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): | July 12, 2021 |
MEDMEN ENTERPRISES INC
_____________________________________________________
(Exact name of registrant as specified in its charter)
| British Columbia | 000-56199 | 98-1431779 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
10115 Jefferson Boulevard, Culver City, CA 90232
(Address, including zip code, of principal executive offices)
| Registrant’s telephone number, including area code | (424) 330-2082 |
(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 (see General Instruction A.2. below):
| ☐ | 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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
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 ☒
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. ☐
| Item 1.01 | Entry into a Material Definitive Agreement. |
The information regarding the Retention Agreement (as defined below) set forth in Item 5.02 of this Current Report on Form 8-K is incorporated by reference in this Item 1.01.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
On July 15, 2021, Medmen Enterprises Inc. (the “Company”) issued a press release announcing the appointment of Tom Lynch, the Chairman of the Company’s Board of Directors (“Board”) and current interim Chief Executive Officer, as the permanent Chief Executive Officer of the Company effective July 15, 2021. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1.
On July 12, 2021, in connection with Mr. Lynch’s appoint as the permanent Chief Executive Officer (“CEO”), the Company and SierraConstellation Partners LLC (“SCP”) entered into a Transaction and Retention Bonus Agreement (the “Retention Agreement”). Previously, in March 2020, the Company retained SCP, an interim management and advisory firm, to support the Company in the development and execution of its turnaround and restructuring plan and Mr. Lynch to serve as the Company’s interim Chief Executive Officer. Mr. Lynch is a Partner and Senior Managing Director at SCP. As of March 27, 2021, the Company had paid $2,172,709 in fees to SCP for interim management and restructuring support during the current fiscal year. In addition, during the nine months ended March 27, 2021, Mr. Lynch received 124,868 stock options.
Pursuant to the Retention Agreement, the Company will pay SCP, in connection with the CEO’s continued service, a bonus award in the aggregate amount of $750,000 (the “Bonus Award”), $500,000 of which will become payable payable upon the consummation of a Transaction that occurs prior to June 1, 2022 (the “Transaction Bonus”), and $250,000 of which will become payable payable on June 1, 2022, each subject to the CEO’s continued service (the “Retention Bonus”). The Retention Bonus will be paid regardless of the consummation of a Transaction prior to June 1, 2022. A “Transaction” means a transaction or series of transactions that constitute (i) the sale of all or substantially all of the Company’s assets, (ii) the sale of all or substantially all of the equity interests of the Company, including through a sale or exchange of capital stock or other equity interest, a merger, consolidation, or other business combination, or (iii) the recapitalization or restructuring of all or substantially all of the equity and/or debt securities and/or other indebtedness of the Company, which recapitalization or restructuring is effected pursuant to an exchange transaction, tender offer, plan of reorganization, plan of arrangement, or otherwise. The occurrence of a Transaction and the effective date will be determined by the Company’s Board in its sole discretion. If a transaction is not consummated prior to June 1, 2022, the Transaction Bonus will not become payable and will be forfeited.
As a condition of SCP receiving any portion of the Bonus Award, Mr. Lynch must continuously and actively serve as CEO of the Company on the applicable payment date of each part of the Bonus Award. If the CEO’s service with the Company is terminated prior to any payment date, the Bonus Award will not become payable.
