UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
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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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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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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AYRO,
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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[ ]
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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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900
E. Old Settlers Boulevard, Suite 100
Round
Rock, Texas 78664
Telephone:
(512) 994-4917
November
9, 2020
Dear
Stockholder:
You
are cordially invited to attend the Annual Meeting of Stockholders of AYRO, Inc. to be held at 12:00 p.m., New York time, on December
17, 2020. The annual meeting will be conducted in a virtual format only via live webcast at www.virtualshareholdermeeting.com/AYRO2020.
In
light of public health concerns regarding the coronavirus outbreak, this year’s annual meeting will be conducted in a virtual
format only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access
to our stockholders regardless of geographic location. Stockholders will not be able to attend the annual meeting in person; however,
stockholders of record will be able to vote and submit questions electronically prior to the annual meeting by visiting www.proxyvote.com,
and during the annual meeting by visiting www.virtualshareholdermeeting.com/AYRO2020. Specific instructions for accessing the
meeting are provided in the enclosed Notice of Annual Meeting of Stockholders, proxy card or voting instruction form you received.
If you encounter any difficulties accessing the virtual annual meeting, please call the technical support number available on
the virtual meeting page on the morning of the annual meeting.
Your
vote is very important. Whether or not you expect to be present at the annual meeting, please vote as promptly as possible to
ensure your representation and the presence of a quorum at the annual meeting. As an alternative to voting during the annual meeting,
you may vote online, by phone or by mail by following the instructions on the enclosed proxy card. Voting online or by phone or
written proxy ensures your representation at the annual meeting regardless of whether you attend the virtual meeting. If your
shares are held in the name of a broker, trust, bank or other nominee, and you receive these materials through your broker or
through another intermediary, please complete and return the materials in accordance with the instructions provided to you by
such broker or other intermediary or contact your broker directly in order to obtain a proxy issued to you by your nominee holder
to attend the annual meeting and vote. Failure to do so may result in your shares not being eligible to be voted by proxy at the
annual meeting. On behalf of the board of directors, I urge you to submit your proxy as soon as possible, even if you currently
plan to attend the meeting virtually.
If
you plan to virtually attend the annual meeting, you will need the 16-digit control number on the enclosed proxy card or on the
instructions that accompany your proxy materials. The annual meeting will begin promptly at 12:00 p.m., New York time. Online
check-in will begin at 11:45 a.m., New York time, and you should allow ample time for the online check-in procedures.
Thank
you for your support of our company. I look forward to seeing you at the annual meeting.
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Sincerely,
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/s/
Joshua Silverman
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Joshua
Silverman
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Chairman
of the Board of Directors
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON DECEMBER 17, 2020:
Our
official Notice of Annual Meeting of Stockholders, Proxy Statement and
2019 Annual Report to Stockholders are available at:
www.proxyvote.com
900
E. Old Settlers Boulevard, Suite 100
Round
Rock, Texas 78664
Telephone:
(512) 994-4917
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held December 17, 2020
The
2020 Annual Meeting of Stockholders (the “Annual Meeting”) of AYRO, Inc., a Delaware corporation (the “Company”)
will be held at 12:00 p.m., New York time, on December 17, 2020, virtually only via live webcast over the Internet at www.virtualshareholdermeeting.com/AYRO2020.
We will consider and act on the following items of business at the Annual Meeting:
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(1)
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Election
of seven directors to serve on our board of directors for a term of one year or until their successors are elected and qualified,
for which the following are nominees: Rodney C. Keller, Jr., Joshua Silverman, Wayne R. Walker, George Devlin, Sebastian Giordano,
Zvi Joseph, and Greg Schiffman.
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(2)
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Ratification
of the appointment of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2020.
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(3)
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Approval,
on an advisory basis, of the compensation paid to our named executive officers.
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(4)
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Approval,
on an advisory basis, of the frequency of future advisory votes on the compensation paid to our named executive officers.
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(5)
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Approval
of the First Amendment to the AYRO, Inc. 2020 Long-Term Incentive Plan to increase the total number of shares of common stock
authorized for issuance under such plan by 1,800,000, to a total of 4,089,650 shares.
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(6)
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Such
other business as may properly come before the Annual Meeting.
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Stockholders
are referred to the Proxy Statement accompanying this notice for more detailed information with respect to the matters to be considered
at the Annual Meeting. After careful consideration, the board of directors recommends a vote “FOR” Proposals 1-3
and 5 and “FOR” the option of “every three years” for Proposal 4.
In
light of public health concerns regarding the coronavirus outbreak, this year’s Annual Meeting will be conducted in a virtual
format only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access
to our stockholders regardless of geographic location. Stockholders will not be able to attend the Annual Meeting in person; however,
stockholders of record will be able to vote and submit questions electronically prior to the Annual Meeting by visiting www.proxyvote.com,
and during the Annual Meeting by visiting www.virtualshareholdermeeting.com/AYRO2020, and entering the 16-digit control number
included on the enclosed proxy card or on the instructions that accompany your proxy materials. Specific instructions for accessing
the meeting are provided in the enclosed Notice of Annual Meeting of Stockholders, proxy card or voting instruction form you received.
The
board of directors has fixed the close of business on November 2, 2020 as the record date (the “Record Date”) for
the Annual Meeting. Only holders of record at the close of business on the Record Date of shares of our common stock and our preferred
stock are entitled to receive notice of the Annual Meeting. Only holders of record at the close of business on the Record Date
of shares of our common stock and our Series H-6 Convertible Preferred Stock, subject to the terms of the Certificate of Designations,
Preferences and Rights of the Series H-6 Convertible Preferred Stock, are entitled to vote at the Annual Meeting or at any postponement(s)
or adjournment(s) of the Annual Meeting. A complete list of registered stockholders entitled to vote at the Annual Meeting will
be available for inspection at the office of the Company during regular business hours for the 10 calendar days prior to and during
the Annual Meeting. A complete list of registered stockholders entitled to vote at the Annual Meeting will also be available for
viewing during the Annual Meeting by visiting www.virtualshareholdermeeting.com/AYRO2020.
You
can vote virtually during the Annual Meeting by use of a proxy card if you receive a printed copy of our proxy materials, or via
the Internet or telephone as indicated on the proxy card. If you hold shares of our common stock as the stockholder of record,
then you have the right to vote those shares at the Annual Meeting. If you are a beneficial owner and hold shares of our common
stock in street name, then you can vote the shares you beneficially own through the online voting platform under a legal proxy
from your bank, brokerage firm, or other nominee and are not required to take any additional action to obtain a legal proxy. Please
follow the instructions at www.virtualshareholdermeeting.com/AYRO2020 in order to vote your shares during the Annual Meeting,
whether you hold your shares of record or in street name.
Whether
or not you expect to attend the Annual Meeting, we urge you to vote your shares as promptly as possible by Internet, telephone
or mail so that your shares may be represented and voted at the Annual Meeting.
YOUR
VOTE AND PARTICIPATION IN THE COMPANY’S AFFAIRS ARE IMPORTANT. TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING. PLEASE VOTE IN ONE OF THESE WAYS:
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USE
THE TOLL-FREE NUMBER shown on your proxy card;
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VISIT
THE WEBSITE noted on your proxy card to vote via the Internet; or
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MARK,
SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope.
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STOCKHOLDERS
WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE VIRTUALLY IF THEY DESIRE.
If
your shares are held in the name of a broker, trust, bank or other nominee, and you receive these materials through your broker
or through another intermediary, please complete and return the materials in accordance with the instructions provided to you
by such broker or other intermediary or contact your broker directly in order to obtain a proxy issued to you by your nominee
holder to attend the Annual Meeting virtually and vote. Failure to do so may result in your shares not being eligible to be voted
by proxy at the Annual Meeting.
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By
Order of the Board of Directors,
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/s/
Rodney C. Keller, Jr.
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Rodney
C. Keller, Jr.
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President
and Chief Executive Officer
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November
9, 2020
TABLE
OF CONTENTS
AYRO,
INC.
900
E. Old Settlers Boulevard, Suite 100
Round
Rock, Texas 78664
Telephone:
(512) 994-4917
PROXY
STATEMENT
FOR
THE
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON DECEMBER 17, 2020
Unless
the context otherwise requires, references in this Proxy Statement to “we,” “us,” “our,” the
“Company,” or “AYRO” refer to AYRO, Inc., a Delaware corporation, and its direct and indirect subsidiaries.
In addition, unless the context otherwise requires, references to “stockholders” are to the holders of our voting
securities, which consist of our common stock and preferred stock, par value $0.0001 per share.
The
accompanying proxy is solicited by the board of directors (the “Board”) on behalf of AYRO, Inc., a Delaware corporation,
to be voted at the 2020 annual meeting of stockholders of the Company (the “Annual Meeting”) to be held virtually
via live webcast on the Internet at www.virtualshareholdermeeting.com/AYRO2020, on December 17, 2020 at 12:00 p.m., New York time,
for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders, and at any postponement(s), adjournment(s)
or recess(es) thereof. This Proxy Statement and accompanying form of proxy are dated November 9, 2020. On or about November 9,
2020, we commenced mailing of copies of the proxy materials to stockholders.
The
executive offices of the Company are located at, and the mailing address of the Company is, 900 E. Old Settlers Boulevard, Suite
100, Round Rock, Texas 78664.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON DECEMBER 17, 2020:
Our
official Notice of Annual Meeting of Stockholders, Proxy Statement and
2019 Annual Report to Stockholders are available at:
www.proxyvote.com
ABOUT
THE ANNUAL MEETING
What
is a proxy?
A
proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document,
that document is also called a “proxy” or a “proxy card.” If you are a street name holder, you must obtain
a proxy from your broker or nominee in order to vote your shares during the Annual Meeting.
What
is a proxy statement?
A
proxy statement is a document that regulations of the Securities and Exchange Commission (the “SEC”) require that
we give to you when we ask you to sign a proxy card to vote your stock at the Annual Meeting.
What
is the purpose of the Annual Meeting?
At
our Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders, including
the following:
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(1)
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Election
of seven directors to serve on our Board for a term of one year or until their successors are elected and qualified, for which
the following are nominees: Rodney C. Keller, Jr., Joshua Silverman, Wayne R. Walker, George Devlin, Sebastian Giordano, Zvi
Joseph, and Greg Schiffman (“Proposal 1”).
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(2)
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Ratification
of the appointment of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2020 (“Proposal 2”).
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(3)
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Approval,
on an advisory basis, of the compensation paid to our named executive officers (“Proposal 3”).
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(4)
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Approval,
on an advisory basis, of the frequency of future advisory votes on the compensation paid to our named executive officers (“Proposal
4”).
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(5)
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Approval
of the First Amendment to the 2020 AYRO, Inc. Long-Term Incentive Plan to increase the total number of shares of common stock
authorized for issuance under such plan by 1,800,000, to a total of 4,089,650 shares (“Proposal 5”).
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(6)
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Such
other business as may properly come before the Annual Meeting.
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What
is “householding” and how does it affect me?
With
respect to eligible stockholders who share a single address, we may send only one Proxy Statement to that address unless we receive
instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed
to reduce our printing and postage costs. However, if a stockholder of record residing at such address wishes to receive a separate
Proxy Statement in the future, he or she may contact AYRO, Inc., 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664,
Attn: Curt Smith or call (512) 643-1256. Eligible stockholders of record receiving multiple copies of our Proxy Statement can
request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker or other nominee
can request householding by contacting the nominee.
We
hereby undertake to deliver promptly, upon written or oral request, a copy of the Proxy Statement to a stockholder at a shared
address to which a single copy of the document was delivered. Requests should be directed to Curt Smith at the address or phone
number set forth above.
SEC
rules permit companies to send you a notice that proxy information is available on the Internet, instead of mailing you a complete
set of materials. In the future, the Company may choose to distribute proxy information in this manner.
What
should I do if I receive more than one set of voting materials?
You
may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards
or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate
voting instruction card for each brokerage account in which you hold shares. Similarly, if you are a stockholder of record and
hold shares in a brokerage account, you will receive a proxy card for shares held in your name and a voting instruction card for
shares held in street name. Please complete, sign, date and return each proxy card and voting instruction card that you receive,
or vote by telephone or Internet in accordance with the instructions set forth thereon, to ensure that all your shares are voted.
What
is the record date and what does it mean?
The
record date to determine the stockholders entitled to notice of and to vote at the Annual Meeting is the close of business on
November 2, 2020 (the “Record Date”). The Record Date is established by the Board as required by Delaware law. Only
holders of record at the close of business on the Record Date of shares of our common stock and preferred stock are entitled to
receive notice of the Annual Meeting. Only holders of record at the close of business on the Record Date of shares of our common
stock and our Series H-6 Convertible Preferred Stock (“Series H-6 Preferred Stock”), subject to the terms of the Certificate
of Designations, Preferences and Rights of the Series H-6 Convertible Preferred Stock, are entitled to vote, as a single class,
at the Annual Meeting or at any postponement(s) or adjournment(s) of the Annual Meeting. On the Record Date, 24,298,333 shares
of common stock were issued and outstanding. On the Record Date, 50 shares of Series H-6 Preferred Stock, which are convertible
into 1,440 shares of common stock, were issued and outstanding, and after application of the conversion price applicable for determination
of the maximum number of votes a holder of Series H-6 Preferred Stock is entitled to cast pursuant to the terms of the Series
H-6 Preferred Stock, subject also to the beneficial ownership limitation, as set forth in the Certificate of Designations, Preferences
and Rights of the Series H-6 Preferred Stock, holders of Series H-6 Preferred Stock are entitled to an aggregate of 922 votes
on the proposals described in this Proxy Statement. See “What are the voting rights of the stockholders?” below.
Who
is entitled to vote at the Annual Meeting?
The
holders of common stock and Series H-6 Preferred Stock at the close of business on the Record Date are entitled to vote at the
Annual Meeting, voting together as a single class on all matters described in this Proxy Statement. On the Record Date, such holders
held total voting power of 24,299,255 shares.
What
are the voting rights of the stockholders?
Each
holder of common stock is entitled to one vote per share of common stock on all matters to be acted upon at the Annual Meeting.
Each holder of Series H-6 Preferred Stock is entitled to the number of votes equal to the number of whole shares of common stock
into which the Series H-6 Preferred Stock beneficially owned by such holder are convertible as of the Record Date (subject to
the 9.99% beneficial ownership limitations) on all matters presented to the stockholders, voting together with the holders of
common stock as a single class; however, pursuant to the terms of the Series H-6 Preferred Stock as set forth in the Certificate
of Designations, Preferences and Rights of the Series H-6 Preferred Stock, holders of Series H-6 Preferred Stock in no event shall
be permitted to exercise a greater number of votes than such holders would have been entitled to cast if the Series H-6 Preferred
Stock had immediately been converted into shares of common stock at a conversion price equal to $3.90. Accordingly, each holder
of Series H-6 Preferred Stock is entitled to exercise votes for approximately 18.46 shares for each share of Series H-6 Preferred
Stock held.
What
constitutes a quorum for the Annual Meeting?
The
presence, in person or by proxy, of the holders of no less than 33 1/3% of the outstanding shares of the Company’s capital
stock entitled to vote is necessary to constitute a quorum to transact business. If a quorum is not present or represented at
the Annual Meeting, the stockholders entitled to vote at the Annual Meeting, present in person or by proxy, may adjourn the Annual
Meeting from time to time without notice or other announcement until a quorum is present or represented.
What
is the difference between a stockholder of record and a “street name” holder?
If
your shares are registered directly in your name with Issuer Direct Corporation, our stock transfer agent, you are considered
the stockholder of record with respect to those shares. The Proxy Statement and proxy card have been sent directly to you by us.
If
your shares are held in a stock brokerage account or by a bank or other nominee, the nominee is considered the record holder of
those shares. You are considered the beneficial owner of these shares, and your shares are held in “street name.”
The proxy materials have been forwarded to you by your nominee. As the beneficial owner, you have the right to direct your nominee
concerning how to vote your shares by using the voting instructions they included in the mailing or by following their instructions
for voting by telephone or the Internet.
What
is a broker non-vote?
Broker
non-votes occur when shares are held indirectly through a broker, bank or other intermediary on behalf of a beneficial owner (referred
to as held in “street name”), and the broker submits a proxy but does not vote for a matter because the broker has
not received voting instructions from the beneficial owner, and (i) the broker does not have discretionary voting authority on
the matter or (ii) the broker chooses not to vote on a matter for which it has discretionary voting authority. Under the rules
of the New York Stock Exchange that govern how brokers may vote shares for which they have not received voting instructions from
the beneficial owner, brokers are permitted to exercise discretionary voting authority only on “routine” matters when
voting instructions have not been timely received from a beneficial owner. Proposal 2 is considered a “routine matter.”
Therefore, if you do not provide voting instructions to your broker regarding such proposal, your broker will be permitted to
exercise discretionary voting authority to vote your shares on such proposal. In the absence of specific instructions from you,
your broker does not have discretionary authority to vote your shares with respect to Proposal 1, Proposal 3, Proposal 4 or Proposal
5.
How
do I vote my shares?
If
you are a record holder, you may vote your voting securities at the Annual Meeting in person virtually or by proxy. To vote in
person virtually, you must be logged in and registered to virtually attend the Annual Meeting and cast your vote before the announcement
of the close of voting during the Annual Meeting. To vote by proxy, you must do one of the following:
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USE
THE TOLL-FREE NUMBER shown on your proxy card;
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VISIT
THE WEBSITE shown on your proxy card to vote via the Internet; or
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MARK,
SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope.
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The
telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow you to vote your
shares and to confirm that your instructions have been properly recorded. Please refer to your proxy card or the information forwarded
by your bank, broker or other nominee to see which options are available to you. The proxy card is fairly simple to complete,
with specific instructions right on the card. By completing and submitting it, you will direct the designated persons (known as
“proxies”) to vote your stock at the Annual Meeting in accordance with your instructions. The Board has appointed
Joshua Silverman, Chairman of the Board, to serve as the proxy for the Annual Meeting.
Your
proxy card will be valid only if you sign, date and return it before the Annual Meeting. If you complete all of the proxy card
except one or more of the voting instructions, then the designated proxies will vote your shares as to which you provide no voting
instructions in the manner described under “What if I do not specify how I want my shares voted?” below. We do not
anticipate that any other matters will come before the Annual Meeting, but if any other matters properly come before the meeting,
then the designated proxies will vote your shares in accordance with applicable law and their judgment.
If
you hold your shares in “street name,” your bank, broker or other nominee should provide to you a request for voting
instructions along with the Company’s proxy solicitation materials. By completing the voting instruction card, you may direct
your nominee how to vote your shares. If you complete the voting instruction card except one or more of the voting instructions,
then your broker may be unable to vote your shares with respect to the proposal as to which you provide no voting instructions.
See “What is a broker non-vote?” Alternatively, if you want to vote your shares during the Annual Meeting, you must
contact your nominee directly in order to obtain a proxy issued to you by your nominee holder. Note that a broker letter that
identifies you as a stockholder is not the same as a nominee issued proxy.
Even
if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy as described above so that your
votes will be counted if you later decide not to attend the Annual Meeting or are unable to attend.
What
if I have technical difficulties or trouble accessing the Annual Meeting?
We
will have technicians ready to assist you with any technical difficulties you may have in accessing the Annual Meeting. If you
encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support
number that will be posted on the Virtual Shareholder Meeting log in page.
Who
counts the votes?
All
votes will be tabulated by Broadridge Investor Communication Solutions, Inc. (“Broadridge”), the inspector of election
appointed for the Annual Meeting. Each proposal will be tabulated separately.
What
are my choices when voting?
When
you cast your vote on:
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Proposal
1:
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You
may vote for all director nominees or may withhold your vote as to one or more director nominees.
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Proposals
2-3:
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You
may vote for the proposal, against the proposal or abstain from voting on the proposal.
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Proposal
4:
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You
may vote to choose an advisory vote on executive compensation every one, two or three years or to abstain from voting on the
proposal.
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Proposal
5:
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You
may vote for the proposal, against the proposal or abstain from voting on the proposal.
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What
are the Board’s recommendations on how I should vote my shares?
The
Board recommends that you vote your shares as follows:
“FOR”
Proposals 1, 2, 3 and 5, and “FOR” the option of every three years for Proposal 4.
What
if I do not specify how I want my shares voted?
If
you are a record holder who returns a completed proxy that does not specify how you want to vote your shares on one or more proposals,
the proxies will vote your shares for each proposal as to which you provide no voting instructions, and such shares will be voted
in the following manner:
“FOR”
Proposals 1, 2, 3 and 5, and “FOR” the option of every three years for Proposal 4.
If
you are a “street name” holder and do not provide voting instructions on one or more proposals, your bank, broker
or other nominee will be unable to vote those shares with respect to Proposal 1, Proposal 3, Proposal 4 and Proposal 5, but will
be able to vote those shares with respect to Proposal 2. See “What is a broker non-vote?”
Can
I change my vote?
Yes.
If you are a record holder, you may revoke your proxy at any time by any of the following means:
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Attending
the Annual Meeting and voting during the Annual Meeting. Your attendance at the Annual Meeting will not by itself revoke a
proxy. You must vote your shares online during the Annual Meeting to revoke your proxy.
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Completing
and submitting a new valid proxy bearing a later date by Internet, telephone or mail.
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Giving
written notice of revocation to the Company addressed to Curt Smith, Chief Financial Officer, at the Company’s address
above, which notice must be received before noon, New York time on December 16, 2020.
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If
you are a street name holder, your bank, broker or other nominee should provide instructions explaining how you may change or
revoke your voting instructions.
What
percentage of the vote is required to approve each proposal?
Assuming the presence
of a quorum, with respect to Proposal 1, the seven director nominees who receive the most votes present in person or represented
by proxy at the Annual Meeting and entitled to vote on the election of directors will be elected. Assuming the presence of a quorum,
approval of Proposals 2 and 3 will require the affirmative vote of a majority of the voting power of the shares of our common
stock represented in person or by proxy at the Annual Meeting and entitled to vote on such proposals. Assuming the presence of
a quorum, approval of Proposal 5 will require approval of a majority of the votes cast on the proposal. For Proposal 4, the number
of years (1, 2 or 3) that receives the highest number of votes represented in person or by proxy at the Annual Meeting and entitled
to vote will be deemed to be preferred by our stockholders. Please note that the vote on Proposal 3 and Proposal 4 are non-binding
advisory votes.
How
are abstentions and broker non-votes treated?
Abstentions
or votes withheld are included in the determination of the number of shares present at the Annual Meeting for determining a quorum
at the meeting. Votes withheld will have no effect with respect to the election of directors (Proposal 1). Abstentions will have
the same effect as a vote against the ratification of the independent registered public accounting firm (Proposal 2) and the approval
of the advisory vote on executive compensation (Proposal 3). Abstentions will have no effect with respect to the advisory vote
on how frequently our stockholders should vote on the compensation of our named executive officers (Proposal 4) or on the approval
of the First Amendment to the AYRO, Inc. 2020 Long-Term Incentive Plan (Proposal 5).
Broker
non-votes are included in the determination of the number of shares present at the Annual Meeting for determining a quorum at
the meeting. Broker non-votes will have no effect upon Proposals 1, 2, 3, 4 or 5.
Do
I have any dissenters’ or appraisal rights with respect to any of the matters to be voted on at the Annual Meeting?
No.
None of our stockholders have any dissenters’ or appraisal rights with respect to the matters to be voted on at the Annual
Meeting.
When
will the next stockholder advisory vote on executive compensation occur?
At
our 2014 annual meeting of stockholders, we submitted to stockholders an advisory vote on whether an advisory vote on executive
compensation should be held every one, two or three years. “Three years” was the frequency that received the highest
number of votes.
As
further described in “PROPOSAL 4: APPROVAL, ON AN ADVISORY BASIS, OF THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION
TO BE PAID TO OUR NAMED EXECUTIVE OFFICERS,” the Board is asking the Company’s stockholders to vote at the Annual
Meeting on a proposal regarding the frequency of the vote on future Say-on-Pay proposals, as required by Section 14A. Subject
to adoption by the Board of a different frequency for an advisory vote on executive compensation in accordance with the recommendation
of the Company’s stockholders pursuant to Proposal 4 or otherwise, the Company currently expects to hold future advisory
votes on executive compensation every three years, and the next “say-on-pay” vote is expected to occur at the annual
meeting of our stockholders in 2023.
What
are the solicitation expenses and who pays the cost of this proxy solicitation?
Our
Board is asking for your proxy and we will pay all of the costs associated with asking for stockholder proxies. We will reimburse
brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation
material to the beneficial owners of common stock and collecting voting instructions. We may use officers and employees of the
Company to ask for proxies, as described below.
Is
this Proxy Statement the only way that proxies are being solicited?
No.
In addition to the solicitation of proxies by use of the mail, officers and employees of the Company may solicit the return of
proxies, either by mail, telephone, fax, e-mail or through personal contact. These officers and employees will not receive additional
compensation for their efforts but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees
and fiduciaries, in connection with shares of the common stock registered in their names, will be requested to forward solicitation
material to the beneficial owners of shares of common stock.
Are
there any other matters to be acted upon at the Annual Meeting?
Management
does not intend to present any business at the Annual Meeting for a vote other than the matters set forth in the Notice of Annual
Meeting of Stockholders and has no information that others will do so. If other matters requiring a vote of the stockholders properly
come before the Annual Meeting, it is the intention of the persons named in the accompanying proxy card to vote the shares represented
by the proxies held by them in accordance with applicable law and their judgment on such matters.
Where
can I find voting results?
The
Company expects to publish the voting results in a current report on Form 8-K, which it expects to file with the SEC within four
business days following the Annual Meeting.
Who
can help answer my questions?
The
information provided above in this “Question and Answer” format is for your convenience only and is merely a summary
of the information contained in this Proxy Statement. We urge you to carefully read this entire Proxy Statement, including the
documents we refer to in this Proxy Statement. If you have any questions, or need additional material, please feel free to contact
Curt Smith by email at curt.smith@ayro.com or phone at (512) 643-1256.
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board currently consists of seven members. Our Board accepted the recommendation of the Nominating and Corporate Governance Committee
and voted to nominate Rodney C. Keller, Joshua Silverman, Sebastian Giordano, Greg Schiffman, Zvi Joseph, George Devlin and Wayne
R. Walker for election at the Annual Meeting for a term of one year to serve until the 2021 annual meeting of stockholders, or
until their respective successors have been elected and qualified. The seven director nominees who receive the most votes present
in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors will be elected. Should
any of the director nominees become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies
for the election, in his stead, of any other person the Board may nominate or designate. Each of the director nominees has expressed
his intention to serve the entire term for which election is sought.
