granted to you shall not be deemed vested, accrued, or exercisable. No right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continue vesting or employment.
Notwithstanding anything to the contrary, all terms and conditions of any stock options granted to you shall be governed by the terms and conditions of the applicable option agreement (as may be amended from time to time), which you will be required to sign.
This letter sets forth the entire agreement between us and supersedes any prior agreements or understandings between us pertaining to the subject matter of this letter. You acknowledge you have not signed this letter based on any representation that is not expressly stated in this letter.
| 2 |
All of us at the Company are excited at the prospect of you contributing to the team in your new role. If you have any questions about the above details, please call me immediately. If you wish to accept this position, please sign below and return this letter agreement to me within three business days. This offer is open for you to accept until March 4 th , 2019 at which time it will be deemed to be withdrawn.
I look forward to hearing from you.
Yours sincerely,
/s/ Nicholas Kovacevich
Nicholas Kovacevich
Chief Executive Officer
I accept the Company's offer of full-time employment pursuant to the terms and conditions described above and acknowledge receipt of the pay rate and pay day information.
By: /s/ Jason Vegotsky
Name: Jason Vegotsky
Date: 2/28/2019
Exhibit 10.3
February 27 th , 2019
RE: Bonus Restructure and Equity Increase
Christopher Tedford
Dear Mr. Tedford,
Congratulations! We are very pleased to offer you an updated Bonus Structure and Equity Increase effective March 1 st , 2019 to recognize your efforts in your role as a Chief Financial Officer.
Following six (6) months from your Commencement Date with KushCo Holdings, you will be eligible to receive $50,000.00 in guaranteed bonus compensation based on KPIs outlined.
Additionally, you will be eligible to earn up to 50% of your base salary and any other discretionary incentives as approved by the Board and the KushCo Holdings' Leadership Team based on the standard fiscal year bonus cycle. Following fiscal year 2019, all bonuses will be paid in accordance with the standard annual schedule.
Subject to the approval of the Company's Board of Directors and any other necessary approvals, you will be granted options to purchase 100,000 shares of the Company's common stock at a per share price equal to the closing price of the common stock on the date of grant, as determined by the Company's Board of Directors (the "Grant Date").
The options granted to .you shall vest or accrue, as applicable, over a three-year period as follows: (i) 33% shall be deemed vested or accrued, as applicable, on the date which is twelve (12) months following the Grant Date and none before such date; and (ii) the balance of the Option Shares will be vested in a series of twenty-four (24) successive equal monthly installments. Should your employment terminate before the date which is twelve (12) months following the Grant Date, the options granted to you shall not be deemed vested, accrued, or exercisable. No right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continue vesting or employment.
Notwithstanding anything to the contrary, all terms and conditions of any stock options granted to you shall be governed by the terms and conditions of the applicable option agreement (as may be amended from time to time), which you will be required to sign.
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We look forward to your continued contribution to the team. Congratulations!
Yours sincerely,
| /s/ Nicholas Kovacevich | /s/ Chris Tedford |
| Nicholas Kovacevich | Chris Tedford |
| Chief Executive Officer | CFO |