UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment
No. )
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[ ]
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Preliminary
Proxy Statement
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[ ]
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Confidential,
For use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to §240.14a-12
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VERB
TECHNOLOGY COMPANY, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11(set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid
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Fee
paid previously with preliminary materials:
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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Verb
Technology Company, Inc.
Annual
Meeting of Stockholders
December
20, 2019
Notice
and Proxy Statement
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held On December 20, 2019
Dear
Fellow Verb Stockholders:
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November
12, 2019
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It
is my pleasure to invite you to this year’s Annual Meeting of the Stockholders of Verb Technology Company, Inc. The meeting
will be held on December 20, 2019 at 3:00 p.m. PST at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663. The
purpose of the Annual Meeting is to vote on the following:
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1.
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To
elect four directors to our Company’s Board of Directors;
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2.
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To
approve the Verb Technology Company, Inc. 2019 Omnibus Incentive Plan (the “Incentive Plan”);
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3.
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To
approve, for purposes of Nasdaq Listing Rules 5635(b) and (d), the issuance by us of up to 3,245,162 shares of our common
stock, par value $0.0001 per share (our “Common Stock”) upon conversion of 5,030 shares of our Series A convertible
preferred stock (our “Series A Preferred Stock”) and up to 3,245,162 shares of our Common Stock upon exercise
of warrants (the “Warrants”), which proposal we refer to as the “Stock Issuance Proposal”;
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4.
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To
hold a stockholder advisory vote on the compensation of our named executive officers disclosed in this Proxy Statement under
the section titled “Executive Compensation,” including the compensation tables and other narrative executive compensation
disclosures therein, required by Item 402 of Securities and Exchange Commission Regulation S-K (the “say-on-pay vote”);
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5.
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To
hold a stockholder advisory vote on the frequency that stockholder advisory votes to approve the compensation of our named
executive officers will be taken (a “say-on-frequency”) vote;
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6.
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To
ratify the selection of Weinberg & Company, P.A. (“Weinberg”), as our independent registered public accounting
firm;
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7.
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To
consider and vote upon a proposal to adjourn the Annual Meeting, if necessary or appropriate; and
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8.
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To
transact such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof.
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You
will also have the opportunity to hear what has happened in our business in the past year and to ask questions.
Only
stockholders of record at the close of business on November 12, 2019 will be entitled to receive notice of and to vote at the
Annual Meeting or any postponement or adjournment thereof. The enclosed Notice and Proxy Statement contains details concerning
the foregoing items and any other business to be conducted at the Annual Meeting, as well as information on how to vote your shares.
Other detailed information about us and our operations, including our audited financial statements, are included in our Annual
Report on Form 10-K (the “Annual Report”), a copy of which is enclosed. We urge you to read and consider these documents
carefully.
Your
vote is very important. Whether or not you expect to attend the Annual Meeting, we urge you to cast your vote and submit your
proxy in advance of the Annual Meeting. You can vote in person at the Annual Meeting or by internet, telephone, or mail as follows:
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By
Internet
Visit
www.proxyvote.com
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By
Phone
Call
the telephone number on your proxy card, voting instruction form, or notice
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By
Mail
Sign,
date, and return the enclosed proxy card or voting instruction form
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In
Person
Attend
the Annual Meeting in Newport Beach, California
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/s/
Rory Cutaia
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Rory
Cutaia
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Chairman
of the Board, Chief Executive Officer, President, Secretary, and Treasurer
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2210
Newport Boulevard, Suite 200, Newport Beach, California 92663 * (855) 250.2300
VERB
TECHNOLOGY COMPANY, INC.
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To
be held December 20, 2019
This
Proxy Statement, and the enclosed proxy card, is solicited by the Board of Directors (our “Board”) of Verb Technology
Company, Inc., a Nevada corporation, for use at the Annual Meeting of Stockholders (the “Annual Meeting”)
to be held December 20, 2019 at 3:00 p.m. PST, or at any adjournments or postponements thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at 2210 Newport Boulevard, Suite
200, Newport Beach, California 92663.
References
in this Proxy Statement to “Verb,” “we,” “us,” “our,” or the “Company”
refers to Verb Technology Company, Inc.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 20, 2019.
This
Proxy Statement, the enclosed proxy card, and the Annual Report for the fiscal year ended on December 31, 2018 are all available
on our website at www.myverb.com. With respect to the Annual Meeting and all of our future stockholder meetings, please
contact James P. Geiskopf at (855) 250.2300, Extension 12, or Jimmy@verb.tech, to request a copy of the proxy statement,
annual report, or proxy card, or to obtain directions to such meeting.
What
is a proxy?
A
proxy is your legal designation of another person to vote the stock you own and are entitled to vote. The person you designate
is your “proxy,” and, by submitting a proxy card, you give the proxy the authority to vote your shares. We have designated
James P. Geiskopf, Lead Director, as proxy for the Annual Meeting.
Why
am I receiving these materials?
You
are receiving this Proxy Statement and the enclosed proxy card because our Board is soliciting your proxy to vote at the Annual
Meeting for the purposes set forth herein. This Proxy Statement provides you with information on the matters to be voted on at
the Annual Meeting as well as instructions on how to vote.
We
intend to mail this Proxy Statement and accompanying proxy card on or about November 20, 2019 to all stockholders of record
entitled to vote at the Annual Meeting.
Who
can vote at the Annual Meeting?
You
can vote if, as of the close of business on November 12, 2019 (the “Record Date”), you were a stockholder of record
of our Common Stock, our only series of common stock issued and outstanding. On the Record Date, there were 23,524,753
shares of our Common Stock issued and outstanding.
Stockholder
of Record: Shares Registered in Your Name
If,
on the Record Date, your shares were registered directly in your name with our transfer agent, V Stock Transfer, LLC, then you
are a stockholder of record. As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether
or not you plan to attend the Annual Meeting, we urge you to vote by written proxy, telephone, or the Internet to ensure your
vote is counted. Even if you vote by proxy, you may still vote in person if you are able to attend the Annual Meeting.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If,
on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization, then
you are the “beneficial owner” of shares held in “street name” and these proxy materials are being forwarded
to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes
of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote
the shares in your account. If you do not direct your broker how to vote your shares, the broker will be entitled to vote the
shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non-discretionary”
items (resulting in a “broker non-vote”). The ratification of the appointment of our independent registered public
accounting firm under Proposal 6 is a “discretionary” matter. The election of directors under Proposal 1, the approval
of the Incentive Plan under Proposal 2, the approval of the Stock Issuance Proposal under Proposal 3, the advisory say-on-pay
vote under Proposal 4, the advisory say-on-frequency vote under Proposal 5, and the approval of the grant of authority to our
Board to adjourn the Annual Meeting, if necessary or appropriate, under Proposal 7 are “non-discretionary” items.
You
are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares
in person at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent.
How
many votes do I have?
On
each matter to be voted upon, you have one vote for each share of our Common Stock that you owned as of the Record Date.
What
am I voting on?
The
following matters are scheduled for the Annual Meeting: (i) the election of four directors to our Board; (ii) the approval of
the Incentive Plan; (iii) the approval of the Stock Issuance Proposal; (iv) an advisory say-on-pay vote; (v) an advisory say-on-frequency
vote; (vi) the ratification of the selection of Weinberg as our independent registered public accounting firm; and (vii) the approval
of any adjournment or postponement. A vote may also be held on any other business as may properly come before the Annual Meeting
or any postponement or adjournment thereof, although there is no other business anticipated to come before the Annual Meeting.
What
are my voting choices for each of the items to be voted on at the Annual Meeting?
Proposal
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Board Recommendation
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Voting Choices
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Vote Required for Adoption
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Effect of Abstentions
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Effect of Broker Non-Votes
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1 – Election of Director Nominees
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FOR each nominee
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● Vote
“For All” of the nominees listed
● Vote
“Withhold All” to withhold for all of the nominees listed
● Vote
“For All Except” to vote for all the nominees except for the name written
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Plurality of the votes cast by the holders
of shares present in person or by proxy and entitled to vote at the Annual Meeting
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No effect
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No effect
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2 – Approval of the Incentive Plan
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FOR
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● Vote
“For” the approval of the Incentive Plan
● Vote
“Against” the approval of the Incentive Plan
● Abstain
from voting on this proposal
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Approved if a majority of the votes cast vote in favor of the proposal
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No effect
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No effect
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3 – Approval of the Stock Issuance Proposal
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FOR
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● Vote
“For” the approval of the Stock Issuance Proposal
● Vote
“Against” the approval of the Stock Issuance Proposal
● Abstain
from voting on this proposal
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Approved if a majority of the votes cast vote in favor of the proposal
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No effect
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No effect
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4 – Approval of the compensation of our named executive officers
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FOR
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● Vote
“For” the approval of the compensation of our named executive officers
● Vote
“Against” the approval of the compensation of our named executive officers
● Abstain
from voting on this proposal
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Approved, on a non-binding advisory basis, if a majority of the votes cast vote in favor of the proposal
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No effect
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No effect
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5 – Determine the frequency of our say-on-pay vote
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FOR “every 3 years”
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● Vote
“Every 1 year” to hold the say-on-pay vote annually
● Vote
“Every 2 years” to hold the say-on-pay vote every two years
● Vote
“Every 3 years” to hold the say-on-pay vote every three years
● Abstain
from voting on this proposal
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The frequency option receiving the most votes will be approved, on a non-binding advisory basis
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No effect
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No effect
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6 – Ratification of the appointment of Weinberg as our independent registered public accounting firm
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FOR
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● Vote
“For” the ratification of the appointment
● Vote
“Against” the ratification of the appointment
● Abstain
from voting on this proposal
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Approved, on a non-binding advisory basis, if a majority of the votes cast support the proposal
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No effect
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Brokers have discretion to vote
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7 – Approval of an adjournment or postponement, if necessary or appropriate
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FOR
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● Vote
“For” the approval of an adjournment or postponement, if necessary or appropriate
● Vote
“Against” the approval of an adjournment or postponement, if necessary or appropriate
● Abstain
from voting on this proposal
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Approved if a majority of the votes cast support the proposal
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No effect
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No effect
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How
do I vote?
Stockholder
of Record: Shares Registered in Your Name
If
you are a stockholder of record, you may vote using the following methods:
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In
Person. To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.
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By
Internet or Telephone. To vote by proxy via the Internet, simply follow the instructions described on the notice or proxy
card. To vote by proxy via the telephone within the United States and Canada, use the toll-free number on the notice or proxy
card.
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By
Mail. To vote by mail using the proxy card, simply complete, sign, and date the enclosed proxy card and return it promptly
in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as
you direct.
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Whether
or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend
the Annual Meeting and vote in person even if you have already voted by proxy.
Beneficial
Owner: Shares Registered in the Name of Broker, Bank, or Other Agent
If
you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you can vote as follows:
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In
Person. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank, or other agent.
Follow the instructions from your broker, bank, or other agent included with these proxy materials, or contact your broker,
bank, or other agent to request a proxy form.
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By
Internet or Telephone. You may vote through the Internet or by telephone only if your broker, bank, or other agent makes
these methods available, in which case the instructions will be included with the proxy materials.
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By
Mail. You should have received a proxy card and voting instructions with these proxy materials from the broker, bank,
or other agent holding your shares rather than from us. To vote by mail, simply complete and promptly mail the proxy card
or voting instruction form to ensure that your vote is counted.
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What
if I am a stockholder of record and return a proxy card but do not make specific choices?
You
should specify your choice for each matter on the proxy card. If you return a signed and dated proxy card without marking voting
selections for the specific proposals, your shares will be voted:
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FOR
the nominees listed under Proposal 1;
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FOR
the approval of the Incentive Plan under Proposal 2;
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FOR
the approval of the Stock Issuance Proposal under Proposal 3;
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FOR
the compensation of our named executive officers under Proposal 4;
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FOR
“every 3 years” for approval of the frequency that stockholder advisory votes to approve the compensation
of our named executive officers will occur under Proposal 5;
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FOR
the ratification of Weinberg as our independent registered public accounting firm under Proposal 6; and
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FOR
the approval of the adjournment or postponement of the Annual Meeting, if necessary or appropriate, under Proposal 7.
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If
any other matter is properly presented at the Annual Meeting, your proxy (the individual named on your proxy card) will vote your
shares using his or her best judgment.
What
if I am a beneficial owner and do not give voting instructions to my broker, bank, or other agent?
If
you fail to complete a proxy card or provide your broker with voting instructions at least ten days before the Annual Meeting,
your broker will be unable to vote on the non-discretionary matters. Your broker may use his or her discretion to cast a vote
on any other routine or discretionary matter for which you did not provide voting instructions.
Who
is paying for this proxy solicitation?
We
will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors, officers, and
employees may also solicit proxies by mail, in person, by telephone, or by other means of communication. Directors, officers,
and employees will not be paid any additional compensation for soliciting proxies. We will also reimburse brokerage firms, banks,
and other agents for the cost of forwarding proxy materials to beneficial owners.
What
does it mean if I receive more than one proxy card?
If
you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts.
Please complete, sign, and return each proxy card to ensure that all of your shares are voted.
What
is “householding”?
The
Securities and Exchange Commission (the “SEC”) has adopted rules that permit companies and intermediaries, such as
brokers, to satisfy the delivery requirements for proxy statements with respect to two or more security holders sharing the same
address by delivering a single proxy statement addressed to those security holders. This process, which is commonly referred to
as “householding,” potentially means convenience for security holders and cost savings for companies and intermediaries.
A
number of brokers with account holders who are Verb stockholders will be “householding” our proxy materials. A single
proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received
from the affected stockholders. Once you have received notice from your broker or us that they will be “householding”
communications to your address, “householding” will continue until you are notified otherwise or until you revoke
your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate
proxy statement, please notify your broker and also notify us by sending your written request to Investor Relations, Verb Technology
Company, Inc., 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663 or by calling Investor Relations at (855) 250.2300.
A stockholder who currently receives multiple copies of the proxy statement at his/her/its address and would like to request “householding”
of their communications should also contact his/her/its broker and notify us in writing or by telephone.
Can
I revoke or change my vote after submitting my proxy?
Yes.
You can revoke your proxy at any time before the final vote at the Annual Meeting. You may revoke your proxy by:
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submitting
a new proxy with a later date;
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sending
written notice of revocation to our Corporate Secretary at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663
in time for him to receive it before the Annual Meeting; or
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voting
in person at the Annual Meeting. Simply attending the meeting will not, by itself, revoke your proxy.
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Who
will count votes?
Votes
will be counted by the inspector of elections appointed for the Annual Meeting. The inspector of elections will also determine
the number of shares outstanding, the voting power of each, the number of shares represented at the Annual Meeting, the existence
of a quorum, and whether or not the proxies and ballots are valid and effective.
What
is the quorum requirement?
One-third (1/3)
of the outstanding shares of Common Stock entitled to vote on a matter must be present at the Annual Meeting (in person
or represented by proxy) in order for us to hold the Annual Meeting and conduct business. This is called a quorum. On the Record
Date, there were 23,524,753 outstanding shares of our Common Stock entitled to vote. Thus, 7,841,585 shares of our
Common Stock must be present at the Annual Meeting (in person or represented by proxy) to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy or vote in person at the Annual Meeting. Abstentions
and broker non-votes will also be counted towards the quorum requirement.
How
can I find out the results of the voting at the Annual Meeting?
We
will announce preliminary voting results at the Annual Meeting. We will report the final voting results in a Current Report on
Form 8-K that we expect to file with the SEC within four business days following the date on which such results become final.
When
are stockholder proposals for the Fiscal 2020 annual meeting due?
Stockholders
interested in presenting a proposal to be considered for inclusion in next year’s proxy statement and form of proxy may
do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and our Bylaws. To be considered for inclusion, stockholder proposals must be submitted in writing to the Corporate
Secretary, Verb Technology Company, Inc., 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663 before July 23,
2020, which is 120 calendar days prior to the anniversary of the mailing date of this Proxy Statement, and must be in compliance
with all applicable laws and regulations.
Any stockholder
who wishes to have a proposal considered at the 2020 annual meeting of stockholders, or nominate a director for election at
the fiscal 2020 annual meeting, but not submitted for inclusion in our proxy statement, must give advance notice to us prior to
the deadline for such meeting as set forth in our Amended and Restated Bylaws (the “Bylaws”). Under our Bylaws, in
order for a proposal or nomination to be timely, it must be received by us no earlier than 120 days prior to the anniversary date
of this Annual Meeting, or August 22, 2020, and no later than 90 days prior to the anniversary of this Annual Meeting, or September
21, 2020. In the event that our annual meeting is more than 30 days before or more than 70 days after such anniversary
date, or if directors are to be elected at a special meeting, you should refer to our Bylaws for specific requirements. Please
also refer to our Bylaws for specific information that must be included in the notice. We will not consider any proposal or nomination
that is not timely or otherwise does not meet the requirements set forth in our Bylaws.
If
a stockholder fails to meet these deadlines or fails to satisfy the requirements of SEC Rule 14a-4, the persons named as proxies
will be allowed to use their discretionary voting authority to vote on any such proposal or nomination as they determine appropriate,
if and when the matter is raised at the 2020 annual meeting.
How
do I get a copy of the exhibits filed with our Annual Report?
A
copy of our Annual Report for the fiscal year ended December 31, 2018, and consolidated financial statements, were provided to
you with this Proxy Statement. We will provide copies of the exhibits filed with our Annual Report upon written request if you
are a stockholder as of the Record Date. Requests for such copies should be directed to Investor Relations at 2210 Newport Boulevard,
Suite 200, Newport Beach, California 92663. In addition, copies of all of our electronically filed exhibits may be reviewed and
printed from the SEC website at http://www.sec.gov.
PROPOSAL
1 – ELECTION OF DIRECTORS
What
Am I Voting On?
Stockholders
are being asked to elect four directors, Rory J. Cutaia, James P. Geiskopf, Phillip J. Bond, and Kenneth S. Cragun, each to serve
for a term ending at the next annual meeting of stockholders following this Annual Meeting, or until their respective successors
have been duly elected and qualified.
If
any of the nominees becomes unable or unwilling to serve as a director before the Annual Meeting, an event which is not presently
anticipated, the individual named as proxy on the proxy card may exercise discretionary authority to vote for substitute nominees
proposed by our Board or, if no substitute is selected by our Board prior to or at the Annual Meeting, for a motion to reduce
the present membership of our Board to the number of nominees remaining available.
Voting
Recommendation
FOR
the election of each director nominee.
Board
and Committee Composition
Currently,
we have four directors with each director serving until his successor is elected and qualified. The table below lists each current
director, each such director’s committee memberships, and the chairman of each Board committee.
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Audit Committee
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Compensation Committee
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Governance and Nominating Committee
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Rory J. Cutaia
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James P. Geiskopf
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X
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Chairman
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X
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Phillip J. Bond
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X
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X
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Chairman
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Kenneth S. Cragun
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Chairman
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X
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X
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Biographical
and Related Information –Directors and Executive Officers
Our
directors and executive officers, their ages, positions held, and duration of such, are as follows:
Name
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Position Held with Our Company
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Age
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Date First Elected or Appointed
|
Rory J. Cutaia
|
|
Chairman of the Board, President, Chief Executive Officer, Secretary, and Treasurer
|
|
64
|
|
October 16, 2014
|
|
|
|
|
|
|
|
Jeffrey R. Clayborne
|
|
Chief Financial Officer
|
|
48
|
|
July 15, 2016
|
|
|
|
|
|
|
|
James P. Geiskopf
|
|
Director
|
|
60
|
|
October 16, 2014
|
|
|
|
|
|
|
|
Phillip J. Bond
|
|
Director
|
|
63
|
|
September 10, 2018
|
|
|
|
|
|
|
|
Kenneth S. Cragun
|
|
Director
|
|
58
|
|
September 10, 2018
|
The
following is an overview of the biographical information for each of our director nominees and executive officers, including their
age, the year they became a director or an officer, their principal occupations or employment for at least the past five years,
and certain of their other directorships.