Directors
and Nominees
The
following table sets forth the name, age and positions of the director nominees and each director:
Name
|
|
Age
|
|
Position
with the Company
|
Rodney
C. Keller, Jr.
|
|
61
|
|
President
and Chief Executive Officer
|
Joshua
Silverman
|
|
49
|
|
Chairman
of the Board
|
Sebastian
Giordano
|
|
62
|
|
Director
|
Greg
Schiffman
|
|
62
|
|
Director
|
Zvi
Joseph
|
|
53
|
|
Director
|
George
Devlin
|
|
66
|
|
Director
|
Wayne
R. Walker
|
|
61
|
|
Director
Nominee
|
The
following sets forth biographical information and the qualifications and skills for each director nominee:
Rodney
C. Keller, Jr. Mr. Keller, in addition to his roles as the Company’s President, Chief Executive Officer and a member
of the Board, served as chief executive officer, president and director of Private AYRO (as defined and described in “CORPORATE
GOVERANCE—Board Composition” below) from November 2017. Mr. Keller is an accomplished executive with domestic and
international experience in sales, marketing, operations, profit and loss oversight, multi-channel product distribution involving
both start-up and growth organizations. Prior to joining Private AYRO, Mr. Keller was a partner with Odgers Berndtson, a global
leader in executive search, leadership services and talent management from January 2016 to November 2017. From April 2013 until
January 2016, Mr. Keller served as the president of Segway Inc. During Mr. Keller’s tenure as the president, Segway Inc.
more than doubled its revenues, and Mr. Keller led the sale of the company to Beijing-based Ninebot in China, the resulting company
becoming a global leader in intelligent short-distance electric personal transportation solutions. From January 2012 to April
2013, Mr. Keller served as president and chief executive officer of T3 Motion, which was a Nasdaq-listed company during his tenure,
a producer of job-specific, 3-wheeled electric-vehicles primarily serving law enforcement and private security applications. From
August 2010 to January 2012, Mr. Keller was vice president and general manager of DIRECTV’s commercial business. During
Mr. Keller’s tenure this business grew more than 20% annually. From January 2007 to August 2010, Mr. Keller was president
and chief executive officer of Siemens Home and Office Communications business in North America. During his service, Mr. Keller
more than doubled revenues while expanding Siemen’s retail and internet footprint with some of the largest retailers in
North America. From January 2005 to January 2007, Mr. Keller was president and chief executive officer of Augmentix, a venture
capital-backed company building ruggedized servers and notebooks based on Dell Inc.’s platform of computing solutions, which
was subsequently sold to Dell. From 1996 until January 2004, Mr. Keller held different management roles in Toshiba America Information
Systems. Mr. Keller is a Distinguished Alumnus of Texas State University, a Trustee for the Development Foundation of Texas State
University and member of the McCoy College Advisory Council at Texas State University since 1987.
Joshua
Silverman. Mr. Silverman served as a member of the DropCar Board of Directors since the completion of the business combination
with Private DropCar and DC Acquisition Corporation, pursuant to which Private DropCar became a wholly owned subsidiary of WPCS
International Incorporated (“WPCS”), which then changed its name to DropCar on January 30, 2018 (the “2018 Merger”)
and, prior to that time, served as a director of WPCS since August 2016, and has continued to serve as a director following the
Merger with Private AYRO (as defined and described in “CORPORATE GOVERANCE—Board Composition” below). Mr. Silverman
currently serves as the Managing Member of Parkfield Funding LLC. Mr. Silverman was the co-founder and a Principal and Managing
Partner of Iroquois Capital Management, LLC (“Iroquois”), an investment advisory firm. Since its inception in 2003
until July 2016, Mr. Silverman served as Co-Chief Investment Officer of Iroquois. While at Iroquois, he designed and executed
complex transactions, structuring and negotiating investments in both public and private companies and has often been called upon
by the companies to solve inefficiencies as they relate to corporate structure, cash flow, and management. From 2000 to 2003,
Mr. Silverman served as Co-Chief Investment Officer of Vertical Ventures, LLC, a merchant bank. Prior to forming Iroquois, Mr.
Silverman was a Director of Joele Frank, a boutique consulting firm specializing in mergers and acquisitions. Previously, Mr.
Silverman served as Assistant Press Secretary to The President of the United States. Mr. Silverman currently serves as a director
of Protagenic Therapeutics, Neurotrope, Inc., and TapImmune Inc., all of which are public companies. He previously served as a
Director of National Holdings Corporation from July 2014 through August 2016, MGT Capital Investments, Inc. from December 2014
to May 2016, and Alanco Technologies Inc. from March 2016 through August 2016. Mr. Silverman received his B.A. from Lehigh University
in 1992. Mr. Silverman’s qualifications to sit on the Board include his experience as an investment banker, management consultant
and as a director of numerous public companies.
Sebastian
Giordano. Mr. Giordano served as a member of the DropCar Board of Directors since the closing of the 2018 Merger and,
prior to that time, served as a director of WPCS since February 2013, and has continued to serve as a director following the Merger
with Private AYRO. Mr. Giordano served as the Interim Chief Executive Officer of WPCS from August 2013 until April 25, 2016, when
the interim label was removed from his title. He served as the Chief Executive Officer of WPCS since such time through the closing
of the 2018 Merger. Since 2002, Mr. Giordano has been Chief Executive Officer of Ascentaur, LLC, a business consulting firm providing
comprehensive strategic, financial and business development services to start-up, turnaround and emerging growth companies. From
1998 to 2002, Mr. Giordano was Chief Executive Officer of Drive One, Inc., a safety training and education business. From 1992
to 1998, Mr. Giordano was Chief Financial Officer of Sterling Vision, Inc., a retail optical chain. Mr. Giordano received B.B.A.
and M.B.A. degrees from Iona College. Mr. Giordano’s qualifications to sit on the Board include his broad management experience,
including having served as Chief Executive Officer of WPCS.
Greg
Schiffman. Mr. Schiffman served as a member of the DropCar Board of Directors since the closing of the 2018 Merger and
has continued to serve as a director following the Merger with Private AYRO. Mr. Schiffman has served as the Chief Financial Officer
of privately-held AbSci, LLC since April 2020. He previously served as the Chief Financial Officer of Vineti, Inc. from October
2017 through April 2018. He also previously served as the Chief Financial Officer of each of Iovance Biotherapeutics (formerly
Lion Biotechnologies), from October 2016 through June 2017, Stem Cells, Inc., from January 2014 through September 2016, and Dendreon
Corporation, from December 2006 through December 2013. He currently serves on the boards of directors of several private companies.
Mr. Schiffman holds a B.S. in Accounting from DePaul University and an MM (MBA) from Northwestern University Kellogg Graduate
School of Management. Mr. Schiffman’s qualifications to sit on the Board include his financial background, business experience
and education.
Zvi
Joseph. Mr. Joseph served as a member of the DropCar Board of Directors since the closing of the 2018 Merger, and has
continued to serve as a director following the Merger with Private AYRO. He has served as Deputy General Counsel of Amdocs Limited,
a publicly traded corporation that provides software and services to communications and media companies, since October 2005. He
received his A.A.S. in Business Administration from Rockland Community College, his B.A. in Literature from New York University
and his J.D. from Fordham University School of Law. He also holds a Certificate in Business Excellence from Columbia University
School of Business. Mr. Joseph’s qualifications to sit on the Board include his legal experience and education.
George
Devlin. Mr. Devlin has, since 2007, managed his own consulting business, Venture Connections, primarily focused on helping
early stage companies with fundraising, commercialization and strategic planning. From 2005 to 2007, Mr. Devlin worked in operations
at Texas Pacific Group (TPG – Private Equity), where he supported deal partners on due diligence and transformation activities
involved in deals. From 2002 to 2005, Mr. Devlin served as Chief Executive Officer of Vivecon, a Stanford University start-up
in Supply Chain Risk Management solutions. From 2001 to 2002, he served as Chief Operations Officer of Converge, Inc. From 1998
to 2001, Mr. Devlin worked at Compaq Computer Corporation, eventually holding the post of Senior Vice President of Global Operations
based in Houston, Texas. He is a native of Scotland and graduated with a Business Studies diploma and a post-graduate diploma
in Human Resources from Glasgow Polytechnic, now called Caledonian University. Mr. Devlin’s international experience and
expertise, ranging from a successful career as an executive in a major global corporation (supply chain and operations) to becoming
an entrepreneur and helping many early stage start-up technology companies globally, qualify him as a valuable addition to the
Board.
Wayne
R. Walker. Mr. Walker has over 35 years of experience in corporate governance, turnaround management, corporate restructuring
and bankruptcy matters. In 1998, Mr. Walker founded Walker Nell Partners, Inc., an international business consulting firm, and
has served as its president from its founding to the present. Before founding Walker Nell Partners, Inc., Mr. Walker worked for
15 years at the DuPont Company in Wilmington, Delaware in the Securities and Bankruptcy group, where he worked in the Corporate
Secretary’s office and served as Senior Counsel. From 2018 to the present, Mr. Walker has served as a director of Wrap Technologies,
Inc., an innovator of modern policing solutions, where he also serves as Chair of the Nominating and Governance Committee and
of the Compensation Committee. From 2018 to the present, Mr. Walker has served as a director of Pitcairn Company and as the Chair
of its Compensation Committee. From 2013 to 2014, Mr. Walker served as Chairman of the Board of Directors of BridgeStreet Worldwide,
Inc., a global provider of extending corporate housing. From 2016 to 2018, Mr. Walker served as Chairman of the Board of Directors
of Last Call Operating Companies, an owner of various national restaurants. From 2013 to 2020, Mr. Walker served as Chairman of
the Board of Trustees of National Philanthropic Trust, a public charity. From 2018 to 2020, Mr. Walker served as Vice President
of the Board of Education of the City of Philadelphia. Mr. Walker has also served on the board of directors for the following
companies and foundations: Seaborne Airlines, Inc., Green Flash Brewery, Inc., and Eagleville Hospital and Foundation. Mr. Walker
has a Doctor of Jurisprudence from Catholic University (Washington, DC) and a Bachelor of Arts from Loyola University (New Orleans).
He is an attorney licensed by the State Bar of Georgia. He is a member of the State Bar Association of Georgia, American Bar Association,
American Bankruptcy Institute and Turnaround Management Association.
The
Board regards all of the individuals above as competent professionals with many years of experience in the business community.
The Board believes that the overall experience and knowledge of the members of Board will contribute to the overall success of
our business.
Unless
otherwise directed in the proxy, it is the intention of the persons named in the proxy to vote the shares represented by such
proxy for the election of the director nominees. Six of the seven director nominees are presently directors of the Company.
Family
Relationships
There
are no family relationships among any of our directors and executive officers.
Vote
Required
The
seven director nominees who receive the most votes present in person or represented by proxy at the Annual Meeting and entitled
to vote on the election of directors will be elected.
The
Board recommends a vote FOR the director nominees.
|
CORPORATE
GOVERNANCE
AYRO,
Inc., with the oversight of the Board and its committees, operates within a comprehensive plan of corporate governance for the
purpose of defining independence, assigning responsibilities, setting high standards of professional and personal conduct and
assuring compliance with such responsibilities and standards. We regularly monitor developments in the area of corporate governance.
Corporate
Code of Conduct and Ethics and Whistleblower Policy
We
have adopted a Corporate Code of Conduct and Ethics and Whistleblower Policy that applies to all of our associates, as well as
each of our directors and certain persons performing services for us. The Corporate Code of Conduct and Ethics and Whistleblower
Policy addresses, among other things, competition and fair dealing, conflicts of interest, protection and proper use of Company
assets, government relations, compliance with laws, rules and regulations and the process for reporting violations of the Corporate
Code of Conduct and Ethics and Whistleblower Policy, employee misconduct, improper conflicts of interest or other violations.
Our Corporate Code of Conduct and Ethics and Whistleblower Policy is available on our website at https://ayro.com/
in the “Governance” section found under the “Investors” tab. We intend to disclose any amendments to,
or waivers from, our Corporate Code of Conduct and Ethics and Whistleblower Policy at the same website address provided above.
Board
Composition
On
January 30, 2018, the Company completed its business combination with DropCar, Inc. (“Private DropCar”) in accordance
with the terms of the Agreement and Plan of Merger and Reorganization, dated as of September 6, 2017, as subsequently amended,
by and among us, DC Acquisition Corporation (“WPCS Merger Sub”), and Private DropCar, pursuant to which WPCS Merger
Sub merged with and into Private DropCar, with Private DropCar surviving as the Company’s wholly owned subsidiary (the “2018
Merger”). On January 30, 2018, immediately after completion of the 2018 Merger, the Company changed its name to “DropCar,
Inc.”
On
May 28, 2020, pursuant to the Agreement and Plan of Merger, dated December 19, 2019 (the “Merger Agreement”), by and
among the Company, ABC Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”),
and AYRO Operating Company, a Delaware corporation previously known as AYRO, Inc. (“Private AYRO”), Merger Sub was
merged with and into Private AYRO, with Private AYRO continuing after the merger as the surviving entity and a wholly owned subsidiary
of the Company (the “Merger”). Upon completion of the Merger on May 28, 2020, the Company changed its name to “AYRO,
Inc.” Immediately prior to the effective time of the Merger, the Board consisted of Spencer Richardson, David Newman, Joshua
Silverman, Sebastian Giordano, Zvi Joseph, Solomon Mayer, and Greg Schiffman. At the effective time of the Merger, David Newman,
the Company’s former Chief Business Development Officer and a former director of the Board, Spencer Richardson, the Company’s
former Chief Executive Officer and a former director of the Board, and Solomon Mayer, a former director of the Board, all tendered
their resignations from their respective positions as officers and directors of the Company. These letters did not contain any
statements describing disagreements with the Company related to its operations, policies or practices, nor did any disagreements
lead to their resignation. Pursuant to the terms of the Merger Agreement, the Board appointed Rodney C. Keller, Jr., George Devlin
and Mark Adams, who were members of Private AYRO’s board of directors immediately prior to the effective time of the Merger,
to the Board at the effective time of the Merger. Our Amended and Restated Certificate of Incorporation and our Amended and Restated
Bylaws, as amended (“Bylaws”), provide that our Board will consist of such number of directors as determined from
time to time by resolution adopted by our Board. Any vacancies or newly created directorships resulting from an increase in the
authorized number of directors may be filled by a majority of the directors then in office. As of November 9, 2020, the Board
consists of Rodney C. Keller, Jr., Joshua Silverman, Mark Adams, George Devlin, Sebastian Giordano, Zvi Joseph, and Greg Schiffman.
We
have no formal policy regarding Board diversity. Our Board believes that each director should have a basic understanding of the
principal operational and financial objectives and plans and strategies of the Company, our results of operations and financial
condition and relative standing in relation to our competitors. The Company values diversity on a Company-wide basis and seeks
to achieve a mix of directors that represent a diversity of background and experience, including with respect to age, gender,
race, ethnicity, and occupation. Although the Board does not establish specific goals with respect to diversity, the Board’s
overall diversity is a significant consideration in the director nomination process. Generally, we will strive to assemble a Board
that brings to us a variety of perspectives and skills derived from business and professional experience as we may deem are in
our and our stockholders’ best interests. In doing so, we will also consider candidates with appropriate non-business backgrounds.
Director
Independence
We
are currently listed on the NASDAQ Capital Market and therefore rely on the definition of independence set forth in the NASDAQ
Listing Rules (“NASDAQ Rules”). Under the NASDAQ Rules, a director will only qualify as an “independent director”
if, in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. Based upon information requested from and provided by each director
and director nominee concerning his background, employment, and affiliations, including family relationships, we have determined
that our current directors Messrs. Silverman, Schiffman, Joseph, Devlin and Adams, and a director nominee, Walker, have no material
relationship with us that would interfere with the exercise of independent judgment and are “independent directors”
as that term is defined in the NASDAQ Listing Rules. We also determined that a former director of the Board, Mayer, during the
time he served on the Board, had no such material relationship with us.
Board
Committees, Meetings and Attendance
During
the fiscal year ended December 31, 2019, the Board held 21 meetings. We expect our directors to attend Board meetings, meetings
of any committees and subcommittees on which they serve, and each annual meeting of stockholders, either in person or by teleconference.
During 2019, each director attended, either in person or telephonically, at least 75% of the aggregate Board meetings and meetings
of committees on which he served during his tenure as a director or committee member, except Brian Harrington, who resigned on
February 6, 2019.
The
Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities
and actions to the full Board. Currently, the Board has established an Audit Committee, a Compensation Committee and a Nominating
and Corporate Governance Committee. Committee assignments are re-evaluated annually. Each of these committees operates under a
charter that has been approved by our Board. The current charter of each of these committees is available on our website at https://ayro.com/
in the “Governance” section under “Investors.”
As
of November 9, 2020, the following table sets forth the membership of each of the Board committees listed above.
Name
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Nominating
and
Corporate Governance
Committee
|
Joshua
Silverman*
|
|
Member
|
|
Member
|
|
Chairman
|
Greg
Schiffman
|
|
Chairman
|
|
Member
|
|
Member
|
Zvi
Joseph
|
|
Member
|
|
Chairman
|
|
Member
|
|
*
|
Chairman
of the Board of Directors
|
Audit
Committee
Our
Audit Committee is responsible for, among other matters:
|
●
|
approving
and retaining the independent auditors to conduct the annual audit of our financial statements;
|
|
●
|
reviewing
the proposed scope and results of the audit;
|
|
●
|
reviewing
and pre-approving audit and non-audit fees and services;
|
|
●
|
reviewing
accounting and financial controls with the independent auditors and our financial and accounting staff;
|
|
●
|
reviewing
and approving transactions between us and our directors, officers and affiliates;
|
|
●
|
recognizing
and preventing prohibited non-audit services;
|
|
●
|
establishing
procedures for complaints received by us regarding accounting matters;
|
|
●
|
overseeing
internal audit functions, if any; and
|
|
●
|
preparing
the report of the audit committee that the rules of the SEC require to be included in our annual meeting proxy statement.
|
Our
Audit Committee is composed of Greg Schiffman (chairman), Zvi Joseph and Joshua Silverman. Our Board has determined that Messrs.
Schiffman, Joseph and Silverman are independent in accordance with NASDAQ Rules and Rule 10A-3 under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). Our Board has also reviewed the education, experience and other qualifications
of each member of the Audit Committee. Based upon that review, our Board has determined that Greg Schiffman qualifies as an “audit
committee financial expert,” as defined by the rules of the SEC. During the fiscal year ended December 31, 2019, the Audit
Committee, which consisted of Greg Schiffman, Zvi Joseph and Solomon Mayer, held 4 meetings.
Compensation
Committee
Our
Compensation Committee is responsible for, among other matters:
|
●
|
reviewing
and recommending the compensation arrangements for management, including the compensation for our president and chief executive
officer;
|
|
●
|
appointing,
compensating and overseeing the work of any compensation consultant, legal counsel or other advisor retained by the Compensation
Committee;
|
|
●
|
establishing
and reviewing general compensation policies with the objective to attract and retain superior talent, to reward individual
performance and to achieve our financial goals;
|
|
●
|
administering
our stock incentive plans; and
|
|
●
|
preparing
the report of the compensation committee that the rules of the SEC require to be included in our annual meeting proxy statement.
|
Our
Compensation Committee is composed of Greg Schiffman, Zvi Joseph (chairman) and Joshua Silverman. Our Board has determined that
Messrs. Schiffman, Joseph and Silverman are independent in accordance with NASDAQ Rules. The Compensation Committee has the authority
to delegate to subcommittees of the Compensation Committee any of the responsibilities of the full committee. During the fiscal
year ended December 31, 2019, the Compensation Committee, which consisted of Zvi Joseph and Solomon Mayer, held 7 meetings. We
did not engage any consultants in determining or recommending the amount or form of executive and director compensation during
2019.
Nominating
and Corporate Governance Committee
Our
Nominating and Corporate Governance Committee is responsible for, among other matters:
|
●
|
evaluating
the current composition, organization and governance of the Board and its committees, and making recommendations for changes
thereto;
|
|
●
|
reviewing
each director and nominee annually;
|
|
●
|
determining
desired Board member skills and attributes and conducting searches for prospective members accordingly;
|
|
●
|
evaluating
nominees, and making recommendations to the Board concerning the appointment of directors to Board committees, the selection
of Board committee chairs, proposal of the slate of directors for election to the Board, and the termination of membership
of individual directors in accordance with the Board’s governance principles;
|
|
●
|
overseeing
the process of succession planning for the chief executive officer and, as warranted, other senior officers of the Company;
|
|
●
|
developing,
adopting and overseeing the implementation of a code of business conduct and ethics; and
|
|
●
|
administering
the annual Board performance evaluation process.
|
Our
Nominating and Corporate Governance Committee is composed of Greg Schiffman, Zvi Joseph and Joshua Silverman (chairman). During
the fiscal year ended December 31, 2019, the Nominating Committee, which consisted of Zvi Joseph and Solomon Mayer, held 2 meetings.
Director
Nominations
Our
Nominating and Corporate Governance Committee considers all qualified candidates identified by members of the Board, by senior
management and by stockholders. The Nominating and Corporate Governance Committee follows the same process and uses the same criteria
for evaluating candidates proposed by stockholders, members of the Board and members of senior management. We did not pay fees
to any third party to assist in the process of identifying or evaluating director candidates during 2019.
Our
Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to
the Board at our Annual Meeting. To recommend a nominee for election to the Board, a stockholder must submit his or her recommendation
to our Secretary at our corporate offices at 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664. Such nomination
must satisfy the notice, information and consent requirements set forth in our Bylaws and must be received by us prior to the
date set forth under “Submission of Future Stockholder Proposals” below. A stockholder’s recommendation must
be accompanied by the information with respect to stockholder nominees as specified in our Bylaws, including among other things,
the name, age, address and occupation of the recommended person, the proposing stockholder’s name and address, the ownership
interests of the proposing stockholder and any beneficial owner on whose behalf the nomination is being made (including the number
of shares beneficially owned, any hedging, derivative, short or other economic interests and any rights to vote any shares) and
any material monetary or other relationships between the recommended person and the proposing stockholder and/or the beneficial
owners, if any, on whose behalf the nomination is being made.
In
evaluating director nominees, the Nominating and Corporate Governance Committee considers the following factors:
|
●
|
the
appropriate size and diversity of our Board;
|
|
●
|
our
needs with respect to the particular knowledge, skills and experience of nominees, including experience in corporate finance,
technology, business, administration and sales, in light of the prevailing business conditions and the knowledge, skills and
experience already possessed by other members of the Board;
|
|
●
|
experience
with accounting rules and practices, and whether such a person qualifies as an “audit committee financial expert”
pursuant to SEC rules; and
|
|
●
|
balancing
continuity of our Board with periodic injection of fresh perspectives provided by new Board members.
|
Our
Board believes that each director should have a basic understanding of our principal operational and financial objectives and
plans and strategies, our results of operations and financial condition and our relative standing in relation to our competitors.
In
identifying director nominees, the Board will first evaluate the current members of the Board willing to continue in service.
Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service
will be considered for re-nomination.
If
any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election,
the Board will identify another nominee with the desired skills and experience described above. The Board takes into consideration
the overall composition and diversity of the Board and areas of expertise that director nominees may be able to offer, including
business experience, knowledge, abilities and customer relationships. Generally, the Board will strive to assemble a Board that
brings to us a variety of perspectives and skills derived from business and professional experience as it may deem are in our
and our stockholders’ best interests. In doing so, the Board will also consider candidates with appropriate non-business
backgrounds.
Board
Leadership Structure and Role in Risk Oversight
The
positions of Chairman of the Board and principal executive officer are filled by two separate individuals. Mr. Silverman currently
serves as our Chairman of the Board, and Mr. Keller currently serves as our principal executive officer. The Board acknowledges
that there are different leadership structures that could allow it to effectively oversee the management of the risks relating
to the Company’s operations and believes its current leadership structure enables it to effectively provide oversight with
respect to such risks. Our Audit Committee is primarily responsible for overseeing the Company’s risk management processes
on behalf of the full Board. The Audit Committee receives reports from management concerning the Company’s assessment of
risks. In addition, the Audit Committee reports regularly to the full Board, which also considers the Company’s risk profile.
The Audit Committee and the full Board focus on the most significant risks facing the Company and the Company’s general
risk management strategy. In addition, as part of its oversight of our Company’s executive compensation program, the Compensation
Committee considers the impact of such program, and the incentives created by the compensation awards that it administers, on
our Company’s risk profile. In addition, the Compensation Committee reviews all of our compensation policies and procedures,
including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether
they present a significant risk to our Company. The Compensation Committee has determined that, for all employees, our compensation
programs do not encourage excessive risk and instead encourage behaviors that support sustainable value creation.
Communications
with Directors
The
Board welcomes communication from our stockholders. Stockholders and other interested parties who wish to communicate with a member
or members of our Board or a committee thereof may do so by addressing correspondence to the Board member, members or committee,
c/o Secretary, AYRO, Inc., 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664. Our Secretary will review and forward
correspondence to the appropriate person or persons.
All
communications received as set forth in the preceding paragraph will be opened by our Secretary for the sole purpose of determining
whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions
of a product or service or patently offensive material will be forwarded promptly to the addressee(s). In the case of communications
to the Board or any group or committee of directors, our Secretary will make sufficient copies of the contents to send to each
director who is a member of the group or committee to whom the communication is addressed. If the amount of correspondence received
through the foregoing process becomes excessive, our Board may consider approving a process for review, organization and screening
of the correspondence by our Secretary or another appropriate person.
Family
Relationships
There
are no family relationships amongst our directors and executive officers, or person nominated or chosen by the Company to become
a director or executive officer.
Involvement
in Certain Legal Proceedings
There
have been no material legal proceedings that would require disclosure under the federal securities laws that are material to an
evaluation of the ability or integrity of our directors or executive officers, or in which any director, officer, nominee or principal
stockholder, or any affiliate thereof, is a party adverse to us or has a material interest adverse to us.
DIRECTOR
COMPENSATION
The
following table sets forth summary information concerning the total compensation earned by the non-employee directors during the
year ended December 31, 2019 for services to the Company. At the effective time of the Merger on May 28, 2020, David Newman, the
Company’s former Chief Business Development Officer and a former director of the Board, Spencer Richardson, the Company’s
former Chief Executive Officer and a former director of the Board, and Solomon Mayer, a former director of the Board, all tendered
their resignations from their respective positions as officers and directors of the Company.
Effective
as of 6:05 pm Eastern Time on May 26, 2020, we filed an amendment to our Amended and Restated Certificate of Incorporation to
effect a reverse stock split of the issued and outstanding shares of our common stock, at a ratio of one share for ten shares.
Immediately following the reverse stock split, we issued a stock dividend of one share of the Company’s common stock for
each outstanding share of common stock to all holders of record immediately following the effective time of the reverse stock
split. The net result of the reverse stock split and the stock dividend was a 1-for-5 reverse stock split (the “Reverse
Split”). The stock awards listed below have been adjusted to give effect to the Reverse Split.
