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
November 9, 2017
Date of Report
[Date of Earliest Event Reported]
THE CASTLE GROUP, INC.
(Exact name of Registrant as specified in its Charter)
Utah | 000-23338 | 99-0307845 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
500 Ala Moana Boulevard, 3 Waterfront Plaza, Suite 555
Honolulu, Hawaii 96813
(Address of Principal Executive Offices)
(808) 524-0900
(Registrant’s Telephone Number, including area code)
N/A
(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 14-a-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))
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 and 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. ¨
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 9, 2017, the Company amended the employment contracts with Mr. Rick Wall, Chairman and Chief Executive Officer and Mr. Alan R. Mattson, Chief Operating Officer. Mr. Wall’s Amendment extends his agreement to December 31, 2027 and Mr. Mattson’s Amendment extends his agreement to December 31, 2022. Both amendments are effective beginning November 9, 2017 and call for:
1.
Base annual salary of $240,000 and $210,000 for Mr. Wall and Mr. Mattson, respectively.
2.
A tiered bonus ranging from 10% to 50% of base salary determined by earnings before interest, income taxes, depreciation and amortization (“EBITDA”) in excess of $2,000,000 per year.
3.
Deferred compensation for ten years, commencing December 31, 2027 payable in annual installments of $100,000 for Mr. Wall and $50,000 for Mr. Mattson.
4.
Three warrants for 500,000 shares each at exercise prices ranging from $5.00 to $10.00 per share for Mr. Wall, expiring December 31, 2022, December 31, 2024, and December 31, 2017, and one warrant for 250,000 shares at an exercise price of $5.00 per share for Mr. Mattson, which expires December 31, 2022.
The foregoing description of the Amendments to the Employment Agreements is only a summary and does not purport to be complete, and is qualified in its entirety by the terms of the Amendments, which are filed as Exhibits 10.4 and 10.5 to this Current Report on Form 8-K and incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
| Amendment to Employment Agreement between the Company and Rick Wall | |
| Amendment to Employment Agreement between the Company and Alan Mattson |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
THE CASTLE GROUP, INC.
Date: | November 9, 2017 |
| By: | /s/Rick Wall |
| 14 |
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| Rick Wall, Chief Executive Officer and |
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|
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| Chairman of the Board |
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EXHIBIT 10.4
THIRD AMENDMENT TO EMPLOYMENT CONTRACT
This THIRD AMENDMENT TO EMPLOYMENT AGREEMENT is executed by and between THE CASTLE GROUP, INC., a Utah corporation (the “Company”), and RICK S. WALL (the “Executive”) as Chairman and Chief Executive Officer of the Company,
WHEREAS, the Company and Executive entered into an Employment Agreement effective July 1, 2004 and amended said Employment Agreement via a first amendment effective July 1, 2009 and a second amendment effective January 1, 2012 (the “Employment Agreement);
WHEREAS, Executive plays a key role in the management of the Company and the Company’s efforts to increase its revenues and profits by obtaining contracts for the Company to supply management and/or sales and marketing services to additional hotels and condominium properties;
NOW THEREFORE, the Company and Executive agree to amend the Employment Agreement as follows:
1.
Base Salary. As compensation for Executive’s services rendered pursuant to this Agreement, Executive shall continue to receive from the Company, or through its wholly owned subsidiary Castle Resorts & Hotels, Inc. (the “Subsidiary”), a base salary of $240,000 per year during the Term of this Agreement in equal installments at least monthly in accordance with the Company’s customary pay schedule.
2.
