Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Item 5.02 of this report is incorporated herein by
reference.
On April 27, 2023, Fresh Vine Wine, Inc. (the "Company") filed a Current Report
on Form 8-K (the "April 27, 2023 Form 8-K") disclosing, among other things, the
Company's entry into an employment agreement with Roger Cockroft, the Company's
Chief Executive Officer. Pursuant to the employment agreement, the Company
granted Mr. Cockroft (i) an inducement award of 463,917 shares of restricted
stock in lieu of a portion of his salary that would otherwise have been paid in
cash, (ii) a 1,000,000 share stock option award exercisable at $1.00 per share,
subject to vesting and (iii) stock-settled, performance based restricted stock
units having a target payout amount equal to $154,726, each as described in the
April 27, 2023 Form 8-K.
On May 11, 2023, the Company entered into an employment agreement with a new
Executive Vice President of Sales and Marketing pursuant to which the Company
granted the employee (i) an inducement award of 380,952 shares of restricted
stock in lieu of a portion of salary that would otherwise have been paid in
cash, and (ii) stock-settled, performance-based restricted stock units having a
target payout amount equal to $89,753.
As disclosed in Item 5.02 of this report, on May 25, 2023, the Company entered
into an employment agreement with Hitesh Dheri pursuant to which the Company
granted Mr. Dheri (i) an inducement award of 196,463 shares of restricted stock
in lieu of a portion of his salary that would otherwise have been paid in cash,
(ii) a 500,000 share stock option award exercisable at $1.00 per share, subject
to vesting, and (iii) stock-settled, performance-based restricted stock units
having a target payout amount equal to $63,575, each as described in Item 5.02
of this report.
The awards of restricted stock, stock options and restricted stock units
identified above were made separately from the Company's 2021 Equity Incentive
Plan as inducements material to the recipients entering into employment with the
Company in accordance with Section 711(a) of the NYSE American LLC Company
Guide, and were not registered under the Securities Act of 1933, as amended.
Such issuances were made in reliance upon the exemption from registration
provided by Section 4(a)(2) under the Securities Act of 1933, as amended, based
on the Company's reasonable belief that the offer and sale of the shares of
restricted stock did not involve a public offering.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers; Compensatory Arrangements of Certain
Officers.
Effective May 25, 2023, the Board of Directors of the Company (the "Board")
appointed Hitesh Dheri to serve as Chief Financial Officer and Secretary of the
Company, succeeding Keith Johnson. In this capacity, Mr. Dheri will serve as the
Company's principal financial and accounting officer.
In connection with the appointment, the Company entered into an employment
agreement with Mr. Dheri dated May 25, 2023. Under the employment agreement,
which is for an indefinite term, Mr. Dheri is entitled to receive an annual base
salary of $300,000 and is eligible to receive an annual cash bonus commencing in
2024 (the "Bonus"), the target amount of which will be equal to 35% of his base
salary. The amount of the actual Bonus payable for each year will be determined
by the Board (or a compensation committee thereof) based on the satisfaction of
performance objectives to be determined by the Board (or a compensation
committee thereof). Achievement of performance objectives for each year will be
determined by the Board (or compensation committee thereof) upon the filing of
the Company's Annual Report on Form 10-K for the applicable performance year
(the "Vesting Date"); and the Bonus, if earned, will be paid in a lump sum
promptly following such determination, provided that the Employee remains
employed by the Company on such date. The Bonus is payable in a combination of
cash and shares of common stock issued out of the Company's 2021 Equity
Incentive Plan (the "Equity Incentive Plan") valued at the closing price of the
Company's common stock on the Vesting Date. Unless agreed otherwise, the cash
portion of the Bonus will be the minimum amount of income withholding taxes
resulting from payment of the entire Bonus. To the extent that there are not
sufficient available shares reserved for issuance under the Equity Incentive
Plan (or successor plans) to support Bonus payments otherwise payable in stock,
the Company will pay such Bonus payments in cash. Mr. Dheri is also eligible to
receive additional discretionary bonuses based upon his performance on behalf of
the Company and/or the Company's performance in such amounts, in such manner and
at such times as may be determined by the board of directors or a committee
thereof, and is eligible to participate in the standard benefits which the
Company generally provides to its full-time employees under its applicable plans
and policies.
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During the first 12 months of his employment term, $200,000 of Mr. Dheri's
salary will be paid in cash installments in accordance with the Company's
regular payroll practices. In lieu of cash salary in the amount of the remaining
$100,000, the Company granted Mr. Dheri an inducement award of 196,463 shares of
restricted stock (the "Restricted Stock") upon the commencement of his
employment. The Restricted Stock award is subject to transfer and forfeiture
restrictions that are scheduled to lapse in four installments as nearly equal in
amount as possible on the three, six, nine and twelve month anniversaries of the
grant date, subject to continued employment. Mr. Dheri may elect to satisfy tax
withholding obligations upon vesting of the award by forfeiting shares having a
value equal to the withholding tax amount.
Also upon commencement of his employment, Mr. Dheri was granted (i) a 500,000
share stock option award (the "Stock Option"), and (ii) a restricted stock unit
award ("RSUs"). The Stock Option has an exercise price equal to $1.00 per share
and, subject to continued employment, is scheduled to vest with respect to
125,000 shares on the one-year anniversary of the grant date and, thereafter, is
scheduled to vest in 36 monthly installments as nearly equal in amount as
possible (approximately 10,416 shares) commencing on the 13th month anniversary
of the grant date and continuing on each one month anniversary thereafter. The
RSUs have a target payout amount equal to $63,575, which represents 35% of Mr.