Name
|
|
Fees
Earned or Paid in
Cash ($)
|
|
|
Stock
Awards ($) (1)
|
|
|
All
other
compensation
|
|
|
Total
($)
|
|
Brian
Harrington (2)
|
|
|
3,036
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,036
|
|
Greg
Schiffman
|
|
|
50,741
|
|
|
|
25,000
|
|
|
|
|
|
|
|
75,741
|
|
Joshua
Silverman
|
|
|
147,391
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147,391
|
|
Sebastian
Giordano (3)
|
|
|
76,261
|
|
|
|
-
|
|
|
|
33,774
|
|
|
|
100,035
|
|
Solomon
Mayer
|
|
|
75,741
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,741
|
|
Zvi
Joseph
|
|
|
75,741
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,741
|
|
|
(1)
|
The
dollar amounts in this column represent the aggregate grant date fair value computed
in accordance with FASB ASC Topic 718. The assumptions underlying the determination of
fair value of the awards are set forth in Note 3 of the financial statements included
in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2020,
and as amended by the Company’s Form 10-K/A filed with the SEC on April 10, 2020.
|
|
(2)
|
Mr.
Harrington served as director until February 6, 2019.
|
|
(3)
|
Mr.
Giordano earned $147,754 through the consulting agreement between the Company and Ascentaur,
LLC. $90,000 of these earnings was tied to the successful sale of WPCS Suisun City International
Inc. in December 2018. Mr. Giordano earned $33,333 through the consulting agreement between
the Company and Ascentaur, LLC in 2019 and received an additional $441 for reimbursed
expenses.
|
From
January 31, 2018 through May 14, 2018, the Board earned cash compensation at the rate of $2,000 per month. Effective on May 15,
2018, the Company’s directors’ received annual compensation of $30,000 and the Chairperson received annual compensation
of $120,000 per year for their service on the Board, with the exception that Mr. Giordano’s compensation was addressed through
the consulting arrangement between Ascentaur LLC and the Company through March 10, 2019. Additionally, in May of 2018, option
grants were awarded based upon the value of $30,000 for the Chairperson and $20,000 for the other non-employee directors.
On
July 30, 2019, the Board approved of certain modifications to director compensation. As consideration for services to the Board,
the Chairman of the Board received (i) an annual cash retainer equal to $90,000 and, as compensation for the period from February
1, 2019 through January 31, 2020, a grant of shares of restricted stock in an amount equal to $60,000 and (ii) each non-Chairman
member of the Board receives an annual cash retainer equal to $30,000 and, as compensation for the period from February 1, 2019
through January 31, 2020, a grant of shares of restricted stock in an amount equal to $50,000, each to be paid as determined by
the Compensation Committee.
Due
to the limited number of shares available for grant pursuant to the DropCar, Inc. Amended and Restated 2014 Equity Incentive Plan,
the restricted stock grants referred to in the foregoing paragraph could not be granted in full in fiscal 2019. Mr. Schiffman
received a grant of 6,330 shares of restricted stock, which represented half of the shares of common stock Mr. Schiffman was entitled
to receive. The shares vested on the date of grant. None of the other non-employee directors received a grant of restricted stock.
In
January 2020, the Board entered into letter agreements with each non-executive member of the Board to address the restricted stock
grants. In lieu of such grants, the Company and each non-employee director agreed that upon (i) a merger or consolidation with
another entity where the Company retains more than 50% of the outstanding voting securities of the Company or (ii) the consummation
of a change of control prior to November 14, 2020, each non-employee director will receive a transaction payment, payable in cash,
shares of the Company’s common stock or shares of a successor company’s common stock, at the discretion of the Company
(each, a “Transaction Payment”). Mr. Silverman would receive a Transaction Payment equal to $60,000, Mr. Schiffman
would receive a Transaction Payment equal to $25,000 (which reflects that the other half of his $50,000 compensation was already
paid in the form of a restricted stock grant) and all other non-employee directors would receive a Transaction Payment equal to
$50,000. Pursuant to such agreements, the Company granted the following shares prior to the Merger on May 28, 2020:
Name
|
|
Number of Shares
|
|
Joshua Silverman
|
|
|
9,756
|
|
Zvi Joseph
|
|
|
8,130
|
|
Sebastian Giordano
|
|
|
8,130
|
|
Solomon Mayer
|
|
|
8,130
|
|
Greg Schiffman
|
|
|
4,065
|
|
On
September 29, 2020, the Board approved annual director compensation, which was prorated based on the number of days in such annual
director compensation cycle beginning on May 28, 2020, the closing date of the Merger. The Board approved the following annual
cash retainer fees for the members of the Board: (A) to each non-executive director, an annual cash retainer fee of $45,000; (B)
to the chairman of the Board, an additional annual cash retainer fee of $80,000; (C) to the chair of each Board committee, additional
cash compensation as follows: (x) $12,500 to the Audit Committee Chair, (y) $11,500 to the Compensation Committee Chair, and (z)
$8,000 to the Nominating and Governance Committee Chair. Additionally, on September 29, 2020, the following Company directors
were granted restricted stock, as shown in the following table:
Director
|
|
Awarded Shares
|
|
|
Vesting Schedule
|
Josh Silverman
|
|
|
5,668
|
|
|
See (1) below
|
Josh Silverman
|
|
|
116,879
|
|
|
See (2) below
|
Mark Adams
|
|
|
42,612
|
|
|
See (2) below
|
George Devlin
|
|
|
42,612
|
|
|
See (2) below
|
Sebastian Giordano
|
|
|
4,723
|
|
|
See (1) below
|
Sebastian Giordano
|
|
|
73,050
|
|
|
See (2) below
|
Zvi Joseph
|
|
|
2,362
|
|
|
See (1) below
|
Zvi Joseph
|
|
|
73,050
|
|
|
See (2) below
|
Greg Schiffman
|
|
|
2,362
|
|
|
See (1) below
|
Greg Schiffman
|
|
|
73,050
|
|
|
See (2) below
|
|
1)
|
Fully
vested on the grant date.
|
|
2)
|
Fully
vested on December 31, 2020, provided that the director has continuously provided services to the Company through that date.
|
Director
Compensation – Private AYRO
The
following table presents the total compensation for each person who served as a member of Private AYRO’s board of directors
during the year ended December 31, 2019. Other than as set forth in the table and described more fully below, Private AYRO did
not pay any compensation, reimburse any expense of, make any equity awards or non-equity awards to, or pay any other compensation
to any of the other members of Private AYRO’s board of directors in 2019.
Name
|
|
Fees
earned
or paid in
cash ($)
|
|
|
Stock
awards
($)
|
|
|
Option
awards
($) (1)
|
|
|
Non-equity
incentive
plan
compensation
($)
|
|
|
Change
in
pension value
and
nonqualified
deferred
compensation
earnings ($)
|
|
|
All
other
compensation
($)
|
|
|
Total
($)
|
|
Christian
Okonsky
|
|
|
—
|
|
|
|
—
|
|
|
$
|
95,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
95,000
|
|
Mark
Adams
|
|
|
—
|
|
|
|
—
|
|
|
$
|
71,250
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
71,250
|
|
|
(1)
|
The
dollar amounts in this column represent the aggregate grant date fair value computed
in accordance with FASB ASC Topic 718. The assumptions underlying the determination of
fair value of the awards are set forth in Note 11 to Private AYRO’s consolidated
financial statements (unaudited) for the year ended December 31, 2019, as set forth in
the Company’s Amendment No. 1 to Form S-4, filed with the SEC on April 24, 2020.
|
|
|
|
|
(2)
|
As
of December 31, 2019, Mr. Okonsky had outstanding options representing the right to purchase
300,000 shares of Private AYRO common stock. At the effective time of the Merger, each
issued and outstanding share of the Private AYRO’s common stock, including shares
underlying Private AYRO’s outstanding equity awards and warrants, was converted
into the right to receive 1.3634 shares (the “Exchange Ratio”) of the Company’s
common stock, followed by the Reverse Split. After giving effect to the Exchange Ratio
and the Reverse Split, such options were converted into the right to receive 81,804 shares
of Company common stock.
|
|
(3)
|
As
of December 31, 2019, Mr. Adams had outstanding options representing the right to purchase
225,000 shares of Private AYRO common stock. After giving effect to the Exchange Ratio
and the Reverse Split, such options were converted into the right to receive 61,353 shares
of Company common stock
|
Prior
to the Merger, Private AYRO directors were compensated for board service by annual option grants under the Private AYRO Equity
Plan. Options vested twenty-five percent (25%) per quarter for board service from the date of grant. The chairman of the board
of directors was granted 100,000 per year of service, and other directors were granted 75,000 shares per quarter for board service.
Such grant for the year 2019 was made on February 15, 2019. After giving effect to the Exchange Ratio and the Reverse Split, such
options were converted to options to receive 27,268 shares and 20,451 shares of Company common stock, respectively, at exercise
price of $3.48 per share.
The
compensation received by Mr. Keller as an officer and director of Private AYRO is presented in “Summary Compensation Table
– Private AYRO” on page 22 of this Proxy Statement.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership of our common stock as of November 2, 2020 by:
|
●
|
each
person known by us to beneficially own more than 5.0% of our common stock;
|
|
●
|
each
of our directors and nominees;
|
|
●
|
each
of the named executive officers of the Company and Private AYRO; and
|
|
●
|
all
of our directors and executive officers as a group.
|
The
percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination
of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if
that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment
power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes
to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares
beneficially owned and each person’s address, unless otherwise specified in the notes below, is c/o AYRO, Inc., 900 E. Old
Settlers Boulevard, Suite 100, Round Rock, Texas 78664. As of November 2, 2020, we had 24,298,333 shares of common stock outstanding.
Name of Beneficial Owner
|
|
Number
of
Shares
Beneficially
Owned (1)
|
|
|
Percentage
Beneficially
Owned (1)
|
|
Named Executive Officers, Directors and Director Nominee
|
|
|
|
|
|
|
|
|
Mark Adams
(2)
|
|
|
1,483,005
|
|
|
|
6.1
|
%
|
Paul Commons (3)
|
|
|
—
|
|
|
|
*%
|
|
George Devlin (4)
|
|
|
64,428
|
|
|
|
*%
|
|
Sebastian Giordano
(5)
|
|
|
85,903
|
|
|
|
*%
|
|
Brian Groh (6)
|
|
|
110,683
|
|
|
|
*%
|
|
Zvi Joseph (7)
|
|
|
79,478
|
|
|
|
*%
|
|
Rodney C. Keller, Jr.
(8)
|
|
|
1,551,114
|
|
|
|
6.2
|
%
|
David Newman (9)
|
|
|
49,492
|
|
|
|
*%
|
|
Richard Perley (10)
|
|
|
144,768
|
|
|
|
*%
|
|
Spencer Richardson
(11)
|
|
|
48,786
|
|
|
|
*%
|
|
Joshua Silverman (12)
|
|
|
133,475
|
|
|
|
*%
|
|
Greg Schiffman (13)
|
|
|
79,478
|
|
|
|
*%
|
|
Curt Smith (14)
|
|
|
333,514
|
|
|
|
1.4
|
%
|
Wayne R. Walker
|
|
|
—
|
|
|
|
*%
|
|
All Current Executive Officers and Directors as a Group
|
|
|
4,065,846
|
|
|
|
15.7
|
%
|
|
*
|
represents
ownership of less than 1%.
|
|
(1)
|
Shares
of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise
of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently
exercisable or exercisable within 60 days of November 2, 2020. Shares issuable pursuant to the exercise of stock options and
warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing
the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing
the percentage of outstanding common stock beneficially owned by any other person.
|
|
(2)
|
Mr.
Adams’ total includes 1,421,652 shares of common stock and options to purchase 61,353 shares of common stock that are
exercisable within 60 days of November 2, 2020.
|
|
(3)
|
Mr.
Commons’ employment was terminated effective February 28, 2019.
|
|
(4)
|
Mr.
Devlin’s total includes 64,428 shares of common stock.
|
|
(5)
|
Mr.
Giordano’s total includes 85,903 shares of common stock.
|
|
(6)
|
Mr.
Groh’s total includes options to purchase 110,683 shares of common stock that are exercisable within 60 days of November
2, 2020.
|
|
(7)
|
Mr.
Joseph’s total includes 79,478 shares of common stock.
|
|
(8)
|
Mr.
Keller’s total includes 651,250 shares of common stock and options to purchase 899,864 shares of common stock that are
exercisable within 60 days of November 2, 2020.
|
|
(9)
|
Mr.
Newman’s total includes 49,492 shares of common stock. Mr. Newman served as Chief Business Development Officer of DropCar
until his resignation at the effective time of the Merger on May 28, 2020.
|
|
(10)
|
Mr.
Perley’s total includes options to purchase 144,768 shares of common stock that are exercisable within 60 days of November
2, 2020.
|
|
(11)
|
Mr.
Richardson’s total includes 48,786 shares of common stock. Mr. Richardson served as Chief Executive Officer of DropCar
until his resignation at the effective time of the Merger on May 28, 2020.
|
|
(12)
|
Mr.
Silverman’s total includes 133,475 shares of common stock.
|
|
(13)
|
Mr.
Schiffman’s total includes 79,478 shares of common stock.
|
|
(14)
|
Mr.
Smith’s total includes options to purchase 333,514 shares of common stock that are exercisable within 60 days of November
2, 2020.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with related persons are governed by our Corporate Code of Conduct and Ethics and Whistleblower Policy, which applies to all of
our associates, as well as each of our directors and certain persons performing services for us. This code covers a wide range
of potential activities, including, among others, conflicts of interest, self-dealing and related party transactions. Waiver of
the policies set forth in this code will only be permitted when circumstances warrant. Such waivers for directors and executive
officers, or that provide a benefit to a director or executive officer, may be made only by our Board, as a whole, or the Audit
Committee and must be promptly disclosed as required by applicable law or regulation. Absent such a review and approval process
in conformity with the applicable guidelines relating to the particular transaction under consideration, such arrangements are
not permitted. All related party transactions for which disclosure is required to be provided herein were approved in accordance
with our Corporate Code of Conduct and Ethics and Whistleblower Policy. The share amounts described below take into account the
Exchange Ratio and the Reverse Split.
Related
Party Transactions
Sale
of Suisun City Operations
On
December 24, 2018, the Company completed the sale of WPCS International – Suisun City, Inc. (the “Suisun City Operations”),
pursuant to the terms of a stock purchase agreement, dated December 10, 2018, by and between the Company and World Professional
Cabling Systems, LLC, a California limited liability company. Upon the closing of the sale, the purchaser acquired all of the
issued and outstanding shares of common stock, no par value per share, of Suisun City Operations, for an aggregate purchase price
of $3,500,000.
Ascentaur
LLC Agreement
On
July 11, 2018, the Company entered into a consulting agreement with Ascentaur, LLC (“Ascentaur”). Sebastian Giordano
is the Chief Executive Officer of Ascentaur. Pursuant to the terms of the consulting agreement, Ascentaur has agreed to provide
advisory services with respect to the strategic development and growth of the Company, including advising the Company on market
strategy and overall strategy, advising the Company on the sale of its Suisun City Operations business segment, providing assistance
to the Company in identifying and recruiting prospective employees, customers, business partners, investors and advisors that
offer desirable administrative, financing, investment, technical, marketing and/or strategic expertise, and performing such other
services pertaining to the Company’s business as the Company and Ascentaur may from time to time mutually agree. As consideration
for its services under the consulting agreement, Ascentaur received (i) a fee of $10,000 per month for a period of nine (9) months
from the effective date of the consulting agreement, (ii) a lump sum fee of $90,000 upon the closing of the sale of the Suisun
City Operations business segment and (iii) reimbursement for reasonable and customary business expenses incurred in connection
with Ascentaur’s performance under the consulting agreement.
Asset
Sale
On
December 19, 2019, the Company and DropCar Operating entered into the Asset Purchase Agreement with DC Partners, Spencer Richardson
and David Newman. DC Partners was a New York limited liability company managed by Spencer Richardson and David Newman. The Asset
Purchase Agreement provided that DC Partners would purchase from DropCar Operating substantially all of the assets and certain
specified liabilities of the Company business prior to the Merger, for a purchase price consisting of (i) the cancellation of
any liabilities pursuant to the employment agreements by and between DropCar Operating and each of Mr. Richardson and Mr. Newman,
respectively (except as otherwise set forth in (x) a Termination and Release Agreement to be entered into between the Company
and each of Mr. Richardson and Mr. Newman and/or (y) Section 3(h) of the employment agreements, which relates to indemnification
with respect to services as a director of the Company) and (ii) the assumption of all liabilities or obligations of the Company
(x) relating to or arising out of workers’ compensation claims of any employee which relate to events occurring prior to
the closing of the Asset Sale Transaction and (y) arising under or relating to the assigned contracts pursuant to the Asset Purchase
Agreement. On May 28, 2020, the parties to the Asset Purchase Agreement entered into Amendment No. 1 to the Asset Purchase Agreement
(the “Asset Purchase Agreement Amendment”), which Asset Purchase Agreement Amendment (i) provided for the inclusion
of up to $30,000 in refunds associated with certain insurance premiums as assets being purchased by DC Partners, (ii) amended
the covenant associated with the funding of the Company’s business, such that the Company provided the Company business
with additional funding of $175,000 at the closing of the transactions contemplated by the Asset Purchase Agreement and (iii)
provided for a current employee of the Company being transferred to DC Partners to provide transition services to the Company
for a period of three months after the closing of the transactions contemplated by the Asset Purchase Agreement. The Asset Purchase
Agreement closed on May 28, 2020, immediately following the consummation of the Merger.
Private
AYRO Related Party Transactions
Royalty
Agreement
On
March 1, 2017, Private AYRO entered into the Outsourced CVO Services Agreement with Sustainability Initiatives, LLC (“SI”)
that is controlled by Mr. Okonsky, a founder of Private AYRO, and Mr. Adams, a founder of Private AYRO and a current AYRO board
member, in its effort to accelerate the start-up of Private AYRO’s operations. In return for acceleration assistance and
SI providing services of the Chief Visionary Officer role, pursuant to the agreement, Private AYRO paid a monthly retainer of
$6,000 per month. On a quarterly basis, Private AYRO also remitted to SI a royalty of a percentage (see table below) of its revenues
less the retainer amounts for the measurement quarter paid. In connection with this agreement, Private AYRO granted 95,438 options
to purchase shares of Private AYRO common stock at an exercise price of $2.446 per share under the Private AYRO Equity Plan, which
was subsequently cancelled in December 2019.
|
|
|
Royalty
Percentage
|
|
Revenues
|
|
|
|
|
$0
- $25,000,000
|
|
|
3.0
|
%
|
$25,000,000
- $50,000,000
|
|
|
2.0
|
%
|
$50,000,000
- $100,000,000
|
|
|
1.0
|
%
|
Over
$100,000,001
|
|
|
0.5
|
%
|
SI
was also granted a right to nominate up to two members of Private AYRO’s board of directors.
In
addition, on April 1, 2017, Private AYRO and SI entered into a fee-for-service agreement, pursuant to which SI agreed to provide
accounting and financial, graphics and marketing services to Private AYRO, based on the market-standard hourly rates as set forth
in the agreement.
Effective
as of January 1, 2019, Private AYRO agreed to an amendment to the Outsourced CVO Services Agreement to reduce the royalty percentage
to a flat 0.5% for all revenue levels. In connection to this amendment, Private AYRO granted each of Mr. Okonsky and Mr. Adams
an additional 190,876 options to purchase $3.48 per share, pursuant to the Private AYRO Equity Plan, which options were fully
vested as of September 30, 2019 and subsequently cancelled in December 2019.
Effective
as of October 14, 2019, Private AYRO and SI terminated the Outsourced CVO Services Agreement, and as consideration for SI to terminate
the agreement, Private AYRO issued 231,778 shares of Private AYRO common stock to SI (or its designees).
In
December 2019, the Private AYRO, SI, Christian Okonsky and Mark Adams agreed to cancel (i) the options to purchase 95,438 shares
of Private AYRO common stock previously granted to SI in March 2017 and (ii) the options to purchase an aggregate of 381,752 shares
of Private AYRO common stock previously granted to Mr. Okonsky and Mr. Adams in connection with the amendment to the Outsourced
CVO Services Agreement to reduce the royalty percentages, in exchange for 434,529 shares of Private AYRO common stock.
For
the years ended 2017, 2018, and 2019 prior to termination, Private AYRO paid SI $60,000, $187,494 and $60,000, respectively, pursuant
to the Outsourced CVO Services Agreement, and $123,538, $36,694 and $1,275, respectively, pursuant to the fee-for service agreement
for accounting and financial, graphics and marketing services.
Consulting
Agreement
On
January 15, 2019, Private AYRO entered into a fee-for-service-based agreement with Sustainability Consultants, LLC (“SCLLC”),
an entity that is controlled by Mr. Adams, John Constantine and Will Steakley, who were principal stockholders of Private AYRO,
in an effort to support the strategic direction of Private AYRO. The duties of SCLLC include (a) participating in strategic advisory
conference calls with management; (b) making introductions to interested parties of strategic value; (c) advising Private AYRO
on capital structure; and (d) acting as ambassadors to promote the company within the Central Texas community. In 2019, SCLLC
received five-year warrants to purchase an aggregate of 177,924 shares of Private AYRO common stock at a $7.33 exercise price
and 67,488 shares of the Private AYRO common stock in connection with the services rendered.
Loan
from SI
In
January 2019, Private AYRO received $50,000 in a short-term loan from SI. The short-term loan did not bear any interest. The amount
was repaid in March 2019.
Adams
Note, Amendment, Lock-Up Agreement and Guarantee
On
October 14, 2019, Mr. Adams, a current member of the Board, was issued a secured promissory note in the aggregate principal amount
of $500,000, in exchange for funding $100,000 to Private AYRO on or before October 15, 2019, and $400,000 on or before October
24, 2019. The note was secured by a first lien security interest in all of the assets of Private AYRO and accrued interest at
14% per annum, until the promissory note was repaid. The note was to mature on the earlier of March 12, 2020, or the date that
is three business days following the closing of a reverse merger transaction involving Private AYRO.
On
December 13, 2019, Private AYRO and Mr. Adams entered into an amendment to the promissory note, extending the maturity date of
the note to April 30, 2021. As consideration, Private AYRO issued 136,340 shares of common stock to Mr. Adams. Such shares are
subject to a six-month lock-up period.
AYRO
has not paid any principal on the promissory note, but has paid all accrued interest timely as per the terms of the note. As of
September 30, 2020, the aggregate principal amount of $500,000 and accrued interest was fully paid.
In
April 2020, Private AYRO issued a secured promissory note in the aggregate amount of $600,000 to an investor of Private AYRO,
pursuant to which Mark Adams entered into a personal guaranty for up to $300,000 of amounts owing under such secured loan, and,
in connection therewith, Private AYRO agreed to grant to each of the investor and Mark Adams a number of shares of Private AYRO
common stock that will convert into two percent (2%) of the aggregate issued and outstanding shares of DropCar immediately post-Merger.
The entire principal balance of the loan plus accrued interest was paid off upon closing of the Merger.
Cenntro
Agreement
In
April 2017, Private AYRO entered into a Manufacturing Licensing Agreement with Cenntro, that provides for its four-wheel sub-assemblies
to be licensed and sold to Private AYRO for final manufacturing and sale in the United States.
In
2017, Private AYRO executed a Stock Purchase Agreement with Cenntro for eight hundred eighteen thousand forty (818,040) shares
of Private AYRO’s common stock. As consideration, Cenntro contributed cash of $50,000, raw material inventory items valued
at $92,061 and supply chain tooling and assembly line development and ramp-up valued at $307,939. As of December 31, 2019, Cenntro
owned approximately 13.73% of Private AYRO’s outstanding common stock on a fully-diluted basis.
In
2017, Private AYRO executed a supply chain contract with Cenntro. Currently, AYRO purchases 100% of its four-wheel vehicle chassis,
cabs and wheels through this supply chain relationship with Cenntro. Contract terms are industry-standard and reflect arms-length
market pricing and other relevant terms.
In
2018, Private AYRO purchased supply-chain tooling to be placed in Cenntro’s facility with a promissory note to Cenntro for
the cost. The tooling note was repaid in full in March 2019.
In
December 2019, Cenntro agreed to convert $1,100,000 of its accounts receivable due from Private AYRO into 299,948 shares of Private
AYRO’s Series Seed 3 Preferred Stock. As of March 31, 2020 and December 31, 2019, the amounts outstanding to Cenntro for
trade accounts payable were $69,824 and $133,117, respectively.
EXECUTIVE
COMPENSATION
Unless
otherwise indicated, the disclosures in this section regarding the Company’s common stock or securities convertible into
common stock for periods or as of a date that precedes the closing of the Merger have been adjusted to give effect to the Reverse
Split, and the disclosures in this section regarding Private AYRO’s common stock or securities convertible into common stock
of Private AYRO for periods or as of a date that precedes the closing of the Merger have been adjusted to give effect to the Exchange
Ratio and the Reverse Split.
Executive
Officers
The
following table sets forth the names, ages and positions of our executive officers as of November 9, 2020:
Name
|
|
Age
|
|
Position
with the Company
|
Rodney
C. Keller, Jr.
|
|
62
|
|
Chief
Executive Officer and President
|
Curtis
Smith
|
|
52
|
|
Chief
Financial Officer
|
Brian
Groh
|
|
62
|
|
Chief
of Business Development
|
Richard
Perley
|
|
56
|
|
Chief
Marketing Officer
|
Please
see the biography of Mr. Keller on page 7 of this Proxy Statement.
Curtis
Smith. Mr. Smith, 52, in addition to serving as the Company’s Chief Financial Officer, served as Private AYRO’s
chief financial officer from March 2018 until the closing of the Merger. Mr. Smith has been a CPA for more than 25 years with
experience in public accounting and executive level experience in financial, operations and IT systems management. From November
2015 through February 2018, Mr. Smith served as the chief financial officer for LAC Group, a private equity-backed portfolio company,
responsible for all aspects of strategic planning, investor relations, treasury management, finance, accounting, HR and IT. Prior
to LAC Group, he served as a consultant to various private companies regarding their financial and operational affairs. From November
2010 to February 2013, he served as the chief financial officer of AgileAssets, a software developer building transportation asset
management enterprise software. Mr. Smith was instrumental in developing the SaaS-business model for AgileAssets. Prior to AgileAssets,
Mr. Smith served as Vice President-Finance and Administration for Troux Technologies. Prior to Troux Technologies, he served as
Director of Finance and Director of Operations with Verio (Nasdaq: VRIO), a 55+ company rollup and was instrumental in both the
rollup as well as the company’s successful IPO in 1998. Mr. Smith holds a B.B.A in accounting from Texas A&M University.
Brian
Groh. Mr. Groh, 61, in addition to his role as the Company’s Chief of Business Development, served as Private AYRO’s
contracted Chief of Business Development from September 2019 until the closing of the Merger. Mr. Groh is an executive and entrepreneur
with over thirty-five years’ experience in technology start-ups, accelerated growth and large corporations, with an extensive
experience in negotiations, mergers and acquisitions, in addition to establishing mutually beneficial and long-term partner relationships.