Rory
J. Cutaia, Chairman of the Board, President, Chief Executive Officer, Secretary, and Treasurer
Rory
J. Cutaia has been our Chairman of the Board, Chief Executive Officer, President, Secretary, and Treasurer since the formation
of Cutaia Media Group, LLC (“CMG”), in which roles he has continued to serve through our October 2014 acquisition
of bBooth (USA), Inc., to current. Mr. Cutaia founded CMG in 2012 and bBooth, Inc. in 2014. In May 2014, CMG and bBooth, Inc.
merged and became known as bBoothUSA, which entity was acquired in October 2014 by Global System Designs, Inc. (“GSD”),
our predecessor. Prior to that, from October 2006 to August 2011, he was a partner and Entrepreneur-in-Residence at Corinthian
Capital Group, Inc. (“Corinthian”), a private equity fund based in New York City that invested in middle-market, U.S.
based companies. During his tenure at Corinthian, from June 2008 to October 2011, he was the co-founder and Executive Chairman
of Allied Fiber, Inc., a company engaged in the construction of a nation-wide fiber-optic network, and from June 2007 to August
2011, Mr. Cutaia was the Chief Executive Officer of GreenFields Coal Company, a company engaged in the deployment of technology
to recycle coal waste and clean-up coal waste sites. Before joining Corinthian, from January 2000 to October 2006, he founded
and was the Chairman and Chief Executive Officer of The Telx Group, Inc. (“Telx”), a company engaged in the telecom
carrier inter-connection, co-location, and data center business, which he sold in 2006. Before founding Telx, he was a practicing
lawyer with Shea & Gould, a prominent New York City law firm. Mr. Cutaia obtained his Juris Doctorate degree from the Fordham
University School of Law in 1985 and his Bachelor of Science, magna cum laude, in business management from the New York
Institute of Technology in 1982. We believe that Mr. Cutaia is qualified to serve on our board of directors because of his knowledge
of our current operations, in addition to his education and business experiences described above.
James
P. Geiskopf, Director
James
P. Geiskopf has been one of our directors since the formation of bBooth USA, in which role he has continued to serve through our
October 2014 acquisition of bBooth USA by GSD, our predecessor, to current. He also serves as our Lead Director. Mr. Geiskopf
has 32 years of experience leading companies in the services industry. From 1975 to 1986, Mr. Geiskopf served as the Chief Financial
Officer of Budget Rent a Car of Fairfield California and from 1986 to 2007, he served as its President and Chief Executive Officer.
In 2007, he sold the franchise. Mr. Geiskopf served on the Board of Directors of Suisun Valley Bank from 1986 to 1993 and also
served on the Board of Directors of Napa Valley Bancorp from 1991 to 1993, which was sold to a larger institution in 1993. Since
2014, Mr. Geiskopf has served on the Board of Directors of CurrencyWorks Inc., a public company quoted on the TSX Venture Exchange
and on the OTC Markets Group Inc.’s OTCQB® Venture Market (the “OTCQB”). From June 2013 to March
16, 2017, the date of his resignation, Mr. Geiskopf had served as a director of Electronic Cigarettes International Group, Ltd.,
a Nevada corporation (“ECIG”), whose common stock had been quoted on the over-the-counter market. ECIG filed a voluntary
petition for relief under the provisions of Chapter 7 of Title 11 of the United States Code on March 16, 2017.
Mr.
Geiskopf has significant and lengthy business experience including building, operating, and selling companies, serving on the
boards of directors for several banks, and serving as a director and officer of several public companies. In these roles he acquired
substantial business management, strategic, operational, human resource, financial, disclosure, compliance, and corporate governance
skills. These were the primary reasons that we concluded that he should serve as one of our directors.
Phillip
J. Bond, Director
Phillip
J. Bond was appointed as one of our directors effective September 10, 2018. On the same date, he was appointed as Chairman of
the Governance and Nominating Committee and to serve on the Audit, Compensation, and Governance and Nominating Committees. In
2018, Mr. Bond co-founded Potomac International Partners, Inc., a multidisciplinary consulting firm and currently serves as its
President of Government Affairs. In 2009, TechAmerica, a U.S.-based technology trade association, was formed from the merger of
AeA, the Cyber Security Industry Alliance, the Government Electronics & Information Technology Association, and the Information
Technology Association of America. Mr. Bond was appointed as the President of TechAmerica at the date of the merger, and later,
in 2010, was appointed as its Chief Executive Officer. Prior to the merger, Mr. Bond served as the President and Chief Executive
Officer of Information Technology Association of America from 2006 to 2008. From 2001 to 2005, Mr. Bond served as Undersecretary
of Technology in the U.S. Department of Commerce for Technology. From 2002 to 2003, Mr. Bond served concurrently as Chief of Staff
to Commerce Secretary Donald Evans. In his dual role, he worked closely with Secretary Evans to increase market access for U.S.
goods and services and further advance America’s technological leadership at home and abroad. Mr. Bond oversaw the operations
of the National Institute of Standards and Technology (NIST), the Office of Technology Policy, and the National Technical Information
Service. During his tenure, the Technology Administration was the pre-eminent portal between the federal government and the U.S.
technology. Earlier in his career, Mr. Bond served as Senior Vice President of Government Relations for Monster Worldwide, the
world’s largest online career site, and General Manager of Monster Government Solutions. Mr. Bond also served as Director
of Federal Public Policy for the Hewlett-Packard Company; Senior Vice President for Government Affairs and Treasurer of the Information
Technology Industry Council; as Chief of Staff to the late Congresswoman Jennifer Dunn (R-WA); Principal Deputy Assistant Secretary
of Defense for Legislative Affairs; Chief of Staff and Rules Committee Associate for Congressman Bob McEwen (R-OH); and as Special
Assistant to the Secretary of Defense for Legislative Affairs. Mr. Bond is a graduate of Linfield College in Oregon and now serves
on the school’s board of trustees.
Mr.
Bond has extensive experience in Washington D.C., where he is recognized for his leadership roles in the Executive branch of the
government of the United States, at major high technology companies, and as the Chief Executive Officer of TechAmerica, the largest
technology advocacy association in the United States. Mr. Bond’s unique leadership experience and expertise in Government
Relations, were the primary reasons that we concluded that he should serve as one of our directors.
Kenneth
S. Cragun, Director
Kenneth
S. Cragun was appointed as one of our directors effective September 10, 2018. On the same date, he was appointed as Chairman of
the Audit Committee, and to serve on the Compensation and Governance and Nominating Committees. Since October 2018, Mr. Cragun
has served as the Chief Accounting Officer of DPW Holdings, Inc., a diversified holding company, and since January 2019, as the
Chief Financial Officer and Treasurer for Alzamend Neuro, Inc., a biopharma company. Mr. Cragun also serves as a partner of Hardesty,
LLC, a national executive services firm. He has been a partner of its Southern California Practice since October 2016. From January
2018 to September 2018, Mr. Cragun served as the Chief Financial Officer of CorVel Corporation (“CorVel”). CorVel
is an Irvine, California-based national provider of workers’ compensation solutions for employers, third-party administrators,
insurance companies, and government agencies. Mr. Cragun is a two-time finalist for the Orange County Business Journal’s
“CFO of the Year – Public Companies” and has more than 30 years of experience, primarily in the technology industry.
He served as Chief Financial Officer of two Nasdaq-listed companies: Local Corporation (April 2009 to September 2016), formerly
based in Irvine, California, which operated a U.S. top 100 website “Local.com” and, in June 2015, filed a voluntary
petition in the United States Bankruptcy Court for the Central District of California seeking relief under the provisions of Chapter
11 of Title 11 of the United States Code (the “Bankruptcy Code”), and Modtech Holdings, Inc. (June 2006 to March 2009),
formerly based in Perris, California, and, in October 2008, filed a voluntary petition in the United States Bankruptcy Court for
the Central District of California seeking relief under the provisions of Chapter 11 of the Bankruptcy Code. Mr. Cragun received
his B.S. in Accounting from Colorado State University-Pueblo.
Mr.
Cragun’s industry experience is vast with extensive experience in fast-growth environments and building teams in more than
20 countries. Mr. Cragun has led multiple financing transactions, including IPOs, PIPEs, convertible debt, term loans, and lines
of credit. For these reasons, we believe that he provides additional breadth and depth to our Board.
Executive
Officer Who Does Not Serve as a Director
Jeffrey
R. Clayborne, Chief Financial Officer
Jeffrey R. Clayborne has been our Chief Financial Officer since July 15, 2016. Mr. Clayborne is an experienced
finance professional with a proven record of driving growth and profit for both Fortune 50 companies, as well as start-up companies.
Prior to joining the Company, Mr. Clayborne served as Chief Financial Officer with Breath Life Healing Center from August 2015
to July 2016. From September 2014 to August 2015, he served as Vice President of Business Development of Incroud, Inc. and from
May 2012 to September 2014, Mr. Clayborne served as President of Blast Music, LLC. Prior to this, Mr. Clayborne was employed by
Universal Music Group, where he served as Vice President, Head of Finance & Business Development for Fontana, in which role
he managed the financial planning and analysis of the sales and marketing division and led the business development department.
He also served in senior finance positions at The Walt Disney Company, including Senior Finance Manager at Walt Disney International,
where he oversaw financial planning and analysis for the organization in 37 countries. Mr. Clayborne began his career as a CPA
at McGladrey & Pullen LLP (now, RSM US LLP), then at KPMG Peat Marwick LLP (now, KPMG LLP). He brings with him more than 20
years of experience in all aspects of strategy, finance, business development, negotiation, and accounting. Mr. Clayborne earned
his Master of Business Administration degree from the University of Southern California, with high honors.
Family
Relationships
There
are no family relationships among any of our directors or executive officers.
Involvement
in Certain Legal Proceedings
Other
than the matters listed above with respect to Messrs. Geiskopf and Cragun, none of our directors and executive officers has been
involved in any of the following events during the past ten years:
|
(a)
|
any
petition under the federal bankruptcy laws or any state insolvency laws filed by or against, or an appointment of a receiver,
fiscal agent, or similar officer by a court for the business or property of such person, or any partnership in which such
person was a general partner at or within two years before the time of such filing, or any corporation or business association
of which such person was an executive officer at or within two years before the time of such filing;
|
|
|
|
|
(b)
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
(c)
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining such person from, or otherwise limiting, the following activities: (i) acting as a futures
commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the U.S. Commodity Futures Trading Commission (“CFTC”), or an associated
person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings and loan association, or insurance company, or engaging
in or continuing any conduct or practice in connection with such activity; engaging in any type of business practice or (ii)
engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation
of federal or state securities laws or federal commodities laws;
|
|
|
|
|
(d)
|
being
the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated of any federal or state authority
barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described
in paragraph (c)(i) above, or to be associated with persons engaged in any such activity;
|
|
|
|
|
(e)
|
being
found by a court of competent jurisdiction (in a civil action) or the SEC to have violated a federal or state securities or
commodities law, and the judgment in such civil action or finding by the SEC has not been reversed, suspended, or vacated;
|
|
(f)
|
being
found by a court of competent jurisdiction in a civil action or by the CFTC to have violated any federal commodities law,
and the judgment in such civil action or finding by the CFTC has not been subsequently reversed, suspended, or vacated;
|
|
|
|
|
(g)
|
being
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended, or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law
or regulation, (ii) any law or regulation respecting financial institutions or insurance companies, including, but not limited
to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
|
|
|
|
(h)
|
being
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
|
CORPORATE
GOVERNANCE
Meetings
of the Board and its Committees
Our
Board has an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. Our Board met 17 times, including
telephonic meetings, during fiscal 2018. All four directors attended 100% of the Board meetings following their respective appointments
to our Board. Messrs. Geiskopf, Bond, and Cragun attended 100% of the meetings held by committees of the Board on which they served.
This is our first annual meeting of stockholders.
It
is our policy that all of our directors are required to make a concerted and conscientious effort to attend our annual meeting
of stockholders in each year during which that director serves as a member of our Board.
Audit
Committee and Audit Committee Financial Expert
On
August 14, 2018, our Board amended and restated the charter (the “Audit Committee Charter”) to govern the Audit Committee
(our “Audit Committee”). Currently, Messrs. Geiskopf, Bond, and Cragun (Chairman) serve as members of our Audit Committee
and each meets the independence requirements of The Nasdaq Capital Market (“Nasdaq”) and the SEC. Mr. Cragun qualifies
as an “audit committee financial expert.” The Audit Committee Charter requires that each member of the Audit Committee
meets the independence requirements of Nasdaq and the SEC and requires the Audit Committee to have at least one member that qualifies
as an “audit committee financial expert.” In addition to the enumerated responsibilities as set forth in the Audit
Committee Charter, the primary function of our Audit Committee is to assist our Board in its general oversight of our accounting
and financial reporting processes, audits of our financial statements, and internal control and audit functions. The Audit Committee
Charter can be found online at https://myverb.com/audit-committe-charter.
Compensation
Committee
On
August 14, 2018, our Board approved and adopted a charter (the “Compensation Committee Charter”) to govern the Compensation
Committee (our “Compensation Committee”). Currently, Messrs. Geiskopf (Chairman), Bond, and Cragun serve as members
of our Compensation Committee and each meets the independence requirements of Nasdaq and the SEC, qualifies as a “non-employee
director” within the meaning of Rule 16b-3 under the Exchange Act, and qualifies as an outside director within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). In addition to the
enumerated responsibilities as set forth in the Compensation Committee Charter, the primary function of our Compensation Committee
is to oversee the compensation of our executives, produce an annual report on executive compensation for inclusion in our proxy
statement, if and when required by applicable laws or regulations, and advise our Board on the adoption of policies that govern
our compensation programs. The Compensation Committee Charter may be found online at https://myverb.com/compensation-committee-charter.
Governance
and Nominating Committee
On
August 14, 2018, our Board approved and adopted a charter (the “Nominating Committee Charter”) to govern the Governance
and Nominating Committee (our “Nominating Committee”). Currently, Messrs. Geiskopf, Bond (Chairman), and Cragun serve
as members of our Nominating Committee and each meets the independence requirements of Nasdaq and the SEC. The Nominating Committee
Charter requires that each member meets the independence requirements of Nasdaq and the SEC. In addition to the enumerated responsibilities
as set forth in the Nominating Committee Charter, the primary function of our Nominating Committee is to determine the slate of
director nominees for election to our Board, to identify and recommend candidates to fill vacancies occurring between annual meetings
of stockholders, to review our policies and programs that relate to matters of corporate responsibility, including public issues
of significance to our stockholders and us, and any other related matters required by federal securities laws. The Nominating
Committee Charter may be found online https://myverb.com/governance-and-nominating-committee-charter.
All
current committee members are expected to be reappointed to the same committees at the meeting of our Board currently scheduled
to be held immediately following the Annual Meeting.
Nominations
Process and Criteria
As
of November 12, 2019, we had not effected any material changes to the procedures by which our stockholders may recommend nominees
to our Board. Our Board does not have a formal policy with regard to the consideration of any director candidates recommended
by our stockholders. Our Board has determined that it is in the best position to evaluate our requirements, as well as the qualifications
of each candidate when it considers a nominee for a position on our Board. Accordingly, we do not currently have any specific
or minimum criteria for the election of nominees to our Board and we do not have any specific process or procedure for evaluating
such nominees. Our Board assesses all candidates, whether submitted by management or stockholders, and makes recommendations for
election or appointment.
There
were no fees paid or due to third parties in fiscal 2019 to identify or evaluate, or to assist in evaluating or identifying, potential
director nominees.
Any
stockholder wishing to propose that a person be nominated for or appointed to our Board may submit such a proposal, according
to the procedure described in the stockholder proposal section on page 7 of this Proxy Statement, to:
Corporate
Secretary
Verb
Technology Company, Inc.
2210
Newport Boulevard, Suite 200
Newport
Beach, California 92663
(855)
250.2300
The
Corporate Secretary will promptly forward any such correspondence to the Chairman of the Governance and Nominating Committee for
review and consideration by the Governance and Nominating Committee in accordance with the criteria described above.
Director
Independence
Our
Board is currently composed of four members. We determined that three directors, James P. Geiskopf, Phillip J. Bond, and Kenneth
S. Cragun qualify as independent directors. We determined that Mr. Cutaia, our Chairman of the Board, President, Chief Executive
Officer, Treasurer, and Secretary, is not independent. We evaluated independence in accordance with the rules of Nasdaq and the
SEC. Messrs. Geiskopf, Bond, and Cragun also serve on our Audit, Compensation, and Governance and Nominating Committees. Accordingly,
all of the members of the Audit, Nominating and Corporate Governance, and Compensation Committees are also independent.
Orientation
and Continuing Education
We
have an informal process to orient and educate new directors to our Board regarding their role on our Board, our committees and
our directors, as well as the nature and operations of our business. This process provides for an orientation with key members
of the management staff, and further provides access to materials necessary to inform them of the information required to carry
out their responsibilities as a Board member. This information includes the most recent Board-approved budget, the most recent
annual report, copies of the audited financial statements, and copies of the interim quarterly financial statements.
Our
Board does not provide continuing education for our directors. Each director is responsible to maintain the skills and knowledge
necessary to meet his obligations as a director.
Assessments
Our
Board intends that individual director assessments be conducted by other directors, taking into account each director’s
contributions at Board meetings, service on committees, experience base, and their general ability to contribute to one or more
of our major needs. However, due to our stage of development and our need to deal with other urgent priorities, our Board has
not yet implemented such a process of assessment.
Compensation
Committee Interlocks and Insider Participation
No
interlocking relationship exists between our Board and the board of directors or compensation committee of any other company,
nor has any interlocking relationship existed in the past.
Code
of Ethics
In
2014, our Board approved and adopted a Code of Ethics and Business Conduct for Directors, Senior Officers, and Employees (our
“Code of Ethics”) that applies to all of our directors, officers, and employees, including our principal executive
officer and principal financial officer. Our Code of Ethics addresses such individuals’ conduct with respect to, among other
things, conflicts of interests; compliance with applicable laws, rules, and regulations; full, fair, accurate, timely, and understandable
disclosure by us; competition and fair dealing; corporate opportunities; confidentiality; protection and proper use of our assets;
and reporting suspected illegal or unethical behavior. Our Code of Ethics is available on our website at https://myverb.com/code-of-ethics.
Related
Party Transactions
We
follow ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
When and if we contemplate entering into a transaction in which any executive officer, director, nominee, or any family member
of the foregoing would have a direct or indirect interest, regardless of the amount involved, the terms of such transaction are
to be presented to our full Board (other than any interested director) for approval, and documented in the Board minutes.
Other
than as disclosed below, we have had no related party transactions.
Notes
Payable – Related Parties
We
had the following outstanding notes payable during the period specified above:
Note
|
|
Issuance
Date
|
|
Maturity
Date
|
|
Interest
Rate
|
|
|
Original
Borrowing
|
|
|
Largest
Aggregate Amount Outstanding Since January 1, 2018
|
|
|
Amount
Outstanding as of November 12, 2019
|
|
|
Interest
Paid Since January 1, 2019
|
|
|
Interest
Paid Since January 1, 2018
|
|
Note 1(1)
|
|
December 1, 2015
|
|
February 8, 2021
|
|
|
12.0
|
%
|
|
$
|
1,249,000
|
|
|
$
|
1,199,000
|
|
|
$
|
825,000
|
|
|
$
|
78,000
|
|
|
$
|
210,000
|
|
Note 2(2)
|
|
December 1, 2015
|
|
February 8, 2021
|
|
|
12.0
|
%
|
|
|
189,000
|
|
|
|
189,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,000
|
|
Note 3(3)
|
|
December 1, 2015
|
|
April 1, 2017
|
|
|
12.0
|
%
|
|
|
112,000
|
|
|
|
112,000
|
|
|
|
112,000
|
|
|
|
-
|
|
|
|
-
|
|
Note 4(4)
|
|
April 4, 2016
|
|
June 4, 2021
|
|
|
12.0
|
%
|
|
|
343,000
|
|
|
|
343,000
|
|
|
|
240,000
|
|
|
|
23,000
|
|
|
|
107,000
|
|
Note 5(5)
|
|
April 4, 2016
|
|
December 4, 2018
|
|
|
12.0
|
%
|
|
|
122,000
|
|
|
|
122,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,000
|
|
Total notes payable – related
parties
|
|
|
|
|
|
|
|
|
|
$
|
2,015,000
|
|
|
$
|
1,965,000
|
|
|
$
|
1,177,000
|
|
|
$
|
101,000
|
|
|
$
|
317,000
|
|
(1)
|
On
December 1, 2015, we issued a convertible note payable to Mr. Rory J. Cutaia, our majority stockholder and Chief Executive
Officer, to consolidate all loans and advances made by Mr. Cutaia to us as of that date. The note bears interest at a
rate of 12% per annum, is secured by our assets, and had an original maturity date of April 1, 2017. Pursuant to the terms
of the note agreement, at Mr. Cutaia’s discretion, he may convert up to 30%, or $375,000 of outstanding principal,
plus accrued interest thereon, into shares of our Common Stock at a conversion rate of $1.05 per share.
