Except for a three for one dividend by us in 2008 the effect of which was a three for one forward split of our outstanding common stock, we have not declared any dividends.
On January 14, 2011, the board of directors of Dakota Plains declared a dividend payable to all its shareholders of record as of January 14, 2011. The dividend was declared in an effort to spread the distribution of positive cash flow throughout 2011. Each Dakota Plains shareholder was given the opportunity to receive the dividend as either (i) a $0.10 cash dividend for each share owned or (ii) a dividend of 0.0645 share of common stock (rounded up to the nearest whole share) for each share owned. Dakota Plains paid aggregate cash dividends of $1,941,632 and issued an additional 1,441,774 shares of our common stock as a result of the dividend.
We intend to retain our future earnings, if any, to finance the expansion and growth of our business. We do not expect to pay cash dividends on our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders, if any.
The following table provides information about shares that may be issued under the 2011 Equity Incentive Plan as of March 22, 2012. We do not have any other equity compensation plans required to be included in this table.
Except for our common stock and options and warrants to purchase our common stock issued pursuant to the Initial Merger, we have not issued any unregistered and restricted securities during the past three years.
Between June and December 2009, Dakota Plains sold an aggregate of 5,980,190 shares of common stock to certain “accredited investors” as defined in Regulation D promulgated under the Securities Act of 1933, as amended, for aggregate proceeds of $1,644,552.25. The sales were effected via a series of closings that took place in each of June, July, August, September, and December 2009. The proceeds were used primarily to build the transloading facility.
In October 2009 Dakota Plains issued 7,500 shares of its common stock in exchange for consulting services rendered.
In October 2009 Dakota Plains issued 78,772 shares of its common stock in exchange for consulting services rendered.
In January 2010, Dakota Plains issued 92,282 shares of its common stock in exchange for consulting services rendered.
In May 2010, Dakota Plains issued 10,000 shares of its common stock for in exchange for consulting services.
In August 2010, Dakota Plains issued 700,000 shares of its common stock for aggregate proceeds of $542,500. The proceeds were used primarily for expanding the transloading facility to meet logistical and storage needs.
In September 2010, Dakota Plains issued 24,000 shares of its common stock in exchange for consulting services rendered.
In February 2011, Dakota Plains issued 1,441,774 shares of its common stock to existing shareholders pursuant to a dividend.
In February 2011, Dakota Plains issued 1,000,000 shares of its common stock to each of its former Chief Executive Officer and former Chief Financial Officer as compensation for their service.
In February 2011, Dakota Plains issued to Mr. Claypool 500,000 restricted shares of its common stock in connection with the commencement of his employment.
In April 2011, Dakota Plains issued to Mr. Dillon 100,000 restricted shares of its common stock in connection with the commencement of his employment.
In March 2011, Dakota Plains sold an aggregate of 1,500,000 shares of its common stock for aggregate proceeds of $3,187,500. The proceeds were used primarily as working capital, to expand the existing transloading facility to meet logistical and storage needs, and for trading uses as part of the marketing arrangement with WFS.
In March, 2011 Dakota Plains issued an aggregate of 50,000 shares due to an exercise of stock warrants.
In April 2011, Dakota Plains issued an aggregate of 272,000 shares to various service providers for consulting and administrative services.
In September 2011, Dakota Plains issued to each of its four non-employee directors a grant of 10,000 shares of its common stock in connection with their election to the board of directors.
In November, 2011, Dakota Plains issued an aggregate of 7,500 shares to holders of promissory notes as an exchange fee.
In December 2011, Dakota Plains issued 10,000 shares of common stock to in exchange for consulting services rendered.
In December 2011, Dakota Plains sold an aggregate of 500,000 shares of its common stock for aggregate proceeds of $2,000,000. The proceeds were used primarily as working capital, in order to expand the existing transloading facility to meet logistical and storage needs and for trading uses as part of the marketing arrangement with WFS.
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None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and we believe the transactions were exempt from the registration requirements of the Securities Act in reliance on Section 4(2) thereof, and the rules and regulations promulgated thereunder, or Rule 701 thereunder, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and agreements relating to compensation as provided under such Rule 701. The recipients of securities in such transactions represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions.
Warrants
In February 2011, Dakota Plains issued warrants to purchase an aggregate of 3,500,000 shares of its common stock at a price of $0.285 per share as an inducement to purchasers of $3,500,000 aggregate principal amount of 12.0% Promissory Notes. 50,000 of these warrants have been exercised as of the time of this filing.
In February 2011, Dakota Plains issued to Mr. Claypool a warrant to purchase 600,000 shares of its common stock at a price of $2.50 per share, in connection with the commencement of his employment.
In April 2011, Dakota Plains issued to Mr. Dillon a warrant to purchase 100,000 shares of its common stock at a price of $2.50 per share, in connection with the commencement of his employment.
Promissory Notes
In February 2011, Dakota Plains borrowed an aggregate principal amount of $3,500,000 pursuant to 12.00% Promissory Notes due January 31, 2012 (the “Senior Notes”) payable to certain shareholders. All holders of promissory notes received warrants to purchase one share of common stock for every $1.00 loaned at an exercise price of $0.285 per share as inducement for the execution of the promissory notes and delivery of the borrowed amounts. All promissory note holders received identical terms for their loans and warrants regardless of their relationship or position as executive officers, directors or their status as a founding shareholder. The unpaid principal balance of each Senior Note was subject to interest at 12.0% per annum and set to become due on January 31, 2012. The Senior notes were consolidated in November 2011 as discussed below.