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If, prior to both June 1, 2022 and the consummation date of a Transaction, Mr. Lynch’s service as CEO of the Company is terminated by the Company other than for Cause, or Mr. Lynch terminates service with the Company for Good Reason, then (i) 100% of the Transaction Bonus will become payable, and (ii) a prorated portion of the Retention Bonus will become payable, based on the number of months served between June 1, 2021 and June 1, 2022. If, upon or following the consummation of a Transaction and prior to June 1, 2022, Mr. Lynch’s service as CEO of the Company is terminated by the Company other than for Cause, or Mr. Lynch terminates service with the Company for Good Reason, then the Retention Bonus will be payable in full. If Mr. Lynch’s service as CEO of the Company is terminated for any other reason, any unpaid portion of the Transaction Bonus and the Retention Bonus will be forfeited. “Cause” means (i) indictment for, conviction of, or a plea of guilty or no contest to, any indictable criminal offence or any other criminal offence involving fraud, misappropriation or moral turpitude, (ii) failure to perform duties to the Company or to follow the lawful direction of the Board for any reason other than illness or physical or mental incapacity, or a breach of fiduciary duty, as determined in the sole discretion of the Board (iii) theft, fraud, or dishonesty or in connection with the CEO’s duties, (iv) violation of the Company’s code of conduct or similar written policies, (v) willful misconduct unrelated to the Company or any of its affiliates having, or likely to have, a material negative impact on the Company or any of its affiliates (economically or its reputation), or (vi) an act of gross negligence or willful misconduct. “Good Reason” means without the CEO’s consent, (i) any material diminution in responsibilities, authorities, title or duties, (ii) any material reduction in base salary, (iii) a relocation of the CEO’s principal place of service by more than 50 miles; provided that the CEO has given the Company written notice of termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within 30 days following the occurrence of such event, and the Company fails to cure such conduct within 30 days. Removal of the CEO from the Board does not constitute Good Reason.
Tom Lynch, 52, was appointed initially interim Chief Executive Officer of the Company in March 2020, elected to the Board in November 2020 and appointed as Chairman in December 2020. Mr. Lynch is currently a Partner and Senior Managing Director of SierraConstellation Partners. Prior to joining SierraConstellation Partners in July 2018, Mr. Lynch was the co-founder and Managing Partner of Woods Hole Capital between July 2014 and July 2018. Prior to founding Woods Hole Capital, Mr. Lynch was the Chairman and Chief Executive Officer of Frederick’s of Hollywood Group (a publicly traded company). Prior to joining Frederick’s, Mr. Lynch was the CEO of Mellon HBV later renamed Fursa Alternative Strategies. Mr. Lynch has held executive positions with Mellon Institutional Asset Management, UBS Global Asset Management and the Dreyfus Corporation. Mr. Lynch is a graduate of St. Anselm College. In light of his business and executive officer experience, the Company believes that Mr. Lynch is qualified to serve as a director of the Company.
Except as described above in this Item 5.02, there are no arrangements or understandings between Mr. Lynch and any other person pursuant to which he was appointed to serve as Chief Executive Officer of the Company and Mr. Lynch does not have a direct or indirect material interest in any “related party” transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. There are no family relationships between Mr. Lynch and any director or executive officer of the Company.
A copy of the Retention Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. The foregoing description of the Retention Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit No. | Exhibit | |
| 10.1 | Transaction and Retention Bonus Agreement dated July 12, 2021 between MedMen Enterprises Inc. and SierraConstellation Partners LLC | |
| 99.1 | Press Release dated July 15, 2021 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: July 15, 2021 | MEDMEN ENTERPRISES INC |
| /s/ Reece Fulgham | |
| By: Reece Fulgham | |
| Its: Chief Financial Officer |
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Exhibit 10.1
July 12, 2021
SierraConstellation Partners LLC
355 S. Grand Avenue, Suite 1450
Los Angeles, California 90071
Attn: Tom Lynch, Managing Director
Re: Transaction and Retention Bonus Award
Reference is made to that certain Engagement Letter between SierraConsellation Partners LLC (“SCP”) and MedMen Enterprises Inc. (the “Company”), dated March 9, 2020 and as amended May 1, 2020 (the “SCP Agreement”). Pursuant to the SCP Agreement, among other things, Tom Lynch currently serves as the Interim Chief Executive Officer of the Company. The Board of Directors of the Company (the “Board”) has determined that Mr. Lynch shall be appointed as the Company’s permanent Chief Executive Officer of the Company (“CEO”), effective as of the date hereof.
