Dirtt Environmental Solutions Ltd 8-K, filed Jan 19, 2022
Dirtt Environmental Solutions Ltd (DRTTF)
About this 8-K
Dirtt Environmental Solutions Ltd filed this 8-K on January 19, 2022, reporting on events of January 18, 2022.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 7.01: Regulation FD disclosure
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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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):
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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).
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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 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
Departure of Chief Executive Officer and Director
On January 18, 2022 (the “Departure Date”), Kevin O’Meara’s employment as the President and Chief Executive Officer of the Company ceased pursuant to the without just cause termination provisions of Mr. O’Meara’s Executive Employment Agreement with the Company. In addition, and also pursuant to the terms of Mr. O’Meara’s Executive Employment Agreement with the Company, Mr. O’Meara resigned as a director of the Company and its affiliates effective as of the Departure Date. As a result, Mr. O’Meara will be entitled to the rights and payments set forth in Section 9 of his Executive Employment Agreement for a termination without just cause, subject to the conditions stated therein. Mr. O’Meara’s Executive Employment Agreement is filed as Exhibit 10.7 to the Company’s Registration Statement on Form 10, filed on September 20, 2019. The foregoing summary of Mr. O’Meara’s rights under the Executive Employment Agreement does not purport to be complete and is qualified in its entirety by reference to that agreement, which is incorporated herein by reference.
Appointment of Interim Chief Executive Officer
On January 18, 2022, the board of directors of the Company (the “Board”) appointed the current Board Chair, Todd Lillibridge, to serve as Interim Chief Executive Officer effective immediately until a replacement is named (the “Service Period”). The Board has retained an executive search firm to identify a permanent Chief Executive Officer replacement. Mr. Lillibridge has served on the Board since 2017. A description of his background and experience can be found in the Company’s Proxy Statement filed with the Securities and Exchange Commission on March 26, 2021.
Mr. Lillibridge will remain on the Board. The Board has determined that Mr. Lillibridge is no longer independent as a result of his appointment as Interim Chief Executive Officer. Therefore, he has resigned from all committees of the Board, including the Nominating and Governance Committee, on which he served.
The Company and Mr. Lillibridge entered into a letter agreement (the “Letter Agreement”) effective as of January 18, 2022 (the “Effective Date”), which provides that Mr. Lillibridge will be entitled to (i) monthly grants of restricted share units (“Monthly RSUs”) pursuant to the Company’s Long Term Incentive Plan (“Plan”) during the Service Period, with a grant-date Fair Market Value (as defined in the Plan) equal to approximately $41,666 per month, and (ii) a one-time grant of 230,414 additional restricted share units (the “Additional RSUs,” and together with the Monthly RSUs, the “RSUs”). The Monthly RSUs will be prorated for partial months. All of the Monthly RSUs and one-half of the Additional RSUs will vest in three equal installments on each of the first, second and third anniversary of the Effective Date. The remaining one-half of the Additional RSUs will vest on the third anniversary of the Effective Date, subject to the satisfaction of certain performance measures set forth in the Letter Agreement. Vesting for the RSUs are subject to Mr. Lillibridge’s continued service as the Interim Chief Executive Officer or, if a new Chief Executive Officer has been appointed, as a member of the Board. Mr. Lillibridge will not receive any additional compensation for his service on the Board during the Service Period.
The foregoing summary of the Letter Agreement does not purport to be complete and is qualified in its entirety by reference to such agreement, a copy of which is filed as Exhibit 10.1 and incorporated herein by reference.
| Item 7.01 | Regulation FD |
The Company issued a press release announcing these management and Board changes on January 18, 2022. A copy of that press release is furnished as Exhibit 99.1 to this Current Report and incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the foregoing information, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall such information, including Exhibit 99.1, be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 8.01. | Other Events |
Appointment of New Lead Independent Director
The Board has named Michael Ford to serve as Lead Independent Director during the Service Period.
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| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits
| Exhibit Number |
Description | |
| 10.1 | Letter Agreement, dated as of January 18, 2022, by and between Todd W. Lillibridge and DIRTT Environmental Solutions Ltd. | |
| 99.1* | Press Release issued by DIRTT Environmental Solutions Ltd. on January 18, 2022 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
| * | Furnished herewith. |
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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 thereunto duly authorized.
| DIRTT Environmental Solutions Ltd. | ||||||
| Date: January 19, 2022 |
By: | /s/ Charles R. Kraus | ||||
| Charles R. Kraus | ||||||
| Senior Vice President, General Counsel & Corporate Secretary | ||||||
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January 18, 2022
Todd W. Lillibridge
c/o DIRTT Environmental Solutions Inc.
