EXHIBIT 10.24
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 21, 2015
|
MONARCH AMERICA, INC. |
|
(Exact Name of Registrant as Specified in Its Charter) |
Nevada
(State or Other Jurisdiction of Incorporation)
|
333-179390 |
99-0372219 | |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
1150 W. Custer Place
Denver, CO 80223
(Address of Principal Executive Offices, Zip Code)
(844) 852-1537
(Registrant's Telephone Number, Including Area Code)
_________________________________________________
(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))
Section 2 - Financial Information
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On July 1, 2015, a payment of $125,000 was due to each of Josh Field and Jeremy Stout pursuant to the terms of the two secured promissory notes each in the principal amount of $1,000,000 (collectively, the "Notes") issued to the two former owners of The Big Tomato, Inc. in January 2015. See the Current Report on Form 8-K filed by Monarch America, Inc. (the "Company) with the Securities and Exchange Commission on January 16, 2015. The Notes are payable in eight equal installments of $125,000 commencing April 1, 2015, accrue interest at the rate of 8% per annum and are secured by a first priority lien on all the assets of The Big Tomato and a pledge of all the shares of the wholly-owned subsidiary.
In consideration for foregoing the $125,000 payment due July 1, 2015, each of Messrs. Field and Stout were issued 1,562,500 shares of common stock of the Company and paid $25,000. The $125,000 payment shall be due and payable on January 2, 2017.
For all the terms and conditions of the forbearance agreement with Messrs. Field and Stout, reference is hereby made to such agreement (which was executed and delivered on July 30, 2015) annexed hereto as Exhibit 10.24. All statements made herein concerning said agreement is qualified by reference to said Exhibit.
Section 3 - Securities and Trading Markets
Item 3.02 Unregistered Sales of Equity Securities.
The disclosure set forth above under Item 2.03 (Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant) and Item 5.02 (Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers) is incorporated by reference into this Item 3.02. The shares of common stock described in Item 1.01 above and Item 5.02 below were offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. The agreements executed in connection therewith contain representations to support the Company's reasonable belief that each of the offerees had access to information concerning the operations and financial condition of the Company, is acquiring the securities for its own account and not with a view to the distribution thereof, and is an "accredited investor" as such term is defined in Rule 501 (a) of Regulation D promulgated under the Securities Act of 1933, as amended. At the time of their issuance, the shares of common stock are restricted securities for purposes of the Securities Act and the certificates representing the securities shall bear legends to that effect.
| 2 |
Section 5 - Corporate Governance and Management
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective July 21, 2015, the Board of Directors of Monarch America, Inc. (the "Company") increased the size of the Board from two directors to five, and appointed Josh Field, Kevin Malone and Robert Shepherd to the Board. Mr. Malone was also appointed as Vice President Finance effective as of July 21, 2015.
Josh Field, 41, has been the Vice President of The Big Tomato, Inc. and affiliated with the Company since January 2015 when the Company acquired all the outstanding shares of The Big Tomato from Mr. Field and his partner. Mr. Field has over 15 years of wholesale and retail store operations relating to hydroponic processes.
Kevin Malone, 48, has been serving as a consultant to the Company since March 2014. Mr. Malone has served on the board of directors of US Highland Inc. (OTC Bulletin Board UHLN) since February 2013. Prior to joining US Highland Mr. Malone worked in the financial service industry since 1985. From March 2009 through October 2012, Mr. Malone served as head trader for R.F. Lafferty & Company, Inc. From January 2006 until March 2009, Mr. Malone worked in the same capacity at Westminster Securities Corporation. From December 2002 through January 2006, Mr. Malone worked for Aegis Capital Corporation.