As an additional incentive and retention measure, the Board has approved a Transaction and Retention Bonus Award (the “Bonus Award”) payable to SCP in connection with the CEO’s continued service with the Company. The Bonus Award, as described in more detail below, shall be subject to the terms and conditions of this agreement (the “Agreement”).
| 1. | Bonus Award. The Bonus Award in the aggregate amount of $750,000 shall become payable in two parts, as follows: |
| ● | “Transaction Bonus.” Two-thirds of the Bonus Award ($500,000) will become payable upon the consummation date of a “Transaction” (as defined in Appendix A) that occurs prior to June 1, 2022, subject to the CEO’s continued service as provided herein. If a Transaction is not consummated prior to June 1, 2022, this Transaction Bonus will not become payable and will be forfeited. |
| ● | “Retention Bonus.” One-third of the Bonus Award ($250,000) will become payable on June 1, 2022, subject to the CEO’s continued service as provided herein. This Retention Bonus will be paid regardless of the consummation of a Transaction prior to June 1, 2022. |
| 2. | Service Requirement. As a condition of SCP receiving any portion of the Bonus Award, the CEO must remain continuously and actively in service with the Company on the applicable payment date of each part of the Bonus Award. Except as provided in Section 3 below, if the CEO’s service with the Company is terminated prior to any payment date, the Bonus Award will not become payable. |
| 3. | Termination of Service. |
| ● | Prior to Transaction. In the event that, prior to both June 1, 2022 and the consummation date of a Transaction, the CEO’s service is terminated by the Company other than for “Cause,” or the CEO terminates service with the Company for “Good Reason” (each as defined in Appendix A), then (i) 100% of the Transaction Bonus will become payable in full, and (ii) a prorated portion of the Retention Bonus will become payable, based on the number of months served between June 1, 2021 and June 1, 2022. Such portions of the Bonus Award will be payable in a lump sum within 30 days following such service termination date, subject to the execution and non-revocation of a release of claims by the CEO and SCP in the form provided by the Company. |
| ● | Upon or Following a Transaction. In the event that, upon or following the consummation date of a Transaction and prior to June 1, 2022, the CEO’s service is terminated by the Company other than for “Cause,” or the CEO terminates service with the Company for “Good Reason” (each as defined in Appendix A), then the Retention Bonus will be payable in full in a lump sum within 30 days following such service termination date, subject to the execution and nonrevocation of a release of claims by the CEO and SCP in the form provided by the Company. |
If the CEO’s service is terminated for any reason other than as provided above in this Section 3, any unpaid portion of the Transaction Bonus and the Retention Bonus shall be forfeited.
| 4. | Section 409A. The payments and benefits under this Agreement are intended to satisfy exemption from the application of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), under Treasury Regulation Section 1.409A-1(b)(4) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted accordingly. In no event shall the Company or any of its subsidiaries or affiliates be liable for any additional tax, interest or penalties that may be imposed on the CEO under Section 409A or for any damages for failing to comply with Section 409A. |
| 5. | Assignment. SCP may not assign its rights under this Agreement without the Company’s consent. The Company may assign its obligations hereunder to any successor. |
| 6. | Entire Agreement. This Agreement sets forth the entire understanding of the Company and SCP regarding the subject matter hereof and supersedes all prior agreements, understandings and inducements, whether express or implied, oral or written, relating to the subject matter hereof. No modification or amendment of this Agreement shall be effective without a prior written agreement signed by SCP and the Company. |