In April 2011, Dakota Plains borrowed an aggregate principal amount of $5,500,000 pursuant to 12.00% Promissory Notes due October 14, 2012 (collectively, the “Junior Notes”). Each holder of Junior Notes also executed a Supplement that caused the Junior Notes to be subordinate to the Senior Notes. All promissory note holders received identical terms for their loans regardless of their relationship with our executive officers, directors or their status as a founding shareholder. The Junior Notes were consolidated in November 2011 as discussed below.
In November 2011, Dakota Plains combined the Promissory Notes issued in February 2011 and April 2011 by issuing $9,000,000 aggregate principal amount of 12% Promissory Notes due March 1, 2013 (the “Consolidated Notes”) pursuant to Exchange and Loan Agreements entered into between Dakota Plains and each holder of the Senior Notes or Junior Notes. Under the Exchange and Loan Agreements, each holder agreed to exchange all of their Senior Notes and Junior Notes for a single Consolidated Note in an aggregate principal amount equal to the combined aggregate principal amount of Senior and Junior Notes exchanged. All accrued but unpaid interest became due and payable in arrears on December 31, 2011. Thereafter, all accrued but unpaid interest is due and payable in arrears on the last day of each fiscal quarter. The Consolidated Notes may be prepaid in whole or in part without penalty or premium at any time after the occurrence of the Initial Merger.
An additional payment, which may be paid in shares or cash at the election of the note holder, is due thirty days after the date of the Second Merger. If the average closing price of our Company’s common stock over the twenty trading days immediately following the Second Merger (the “Initial Trading Price”) exceeds $2.50, as the same may be adjusted, then each note holder will be entitled to receive from our Company an amount equal to the remainder, to the extent positive, of (x) the unpaid principal amount of their Consolidated Note multiplied by the Initial Trading Price and divided by $2.50 minus (y) the unpaid principal amount of the Consolidated Note. The additional payments, if any, will be due and payable to the holders of the Consolidated Notes within thirty days of the Second Merger.
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In connection with the Initial Merger, our Company issued (a) 37,014,018 shares of its common stock to 165 record holders in exchange for all the issued and outstanding stock of Dakota Plains, including 530,000 restricted shares of our Company’s common stock to two holders in exchange for the same number of shares of similarly restricted Dakota Plains common stock. In addition, all outstanding options to purchase shares of Dakota Plains common stock were converted to options to purchase an aggregate of 250,000 shares of our Company’s common stock and all outstanding warrants to purchase shares of Dakota Plains, common stock were converted into warrants to purchase an aggregate of 4,150,000 shares of our Company’s common stock.
These issuances were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, since the issuances did not involve a public offering, the recipients took the shares for investment and not resale and we took appropriate measures to restrict transfer.
Exemptions from Registration for Sales of Restricted Securities
We issued all of these securities to a limited number of persons who were “accredited investors” or “sophisticated investors,” as those terms are defined in Rule 501 of Regulation D of the SEC, without the use of any general solicitations or advertising to market or otherwise offer the securities for sale. In addition, each such person had prior access to all material information about our Company and represented to us in writing (i) that it was an accredited investor or sophisticated investor investing with the assistance of a purchaser representative, (ii) that it was acquiring the common stock, warrants or promissory notes, each as applicable, for its own account and not with a view to distribute them and (iii) that the common stock, warrants or promissory notes each investor acquired were restricted securities. Dakota Plains (or its successor) also caused the filing of a Notice on Form D with the SEC with respect to each transaction for which such filing is required under Regulation D. Based on the foregoing, we believe that the offer and sale of these securities were exempt from the registration requirements of the Securities Act, pursuant to Sections 4(2) and 4(6) thereof. Registration of sales to “accredited investors” is preempted from state regulation by Section 18 of the Securities Act, though states may require the filing of notices, a fee and other administrative documentation.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock. It does not purport to be complete and is subject to, and is qualified in its entirety by, the provisions of our certificate of incorporation and bylaws, copies of which are attached hereto and incorporated herein by reference.
Authorized Capital
Our authorized capital stock consists of: (1) 200,000,000 shares of common stock and (2) 10,000,000 shares of preferred stock. As of March 22, 2012, there were approximately 230 holders of record of our common stock and no holders of preferred stock. As of March 22, 2012, after giving effect to the Initial Merger, we had 37,654,218 shares of common stock and no shares of preferred stock outstanding.
Common Stock
Voting Rights
Each share of common stock entitles the holder to one vote for all purposes and cumulative voting is not permitted in the election of directors. Significant corporate transactions, such as amendments to the articles of incorporation, mergers, sales of assets and dissolution or liquidation, require approval by the affirmative vote of the majority of the outstanding shares of common stock. Other matters to be voted upon by the holders of common stock normally require the affirmative vote of a majority of the shares present at the particular shareholders meeting.
Dividend Rights
Holders of common stock are entitled to receive such dividends as may be declared by the board of directors out of assets legally available therefore, and to share ratably in the assets of our Company available upon liquidation. However, we do not anticipate payment of any dividends in the foreseeable future. See “Dividend Policy.”
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Liquidation and Preemptive Rights
In the event of liquidation, dissolution or winding-up, holders of our common stock are entitled to share ratably in the assets of our Company available upon liquidation. There are no preemptive, subscription, conversion or redemption rights pertaining to our common stock. The absence of preemptive rights could result in a dilution of the interest of investors should additional shares of common stock be issued.