Robert Shepherd, has been the Native American Tribal Relations Officer to the Company since January 2015. Mr. Shepherd is the former Tribal Chairman of Sisseton Wahpeton Oyate of the Lake Traverse Reservation near Sisseton, South Dakota. (Feb. 2012 - Jan. 2015). As Chairman he formally held regional and national positions such as: the former Secretary of the National Congress of American Indians (Oct. 2013 - Jan. 2015), and former Co-Chairman of the Tribal Interior Budget Council (Mar. 2013 - Nov. 2014), Vice-President of the Great Plains Chairman's Association, Chairman of the Great Sioux Nation of South Dakota, Board of Military Affairs for South Dakota and Board Secretary of United Tribes Technical College. Before being elected to the position of Tribal Chairman his employment experiences consist of Tribal Planning Director supervising: Community Planning, Zoning Office, Economic Development, Energy Office, Transportation Office, Tourism and Parks & Recreation. Mr. Shepherd served in the U.S. Navy (Nov. 1996 - Feb. 2004) reaching the rank of Petty Officer 2nd Class and he is presently a Board Member of the South Dakota Board of Military Affairs. Mr. Shepherd earned a Bachelor of Science degree from the University of North Dakota in 2008 and a Master of Business Administration (MBA) degree from the University of Mary in 2010. He currently provides consulting and government relations services to select public and private sector clients
Neither Messrs, Field, Malone nor Shepherd has been affiliated with any company that has filed for bankruptcy within the last five years. Neither Messrs, Field, Malone nor Shepherd has any familial relationships with any other directors or executive officers of the Company. There were no transactions or any proposed transactions, to which the Company was or is to be a party, in which either Messrs. Field, Malone or Shepherd had or is to have a direct or indirect material interest, other than as described in this Current Report.
Compensation Arrangements
Kevin Malone. For his services as a consultant to the Company, Mr. Malone has been granted an aggregate of 2,000,000 shares of common stock. As Vice President Finance, Mr. Malone will be entitled to $3,000 per month that he serves the Company is such capacity.
| 3 |
Robert Shepherd. Since January 2015, Mr. Shepherd was entitled to receive $5,000 in shares of common stock, based on the volume weighted average for the previous 20 days, and $1,500 in cash on a monthly basis. As a result of the execution of the consulting agreement with the Flantree Sioux Indian Tribe, Mr. Shepherd shall be entitled on a monthly basis (1) $5,500 in shares of common stock and (2) $5,500 in cash. Mr. Shepherd is expected to represent the Company at no less than five conferences during the year at a cost of $3,000 per conference to the Company.
Josh Field. In connection with the closing of the acquisition of The Big Tomato, Inc., Mr. Field became employed as Vice President-Operations pursuant to a two-year employment agreement, effective as of January 1, 2015. Pursuant to the terms of his employment agreement with The Big Tomato, Mr. Field is entitled to an annual base salary of $120,000, to be paid in equal biweekly installments. He is also entitled to the following bonus based upon the annual net revenues of The Big Tomato, Inc. for 2015 and 2016: (i) $2,500 for every $10,000 of revenue generated between $400,000 and $460,000, and (ii) $15,000 plus 7.5% of net revenue over $460,000. In the event the agreement is terminated by the employer without "cause" or by the employee as a result of "constructive termination" (as such terms are defined in the agreement), the employee will receive a bonus based upon the aforesaid net revenues notwithstanding termination of his agreement. The agreement also provides that the employer pay health insurance premiums for the employee and his family (including SIS supplemental insurance), automobile and gas expenses of $1,000 per month and communication expenses of $500 per month. The agreement prohibits Mr. Field from competing with the business of The Big Tomato, Inc. during the term of the agreement and for one year thereafter.
For all the terms and conditions of the agreements with each of Messrs. Malone and Shepherd, reference is hereby made to such agreements annexed hereto as Exhibit 10.25 and Exhibit 10.26, respectively. All statements made herein concerning the respective consulting agreements are qualified by reference to said Exhibits. The foregoing description of the employment agreement with Mr. Field is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached as Exhibit 10.19 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2015.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
|
Exhibit No. |
|
Description |
|
|
|
|
|
10.24 |
|
Letter Agreement as of July 1, 2015 among Monarch America, Inc., Josh Field and Jeremy Stout |
|
10.25 |
Agreement, dated January 2015 between Monarch America, Inc. and Robert Shepherd | |
| 10.26 | Agreement dated July 30, 2015 between Monarch America, Inc. and Kevin Malone |
| 4 |
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.
|
MONARCH AMERICA, INC. |
|||
| Date: July 31, 2015 | By: | /s/ Eric Hagen | |
| Eric Hagen | |||
| President and Chief Executive Officer | |||
5
EXHIBIT 10.24
EXHIBIT 10.25
Monarch America, Inc.