On
May 4, 2017, we entered into an extension agreement with Mr. Cutaia to extend the maturity date of the note from April
1, 2017 to August 1, 2018. In consideration, we issued Mr. Cutaia a three-year warrant to purchase up to 117,013 shares
of our Common Stock at a price of $5.33 per share with a fair value of $517,000. All other terms of the note remain unchanged.
On
August 8, 2018, we entered into an extension agreement with Mr. Cutaia to extend the maturity date of the note to February
8, 2021. All other terms of the note remain unchanged. In connection with the extension, we granted to Mr. Cutaia a three-year
warrant to purchase up to 163,113 shares of our Common Stock at a price of $7.35 per share with a fair value of $1,075,000.
On
September 30, 2018, Mr. Cutaia converted the principal balance that was convertible, or $375,000, into 356,824 restricted
shares of our Common Stock at $1.05 per share.
As
of November 12, 2019, the outstanding balance of the note amounted to $825,000.
|
|
|
(2)
|
On
December 1, 2015, we issued a convertible note to Mr. Cutaia in the amount of $189,000, representing a portion of Mr.
Cutaia’s accrued salary for 2015. The note was unsecured, bore interest at a rate of 12% per annum, and was convertible
into shares of our Common Stock at a conversion price of $1.05 per share. The original maturity date of August 1, 2018,
was subsequently extended to February 8, 2021. As of December 31, 2017, outstanding balance of the note amounted to $189,000.
On
September 30, 2018, Mr. Cutaia converted the entire unpaid balance of $189,000 into 180,000 restricted shares of our Common
Stock at $1.05 per share.
|
|
|
(3)
|
On
December 1, 2015, we issued a note payable to a former member of our Board, in the amount of $112,000, representing unpaid
consulting fees as of November 30, 2015. The note is unsecured, bears interest at a rate of 12% per annum, and matured
in April 2017.
As
of September 30, 2019, and the date of this Proxy Statement, the note is past due. We are currently in negotiations with
the note holder to settle the note payable.
|
|
|
(4)
|
On
April 4, 2016, we issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made
by Mr. Cutaia to us from December 2015 through March 2016. The note bears interest at a rate of 12% per annum, is secured
by our assets, and, at one point, originally matured on December 4, 2018. Pursuant to the terms of the note, a total of
30% of the note principal, or $103,000, can be converted into shares of our Common Stock at a conversion price of $1.05
per share. As of December 31, 2017, the outstanding balance of the note was $343,000.
On
September 30, 2018, pursuant to the terms of the note, Mr. Cutaia converted 30% of the principal balance, or $103,000,
into 98,093 restricted shares of our Common Stock at $1.05 per share.
On
December 4, 2018, we entered into an extension agreement with Mr. Cutaia to extend the maturity date of the note to June
4, 2021. All other terms of the note remain unchanged. In connection with the extension, we granted to Mr. Cutaia a three-year
warrant to purchase up to 353,000 shares of our Common Stock at a price of $5.10 per share with a fair value of $111,000.
As
of November 12, 2019, the outstanding balance of the note amounted to $240,000.
|
|
|
(5)
|
On
April 4, 2016, we issued a convertible note payable to Mr. Cutaia in the amount of $122,000, representing his unpaid salary
from December 2015 through March 2016. The note was unsecured, bore interest at the rate of 12% per annum, originally
matured on December 4, 2018, and was convertible into shares of our Common Stock at a conversion price of $1.05 per share.
As of December 31, 2017, the outstanding balance of the note amounted to $122,000.
On
September 30, 2018, Mr. Cutaia converted the entire outstanding principal amount of $122,000 into 116,071 restricted shares
of our Common Stock. Thus, as of that date, the note was satisfied in full.
|
Board
Leadership Structure and Role in Risk Oversight
Board
Leadership Structure
We
currently combine the positions of Chairman and Chief Executive Officer into one position. We believe that this structure is appropriate
at this time and is a leadership model that has served our stockholders well since the inception of the Company. We believe that
this combined model has certain advantages over other leadership structures. This combined role allows Mr. Cutaia to drive execution
of our strategic plans and facilitates effective communication between management and our Board to bring key issues to its attention,
and to see that our Board’s guidance and decisions are implemented effectively by management. Further, our Board has designated
Mr. Geiskopf as its Lead Director. Our Board believes that Mr. Geiskopf’s strong leadership and qualifications, including
his prior experience as a chief executive officer and chief financial officer and his tenure on our Board, among other factors,
contribute to his ability to fulfill the role of Lead Director effectively.
Role
of the Board in Risk Oversight
Our
Board is responsible for the oversight of our operational risk management process. Our Board has delegated authority for addressing
certain risks, and accessing the steps management has taken to monitor, control, and report such risks to our Audit Committee.
Such risks include risks relating to execution of our growth strategy, the effects of the economy and general financial condition
and outlook, our ability to expand our client base, communication with investors, certain actions of our competitors, the protection
of our intellectual property, sufficiency of our capital, security of information systems and data, integration of new information
systems, credit risk, product liability, and costs of reliance on external advisors. Our Audit Committee then reports such risks
as appropriate to our Board, which then initiates discussions with appropriate members of our senior management if, after discussion
of such risks, our Board determines that such risks raise questions or concerns about the status of operational risks then facing
us.
Our
Board relies on our Compensation Committee to address significant risk exposures that we may face with respect to compensation,
including risks relating to retention of key employees, protection of partner relationships, management succession, and benefit
costs, and, when appropriate, reports these risks to the full Board.
Stockholder
Communications with the Board
Stockholders
and other parties interested in communicating directly with our Board, a committee thereof, or any individual director, may do
so by sending a written communication to the attention of the intended recipient(s) in care of the Corporate Secretary, Verb Technology
Company, Inc., 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663. The Corporate Secretary will forward all appropriate
communications to the Chairman of our Audit Committee.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of November 12, 2019, certain information with respect to the beneficial ownership of shares of
our Common Stock by (i) each of our directors (including director nominees), (ii) each of our named executive officers, (iii)
our directors and executive officers as a group, and (iv) each stockholder known by us to be the beneficial owner of more than
5% of our outstanding Common Stock.
Name and Address(7)
|
|
Title of Class
|
|
Amount and Nature of Beneficial Ownership(1)
|
|
|
Percent Owned (%)(2)
|
|
Rory J. Cutaia
c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663
|
|
Common Stock
|
|
|
3,981,869
|
(3)
|
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
James P. Geiskopf
c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663
|
|
Common Stock
|
|
|
503,933
|
(4)
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey R. Clayborne
c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663
|
|
Common Stock
|
|
|
403,265
|
(5)
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Phillip J. Bond
c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663
|
|
Common Stock
|
|
|
28,167
|
(6)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth S. Cragun
c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663
|
|
Common Stock
|
|
|
28,167
|
(7)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Chad Thomas
c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663
|
|
Common Stock
|
|
|
44,444
|
(8)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (6 persons)
|
|
Common Stock
|
|
|
4,989,845
|
(9)
|
|
|
20.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial owner of more than 5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
*
Represents less than 1%.
(1)
|
Except
as otherwise indicated, we believe that the beneficial owners of the shares of our Common Stock listed above, based on information
furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property
laws, where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Shares of our Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days are deemed outstanding for purposes of computing the percentage ownership of the
person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership
of any other person.
|
|
|
(2)
|
Percentage
of Common Stock is based on 23,524,753 shares of our Common Stock being issued and outstanding as of November 12, 2019,
the Record Date.
|
(3)
|
Consists
of 3,004,269 shares of our Common Stock held directly, 240,240 shares of our Common Stock held by Cutaia Media Group Holdings,
LLC (an entity over which Mr. Cutaia has dispositive and voting authority), 54,006 shares of our Common Stock held by Mr.
Cutaia’s spouse (as to which shares, he disclaims beneficial ownership), and 3,000 shares of our Common Stock held
jointly by Mr. Cutaia and his spouse. Also includes 336,667 shares of our Common Stock underlying stock options held directly
and 40,000 shares of our Common Stock underlying stock options held by Mr. Cutaia’s spouse that are exercisable within
60 days of the date of the Record date (as to which underlying shares, he disclaims beneficial ownership). The total also
includes 303,688 shares of our Common Stock underlying warrants granted to Mr. Cutaia, which warrants are exercisable within
60 days of the Record Date.
|
|
|
(4)
|
Includes
275,266 shares of our Common Stock held directly and 5,333 shares of our Common Stock held by Mr. Geiskopf’s
children. Also includes 223,333 shares of our Common Stock underlying stock options exercisable within 60 days of the Record
Date.
|
|
|
(5)
|
Includes
134,833 shares of our Common Stock held directly. Also, includes 268,432 shares of our Common Stock underlying stock
options that are exercisable within 60 days of the Record Date. Excludes 11,111 shares of our Common Stock underlying stock
options that are not exercisable within 60 days of the Record Date.
|
|
|
(6)
|
Includes
1,500 shares of our Common Stock held directly. Also includes
26,667 shares of our Common Stock underlying stock options exercisable within 60 days of the Record Date. Excludes 40,000
shares of our Common Stock underlying stock options not exercisable within 60 days of the Record Date.
|
|
|
(7)
|
Includes
1,500 shares of our Common Stock held directly. Also includes
26,667 shares of our Common Stock underlying stock options exercisable within 60 days of the Record Date. Excludes 40,000
shares of our Common Stock underlying stock options not exercisable within 60 days of the Record Date.
|
|
|
(8)
|
Chad
Thomas qualified as one of our named executive officers for fiscal 2018. Effective April 2019, Mr. Thomas moved out of his
role as Chief Technology Officer and now serves as our Senior Managing Director of Technology Development and Engineering.
The number above includes 44,444 shares of our Common Stock underlying stock options exercisable within 60 days of the Record
Date. Excludes 88,889 shares of our Common Stock underlying stock options not exercisable within 60 days of the Record Date.
|
|
|
(9)
|
Includes all shares,
options, and warrants referenced in notes 3 through 8.
|
Change-in-Control
Arrangements
We
do not know of any arrangements, which may, at a subsequent date, result in a change-in-control.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act, requires that our directors and executive officers, and persons who beneficially own more than 10%
of our Common Stock (referred to herein as the “Reporting Persons”) file with the SEC various reports as to their
ownership of and activities relating to our Common Stock. To the best of our knowledge, all Reporting Persons complied on a timely
basis with all filing requirements applicable to them with respect to transactions during our most recent fiscal year. In making
these statements, we have relied solely on our review of copies of the reports furnished to us, representations that no other
reports were required, and other knowledge relating to transactions involving the Reporting Persons.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth certain compensation awarded to, earned by, or paid to the following “named executive officers,”
which is defined as follows:
|
(a)
|
all
individuals serving as our principal executive officer during the year ended December 31, 2018; and
|
|
|
|
|
(b)
|
each
of our two other most highly compensated executive officers who were serving as executive officers at the end of the year
ended December 31, 2018.
|
We
did not have any individuals for whom disclosure would have been required but for the fact that the individual was not serving
as an executive officer as of the end of fiscal 2018.
Name and Position
|
|
Fiscal Year
|
|
|
Salary ($)
|
|
|
Stock Awards ($)(1)
|
|
|
Option Awards ($)(2)
|
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
|
All Other Compensation ($)
|
|
|
Total
($)
|
|
Rory J. Cutaia(3)
|
|
2018
|
|
|
|
436,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,186,000
|
|
|
|
1,622,000
|
(4)
|
Chairman of the Board, Chief Executive Officer, President, Secretary, and Treasurer
|
|
2017
|
|
|
|
400,000
|
|
|
|
710,000
|
|
|
|
167,000
|
|
|
|
-
|
|
|
|
690,000
|
|
|
|
1,967,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey R. Clayborne(6)
|
|
2018
|
|
|
|
110,000
|
|
|
|
-
|
|
|
|
17,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127,000
|
|
Chief Financial Officer
|
|
2017
|
|
|
|
96,000
|
|
|
|
325,000
|
|
|
|
313,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
733,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chad J. Thomas(7)
|
|
2018
|
|
|
|
28,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
965,000
|
|
|
|
-
|
|
|
|
993,000
|
|
Chief Technology Officer
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(1)
|
For
valuation purposes, the dollar amount shown is calculated based on the market price of our Common Stock on the grant dates.
The number of shares granted, the grant date, and the market price of such shares for each named executive officer is set
forth below.
|
|
|
(2)
|
For
valuation assumptions on stock option awards refer to Note 2 to the audited consolidated financial statements for the year
ended December 31, 2018. The disclosed amounts reflect the fair value of the stock option awards that were earned during fiscal
years ended December 31, 2018 and 2017 in accordance with FASB ASC Topic 718.
|
|
|
(3)
|
Mr.
Cutaia was appointed as Chairman of the Board, President, Chief Executive Officer, Secretary, and Treasurer on October 16,
2014.
|
(4)
|
As
of December 31, 2018, Mr. Cutaia had accrued but unpaid compensation equal to $188,000.
|
|
|
(5)
|
As
of December 31, 2017, Mr. Cutaia had accrued but unpaid compensation equal to $400,000.
|
|
|
(6)
|
Mr.
Clayborne was appointed as Chief Financial Officer on July 15, 2016.
|
|
|
(7)
|
Mr.
Thomas was appointed as Chief Technology Officer on October 12, 2018 and stepped out of this role on April 11, 2019. Mr. Thomas
currently serves as our Senior Managing Director of Technology Development and Engineering.
|
Narrative
Disclosure to Summary Compensation Table
The
following is a discussion of the material information that we believe is necessary to understand the information disclosed in
the foregoing Summary Compensation Table.
Rory
J. Cutaia
On
November 1, 2014, we entered into an employment agreement with Mr. Cutaia. The employment agreement is for a five-year term, and
can be extended for additional one-year periods. On October 30, 2019, we entered into that certain First Amendment to Executive
Employment Agreement with Mr. Cutaia for the purpose of extending the term of his employment agreement to December 31, 2019.
In addition to certain payments due to Mr. Cutaia upon termination of employment, the employment agreement contains customary
non-competition, non-solicitation, and confidentiality provisions. Mr. Cutaia is entitled to a base salary of $325,000 per year,
with annual increases of 10%. Mr. Cutaia is also entitled to a mandatory increase of not less than $100,000 per annum upon us
achieving EBITDA break-even. In addition, Mr. Cutaia is eligible for an annual bonus in an amount of $325,000 upon the achievement
of certain performance targets established by our Board, as well as an annual stock option grant of 16,667 shares of our Common
Stock. Finally, Mr. Cutaia is eligible for certain other benefits such as health, vision, and dental insurance, life insurance,
and 401(k) Company matching.
Mr.
Cutaia earned total cash compensation for his services to us in the amount of $436,000 and $400,000 for fiscal years 2018 and
2017, respectively.
On
August 15, 2017, we issued Mr. Cutaia 250,000 shares of our Common Stock. The price per share was $2.25, as reported on the OTCQB.
On
January 10, 2017, we granted Mr. Cutaia a stock option to purchase up to 133,333 shares of our Common Stock at an exercise price
of $1.20 per share. The option is not currently vested, but will vest in full on January 10, 2020, and will expire on January
9, 2022. On December 19, 2017, we granted Mr. Cutaia a stock option to purchase up to 16,667 shares of our Common Stock at an
exercise price of $1.16 per share. The option was vested as to 8,333 shares on the date of grant and vested as to the other 8,333
shares on December 18, 2018. The option expires on December 18, 2022.
On
March 7, 2018, we issued Mr. Cutaia 100,000 shares of our Common Stock for services rendered in 2017. The price per share was
$6.60, as reported on the OTCQB.
Mr.
Cutaia also received $1,186,000 and $690,000 for fiscal years 2018 and 2017, respectively, as “other compensation,”
which represented warrants with 3-year terms to purchase up to 186,675 and 205,623 shares of our Common Stock, respectively.
Jeffrey
R. Clayborne
Mr.
Clayborne earned total cash compensation for his services to us in the amount of $110,000 and $96,000 for fiscal years 2018 and
2017, respectively.
On
May 4, 2017, we issued Mr. Clayborne 33,333 shares of our Common Stock. The price per share was $5.40, as reported on the OTCQB.
On
January 10, 2017, we granted Mr. Clayborne a stock option to purchase 133,333 shares of our Common Stock at an exercise price
of $1.20 per share. All of the shares will vest on January 10, 2020. On May 4, 2017, we granted Mr. Clayborne a stock option to
purchase 33,333 shares of our Common Stock at an exercise price of $1.20 per share. The shares will vest annually in three equal
installments. As of November 12, 2019, 22,222 shares were vested.
On
March 7, 2018, we issued Mr. Clayborne 100,000 shares of our Common Stock for services rendered in 2017. The price per share was
$6.60, as reported on the OTCQB.
On
January 22, 2018, we granted Mr. Clayborne a stock option to purchase 12,876 shares of our Common Stock at an exercise price of
$1.35. The shares vested on grant date.
Chad
J. Thomas
Mr.
Thomas earned total cash compensation for his services to us in the amount of $28,000 for fiscal year 2018.
On
October 12, 2018, we granted Mr. Thomas a stock option to purchase 133,333 shares of our Common Stock at an exercise price of
$7.50. The shares will vest annually in three equal installments. As of November 12, 2019, no shares were vested.
Outstanding
Equity Awards at Fiscal Year-End
We
did not have any stock awards outstanding as of December 31, 2018. The following table sets forth, for each named executive officer,
certain information concerning outstanding option awards as of December 31, 2018:
Name
|
|
Number of securities underlying unexercised
options (exercisable)
(#)
|
|
|
Number of securities underlying unexercised
options (unexercisable) (#)
|
|
|
Option
exercise
price
($)
|
|
|
Option
expiration date
|
Rory J. Cutaia
|
|
|
16,667
|
|
|
|
-
|
|
|
|
1.20
|
|
|
December 18, 2022(1)
|
|
|
|
-
|
|
|
|
133,333
|
|
|
|
1.20
|
|
|
January 9, 2022(2)
|
|
|
|
16,667
|
|
|
|
-
|
|
|
|
1.65
|
|
|
October 31, 2012(3)
|
|
|
|
83,333
|
|
|
|
-
|
|
|
|
1.50
|
|
|
May 11, 2021(4)
|
|
|
|
16,667
|
|
|
|
-
|
|
|
|
1.20
|
|
|
November 1, 2019(5)
|
|
|
|
53,333
|
|
|
|
-
|
|
|
|
7.50
|
|
|
May 12, 2019(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey R. Clayborne
|
|
|
11,111
|
|
|
|
22,222
|
|
|
|
5.40
|
|
|
May 3, 2022(7)
|
|
|
|
-
|
|
|
|
133,333
|
|
|
|
1.20
|
|
|
January 9, 2022(8)
|
|
|
|
68,889
|
|
|
|
31,178
|
|
|
|
1.65
|
|
|
July 14, 2021(9)
|
|
|
|
12,876
|
|
|
|
-
|
|
|
|
1.35
|
|
|
January 21, 2023(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chad J. Thomas
|
|
|
-
|
|
|
|
133,333
|
|
|
|
7.50
|
|
|
October 11, 2023(11)
|
(1)
|
All
shares have fully vested.
|
|
|
(2)
|
133,333
shares will vest on January 10, 2020.
|
|
|
(3)
|
All
shares have fully vested.
|
|
|
(4)
|
83,333
shares vested on the grant date.
|
|
|
(5)
|
All
shares have fully vested.
|
|
|
(6)
|
All
shares have fully vested.
|
|
|
(7)
|
Shares
will vest annually in three equal installments.
|
(8)
|
All
133,333 shares will vest on January 10, 2020.
|
|
|
(9)
|
6,667
shares vested on the grant date, and the remaining 93,333 shares will vest annually in three equal installments.
|
|
|
(10)
|
All
shares vested on the grant date.
|
|
|
(11)
|
Shares
will vest annually in three equal installments.
|
Retirement
or Similar Benefit Plans
There
are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.