Mr. Groh was the founder and chief executive officer of public companies for over twenty years in various technology companies
in the cellular, tablet and mobile computing sectors. Since January 2018, Mr. Groh has been on the Board of Advisors Meghraj Capital
International, an international banking advisory, fiduciary services and consulting company headquartered in the British Isles
that manages over $100 billion in client assets. Mr. Groh also serves on the board of WellSmith, an Austin-based digital platform
company for population health management of chronic diseases that has partnered with Cone Health, a private, not-for-profit, healthcare
delivery system. From August 2015 to January 2018, Mr. Groh was employed as General Manager of Business Development at Wistron
Corporation, a Taiwanese global technology engineering and manufacturing leader, and was responsible for creating Wistron’s
smart product business development operations in North America. From October 2008 until July 2015, Mr. Groh served as General
Manager of Business Development of Wistron as a contractor and oversaw the growth of Wistron’s smartphone business where
he was successful in securing over $7 billion in contacts. From 2005 until 2008, Mr. Groh provided consulting services to a number
of high tech companies in Canada and the United States. Prior to working with Wistron, Mr. Groh founded and served as CEO of Xplore
Technologies Corp. from 1995 to September 2005, a global rugged tablet provider, and Mr. Groh spearheaded Xplore’s initial
public offering and acquisitions, raising more than $70 million in funding. From 1986 to 1995, Mr. Groh founded and served as
the CEO of Telular Canada, an innovative wireless data company with patented rights from its U.S. counterpart, Telular Corporation.
Mr. Groh led Telular Canada’s $18 million initial public offering in 1992 and acquisition of 20% of Telular Corporation
that had a $40 million market cap at the time. Less than one year after the acquisition, Telular Corporation conducted its initial
public offering as a $400 million market cap company. From 1985 until 1989, Mr. Groh was the Founder and CEO of Roadway Communications,
one of Canada’s first cellular phone dealers.
Richard
Perley. Mr. Perley, 55, in addition to serving as the Company’s Chief Marketing Officer, served as Private AYRO’s
contracted Chief Marketing Officer from September 2019 until the closing of the Merger, and previously from October 2018 through
April 2019. Mr. Perley is an experienced technology executive and entrepreneur who has led successful marketing, product management,
business development and operational teams over a thirty-two-year career. He has extensive experience in high-growth, early-stage
technology/innovation companies in the consumer, commercial, industrial and government sectors. From February 2018 through August
2018, and from May 2019 through August 2019, Mr. Perley founded and was a managing director and Chief Marketing Officer of PerlTek,
a technology consulting firm providing marketing, product management and business development services to a range of companies
from the healthcare, cybersecurity and blockchain industries. From September 2015 to January 2018, Mr. Perley served as Vice President,
Business Development for Wistron Corporation. Mr. Perley helped create Wistron’s smart product business development operations
in North America where major account customer acquisition opportunities expanded by 20 times during Mr. Perley’s employment.
From September 2015 to January 2018, Mr. Perley was Chief Marketing Officer and Managing Partner of Kinetex, LLC, an integrated
product marketing, launch, sales and strategic planning accelerator for B2B and B2C companies in North America and Western Europe
he co-founded. Prior to Kinetex, Mr. Perley served as VP of Marketing and Services for Augmentix and Xplore Technologies (co-founder),
both rugged field computing companies. He was instrumental in driving accelerated product, market and revenue growth for both
organizations which ultimately were successfully sold to larger entities. Mr. Perley was also a Director at Motorola where he
led wireline marketing and sales team. He has an honors Business Degree from McMaster University, Ontario Canada.
Compensation
Philosophy and Process
The
responsibility for establishing, administering and interpreting our policies governing the compensation and benefits for our executive
officers lies with our senior management, subject to the review and approval of our Board. Our Board has not retained the services
of any compensation consultants.
The
goals of our executive compensation program are to attract, motivate and retain individuals with the skills and qualities necessary
to support and develop our business within the framework of our size and available resources. In 2020, we designed our executive
compensation program to achieve the following objectives:
|
●
|
attract
and retain executives experienced in developing and delivering products such as our own;
|
|
●
|
motivate
and reward executives whose experience and skills are critical to our success;
|
|
●
|
reward
performance; and
|
|
●
|
align
the interests of our executive officers and other key employees with those of our stockholders by motivating our executive
officers and other key employees to increase stockholder value.
|
Summary
Compensation Table
The
following table sets forth all compensation earned, in all capacities, during the fiscal years ended December 31, 2019 and 2018
by the Company’s (i) former Chief Executive Officer and (ii) the two most highly compensated former executive officers other
than the former Chief Executive Officer who were serving as an executive officer at the end of the 2019 fiscal year and whose
salary, as determined by Regulation S-K, Item 402, exceeded $100,000 (the individuals falling within categories (i) and (ii) are
collectively referred to as the “named executive officers”).
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards ($) (1)
|
|
|
All
Other
Compensation ($)
|
|
|
Total
($)
|
|
Spencer
Richardson
|
|
|
2019
|
|
|
|
299,010
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
106,722
|
|
|
|
3,600
|
|
|
|
484,332
|
|
Former
Chief Executive Officer (2)
|
|
|
2018
|
|
|
|
273,471
|
|
|
|
387,500
|
|
|
|
1,621,983
|
|
|
|
100,000
|
|
|
|
26,957
|
|
|
|
2,409,911
|
|
David
Newman
|
|
|
2019
|
|
|
|
299,010
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
106,722
|
|
|
|
3,600
|
|
|
|
484,332
|
|
Former
Chief Business Development Officer (3)
|
|
|
2018
|
|
|
|
273,471
|
|
|
|
395,972
|
|
|
|
1,621,983
|
|
|
|
100,000
|
|
|
|
27,233
|
|
|
|
2,418,659
|
|
Paul
Commons
|
|
|
2019
|
|
|
|
45,692
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
180,000
|
|
|
|
230,692
|
|
Former
Chief Financial Officer (4)
|
|
|
2018
|
|
|
|
208,152
|
|
|
|
15,000
|
|
|
|
-
|
|
|
|
234,139
|
|
|
|
-
|
|
|
|
457,291
|
|
|
(1)
|
The
dollar amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
The assumptions underlying the determination of fair value of the awards are set forth in Note 9 the financial statements
included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30,
2020, as amended.
|
|
(2)
|
Mr.
Richardson served as Chief Executive Officer of Private DropCar until taking over as Chief Executive Officer of the Company
upon the 2018 Merger, and as Chief Executive Officer of DropCar until his resignation at the effective time of the Merger
on May 28, 2020.
|
|
(3)
|
Mr.
Newman served as Chief Business Development Officer of Private DropCar until taking over as Chief Business Development Officer
of the Company upon the 2018 Merger, and as Chief Business Development Officer of DropCar until his resignation at the effective
time of the Merger on May 28, 2020.
|
|
(4)
|
Mr.
Commons served as Chief Financial Officer of the Company upon the 2018 Merger. His employment terminated effective February
28, 2019.
|
Narrative
Disclosure to Summary Compensation Table
Employment
Agreement with Spencer Richardson
In
connection with the 2018 Merger, the Company entered into an employment agreement with Mr. Richardson pursuant to which he served
as the Company’s Chief Executive Officer until his resignation at the effective time of the Merger. The employment agreement
provided for an initial term of three (3) years with automatic one (1) year renewals. The employment agreement provided for the
following cash-based compensation: (a) an annual base salary equal to $275,000, subject to a 10% increase per year; (b) a bonus
payment of $250,000 in connection with the closing of the 2018 Merger; (c) quarterly bonuses of at least $12,500; (d) milestone
bonus payments based on the Company’s achievement of certain specified milestones; and (e) allowances for automobile, medical
and dental.
Mr.
Richardson was also entitled to annual option grants equivalent to 1% of the outstanding shares of the Company. Subject to continued
employment through each vesting date, these annual grants would vest and become exercisable with respect to 1/8th of the shares
on each 90th day following the date of grant; provided that all options would vest on a change of control of the Company. In addition
to annual option grants, Mr. Richardson was eligible to receive additional option grants based on the Company’s achievement
of certain specified milestones.
In
the event that Mr. Richardson’s employment with the Company was terminated (a) by the Company without “cause”
(including as a result of death or disability) following the end of the initial term, (b) by Mr. Richardson for “good reason”,
or (c) due to non-renewal of the initial term by the Company, then the Company would pay or provide (x) 24 months’ of salary
continuation, (y) $100,000 (such amount representing the guaranteed quarterly bonus for 24 months), and (z) to the extent unvested,
full acceleration of the vesting of any outstanding options.
In
addition, Mr. Richardson entered into a non-solicitation and non-competition agreement that applies during the term of employment
and for 12 months thereafter.
At
the effective time of the Merger, Mr. Richardson tendered his resignation from his positions as officer and director of the Company.
Pursuant to (i) Section 3(e) of an employment agreement, dated as of September 6, 2017, by and between the Company and Mr. Richardson,
on January 30, 2020, Mr. Richardson was entitled to receive a grant of options to purchase shares of the Company’s stock
in an amount equal to 1% of the then-outstanding shares of Company common stock on a fully diluted basis (which would have been
equal to options to purchase 25,140 shares). Such grant was not issued due to a lack of shares available for issuance pursuant
to DropCar’s Amended and Restated 2014 Equity Incentive Plan. Following approval of the AYRO, Inc. 2020 Long-Term Incentive
Plan by the stockholders of the Company and prior to the consummation of the Merger and in lieu of the January 30, 2020 options
at the request of Mr. Richardson, the Company issued to Mr. Richardson a grant of 12,500 restricted shares. Such shares were granted
pursuant to an exemption from registration pursuant to Rule 506(b) of Regulation D.
Employment
Agreement with David Newman
In
connection with the 2018 Merger, the Company entered into an employment agreement with Mr. Newman pursuant to which he served
as the Company’s Chief Business Development Officer until his resignation at the effective time of the Merger. The employment
agreement provided for an initial term of three (3) years with automatic one (1) year renewals. The employment agreement provided
for the following cash-based compensation: (a) an annual base salary equal to $275,000, subject to a 10% increase per year; (b)
a bonus payment of $250,000 in connection with the closing of the 2018 Merger; (c) quarterly bonuses of at least $12,500;
(d) milestone bonus payments based on the Company’s achievement of certain specified milestones; and (e) allowances for
automobile, medical and dental.
Mr.
Newman was also entitled to annual option grants equivalent to 1% of the outstanding shares of the Company. Subject to continued
employment through each vesting date, these annual grants would vest and become exercisable with respect to 1/8th of the shares
on each 90th day following the date of grant; provided that all options would vest on a change of control of the Company. In addition
to annual option grants, Mr. Newman was eligible to receive additional option grants based on the Company’s achievement
of certain specified milestones.
In
the event that Mr. Newman’s employment with the Company was terminated (a) by the Company without “cause” (including
as a result of death or disability) following the end of the initial term, (b) by Mr. Newman for “good reason”, or
(c) due to non-renewal of the initial term by the Company, then the Company would pay or provide (x) 24 months’ of salary
continuation, (y) $100,000 (such amount representing the guaranteed quarterly bonus for 24 months), and (z) to the extent unvested,
full acceleration of the vesting of any outstanding options.
In
addition, Newman entered into a non-solicitation and non-competition agreement that applied during the term of employment and
for 12 months thereafter.
At
the effective time of the Merger, Mr. Newman tendered his resignation from his positions as officer and director of the Company.
His resignation did not contain any statements describing disagreements with the Company related to its operations, policies or
practices, nor did any disagreements lead to his resignation. Pursuant to (i) Section 3(e) of an employment agreement, dated as
of September 6, 2017, by and between the Company and Mr. Newman, on January 30, 2020, Mr. Newman was entitled to receive a grant
of options to purchase shares of the Company’s stock in an amount equal to 1% of the then-outstanding shares of Company
common stock on a fully diluted basis (which would have been equal to options to purchase 25,140 shares). Such grant was not issued
due to a lack of shares available for issuance pursuant to DropCar’s Amended and Restated 2014 Equity Incentive Plan. Following
approval of the AYRO, Inc. 2020 Long-Term Incentive Plan by the stockholders of the Company and prior to the consummation of the
Merger and in lieu of the January 30, 2020 options at the request of Mr. Newman, the Company issued to Mr. Newman a grant of 12,500
restricted shares. Such shares were granted pursuant to an exemption from registration pursuant to Rule 506(b) of Regulation D.
Employment
Agreement with Paul Commons
On
January 22, 2018, the Company entered into an employment agreement with Mr. Commons pursuant to which Mr. Commons agreed to serve
as the Company’s Chief Financial Officer. The employment agreement provided for an initial term of three (3) years with
automatic one (1) year renewals. The employment agreement for Mr. Commons provided for an annual base salary equal to $220,000
and quarterly bonuses equal to $5,000. Mr. Commons was also entitled to annual option grants equivalent to 1% of the outstanding
shares of the Company. Subject to continued employment through each vesting date, these annual grants would vest and become exercisable
with respect to 1/3 of the shares on the first anniversary of the effective date of the employment agreement, with the remaining
2/3 vesting in equal installments on a quarterly basis beginning on the last day of the next calendar quarter after the date on
which the initial 1/3 of the shares vested.
In
the event that Mr. Commons’ employment with the Company was terminated (a) by the Company without “cause” or
(b) by Mr. Commons for “good reason” at any time during the 90 days following the effective date of the employment
agreement, then for the nine month period following the termination date, the Company agreed to continue to pay to Mr. Commons
(i) one-twelfth of his annual base salary each month and (ii) his quarterly bonus payments.
In
addition, Mr. Commons entered into a non-solicitation and non-competition agreement that applied during the term of employment
and for 12 months thereafter.
Mr.
Commons’ employment as the Company’s Chief Financial Officer terminated on February 28, 2019. Upon such termination,
Mr. Commons was entitled to receive $180,000 in severance payments, which was equal to nine months of his salary and three quarterly
bonus payments equal to $5,000 each.
Private
AYRO’s Executive Officer Compensation
The
following is a discussion of the material components of the executive compensation arrangements of Private AYRO’s named
executive officers, comprised of (1) Private AYRO’s principal executive officer, (2) Private AYRO’s next two most
highly compensated executive officers other than the principal executive officer and (3) up to two additional individuals for
whom disclosure would have been provided pursuant to clause (2) but for the fact that such individual was not serving as an executive
officer on December 31, 2019. Immediately following the effective time of the Merger, the Board appointed Rodney C. Keller, Jr.
as the Company’s Chief Executive Officer and President, Curtis Smith as the Company’s Chief Financial Officer, Brian
Groh as the Company’s Chief of Business Development, and Richard Perley as the Company’s Chief Marketing Officer.
Private
AYRO’s named executive officers for 2019 were as follows:
|
●
|
Rodney
C. Keller, Jr., President and Chief Executive Officer;
|
|
●
|
Curt
Smith, Chief Financial Officer;
|
|
●
|
Brian
Groh, Chief of Business Development; and
|
|
●
|
Richard
Perley, Chief Marketing Officer
|
Summary
Compensation Table – Private AYRO
The
following table sets forth total compensation paid to the named executive officers of Private AYRO for the years ended December
31, 2018 and 2019. The option amounts listed below take into account the Exchange Ratio and the Reverse Split.
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Grants
($) (1)
|
|
|
All
other
compensation
($)
|
|
|
Total
($)
|
|
Rod
Keller
|
|
|
2018
|
|
|
$
|
250,000
|
|
|
$
|
0
|
|
|
$
|
48,000
|
(5)
|
|
$
|
0
|
|
|
|
298,000
|
|
Chief
Executive Officer
|
|
|
2019
|
|
|
$
|
250,000
|
|
|
$
|
0
|
|
|
$
|
398,750
|
(6)
|
|
$
|
0
|
|
|
$
|
648,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curt
Smith (2)
|
|
|
2018
|
|
|
$
|
158,333
|
|
|
$
|
0
|
|
|
$
|
160,000
|
|
|
$
|
0
|
|
|
$
|
318,333
|
|
Chief
Financial Officer
|
|
|
2019
|
|
|
$
|
200,000
|
|
|
$
|
20,000
|
|
|
$
|
182,000
|
|
|
$
|
0
|
|
|
$
|
402,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Groh (3)
|
|
|
2018
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Chief
of Business Development
|
|
|
2019
|
|
|
$
|
58,331
|
|
|
$
|
0
|
|
|
$
|
214,000
|
|
|
$
|
0
|
|
|
$
|
272,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Perley (4)
|
|
|
2018
|
|
|
$
|
66,664
|
|
|
$
|
3,333
|
|
|
$
|
0
|
|
|
$
|
4,600
|
(7)
|
|
$
|
74,597
|
|
Chief
Marketing Officer
|
|
|
2019
|
|
|
$
|
118,752
|
|
|
$
|
10,000
|
|
|
$
|
214,000
|
|
|
$
|
25,817
|
(8)
|
|
$
|
368,569
|
|
|
(1)
|
Amounts
reflect the full grant-date fair value of stock awards granted during the relevant fiscal year computed in accordance with
ASC Topic 718, rather than the amounts paid to or realized by the named individual. Private AYRO provided information regarding
the assumptions used to calculate the value of all stock awards and option awards made to its executive officers in Note 9
to the audited consolidated financial statements for the year ended December 31, 2018 contained the Company’s Amendment
No. 1 to its Form S-4, filed with the SEC on April 24, 2020.
|
|
(2)
|
Mr.
Smith was appointed Chief Financial Officer of Private AYRO effective March 8, 2018.
|
|
(3)
|
Mr.
Groh was appointed Chief of Business Development of Private AYRO effective September 16, 2019.
|
|
(4)
|
Mr.
Perley served as Private AYRO’s contracted Chief Marketing Officer since September 2019 until the closing of the Merger,
and previously served in the same position from October 2018 through April 2019.
|
|
(5)
|
In
November 2018, Mr. Keller was granted options to purchase 75,000 shares of Private AYRO’s common stock at an exercise
price of $0.667 per share as annual board service compensation. The fair market value of the options at the time of the grant
was $48,000, and the options vested quarterly over a twelve-month period. After giving effect to the Exchange Ratio and the
Reverse Split, such Private AYRO options became the right to purchase 20,451 shares of the Company’s common stock at
an exercise price of $2.45.
|
|
(6)
|
In
November 2019, Mr. Keller was granted options to purchase 75,000 shares of Private AYRO’s common stock at an exercise
price of $1.10 per share as annual board service compensation. The fair market value of the options at the time of the grant
was $80,250, and the options vested quarterly over a twelve-month period. In 2019, Mr. Keller was granted an additional option
to purchase 350,000 shares of Private AYRO’s common stock at an exercise price of $0.95 per share by Private AYRO’s
board for his services as an executive officer. The fair market value of the options at the time of the grant was $318,500,
and the options vested one-sixth every six months. After giving effect to the Exchange Ratio and the Reverse Split, such Private
AYRO options for such grants became options to purchase 20,451 and 95,438 shares of the Company’s common stock at exercise
prices of $2.45 and $3.48, respectively.
|
|
(7)
|
In
2018, pursuant to the independent contractor agreement with Mr. Perley, doing business as Perltek, Mr. Perley was granted
five-year warrants to purchase 5,454 shares of Private AYRO’s common stock at an exercise price of $7.33 per share.
The value of the warrants at the time of issuance was $4,600. After giving effect to the Exchange Ratio and the Reverse Split,
such Private AYRO warrants became warrants to purchase 1,487 shares of the Company’s common stock at an exercise price
of $26.88.
|
|
(8)
|
In
2019, pursuant to the independent contractor agreement with Mr. Perley, doing business as Perltek, Mr. Perley was granted
five-year warrants to purchase 28,631 shares of Private AYRO’s common stock at an exercise price of $7.33 per share.
The value of the warrants at the time of issuance was $25,817. After giving effect to the Exchange Ratio and the Reverse Split,
such Private AYRO warrants became warrants to purchase 7,807 shares of the Company’s common stock at an exercise price
of $26.88.
|
Narrative
Disclosure to Summary Compensation Table – Private AYRO
Private
AYRO had entered into employment agreements with each of Mr. Keller and Mr. Smith. Pursuant to the Merger Agreement, as a condition
to the closing of the Merger, immediately prior to the effective time of the Merger, (i) the employment agreement between Private
AYRO and Mr. Keller then in effect was terminated, and the Company entered into a new executive employment agreement with Mr.
Keller, effective upon completion of the Merger, and (ii) Private AYRO entered into an amendment to the current executive employment
agreement with Mr. Smith, effective upon completion of the Merger.
Each
of Mr. Groh and Mr. Perley provided services as a contractor to Private AYRO pursuant to an independent contractor agreement Private
AYRO entered into with the respective entity controlled by Mr. Groh and Mr. Perley.
The
material terms of the employment agreements and the independent contractor agreements with the named executive officers of Private
AYRO are summarized below.
Executive
Employment Agreements with Rodney C. Keller, Jr.
Pre-Merger
Keller Employment Agreement
Pursuant
to his employment agreement, effective November 13, 2017, and to subsequent actions by Private AYRO’s board of directors,
Mr. Keller was entitled to a base salary of $250,000 and a target annual bonus in the amount of 50% of his annual base salary.
The target annual bonus was based on Mr. Keller’s performance, as determined by the Private AYRO board of directors in its
sole discretion, based on agreed upon certain milestones. Mr. Keller was eligible to participate in Private AYRO’s 2017
Long Term Incentive Plan (the “Private AYRO Equity Plan”) subject to the discretion of the Private AYRO board of directors
if and when the Private AYRO board of directors determined to make a grant to him.
Post-Merger
Keller Employment Agreement
Pursuant
to the Merger Agreement, effective upon consummation of the Merger and as a condition to the closing of the Merger, immediately
prior to the effective time of the Merger, the Company entered into an executive employment agreement with Mr. Keller (the “Keller
Employment Agreement”). Pursuant to the Keller Employment Agreement, Mr. Keller agreed to serve as the chief executive officer
of the Company and as a director for the one-year initial term commencing upon effective time of the Merger, which term shall
be automatically renewed for a successive one-year term, unless earlier terminated by either party upon four months’ written
notice or terminated otherwise as set forth in the new employment agreement. Mr. Keller agreed to also serve as a director of
the Company.
The
Keller Employment Agreement provides that Mr. Keller is entitled to a base salary of $250,000, which may be increased at the discretion
of the Board but may not be decreased without Mr. Keller’s consent. Mr. Keller is also eligible to receive for fiscal years
during the term of his employment periodic bonuses up to 50% of his annual base salary upon achievement of target objectives and
performance criteria, payable on or before March 15 of the fiscal year following the fiscal year to which the bonus relates. Except
upon termination by the Company without cause or upon non-renewal, or by Mr. Keller for good reason, Mr. Keller shall be entitled
to a bonus for a year, subject to achievement of the performance criteria, if he is employed by the Company as of December 31
for the year to which services to which the bonus applies were performed. Targets and performance criteria shall be established
by the Board after consultation with Mr. Keller, but the evaluation of Mr. Keller’s performance shall be at the Board’s
sole discretion.
As
soon as administratively practicable after the closing date of the Merger, the Company agreed to grant Mr. Keller an award of
1,514,354 restricted stock units (giving effect to the Exchange Ratio and Reverse Split), equivalent to 5% of the issued and outstanding
shares of Company common stock on a fully diluted basis, subject to the terms and conditions of the Company’s equity plan
and form of restricted stock unit award agreement, which terms shall include (i) forfeiture of any unvested restricted stock units
on termination of employment for any reason; and (ii) vesting of the restricted stock units as follows: (A) 33.33% will vest upon
the Company’s receipt of purchase orders for at least 500 AYRO vehicles to be sold to Club Car in calendar year 2020 with
specified quarterly targets, provided, that (1) on or before December 16, 2019, a definitive written agreement with respect to
such purchase is executed, and at least $1,000,000 of the purchase has been received by the Company; (2) on the closing date of
the Merger, Private AYRO secures borrowing based on a line of credit of $4,000,000 to support inventory purchase flow in line
with the Company’s 2020 budget; (3) the Merger closes on or before April 23, 2020 and the Company receives additional funding
of at least $5,000,000 by the closing date of the Merger; (4) in the event the closing date of the Merger is after January 25,
2020, Private AYRO and the investors mutually agree on the earlier release of approved funding of at least $500,000; and (5) the
Company receives additional funding from third parties of at least $1,500,000 on or before September 30, 2020; (B) an additional
33.33% on the date that, in addition to the conditions set forth in (A), the Company enters into a definitive written agreement
with Club Car or Ingersoll Rand on or before May 31, 2020, that results in a minimum equity investment of $1,500,000, and publicly
discloses such investment; and (C) the remainder on the date that the Company achieves a minimum average valuation of 25% higher
for twenty out of the thirty calendar days following the end of the first full quarter after the closing date of the Merger than
the Company’s valuation on the date of the Merger, provided that the conditions set forth in (A) have been achieved by such
date.
On
September 29, 2020, the Company and Mr. Keller entered into an amendment (the “Keller Amendment”) to the Keller Employment
Agreement. The Keller Amendment (i) changed the form of certain equity awards from restricted stock units to shares of restricted
common stock of the Company, (ii) modified certain vesting conditions that apply to the restricted stock award as described in
the Keller Employment Agreement and (iii) reduced the number of shares of restricted stock to be granted to Mr. Keller by the
number of stock options to be granted to him by the Company contemporaneously with the Keller Amendment. Pursuant to the Keller
Amendment, on September 29, 2020, the Company granted Mr. Keller 651,250 shares of restricted stock and options to purchase 459,468
shares of common stock at an exercise price of $3.17 per share. One-third of the shares underlying the options will vest on the
first anniversary of the date of grant, and the remaining optioned shares will vest in twenty-four substantially equal monthly
installments on each of the next twenty-four monthly anniversaries of the initial vesting date, provided that Mr. Keller has remained
continuously employed by or has been providing services to the Company through the applicable vesting date.
The
Company may terminate Mr. Keller’s employment for cause at any time after providing written notice to Mr. Keller, and without
cause with thirty days’ written notice. Mr. Keller may terminate his employment without good reason at any time upon thirty
days’ written notice or with good reason, which requires delivery of a notice of termination within ninety days after Mr.
Keller first learns of the existence of the circumstances giving rise to good reason, and failure of the combined company to cure
the circumstances giving rise to the good reason within thirty days following delivery of such notice.
If
the Company terminates Mr. Keller’s employment for cause or if Mr. Keller resigns, Mr. Keller shall receive, within thirty
days of such termination, any accrued but unpaid base salary and expenses required to be reimbursed, and all vested outstanding
stock options will remain exercisable until the earlier of expiration of the option’s term or the date that is two years
following the termination.
If
Mr. Keller’s employment is terminated due to his death or disability, Mr. Keller or his estate will receive the accrued
obligation Mr. Keller would have received upon termination by the Company for cause or by Mr. Keller by resignation, and any earned,
but unpaid, bonus for services rendered during the year preceding the date of termination.
If
the Company terminates Mr. Keller’s employment without cause or upon non-renewal or by Mr. Keller for good reason, Mr. Keller
is entitled to receive the accrued obligation Mr. Keller would have received upon termination by the Company for cause or by Mr.
Keller by resignation, and any earned, but unpaid, bonus for services rendered during the year preceding the date of termination.