Preferred Stock
The amended and restated articles of incorporation provides that we may issue up to 10,000,000 shares of preferred stock in one or more series as may be determined by the board of directors. The board has broad discretionary authority with respect to the rights of any new series of preferred stock and may establish the following with respect to the shares to be included in each series, without any vote or action of the shareholders:
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• | the number of shares; |
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• | the designations, preferences and relative rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences; and |
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• | any qualifications, limitations or restrictions. |
We believe that the ability of the board to issue one or more series of preferred stock will provide flexibility in structuring possible future financings and acquisitions, and in meeting other corporate needs that may arise. The authorized shares of preferred stock, as well as authorized and unissued shares of common stock, will be available for issuance without action by the holders of common stock, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded.
The board may authorize, without shareholder approval, the issuance of preferred stock with voting and conversion rights that could adversely affect the voting power and other rights of holders of common stock. Although the board has no current intention of doing so, it could issue a series of preferred stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt of our Company. The board could also issue preferred stock having terms that could discourage an acquisition attempt through which an acquirer may be able to change the composition of the board, including a tender offer or other transaction that some, or a majority, of the shareholders might believe to be in their best interests or in which shareholders might receive a premium for their stock over the then-current market price. Any issuance of preferred stock therefore could have the effect of decreasing the market price of our common stock.
The board will make any determination to issue such shares based on its judgment as to the best interests of our Company and shareholders. We have no current plans to issue any preferred stock.
Options
As of March 22, 2012, we had issued and outstanding options to purchase 250,000 shares of common stock with a weighted average exercise price of $2.50 per share, all of which were issued under the 2011 Plan and assumed by our Company pursuant to the Initial Merger. As of the same date, an additional 1,750,000 shares remained available for future grants under the 2011 Plan.
Warrants
As of March 22, 2012, we had issued and outstanding warrants to purchase 4,150,000 shares of common stock with a weighted average exercise price of $0.66 per share and no warrants to purchase shares of preferred stock outstanding.
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Anti-Takeover Provisions
Provisions of the amended and restated articles of incorporation and amended and restated bylaws of our Company, may delay or discourage transactions involving an actual or potential change in control of our Company or change in the management, including transactions in which shareholders might otherwise receive a premium for their shares, or transactions that the shareholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, the amended and restated articles of incorporation and amended and restated bylaws:
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• | provide for the board of directors to be elected at each regular meeting of the shareholders to serve for an indefinite term that expires at the next regular meeting of the shareholders; |
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• | permit the board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change in the control; |
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• | provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
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• | provide that shareholders may act by written consent in lieu of a meeting; |
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• | provide that a special meeting of the shareholders may be called by the president, vice president or by the board of directors or any two or more members thereof; or by one or more shareholders holding not less than ten percent of the voting power of all shares of our Company entitled to vote (except that a special meeting called by shareholders for the purpose of considering any action to directly or indirectly effect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, must be called by shareholders holding not less than twenty-five percent of all shares of our Company entitled to vote); |
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• | do not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose. |
Limitation on Liability of Directors and Indemnification
The amended and restated articles of incorporation limit the liability of the directors to the fullest extent permitted by Nevada law. Nevada law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
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• | breach of their duty of loyalty to our Company or the shareholders; |
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• | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
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• | unlawful payment of dividends or redemption of shares as provided in Chapter 78 of the Nevada Revised Statutes; |
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• | transaction from which the directors derived an improper personal benefit; or |
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• | act or omission occurring prior to the date when the provision in the articles eliminating or limiting liability becomes effective. |
These limitations of liability do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.
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The amended and restated bylaws provide that we will indemnify and advance expenses to the directors and officers to the fullest extent permitted by law or, if applicable, pursuant to indemnification agreements. They further provide that we may choose to indemnify other employees or agents of our Company from time to time. Section 78.752 of the Nevada Revise Statutes and the amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to our Company, regardless of whether the bylaws permit indemnification. We obtained a directors’ and officers’ liability insurance policy.
Except as described above under “Certain Relationships and Related Party Transactions,” at present there is no pending litigation or proceeding involving any of the current or former directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Listing
Our common stock is listed on the OTC Bulletin Board of the Financial Industry Regulatory Authority, Inc. under the symbol “MCTH.OB.” We have initiated a request for a new trading symbol that reflects the change in our Company’s name as a result of the Second Merger.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Interwest Transfer Company, Inc., 1981 Murray Holladay Road, Suite 100, Salt Lake City, Utah 84117 telephone, (801) 272-9294.
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Item 3.02 | Unregistered Sales of Equity Securities. |
The disclosures set forth in Item 2.01 above are hereby incorporated by reference into this Item 3.02.
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Item 5.01 | Changes in Control of Registrant. |
The disclosures set forth in Item 2.01 above are hereby incorporated by reference into this Item 5.01.
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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. |
In connection with the Initial Merger, all of our previous directors and officers resigned and were replaced by the directors and officers of Dakota Plains, Inc.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning our directors and executive officers:
| | | | |
Name | | Age | | Position |
Gabriel G. Claypool | | 36 | | Chairman of the Board of Directors, Chief Executive Officer, President and Secretary |
Timothy R. Brady | | 50 | | Chief Financial Officer and Treasurer |
Nicholas Q. Dillon | | 28 | | Vice President of Finance |
Paul M. Cownie | | 35 | | Director |
David J. Fellon | | 49 | | Director |
Terry H. Rust | | 59 | | Director |
John W. Whitaker | | 60 | | Director |
Executive Officers
Gabriel G. Claypool was elected director of our Company and appointed to serve as our Chief Executive Officer, President and Secretary in connection with the Initial Merger effective as of March 22, 2012. He had previously served as a director and Chief Executive Officer, President and Secretary of Dakota Plains since February 2011. On February 10, 2011, he was appointed to also serve as Chairman of the Board of Directors of Dakota Plains. Mr. Claypool was previously Regional Manager with Juniper Networks from 2009 to 2011 and prior to that was with AT&T, from 2004 to 2009. Mr. Claypool has been involved in the agriculture industry his entire life and has substantial experience from one of the largest century farms in northern Iowa. Mr. Claypool has numerous years’ experience with various forms of transportation logistics, as well as commodity marketing, trading and hedging through futures and other contracts. Mr. Claypool also brings strong business development and management experience from two Fortune 10 companies, handling relationships with Fortune 500 firms. Mr. Claypool holds a Bachelor of Business Administration degree from the University of Iowa.