Resignation,
Retirement, Other Termination, or Change in Control Arrangements
Other
than as disclosed below, we have no contract, agreement, plan, or arrangement, whether written or unwritten, that provides for
payments to our directors or executive officers at, following, or in connection with the resignation, retirement, or other termination
of our directors or executive officers, or a change in control of our company or a change in our directors’ or executive
officers’ responsibilities following a change in control.
Rory
J. Cutaia
Pursuant to Mr. Cutaia’s
executive employment agreement dated November 1, 2014 (the “Employment Agreement”), Mr. Cutaia is entitled
to the following severance package in the event he is “terminated without cause,” “terminated for good reason,”
or “terminated upon permanent disability”: (i) monthly payments of $27,000 or such sum equal to his monthly base compensation
at the time of the termination, whichever is higher, for a period of 36 months from the date of such termination or to the end
of the term of the Employment Agreement, whichever is longer; and (ii) reimbursement for COBRA health insurance costs for 36 months
from the date of such termination or to the end of the term of the Employment Agreement, whichever is longer. In addition, Mr.
Cutaia’s unvested equity will immediately vest, without restriction, and any unearned and unpaid bonus compensation, expense
reimbursement, and all accrued vacation, personal, and sick days, etc. shall be deemed earned, vested, and paid immediately. For
purposes of the Employment Agreement, “terminated without cause” means Mr. Cutaia is terminated for any reason other
than a discharge for cause or due to Mr. Cutaia’s death or permanent disability. For purposes of the Employment Agreement,
“terminated for good reason” means the voluntary termination of the Employment Agreement by Mr. Cutaia if any of the
following occurs without his prior written consent, which consent cannot be unreasonably withheld considering our then current
financial condition, and in each case, which continues uncured for 30 days following receipt by us of Mr. Cutaia’s written
notice: (i) there is a material reduction by us in (A) Mr. Cutaia’s annual base salary then in effect or (B) the annual
target bonus, as set forth in the Employment Agreement, or the maximum additional amount up to which Mr. Cutaia is eligible pursuant
to the Employment Agreement; (ii) we reduce Mr. Cutaia’s job title and position such that Mr. Cutaia (A) is no longer our
Chief Executive Officer; (B) is no longer the Chairman of the Board; or (C) is involuntarily removed from our Board; or (iii)
Mr. Cutaia is required to relocated to an office location outside of Los Angeles, California, or outside of a 30-mile radius of
Los Angeles, California. With respect to our recent office relocation to Newport Beach, California, Mr. Cutaia voluntarily relocated.
For purposes of the Employment Agreement, “terminated upon permanent disability” means Mr. Cutaia is terminated because
he is unable to perform his duties due to a physical or mental condition for (i) a period of 120 consecutive days or (ii) an aggregate
of 180 days in any 12-month period. On October 30, 2019, we entered into that certain First Amendment to Executive Employment
Agreement with Mr. Cutaia for the purpose of extending the term of the Employment Agreement to December 31, 2019.
DIRECTOR
COMPENSATION
Director
Summary Compensation Table
The
table below summarizes the compensation paid to our non-employee directors for the fiscal year ended December 31, 2018:
Name(1)
|
|
Fees earned or paid in cash
($)
|
|
|
Stock awards
($)
|
|
|
Option awards
($)
|
|
|
|
Non-equity incentive plan compensation
($)
|
|
|
Nonqualified deferred compensation earnings
($)
|
|
|
All other compensation
($)
|
|
|
Total
($)
|
|
James P. Geiskopf
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip J. Bond
|
|
|
-
|
|
|
|
-
|
|
|
|
483,000
|
(2)(3)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
483,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth S. Cragun
|
|
|
-
|
|
|
|
-
|
|
|
|
483,000
|
(2)(3)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
483,000
|
|
(1)
|
Rory
J. Cutaia, our Chairman of the Board, Chief Executive Officer, President, Secretary, and Treasurer during fiscal 2018, is
not included in this table as he was an employee, and, thus, received no compensation for his services as a director. The
compensation received by Mr. Cutaia as an employee is disclosed in the Summary Compensation Table on page 19.
|
|
|
(2)
|
The
aggregate number of option awards outstanding at the end of fiscal 2018 was 66,667 shares.
|
|
|
(3)
|
Represents
an option award of 66,667 shares of our Common Stock valued at a price per share of approximately $7.50, which was the closing
price as reported on the OTCQB on the grant date.
|
Narrative
Discussion on Director Compensation
We
have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled
to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of
our Board. Our Board may award special remuneration to any director undertaking any special services on their behalf other than
services ordinarily required of a director.
James
P. Geiskopf
We
did not pay any compensation to Mr. Geiskopf for his services as a director during fiscal 2018.
Phillip
J. Bond
On
August 27, 2018, we granted Mr. Bond a stock option to purchase up to 66,667 shares of our Common Stock at an exercise price of
$7.50 per share. 13,333 of the shares vested on the inception of service, the remaining shares vest annually in four equal installments.
Kenneth
S. Cragun
On
August 27, 2018, we granted Mr. Cragun a stock option to purchase up to 66,667 shares of our Common Stock at an exercise price
of $7.50 per share. 13,333 of the shares vested on the inception of service, the remaining shares vest annually in four equal
installments.
Golden
Parachute Compensation
For
a description of the terms of any agreement or understanding, whether written or unwritten, between any officer or director and
us concerning any type of compensation, whether present, deferred, or contingent, that will be based on or otherwise will relate
to an acquisition, merger, consolidation, sale, or other type of disposition of all or substantially all assets of our company,
see above under the heading “Executive Compensation,” “Director Summary Compensation Table,” and “Narrative
Discussion on Director Compensation.”
Risk
Assessment in Compensation Programs
During
fiscal 2018 and 2017, we paid compensation to our employees, including executive and non-executive officers. Due to the size and
scope of our business, and the amount of compensation, we did not have any employee compensation policies and programs to determine
whether our policies and programs create risks that are reasonably likely to have a material adverse effect on us.
Equity
Compensation Plan Information
Equity
Compensation Plan Information
The
following table summarizes certain information regarding our equity compensation plans as of December 31, 2018:
Plan category
|
|
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
(a)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Equity compensation plans not approved by security holders
|
|
|
2,478,974
|
|
|
$
|
5.25
|
|
|
|
168,600
|
|
Total
|
|
|
2,478,974
|
|
|
$
|
5.25
|
|
|
|
168,600
|
|
Effective
October 16, 2014, our board of directors adopted and approved the 2014 Stock Option Plan (the “2014 Plan”). The purpose
of the 2014 Plan is to (a) enable us and any of our affiliates to attract and retain the types of employees, consultants, and
directors who will contribute to our long-term success; (b) provide incentives that align the interests of employees, consultants
and directors with those of our stockholders; and (c) promote the success of our business.
The
2014 Plan provides for the grant of incentive stock options to purchase shares of our Common Stock to our directors, officers,
employees, and consultants. The 2014 Plan is administered by our Board, except that it may, in its discretion, delegate such responsibility
to a committee comprised of at least two directors. A maximum of 800,000 shares are reserved and set aside for issuance under
the 2014 Plan. Each option, upon its exercise, entitles the optionee to acquire one share of our Common Stock, upon payment of
the applicable exercise price, which is determined by our Board at the time of grant. Stock options may be granted under the 2014
Plan for an exercise period of up to ten years from the grant date of the option or such lesser periods as may be determined by
our Board, subject to earlier termination in accordance with the terms of the 2014 Plan.
Vesting
terms are determined by our Board at the time of grant; provided, that, if no vesting schedule is specified at the time of grant,
25% of the options granted will vest on each of the first, second, third, and fourth anniversaries of the grant date. Options
that have vested will terminate, to the extent not previously exercised, upon the occurrence of the first of the following events:
(i) the expiration of the options; (ii) the date of an optionee’s termination of employment or contractual relationship
with us for cause (as determined in the sole discretion of the plan administrator; (iii) the expiration of three months from the
date of an optionee’s termination of employment or contractual relationship with us for any reason whatsoever other than
cause, death, or disability (as defined in the Plan); or (iv) the expiration of one year from termination of an optionee’s
employment or contractual relationship by reason of death or disability.
PROPOSAL
2 – APPROVAL OF THE 2019 OMNIBUS INCENTIVE PLAN
What
Am I Voting On?
Stockholders
are being asked to approve the Incentive Plan, which was approved by our Board on November 11, 2019. The Incentive
Plan will become effective on the date it is approved by our stockholders, and will replace the 2014 Plan, which is the only plan
under which equity awards are currently being granted.
Voting
Recommendation
FOR
the approval of the Incentive Plan because it includes a number of features that we believe are consistent with the interests
of our stockholders and sound corporate governance practices.
General
The
purpose of the Incentive Plan is to enhance stockholder value by linking the compensation of our officers, directors, key employees,
and consultants to increases in the price of our Common Stock and the achievement of other performance objections and to encourage
ownership in the Company by key personnel whose long-term employment is considered essential to our continued progress and success.
The Incentive Plan is also intended to assist us in recruiting new employees and to motivate, retain, and encourage such employees
and directors to act in our stockholders’ interest and share in our success.
Term
The
Incentive Plan will become effective upon approval by our stockholders and will continue in effect from that date until it is
terminated in accordance with its terms.
Administration
The
Incentive Plan may be administered by our Board, a committee designated by it, and/or their respective delegates. Our Board currently
contemplates that our Compensation Committee will administer the Incentive Plan. The administrator has the power to determine
the directors, employees, and consultants who may participate in the Incentive Plan and the amounts and other terms and conditions
of awards to be granted under the Incentive Plan. All questions of interpretation and administration with respect to the Incentive
Plan will be determined by the administrator. The administrator also will have the complete authority to adopt, amend, rescind,
and enforce rules and regulations pertaining to the administration of the Incentive Plan; to correct administrative errors; to
make all other determinations deemed necessary or advisable for administering the Incentive Plan and any award granted under the
Incentive Plan; and to authorize any person to execute, on behalf of the Company, all agreements and documents previously approved
by the administrator, among other items.
Eligibility
Any
of our directors, employees, or consultants, or any directors, employees, or consultants of any of our affiliates (except that
with respect to incentive stock options, only employees of the Company or any of our subsidiaries are eligible), are eligible
to participate in the Incentive Plan.
Available
Shares
Subject
to the adjustment provisions included in the Incentive Plan, a total of 8,000,000 shares of our Common Stock would be authorized
for awards granted under the Incentive Plan. Shares subject to awards that have been canceled, expired, settled in cash, or not
issued or forfeited for any reason (in whole or in part), will not reduce the aggregate number of shares that may be subject to
or delivered under awards granted under the Incentive Plan and will be available for future awards granted under the Incentive
Plan.
Types
of Awards
We
may grant the following types of awards under the Incentive Plan: stock awards; options; stock appreciation rights; stock units;
or other stock-based awards.
Stock
Awards. The Incentive Plan authorizes the grant of stock awards to eligible participants. The administrator determines (i)
the number of shares subject to the stock award or a formula for determining such number, (ii) the purchase price of the shares,
if any, (iii) the means of payment for the shares, (iv) the performance criteria, if any, and the level of achievement versus
these criteria, (v) the grant, issuance, vesting, and/or forfeiture of the shares, (vi) restrictions on transferability, and such
other terms and conditions determined by the administrator.
Options.
The Incentive Plan authorizes the grant of non-qualified and/or incentive options to eligible participants, which options give
the participant the right, after satisfaction of any vesting conditions and prior to the expiration or termination of the option,
to purchase shares of our Common Stock at a fixed price. The administrator determines the exercise price for each share subject
to an option granted under the Incentive Plan, which exercise price cannot be less than the fair market value (as defined in the
Incentive Plan) of our Common Stock on the grant date. The administrator also determines the number of shares subject to each
option, the time or times when each option becomes exercisable, and the term of each option (which cannot exceed ten (10) years
from the grant date).
Stock
Appreciation Rights. The Incentive Plan authorizes the grant of stock appreciation rights to eligible participants, which
stock appreciation rights give the participant the right, after satisfaction of any vesting conditions and prior to the expiration
or termination of the stock appreciation right, to receive in cash or shares of our Common Stock the excess of the fair market
value (as defined in the Incentive Plan) of our Common Stock on the date of exercise over the exercise price of the stock appreciation
right. All stock appreciation rights under the Incentive Plan shall be granted subject to the same terms and conditions applicable
to options granted under the Incentive Plan. Stock appreciation rights may be granted to awardees either alone or in addition
to or in tandem with other awards granted under the Incentive Plan and may, but need not, relate to a specific option granted
under the Incentive Plan.
Stock
Unit Awards and Other Stock-Based Awards. In addition to the award types described above, the administrator may grant any
other type of award payable by delivery of our Common Stock in such amounts and subject to such terms and conditions as the administrator
determines in its sole discretion, subject to the terms of the Incentive Plan. Such awards may be made in addition to or in conjunction
with other awards under the Incentive Plan. Such awards may include unrestricted shares of our Common Stock, which may be awarded,
without limitation (except as provided in the Incentive Plan), as a bonus, in payment of director fees, in lieu of cash compensation,
in exchange for cancellation of a compensation right, or upon the attainment of performance goals or otherwise, or rights to acquire
shares of our Common Stock from us.
Award
Limits
Subject
to the terms of the Incentive Plan, the aggregate number of shares that may be subject to all incentive stock options granted
under the Incentive Plan cannot exceed the total aggregate number of shares that may be subject to or delivered under awards under
the Incentive Plan. Notwithstanding any other provisions of the Incentive Plan to the contrary, the aggregate grant date fair
value (computed as specified in the Incentive Plan) of all awards granted to any non-employee director during any single calendar
year shall not exceed 300,000 shares during 2019 and, thereafter, 200,000 shares.
New
Plan Benefits
The
amount of future grants under the Incentive Plan is not determinable, as awards under the Incentive Plan will be granted at the
sole discretion of the administrator. We cannot determinate at this time either the persons who will receive awards under the
Incentive Plan or the amount or types of such any such awards.
Transferability
Unless
determined otherwise by the administrator, an award may not be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by beneficiary designation, will, or by the laws of descent or distribution, including but not limited
to any attempted assignment or transfer in connection with the settlement of marital property or other rights incident to a divorce
or dissolution, and any such attempted sale, assignment, or transfer shall be of no effect prior to the date an award is vested
and settled.
Termination
of Employment or Board Membership
At
the grant date, the administrator is authorized to determine the effect a termination from membership on the Board by a non-employee
director for any reason or a termination of employment (as defined in the Incentive Plan) due to disability (as defined in the
Incentive Plan), retirement (as defined in the Incentive Plan), death, or otherwise (including termination for cause (as defined
in the Incentive Plan)) will have on any award. Unless otherwise provided in the award agreement:
|
●
|
Upon
termination from membership on our Board by a non-employee director for any reason other than disability or death, any option
or stock appreciation right held by such director that (i) has not vested and is not exercisable as of the termination effective
date will be subject to immediate cancellation and forfeiture or (ii) is vested and exercisable as of the termination effective
date shall remain exercisable for one year thereafter, or the remaining term of the option or stock appreciation right, if
less. Any unvested stock award, stock unit award, or other stock-based award held by a non-employee director at the time of
termination from membership on our Board for a reason other than disability or death will immediately be cancelled and forfeited.
|
|
|
|
|
●
|
Upon
termination from membership on our Board by a non-employee director due to disability or death will result in full vesting
of any outstanding option or stock appreciation rights and vesting of a prorated portion of any stock award, stock unit award,
or other stock based award based upon the full months of the applicable performance period, vesting period, or other period
of restriction elapsed as of the end of the month in which the termination from membership on our Board by a non-employee
director due to disability or death occurs over the total number of months in such period. Any option or stock appreciation
right that vests upon disability or death will remain exercisable for one year thereafter, or the remaining term of the option
or stock appreciation right, if less. In the case of any stock award, stock unit award, or other stock-based award that vests
on the basis of attainment of performance criteria (as defined in the Incentive Plan), the pro rata vested amount will be
based upon the target award.
|
|
|
|
|
●
|
Upon
termination of employment due to disability or death, any option or stock appreciation right held by an employee will, if
not already fully vested, become fully vested and exercisable as of the effective date of such termination of employment due
to disability or death, or, in either case, the remaining term of the option or stock appreciation right, if less. Termination
of employment due to disability or death shall result in vesting of a prorated portion of any stock award, stock unit award,
or other stock based award based upon the full months of the applicable performance period, vesting period, or other period
of restriction elapsed as of the end of the month in which the termination of employment due to disability or death occurs
over the total number of months in such period. In the case of any stock award, stock unit award, or other stock-based award
that vests on the basis of attainment of performance criteria, the pro-rata vested amount will be based upon the target award.
|
|
|
|
|
●
|
Any
option or stock appreciation right held by an awardee at retirement that occurs at least one year after the grant date of
the option or stock appreciation right will remain outstanding for the remaining term of the option or stock appreciation
right and continue to vest; any stock award, stock unit award, or other stock based award held by an awardee at retirement
that occurs at least one year after the grant date of the award shall also continue to vest and remain outstanding for the
remainder of the term of the award.
|
|
|
|
|
●
|
Any
other termination of employment shall result in immediate cancellation and forfeiture of all outstanding awards that have
not vested as of the effective date of such termination of employment, and any vested and exercisable options and stock appreciation
rights held at the time of such termination of such termination of employment shall remain exercisable for 90 days thereafter
or the remaining term of the option or stock appreciation right, if less. Notwithstanding the foregoing, all outstanding and
unexercised options and stock appreciation rights will be immediately cancelled in the event of a termination of employment
for cause.
|
Change
of Control
In
the event of a change of control (as defined in the Incentive Plan), unless other determined by the administrator as of the grant
date of a particular award, the following acceleration, exercisability, and valuation provisions apply:
|
●
|
On
the date that a change of control occurs, all options and stock appreciation rights awarded under the Incentive Plan not previously
exercisable and vested will, if not assumed, or substituted with a new award, by the successor to the Company, become fully
exercisable and vested, and if the successor to the Company assumes such options or stock appreciation rights or substitutes
other awards for such awards, such awards (or their substitutes) shall become fully exercisable and vested if the participant’s
employment is terminated (other than a termination for cause) within two years following the change of control.
|
|
|
|
|
●
|
Except
as may be provided in an individual severance or employment agreement (or severance plan) to which an awardee is a party,
in the event of an awardee’s termination of employment within two years after a change of control for any reason other
than because of the awardee’s death, retirement, disability, or termination for cause, each option and stock appreciation
right held by the awardee (or a transferee) that is vested following such termination of employment will remain exercisable
until the earlier of the third anniversary of such termination of employment (or any later date until which it would have
remained exercisable under such circumstances by its terms) or the expiration of its original term. In the event of an awardee’s
termination of employment more than two years after a change of control, or within two years after a change of control because
of the awardee’s death, retirement, disability, or termination for cause, the regular provisions of the Incentive Plan
regarding employment termination (described above) will govern (as applicable).
|
|
|
|
|
●
|
On
the date that a change of control occurs, the restrictions and conditions applicable to any or all stock awards, stock unit
awards, and other stock-based awards that are not assumed, or substituted with a new award, by the successor to the Company
will lapse and such awards will become fully vested. Unless otherwise provided in an award agreement at the grant date, upon
the occurrence of a change of control without assumption or substitution of the awards by the successor, any performance-based
award will be deemed fully earned at the target amount as of the date on which the change of control occurs. All stock awards,
stock unit awards, and other stock-based awards shall be settled or paid within 30 days of vesting. Notwithstanding the foregoing,
if the change of control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Internal
Revenue Code, and the regulations thereunder, the awardee shall be entitled to receive the award from the Company on the date
that would have applied, absent this provision. If the successor to the Company does assume (or substitute with a new award)
any stock awards, stock unit awards, and other stock-based awards, all such awards shall become fully vested if the participant’s
employment is terminated (other than a termination for cause) within two years following the change of control, and any performance
based award will be deemed fully earned at the target amount effective as of the termination of employment.
|
|
|
|
|
●
|
The
administrator, in its discretion, may determine that, upon the occurrence of a change of control of the Company, each option
and stock appreciation right outstanding will terminate within a specified number of days after notice to the participant,
and/or that each participant receives, with respect to each share subject to such option or stock appreciation right, an amount
equal to the excess of the fair market value of such share immediately prior to the occurrence of such change of control over
the exercise price per share of such option and/or stock appreciation right; such amount to be payable in cash, in one or
more kinds of stock or property (including the stock or property, if any, payable in the transaction), or in a combination
thereof, as the administrator, in its discretion, determines and, if there is no excess value, the administrator may, in its
discretion, cancel such awards.
|
|
|
|
|
●
|
An
option, stock appreciation right, stock award, stock unit award, or other stock-based award will be considered assumed or
substituted for if, following the change of control, the award confers the right to purchase or receive, for each share subject
to the option, stock appreciation right, stock award, stock unit award, or other stock-based award immediately prior to the
change of control, the consideration (whether stock, cash, or other securities or property) received in the transaction constituting
a change of control by holders of shares for each share held on the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that, if such consideration received in the transaction constituting a change of control
is not solely shares of common stock of the successor company, the administrator may, with the consent of the successor company,
provide that the consideration to be received upon the exercise or vesting of an option, stock appreciation right, stock award,
stock unit award, or other stock-based award, for each share subject thereto, will be solely shares of common stock of the
successor company with a fair market value substantially equal to the per-share consideration received by holders of shares
in the transaction constituting a change of control. The determination of whether fair market value is substantially equal
shall be made by the administrator in its sole discretion and its determination will be conclusive and binding.
|
U.S.