January , 2015
Robert Shepherd
Re: Native American Tribal Relations Officer
Dear Mr. Shepherd:
We are pleased that you have accepted our offer as the Native American Tribal Relations Officer of Monarch America, Inc., a Nevada corporation (the "Company"). In this position, we are expecting that you will, among other responsibilities, introduce the Company and its management to the Native American community.
For each month you remain in this position until the earlier of (i) the execution of a revenue generating agreement between the Company and an Indian tribe and (ii) the termination of your role with the Company, you will be entitled to (1) $5,000 in shares of common stock, based on the volume weighted average of our stock for the previous 20 days, and (2) $1,500 in cash. After the Company executes such an agreement with a tribe, you will be compensated on a monthly basis (1) $5,500 in shares of common stock and (2) $5,500 in cash. In addition, we will be issuing you a sign-on bonus of $10,000 worth of shares of common stock.
You will be expected to represent the Company at no less than five (5) conferences during the year. We will pay you $3,000 per conference you attend on behalf of the Company. We will also pay you $500 per month for traveling expenses in connection with your duties to the Company; any travel expense in excess of $500 requires the written approval of the President of the Company. All reimbursement will be made against original receipts and otherwise in accordance with the Company's general expense reimbursement policies and procedures.
You should be aware that your position with the Company constitutes "at-will" employment. This means that your employment relationship with the Company may be terminated at any time, with or without cause. You understand and agree that neither your job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of the terms of your employment with the Company. If you decide that you no longer desire to remain employed by the Company, we hope you will provide us with no less than 30 days' prior written notice of your decision.
You agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Specifically, but not to limit the foregoing, you are not to, directly or indirectly, whether alone or as a partner, principal, agent, employee, consultant, proprietor, director, officer, employee, member, joint venture, creditor, shareholder, owner, manager or otherwise, be employed by, act as a consultant to or be an owner or participate in the ownership, management, operation or control of any company involved directly or indirectly with cannabis or any cannabis related product.
As a Company employee, you will be expected to abide by all federal or state laws and in accordance of normal industry practices. You also agree to maintain the confidentiality of all confidential and proprietary information of the Company.
1
You agree that any dispute or claim relating to or arising out of our employment relationship shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in the State of Colorado. However, we agree that this arbitration provision shall not apply to disputes or claims relating to or arising out of the misuse or misappropriation of the Company's trade secrets or proprietary information or the breach or threatened breach of the non-compete provision contained above.
This letter represents the entire agreement and understanding between you and the Company concerning your relationship with the Company and supersedes in its entirety all prior agreements and understandings concerning your employment relationship with the Company, whether written or oral.
In accepting this offer, you represent and warrant to us that (a) you are not a party to any employment agreement or other contract or arrangement which prohibits your employment with the Company, (b) you do not know of any conflict which would restrict your employment with the Company, and (c) you do not have and will not bring with you to your employment with the Company any document, record or other confidential information belonging to a former employer. Each of these representations and warranties is a material inducement to the making of this offer and a condition to your continued employment, and you agree that a termination of your employment by the Company in the event of a breach of any of them would be with cause and not subject to an opportunity to cure.
The terms of this letter may only be amended, canceled or discharged in writing signed by you and an authorized director or officer of the Company. As this letter relates to employment to be performed for a company with headquarters in the State of Colorado, this letter shall be governed by the internal substantive laws, but not the choice of law rules, of the State of Colorado. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this letter shall continue in full force and effect without such provision.