Timothy R. Bradywas appointed to serve as our Chief Financial Officer and Treasurer in connection with the Initial Merger effective as of March 22, 2012. He had previously served as Chief Financial Officer and Treasurer of Dakota Plains since September 2011. Before joining Dakota Plains, Mr. Brady served as one of three founders and Chief Financial Officer of Encore Energy, a privately held independent operator of oil and natural gas properties, from May 2011 through September 2011. Prior to that position, Mr. Brady served as the Chief Financial Officer from April 2010 through May 2011 of Allied Energy, a publicly traded oil and natural gas company, and served on its Board of Directors, where Mr. Brady was instrumental in upgrading the firm to the highest grading level on the OTC Market tier. Prior to that position, Mr. Brady was an independent consultant for eight years. Mr. Brady has over 28 years of financial experience within the energy, financial services, and manufacturing industry. Mr. Brady has extensive experience with SEC reporting, balance sheet management, investor relations, treasury, mergers and acquisitions, audit, internal controls implementation, and compliance. Mr. Brady holds a Bachelor of Science degree in Finance from Indiana University and an MBA from Loyola University of Chicago.
Nicholas Q. Dillonwas appointed to serve as our Vice President of Finance in connection with the Initial Merger effective as of March 22, 2012. He had previous served as Vice President of Finance of Dakota Plains since September 2011. He previously served as Chief Financial Officer and Treasurer of Dakota Plains from April to September 2011. Mr. Dillon is responsible for activities including financial reporting, forecasting, accounting, tax, and Sarbanes Oxley compliance. Prior to joining our Company, Mr. Dillon held various finance and accounting positions within Honeywell International’s Aerospace and Automated Control Solutions businesses from 2007 to 2011. He also spent time with International Business Machines in 2006, after graduating from the University of Wisconsin, Madison, with a Bachelor of Business Administration degree focused on finance, investments and banking.
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Board of Directors
Each of the following individuals was elected to serve as a director of our Company effective as of March 22, 2012, in connection with the Initial Merger.
Paul M. Cowniehas served as Chairman and Chief Executive Officer of Southern Plains Resources, an exploration and production company based in Des Moines, IA and focused on domestic oil and gas resource plays, since July 2010. Mr. Cownie has also served as President of COG Partners, LLC, a family-owned energy business focused on investing in the oil and gas industry, since July 2008. Mr. Cownie co-founded Format Dynamics, a software company based in Denver, CO, in November 2002 and served as its Director of Business Development from November 2002 to November 2007. Mr. Cownie also founded TrophyRoom.com, which is currently the world’s largest hunting and fishing video-hosting website. Mr. Cownie holds a Bachelor of Arts in History from Colorado College. Mr. Cownie brings to the board considerable management and leadership experience, especially his knowledge of the energy industry.
David J. Fellonis the owner and President of Progressive Rail, Progressive Rail Specialized Logistics and Carload Connection Group, a position he has held since January 1996. Mr. Fellon’s entire life has revolved around the rail transportation industry, with his independent start coming in 1996 with the acquisition of a three mile section of track in Lakeville, Minnesota. With a focus on consistently providing a level of rail transportation service that far and away exceeded his valued customers’ highest expectations, that original three miles has expanded to nearly three hundred miles. Throughout their impressive growth, Mr. Fellon’s companies have remained keenly focused on delivering a wide range of supply chain solutions for customers of every imaginable description in both size and scope. Mr. Fellon’s extensive rail experience provides him with the necessary skills to serve as a member of the board of directors.
Terry H. Rustretired from his position as a Principal with LarsonAllen LLP in Minneapolis, Minnesota, in November 2011. Mr. Rust served as a Principal from January 1990 to November 2011. LarsonAllen is a professional services firm that provides assurance, accounting, tax, consulting and advisory services via their network of 1,800 employees and over 40 locations throughout the United States. Mr. Rust is a Certified Public Accountant (CPA) and has over 35 years in public accounting, with a focus on manufacturing, construction, real estate and other professional services groups. He is affiliated with the American Institute and Minnesota Society of CPAs. Mr. Rust enjoys supporting numerous community organizations and has been a Board member of four separate corporations. Mr. Rust holds a Bachelor of Business Administration degree from the University of Iowa. Mr. Rust’s 35 years of public accounting experience provide him with the necessary skill set to serve as a member of the board of directors.
John W. Whitakeris a Private Investor from Kansas City, Missouri. Mr. Whitaker is the Co-founder/CEO of O’Neill & Whitaker Inc., a United States Customs Brokers/Foreign Freight Forwarders founded in 1979. Mr. Whitaker was also the CEO of Midwest Intermodal Freight Services Inc., formed in 1981. O’Neill & Whitaker Inc., with offices in Kansas City, Los Angeles, New York, Chicago, Seattle, Atlanta and Miami represented importers and exporters in all facets of international trade and logistics. O’Neill & Whitaker Inc. and Midwest Intermodal Freight Services Inc. were acquired by Maersk Logistics USA in May 2001. Mr. Whitaker is a licensed Customs Broker (#5474) with the United States Department of the Treasury. Mr. Whitaker holds a Bachelor of Arts degree from Regis University in Denver, Colorado. Mr. Whitaker’s past CEO experience provide him with the skills, knowledge and ability to serve as a member of the board of directors.