In addition, subject to compliance with the restrictive covenants set forth in the Keller Employment Agreement and the execution
of a release of claims, the Company will pay the following severance payments and benefits: (1) an amount equal to twelve months’
base salary, payable in equal monthly installments over a twelve-month severance period; (2) an amount equal to the greater of
(x) the most recent annual bonus earned by Mr. Keller, (y) the average of the immediately preceding two year’s annual bonuses
earned by Mr. Keller, or (z) if Mr. Keller’s termination of employment occurs during the first calendar year of the initial
employment term before any annual bonus for a full twelve-month period of service has been paid, then the target bonus Mr. Keller
is eligible for under the employment agreement; provided that no bonus amount shall be payable if the bonuses for the year of
termination are subject to achievement of performance goals and such performance goals are not achieved by the combined company
for such year; provided further that the bonus amount shall be paid at the same time bonuses would be payable under the employment
agreement as if Mr. Keller was actively employed; (3) all outstanding stock options and restricted stock unit awards granted shall
be fully and immediately vested, to the extent not previously vested and shares with respect to the restricted stock unit awards
that become vested under the employment agreement shall be delivered within ten days of termination; and (4) continued healthcare
coverage under the group health plan at the same cost, if any, imposed on active employees of the Company, until the earlier of
(x) the expiration of the severance period or (y) the date Consolidated Omnibus Budget Reconciliation Act of 1986 coverage terminates
or expires.
If
the Company terminates Mr. Keller’s employment without cause or upon non-renewal or by Mr. Keller for good reason in connection
with or within 24 months following a change in control (as defined in the Company’s 2020 Long-Term Equity Incentive Plan),
Mr. Keller shall receive the severance payments and benefits he would receive in the event that the Company terminates Mr. Keller’s
employment without cause or upon non-renewal or by Mr. Keller for good reason set forth above, but instead of twelve months’
base salary, Mr. Keller will receive twenty-four months’ base salary over a twelve-month severance period and double the
bonus amount he would have received without change in control.
The
Keller Employment Agreement also contains certain standard noncompetition, non-solicitation, non-disparagement, confidentiality,
and assignment of inventions requirements for Mr. Keller.
Executive
Employment Agreement with Curtis Smith
Pre-Merger
Smith Employment Agreement
Pursuant
to his employment agreement, effective March 8, 2018, and to subsequent actions by Private AYRO’s board of directors, Curtis
E. Smith was entitled to a base salary of $200,000 and a target annual bonus in the amount of 25% of his annual base salary. The
target annual bonus was based on Mr. Smith’s performance, as determined by Private AYRO’s board of directors in its
sole discretion, against fundamental corporate and/or individual objectives to be determined by Private AYRO’s board of
directors. Mr. Smith was eligible to participate in the Private AYRO Equity Plan, subject to the discretion of Private AYRO’s
board of directors, if and when the board of directors determined to make a grant to him. Pursuant to Mr. Smith’s employment
agreement, as consideration for entering into the employment agreement, Private AYRO granted nonqualified options to acquire 109,072
shares of Private AYRO common stock (giving effect to the Exchange Ratio and Reverse Split) with an exercise price of $2.446 in
March 2018.
Smith
Employment Agreement Amendment
On
May 28, 2020, immediately prior to the effective time of the Merger, Private AYRO entered into an amendment to its executive employment
agreement with Mr. Smith (the “Smith Amendment”). The Smith Amendment provides that if Mr. Smith’s employment
is terminated upon either party’s failure to renew or by Mr. Smith without good reason, then all of Mr. Smith’s vested,
outstanding stock options will remain exercisable until the earlier of the expiration of the option’s term or the date that
is two years following the termination. The Smith Amendment further provides that if Mr. Smith’s employment is terminated
by Private AYRO without cause or by Mr. Smith for good reason, then all outstanding equity awards granted to Mr. Smith pursuant
to his employment agreement shall be fully and immediately vested, to the extent not previously vested, and all of his then vested,
outstanding stock options shall remain exercisable until the earlier of the expiration of the options’ term or the date
that is two years following termination. On September 29, 2020, Mr. Smith was awarded options to purchase 169,906 shares of our
common stock, at an exercise price of $3.17 per share. One-third of the shares underlying the options will vest on the first anniversary
of the date of grant, and the remaining optioned shares will vest in twenty-four substantially equal monthly installments on each
of the next twenty-four monthly anniversaries of the initial vesting date, provided that Mr. Smith has remained continuously employed
by or has been providing services to the Company through the applicable vesting date.
Independent
Contractor Agreement with Brian Groh
Private
AYRO and 2196005 Ontario, Inc., an Ontario corporation owned and controlled by Mr. Groh (the “Groh Entity”), entered
into an independent contractor agreement, on September 16, 2019. Pursuant to the agreement, the Groh Entity agreed to provide
services as chief of business development for a term of 12 months.
Private
AYRO paid the Groh Entity $8,333 per month, based on 50% normal business hours utilization, upon receipt of invoice. Such amount
may have been increased or decreased based on actual hours worked. Private AYRO was to pay to the Groh Entity quarterly management
by objectives (“MBO”) targeted at $12,500 per quarter, based on MBOs mutually agreed upon by the parties, payment
of which was scheduled to commence after the completion of the Merger. The Groh Entity was also eligible to participate in a commission
pooling plan with the other sales team participants. Pursuant to the independent contractor agreement, Private AYRO granted Mr.
Groh options to purchase 54,536 shares of Private AYRO common stock pursuant to the Private AYRO Equity Plan, with such share
numbers giving effect to the Exchange Ratio and Reverse Split
Either
the Groh Entity or Private AYRO may have terminated the independent contractor agreement at any time and for any reason with 90
days’ advance written notice.
If
Private AYRO terminated the contract for cause or the Groh Entity terminated the contract without good reason, the Groh Entity
would have received its earned fees, commissions and quarterly MBO payment. If the contract was terminated by the Groh Entity
for good reason or by Private AYRO without cause, the Groh Entity would have received its earned fees, commissions and quarterly
MBO payment and continued payments of fees, quarterly MBO payment and commissions owned based on the mutually agreed commission
plan for six months following their termination date in an aggregate amount equal to the greater of (1) the Groh Entity’s
monthly fees, quarterly MBO and qualifying commissions for the year in which the termination date occurs, or (2) the Groh Entity’s
monthly fees, quarterly MBO and qualifying commissions averaged for 6 months prior to the termination date. In addition, pursuant
to the option award agreements executed upon each option grant made to Mr. Groh, upon termination by Private AYRO not for cause
(as defined in such option agreements), Mr. Groh may have exercised the options vested as of the date of his termination by the
earlier of (i) the date that was 3 months following Mr. Groh’s termination or (ii) the expiration date (unless being exercised
by his estate).
The
agreement also contained certain standard non-solicitation, confidentiality, indemnification and assignment of work products.
On
September 29, 2020, Mr. Groh was awarded options to purchase 56,147 shares of our common stock.at an exercise price of $3.17 per
share. One-third of the shares underlying the options will vest on the first anniversary of the date of grant, and the remaining
optioned shares will vest in twenty-four substantially equal monthly installments on each of the next twenty-four monthly anniversaries
of the initial vesting date, provided that Mr. Perley has remained continuously employed by or has been providing services to
the Company through the applicable vesting date.
Independent
Contractor Agreement with Richard Perley
Private
AYRO and Mr. Perley, doing business as PerlTek, entered into an independent contractor agreement on August 27, 2018. Pursuant
to the agreement, Mr. Perley served as Private AYRO’s Vice President, Product Management and Marketing.
The
initial term was for 12 months. Effective September 4, 2018, Private AYRO was to pay Mr. Perley a monthly retainer of $16,667/month,
and Mr. Perley was to receive a quarterly bonus for the period September 4, 2018, through December 31, 2018, targeted at $13,333
for the first quarter and $10,000 per quarter thereafter based on MBOs mutually agreed upon by the parties and subject to Private
AYRO’s performance. Pursuant to the independent contractor agreement, Private AYRO granted Mr. Perley five-year warrants
to purchase 4,545 shares (with such share numbers giving effect to the Exchange Ratio and Reverse Split) of Private AYRO common
stock per month at $7.33 per share; by the time the initial independent contractor relationship was terminated in April 2019,
Mr. Perley had received warrants to purchase a total of 34,085 shares of Private AYRO common stock, with such share numbers giving
effect to the Exchange Ratio and Reverse Split. The initial independent contractor relationship between Private AYRO and Mr. Perley
was terminated in April 2019.
On
September 9, 2019, Private AYRO appointed Mr. Perley as Chief Marketing Officer. Private AYRO was to pay Mr. Perley $8,333 per
month, based on 50% normal business hours utilization, upon receipt of invoice. Such amount may have been increased or decreased
based on actual hours worked. Private AYRO was to pay Mr. Perley quarterly MBO targeted at $12,500 per quarter, based on MBOs
mutually agreed upon by the parties, payment of which will commence after the completion of the Merger. Mr. Perley was also eligible
to participate in a commission pooling plan with the other sales team participants. Pursuant to the independent contractor agreement,
Private AYRO granted Mr. Perley options to purchase 54,536 shares of Private AYRO common stock pursuant to the Private AYRO Equity
Plan, with such share numbers giving effect to the Exchange Ratio and Reverse Split.
Either
Mr. Perley or Private AYRO may have terminated the independent contractor agreement at any time and for any reason with 90 days’
advance written notice.
If
Private AYRO terminated the contract for cause or if Mr. Perley terminated the contract without good reason, Mr. Perley would
have received his earned fees, commissions and quarterly MBO payment. If the contract was terminated by Mr. Perley for good reason
or by Private AYRO without cause, Mr. Perley would have received his earned fees, commissions and quarterly MBO payment and continued
payments of fees, quarterly MBO payment and commissions owned based on the mutually agreed commission plan for six months following
their termination date in an aggregate amount equal to the greater of (1) Mr. Perley’s monthly fees, quarterly MBO and qualifying
commissions for the year in which the termination date occurred, or (2) Mr. Perley’s monthly fees, quarterly MBO and qualifying
commissions averaged for 6 months prior to the termination date. In addition, pursuant to the option award agreements executed
upon each option grant made to Mr. Perley, upon termination by Private AYRO not for cause (as defined in such option agreements),
Mr. Perley may have exercised the options vested as of the date of his termination by the earlier of (i) the date that was 3 months
following Mr. Perley’s termination or (ii) the expiration date (unless being exercised by his estate).
The
agreement also contained certain standard non-solicitation, confidentiality, indemnification and assignment of work products.
On
September 29, 2020, Mr. Perley was awarded options to purchase 56,147 shares of our common stock.at an exercise price of $3.17
per share. One-third of the shares underlying the options will vest on the first anniversary of the date of grant, and the remaining
optioned shares will vest in twenty-four substantially equal monthly installments on each of the next twenty-four monthly anniversaries
of the initial vesting date, provided that Mr. Perley has remained continuously employed by or has been providing services to
the Company through the applicable vesting date.
Equity
Compensation - Private AYRO
Private
AYRO primarily offered stock options to Private AYRO’s named executive officers in addition to certain non-executive employees
as the long-term incentive component of Private AYRO’s compensation program. Private AYRO’s stock options allowed
employees to purchase shares of Private AYRO common stock at a price per share equal to the fair market value of Private AYRO
common stock on the date of grant and may or may not be intended to qualify as “incentive stock options” for U.S.
federal income tax purposes. In the past, Private AYRO’s board of directors determined the fair market value of Private
AYRO common stock based upon inputs including valuation reports prepared by third-party valuation firms from time to time. Generally,
the stock options Private AYRO granted vested over three years, subject to the employee’s continued employment with Private
AYRO on the vesting date. Additionally, named executive officers’ options vested over three years, with one-sixth (1/6)
of the options vesting every six-months, commencing on the six-month anniversary of the grant date. On January 1, 2017, Private
AYRO adopted the Private AYRO Equity Plan in order to facilitate the grant of equity incentives to directors, employees (including
Private AYRO’s named executive officers) and consultants of Private AYRO and to enable Private AYRO to obtain and retain
services of these individuals.
On
March 8, 2018, Mr. Smith received a stock option to purchase 109,072 shares of Private AYRO common stock (with such share numbers
giving effect to the Exchange Ratio and Reverse Split) as an inducement grant to enter into his employment agreement, pursuant
to his employment agreement. The option vests over three years, with one-sixth (1/6) of the option vesting upon the six-month
anniversary of the date of grant and the remainder vesting every six months thereafter, subject to Mr. Smith’s continued
employment with Private AYRO on each vesting date. The options were granted with an exercise price per share of $2.446, which
was equal to or greater than the fair market value per share of Private AYRO’s common stock at the time of the grant, as
determined by Private AYRO’s board of directors. The option has a term of ten years from the date of grant.
On
March 31, 2019, Mr. Keller received a discretionary grant of a stock option to purchase 95,438 shares of Private AYRO common stock,
with such share numbers giving effect to the Exchange Ratio and Reverse Split. The option vests over three years, with one-sixth
(1/6) of the option vesting upon the six-month anniversary of the date of grant and the remainder vesting every six months thereafter,
subject to Mr. Keller’s continued employment with Private AYRO on each vesting date. The options were granted with an exercise
price per share of $3.48, which was equal to or greater than the fair market value per share of Private AYRO common stock at the
time of the grant, as determined by the Private AYRO board of directors. The option has a term of ten years from the date of grant.
On
March 31, 2019, Mr. Smith received a discretionary grant of a stock option to purchase 54,536 shares of Private AYRO common stock,
with such share numbers giving effect to the Exchange Ratio and Reverse Split. The option vests over three years, with one-sixth
(1/6) of the option vesting upon the six-month anniversary of the date of grant and the remainder vesting every six months thereafter,
subject to Mr. Smith’s continued employment with Private AYRO on each vesting date. The options were granted with an exercise
price per share of $3.48, which was equal to or greater than the fair market value per share of Private AYRO common stock at the
time of the grant, as determined by the Private AYRO board of directors. The option has a term of ten years from the date of grant.
On
September 30, 2019, 2019, pursuant to the independent contractor agreement, Mr. Groh received a discretionary grant of a stock
option to purchase 54,536 shares of Private AYRO common stock, with such share numbers giving effect to the Exchange Ratio and
Reverse Split. The option vests over three years, with one-sixth (1/6) of the option vesting upon the six-month anniversary of
the date of grant and the remainder vesting every six months thereafter, subject to Mr. Groh’s continued employment with
AYRO on each vesting date. The options were granted with an exercise price per share of $4.03, which was equal to or greater than
the fair market value per share of Private AYRO common stock at the time of the grant, as determined by the Private AYRO board
of directors. The option has a term of ten years from the date of grant.
On
September 30, 2019, pursuant to the independent contractor agreement, Mr. Perley received a discretionary grant of a stock option
to purchase 54,536 shares of Private AYRO common stock, with such share numbers giving effect to the Exchange Ratio and Reverse
Split. The option vests over three years, with one-sixth (1/6) of the option vesting upon the six-month anniversary of the date
of grant and the remainder vesting every six months thereafter, subject to Mr. Perley’s continued employment with Private
AYRO on each vesting date. The options were granted with an exercise price per share of $4.03, which was equal to or greater than
the fair market value per share of Private AYRO’s common stock at the time of the grant, as determined by the Private AYRO
board of directors. The option has a term of ten years from the date of grant.
The
foregoing grants were made pursuant to the Private AYRO Equity Plan and option agreements under the Private AYRO Equity Plan.
Certain awards granted to Private AYRO’s named executive officers may have been subject to accelerated vesting in certain
circumstances pursuant to the option agreements for executive officers.
Outstanding
Equity Awards at Fiscal Year-End
The
following table includes certain information with respect to all unexercised stock options and unvested shares of common stock
outstanding owned by the named executive officers as of December 31, 2019.
Name
|
|
Number
of
Securities
underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($/Share)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares or
Units of
Stock that
have not
vested (#)
|
|
|
Market
Value of
Shares or
units of
Stock that
have not
vested ($)
|
|
Spencer
Richardson
|
|
|
13,268
|
|
|
|
-
|
|
|
|
8.10
|
|
|
|
12/23/2028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
3,715
|
|
|
|
6,192
|
|
|
|
11.60
|
|
|
|
01/30/2029
|
|
|
|
-
|
|
|
|
-
|
|
David
Newman
|
|
|
13,268
|
|
|
|
-
|
|
|
|
8.10
|
|
|
|
12/23/2028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
3,715
|
|
|
|
6,192
|
|
|
|
11.60
|
|
|
|
1/30/2029
|
|
|
|
-
|
|
|
|
-
|
|
Paul
Commons
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding
Equity Awards at Fiscal Year-End – Private AYRO
The
following table sets forth information concerning the outstanding equity awards that were previously awarded to each of Private
AYRO’s named executive officers and which remained outstanding as of December 31, 2019. Private AYRO did not have any equity
incentive plans other than the Private AYRO Equity Plan. As of the date hereof, there are no share-based award plans for any of
Private AYRO’s named executive officers or directors. Unless otherwise noted, option grants vest one-sixth (1/6) per six-month
anniversary from grant date.
Named
Executive Officer or
Director
|
|
Number
of
securities
underlying
unexercised
options
(#)
exercisable
|
|
|
Number
of
securities
underlying
unexercised
options
(#)
unexercisable
|
|
|
Equity
incentive
plan
awards:
number of securities
underlying unexercised unearned
options
(#)
|
|
|
Option
exercise
price
|
|
|
Option
expiration
date
|
Rod
Keller
|
|
|
181,787
|
(1)
|
|
|
90,893
|
|
|
|
-
|
|
|
$
|
2.446
|
|
|
November
12, 2027
|
President,
Chief Executive Officer and Director
|
|
|
20.451
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
2.446
|
|
|
November
12, 2027
|
|
|
|
10,907
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
2.449
|
|
|
November
30, 2027
|
|
|
|
20,451
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
2.446
|
|
|
November
12, 2028
|
|
|
|
15,906
|
(5)
|
|
|
31,813
|
(5)
|
|
|
-
|
|
|
$
|
3.484
|
|
|
March
30, 2029
|
|
|
|
-
|
|
|
|
20,451
|
(6)
|
|
|
|
|
|
$
|
3.924
|
|
|
November
12, 2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curt
Smith
|
|
|
54,536
|
(7)
|
|
|
54,536
|
(7)
|
|
|
-
|
|
|
$
|
2.446
|
|
|
March
11, 2029
|
Chief
Financial Officer
|
|
|
9,089
|
(8)
|
|
|
45,447
|
(8)
|
|
|
-
|
|
|
$
|
3.484
|
|
|
March
30, 2029
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
Brian
Groh
|
|
|
-
|
|
|
|
54,536
|
(9)
|
|
|
-
|
|
|
$
|
4.034
|
|
|
September
29, 2029
|
Chief
of Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
Richard
Perley
|
|
|
-
|
|
|
|
54,536
|
(9)
|
|
|
-
|
|
|
$
|
4.034
|
|
|
September
29, 2029
|
Chief
Marketing Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six
months, commencing on the six-month anniversary of November 13, 2017.
|
|
(2)
|
These
options vest over twelve months, with one-quarter (1/4) of the options vesting every
three months, commencing on the three-month anniversary of November 13, 2017.
|
|
(3)
|
These
options are 100% vested upon issuance on December 1, 2017.
|
|
(4)
|
These
options vest over twelve months, with one-quarter (1/4) of the options vesting every
three months, commencing on the three-month anniversary of November 13, 2018.
|
|
(5)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six
months, commencing on the six-month anniversary of March 31, 2019.
|
|
(6)
|
These
options vest over twelve months, with one-quarter (1/4) of the options vesting every
three months, commencing on the three-month anniversary of November 13, 2018.
|
|
(7)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six
months, commencing on the six-month anniversary of March 12, 2019.
|
|
(8)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six
months, commencing on the six-month anniversary of March 31, 2019.
|
|
(9)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six
months, commencing on the six-month anniversary of September 30, 2019.
|
Change
in Control Agreements
We
do not currently have plans providing for the payment of retirement benefits to our officers or directors, other than as described
under “Narrative Disclosure to Summary Compensation Table” above.
We
do not currently have any change-of-control or severance agreements with any of our executive officers or directors, other than
as described under “Narrative Disclosure to Summary Compensation Table” above. In the event of the termination of
employment of the named executive officers, any and all unexercised stock options shall expire and no longer be exercisable after
a specified time following the date of the termination, other than as described under “Agreements with Executive Officers”
above.
Incentive
Plans
AYRO,
Inc. 2020 Long-Term Incentive Plan
On
April 21, 2020, our Board adopted the AYRO, Inc. 2020 Long-Term Incentive Plan (the “Plan”), subject to stockholder
approval, which was obtained on May 28, 2020. Our outside directors and our employees, including the principal executive officer,
principal financial officer and other named executive officers, and certain contractors are all eligible to participate in the
Plan. For description of the Plan, see “Description of the Plan” under Proposal 5 on Page 40 of this Proxy Statement.
Old
AYRO Incentive Plans
AYRO,
Inc. 2017 Long Term Incentive Plan (the “Private AYRO Equity Plan”)
Pursuant
to the Merger Agreement, effective as of the effective time of the Merger, the Company assumed the Private AYRO Equity Plan, assuming
all of Private AYRO’s rights and obligations with respect to the options issued thereunder. Immediately thereafter, the
Company terminated the Private AYRO Equity Plan.
The
Private AYRO Equity Plan, effective as of January 1, 2017, allowed for the granting of a variety of equity-based awards to provide
Private AYRO with flexibility in attracting and retaining key employees, consultants, and nonemployee directors and to provide
such persons with additional incentive opportunities designed to enhance Private AYRO’s profitable growth. Consequently,
the Private AYRO Equity Plan primarily provided for the granting of incentive stock options, non-qualified stock options, restricted
stock awards, restricted stock units, stock appreciation rights, other stock-based awards, or a combination of the foregoing.
Authorized
Shares. At inception, a total of 125,000 shares of Private AYRO common stock (without giving effect to the Exchange Ratio
or the Reverse Split) that occurred immediately after the effective time of the Merger, were authorized for issuance under the
Private AYRO Equity Plan. The Private AYRO Equity Plan was amended from time to time to increase the maximum number of shares
authorized for issuance under the Private AYRO Equity Plan. A total of 6,410,000 shares of common stock were authorized under
the Private AYRO Equity Plan, without giving effect to the Exchange Ratio or the Reverse Split that occurred immediately after
the effective time of the Merger.
Plan
Administration. As permitted by the terms of the Private AYRO Equity Plan, the Private AYRO board of directors delegated administration
of the Private AYRO Equity Plan to the compensation committee of Private AYRO’s board of directors (the “Private AYRO
Committee”). As used herein with respect to the Private AYRO Equity Plan, the term “Private AYRO Committee”
refers to any committee Private AYRO’s board of directors may have appointed to administer the Private AYRO Equity Plan
as well as to the board of directors itself. Subject to the provisions of the Private AYRO Equity Plan, the Private AYRO Committee
had the power to construe and interpret the Private AYRO Equity Plan and awards granted under it and to determine the persons
to whom and the dates on which awards would have been granted, the number of shares of common stock to be subject to each award,
the time or times during the term of each award within which all or a portion of such award may have been exercised, the exercise
price, the type of consideration to have been paid, and the other terms and provisions of each award, which need not have been
identical. All decisions, determinations and interpretations by the Private AYRO Committee regarding the Private AYRO Equity Plan
and any awards granted under it were final, binding and conclusive on all participants or other persons claiming rights under
the Private AYRO Equity Plan or any award.
Options.
Options granted under the Private AYRO Equity Plan may (i) either have been “incentive stock options” within the
meaning of Section 422 of the Code, or “nonqualified stock options,” and (ii) became exercisable in cumulative increments
(“vest”) as determined by the Private AYRO Committee. Such increments may have been based on continued service to
Private AYRO over a certain period of time, the occurrence of certain performance milestones, or other criteria as determined
by the Committee. Options granted under the Private AYRO Equity Plan may have been subject to different vesting terms. The Private
AYRO Committee generally had the power to accelerate the time during which an option may have vested or have been exercised. Options
may not have had an exercise price per share of less than 100% (110% in the case of a participant who owned more than 10% of the
combined voting power of Private AYRO or an affiliate (a “10% Stockholder”)) of the fair market value of a share of
Private AYRO common stock on the date of grant or a term longer than ten years (five years in the case of a 10% Stockholder).
To the extent provided by the terms of an option, a participant may have satisfied any federal, state or local tax withholding
obligation relating to the exercise of such option by a cash payment upon exercise, by authorizing Private AYRO to withhold a
portion of the stock otherwise issuable to the participant upon exercise, or by such other method as may be set forth in the option
agreement or authorized by the Private AYRO Committee. The treatment of options under the Private AYRO Equity Plan upon a participant’s
termination of employment with or service to Private AYRO were set forth in the applicable award agreement, which typically provided
that the options will terminate three months after a termination of employment or service. Incentive stock options are not transferable
except by will or by the laws of descent and distribution, provided that a participant may designate a beneficiary who may exercise
an option following the participant’s death. Non-qualified stock options are transferable to certain permitted transferees
(as provided in the AYRO Equity Plan) to the extent included in the option award agreement.
Restricted
Stock and Restricted Stock Unit Awards. Subject to certain limitations, the Private AYRO Committee was authorized to grant
awards of restricted stock and restricted stock units, which were rights to receive shares of Private AYRO common stock or cash,
as determined by the Private AYRO Committee and as set forth in the applicable award agreement, upon the settlement of the restricted
stock units at the end of a specified time period. The Private AYRO Committee may have imposed any restrictions or conditions
upon the vesting of restricted stock or restricted stock unit awards, or that delay the settlement of a restricted stock unit
award after it vests, that the Private AYRO Committee deemed appropriate and in accordance with the requirements of Section 409A
of the Code and the regulations and other authoritative guidance issued thereunder. Dividend equivalents may have been credited
in respect of shares covered by a restricted stock or a restricted stock unit award, as determined by the Private AYRO Committee.
At the discretion of the Private AYRO Committee, such dividend equivalents may have been converted into additional shares covered
by restricted stock or restricted stock units, as applicable. If a restricted stock or restricted stock unit award recipient’s
employment or service relationship with Private AYRO terminated, any unvested portion of the restricted stock or restricted stock
unit award would be forfeited, unless the participant’s award agreement provided otherwise. Restricted stock and restricted
stock unit awards are generally not transferable except (i) by will or by the laws of descent and distribution or (ii) to certain
permitted transferee, to the extent provided in the award agreement.
Other
Awards. Other awards permitted under the Private AYRO Equity Plan included stock appreciation rights, bonus stock, dividend
equivalents, and other stock-based awards that were denominated or payable in, valued in whole or in part by reference to or otherwise
based on or related to Private AYRO common stock.
Certain
Adjustments; Change in Control. In connection with any reorganization, recapitalization, reincorporation, reclassification,
stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares,
or other change in Private AYRO’s capital structure, the Private AYRO Committee would have appropriately adjusted the type(s),
class(es) and number of shares of common stock subject to the Private AYRO Equity Plan (and the other share limits contained therein),
and any outstanding awards would also be appropriately adjusted as to the type(s), class(es), number of shares and exercise price
per share of common stock subject to such awards.