6105 Tennyson Parkway
South Building - Suite 100
Plano, Texas 75024
Dear Todd:
RE: Appointment as Interim Chief Executive Officer and President
This letter will confirm your appointment and agreement to serve as Interim Chief Executive Officer and President (“Interim CEO”) of DIRTT Environmental Solutions Ltd. (the “Company”), effective January 18, 2022 (the “Effective Date”).
During your period of service as Interim CEO (your “Interim CEO Period”), you will report directly to the Board of Directors of the Company (the “Board”) and perform such duties as may be reasonably assigned to you by the Board. The Company expects that your Interim CEO Period will continue until such time as the Company appoints a new Chief Executive Officer and President; however, your engagement as Interim CEO may be terminated by either you or the Company at any time, for any reason, upon notice in writing to the other party.
Your service as Interim CEO shall not affect your status as a member of the Board, or as Chair of the Board; however, during the Interim CEO Period, you will not be entitled to any compensation as a result of your service as a member of the Board. You acknowledge that in connection with your appointment as Interim CEO, (a) the Board has appointed Michael Ford as Lead Independent Director, and (b) you will resign from all Board committees on which you currently sit.
During the Interim CEO Period, your compensation will be comprised of monthly grants of restricted share units (“Monthly RSUs”) pursuant to the Company’s 2021 Long Term Incentive Plan, as amended from time to time (“Plan”). Each grant of Monthly RSUs will have a grant-date Fair Market Value (as defined in the Plan) equal to approximately $41,666, and will be issuable on the last business day of each month. Any partial months will be prorated. In addition, on the Effective Date, you will receive a one-time grant of 230,414 additional restricted share units (the “Additional RSUs, and together with the Monthly RSUs, the “RSUs”).
All of the Monthly RSUs and one half of the Additional RSUs will vest in three substantially equal installments on each of the first, second and third anniversary of the Effective Date, and the remaining one-half of the Additional RSUs will be performance-based RSUs that will vest on the third anniversary of the Effective Date (the “Performance RSUs”), in each case subject to your continued service as Interim CEO or, following the appointment of a new Chief Executive Officer and President, your continued service as a member of the Board. In addition, the vesting of the Performance RSUs will be subject to the satisfaction of the performance measures set out in Exhibit A hereto.
You shall forfeit any unvested RSUs in the event that you voluntarily resign your service as Interim CEO prior to the appointment of a new Chief Executive Officer and President, or you voluntarily resign from the Board, or refuse or decline to stand for re-election as part of the Board-nominated slate of directors. The RSUs will immediately fully vest upon your cessation as a member of the Board except under the circumstances in which the RSUs are forfeited in the immediately preceding sentence. Except as provided above, the grant of RSUs shall be in accordance with the terms of the Plan and the Company’s standard time-based RSU award agreement and performance-based RSU award agreement, as applicable (including with respect to treatment upon a change in control, death, disability and retirement).
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The RSU grants described above are intended to constitute your entire compensation during the Interim CEO Period, and absent a subsequent determination by the Board or its Compensation Committee, you will not be eligible for any salary, annual bonus or additional equity awards during the Interim CEO Period. You will not be entitled to any severance compensation or other benefits upon the cessation of the Interim CEO Period. The Company will reimburse you for all reasonable and necessary expenses incurred by you in connection with your performance of services as Interim CEO on behalf of the Company, in accordance with applicable Company policies and guidelines.
This letter agreement represents the entire agreement between the Company and you regarding your service as Interim CEO and the compensation arrangements in connection therewith, and it supersedes all prior and contemporaneous discussions, agreements and understandings of every nature related to that subject matter. This letter agreement may be modified or amended only in a writing signed by you and the Company. This letter agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns.
This letter agreement will be governed by, and enforced in accordance with, the laws of the State of South Carolina, without regard to the application of the principles of conflicts or choice of laws. By executing this letter agreement, you and the Company are waiving any right to trial by jury in connection with any suit, action or proceeding under or in connection with this letter agreement.
[signature page follows]
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To acknowledge your agreement with the foregoing, please execute and date this letter in the space provided below and return the executed original to me.
Yours truly,
/s/ Diana Rhoten
Diana Rhoten
Chair, Compensation Committee
Acknowledged and Agreed:
/s/ Todd W. Lillibridge
Todd W. Lillibridge
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EXHIBIT A
PERFORMANCE MEASURES
Subject to the terms of the Award Agreement and the Plan, the vesting of the Performance RSUs will be determined in accordance with the following performance criteria:
| • | If the closing price of the Company’s Common Shares on the Nasdaq (the “Nasdaq”) is never at or above USD $3.00 for twenty consecutive trading days during the performance period, then none of the Performance RSUs will be eligible to vest. |
| • | If the closing price of the Company’s Common Shares on the Nasdaq is at least USD $3.00 for twenty consecutive trading days during the performance period, then 33.3% of the target number of the Performance RSUs will be eligible to vest. |
| • | If the closing price of the Company’s Common Shares on the Nasdaq is at least USD $4.00 for twenty consecutive trading days during the performance period, then 66.7% of the target number of the Performance RSUs will be eligible to vest. |
| • | If the closing price of the Company’s Common Shares on the Nasdaq is at least USD $5.00 for twenty consecutive trading days during the performance period, then 100% of the target number of the Performance RSUs will be eligible to vest. |
There will be no interpolation between the USD dollar thresholds outlined above. For example, if the Company’s Common Shares trade on the Nasdaq at a price of US $3.50 for twenty consecutive trading days during the performance period but never trade at or above US $4.00 on the Nasdaq for twenty consecutive trading days during the performance period, then only 33.3% of the target number of the Performance RSUs will be eligible to vest.
