Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 31, 2023, the Board of Directors (the "Board") of Sugarmade, Inc.
(the "Company") increased the size of the Board from two to three persons and
appointed Jamie Steigerwald as a member of the Board to fill the vacancy created
by the increase of the size of the Board. The Board also appointed Mr.
Steigerwald as the Company's Chief Operating Officer on January 31, 2023.
Mr. Steigerwald, age 51, is a seasoned entrepreneur with three decades of
experience. He joined Nug Avenue as its Chief Marketing Officer in January 2021
and played a key role in Nug Avenue's growth during the COVID pandemic. In
February 2022, Jamie was appointed as the Company's General Manager. Before
entering the cannabis industry, Mr. Steigerwald worked in the real estate and
mortgage sector, eventually starting his own mortgage brokerage in 2003.
However, following the 2008 mortgage crisis, he shifted his focus to consulting
and became a principal in various industries, specializing in marketing, sales,
and operations. Since July 2012, Mr. Steigerwald has owned SwiftLead, Inc., a
sales, business operations and marketing consulting firm. From July 2017 to
March 2020, he owned 3JE, Inc., an AT&T Direct TV and cell phone reseller, and
from February 2019 to December 2019, he owned ESSRW, Inc., an equestrian
equipment manufacturer and repairer.
On January 31, 2023, the Company entered into an Executive Employment Agreement
(the "Agreement"), by and between the Company and Mr. Steigerwald. The term of
the Agreement will continue from year to year, with automatic renewal, unless
terminated earlier pursuant to the terms of the Agreement.
In exchange for his services, the Company agreed to pay Mr. Steigerwald an
annual base salary of $60,000 and a sign-up bonus of 250,000 shares of Series B
preferred stock, with a market value of approximately $50,000 as of the date
hereof. In lieu of payment of Mr. Steigerwald's base salary, Mr. Steigerwald may
convert any or all unpaid base salary due and owing into shares of the Company's
common stock at any time. Mr. Steigerwald is also eligible to receive an annual
bonus in the sole and absolute discretion of the Board. Also, Mr. Steigerwald is
eligible to receive a bonus for acquisitions of entities related to the
Company's business. The Board has established a target of 5% to 15% of the
acquisition value.
The Agreement may be terminated by either the Company or Mr. Steigerwald at any
time and for any reason with at least 30 days' advance written notice. Upon
termination, Mr. Steigerwald will be entitled to certain compensation as
described in the Agreement.
If Mr. Steigerwald's employment is terminated by the Company for Cause (as
defined in the Agreement) or by Mr. Steigerwald without Good Reason (as defined
in the Agreement), Mr. Steigerwald will be entitled to receive (collectively
referred to as the "Accrued Amounts"):
(i) any accrued but unpaid base salary and accrued but unused vacation;
(ii) any earned but unpaid annual bonus as provided in the Agreement; provided
that, if Mr. Steigerwald's employment is terminated by the Company for Cause,
then any such accrued but unpaid annual bonus will be forfeited;
(iii) reimbursement for unreimbursed business expenses properly incurred by Mr.
Steigerwald; and
(iv) such employee benefits (including equity compensation), if any, to which
Mr. Steigerwald may be entitled under the Company's employee benefit plans pro
rata as of the termination date; provided that, in no event shall Mr.
Steigerwald be entitled to any payments in the nature of severance or
termination payments except as specifically provided in the Agreement.
Mr. Steigerwald's employment may be terminated on account of the Company's
failure to renew the Agreement as provided therein; by Mr. Steigerwald for Good
Reason; or by the Company without Cause. In the event of such termination, Mr.
Steigerwald will be entitled to receive the Accrued Amounts and, subject to the
terms of the Agreement, a lump sum payment equal to one year of Mr.
Steigerwald's base salary and target bonus for the year in which the termination
date occurs.
If Mr. Steigerwald's employment is terminated on account of Mr. Steigerwald's
death or Disability (as defined in the Agreement), Mr. Steigerwald (or Mr.
Steigerwald's estate and/or beneficiaries, as the case may be) will be entitled
to receive (i) the Accrued Amounts; and (ii) a lump sum payment equal to the
pro-rata bonus/annual bonus, if any, that Mr. Steigerwald would have earned for
the fiscal year in which the termination date occurs based on the achievement of
applicable performance goals for such year.
If Mr. Steigerwald's employment is terminated by Mr. Steigerwald for Good Reason
or by the Company on account of its failure to renew the Agreement as provided
in the Agreement, or without Cause (other than on account of Mr. Steigerwald's
death or Disability), in each case within 24 months following a Change in
Control (as defined in the Agreement), Mr. Steigerwald will be entitled to
receive the Accrued Amounts and, subject to the terms of the Agreement, the
following: (i) a lump sum payment equal to two times the sum of Mr.
Steigerwald's base salary and target bonus for the year in which the termination
date occurs (or if greater, the year immediately preceding the year in which the
Change in Control occurs); and, (ii) a lump sum payment equal to Mr.
Steigerwald's target bonus for the fiscal year in which the termination date
occurs (or if greater, the year in which the Change in Control occurs).
Notwithstanding the terms of any equity incentive plan or award agreements, as
applicable:
(i) all outstanding unvested stock options or stock appreciation rights granted
to Mr. Steigerwald during the term of the Agreement will become fully vested and
exercisable for the remainder of their full term;
(ii) all outstanding equity-based compensation awards other than stock options
or stock appreciation rights that are not intended to qualify as
performance-based compensation under Section 162(m)(4)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), will become fully vested and the
restrictions thereon will lapse; provided that, any delays in the settlement or
payment of such awards that are set forth in the applicable award agreement and
that are required under Section 409A shall remain in effect; and,
(iii) all outstanding equity-based compensation awards other than stock options
and stock appreciation rights that are intended to constitute performance-based
compensation under Section 162(m)(4)(C) of the Code will remain outstanding and
will vest or be forfeited in accordance with the terms of the applicable award
agreements, if the applicable performance goals are satisfied.
The Employment Agreement contains customary representations and warranties.
The foregoing description of the Agreement is qualified in its entirety by
reference to the Agreement, a copy of which is filed as Exhibit 10.1 hereto and
incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
10.1 Employment Agreement, dated January 31, 2023, by and between the
registrant and Jamie Steigerwald.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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