Bonus. Executive will be eligible to participate in the Company’s Executive Bonus Program pursuant to which Executive will receive a bonus of his Base Salary for each year of his employment in which the Company’s EBITDA as reported in its audited financial statements, is Two Million Dollars ($2,000,000.00) or more, calculated as follows:
Bonus as a Percentage of
EBITDA
Executive’s Base Salary
Less than $2,000,000
0%
$2,000,000 to $2,999,999
10%
$3,000,000 to $3,999,999
20%
$4,000,000 to $4,999,999
30%
$5,000,000 to $5,999,999
40%
$6,000,000 or more
50%
The Bonus shall be based on the audited financial statements for the years ending December 31, 2018 through and including December 31, 2027. If Executive resigns or is terminated for cause, the bonus shall be prorated based on the number of months and the amount of base salary paid during the calendar year Executive was employed by the Company.
3.
Deferred Compensation. In addition to Executive’s other compensation, Executive (or Executive’s estate, trust established by Executive or other designee specified by Executive in writing delivered to the Company, as the case may be) shall receive in consideration of future services rendered, ten annual payments of $100,000 each payable in monthly installments of $8,333.33 each, commencing on the earlier to occur of : (i) December 31, 2027 or (ii) the first day of the first month after the death or permanent disability of Executive. If Executive resigns or is terminated for cause, the deferred compensation shall be pro-rated based on the number of complete years that Executive has served during the term as compared to the period beginning November 1, 2017 and ending December 31, 2027. As an example, if Executive terminates on October 31, 2018, Executive completed one full year of service and would receive 1/10th of the annual payment of $100,000, or $833.33 per month.
THIRD AMENDMENT TO RICK S. WALL EMPLOYMENT CONTRACT PAGE 1 OF 2
4.
Warrants. In addition to Executive’s other compensation, Executive shall receive three warrants, each warrant shall be for the right to purchase Five Hundred Thousand (500,000) shares of the Company’s common stock, at an exercise price as follows:
(i)
Five Dollars ($5.00) per share exercisable on or before October 31, 2022;
(ii)
Seven Dollars ($7.00) per share exercisable on or before October 31, 2024; and
(iii)
Ten Dollars ($10.00) per share exercisable on or before October 31, 2027.
Executive must be an employee of the Company at the time of exercise, except in the case of death or permanent disability of Executive, in which case the Warrants shall automatically vest to Executive, (or Executive’s estate, trust established by Executive or other designee specified by Executive in writing delivered to the Company, as the case may be) on the first day of the first month after the death or permanent disability of Executive.
The shares purchased under these warrants shall be unregistered and restricted shares that have not been registered under the Securities and Exchange Act of 1933, as amended.
5.
Term. The Employment Agreement shall continue in full force and effect for the term beginning November 1, 2017 and ending December 31, 2027, unless sooner terminated pursuant to the Employment Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the 9th day of November, 2017.
THE CASTLE GROUP, INC.
RICK S. WALL
“Company”
“Executive”
_/s/ Alan Mattson_________________________
_/s/ Rick S. Wall__________________
By Alan Mattson
Its Chief Operating Officer
CASTLE RESORTS & Hotels, INC.
“Subsidiary”
_/s/ Michael Nitta__________________________
By Michael Nitta
Its Chief Financial Officer
THIRD AMENDMENT TO RICK S. WALL EMPLOYMENT CONTRACT PAGE 2 OF 2
EXHIBIT 10.5
AMENDMENT TO EMPLOYMENT CONTRACT
This AMENDMENT TO EMPLOYMENT AGREEMENT is executed by and between THE CASTLE GROUP, INC., a Utah corporation (the “Company”), and ALAN R. MATTSON (the “Executive”),
WHEREAS, the Company and Executive entered into an Employment Agreement effective January 1, 2013 (the “Employment Agreement”) through its wholly owned subsidiary Castle Resorts & Hotels, Inc. (the “Subsidiary”);
WHEREAS, Executive plays a key role in the management of the Company and the Company’s efforts to increase its revenues and profits by obtaining contracts for the Company to supply management and/or sales and marketing services to additional hotels and condominium properties;
NOW THEREFORE, the Company and Executive agree to amend the Employment Agreement as follows:
1.