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Exhibit 99.1
DIRTT ANNOUNCES CEO TRANSITION
CALGARY, Alberta, Jan. 18, 2022 – DIRTT Environmental Solutions Ltd. (“DIRTT”, the “Company”, “we” or “us”) (Nasdaq: DRTT, TSX: DRT), an interior construction company that uses proprietary software to design, manufacture and install fully customizable environments, today announced the departure of Kevin O’Meara as the Company’s CEO and as a director. Todd Lillibridge, the Board Chair, has been appointed Interim CEO, and will serve until his replacement is named. The Board also named Michael Ford as Lead Independent Director for the period Mr. Lillibridge serves as CEO.
The Board has retained an executive search firm to help it identify a permanent leader for the Company. Mr. Lillibridge does not intend to be a candidate for the permanent role.
Mr. Lillibridge has served on the DIRTT Board since 2017. He has over thirty years of executive experience in the healthcare real estate industry, having founded and built a multi-billion-dollar medical office building business. He is guided by passion, persistence, and humility, and has extensive experience in leadership roles, strategic planning, property investments, debt and equity financing, facility development and property operations.
“Todd is the ideal person to lead the company during this interim period,” said Mr. Ford. “He is approachable, deliberate and strategic. His work with leaders in the healthcare industry, which continues through his service on two leading academic medical centre boards, will be of real value as DIRTT looks to grow this important part of the business. He has a proven ability to seize new opportunities, motivate teams, delight customers and partners, and drive financial performance.”
Mr. Ford added that DIRTT has a well-developed strategy and needs a leader who can advance that while navigating the challenges and opportunities COVID-19 has created. “We need to adapt our approach to ensure we are well-placed to serve the changing needs of our client base.”
“This is a company with enormous potential. I look forward to working with our talented team to adapt and execute our strategy to address what we believe will be a higher demand for flexible workspaces,” Mr. Lillibridge said. “By empowering our people with the support, resilience and agility they need to flourish, we can optimize our performance, and drive towards profitability for the benefit of our shareholders and all other stakeholders.”
Mr. Ford thanked Mr. O’Meara for his service to the Company. “On behalf of the Board of Directors and everyone at DIRTT, I would like to thank Kevin for his positive contributions to our company, including his role in the development and implementation of our strategic plan. We wish him the best.”
Special Note Regarding Forward-Looking Statements
This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects the Company’s current expectations regarding future events. In some cases, forward-looking information can be identified by such terms as “plans”, “anticipated”, “believe”, and “will”. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. The Company’s estimates, beliefs and assumptions, may prove to be incorrect. The risks and uncertainties that may affect forward-looking information include, but are not limited to, market conditions, the effect of the COVID-19 pandemic on the Company’s operations, business and financial results, and other factors discussed under “Risks Factors” in the Company’s management’s discussion and analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commissions or similar regulatory authorities in Canada on February 24, 2021, as supplemented by our Quarterly Report on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021, as filed with the SEC and applicable securities commissions or similar regulatory authorities in Canada on May 5, 2021, August 4, 2021 and November 3, 2021, respectively, and Current Report on Form 8-K, filed with the SEC and applicable securities commissions or similar regulatory authorities in Canada on or about December 1, 2021, which are available on SEDAR (www.sedar.com) and on the SEC’s website (www.sec.gov). The Company does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.
About DIRTT
DIRTT is a building process powered by technology. The Company uses its proprietary ICE® software to design, manufacture and install fully customized interior environments. The technology drives DIRTT’s advanced manufacturing and provides certainty on cost, schedule, and the final result. Complete interior spaces are constructed faster, cleaner, and more sustainably. DIRTT has manufacturing facilities in Phoenix, AZ, Savannah, GA, Rock Hill, SC, and Calgary, AB. The Company works with distribution partners throughout North America. DIRTT trades on Nasdaq under the symbol “DRTT” and on the Toronto Stock Exchange under the symbol “DRT”.
Contact Data
FOR FURTHER INFORMATION, PLEASE CONTACT
Kim MacEachern
Investor Relations, DIRTT
403-618-4539