Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
Appointment and Compensatory Arrangement of Nestor Jaramillo, Jr.
Effective January 16, 2021, Nestor Jaramillo, Jr. was appointed as Chief
Executive Officer and President of CHF Solutions, Inc. (the "Company").
Mr. Jaramillo, age 63, has served as our chief operating officer and president
since June 2020 and as our chief commercial officer from May 2019 to June 2020.
From October 2017 to May 2019, Mr. Jaramillo served as president and chief
executive officer of Innerspace Neuro Solutions, Inc., a commercial-stage
medical technology company that developed, manufactured and distributed an
intracranial pressure monitoring system. From May 2014 to September 2017, Mr.
Jaramillo was managing director of healthcare investment banking at Craig-Hallum
Capital, based in Minneapolis, Minnesota, and from March 2010 to April 2014, he
was managing director of healthcare investment banking at Cherry Tree &
Associates, an investment banking firm in Minneapolis, Minnesota. Mr. Jaramillo
has also served in a variety of roles at Transoma Medical from 2007 to 2010, St.
Jude Medical from 2006 to 2007, and at Medtronic plc from 1982 to 2006. In these
roles, his responsibilities included leading sales and marketing teams both in
the United States and internationally, where he spent five years in Europe. Mr.
Jaramillo received an M.B.A. from the University of St. Thomas and a B.S. in
Electrical Engineering from the University of North Dakota.
Effective January 22, 2021, in connection with his appointment as President and
Chief Executive Officer, Mr. Jaramillo was granted an option to purchase 12,750
shares of common stock of the Company, with a per share exercise price equal to
the per share fair market value of the Company's common stock, which is the
closing sales price for the Company's common stock on January 22, 2021, as
quoted on the Nasdaq Capital Market. 25% of the shares shall vest on January
22, 2022 and the remaining shares shall vest in 36 equal consecutive monthly
increments, so that all of the shares shall be fully vested on the fourth-year
anniversary of the date of grant.
On January 16, 2021. the Company entered into an Executive Employment Agreement
with Mr. Jaramillo (the "CEO Executive Employment Agreement").
Title and Term
Pursuant to the CEO Executive Employment Agreement, the Company agreed to employ
Mr. Jaramillo as Chief Executive Officer and President of the Company. The
Executive Employment Agreement has an initial term (the "Initial Term") of
twelve (12) months beginning on January 16, 2021 and automatically renews for an
additional twelve (12) month period at the end of the Initial Term and each
anniversary thereafter provided that at least ninety (90) days prior to the
expiration of the Initial Term or any renewal term the board of directors of the
Company (the "Board") does not notify Mr. Jaramillo of its intention not to
renew the employment period.
Compensation
The CEO Executive Employment Agreement entitles Mr. Jaramillo to, among other
benefits, the following compensation:
• An annual base salary of $385,000.00, reviewed at least annually;
• An opportunity for Mr. Jaramillo to receive an annual performance bonus in an
amount of up to fifty-five percent (55%) of Mr. Jaramillo's annual base salary
for such fiscal year based upon achievement of certain performance goals to be
established by the Board;
• An opportunity to receive equity awards as determined by the Compensation
Committee of the Board based on Mr. Jaramillo's performance;
• Prior to January 31, 2022, an opportunity to receive a stock option to purchase
a number of shares of the Company's common stock equal to 2.4% of the
outstanding shares of common stock and preferred stock calculated on an
as-converted basis to shares of the Company's common stock basis, following
approval of the Board;
• Participation in welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs) to the
extent available generally or to other senior executive officers of the
Company;
• Prompt reimbursement for all reasonable expenses incurred by Mr. Jaramillo in
accordance with the plans, practices, policies and programs of the Company; and
• Twenty-two (22) days paid time off (PTO), to accrue and to be used in
accordance with the Company's policies and practices in effect from time to
time, as well as all recognized Company holidays.
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Termination Rights
The Company is permitted to terminate Mr. Jaramillo's employment for the
following reasons: (i) death or disability (as defined in the CEO Executive
Employment Agreement) or (ii) cause (as defined in the CEO Executive Employment
Agreement).
Mr. Jaramillo is permitted to terminate his employment under the CEO Executive
Employment Agreement for good reason (as defined in the CEO Executive Employment
Agreement) or upon Mr. Jaramillo's written notice to the Company's Board of
Directors forty-five (45) days prior to the effective date of such termination.