Base Salary. As compensation for Executive’s services rendered pursuant to this Agreement, Executive shall continue to receive from the Company a Base Salary of $210,000 per year during the Term of this Agreement in equal installments at least monthly in accordance with the Company’s customary pay schedule.
2.
Bonus. In lieu of the Bonus Program set forth in paragraph 4 of Executive’s Employment Agreement, Executive will receive a bonus of his Base Salary for each year of his employment in which the Company’s EBITDA as reported in its audited financial statements, is Two Million Dollars ($2,000,000.00) or more, calculated as follows:
Bonus as a Percentage of
EBITDA
Executive’s Base Salary
Less than $2,000,000
0%
$2,000,000 to $2,999,999
10%
$3,000,000 to $3,999,999
20%
$4,000,000 to $4,999,999
30%
$5,000,000 to $5,999,999
40%
$6,000,000 or more
50%
The Bonus shall be based on the audited financial statements for the years ending December 31, 2018 through and including December 31, 2022. If Executive resigns or is terminated for cause, the bonus shall be prorated based on the number of months and the amount of base salary paid during the calendar year Executive was employed by the Company.
3.
Deferred Compensation. In addition to Executive’s other compensation, Executive (or Executive’s estate, trust established by Executive or other designee specified by Executive in writing delivered to the Company, as the case may be) shall receive in consideration of future services rendered, five annual payment of $50,000 each payable in monthly installments of $4,166.67 each, commencing on the earlier to occur of : (i) December 31, 2027 or (ii) the first day of the first month after the death or permanent disability of Executive. If Executive resigns or is terminated for cause, the deferred compensation shall be pro-rated based on the number of complete years that Executive has served during the term as compared to the period beginning November 1, 2017 and ending December 31, 2027. As an example, if Executive terminates on October 31, 2018, Executive completed one full year of service and would receive 1/10th of the annual payment of $50,000, or $416.67 per month.
AMENDMENT TO ALAN MATTSON EMPLOYMENT CONTRACT PAGE 1 OF 2
4.
Warrants. In addition to Executive’s other compensation, Executive shall receive a warrant for the right to purchase Two Hundred Fifty Thousand (250,000) shares of the Company’s common stock at an exercise price of $5.00 on or before October 31, 2022.
Executive must be an employee of the Company at the time of exercise, except in the case of death or permanent disability of Executive, in which case the Warrants shall automatically vest to Executive, (or Executive’s estate, trust established by Executive or other designee specified by Executive in writing delivered to the Company, as the case may be) on the first day of the first month after the death or permanent disability of Executive.
The shares purchased under these warrants shall be unregistered and restricted shares and have not been registered under the Securities and Exchange Act of 1933, as amended.
5.
Auto Allowance. Company shall reimburse Executive, on a monthly basis during the term of this Agreement, up to $1,700 per month for Executive’s auto allowance. Company shall also provide any required down payment or initial lease payment for a lease or purchase of an automobile on terms approved by the Company.
6.
Term. The Employment Agreement shall continue in full force and effect for the term beginning November 1, 2017 and ending December 31, 2022, unless sooner terminated pursuant to the Employment Agreement. At Executive’s option, this Agreement may be renewed for up to five additional years on the same terms and conditions; in that event, Executive shall receive additional deferred compensation on the same basis as provide herein, prorated for the number of full years of the extension with no additional adjustments to the Warrants.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the 9th day of November, 2017.
THE CASTLE GROUP, INC.
ALAN R. MATTSON
“Company”
“Executive”
__/s/ Rick Wall_________________________
__/s/Alan R. Mattson_________________
By Rick Wall
Its Chairman and Chief Executive Officer
CASTLE RESORTS & HOTELS, INC.
“Subsidiary”
__/s/ Michael Nitta______________________
By Michael Nitta
Its Chief Financial Officer
AMENDMENT TO ALAN MATTSON EMPLOYMENT CONTRACT PAGE 2 OF 2