[Signature Page to Follow]
2
To indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me. A duplicate original is enclosed for your records. This letter will expire if not accepted and returned by you on or before January ___, 2015.
|
|
Sincerely, |
|
|
Monarch America, Inc. |
|
By: |
/s/ Eric Hagen |
| President and CEO |
ACCEPTED and AGREED TO this
_______ day of _____________ 2015
/s/ Robert Shepherd
Robert Shepherd
3
EXHIBIT 10.26
Monarch America, Inc.
July 30, 2015
Kevin Malone
|
Re: |
|
Employment Terms |
Dear Kevin:
This letter shall memorialize your compensation as Vice President Corporate Finance of Monarch America, Inc., a Nevada corporation (the "Company").The Company is also appointing you as a director. We thank you for your continued support and all your efforts on behalf of the Company.
For each month you remain with the Company as Vice President, you will be entitled to $3,000 in cash.
We will also pay you for traveling expenses in connection with your duties to the Company; any travel expense in excess of $100 requires the written approval of the President of the Company. All reimbursement will be made against original receipts and otherwise in accordance with the Company's general expense reimbursement policies and procedures.
You should be aware that your position with the Company constitutes "at-will" employment. This means that your relationship with the Company may be terminated at any time, with or without cause. You understand and agree that neither your job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of the terms of your employment with the Company. If you decide that you no longer desire to remain employed by the Company, we hope you will provide us with no less than 30 days' prior written notice of your decision.
You agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Specifically, but not to limit the foregoing, you are not to, directly or indirectly, whether alone or as a partner, principal, agent, employee, consultant, proprietor, director, officer, employee, member, joint venture, creditor, shareholder, owner, manager or otherwise, be employed by, act as a consultant to or be an owner or participate in the ownership, management, operation or control of any company involved directly or indirectly with cannabis or any cannabis related product.
As a Company employee, you will be expected to abide by all federal or state laws and in accordance of normal industry practices, subject to all parties' acknowledgment that federal law currently purports to prohibit the manufacture, growing, sale, possession, and distribution of marijuana. You also agree to maintain the confidentiality of all confidential and proprietary information of the Company.
You agree that any dispute or claim relating to or arising out of our employment relationship shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in the State of Colorado. However, we agree that this arbitration provision shall not apply to disputes or claims relating to or arising out of the misuse or misappropriation of the Company's trade secrets or proprietary information or the breach or threatened breach of the non-compete provision contained above.
1
This letter represents the entire agreement and understanding between you and the Company concerning your relationship with the Company and supersedes in its entirety all prior agreements and understandings concerning your relationship with the Company, whether written or oral.
In accepting this offer, you represent and warrant to us that (a) you are not a party to any employment agreement or other contract or arrangement which prohibits your employment with the Company, (b) you do not know of any conflict which would restrict your employment with the Company, and (c) you do not have and will not bring with you to your employment with the Company any document, record or other confidential information belonging to a former employer. Each of these representations and warranties is a material inducement to the making of this offer and a condition to your continued employment, and you agree that a termination of your employment by the Company in the event of a breach of any of them would be with cause and not subject to an opportunity to cure.
The terms of this letter may only be amended, canceled or discharged in writing signed by you and an authorized director or officer of the Company. As this letter relates to employment to be performed for a company with headquarters in the State of Colorado, this letter shall be governed by the internal substantive laws, but not the choice of law rules, of the State of Colorado. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this letter shall continue in full force and effect without such provision, as though the offending provision had been stricken in the most narrow manner possible.
[Signature Page to Follow]
2
To indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me. A duplicate original is enclosed for your records. This letter will expire if not accepted and returned by you on or before July 31, 2015.
|
|
Sincerely, |
|
|
Monarch America, Inc. |
|
By: |
/s/ Eric Hagen |
| President and CEO |
ACCEPTED and AGREED TO this
30th day of July 2015
/s/ Kevin Malone
Kevin Malone
3