Federal Income Tax Treatment
The
following discussion is intended only as a brief summary of the federal income tax rules that are generally relevant to awards
as of the date of this Proxy Statement. The laws governing the tax aspects of awards are highly technical and such laws are subject
to change.
Non-Qualified
Options. With respect to non-qualified options granted to participants under the Incentive Plan, (i) no income is realized
by the participant at the time the non-qualified option is granted, (ii) at exercise, (a) ordinary income is realized by the participant
in an amount equal to the difference between the option exercise price and the fair market value of our Common Stock on the date
of exercise, (b) such amount is treated as compensation and is subject to both income and wage tax withholding, and (c) we may
claim a tax deduction for the same amount, and (iii) on disposition of the option shares, any appreciation or depreciation after
the date of exercise of the non-qualified option, compared to the disposition price of the option shares will be treated as either
short-term or long-term capital gain or loss depending on the holding period.
Incentive
Stock Options. With respect to incentive stock options, there is no tax to the participant at the time of the grant. Additionally,
if applicable holding period requirements (a minimum of both two years from the grant date and one year from the exercise date)
are met, the participant will not recognize taxable income at the time of the exercise. However, the excess of the fair market
value of the shares acquired at the time of exercise over the aggregate exercise price is an item of tax preference income, potentially
subject to the alternative minimum tax. If shares acquired upon exercise of an incentive stock option are held for the holding
period described above, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale
and the option exercise price), upon their disposition, the holding period of the option shares will be treated as a long-term
capital gain or loss, and, unlike the treatment for shares issued pursuant to the exercise of a non-qualified option, we will
not be entitled to any tax deduction. If the shares acquired on option exercise are disposed of in a “non-qualifying disposition”
(i.e., before the holding period requirements had been met), the participant will generally realize ordinary income
at the time of the disposition of the option shares in an amount equal to the lesser of (i) the excess of the fair market value
of the option shares on the date of exercise of the incentive stock option over the exercise price thereof or (ii) the excess,
if any, of the amount realized upon disposition of the option shares over the exercise price of the incentive stock option, and,
just as the treatment for shares issued pursuant to the exercise of a non-qualified option, we will be entitled to a corresponding
tax deduction. Any amount realized in excess of the value of the shares on the date of exercise will be capital gain. If the amount
realized is less than the exercise price, the participant will not recognize ordinary income, and the participant will generally
recognize a capital loss equal to the excess of the exercise price of the incentive stock option over the amount realized upon
the disposition of the option shares.
Other
Awards. The current federal income tax consequences of other awards authorized under the Incentive Plan generally follow certain
basic patterns. An award of restricted shares of Common Stock results in income recognition by a participant in an amount equal
to the fair market value of the shares received at the time the restrictions lapse and the shares then vest, unless the participant
elects under Internal Revenue Code Section 83(b) to accelerate income recognition and the taxability of the award to the grant
date. Stock unit awards generally result in income recognition by a participant at the time payment of such an award is made in
an amount equal to the amount paid in cash or the then-current fair market value of the shares received, as applicable. Stock
appreciation right awards result in income recognition by a participant at the time such an award is exercised in an amount equal
to the amount paid in cash or the then-current fair market value of the shares received by the participant, as applicable. In
each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes ordinary
income, subject to Internal Revenue Code Section 162(m) with respect to covered employees.
Section
162(m) of the Internal Revenue Code. Internal Revenue Code Section 162(m) denies a deduction to any publicly-held corporation
for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to a covered
employee exceeds $1,000,000. “Covered employees” generally includes the Chief Executive Officer, the Chief Financial
Officer, and the three other most highly compensated executive officers.
Section
409A of the Internal Revenue Code. Awards granted under the Incentive Plan will generally be designed and administered in
such a manner that they are either exempt from the application of, or comply with the requirements of, Section 409A of the Internal
Revenue Code. Section 409A of the Internal Revenue Code imposes restrictions on nonqualified deferred compensation. Failure to
satisfy these rules results in accelerated taxation, an additional tax to the holder in an amount equal to 20% of the deferred
amount, and a possible interest charge. Options granted with an exercise price that is not less than the fair market value of
the underlying shares on the date of grant will not give rise to “deferred compensation” for this purpose unless they
involve additional deferral features.
Other
Tax Considerations. This summary is not intended to be a complete explanation of all of the federal income tax consequences
of participating in the Incentive Plan. A participant should consult his or her personal tax advisor to determine the particular
tax consequences of the Incentive Plan, including the application and effect of foreign state and local taxes and any changes
in the tax laws after the date of this Proxy Statement.
Amendment
and Termination
The
administrator may amend, alter, or discontinue the Incentive Plan or any award agreement, but any such amendment is subject to
the approval of our stockholders in the manner and to the extent required by applicable law. In addition, without limiting the
foregoing, unless approved by our stockholders and subject to the terms of the Incentive Plan, no such amendment shall be made
that would (i) increase the maximum aggregate number of shares that may be subject to awards granted under the Incentive Plan,
(ii) reduce the minimum exercise price for options or stock appreciation rights granted under the Incentive Plan, or (iii) reduce
the exercise price of outstanding options or stock appreciation rights, as prohibited by the terms of the Incentive Plan without
stockholder approval.
No
amendment, suspension, or termination of the Incentive Plan will impair the rights of any participant with respect to an outstanding
award, unless otherwise mutually agreed between the participant and the administrator, which agreement must be in writing and
signed by the participant and us, except that no such agreement will be required if the administrator determines in its sole discretion
that such amendment either (i) is required or advisable in order for us, the Incentive Plan, or the award to satisfy any applicable
law or to meet the requirements of any accounting standard or (ii) is not reasonably likely to diminish the benefits provided
under such award significantly, or that any such diminution has been adequately compensated, except that this exception shall
not apply following a change of control. Termination of the Incentive Plan will not affect the administrator’s ability to
exercise the powers granted to it hereunder with respect to awards granted under the Incentive Plan prior to the date of such
termination.
PROPOSAL
3 – APPROVAL OF THE STOCK ISSUANCE PROPOSAL
What
Am I Voting On?
Stockholders
are being asked to approve the issuance of up to 3,245,162 shares of our Common Stock upon conversion of the shares of our Series
A Preferred Stock and up to 3,245,162 shares of our Common Stock upon exercise of the Warrants, the aggregate of which conversions
and exercises would represent greater than 19.99% of the issued and outstanding shares of our Common Stock as of August 14, 2019
(the date on which we issued and sold the shares of our Series A Preferred Stock and granted the Warrants). This requested approval
is required by and in accordance with Nasdaq Listing Rules 5635(b) and 5635(d).
Voting
Recommendation
FOR
the approval of the Stock Issuance Proposal.
General
We
are currently authorized to issue up to 200,000,000 shares of our Common Stock and 15,000,000 shares of our preferred stock, par
value $0.0001 per share. Of the 200,000,000 shares of our Common Stock authorized by our Articles of Incorporation, 24,469,949
shares of our Common Stock are issued and outstanding as of November 12, 2019. Of the 15,000,000 shares of preferred stock, par
value $0.0001 per share, authorized in our Articles of Incorporation, 6,000 shares have been designated as Series A Preferred
Stock, of which 5,030 shares were issued and outstanding as of November 12, 2019.
On August 14, 2019, we
entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers named therein, pursuant to which
we issued and sold to the purchasers up to an aggregate of 5,030 shares of our Series A Preferred Stock and granted Warrants to
purchase an aggregate of up to 3,245,162 shares of our Common Stock (an amount equivalent to the number of shares of our Common
Stock into which the shares of our Series A Preferred Stock is initially convertible). Each share of our Series A Preferred Stock
is convertible, at any time and from time to time from and after August 14, 2019, at the holder’s option into that number
of shares of our Common Stock equal to its stated value per share (or $1,000) divided by the conversion price (initially, $1.55);
thus, initially, each share of our Series A Preferred Stock is convertible into approximately 645 shares of our Common Stock.
The Warrants have an initial exercise price of $1.88 per share of our Common Stock, subject to customary adjustments, are exercisable
from and after February 14, 2020, and will expire at 5:00 p.m. (New York City time) on August 14, 2024. We closed the offering
on August 14, 2019 and issued and sold 5,030 shares of our Series A Preferred Stock and granted Warrants exercisable into a
maximum of 3,245,162 shares of our Common Stock, resulting in aggregate proceeds of $5,030,000. The conversion price of the
shares of our Series A Preferred Stock and the exercise price of the Warrants may be subject to downward price adjustments based
on the pricing of future equity sales or rights offerings.
Unless
and until this Proposal 3 is approved by our stockholders as required by the Nasdaq Listing Rules, the purchasers are limited
as to the number of shares of our Series A Preferred Stock that may be converted and the number of Warrants that may be exercised.
If our stockholders approve this Proposal 3, and assuming the conversion of all of the shares of our Series A Preferred Stock
and exercise of all of the Warrants, the purchasers would own an aggregate of 6,490,324 shares of our Common Stock, representing
approximately 22% of our outstanding capital stock as of November 12, 2019.
Nasdaq
Rules
Our
Common Stock is listed on the Nasdaq Capital Market under the symbol “VERB” and, as such, we are subject to the Nasdaq
Listing Rules. Pursuant to Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities if such
issuance or potential issuance may result in a change of control of the issuer. Under Nasdaq rules and policies, a change of control
may be deemed to occur when, as a result of an issuance, an investor or a group would own, or have the right to acquire, 20% or
more of the outstanding shares of common stock or voting power of the issuer, and such ownership or voting power would be the
largest ownership position of the issuer. Conversion of the shares of our Series A Preferred Stock and exercise of the Warrants
could result in the holders thereof owning an amount in excess of 19.99% of the issued and outstanding shares of our Common Stock
as of August 14, 2019 (the date on which we issued and sold the shares of our Series A Preferred Stock and granted the Warrants).
Pursuant to Listing Rule 5635(d), stockholder approval is required for a transaction, other than a public offering,
that involves the sale, issuance, or potential issuance by a company of shares of its common stock (or securities convertible
into or exercisable for common stock) equal to 20% or more of the number of shares of its common stock, or 20% or more of the
voting power outstanding before the issuance for less than the lower of: (i) the closing price as reported by Nasdaq immediately
preceding the signing of the SPA, or $1.85, or (ii) the average closing price of our Common Stock as reported by Nasdaq for the
five trading days immediately preceding the signing of the SPA, or $1.828.
Accordingly,
to comply with Listing Rules 5635(b) and 5635(d), the Certificate of Designation of Rights, Preferences, and Restrictions of our
Series A Preferred Stock and each Common Stock Purchase Warrant prevents us from issuing that number of shares of our Common Stock,
which, when aggregated with any shares of our Common Stock that were issued on or after the date on which the shares of our Series
A Preferred Stock were issued and sold and on which the Warrants were granted, but prior to such conversion or exercise date (i)
in connection with any conversion of shares of our Series A Preferred Stock issued pursuant to the SPA, (ii) in connection with
any exercise of any Warrants issued pursuant to the SPA, and (iii) in connection with the exercise of any warrants issued to any
registered broker-dealer as a fee in connection with the issuance and sale of the shares of our Series A Preferred Stock and the
grant of the Warrants, all pursuant to the SPA, would exceed 4,459,725 shares of Common Stock (the “Issuable Maximum”).
Effect
of Issuance of Common Stock
The
issuance of the 6,490,324 shares of our Common Stock that are the subject of this Proposal 3 will result in an increase in the
number of shares of our Common Stock outstanding, and our stockholders will incur further dilution of their percentage ownership
in us to the extent that the holders of our Series A Preferred Stock convert their shares of our Series A Preferred Stock and
the holders of the Warrants exercise their Warrants for shares of our Common Stock.
Required
Vote
We
are seeking your approval of this Proposal 3 in order to satisfy the stockholder approval requirements of Nasdaq, including Nasdaq
Listing Rules 5635(b) and 5635(d), with respect to our issuance of shares of our Common Stock to the holders of shares of our
Series A Preferred Stock upon their conversion thereof and shares of our Common Stock to the holders of Warrants upon their exercise
thereof, which potential issuances, in the aggregate, represent more than 19.99% of our outstanding Common Stock as of August
14, 2019 (the date on which we issued and sold the shares of our Series A Preferred Stock and granted the Warrants).
Stockholder
approval of this Proposal 3 requires a FOR vote from at least a majority of the votes cast. Abstentions and broker non-votes
will not have any effect on the outcome of this matter.
Consequences
if Stockholder Approval is Not Obtained
If
we do not obtain stockholder approval, conversions of shares of our Series A Preferred Stock into shares of our Common Stock and
exercises of the Warrants for shares of our Common Stock in excess of the Issuable Maximum will not be permitted, and the holders
of the shares of our Series A Preferred Stock will continue to hold those shares, just as the holders of the Warrants will continue
to hold those Warrants. We are also required to continue to seek stockholder approval of the Stock Issuance Proposal.
PROPOSAL
4 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
What
Am I Voting On?
Stockholders
are being asked to approve, on a non-binding, advisory basis, the compensation of our named executive officers.
Voting
Recommendation
FOR
the non-binding, advisory vote to approve the executive compensation of our named executive officers disclosed in this Proxy
Statement under the section entitled “Executive Compensation,” including the compensation tables and other narrative
executive compensation disclosures therein, required by Item 402 of SEC Regulation S-K.
Summary
We
believe executive compensation is an important matter for our stockholders. A fundamental principle of our executive compensation
philosophy and practice continues to be to pay-for-performance. An executive officer’s compensation package historically
has been comprised of a base salary, which reflects individual performance and expertise. Previously, we have also granted stock
options to our executive officers as part of their compensation. Based on our size and scope, we believe that this type of compensation
program is consistent with our strategy, competitive practice, sound corporate governance principles, and stockholder interests
and concerns. We urge you to read this Proxy Statement for additional details on our executive compensation, including our compensation
philosophy and objectives and the fiscal 2018 compensation of the named executive officers.
This
proposal, commonly known as a “say-on-pay” proposal, gives you, as a stockholder, the opportunity to endorse or not
to endorse our executive pay philosophy, policies, and procedures. This vote is intended to provide an overall assessment of our
executive compensation program, rather than focus on any specific item of compensation. Given the information provided above and
elsewhere in this Proxy Statement, our Board asks you to approve the following resolution:
“RESOLVED,
that the Company’s stockholders approve the compensation of the Company’s named executive officers described in the
Proxy Statement under the section titled “Executive Compensation”, including the compensation tables and other narrative
executive compensation disclosures therein, required by Item 402 of Regulation S-K.”
As
an advisory vote, this proposal is non-binding on us. However, our Board and Compensation Committee value the opinions of our
stockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
PROPOSAL
5 – ADVISORY VOTE TO APPROVE THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
What
Am I Voting On?
Stockholders
are being asked to approve, on a non-binding, advisory basis, the frequency of say-on-pay votes.
Voting
Recommendation
FOR
the non-binding, advisory vote on the frequency of say-on-pay votes approving the executive compensation of our named executive
officers disclosed in this Proxy Statement under the section titled “executive compensation,” including the compensation
tables and other narrative execution compensation disclosures therein, required by Item 402 of SEC Regulation S-K every three
years.
Summary
As
discussed above in Proposal 4, executive compensation is an important matter for the Company’s stockholders. Companies are
required to provide a separate stockholder advisory vote once every six years to determine whether the stockholders’ say-on-pay
vote should occur every year, every two years, or every three years. We believe that approval of executive compensation should
occur every three years, as stockholder feedback on executive compensation would be more useful if the success of our compensation
program is judged over a period of time.
We
are asking stockholders to vote on whether the say-on-pay vote should occur every year, every two years, or every three years.
As an advisory vote, this proposal is non-binding on the Company. However, our Board values the opinions of our stockholders and
will consider the outcome of the vote when determining how often a say-on-pay advisory vote of the stockholders should be taken.
PROPOSAL
6 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
What
Am I Voting On?
It
is the responsibility of the Audit Committee to select and retain our independent registered public accounting firms. Our Audit
Committee has appointed Weinberg, as our independent registered public accounting firm for our fiscal year ending December 31,
2019. Although stockholder ratification of the Audit Committee’s selection of our independent registered public accounting
firm is not required by our Bylaws or otherwise, we are submitting the selection of Weinberg to stockholder ratification so that
our stockholders may participate in this important corporate decision. If not ratified, the Audit Committee will reconsider the
selection, although the Audit Committee will not be required to select a different independent registered public accounting firm
for us.
Representatives
of Weinberg will be present at the Annual Meeting and will have an opportunity to make a statement and respond to questions from
stockholders present at the meeting.
Voting
Recommendation
FOR
the ratification of the appointment of Weinberg as our independent registered public accounting firm.
Audit
Fees
The
following table presents fees paid or to be paid for professional audit services rendered by Weinberg for the audit of our annual
financial statements during the years ended December 31, 2018 and 2017, review of financial statements included in our quarterly
reports during the years ended December 31, 2018 and 2017, and fees billed for other services rendered:
|
|
Fiscal 2018
|
|
|
Fiscal 2017
|
|
Audit Fees (1)
|
|
$
|
122,000
|
|
|
$
|
62,000
|
|
Audit-Related Fees (2)
|
|
|
7,000
|
|
|
|
1,000
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
All Other Fees (3)
|
|
|
166,000
|
|
|
|
8,000
|
|
Total All Fees
|
|
$
|
295,000
|
|
|
$
|
71,000
|
|
|
(1)
|
Audit
Fees consisted of fees billed for professional services rendered for the audit of our annual financial statements and review
of the interim financial statements included in quarterly reports, and review of other documents filed with the SEC within
those fiscal years.
|
|
|
|
|
(2)
|
Audit-related
fees consisted of costs associated with the travel to Utah to perform audits of Verb Direct, LLC, f/k/a Sound Concepts,
Inc., and miscellaneous expenses associated with professional services rendered.
|
|
|
|
|
(3)
|
All
Other Fees consisted of fees billed for professional services rendered to perform audits of Verb Direct, LLC, f/k/a
Sound Concepts, Inc., financial and professional services rendered associated with the filing of our Registration Statement
on Form S-1.
|
The
Audit Committee has adopted policies and procedures to oversee the external audit process and pre-approves all services provided
by our independent registered public accounting firm. Prior to the addition of Messrs. Bond and Cragun as members of the Audit
Committee, our entire Board, consisting of Messrs. Cutaia and Geiskopf, acted as our Audit Committee and was responsible for pre-approving
all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and
approved by our Board or Audit Committee, as applicable, before the respective services were rendered.