Director Independence; Structure of the Board of Directors
Our board of directors will consist of five directors. Four of the five directors will be independent directors, as defined under the applicable listing standards of the NYSE Amex Equities Market. These independent directors are Messrs. Cownie, Fellon, Rust and Whitaker.
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There is no family relationship among any of our directors, executive officers or persons nominated to become a director or executive officer.
Committees of Our Board of Directors
The board of directors has established three standing committees: an audit committee, a compensation committee and a nominating committee.
The membership of each committee is as follows:
| | | | | | | | |
| | Committees | | Independent Directors |
Director | | Audit | | Compensation | | Nominating | |
Gabriel G. Claypool | | | | | | | | |
Paul M. Cownie | | ü | | | | ü* | | ü |
David J. Fellon | | | | ü* | | ü | | ü |
Terry H. Rust | | ü* | | ü | | ü | | ü |
John W. Whitaker | | ü | | ü | | | | ü |
* Denotes committee chair. John W. Whitaker will serve as lead independent director.
Our board of directors has adopted written charters for each of its committees. Current copies of all committee charters appear on our website at www.dakotaplains.com and are available in printed form upon written request delivered to Corporate Secretary, Dakota Plains Holdings, Inc., 294 Grove Lane East, Wayzata, Minnesota 55391.
Audit Committee
The audit committee’s primary functions, among others is to: (a) assist the board of directors in discharging its statutory and fiduciary responsibilities with regard to audits of the books and records of our Company and the monitoring of its accounting and financial reporting practices; (b) carry on appropriate oversight to determine that our Company and its subsidiaries have adequate administrative and internal accounting controls and that they are operating in accordance with prescribed procedures and codes of conduct; and (c) independently review our Company’s financial information that is distributed to shareholders and the general public.
All of the members of the audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC. Our board of directors has determined that Terry Rust is qualified to serve as an audit committee financial expert, as that term is defined under the applicable rules of the SEC. Each member of the audit committee satisfies the independence requirements of Rule 10A-3(b)(1) of the Securities Exchange Act.
Nominating Committee
The nominating committee is primarily responsible for identifying individuals qualified to serve as members of our board of directors, recommending individuals to our board of directors for nomination as directors and committee membership, reviewing the compensation paid to our non-employee directors and recommending adjustments in director compensation, as necessary, in addition to overseeing the annual evaluation of our board of directors.
Compensation Committee
The compensation committee reviews and approves on an annual basis the goals and objectives relevant to our Chief Executive Officer’s compensation and the annual compensation of our executive officers in light of their respective performance evaluations. Our compensation committee is responsible for administering our 2011 Omnibus Incentive Plan, including approval of individual grants of stock options and other awards.
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Code of Conduct
Our board of directors has adopted a code of business conduct and ethics relating to the conduct of our business by our employees, officers and directors, which is posted on our Company website.
Role of the Board in Risk Oversight
One of the key functions of our board of directors is informed oversight of our risk management process. The board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Our nominating committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee nor any director nominee proposed to become a member of the compensation committee is or has at any time during the last completed fiscal year been an officer or employee of our Company. None of our executive officers has served as a member of the board of directors or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors during the last completed fiscal year.
None of the members of the compensation committee is or has at any time during the last completed fiscal year been an officer or employee of ours. None of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during the last completed fiscal year.
Director Compensation
From the inception of our Company in 2008 through 2010, Dakota Plains did not provide any compensation to its directors. Our Company reimburses its directors for out-of-pocket expenses incurred in connection with attending our board and committee meetings.
The following table sets forth director compensation for non-employee directors for the year ended December 31, 2011.
| | | | | | | | | | | | | | | | |
Name | | Fees earned or paid in
cash ($) | | Stock awards ($)(a) | | Option awards ($)(a) | | All other
compensation ($) | | Total ($) | |
Paul M. Cownie | | | - | | | $21,250 | | | $16,541 | | | - | | | $37,791 | |
David J. Fellon | | | - | | | $21,250 | | | $16,541 | | | - | | | $37,791 | |
Terry H. Rust | | | - | | | $21,250 | | | $16,541 | | | - | | | $37,791 | |
John W. Whitaker | | | - | | | $21,250 | | | $16,541 | | | - | | | $37,791 | |
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(a) | In accordance with our current director compensation policy, upon his respective appointment to our board of directors on September 27, 2011, each of our four current non-employee directors was awarded an initial stock option to purchase up to 50,000 shares at an exercise price of $2.50 per share, and an initial grant of 10,000 shares of our common stock. |
For 2011 Dakota Plains adopted a policy that, upon appointment to its board of directors, each non-employee director received (i) an initial stock option to purchase up to 50,000 shares of our common stock and (ii) an initial grant of 10,000 shares of our common stock.
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EXECUTIVE COMPENSATION
Base salaries for each of our named executive officers were initially established based on arm’s-length negotiations between Dakota Plains and the executive. Our compensation committee will review our named executive officers’ salaries annually at the beginning of each year. When negotiating or reviewing base salaries, the compensation committee expects to consider market competitiveness based on their market experience, the executive’s expected future contribution to our success and the relative salaries and responsibilities of our other executives. None of our Company’s continuing executive officers were employed by our Company during the most recent completed fiscal year.