Dheri's salary (i.e., $105,000), but prorated for the partial 2023 year during
which he will be employed by the Company. The amount of the RSU award actually
payable will be determined by the Board (or a compensation committee thereof) in
its discretion based on the satisfaction of 2023 performance objectives to be
determined by the Board (or a compensation committee thereof). Achievement of
performance objectives will be determined by the Board (or compensation
committee thereof) upon the filing of the Company's Annual Report on Form 10-K
for the 2023 fiscal year, and the RSUs, if and to the extent earned, will be
paid in a lump sum promptly following such determination, provided that Mr.
Dheri remains employed by the Company. The RSUs will be settled in shares of the
Company's common stock valued at the most recent closing price of the Company's
common stock on the payment date; provided, however, that Mr. Dheri may elect to
satisfy tax withholding obligations upon vesting of the award by having the
Company withhold shares having a value equal to the withholding tax.
The grants of the Restricted Stock award, the Stock Option and the RSUs were
made separately from the Company's 2021 Equity Incentive Plan (the "Equity
Incentive Plan") as inducements material to Mr. Dheri entering into employment
with the Company in accordance with Section 711(a) of the NYSE American LLC
Company Guide, and each was approved by the Company's independent compensation
committee. Although granted separately from the Equity Incentive Plan, the
Restricted Stock grant, the Stock Option and the RSUs are subject to the terms
contained in the Equity Incentive Plan, except as otherwise provided for in the
agreements governing such awards (the "Restricted Stock Agreement," "Stock
Option Agreement" and "RSU Agreement," respectively).
Under his employment agreement, if Mr. Dheri's employment is terminated by the
Company for any reason other than Cause (as defined in the employment
agreement), or Mr. Dheri resigns as an employee of the Company for Good Reason
(as defined in the employment agreement), so long as he has signed and has not
revoked a release agreement, he will be entitled to receive severance in the
form of continued base salary over a period of six months. In addition, upon the
occurrence of a Change in Control (as defined in the employment agreement), the
vesting of all outstanding unvested equity-based incentive awards will
accelerate. The employment agreement includes a provision allowing the Company
to reduce the payment to which Mr. Dheri would be entitled upon a
Change-in-Control transaction to the extent needed for him to avoid paying an
excise tax under Internal Revenue Code Section 280G, unless he would be better
off, on an after-tax basis, receiving the full amount of such payments and
paying the excise taxes due.
Mr. Dheri's employment agreement contains customary confidentiality and
intellectual property covenants and a non-solicitation restriction that
provides, among other things, that Mr. Dheri will not solicit our employees,
consultants, customers, suppliers or other business relations for a period of
one year after termination of employment.
Mr. Dheri, age 49, is a proven executive leading finance teams in complex
fast-growing environments. Prior to joining the Company, Mr. Dheri served as a
consultant leading IPO teams for multinational companies in the biotech industry
from 2021 to 2023. From April 2019 until May 2020, Mr. Dheri served as Vice
President - Finance of Kadiant, a private-equity owned company providing Applied
Behavior Analysis (ABA) therapy to children diagnosed with autism spectrum
disorder. From November 2015 until February 2019, Mr. Dheri served as Corporate
Controller of SunLink Corporation, a private company providing renewable energy
solutions including fixed-tilt and tracker systems for commercial and
utility-scale installations. Previously, Mr. Dheri held finance positions with
several companies in the high-tech and healthcare industries including LiveOps
Inc., CRC Health Corporation, Globalstar, Inc. and PricewaterhouseCoopers LLP.
Mr. Dheri received a Bachelor of Science from Rutgers University and is a
licensed CPA in the state of New York.
2
In connection with his appointment as an officer of the Company, the Company
entered into the Company's standard form indemnification agreement for directors
and officers with Mr. Dheri (the "Indemnification Agreement"). The
indemnification agreement clarifies and supplements indemnification provisions
already contained in the Company's articles of incorporation and bylaws and
generally provides that the Company shall indemnify its directors and officers
to the fullest extent permitted by applicable law, subject to certain
exceptions, against expenses, judgments, fines and other amounts actually and
reasonably incurred in connection with their service as a director or officer
and also provide for rights to advancement of expenses and contribution.
The foregoing summaries of Mr. Dheri's employment agreement with the Company,
the Restricted Stock Agreement, the Stock Option Agreement and the RSU Agreement
are qualified in all respects by the agreement themselves, copies of which are
attached to this report as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and
incorporated by reference herein. The foregoing summary of the Indemnification
Agreement is qualified in all respects to the form of such agreement, a copy of
which is incorporated by reference as Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2022, and incorporated by
reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Employment Agreement dated effective May 25, 2023 by and between Fresh
Vine Wine, Inc. and Hitesh Dheri
10.2 Restricted Stock Agreement dated May 25, 2023 by and between Fresh
Vine Wine, Inc. and Hitesh Dheri
10.3 Stock Option Agreement dated May 25, 2023 by and between Fresh Vine
Wine, Inc. and Hitesh Dheri
10.4 Restricted Stock Unit Agreement dated May 25, 2023 by and between
Fresh Vine Wine, Inc. and Hitesh Dheri
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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