Audit
Committee Report
Our
Audit Committee is responsible for, among other things, reviewing and discussing our audited financial statements with management,
discussing with our independent registered public accounting firm information relating to its judgments about the quality of our
accounting principles, recommending to our Board that we include the audited financial statements in our Annual Report, and overseeing
compliance with the SEC requirements for disclosure of our auditor’s services and activities.
Review
of Audited Financial Statements
Our
Audit Committee reviewed our financial statements for the fiscal year ended December 31, 2018, as audited by Weinberg, our independent
registered public accounting firm, and discussed these financial statements with management. In addition, the Audit Committee
has discussed with Weinberg the matters required to be discussed by Auditing Standards No. 1301, Communications with Audit
Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”), as may be modified or supplemented.
Furthermore, our Audit Committee has received the written disclosures and the letter from Weinberg required by the Independence
Standards Board Standard No. 1, as may be modified or supplemented, and has discussed with Weinberg its independence.
Generally,
the members of our Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts
in the fields of accounting or auditing, or in determining auditor independence. However, our Board has determined that each member
of our Audit Committee meets the independence criteria set forth in the applicable rules of Nasdaq and the SEC, and that one member
of our Audit Committee, Mr. Cragun, qualifies as an “audit committee financial expert,” as defined by SEC rules. Members
of our Audit Committee rely, without independent verification, on the information provided to them and on the representations
made by management. Accordingly, our Audit Committee’s oversight does not currently provide an independent basis to determine
that management has maintained procedures designed to assure compliance with accounting standards and applicable laws and regulations.
Recommendation
Based
upon the foregoing review and discussion, our Audit Committee recommended to our Board that the audited financial statements for
the fiscal year ended December 31, 2018, be included in our Annual Report for such fiscal year.
|
Audit
Committee:
|
|
Kenneth
S. Cragun, Chairman
|
|
James
P. Geiskopf
|
|
Phillip
J. Bond
|
PROPOSAL
7 – AUTHORITY TO ADJOURN THE ANNUAL MEETING
What
Am I Voting On?
In
this proposal, we are asking you to authorize our Board to adjourn the Annual Meeting to another place, date, or time if our Board
believes adjournment is necessary or appropriate. If the stockholders approve the proposal to adjourn the Annual Meeting, we would
expect to adjourn the Annual Meeting and use the additional time to solicit additional votes, including the solicitation of votes
from stockholders that have previously voted, if necessary to approve Proposals 1, 2, 3, 4, 5, or 6.
If
a quorum does not exist, the holders of a majority of shares present at the Annual Meeting in person or by proxy may adjourn the
Annual Meeting to another place, date, or time.
Voting
Recommendation
FOR
the approval of granting our Board the authority to adjourn the Annual Meeting if our Board deems it necessary or appropriate.
OTHER
BUSINESS
Our
Board is not aware of any other business to be considered or acted upon at the Annual Meeting other than that for which notice
is provided in this Proxy Statement and the accompanying notice. In the event any other matters properly come before the Annual
Meeting, it is expected that the shares represented by proxy will be voted with respect thereto in accordance with the judgment
of the persons voting them.
2018
ANNUAL REPORT ON FORM 10-K
Copies
of our Annual Report for fiscal 2018, which contains our Form 10-K for the fiscal year ended December 31, 2018, and consolidated
financial statements, as filed with the SEC, have been included in this mailing. Additional copies may be obtained without charge
to stockholders upon written request to Investor Relations at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663.
In addition, copies of this document, the Annual Report and all other documents filed electronically by us may be reviewed and
printed from the SEC’s website at: http://www.sec.gov.
By
Order of the Board of Directors,
Rory
J. Cutaia
Chairman
of the Board, Chief Executive Officer, President, Secretary, and Treasurer
Newport
Beach, California
November
12, 2019
APPENDIX
A
PROPOSED
2019 STOCK AND INCENTIVE COMPENSATION PLAN
1.
Purpose of the Plan. The purpose of this Plan is to enhance stockholder value by linking the compensation of officers, directors,
key employees, and consultants of the Company to increases in the price of Verb Technology Company, Inc. common stock and the
achievement of other performance objectives, and to encourage ownership in the Company by key personnel, whose long-term employment
is considered essential to the Company’s continued progress and success. The Plan is also intended to assist the Company
in the recruitment of new employees and to motivate, retain, and encourage such employees and directors to act in the stockholders’
interest and share in the Company’s success.
2.
Definitions. As used herein, the following definitions shall apply:
(a)
“Administrator” means the Board, any Committee, or such delegates as shall be administering the Plan in accordance
with Section 4 of the Plan.
(b)
“Affiliate” means any Subsidiary or other entity that is directly or indirectly controlled by the Company or
any entity in which the Company has a significant ownership interest as determined by the Administrator. The Administrator shall,
in its sole discretion, determine which entities are classified as Affiliates and designated as eligible to participate in this
Plan.
(c)
“Applicable Law” means the requirements relating to the administration of stock option plans under U.S. federal
and state laws, any stock exchange, or quotation system on which the Company has listed or submitted for quotation of the Common
Stock to the extent provided under the terms of the Company’s agreement with such exchange or quotation system and, with
respect to Awards subject to the laws of any foreign jurisdiction where Awards are, or will be, granted under the Plan, the laws
of such jurisdiction.
(d)
“Award” means a Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other Stock-based Award granted
in accordance with the terms of the Plan, or any other property (including cash) granted pursuant to the provisions of the Plan.
(e)
“Awardee” means an Employee, Director, or Consultant who has been granted an Award under the Plan.
(f)
“Award Agreement” means a Stock Award Agreement, Option Agreement, Stock Appreciation Right Agreement, Restricted
Stock Unit Agreement, or Other Stock-based Award Agreement, which may be in written or electronic format, in such form and with
such terms as may be specified by the Administrator, evidencing the terms and conditions of an individual Award. Each Award Agreement
is subject to the terms and conditions of the Plan. The Award Agreement shall be delivered to the Participant receiving such Award
upon, or as promptly, as is reasonably practicable following, the grant of such Award. The effectiveness of an Award shall not
be subject to the Award Agreement’s being signed by the Company and/or the Participant receiving the Award unless specifically
so provided in the Award Agreement.
(g)
“Board” means the Board of Directors of the Company.
(h)
“Change of Control” shall mean, except as otherwise provided in an Award Agreement, one of the following shall
have taken place after the date of this Agreement:
(i)
any one person, or group of owners of another corporation who, acting together through a merger, consolidation, purchase, acquisition
of stock or the like (a “Group”), acquires ownership of Shares of the Company that, together with the Shares held
by such person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the
Shares of the Company (or other voting securities of the Company then outstanding). However, if such person or Group is considered
to own more than fifty percent (50%) of the total fair market value or total voting power of the Shares (or other voting securities
of the Company then outstanding) before this transfer of the Company’s Shares (or other voting securities of the Company
then outstanding), the acquisition of additional Shares (or other voting securities of the Company then outstanding) by the same
person or Group shall not be considered to cause a Change of Control of the Company; or
(ii)
any one person or Group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition
by such person or persons) ownership of Shares (or other voting securities of the Company then outstanding) of the Company possessing
thirty percent (30%) or more of the total voting power of the Shares (or other voting securities then outstanding) of the Company
where such person or Group is not merely acquiring additional control of the Company; or
(iii)
a majority of members of the Company’s Board is replaced during any twelve (12)-month period by directors whose appointment
or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or
election (the “Incumbent Board”), but excluding, for purposes of determining whether a majority of the Incumbent Board
has endorsed any candidate for election to the Board, any individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a person or Group other than the Company’s Board; or
(iv)
any one person or Group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition
by such person or Group) all or substantially all of the assets from the Company that have a total gross fair market value equal
to or more than forty percent (40%) of the total fair market value of all assets of the Company immediately prior to such acquisition
or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the
value of the assets being disposed of, determined without regard to any liabilities associated with such assets. A transfer of
assets by the Company will not result in a Change of Control if the assets are transferred to:
(1)
a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;
(2)
an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company
immediately after the transfer of assets;
(3)
a person or Group that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the
outstanding stock of the Company; or
(4)
an entity, at least fifty percent (50%) of the total value or voting power of which is owned directly or indirectly, by a person
described in subparagraph (h)(i), above; or
(v)
Stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
Notwithstanding
the foregoing, if any payment or distribution event applicable to an Award is subject to the requirements of Section 409A(a)(2)(A)
of the Code, the determination of the occurrence of a Change of Control shall be governed by applicable provisions of Section
409A(a)(2)(A) of the Code and regulations and rulings issued thereunder for purposes of determining whether such payment or distribution
may then occur.
(i)
“Code” means the United States Internal Revenue Code of 1986, as amended, and any successor thereto, the Treasury
Regulations thereunder, and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department.
Reference to any specific section of the Code shall be deemed to include such regulations and guidance, as well as any successor
provision of the Code.
(j)
“Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan
or, in the absence of any such special appointment, the Compensation Committee of the Board.
(k)
“Common Stock” means the Common Stock, $0.0001 par value per share, of the Company, or any security of the
Company issued in substitution, exchange, or lieu thereof.
(l)
“Company” means Verb Technology Company, Inc., a Nevada corporation, or, except as utilized in the definition
of Change of Control, its successor.
(m)
“Consultant” means an individual providing services to the Company or any of its Affiliates as an independent
contractor, and includes prospective consultants who have accepted offers of consultancy for the Company or any of its Affiliates,
so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s
securities in a capital-raising transaction, (ii) does not directly or indirectly promote or maintain a market for the Company’s
securities, and (iii) otherwise qualifies as a consultant under the applicable rules of the SEC for registration of shares of
stock on a Form S-8 registration statement.
(n)
“Conversion Award” has the meaning set forth in Section 4(b)(xii) of the Plan.
(o)
“Director” means a member of the Board. Any Director who does not serve as an employee of the Company is referred
to herein as a “Non-employee Director.”
(p)
“Disability” means (i) “Disability” as defined in any employment, consulting, or similar agreement
to which the Participant is a party, or (ii) if there is no such agreement or it does not define “Disability,” (A)
permanent and total disability as determined under the Company’s long-term disability plan applicable to the Participant
or (B) if there is no such plan applicable to the Participant or the Committee determines otherwise in an applicable Award Agreement,
“Disability” shall mean the Participant is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve (12) months, as determined by the Committee. Notwithstanding the above, with
respect to an Incentive Stock Option, Disability shall mean permanent and total disability as defined in Section 22(e)(3) of the
Code and, with respect to any Award that constitutes “nonqualified deferred compensation” within the meaning of Section
409A of the Code, the foregoing definition shall apply for purposes of vesting of such Award, provided that such Award shall not
be settled until the earliest of: (x) the Participant’s “disability” within the meaning of Section 409A of the
Code, (y) the Participant’s “separation from service” within the meaning of Section 409A of the Code, and (z)
the date such Award would otherwise be settled pursuant to the terms of the Award Agreement.
(q)
“Disaffiliation” means a Subsidiary’s or Affiliate’s ceasing to be a Subsidiary or Affiliate for
any reason (including, without limitation, as a result of a public offering, or a spin-off or sale by the Company, of the stock
of the Subsidiary or Affiliate) or a sale of a division of the Company and its Affiliates.
(r)
“Employee” means a regular, active employee of the Company or any Affiliate, including an Officer or Director
who is also a regular, active employee of the Company or any Affiliate. The Administrator shall determine whether the Chairman
of the Board qualifies as an “Employee.” For any and all purposes under the Plan, the term “Employee”
shall not include a person hired as a leased employee, Consultant, or a person otherwise designated by the Administrator, the
Company, or an Affiliate at the time of hire as not eligible to participate in or receive benefits under the Plan or not on the
payroll, even if such ineligible person is subsequently determined to be an employee of the Company or an Affiliate or otherwise
an employee by any governmental or judicial authority. Unless otherwise determined by the Administrator in its sole discretion,
for purposes of the Plan, an Employee shall be considered to have terminated employment and to have ceased to be an Employee if
his or her employer ceases to be an Affiliate, even if he or she continues to be employed by such employer.
(s)
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and any successor thereto.
(t)
“Fair Market Value” means the closing price for the Common Stock reported on a consolidated basis on the primary
national securities exchange on which such Common Stock are traded on the date of measurement, or if the Common Stock were not
traded on such measurement date, then on the next preceding date on which Common Stock were traded, all as reported by such source
as the Committee may select. If the Common Stock is not listed on a national securities exchange, Fair Market Value shall be determined
by the Committee in its good faith discretion, taking into account, to the extent appropriate, the requirements of Section 409A
of the Code.
(u)
“Grant Date” means, with respect to each Award, the date upon which the Award is granted to an Awardee pursuant
to this Plan, which may be a designated future date as of which such Award will be effective, as determined by the Committee.
(v)
“Incentive Stock Option” means an Option that is identified in the Option Agreement as intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder, and that
actually does so qualify.
(w)
“Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.
(x)
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(y)
“Option” means a right granted under Section 8 of the Plan to purchase a number of Shares at such exercise
price, at such times, and on such other terms and conditions as are specified in the agreement or other documents evidencing the
Award (the “Option Agreement”). Both Incentive Stock Options and Nonqualified Stock Options may be granted under the
Plan.
(z)
“Other Stock-based Award” means an Award granted pursuant to Section 12 of the Plan on such terms and conditions
as are specified in the agreement or other documents evidencing the Award (the “Other Stock-based Award Agreement”).
(aa)
“Participant” means the Awardee or any person (including any estate) to whom an Award has been assigned or
transferred as permitted hereunder.
(bb)
“Performance Criteria” shall have the meaning set forth in Section 13(b) of the Plan.
(cc)
“Plan” means this 2019 Stock and Incentive Compensation Plan, as set forth herein and as hereafter amended
from time to time.
(dd)
“Retirement” means, unless the Administrator determines otherwise, voluntary Termination of Employment by a
Participant from the Company and its Affiliates after attaining age sixty (60) and having completed at least ten (10) years of
service for the Company and its Affiliates, excluding service with an Affiliate of the Company prior to the time that such Affiliate
became an Affiliate of the Company.
(ee)
“Securities Act” means the United States Securities Act of 1933, as amended.
(ff)
“Share” means a share of Common Stock, as adjusted in accordance with Section 15 of the Plan.
(gg)
“Stock Appreciation Right” means a right granted under Section 10 of the Plan on such terms and conditions
as are specified in the agreement or other documents evidencing the Award (the “Stock Appreciation Right Agreement”).
(hh)
“Stock Award” means an award or issuance of Shares made under Section 11 of the Plan, the grant, issuance,
retention, vesting, and/or transferability of which is subject during specified periods of time to such conditions (including,
without limitation, continued employment or performance conditions) and terms as are expressed in the agreement or other documents
evidencing the Award (the “Stock Award Agreement”).
(ii)
“Stock Unit” means a bookkeeping entry representing an amount equivalent to the Fair Market Value of one Share,
payable in cash, property, or Shares. Stock Units represent an unfunded and unsecured obligation of the Company, except as otherwise
provided for by the Administrator.
(jj)
“Stock Unit Award” means an award or issuance of Stock Units made under Section 12 of the Plan, the grant,
issuance, retention, vesting, and/or transferability of which is subject during specified periods of time to such conditions (including,
without limitation, continued employment or performance conditions) and terms as are expressed in the agreement or other documents
evidencing the Award (the “Stock Unit Award Agreement”).
(kk)
“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning
with the Company; provided, that each company in the unbroken chain (other than the Company) owns, at the time of determination,
stock possessing 50% or more of the total combined voting power of all classes of stock, in one of the other corporations in such
chain.
(ll)
“Termination for Cause” means, unless otherwise provided in an Award Agreement, Termination of Employment on
account of any act of fraud or intentional misrepresentation or embezzlement, misappropriation, or conversion of assets of the
Company or any Affiliate, or the intentional and repeated violation of the written policies or procedures of the Company; provided,
that, for an Employee who is party to an individual severance or employment agreement defining Cause, “Cause” shall
have the meaning set forth in such agreement except as may be otherwise provided in such agreement. For purposes of this Plan,
a Participant’s Termination of Employment shall be deemed to be a Termination for Cause if, after the Participant’s
employment has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Committee,
a Termination for Cause.
(mm)
“Termination of Employment” means, for purposes of this Plan, unless otherwise determined by the Administrator,
ceasing to be an Employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder)
of the Company and any of its Subsidiaries or Affiliates. Unless otherwise determined by the Committee in the terms of an Award
Agreement or otherwise, if a Participant’s employment with the Company and its Affiliates terminates but such Participant
continues to provide services to the Company and its Affiliates in a Non-employee Director capacity, such change in status shall
not be deemed a Termination of Employment. A Participant employed by, or performing services for, a Subsidiary or an Affiliate
or a division of the Company and its Affiliates shall be deemed to incur a Termination of Employment if, as a result of a Disaffiliation,
such Subsidiary, Affiliate, or division ceases to be a Subsidiary, Affiliate, or division, as the case may be, and the Participant
does not immediately thereafter become an Employee of (or service provider for), or member of the board of directors of, the Company
or another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation, or leave of absence and transfers
among the Company and its Subsidiaries and Affiliates shall not be considered Terminations of Employment. In addition, Termination
of Employment shall mean a “separation from service” as defined in regulations issued under Code Section 409A whenever
necessary to ensure compliance therewith for any payment or settlement of a benefit conferred under this Plan that is subject
to such Code section, and, for such purposes, shall be determined based upon a reduction in the bona fide level of services performed
to a level equal to twenty percent (20%) or less of the average level of services performed by the Employee during the immediately
preceding thirty-six (36)-month period.
3.
Stock Subject to the Plan.
(a)
Aggregate Limit. Subject to the provisions of Section 15(a) of the Plan, the maximum aggregate number of Shares which may
be subject to or delivered under Awards granted under the Plan is eight million (8,000,000) Shares. Shares subject to or delivered
under Conversion Awards shall not reduce the aggregate number of Shares which may be subject to or delivered under Awards granted
under this Plan. The Shares issued under the Plan may be either Shares reacquired by the Company, including Shares purchased in
the open market, or authorized but unissued Shares.
(b)
Code Section 422 Limits; Limit on Awards to Directors. Subject to the provisions of Section 15(a) of the Plan, the aggregate
number of Shares that may be subject to all Incentive Stock Options granted under the Plan shall not exceed the total aggregate
number of Shares that may be subject to or delivered under Awards under the Plan, as the same may be amended from time to time.
Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date
of grant in accordance with applicable financial accounting rules) of all Awards granted to any Non-employee Director during any
single calendar year shall not exceed two hundred thousand (200,000) Shares; provided, however, that, for calendar
year 2019, the limit shall be three hundred (300,000) Shares.
(c)
Share Counting Rules.
(i)
For purposes of this Section 3 of the Plan, Shares subject to Awards that have been canceled, expired, settled in cash, or not
issued or forfeited for any reason (in whole or in part) shall not reduce the aggregate number of Shares that may be subject to
or delivered under Awards granted under this Plan and shall be available for future Awards granted under this Plan.
(ii)
Shares subject to Awards that have been retained by the Company in payment or satisfaction of the purchase price of an Award or
the tax withholding obligation of an Awardee, and Shares that have been delivered (either actually or constructively by attestation)
to the Company in payment or satisfaction of the purchase price of an Award or the tax withholding obligation of an Awardee, shall
not be available for grant under the Plan.
(iii)
Conversion Awards shall not reduce the Shares authorized for grant under the Plan or the limitations on Awards to a Participant
under subsection (b), above, nor shall Shares subject to a Conversion Award again be available for an Award under the Plan as
provided in this subsection (c).
4.
Administration of the Plan.
(a)
Procedure.
(i)
Multiple Administrative Bodies. The Plan shall be administered by the Board, a Committee designated by the Board to so
administer this Plan, and/or their respective delegates.
(ii)
Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3 promulgated under the
Exchange Act (“Rule 16b-3”), Awards to Officers and Directors shall be made by the entire Board or a Committee of
two or more “non-employee directors” within the meaning of Rule 16b-3.
