| Item 1.01 | Entry Into a Material Definitive Agreement. |
On July 25, 2023, 4Front Ventures Corp. (“we,” “us,” “our” or the “Company”) entered into a Consulting Agreement (the “Agreement”) with Maha Consulting LLC (“Maha”), pursuant to the terms of which Maha agreed to provide us with the services of its principal, Leo Gontmakher (“Gontmakher” and, together with Maha, the “Consultant”), to serve as our Chief Executive Officer, effective July 24, 2023 through December 31, 2023 (the “Initial Term”). Capitalized terms used but not otherwise defined in this Current Report on Form 8-K have the meanings ascribed to them in the Agreement.
Under the terms of the Agreement we will pay the Consultant: (i) an annualized fee of $400,000, payable in installments (the “Consulting Fee”); (ii) a signing bonus of 6,000,000 shares of our Class A Subordinate Voting Shares (“SVS”); and (iii) if Gontmakher remains Chief Executive Officer through the end of the Initial Term, (A) and the Company achieves positive Net Income for the year ended December 31, 2023, a bonus of 1,800,000 SVS, and (B) a true-up bonus equal to that number of additional SVS, if any, such that the Consultant will own 1.00% of our SVS on a fully diluted basis. During the Term, the Consultant will be entitled to participate in all employee benefit plans and programs maintained by the Company (the “Benefits”).
If the Agreement remains in effect through the closing of a Change in Control (the “Closing”), and subject to the terms and conditions set forth in the Agreement, including a clawback provision, the Consultant will be eligible to participate in a transaction bonus pool equal to 1.00% of the fair market value of all consideration paid to the Company’s stockholders in the Change in Control, and, immediately prior to the Closing, (i) 50% of any outstanding options held by the Consultant will vest, or (ii) if the Consultant is not offered a commensurate position with the surviving entity, 100% of such options will vest.
We may terminate the Agreement at any time for Cause, or without Cause upon 30 days’ written notice. The Consultant may terminate the Agreement at any time for Good Reason by providing the Company with written notice, or without Good Reason upon 90 days’ written notice. The Agreement terminates automatically in the event of the Consultant’s death or Permanent Disability.
If we terminate the Agreement without Cause, or if the Consultant terminates the Agreement for Good Reason, subject to the terms and conditions set forth in the Agreement, the Consultant will continue to receive the Consulting Fee and Benefits for a period of 12 months, 50% of any outstanding options held by the Consultant will immediately vest, and the time to exercise the Consultant’s options will be extended for a period of 12 months.
Following the Initial Term, the Agreement will automatically renew for successive one-year periods (each a “Renewal Term”), unless terminated by written notice at least 30 days prior to expiration of the Initial Term, and any Bonuses payable under a Renewal Term will be mutually agreed to by the parties.
The foregoing descriptions of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which was is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