In the event of Mr. Jaramillo's death during the employment period or a
termination due to Mr. Jaramillo's disability, Mr. Jaramillo or his
beneficiaries or legal representatives shall be provided the sum of (i) any
annual base salary earned, but unpaid, for services rendered to the Company on
or prior to the date on which the employment period and (ii) if Mr. Jaramillo's
employment terminates due to Mr. Jaramillo's death or in a termination due to
disability or a termination for good reason or due to the Company's exercise of
its termination right, in any case, after the end of a fiscal year, but before
the annual bonus payable for services rendered in that fiscal year has been
paid, the annual bonus that would have been payable to Mr. Jaramillo for such
completed fiscal year and (iii) certain other benefits provided for in the
Executive Employment Agreement (the "Unconditional Entitlements" ).
In the event of Mr. Jaramillo's termination for cause by the Company or the
termination of Mr. Jaramillo's employment as a result of Mr. Jaramillo's
resignation without good reason, Mr. Jaramillo shall be provided the
Unconditional Entitlements.
In the event of a termination by Mr. Jaramillo for good reason or the exercise
by the Company of its termination rights to terminate Mr. Jaramillo other than
for cause, death or disability, Mr. Jaramillo shall be provided the
Unconditional Entitlements and, subject to Mr. Jaramillo signing and delivering
to the Company and not revoking a general release of claims in favor of the
Company and certain related parties, the Company shall provide Mr. Jaramillo a
severance amount equal to (i) one times Mr. Jaramillo's annual base salary as of
the termination date, (ii) continued medical coverage for twelve (12) months
follow such termination, (iii) continued vesting of equity awards for twelve
(12) months following such termination and (iv) a pro-rated annual bonus for the
year in which
Mr. Jaramillo is terminated.
Recoupment and Release Requirement
The CEO Executive Employment Agreement provides the following additional terms:
• a provision providing for the recoupment of unearned incentive compensation if
the Board, or an appropriate committee thereof, determines that Mr. Jaramillo
engaged in any fraud, negligence, or intentional misconduct that caused or
significantly contributed to the Company having to restate all or a portion of
its financial statements, or if the Company is required to seek reimbursement
by applicable laws or regulations; and
• a requirement that Mr. Jaramillo sign a release and waiver of claims of the
Company prior to the payment of any severance payment by the Company.
The foregoing description of the CEO Executive Employment Agreement is not
complete and is qualified in its entirety by reference to the Executive
Employment Agreement which is filed as Exhibit 10.1 hereto and incorporated
herein by reference.
Increase in Board Size and Director Appointment
In connection with his appointment, the Board also approved an increase in the
size of the Board from six to seven members and appointed Mr. Jaramillo to serve
as a member of the Board. Mr. Jaramillo will serve as a Class I Director of the
Company and will hold office until the 2023 annual meeting of the stockholders
or until his earlier resignation or removal. Mr. Jaramillo was not appointed to
the Board pursuant to any arrangement or understanding with any other person.
Mr. Jaramillo does not have any family relationships with an director or
executive officer of the Company and there are not transactions in which Mr.
Jaramillo has an interest requiring disclosure under Item 404(a) of Regulation
S-K.
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Compensatory Arrangement of John L. Erb
In connection with the appointment of Mr. Jaramillo as Chief Executive Officer
and President, John L. Erb, who has been serving as Chairman of the Board, Chief
Executive Officer and President of the Company since November 2015, will
continue to serve as Chairman of the Board of the Company.
Mr. Erb, age 73, has served as a director of the Company since September 2012
and as chairman of our Board since October 2012, in addition to his role as
Chief Executive Officer and President. Previously, Mr. Erb served as chief
. . .
Item 7.01. Regulation FD Disclosure.
On January 19, 2021, the Company issued a press release announcing the
information set forth herein. A copy of the press release is attached as
Exhibit 99.1 hereto and is incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in this
Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 attached
hereto, shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except as shall be expressly set forth by
specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
10.1 Executive Employment Agreement, dated January 16, 2021, by and between
CHF Solutions, Inc. and Nestor Jaramillo, Jr.
10.2 Executive Employment Agreement, dated January 16, 2021, by and between
CHF Solutions, Inc. and John L. Erb
99.1 Press Release dated January 19, 2021
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