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| 7. | Governing Law, Venue, and Remedies and Arbitration. This Agreement shall be governed by and construed and enforced in accordance with the laws of California without regard to the conflict of law provisions of any jurisdiction. Any action to enforce this Agreement shall be brought in a court of competent jurisdiction located in California. Any controversy or claim arising out of or relating to this Agreement or the breach thereof) (collectively, “Disputes”) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association (“AAA”) in Los Angeles, CA in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. Notwithstanding the foregoing, nothing in this Agreement shall require arbitration of any Disputes that by law cannot be the subject of a compulsory arbitration agreement. In the event that any person or entity other than SCP or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The Company and SCP shall split the arbitrator's fees and all expenses that are unique to arbitration. SCP shall not be required to pay any cost or expense of the arbitration that he would not be required to pay if the matter had been heard in court. Each party shall pay their own attorneys’ fees, witness and transcript fees, and other litigation expenses associated with the arbitration. This Section 7 shall be specifically enforceable. |
| 8. | (a) Withholding. Amounts payable under this Agreement shall be subject to withholding for all federal, state and local income and employment taxes as shall be required to be withheld pursuant to any applicable law or regulation. |
| 9. | Severability. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. |
[APPENDIX A FOLLOWS]
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APPENDIX A
Definitions
“Cause” means, (i) the CEO’s indictment for, conviction of, or a plea of guilty or no contest to, any indictable criminal offence or any other criminal offence involving fraud, misappropriation or moral turpitude, (ii) the CEO’s failure to perform the CEO’s duties to the Company or to follow the lawful direction of the Board of Directors of the Company (the “Board”) for any reason other than illness or physical or mental incapacity, or a breach of fiduciary duty, as determined in the sole discretion of the Board (iii) the CEO’s theft, fraud, or dishonesty with regard to the Company or any of its affiliates or in connection with the CEO’s duties, (iv) the CEO’s violation of the Company’s code of conduct or similar written policies, including, without limitation, the Company’s sexual harassment policy, (v) the CEO’s willful misconduct unrelated to the Company or any of its affiliates having, or likely to have, a material negative impact on the Company or any of its affiliates (economically or its reputation), or (vi) an act of gross negligence or willful misconduct by the CEO that relates to the affairs of the Company or any of its affiliates.
“Good Reason” means without the CEO’s consent, (i) any material diminution in the CEO’s responsibilities, authorities, title or duties, (ii) any material reduction in the CEO’s base salary, (iii) a relocation of the CEO’s principal place of service by more than fifty (50) miles; provided, that no event shall constitute Good Reason unless the CEO has given the Company written notice of the termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within thirty (30) days following the occurrence of such event, and the Company fails to cure such conduct within thirty (30) days. For avoidance of doubt, removal of the CEO from the Board shall not constitute Good Reason for purposes of this Agreement.
“Transaction” means a transaction or series of transactions that constitute (i) the sale of all or substantially all of the Company’s assets, (ii) the sale of all or substantially all of the equity interests of the Company, including through a sale or exchange of capital stock or other equity interest, a merger, consolidation, or other business combination, or (iii) the recapitalization or restructuring of all or substantially all of the equity and/or debt securities and/or other indebtedness of the Company, which recapitalization or restructuring is effected pursuant to an exchange transaction, tender offer, plan of reorganization, plan of arrangement, or otherwise. The occurrence of a Transaction and the effective date thereof shall be determined by the Board in its sole discretion.
[SIGNATURE PAGE FOLLOWS]
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| Sincerely, | ||
| MEDMEN ENTERPRISES INC. | ||
| /s/ Niki Christoff | ||
| By: | Niki Christoff | |
| Title: | Director, Chair of Compensation Committee | |
| ACCEPTED AND AGREED AS OF THE DATE SET FORTH ABOVE: | ||
| SIERRA CONSTELLATION PARTNERS | ||
| /s/ Tom Lynch | ||
| By: | Tom Lynch | |
| Title: | Managing Director | |
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Exhibit 99.1
MedMen Announces Permanent Appointment of Tom Lynch as Chief Executive Officer
LOS ANGELES--(BUSINESS WIRE)-- MedMen Enterprises Inc. (“MedMen” or the “Company”) (CSE: MMEN) (OTCQX: MMNFF) today announced MedMen’s current interim Chief Executive Officer and Chairman of the Board of Directors, Tom Lynch, will be appointed as the permanent Chief Executive Officer of the Company effective Thursday, July 15, 2021. Lynch has served as the interim Chief Executive Officer since March 2020.