(iii)
Other Administration. To the extent required by the rules of the principal U.S. national securities exchange on which the
Shares are traded, the members of the Committee shall also qualify as “independent directors” as set forth in such
rules. Except to the extent prohibited by Applicable Law, the Board or a Committee may delegate to a Committee of one or more
Directors or to authorized officers of the Company the power to approve Awards to persons eligible to receive Awards under the
Plan who are not subject to Section 16 of the Exchange Act.
(iv)
Awards to Directors. The Board shall have the power and authority to grant Awards to Non-employee Directors, including
the authority to determine the number and type of awards to be granted; determine the terms and conditions, not inconsistent with
the terms of this Plan, of any award; and to take any other actions the Board considers appropriate in connection with the administration
of the Plan.
(v)
Delegation of Authority for the Day-to-Day Administration of the Plan. Except to the extent prohibited by Applicable Law,
the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned
to it in this Plan. Such delegation may be revoked at any time.
(b)
Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee or delegates acting
as the Administrator, subject to the specific duties delegated to such Committee or delegates, the Administrator shall have the
authority, in its discretion:
(i)
to select the Non-employee Directors, Consultants, and Employees of the Company or its Affiliates to whom Awards are to be granted
hereunder;
(ii)
to determine the number of Shares of Common Stock to be covered by each Award granted hereunder;
(iii)
to determine the type of Award to be granted to the selected Employees, Consultants, and Non-employee Directors;
(iv)
to approve forms of Award Agreements;
(v)
to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms
and conditions include, but are not limited to, the exercise and/or purchase price, the time or times when an Award may be exercised
(which may or may not be based on Performance Criteria), the vesting schedule, any vesting and/or exercisability provisions, terms
regarding acceleration of Awards or waiver of forfeiture restrictions, the acceptable forms of consideration for payment for an
Award, the term, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine and may be established at the time an Award is granted or
thereafter;
(vi)
to correct administrative errors;
(vii)
to construe and interpret the terms of the Plan (including sub-plans and Plan addenda) and Awards granted pursuant to the Plan;
(viii)
to adopt rules and procedures relating to the operation and administration of the Plan to accommodate the specific requirements
of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized (A)
to adopt rules and procedures regarding the conversion of local currency, the shift of tax liability from employer to employee
(where legally permitted) and withholding procedures, and handling of stock certificates which vary with local requirements, and
(B) to adopt sub-plans and Plan addenda as the Administrator deems desirable, to accommodate foreign laws, regulations, and practice;
(ix)
to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans
and Plan addenda;
(x)
to modify or amend each Award, including, but not limited to, the acceleration of vesting and/or exercisability; provided,
however, that any such modification or amendment (A) is subject to the minimum vesting provisions under the Plan, if any,
and the Plan amendment provisions set forth in Section 16 of the Plan, and (B) may not materially impair any outstanding Award
unless agreed to in writing by the Participant, except that such agreement shall not be required if the Administrator determines
in its sole discretion that such modification or amendment either (Y) is required or advisable in order for the Company, the Plan,
or the Award to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (Z) is not reasonably likely
to significantly diminish the benefits provided under such Award, or that adequate compensation has been provided for any such
diminishment, except following a Change of Control;
(xi)
to allow or require Participants to satisfy withholding tax amounts by electing to have the Company withhold from the Shares to
be issued upon exercise of a Nonqualified Stock Option or vesting of a Stock Award or Stock Unit Award that number of Shares having
a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined
in such manner and on such date that the Administrator shall determine or, in the absence of provision otherwise, on the date
that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose
shall be made in such form and under such conditions as the Administrator may provide;
(xii)
to authorize conversion or substitution under the Plan of any or all stock options, stock appreciation rights, or other stock
awards held by awardees of an entity acquired by the Company (the “Conversion Awards”). Any conversion or substitution
shall be effective as of the close of the merger or acquisition. The Conversion Awards may be Nonqualified Stock Options or Incentive
Stock Options, as determined by the Administrator, with respect to options granted by the acquired entity;
(xiii)
to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously
granted by the Administrator;
(xiv)
to impose such restrictions, conditions, or limitations as it determines appropriate as to the timing and manner of any resale
by a Participant or of other subsequent transfers by the Participant of any Shares issued as a result of or under an Award or
upon the exercise of an Award, including, without limitation, (A) restrictions under an insider trading policy, (B) restrictions
as to the use of a specified brokerage firm for such resale or other transfers, and (C) institution of “blackout”
periods on exercises of Awards;
(xv)
to provide, either at the time an Award is granted or by subsequent action, that an Award shall contain as a term thereof, a right,
either in tandem with the other rights under the Award or as an alternative thereto, of the Participant to receive, without payment
to the Company, a number of Shares, cash, or a combination thereof, the amount of which is determined by reference to the value
of the Award; and
(xvi)
to make all other determinations deemed necessary or advisable for administering the Plan and any Award granted hereunder.
(c)
Effect of Administrator’s Decision. All questions arising under the Plan or under any Award shall be decided by the
Administrator in its total and absolute discretion. All decisions, determinations, and interpretations by the Administrator regarding
the Plan, any rules and regulations under the Plan, and the terms and conditions of any Award granted hereunder, shall be final
and binding on all Participants. The Administrator shall consider such factors as it deems relevant, in its sole and absolute
discretion, to making such decisions, determinations, and interpretations, including, without limitation, the recommendations
or advice of any officer or other employee of the Company and such attorneys, consultants, and accountants as it may select.
(d)
Indemnity. To the extent allowable under Applicable Law, each member of the Committee or of the Board and any person to
whom the Committee has delegated any of its authority under the Plan shall be indemnified and held harmless by the Company from
any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting
from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act pursuant to the Plan, and against and from any and all amounts paid by him or her in satisfaction
of judgment in such action, suit, or proceeding against him or her; provided, that, he or she gives the Company
an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which
such persons may be entitled pursuant to the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify them or hold them harmless.
5.
Eligibility. Awards may be granted only to Directors, Employees, and Consultants of the Company or any of its Affiliates;
provided, however, that Incentive Stock Options may be granted only to Employees of the Company and its Subsidiaries
(within the meaning of Section 424(f) of the Code).
6.
Term of Plan. The Plan shall become effective upon its approval by the stockholders of the Company. It shall continue in effect
from the date the Plan is approved by the stockholders of the Company (the “Effective Date”) until terminated under
Section 16 of the Plan.
7.
Term of Award. Subject to the provisions of the Plan, the term of each Award shall be determined by the Administrator and
stated in the Award Agreement, and may extend beyond the termination of the Plan. In the case of an Option or a Stock Appreciation
Right, the term shall be ten (10) years from the Grant Date or such shorter term as may be provided in the Award Agreement. Notwithstanding
the foregoing, the term of Awards other than Awards that are structured to qualify as Incentive Stock Options under Section 9
shall be extended automatically if the Award would expire at a time when trading in Shares of Common Stock is prohibited by law
or the Company’s insider trading policy to the thirtieth (30th) day after the expiration of the prohibition.
8.
Options. The Administrator may grant an Option or provide for the grant of an Option, either from time to time in the discretion
of the Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement
of performance goals.
(a)
Option Agreement. Each Option Agreement shall contain provisions regarding (i) the number of Shares that may be issued
upon exercise of the Option, (ii) the type of Option, (iii) the exercise price of the Option and the means of payment of such
exercise price, (iv) the term of the Option, (v) such terms and conditions regarding the vesting and/or exercisability of an Option
as may be determined from time to time by the Administrator, (vi) restrictions on the transfer of the Option and forfeiture provisions,
and (vii) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time
by the Administrator.
(b)
Exercise Price. The per share exercise price for the Shares to be issued upon exercise of an Option shall be determined
by the Administrator, except that the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on
the Grant Date, except with respect to Conversion Awards.
(c)
No Option Repricings. Subject to Section 15(a) of the Plan, the exercise price of an Option may not be reduced without
stockholder approval, nor may outstanding Options be cancelled in exchange for cash, other Awards, or Options with an exercise
price that is less than the exercise price of the original Option without stockholder approval.
(d)
No Reload Grants. Options shall not be granted under the Plan in consideration for and shall not be conditioned upon the
delivery of Shares to the Company in payment of the exercise price and/or tax withholding obligation under any other employee
stock option.
(e)
Vesting Period and Exercise Dates. Options granted under this Plan shall vest and/or be exercisable at such time and in
such installments during the period prior to the expiration of the Option’s term as determined by the Administrator and
as specified in the Option Agreement. The Administrator shall have the right to make the timing of the ability to exercise any
Option granted under this Plan subject to continued active employment, the passage of time and/or such performance requirements
as deemed appropriate by the Administrator. Unless otherwise provided in the Award Agreement, no Option shall vest and be exercisable
sooner than one (1) year after its Grant Date. More specifically, unless otherwise provided in the Award Agreement, the Options
shall vest in twenty-five percent (25%) increments on each of the first four anniversaries of its Grant Date. At any time after
the grant of an Option, the Administrator may reduce or eliminate any restrictions surrounding any Participant’s right to
exercise all or part of the Option.
(f)
Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option,
including the method of payment, either through the terms of the Option Agreement or at the time of exercise of an Option. Acceptable
forms of consideration may include:
(i)
cash;
(ii)
check or wire transfer (denominated in U.S. Dollars);
(iii)
subject to any conditions or limitations established by the Administrator, other Shares which were held for a period of more than
six (6) months on the date of surrender and which have a Fair Market Value on the date of surrender equal to or greater than the
aggregate exercise price of the Shares as to which said Option shall be exercised (it being agreed that the excess of the Fair
Market Value over the aggregate exercise price, if any, shall be refunded to the Awardee in cash);
(iv)
subject to any conditions or limitations established by the Administrator, the Company withholding Shares otherwise issuable upon
exercise of an Option;
(v)
consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Administrator and
in compliance with Applicable Law;
(vi)
such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Law; or
(vii)
any combination of the foregoing methods of payment.
(g)
Procedure for Exercise; Rights as a Stockholder.
(i)
Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the applicable Option Agreement.
(ii)
An Option shall be deemed exercised when (A) the Company receives (1) written or electronic notice of exercise (in accordance
with the Option Agreement or procedures established by the Administrator) from the person entitled to exercise the Option and
(2) full payment for the Shares with respect to which the related Option is exercised, and (B) with respect to Nonqualified Stock
Options, provisions acceptable to the Administrator have been made for payment of all applicable withholding taxes.
(iii)
Unless provided otherwise by the Administrator or pursuant to this Plan, until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding the exercise
of the Option.
(iv)
The Company shall issue (or cause to be issued) such Shares as soon as administratively practicable after the Option is exercised.
An Option may not be exercised for a fraction of a Share.
9.
Incentive Stock Option Limitations/Terms.
(a)
Eligibility. Only Employees (who qualify as employees under Section 3401(c) of the Code and the regulations promulgated
thereunder) of the Company or any of its Subsidiaries may be granted Incentive Stock Options. No Incentive Stock Option shall
be granted to any such Employee who as of the Grant Date owns stock possessing more than 10% of the total combined voting power
of the Company.
(b)
$100,000 Limitation. Notwithstanding the designation “Incentive Stock Option” in an Option Agreement, if and
to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable
for the first time by the Awardee during any calendar year (under all plans of the Company and any of its Subsidiaries) exceeds
U.S. $100,000, such Options shall be treated as Nonqualified Stock Options. For purposes of this Section 9(b) of the Plan, Incentive
Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the Grant Date.
(c)
Transferability. The Option Agreement must provide that an Incentive Stock Option is not transferable by the Awardee otherwise
than by will or the laws of descent and distribution, and, during the lifetime of such Awardee, must not be exercisable by any
other person. If the terms of an Incentive Stock Option are amended to permit transferability, the Option will be treated for
tax purposes as a Nonqualified Stock Option.
(d)
Exercise Price. The per Share exercise price of an Incentive Stock Option shall in no event be inconsistent with the requirements
for qualification of the Incentive Stock Option under Section 422 of the Code.
(e)
Other Terms. Option Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may
be necessary to qualify, to the extent determined desirable by the Administrator, with the applicable provisions of Section 422
of the Code. If any such terms and conditions, as of the Grant Date or any later date, do not so comply, the Option will be treated
thereafter for tax purposes as a Nonqualified Stock Option.
10.
Stock Appreciation Rights. A “Stock Appreciation Right” or “SAR” is a right that entitles the Awardee
to receive, in cash or Shares (as determined by the Administrator), value equal to or otherwise based on the excess of (i) the
Fair Market Value of a specified number of Shares at the time of exercise over (ii) the aggregate exercise price of the right,
as established by the Administrator on the Grant Date. All Stock Appreciation Rights under the Plan shall be granted subject to
the same terms and conditions applicable to Options as set forth in Section 8 of the Plan. Stock Appreciation Rights may be granted
to Awardees either alone (“freestanding”) or in addition to or in tandem with other Awards granted under the Plan
and may, but need not, relate to a specific Option granted under Section 8 of the Plan. However, any Stock Appreciation Right
granted in tandem with an Option may be granted at the same time such Option is granted or at any time thereafter before exercise
or expiration of such Option, and shall be based on the Fair Market Value of one Share on the Grant Date or, if applicable, on
the Grant Date of the Option with respect to a Stock Appreciation Right granted in exchange for or in tandem with, but subsequent
to, the Option (subject to the requirements of Section 409A of the Code). Subject to the provisions of Section 8 of the Plan,
the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate.
11.
Stock Awards.
(a)
Stock Award Agreement. Each Stock Award Agreement shall contain provisions regarding (i) the number of Shares subject to
such Stock Award or a formula for determining such number, (ii) the purchase price of the Shares, if any, and the means of payment
for the Shares, (iii) the Performance Criteria, if any, and level of achievement versus these criteria that shall determine the
number of Shares granted, issued, retainable, and/or vested, (iv) such terms and conditions on the grant, issuance, vesting, and/or
forfeiture of the Shares as may be determined from time to time by the Administrator, (v) restrictions on the transferability
of the Stock Award, and (vi) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined
from time to time by the Administrator. Unless otherwise provided in the Award Agreement, no Stock Award shall vest sooner than
one (1) year after its Grant Date. More specifically, unless otherwise provided in the Award Agreement, the Stock Award shall
vest in twenty-five percent (25%) increments on each of the first four anniversaries of its Grant Date. The Committee may, in
its sole discretion, waive the vesting restrictions and any other conditions set forth in any Award Agreement under such terms
and conditions as the Committee shall deem appropriate.
(b)
Restrictions and Performance Criteria. The grant, issuance, retention, and/or vesting of Stock Awards issued to Employees
may be subject to such Performance Criteria and level of achievement versus these criteria as the Administrator shall determine,
which criteria may be based on financial performance, personal performance evaluations, and/or completion of service by the Awardee.
Awards with vesting conditions that are based upon Performance Criteria and level of achievement versus such criteria are referred
to as “Performance Stock Awards” and Awards with vesting conditions that are based upon continued employment or the
passage of time are referred to as “Restricted Stock Awards.”
(c)
Rights as a Stockholder. Unless otherwise provided for by the Administrator, the Participant shall have the rights equivalent
to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) to the Participant. Any certificate issued in respect
of a Restricted Stock Award shall be registered in the name of the applicable Participant and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Award. The Committee may require that the certificates
evidencing such Shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition
of any Award of Restricted Stock, the applicable Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award. The Participant shall not be permitted to sell, assign, transfer, pledge, or otherwise
encumber a Stock Award.
12.
Stock Unit Awards and Other Stock-based Awards.
(a)
Stock Unit Awards. Each Stock Unit Award Agreement shall contain provisions regarding (i) the number of Shares subject
to such Stock Unit Award or a formula for determining such number, (ii) the Performance Criteria, if any, and level of achievement
versus these criteria that shall determine the number of Shares granted, issued, and/or vested, (iii) such terms and conditions
on the grant, issuance, vesting, and/or forfeiture of the Shares as may be determined from time to time by the Administrator,
(iv) restrictions on the transferability of the Stock Unit Award, and (v) such further terms and conditions, in each case not
inconsistent with this Plan, as may be determined from time to time by the Administrator. Unless otherwise provided in the Award
Agreement, no Stock Unit Award shall vest sooner than one (1) year after its Grant Date. More specifically, unless otherwise provided
in the Award Agreement, the Stock Unit Award shall vest in twenty-five percent (25%) increments on each of the first four anniversaries
of its Grant Date. The Committee may, in its sole discretion, waive the vesting restrictions and any other conditions set forth
in any Award Agreement under such terms and conditions as the Committee shall deem appropriate.
(b)
Restrictions and Performance Criteria. The grant, issuance, retention, and/or vesting of Stock Unit Awards issued to Employees
may be subject to such Performance Criteria and level of achievement versus these criteria as the Administrator shall determine,
which criteria may be based on financial performance, personal performance evaluations, and/or completion of service by the Awardee.
Awards with vesting conditions that are based upon Performance Criteria and level of achievement versus such criteria are referred
to as “Performance Stock Unit Awards” and Awards with vesting conditions that are based upon continued employment
or the passage of time are referred to as “Restricted Stock Unit Awards.”
(c)
Rights as a Stockholder. Unless otherwise provided for by the Administrator, the Participant shall have the rights equivalent
to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) to the Participant.
(d)
Other Stock-based Award. An “Other Stock-based Award” means any other type of equity-based or equity-related
Award not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares), as well
as any cash based bonus based on the attainment of Performance Criteria as described in Section 13(b), in such amount and subject
to such terms and conditions as the Administrator shall determine. Such Awards may involve the transfer of actual Shares to Participants,
or payment in cash or otherwise of amounts based on the value of Shares or pursuant to attainment of a performance goal. Each
Other Stock-based Award will be evidenced by an Award Agreement containing such terms and conditions as may be determined by the
Administrator.
(e)
Value of Other Stock-based Awards. Each Other Stock-based Award shall be expressed in terms of Shares or units based on
Shares or a target amount of cash, as determined by the Administrator. The Administrator may establish Performance Criteria in
its discretion. If the Administrator exercises its discretion to establish Performance Criteria, the number and/or value of Other
Stock-based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
(f)
Payment of Other Stock-based Awards. Payment, if any, with respect to Other Stock-based Awards shall be made in accordance
with the terms of the Award, in cash or Shares as the Administrator determines.
13.
Other Provisions Applicable to Awards.
(a)
Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by beneficiary designation, will, or by the laws of descent
or distribution, including, but not limited to, any attempted assignment or transfer in connection with the settlement of marital
property or other rights incident to a divorce or dissolution, and any such attempted sale, assignment, or transfer shall be of
no effect prior to the date an Award is vested and settled. The Administrator may only make an Award transferable to an Awardee’s
family member or any other person or entity provided the Awardee does not receive consideration for such transfer. If the Administrator
makes an Award transferable, either as of the Grant Date or thereafter, such Award shall contain such additional terms and conditions
as the Administrator deems appropriate, and any transferee shall be deemed to be bound by such terms upon acceptance of such transfer.
(b)
Performance Criteria. For purposes of this Plan, the term “Performance Criteria” shall mean any one or more
criteria based on financial performance, personal performance evaluations, and/or completion of service, either individually,
alternatively, or in any combination, applied, as applicable, to either the Company as a whole or to a Subsidiary, business unit,
Affiliate, or business segment, either individually, alternatively, or in any combination, and measured either annually or cumulatively
over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results, or to
a designated comparison group, in each case as specified by the Committee in the Award or by duly adopted resolution. The Administrator
may establish specific performance targets (including thresholds and whether to exclude certain extraordinary, non-recurring,
or similar items) and Award amounts, subject to the right of the Administrator to exercise discretion to adjust payment amounts,
either up or down, following the conclusion of the performance period on the basis of such further considerations as the Administrator
in its sole discretion shall determine. Extraordinary, non-recurring items that may be the basis of adjustment include, but are
not limited to, acquisitions or divestitures, restructurings, discontinued operations, extraordinary items, and other unusual
or non-recurring charges, an event either not directly related to the operations of the Company, Subsidiary, division, business
segment, or business unit or not within the reasonable control of management, the cumulative effects of tax or accounting changes
in accordance with U.S. generally accepted accounting principles, and foreign exchange gains or losses.