Summary Compensation Table for Dakota Plains
The following table provides information regarding the compensation earned during the fiscal years ended December 31, 2011 and 2010 by the named executive officers of Dakota Plains. Messrs. Reger and Gilbertson resigned all of their respective positions with Dakota Plains as of February 10, 2011.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary
($) | | Bonus
($) | | Stock
Awards
($)(a) | | Option Awards
($)(b) | | All OtherCompensation
($) | | Total
($) | |
James Randall Reger | | 2010 | | | | — | | | | | — | | | | | — | | | | | — | | | — | | | | | — | | |
Former Chief Executive Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
2011
| | | | — | | | | | — | | | | $ | 775,000 | | | | | — | | | — | | | | $ | 775,000 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weldon W. Gilbertson | | 2010 | | | | — | | | | | — | | | | | — | | | | | — | | | — | | | | | – | | |
Former President and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2011 | | | | — | | | | | — | | | | $ | 775,000 | | | | | — | | | — | | | | $ | 775,000 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gabriel G. Claypool | | 2011 | | | $ | 75,000 | | | | $ | 52,500 | | | | $ | 387,500 | | | | | 56,549 | | | — | | | | $ | 571,549 | | |
Chief Executive Officer, President and Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Timothy R. Brady | | 2011 | | | $ | 47,064 | | | | | — | | | | | — | | | | $ | 16,541 | | | — | | | | $ | 63,605 | | |
Chief Financial Officer and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nicholas Q. Dillon | | 2011 | | | $ | 37,103 | | | | $ | 25,000 | | | | $ | 212,500 | | | | | 77,799 | | | — | | | | $ | 352,402 | | |
Vice President of Finance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(a) | The amounts shown for each individual represents the grant date fair value of a stock award granted during the year computed in accordance with ASC Topic 718,Compensation–Stock Compensation, utilizing the assumptions discussed in Note 6 of the Notes to Consolidated Financial Statements for the year ended December 31, 2011 and disregarding the effects of any estimate of forfeitures related to service-based vesting. |
(b) | The amounts shown for each individual represents the grant date fair value of a stock option, in the case of Mr. Brady, or stock warrant, in the cases of Mr. Claypool and Mr. Dillon, granted during the year computed in accordance with ASC Topic 718,Compensation–Stock Compensation, utilizing the assumptions discussed in Note 6 of the Notes to Consolidated Financial Statements for the year ended December 31, 2011 and disregarding the effects of any estimate of forfeitures related to service-based vesting. |
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Pursuant to the employment agreement between Dakota Plains and Mr. Claypool, he received the equivalent of (i) 500,000 restricted shares of Dakota Plains common stock and (ii) a warrant to purchase up to 600,000 shares of its common stock at an exercise price of $2.50 per share. The warrant was set to expire on February 22, 2016. Fifty thousand of Mr. Claypool’s restricted shares vested on November 1, 2011. All of Mr. Claypool’s remaining restricted shares and his warrant were to vest in full on the earliest of (a) February 5, 2013, (b) a change in control of our Company, and (c) termination of Mr. Claypool’s employment by our Company for any reason other than certain limited circumstances. Any unvested shares underlying Mr. Claypool’s’ restricted shares and his warrant would have automatically terminated and been cancelled in the event Mr. Claypool terminated his employment with Dakota Plains for any reason. In connection with the Initial Merger, Mr. Claypool received a replacement warrant and shares of restricted stock bearing substantially similar terms.
Pursuant to the employment agreement between Dakota Plains and Mr. Brady, he received an option to purchase the equivalent of up to 50,000 shares of its common stock at an exercise price of $2.50 per share, in accordance with the terms of its 2011 Equity Incentive Plan. The option was immediately exercisable in full and expires on September 26, 2016. In connection with the Initial Merger, Mr. Brady received a replacement option bearing substantially similar terms under our 2011 Equity Incentive Plan (described below).
Pursuant to the employment agreement between Dakota Plains and Mr. Dillon, he received the equivalent of (i) 100,000 restricted shares of its common stock and (ii) a warrant to purchase up to 100,000 shares of its common stock at an exercise price of $2.50 per share. The warrant was set to expire on April 5, 2016. Twenty thousand of Mr. Dillon’s restricted shares vested on January 1, 2012 and his remaining 80,000 restricted shares and his warrant were to vest in full on April 5, 2013. All of Mr. Dillon’s restricted shares and his warrant were subject to accelerated vesting in full upon either (a) a change in control of Dakota Plains or (b) termination of Mr. Dillon’s employment by Dakota Plains for any reason other than certain limited circumstances. Any unvested shares underlying Mr. Dillon’s restricted shares and his warrant would have automatically terminated and been cancelled in the event Mr. Dillon terminated his employment with Dakota Plains for any reason. In connection with the Initial Merger, Mr. Dillon received a replacement warrant and restricted stock bearing substantially similar terms.
Employment Agreements
Dakota Plains originally entered into an employment agreement with Gabriel G. Claypool, our Chief Executive Officer, on February 22, 2011. In connection with the Initial Merger, our Company entered into a new employment agreement with substantially similar terms and replacing Mr. Claypool’s original employment agreement with Dakota Plains, effective as of March 22, 2012. Mr. Claypool’s employment agreement provides for an initial annualized salary of $90,000. Mr. Claypool’s employment agreement is effective for an initial term through February 22, 2013 and automatically renews for one additional year at the end of each calendar year unless terminated by us or Mr. Claypool.