In
the event of a “Change in Control” (as defined in the Private AYRO Equity Plan), the Private AYRO Committee would
have approved, without the consent or approval of any participant, one or more of the following alternatives with respect to outstanding
awards under the Private AYRO Equity Plan: (i) accelerate the time at which outstanding awards may be exercised, whether in full
or in part, or for a limited period of time on or before a specified date after which date all unexercised awards and all rights
of holders thereunder shall terminate; (ii) require the surrender of some or all of a participant’s outstanding awards,
upon which such awards shall be cancelled and the participant shall receive an amount in cash equal to the positive difference,
if any, between the underlying stock’s then current fair market value over the award’s exercise or purchase price,
as applicable; or (iii) make such adjustments to outstanding awards as the Private AYRO Committee deemed appropriate to reflect
such Change in Control. Any determination of the Private AYRO Committee with regard to any outstanding awards under the Private
AYRO Equity Plan in connection with a Change in Control would be final, binding and conclusive.
Amendment,
Termination. Private AYRO’s board of directors may have amended, altered, suspended, discontinued, or terminated the
Private AYRO Equity Plan, provided that no such amendment would have adversely affected the rights of any participant without
the participant’s consent.
Equity
Compensation Plan Information
The
following table provides certain information as of December 31, 2019 with respect to our equity compensation plans under which
our equity securities are authorized for issuance, giving effect to the Reverse Split:
Plan
Category
|
|
(a)
Number
of securities
to be issued
upon
exercise of
outstanding
options,
warrants
and rights
|
|
|
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
|
|
Number
of
securities
available for
future
issuance
under equity
compensation
plans
excluding
securities
reflected in
column (a)
|
|
Equity
compensation plan approved by security holders
|
|
|
76,079
|
|
|
$
|
72.15
|
|
|
|
9,989
|
|
Total
|
|
|
76,079
|
|
|
$
|
72.15
|
|
|
|
9,989
|
|
Equity
Compensation Plan Information – Private AYRO
The
following table provides information regarding the number of securities that were to be issued under the Private AYRO Equity Plan,
the weighted-average exercise price of options issued under the Private AYRO Equity Plan and the number of securities that were
remaining available for future issuance under the Private AYRO Equity Plan, in each case as of December 31, 2019, giving effect
to the Exchange Ratio and Reverse Split:
Plan
category
|
|
Number
of
securities
to be
issued
upon exercise
of
outstanding
options,
warrants
and
rights
|
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
|
|
Number
of securities
remaining
available
for
future issuance
under
equity
compensation
plans
|
|
Equity
compensation plans approved by security holders
|
|
|
1,214,789
|
|
|
$
|
2.9749
|
|
|
|
533,089
|
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
1,214,789
|
|
|
$
|
2.9749
|
|
|
|
533,089
|
|
AUDIT
COMMITTEE MATTERS
Audit
Committee Report
The
Audit Committee assists the Board in its general oversight of the Company’s financial reporting processes. The Audit Committee
Charter describes in greater detail the full responsibilities of the Audit Committee. During each fiscal year, the Audit Committee
reviews the Company’s financial statements, management reports, internal control over financial reporting and audit matters.
In connection with these reviews, the Audit Committee meets with management and independent public accountants at least once each
quarter. The Audit Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its
tasks. These meetings include, whenever appropriate, executive sessions in which the Audit Committee meets separately with the
independent public accountants, financial management personnel and legal counsel.
As
part of its review of audit matters, the Audit Committee supervises the relationship between the Company and its independent registered
public accountants, including: having direct responsibility for their appointment, compensation and retention; reviewing the scope
of their audit services; approving audit and non-audit services; and confirming the independence of the independent public accountants.
Together with senior members of the Company’s financial management team, the Audit Committee reviewed the overall audit
scope and plans of the independent public accountants, the results of external audit examinations, and evaluations by management
of the Company’s internal control over financial reporting and the quality of the Company’s financial reporting.
In
addition, the Audit Committee reviewed key initiatives and programs aimed at designing and maintaining an effective internal and
disclosure control structure. As part of this process, the Audit Committee continued to monitor the scope and adequacy of the
steps taken to maintain the effectiveness of internal procedures and controls.
In
performing all of these functions, the Audit Committee acts in an oversight capacity. The Audit Committee reviews and discusses
the quarterly and annual consolidated financial statements with management, and the Company’s independent public accountants
prior to their issuance. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management,
which is responsible for establishing and maintaining adequate internal control over financial reporting, preparing the financial
statements and other reports and maintaining policies relating to legal and regulatory compliance, ethics and conflicts of interest.
Friedman LLP is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion
on the conformity of those financial statements with accounting principles generally accepted in the United States of America.
The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements and related footnotes
for the year ended December 31, 2019, and the independent auditor’s reports on those financial statements, with management
and with our independent auditors, Friedman LLP.
The
Audit Committee has reviewed with the independent public accountants the matters required to be discussed by the applicable requirements
of the Public Company Accounting Oversight Board and the SEC including a discussion with management and the independent public
accountants of the quality (and not merely the acceptability) of the Company’s accounting principles, the reasonableness
of significant estimates and judgments and the disclosures in the Company’s financial statements. In addition, the Audit
Committee reviewed and discussed with Friedman LLP matters related to its independence, including a review of audit and non-audit
fees and the written disclosures in the letters from Friedman LLP to the Audit Committee required by applicable requirements of
the Public Company Accounting Oversight Board regarding the independent public accountants’ communication with the Audit
Committee concerning independence. The Audit Committee concluded that Friedman LLP is independent from the Company and its management.
Taking
all these reviews and discussions into account, the Audit Committee recommended to the Board that the audited financial statements
be included in AYRO’s Annual Report on Form 10-K for fiscal year 2019, as amended, that was filed with the SEC.
AUDIT
COMMITTEE
Greg
Schiffman (Chairman)
Joshua
Silverman
Zvi
Joseph
The
Report of the Audit Committee set forth in this Proxy Statement shall not be deemed to be “soliciting material” or
to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section
18 of the Exchange Act. In addition, it shall not be deemed incorporated by reference by any statement that incorporates this
Proxy Statement by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates this information by reference.
Pre-Approval
Policies and Procedures
Under
the Audit Committee’s pre-approval policies and procedures, the Audit Committee is required to pre-approve the audit and
non-audit services performed by our independent registered public accounting firms. On an annual basis, the Audit Committee pre-approves
a list of services that may be provided by the independent registered public accounting firms without obtaining specific pre-approval
from the Audit Committee.
The
Audit Committee has delegated pre-approval authority to the Audit Committee chairman and any pre-approved actions by the Audit
Committee chairman as designee are reported to the Audit Committee for approval at its next scheduled meeting.
All
of the services rendered by EisnerAmper LLP in 2018 and Friedman LLP in 2019 were pre-approved by the Audit Committee.
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF Friedman LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee has appointed Friedman LLP as the independent registered public accounting firm for the fiscal year ending December
31, 2020, subject to stockholder ratification. Friedman LLP served as our independent registered public accounting firm for the
fiscal year ended December 31, 2019. The Audit Committee has reviewed the independence of Friedman LLP as auditor and its performance
over the fiscal year ended December 31, 2019. The Audit Committee has concluded that Friedman LLP is independent and that it is
in the best interests of the Company and its shareholders to retain Friedman LLP as independent auditor for 2020.
Representatives
of Friedman LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
On
July 3, 2019, the Board engaged Friedman LLP as the Company’s independent registered public accountants for the fiscal year
ended December 31, 2019. Prior to July 3, 2019, EisnerAmper LLP served as the Company’s independent registered public accounting
firm since 2017.
The
reports of EisnerAmper LLP on the Company’s financial statements for each of the two fiscal years ended December 31, 2018
and December 31, 2017 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles, except that the report contained an explanatory paragraph relating to the Company’s
ability to continue as a growing concern.
In
connection with the audits of the Company’s financial statements for each of the two fiscal years ended December 31, 2018
and December 31, 2017, and in the subsequent interim period through July 3, 2019, there were no “disagreements” (as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) between the Company and EisnerAmper LLP
on any matters of accounting principles or practices, financial statement disclosure or auditing scope and procedures which, if
not resolved to the satisfaction of EisnerAmper LLP, would have caused EisnerAmper LLP to make reference to the subject matter
of the disagreement in their reports.
During
the years ended December 31, 2018 and 2017, and the subsequent interim period through July 3, 2019, neither the Company nor anyone
on its behalf consulted with Friedman LLP, regarding either (i) the application of accounting principles to a specific transaction,
completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither
a written report nor oral advice was provided to the Company that Friedman LLP concluded was an important factor considered by
the Company in reaching a decision as to any accounting, auditing or financial reporting issue or (ii) any matter that was either
the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable
event (as described in Item 304(a)(1)(v) of Regulation S-K).
Fees
to Independent Registered Public Accounting Firm
The
following table presents fees for professional audit services rendered by Friedman LLP for the audit of the Company’s annual
financial statements for the year ended December 31, 2019 and EisnerAmper LLP for the audit of the Company’s annual financial
statements for the year ended December 31, 2018 and fees billed for other services rendered by Friedman LLP and EisnerAmper LLP
and other professional accounting firms during those periods. The percentage of services set forth above in the category audit
related fees that were approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i)(C) (relating to the approval of a de minimus
amount of non-audit services after the fact but before completion of the audit), was 100%.
|
|
2019
|
|
|
2018
|
|
Audit
Fees:(1)
|
|
$
|
460,368
|
|
|
$
|
421,373
|
|
Audit-Related
Fees:(2)
|
|
|
2,800
|
|
|
|
59,986
|
|
Tax
Fees:(3)
|
|
|
-
|
|
|
|
—
|
|
All
Other Fees:(4)
|
|
|
-
|
|
|
|
—
|
|
Total
|
|
$
|
463,168
|
|
|
$
|
481,359
|
|
|
(1)
|
Audit
Fees include fees for services rendered for the audit of our annual financial statements,
the review of financial statements included in our Quarterly Reports on Form 10-Q, assistance
with and review of documents filed with the SEC and consents and other services normally
provided in connection with regulatory filings. In 2019, $460,368 was billed for audit
fees, of which $320,368 was billed by EisnerAmper LLP in connection with regulatory filings
and the remainder was billed by Friedman LLP in connection with regulatory filings. In
2018, $399,299 was billed for audit fees, of which $46,200 was billed by Marcum LLP in
connection with regulatory filings and the remainder was billed by EisnerAmper LLP.
|
|
(2)
|
Audit-Related
Fees principally include fees incurred for due diligence in connection with potential
transactions and accounting consultations.
|
|
(3)
|
Tax
Fees would include fees for services rendered for tax compliance, tax advice, and
tax planning. There were no tax fees incurred with Friedman LLP in 2019 or EisnerAmper
LLP in 2018.
|
|
(4)
|
All
Other Fees would include fees that do not constitute Audit Fees, Audit-Related Fees,
or Tax Fees.
|
Approval
of Independent Registered Public Accounting Firm Services and Fees
The
Board requests that stockholders ratify the appointment of Friedman LLP as the independent registered public accounting firm to
conduct the audit of our financial statements for the fiscal year ending December 31, 2020. In the event that the stockholders
fail to ratify the selection, the Board will reconsider whether or not to retain that firm. Even if the selection is ratified,
the Board, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time
during the fiscal year if the Board determines that such a change could be in the best interest of our stockholders.
Vote
Required
The
affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the Annual Meeting
and entitled to vote on this proposal is required to adopt the proposal to ratify the appointment of Friedman LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2020. Abstentions will have the same effect as a vote
against the approval of this proposal.
The
Board recommends a vote FOR the ratification of the appointment of Friedman LLP.
|
PROPOSAL
3
APPROVAL,
ON AN ADVISORY BASIS, OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS
Pay
that reflects performance and alignment of pay with the long-term interests of our stockholders are key principles that underlie
our compensation program. The Dodd-Frank Act enables our stockholders to approve, on an advisory basis, the compensation of our
named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s rules. The proposal, commonly
known as a “say-on-pay” proposal, is required under Section 14A of the Exchange Act (which was put in place by the
Dodd-Frank Act) and gives our stockholders the opportunity to express their views on the Company’s executive compensation.
Because this vote is an advisory vote, this proposal is not binding upon the Company, our Board or upon a designated compensation
committee of the Board; however, the Board values the opinions expressed by stockholders in their vote on this proposal and will
review the voting results. To the extent there is any significant vote against the compensation of our named executive officers
as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Board will evaluate whether any
actions are necessary to address these concerns.
We
are asking our stockholders to indicate their support for our named executive officer compensation program as described in this
Proxy Statement in accordance with the compensation disclosure rules of the SEC. This vote is not intended to address any specific
item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described
in this Proxy Statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual
Meeting:
“RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the compensation tables and the related narrative discussion in this Proxy Statement, is hereby APPROVED.”
As
required by the Dodd-Frank Act, this vote does not overrule any decisions by our Board and will not create or imply any change
to or any additional fiduciary duties of the Board.
As
further described in Proposal 4, the Board is asking the Company’s stockholders to vote at the Annual Meeting on a proposal
regarding the frequency of the vote on future say-on-pay proposals as required by Section 14A. Subject to adoption by the Board
of a different frequency for an advisory vote on executive compensation in accordance with the recommendation of the Company’s
stockholders pursuant to Proposal 4 or otherwise, we currently expect to hold future advisory votes on executive compensation
every three years, and the next “say-on-pay” vote is expected to occur at the annual meeting of our stockholders in
2023.
Required
Vote and Board Recommendation
The
affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and
entitled to vote on the proposal is required for approval of, on an advisory basis, the executive compensation. This is a non-binding
advisory vote. If your shares are held by a broker and you do not give the broker specific instructions on how to vote your shares,
your broker may not vote your shares at its discretion. Abstentions will have the same effect as a vote against the approval of
this proposal, and broker non-votes will have no effect on the proposal.
The
Board recommends that you vote “FOR” the advisory vote on executive compensation disclosed in this Proxy
Statement, including the compensation tables and the related narrative disclosure.
|
PROPOSAL
4
APPROVAL,
ON AN ADVISORY BASIS, OF THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION TO BE PAID TO OUR NAMED EXECUTIVE OFFICERS
The
Dodd-Frank Act also provides that stockholders must be given the opportunity to vote, on a non-binding, advisory basis, for their
preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers as disclosed
in accordance with the compensation disclosure rules of the SEC, which we refer to as an advisory vote on executive compensation.
By voting with respect to this proposal, stockholders may indicate whether they would prefer that we conduct future advisory votes
on executive compensation once every one, two, or three years. Stockholders also may, if they wish, abstain from casting a vote
on this proposal.
The
Board believes that a frequency of “every three years” for the advisory vote on executive compensation is the optimal
interval for conducting and responding to a “say-on-pay” vote. In determining to recommend that stockholders vote
for a frequency of once every three years, the Board considered how an advisory vote at this frequency will provide our stockholders
with sufficient time to evaluate the effectiveness of our overall compensation policies and practices in the context of our long-term
business results for the corresponding period, while avoiding over-emphasis on short-term variations in compensation and business
results. An advisory vote occurring once every three years will also permit our stockholders to observe and evaluate the impact
of any changes to our executive compensation policies and practices that have occurred since the last advisory vote on executive
compensation, including changes made in response to the outcome of a prior advisory vote on executive compensation. We will continue
to engage with our stockholders regarding our executive compensation program during the period between advisory votes on executive
compensation. Stockholders who have concerns about executive compensation during the interval between “say-on-pay”
votes are welcome to bring their specific concerns to the attention of the Board. Please refer to “Corporate Governance”
in this Proxy Statement for information about communicating with the Board.
Although
this advisory vote on the frequency of the “say-on-pay” vote is non-binding, the Board and the Compensation Committee
will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.
As
required by the Dodd-Frank Act, this vote does not overrule any decisions by the Board, will not create or imply any change to
or any additional fiduciary duties of the Board.
Required
Vote and Board of Directors Recommendation
For
the advisory vote on how frequently our stockholders should vote on the compensation of our named executive officers, the number
of years (1, 2 or 3) that receives the highest number of votes present in person or represented by proxy at the meeting and entitled
to vote on the proposal will be deemed to be preferred by our stockholders. This is a non-binding advisory vote. If your shares
are held by a broker and you do not give the broker specific instructions on how to vote your shares, your broker may not vote
your shares at its discretion. Abstentions and broker non-votes will each be counted as present for purposes of determining the
presence of a quorum but will not have any effect on the outcome of the vote on this proposal.
The
Board recommends that you vote “FOR” the option of “every three years” for future advisory
votes on executive compensation.
|
PROPOSAL
5
APPROVAL
OF AMENDMENT TO THE AYRO, INC. 2020 LONG-TERM INCENTIVE PLAN
The
Board is seeking the approval of our stockholders of an amendment to the AYRO, Inc. 2020 Long-Term Incentive Plan (the “Plan”),
which was adopted by our board of directors on November 6, 2020, subject to stockholder approval (the “Amendment”).
The Plan was originally approved by our board of directors on April 21, 2020, and by our stockholders on May 28, 2020. Under the
Plan as originally adopted, we reserved 2,289,650 shares of our common stock for issuance as awards under the Plan. As of November
2, 2020, there were 389,023 shares remaining available for future issuance as awards under the Plan. The numbers contained in
this proposal reflect the adjustments made to the Plan to give effect to the Reverse Split. The Amendment would further increase
the number of shares of common stock available for issuance pursuant to awards under the Plan by an additional by 1,800,000, to
a total of 4,089,650 shares of our common stock.
We
believe that operation of the Plan is a necessary and powerful tool in enabling us to attract and retain the best available personnel
for positions of substantial responsibility; to provide additional incentive to key employees, key contractors, and non-employee
directors; and to promote the success of our business. The Plan is expected to provide flexibility to our compensation methods
in order to adapt the compensation of such employees, contractors, and directors to a changing business environment, after giving
due consideration to competitive conditions and the impact of federal tax laws. We have strived to use our Plan resources effectively
and to maintain an appropriate balance between stockholder interests and the ability to recruit and retain valuable employees.
However, we believe there is an insufficient number of shares remaining under our Plan to meet our current and projected needs.
Accordingly, it is the judgment of our board of directors that the Amendment is in the best interest of the Company and its stockholders.
We believe that the Amendment, which increases the number of shares of common stock available for issuance pursuant to awards
under the Plan, reflects best practices in our industry and is appropriate to permit the grant of equity awards at expected levels
for the future.
A
copy of the Amendment and the Plan are included as Annex A and Annex B, respectively, to this Proxy Statement. Described
below is a summary of certain key provisions of the Plan, which is qualified in its entirety by reference to the full text of
the Plan, as amended.
The
board of directors recommends that the stockholders vote “FOR” the approval of the Amendment.
Summary
of the Proposed Amendment
Our
board of directors adopted the Amendment on November 6, 2020, subject to stockholder approval, to increase the number of shares
of our common stock available for issuance pursuant to awards under the Plan by an additional by 1,800,000, to a total of 4,089,650
shares of our common stock.
Description
of the Plan
Purpose.
The purpose of the Plan is to enable us to remain competitive and innovative in our ability to attract and retain the services
of key employees, key contractors, and non-employee directors of the Company or any of our subsidiaries. The Plan provides for
the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock
units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem,
and which may be paid in cash or shares of our common stock. The Plan is expected to provide flexibility to our compensation methods
in order to adapt the compensation of our key employees, key contractors, and non-employee directors to a changing business environment,
after giving due consideration to competitive conditions and the impact of applicable tax laws.
Effective
Date and Expiration. The Plan was approved by our board of directors on April 21, 2020 (the “Effective Date”),
subject to the Plan’s approval by our stockholders. The Plan will terminate on the tenth anniversary of the Effective Date,
unless sooner terminated by our board of directors. No award may be made under the Plan after its termination date, but awards
made prior to the termination date may extend beyond that date in accordance with their terms.
Share
Authorization. Subject to certain adjustments, the number of shares of our common stock that are reserved for issuance pursuant
to awards under the Plan is currently 2,289,650 shares, 100% of which may be delivered as incentive stock options. If the Amendment
is approved, the total number of shares that may be issued pursuant to awards will be increased by 1,800,000 shares for a total
of 4,089,650 shares, 100% of which may be delivered as incentive stock options.
Shares
to be issued may be made available from authorized but unissued shares of our common stock, shares held by us in our treasury,
or shares purchased by us on the open market or otherwise. During the term of the Plan, we will at all times reserve and keep
enough shares available to satisfy the requirements of the Plan. If an award under the Plan is cancelled, forfeited, or expires,
in whole or in part, the shares subject to such forfeited, expired, or cancelled award may again be awarded under the Plan. In
the event that previously acquired shares are delivered to us in full or partial payment of the option price upon the exercise
of a stock option or other award granted under the Plan, the number of shares available for future awards under the Plan shall
be reduced only by the net number of shares issued upon the exercise of the stock option or settlement of an award. Awards that
may be satisfied either by the issuance of common stock or by cash or other consideration shall be counted against the maximum
number of shares that may be issued under the Plan only during the period that the award is outstanding or to the extent the award
is ultimately satisfied by the issuance of shares. An award will not reduce the number of shares that may be issued pursuant to
the Plan if the settlement of the award will not require the issuance of shares, as, for example, a stock appreciation right that
can be satisfied only by the payment of cash. Only shares forfeited back to us; shares cancelled on account of termination, expiration,
or lapse of an award; shares surrendered in payment of the option price of an option; or shares withheld for payment of applicable
employment taxes and/or withholding obligations resulting from the exercise of a stock option shall again be available for grant
as incentive stock options under the Plan, but shall not increase the maximum number of shares described above as the maximum
number of shares that may be delivered pursuant to incentive stock options.
Administration.
The Plan shall be administered by our board of directors or such committee of the board as it designated by it to administer the
Plan (the “Committee”). At any time there is no Committee to administer the Plan, any reference to the Committee is
a reference to the board of directors. The Committee will determine the persons to whom awards are to be made; determine the type,
size, and terms of awards; interpret the Plan; establish and revise rules and regulations relating to the Plan; establish performance
goals for awards and certify the extent of their achievement; and make any other determinations that it believes are necessary
for the administration of the Plan. The Committee may delegate certain of its duties to one or more of our officers as provided
in the Plan.
Eligibility.
Employees (including any employee who is also a director or an officer), contractors, and non-employee directors of the Company
or any of our subsidiaries, whose judgment, initiative, and efforts contributed to or may be expected to contribute to our successful
performance, are eligible to participate in the Plan. As of the record date, we had 25 employees, 3 contractors, and 6 non-employee
directors who would be eligible for awards under the Plan.
Stock
Options. The Committee may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, provided that only employees of the
Company and our subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may
not be granted with an option price less than 100% of the fair market value of a share of common stock on the date the stock option
is granted. If an ISO is granted to an employee who owns or is deemed to own more than 10% of the combined voting power of all
classes of our stock (or of any parent or subsidiary), the option price shall be at least 110% of the fair market value of a share
of common stock on the date of grant. The Committee will determine the terms of each stock option at the time of grant, including,
without limitation, the methods by or forms in which shares will be delivered to participants or registered in their names. The
maximum term of each option, the times at which each option will be exercisable, and provisions requiring forfeiture of unexercised
options at or following termination of employment or service generally are fixed by the Committee, except that the Committee may
not grant stock options with a term exceeding 10 years or, in the case of an ISO granted to an employee who owns or is deemed
to own more than 10% of the combined voting power of all classes of our stock (or of any parent or subsidiary), a term exceeding
five years.
Recipients
of stock options may pay the option price (i) in cash, check, bank draft, or money order payable to the order of the Company;
(ii) by delivering to us shares of common stock (included restricted stock) already owned by the participant having a fair market
value equal to the aggregate option price and that the participant has not acquired from us within six months prior to the exercise
date; (iii) by delivering to us or our designated agent an executed irrevocable option exercise form, together with irrevocable
instructions from the participant to a broker or dealer, reasonably acceptable to us, to sell certain of the shares purchased
upon the exercise of the option or to pledge such shares to the broker as collateral for a loan from the broker and to deliver
to us the amount of sale or loan proceeds necessary to pay the purchase price; (iv) by requesting us to withhold the number of
shares otherwise deliverable upon exercise of the stock option by the number of shares having an aggregate fair market value equal
to the aggregate option price at the time of exercise (i.e., a cashless net exercise); and (v) by any other form of valid
consideration that is acceptable to the Committee in its sole discretion.
Stock
Appreciation Rights. The Committee is authorized to grant stock appreciation rights (“SARs”) as a stand-alone
award (or freestanding SARs) or in conjunction with options granted under the Plan (or tandem SARs). SARs entitle a participant
to receive an amount equal to the excess of the fair market value of a share of common stock on the date of exercise over the
fair market value of a share of our common stock on the date of grant. The grant price of a SAR cannot be less than 100% of the
fair market value of a share of our common stock on the date of grant. The Committee will determine the terms of each SAR award
at the time of the grant, including, without limitation, the methods by or forms in which shares will be delivered to participants
or registered in their names. The maximum term of each SAR award, the times at which each SAR award will be exercisable, and provisions
requiring forfeiture of unexercised SARs at or following termination of employment or service generally are fixed by the Committee,
except that no freestanding SAR may have a term exceeding 10 years and no tandem SAR may have a term exceeding the term of the
option granted in conjunction with the tandem SAR. Distributions to the recipient may be made in common stock, cash, or a combination
of both as determined by the Committee.
Restricted
Stock and Restricted Stock Units. The Committee is authorized to grant restricted stock and restricted stock units. Restricted
stock consists of shares of our common stock that may not be sold, assigned, transferred, pledged, hypothecated, encumbered, or
otherwise disposed of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end
of the restricted period as specified by the Committee. Restricted stock units are the right to receive shares of common stock
at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee,
which include a substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The Committee
determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units
will be made; the number of shares or units to be granted; the price to be paid, if any; the time or times within which the shares
covered by such grants will be subject to forfeiture; the time or times at which the restrictions will terminate; and all other
terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance
goals (as described below), continuous service with us, the passage of time, or other restrictions or conditions. Except as otherwise
provided in the Plan or the applicable award agreement, a participant shall have, with respect to shares of restricted stock,
all of the rights of a stockholder of the Company holding the class of common stock that is the subject of the restricted stock,
including, if applicable, the right to vote the common stock and the right to receive any dividends thereon.
Dividend
Equivalent Rights. The Committee is authorized to grant a dividend equivalent right to any participant, either as a component
of another award or as a separate award, conferring upon the participant the right to receive credits based on the cash dividends
that would have been paid on the shares of common stock specified in the award as if such shares were held by the participant.
The terms and conditions of the dividend equivalent right shall be specified in the grant. Dividend equivalents credited to the
holder of a dividend equivalent right may be paid currently or may be deemed to be reinvested in additional shares. Any such reinvestment
shall be at the fair market value at the time thereof. A dividend equivalent right may be settled in cash, shares, or a combination
thereof.