“I am thrilled to be joining MedMen in a more permanent capacity,” said Lynch. “We have an incredible opportunity to capitalize on our recent successes, and continue on our path of rapid growth and profitability. It is our goal to solidify MedMen’s place as the premier cannabis retailer, and to continue the expansion of our retail footprint to ensure everyone has access to the highest quality and most effective cannabis products in the market today.”
About MedMen
MedMen is a premier American cannabis retailer with an operational footprint in California, Nevada, Illinois, Arizona, Massachusetts and Florida. MedMen offers a robust selection of high-quality products, including MedMen-owned brands [statemade], LuxLyte, and MedMen Red through its premium retail stores, proprietary delivery service, as well as curbside and in-store pick up. MedMen Buds, an industry-first loyalty program, provides exclusive access to promotions, product drops and content. MedMen believes that a world where cannabis is legal and regulated is safer, healthier and happier. Learn more about MedMen at www.medmen.com.
Media Contact
Tracy McCourt
MedMen
Chief Revenue Officer
Email: communications@medmen.com
Investor Relations Contact
Reece Fulgham
MedMen
Chief Financial Officer
Email: investors@medmen.com
Cautionary Note Regarding Forward-Looking Information and Statements:
This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only MedMen’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of MedMen’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “look forward”, “continuing” and “remain”. This forward-looking information is based on certain assumptions made by management and other factors used by management in developing such information.
Forward-looking information and statements are not based on historical facts but instead are based on assumptions, estimates, analysis and opinions of management of the Company at the time they were provided or made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances and are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the Forward-Looking Statements in this press release and other reports we file with, or furnish to, the SEC and other regulatory agencies and made by our directors, officers, other employees, and other persons authorized to speak on our behalf. Such factors include, without limitation: (i) ability to effectively deal with the restrictions, limitations and health issues presented by the COVID-19 pandemic; (ii) management’s perceptions of historical trends, current conditions and expected future developments; (iii) development costs remaining consistent with budgets, (iv) the ability to effectively manage growth, including anticipated and unanticipated costs; (v) achieving the anticipated results of the Company’s strategic plans; (vi) the adequacy of our capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute our business plan (either within the expected timeframe or at all); (vii) the ability to raise necessary or desired funds to achieve our strategic business plan; (viii) obtaining and maintaining all required licenses, approvals and permits; (ix) favorable production levels and sustainable costs; (x) inputs, suppliers and skilled labor being unavailable or available only at uneconomic costs; (xi) supply chain disruptions of materials and technology for tenant improvements and timing of regulatory approval related to new and expanded retail stores, including the expansion in Oak Park, IL; (xii) adverse future legislative and regulatory developments involving medical and recreational marijuana; (xiii) consumer interest in our products and products of other brands that we offer in our stores; (xiv) competition; (xv) government regulation of our activities and products including, but not limited, to the areas of taxation and environmental protection; (xvi) the risks of operating in the marijuana industry in the United States; (xvii) the outcome of any claims, litigation and proceedings of which we are a party, including any settlements of litigation or regulatory actions pending against us or other legal contingencies; (xviii) our ability to conduct operations in a safe, efficient and effective manner; (xix) changes in general economic, business and political conditions in which we operate, including changes in the financial markets; changes in applicable laws generally and (xx) and those other risk factors discussed in MedMen’s Form 10 (as amended), and other continuous disclosure filings, all available under MedMen’s profile on www.sedar.com and at www.sec.gov.
Although MedMen believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.
The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and MedMen does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.
Forward-looking statements contained in this news release are expressly qualified by this cautionary note.