Dakota Plains originally entered into an employment agreement with Timothy R. Brady, our Chief Financial Officer and Treasurer, on September 26, 2011. In connection with the Initial Merger, our Company entered into a new employment agreement with substantially similar terms and replacing Mr. Brady’s original employment agreement with Dakota Plains, effective as of March 22, 2012. Mr. Brady’s employment agreement provides for an initial annualized salary of $175,000. Mr. Brady’s employment agreement is effective for an initial term through September 26, 2013 and automatically renews for one additional year at the end of each calendar year unless terminated by us or Mr. Brady.
Dakota Plains originally entered into an employment agreement with Nicholas Q. Dillon, our Vice President of Finance, on April 5, 2011. In connection with the Initial Merger, our Company entered into a new employment agreement with substantially similar terms and replacing Mr. Dillon’s original employment agreement with Dakota Plains, effective as of March 22, 2012. Mr. Dillon’s employment agreement provides for an initial annualized salary of $50,000. Mr. Dillon’s employment agreement is effective for an initial term through April 5, 2013 and automatically renews for one additional year at the end of each calendar year unless terminated by us or Mr. Dillon.
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Pursuant to their employment agreements, Messrs. Claypool, Brady and Dillon are each entitled to such bonuses (in addition to an initial signing bonus) as may be determined by our board of directors or its compensation committee, but our company is not obligated to pay any bonuses to any executive. The employment agreements also provided for restricted stock and warrant or option grants as described in further detail under “Executive Compensation” above and restrict Messrs. Claypool, Brady and Dillon from disclosing our confidential information or competing with us or soliciting our employees to engage in other employment during the term of their respective employment with us and for two years thereafter.
Outstanding Equity Awards at Fiscal Year-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
Name | | Number of
securities
underlying
unexercised
options (#)
exercisable | | Number of
securities
underlying
unexercised
options (#)
unexercisable | | Equity
incentive
plan
awards:
Number of
Securities
underlying
unexercised
unearned
options (#) | | Option
exercise
price ($) | | Option
expiration
Date | | Number of
shares or
units of
stock that
have not
vested (#) | | Market
value of
shares or
units of
stock that
have not
vested ($) | | Equity
incentive
plan
awards:
Number of
unearned
shares, units
or other
rights that
have not
vested (#) | | Equity
incentive
plan
awards:
Market or
payout value
of unearned
shares, units
or other
rights that
have not
vested ($) | |
James Randall Reger | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weldon W. Gilbertson | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gabriel G. Claypool | | | — | | | 600,000 | (a) | | — | | $ | 2.50 | | | 2/22/2016 | | | 450,000 | (a) | $ | 1,800,000 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Timothy R. Brady | | | 50,000 | | | — | | | — | | $ | 2.50 | | | 9/26/2016 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nicholas Q. Dillon | | | — | | | 100,000 | (b) | | — | | $ | 2.50 | | | 4/5/2016 | | | 80,000 | (b) | $ | 320,000 | | | — | | | — | |
| | |
(a) | All shares become exercisable or vest, as applicable, on February 5, 2013 but are subject to accelerated exercisability or vesting as discussed under “Potential Payments Upon Termination or Change-in-Control” below. |
(b) | All shares become exercisable or vest, as applicable, on April 5, 2013 but are subject to accelerated exercisability or vesting as discussed under “Potential Payments Upon Termination or Change-in-Control” below. |
Potential Payments Upon Termination or Change-in-Control
As December 31, 2011, the last day of the most recent completed fiscal year of Dakota Plains, it did not have any arrangements that provided for payments to a named executive officer at, following, or in connection with any termination.
All of the restricted shares and warrants granted to Messrs. Claypool and Dillon under his respective employment agreement are subject to accelerated vesting in full upon either (a) a change in control of our Company (as defined in the agreement) or (b) termination by our Company of the respective employee’s employment for any reason other than certain limited circumstances. The employment agreements define a “change in control” to include both (i) the consummation of a reorganization, merger, share exchange, consolidation or similar transaction (other than a transaction effectuated in connection with our Company becoming “publicly trade”), or the sale or disposition of all or substantially all of the assets of our Company, unless, in any case, the persons beneficially owning the voting securities of our Company immediately before that transaction beneficially own, directly or indirectly, immediately after the transaction, at least fifty percent of the voting securities of our Company or any other corporation or other entity resulting from or surviving the transaction in substantially the same proportion as their respective ownership of the voting securities of our Company immediately prior to the transaction and (ii) our shareholders approve a complete liquidation or dissolution of our Company. Messrs. Claypool and Dillon’s restricted shares and warrants granted under their employment agreements do not vest in full if our Company terminates their respective employment for (1) an intentional act of fraud, embezzlement, theft or any other material violation of law, (2) grossly negligent or intentional damage to our Company’s reputation or assets, (3) grossly negligent or intentional disclosure of confidential information in violation of his employment agreement, or (4) willful and continued failure to substantially performed required duties for our Company (other than as a result of incapacity due to physical or mental illness).
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Neither the Initial Merger, Second Merger nor any related transactions are deemed change-in-control with respect to Dakota Plains, Inc.
| |
Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
Effective as of March 23, 2012, our board of directors amended and restated our articles of incorporation to reflect the change in our Company’s name pursuant to the Second Merger and to remove references to the incorporator and initial members of the board of directors. The text of the resulting amended and restated articles of incorporation of Dakota Plains Holdings, Inc. is filed as Exhibit 3.1 to this current report on Form 8-K and is hereby incorporated by reference into this Item 5.03.