Performance
Awards. The Committee may grant performance awards payable at the end of a specified performance period in cash, shares of
common stock, units, or other rights based upon, payable in, or otherwise related to our common stock. Payment will be contingent
upon achieving pre-established performance goals (as described below) by the end of the applicable performance period. The Committee
will determine the length of the performance period, the maximum payment value of an award, and the minimum performance goals
required before payment will be made, so long as such provisions are not inconsistent with the terms of the Plan, and to the extent
an award is subject to Section 409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code
and any applicable regulations or guidance. In certain circumstances, the Committee may, in its discretion, determine that the
amount payable with respect to certain performance awards will be reduced from the maximum amount of any potential awards. If
the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable
because of a change in our business, operations, corporate structure, or for other reasons that the Committee deems satisfactory,
the Committee may modify the performance measures or objectives and/or the performance period.
Performance
Goals. Awards of restricted stock, restricted stock units, performance awards, and other awards under the Plan may be made
subject to the attainment of performance goals relating to one or more business criteria which shall consist of one or more or
any combination of the following criteria (“Performance Criteria”): cash flow; cost; revenues; sales; ratio of debt
to debt plus equity; net borrowing, credit quality, or debt ratings; profit before tax; economic profit; earnings before interest
and taxes; earnings before interest, taxes, depreciation, and amortization; gross margin; earnings per share (whether on a pre-tax,
after-tax, operational, or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value
added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net
asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings, or similar extraordinary business
transactions; sales growth; price of the shares; return on assets, equity, or stockholders’ equity; market share; inventory
levels, inventory turn or shrinkage; or total return to stockholders. Any Performance Criteria may be used to measure our performance
as a whole or of any of our business units and may be measured relative to a peer group or index. Any Performance Criteria may
include or exclude (i) events that are of an unusual nature or indicate infrequency of occurrence, (ii) gains or losses on the
disposition of a business; (iii) changes in tax or accounting regulations or laws; (iv) the effect of a merger or acquisition,
as identified in our quarterly and annual earnings releases; or (v) other similar occurrences. In all other respects, Performance
Criteria shall be calculated in accordance with our financial statements, under generally accepted accounting principles, or under
a methodology established by the Committee prior to the issuance of an award, which is consistently applied and identified in
the Company’s audited financial statements, including in footnotes, or the Compensation Discussion and Analysis section
of the Company’s annual report.
Other
Awards. The Committee may grant other forms of awards, based upon, payable in, or that otherwise relate to, in whole or in
part, shares of our common stock, if the Committee determines that such other form of award is consistent with the purpose and
restrictions of the Plan. The terms and conditions of such other form of award shall be specified in the grant. Such other awards
may be granted for no cash consideration, for such minimum consideration as may be required by applicable law, or for such other
consideration as may be specified in the grant.
Vesting,
Forfeiture and Recoupment, Assignment. The Committee, in its sole discretion, may determine that an award will be immediately
vested, in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its date of grant,
or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes
conditions upon vesting, then, subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date
on which all or any portion of the award may be vested.
The
Committee may impose on any award at the time of grant or thereafter, such additional terms and conditions as the Committee determines,
including terms requiring forfeiture of awards in the event of a participant’s termination of service. The Committee will
specify the circumstances on which performance awards may be forfeited in the event of a termination of service by a participant
prior to the end of a performance period or settlement of such awards. Except as otherwise determined by the Committee, restricted
stock will be forfeited upon a participant’s termination of service during the applicable restriction period. In addition,
we may recoup all or any portion of any shares or cash paid to a participant in connection with any award in the event of a restatement
of the Company’s financial statements as set forth in the Company’s clawback policy, if any, as such policy may be
approved or modified by our board of directors from time to time.
Awards
granted under the Plan generally are not assignable or transferable except by will or by the laws of descent and distribution,
except that the Committee may, in its discretion and pursuant to the terms of an award agreement, permit transfers of nonqualified
stock options or SARs to (i) the spouse (or former spouse), children, or grandchildren of the participant (“Immediate Family
Members”); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership in which
the only partners are (a) such Immediate Family Members and/or (b) entities which are controlled by the participant and/or his
or her Immediate Family Members; (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any
successor provision; or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor
provision, provided that (x) there shall be no consideration for any such transfer, (y) the applicable award agreement pursuant
to which such nonqualified stock options or SARs are granted must be approved by the Committee and must expressly provide for
such transferability, and (z) subsequent transfers of transferred nonqualified stock options or SARs shall be prohibited except
those by will or the laws of descent and distribution.
Adjustments
Upon Changes in Capitalization. In the event that any dividend or other distribution (whether in the form of cash, shares
of our common stock, other securities or other property), recapitalization, stock split, reverse stock split, rights offering,
reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of shares
of common stock or other securities of the Company, issuance of warrants or other rights to purchase shares of common stock or
other securities of the Company, or other similar corporate transaction or event affects the fair value of an award, then the
Committee shall adjust any or all of the following so that the fair value of the award immediately after the transaction or event
is equal to the fair value of the award immediately prior to the transaction or event: (i) the number of shares and type of common
stock (or the securities or property) which thereafter may be made the subject of awards; (ii) the number of shares and type of
common stock (or other securities or property) subject to outstanding awards; (iii) the number of shares and type of common stock
(or other securities or property) specified as the annual per-participant limitation under the Plan; (iv) the option price of
each outstanding stock option; (v) the amount, if any, we pay for forfeited shares in accordance with the terms of the Plan; and
(vi) the number of or exercise price of shares then subject to outstanding SARs previously granted and unexercised under the Plan,
to the end that the same proportion of our issued and outstanding shares of common stock in each instance shall remain subject
to exercise at the same aggregate exercise price; provided, however, that the number of shares of common stock (or other securities
or property) subject to any award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made
or authorized to the extent that such adjustment would cause the Plan or any stock option to violate Section 422 or Section 409A
of the Code. All such adjustments must be made in accordance with the rules of any securities exchange, stock market, or stock
quotation system to which we are subject.
Amendment
or Discontinuance of the Plan. Our board of directors may, at any time and from time to time, without the consent of participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that (i) no amendment that requires
stockholder approval in order for the Plan and any awards under the Plan to continue to comply with Sections 421 and 422 of the
Code (including any successors to such sections or other applicable law) or any applicable requirements of any securities exchange
or inter-dealer quotation system on which our stock is listed or traded, shall be effective unless such amendment is approved
by the requisite vote of our stockholders entitled to vote on the amendment; and (ii) unless required by law, no action by our
board of directors regarding amendment or discontinuance of the Plan may adversely affect any rights of any participants or obligations
of the Company to any participants with respect to any outstanding awards under the Plan without the consent of the affected participant.
Federal
Income Tax Consequences
The
following is a brief summary of certain U.S. federal income tax consequences relating to the transactions described under the
Plan as set forth below. This summary does not purport to address all aspects of U.S. federal income taxation and does not describe
any potential state, local, or foreign tax consequences. This discussion is based upon provisions of the Code and the Treasury
Regulations issued thereunder, and judicial and administrative interpretations under the Code and Treasury Regulations, all as
in effect as of the date hereof, and all of which are subject to change (possibly on a retroactive basis) or different interpretation.
Law
Affecting Deferred Compensation. In 2004, Section 409A was added to the Code to regulate all types of deferred compensation.
If the requirements of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject
to tax as it vests, plus an interest charge at the then current underpayment rate plus 1% and a 20% penalty tax. Certain performance
awards, stock options, SARs, restricted stock units, and certain types of restricted stock are subject to Section 409A of the
Code.
Incentive
Stock Options. A participant will not recognize income at the time an ISO is granted. When a participant exercises an ISO,
a participant also generally will not be required to recognize income (either as ordinary income or capital gain). However, to
the extent that the fair market value (determined as of the date of grant) of the shares with respect to which the participant’s
ISOs are exercisable for the first time during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated
as nonqualified stock options, and not ISOs, for federal tax purposes, and the participant will recognize income as if the ISOs
were nonqualified stock options (as described in more detail below). In addition to the foregoing, if the fair market value of
the shares received upon exercise of an ISO exceeds the option price, then the excess may be deemed a tax preference adjustment
for purposes of the federal alternative minimum tax calculation. The federal alternative minimum tax may produce significant tax
repercussions depending upon the participant’s particular tax status.
The
tax treatment of any shares acquired upon exercise of an ISO will depend upon whether the participant disposes of his or her shares
prior to the later of: (i) two years after the date the ISO was granted or (ii) one year after the shares were transferred to
the participant (referred to as, the “Holding Period”). If a participant disposes of shares acquired upon exercise
of an ISO after the expiration of the Holding Period, any amount received in excess of the participant’s tax basis for such
shares will be treated as a short-term or long-term capital gain, depending upon how long the participant has held the shares.
If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as a short-term
or long-term capital loss, depending upon how long the participant has held the shares. If the participant disposes of shares
acquired upon exercise of an ISO prior to the expiration of the Holding Period, the disposition will be considered a “disqualifying
disposition.” If the amount received for the shares is greater than the fair market value of the shares on the exercise
date, then the difference between the ISO’s option price and the fair market value of the shares at the time of exercise
will be treated as ordinary income for the tax year in which the disqualifying disposition occurs. The participant’s basis
in the shares will be increased by an amount equal to the amount treated as ordinary income due to such disqualifying disposition.
In addition, the amount received in such disqualifying disposition over the participant’s increased basis in the shares
will be treated as capital gain. However, if the price received for shares acquired upon exercise of an ISO is less than the fair
market value of the shares on the exercise date and the disposition is a transaction in which the participant sustains a loss
which otherwise would be recognizable under the Code, then the amount of ordinary income that the participant will recognize is
the excess, if any, of the amount realized on the disqualifying disposition over the basis of the shares.
Nonqualified
Stock Options. A participant generally will not recognize income at the time a nonqualified stock option is granted. When
a participant exercises a nonqualified stock option, the difference between the option price and any higher market value of the
shares of common stock on the date of exercise will be treated as compensation taxable as ordinary income to the participant.
The participant’s tax basis for the shares acquired under a nonqualified stock option will be equal to the option price
paid for such shares, plus any amounts included in the participant’s income as compensation. When a participant disposes
of shares acquired upon exercise of a nonqualified stock option, any amount received in excess of the participant’s tax
basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held
the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as
a short-term or long-term capital loss, depending upon how long the participant has held the shares.
Special
Rule if Option Price is Paid for in Shares. If a participant pays the option price of a nonqualified stock option with previously-owned
shares of our common stock and the transaction is not a disqualifying disposition of shares previously acquired under an ISO,
the shares received equal to the number of shares surrendered are treated as having been received in a tax-free exchange. The
participant’s tax basis and holding period for these shares received will be equal to the participant’s tax basis
and holding period for the shares surrendered. The shares received in excess of the number of shares surrendered will be treated
as compensation taxable as ordinary income to the participant to the extent of their fair market value. The participant’s
tax basis in these shares will be equal to their fair market value on the date of exercise, and the participant’s holding
period for such shares will begin on the date of exercise.
If
the use of previously acquired shares to pay the option price of a nonqualified stock option constitutes a disqualifying disposition
of shares previously acquired under an ISO, the participant will have ordinary income as a result of the disqualifying disposition
in an amount equal to the excess of the fair market value of the shares surrendered, determined at the time such shares were originally
acquired on exercise of the ISO, over the aggregate option price paid for such shares. As discussed above, a disqualifying disposition
of shares previously acquired under an ISO occurs when the participant disposes of such shares before the end of the Holding Period.
The other tax results from paying the option price with previously-owned shares are as described above, except that the participant’s
tax basis in the shares that are treated as having been received in a tax-free exchange will be increased by the amount of ordinary
income recognized by the participant as a result of the disqualifying disposition.
Restricted
Stock. A participant who receives restricted stock generally will recognize as ordinary income the excess, if any, of the
fair market value of the shares granted as restricted stock at such time as the shares are no longer subject to forfeiture or
restrictions, over the amount paid, if any, by the participant for such shares. However, a participant who receives restricted
stock may make an election under Section 83(b) of the Code within 30 days of the date of transfer of the restricted shares to
recognize ordinary income on the date of transfer of the restricted shares equal to the excess of the fair market value of such
shares (determined without regard to the restrictions on such shares) over the purchase price, if any, paid for such shares. If
a participant does not make an election under Section 83(b) of the Code, then the participant will recognize as ordinary income
any dividends received with respect to such shares. At the time of sale of such shares, any gain or loss realized by the participant
will be treated as either short-term or long-term capital gain (or loss) depending upon how long the participant has held the
shares. For purposes of determining any gain or loss realized, the participant’s tax basis will be the amount previously
taxable as ordinary income, plus the purchase price paid by the participant, if any, for such shares.
Stock
Appreciation Rights. Generally, a participant who receives a stand-alone SAR will not recognize taxable income at the time
the stand-alone SAR is granted, provided that the SAR is exempt from or complies with Section 409A of the Code. If an employee
receives the appreciation inherent in the SARs in cash, the cash will be taxed as ordinary income to the recipient at the time
it is received. If a recipient receives the appreciation inherent in the SARs in stock, the spread between the then current market
value and the grant price, if any, will be taxed as ordinary income to the employee at the time it is received.
Other
Awards. In the case of an award of restricted stock units, performance awards, dividend equivalent rights, or other stock
or cash awards, the recipient will generally recognize ordinary income in an amount equal to any cash received and the fair market
value of any shares received on the date of payment or delivery, provided that the award is exempt from or complies with Section
409A of the Code.
Federal
Tax Withholding. Any ordinary income realized by a participant upon the granting, vesting, exercise or conversion of an award
under the Plan, as applicable, is subject to withholding of U.S. federal, state, and local income tax and to withholding of the
participant’s share of tax under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act. To satisfy
our federal income tax withholding requirements, we will have the right to require, as a condition to delivery of any certificate
for shares of common stock or the registration of the shares in the participant’s name, that the participant remit to us
an amount sufficient to satisfy the withholding requirements. Alternatively, we may withhold a portion of the shares (valued at
fair market value) that otherwise would be issued to the participant to satisfy all or part of the withholding tax obligations
or may, if we consent, accept delivery of shares (that the participant has not acquired from us within six months prior to the
date of exercise) with an aggregate fair market value that equals or exceeds the required tax withholding payment. Withholding
does not represent an increase in the participant’s total income tax obligation, since it is fully credited toward his or
her tax liability for the year. Additionally, withholding does not affect the participant’s tax basis in the shares. Compensation
income realized and tax withheld will be reflected on Forms W-2 supplied by the Company to employees no later than January 31
of the succeeding year. Deferred compensation that is subject to Section 409A of the Code will be subject to certain federal income
tax withholding and reporting requirements.
Tax
Consequences to Us. To the extent that a participant recognizes ordinary income in the circumstances described above, we will
be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an
ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of
the Code, and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Code.
Million
Dollar Deduction Limit and Other Tax Matters. We may not deduct compensation of more than $1,000,000 that is paid to “covered
employees” (as defined in Section 162(m) of the Code), which include (i) an individual (or, in certain circumstances, his
or her beneficiaries) who, at any time during the taxable year, is either our principal executive officer or principal financial
officer; (ii) an individual who is among our three highest compensated officers for the taxable year (other than an individual
who was either our principal executive officer or principal financial officer at any time during that taxable year); or (iii)
anyone who was a covered employee for purposes of Section 162(m) of the Code for any tax year beginning on or after January 1,
2017. This limitation on deductions (x) only applies to compensation paid by a publicly-traded corporation (and not compensation
paid by non-corporate entities) and (z) may not apply to certain types of compensation, such as qualified performance-based compensation
that is payable pursuant to a written, binding contract that was in effect as of November 2, 2017, so long as the contract is
not materially modified after that date.
If
an individual’s rights under the Plan are accelerated as a result of a change in control and the individual is a “disqualified
individual” under Section 280G of the Code, the value of any such accelerated rights received by such individual may be
included in determining whether or not such individual has received an “excess parachute payment” under Section 280G
of the Code, which could result in (i) the imposition of a 20% federal excise tax (in addition to federal income and employment
taxes) payable by the individual on the value of such accelerated rights, and (ii) the loss by us of a compensation deduction.
Interest
of Directors and Executive Officers
All
members of our board of directors and all of our executive officers are eligible for awards under the Plan and, thus, have a personal
interest in the approval of the Plan.
New
Plan Benefits
With
respect to the increased number of shares reserved under the Plan pursuant to the Amendment, we cannot currently determine the
benefits or number of shares subject to awards that may be granted in the future to eligible participants under the Plan because
the grant of awards and terms of such awards are to be determined in the sole discretion of the Committee.
The
market value of our common stock is $2.59 per share based on the closing price of our common stock on November 2, 2020.
Vote
Required
The
affirmative vote of a majority of the votes cast on the proposal is required for the approval of the Amendment.
The
Board recommends that you vote “FOR” the approval of the Amendment.
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OTHER
BUSINESS
The
Board knows of no other business to be brought before the Annual Meeting. If, however, any other business should properly come
before the Annual Meeting, the persons named in the accompanying proxy will vote the proxy in accordance with applicable law and
as they may deem appropriate in their discretion, unless directed by the proxy to do otherwise.
SUBMISSION
OF FUTURE STOCKHOLDER PROPOSALS
Pursuant
to rules of the SEC, a stockholder who intends to present a proposal at our next annual meeting of stockholders and who wishes
the proposal to be included in the proxy statement for that meeting must submit the proposal to us in writing to the attention
of the Secretary at AYRO, Inc., 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664. The proposal must be received
no later than July 12, 2021, after which date such stockholder proposal will be considered untimely. With respect to other shareholder
proposals, management will be able to vote proxies in its discretion without advising shareholders in the 2021 proxy statement
about the nature of the matter and how management intends to vote if notice of the proposal is not received by us at our principal
executive offices on or before September 25, 2021.
A
copy of AYRO, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as amended, is available without
charge (except for exhibits, which are available upon payment of a reasonable fee) upon written request to AYRO, Inc., 900 E.
Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664.
ANNEX
A
First
AMENDMENT TO
AYRO,
INC. 2020 LONG-TERM INCENTIVE PLAN
This
FIRST AMENDMENT TO AYRO, INC. 2020 LONG-TERM INCENTIVE PLAN (this “Amendment”), effective as of __________,
2020, is made and entered into by AYRO, Inc., a Delaware corporation (the “Company”). Terms used in
this Amendment with initial capital letters that are not otherwise defined herein shall have the meanings ascribed to such terms
in the AYRO, Inc. Long-Term Incentive Plan (the “Plan”).
RECITALS
WHEREAS,
Article 9 of the Plan provides that the Board of Directors of the Company (the “Board”) may amend the
Plan at any time and from time to time;
WHEREAS,
the Board desires to amend the Plan to increase the aggregate number of shares of Common Stock that may be issued under the Plan,
as set forth in Article 5 of the Plan, by an additional 1,800,000 shares of Common Stock; and
WHEREAS,
the Board intends to submit this Amendment to the Company’s stockholders for their approval.
NOW,
THEREFORE, in accordance with Article 9 of the Plan, the Company hereby amends the Plan as follows:
1.
Section 5.1 of the Plan is hereby amended by deleting said section in its entirety and substituting in lieu thereof the following
new Section 5.1:
5.1
Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12, the maximum number of shares of Common
Stock that may be delivered pursuant to Awards granted under the Plan is four million eighty-nine thousand six hundred fifty (4,089,650)
shares, of which one hundred percent (100%) may be delivered pursuant to Incentive Stock Options. Shares to be issued may be made
available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased
by the Company on the open market or otherwise. During the term of the Plan, the Company will at all times reserve and keep available
the number of shares of Common Stock that shall be sufficient to satisfy the requirements of the Plan.
2.
Except as expressly amended by this Amendment, the Plan shall continue in full force and effect in accordance with the provisions
thereof.
IN
WITNESS WHEREOF, the Company has caused this Amendment to be duly executed as of the date first written above.
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AYRO,
INC.
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By:
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Name:
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Title:
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Signature
Page to
First
Amendment to
AYRO,
Inc. Long-Term Incentive Plan
ANNEX
B
AYRO
INC.
LONG-TERM
INCENTIVE PLAN
The
AYRO, Inc. Long-Term Incentive Plan (the “Plan”) was adopted by the Board of Directors of AYRO, Inc.
a Delaware corporation (the “Company”), effective as of April 21, 2020 (the “Effective Date”),
subject to approval by the Company’s stockholders.
Article
1.
PURPOSE
The
purpose of the Plan is to attract and retain the services of key Employees, key Contractors, and Outside Directors of the Company
and its Subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of Incentive
Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards,
Dividend Equivalent Rights, and Other Awards, whether granted singly, or in combination, or in tandem, that will:
(a)
increase the interest of such persons in the Company’s welfare;
(b)
furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and
(c)
provide a means through which the Company may attract able persons as Employees, Contractors, and Outside Directors.
With
respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions
of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to
so comply, such provision or action shall be deemed null and void ab initio, to the extent permitted by law and deemed
advisable by the Committee.
Article
2.
DEFINITIONS
For
the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:
2.1
“Applicable Law” means all legal requirements relating to the administration of equity incentive plans
and the issuance and distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws,
the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, the
rules of any foreign jurisdiction applicable to Incentives granted to residents therein, and any other applicable law, rule or
restriction.
2.2
“Authorized Officer” is defined in Section 3.2(b) hereof.
2.3
“Award” means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock,
SAR, Restricted Stock Unit, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination
or in tandem (each individually referred to herein as an “Incentive”).
2.4
“Award Agreement” means a written agreement between a Participant and the Company which sets out the
terms of the grant of an Award.
2.5
“Award Period” means the period set forth in the Award Agreement during which one or more Incentives
granted under an Award may be exercised.
2.6
“Board” means the board of directors of the Company.
2.7
“Change in Control”
(a)
any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing fifty percent
(50%) or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a transaction described in clause (a) of paragraph (c) below;
(b)
the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who,
on the effective date of this Plan, constitute the Board and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by
the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3rds) of the directors
then still in office who either were directors on the effective date of this Plan or whose appointment, election or nomination
for election was previously so approved or recommended;
(c)
there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other
corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii)
a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including the securities Beneficially
Owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition
by the Company or its Affiliates of a business) representing fifty percent (50%) or more of the combined voting power of the Company’s
then outstanding securities; or
(d)
the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale
or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%)
of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale.
For
purposes hereof:
“Affiliate”
shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
“Beneficial
Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
“Person”
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the Company.
Notwithstanding
the foregoing provisions of this Section 2.7, if an Award issued under the Plan is subject to Section 409A of the Code,
then an event shall not constitute a Change in Control for purposes of such Award under the Plan unless such event also constitutes
a change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets within
the meaning of Section 409A of the Code.
2.8
“Claim” means any claim, liability or obligation of any nature, arising out of or relating to this Plan
or an alleged breach of this Plan or an Award Agreement.
2.9
“Code” means the United States Internal Revenue Code of 1986, as amended.
2.10
“Committee” means the committee appointed or designated by the Board to administer the Plan in accordance
with Article 3 of the Plan.
2.11
“Common Stock” means the common stock, par value $0.0001 per share, which the Company is currently authorized
to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company
may be converted or exchanged, as the case may be, pursuant to the terms of this Plan.
2.12
“Company” means AYRO, Inc., a Delaware corporation, and any successor entity.
2.13
“Contractor” means any natural person, who is not an Employee, rendering bona fide services to
the Company or a Subsidiary, with compensation, pursuant to a written independent contractor agreement between such person and
the Company or a Subsidiary, provided that such services are not rendered in connection with the offer or sale of securities in
a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
2.14
“Corporation” means any entity that (a) is defined as a corporation under Section 7701 of the Code and
(b) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of
the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined
voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (b) hereof, an entity
shall be treated as a “corporation” if it satisfies the definition of a corporation under Section 7701 of the Code.
2.15
“Date of Grant” means the effective date on which an Award is made to a Participant as set forth in
the applicable Award Agreement; provided, however, that solely for purposes of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder, the Date of Grant of an Award shall be the date of stockholder approval of the Plan if such
date is later than the effective date of such Award as set forth in the Award Agreement.
2.16
“Dividend Equivalent Right” means the right of the holder thereof to receive credits based on the cash
dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant
to whom the Award is made.
2.17
“Employee” means a common law employee (as defined in accordance with the Regulations and Revenue Rulings
then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company; provided, however,
in the case of individuals whose employment status, by virtue of their employer or residence, is not determined under Section
3401(c) of the Code, “Employee” shall mean an individual treated as an employee for local payroll tax or employment
purposes by the applicable employer under Applicable Law for the relevant period.
2.18
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
2.19
“Exercise Date” is defined in Section 8.3(b) hereof.
2.20
“Exercise Notice” is defined in Section 8.3(b) hereof.
2.21
“Fair Market Value” means, as of a particular date, (a) if the shares of Common Stock are listed on
any established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction
reporting system for the principal securities exchange for the Common Stock on that date, or, if there shall have been no such
sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock
are not so listed, but are quoted on an automated quotation system, the closing sales price per share of Common Stock reported
on the automated quotation system on that date, or, if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported; (c) if the Common Stock is not so listed or quoted, the mean between the
closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on
which such quotations shall be available, as reported by the National Association of Securities Dealer, Inc.’s OTC Bulletin
Board or the Pink OTC Markets, Inc. (previously known as the National Quotation Bureau, Inc.); or (d) if none of the above is
applicable, such amount as may be determined by the Committee (acting on the advice of an Independent Third Party, should the
Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair
market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with
Section 409A of the Code.
2.22
“Immediate Family Members” is defined in Section 15.7 hereof.
2.23
“Incentive” is defined in Section 2.3 hereof.
2.24
“Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Code,
granted pursuant to this Plan.
2.25
“Independent Third Party” means an individual or entity independent of the Company having experience
in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities
or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties.
2.26
“Nonqualified Stock Option” means a nonqualified stock option, granted pursuant to this Plan, which
is not an Incentive Stock Option.
2.27
“Option Price” means the price which must be paid by a Participant upon exercise of a Stock Option to
purchase a share of Common Stock.
2.28
“Other Award” means an Award issued pursuant to Section 6.9 hereof.
2.29
“Outside Director” means a director of the Company who is not an Employee or a Contractor.
2.30
“Participant” means an Employee, Contractor or an Outside Director to whom an Award is granted under
this Plan.
2.31
“Performance Award” means an Award hereunder of cash, shares of Common Stock, units or rights based
upon, payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof.
2.32
“Performance Goal” means any of the Performance Criteria set forth in Section 6.10 hereof.
2.33
“Plan” means this AYRO, Inc. Long-Term Incentive Plan, as amended from time to time.
2.34
“Reporting Participant” means a Participant who is subject to the reporting requirements of Section
16 of the Exchange Act.
2.35
“Restricted Stock” means shares of Common Stock issued or transferred to a Participant pursuant to Section
6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement.
2.36
“Restricted Stock Units” means units awarded to Participants pursuant to Section 6.6 hereof,
which are convertible into Common Stock at such time as such units are no longer subject to restrictions as established by the
Committee.
2.37
“Restriction Period” is defined in Section 6.4(b)(i) hereof.