(c)
Termination of Employment or Board Membership. The Administrator shall determine as of the Grant Date (subject to modification
subsequent to the Grant Date) the effect a termination from membership on the Board by a Non-employee Director for any reason
or a Termination of Employment due to Disability, Retirement, death, or otherwise (including Termination for Cause) shall have
on any Award. Unless otherwise provided in the Award Agreement:
(i)
Upon termination from membership on the Board by a Non-employee Director for any reason other than Disability or death, any Option
or SAR held by such Director that (1) has not vested and is not exercisable as of the effective date of such termination from
membership on the Board shall be subject to immediate cancellation and forfeiture or (2) is vested and exercisable as of the effective
date of such termination shall remain exercisable for one (1) year thereafter, or the remaining term of the Option or SAR, if
less. Any unvested Stock Award, Stock Unit Award, or Other Stock-based Award held by a Non-employee Director at the time of termination
from membership on the Board for a reason other than Disability or death shall be immediately cancelled and forfeited.
(ii)
Termination from membership on the Board by a Non-employee Director due to Disability or death shall result in full vesting of
any outstanding Options or SARs and vesting of a prorated portion of any Stock Award, Stock Unit Award, or Other Stock-based Award
based upon the full months of the applicable performance period, vesting period, or other period of restriction elapsed as of
the end of the month in which the termination from membership on the Board by a Non-employee Director due to Disability or death
occurs over the total number of months in such period. Any Options or SARs that vest upon Disability or death shall remain exercisable
for one (1) year thereafter, or the remaining term of the Option or SAR, if less. In the case of any Stock Award, Stock Unit Award,
or Other Stock-based Award that vests on the basis of attainment of Performance Criteria, the pro-rata vested amount shall be
based upon the target award.
(iii)
Upon Termination of Employment due to Disability or death, any Option or SAR held by an Employee shall, if not already fully vested,
become fully vested and exercisable as of the effective date of such Termination of Employment and shall remain exercisable for
one (1) year after such Termination of Employment due to Disability or death, or, in either case, the remaining term of the Option
or SAR, if less. Termination of Employment due to Disability or death shall result in vesting of a prorated portion of any Stock
Award, Stock Unit Award, or Other Stock-based Award based upon the full months of the applicable performance period, vesting period,
or other period of restriction elapsed as of the end of the month in which the Termination of Employment due to Disability or
death occurs over the total number of months in such period. In the case of any Stock Award, Stock Unit Award, or Other Stock-based
Award that vests on the basis of attainment of Performance Criteria, the pro-rata vested amount shall be based upon the target
award.
(iv)
Any Option or SAR held by an Awardee at Retirement that occurs at least one (1) year after the Grant Date of the Option or SAR
will remain outstanding for the remaining term of the Option or SAR and continue to vest; any Stock Award, Stock Unit Award, or
Other Stock-based Award held by an Awardee at Retirement that occurs at least one (1) year after the Grant Date of the Award shall
also continue to vest and remain outstanding for the remainder of the term of the Award.
(v)
Any other Termination of Employment shall result in immediate cancellation and forfeiture of all outstanding Awards that have
not vested as of the effective date of such Termination of Employment, and any vested and exercisable Options and SARs held at
the time of such Termination of Employment shall remain exercisable for ninety (90) days thereafter, or the remaining term of
the Option or SAR, if less. Notwithstanding the foregoing, all outstanding and unexercised Options and SARs shall be immediately
cancelled in the event of a Termination for Cause.
14.
Dividends and Dividend Equivalents. Awards other than Options and Stock Appreciation Rights may provide the Awardee with the
right to receive dividend payments or dividend equivalent payments on the Shares subject to the Award, whether or not such Award
is vested. Notwithstanding the foregoing, dividends or dividend equivalents shall not be paid with respect to Stock Awards, Stock
Unit Awards, or Other Stock-based Awards that vest based on the achievement of performance goals prior to the date the performance
goals are satisfied and the Award is earned, and then shall be payable only with respect to the number of Shares or Stock Units
actually earned under the Award. Such payments may be made in cash, Shares, or Stock Units or may be credited as cash or Stock
Units to an Awardee’s account and later settled in cash or Shares or a combination thereof, as determined by the Administrator.
Such payments and credits may be subject to such conditions and contingencies as the Administrator may establish.
15.
Adjustments upon Changes in Capitalization, Organic Change, or Change of Control.
(a)
Adjustment Clause. In the event of (i) a stock dividend, extraordinary cash dividend, stock split, reverse stock split,
share combination, or recapitalization or similar event affecting the capital structure of the Company (each, a “Share Change”),
or (ii) a merger, consolidation, acquisition of property or shares, separation, spin-off, reorganization, stock rights offering,
liquidation, Disaffiliation, or similar event affecting the Company or any of its Subsidiaries (each, an “Organic Change”),
the Administrator or the Board shall make such substitutions or adjustments as it deems appropriate and equitable to (i) the Share
limitations set forth in Section 3 of the Plan, (ii) the number and kind of Shares covered by each outstanding Award, and (iii)
the price per Share subject to each such outstanding Award. In the case of Organic Changes, such adjustments may include, without
limitation, (x) the cancellation of outstanding Awards in exchange for payments of cash, property, or a combination thereof having
an aggregate value equal to the value of such Awards, as determined by the Administrator or the Board in its sole discretion (it
being understood that in the case of an Organic Change with respect to which stockholders receive consideration other than publicly
traded equity securities of the ultimate surviving entity, any such determination by the Administrator that the value of an Option
or Stock Appreciation Right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being
paid for each Share pursuant to such Organic Change over the exercise price of such Option or Stock Appreciation Right shall conclusively
be deemed valid); (y) the substitution of other property (including, without limitation, cash or other securities of the Company
and securities of entities other than the Company) for the Shares subject to outstanding Awards; and (z) in connection with any
Disaffiliation, arranging for the assumption of Awards, or replacement of Awards with new awards based on other property or other
securities (including, without limitation, other securities of the Company and securities of entities other than the Company),
by the affected Subsidiary, Affiliate, or division or by the entity that controls such Subsidiary, Affiliate, or division following
such Disaffiliation (as well as any corresponding adjustments to Awards that remain based upon Company securities). The Committee
may adjust in its sole discretion the Performance Criteria applicable to any Awards to reflect any Share Change and any Organic
Change and any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued
operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles
or as identified in the Company’s financial statements, notes to the financial statements, management’s discussion
and analysis or the Company’s other SEC filings. Any adjustment under this Section 15(a) need not be the same for all Participants.
(b)
Change of Control. In the event of a Change of Control, unless otherwise determined by the Administrator as of the Grant
Date of a particular Award (or subsequent to the Grant Date), the following acceleration, exercisability, and valuation
provisions shall apply:
(i)
On the date that such Change of Control occurs, any or all Options and Stock Appreciation Rights awarded under this Plan not previously
exercisable and vested shall, if not assumed, or substituted with a new award, by the successor to the Company, become fully exercisable
and vested, and if the successor to the Company assumes such Options or Stock Appreciation Rights or substitutes other awards
for such Awards, such Awards (or their substitutes) shall become fully exercisable and vested if the Participant’s employment
is terminated (other than a Termination for Cause) within two (2) years following the Change of Control.
(ii)
Except as may be provided in an individual severance or employment agreement (or severance plan) to which an Awardee is a party,
in the event of an Awardee’s Termination of Employment within two (2) years after a Change of Control for any reason other
than because of the Awardee’s death, Retirement, Disability, or Termination for Cause, each Option and Stock Appreciation
Right held by the Awardee (or a transferee) that is vested following such Termination of Employment shall remain exercisable until
the earlier of the third anniversary of such Termination of Employment (or any later date until which it would remain exercisable
under such circumstances by its terms) or the expiration of its original term. In the event of an Awardee’s Termination
of Employment more than two (2) years after a Change of Control, or within two (2) years after a Change of Control because of
the Awardee’s death, Retirement, Disability, or Termination for Cause, the provisions of Section 13(c) of the Plan shall
govern (as applicable).
(iii)
On the date that such Change of Control occurs, the restrictions and conditions applicable to any or all Stock Awards, Stock Unit
Awards, and Other Stock-based Awards that are not assumed, or substituted with a new award, by the successor to the Company shall
lapse and such Awards shall be fully vested. Unless otherwise provided in an Award Agreement at the Grant Date, upon the occurrence
of a Change of Control without assumption or substitution of the Awards by the successor, any performance-based Award shall be
deemed fully earned at the target amount as of the date on which the Change of Control occurs. All Stock Awards, Stock Unit Awards,
and Other Stock-based Awards shall be settled or paid within thirty (30) days of vesting hereunder. Notwithstanding the foregoing,
if the Change of Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and
the regulations thereunder, the Awardee shall be entitled to receive the Award from the Company on the date that would have applied
absent this provision. If the successor to the Company does assume (or substitute with a new award) any Stock Awards, Stock Unit
Awards, and Other Stock-based Awards, all such Awards shall become fully vested if the Participant’s employment is terminated
(other than a Termination for Cause) within two (2) years following the Change of Control, and any performance-based Award shall
be deemed fully earned at the target amount effective as of such Termination of Employment.
(iv)
The Committee, in its discretion, may determine that, upon the occurrence of a Change of Control of the Company, each Option and
Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and/or
that each Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount
equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over
the exercise price per Share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more
kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof,
as the Committee, in its discretion, shall determine, and if there is no excess value, the Committee may, in its discretion, cancel
such Awards.
(v)
An Option, Stock Appreciation Right, Stock Award, Stock Unit Award, or Other Stock-based Award shall be considered assumed or
substituted for if following the Change of Control the Award confers the right to purchase or receive, for each Share subject
to the Option, Stock Appreciation Right, Stock Award, Stock Unit Award, or Other Stock-based Award immediately prior to the Change
of Control, the consideration (whether stock, cash, or other securities or property) received in the transaction constituting
a Change of Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided,
however, that, if such consideration received in the transaction constituting a Change of Control is not solely common
stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to
be received upon the exercise or vesting of an Option, Stock Appreciation Right, Stock Award, Stock Unit Award or Other Stock-based
Award, for each Share subject thereto, will be solely common stock of the successor company with a fair market value substantially
equal to the per Share consideration received by holders of Shares in the transaction constituting a Change of Control. The determination
of whether fair market value is substantially equal shall be made by the Committee in its sole discretion and its determination
shall be conclusive and binding.
(c)
Section 409A. Notwithstanding the foregoing: (i) any adjustments made pursuant to Section 15(a) of the Plan to Awards that
are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance
with the requirements of Section 409A of the Code; (ii) any adjustments made pursuant to Section 15(a) of the Plan to Awards that
are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to
ensure that, after such adjustment, the Awards either continue not to be subject to Section 409A of the Code or comply with the
requirements of Section 409A of the Code; (iii) the Administrator shall not have the authority to make any adjustments pursuant
to Section 15(a) of the Plan to the extent that the existence of such authority would cause an Award that is not intended to be
subject to Section 409A of the Code to be subject thereto; and (iv) if any Award is subject to Section 409A of the Code, Section
15(b) of the Plan shall be applicable only to the extent specifically provided in the Award Agreement and permitted pursuant to
Section 24 of the Plan in order to ensure that such Award complies with Code Section 409A.
16.
Amendment and Termination of the Plan.
(a)
Amendment and Termination. The Administrator may amend, alter, or discontinue the Plan or any Award Agreement, but any
such amendment shall be subject to approval of the stockholders of the Company in the manner and to the extent required by Applicable
Law. In addition, without limiting the foregoing, unless approved by the stockholders of the Company and subject to Section 16(b),
no such amendment shall be made that would:
(i)
increase the maximum aggregate number of Shares which may be subject to Awards granted under the Plan;
(ii)
reduce the minimum exercise price for Options or Stock Appreciation Rights granted under the Plan; or
(iii)
reduce the exercise price of outstanding Options or Stock Appreciation Rights, as prohibited by Section 8(c) without stockholder
approval.
(b)
Effect of Amendment or Termination. No amendment, suspension, or termination of the Plan shall impair the rights of any
Participant with respect to an outstanding Award, unless mutually agreed otherwise between the Participant and the Administrator,
which agreement must be in writing and signed by the Participant and the Company, except that no such agreement shall be required
if the Administrator determines in its sole discretion that such amendment either (i) is required or advisable in order for the
Company, the Plan, or the Award to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (ii)
is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been
adequately compensated, except that this exception shall not apply following a Change of Control. Termination of the Plan shall
not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under
the Plan prior to the date of such termination.
(c)
Effect of the Plan on Other Arrangements. Neither the adoption of the Plan by the Board or a Committee nor the submission
of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the
Board or any Committee to adopt such other incentive arrangements as it or they may deem desirable, including without limitation,
the granting of restricted shares or restricted share units or stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
17.
Designation of Beneficiary.
(a)
An Awardee may file a written designation of a beneficiary who is to receive the Awardee’s rights pursuant to Awardee’s
Awards or the Awardee may include his or her Awards in an omnibus beneficiary designation for all benefits under the Plan. To
the extent that Awardee has completed a designation of beneficiary while employed with the Company or an Affiliate, such beneficiary
designation shall remain in effect with respect to any Award hereunder until changed by the Awardee to the extent enforceable
under Applicable Law.
(b)
Such designation of beneficiary may be changed by the Awardee at any time by written notice. In the event of the death of an Awardee
and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Awardee’s death,
the Company shall allow the legal representative of the Awardee’s estate to exercise the Award.
18.
No Right to Awards or to Employment. No person shall have any claim or right to be granted an Award and the grant of any Award
shall not be construed as giving an Awardee the right to continue in the employ of the Company or its Affiliates. Further, the
Company and its Affiliates expressly reserve the right, at any time, to dismiss any Employee or Awardee at any time without liability
or any claim under the Plan, except as provided herein or in any Award Agreement entered into hereunder.
19.
Legal Compliance. Shares shall not be issued pursuant to an Option, Stock Appreciation Right, Stock Award, Stock Unit Award,
or Other Stock-based Award unless such Option, Stock Appreciation Right, Stock Award, or Other Stock-based Award and the issuance
and delivery of such Shares shall comply with Applicable Law and shall be further subject to the approval of counsel for the Company
with respect to such compliance. Unless the Awards and Shares covered by this Plan have been registered under the Securities Act
or the Company has determined that such registration is unnecessary, each person receiving an Award and/or Shares pursuant to
any Award may be required by the Company to give a representation in writing that such person is acquiring such Shares for his
or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.
20.
Inability to Obtain Authority. To the extent the Company is unable to or the Administrator deems it unfeasible to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be advisable or necessary
to the lawful issuance and sale of any Shares hereunder, the Company shall be relieved of any liability with respect to the failure
to issue or sell such Shares as to which such requisite authority shall not have been obtained.
21.
Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the Plan.
22.
Notice. Any written notice to the Company required by any provisions of this Plan shall be addressed to the Secretary of the
Company and shall be effective when received. Any notice to a Participant hereunder shall be addressed to the last address of
record with the Company and shall be effective when sent via first class mail, courier service, or electronic mail to such last
address of record.
23.
Governing Law; Interpretation of Plan; and Awards.
(a)
This Plan and all determinations made and actions taken pursuant hereto shall be governed by the substantive laws, but not the
choice of law rules, of the State of Nevada, except as to matters governed by U.S. federal law.
(b)
In the event that any provision of the Plan or any Award granted under the Plan is declared to be illegal, invalid, or otherwise
unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to
render it legal, valid, and enforceable, or otherwise deleted, and the remainder of the terms of the Plan and/or Award shall not
be affected except to the extent necessary to reform or delete such illegal, invalid, or unenforceable provision.
(c)
The headings preceding the text of each section hereof are inserted solely for convenience of reference, and shall not constitute
a part of the Plan, nor shall they affect its meaning, construction, or effect.
(d)
The terms of the Plan and any Award shall inure to the benefit of and be binding upon the parties hereto and their respective
permitted heirs, beneficiaries, successors, and assigns.
24.
Section 409A. It is the intention of the Company that no Award shall be “deferred compensation” subject to Section
409A of the Code, unless and to the extent that the Administrator specifically determines otherwise, and the Plan and the terms
and conditions of all Awards shall be interpreted accordingly. The terms and conditions governing any Awards that the Administrator
determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery
of cash or Shares pursuant thereto and any rules regarding treatment of such Awards in the event of a Change of Control, shall
be set forth in the applicable Award Agreement, deferral election forms and procedures, and rules established by the Administrator,
and shall comply in all respects with Section 409A of the Code. The following rules will apply to Awards intended to be subject
to Section 409A of the Code (“409A Awards”):
(a)
If a Participant is permitted to elect to defer an Award or any payment under an Award, such election will be permitted only at
times in compliance with Code Section 409A.
(b)
The Company shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under
Section 409A.
(c)
Any distribution of a 409A Award following a Termination of Employment that would be subject to Code Section 409A(a)(2)(A)(i)
as a distribution following a separation from service of a “specified employee” as defined under Code Section 409A(a)(2)(B)(i),
shall occur no earlier than the expiration of the six (6)-month period following such Termination of Employment.
(d)
In the case of any distribution of a 409A Award, if the timing of such distribution is not otherwise specified in the Plan or
an Award Agreement or other governing document, the distribution shall be made not later than the end of the calendar year during
which the settlement of the 409A Award is specified to occur.
(e)
In the case of an Award providing for distribution or settlement upon vesting or the lapse of a risk of forfeiture, if the time
of such distribution or settlement is not otherwise specified in the Plan or an Award Agreement or other governing document, the
distribution, or settlement shall be made not later than March 15 of the year following the year in which the Award vested or
the risk of forfeiture lapsed.
(f)
Notwithstanding anything herein to the contrary, neither the Company nor the Administrator makes any representation or guarantee
that the Plan or its administration shall comply with Code Section 409A, and in no event shall the Company or the Administrator
be liable for the payment of, or any gross up payment in connection with, any taxes or penalties owed by the Participant pursuant
to Code Section 409A.
25.
Limitation on Liability. The Company and any Affiliate which is in existence or hereafter comes into existence shall not be
liable to a Participant, an Employee, an Awardee, or any other persons as to:
(a)
The Non-Issuance of Shares. The non-issuance or sale of Shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance
and sale of any shares hereunder; and
(b)
Tax or Exchange Control Consequences. Any tax consequence expected, but not realized, or any exchange control obligation
owed, by any Participant, Employee, Awardee, or other person due to the receipt, exercise, or settlement of any Option or other
Award granted hereunder.
26.
Unfunded Plan. Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Awardees who are granted Stock Awards, Stock Unit Awards, or Other Stock-based Awards under this Plan, any such
accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may
at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation. Neither the Company
nor the Administrator shall be deemed to be a trustee of Shares or cash to be awarded under the Plan. Any liability of the Company
to any Participant with respect to an Award shall be based solely upon any contractual obligations that may be created by the
Plan; no such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Administrator shall be required to give any security or bond for the performance of any obligation
that may be created by this Plan.
27.
Foreign Employees and Consultants. Awards may be granted hereunder to Employees and Consultants who are foreign nationals,
who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are
otherwise subject to (or could cause the Company to be subject to) legal or regulatory provisions of countries or jurisdictions
outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of
the Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance
of such purposes, the Administrator may make such modifications, amendments, procedures, or subplans as may be necessary or advisable
to comply with such legal or regulatory provisions.
28.
Tax Withholding. Each Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local, or foreign taxes of any kind required by law to be withheld with respect to any Award under
the Plan no later than the date as of which any amount under such Award first becomes includible in the gross income of the Participant
for any tax purposes with respect to which the Company has a tax withholding obligation. Unless otherwise determined by the Company,
withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding
requirement; provided, however, that not more than the maximum statutory withholding requirement may be settled
with Shares that are part of the Award. The obligations of the Company under the Plan shall be conditional on such payment or
arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes
from any vested Shares or any other payment due to the Participant at that time or at any future time. The Administrator may establish
such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations
with Shares.
29.
Cancellation of Award; Forfeiture of Gain.
Notwithstanding
anything to the contrary contained herein, an Award Agreement may provide that the Award will be cancelled and the Participant
will forfeit the Shares or cash received or payable on the vesting or exercise of the Award, and that the amount of any proceeds
of the sale or gain realized on the vesting or exercise of the Award must be repaid to the Company, under such conditions as may
be required by Applicable Law or established by the Committee in its sole discretion.
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