Effective as of March 23, 2012, our board of directors amended and restated our bylaws to reflect the change in our Company’s name. The text of the resulting amended and restated bylaws is filed as Exhibit 3.2 to this current report on Form 8-K and is hereby incorporated by reference into this Item 5.03.
| |
Item 9.01 | Financial Statements and Exhibits. |
| | |
| (a) | Financial Statements of Business Acquired |
| | |
| 1. | Dakota Plains, Inc. and subsidiaries Consolidated Financial Statements for the fiscal years ended December 31, 2011 and 2010. |
| | |
| 2. | Dakota Petroleum Transport Solutions, LLC Financial Statements for the fiscal years ended December 31, 2011 and 2010. |
| | |
| 3. | DPTS Marketing, LLC Financial Statements for the period from April 29, 2011 to December 31, 2011. |
| | |
| (b) | Pro Forma Financial Information |
| | |
| 1. | Pro Forma Financial Statements (Unaudited) of Dakota Plains Holdings, Inc. and Subsidiaries for the year ended December 31, 2011. |
| | |
| (c) | Exhibits |
| |
| | The Exhibit Index is incorporated herein by reference. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
| | |
| DAKOTA PLAINS HOLDINGS, INC. | |
|
Date: July 27, 2012 | /s/ Gabriel G. Claypool | |
| Gabriel G. Claypool | |
| Chief Executive Officer, President and Secretary | |
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EXHIBIT INDEX
| | | | |
Exhibit No. | | Description | | Manner of Filing |
2.1 | | Agreement and Plan of Merger, dated March 22, 2012, by and among MCT Holding Corporation, Dakota Plains, Inc. and DP Acquisition Corporation | | Previously Filed |
| | | | |
2.2 | | Plan of Merger of Dakota Plains, Inc. with and into MCT Holding Corporation | | Previously Filed |
| | | | |
2.3 | | Stock Purchase Agreement, dated March 23, 2012, by and among MCT Holding Corporation, MCT Distribution Corporation and Lindsey Hailstone | | Previously Filed |
| | | | |
3.1 | | Amended and Restated Articles of Incorporation, effective March 23, 2012 | | Previously Filed |
| | | | |
3.2 | | Amended and Restated Bylaws, effective March 23, 2012 | | Previously Filed |
| | | | |
4.1 | | Form of Promissory Note dated November 1, 2011 | | Previously Filed |
| | | | |
10.1 | | Dakota Plains Holdings, Inc. 2011 Equity Incentive Plan | | Previously Filed |
| | | | |
10.2 | | Form of Incentive Stock Option under 2011 Equity Incentive Plan | | Previously Filed |
| | | | |
10.3 | | Form of Non-Statutory Stock Option under 2011 Equity Incentive Plan | | Previously Filed |
| | | | |
10.4 | | Form of Restricted Stock Agreement under 2011 Equity Incentive Plan | | Previously Filed |
| | | | |
10.5 | | Form of Warrant with Executive Officers | | Previously Filed |
| | | | |
10.6 | | Form of Warrant | | Previously Filed |
| | | | |
10.7 | | Employment Agreement with Gabriel G. Claypool, dated March 22, 2012 | | Previously Filed |
| | | | |
10.8 | | Employment Agreement with Timothy R. Brady, dated March 22, 2012 | | Previously Filed |
| | | | |
10.9 | | Employment Agreement with Nicholas Q. Dillon, dated March 22, 2012 | | Previously Filed |
| | | | |
10.10 | | Form of Exchange and Loan Agreement dated November 1, 2011 | | Previously Filed |
| | | | |
10.11 | | Form of Exchange and Loan Agreement (Standby Credit Arrangement) dated November 1, 2011 | | Previously Filed |
| | | | |
10.12 | | Dakota Petroleum Transport Solutions, LLC Member Control Agreement dated November 9, 2009 | | Previously Filed |
| | | | |
10.13 | | DPTS Marketing LLC Member Control Agreement dated April 29, 2011 | | Previously Filed |
| | | | |
10.14 | | Amendment to DPTS Marketing LLC Member Control Agreement dated August 17, 2011 | | Previously Filed |
| | | | |
10.15 | | Lease Agreement dated November 4, 2009 | | Previously Filed |
| | | | |
10.16 | | Supplemental Agreement to Dakota Petroleum Transport Solutions, LLC Member Control Agreement and Dakota Petroleum Transport Solutions, LLC Lease Agreement dated July 22, 2010 | | Previously Filed |
| | | | |
10.17 | | Amendment to Dakota Petroleum Transport Solutions, LLC Member Control Agreement dated April 29, 2011 | | Previously Filed |
| | | | |
10.18 | | Amendment to Lease Agreement dated August 18, 2011 | | |
| | | | |
10.19 | | Indemnification Agreement | | Previously Filed |
| | | | |
21.1 | | List of Subsidiaries | | Previously Filed |
| | | | |
99.1 | | Dakota Plains, Inc. and Subsidiaries Consolidated Financial Statements for the fiscal years ended December 31, 2011 and 2010 | | Filed Electronically |
| | | | |
99.2 | | Dakota Petroleum Transport Solutions, LLC Financial Statements for the fiscal years ended December 31, 2011 and 2010. | | Previously Filed |
| | | | |
99.3 | | DPTS Marketing, LLC Financial Statements for the period from April 29, 2011 to December 31, 2011. | | Previously Filed |
| | | | |
99.4 | | Pro Forma Financial Statements (Unaudited) of Dakota Plains Holdings, Inc. and Subsidiaries for the fiscal year ended December 31, 2011 | | Previously Filed |
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