2.38
“SAR” or “Stock Appreciation Right” means the right to receive an amount,
in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of
the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares.
2.39
“SAR Price” means the exercise price or conversion price of each share of Common Stock covered by a
SAR, determined on the Date of Grant of the SAR.
2.40
“Spread” is defined in Section 12.4(b) hereof.
2.41
“Stock Option” means a Nonqualified Stock Option or an Incentive Stock Option.
2.42
“Subsidiary” means (a) any corporation in an unbroken chain of corporations beginning with the Company,
if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total
combined voting power of all classes of stock in one of the other corporations in the chain, (b) any limited partnership, if the
Company or any corporation described in item (a) above owns a majority of the general partnership interest and a majority of the
limited partnership interests entitled to vote on the removal and replacement of the general partner, and (c) any partnership
or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item
(a) above or any limited partnership listed in item (b) above. “Subsidiaries” means more than one of
any such corporations, limited partnerships, partnerships or limited liability companies.
2.43
“Termination of Service” occurs when a Participant who is (a) an Employee of the Company or any Subsidiary
ceases to serve as an Employee of the Company and its Subsidiaries, for any reason; (b) an Outside Director of the Company or
a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (c) a Contractor of the Company
or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary
or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be deemed to have
occurred when a Participant who is an Employee becomes an Outside Director or Contractor or vice versa. If, however, a Participant
who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service,
and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon
ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the
foregoing provisions of this Section 2.43, in the event an Award issued under the Plan is subject to Section 409A of the
Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of
the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of “separation
from service” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
2.44
“Total and Permanent Disability” means a Participant is qualified for long-term disability benefits
under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in
existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical
or mental condition resulting from bodily injury, disease, or mental disorder, is unable to perform his or her duties of employment
for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence
satisfactory to the Committee; provided that, with respect to any Incentive Stock Option, Total and Permanent Disability
shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing
provisions of this Section 2.44, in the event an Award issued under the Plan is subject to Section 409A of the Code, then,
in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the
definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of “disability”
provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
Article
3.
ADMINISTRATION
3.1
General Administration; Establishment of Committee. Subject to the terms of this Article 3, the Plan shall be administered
by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “Committee”).
The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without
cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the
Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed
to refer to the Board.
Membership
on the Committee shall be limited to those members of the Board who are “non-employee directors” as defined in Rule
16b-3 promulgated under the Exchange Act. The Committee shall select one of its members to act as its Chairman. A majority of
the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which
a quorum is present shall be the act of the Committee.
3.2
Designation of Participants and Awards.
(a)
The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted
and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms,
provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The
Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination
or two or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive results in cancellation of
all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, all decisions
with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall
be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by
the Board.
(b)
Notwithstanding Section 3.2(a), to the extent permitted by Applicable Law, the Board may, in its discretion and by a resolution
adopted by the Board, authorize one or more officers of the Company (an “Authorized Officer”) to (i)
designate one or more Employees as eligible persons to whom Nonqualified Stock Options, Incentive Stock Options or SARs will be
granted under the Plan, and (ii) determine the number of shares of Common Stock that will be subject to such Nonqualified Stock
Options, Incentive Stock Options or SARs; provided, however, that the resolution of the Board granting such authority
shall (x) specify the total number of shares of Common Stock that may be made subject to the Nonqualified Stock Options, Incentive
Stock Options or SARs, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be
paid for the purchase of the Common Stock subject to such Nonqualified Stock Options, Incentive Stock Options or SARs, and (z)
not authorize an officer to designate himself as a recipient of any Award.
3.3
Authority of the Committee. The Committee, in its discretion, shall (a) interpret the Plan and Award Agreements, (b) prescribe,
amend, and rescind any rules and regulations, as necessary or appropriate for the administration of the Plan, (c) establish performance
goals for an Award and certify the extent of their achievement, and (d) make such other determinations or certifications and take
such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or
other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee’s
discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable
notwithstanding any other provision of the Plan to the contrary.
The
Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions
under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed
to have been taken by the Committee.
With
respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the Exchange Act, Section
422 of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed
or quoted, or any other Applicable Law, to the extent that any such restrictions are no longer required by Applicable Law, the
Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or
to waive any such mandated restrictions with respect to outstanding Awards.
Article
4.
ELIGIBILITY
Any
Employee (including an Employee who is also a director or an officer), Contractor or Outside Director of the Company whose judgment,
initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible
to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options.
The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside
Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants,
or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine.
Except as required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under the Plan
(including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards,
the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not
be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan.
Article
5.
SHARES
SUBJECT TO PLAN
5.1
Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12, the maximum number of shares
of Common Stock that may be delivered pursuant to Awards granted under the Plan is 11,448,253 shares, of which one hundred percent
(100%) may be delivered pursuant to Incentive Stock Options. Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or
otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common
Stock that shall be sufficient to satisfy the requirements of this Plan.
5.2
Reuse of Shares. To the extent that any Award under this Plan shall be forfeited, shall expire or be canceled, in whole
or in part, then the number of shares of Common Stock covered by the Award or stock option so forfeited, expired or canceled may
again be awarded pursuant to the provisions of this Plan. In the event that previously acquired shares of Common Stock are delivered
to the Company in full or partial payment of the exercise price for the exercise of a Stock Option granted under this Plan, the
number of shares of Common Stock available for future Awards under this Plan shall be reduced only by the net number of shares
of Common Stock issued upon the exercise of the Stock Option. Awards that may be satisfied either by the issuance of shares of
Common Stock or by cash or other consideration shall be counted against the maximum number of shares of Common Stock that may
be issued under this Plan only during the period that the Award is outstanding or to the extent the Award is ultimately satisfied
by the issuance of shares of Common Stock. Awards will not reduce the number of shares of Common Stock that may be issued pursuant
to this Plan if the settlement of the Award will not require the issuance of shares of Common Stock, as, for example, a SAR that
can be satisfied only by the payment of cash. Notwithstanding any provisions of the Plan to the contrary, only shares forfeited
back to the Company, shares canceled on account of termination, expiration or lapse of an Award, shares surrendered in payment
of the exercise price of a Stock Option or shares withheld for payment of applicable employment taxes and/or withholding obligations
resulting from the exercise of an option shall again be available for grant of Incentive Stock Options under the Plan, but shall
not increase the maximum number of shares described in Section 5.1 above as the maximum number of shares of Common Stock
that may be delivered pursuant to Incentive Stock Options.
Article
6.
GRANT
OF AWARDS
6.1
In General.
(a)
The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Incentive
or Incentives being granted, the total number of shares of Common Stock subject to the Incentive(s), the Option Price (if applicable),
the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance objectives, as are approved
by the Committee, but (i) not inconsistent with the Plan, and (ii) to the extent an Award issued under the Plan is subject to
Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other
guidance issued thereunder. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance
of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years of the date of adoption of this Plan
by the Board. The Plan shall be submitted to the Company’s stockholders for approval; however, the Committee may grant Awards
under the Plan prior to the time of stockholder approval. Any such Award granted prior to such stockholder approval shall be made
subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant
to, or to disqualify the Participant from, receipt of any other Award under the Plan.
(b)
If the Committee establishes a purchase price for an Award, the Participant must accept such Award within a period of thirty (30)
days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement
and paying such purchase price.
(c)
Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide for interest equivalents
to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and
conditions as may be specified by the grant.
6.2
Option Price. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for
any share of Common Stock must be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option
Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair
Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power
of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the Date of Grant.
6.3
Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit
the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options
(under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive
Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion
thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive
Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option
stock on the Company’s stock transfer records.
6.4
Restricted Stock. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option),
the Committee shall set forth in the related Award Agreement: (a) the number of shares of Common Stock awarded, (b) the price,
if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (c) the time or times
within which such Award may be subject to forfeiture, (d) specified Performance Goals of the Company, a Subsidiary, any division
thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove
any restrictions (including vesting) on such Award, and (e) all other terms, limitations, restrictions, and conditions of the
Restricted Stock, which shall be consistent with this Plan, to the extent applicable and, to the extent Restricted Stock granted
under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code
and the regulations or other guidance issued thereunder. The provisions of Restricted Stock need not be the same with respect
to each Participant.
(a)
Legend on Shares. The Company shall electronically register the Restricted Stock awarded to a Participant in the name of
such Participant, which shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, substantially as provided in Section 15.9 of the Plan. No stock certificate or certificates shall be
issued with respect to such shares of Common Stock, unless, following the expiration of the Restriction Period (as defined in
Section 6.4(b)(i)) without forfeiture in respect of such shares of Common Stock, the Participant requests delivery of the
certificate or certificates by submitting a written request to the Committee (or such party designated by the Company) requesting
delivery of the certificates. The Company shall deliver the certificates requested by the Participant to the Participant as soon
as administratively practicable following the Company’s receipt of such request.
(b)
Restrictions and Conditions. Shares of Restricted Stock shall be subject to the following restrictions and conditions:
(i)
Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined
by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “Restriction Period”),
the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations,
the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine
that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of the Award, such action
is appropriate.
(ii)
Except as provided in sub-paragraph (a) above or in the applicable Award Agreement, the Participant shall have, with respect to
his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the
right to receive any dividends thereon. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered
to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares
of Common Stock or after any other restrictions imposed on such shares of Common Stock by the applicable Award Agreement or other
agreement have expired. Certificates for the shares of Common Stock forfeited under the provisions of the Plan and the applicable
Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that
each Participant, in connection with the issuance of a certificate for Restricted Stock, shall endorse such certificate in blank
or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to
the Company.
(iii)
The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, as specified
in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award
Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award
Agreement; such conditions may provide for vesting based on length of continuous service or such Performance Goals, as may be
determined by the Committee in its sole discretion.
(iv)
Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction
Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any
consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either
(1) the Company shall be obligated to, or (2) the Company may, in its sole discretion, elect to, pay to the Participant, as soon
as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the
Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service,
as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited
shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company.
6.5
SARs. The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option.
SARs shall be subject to such terms and conditions as the Committee shall impose, provided that such terms and conditions are
(a) not inconsistent with the Plan, and (b) to the extent a SAR issued under the Plan is subject to Section 409A of the Code,
in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder.
The grant of the SAR may provide that the holder may be paid for the value of the SAR either in cash or in shares of Common Stock,
or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall
receive that number of whole shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the
value obtained by multiplying (a) the difference between the Fair Market Value of a share of Common Stock on the date of exercise
over the SAR Price as set forth in such SAR (or other value specified in the agreement granting the SAR), by (b) the number of
shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common
Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the
share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of
a SAR, but any such limitation shall be specified at the time that the SAR is granted.
6.6
Restricted Stock Units. Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions
as shall be established by the Committee, provided, however, that such terms and conditions are (a) not inconsistent with the
Plan, and (b) to the extent a Restricted Stock Unit issued under the Plan is subject to Section 409A of the Code, in compliance
with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. Restricted
Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition
against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a requirement that
the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost)
such shares or units in the event of Termination of Service during the period of restriction.
6.7
Performance Awards.
(a)
The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance Awards shall be
specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be
achieved during a performance period, and the maximum or minimum settlement values, provided that such terms and conditions are
(i) not inconsistent with the Plan and (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A
of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance
issued thereunder. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance
of the shares of Common Stock at the time of the grant of the Performance Award or at the time of the certification by the Committee
that the Performance Goals for the performance period have been met; provided, however, if shares of Common Stock
are issued at the time of the grant of the Performance Award and if, at the end of the performance period, the Performance Goals
are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the
contrary, the Common Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines
that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance
Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other restrictions
provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more
Participants shall have its own terms and conditions.
If
the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable
because of a change in the Company’s business, operations, corporate structure, or for other reasons that the Committee
deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.
(b)
Performance Awards may be valued by reference to the Fair Market Value of a share of Common Stock or according to any formula
or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of Performance
Goals or other specific financial, production, sales or cost performance objectives that the Committee believes to be relevant
to the Company’s business and/or remaining in the employ of the Company or a Subsidiary for a specified period of time.
Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable
in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective
established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments
and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable
performance objective has been achieved shall be conclusively determined by the Committee.
6.8
Dividend Equivalent Rights. The Committee may grant a Dividend Equivalent Right to any Participant, either as a component
of another Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant.
Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested
in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall
be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares of Common Stock,
or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions
on, such other Award, and that such Dividend Equivalent Right granted as a component of another Award may also contain terms and
conditions different from such other Award.
6.9
Other Awards. The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related
to, in whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with
the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant.
Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law,
or for such other consideration as may be specified by the grant.
6.10
Performance Goals. Awards of Restricted Stock, Restricted Stock Units, Performance Award and Other Awards (whether relating
to cash or shares of Common Stock) under the Plan may be made subject to the attainment of Performance Goals relating to one or
more business criteria which may consist of one or more or any combination of the following criteria: cash flow; cost; revenues;
sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings
before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether
on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic
value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales;
net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary
business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity or stockholders’
equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders (“Performance
Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business
unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (a)
events that are of an unusual nature or indicate infrequency of occurrence, (b) gains or losses on the disposition of a business,
(c) changes in tax or accounting regulations or laws, (d) the effect of a merger or acquisition, as identified in the Company’s
quarterly and annual earnings releases, or (e) other similar occurrences. In all other respects, Performance Criteria shall be
calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under
a methodology established by the Committee prior to the issuance of an Award which is consistently applied and identified in the
audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s
annual report.
6.11
Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “tandem Award,”
so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is
exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect
to one hundred (100) shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled
to the extent of one hundred (100) shares of Common Stock.
6.12
Recoupment for Restatements. Notwithstanding any other language in this Plan to the contrary, the Company may recoup all
or any portion of any shares or cash paid to a Participant in connection with an Award, in the event of a restatement of the Company’s
financial statements as set forth in the Company’s clawback policy, if any, approved by the Company’s Board from time
to time.
Article
7.
AWARD
PERIOD; VESTING
7.1
Award Period. Subject to the other provisions of this Plan, the Committee may, in its discretion, provide that an Incentive
may not be exercised in whole or in part for any period or periods of time or beyond any date specified in the Award Agreement.
Except as provided in the Award Agreement, an Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of Service. No Incentive granted under the Plan
may be exercised at any time after the end of its Award Period. No portion of any Incentive may be exercised after the expiration
of ten (10) years from its Date of Grant. However, if an Employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company
(or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the term of such Incentive Stock Option
(to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant.
7.2
Vesting. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or
in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence
of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting,
then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion
of the Incentive may be vested.
Article
8.
EXERCISE
OR CONVERSION OF INCENTIVE
8.1
In General. A vested Incentive may be exercised or converted, during its Award Period, subject to limitations and restrictions
set forth in the Award Agreement.
8.2
Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or shares of Common Stock issued pursuant
to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system
or any registration under state or federal securities laws required under the circumstances has not been accomplished.
8.3
Exercise of Stock Option.
(a)
In General. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise
of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement.
If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion,
accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional
share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option.
(b)
Notice and Payment. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option
may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect
to which the Stock Option is to be exercised (the “Exercise Notice”) and the date of exercise thereof
(the “Exercise Date”) with respect to any Stock Option shall be the date that the Participant has delivered
both the Exercise Notice and consideration to the Company with a value equal to the total Option Price of the shares to be purchased
(plus any employment tax withholding or other tax payment due with respect to such Award), payable as provided in the Award Agreement,
which may provide for payment in any one or more of the following ways: (i) cash or check, bank draft, or money order payable
to the order of the Company, (ii) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued
at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months
prior to the Exercise Date, (iii) by delivery (including by FAX or electronic transmission) to the Company or its designated agent
of an executed irrevocable option exercise form (or, to the extent permitted by the Company, exercise instructions, which may
be communicated in writing, telephonically, or electronically) together with irrevocable instructions from the Participant to
a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise
of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, (iv) by requesting the Company to withhold the number of shares otherwise
deliverable upon exercise of the Stock Option by the number of shares of Common Stock having an aggregate Fair Market Value equal
to the aggregate Option Price at the time of exercise (i.e., a cashless net exercise), and/or (v) in any other form of
valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are
tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the
Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions
and provisions as the Restricted Stock so tendered. If the Participant fails to deliver the consideration described in this Section
8.3(b) within three (3) business days of the date of the Exercise Notice, then the Exercise Notice shall be null and void
and the Company will have no obligation to deliver any shares of Common Stock to the Participant in connection with such Exercise
Notice.
(c)
Issuance of Certificate. Except as otherwise provided in Section 6.4 hereof (with respect to shares of Restricted
Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the
Common Stock then being purchased to be registered in the Participant’s name (or the person exercising the Participant’s
Stock Option in the event of his or her death), but shall not issue certificates for the Common Stock unless the Participant or
such other person requests delivery of the certificates for the Common Stock, in writing in accordance with the procedures established
by the Committee. The Company shall deliver certificates to the Participant (or the person exercising the Participant’s
Stock Option in the event of his or her death) as soon as administratively practicable following the Company’s receipt of
a written request from the Participant or such other person for delivery of the certificates. Notwithstanding the forgoing, if
the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate
evidencing the shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the
Code. Any obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at
any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option
or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent
or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the
issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably
acceptable to the Committee.
(d)
Failure to Pay. Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of the
Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option
and right to purchase such Common Stock may be forfeited by the Participant.
8.4
SARs. Subject to the conditions of this Section 8.4 and such administrative regulations as the Committee may from
time to time adopt, a SAR may be exercised by the delivery (including by FAX) of written notice to the Committee setting forth
the number of shares of Common Stock with respect to which the SAR is to be exercised and the date of exercise thereof (the “Exercise
Date”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually
agreed upon. Subject to the terms of the Award Agreement and only if permissible under Section 409A of the Code and the regulations
or other guidance issued thereunder (or, if not so permissible, at such time as permitted by Section 409A of the Code and the
regulations or other guidance issued thereunder), the Participant shall receive from the Company in exchange therefor in the discretion
of the Committee, and subject to the terms of the Award Agreement:
(a)
cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, or if provided in the Award
Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by
the total number of shares of Common Stock of the SAR being surrendered;
(b)
that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided in the Award
Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to
be made for any fractional share interests; or
(c)
the Company may settle such obligation in part with shares of Common Stock and in part with cash.
The
distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award
Agreement.
8.5
Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired upon exercise of an Incentive Stock
Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option
or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option,
or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company
in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status
of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.
Article
9.
AMENDMENT
OR DISCONTINUANCE
Subject
to the limitations set forth in this Article 9, the Board may at any time and from time to time, without the consent of
the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment
for which stockholder approval is required either (a) by any securities exchange or inter-dealer quotation system on which the
Common Stock is listed or traded or (b) in order for the Plan and Incentives awarded under the Plan to continue to comply with
Sections 421 and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless
such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Any such amendment
shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted
under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to
the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating
thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted
by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with
respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant.
Article
10.
TERM
The
Plan shall be effective from the date that this Plan is adopted by the Board. Unless sooner terminated by action of the Board,
the Plan will terminate on the tenth anniversary of the Effective Date, but Incentives granted before that date will continue
to be effective in accordance with their terms and conditions.
Article
11.
CAPITAL
ADJUSTMENTS
In
the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property),
recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off,
split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants
or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects
the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately
after the transaction or event is equal to the fair value of the Award immediately prior to the transaction or event (a) the number
of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (b) the
number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (c) the number of shares
and type of Common Stock (or other securities or property) specified as the annual per-participant limitation under Section
5.1 of the Plan, (d) the Option Price of each outstanding Award, (e) the amount, if any, the Company pays for forfeited shares
of Common Stock in accordance with Section 6.4, and (f) the number of or SAR Price of shares of Common Stock then subject
to outstanding SARs previously granted and unexercised under the Plan, to the end that the same proportion of the Company’s
issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price;
provided, however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always
be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment
would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall
be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company
is subject.
Upon
the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such
adjustment which shall be conclusive and shall be binding upon each such Participant.
Article
12.
RECAPITALIZATION,
MERGER AND CONSOLIDATION
12.1
No Effect on Company’s Authority. The existence of this Plan and Incentives granted hereunder shall not affect in
any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company’s capital structure and its business, or any Change in Control, or any
merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to
or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise.
12.2
Conversion of Incentives Where Company Survives. Subject to any required action by the stockholders and except as otherwise
provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other
guidance issued thereunder, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share
exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or
assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled.
12.3
Exchange or Cancellation of Incentives Where Company Does Not Survive. Except as otherwise provided by Section 12.4
hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder,
in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation,
there shall be substituted for each share of Common Stock subject to the unexercised portions of outstanding Incentives, that
number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting
or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of
Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property
in accordance with their terms.
12.4
Cancellation of Incentives. Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, and except as may be
required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, all Incentives granted
hereunder may be canceled by the Company, in its sole discretion, as of the effective date of any Change in Control, merger, consolidation
or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting
the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or of any proposed sale of all
or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either:
(a)
giving notice to each holder thereof or his personal representative of its intention to cancel those Incentives for which the
issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase during the
thirty (30) day period next preceding such effective date of any or all of the shares of Common Stock subject to such outstanding
Incentives, including in the Board’s discretion some or all of the shares as to which such Incentives would not otherwise
be vested and exercisable; or
(b)
in the case of Incentives that are either (i) settled only in shares of Common Stock, or (ii) at the election of the Participant,
settled in shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between
the net amount per share payable in such transaction or as a result of such transaction, and the price per share of such Incentive
to be paid by the Participant (hereinafter the “Spread”), multiplied by the number of shares subject
to the Incentive. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in
its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the
Spread, appropriate adjustments to give effect to the existence of the Incentives shall be made, such as deeming the Incentives
to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon
exercise of the Incentives as being outstanding in determining the net amount per share. In cases where the proposed transaction
consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount
receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses
and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed.
An
Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or exercisable
for purposes of Section 12.4(a) hereof.
Article
13.
LIQUIDATION
OR DISSOLUTION
Subject
to Section 12.4 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and
remain unexpired, (a) sell all or substantially all of its property, or (b) dissolve, liquidate, or wind up its affairs, then
each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would
have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable,
or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company.
If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable
out of earned surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the
dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof.
Article
14.
INCENTIVES
IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives
may be granted under the Plan from time to time in substitution for similar instruments held by employees, independent contractors
or directors of a corporation, partnership, or limited liability company who become or are about to become Employees, Contractors
or Outside Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with
the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which
the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the
terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform,
in whole or in part, to the provisions of the incentives in substitution for which they are granted.
Article
15.
MISCELLANEOUS
PROVISIONS
15.1
Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan,
such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased
or transferred are being acquired for investment and not with a view to their distribution.
15.2
No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant
any right with respect to continuance of employment by the Company or any Subsidiary.
15.3
Indemnification of Board and Committee. No member of the Board or the Committee, nor any officer or Employee of the Company
acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken
or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and
each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified
and protected by the Company in respect of any such action, determination, or interpretation to the fullest extent provided by
law. Except to the extent required by any unwaiveable requirement under applicable law, no member of the Board or the Committee
(and no Subsidiary of the Company) shall have any duties or liabilities, including without limitation any fiduciary duties, to
any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award Agreement or any Claim
arising hereunder and, to the fullest extent permitted under applicable law, each Participant (as consideration for receiving
and accepting an Award Agreement) irrevocably waives and releases any right or opportunity such Participant might have to assert
(or participate or cooperate in) any Claim against any member of the Board or the Committee and any Subsidiary of the Company
arising out of this Plan.
15.4
Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give
any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment
thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms
and conditions expressly set forth therein.
15.5
Compliance with Other Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall
not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation
by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without
limitation Section 16 of the Exchange Act); and, as a condition of any sale or issuance of shares of Common Stock under an Incentive,
the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the
Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
15.6
Tax Requirements. The Company or, if applicable, any Subsidiary (for purposes of this Section 15.6, the term “Company”
shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form
in connection with the Plan, any federal, state, local, or other taxes required by law to be withheld in connection with an Award
granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock
issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the
Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by the
Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment
may be made by (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional
shares under (c) below) the required tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so
consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant
has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate
Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding
payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares
to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate fair market value that equals
(but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c). The Company may, in its
sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The
Committee may in the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or
desirable.
15.7
Assignability. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or
encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant
only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an
Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the
Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.7
that is not required for compliance with Section 422 of the Code.
Except
as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered
other than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Committee may, in its discretion,
authorize all or a portion of a Nonqualified Stock Option or SAR to be granted to a Participant on terms which permit transfer
by such Participant to (a) the spouse (or former spouse), children or grandchildren of the Participant (“Immediate
Family Members”), (b) a trust or trusts for the exclusive benefit of such Immediate Family Members, (c) a partnership
in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by the Participant and/or
Immediate Family Members, (d) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor
provision, or (e) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision,
provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such
Nonqualified Stock Option or SAR is granted must be approved by the Committee and must expressly provide for transferability in
a manner consistent with this Section, and (z) subsequent transfers of transferred Nonqualified Stock Options or SARs shall be
prohibited except those by will or the laws of descent and distribution.
Following
any transfer, any such Nonqualified Stock Option and SAR shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term “Participant”
shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the
original Participant, following which the Nonqualified Stock Options and SARs shall be exercisable or convertible by the transferee
only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation
to inform any transferee of a Nonqualified Stock Option or SAR of any expiration, termination, lapse or acceleration of such Stock
Option or SAR. The Company shall have no obligation to register with any federal or state securities commission or agency any
Common Stock issuable or issued under a Nonqualified Stock Option or SAR that has been transferred by a Participant under this
Section 15.7.
15.8
Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall
constitute general funds of the Company.
15.9
Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend,
or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not
having such legend shall be surrendered upon demand by the Company and so endorsed):
On
the face of the certificate:
“Transfer
of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”
On
the reverse:
“The
shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain AYRO, Inc.
Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Round Rock, Texas. No transfer
or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By
acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”
The
following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued
in a transaction registered under the applicable federal and state securities laws:
“Shares
of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution,
have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and
may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions
otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which
the Company may rely upon an opinion of counsel satisfactory to the Company.”
15.10
Governing Law. The Plan shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware
(excluding any conflict of laws, rule or principle of Delaware law that might refer the governance, construction, or interpretation
of this Plan to the laws of another state). A Participant’s sole remedy for any Claim shall be against the Company, and
no Participant shall have any claim or right of any nature against any Subsidiary of the Company or any stockholder or existing
or former director, officer or Employee of the Company or any Subsidiary of the Company. The individuals and entities described
above in this Section 15.10 (other than the Company) shall be third-party beneficiaries of this Plan for purposes of enforcing
the terms of this Section 15.10.
A
copy of this Plan shall be kept on file in the principal office of the Company in Round Rock, Texas.
***************
IN
WITNESS WHEREOF, the Company has caused this instrument to be executed as of May 28, 2020, by its Chief Executive Officer pursuant
to prior action taken by the Board.
|
AYRO,
INC.
|
|
|
|
By:
|
/s/
Rodney Keller
|
|
Name:
|
Rodney
Keller
|
|
Title:
|
Chief
Executive Officer
|
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